Edgeworth Capital, a company in which property investor Robert Tchenguiz is the “moving spirit” may be liable for more than €100m after it lost a High Court lawsuit today.
The judgment, which may be taken to the Court of Appeal, relates to a dispute between Edgeworth and Abu Dhabi investment company Aabar over a joint investment in the global headquarters of Santander Banking Group in Madrid.
The freehold to the property, know as “Ciudad Financiera”, was acquired in 2008 by investors Derek Quinlan and Glenn Maud, the judgment said. However, in 2010 loans from RBS used to finance it went into default.
As a result, Edgeworth and Aabar “entered into an agreement with RBS for each to acquire 50% of the RBS loans for a total sum of just over €195m… Edgeworth and Aabar thereby acquired the right to enforce the security attached to the RBS loans with a view to obtaining the freehold of the property,” the ruling said.
However, attempts to gain control were “frustrated” and the property came, and remains, under the control of the Spanish insolvency administrator.
Edgeworth’s share of the investment was financed by Aabar. In June 2016, Aabar demanded repayment of the sums it invested on Edgeworth’s behalf, plus costs and intersects. Edgeworth disputed Aabar’s right to do this and obtained an injunction to stop it until matters could be resolved at trial.
And in a ruling today, High Court judge Mr Justice Popplewell backed Aabar, ruling against Edgeworth.
Aabar claims that, under the terms of two written agreements, a Counter Indemnity Deed (CID) and a Security Assignment of Agreements (SAA), it had the right to take over Edgeworth’s security interests attached to the RBS loan.
Edgeworth, however, argues that the CID and the SAA “do not represent the totality of the legal relationship between the parties,” the judgment said. It says that there were three oral agreements, negotiated by Robert Tchenguiz, restricting Aabar’s rights.
They are seeking a final injunction stopping Aabar from exercising its rights under the CID and the SAA plus damages of up to €2bn.
Aabar denies the oral agreement took place. In his ruling today, Popplewell J agreed.
“I have concluded, without any real hesitation, that there was no express agreement on the terms of any of the three alleged oral agreements,” he said.
While there “probably were” meetings between Tchenguiz and Aabar’s then chairman, Khadem Al-Qubasi, “it was clear from Mr Tchenguiz’s evidence that he had no genuine recollection of agreeing the terms alleged,” he said.
There were inconsistencies between the terms of the alleged oral agreements and the written agreements, and “the contemporaneous documents tell strongly against the existence of any oral agreements”.
“There is no documentary support for the existence of any of the oral agreement in any of the contemporaneous documents… This would indeed be very surprising if there had been agreement on such terms, given the vast quantities of written communication between the parties.”
He said that Tchenguiz “was not a good witness”.
“He seemed to take little care of his language or the accuracy of his evidence, often contradicting something he had said previously… I am afraid that I was driven to the conclusion that he was prepared to say whatever he thought would assist Edgeworth’s case, without any regard for its truth,” he said.
He dismissed arguments from Edgeworth that its liability should be capped at €91,275,000. However, giving judgment today, he said the injunction stopping Aabar from using the SAA and CID should remain in force pending “further arguments”.
The judge said that Edgeworth planned to seek permission to appeal at a later hearing.
According to the ruling, Edgeworth is a “Luxembourg-registered company owned by a Jersey trust of which the ultimate beneficiaries are Mr Robert Tchenguiz and his family. It was created at a special purpose vehicle for the transaction [in the judgment]. Mr Tchenguiz is its moving spirit, although he is not a director or shareholder.”
Edgeworth Capital (Luxembourg) SARL v Aabar Investment PJS Commercial Court (Popplewell J) 29 June 2018
