Just 8 months on from our previous post on this case, on 23 March 2018 the Bermuda Court of Appeal in the matter of Sturgeon Central Asia Balanced Fund Ltd. (the Fund) has overturned the judgment at first instance refusing a winding up.
The decision really turned on the question of the true construction of the Bye-Laws of the Fund. The Court of Appeal found that in 2014 the Fund wrongly took away the Participating Shareholders’ right, a right which it found existed for the benefit of the ultimate beneficial owners of those shares, to procure the winding up of the Fund which had been enshrined in its Bye-Laws since inception in 2007. It did not agree with the Chief Justice at first instance that the Management Shareholder must also vote in favour of the winding up for the Participating Shareholders to exercise that option under the Bye-Laws.
The Court of Appeal viewed the Fund’s actions in denying the Participating Shareholders their rights as giving rise to a “justifiable lack of confidence in the conduct and management of the fund’s affairs”, and that the business of the Fund had not been conducted “in accordance with the principles of commercial administration” as laid down in the Bye-Laws to which the Participating Shareholders subscribed.
Of note was the Court’s finding that want of probity was not a prerequisite for a petition of this type, and that the action of depriving a “class of shareholders of a fundamental right may justify winding up especially when that right is to vote for one, even if the action was bona fide (but wrong)”. The observations of Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd  AC 360 that “to confine the application of the just and equitable clauses to proved cases of mala fides would be to negative the generality of the words” were relied upon in this respect.