Between: (1) Kuwait Ports Authority (2) The Public Institution for Social Security (3) The Port Fund L.P. Plaintiffs/Respondents v (1) Port Link GP Ltd (2) Mark Eric Williams (3) Wellspring Capital Group, Inc. (4) KGL Investment Company Asia Defendants/Appellants
| Jurisdiction | Cayman Islands |
| Judge | Sir Richard Field JA,Sir Michael Birt JA,Sir Jack Beatson JA |
| Judgment Date | 20 January 2023 |
| Docket Number | CICA (Civil) Appeal Nos. 002 & 003 of 2022 |
| Court | Court of Appeal (Cayman Islands) |
The Hon. Sir Richard Field JA
The Hon Sir Michael Birt JA
The Rt Hon Sir Jack Beatson JA
CICA (Civil) Appeal Nos. 002 & 003 of 2022
(Grand Court Cause No. FSD 236 of 2020 (RPJ))
IN THE COURT OF APPEAL OF THE CAYMAN ISLANDS
ON APPEAL FROM THE GRAND COURT, FINANCIAL SERVICES DIVISION
Ms Clare Stanley KC and Mr Peter Tyers-Smith and Mr Thomas Wright of Kobre & Kim on behalf of the First Appellant
Mr Graham Chapman KC, Mr Andrew Pullinger and Mr Harry Shaw of Campbells LLP on behalf the Second-Fourth Appellants
Mr David Allison KC, Ms Jennifer Fox, Mr Oliver Green and Mr Harry Clark of Ogier for the Respondents
This is the judgment of the Court to which each member has contributed.
There are two appeals before the Court. The first is brought by all the appellants from the order made by Justice Parker (“the judge”) dismissing their summonses to strike out certain claims in the Amended Statement of Claim 1 (the “ASOC”) (the “Strike Out Appeal”). The second appeal is brought by the first appellant against the dismissal of its summons for security for costs (“the SFC Appeal”). Hereinafter, we refer to the appellants as “the defendants” or “D1”, “D2”, “D3” and “D4” and to the respondents as “the plaintiffs”.
This appeal raises important issues concerned with: (a) the nature of a Cayman Islands Exempted Limited Partnership (“ELP”) established under the Exempted Limited Partnership Act (2021 Revision) (“the ELPA”); (b) whether a limited partner of an ELP can sue, independently of any of the other limited partners, alleged wrongdoers, including the ELP's general partner, who are alleged to have been parties to the wrongful misappropriation of the ELP's assets held on trust by the general partner and, if so, what is the appropriate remedy to be granted by the court; and (c) the circumstances in which a limited partner can bring a derivative action under section 33(3) of the ELPA in the name of the ELP against the general partner for breaches of contractual, statutory and fiduciary duty.
The ELP in question is The Port Fund L. P. (“TPF”) which was registered on 21 March 2007. It was established as a vehicle for investments in port-related assets around the world. It has one general partner and eleven limited partners including the two plaintiffs, the Kuwait Ports Authority (“KPA”), which it is alleged has invested USD 85 million giving it at least a 41% interest in TPF and The Public Institution for Social Security (“PIFSS”), which it is alleged invested USD 40 million (giving it a 23.77% interest in TPF). The total invested in TPF by the limited partners was USD 188,152,000.
The first defendant, Port Link GP Limited (“the GP” or “D1”), is a Cayman Islands Exempted Limited Company incorporated on 8 March 2007. It was appointed the general partner of TPF pursuant to a limited partnership agreement (“the LPA”) made on 21 March 2007 between it and the original limited partners of TPF. The whole of the GP's share capital is held by Port Link Holdings USA Inc (“PLH”), a Delaware company; and the whole of PLH's share capital is held by the Second Defendant (“Mr Williams”). Mr Williams is also CEO, CFO, President, Vice President, Treasurer and Secretary of the Third Defendant, Wellspring Capital Group Inc (“Wellspring”), a company incorporated in the US State of Georgia. Wellspring is owned by
the Mark E Williams Living Trust, the trustees of which are Mr Williams, his wife Laura Williams, and his brother, Dylan WilliamsTPF's sponsor and placement agent was KGL Investment Company KSCC, a Kuwaiti company (“KGLI Kuwait”). From September 2007 until 2008, Mr Williams was KGLI Kuwait's Vice President and he was its Investment Director from 2009 to 2011. He was also a member of TPF's Investment Committee in the years 2009 – 2013.
Pursuant to an agreement with the GP dated 28 June 2007 (“the IMA”), KGL Investment Cayman Limited was appointed TPF's investment manager. In July 2018, KGL Investment Cayman Limited changed its name to Emerging Markets PE Management Limited (“EMPEML”). The ultimate beneficial owner of EMPEML as at the date of the IMA and until around January 2018 was KGLI Kuwait, which is the 100% shareholder of the Fourth Defendant (“KGLI Asia”). KGLI Asia is said by the defendants to have provided administrative support to TPF between December 2017 and August 2020 pursuant to an agreement for the provision of such services dated 1 December 2017 (“the ASA”).
Briefly put, the plaintiffs plead in the ASOC that assets of TPF worth hundreds of millions of US Dollars held on trust by the GP have been misappropriated as part of an unlawful means conspiracy and/or dishonest breaches of trust and fiduciary duty and that each of the defendants has wrongfully participated in some or all of these defalcations, in some cases having knowingly received some or all of the proceeds thereof. Amongst the allegations made against the defendants is a claim that the GP made substantial improper payments using TPF monies that were not for the benefit of TPF.
Two of the other limited partners in TPF, Gulf Investment Corporation (“GIC”) and General Retirement and Social Insurance Authority of Qatar (“GRSIA”), who between them it is alleged invested 15.14 % of the total alleged investment in TPF, have brought claims against the Second and Third Defendants in the US State of Georgia alleging that those parties are guilty of dishonesty, deliberate breaches of fiduciary and unlawful means conspiracy. GIC and GRSIA have consented to a stay of their claims in the courts of Georgia pending determination of the instant proceedings which they support.
The two current directors of the GP (“the FFP Directors”) are individuals recruited from FFP (Directors) Limited. Mr Andrew Childe (“Mr Childe”) was appointed on 29 January 2020 and Mr Richard Lewis (“Mr Lewis”) on 28 October 2020, replacing Mr Christopher Rowland (“Mr Rowland”) who had been appointed at the same time as was Mr Childe.
The FFP Directors have no connection to any of the wrongdoing alleged in the ASOC and describe themselves as “independent directors”. In his third affidavit, Mr Lewis states that, fully cognisant of their fiduciary duties, they have conducted an intensive, forensic investigation into the actions of the GP and the former management team of TPF for the benefit of all the limited partners and not just the plaintiffs. The stated results of the FFP Directors' forensic investigation are set out in a series of memoranda issued to the limited partners in an update to the limited partners dated 29 May 2021, save for their investigations into the DIFC Proceedings Claim and the Lazareva Lobbying Campaign which are respectively dealt with in [300] –[345] and [346] – [399] of Mr Lewis's third affidavit. In their view, there is currently no cause to bring the derivative claims and even if TPF had meritorious claims, it would be necessary to consider whether the claims were worth pursuing on a cost/benefit analysis and, if so, whether TPF was in a position to pursue them or could raise funding to do so, and whether it would be in the best interests of TPF to do so.
The plaintiffs plead individual direct claims against the defendants for losses each has suffered as a limited partner in TPF by reason of the defendants' actionable involvement in the wrongful misappropriation of assets held on trust by the GP. Relying on section 33(3) ELPA, they also plead derivative claims against the GP and the other defendants on behalf of TPF in respect of the aforesaid alleged misappropriation of assets.
We first consider the direct claims brought against the GP, (D1), Mr Williams (D2), and Wellspring (D3). It is not necessary to consider the plaintiffs' claims against KGLI Asia (D4) for their losses from payments made to that entity under the ASA because the plaintiffs' counsel, Mr Allison KC, accepted that there is no direct claim against D4; see respondents' skeleton [48].
The plaintiffs plead that in breach of the statutory, contractual, common-law and fiduciary duties owed by the GP to TPF and the limited partners and pursuant to a conspiracy to injure TPF and the limited partners by unlawful means, the GP made very substantial payments using TPF monies that were not for the benefit of TPF and the limited partners. These payments were allegedly made to the following five recipients and/or for the following purposes: (i) Apache Asia Limited and its related Macau entity, Apache Asia Limitada (“Apache”) which received USD 58,528,399 from the GP, of which USD 45,850,000 was purportedly for services under an advisory agreement and USD 14,550,000 was directed to be paid to KGLI Kuwait; (ii) Wilfredo Placino who received USD 2,920,000 purportedly by way of “advisor fees”; (iii) lawyers and lobbyists acting for Ms Marsha Lazareva (a director of the GP from 8 March 2007 to 24 May 2018) and Mr Saeed Dashti (a director of the GP from 16 April 2007 to 24 May 2018); (iv) a group of Kuwaiti Service Providers, allegedly for services rendered, of which USD 14,070,000 was paid to Golden Shahin General & Trading Contracting Company (“Golden Shahin”), which is part of a group of companies associated with KGLI Kuwait and Mr Dashti; and (v) Wellspring, which received USD 59,990,461.30 (“the Wellspring Payment”) by way of a payment alleged to be due under a judgment given in proceedings brought by EMPEML against the GP and TPF in the Dubai International Finance Centre Court (‘the DIFCC”).
The alleged background...
To continue reading
Request your trial