Blackstar Advisors Ltd v Cheyne Capital International Ltd & Anor

A contract recording an investment programme is not necessarily confined to every structural feature used for its initial implementation. The effect of later agreements depends on their language and defined terms. An agreement accepting a note as full and fair consideration for all profit sharing, whether due immediately or in the future, may fully discharge earlier payment obligations. A later entitlement triggered by an extension of a defined investment ends when the specified investor and contractual investment cease, even if similar underlying assets remain invested through a new structure. Descriptions that fees are what an investment currently produces or are currently equivalent to stated percentages describe the position at the time; without operative wording or a calculation mechanism, they do not create a fixed percentage of net asset value. The appeal was dismissed.

Blackstar, an investment introducer, claimed further fees from Cheyne under a memorandum of understanding, a capital introduction and fee-sharing agreement, and two later side letters. The claim concerned an investment introduced to Cheyne for ARRCO, a French pension fund, which was initially held through Luxembourg entities and later restructured through a French fund.

Moulder J dismissed the claim, holding that the 2008 side letter discharged the relevant payment obligations and that the 2009 side letter did not extend the entitlement beyond the restructuring. She also rejected a claim to fixed fees amounting to 1.93% of net asset value: [2018] EWHC 3496 (Comm). Blackstar appealed. The central questions were whether the fee entitlement survived the restructuring and whether the agreement created a fixed percentage entitlement.

The appeal was dismissed. The Court of Appeal unanimously upheld the result reached by Moulder J, although Lord Justice Lewison expressed no view on one aspect of the contractual construction.

1. Scope of the original investment programme. Newey LJ considered that the seven-year maturity and the use of SDFP were descriptive features of the first tranche, rather than essential limits on the broader €2 billion discretionary investment programme for ARRCO. Lady Justice Asplin agreed with the judgment. Lord Justice Lewison considered it unnecessary to decide between that construction and the narrower construction adopted below.
2. Effect of the 2008 Letter Agreement. The agreement accepted the Amortizing Note as full and fair consideration for all profit sharing payable in relation to the identified LuxCo Investor and LuxCo Investment, whether payable at the time or in the future. It therefore fully discharged Cheyne’s obligations in respect of that investment. The discharge was not confined to the Note’s maturity date. The defined expressions referred naturally to HDFP and the investment made under the specified LuxCo Agreements. Blackstar retained rights concerning other investments, but could not recover twice in respect of the same tranche.
3. Effect of the 2009 Letter Agreement and restructuring. The 2009 agreement gave Blackstar an entitlement only if the defined LuxCo Investment was extended beyond the Note’s maturity. That entitlement continued until 31 March 2014. The French Restructuring removed HDFP and replaced the contractual structure with a new arrangement involving FCP and management under Darius’ control. Investment in similar underlying assets did not preserve the defined LuxCo Investment. If the CACEIS certificate delayed completion, the entitlement ended no later than 16 April 2014; no fees were claimed for the intervening period.
4. Calculation of fees. The references to fees that the investment currently produces and are currently equivalent to stated percentages described the then-existing arrangements. They did not impose a fixed entitlement to 1.39% and 0.54% of net asset value. The agreement supplied no adequate mechanism for changes in performance or allocation, and the commercial evidence supported Cheyne’s construction.
5. Negotiation evidence. The court relied on the approach explained in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, concerning evidence of negotiations. Merthyr (South Wales) Ltd v Merthyr Tydfil County Borough Council [2019] EWCA Civ 526 did not assist because the evidence relied on was not pre-contractual. The final order was that the appeal be dismissed.

1. Court of Appeal (Civil Division): On 12 December 2019, the appeal from the Commercial Court was dismissed.
2. High Court of Justice, Business and Property Courts, Commercial Court: Moulder J dismissed Blackstar’s claim for further fees, holding that the relevant entitlement did not survive the French Restructuring and that the agreement did not create a fixed 1.93% net asset value entitlement: [2018] EWHC 3496 (Comm).