MUSST HOLDINGS LIMITED v ASTRA ASSET MANAGEMENT UK LIMITED

This judgment arises out of two claims heard together, one referred to as the “Contract Claim” and the other as the “Defamation Claim”. In the Contract Claim (which is Claim No BL-2018-002369), Musst Holdings Limited sues Astra Asset Management UK Limited (“Astra UK”) and Astra Asset Management LLP (“Astra LLP”) for fees for effecting two introductions, and for access to their books and records to assess all the fees that are properly due to them or an account. The term “Musst” is used for Musst Holdings Limited. Where it is intended to refer to the Musst group of companies, the term “MUSST” is used. The term “Astra” is used collectively for the Defendants in the Contract Claim. In the Defamation Claim (which is Claim No BL-2019-001483), Astra UK and Astra Capital International Limited (“Astra Capital”) sue Mr Siddiqi and Musst Investments LLP (“Musst LLP”) on the basis that Mr Siddiqi, while acting on behalf of Musst LLP, made defamatory oral statements about them in Rome in June 2016. The term Astra is also used collectively in context to refer to the Claimants in the Defamation Claim. These and other statements also form the subject matter of the counterclaim in the Contract Claim.

Musst is an entity which is wholly beneficially owned by Saleem Siddiqi. Since 2010, he has been married to Alexandra Galligan. She too works in the financial services industry, and since 2009 she had worked for an organisation called Matrix Money Management Limited (“Matrix”), which was part of a group of companies known as the Matrix group. She reported to Mr Luke Reeves, who was the Head of Retail and Institutional Business.

Since the collapse of Matrix in late October or early November 2012, Ms Galligan has worked for Musst. Astra LLP was at all material times controlled by Mr Anish Mathur, who is also the ultimate beneficial owner of Astra UK through Astra Capital, a BVI company. Musst LLP is a UK LLP in which both Mr Siddiqi and Ms Galligan are partners and through which they conduct business.

Musst’s claim is made under the Octave Contract, a written contract dated 18 April 2013, which was originally entered into with Octave LLP and Octave Limited (collectively “Octave”), under which Octave Limited agreed to pay Musst a 20% share of management and performance fees Octave received from clients whose funds Octave managed, and to whom Octave had been introduced by Musst. At the material time, Mr Mathur was a member of Octave LLP. The fees were payable in return for introducing clients who invested in an investment strategy primarily focused on “synthetic ABS”, i.e. synthetic asset backed securities, a type of financial product which was trading at very low prices relative to their face value after the financial crash of 2008, but which Mr Mathur (who had considerable expertise in such investments) expected in 2011 and 2012 to increase substantially over a three-year period. The Octave Contract defines investments made in Mr Mathur’s strategy as “Eligible Investments”.

Under this contract, Musst says that it introduced at least two clients (a) a US client, 2B LLC (hereafter “2B”), and (b) a Swiss client, Crown Managed Accounts SPC (hereafter “Crown”). 2B agreed to invest in February 2013 (i.e. before the Octave Contract was actually concluded, but after its “Effective Date”), and Crown agreed to invest in June 2013. In both cases, they invested in “managed accounts” – i.e. accounts managed by Octave but managed in turn by Astra LLP on Octave’s behalf. The reason for this arrangement is that, at this point, none of the Astra entities had regulatory authority to manage the accounts themselves, so Astra LLP acted under Octave’s “umbrella”. 2B initially invested US$20 million for Octave to manage, and Crown initially invested $40 million for Octave to manage in synthetic asset backed securities.

At first, Octave LLP paid the agreed share of fees received from both clients until 10 November 2014 (in the case of Crown), and until 3 February 2015 (in the case of 2B). Shortly before the earlier date, Astra LLP obtained the necessary regulatory approvals. Musst’s case is that with Musst’s and Octave’s consent, (a) Astra LLP took over the management of the clients’ respective funds in place of Octave, (b) it received fees for doing so just as Octave had done, and (c) it asked Musst to send its invoices to Astra LLP instead of Octave, which Musst then did. In relation to Crown, it split the invoices between Octave and Astra LLP for the fees accruing before and after 1 September 2014, and in relation to 2B it sent its first invoices in February 2015. Astra LLP then paid these invoices and Octave dropped out of the picture. The fees payable in relation to 2B were payable monthly, and those in relation to Crown were payable quarterly, as this was how Octave and Astra LLP were paid.

By late April 2016, the management of the clients’ funds had been transferred to Astra UK. Astra UK sent to Musst the invoice which it, Astra UK, had sent to 2B for its management of 2B’s funds in April 2016. By reply on 13 May 2016, Musst as requested sent its invoice, but still made out to Astra LLP. Astra UK then paid this fee, and on 16 May 2016 it asked for all future invoices to be sent to itself rather than Astra LLP.

Astra UK thereafter did not provide the information sought for Musst to work out the precise amount of the invoices. On 28 July 2016, Musst sent to Astra UK three invoices, one in relation to Crown (for the period April to June 2016), and two in relation to 2B (for May and June 2016), which Astra UK did not pay. In August 2016, it denied it was under an obligation to pay them, since then nothing has been paid.

Musst claims that the Octave Contract was novated to Astra LLP (or at least Astra LLP took on its liabilities), first in relation to the Crown account (in November 2014 or February 2015) and then in relation to the 2B account (in February 2015), after Astra LLP had taken the management of these accounts from Octave; and that it was then in turn novated on to Astra UK in May 2016 (alternatively in late July 2016) in relation to both accounts.

Musst claims the payment of fees and access to the Defendants’ books and records under the Octave Contract in return for introducing 2B and Crown who made investments in managed accounts. It also claims an account of all sums that have been received by Astra LLP and Astra UK from any other investors in addition to 2B and Crown.

Further or in the alternative to the contract of novation, Musst relies on an estoppel by convention precluding a denial of such a contract, because this was the basis on which all parties operated until Astra ceased paying in July 2016.

In addition, Musst seeks rectification of the Octave Contract if and insofar as (taken on its own) it did not cover the introductions to 2B and Crown. It also alleges that in any event, Astra UK, having taken over the management of the funds in the knowledge of the terms (and restrictions) in the Octave Contract, is obliged to pay the 20% share, either because it has an equitable interest in the same, or by way of unjust enrichment or quantum meruit.

Musst therefore claims an account of all sums that have been received by Astra LLP and Astra UK from 2B and Crown, pursuant to the Octave Contract (which provides for access to the books and records) or pursuant to its claims in unjust enrichment or quantum meruit.

Astra denies liability in summary for the following reasons:

The November arrangement: Octave and then Astra LLP and Astra UK made their respective payments in respect of 2B and Crown pursuant not to the Octave Contract, but to a voluntary oral arrangement agreed in November 2012 to pay three years’ worth of fees, which it calls “the November Arrangement”, which came to an end by May 2016. Thus, the Octave Contract has no application to the arrangements with 2B and Crown.

Even if the Octave Contract applies, Musst has no right to payment under it, (a) because there was no introduction by Musst: any introduction was by another entity called Matrix which introduced 2B and Crown; and anyway, (b) there were no introductions capable of giving rise to a fee because any introductions made were before the “Effective Date” of the contract, which was expressed to be 21 November 2012.

The Octave Contract was not novated to Astra LLP or Astra UK, nor did either of them take on its liabilities. A draft agreement was proposed in this regard, but it was rejected by Musst, and then withdrawn by Astra LLP.

The attempts to contend for estoppels, rectification, equitable interest and unjust enrichment are all attempts to paper over the fundamental cracks in the case, and do not save the case.

Even if the Octave Contract applied, Musst’s rights came to an end in late 2014 or 2015 when the investment strategy pursued on behalf of Crown and 2B changed and ceased to follow “the Current Strategy”. It is contended that under the Octave Contract, the right to fees is limited for so long as the investment strategy is following the Current Strategy.

In any event, Musst acted in breach of the US Securities and Exchange Act 1934 in introducing 2B (to be explained in more detail below), with the result that Astra do not have to pay for the 2B introduction.

In 2016 and 2017, Mr Siddiqi of Musst made disparaging statements in material or repudiatory breach of the Octave Contract which entitled Astra to terminate it (if it applied), as they did by their counterclaim in January 2019. As a result, they brought to an end any continuing rights to fees, and they are also entitled to damages.

In any event, Musst is not entitled to the relief claimed.

After complaints and pre-action protocol correspondence, Musst issued the Contract Claim in November 2018 claiming that it was entitled to unpaid fees and seeking an account of its 20% revenue share. The total sums paid by Octave and Astra to Musst were US$784,000 ($325,000 by Octave between 13 May 2013 and 3 February 2015, and about $459,000 by Astra LLP and then Astra UK between 10 November 2014 and 25 May 2016). These sums were, Musst says, its share of “management fees” due to it under the Octave Contract, that is to say 20% of the revenue which Octave and then Astra received from Crown and 2B, in return, as Musst says, for Musst’s introductions. The amount of these management fees depended on the size of Crown and 2B’s funds under Octave’s and then Astra’s management, subject to various limits.

Musst says that the 2B and Crown accounts are still in existence, and Astra UK is still receiving payments from them five years down the line, although it appears that, since May 2016, a number of their investments have been sold, which have resulted in Astra UK receiving at least some performance fees (a form of success fee payable when investments are realised). Astra UK accepted in July 2019 (in its Further Information) that by December 2018 it had received £6,671,813 from 2B, and that by September 2018 it was entitled to receive sums totalling £3,021,666 from Crown. It is not known whether Astra UK has received more money from Crown and 2B. Musst claims 20% of the money received whenever received, but Astra state that (a) there was no obligation to pay fees, but a voluntary arrangement as above, (b) the arrangement was only for the initial three-year period during which management fees were paid, and in any event (c) there is no liability beyond the three-year period, and there were no performance fees during the first three-year period.

Musst disputes all this. In particular, even if there is anything in Astra’s points:

There was no November arrangement. This is an important backdrop to the construction of the Octave Contract and the entitlement to fees for the introductions of 2B and Crown.

There were introductions of 2B and Crown respectively by Musst under the Octave Contract. The introductions were not those of Matrix, and in any event, Musst as an introducer is entitled to management and performance fees. Astra LLP and Astra UK are estopped from denying its claims, on the basis that the parties throughout (including Octave) acted on the common basis that the Octave Contract governed the relevant introductions. (A claim for rectification is also brought on this basis.).

The Octave Contract was novated to Astra LLP and then to Astra UK. Further, Astra LLP is estopped from denying the alleged novation (or assumption of Octave’s liabilities), because all parties acted on the assumption that the Octave Contract had been novated to Astra LLP (or at least, Astra LLP had taken on Octave’s liabilities); and further it was bound by the same estoppels as Octave was in relation to the construction of the Octave Contract, as it knew all the relevant facts giving rise to the same. (Astra and Octave were related entities, worked in the same building and shared many of the same staff).

If there is no contractual entitlement, Musst makes a claim for unjust enrichment.

The defence by reference to the Current Strategy is misplaced because as a matter of construction the relevant investments were made subject to the Current Strategy, and they cannot be defeated simply because Octave or Astra subsequently departed from the Current Strategy. In any event, Astra are estopped from taking the point (if there is anything in it) that the investment strategy changed, if it did, because the parties acted on the common assumption that on a proper construction Musst was entitled to management fees unless and until the relevant investments were sold, at which point it would be entitled to performance fees.

The alleged illegality according to US law is not a defence because a relevant infringement has not been proven. In any event, even if there was a breach of US law, it would not prevent Musst from claiming the sums due. Further, Astra are said to be estopped from taking the US law point (which anyway does not arise) because of Octave’s representations that it was satisfied with the assurances provided by Musst’s lawyers on the point before the Octave Contract was signed.

Musst disputes that Mr Siddiqi made any of the statements he is alleged to have made (save two, which it says do not matter and were anyway true); and in any event, even if he did, they were immaterial and did not justify termination of the contract or the continuing right to payment of fees, or cause any loss.

It follows that Musst should be given the relief sought.

By way of a fuller introduction, more can be said at this stage in respect of the Counterclaim. Astra allege that Mr Siddiqi made four disparaging statements about Astra at a Goldman Sachs hedge fund conference in Rome on 23 June 2016 to Mr Ralph Plotke of Crown, namely that (a) “Astra is a sinking ship”, (b)“Astra does not have enough money to pay its staff”; (c) “Astra [Mr Mathur] is a one-trick pony”; and (d) “All Astra’s investors are pulling money out of funds managed by Astra and Crown should get out while it can. Don’t’ be the last man standing”.

Mr Plotke has not given evidence in respect of this conversation, but Astra seek to prove the same both inferentially and through hearsay evidence including communications by Mr Plotke, in particular to his line manager Mr Rigter. Mr Siddiqi has given evidence. Musst admits that Mr Siddiqi spoke to Mr Plotke at lunch at the Rome conference on 23 June 2016, and that they talked about the performance of the Astra funds, but denies that he said the alleged words (or words to similar effect): see paragraphs 151 to 152 of the Amended Reply and Defence to Counterclaim (“ARDCC”).

Astra also allege that Mr Siddiqi repeated the “sinking ship” and “one-trick pony” statements to Dr Sunil Chander in July 2017 on the London underground on the way to Knightsbridge. Musst admits that Mr Siddiqi spoke to Dr Chander on the underground in or about July 2017 about the dispute which had by then arisen, and that he said that he considered that Mr Mathur was being “unreliable” and that he felt that there was a “dark side” to Mr Mathur, as he was now seeking to exploit his (Mr Siddiqi’s) weak financial position by avoiding paying Musst’s fees after Mr Siddiqi had helped put him in business: see paragraphs 154 to 158 ARDCC. Further, it alleges that these statements were true and defensible, and therefore not a breach of either clause 5.1 or 5.7 (see paragraphs 159 to 162 ARDCC).

Further, by an amendment made in May 2020, Astra allege that before all this, in May 2016, Mr Siddiqi had made statements to the effect that Mr Mathur was a “one trick pony” and “maybe it is a good time to get out” to Mr Albertus Rigter, also of Crown, at a J. P. Morgan conference. Musst admits that Mr Siddiqi attended the JPM Leaders Conference in London in May 2016 but denies that he said to Mr Rigter (if he met him) the words alleged: see paragraph 150A of the ARDCC.

If (contrary to their main case) the Octave Contract was novated to Astra LLP and Astra UK, Astra allege that Musst was in breach of clause 5.1 and 5.7, which require Musst to act in good faith and prohibit “disparaging” statements, for which Astra LLP and Astra UK are entitled to damages. Further, they allege that these amounted to repudiatory breaches of the Octave Contract, which, by the Counterclaim (served on 18 January 2019), Astra accepted, so as to bring to an end their obligations to pay relevant fees, if any, earned by and paid to Astra UK thereafter.

In reply, Musst denies that Mr Siddiqi made any of the other statements alleged in the conversation with Dr Chander or in the other conversations, or that this amounted to a breach of condition or repudiatory breach such as to entitle Astra to terminate the Octave Contract or that it gave rise to a contractual right to terminate; and anyway, on a proper construction, even if it did, this would not affect its continuing right to fees: see paragraphs 166 to 169 ARDCC.

The main issues, therefore, are the following:

Did the parties agree to the voluntary “November Arrangement” alleged by Astra, and (correspondingly) did they agree that the subsequently negotiated Octave Contract would not apply to the introductions of 2B and Crown?

If the Octave Contract was the only relevant arrangement:

Did Musst introduce 2B and Crown to Octave within the meaning of “Introduction” provided for in this contract (and notwithstanding the role played by Matrix)?

If Musst did introduce 2B and Crown, is its claim nonetheless precluded by the “Effective Date” provision in that the introductions preceded the Effective Date?

In any event, whatever the strict position on (a) and (b), was Octave estopped from denying that Musst is entitled to payment in relation to the 2B and Crown accounts, by virtue of its representations to Musst in the course of negotiations, or by virtue of the common assumption on which both parties acted in relation to 2B, and Crown thereafter, as evidenced by Octave’s payments to Musst in relation to 2B and Crown? Or at least, is Musst entitled to rectification of the Octave Contract so as to provide for this?

Was the Octave Contract novated to Astra LLP and then to Astra UK in relation to the 2B and Crown accounts? This includes consideration of whether the acts relied upon gave rise to an offer and acceptance required for a novation. Insofar as there was an offer, did Mr Holdom have the necessary authority on behalf of the Astra entities and/or Octave to make the same? If there was no novation, is Astra estopped by its representation and/or common assumption in denying the novation. Insofar as material, were Astra LLP and Astra UK bound by the alleged estoppels or claims to rectification as against Octave?

Even if the Octave Contract was not novated to Astra UK (or even Astra LLP) in relation to the 2B and Crown accounts, is Astra UK liable on the basis that it has been unjustly enriched at Musst’s expense by the transfer of the management of the Crown and 2B funds in the knowledge of Musst’s rights in relation to the fees arising therefrom? And what is the position of Astra LLP?

On a proper construction of the Octave Contract, does it matter if the investment “strategy” changed by December 2014 or 2015 (or later); and anyway, if there was any change, was it a material change such as to bring to an end Musst’s rights to fees? And even if there was such a material change, are Astra estopped from relying on it because the parties had a common understanding that Musst’s rights to payment would not be affected by it?

Did Musst act in breach of section 15(a)(1) of the US Securities and Exchange Act 1934 in introducing 2B on the footing that it was acting as a “broker or dealer” without the necessary registration; and even if it did, does this affect its right to fees? In any event, are a Astra estopped from taking the point because of Astra leading Musst to believe that they were satisfied with the assurances Musst had received from its own US lawyers that there was no need for it to be so registered ?

Did Mr Siddiqi make the alleged disparaging statements; and if so, were they material or continuing, did they put Musst in repudiatory breach, and what are the consequences?

To what relief, if any, is Musst entitled? In particular, is it entitled to inspect the books and records of all Crown’s and 2B’s accounts (including those on which it has not been paid), or those relating to other investors who have made investments following the “Current Strategy”? Or at least, is it entitled to an account of all such sums received, and to provision of information for the purpose of that account under its unjust enrichment or quantum meruit claims?

The Defamation Claim is for slander, arising out of the same words as are alleged to have been spoken by Mr Siddiqi to Mr Ralph Plotke on 23 June 2016 as pleaded in Astra’s counterclaim in the Contract Claim. The original Particulars of Claim was served in September 2017, before the Contract Claim was issued (the Contract Claim dispute then being the subject of pre-action correspondence). The original Particulars of Claim in the Defamation Claim alleged that Mr Siddiqi spoke the words complained of not only to Mr Plotke, but to Mr Albertus Rigter of Crown as well, but Astra have since accepted that this was incorrect, and have amended their claim accordingly.

The words complained of are set out at paragraphs 6.1 to 6.4 of the Amended Particulars of Claim and are to the same effect as those relied on in the counterclaim in the Contract Claim.

Astra set out the natural and ordinary meaning they contend for at paragraph 7 and an innuendo meaning at paragraph 8.1 of the Amended Particulars of Claim. They also bring a claim for malicious falsehood arising from the same words, which is set out at paragraphs 11 to 18, with particulars of malice at paragraphs 19 – 28 of the Amended Particulars of Claim.

As in Musst’s defence to counterclaim, in the Defence to the Defamation Claim, it is denied that Mr Siddiqi said the words complained of to Mr Plotke on 23 June 2016. The burden, he and Musst LLP say, is on Astra to establish that the words complained of (or words not materially different) were published on the occasion pleaded, and Mr Plotke has not even provided a witness statement. The only direct evidence of what took place at the Cavalieri Hotel in Rome on 23 June 2016 comes from Mr Siddiqi.

Musst and Mr Siddiqi further deny, if the words were spoken, that they caused serious harm or financial loss to Astra. Section 1 of the Defamation Act 2013 introduced a higher statutory threshold which requires a claimant to establish that – in addition to the words complained of being defamatory at common law – they caused or were likely to cause serious harm to the claimant’s reputation. As Astra bring the claim as a corporate entity, s. 1(2) of the Defamation Act 2013 also requires them to establish that the words complained of caused or were likely to cause them serious financial loss. Musst’s position is that there is simply no evidence that this was the case. As said, there is no evidence in the disclosure that Astra suffered any serious financial loss as a consequence of the words allegedly spoken by Mr Siddiqi.

Much the same applies to the claim brought in malicious falsehood. Astra must establish that the words were in fact spoken on the occasion pleaded. In addition, it must establish that they were spoken maliciously and that they caused or were calculated to cause it actual financial loss. Again, if Astra fail to establish these elements, their claim, it is submitted, in malicious falsehood fails.

In the alternative, if the relevant words are found to have been spoken, Musst relies on the following substantive defences:

In addition, Musst denies that the words allegedly spoken would bear the natural and ordinary meaning or the innuendo meanings contended for by Astra. Musst further denies that the words complained of were spoken maliciously. Musst also contends that the claim is an abuse of process in accordance with the principles in Jameel v Dow Jones [2005] QB 946.

There are many issues on paper in the Defamation Claim. However, the focus in the course of the trial, and especially the final submissions has been on (a) whether the words complained of (or words not materially different) were spoken at the Goldman Sachs conference by Mr Siddiqi to Mr Plotke on 23 June 2016; and (b) if the words complained of were spoken, whether they caused or were likely to cause Astra (i) serious harm to its reputation, and (ii) serious financial loss.

The first formal stage in the dispute was the pre-action protocol correspondence in the Contract Claim, which began in October 2016, with Musst’s complaints that Astra had acted in breach of contract as from May 2016 by stopping payments on the Crown and 2B accounts, and failing to provide information, along the lines later set out in the Particulars of Claim. Pre-action protocol correspondence started not long afterwards on the defamation proceedings.

The Defamation Claim was issued on 1 June 2017 and served on 29 September 2017 together with the Particulars of Claim. The Contract Claim was issued on 7 November 2018, which was served shortly thereafter together with the Particulars of Claim. After the transfer of the defamation proceedings to the Chancery Division, the two claims were case managed together at a hearing before Chief Master Marsh on 12/13 December 2019. He directed that the two claims should be heard together.

It is of importance in this case, having regard to the fact that the oral evidence was directed to memories of matters that occurred many years ago, for the Court to have regard to the contemporary documents and the overall probabilities. It is useful to remind oneself of case law to the effect that the contemporaneous documentary record and the overall probabilities are usually more reliable than the content of witness statements, prepared with the assistance of a legal team after the event and for the purpose of proving a case or meeting a case against them.

This is a case where the Court has had to consider the recollection of witnesses. Despite the heavy documentation of this claim, this has been especially so in connection with the November Arrangement and with the Defamation Claim, which were oral and without any contemporaneous or near contemporaneous documentary record of the words used. Some of the witness statements in this regard were prepared years later. It is therefore particularly important to remind oneself of the frequently cited case law of the approach of the courts to such cases.

In Simetra Global Assets Ltd & Anor v Ikon Finance Ltd & Ors [2019] EWCA Civ 1413, Males LJ stated the following at paragraphs 48-49 under the heading "The importance of contemporary documents":

Whilst The Ocean Frost and Simetra were cases concerning fraud, the dicta in the Ocean Frost have been applied in numerous cases especially in commercial cases.

In Grace Shipping v Sharp & Co [1987] 1 Lloyd's Rep 207 (Privy Council) Lord Goff said at p. 215:

In Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) Leggatt J (as he then was) said this:

These passages were considered by the Court of Appeal in Kogan v Martin [2020] EMLR 4, confirming the general proposition that especially in commercial cases, the Court must adopt this approach. However, that is not to say that all the evidence including the oral evidence should not be taken into account. The Court of Appeal was there critical of a judge who said that he would take very little account of the oral evidence because of the documents. In the judgment of the court at pp.88-89 (Floyd, Henderson, Peter Jackson LJJ), it was stated:

Considering the evidence in this case, I make the following observations in respect of the witnesses of fact. I was particularly impressed by the intellectual ability of both Mr Mathur and Mr Siddiqi. If and to the extent that there were any shortcomings, it was not due to lack of comprehension on their part.

Overall, I regarded Ms Galligan and Mr Siddiqi as credible and reliable witnesses, who assisted the Court by their evidence. Their evidence was reduced in value to the extent that Ms Galligan went first, whereas the more important witness was Mr Siddiqi (as the person who had been a part of Musst from its inception and as the person who was alleged to have made the defamatory statements). It was not satisfactory for Mr Siddiqi to confirm in part evidence of Ms Galligan instead of speaking from his own independent recollection. I had a concern that the superior presentational ability of Ms Galligan had led to her taking the lead.

Ms Galligan demonstrated a great familiarity with the documents in the case, but there were times when she appeared to have little recollection outside the documents. This was not surprising given how many years earlier the events took place. With her background in sales, she sometimes seemed to be seeking to win over by her personality rather than by the details of her evidence. There were aspects of her evidence which were unsatisfactory, notably her evidence that the role of Matrix was administrative and secretarial. Her skill in sales (representing Matrix until late October/early November 2012) must have gone significantly beyond the administrative or secretarial. On one occasion, in this strain of evidence, she referred to herself as a passive attendee which seemed unlikely.

Despite the defensive strategy of apparently sheltering Mr Siddiqi by calling him second, the skill of Mr Boardman QC and Mr Glen respectively and the legal team for Astra ensured that the evidence was tested thoroughly including the confirmations of Ms Galligan’s evidence. There was a concern about the extent to which Mr Siddiqi embellished the extent of financial difficulties in order to persuade Mr Mathur to make payments, and how this impacted on the reliability of his evidence. It is possibly cancelled out by the fact that Mr Mathur appears to have invoked financial difficulties preventing payments at that stage, whereas, as he accepted in his evidence, Astra did not have such problems as would have prevented any payments at that stage in May/June 2016.

The evidence of Mr Mathur has given rise to greater concerns. He had an explanation more than once when important aspects of his evidence were missing from his witness statement, saying that his solicitors had excised large parts of his statement and casting the blame on his solicitors. He also claimed lack of recollection or lack of attention to important aspects of the case, saying that he was so busy with thousands of emails a day and working long hours. He also referred to his being a lay person in respect of legal matters like putting things on record. The more important the matter, the less credible were these answers.

An example of his unsatisfactory evidence was that in the course of about 10 pages of the transcript from [T6/76] onwards, Mr Mathur took issue with the accuracy of numerous points recorded by Ms Galligan in her note of 17 June 2016 of a conversation of 14 June 2016 between Mr Mathur, Mr Siddiqi and herself. He had no documentary evidence to show what was actually said. It stretched credulity that absent invention, Ms Galligan’s note should be so radically wrong, and I dismiss any suggestion of invention which Mr Mathur retreated from when asked if it was made up: see [T7/77]).

When there was no obvious answer to questions, Mr Mathur had a tendency to avoid the question, despite his total command of his business. Thus, when a telling question was asked about why he did not want to make a payment in respect of 2B until after the Octave Contract was signed (which appeared contrary to his case that the payment was not under the Octave Contract but under a November arrangement), he failed to answer the question [T7/22]. He started with a long explanation which did not deal with the question [T7/22-23], he then invoked legal advice for which privilege was claimed [T7/24], but that was contradicted by a different explanation in his fifth witness statement (at para. 103)[T7/28-30]. This subject matter is considered in detail below, but for the moment, this is an example of Mr Mathur seeking to avoid an important question.

Another example was his initial failure to answer probing questions relating to the assertion that the removal of $7.5 million in October 2016 was caused by the alleged Defamatory Statements, which was not asserted in a letter of Jones Day of February 2017. Mr Mathur retreated to the mantra that he was not responsible for what his solicitors wrote. He then sought to give a very long answer over several pages of transcript about how a decision in October 2016 to prefer the cash to rest in Deutsche Bank rather than with Astra showed something about the impact of the Statements in June 2016 [T8/34-40]. This had not appeared in his witness statement.

Mr Murray, in-house counsel with Astra, gave evidence which was unsatisfactory, namely how he had taken a note of being informed about the alleged Defamatory Statements, but that he had lost the note. This is dealt with in detail below. At best, this showed serious neglect that he had lost the statement. More likely is that he was wrong and there was no note: his explanations about the note were contrary to the overall probabilities. I regret that I did not find him a satisfactory witness in the way in which he dealt with the questions regarding the notebook. He also seemed to have an agenda about how the Octave Contract was forward looking which got in the way of his answering questions satisfactorily e.g. [T10/41-44].

Mr Reeves of Matrix gave evidence which was not satisfactory. An example is that paragraph 18 of his witness statement indicated that he had agreed a 20% commission with Mr Mathur, but then in cross-examination, he said that he did not have a positive recollection about this: T9/94-98. His evidence lacked precision about what agreement there was as regards commission at any stage and between whom.

Mr Rigter formerly of Crown before moving to Astra in 2019 was not particularly good at telling the case in an authoritative way. He was an important witness in the absence of Mr Plotke the publishee, to whom the alleged Statements had been related. I was not satisfied about the extent to which he was simply seeking to support a case which had been prepared and developed long before his involvement. This may not be surprising given the lateness of his statement and the fact that he had become part of Astra through employment.

I found Dr Chander to be a very defensive witness. For much of his evidence, he did not engage in the question and answer process required of witnesses in these courts. He did not come over as if was seeking to derail the process, but he was rather set in his very precise ways. He was often not willing to wait for the question. He then sought to analyse the question, asking questions about the questions. He was especially unsatisfactory when asked questions about the Jones Day letter insofar as it concerned him.

There is less to relate about Dr Adler and Mr Holdom, who were employees of Astra. Dr Adler was cautious in his answers. Mr Holdom gave evidence that was clear and understated. They were not the central witnesses. They have to be considered carefully because of their position as employees of Astra giving evidence about historic matters which were largely undocumented.

It is first necessary to consider the background to the Contract Claim and the submissions of the parties in order to make conclusions in respect of the claim.

In 2011, Mr Siddiqi was introduced to Mr Mathur by Dr Chander, who was a mutual acquaintance. At the time, Mr Mathur was working for Deutsche Bank as head of Winchester Capital Principal Finance, where he managed a portfolio of cash and synthetic ABS, which was a multi-billion dollar pool of ABS consisting of various different types of ABS.

Mr Siddiqi was a partner in Tapestry Asset Management LLP, a hedge fund adviser focussing on institutional clients, with a reputation for “seeding” (providing initial finance to hedge fund managers), and he managed the London side of the business.

Mr Siddiqi and Mr Mathur got along well and there were discussions about Mr Siddiqi helping Mr Mathur in a new business which would trade in synthetic ABS. According to the evidence of Ms Galligan and Mr Siddiqi, Mr Mathur would come round to Mr Siddiqi’s home, where he lived with his wife Alexandra Galligan, and they would discuss business plans, strategy and how to present the opportunity to potential investors. The first such visit appears from the documents to have been on 25 October 2011.

Mr Mathur intended in due course to leave Deutsche Bank and set up a new company which ran a hedge fund focussing on synthetic ABS, and in which clients would subscribe for shares in return for capital contributions. Mr Mathur would manage the company and charge management and performance fees to it.

On 26 October 2011, Mr Mathur sent to Mr Siddiqi a “Draft Proposed New Regulatory/Special Situation Funds” document which set out the rationale of the proposed fund and a short power point presentation. As a result of the 2008 banking crisis, banks were under pressure to get rid of credit instruments such as synthetic ABS. This created an opportunity in that the assets were complicated and unlikely to mature for some time. Mr Mathur knew from his experience in the market where to acquire them cheap with a view to holding them for a few years, and selling them at a substantial profit on maturity, by which time it was expected that the market would have recovered.

The Claimant, Musst, was incorporated in the BVI by Mr Siddiqi on 2 February 2012, when he decided he wanted to leave Tapestry and devote himself to his own business. Mr Siddiqi is the ultimate beneficial owner of Musst, and it is a vehicle through which he (and since she left Matrix in October/November 2012, his wife Alexandra) conducts business. Musst was a part of a business group of companies through which Mr Siddiqi operated.

The business planned by Mr Mathur was referred to as “AMCo” (standing for Anish Mathur Company, and then latterly Astra Management Company). On 16 January 2012 and 8 February 2012 Mr Siddiqi introduced Mr Reeves to Mr Mathur and, subsequently, Mr Siddiqi and Mr Mathur presented the proposed AMCO business strategy to the Matrix sales team. As a result, Ms Galligan and other members of the Matrix sales team started speaking to potential investors about the proposed AMCO business in March and April 2012.

There is a dispute between Mr Siddiqi and Ms Galligan on the one hand, and Mr Mathur and Mr Reeves on the other, as to what happened in this period, as to how much the introductions of prospective investors was by Matrix and how much by Musst, and as to the terms, or at least understandings, on which the parties were operating.

The following is to be noted from the contemporary documents:

Mr Siddiqi wanted to involve Mr Reeves in discussions as to how to take things forward. Mr Reeves was keen to be involved in them as was apparent from a number of emails between 16 January 2012 and 18 January 2012.

In an email of 16 January 2012, Mr Siddiqi wrote to Mr Reeves as follows:

17 January 2012 from Mr Siddiqi: “It was really good talking yday, Anish, and I am happy that you are comfortable involving me. From my side, let me assure you … as I mentioned to you yesterday, I would never put my name on anything that I did not completely believe in nor had an interest in. …. Most importantly, I am happy that you feel comfortable trusting me and vice versa. Looking forward to building a big business that is successful and has long term legs”.

18 January 2012 from Mr Mathur: “As usual, I am quite amazed with your network and ability to connect dots. I hope we are able to take this forward. Not only am I pleased that you’re keen to be involved, I am actually very happy that you believe in the opportunity and my abilities to capitalized it [sic] for all of us.”

After a meeting with Mr Siddiqi, Ms Galligan, Mr Mathur and Mr Shamil Chandaria on 8 February 2012, Mr Reeves sent an email on 9 February 2012 setting out what he believed needed to be done, which involved, amongst other things, creating a “pitch book” , a “product structure” , and working out which clients to target. He also gave a few initial thoughts on a sales strategy. At a further meeting the next day, Mr Siddiqi, Mr Mathur and Mr Reeves spent a few hours working on the “pitch”, which resulted in Mr Siddiqi coming up with a “one pager”.

In emails in February 2012 and March 2012, Mr Reeves suggested various terms which could apply as between MUSST and Matrix in relation to Mr Mathur’s project, and also on another deal, which involved raising money for an equity fund backed by Mr Shamil Chandaria and run by Octave. He noted that terms needed to be agreed between MUSST and Mr Mathur before agreement could be reached between MUSST and Matrix.

More particularly, on 15 February 2012, there was an email from Mr Reeves to Mr Siddiqi and Ms Galligan as follows:

On 6 March 2012 (and another on 21 March 2012), there was an email from Mr Reeves to Mr Siddiqi stating: “MUST (sic) Fee agreement (SS to complete once completed then MUST (sic) to complete with Matrix).” (This appears to indicate an understanding on the part of Mr Reeves as at March 2012, and contrary to Astra’s case, that the fees would be paid by Octave, the manager, to MUSST and then from MUSST to Matrix.)

On 11 April 2012, Mr Mathur gave a presentation to the Matrix sales team about his proposed fund, along with Mr Siddiqi. This sales team included Mr Christopher Elliott and Mr Ben Fox, as well as Mr Reeves and Ms Galligan.

By about mid-April 2012, Mr Mathur had decided to trade under Octave’s regulatory umbrella (he had to have some umbrella until his vehicle obtained the relevant authority to trade in its own right from the (then) Financial Services Authority). He was still at the time with Deutsche Bank.

From mid-April 2012, the following is to be noted from the contemporary documents:

Mr Siddiqi was working very intensely on the preparation of the presentations e.g. “OK team – I spent 10 hours on this today … and will probably do the same again tomorrow. I have locked myself up until this gets done … but I would like us to have a wrap on it for Friday … I have started initiating contacts with ADIC, EIA already and will need to send them something for Sunday …. The heat is on!” (Mr Siddiqi, 18 April 2012);

“Anish came over this morning and we spent some hours on the document. I attach its most updated incarnation including comments we discussed this am. …” (Mr Siddiqi, 23 April 2012);

“Looks like another long night for Mr Siddiqi. Please see attached version 7 draft”. (Mr Mathur, 27 April 2012);

“The goal is to keep evolving this document as we get closer to launch and as we get more intelligence from our sales process, Hence, please keep shooting me comments as and when we get them … Well played team and thank you everyone! S” (Mr Siddiqi, 27 April 2012).

The Matrix sales team became involved in assisting Mr Siddiqi and Mr Mathur to prepare the presentations for the fund to send to prospective investors as is apparent from emails in the second half of April 2012 especially. They were also making the initial contact with investors in many cases and going on road trips with Mr Siddiqi and Mr Mathur either locally or abroad e.g. 12 April 2012 planning European trips, 8-9 May 2012 two presentations in the UK offices of Matrix in London with 12 investors at each, 14-17 May 2012 referring to a trip to Switzerland, 30 May 2012– 1 June 2012 trip to Sweden. The Matrix team assisted Mr Siddiqi and Mr Mathur in drawing up the prospectus and the “due diligence questionnaire” (the “DDQ”) for Octave to send out to prospective investors about the fund (especially late June 2012 and July 2012).

Mr Reeves continued to suggest that agreements needed to be reached between MUSST and (now) Octave, and between MUSST and Matrix. Mr Siddiqi chased Mr Mathur to finalise the agreement which he said they had reached, given that “the AMCo/Octave marriage is now in place and hence we need to draw up T&C’s between us” (25 June 2012).

By early July 2012, Simmons & Simmons had drawn up a “Summary of Principal Fund Terms” for what was now called “AMCO Special Situations Credit Fund Ltd”, which noted that the fund was to pay the “Investment Manager” (i.e. Octave as then expected) 20% of net realised appreciation on investments and a 2% management fee. They had also started work, with Mr Siddiqi’s assistance, on the proposed offering memorandum. Octave sent a rough draft of the first prospectus to Mr Reeves, Ms Galligan and Mr Siddiqi.

Three other points are to be noted about this period.

First, in this period, the first approaches were made to the two investors whose investments form the main subject matter of this claim, i.e. LGT Capital Partners (“LGT”) (who eventually invested through Crown), and The Observatory (who eventually invested through 2B).

Thus, on 24 April 2012, Ms Galligan then of Matrix made the first approach to Mr Issac Septon, of The Observatory, a United States entity, and set up a teleconference with him which eventually took place on 2 July 2012 between Mr Septon, Mr Mathur, Mr Siddiqi and Ms Galligan. Musst says that it was at Mr Siddiqi’s suggestion that Ms Galligan made this approach, when the two of them had a “brainstorming” session on 12 March 2012 (Ms Galligan already knew Mr Septon, but Matrix had not sold any products to him).

On 18-21 September 2012, Ms Galligan and Mr Mathur went to the US to visit Mr Septon as Mr Siddiqi could not go due to visa complications. It is suggested that Ms Galligan went in place of Mr Siddiqi. (On 25 September 2012, there was a trip to Stockholm and on 16/17 October 2012 further roadshow in Switzerland. On 9 October 2012, another one was fixed for 9 December 2012).

As for LGT, at some point, Mr Elliott of Matrix made the first approach to them, and also arranged a first meeting with them in Pfaffikon, Switzerland, which took place on 15 May 2012, attended by Mr Mathur, Mr Siddiqi, Mr Elliott and Ms Galligan. Musst says that this again was at Mr Siddiqi’s suggestion to Ms Galligan in their 12 March 2012 brainstorming session because he had met various members of LGT’s investment team including Mr Rigter and Mr Plotke (the latter of whom he had met several times on the hedge fund circuit).

Mr Siddiqi says that he had intended that he himself should make the first contact, but Mr Elliott, without his permission, jumped in and did so. Mr Siddiqi let him continue to liaise with Crown because the “industry etiquette” is that a potential investor is contacted on a specific idea by one person. Thereafter, Mr Elliott arranged the further meetings with LGT on 16/17 October 2012 in Switzerland again, and on 13 November 2012 in London.

Second, Mr Mathur ceased to be registered as an authorised person at Deutsche Bank on 13 September 2012 (according to the Financial Services Register). He left Deutsche Bank at some point in “September 2012”. This meant at last that contracts could be drawn up with him (or, rather, his vehicle), and with Octave. As Mr Siddiqi wrote on 9 October 2012: “We also need to put the Musst/Octave Agreement in place as I explained to you now that we are going to be in a position to do so”.

The departure of Mr Mathur from Deutsche Bank enabled the “Red Herring” prospectus (i.e. a preliminary prospectus) to be sent to investors who had already shown a real interest, which explained the Astra Special Situations Credit Fund Ltd and that Octave LLP was going to be the investment manager, and Astra LLP the investment adviser. On 8 November 2012, Mr Siddiqi sent to Mr Plotke of LGT the Red Herring prospectus on Astra Special Situations Credit Fund Ltd. He explained that Astra LLP will “be investment advisor, appointed by Octave Investments Management LLP as such... Once you have had the opportunity of looking at the Red Herring prospectus, please do not hesitate to contact me if there are any questions or comments with respect to the document …. I believe we have a meeting with LGT next Tuesday at Octave’s office and I look forward to it. Are you also going to be in London in which case if it is convenient for you, could I take you out for a meal or drink?”. On 5 December 2012, Ms Galligan sent by email to Mr Septon the following: “Dear Issac, Thank you for your time yesterday. We greatly enjoyed seeing you. I have attached a prospectus. Please let me know what else you may need to complete DD.”

Third, by September 2012:

Mr Mathur had set up Astra Capital on 24 July 2012, of which he was the 76% beneficial owner, and in which, initially, Mr Joshi had 4% and Octave 8% of the shares. Dr Adler had 5%. However, Mr Mathur did not become a director of Astra Capital until 19 October 2012.

Astra UK was incorporated on 6 August 2012. Initially, its members were Mr Joshi and Mr Phillips (to March 2013 and October 2013 respectively). Mr Mathur did not become a director until 21 March 2013.

Mr Mathur had also, on 7 August 2012, set up Astra LLP. Mr Mathur did not become a member of Astra LLP until 21 November 2012.

Astra Capital, at least in due course, had 51% of the votes in Astra LLP (as to the rest, Mr Mathur had 29% and Mr Holdom and Dr Adler each had 10%). As of 7 August 2012, it may be that Astra UK and Octave Capital Management were members of Astra LLP.

Mr Mathur had set up the Astra Special Situations Credit Fund Ltd (hereafter “ASSCFL”) on 11 October 2012.

As for Octave, the ownership position (at least by April 2013) was that:

Octave Ltd was owned as to 39.25% by Mr Joshi; 5% by Mr Phillips; 6% by a Mr Holt, and 2.5% by Mr Holdom;

Octave Ltd owned 100% of Octave Capital Management Ltd, which in turn held 65% of the votes of Octave LLP (the rest being held as to 15% by Mr Joshi, 5% by Mr Holdom, 5% by Mr Holt, 5% by Mr Phillips and 5% by Mr Mathur). Mr Mathur says that it was on 6 November 2012 that he became a member of Octave LLP.

The various agreements necessary to give effect to the intended arrangements between Octave and Astra in relation to ASSCFL were not concluded until 29 November 2012. In the meantime, Mr Mathur was registered with the FSA to perform the controlled functions as a partner with Octave LLP on 30 October 2012, and Astra LLP became Octave LLP’s appointed representative on 6 November 2012, when it moved into Octave’s premises in Ironmonger Lane in the City.

Points in dispute in the period between January and October 2012

There are disputes between the parties including about the following three points:

the nature of Matrix’s role and responsibilities;

what was the intention as regards payments to Matrix: Astra say that there was an agreement/arrangement between Matrix and Mr Mathur in early 2012 as regards a share to be paid by Mr Mathur to Matrix for its distribution efforts (what has been called “the Matrix arrangement”), whereas Musst says that an agreement would be made between Mr Mathur/Octave and Mr Siddiqi/MUSST and a separate agreement between MUSST and Matrix to pay a part of the moneys received from MUSST;

the dispute about whether there was a November arrangement in the nature of a voluntary arrangement: according to Astra, following the November arrangement, Matrix agreed that the voluntary payments would be made by Mr Mathur/Octave to Musst/MUSST which in turn would make payments to Matrix. This will be considered further when discussing the first issue.

As regards the first of the above points, Musst says that Matrix was acting at all times under the direction and control of Musst such that Matrix was no more than an administrator taking instructions from Mr Siddiqi/Musst. Thus, any investor who was approached or introduced would have been upon the initiative and/or at the instigation of Mr Siddiqi/Musst, because the initiative/instigation was that of Mr Siddiqi/Musst and Matrix was simply acting on instructions. However, Astra say that Matrix designed the distribution strategy from its database of investors (which included The Observatory and LGT), and worked out who to contact, albeit that there was coordination between Musst and Matrix. In no sense was Matrix acting on the instructions of Musst.

As regards the second of the above points, Musst says that there was no agreement or arrangement between Mr Mathur or his vehicle and Matrix, but that it was intended at all times that there would be one binding agreement between Musst and Mr Mathur or his vehicle: separately, Matrix would look to Musst/Mr Siddiqi for payment for its efforts out of moneys received by Musst/Mr Siddiqi from Mr Mathur or his vehicle. Astra say that although the relationship became tripartite (that is to say Mr Mathur/Octave, Matrix and Siddiqi/MUSST after 21 November 2012), in early 2012 the arrangement was that Mr Mathur/Octave would pay Matrix directly for its introductions, and the parties discussed a 20% fee in respect of management fees and performance fees.

As regards the third of the above points, Musst says that there was no November arrangement between Musst and Octave of a voluntary nature and in respect only of introductions made before 21 November 2012. The parties reached an agreement in principle in November 2012 on the basis that any agreement would be made in writing thereafter. The parties then negotiated the agreement which was made on 18 April 2013. By contrast, Astra say that there was an arrangement to pay to MUSST for its efforts up to 21 November 2012 by a voluntary payment. There would then be negotiated a forward-looking written agreement in addition to the November arrangement. Thereafter, the voluntary arrangement was modified to involve Matrix, so that all three parties would become parties to the November arrangement whereby the voluntary payments would be made to MUSST in respect of any introductions before that time, and MUSST would be responsible to pass on payments to Matrix as would be negotiated between MUSST and Matrix.

The position of Musst is that Matrix was always acting under MUSST’S direction and control, and it had no discretion of its own to approach investors or indeed to discuss arrangements with Mr Mathur. In particular:

It contends that it was Mr Siddiqi’s role to co-ordinate all sales efforts. In the context of a possible overlap, Ms Galligan wrote to Mr Mathur on 11 September 2012 that “As we have discussed I believe Saleem to coordinate all sales efforts for AMCO.”

Mr Siddiqi was the “product specialist and key presenter” , and he attended the majority of the key meetings, sometimes with Mr Mathur, sometimes without.

It was at Mr Siddiqi’s instigation that The Observatory and LGT were first approached, albeit that it was Ms Galligan and Mr Elliott who then made the first contact.

Although, as had been agreed, Matrix generally made the initial approach, this was only to 58% of the 178 investors identified on a list sent by Mr Siddiqi to Mr Mathur on 28 November 2012, and the other 42% were first contacted initially by Mr Siddiqi. Where clients expressed interest following an initial approach by Matrix, Mr Siddiqi would step in, as the product specialist, to talk about the proposal in more detail with the decision makers. He also approached over 100 potential clients, many of which he met in London, Geneva, Zurich, New York and Stockholm.

Musst says that the work Matrix did was essentially administrative (e.g. making initial contacts with the potential investors, arranging meetings and printing presentations, and sending presentations to target clients).

Astra accept that Mr Siddiqi was the “co-ordinator” of the distribution effort in that there had to be someone ensuring that there was a united strategy and especially that potential investors were not approached by different people. It is also accepted that Mr Siddiqi made the introduction of Mr Reeves to Mr Mathur. That is not surprising in view of the fact that he is married to Ms Galligan, who at the material time, namely early 2012, worked for Matrix. The case of Astra, especially through the evidence of Mr Reeves, is that it was Matrix that took the lead and was the “capital introducer” for the fund. They contend that Mr Mathur often had direct contact with them without Mr Siddiqi being there. Likewise, it was Matrix, Mr Reeves says, that designed the distribution strategy from its database of investors (which included The Observatory and LGT), and worked out who to contact, pursuant to which it contacted over 200 potential investors. It involved its compliance and legal teams and its risk committee and new business committee.

In my judgment, starting with the contemporaneous evidence, this shows that Matrix was more than an administrator or a secretary. This is for the following reasons. First, it had a bank of contacts itself to whom it could reach out. Second, it made contact with potential investors which indicates much more than an administrative role. Third, Ms Galligan in particular presented as a person with ‘the gift of the gab’ and the charm that the best salespersons have. Until October/November 2012, she was acting for Matrix and not for MUSST, despite her being married to Mr Siddiqi. In that capacity, she was doing more than simply administrative tasks. Fourth, when Mr Elliott reached out to LGT (without the prior approval of Mr Siddiqi), he was doing more than being an administrator, but seeking to get the business of a prospective investor.

The key points relied upon by Musst do not make the contact of Matrix merely administrative. Matrix lacked the technical know-how in the credit instruments relating to synthetic ABS, such that any investment depended on contact between Mr Mathur and/or Mr Siddiqi and the prospective investor. However, that does not relegate the contact of Matrix to a secretarial role. The co-ordinator was Mr Siddiqi, but the fact that there was supposed to be liaison before and after contact took place between Matrix and prospective investors does not mean that the extensive personal contact including meetings of Matrix with them was not important. This is particularly evident as regards the meeting attended in the US by Ms Galligan in September 2012. The absence of Mr Siddiqi would not mean that an administrator would be a substitute: it reflected on her abilities that she deputed for her husband, and at that stage she deputed as an employee of Matrix rather than as a representative of her husband.

It does not follow from the fact that Matrix was taking a part of the distribution role that Matrix was taking the entire distribution role. I accept the evidence of Mr Siddiqi and Ms Galligan that they had a brainstorming session together on 12 March 2012 about their contacts including LGT and Crown. Mr Siddiqi did have the overall coordinating role, and this is not affected by the fact that Mr Elliott made the approach to LGT without prior reference to Mr Siddiqi. Mr Siddiqi had a major role in respect of distributions, preparing technical material, compiling names of potential investors, attending meetings and speaking with and writing to them. Likewise, after she ceased to act for Matrix, Ms Galligan immediately continued her distribution role, but this time for MUSST.

Musst says that:

It was agreed (albeit the specifics had not been worked out) at a meeting between Mr Siddiqi and Mr Mathur on 16 January 2012 that Mr Siddiqi’s business would get 25% of all fees charged by Astra to investors on capital which he raised; and this was mentioned at other times in 2012. There was nothing which was set out in writing at that stage containing or evidencing the terms of the deal.

In subsequent emails, the following was set out. On 25 June 2012,

“11.47: Mr Siddiqi “Dada, I wanted to see if we could sit down and finalise everything relating to our deal please? The AMCo/Octave marriage is now in place and hence we need to draw up T&Cs between us. Do you want to do it post the AMCo meeting at Matrix on Wednesday? Hope all is well, S” .

12.01: Mr Mathur “Do you want to revisit T&Cs for us!!!!”.

12.01 Mr Siddiqi “No revision, just finalisation. Want to put it down on paper, there have been some changes at your end, that affect me and now that you have clarity, we need to noterise [sic] it. I need to have that for Musst/Matrix too … they need to see that I have a written up deal with AMCo….”

On 23 September 2012, in an email of Mr Siddiqi to Mr Kaushnik Ghosh, he wrote:

It was agreed that Musst would come to an arrangement with Matrix for its assistance, but only after Musst had agreed fees with Mr Mathur; and so the matter was left to be discussed later.

The witness statements of Ms Galligan and Mr Siddiqi respectively in this regard read as follows:

“Mr Reeves said we would see how it went and then discuss what terms MUSST and Matrix should work together on, which would also account for the help Saleem had already given Matrix and continued to do. Mr Reeves accepted that MUSST would direct Matrix with respect to AMCo/Astra and which potential investors MUSST wanted Matrix to contact.” : Ms Galligan’s third witness statement para. 54

“Because the whole arrangement was rather provisional and it was unclear how it would go (Mr Mathur had not even left Deutsche Bank yet), there was no deal between MUSST and Matrix about any payment or cut of potential future fees. MUSST did not have anything agreed firmly with Mr Mathur/Astra either (he was still at Deutsche Bank). It was all too early and we were all agreed that MUSST and Matrix would talk about a potential agreement once the arrangement and work scope had become clearer and MUSST had formally agreed terms with Astra. We also wanted any future terms to be discussed with Matrix to include my separate work helping with Matrix. In particular, I needed to know where MUSST stood (with Astra) before thinking about what deal might be appropriate between MUSST and Matrix.” : see Mr Siddiqi’s fourth witness statement para. 35.

Astra dispute that there was any such agreement with Mr Siddiqi in January 2012 or otherwise. On the contrary, they say:

By 15 February 2012, Mr Reeves had agreed with Mr Siddiqi that Matrix and Musst (or MUSST) “would split the fees received 80/20. I wanted Matrix’s fees to equate to 20% of the total fees” . He adds: “I believe we proceeded on the basis that Mr Siddiqi would negotiate to receive 5% (whether by way of equity and/or commission” : see Mr Reeves’ statement paras. 18 - 21.

Correspondingly, Mr Mathur agreed in principle to give Matrix 20% of fees received. When it turned out on 27 February 2012 (contrary to what Mr Mathur says he had previously understood) that Mr Siddiqi was not going to be in a position to advance working capital, Mr Siddiqi asked him nonetheless for a 5% override on top of Matrix’s 20% in cash or equity. Mr Mathur, however, declined, as Matrix “had already negotiated a 20% share with me over 3 years …” : see Mr Mathur’s fifth statement at paras. 30-32.

In about March 2012, Mr Siddiqi said that he could obtain commission from Matrix, which Mr Mathur had no problem with, as long as he did not have to pay any more fees than the 20% already agreed with Matrix. That Mr Siddiqi was going to get 20% from Matrix was subsequently confirmed to him in June 2012: see Mr Mathur’s fifth witness statement paras. 33, 66.

Subsequently, Mr Mathur and Mr Reeves agreed around 3 April 2012 that Matrix should begin to market the fund on a non-exclusive basis, including identifying potential investors, contacting them and having initial discussions to gauge their interest before bringing Mr Mathur in to present the detailed strategy to them: see Mr Mathur’s fifth witness statement at para. 25.

Mr Reeves and Mr Mathur say that they had at least reached the above agreement in principle for 20% during the initial three-year period (to include both management and performance fees) by or in May 2012, with Mr Mathur to pay Matrix directly: see Mr Mathur’s fifth witness statement at paras. 26, 65. It was also agreed at dinner on 6 August 2012: see Mr Reeves’ witness statement paras. 32-33.

The exception to this, say Astra, is that it was agreed in principle that Mr Siddiqi would be paid 25% of management fees, but no performance fees, on investors with whom he, Mr Siddiqi, had a particularly close relationship and whom he introduced directly without any assistance from Matrix. Again, the sum was to be payable over a three-year period. This is what the Defence calls “The Siddiqi Understanding”: see Mr Mathur’s fifth witness statement at paras. 34, 67.

This period starts with the decision of Matrix’s parent company to go into administration, and ends with the meeting which, it is common ground, took place between Mr Mathur, Mr Siddiqi and Ms Galligan on 21 November 2012 to discuss terms with them.

On 24 October 2012, Matrix (or the parent company, Matrix Group Limited) gave notice of intention to appoint administrators. On 25 October 2012 or shortly after this, Mr Mathur was informed of this at a meeting between himself, Mr Reeves, Mr Siddiqi and Ms Galligan at MUSST’s premises. Mr Mathur was shocked, and very concerned that an abrupt stop to the distribution of the fund would have a detrimental effect on the launch of ASSCFL. He disputes that he had been told of Matrix’s difficulties in Switzerland on their trip in May 2012, but says that, in any event, going into administration was of a different order.

Musst says that there was then a further meeting between the same participants on 5 November 2012, at which Mr Mathur was told that Matrix was on its last legs and was about to make a statement that it was going into administration, which it did the next day. Mr Mathur, it says, expressed concern that Matrix could not continue helping MUSST’s marketing efforts, and he was angry with them for withholding the information about Matrix’s difficulties.

There then ensued the discussions over the next two weeks or so in which according to Astra’s case, the November Arrangement was negotiated between Mr Mathur, Mr Reeves, Mr Siddiqi and Ms Galligan. As noted above, this is disputed by Musst which says that no arrangement was made, and it was always understood that the introductions so far effected (including in particular those of 2B and Crown) would be covered by the contract that was eventually negotiated, that is the Octave Contract.

The contemporaneous documents during this period are informative. In an exchange on 8 and 9 November 2012, Mr Siddiqi identified to Mr Holdom of Octave 28 entities to whom “we want to send prospecti urgently”: Mr Holdom agreed with the list. This list included The Observatory and LGT.

On 11 to 16 November 2012, Mr Mathur and Ms Galligan went on another roadshow to the US (Ms Galligan was now working for MUSST, as she had been made redundant by Matrix on 6 November 2012). Ms Galligan accepted in cross examination the proposition that Mr Mathur met Mr Septon without her, that meeting was without her (if that was what Mr Mathur said [T3/52/1-11]). In fact, Mr Mathur’s evidence was unclear in respect of the same because he did not recall whether she was there. In any event, she appears to have set up the meeting and she was in New York at the relevant time: see Mr Mathur’s fifth witness statement at paras. 40.4 and 54. -.

In the meantime, on 13 November 2012, a further meeting with LGT took place, this time at Octave’s offices, attended by Mr Rigter and Plotke of LGT, Mr Siddiqi, Mr Elliott (apparently now of LGBR), Mr Thomas of Octave and Dr Adler. Mr Mathur (who was in the US) attended by telephone.

It is clear also that arrangements were now being made to get a contract signed between MUSST and Octave. By this time, over 100 potential clients had already been approached, but none of them had yet committed to making an investment.

Thus:

On 13 November 2012, Mr Siddiqi had a meeting with Mr Phillips, Octave’s Chief Financial Officer, in which Mr Phillips said that the relationship needed to be finalised.

On the US road trip, Ms Galligan says that she told Mr Mathur that they needed to formalise arrangements. Later, while they were in a Starbucks café in Chicago, Mr Mathur complained again about being misled over Matrix, but after calming down he said that he no longer thought MUSST should receive 25% of all fees, but just 20%. He said that he would consider whether to give them equity: see Ms Galligan’s third witness statement at para. 128. Mr Mathur made it clear during the course of the trip that any future relationship needed to be sorted out as soon as they got back to the UK.

On 16 November 2012, Mr Siddiqi gave instructions to Mr Christopher Hilditch of Schulte Roth & Zabel LLP (“SRZ”) to draft a contract and provided a draft which Mr Phillips had provided to him. Musst has, unlike Octave, made available its correspondence with its lawyers in relation to the negotiations for the Octave Contract.

At 9.33am on 19 November 2012, Mr Siddiqi sent an email to Mr Mathur which stated among other things:

Mr Mathur did not answer this request, but later, at 11.28 pm Ms Galligan sent another email to Mr Mathur, after passing the draft across to Mr Reeves for his comments, to whom she copied in the email as sent (along with Mr Siddiqi). This repeated that “Heads of terms between Amco and Musst need to be signed. Musst needs this as soon as possible to be able to get financing.”

She continued:

Musst to receive 25% of Management and Performance fees on all assets raised on Funds managed by Anish Mathur. There continues to be ambiguity on the treatment of 5% of the 25% Performance and Management Fee.

You had initially suggested that the 5% be reinvested to obtain equity, at a valuation metric derived by you. We had requested that we maintain some flexibility on this given our financial predicament. We had suggested that 25% of this 5% could be reinvested for equity and that 2.5% be paid out in order to facilitate the agreement. In terms of the equity component, you have said you would give this some thought …

When we initially started our dialogue you had agreed that Musst have 1% equity in AMCO, after Saleem told you that it was imperative that he have even a small interest. It is vital that Musst have equity in Amco to maintain with investors that we have spoken to and continue to speak to that Musst is not merely a placement agent but has a strategic partnership with AMCO ….

It is something Musst has been saying at every meeting, as you know. We believe this is beneficial to all parties in aiding asset raising. Many doors have been used to open doors with personal introductions due to Saleem’s reputation and network within the industry. This is what has greatly facilitated conversations and this is something that will be of great use in the future. Now with me sitting at Musst, this becomes much easier.

Musst has exclusivity on the marketing of Amco. We are happy to discuss Amco using other 3 ^rd party distributors should you feel it necessary. Third party conversations are to be co-ordinated with Musst to ensure efficiency and duplication issues.”

At 23.54, Mr Mathur replied (copied to Mr Reeves and Mr Siddiqi):

By reply sent just after midnight, on Tuesday 20 November 2012, Ms Galligan apologised if this was not Mr Mathur’s understanding “and I think it would be good idea to discuss what your understanding is before we draft a contract”. She suggested a meeting for Wednesday 21 November. Mr Reeves, who was copied in on these emails, expressed concern that Mr Mathur had the contact details of the clients, to which Mr Siddiqi replied, just the list of company names, although he had met individuals. Mr Reeves replied observing:

A meeting then took place between Mr Siddiqi, Ms Galligan and Mr Mathur at MUSST’s offices on Wednesday 21 November 2012:

According to Musst, Mr Mathur repeated that he was upset about not being told about Matrix’s difficulties and said that he thought MUSST should receive only 20% of Astra’s fees. It was agreed that this was to be 20% on all management and performance fees received in relation to investors they introduced as long as they remained invested: see Ms Galligan’s third witness statement at paras.149 – 152.

According to Mr Mathur, the meeting was “to discuss the prospect of Saleem and Alexandra taking equity by reinvesting future commissions, but no agreement was reached” . Although the Defence originally said that Mr Reeves was present at the meeting, and that what he now calls the “November Arrangement” was agreed at it (hence it was originally called the “21 November Arrangement”), Mr Mathur now appears to accept that it was not discussed at this meeting.

Later on the same day, Mr Mathur discussed the matter with Mr Phillips and told him to send over a draft contract to Mr Siddiqi and in the late afternoon, Mr Siddiqi invited Mr Mathur to dinner with his wife, which Mr Mathur later accepted. He wrote:

Having regard to principles of contractual construction, the court is not entitled to look at what the parties said or did in the course of negotiation of the contract or at the earlier drafts for the purpose of drawing inferences as to what the contract means: see Chartbrook v Persimmon Homes [2009] UKHL 38. That is not to exclude consideration of the following:

The issue as to whether there was a “November Arrangement”. If there was a November Arrangement, it would inform as to the contractual matrix against which the Octave Contract falls to be considered, which in turn might be relevant to the question as to whether the Octave Contract could have been intended to apply to the contracts with 2B and Crown:

Any other aspects of the factual matrix to the contract;

The question of whether the Octave Contract should apply to any introductions to 2B and Crown under the alternative claims of estoppel and rectification.

The chronology of the negotiations may be summarised as follows. On 28 November 2012, Mr Phillips sent to Mr Siddiqi and Ms Galligan a draft contract, which noted that the contract discussion had started on 13 November (that is the date when Mr Siddiqi and Mr Phillips had met).

This removed the reference, which had been present in the previous draft provided by Mr Phillips, for Matrix to be a sub-introducer. It provided for commission at 20% of fees (both management and performance), less £50,000, evidently referring to the expenses which Mr Mathur had had to pay to cover Ms Galligan’s trip to the US after Matrix went into administration.

No distinction was made between introductions already made to Mr Mathur (or Octave) before 21 November 2012 and those made afterwards, nor was there an “Effective Date” provision. The agreement was to last initially for one year, with a three-year run off period for commissions after termination. Mr Mathur says that the purpose of the contract was to enable Mr Siddiqi and Ms Galligan to raise finance on the basis that they had a written contract entitling them to commission in respect of future introductions by Musst.

After a discussion on Friday 14 December 2012, Mr Phillips sent a further draft, which accepted that “the fee obligation will continue for so long as the funds are in place” (by contrast with the three year cut-off provision in the previous draft); and that although the contract would have a six month period, “post termination, we can meet you in the middle and allow a 9 month period after termination for investments to come in”.

On 19 March 2013, Mr Murray, who had joined Octave as legal counsel and compliance consultant on 27 February 2013, sent to SRZ a revised draft which for the first time introduced an “Effective Date” provision, which provided that 21 November 2012 was the “Effective Date”.

He says that this was introduced after discussions with Mr Phillips and Mr Mathur in which Mr Mathur said that, before this date, introductions had been made by Matrix. Musst says that the provision was not communicated to Mr Siddiqi and Ms Galligan, who say that they assumed that this was the date on which they finalised the commercial terms of the deal with Mr Mathur.

In the meantime, in late February 2013, Octave had received advice from their US lawyers, Seward & Kissel, to the effect that if Octave was to use a third party marketer to market its proposed fund to US investors, then the marketer would need to be registered in the US as a “broker-dealer”, although there were a number of ways in which that could be achieved; and that US investors could claim rescission of their investments if Octave used an unregistered broker dealer.

This advice was emailed on to Musst’s lawyers, who evidently advised that there was nothing in the point, which in turn led to Mr Siddiqi complaining to Mr Mathur. Mr Mathur replied that he wanted to work in a “framework that was legit” and it was better to be safe than sorry.

A considerable amount of correspondence then followed on the issue between Mr Mathur, Mr Murray, SRZ, Mr Siddiqi and Ms Galligan. In the course of this:

Ms Galligan and Mr Siddiqi looked for and found a broker dealer who was willing to provide the necessary cover.

They took the view (on 19 March 2013), however, that “our first client, although US has invested via a managed account and hence, I would argue is not effected” . This was a reference to The Observatory, who had invested on 19 February 2013 (see further below). This view about managed accounts was confirmed by SRZ’s US lawyer, Mr Elovitz, which Mr Siddiqi emailed on to Mr Mathur.

Mr Murray continued to press the point (he said it was a “core element” of the deal), to which SRZ replied that broker dealer registration “is not required for managed accounts” . This repeated reference to “managed accounts” . Musst submits, shows that the issue was being discussed because it was assumed that the 2B investment was to be covered by the contract.

The discussions rumbled along in late March and early April 2013, with Mr Murray insisting on broker dealer cover (or at least a certificate from SRZ that the services of a broker dealer were not required); and SRZ and Mr Siddiqi and Ms Galligan insisting that it was not required for managed accounts.

Eventually, on 5 April 2013, Ms Galligan complained to Mr Mathur about Mr Murray’s request for an opinion from SRZ, given the likely cost. Mr Mathur, she says, said that he could not see why it should be a problem, and he would work it out with Mr Murray.

After an interval of ten days, Mr Murray, on 15 April 2013 at 15.04, sent through to Mr Siddiqi and Ms Galligan an “Execution version of the Introduction Agreement”, and wrote (in an email chain that appears to have been copied to Mr Mathur on 15 April 2013):

The retention by Musst of the services of a US broker dealer are not required for performance of contractual obligations to managed accounts

the performance by Musst of the contractual obligations contemplated by the Agreement to 2BLLC will not infringe US legal or regulatory requirements.”

To similar effect, on 16 April 2013, Mr Phillips wrote to Mr Murray, Ms Galligan and Mr Siddiqi, copied to Mr Mathur:

Accordingly, at 17.27 on the next day, 17 April 2013, Ms Galligan wrote to Mr Mathur, Mr Phillips and Mr Murray, under the heading “Subject Execution Version of the Introduction Agreement”:

There then followed at 17.46 (same subject): Mr Phillips, Ms Galligan, Mr Mathur, Mr Murray cc Mr Siddiqi: “Alexandra, Many thanks, Let’s sign! P”. The parties accordingly signed on 18 April 2013.

After, but only after, the parties had signed, Octave (or in fact Astra LLP on its account) paid the 20% share of the fees which it had already received from 2B, who had invested US$20 million with it in a managed account.

The terms of the Octave Contract are discussed in detail below, but in essence, by it, Octave Limited appointed Musst, from the “Effective Date” of 21 November 2012, to introduce to it “Prospective Investors”, in return for a 20% share of all fees earned and received by Octave and its affiliates from their management of “the Funds”, which share was to be paid to Musst by Octave Limited. The “Funds” were defined as “The Astra Special Situations Credit Fund Limited”, and other funds and managed accounts with similar risk profiles which substantially followed the “Current Strategy”, which was “to invest primarily in synthetic asset backed securities, on a buy and hold basis with limited or no direct leverage, and such that the investments were intended as if they were closed-ended investment pools with capital committed on a locked up basis for several years to be returned to the investors in such funds following realisation of the investments therein”.

Octave Limited was designated the “Manager”, and Octave LLP the “Investment Manager”, to whom Octave Limited was entitled to delegate any functions under the contract (see clause 3.6). Although this does not appear from the Octave Contract itself, it was always intended that the funds were to be managed by Astra LLP, as Octave’s appointed representative, at least until Astra LLP obtained its own authorisation to act as manager.

While the Octave Contract was being negotiated, the various agreements necessary to get ASSCFL launched (i.e. the hedge fund company in which investors could subscribe for shares) were put in place on 29 November 2012 and the fund launched in late December 2012. At the same time, Mr Mathur also set up and put in place the arrangements for another fund, called ASCIL, which appears to have followed the same or a very similar strategy as ASSCFL.

By the end of the first quarter of 2013, it would appear that US$5 million had been invested in ASSCFL, and US$32 million in ASCIL. Mr Chandaria had by now made an investment of US$15 million, as had his friend Mr Edwards. This appears to have been invested in the ASCIL fund.

In the meantime, discussions continued with The Observatory and LGT, which eventually resulted in The Observatory agreeing in February 2013 to invest US$20 million, and LGT agreeing in June 2013 to invest US$40 million with Octave in managed accounts.

In the case of The Observatory, on 4 December 2012, Mr Septon came over to London and had a meeting at Octave’s offices with Mr Mathur, Mr Siddiqi, Ms Galligan and the wider investment management team (including Dr Adler, although the latter had not yet left Deutsche Bank). On 5 December 2012, Ms Galligan sent him the AMCo Red Herring prospectus. From that point on, the focus of discussions, Mr Siddiqi says, was on the logistical side of setting up the managed account for 2B, the vehicle through which The Observatory eventually invested. On 11 December 2012 he said he was ready to “open an SMA for Anish at DB”, that is a separately managed account held at Deutsche Bank, which Mr Siddiqi and Ms Galligan (they say) took the lead in setting up, although the bank was changed to UBS. Subsequently, Mr Siddiqi, with Mr Mathur’s assistance, dealt with various questions which Mr Septon raised.

On 15 January 2013, Octave, through Mr Phillips, explained how the managed account was to work, that is that it was intended to operate on the basis of an investment management agreement “which will give Octave power to manage the assets of a sub-account in your name at UBS, following a strategy in substantially the same terms as the Astra Special Situations Fund. As with the fund, we envisage the IMA [investment management agreement] lasting for a minimum period of 3 years to allow Octave to follow a buy and hold strategy, as for the Fund”.

After further discussions, 2B agreed to invest US$20 million in “cash and synthetic asset backed securities” and other structured credit products by a contract dated 11 February 2013 (“the 2B Contract”). Octave sent over a copy to Musst shortly before it was executed on 13 February 2013. Mr Septon also sent over a copy to Musst.

Under the 2B Contract, 2B agreed to pay to Octave, in return for management of its funds, (a) a management fee assessed (to put it simply, although the formula is more complicated) by reference to the net asset value of the fund invested (see clause 13.1 of schedule 4), and (b) a “performance fee” on the net profits it made from the fund (see clause 13.3 and clause 2 of schedule 4). Shortly afterwards, 2B invested US$20 million and Octave sent it invoices for its February and March 2013 services.

LGT took longer to make their investment and carried out more due diligence during which there were further meetings and discussions. Mr Siddiqi and Ms Galligan dealt with LGT’s due diligence questions, acted as conduit between LGT and Octave/Astra, and assisted in the negotiation of fees.

Eventually, LGT, through its vehicle Crown entered into a “Trading Advisory Agreement” dated 13 June 2013 (“the Crown Contract”), under which it agreed to invest US$40 million with Octave. As with the 2B Contract, Octave (through Mr Mathur) sent to Musst a copy of the contract in final unsigned form, on 13 June 2013. Mr Murray sent it to Musst in signed form on 23 July 2013, and an amended agreement on 3 June 2014.

The Crown Contract provided, amongst other things that:

“The investment objective is to generate attractive returns by investing in structured credit products. The principal investments of the Segregated Portfolio will be in cash and synthetic asset backed securities (including mortgage backed securities) and their derivatives and other structured credit products” ;

Although Octave had the “maximum flexibility to invest in a wide range of instruments and will not be subject to any limitations with respect to the types of investments that it may make …” , nonetheless “it is expected that the focus of the portfolio will be on the US and European asset-backed securities market … in both cash and synthetic form and derivatives of such instruments. The Trading Manager … may also invest in other structured credit products, such as CDO’s, CLO’s and similar instruments, as well as composite debt securities”;

Crown acknowledged that the total amount contributed was subject to a three-year lock in period;

An “Advisory Fee” was payable – i.e. a management fee - of 2% a year of the value of the funds under management, if their value was US$86.67 million or more; but if not, then the lesser of 2% of their value or US$650,000. On top, it agreed to pay 0.75% a year of the value of these funds, as long as it exceeded US$86.67 million; and

A “Success Fee” – i.e. a performance fee - of 20% of the net profits made by the fund, subject to certain deductions. (See clause 10.)

Pursuant to this contract, Crown made its first investment in the fund in about October or November 2013, and Octave received its first payment on 19 November 2013. The first payment of Musst’s 20% share was made shortly afterwards.

The total fees invoiced to and paid by Octave in relation to 2B and Crown (including the first US$10,000 paid by Astra LLP) were about US$221,000 in relation to 2B; and about US$124,000 in relation to Crown.

Mr Siddiqi’s email to Mr Mathur of 28 November 2012 identified the potential investors already approached in three ranks. Rank 1 comprised 16 with a very strong possibility of investing on whom MUSST was spending most of its time now (which included The Observatory and LGT); rank 2 comprised 40, for whom “there is hurdle to overcome”, mainly timing or understanding the strategy; and rank 3 comprised 41 who were most unlikely to invest. (There were also 9 who were “No’s”.)

In addition, there were 73 potential investors, being “firms we are in conversation with. We have sent them materials/spoken to them and are working on getting meetings with any that we feel can allocate very quickly should they understand the opportunity. Given the timing, they more are likely second tranche investors”.

At the time, it was proposed that there be a second tranche of investments to get the fund’s total capital raised up to its planned US$300 million. It was marketing to these 73 potential investors, Mr Mathur appears to suggest, that was to be covered by what became the Octave Contract: see Mr Mathur’s fifth witness statement at paras. 91-93.

From November 2012, MUSST continued its marketing efforts, but by 26 April 2013, Mr Mathur had indicated to Ms Galligan (as indicated in her email to Ms Imiolek) that “he will soon stop marketing/asset raising (end of June) as it consumes too much time and he wants to focus on investments. Therefore it is likely he will close at circa $200m but will take additional subscriptions from existing investors. Based on assumption of assets at $200m AMCO needs $3m of management fees to cover the costs of running the business”.

Subsequently, in about mid-2013, Mr Mathur told Ms Galligan, she says, that Astra had to stop raising capital, as they were struggling to deploy what they had raised. As a result, MUSST ceased actively to introduce investors, and its day-to-day contact with the Astra team was markedly reduced, but Mr Siddiqi and Ms Galligan (she says) would still visit them about once a month or every six weeks.

Musst says something about this, because it goes to whether or not the alleged November Arrangement ever existed, and to the related question, what arrangements if any had been made between Musst and Matrix before November 2012.

The day after administrators were appointed over Matrix’s parent company, on 6 November 2012, Mr Reeves set up LGBR. Almost all the sales team from Matrix (except Ms Galligan) joined him, he says, and he soon arranged a buyout of Matrix Bermuda, the investment manager of various hedge funds for which Matrix had provided distribution services.

Mr Reeves says that the ex-Matrix sales team then continued to help Mr Mathur and organised various meetings with potential investors, although Mr Siddiqi continued in his coordination role. However, there was no arrangement, he says, between Musst and LGBR in relation to new introductions, so it did not engage with new investors.

Musst accepts that, after Matrix’s administration, Mr Elliott was expected for a while to keep in touch with clients he had contacted, and that he continued to have dealings with LGT. In fact, this came to an end in February 2013, and Mr Elliott did not play any further role in the negotiations with Crown or its due diligence exercise.

There appears to have been some discussion as to LGBR and Musst working together in a strategic relationship, which might involve Mr Reeves being a non-executive director of Musst, but nothing came of this.

After LGBR’s acquisition of Matrix Bermuda, Mr Reeves, he says, worked with Begbies Traynor, Matrix’s administrators and then liquidators (as from 3 December 2012) to obtain recoveries. This included fees in relation to the introductions which, he says, Matrix had made for Mr Mathur’s fund. He says of this:

There were various communications over the next 12 months (including on 19 and 20 February 2013, 1 and 12 August 2013 and 17 December 2013) in which Mr Reeves raised the question of fees in relation to Mr Elliott’s work in relation LGT, to be paid either to Mr Elliott direct, or to LGBR. On 19 August 2020, Mr Reeves, through his vehicle Matrix Receivables Ltd (“MRL”), took an assignment from Matrix (i.e. Matrix Money Management Limited) of its causes of action. MRL then issued a claim form on 4 September 2020 alleging that in March 2012, Musst had reached an agreement with Matrix to split its fees 80/20 in Matrix’s favour (it also alleged a quantum meruit).

The claim of MRL does not arise for determination in the trial before the Court, and MRL has not appeared in the trial. MRL applied to have its claim joined to the current proceedings, so there would in effect be three claims that would have to be decided at trial. This late application was supported by Astra. However, the application was dismissed by the Chief Master on 2 November 2020.

Mr Mathur and Mr Reeves kept in touch with each other. Particular attention was drawn to the following communications, namely

In early March 2013, Mr Reeves “as promised” did some work on a sales plan and distribution strategy for the existing fund and for some new ideas. He added: “However, as discussed, I feel that we should only be considered if/once you make your decision with Musst as although we have different target audiences, I wouldn’t want to be involved in any turf wars”. (According to Mr Mathur, this was said in the context of “future” introductions.)

Mr Mathur, he says, kept Mr Reeves and Mr Elliott updated on progress “for example, in relation to LGT’s due diligence, on the basis they had an economic interest as well …”.

On 8 August 2014, Astra LLP entered into a Marketing and Distribution Agreement with LGBR, appointing it to act as “distributor in relation to the Fund(s)” with effect from 11 August 2014, with an initial period of six months, at a monthly fee of £6,666 plus expenses, with Astra LLP to pay 10% of performance fees received over five years from the effective date, with a maximum of $2 million. The fund was the “Astra European Opportunities Fund ”, and the agreement applied to any contract entered into not later than three months after the termination date.

According to Mr Mathur, no work was ever done “in relation to future introductions”.

On 22 July 2014, Astra LLP ceased to be an appointed representative of Octave LLP (Octave had disposed of its 8% shareholding in Astra Capital on 23 May 2014). On 23 July 2014, Astra LLP obtained FSA authorisation, and Astra Capital was appointed manager and Astra LLP as investment manager in relation to ASSCFL and ASCIL.

By an agreement dated 14 August 2014, it was agreed between Octave LLP and Astra LLP that all investment management services under investment management agreements would transfer from the management of Octave LLP to Astra LLP; and all fees payable to Octave Ltd would transfer, subject to the agreement of contracting parties to Astra Capital.

On 5 September 2014, Astra LLP and Crown entered into an “amended trading advisory agreement” which replaced and was on the same terms (or materially the same terms) as the Crown Contract (in particular for a US$40 million investment at the same fees). The payments were to be made to Astra LLP.

On 5 November 2014, Mr Holdom, writing on behalf of Octave, informed Musst that there had been “a change of Trading Advisor from Octave to [Astra LLP] effective on 1 September”, and said that the fees invoiced to Crown had been split as to US$107,782.80 from Octave, and US$52,175.70 from Astra LLP (which reflected the respective periods of management before and after 1 September 2013). He asked Musst to split its own invoices (i.e. to Octave and Astra LLP) accordingly.

Musst then sent out to Octave two invoices as requested, for US$21,565.96 and for US$10,435.14, which Octave and Astra LLP respectively paid. Thereafter, Musst sent all its invoices on the Crown contract to Astra LLP, and Astra LLP paid them, up to and including a payment on 4 May 2016.

By a further exchange on 4 February 2015, Mr Holdom (this time from Astra LLP) informed Ms Galligan that the amounts expected to be received were “$3,579.06 (Crown II) $160,256.56 (Crown 1)”. Ms Galligan asked what was the difference between Crown I and Crown II. She received no reply on this point, save for Mr Holdom confirming that as the account was paying its maximum fee, she could invoice US$32,500 per quarter to Astra LLP, which Musst duly did.

Subsequently, when the next quarterly payment came round, Mr Holdom on 30 April 2015 told Miss Imiolek that he had sent her a Crown II invoice by mistake. He wrote:

Musst rely upon this as an indication of the belief of Mr Holdom that the payments were being made not under the November Arrangement, but under the Octave Contract. On the question of who provided Mr Holdom with this information, he said that “I was assisted in the drafting of this email by a member of the Investment Team.”

As for the 2B account, Musst continued for a while to send invoices to Octave, and Octave paid them, on 24 November 2014, 16 December 2014, and 3 February 2015. On 3 February 2015, Astra LLP entered into an “Amended and Restated Investment Management Agreement” with 2B in place of Octave, again on the same terms as the previous 2B Contract. On 11 February 2015, Mr Holdom, writing on behalf of Astra LLP, sent to Musst the latest invoice to 2B, which had been sent by Astra LLP rather than Octave. In response on the same day, Musst asked Mr Holdom: “Just to confirm that we bill Astra as opposed to Octave for 2B LLC”, to which Mr Holdom, again writing on behalf of Astra LLP, replied: “Yes please”. (That he wrote these emails on behalf of Astra LLP is apparent from the footer to the emails.)

In total, from now on Astra LLP paid to Musst about US$230,000 on the 2B account up to 26 April 2016, and about US$220,000 on the Crown contract up to 4 May 2016.

Shortly after Mr Holdom’s request to invoice Astra LLP on the 2B account, Mr Murray, on 19 February 2015, wrote on its behalf to Ms Galligan at Musst, saying that: “We have moved to our new offices ... today and we are completing some final documentation in connection with the investment manager migration from [Octave LLP] to [Astra LLP]”. Accordingly, he sent an amended version of the Contract, showing Astra Capital as “Manager” in place of Octave Ltd, and Astra LLP as “Investment Manager” in place of Octave LLP. He explained that the amendment was “to facilitate the investment manager migration. There are no substantive changes ... and you will note that this is effectively a name changing exercise with [Astra Capital] acting as Manager and [Astra LLP] as investment manager”. He asked Ms Galligan to confirm that she was satisfied with the amended agreement, and he would arrange execution at his end “to complete matters”.

The amended agreement was in all respects the same as the Octave Contract, save that it altered the names as Mr Murray had explained, and it also altered the “Effective Date” from 21 November 2012 to 20 February 2015. In response to Ms Galligan’s email of 20 February 2015 acknowledging receipt and saying she would get back next week, Mr Murray reassured her that the draft contained “no substantive amendments”.

Ms Galligan did not revert. By an email of 27 April 2015, Mr Murray for Astra LLP asked Ms Galligan to return an executed version of the agreement, this time referring to a draft dated 4 March 2015, with this date, rather than 20 February 2015, made the “Effective Date”. Mr Murray then chased Ms Galligan for a response on 1 May 2015. She replied on the same day that she was waiting to hear from Musst’s directors and asked Mr Murray to send her a copy signed by Astra, which Mr Murray did, again on the same day (sending the 4 March 2015 version).

When Musst’s directors looked at the replacement contract, they were concerned, it seems, that by changing the “Effective Date” to 4 March 2015, the contract would exclude liability on the part of Astra to continue to make payments for the two introductions which had so been effected to 2B and Crown, because they had been introduced well before 4 March 2015. Accordingly, on 6 May 2015, Ms Galligan telephoned Mr Murray and explained this to him.

The call was taped, and there is a transcript, in which Mr Murray reassured her that this was not the intention, and that rather, the intention was to “novate the relationship but erm existing contractual entitlements with Octave up until the effective date remain in place”. At the end of the conversation, Mr Murray promised to send a letter of termination which confirmed that the existing contractual relations in the Octave Contract remained valid up to the termination date, and all the other provisions that were intended to survive termination would do so.

The matter then went quiet for almost a year, although Astra LLP now managed both the 2B and the Crown Contracts, and paid Musst’s invoices in relation to them. However, on 11 April 2016, Mr Murray, again writing on Astra LLP’s behalf, returned to the subject, noting that he had been going through “our agreements”, but he had not yet received a copy of the fully executed replacement agreement. He asked Ms Galligan to send one back “to tidy up our records”.

In response, Ms Galligan appears to have sent through the original Octave Contract. In reply, Mr Murray by email of 12 April 2016 asked again for execution of the replacement agreement. By return, Ms Galligan replied that Musst had not signed this agreement, and (apparently overlooking their conversation the previous year) asked what was the reason for the amendment. Mr Murray replied the same day that the amendment was necessary, as “[Octave LLP] is no longer the manager, [Astra LLP] is, none of the terms have changed this is a change of name exercise and I am trying to ensure our files our [sic] fully tied up”. Mr Murray chased for the executed replacement again a week later, on 19 April 2016. Ms Galligan replied on 20 April 2016 that she had sent it to Musst’s directors and lawyer.

However, on 20 April 2016, at 14.24, Mr Murray sent Ms Galligan another email, still on behalf of Astra LLP, withdrawing the draft replacement agreement. He explained that, in the light of tax advice, Astra UK were going to be taking over, in that week, the regulatory permissions and authorisations previously held by Astra LLP. He said that: “The management and Risk Committee of [Astra LLP] and [Astra UK] will remain identical.” In consequence, “contracts will be novated to [Astra UK]. [Astra LLP] and [Astra Capital] expressly withdraws [sic] the Introduction Agreement dated 4 March 2015 .... which has not been executed by Musst”.

Accordingly, although Astra LLP paid two more invoices from Musst, by payments made on 26 April 2016 and 4 May 2016, Mr Holdom started writing on behalf of Astra UK on 10 May 2016. From this point onwards, his emails were written on behalf of Astra UK, as appears from their footers, although his actual email address remained the same.

Thus, by email of 10 May 2016 on Astra UK’s behalf, he sent to Musst a copy of Astra UK’s invoice to 2B for the management fees due to it in relation to April 2016 (totalling US$75,692.82). In response, Ms Agatha Imiolek on 13 May 2016 sent to Mr Holdom at Astra UK Musst’s invoice for its share of these fees (i.e. US$15,138.56), which invoice, Musst says inadvertently was made to Astra LLP rather than Astra UK. By email of 16 May 2016, Mr Holdom replied that this had now been paid. It is understood that it was Astra UK which paid this fee (everything had been transferred over to it). The payment was not received until 25 May 2016, but nothing appears to turn on this.

Mr Holdom’s email of 16 May 2016 also said: “Going forward can you please address invoices to [Astra UK]”. By this stage, Astra UK had entered into revised agreements with 2B and Crown to replace those with Astra LLP, again on the same terms, on 21 March 2016 and 30 March 2016. It had also entered into a revised agreement with Crown in relation to the “Crown II” account on 30 March 2016 mentioned above, and which it told Musst on 30 April 2015 was following a different strategy. The entirety of Astra LLP’s business was transferred to Astra UK on 29 April 2016.

The next email on the subject was sent by Ms Imiolek for Musst on 16 June 2016, to Mr Holdom, asking “Have you received May invoice for 2B LLC? If not when do you anticipate invoicing them?”. In other words, when did Mr Holdom anticipate invoicing 2B for May 2016, so Musst could then send on its own invoice for its share of the fees? Mr Holdom replied on the same day that he understood discussions were taking place between Mr Siddiqi, Ms Galligan and Mr Mathur on the subject.

These discussions then took place on 14 June 2016 (a meeting at Astra’s offices), 27 June 2016 (a meeting at Astra’s offices, and a telephone call), and 13 July 2016 (a telephone call).

In essence, Mr Siddiqi had cashflow problems, and so he needed fees to be paid to Musst, in particular, the performance fees which he understood were due from 2B and Crown. However, Mr Mathur maintained that he himself was having difficulty getting paid, and there was nothing to pay over yet. On one occasion, he suggested that instead that they just settle on a figure now, regardless of what the performance should turn out to be in future. On another, he suggested he make an advance against performance fees now, another £250,000 next year, and then the balance when he was paid. However, no such payments were made.

In the light of these discussions, it would seem, Mr Holdom calculated the performance fees which had so far accrued to Musst on an “accrual” basis, that is taking the current value of 2B’s assets in the 2B Contract and Crown’s in the Crown 1 Contract, although no performance fees had yet been paid by either 2B or Crown. Hence after the 14 June 2016 meeting, at 18.55, he emailed himself:

Later the same evening, he wrote to Mr Mathur:

Similarly, the day after the 27 June meetings, Mr Holdom emailed Mr Mathur and Dr Adler:

On 19 July 2016, Mr Murray on behalf of Astra UK, emailed Mr Siddiqi saying he had received instructions to prepare an agreement “which remains subject to contract relating to some outstanding matters”. By reply of 22 July 2016, Mr Siddiqi said that Musst wanted its “outstanding fees due for May, June, and any ongoing fees due to MUSST to continue to be settled until such a stage that a mutually agreeable proposal is reached”. By reply of 26 July 2016, Mr Murray, for Astra UK, writing under the heading “Subject to Contract/Contract Denied”, said he was still working on the agreement; to which Mr Siddiqi replied on 28 July 2016 that “in relation to our contract dated 18 April 2013 .... you are obliged to pay management and performance fees”. He complained that in breach of contract, the fees due for May and June had not been paid and asked for payment immediately. He attached three undated invoices, each made out to Astra UK, (a) one for US$32,500 for management fees on the Crown Contract for 1 April to 30 June 2016, and (b) two for US$15,125.96, for management fees on the 2B Contract for May 2016 and June 2016.

These invoices were all made out to Astra UK, and the figures, as the email itself notes, were estimates worked out on the basis of previous information already known to Musst. Thus:

The invoice for US$32,500 was the quarterly amount due to Musst (at an annual rate of US$130,000) being 20% of the previously notified annual management fee paid by Crown under the Crown Contract of US$650,000; and

The two invoices for US$15,125.96 were worked out on the basis of the funds figure of US$75,692.82 contained in Astra UK’s invoice for 2B of 9 May 2016 for April 2016, but, by mistake, transposing this figure to US$75,629.82 (i.e. getting the “2” and the “9” in the wrong order). Hence, they invoiced for the slightly lower figure of US$15,125.96 than the US$15,138.56 which had appeared in Musst’s invoice for April 2016, and which had by now been paid.

The email sought information about the relevant net asset values of the funds under management under clause 4.1 and said it would provide adjusted invoices as and when this was provided.

By reply of 3 August 2016 marked “Without Prejudice, Subject to Contract/Contract Denied”, Mr Murray professed surprise at Mr Siddiqi’s email, and denied the existence of any contract with Astra UK or Astra Capital (he said nothing about Astra LLP), and any breach. He also attached a draft deed of release between Astra UK and Musst (and Musst Investments LLP), and a draft deed of guarantee by Mr Siddiqi and Ms Galligan to Astra UK:

The draft deed of release claimed that Astra UK had paid Musst the sum of US$458,701.66 “without admission of liability to pay” and offered to pay it (a) a further US$250,000, plus (b) 20% of all performance and success fees received over US$325,000 from each of Crown and 2B for the first three years of each of the Crown and 2B Contracts.

The draft guarantee provided that in the event Astra UK did not receive success fees of US$325,000 Mr Siddiqi and Ms Galligan would personally have to reimburse any shortfall.

Musst did not accept this offer. Nor did Mr Siddiqi nor Ms Galligan. In the meantime, it seems, Astra UK has been continuing to manage 2B’s and Crown’s funds and continued to receive management and performance fees for doing so. It has made no attempt to account for any of them to Musst. Nor has Astra LLP. The total amount paid to Musst by Astra LLP and Astra UK combined has been about US$459,000, with the last payment on 25 May 2016.

By pre-action protocol letters to Astra dated 9 October 2016, Musst’s solicitors set out Musst’s claims against Astra, and asked them to provide the information provided for by clause 4.1 of the Contract to enable Musst to work out the fees due to it since May 2016. Astra denied liability, on the bases that (a) Musst did not affect the introductions, and (b) there was no agreed transfer of liability to any Astra entity. Nor did they provide the requested information under clause 4.1, or indeed any information or documentation at all. They maintained that Astra, in making the payments they did, were just being generous. (Similar allegations were made by Octave in answer to pre-action letters to Octave.)

On 17 October 2016, Astra’s solicitors suggested, for the first time in writing, that defamatory or disparaging statements had been made by Mr Siddiqi, but without giving any specifics (Mr Mathur had hinted in the conversation on 13 July 2016 that some such statements had been made). The first time the alleged statements were spelt out was in Astra’s solicitors’ correspondence of 23 February 2017.

The first question is whether there was a November Arrangement under which Mr Mathur agreed with Mr Siddiqi and Ms Galligan a voluntary arrangement under which all introductions made (including those of 2B and Crown) would be the subject of a revenue share of 20% for three years from the date of 2B’s and Crown’s investments. Musst says that the November Arrangement did not take place, and that the written agreement applied to introductions of 2B and Crown. If there was a November Arrangement, then Astra are able to rely upon the same as an important part of the factual matrix to the written Octave Contract. Its existence would assist an argument that the payments made subsequently in respect of 2B and Crown which were made over the period of three years from the date of execution of the written agreement are not referable to the written agreement, but to the November Arrangement. This would assist Astra in being able to contend that the written agreement was intended only to be forward looking and not to look to introductions before 21 November 2012 including 2B and Crown. The force of this argument might be reduced if there was no November arrangement.

The evidence of the witnesses in respect of the November Arrangement is predominantly from Mr Mathur and Mr Reeves whose written evidence supported the existence of the November Arrangement and Mr Siddiqi and Ms Galligan, whose evidence denied the existence of the arrangement. The November Arrangement was not in a vacuum. It was, according to the evidence of Mr Mathur and Mr Reeves, to be seen in the context of what was called the Matrix Arrangement (under which Mr Mathur had agreed to pay Matrix 20% of fees for its introduction for three years) and the Siddiqi Understanding (under which Mr Mathur had agreed to pay Mr Siddiqi 25% of management fees over a three-year period on investments which he introduced directly without assistance from Matrix).

According to both Mr Mathur’s and Mr Reeves’ oral evidence, this was a tripartite agreement reached at a meeting at which Mr Siddiqi was present at some point in early 2012: see T8/168-9, T9/99, T9/106/12-19 and the statement of Mr Reeves at para. 180. Mr Mathur said that it was an agreement in principle. Mr Reeves said it amounted to “our commercial terms of engagement” [T9/106/23-25 and T9/110-111]. By contrast, the evidence of Ms Galligan was to the effect that there was an oral arrangement made on 16 January 2012. The contractual chain of arrangement was to be between Musst and Mr Mathur and then between Musst and Matrix. The arrangement was 25% but there was fluidity in respect of the last 5% because it was to be worked out whether Musst would obtain an equity in the business of 5%: see Mr Siddiqi’s evidence at [T4/168/9-170/8] and Ms Galligan’s evidence at [T2/127/3-10, T2/158/14-159/14, T3/116/7-118/10, T3/137/19-21].

If the evidence for Astra were accepted, it would be a significant building block of the alleged November Arrangement. The reason for this is that it would establish that, as of November 2012, there was at least an agreement in principle between Matrix and Octave. This would, if accepted, contradict Musst’s case that there was a contractual chain of arrangements between Musst and Mr Mathur’s companies, and then between Musst and Matrix. If the primary deal was between Mr Mathur and Matrix, then that would make more plausible the alleged Siddiqi Understanding (giving rise to a very limited entitlement and predicated upon those instances where investments had been introduced by Mr Siddiqi directly and without any assistance by Matrix).

It is said that the November Arrangement occurred in the weeks after the news of the administration of Matrix had been passed on to Mr Mathur. Mr Reeves had told Mr Mathur that a new vehicle, LGBR, would take on the old sales team of Matrix and would continue to provide the same support as Matrix had done.

In his fifth witness statement at para. 78, Mr Mathur said:

At paras. 83-84 of Mr Mathur’s witness statement, he said the following:

The case of Astra is that this was to be seen in the light of various arrangements made earlier in the year including the following:

Between Mr Mathur and Mr Reeves a commission for Matrix for introducing investors of 20% of management and performance fees paid over the anticipated three-year period of investment i.e the Matrix Arrangement referred to above. This was the arrangement said to have been previously agreed with Matrix. The case of Astra is that Matrix was introduced to Mr Mathur by Mr Siddiqi around the beginning of 2012 with a view to carrying out distribution work. Matrix had the resources, contacts, experience and regulatory cover to do this job.

No figures were discussed according to Astra in January 2012. However, by May at the latest, Mr Mathur had agreed to pay Matrix 20% of fees on its introductions for 3 years under the Matrix Arrangement. Mr Mathur found out in about June 2012 that there was an arrangement for this to be shared between Musst and Matrix as to 80% to Matrix and as to 20% to Musst. Around this time, Astra say that Mr Mathur agreed in principle the Siddiqi Understanding, namely to pay Mr Siddiqi a commission on investments he introduced directly without Matrix assistance, at 25% of management fees only, over a three-year period.

There was an arrangement between Mr Mathur and Mr Siddiqi that he would receive a commission of 25% of management fees for three years for any investors that he introduced separately from Matrix.

The November arrangement was summarised in the Re-amended Defence and Counterclaim (“RADCC”) as follows:

Musst denies the existence of the November Arrangement. The evidence of Mr Siddiqi is that he agreed on 16 January 2012 that his business would get 25% of all fees charged by Astra to investors on capital which he raised, and that this was mentioned at other times. This was not evidenced at the time in writing. There was the email on 16 January 2012 of Mr Siddiqi to Ms Galligan and Mr Reeves timed 18:42 saying “So, I had a two hour meeting with Anish and laid down a gauntlet. The net result is he will work with Musst Investments and understands how we operate. The specifics of a deal have not been decided, but the essence of the deal has been transmitted, and I think he gets it... Hence, it [sic] time to morph his pitch book and move the story forward... I have suggested a meeting with the three of us.” This by itself does not confirm an agreement or arrangement of the kind contended for by Mr Siddiqi.

Musst contends that by November 2012, there had been agreed in principle between Musst by Mr Siddiqi and Octave by Mr Mathur an arrangement whereby Musst would be paid 20% of any monies Mr Mathur received both in respect of management and performance fees whilst the monies sat there without limitation in time (that is contrary to the three-year limit contended for by Astra). This agreement was with the consent of Mr Reeves with whom there would be sharing of the moneys received by Musst. The primary agreement would be as between Musst and Octave, and Musst would agree with Mr Reeves some sharing of moneys received by Musst with Mr Reeves for himself and/or LGBR and/or those behind Matrix. Musst’s case is that with that agreement, there were then negotiations with a view to having an agreement in writing. This culminated in the agreement in writing dated 18 April 2013. This was not a separate agreement from that which had been agreed in November 2012. There was not an agreement in respect of previously made introductions and introductions thereafter. Nor was the former a voluntary arrangement, whereas only the latter was the subject of a binding agreement. Nor as between Octave and Musst was there a distinction between introductions made by Matrix and those made by Musst without the involvement of Matrix.

Musst’s case is that the written agreement is to be construed as applying to all of those introductions: alternatively, that it was agreed between the parties by convention that it applied to the same. Likewise, although there was not a signed novation to apply to the Astra parties, the written agreement was novated with Astra and/or the parties agreed by convention that the written agreement was to be treated as novated as between Musst and Astra. This was at least the case as regards 2B and Crown Contracts.

This is a case where the contemporaneous documents contradict substantially Astra’s account. I have considered the conflict of oral evidence having regard to this. I find that there was no Matrix arrangement as contended for by Astra, nor was there a Siddiqi understanding. The critical stage was November 2012 when there was an agreement in principle between Mr Mathur for Octave and Mr Siddiqi for Musst. It was agreed that the parties would record their agreement in writing, and it was at this point that the parties embarked on negotiations which went on up to the written agreement dated 18 April 2013. In my judgment, the contemporaneous written evidence at all times strongly suggests that there was no oral or voluntary arrangement of the kind comprised in the November Arrangement.

The overall probabilities are also of great importance in this case. In particular, the following aspects of the case make commercial sense as regards Musst’s case, unlike Astra’s case which is implausible in this regard, namely that:

Musst would not be satisfied with a voluntary arrangement under which Astra could decide whether they wanted to pay anything, and if so what, for the work undertaken up to November 2012. This might have made sense after some limited work based on trust of friends, but in this case the documents evidence that Mr Siddiqi had by November 2012 carried out a very large amount of work. The likely amounts of money involved based on the intended management and performance fees if 2B and Crown would invest was capable of giving rise to fees of hundreds of thousands of pounds or more.

Musst would wish to have a written agreement to provide to its financiers which would give it valuable rights in respect of the introductions hitherto made, particularly in circumstances when the introductions of 2B and Crown were expected to be of more value than anything else. If in fact the written agreement would exclude 2B and Crown, then the most tangible value would be removed and instead there would be the hope value of future prospective clients which might or might not occur.

Given the recognition that it was necessary to have an agreement in writing, it makes no sense for either party to have an arrangement for the payment obligations to be recorded in a formal legal contract and the remainder to be oral and without any written record. If the distinction is said to be that one was binding and the other is not, that is not an obvious answer, because it only adds to the difficulty in understanding why some part of the arrangement between commercial parties should be binding and other parts voluntary. In any event, it is not an answer to say that there was no need to have a document because there were no binding obligations to record: it was important to differentiate between what was the subject of a binding agreement and what was not. That could have been done as part of the written agreement, or as part of a memorandum of understanding, or otherwise in written form.

Further, in such a heavily documented case, one would expect that there would be contemporaneous documentary evidence that would support Astra’s case. There is a dearth of such documents. However, such documents as there are provide more support for Musst’s case than Astra’s case. Documents prior to November 2012 were to the effect that Musst/Mr Reeves were keen to have an agreement in writing between MUSST and Octave/Astra with a view thereafter to an agreement being made between Matrix and MUSST: see the emails of 15 February 2012, 6 and 21 March 2012 and 23 September 2012 above referred to. Likewise, the documents at the time of the alleged November Arrangement are inconsistent with a November Arrangement: see the email of 16 November 2012 by Mr Siddiqi to his solicitor seeking to protect the interests of MUSST in respect of the work done to date including reference to “two closes” which appear to have been 2B and Crown. They are singled out as if they are the most likely to bear very substantial fruit. The privilege has been lifted as regards these emails, but not as between Octave and their solicitors.

The above-mentioned documents of 19-21 November 2012 were all about having an agreement. It was important from a financing point of view for Mr Siddiqi to be able to show them to financiers, but that is not to say that the written agreement was to be only in respect of work done from 21 November 2012. On the contrary, it was to show the financiers that there was to be reward from all efforts carried out by Musst.

It is apparent from the foregoing that there was nothing in writing to say that there was to be no binding agreement in respect of 2B or Crown or anybody previously introduced. In the words of the Opening Skeleton of Musst, the above emails preceding the meeting of 21 November 2012, copied to Mr Reeves, make it plain that Mr Siddiqi was very anxious to get a contract in place to cover the work he had already done and the contacts he had already introduced. In the way in which it was put in the opening skeleton for Musst at para. 160(5), not once did Mr Mathur, or Mr Reeves, say: “But Saleem, we have already agreed we shall pay Matrix on a voluntary basis for three years for all that”.

Astra’s amendment to the pleading is also important because the case that the November Arrangement was made on 21 November 2012 has been abandoned or replaced with a case that it was made in several communications. There is no evidence that it was made after the 21 November meeting. It is therefore significant that the alleged November arrangement was not mentioned in the email correspondence of 19 and 20 November 2012.

Documents in 2013 also provide further support to Musst’s case and are inconsistent with Astra’s case. First, exchanges with Mr Phillips and Mr Murray of 15 and 16 April 2013 about the need for broker dealer cover to deal with the 2B introduction (to which Mr Mathur was copied in) make it plain that it was intended that the Octave Contract should cover the introductions to 2B and, by inference, any other investors such as Crown, whenever introduced. If the Octave Contract had nothing to do with 2B, it is difficult to understand why Mr Mathur would have insisted on 22 April 2013 to have “a binding agreement with a director’s signature” before authorising the payment of Musst’s 20% share of the fees that had already been received from 2B.

Second, open communications in 2015 suggest strongly that the parties treated the payments in respect of 2B and Crown as legal obligations rather than a voluntary arrangement. There were emails of 30 April 2015 which were consistent with the moneys paid in respect of 2B and Crown being paid under the written agreement. Mr Holdom had first said (11.51am) that the “2B invoice is not yet available. LGT have not yet settled their invoice”. Later (17.00) he said that a Crown 2 invoice had been sent in error: “The Crown 2 account was set up for a new strategy (primarily CLO and CRE) and therefore is not covered by the Introduction Agreement “as it does not substantially replicate the investment securities and risk profile of ASSCF”. I will settle the [other] invoice once the client has made their payment.” This judgment will revert later to the question whether Crown 2 was a new strategy such that Musst was not entitled to payment in respect of the same. The important point here is that the “error” of sending the Crown 2 invoice was an acknowledgment that payment in respect of the Crown Contract was covered by the written agreement (referred to as the Introduction Agreement) and not under the November Arrangement. On the same premise of operating under the written agreement, at 17.45, Mr Holdom wrote saying:

Insofar as Mr Mathur recalls that he entered into a voluntary November Arrangement, I reject his evidence. Mr Mathur was unable to provide any satisfactory explanation for the absence of anything in writing to record or confirm the November Arrangement (even a short email) whether for the benefit of the liquidator of Matrix or LGBR or Octave. In particular:

He claimed that he received an oral assurance that there would not be different people making claims for the same introductions, but the informality of this, contrasted with the written agreement, was unconvincing. He said at [T9/66]:

He then went on to say at [T9/67-68] that Mr Reeves was going to take over the Matrix distribution platform and the sales and infrastructure people were going to work under his umbrella.

Mr Mathur was given many opportunities to provide a satisfactory explanation why there was nothing in writing, but he was unable to do so: see [T9/65-69]. At [T9/68], he said:

None of the explanations were illuminating. Insofar as the financing of Mr Siddiqi needed to be in place, the most promising source of finance was anything that would result from the introductions already made and in particular in respect of 2B and Crown. Without this, it is difficult to see how the written agreement fulfilled Mr Siddiqi’s aspiration to have something to get the financing in place.

Mr Mathur had difficulty in explaining why the payments, when made, were to Musst, and not to LGBR or Mr Reeves’ corporate vehicle. He said that he was told that there “compliance issues” and so the payment was diverted to Musst: see [T9/63/1-7]. This was not mentioned in Mr Mathur’s explanation at para. 84 of his witness statement where he said that Mr Siddiqi and/or Ms Galligan asked for the payments to be made to Musst because of a concern that Mr Siddiqi would not get his fair share, and that Mr Reeves did not object. The inconsistency in these explanations seems at odds with their veracity.

It was put to Mr Mathur that the communications of 19/20 November 2012 seem to be predicated upon the basis that the payments would be to Musst, his explanation at [T8/203-204] that this was to be a second tranche of investments was obviously wrong because the emails were talking about a deal relating to all the investors thus far approached. Mr Mathur’s suggestion that the email in reply to Ms Galligan saying “please freeze the sales effort” was saying only not to contact new investors but did not refer to existing investors is rejected. When pressed about this, he said “I don’t recall what I meant at that time, to be honest, and if you ask me what that honestly I don’t know.”

Further, the evidence of Mr Reeves on this point was unsatisfactory. It was intended that he would corroborate the evidence of Mr Mathur and prove the Matrix Arrangement. When cross-examined, his evidence suggested strongly that there was no Matrix Arrangement. Nor was there an arrangement where Matrix would receive money in the first instance and pass on something to Musst. In particular:

It was apparent from the conversations of 19/20 November 2012 as recorded in contemporaneous documents that Mr Reeves was leaving it to Musst to negotiate with Octave. He was unable to provide a satisfactory explanation as to why he did not simply tell Ms Galligan that a deal had already been reached in relation to previous introductions with Mr Mathur.

Likewise, he was unable to explain why he did not tell the liquidators of Matrix about the arrangement which Matrix is alleged to have had with Octave. On the contrary, he could not remember telling Begbies Traynor about any alleged arrangement: see [T9/162-168]. He was also unable to explain why he did not tell them about the alleged change by which Mr Siddiqi became the payee: see [T9/168-170].

If there had been an agreement for Matrix to receive 80% of the introductions, Mr Reeves would have pressed Musst far harder than he did, and his explanations as to why this did not take place were inadequate [T9/186/9-189/12]. Despite knowing as at 1 August 2013 that LGT had agreed to put in $40 million into Mr Mathur’s fund, (a) he did not inform the liquidators [T9/184/2-16], and (b) he did not chase Musst, save to contact Ms Galligan in December 2013 and to ask her “whether you intend to pay us on LGT or think you need to” , and to suggest that nothing be paid on the management fees “and just a percentage of the performance (if/when it becomes payable) to us.”

For all of these reasons, the Court rejects the arguments of Astra about the existence of the alleged November Arrangement and accepts the arguments of Musst to the contrary. The reasoning thus far is without reference to the communications said to have been without prejudice. There will be a ruling below on whether the communications were indeed without prejudice, and if and to the extent that the Court considers that they were not without prejudice, it will be necessary to consider whether this modifies the above conclusion concerning the alleged November Arrangement.

There were discussions between Mr Siddiqi and Ms Galligan of the one part, and Mr Mathur of the other part, between June and August 2016. There is a dispute between the parties as to whether these discussions were without prejudice and therefore privileged. The parties agreed that instead of resolving this question of admissibility of evidence prior to the trial, it should in fact be resolved at the same time as the issues in the trial. The parties are to be commended for this course of action because the evidential issues were intimately connected with the substantive issues in the action.

The evidential dispute can be summarised as follows. Musst through the evidence of Ms Galligan and Mr Siddiqi submits that there was no reference to the conversations being “without prejudice” until August 2016. Further there was no dispute between the parties until, at earliest, late July 2016. The failure to pay did not evidence a dispute but was simply a non-payment that had to be resolved. Mr Mathur says that the discussions were agreed to be without prejudice, in particular those of 27 June 2016 and 13 July 2016. Further, there was a dispute as to whether there was a contractual obligation to make any payment. Astra also say that the transcripts were the result of furtive recordings without the knowledge or consent of Mr Mathur which reflects a lack of integrity on the part of Musst. Further the recordings are incomplete, which suggests that those conversations or parts of the conversations which do not suit Musst’s case have been edited out or withheld.

Musst says that nothing in the contemporary documents or transcripts of the discussions prior to late July 2016 supports the notion that there was a dispute of legal right or an agreement to conduct discussions on a without prejudice basis. In particular there was no reference to the alleged November Arrangement. The transcripts were sent between solicitors on 12 January 2017 in support of the claim and the first allegation by Astra that the conversations were without prejudice was almost 2 years later on 7 November 2018.

In the fifth witness statement of Mr Mathur at paragraph 136, it is stated in vague terms (“during June 2016”) that an agreement was reached to have without prejudice conversations. No specific time was provided for this agreement. From Mr Mathur’s sixth witness statement, he claims that he mentioned the words “without prejudice” just before the meeting of 27 June 2016. This came after the meeting of 14 June 2016. However, Astra rely upon the statement of Ms Galligan in her third witness statement that Mr Mathur muttered under his breath “you don’t even have a contract”. Subsequently, in her fourth witness statement, she said that she thought that this might have been said during the 27 June 2016 meeting.

Subsequent to the 14 June 2016 meeting, there were notes that were written by Ms Galligan on 17 June 2016. This does not indicate that the conversation was without prejudice or that there was a dispute. Mr Mathur said that although he was receiving fees from 2B and Crown, he would not pay Musst its percentage of management fees because he was having cashflow problems. Due to reduced management fees, Mr Mathur said that he would no longer be in a position to pay all his staff and costs. He would no longer be in a position to pay Musst or Mr Chandaria. There was no dispute about the contractual entitlement of Musst, but Mr Mathur required breathing space. His primary focus was to ensure that Astra met its FCA capital adequacy requirement.

Mr Mathur’s evidence is that he had suggested a payment in relation to performance fees even though they had not crystallised. Mr Siddiqi asked for details of the performance fees which had accrued on Crown and 2B. The email to himself on 14 June 2016 referred to the above saying: “calculate fee due to Musst and a deal for final settlement.” Mr Holdom said that he understood that there was a dispute that might result in litigation.

Similarly, the day after the 27 June meetings, Mr Holdom emailed Mr Mathur and Dr Adler:

Astra say that Musst knew that there was a dispute. On 19 June 2016, Mr Siddiqi wrote an email that is regarded by Astra as “the most telling document” in which he talks about being in the “Combat Zone” and that he needed help “in barrister land”. He acknowledged that he had spoken to advisors prior to the meeting of 14 June 2016 but she denied a dispute. She referred to “alarm bells going” and “a lack of trust”. Musst submitted that the reference to “barrister land” centred around a failure to pay rather than a dispute.

As regards the evidence relating to the conversations of 27 June 2016, I accept the evidence of Ms Galligan that at that stage, it was not stated that the conversation was without prejudice. Her oral evidence was as follows [T4/3/24 – T5/3/14]:

Mr Mathur has said that following a discussion with Mr Murray (which Mr Murray has said took place on 24 June 2016), he said at the outset of the 27 June 2016 conversation that the discussions would be without prejudice. The evidence of Mr Murray was that he advised that the conversation should be without prejudice. As will be set out below as regards the case about defamation, his evidence was unsatisfactory as regards his failure to have a note about the alleged defamation. There was no contemporaneous record to support this evidence. Further, although in emails of 19 July and 26 July 2016, he wrote that the intended contract was subject to contract and he wrote “contract denied”, his use of the term “without prejudice” was not until 3 August 2016.

Further, there was no indication in the recording that there was a dispute between the parties. The absence of the first part of the conversation is explained by Ms Galligan as being about pleasantries, and the suggestion that this has not been produced smacks of an allegation of concealment. It is not proven, and in any event, having seen the witnesses, the Court has no reason to believe that they would have sought to conceal such evidence. In any event, if it were the case that there was something in the early part of the conversation which showed that it was about a resolution of dispute, it would be expected that the contents of the conversation which was transcribed would indicate that it was about the resolution of a dispute. It does not. Rather it is that the moneys were said not yet to be due because they had not been received by Astra. There was a discussion about bringing forward the time for payment of such money as would become due. If in fact there was a dispute about the money ever being due (on the basis that Musst had no rights and there was only a voluntary arrangement), one would expect that this would have been stated expressly. It was not.

More specifically, the recording referred to Mr Mathur saying, on the morning of 27 June 2016, that: “I can terminate your contract but that’ll only be if you agree to it. Otherwise I won’t terminate it”. This was inconsistent with the November Arrangement because, on his evidence: (a) the arrangement was voluntary, and anyway (b) it had come to an end. In answer to Mr Siddiqi saying, “In terms of our contract, …You are saying you want to get rid of that contract to give you breathing space”, he says “Yes”. It made no sense that he needed breathing space if the November Arrangement applied; or why he never mentioned the fact that there was simply a voluntary arrangement and not a contract in any of the transcribed conversations [T6/142/12-143/1, T6/159/23-160/4]. He also used the term “liability” in respect of management fees, but this term presupposed a legal liability, and he was unable to explain why he said this. [T6/119/1-120/4]:

Likewise, Mr Mathur had no explanation for why he offered to pay performance fees on 27 June 2016 and on 13 July 2016 which were likely to be a very large sum, even after the first three-year period. He said that it did not seem honourable to walk away, because it had originally been expected that they would be paid in three years: see [T6/100/24-101/9; T6/109/5-16; T6/110/7-20, T6/140/11-19] (“I accepted that the fair and most generous thing to do was to pay even when it arises at ten years’ time”). Likewise, he said in re-examination that in conversations between April and June 2016, he informed Mr Siddiqi and Ms Galligan that he would pay the performance fees when he was himself paid “crystallisation of the performance fee will happen and once you get paid - - once I get paid, you will get paid.” [T9/25/19 – T9/26/16].

This was in contradiction of Mr Mathur’s written evidence where he said that in March 2016, he had informed Mr Siddiqi and Ms Galligan that there would be nothing payable after the first three years ( that is after April 2016) even if the performance had not become due by then: see Mr Mathur’s fifth witness statement at paras. 134 – 135 and his initial oral evidence to like effect: [T6/89/17-20]. The recorded conversation is entirely consistent with the fact that there was no dispute at that stage as to whether there was an obligation to pay the performance fees: neither was there a point taken as to the absence of any contractual obligation or as to the expiry of three years.

There are other indicators that there was no agreement on 27 June 2016 that the discussion would be without prejudice and nor were they intended to settle a dispute. Mr Mathur knew about the tape recordings from January 2017 when he received the transcript (he was shocked). Yet he did not say that the conversations were without prejudice. It was not mentioned in a letter by his then solicitors Jones Day on 17 February 2017, complaining only of various telecommunication breaches and the like.

Further, if the conversations had been without prejudice, then the 13 July 2016 transcript would not have been attached to Mr Mathur’s first witness statement. The attempt to cast the blame at solicitors for this was unconvincing, not least because Mr Murray had assisted in the drafting of the statement.

In my judgment, there was no agreement that the conversation of 27 June 2016 was without prejudice. Further, there was no dispute at that stage about whether there was a contractual obligation to pay.

The discussion of 13 July 2016 went along with the discussion of 27 June 2016 and there is no reason to separate the discussions. However, there is reason to separate the discussion of 3 August 2016, because this was preceded by an email from Mr Murray dated 19 July 2016 which had stated that he was preparing a “subject to contract” agreement. Of greater significance, on 26 July 2016, Mr Murray sent the email referred to above to Mr Siddiqi and Ms Galligan headed “Subject to Contract/Contract Denied”. When the draft was sent on 3 August 2016, it had the same heading and also “Without Prejudice”. I am satisfied that, by this stage there was a dispute as to whether there was a contractual relationship and that the draft contract sent on 3 August 2016 was not only subject to contract, but that it was without prejudice. However, I conclude that the earlier discussions were not without prejudice.

There is a useful summary of the two bases of the without prejudice rule, public policy and contractual, by Lewison LJ in Avonwick Holdings Ltd v Webinvest Ltd [2014] EWCA Civ 1436 at para. 17:

In the instant case, there was not a dispute or issue at the time of the conversations prior to 3 August 2021, nor was there an agreement that any of the conversations before 3 August 2021 should be treated as without prejudice.

It follows that, in respect of the application of 22 March 2021 of Astra, the application is refused to treat as inadmissible on the ground of without prejudice privilege the material at paras. 1-11 of Schedule 1 to the ninth witness statement of Lucas Julian Moore. However, the application in respect of paragraphs 12-15 of Schedule 1 and paragraphs 1-3 of Schedule 2 is allowed.

Those documents which have not been found to be inadmissible support the case that there was no voluntary arrangement of November 2012, and that the parties treated as binding whatever had been agreed before then in respect of management and performance fees from 2B and Crown. Even if these conversations had been excluded, the Court would still have concluded, contrary to Astra’s case, that there was no voluntary November Arrangement.

The first issue (was there a November Arrangement) and the second issue (was there an introduction of 2B and Crown such as to trigger an entitlement under the Octave Contract) are not entirely separate and distinct. The parties’ cases on the construction of the Octave Contract as regards what constituted an introduction are predicated, in part, upon a factual matrix that as per Astra there was a November Arrangement, and as per Musst there was no November Arrangement. Further, Musst’s alternative case on rectification and/or estoppel is predicated upon there having been no November Arrangement and the payments which were made being thought by the parties to be referable to the Octave Contract alone (even if as a matter of construction of the Octave Contract, the same were not payable).

The above needs to be considered as if Octave had remained the vehicle of Mr Mathur throughout and as if the Astra parties had never existed. If there was an entitlement as against Octave, then the question arises as to whether the entitlement passed over to the Astra parties through novation or through an estoppel precluding a denial that the entitlement passed over to the Astra parties.

Astra’s case is that the Octave Contract was forward looking whereas the November Arrangement was backward looking. Thus, the November Arrangement applied to introductions which had been effected prior to the Effective Date, that is to say 21 November 2012. The structure of the Octave Contract was forward looking from the Effective Date. Since there was a period of about 5 months of negotiation of the Octave Contract which went through numerous iterations, the parties agreed an Effective Date, said by Astra to be from the time of the agreement of the backward-looking November Arrangement. To that limited extent to the time to the Effective Date, even on Astra’s case, the Octave Contract too was backward looking.

Musst’s case has a wider construction of the meaning and effect of the term “introduction” in this case. There are also differences between the parties as a matter of fact about the role of Musst as regards the introduction of 2B and Crown. Astra’s case is that any introduction was not by Musst: to the extent that there was an introduction by anyone, it was by Matrix. Musst says that it effected the introductions and to the extent that Matrix was involved, it was in an administrative or secretarial role.

Musst says that whereas the first part of the definition of “Introduction” is by reference to the time of the initial meeting, the second part is by reference to the time when the investment is ultimately made. By clause 2.1 of the Octave Contract, Octave Limited appointed Musst to be the Introducer “from the Effective Date … to introduce Prospective Investors and make introductions to Octave”, but bearing in mind the wide definition of “Introduction” all this means is that Musst’s appointment ran from 21 November 2012: it does not mean that the initial introduction itself, in the sense of a meeting or discussion, had to take place after this date as well: only the investment had to take place after it, as happened.

The Octave Contract has to be construed in the light of the “factual matrix” known to both parties in which the Contract was concluded. The relevant law from Lord Hoffman’s speech in Investors Compensation Scheme Limited v. West Bromwich Building Society [1998] 1 WLR 898 at 912-3 is considered further below. Objectively, the reason for the choice of 21 November 2012 as the Effective Date was that this was when the parties agreed in principle the main part of the deal, namely Musst’s entitlement to 20% of Octave’s fees, which led to the production of the Octave Contract.

By this stage, MUSST through Mr Siddiqi had been heavily engaged in identifying prospective investors and effecting introductions and making or preparing presentations. Musst submits that it would be absurd to suppose that it was intended that Musst would have no right to fees for any of these potential investors, but only a right for new investors whom Octave met for the first time to discuss the fund after 21 November 2012. Likewise, it would be very surprising if it was intended to exclude Musst’s right to payment under the Contract in relation to investments by 2B and Crown given the nature of the discussions with and about them before and after 21 November 2012, and there were, as at the date of the contract on 18 April 2013, no other likely investors on the horizon.

Astra say that the Octave Contract would apply to new introductions which might occur after the Effective Date of 21 November 2012, but that the November Arrangement would apply to those investors who had previously been introduced. In considering the factual matrix of the Octave Contract, the question as to whether the November Arrangement existed is of importance. On Astra’s case, there was a Matrix Arrangement and thereafter a November Arrangement. The effect was that the introductions were to be done by Matrix who would be paid directly by Mr Mathur or his vehicle. By the November Arrangement, this was converted into a three-way arrangement whereby payments would be made on a voluntary basis by Octave to Musst for the benefit of Matrix/LGBR/Mr Reeves and for Musst.

Astra say that the previous introductions were by Matrix and not Musst. Matrix was principally responsible for the marketing strategy until November 2012. The initial introductions of The Observatory (2B) and LGT (Crown) were by Matrix to Octave. The subsequent relationship with Octave was not through Musst’s initiative, nor was any investment made by them at the instigation of or on the initiative of Musst.

Astra say that the effect of the Effective Date was that Musst did not become the “Introducer” until its appointment as such which was not until 21 November 2012. This therefore excluded any introduction done before that date. If it had been intended that either 2B or Crown should comprise a “Prospective Investor” for the purposes of Clause 3.1, the Octave Contract would have said so expressly.

It is necessary at this stage to consider in detail the Octave Contract. The recitals describe Octave LLP’s and Octave Ltd’s role in relation to “the Funds” (i.e. ASSCFL and managed accounts designed to replicate ASSCFL’s risk strategy etc) (Taken together Octave Ltd and Octave LLP were “Octave”). They then provide:

The rules of interpretation of the Octave Contract are set out in clause 1, relevant parts of which and other relevant terms of the Octave Contract are set out below:

In addition, Clause 4 provided for the payment mechanisms. This included Clause 4.1 which required Octave to provide a statement on request to provide the particulars of all Eligible Investments in the previous calendar month, the fees due and payable to Octave in respect of such month and the Introducer’s revenue. The amounts payable were to be paid by Octave Limited within 10 days of first receipt of fees by it, without set-off, counterclaim, withholding or deduction. (Clause 4.5.) Any dispute as to the amount payable was to be resolved by referring it to Octave’s auditors (Clause 4.6.) If Octave Limited failed to make any payment on or by the due date, it would pay (without prejudice to Musst’s other rights and remedies) interest, both before and after judgment, on the late payment at the rate of 2% above base rate of Musst’s bank from time to time (Clause 4.7.)

Octave was to do all such things as within its power to ensure that: (a) responsibility for the management of the Funds (as defined) and any managed account was retained by Octave and (b) the spirit of the Contract was given full force and effect. (Clause 9.4, first part.) In particular, Octave was to do all such things and exercise its rights as reasonably within its power so as to ensure that the responsibility for the management of the Funds or any managed account was not transferred to another party without Musst’s consent, unless such party offered in good faith to enter into an agreement with Musst whereby Musst continued to receive its said 20% revenue share on the same terms as in the Contract. (Clause 9.4, second part.)

Octave was to keep (and to maintain for five years after termination) full, accurate and up to date books, accounts and records of its activities relating to the Contract, including recording any Eligible Investments, their ongoing value, and the payments due to Musst. (Clauses 11.1 and 11.2.) Musst was entitled on reasonable notice to attend premises where such records were kept (and Octave was to procure access to the same), and to access them and to take copies to ensure that the correct amounts had been paid to it. If on an audit Musst identified any shortfall, “Octave”, Octave Limited was to pay that shortfall, interest calculated as above, and Musst’s costs and expenses of the audit within seven days of the shortfall being notified. This right survived termination of the Contract. (Clauses 11.3 to 11.4 and 11.6.)

Therefore, in order to be entitled to a revenue share, Musst has to show in relation to any given investor such as 2B and Crown that:

the investor was a “Prospective Investor” that is to say “a person introduced by the Introducer other than an Excluded Investor” ; and either

it made “the initial introduction, by means of the arrangement of a face-to-face meeting or conference call for the purposes of discussing the Fund or Octave at which the Introducer is present (or which has been arranged at the instigation of the Introducer), to Octave of a Prospective Investor” – i.e. the first part of the definition in “Introduction” ; or

“any circumstance where a Prospective Investor [i.e. the person introduced] ultimately makes an investment for the Current Strategy” in a relevant account “at the instigation or on the initiative of [Musst] or commences a relationship with Octave through the initiative of [Musst]” – i.e. the second part of the definition in “Introduction” .

Before considering the facts relating to the alleged introductions and whether or not the introduction fees are payable, it is first necessary to consider the law relating to interpretation of contracts. The particular issue is the extent to which construction is about textualism or contextualism. To what extent is one bound by the words themselves, or the extent to which textual meaning yields to a construction which is consistent with business common sense.

In the last decade, there have been a number of cases of the Supreme Court considering principles of construction. Particular focus in the submissions before this court was on three cases, namely:

The starting point has, for a long time, been the emphasis of Lord Wilberforce on the factual matrix in Prenn v Simmonds [1971] 1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (997), and on the five principles set out by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (“ICS”). In Wood, it was stated (at para.10) how Lord Wilberforce had “affirmed the potential relevance to the task of interpreting the parties’ contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations.”

In commercial cases in the last decade, there were often rival propositions upon which the precise words should be emphasised, or the commercial sense of the particular construction contended for. There was not necessarily a contradiction between these approaches, because of an emphasis for an iterative approach which took into account both textualism and contextualism, as they would be referred to by Lord Hodge in Wood. It had, prior to these cases, been said that an iterative approach was required, involving checking each of the rival meanings against other provisions of the document and investigating its commercial consequences: see in Re Sigma Finance Corporation (in administrative receivership) [2009] UKSC 2; [2010] 1 All ER 571, per Lord Mance at para. 12.

In Wood, the Court summarised the principles in the following terms. The case is of particular use because of submissions made in that case (and indeed commonly) that there was a difference in approach between Rainy Sky and Arnold v Britton. There were passages of Rainy Sky which were often used bythose championing the importance of the commercial consequences of the words used. Likewise, there were parts of Arnold v Britton which were used by those saying that the words used were more important than commercial consequences, bearing in mind that the parties could control the words and the Court was not there to protect a party against an improvident bargain.

The constitution of the Court in Wood comprised judges in both of those cases. In Rainy Sky, the Supreme Court justices were Lords Phillips, Mance, Kerr, Clarke and Wilson. In Arnold v Britton, the Supreme Court justices were Lords Neuberger, Sumption, Carnwath, Hughes and Hodge. The Supreme Court in Wood contained judges from both cases Lords Mance and Clarke from Rainy Sky and Lords Neuberger, Sumption and Hodge from Arnold v Britton. Collectively, they did not regard any difference in approach between Rainy Sky and Arnold v Britton. Various parts of the judgments are worth quoting.

In Rainy Sky, Lord Clarke gave a speech with which the other justices agreed. He said the following:

In Arnold v Britton, the first and most oft cited speech was that of Lord Neuberger. Some of what he said was supportive of an emphasis on the words used. In particular, he said the following:

In considering the submission that the cases had different emphases as to contractual construction, the Court in Wood saw no contradiction. In particular, Lord Hodge giving the speech, with which the other justices agreed, stated:

With the above in mind, the Court must now embark upon the iterative process, balancing the suggested indications of a close examination of the language of the contract with the factual background and the implications of the rival constructions.

Musst’s case on how the introduction of 2B came about is that in early 2012, Mr Siddiqi put Mr Reeves, the manager of Ms Galligan, at Matrix, in touch with Mr Mathur, on the basis that Matrix was authorised by the FSA to market and sell financial products. On 16 January 2012 and 8 February 2012, Mr Siddiqi introduced Mr Reeves to Mr Mathur and, subsequently, Mr Siddiqi and Mr Mathur presented the proposed AMCO business strategy to the Matrix sales team. As a result, Ms Galligan and other members of the Matrix sales team started speaking to potential investors about the proposed AMCO business in March and April 2012. Potential investors were suggested to them as such by Mr Siddiqi on behalf of Musst.

There was a brainstorming session between Mr Siddiqi and Ms Galligan in March 2012 which led to a list of target customers being compiled. Among them, Mr Siddiqi for Musst suggested to Ms Galligan that Matrix should contact The Observatory as a potential investor. Ms Galligan had known Mr Issac Septon and others at The Observatory since around 2010.

As a result, Ms Galligan and other members of the Matrix sales team in March and April 2012 started speaking to potential investors about the proposed AMCO business. This then enabled direct contact with customers by Mr Mathur and Mr Siddiqi. Mr Siddiqi had technical know-how of the credit instruments relating to synthetic ABS which enabled him to make detailed presentations of the product, which was particularly important for a sophisticated investor including 2B and Crown.

In about June 2012, Ms Galligan organised a conference call between Mr Siddiqi (of Musst), Mr Mathur, and Mr Septon of The Observatory at Musst's offices, and a call then took place between the three of them on 2 July 2012. On the same day, Ms Galligan emailed Mr Septon an “AMCO” marketing presentation. On 20 September 2012, Ms Galligan, still at Matrix, and Mr Mathur, still at Deutsche Bank, met Mr Septon in New York. Subsequently, in October 2012, Ms Galligan left Matrix (which shortly afterwards went into insolvency) and joined Musst. She was made redundant by Matrix on 6 November 2012. There was a meeting on 13 November 2012 in New York with Mr Septon to which reference has been made above. Mr Mathur did not know if Ms Galligan had been there, and Ms Galligan accepted that she was not there if that was what Mr Mathur said.

After 21 November 2012 (i.e. the “Effective Date” in the Octave Contract), Mr Septon came to London to do his and The Observatory's first (or first proper) due diligence on the proposed business on behalf of 2B (or at least in anticipation of an investment by 2B or a vehicle such as 2B). At Ms Galligan's instigation (now of Musst having left Matrix since its insolvency), he attended a long meeting on 4 December 2012 with herself, Mr Siddiqi, and Mr Mathur (now of Octave) at Octave LLP’s offices at 23 Ironmonger Lane, London EC2V 8EY, at which he said he wanted to invest in the proposed AMCO fund, as he confirmed by email later that day to Musst. At that meeting, Mr Septon not only carried out operational due diligence, but enquired into the underlying strategy, and what types of trade would be carried out, and what underlying collateral there was for the synthetic ABS and what there would be in the portfolio if he were to invest.

Subsequently, on 11 February 2013, at Mr Septon’s or The Observatory’s direction, 2B entered into a contract with Octave LLP (“the 2B Contract”), under which it agreed to invest and thereafter invested (at least) US$20 million in “cash and synthetic asset-backed securities” and their derivatives, and other “structured credit products” controlled by Octave. 2B agreed to pay (a) a management fee assessed (to put it simply) by reference to the net asset value of the fund invested; and (b) a “Performance Fee” on net profits it received from the fund.

After Musst and Octave entered into the Octave Contract on 18 April 2013, Ms Galligan, by an email exchange on 19 and 22 April 2013, asked Mr Michael Holdom (of Octave LLP) when Musst’s share of revenue thereunder would be paid to it; to which Mr Holdom, in reply, sent on Octave LLP’s March 2013 invoice to 2B, and asked Ms Galligan in turn to send him Musst’s invoices to Octave (i.e. for this agreed 20% share).

Accordingly, from this point on, Musst invoiced Octave in relation to 2B, and Octave duly paid in accordance with the Octave Contract (until the novation to Astra LLP mentioned below), save that the first payment of US$10,000, was paid by Astra LLP on 13 May 2013. The total sum paid by Octave to Musst in relation to 2B (including the said first payment of US$10,000) was US$221,974.78.

Musst’s case is that there was a variety of ways that the 2B Contract was an introduction of Musst. Astra say that on the true construction of the Octave Contract, the only source of legal obligations, the introduction was not covered for the following reasons:

The introduction occurred prior to the Effective Date. The meetings of July 2012 (remotely) and/or September 2012 (face to face in New York) were the critical dates, such that the introduction had already occurred by 21 November 2012. There was a further follow up meeting on 13 November 2012 in New York attended by Mr Mathur and Mr Septon. Although Ms Galligan accepted in cross-examination the proposition that that meeting was without her (if that was what Mr Mathur said [T3/52/1-11]): in fact, Mr Mathur’s evidence was unclear in respect of the same because he did not recall whether she was there. In any event, she appears to have set up the meeting and she was in New York at the relevant time: see Mr Mathur’s fifth witness statement at paras. 40.4 and 54. Even on the basis that Ms Galligan was by this stage working for MUSST, this was a meeting prior to the Effective Date. The case of Astra is that the introduction was at the meetings of July and September 2012, and the fact that there was follow up and subsequent due diligence (which was organised by Ms Galligan in October 2012 whilst still working for Matrix) and/or that the 2B Contract made was after the time of the introduction did not postpone the time of the introduction of 2B until after the Effective Date;

If there was an introduction at all, it was by Matrix through Ms Galligan in particular prior to her joining Musst by the time that she was made redundant by Matrix on 6 November 2012. She had known Mr Septon and others at The Observatory since around 2010. She had joined Matrix in November 2008 and had acquired and/or retained that relationship in her capacity as an employee of Matrix (or one of its affiliates). Independently of Mr Siddiqi, Matrix had its own extensive network of contacts. It was Ms Galligan who arranged the call on 2 July 2012 even if Mr Siddiqi attended remotely, and it was she (still an employee of Matrix) who with Mr Mathur attended on Mr Septon in New York, and without Mr Siddiqi who was unable to travel to the USA.

The allegation of a brainstorming session in March 2012 between Mr Siddiqi and Ms Galligan is to be treated as an undocumented afterthought which should be rejected. Even if it took place, it was not that which caused the introductions, but the subsequent contact of Ms Galligan on behalf of Matrix.

The role of Mr Siddiqi was not that of an introducer. He did not reach out to the customer. If he wrote presentations and knew the technical details, this did not qualify him as such. The role of Musst did not qualify in that no investment was made “at the instigation or initiative” of Musst.

It is Musst which is the party to the Octave Contract, and any activity by a MUSST entity up to 21 November 2012 was by Mr Siddiqi or Musst Investments LLP and not by Musst.

The case of Musst is that the second limb of the definition of “Introduction” applies as follows. 2B was a “Prospective Investor” because it was not an “Excluded Investor” as neither Octave nor its agent or employees had a “prior substantive relationship” with the Observatory (or Mr Septon) as at the Effective Date of 21 November 2012. Mr Mathur had spoken to Mr Septon and met him on the trip to New York in September 2012, and again in New York on the 11 to 16 November 2012 trip, but that was not a “substantive relationship” – it was an attempt to persuade him to invest; and in any event Musst never agreed that 2B was an Excluded Investor, as required by the definition.

Musst submitted that 2B was a “Prospective Investor” because it was introduced to Octave by Musst, that is to say, by Mr Siddiqi operating on behalf of the MUSST business, of which Musst was a part. He did that in the “brainstorming” session in March 2012 which he had with Ms Galligan. That led to Ms Galligan contacting Mr Septon and arranging the first discussion with 2B on 2 July 2012, which in turn ultimately led to further meetings and his decision to invest. Whilst Ms Galligan was then an employee of Matrix, the instigation or initiative was that of Mr Siddiqi and Musst was responsible for co-ordinating approaches.

In my judgment, there was an introduction by Musst of 2B to Octave. It came within the second limb of the definition of introduction which is very broad.

As a matter of textual analysis, the two limbs of the definition of Introduction are to be contrasted. The first limb concentrates on the initial face-to-face meeting or conference call. It is necessary to consider whether this occurred only before 21 November 2012. However, the second limb concentrates on the time when the Prospective Investor “ultimately makes an investment” where the investment occurred “at the instigation or on the initiative of the Introducer”. The wording is broader than the wording in the first limb of the definition. That is clear from the opening words saying that “Introduction shall also include any circumstance…”. It is not by reference to the initial meeting, but it fastens on the time when the investment was made. At the point in time when the investment was made, the question is whether that was at the instigation or initiative of Introducer. That is not limited in time to after 21 November 2012. The circumstance does not arise until and unless an investment is ultimately made. At that point, one looks retrospectively and considers if it was “at the instigation or on the initiative of the Introducer”.

If the Effective Date has to be given an effect as regards when the introduction takes place, it is not until the investment on this second limb. It must follow as a matter of construction that if the introduction has to be after the Effective Date, this is satisfied at least for the second limb provided that the Effective Date precedes the making of the investment. In the case of 2B, the investment was not made until February 2013, that is after 21 November 2012.

Astra say that there are obligations in the Octave Contract as regards whom the Introducer must approach and surrounding the solicitation of customers. They submit that these could not have meaning and effect in the event that the solicitation could take place prior to the Effective Date. I do not accept this. Applying a textual approach, I am satisfied that even if all or a part of the instigation occurred before the Effective Date, for the purpose of the second limb of the definition of “Introduction”, it sufficed if the investment was made after the Effective Date.

If, contrary to the above, the construction is not that clear, then at highest for Astra, the words would not by themselves be sufficiently clear to fit with the construction of Musst. In my judgment, if it was intended to exclude from the purview of the contract approaches or solicitation or instigation or initiatives prior to the Effective Date which had not led to the making of an investment at the Effective Date, then it would have been necessary to say so explicitly. Neither was this said in the Octave Contract nor outside the contract in communications between the parties at the relevant time. In the iterative approach commended above, it would be necessary then to consider a contextual approach and to consider the contract in the light of the factual matrix and to consider which of any competing constructions bears a meaning most consistent with commercial common sense.

On the basis that there was no November Arrangement of the kind contended for by Astra, the effect of Astra’s submissions would have been that there would be no remuneration for the extensive work done by MUSST throughout 2012 comprising on Musst’s case contacting over 100 prospective investors, and, in many cases, arranging meetings or discussions between them and Mr Mathur to discuss the AMCO fund. They included especially 2B and Crown. There is nothing in the factual background to suggest that there has been excluded any work carried out prior to the Effective Date. A construction that the words indicate that the approaches prior to the Effective Date would be paid for provided that the investments were made thereafter accords with the factual matrix and is consistent with commercial sense. This would not be the case if Musst had no right to fees other than for potential investors approached for the first time after 21 November 2012. Going back from the contextual approach to the textual approach, even on the basis that the construction was not clear, there is nothing in the words used which precludes the construction that the investments are covered by the Octave Contract provided that they were made after the Effective Date, even if the customer was solicited prior to the Effective Date.

This does not yet suffice because it is necessary to consider whether there was an introduction for the purposes of the Octave Contract. The questions arise as follows, namely

Whether the investment occurred at the initiative or instigation of Musst;

Whether in fact the investment was at the initiative or instigation of Matrix and not of Musst;

Whether in fact the investment was made at the initiative or instigation of Musst Investments LLP and not Musst?

An argument of Astra is that the introductions were those of Matrix rather than Musst. As part of the way of seeking to meet this argument, Musst submits that the role of Matrix was merely administrative or secretarial. If this were the case, then the role of Matrix was just to put in touch the customer with Musst so that Musst could seek to solicit the custom. I have noted above that I do not accept that the role of Matrix can be characterised fairly as being merely administrative or secretarial.

In my judgment, it does not follow from the fact that the role of Matrix was greater than portrayed by Musst that Musst was not an introducer. A question which arises is whether a qualifying introduction must be at the sole instigation or on the sole initiative of the introducer. In a different kind of contract, namely that of estate agents, a question arises on the particular contracts before the Court whether the implied term that the estate agent be the effective cause is to be interpreted as “the” or “an” effective cause: see Bowstead and Reynolds on the Law of Agency 32^nd Ed. para. 7-030. This is a different kind of contract from an estate agent, bearing in mind not least the obligations on Musst. The words of the clause do not state that the instigation or initiative has to be the sole or predominant instigation or initiative of Musst. I therefore prefer the construction that this is not required so long as in the case of the instigation, it was substantial.

The textual point is not easy, and so it is prudent to move on to a contextual approach. I am at least satisfied that this is not a case where the textual approach shows that there is not a qualifying introduction without a sole instigation or initiative of Musst. Accordingly, I turn to the iterative process referred to above. When testing what at highest was an uncertain meaning against the factual matrix, or looking at the matter contextually, there are important contextual matters to take into account relevant to the construction of the contract.

One way in which Musst can be seen to be the introducer notwithstanding a more than secretarial or administrative role of Matrix is by the clause being capable of operating where Matrix and Musst/MUSST are acting together. I am satisfied that when the words are construed contextually the words are broad enough to include a case where both Matrix and Musst are acting together as introducers. Prior to the making of the Octave Contract, Mr Siddiqi introduced Matrix to Mr Mathur to provide distribution services. To this end, Matrix reached out to customers in distribution services generally under the coordination of Musst. In my judgment, the services of Matrix by themselves were not sufficient to open the door to the customers even those whom they approached, but a critical part of which was the presentations to the clients and the documentation prepared by Mr Siddiqi with his detailed appreciation of the technical details of the product. Further, the parties organised their affairs on the basis that payment for introductions would be made by Octave/Astra to Musst and that Musst would make their arrangement with Matrix. On this basis, vis-à-vis Octave it is an entirely logical construction that an introduction of Musst in circumstances where Matrix was acting jointly or taking a part of the introduction, is still an introduction of Musst.

This can be applied as regards 2B. Ms Galligan had known Mr Septon for some time, and a suggestion of Mr Siddiqi was Mr Septon as a possible investor, following which Ms Galligan got in touch with Mr Septon. I accept the oral evidence that there was a brainstorming session, and I do not treat it as a retrospective invention even though there is no contemporaneous written evidence. The July meeting was joint between Mr Siddiqi and Matrix, or in part one and in part the other. The September meeting would have been joint but for the visa problem of Mr Siddiqi. The evidence was equivocal as to whether Ms Galligan attended the 13 November meeting with Mr Septon, but she appears to have organised the meeting with Mr Septon. She was in New York at the time, by then being part of Musst. The 4 December meeting was in large part Musst. On this basis, I conclude that the instigation or the initiative was that of Musst or of Musst jointly with Matrix or of Musst in part and Matrix in part. Any of those formulations suffice in my judgment to qualify so that the 2B Contract was on the instigation or initiative of Musst.

I conclude that the words used seen in their contextual analysis provide support to Musst being the Introducer as regards 2B. The commercial common sense was that the fees were or would become due to Musst. The context or factual matrix included (without limitation) (a) the way in which the contract was drawn up between Octave and Musst with the expectation of a separate arrangement or negotiation between Musst and Matrix, (b) Mr Siddiqi’s overall coordinating role including bringing Matrix into the distribution process, (c) the critical role of Mr Siddiqi in preparing the documentation and making technical presentations to clients with his detailed appreciation of the technical details of the product. It would be surprising if it was intended to exclude Musst’s right to payment under the Octave Contract in relation to the investments by 2B (and Crown), which is the consequence of Astra’s construction, given that at the time of the contract 2B had already invested and Octave was discussing payment to it. At the date of the Octave Contract, there were no other likely new investors on the horizon. By then, Crown had already done a considerable amount of due diligence on AMCO and expressed considerable interest in investing. It is much more appropriate to adopt the construction of Musst than that of Astra in that its construction is more consistent with business common sense.

If a joint or partial instigation or initiative did not suffice, I conclude that the introduction of 2B was that of Musst. The reason for this is that the activities of Mr Siddiqi were sufficient to amount of themselves to the instigation or the initiative of Musst. This includes the following, namely

Mr Siddiqi’s suggestion in March 2012 that Ms Galligan contact Mr Septon;

the fact that Mr Siddiqi coordinated the distribution activity;

the critical role of Mr Siddiqi in preparing technical literature and other documentation;

making technical presentations to clients by Mr Siddiqi with his detailed appreciation of the technical details of the product, and his ability to address the concerns of the prospective client;Mr Siddiqi’s technical expertise more than the salesmanship was responsible for instigating the business from 2B;

the direct participation of Mr Siddiqi at the meetings of 2 July 2012, 13 November 2012 and 4 December 2012.

I do not accept as a matter of construction that the instigator conduct relied on must be after the Effective Date since, on the second limb of the definition of Introduction, there is no introduction without an investment being made. However, if, contrary to the above, the instigatory conduct relied on must be after the Effective Date, then Musst is able to rely on its conduct and especially of Mr Siddiqi in and around the meeting of 4 December 2012 either by itself or in conjunction with the conduct prior to the Effective Date. The reason for this is that prior to 21 November 2012, Mr Septon had not decided that he would invest. That depended on the due diligence of and around the 4 December 2012 meeting. That was not a box ticking exercise, but a detailed appraisal with very substantial input from Mr Siddiqi on behalf of Musst in providing detailed technical information. That therefore satisfied the second limb of the definition of introduction in that the investment was instigated by the detailed satisfaction of the queries of Musst and by his showing that the product would be a suitable investment for 2B.

It does not alter the analysis that the initial approach was to The Observatory and the ultimate investor was 2B. 2B acted at the behest of The Observatory and so the introduction was still at the initiative or on the instigation of Musst.

What of the argument that the conduct of Mr Siddiqi was at all material times personal or on behalf of Musst Investments LLP and not Musst? Astra point to emails which show Mr Siddiqi acting in a personal capacity or for Musst Investments LLP. They contend that the use of Musst as a corporate vehicle thereafter does not mean that the conduct of Mr Siddiqi was on behalf of Musst and therefore no introduction was made by Musst. Given the factual matrix of the agreement that the parties intended to capture the introductory conduct of Mr Siddiqi prior to the Octave Contract being made, to the extent that his conduct was for Musst Investments LLP, it must have been the intention of the parties to treat the same as carried out as delegate on behalf of Musst. This is consistent with Clause 2.2 of the Octave Contract. This refers to the delegation of functions by Musst to Musst Investments LLP to which Octave consented and could not revoke. In the context of this agreement, such delegation of functions can be by retrospective adoption as much as by prospective appointment. If and to the extent that the relevant introductory conduct was that of Musst Investments LLP, Musst adopted that conduct as carried out on its behalf. Likewise, the point was never taken at the time of the payments being made because it was understood by the parties concerned that Musst was adopting acts of Musst Investments LLP as its delegate.

For all these reasons, I am satisfied in the circumstances that Musst introduced 2B to Octave as per the second sentence of “Introduction” in the second limb of that definition. I reach this conclusion starting off with a textual analysis and reaching that conclusion. Even if the construction of the Octave Contract on a textual analysis did not without more support the construction set out above, this is not a case where the language used in the Octave Contract and the natural meaning of the words used supports a conclusion that there was no qualifying introduction in this case. However, applying a contextual analysis, I am satisfied that the Musst is to be regarded as an Introducer of 2B. Returning in the iterative process on this alternative footing to the textual analysis, I am satisfied that this is not a case where the language used and the natural meaning of the words used support the construction of Astra.

Mr Siddiqi knew various members of LGT's investment team, including Albertus Rigter (whom he has known since 2006) and Ralph Plotke. In the brainstorming conversation with Ms Galligan on 12 March 2012, Mr Siddiqi on behalf of Musst suggested to Ms Galligan that she should contact Mr Rigter and Mr Plotke of LGT as a potential investor. Although the introductions were supposed to be coordinated through Mr Siddiqi, Mr Christopher Elliott of Matrix sent AMCO marketing documents to Mr Plotke of LGT without prior reference to Mr Siddiqi. Subsequently, Mr Elliott contacted LGT and set up a meeting on 15 May 2012 in Pfaffikon, Switzerland, between Mr Siddiqi of Musst, Ms Galligan, Mr Reeves and Mr Elliott of Matrix, Mr Mathur (still at Deutsche Bank), and Mr Plotke of LGT.

Thereafter LGT acted on behalf of Crown using Crown as the vehicle to consider and ultimately make the investment. On 13 November 2012 Mr Siddiqi, with Mr Elliott of Matrix and Messrs Plotke and Rigter of LGT, attended a meeting at Octave’s offices. At this meeting, Mr Plotke and Mr Rigter had a conference call with Mr Mathur (who was in New York)

After the Effective Date (i.e. 21 November 2012), Mr Siddiqi, or Ms Galligan, for Musst arranged the following meetings or conversations for Octave with LGT:

a meeting in Pfaffikon Switzerland on 22 January 2013 organised by Mr Elliott and attended by Mr Siddiqi, Mr Mathur, Mr Plotke and Mr Rigter;

a due diligence meeting on 4 April 2013 at Octave’s offices with the same attendees as the 22 January 2013 meeting, together with Dr Adler (for Octave) and with Ms Galligan and (for LGT) Mr Raymond Seeholzer;

conference calls on 22 and 26 April 2013 to discuss fees, attended by Mr Siddiqi and Ms Galligan (of Musst), Mr Rigter (of LGT), and (in the earlier call) Mr Thomas and Dr Adler for Octave. These calls took place after Musst had provided further information to LGT on Mr Mathur by email of 12 April 2013, and in a telephone conference (Mr Siddiqi and Ms Galligan) with Mr Seeholzer and Mr Rigter on 17 April 2013;

a conference call between Mr Jan Friedhof (of LGT), Mr Siddiqi and Mr Mathur on 30 April 2013, in which LGT carried out operational due diligence;

a further conference call between Mr Plotke of LGT, Mr Siddiqi, and Mr Mathur on 7 May 2013.

Crown entered into a 'Trading Advisory agreement' dated 13 June 2013, (i.e the Crown Contract), by which it agreed to invest US$40 million into a fund which dealt in synthetic ABS controlled by Octave for Octave to manage. In return, Crown agreed to pay Octave:

an “Advisory Fee” – i.e. a management fee – of the lesser of (i) US$650,000 and (ii) 2% a year of the value of the funds under management, if their value was less than US$86.67 million, but if their value was US$ 86.67 million or more, 0.75% a year of the value of those funds; and

a “Success Fee” – i.e. a performance fee – of 20% of the net profits made by the fund, subject to certain deductions.

On 13 June 2013, Octave sent an unsigned form of this Crown Contract to Musst, and a signed contract was sent to Musst on 23 July 2013. Crown invested about US$35 million in November 2013 in a fund of synthetic ABS managed by Octave LLP, which sent invoices to Crown for its services. As in the case of 2B’s investment, investment advisory services were provided on Octave LLP's behalf by Astra LLP as its appointed representative. From this point on, Octave sent to Musst its invoices to Crown (albeit not in relation to all quarters); Musst invoiced Octave for its 20% share of the revenue which Octave said it had received from Crown; and Octave paid those invoices without complaint in accordance with the Octave Contract until the novation to Astra LLP. The total amount paid by Octave in relation to Crown to Musst was US$103,690.19.

Musst’s case is that there was a variety of ways that the Crown Contract was an introduction of Musst. Astra say that on the true construction of the Octave Contract, the only source of legal obligations, the introduction was not covered for the following reasons:

The introduction occurred prior to the Effective Date. The meetings of 15 May 2012 and/or 13 November 2012 were the critical dates, such that the introduction had already occurred by 21 November 2012. The case of Astra is that the subsequent follow up and due diligence did not postpone the time of the introduction of Crown until after the Effective Date.

If there was an introduction at all, it was by Matrix through Mr Elliott. If there was a breach of protocol by Mr Elliott in reaching out to Crown, that did not affect the fact that the custom was obtained at the instigation or upon the initiative of Mr Elliott.

Even if there was a brainstorming session in March 2012 between Mr Siddiqi and Ms Galligan, it was not that which caused the introductions, but the subsequent contact of Mr Elliott on behalf of Matrix.

The role of Mr Siddiqi was not that of an introducer. He did not reach out to the customer. If he wrote presentations and knew the technical details, neither that nor his attendance at meetings made him an introducer.

It is Musst which is the party to the Octave Contract, and any activity by a MUSST entity up to 21 November 2012 was by Mr Siddiqi or Musst Investments LLP and not by Musst.

As in the case of 2B, the case of Musst is that the second limb of the definition of “Introduction” applies as follows. Crown/LGT was a “Prospective Investor” because it was not an “Excluded Investor” as neither Octave nor its agent or employees had a “prior substantive relationship” with Crown/LGT as at the Effective Date of 21 November 2012. Any attempt of Mr Mathur to persuade Crown/LGT to invest was not a “substantive relationship” – it was an attempt to persuade him to invest; and in any event Musst never agreed that Crown/LGT was an Excluded Investor, as required by the definition. It was at Musst’s instigation or initiative that Crown ultimately made this investment because it was at Mr Siddiqi’s suggestion on behalf of Musst that there was an approach of Crown and/or that there were the subsequent meetings with Crown culminating in Crown’s decision to invest with the critical participation of Mr Siddiqi.

As in respect of 2B, in my judgment, there was an introduction for the purposes of the Octave Contract by Musst of Crown to Octave. It came within the second limb of the definition in the sense of concentrating on the investment being made. It looks to any circumstance where its being made has been at the instigation or on the initiative of the Introducer. In the case of Crown, the investment was not made until June 2013. As in respect of 2B, for the reasons set out above, I do not accept that the solicitation of customers had to start after the Effective Date. I adopt the same iterative approach of construction. As in respect of 2B and for the same reasoning, it did not negate the instigation or initiative of Musst that it acted with Matrix in the securing of the custom of Crown.

This can be applied as regards Crown. The contact was advanced by Mr Siddiqi in the brainstorming session. He had known the representatives of LGT for years before. The fact that Mr Elliott jumped in and made the first approach to Crown, and that thereafter pursuant to industry etiquette Mr Elliott was not removed as the point of contact, does not prevent Musst from qualifying as introducer under the Octave Contract. This follows from the fact that the overall arrangement was still that Musst was the overall co-ordinator and Mr Siddiqi was creating the technical literature, presenting technical information and participating directly at meetings. The reasoning above in respect of 2B has application as regards the textual and contextual approaches and the iterative process.

Mr Siddiqi attended the meeting in Switzerland on 15 May 2012 with Matrix representatives in attendance including Mr Elliott who was taking a leading role. Mr Siddiqi attended the meeting of 13 November 2012 with representatives of Musst in London together with representatives of Matrix including Mr Elliott and others. There were many points of contact after the Effective Date in which Mr Siddiqi and Ms Galligan participated as set out above.

If a joint instigation or initiative did not suffice, I would still conclude that the introduction of Crown was that of Musst. The reason for this is that the activities of Mr Siddiqi and Ms Galligan from the time that she started to work for Musst were sufficient to amount of themselves to the instigation or the initiative of Musst. This includes the following, namely

the connection which Mr Siddiqi had with LGT over many years and his part in initiating contact by the brainstorming session in March 2012;

the critical role of Mr Siddiqi in preparing the technical literature and other documentation;

the presentations and answering questions on the part of Mr Siddiqi to Crown with his detailed appreciation of the technical details of the product, and his ability to address the concerns of the prospective client. Mr Siddiqi’s technical expertise more than the salesmanship was responsible for instigating the business from Crown;

the direct participation at the meetings of 15 May 2012, 13 November 2012, 22 January 2013 and 4 April 2013 and conference calls on 22 and 26 April 2013 and 30 April 2013 and 7 May 2013.

As in respect of 2B, I do not accept as a matter of construction that the instigatory conduct relied on must be before the Effective Date: at least on the second limb of the definition, there is no introduction without an investment being made. However, if, contrary to the above, the instigatory conduct relied on must be after the Effective Date, then the conduct of Musst and especially of Mr Siddiqi in and around the meetings and calls after 21 November 2012 sufficed either by itself or in conjunction with the conduct prior to the Effective Date. The reason for this is that prior to 21 November 2012, Crown had not decided to invest. That depended on the further meetings, consideration and due diligence thereafter. That involved a detailed appraisal with very substantial input from Mr Siddiqi on behalf of Musst in providing detailed technical information and showing that the product would be a suitable investment for Crown.

What of the argument that the conduct of Mr Siddiqi was at all material times personal or on behalf of Musst Investments LLP and not Musst? The same arguments apply as regards 2B, such that any conduct of Musst Investments LLP was to be treated as the conduct of Musst for the same reasons as identified in respect of 2B above.

It does not alter the analysis that the initial approach was to LGT and the ultimate investor was Crown. Crown acted at the behest of LGT and so the introduction was still at the initiative or on the instigation of Musst.

For all these reasons, I am satisfied in the circumstances that Musst introduced Crown to Octave as per the second limb of the definition of “Introduction”. I have applied the iterative process in substantially the same way as in respect of the 2B investment as described above.

In the event that the arguments of Musst prevail that there was no November Arrangement, but do not succeed on the construction issue, Musst has alternative arguments based on estoppel and rectification.

In both instances, Musst relies on a common understanding. The relevant matters include the following before the time of the Octave Contract, namely:

Octave sent over the draft 2B Contract to Musst shortly before it was executed on 13 February 2013. It is said that it should be inferred that on each occasion this was done by the sender with Octave’s authority. There was no point in so doing (on the basis that there was no November Arrangement) unless Octave understood that the then intended Octave Contract applied to the introduction of 2B, and that Musst should have an entitlement to a share of the fees payable thereunder.

In respect of the first tranche of management fees, Mr Mathur refused to authorise any payment by Octave to Musst until the Octave Contract had been signed by the parties, as evidenced by the email exchange between himself and Mr Holdom dated 22 April 2013. This must have been (on the basis that there was no November Arrangement) because the intention of the parties was that right to the management fees was intended to be by reason of provisions of the Octave Contract.

Octave insisted on receiving assurances that there was no need for US broker dealer cover, in the context of the 2B investment. If in fact, Musst was not acting as an introducer in respect of 2B, this was not required. The need for this is apparent in particular from an email of 16 April 2013 timed 15:41 in the following terms from Octave (Mr Phillips) to Musst (Ms Galligan):

There is also reliance on post-contract conduct including:

Octave requested that Musst send invoices to it relating to Musst’s share in respect of 2B under the Octave Contract, which Musst did. Fees were subsequently paid pursuant to those invoices reflecting the intention of the parties that the same were payable under the Octave Contract.

Fees were subsequently paid in respect of the Crown Contract reflecting the intention of the parties that the same were payable under the Octave Contract.

In emails of 30 April 2015 timed 11.51 and 17.00, Mr Holdom admitted that the Crown I payments were being made under the “Introduction Agreement” (being a reference to the Octave Contract), whereas in distinction, he said, that the Crown 2 account was not covered since it was a new strategy.

In Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878, at 913E-G, Lord Steyn summarised the relevant legal principles as follows:

The principles were further explained by Briggs J in HM Revenue & Customs v Benchdollar [2009] EWHC 1310 (Ch), [2010] 1 All ER 174 at [52], (“Benchdollar”), as amended by Briggs J in Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustees Ltd [2010] EWHC 1805 (Ch); [2010] Pens LR 411 (“Stena Line”). Those amended principles were then approved by the Court of Appeal in Blindley Heath Investments Ltd v Bass [2015] EWCA Civ 1023; [2017] Ch 389 (“Blindley Heath”)and by the Court of Appeal in Dixon v Blindley Heath Investments Ltd [2015] EWCA Civ 1023, [2017] Ch 389, at [90]-[91]. Since the hearing concluded, the Supreme Court gave its judgment in Tinkler v HMRC [2021] UKSC 39 in which Lord Burrows, giving the lead judgment, said the following at para. 45 approving Briggs J’s formulations as amended:

In Seakom v Knowledgepool [2013] EWHC 4007 (Ch) (Footnote: ¹), at paras 112-116, Carr J summarised the relevant principles and noted that silence or mere inactivity will not suffice (para 114). Referring to para 43 of Benchdollar, she noted “an estoppel can only operate for the period of time and to the extent required by the equity which the estoppel has raised” (para 115).

A conventional estoppel can arise not only by virtue of conduct after the entry into a contract, but by virtue of conduct before the entering into of a contract in relation to the meaning of a clause in the contract: see Chartbrook Limited v. Persimmon Homes Limited [2009] 1 AC 1101 at paragraph 47 per Lord Hoffman; and Dubai Islamic Bank PJSC v. PSI Energy Holding Company BSC [2011] EWHC 2718 at paragraph 72 per Hamblen J.

The same five factors will now be considered. They are as follows:

There is enough to establish detriment. If in fact the communications were corrected so as to say that the contract as drafted did not specify that there should be any sharing of fees in respect of 2B and Crown (or other introductions made before the Effective Date), the matter at that stage would have been put right so that, if it did not do already, the terms of Octave Contract would have made it explicit that the fees would become payable. Mr Mathur accepted in cross-examination that he would have agreed to have the contract altered to reflect the parties’ true intentions if he had thought that there was a mistake in the Octave Contract [T7/42/8 – T743/8]. Further, following the drafting of the Octave Contract, when the requests were made to agree to Astra LLP and then Astra UK taking over the obligations, if the matter had been put that the Octave Contract did not provide an obligation to pay the fees, it can be inferred that the parties would have tidied up the written contract so as to give effect to the common assumption of the parties. In the event that Octave/Musst had resiled from the assumption before the summer of 2016, then, although it is put in very general terms, it can be inferred that Musst would have arranged its affairs in a different way and would have sought clarification both at the time of the Octave Contract and the arrangements subsequently with Astra LLP and Astra UK. If that had been indicated at an earlier stage, then Musst would have sought to amend the contract to reflect the common understanding of the parties. On the basis of my findings above, there would or ought to have been no argument to the contrary. It is now inequitable in the circumstances to resile from that state of affairs.

The parties therefore proceeded on a conventional basis that Musst had made the relevant introductions to 2B and Crown, and so was entitled to the 20% share of fees under the Octave Contract, in reliance on which Musst arranged its affairs and did not seek earlier clarification of the Octave Contract. The common assumption was a convention in respect of 2B and Crown which overrode an argument of construction that there was no contractual entitlement due to the Effective Date clause or the involvement of Matrix or otherwise. Notwithstanding any argument of construction, the convention of the parties was that the introductions in respect of 2B and Crown were understood to be effected by Musst. It would be unjust or unconscionable for Octave or Astra to resile from an agreement on the basis that it applied to the 2B and the Crown Contracts.

The requirements for rectification were summarised by Peter Gibson LJ in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71, 74, para 33 (as approved in the House of Lords in Chartbrook Limited v Persimmon Homes Limited [2009] UKHL 38 (“Chartbrook”) per Lord Hoffmann):

As set out in the recent decision of FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2019] EWCA Civ 1361, [2020] Ch 365, at para 6, “Rectification is an equitable remedy by which the court may amend the terms of a legal document which, because of a mistake, fails accurately to reflect the intention of the parties to it.” In the same case, the Court of Appeal confirmed that it is the parties’ subjective intentions that are relevant for this purpose, but it is also necessary to establish that there has been some “outward expression of accord” to that effect (see paras 60-61, 72-73).

In Chartbrook supra, at para. 65, Lord Hoffmann stated that in establishing a prior consensus, evidence of subsequent conduct may be of some evidential value, albeit that where the prior consensus was expressed entirely in writing, it was likely to carry very little weight, but it was not inadmissible. The actions after the Octave Contract therefore provide some assistance to shed light on what was intended by the parties at the time of execution of the Octave Contract. It will be borne in mind that although especially as regards the Crown Contract, there is reliance on post-contract conduct, it is conduct of a very similar nature to the pre-contract conduct relied upon as regards the 2B Contract.

The arguments of Astra against rectification are in large part predicated upon the following:

The parties had agreed between themselves, albeit in a non-binding manner, that there was a November Arrangement referable to introductions prior to 21 November 2012. On this basis, there was no reason to construe the contract as having any application to any activities prior to that date.

The Octave Contract was said to be forward looking, and the November Arrangement was backward looking, thereby showing that there was no contrary intention of the parties.

The actions in connection with 2B and Crown and relied upon as the outer expression of an accord do not reflect the same. Instead, they reflect the November Arrangement and are not inconsistent with the Octave Contract.

The Octave Contract was the product of detailed negotiation with lawyers on both sides, and the notion that it did not reflect that which was agreed is a matter which the Court should not reach lightly.

In the event, none of the arguments reflect a common intention requiring rectification, but an agreement which is not as favourable to Musst as it would now wish. The source of that problem is the terms of the contract, which could have been negotiated differently, albeit that any different terms proposed by Musst may not have been accepted.

In reaching the conclusion that there was no November Arrangement, the Court takes into account the submission of Astra that the Octave Contract was forward facing only, thereby making it more likely that a November Arrangement was made. However, even taking this submission into account, the Court rejects the submission that there ever was a November Arrangement in the light of the discussion in this judgment about the same. For the avoidance of doubt, this submission of Astra does not affect the overall result. The effect is that the factual matrix of the Octave Contract is very different from that on which the arguments of Astra are premised. In part, this informs or reinforces the conclusion on construction above, which renders the questions of rectification/estoppel otiose. However, if in fact rectification is required in order to give rise to an obligation to pay management/performance fees in respect of 2B/Crown, in my judgment, the requisite requirements have been satisfied, and the Octave Contract should be rectified so as to reflect the intention of the parties that the 2B and Crown Contracts are subject to the same fees in favour of Musst as if they too were introductions as defined in the Octave Contract.

The rejection of the November Arrangement is an answer to the first three of the points of Astra. I have taken into account the fourth point. If, contrary to that which I have held, the agreement is to be construed as per Astra’s submissions, then notwithstanding the involvement of lawyers on both sides, this mistake has occurred, and it should be corrected. There is nothing specific in the communications between the lawyers that indicates that the agreement as contended for by Astra was intended to have subjectively the meaning contended for. As regards the fifth point, this is a not an Arnold v Britton point of a party who has entered into an agreement which was not as favourable as Musst would now wish. The rectification, an alternative finding in this judgment, would be to reflect the terms of the agreement as the parties intended it to be.

It therefore follows that the primary findings are of construction of the Octave Contract that Musst is entitled to introduction fees in respect of both the 2B and Crown Contracts. Alternatively, the argument that no fees are due in respect of 2B or Crown would be barred by an estoppel by convention. In the alternative, and to like effect, if the findings of construction were wrong, then the agreement would be rectified so as to give rise to liabilities as regards the introductions of 2B and Crown. In fact, it is not necessary to make declarations about an estoppel by convention or to order rectification in view of the primary findings of construction of the Octave Contract.

The written contract in this case is the Octave Contract between Musst, Octave Limited and Octave LLP (referred to in this judgment collectively as ‘Octave’). However, the contractual claim in this case is against two Astra entities, namely Astra UK and Astra LLP (referred to in this judgment collectively as ‘Astra’). The very names of the entities evidence how at its inception, the Astra companies were intended to carry out the same functions of manager and investment manager respectively as the Octave companies. The issue to consider is whether the original contracts were novated from Octave to Astra LLP and from Astra LLP to Astra UK.

In this case, it is claimed that the Astra entities took over the function of the Octave entities, and that Musst agreed to this taking place. The Octave Contract was therefore carried out by the Astra entities, such that any breach of contract taking place after that take-over of functions is actionable against the Astra entities. Astra deny that there was ever such a take-over of functions. On the contrary, a draft contract was sent to Musst, but it was never agreed. There was an issue as to an effective date provision which was never resolved. Hence, no novation was ever agreed, and there was no contract between Musst and the Astra entities. For this reason (in addition to the other grounds of defence), Astra deny liability to Musst.

The novation questions require a close examination of the facts, which has already been undertaken. In the light of that, the law will be stated and then the parties’ submissions will be considered.

A novation will occur when the parties to an existing contract agree that a third person, who also agrees, shall take the place of one of them in an existing contract. The principles applicable to the formation of contracts apply to the existence of any novation: Chitty on Contracts (33^rd edition), para 19-087 (Footnote: ²), which also notes: “There is a new contract and it is therefore essential that the consent of all parties shall be obtained … in this necessity for consent lies the most important difference between novation and assignment.”. Accordingly, the normal contractual rules as to offer and acceptance, the requirement of certainty of terms, consideration and the parties’ intention to enter into legal relations all apply to novations as they do to the formation of any contract.

A contract can be novated by conduct. It can also be novated in part or in whole (see Chitty on Contracts 33^rd Ed. paras. 19-088 and 19-090):

In CEP Holdings v Steni [2009] EWHC 2447 (QB) it was claimed that an exclusive distribution agreement with the defendant had been novated from one of the claimants to the other. The evidence included a notice sent by the claimants to the defendant informing it that the relevant cladding business had been transferred and that invoices should be addressed to the second claimant in place of the first claimant. Gloster J found that the evidence did not get “anywhere near to establishing that the DA was novated” (para 26) and endorsed an earlier version of the part of Chitty cited above at para 28: “Novation, which involves the extinguishing of the original contract and the creation of a new contract between different parties, requires the consent of all parties; see Chitty on Contracts (2008) paragraph 19-086.”

In The Tychy (No.2), David Steel J also said:

Steel J’s decision on the facts was overturned on appeal, but the above quotation was referred to without criticism at paragraph 24 by the Court of Appeal. It added: “We believe that he [Steel J] was indicating that, where there is an established contract in existence, clear evidence of an intention to produce a novation is likely to be needed if that standard of proof is to be discharged. With that proposition we would agree.”

The Court of Appeal also noted at paragraph 24 that Steel J had “declined to pay any regard to written and oral evidence of witnesses, as to their understanding of the implications of the contemporary correspondence. We have followed his example. Such evidence is of no assistance to the Court's task of making an objective assessment of the implications of what the representatives of the parties wrote at the time.”

Further, at paragraph 29, the Court of Appeal emphasised the need to distinguish, as with all contracts, between the admissible background evidence concerning the nature and object of the novation and inadmissible evidence of the terms contended for. In particular, at paragraphs 33-34, the Court emphasised that while the conduct of parties after an alleged contract may be relevant to an estoppel, it was not legitimate to have regard to the subsequent conduct of the parties as an aid to construing the meaning of the words used.

After setting out the above points of principle, the Court of Appeal summarised the position in a manner apt to this case:

Further, as to the continued effect of any rectification and estoppel claims and the way consideration arises, Chitty at 19-089 states as follows:

In analysing the parties’ conduct, it is important to bear in mind that Astra and Octave were closely related entities working from the same address and were evidently seen by all parties as such. There was an overlap of staff between Octave LLP and Astra LLP; they shared the same offices at the date of the novations: and Mr Holdom and Mr Murray then moved over to Astra LLP [T7/64/18-66/24].

Hence, the lack of formality is not surprising. Further, it was always anticipated by Musst in early 2012 that Mr Mathur would in due course “spin out” of Octave’s regulatory umbrella and provide management services under his company’s own authorisation. That was reflected in the Octave Contract which provided at clause 9.4 as follows: “Octave shall do all such things as may be within their power to ensure (i) that responsibility for the management of the Funds and any managed account is retained by Octave and (ii) that the spirit of this Agreement is given full force and effect. Without limiting the generality of the foregoing, Octave shall to (sic) do all such things and exercise all such rights as may be reasonably within their power so as to ensure that responsibility for the management of any Fund or managed account is not transferred to another party without the consent of Introducer unless such party offers in good faith to enter into an agreement with the Introducer whereby the Introducer continues to receive the revenue share payable hereunder in respect of Eligible Investments on the same terms as (or such of the same terms as remain in force at the relevant time following the Termination Date of this agreement) are contained in this agreement (in which event the consent of Introducer shall not be unreasonably withheld).”

The evidence supported this intention to spin out of Octave. In 2012, Mr Mathur had discussed the possibility of his vehicle spinning out of Octave with Mr Tarun Joshi and Mr Siddiqi (T7/60/5-19); and the point had been discussed again in February 2013 when the contract was being negotiated (T7/59/15-23 and Ms Galligan’s evidence at T3/165/22-24; T3/168/12-25; T3/173/8-24, T3/176/9-15; T3/177/19-25; T4/92/10-93/5). As far as Musst was concerned, and relying upon what was related by Mr Mathur, it would deal in effect with the same people, and it was no different from a name change so that Astra would replace Octave. Further, the evidence was that Mr Mathur knew that under clause 9.4 of the Octave Contract, Octave was not entitled to transfer over the management of the 2B and Crown funds. (T7/54/7-55/23)

Musst points to the conduct referred above comprising:

Before Astra LLP took over the management of the 2B and Crown Contracts, Astra LLP had agreed with Octave LLP that it should do so. (Mr Mathur at T7/78/15-79/7)

It was agreed between Octave LLP, Octave Ltd and Astra LLP that Octave LLP and Octave Ltd would play no further part in the management. (Mr Mathur at T7/67/11-18, T7/74/21-75/1, and Mr Murray at T10/56/6-57/2). Mr Murray did not believe there would be any issues in relation to the transfer of the managed accounts from Octave LLP to Astra LLP, and he did not think about this. (T10/63/21 to 64/19).

Astra LLP took over the management of the 2B Contract on 1 September 2014, something which it was not entitled to do without Musst’s consent unless it offered to enter into an identical agreement with Musst as per clause 9.4 quoted above;

After doing so, Mr Holdom, in his email of 5 November 2014, informed Musst of the transfer, and asked Musst to split its own fees in relation to the 2B Contract, and to invoice Octave for the period before 1 September 2014, and Astra LLP for the period afterwards. Mr Holdom was authorised to write this email not only on behalf of Octave LLP, but also on behalf of Astra LLP, of which he was (as he accepted) then a partner and employee (Mr Holdom at T11/22/4-23/4)

Musst submits that in context this was an offer to Musst by both Octave and Astra LLP through Mr Holdom to have Octave’s rights and liabilities under the Octave Contract in relation to the Crown Contract transferred to Astra LLP. This is said to be a natural construction of the email in the context of the transfer of the funds to Astra LLP, and therefore the right to the fees to Astra LLP in respect of which Musst was entitled to a 20% share. Although Mr Holdom wrote as “Partner, Octave Investment Management LLP”, he must have had Astra LLP’s authority to write this email on its behalf as well, albeit that Astra deny that he had authority to novate the Octave Contract. That is not the point: the question is, did he have authority (or ostensible authority) to make the communication which he did, to which the answer is plainly ‘yes’. If, in context, that amounted to an offer by Octave and Astra LLP, that is the end of the matter.

As mentioned above, two invoices were split in the requested amounts, one to Octave, the other to Astra LLP, without complaining that the transfer amounted to a breach of its (Musst’s) rights under clauses 9.4 and 17 of the Octave Contract to prevent the transfer of the management. This conduct, looked at objectively, was an unequivocal waiver of its rights under these clauses, and an unequivocal acceptance that Astra LLP, as the new manager of the funds and therefore the new recipient of fees from Crown, was now the party responsible for paying 20% of them to Musst. Even if Octave was not a party to this exchange, Astra LLP still agreed with Musst (i.e. on a two-part basis rather than tripartite basis) to take on Octave’s liabilities in relation to the Crown Contract.

On 4 February 2015, Mr Holdom again asked Musst to send Astra LLP the next invoice in relation to Crown, which Musst did. One analysis is that this is evidence of a novation which had already taken place. If a novation had not yet taken place, Musst submits that this was an offer by Octave and Astra LLP to have the benefit and burden of the Octave Contract in relation to Crown Contract transferred to Astra LLP (Mr Holdom must realistically have had both Octave’s and Astra LLP’s authority to ask for this). Musst then accepted this offer by conduct by sending the invoice to Astra LLP shortly afterwards and accepting the consequent payment.

Astra say that this was barred by clause 16 of the Octave Contract (which provides that no variation was to be effective unless it was in writing and signed by the parties). However, Musst says that this has no application, as the novation (or Astra LLP’s taking on of the liabilities) was not a “variation”, but a new contract involving different parties.

The same analysis applies in relation to the 2B Contract. In his first email of 11 February 2015, Mr Holdom made it plain that the management of 2B’s Contract had also been transferred to Astra LLP. In his second email of that date, he offered on Octave’s and Astra’s behalf to transfer the benefits and burdens of the Octave Contract in relation to 2B Contract to Astra LLP, by asking Musst to invoice Astra LLP in relation to the 2B Contract. Musst accepted this offer by sending the relevant invoice to Astra LLP shortly afterwards and accepting payment.

Accordingly, Musst’s case is that the effect of these communications was to novate the Octave Contract in relation to the Crown and 2B Contracts to Astra LLP, with Octave dropping out of the picture; alternatively, Astra LLP in any event agreed to take on Octave’s liabilities in relation to the Crown and 2B Contracts, whatever the position with Octave was. Further, the parties then proceeded for the next year or so on the footing that the Octave Contract had been novated to Astra LLP (or at least Astra LLP had taken on Octave’s liabilities) in relation to both the 2B Contract and the Crown Contract, because from now Astra LLP, with Musst’s consent, was managing Crown’s and 2B’s funds pursuant to those contracts, receiving the fees there from, and paying over to Musst its 20% share.

This was confirmed by Mr Holdom’s said email of 30 April 2015, in which he said that “The Crown 2 account was set up for a new strategy (primarily CLO and CRE) and therefore [Crown 2] is not covered the Introduction Agreement”- i.e. the Crown Contract was covered by it.

As stated above, Astra LLP entered into contracts with Crown and 2B. Astra say that there could be no novation because if any contracts had been introduced, it was not these contracts. Musst submits that it makes no difference that these were not the same contracts since they were replacement contracts on the same terms and the payments received were from the management of 2B’s and Crown’s funds pursuant to these contracts: the basis of the claim is the original introduction and the continued management by Astra LLP and then Astra UK of these 2B and Crown funds: see paragraphs 5, 118 and 130 ARDCC.

Astra point to the abortive communications in April/May 2015 and April 2016 between the parties (Ms Galligan for Musst and Mr Murray for Astra) negotiating the terms of a novation as evidence that the parties had not yet made a novation and understood this to be the case. However, Musst says that the parties were already acting on the common assumption that it had been novated, and Musst had changed its position in reliance on this (i.e. by accepting the transfer of management from Octave to Astra without complaint). Further, the draft proceeded upon the premise that Octave was no longer a party, as it was not a party to the draft; and its purpose, as said by Mr Murray to Ms Galligan on 6 May 2015 was: “just to ensure that there was you know a transitioning of accounts and that payments would be made directly from Astra rather than from Octave from the effective date so … existing contractual entitlements with Octave up until the effective date remain in place” (see para 138 ARDCC). As said, in the event it was not signed and Astra LLP withdrew the draft on 20 April 2016, but Musst submits that this was only because the parties’ rights and obligations were now to be novated to Astra UK.

A similar but not identical analysis applies to the onward novation to Astra UK. This is dealt with in paragraphs 85 to 101 of the RAMPOC, paragraphs 170 to 178 of the RADCC, and paragraphs 137 to 139A ARDCC.

As said, by the email of 20 April 2016, Mr Murray on behalf of Astra Capital and Astra LLP informed Musst that the management of both funds was going to be transferred that week to Astra UK, and that: “As part of the Change of Legal Status Application, contracts will be novated to [Astra UK]”. Accordingly, it withdrew the draft agreement. As also said, the transfer then took place on 29 April 2016, and Astra UK entered into replacement contracts with 2B and Crown, again on the same terms (or materially the same terms) as the contracts entered into by Octave. The transfer to Astra UK was confirmed by Mr Holdom’s email of 10 May 2016.

Musst submits that the novation to Astra UK (or its taking on of the Astra LLP’s obligations) then occurred in one or other of the following ways, as pleaded in paragraphs 98 to 101 of the RAMPOC, namely:

On 10 May 2016, Mr Holdom, for Astra UK, sent the 2B invoice to Musst, thereby offering to take over the benefits and burdens of the Octave Contract in relation to the 2B Contract from Astra LLP (or Astra LLP and Astra Capital). In the context of Mr Murray’s 20 April 2016 email and the announcement that Astra UK was taking over all Astra LLP’s contracts, this was an offer in relation to the Crown Contract as well as the 2B Contract. This offer was accepted by Musst by sending the invoice for 2B to Mr Holdom’s Astra UK email address (albeit by mistake made out to Astra LLP) on 13 May 2016, which Astra UK then paid, which payment Musst accepted by 25 May 2016.

Alternatively on 16 May 2016, Mr Holdom, for Astra UK (and by necessary implication for Astra LLP), by asking for all future invoices to be sent to Astra UK, again offered on Astra UK’s behalf to take over (or to take on) the benefits and burdens of the Octave Contract in relation to the Crown and 2B Contracts. This offer was accepted by Musst by sending to Mr Murray, on behalf of Astra UK, the three invoices for the periods from April 2016 onwards (two in relation to the 2B Contract, one in relation to the Crown Contract) on 28 July 2016. It did not happen earlier because Astra UK did not provide the necessary information for Musst to prepare and send invoices. In the meantime, Astra UK continued to manage the funds and to receive fees from 2B and Crown in lieu of Astra LLP.

In paragraph 178 of Astra’s RADCC, Astra dispute the novation to Astra UK pleaded in paragraphs 98 to 101 of the Re-Amended Particulars on the following ground:

As to this, Musst submits as follows:

Paragraphs 140 to 169 of the RADCC, referred to in paragraph 178 of the RADCC, take matters no further (this is just a general repetition of points made in answer to the claim in relation to the novation to Astra LLP).

Once Astra UK had offered, as said above, to take over or to take on the obligations under the Octave Contract by Mr Holdom’s emails of 10 May 2016 or 16 May 2016, the offer remained in place unless and until it was withdrawn.

The mere fact that Astra UK had not in fact sent on to Musst any more invoices in relation to the 2B or Crown Contracts is neither here nor there in that:

As far as the Crown Contract was concerned, the invoices were rendered quarterly, and Astra UK (or Astra LLP) had already paid up to 1 April 2016 in any event; so there were no invoices to send on in any event, or at least, if there were, Musst had no reason to suppose that the offer had been withdrawn.

As far as the 2B Contract was concerned, the invoices were rendered monthly, but the only invoices which had not been sent were those for the May 2016 and June 2016 management fees, the earlier of which would not normally have been rendered until some point in June, and the latter of which at some point in July 2016. But the mere delay in sending these invoices was not a withdrawal of the offer, given that Astra UK had now taken over the management of the two accounts and the receipts therefrom.

Accordingly, Astra UK’s offer remained in place, and Musst’s 28 July 2016 letter of demand constituted an acceptance thereof.

Astra say that there was no contractual relationship at any stage between Musst and the Astra companies. They point to the following, namely:

Octave LLP and Octave Limited were the counterparties of Musst under the Octave Contract, not Astra.

Further, when the Astra companies made their replacement contracts with 2B and Crown, they were not the contracts which had been introduced (if there had been any introduction which Astra deny) by Musst.

There was a carefully drafted agreement involving several iterations and legal advice on both sides before it was made between Musst and Octave. If there was an intention to have an agreement to replace this agreement, it would be expected that the parties would replace the same in writing and expressly provide how it was intended to do so.

The possibility of having such an agreement was canvassed, and to that end, a draft was prepared, and then submitted for consideration. Musst had a long time to approve the same, but instead objected to the Effective Date provision. As noted above, Astra rely upon the communications between Ms Galligan and Mr Murray in April/May 2015 and April 2016 for the replacement contract with Astra Capital and Astra LLP and say that these show that the parties understood that there had not yet been any novation to Astra LLP. The parties were not in agreement about the terms of the same. Before any agreement was made, Astra withdrew the draft and refused to proceed.

Clause 16 of the Octave Contract provides (as quoted above) that no variation was to be effective unless it was in writing and signed by the parties. Astra say that the effect of Musst’s argument is that there was at least for the future intended to be a variation in the nature of Astra LLP or Astra UK taking over liabilities of Octave under the Octave Contract. This could only be effective if it was in writing and signed by the parties, and this was not done.

Astra say that this is not a case about a wholesale novation of the Octave Contract. The pleadings refer to two alternative ways in which the change was to operate at paras. 64 and 78 of the RAMPOC, namely that the emails showed:

Astra say that the reference in the pleadings to a novation of “Octave’s” rights and liabilities relating to the Crown Contract and the 2B Contract simplifies the fact that it was Octave Ltd that had the obligations under the Octave Contract whereas it was Octave LLP that had the rights under the Crown Contract and 2B Contract.

Astra submit that the communications relied on by Musst as a novation offer, taken at their highest, simply request Musst to address particular invoices to Astra LLP or Astra UK in place of Octave LLP and are not offers to found a novation of any contract either to Astra LLP or to Astra UK.

They submit that the fact that there were emails from Mr Holdom and Mr Murray informing Musst that Astra LLP and Astra UK have taken over from Octave LLP as the Investment or Trading Adviser does not assist Musst because this role is much more limited than the role of Manager under the Octave Contract. All they were doing was entering into the position of Investment or Trading Adviser under the Second and Third 2B Contracts and the Second and Third Crown Contracts.

They also submit that this was, at its highest, an offer to take over the position of Octave LLP and not Octave Ltd. It is said that it is necessary to distinguish between the position of Octave LLP which had the rights under the 2B and Crown contracts, whereas it was Octave Ltd which had the obligations under the Octave Contract. Without taking over the position of Octave Ltd, there were no relevant obligations to be enforced under any novated contract.

In this regard, Astra rely upon Clause 3.6 of the Octave Contract set out above under which Octave Limited was designated the “Manager”, and Octave LLP the “Investment Manager”, to whom Octave Limited was entitled to delegate any functions under the contract. The obligations of Octave LLP were limited to performance of such actions as may be required by Octave Ltd as Manager in connection with the Octave Contract and for the performance of any actions or functions delegated by Octave Limited.

Astra submitted that an offer, if any, by Astra LLP and in turn Astra UK to take on the administrative role formerly carried out by Octave LLP under the Octave Contract, was simply to issue invoices and make payments. It was not to offer to take on the obligations of Octave Ltd.

Further, Astra say that Musst has to show that all the relevant parties have consented to the alleged novation. It is said that there is nothing in the emails that can reasonably be understood to indicate that Octave Ltd was making any offer to Musst nor that Mr Holdom or Mr Murray were intending or authorised (or could be reasonably understood as such) to alter the legal relations of the Octave companies or the Astra companies.

Mr Holdom was engaging in an administrative activity, passing on copy invoices and asking Ms Galligan and/or Agatha Imiolek (Mr Siddiqi’s administrative assistant) to submit invoices so that payment would be made. These invoices formed no part of the contractual machinery (Clause 4). Further, Mr Murray was attempting to get Musst to agree to a new form of agreement involving Astra Capital taking the place of Octave Ltd as Manager going forward, which was different from what was proposed by the emails.

The emails from Mr Holdom are also inconsistent with Astra LLP taking on Octave’s liability under the Octave Contract in relation to the Crown Contract. The whole point of the split invoices that Mr Holdom provided on 5 November 2014 was to make clear that Octave LLP would only pay 20% of the fees that were earned by it from Crown under the Crown Contract and that Musst should invoice Astra LLP thereafter. This had nothing to do with Octave Ltd’s obligations under the Octave Contract.

Further, Astra submitted that any offer did not involve any consideration for the offer but was simply to receive money from Astra LLP or Astra UK without any concomitant obligation to either of them.

Astra also challenged the acceptance of the offers in the following regards:

Musst was unable to show how Ms Galligan or Ms Imiolek had any authority to alter its contractual relations or that this was understood by the Octave companies and the Astra companies. On the contrary, Ms Galligan made clear in her email exchanges that Mr Saksena would need to sign any new introduction agreement with Astra Capital (as Manager) and Astra LLP (as Investment Manager), and so there was no reason to believe that the acceptance could be made other than through Mr Saksena.

The actions said to amount to acceptance were not by express communication but by simply sending invoices and/or accepting payment “without complaint” (RAMPOC paras. 67,70) and para.80). They could not reasonably be construed as acceptance just as the conduct in connection with the requests for invoices to be sent could not reasonably be construed as offers. The absence of “complaint” is simply explained by the fact that Musst did not consider that it had any basis to complain. Musst was happy to invoice Astra LLP rather than Octave LLP in order to receive payment. There is nothing in the evidence to suggest that any “complaint” was communicated or compromised by either party.

The communications relied upon do not sit comfortably within the alleged framework of offer and acceptance. Musst relies upon a number of alternatives and there is lack of certainty about when the novation is supposed to have occurred. This recalls a comment made in Tito v Waddell [1977] Ch 106 by Megarry VC at 288: “such uncertainties do not provide favourable soil for a rich crop of novations”.

The billing and payment process employed was informal and did not follow the process in Clause 4 of the Octave Contract for the production of Statements in any event. Neither the emails nor the invoices upon which Musst relies make any reference to the Octave Contract. Indeed, communications between Mr Murray and Ms Galligan between February 2015 and April 2016 relating to the proposed Introduction Agreement between Musst and Astra LLP are inconsistent with any prior novation of the Octave Contract to Astra LLP and proceed as if the Octave Contract was still in place.

Without affecting the fact that these arguments apply also to the alleged novation to Astra LLP, the submissions are made as regards the alleged novation to Astra UK that:

If there was any offer, it was not accepted because the invoice was sent to Astra LLP and not to Astra UK as sought.

The subsequent invoices sent to Astra UK was after the event and when there was obvious conflict between the parties, such that any offer had by then expired.

There have been set out above the anti-variation and transfer provisions at Clauses 16-17 of the Octave Contract. Astra say that the alleged novations would fall within both of the above clauses. It is settled law that no oral modification clauses operate to prevent any variation to a contract being effected other than in writing: Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, [2019] AC 119, at para 10. Musst’s argument that a novation does not fall within clause 16 because: “it is not a “variation” of the Octave Agreement, but a new agreement involving different parties” (ARDCC paras. 125(1), 136(1)) ignores the termination of the existing agreement. Musst’s claim that it waived the need for consent under Clause 17 (paras. 125(2) and 136(2)) is without foundation, but even if this were the case, it does not establish that Octave Ltd and Octave LLP waived their consent or latterly Astra LLP (especially given that this is required to be given beforehand in writing and the formal communication requirements that are expressly set out at Clause 20.1 (para.125(3)). In CEP Holdings v Steni [2009] EWHC 2447 (QB) at para 37 Gloster J observed the importance of complying with the formal requirements of a similar clause at para 35 and noted the difficulty of establishing a waiver of such a clause:

The alleged novation extends only to the rights and obligations of the parties to the Octave Contract in relation to the 2B Contract and Crown Contract. The extent of such a claim is to the fees earned by Octave LLP under the 2B Contract and Crown Contract and not to fees in contracts subsequently entered into with Astra LLP or Astra UK, to which neither Octave LLP nor Octave Ltd are entitled . All the monies that might have been due to Musst in relation to the Crown Contract and 2B Contract have been paid. The claim advanced by Musst against Astra UK and Astra LLP is, on this basis, misconceived. Novation concerns the transfer of contractual rights and obligations held by the original obligor A to a new obligor B and not with contracts B has entered into independently.

Finally, as identified by the editors of Chitty (19-089), quoted above: a novated contract is not subject to the equitable claims that bite upon the original discharged contract. If Musst’s rectification and estoppel arguments concerning the inclusion of introductions to 2B and Crown are correct, they would not carry forward into any novated contract (RAMPOC 73, 84).

The Court has well in mind the submissions of Astra, not least, that absent an express agreement about novation, it is wrong lightly to infer a novation. The release from obligations on the part of one party and the replacement of another party in its stead is a matter of grave consequence for the three parties concerned and for others affected. Even in the context of the released party and the new party being closely associated, it is a matter of serious consequence for the third party concerned and for third parties such as creditors. Further, there is Astra’s submission that the language of novation was not used, and that the agreement contended for is at highest only a partial novation. It is said that the language is so imprecise that at highest there was simply a request for payments to be directed to Astra companies, and that this by itself does not alter the identity of the contracting parties or to whom obligations are owed.

Astra submit that the case law supports their case, but all cases are dependent on their facts. The starting point of the facts in this case is that Astra and Octave were closely related entities. There was also the anticipation that Mr Mathur would ‘spin out’ of the umbrella of Octave, and Clause 9.4 of the Octave Contract.

In analysing the parties’ conduct, it is important to bear in mind that Astra and Octave were working from the same address at the date of the novations, there was an overlap of staff. Mr Holdom and Mr Murray then moved over to Astra LLP [T7/64/18-66/24]. I accept the evidence especially of Ms Galligan as to how she accepted the position related by Mr Murray that it was in effect a name changing exercise. The lack of formality is therefore not surprising. As far as Musst was concerned, and relying upon what was related by Mr Murray, it would deal in effect with the same people, and it was no different from a name change so that Astra would replace Octave.

The context was as follows. The business of Mr Mathur formerly conducted through the vehicle of Octave with the advantage of its regulatory registration would from August 2014 be conducted by Astra LLP. This was the context of the termination of the Crown Contract and a new contract between Crown and Astra LLP. Likewise, there was a termination of the 2B Contract and a new contract between 2B and Astra LLP. All fees payable to Octave Ltd would transfer, subject to the agreement of contracting parties, to Astra Capital. Likewise the fees earned by Octave would henceforth be charged by Musst to Astra LLP instead of to Octave LLP. The summary of facts above sets this out in more detail.

In this context, the request on the part of Astra LLP to Musst to be invoiced the money instead of Octave was not administrative but substantive. Astra LLP was not acting as agent for Octave in and about the receipt of the moneys. It was acting for itself as a consequence of the transfer of business from Octave to Astra LLP. There are no documents showing that the moneys received by Astra LLP were accounted for between Astra LLP and Octave which would have happened if they had been received by Astra LLP as agent on behalf of Octave. With this transfer from Octave to Astra LLP and then to Astra UK went a transfer of the relevant income stream. The request to Musst to send its invoice to Astra LLP instead of to Octave LLP reflected an intention that the company receiving the income stream (Astra LLP and then Astra UK) should pay the agreed percentage of the moneys to Musst. This was the corollary of the transfer from Octave to Astra LLP and then to Astra UK.

Musst ought to have been asked to consent to the transfer in advance of its being effected: see Clause 9.4 of the Octave Contract as set out above. It was not asked. By the time that Musst was asked to send the invoices to Astra LLP instead of to Octave, the matter was a fait accompli. Astra say among other things that if anything this would have given rise to a right to damages for a failure to seek consent in advance. On that analysis, the claim would have been to damages against Octave, but it did not give rise to a contractual claim against Astra LLP and subsequently Astra UK. The fallacy of this argument is that subsequent to the transfer and in the light of the same, the invoicing chain was altered by agreement so that the customer (Crown/2B) paid to Astra LLP instead of to Octave and Musst was asked to send its invoices from a point of time to Astra LLP instead of to Octave in effect to follow the money.

It is this context which provides the answers to the arguments of Astra. The fact that there was no express agreement of novation does not preclude an agreement by conduct. The fact that the possibility of an express agreement was canvassed but not finalised does not show that no agreement was made. In my judgment, the draft agreement was intended not to create a new agreement but to reflect and formalise an agreement which had already been made. The stumbling block to the finalisation of that agreement was a concern about the Effective Date. In the light of the issue between the parties about the significance of the Effective Date in the Octave Contract, this may have been an issue of substance. It was important at least from the perspective of Musst that this provision should not have as its effect that only introductions made after the new Effective Date should be caught by the new written agreement.

The argument of Astra that Musst did not make an introduction to Astra LLP is not an answer to the claim. The agreement occurred in circumstances where Astra LLP had acquired from Octave the income stream of which a percentage was payable to Musst to the extent that it had introduced the same. The invoicing was so that the percentage, where applicable, should be paid by Astra LLP as the recipient of the income stream to Musst. It made commercial sense for the obligation to pay the percentage to go with the receipt of the income. That was not administrative: it was substantive, and it involved Astra LLP, and latterly Astra UK, taking on the obligation to pay the same percentage which Octave had agreed to pay under the Octave Contract.

It is right to say that this was not a wholesale novation of the Octave Contract in that it did not go back to the inception of the Octave Contract. The alternative ways in which the case is put, that is to say taking over Octave’s rights and liabilities or taking on its rights and liabilities in addition to Octave are said to be inconsistent with the certainty required for inferring a novation. The point does not undermine Musst’s case. It suffices for either case to be correct provided that it is one case or the other.

Astra say that the novation case involved an over-simplification of the fact that Octave Ltd had the obligations under the Octave Contract whereas Octave LLP had the rights under the Crown Contract and the 2B Contract. It is right to say that there was a greater precision in the Octave Contract where Octave Ltd was designated the Manager and Octave LLP the Investment Manager to whom Octave Ltd was entitled to delegate any functions. The submission of Astra is that Astra LLP was simply taking over the administrative role formerly carried out by Octave LLP under the Octave Contract, and it was not to take on the obligations of Octave Ltd.

These submissions do not reflect the evidence. The evidence is not that Octave Ltd remained in place as Manager and Octave LLP divested its position as Investment Manager to Astra LLP. The evidence in chief of Mr Murray (paras.24-32) referred to Astra LLP’s migration from Octave LLP’s regulatory umbrella. Astra Capital was authorised by the Cayman Islands Monetary Authority and was appointed as the manager of Astra’s funds (ASSCFL and ASCIL), and Astra LLP was appointed as the Investment Manager to the Astra Funds. This was not an arrangement that Astra LLP would act as the Investment Manager to Octave Limited as Manager or that Octave Limited would delegate powers to Astra LLP. It was that Octave Limited and Octave LLP would drop out of the picture and that Astra Capital as Manager and Astra LLP as Investment Manager would take over. Hence the new agreements with Crown and 2B respectively.

Mr Murray says that it did not occur to him at the time that the agreements would place Octave in breach of Clauses 9.4 and 17 of the Octave Contract. He says that the Octave Contract was not seen as a priority during the negotiations. However, it was appreciated that there was a potential consequence in connection with the Octave Contract, and hence the above-mentioned email was sent from Mr Murray with an amended introduction agreement. This was referred to by Mr Murray as “effectively a name changing exercise with [Astra Capital] acting as Manager and [Astra LLP] as investment manager”. In the taped conversation of 6 May 2015, Mr Murray’s words were that the intention was to novate the relationship but that existing contractual entitlements would remain in place until an effective date. Mr Murray wrote to Ms Galligan, as noted above, on 11 April 2016 saying that a fully executed replacement agreement was required in order “to tidy up our records”. Mr Murray again used the same expression about a “change of name exercise” on 12 April 2016 in answer to a question as to why a replacement agreement was required.

Mr Murray in his witness statement was contending that that agreement would not take effect until such time as it had been executed with the effect that there could be no contractual agreement with Astra until the written agreement had been executed. It is common for the parties not to intend to enter into an agreement if a formal agreement is contemplated until such agreement has been executed. It is not conclusive that there is no agreement between the parties in the event that a draft written agreement has not yet been executed.

There are cases where the parties have agreed in principle, but not yet agreed all the terms, and the Court has to decide whether they intended to enter into a binding agreement. There are cases where the parties had agreed subject to contract, but the question is whether they have waived the subject to contract stipulation. This was considered in the speech of Lord Clarke in RTS Flexible Systems Limited (Respondents) v Molkerei Alois Müller Gmbh & Company KG (UK Production) [2010] UKSC 14. Where a contract has been performed on terms that were agreed to be subject to contract, that might, dependent on the circumstances, indicate an intention to enter into a contract. The parties may intend to enter into an agreement when other terms remain to be negotiated dependent on their objective intention and the importance of the terms remaining outstanding: see Pagnan SPA v Feed Products Ltd [1987] 2 Lloyd's Rep 601. However, in other cases, a problem is that it is common for important terms to be inserted at a late stage, such as exemption and limitation clauses where there would be no intention to enter into a contract without such terms: see Robert Goff J in British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 from p.510G onwards.

At para. 50, Lord Clarke referred to a judgment of Steyn LJ in Percy Trentham v Archital Luxfer Ltd [1993]1 Lloyd’s Rep 25 who had drawn attention to four particular matters summarised by Lord Clarke as follows:

It is a question of fact in each case. In my judgment, the defining points here include the following, namely:

the terms of the contract had been agreed through the Octave Contract;

Octave had dropped out and, in effect, Astra had stepped in: it was more than a name change because it was not the same company, but the company change was with Mr Mathur who used the relevant companies as his vehicle from time to time;

by acceding to the request for the invoices to be addressed to Astra LLP and by Astra LLP paying, the contract was performed through the changed companies;

there were no significant terms to negotiate, and the lack of understanding about what was the date when Octave’s involvement and obligation ceased and Astra’s started was of no importance, especially following and as a result of performance.

In this case, in my judgment, as soon as Octave stepped out of the picture, and Musst agreed to this by addressing invoices to Astra LLP and Astra UK respectively at the request of Astra, there was a relationship at least between Musst and Astra LLP (it is immaterial for the purpose of the instant claim if this was in addition to or instead of Octave). Mr Holdom and Mr Murray were right to refer to a change of name exercise. The agreement being required to tidy up records reflects the fact that the written agreement was a record of what had been agreed rather than the making of a new agreement.

The argument that the income stream transferred to Astra LLP and the 20% payments were made by Astra LLP to Musst, but the Octave Contract remained without the substitution or addition of Astra LLP is contrived and commercially unrealistic. I am satisfied in the circumstances that the expressions of name change and tidying up the position were well made and reflected the intention of the parties that an agreement in the nature of a company change had already taken place, whether Astra LLP was in addition to or instead of Octave. It did not require formalisation to take effect, but that was confirmatory of an existing agreement.

There are other arguments of Astra which stand to be rejected. It is said that the offer was not to take on the obligations of Octave Ltd, but simply to issue invoices and make payments. That ignores the context of Astra Capital and Astra LLP respectively becoming Manager and Investment Manager instead of Octave Ltd and Octave LLP respectively. The suggestion then that Astra LLP was acting in simply an administrative capacity also ignores this context. If it had been, it would have been acting on behalf of Octave as principal, but the evidence is clearly that it did not do so but must have been acting for itself. Receiving hundreds of thousands of pounds and paying over 20% to Musst for a period and not passing it on to a principal is not an administrative exercise. The attempt to sideline Astra and not to see it in the context of the transfer from Octave to Astra is to ignore the context in which the arrangement between Musst and Astra LLP and then Astra UK was created.

The analysis of Musst of an offer and acceptance around the issuing of invoices and the receipt of moneys so as to create a contractual relationship between Musst and Astra is a fair characterisation of what occurred. The submission that there was nothing in the emails to indicate such an analysis is again to ignore the context of the transfer from Octave to Astra. A challenge is made about the authority of Mr Holdom and Mr Murray to alter the legal relations of Octave and Astra companies but it can be inferred that they did have such authority.

In the case of Mr Holdom, I accept the submissions that he must have had the authority to write the emails which he did. It is to be noted that he worked for Octave LLP and then he transferred his work to Astra LLP. He was a minor shareholder in Octave Ltd and through that company in Octave LLP. He was also a minor shareholder in Astra LLP. Although one of the emails was signed off in an Octave LLP capacity, it was apparent that he was acting by then for Astra either in addition to, or instead of, Octave. Mr Murray’s work as legal adviser was clearly for Astra, and he must have had actual, or at least apparent, authority to represent Astra LLP and Astra UK in his communications.

At times in his evidence, Mr Mathur suggested that he was not particularly hands on since he was exceptionally busy working every day for 18 hours a day. I accept that Mr Mathur was very busy, but in my judgment, he was more hands on than he acknowledged. I find that he knew, authorised and intended the transfer from Octave to Astra which was fundamental to his business strategy of being able to control the business without having to use Octave which he did not control. He must also have been involved in the engagement of Mr Holdom and Mr Murray, and he relied upon them to effect the transfer from Octave to Astra. The emails relied upon by Musst and the offer and acceptance identified by Musst were part and parcel of this transfer. It follows that the suggestions of lack of authority are rejected, as is the attempt to relegate the importance of the communications to mere administrative acts in connection with specific payments.

As regards the question of consideration for the liabilities of Astra LLP and Astra UK, the payments that were made were not in a vacuum. The payments and the obligations were made in order to discharge the liabilities of Octave under the Octave Contract. They were also part of the price for Astra acquiring the income stream from specifically Crown and 2B from Octave that these liabilities would be discharged. Further, from the perspective of Musst, the moneys were received in consideration of Musst treating the obligations of Octave to it as discharged to the extent of the moneys received. Going forward, Musst either accepted the liability of Astra LLP and Astra UK as being in discharge of the liability of Octave or as being additional to Octave with the promise that Musst would accept payments pursuant to the same in discharge of any ongoing liability of Octave to the extent of the moneys received.

The defence that the partial novation did not work because it offended against the anti-variation and transfer provisions at Clauses 16-17 of the Octave Contract is rejected. Those clauses did not prevent any of the above analysis. As regards Clause 16, this is not about a variation between the same parties of the same agreement. The introduction of new parties is not a variation as between the new parties and the old parties, but a new contract. This has no application, as the novation (or Astra LLP’s or Astra UK’s taking on of the liabilities) was not a “variation”, but a new contract involving different parties.

It therefore has no application either to a total or a partial novation to the extent that it creates a relationship between the new parties and the old parties. As regards Clause 17, this might be relevant to whether Octave could transfer its obligations to Astra without the prior written consent, but it does not affect the ability of Astra to take on liabilities of Octave. It is therefore not necessary to consider whether in fact written consent was waived in the circumstances of this case. It is simply necessary to consider whether there were obligations assumed by Astra LLP/Astra UK on which Musst could sue. For all the reasons stated above, this is answered in the affirmative.

As regards the novation to Astra UK, I accept the submissions of Musst. In particular, when asked to charge Astra UK instead of Astra LLP, there was no objection from Musst. There was an administrative error to send the bill to Astra LLP, but in context that was a clear mistake and understood as such. Had it not been, the invoice would have been accompanied by protest, but there was none. Further, the subsequent payment would not have been made at all until this point had been sorted. Since there was nothing to sort, the payment was made by Astra UK, and it was accepted by Musst. Thereafter, albeit at a time when no information about receipts was provided, in July 2016, invoices were made out by Musst to Astra UK, confirming that it had no objection to the transfer from Astra LLP to Astra UK. This acceptance of the transfer to Astra UK is to be seen in the context of the earlier transfer from Octave to Astra LLP. It was a matter of no significance in that the infrastructure of the business was moving over as was the income stream. There was no reason to object: it would have been objectionable had it been the case that the business was moved to Astra UK, Astra LLP had given up the income stream and Astra UK was not taking over its position vis-à-vis Musst. That was not the case: this was a second novation.

If the first way of putting the case had not occurred, then the combination of those matters and the subsequent invoices would have sufficed. The allegation of a withdrawal of any offer of novation is rejected. I accept Musst’s submission relating to the timing of the invoices, and despite concern that Astra might not honour its obligations, this did not bring to an end the ability of Musst to commit to accept the offer of novation and that all further invoices would be to Astra UK. There was no termination either of the offer or of the novated Octave Contract.

Finally, I reject the final argument of Astra referred to above that the novated contract is not subject to the equitable claims that bite upon the original discharged contract and in particular that Musst’s rectification and estoppel arguments concerning the inclusion of introductions to 2B and Crown are correct, and they would not carry forward into any novated contract. This is for the following reasons, namely:

Astra LLP and/or Astra UK were, like Octave, bound by the estoppels alleged against Octave, because they knew of the relevant facts which gave rise to the estoppels and realised that Astra LLP and Astra UK were bound to pay under the Octave Contract. They acted in this regard, and as evidenced by Mr Holdom’s email of 30 April 2015 on behalf of Astra LLP on the basis that the Crown 1 Contract was covered by the Octave Contract.

In any event, Astra LLP and/or Astra UK, through Mr Mathur, Mr Holdom and Mr Murray at all material times knew the relevant facts which entitled Musst to rectification and gave rise to the conventional estoppel. They were not entitled, as against Musst, to take the benefit of Octave’s rights under the Contract without the burden of the claims affecting Octave’s rights.

It is also pleaded on behalf of Musst that there is an estoppel barring Astra LLP from denying the novation because there was an assumption that there was a novation: see RAMPOC para. 71. The matters there set out are largely evidence that there were novations. It is unlikely that this adds anything to the argument in that it is difficult to see the circumstances in which there would not be a novation by conduct, but the estoppel would still exist.

Nonetheless, for the purpose of completeness, if there were no novations, I find that there were estoppels by convention. Musst and Astra LLP and Octave or Musst and Astra LLP acted on the common assumption that, in relation to the Crown and 2B Contracts and the fees receivable thereunder, the Octave Contract had been novated from Octave to Astra LLP from 5 November 2014. The common assumption was manifested by Astra LLP asking Musst to make out invoices to Astra LLP in place of Octave and by Astra LLP providing information to enable this to take place. It was manifested by the email of 30 April 2015 from Mr Holdom referred to above to the effect that payments would continue to be made under the Crown Contract, but not under the Crown 2 account. It was also manifested by Musst making out invoices to Astra LLP in place of Octave and accepting payments made by Astra LLP in place of Octave. The common assumption thereby crossed the line from which its being shared can be properly inferred. Astra LLP conveyed to Musst that it expected Musst to rely on it.

From this point onwards, without challenge from the Claimant, Astra LLP continued to control and to manage the 2B and Crown Contracts in place of Octave. Both Musst and Astra LLP continued to operate on the basis of the Octave Contract. Musst acted in reliance upon the same by making out invoices and accepting the payments made by Astra LLP. Further, Musst did not chase Octave for payment or complain about Octave’s breach of clause 9.4 of the Octave Contract or about Astra LLP procuring such breach by agreeing to receive the transferred assets. In this context, the draft written novation agreement was or was understood to be simply an attempt to formalise that which had already been agreed by conduct.

It would be unconscionable for Astra LLP to deny that the agreement contained in correspondence and/or by conduct was a novation of the Octave Contract in relation to the Crown Contract and the 2B Contract and the fees receivable thereunder (or at least, that by that agreement it took on Octave’s liabilities thereunder in relation to Crown) and so it is estopped from denying such novation or assumption of liabilities. It would be unconscionable because Astra LLP enjoyed the benefit of the transfer agreements from Octave (including the income stream that went with it) and Musst changed its position by its above-mentioned reliance upon the common assumption.

The same applies also to the transfer from Astra LLP to Astra UK. Against the background of the transfer to Astra LLP, this was more of the same. Musst, Astra LLP and Astra UK acted on the common assumption that, in relation to the Crown Contract and the fees receivable thereunder, the Octave Contract had been novated from Astra LLP to Astra UK from April/May 2016. The common assumption was manifested by Astra UK asking Musst to make out invoices to Astra UK in place of Astra LLP. When asked to charge Astra UK instead of Astra LLP, there was no objection from Musst. Musst made out an invoice in May 2016 (albeit in obvious error to Astra LLP), and payment was duly made by Astra UK and accepted by Musst. Astra UK reminded Musst that the payee should be Astra UK and there was no protest. Thereafter, in July 2016, albeit when no further information about revenue was being provided by Astra UK, further invoices were made by Musst to Astra UK, which was further confirmation that there was no objection to the latest transfer. The sharing of the common assumption takes its character in the context of the transfer from Octave to Astra LLP: this was a further transfer this time from Astra LLP to Astra UK which was also accepted by conduct. Musst acted in reliance upon this common assumption by sending invoices without protest and accepting the money from Astra UK and not insisting on its rights against Astra LLP. It would be unconscionable for Astra UK to resile from the common assumption having taken the benefit of the income stream on the latest transfer and in view of the reliance by Musst.

This fourth issue is said to arise if there had been a novation to Astra LLP, but not to Astra UK. Although there are complexities in the argument about unjust enrichment, the matter would be considered in the context of the business of Astra LLP being transferred to Astra UK in a contract dated 29 April 2016 signed by Mr Mathur on both sides and providing obligations in the nature of (a) an assumption of liabilities in the widest terms of Astra LLP by Astra UK (Clauses 3.1 and 3.2), and (b) an undertaking by Astra UK to perform the obligations of Astra LLP and an indemnity arising out of any failure to perform (Clauses 6.4 and 6.5. It would also be considered in the context of the argument of MUSST that receipt of fees by Astra UK was sufficient to give rise to a claim for those fees against Astra LLP. This was on the basis that Astra UK was an affiliate, as per the Octave Contract, of Astra LLP. This would then found an entitlement to an indemnity against Astra UK under the deed of transfer dated 29 April 2016.A long and detailed consideration is not proportionate in circumstances where if an argument in restitution failed, it appears that ultimately the liability would be enforced to the advantage of Musst, if necessary, through Astra LLP’s rights against Astra UK. Having determined the issue of novation in favour of Musst and against Astra LLP and Astra UK, then it is not necessary to reach any findings in respect of the fourth issue.

There is an issue between the parties as to whether the right to management and/or performance fees in respect of “Eligible Investments” ceases in the event that the funds no longer followed the “Current Strategy”, i.e. investing primarily in synthetic ABS on a “buy and hold basis with limited or on direct leverage” [Clause 1.1]. (The word “on” is presumably a typo for “no”.) In the submission of Astra, in that event, the right to fees ceased, but Musst submits that the critical time for assessing whether an investment is following the Current Strategy is the point when the investment is made.

In the event that Astra are correct, there ensues a difficult issue regarding at what point the Current Strategy ceased to be followed in respect of a given investment. This has given rise to a considerable amount of controversy between experts who have given evidence with many points of disagreement as to whether the Current Strategy remained, and if it did not, when it ceased and the reasoning as to how it was ceased and by what it was replaced.

The provisions relevant to the Current Strategy issue include the following:

Musst submits that once an “Eligible Investment” was made for the “Current Strategy” (whether a synthetic ABS, or a non-synthetic instrument bought as part of the original portfolio), it remained such unless and until it was redeemed. At that point, the performance fee, if any, would be received by Octave, who in turn would pass on the relevant percentage to Musst. Clause 3.1 is the governing clause, and it entitles Musst to all fees in relation to any Prospective investor “who makes” an Eligible Investment. There is no requirement that the strategy must continue thereafter to be the same.

If there was a redemption consequent upon the investment being sold and the proceeds being put into a “New Fund”, the redemption request would trigger a performance fee payable. However, the Octave Contract specifically provided that in the event that there was an investment of the proceeds in a New Fund following a different strategy from the Current Strategy, there would be no fees triggered: see clause 3.7. Musst submit that it is therefore to be inferred or a necessary implication that in the event that the proceeds were reinvested without a redemption and used to buy another instrument not for a “New Fund”, but for the same fund as before, the funds (or the new instrument) continued to be an “Eligible Investment” regardless of the nature of that investment. Were it otherwise, it would not be necessary to say anything regarding the New Fund since the position would be obvious: if it was already the case that the fees would no longer be triggered on investment into an old fund, then it would have been unnecessary to provide the same in respect of investment into a “New Fund”.

A part of Musst’s written opening argument [para. 229] is put as follows:

Therefore, reinvestment of funds deriving from “Eligible Investments” into the same fund did not deprive Musst of the right to payment of fees, even if (say) the fund as a result consisted mainly of stocks and shares, rather than synthetic ABS.

Astra’s case is that on the true construction of the Octave Contract, the entitlement of Musst to a share in fees came to an end when the investment ceased to be in a Fund following the Current Strategy. By reference to Clause 3.1 and the Octave Contract as a whole, it says that Musst’s continuing entitlement depended upon all parts of the definitions in the Octave Contract being satisfied. Musst’s entitlement under the Octave Contract to a share of fees applies, in respect of an investment, only so far as it was and remained (a) “an investment in a Fund managed or advised by Octave … for the Current Strategy” (for the purposes of clause 3.1); and (b) a “Fund” (falling within the definition contained in clause 1.1) namely a managed account “designed to substantially replicate the investment securities and risk profile of the ASSCF, and following substantially the same strategy as set out under the Current strategy”

The Revenue share in Clause 3.2 is specified to be 20% of all fees earned by Octave or its affiliates “in respect of any Eligible Investments”. The definitions of Fund and Current Strategy in Clause 1.1 specify that for an Investment to be one for Current Strategy, it has to satisfy the characteristics as regards both (a) the securities, and (b) the strategy.

Astra submit that “It is axiomatic (emphasis added) that Current Strategy is something ongoing which is capable of changing. The purpose of the definition is to capture what Musst Holdings was being appointed to sell and to tie its fee entitlement to the pursuit of it”: Astra’s opening skeleton argument para. 201c.i. Astra also place emphasis on the definition of Fund, saying that “it is axiomatic that this is ongoing” (emphasis added) such that if the Fund is no longer following the Current Strategy that something which was a Fund may cease to be such. Accordingly, the investment may cease to be an Eligible Investment and with that change, Musst’s entitlement to share fees in respect of it comes to an end.

It is said that if the parties had wished Musst to share fees indefinitely, they would have said so. The purpose of the clauses was to limit Musst’s entitlement in a way that could be applied by the parties to changing circumstances. This produced a sensible commercial result, whereas Musst’s interpretation was said to “produce an absurd or uncommercial result.

An alternative submission of Astra is that the relevant contract dates (for assessing whether the Current Strategy was being followed) were not from the time of the Octave Contract, but (a) from the Second Crown Contract and the Second 2B Contract (with Astra LLP instead of Octave) from 1 September 2014 and 2 February 2015 respectively, and (b) from the Third Crown Contract and the Third 2B Contract (with Astra UK instead of Astra LLP from 1 April 2016 and 21 March 2016 respectively). They submit that by these times, the investment strategy was no longer the Current Strategy. Thus, even if the Current Strategy issue is to be judged by reference to the time of the investment being made, by the time of these contracts, the investment was no longer an Eligible Investment because it was not following the Current Strategy.

They also submit that if the relevant date were the making of the investment, the investments were made by Astra LLP at the time of the transfer to it. Before that, the investment had been made by Octave. Likewise, the making of the investment occurred in respect of Astra UK at the time of the transfer to it. By those times, Astra submit that the investments had moved away from the Current Strategy. Accordingly, there was no continuing right thereafter to fees, and accordingly the claim of Musst fails because the investments with Astra LLP and Astra UK respectively were not on the Current Strategy.

The key question of construction

The key question of construction is whether the Fund has to remain on the Current Strategy, or whether it suffices if at the point when the original investment or an additional investment was made that it was for the Current Strategy.

Textual approach

The words used in Clause 3.1, which provides for the entitlement to share in management and performance earned and received by Octave, are that it is in respect of each Prospective Investor “who makes an investment in a Fund managed or advised by Octave for the Current Strategy on or before the Cut-off Date (emphasis added).” The last words of Clause 3.1 are also significant referring to “additional investments made for the Current Strategy (emphasis added) directly or indirectly by an Investor into a Fund whether before or after the Cut-off Date are also Eligible Investments.” Both as regards the original investment and the additional investments, the clause refers specifically to the making of the investment. This indicates that the investment has to be for the Current Strategy at the time of the making of the investment in order to qualify for a share of fees.

In my judgment, it is telling that the submission of Astra is that the share of fees applies in respect of an investment only “so far as it was and remained” an investment in a Fund managed or advised by Octave for the Current Strategy. The wording in Clause 3.1 is about the point of the making of the original investment and any additional investments. It does not contain words that in the event that the investments cease to be managed according to the Current Strategy, the entitlement to the fees would cease from then onwards. If that had been intended, the Octave contract would have provided for that expressly. It did not do so.

I accept the submission of Musst that the wording of Clause 3.7 assists its case on construction. On Astra’s construction, whether it was a new fund or an old fund, whether at the time of the making of the investment or at any time thereafter, in the event that it no longer followed the Current Strategy, the right to fees thereafter would cease. If that had been the case, it would not be necessary to refer to the case of the New Fund. It was necessary to do that because the emphasis is on the time of the making of the investment, the original investment and the new investment. Clause 3.7 says that it is not sufficient that the investor makes a new investment arising out of redeemed funds of an investment which was made for the Current Strategy. The next investment must be for the Current Strategy for it to be an Eligible Investment. I accept the submission of Musst that Clause 3.7 supports the construction that the key time for an entitlement to fee is the point of the making of the investment, and not what happens thereafter. There is a necessary implication or inference from Clause 3.7 that, provided that the investment was at its inception for the Current Strategy, it remains an Eligible Investment attracting fees.

There are points of textual interpretation said to go the other way which need to be considered. The last sentence of the definition of Fund in Clause 1.1 contains the words that “the strategy remains substantially the similar to the Current Strategy (sic).” Astra submit that this means that the strategy has to remain substantially similar to the Current Strategy, so that the point is not static by reference to the time of the making of the investment. Likewise, it is said that the opening words of Clause 13.2 show that the Eligible Investment must follow the Current Strategy, not just when the investment was made but thereafter. Astra draw attention especially to the emphasised words ““The Introducer shall continue to be entitled to the revenue share in respect of all Eligible Investments (as defined in Clause 3) for so long as such Eligible Investments in the Current Strategy are maintained by the Investor.”

The Octave Contract is not particularly well drafted, but as a matter of textual interpretation, I do not accept the interpretation of Astra. As regards the definition of the Fund, the reference does not in context appear to mean that the strategy has to remain as per the Current Strategy, such that it is no longer eligible as an investment if this ceases. In my judgment, the provision in context was saying that the other funds and securities were still similar to the Current Strategy. If it had been intended to say that it had to remain as such in order to qualify as an Eligible Investment, much clearer words would have been required, especially bearing in mind the consequences of such construction.

The words at the start of Clause 13.2 come a little closer, namely: “The Introducer shall continue to be entitled to the revenue share in respect of all Eligible Investments (as defined in Clause 3) for so long as such Eligible Investments in the Current Strategy are maintained by the Investor...” There is a limitation in time to so long as they are maintained by the investor. The question is whether this might mean, as Astra contend, for so long as the Eligible Investments are in the Current Strategy. In my judgment, the words are not sufficiently clear to bear that meaning. It is possible that if the words had been transposed to say that it was for so long as the Eligible Investments were maintained in the Current Strategy that there would be a better textual argument. As written, Clause 13.2 appears to be saying that the words are to emphasise that, for so long as the investment is maintained by the investor, there is an entitlement to the revenue share. However, there is a qualification, namely that this comes to an end if the Octave Contract is terminated for material breach including continued breach.

In any event the words in these clauses must be seen in the context of the Octave Contract as a whole. This includes the points above regarding Clauses 3.1 and 3.7. I have taken into account the fact that the most important matter is still what the words mean. In this regard, I have well in mind the words of Lord Neuberger in Arnold v Britton above at paras. 17 - 20. In particular, I have had full regard to the importance of the words used in that the parties can choose the words (para. 17), and the importance of being very slow to reject the natural meaning of a word because it gives rise to an imprudent term for one of the parties (para. 20). In the instant case, that might mean that, even if the meaning of Astra which with hindsight did not serve the interest of Musst, Musst is still saddled with the interpretation (Arnold v Britton at para. 19). I also take into account that the wording has been drafted with lawyers on both sides who can be taken to have approached the matter to give effect to the intentions of the parties due to the assistance of skilled professionals.

In my judgment, the points on textual interpretation as a whole lead to the conclusion that the Octave Contract bears the interpretation that the critical time is the time of the investment and that the entitlement to fees does not cease because the Current Strategy is modified or not maintained.

However, if the textual construction is not as I have found above, this is not a case where there is clear meaning to opposite effect to bear out the construction of Astra. In this regard, I have regard to that which was said by Lord Hodge in Wood at para. 13 cited above. The highest that the matter could be put on this alternative footing is that the words themselves are not clear, and that there are rival constructions. It is at that point that consistent with the unitary exercise of construction the Court can give weight to the implications of rival constructions by reaching a view which is more consistent with business common sense. This can be considered as a factor in order to ascertain the objective meaning of the provisions.

Contextual approach and iterative approach

In line with the authorities on contractual construction, the parties have emphasised the commercial sense of their respective constructions. I reject the submission of Astra that Musst’s construction leads to an absurd or uncommercial result. The payment is for an introduction. The terms of the Octave Contract were clear that payment does not become due until fees have been earned and received by Octave. That may be a long period of time. There is the original lock up period which may be three years, that is the period of time during which the investor is unable to release the investment. Thereafter, the investor may choose not to release the investment. In the event that the investments were a success, the main fee would be likely to be the performance fee.

On Astra’s construction, that fee could be removed from that point onwards by Musst moving away from the Current Strategy. That could happen because Octave would rather keep the benefit from future performance for itself. The sensible commercial result is that the determining factor should be at the point of the making of the investment, and it is not a sensible commercial result to be deprived of a future performance fee as a result of a modification or change of the strategy in the years prior to the performance fee ever becoming due.

That is not an unlikely scenario. On the case of Astra, it is axiomatic that the Current Strategy was capable of changing. On the case of Astra, over a period of years, there was scope for that change, and it must be inferred, by reference to their expert evidence, that it was likely that there would be change. On that case, it was then likely that no future performance fees would become payable.

This is not the case of an improvident bargain for Musst. It is a result that is not easy to discern and does not arise from the wording of the Octave Contract. It is so difficult to discern that the payment of the management fees until 2016 is a strong indicator that Octave/Astra did not see the point. Their case is that the payments were made pursuant to the November Arrangement, but on the basis of the analysis above, I have found that the payments were made pursuant to the Octave Contract. This defence, like others, in this case, appears only to have come following non-payment and as a retrospective attempt to justify the non-payment. I shall say more about this in connection with the convention estoppel answer to the Current Strategy defence.

Astra say that there is an absurdity about the liability continuing for ever. In fact, the liability is contained. It is only in respect of the original investment or any additional investment if they are made for the Current Strategy at the point that they are made. The agreement can be terminated for breach under Clause 13, and Clause 13.2 would then provide for the fees ceasing to be payable. In the ordinary course, the investment would be the subject of a redemption, and the nature of strategies changing would be that future investments may not follow the Current Strategy at inception. The Octave Contract does not require a payment in respect of any further investments (not emanating from the original investment) in the event that the further investment is not following the Current Strategy. Likewise, it does not require a payment in respect of an investment in a new fund (emanating from the original investment) where there has been a redemption of the old fund.

There is a further point. The nature of the controversy in this case illustrates the virtual unworkability of the construction of the clause on the construction of Astra. It is straightforward to be able to ascertain at the inception of a fund that the investment is for the Current Strategy: that was intended from the start, and unsurprisingly, this is not the subject of controversy that, at their inception, the investments of 2B and Crown were for the Current Strategy. It might be more difficult in respect of a new investment (not being the proceeds of the original investment) at a future time, but it is a binary question at the point in time when the original investment is made.

However, having to consider over a period of time in respect of a fund which starts off for the Current Strategy whether it remained for the Current Strategy is extremely complex. So it has turned out with the calling of expert evidence in this case and the numerous points of dispute between the experts. That evidence is accepted to be complex by the parties in the context of a court case. The construction of Astra presupposes that there would have to be consideration at any point in time whether the investment was subject to the Current Strategy without experts being enlisted and a court case in which the evidence of the experts was tested. Even in this case, the submissions of the parties are not particularly precise as regards each point of time when it is said that the investments were following or were departing from the Current Strategy. Hence, the formulations of Astra that the investments had moved out of the Current Strategy at various alternative points of time.

A further pointer to the lack of commerciality of this construction is the difficulty of Musst (without disclosure in a court case) of having access to the records of Astra sufficiently so as to enable it to do an analysis of whether at any point of time the Current Strategy was or was not being followed. All of this provides a reason contextually for the interpretation that the relevant time for determining whether there was an Eligible Investment for the purpose of an entitlement to management/performance fees was at the time of the making of the investment and not from time to time thereafter.

All of these matters show that, at lowest, the construction of Musst makes more commercial sense than the construction of Astra. Astra have sought to pitch its case higher and to say that in fact the construction of Musst produces an uncommercial or absurd result. In my judgment, the construction of Astra does produce an uncommercial result, whereas the construction of Musst is a commercially sensible result.

Adopting the unitary process of going back from the commercial consequences to the close examination of the words used, the words of the Octave Contract need to be revisited. Considering those words again, the words do not indicate that Astra’s construction is correct. Further, revisiting the words in the light of the commercial consequences, and seen as a whole and balancing textualism and contextualism, I am satisfied that the investments at the start satisfied the Current Strategy, and that investments once made under the Current Strategy did not cease to attract fees simply because the strategy changed.

Further argument regarding the date of the making of the investments

It remains to consider that if Musst’s argument is correct that the date of the making of the investments is the operative date for considering whether an Eligible Investment has been made, and it is necessary to consider the dates of the Second and Third 2B and Crown Contracts, then by that time the Current Strategy was not being followed as a result of which no fees were payable. In my judgment, that is to ignore the nature of the Second and Third 2B and Crown Contracts and the nature of the novation. There was not a new investment which was made at the point when the Second and Third Contracts were made. Those contracts were headed “Amended and Restated Investment Management Agreement”. They were substantially in the same terms as the Crown Contract and the 2B Contract. Their purpose was that there was a change of investment manager from Octave to Astra LLP and then from Astra LLP to Astra UK. In my judgment, the operative date for considering whether the Current Strategy was being operated was the time when the investment was made. Otherwise, the change in the corporate vehicle used by Mr Mathur would have an effect beyond what was intended. It was intended that there would be a seamless transition of companies. This is reflected in the reasoning and conclusions above in respect of novations. It was not intended that there would have to be a question as to whether the introductions were made in respect of the investments transferred to Astra LLP and then to Astra UK. The original investments had been made in 2013 and whenever they were made thereafter. The amended and restated agreements or the taking over of the management of the investments by Astra LLP and then Astra UK was not the making of the investments all over again.

In case the construction is different from the above, I consider the argument about an estoppel by convention, and the application of the test as recently confirmed by the Supreme Court in Tinkler. The argument of Musst is that if it is not the case that the Octave Contract is to be construed as per Musst’s primary argument, the parties acted on the common assumption that the right of Musst to management and performance fees would continue in relation to each Eligible Investment. This would be until and to the extent that it (or an asset acquired by it) was sold or converted into a non-Eligible Investment, at which point a right to performance fees would accrue: see RAMPOC para. 113C. It is pleaded that the reason why they did this was because they realised that the Claimant’s right to fees continued to subsist even if the accounts had ceased to follow the Current Strategy (if that was the case): see RAMPOC para.113D. In addition to payment of fees, Musst also relies on conversations in April 2015 and June and July 2016 referred to in paragraph 5 of Appendix 1 RAMPOC, because the premise of all of those conversations was that the Claimant was entitled to management fees and performance fees even though (according to the Defendants’ Defence) the managed accounts had ceased by then to follow the Current Strategy. It is also evidenced by Mr Holdom’s emails to Mr Mathur of 14 June 2016 and 28 June 2016 disclosed by the Defendants, which proceed upon the same premise.

Appendix 1 RAMPOC in summary, reads as follows:

On 30 April 2015, Mr Mathur sought to explain non-payment in that Astra LLP had not been paid and had no liability until paid, and that Astra LLP would pay as soon as possible. He suggested that Mr Siddiqi sell the Claimant’s rights to revenue to Mr Shamil Chandaria;

At a meeting on 27 June 2016 between Mr Siddiqi, Ms Galligan and Mr Mathur, Mr Mathur accepted that management fees were payable. The Octave Contract could not be terminated by Astra UK , and it would not do so. He said that on converting the funds to a different investment, the performance fees would be payable to the Musst. He assured Ms Galligan and Mr Siddiqi that he was not going to cheat the Musst out of any performance fees.

In a telephone call on 27 June 2016 between Mr Siddiqi and Mr Mathur, Mr Mathur accepted that Musst had a continuing entitlement to performance fees.

In a telephone conversation on 13 July 2016, Mr Mathur assured Mr Siddiqi that there was no reason why the Musst should not be paid. He said the whole agreement was that as soon as he was paid, Musst would get paid, and he really wanted it to get paid the performance fee that was due to it. He offered to make an advance of $250,000 against performance fees in each of the next two years (subject to a guarantee to repay any overpayment).

Astra challenges the existence of an estoppel by convention both as regards the facts and the law. Factually, at [T6/176 – 181], Mr Mathur said that he communicated his view that the fees should only be payable when the funds were invested in the Current Strategy, and that Mr Phillips and Mr Siddiqi then came to an agreement about this “that it would only be applicable so long as the funds are invested in the current strategy”. Mr Mathur then expanded on this evidence in re-examination at [T9/45-46]. I reject this evidence. Had it been true, then it would have been a part of the pleadings and Mr Mathur’s witness statements, particularly following a detailed pleading in paras. 113A – 113E of RAMPOC setting out the common assumption. The evidence of Mr Mathur contradicted an email of Mr Phillips of 14 December 2012 copied to Mr Mathur telling Musst that the fee obligation would continue to subsist for as long as the funds are in place, on which Mathur commented: “Looks like we are there now on the agreement”. There was no email or other communication from Mr Phillips or Mr Mathur backtracking on this. Although the internal communications between Mr Siddiqi and Ms Galligan and SRZ have been disclosed, there is no internal communication recording any discussion by Mr Mathur to the effect that the introduction of the phrase “the Current Strategy” meant that Musst’s rights would expire upon a change in the strategy, even in relation to investments already made. The evidence of Mr Mathur suited the case of Astra, and it matters not for this purpose whether his evidence was divined at this later stage consciously or unconsciously. It is not credible.

Astra’s argument as to the law is that the elements of the estoppel by convention are not satisfied. The case of Musst is summarised in the skeleton argument in the following terms, namely for the reasons set out in paragraphs 113A to 113E of the RAMPOC that all parties acted on the common assumption that the Octave Contract meant that the Current Strategy was only by reference to the time of the making of the investments and/or that the 2B and Crown managed accounts continued to follow the Current Strategy, in reliance on which Musst made no alterations to the Octave Contract before it was signed. Musst says: “Why else did Octave and then Astra keep paying Musst right up to May 2016, when on Astra’s (now) interpretation, the Octave Contract did not require them to do so?”

In my judgment, there was no common assumption about the meaning of the Current Strategy in the sense that there is no evidence that the parties applied their minds to it, or communicated their understanding of the phrase. When the phrase first appeared in the travelling draft, there was no explanation as to what it meant, nor was there some specific accord as to what it meant. The reason for the payments was not then because of a specific assumption about the meaning of the Current Strategy. It is likely that the parties never applied their mind to this alleged defence until after the inception of the dispute. It is possible that they did not think that there was any change in the Current Strategy and so they never had to apply their mind to the construction argument. In my judgment, the common assumption that the fee would be payable because a possible defence (if that is what it was) had not occurred to Astra is not specific enough to give rise to a relevant common assumption.

Likewise, there is no specific case as to how Musst acted on the common assumption to its detriment. It does not suffice to say that Musst entered into the Octave Contract without seeking to change its terms because there is no relevant common assumption in respect of the words “Current Strategy” before the Octave Contract. As regards the understanding that there would be payments thereafter and the course of conduct of making payments of management fees and making admissions in respect of what would be paid, it is difficult to see how this gave rise to a detriment. Again, it is not sufficiently specific to the “Current Strategy” terms so as to indicate that had it been pointed out, Musst would have insisted that the relevant contractual clauses would have been amended. There is an argument that in the event that the admissions about payment had not been made, Musst would not have consented to the transfers to Astra LLP and Astra UK respectively, but I am not satisfied that that is sufficiently specific to give rise to an estoppel by convention about the meaning of the Current Strategy. Likewise, it does not indicate that the parties believed that they were following the Current Strategy, since it is perhaps more likely that they did not consider what was the strategy at the relevant time or that this might afford the basis of a defence.

What then is the position about the conduct after the time of the Octave Contract? There are three points to make. First, for the above reasons, there is no estoppel by convention. Second, as a matter of law, such conduct after the contract, and absent an estoppel, cannot be an aid to construction of the contract. Third, it is possible that the behaviour of Astra in connection with payments is evidence that the paying party did not understand that the Current Strategy had been altered. However, this is far from conclusive evidentially, because it may simply be that, at the material time, Astra did not apply its mind to the Current Strategy point.

Despite the rejection of the alternative estoppel argument, I am satisfied that the contract is to be construed so that, once the investment has been made on the basis of the Current Strategy, a change in strategy prior to redemption giving rise to a fee does not bring to an end the entitlement of Musst to a share of the fee.

Having regard to the above, it is not necessary to make a determination of the evidence as regards whether the Current Strategy had been followed and implemented throughout, or at what time or times it was no longer followed. The Court has heard expert evidence from Mr Aldama for Musst and Mr Finkel for Astra. I shall make some remarks which are not intended as a detailed analysis of the voluminous evidence. They also do not bind the Court in considering other issues which might arise where the expert evidence needs to be revisited. The following is noted, namely

in the joint report at para. 2.1.3, it is stated that the experts “agree that synthetic ABS are complex structured instruments and can exist in fully funded or unfunded form, and that fully funded ABS can be synthetic or non-synthetic depending of (sic) its structural characteristics” . The complexities of the instruments are reflected by the difficulties (a) in assessing the relevant characteristics of complex financial instruments held within the Managed Accounts during the material time period, and (b) in ascertaining how and when investments cease to be managed on the Current Strategy. This is referred to as Issue 2 in the opening skeleton of Astra at para. 212 et seq. It will be noted that the experts could not agree the classification of 10 out of 33 securities. A list of points of disagreement between the experts would be vast. The exercise would involve the various features which give rise to the investments being operated on the Current Strategy and then comparing this with the way in which the investments have been operated at each stage over the period of many years.

On the analysis of Mr Finkel, the expert for Astra, the analysis as to what distinguishes synthetic from non-synthetic assets has three most significant characteristics. They are the primary characteristics, namely predominance of CDS credits or Funded Credits in the asset pools; the second characteristic, namely active management of pools versus static pools; and the third characteristic, namely liabilities issued as unfunded or funded tranches. These are only the most significant characteristics. It is therefore a multi-factorial and evaluative analysis. By its nature, it admits of different and uncertain analyses as to whether the fund is at any one time to be regarded as synthetic asset-backed securities or not.

This uncertainty is evident even in Astra’s analysis. There are particular difficulties in assessing a point in time when the investments ceased to be made “primarily” in synthetic asset-backed securities. Likewise, in assessing a point in time when the investments ceased to be made primarily on a “buy and hold basis” . It may be that the difficulties of precision are reflected by Astra’s alternative dates as to when the Current Strategy was no longer followed. The lack of certainty and precision is a factor in the contextual part of the construction submission of Musst above, and the submission that the relevant time when an investment was following the Current Strategy was the time of making the investment and not from time to time thereafter.

There was something to be said for the approach of Astra to expert evidence through Mr Finkel in avoiding any opinion by reference to the meaning of the Octave Contract and considering matters of Current Strategy from the perspective of an expert in the trade rather than a contract lawyer. There were times when Mr Aldama was less rigorous not to trespass into the territory of construction which is for the Court.

Having said that, the experts’ views about the meanings of the words in abstract may not provide the answer to the questions before the Court. In the oft-cited words of Lord Hoffmann in Investors’ Compensation Scheme v West Bromwich BS [1998] 1 WLR 896, 912-913: “ The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.” If, contrary to the above analysis of construction, the Current Strategy must be assessed from time to time, so as to determine whether an investment has ceased to follow the Current Strategy, then that itself might affect the objective meaning of the Current Strategy. It might make the Court cautious about a narrow approach to the ambit of the Current Strategy. This may be an indicator that the Current Strategy was rather broader than that allowed for by Mr Finkel.

In the joint report, a disagreement of the experts is summarised as follows (para. 1.3.10):

I have also given consideration to the statements of Mr Mathur and Dr Adler as regards their evidence of what was the Current Strategy. The weight to be attached to this evidence is reduced for the following reasons. Since the Current Strategy was either disregarded or analysed differently at the time by Astra, and hence the payments continued to be made and this point did not arise until the litigation, the evidence as to the Current Strategy appears to be based on reconstruction. Dr Adler has given evidence that he was not concerned with the terms of the Octave Contract at the time. It follows that he was not considering the Current Strategy at the time. Mr Mathur has given evidence that he was concerned with the Current Strategy at the point when the contract was being negotiated, and he has given evidence about this. However, for the reasons set out above, I have not accepted that evidence. This does not form a sound start to consideration of his evidence about Current Strategy. Just as his evidence which has been rejected has been self-serving, so too there is the risk of his analysis being after the event and tailored consciously or unconsciously to the case. For these reasons, this evidence does not weigh heavily with the Court.

I am satisfied as a matter of construction of the contract that the operative date for considering whether the Current Strategy was being operated was the time when the investment was made. It follows that there is no need to reach final conclusions in respect of this aspect of the expert evidence as to whether and when there may have been a change in the Current Strategy. Without reaching final conclusions, the Court has made some remarks about the evidence before it.

Astra have raised a further defence by way of amendment, namely, (a) under the US Securities and Exchange Act 1934 (“the 1934 US Act”), Musst required broker dealer cover to effect the introduction to The Observatory (as it was based in the US), and (b) if Astra were now to pay Musst, it would be “at risk of … being held liable for aiding and abetting a breach of Section 15 of the 1934 Act”: see paragraph 118 of the RADCC and paragraphs 111A to 111K ARDCC.

S.15(a)(1) of the 1934 US Act provides:

Astra’s argument is that, by introducing The Observatory (or 2B) to Octave so that it invested in a managed account, Musst induced the purchase or sale of a “security” within the meaning of this section.

With the Court’s permission pursuant to the order of Chief Master Marsh dated 25 November 2020, the parties have therefore obtained reports from experts on US law to address the following three issues:

the interpretation of ss.15(a)(1) & 20 of the 1934 US Act, including whether the term “security” encompasses (i) managed accounts and in particular 2B’s managed account, and (ii) the underlying bonds and swaps held within managed accounts and in particular 2B’s managed account;

whether a contractual obligation to pay a share of management or performance fees, including Clause 3.1 of the Octave Contract resulting from an introduction in breach of s.15(a)(1) by not being “registered” would be enforceable as a matter of US law, including under s.29 of the 1934 US Act;

whether a party that makes payment of a share of management or performance fees to an Unregistered Introducer, pursuant to an agreement to do so including Clause 3.1 of the Octave Contract, would be at risk of contravening US law, in particular, for aiding and abetting a breach of s.15 of the 1934 US Act, pursuant to s.20 of the 1934 US Act.

The relevant expert evidence adduced in this regard was by Professor Steven Thel dated 3 February 2021 (“the Thel Report”) called by Musst and the report of Mr Charles Riely dated 3 February 2021 (“the Riely Report”) called by Astra. Following a meeting on 19 February 2021, Professor Thel and Mr Riely produced a joint report dated 19 March 2021 (“the Joint Thel/Riely Report”). They both attended by video link in the trial and gave oral evidence.

This is a case where the Court has been assisted by having the issues of foreign law pleaded and evidenced by US lawyers whose evidence has been tested in detailed cross-examination. It has had the advantage of lawyers who evidently specialised in the field, and advocates who had prepared fully for the cross-examination and were therefore able to prepare their questioning impressively.

In one sense, the Court is at an advantage when deciding foreign law. It is that, with the assistance of experts in foreign law, although it is deciding a question technically of fact (because foreign law has been treated as such), it has the advantage of being familiar with the subject matter. This is very different from many areas of expert evidence where the court is asked to go into more unfamiliar fields. On the other hand, in a case such as the present where it is said that there are conflicting decisions, and the Court would have to treat itself as if it were the Supreme Court of the United States of America, the task is considerable.

There are limitations imposed on the witnesses in such cases. Primarily the role of the expert is to inform the Court as to the contents of the foreign law by reference to legislation and case law. In an appropriate case, where there is no definitive final authority, the expert is entitled to predict what the foreign court would decide. This was stated in the Court of Appeal in the case of MCC Proceeds v Bishopsgate Investment Trust plc [1998] EWCA Civ 1680 per Evans LJ who gave the judgment of the whole court at paras. 23-24:

As regards the expert evidence, both experts Professor Thel and Mr Riely were knowledgeable in the areas on which they gave evidence. They were helpful in providing to the Court considerable material to assist in the issues before the Court. There were times when the evidence of Professor Thel went beyond that which was referred to the Court e.g. the application of the 1934 US Act. In cross-examination, it was shown how he had relied on his own academic treatise/article rather than authorities. This therefore might have indicated his opinion of the direction in which the law should travel rather than the test articulated by the courts.

Mr Riely impressed particularly by confining himself generally to elucidating the law and not giving views which depended on the analysis of the facts. For example, he identified areas of fact which would be taken into account in connection with the topic of equitable defences, recognising that it was for the Court in any case to apply the law to the facts. He explained in a nuanced way when a person might or might not be a broker/dealer, especially in cases where acts were carried out both within and outside the USA.

In late February 2013, Octave received advice from US lawyers, Seward & Kissel, that if Octave was to use a third party marketer to market its proposed fund to US investors, then the marketer would need to be registered in the US as a “broker-dealer”, although there were a number of ways in which that could be achieved; and that US investors could claim rescission of their investments if Octave used an unregistered broker deal.

This advice was emailed on to Musst’s lawyers, who advised that there was nothing in the point. Mr Siddiqi complained to Mr Mathur, who replied that he wanted to work in a “framework that was legit” and it was better to be safe than sorry.

A considerable amount of correspondence then followed on the issue between Mr Mathur, Mr Murray, SRZ, Mr Siddiqi and Ms Galligan which has been set out above.

The Octave Contract had the following terms:

These terms: (1) obliged Musst to comply with the 1934 US Act, (2) prohibited it from introducing a potential investor in breach of its terms, and (3) represented that Musst had and would comply with it.

The pleadings

Astra’s pleaded case is that:

the introduction to 2B alleged in RAMPOC/35-37 (including Ms Galligan’s alleged instigation of the 13 November 2012 meeting) was a breach of s.15(a)(1) of the 1934 US Act, which provides that it “shall be unlawful for any broker or dealer … to induce or attempt to induce the purchase or sale of any security … unless the broker or dealer is registered” (RADCC para. 118(1A)(2));

any contractual obligation to pay a share of any fees earned as a result of such obligation would be unenforceable under US law (RADCC para. 118(1A));

Musst was in breach of Clauses 5.2, 5.6 and/or 10.1.2 of the Octave Contract, and, on the proper construction of Clause 3.1, there is no obligation to pay a share of any fees earned by such instruction (RADCC para. 118(2));

the payment of “Revenue Share” in respect of 2B’s investment would contravene the 1934 Act, so if Astra LLP and/or Astra UK were to make such payment they would be at risk of being held liable for aiding and abetting under s.20 of the 1934 (RADCC para. 118(3));

accordingly, 2B’s investment did not constitute an “Eligible Investment” for the purposes of Clause 3.1 of the Octave Contract (RADCC para. 118(4)).

Musst denies these allegations (ARDCC paras.111A, B and H) on the grounds that:

Ms Galligan and Musst were not seeking to induce 2B to make the “purchase or sale of a security”, but to induce it to appoint Octave to be its manager of a managed account (ARDCC/111A(b));

any breach of s.15(a)(1) is of no consequence because (i) in the event, 2B did not purchase a “security” but appointed Octave to be the manager of its account, and (ii) Musst’s claim based on the 13 November 2012 meeting is alternative to its main claim based on the 4 December 2012 meeting or the original initiative of Mr Siddiqi (ARDCC/111A(c));

Musst was not seeking to induce 2B to purchase a security in other discussions; rather Ms Galligan knew from her past dealings with Mr Septon that his practice was to invest through a separate managed account, as opposed to purchasing an interest in funds, and he made this clear from the beginning (ARDCC/111B);

even if there was a breach of s.15(a)(1), this would not render Clause 3.1 or the other obligations in the Octave Contract unenforceable as a matter of US law and, even if it did, this would not entitle Octave to withhold payment (ARDCC/111B(3), 111H);

by entering into the Octave Contract after the provision of a letter of comfort from US attorneys, SRZ, Octave represented and agreed that it would accept that confirmation that Musst did not require to be registered, in reliance on which Musst entered into the Octave Contract without removing clauses which might prejudice its rights or procuring the services of a US broker. Further, Octave and subsequently Astra kept fees from 2B, so it would be unconscionable and Astra is estopped by representation or convention from asserting otherwise (ARDCC/111C-G);

a risk of being held liable under s.20 of the 1934 US Act is insufficient to engage Clause 3.5 and withhold payment (ARDCC/111I);

by receiving and keeping the fees earned from 2B, Octave and Astra approbated the transaction with 2B and so are not entitled to reprobate it by withholding from Musst its agreed share of fees (ARDCC/111J).

Even if Musst did act in breach of s.15 by introducing 2B, nothing in the Octave Contract entitles Astra to withhold payment from Musst merely on the footing that Astra will be “at risk” thereby of being held liable for a breach, or aiding and abetting a breach, of a foreign law. In order to found an aspect of the defence of illegality, it is necessary to prove not just a mere “risk”, but that payment of the 20% share would contravene the law. It submits that there is no evidence that the payment would contravene the law. Even that, according to Musst, does not suffice, as mentioned below.

As to the clauses Astra relies on:

Clause 5.2 requires compliance with all applicable laws, but it does not provide that if there has not been, that of itself entitles Astra to withhold payment of the 20% share (at least if Astra itself has received it and kept it). The most it would give rise to is a claim in damages, but no such damage has been alleged.

The same applies to clause 5.6 (which prohibits promotion where this is likely to contravene any law of any jurisdiction).

The same applies to clause 10.1 (by which Musst represented that it had obtained all authorisations required in connection with the agreement).

To establish liability for aiding and abetting under s.15 of the 1934 Act, it is necessary to show that the payer (i.e. Octave) acted “knowingly or recklessly”. As noted above, Octave, in the course of the negotiations for the Octave Contract, required and obtained confirmation from SRZ on 17 April 2013 that Musst did not need broker dealer cover in relation to the 2B introduction. Further, the exchanges between the parties, and the internal correspondence from SRZ (and its US lawyers) to Musst, show that the firm view was taken that inducing a person to enter into a managed account was not to induce the sale or purchase of a “security”.

The test as to whether the 2B Contract is an “investment contract” and therefore a “security” within s.15 of the 1934 US Act is set out in the US Supreme Court’s judgment in SEC v Howey Co. 328 U.S. 293 (1946). This emphasises that the phrase “investment contract” was used against the background of previous decisions by state courts which had applied the phrase “to a variety of situations where individuals were led to invest money in a common enterprise with the expectation of profit solely through the efforts of the promoter or of someone other than themselves”. Musst submitted that the test was not satisfied because: (1) 2B participated in the performance of the investment, and (2) on a plain and natural meaning of s.15, the US Supreme Court would not extend the meaning of investment contract beyond, at most, cases involving fraud.

As regards the first of those propositions, Mr Riely accepted that this background would be looked at by the Supreme Court were the facts of this case (i.e. the 2B Contract) to be considered [T10/197/5 to 198/8]. Further, he accepted, on “solely”, that the statement in SEC v. Infinity Group Co., 212 F.3d 180 (2000) the question is “whether the purchaser has meaningfully participated in the management of the partnership in which it has invested such that it has more than minimal control over the investment’s performance” was a reasonable summary of the law [T10/203/1-22].

As regards the facts of the case in this regard, Mr Mathur’s and Mr Holdom’s witness statements are to the effect that: (a) neither Octave nor Astra owned or controlled the bonds or swaps in question, (b) The Observatory “retained full visibility and control in respect of” the managed account (emphasis in underlining added), and (c) it provided “only limited authority to [Astra] as outlined under the relevant contracts”. Further, information was provided to The Observatory on a day-to-day basis by email by records of trades, position statements with invoices setting out the loans, net asset value statements and reports setting out the prices of bonds: Mr Holdom’s first witness statement paras. 9-10 and Mr Mathur’s fourth witness statement at para.13.

Mr Riely referred to not eliminating the possibility that the 2B Contract was still an investment contract [T10/199/9 – T10/200/17], and that the court would look past the technical retention of control to see the economic realities [T10/201/16-20]. He accepted that each of the points set out in Mr Holdom’s statement would be important and relevant factors in deciding what The Observatory’s level of control and participation actually was [T10/204/20-T10/207/19] and [T10/210/10–T10/211/1]. Although he said that Mr Mathur’s evidence on the point “doesn’t necessarily mean that they controlled the ultimate decisions” [T10/209/16-24], he did accept that the fact that full control was retained, with only limited authority. This counted against the notion that The Observatory’s participation was just minimal.

Musst submits that it follows from Mr Mathur’s and Mr Holdom’s evidence that 2B did participate in the management at least to some degree, and that it had more than “minimal control” over its investments’ performance.

There is a conflict of authority in the federal courts, both at first instance and in the appellate courts [see T10/214/5-215/9], on whether the doctrine of “vertical commonality” applies (such as would cover the 2B Contract). Astra say that the judgments in the courts of New York have said that it does apply. Musst says that an overall analysis is that it should not apply based on other decisions and the fact that it has been applied only in cases of fraud, which this one is not.

It is common ground that a breach of s.15 does makes a contract voidable rather than void, to which the broker has equitable defences (see T10/236/7-19). It submits that on the facts of this case, Musst has a good defence in US law to a claim by Astra UK for the following reasons.

The parties relied on proper professional advice, and 2B has not sustained any loss. (Mr Riely accepted that this would be “a good argument” for Astra UK against recission by 2B [T10/238/6-13]).

Musst consulted with a lawyer, and although there is speculation [T10/240/22-241/16] there is no evidence that SRZ were not aware of the relevant facts in relation to the 2B introduction. (Mr Riely accepts that advice from lawyers, especially if apprised of all relevant facts, would be relevant [T10/242-3].

It is inconsistent for Astra on the one hand to repudiate the transaction with Musst but then on the other to affirm it as against 2B and thereby keep all the fees paid by 2B. (Mr Riely accepted that this would be relevant to the equitable analysis: [T10/241/17-242/10].)

Musst submits that save in cases involving fraud, a managed account is not a security within s.15 of the 1934 Act; and therefore no breach was involved by Musst in introducing 2B to Octave as a manager to manage its account for it. Mr Septon always made it plain to Musst that he was interested in investing only through a managed account.

Further, it is in any event submitted that, as pleaded by Musst, Octave and Astra are estopped from taking any point on illegality, because it is based on a mere risk of illegality (rather than actual illegality) and/or the parties acted on the shared understanding and/or a representation of Octave that there was no illegality on the basis of the SRZ letter, in reliance on which Musst did not obtain the broker dealer cover which it could have obtained had Octave insisted upon it: see paragraphs 111D-F ARDCC.

Further, by receiving and keeping (and indeed continuing to keep) the fees received from 2B, Astra have approbated Musst’s introduction of 2B, so in any event they are not entitled at the same time to reprobate it on the basis that the transaction was not lawfully entered into (see paragraph 111J ARDCC): see for example, Express Newspapers v. News (UK) Ltd [1990] 1 W.L.R. 1320 at 1329E to 1330C where Browne Wilkinson J (as he then was) said:

Mr Riely first considers what is said to be the first issue, namely whether section 15(a)(1) has been violated by Musst. He opines that two forms of “security” under the 1934 US Act exist in this case: (1) the 2B managed account; and (2) the underlying bonds and swaps.

As to the first of these (managed account):

Mr Riely refers to the definition of “security” in s3(a)(10) which includes “investment contract” and refers to the explanation in Howey above. This definition puts function over form and “embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek to use the money of others on the promise of profits.”

Mr Riely explains that, when evaluating whether an investing agreement is an “investment contract”, there is not uniformity on what “common enterprise” means. He says that many US courts: “have modelled the concept of common enterprise around fact patterns in which an investor’s fortunes are tied to the promoter’s success”. This is known as “vertical commonality”, in contrast to the term “horizontal commonality,” ie “the pooling of assets from multiple investors so that all share in the profits and risks of the enterprise”. However, he says that a few US courts have held that “horizontal communality” is required, and others accept both approaches (Riely para.8);

Mr Riely identifies the Federal Court in New York City as the most likely venue for an action, as that is where The Observatory is based and first met Mr Mathur (Riely para.9). He explains that these courts have consistently held that agreements for paid-for-performance managers like Astra to run a managed account and invest its funds in third party securities are themselves “securities” because they are “investment contracts”. Mr Riely cites three New York authorities to support this: In re Jeanneret Associates 769 F. Supp. 2d 340 (S.D.N.Y. 2011), Savino v EF Hutton & Co , 507 F. Supp. 1225 (S.D.N.Y. 1981) and Walther v Maricopa International 1998 WL 186736 (S.D.N.Y. 1998). He explains that, doctrinally, these cases embrace “strict vertical commonality” whereby “common enterprise” is met “when the fortunes of the investor are tied to the fortunes of the promoter”. Each case involved managed accounts said to be similar to the 2B Contract.

As to the second of these (underlying assets):

Mr Riely states that these same decisions recognise that, irrespective of the “investment contract” concept, the 1934 US Act can regulate a separately managed account because of its holdings. Thus, in Jeanneret the court held that “Madoff’s purported buying and selling of securities is sufficient in itself to satisfy” the “in connection with the purchase or sale of securities” requirement. And in Savino, the court held that the plaintiff’s plea included “securities” because “the common stocks and stock options that [the managers] purchased and sold for the accounts undoubtedly constituted securities” (Riely para.10);

Mr Riely states that the Chief Master Marsh’s order states that 2B’s managed account held “bonds and swaps”. Relevant to those assets, the 1934 US Act’s definition of “securities” explicitly includes bonds and swaps (Riely para.11).

Mr Riely opines that a US court would be likely to conclude that the 2B’s managed account comprised “securities” under the 1934 US Act. First, many US courts including the Federal Courts of New York, would consider the 2B’s Contract itself a “security” because it provided for Octave LLP to manage the funds and be compensated in part by the account’s profits, and is therefore an “investment contract”. Second, any US court would conclude that the account’s underlying swaps and bonds are securities, for these are paradigmatic securities under US law.

The Joint Thel/Riely Report states (at para 8) that:

Prof Thel believes a US court would likely to conclude that the 2B managed account is not a common enterprise because the vast majority of court decisions have held that a managed account advised by an investment adviser is not a security and because (i) investment management arrangements are extensively regulated under other statutes, in particular the Investment Advisers Act (ii) a few cases have held managed accounts to be securities when fraud is involved and (iii) the cases decided by the district court for the Southern District in New York represent a minority of cases overall;

Mr Riely believes that a US court would be likely to conclude that the 2B managed account is a common enterprise for the reasons in his report and he notes that: (i) the investment manager for the 2B managed account had discretionary authority and was to be paid according to performance (ii) the Federal Court of New York have repeatedly embraced vertical communality and repeatedly found managed accounts to be “securities” on that basis; (iii) he disagrees with Prof. Thel’s statement that the New York federal cases represent a minority view but, either way, the case law of the Southern District of New York is important; (iv) he does not agree with Prof. Thel’s statements that the vast majority of decisions have held that a managed account is not a security or that this is the case because they are regulated under the Investment Advisers Act; and (v) he does not agree that the cited cases are entitled to less weight because they involve fraud;

as for the bonds and swaps within the managed account, Mr Riely believes that they are securities and Prof. Thel assumes that they are but believes that Musst did not serve as broker-dealer in connection with bond and swap transactions.

Mr Riely opines in his report (Riely paras.16-19) that:

the 1934 US Act requires an investment professional to register as a broker or dealer if they “effect any transactions in, or induce or attempt to induce the purchase or sale of, any security.” The concept of “effecting transactions in securities” has “been interpreted broadly” and the SEC take a case-specific “totality of the circumstances” approach to evaluating whether an intermediary is a broker: see Cornhusker Energy Lexington, LLC v. Prospect St. Ventures, 2006 WL 2620985 (D. Neb. 2006) (“Cornhusker”);

factors articulated by courts differ in particulars, but are broadly similar. Courts and the SEC emphasise the importance of the intermediary receiving ““transaction-based compensation” like commissions or a share of management fees, which are the “hallmark of a salesman”” and go to the core concern of the 1934 US Act because they incentivize professionals to increase sales: Cornhusker;

each case is specific to its facts, but through lines emerge. At one end of the spectrum, an amateur “finder” who does no more than introduce two parties is likely safe from registration; but, at the other end, unregistered professionals who take an active role in shepherding an investment are frequently found to be in violation of the 1934 US Act. It is a matter of reviewing the specific conduct and experience of the funder, including their involvement, background, relationship to the issuer and compensation. Two paradigmatic examples are SEC v Ranieri, where an investment manager asked an unregistered intermediary to raise money for two investment funds and paid him a percentage of funds raised (where the violation of s15a was admitted) and SEC v Kramer where the defendant received commission for recommending family and friends (where the violation was not made out).

The submissions of Astra then moved on to what was called the second issue, namely whether the Octave Contract was unenforceable. Section 29 of the 1934 US Act provides:

Mr Riely opines in his report (Riely paras.14-15):

as interpreted by the courts, s.29 of the 1934 US Act means a contract is not automatically void, but instead invests in an “innocent party” the “right to have it judicially set aside”: Cornhusker;

US courts therefore undertake a careful inquiry when a sponsor or issuer seeks to void a contractual obligation to pay an unregistered intermediary. The court first considers whether broker-dealer registration is required (see above). If yes, the court considers any equitable defences. If equitable defences are raised, the court generally considers whether the s.29 remedy is appropriate.

Mr Riely further opines (Riely paras. 20-21, 26-28):

if a party seeking to void an obligation to pay an unregistered intermediary establishes that the intermediary violated s.15, the inquiry turns to whether the party has “standing to seek rescission”. As the Supreme Court explained in Salamon, s.29’s “language establishes that the guilty party is precluded from enforcing the contract against an unwilling innocent party”.

these standards mean that US courts focus on the complicity of the party seeking recission in the underlying violation. Once again, this is a fact sensitive inquiry requiring an assessment of whether Astra were an “unwilling innocent” in any registration violation by Musst;

in evaluating the parties’ positions, a US court would consider the parties’ February to April 2013 dialogue about Musst’s eligibility to solicit US investors, whether Octave would not agree to the Octave Contract unless Musst provided assurances via its US counsel and, even so, Octave’s insistence on making compliance with the 1934 US Act a term of the Octave Contract;

when evaluating these events, a US court may consider whether the parties’ intention regarding the Octave Contract’s US law provisions was for Musst to bear responsibility for complying with the 1934 US Act.

In the Joint Thel/Riely Report, neither Prof. Thel or Mr Riely suggest that Astra is not entitled to seek the remedy or that Musst would prevail on equitable defences against rescission.

Then the submissions of Astra considered what was called the third issue, namely whether payments by Astra LLP or Astra UK would be at risk of being held liable for aiding and abetting a breach of Section 15 of the 1934 US Act. Section 20(e) of the 1934 US Act provides:

Mr Riely, at paras. 31-33 of his report, relies on the decision in Apuzzo. The Second Circuit held that for a defendant to be liable as an aider and abettor in a civil enforcement action, the SEC must prove: (1) the violation by the primary violator, (2) knowledge of this violation on the part of the aider and abettor, and (3) substantial assistance by the aider and abettor. The court applied the test of “substantial assistance” in criminal cases of aiding and abetting as stated by Judge Learned Hand: “that he in some sort associate[d] himself with the venture, that [the defendant] participate[d] in it as in something that he wishe[d] to bring about, [and] that he [sought] by his action to make it succeed.” (at 212).

In the Joint Thel/Riely Report:

Prof. Thel and Mr Riely agree that a party that hires an intermediary who is unregistered in violation of s.15 and pays them a share of management or performance fees as compensation, is at risk of being held liable for aiding and abetting (paragraph 19);

Prof. Thel and Mr Reily agree that a court would find Astra liable only if they “knowingly or recklessly” assisted a s.15 violation by Musst; and that, for this purpose, recklessness means “conduct whereby the actor does not desire the harmful consequence but nonetheless foresees the possibility and consciously takes the risk”;

Prof. Thel opines that it is almost inconceivable that a court would find Astra acted knowingly or recklessly in the light of SRZ’s letter dated 17 April 2013. Mr Riely opines that this is not dispositive and points to the expansive potential of aiding and abetting demonstrated by Ranieri.

Astra submit that a US court is unlikely to find that Octave aided and abetted Musst to breach s.15 by introducing 2B. However, if the Court finds in favour of Astra on issue 1, Astra is at risk of being held liable for aiding and abetting under s.20 if it makes payment to Musst: see para. 19 of the joint report, and Astra also rely on the test applied in Apuzzo.

There was an attempt on the part of Professor Thel, at the conclusion of his report, to question whether the 1934 US Act applied to all given activities outside the United States. In the joint report at paras. 24-27, Prof Thel and Mr Riely agreed that some conduct leading to the formation of the 2B Contract took place in England and some conduct took place in the United States. In the event, this does not appear to be an issue here for consideration.

In my judgment, Musst’s claim in relation to fees received from 2B is not barred for illegality. The reasons for this are as follows:

The 2B Contract has not been shown to be an investment contract and therefore a security within section 15 of the 1934 US Act.

A breach of section 15 would make the contract voidable rather than void, to which the broker has equitable defences and accordingly Musst has an equitable defence in US law to a claim by Astra.

The case against Musst is that there is a risk of aiding and abetting under section 20(e) of the 1934 US Act, but it does not suffice that there is a risk of aiding and abetting: it must be shown that there has been or would be knowing or reckless assistance in a violation of the 1934 US Act.

In any event, it has not been shown that there has been or would be (upon payment) a violation of the 1934 US Act.

It also alleged that there is an estoppel against Astra treating the investment as not an eligible investment or asserting that there was a contravention of the law, but this allegation is not made out.

Before considering these factors, it is necessary to consider a preliminary matter about the evidence adduced. There are two procedural points. First, the pleaded case referred to in sub-paragraph (3) above is that there is a risk of aiding and abetting, and it is not sufficient to base the case on a risk: the question is whether there was or would be a violation not whether there may have been or might be a violation, and a mere risk is not sufficient. This could be dispositive of this part of the case against Astra, so I have gone on to consider the issue whether there has been or would (upon payment) be a violation. This might go further than the pleading, but the relevant evidence is before the Court, and the issue should be dealt with.

Second, whilst it was denied that there was a breach of section 15 of the 1934 US Act, the written expert evidence was by reference to whether there was a common enterprise. However, in the course of the oral evidence of Professor Thel, he referred to what he called a fourth element of the Howey test, namely that the expectation of profit had to be solely through the efforts of the promoter [T10/125/1-127/19]. He said that whilst he had not put it in his report, there may be a question as to whether this was entirely a discretionary account despite what the 2B Contract said. In detailed cross examination, it was put to Mr Riely that the profits may be coming not solely from Octave and Astra, but only partly from them [T/10/198/17 - T10/211/1]. In re-examination, Mr Riely gave further evidence about the meaning of control, that the key was which party was generating the profits [T10/247/17 – T10/248/18].

In final oral submissions, Astra relied on Professor Thel having previously agreed that the issue was about common enterprise and not adverting to the “solely” issue until oral evidence. In fact, there was relevant evidence before the Court in this regard from the experts, and the factual evidence was from Mr Mathur and Mr Holdom on behalf of Astra and was not controversial. In these circumstances, it is fair for the Court to consider the control issue, and it would be artificial to exclude it as an issue.

I apply the definition of an “investment contract” in Howey as set out in the section of Musst’s submissions above. The evidence of Mr Holdom (first statement paras. 9-10, corroborated by Mr Mathur’s fourth statement para.13) was as follows:

Although the 2B Contract contained terms that the management was on a discretionary basis involving complete discretion, the effect of that evidence was that 2B participated in the performance of the investment, and therefore this was not the case that the expectation of profit was solely through the efforts of persons other than 2B. Mr Riely accepted that this evidence constituted important and relevant factors in deciding what The Observatory’s level of control and participation actually was.

Mr Riely said in his evidence [T10/201/11 – T10/202/5] that:

Based on the evidence adduced by Astra, and the evidence of the experts, it is not established that the expectation of profit was solely through the efforts of Octave/Astra. I take into account the words of the 2B Contract, but the evidence was about the economic realities of the situation. On the basis of the evidence, it is more likely that 2B and at least one third party did participate in the management to some degree and that it had more than “minimal control” over its investments’ performance. In the circumstances, it has not been shown that the 2B Contract was an investment contract, irrespective of the issue of whether there was a common enterprise.

On this basis, but also on the basis of the other factors which are against Astra’s case and in favour of Musst’s case, it is not necessary to rule on whether there was a common enterprise, part of the definition of an investment contract in Howey. As noted above, there is a conflict of authority in the federal courts, both at first instance and in the appellate courts on what a “common enterprise” means [T10/214/5 – T10/215/9]. There is a question as to whether the doctrine of “vertical commonality” applies. As noted above, there is not consistency in this regard because many court decisions (according to Professor Thel, the majority) have held that a managed account advised by an investment adviser is not a security, whereas there is a consistency of the courts of the Southern District of New York to contrary effect. Professor Thel says that the cases relied on by Mr Riely are limited to cases where the investment was obtained by fraud both of the introducer and the investment manager. Mr Riely says that the cases do not say that they hinge on fraud in finding a common enterprise, and so there is no distinction between a case with or without fraud. Attention is drawn to SEC v Ranieri which has been referred to as a case where fraud had not been established, but which Professor Thel regards as an “outlier”.

The parties are agreed that the question is, how would the U.S. Supreme Court resolve this conflict (see Dicey & Morris, 15^th edition, at 9-020, note 17, and Blue Sky One Ltd v. Mahan Air [2010] EWHC 631 at para 88). Both experts accepted that the question could go to the Supreme Court: (T10/187/18-188/15, cf T10/222/18-223/1.)

I am impressed by the point of Professor Thel emphasising that cases of fraud are on their own. That is to be seen in the context of the Howey test being applied as (at p.298 of Howey) itself as “a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek to use the money of others on the promise of profits.” When it comes to fraud, the law of many countries is at its most flexible, without being unprincipled, in the fight against fraud. Further, as Professor Thel said, when the independence is broken between the introducer and the investment manager, there is no independent manager to make the decision to invest. However, since there are other routes to get to its conclusion without having to act as if this Court is the U.S. Supreme Court (a task not to be undertaken if not necessary) I prefer not to reach a concluded view.

In my judgment the 2B Contract does not satisfy the part of the test of having no more than “minimal control” over its investments’ performance, but, in any event, there are other reasons to reject the defence which forms the subject of the sixth issue. It is to the other reasons why this defence is rejected that I now turn.

If there was a breach of contract, in US law, it is common ground that this gives rise only to a right to seek to avoid the contract if equity will allow this. It does not have as its effect that the contract is void. I accept the submission of Musst that the Court is likely in this case to prevent rescission from taking place on the following grounds.

Octave/Astra have enjoyed the benefit of the introduction of 2B, which they have not sought to surrender. This is related to the concept of blowing hot and cold in a broader sense than the concept of election embodied in the doctrine of approbation and reprobation. It is inequitable for Octave/Astra to take the benefit, and then to refuse to pay the agreed fees for receiving the benefit. Mr Riely accepted that this would be a relevant factor as a bar to rescission. Mr Riely accepted that this would be relevant to the equitable analysis, albeit that a part of the balance would be whether Octave was getting what it bargained for, namely that the services complied with US law [T10/241/17 - T10/242/10].

Octave/Astra have acted in good faith at the time by taking advice before entering into the Octave Contract. There was no reason to believe that the advice was not correct. The advice was accepted by both Octave and Musst at the time, and 2B has not sustained or alleged any loss. Mr Riely accepted that this would be “a good argument” for Astra UK in respect of the 2B Contract. This is an extract of what he said in oral evidence, namely:

Mr Riely accepted that advice from lawyers, especially if apprised of all relevant facts, would be relevant [T10/242-3].

As for the speculative suggestion [T10/240/22-241/16] that full instructions were not provided, there is no evidence that SRZ was not aware of the relevant facts in relation to the 2B introduction.

In my judgment, there are no countervailing indicators which have any real prospect of tilting any balance against the equitable defence. For example, the suggestion that Octave was not getting what it bargained for, namely compliance with US law, does not carry much weight, absent loss. It bargained for business obtained for it, and it is likely that it has enjoyed large sums from the relationship from 2B.

There were terms of the contract about compliance with US law. They would sound in damages, but there is no evidence of even an allegation of breach by 2B, let alone any loss being suffered by Octave/Astra. In all the above circumstances, taking into account the assistance of both Professor Thel and Mr Riely, I am satisfied that the equitable defence would succeed.

As said before, on a proper construction of the Octave Contract, the central provision is clause 3.5, but this does not entitle Astra to withhold payment from Musst merely on the footing that Astra would be “at risk” of thereby being held liable for a breach or aiding and abetting a breach of foreign law. Payment under this clause can be withheld only if it “would contravene”, not just “might contravene” the 1934 Act.

Even if the Court had found that Musst did act in breach of s.15 by introducing 2B, nothing in the Octave Contract entitles Astra to withhold payment from Musst merely on the footing that Astra will be “at risk” thereby of being held liable for a breach, or aiding and abetting a breach, of a foreign law. As to the clauses Astra relies on:

Clause 5.2 requires compliance with all applicable laws, but it does not provide that if there has not been, that of itself entitles Astra to withhold payment of the 20% share, especially where Astra itself has received it and kept it. It might give rise to a claim in damages, but there has been no damage and no damage has been alleged.

The same applies to clause 5.6 (which prohibits promotion where this is likely to contravene any law of any jurisdiction). It is not sufficient where there is a risk of being held liable for breach.

The same applies to clause 10.1 (by which Musst represented that it had obtained all authorisations required in connection with the agreement).

As to clause 3.5, in order to come within this, it is not sufficient that there is a mere risk that payment of the 20% share “would contravene any law…”. It would be necessary for the payment to contravene the law.

As I have indicated, despite the way in which the case has been put by reference to risk, I should consider whether a payment would contravene the law if the 2B Contract were to be treated as an investment contract. In my judgment, even if it were the case that the 2B Contract were to be treated as an investment contract, I do not accept that a payment by Astra to Musst would contravene the law. The suggestion is made for Astra that even if there was no knowing or reckless breach at the time of the 2B Contract, at this stage, the payment would amount to a knowing or reckless breach. It is suggested that this point is accepted in the joint experts’ report at para.19 which reads as follows:

This does not support the proposition that the payment would amount to a knowing or reckless breach. The proposition in paragraph 19 is upon the premise that the legal test for aiding and abetting liability under section 20 of the 1934 Act is otherwise satisfied. If in fact there was no knowing or reckless breach at the time of the 2B Contract because of taking the legal advice, the legal test would not be otherwise satisfied. Second, (and possibly a different way of expressing the same thing as the first point) a payment made subsequently, that is after the Octave Contract and following the introduction would not be to effect “any transactions in, or to induce or attempt to induce, the purchase or sale of, any security”. It would simply be a reward after the event for the introduction. A knowing or reckless breach either at the time of the 2B Contract or thereafter is not established.

Although the facts come close to amounting to a shared assumption that the performance by Musst does not require registration of the contractual investment of 2B, I am not satisfied that an estoppel by convention or an estoppel by representation are made out. The context of the letter of comfort could be understood as follows. Octave was saying “we will not proceed without a letter of comfort because we do not wish to expose ourselves to liabilities.” This does not mean that Octave was necessarily saying that the various terms of the contract requiring an investment not to contravene the law were to be modified. In particular, if notwithstanding the letter of comfort, the investment was not regarded as an Eligible Investment due to payment of the Revenue Share contravening the law, there is no clear and unequivocal promise that the agreement to accept the letter of comfort overrides those words. That being the case, the estoppel by representation and estoppel by convention are not established.

As for the suggestion that Musst is approbating and reprobating, I am not satisfied that this founds the equivalent of an estoppel for the same reasons as the previous paragraph. The premise of the argument is that at the point of the transaction with 2B and the Octave Contract, it believes that there is no contravention. Years later, when it comes to payment, it asserts that there is a contravention by the payment itself. If that is true, it has in particular Clause 3.5 to deal with that, the consequence of which is (according to Astra) that the investment is not to be treated as Eligible Investment and so no payment would be due. In fact, the answer is in the paragraphs above such that the payment of the Revenue Share does not contravene any law. Further and in any event, the broader concepts of the inequity of having the benefits of the introduction without having to pay the fees for the introduction still resonate in connection with the equitable defences.

In view of the success on the primary arguments (estoppel being an alternative secondary argument) I am satisfied for all of the above reasons that this defence based on an alleged contravention of US law is not well founded.

It is convenient to set out the factual analysis of the Defamation Claim separately from the Contract Claim despite the fact that the facts of the two claims are intimately connected in time and in content. They nevertheless give rise to different claims. The Defamation Claim is brought by Astra, and it is against Mr Siddiqi in addition to Musst. The alleged disparaging remarks are also relied upon as a defence to the Contract Claim on the ground that it is said to be a ground for termination of the Octave Contract. In one sense, it is logical to complete consideration of the Contract Claim before going on to the Defamation Claim. However, since there is a large overlap between the two claims, it makes sense to consider the Defamation Claim first and then to revert to the Seventh Issue in the Contract Claim.

Although a number of allegedly similar statements are alleged to have taken place, the Defamation Claim relates to a single conversation in the Rome Conference on 23 June 2016 between Mr Siddiqi and Mr Plotke of LGT. Mr Glen in his final closing submissions for Astra referred to the question of whether the Statements were made as being the “first and primary issue of dispute between the parties”. Mr Glen referred to “diametrically conflicting factual accounts” of what took place at the Rome conference on 23 June 2016 between Mr Siddiqi and Mr Plotke. The second issue is the correct approach to the issue of serious harm and damage for the purpose of the malicious falsehood claim and the evidential issues in this regard. There were issues other than publication and damage, but rightly the parties concentrated especially on publication and damage in the closing submissions.

There is a related issue as to whether there was a breach of contract on the part of Musst. The clause of the Octave Contract required Musst not to disparage, slander, comment maliciously or make any accusation whatsoever against Octave or its affiliates. Whether the precise words complained of were used, the breadth of the concept of disparaging statements was such that Musst might have been in breach of contract due to what was said by Mr Siddiqi.

There is a background to the conversation. LGT was one of Astra’s most important investors. It is important to consider the background because Astra say that the concerns which Musst entertained about the Defendant at this stage provides a motive for Musst to make disparaging remarks in connection with Astra especially to LGT. This makes it more likely, Astra submit, that Musst did make the remarks, and the less likely that the anodyne account of Mr Siddiqi of the conversation was correct. Further, a false denial would raise obvious question marks as to what did take place.

On 13 June 2013, the Crown Contract had been entered into between Crown and Octave LLP, as set out in detail above. On 5 September 2014, Astra LLP entered into the Second Crown Contract with Crown. There were further Crown Contracts. On 1 December 2014, Astra LLP entered into a further Trading Advisory Agreement with Crown acting for Crown/AAM/2 Segregated Portfolio. On 30 March 2016, Astra UK subsequently entered into its own Trading Advisory Agreement with Crown (the Third Crown Contract).

Astra UK was paid by way of advisory or management fees (ranging from 0.75% to 2% per annum). In addition, success or performance fees (20% for Crown AAM) became payable to Astra by Crown when money was redeemed from the accounts. The latter fees were calculated by reference to a percentage of the return which Astra achieved on the investment, subject to performance hurdles being met.

As regards performance fees, in 2015 and 2016 there was the prospect of performance fees crystallising in respect of the Crown and 2B contracts. Neither Crown nor 2B chose to redeem their investment at the end of the initial three-year period (during which they were unable to redeem) and therefore the question arose as to whether and when the fees might crystallise in the future. The performance fees were of importance to the finances of Musst, Mr Siddiqi and Ms Galligan.

In March 2016, Mr Mathur informed Mr Siddiqi and Ms Galligan that commission payments would shortly be coming to an end. No fees were paid from May 2016 onwards, and there ensued discussions over the next 6 weeks between the parties about the entitlement to fees. Musst expressed concerns about the financial consequences of no further payments. On 14 June 2016, Mr Siddiqi and Ms Galligan attended a meeting with Mr Mathur, and an internal note of it was taken by Ms Galligan and circulated internally within Musst by email on 17 June 2016.

During the course of the meeting, the evidence of Mr Siddiqi is that Mr Mathur said that despite him continuing to receive fees from the two investment funds 2B and Crown/LGT, he would no longer be able to pay Musst its percentage of management fees. The reason given was that he had cashflow problems and that staff were upset that Musst was being paid so generously. Mr Mathur went on to say that he had received redemption requests from two other investors, Mr Chandaria and Mr Edwards. He told Mr Siddiqi and Ms Galligan that after that, the only other investors and assets which remained were Crown and 2B and that the latter was only paying fees on a diminished account: see fourth statement of Mr Siddiqi at para. 91.

It is clear from the note of that meeting that Mr Siddiqi and Ms Galligan were concerned that Mr Mathur was “emotionally volatile” and that any next steps would need to be carefully managed. They were also asked not to mention the situation to the remaining investors, including LGT and that Mr Mathur did not want the remaining two to put in redemption requests at that stage.

Astra say that the fact that investors were seeking to redeem their investments at the end of the initial three year “lock up” period did not come as a surprise to Mr Siddiqi or to Ms Galligan. This was expected and had been part of the original investment proposal: Mr Siddiqi’s fourth witness statement at para. 93. However, the sudden refusal to pay money did come as a shock and Mr Siddiqi decided to call Dr Chander for advice: he had introduced him to Mr Mathur. There is a dispute as to what was said during the course of that phone call. Dr Chander says in his witness statement that he did not wish to get involved in any dispute between Mr Mathur and Mr Siddiqi. He says that he hoped “they would resolve matters amicably”. Mr Siddiqi’s recollection of the phone call is that Dr Chander expressed surprise that Mr Mathur was acting in this way and offered to assist in an informal “mediator” role in an attempt to resolve matters amicably: see Siddiqi’s fourth witness statement para. 95.

The Rome conference was the annual Goldman Sachs Hedge Fund Conference in Rome, Italy. Mr Siddiqi and Ms Galligan attended it between 21 and 24 June 2016. While travelling on a bus on the way to the dinner reception on 22 June 2016, Mr Siddiqi and Ms Galligan bumped into Mr Plotke. He was attending the conference that year without Mr Rigter. There was a brief conversation on the bus, during which they all agreed that Astra had done well with LGT’s investment. According to the evidence of Mr Siddiqi, Mr Plotke mentioned the investment with Astra in superlative terms to another attendee on the bus, Tom Cahill: Siddiqi fourth witness statement para. 102.

On 23 June 2016, Mr Siddiqi said that he again bumped into Mr Plotke and Mr Siddiqi during a coffee break in the morning session at the conference. They agreed to have a quick lunch together at the pool restaurant at 12.45pm. Mr Plotke was concerned about lengthy queues for taxis and making his flight in time. The lunch was therefore a quick affair, lasting only around 40-45 minutes: see fourth witness statement of Mr Siddiqi at paras.106-7.

The only direct evidence of the conversation which took place at the Cavalieri Hotel on 23 June 2016 between Mr Plotke and Mr Siddiqi comes from Mr Siddiqi. Mr Plotke has not provided any witness statement in these proceedings. There were no other conference attendees present. Mr Rigter was not present at the conference, contrary to the case of Astra as originally pleaded.

Mr Siddiqi’s evidence is that the topics of conversation included small talk about the finance course Mr Plotke was taking, his family, wife and home. They then spent about 20-25 minutes discussing the markets in general terms. Mr Plotke and Mr Siddiqi spent the final five minutes of their lunch, while Mr Plotke was waiting for the bill and about to get a taxi to the airport, discussing LGT’s investment in Astra’s synthetic asset-backed strategy (“ABS”) via their Crown vehicle: see Mr Siddiqi’s fourth statement paras. 109-112.

According to Mr Siddiqi’s evidence, he mentioned that he thought the ABS had done well and LGT would be happy with how it had performed. However, he said that it would not continue to maintain the level of excellent performance that it had in the past, but that this was no surprise – it was an inevitability in the current market: see Mr Siddiqi’s fourth statement at para. 115. Mr Plotke indicated that he intended to continue with the investment and that, as he was the analyst, he had received some credit for having sourced it for the organisation.

According to Astra (who are the claimants in the Defamation Claim), Mr Siddiqi made the statements which form the subject of the Defamation Claim during his lunch on 23 June 2016 with Mr Plotke a senior analyst and portfolio manager at LGT, and LGT’s primary liaison with Octave and subsequently with Astra.

Astra’s case (Amended Particulars of Claim para. 6) is that Mr Siddiqi made the following statements to Mr Plotke on 23 June 2016:

‘ Astra is a sinking ship’ .

‘Astra does not have enough money to pay its staff’ .

‘Anish [Mathur] is a one trick pony ’.

‘All Astra’s investors are pulling money out and Crown should get out while it can. Don’t be the last man standing.’

Astra say that the decision of Mr Siddiqi to publish the Statements was driven by a desire to provoke LGT into redeeming Crown’s investments under Astra’s management to trigger the premature payment of performance fees in respect of then Crown AAM account. This would in turn allow commission payments to become payable which form the subject of the Contract Claim.

Astra do not have evidence from Mr Plotke to which further reference will be made in due course. However, they rely upon evidence from Mr Albertus Rigter, a partner and member of the Investment Committee at LGT until 2019, as well as the Co-Portfolio Manager of various Crown investment funds controlled by LGT. He was the line manager of Mr Plotke at LGT, but since 2019, he has worked for Astra. His evidence is that upon the return of Mr Plotke from the Rome Conference, Mr Plotke submitted a report of the conversation which he had had with Mr Siddiqi. The conversation was “sometime in June 2016”. At para. 20 of his witness statement, he related each of the Statements.

Astra also rely on other similar allegations being made by Mr Siddiqi on other occasions not as the subject of further claims, but as evidence of the likelihood that the Statements were made. Astra say that what was said on the other occasions comprised words to like effect, and that they show an intent of Mr Siddiqi to defame and disparage Astra. They rely on an approach from Mr Siddiqi to Mr Rigter at a previous conference where he is alleged to have said that Mr Mathur was a “one trick pony” and “implied” that now was a good time for LGT to get out of its investment with Astra: see para. 19 of the witness statement of Mr Rigter. Dr Chander gave evidence of a chance meeting in the underground on 23 June 2017 when Mr Siddiqi said that Mr Mathur was “unreliable” and had a “dark side” and he also used the expression “one trick pony” and that Astra was a “sinking ship”. There were also related to Mr Mathur, according to his evidence, instances of reports of what Mr Siddiqi had said, namely: (a) on 7 July 2016, Mr Septon related to Mr Mathur that Mr Siddiqi had made “inappropriate statements about Astra”, and he asked if anything was wrong, and, (b) another investor mentioned that he had heard similar disparaging remarks to “one trick pony”.

Reference was made to a conversation of Mr Siddiqi with Mr Rigter before the Rome Conference in 2016. Mr Rigter’s evidence as to what was said does not correspond with what is pleaded at paragraph 5.2 of the Reply. The Reply alleges that Mr Siddiqi alleged: “in identical terms to the words complained of that Mr Mathur was a ‘one trick pony’ and that ‘maybe it is a good time to get out’”. Paragraph 19 of Mr Rigter’s witness statement makes clear that he does “not recall exactly what was said” although he does say that Mr Siddiqi used the phrase “one-trick pony” in relation to Mr Mathur.

Even if Mr Rigter took there to be an “implication” that it might be time for LGT to “get out of its investment with Astra”, there is nothing inherently disparaging about that suggestion. The three-year lock-up period was almost at an end, and other redemptions were likely (and entirely normal). However, the basis of the “implication” cannot be tested because Mr Rigter does not recall what exactly was said which apparently implied this. Again, despite this apparently being reported further within LGT, there are no records or notes which have been disclosed of what was said. It does not appear that it was raised with anyone else at the time, or at the meeting in July 2016 when he says that he told Mr Mathur of the statements set out at paragraph 20 of his witness statement.

Further, the reference to an “implication” that LGT should redeem its investments is not the same as suggesting they “get out now” so as not to be “the last man standing”. Mr Rigter’s statement does not allege that Mr Siddiqi spoke in “identical terms” to the words complained of. Mr Rigter’s evidence, many years later and without the benefit of any contemporaneous note or record, should be viewed with caution. There is no ability to contextualise the words without knowing the words that was said. Further, there is a considerable risk of contamination, as a consequence of subsequent discussions about the statements in issue in these proceedings.

Astra have not expressly pleaded either in its Amended Particulars of Claim or in its Reply (served in 2020) the subsequent conversation between Mr Siddiqi and Mr Rigter in November 2016 in support of its case on publication. This is a factor to be borne in mind when considering the weight to attach to this conversation as evidence that the words complained of were spoken in June 2016.

Mr Siddiqi sent an internal email summarising his conversation with Mr Rigter in November 2016. His account was that Mr Rigter had asked him about his conversation with Mr Plotke in Rome and Mr Siddiqi had replied “All I had said to Ralf (sic) was LGT were the last remaining investor and since Musst was integral to the deal construct and coupled with our fiduciary responsibility to LGT, we knew Shamil had redeemed and 2B was in the process of redeeming.” The point is made by the Defendants that if the conversation of 23 June 2016 was as entirely as per the evidence of Mr Siddiqi, it would not have been recalled five months later. That is a point of comment, but it does not bear out the construction that the conversation must have involved disparaging remarks. The email records that Mr Siddiqi was not negative about Astra. Mr Rigter disputed the accuracy of “some” of the contents of that email but does not say what, other than that he and Mr Siddiqi had not known each other for “a near-decade”. Mr Rigter does not bring up any allegedly disparaging statements, nor does he suggest that such statements were made. Mr Rigter’s witness statement at para. 28 is carefully worded in relation to the November 2016 encounter and is silent as to what exactly was said, and the context of the discussion.

It was suggested to Mr Siddiqi that his account of what he told Mr Rigter he said was “tantamount” to saying that “Astra’s investors were pulling their money out … don’t be the last man standing” [T5/230/8-14]. Mr Siddiqi explained that this was not the case: it was not a reference to all of Astra’s investors, but to that particular strategy. Mr Siddiqi’s evidence was that his email was not clear that he was explaining the position as of June 2016 or November 2016 [T5/230/15-19; 232-234]. Mr Siddiqi’s explanation was credible; what was said in the internal email of 30 November was not a disparaging comment of the sort alleged in the Defamation Claim. It does not suggest that Astra cannot pay its staff, that Mr Mathur is a “one-trick pony”, or that the business is about to “go under” so LGT should “get out while it can”. I accept the submission that this does not enable the Court to draw an inference after the fact as to what was said during the lunch in Rome in June 2016, still less that the disparaging words alleged were used.

Nevertheless, Astra submit that there was an obvious question why Mr Rigter and LGT would have taken the measures that they did, as described in paragraphs 22-24 of Mr Rigter’s witness statement, if something serious had not been said about Astra shortly before the 7 July. He says that he carried out an on-site due diligence exercise on Astra and used a pre-arranged meeting for this purpose. He says at para. 24 that he and Mr Plotke asked: “detailed questions of Mr Mathur and Dr Adler about the business, portfolio, new investment opportunities and the overall performance”. Mr Rigter was broadly satisfied with the answers, and he reported this to the next meeting of LGT’s Investment Committee. These were referred to as “extraordinary measures” in the concluding oral submissions for Astra. In my judgment, this characterisation is not justified. There is nothing from that description to show that the questions that were being asked were significantly greater than a routine current updating about the investment and current performance. If, in fact, the Statements had just been made, one would have expected a real escalation including questions in writing, requiring written responses. It is also difficult to see how Mr Rigter and Mr Plotke would have been satisfied by information provided orally in this way, without wishing to go through precisely what had been said. Far from demonstrating a likelihood of disparaging remarks, this evidence undermines rather than supports the case of Astra. It also dovetails with the failure on the part of Musst to confront Mr Siddiqi with the allegations as soon as they were reported on 7 July 2016. It therefore calls into question whether the Statements were reported in the manner alleged, and whether the Statements were made in the terms alleged.

While Mr Siddiqi denies that he spoke the words complained of or words materially the same, even if something was said which prompted the additional scrutiny at the meeting on 7 July 2016 (which was arranged before the alleged words were spoken and lasted, according to Dr Adler, 1-1.5 hours [T8/110/2]), this does not suffice to discharge Astra’s burden in respect of publication. It does not assist the Court in its task of determining – with a degree of precision – what was said on 23 June 2016. Mr Rigter could give no evidence as to the context in which the words were apparently spoken, or whether Mr Plotke reported them in full. There is no contemporaneous note or recording that assists in that task. Musst therefore had no opportunity to test these crucial aspects of the evidence.

There is also evidence from Dr Chander who gave evidence about being approached by Mr Siddiqi when both were boarding a tube on 23 June 2017. Astra do not rely upon this as a slander, but upon the correlation between the terms which Mr Siddiqi used on that occasion to describe Astra and Mr Mathur and the Statements. Dr Chander says that it was said that Mr Mathur was “unreliable” and had a “dark side”, and that Mr Siddiqi used the expression “one trick pony” and claimed that Astra was a “sinking ship”.

Mr Siddiqi himself admits seeking out Dr Chander when he saw him at Green Park station on 23 June 2017, and that he sought to enlist the assistance of Dr Chander to exert influence over Mr Mathur to pay fees which he considered were due to Musst. He did believe that Mr Mathur was unreliable and that he had a dark side: see the fourth statement of Mr Siddiqi para. 184.

The evidence of Dr Chander was unsatisfactory. He was a defensive witness who found it difficult to engage with the question and answer process. He said that he was a friend of both Mr Mathur and Mr Siddiqi, but he seemed much closer to Mr Mathur. They worked together at Deutsche Bank and were connected through Apeiron Securities. After the statement, he claims that he immediately reported his conversation with Mr Siddiqi (although not the details) to Mr Mathur, but he did not take them up with Mr Siddiqi. This did not seem the action of a neutral party. There was no contemporaneous note about the meeting in the tube. The evidence did not feature in the pre-action correspondence in 2017, nor in the pleadings before amendment. He made his first statement in October 2018, that is more than one year after the conversation. There is no plausible reason for the delay in committing to writing the precise words alleged to have been spoken until 2018.

The submission that strikingly similar words were used to Dr Chander as to Mr Plotke does not carry weight. In the light of the above findings regarding the partisan approach of Mr Mathur and Mr Murray, and the way that the other witness statements were prepared as regards the words complained of in the Statements, it is probable that Dr Chander was aware of the precise words complained of before he wrote his witness statement, which contaminated his recollection of events that had taken place some considerable time earlier, and in respect of which he has no written note. If the words which he said in 2018 had been said on 23 June 2017, namely “one trick pony” and “sinking ship”, he would have in all probability related those words in 2017. The fact that he did not made it likely (despite his evidence to the contrary) that he was shown these words by Astra: see [T11/77/6-21]. I therefore find that nothing in connection with Dr Chander makes more likely that the offending words were said on 23 June 2016 to Mr Plotke.

As regards the dinner with Mr Septon of 7 July 2016, in the course of which Mr Septon suggested that Mr Siddiqi ‘had made similar inappropriate statements about Astra’ and ‘asked me if there was anything wrong’ (Mr Mathur’s fifth witness statement at para. 147), this does not provide any confirmation of the words alleged to have been said to Mr Plotke. On the contrary, Mr Mathur accepted that he passed on Mr Septon’s complaints to Mr Siddiqi before the 13 July meeting but alleged that Mr Septon asked him to do so [T7/147]. This begs the question as to why, if he was prepared to pass on the comments of Mr Septon, Mr Mathur did not also pass on the comments of LGT on 13 July 2016. Mr Mathur was unable to give a proper explanation why his allegations on 13 July 2016 fail to mention even the gist of what was allegedly said to LGT. It is not credible to suggest, as Mr Mathur did, that he did not put even a gist of the allegations to Mr Siddiqi because he did not wish to confront him, but to make him stop making disparaging statements. If that were the true position, then there was all the more reason to let Mr Siddiqi know that he had been found out [T7/147-158].

A further instance seemingly relied on by Astra is that another of Astra’s European investors mentioned that “he had heard similar disparaging statements to “one-trick pony” from Saleem” prior to 7 July 2016 but declined to get involved as he was only interested in informing him “who my friends are and who are not”: see Mr Mathur’s fifth witness statement at para. 150. This contains either no or minimal detail, not providing information as regards the recipient of the information, the identity of the person, the context of the discussion. It provides no opportunity to Mr Siddiqi to defend himself. It provides no basis for confirming what might have been said on another occasion.

It was alleged for the first time in cross examination of Mr Siddiqi that he had made further disparaging remarks about LGT to Luc Huyghebaert, when seated at a lunch at the Rome Conference in 2016. This is not part of Astra’s pleaded case, but was said to be because in a witness statement, Mr Siddiqi had mentioned Mr Huyghebaert. Mr Huyghebaert is connected with Astra, having been listed on their website in 2015 as a salesman [T5/195/22-25]. He also had an investment fund with Astra [T5/195/14-21]. It was put to Mr Siddiqi that he must have made disparaging remarks to Mr Huyghebaert, otherwise Mr Siddiqi would not have brought up his name during the 13 July phone call. It was submitted by Astra that so anodyne was Mr Siddiqi’s account of the conversation with Mr Huyghebaert that he would not have had any concerns about Astra. It followed that something must have been said by Mr Siddiqi to the effect that Astra was in danger of collapse, and he needed to take urgent steps to protect his investment.

It is not pleaded by Astra that such remarks were made. There is no evidence from Mr Huyghebaert about this. There is no proper basis upon which to infer that Mr Siddiqi either repeated the words complained of or made substantially the same remarks to him at lunch. Mr Siddiqi denied that he made disparaging remarks, but he did refer to the investment with Astra and he said that “we seemed to be getting to the end of the journey with Astra on the synthetic ABS strategy”, referring to the expiry of the 3-year lock-up period. Instead of adducing evidence, the case that Mr Huyghebaert was anxious about the safety of his investment due to what he had been told by Mr Siddiqi is a case based on speculation and conjecture, and not inference. This non-pleaded case neither establishes that disparaging remarks were made by Mr Siddiqi to Mr Huyghebaert, still less that the Statements which were pleaded were made by Mr Siddiqi to Mr Plotke.

Musst’s position is that Mr Siddiqi did not make the Statements. The conversation in relation to Astra was brief, and confined to the synthetic ABS, as those investments were coming to the end of the three-year lock up period. At no stage did Mr Siddiqi advise that LGT should redeem its investment: Mr Siddiqi’s fourth statement at para. 118.

On 27 June 2016, Mr Siddiqi and Ms Galligan met with Mr Mathur at Astra’s offices. Mr Siddiqi sent a contemporaneous note of the conversation by email the same day, which documents that, as part of a discussion about a “solution” to the non-payment of fees, Mr Mathur wanted: “LGT to transfer assets to another low vol vehicle. When the transfer is paid made [sic] fees will crystallise.”

On 28 June 2016, Mr Siddiqi followed up on his conversation with Mr Plotke by email. The email referenced the result of the Brexit Referendum, and a book recommendation. Mr Siddiqi also sought to set up a time to follow up on their discussion by phone in the coming days. In the event, the call was delayed, and subsequent email correspondence made reference to the distraction that the outcome of the referendum was having and the impact on the markets. There is no reference to Astra or of any concerns in relation to LGT’s investments with Astra in the subsequent emails between Mr Siddiqi and Mr Plotke.

Mr Mathur says that Mr Rigter and Mr Plotke told him at a meeting on 7 July 2016 what Mr Siddiqi had said in Rome on 23 June 2016. The discussion started at the offices of Astra and ended in the Anthologist public house where Mr Mathur relates that Mr Rigter informed him about the Statements: see the fifth witness statement of Mr Mathur paras. 143-147 and the third statement of Dr Adler paras. 26-29. The Statements are set out word for word the same in both statements and in accordance with the Amended Particulars of Claim.

If the Statements had been related in the terms alleged on 7 July 2016, it defies commercial logic that Mr Mathur did not confront Mr Siddiqi with the evidence immediately, if only to prevent the repetition of the Statements. Mr Mathur was unable to explain why he waited so long before getting the defamatory words on the written record when it was obviously important to do so as soon as possible [T7/185]. The oral evidence of Mr Mathur bears more extensive reference. It went as follows:

I do not take this evidence at face value. A man of the intelligence of Mr Mathur would know how important a written record was. He is, on his own evidence, experienced in litigation [T6/57:10 – 6/59:5]. In any event, Astra employed a lawyer in house, namely Mr Murray. Further, Astra were already in a dispute with Musst in respect of the contractual dispute. It is therefore not an answer to say that it was only with the advantage of hindsight that the importance of documentary evidence was apparent to him. Further, on Musst’s evidence, there was an existential aspect. If it were true that the evidence of the Statements was known by Mr Mathur, then there is no reason for not confronting Mr Siddiqi with the full detail of what had been said immediately. It would have been necessary to obtain undertakings not to repeat any of these statements. The fact that this did not occur for months goes strongly against the case that, on 7 July 2016, Mr Mathur was in the receipt of the Statements in the terms alleged.

Mr Murray’s evidence was that he was informed of the conversation by Mr Mathur and Dr Adler, and he took a note of the conversation, but he has mislaid his note. This evidence arose in the following way:

Mr Mathur was asked if he made a contemporary note of the conversation. In response, he said:

It was put to him that this was the first mention of such a note: it was not in his witness statement. He said that he: “ did not know whether [the notes] exist or not. My understanding is we may not have been able to find them” [T7/126/2-6]. He confirmed that the legal counsel who took the note was Mr Murray who had not given any evidence in his witness statements about a note. Mr Mathur said that he saw Mr Murray take a note in his notebook. [T7/127/12-13]

Mr Murray said that he only realised about 7 weeks prior to trial, during a conversation with Dr Adler, that the alleged note had been “ irretrievably lost ” [T10/6/19-25]. His evidence was that the last place he had seen it was in a drawer in Astra’s offices and that certain (unspecified) steps had been taken to preserve it for the purposes of disclosure. He accepted that there had been no break-in or act of God which might have resulted in its loss or destruction. He posited that someone could have taken it out of the drawer. When asked if any other notebooks had gone missing, he confirmed that they had not [T7/31/5-25]. His only explanation for the omission of the note from his witness statement was that Astra’s lawyers, Payne Hicks Beach, had not included the information [T10/4/6-25 and T10/5/1-12].

Not only was Mr Murray not listed as custodian for documents in the Contract Claim counterclaim, PHB resisted with considerable force the suggestion that he should be a custodian in the Defamation Claim, on the basis that he was not involved with any of the issues in that claim.

If the note existed, the absence of reference to it in the evidence and its emergence for the first time in cross-examination are unsatisfactory. The note was potentially important, if it existed, because it might have corroborated the passing on of information about the Statements two weeks later. This was not something that would be omitted from a witness statement on the ground of marginal relevance. It cannot be explained sensibly by reference to the information not being considered relevant to mention to the solicitors (which Mr Murray did not suggest) or by a selection process of information by the solicitors (which Mr Murray did suggest).

Mr Murray claimed that he told Mr Lucas Moore of Jones Day about the note’s existence and that he gave some contents of the note. It is inherently improbable, if that were the case, that the note was not then requested and that the solicitors did not preserve it for disclosure. If it had been mentioned to solicitors, then it would have been incumbent on them to give disclosure of the document even if it could not be located, and it would have been a serious dereliction of professional duty not to have done so.

A much more likely conclusion is that the note did not exist. The story about its disappearance is truly remarkable given that Mr Murray was an inveterate note taker, and his other notes were preserved. It is far-fetched that of all the notes, this note would disappear or be removed. If it had existed, the following would have occurred:

it would have been produced to solicitors and they would have complied with their obligations as solicitors by disclosing it;

if it had been mislaid, the solicitors would have been informed and would have mentioned it in disclosure;

in any event, it would have been mentioned in the witness statements of Mr Murray, Mr Mathur and Dr Adler.

The fact that none of this occurred indicates strongly that the note never existed. I am not persuaded to the contrary by the fact of the evidence of Mr Murray because the above factors indicate so strongly to the contrary. His evidence was challenged in cross-examination, and he was unable to give sensible answers in cross-examination when these points were put to him.

Was the evidence of Mr Murray saved by the evidence of Mr Mathur who gave evidence that Mr Murray was taking a note? The answer is in the negative because that evidence was undermined by the same points as are made above as to why the note never existed. It makes no sense in the light of those objective facts that the note was not produced or identified at an earlier stage. Mr Mathur was unable either to answer these objective points or to explain why this did not form a part of the witness statements or the disclosure. He was seeking to bolster the case that the Statements were made. The Court does not have to find that the evidence was dishonest, but in my judgment the fact that he was wrong in his evidence and that he was seeking to bolster the case of Astra (whether consciously or sub-consciously) shows that his recollection was strongly influenced by a desire to support Astra’s case. This indicates that the evidence of Mr Mathur must be viewed with particular caution.

Was the evidence that there was a note saved by the evidence of Dr Adler? His evidence was in tentative terms as to whether a note was taken. Dr Adler, who had been present in Court for the latter part of Mr Mathur’s evidence, said that they had gone to see Mr Murray after the words complained of were allegedly relayed to him. He said that he believes Mr Murray made a note, but he does not “recall with 100% certainty. I am, as I said, 99% sure” [T8/113; T8/129]. He was more equivocal as to whether he had seen the note: “I might have asked to see the note. But I don’t think I’ve ever seen it” [T8/133].

The evidence was not referred to in Dr Adler’s witness statement. The inference is that he does not recall a note, but he has been insufficiently certain to contradict the evidence which he heard from Mr Mathur. In my judgment, this tentative evidence does not indicate that there was a note, and it does not provide any answer to the powerful points above which indicate that there was no note.

If the Court had held that there was a note, then it would have been necessary to consider whether to find that the note had been concealed and/or to draw negative inferences from its non-production. However, in my judgment, since the probability is that the note never existed, I do not draw the inferences that would otherwise be required for such a finding.

The above is damaging to Astra’s Defamation Claim generally. The evidence of Mr Mathur and Mr Murray are to be treated with considerable caution at least in respect of their evidence as to whether they ever received information relating to the Statements. The fact that they have both sought to bolster the evidence about the Statements by evidence about a note, irrespective of whether they did or did not believe that there was such a note, makes their evidence generally regarding the Statements unreliable. In the case of Mr Murray, his evidence went beyond identifying the making of the note, but extended to the information being provided to lawyers and his realising 7 weeks before his oral testimony that the note had been lost without this point being pointed out to the solicitors for Musst. If it were otherwise, and there had not been produced a note which existed, Mr Murray, despite being a lawyer, has failed to preserve this critical evidence, to ensure that it was disclosed and to mention this in his witness statement. In either event, his reliability as a witness was severely undermined.

Away from the note itself, the supposed corroboration of the witnesses about the precise words complained of has not enhanced Astra’s case. First, if they each had an independent recollection, it is nigh on impossible that each would quote the identical words. Second, the unsatisfactory nature of the evidence of Mr Mathur and Mr Murray, who were trying to prove a case and whose evidence was unreliable as to the Statements, is such that their corroboration, far from enhancing the case, adds to the likelihood of contamination by discussions and recollections from others. Dr Adler accepted he would have spoken “at some point” about the words to Mr Mathur [T8/114]. This was confirmed by Mr Mathur, who said there was a “high likelihood” they spoke to each other [T8/166]. Dr Adler also accepted that what he used to refresh his memory is “the first or the earlier legal communications” which set out the words complained of: “I wouldn’t say I looked at it to remind myself, but when I had to put the witness statement later, that would obviously be then, the recollection at that point two years ago, the only reference I had to the statements.” [T8/132].

When asked whether he could recall independently the words complained of today, he accepted that the only phrases he had any recollection of were the reports from Mr Rigter (not Mr Plotke) that Mr Siddiqi had said that Astra as a sinking ship and that Mr Mathur was a “one trick pony” [T8/140; 162]. Dr Adler could not, today, remember the word “All” before Astra’s investors. [T8/138]. Dr Adler further accepted that the reference to “last man standing” was “contaminated as well” [T8/139].

Dr Adler accepted that he did not take a note of the conversation that took place between him, Mr Mathur, and Mr Plotke in October 2018. Dr Adler has no recollection of this conversation [T8/129]. He accepted that his first statement in 2018 was probably drafted by “the lawyers” and when put that there is a sense of cut and paste between the statements in relation to the words complained of, he said “I see what you are saying” [T8/130/8-25].

Of the witnesses who gave evidence, it then remains to consider the evidence of Mr Rigter. In my judgment, his evidence was unsatisfactory for the following reasons, namely:

The first time that he provided a written account of the words complained of was in January 2021, that is more than 4½ years after the alleged Statements of June 2016.

Mr Rigter is not an objective or independent witness. He worked closely with Mr Mathur and Astra when at LGT and has, since 2019, been employed by Astra. It was only after he became an Astra employee that he provided any witness statement in support of the Defamation Claim. Without finding that he was deliberately manufacturing evidence, being in the camp of Astra by the time of his preparation of a witness statement means that his evidence lacked independence.

His recollection of the words was not by reference to any note at the time whether of Mr Plotke or anyone else.

His evidence as regards the critical conversation was second-hand hearsay, namely what Mr Plotke related to him about what Mr Siddiqi said to Mr Plotke. Mr Rigter could give no evidence as to the context in which the words were apparently spoken, or whether Mr Plotke reported them in full. Musst therefore has no opportunity to test these crucial aspects of the evidence.

The risk of contamination by conversations with others involved in these proceedings , including Mr Mathur, and by being made aware of the words complained of in the Defamation Claim and/or Contract Counterclaim undermines the reliability of his evidence on publication. Mr Rigter accepted that he had discussed the statements with Mr Mathur and Dr Adler after the meeting at Astra’s offices on 7 July 2016 [T10/82-3]. He accepted that he had been given a draft of his statement by PHB and that he had not written it himself [T10/83]. This increases the risk that the words are put to Mr Rigter, rather than independently recalled by him. Hence, the reason why the words quoted by each witness are the same, despite the same being oral, is because the words complained of are placed verbatim from the pleaded case into the statements. As noted by Musst, in the case of Dr Adler, his first witness statement is a copy and paste from the statement of Mr Mathur to such extent that paras. 7.1-7.4 of paragraph 7 of the latter are copied into paragraph 6 of the former and still numbered paras. 7.1 – 7.4 (instead of 6.1 – 6.4) [T8/130/8-25]. Misnumbering sometimes occurs, but in this case, it is evidence of direct copying and absence of independence of recollection.

This risk of contamination is particularly severe in view of the part taken by Mr Mathur and Mr Murray in gathering the evidence about whom criticisms have been made as above. Thus, the concern about contamination was particularly serious in this case. The evidence about the conversation of 7 July 2016 is already odd with a meeting of about 1.5 hours according to Dr Adler, and the reference to the alleged words only at the end and thereafter. All of this affects the ability to test properly what exactly was said and/or its full gist. Overall, the discrediting of the evidence of Mr Mathur and Mr Murray undermines the evidence of the recollection of the alleged conversations of 7 July 2016 of Mr Mathur with Mr Rigter and Mr Plotke, and of Mr Murray with Mr Mathur and Dr Adler. Just as the evidence about the note is, in my judgment, false (whether intentionally or unintentionally), they both have been shown to have had a demonstrable desire to support the case that the Statements were made. To this end, the falsity of the evidence of the note taints also the recollection about what was said in these conversations of Mr Mathur and Mr Murray respectively.

There are a number of significant matters which weigh against Astra’s case on the publication issue. The first is the time which elapsed before the Statements were put to Mr Siddiqi. If the Statements had been made, then it would be expected that they would be passed on as a matter of urgency to Astra and from Astra to Musst in order to prevent the publication of further statements. However, the evidence is that this did not occur. In fact, the chronology is that it was over 7 months before the earliest written record in evidence of any (and, even then, not all) of the words allegedly spoken. There was a delay of over a year before any attempt was made to put Musst on notice of the precise words complained of. The claim was issued close to the end of the one-year limitation period and issued near the maximum 4-month deadline.

Even in late 2016 and early 2017, after he had decided to instruct external lawyers in response to the Contract Claim, neither Mr Mathur nor Mr Murray could explain the tentative tone of Jones Day’s October 2016 correspondence and why they only said that Mr Siddiqi “may” have made (unparticularised) defamatory statements, not even confirming to whom such statements were alleged to have been made or whether such statements were alleged to have been oral or in writing. That is notwithstanding Mr Mathur’s admission that he read the correspondence [T7/166-167, T7/172-173]. Again, Mr Mathur blamed his lawyers and sought to absolve himself of any responsibility for this omission.

This explanation is further undermined by Mr Murray’s evidence that he was apparently in possession of a note confirming that defamatory statements had been made [T10/16/17-20], but signed off on two letters from Jones Day on 17 October 2016 and 24 October 2016, the latter of which also expressly stated that they were not asserting any “wrongdoing” by Musst, but “sought confirmation as to the absence of wrongdoing”. In Boodle Hatfield’s letter for Musst of 18 October 2016, they stated that Musst assumed that Jones Day’s reference to “existing and/or prospective investors” was to 2B and/or Crown, on the basis that they were introduced by Musst to Astra. “We note the confirmations provided on behalf of your clients as regards of 2B LLC and/or Crown Managed Accounts SPC. Your assumption is, however, incorrect…” This is inconsistent with the accounts of Astra’s witnesses as to the events in June/July 2016. Boodle Hatfield went on to deny any (then unknown) defamatory statements had been or would be made to those parties.

Neither Mr Murray nor Mr Mathur could give any satisfactory explanation as to why the first letter of claim from Jones Day only said that defamatory statements may have been made by Mr Siddiqi. If it really was the case that Mr Mathur and Mr Murray were not only aware of the precise nature of those statements, but had an almost contemporaneous written note which documented them, they would have instructed Jones Day to make this explicit in correspondence.

Mr Mathur said that he did not take the October 2016 letter before action in the Contract Claim seriously [T7/128]. It was obviously a serious letter threatening litigation against someone he had considered his best friend, which required a full response, using all the arguments at his disposal. Mr Mathur is an intelligent man. His suggestion that he omitted what he now relies upon as the basis upon which he brings significant litigation from pre-action correspondence because he “didn’t take it seriously” does not stand scrutiny.

Mr Mathur was unable to explain why Jones Day’s November 2016 letter did not refer specifically to the terms of the defamatory or disparaging statements or terminate the contract on account of them [T7/181-2]. For the purpose of completeness, the force of these points is not diminished by the failure of Ms Galligan in a letter of 31 March 2017 in which she did not deny the words complained of, but asked questions about the evidence to prove what was said. That was not a substantive response, but a non-lawyer’s further holding response, and I decline to draw an inference that it is significant that she did not in fact respond substantively, at that stage, by denying that which had been alleged.

In the circumstances, it is more likely than not that the true position is that there was no report to Mr Murray and no note was taken. If and to the extent that there was a report to Mr Murray and a note taken, which I find there was not, then it would be necessary to consider whether the Court should or could infer that it was withheld because it does not support Astra’s case on publication. Either way, Astra’s case on publication and the credibility of their key witnesses is undermined substantially.

It is not impossible for a case in slander to be proven without the evidence of the publishee, but it is not easy to establish or to imagine circumstances in which this can occur. Astra have not provided any explanation as to why Mr Plotke, the only person to whom the words were allegedly spoken, was not called as a witness. His absence is particularly surprising given that his name appeared in the directions’ questionnaire in January 2019. His evidence is central to one of the most important issues in dispute. It is not suggested that he was unavailable, or that they had no means of contacting him. Mr Mathur’s evidence was that he “expected” him to give oral evidence as of 2018, which is the reason he did not bother to make any note of his conversation with Mr Plotke on 2 October 2018 [T8/4:18]. No information has been given as to the basis for that expectation or why or when it changed.

In the absence of any explanation as to the absence of Mr Plotke, Astra have tried to downplay the significance of the decision not to call any direct evidence of publication. It said, through the note provided by its counsel, Mr Glen, after opening, that it was open to Musst to call Mr Plotke if they thought it necessary. I do not accept this point. Firstly, in the Defamation Claim, the onus of proof is on Astra and not on Musst. Second, if Musst were to call him, it would have been unable to cross examine him on his evidence, and given his continued employment with LGT, still a client of Astra, it seems unlikely that he would have been cooperative. In light of the ongoing dispute, it was reasonable for Musst not to approach Mr Plotke directly.

The judgment of Sharp J (as she then was) about the burden of proof in Miller v Associated Newspapers [2012] EWHC 3271 (QB) at para. 37 has a particular resonance to this case and the way that Astra have sought to approach the case without Mr Plotke:

The burden rests on Astra to prove publication with the necessary degree of precision. Astra have not even sought to adduce any written evidence from Mr Plotke via a witness summary or statement. While that would still have been problematic, it is a major deficiency at the heart of the Defamation Claim that there is no evidence from Mr Plotke at all and no explanation through evidence as to why he has not been called.

The point about who should call Mr Rigter can be amplified as follows. Musst is entitled to test the evidence of the only person to whom the words were allegedly spoken. Mr Plotke is the only other person who could give evidence as to the context of the conversation, the way in which the words, if spoken, were relayed, and any other parts of the conversation which may undermine Astra’s case. Musst and Mr Siddiqi have been deprived of the right to test the primary evidence, without explanation. By contrast, Astra have had the opportunity to question Mr Siddiqi, who has given an account of his lunch with Mr Plotke.

Astra has developed this submission by the following, namely that it was said by Mr Rigter during cross-examination that he believes Mr Plotke would have taken a note of the conversation [T10/75/14]. This was the first time that this suggestion was made. If such a contemporaneous note does exist, it has not been disclosed, and its contents cannot be tested. Musst is forced to meet a case based entirely on oral hearsay accounts. These accounts are necessarily a ‘snapshot’, provided a long time after the making of the alleged Statements, of what is alleged to have happened. They refer only to the words complained of, in most cases simply repeating them verbatim from the amended claim form and pleadings. They do not offer any context to the words spoken, as, contrary to the case as initially pleaded, none of the witnesses in this claim were even present at the lunch between Mr Plotke and Mr Siddiqi. In short, it is not for Musst to seek to prove Astra’s case that there was a publication at all, and, if there was, to prove the necessary degree of precision.

The evidence in favour of publication must obviously be weighed against Mr Siddiqi’s denial of what is alleged to have taken place in the conversation of 23 June 2016. The attempt to make out what Mr Siddiqi said is, in large part, based on the motivation of Mr Siddiqi. As of 23 June 2016, it is apparent that Mr Siddiqi had had conversations with Mr Mathur which made him concerned that Astra did not intend to pay to Musst the sums claimed to be due to alleged cash flow difficulties of Astra.

Astra’s case is that this led to desperate measures including provoking LGT to terminate their investments with a view to triggering the performance fees. Hence, it is contended that Mr Siddiqi had a motive for disparaging statements, which make it likely that he made the disparaging remarks contended for by Astra. It is also apparent that there was a conversation between Mr Siddiqi and Mr Plotke from which Astra seek to infer that the disparaging remarks were made.

Astra also rely upon the fact that after the receipt of Mr Holdom’s email of 16 June 2016 (which made clear that Astra could no longer be relied upon to make any further payments), Mr Siddiqi and Ms Galligan considered themselves in the ‘combat zone’ with Astra (to adopt the words Mr Siddiqi’s email to ‘Moni’ of 19 June 2016). Moreover, Ms Galligan’s email of 17 June 2016 reveals that they ‘all agreed’ that the ‘best solution’, at that stage, was to approach LGT directly and request that they withhold Musst’s share of the fees payable in respect of the two managed accounts. This is relied upon as evidence of a mindset in which Astra were prepared to cause grave damage to Astra’s relations with its key investors in order to improve their own precarious commercial position. It is also relied upon that Mr Siddiqi initiated the conversation of 23 June 2016.

Astra also pointed to the recorded conversation of Mr Mathur with Mr Siddiqi and Ms Galligan of 13 July 2016 with the suggestion that answers of Ms Galligan indicated guilty knowledge about the conversation of 23 June 2016 having been more significant than acknowledged by Mr Siddiqi.

The attempts to find that the evidence of Mr Siddiqi and Ms Galligan supported Astra’s case fail. First, the submissions were based on insinuation and speculation rather than on direct evidence of anything which Mr Siddiqi said or on inference. Second, insofar as the insinuation and speculation was put to Mr Siddiqi and/or Ms Galligan, this was answered in a way that was credible and plausible. I accept the evidence that the email of 17 June 2016 was not evidence of a series of decisions taken or action subsequently undertaken, rather it was a list of points for consideration. The evidence of Ms Galligan and Mr Siddiqi was that they formed the view that to agree with LGT for them to hold back Musst’s share of the fee would have been inflammatory and would have damaged significantly the relationships of Astra with its key investors. It was an idea which was not implemented. Likewise, I accept the explanations given regarding the matters of statements allegedly made to third parties, which is an answer both to the allegations that the statements were made or that they evidence the alleged Statements made to Mr Plotke. Although there was a context for Musst to be dissatisfied about Astra due to the fact that it appeared that their contractual rights would or might not be honoured, this does not suffice on the evidence as a whole to find that the positive case of Astra in the Defamation Claim is established.

The claim against Musst and Mr Siddiqi is brought as a claim in slander. There is no written publication complained of, and the Amended Particulars rely on a single conversation between Mr Plotke and Mr Siddiqi on 23 June 2016 in Rome. There was no-one present at the time. The only direct evidence has been given by Mr Siddiqi and none by Mr Plotke. It is therefore necessary to review the law as to the extent to which evidence of a slander can be proven by hearsay evidence or otherwise without any evidence of the publishee.

The general principle is accurately stated in Gatley on Libel and Slander, 15^th ed., at para. 32.13:

This general proposition is confirmed by decided cases on the point. In Pannu v Carter [2017] 3270 (QB), the defendant was the owner of a taxi firm, who heard a rumour that the claimant (who drove for another taxi firm) had been arrested for the suspected supply of drugs. The slander was established without evidence from the publishee or her line manager, who in turn contacted the claimant about the allegation.

In Webster v British Gas [2003] EWHC 1188 (QB), Tugendhat J refused to grant summary judgment on the issue of publication of an alleged slander. Despite the absence of any first-hand evidence from either alleged publishee, Tugendhat J (at paras.22-23) found that inferences which could be drawn from a fax and a letter passing between the individuals concerned gave rise to a properly arguable case that the words had been spoken as alleged.

In Umeyor v Ibe [2016] EWHC 862 (QB) Warby J (as he then was), at para. 1, remarked on the rarity of slander claims. He suggested several reasons why this was likely to be the case: “…the difficulties sometimes encountered in proving the exact words spoken […] and the fact that spoken words are, as a rule, less likely than written publications to cause serious harm to reputation.”

The burden of proof is on the claimant to establish that the words complained of, or words not materially different, were published to a third party. It is not sufficient for a claimant to prove that the words complained of were spoken on a different occasion or to a different individual. The following passages from Bode v Mundell [2016] EWHC 2533 (QB) per Warby J are in point:

These requirements are not “mere technicalities”: per Warby J in Bode v Mundell. The “best evidence” of the words spoken will be a recording. In Bode, there was neither any recording nor any witnesses to the alleged slander. The case was dependent on inferences from documents obtained “some months” later. Although proof of publication will be fact-specific, the defendant in Bode was granted summary judgment on the claims in slander which were described by the judge as “fanciful”. Factors relevant to the determination that there was no realistic prospect of proving that the words complained of were spoken were the absence of any contemporaneous recording, and the fact that there was no evidence from any of the alleged publishees: the “sole basis for the claimant’s contention that the defendant spoke to Dr Foley and Dr Sheth in the terms alleged is inference from the contents of […] email correspondence” (at para. 41).

In Raynor v Seabourne-Hawkins [2020] EWHC 2895 (QB), Nicklin J noted at para. 74 that: “Had an allegation … been made as alleged in the First Slander, I would have expected the Claimant to have confronted the Defendant about it very shortly afterwards. There is no trace of any such complaint from the Claimant about what would have been a serious and baseless allegation”. Nicklin J struck a cautionary note for claimants in slander claims that: “Those contemplating slander actions would be well-advised to prioritise the gathering of evidence in support of their claim whilst events are still fresh in witnesses’ minds.” The absence of contemporaneous notes, records, or accounts of an alleged slander is likely to make it very difficult for a claimant to discharge their burden and prove publication in a slander claim. If a claimant is unable to prove – on the balance of probabilities – that the words complained of were spoken by the defendant on the occasion pleaded, that is the end of the matter, and the claim will be dismissed: see Raynor v Seabourne Hawkins at paras. 75-77.

The case of ABC v Chief Constable of West Yorkshire Police [2017] EWHC 1650 (QB) acknowledges the possibility of an inferential case in slander. At para. 67, Warby J (as he then was) said that:

In ABC, an inferential case was not made out and publication was not proven. Warby J noted that: “it is often going to be hard to prove such a case, and there are real difficulties with the inferences invited in this instance” [para. 72]. Although the claimant had proven one word (“lied”), as a whole, she had not been able to prove publication by inference of the precise words alleged to have been spoken.

The burden of proof in respect of publication in slander claims is often a difficult one for claimants to discharge. While it may be possible to prove publication in the absence of any direct evidence, it is not the case that the court should adopt a more lenient or relaxed approach in recognition of the fact that oral publications are more difficult to prove than written publications. As per Warby J in Umeyor v Ibe, slander claims are rare precisely because it can be difficult to prove the exact words spoken, and because spoken words are generally less likely to cause serious harm to a person’s reputation.

The courts have confirmed repeatedly the difficulties in proving publication in slander claims. For example, in Barkhuysen v Hamilton [2016] EWHC 2858 (QB) Warby J said at para. 147: “In large part I uphold his claims in slander. But not entirely. The reason is a shortage of evidence: in some respects he has – as is quite common in slander - fallen short of proving to the court's satisfaction the publication of particular words defamatory of him. Proof of the exact words spoken is crucial: see Bode v Mundell [2016] EWHC 2533 (QB) [12]-[16]. When witnesses are asked to recall spoken words some time after the event, memories can fail.” (Emphasis added)

The facts of Barkhuysen are different from those in issue in this case, involving a long-running dispute between neighbours and some salacious allegations, some of which had the benefit of being recorded on CCTV, direct evidence from the publishee, or having been the subject of a contemporaneous note produced in evidence. None of that type of objective evidence is available here. However, the point of general principle is instructive, particularly in relation to the evidence of witnesses, recalling events which occurred several years previously and without contemporaneous written material, as is the case here.

The Defamation Claim faces grave difficulties in the proof of the Statements both in law and in fact. Those difficulties include the following (without limiting the extent of the matters set out in preceding paragraphs), namely:

Without the only publishee giving evidence, it is very difficult, but not impossible, to make out a case for slander based on hearsay;

This difficulty is exacerbated by the absence of contemporaneous records of any kind about the Statements;

A near contemporaneous record of the alleged conversations at which the Statements were said to be related to Mr Mathur and his inhouse lawyer Mr Murray, on the basis of what I have seen, does not exist.

The alleged slander was not reported to Mr Siddiqi or anyone on Musst ’s side for months, with no satisfactory explanation of why not earlier.

The absence of contemporaneous notes, records, or accounts of the alleged slander makes it very difficult for Astra to discharge their burden and prove publication in a slander claim. There was no contemporaneous note produced of the Statements by Mr Plotke or Mr Rigter.

The alleged note of Mr Murray has not been produced, and there has been no explanation as to why it has not been available. Having considered the evidence in this regard, I conclude that there never was any such note.

The evidence of Mr Mathur and Mr Murray in this regard is rejected. Their evidence displayed a desire to prove the Defamation Claim and was shown as regards the alleged note to be unreliable.

The hearsay evidence was given by Mr Mathur and Mr Murray, whose evidence is undermined by their evidence regarding the note.

Although evidence was given by Dr Adler and Mr Rigter, their written evidence was compiled long after the events in question. Both of them had ties of allegiance to Astra by virtue of their employment by Astra . In the case of Mr Rigter, before any statement, he had moved from LGT to Astra in 2019 during the pendency of the action.

Their evidence showed considerable capacity for contamination. In my judgment, the apparent value of their confirming the same precise words was rendered nugatory. The precise correlation in statements taken years after the event wreaked of their being shown the words pleaded and confirming the same, instead of each starting from their own recollection and stating what it was. I do not accept that their statements represented their recollections at all. In these circumstances, the Court views with caution their evidence of how information about the alleged Statements was drawn to their attention.

The judgment above goes through the evidence in some detail and considers the evidence of each of the witnesses on behalf of Astra who have given evidence. These criticisms are such that the evidence of each of the witnesses regarding the words in question is unreliable.

In the light of the authorities above and the conclusions which I have reached about the evidence, I find that Astra have failed to discharge the burden to establish that the Statements were made. This is not one of those cases of a slander being proven without the publishee giving oral evidence. Astra have not come in any way close in proving that the Statements were made. Bearing in mind the onus on Astra to prove the Defamation Claim, and all the matters set out above as regards the onus of proof, I conclude that Astra have failed to prove that the alleged Statements were made in whole or in part.

It therefore follows that the Defamation Claim must fail at the first hurdle, namely that Astra have failed to prove that the Statements were made in whole or in part. It is therefore unnecessary to deal with the other issues relating to the Defamation Claim, but in deference to the evidence and the arguments of the parties, I shall consider the points relating to damage.

The burden is on the claimants to satisfy the requirements of s. 1 of the Defamation Act 2013 (“the 2013 Act”), which provides as follows:

This provides the alternatives of causing actual loss or being likely to cause serious harm to the reputation of the claimant.

There should also be considered the following, namely:

Section 3(1) (b) of the 1952 Act provides as follows:

Section 2 of the 1952 Act does not remove the requirement under s. 1 of the 2013 Act in relation to a claim for slander. As set out above, section 1(2) of the 2013 Act is distinct from any plea in relation to special damages or actual financial loss. In relation to the slander claim, all that s. 2 of the 1952 Act does is remove the usual requirement that slander is only actionable upon proof of special damage. Section 3 of the 1952 Act provides an exemption to the usual requirement that a claimant in an action for malicious falsehood must establish that the falsehood caused actual financial loss.

The requirements of a claimant seeking to rely on s. 3 of the 1952 Act were considered by the Court of Appeal in Tesla Motors v BBC [2013] EWCA Civ 152. Tesla Motors was a claim brought in both libel (before the introduction of the 2013 Act) and malicious falsehood, relying on s. 3 of the 1952 Act. It was common ground before the Court of Appeal in Tesla that – as held by Tugendhat J in the second of a series of interlocutory judgments - that the word calculated in s. 3 requires a claimant to prove that pecuniary damage was more likely than not to be caused by the publication complained of [para. 27].

The Supreme Court has confirmed that the correct interpretation of section 1 is that it “requires its application to be determined by reference to the actual facts about its impact and not just to the meaning of the words.” Lachaux v Independent Print Ltd [2020] AC 612 [para. 12] per Lord Sumption.

Lord Sumption in Lachaux dealt with the meaning of “financial loss” in the context of s. 1(2) of the 2013 Act at paragraph 15 of his judgment:

The particular requirements of s. 1(2) were recently considered by Warby J (as he then was) in Gubarev and Ors v Orbis Business Intelligence Ltd and Ors [2020] EWHC 2912 (QB). Considering the application of Lord Sumption’s analysis above, Warby J noted that while proof of financial loss may not be the “sole requirement” in relation to s. 1(2), “in principle, all cases that fall within s. 1(2) require proof of serious reputational harm that results from the statement complained of and financial loss that is (a) serious, and (b) consequent on the reputational harm” [at para. 42].

Although it is open to the court to infer serious financial loss in some cases [at para. 44], “inference is not the same as speculation; there must be a sound evidential basis on which to infer that the publication is more likely than not to have caused serious financial loss” [at para. 45]. Wide publication and the seriousness of the allegation will rarely suffice. Moreover, the burden is on the claimant to establish that it is more likely than not that the loss it says it suffered is a consequence of the publication complained of and not “some other cause or causes” [at para. 45]. At para. 89, the Judge referred to the significance of the “bottom line” of a company in assessing whether there has been financial loss.

It is difficult to approach this matter, having regard to the findings already made. Even assuming that the Statements had been made, matters discussed making publication unlikely have to be considered in respect of damage. This includes the delay in putting the alleged disparaging remarks. This is a significant indicator against loss. If losses were being suffered, one would expect Astra or any other victim to move very quickly to ensure that loss was stopped and contained.

I shall first consider whether the Statements caused serious harm to Astra. The primary allegation is that, as a result of their publication, there were three redemptions made in the Crown 1 account as a consequence of the Statements. The three withdrawals of redemption moneys requested by LGT between October 2016 and April 2017 comprising a total sum of US$46 million were as follows:

a request to redeem US$15m which was made in respect of the Crown AAM account on 14 October 2016 and to which the Claimants acquiesced and fulfilled in part, leading to a US$7.5m redemption on 25 October;

a request to redeem US$24.4m which was made in respect of the Crown AAM on 3 April 2017 and fulfilled the following day (4 April 2017); and

a request to redeem US$14.1m which was made in respect of the Crown AAM II account on 4 April 2017 and fulfilled the same day.

In my judgment, this assertion has not been proven by the evidence. The first redemption request was therefore almost 4 months after the conversations with Mr Plotke on 23 June 2016. There were two further redemptions over a period of six months. The final redemption was 10 months after the Statements were allegedly made.

The explanation of this delay is said to be that the redemption request had to be processed within LGT. This is a bare assertion, and it does not have an evidential basis e.g. of documents reflecting internal discussions within LGT. Nor is there any evidence of internal dissatisfaction about Astra within LGT. On the contrary, there is evidence of satisfaction. Between 23 June 2016 and 4 April 2017, Crown, acting for Crown III invested a further US $8 million into its fund with Astra.

Even in the written evidence of Mr Rigter, he did not say that the requests for redemptions were made because of the Statements. The most he says is that the Statements “remained in his mind” but that the decisions to request redemptions were made on the basis of a range of factors and taken in conjunction with other individuals.

As regards the four-month period prior to the first redemption, there are various pointers to the fact that the subsequent redemptions were not due to dissatisfaction including:

A conversation on 26 September 2016 (just over 3 months after the Rome conversation): a transcript of the call was before the Court. This was the first record of any discussion relating to the Crown I investment between LGT and Astra since June 2016. The discussion was in general terms, and both parties appeared to agree that it is not clear what to do with Crown I, which had a large amount of cash sitting inactive in the account. There was no indication that LGT/Crown was unhappy with Astra’s performance or management of its investment. There is no reference to LGT/Crown wanting to redeem its investment.

On 4 October 2016, there was an exchange of emails between Mr Plotke and Mr Mathur. Mr Plotke expressed concern that cash (approximately US$15 million) “lying around” in the Crown I account was bad for both Astra and LGT/Crown. He raised the possibility of either recalling part of the capital in the account, or re-investing it elsewhere. This was not connected with dissatisfaction with LGT/Crown.

On 5 October 2016, a call took place between Mr Plotke, Mr Mathur, Dr Adler, and Raymond Seeholzer (also of LGT) during which the options for the large amount of dormant cash in Crown I were again discussed. Mr Mathur told Mr Plotke that there was around US $15 million in Crown I which would be “available to draw in normal circumstances”. He asked Mr Plotke whether there was a “better use” for the cash and said that the reason the cash had not been “deployed” previously was that Astra “didn’t know whether [LGT] wanted unwind the vehicle in end of ’16, middle of ’16, or you wanted to carry it on and how long do you have it for. That is why we stopped releasing the cash for a long time, as you know. This is sort of in that mode at the moment.”

During this conversation, there was no expression of concern with the Defendants or mention of any previous concerns or remarks made by third parties. Mr Mathur ultimately accepted that Mr Plotke said that having the cash lying around was “not a good idea”, but that if there is an investment he could buy with it, “that would be good” [T8/46-47]. However, there was no asset to buy in October, but if there had been, Mr Plotke would have asked him to buy it [T8/48; T8/53-54].

On 14 October 2016, almost four months after the conversation between Mr Plotke and Mr Siddiqi in Rome, Crown made a redemption request for US $7.5 million. They requested that Astra waive the usual three-month notice requirement, with a view to a further redemption of US$7.5 million in the new year. The US$7.5 million was withdrawn on 17 October 2016, bringing the total cash investment in Crown I to US $35.4 million. That was a very large amount of money if it had been the case that the withdrawal had been prompted by existential or reputational concerns relating to Astra.

In respect of the months which followed:

On 19 and 22 December 2016, there was an exchange of friendly emails between Mr Plotke and Mr Mathur thanking Mr Mathur and Dr Adler for a very generous Christmas gift. Mr Plotke described his/LGT’s opinion of Astra’s performance over the last twelve months as “outstanding”. Mr Rigter replied to say that they were “looking forward to continue this for the years to come…”.

Later in December 2016 two large credit default swap positions were sold in Crown I. Dr Adler suggested to Crown that they leave the money in the account rather than withdraw it, for last minute opportunities. Mr Mathur accepted that this is what was said [T8/81-82]. He also accepted that Crown did then keep the money in for last minute opportunities. [T8/832-83] Thus, LGT was content to leave money in Crown I in late December 2016 for last minute opportunities. Mr Mathur attempted to explain this by saying that Mr Seeholzer was very concerned about the matter, although Mr Plotke and Mr Rigter were broadly satisfied. He purported to explain that it was not his witness statement because “…it is my supposition. It is not a fact.” The transcript continued: “Q. That is all we have to go on? A. At the moment yes.” This is based entirely of supposition and speculation.

A further redemption request was made by Crown for US $14.1m from the Crown II portfolio on 4 April 2017. However, between 29 April 2017 and 15 May 2017, there was an ongoing discussion between the Defendants and LGT of new “co-investments”, and an all-day meeting about different trades. During the course of 2017, the business relationship between LGT and the Defendants continued, for example in May 2017, Mr Plotke wrote an email to Mr Mathur enquiring about a potential co-investment. Crown III continued to make contributions throughout May 2017.

On 9 August 2017, LGT sent its quarterly due diligence questionnaire to the Defendants for the reporting period 1 January 2017 – 30 June 2017. The disclosure suggests that the friendly business relationship between LGT and the Defendants continued until at least the end of 2019. For example, Mr Plotke wrote an email to Mr Mathur and Dr Adler (copying in Raymond Seeholzer) thanking them for the “nice basket” they had been sent. Mr Plotke went on to say that “highly appreciated was also your great performance from last year and I hope you are able to deliver such fantastic returns going forward.”

There is no evidence that Astra’s overall financial position worsened after 23 June 2016, less still that it worsened as a consequence of the words complained of. The focus of the evidence has been on the individual redemptions and their impact on a particular managed fund. When asked about Astra’s overall financial health, Mr Mathur accepted that since 2016, Astra had continued to do well financially [T7/113:4]. There is an absence of evidence as to how any serious actual financial losses impacted on the overall financial position of Astra, or on Astra’s “bottom line” in the words of Gubarev referred to below at para. 89.

Astra suggested that the matter escalated to due diligence in respect of Astra, showing that the words must have caused loss. However, a due diligence exercise was carried out at a meeting on 7 July 2016. It was arranged before the Statements were even made, showing that it was a routine meeting at its inception. It lasted approximately an hour to an hour and a half. To the extent that there were any concerns about the Defendants’ “operational risk”, these were clearly addressed as of 7 July 2017. It did not lead to a complaint by Mr Mathur at the time. There was no evidence of financial loss in respect of the audits. In the light of the matters set out above, there is no evidence of actual loss, nor was actual loss a natural and probable result of the words spoken.

Mr Rigter’s evidence was that at the conclusion of the meeting of 7 July 2016, LGT was “broadly satisfied.” Mr Mathur accepted that LGT did not at any stage say to him, or to Dr Adler, that they were taking into account comments made by Mr Siddiqi in their investment decisions [T8/53-54]. Further, he accepted that at the 5 October 2016 meeting, Mr Seeholzer asked the Defendants to make some purchases for Crown I as well as for Crown II and III [T8/59] if the opportunity arose. The obvious inference here is that Mr Seeholzer, if he was aware of the statements at all, was unconcerned when it came to making investment decisions. The continuance of the relationship and the making of new investments strongly indicates that the alleged Statements did not cause actual financial loss.

On the contrary, if there was a problem which might have been caused by the alleged words used, a reasonable investor would not simply pull its money or reduce its investments unless satisfied that it was the right thing to do. This was accepted by Mr Mathur [T8/52-53]. The natural and probable result was that any issue would be resolved by disclosure of the financial position of Astra, which would have demonstrated the true position. In this case, a small amount of due diligence would have resolved the position without the need for detailed inquiry to the satisfaction of LGT. It should also consider the context in which the publication occurred. It should not assume that a publishee would take immediate or unreasonable action in relation to the statement. This was the approach of the Court in Brady v Express Newspaper [1997] EMLR 192, in which a claim for malicious falsehood brought by a prisoner on the basis that the falsehood could have resulted in the loss of a discretionary weekly allowance was struck out on the basis that no reasonable prison authority would withdraw a privilege without further inquiry.

That is what ensued here, and so not only are Astra not able to establish any loss, nor are they able to show that there was or would have been any natural and probable loss. Some of the proof of this is what happened after the statements were allegedly made. There was no likelihood of serious loss because it was likely that LGT would inquire of the true position and would ascertain that there was no problem, and the alleged words were not borne out by the true financial position of Astra. It is also to be borne in mind that if the Statements were made, they were not committed to writing, they were not widely published, but related to Mr Plotke. Further, the effect of not calling Mr Plotke is that there is no direct evidence of the way in which the words were uttered and the precise context which would be of value in order to prove a natural and probable effect of the words used. In all the circumstances, Astra have failed to prove that Mr Siddiqi and/or Musst caused or was likely to cause Astra serious financial loss.

There have been raised other defences of qualified privilege, honest opinion and truth to the claim in defamation. In view of the findings in respect of publication and damage, it is not necessary to make findings about these defences.

The Court has rejected the Defamation Claim on the basis that it has not been proven that there was a publication as alleged and likewise that the actual or natural and probable requisite loss has not been proven. There is a claim also in malicious falsehood. As regards publication, it fails in that the publication has not been proven.

The central ingredient of malicious falsehood is malice. The law is that “a defendant should only be liable for malicious falsehood if the falsehood represents one of the possible correct meanings of the defendant’s words and the defendant intended to convey the falsehood”: Cruddas v Calvert [2015] EMLR 16 at [para.114] per Jackson LJ. Evidence of an improper dominant motive, or proof that the maker of the statement knew that it was false, may be evidence of malice. However, it is the defendant’s subjective understanding of the meaning which is relevant: Cruddas v Calvert [2013] EWHC 2298 (QB) at [para.206] and Clerk & Lindsell on Torts 23^rd Ed. paras. 22.12 – 22.15. The submission of Astra is that Mr Siddiqi made the statements maliciously in that he wanted 2B and/or Crown to withdraw the investments and thereby to bring about what he perceived as an entitlement to a performance fee. He did so because he was short of money, and he either knew that he was saying was false, or he did not care whether it was true or false.

Astra draw attention to the differences between a claim in slander and a claim in malicious falsehood. However, the differences in the end do not assist the position of Astra. This is because, on the two central issues of publication and malice, the case has not been proven. It is not therefore necessary to go into detail about alternatives to alternatives.

At common law, a claimant can maintain an action for malicious falsehood if it can be shown that: (i) the defendant published false words which refer to, or impact upon, the claimant or his business or his property or his economic interests; (ii) that they were published maliciously in the meanings which they are reasonably understood; and (iii) that special damage has followed. However, as with slander, the common law requirement for proof of special damage has been removed by statute in respect of certain types of falsehood: – see s.3 of the 1952 Defamation Act.

The subject of the publication is the same in malicious falsehood as in slander. I have found that the claim must fail in slander on publication, and it must fail for the same reasons in malicious falsehood. It is then necessary to consider whether the words were published maliciously in the meaning which they are understood. It is difficult to consider alternative cases. I have considered the matter from the perspective of publication, but I must now consider the matter from the perspective of the state of mind of Mr Siddiqi.

In my judgment, the claim in malicious falsehood fails not only on publication, but if there was a publication, on malice. It was not in the perceived interests of Mr Siddiqi to publish falsehoods about Astra. I have seen Mr Siddiqi being cross examined. Contrary to what is alleged, he did not seek to traduce Astra. The scheme of seeking to get investors to leave or to pay the fees directly to Musst has not been established. He was interested in seeking to persuade Mr Mathur to pay what he believed was owed. That did not mean that he would make up matters intentionally or recklessly. The approach of him and his wife was more analytical than that, and they would know that falsehoods would not assist their cause.

Having found against Astra on the central features of publication and malice in the malicious falsehood claim, it is unnecessary to prolong this judgment by considering whether any differences in respect of proving special damage in malicious falsehood from slander might have led to a different conclusion on damage. It appears from the Tesla case that, due to section 3 of the Defamation Act 1952, there is no difference, and the claim in malicious falsehood must fail due to an inability to prove either actual loss or that the words were calculated to cause loss in the sense that pecuniary damage was more likely than not to be caused by the publication.

For all the reasons above, the Defamation Claim is dismissed.

This arises not in tort, but as a contractual claim under the Octave Contract. It is brought in the event that (as has occurred) the Court has found that the Octave Contract has been novated. There are two principal consequences of the alleged breach or breaches of contract. First, it is to seek to say that statements made by Mr Siddiqi in May 2016, June 2016 and July 2017 amounted to repudiatory breaches and/or gave rise to a contractual right to terminate. It is said that the Octave Contract was terminated by the notice given in the Defence and Counterclaim with effect from 18 January 2019. It is said that Musst’s right to a revenue share terminated either at common law or pursuant to Clause 13.2 of the Octave Contract. Second, it is to claim damages for breach of contract.

The relevant clauses are as follows:

It is first necessary to identify the alleged breaches. As noted above, the Defamation Claim was brought only in respect of alleged slander on 23 June 2016 at the Rome Conference. The Counterclaim alleging defamatory statements relies additionally on a conversation in May 2016 between Mr Rigter and Mr Siddiqi and a conversation in July 2017 between Dr Chander and Mr Siddiqi. These conversations have already been considered in the context of the contention of Astra that they are said to be evidence that the alleged defamatory statements were made on 23 June 2016.

I bear in mind in considering the matters now in the Contract Claim that the burden on a claimant is to prove a disparaging statement and that the questions are not the same as in a slander case, albeit that there is overlap of subject matter in this regard between the Counterclaim in the Contract Claim and the Defamation Claim. A disparaging statement may occur even if it is true and no loss occurs. In RSM International Ltd v. Harrison [2015] EWHC 2252 (QB), a successful summary judgment application was made to enforce the provisions of a settlement agreement prohibiting the defendant from making “ any disparaging or derogatory statements ”, in which HHJ Waldon Smith said:

With reference to the Rigter conversation in May 2016 which has been discussed in the context of the Defamation Claim, I make the following findings, namely:

Mr Rigter does not recall exactly what was said.

There was no contemporaneous record of what was said.

The allegation was raised long after the event.

There was a real risk of contamination of the kind referred to in Gestmin above.

I was critical of the evidence of Mr Rigter in the Defamation Claim, which is relevant to the weight which can be placed on his evidence as regards the conversation in May 2016.

In the circumstances, the allegation of express disparaging statements being made in May 2016 is not proven.

Further, the statement that there was an implication is not proven without the words used or the context. It is not proven that there was the alleged or any implication or that anything was said that was disparaging.

In any event, even if the statements were made to Mr Rigter in May 2016, there is no evidence that either the statements caused or were likely to cause loss to Astra for the reasons set out in the Defamation Claim. The reasons here are very similar to those in the Defamation Claim relating to the Rome Conference. The alleged statements did not cause Astra to make a complaint or LGT to stop its business with Astra. On the contrary, on the basis of his statement at para. 19, Mr Rigter said that he reported this to the Chief Investment Officer of Liquid Alternatives at LGT. It was decided to take no action given Astra’s positive performance. Mr Rigter suspected some personal reason on the part of Mr Siddiqi.

As regards the Rome conference, the findings in the Defamation Claim are repeated. Although that was a finding about slander, whereas disparaging statements are broader because they might include true statements, it has not been proven that disparaging statements were made about Astra or Mr Mathur. The rationale is substantially the same as the reason why the Statements were not found to have been at the Rome Conference. In any event, even if the statements were made there is no evidence that either the statements caused or were likely to cause loss to Astra for the reasons set out in the Defamation Claim. They were not taken up for months with Mr Siddiqi. Since Mr Plotke has not given evidence, there is no contextual evidence from which to shed light on how the alleged words were uttered and how grave any alleged breach of contract was, which would be relevant to materiality and whether any breach was remediable.

As regards the conversation with Dr Chander, the Court repeats its criticisms of the evidence of Dr Chander, and its findings regarding the overall credibility of Mr Siddiqi. The Court does not find proven the allegations made by Dr Chander and bears in mind the absence of contemporaneous record, the absence of contemporaneous challenge and the real risk of contamination in respect of Dr Chander’s evidence. It is arguable that the admitted comments of Mr Siddiqi, namely his belief that Mr Mathur was unreliable and had a dark side were disparaging statements about Astra and therefore amounted to a breach of contract: see the fourth statement of Mr Siddiqi para. 184.

Here too, there is no evidence that either the statements caused or were likely to cause loss to Astra. The Court bears in mind the fact that this was a passing conversation in the London Underground to a solitary person who was a friend and not a customer. At worst, it was an attempt to enlist an intended go-between to assist in a dispute. There has been no evidence of actual loss. Further, it is not proven that any loss was a natural and probable result of the words used.

On the basis of these findings, it is necessary to consider whether there was a right of termination on the basis of the admitted comments of Mr Siddiqi. In my judgment, there was not a right of termination for the following reasons, namely:

There was not a right of termination at common law. If there was a breach of contract, it did not go to the root to the contract bearing in mind the nature of the conversation with the intention that Dr Chander assist in finding a solution to the dispute, the lack of consequence and the other features related in the paragraph immediately above of this judgment;

In respect of the contractual termination, the breach was not irremediable in the sense defined below.

Likewise, the breach was not material in the sense defined below.

There was a right to termination for breach where the breach was not remediable. Given the lack of gravity of the breach, it would be surprising if the parties intended that, without more, there could be a termination. In some cases, courts have inferred that this does not apply to every breach, but only to a breach of a particular gravity: e.g. see Rice v Great Yarmouth Borough Council (2001) 3 L.G.L.R. 4; The Times, July 26, 2000. If this was a breach, it was not a repudiatory breach or (as noted below) a material breach.

In my judgment, this construction does not arise for consideration since in my judgment, the breach was remediable. If it was remediable, there can be no termination without a notice to remedy. Astra submit that the breach was not remediable on the basis that the disparaging words had been uttered, and that act cannot be undone. However, in connection with less serious breaches, the Courts have interpreted breaches capable of remedy in a broader sense. This was expressed by Lord Reid in Schuler (L) AG v Wickman Machine Tool Sales Ltd [1974] A.C. 235 HL at 248-250:

In this case, if there was a breach of contract, then it could have been put right by clarification to Dr Chander. In the second sense of Lord Reid, the breach, if any, could have been remedied.

In any event, even if the statements amounted to a breach under clause 12.2.2 of the Octave Contract so as to entitle Astra to terminate it, this did not have the effect of terminating Musst’s rights to payment of fees for introductions already made, unless the “Agreement be terminated following a repeated (after written notification) material breach of the Introducer’s obligations hereunder”: see clause 13.2. The courts have in the past considered what is meant by a “material breach” (as opposed to “repudiatory breach”) in the context of clauses giving rise to a right to terminate (which is analogous to the right here to stop paying fees), and they have held that:

Even if any of the alleged statements is found to have been made, none of them constituted a “material breach” within clause 13.2 of the Octave Contract such as to entitle Astra to escape ability to pay for future entitlements, because (a) none was likely to cause, nor did any of them cause, any loss, and (b) as regards the actual breaches themselves, they were statements to single individuals, not reduced to writing and without any evidence of wide circulation thereafter.

In respect of the statement to Mr Rigter, Mr Rigter says that, although he reported the first statement to the Chief Investment Officer of Liquid Alternatives at LGT, it was decided to take no action. This was because LGT’s investments were doing so well with Astra, and he suspected that Mr Siddiqi simply had personal reasons for saying what he said.

In any event, there was no “repeated (after written notification) material breach” within clause 13.2. The only statement after written notification was the one to Dr Chander. However, there was no material breach, nor any repeated material breach, even if Mr Siddiqi did say the words to Dr Chander. Even if that was a breach, which is not accepted, it was not material. There is no suggestion that there was or could have been any adverse consequence from the words spoken to Dr Chander.