Stefan Peterson and Hans Ekstrom, Justice Andrew J Jones QC wrote in his decision, “consciously chose not to perform their duties” to the fund, “or at least not in any meaningful way”, based on the the evidence presented in court.
The ruling is being described by local legal professionals “as a landmark judgement”, according to an articleon the Cayman News Service website, which noted that it was the first time such a decision had been handed down in the Caymans “in the context of a failed investment fund”.
According to the court documents, the Weavering Macro Fixed Income Fund Ltd had been set up in April 2003, incorporated in the Cayman Islands, listed on the Irish Stock Exchange, and was being managed by a London-based company, Weavering Capital (UK) Ltd.
This UK entity was, the documents note, “indirectly owned and controlled” by Magnus Peterson, reportedly a brother of defendant Stefan and the stepson of defendant Ekstrom. Magnus Peterson, it notes, had been described in the fund’s offering document as its ‘principal investment adviser’.
Weavering Capital went into administration in the UK, amid a fair amount of publicity, in March 2009. Even now, the UK’s Serious Fraud Office’s website maintains a page where, as recently as last December, investors who had bought into the fund were being urged to get in touch.
‘Wilful neglect’
In his judgement, Justice Andrew J Jones QC said the evidence in the case led "unequivocally to the conclusion that both of these directors are guilty of wilful neglect or default”, because of what he said was their conscious decision not to perform their duties as directors.
“Given their business backgrounds and experience, they must have known that the directors of an investment fund whose shares were listed on the Irish Stock Exchange would be expected to act in a businesslike manner, and that they could not discharge their duty by signing whatever documents were put in front of them (including standard form minutes of meetings) without reading them, or if they did read them, without applying their minds to their content," he wrote.
The two defendants also “never once, in six years, asked any of those whom they were supposedly supervising to give them a written report, or attend a board meeting provide to provide them with an oral report”, the judge went on.
‘Excellent decision’
Writing in a column carried on the Cayman News Service, Don Seymour, founder and managing director of dms Management Ltd, a fund governance service in the Caymans, said the decision was an "excellent" one for fund investors, and for "continued confidence in the Cayman Islands fund and alternative investment industry".
"It proves that the system works effectively and should blunt any criticism by those proposing extreme concepts and agitating for radical overhaul," he added.
"Simply put, the Cayman Islands will hold directors accountable for their poor performance."
Shaun Folpp of the Cayman Islands’ office of Ogier and David Lord QC represented the plaintiff in the case, the liquidators of the Weavering Macro Fixed Income fund, or Ian Stokoe and David Walker of PwC. Ben Valentin, instructed by Kirsten Houghton of Campbells, represented Peterson and Ekstrom.
