Torchlight GP Ltd v (1) Millinium Asset Services Pty Ltd

• Jurisdiction: Cayman Islands
• Judge: Kawaley
• Judgment Date: 17 January 2018
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO. FSD 114 OF 2016 (IKJ)
• Date: 17 January 2018

Torchlight GP Limited

Plaintiff

and

(1) Millinium Asset Services Pty Limited

(2) Millinium Capital Managers Limited

(3) Thomas James Wallace

(4) Gregory Philippe Marshall

(5) Accident Compensation Corporation of New Zealand

(6) Nicholas Stuart Bagnall

(7) Crown Asset Management Limited

(8) Gary Traveller

(9) Sharon Burleigh

Defendants

Before:

The Hon. Justice Kawaley

CAUSE NO. FSD 114 OF 2016 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Application to set aside ex parte order granting leave to serve 5 ^th to 9 ^th Defendants out of the jurisdiction-abuse of process-whether serious issue to be tried-breach of partnership agreement and tortious conspiracy claims

Appearances:

Mr Tom Lowe QC, Ms Joanne Verbiesen and Ms Aleisha Brown of Harneys on behalf of the 5 ^th to 9 ^th Defendants

Mr John Wardell QC, Mr Andrew Mold, Mr Ben Hobden, Mr Erik Bodden and Mr Jordan McErlean of Conyers Dill & Pearman on behalf of the Plaintiff

IN OPEN COURT

Introductory

1 The Plaintiff is the General Partner of Torchlight Fund LP (“the Cayman Partnership”). It is the respondent in winding-up proceedings commenced against it in this Court on or about June 18, 2015 in Cause No. FSD 103 of 2015 (RMJ) (the “Petition Proceedings”). The co-petitioners in the Petition Proceedings are the 5 ^th Defendant (“ACC”), the 7 ^th Defendant (“CAML”) and Aurora Funds Management Limited (“Aurora”).

2 The 1 ^st Defendant (“MAS”) and the 2 ^nd Defendant are Australian companies alleged to be directed and controlled by the 3 ^rd Defendant (“Mr Wallace”). MAS is said to have engaged in a competing strategy with the Cayman Partnership in relation to the Lantern Hotel Group. The 4 ^th Defendant (“Mr Marshall”) is said to be the chief executive officer of Logic Fund Management Limited, and to be involved in advising a group of the Cayman Partnership's limited partners. It is alleged that Mr Marshall “harbours personal animus” towards the Plaintiff's chairman (“Mr Kerr”). The 1 ^st to 4 ^th Defendants are separately represented by Mourant Ozannes.

3 ACC is a New Zealand Crown entity responsible for that country's Accident Compensation scheme. The 6 ^th Defendant (“Mr Bagnall”) is ACC's chief investment officer and he is said, for the purposes of the imputation of the actions, knowledge and intentions involved in the present case, to be a directing mind of ACC. ACC and CAML are both limited partners of the Cayman Partnership. The 8 ^th Defendant (“Mr Traveller”) and the 9 ^th Defendant (“Ms Burleigh”) are said to have been at all material times the Chairman and General Manager of CAML.

4 The present proceedings were commenced against the 1 ^st to 7 ^th Defendants on July 26 2016.

The present applications

5 By Summonses dated September 9, 2016 and June 26, 2017, respectively, the Plaintiff applied for, inter alia, leave to serve the 1 ^st to 7 ^th and 8 ^th to 9 ^th Defendants, respectively, out of the jurisdiction. The Plaintiff obtained leave to serve the Applicants abroad through two ex parte orders:

• (a) an Order made by Robin McMillan J on September 15, 2016 (1 ^st to 7 ^th Defendants) (the “First Ex Parte Order”);

• (b) an Order made by myself on October 23, 2017 (8 ^th to 9 ^th Defendants) (the “Second Ex Parte Order”) joining these Defendants and granting largely ancillary leave to amend the Writ and Statement of Claim.

6 The 5 ^th to 7 ^th Defendants applied by Summons dated November 3, 2016 to set aside the First Ex Parte Order and that application was formally listed for hearing before me. Counsel sensibly agreed that because the issues in dispute were essentially the same, I should proceed as if the 8 ^th to 9 ^th Defendants had filed a corresponding application in relation to the Second Ex Parte Order.

7 As the 1 ^st to 4 ^th Defendants abandoned their own jurisdictional challenge, the Applicants were unable to plausibly contend that Cayman was not in general terms an appropriate forum. Accordingly, the attack on both Ex Parte Orders which was pursued at the inter partes hearing was based on the following main grounds:

• (1) the proceedings against the Applicants were an abuse of process because:

  • (a) they relied upon documents and/or information disclosed in the Petition Proceedings which were deployed in breach of the Plaintiff's implied undertaking to this Court not to use such documents (and information derived from them) for any collateral purpose, and

  • (b) the proceedings, particularly as regards the individual Defendants, were first threatened while the Defendants were actual and/or potential witnesses in the Petition Proceedings;

• (2) the Amended Statement of Claim (“ASOC”) did not disclose a serious issue to be tried as regards the relevant causes of action, the onus being on the Plaintiff to meet this limb of the legal requirements for obtaining leave to serve an overseas party not otherwise subject to the personal or territorial jurisdiction of this Court.

The Amended Statement of Claim: an Overview

8 The starting point for the Plaintiff's pleaded case against ACC and Mr Bagnall is the averment (paragraph 6) that ACC became a limited partner of the Cayman Partnership in the following circumstances:

• • in January 2010 ACC invested NZ$4.5 million in the ‘Southbury Notes’ (debt instruments in the parent of South Canterbury Finance Limited (“SCF”)) and subsequently became concerned about its ability to recover its investment when SCF's parent was restructured;

• • the General Partner of Torchlight Fund No 1 LP (the “NZ Partnership”), the predecessor of the Cayman Partnership, proposed a swap of ACCs Southbury Notes investment for an investment in the NZ Partnership;

• • ACC invested in the NZ Partnership primarily to mitigate its loss, rather than being motivated to invest in the long term closed investment structure which the NZ Partnership actually was. This represented a departure from its standard investment mandate.

9 As far as CAML is concerned, it is averred (paragraph 7) that CAML was incorporated in 2012 to acquire and manage the assets of failed companies which the New Zealand Government had supported in the wake of the Global Financial Crisis. One of those companies was SCF which held a NZ$30 million interest in the NZ Partnership.

10 The main claim is summarised in paragraph 9 of the ASOC, and is an unlawful means conspiracy which is said to have had the following elements 2 to it as far as the Applicants are concerned:

• • “Common Aims”, replacing the General Partner of the Cayman Partnership so that ACC and CAML could achieve an early exit;

• • overt acts: disclosing confidential information to journalists as part of a misleading media campaign, delaying the completion of the Cayman Partnership's audit, making false complaints to regulators, making ill-founded

  complaints against the Plaintiff as General Partner of the Cayman Partnership, and commencing the Petition Proceedings in furtherance of the Common Aims;

• • intention to cause harm (paragraph 96.2): this could be inferred because if the Common Aims were achieved, the Cayman Partnership would be prevented from realising the long term benefits of its assets and the Plaintiff deprived of its fee entitlements;

• • unlawful means (paragraph 96.3): breach of contract and/or confidence, procuring or inducing a breach of contract and/or confidence, and unlawful interference.

11 The key contractual provisions in the Cayman Limited Partnership Agreement (“ LPA”) which the Plaintiff relies upon include the following:

• • clause 4.7(a): limited partners may not get involved with management;

• • clause 4.10: restricted early exit rights for limited partners;

• • clause 15.5(a): duty to protect confidentiality of information about the Partnership and not to use confidential information to the detriment of the Cayman Partnership or any Partner.

The evidence

The Plaintiff's evidence on the first ex parte application

12 The first ex parte application for leave to serve out was supported by an affidavit sworn by an associate attorney with the Plaintiff's attorneys. The basis for the present proceedings being commenced was explained by the deponent as follows:

“12. As a result of a detailed review of the Petitioners' disclosure in May 2016, it became clear that the Petitioners do not have a genuine bona fide belief that the General Partner has been guilty of serious misconduct as alleged but have joined forces with a view to achieving a number of disparate aims.”

13 Based on the discovery materials obtained in the Petition Proceedings, the deponent explains the Plaintiff's case on conspiracy describing Mr Marshall and Mr Wallace as the “prime movers” and asserting that they approached ACC and CAML “ as early as 2013 with a view to drumming up support for a campaign against the General Partner”(paragraph 15). The deponent also makes reference to the June 14, 2016 “Conspiracy Letter of Claim” to which the Applicants' attorneys Harneys responded advising that the firm only acted for the Petitioners. The involvement of ACC is initially set out in five paragraphs over more than one page and the involvement of CAML is set out in three paragraphs over more than half a page. All that is initially said about Mr Bagnall personally is as follows:

“Mr Bagnall has been the head of investment at ACC since 1999. We understand that, until recently, Mr Bagnall was responsible for supervising the largest equity portfolio in New Zealand valued at about NZ$31 billion and that he regularly earns in the region of NZ$800,000 per annum, approximately two thirds of which is made up of his bonus.”

14 When the conspiracy is particularised later in the letter, it is clearly asserted that ACC was acting through Mr Bagnall and that the claim would be relied upon both independently and by way of defence in the Petition Proceedings. Very broadly, the complaint was that unfounded criticisms had been made...