Andre Visser v FFC Fund Ltd

• Jurisdiction: Cayman Islands
• Judge: Raj Parker
• Judgment Date: 12 February 2018
• Date: 12 February 2018
• Docket Number: CAUSE NO: 162 OF 2017 (RPJ)
• Court: Grand Court (Cayman Islands)

In the Matter of the Companies Law (2016 Revision) and in the Matter of FFC Fund Ltd

Between

Andre Visser

Petitioner

and

FFC Fund Ltd.

Respondent

Before:

Hon. Justice Raj Parker

CAUSE NO: 162 OF 2017 (RPJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Winding up petition — discovery — CWR Order 12 (1) — GCR Order 24 rules 3 and 8 — relevance test — corporate structure — does Respondent have presently enforceable legal right to documents held by other entities — agency — nominated directors — Partnership Law (2013 Revision) — Exempted Limited Partnership Law (2003 and 2013 and 2014 Revisions) — Confidential Information and Disclosure Law (2016)

IN CHAMBERS

Appearances:

Mr. Barry Isaacs QC instructed by Mr. Anthony Heaver-Wren and Anna Snead of Appleby for the Petitioner

Mr. David Alexander QC instructed by Charles Lloyd, Mr. William Fletcher and Ms. Kristin Hanshaw of Macfarlanes, London, and Mr. Rocco Cecere, Mr. Jonathan Moffatt and Mr. Edoardo Lupi of Mourant Ozannes, Grand Cayman

Introduction

1 By way of a restored summons for directions dated 8 August 2017, Mr. Andre Visser (the “Petitioner”), seeks an order for discovery against FFC Fund Ltd (the “Company”).

2 The summons was issued at the same time as the Petitioner's winding up petition dated 4 August 2017 under section 92(e) of the Companies Law (2016) on a “just and equitable” basis.

3 There is a large measure of agreement as to the discovery the Company should make. The issues which arise for determination are whether:

• A) The Company should make discovery of documents (within 11 defined categories) which are or have been in the possession, custody or power of FFC Management Ltd in its capacity as a general partner of FFC Holdings LP (the “Partnership”);

• B) The Company should make discovery of documents (within the 11 categories) which are or have been in the possession, custody or power of the directors of Citco III Limited ( “Citco III”) who were nominated or appointed by the Partnership;

• C) The Company should make discovery of the register of Members of the Company, anonymised so as not to disclose the names of the shareholders in the Company and subject to confidentiality undertakings to not release the documents and information that they contain beyond the Petitioner and his legal advisers;

• D) The Company should make discovery of documents evidencing written consents and refusals of consent obtained in respect of each extension of the Company, namely the extensions in 2010, 2012 and 2017; and

• E) The documents relating to the Shareholders' Agreement as defined in paragraph 12(e) of the petition (all amended versions thereof and all documents purporting to supersede or replace the Shareholders' Agreement) and the original Memorandum and Articles of Association of Citco III (and all subsequently amended Memoranda and Articles of Association) are confidential as befween the Petitioner and the Company.

Factual Background

4 Mr. Andre Visser is the Petitioner in these proceedings. He is the registered holder of 1,110.10 Participating Shares in the Company. The Company is a Cayman Islands exempted company and is a special purpose vehicle for an indirect equity investment into Citco Group Limited.

5 Citco Group Limited is the parent of the Citco group of companies which provides administrative, fiduciary and financial services around the world and apparently had assets under custody (as at 2016) of US $120 billion. In 2005, the majority of the shares in Citco Group Limited were owned by a company which represented the interests of the Rotonde family trust (Rotonde Investments Limited) ( “Rotonde”) which is wholly- owned by the Foundation de Famille Sandoz.

6 The Smeets Family Citco Trust ( “SFCT”) wished to become the largest shareholder in Citco Group Limited and proposed that ‘friends and family” of Citco, including the Petitioner, should have the right to share in a transaction to achieve the acquisition of the majority shareholder's stake in the business of Citco Group Limited.

7 A proportion of the shares in Citco III were to be held by SFCT Investments Limited (a company wholly-owned by the SFCT) (418,000), a minority proportion by Rotonde (182,000) and a proportion by the Partnership (360,000) —see the Petitioner's second affidavit of 12 December 2017 at paragraph 31.

8 The acquisition was completed in July 2005. Citco Group Limited became a wholly owned subsidiary of Citco III, which is a company incorporated in the Cayman Islands for the purposes of the transaction. Citco III has two directors nominated by the Partnership: Mr Pieter Maaskant and Mr Peter Whitman.

9 It is necessary to set out some features of the investment terms and structure which are referred to in a Confidential Offering Memorandum dated 11 July 2005 (the “OM”) The Company (together with a Delaware limited liability company called FFC Fund LLC (the “US Fund”)) invited subscriptions of a minimum US $lmillion from the “friends and family” of Citco for the issue of shares by the Company (or, for US investors, interests in the US Fund). These entities, which were formed as special purpose vehicles for the single purpose of making an indirect equity investment into Citco Group Limited, by reason of their investments, became limited partners of the Partnership.

10 The general partner of the Partnership is FFC Management Limited ( “FFC Management”) (which is a wholly-owned subsidiary of SFCT). FFC Management is also the sole director of the Company (and sole manager of the US Fund.) This structure is detailed in a partnership agreement between FFC Management (the general partner), the Company and the US Fund dated 22 July 2005.

11 The Petitioner was invited to and did invest in the Company. The subscription monies paid by investors for shares in the Company (and the US Fund) were to be transferred by them to the Partnership and used by the Partnership to buy its shares in Citco III. Those shares remain the Partnership's sole asset.

12 At the time of the acquisition it was contemplated that within about 3 to 5 years there would be a public offering of shares in Citco III at which time the shares held by the Partnership would be distributed in kind to the investors pro-rata to their investments. If no public offering took place the shares would be distributed on or prior to the dissolution of the Company (or the US Fund). The date of dissolution was to be 31 August 2008, although FFC Management had a discretion to extend that date by up to two one-year periods, that is to say until 31 August 2010. In fact the date for the dissolution of the Company has been extended beyond 2010 three times, first to 31 August 2012, then to 31 August 2017, and more recently to 30 June 2018. As matters stand therefore the Company is due to be wound up later this year.

13 The OM also contemplated a Shareholders' Agreement between the three shareholders of Citco III: SFCT, Rotonde and the Partnership.

14 The Petitioner raises four grounds for winding up the Company. First, that his legitimate expectation has been defeated in that his pro-rata proportion of the shares held by the Partnership would be distributed to him by 31 August 2010 at the latest Second, that he has lost confidence in the management of FFC Management caused by a lack of probity on their part. Third, that the Company is incapable of achieving its principal commercial object. Finally, that the Company's affairs require investigation by official liquidators.

15 There are a number of matters pleaded in the petition including the following:

• i. The Petitioner has been unable to realise his investment in the Company since there has been no public offering and the dissolution date has been extended on three occasions, most recently to 30 June 2018. The dissolution date was extended by altering the Company's Articles of Association which required the approval of a two thirds majority of its investors. I note in passing that Mr. Luckmann, a director of FFC Management agrees with this in his first affidavit dated 16 January 2018 and states that the amendments to the Articles were made in accordance with article 147 (B) which required a special majority effectively defined as a two thirds majority —see paragraphs 42–45.

• ii. Rotonde and SFCT have been able to realise some or all of their investments in 2011 (the “2011 Transactions”) by either selling shares to Citco III or by Citco III agreeing to convert shares to preference shares (for no consideration) which were then sold on to two new investors. Those transactions would have required the consent of the Partnership and of the Partnership's representatives, the two directors nominated to the Board of Citco III. The Shareholders' Agreement would have been amended in light of the acquisition by the two new shareholders. Those new investors are currently in the process of realising their investment which again would require the consent of the Partnership and/or the Partnership's representatives.

• iii. Investors in the Company have also been able to realise their interests either by realising their market value as part of the larger transactions referred to above or at an undervalue (since they have been locked into their investment in the same way as the Petitioner).

• iv. Nothing has been done to promote the interests of the Company by enabling the investors to realise their investment since 2005, there has been no public offering and the 2012 extension to the dissolution date for the Company to 2017 was obtained on the basis of representations made by FFC Management that the interests of investors in the Company would be best served by their remaining as investors (rather than their receiving a distribution of the Citco III shares) and that FFC Management would more closely align the Company's interests to those of other Citco III shareholders under the terms of...