Musst Holdings Limited v Astra Asset Management UK Limited & Anor

A contractual commission is payable where an investment satisfies the agreed definitions when the investment is made. “Synthetic asset backed securities” may include hybrid securities backed by both cash and synthetic assets where that is the objective meaning and shared commercial understanding of the contract. “Buy and hold” does not require assets to be held for a fixed period. A replication requirement expressed by reference to what a fund was “designed to” do is principally a factual inquiry into the investment team’s intention, assessed at the point of investment. A novation may arise by conduct where the parties perform the agreement through a substituted contracting party. A party making important factual representations to a contractual counterparty may assume a duty of care where reliance is reasonably foreseeable.

The claimant, Musst Holdings Ltd, had an introduction agreement with Octave under which it was entitled to 20% of management and performance fees from eligible investments. In earlier proceedings concerning Crown I and 2B, Freedman J found that the agreement had been novated first to Astra LLP and then to Astra UK. The Court of Appeal dismissed Astra’s appeal.

The present claim concerned Crown II and Crown III. The issues were whether those managed accounts followed the contractual Current Strategy, whether they were Funds and Eligible Investments, whether the earlier novations extended to them, whether Astra breached its payment and information obligations, and whether representations that Crown II followed a different strategy gave rise to liability.

1. Eligible Investments. The court held that Crown II and Crown III were Funds and Eligible Investments. The relevant requirements were assessed at the point of investment. Crown II was tested when its committed capital had been fully drawn down on 31 March 2016. Crown III was tested when its US$15 million commitment had been fully drawn down on 30 June 2017.
2. Construction. “Synthetic asset backed securities” included hybrid securities backed by both cash and synthetic asset pools. The contractual expression “primarily” required investment well over 50% in synthetic ABSs. “On a buy and hold basis” meant acquiring securities at a substantial discount and holding them until their market value reflected their perceived fundamental credit risk and reward. It did not impose a fixed three-year holding period.
3. Replication. “Designed to substantially replicate” required a factual inquiry into the Investment Team’s subjective intention when the account was established and at the point of investment. It did not require a costly, multi-factor forensic comparison of portfolios over an extended period. The contractual documents, contemporaneous communications, overlapping investments and surrounding evidence established the requirement for both accounts.
4. Novation. The earlier judgment found that Astra LLP assumed Octave’s obligations under the agreement on 5 November 2014 and that Astra UK assumed them in place of Astra LLP in July 2016. That finding extended to the obligation to pay the revenue share on any Eligible Investment within clause 3.1. Alternatively, the correspondence and payment on 4 February 2015 constituted a further novation extending the obligation to Crown II. The court adopted the earlier judge’s findings and reasoning even if no issue estoppel arose.
5. Contractual breaches and relief. Astra UK breached clause 4.1 by failing to provide statements after Musst’s request on 28 July 2016, and clause 4.5 by failing to pay the revenue share on fees received. No past breach of clause 11.3 was established, although further relief could be sought if Astra did not undertake to comply. Quantum and consequential orders were deferred.
6. Misrepresentation and negligence. Statements that Crown II followed a new CLO and commercial-real-estate strategy, was outside the agreement, and did not replicate ASSCFL were false. Astra LLP owed a duty of care because the information was important, exclusively within Astra’s knowledge and intended to be relied upon. Mr Holdom breached that duty by repeating the statements without verification. The representations caused Musst to lose the opportunity to bring the claims in the earlier proceedings. The claim against Astra UK for negligent misrepresentation was dismissed on the pleaded case.
7. Other issues. The court declined to infer deliberate concealment or bad faith. Contractual claims accruing before 29 April 2015 were statute-barred, subject to the possibility of recovery through the misrepresentation claim. The further unjust-enrichment and account claims did not arise.

• Earlier High Court proceedings: Freedman J gave judgment in the First Claim on 17 December 2021, [2021] EWHC 3432 (Ch), and consequential judgment on 18 March 2022, [2022] EWHC 629 (Ch).
• Court of Appeal: Astra’s appeal was dismissed on 13 February 2023, [2023] EWCA Civ 128.
• High Court: The present judgment determined the Crown II and Crown III issues and deferred consequential matters.