Between: Neoma Manager (Mauritius) Ltd, in its capacity as the manager of Neoma Private Equity Fund IV L.P. Plaintiff v (1) Abraaj Abof IV SPV Ltd (2) Mark Longbottom and Geoffrey Varga, as Trustees of the Creditors of Members of Abof IV Fund Investor Ltd, Dissolved (4) Columbus Ventures Ltd (acting by its joint receivers, Mark Shaw and Russell Smith) (6) Mena Vehicle Ltd (acting by its joint receivers, Mark Shaw and Russell Smith) Defendants and Abraaj General Partner VIII Ltd, in its capacity as the general partner of Neoma Private Equity Fund IV L.P. Additional Defendant
| Jurisdiction | Cayman Islands |
| Judge | Justice Raj Parker |
| Judgment Date | 10 March 2023 |
| Docket Number | FSD CAUSE NOs: 322 of 2020 (RPJ) 52 of 2022 (RPJ) |
| Court | Grand Court (Cayman Islands) |
in its capacity as the manager of
(acting by its joint receivers, Mark Shaw and Russell Smith)
(acting by its joint receivers, Mark Shaw and Russell Smith)
and
in its capacity as the general partner of
The Hon. Justice Raj Parker
FSD CAUSE NOs: 322 of 2020 (RPJ)
141 of 2021 (RPJ)
52 of 2022 (RPJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Calculation of limited partners' capital account balances — s.22 Exempted Limited Partnership Act (as amended) — Observations as to compliance with s.22 ELPA — Application for summary judgment — Application for case management directions — The order in which applications are to be considered.
Ms Clare Stanley KC instructed by Mr. Bamaby Gowrie and Mr. Blake Egelton of Walkers (Cayman) LLP on behalf of the First Defendant
Mr Sebastian Said and Mr Daniel Coelho of Appleby (Cayman) Ltd on behalf of the Fourth and Sixth Defendants
Ms. Sue Prevezer KC instructed by Mr. James Kennedy, Mr. Mark Russell, and Ms. Alexandra Murphy of KSG on behalf of the Plaintiff and Additional Defendant
Abraaj ABOF IV SPV Limited (“D1”) is a limited partner in the Neoma Private Equity Fund IV L.P. (the “Fund” or “Partnership”). Columbus Ventures Limited (“D4”) and Mena Vehicle Limited (“D6”) are also each limited partners in the Partnership.
The Additional Defendant to D1, D4 and D6's Counterclaims in litigation before this Court is Abraaj General Partner VIII Limited (the “GP”), the general partner of the Partnership.
Between 24 September 2008 and 13 July 2019, the manager of the Partnership was Abraaj Investment Management Limited (“AIML”). AIML also acted as the investment manager of the Abraaj Group and was responsible for the management of all of the funds of that group.
In 2018, certain financial irregularities were identified in the Abraaj Group and regulatory proceedings in Dubai and the US have followed. Certain former directors of the GP have faced and are facing allegations of serious wrongdoing.
Abraaj Holdings Limited (“AH”), the parent company of the Abraaj Group, was placed into provisional liquidation on 18 June 2018. AIML was placed into provisional liquidation on 18 July 2018. AH and AIML were placed into official liquidation on 11 September 2019.
On 14 July 2019, the Plaintiff, Neoma Manager (Mauritius) Limited (the “Manager”), was appointed as the new manager of the Partnership. An Amended and Restated Limited Partnership Deed (“ LPA”) was concluded on 14 July 2019.
The AH Joint Official Liquidators (“AH JOLs”) have concluded that the Abraaj Group was effectively operated as a single entity with little regard for the separate corporate personality of the various companies within the Abraaj Group, including the Partnership. The Manager was appointed against the backdrop of the Abraaj Group's collapse and serious allegations of fraud and mismanagement.
Pursuant to the new LPA, the Manager was charged with determining each limited partner's ‘Capital Account Balance’. Under clauses 11.1 (h) and 11.1 (h) (iii), the Manager undertakes “as soon reasonably practicable following the date of this Deed” to provide or procure the provision to each limited partner of “all relevant supporting documentation”. There is now litigation between the Manager as Plaintiff and D1, D4 and D6 (and D2) as Defendants in FSD 322 of 2020 (the “CAB proceedings”). The Manager is an entirely new entity and has no financial incentive or interest in the outcome of the CAB proceedings.
Clare Stanley KC appeared for D1. Sebastian Said appeared for D4 and D6. Sue Prevezer KC appeared for the Plaintiff and Additional Defendant.
On 27 May 2020, the Manager reissued the limited partners' Capital Account Balances, following which D1, along with 25 other limited partners representing approximately 30% of all limited partners, disputed the accuracy of the Manager's calculations. 1
In the case of D1, the Manager concluded (D1 says wrongly) that D1 had not made any of its capital contributions. The consequence was that D1's Capital Account Balance was negative (-US11.9 million), meaning that D1 has no economic interest in the Partnership.
D1 alleges (in its Defence), among other matters, that the Manager's calculation was fundamentally flawed not least because the Manager ignored the reality of the way that the Abraaj Group as a whole was operated. In addition, D1 also alleges that although the Manager had possession of some 300,000 documents, it failed to review at least 231,000 (77%) of them.
D1 contends that it was always the position that further time and information was required to properly calculate D1's Capital Account Balance and that the Manager's calculation and issuance of the Capital Account Balances following its appointment was premature. 2
In accordance with the machinery under the LPA, D1 issued an ‘Adjustment Notice’ on 21 October 2020, which triggered a review period whereby the Manager and D1 could seek to reach agreement on D1's Capital Account Balance.
No agreement was reached, and the Manager issued the CAB proceedings on 23 December 2020 to seek declarations as to the accuracy of its calculations.
On 6 August 2021, D1 issued its counterclaim against the Manager and the GP (as an Additional Defendant), 3 seeking relief under s.22 of the Exempted Limited Partnership Act (as amended) (the “ELPA”).
As against the GP, the counterclaim seeks an order pursuant to s.22 of the ELPA that the GP “do forthwith provide to the First Defendant true and full information regarding the state of the
D4 and D6 are also each limited partners in the Partnership. D4 and D6 act via their Joint Receivers who were appointed by Société Générale SA (“SocGen”). SocGen advanced a loan of US$100 million to AH on 24 September 2014, drawn down in full, on the security of D4's and D6's interests in the Partnership and allegedly on the strength of representations by the GP that D4 and D6 had fully paid up all of the drawdowns requested as at 22 September 2014.
D4 and D6 say that the GP provided signed extracts of the Partnership's register, to prove compliance with the standard secured finance obligation that the security interests in the form of D4's and D6's Partnership stakes were fully paid-up. D4 and D6 say that it is particularly unsatisfactory that the same GP, having induced SocGen to lend to AH on the basis that their stakes were fully paid-up, should now contend (as it does in the CAB proceedings through its new Manager) that there is no evidence that the stakes were ever funded at all. They make similar counterclaims in respect of s.22 ELPA.
D1 by summons filed 4 April 2022, D4 and D6 by summons filed 3 March 2022, now apply for summary judgment on their counterclaims under s.22 of the ELPA against the GP and for summary judgment against the Manager under clauses 5.1(h) and 11.1(h)(iii) of the LPA against the Manager.
The order sought by D1 is (inter alia) for declaratory relief as to D1's entitlement under s.22, and for the provision of “true and full information regarding the state of the business and financial condition of [the Partnership]” (the “s.22 Information”).
D1 contends that notwithstanding numerous demands having been made by D1 under s.22 for many months, both the GP and the Manager have refused to comply with those demands, and none of the s.22 Information has been forthcoming.
The s.22 Information D1 requires, it says, will include a large number of documents, but it will go further than just documents; it will require the GP (and therefore its agent, the Manager) to provide “ information”, which will include explanations and answers to certain questions which have been put by D1 in its s.22 requests.
D1 also says that the s.22 Information which has been sought is wider than just information as regards the calculation of the Capital Account Balances. The s.22 Information as sought is “true and full information regarding the state of the business and financial condition” of the Partnership.
D1 says it follows that documents and information regarding the Manager's calculation of the Capital Account Balances are likely to be included in the s.22 Information when it is provided by the GP.
D1 says whilst it is possible that some documents which are relevant only to the calculation of the Capital Account Balances will not be included in the s.22 Information as provided because the GP might say that those documents do not concern the “state of the business and financial condition of the Partnership”, those additional CAB documents will fall to be disclosed by the Manager in its discovery in the CAB proceedings, albeit that they will not have been disclosed under s.22.
D1 says there is likely to be a large number of documents in the s.22 Information which have little or no relevance to the calculation of the CAB. These non-CAB documents will not fall to be disclosed by the Manager in its discovery in this action but must be disclosed by the GP under s22.
D4 and D6 support D1's arguments for summary determination of the entitlement to s.22 Information and say the issues raised concern...
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