Cairnwood Global Technology Fund, Ltd (in Voluntary Liquidation) Plaintiff v (1) Lane P Pendleton (2) Kirk P Pendleton (3) Thayer B Pendleton (4) Laird P Pendleton (5) Timothy P Lundberg (6) Nadia Aouad (7) Jean Marc Dubois (8) Cairnwood Group, LLC (9) Cairnwood Capital Management, LLC Defendants
| Jurisdiction | Cayman Islands |
| Judge | Foster J. |
| Judgment Date | 07 May 2007 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO 560 OF 2006 |
| Date | 07 May 2007 |
In The Matter of The Companies Law (2004 Revision)
And In The Matter of Cairnwood Global Technology Fund, Ltd (In Voluntary Liquidation)
The Honourable Mr Justice Foster (Actg)
The nine Defendants in this action have applied to set aside the order of 5 January 2007 (Henderson J) granting the Plaintiff leave to serve its writ of summons and statement of claim out of the jurisdiction of the Cayman Islands on the Defendants in several jurisdictions pursuant to GCR 0. 11,r. 1 and alternatively for a stay of the action. The Defendants contend that there is another forum in which the Plaintiffs claims can be suitably tried, namely the Superior Court of Fulton County in Atlanta, Georgia, USA (“the Georgia Court”) and that in the circumstances Cayman is not clearly the appropriate forum for the trial of the action. In their applications as filed the Defendants also sought an order that the service of the Plaintiffs writ and statement of claim should be set aside but those applications were not pursued. Accordingly, broadly speaking, this is what has become loosely known as a “forum non conveniens” case in which the application of the well known principles established in England inSpiliada Maritime Corporation v Cansulex Ltd [1987] 1AC 460, as subsequently generally adopted by this Court, are to be applied to the particular circumstances of this matter.
2.1 The Plaintiff, Cairnwood Global Technology Fund Ltd (“The Fund”) is a Cayman Islands company in voluntary liquidation. The Fund was incorporated under the Cayman Islands Companies Law on 9 March 2000 and has its registered office in George Town, Grand Cayman. The shares of the Fund are divided into Class A and Class B shares. The only Class A shareholder is Cairnwood Capital Partners LLC, a member of the Cairnwood group of companies owned and operated by members of an American family called Pendleton. There are 5 Class B shareholders, the largest of which is a Luxembourg registered company, Amana 1SA, (“Amana”), with 40% of the B shares. The beneficial owner of Amana is a Mr Mohammed Al-Amoudi, a citizen of Saudi Arabia. Before the Fund was put into voluntary liquidation in May 2006 its business was to act as a closed-end collective investment fund over a period of 5 years. Its purpose was to be the pooling of investors' funds to enable the investors to obtain profits or gains from the acquisition, holding and disposal of investments by the Fund in technology-related businesses. In short, the apparent intention of the Fund was typical of the many mutual funds for which the Cayman Islands are an internationally well known jurisdiction.
2.2 The 9 Defendants are all either former directors or officers of the Fund or, in the case of the 8th and 9th Defendants, they are respectively the former promoter/sponsor and the former manager of the Fund. The first 4 Defendants are all members of the Pendleton family. The 2nd Defendant, Mr Kirk Pendleton, is the brother of the 4th Defendant, Mr Laird Pendleton, and the 1st and 3rd Defendants, Mr Lane Pendleton and Mr Thayer Pendleton are the sons of Mr Kirk Pendleton. The 5th Defendant, Mr Timothy Lundberg, is the former Treasurer of the Fund. The 6th Defendant, Ms Nadia Aouad, and the 7th Defendant, Mr Jean Marc Dubois, were also directors and/or officers of the Fund at material times. The 8th Defendant, Cairnwood Group LLC, the promoter/sponsor of theFund, was at all material times owned or controlled by Pendleton family members together with Mr Lundberg and the 9th Defendant, Cairnwood Capital Management LLC, the former manager of the Fund, was also (with the exception of Mr Lane Pendleton) at all material times owned or controlled by Pendleton family members, together with Mr Lundberg. Cairnwood Capital Management LLC acted as manager of the Fund pursuant to a Management Agreement dated 1 April 2000, which was expressly governed by Cayman Islands law.
2.3 None of the Defendants are resident in the Cayman Islands. Mr Lane Pendleton is resident in Singapore. Mr Kirk Pendleton and Mr Thayer Pendleton are resident in Pennsylvania. Mr Laird Pendleton is resident in Massachusetts. Ms Nadia Aouad and Mr Jean Marc Dubois are resident in France and Mr Timothy Lundberg is resident in Georgia. Cairnwood Group LLC is a Delaware company with its principal place of business at Roswell in Georgia and Cairnwood Capital Management LLC is a Georgia company also with its principal place of business at Roswell in Georgia.
3.1 According to the uncontradicted affidavit evidence before the Court sworn on behalf of the Fund, Amana, the largest investor in the Fund, became increasingly concerned about the lack of accounting and other financial information provided to it and about the representations made to it by the Defendants and by Mr Lane Pendleton in particular concerning the Fund. By mid 2005 Amana had become sufficiently concerned that at an Extraordinary General Meeting of the Fund in January 2006 it procured the removal of the Pendleton family members, of Ms Nadia Aouad and of Mr Jean Marc Dubois as directors and/or officers of the Fund and appointed a new sole director. The Management Agreement with Cairnwood Capital Management LLC was also terminated. Prior to this Meeting, in December 2005, Amana obtained from this Court an ex parteinjunction against the Fund restraining the Fund from dealing with or disposing of any of its assets by making payments out of its bank accounts and restraining it from destroying or disposing of any documentation. The Fund, through its newly appointed sole director, then requested a Mr Gray, an English solicitor in the London office of the American law firm, LeBoeuf, Lamb, Green & MacRae, (“LeBoeuf”), who were already acting generally as lawyers for Amana, to recover all of the Fund's documentation and to investigate its activities.
3.2 On 3 April 2006 Amana commenced proceedings in the Georgia Court against Cairnwood Group LLC (the 8th Defendant and promoter/sponsor of the Fund), Cairnwood Capital Management (the 9th Defendant and former Manager of the Fund) and the four Pendleton family members (“the Georgia Proceedings”). I will make further reference to the Georgia Proceedings below.
3.3 At a further Extraordinary General Meeting on 3 May 2006 the Fund was put into voluntary liquidation and two members of the accounting firm, Rawlinson & Hunter, were appointed as joint liquidators. In June 2006, following investigations into the activities of the Fund by LeBoeuf, a letter was sent by LeBoeuf to each of the Defendants asking various questions about their management and direction of the Fund and making a number of claims against them for breach of their duties as directors, officers and manager respectively of the Fund. On 30 September 2006 the joint liquidators of the Fund who had been appointed in May 2006 resigned and were replaced by two others from the local firm, Kinetic Partners LLP. The present action (“the Cayman Proceedings”) was commenced by the Fund by writ and statement of claim issued on 29 December 2006 and, as noted above, ex parte leave was given to the Fund to serve the writ and statement of claim on the nine Defendants at their various locations out of the jurisdiction on 5 January 2007.
4.1 The Fund brings the Cayman Proceedings through its joint liquidators, who are independent professionals resident and carrying on business in the Cayman Islands. The Fund claims breaches of various contractual, common law, statutory and fiduciary duties, including breach of trust (which are all set out at length in the statement of claim) by the Defendants or some one or more of them, depending on the alleged duty concerned, as former directors, officers, promoter/sponsor or manager respectively of the Fund. The Fund alleges that the Defendants' true purpose in establishing and operating the Fund was to attract capital from outside investors which would be used to satisfy the financial obligations of the Pendleton family's Cairnwood group of companies which they were unable or unwilling to satisfy themselves. The Fund alleges in particular that some 18 payments of varying amounts out of the Fund's assets at various times in the period April 2000 to January 2006 were made or caused to be made by the Defendants either to themselves or to third parties in which they had a personal interest in breach of their duties to the Fund (“the Transactions”). The Fund alleges that the Transactions were made for no or no adequate consideration and/or were made by the Defendants for their own personal interests and not the best interests of the Fund and/or were made in breach of their respective duties to the Fund. The total of the Transactions amounts to US $ 13,872,404, which is the amount for which the Fund sues. The Fund also claims an account of profits together with interest and other related relief.
5.1 The Georgia Proceedings were commenced by Amana, the majority investor in the Fund, on 3 April 2006. Amana's claim is for return of its investment of US$10 million (less a small amount) in the Fund together with triple and/or punitive damages underGeorgia law. The Fund is not a party to the Georgia Proceedings. Six of the Defendants in the Cayman Proceedings, including all four of the Pendleton family members, are the Defendants in the Georgia proceedings (“the Georgia Defendants”). Mr Lundberg, Ms Aouad and Mr...
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