Quilvest Finance Ltd Appellant/Defendant v Fairfield Sentry Ltd ((in Liquidation)) Respondent/Claimant

JurisdictionBritish Virgin Islands
CourtCourt of Appeal (British Virgin Islands)
JudgeMitchell, JA [AG.],Pereira, JA,Justice of Appeal [Ag.],Justice of Appeal,Don Mitchell,Janice M. Pereira
Judgment Date13 June 2012
Judgment citation (vLex)[2012] ECSC J0613-1
Date13 June 2012
Docket NumberHCVAP 2011/041 HCVAP 2011/043 HCVAP 2011/044 HCVAP 2011/045 HCVAP 2011/046 HCVAP 2011/047 HCVAP 2011/048 HCVAP 2011/049 HCVAP 2011/050 HCVAP 2011/051 HCVAP 2011/052 HCVAP 2011/054 HCVAP 2011/055 HCVAP 2011/056 HCVAP 2011/058 HCVAP 2011/059 HCVAP 2011/060 HCVAP 2011/061 HCVAP 2011/062
[2012] ECSC J0613-1

EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Janice M. Pereira Justice of Appeal

The Hon. Mr. Davidson Kelvin Baptiste Justice of Appeal

The Hon. Mr. Don Mitchell Justice of Appeal [Ag.]

HCVAP 2011/041

HCVAP 2011/042

HCVAP 2011/043

HCVAP 2011/044

HCVAP 2011/045

HCVAP 2011/046

HCVAP 2011/047

HCVAP 2011/048

HCVAP 2011/049

HCVAP 2011/050

HCVAP 2011/051

HCVAP 2011/052

HCVAP 2011/054

HCVAP 2011/055

HCVAP 2011/056

HCVAP 2011/058

HCVAP 2011/059

HCVAP 2011/060

HCVAP 2011/061

HCVAP 2011/062

Between:

On appeal from the Commercial Division

Quilvest Finance Limited
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] Caja De Ahorros Y Monte De Piedad De Madrid
[2] Deutsche Bank (Suisse) SA
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
SNS Global Custody BV
Appellant/Defendant
and
Fairfield Sentry Limited (In Liquidation)
Respondent/Claimant
Between:
Deutsche Bank Trust Company Americas
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] Bank Julius Baer & Co Limited
[2] Lloyds Tsb Bank
[3] Martello Nominees Limited (formerly Meespierson Nominees (Guernsey) Limited)
[4] ABN Amro Fund Services (Isle of Man) Nominees Limited (formerly Fortis (Isle of Man) Nominees Limited)
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
Wise Global Fund Limited
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] Lombard, Odier, Darier, Hentsch & CIE
[2] Mirabaud & CIE
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] Sg Private Banking (Suisse) SA
[2] Lombard, Odier, Darier, Hentsch & CIE
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] EFG Bank SA
[2] EFG Bank European Financial Group SA
[3] Pictet & CIE
[4] SG Private Banking (Suisse) SA
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] EFG Banks SA
[2] SG Private Banking (Suisse) SA
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
Pictet & CIE
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
Credit Suisse London Nominees Limited
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] Credit Suisse London Nominees Limited
[2] Buckmore Nominees Limited
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
Credit Suisse London Nominees Limited
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
Credit Suisse London Nominees Limited
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] UBS AG New York
[2] UBS (Cayman) Limited
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] UBS (Cayman) Limited
[2] UBS (Luxembourg) SA
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
[1] UBS (Cayman Islands) Limited
[2] UBS AG New York
[3] UBS (Cayman) Limited
Appellants/Defendants
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
UBS (Luxembourg) SA
Appellant/Defendant
and
Fairfield Sentry Limited (in Liquidation)
Respondent/Claimant
Between:
Fairfield Sentry Limited (in Liquidation)
Appellant/Claimant
and
[1] Alfredo Migani & 22 others
[2] Banco General SA/Banca Privada & 30 others
[3] Bank Julius Baer & Co Ltd & 26 others
[4] Bank Julius Baer & Co Ltd and others
[5] Arbitral Finance Inc and 23 others
[6] Bank Julius Baer & Co Ltd & 33 others
[7] Wise Global Fund Limited
[8] Credit Suisse London Nominees Limited
Respondents/Defendants
Appearances:

Mr. Mark Hapgood, QC, with him, Mr. Phillip Kite, Mr. Kissock Laing and Ms. Colleen Farrington, for the Harney Westwood & Riegels Appellants/Respondents

Mr. David Lord, QC, with him, Mr. Robert Foote and Ms. Claire Goldstein, for the Ogier Appellants/Respondents

Mr. Dominic Chambers, QC, with him, Ms. Arabella Di Iorio, for the Maples & Calder Appellants/Respondents

Mr. David Railton, QC, with him, Mr. Paul Webster, QC and Ms. Nadine Whyte, for the O'Neal Webster Appellants/Respondents

Mr. Michael Brindle, QC, with him, Mr. Andrew Westwood, Mr. William Hare and Mr. Robert Nader, for Fairfield Sentry Limited

Civil appeal - Commercial - Net Asset Value - Ponzi scheme - Trial of Preliminary Issues - What constitutes a certificate as to Net Asset Value per Share and Redemption Price within the meaning of Article 11(1) of Articles of Association of Fairfield Sentry - Mistake - Whether NAV per Share should be revalued - Contract - Mutual mistake - Common mistake - Whether surrendering shares was good consideration for payment of the Redemption Price - Whether contract voidable in equity or common law - Whether restitutionary claim available

Fairfield Sentry Limited ("Sentry") had invested a substantial amount of its funds with Bernard L. Madoff Investment Securities LLC ("BLMIS") on behalf of its shareholders between 1997 and 2008. BLMIS collapsed shortly thereafter when its proprietor, Bernard L. Madoff, admitted that it had been run as a Ponzi scheme. Both companies subsequently went into liquidation, BLMIS in the United States, and Sentry in the Territory of the Virgin Islands.

Sentry commenced a number of proceedings in the Virgin Islands against various former shareholders who had redeemed their shares in the company. The Articles of Association of Sentry stipulated that the price at which the shares were to be redeemed was to be calculated by reference to the company's Net Asset Value ("NAV"). Article 11 also provided that: "Any certificate as to the Net Asset Value per Share or as to the … Redemption Price therefor given in good faith by or on behalf of the Directors shall be binding on all parties."

Sentry argued that in redeeming the shares, the NAV had been calculated under a mistake since BLMIS was in fact operating a Ponzi scheme and Sentry's investments in BLMIS were lost from the date of their investment in the company. Accordingly, its NAV was at all times either nil or a nominal value, so that the aggregate redemption sums should have been either nil or nominal. Sentry therefore contended that the former shareholders had been unjustly enriched at its expense and were liable to make restitution to the company of the amounts paid to them when the shares were redeemed.

The former shareholders (the defendants in the court below), in their pleaded defences contended, in essence, that the redemption proceeds had been paid out under a certificate as to the NAV pursuant to Article 11 and as such was conclusive and binding on Sentry. They relied on various documents comprising emails, contract notes, monthly statements as well as computer screen shots ("the Documents") as constituting certificates for the purposes of Article 11. They also contended that in surrendering their shares they gave good consideration for the payment of the Redemption Price and as such this was a complete defence to Sentry's claim.

The Article 11 Defence and the Good consideration Defence formed the basis of preliminary issues which were tried by the court below. The trial judge found in favour of Sentry in respect of the Article 11 Defence but found in favour of the former shareholders on the Good Consideration Defence. He subsequently, pursuant to a summary judgment application made by one of the former shareholders, dismissed Sentry's claims. The former shareholders appealed the judge's findings in respect of the Article 11 Defence. Sentry appealed against the judge's findings in relation to the Good Consideration Defence and in respect of the summary judgment given against it dismissing its claims.

Held: dismissing the appeals against the learned trial judge's findings in relation to the Article 11 Preliminary Issues and upholding his finding on the Article 11 Defence; awarding one set of costs to Fairfield Sentry to be in two-thirds of the amount assessed below, and dismissing the appeal against the learned trial judge's finding in relation to the Good Consideration defence and the grant of Summary Judgment and awarding costs to the former shareholders (as one set of costs) to be fixed at two thirds of the amount as assessed below, that:

  • 1. Article 11(1) does not require that a certificate be signed. If this was the case, then the Article would have expressly so stated. The absence of a signature on a Document would not necessarily preclude it from being deemed a certificate for the purpose of Article 11(1).

  • North Shore Ventures Ltd. v Anstead Holdings Inc. and Others [2011] 3 W.L.R. 628 distinguished.

  • 2. The learned trial judge was right in holding that none of the Documents could have amounted to certificates. Firstly, the plain wording of the Article is that there can be a determination published without it having been certified. Secondly, the function that the Directors had delegated to Fairfield Greenwich and Citco was that of calculation; there is nothing in the documentation that indicates a delegation of either determination or certification. Thirdly, there is no reason why under Article 11 there cannot be an uncertified determination which is not binding; the plain meaning of the wording of the Article is that not every determination is intended to be binding on the parties. Fourthly, the mere stating of a precise price will not suffice for any Document to amount to a certificate. The learned trial judge was correct to find that a certificate must be something more than a simple statement. Lastly, the certificate must have been issued either by the...

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