MAPLE LEAF MACRO VOLATILITY MASTER FUND V ROUVROY

[2009] EWHC 257 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Andrew Smith, 19 February 2009

Funding Agreement – Claim for breach and claim for deceit – Whether English court possessed jurisdiction – Whether defendants had submitted to the jurisdiction of the English courts by entering appearance – Scope of exclusive jurisdiction agreement – Whether agreement a consumer agreement – Whether tort committed in England – Council Regulation 44/2001, articles 5(3), 15, 23 and 24 – Validity of Funding Agreement – Intention to create legal relations – Whether there was a breach of the funding agreement – Whether termination provisions in Funding Agreement constituted a penalty at common law – Scope of Unfair Terms in Consumer Contracts Regulation 1999 – Scope of Consumer Credit Act 1974, sections 140A-140B – Whether defendants liable in the tort of deceit – Whether defendants had counterclaim under section 150 of the Financial Services and Markets Act 150 for breach of Conduct of Business Rules

The first claimant, ML, a Cayman hedge fund managed in London, alleged that it had in July 2007 entered into a Funding Agreement with the defendants, officers of a French company, Belvédère, under which ML agreed to provide some €30 million to the defendants to assist them to complete the funding of a private placement of the securities in Belvédère. The second claimant, Astin, was to be paid a fee for arranging the funding. ML subscribed for warrants in Belvédère worth €29,999,946. The value of the warrants plummeted, but ML was not reimbursed: it alleged that the defendants were in breach of the agreement and sought damages for breach of contract and deceit. Astin sought damages for breach of contract. The court ruled as follows. (1) The defendants had entered an appearance before the English courts by acknowledging service of the proceedings, so that the English courts possessed jurisdiction under article 24 of Council Regulation (EC) No 44/2001. There had been no attempt to contest the jurisdiction of the English court. Further the claims by Astin which were introduced by way of amendment also fell within article 24, as a defendant who entered an appearance did so with respect to amendments to the claim. (2) In the alternative there was jurisdiction under article 23. There was an exclusive jurisdiction clause in favour of the English courts. The parties could not have intended that claims in contract and claims in deceit would be heard in different jurisdictions. Although there was a dispute as to the existence of the Funding Agreement itself, there was no challenge to the existence of the independent exclusive jurisdiction clause. (3) The court did not have jurisdiction under article 15, because the defendants were not consumers and did not enter into the agreement for purposes outside their trade or business. However, the court did possess jurisdiction under article 5(3) because the place where the harmful event occurred was England, in that ML suffered its damage when it committed itself to accepting the deal in England and put it beyond itself to withdraw. (4) Assessed objectively, the defendants had intended to create legal relations and accordingly the Funding Agreement was binding. The fact that signatures were not witnessed was irrelevant, as there was no statement by Astin that witnesses were required, and the agreement was not void for uncertainty. (5) The termination clause, which stated that payment of 25 per cent of the purchase price plus payment of payment of any loss, was not a penalty clause. (6) The terms of the Funding Agreement were not invalid under the Unfair Terms in Consumer Contracts Regulations 1999 or the Consumer Credit Act 1974. The 1999 Regulations did not apply because the defendants were not consumers, and in any event there was no evidence that the claimants had not acted in good faith. Sections 140A and 140B of the 1974 Act, which allows the court to make an order in favour of a consumer where the creditor has exercised rights unfairly, did not apply because the Funding Agreement was not a consumer credit agreement at all and in any event there had been no unfairness. (7) The claimants were entitled to damages for breach of contract. (8) The claims in deceit failed. The defendants had misrepresented their intentions as regards honouring the Funding Agreement, but their statements did not have any inducing effect and there was no loss as a result of the statements. (9) Had deceit been found, ML would have been entitled to a sum which would have put it into the position that it would have been in but for the false statement. (10) The defendants’ allegation that they were entitled to damages under section 150 of the Financial Services and Markets Act 2000 by way of counterclaim against Astin, for breach of the Conduct of Business Rules made by the Financial Services Authority, would be dismissed. Astin did not engage in stock lending activity. (11) Astin had not issued any unfair or misleading communications contrary to the COB Rules. (12) If there had been a breach of COB Rules, there was no loss caused by it.