Cannonball Plus Fund Ltd v Dutchess Private Equities Cayman Fund Ltd - Judgment

¶ ```html IN THE GRAND COURT OF THE CAYMAN ISLANDS FINANCIAL SERVICES DIVISION Cause No.：FSD 185 of 2016(RMJ) IN THE MATTER OF SECTION 46 OF THE COMPANIES LAW (2016 REVISION) AND IN THE MATTER OF DUTCHESS PRIVATE EQUITIES CAYMAN FUND LTD BETWEEN： CANNONBALL PLUS FUND LTD AND： DUTCHESS PRIVATE EQUITIES CAYMAN FUND LTD IN OPEN COURT Appearances： Mr. Tom Lowe QC instructed by Ms. Laura Hatfield and Mr. Tom Wright of Solomon Harris for the Plaintiff Mr. Fraser Hughes of Conyers，Dill & Pearman for the Defendant Before： The Hon. Justice Robin McMillan Heard： 22 and 23 March 2018 Draft Judgment Circulated： 31 May 2018 Judgment Delivered： 12 June 2018 HEADNOTE between a claim under registration for legal title and the second form of the section 46 of the Companies Law of a vaof recognize the scope of the Court's jurisdiction by validat the distinctio Rectificatio scope of the Co The need for the Court to the justice of the case 180612 Cannonball Plus Fund Ltd - Judgment Page 1 of 20 ```
```markdown # REASONS FOR JUDGMENT ## Introduction

¶ [1] On 12 April 2018 the Court gave Judgment in relation to an Originating Summons dated 3 November 2016, granting to the Plaintiff in these proceedings the rectification relief sought.

¶ [2] The Originating Summons sought the following Orders that:

¶ [1] Pursuant to Section 46 of the Companies Law (2016 Revision) (the ‘Law’), the Register of Members of Dutchess be rectified by entering the name of Cannonball Plus Fund Ltd as holder of 1,855,9022 Base Series 7 shares on the basis of a transfer dated 15 April 2016 of such shares from ABN Amro Global Custody Services N.V to the Plaintiff.

¶ [2] The cost of this Originating Summons be paid by Dutchess.

¶ [3] There be such further or alternative relief granted as the Court shall think fit.”

¶ [3] Cannonball Plus Fund Ltd. (“the Plaintiff”) is an open-ended investment fund incorporated under the laws of the British Virgin Islands and with its registered offices at Circle Trust Services (BVI Limited, Rodus Building, 4th Floor, PO Box 4064, Road Town, Tortola.

¶ [4] Dutchess Private Equities Cayman Fund Ltd. (“the Defendant”) is an exempted limited company incorporated under the laws of the Cayman Islands on 17 November 2006, with its registered offices at Codan Trust Building, PO Box 2681, Grand Cayman, Cayman Islands, KY1-1111, Cayman Islands. ## The Background

¶ [5] In early 2007, the Plaintiff invested US$ 2,500,000 in Dutchess Ltd., in exchange for the Shares referred to in Paragraph 1 of the Originating Summons (the “shares”). The Plaintiff made this investment through ABN Amro Global Custody Services N.V. (“ABN Amro”) (formerly Fortis Bank (Nederland) N.V.). ABN Amro entered into a subscription agreement (the “Subscription Agreement”) with Dutchess Ltd., on behalf of Cannonball Plus. As a result, the Shares are registered in the name of ABN Amro for the benefit of Cannonball Plus.

¶ [6] The Defendant is the feeder fund in a Master/Feeder structure. The master fund is Dutchess Private Equities Fund Ltd. (the “Master Fund”), also an exempted limited company incorporated under the laws of the Cayman Islands. The Defendant invested into the Master Fund, as did Dutchess Private Equities Fund LP, a Delaware partnership (the “Onshore Feeder”).

¶ [7] On 21 June 2011, the Plaintiff and others, including Cannonball Fund, Ltd., another beneficial owner of shares in Dutchess Ltd. (collectively, with Cannonball Plus, the “U.S. Cannonball Plaintiffs”), filed a derivative lawsuit in the Massachusetts Superior Court (“the U.S. Proceedings”), for and on behalf of Dutchess Ltd., against, among others: 7.1 Dutchess Capital Management LLC (“Dutchess Capital Management” or “DCM”), the Investment Manager to Dutchess Ltd., with full discretion over the investment of Dutchess Ltd.’s assets; 7.2 Dutchess Advisors LLC (“Dutchess Advisors”), a consultant to companies in which Dutchess Ltd. invested; 7.3 Michael Novielli and Douglas Leighton, citizens of New York and Massachusetts, respectively, and the only two Directors of Dutchess Ltd. and the principals in Dutul Managemess Adviso rs; and 257.4 Theodore Smit of Massancc, citizen of Massachusetts, Officer an member of the Investment Committee of Dutchess Capital Management and Vice President of Business Development for Dutchess Advisors (collectively, Novielli, ``` ```html 257.4 Theodore Smit of Massancc, citizen of Massachusetts, Officer and member of the Investment Committee of Dutchess Capital Management and Vice President of Business Development for Dutchess Advisors (collectively, Novielli, ``` ```latex \begin{equation} \text{257.4 Theodore Smit of Massancc, citizen of Massachusetts, Officer and member of the Investment Committee of Dutchess Capital Management and Vice President of Business Development for Dutchess Advisors (collectively, Novielli,} \end{equation} ``` ```markdown 180612 Cannonball Plus Fund Ltd - Judgment Page 3 of 20 ```
Leighton, and Smith are referred to herein as the “Individual Defendants” and, collectively, Dutchess Capital Management, Dutchess Advisors, and the Individual Defendants are referred to herein as the “Dutchess Defendants”). 7.5 Dutchess Ltd., the Master Fund and the Onshore Feeder were named as nominal Defendants.

¶ [8] In the Complaint in the U.S. Proceedings (the “Complaint”), the U.S. Cannonball Plaintiffs alleged that Dutchess Capital Management and the Individual Defendants breached their fiduciary duties to the Defendant by causing the Defendant to invest in failing companies in violation of Dutchess Ltd.’s stated investment strategy and conflict of interest policies for the purpose of the Individual Defendants gaining control of those companies (the “Portfolio Companies”) and using such Portfolio Companies to line their pockets at the expense of Dutchess Ltd. Specifically, the Complaint alleges that the Individual Defendants extracted value from the Portfolio Companies through compensation for serving as board members, through causing the Portfolio Companies to engage in lucrative transactions with companies in which the Individual Defendants had a financial interest, including Dutchess Advisors, and through inflating the value of the Portfolio Companies for the purpose of increasing the amount of management fees paid to Dutchess Capital Management and the Individual Defendants did not disclose their conflicts of interest or the compensation they were receiving and that, eventually, as a result of these breaches of fiduciary duty, Dutchess Ltd.’s returns began to suffer and Dutchess Capital Management had to write down millions of dollars in losses. The shareholders of Dutchess Ltd., including Cannonball Plus, are said to have lost nearly all of their investments in Dutchess Ltd. The Complaint also alleges unjust enrichment against the Dutchess Defendants. Dutchess Defendants filed a Motion to Dismiss (the “Motion to Dismiss”) raising for the first time a new defence that, because the U.S. Cannonball Plaintiffs are beneficial
180612 Cannonball Plus Fund Ltd - Judgment #### Page 5 of 20

¶ [1] shareholders in the Defendant but not registered shareholders, they do not have standing under Cayman law to assert a derivative claim against the Defendant (the “Standing Defence”).

¶ [2] Upon learning of the Standing Defence, Cannonball Plus decided to request that ABN Amro transfer to Cannonball Plus the Shares that ABN Amro was holding as a nominee on behalf of Cannonball Plus. On 14 April 2016, ABN Amro executed the stock transfer form which, when fully executed, was sent to the Administrator of Dutchess Ltd., Opus Fund Services (the “Administrator”). On 9 June 2016, the Administrator confirmed, by email that it had completed the requested transfer, effective as of 1 April 2016.

¶ [3] On 4 April 2016, in its Reply Brief (the “Reply Brief”) in support of the Motion to Dismiss the Dutchess Defendants stated that the Board of Dutchess Ltd., which consists solely of Novielli and Leighton, would block any attempt to have the legal title in the Shares transferred to the Cannonball Plaintiffs because the Board had determined on its own that the U.S. Proceedings are “frivolous”. The Dutchess Defendants asserted they had the power to block the transfer under what they asserted was Article 12.5 of Dutchess Ltd.’s Articles of Association. That Article provides:

¶ [4] “12.5 The Board may in its absolute discretion and without assigning any reason therefor refuse to register the transfer of a share. If the Board refuses to register a transfer of any share the Secretary shall, within three months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal.”

¶ [5] At a 20 June 2016 hearing in the U.S. Proceedings, U.S. Counsel for the Dutchess Defendants stated that the transfer had been rejected.

¶ [13] Thus, the Plaintiff alleged that the facts show that Leighton and Novielli, two individuals who are Defendants in their personal capacities and who are financially interested in co-Defendants Dutchess Capital Management and Dutchess Advisors, rejected the transfer.

¶ [14] On 29 September 2016, the Judge presiding over the U.S. Proceedings, Judge Mitchell H. Kaplan, issued a ruling on the Motion to Dismiss. Judge Kaplan found that, under Cayman law, only a registered shareholder has standing to bring a derivative suit and that only the Cayman Islands Court has the power to decide whether the Shares should be ordered registered in the name of Cannonball Plus. Judge Kaplan, however, did not hide his displeasure with the tactics being used by Dutchess Defendants [pages 144 to 153 of Tab 20, Bundle B1]:

¶ [11] "Novielli and Leighton have stated that they will use their control over Dutchess Ltd. to deny the Cannonball Plaintiffs the opportunity to become the registered shareholders of the shares that they beneficially own, an act which would cure the jurisdictional issue and allow the case to be adjudicated on its merits... The Court is not pleased by the posture of this case or its apparent inability to itself resolve this jurisdictional issue. Were it empowered to do so, it would have no problem finding that it was an abuse of discretion for the defendant Board members to decide for themselves that the claims brought against them individually are 'frivolous' and, therefore that it is Dutchess Ltd.'s best interest that they refuse to register the shares in order to prevent those claims from being decided on the merits. That is a far cry from the independent review by disinterested parties of the value of a derivative claim that can result in its dismissal when brought on behalf of a Massachusetts corporation under G.L c. 156D, & 7.44.

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```html 1 Ltd. [1942] 1 All ER 542，543. Having read that decision and considered it in the 2 circumstances of this case，including the timing of the Dutchess Defendants' second 3 standing motion，the court is not persuaded that it supports their contention. In any 4 event，the Court will stay entry of a judgment dismissing the derivative claims for 5 a reasonable period in which the Cannonball Plaintiffs may pursue a motion under 6 Section 46 of the Cayman Islands Companies Law before the Grand Cayman 7 Islands. As noted above，registration of shares in a Cayman Island Company before 8 the case is decided on the merits has been held to cure the jurisdictional problem. 9 See Stena BV，supra." 10 15. It must be carefully noted at this juncture that in its written submissions to the learned 11 Judge dated 4 April 2016，exhibit JH1 to the First Affidavit of John F. Hagan Jr.，it is 12 categorically stated on behalf of the Defendant by its attorneys that the applicable 13 relevant provision was section 12.5 of the Articles of the Defendant Company. 14 16. It has subsequently been conceded by the Defendant in the present proceedings before the 15 Court that this representation was entirely wrong，and in effect that the learned Judge had 16 been misled. 17 17. In fact，the applicable and relevant provisions are to be found in Article 10 of the Amended 18 and Restated Articles of Association of the Defendant，amended and restated by way of a 19 shareholders' Special Resolution dated 28 December 2006 (the "Amended Articles"). 20 18. Article 10 in its entirety states： 21 "10. TRANSFER OF SHARES 22 10.1 Subject to such of the restrictions of these Articles as may be applicable，any 23 Member with the prior written consent of the Board of Directors，which consent 24 may withheld in 25 dispinafter "tra 26 be given or its sole ( 27 The transferor shall be deemed to remain the holder of such shares until the name 180612 Cannonball Plus Fund Ltd - Judgment ```
```html 1 of the transferee is entered in the Register in respect thereof. An instrument of 2 transfer need not be signed by or on behalf of the transferee. 3 10.2 No transfer of shares may be made if (i) as a result of such transfer either the 4 transferor or the transferee of such shares would hold less than the minimum 5 number of shares as the Directors may from time to time specify or (ii) such transfer 6 would in the opinion of Directors result in a breach of any restrictions imposed by 7 the Directors under these Articles. 8 10.3 The Directors may decline to recognize any transfer, unless the instrument of 9 transfer is deposited at the Office or such other place as the Directors may appoint, 10 accompanied by the certificate, if any, for the shares to which it relates, and such 11 other evidence as the Directors may reasonably require to show right of the 12 transferor to make the transfer. 13 10.4 The registration of transfers may be suspended at such times and for such periods 14 as the Directors may from time to time determine provided always that such 15 registration shall not be suspended for more than thirty days in any year. 16 10.5 All instruments of transfer which shall be registered shall be retained by the 17 Company, but any instrument of transfer which the Directors may decline to 18 register shall (except in the case of fraud) be returned to the person depositing the 19 same. 20 10.6 Any attempt to transfer Shares other than in accordance with the provisions of these 21 Articles may subject such Shares to a compulsory redemption." 22 19. This was a most unfortunate omission, especially given that amongst the matters upon 23 which the Plaintiff seeks to rely is that both the Defendant and Mr. Novielli and Mr. 24 Leighton, th Directors 25 hemselves proof by re 26 20. The Plaintiff's Originating Summons has been mentioned before this Court on several 27 occasions, and during the course of those hearing the Court has made enquiry of the parties 180612 Cannonball Plus Fund Ltd - Judgment Page 8 of 20 ```
```markdown as to whether there was any scope for resolution of the Cayman Islands proceedings. Ultimately, however, it is fair to state that those enquiries have not resulted in such an outcome.

¶ [21] Accordingly on this occasion the Plaintiff invited the Court to determine this immediate matter by reliance upon the course of events which transpired in relation to a Stock Power form dated 15 April 2016 whereby it claims ABN Amro for value received irrevocably authorised the Defendant to transfer certain capital stock of the Defendant to the Plaintiff as transferee.

¶ [22] On 12 April 2016 Mr. Dennis Niezen of ABN Amro sent the following email message to Opus Fund Services (“Opus”) acting on behalf of the Defendant: “Dear all, We would like to transfer our holding in Dutchess to the underlying client. Please find attached the holding involved. Please note this transfer would not involve a change in beneficial ownership as the securities would be transferred to Cannonball Plus Fund Ltd, we would only remove the custodial company. Can you please send the related documents that are required to process this transfer? Thanks in advance, Dennis Niezen”

¶ [23] This appears to have been acknowledged in an email response from Ms. Amelia Vacik of Opus, addressed to ABN Amro and copied to the Plaintiff. The message, headed “Dutchess Private Equity Cayman Fund Ltd,” simply states: “Good morning, Please see attached. Thank you. Sincerely, Amalia Vacik” 180612 Cannonball Plus Fund Ltd - Judgment Page 9 of 20 ```
```html 1 Investor Relations Supervisor”. 24. Then on 26 April 2016，Mr. Andrew Hoffman of the Plaintiff sent an email to Ms. Vacik 3 as follows： 4 “Hi Amelia， 5 Here is the signed stock transfer form. The updated sub docs and signature page. The 6 version of adobe I have does not allows me to merge documents so please let me know if 7 you need the signature page merged with the rest of the sub docs or if separately as above 8 is ok. 9 Please confirm receipt and that everything is in good order. 10 Many thanks for your help. 11 Andrew 12 Andrew Hoffman 13 Director”. 14 25. It would appear that the signed stock transfer form to which reference is made was at least 15 a copy of the Stock Power form dated 15 April 2016. 16 26. Then also on 26 April 2016 Ms. Vacik emailed ABN Amro，copied to the Plaintiff，in these 17 terms： 18 “Good morning， 19 I can confirm receipt - we will process and follow up if we have questions. Thank you! 20 Sincerely， 21 Amelia Vac 22 ik 23 Investor Relations Supervisor”. 27. There then followed a short series of email messages in June 2016. 180612 Cannonball Plus Fund Ltd - Judgment Page 10 of 20 ```
```html 1 28. On 9 June 2016 Ms Vacik wrote to Mr. Hoffman of the Plaintiff: 2 “Hi Andrew, 3 I confirm that we have processed the transaction. Thank you! 4 Sincerely, 5 Amelia Vacik 6 Investor Relations Assistant Manager”. 7 29. Mr. Hoffman replied accordingly also on 9 June 2016: 8 “Hi Amelia, 9 One final question. Is there any contract note or paperwork that we could have that would 10 document the assignment? 11 Andrew 12 Andrew Hoffman 13 Director”. 14 30. Ms. Vacik in turn responded on 9 June 2016 as follows: 15 “Hi Andrew, 16 As the transaction was processed for 4/1 and the fund’s reporting is quarterly, you should 17 expect confirmation during the third quarter. I do not have an estimate at this time. Thank 18 you! 19 Sincerely, 20 Amelia Vac 21 ik Investor Relations Assistant Manager” 180612 Cannonball Plus Fund Ltd - Judgment Page 11 of 20

¶ [31] Up to this point every aspect of the transaction appears to have proceeded in a straightforward manner.

¶ [32] However, a difficulty then arose in that on 20 June 2016 Mr. Mike Canni, described as COO of Opus, wrote to Mr. Ted Smith of the Defendant, copied to Ms. Vacik and Mr. Matthew Iverson in these terms: 7 Dutchess Cayman_2016.04.01_Cannonball Plus -Full Transfer.pdf 8 Hi Ted, 9 Per our conversation, we are rejecting the attached transfer request and will remove it from our pending transaction list. 11 If there are any changes please let Amelia know. 12 Thank you, 13 Mike 14 Mike Canni 15 COO".

¶ [33] Mr. Iverson is an attorney for the Dutchess Defendants.

¶ [34] In an Affidavit dated 13 January 2017 Mr. Theodore Smith, stated at paragraph 7: 20 "On June 20, 2016, DCM learned that a registered owner of some of the Company's non-voting shares had requested to transfer some of its shares to the Company's administrator to reject that transfer request." ```
```html 1 35. DCM was Dutchess Capital Management， the investment manager for the Defendant. 2 36. What is perhaps surprising is that Mr. Smith attributed the reason for rejection to be that 3 the share owner had not sought the Directors’ prior consent to the transfer. 4 5 37. This characterization clearly borrows from the wording of Article 10.1 of the Amended 6 Articles， even though at the relevant time the Defendant and its Directors were unaware of 7 the existence of Article 10. 8 9 10 38. In fact， the Dutchess Defendants had indicated to His Honour Judge Kaplan that， the 11 Dutchess Defendants were relying in the U.S. Proceedings completely on a form of the 12 Articles which it is now clear， no longer existed. Under that obsolete provision， the 13 Defendant Board of Directors wrongly believed and asserted that it may in its absolute 14 discretion and without assigning any reason refuse to register the transfer of a share. 15 16 39. The right to refuse registration as such has now gone and it has been replaced by a right of 17 refusal to consent to any assignment prior to that assignment resulting in a formal transfer 18 of shares. 19 20 40. This distinction is factually important and the failure of Mr. Smith to make that distinction 21 clear is a matter of some disappointment and even dismay. 22 23 41. It is in these circumstances that Mr. Tom Lowe Q.C. on behalf of the Plaintiff makes this 24 submission at paragraphs 8 and 9 of the Plaintiff’s Skeleton Argument： 25 268 Can s’ primary 27 refuse the assignment. The assignment already occurred when they did not take this Page 13 of 20 180612 Cannonball Plus Fund Ltd - Judgment ```
```html 1 point and encouraged Cannonball Plus to bring proceedings before this Court 2 under Sect. 46 to have the transfer that had already taken place be registered. 3 9 The Company has now waived its right to refuse a transfer or is estopped from 4 refusing to consent to a transfer of title. Under its present Articles produced in these 5 proceedings there is no longer any basis on which Cannonball Plus’ transfer of 6 registered title can be refused." 7 The Governing Law 8 10 42. The relevant governing provisions of the Companies Law (2016 Revision) are set out at 11 section 46 in this manner: 12 13 46. If the name of any person is, without sufficient cause, entered in or omitted from 14 the register of members of any company, or if default is made or unnecessary delay 15 takes place in entering on the register the fact of any person having ceased to be a 16 member of the company, the person or member aggrieved or any member of the 17 company or the company itself may, by motion to the Court, apply for an order that 18 the register be rectified； and the Court may either refuse such application with or 19 without costs to be paid by the applicant or it may, if satisfied of the justice of the 20 case, make an order for the rectification of the register, and may direct the company 21 to pay all the costs of such motion, application or petition, and any damages 22 the party aggrieved may have sustained. The Court may, in any proceeding under this 23 section, decide any question relating to the title of any person who is a party to 24 such proceeding to have his name entered in or omitted from the register, whether 25 such question arises between two or more members or alleged members, or between 26 any members，or alleged members and the company and generally the Court may 27 in aceeding，dening，re 28 to de rectificati 29 Provided that the Court may direct an issue to be tried，on which any question of 30 law may be raised. 180612 Cannonball Plus Fund Ltd - Judgment Page 14 of 20 ```
```html 1 2 43. This is a complex section and it appears to this Court that it forms what is essentially a self-contained code for the determination of disputes as to the narrow issue of improper entry, or omission of entry, in the company register. 5 6 44. By way of amplification, the Plaintiff has drawn to the attention of the Court the equitable nature of the remedy of rectification, stating that in Trevor v. Whitworth [1887] 2 App Case 409 at page 440 the House of Lords held that the words “if satisfied by the justice of the case” are “not mere idle words”. Instead, the House of Lords said, these words show “that the Court is bound to go into all the circumstances and to consider what equity the applicant has to call for its inter-position.” 12 13 45. In the Defendant’s Fourth Skeleton Argument dated 21 March 2018 (misstated as 2017) Mr. Fraser Hughes emphasised at paragraph 15 that the Articles operate as a statutory contract between a company and its registered shareholders, and as such ABN Amro was (and remains) bound by the terms of Article 10. This position is maintained notwithstanding the fact that at the relevant time neither of the Directors even knew that Article 10 existed. 19 20 46. It also was pointed out by Mr. Fraser Hughes that none of the material correspondence was copied to the Defendant or its Directors although in light of the responsibilities exercised by Opus as administrator it is hard to see the logical relevance or necessity to do so. 23 24 47. The contention that the administrator’s “processing” had any legal implications is 25repudiated by Hughes. 26 27 48. The Defendant submits at paragraphs 43-44: 28 ```
```html 1 43. The present issue is whether Cannonball has an entitlement to have the legal shareholding transferred in its name. If it did have such a right, notwithstanding that the directors have refused the share transfer, Article 10.1 (requiring directors’ prior consent) would be meaningless as ABN Amro could transfer its legal rights without first obtaining director consent. 2 44. The facts and relevance of the Nilon Limited and another v Royal Westminster Investments S-A 2，UKPC [2015] (“Nilon”) decision are discussed at length in paragraphs 36 to 42 of Dutchess’ 19 April 2017 Skeleton.” 9 10 49. The following passages from the Nilon case were cited in the Skeleton Argument: 11 37 There are two points which emerge from the cases. The first is that from the earliest days of the legislation, the courts have made it clear that the summary nature of the jurisdiction makes it an unsuitable vehicle if there is a substantial factual question in dispute：eg Re Russian (Vyksounsky) Iron Works Company，Stewart’s Case (18866) LR 1 Ch App 574，585-586；Re Heaton Steel and Iron Company，Simpson’s Case (1869) LR 9 Eq 91. In such a case an issue may be directed to be tried (Re Diamond Rock Boring Co Ltd，Ex p Shaw (1877) 2 QBD 463，at 484) or the application may be adjourned or stayed (Re South Kensington Hotel Company Limited，Braginton’s Case (1865) 12 LT (NS) 259)，but it may also be dismissed or struck out：Re Hoicrest Ltd [2000] 1 WLR 414，at 420，citing Re Greater Britain Products Development Corporation Ltd (1924) 40 TLR 488，where it was said (at 489)： 23 24 “Where it was clear that there was something to be answered and something to be investigated，the ordinary course，as far back as the court had been able to trace，had been for the judge to dismiss the summons or but to leave party to bring his action in the ordinary way，and not to have any order made in deciding the case for the defendant to have his action adjourned，or to have his appeal allowed，or to have his appeal dismissed，or to have his appeal allowed，or to have his appeal dismissed，or to have his appeal allowed，or to have his appeal 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Re Hoicrest Ltd stands alone in being an actual decision which turned on the question whether proceedings for rectification are a permissible vehicle for determining a dispute about beneficial ownership, and whether they can be used not only by a person seeking registration of a share transfer, but also by a person claiming an order for transfer of shares. In the view of the Board, proceedings for rectification can only be brought where the applicant has a right to registration by virtue of a valid transfer of legal title, and not merely a prospective claim against the company dependent on the conversion of a contract. It follows that Re Hoicrest Ltd was wrong as a matter of principle, however sensible it might have been as a matter of case management. The claim form seeks an order that the register be rectified forthwith to give effect to what is described as the true and proper state of affairs pertaining to it, in accordance with the terms of the Joint Venture Agreement, by entering the names of the Mahtani parties as the legal owners of the relevant numbers of shares in Nilon. The Mahtani parties have no such present right, which could only arise after they had been successful in their principal claim against Mr. Varma, and only after he had been ordered to procure the issue and allotment of the shares to them. In these proceedings the Mahtani parties have no arguable case to a present right to rectification, and there is therefore no claim against Nilon to which Mr. Varma can be a necessary and proper party." Mr. Lowe's response, however, is an extremely narrow one, stated concisely at paragraph 10 of the Plaintiff's Skeleton Argument of 20 March 2018: "The Company reliance on Nilon v Royal Westminster Investments SA [2015] UKPC 2 is wholly misconceived. What the Privy Council clearly stated was that a beneficial interest in shares is subject to registration to the legal interest." 180612 Cannonball Plus Fund Ltd - Judgment Page 17 of 20
```html 51. In terms of paragraph 51 of the Nilon decision, Mr. Lowe is in effect saying that in light of the administrator's action a valid transfer of title has already taken place, and that the Plaintiff has not merely a prospective claim against the Defendant on the conversion of an equitable right to a legal title, but a great deal more than a prospective claim：the transfer had been completed. 52. In other words, upon the facts of this case the Nilon principle operates to the benefit of the Plaintiff and not to the benefit of the Defendant. 53. In addition to the logic of Mr. Lowe's submission, which the Court upon the facts accepts to be correct, there are additional factors which serve to satisfy the justice of the case in any event. 54. First, the Defendant seeks at this juncture to rely upon Article 10 when at the relevant and critical time this was a provision of which the Defendant and its administrator were entirely unaware. 55. Secondly, the Plaintiff was fully justified in accepting the assurance of Opus that everything was in good order and, at a later stage on 9 June 2016, that Opus had "processed the transaction". 56. Thirdly, it was made clear by Mr. Hughes in response to a direct enquiry from the Court that no facility existed whereby in addition to appropriately contacting the administrator an interested party could directly contact the Board of Directors to seek the prior written consent of the Board. 57. Fourthly, the Plaintiff was fully entitled to conclude from its correspondence with Opus that all necessary formalities and requirements had been properly complied with. ```
```html 1 2 58. With regard to the last point, the Court notes that it has been provided with a Second 3 Affidavit of Mr. Novielli, dated 23 March 2018, which exhibits a copy of the administrative 4 agreement between the Defendant and Opus Fund Services (Bermuda) Ltd. The services 5 in question are set out in Schedule III and they include the following: 6 7 “Investor Subscriptions, Redemptions and Transfers: 8 The Administrator will process all approved investor subscription, redemption and 9 transfer activity.” 10 11 59. Quite separate from that, Article 1.1(c) of Schedule 1 states that no agency relationship is 12 formed hereby or exists between the parties except as specifically set forth herein. In 13 addition, in Article 1.1 the Defendant appoints the Administrator to provide the services 14 set forth on Schedule III (the"Services"). 15 16 60. Mr. Hughes has sought to counter the inevitable implications of that arrangement by 17 contending that prior written consent of the Board of Directors is somehow distinct and 18 separate from prior written consent of the Defendant per se, but with great respect that 19 proposition stands at variance with accepted principles of corporate responsibility. 20 21 61. Finally, it is peculiarly self-serving to contend that the Plaintiff, or ABN Amro for that 22 matter, should be barred by provisions of which they had never been made aware and of 23 which the processing administrator explicitly failed to notify them. 24 25 26 27 28 ```
Conclusion

¶ [62] For the Reasons which have been identified and analysed above, the Court is bound to conclude in accordance with Section 46 of the Companies Law that the Plaintiff's name has been omitted from the company register without sufficient cause or indeed any cause, and that in accordance with the justice of the case there should be an order for the rectification of the register.

¶ [63] Finally, the Court further states that in the event that this decision may be incorrect, the Court remains conscious of the concerns raised by His Honour Judge Kaplan as stated above. Those concerns relate to the purported disinterestedness of Mr. Novielli and Mr. Leighton as Directors and whether there may be on their part "an abuse of discretion" as Directors. In those circumstances, the Court would be further minded to consider whether in the context of Section 46 the Court should direct an issue to be tried, and if so to consider what issue or issues it or they should be. THE HON. JUSTICE McMILLAN JUDGE OF THE GRAND COURT 180612 Cannonball Plus Fund Ltd - Judgment Page 20 of 20