Al Sadik v Investcorp Bank BSC and others

A commercial agreement expressed at a high level is construed as a whole, in its admissible factual context and by reference to its business purpose. A general power to take actions necessary or desirable to achieve that purpose may authorise implementing steps which are not individually specified. A limited express power does not exclude another power arising from the agreement’s primary purpose where exclusion would defeat that purpose.

The Privy Council ordinarily declines to disturb concurrent findings of primary fact, particularly findings rejecting want of probity, unless a very limited exceptional category is established. An exceptionally delayed appellate judgment may cause injustice and require careful scrutiny, but delay alone does not make the judgment unreliable or deprive the proceedings of their judicial character.

The appellant invested AED500 million under a share purchase agreement with Investcorp Bank BSC and related companies. The investment was placed through Shallot IAM Ltd and its wholly owned subsidiary, Blossom IAM Ltd. Blossom borrowed against the portfolio to make leveraged investments in hedge funds.

The Grand Court of the Cayman Islands rejected claims that the transfer to Blossom and the portfolio-level borrowing were unauthorised. It found that Investcorp had breached its monthly reporting obligation under clause F4, but that the breach was innocent rather than dishonest. The Court of Appeal upheld those conclusions after a delay of three years and ten months in delivering judgment.

The appeal concerned whether the agreement authorised the use of Blossom and portfolio-level leverage, and whether the Board should depart from its settled practice of declining to disturb concurrent findings of primary fact because the appellate delay had rendered the first appeal ineffective.

1. Appeal dismissed. Lord Briggs delivered the Board’s judgment. The agreement authorised both portfolio-level leverage and the use of Blossom as the vehicle through which that leverage was achieved.
2. The share purchase agreement was a commercial agreement expressed at a high level of generality and by reference to its business purpose. Clause A identified investment in hedge funds as its purpose. The Investment Proposal formed part of the admissible factual background and showed that the contemplated purpose included leveraged investment. Clause D2 therefore authorised Shallot to take actions necessary or desirable to achieve that purpose, without any need to imply an additional contractual term. The investment manager retained discretion over the funds and leveraging method selected: paras 32–37.
3. The industry did not treat portfolio-level and fund-level leverage as materially distinct terms of art. Both were available methods of implementing a leveraged strategy. Blossom was wholly owned and funded by Shallot and existed solely to borrow before investing the combined funds in hedge funds. The purchase of its shares was therefore an administrative step, not an investment within clause A. The character of the transaction had to be determined within the agreement rather than by its abstract corporate form: paras 36–39.
4. Clause I’s express power to borrow for temporary liquidity needs did not exclude borrowing undertaken to achieve the investment purpose. That liquidity power was additional to the authority arising from clauses A and D2. Applying expressio unius est exclusio alterius would have produced a construction destructive of the agreement’s leveraged investment purpose: para 40.
5. The absence of breach made causation and quantum academic. The Board nevertheless observed that causation would have been difficult to establish because the judge found that Investcorp would otherwise have used fund-level leverage, which would have caused a greater loss: para 41.
6. The Board applied the settled practice explained in Central Bank of Ecuador v Conticorp SA [2015] UKPC 11. It declined to disturb concurrent findings of primary fact exonerating a party from dishonesty. Although the Court of Appeal’s delay was exceptional and caused real injustice, delay alone increased the risk of unreliability rather than invalidating the judgment. Its detailed reasoning demonstrated that the appeal remained a proper judicial process and did not fall within the exceptional category illustrated by Devi v Roy [1946] AC 508: paras 42–53. The consequential issues of deceit, rescission and loss did not arise.

1. Privy Council: Dismissed the appeal. It upheld the construction of the agreement adopted below and declined to interfere with the concurrent finding that the reporting breach was not dishonest.
2. Court of Appeal of the Cayman Islands: Upheld the Grand Court’s conclusions that the transfer to Blossom was an authorised administrative step, portfolio-level leverage was permitted, and the reporting breach was innocent rather than dishonest.
3. Grand Court of the Cayman Islands: Jones J rejected the claims based on unauthorised investment, unauthorised leveraging and dishonest concealment. He found that Investcorp had breached clause F4’s reporting obligation, but that the breach was not dishonest.