Qatar Investment & Projects Development Holding Co W.L.L v Elanus Holdings Limited

The court dismissed the claimant's claim for specific performance of a pre-emption purchase under the Loan Agreement concerning the 70.21 carat "Idol's Eye" diamond.

Key legal principles applied included contractual construction of paragraph 10 of the Loan Agreement (the pre-emption clause), attribution principles for corporate states of mind (Meridien/Singularis principles), the scope and operation of the Duomatic principle, and the limits of ostensible authority and ratification. The court treated a "wish to sell" as a present, settled intention to sell which must subsist at the point the purchaser exercises its pre-emption right.

Material grounds for decision: the court found no qualifying "wish" of Elanus to sell within paragraph 10; the evidence did not show that Sheikh Hamad bin Saoud Al-Thani (HBS) had a settled, unconditional wish to sell that could be attributed to Elanus; the family members other than HBS did not share such a wish; the 6 February 2020 letter from Neupert did not establish authority of Elanus to trigger the clause and could not be relied on as ostensible authority; ratification failed; and the April notice served by Qipco did not validly exercise the pre-emption right in any event.

This is a first instance commercial court dispute between a Qatari investment company (QIPCO) and Elanus Holdings Limited concerning the operation of a contractual pre-emption right in a 2014 English-law Loan Agreement governing the loan of the 70.21 carat "Idol's Eye" diamond.

Background and procedural posture:

• The diamond was transferred by the Al Thani Foundation into Elanus, a Guernsey SPV, and loaned to QIPCO under a 20 year Loan Agreement executed 2 May 2014.
• Paragraph 10 of the Loan Agreement granted QIPCO a right to purchase the Asset if "the Lender wish[ed] to sell the Asset" (among other triggers), with price to be the higher of the average of two auction house mid-estimate valuations and US$10m.
• In early 2020 communications and valuation activity followed a 6 February 2020 letter from a Swiss lawyer, Dr Neupert, to QIPCO’s lawyer, asserting that the family wished to sell; QIPCO later served notices in April and July 2020 invoking paragraph 10.

Nature of claim and relief sought: QIPCO sought an order compelling specific performance of the sale under the paragraph 10 mechanism (or damages), asserting its right to purchase had been triggered and validly exercised.

Issues for determination:

• Construction: what constitutes a qualifying "wish to sell" under paragraph 10 and whose state of mind counts for the Lender;
• Fact: whether HBS, other family members, the Foundation or Elanus had such a wish;
• Attribution: whether any relevant wish could be attributed to Elanus (including by application of the Duomatic principle, ostensible authority or ratification);
• Withdrawal: whether any wish could be withdrawn before QIPCO exercised the right;
• Form: whether QIPCO’s April (and July) notices validly exercised the pre-emption right;
• If exercise was effective, what relief (specific performance or damages) was appropriate.

Reasoning and conclusions:

• Construction: the court read paragraph 10 so that a qualifying "wish" is a firmly formed and unequivocal intention to sell which must subsist at the time the purchaser serves written notice; a transient or merely exploratory desire to obtain valuations does not qualify.
• Attribution: the relevant enquiry is whether Elanus (the Lender) had the requisite wish applying ordinary attribution and agency rules and corporate constitution principles (Meridien / Singularis). The court rejected reading "the Lender" as including the Foundation or as meaning solely the Elanus directors.
• Fact-finding: HBS was interested in exploring a sale and wanted valuations, but did not have a settled intention to sell that would qualify under paragraph 10; other family members (including Sheikha Sara and the mother) did not consent or share any wish to sell; the Foundation had not adopted any resolution to sell.
• Duomatic and attribution: the court found no basis to treat HBS’s views as de facto Foundation control or to attribute any such wish to Elanus by the Duomatic principle; shareholders’ unanimous informal consent cannot be used to substitute for director-managed decisions absent competent shareholder action and, in the facts, no amendment or exercise of shareholder powers occurred.
• Ostensible authority and ratification: the 6 February letter was not shown to have been sent with authority of Elanus, there was no effective holding-out by Elanus, and by April/May 2020 various communications put QIPCO on enquiry that Neupert lacked authority; ratification failed because the Elanus directors had not unequivocally adopted the act with full knowledge of material circumstances.
• Withdrawal and form: even if a qualifying wish had arisen, it had been withdrawn or ceased before QIPCO acted; the April notice did not, in any event, validly exercise the pre-emption right because it expressly sought only to "preserve" an entitlement rather than to give the written notice required by paragraph 10.

Result: QIPCO’s claim was dismissed for failure to establish a triggered and effectively exercised pre-emption right under paragraph 10.

Claim dismissed. The court held that on construction paragraph 10 required a present, settled "wish to sell" which must subsist at the time the purchaser serves notice; no such qualifying wish of Elanus was established, HBS did not have a qualifying wish that could be attributed to Elanus, ostensible authority and ratification arguments failed, any wish was withdrawn before QIPCO purported to exercise its right, and the April Notice did not validly exercise the pre-emption right. Accordingly QIPCO's claim fails.