Financial Technology Ventures II (Q), LP and Ors v ETFS Capital Ltd and Anor [2021] JCA 191 (20 July 2021)

Court of Appeal 20 July 2021 Before : Jonathan Crow, Q. C., President; Lord Anderson of Ipswich K. B. E., Q. C., and; David Perry, Q. C.. Between (1) Financial Technology Ventures II (Q), LP & Others Appellants And (1)

ETFS Capital Limited First Respondent And (2) Graham Tuckwell Second Respondent Advocate N. A. K. Williams for the Appellants. Advocate S. J. Alexander for the First Respondent. Advocate R. A. B. Gardner for the Second Respondent. judgment CROW JA:

INTRODUCTION 1. Following the judgment of this court given on 29 June 2021 Financial Technology Ventures II (Q) LP & Others v. ETFS Capital Limited [2021] JCA 176 ( "the Judgment" ), the parties have helpfully agreed a number of consequential matters. We will make an order in the terms of the draft Act of Court provided by the parties, in so far it is agreed.

2. There remains a dispute between the parties in relation to two issues - namely, the timing of the purchase of the Plaintiffs' shares in the First Defendant ( "the Company" ) either by the Company itself or by the Second Defendant ( "Mr Tuckwell" ) , and the costs of the proceedings in this court. The parties have each provided written submissions and reply submissions in relation to those two issues, for which we are grateful and which we have considered carefully. This is the judgment of the court.

3. The background facts are set out in the Judgment and they do not need to be repeated here. TIMING OF THE BUY-OUT 4. By an Act of Court dated 26 January 2021, the Royal Court ordered that the buy-out of the Plaintiffs' shares in the Company be completed by 30 April 2021. By a later Act of Court dated 2 April 2021 the operation of that buy-out order was stayed "until further order of the Royal Court or Court of Appeal" . There is now a disagreement over the appropriate replacement timetable for completion.

5. The Plaintiffs originally submitted that the buy-out should be completed within 21 days of the date of this court's order. In response, the Company sought about 6 weeks. This was on the basis that the Company contended (and Mr Tuckwell agreed) that consent is required from the Jersey Financial Services Commission ( "the JFSC" ) pursuant to Article 14 of the Financial Services (Jersey) Law 1998 before the buy-out can be completed. The necessary paperwork seeking such consent was apparently submitted on 8 July 2021 with a request that it be considered at the earliest opportunity, and the timeframe within which a response is expected from the JFSC is between 4 and 8 weeks, although it might take longer. On that basis, both the Company and Mr Tuckwell submitted that the order should provide for completion of the buy-out by the third week in August (the Company specified 19 August, whereas for some reason Mr Tuckwell specified 23 August), on the understanding that it can be effected earlier if permission is granted sooner.

6. Having seen the submissions from the Company and from Mr Tuckwell, the Plaintiffs then indicated in their reply submissions that, although they did not take a view on whether JFSC consent was in reality required, since an application for such consent had been made, they would be content for completion to be effected by the earlier of ( i ) 21 days after the JFSC has given confirmation that it has no objection, or (ii) 19 August 2021.

7. We have not been asked to rule on whether JFSC consent is in truth required, and we do not do so at this stage. If, in due course, there is any need for such a ruling, the parties can apply to the court and make such submissions as seem appropriate. The ruling today on the timing of the buy-out is made simply on the basis that, as a matter of fact, the Company considers that JFSC consent is required, an application has been made, and the response is awaited.

8. Against that background, we start from the position that the original buy-out order was made on 26 January 2021, nearly 7 months ago. The effect of that order was stayed pending this appeal, but Mr Tuckwell and the Company would have been aware that the cross-appeal was not guaranteed of success, and accordingly there was every possibility that the buy-out order would be upheld. For these reasons, the Plaintiffs are entitled to urge for a relatively short timetable. Nevertheless, when making the original buy-out order, the Royal Court directed completion to be effected by 30 April 2021: in other words, it allowed some 13 weeks from the date of its order. Since the effect of that order was stayed, and since there was considered to be a real prospect of the cross-appeal succeeding, it would have been unnecessary and inexpedient for Mr Tuckwell or the Company to take any preliminary steps towards effecting completion until after the outcome of the appeal was known. Furthermore, assuming that JFSC consent is required, it seems unlikely that the JFSC would even have entertained a contingent application for such consent, dependent on the outcome of the appeal. Moreover, although the passage of time might be considered to cut both ways, the fact remains that this dispute has been festering for many years, and the Plaintiffs have not sought to make out any tangible grounds for urgency. Any prejudice they might claim to suffer from being kept out of their money will be compensated by the accrual of interest under §6 of the Act of Court dated 26 January 2021. Finally, it would be a waste of resources if the parties were forced to apply for a variation of this court's order if, in the event, the consent of the JFSC were not obtained within the expected timeline.

9. For these reasons, we direct that completion should be effected by the earlier of ( i ) 21 days after the JFSC has given confirmation that it has no objection, or (ii) 31 August 2021 (allowing a little more time than sought, taking account of the possible delays resulting from the pandemic and the holiday season).

10. The draft Act of Court submitted by the parties included provision for liberty to apply, should there be any unexpected problems, and that provision will be included in the Act of Court as issued.

COSTS 11. The Plaintiffs seek an order that Mr Tuckwell should pay one third of their costs of the appellate proceedings, and that the Company's costs should be borne either by the Company itself or by Mr Tuckwell. For his part, Mr Tuckwell submits that he and the Plaintiffs should each bear their own costs, and that the Plaintiffs should pay the Company's costs. The Company seeks an order that its costs be paid as to 70% by the Plaintiffs and as to 30% by Mr Tuckwell.

12. The applicable principles in relation to costs which are relevant in the present appellate proceedings were not in dispute. ( i ) Costs are in the discretion of the court, pursuant to Article 16 of the Court of Appeal (Jersey) Law 1961 . (ii) It is a very wide jurisdiction: Channel Islands Knitwear Co Ltd v. Hotchkiss [2001] JLR 570 . (iii) The overriding objective is to do justice between the parties. (iv) In exercising the court's discretion, there are no inflexible rules. (v) Nevertheless, the general starting point is that costs should follow the event, unless it appears to the court that the circumstances of the case are such that some other order should be made. (vi) Where a split order for costs is considered appropriate, the court is now more often willing to make an order by reference to a specified percentage of the overall costs, rather than making an issues-based order which consigns the parties to a lengthy process of taxation: MB & Services Ltd v. Utd Co Rusal [2020] JRC 099 , at [21], and In the matter of Saisies Judiciaires in respect of the realisable property of Robert Tantular [2020] JCA 01 3, at [55] - [56].

13. Applying that approach, it is first necessary to consider whether any party can properly be said to have won in this court. In our judgment, it cannot. Mr Tuckwell failed to persuade us to set aside the buy-out order, or to increase the minority discount, or to apply a blockage discount in valuing the WisdomTree shares. Similarly, the Plaintiffs failed to persuade us to alter the buy-out order by removing the minority discount or by altering the valuation date, or to set aside the Royal Court's order in relation to the valuation of the portfolio companies. The Company failed to persuade us that, if no buy-out order had been made, no winding-up order should be made either (the possibility of a winding-up order having been left open by the grant of leave to apply in §4 of the Act of Court dated 26 January 2021). We would also add that, for the purposes of costs, this court's views on winding-up cannot be regarded as a 'win' for the Plaintiffs, because the ruling was entirely contingent and no winding-up order was in fact made.

14. In short, the parties are now in exactly the same positions as they were following the trial in the Royal Court. That being so, there is no starting presumption that any one party should pay any other party's costs.

15. Recognising the reality of the situation, the Plaintiffs have fashioned their argument on the basis that the preponderant weight of costs was incurred in relation to the issues raised by Mr Tuckwell. In support of that approach, they have counted the pages and the time spent in written submissions, in oral argument and in the Judgment, and they have suggested that roughly two thirds were dedicated to the issues raised by Mr Tuckwell. It is on that basis that the Plaintiffs seek an order that he should pay one third of their costs.

16. We reject that argument. In our judgment, applying the test outlined in §12 above, the justice of the case is best served by requiring the Plaintiffs and Mr Tuckwell respectively to bear their own costs. There have been no winners in this court. Further, it is unrealistic to attempt even a broad-brush allocation of time as between the main issues in the appeal - namely, whether a buy-out order should have been made, and whether the minority discount should have been applied, or whether it should be increased. For the reasons given in the Judgment, each of those issues required the court to address essentially the same legal analysis and the same evidential material. In the circumstances, we do not consider that it can properly be said, for the purpose of making a costs order, that the issues on which Mr Tuckwell failed have occupied relevantly more time and effort than the issues on which the Plaintiffs failed.

17. Very properly, the Company took a largely neutral position. It submits that the active litigants (the Plaintiffs and Mr Tuckwell) should pay its costs, and that the costs burden should not be shared by the minority shareholders who have taken no active part in the proceedings. There is undoubtedly some force in that submission, but in our judgment it must be rejected. It is one of the incidents of holding shares that the company may become involved in litigation not of its own choosing, and the costs of such proceedings are properly to be regarded as part of the risk incurred in acquiring a shareholding. Furthermore, the one issue on which the Company engaged actively in these appellate proceedings was whether a winding-up order should be made in the absence of a buy-out order. On that issue, the Company's arguments were rejected. In the circumstances, it would not be appropriate to require the Plaintiffs to pay any part of its costs. Nor, given the overall outcome in this court, would it achieve justice between the parties for Mr Tuckwell to pay any proportion of the Company's costs in circumstance where the Plaintiffs are not doing so. In our judgment, the Company should accordingly bear its own costs.

CLOSING REMARKS 18. In §305 of the Judgment, this court made certain observations about the language used in some of the submissions made on behalf of Mr Tuckwell. It is right to record that, in their submissions following judgment, his legal team has offered a fulsome apology both to this court and to the Royal Court, which is naturally accepted with thanks, and nothing more needs to be said on that score. Authorities Financial Technology Ventures II (Q) LP & Others v. ETFS Capital Limited [2021] JCA 176 . Channel Islands Knitwear Co Ltd v. Hotchkiss [2001] JLR 570 . MB & Services Ltd v. Utd Co Rusal [2020] JRC 099 . In the matter of Saisies Judiciaires in respect of the realisable property of Robert Tantular [2020] JCA 013 . Financial Services (Jersey) Law 1998, Article 14. Court of Appeal (Jersey) Law 1961. Page Last Updated: 21 Jul 2021 BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII