Palladyne International.Asset Management B.v v. Upper Brook (A) Ltd
| Jurisdiction | Cayman Islands |
| Judgment Date | 30 January 2019 |
| Date | 30 January 2019 |
| Docket Number | CAUSE NO: FSD 68 OF 2016 (NSJ) |
| Court | Grand Court (Cayman Islands) |
CAUSE NO: FSD 68 OF 2016 (NSJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Shares in Cayman companies held by Libyan state entities — whether written shareholder resolutions of the Cayman companies purportedly signed on behalf of the Libyan state entities were valid and effective — written resolutions purported to remove directors of and appoint new directors to the Cayman companies — effect of UN sanctions and asset freeze in respect if Libya on the written resolutions — whether those signing the written resolutions were, properly authorised to do so on behalf of the Libyan state, entities, as a matter of Libyan or Cayman law
Mr Mark Hapgood QC and Mr Brian Kennelly QC instructed by Walkers for the Plaintiff
Ms Dinah Rose QC and Mr Peter McMaster QC instructed by Appleby for the Defendants
This case relates to very substantial sums invested in 2006-2007 on behalf of the Libyan State in three Cayman Islands investment companies.
The case concerns in particular the validity of written resolutions of the shareholders of the Cayman Islands companies, signed in July 2014, purporting to remove the Plaintiff as a director of the companies (each a Resolution, together the Resolutions). The Plaintiff, a Dutch company, had been appointed to act as the investment manager of the companies and the investments acquired by them using the sums injected into the companies (by way of a subscription for shares). The shareholders were Libyan entities and the Resolutions were signed by individuals purporting to act for them the Plaintiff asserts that the Resolutions were void so that it remains a director of the companies and it seeks a declaration to that effect. It relies on two main arguments. First, that the Resolutions were void because the exercise by the Libyan shareholders of their shareholder rights to replace the Plaintiff involved or gave rise to a breach of the instrument giving effect in the Cayman Islands to the United Nations ( UN) asset freeze of Libyan Government assets (the Sanctions Point). Secondly, and in the alternative, the Plaintiff argues that the individuals who signed the Resolutions were not properly authorised to do so by the Libyan shareholders (the Authority Point).
The main Libyan investor was the Libyan Investment Authority (the LIA) which is the Libyan state's sovereign wealth fund. It is the shareholder of one of the Cayman Islands companies (the Third Defendant); the parent of a wholly owned subsidiary (the Libya Africa Investment Portfolio (the LAP)) which is the shareholder of another of the companies (the First Defendant); and a transferee of the beneficial interest in the shares in the other company (the Second Defendant). The transferor was another Libyan entity called the Libyan Foreign Bank (the LFB) (I refer to the LIA, the LAP and the LFB together as the Libyan Investors).
This case arises in large part because of the uncertainties that have existed, after the deposing of Colonel Gaddafi in October 2011, since October 2014 concerning the identity of the legitimate government of Libya. These uncertainties have given rise in turn to uncertainties and disputes as to who is properly appointed as a director of and has authority to act for the LIA and therefore who can now make decisions on its behalf (for example to confirm and ratify the Resolutions or if necessary authorise the passing of new resolutions and the appointment of new directors), Despite litigation on this issue in various jurisdictions (in particular England and Wales and Libya) the disputes continue and the issue remains unresolved so that there is no-one (and no single group) that is clearly entitled and authorised to act for the LIA. All those who claim to act for the LIA could combine and act together but they are not in agreement. Accordingly, the question of who is a director of the three Cayman Islands companies owned or controlled by the LIA must be determined by reference to the validity and effectiveness of the action taken in 2014. The LIA is not a party to these proceedings but it is the entity which arranged for the passing of the Resolutions and is in substance the defendant to these proceedings.
I have decided that the Plaintiffs claim must be dismissed. My conclusions can be summarised as follows:
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(a). the adoption and passing of the Resolutions did not constitute a breach and contravention of the prohibition in Article 10(4)(a)(i) of the Sanctions Order (as defined below) on dealing with the shares in the Cayman Islands companies (whether by reason of there being a use, allowing of access to or the making of other changes that would enable use of the shares or the assets and investments held by or for the Cayman Islands companies).
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(b). the adoption and passing of the Resolutions did not constitute a breach and contravention of the prohibition in Article 13 on participation in activities the object or effect of which was to circumvent the prohibition in Article 10(1) Of the Sanctions Order.
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(c). the Resolutions were validly adopted and made and the individuals who signed the powers of attorney which authorised the signing and passing of the Resolutions were validly authorised to do so.
As will become apparent, this case has involved a large number of factual disputes and factual uncertainties because of the incomplete state of the evidence and a large number of legal issues under both Cayman Islands and Libyan law. In order to provide a proper statement of the facts relevant to the issues in dispute and a framework for the legal analysis, I have I set out below a chronology and summary of the history and events as they appear to me based On the evidence that has been filed. To do justice to the many legal arguments that were relied on, I have also summarised the parties' submissions but have only dealt in the parts of the judgment that explain my reasons and analysis with those arguments that need to be dealt with in order for me to decide the case and reach a decision on the various points in dispute. As a result, because of the need to reconstruct the factual background and at least record the many legal points raised, this is unfortunately a very long judgment.
These proceedings were originally commenced by an originating summons dated 20 May 2016. However, on 16 November 2016 I granted the Defendants' application that the proceedings should proceed as if commenced by writ.
In accordance with that judgment and the directions order made on 10 January 2017 pursuant thereto, the parties have filed and served pleadings and have given discovery. The Plaintiff served its Points of Claim on 20 January 2017; the Defendants served their Points of Defence and Counterclaim on 10 February 2017; the Plaintiff served its Reply and Defence to Counterclaim on 3 March 2017; and the Defendants served their Reply to the Defence to Counterclaim on 17 March 2017, On 12 March 2018 the Plaintiffs served an Amended Points of Claim and an Amended Reply and Defence to Counterclaim.
On 23 May 2017, following an application by the Plaintiff, I ordered that, save in relation to the Defendants' applications for a declaration that on the passing of the Resolutions of the shareholders of the First, Second and Third Defendants the Plaintiff ceased to be a director and the individuals appointed as new directors became directors, the Defendants' counterclaim be stayed until after judgment on the Plaintiffs claim in these proceedings.
Shortly before the commencement of the trial an application was made by one of the individuals claiming to be the legitimate and properly appointed Chairman of the LlA's Board of Directors - Mr Abdulmagid Breish (Mr Breish) - for the appointment of a receiver over the LIA's shares in the Third Defendant - primarily on the basis that a receiver was needed to enable funding to be made available for the defence of these proceedings. This application was Opposed by Dr Ali Mahmoud Hassan Mohamed ( Dr Mahmoud), one of the claimants to the Chairmanship of the LIA, and the Plaintiff Primarily because it became clear that the requisite funding had been secured, I dismissed the application.
The trial took place between 12 and 23 March 2018, Following the trial there were two significant further developments. Post-trial submissions were filed on 17 April 2018. Then on 27 April 2018 the Plaintiff applied pursuant to Order 24, Rule 11(2) of the GCR, for an order that me Defendants give inspection of documents prepared by Deloitte which had been referred to in the Defendants' Re-Amended List of Documents,; which had also been served after the end of the trial. This application gave rise to the risk that it would be necessary to re-open the trial and required a determination of the application by reference to all the evidence filed at the trial. I gave directions for the filing of written submissions and evidence, to be done in the period to 19 June 2018. On 25 July 2018 J handed down my judgment (the Discovery Judgment) and dismissed the Plaintiff's application. I was then able to turn to preparing this judgment.
Before considering in further detail the parties to and the nature of the dispute, it is helpful to set out an outline of the developments that took place in relation to the government of Libya that form, the backdrop to these proceedings, I have prepared this by reference to the documentary and oral evidence and based on my findings of fact. As I explain further...
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