Epsilon Global Equities Ltd v Paul Hoo

• Jurisdiction: Jamaica
• Judge: Phillips JA,BROOKS JA,MCDONALD-BISHOP JA (AG),PHILLIPS JA
• Judgment Date: 30 May 2017
• Neutral Citation: JM 2017 CA 21,[2017] JMCA Civ 12
• Court: Court of Appeal (Jamaica)
• Docket Number: SUPREME COURT CIVIL APPEAL NO 28/2011
• Date: 30 May 2017

[2017] JMCA Civ 12

IN THE COURT OF APPEAL

Before:

The Hon Miss Justice Phillips Ja

The Hon Mr Justice Brooks Ja

The Hon Mrs Justice Mcdonald-Bishop Ja (Ag)

SUPREME COURT CIVIL APPEAL NO 28/2011

Between

Epsilon Global Equities Limited

Appellant

and

Paul Hoo

1 ^st Respondent

and

Ian Levy

2 ^nd Respondent

and

Janette Stewart

3 ^rd Respondent

and

Supreme Ventures Limited

4 ^th Respondent

and

Martyn Viera

5 ^th Respondent

John Vassell QC, Miss Cindy Lightbourne and Jonathan Morgan instructed by DunnCox for the appellant

John Graham and Miss Peta-Gaye Manderson instructed by John G Graham & Company for the 1 ^st respondent

Michael Hylton QC and Kevin Powell instructed by Hylton Powell for the 2 ^nd respondent

Walter Scott QC and Ms Dianne Edwards instructed by Dianne A Edwards for the 3 ^rd respondent

Miss Annaliesa Lindsay instructed by John G Graham & Company for the 4 ^th respondent

Walter Scott QC and Miss Anna Gracie instructed by Rattray Patterson Rattray for the 5 ^th respondent

Phillips JA

1 This appeal sought to challenge the decision of Jones J delivered on 21 January 2011, refusing to grant the appellant's claim for inter alia, specific performance with respect to forward sale of shares agreements (FSAs) in 2002 and 2004 (hereinafter referred to as the “2002 FSA” and the “2004 FSA”). Epsilon Global Equities Limited (the appellant) contended that inter alia, the learned judge erred in refusing the orders it had sought because upon a proper construction of the 2002 FSA it is evident that a sale and transfer of 17% of the shares in Supreme Ventures Limited (the 4 ^th respondent) ought to have been made to the appellant and an additional 1.2874% of the shares in the 4 ^th respondent ought to have been made to the appellant pursuant to the 2004 FSA. However, the respondents (not including the 3 ^rd respondent) argued that the appellant's failure to acquire the shares in the 4 ^th respondent occurred as a result of the appellant's failure to pay the purchase price for the shares, and execute and deliver the undated instruments of transfer upon the occurrence of the acquisition date as required by the agreements. The grant or dismissal of this appeal is dependent upon inter alia, an analysis of whether the learned judge's interpretation and construction of those agreements was correct. In order to make such a determination it is necessary to outline the important background facts underpinning this case.

Background

The parties

2 The appellant stated that it is “part of a global family of related entities”, under the Epsilon Group. The Epsilon Group is engaged in “sourcing, structuring, managing, and monitoring investments for a family of investment funds whose strategies are credit oriented”. Epsilon Group provides direct loans to high risk borrowers who do not qualify for, or are unable to access business loans from commercial banks. The appellant also claimed to be a “special purpose entity” that was created specifically, by the Epsilon Group, to acquire 18.2874% subscription shares (which will be referred to interchangeably as “shares”) in the 4 ^th respondent pursuant to the FSAs.

3 Mr Paul Hoo and Mr Ian Levy (the 1 ^st and 2 ^nd respondents respectively) and Mr Peter Stewart (deceased, as at 28 March 2004) are the founding shareholders of the 4 ^th respondent, which has its principal business in online lotteries services. The 4 ^th respondent was formed in 1995 but commenced operations in January 2001, upon receipt of a 10 year licence issued by the Betting, Gaming and Lotteries Commission. The 3 ^rd respondent is the widow of the late Mr Peter Stewart and beneficiary under his estate. The 5 ^th respondent is the executor of the estate of the late Mr Peter Stewart.

The loan transactions

4 In 2002 and 2004, the following loans were disbursed by entities under the Epsilon Group:

• a) US$29,500,000.00 to Atlantic Marketing Services Limited (hereinafter referred to as “AMSL”) a company incorporated pursuant to the laws of Saint Lucia and in which Mr Paul Mouttet was a director, which provided marketing and strategic management consultancy services to the 4 ^th respondent pursuant to a marketing services agreement dated 30 September 2001 (in 2002);

• b) US$500,000.00 to the 4 ^th respondent (in 2002); and

• c) US$2,270,000.00 to AMSL (in 2004).

5 A loan agreement related to the disbursement of US$29,500,000.00, dated 28 August 2002, was entered into by Epsilon Global Master Fund LP (EGMF I), Epsilon Global Master Fund II LP (EGMF II), and AMSL. Mr Paul Mouttet executed that agreement on behalf of AMSL.

6 In respect of US$500,000.00, a loan agreement dated 28 August 2002, was executed between EGMF I and the 4 ^th respondent. The 1 ^st and 2 ^nd respondents executed the agreement on behalf of the 4 ^th respondent.

7 As it relates to the loan of US$2,270,000.00, a loan agreement was entered into between Westford Special Situations Master Fund LP and AMSL and was executed on 27 February 2004. Mr Paul Mouttet and Mr Colin Mouttet signed that agreement on behalf of AMSL.

The forward sale of shares agreements (FSAs)

8 The appellant entered into two FSAs, which concerned the sale of shares in the 4 ^th respondent to the appellant at a future date (acquisition date). The 2002 FSA was between the founding shareholders, the 4 ^th respondent and the appellant, and was entered into on 28 August 2002. However, the 2004 FSA, executed on 27 February 2004, was between the 1 ^st and 4 ^th respondents, and the appellant.

9 Under the 2002 FSA, an obligation was placed on the founding shareholders to call an extraordinary general meeting to increase the number of subscription shares in the 4 ^th respondent by 204,820 ordinary shares at a par value of J$1.00 per share. The founding shareholders were to have caused a board meeting to be held in which the newly subscribed shares would be issued to them as follows:

“Paul Hoo 84,350

Peter Stewart 84,329

Ian Levy 36,141”

Two representatives of the appellant were also to have been appointed to the board of directors of the 4 ^th respondent. Subsequently, the founding shareholders, pursuant to the 2002 FSA, executed undated instruments of transfer, in relation to their respective portion of the newly acquired subscription shares, in favour of the appellant, and caused the 4 ^th respondent to issue 17 share certificates in favour of the appellant. Thereafter the appellant, under the said FSA, prior to the acquisition date, was to be entitled to all dividends and distributions declared and paid. Also, the appellant agreed not to execute or take steps to execute the instruments of transfer or to take possession of the share certificates until the acquisition date. The appellant further agreed to an obligation that required it to, upon the occurrence of the acquisition date, pay the founding shareholders the consideration of J$1.00 per subscription share for the transfer of such shares, as well as, to deliver the instruments of transfer, duly completed and stamped, to the 4 ^th respondent for registration of the said transfers.

10 ‘Acquisition date’ under the 2002 FSA, is defined to mean any of the following dates, whichever is earliest in time:

• “5.1 One (1) month prior to the date of change of control of the [4 ^th respondent] (control shall have the same meaning as is set out in the definition for ‘Affiliate’).

• 5.2 One (1) month prior to the date of an initial offering of the share capital of the [4 ^th respondent] or its Affiliates to the public in Jamaica or elsewhere.

• 5.3 One (1) month prior to the date of completion of the sale of any portion of the shares which are held by the Founding Shareholders on the signing of this Agreement (i.e. any portion of 1,000,000 ordinary shares).

• 5.4 The Maturity Date of the Loan [in the sum of US$500,000.00] which is the earlier of (i) the repayment of all principal and accrued interest of the Loan or (ii) August 31, 2005.”

11 The 2004 FSA provided that the 1 ^st respondent should cause an extraordinary general meeting to be held to pass a resolution to transfer 15,510 subscription shares in the 4 ^th respondent at a par value of J$1.00 per share. Thereafter, he was to execute an undated instrument of transfer with respect to the 15,510 subscription shares, in favour of the appellant, and cause the 4 ^th respondent to issue two share certificates to the appellant. The appellant under the said FSA, prior to the acquisition date, was to be entitled to all dividends and distributions declared and paid, in respect of those subscription shares. The appellant agreed not to execute or take steps to execute the instrument of transfer or to take possession of the share certificates until the acquisition date. The appellant further agreed to an obligation that required it to, upon the occurrence of the acquisition date, pay the 1 ^st respondent the consideration of J$1.00 per subscription share for the transfer of the subscription shares, as well as, to deliver the instrument of transfer, duly completed and stamped, to the 4 ^th respondent for registration of the said transfer.

12 Under the 2004 FSA, the term “acquisition date” is defined to mean any of the following dates, whichever is earliest in time:

• “5.1 One (1) month prior to the date of change of control of the [4 ^th respondent] (control shall have the same meaning as is set out in the definition for ‘Affiliate’).

• 5.2 One (1) month prior to the date of an initial offering of the share capital of the [4 ^th respondent] or its Affiliates to the public in Jamaica or elsewhere.

• 5.3 One (1) month prior to the date of completion of the sale [of] any portion of the shares which are held by the [1 ^st respondent] to any Person other than the [appellant].

• 5.4 One (1) month prior to the date of any increase in the authorized number of shares of the [4 ^th respondent] or any allotment of additional shares by the [4 ^th respondent].

• 5.5 The earlier of (i) the...