Musst Holdings Limited v Astra Asset Management UK Limited & Anor [2026] EWHC 357 (Ch)

[2026] EWHC 357 (Ch)

BL-2021-000680

Date 20 February 2026

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST (ChD)

Before

MR JUSTICE LEECH

Between

MUSST HOLDINGS LIMITEDClaimant

ASTRA ASSET MANAGEMENT UK LIMITEDDefendants

ASTRA ASSET MANAGEMENT LLPDefendant

B E T W E E N:

MR PETER KNOX KC and MS KATHARINE BAILEY (instructed by Taylor Wessing LLP) appeared for Claimant

MR GEORGE SPALTON KC and MR JONATHAN MO (instructed by Payne Hicks Beach) appeared for Defendants

Hearing Hearing dates: 12-14 and 17-20 November 2025

APPROVED JUDGMENT

[1]This is my judgment following the second trial of a number of claims brought by the Claimant, Musst Holdings Ltd (“Musst”) against the First Defendant, Astra Asset Management UK Ltd (“Astra UK”) and the Second Defendant, Astra Asset Management LLP (“Astra LLP”) (together “Astra”). In Claim No. BL 2018 002369 Musst claimed the payment of fees which it claimed were due under an introduction contract dated 18 April 2013 (the “Octave Contract”) together with associated relief. On 29 April 2021 the Claim Form in the second and present action was issued in which Musst claimed that further fees were due under the Octave Contract. I will refer to the first action as the “First Claim” and the second and present action as the “Second Claim”.

[2]In April and May 2021 Freedman J (the “Judge”) heard the trial of the First Claim together with the trial of Claim No BL 2019 001483 (the “Defamation Claim”) and I will refer to it as the “First Trial”. After receiving further written submissions he handed down a detailed judgment dated 17 December 2021 (the “Trial Judgment”): see

[2021] EWHC 3432 (Ch)

. On 18 March 2022 he handed down a second judgment dealing with a number of consequential matters (the “Consequentials Judgment”): see

[2022] EWHC 629 (Ch)

. Musst was the successful party and Astra appealed. On 13 February 2023 the Court of Appeal handed down judgment dismissing the Appeal: see

[2023] EWCA Civ 128

. Falk LJ gave the only reasoned judgment with which both Peter Jackson and Whipple LJJ agreed and I will refer to her judgment as the “CA Judgment”. Finally, on 28 February 2023 (i.e. two weeks later) Freedman J handed down judgment dismissing Astra’s application to strike out the Second Claim and for reverse summary judgment (the “Strike Out Judgment”): see

[2023] EWHC 432 (Ch)

. It will be necessary for me to consider all of these decisions in some detail in the course of this judgment and I do not therefore discuss them any further in this introductory section.

[3]The Judge set out the essential background to both actions in the introduction to the Trial Judgment and it easiest for me simply to set out the relevant paragraphs by way of introduction myself. I gratefully adopt the defined terms and abbreviations which he used below:

“I Introduction 1. This judgment arises out of two claims heard together, one referred to as the “Contract Claim” and the other as the “Defamation Claim”

. In the Contract Claim (which is Claim No BL-2018-002369), Musst Holdings Limited sues Astra Asset Management UK Limited (“Astra UK”) and Astra Asset Management LLP (“Astra LLP”) for fees for effecting two introductions, and for access to their books and records to assess all the fees that are properly due to them or on account. The term “Musst” is used for Musst Holdings Limited. Where it is intended to refer to the Musst group of companies, the term “MUSST” is used. The term “Astra” is used collectively for the Defendants in the Contract Claim. In the Defamation Claim (which is Claim No BL-2019-001483), Astra UK and Astra Capital International Limited (“Astra Capital”) sue Mr Siddiqi and Musst Investments LLP (“Musst LLP”) on the basis that Mr Siddiqi, while acting on behalf of Musst LLP, made defamatory oral statements about them in Rome in June 2016. The term Astra is also used collectively in context to refer to the Claimants in the Defamation Claim. These and other statements also form the subject matter of the counterclaim in the Contract Claim. II The background 2. Musst is an entity which is wholly beneficially owned by Saleem Siddiqi. Since 2010, he has been married to Alexandra Galligan. She too works in the financial services industry, and since 2009 she had worked for an organisation called Matrix Money Management Limited (“Matrix”), which was part of a group of companies known as the Matrix group. She reported to Mr Luke Reeves, who was the Head of Retail and Institutional Business. 3. Since the collapse of Matrix in late October or early November 2012, Ms Galligan has worked for Musst. Astra LLP was at all material times controlled by Mr Anish Mathur, who is also the ultimate beneficial owner of Astra UK through Astra Capital, a BVI company. Musst LLP is a UK LLP in which both Mr Siddiqi and Ms Galligan are partners and through which they conduct business. 4. Musst’s claim is made under the Octave Contract, a written contract dated 18 April 2013, which was originally entered into with Octave LLP and Octave Limited (collectively “Octave”), under which Octave Limited agreed to pay Musst a 20% share of management and performance fees Octave received from clients whose funds Octave managed, and to whom Octave had been introduced by Musst. At the material time, Mr Mathur was a member of Octave LLP. The fees were payable in return for introducing clients who invested in an investment strategy primarily focused on “synthetic ABS”, i.e. synthetic asset backed securities, a type of financial product which was trading at very low prices relative to their face value after the financial crash of 2008, but which Mr Mathur (who had considerable expertise in such investments) expected in 2011 and 2012 to increase substantially over a three-year period. The Octave Contract defines investments made in Mr Mathur’s strategy as “Eligible Investments”. 5. Under this contract, Musst says that it introduced at least two clients (a) a US client, 2B LLC (hereafter “2B”), and (b) a Swiss client, Crown Managed Accounts SPC (hereafter “Crown”). 2B agreed to invest in February 2013 (i.e. before the Octave Contract was actually concluded, but after its “Effective Date”), and Crown agreed to invest in June 2013. In both cases, they invested in “managed accounts” – i.e. accounts managed by Octave but managed in turn by Astra LLP on Octave’s behalf. The reason for this arrangement is that, at this point, none of the Astra entities had regulatory authority to manage the accounts themselves, so Astra LLP acted under Octave’s “umbrella”. 2B initially invested US$20 million for Octave to manage, and Crown initially invested $40 million for Octave to manage in synthetic asset backed securities. 6. At first, Octave LLP paid the agreed share of fees received from both clients until 10 November 2014 (in the case of Crown), and until 3 February 2015 (in the case of 2B). Shortly before the earlier date, Astra LLP obtained the necessary regulatory approvals. Musst’s case is that with Musst’s and Octave’s consent, (a) Astra LLP took over the management of the clients’ respective funds in place of Octave, (b) it received fees for doing so just as Octave had done, and (c) it asked Musst to send its invoices to Astra LLP instead of Octave, which Musst then did. In relation to Crown, it split the invoices between Octave and Astra LLP for the fees accruing before and after 1 September 2014, and in relation to 2B it sent its first invoices in February 2015. Astra LLP then paid these invoices and Octave dropped out of the picture. The fees payable in relation to 2B were payable monthly, and those in relation to Crown were payable quarterly, as this was how Octave and Astra LLP were paid. 7. By late April 2016, the management of the clients’ funds had been transferred to Astra UK. Astra UK sent to Musst the invoice which it, Astra UK, had sent to 2B for its management of 2B’s funds in April 2016. By reply on 13 May 2016, Musst as requested sent its invoice, but still made out to Astra LLP. Astra UK then paid this fee, and on 16 May 2016 it asked for all future invoices to be sent to itself rather than Astra LLP. 8. Astra UK thereafter did not provide the information sought for Musst to work out the precise amount of the invoices. On 28 July 2016, Musst sent to Astra UK three invoices, one in relation to Crown (for the period April to June 2016), and two in relation to 2B (for May and June 2016), which Astra UK did not pay. In August 2016, it denied it was under an obligation to pay them, since then nothing has been paid. 9. Musst claims that the Octave Contract was novated to Astra LLP (or at least Astra LLP took on its liabilities), first in relation to the Crown account (in November 2014 or February 2015) and then in relation to the 2B account (in February 2015), after Astra LLP had taken the management of these accounts from Octave; and that it was then in turn novated on to Astra UK in May 2016 (alternatively in late July 2016) in relation to both accounts. 10. Musst claims the payment of fees and access to the Defendants’ books and records under the Octave Contract in return for introducing 2B and Crown who made investments in managed accounts. It also claims an account of all sums that have been received by Astra LLP and Astra UK from any other investors in addition to 2B and Crown.”

II The background

[4]The Judge set out the corporate structure and ownership of Astra and Octave in the First Judgment, at [79] to [81] and also the establishment of Astra Special Situations Credit Fund Ltd (“ASSCFL”), which was the principal fund which Octave (and then Astra) promoted: “79. Third, by September 2012:(1) Mr Mathur had set up Astra Capital on 24 July 2012, of which he was the 76% beneficial owner, and in which, initially, Mr Joshi had 4% and Octave 8% of the shares. Dr Adler had 5%. However, Mr Mathur did not become a director of Astra Capital until 19 October 2012.

(2) Astra UK was incorporated on 6 August 2012. Initially, its members were Mr Joshi and Mr Phillips (to March 2013 and October 2013 respectively). Mr Mathur did not become a director until 21 March 2013.

(3) Mr Mathur had also, on 7 August 2012, set up Astra LLP. Mr Mathur did not become a member of Astra LLP until 21 November 2012.

(4) Astra Capital, at least in due course, had 51% of the votes in Astra LLP (as to the rest, Mr Mathur had 29% and Mr Holdom and Dr Adler each had 10%). As of 7 August 2012, it may be that Astra UK and Octave Capital Management were members of Astra LLP.

(5) Mr Mathur had set up the Astra Special Situations Credit Fund Ltd (hereafter “ASSCFL”) on 11 October 2012. 80. As for Octave, the ownership position (at least by April 2013) was that: (1) Octave Ltd was owned as to 39.25% by Mr Joshi; 5% by Mr Phillips; 6% by a Mr Holt, and 2.5% by Mr Holdom; (2) Octave Ltd owned 100% of Octave Capital Management Ltd, which in turn held 65% of the votes of Octave LLP (the rest being held as to 15% by Mr Joshi, 5% by Mr Holdom, 5% by Mr Holt, 5% by Mr Phillips and 5% by Mr Mathur). Mr Mathur says that it was on 6 November 2012 that he became a member of Octave LLP. 81. The various agreements necessary to give effect to the intended arrangements between Octave and Astra in relation to ASSCFL were not concluded until 29 November 2012. In the meantime, Mr Mathur was registered with the FSA to perform the controlled functions as a partner with Octave LLP on 30 October 2012, and Astra LLP became Octave LLP’s appointed representative on 6 November 2012, when it moved into Octave’s premises in Ironmonger Lane in the City.

[5]There was no dispute that Mr Mathur controlled both Astra UK and Astra LLP and through them ASSCFL or that Mr Mathur was the ultimate beneficial owner of Astra UK. Both Mr Holdom and Dr Adler gave evidence at the First Trial and I will describe their roles in greater detail when I comment on the witnesses below. The Judge also referred to a second fund, Astra Structured Credit Investments Ltd (“ASCIL”), and he stated that this fund followed the same or a very similar strategy. He described the position by the middle of 2013 as follows:

“(i) The initial investments in ASSCFL and ASCIL 126. While the Octave Contract was being negotiated, the various agreements necessary to get ASSCFL launched (i.e. the hedge fund company in which investors could subscribe for shares) were put in place on 29 November 2012 and the fund launched in late December 2012. At the same time, Mr Mathur also set up and put in place the arrangements for another fund, called ASCIL, which appears to have followed the same or a very similar strategy as ASSCFL. 127. By the end of the first quarter of 2013, it would appear that US$5 million had been invested in ASSCFL, and US$32 million in ASCIL. Mr Chandaria had by now made an investment of US$15 million, as had his friend Mr Edwards. This appears to have been invested in the ASCIL fund. 128. In the meantime, discussions continued with The Observatory and LGT, which eventually resulted in The Observatory agreeing in February 2013 to invest US$20 million, and LGT agreeing in June 2013 to invest US$40 million with Octave in managed accounts.”

[6]LGT Capital Partners (“LGT”) was a firm of Swiss asset managers who managed funds for the Liechtenstein Global Trust owned by the Lichtenstein royal family. Mr Ralph Plotke and Mr Albertus Rigter were two of its partners (and Mr Rigter later joined Astra). They were the principal points of contact for Mr Siddiqi and then Astra. Crown was a corporate vehicle through which LGT held assets or otherwise operated and on 13 June 2013 it entered into a “Trading Advisory Agreement” with Octave.

The Judge described the relevant events in the First Judgment at [133] to [137]:

“(iii) The investment made by LGT 133. LGT took longer to make their investment and carried out more due diligence during which there were further meetings and discussions. Mr Siddiqi and Ms Galligan dealt with LGT’s due diligence questions, acted as conduit between LGT and Octave/Astra, and assisted in the negotiation of fees. 134. Eventually, LGT, through its vehicle Crown entered into a “Trading Advisory Agreement” dated 13 June 2013 (“the Crown Contract”), under which it agreed to invest US$40 million with Octave. As with the 2B Contract, Octave (through Mr Mathur) sent to Musst a copy of the contract in final unsigned form, on 13 June 2013. Mr Murray sent it to Musst in signed form on 23 July 2013, and an amended agreement on 3 June 2014. 135. The Crown Contract provided, amongst other things that: (1) “The investment objective is to generate attractive returns by investing in structured credit products. The principal investments of the Segregated Portfolio will be in cash and synthetic asset backed securities (including mortgage backed securities) and their derivatives and other structured credit products”; (2) Although Octave had the “maximum flexibility to invest in a wide range of instruments and will not be subject to any limitations with respect to the types of investments that it may make …” , nonetheless “it is expected that the focus of the portfolio will be on the US and European asset-backed securities market … in both cash and synthetic form and derivatives of such instruments. The Trading Manager … may also invest in other structured credit products, such as CDO’s, CLO’s and similar instruments, as well as composite debt securities”; (3) Crown acknowledged that the total amount contributed was subject to a three-year lock in period; (4) An “Advisory Fee” was payable – i.e. a management fee - of 2% a year of the value of the funds under management, if their value was US$86.67 million or more; but if not, then the lesser of 2% of their value or US$650,000. On top, it agreed to pay 0.75% a year of the value of these funds, as long as it exceeded US$86.67 million; and (5) A “Success Fee” – i.e. a performance fee - of 20% of the net profits made by the fund, subject to certain deductions. (See clause 10.) 136. Pursuant to this contract, Crown made its first investment in the fund in about October or November 2013, and Octave received its first payment on 19 November 2013. The first payment of Musst’s 20% share was made shortly afterwards. (iv) The fees paid by Octave to Musst from 2B and Crown 137. The total fees invoiced to and paid by Octave in relation to 2B and Crown (including the first US$10,000 paid by Astra LLP) were about US$221,000 in relation to 2B; and about US$124,000 in relation to Crown.”

[7]I will refer to the Trading Advisory Contract made between Crown and Octave as the “Crown Contract” (as the Judge did). I will also refer to the managed account which held the assets purchased on behalf of Crown as “Crown I” to distinguish it from Crown II and Crown III (below). On 5 September 2014 Crown entered into an amended and restated Trading Advisory Agreement with Astra LLP in relation to Crown I and then on 30 March 2016 it entered into a revised Trading Advisory Agreement with Astra UK for the same account. One of the key issues which the Judge had to decide was whether the Octave Contract was novated when Astra LLP and then Astra UK took over the management of Crown I and charged for the services which Mr Mathur and his team provided to Crown and LGT. (2). The Second Claim

[8]By a Trading Advisory Agreement dated 1 December 2014 and made between Astra LLP and Crown, Crown agreed to contribute US $40 million to be invested in a second managed account and Astra LLP was appointed to be its Trading Advisor. By an amended and restated Trading Advisory Agreement dated 1 April 2016 Astra UK was substituted as the Trading Advisor for Astra LLP. I will refer to both agreements as the “Crown II Contract” (unless it is necessary to distinguish between them) and to the managed account itself as “Crown II”.

[9]By a Trading Advisory Agreement dated 25 February 2016 and made between Astra LLP and Crown, Crown agreed to contribute US $15 million to be invested in a third managed account and Astra LLP was also appointed to be the Trading Advisor for that account. By an amended and restated Trading Advisory Agreement dated 30 March 2016 Astra UK was substituted as the Trading Advisor for Astra LLP. Again, I will refer to both agreements as the “Crown III Contract” (unless it is necessary to distinguish between them) and to the managed account itself as “Crown III”.

[10]In the Second Claim Musst claimed a share of the management and performance fees which Astra had received from Crown in respect of both Crown II and Crown III. Astra denied any liability to pay on two principal grounds. First, it contended that neither Crown II nor Crown III were “Eligible Investments” for the purposes of the Octave Contract. In order to satisfy the definition of such an investment, it was necessary for Musst to prove that each of Crown II and Crown III was a “Fund” and following the “Current Strategy” (all three terms defined in the Octave Contract).

[11]These were issues which the Judge did not have to decide after the First Trial because there was no dispute that Crown I was a Fund or that it was following the Current Strategy (and, therefore, an Eligible Investment). However, the Judge had to decide a very closely related issue, namely, whether the right to management and performance fees came to an end if there was a later departure from the Current Strategy. The Judge held that it did not because the operative date for testing whether Crown I was following the Current Strategy was the time when the investment was made and his decision was upheld by the Court of Appeal. Both decisions and the reasons given are relevant to issues which I had to determine following the second trial.

[12]The Judge held that the Octave Contract was novated so that Astra LLP and Astra UK became liable to pay the fees due from Octave to Musst in respect of Crown I. But he did not hold that the effect of either novation was to impose the obligation upon either Astra LLP or Astra UK to pay the fees due from Octave to Musst in respect of Crown II and Crown III (or he did not do so expressly). It was necessary for me to consider the scope of his findings in the First Judgment and whether the novation of the Octave Contract had that effect or whether it was separately novated to make Astra LLP liable for those fees and then novated again to make Astra UK liable in its place. Musst also claimed damages for misrepresentation and for breach of a contractual duty of good faith and restitution for unjust enrichment. I consider each of these causes of action separately below. B. The Individual Claims

[13]The parties agreed a list of issues for trial (the “List of Issues”) and I set out the Court’s findings on those issues at the end of this judgment. By way of introduction I summarise the individual claims immediately below to enable any reader to better understand its structure and to navigate its contents. (1). The Octave Contract

[14]Musst advanced the same claim in contract in relation to both Crown II and Crown III as it did in relation to Crown I at the First Trial. The principal issue between the parties was whether either of these accounts was an Eligible Investment or, perhaps better, contained Eligible Investments. This required the Court to determine a number of issues of construction of the Octave Contract and then to apply them. Those issues were as follows.

(i) Synthetic ABSs

[15]The first issue was whether the term “synthetic asset backed securities” in the Current Strategy definition included “hybrid” asset backed securities, which were essentially bonds where the issuer’s covenant was secured by a mixture of both cash (or the equivalent in other assets such as real property) and synthetic assets. Throughout this judgment I will refer to asset backed securities as “ABSs” and I set out below the understanding of that term and the terms synthetic and non-synthetic securities agreed between the experts. As the experts did, I will also refer to non-synthetic ABSs as “cash” ABSs. I then had to apply the term on its proper construction to the investments held in Crown II and Crown III. I also had to determine when the date or point of the investment occurred for both Crown II and Crown III. (ii) “On a buy and hold basis”

[16]The second issue was what the parties meant by the term “on a buy and hold basis” in the Current Strategy and, in particular, whether it required Octave (and then Astra) to hold investments for three years which was the “lock-up” period during which Astra could not be compelled by Crown to sell them. I then had to apply that term to Astra’s actual performance in trading investments for both Crown II and Crown III. (iii) The replication requirement

[17]Next, the Court had to construe the requirement in the Funds definition that a Fund had to be “designed to substantially replicate the investment securities and risk profile of ASSCF[L]” and to decide whether this requirement was satisfied for both Crown II and Crown III. I will refer to this as the “replication requirement” and the important issue of construction was whether it imposed a subjective test which was to be answered by reference to the actual intentions of Mr Mathur and the Investment Team. (iv) Did Astra follow the Current Strategy

[18]Finally, the Court had to decide what evidence it was entitled to take into account in deciding whether Astra followed the Current Strategy for the purposes of the Funds definition and then to decide whether it had done so. (2).

(i) The Judge’s findings

[19]The first and critical issue which the Court had to decide was whether novation to Astra LLP and then to Astra UK as found by the Judge in the First Judgment (and upheld by the Court of Appeal) extended to Crown II and Crown III. It was common ground that there was no issue estoppel which bound Astra to accept that it did or to prevent it from disputing this issue but the real question was whether the Judge had in substance decided this issue in the First Judgment and, if so, what the consequence was. (ii) Musst’s Alternative Case

[20]If I found against Musst on the first question, the Court then had to decide whether on the facts the Octave Contract was novated in February 2015 to extend to Crown II and, if so, whether the subsequent novation to Astra UK also extended to Crown II and Crown III. The Court also had to decide whether the facts gave rise to an estoppel by convention even if there was no contractual novation. (3). Breach of Contract

[21]If the Court found in favour of Musst in relation to the construction and application of the Octave Contract and that it had been novated to extend to Crown II and Crown III, I had to determine whether Astra had committed breaches of contract by failing to comply with its contractual accounting and payment obligations. If I held that Astra had committed breaches of contract, Musst invited me to make mandatory orders requiring Astra to comply with those obligations. It was common ground that the determination of the amount due (if any) would have to be deferred to a consequential hearing. (4). Negligent Misrepresentation

[22]Whether or not the claim for breach of contract succeeded, the Court had to determine Musst’s claim that on 30 April 2015 and later on 5 December 2019 Astra LLP made false and negligent representations that Crown II had been set up for a different strategy, that it did not satisfy the replication requirement and that it was not covered by the Octave Contract. Again, if I held that the claim succeeded, the parties agreed that the actual assessment of any loss would have to be deferred to a consequential hearing. (5). Deliberate Concealment

[23]The Court also had to determine whether Astra deliberately concealed the fact that Crown II followed the Current Strategy. Musst alleged that Astra was guilty of deliberate concealment for two reasons: first, to meet any potential defence of limitation by relying on deliberate concealment under section 32(2) of the Limitation Act 1980; and, secondly, in support of its claim that Astra acted in breach of its contractual duty of good faith. (6). Unjust Enrichment

[24]Finally, Musst advanced a case that if the Octave Contract was not novated so as to impose an obligation upon Astra LLP and then Astra UK to pay management and performance fees to Musst, they were liable to Musst for unjust enrichment because they had taken the benefit of the introductions without assuming the obligations to pay the fees. On this basis, Musst claimed a quantum meruit for reasonable fees. II. The Witnesses C. Factual Witnesses (1). Ms Galligan

[25]Ms Alexandra Galligan is a financial services professional and an approved person. She is a partner in Musst with her husband, Mr Siddiqi. Ms Galligan made a single witness statement dated 28 July 2025 and gave oral evidence. She was the principal point of contact for Octave and then Astra in relation to the payment of fees under the Octave Contract. I found her an honest and straightforward witness and I accepted her evidence where it was consistent with the contemporaneous documents. (2). Mr Siddiqi

[26]Mr Saleem Siddiqi has been a financial services professional for 30 years and an approved person. He was also a partner in Musst with Ms Galligan. He also made a single witness statement dated 30 July 2025 and gave oral evidence. Through his previous business, Tapestry Asset Management, Mr Siddiqi assisted major institutional investors to invest directly in hedge funds and also to develop portfolios of this kind of investment. As such, he had considerable experience in the market in which Mr Mathur was operating and was able to introduce potential clients to him. Again, I found Mr Siddiqi to be an honest and straightforward witness and I accepted his evidence where it was consistent with the contemporaneous documents.

[27]There was only one issue where the evidence of Mr Siddiqi and Ms Galligan was not corroborated by the contemporaneous documents and this related to a telephone call which Mr Siddiqi made to LGT approximately two hours after Ms Galligan had spoken to Mr Holdom on 30 April 2015. The case which Mr Spalton put to them both was that they spoke to LGT about Crown II after that call. Neither of them accepted that and after consideration I accept their evidence that this was a coincidence and that they spoke about an unrelated issue. Astra did not seriously challenge their credibility in relation to any other evidence and if Mr Siddiqi had spoken to LGT about Crown II I would have expected this to be recorded at the time (and it was not). (3). Mr Holdom

[28]Mr Michael Holdom is a director of Astra UK and its Chief Operating Officer and before that he was the Chief Operating Officer of Astra LLP. He joined Bankers Trust in 1991 and between 1999 and 2008 he worked for Deutsche Bank specialising in hedging and market making in a wide range of securitised products culminating in his appointment as European Head of Alternative Investment Trading. In 2009 he joined Octave and in 2012 he met Mr Mathur. He made a single witness statement dated 28 July 2025 and he gave oral evidence.

[29]I found Mr Holdom to be an unsatisfactory witness. He gave very guarded answers and throughout his evidence he attempted to downplay his knowledge of the assets which Octave (and then Astra) were acquiring for Crown II and Crown III and to distance himself from the decisions taken by Mr Mathur. For example, it was his evidence that on a number of occasions he simply repeated what he was told by other team members without checking whether it was true. For the Chief Operating Officer of a sophisticated financial firm such as Astra, I found this incredible. Finally, on a number of critical issues Mr Holdom gave evidence which was inherently improbable and I therefore rejected it or gave it no weight. (4). Dr Adler

[30]Dr Christian Adler is a director of Astra UK and he was a member of the investment team of Mr Mathur, Mr Mark Thomas and himself (the “Investment Team”). He also worked at Deutsche Bank between 1999 and 2012 when he joined Astra. His evidence was that his focus at Astra was twofold: first, analysing bonds and swaps for ASSCFL and ASCIL and, secondly, introducing a bespoke portfolio management system. He made a single witness statement dated 18 July 2025 and gave oral evidence.

The Judge described Dr Adler as “cautious”:

[31]see the First Judgment, [55]. I agree with that assessment. Nevertheless, I do not consider that he was evasive and for the most part he answered Mr Knox’s questions directly although on some occasions they had to be put to him a number of times. On a few occasions, however, he did not accept the plain and obvious meaning of the contemporaneous documents which were put to him and I attached little or no weight to his evidence. I have in mind, in particular, an important email dated 3 February 2016 which Astra disclosed in the Defamation Claim on 18 September 2020. (5). Other key individuals

The Judge stated that Mr Holdom and Dr Adler were not central witnesses at the First Trial:

[32]see the First Judgment, [55]. The position was the same in the second trial before me. Mr Mathur and, to a lesser extent, Mr Thomas and Mr Mark Murray (who was Astra’s in-house counsel and who gave evidence at the First Trial) were the individuals who would have been able to give most assistance to the Court. But Astra did not call them and I was given no explanation for the failure to do so. Indeed, Mr Holdom accepted in cross-examination that, so far as he was aware, there was no reason why Mr Mathur could not have come to court to answer the allegations made against him.

[33]Mr Knox and Ms Bailey submitted that I should draw adverse inferences from the failure to call Mr Mathur although this is not decisive because the Supreme Court has confirmed that this is not an issue of law and that tribunals should be free to do such an inference where appropriate: see Efobi v Royal Mail Group Ltd

[2021] UKSC 33

[2021] 1 WLR 3863

at [41] (Lord Leggatt JSC). However, I am not satisfied that it is appropriate to draw such an inference in the present case and certainly not when the issue has not been the subject of argument. Nevertheless, because Astra failed to call Mr Mathur and, to a lesser extent, Mr Thomas and Mr Murray it was necessary for me to draw inferences from the documents about Mr Mathur’s state of mind. For the most part, the documents justified drawing inferences in Musst’s favour. However, I was not prepared to go so far as to draw the inference that Mr Mathur acted in bad faith in failing to disclose that Crown II and Crown III were Eligible Investments. D. Expert Witnesses (1). Mr Aldama

[34]Mr Jaime Aldama gave expert evidence on behalf of Musst. He gave evidence that he had 18 years of experience in synthetic ABSs and that between 2008 and 2017 he was employed by Barclays Capital to run their “Credit and ABS structuring group”. He made an expert report dated 9 September 2025 (“Aldama 1") and signed the joint statement dated 10 October 2025 (the “Joint Statement”). He also produced a one page analysis of further disclosure documents relating to seven instruments. Mr Aldama gave evidence by remote link.

[35]I found Mr Aldama to be an impressive witness even though at times the remote link made it difficult to hear some of his answers. Although he accepted that he was no longer working in the relevant field after 2017, I accept that he had direct experience at a senior level of synthetic ABSs and the market in which they were traded for the key period with which the Second Claim was concerned. Mr Spalton and Mr Mo submitted that his evidence was “broad brush” and that he came up with new points in cross-examination. I do not accept those criticisms. Mr Aldama was able to explain highly complex financial concepts and products in simple terms which were of real assistance to the Court and to distil the key points. Moreover, in the passage from his evidence to which Mr Spalton and Mr Mo referred he was doing no more than trying to expand on his earlier evidence in trying to assist the Court.

[36]Mr Spalton and Mr Mo also made great play of the fact that Mr Aldama’s evidence was that the market definition of synthetic ABSs differed over time and that hybrid ABSs, which would not have been regarded as synthetic ABSs both before the financial collapse in 2008 and also much more recently, would have been regarded as synthetic ABSs between 2013 and 2017. Mr Spalton and Mr Mo suggested that this evidence was simply incredible and highly damaging to Mr Aldama. Again, I disagree and for the reason which Mr Aldama gave when explaining his experience:

“Q And you describe it, I think, as one of the largest deleveraging exercises in the industry. Just very briefly, just to give us some context, post−crisis, what do you mean by "deleveraging"? A So, up to and before 2008, a lot of the investors that I dealt with were in the buying business. They were buying the risk and leveraging the balances on their portfolios; and after 2008, post−financial crisis, there was a move by the regulators, by accountants, demanding they move to sell everything that they had acquired up to 2008. They had structured products −− mostly structured products. Because of their opacity and complexity, a lot of investors were going to sell. It was post−Lehman default. At the core of Lehman products −− (inaudible) these products, so the fear and anxiety that these products created has moved the market to deleverage their portfolios. "Deleverage asset" means to sell at risk , and sell (inaudible) into the market.”

Q You say:

" ... the supply and visibility had become very thin, primarily because by 2016 most legacy synthetic ABS were winding down, being liquidated, or had experienced credit events. Even if Astra had tried to purchase them it would have been hard to do so which explains the intentional shift by Crown III to acquire CLOs as evidenced by the chart in paragraph 107 above."

Now probably just at that moment, before I come to my question, do you want to refresh your memory about paragraph 107? It's page E/34. A Yes. Q You summarised there your opinion of the breakdown of the types of asset. So, just explain a little bit more, just building on what you say there about the legacy synthetic ABS winding down and the volumes drying up, was that your experience at Barclays Capital at the time? A Yes. I mean, that was one of the reasons I left Barclays, is because my job was pretty much done by 2017. It was hard for me. My expertise of advising clients on selling synthetics , and moving synthetics into the market was, at the time, pretty much done, and there was some synthetics still outstanding but, for the most part, most of the major banks, insurance companies, and financial firms that −−had already sold and disposed of their synthetic (inaudible).” asset" means to sell at risk , and sell (inaudible) into the market.”

[37]What Mr Aldama was describing in these passages was the business opportunity which Mr Mathur sought to exploit from 2012 onwards. Put crudely, from 2002 to 2008 onwards it was a selling point that the issue of bonds or notes involved synthetic collateral but after 2012 and between 2013 and 2017 any synthetic element of a bond issue impaired it and reduced its value. An astute investor could, therefore, acquire bonds or notes where the issuer had a strong covenant or good collateral but which were undervalued because they had a synthetic element which few market participants could understand or properly price. Whether or not Mr Aldama’s understanding of synthetic ABSs informs the definitions used in the Octave Contract is a different question for the Court. But his evidence on this issue did not, in my judgment, undermine his credibility as a witness. (2). Mr Malik

[38]Mr Pawan Malik gave expert evidence for Astra. He gave evidence that he had over 30 years of experience in investment banking and trading including structured credit. His CV showed that he was employed in trading in senior positions in the market from 1990 to 2007 (although not exclusively in synthetic products) but that from 2009 onwards he was a partner in Navigant Capital Markets Advisors (“NCMA”) whose business he described as “Structured Products Advisory & Litigation”. He made an expert report dated 10 September 2025 and signed the Joint Statement. He also made two addenda to the Joint Statement dated 4 November 2025 and 13 November 2025.

[39]Mr Malik accepted that Mr Aldama had direct experience of the market in 2013 but that he was not buying and selling or sitting behind a trading desk. He gave evidence, however, that he was working with people who were active in the market and spoke the same language:

“Q So, obviously, he has direct experience of the market, at the time we're talking about, 2013 and thereabouts. Would you accept that? A Yes. Q Now, as for yourself , as I understand it, you were not, in 2013, active in the synthetic asset−backed −−or in the asset−backed security market, buying and selling, were you? A Buying and selling? No, my Lord. But as I've mentioned very early in my testimony, that I was directly involved in the market at that time as a managing partner of NCMA. Q But you wouldn't have, as it were, had the knowledge that a trader would have, or −− Let me put it this way, you wouldn't have been using the vocabulary that a trader would have been using in 2013 in relation to hybrid securities and synthetic securities. You wouldn't have been using their vocabulary on a daily basis, would you? A On a daily basis , no, but my Lord, I have been in this market for over 35 years, and I have been in and out and looking at this market from different angles throughout this period. I have never left this market, so I am very familiar with all the terminology that is used in the market. I am very familiar with also the regulatory regime that all of this falls under. And if I had a question, my Lord, it would simply be if Mr Aldama has got experience in European regulations as well, because this is really a market which is driven in Europe. That's my only comment. Q Now, in your report, you don't give evidence of what first −hand knowledge you had of the way the phrase "synthetic asset−backed securities" was used at the time in relation to hybrids. You don't explain what first −hand knowledge you had of whether hybrids were treated as part of synthetics or not. You don't speak to that. A My Lord −− Of course, my Lord. So, as I mentioned, I worked in advising several banks with their banking books, which contained many assets, which included hybrid CDOs, and it was not even thought of whether there would be cash or synthetic, you just understood why it was cash. So a lot of the questions that are being asked about cash versus synthetic is really about something that the market did without blinking. Now the question is, well, who said it, and what is your proof that it happened? And so we're having to go through this entire exercise. So, my point is, my Lord, I was absolutely in the market at that time, and while I was not sitting behind a desk, I was working with the people sitting behind the desk, speaking the same language, doing the same things but, yes, I was not sitting at a desk structuring CDOs at that time.”

[40]For the most part, I found Mr Malik to be a reliable witness and I do not attribute very much weight to the fact that did not have the same direct experience as Mr Aldama at the relevant time. He was very experienced in investment banking and was plainly familiar with the securities which were held in Crown II and Crown III. However, on the key issues I preferred Mr Aldama’s evidence for a reason which is illustrated by the passage above. Traders or investors like Mr Mathur or Mr Siddiqi did not approach the buying and selling of securities in the market by asking themselves whether they should be treated as cash or synthetic ABSs under the relevant European regulatory regime or by carrying out a series of highly complex financial tests (as Mr Malik had done). They did it “without blinking” and adopting the same high level approach as Mr Aldama.

[41]For reasons which I set out below, I found the complex and highly detailed tests which Mr Malik had carried out to be artificial and unrealistic and, therefore, of little assistance in construing a contract for what was in substance the payment of a commission. Both parties needed to know fairly easily whether the commission was due or not and would not have used the tests which Mr Malik carried out in order to reach agreement or to invoke the contractual dispute resolution mechanism. Furthermore, there were a few isolated points on which I considered that Mr Malik had descended into the arena and was arguing the case for Astra and, although I am satisfied that they did not undermine Mr Malik’s overall reliability as a witness, this was another reason why I preferred Mr Aldama’s evidence. III. The Octave Contract E. Background (1). The Prospectus

[42]On 30 November 2012 Octave and Astra LLP issued a prospectus for ASSCFL to potential investors (the “Prospectus”). In a section headed “Principal Features” it summarised the detailed information in the Prospectus as follows (my emphasis):

“Fund The Fund is an exempted company incorporated with limited liability in the Cayman Islands as an exempted company and, as such, has power to issue and redeem Shares. Base Currency Shares will be issued as Euro Shares and US$ Shares and are issued and redeemed in Euro and US Dollars respectively. The base currency of the Fund will be US Dollars. Investment Objective The investment objective of the Fund is to generate attractive returns by investing in structured credit products. The principal investments of the Fund will be in cash and synthetic asset-backed securities (including mortgage-backed securities) and their derivatives, and other structured credit products. Investment Approach The Investment Manager will seek to take advantage of various investment opportunities, including those that it believes arise as a result of regulatory changes and dislocation in the structured credit market. The Investment Manager intends to follow a flexible approach in order to place the Fund in the best position to capitalise on opportunities in the financial markets. Accordingly, the Investment Manager has maximum flexibility to invest in a wide range of instruments and will not be subject to any limitations with respect to the types of investments that it may make on behalf of the Fund. Without limiting the generality of the foregoing, and although the Investment Manager may invest in such a wide range of instruments globally, it is expected that the focus of the portfolio will be on the US and European asset-backed securities market, including commercial and residential mortgage-backed securities, in both cash and synthetic form and derivatives of such instruments. The Fund may also invest in other structured credit products, such as CDOs, CLOs and similar instruments, as well as corporate debt securities. It is also expected that the Fund is likely to acquire and/or hold certain investments that are, or become, illiquid and that require long holding periods to realise value. Such illiquid investments may well comprise the majority of the Fund’s portfolio. To make such investments, the Investment Manager, together with the Investment Advisor, have adopted an investment process that will include a structural and collateral analysis, cash flow and return profile projections, as well as an analysis of any idiosyncratic features and risks (including any special swap agreements, specific deal structure and deal related covenants). The Fund may also invest in certain special situation trades with diversified asset classes (including bonds, equity and mezzanine exposures to asset-pools, corporate bonds including bonds convertible into equity, and derivatives, including options, swaps and forwards over indices such as CMBX, ABX and LCDX). The Fund may also seek to “warehouse” positions by acquiring a pool of assets and subsequently selling instruments linked to the risk and returns, or a portion of the risk and returns, of such assets. The Fund may, but is not obliged to, invest in interest-rate and other swaps, Eurodollar futures, and other derivative and/or hedge instruments, whether exchange-traded or over the counter, both for risk (including tail risk) hedging purposes and to enhance returns. Manager, Investment Manager and Investment Advisor Octave Investment Management Limited and Octave Investment Management LLP have been appointed as manager and investment manager of the Fund respectively. Astra Asset Management LLP has been appointed by Octave Investment Management LLP as its investment advisor.”

Base Currency Investment Objective Investment Approach

Manager, Investment Manager and Investment Advisor

[43]The Prospectus stated that ASSCFL was looking to raise a minimum of US $100 million and a maximum of US $300 million through the issue of shares and that the minimum initial investment permitted for each subscriber was US $5 million or the Euro equivalent. It then continued:

“Redemptions Shares will be redeemable at the option of the Shareholder on any Redemption Day, save that Shares will not be redeemable within 36 months of the Closing Date (the "Lock-up Period").”

[44]I adopt the term “Lock-up Period” to refer to the period during which an investor was not permitted to redeem its investments. In a more detailed section headed “Investment Objective, Approach and Restrictions” the Prospectus then repeated much of the material above. But it also included additional information about the investments in the fund:

“It is anticipated that the Fund’s portfolio will generally include one or more of the following: mortgage-backed securities (“MBS”) collateralised by residential and/or commercial mortgages, government, agency, or private-label, senior or subordinated, including but not limited to MBS categorised as ‘jumbo’, ‘prime’, ‘subprime’, ‘near prime’, ‘alt-A’, ‘non-conforming’, ‘distressed’, or ‘mezzanine’; asset-backed securities (“ABS”); credit default swaps referencing individual MBS or ABS or other indices; credit default swaps referencing portfolios of MBS or ABS; cash and synthetic collateralised debt obligations (“CDOs”), collateralised synthetic obligations (“CSOs”), trust preferred securities (“TruPS”) or collateralised loan obligations (“CLOs”) and bespoke baskets of CDOs, CSOs and/or TruPS; municipal bonds; corporate and/or government bonds, whether investment grade, below-investment grade or unrated (including “distressed” situations or post-bankruptcy); corporate bank loans, or participations in such loans (including distressed or post-bankruptcy); credit default swaps referencing corporate issuers; credit default swap indices referencing portfolios of corporate issuers; call and put options on corporate credit indices or individual corporations; residual interests from securitisations; and whole mortgage loans, and in respect of each of the above, any related derivative products. Securities acquired by the Fund will primarily be denominated in US$, Euro, Sterling, Swiss Francs and Japanese Yen.”

[45]I explain the significance of the words and phrases which I have highlighted in bold when I come to assess whether the replication requirement was satisfied. In a section under the heading “Investment Manager” the Prospectus identified four individual members of Octave as the Investment Manager including Mr Mathur and Mr Holdom and it gave the following details of their experience: “Anish Mathur has over 15 years experience working in finance and financial consulting and currently acts as Chief Investment Officer at the Investment Manager in respect of the Astra Special Situations Credit Fund. Mr Mathur previously worked as the head of the principal finance desk at Deutsche Bank, designated as ‘Winchester Capital’, between 2006 and 2012. In this role he was responsible for managing a portfolio of cash and synthetic asset-backed securities and structured products specialising in US CMBS, CLOs, CDOs, Euro ABS in both cash and synthetic form and this portfolio included, legacy positions and bilaterally-traded structured credit positions. Mr Mathur’s responsibilities at Winchester Capital involved both active trading in new and existing positions, as well as the management of hedging books involving both single name positions (e.g. through single name CDS) and index hedging in instruments such as ABX, CMBX, iTraxx, XOver derivatives and equity index options to hedge against portfolio and/or tail risks. Prior to that, Mr Mathur worked as a consultant for several Fortune 500 Companies between 1997 and 2004, advising upon various financial matters including capital efficacy, P&L maximisation and post-M&A optimisation methodology. Mr Mathur holds a degree from the Indian Institute of Technology, and an MBA from Said Business School, Oxford University.” “Michael Holdom has over 19 years experience in investment banking, and currently acts as Chief Risk Officer and Chief Operating Officer at Octave Investment Management LLP. He was most recently manager of the Alternative Investment Trading team within Deutsche Bank AG, London. This team specialises in the hedging and market making of a wide range of Deutsche Bank securitised products, including the systematic quantitative delta one equity strategies created by the Quantitative Products Structuring team. Prior to this he held a wide number of operational roles for Deutsche Bank and Bankers Trust within Equities, FX, Commodities and Interest Rate asset classes. He has a BSc (Hons) in Physics from the University of London.” (2). The DDI Memorandum

[46]On 15 April 2013 and, therefore, three days before the parties entered into the Octave Contract, Octave published a memorandum containing “Due Diligence Information” in relation to ASSCFL (the “DDI Memorandum”). It was organised as a table with a series of questions in one column and a series of replies or answers in the next. I will use the prefix “Q” to refer to the questions and the prefix “R” to refer to the replies. Q1.6.2 asked Octave to describe its risk management philosophy and R1.6.2 included the following text as part of the answer:

“The fund has the following Portfolio guidelines, monitored and reported on a daily basis;… E. The Fund shall not make investments in equity securities of non-financial corporate issuers although the Fund may acquire exposure to equity or other subordinated securities of structured finance vehicles, bond issuance vehicles, asset-back security issuers, CDOs and other similar entities engaged in finance transactions;”

[47]Q1.6.5 asked how liquidity was assessed and R1.6.5 stated:

“The core strategy of the fund involves investment in assets that are illiquid in nature. There are no liquidity restrictions in the fund.”

Section 10.3 was headed “Investment Strategy” and in Q10.3.1 Octave was asked to explain the Fund’s investment philosophy. R10.3.1 emphasised Mr Mathur’s experience:

“Philosophy; Due to changing Regulations, assets traded primarily in the interbank market and held through both on balance sheet and through off balance sheet vehicles are being liquidated in the market. Weakened capital ratios at Investment Banks globally has triggered a broadly orderly sale of certain instruments that have the largest positive impact on the bank’s core capital. Most major banks have large legacy portfolios of such instruments that have very thin market liquidity. Due to the capital intensive nature of such instruments, Bank’s themselves are not able to offer liquidity in the market. Many of these instruments despite their fundamentally good collateral quality and sound structural features require lengthy holding periods that make them ineligible for many Hedge Funds/Asset Managers with quarterly liquidity provisions. Many of these instruments are highly complex and draw a huge complexity premium. The Portfolio Manager structured and traded these securities at a global Investment Bank identifying a significant valuation dislocation in a specific set of assets where the market price is not reflective of the quality/risk of the underlying collateral. The Investment Team will build a portfolio of these assets using its knowledge of their trade history and market relationships to access the market.”

[48]Q10.3.2 contained a question of particular relevance to the issues which the Court has to decide:

“Describe the Fund's investment strategy in as much detail as possible.”

Because of its importance I quote R.10.3.2 extensively:

“The Investment Advisor will focus on building a portfolio of bespoke synthetic Asset Backed Securities referencing US and European Commercial and Residential Mortgages in both a cash and synthetic form. The Investment Team is looking to build this portfolio by purchasing assets at a significant discount to face value and holding them in the fund. The Investment Team will look to sell these securities once the market value of these securities reflects the fundamental credit risk/reward profile for these assets. This would result in the true value being realised in the market – i.e. through the pull to par effect, or the securities paying down principal. The Investment Advisor expects this to occur between year 2 and year 3. The Fund has a 3 Year Lock in line with this expectation, however, should this time horizon compress the Investment Advisor will look to return funds earlier. The Investment Team has previously identified a number of such securities priced in the market at levels not reflective of the fundamental quality of the underlying collateral and the structural characteristics of the notes. The Investment Team has the unique position of being able to source such securities given not only their long established relationships within the dealer community but their exposure to the location of the securities in the market. As a result the Investment Team will not rely solely on market auctions, i.e. when the bank initiates sale, but use its relationships, reverse enquiries and bilateral negotiations to secure these assets. Whilst the target portfolio comprises of certain pre-identified instruments, the Investment Advisor will continue to source securities in line with our Investment Philosophy. The Investment Advisor will use its existing network in the market as well as published lists to identify additional investment opportunities. In addition to the core assets of the portfolio, the Investment Manager will look to purchase more-liquid, single name US and European RMBS and CMBS securities, to ensure a strong cash yield profile. This cash flow is expected to fund the hedging bucket of the portfolio, hedging the portfolio risks detailed in 3.10. The Investment Team will conduct extensive micro loan level analysis on the underlying collateral and structural analysis of all new and existing investment opportunities. Please refer to section 2.1 for detail on the investment process.”

The Investment Team will conduct extensive micro loan level analysis on

[49]Q10.3.4 also asked Octave to attach a document detailing the markets in which ASSCFL would be trading and the instrument types which it would be trading. R10.3.4 replied to this as follows:

“The fund will be investing in, but not limited to, securities backed by US and European Commercial and Residential Mortgage loans in both cash and synthetic from and their derivatives. The portfolio will consist mainly of the following asset classes; - Synthetic securitized exposures (unfunded instruments) - Portfolio backed bespoke trades e.g. Special Reg Cap relief trades - RMBS and related products: portfolios backed by Non-Agency issued Residential Mortgage loans - CMBS and related products: securities backed by loans on Commercial Real Estate assets - Other Cash and Synthetic ABS Bonds (liquid instruments)”

[50]Q10.5.9 asked how much leverage the Fund used and how this was measured and controlled. R10.5.9 relied as follows:

“Whilst the Fund’s investment objective and approach are not dependent upon the use of borrowing, the Fund may gear its capital by borrowing for margin and/or settlement purposes and/or in connection with any amounts payable under currency hedging arrangements. The Fund has not imposed any hard limit on such borrowing, although it is expected that its aggregate borrowing will normally not exceed 100 per cent of its Net Asset Value. The Fund may also be leveraged as a result of the leverage embedded in its investments, including margin lending agreements, and through the use of futures, forward contracts, options and other derivative instruments.”

[51]Again, I explain the relevance of the text highlighted in bold when I assess whether the replication requirement was satisfied. The DDI Memorandum did not state in terms who the members of the Investment Team were. However, Q3.1 asked who was authorised to trade on behalf of ASSCFL and R3.1 made it clear that these individuals were the members of the Investment Team. Q10.4.1 also asked who had ultimate authority for decision-making and R10.4.1 made it clear that the final decision was made by Mr Mathur himself: “Anish Mathur, Christian Adler and Mark Thomas are authorised to execute trades on behalf of the fund. They are the only Octave staff authorised to enter trades into the Credit Portfolio Management System (CPMS). The Investment Team is expected to grow by the end of Q2 2013; as a result this is subject to change.” “Anish Mathur as the Portfolio Manager has the ultimate authority. New investment ideas or asset identification will be discussed, analysed and reviewed by the Investment team, the final decision is made by the Portfolio Manager, Anish Mathur.” (3). The One Pagers

[52]Astra produced what it called a “One Pager” for each asset it acquired consisting of one page with a box headed “Deal Summary” at the top which set out the deal type, issuer, class or “tranche” of the issue, the coupon, arranger, the collateral, the trade size (i.e. its nominal value), the price (i.e. the percentage of the nominal value which Astra had paid) and finally the date. The second box headed “Issue Detail” provided further details of the individual tranche which Astra had purchased and the third box headed “Collateral Stratification" contained pie charts showing the types of collateral and where they were located.

[53]It was clearly important for the Court to receive evidence of the actual investments which the Investment Team acquired on behalf of Crown and held in both Crown II and Crown III. However, the parties agreed that the identity of the issuer, the arranger and other information which would have enabled third parties to identify the bond or note issue was to be redacted for confidentiality. The parties therefore referred to each security which Astra had purchased as a “REDAC*” giving it a number. I adopt the same convention.

[54]Finally, I add that the parties did not really attempt to explore the nature of a “managed account” or explained the contractual or equitable basis upon which Astra “held” assets in each of the three accounts Crown I, Crown II and Crown III and I have assumed that it made no difference to the legal and factual issues which I had to decide whether the assets were properly segregated and Crown had a legal or beneficial interest in the assets which Astra acquired on its behalf. I also add that I use the words “asset”, “investment” and “security” fairly interchangeably to refer to the individual bonds or notes which Astra acquired, held in Crown II and Crown III and which have now been sold or which it continues to hold. F. The Terms

[55]In this section I set out the relevant terms of the Octave Contract. Where I quote a defined term and have highlighted a term or the definition in bold, I should be taken to adopt that defined term in this judgment. The contract was dated 18 April 2013 and made between Octave Investment Management Ltd (defined as the “Manager”) (1), Octave Investment Management LLP (defined as the “Investment Manager”) and Musst (defined as the “Introducer”) and the recitals to the contract recorded as follows: “A. Octave act as manager, investment manager or investment adviser to investment funds and/or managed accounts, howsoever structured. B. In respect of the Funds, Octave is appointed as a non-exclusive distributor with power to appoint sole agents. C. The Introducer is willing to introduce Octave to potential investors in the Funds (or any of them) or managed accounts. D. The parties wish to enter into this agreement (the “Agreement”) in respect of the appointment of the Introducer to introduce Octave to potential investors as aforesaid.” (1). Funds

[56]Clause 1 was headed Interpretation and clause 1.1 provided that the definitions in that clause applied to the Octave Contract. The term “Funds” referred to in Recitals B and C (above) was defined as follows (and there was no dispute that ASSCF in the third line of the definition below was also intended to be a reference to ASSCFL): ““The Astra Special Situations Credit Fund Limited (“ASSCFL”), and other funds and managed accounts designed to substantially replicate the investment securities and risk profile of ASSCF[sic], and following substantially the same strategy as set out under the Current Strategy below, howsoever structured, established (or if not established, for which advanced marketing activities are being undertaken) on or before the Termination Date of this agreement, to which Octave or Manager acts as investment manager. It is understood for the purposes of interpretation of the definition of a Fund that the strategy remains substantially the [sic] similar to the Current Strategy.” (2). Current Strategy

[57]The term “Current Strategy” was not a defined term as such but in clause 1.1 the parties adopted the following description and, again, there was no dispute that it was intended to be exhaustive rather than merely illustrative: ““Current Strategy” is to invest primarily in synthetic asset backed securities and on a buy and hold basis with limited or on direct leverage, and such that the investments are intended to operate as if they were closed-ended investment pools with capital committed on a locked up basis for several years to be returned to the investors in such funds following realisation of the investments therein.” (3). Introduction

[58]By clause 2 the Manager appointed the Introducer from the Effective Date (21 November 2012) on a non-exclusive basis to introduce “Prospective Investors” and make Introductions to Octave. A Prospective Investor was defined in clause 1.1 as any person introduced by the Introducer other than an Excluded Investor, which was defined as “a person with whom Octave or the Manager (or their agents or employees) has had a prior substantive relationship and agreed as such by the Introducer (such agreement not to be unreasonably withheld)”. The term “Introduction” was also defined in clause 1.1 as follows and it is clear that it had two separate limbs: “the initial introduction, by means of the arrangement of a face-to-face meeting or conference call for the purposes of discussing the Fund or Octave at which the Introducer is present (or which has been arranged at the instigation of the Introducer), to Octave of a Prospective Investor. Introduction shall also include any circumstance where a Prospective Investor ultimately makes an investment for the Current Strategy in a Fund or a managed account at the instigation or on the initiative of the Introducer or commences a relationship with Octave through the initiative of the Introducer. For the avoidance of doubt, Introduction shall not include the mere passing on of a list of contact details to Octave or Prospective Investors who Octave might wish to call or contact at its own initiative but who have not otherwise been informed of Octave and the Fund by the Introducer. "Introduce", "Introduces" and "Introduced" shall be interpreted accordingly.” (4). Revenue Share

[59]Clause 3.1 was headed “Revenue Share” and it provided that the Introducer was entitled to 20% of all management and performance fees received by Octave in respect of each Prospective Investor who made an investment in a Fund “managed or advised” by Octave:

“3.1 The Introducer shall be entitled to share in all management and performance fees (howsoever described) earned and received by Octave (or any of Octave’s affiliates, provided that there shall be no double counting of revenues earned by one affiliate and paid on to another affiliate by whatever means) in respect of each Prospective Investor who makes (directly or indirectly) an investment in a Fund managed or advised by Octave (an Investor) for the Current Strategy on or before the Cut-off Date, each such investment being an Eligible Investment. For the avoidance of doubt, additional investments made for the Current Strategy directly or indirectly by an Investor into a Fund whether before or after the Cut-off Date are also Eligible Investments. 3.2 Unless otherwise agreed between the parties, the revenue share shall be 20% of all fees earned by Octave (or its affiliate(s)) in respect of any Eligible Investment. Notwithstanding the generality of the foregoing, the revenue share in respect of performance fees shall be reduced (but not below zero) by an amount equal to £50,000 in aggregate in consideration of the undertaking in Clause 3.4 to reimburse expenses of the Introducer.”

[60]The term “Cut-off Date” was defined in clause 1.1 as the date falling nine months after the “Termination Date” which was defined as the date on which the Octave Contract was terminated in accordance with clause 12. Clause 12 provided that the contract was to continue in force for a period of six months after which it was to continue until terminated on not less than 30 days’ notice. Clause 3.3 dealt with discounts or alternative fee structures and clause 3.4 provided as follows: “3.4 Manager shall, on a monthly basis and on presentation of valid invoices, reimburse the Introducer for reasonable out-of-pocket expenses (other than entertainment expenses) incurred by the Introducer in the performance of its duties hereunder, provided that the amounts so payable hereunder shall not exceed £50,000 in aggregate. For the avoidance of doubt, all other expenses incurred by the Introducer shall be borne by the Introducer.” (5). New Fund

[61]Clause 3.5 (which is not in issue in this claim) was concerned with illegality. Clause 3.6 limited the payment obligations under the Octave Contract to the Manager alone and clause 3.7 provided that it would not be liable to pay performance or management fees if Octave invested in a “New Fund”, namely, a direct investment in a new fund which did not follow the Current Strategy or an investment in a new fund following the redemption of an investment in a Fund (as defined): “3.6 The Parties hereby acknowledge that, the sole obligor for payment of any costs, fees, expenses or liabilities of an Octave party under this agreement shall be Manager, and that the obligations of Investment Manager hereunder are limited to a) the performance of such actions as may be required by Manager to be undertaken to facilitate the operation or administration of this Agreement, and b) the performance of any such other actions or functions as may be delegated to Investment Manager under any Investment Management Agreement between Investment Manager and Manager or any Fund, it being understood that where this Agreement makes reference to a right or obligation of Octave, Investment Manager is hereby authorised to act as the Manager's delegate with respect to the exercise of such rights or performance of such obligations (any such actions being undertaken at Investment Manager's own cost). 3.7 The parties hereby agree that a) any new investments made by an investor in a fund under the management of Octave or the Investment Manager following a strategy other than the Current Strategy (a "New Fund") and deriving from the redemption of investments originally made in a Fund following the Current Strategy will not be treated as Eligible Investments under this agreement and this includes a restructuring of ASSCF to turn into a liquid open ended fund following; and (b) should amounts deriving from an Eligible Investment be reinvested in a New Fund by an investor, performance fees are currently expected to become crystallised no later than the date on which such a reinvestment is made, and in any event Revenue share relating to such performance fees as may become payable with respect to the period during which the investment remained an Eligible Investment would remain payable under this agreement as set out in paragraph 4.” (6). Payment of Revenue Share

[62]Clause 4 set out detailed obligations upon Octave to provide accounting information to the Introducer and also for payment: “4.1 Octave shall, on request within ten working days, send to the Introducer a statement (the Statement) showing:4.1.1 the particulars of all Eligible Investments made during the preceding calendar month;

4.1.2 the fees due and payable to Octave in respect of the previous calendar month and the Introducer’s revenue share (and, where such fees are invoiced by Octave, Octave shall provide a copy of the relevant invoice); and

4.1.3 the net asset value of each Eligible Investment at the most recent valuation date. 4.2 The Introducer shall have a period of 10 working days from the date of receipt of the statement to approve or object [to] the content of the Statement and the stated amount payable. If the Introducer does not object to the content of the Statement within the 10 day working period, it will be deemed to have approved the content of the Statement. 4.3 If the Introducer objects to the content of the Statement then the parties will attempt, in good faith, to reach an agreement as soon as possible on the dispute elements of the Statement. 4.4 If the parties are unable to reach agreement under clause 4.3, the disputed elements of the Statement shall be referred to Octave’s auditors for settlement and their decision, save in the case of manifest error, shall be final and binding on both parties. 4.5 Amounts payable hereunder shall be paid by Manager within 10 days of first receipt of fees by Octave without set-off, counterclaim, withholding or deduction. For the avoidance of doubt, amounts payable are (subject to the representation in clause 10.4 being correct) exclusive of any value-added or sales tax which if payable shall be paid at the same time. 4.6 If there is any dispute as to the amount payable to the Introducer then any undisputed portion shall be paid in accordance with clause 4.5 and the disputed element shall be paid within 7 days of the date on which the disputed element is agreed by the parties. 4.7 If Manager fails to make any payment on or by the due date, Manager shall pay (without prejudice to any other rights and/or remedies the Introducer may have) interest (both before and after judgement) at the rate of 2% above the base rate of the Introducer’s bank from time to time.” (7). Other Obligations

[63]Clause 5.1 imposed an obligation to act in good faith at all times on the Introducer and clause 6.1 imposed a similar obligation upon Octave:

“Octave shall at all material times act in good faith towards the Introducer.”

Clause 9.4 also imposed a restrictive covenant upon Octave to ensure that the responsibility for the management of any Fund was not transferred to another party without the Introducer’s consent:

"9.4 Octave shall do all such things as may be within their power to ensure (i) that responsibility for the management of the Funds and any managed account is retained by Octave and (ii) that the spirit of this Agreement is given full force and effect. Without limiting the generality of the foregoing, Octave shall do all such things and exercise all such rights as may be reasonably within their power so as to ensure that responsibility for the management of any Fund or managed account is not transferred to another party without the consent of Introducer unless such party offers in good faith to enter into an agreement with the Introducer whereby the Introducer continues to receive the revenue share payable hereunder in respect of Eligible Investments on the same terms as … are contained in this agreement (in which event the consent of Introducer shall not be unreasonably withheld)."

[64]Clauses11.1 and

11.2 imposed obligations upon Octave to keep full, accurate and up to date books, accounts and records for five years including recording any Eligible Investments (and their ongoing value) and the payments due to Musst (defined as the “Records”). Clause

11.3 expressly permitted Musst to attend Octave’s premises on reasonable notice to access them and to take copies of the Records:

“The Introducer shall be entitled on reasonable notice to attend premises where the Records are located (and Octave shall allow and/or procure access to the same) and to access the Records and to take copies of the same in order to ensure that the correct amounts [have] been paid to it under this Agreement.”

[65]Finally, clause 13.2 made it clear that the Introducer was to continue to receive its Revenue Share after termination of the contract unless it was terminated for material breach:

"13.2 The Introducer shall continue to be entitled to the revenue share in respect of all Eligible Investments (as defined in Clause 3) for so long as such Eligible Investments in the Current Strategy are maintained by the Investor; provided that, notwithstanding the foregoing, should this Agreement be terminated following a repeated (after written notification) material breach of the Introducer's obligations hereunder including a sustained failure to comply with its obligations under Clause 2.3, the right of the Introducer to receive revenue share will terminate as of the Termination Date."

G. Construction (1). The First Claim

[66]It is common ground that in the First Claim both the Judge and the Court of Appeal reached conclusions about the meaning and extent of the Octave Contract which are res judicata and binding on the parties. In particular, the Judge held that both LGT and Crown were Prospective Investors and that Musst introduced Crown under the second limb of the Introduction definition: see the Trial Judgment, [295] to [303]. He also held that the operative date for considering whether the Current Strategy was being operated was at the time of the investment: see the Trial Judgment, [447]. Following the Trial Judgment, Astra took a new point, namely, that a managed account or investment ceased to be a Fund once ASSCFL had been restructured on 31 December 2015. The Judge rejected this argument: see the Consequentials Judgment, [61] and [62].

[67]The Court of Appeal upheld all of these conclusions. Falk LJ agreed that the clear focus was on the point at which an investment was made and held that the Current Strategy requirement was determined by reference to the date of the investment: see the CA Judgment, [97]. She also rejected the argument that an investment ceased to be a Fund when ASSCFL was restructured at the end of December 2015. In particular, she stated that it made no commercial sense for a subsequent change in strategy within ASSCFL to prejudice Musst’s entitlement to fees. She stated as follows at [119] and [120]:

“The key role for the definition of Fund in the agreement is in determining what is an Eligible Investment. As already discussed, on a proper interpretation the question whether something is an Eligible Investment is tested at the point of investment rather than from time to time. If a managed account falls within the definition of Fund at the point of investment and the other requirements are met, then the investment is, and in principle will remain, an Eligible Investment. Thus, if at the time of the investment the managed account: (a) was designed substantially to replicate the investment securities and risk profile of ASSCFL; (b) substantially followed the Current Strategy; and (c) was subject to investment management by Octave, then it was a "Fund" and the investment in it can be an Eligible Investment, both at inception and thereafter. 120. It makes obvious commercial sense for the definition of Funds to refer not only to ASSCFL but also to other funds and accounts substantially replicating ASSCFL’s investment approach. That caters for the fact that certain investors might not wish to (or be able to) invest via ASSCFL and instead might use another fund or account, as was the case with Crown and 2B. I also note that it makes no commercial sense for a subsequent change in strategy within ASSCFL which is not followed by such other fund or account to prejudice Musst’s entitlement to fees in respect of it. On Mr Boardman’s submission that would be the result even if Astra were correct in their argument that the Current Strategy must continue to be followed, and did in fact continue to be followed, by the fund or account in question.”

[68]Falk LJ considered that clause 3.7 supported this construction of clause 3.1 for reasons which she set out at [121] and [122]. She also addressed the last sentence of the definition of “Funds” and concluded that it was intended to acknowledge that the Current Strategy was being followed at the date of the Octave Contract. She stated as follows at [108]: “In my view the most obvious and straightforward interpretation of this sentence was one argued neither before the judge nor this court, until it was adopted by Mr Knox after the court raised it during argument. It is that the words confirm that the strategy being followed at the date of the agreement continued at that time to be substantially similar to the Current Strategy. That is what the use of the word "remains" in the present tense is getting at. The inclusion of the sentence would have provided comfort to Musst that Octave would not subsequently be able to claim that the strategy had already altered before the agreement was signed, so that future investments in funds or management accounts, or indeed investments already made prior to the date of the agreement, would not or did not meet the Current Strategy requirement, in the case of future investments even if there was no change after the date of the agreement. These words would have been potentially relevant to both Crown and 2B.” (2). Legal Principles

[69]There was no dispute about the legal principles to be applied to the construction of the Octave Contract. I can conveniently take them from the judgment of Carr LJ (as she then was) in ABC Electrification Ltd v Network Rail Infrastructure Ltd

[2020] EWCA Civ 1645

, 193 ConLR 66 at [18] to [19] (and these principles were cited to both

the Judge and the Court of Appeal):

“[18] A simple distillation, so far as material for present purposes, can be set out uncontroversially as follows: (i) When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. It does so by focussing on the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the contract, (iii) the overall purpose of the clause and the contract, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions; (ii) The reliance placed in some cases on commercial common sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision; (iii) When it comes to considering the centrally relevant words to be interpreted, the clearer the natural meaning, the more difficult it is to justify departing from it. The less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning; (iv) Commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made; (v) While commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party; (vi) When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time the contract was made, and which were known or reasonably available to both parties. [19] Thus the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. This is not a literalist exercise; the court must consider the contract as a whole and, depending on the nature, formality, and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. The interpretative exercise is a unitary one involving an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences investigated.”

[70]Furthermore, expert evidence of “market practice” is admissible on the meaning and interpretation of a contract even if it does not amount to evidence of “trade usage” strictly so-called. In Crema v Cenkos Securities plc

[2010] EWCA Civ 1444

[2011] 1 WLR 2066

Aikens LJ stated as follows at [42] and [43]:

“42 The Belize case [2009] 1 WLR 1988 confirms that a court must consider all the background knowledge which would be reasonably available to the parties when deciding whether or not a wholly written contract is to be interpreted so as to contain a term which is implicit. The same must be true of a contract which is partly oral and partly in writing or even wholly oral. Only in that way can a court be put in the position of being what Lord Hoffmann calls the “reasonable addressee” in the Belize case, at para 18. It seems to me that it must follow that, in either case, a court will be entitled to receive independent expert evidence of what “market practice” is if that is relevant background knowledge for the purposes of interpreting the terms of the contract, both explicit and implicit. Contrary to the submission of Mr Page, I think that this will be particularly so if there is a dispute about the “market practice” between the rival parties to the litigation. 43 In my experience, it has been common practice for the Commercial Court to hear evidence of “market practice”, which does not amount to evidence of an alleged “trade usage or custom”, in order to assist the court with a full understanding of the factual background to the proper construction of a written contract. The landmark decision of the House of Lords in Prenn v Simmonds [1971] 1WLR 1381, 1383H—1385H4 reminded both judges and practitioners that written contracts were not to be interpreted “isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations”

. Therefore, evidence of the factual background known to the parties at and before the date of the contract, including evidence of the “genesis” and objectively the “aim” of the transaction, but not of negotiations, was admissible” date of the contract, including evidence of the “genesis” and objectively the “aim” of the transaction, but not of negotiations, was admissible” (3). Agreed terms

[71]Mr Aldama and Mr Malik agreed on the generally understood meaning of a number of terms in the relevant market which I reproduce below (without the references). Neither party submitted that their evidence on the meaning of these terms was inadmissible and I accept it. In the Joint Statement they agreed as follows: “2.1 Generally understood meaning of certain terms used in the definition of Current Strategy.2.1.1 The experts agree on the general definitions provided in their respective reports on the commonly understood meanings of these terms.

2.1.2 In general market practice, an asset-backed security (“ABS”) transaction finances a specified pool of financial assets through an SPV that is legally distinct from the originator. The originator transfers or references the pool to the SPV; the SPV issues notes to investors; and investors rely on the performance of the pool and the transaction documents for payment. The transaction issues liabilities in multiple tranches, ranking in order of priority of payment.

2.1.3 A synthetic ABS is a financial instrument that, through the use of a derivative contract, is engineered to mimic/replicate the financial risks and benefits of buying an ABS.

2.1.4 A non-synthetic ABS is a security where the originator sells a pool of assets to an SPV, which then issues notes to investors that are directly backed by the cash flows of those assets. A non-synthetic ABS involves a real transfer of assets and related cash flows.

2.1.5 A closed-ended investment pool is a professionally managed portfolio of pooled assets that raises a fixed amount of capital by selling a fixed number of shares. After its initial offering, it will not issue new shares to new investors. Investors are generally not required to redeem or buy back shares from existing investors. They are “closed” in the sense that capital does not regularly flow into them when investors buy shares, and it does not flow out when investors sell shares.

2.1.6 The terms “Locked-up” vs “Liquid” basis of investment describe how investor capital operates in practice. A locked-up basis means investor capital is not freely redeemable during the investment period. Liquidity is only available at the end of the term or through limited distribution events. A liquid basis means investors can redeem regularly, for example, monthly or quarterly, at NAV. In such cases, the portfolio is managed so that the underlying assets are easily saleable, and cash can be raised in an orderly manner to meet redemptions.

2.1.7 ASSCFL and the Crown II and Crown III portfolios had broadly similar investment mandates. Each was authorised to invest in structured-credit instruments, including RMBS, CMBS, CLOs, ABS CDO, and synthetic exposures such as credit-linked notes.

2.1.8 ASSCFL and the Crown II and Crown III portfolios employed no balance sheet leverage.

2.1.9 ASSCFL and the Crown II and Crown III portfolios were open-ended in form but locked up funds in substance.” (4).

(i) No leverage

[72]There was no dispute between the parties that the Current Strategy definition included a typo and that “limited or on direct leverage” meant “limited or no direct leverage”. There was no dispute either about the meaning or application of that term because the experts were agreed that both Crown II and Crown III employed no balance sheet leverage. I am satisfied, therefore, that both funds satisfied this requirement of the definition. (ii) Closed ended investment pools with capital committed on a locked-up basis

[73]Mr Aldama’s evidence was that Crown II and Crown III were intended to operate “as if they were closed-ended investment pools with capital committed on a locked-up basis for several years”: see Aldama 1, §86 to §92. In particular, he challenged Astra’s pleaded case as inconsistent with the facts: see §89. Mr Malik did not disagree with him. Indeed, he accepted that: “In practice, therefore, Crown II and Crown III operated on a locked-up basis, with functional characteristics similar to closed-ended pools”: see Malik 1, §3.4.23.

[74]In case there is any doubt I find that Crown II and Crown III met the requirement that they were intended to operate as if they were closed-ended investment pools with capital committed on a locked-up basis for several years. In my judgment, it was sufficient to meet that requirement, that Astra operated them as locked-up funds in practice. It is clear from the Current Strategy definition that the requirement was that they were intended to operate “as if they were” closed-ended investment pools whatever their form. (iii) Synthetic asset backed securities

[75]The experts agreed on the generally accepted meaning of a synthetic ABS and I have already set out that meaning. They also agreed that synthetic ABSs could be either funded or unfunded. For example, Mr Malik gave the following description of funded, partially funded and unfunded ABSs in Malik 1, §2.3.12 and §2.3.13:

“Synthetic securitisations can be structured in various forms, depending on how much funding is involved in the risk transfer: a) Fully funded: The example above is fully funded – the entire exposure amount (100% of the reference pool’s notional) is collateralised by investor funds raised through note issuance. The SPV holds sufficient collateral from day one to cover all potential losses on the reference pool. Investors thus provide all the capital upfront, and all credit risk transfer occurs through the funded structure. b) Partially funded: In some transactions, only part of the risk is financed through issued notes, with the remainder transferred via an unfunded agreement. For instance, an SPV might issue notes to cover losses in a middle tranche of the portfolio (the mezzanine risk). In contrast, the most senior risk is assumed by the originator through an unfunded swap with a third-party investor (or retained). Partially funded deals combine a funded portion (investor money in an SPV account covering a specific loss band) with an unfunded portion (usually for the higher-rated, lower-risk tranche where losses are less likely; the investor provides a guarantee or CDS without initially posting full funds, possibly posting collateral only if certain triggers occur). This method reduces upfront funding costs while still transferring risk. c) Unfunded: In an unfunded synthetic securitisation, no notes are issued through an SPV. Instead, the bank might directly purchase protection from investors (e.g., enter a CDS or a financial guarantee with a hedge fund or an insurer) without using any SPV intermediary. The investors agree to cover losses up to a specified amount and usually either periodically post collateral or rely on their creditworthiness to reassure the bank it will be repaid. Unfunded transactions are pure derivative contracts for risk transfer. (These may not always be considered as “securitisations” in the traditional sense since no asset-backed security is issued, but in regulatory terminology, they can still qualify as synthetic securitisations if structured correctly.) 2.3.13 In all cases, the defining feature is that credit risk is transferred through contracts rather than by selling the assets. While the economic exposure of a funded synthetic ABS can resemble that of a cash ABS, the legal structure differs, with noteholder payments tied to a reference pool and derivative terms rather than direct asset ownership.”

[76]The principal issue between the experts was whether hybrid ABSs were synthetic securities for the purposes of the Current Strategy definition. Hybrid ABSs typically consisted of collateralised debt obligations (“CDOs”) where the underlying pool of assets which secured the issuer’s covenant contained a combination of synthetic and non-synthetic instruments or securities. I consider a number of these securities in detail when I come to consider the assets in Crown III. Mr Aldana gave evidence that hybrid CDOs should be treated as synthetic ABSs as at the date of the Octave Contract. His evidence in Aldana 1, §56 to §59 was as follows:

“56. All of the Disputed Investment Securities are commonly known in the market as hybrid CDOs, where the underlying pool of assets is constructed of a combination of synthetic and non-synthetic securities. It is these hybrid securities that, in my opinion, Astra wrongly classified in the previous proceedings as non-synthetic. 57. The presence of synthetic securities in these hybrid instruments unquestionably exposes investors to credit derivatives (this is a unique risk and was disclosed to all investors on each risk factors section in the offering memoranda). In my opinion, because ‘synthetic ABS’ is not given a specific and limited definition in the Introduction Agreement, one has to look at the generally understood meaning of synthetic ABS and not focus on the degree of “syntheticness” of each security instrument, but rather whether the criteria and risk exposure there should be described as synthetic ABS. Therefore, deciding whether an instrument is synthetic/non-synthetic should not just be led by looking at the percentage of the underlying synthetic investments in the structure, but rather one should broadly look at the structure and investment parameters. 58. In market practice when dealing with synthetic ABS in contracts, financial institutions, for their own commercial purposes, normally define “synthetic ABS” in such contracts in a (very long) list of asset types and structures. The Introduction Agreement is silent as to this. Because of this lack of specificity in the Introduction Agreement, the only way to approach the issue of what makes an ABS “synthetic” is to (i) address the generally understood meaning of a ‘synthetic ABS’ (i.e. what makes an ABS properly described as synthetic) and (ii) look at the Due Diligence Information regarding ASSCFL dated 15th of April 2013, produced by Octave. I have already expressed what the generally understood meaning is, and this meaning is confirmed by Octave’s own description of ‘synthetic ABS’ in this document in the response to Question 10.3.2, which provides a good description of the type of synthetic ABS they were originally set out to invest in: Question 10.3.2: “Describe the Fund's investment strategy in as much detail as possible”

Response:

“The Investment Advisor will focus on building a portfolio of bespoke synthetic Asset Backed Securities referencing US and European Commercial and Residential Mortgages in both a cash and synthetic form.” (my emphasis). 59. Based on the above response, the Due Diligence memorandum recognised that investments in ‘synthetic ABS’ would be both in funded and unfunded form. Therefore, Astra’s assertion that an asset is “cash” does not help determine whether it is or is not a synthetic ABS. 60. Further, as noted on the Trading Advisory Agreements for Crown II and Crown III, the investment objective for these deals was to take advantage of investment opportunities that arose as a result of regulatory changes and dislocation in the structured credit market. At the time, these regulatory shifts prompted banks to offload a wide range of structured credit assets - including both synthetics and ‘cash’ synthetics - without distinction.”

Question 10.3.2:

“Describe the Fund's investment strategy in as much detail as possible”

Response: “The Investment Advisor will focus on building a portfolio of bespoke synthetic Asset Backed Securities referencing US and European Commercial and Residential Mortgages in both a cash and synthetic form.” (my emphasis).

[77]Mr Aldama also exhibited an extract from Standard & Poor’s “Criteria for Rating Synthetic CDO Transactions” dating from 2003 in which hybrid transactions were treated as types of synthetic transactions and some other research materials which supported his conclusion. He defended that conclusion in cross-examination although, as I have set out above, he accepted that hybrid CDOs might not have been treated as synthetic ABSs in the market at other times. Mr Aldama stated his reason for treating hybrid transactions as synthetic in 2013 very clearly in the following passage from his cross-examination:

“Q But it's your opinion, isn't it, that however small the exposure is to synthetic, that is eﬀicient to render the structure as a hybrid design and therefore synthetic by market convention? A It's the period of time between 2013 and 2017. Any shape or any exposure to synthetic would have tainted the entire portfolio and would have made investors lean towards a synthetic classification of the asset and post−Lehman, post−Bear Stearns, RBS, Lloyds, Dexia, you know, there was a lot of banks that collapsed on the back of synthetic exposure, so any small exposure would have tainted the entire −− Yes, that was my view.”

[78]Mr Malik disagreed with Mr Aldama’s evidence above. He classified hybrid ABSs by reference to the payment terms of the individual notes themselves. He also rejected Mr Aldama’s reliance on the DDI Memorandum. The Joint Statement recorded his views at §3.2.12 to §3.2.14:

“3.2.12 In JA1 57, Mr Aldama also says that, because the Introduction Agreement does not contain a specific definition of synthetic ABS, one should look to the “generally understood meaning” of synthetic ABS. Mr Malik disagrees with that approach. Classification is not a matter of broad interpretation or generalised language in commercial documents. It is an objective exercise that depends on the payment terms of the note itself — how coupons are funded and how losses are absorbed. 3.2.13 From JA1 58 onwards, Mr Aldama builds a chain of evidence to support his position. In JA1 58-59, he relies on the ASSCFL DD memo. He highlights the response to Question 10.3.2 within the memo: “The Investment Advisor will focus on building a portfolio of bespoke synthetic ABS … in both a cash and synthetic form.”

Mr Aldama interprets this statement as evidence that Astra regarded hybrid CDOs as synthetic for classification purposes. Mr Malik believes that reading is incorrect: the phrase is generic market language, setting out the two formats in which synthetic securitisations were issued. a) Funded structures – credit-linked notes (CLNs), where investors subscribe in cash, the SPV holds collateral, and the notes reference a CDS; and b) Unfunded structures – pure CDS or guarantees, where no note is issued and the risk is transferred contractually. 3.2.14 Irrespective of JA’s reading of the DD memo, descriptions of investment strategy in contractual documents do not determine classification. Classification depends solely on the contractual terms of the note. It is classified as synthetic if payments are derived from CDS or CLN arrangements with losses on credit events; otherwise, it is cash-ABS. Regulators at the time applied the same distinction, treating securitisations as synthetic where credit risk was transferred through derivatives or guarantees, and as cash where it was transferred through an actual sale of assets.”

[79]When Mr Knox put Aldama 1, §58 and the DDI Memorandum, R10.3.2 to Mr Malik, his evidence was that Astra was referring to unfunded and funded synthetic ABSs. He also disagreed with Mr Aldama that the generally understood meaning of “synthetic ABSs” in the market included hybrid securities or transactions in those securities:

“Q No, no, but obviously it's only fair if you have the page in front of you. E22, halfway down the page, paragraph 58 −−forgive me, Mr Malik: "Describe the Fund's investment strategy in as much detail as possible." That's an extract from a due diligence memorandum prepared by, well, essentially, Mr Mathur. It was Octave, in fact, but it was with his input. The response is: "The Investment Advisor will focus on building a portfolio of bespoke synthetic Asset Backed Securities referencing US and European Commercial and Residential Mortgages in both a cash and synthetic form." So what this is envisaging is that you have synthetic asset−backed securities in synthetic form, but also in "cash form." You see that, don't you? A I do. Q Now, what I suggest to you there is that is recognising that synthetic asset−backed securities can be essentially transfers of cash, what you would call a cash asset; that is to say the SPV buys the loan and is funded −−let's say the investors contribute to the purchase price −−but amongst the securities or the collateral, there is synthetic risk. That, I suggest to you, is what is being recognised by that. What do you say to that? A So, my Lord, I −−I read that differently. I 've made that comment in 3.2.12 and 3.2.13 of my −−the joint memo with Mr Aldama. I think it's a misread of the term. So, essentially, what the due diligence memo is saying is that Astra will go and buy a synthetic, either in funded form or unfunded form. That's all it's saying. It's not saying that they're going to buy −−that there is a third category that's been created. Q So you say cash equals funded, as it were? A Yes, it's just C −− It's either CDS −− MR JUSTICE LEECH: Sorry, which were the two paragraphs? A 3.2.12, my Lord −− MR JUSTICE LEECH: Oh, right. Thank you. A −−and 3.2.13 of the joint memo.” “MR KNOX: (After a pause) Now, I just want to pursue this point about classification. You've made the point quite a few times, as I've said, in your report. Can I ask you please to go to page E869? I'd like to ask you about what you say here. Paragraph 3.2.12: "In J57, Mr Aldama says that because the introduction agreement doesn't contain a specific definition of synthetic ABS, one should look to the generally understood meaning of synthetic ABS. Mr Malik disagrees with this approach, then you continue. 5 Classification is not a matter of broad interpretation or generalised language in commercial documents. It is an objective exercise that depends on the payment terms of the note itself – how coupons are funded and how 9 losses are absorbed." Do you see what you say there? A Yes, I do. Q But surely one should be looking at the generally understood meaning of "synthetic" in (inaudible)? A Yeah, I absolutely agree that you should look at the generally understood meaning. I just disagree with Mr Aldama's interpretation of what he says is general market understanding. The market understanding for this has always been to just look at the note payoff.”

[80]Mr Malik also placed particular reliance upon Regulation (EU) 575/2013 (the “Capital Requirement Regulation” or “CRR”) and Regulation (EU) 2402/2017 (the “Securitisation Regulation”). In particular, he relied on the following definitions in Article 2 of the latter:

“(1) ‘securitisation’ means a transaction or scheme, whereby the credit risk associated with an exposure or a pool of exposures is tranched, having all of the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures; (b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme; (c) the transaction or scheme does not create exposures which possess all of the characteristics listed in Article 147(8) of Regulation (EU) No 575/2013. (2) ‘securitisation special purpose entity’ or ‘SSPE’ means a corporation, trust or other entity, other than an originator or sponsor, established for the purpose of carrying out one or more securitisations, the activities of which are limited to those appropriate to accomplishing that objective, the structure of which is intended to isolate the obligations of the SSPE from those of the originator;…” (7) ‘asset-backed commercial paper programme’ or ‘ABCP programme’ means a programme of securitisations the securities issued by which predominantly take the form of asset-backed commercial paper with an original maturity of one year or less; (8) ‘asset-backed commercial paper transaction’ or ‘ABCP transaction’ means a securitisation within an ABCP programme; (9) ‘traditional securitisation’ means a securitisation involving the transfer of the economic interest in the exposures being securitised through the transfer of ownership of those exposures from the originator to an SSPE or through sub-participation by an SSPE, where the securities issued do not represent payment obligations of the originator; (10) ‘synthetic securitisation’ means a securitisation where the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originator;…”

[81]Mr Malik summarised his views about the regulatory framework in the Joint Statement and this best captures his evidence on this issue. The paragraphs immediately preceding the quotation below refer to differences between the experts in relation to individual securities (to which I will return below). The Joint Statement then continued as follows at §3.2.49 and §3.2.50:

“3.2.49 Mr Aldama says in [3.2.40–42] that Mr Malik’s approach may be defensible with hindsight but inconsistent with contemporaneous convention. Mr Malik disagrees. This is not hindsight. The CRR was already in force in 2014 during the relevant period and established a binary classification of traditional or synthetic, which market participants would have applied in practice. Hybrid securitisations could contain both cash assets and CDS exposures, but that did not create a third category. The proper focus is on the notes actually acquired: if coupons and losses flow through the collateral waterfall of assets sold into the SPV, the tranche is considered cash; if they derive from CDS premia and credit events, the tranche is considered synthetic. 3.2.50 Mr Malik does not accept that there was a uniform market convention treating hybrids as synthetic. References to hybrids being grouped with synthetics were descriptive of investor risk perspectives, not a classification framework. Mr Malik appreciates that not every investor treated hybrids as cash. Some grouped them with synthetics for risk or capital reasons. Still, the generally understood meaning of synthetic securitisation in 2014–2019 followed the CRR’s binary definitions, which were binding for regulated participants. In practice, investors also looked to tranche-level payoff mechanics. Labels in policy reports or eligibility rules reflected risk perspectives, rather than classifications. References to BIS, Philadelphia Fed, FCIC reports, in S&P criteria, or in UCITS/ insurer/pension rules illustrate investor or policy perspectives, but they were not a uniform market convention and did not alter the binary classification under the CRR. Even on Mr Aldama’s own Philadelphia Fed reference, hybrids are analysed as a separate cohort from pure synthetics, which contradicts the notion of a uniform convention collapsing hybrids into synthetics.”

[82]Mr Knox put the definitions in the Securitisation Regulation to Mr Malik and suggested to him that it set out rules by which banks classify transactions for the purpose of their risk exposure and capital adequacy. Mr Malik disagreed. I then asked him how the regulations applied to hybrid transactions and his evidence was that a transaction could not fall within both definitions and that the cash and synthetic parts of each investment should be looked at separately:

“MR JUSTICE LEECH: Well, can we just go then to −− So we've got a definition of traditional securitisation and synthetic securitisation. We've got no definition of hybrid securitisation. A Yeah, because there is no third −−there is no third category. MR JUSTICE LEECH: Exactly. So hybrids have got to fall into one or the other. A Exactly. MR JUSTICE LEECH: So my question for you is, based on the regulation, just looking at the regulation alone, do they always fall within, so far as you're concerned, traditional securitisation or do they sometimes fall within synthetic securitisation? A It depends −− MR JUSTICE LEECH: Sometimes they can be one rather than the other? A Well, first of all, my Lord, when −−if the originator bank, say, sells assets into an SPV in two forms, there is −−as I said, there is no third category. MR JUSTICE LEECH: So it's both? A Both pools are watched and monitored separately. There is a different capital relief for synthetic and a different capital relief −− MR JUSTICE LEECH: So the same instrument, same notes −− let's get away from instruments −−same notes can fall within both the definition of both −− A It depends. MR JUSTICE LEECH: −−traditional securitisation and synthetic securitisation? A Yes, so the driving definition is, how do the notes pay off? If the payoff of the notes that the investor buys gives them exposure to a credit derivative, it would be considered as a synthetic. That is −−that is the rule, and the rule is based on the test that CRR 242(10) and 242(11) give, and they also provide you with a very clear guidance. I think it's 41/62(?), my Lord. It says that the securitisation position in the hands of the investor is the note, and that gives you the guidance to say that when you're holding a note and you want to look to see whether it's cash or it's synthetic, you apply that test. MR KNOX: My Lord, I can't debate this. We just say this is just too (inaudible ). MR JUSTICE LEECH: Well, I think the answer is −− Thank you for your view, Mr Malik. I think we're going to have to debate this. A Yeah. MR JUSTICE LEECH: But as far as you're concerned, there are only two definitions and it has to be one or the other, and sometimes it can be both. Am I right about that? A No, it can't be both, my Lord. It has to be one or the other, even if the pool is mixed. MR JUSTICE LEECH: Well, let's say you've got securities which consist of both −− A Absolutely. MR JUSTICE LEECH: −−asset−backed securities and also the benefit of a CDS. (Inaudible). A All right. So, I think what you're saying is if the SPV issues a synthetic note and a cash note, each of those would be looked at separately, and one could be a synthetic and one is a cash. Yes, it's possible . It's rare , but it's possible.”

[83]The question whether the term “synthetic asset backed securities” includes hybrid ABSs is one of contractual interpretation for the Court having regard to the admissible background to the Octave Contract. In approaching that question I bear in mind that the evidence of the experts may be relevant to the construction of a contractual term where it is a technical term with an established technical meaning. That evidence may also be relevant insofar as it provides evidence of admissible background facts or assists the Court to understand or evaluate those background facts: see Cenkos (above). But the opinions expressed by the experts as to the meaning of a contract term cannot be determinative.

[84]Although the construction of the Octave Contract is one for the Court and not the experts, I agree with Mr Aldama on this issue and I find that the term “synthetic asset backed securities” extends to and includes hybrid securities including securities backed by collateral which include both cash and synthetic asset pools. I make this finding for the following reasons:(1) As Mr Aldama pointed out in Aldama 1, the term “synthetic asset backed securities” is not a defined term. Moreover, neither expert gave evidence that it had a specific technical meaning or a meaning derived from the regulatory framework and, in particular, from either the CRR or the Securitisation Regulation. Although the term is similar to the terms “asset backed commercial paper transaction” and “synthetic securitisation" in Article 2(8) and (10) of the Securitisation Regulation, neither expert gave evidence that “synthetic asset backed securities” was intended to be a synonym for either of those terms.

(2) Neither party submitted that the Prospectus or the DDI Memorandum did not form part of the admissible background to the Octave Contract but in case there is any doubt, I find that both are admissible. Indeed, it is difficult to see how the Court could decide what strategy Octave adopted for ASSCFL without reference to both documents. Furthermore, the DDI Memorandum was dated only three days earlier than the Octave Contract itself.

(3) I am satisfied that on 30 November 2012 when the Prospectus was issued, it was part of the investment strategy of the ASSCFL to invest in hybrid ABSs. In particular the Prospectus stated that Octave intended to invest in “commercial and residential mortgage-backed securities, in both cash and synthetic form”. In my judgment, this was a reference to hybrid ABSs.

(4) I am also satisfied that on 15 April 2013 when the DDI Memorandum was published, it remained part of ASSCFL’s strategy to invest in hybrid ABSs. R10.3.2 referred to “a portfolio of bespoke synthetic Asset Backed Securities referencing US and European Commercial and Residential Mortgages in both a cash and synthetic form”. In my judgment, this was also a reference to hybrid ABSs and, although Mr Mathur did not give evidence, the inference which I draw is that he wrote or approved this text and that he understood that the term “synthetic Asset Backed Securities” included securities “in both a cash and synthetic form”. Dr Adler and Mr Holdom did not give evidence to the contrary.

(5) Mr Siddiqi also gave evidence in his witness statement (which was not challenged) that when he was discussing matters with LGT he understood that a “cash synthetic” was a synthetic ABS because there were credit derivatives in the structure: “34. I am aware that an issue in the Crown I claim was the status of "cash synthetics". My understanding is a cash synthetic is a hybrid synthetic instrument. It is where some cash (level of funding) is held in the SPV but the credit exposure is obtained by using CDS (credit default swaps) which are derivative instruments and thus make it by definition a synthetic instrument. It does not matter there is some cash in the SPV, what makes it a synthetic security is the use of CDS and other credit derivative technology. At the time I was discussing matters with LGT, I considered a cash synthetic was a synthetic asset backed security (since there are credit derivatives in the structure/SPV) and hence one and the same in my eyes.”

(6) I am satisfied, therefore, that at the date of the Octave Contract, the parties who negotiated its terms understood that a synthetic ABS included a hybrid ABS such as a CDO which was secured by collateral consisting of an asset pool of both cash and synthetic assets. I am also satisfied that this understanding forms part of the admissible background to the agreement because it was an understanding shared by both parties. In any event, I accept Mr Aldama’s evidence that this was how the term synthetic ABS was generally understood by traders and other market participants at the time.

(7) Moreover, I also accept Mr Aldama’s evidence that the reason why synthetic ABSs were understood to include hybrid CDOs and other hybrid transactions at the date of the Octave Contract was that any securities which were backed by asset pools which included synthetic assets were regarded as toxic. Indeed, it is clear from the DDI Memorandum that Mr Mathur’s investment strategy was based on this fact. It stated in terms that it had identified a “significant valuation dislocation in a specific set of assets where the market price is not reflective of the quality/risk of the underlying collateral”: see R10.3.1. It also stated that the Investment Team had previously identified a number of securities in the market at levels “not reflective of the fundamental quality of the underlying collateral and the structural characteristics of the notes”.

(8) Finally, there is no obvious reason why the parties would have chosen to exclude hybrid CDOs from the Current Strategy definition if it formed part of ASSCFL’s investment strategy to invest in those securities in both the Prospectus and the DDI Memorandum. The purpose of the Current Strategy and Funds definition was to limit Musst’s introduction fees to those investors whom it introduced to ASSCFL and to Funds which followed substantially the same strategy. The purpose of the Current Strategy definition was, therefore, to reduce to a form of words the investment strategy of the ASSCFL at the date of the Octave Contract. Indeed, they expressly agreed that this was correct in the last sentence of the Funds definition (as the Court of Appeal found).

[85]Although I accept that Mr Malik was a reliable witness expressing his honestly held expert opinions, I do not accept his evidence that Octave and Astra must have been referring to funded and unfunded synthetic ABSs in the DDI Memorandum. This is not what it stated in R10.3.2. If the parties had intended to refer to funded and unfunded synthetic ABSs, they would have said so. Moreover, it is clear that the author or authors of the DDI Memorandum understood the difference between cash and synthetic assets on the one hand and funded and unfunded instruments on the other: see, in particular, the text in bold in R10.3.4.

[86]Moreover, I attach little weight to Mr Malik’s evidence that the term “synthetic ABS” was not generally understood to include hybrid securities. I do so because he expressly stated that he had not approached this question on the basis that it was “a matter of broad interpretation or generalised language in commercial documents”. However, this was the very exercise which the Court was required to carry out in the present case. I fully accept that it was not for the expert witnesses to express their personal views about what the Octave Contract meant. But the Court did require their assistance on how market participants would express themselves generally in commercial documents. Mr Malik did not do this.

[87]Finally, I attach little weight Mr Malik’s evidence on this issue because he adopted a highly complex test based on the individual classes or tranches of notes which he expressed as follows:

“if coupons and losses flow through the collateral waterfall of assets sold into the SPV, the tranche is considered cash; if they derive from CDS premia and credit events, the tranche is considered synthetic.”

Moreover, he was not prepared to accept that there was a category of hybrid securities or transactions at all and continued to maintain in reliance on the Securitisation Regulation that a transaction had to be either a cash or synthetic transaction even if the asset pool consisted of both types of asset.

[88]This evidence was wholly unrealistic and, in my judgment, Mr Malik had lost sight of the fact that this was an introduction contract. The parties could not have intended the question whether Octave was entitled to payment of management or performance fees to depend on expert advice or a detailed analysis of each tranche of each investment by reference to the definitions in the Securitisation Regulation (which was intended to regulate the risk weighting of investments held by banks and other institutions). The detailed analysis which I perform in relation to Crown III (see [188] to [254] below) also convinces me that the parties could not have had such a test in mind. I, therefore, find in Musst’s favour on the meaning of the term “synthetic asset backed securities”. (iv) Primarily

[89]Mr Spalton and Mr Mo submitted that “primarily” means “mainly”: see Harry Ferguson Research Ltd v Dawkins

[1960] 1 WLR 639

at 645 (Willmer LJ). They also submitted that for investments to be made “primarily” in synthetic ABSs the relevant funds had to be invested predominantly in securities of that type in the sense that there should be more than one percentage point difference between securities of that type and other types of securities. Put another way, they submitted that the Court should be satisfied that the investments were made “first and foremost” in securities of that type: see Payne v HMRC

[2020] EWCA Civ 889

[2020] 1 WLR 5254

at [62] (Asplin LJ).

[90]I accept this submission and Mr Knox did not argue for a different test. In particular, I accept that the parties must have intended that this requirement should not turn on fine distinctions and that both the parties and the Court should be able to discern clearly whether a Fund was invested mainly or predominantly in synthetic ABSs: see Payne v HMRC at [61] (above). In numerical terms, this requires Musst to prove that well over 50% of the Fund was invested in synthetic ABSs at the relevant time.

(v) On a buy and hold basis

[91]Mr Spalton and Mr Mo submitted that when construed against the factual matrix, the term “on a buy and hold basis” required Octave to hold the relevant securities for a period of three years or until maturity. In support of this submission, they relied on the DDI Memorandum which stated that the Fund had a “3 Year Lock” In their Closing Submissions they stated that this was in the Prospectus but it appears in the DDM. The Prospectus contained a similar statement about the Lock-Up Period of 36 months: see [43] above. and the slides of a presentation made in November 2012 which stated that the core investments in the ASSCFL would be held “to either maturity or until monetisation” and that they were “longer term in nature”. They also relied on the fact that Musst had accepted in the Particulars of Claim that “it would be usual for the Current Strategy” to hold instruments for an initial three-year period: see paragraph 9A(3). Finally, they relied on the following evidence given by Mr Siddiqi in paragraph 33 of his witness statement:

“When I was discussing matters initially with LGT, I knew that the fund that Anish [was] trying to launch – and I was helping him with - was going to be buying high yielding loan securities and derivatives of RMBS, CMBS and synthetic asset backed securities. Such securities would comprise 60-70% of the portfolio and would be required to be held for a longer term of up to three years. These core positions would be coupled with liquid medium and short dated instruments that provided consistent cash flow and facilitated risk management and could represent 30% to 40% of the portfolio. This was explained in the pitchbook.”

[92]I reject Astra’s submissions on this issue. The period of three years is not specified in the Current Strategy and none of the documents stated that Octave was rigidly bound or obliged to hold any securities for the Lock-Up Period or until the maturity of the relevant instruments. If the parties had intended Musst’s entitlement to an introduction fee to depend on whether assets were held in Crown II or Crown III for more than three years, they could have said so very easily. They did not.

[93]Furthermore, Astra’s submissions did not fairly reflect Mr Siddiqi’s evidence either in the passage from his witness statement (above) or in cross-examination. His evidence was not that Astra intended to hold assets for three years or until maturity. He carefully stated in that passage that securities would be held for “up to three years” and in cross-examination he gave evidence that Mr Mathur told him that the strategy was to hold them until he had doubled his money which could be 15 months or two years but he wanted a minimum Lock-up Period of three years:

“Q. And so what did you tell them buy and hold was? A. Buy and hold is, as Mr Mathur had taught me was, look, the actual life of these securities is 30 years, 40 years, right ; nobody is holding them for 30, 40 years. But the whole idea of the trade is I 'm going to buy these −− take a number −−30 cents on the dollar. As this clarity comes into the security, it will be 50, 60; at this point of time we're going to sell it and I've doubled my money; and that could be 15 months could be two years, could be two years and a bit. I just can't tell you right now. So we need you to have the ability to sit with us on these assets for a minimum three years, whilst we really work this through correctly. That was the strategy. Q. I see. Because that's the −−you use −−in paragraph 33 you've also referred to a three year period. So that was the period which you had in mind for −− A. That was the period Mr Mathur needed in order to monetise this strategy.”

[94]I accept that evidence and I find that it represented the shared understanding of Mr Mathur and Mr Siddiqi when they entered into the Octave Contract. Neither party submitted that this evidence was not admissible as an aid to construction and Mr Spalton and Mr Mo themselves relied on Mr Siddiqi’s evidence in support of their own construction. In my judgment, the parties intended the term “on a buy and hold basis” to be shorthand for the strategy which Mr Mathur explained to Mr Siddiqi and which he then set out in the DDI at R10.3.2, namely, that the Investment Team intended to buy securities at a significant discount and to hold them until their market value reflected the “fundamental credit risk/reward profile for these assets”. I hold, therefore, that is the contractual meaning of the term.

[95]Furthermore, I am satisfied that the term “on a buy and hold basis” did not require Octave (or Astra) to hold securities for a specific period although the expectation of the parties was that they would be held for about two years. Consistently with Mr Siddiqi’s oral evidence, R10.3.2 stated that Astra as Investment Advisor expected the market value of the securities to reflect their “fundamental credit risk/reward profile” between the second and third year and that ASSCFL had a “3 Year Lock in line with that expectation”. The reliance which Mr Spalton and Mr Mo placed in their Closing Submissions on the phrase “3 Year Lock” ignored entirely the words which immediately follow that phrase, namely: “should this time horizon compress the Investment Advisor will look to return funds earlier".

[96]The interpretation which I have adopted is also consistent with the expert evidence. Neither expert gave evidence that “on a buy and hold basis” had a specific technical or industry meaning and when I put this to Mr Malik, he accepted that there was no “bright line” in the market as to the number of days, weeks or months which such a strategy required. Mr Malik also accepted in cross-examination that he did not disagree with Aldama 1, §44 and §45 (which I set out immediately below):

“43. Buy and Hold is generally understood in the investment management world to be a passive investment strategy in which an investor buys an asset with the intention to hold it over a period of time, anticipating that the price will rise over time, despite volatility and fluctuations in the market. I am aware of this from my general understanding working in the financial services world for many years and my direct experience of, for example, dealing with insurance companies in the United States when working at Barclays advising some of the largest insurance companies on divestment strategies for their structured products portfolios. Most, if not all, of those insurance companies had funds with buy-and-hold strategies. 44. As to what is an optimal period of time, it comes down to several factors - mainly the type of investor and the asset being purchased. For instance, a hedge fund manager will have a different view as to what is an optimal period of time to that of an insurance or pension fund manager. Similarly, an investor buying US treasuries will have a different view as to what is an optimal period of time to that of someone buying highly complex structured products; some of them could be just a matter of days. 45. It is important to note that a buy-and-hold investment strategy does not preclude investors from selling assets earlier than initially anticipated. The buy-and-hold strategy does not mean “never sell”

. A buy-and-hold strategy does not preclude the investor from opportunistically taking advantage of price movements to capture gains or sell if the underlying fundamentals of an asset deteriorate.”

[97]I accept Mr Aldama’s evidence in those two paragraphs and in the paragraph immediately preceding it and I hold that the expression “on a buy and hold basis” did not mean holding individual assets in a Fund for three years or, for that matter, for any particular length of time. It meant no more than that the Investment Team would identify and acquire synthetic ABSs which were being traded at a significant discount and hold them until their market price reflected what the Investment Team perceived to be their true value. (vi) Timing

[98]The only remaining issue between the parties was the appropriate point in time at which to assess whether Astra was following the Current Strategy. Given the views expressed by both the Judge and the Court of Appeal in the First Claim, both parties accepted that the time at which to test this issue was the date of investment. But they did not agree about the application of this test to the facts. Musst’s case was that this test was satisfied for Crown II by February or March 2016 and for Crown III by October 2017. Astra’s primary case was that this test was satisfied for Crown II by 1 December 2015 and for Crown III by 25 May 2017. Astra also used the expression “Investment Time Period” or “ITP” to describe the period in which those funds were invested by Astra.

[99]I do not consider that the interpretation of the Current Strategy definition has very much bearing on what is primarily a factual issue and I address it in greater detail when I come to the application of the Octave Contract. However, I make two observations at this stage. First, both parties and both experts approached this issue on the basis that it was necessary to look at the position not only at the time of the initial investment into Crown II and Crown III but also at the way in which Astra deployed those funds. I am far from certain that either the Judge or the Court of Appeal really considered this point: see, e.g., the CA Judgment, at [97] and [119]. But in case there is any doubt, I am satisfied that the parties were right to approach the timing issue on this basis. It is impossible to assess whether Astra invested in synthetic ABSs if the clock is stopped on the date on which the relevant funds were paid into Astra’s bank account or the Crown II and Crown III designated accounts.

[100]Secondly, Musst relied on schedules of management and incentive fees which showed that either LGT or Crown paid total funds of US $38.2 million and US $15 million into Crown II and Crown III in a number of tranches. Astra also accepted that funds were paid into Crown II and Crown III in tranches. But neither party argued that each tranche should be treated as a separate investment for the purposes of the Current Strategy definition or that only the first tranche should be treated as the relevant investment (on the basis that further tranches are covered by the last sentence of clause 3.7). Indeed, both parties approached the timing issue on the basis that the sum of US $38.2 million paid into Crown II and the sum of US $15 million paid into Crown III should each be treated as a single investment. A further sum of US $5 million was paid into Crown III in or about March 2017. But neither party submitted that this was part of the initial investment. Again, in case there is any doubt I am satisfied that the parties were right to approach the timing issue on this basis. In my judgment, the question whether Octave (or Astra) followed the Current Strategy ought not to depend on whether an investor invested into a Fund in instalments, rather than a lump sum, and the alternative construction would make what was a complicated exercise even more complicated than is necessary. (5). Funds

[101]Falk LJ identified three separate requirements of the Funds definition which had to be satisfied at the point of investment before the sums invested in Crown II and Crown III were to be treated as Eligible Investments: see the CA Judgment, [119] (above). I deal with each one in turn and also a fourth issue which arose on the facts of the present case but which did not arise at the First Trial. (i) Crown II and Crown III were designed substantially to replicate the investment securities and risk profile of ASSCFL

[102]The principal issue between the parties was whether the replication requirement was to be judged subjectively or objectively. Musst’s case was that this was a subjective question and, as Mr Knox and Ms Bailey put it in their Closing Submissions:

“It is the intention which matters.”

Their case was that the best evidence of Astra’s design and of its intention to replicate substantially the same investment securities and risk profile in Crown II and Crown III was that it adopted almost word for word the investment approach set out in the Prospectus, the DDI Memorandum, the Crown II Contract and the Crown III Contract.

[103]Mr Aldama also produced a detailed table comparing the statements about both investments and risk profile in the Prospectus, the Crown II Contract, the Crown III Contract and the DDI Memorandum: see Aldama 1, Appendix K. He highlighted the words or phrases which he considered to be directly relevant to the nature of the investment securities and their risk profile and I have set out the relevant passages in the Prospectus and the DDI Memorandum. I also set out the relevant passage from the Crown II Contract below. A comparison between those statements shows that they are virtually identical.

[104]Furthermore, Mr Aldama gave evidence that 88% of the securities acquired for Crown II mirrored those acquired for ASSCFL and that 36% of the securities acquired for Crown III mirrored those acquired for ASSCFL. He expressed the view that Crown II’s overall risk profile was likely to have been intentionally structured to substantially replicate that of ASSCFL and that Crown III’s overall risk profile was likely to have been intentionally structured, so far as practicable, to have the same effect.

[105]In their written opening submissions Mr Spalton and Mr Mo argued that “replication”, “investment securities” and “risk profile” were technical terms and that if the parties had intended the question of replication to be assessed by reference to the Prospectus, they would have said so expressly. They also submitted that the question whether Crown II and Crown III replicated the investment securities and risk profile of ASSCFL was a “multi-factorial issue” which had to be determined by considering the investments which were acquired for Crown II and Crown III for the entire ITP or, alternatively, the “Disclosure Time Period” or “DTP” (which extended the ITP by a further six months) and then comparing them with the investments which were acquired for ASSCFL.

[106]Mr Malik gave evidence that to decide whether the replication requirement was satisfied it was necessary to compare the investments in Crown II and Crown III and ASSCFL by reference to five separate tests, namely,(a) the extent to which securities were cash or synthetic ABSs,

(b) the holding periods of the assets,

(d) the “Net Asset Value” or “NAV” and performance of the securities and

(e) the risk composition by reference to asset type, tranche and credit rating. He added a sixth test in the Joint Statement, namely, to consider what Mr Spalton and Mr Mo described in their Closing Submissions as the “transactional overlap”.

[107]I have no hesitation in accepting Musst’s submissions and rejecting Astra’s submissions in relation to this issue. In my judgment, the question whether Crown II and Crown III was designed to substantially replicate the investment securities and risk profile of ASSCFL is a question of fact to be determined by reference to the subjective intention of the Investment Team of Astra LLP as the Trading Advisor under the Crown II Contract and the Crown III Contract. I have reached this conclusion for the following reasons:(1) The parties chose to use the words “designed to substantially replicate” in the Funds definition. Indeed, they agreed that Musst was only entitled to a Revenue Share if Octave (and then Astra) deliberately chose to adopt the same or substantially the same investment securities and risk profile as the ASSCFL. This was clearly a subjective enquiry and Mr Spalton and Mr Mo effectively ignored the words “designed to” in both their opening and closing submissions.

(2) It is almost inconceivable that the parties to an introduction contract would have intended it to be necessary to carry out the six tests identified by Mr Malik in order to work out whether Musst was entitled to a Revenue Share. Clause 4.4 provided that any dispute over the amount to which Musst was entitled was to be referred to the auditors and their decision would be final and binding. The parties could not have intended them to perform these six tests in order to decide whether Musst was entitled to payment or, more likely, to instruct an expert to do so.

(3) Mr Malik accepted in cross-examination that it was a fairly simple exercise to compare the Prospectus with the Crown II Contract and the Crown III Contract and that they were almost identical. When Mr Knox then put the cost of his expert evidence to Mr Malik he accepted that the exercise which he had carried out was “a deep forensic analysis” and not “an analysis that you would do in the market at the time”: “MR KNOX: My Lord, Mr Malik, I'd like to ask you now some points about replication , that is to say, replication as between Crown 2 and ASSCFL. Now, first of all, would you accept this, and you'll be familiar with the documents, I think, that if you look at the investment objectives and investment guidelines set out in the Crown 2 trading agreement, and the similar headings under the ASSCFL prospectus, they are pretty well identical. Would you accept that? A Yes. Q Would you accept, too, that obviously if the relevant test, in this case, was to compare just those two documents without having to go any further, if that was the relevant test , that's a fairly easy thing to compare, isn't it? A Yes, if the question was purely to look at the documents, these documents look identical. Q On the other hand, the test which you've been asked to apply is a quite complicated test, isn't it? A Well, the question that the Court has asked is to look at whether Crown 2, Crown 3 replicated ASSCFL, and, in doing so, look at both the documents as well as the investment securities That is what I've done. Q Yes. That wasn't an answer to my question, with great respect. It's quite a complicated test you have to carry out. Would you not agree with that? A Well, it depends on what is complicated, my Lord. These are relatively simple calculations once you have the data that's available to you. They're not complex derivative calculations, which I'm more used to. Q Would you accept that the total amount of fees, according to Payne Hicks Beach, incurred just for yourself in these proceedings is £254,000? Would you accept that is what, apparently, you have charged, or said you will charge, Payne Hicks Beach for the provision of the reports and assistance in this case? Would you accept that? A It must be. You have the right figure. I 'm not sure −− I have not seen the last invoice. Q Would you accept, too, that Payne Hicks Beach's own fees for dealing with the expert issues are apparently £115,000? Do you accept that from me? We've worked it out from information. A My Lord, if that is a matter of fact and he's just telling me that is what it is. Yes, of course, I accept it. MR JUSTICE LEECH: Why don't you assume that Mr Knox is right, unless you're told otherwise by Mr Spalton? MR KNOX: And the global cost of the exercise is £369,000−odd for the expert evidence, you and Payne Hicks Beach. Take that from me. A Yes, yes. Q Would you not accept that the exercise which you have been asked to carry out is a complicated one? That's how the fees have got that high. A Well, the complexity comes from the fact, my Lord, that you are answering these questions in the context of an expert report for the Court, which is a deep forensic analysis. It is not an analysis that you would do in the market, at the time, if somebody was looking at this, right? Q Why would you not do it in the market at the time? A Because you wouldn't have to do cross−referencing, you wouldn't have to go into doing all kinds of, you know, backing up everything that you say. There is so much work that goes into an expert report to make sure that the evidence that you provide is, you know, the whole truth, etc., but also to make sure that it's ready for any cross−examination going all the way down, you know into court. So there's a lot of work involved in an expert report, my Lord, that I have −−in another type of analysis, again, depending on what the mandate is, I would say an exercise like this, if you didn't have to submit it to a court, would not be that expensive. Q Well, not as expensive as £360,000. A I don't know how much it would cost, my Lord. Q Precisely , but, of course, if there was a dispute between the parties which couldn't be resolved without going to court then, of course, you'd be looking at a lot of money being spent, wouldn't you? A Could you repeat that question, please? Q If there was a dispute, let 's say, as here, between the parties as to whether or not a particular entity, introduced by Musst, had made a relevant investment, if there was some such dispute, then one would have to go through all this, in any event, wouldn't you? A Yes, my Lord.”

(4) Mr Spalton and Mr Mo did not challenge the figures which Mr Knox put to Mr Malik and I accept them. In my judgment, the parties could not have intended that it would be necessary to carry out a “deep forensic analysis” at a cost of hundreds of thousands of pounds to determine whether the Funds definition was satisfied. In my judgment, they intended the question the replication requirement to be a simple test capable of immediate verification.

(5) Furthermore, it is relevant at this point that both parties assumed obligations of good faith: see clauses 5.1 and 6.1. Musst was entitled to expect Octave (and, if the contract was novated, Astra) to confirm in good faith whether Crown II and Crown III were designed to replicate ASSCFL. Moreover, even if Musst was not prepared to accept the word of Mr Mathur as Chief Investment Officer or Mr Holdom as Chief Operating Officer, Musst was entitled to assume that the auditors would be able to assess very quickly whether the replication requirement was satisfied by reference to the Trading Advisory Agreements and the Records referred to in paragraph 11.3.

(6) Mr Malik did not support the submission which Mr Spalton and Mr Mo made in their written opening submissions that “replication”, “investment securities” and “risk profile” had a special technical meaning and this was not a point which was put to Mr Aldama. In my judgment, these are ordinary English words and the parties included them in the Funds Definition to give greater flexibility rather than because they wanted to impose an obligation to carry out a series of complicated tests. To earn its Revenue Share, it was not necessary that a Fund had to contain exactly the same investments as ASSCFL. It was enough that it contained substantially the same investments provided that they were intended to have the same or substantially the same risk profile.

(7) Finally, there was considerable overlap between the tests which Mr Malik employed to determine whether Astra was following the Current Strategy and to determine whether the replication requirement was satisfied. As I explain below, I accept that it is necessary to carry out a factual enquiry to determine whether the Current Strategy definition is satisfied. But I do not accept that it necessary to carry out a separate but closely related exercise to determine whether the Funds definition is also satisfied. There is no obvious purpose in doing so since the Funds definition refers in terms to the Current Strategy.

[108]For these reasons, therefore, I hold that the replication requirement is satisfied if the Court finds on a balance of probabilities that the Investment Team of Astra intended to substantially replicate the investment securities and risk profile of ASSCFL in Crown II and Crown III when those funds were set up or established. I also accept that in deciding this issue it is relevant to compare the Prospectus with the Crown II Contract and the Crown III Contract. However, it is also necessary for the Court to have regard to any other evidence of intention including the direct evidence of the witnesses.

[109]In my judgment, this conclusion is consistent with the findings of the Judge and the Court of Appeal in the First Claim. Falk LJ stated that it was necessary to test the replication requirement at the point of investment rather than from time to time: see the CA Judgment, [119]. Contrary to this guidance, Mr Malik’s six tests involved looking at the composition of ASSCFL, Crown II and Crown III over the ITP and the DTP rather than at the point of investment into the Fund and taking into account changes in individual investments. Applying this test, Crown II or Crown III might have satisfied the replication requirement to begin with but ceased to satisfy it later on. This is precisely the argument which the Judge and the Court of Appeal rejected. (ii) Crown II and Crown III substantially followed the Current Strategy

[110]I have addressed the question of timing in dealing with the Current Strategy definition. In my judgment, the question whether Astra followed the Current Strategy at the point of investment is a question of fact and degree to be assessed by reference to all of the available evidence including the constitutional documents of Crown II and Crown III, the subjective intentions and conduct of the Investment Team and the nature of the investments which the Investment Team then made on behalf of both funds. Although neither counsel team articulated the test in this way, this is in substance how they approached the exercise.

[111]The Current Strategy definition was satisfied if Crown II and Crown III invested “primarily” in synthetic ABSs and the Fund definition was satisfied if Crown II and Crown III “substantially” followed the Current Strategy. Although strict adherence with neither standard was necessary, Musst was not in my view entitled to rely on both adverbs to dilute the overall test. In numerical terms, I am satisfied that Musst still had to show that each fund invested in well over 50% of synthetic ABSs. For example, if Crown III invested in 45% of synthetic ABSs, the Funds definition is not satisfied because the Current Strategy required it to invest in at least 55% of synthetic ABSs and it substantially met that standard. (iii) Crown II and Crown III were subject to Octave’s investment management

[112]Neither party submitted that the third and final element of the Funds definition was not satisfied if the Octave Contract was validly novated in relation to Crown II and Crown III. But in any event, I am satisfied that this is correct. The effect of a novation of the Octave Contract was to substitute Astra LLP and then Astra Ltd for Octave Ltd and Octave LLP as Manager and Investment Manager throughout the Octave Contract: see the CA Judgment, [74] to [80]. I do not, therefore, consider this issue any further. (iv) ASSCFL

[113]A further but closely related issue arose in the present case which did not arise at the First Trial. It was common ground that after the end of 2015 when ASSCFL was restructured, Astra no longer operated it as a managed account on behalf of its clients. It was also common ground that a small number of securities were acquired by Astra and held in ASSCFL after the end of 2015 and that they were held on behalf of Astra itself rather than on behalf of clients. I set out the evidence on this issue in greater detail below but the question arose in the context of Crown III how the replication requirement was to be tested after the end of 2015 when ASSCFL had been restructured in this way.

[114]Mr Knox and Ms Bailey raised this both in their opening and closing submissions. They submitted that once ASSCFL had been restructured at the end of 2015, the replication requirement fell away and did not need to be satisfied at all because ASSCFL was no longer a Fund itself for the purposes of the Funds definition. Mr Spalton and Mr Mo submitted that the issue had to be tested by reference to the investments held in ASSCFL and their risk profile. They did not submit, however, that it was appropriate to compare ASSCFL and Crown III by reference to a snapshot of the investments held in ASSCFL and Crown III on any specific date. But they invited the Court to accept the approach adopted by Mr Malik and to look at the investments over both the ITP and the DTP (and even though ASSCFL had been restructured).

[115]I reject the submission of Mr Knox and Ms Bailey that the replication requirement simply fell away when ASSCFL ceased to be a Fund. In my judgment, Musst had to satisfy the replication requirement at the point of investment whether or not ASSCFL was continuing to follow the Current Strategy. Falk LJ stated in terms that the replication requirement was one of three conditions which had to be satisfied at the point of investment before any investment could be treated as an Eligible Investment: see the CA Judgment, [119].

[116]However, I do accept that it is appropriate to test the replication requirement by reference to the investment securities and profile of ASSCFL when it was a Fund and following the Current Strategy rather than during the period after it had been restructured and was no longer a Fund. In my judgment, the Funds definition must be read as a whole and Crown III fell within the Funds definition if it was designed to replicate the investments and risk profile of ASSCFL when it was “following substantially the same strategy as set out under the Current Strategy below”.

[117]If it were otherwise, the Current Strategy definition and the Funds definition would have been in conflict and it would have been impossible for Musst to satisfy both definitions at the same time. It could not both follow the Current Strategy and replicate the investments and risk profile of ASSCFL once it had been restructured, if only because there was a period when it held no assets at all. Moreover, it would have been possible for Octave (and then Astra) to defeat Musst’s entitlement to payment simply by transferring all of the assets in ASSCFL to another account in the name of another company on the day before any new fund was established and then winding up ASSCFL.

[118]But in any event, I am satisfied that any Fund which was designed to replicate the investments and risk profile of ASSCFL before 31 December 2015 satisfied the Funds definition. In October 2012 Mr Mathur established ASSCFL and the Effective Date for the purposes of the Octave Contract was 21 November 2012. On 13 April 2013 the Octave Contract was signed and the parties agreed in terms that Octave was following the Current Strategy at that date: see the last sentence of the Funds definition. On 31 December 2015 ASCFFL ceased to be a Fund and on 31 March 2016 the parties entered into the Crown III Contract. If Crown III was designed to replicate the investments and risk profile of ASSCFL between October 2012 and 31 December 2015 when the new managed account was opened, then in my judgment it was designed to substantially replicate the investment securities and profile of ASSCFL. It had been a Fund and following the Current Strategy for over three years and had only ceased to be a Fund for three months.

[119]Finally, this interpretation of the Funds definition is consistent with the reasoning of the Court of Appeal. As Falk LJ stated in the CA Judgment, [120], it made obvious commercial sense for the Funds definition to refer to other funds and accounts substantially replicating ASSCFL’s investment approach. If Crown II was following the Current Strategy and Crown III was designed to replicate it because LGT wanted to invest through another managed account, it made no commercial sense for the restructuring or change of strategy within ASSCFL to prejudice Musst’s entitlement to fees in respect of it. H. Crown II: Application (1). The Crown II Contract

[120]The Crown II Contract was a Trading Advisory Agreement and it was dated 1 December 2014 which was defined as both the “Effective Date” and the “Initial Day”. It was made between Astra LLP and Crown and Crown II was described as the “Crown/AAM2 Segregated Portfolio”. It also recorded that it had appointed LGT as the Investment Manager.

[121]In clause 3 Crown committed to contribute US $40 million in funding into Crown II (defined as the “Minimum Commitment Amount”). Clause 3 also provided that Astra would serve notice on Crown specifying the funding instalments (defined as the “Contributions”) to be allocated up to the Minimum Commitment Amount. It also provided that no Contributions would be made after the Client Commitment Closing Date (which was two years after the Initial Day). Clause 5 was headed “Investment Objective and Strategy”, and it provided as follows:

“The investment objective is to generate attractive returns by investing in structured credit products. The principal investments of the Segregated Portfolio will be in cash and synthetic asset-backed securities (including mortgage-backed securities) and their derivatives, and other structured credit products. The Trading Advisor will seek to take advantage of various investment opportunities, including those that it believes arise as a result of regulatory changes and dislocation in the structured credit market. The Trading Advisor intends to follow a flexible approach in order to place the Segregated Portfolio in the best position to capitalize on opportunities in the financial markets. Accordingly, the Trading Advisor has maximum flexibility to invest in a wide range of instruments and will not be subject to any limitations with respect to the types of investments that it may make on behalf of the Segregated Portfolio. Without limiting the generality of the foregoing, and although the Trading Advisor may invest in such a wide range of instruments globally, it is expected that the focus of the portfolio will be on the US and European asset-backed securities market, including commercial and residential mortgage-backed securities, in both cash and synthetic form and derivatives of such instruments. The Trading Advisor for and on behalf of the Segregated Portfolio may also invest in other structured credit products, such as CDOs, CLOs and similar instruments, as well as corporate debt securities. It is also expected that the Segregated Portfolio is likely to acquire and/or hold certain investments that are, or become, illiquid and that require long holding periods to realize value. Such illiquid investments may well comprise the majority of the Client's portfolio. To make such investments, the Trading Advisor has adopted an investment process that will include a structural and collateral analysis, cash flow and return profile projections, as well as an analysis of any idiosyncratic features and risks (including any special swap agreements, specific deal structure and deal related covenants). The Trading Advisor for and on behalf of the Segregated Portfolio may also invest in certain special situation trades with diversified asset classes (including bonds, equity and mezzanine exposures to asset-pools, corporate bonds including bonds convertible into equity, and derivatives, including options, swaps and forwards over indices such as CMBX, ABX and LCDX). The Trading Advisor for and on behalf of the Segregated Portfolio may also seek to "warehouse" positions by acquiring a pool of assets and subsequently selling instruments linked to the risk and returns, or a portion of the risk and returns, of such assets, provided that the Client provided its prior consent to the "warehousing" of such particular position/transaction. The Trading Advisor for and on behalf of the Segregated Portfolio may, but is not obliged to, invest in interest-rate and other swaps, Eurodollar futures, and other derivative and/or hedge instruments, whether exchange-traded or over the counter, both for risk (including tail risk) hedging purposes and to enhance returns provided the Trading Advisor has the relevant authority to make investments of this nature under the 2002 ISDA Master Agreement (as published by the International Swaps and Derivative Association) (the “ISDA”), the Schedule to the ISDA and the Credit Support Annex and any relevant agreement governing the terms of this Agreement.”

[122]The words highlighted in bold are the words and phrases which Mr Aldama highlighted in Aldama 1, Appendix K when comparing Crown II with the Prospectus and the DDI Memorandum. Clause 6 then contained very similar (although not identical) portfolio guidelines to the DDI Memorandum, R1.6. In particular clause 6(e) was in identical form to R1.6, guideline E: “The Segregated Portfolio shall not make investments in equity securities of non-financial corporate issuers although the Fund may acquire exposure to equity or other subordinated securities of structured finance vehicles, bond issuance vehicles, asset-backed security issuers, CDOs and other similar entities engaged in finance transactions;” (2). The Timing Issue

[123]On 31 December 2014 Crown made an initial Contribution of US $14.3 million and on 27 February, 31 March, 8 May and 30 June 2015 it made Contributions of US $8.5 million, US $1.9 million, US $2 million, US $0.5 million and US $6 million respectively. On 31 March 2016 Crown made a final Contribution of US $5 million. The total amount which Crown paid into Crown II was US $38.2 million. Dr Adler confirmed in his witness statement, paragraph 27 that funds were drawn down in tranches and at the request of Astra:

“I note that the full sum of US $40m reflecting the commitment to Astra was not provided to Astra at the outset of Crown/AAM2; rather capital was drawn down in various tranches following requests by Astra (often linked to specific buying opportunities). For the avoidance of doubt, this was the same approach as adopted previously in relation to Crown/AAM (and subsequently for the third managed account).”

[124]Dr Adler did not explain why Crown did not advance the final tranche of US $1.8 million but neither he nor Mr Holdom gave evidence that Astra requested that sum or that Crown failed to advance it in breach of contract. The inference which I draw is that Astra did not serve notice under clause 3 because it had not identified any specific buying opportunity to make use of that sum. Further, although Crown committed to contribute US $40 million, it was not in my judgment obliged to make any Contributions unless or until Astra gave notice under clause 3 specifying that it was required to do so.

[125]In their closing submissions Mr Knox and Ms Bailey argued that the question whether Crown II followed the Current Strategy should be tested as at March 2016 when Crown had made total Contributions of US $38.2 million to Crown II. They also relied on the portfolio transaction reports which showed that the Investment Team had fully deployed those Contributions by about the same time and submitted that this provided a reliable picture whether Crown II had followed the Current Strategy.

[126]By contrast, Mr Spalton and Mr Mo argued that this question should be tested at the end of the ITP (i.e. 1 December 2015) or, alternatively at the end of the DTP (i.e. 1 June 2016). They explained this in their closing submissions on the basis that:

“It looks at gross purchases until the total gross buys equated to the initial investment sum”

. They argued that this “heeds the warning of the Court of Appeal and does not go further, thereby avoiding the problem of a fluctuating or rolling analysis”.

[127]Again, I have no hesitation in accepting Musst’s submissions on this issue and rejecting Astra’s submissions. In my judgment, the appropriate time at which to test the question whether Crown II followed the Current Strategy was 31 March 2016 and I have reached that conclusion for the following reasons:(1) Falk LJ was quite clear in the CA Judgment that the issue had to be tested at the “point of investment”. However, she clearly had in mind a Prospective Investor making a single lump sum investment into a Fund following an introduction by Musst and it was not necessary for her to decide what date should be treated as the point of investment when the Prospective Investor entered into a Trading Advisory Agreement but Astra drew down the funds in tranches over time. I must, therefore, decide that issue.

(2) In relation to Crown II, Crown made a commitment to invest US $40 million but Astra drew down the relevant funds at Astra’s request over a period of 16 months from 1 December 2014 to 31 March 2016. In my judgment, the relevant investment was US $40 million (which Crown was contractually liable to contribute) and the point of investment was the date on which that investment was fully drawn down.

(3) If Astra had given notice to Crown to draw down the final US $1.8 million, then the point of investment would have been the date on which Crown paid that sum into the managed account (or the relevant bank account) at Astra’s request. But there is no evidence that it ever called for that sum and it can be seen with the benefit of hindsight that the investment was fully drawn down by 31 March 2016.

(4) This date also makes practical sense. It is clear from Dr Adler’s evidence that Astra drew down Crown’s Contributions when it had specific buying opportunities and so the full amount of the US $38.2 million had been fully deployed or utilised by 31 March 2016. Indeed, Astra’s portfolio transaction reports showed that on 18 March 2016 Astra entered into a trade of US $5 million for Crown II which settled on 23 March 2016.

(5) Neither the end of the ITP (i.e. 1 December 2015) nor the end of the DTP (i.e. I June 2016) could be said by any stretch to represent “the point of investment” for Crown II. The last Contribution which Crown had made before 1 December 2015 was five months before on 30 June 2015 and the last Contribution which Crown made before 1 June 2016 was two months before on 31 March 2016. Both dates seem to me to be entirely arbitrary.

(6) Furthermore, it became clear in cross-examination that Mr Malik had been instructed to adopt those dates and had not exercised any independent judgment in selecting them: “MR JUSTICE LEECH: We were looking at Q4 2015, and I think in your report we get to PM classification. Once you've done all the gross classification , you've got 40 million give or take, haven't you, in the −− A Yes, my Lord. So, my approach is simply to take all the purchases and just list them out. MR JUSTICE LEECH: If you go to −− And that is Crown 2, isn't it? MR KNOX: Yes, this is Crown 2. MR JUSTICE LEECH: If you go to M/7, we know that there was a payment of 5 million, so in terms of actual sums drawn down by Astra from the investor for the purpose of the fund, we know that on 31 March 2016, there was an additional 5 million drawn down, giving a total of drawdowns of 38.2 million. Under the terms of the Trading Advisory Agreement, as I understood it, Astra was entitled to call on LGR to provide 40 million. But you stopped your calculation at the end of Q4 2015. Is that right? A Only because that is the date that's provided to me under my instructions, my Lord. So there is a line that is drawn.”

(7) Finally, the reason given by Astra (as opposed to their expert) for selecting the end of the ITP as the appropriate date made no sense whatever to me. Mr Spalton and Mr Mo justified it on the basis that it was the date at which Crown II had purchased investments for Crown II for a total price of US $40 million ignoring the proceeds of sales which had been reinvested in the meantime. It followed, therefore, that Astra urged me to decide whether it had followed the Current Strategy with the money invested in Crown II before it had drawn down US $5 million of that money. I got the very strong sense that Astra had chosen dates on which the facts were most favourable to its case rather than for principled reasons. (3).

(i) Synthetic ABSs

[128]Mr Aldama gave evidence in Aldama 1 that Crown II was invested primarily in synthetic ABSs at all times and that synthetic ABSs represented 85.45% of the assets in the Crown II asset pool as at March 2016. Following discussions with Mr Malik he prepared revised calculations and in the Joint Statement he produced a table which showed that synthetic ABSs represented 85% of the assets in the Crown II asset pool (including hybrid ABSs) and 66% of those assets (excluding hybrid ABSs). Mr Malik gave evidence in Malik 1 that synthetic ABSs represented 55.31% of assets in the Crown II asset pool for the quarter ended 31 March 2016 and that 44.69% of those assets represented cash assets. (Mr Malik did not accept that synthetic ABSs included hybrid securities and so he excluded them as a matter of course.)

[129]There were a number of differences between Mr Aldama and Mr Malik in relation to both their methodology and their analysis of individual securities which I will have to consider in the context of Crown III. However, Mr Knox submitted that it was unnecessary for me to address those issues in relation to Crown II because, on any view, Crown II was primarily invested in synthetic ABSs. I accept that submission. Even if I had accepted Mr Malik’s methodology and analysis in full, I would still have found that 55.31% of the assets held in Crown II during the quarter ended 31 March 2016 were synthetic ABSs and that on that day Crown II was mainly or first and foremost invested in synthetic ABSs or, put another way, that synthetic ABSs made up well over 50% of the assets in the Crown II asset pool. (ii) On a buy and hold basis

[130]Mr Knox and Ms Bailey relied on clause 5 of the Crown II Contract in support of their case that Crown II was managed on a buy and hold basis at the point of investment together with the evidence of the experts about this clause. They also relied on the oral evidence given by Dr Adler both about the Crown II Contract and also about the management of the Crown II portfolio. I begin by setting out that expert evidence and then the factual evidence.

[131]Mr Spalton and Mr Mo also relied on an exercise which Mr Malik had carried out to determine the average holding period of investments in each of Crown II and Crown III, which he described as the “holding period test”. Mr Knox objected to this evidence on the basis that it was misleading and that Astra had failed to give adequate disclosure of the data which would be required to test this evidence. Nevertheless, I summarize and consider this evidence before setting out my conclusions on this issue.

[132]Expert evidence. Clause 5 of the Crown II Contract expressly stated that it was expected that Crown II was “likely to acquire and/or hold certain investments that are, or become, illiquid and that require long holding periods to realise value” and that such investments “may well comprise the majority of the Client’s portfolio”. Mr Aldama also gave the following evidence in Aldama 1, §94 to §96:

“94. This intent to hold assets for a longer period was documented and disclosed by Octave on the Trading Advisory Agreements for Crown II and Crown III, where in Section 6 This should refer to clause 5 in each agreement. under Investment Objective and Strategy it reads “It is also expected that the Segregated Portfolio is likely to acquire and/or hold certain investments that are, or become, illiquid and that require long holding periods to realise value. Such illiquid Investments may well comprise the majority of the Client's portfolio.” 95. It is important also to note that a buy-and-hold investment strategy does not preclude investors from selling assets earlier than initially anticipated. The buy-and-hold strategy does not mean “never sell”

. A buy-and-hold strategy does not preclude the investor from opportunistically taking advantage of price movements to capture gains or sell if the underlying fundamentals of an asset deteriorate. 96. There are several examples of short-term trading activity on the portfolios, both on synthetics and non-synthetics. For example, REDAC028 (E) (a disputed synthetic) was sold out of Crown II and Crown III just twenty-nine (29) days after being purchased, capturing an impressive 19% return on the investment. Similarly, REDAC016 (D) was sold out of Crown II less than a year after being purchased capturing a 160% return on the investment.”

[133]Mr Aldama then identified in a table two investments in Crown II and one in Crown III which were sold in less than year. US $5 million of REDAC16 was bought for Crown II at 36.25% of its nominal value and then sold in two tranches for 93.8% and 95% of its nominal value after being held for 260 and 333 days respectively. Two tranches of REDAC28 were bought for both Crown II and Crown III for 83.25% of their nominal value and both sold 29 days later for 99.25% of their nominal value. Mr Aldama’s evidence about this table in Aldama 1, §97 was as follows:

“This type of short-term trading is very much compatible with a buy-and-hold investment strategy. It would be perverse for any strategy not to allow a nimble response to market conditions/opportunities, notwithstanding a general expectation that market conditions might mean that assets would be held for a longer period.”

[134]Mr Knox put the first passage (above) to Mr Malik and suggested to him that clause 5 envisaged a buy and hold strategy. Mr Malik did not accept this in terms although he was prepared to accept that illiquid investments would generally be held on a buy and hold strategy. But he also qualified his answer by stating that the way to establish the strategy was by looking at how the portfolio was managed:

“MR KNOX: Can I ask you please to go to E/31, paragraph 94, see what Mr Aldama says. He's talking about buy and hold generally in relation to Crown 2 and 3. Have a look at E/31, 94, and he refers to the investment objective and strategy. Do you see this at E/31, 94? And he says: " ... it reads ' It is also expected that the Segregated Portfolio ls likely to acquire and/or hold certain investments that are, or become, illiquid and that require long holding periods to realise value. Such illiquid Investments may well comprise the majority of the Client 's portfolio. '" Do you see that? A I do. Q Now, normally one would expect illiquid investments to be held on a buy and hold strategy, wouldn't you? A Generally, yes. Q And here, the trading agreement provided that the illiquid investments may well comprise the majority? A Yes, it says −− I can read what it says. Q So this, the trading agreement does appear to be envisaging −−envisaging −−that the account will be operated on a buy and hold basis. A So, my Lord, my experience in these type of agreements is that it's a very common language to provide a broad mandate and to let the investors know that they're locked in for a while. MR JUSTICE LEECH: Well, look at the language. It's not just, "You're locked in and you can't stop us from −− you can't require us to invest in XYZ or not to invest in ABC." What it says is −− It's actually put in positive terms, isn't it? "It is also expected that the Segregated Portfolio is likely to acquire and/or hold certain investments..." A Yes, my Lord. MR JUSTICE LEECH: That's the expectation. A Absolutely. Because they are structured credit assets, they are generally illiquid, and you would tell the investor that your money is locked in for a while. If the question is what was the strategy, my Lord, the strategy that you can see from the portfolio management is the one that I described to you.”

[135]When Mr Knox put Aldama 1, §97 to Mr Malik, he accepted that the sale of an asset which suddenly goes up in value was not inconsistent with a buy and hold strategy. But he expressed the view that if the investor was constantly doing this, he would describe this as two different strategies or a mixed strategy:

“Q We've read this before. But then paragraph 97, he says: "This type of short−term trading is very much compatible with a buy−and−hold investment strategy." And he continues: "It would be perverse for any strategy not to allow a nimble response to market conditions/opportunities, notwithstanding a general expectation that market conditions might mean that assets would be held for a longer period." You agree with that, don't you? A So, I −− Look, I mean, I can read what he says, and I agree with the fact that you can have two different strategies. Right? So if you have a buy and hold strategy and suddenly you have an asset that suddenly goes up in value, you sell it. That shouldn't impede your ability to say that this is a buy and hold strategy. But if you're constantly doing that, so if you have a particular strategy, which is to buy a price −−at a price which you believe that the market, let's say, underprices, and you're able to then actualise the means to be able to sell it to someone else at a higher price, that is part of a strategy, my Lord, right? Now, generally, because you're holding a structured credit portfolio, it's −−you know, it's illiquid. So we keep going back to the same thing, my Lord, because you can have two different strategies within an overall strategy, but if you ask the question, did −−"Was this a buy and hold strategy?" it's not clear. To me, it's mixed. Q Could I ask this: would you accept that Mr Aldama's point of view, that this was a buy and hold strategy, is a perfectly reasonable point of view? A It is a point of view, my Lord.”

[136]Witness evidence. By email dated 20 November 2014 Mr Mathur wrote to Mr Plotke of LGT about Crown II (which was set up less than two weeks later on 1 December 2014). After congratulating Mr Plotke about obtaining an MBA he continued as follows:

“We are hoping to initiate the work on the AAM2 soon and look forward for the documents to be completed. In terms of the asset buying opportunity, I have tried to keep you in the loop on the various discussions we’ve been having. I am still looking to target lo-mid teens return IRR on the AAM2 and we believe we can deploy with a long term view in mind. Strategy would be to have a quick deployment on assets (hi single digits) and replace them with opportunistic assets as and when we are able to deploy. This would include cash CMBS and RMBS assets and some CLO positions.”

[137]When Mr Knox put Mr Mathur’s “long term view” in this email to Dr Adler, he accepted that LGT was investing in Crown II for a long term return rather than short term profits and that LGT was itself an alternative investment fund manager:

“Q −−you'll see he says, this is the same sentence: "…I am still looking to target lo−mid teens return IRR on the AAM2 [this is the point I want to focus on] and we believe we can deploy with a long term view in mind." Do you see that? A Yes. Q This was obviously −− Crown 2 agreement was subject to a three−year lock−up period. A Yes. Q In which, basically , they weren't allowed to take the money out −− A That's right. Q −−unless you consented, in broad terms. A Yes. Q And what I suggest they are envisaging is a lot of investments being made in "illiquid" assets. Is that not right? Long−term view? A Well, long−term view is −−and "illiquid" is a little bit of a vague term. Q But broadly, Dr Adler, and being sensible, I mean, this is what is envisaged? A See, the liquidity of the instruments that we bought is −−and we do provide those liquidity kind of overviews to both the AGT and our other clients. You can typically unwind a portfolio within a week to 10 days, but that kind of liquidity is obviously not the churning of the portfolio that they want to see in this account. Q No, and that's what −− Sorry. A So they want to invest in a long term, or with a longer−term view. Q Sorry, that's what LGT were interested in? 1 A Yeah, investing, not trading, I 'd say. Q Yes, investing for the long−term return rather than the short−term profits. Would that be fair? A Yes. Q And LGT, as I understand it, in some way, are they the fund that −−or manages funds for the Lichtenstein Royal Family? A Sorry, did the −− Q Does it manage funds for the Lichtenstein Royal Family? A I think they do that too, yeah. Q Would it be fair to say that they're an alternative investment fund, as I understand it? They call themselves that. You don't know. It doesn't matter. A Well, if you ask me, are they an AIFM? I don't know, but they are an alternative asset specialist, definitely. Q Yes, right.”

[138]Dr Adler also gave evidence in his witness statement about the first purchase for Crown II which involved Astra identifying an option which was “embedded” in the bond and which enabled Astra to force the liquidation of the security. His evidence was that Crown II was established in time to take advantage of any investment opportunities which might be available at the end of 2014. He continued as follows (references omitted): “One such opportunity became the first purchase of the newly established Crown/AAM2; the bond traded on 8 December 2014 and settled a week later on the 15th. I recall and have had it confirmed by the documents that the asset in question was a US CRE CDO, which Astra had acquired on previous occasions, albeit at lower prices and with a longer holding period in mind. However, by late 2014 – after a rating downgrade of one of the transaction parties during the second half of that year – Astra had reassessed the value of an option that was embedded in this structured bond. Rather than being a passive stakeholder as had been the intention previously, building a controlling stake would allow Astra to take a much more active (and almost activist) approach towards forcing the liquidation of the CDO (Astra’s approach was successful; the bonds were repaid in full in April 2016).

[139]Finally, Dr Adler gave evidence about REDAC50 which Astra purchased for both Crown II and Crown III and for which it deployed a very similar strategy. Dr Adler described this strategy as one to “collapse the structure” to get access to valuable collateral:

“Q Without identifying the name, can you tell us what that was, what the story was? We can then probably work it out −− A Yeah, what the story −− I think that I can tell without −−without identifying the REDAC. I think it is 50 or 50(C) was the one that −−similar to that, but −− So, the −− MR JUSTICE LEECH: Did you get the number there? Can you just repeat the numbers so that counsel has it? A One −− Don't hold me to it. I think it's either 50 or 50(c) that is the one that was kind of −−the one we tried to repeat for this new one. So the one that we tried to −−or the success story we tried to repeat was we built a position in a European ABS CDO over the1 course of, kind of, second half of '17 and early '18, which had a huge mismatch between assets and liabilities, i .e. the underlying assets in the pool were way more expensive and valuable than −−that where we could buy the debt of that securitisation. So if we can kind of push the collapse of the structure by calling it, then we would get all the value of the collateral to us, or the cash flows came out of those liquidation proceeds to us, and we acquired −−those transfers were allegedly cheap compared to that. So that had worked quite well in January 2018 with the European ABS CDOs, and it was a 2004 vintage CDO, and then we tried to do the same thing with the 2005 of the same issuer. So, basically, those issues are typically repeat issuers. Year after year, they come with new CDOs. So it worked with the 2004 vintage, and we try to do it with the 2005 vintage.”

[140]The holding period test. For the purposes of this exercise Mr Malik calculated the average weighted holding period of all of the assets in both Crown II and Crown III over what he called the “Court window” or “disclosure window” from 1 December 2014 to 30 November 2017 in respect of Crown II and from 25 February 2016 to 1 February 2019 in respect of Crown III. He explained his methodology in Malik 1, §3.3.13 to §3.3.19:

“3.3.13 On this basis, I calculated the cost-weighted holding period of investments to test whether Crown II and Crown III were operated as buy-and-hold portfolios in practice. The analysis encompasses all transactions within the Court’s observation windows: Crown II, from 1 December 2014 to 30 November 2017, and Crown III, from 25 February 2016 to 1 February 2019. 3.3.14 The analysis was performed at the note level using the portfolio transaction lists. Each purchase (“buy”) was linked to a corresponding sale (“sell”) or sales, and holding periods were calculated in calendar time between trade dates. 3.3.15 Where multiple purchases and sales occurred, I applied a first-in, first-out (FIFO) method, matching the earliest buys against the earliest sells. This ensured that costs and quantities were allocated consistently across the life of each position. 3.3.16 Where a bond was still held at the end of the disclosure window, I treated the Court window end date as the effective “sell” date for that parcel, so that a holding period could be measured on the same basis as sold positions. This allows sold and unsold holdings to be assessed consistently. It also has the effect of shortening the estimated duration of those positions, as some have been retained beyond the Court window in practice. 3.3.17 The results were then combined into a cost-weighted average, with larger investments having greater influence. For both Crown II and Crown III, I calculated three metrics: (i) the holding period of securities sold within the Court window; (ii) the holding period of the securities sold at the end of the Court window; and (iii) the overall weighted average across the entire fund. 3.3.18 Each measure provides a different perspective. The sold-only holding period indicates the typical duration that positions which were sold during the period were held for. The end-period holding period captures the minimum duration of positions that were still on the books when the window closed, giving a floor on holding length for those investments. The overall average combines both and reflects the broad mix of activity, smoothing differences between shorter-term trades and longer-term holdings. Taken together, these three measures provide a balanced view of how the portfolios were managed. 3.3.19 This method was applied separately to each trade in Crown II and Crown III that fell in the ITP, based on the respective PTRs. The resulting averages provide a measure of whether they were actively trading or holding them for extended periods.”

[141]The results of the holding period test were as follows. For Crown II the average holding period of those investments sold during the Court window was 1.46 years and the average holding period of those held at the end of that window was 2.71 years giving a weighted average of 1.89 years. For Crown III the average holding period of those investments sold during the Court window was 0.70 years and the average holding period of those investments held at the end of that window was 2.35 years giving a weighted average of 1.14 years. Mr Malik expressed the following conclusion in his written evidence (which he stood by in cross-examination):

“The results are consistent across all three tests. The holding-period analysis shows that Crown II typically held positions for multiple quarters, with a cost-weighted average of about 1.9 years. Crown III’s average was just over one year, with most of its positions held for a year or less, while the remainder were carried longer, including some through to the end of the observation window. Overall, both portfolios exhibited a medium-term, trading style posture with limited turnover. This is more consistent with a buy-and-hold approach than with active short-term trading, even if not “held to maturity” in the strict accounting sense.”

[142]Findings of fact. I have held that on its true construction, the term “on a buy and hold basis” meant to buy securities at a significant discount and to hold them until their market value reflected the “fundamental credit risk/reward profile for these assets”. I find on a balance of probabilities that Astra managed the Crown II portfolio of investments on that basis as the Trading Advisor under the Crown II Contract for the three-year period between 1 December 2014 and 30 November 2017. I also find that Astra was managing the portfolio on that basis as at 31 March 2016. I make these findings of fact for the following reasons:(1) Clause 5 of the Crown II Contract provides objective evidence that Astra intended to manage the Crown II portfolio of securities on a buy and hold basis. Mr Aldama gave evidence that he understood clause 5 in this way and, although he did not accept this proposition in terms, Mr Malik accepted that illiquid assets are generally managed on a buy and hold basis and that it was the expectation of the parties to the Crown II Agreement (as set out in clause 5) that Astra would acquire and hold investments on that basis.

(2) Mr Mathur’s email dated 20 November 2014 provides contemporaneous evidence that when Crown II was set up he continued to hold a “long term view” and Dr Adler confirmed that LGT was investing for the long-term return rather than the short-term profits.

(3) Mr Knox was highly critical of the holding period test because Mr Malik took no account of the period of time for which assets continued to be held in Crown II after the three year Lock-up Period had expired. There is undoubtedly some force in this criticism. But I still consider that the holding period test has some evidential value because it shows how long, on average, each asset was held during the initial three-year period when LGT had no contractual right to redeem its investment or to require Astra to liquidate assets.

(4) But, as Mr Malik had to accept, the results of the holding period test were consistent with Astra managing Crown II on a buy and hold basis throughout the Lock-up Period. Given the proper construction of the Octave Contract which I have found (but which Mr Malik did not himself accept), I go further. In my judgment, the holding period test provides positive evidence that Astra managed Crown II on a buy and hold basis. The weighted average confirms that Astra held assets for the length of time which Mr Mathur anticipated in his discussions with Mr Siddiqi before the parties entered into the Octave Contract. It also confirms that Astra held those assets for the period of time set out in the DDI Memorandum at R10.3.2.

(5) I am prepared to accept Dr Adler’s evidence that Astra adopted a more active (or activist) approach in relation to individual investments such as REDAC19 and REDAC50. But I am not satisfied that it demonstrates that Crown II was not managed on a buy and hold basis. Astra held the relevant bonds for substantial periods of time and although it may have acquired them with the ultimate aim of collapsing the structure, it was only able to do so by building up a controlling stake over time before it exercised the relevant option. Moreover, Astra’s overall strategy was to buy a distressed asset and to hold it until it could realise that asset at the true market value of the collateral.

(6) Furthermore, it is clear that Astra used not only Crown II but also ASSCFL itself to build up a controlling stake in REDAC19. The ASSCFL transaction list confirms that ASSCFL acquired tranches of REDAC19 on 13 May 2015 and then sold them on 31 December 2015 when the Lock-up Period for ASSCFL expired and the entire Fund was restructured. This provides clear evidence that Astra used the same strategy to manage both ASSCFL and Crown II over the same period. If Astra was managing ASSCFL on a buy and hold basis, then it was managing Crown II on the same basis.

(7) But in any event, and for the reasons which I have given, I am satisfied that Crown II was managed primarily on a buy and hold basis. Even if I had been prepared to accept that REDAC19 was not managed on a buy and hold basis, this is evidence at best that Astra adopted a “mixed strategy” for Crown II (to use Mr Malik’s term). Even after taking into account those investments in Crown II which were realised early, the weighted average holding period of all of the assets in the account was still 1.89 years and fully in line with the DDI Memorandum. (4).

(i) The replication requirement

[143]Witness evidence. Astra did not call any witnesses to give direct evidence of the intentions of the Investment Team or Astra more widely when setting up Crown II. Mr Mathur and Mr Thomas did not give evidence and Dr Adler’s evidence was that he did not review the Octave Contract and was unaware of its terms until much later. Moreover, he did not address directly the question whether the Investment Team intended to buy the same investments for ASSCFL and Crown II or to achieve the same risk profile for its investors. I found this surprising considering that these ought to have been relatively simple issues for him to address.

[144]This was also an obvious lacuna or gap in Mr Holdom’s evidence. He did not address the question whether Crown II was intended to replicate ASSCFL either even though he had positively represented to Musst at the time that the replication requirement was not satisfied. By email dated 30 April 2015 Mr Holdom wrote to Ms Agatha Imiolek of Musst copying in Mr Murray, Mr Thomas and Ms Galligan stating that Crown did not satisfy the replication requirement:

“My apologies, I sent you the Crown AAM 2 invoice in error. The Crown 2 account was setup for a new strategy (primarily CLO and CRE) and therefore is not covered by the existing Introduction Agreement as it does not “substantially replicate the investment securities and risk profile of ASSCF”

. I will settle the Crown AAM 1 invoice once the client has made their payment.”

[145]Mr Holdom’s evidence was that Mr Thomas helped him to compose this email and that it suggested a “knowledge of trading strategies I did not possess at the time (I was not aware of the strategies that Astra deployed on its funds and managed accounts at this time)”. He also gave evidence that it suggested a “knowledge of the terms of the Octave Contract that I also did not possess at the time”. When cross-examined about this email Mr Holdom stated that he was simply repeating what he had been told and that he was not aware of the basis for the statements.

[146]I return to Mr Holdom’s evidence about this email when addressing the negligent misrepresentation claim. But I also found this evidence surprising. Mr Holdom was the Chief Operating Officer of Astra and he made a positive representation to a contractual counter-party. But he had made no attempt to verify what he said in his email (or later to Ms Galligan orally) either at the time or before he came to give evidence and, if had done so, it would have made the Court’s task very much simpler. I raised this with him in the following exchange:

“MR JUSTICE LEECH: So, just probing that before Mr Knox asks his question, a little bit further: so you made a −−made an assumption or maybe not even made an assumption, you just sent the two invoices on the basis that there are two managed accounts and that if they're entitled to one they must be entitled to the other. Is that a fair? A. I had no knowledge one way or the other. I just didn't think about it. I just did it. MR JUSTICE LEECH: Well, you are the Chief – point that's been put to you, politely , a number of times, the is that you are the Chief Operations Oﬀicer −− A. I understand. MR JUSTICE LEECH: −− of this organisation. So one question I was going to ask you at the end, but I'll now ask you it, which is that Mr Knox put the question to you, said: you know, you don't give positive evidence to me that there was a reasonable basis for the −−even now, reasonable basis for the belief that what you said was true on that occasion. And the question I wanted to ask you is: well, why not go back and −−you're the Chief Operations Oﬀicer of this organisation, even now. Why not go back and satisfy yourself that you were −−you were actually right, before you come to give evidence? A. It hasn't crossed my mind to do so. I trust Mark Thomas' judgment on these things implicitly. MR JUSTICE LEECH: So effectively your evidence to me is you just relied −−you relied on other people? A. That's true. MR KNOX: Could I call it you're just the messenger? A. In this instance, yes.”

[147]The Astra European Opportunities Fund. In both their written opening and closing submissions Mr Spalton and Mr Mo sought to suggest that at or about the time when Crown II was set up, Astra decided to promote a new fund called the Astra European Opportunities Fund LLP (the “AEO Fund”) to invest in commercial real estate (“CRE”). They did not submit in so many words that the assets in Crown II were invested in that fund. But they certainly gave that impression. For, example, in their closing submissions they stated as follows (footnotes omitted):

“60. Around this time, there was a perception that the market environment and opportunity set pursued by the Crown I account was changing, in part due to regulatory shifts following the global financial crisis. 60.1. Mr Adler, whose role at Astra involved researching potential investment opportunities, recalls that during 2014, his research had shifted. He explains that, then, he was unaware of the Current Strategy definition. In cross-examination, he explained that due to the change in the synthetic ABS market, Astra had pivoted its focus to CRE assets and LGT to CLOs {Day3/5:10-15}. This was because the synthetic ABSs, such as those bought for Crown I, were getting more expensive and harder to find {Day3/11:7-8}. In view of that market situation, Astra and LGT discussed different investment opportunities in CRE and CLOs. 60.2. Mr Siddiqi’s oral evidence was that by 2015, i.e. the very time Crown II kicked off, the market had changed and synthetic ABSs were no longer available at the heavily distressed prices they were formerly {Day2/23:9-15}. 60.3. In fact, only a further US$3 million of the additional sums committed to Crown I were used to acquire further capital. Astra had begun to develop an investment thesis focusing on European commercial real estate (including real estate debt and physical properties), which resulted in the marketing of the Astra European Opportunities Fund LLP.”

[148]It was quite important for Astra to advance a case that Astra intended to set up a new fund because, in the absence of evidence to this effect, the obvious inference for the Court to draw was that when they set up Crown II, Mr Mathur and the Investment Team intended to follow the same strategy as for ASSCFL and Crown I and to purchase the same investments for Crown II as they were buying for ASSCFL and Crown I.

[149]In support of their submissions, Mr Spalton and Mr Mo relied upon a series of emails relating to the AEO Fund beginning with a chain between 15 October 2014 and 5 November 2014 in which Mr Plotke raised the possibility of investing in collateralised loan obligations (“CLOs”). They then relied on a chain passing between Mr Plotke and Mr Mathur on 20 and 21 November 2014 which included Mr Mathur’s email referring to “a long term view in mind”. By email dated 21 November 2014 Mr Plotke then broadened the discussion and asked Mr Mathur to give a “quick overview on ALL products you manage/oversee” and on the same day Mr Mathur replied as follows:

“Hope you have now received the questionnaire duly filled. If there are any questions please let me know and we’ll come back to you as soon as we can. Further to your questions here’s a brief summary of the changes we have had at the firm. Please feel free to ask any questions if you have any. Astra Asset Management has now been in existence for over two years now and we are nearing the second anniversary for the first fund - Astra Structured Credit Investment Limited. We have had no redemptions in any of our 2 funds so far and broadly investors are pleased with the performance across the funds and other managed accounts. We continue to advise on 3 managed accounts (including Crown AAM) that form the bulk of our AUM which stands at about 370mm at the moment. Of these, about 169mm is in a Sharia compliant fund where we act as an Investment Manager. During the course of time Astra has successfully obtained its own FCA license. This now allows us to directly perform the investment manager functions. As you are probably aware there was very little operational overlap with Octave (primarily IT and legal counsel). In the previous half of the year we segregated the IT infrastructure and is now entirely run separate to Octave. We have also now engaged the legal counsel full time and exclusively with Astra. Astra team has grown since, which includes two hires on the CRE fund and two executives on the marketing and investor relationships. We still share the same office with Octave but are going to need additional space for new investment team. There continues to be no share overlap between octave and Astra. We continue to find investment opportunities to ramp up existing vehicles and managed accounts where possible at attractive yield levels. However recent tightening in the market has made opportunities in bond market very rare. As a follow up we came up with our next strategy in the European markets backed by commercial real estate. As you may already be aware that we are aiming to launch the fund capitalising on this strategy in january next year. please feel free to contact me on any of these aspects and i would be pleased to furnish additional details.”

[150]When he cross-examined Dr Adler about this email, Mr Knox suggested to him that Crown II was “basically still going to be a fund which consists of asset−backed securities and synthetic asset−backed securities”. Dr Adler accepted this when it was put to him without any qualification.

[151]By email dated 3 December 2014 Mr Plotke then instructed Mr Mathur to go ahead with Crown II. Moreover, it is clear from the Crown II transaction list that Mr Mathur followed those instructions because Astra entered into two trades for Crown II dated 8 December 2014 and 17 December 2024 (REDAC19 and REDAC21) totalling approximately US $14 million. It is also clear from Astra’s fee schedule that on 31 December 2014 Astra received US $14.3 million from Crown to settle those trades.

[152]On 27 January 2014 Mr Joseph Shiels of Astra sent Mr Rigter and Mr Plotke a number of promotional documents relating to the AEO Fund. These included what he described as a “one pager” This was not a One Pager of the kind which I have described above. This was a term which he used to describe a one page summary of the fund. which stated as follows (original emphasis):

“Astra AMCO launched its first fund, Astra Structured Credit Investments, in December 2012. Since inception, Astra’s ABS fund, with specialist focus on synthetic real estate backed securities, has generated returns > 30% (net). As of July 2014 Astra’s AUM stands at approximately $400m. Now launching its second strategy, Astra European Opportunities, Astra aims to capitalise, through ‘arbitrage’ on the significant pricing dislocation between European commercial real estate (CRE) market and the CMBS bond market. Despite a significant rally in the price of CRE in tier 1 European cities, real estate prices in tier 2 and tier 3 locations remain significantly depressed, often below the costs of construction. Mezzanine CMBS bonds backed by properties in these tier 2 and tier 3 locations however, trade at levels implying the bond market expects significant short term price appreciation in the underlying properties. This market premium paid for mezzanine CMBS bonds is attributed to 1) lack of supply of CMBS bonds 2) lower yields demanded by fixed income investors and 3) lack of appetite to invest in commercial properties in tier 2 and tier 3 European cities. Extensive analysis of non-performing CMBS collateral has led to the identification of a pipeline of properties which due to the upcoming refinancing wall, are available to acquire before reaching the market. Astra aims to capitalise on the CMBS market premium by constructing a portfolio of physical properties as collateral for structuring and issuing synthetic mezzanine bonds to the capital markets, providing risk exposure to the future price appreciation of the European property portfolio. Astra expects fund investors to benefit not only from capturing CMBS market premium through the issuance of the synthetic bonds, but by retaining equity ownership of the CRE, the fund will also receive regular income and capital returns should the CRE value appreciate beyond the issued tranche.”

[153]This marketing material demonstrates that the AEO Fund was intended to acquire actual properties and then issue bonds itself in the market secured on these assets (and Dr Adler confirmed this in cross-examination). By email dated 17 February 2014 Mr Plotke wrote to Mr Mathur in the following terms:

“I trust you are well. I am back in the office and will start soon to work on the real estate opportunity for our AAM2 account. Therefore I will need all documents you have on this new venture (PPM, DDQ, Marketing Materials, etc) Pls also send me the CVs of the new people which were hired for the opportunity. By when do you expect now the first closing to take place? If we do it, we would [want] to be in the first closing. Further, we should schedule a call regarding the fees on this vehicle, given they are not yet set in stone and how we combine this with our other fees we pay.”

[154]By email dated 19 February 2015 Mr Shiel wrote back to him enclosing what he described as “Presentation Materials”, “CRE Asset Documentation” and “Fund Documentation”. By email dated 4 March 2015 Mr Plotke wrote to Mr Mathur himself raising a number of questions about the AEO Fund:

“There are a number of open points which we have to fill within the next 10 days, as the week after I will be in the US. - Exact due diligence process you undertake before investing into a property (in as much detail as possible) (if Iwan has examples of his past investments and what he looked at could help as well) - List of potential property investments (you mention this one in the meeting) - We should go through the potential investor list once again (over phone) - Ownership structure of Astra - Deeper knowledge how employees are compensated - Principal investments - Organization chart - What is your IRR expectation for this fund? - Change to the PPM on how long someone can invest after first close There are some other points, which I would like to discuss with you over the phone directly. Last point to discuss would be that we need to address the fee topic as well.”

[155]Dr Adler accepted that this was the kind of due diligence which LGT would have carried out if it had been intending to invest in an entirely new fund. He also accepted that LGT carried out no due diligence in relation to Crown II:

“Q Now, I think we can take this shortly, it's right that LGT, before they agreed to invest in Crown 1 with Octave, at the time, they carried out extensive due diligence in relation to what the nature of the fund and acquisitions would be for the managed account. Is that right? A Yes. Q Would it also be fair to say that, I think, in late 2014, there and abouts, Astra decided to set up what was called the Euro Opportunities Fund? Do you remember that? A I do remember it. I think we started looking into that idea a little earlier than late '14. I think it wasn't more summer '14, but yes. Q Okay. I mean, it may not matter very much, and we know that it was thought by Mr Mathur that LGT might like to invest in the Euro Opportunities Fund as well. A Yes. Q And when that was suggested, LGT expressed some interest in doing so. Would that be right? A Yes. Q And we know that, before committing themselves to doing so, they carried out extensive due diligence on what the nature of that fund would that be. Is that fair to say? A They would do that, yes. Q They would do that, but I saying they did do that, didn't they? A Yeah, at that stage, the fund was an early stage, so there was no final BPM and documentation yet so the due diligence you can do is limited at that stage, yes. Q I mean, if I can just ask you to, please, look at F3, 351. A 351? Q 351, Dr Adler. A Yeah. Q I mean, I know this is a long time ago, so it's going to be diﬀicult to recall exactly what was going on, but we have here, at 351, an email from Mr Plotke to Mr Mathur about the Euro Ops Fund, March 2015. Do you see that, Dr Adler? A Yes…Now, I just put that to you as a sort of summary. I mean, this is the sort of thing they would do if they were going to be investing in something new, if I put it that way? A Yes. Q Now, I think there was also a CLO fund, a CLO mezzanine fund. I think you refer to that in your statement, Dr Adler. A Well, it was not quite a mezzanine fund. I think there was an idea to invest in a CLO portfolio. Q Which is separate from Crown 2, as I understand it. A No, I don't think they were separate, but the idea was in late '14 −−or the LGT's idea was to go into CLOs, and our idea was more to go into CRE. Q Right. Now, we know it would appear that no due diligence was done by Crown in relation to the proposed investments in relation to Crown 2. Would you accept that from the record? A I don't recall specific due diligence on Crown 2 alone.”

[156]In early March 2015 Mr Holdom also became involved in dealing with LGT’s queries about the operational side of the AEO Fund. By email dated 2 March 2015 he wrote to Mr Gallus Rechsteiner of LGT in the following terms:

“Astra Real Estate Asset Management LLP (“Astra Real Estate”) was incorporated in October 2014 for the purpose of providing in-house real estate investment and management capabilities. The Fund will invest primarily in European Commercial Real Estate and synthetic CMBS. The fund launched on 22 January 2015 and is currently open to adherence by investors. Two senior hires have been made to lead the investment and management of real estate assets.”

[157]When Mr Holdom was cross-examined about this email, he accepted that the AEO Fund never “took off”. He also accepted that it was probably true that LGT carried out a lot of due diligence on the AEO Fund although he could not recall it taking place:

“Q. And at the time you must therefore have known what7 the Astra real estate fund was all about? A. Well, I said so, yes. Q. In fact, as I understand, in the end, it never took off; is that right? It never −−for whatever reason, it never took off? A. Correct. Q. Will you take it from me, from the correspondence, that Crown or, rather, LGT, wanted to do, and did ask for, quite a lot of due diligence on this new fund. Or would you like me to take you to the documents? A. I can take what you said as logically probably true, but I don't recall it. Q. It's the sort of thing you would expect them to do? A. It is, but, as I said, the fund −−as you said, the fund didn't launch. My role is generally the operations of such things. And the operations hadn't started; and I actually don't recall whether they came in to do any operational due diligence on this fund. They may have been doing due diligence on the investment process and other such things.”

[158]On 4 March 2015 Mr Rechsteiner met Mr Holdom for a “DDQ meeting” (which Mr Holdom explained was a due diligence questionnaire meeting). Under cover of an email dated 6 March 2015 Mr Holdom sent him a series of documents and on the same day he wrote to Mr Rechsteiner correcting some earlier information and confirming that the NAV of Crown II was already US $24.6 million as at that date. This showed that assets had already been acquired for Crown II even though the AEO Fund had not yet been launched. On 10 March 2015 Mr Rechsteiner replied to this email stating:

“please could you forward the latest PPM and related agreements for Astra European Opportunities Fund LP”

. Mr Knox put these documents to Mr Holdom and after some prevarication he finally accepted that Crown II and the AEO Fund were two different things. He also accepted that he knew this at the time:

“Q. Right. And you obviously knew something −−you knew something about the Euro Ops Fund and it being a separate thing from Crown II, if I can suggest F you go to F3/344. Perhaps I can take you to 346 to start with. It's an e−mail from you to Mr Rechsteiner. You are saying: "Thank you for visiting us ... " Do you see that? So Crown had obviously come to visit you. "Any further questions". And this is a DDQ meeting. "DDQ" stands for? A. Due diligence questionnaire. Q. Yes. So he comes along and speak to you, basically to find out what Astra are doing and how things are going; is that right? A. Actually, I don't remember this at all, but, yes, I can see the e−mail, so it obviously occurred. Q. And then you see the next one immediately up: "Hi Michael, thanks for having me yesterday. And it was quite interesting to get a strategy presentation from Anish." So Mr Mathur gave a strategy presentation? A. If that's what he says. Q. And I imagine that would have been, in particular, about the Euro Ops Fund; is that right? A. I would think so. Q. Sorry, you would? A. I would think so. Q. Yes. And then if you go to 345. You write to Mr Rechsteiner with copies of the compliance manual and various other things and a breakdown of the assets under management. And you say, note this, halfway down the page: "LG2 16.20". So you know there is this fund, at this moment, of LG2. This must surely by Crown II. We see that halfway down 345. A. Oh yes. Q. That must be a reference to Crown II; is that right? A. Yes. Q. So you're telling him that the Crown II fund has already got 16.2 million in. And then, if you go to 344, you correct this : "Please note that Crown 2 should read $24.6mm". So you're obviously keeping yourself up to date, if I can put it this way, with Crown II, with at least its −−the net asset value, I imagine; is that right? A. I get quarterly reports upon which the invoices are based to LGT. Q. Yes. So here you're, as it were, talking about Crown II. And then, in the next e−mail up, Mr Rechsteiner is saying "please [send] me the PPM and related agreements for the Astra European Opportunities Fund". So it's obviously something separate from Crown II, isn't it? A. I don't know. Q. Well, just looking at this, I mean, you obviously know there's something called Crown II which you've gone to the trouble of correcting the figures for. Then you're also being told, on 10 March, "please ... forward the latest PPM and related agreements for the Astra European Op ... Fund". So they're different things, aren't they? A. Well, they're not connected to my −−in my mind, in this e−mail train, I 'm being asked two different things. Q. Can I suggest to you that you knew they weren't connected at this time; they obviously weren't connected? A. No, this is just administration. This is just responding to a client 's request. Q. Mr Holdom, you're an intelligent man; and I understand, of course, things are administration. But you can't administer things properly if you don't understand what you're doing? A. I can send a PPM to someone that asks for it. Q. But it is obvious that the PPM for Astra Euro Ops is obviously something quite separate from the Crown II Fund; that's obvious, isn't it ? A. It is. Q. And you knew that at the time? A. I know that. Q. Sorry? A. I know that. Q. No, no, you knew it at the time? A. I think I would know that at the time.”

[159]I return to this evidence in the context of the misrepresentation claim. But Dr Adler also confirmed Mr Holdom’s evidence that the AEO Fund never took off. In cross-examination he accepted that the fund “launched but never closed” and that no funds were ever invested in it:

“Q So what the position is, is basically there's a tightening in the market, opportunities in the bond market are rare, but what they are thinking of doing, or what Astra are thinking of doing is getting straight into the commercial real estate field with a different fund. That's right, isn't it? A Yeah. Well, it's a related field, commercial real estate is part of ABS world as well, but yes. So basically supply in one corner of the market is drying 21 up, so we move in another corner. That's right. Q But the ABS −− Sorry, forgive me, the Astra Euro Opportunities fund proposed −− A Yes. Q That essentially would involve, amongst other things, actually buying physical properties, wouldn't it? A It was envisaged it would be a blend of CNBS and physical properties, yes. Q So you'd have, as it were, bonds on one hand, and then actual physical properties −− A Yeah, or loans on those properties. That's right, yes. Q −−or loans. We know, I think you may recall this, we've got an email where Mr Mathur goes around three countries in Europe specifically looking for properties to buy? Actual properties. A Yeah, I wasn't on that trip but I think AGT was as well, yes. Q Yes. But in the end, nothing happened to that. A To the fund? Q Yes, to the proposed commercial real estate fund. A It kind of launched but never closed, yes. Q Yes, and I think before it closed, you employed, or Astra employed two people: a Mr O'Leary and a Mr Assys, I think? A Yes. Q And then eventually they had to be −−their employment came to an end. A That's right. Q Because there was no fund in the end to operate. A Yes.”

[160]As I have said, Mr Spalton and Mr Mo did not submit in terms that the Crown II investments included shares in the AEO Fund or even in assets which had also been bought for the AEO Fund. But in case there is any doubt, I find as a fact that Astra did not invest any of the funds in the Crown II managed account in the AEO Fund. I also find that although Astra marketed it in late 2014 and early 2015, the AEO Fund never attracted sufficient investment to become operational and no investors invested in the AEO Fund.

[161]The Crown II Contract. As I have stated, Mr Aldama carried out an exercise in Aldama, Appendix K to compare the Prospectus, the DDI Memorandum, the Crown II Contract and the Crown III Contract placing particular emphasis on those passages which were directly relevant to the securities purchased for ASSCFL, Crown II and Crown III and the risk profile of those assets. I have set out the relevant passages from the first three of those documents above and I have also highlighted in bold the words and phrases which Mr Aldama highlighted in bold in Appendix K. The exercise which Mr Aldama carried out in Appendix K demonstrates that the language used in all three documents relating to the investments which were to be acquired and their risk profile, is almost identical. Indeed, when Mr Knox put this proposition to Mr Malik, he accepted it without qualification:

“MR KNOX: My Lord, Mr Malik, I'd like to ask you now some points about replication, that is to say, replication as between Crown 2 and ASSCFL. Now, first of all, would you accept this, and you'll be familiar with the documents, I think, that if you look at the investment objectives and investment guidelines set out in the Crown 2 trading agreement, and the similar headings under the ASSCFL prospectus, they are pretty well identical. Would you accept that? A Yes. Q Would you accept, too, that obviously if the relevant test, in this case, was to compare just those two documents without having to go any further, if that was the relevant test, that's a fairly easy thing to compare, isn't it? A Yes, if the question was purely to look at the documents, these documents look identical.”

[162]Dr Adler also accepted in cross-examination that there was “almost complete overlap” between the Prospectus and the Crown II Contract although there were some additional restrictions in the Crown II Contract. He also confirmed that LGT’s counsel (rather than Astra’s counsel) drafted the Crown II Contract and that it was intended to mirror the Crown Contract:

“Q Yes, I think this may be −−it begins −− Well, I can take it from F3, 53. A F3, 53. Q Thank you very much. It's Mr Freidhof to Mr Murray. A Yes. Q "Dear Mark, Ralph and Bert informed me that it is agreed that we set up a second Crown Managed Account managed by Astra−basically mirroring the Crown/AAM Segregated Portfolio ." And Ralph and Bert would be Mr Plotke and Mr Rigter? A That's correct. Q "Full legal name," gives the full legal name. "In the meantime, I've drafted the Trading Advisory Agreement [that's my emphasis]. May I ask you to review and confirm if these terms are acceptable to you." And then he says: "I've changed the advisory fee section to change it to what I understand the position has been agreed to be." Do you see that? A Yes, I do. Q And so it's Crown who eventually draw up agreement, basically, mirroring the previous Crown 1 agreement, subject to the point about the fees. That's right, isn't it? A Well, I mean, LGT, yeah. Mr Freidhof works for LGT, yes. Q Sorry, but that's right, isn't it , it's Crown who draw it up, copying the existing one? A Well, as I just said, Mr Freidhof is LGT's lawyer, but −− Q Yes, exactly. So, what he's done is he's looked at the Crown 1 agreement, the agreement in relation to Crown 1 Then he said, "Well, we want something for Crown "and he just copied the Crown 1 agreement, subject to the point about fees. That's right, isn't it? A That's what it looks like. Q And then if you go to the next page, I think. Sorry, F3, 52, going backwards, but forwards chronologically, you will see Mr Freidhof chases Mr Murray, and then, at the top of the page, I think the date is 18 November, as you can see, from 51, Mr Murray replies: " ... apologies for the delay in reverting to you. It all looks relatively straightforward, although we will review and revert our comments shortly." A Mm−hmm. Q Now, what I suggest to you, and then over the page 51, going backwards, you'll note that, while there's still a discussion of some sort, Mr Freidhof says: "…please note that we've established the Crown/AAM 2 Segregated Portfolio in the meantime." And then he asks them to attach, confirm the attached draft of the supplement and then the amendment. Now, do you see that? A Yes. Q Now, what I suggest to you is that basically the position is this: LGT are, not surprisingly, rather pleased with the way the Crown 1 fund has performed. A Yes. Q They would like to have another fund, this time for a different portfolio called Crown 2. That's right, isn't it? A I would agree, yeah. Q Just to get this right, there is, basically , LGT manage −−or Crown manage certain portfolios of investors. Is that right? A That's right. Q And they're segregated. Hence the name, segregated. A Yes, it's a segregated portfolio company operating segregated portfolios. Q And so what's going on here is this investment is being made for a different portfolio of investors, but by Crown on behalf of a different portfolio of investors. That's right, isn't it? A Yeah, on behalf of a different investor on the same platform, that's right.”

[163]In the light of Dr Adler’s evidence, I find that the reason why LGT opened Crown II as a separate managed account was because it was itself an asset manager managing segregated portfolios of investments on behalf of different groups of investors. It wanted to open a second managed account on the same platform on behalf of a group of investors who were different from the investors in Crown I. I also find that LGT prepared and drafted the Crown II Contract to mirror the Crown Contract.

[164]The Investment Securities. Mr Aldama carried out an exercise to compare the securities which Astra acquired for ASSCFL and both Crown II and Crown III. His evidence was that by February 2016 when Astra had drawn down Crown’s commitment of US $38.2 million, there was an overlap of 88% between the securities held in ASSCFL and the securities held in Crown II. He produced a table at Aldama 1, Appendix M which showed that Astra had purchased 14 out of 16 of the same securities for ASSCFL and for Crown II between December 2014 and February 2016. Dr Adler also accepted in cross-examination that the risks associated with the individual investments would be the same (although both funds would not necessarily have the same overall risk profile):

“Q But if you're buying the same, more or less, for ASSCFL and Crown 2 in 2015, presumably, the risks of what you're buying are more or less the same? A Well, for that specific asset, maybe, but for the overall account that is monitored here, not. Q Of course, that might depend in ASSCFL's case on the fact it's already been going for two years by the time −−about two years, I think I'm right in saying −−it's already been going −− A It's almost fully invested, exactly. Q It's fully invested, so in one sense, it’s starting at a different level, but if you just look at the purchases for ASSCFL in 2015, one can see that 10 out of 12 of them are the same as the purchases for Crown 2. Can you take that from me? A I take that from you, yeah. Q Yes, and so at least in relation to those purchases, the risk profile isn't going to be all that different you accept that? A Yeah, we can go through the list −− Q Exactly, the −− A −−but as I said, I don't remember much cash being available in ASSCFL, but yes.”

[165]Findings of fact. Given Astra’s failure to adduce any evidence to prove its intentions when Crown II was set up, I must make findings of fact about Astra’s intentions based on inferences to be drawn from the contemporaneous documents and the evidence of the witnesses whom Astra chose to call. In my judgment, it is appropriate to draw the inference that Mr Mathur and Mr Thomas intended to use the funds in Crown II to invest in substantially the same investment securities as ASSCFL and that both funds should have substantially the same risk profile. I draw this inference for the following reasons:(1) I have found as a fact that the AEO Fund did not attract sufficient investment to become operational and that the funds in Crown II were not invested in the AEO Fund at all. Other than Crown I, there was no evidence before me that Astra was managing any more than the two funds ASCIL and ASSCFL when Crown II was set up. Indeed, Mr Mathur’s email dated 21 November 2014 confirms this to be correct.

(2) Although Mr Spalton and Mr Mo tried to suggest that Crown II was set up as a separate managed account because LGT wanted to invest in different assets with a different risk profile, Astra adduced no evidence to support this conclusion. Dr Adler’s evidence was that LGT was an alternative investment manager and I have found that Crown II was set up as a separate managed account at the request of LGT because it managed segregated portfolios of assets on behalf of different pools of investors. I am satisfied, therefore, that Crown II was set up for this reason and not to invest in different types of assets.

(3) I have also found that LGT’s legal counsel drafted the Crown II Contract to mirror the Crown Contract and I am satisfied that the language which in both the Prospectus and the Crown II Contract used to describe the investment securities to be acquired for each Fund and their risk profile was identical or almost identical. I have set out the relevant extracts from the Prospectus, the DDI Memorandum and the Crown II Contract above and Mr Malik accepted without qualification that the language in both documents was identical. Dr Adler also accepted that there was almost complete overlap between them.

(4) The obvious inference to draw is that the Crown II Contract mirrored the Crown Contract and used identical or almost identical language to describe the investments which Astra proposed to buy and their risk profile, because LGT intended Astra to buy the same investment securities for Crown II as for Crown I and ASSCFL and Mr Mathur and Mr Thomas agreed to do so. Mr Aldama’s evidence that Astra purchased 88% of the same securities for Crown II as for ASSCFL provides clear support for this inference.

(5) Dr Adler also accepted that the risk profile of the 10 securities which Astra had bought for both ASSCFL and Crown II was the same. I accept that the risk profile of ASSCFL and Crown II were not identical but, in my judgment, this is only a consequence of the fact that ASSCFL had been set up earlier and had been in operation for much longer.

(6) I consider in detail the individual assets which were acquired for Crown III below and for reasons which I explain there, I found Mr Malik’s six tests and detailed evidence of little assistance. As I have already found, the parties could not have had his six tests in mind when the Octave Contract was drafted. Furthermore, in my judgment, the words “substantially” and “risk profile” in the definition of Funds were intended to provide flexibility given that the same investment securities would not always have been available in the market even if Astra was continuing to follow the Current Strategy.

[166]Given the inference or inferences which I have drawn from the documents, I find as a fact that the replication requirement was satisfied in relation to Crown II when that managed account was set up and that Astra designed and intended Crown II to replicate the investment securities and risk profile of ASSCFL. I also find that this remained Astra’s design and intention at the point of investment, namely, in March 2016. (ii) Did Crown II follow the Current Strategy?

[167]I have held that the funds in Crown II were invested primarily in synthetic ABS and on a buy and hold basis and there was no issue that the remaining elements of the Current Strategy definition were satisfied. However, I must also go on and consider whether as a matter-of-fact Crown II was following the Current Strategy at the point of investment. Again, Mr Mathur and Mr Thomas were the two individuals with direct knowledge of this issue. But Astra chose not to call them. Mr Knox and Ms Bailey, therefore, relied on two key documents which they were able to put to Mr Holdom and Dr Adler.

[168]The LGT Questionnaire. The first document was a questionnaire headed “Manager Update Period 01 July through 31 December 2014” which Mr Holdom completed for LGT on 23 January 2015 (the “LGT Questionnaire”). In Box A1 headed “Assets under Management” Mr Holdom had written “Credit Strategy – Funds USD 71 mm, Managed Accounts 166mm as of 31st December 2014. Passive Vehicle – USD 166mm as of 31st December 2014”. In Box B2 headed “Investment Management” he was asked the following series of questions to which he gave the following answers in bold:

“2.1 Please state an indicative expected performance range over the next 12 months. No change to expected performance 2.2 Has your philosophy, investment process or risk management changed in any way? No 2.3 Have any new strategies been added? No”

[169]Appendix A to the LGT Questionnaire contained a list of the securities under the heading “Illiquid Assets Analysis”. Mr Knox put these parts of the document to Mr Holdom. His evidence was that he could not say whether the answer to Question 2.2 (“Q2.2”) was correct and that he made no inquiries before giving that answer:

“Q. And you asked −−and this is as at January 2015. One of the questions you were asked is: "Have any new strategies been added?" That is at F3/107: "Has your philosophy ... changed ... " Do you see that? 2.2, 2.3; yes? Now, can I suggest this: that that, at the time, was correct? It was correct at the time, wasn't it? A. Well, yes, we didn't have any money invested in the new fund. Q. Wait a minute: "Have any new strategies being added?" I 'm asking you, first of all, is that a correct answer? A. I 'd have to look at the timings. I don't know. Q. Well, we know −−well, first of all, take it in stages: you accept you said that? A. I would have been aware of it. Q. And you would, therefore, before answering this question, have made sure that it was following the same type of strategies as Crown I? A. I wouldn't have no knowledge of that. Q. No, no, no. You're filling in this form saying −− answering questions, from LGT, their question is: "Have any new strategies been adopted? "And you said "No". So surely you must have made enquiries to find out whether or not that was true? A. No. Q. What, you mean you just answered it "no" without actually knowing whether it was true; is that right? A. Well, I think the −− the diﬀiculty here, I think, is that it's the −−the understanding of the word "strategy". So, for me, it would be a completely new fund. Q. Okay. Right. So you would accept that Crown II was not a completely new fund? A. No, I −−in this context, I'm talking about the real estate fund. Q. Well −−but I am suggesting to you that, by this time, Crown II had been set up; right? A. Hmm, hmm. Q. I 'm also suggesting to you that your understanding must have been that this was not a major new strategy that was involved in the setting up of Crown II. What do you say to that? A. I don't know whether it's a new strategy or not. Q. Well, my next question is: surely you asked someone before asking that question. Surely you asked someone. A. No, I didn't. Q. Sorry? A. I did not. Q. But, hang on, you're the Chief Operating Oﬀicer. It's important you are −−that's the answer? A. Yes. Yes, that's true. Q. It's important you answer LGT's questions accurately, isn't it? A. The fact of the matter is this is a very administrative form coming in every six months; it's not −− it's not looked at in the forensic detail to which you're looking at it now. Q. Well −− A. You're giving it more weight than it actually deserves. Nevertheless I accept your point. Q. I suggest to you, you must have asked someone, "Is Crown II basically following the same strategy?" Because otherwise you wouldn't have been able to answer the question. A. I can tell you I did not; and I answered the question as it's written.”

[170]Email dated 3 February 2016. On that date Dr Adler replied to an email from Mr Plotke which contained a number of questions. Dr Adler had adopted the common device of embedding his answers in the earlier email and I set out the questions and answers below (with the questions in bold):

“On a different matter. As we are launching a new account with you, I have to write another research report on Astra. Therefore I will need some updated facts and figures on the company: - Can you pls send me an overview list of the various products you manage (including AuM, what kind of product, etc) Total AuM is appr. $500mm, out of which $90mm are in a ‘non-core’ mandate with DB where we manage certain market exposures of their Sharia compliant platform (I believe we have spoken about this when we launched AAM 2). The remainder is held across four vehicles, namely Crown/AAM, Crown/AAM 2, 2B LLC and Astra Structured Credit Investments Ltd (‘ASCIL’) (with the restructuring into a more liquid vehicle we have merged Astra Special Situations Credit Fund Ltd and ASCIL for efficiency reasons; Astra Special Situations Credit Fund Ltd retains some cash until its de-regulation is completed, but all assets have been transferred to ASCIL as of 31st December). As you know, all our credit vehicles have pursued a very similar if not identical strategy so far; going forward, ASCIL will invest in slightly more liquid credit assets to reflect its changed liquidity profile (1y soft lock/quarterly redemptions). - I will need to know the terms of the various products The terms of interest are probably the fees and the liquidity; Crown/AAM and Crown/AAM 2 terms are familiar, I guess; 2B LLC is still locked up and has a 2%/20% fee structure. The restructured ASCIL is the only vehicle where things have changed: as mentioned in the previous answer, the liquidity is now quarterly with a one year soft lock (i.e. funds can be withdrawn within the first 12 months, but a redemption fee is payable in this case). The management fee is 2% p.a. for subscriptions less than $20mm and 1.5% p.a. otherwise. In addition, we are entitled to a performance fee: there is no annual hurdle, but a lifetime hurdle of 5%, i.e. no performance fee is payable unless the NAV has crept up to at least 105% of the NAV on day one. Provided we clear that hurdle, we get 15% performance fee for a performance up to 10% during the calculation period (read: year) and 20% for a performance above 10%, with catch-up. I have attached the prospectus where all of this is described over many pages in fun-to-read legalese. - Would you have fact sheets for your two liquid funds? Please see attached. As mentioned, there is really only one liquid fund”

Please see attached. As mentioned, there is really only one liquid fund”

[171]Dr Adler explained in his witness statement that once the Lock-up Period for ASSCFL had expired in December 2015, Astra liquidated and de-registered the fund. He also explained in cross-examination that ASCIL acquired the shares in ASSCFL and it was used by Astra to hold certain assets. When he was cross-examined about the email dated 3 February 2016 he refused to accept that he had intended to tell Mr Plotke that Astra had followed a similar if not identical strategy for both ASSCFL and Crown II. Because of its importance I must set out the passage in full: “MR KNOX: F4, page 230. Now, this is an email which −− A I 'm familiar with. Q Because it was brought it up last time, you're familiar with. One can pick it up to −− It's unfortunately not in colour, but I don't think that matters very much. If you go to the foot of 230 −− MR JUSTICE LEECH: So, just to be clear, this is, again, an email on which you cross−examined Mr Adler last time? MR KNOX: Briefly, but in connection with a Crown 2 −− MR JUSTICE LEECH: Yes. MR KNOX: −−not at all defamation. This is Mr Plotke writing to you, and in this email there are questions from Mr Plotke, which are in a slightly more bold version in the hard copy, and answers from you, which are in the lighter shade. Do you see that? A Yep. Q The first question you're asked: "Can you pls send me an overview list of the various products you manage..."Do you see that? You answer that by saying, well, you've got this Sharia compliant platform. That's the first sentence. Then you continue: "The remainder is held across four vehicles, namely Crown/AAM, Crown/AAM 2, 2B LLC and Astra Structured Credit Investments Ltd ('ASCIL') [because by this time ASSCFL had transferred its assets]..." All right? MR JUSTICE LEECH: So, just to be absolutely clear, for my note, so "Astra Structured Credit Investments Ltd" is effectively the same fund as ASSCFL, is it? It's been −− With the change from Astra −− A Not a change. Both of them existed in parallel from late 2012 to December '15, and then they −−well, we'll called it "merged" basically. The clients in special situations in ASSCFL kind of redeemed but subscribed into −− MR JUSTICE LEECH: So this is a merged fund, then, or combined fund? A Yeah −− MR JUSTICE LEECH: If I call it the "combined fund," do you think that's accurate? A Yeah, you can call it "combined fund." MR JUSTICE LEECH: Yes. Thank you, Mr Knox. MR KNOX: But ASCIL did not follow the same strategy as ASSCFL. That's right, isn't it? ASCIL followed a different strategy from ASSCFL? A From −− Q It had a different mandate, didn't it? A Well, now we're talking "mandate" again. It was −− Yeah, the main difference was that ASCIL was a 90−day liquidity vehicle from day one −− Q Yes. A −−so there was no lockup −− Q Exactly, okay −− A −−(inaudible). Q Now, I just want to see what you say here: "The remainder is held across four vehicles, namely Crown/AAM, Crown/AAM 2, 2B LLC and Astra Structured Credit Investments Ltd ('ASCIL') [and you mention] (with the restructuring into a more liquid vehicle we have merged Astra Special Situations Credit Fund Ltd and ASCIL for eﬀiciency reasons..." A Mm−hmm. Q Then: "[ASSCFL] retains some cash until its de−regulation is completed, but all assets have been transferred to ASCIL as of 31st …December" 2015, correct? A Yes. Q "As you know, all our credit vehicles have pursued a very similar if not identical strategy so far; going forward, ASCIL will invest in slightly more liquid credit assets to reflect its changed liquidity profile (1y soft lock/quarterly redemptions)." Now, can I suggest to you, in your witness statement you essentially say that when you say –when you talk about "all our credit vehicles have pursued a very similar if not identical strategy so far ," you're simply talking about the mandate. A That's right. Q Dr Adler, you speak very good English. Surely what you are saying is not, " all our credit vehicles have got a very similar mandate so far" −− Look at the words, "pursued a very similar if not identical strategy so far." That's talking about something that's been done since they were set up; it's not talking about the mandate with which they were set up, isn't it? A Well, the mandate setup is kind of the instructions on day one, right? Q No, I understand that, but answer my question, please. There is a difference between saying, "They've all got the same mandate," and saying: "As you know … [they] have pursued a very similar if not identical strategy so far ... " That's different, isn't it? You're talking about what's happened since the mandate, not what the mandate was, on any normal reading of that sentence. Would you not agree? A I don't think −− No, I don't remember putting that much kind of weight onto those "so far" words, so what I really said is what I said to you last time. Q Okay, well −− A "As you know, they had all the same mandate." Mr Plotke had seen, obviously, the mandates for the Crown, he had seen the ASSCFL prospectus, he had not seen the investment and management agreement for 2B, so if I had told him −−or I meant to tell him here that we bought the same bonds and they did all, kind of, the same thing, he wouldn't have laughed me out of the house. Q No, he wouldn't, because you're not saying here they buy the same bonds. Two points: you're saying here they have pursued a very similar, if not identical, strategy. A Yes. Q You're talking about what has happened since −−in terms of what has happened since, "pursued" almost identical strategies so far. A Yes, but what does it mean −− Q No, but wait a minute. He wouldn't have laughed at you if you had simply said that. Why would that be laughable, bearing in mind what Crown 2 by then had done in February 2016? A But what does it mean then, in your mind, to −−or in your question, to "pursue" a strategy up to a certain point in time? Q I'm suggesting to you that what this is saying is the purpose with which the acquisitions are being made is, essentially, to get synthetics and asset−backed securities into the funds. That's what it's saying, "We've pursued the same strategy" −− A But why −− Q −−wait a minute −−of buying synthetic asset−backed securities and asset−backed securities. That's what you're saying, isn't it? A No, that's absolutely not what I'm saying and, actually , nowhere in −− Well, it does give us the flexibility in the Crown mandates to invest in synthetics, but it doesn't say, "This is devised for synthetic assets." Q Just look at the next sentence, or after the semi−colon: " ... going forward, ASCIL will invest in slightly more liquid credit assets ... " A Mm−hmm. Q So there you're talking about what is going to happen in the future for ASCIL. And it's going to invest in slightly more liquid credit assets to reflect its changed liquidity profile. You're not suggesting, however, that any of the other funds are going to change, invest in slightly more liquid credit assets, are you? A Well −− Q No, no, no, you're not. Please, I 'm conscious of the time. You're not suggesting that anyone else is going to do that −− A No, but −− I know, but I have to have a chance to put this all in −−in context. So, he would obviously know that his own account will come out of that three−year lock in a few weeks' time. He would also see −−or ask about 2B, which is in the email on −−well, this table that is in 229 to 230, that 2B will be out of the lock in pretty much a few days' time. So, again, I didn't put that much thinking into, "How exactly should I phrase that thing?" I just wanted to point out that ASCIL is now −−or the former ASSCFL, after the merger, is a 90−day liquidity, as it has always been, but has a one−year soft lock over the penalty charge. Q Now, just take a look at the next paragraph: "I will need to know the terms of the various products." A Mm−hmm. Q This is the paragraph where you deal with the mandate, isn't it ? What you've been telling him beforehand is the strategy, and then you're asked, "Well, what are the terms of the various products?" That's the contrast, isn't it? A Well, you can −− Q And then you do talk about the terms. A Well, terms −− I think I mentioned, essentially, the fees, which is always top of mind for investors, but coming back to your previous point, it talks very kind of broadly about, "What is the various products you manage?" That is why I mentioned the equity mandate in the first few lines as well, a Sharia compliant platform. So I think that is really, at a very high level, "Yes, we have a Sharia compliant platform and we have absolute return credit strategies," which is those four accounts, two funds, two managed accounts −−one fund, three managed accounts, sorry, and when it comes to the terms, its fees and, typically , the liquidity profile Q Okay. Doctor, I obviously challenge that. I suggest it's obvious that you were simply saying here, "Crown 2 has followed the same strategy as ASSCFL and Crown 1." That's what you're saying, since −− It's pursued it since its inception. That's what you're saying. A I think our main disagreement –"

[172]Findings of Fact. As I have already stated, I found Mr Holdom to be an unsatisfactory witness who tried to downplay his own involvement and distance himself from any decision-making. I consider it highly improbable that the Chief Operating Officer of a financial services provider such as Astra would take no steps to satisfy himself that the answers which he gave to a client’s questions were correct before completing a document containing representations about investments totalling millions of US dollars.

[173]I therefore reject Mr Holdom’s evidence that he made no inquiries before answering Q2.2 in the LGT Questionnaire and I find on a balance of probabilities that he checked with a member or the members of the Investment Team and they confirmed that Astra had not adopted a new strategy for Crown II before he answered Q2.2. I also find that when he informed LGT that no new strategies had been added, he was intending to represent to LGT that Astra was not following a new strategy in relation to any of the funds set out in Box A1, namely, ASSCFL, ASCIL and Astra’s managed accounts including Crown II.

[174]I also reject Dr Adler’s evidence that when he used the words “all our credit vehicles have pursued a very similar if not identical strategy” in his email dated 3 February 2016, he was intending to refer to the mandates for those credit vehicles. In my judgment, the email is clear and unambiguous and Dr Adler was intending to inform Dr Plotke that all four credit vehicles mentioned earlier in his answer “Crown/AAM, Crown/AAM 2, 2B LLC and Astra Structured Credit Investments Ltd (‘ASCIL’)” had pursued a very similar if not identical strategy and, as Mr Knox put to him, that strategy was to acquire synthetic ABSs. I found Dr Adler’s refusal to accept that this is what he meant incredible and, although I generally found Dr Adler to be a reliable witness, I attached no weight to his answer on this occasion. He was fully aware of the difference between a mandate and a strategy and I found his answer disingenuous.

[175]The LGT Questionnaire provides clear and contemporaneous documentary evidence that the Investment Team was following the Current Strategy in January 2015 and immediately after Crown II was established on 1 December 2014. Dr Adler’s email dated 3 February 2016 also provides clear and contemporaneous documentary evidence that Astra was still following the Current Strategy a year later in February 2016. I find as a fact, therefore, that at the point of investment in March 2016 Astra was following the Current Strategy. (5). Conclusion

[176]Subject to the question whether the Octave Contract was novated, I hold that Musst is entitled to share in all management fees and performance fees earned by Astra in relation to Crown II because Crown II was a Fund managed or advised by Astra for the Current Strategy and was, therefore, an Eligible Investment for the purposes of clause 3.1 of the Octave Contract. I. Crown III: Application (1). The Crown III Contract

[177]The Crown III Contract was a Trading Advisory Agreement and it was dated 25 February 2016. However, its “Effective Date” and the “Initial Day” for the purposes of the agreement was 1 March 2016. It was made between Astra LLP and Crown and Crown III was described as the “Crown/AAM3 Segregated Portfolio”. Again, it recorded that Crown had appointed LGT as the Investment Manager.

[178]In clause 3 Crown committed to contribute US $15 million into Crown III (defined as the “Commitment Amount”). Clause 3 also provided that Astra would serve notice on Crown specifying the funding instalments (defined as the “Contributions”) to be allocated up to the Commitment Amount. It also provided that no Contributions would be made after the Client Commitment Closing Date (which was two years after the Initial Day). Clause 5 was headed “Investment Objective and Strategy” and it provided as follows:

“The investment objective is to generate attractive returns by investing in structured credit products. The principal investments of the Segregated Portfolio will be in cash and synthetic asset-backed securities (including mortgage-backed securities) and their derivatives, and other structured credit products. The Trading Advisor will seek to take advantage of various investment opportunities, including those that it believes arise as a result of regulatory changes and dislocation in the structured credit market. The Trading Advisor intends to follow a flexible approach in order to place the Segregated Portfolio in the best position to capitalize on opportunities in the financial markets. Accordingly, the Trading Advisor has maximum flexibility to invest in a wide range of instruments and will not be subject to any limitations with respect to the types of investments that it may make on behalf of the Segregated Portfolio. Without limiting the generality of the foregoing, and although the Trading Advisor may invest in such a wide range of instruments globally, it is expected that the focus of the portfolio will be on the US and European asset-backed securities market, including commercial and residential mortgage-backed securities, in both cash and synthetic form and derivatives of such instruments. The Trading Advisor for and on behalf of the Segregated Portfolio may also invest in other structured credit products, such as CDOs, CLOs and similar instruments, as well as corporate debt securities. It is also expected that the Segregated Portfolio is likely to acquire and/or hold certain investments that are, or become, illiquid and that require long holding periods to realize value. Such illiquid investments may well comprise the majority of the Client's portfolio. To make such investments, the Trading Advisor has adopted an investment process that will include a structural and collateral analysis, cash flow and return profile projections, as well as an analysis of any idiosyncratic features and risks (including any special swap agreements, specific deal structure and deal related covenants). The Trading Advisor for and on behalf of the Segregated Portfolio may also invest in certain special situation trades with diversified asset classes (including bonds, equity and mezzanine exposures to asset-pools, corporate bonds including bonds convertible into equity, and derivatives, including options, swaps and forwards over indices such as CMBX, ABX and LCDX). The Trading Advisor for and on behalf of the Segregated Portfolio may also seek to "warehouse" positions by acquiring a pool of assets and subsequently selling instruments linked to the risk and returns, or a portion of the risk and returns, of such assets, provided that the Client provided its prior consent to the "warehousing" of such particular position/transaction. The Trading Advisor for and on behalf of the Segregated Portfolio may, but is not obliged to, invest in interest-rate and other swaps, Eurodollar futures, and other derivative and/or hedge instruments, whether exchange-traded or over the counter, both for risk (including tail risk) hedging purposes and to enhance returns provided the Trading Advisor has the relevant authority to make investments of this nature under the 2002 ISDA Master Agreement (as published by the International Swaps and Derivative Association) (the “ISDA”), the Schedule to the ISDA and the Credit Support Annex and any relevant agreement governing the terms of this Agreement.”

[179]The words highlighted in bold are the words and phrases which Mr Aldama highlighted in Aldama 1, Appendix K when comparing Crown III with the Prospectus and the DDI Memorandum. A comparison with clause 5 of the Crown II Contract shows that clause 5 of the Crown III Contract was lifted word for word from the Crown II Contract and is in identical form. Clause 6 contained identical portfolio guidelines to the Crown II Contract and clause 6(e) was in identical form to both clause 6(e) of the Crown II Contract and the DDI Memorandum R1.6, guideline E: “The Segregated Portfolio shall not make investments in equity securities of non-financial corporate issuers although the Fund may acquire exposure to equity or other subordinated securities of structured finance vehicles, bond issuance vehicles, asset-backed security issuers, CDOs and other similar entities engaged in finance transactions;” (2). The Timing Issue

[180]On 31 March 2016 Crown made an initial Contribution of US $2 million and on 30 September and 30 December 2016 it made Contributions of US $6 million and US $2 million. On 30 June 2017 Crown made a further Contribution of US $5 million and on that date, therefore, Crown fulfilled its obligation to fund the Commitment Amount. On 31 March 2018 and 29 March 2019 Crown made further Contributions of US $2 million and US $5 million respectively.

[181]Dr Adler’s evidence in relation to the funding of Crown III was that Crown initially agreed to invest US $15 million but that this was later increased to US $45 million. He did not exhibit any documents or identify when this increase was agreed. In cross-examination Mr Knox took him to a passage in the evidence which Mr Mathur had given at the trial of the First Claim:

“Q Right, and then you can see the calculations, I 'd like to see the sums drawn for Crown 3, and that you get from bundle M, I think it's behind tab 5. Dr Adler −− A Sorry, 5? Q Tab 5, page 8. A M, 8, yes. Q And we know, in relation to Crown 3, that the amount committed by the agreement was $15 million, all right? A That's right. Q And then you can see here, if you look at M8, you can see when the $15 million was eventually committed, or rather added, to the fund, and that's 30 June 2017. A Mm−hm. Q And that's the time, roughly, by when that money would have been used up or at least put into Astra's hands to buy things with. A Yeah. Q Now, there was a problem on Crown 3 and Mr Mathur –if you go to the bundle L at 61 to 7273. So, if you go to bundle L. (After a pause) I'm sorry, page 61. A Mm−hmm. Q You'll see on page 72, the question begins: "Well, I agree but hang on, our focus is, unfortunately, on AM3, the size is too small, frankly speaking. You do need AM2 support as well. [Now, you can drop down to the answer] Answer not accurate, but in the interest of time, I don't know what I should do. The AM3 asset, it's not about lack of cash, it's that the AM3 position itself is very tiny . It's $15 million total commitment, and you've already spent a lot of it already, and for you to buy a larger set of assets, you just cannot buy it if you don't have more positions because those assets don't come in small sizes. They come in like $10 million sizes , there's something called the concentration limits on each, and so forth. So unless the asset comes in really small sizes like 1.5 million, we just kind of buy an AM3." That was a problem, wasn't it, for Crown 3? Well, that's what Mr Mathur said. A Yeah. Q But was that the problem for Crown 3? Not big enough, it's just 15 million. A Well, if you see some of the, kind of, bigger positions we had acquired in the past, yes, we would not be able to acquire them.” to acquire them.”

[182]Mr Knox’s primary submission was that the question whether Crown III followed the Current Strategy should be tested at 30 June 2017 when Crown had made Contributions of US $15 million but if there was any doubt about whether Crown III was primarily invested in synthetic ABSs, the Court could look at the pattern over the remainder of the Lock-up Period: I set out Mr Knox’s oral submissions because there is what I assume is a mistake in his and Ms Bailey’s Closing Submissions, ¶45 where they argued that the relevant period was October to December 2015. “My Lord, just on Crown 3, the question arises, how do we assess where to get? My Lord, what we know is from −− How do you deal with the time point? What we know is, on the time point, if you go to M, I think it's 7, which I probably lost. I said M; it should be M/8, page 8, you can see when −− MR JUSTICE LEECH: The original 15 million. MR KNOX: Yes, you can see the 15 million goes in by 30 June 2017. Now, my Lord, and then at the beginning of 2018 a further 2 million goes in, and you can forget about everything else. Now, the diﬀiculty here is, assuming we're right about hybrids, the amount of synthetics as at 30 June 2017 and going into 31 December is about 50/50, and that you get from the table at 3.3.6. If you just want to check that, I think I 'm right in saying that. Page E/884. My Lord, 30 June, Mr Aldama has it as 54 per cent, then 31 July, 51 per cent, so it's okay up to 31 August and then December, it's down at 50 per cent. So I'm just being realistic, as it were. Your Lord says, "Well, it's at the 54, 50 per cent mark at the relevant time," and we say, "Well, that should be enough" but supposing you said, "Well, I don't know, you know, at the end of December, it's 50 per cent," my Lord, we say it is legitimate, therefore, to take into account what subsequently happened because that way you can get a better steer as to what the assets were really being acquired for. Our case is that if you look at Mr Aldama's table, which I think is at −−which takes into account the subsequent purchases, which is at E/908. This takes you from December 2017 to the end of the lockup period in February 2019, you'll see down on the right hand −− MR JUSTICE LEECH: Sorry, what's the page number? MR KNOX: 908. This takes into account the information about the other seven instruments. MR JUSTICE LEECH: Yes, got that. MR KNOX: And he notes that there are two more disputed, call it hybrid instruments, and he looks at the effect on the table I 've just shown you, if you run it from December 2017, which is the date up to which we knew the position , and then you take into account these other seven by reference to the subsequent pattern of trading, and you see that you'll end up by 31 October at 54 per cent, by taking into account the purchases made in that period, and you'll see there's really no activity, or very little activity after that. I think I 'm right in saying there are no further purchases, my Lord. The figures appear to change, but my Lord, we know there are no further purchases −−I think I'm right in saying −−after 31 June, 2018. MR JUSTICE LEECH: After 31 June? MR KNOX: I think, pretty sure, by the time you see 54 per cent, 31 October 2018. You can see that from the Crown 3 table at tab −−I think it's tab 3, Crown 3 transaction list . The last acquisition , I think I 'm right in saying, is made −− Oh, sorry, the last acquisition appears to be made on 11 October 2018. That's the last acquisition , right at the foot of M6. MR JUSTICE LEECH: I mean, the oddity is that there is another 5 million paid into eventually, isn't there? MR KNOX: There is, exactly, but we're saying, well, if you're trying to work out what the purpose was of the first 15 million, in a sense, and you're landing up, let 's say, with a tiebreak or close to it, what you are entitled to do is to see what was done with the next slug of money. If you take into account what was done with the next slug of money, well, then you get to over 50 per cent for that. My Lord, our primary position is, well, if you stop at June 2017 or whatever it is, you've got more than 50 per cent.”

[183]Mr Spalton and Mr Mo submitted that the timing issue should be tested at the end of the ITP (i.e. 25 May 2016) or, alternatively at the end of the DTP (i.e. 25 November 2016) and they advanced the same reasons in support of this submission as they had done in relation to Crown II. I have accepted Mr Knox’s submission in relation to Crown II and for essentially the same reasons I accept his submission in relation to Crown III. I decide that the appropriate time at which to test the question whether Crown III followed the Current Strategy was 30 June 2017. Those reasons are as follows:(1) The issue has to be tested at the “point of investment”. Crown undertook in clause 3 of the Crown III Contract to pay the Commitment Amount of US $15 million and, in my judgment, that was the relevant investment and the point of investment was the date on which that investment was fully drawn down. This date also makes practical sense. Dr Adler accepted in cross-examination that it was either used up or in Astra’s hands by that date.

(2) The end of the ITP (i.e. 25 May 2016) and the end of the DTP (i.e. 25 November 2016) are more or less arbitrary and cannot be said to represent the “point of investment” for any individual Contributions which Crown made to Crown III or the Commitment Amount as a whole. Furthermore, Mr Malik was instructed to adopt those dates and did not exercise any independent judgment in selecting them.

(3) Neither party argued that the point of investment should be the date on which Crown invested US $45 million and, indeed, Astra had adduced no evidence to establish when the additional investment of US $30 million was made. Dr Adler did not explain this in his witness statement and the Crown III fee schedule recorded only one additional Contribution of US $5 million between 1 July 2017 and 30 September 2021 (which was made on 29 March 2019).

(4) As with Crown II the reason given by Astra for selecting the end of the ITP as the appropriate date made no sense because it involved testing the question whether Crown III followed the Current Strategy at a date when it had made Contributions of US $8 million rather than the total Commitment Amount of US $15 million. Moreover, Astra selected the date when the funds in the managed account had reached US $15 million. As with Crown II, this was entirely artificial because it ignored the amounts which Astra had realised by selling investments as well as buying them. (3).

(i) Synthetic ABSs

[184]Mr Aldama gave evidence in Aldama 1 that Crown III was invested primarily in synthetic ABSs at all times and that synthetic ABSs represented 51.99% of the Crown III asset pool as at June 2017. Following discussions with Mr Malik he prepared revised calculations and presented a table in the Joint Statement which showed that synthetic ABSs represented 54% of the Crown III asset pool (including hybrid ABSs) and 27% of the asset pool (excluding hybrid ABSs). Mr Malik gave evidence in Malik 1 that synthetic ABSs represented 26.25% of the Crown III asset pool for the quarter ended 31 June 2017 and that cash assets represented 73.75% of the asset pool. In calculating that figure, Mr Malik treated hybrid ABSs as cash assets.

[185]Quite apart from the question whether hybrid securities should be treated as synthetic ABSs or cash ABSs, there were a number of other differences between the methodologies of the two expert witnesses in assessing the percentage of synthetic ABS in both Crown II and Crown III. Mr Malik helpfully identified those differences in the Joint Statement as follows:(a) Mr Malik had taken the gross purchases of securities and excluded sales from his analysis whereas Mr Aldama had included both purchases and sales;

(b) Mr Malik had adopted the date of each trade whereas Mr Aldama had adopted the date of settlement for each trade; and

(c) Mr Aldama had adopted the local currency of each transaction whereas Mr Malik had converted the relevant figures into US dollars.

[186]Mr Malik also produced a table showing the effect of these differences in methodology to the overall percentages assuming that hybrid securities were treated as synthetic ABSs. Thus, he calculated that 55.14% of Crown III’s asset pool was synthetic and 44.86% was cash using Mr Aldama’s methodology (i.e. including sales but adopting the settlement date but making no conversion from local currency) but that 53.77% was synthetic and 46.23% was cash adopting his own methodology (i.e. excluding sales and adopting the trade date after converting into US dollars). This exercise demonstrated that these differences in methodology were small and that Mr Aldama’s figures would only have changed by 1.37% if he had adopted Mr Malik’s methodology in full except for the inclusion of hybrid ABSs. It follows, therefore, that the major difference between the experts was whether to treat hybrid securities as synthetic or cash ABSs and that the difference between them was still about 20% using either expert’s methodology.

[187]I have held that on the true construction of the Octave Contract the term “synthetic asset backed securities” extends to and includes hybrid ABSs supported by collateral consisting of cash and synthetic asset pools. I also accept Mr Aldama’s evidence that in assessing whether Crown III was invested primarily in synthetic ABSs it is appropriate to count hybrids as synthetic and I reject Mr Malik’s evidence to the contrary. Because they are immaterial, it is unnecessary to decide the other differences in methodology between Mr Aldama and Mr Malik. But whichever methodology is correct, no less than 53.77% of Crown III’s asset pool was invested in synthetic ABSs as at 30 June 2017. On the basis of this figure, I find that Crown III was primarily invested in synthetic ABSs at the point of investment. (ii) The individual securities: the expert evidence

[188]The experts were able to agree the classification of all of the individual securities held in Crown II and Crown III apart from fifteen. The experts originally disagreed on the classification of seven securitisations which included the issue of 15 separate bonds acquired by Crown II and 5 separate bonds acquired by Crown III: see the Joint Report, §3.2.1. By the end of the trial there was an eighth securitisation (REDAC60) on which they also disagreed. In relation to nine of those investments there was a dispute about the “concentration” of synthetic assets which the issuer or security trustee was permitted to hold under the circular or offering memorandum (the “Offering Memorandum” or "OM") which it is necessary for me to resolve. By the end of the trial the parties were able to agree the concentration of synthetic assets for three securities (REDAC30 (28%), REDAC31 (20%) and REDAC57 (20%)). This left six investments in dispute.

[189]The dispute over these investments gave me an opportunity to consider in detail both the OM and the One Pagers for each asset and to assess the evidence of the experts in relation to each one. I found this a helpful exercise because it enabled me to cross-check my conclusion that hybrid securities should be treated as synthetic and my finding that Crown III was primarily invested in synthetic ABSs. I approached this exercise by choosing a single example (REDAC13) and analysing the OM and One Pager in detail. I then considered briefly the OMs and One Pagers of each of the other disputed securities. (iii) REDAC13

[190]The Offering Memorandum. The OM for REDAC13 was a circular addressed to limited classes of institutional investors primarily in the US but also contained risk warnings for investors in a number of European countries and in the rest of the world. The OM promoted an issue of notes in classes from A-1 to D-2 and also a class of subordinated notes. The first section of the OM contains a summary of terms including the following description of the “Security for the Notes”:

“The Notes will be secured in favour of the Trustee for the benefit of the Secured Parties by (amongst other things) a portfolio of Collateral Debt Securities together with certain other rights and assets of the Issuer. The portfolio of Collateral Debt Securities will comprise: (a) Structured Finance Securities of various issuers denominated in Euro (or one of the predecessor currencies of those European Union ("EU") Member States which have adopted the Euro as their currency) and which, either at the time of purchase or the time when the Issuer enters into a binding agreement to purchase such Structured Finance Securities, satisfy the Eligibility Criteria described herein; and/or (b) Synthetic Securities which are linked to obligations with the characteristics of Structured Finance Securities which, either at the time of purchase or the time when the Issuer enters into a binding agreement to purchase such Synthetic Securities, satisfy the Eligibility Criteria described herein; and/or (c) Currency Swap Obligations which shall each comprise: (i) a Structured Finance Security denominated in U.S. dollars or in Sterling (each a "Non-Euro Security") which satisfies each of the Eligibility Criteria either at the time of purchase or at the time that the Issuer enters into a binding agreement to purchase such Structured Finance Security; and (ii) a Currency Swap Transaction entered into with a Currency Swap Counterparty in respect of such obligation referred to in (i) above pursuant to which the payments of principal, interest and other amounts in U.S. dollars or Sterling, as the case may be, in respect of such Non-Euro Security are exchanged for amounts in Euros.”

[191]The summary of terms also contained a side heading “Purchase of Collateral Debt Securities” which set out the intentions of the issuer immediately after the Closing Date. It is clear that the issuer intended to acquire certain securities from a single source or sources (and the text was redacted so as not to disclose the identity of those sources):

“It is expected that on or around the Closing Date, the Issuer will have purchased or entered into binding agreements to purchase a diversified portfolio of Collateral Debt Securities (which have been recommended to the Issuer by the Portfolio Advisor and approved by the Issuer) out of the net proceeds from the issuance of the Notes. Certain Collateral Debt Securities in respect of which the Issuer has entered or will enter into binding agreements to purchase on the Closing Date will be acquired from [ ] and [ ] will hold such Collateral Debt Securities on its balance sheet pending the effective sale and transfer thereof to the Issuer on the Closing Date. The Minimum Ramp-Up Amount will be €249,500,000. It is anticipated that, on or around the Closing Date, the Aggregate Principal Balance of Collateral Debt Securities held by the Issuer will be approximately 65% of the Minimum Ramp-Up Amount. It is also anticipated that, on or about the Initial Calculation Date, the Aggregate Principal Balance of Collateral Debt Securities held by the Issuer will be approximately 80% of the Minimum Ramp-Up Amount. After the Closing Date and during the Initial Investment Period, the Issuer will, acting upon the recommendation of the Portfolio Advisor, purchase further Collateral Debt Securities pursuant to the terms of the Portfolio Advisory and Portfolio Administration Agreement. For the avoidance of doubt, references herein to "purchasing" Synthetic Securities shall also mean entering into the contracts evidencing such Synthetic Securities.”

[192]The summary of terms then set out a series of tests which the issuer would use to satisfy the Eligibility Criteria. These included the “Concentration Limits” but also a series of “Collateral Quality Tests” (e.g. ratings) and tests for different classes of note. In order to make sense of the Concentration Limits it is necessary to have regard to a number of definitions in the OM. The term “Structured Finance Security” was defined as:

“any collateral bond obligation, collateral loan obligation, commercial mortgage backed security, residential mortgage backed security, Whole Business Securitisation, asset-backed security which is partially asset-backed and where payment is dependent on continued future asset generation or other bearer or registered asset backed security (and including for the avoidance of doubt, a preference share issued by the issuer of, and simultaneously with, any of the obligations or securities referred to above); provided that, (a) if the issuer thereof is organised under the laws of, or is a resident of, The Netherlands, the acquisition of such security by or on behalf of the Issuer does not cause a breach of applicable selling or transfer restrictions and (b) if the issuer thereof is organised under the laws of, or is a resident of, the United States (or is a fiscally transparent entity more than 50% of the equity of which is owned by any such person), then (i) such security is in legal form a debt security (or, if such security is an equity interest in a fiscally transparent entity, each asset of such entity is in the legal form of debt), and (ii) either (A) such security is purchased by the Issuer on the secondary market more than thirty days after its original issuance, or (B) such security is purchased pursuant to an effective registration statement under the Securities Act, as amended, or (C) such security is purchased pursuant to an offering circular, private placement memorandum or similar offering document, and is a privately placed security eligible for resale under Rule 144A, Regulation S or another exemption under the Securities Act.”

[193]The term “CDO” was defined as a “collateralised debt obligation” and the term "Collateral Debt Security" was a compendious term which referred to all of the following forms of security:

“any Structured Finance Security or a Synthetic Security (the Reference Securities under which are Structured Finance Securities) purchased by the Issuer acting upon the recommendation of the Portfolio Advisor from time to time (provided that, solely for the purposes of the grant of the security interest to the Trustee for the benefit of the Secured Parties pursuant to the charging or assignment or pledging clauses of the Security Documents, Collateral Debt Securities shall include all securities or other obligations, instruments or investments referred to therein, regardless of whether such securities or other obligations, instruments or investments satisfy the tests as set forth in the definition of Eligibility Criteria and shall include any security redelivered to, or to the account of, the Issuer pursuant to any Securities Lending Agreement and, for the avoidance of doubt, any Exchanged Security). For the avoidance of doubt, the failure by any security to satisfy the Eligibility Criteria at any time after its acquisition shall not cause such security to cease to constitute a Collateral Debt Security. References to Collateral Debt Securities shall, where the context permits, include Non-Euro Securities.”

[194]The terms “Currency Swap Obligation” and "Currency Swap Transaction" were defined as obligations or transactions which the issuer entered into directly with currency swap counterparties under the 1992 ISDA Master Agreement. These definitions are to be contrasted with the term “Synthetic Security” which referred to swap transactions entered into by third parties (defined as Synthetic Security Counterparties) and used as security for a separate transaction with the issuer. The term “Synthetic Security” could include credit default swaps (“CDSs”) credit-linked notes (“CLNs”) and also collateralised transactions but not uncollateralised CDSs:

“any swap transaction (including a credit default swap transaction or total return swap), structured bond investment or other investment denominated in Euro and purchased from, or entered into with a Synthetic Security Counterparty, the Reference Security of which is a Structured Finance Security, which investment contains the equivalent probability of default, recovery upon default (or a specific percentage thereof) and expected loss characteristics as the applicable Reference Security (without taking into account such considerations as they relate to the counterparty), but which may contain a different currency, maturity, interest rate or other non-credit characteristics than such Reference Security, provided that if the issuer thereof is organised under the laws of, or is a resident of, The Netherlands, the acquisition of such security by or on behalf of the Issuer does not cause a breach of applicable selling or transfer restrictions and further, provided that a Synthetic Security shall not include an uncollateralised credit default swap. The Synthetic Securities acquired by or on behalf of the Issuer are either fully collateralised or subject to limited recourse provisions similar to those set out in the Trust Deed, and include without limitation: (a) a credit-linked note issued by a corporate entity that is not a special purpose vehicle or trust; (b) a credit-linked note issued by a special purpose vehicle or trust which is secured on or has recourse to collateral in a principal amount equal to the principal amount of such credit-linked note; or (c) a Collateralised Credit Default Swap under which the Issuer will be required to provide Synthetic Collateral for its contingent obligations to the Synthetic Security Counterparty thereunder, in each case, principal payments in respect of which are linked to the credit of the issuer of a Reference Security (the "Reference Entity") and the value of such Reference Security following the occurrence of certain specified credit events in respect of such Reference Entity.”

[195]The term “Qualifying Synthetic Security” was defined as “a Synthetic Security which was a credit default swap transaction or a total return swap where the Issuer acted as “protection seller”. By contrast, “Synthetic Security Counterparty” was defined as a “protection buyer”:

“pursuant to the terms of a Synthetic Security, any entity which: (a) is required to make payments as protection buyer directly to the Issuer, or any guarantor of any such entity or, in the case of a Synthetic Security that represents an ownership interest in one or more assets held by the issuer of such Synthetic Security, any entity required to make payments on any such asset; (b) who at the time of entering into the relevant Synthetic Security satisfies the Counterparty Rating Requirement (after giving effect to any guarantee or other credit support applicable to such Synthetic Security Counterparty) or in respect of which (taking into account any guarantor thereof) Rating Agency Confirmation is obtained or any permitted assignee or successor under such Synthetic Security in respect of which Rating Agency Confirmation has been obtained; and (c) is authorised to conduct derivatives business with Dutch counterparties.”

[196]Clause 3.2 was headed “Concentration Limits” and it provided that the Collateral Debt Securities in aggregate were required to satisfy each of the Concentration Limits set out below to the extent required to do so by the Reinvestment Criteria:

“(a) not more than 11% of the CDO Principal Balance shall consist of obligations with a public S&P Rating lower than "BBB-" or a public Moody's Rating lower than "Baa3"; (b) except as provided in paragraphs (c) and (d) below, the aggregate Principal Balance of any Collateral Debt Securities issued by the same entity or any of its Affiliates shall not be more than 2.5% of the CDO Principal Balance; (c) the aggregate Principal Balance of any Collateral Debt Securities issued by the same entity or any of its Affiliates that has a public Moody's Rating of "Baa3" or above or a public S&P Rating of "BBB-" shall not exceed €5,000,000, provided that (i) the aggregate Principal Balance of up to four Collateral Debt Securities issued by the same entity or any of its Affiliates may be up to €6,250,000 and (in addition to (i)), (ii) the Aggregate Principal Balance of the Initial Portfolio may contain up to six Collateral Debt Securities issued by the same entity or any of its Affiliates that has a public Moody's Rating of "A3" or above or a public S&P Rating of "A-" or above may be up to €6,250,000; (d) the aggregate Principal Balance of any Collateral Debt Securities issued by the same entity or any of its Affiliates that has a public Moody's Rating of "Ba1" or below or a public S&P rating of "BB+" or below shall not exceed €3,000,000, provided that the aggregate principal balance of two Collateral Debt Securities issued by the same entity or any of its affiliates that has a public Moody's rating of "Ba1" or below or a public S&P rating of "BB+" or below may be up to €4,000,000; (e) the Aggregate Look-Through Exposure of any one Underlying Asset shall not be more than 0.7% of the CDO Principal Balance; (f) not more than 10% of the CDO Principal Balance shall consist of securities denominated in Sterling and Dollars; (g) not more than 5% of the CDO Principal Balance shall consist of Market Value CDOs; (h) not more than 7.5% of the CDO Principal Balance shall consist of Synthetic Securities and not less than 4% of the CDO Principal Balance shall consist of Qualifying Synthetic Securities; (i) any single Third Party Credit Exposure shall not be more than 10%; (j) not more than 25% of the CDO Principal Balance shall consist of PIK Securities; (k) the aggregate Principal Balance of any Collateral Debt Securities which are CDOs, excluding SME collateralised debt obligations, shall not exceed €37,500,000; (l) Synthetic Securities that are not Collateralised Credit Default Swaps but are acquired from or entered into with any Synthetic Security Counterparty (at the time that such Synthetic Security is acquired or entered into) in a particular credit rating category as set out in the table below shall not exceed the maximum percentage of the CDO Principal Balance set out in the table below for Synthetic Security Counterparties within such rating category: Credit Rating of Synthetic Security Counterparty (or the guarantor thereof) Maximum Percentage of CDO Principal Balance for Synthetic Security Counterparties Maximum Percentage for each Individual Synthetic Security Counterparty with such Ratings Aaa/AAA 10% 10% Aa1/AA+ 10% 7.5% Aa2/AA 10% 7.5% Aa3/AA- 10% 7.5% A1/A+ 7.5% 5% A2/A 5% 5% Below A2/A 0% 0% (m) not more than 10% of the CDO Principal Balance shall consist of fixed rate securities; (n) not more than 10% of the CDO Principal Balance shall consist of Collateral Debt Securities advised, managed or serviced by the 2 largest collateral advisors, managers or servicers; (o) not more than 5% of the CDO Principal Balance shall consist of Collateral Debt Securities which pay interest annually (rather than no less frequently than semi-annually); (p) not more than 3% of the CDO Principal Balance may consist of Collateral Debt Securities with a Moody's Rating, of "B1" to "B2"; (q) not more than 12% of the CDO Principal Balance may consist of Collateral Debt Securities that are CDO's of SMEs; (r) not more than 5% of the CDO Principal Balance shall consist of Collateral Debt Securities that are CDOs, which are not CLOs, Structured Finance CDOs or CDOs of SMEs; (s) not more than 15% of the CDO Principal Balance shall consist of Collateral Debt Securities that are Non-performing Loan Structured Finance Securities; (t) not more than 20% of the CDO Principal Balance shall consist of Collateral Debt Securities that are CMBS; (u) not more than 7.5% of the CDO Principal Balance shall consist of Collateral Debt Securities that are Sub-Prime RMBS; (v) not more than 15% of the CDO Principal Balance shall consist of Collateral Debt Securities that are Consumer Loan Structured Finance Securities; (w) not more than 10% of the CDO Principal Balance shall consist of Credit Card Structured Finance Securities; (x) not more than 35% of the CDO Principal Balance shall consist of RMBS; (y) not more than 7.5% of the CDO Principal Balance shall consist of Auto Loan Structured Finance Securities; (z) not more than 5% of the CDO Principal Balance shall consist of Collateral Debt Securities that are not RMBS, CLO, CMBS, Corporate Lease Structured Finance Securities, Consumer Loan Structured Finance Securities, Credit Card Structured Finance Securities, Structured Finance CDO, Auto Loan Structured Finance Securities, Sub-Prime RMBS or Non-Performing Loan Structured Finance Securities, provided that any such Collateral Debt Security shall not have public rating of lower than "Baa3" by Moody's or "BBB-" by S&P; (aa) not more than 2% of the CDO Principal Balance shall consist of Collateral Debt Securities in the form of preference shares; and (bb) not more than 7.5% of the CDO Principal Balance shall consist of Collateral Debt Securities that are PIK Securities which have a maturity falling after 2024.”

[197]The term “Reinvestment Period” was defined as the period ending on 29 December 2009 and section 4 of the OM set out a series of highly complex provisions governing the ability of the issuer to sell securities and re-invest the proceeds. In particular, clause 4.8 set out the following Reinvestment Criteria:

“During the Reinvestment Period, Principal Proceeds shall and, after the end of the Reinvestment Period, Unscheduled Principal Proceeds and Sale Proceeds may, be reinvested (subject to being so directed by the Issuer) by the Portfolio Advisor in Substitute Collateral Debt Securities if, after such reinvestment, the criteria set out below (the "Reinvestment Criteria") are satisfied (as confirmed to the Issuer and the Portfolio Advisor by the Portfolio Administrator). The Reinvestment Criteria are as follows: (a) with respect to any such reinvestment after the end of the Initial Investment Period: (i) the Coverage Tests, the Collateral Quality Tests (other than the S&P Trading Model Test) and the Concentration Limits are satisfied following such reinvestment or, if not so satisfied prior to such reinvestment, each such test is maintained or improved following such reinvestment. For the purpose of determining the Coverage Tests, the Collateral Quality Tests and the Concentration Limits in relation to this section 4.8, each such test shall be calculated by reference to its respective level immediately prior to the applicable sale (save for the sale of Credit Impaired Securities or defaulted Securities) or repayment or prepayment of the relevant Collateral Debt Security; (ii) during the Reinvestment Period and subject to paragraph (iii) below, if the S&P Trading Model Test is not satisfied, then such test will be as close as, or closer to, being satisfied after giving effect to such reinvestment; and (iii) following the expiry of the Reinvestment Period and so long as any notes rated by S&P remain Outstanding, after giving effect to such reinvestment (i) if any Coverage Test has not been satisfied immediately prior to the receipt of the Principal Proceeds or after the proposed investments, the Coverage Ratio of each Coverage Test has been maintained or improved if compared to the respective Coverage Ratio immediately prior to the receipt of such Principal Proceeds; and (ii) the Class A Scenario Loss Rate, the Class B Scenario Loss Rate, the Class C Scenario Loss Rate and the Class D Scenario Loss Rate are equal to or lower than their respective levels as calculated immediately prior to the receipt of such Principal Proceeds; and (b) the Collateral Debt Security to be purchased satisfies the Eligibility Criteria (as at the time that a binding agreement to acquire such Collateral Debt Security is entered into by the Issuer); (c) with respect to any such reinvestment from Unscheduled Principal Proceeds and Sale Proceeds from Credit Impaired Obligations and Credit Improved Obligations after the end of the Reinvestment Period: (i) the Senior Coverage Tests are satisfied both prior to and following such reinvestment; (ii) the Moody's Maximum Rating Factor Test and the Maximum Weighted Average Life Test would be satisfied both prior to and after such reinvestment; (iii) the Excess B Rated Security Amount and the Excess BB Rated Security Amount are both zero; (iv) there are no CCC Rated Securities in the Portfolio; and (v) the ratings by the Rating Agencies of the Class A Notes and the Class B Notes have not been withdrawn or reduced and the ratings by the Rating Agencies of the Class C Notes and the Class D Notes have not been withdrawn or downgraded by more than one subcategory compared with the ratings given to such Notes on the Closing Date. Any Collateral Debt Security purchased pursuant to paragraph (W)(x) of Condition 3.3.1 (Application of Interest Proceeds) following a breach of the Additional Par Coverage Test shall be required to satisfy the Reinvestment Criteria set out above.”

The Reinvestment Criteria are as follows:

[198]Having spent a considerable amount of time studying the OM for REDAC13, the conclusion which I reached was that it was virtually impossible to establish from the OM alone what kind of assets the issuer had initially acquired or in which it had reinvested during the Reinvestment Period. The document contained so many inter-locking definitions and so many complex provisions that it was impossible for me to decide simply by looking at the document itself whether the securities issued under this OM were synthetic or cash ABSs. I also reached the conclusion that this was one of the reasons (if not the principal reason) why Astra had targeted this security. Only an insider like Mr Mathur who was both familiar and comfortable with the market in securities of this kind would be able to understand its terms or obtain access to further information about the holdings of the issuer and the collateral for the notes.

[199]Criado & van Rixtel. To make some sense of the terms of the OM and the Concentration Limits, it was necessary for me to consult some of the academic papers and textbooks which the parties put in evidence. Mr Malik placed great reliance on an academic article by Sarai Criado and Adrian van Rixtel published by the Bank of Spain in 2008 and entitled “Structured Finance and The Financial Turmoil of 2007-2008: An Introductory Overview” (“Criado & van Rixtel”). I found this the most useful text and under the heading “Asset-backed commercial paper” the authors stated as follows:

“Figure 4 explains the basic mechanism of ABCP. Certain investors, or collateral providers which can be banks or other entities, want to obtain financing by selling certain assets to an ABCP conduit. These assets need to be “eligible”, i.e. they need to have a certain rating that allows the conduits to purchase them. The ABCP conduit finances its purchase of the eligible assets by issuing ABCP, which is subsequently bought by investors in the ABCP market. In order to make the paper more attractive for the investors, often credit enhancement is sought (see section 3.1). Finally, an ABCP program involves the presence of a liquidity provider (bank or syndicate of banks) (see Figure 4), which commits itself to provide liquidity to the ABCP conduit in case of financing shortages (for example when the conduit cannot issue sufficient amounts of ABCP and consequently experiences a financing gap). This liquidity support may be important, since the ABCP issued has short to very short maturities. The ABCP market has been heavily hit by the 2007-2008 financial turmoil. When pressures stemming from the US subprime mortgage markets spilled over to structured finance products directly or indirectly linked to these markets, in August 2007 issuers of ABCP started to experience increasingly problems in finding investors willing to purchase these securities. The problem was that the exposure of ABCP programs to mortgage related financial instruments (which were included in the assets sold to conduits by collateral providers in Figure 4) had grown very fast to an estimated $300 billion [BIS (2007)], so that investors completely lost confidence in ABCP when the subprime tensions mounted, as potentially this instrument could incur significant losses due to the crisis. The high exposure of ABCP programs to mortgage markets is exemplified in Table 1, where it is shown that mortgages were the largest single collateral category representing more than one quarter of all collateral in US ABCP programs. The ABCP conduits that were hit the hardest in the turmoil have been so-called Structured Investment Vehicles or SIVs, which specialized in investing in structured finance products. An overview of these and other ABCP conduits is provided in Table 2. Chart 3 shows that the amount outstanding of US ABCP, which is by far the main segment of the global ABCP market, started to decline rapidly in the third quarter of 2007 and that in 2008 outstanding levels remained at relatively subdued levels from a historic perspective.”

[200]Under the heading “Cash-flow collateralised debt obligations (CDOs)” the authors gave a very helpful description of CDOs. They also stated that there were a number of different ways to classify CDOs:

“Collateralized debt obligations (CDOs) are securities that are based on the packaging of in particular higher risk assets, such as risky loans, mortgages, bonds and asset backed securities, into a new security [Cousseran and Rahmouni (2005); Lucas et al. (2007)]. Thus, a pool or number of debt contracts is grouped within a SPE/SPV (see also section 2). The CDO’s liabilities are divided in tranches of different credit quality and therefore of different subordination, as is the case with the asset-backed securities discussed before. The investors in the tranches of a CDO have the ultimate credit risk exposure to the underlying reference entities. There are a number of ways to classify CDOs. The main classification of CDOs is based on the specific way credit risk is being transferred, in accordance with similar practices in securitizations in general. If the SPE/SPV of a CDO owns the underlying debt obligations, the CDO is referred to as a “cash flow” or “true sale”

CDO. In case the SPE/SPV does not acquire the portfolio of underlying debt instruments, but sells a credit default swap (CDS) to transfer the credit risk exposure of these instruments, the CDO is referred to as a “synthetic” CDO. In addition, some other types of CDOs exist, such as a hybrid variant combining elements of the “cash flow” and “synthetic” CDOs. These other CDOs will not be discussed in this Occasional Paper. As is shown in Chart 4, the bulk of CDOs exist of “cash flow” CDOs (including “hybrid” CDOs), with a much smaller share accounted for by “synthetic” CDOs. Another classification of CDOs is based on the specific underlying portfolio. Here, CDOs can be divided in collateralized loan obligations (CLOs) and collateralized bond obligations (CBOs). CLOs are CDOs completely based on the packaging in a new security of loans, such as bank loans. CBOs are similar but then based solely on bonds [Jobst (2003)]. As is shown in Chart 5, the issuance of CDOs collateralized by loans traditionally has been much larger than that of CDOs collateralized by bonds. Apparently, institutional investors in the US and Europe have been the main investors in CLOs. A large part of the loans underlying CLOs has been originated by private equity and LBO operations and consequently CLOs have performed a crucial role in the recent boom in these operations [see BIS (2008b)].”

[201]Finally, the authors provided a very helpful explanation of the way in which “synthetic” CDOs worked in the financial markets at the time and the importance of these instruments to the financial turmoil which took place in 2007 and 2008. They began by explaining the different kinds of credit derivatives:

“Generally, credit derivatives can be defined as private financial contracts under which an financial market participant buys or sells risk protection in a OTC market against the credit risk associated with a specific reference entity (or specific entities) [IMF (2007)]. The main credit derivatives (which have been typified as “pure” credit derivatives in Figure 1 in section 2) are credit default swaps (CDS) and synthetic collateralized debt obligations (CDOs), with other instruments existing as well such credit-linked notes, total return swaps and credit spread options [BIS (2004); Mengle (2007); Partnoy and Skeel, Jr. (2007); Morgan Stanley (2008)]. The main types of credit default swaps are single name CDS and CDS index contracts, whereas an important category of synthetic CDOs are so-called index tranches-based CDOs. An overview of the development of these main credit derivatives is presented in Table 4, which shows that CDS index contracts expanded their market share rather significantly in recent years.”

[202]After setting out a table which stated that by 2006 synthetic CDOs represented 17% of the market, they explained how single-name and CDS index contracts operated, before providing the following explanation about synthetic CDOs:

“Similar to securitizations, in addition to “cash flow”

CDOs (which were discussed in section 3.3), there also exist “synthetic” CDOs, where the SPE/SPV does not buy physically the portfolio of underlying debt instruments, but sells credit default swaps over the same debt instruments underlying the “cash flow” CDO described above. Thus, the SPE/SPV acquires the same credit risk exposure to this underlying debt without owning it, and transfers this credit risk to investors. An example of a synthetic CDO is shown in Figure 8 (with in red the changes from the “cash flow” CDO). The originator only wants to get rid of the credit risk of the underlying pool of assets and not the physical assets themselves, in this case (similar as above) a pool of “mezzanine” tranches (rated “B”) of various RMBS. The originator buys protection through a CDS contract with the SPE/SPV, which is the seller of protection and gets a CDS premium for the acquired exposure to the credit risk of the reference debt. The SPE/SPV transfers the credit exposure by issuing CDO tranches and selling it to investors (through the same process as in the “cash” CDO). With the cash it receives from its investors, SPE/SPV buys senior low risk debt (rated AAA), receives the interest of that debt (coupons) and transfers a proportion of it to the investors. If a credit event occurs to the underlying debt, the SPE/SPV sells the senior debt in order to pay the CDS protection to the originator. With the profit from the sale of this debt, the SPE/SPV also returns to the investors their principal-back payment. If the SPE/SPV lacks funds to fully repay all investors the principal amount that they invested in the tranched CDO, the order of payment follows the seniority of the tranches. “Synthetic” CDOs played a rather active role in the propagation of the financial turmoil. In the context of actual and feared further downgrades of various financial guarantors (or monolines) and of CDOs by the rating agencies, a rapid unwinding of “synthetic” CDO positions by in particular hedge funds resulted in a further widening of credit spreads, as demand for these products collapsed [ECB (2008b)]. This process spilled over to other structured finance products such as residential and commercial mortgage-backed securities (RMBS and CMBS) and other asset-backed securities.”

[203]What I take from the complex definitions in the REDAC13 OM and the explanations given by Criado & Van Rixtel is that there were a wide range of synthetic securities which included CDSs and CLNs where the issuer was either the protection seller or protection buyer but also synthetic securities where the transaction involves combined elements of both synthetic and cash securities: see, in particular, the example of a collateralised synthetic CDO given by the authors above. In that example, an investor was able to acquire a tranche of a CDS secured by AAA senior low risk debt. The CDO could be treated as either a “synthetic” ABS because the investor was purchasing a tranche of a security from the protection buyer of a CDS (which is the main purpose of the transaction) but also a “cash” ABS because the new instrument issued by the SPV is backed by collateral which consists of AAA security. My understanding was confirmed by clause 2.11 of the OM which explained the risks relating to Synthetic Securities:

“In the event that Collateral Debt Securities acquired by or on behalf of the Issuer from time to time are Synthetic Securities, in addition to the credit risks associated with the Structured Finance Securities to which such Synthetic Securities are linked (the "Reference Securities"), the Issuer will also be subject to the credit risk of the applicable Synthetic Security Counterparty, although the obligations of such Synthetic Security Counterparty may, in certain cases, be collateralised. The Issuer will have a contractual relationship only with the Synthetic Security Counterparty and not with the obligor under the Reference Security. The Issuer generally will have no right directly to enforce compliance by the obligor under the Reference Security with the terms of the Reference Security and no voting rights with respect to the Reference Security, will not directly benefit from any collateral supporting the Reference Security and will not have the benefit of the remedies that would normally be available to a holder of such Reference Security. The Issuer will therefore be exposed to the credit risk of the applicable Synthetic Security Counterparty as well as the issuer of the Reference Security (the "Reference Entity"). In addition, in the event of the insolvency of any Synthetic Security Counterparty, the Issuer may be treated as a general unsecured creditor of such Synthetic Security Counterparty, and will not have any specific claim in respect of the Reference Security the subject of the applicable Synthetic Security. As a result, concentrations of Synthetic Securities in any one Synthetic Security Counterparty may subject the Notes to an additional degree of risk with respect to defaults by such Synthetic Security Counterparty in addition to the credit risk of the Reference Security. The Concentration Limits impose restrictions on the level of exposure to the credit of Synthetic Security Counterparties by reference to the rating thereof and on the percentage of the Portfolio that may comprise Synthetic Securities. It is expected that the returns on a Synthetic Security will generally reflect those of the related Reference Security, however, as a result of the terms of the Synthetic Security and the assumption of the credit risk of the applicable Synthetic Security Counterparty, a Synthetic Security may have a different expected return, a different (and potentially greater) probability of default, a different (and potentially greater) expected loss characteristic following a default, and a different (and potentially lower) expected recovery following default. Additionally, the terms of a Synthetic Security may provide for different maturities, payment dates, interest rates and interest rate references and credit exposures to obligations of the issuer other than the Reference Security. Generally, upon the occurrence of certain specified credit events under a Synthetic Security relating generally to the credit of the applicable Reference Entity, the relevant Synthetic Security will become repayable and its terms may permit or require the Synthetic Security Counterparty to satisfy its repayment obligations under the Synthetic Security in such circumstances by delivering to the Issuer a principal amount of Reference Securities or other deliverable obligations of the applicable Reference Entity or cash in an amount equal to the current market value of a principal amount of the Reference Securities or such deliverable obligations of the Reference Entity equal to the original principal amount of the applicable Synthetic Security, provided that in the case of Synthetic Securities the Reference Securities of which are not denominated in Euro, the terms of such Synthetic Security must provide for a cash settlement in the event of default. The market value of the Reference Securities or other deliverable obligations may be significantly less than the original market value of such Synthetic Security or, in certain circumstances, zero. The Portfolio Advisor, acting on behalf of the Issuer, may be required to sell any deliverable obligations which are delivered in such circumstances if they do not satisfy the Eligibility Criteria as described in "Description of the Portfolio - Synthetic Securities" below, which exposes the Issuer to additional disposal risk as discussed under paragraph 2.1 "Nature of the Collateral - Disposal Risk" above.”

[204]The One Pager. The REDAC13 One Pager described the deal type as a “CDO” and the collateral for the investment as “cash” at the date on which Crown III acquired the asset (which was at least a decade after the original issue). It also showed that the tranche of the investment in which Astra had chosen to invest Crown III funds were subordinated notes (and, therefore, the equivalent of equity). The One Pager gave the following description of the investment (and the details of the issuer and manager and deal structure were redacted):

“[ ] is a €256.5M re-securitization of European ABS securities issued between 2002-2012 and managed by [ ]. The deal was arranged by [ ] and issued in 2004. The collateral pool securing the notes consists of 38 individual bonds across 33 deals, that are split as 34% RMBS, 28% CDO, 10% Consumer Loans, 9% CLO and the rest as other ABS securities. All underlying bonds were denominated in Euro. Geographically, the collateral is spread across Europe (33% Netherlands, 23% Spain, 17% UK, 11% Italy, ...) and a 1 asset with exposure to US collateral. The reinvestment end date was in 2009, after which the collateral manager can no longer buy/sell additional portfolio collateral and all proceeds (after fees/expenses) are now paid through the waterfall to noteholders. The investment was made to the Subordinated Notes, which is the most junior class in the deal. The current deal balance is €64.6M compared to current collateral balance of €67.4M. There is currently €765k currently held in the principal collection account. The structure has a an mandatory auction call in June 2016 and each subsequent payment date thereafter on which the underlying collateral will be sold if the proceeds are sufficient to redeem the senior notes. The Equity notes will receive the excess proceeds from the collateral sale.”

[205]Astra chose to invest in subordinated notes which was the lowest ranking class of notes issued under REDAC13. It is clear that the principal reason why it was prepared to do so was because the value of the collateral exceeded the amount outstanding under all classes of notes by €2.8 million, the issuer held cash of €765,000 and the notes were due to be redeemed in June 2016. None of this would have been obvious to an investor who read the OM (even with the benefit of legal advice). The One Pager did not, however, describe the collateral in any detail although it is apparent that it consisted of 38 different bonds or notes with a wide spread of asset classes.

[206]Mr Malik classified REDAC13 as a cash ABS with high confidence on the basis of the OM and the One Pager alone: see Malik 1, p.88. I do not share that confidence. In my judgment, it is not possible to tell from the One Pager for REDAC13 how many of the 38 bonds which were held by the issuer as collateral consisted of synthetic CDOs in the sense used by Criado & van Rixtel (above). It is also impossible to tell from the One Pager what securities the issuer acquired when the original notes were issued and the extent to which it had sold and reinvested those assets under the Reinvestment Criteria. As Mr Malik pointed out, what was important to the author of the One Pager was the extent to which the collateral covered the subordinated notes and the fact that it could be realised very soon.

[207]The waterfall. It was also Mr Malik’s evidence that the question whether the assets in Crown III were synthetic ABSs had to be analysed at the “note level” i.e. by reference to each tranche or class of notes issued under the OM and the question whether the individual class of notes should be treated as a “synthetic” or “cash” ABS had to be determined by reference to the “waterfall” or the order of priorities in which the noteholders were due to be paid and also by reference to whether they were to be paid out of cash collateral or synthetic collateral. He gave evidence that when viewed at that level there were only two categories of ABS either “cash” or “synthetic” and “the driving definition” was how the notes paid out:

“MR JUSTICE LEECH: So my question for you is, based on the regulation, just looking at the regulation alone, do they always fall within, so far as you're concerned, traditional securitisation or do they sometimes fall within synthetic securitisation? A It depends −− MR JUSTICE LEECH: Sometimes they can be one rather than the other? A Well, first of all, my Lord, when −−if the originator bank, say, sells assets into an SPV in two forms, there is −−as I said, there is no third category. MR JUSTICE LEECH: So it's both? A Both pools are watched and monitored separately. There is a different capital relief for synthetic and a different capital relief −− MR JUSTICE LEECH: So the same instrument, same notes −− let 's get away from instruments −−same notes can fall within both the definition of both −− A It depends. MR JUSTICE LEECH: −− traditional securitisation and synthetic securitisation? A Yes, so the driving definition is, how do the notes pay off? If the payoff of the notes that the investor buys gives them exposure to a credit derivative, it would be considered as a synthetic. That is −−that is the rule, and the rule is based on the test that CRR 242(10) and 242(11) give, and they also provide you with a very clear guidance. I think it's 41/62(?), my Lord. It says that the securitisation position in the hands of the investor is the note, and that gives you the guidance to say that when you're holding a note and you want to look to see whether it's cash or it's synthetic, you apply that test. MR JUSTICE LEECH: But as far as you're concerned, there are only two definitions and it has to be one or the other, and sometimes it can be both. Am I right about that? A No, it can't be both, my Lord. It has to be one or the other, even if the pool is mixed. MR JUSTICE LEECH: Well, let's say you've got securities which consist of both −− A Absolutely.”

[208]Mr Aldama’s evidence was that one had to consider each asset on a global basis and by reference to the OM as a whole rather than by reference to each tranche or class of notes because the risks associated with all of the notes would be the same (whatever their order of priority): “Q Now, I just want to ask you this very briefly, just to clarify this. It is put to you that in this case, it would be appropriate to carry out a note−level analysis when assessing risk and the relative risks of Crown 2 and ASSCFL, all right? We can't hear you, Mr Aldama. Can you hear us? A Yes, I can hear you, yes. Q Now, you said it wouldn't be appropriate to apply Mr Malik's note−level analysis for risk on the facts of this case when comparing Crown II and ASSCFL. Could you just say in very few words, just for the Court's benefit, just a few words why it's not appropriate in this case to carry out a comparison by reference to the note level? MR JUSTICE LEECH: We can't hear you, Mr Aldama, you might be on mute. 11 A Sorry, my apologies. Yes, my apologies. So, yes, when you look at the transaction list, the different REDAC and with the note you find that each note, even though it has a different label, the E, D, 4, 5, it trades pretty much at the same price across −− I mean, they're pretty much identical, right? So it's −−I guess what I'm saying is that when comparing or when doing the comparison analysis on this type of deals, looking at the note level doesn't really combine additional information. You're taking exposure to the exact same risk, and when you're buying REDAC tranche A1 versus tranche A2, it's mortgage−backed housing, distressed and US or Europe, you know, it's −− the risk itself is the same. It just has a different subordination, and by the time these assets were acquired, the subordination, for the most part, had already been wiped, and there was no (inaudible) on these assets. So by comparing the notes, you're missing the point that you're buying the same – If you compare the Note 4 with Note 5, you might say, "Oh, there's no overlap, we're buying something completely different, "when in reality, it's the exact same portfolio , it's the exact same risk, with no subordination (inaudible) exposed to the same –"

[209]Based on my analysis of REDAC13 and the example given by Criado & Van Rixtel, I prefer the evidence of Mr Aldama on this issue. In their example, the source of the funds which the SPV will use to pay investors in the CDO will depend on whether there is a credit event. If the protection seller performs its obligations under the CDS, the SPV will pay investors out of synthetic collateral (i.e. the proceeds of the CDS). If the protection seller defaults, the SPV will pay investors out of a cash security (i.e. the coupon on the AAA bonds). Moreover, some classes of noteholders might be paid out of one rather than the other. If the protection seller of the CDS defaults in part, A1 or A2 noteholders might be paid out of the proceeds of the synthetic collateral and other classes of noteholder might be paid out of the coupon on the cash collateral (or it might be the other way round).

[210]Mr Malik accepted in his analysis that there was “no note-level credit protection deed that defines credit events or writes down note principal outside these payment waterfalls” and, in those circumstances, I fail to understand how he could be certain that either the interest or principal payable under the Class D or combination notes which Astra purchased on behalf of Crown III would be paid out of cash rather than synthetic collateral. His logic appeared to be that because all payments under the notes were governed by the waterfall in the OM, REDAC13 must be a cash ABS. In my judgment, this was false logic and no more than an assumption which he made in favour of the Defendants’ case.

[211]Indeed, it is quite clear from the OM for REDAC13 that the expectation was that the issuer would acquire synthetic collateral which would be used to pay the notes. The definition of Synthetic Securities included “any other investment denominated in Euro and purchased from or entered into with a Synthetic Security Counterparty”. The Synthetic Security Counterparties had to satisfy a “Counterparty Rating Requirement (after giving effect to any guarantee or other credit support applicable to such Synthetic Security Counterparty)”. The authors of the OM were contemplating that a Synthetic Security Counterparty would acquire tranches of collateralised CDSs which the Synthetic Security Counterparty would then syndicate to other investors. The issuer was, however, only permitted to purchase such securities if the Counterparty Rating Requirement was satisfied and the obvious way for the Synthetic Security Counterparty to satisfy this requirement was to obtain credit support by buying the equivalent bonds (as Criado & Van Rixtel describe in their example).

[212]Concentration Limits. The principal issue between the parties in relation to each of the Crown III securities was the percentage of synthetic ABSs the issuer was entitled to hold as security. In the case of REDAC13 Mr Spalton and Mr Mo submitted that it was limited to a minimum of 4% and a maximum of 7%: see clause 3.2(h). Mr Knox and Ms Bailey submitted that it was at least 17.5% relying on clause 3.2(l). In my judgment, the REDAC13 OM permitted the Issuer to acquire up to 52.5% of Synthetic Securities. Clause 3.2(h) permitted the issuer to acquire 7% of any Synthetic Securities (of which 4% had to be Qualifying Securities) but up to 10% from three categories of Synthetic Security Counterparties with ratings of AAA, up to 7.5% from Synthetic Security Counterparties with ratings A1/A+ and 5% from Synthetic Security Counterparties with a rating of 5%.

[213]It is correct to say that the issuer was not permitted by clause 3.2(l) to invest in collateralised CDSs directly but it was permitted to buy from Synthetic Security Counterparties who were themselves protection buyers of collateralised CDSs. This is because the issuer would be relying on the additional credit support which the Synthetic Security Counterparty (or a guarantor) was able to provide (although it would not have direct recourse to those assets: see clause 2.11). The limits were lower for individual Synthetic Security Counterparties but this did not prevent the issuer from purchasing up to the maximum in each category.

[214]Finally, it makes no sense, in my judgment, for the Concentration Limit for Synthetic Securities to be limited to 7% of the value of the collateral. The summary of terms stated that security for the notes would be made up of a portfolio of Collateral Debt Securities consisting of three categories:(1) Structured Finance Securities (i.e. pure cash ABSs),

(2) Synthetic Securities “linked to obligations with the characteristics of Structured Finance Securities” (i.e. hybrid ABSs such as the synthetic CDO example given by Criado & Van Rixtel) and Currency Swap Obligations which consisted of both (a) Structured Finance Securities and (b) CDSs.

[215]The difference between Synthetic Securities in the second category and Currency Swap Obligations in the third category, as I understand it, was as follows. The second category consisted of collateralised CDOs (or similar instruments) issued by a Synthetic Security Counterparty which the issuer bought as an investment and the third category consisted of Currency Swap Transactions into which the issuer entered as protection buyer or protection seller and then bought credit support in the form of Structured Finance Securities.

[216]Conclusion. In my judgment, the detailed analysis which I have carried out of REDAC13 confirms the finding which I have made that synthetic ABSs were intended to include hybrid ABSs where the collateral consisted of both cash and synthetic securities. That analysis supports this finding for the following reasons:(1) REDAC13 contemplated three types of security for the note issue. The first category consisted of cash ABSs but the second and third categories consisted of hybrid ABSs where the Synthetic Security Counterparty had bought credit support in the form of cash securities as collateral for the synthetic security which it was offering, or the issuer itself had entered into a Currency Swap Obligation but had bought cash securities as credit support.

(2) The synthetic and cash collateral were both an integral part of the investment security which the issuer was offering under the OM and the Concentration Limits depended on the credit rating of the Synthetic Security Counterparty. The Concentration Limits for Synthetic Securities of all kinds amounted to 52.5% of the Principal Balance (i.e. the nominal total value) of the Collateral Debt Securities.

(3) Contrary to Mr Malik’s evidence, it is not possible to classify REDAC13 as either a cash ABS or a synthetic ABS by reference to the individual classes of notes issued under the OM. This is because all three categories of security were offered as security for all classes of notes (including the subordinated notes).

(4) Again, contrary to Mr Malik’s evidence, it is not possible to classify REDAC13 as either a cash ABS or a synthetic ABS by reference to the source of funds used to pay each class of notes. Mr Spalton and Mr Mo did not suggest that it was a term of REDAC13 that any class of notes would be paid out of any specific collateral and any creditor could be paid out of either Structured Finance Securities or Synthetic Securities depending on whether there was a credit event in the underlying CDSs.

(5) Although the One Pager described REDAC13 as having “cash” collateral, it consisted of 33 different bonds of which 28% were CDOs and, as Mr Malik later accepted in relation to REDAC28 (below), these were likely to include a mixed pool of both cash and synthetic assets and the key issue for Astra was whether the collateral would cover the subordinated notes and that it could be realised promptly.

(6) REDAC13 was the kind of security which Mr Mathur was likely to target. The three classes of security which the issuer was offering for the notes were very complex indeed and both the second and third classes involved a mixture of both synthetic and cash assets. Mr Mathur would have been looking to invest in securities where the complex blend of synthetic and cash collateral would have led to banks and other investors dumping them on the market at depressed prices even though the underlying collateral was sound.

(7) Finally, even if I had reached the conclusion that REDAC13 was a cash ABS and not a synthetic ABS, it is, in my judgment, wholly unrealistic to have expected the parties to undertake the kind of analysis which I have undertaken in order to decide whether Astra was following the Current Strategy when it invested in REDAC13. (iv) REDAC20

[217]The Offering Memorandum. The OM for REDAC20 was a circular addressed to investors promoting an issue of notes in classes from A-1 to F and also a class of combination notes. The relevant terms in the OM were the same or substantially the same as the OM for REDAC13 and the summary stated that the Portfolio was intended to consist of CDOs with a par value of £1 billion and that they would “primarily consist of Asset-Backed Securities and Synthetic Securities”. The OM also stated under the heading “Nature of the Collateral”:

“An asset backed security is a security or any obligation that entitles the holder thereof to receive payments that depend primarily on, and are secured upon or derived from, the cash flow from, or the market value of, a specified pool of assets or transactions that synthetically replicate the investment risks of holding a specified pool of assets, that by their terms are expected to generate or convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the securities or other obligations.”

[218]The OM for REDAC20 also contained the same risk warning about Synthetic Securities as the OM for REDAC13 and similar definitions for Synthetic Securities and Synthetic Counterparties. Clause 6.2 contained a series of “Portfolio Profile Tests” which included the following:

“(o) not more than 20.00 per cent. of the Aggregate Collateral Balance shall be Credit Linked Notes; (p) not more than 20.00 per cent. of the Aggregate Collateral Balance (or such lower concentration specified in the Biveriate Risk Table, to the extent applicable) shall be Synthetic Securities;”

[219]Mr Knox and Ms Bailey submitted that the OM permitted the issuer to acquire up to 40% of synthetic ABSs. Mr Spalton and Mr Mo submitted that it only permitted the issuer to acquire up to 20% of synthetic ABSs. On this issue, I prefer the submission of Mr Knox and Ms Bailey. Mr Malik accepted that CLNs were synthetic ABSs and I am satisfied that the definition of Synthetic Securities was much more extensive than CLNs and extended to collateralised or synthetic CDOs in the same way as REDAC13. Moreover, it is clear from clause 6.2 that the issuer was entitled to hold securities in both categories and, therefore, up to 20% of the Aggregate Credit Balance in CLNs and up to 20% in other Synthetic Securities.

[220]The One Pager. REDAC20 One Pager described the deal as an “EU CDO” and the collateral as “cash”. It also stated that Astra was acquiring €500,000 of the Class D notes at 71.35% of their face value and €4,000,000 of the combination notes at 73.35% of their face value. It also provided the following asset description:

“[ ] is EUR 1BN re-securitisation of European ABS issued in 2007 by and managed by [ ]. The collateral pool securing the notes consists of 157 individual bonds that are split as 50% RMBS, 32% CLO, 16% CMBS, 1% CDO and 1% CLN and were issued between 2003 and 2014. The deal allows for the manager, [ ], to sell certain assets and reinvest the proceeds into new securities, this process has allowed the deal to build almost 9% subordination to the Class E notes. Investments were made in the class D notes and the Combination note, which consists of three components; €15M of class A2, €10M of class C and €5M of class E. The most senior class, A1, is the security linked to [ ] notes also in the [ ] account. As the deal distributes principal sequentially, the principal is paid to the class A1. All classes are receiving interest. The structure has an auction call in March 2017, at which time if the pool sale value is greater than the class E tranche the collateral is sold and the proceeds repaid to the notes at PAR. The collateral NAV currently stands at approximately EUR 820MM.”

[221]Again, it is clear from the One Pager why Astra chose to invest in REDAC20 and in the two particular classes of note. The issuer had reinvested in securities which had built up a level of cover for both classes and there was an “auction call” in the very near future. It is also clear that the 157 bond asset pool included at least 1% of CLNs. But, again, it is not possible to tell from the One Pager how far the issuer originally invested in Synthetic Securities or the extent to which the issuers of the underlying 157 bonds were holding mixed asset pools.

[222]Mr Spalton put it to Mr Aldama that 99% of the 157 bonds in the collateral pool consisted of cash collateral on the basis that the 1% CLN (or CLNs) was (or were) the only synthetic asset (or assets) in the collateral pool. Mr Aldama refused to accept this:

“Q And the second sentence says: "The collateral pool securing the notes consists of 157 individual VOMs, (inaudible) 50% RMBS, 32% CLO, 16% CNBS, 1% CNDO, 1% CLN." Do you see that? A Yes. Q And that illustrates that when this security was purchased, the underlying synthetic exposure was no more than 1 per cent. Would you agree? A That's what these documents say, yes.” “MR SPALTON: And so here we've got 99 exposure to what might be called cash and 1 per cent exposure to synthetic, and yet you maintain that, properly characterised , this is a synthetic asset. A I don't know how they gain exposure to the RMBS, the CLRs, the CNBS or CDLs. I know CLNs is one type of synthetic securities , but you have all the types of synthetic securities . I just don't know if the CLOs were synthetic or the RMBS were synthetic. So I don't really have an opinion on whether it is 1 per cent or more. Q I see. Well, Mr Malik has done that exercise and he says the rest of it −−I'm sure this will be raised with him tomorrow −−is non−synthetic. A I doubt he could have done that because we didn't get that information from Astra. All we got is the one pager and the offer memorandum, so we would need a lot more information to be able to get to that point.”

[223]When he was cross-examined about the One Pager, Mr Malik very fairly accepted that it was not always possible to tell from the One Pager whether the collateral which it described included synthetic assets. He also accepted that ABS CDOs mostly consisted of a mixed pool of assets:

“Mr Malik, the point I wanted to make about the one−pagers is this: take the one which I showed you, REDAC020, with CLN, all right? You can tell therefore on the face of the one−pager −−A Is that 37, sorry? Q Yes, but Mr Malik, please, I 'm conscious of the time. A I 'm sorry, Mr Knox. I do really need to look to see what you're going to ask me about, so could you just bear with me and just tell me which tab again? MR JUSTICE LEECH: Tab 17, page 35. A Thank you, my Lord. MR KNOX: It's the document we were looking at and the very sentence we were looking at. I just want to make this plain. Some one−pagers will make it obvious, like this one, that there is some existing synthetic aspect in the security, won't they? Like this one. A So you're saying that this tells −− Sorry, what's the question you're asking? Q Some of these one−pagers make it plain on their face that there is, like this one, some synthetic element in the bond. They make that plain. A Yes, yeah, sure. Q Right. However, you cannot draw the inference that because there is reference to CLN and therefore 1 per cent CLN, there is no other synthetic in, for instance, the other aspects referred to in that document like CDO. You just can't tell. That's right, isn't it? A Well, I mean, ABS CDOs, for example, from around that time were mostly, you know, of a mixed pool. Q Right. So, in fact, you could probably tell just from the phrase "ABS CDO" that there's a pretty good chance it's already got some synthetic in. A Yeah, and it's only because it's not important, my Lord, to the trader as to the fact that you have a synthetic link to it, because what matters is whether it's an asset of the SPV which has been pledged to you as an investor, or are you actually taking on CDS risk, in which case it becomes a synthetic? That's the only thing that matters at this point.”

[224]In the light of Mr Malik’s concession in cross-examination, I accept Mr Aldama’s evidence that it is not possible to be certain what assets in the collateral pool should be treated as cash and what assets should be treated as synthetic. I draw the inference that a significant number of the assets in the collateral pool were synthetic when REDAC20 was originally issued in 2007 because of the description of asset backed securities used in the OM (above). When the document was drafted, the promoters treated all asset backed securities as synthetic and this supports Mr Aldama’s evidence that at the time, any CDO which had an asset pool including synthetic bonds or securities would be treated by the market as synthetic.

[225]Conclusion. There is nothing in this brief analysis of REDAC20 which disturbs the conclusions which I have reached in relation to REDAC13. In particular, I reject Astra’s case that the issuer was only entitled to acquire a maximum of 20% Synthetic Securities and that by the date on which Astra acquired a participation in REDAC20 for Crown III it only held 1% of Synthetic Securities in the collateral asset pool.

(v) REDAC28

[226]The Offering Memorandum. The OM for REDAC 28 was a circular offering notes between Class A-1 and Class F together with combination notes of Class P issued by an Irish SPV. The relevant terms in the OM were the same or substantially the same as the OM for REDAC13 and the summary stated that the Portfolio was intended to consist of Collateral Debt Securities with a par value of €490 million. The summary also stated as follows:

“Collateralised Synthetic Obligations The Collateralised Debt Securities may include a substantial amount of collateralised synthetic obligations (“CSOs”) which are securities that are backed by a portfolio of credit default swaps excluding credit default swaps referencing any corporate or sovereign entities. Pursuant to the Portfolio Profile Tests, no more than 20 per cent. of the Aggregate Collateral Balance may consist of Collateral Debt Securities which are CSOs. Risks Related to Synthetic Securities …The Portfolio Profile Tests also impose restrictions on the level of exposure to the credit of Synthetic Security Counterparties by reference to the rating thereof and on the percentage of the Portfolio that may comprise Synthetic Securities (both collateralised and un-collateralised).”

Risks Related to Synthetic Securities Synthetic Securities (both collateralised and un-collateralised).”

Risks Related to Synthetic Securities

[227]The Portfolio Profile Tests were set out in the detailed terms of the OM. These tests included the following (under the heading “Asset Type”): “(d) the Aggregate Principal Balance of all CDOs which are CSOs will be not more than 20 per cent. of the Aggregate Collateral Balance;” “(m) the Aggregate Principal Balance of all Synthetic Securities entered into with an individual Synthetic Security Counterparty within the same such rating category or lower set out in the table below (the “Bivariate Risk Table”) shall not exceed the percentages of the Aggregate Collateral Balance set out in the table below; S&P/Fitch long-term unsecured, unguaranteed and unsubordinated debt rating of Synthetic Security Counterparty Maximum Percentage of CDO Principal Balance for Synthetic Security Counterparties AAA/AAA 10 per cent AA+/AA+ 10 per cent AA/AA 10 per cent AA-/AA- 10 per cent A+ or A/A+ 5 per cent

[228]Mr Knox and Ms Bailey submitted that the only limits on Synthetic Securities which the OM imposed were on acquisitions from an individual Synthetic Security Counterparty of 10% or 5% (as shown in the table above). Mr Spalton and Mr Mo submitted that the OM only permitted the issuer to acquire up to 10% of Synthetic Securities in total. On this issue I also prefer the submission of Mr Knox and Ms Bailey. Category (m) above stated in terms that it applied only to an individual counterparty and not to the total of Synthetic Securities held by the issuer upon which there was no limit. Moreover, Mr Spalton and Mr Mo ignored entirely the fact that OM permitted the issuer to hold up to 20% of CSOs which were a form of collateralised CDOs.

[229]The One Pager. The REDAC 20 One Pager stated that the deal type was an “EU CDO” and that the collateral was bonds. It also stated that Astra was acquiring €1,050,000 of the Class P Notes at 72.25% of their face value and then set out the following asset description:

“[ ] is a €485.8M re-securitization of European ABS assets, the deal was issued in 2007 by and collateral is managed by [ ]. The deal collateral balance currently stands at €405.2M against an outstanding note balance of €415.9M. The [ ] principal a/c currently stands at €2.6M. The underlying portfolio now consists of 123 individual RMBS, CLO, CMBS, CDO and Consumer ABS all denominated in Euro's and issued between 2002 and 2007. The underlying obligations are currently split as 75% RMBS, 18% CDOs, 3% CMBS, and the remaining 4% are spread across CLOs and consumer finance ABS. There are no direct loans in the [ ] portfolio. The underlying loans are secured by assets throughout Western and Southern Europe. The deal reinvestment period ended in May 2012, as a result the collateral manager [ ] can no longer buy or sell assets or reinvest principal proceeds received on the collateral securities. Subsequently all income is paid to the notes (after expenses and fees). The investment was made in the combination notes P. The class P combination note consists of two components; €6M of class C notes with current credit support of 17.7% and €2M of Subordinated notes with current credit support of 6.51%. The class P notes pay a coupon of 6 month EURIBOR plus 2%.”

[230]Again, it is clear from the One Pager that Astra chose to invest in REDAC28 because the issuer was paying the coupon on the notes and the combination of Class C and subordinated notes included in the Class P notes had good underlying credit support which had increased substantially since the original issue. It is not possible to tell, however, how many of the underlying bonds which the issuer originally acquired or which it held at the date of the transaction were either CSOs or Synthetic Securities. Based on the OM and the One Pager, Mr Malik classified REDAC28 as a cash ABS with a high degree of confidence: see Malik 1, p. 92. He stated as follows:

“CDO issued by an Irish SPV, secured by a managed portfolio of consisting primarily of collateral debt securities including CDOs, CLOs, CMBS and RMBS. The payment of interest and repayment of principal on the Notes is funded from interest and principal received on the portfolio and allocated according to the Priority of Payments, subject to collateral quality/OC tests. There is no CDS or contractual credit-event settlement. Losses are absorbed through collateral defaults and tranche subordination, with mezzanine and subordinated notes bearing losses first. Collateralised synthetic obligations (CDOs) are permitted in the portfolio but do not have the effect of recharacterizing the Notes as CLNs. On that basis, the Notes are cash ABS at the note level. Tranche: P (Combination Notes)/C/E | Currency: EUR Payment source: Interest and principal from ABS collateral; excess spread to subordinated tranche Loss mechanism: Collateral defaults absorbed by subordination and excess spread Classification: cash ABS Confidence: A (OM + one pager (for 028 and 028(C)).”

Tranche: P (Combination Notes)/C/E | Currency: EUR Payment source: Interest and principal from ABS collateral; excess spread to subordinated tranche Loss mechanism: Collateral defaults absorbed by subordination and excess spread Classification: cash ABS Confidence: A (OM + one pager (for 028 and 028(C)).”

Classification: cash ABS

[231]Again, I find it impossible to reach the same conclusion as Mr Malik on the basis of the OM and One Pager and for the same reasons which I gave in relation to REDAC13. Moreover, I see no basis whatsoever to treat CSOs as cash ABSs as opposed to synthetic ABSs just because they cannot be classified as CLNs and Mr Malik gave no evidence to support this distinction. I have set out above the description of CSOs in the OM (above) and the issuer clearly treated them as synthetic assets. Finally, I find it impossible to understand how Mr Malik could have confidently asserted that interest and principal were payable on the notes from the collateral when the One Pager stated in terms that there were no direct loans in the portfolio.

[232]Conclusion. There is nothing in my brief analysis of REDAC28 which disturbs the conclusions which I have reached in relation to REDAC13. Furthermore, that brief analysis undermines Mr Malik’s classification of individual securities as cash ABSs. He treated CSOs as cash assets when they are clearly described as synthetic assets in the OM and he overlooked the fact that there were no direct loans in the portfolio. (vi) REDAC50

[233]The Offering Memorandum. The OM for REDAC50 was a circular dated 21 May 2004 offering notes between Class A-1 and Class C subordinated notes together with combination notes of Class S issued by a European SPV promoted by Bear Stearns International Ltd and Fortis Bank. The relevant terms in the OM were the same or substantially the same as the OM for REDAC13 and the summary stated that the Portfolio was intended to consist of Collateral Debt Securities. The summary also stated that the proceeds of the issue would be used by the issuer to:

“acquire a portfolio consisting of a diversified pool of euro denominated Asset Backed Securities and Synthetic Securities satisfying the Eligibility Criteria with an Aggregate Principal Balance of approximately €245,000,000 (the “Initial Portfolio Collateral”) and, with all other Asset Backed Securities and Synthetic Securities purchased by the Issuer from time to time as described herein (the “Portfolio Collateral”)”

[234]The summary also stated that:

“The Issuer has entered into certain agreements to purchase a substantial portion of the Portfolio Collateral on or prior to the Closing Date.”

It contained a similar risk warning in relation to Synthetic Securities to REDAC13 and the following warning under the heading “Concentration Risk”:

“The Issuer will invest in Portfolio Collateral consisting, at the Closing Date, of Asset Backed Securities and Synthetic Securities under which the Reference Obligations are Asset Backed Securities. The Portfolio Profile Tests impose limits on the percentage of the Aggregate Collateral Balance that may consist of obligations of a single issuer or obligations the assets under which are serviced or administered by the same entity. Although no significant concentration with respect to any particular issuer, industry or country is expected to exist at the Effective Date, the concentration of the Portfolio Collateral in any one issuer would subject the Notes to a greater degree of risk with respect to defaults by such Reference Entity, and the concentration of the Portfolio Collateral in any one industry or region could subject the Notes to a greater degree of risk with respect to economic downturns relating to such industry or region.”

[235]The OM contained a detailed description of the portfolio and section 3.1 set out the Eligibility Criteria. It expressly stated that a Synthetic Security was not required to satisfy a number of those criteria provided that the underlying reference obligation satisfied those criteria instead. Section 4.2 set out the Portfolio Profile Tests which were as follows:

“In addition to the foregoing tests, the Issuer or the Collateral Manager (on the Issuer’s behalf) may purchase Original Portfolio Collateral, Additional Portfolio Collateral or Substitute Portfolio Collateral only if the following criteria (the “Portfolio Profile Tests”) are satisfied, maintained or improved as required by the Reinvestment Criteria: (i) such item of Portfolio Collateral has a public rating, from Moody’s, of at least “Ba3” or a public rating from S&P of at least “BB-” or, where such item of Portfolio Collateral is not publicly rated by either of the Rating Agencies, such item of Portfolio Collateral has an implied rating (as determined according to paragraph (b) of the Moody’s Rating definition) from Moody’s, of at least “B2” or an implied rating (as determined according to the S&P Rating definition) from S&P, of at least “B”; (ii) the Aggregate Principal Balance of all Fixed Rate Portfolio Collateral (together with the Aggregate Principal Balance of any Synthetic Securities related thereto) does not exceed five per cent. of the Aggregate Collateral Balance; (iii) the Aggregate Principal Balance of all Synthetic Securities does not exceed 5 per cent. of the sum of the Aggregate Collateral Balance; (iv) the Aggregate Principal Balance of all Synthetic Securities entered into with an Individual Synthetic “BBB-” or above by S&P, or €5 million if such tranche or item of Portfolio Collateral has a public or implied rating of (or if publicly rated by both Rating Agencies, the lowest of such ratings is) “Ba1” or below by Moody’s or “BB+” or below by S&P; (v) the Principal Balance of an item of, or of a particular tranche of an item of, Portfolio Collateral does not exceed €10 million or €5 million if such tranche or item of Portfolio Collateral has a public or implied rating of (or if publicly rated by both Rating Agencies, the lowest of such ratings is) “Baa3” or above by Moody’s or (vi) the Aggregate Principal Balance of all Portfolio Collateral with a public rating of “Ba1” or below by Moody’s or “BB+” or below by S&P does not exceed €87.5 million; (vii) with respect to the particular issuer of the Portfolio Collateral, the Aggregate Principal Balance of all items of Portfolio Collateral issued by such issuer does not exceed €10 million; (viii) the Aggregate Principal Balance of all PIK Securities does not exceed 5 per cent. of the Aggregate Collateral Balance; (ix) with respect to the particular servicer of the item of Portfolio Collateral being acquired, the Aggregate Principal Balance of all items of Portfolio Collateral serviced or administered by such servicer (together with the aggregate Principal Balance of any Synthetic Securities related thereto) does not exceed €52.5 million; (x) the Aggregate Principal Balance of all Portfolio Collateral comprising sub-prime RMBS does not exceed 5 per cent. of the Aggregate Collateral Balance; (xi) the Aggregate Principal Balance of all Portfolio Collateral comprising SME CLO Securities does not exceed 25 per cent. of the Aggregate Collateral Balance; (xii) the Aggregate Principal Balance of all Portfolio Collateral comprising CMBSs does not exceed 30 per cent. of the Aggregate Collateral Balance; (xiii) the Aggregate Principal Balance of all Portfolio Collateral comprising Whole Business Securities does not exceed 5 per cent. of the Aggregate Collateral Balance; (xiv) at least 95 per cent. of the Aggregate Collateral Balance has provision to make at least one payment of interest in each of the Payment Periods during any one year; and (xv) the Aggregate Principal Balance of all Portfolio Collateral comprising Non-Performing Loans ABS does not exceed 5 per cent. of the Aggregate Collateral Balance Security Counterparty does not exceed five per cent. of the Aggregate Collateral Balance;…”

[236]Mr Spalton and Mr Mo submitted that clause (iii) (above) prevented the issuer of REDAC50 from acquiring more than 5% of Synthetic Securities. Mr Knox and Ms Bailey submitted that the total was likely to be significantly more than 5% because the issuer had already undertaken to acquire a substantial proportion of the Portfolio Collateral before the closing date. Subject to one qualification, I accept Mr Spalton and Mr Mo’s submission on this issue and that the issuer was unable to acquire more than 5% of Synthetic Securities.

[237]The one qualification which I have is as follows. Section 3.3 of the OM headed “Synthetic Securities” stated that a portion of the Portfolio Collateral could consist of Synthetic Securities. It also stated that the acquisition of such securities would be subject to rating agency confirmation. It then continued as follows:

“For purposes of the Coverage Tests and the limits set forth in the Portfolio Profile Tests and the Collateral Quality Tests, a Synthetic Security shall be included as an item of Portfolio Collateral having the relevant characteristics of the Synthetic Security and not of the related Reference Obligation, unless the Collateral Manager determines otherwise and receives Rating Agency Confirmation in respect of such determination. For the purposes of the Coverage Tests, the Collateral Quality Tests (other than the Moody’s Diversity Test, the Moody’s Weighted Average Recovery Rate Test and the S&P Weighted Average Recovery Rate Test) and the Portfolio Profile Tests, a Synthetic Security shall be included as Portfolio Collateral having the relevant characteristics of the Synthetic Security and not of the related Reference Obligation, unless the Collateral Manager, acting on behalf of the Issuer, determines otherwise and receives Rating Agency Confirmation in respect of such determination. For the purposes of the Moody’s Diversity Test, the Moody’s Weighted Average Recovery Rate Test and the S&P Weighted Average Recovery Rate Test, a Synthetic Security shall be included as a Portfolio Collateral having the relevant characteristics of the related Reference Obligation (and the issuer of such Synthetic Security shall be deemed to be the issuer of the related Reference Obligation) and not of the Synthetic Security, unless the Collateral Manager (acting on behalf of the Issuer) determines otherwise and receives Rating Agency Confirmation in respect of such determination.”

[238]It is clear, therefore, from this provision that the Collateral Manager had the power to determine that a Synthetic Security should be treated as having the characteristics of the underlying Reference Obligation if it chose to do so and it received a suitable rating agency confirmation. Moreover, it is also clear that for the purposes of a number of rating agency tests the Synthetic Security was to be treated as having the characteristics of the Reference Obligation.

[239]The One Pager. The REDAC50 One Pager stated that the deal type was a CDO and that the collateral was cash. It also stated that Astra was acquiring €600,000 of Class C Notes at a premium of 32% to their face value. It also contained the following asset description:

“[ ] is a CLN repackaging of which is the Equity tranche of a European CDO issued in 2004 by [ ]. The [ ] issued €293.7mm of notes including a €17.50mm equity tranche. €12mm of the Equity notes were repackaged into the [ ]. There are currently 27 assets remaining in the collateral pool with an outstanding balance of €64.6mm. The outstanding balance of the notes senior to the equity tranche is €23.8mm. Geographically, the collateral is exposed to Italy (38%), Portugal (25%), Spain (22%), UK (9%) and the Netherlands (6%). The collateral is 93% residential mortgage backed with the remaining secured by corporate debt. The reinvestment period ended in 2009 after which the collateral manager is no longer able to purchase additional collateral but may dispose of assets under strict criteria. The CDO can now be liquidated at any time at the option of 67% of the class C noteholders. At liquidation the class C notes receive the proceeds from the sale of the assets in excess of the senior debt and expenses. The investment was made in the [ ] which is a pass-through of the class C notes, the equity tranche, which receives all residual interest amounts remaining after paying the senior debt.”

[240]Mr Malik characterised REDAC50 as a cash ABS based on the OM and the One Pager with a high degree of confidence. He also stated that it was a CDO issued by a European SPV and that:

“Any CDS within the portfolio affects collateral cash flows and coverage tests but does not recharacterise the investor notes as CLNs.”

Again, however, I do not share his confidence. Mr Malik ignored entirely the first sentence of the asset description in which the author stated that the security was a “CLN repackaging” of the original security and classified the security by reference to the original issue only. Indeed, his evidence throughout his expert report was that a CLN was a synthetic instrument: see, e.g., Malik 1, §3.2.4.

[241]In my judgment, REDAC50 confirms the difficulty which any investor would have in establishing the extent to which the collateral for a particular instrument or issue of notes was synthetic or cash unless the investor was (like Mr Mathur) very familiar with the market for these securities and the individual securities which were being traded. It would not have been enough to take financial or legal advice on the OM itself, it would have been necessary to carry out due diligence to establish the extent to which the Collateral Manager had classified collateral by reference to the Synthetic Security itself or by reference to the underlying Reference Obligations. Finally, it would have been necessary for the investor to be aware that the equity had been repackaged as a CLN. Without the documents relating to the “repackaging” transaction it is impossible for me to ascertain or decide the extent to which the issuer held cash or synthetic collateral for the notes which Astra acquired on behalf of Crown III and I do not do so.

[242]Conclusion. Dr Adler gave evidence about REDAC50 and I have considered that evidence in the context of Crown II. But, again, there is nothing in my brief analysis of REDAC50 which disturbs or undermines the conclusions which I have reached in relation to REDAC13. Furthermore, that brief analysis also casts doubt on Mr Malik’s individual classification of hybrid securities as cash ABSs. He ignored the clear statement that the security was a CLN and expressed the view that it was a cash ABS without any reference to the repackaging transaction. In my judgment, REDAC50 tends to confirm Mr Aldama’s evidence that any element of synthetic collateral would have infected the market value of an ABS after 2009. (vii) REDAC58

[243]The Offering Memorandum. The REDAC58 OM was a circular issued by a European SPV largely promoted and managed by Dutch financial institutions for notes in Classes A to D1 and income notes. The summary of terms stated that the proceeds of the issue were to be used to acquire ABSs, CDS Currency Bonds and Synthetic Securities satisfying the Eligibility Criteria:

“The Portfolio Collateral will consist primarily of Asset Backed Securities, CDS Currency Bonds and Synthetic Securities the Reference Obligations of which are Asset Backed Securities, which obligations are subject to credit, liquidity and interest rate risk. To the extent that a default occurs with respect to any item of Portfolio Collateral and the Collateral Manager (on behalf of the Issuer) sells or otherwise disposes of such item of Portfolio Collateral, it is not likely that the proceeds of such sale or disposition will be equal to the amount of principal and interest owing to the Issuer in respect of such item of Portfolio Collateral.”

[244]The principal issue between the parties was how to classify “CDS Currency Bonds” for the purposes of the Portfolio Profile Tests. The term “Synthetic Securities” did not include CDS Currency Bonds but “Synthetic Collateral” was defined to include “any CDS Currency Bond or Synthetic Security pursuant to the terms thereof, provided that Synthetic Collateral may not consist of any Dutch Ineligible Securities”. Section 3.3 of the detailed terms also stated that:

“A portion of the Portfolio Collateral will consist of CDS Currency Bonds and may also consist of other types of Synthetic Securities.”

The Portfolio Profile Tests were then in the following form:

“In addition to the foregoing tests, the Issuer or the Collateral Manager (on the Issuer’s behalf) may purchase Original Portfolio Collateral, Additional Portfolio Collateral or Substitute Portfolio Collateral only if the following criteria (the "Portfolio Profile Tests") are satisfied, maintained or improved as required by the Reinvestment Criteria: (i) the Aggregate Principal Balance of all Portfolio Collateral having an S&P Rating which is lower than "BBB-" or having a Moody's Rating below "Baa3" does not exceed 25 per cent.; (ii) the Aggregate Principal Balance of all Portfolio Collateral having a Moody's Rating which is lower than "Ba3" or having an S&P Rating below "BB-" does not exceed 5 per cent.; (iii) the Aggregate Principal Balance of all Fixed Rate Portfolio Collateral (together with the Aggregate Principal Balance of any CDS Currency Bonds and Synthetic Securities related thereto) does not exceed 5 per cent. of the Aggregate Collateral Balance; (iv) the Principal Balance of an item of, or of a particular tranche of an item of, Portfolio Collateral does not exceed 3.5 per cent. of the Aggregate Collateral Balance if such tranche or item of Portfolio Collateral has a public or implied rating of (or if publicly rated by both Rating Agencies, the lowest of such ratings is) "Baa3" or above by Moody’s or "BBB-" or above by S&P, or 2.0 per cent. of the Aggregate Collateral Balance if such tranche or item of Portfolio Collateral has a public or implied rating of (or if publicly rated by both Rating Agencies, the lowest of such ratings is) "Ba1" or below by Moody’s or "BB+" or below by S&P; (v) with respect to the particular issuer and/or Reference Obligor of the Portfolio Collateral, the Aggregate Principal Balance of all items of Portfolio Collateral issued by such issuer and/or Reference Obligor does not exceed 5.0 per cent. of the Aggregate Collateral Balance; (vi) the Aggregate Principal Balance of all Portfolio Collateral comprising PIK Securities (including the Aggregate Principal Balance of any CDS Currency Bonds and Synthetic Securities related thereto) does not exceed 10 per cent. of the Aggregate Collateral Balance; (vii) the Aggregate Principal Balance of all Portfolio Collateral comprising CDOs does not exceed 10 per cent. of the Aggregate Collateral Balance; (viii) with respect to the particular servicer of the item of Portfolio Collateral being acquired, the Aggregate Principal Balance of all items of Portfolio Collateral serviced or administered by such servicer (together with the aggregate Principal Balance of any Synthetic Securities related thereto) does not exceed 10 per cent. of the Aggregate Collateral Balance; (ix) the Aggregate Principal Balance of all Portfolio Collateral comprising securities in respect of which interest payments are less frequent than quarterly does not exceed 5 per cent. of the Aggregate Collateral Balance; (x) the Aggregate Principal Balance of all Portfolio Collateral comprising CDS Currency Bonds does not exceed 20 per cent. of the Aggregate Collateral Balance; (xi) the Aggregate Principal Balance of all Portfolio Collateral comprising Synthetic Securities does not exceed 5 per cent. of the Aggregate Collateral Balance;…”

[245]Mr Knox and Ms Bailey submitted that CDS Currency Bonds should be treated as synthetic collateral and that the combined effect of clauses (x) and (xi) (above) restricted the issuer from acquiring more than 25% of synthetic collateral. Mr Spalton and Mr Mo submitted that clause (xi) (above) restricted the issuer of REDAC58 from acquiring more than 5% of Synthetic Securities. They also submitted in their Note on Synthetic Concentration Mr Spalton and Mr Mo prepared this in response to Musst’s Closing Submissions and handed it in on the last day of the trial. that on the basis of their instructions it was Mr Malik’s view that CDS Currency Bonds were not treated in the market as synthetic collateral “in the traditional CDS/CLN context”.

[246]Although Mr Malik did not expressly state that he was treating CDS Currency Bonds as cash collateral, this was implicit in his analysis of REDAC58: see Malik 1, p.96. I accept, therefore, that this was his evidence even though he was not asked to confirm this in evidence in chief and did not do so either in cross-examination. However, I am unable to accept that evidence for the simple reason that the promotors of REDAC58 and the authors of the OM plainly treated CDS Currency Bonds as synthetic collateral. I, therefore, accept the submission of Mr Knox and Ms Bailey on this issue and I find that CDS Currency Bonds were synthetic collateral and that the combined effect of the Portfolio Profile Tests was that the issuer was restricted from acquiring more than 25% of synthetic collateral.

[247]Moreover, I reject Mr Malik’s evidence that the market would have taken a different view. I do so because of the description in the OM of the CDS Currency Bonds, which was of CDSs in a conventional form:

“The following description consists of a summary of certain standard provisions of the CDS Currency Bonds. The CDS Currency Bonds which the Issuer will purchase on or after the Closing Date consist of collateralised credit default swaps ("Credit Default Swaps") with [ ] nv-sa, the reference obligations of which are Asset Backed Securities which are denominated in a currency other than Euro and which otherwise satisfy the Eligibility Criteria on the date of purchase. The Credit Default Swaps will be entered into pursuant to an ISDA Master Agreement (Multicurrency-Cross Border) governed by English law which includes the Schedule and Confirmation (a "Master Agreement"). Each Credit Default Swap will incorporate the 2003 ISDA Credit Derivatives Definitions (the "2003 Definitions") and will be a Form-Approved Synthetic Security which will have the standard terms described below. The notional amount of each Credit Default Swap will be equal to the Euro equivalent of the face amount of the relevant Reference Obligation at the initial exchange rate determined on the date the Issuer entered into a CDS Currency Bond and specified in the Confirmation. [ ] nv-sa as Synthetic Security Counterparty will pay a premium (the "CDS Risk Premium") to the Issuer in Euro on the notional amount at a fixed spread on each date that is an interest payment date in respect of the Reference Obligation.”

[248]The One Pager. The REDAC58 One Pager stated that the deal type was an “EU CDO” and that the collateral was “cash/synthetic”. It also stated that Astra was acquiring €1,500,000 Class C Notes at 67% of their face value. It gave the following asset description:

“[ ] is a €280M re-securitization of European ABS assets, the deal was issued in 2005 by and collateral is managed by [ ]. The deal collateral balance currently stands at €121.6M against an outstanding note balance of €113.2M. The underlying pool consists of 80 individual bonds which are split as 70% RMBS, 8% CDO, 8% CMBS and the remaining 14% as CLOS, Consumer loans and Receivables; there are no direct loans in the portfolio. The collateral is in both cash (81%) and synthetic (19%) form. The underlying assets are spread across Western and Southern Europe; with majority in the UK (47%), Spain (16%) and the Italy (13%). The deal reinvestment period ended in April 2010 and as a result the collateral manager, [ ], can no longer reinvest principal proceeds received on the collateral securities. Subsequently all income is paid sequentially to the notes (after expenses and fees). The investment was made in the class C notes. The class C tranche has credit support of 29.26% up from 8.82% at issuance. The class C notes pay a coupon of 3 month EURIBOR plus 0.85%.”

[249]The One Pager confirms the conclusion which I have reached in relation to CDS Currency Bonds. Mr Spalton and Mr Mo did not explain how 19% of the collateral could be synthetic if the OM restricted the issuer from holding more than 5% of synthetic ABSs and CDS Currency Bonds were treated as cash rather than synthetic. Indeed, the One Pager provides clear evidence that Astra itself treated CDS Currency Bonds as synthetic ABSs and not as cash.

[250]Conclusion. Again, there is nothing in my brief analysis of REDAC50 which disturbs or undermines the conclusions which I have reached in relation to REDAC13. Furthermore, that brief analysis casts considerable doubt on Mr Malik’s individual classification of hybrid securities as cash ABSs given that he was prepared to treat standard form CDSs as cash collateral rather than synthetic collateral. Finally, it confirms my view that Astra itself took a much wider view of synthetic ABSs than Mr Malik when it entered into the Octave Contract. (viii) REDAC60

[251]The Offering Memorandum. The REDAC60 OM was a circular offering notes in Class A1 to Class C and subordinated notes issued by an Irish SPV. The OM contained the same or substantially the same terms as the REDAC50 OM (above) and the issue was the same, namely, whether the Portfolio Profile Test in section 4.2 restricted the issuer from acquiring more than 5% of Synthetic Securities. On this issue, I accept the submission of Mr Spalton and Mr Mo but subject to the same qualification.

[252]The One Pager. The REDAC60 One Pager stated that the deal type was a CDO, that the collateral was cash and that Astra was acquiring €1,300,000 notes in Class B at 71.5% of their face value. It also contained the following asset description:

“[ ] is a CDO which was issued in 2005 by [ ]. A total of €242.8.7mm [sic] of notes was originally issued and the total balance of outstanding notes at the moment is €58.6mm. There are currently 31 underlying bonds remaining in the collateral pool with an outstanding balance of €70mm. Geographically the collateral is exposed to Spain (27%), Germany (24%), UK (15%), the Netherlands (14%), US (11%), Italy (8%) an [sic] Portugal (1%). The collateral asset type is 64% RMBS, 18% CMBS, 11% CDO and the remaining secured by corporate debt. The reinvestment period ended in 2011 after which the collateral manager is no longer able to purchase additional collateral but may dispose of assets under strict criteria. The same collateral manager has exercised this discretion in the past for other [ ] deals. Investment was made to the class B, which will become second pay tranche once the class A3 is fully paid off in next payment date in May -18. Classes that are currently shortfalling have mechanism that adds the unpaid interest to their principal balance, hence some current balances are higher than original ones.”

[253]Conclusion. Neither expert gave any detailed evidence about REDAC60 because no information was available to them about it when they made their experts reports. My brief analysis of REDAC60 does not alter or undermine the more detailed conclusions which I reached in relation to REDAC13 and the further conclusions which I reached in relation to REDAC50 (above). There is no real evidence on the One Pager to show how much collateral for the notes acquired by Astra for Crown III was cash and how much was synthetic and the OM confirms my views about the expertise which was necessary to trade in the market for these securities. (ix) The individual securities: overall conclusions

[254]The individual analysis which I have carried out for six disputed investments held in Crown III confirms my conclusion that the term “synthetic asset backed securities” was intended to include hybrid ABSs where the collateral consisted of both cash and synthetic securities. That analysis also raised considerable doubts about Mr Malik’s classification of a number of individual securities as either cash or synthetic ABSs and damaged his credibility on that issue. I therefore accept Mr Aldama’s evidence that the fifteen securities disputed between them should be classified as synthetic rather than cash ABSs.

(x) On a buy and hold basis

[255]Expert evidence. Clause 5 was in identical form to clause 5 of the Crown II Contract. Mr Aldama dealt with both contracts together and Mr Knox put the relevant passages to Mr Malik. I have set out the relevant passages from their evidence above. Neither drew any distinction between the two contracts and Astra did not suggest there was in closing submissions.

[256]Witness evidence. In cross-examination Dr Adler accepted that Astra would choose the bonds and that although he was the analyst Mr Mathur was the Chief Investment Officer and would have the last word. Mr Knox then put a passage from Mr Mathur’s cross-examination at the First Trial to him and he accepted that Mr Mathur’s description of both Crown II and Crown III was a fair one:

“Q No, no, no, right at the foot of 59. The question comes: "Yes, but they wouldn't be suggesting at all' If you have assets, please buy.' They wouldn't be saying that at all, would they, if they wanted to withdraw?" And the answer is: "They don't have a choice on Crown 2 and Crown 3 to buy at this stage. Crown 2 and Crown 3 are locked up capital. Crown 3 was just established, and Crown 2 was established a year and a half ago. They don't really have a choice. We want to buy an asset there. It's in our discretion in its entirety. What they're really saying is, 'Don't really buy an AAM1 right now.'" Now, that was right, wasn't it? That was Mr Mathur's attitude about it. It's essentially up to Astra to decide what to buy, and it wasn't up to LGT to tell Astra what to do unless LGT had some real objections. Is that not a fair description? A Yeah. I mean, if you look at the documentation of the Crowns, they are discretionary accounts, and they are, as you pointed out, locked up for three years. So, yes, contractually , I guess they can't take the money out and we can buy what we see fit in line with those guidelines that we discussed earlier.”

[257]Immediately after Dr Adler had given evidence about REDAC50, Mr Knox put an email to him dated 13 March 2018 in which he had written to Mr Plotke stating that:

“as you know from the past we’d rather take time to find opportunities and build positions – be it in ABS CDOs or CMBS – than invest cash quickly in what’s easily available”

. When this email was put to him he accepted that it was an accurate description of Mr Mathur’s market practice:

“Then you continue. This is March 2018: "We'd look to redeploy a significant portion of that over time. I realise that sounds a bit vague, but as you know from the past, we'd rather take time to find opportunities and build positions – be it in ABS CBOs or CNBS – than invest cash quickly in what's easily available. I believe it's proven to be very selective in the current market." Now, that would be a generally accurate description of the way Mr Mathur went about acquiring assets for Crown 2 and Crown 3, isn't it? A Yes. I think it might be worth going to the last sentence as well because it gives an idea of what kind of −−"giving it sometime" means in, at least, my mind at the time. So, this email is March, and I talk about May, June. Q Exactly, yes. A And I add that the cash we're talking here, or part of it, is the cash that came from the liquidation in Jan that I mentioned just five minutes ago. Q But the point I'm getting at is that you didn't just go to the market to buy whatever was there because it was there. Generally −− A No. No. Q −−that wasn't your strategy. You waited for the good opportunities to come up. A Absolutely.”

[258]The holding period test. Mr Malik’s evidence was that the weighted average of the time periods for which Crown III held assets during the period between 25 February 2016 and 1 February 2019 was 1.14 years. Although the weighted average was shorter than the weighted average of holding periods for Crown II, he did not suggest that a different inference about Astra’s strategy should be drawn from this. Indeed, he stated that:

“Overall, both portfolios exhibited a medium-term, trading style posture with limited turnover.”

[259]I have held that the term “on a buy and hold basis” meant to buy securities at a significant discount and to hold them until their market value reflected the “fundamental credit risk/reward profile for these assets”. I find on a balance of probabilities that Astra managed the Crown III portfolio of investments on that basis as the Trading Advisor under the Crown III Contract for the period between 25 February 2016 and 1 February 2019. I also find that it was managing the portfolio on that basis as at 30 June 2017. I make these findings of fact for the following reasons:(1) Clause 5 of the Crown III Contract provides objective evidence that Astra intended to manage the Crown III portfolio of securities on a buy and hold basis as Mr Aldama gave evidence (and Mr Malik in substance accepted): see [132] and [135] (above).

(2) Mr Mathur’s evidence at the First Trial was that both Crown II and Crown III were “locked up capital” and Dr Adler accepted in evidence at this trial that this was a fair description. Moreover, Dr Adler was effectively describing a “buy and hold strategy” in his email dated 13 March 2018 to Mr Plotke and he accepted that this was Mr Mathur’s general market practice. The date of this email was also significant as being after the point of investment and Mr Knox was careful to draw Dr Adler’s attention to the date.

(3) As Mr Malik accepted, the results of the holding period test were consistent with Astra managing both Crown II and Crown III “on a buy and hold basis” throughout their Lock-up Periods. Given the proper construction of that term, the holding period test provides positive evidence that Astra managed Crown III on that basis. The weighted average was only slightly less than Mr Mathur anticipated in his discussions with Mr Siddiqi before the parties entered into the Octave Contract and in line with the expectations which the Investment Team set out in the DDI Memorandum.

(4) I am prepared to accept Dr Adler’s evidence that Astra adopted an activist approach in relation to REDAC50 where the bond was held in Crown III for a week only in October 2017. But I am not satisfied that this demonstrates that Crown III was not managed on a buy and hold basis. Dr Adler’s evidence was that Astra’s strategy was to collapse the structure and to do this it started building up a position in REDAC50 from the second half of 2017 until early 2018. Moreover, it built up that position across ASSCFL, Crown II and Crown III. If Astra had been adopting a very different strategy for Crown III, it would not have bought REDAC50 bonds for all three managed accounts.

(5) But even if I had been prepared to accept Dr Adler’s evidence that REDAC50 was not managed on a buy and hold basis, this is evidence at best that Astra adopted a “mixed strategy” for Crown III. For the reasons given, I am satisfied that Crown III was managed primarily or mainly on a buy and hold basis. Even after taking into account those investments in Crown II which were realised quickly or early, the weighted average holding period of all of the assets in the managed account was 1.14 years. (4).

(i) The replication requirement

[260]The AEO Fund. Mr Spalton and Mr Mo did not seek to persuade me that Astra intended to adopt the same strategy for Crown III as the AEO Fund. Indeed, there is no suggestion that Astra was continuing to market the AEO Fund in early 2016 and Dr Adler gave no evidence to support such a contention. Mr Spalton and Mr Mo did not seek to persuade me either that Mr Mathur or Mr Thomas intended to adopt any other alternative strategy and none of the witnesses whom they called on behalf of Astra gave any evidence to support such a contention either.

[261]The Crown III Contract. Astra adopted the same position in relation to Crown III as it had done in relation to Crown II and it did not adduce any direct evidence of the intentions of the Investment Team when setting up Crown III. Dr Mathur and Mr Thomas did not give evidence and Dr Adler did not address the question whether the Investment Team intended to buy the same investments for ASSCFL and Crown III or to achieve the same risk profile for its investors. However, he referred in his witness statement to discussions a year earlier which “did not progress at the time” and gave evidence that “these characteristics were not reflected in the Crown/AAM3 managed account when it was ultimately established a year later.” His evidence about the setting up of Crown III was as follows (references excluded):

“I do not recall there being further discussions with LGT in relation to a third managed account until the first quarter of 2016. I have been shown emails between Ralph Plotke (of LGT) and myself relating to a number of bonds that had been shown to Astra repeatedly over prior months (i.e. during H2 2015) on a bond by bond basis. In my recollection, the main reason that LGT wanted to set up a third managed account was that they had raised capital for a new Fund-of-Funds, some of which they wanted to allocate to Astra. The bonds mentioned above appeared to be a good way to start deploying capital.”

[262]Dr Adler did not, however, refer in his witness statement to an email dated 1 February 2016 which Mr Plotke sent to him (copying in Ms Liliya Ibraeva of LGT) and only two days before his strategy email dated 3 February 2016. This email showed that there had been significant discussions about setting up Crown III to which Dr Adler had not referred in his witness statement:

“As already discussed last week, we would be very interested in this portfolio which is available in the market for the right price. Therefore, I discussed with Liliya that we should start setting up AAM3, which would buy this portfolio to some part (the other part should be bought by AAM2). Given we just discussed the terms of AAM2 (TAA), AAM3 should just be a copy of those terms. Liliya is going to send you a draft in the next couple of days. The commitment amount is going to change and I believe we need another couple of days until we have more insights into that matter. Pls do not hesitate to contact if you have any questions.”

[263]When he was cross-examined about this email, Dr Adler accepted that Crown III was set up on exactly the same terms as Crown II. He also accepted that the portfolio in which LGT was interested mostly consisted of synthetic bonds. Finally, he accepted that the draft of the Crown III Contract was circulated in February or early March 2016 and that LGT carried out no due diligence beyond the preparation of an updating memo:

“Q You'll see here, it's the middle email. A "Hi …Christian" Q Yes. "We would be very interested in this portfolio which is available." In fact, that was a synthetic, wasn't it? A I think it was mostly synthetic, yes. Q All right. "Therefore, I discussed with Liliya that we should start setting up AAM3, which would buy this portfolio to some part (the other part should be bought by AAM2). Given we just discussed the terms of AAM2 (TAA), AAM3 should just be a copy..." And then the draft is sent round, and the agreement is made at the beginning, I think I'm right in saying, of February 2016, maybe March 2016. All right? A Yeah, yeah, yeah. Q And again, there was no due diligence done in relation to Crown 3, was there, the Crown 3 fund? A No, other than the kind of memo that Mr Plotke had to write in relation to that email we've just discussed, that input was obviously into his memo.”

[264]In the light of this evidence, I find that Crown III was set up on Mr Plotke’s instructions and that he intended the terms of the Crown III Contract to mirror the terms of the Crown II Contract (which LGT’s counsel had originally drafted). In this context, Dr Adler’s explanation why LGT wanted to open a third managed account makes perfect sense, namely, that it “had raised capital for a new Fund-of-Funds”. I find, therefore, that in the same way Crown II was set up as a second managed account on behalf of a different group of investors from Crown I, Crown III was set up as a third managed account on behalf of a different group of investors from those who had invested in either Crown I and Crown II.

[265]Furthermore, the exercise which Mr Aldama carried out in Aldama 1, Appendix K also demonstrated that the terms of the Crown II Contract and the Crown III Contract which were directly relevant to the securities in which Crown II and Crown III were invested and the risk profile of those assets. Although Mr Knox did not formally put this proposition to Mr Malik, Dr Adler had already accepted that Crown III was set up on exactly the same terms as Crown II. But if there is any doubt, I find that the terms of both contracts which were relevant to the acquisition of investment securities and their risk profile were identical.

[266]The Investment Securities. Dr Adler accepted in cross-examination that as early as 2014 it had become more expensive to get hold of ABSs and synthetic ABSs and also that they were harder to find. He also accepted that Astra had an allocation policy that if an asset was eligible for more than one account, all clients had to be treated the same and the same assets were bought on occasions for both Crown II and Crown III:

“Q You don't need to work them out, because we've been able to work out by different reasons what the redacted were. Now, just a couple of points on this. It's quite apparent from this, and indeed from a number of other emails, that what was going on was that −− Maybe normally what would happen, you would buy assets for both Crown 2 and Crown 3 at the same time, or share the asset partly for Crown 2 and partly for Crown 3. That appears to have been the pattern on the whole. Would that not be a fair description? Not always. A Not always. It always depends. We have an allocation policy that if an asset is eligible for more than one account, then we have to treat all clients fairly, so we can't give the extra juicy ones to one client and the not so juicy ones to another. Q And would that operate as between Crown 1 and Crown −− Well, leave Crown 1 out for the moment because their lockup period had come to an end, but for Crown 2 and Crown 3, that would be broadly the case, wouldn't it? You'd be buying −− If you bought asset X, you would attribute, let's say, 60 per cent to Crown 2 and 40 per cent to Crown 3, or whatever the appropriate percentage might be. A Yeah, well, not quite as straightforward, but because they were also quite different size in terms of capital. Sometimes Crown 3 might be out of capital and Crown 2 had cash lying around. So not always, but, yeah, there's definitely a pattern that there's the same assets bought on occasions.”

[267]Mr Knox also put to Dr Adler an extract from Mr Mathur’s cross-examination at the First Trial and he accepted that the size of Crown III presented a particular problem and that securities could only be purchased if they were also being bought for Crown II:

“Q Now, there was a problem on Crown 3 and Mr Mathur −−if you go to the bundle L at 61 to 7273. So, if you go to bundle L. (After a pause) I'm sorry, page 61. A Mm−hmm. Q You'll see on page 72, the question begins: "Well, I agree but hang on, our focus is, unfortunately, on AM3, the size is too small, frankly speaking. You do need AM2 support as well. [Now, you can drop down to the answer] Answer not accurate, but in the interest of time, I don't know what I should do. The AM3 asset, it's not about lack of cash, it's that the AM3 position itself is very tiny. It's $15 million total commitment, and you've already spent a lot of it already, and for you to buy a larger set of assets, you just cannot buy it if you don't have more positions because those assets don't come in small sizes. They come in like $10 million sizes, there's something called the concentration limits on each, and so forth. So unless the asset comes in really small sizes like 1.5 million, we just kind of buy an AM3." That was a problem, wasn't it, for Crown 3? Well, that's what Mr Mathur said. A Yeah. Q But was that the problem for Crown 3? Not big enough, it's just 15 million. A Well, if you see some of the, kind of, bigger positions we had acquired in the past, yes, we would not be able to acquire them.”

[268]Mr Aldama carried out a similar exercise to establish the overlap between ASSCFL and Crown III in Aldama 1, Appendix M. This showed that all of the securities purchased for Crown III were also purchased for, or held by, Crown II but that there was only a 36% overlap between the securities purchased for ASSCFL and Crown III. Mr Aldama also gave the following evidence both about the overlap between the investment securities in the three different managed accounts and their risk profiles:

“113. As I have said, by the time Crown III was set up in March 2016, ASSCFL appears to have sold its assets, so it had no funds in existence against which to compare those in Crown III. However, on Crown III: (a) As set out in Appendix J-5, it can be seen that by May 2017, on an “invested basis”, Crown III consisted of 54.33% synthetics, a percentage that remained more or less the same until October 2017. (b) This fact, together with my calculations set out in Appendix M-2, that shows an individual REDAC overlap of 36% between Crown III and ASSCFL by May 2017, leads me to conclude that the Crown III portfolio was designed so far as it could to substantially replicate that of ASSCFL. 114. It is worth noting that synthetic ABS volumes had largely dried up by 2016, where the supply and visibility had become very thin, primarily because by 2016 most legacy synthetic ABS were winding down, being liquidated, or had experienced credit events. Even if Astra had tried to purchase them it would have been hard to do so which explains the intentional shift by Crown III to acquire CLOs as evidenced by the chart in paragraph 107 above. This chart showed that 50% of Crown III’s investments were held in CDOs and CMBS. Comparison of the “risk profile” of Crown II and Crown III with that of ASSCFL 115. Comparing risk profiles across portfolios is inherently a multi-layered exercise, requiring the integration of credit analysis, structural and legal reviews, market considerations, macroeconomic context, and stress testing (both macro shocks and collateral-specific stresses). The task is further complicated by the fact that the relevant assessment is not of today’s risk profile, but of the one that prevailed in 2015 and later when the REDAC investment securities were originally acquired. 116. I have not been provided with sufficient information to conduct a meaningful analysis or comparison of the “risk profile” across ASSCFL, Crown II, and Crown III. A heavily redacted prospectus and a one-page summary are inadequate to evaluate the risk characteristics of a single REDAC security investment, let alone to support comparative analysis across multiple portfolios. Regardless, (a) For Crown II, by February 2016 — at which point the initial $40 million of committed capital had been fully deployed — the securities acquired by Crown II mirrored those of ASSCFL to a significant degree (Appendix M-1 evidences an 88% overlap of individual REDAC securities). Accordingly, Crown II’s overall risk profile is likely to have been intentionally structured to substantially replicate that of ASSCFL. (b) For Crown III, by May 2017 — at which point the initial $15 million of committed capital had been fully deployed — the securities acquired by Crown III mirrored those of ASSCFL to a lesser degree (Appendix M-1 evidences an 36% overlap of individual REDAC securities). This lower degree of replication was principally attributable to the reduced availability of comparable assets by 2017 (as discussed in Paragraph 114), combined with the portfolio’s pronounced concentration in CDO and CMBS collateral as noted in paragraph 107. Accordingly, Crown III’s overall risk profile is likely to have been intentionally structured, insofar as practicable, to substantially replicate that of ASSCFL prior to its divestment program commencing in 2015.”

Comparison of the “risk profile” of Crown II and Crown III with that of ASSCFL

[269]Mr Spalton challenged this evidence. He put it to Mr Aldama that Mr Malik’s approach to the risk profile of the individual assets held in Crown II and Crown III reflected the approach which a sophisticated investor would have adopted in the market. He began by summarising that approach:

“Let's summarise there. First, the extent to which securities were held as cash or synthetic asset−backed securities; secondly, the holding period of assets; thirdly, the use of leverage; fourthly, NAV and performance; fifthly, transactional overlap; and sixth, risk composition. So he's done six tests , and he does that by reference to really four different things, doesn't he? Asset type, tranche −− Well, three things: asset type, tranche and credit rating . And you −− A Correct. Q Correct, thank you. So, can I just start by a sort of overriding observation, which is this. It was suggested to you that what Mr Malik has done properly reflects the approach that a sophisticated market participant would when comparing portfolios. A I would disagree with that, but please continue. Q He's looked at actual assets, how they're managed, and (inaudible) the risk , and he's done that by focusing on −−this is really important −−the note level. You accept that's what he's done? A I see that's what he says he's done, correct. Q And the reason that's so important, Mr Aldama, is you can test Mr Malik's approach by reference to the NAV and the returns of a particular portfolio. Would you accept that? A For these specific assets, I disagree. It just shows that he wasn't aware of how these assets perform at the time, so he's just done something that doesn't really make sense to do on these types of assets. Q Well, let 's start as a matter of theory. I put to you that a market participant would look at portfolios in this way. Would you agree that, all else being equal, if you do these kind of careful tests , you can then measure performance by reference to the NAV and the returns? A That's correct. In terms of the asset class−− For the type of client , this test would be asset class.”

[270]Mr Aldama accepted that he had not carried out the “multi-layered exercise” which Mr Malik had performed. He also accepted that he had not performed the necessary calculations to challenge Mr Malik’s evidence that by applying his multi-layered tests, there was a material difference between ASSCFL, Crown II and Crown III. But Mr Spalton fairly gave Mr Aldama an opportunity to explain why he considered Mr Malik’s evidence unhelpful:

“Q Well, now is your opportunity. Please explain to my Lord why you think this is an unhelpful table. A Thank you. So, just to say, this is the first time I see anyone using ratings as a benchmark to look at risk. Anyone who understands what happened in 2008/2009, and how the rating agencies were perceived to be the culprit of what happened during the financial crisis, every asset on that portfolio was downgraded to below investment grade shortly after, you know, 2008. Every time an asset was acquired on this portfolio, it was actually below investment grade. Those ratings didn't mean anything. I understand the original rating. This basically shows the original rating of the securitisation in play, so it was originally rated AAA, AA, A. At the time that Astra bought its assets into the Crown 2 and Crown 3 portfolios, every single asset had been downgraded and it was below investment grade. The idea was −− And again, the rating agencies have always been criticised for not properly reflecting and identifying what the risks were and using more commercial incentives to rate these structures versus the actual risk profile. So again, this is the first time I see anyone using or trying to benchmark risk to ratings when after 2008, regulators, insurance companies and, you know, they did away with ratings, they actually advised to move away from the rating approach and use a different way to calculate capital. Before the crisis, banks used to look at rating to calculate capital requirements. Basel introduced new metrics so you wouldn't have to look at ratings because it was deemed to be inappropriate. So that (inaudible) relates to ratings. You also talk about the composition of the portfolio. I know there was an (inaudible) and how Mr Malik did this analysis where he would look at the composition of what was synthetic and what was cash, and that was on E/146, 1−4−6. And the one thing that you also have to look at is at the top of that table, it clearly says that it's "a comparison of the gross purchases" for Crown 2 and Crown 3. So yet again, this is what we disagree, where he is ignoring sells, I guess, looking at purchases. So that percentage −− So that percentage composition, if you look at your sells, you're just basically getting a misleading number because that's not what the portfolio looks at; what you have right now, what you have deployed right now. Only the portfolio that just looks at the risk ever since you started ignoring sells. When you sell an asset, you no longer have the risk so I 'm not really sure how ignoring sells that you risk your portfolio, you then use that metric to convert this between the assets. So that's another point of disagreement.”

[271]Mr Spalton also put it to Mr Aldama that Crown II and Crown III did not replicate ASSCFL because the performance of each fund was materially different when the net asset values or “NAV” of the individual assets were measured:

“Q Well, can I just test it this way? You've concluded, have you not −−that the Crown 2, Crown 3 managed account replicated the ASSCFL fund, haven't you? MR KNOX: Designed to. MR SPALTON: Designed to replicate the ASSCFL fund. A (Inaudible) that's correct, as the Court instructed. Q You've done that at the deal level, as we saw half an hour or so ago by reference to deal level REDAC codes. A Correct. Q But what Mr Malik has done is actually look at performance NAV, and I would suggest that what you can't do is conclude that there's replication when the outcome is materially different for each of these different accounts. Your conclusion, in short, doesn't match up with the analysis, does it? A I mean, if you want, we can walk through what Mr Malik has answered (inaudible). Q No, can you answer that question? You concluded that they replicate but the NAV is different, the IRR is different, isn't it? A That's not correct, no. Q All right. Now, please, elaborate. A Okay, so this table 4.4.1 is quite telling. As you described, he's already requested that ASSCFL was sold down by the end of 2015. So, just to look at Q4 2016, the NAV is $2.1 million and goes up to $3.8 million in Q4 2017. What is important to understand is what's driving the NAV. In 2017, there was one asset driving the NAV. So, the NAV that drives 2.1 million is driven by one single asset, and, at the end of 2017, they bought a second asset. So the $3.8 million NAV of ASSCFL is driven by two single assets. So, when Mr Malik does this detail, as has been decided, a comparison between Crown 1 which has, you know, 10, 20, 30 assets and (inaudible), which also serves a fully ramped portfolio, you are comparing (inaudible) of 30 assets of different shapes and forms with one asset, the entity driven by one asset, and that, in Mr Malik's mind, is suﬀicient to say that is −−you know, how to compare risks. I would argue that you cannot compare a full portfolio entity with the NAV of one single asset or, in 2017, with the NAV of two assets. So that's one point that I would bring that I don't understand how that makes sense, in my mind, anyway. I wouldn't have done that and that's why I didn't do it. We don't have enough information to perform this NAV analysis. That's number one. Number two, as it relates to NAV, we have to understand the NAV is driven by prices, the price of each individual bond held in the portfolio, and we need to understand how those prices are acquired, and this is where I also don't agree with using those prices to do any meaningful analysis. There's three types of prices that banks use; the level one, level two, and level three. Level one are observable prices . You see prices traded and you then use that price, and level two is you don't see prices on data, you see it in position, but you see similar positions being traded in the market and that's the prices that you use. Every single asset in Crown 2, Crown 3, and ASSCFL are level three assets , which are −− There is no observable price, there is no actual trading activity with bonds, they are highly illiquid. So you use model trading prices, you use assumptions. What is the repayment? What is the interest rate? You project cash flows, you discount those cash flows and there are firms that you pay to provide these projected cash flows and theoretical cash flows. They are nothing other than theoretical cash flows and projections and prices anybody to perform this risk analysis . So, that's −− that's why I didn't do the −−the analysis because it is −−is meaningless in my mind. MR SPALTON: Mr Aldama, none of that was in your report, that long speech.”

[272]I have already held that the parties to the Octave Contract could not have intended it to be necessary to carry out Mr Malik’s “deep forensic exercise” in order to determine Musst’s entitlement: see [107](3) to (7) and [165](6). But Mr Knox also put Aldama 1, §116 (above) to Mr Malik and pressed him to accept Mr Aldama’s opinion that the overall risk profile of Crown III was likely to have been intentionally structured (insofar as practicable) to substantially replicate that of ASSCFL prior to its divestment program commencing in 2015. Mr Malik would not accept this although he accepted that there was reduced availability for synthetic securitisations which had been undertaken before the financial crisis. He described these as “legacy assets”:

“Q Okay, and while I'm on this page, in relation to Crown 3 −− Now, in relation to Crown 3, of course there never was, we say, anything that can properly be called a fund in ASSCFL to copy. But just see what Mr Aldama says in relation to Crown 3 at E/36. I just want your comment on that. Do you mind reading it to yourself? Sorry, Mr Malik. A E/36? Q E/36, paragraph 116(b). A (After a pause) Yes, I 've read it. Q Now, just pausing for a moment, do you accept that in 2017 −−and indeed I think Mr Aldama says a little bit earlier, but never mind about that −−do you accept that by 2017 there was reduced availability of the sort of assets that were being bought for Crown 2 in 2015? That's to say, basically, asset−backed securities and some synthetics. A I think that the composition of the market had changed and the style of securitisation that were available in synthetic form or the large, sort of, synthetic risk transfer type of securitisations. The legacy, my Lord, is the word given to securitisations that were done before the financial crisis. Legacy CDOs had more or less either been sold off or had been sort of killed off. MR JUSTICE LEECH: Or unwound, presumably. A Sorry? MR JUSTICE LEECH: Or unwound, or been through −− liquidated, the portfolios. A Yes, yes. And so you had a new world of assets being sold, so, yeah, clearly the market had moved from a particular type of asset and a composition of asset to a different style. MR KNOX: But we know, in fact, I think in relation to Crown 3, that most of them were what you might call old style rather than new style assets. A Yes, my Lord. So, you always have secondary assets trading in the market and, you know, when you say "old style," you have to sort of look to see which date they were issued. Q Pre−crash style, pre−crash assets. A Yes. I mean, absolutely. There were still some assets. Some had gone. Q So it would have been harder, however hard one tried, to build up for Crown 3 the sort of portfolio which Crown 2 had. A It goes to reason, yes, my Lord. Q But what Mr Aldama is saying here is that bearing that in mind, namely the diﬀiculty of building up something so similar with comparable assets, he says, look at his final sentence in 116(b): "Accordingly, Crown III's overall risk profile is likely to have been intentionally structured [ insofar as practical] to substantially replicate that of ASSCFL." I mean, what can you say? Can you dispute that? A That's his view, my Lord. I don't know how he gets to that view based on what work he's done to be able to get to that view. I certainly can't get to a view as narrow as that, as precise as that, within a paragraph. Q But it's a fairly general view, isn't it, rather than the precise view? A Which is −− Q Well, what he's expressing here. He's not purporting to express a very precise view, he's purporting to express a general view, isn't he? A I understand, Mr Knox, but I think I'm sort of weighing it up with the Court question to me, which is to establish whether there was a (inaudible) is a much more detailed analysis and this doesn't meet that standard. Q I can see the detailed analysis standard, you might say it doesn't meet. But broadly, if you adopt a rather more broadbrush approach, this is a perfectly reasonable point of view, isn't it? A It is a point of view. I don't particularly −− Q Mr Malik. A It is a point of view. Q It's a reasonable point of view. A I 'm not being pedantic, Mr Knox. I mean, I really would like to say that I feel that this is a view because it's really not been thought through. To be able to come up with a more considered view, you have to do more reasonable, detailed analysis with the same data that was available to both him and I.”

[273]ASSCFL. It appeared to be common ground at the consequential hearing after the First Trial and for the Appeal that ASSCFL was restructured at the end of 31 December 2015. When he was cross-examined about this, Dr Adler confirmed that at the end of 2015 the assets in ASSCFL were either sold off or transferred over to ASCIL and that ASSCFL was used by Astra to take proprietary positions of its own. He also confirmed that after 2015 it was operating on a completely different basis and not as a client account:

“Q Okay. Now, who became the new owners of the shares in ASSCFL when the assets were all transferred out of ASSCFL? What happened? A I'm not an expert on how deregistration works, but I think the shares are kind of redeemed and destroyed. Q And we do know, however, ASSCFL has been continuing in existence and did have that one asset you mentioned, and it also appears to have acquired a few other assets later. It's not quite clear why. Are you able to explain what was happening? A Yes. So, are we still talking about this one asset in '16? Q Yes, there's one for 1.62 million which was acquired, which you referred to. A Yes. Q And that was essentially −− A Well, 6.2 million face. Q Yes. Oh, I see. A We bought it for 2−ish million. Q Right, okay. There's another asset which is acquired. All right, but after that, there's some further assets acquired −− A Yes. Q −−which you don't speak about. Were they acquired for the same reason by Astra? A Not the same reason. That little accident with the managed accountholder not being happy to go ahead at the 11th hour only happened once, but, from there on, we would use as ASSCFL to −− How to best describe it −− Q Warehouse? A Not warehouse. Basically, take positions that were either completely ineligible for any of the vehicles that we run for clients , or because of, say, concentration limits , client accounts could only take X, but we had a situation where we needed to buy more, could buy more, then we would buy some of that in ASSCFL, rather than let the opportunity go. Q When you say, "We would buy," that would be Astra? A Astra. Q So, essentially −− A ASSCFL. Q ASSCFL, but assets were bought in ASSCFL's name, for the benefit of Astra, not for the benefit investors in ASSCFL. Is that right? A No. ASSCFL is a fund that's wholly owned by Astra Capital International, which is our holding company. So, when you say Astra, you probably mean ASS, like Astro UK Limited. We have nothing to do −−well, not nothing but, you know. Q Astra Capital, in that case, was the owner? A They are the owner of the fund. Q Okay, so it wasn't in any sense like the fund that had previously been in operation until the end of December 2015. A Sorry, say again? Q In any sense, after December 2015, ASSCFL was not operating, in any material way, as a fund as it had done up until December 2015. A No, it was not a, kind of, client account in any sense, no.”

[274]Findings of fact. I find as a fact that Astra purchased the same investment securities on behalf of Crown III as it purchased on behalf of Crown II. Dr Adler accepted that Astra had an allocation policy to share all assets between eligible managed accounts but his evidence that it was only “on occasion” that Astra purchased the same assets on behalf of both funds understates the position. Aldama 1, Appendix M, Part 2 shows that Astra did not purchase any assets for Crown III which it did not purchase for Crown II. Mr Malik made a number of criticisms of Appendix M in the Joint Statement but I am not satisfied any of those criticisms undermined the conclusion that Astra bought the same assets for both Crown II and Crown III.

[275]I also find as a fact that from 2014 onwards the investment securities which ASSCFL as part of the Current Strategy had become much more scarce in the market. Dr Adler accepted that in 2014 it had become more expensive to get hold of ABSs and synthetic ABSs and also that they were harder to find. Mr Aldama gave evidence that there was reduced availability of these assets in the market and Mr Malik agreed that the composition of the market had changed and that legacy CDOs had been “killed off”. I also find that there was a special problem which prevented Astra from acquiring the same investment securities as ASSCFL, namely, that the funds in the managed account were too small to enable it to purchase investments unless they were also being purchased for another managed account.

[276]In case there is any doubt, I also find that on 31 December 2015 ASSCFL ceased to be a Fund for the purposes of the Funds definition. Mr Aldama’s evidence was that it no longer held any assets at all when Crown III was set up and Dr Adler accepted in terms that after the end of 2015 it was not operating as a Fund or a client account in any material way. Further, neither party advanced a positive case that ASSCFL continued to follow the Current Strategy after 31 December 2015. But again in case there is any doubt, I find that it did not do so.

[277]Given Astra’s failure to adduce any evidence to prove its intentions when Crown III was set up, I must undertake the same exercise which I undertook in relation to Crown II and make findings of fact about those intentions based on inferences to be drawn from the contemporaneous documents and the evidence of the witnesses whom Astra chose to call. In my judgment, it is appropriate to draw the inference that Mr Mathur and the Investment Team intended to use the funds in Crown III to replicate the investment securities held in both Crown II and also in ASSCFL before 31 December 2015 and that it should have substantially the same risk profile. I draw this inference for the following reasons:(1) Astra adduced no evidence to establish that Mr Mathur or any other members of the Investment Team consciously decided to acquire different assets with a different risk profile when Crown III was established. In particular, there was no evidence to suggest that Astra intended to invest Crown III funds in the AEO Fund. The obvious inference to draw, therefore, is that Mr Mathur and the Investment Team intended Astra to buy the same investments and adopt the same risk profile for Crown III as it had done for Crown II and for ASSCFL before 31 December 2015.

(2) This inference is supported by Dr Adler’s email dated 1 February 2016 and my findings of fact that Crown III was set up on the instructions of LGT, that it was intended to mirror the terms of the Crown II Contract and that LGT wanted to open a third managed account on the same platform on behalf of a separate group of investors. The decision to open a new managed account had nothing to do, therefore, with a change in strategy or the nature of the securities which Astra intended to acquire or their risk profile.

(3) This inference is also supported by my finding of fact that the original portfolio of assets which Astra purchased for Crown III were synthetic ABSs and by Dr Adler’s evidence that “old style” or “legacy” assets were bought for Crown III. It is also supported by the fact that Astra purchased the same investment securities on behalf of Crown III as it purchased on behalf of Crown II. I have already found that the replication requirement was satisfied for Crown II and if Astra purchased the same investments for both Crown II and Crown III, this supports the inference that the replication requirement is satisfied for Crown III.

[278]I was initially concerned that it was not reasonable to draw the inference that the Investment Team intended to buy the same investments and adopt the same risk profile for Crown III as it had done for ASSCFL because of the limited overlap between the assets held in ASSCFL and those held in Crown III. However, on reflection I am satisfied that it is reasonable to draw that inference for the following reasons:(1) I accept Mr Aldama’s evidence in Aldama 1, Appendix M, Table 2 that 36% of the investments acquired by Crown III were also acquired by ASSCFL. However, I also accept Mr Malik’s evidence that different tranches of the individual REDACs were acquired for each account and held for different periods of time and at different times.

(2) It was also Mr Malik’s evidence that the overlap between ASSCFL and Crown III appeared to have been greater than in substance it was. Mr Aldama did not accept this and expressed the view that replication was properly assessed at the level of portfolio design, asset-type allocation and deal-level exposure. If it is necessary to decide between them, I prefer Mr Aldama’s evidence on this issue.

(3) But whichever approach is adopted, I am satisfied that the principal reason why the overlap between the investments in ASSCFL and Crown III was limited to 36% at the deal level was not because Mr Mathur and the Investment Team had adopted an entirely new strategy for Crown III which involved different investments and a different risk profile, but because it was no longer operating ASSCFL as a Fund at all. Indeed, when ASSCFL was used to hold assets purchased on behalf of Astra itself, it held assets which were also purchased for both Crown II and Crown III. (3) Furthermore, the limited overlap between ASSCFL and Crown III can also be explained by two additional factors. First, I have found that there was a scarcity of synthetic ABSs in the market after 2014 which meant that Astra could not acquire them so frequently. Secondly, I have also found that the size of Crown III prevented it from acquiring such investments unless they were also purchased for other managed accounts.

(4) For these reasons, therefore, I agree with Mr Aldama that the degree of overlap between ASSCFL and Crown III after March 2016 was significant and still tends to support the inference that Crown III was intended to substantially replicate the investments and risk profile of ASSCFL before 31 December 2015. In particular, it supports the inference that whenever Astra purchased assets for ASSCFL, it was still following the Current Strategy.

(5) I also agree with Mr Aldama’s criticisms of Mr Malik’s approach to the issue of replication in relation to Crown III. In particular, I accept his criticism that it was meaningless to assess the risk profile of securities by reference to their ratings before the financial crisis of 2008 and 2009. I also accept his criticism that it was equally meaningless to compare the NAV of the investments acquired and held in Crown III with the few individual investments later acquired and held in ASSCFL for Astra itself after it had ceased to operate as a Fund.

[279]In the light of the expert evidence, the findings of fact which I have made and the inference which I have drawn from those facts, I find on a balance of probabilities that Mr Mathur and the Investment Team intended to use the funds in Crown III to substantially replicate the investment securities and risk profile of Crown II and ASSCFL before 31 December 2015. On the true construction of the Octave Contract I hold that the replication requirement is satisfied for Crown III. (ii) Did Crown III follow the Current Strategy?

[280]I have held that the funds in Crown III were primarily invested in synthetic ABSs (including hybrid ABSs) and my detailed analysis of REDAC13 and the other disputed securities supports my conclusion that the parties to the Octave Contract understood and intended the Current Strategy to include investment in hybrid ABSs where the collateral consisted of both cash and synthetic assets. I have also held that Astra purchased assets on a “buy and hold basis” in reliance on the evidence of Mr Mathur at the First Trial and his email dated 18 March 2018. Finally, I have held that Mr Mathur and the Investment Team intended to use the funds in Crown III to substantially replicate the investments and risk profile of ASSCFL before it was restructured on 31 December 2015.

[281]Dr Adler confirmed in evidence that Crown II was wound up in 2024 but that Crown III remains in existence. However, he gave no positive evidence about the strategy which Astra was currently following in relation to the account. By contrast, Ms Galligan gave the following evidence in her witness statement which Astra did not challenge (references removed):

“130. At the start of 2025, I attended the iconnections conference in Miami. Anish was presenting there to seek to raise capital. I had access to a presentation document which provides information about the various funds managed by Astra. I was subscribed as an investor at this conference. Investment managers uploaded their materials to a database so these materials could be reviewed by investors. 131. My understanding is that as set out on page 25, Fund 2 is Crown 1, Fund 3 is Crown 2 and Fund 4 is Crown 3. It is clear to me that the presentation does not differentiate between different strategies and is focused on Synthetic ABS. I spoke to a number of investors who attended Anish's talk at this conference who also confirmed that he did not differentiate between different strategies or suggest that Astra followed multiple strategies when setting out its activities.”

[282]I have reviewed the presentation to which Ms Galligan referred and I accept her evidence. Based on the timelines shown on page 25, I agree with her and draw the inference that Fund 1 was ASSCFL, Fund 2 was Crown 1, Fund 3 was Crown II and Fund 4 was Crown III. Moreover, I am satisfied that Astra presented itself as adopting a single strategy for all four funds from 2013 to 2024. It also described them as “Private Debt/Closed End” funds and contrasted them with ASCIL which it described as “Open End”. In the light of this finding and my earlier findings of fact, I find on a balance of probabilities that Astra followed the Current Strategy for Crown III from March 2016 when the account was set up until 30 May 2017 which I have found to be the point of investment and that it was following the Current Strategy for Crown III on that date. (5). Conclusion

[283]Subject to the question whether the Octave Contract was novated, I hold that Musst is entitled to share in all management fees and performance fees earned by Astra in relation to Crown III because Crown III was a Fund managed or advised by Astra for the Current Strategy and was, therefore, an Eligible Investment for the purposes of clause 3.1 of the Octave Contract.

IV. Novation

[284]Musst’s primary case was that the Judge decided in its favour the question whether the Octave Contract was novated so that Astra LLP and then Astra UK were bound by its terms to pay the relevant management and performance fees in respect of Crown II and Crown III and the Court of Appeal upheld his decision. Musst’s alternative case was that the Court should find on the facts that the Octave Contract was novated so that Astra LLP became bound to perform is terms in relation to Crown II and Crown III and novated again so that Astra UK then became a party and bound by the same terms.

[285]Astra submitted that Musst’s case was inconsistent with its position at the First Trial and unsustainable on the facts. Astra relied on the fact that the Judge found that there was a novation by conduct, that no invoices submitted or payments made in relation to Crown II or Crown III and that the novation alleged by Musst and found by the Judge at the First Trial was specific and limited to Crown I. Astra also relied on Mr Holdom’s email dated 30 April 2015 in which Mr Holdom expressly stated that the Crown II invoice had been sent in error. J. The Judge’s Findings (1). The Trial Judgment

[286]The Judge set out the basic facts upon which both novations turned at [152] to [173] before moving on to set out discussions which took place between Mr Mathur, Mr Siddiqi and Ms Galligan in June and July 2016, a proposal from Astra in late July 2016 and the relevant pre-action correspondence. I set out the relevant passages in full:

“(a) The transfer from Octave to Astra LLP 152. On 22 July 2014, Astra LLP ceased to be an appointed representative of Octave LLP (Octave had disposed of its 8% shareholding in Astra Capital on 23 May 2014). On 23 July 2014, Astra LLP obtained FSA authorisation, and Astra Capital was appointed manager and Astra LLP as investment manager in relation to ASSCFL and ASCIL. 153. By an agreement dated 14 August 2014, it was agreed between Octave LLP and Astra LLP that all investment management services under investment management agreements would transfer from the management of Octave LLP to Astra LLP; and all fees payable to Octave Ltd would transfer, subject to the agreement of contracting parties to Astra Capital. 154. On 5 September 2014, Astra LLP and Crown entered into an “amended trading advisory agreement” which replaced and was on the same terms (or materially the same terms) as the Crown Contract (in particular for a US$40 million investment at the same fees). The payments were to be made to Astra LLP. (b) The alleged novation to Astra LLP in relation to the Crown Contract 155. On 5 November 2014, Mr Holdom, writing on behalf of Octave, informed Musst that there had been “a change of Trading Advisor from Octave to [Astra LLP] effective on 1 September”, and said that the fees invoiced to Crown had been split as to US$107,782.80 from Octave, and US$52,175.70 from Astra LLP (which reflected the respective periods of management before and after 1 September 2013). He asked Musst to split its own invoices (i.e. to Octave and Astra LLP) accordingly. 156. Musst then sent out to Octave two invoices as requested, for US$21,565.96 and for US$10,435.14, which Octave and Astra LLP respectively paid. Thereafter, Musst sent all its invoices on the Crown contract to Astra LLP, and Astra LLP paid them, up to and including a payment on 4 May 2016. 157. By a further exchange on 4 February 2015, Mr Holdom (this time from Astra LLP) informed Ms Galligan that the amounts expected to be received were “$3,579.06 (Crown II) $160,256.56 (Crown 1)”

. Ms Galligan asked what was the difference between Crown I and Crown II. She received no reply on this point, save for Mr Holdom confirming that as the account was paying its maximum fee, she could invoice US$32,500 per quarter to Astra LLP, which Musst duly did. 158. Subsequently, when the next quarterly payment came round, Mr Holdom on 30 April 2015 told Miss Imiolek that he had sent her a Crown II invoice by mistake. He wrote:

“Hi Agatha, My apologies, I sent you the Crown AAM 2 invoice in error. The Crown 2 account was set up for a new strategy (primarily CLO and CRE) and therefore is not covered by the Introduction Agreement “as it does not substantially replicate the investment securities and risk profile of ASSCF”

. I will settle the [other invoice] once the client has made their payment.” “(d) The draft contract providing for a change to Astra LLP and Astra Capital 162. Shortly after Mr Holdom’s request to invoice Astra LLP on the 2B account, Mr Murray, on 19 February 2015, wrote on its behalf to Ms Galligan at Musst, saying that:

“We have moved to our new offices ... today and we are completing some final documentation in connection with the investment manager migration from [Octave LLP] to [Astra LLP]”

. Accordingly, he sent an amended version of the Contract, showing Astra Capital as “Manager” in place of Octave Ltd, and Astra LLP as “Investment Manager” in place of Octave LLP. He explained that the amendment was “to facilitate the investment manager migration. There are no substantive changes ... and you will note that this is effectively a name changing exercise with [Astra Capital] acting as Manager and [Astra LLP] as investment manager”. He asked Ms Galligan to confirm that she was satisfied with the amended agreement, and he would arrange execution at his end “to complete matters”. 163. The amended agreement was in all respects the same as the Octave Contract, save that it altered the names as Mr Murray had explained, and it also altered the “Effective Date” from 21 November 2012 to 20 February 2015. In response to Ms Galligan’s email of 20 February 2015 acknowledging receipt and saying she would get back next week, Mr Murray reassured her that the draft contained “no substantive amendments”. 164. Ms Galligan did not revert. By an email of 27 April 2015, Mr Murray for Astra LLP asked Ms Galligan to return an executed version of the agreement, this time referring to a draft dated 4 March 2015, with this date, rather than 20 February 2015, made the “Effective Date”. Mr Murray then chased Ms Galligan for a response on 1 May 2015. She replied on the same day that she was waiting to hear from Musst’s directors and asked Mr Murray to send her a copy signed by Astra, which Mr Murray did, again on the same day (sending the 4 March 2015 version). 165. When Musst’s directors looked at the replacement contract, they were concerned, it seems, that by changing the “Effective Date” to 4 March 2015, the contract would exclude liability on the part of Astra to continue to make payments for the two introductions which had so been effected to 2B and Crown, because they had been introduced well before 4 March 2015. Accordingly, on 6 May 2015, Ms Galligan telephoned Mr Murray and explained this to him. 166. The call was taped, and there is a transcript, in which Mr Murray reassured her that this was not the intention, and that rather, the intention was to “novate the relationship but erm existing contractual entitlements with Octave up until the effective date remain in place”. At the end of the conversation, Mr Murray promised to send a letter of termination which confirmed that the existing contractual relations in the Octave Contract remained valid up to the termination date, and all the other provisions that were intended to survive termination would do so. 167. The matter then went quiet for almost a year, although Astra LLP now managed both the 2B and the Crown Contracts, and paid Musst’s invoices in relation to them. However, on 11 April 2016, Mr Murray, again writing on Astra LLP’s behalf, returned to the subject, noting that he had been going through “our agreements”, but he had not yet received a copy of the fully executed replacement agreement. He asked Ms Galligan to send one back “to tidy up our records”. 168. In response, Ms Galligan appears to have sent through the original Octave Contract. In reply, Mr Murray by email of 12 April 2016 asked again for execution of the replacement agreement. By return, Ms Galligan replied that Musst had not signed this agreement, and (apparently overlooking their conversation the previous year) asked what was the reason for the amendment. Mr Murray replied the same day that the amendment was necessary, as “[Octave LLP] is no longer the manager, [Astra LLP] is, none of the terms have changed this is a change of name exercise and I am trying to ensure our files our [sic] fully tied up”. Mr Murray chased for the executed replacement again a week later, on 19 April 2016. Ms Galligan replied on 20 April 2016 that she had sent it to Musst’s directors and lawyer. (e) The transfer to Astra UK 169. However, on 20 April 2016, at 14.24, Mr Murray sent Ms Galligan another email, still on behalf of Astra LLP, withdrawing the draft replacement agreement. He explained that, in the light of tax advice, Astra UK were going to be taking over, in that week, the regulatory permissions and authorisations previously held by Astra LLP. He said that:

“The management and Risk Committee of [Astra LLP] and [Astra UK] will remain identical.”

In consequence, “contracts will be novated to [Astra UK]. [Astra LLP] and [Astra Capital] expressly withdraws [sic] the Introduction Agreement dated 4 March 2015 .... which has not been executed by Musst”. 170. Accordingly, although Astra LLP paid two more invoices from Musst, by payments made on 26 April 2016 and 4 May 2016, Mr Holdom started writing on behalf of Astra UK on 10 May 2016. From this point onwards, his emails were written on behalf of Astra UK, as appears from their footers, although his actual email address remained the same. 171. Thus, by email of 10 May 2016 on Astra UK’s behalf, he sent to Musst a copy of Astra UK’s invoice to 2B for the management fees due to it in relation to April 2016 (totalling US$75,692.82). In response, Ms Agatha Imiolek on 13 May 2016 sent to Mr Holdom at Astra UK Musst’s invoice for its share of these fees (i.e. US$15,138.56), which invoice, Musst says inadvertently was made to Astra LLP rather than Astra UK. By email of 16 May 2016, Mr Holdom replied that this had now been paid. It is understood that it was Astra UK which paid this fee (everything had been transferred over to it). The payment was not received until 25 May 2016, but nothing appears to turn on this. 172. Mr Holdom’s email of 16 May 2016 also said:

“Going forward can you please address invoices to [Astra UK]”

. By this stage, Astra UK had entered into revised agreements with 2B and Crown to replace those with Astra LLP, again on the same terms, on 21 March 2016 and 30 March 2016. It had also entered into a revised agreement with Crown in relation to the “Crown II” account on 30 March 2016 mentioned above, and which it told Musst on 30 April 2015 was following a different strategy. The entirety of Astra LLP’s business was transferred to Astra UK on 29 April 2016. 173. The next email on the subject was sent by Ms Imiolek for Musst on 16 June 2016, to Mr Holdom, asking “Have you received May invoice for 2B LLC? If not when do you anticipate invoicing them?” In other words, when did Mr Holdom anticipate invoicing 2B for May 2016, so Musst could then send on its own invoice for its share of the fees? Mr Holdom replied on the same day that he understood discussions were taking place between Mr Siddiqi, Ms Galligan and Mr Mathur on the subject.” “Hi Agatha, My apologies, I sent you the Crown AAM 2 invoice in error. The Crown 2 account was set up for a new strategy (primarily CLO and CRE) and therefore is not covered by the Introduction Agreement “as it does not substantially replicate the investment securities and risk profile of ASSCF”. I will settle the [other invoice] once the client has made their payment.” between Mr Siddiqi, Ms Galligan and Mr Mathur on the subject.”

[287]Whilst these discussions were taking place, on 28 July 2016 Musst sent Astra UK three estimated invoices (one relating to Crown I for the April to June 2016 quarter and two in relation to 2B for May and June 2016). I return to this email below in considering the allegations of breach of contract. The Judge dismissed an allegation made by Astra that the payments were made pursuant to a voluntary arrangement entered into between Musst and Octave in November 2012, known in the First Claim as the November Arrangement: see [186] to [211]. In the course of his discussion of that issue he referred to a number of emails including the email which Mr Holdom sent to Ms Imiolek on 30 April 2015. He stated as follows at [205]:

“Second, open communications in 2015 suggest strongly that the parties treated the payments in respect of 2B and Crown as legal obligations rather than a voluntary arrangement. There were emails of 30 April 2015 which were consistent with the moneys paid in respect of 2B and Crown being paid under the written agreement. Mr Holdom had first said (11.51am) that the “2B invoice is not yet available. LGT have not yet settled their invoice”

. Later (17.00) he said that a Crown 2 invoice had been sent in error:

“The Crown 2 account was set up for a new strategy (primarily CLO and CRE) and therefore is not covered by the Introduction Agreement “as it does not substantially replicate the investment securities and risk profile of ASSCF”

. I will settle the [other] invoice once the client has made their payment.” This judgment will revert later to the question whether Crown 2 was a new strategy such that Musst was not entitled to payment in respect of the same. The important point here is that the “error” of sending the Crown 2 invoice was an acknowledgment that payment in respect of the Crown Contract was covered by the written agreement (referred to as the Introduction Agreement) and not under the November Arrangement. On the same premise of operating under the written agreement, at 17.45, Mr Holdom wrote saying:

“Hi Agatha [Agatha Imiolek of Musst], I did not complete my explanation earlier. I should have asked you to reissue the first invoice using the capped annual fee of $650,000 as you did last quarter”” “Hi Agatha [Agatha Imiolek of Musst], I did not complete my explanation earlier. I should have asked you to reissue the first invoice using the capped annual fee of $650,000 as you did last quarter””

[288]The legal issue which the Judge was addressing in this part of the First Judgment was whether certain without prejudice discussions were admissible: see [212] to [233]. The second issue which he addressed was whether Musst introduced 2B and Crown and on this issue he found in Musst’s favour in relation to both investors: see [234] to [303]. He also held in the alternative that there was an estoppel by convention and that, if necessary, Musst was entitled to rectification of the Octave Contract: see [304] to [320]. The third issue for the Judge was novation. He set out the law at [324] to [332] and summarised Musst’s submissions on the first novation at [333] to [345]. That summary included the following paragraphs (and Astra placed particular reliance upon [337] and [342]):

“336. Musst points to the conduct referred above comprising: (1) Before Astra LLP took over the management of the 2B and Crown Contracts, Astra LLP had agreed with Octave LLP that it should do so. (Mr Mathur at T7/78/15-79/7) (2) It was agreed between Octave LLP, Octave Ltd and Astra LLP that Octave LLP and Octave Ltd would play no further part in the management. (Mr Mathur at T7/67/11-18, T7/74/21-75/1, and Mr Murray at T10/56/6-57/2). Mr Murray did not believe there would be any issues in relation to the transfer of the managed accounts from Octave LLP to Astra LLP, and he did not think about this. (T10/63/21 to 64/19). (3) Astra LLP took over the management of the 2B Contract on 1 September 2014, something which it was not entitled to do without Musst’s consent unless it offered to enter into an identical agreement with Musst as per clause 9.4 quoted above; (4) After doing so, Mr Holdom, in his email of 5 November 2014, informed Musst of the transfer, and asked Musst to split its own fees in relation to the 2B Contract, and to invoice Octave for the period before 1 September 2014, and Astra LLP for the period afterwards. Mr Holdom was authorised to write this email not only on behalf of Octave LLP, but also on behalf of Astra LLP, of which he was (as he accepted) then a partner and employee (Mr Holdom at T11/22/4-23/4) 337. Musst submits that in context this was an offer to Musst by both Octave and Astra LLP through Mr Holdom to have Octave’s rights and liabilities under the Octave Contract in relation to the Crown Contract transferred to Astra LLP. This is said to be a natural construction of the email in the context of the transfer of the funds to Astra LLP, and therefore the right to the fees to Astra LLP in respect of which Musst was entitled to a 20% share. Although Mr Holdom wrote as “Partner, Octave Investment Management LLP”, he must have had Astra LLP’s authority to write this email on its behalf as well, albeit that Astra deny that he had authority to novate the Octave Contract. That is not the point: the question is, did he have authority (or ostensible authority) to make the communication which he did, to which the answer is plainly ‘yes’. If, in context, that amounted to an offer by Octave and Astra LLP, that is the end of the matter.” “342. Accordingly, Musst’s case is that the effect of these communications was to novate the Octave Contract in relation to the Crown and 2B Contracts to Astra LLP, with Octave dropping out of the picture; alternatively, Astra LLP in any event agreed to take on Octave’s liabilities in relation to the Crown and 2B Contracts, whatever the position with Octave was. Further, the parties then proceeded for the next year or so on the footing that the Octave Contract had been novated to Astra LLP (or at least Astra LLP had taken on Octave’s liabilities) in relation to both the 2B Contract and the Crown Contract, because from now Astra LLP, with Musst’s consent, was managing Crown’s and 2B’s funds pursuant to those contracts, receiving the fees there from, and paying over to Musst its 20% share.”

[289]The Judge summarised Musst’s submissions on the second novation at [345] to [351] and Astra’s arguments at [352] to [368]. The Judge discussed the issues and set out his conclusions at [369] to [401]. The Judge set out what he considered to be the critical context for his findings at [372] to [375]:"372. The context was as follows. The business of Mr Mathur formerly conducted through the vehicle of Octave with the advantage of its regulatory registration would from August 2014 be conducted by Astra LLP. This was the context of the termination of the Crown Contract and a new contract between Crown and Astra LLP. Likewise, there was a termination of the 2B Contract and a new contract between 2B and Astra LLP. All fees payable to Octave Ltd would transfer, subject to the agreement of contracting parties, to Astra Capital. Likewise the fees earned by Octave would henceforth be charged by Musst to Astra LLP instead of to Octave LLP. The summary of facts above sets this out in more detail.

373. In this context, the request on the part of Astra LLP to Musst to be invoiced the money instead of Octave was not administrative but substantive. Astra LLP was not acting as agent for Octave in and about the receipt of the moneys. It was acting for itself as a consequence of the transfer of business from Octave to Astra LLP. There are no documents showing that the moneys received by Astra LLP were accounted for between Astra LLP and Octave which would have happened if they had been received by Astra LLP as agent on behalf of Octave. With this transfer from Octave to Astra LLP and then to Astra UK went a transfer of the relevant income stream. The request to Musst to send its invoice to Astra LLP instead of to Octave LLP reflected an intention that the company receiving the income stream (Astra LLP and then Astra UK) should pay the agreed percentage of the moneys to Musst. This was the corollary of the transfer from Octave to Astra LLP and then to Astra UK.

374. Musst ought to have been asked to consent to the transfer in advance of its being effected: see Clause 9.4 of the Octave Contract as set out above. It was not asked. By the time that Musst was asked to send the invoices to Astra LLP instead of to Octave, the matter was a fait accompli. Astra say among other things that if anything this would have given rise to a right to damages for a failure to seek consent in advance. On that analysis, the claim would have been to damages against Octave, but it did not give rise to a contractual claim against Astra LLP and subsequently Astra UK. The fallacy of this argument is that subsequent to the transfer and in the light of the same, the invoicing chain was altered by agreement so that the customer (Crown/2B) paid to Astra LLP instead of to Octave and Musst was asked to send its invoices from a point of time to Astra LLP instead of to Octave in effect to follow the money.

375. It is this context which provides the answers to the arguments of Astra. The fact that there was no express agreement of novation does not preclude an agreement by conduct. The fact that the possibility of an express agreement was canvassed but not finalised does not show that no agreement was made. In my judgment, the draft agreement was intended not to create a new agreement but to reflect and formalise an agreement which had already been made. The stumbling block to the finalisation of that agreement was a concern about the Effective Date. In the light of the issue between the parties about the significance of the Effective Date in the Octave Contract, this may have been an issue of substance. It was important at least from the perspective of Musst that this provision should not have as its effect that only introductions made after the new Effective Date should be caught by the new written agreement.”

[290]The Judge accepted that the first novation was not a “wholesale novation” because it did not go back to the inception of the Octave Contract but took effect when Astra LLP took over Octave’s rights and liabilities or took on those rights and liabilities in addition to Octave. He also considered that it sufficed if either analysis was correct: see [377]. He then addressed the argument that there was no binding contract because the parties contemplated that they would execute a formal written agreement and set out his findings at [384] and [385]:

“384. It is a question of fact in each case. In my judgment, the defining points here include the following, namely: (i) the terms of the contract had been agreed through the Octave Contract; (ii) Octave had dropped out and, in effect, Astra had stepped in: it was more than a name change because it was not the same company, but the company change was with Mr Mathur who used the relevant companies as his vehicle from time to time; (iii) by acceding to the request for the invoices to be addressed to Astra LLP and by Astra LLP paying, the contract was performed through the changed companies; (iv) there were no significant terms to negotiate, and the lack of understanding about what was the date when Octave’s involvement and obligation ceased and Astra’s started was of no importance, especially following and as a result of performance. 385. In this case, in my judgment, as soon as Octave stepped out of the picture, and Musst agreed to this by addressing invoices to Astra LLP and Astra UK respectively at the request of Astra, there was a relationship at least between Musst and Astra LLP (it is immaterial for the purpose of the instant claim if this was in addition to or instead of Octave). Mr Holdom and Mr Murray were right to refer to a change of name exercise. The agreement being required to tidy up records reflects the fact that the written agreement was a record of what had been agreed rather than the making of a new agreement.”

The Judge then rejected a number of arguments which Astra had advanced:

[291]see [387] to [393]. In particular, he rejected the argument that Mr Holdom did not have authority to bind Astra LLP. He also made a finding of fact that Mr Mathur knew and authorised the transfer of rights and liabilities from Octave to Astra and he held that there was consideration for the novation:

“389. In the case of Mr Holdom, I accept the submissions that he must have had the authority to write the emails which he did. It is to be noted that he worked for Octave LLP and then he transferred his work to Astra LLP. He was a minor shareholder in Octave Ltd and through that company in Octave LLP. He was also a minor shareholder in Astra LLP. Although one of the emails was signed off in an Octave LLP capacity, it was apparent that he was acting by then for Astra either in addition to, or instead of, Octave. Mr Murray’s work as legal adviser was clearly for Astra, and he must have had actual, or at least apparent, authority to represent Astra LLP and Astra UK in his communications. 390. At times in his evidence, Mr Mathur suggested that he was not particularly hands on since he was exceptionally busy working every day for 18 hours a day. I accept that Mr Mathur was very busy, but in my judgment, he was more hands on than he acknowledged. I find that he knew, authorised and intended the transfer from Octave to Astra which was fundamental to his business strategy of being able to control the business without having to use Octave which he did not control. He must also have been involved in the engagement of Mr Holdom and Mr Murray, and he relied upon them to effect the transfer from Octave to Astra. The emails relied upon by Musst and the offer and acceptance identified by Musst were part and parcel of this transfer. It follows that the suggestions of lack of authority are rejected, as is the attempt to relegate the importance of the communications to mere administrative acts in connection with specific payments. 391. As regards the question of consideration for the liabilities of Astra LLP and Astra UK, the payments that were made were not in a vacuum. The payments and the obligations were made in order to discharge the liabilities of Octave under the Octave Contract. They were also part of the price for Astra acquiring the income stream from specifically Crown and 2B from Octave that these liabilities would be discharged. Further, from the perspective of Musst, the moneys were received in consideration of Musst treating the obligations of Octave to it as discharged to the extent of the moneys received. Going forward, Musst either accepted the liability of Astra LLP and Astra UK as being in discharge of the liability of Octave or as being additional to Octave with the promise that Musst would accept payments pursuant to the same in discharge of any ongoing liability of Octave to the extent of the moneys received.”

[292]The Judge then stated that he accepted Musst’s argument in relation to the second novation. Indeed, he stated that it would not have made any difference if the first novation had not taken place. Finally, he accepted that:

“394. As regards the novation to Astra UK, I accept the submissions of Musst. In particular, when asked to charge Astra UK instead of Astra LLP, there was no objection from Musst. There was an administrative error to send the bill to Astra LLP, but in context that was a clear mistake and understood as such. Had it not been, the invoice would have been accompanied by protest, but there was none. Further, the subsequent payment would not have been made at all until this point had been sorted. Since there was nothing to sort, the payment was made by Astra UK, and it was accepted by Musst. Thereafter, albeit at a time when no information about receipts was provided, in July 2016, invoices were made out by Musst to Astra UK, confirming that it had no objection to the transfer from Astra LLP to Astra UK. This acceptance of the transfer to Astra UK is to be seen in the context of the earlier transfer from Octave to Astra LLP. It was a matter of no significance in that the infrastructure of the business was moving over as was the income stream. There was no reason to object: it would have been objectionable had it been the case that the business was moved to Astra UK, Astra LLP had given up the income stream and Astra UK was not taking over its position vis-à-vis Musst. That was not the case: this was a second novation. 395. If the first way of putting the case had not occurred, then the combination of those matters and the subsequent invoices would have sufficed. The allegation of a withdrawal of any offer of novation is rejected. I accept Musst’s submission relating to the timing of the invoices, and despite concern that Astra might not honour its obligations, this did not bring to an end the ability of Musst to commit to accept the offer of novation and that all further invoices would be to Astra UK. There was no termination either of the offer or of the novated Octave Contract. 396. Finally, I reject the final argument of Astra referred to above that the novated contract is not subject to the equitable claims that bite upon the original discharged contract and in particular that Musst’s rectification and estoppel arguments concerning the inclusion of introductions to 2B and Crown are correct, and they would not carry forward into any novated contract.”

[293]The Judge also held that Astra was bound by an estoppel by convention from denying that in relation to the Crown and 2B Contracts the Octave Contract had been novated from Octave to Astra from 5 November 2014 and from Astra LLP to Astra UK from April or May 2016. He made the relevant findings at [398] and [399] and expressed his legal conclusions in relation to the first novation at [400] and in relation to the second novation to Astra UK at [401]:

“398. Nonetheless, for the purpose of completeness, if there were no novations, I find that there were estoppels by convention. Musst and Astra LLP and Octave or Musst and Astra LLP acted on the common assumption that, in relation to the Crown and 2B Contracts and the fees receivable thereunder, the Octave Contract had been novated from Octave to Astra LLP from 5 November 2014. The common assumption was manifested by Astra LLP asking Musst to make out invoices to Astra LLP in place of Octave and by Astra LLP providing information to enable this to take place. It was manifested by the email of 30 April 2015 from Mr Holdom referred to above to the effect that payments would continue to be made under the Crown Contract, but not under the Crown 2 account. It was also manifested by Musst making out invoices to Astra LLP in place of Octave and accepting payments made by Astra LLP in place of Octave. The common assumption thereby crossed the line from which its being shared can be properly inferred. Astra LLP conveyed to Musst that it expected Musst to rely on it. 399. From this point onwards, without challenge from the Claimant, Astra LLP continued to control and to manage the 2B and Crown Contracts in place of Octave. Both Musst and Astra LLP continued to operate on the basis of the Octave Contract. Musst acted in reliance upon the same by making out invoices and accepting the payments made by Astra LLP. Further, Musst did not chase Octave for payment or complain about Octave’s breach of clause 9.4 of the Octave Contract or about Astra LLP procuring such breach by agreeing to receive the transferred assets. In this context, the draft written novation agreement was or was understood to be simply an attempt to formalise that which had already been agreed by conduct. 400. It would be unconscionable for Astra LLP to deny that the agreement contained in correspondence and/or by conduct was a novation of the Octave Contract in relation to the Crown Contract and the 2B Contract and the fees receivable thereunder (or at least, that by that agreement it took on Octave’s liabilities thereunder in relation to Crown) and so it is estopped from denying such novation or assumption of liabilities. It would be unconscionable because Astra LLP enjoyed the benefit of the transfer agreements from Octave (including the income stream that went with it) and Musst changed its position by its above-mentioned reliance upon the common assumption. 401. The same applies also to the transfer from Astra LLP to Astra UK. Against the background of the transfer to Astra LLP, this was more of the same. Musst, Astra LLP and Astra UK acted on the common assumption that, in relation to the Crown Contract and the fees receivable thereunder, the Octave Contract had been novated from Astra LLP to Astra UK from April/May 2016. The common assumption was manifested by Astra UK asking Musst to make out invoices to Astra UK in place of Astra LLP. When asked to charge Astra UK instead of Astra LLP, there was no objection from Musst. Musst made out an invoice in May 2016 (albeit in obvious error to Astra LLP), and payment was duly made by Astra UK and accepted by Musst. Astra UK reminded Musst that the payee should be Astra UK and there was no protest. Thereafter, in July 2016, albeit when no further information about revenue was being provided by Astra UK, further invoices were made by Musst to Astra UK, which was further confirmation that there was no objection to the latest transfer. The sharing of the common assumption takes its character in the context of the transfer from Octave to Astra LLP: this was a further transfer this time from Astra LLP to Astra UK which was also accepted by conduct. Musst acted in reliance upon this common assumption by sending invoices without protest and accepting the money from Astra UK and not insisting on its rights against Astra LLP. It would be unconscionable for Astra UK to resile from the common assumption having taken the benefit of the income stream on the latest transfer and in view of the reliance by Musst.”

[294]The Judge held that Musst was entitled to an order compelling Astra UK to provide a Statement or Statements pursuant to clause 4.1 of the Octave Contract in relation to the Crown I and 2B managed accounts but he did not at that stage make an order for payment: see [661] to [666]. He held that this relief did not extend to Crown II and Crown III and he reverted to the issue which he had raised in [205] (above) in the following passage at [667] to [673]:

“667. This does not apply to other Crown Contracts which have been operated, namely Crown II and Crown III. They were set up for different portfolios in Crown. On 30 April 2015, Astra LLP told Musst that what was called Crown II had been set up for a new strategy, “and therefore it is not covered by the existing Introduction Agreement [the Octave Contract]”

. The management of this account was subsequently transferred to Astra UK at the time of the transfer of Astra LLP’s business to it. On 5 December 2019, Payne Hicks Beach reiterated that the Crown II account followed a different strategy. 668. On disclosure in relation to the Defamation Claim, Astra, on 18 September 2020, disclosed for the first time an internal email (from Mr Adler (of Astra) to Crown) dated 3 February 2016 in which he said, talking of the Crown I and the Crown II accounts and two other entities:

“As you know, all our credit vehicles have pursued a very similar if not identical strategy so far; forward ASCIL (another entity) will invest in slightly more liquid credit assets to reflect its changed liquidity profile.” 669. Musst say that it was agreed between the parties that any questions in relation to non-payment in relation to Crown II could not be conveniently dealt with in these proceedings (i.e. because of the need for disclosure and expert evidence) but would have to be dealt with in subsequent proceedings, if need be. It is not apparent whether that means in this action or in another action. There was not an express plea as regards non-payment in relation to Crown II and Crown III. An application to amend this action so as to include reference to Crown II and Crown III was withdrawn by consent. There was a holding claim form issued on 29 April 2021 in which Musst sought to claim for the fees in respect of Crown II and Crown III. 670. In the meantime, Musst submits that an order should be made in these proceedings allowing Musst to inspect the books and records in relation to Crown II and/or Crown III if it otherwise proves its case on liability, without having first to show that Crown II and Crown III consisted of “Eligible Investments”

. It relies on para. 105(1) and 105(2) of RAMPOC seeking production of statements “in relation to all payments made to it … since May 2016 by 2B, Crown and any other entity introduced by the Claimant ….” and see also paras. 105(3) and 105(4) and 113 (which claims the same relief against Astra LLP if there was no novation to Astra UK). This is said to arise also out of the wide requirements of clause 13, which provides an obligation to keep books and records, and to allow inspection, in relation to “its activities relating to this Agreement, including but not limited to recording any Eligible Investments”. It also relies on the last words of clause 3.1 referring to “additional investments made for the Current Strategy (emphasis added) directly or indirectly by an Investor into a Fund whether before or after the Cut-off Date are also Eligible Investments.” It submits that there is an argument that the investments in Crown II and Crown III are additional investments, and that is therefore sufficient to open the door to disclosure relating to Crown II and Crown III. 671. Since this part of the judgment had been prepared in draft, the Court has been provided with the evidence in support of an application to strike out the 2021 action claiming management and performance fees in respect of Crown II and Crown III. It comprised a 40-page witness statement of Lucas Julian Moore dated 29 September 2021. This was forwarded to the Court on 13 October 2021 by solicitors for Musst with relatively short letters summarising its position. It is not necessary or reasonably possible at this stage to consider that in any detail. One feature of the witness statement is that Astra disagree with the submission of Musst that there was agreement that a claim in respect of Crown II and Crown III might be made in a second action. The submission is that Musst could and should have brought any claim relating to Crown II and Crown III, if at all, in this action. It is submitted by Astra that a fuller analysis of the documents between the parties shows that Musst was not misled as to the strategy adopted in respect of Crown II and Crown III, and there is nothing in the suggestion that there was a recent discovery that the position was not as previously represented. It is also submitted on behalf of Astra that the claim in respect of Crown II and Crown III ought to be struck out on a whole variety of grounds, including abuse of process and no reasonable prospect of success. Astra also say, in any event, that the reference to “other entity” in RAMPOC is not sufficient to open the door to a disclosure in respect of Crown II and Crown III if the claims in respect of those entities are not being dealt with in this action. 672. This recent development has the effect that it is premature at this stage for the Court to make findings as to whether there ought to be disclosure in this action about Crown II and Crown III. The different understandings of the parties regarding the consequences of the abandonment of the amendment application in respect of Crown II and Crown III require further consideration. Musst may wish to consider which way to turn in respect of any claim in respect of Crown II and Crown III, and in that context, Astra will wish to submit that whichever way Musst turns, it will be to no avail. 673. In these circumstances, this judgment will not, at this stage, make any determination relating to how any claim in respect of Crown II and Crown III will be dealt with or about how disclosure might take part in respect of the same. It is premature in the face of the matters considered above, not least the voluminous evidence in support of the strike out application, for this Court to make any determination at this stage. Further consideration of these matters will be a part of the consequential matters to be considered." (2). The CA Judgment

[295]The Court of Appeal held that the Judge was entitled to reach the conclusions which he did on the novation issue and that he applied the correct legal principles: see [69]. The court also held that he was entitled to conclude that there was an estoppel by convention in the alternative: see [88]. Falk LJ’s reasoning at [89] is relevant because she referred to Mr Holdom’s email dated 30 April 2015: “In the case of Astra LLP this was supported by the correspondence and invoicing in its factual context, and the payments made by Astra LLP and accepted by Musst. It was also reinforced by the way in which Mr Holdom dealt with the mistake over the Crown AAM 2 fund referred to at [15] above, by referring to the express terms of the Octave Contract and distinguishing that other fund as not being within its scope. The judge had correctly found at [205] (in the context of a discussion of the November Arrangement) that this evidenced the parties treating the payments that Astra LLP was making in respect of Crown as being paid under the terms of the written agreement. Musst’s reliance (and detriment) included not pursuing any breach of clause 9.4, whether against Octave or indeed Astra LLP for inducing the breach of a term of which, through Mr Mathur, it must be taken to have been aware.” (3). The Strike Out Judgment

[296]Only two weeks later, on 28 February 2023 the Judge handed down the Strike Out Judgment in which he determined Astra’s application to strike out the Second Claim and its application for reverse summary judgment. The Judge set out the background to the applications (quoting the Trial Judgment, [667] to [673] above) and the relevant law at [1] to [34]. In relation to issue estoppel he cited the speech of Lord Sumption in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd

[2013] UKSC 46

[2014] AC 160

at [17] to [26]. He held that the determination of the First Claim did not bar the Second Claim for detailed reasons which he set out at [61] and [62]. He also rejected an argument that the Second Claim was inconsistent with the findings of novation which he had found in the First Judgment (above). He stated as follows at [63]:

“The novation point of Astra does not invalidate the above analysis. There is no necessary inconsistency between the novation as found in the trial, and the way that the novation may be expressed in respect of Crown II and Crown III. It is possible to allege a limited novation in order to capture the share of the Crown I investment. A wider novation can be expressed in respect of the Crown II and Crown III investments provided that it does not contradict the novation established in respect of Crown I, as has been done in the Particulars of Claim in the Second Action especially at paras.14, 19, It will be for Musst to prove any novation. Astra will still be able to challenge the existence of the alleged novation in the Crown II/ Crown III claim whether on the basis that it is not established on the evidence or that it contradicted the basis on which there was found to be a novation in the First Action. These are matters to be considered in a second action and are not a reason for striking out the Second Action. On the information available at present, there is no reason to believe that the novation in respect of Crown II and Crown III is in contradiction of the novation in respect of Crown I. If it is the case, as I hold that the case can be brought against Crown II and Crown III for the first time in the later action, so it is the case that there is scope for alleging a novation in different and non-contradictory terms from the novation in respect of Crown I.”

[297]The Judge also rejected an argument that there was an issue estoppel which prevented Musst from bringing the Second Claim because it could and should have raised the claims for a Revenue Share in relation to Crown II and Crown III in the First Claim. He stated as follows at [69]:

“Astra's submissions are at the same time that any claim in respect of commissions relating to Crown II and Crown III was precluded because the prayer for relief extended to Crown II and Crown III (through disclosure) but not for commissions. It was now therefore too late. In the light of the matters set out above, the points now raised are not points which could and should have been raised by Musst at the trial of the first proceedings on 29 April 2021. The disclosure in respect of other accounts was not provided at that stage. The Adler email was produced too late for it to be practicable for a claim in respect of Crown II and Crown III to be dealt with in the trial. In any event, it was expressly agreed between the parties in October 2020 that any claim by Musst in relation to Crown II and Crown III would have to be deferred until after the trial. As noted above, these features are to be taken into account in respect of issue estoppel, and particularly by reference to the quotation of Lord Keith in Arnold v National Westminster Bank above cited by Lord Sumption in the Virgin Atlantic case.”

[298]The Judge dealt with Astra’s reverse summary judgment application at [79] to [98]. He did not accept the arguments which Astra advanced but held that a trial would require the Court to consider whether the novation which he had found was too limited to be capable of extending to Crown II and Crown III. He stated as follows at [80], [81] and [93]: “80. As for novation, Astra submits that bearing in mind the limited nature of the novation as found in the first judgment, there is no reasonable basis for reformulating the novation as regards Crown II and Crown III. The correspondence, invoices and payments on which the novation was based in the Original Claim do not mention Crown II or Crown III. The documents pre-date the existence of Crown III. The novation was entirely by reference to Crown I. 81. There was a reference by Mr Holdom to Crown II in correspondence of 4 February 2015 in respect of one relatively small payment, but this was contradicted on 30 April 2015, when it was explained orally and in writing that there had been a mistake, which Mr Holdom maintained in cross-examination.” “93. As regards the point about the novation, a trial will require anxious consideration as to whether the novation was too limited such as not to be capable of applying or extending to the position as regards Crown II, and especially Crown III which was not in existence at the time of the novation which has been found. There is at lowest a real prospect that Musst will be able at trial to establish the novation as pleaded by the process of construction and/or implication, and that it will not be an answer to the matters pleaded that there was limited express reference to Crown II and none to Crown III, given all or parts of the matters giving rise to the construction and/or implication and/or estoppel by convention.” (4).

(i) Novation

[299]The critical issue for this Court is to determine the scope of the findings which the Judge made in relation to the two novation issues in the Trial Judgment. If he decided that the Octave Contract was novated first to Astra LLP and then to Astra UK so that Astra UK assumed all of the obligations of Octave under clause 3.1 of the Octave Contract, then it follows that Astra UK is liable to pay Musst the management and performance fees due in relation to Crown II and Crown III under that clause. If, however, he decided that Astra LLP and then Astra UK only assumed the obligation to pay Musst in relation to Crown I and 2B, then Astra UK is not liable for those fees (whenever the Octave Contract was novated).

[300]In my judgment, the Judge decided in the Trial Judgment that on 14 November 2014 the Octave Contract was novated to Astra LLP and then in July 2016 to Astra UK and that each assumed all of the obligations of Octave under the Octave Contract with effect from that date. I have reached that conclusion for the following reasons:(1) The Judge recorded that on 5 November 2014 Mr Holdom invited Musst to split its invoices and to invoice Astra LLP with effect from 1 September 2014, that Musst issued two invoices as requested which Octave and that Astra then paid them. He also recorded that Musst continued to submit invoices to Astra LLP and that it paid them until 4 May 2016: see [155] and [156]. Although the Judge did not record this fact, there was no dispute that Musst issued the first two invoices on the same day, namely, 5 November 2014.

(2) The Judge held that this was not an administrative change but a substantive one: see [372]. He also held that the wider context (and, in particular, Octave’s own failure to comply with its contractual obligations) did not a prevent a novation arising by conduct: see [372] to [376]. He held that it was not a “wholesale” novation but not because it was limited exclusively to Crown I and 2B but because Astra LLP did not step into Octave’s shoes and assume those obligations and liabilities which had arisen before 1 September 2014: see [377]. If he had considered that the novation was limited to Crown I and 2B he would surely have said so.

(3) The Judge stated at two places that the draft agreement sent by Mr Thomas to Ms Galligan on 19 February 2015 was intended not to create a new agreement but to reflect and formalise an agreement which had already been made: see [375] and [385]. Indeed, I consider that the critical finding of fact which the Judge made is to be found in the second of those paragraphs. He stated that in his judgment a relationship arose when Musst agreed to address its invoices to Astra LLP and then to Astra UK and repeated that the written agreement was a record of what had been agreed. The Judge did not specify a date in [384] but it is clear that he considered the date of the first novation to be 5 November 2014 and the second novation to be July 2016: see [394] and [398].

(4) The issue can be tested very simply. The Judge held that the draft agreement which Mr Thomas sent to Ms Galligan recorded the agreement which had already been reached between Musst and Astra LLP. In that draft, Astra Capital and Astra LLP were defined as “Astra” and it also contained both the Current Strategy definition and the Funds definition. Mr Thomas had then inserted “Astra” in substitution for “Octave” throughout the draft. For example, clause 3.1 provided as follows: “The Introducer shall be entitled to share in all management and performance fees (howsoever described) earned and received by Astra (or any of Astra's affiliates, provided that there shall be no double counting of revenues earned by one affiliate and paid on to another affiliate by whatever means) in respect of each Prospective Investor who makes (directly or indirectly) an investment in a Fund managed or advised by Astra (an Investor) for the Current Strategy on or before the Cut-off Date, each such investment being an Eligible Investment. For the avoidance of doubt, additional investments made for the Current Strategy directly or indirectly by an Investor into a Fund whether before or after the Cut-off Date are also Eligible Investments.”

(5) In my judgment, the Judge clearly found that on 5 November 2014 Astra LLP assumed Octave’s obligations to Musst under the Octave Contract (including the obligations in clauses 3, 4, 6, 11 and 17) and that from July 2016 Astra UK assumed those obligations in place of Astra LLP. He also held that Mr Holdom had actual authority to enter into a binding agreement and that he was acting with the knowledge and approval of Mr Mathur: see [389] and [390]. Finally, he held that there was consideration for each novation: see [391].

[301]It follows that I reject Astra’s argument that the Judge found that the novation of the Octave Contract related only to the Crown Contract or to the Crown and 2B Contracts only. He made no finding to that effect and I attribute no weight to the Judge’s summary of Musst’s submissions at [337] and [344]. Astra did not take me to any extracts from Musst’s written or oral submissions at the First Trial and those two paragraphs did not form an essential part of the Judge’s reasoning and a limitation to Crown I (or Crown I and 2B) did not feature in the Judge’s reasoning at all. Moreover, it is unsurprising that Musst limited its submissions to Crown I only because, as the Judge found, the parties had expressly agreed in October 2020 that any claim in relation to Crown II and Crown III would have to be deferred until after the trial: see the Strike Out Judgment, [69].

[302]I also attribute little weight to the reliance which the Judge placed on Mr Holdom’s email dated 30 April 2015 in the Trial Judgment, [205] or Falk LJ’s reliance on that email in the CA Judgment, [89]. I address both its relevance to the findings which the Judge made on estoppel by convention and also the claim for negligent misrepresentation below. Based on the findings which I have already made his statement that Crown II was not covered by the Octave Contract was incorrect and misleading. But in any event, both the Judge and Falk LJ were relying on that email for a different reason. The significance which they attached to it was that it provided clear evidence that Astra considered itself bound by the Octave Contract and this was the case whether or not the statement about Crown II was untrue.

[303]Furthermore, I reject Astra’s argument that the novation to Astra LLP and subsequently to Astra UK were limited to Crown I because Musst only ever submitted invoices in relation to Crown I and Astra only ever paid them. In particular, it ignores entirely the key finding which the Judge made at [375] and repeated at [385] that the draft agreement was intended to reflect and record a binding agreement which the parties had already made. It also ignores the general statement which Mr Holdom made in his email dated 5 November 2014 that there had been a change of Trading Advisor from Octave to Astra LLP with effect from 1 September 2014. This was the offer of a novation which Musst accepted by submitting the relevant invoices and the Judge fully captured the general context in which it was made at [372].

[304]Finally, I have carefully considered whether these conclusions are consistent with the Strike Out Judgment and, in particular, [63]. I am satisfied that they are. It is important not to lose sight of the fact that the Judge was deciding Astra’s applications to strike out the Second Claim and for reverse summary judgment and that Astra was arguing that Musst was bound by an issue estoppel (rather than the other way round). In dismissing those applications, he held that a trial of the Second Claim would “require anxious consideration as to whether the novation was too limited such as not to be capable of applying or extending to the position as regards Crown II, and especially Crown III”: see [93]. In my judgment, he left it open to the Court trying the Second Claim to decide whether the findings of novation which he had made applied to Crown II and Crown III. (ii) Estoppel by convention

[305]The Judge did not find that there was an estoppel by convention which extended to any Revenue Share payable under clause 3.1 of the Octave Contract: see the Trial Judgment, [398] to [401]. By contrast with his findings in relation to novation and, in particular, his finding of fact at [385], he expressed his conclusions solely by reference to Crown I and 2B. It is clear from his reasoning at [398] that he did so because he considered the common assumption between the parties to be “manifested” by Mr Holdom’s email dated 30 April 2015. It follows that no issue estoppel may arise in relation to the Judge’s findings of estoppel by convention for this reason alone.

[306]Nevertheless, I do not consider that the Judge’s findings on estoppel by convention prevent me from concluding that either novation of the Octave Contract extended to any Revenue Share payable under clause 3.1 either as a result of the Judge’s findings or as a result of a novation or estoppel by convention which arose earlier in February 2015. The Judge was not asked to decide (and did not decide) whether the email dated 30 April 2015 was inaccurate or misleading or whether it reflected the intention of the parties in February 2015. Moreover, if he had decided those questions he might have come to a different conclusion. Finally, as I have stated above, the Judge clearly left it open to this Court to decide the scope of the novation and did not express the view that I was bound in any way by his findings in relation to estoppel by convention: see the Strike Out Judgment, [69] and [93]. I, therefore, go on to consider those issues. K. Musst’s Primary Case: Issue Estoppel (1). The Law

[307]There was no detailed argument about the law before me. However, the parties included in the agreed authorities bundle the decision of the Supreme Court in Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners

[2020] UKSC 47

[2022] AC 1

(“FII”) and in their judgment, Lord Reed PSC and Lord Hodge DPSC set out the law relating to issue estoppel at [64] to [67]: “64. The second estoppel which we must consider is issue estoppel. This expression, which appears to have been coined by Higgins J in the Australian case of Hoystead v Federal Taxation Comr

(1921) 29 CLR 537

, 561 and adopted by Diplock LJ in Thoday v Thoday

[1964] P 181

, 197—198, concerns the principle which Lord Sumption JSC in Virgin Atlantic Airways Ltd, para 17 described as: “the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties.”65. In Thoday v Thoday

[1964] P 181

, 198, Diplock LJ observed that issue estoppel was an extension of the public policy underlying cause of action estoppel and described it in these terms: “There are many causes of action which can only be established by proving that two or more conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; andthere may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.”

66. In Fidelitas Shipping Co Ltd v V/O Exportchleb

[1966] 1 QB 630

, 642 Diplock LJ expressed the view that in an action in which certain questions of fact or law are tried and determined before others and an interlocutory judgment is given, the parties are bound by the determination of that issue in subsequent proceedings in the same action and their only remedy is to appeal the interlocutory judgment. He saw this as an example of issue estoppel.

67. In Arnold

[1991] 2AC 93

, 105 Lord Keith said that issue estoppel: “may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re-open that issue.” “There are many causes of action which can only be established by proving that two or more conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; andthere may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.” “may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re-open that issue.” (2). Musst’s Case

[308]Musst’s pleaded case in relation to the issue estoppel which was said to arise out of the Judge’s findings in relation to novation was pleaded in the Amended Particulars of Claim at paragraphs 5B(3) and (4):

“(3) By paragraphs 369 to 393 (and in particular 377, 379, 384 to 386, 388 to 393) Astra are estopped from denying that the Octave Contract was novated to Astra LLP in relation to Crown I (alternatively that Astra LLP took on the liabilities in relation thereto) in relation to the Crown I account on or about 5 November 2014; and, further, by paragraphs 398 to 400 they are estopped from denying such a novation or taking on by Astra LLP; (4) By paragraphs 394 to 396 Astra are estopped from denying that the Octave Contract was novated by Astra LLP to Astra UK in relation to the Crown I account (alternatively, Astra UK took on the liabilities in relation thereto) in May 2016; and, so far as material, by paragraph 401 they are estopped from denying such a novation or taking on by Astra UK.”

[309]Mr Spalton took me to these paragraphs in his oral closing submissions. He also took me to the Reply, paragraph 14(1) in which Musst repeated that any res judicata or issue estoppel applied only to matters which were decided in the First Claim. Finally, he took me to paragraph 14(4) in which Musst pleaded that it was entitled to plead and prove that the novations extended to Crown II and Crown III for the reasons given in the Amended Particulars of Claim. (3). Is Astra bound by the Judge’s findings?

[310]It was common ground that there was no issue estoppel which bound Astra LLP or Astra UK to pay the Revenue Share in respect of either Crown II or Crown III and that any issue estoppel extended only to Crown I. Mr Spalton relied on Musst’s pleaded case in his oral closing submissions and Mr Knox intervened to make his position clear:

“MR SPALTON: There was no finding the novation of the octave contract extended to Crown 2 or Crown 3. There was a specific limit to novation in relation to Crown 1, and my learned friend's pleading (inaudible) on that. MR KNOX: My Lord, we've never said this. We've always accepted the question of whether the novation caught Crown 2 by virtue of the later investment. We've expressly said that is not res judicata. The bit that is res judicata is the novation of 5 November. I'm sorry, I thought that was absolutely plain. The question is, what is the consequence of the novation? MR SPALTON: I'm grateful because I was going to say that paragraph 5.3 of the pleading makes it plain that it was only a case of Astra LLP taking over liabilities in relation to Crown 1. That was the original case.”

[311]I agree with both counsel that the Judge did not make any findings in the Trial Judgment that Astra LLP or Astra UK was liable to pay the Revenue Share of the management fees or performance fees which it earned in respect of Crown II and Crown III. But it is important to remember why. It was hotly disputed then (as it was before me) whether Crown II and Crown III were Eligible Investments. It always remained open to Astra to dispute this and they continued to do so all the way through the second trial. The Judge also made it clear in the Strike Out Judgment that it was open to Astra to argue that his findings did not extend to either Crown II or Crown III and, in particular, because they were not in existence at the relevant time or times: see [69] and [93].

[312]But I have now found that both Crown II and Crown III (or, more properly, the investments held in both managed accounts) were Eligible Investments. I have also heard detailed argument on the scope of the Judge’s findings in the Trial Judgment and found that he clearly held that on 5 November 2014 Astra LLP assumed Octave’s obligations to Musst under the Octave Contract (including the obligations in clauses 3, 4, 6 and 17) and that from July 2016 Astra UK assumed those obligations in place of Astra LLP.

[313]In my judgment, Astra is now bound by an issue estoppel which prevents it from disputing that on 5 November 2014 Astra LLP assumed the obligation to pay the Revenue Share to Musst of any Eligible Investment which fell within clause 3.1 of the Octave Contract and that in July 2016 Astra UK assumed those obligations in place of Astra UK. But even if I am wrong and the Judge’s findings on this specific issue are not res judicata, I adopt the Judge’s findings and reasoning which I have set out above in full having heard full argument on the merits. In particular, I adopt his finding in the Trial Judgment at [385]. L. Musst’s Alternative Case: February 2015 (1). The Law

[314]The Judge set out the law on novation in the Trial Judgment at [324] to [332]. He also set out the law on estoppel by convention at [307] to [310]. Falk LJ recorded that Astra did not challenge either statement of the law and she summarised the principles herself in the CA Judgment at [54] to [62]. Neither party addressed me in any detail on any of the legal principles and I apply the law as set out by the Judge and by the Court of Appeal. (2). Musst’s Case

[315]Even if I am wrong and the Judge left open the question whether the novation of the Octave Contract extended to either Crown II or Crown III or even decided that issue against Musst, Musst submitted that Astra acknowledged liability to pay fees in relation to Crown II by inviting it to submit invoices in relation to Crown II and making a small payment in respect of Crown II. Musst’s case was set out in the Amended Particulars of Claim, paragraph 11: “(1) By reason of the matters in the following paragraph, it was implicit in the correspondence in February 2015 by which the novation to Astra LLP (or the said taking on by Astra LLP) was confirmed (or made, if it had not yet taken place), that the novation (or the taking on) applied to any current and future investments made by Crown with Astra LLP (such as those in Crown II) which followed the Current Strategy and were made in a managed account which substantially replicated the investment securities and risk profile of ASSCF. Accordingly, this was a term of the novation (or of Astra LLP’s taking on the rights and liabilities under the Octave Contract). (2) Further or in the alternative, this was the common assumption upon which the parties acted in relation to the novation (or taking on), in reliance on which the Claimant did not seek express agreement to this effect in February 2015 or subsequently in 2015, before the disputes arose in 2016 between the parties as to the Claimant’s entitlement to be paid at all. Accordingly, Astra LLP is estopped from denying that this was the effect of the novation (or of the taking on).” (3). The Evidence

[316]The evidence upon which Musst relied in paragraph 11 was a sequence of emails in early February 2015. By email dated 4 February 2015 Mr Holdom wrote to Ms Galligan stating that Astra expected the relevant fees for Crown I to be US $160,256.56 and for Crown II to be US $3,579.06. By email also dated 4 February 2015 Ms Galligan asked him to explain the difference between the two accounts and by an email also dated 4 February 2015 he replied stating:

“On reflection as the account is paying its maximum fee, you can invoice $32,500 per quarter (being $650,000/4 * 20%). Invoice should be addressed to Astra Asset Management LLP.”

[317]There was no dispute that Musst invoiced Astra LLP for US $32,500 or that Astra LLP then paid this sum. Further, under cover of an email dated 27 April 2015 Mr Holdom sent the invoices which it had submitted to LGT for both Crown I and Crown II. Upon receipt of those invoices, Ms Imiolek prepared an invoice for US $24,110.20 in respect of management fees for Crown II and an invoice for US $7,944.59 in respect of management fees for Crown I and under cover of an email also dated 27 April 2015 she sent them to Mr Holdom copying in Mr Thomas. In the covering email she stated:

“Please find attached the invoices for 1Q 2015 fees relating to Crown AAM 1&2 accounts. Could you please let us know when payment has been made?”

[318]Astra did not pay the management fee for Crown II. On 28 April 2015 Mr Holdom sent an email to himself stating: “Musst not paid on Crown 2” and on 30 April 2015 he sent the email about the replication requirement which I have set out at [144] above and the Judge set out in the Trial Judgment at [205]. Mr Holdom’s evidence in both his witness statement and in cross-examination was that he could not recall any of this correspondence.

[319]When Mr Knox cross-examined Mr Holdom about his likely course of conduct, he accepted that it was reasonable to assume that a responsible Chief Operating Officer would have made sure that Musst was entitled to payment for Crown II before sending information or invoices relating to that account. But he would not accept that it was likely that he did so (although he later accepted that if he had spoken to someone, it was likely to have been Mr Mathur):

“Q. I just want to go back to what I was asking you before. You say you have no recollection of what happened as to how it came about that you sent these invoices; and you say "it is likely that". I 'm probing you about the likelihood. I'm suggesting to you this: first of all, before sending out an invoice or before asking Musst to invoice Astra for a new account, Crown II, you would have asked whoever told you about Crown II whether the existence of the Crown II account itself should be mentioned to Musst. You, as a reasonably prudent Chief Operations Oﬀicer would have said, "Should we be letting Musst know about all of this?" Wouldn't you? Isn't that likely what you'd normally do? A. It didn't cross my mind. Q. I'm asking you about likely. Is it not likely that a Chief Operations Oﬀicer would not want to pass on information to a third party which might make a third party start asking for money unjustifiably, let's say? You wouldn't want to do that, would you? A. That would seem a bit disingenuous. I don't think I'd do that. Q. You surely would have wanted, as a responsible Chief Operations Oﬀicer, to make sure that Astra was obliged to pay only those people or paid only those people whom it was obliged to pay? A. That's a reasonable assumption. Q. And only on those accounts on which it was obliged to pay. A. But that's not how I operated. I operated on –by word. Q. No, I'm talking about likely. Isn't it likely, actually, at the time, that you would have wanted to make sure that Musst −−Crown II was a proper account to pay up on? A. No, I disagree with you. Q. Why is it not likely? A. I didn't need to, because I could rely on the investment team to tell me what to do. Q. But did the investment team therefore tell you to invoice or to ask for an invoice from Musst? A. Well, eventually they fixed the situation. Q. No, no, no, at the beginning −− A. No. Q. Well, that's the gap, you see, which I don't understand. Surely the investment team did sell you to send −−to ask Musst for an invoice. Isn't that more likely? A. No, not at all. Q. So it's likely you didn't bother to ask them? A. Correct. Q. That is more likely −−you say it's more likely than that you did ask them and they said, "Sure, send an invoice"? A. That's correct. Q. Why is it more likely that you didn't ask than did ask, which is what −−would you, first of all, accept that you should have asked? A. I think I can accept that. Q. So if you should have asked, why is it likely that you didn't ask? A. Because it didn't cross my mind.”

[320]Although Mr Holdom did not accept that he spoke to anyone before sending the first email to Ms Galligan mentioning Crown II or the Crown II invoice later in April, he gave evidence in his witness statement that he would have consulted the Investment Team before sending his response later that day. Mr Knox challenged that evidence:

“And then you say: "Although I do not recall doing so, given the nature of Ms Galligan's question and my response, I consider it very likely on the basis of my usual practice that (i) I spoke to a member of the Investment Management Team, and (ii) was told that Musst should not be paid in relation to Crown AAM II and that I should respond to Ms Galligan in the manner that I did." Now, can we just take this in stages. The first point is you have no actual recollection of that? A. Correct. Q. The second point, would you accept this, is that you did not mention this in your witness statement in the previous proceedings. Would you accept that from me? A. Correct. Q. You say all −− I think also you didn't mention this in cross−examination? A. It was brought up in cross−examination by yourself. Q. But this point you didn't make in cross−examination? A. No, but you made −−you made reference to this event in cross−examination. Q. I did, but you didn't make reference to the point that you consider it very likely that you were told that Musst shouldn't be paid? A. I did not. Q. Now, you say it's very likely −−or you emphasise "very" −−what's the difference between likely and very likely? A. About that much.”

[321]Mr Knox then put it to Mr Holdom that if he had been given instructions by the Investment Team, he would have made it clear in the subsequent reply that Musst was not entitled to payment for Crown II rather than inviting Ms Galligan to submit an invoice for US $32,500:

“Q. F3/173. This is your reply: "On reflection as the account is paying its maximum fee you can invoice $32,500 per quarter". Why didn't you say −−if you had been told that Musst is not to be paid, why didn't you just say, "I'm very sorry, Musst is not to be paid on Crown II"? A. I don't know, I just −−I worded it in a particular way for I don't know what particular reasons. Q. But, Mr Holdom, we're here talking about likelihoods because you've got no recollection; is that fair? A. Correct. Q. Isn't the likelihood if someone had actually said to you, "Look, Musst shouldn't be paid on this account", you would have written to Musst saying, "Terribly sorry. Big mistake. You shouldn't be paid on this account"? A. No −−well, it's possible, but I didn't. Q. Probable, isn't it ? If −−if −−if someone had really told you, "Musst should not be paid on this account", at this point in February, if someone had said that to you A. No −− Q. −−you would have written, surely, "Terribly sorry, Musst should not be paid on that", if somebody had already said that to you −− A. Yes. So −−Q. Please answer my question. A. I am −−well, there is −−there's an element of embarrassment in my answer, because although I did not know, at this point I think I should know that they shouldn't be paid on II, and I had made a mistake and I want to rectify it. I 'm embarrassed. Q. Well, why on earth not just −−I don't understand that. Why not say −−this is an important commercial matter, isn't it, that Musst are put right on this point? It must be important for Musst to be told the correct position. A. Yes. Q. If it's important for Musst to be told the correct position, why didn't you tell them the correct position? Namely, "Very sorry. My mistake, but Crown II is not something you're entitled to be paid on"? A. Again, no real thought, I think, was given to this. What's important for them, given the chains of e−mails that you've seen about them asking for the money every month, is that they want to get paid and they want to calculate how much they're due to get paid. This was about telling them how much they're going to get paid so they could invoice correctly.”

[322]Mr Knox then put the calculation of the fee to Mr Holdom. It was Musst’s case that the sum of US $32,500 included a small fee for Crown II. The figure was tiny because the fee due in respect of Crown I was US $32,051.32. Mr Holdom’s evidence was that it was likely that he was just told to ask Musst to invoice for the full amount of the cap of US $32,500:

“Now, the other point is this : mathematically if you just take Crown I, the fee on Crown I, if you go back to whatever the page was −−174. If you take 20% of 160,000 you get to something like 32,000−odd; right? But by asking them to bill for the full amount, at 32,500, you're asking them actually to bill for part of what is referable to Crown II. Do you understand what I'm saying? A. I do. Q. Why on earth do that if, in fact , they are not owed anything on Crown II? A. Well, as I 've stated, I don't recall the event in −−in detail, but I can infer two alternatives if that's helpful. One alternative is that Crown I already had the −− enough assets in there to have reached the cap on its own and, therefore, paying the cap on Crown I would be appropriate. And the second alternative, which is, I think, probably what happened, is that I was just told to pay 32,500 because they had reached a cap. Q. Surely before giving any of Astra's money away, you would give away only −−you would make sure you gave away only the right amount? A. Correct. Q. Therefore, the probability is, actually, if you had been told Musst was not to be paid, you would have simply said, "Just invoice us for 20% on the Crown I account"? A. Which is why I can confidently infer I was told to pay 32,500. Q. Well, it doesn't make sense, does it? You are the Chief Operations Oﬀicer of Astra; that's right? A. I am. Q. You had no authority to give away $400, did you? A. I was acting on instruction. Q. Whose? A. Either Mr Thomas or Mr Mathur. Q. So you're saying −−now, let's take that in stages. Mr Thomas: on what conceivable basis would Mr Thomas have authority to tell you, effectively, to give Musst an extra $400? A. I would imagine on Mr Mathur's say so. Q. So it −− A. These aren't facts. I don't remember. So they're not in my witness statement because they're not facts. Q. Well, I understand that. I am suggesting to you that what really happened here is that, at this point, Mr Mathur was quite happy to pay on Crown II; and that's why you were −−he was −−whether through Mr Thomas or directly, he was telling you, "Just pay them the maximum amount", which includes something for Crown II? A. I don't think that's true. Q. Okay. Well, that's a matter of argument, I think. I don't think I can press that.”

[323]Mr Knox asked Mr Holdom next about the correspondence in April 2015. In particular, he challenged Mr Holdom’s evidence that he must have forgotten the instructions which he had received in February when he sent Musst the invoices in relation to Crown II:

“Now, if you go, please, to paragraph 22 of your statement, I would like to ask you some questions about what you say here: "I have also been shown an e−mail that I sent to Ms Galligan at 13:37 on 27 April 2015 to which I had attached Astra LLP's invoices to Crown AAM and Crown AAM II (Ds000003049). I do not recall sending this e−mail. Given that more than 11 weeks had passed since the exchange and discussion of 4 February 2015 (see paragraph 21 above) and that I was very busy at the time, I consider it likely that I had simply forgotten that I had already been told that Musst should not be paid in respect of the Crown AAM II managed account." Now, just taking it in stages. You have no actual recollection. You are saying "I consider it likely". A. Well, I have a very clear recollection of Mr Thomas interjecting when he saw the e−mail and forcefully reminding me that I shouldn't have sent those invoices. Q. I just −−let's take it in stages, please. A. Sure. Q. You say −−that's a later event you're talking about. You say here: "I consider it likely that I had simply forgotten that I had already been told [and back in February] that Musst should not be paid..." So this part of what you say here, as to what happened on 27 April, is based not on actual recollection but on your assessment of likelihood; is that right? A. Yes. Q. Would you accept too that what you say here about forgetting about what you'd been told, 11 weeks ago or so forth, was not mentioned in your previous witness statement? A. I can take it from you, if that's the fact, but I don't −−I don't know. Q. If, in real life, it is likely that this was so, why did you not mention it in your previous witness statement? A. I don't know. Q. You didn't mention it in cross−examination either in the previous proceedings, when you were asked about this e−mail of 27 April. You didn't mention this particular point that you had forgotten that you had already been told not to send out invoices to Musst. You didn't mention that in cross−examination either. A. I have no idea whether I did or whether I didn't. Q. You may say to that, "Well, that depends on the questions." A. Yes. Q. Now, can I ask you this: surely, if already, just for the previous quarter, you had already sent out one invoice in error, ie on Crown II, and you had already been told that Musst should not be paid on Crown II, you would have been very careful, in April −−at the end of April before you sent out another e−mail on Crown II, this time for 32,000. Surely you would have been rather careful about that, just as a matter of probabilities. A. Which is why I think I forgot. Q. Well, that's one possibility. Would you not accept the other possibility is that you had never been told not to do this back in February? A. No, I would not accept that. Q. Well, we're arguing about −−I suggest to you about the reason you sent out this bigger Crown II invoice was precisely because you'd never been told not to. A. I disagree, but ... Q. Fine. Now, in paragraph 23 there's an email −− you refer to an e−mail which you sent to yourself. I know this −−I know the feeling well: "Musst not paid on Crown 2". You say: "I do not recall sending this e−mail", but you note −−you explain why you sent it, because Mark Thomas was copied in on the 27 April correspondence. And you say he told you. Now, if that's the case in April 2015, why did you not do the same back in −−why did you not do, in fact, this very process back in February 2015? A. I didn't expect to forget to do it again. And I didn't want to repeat the mistake. Q. Can I suggest the reason you didn't do it in February 2015 is precisely because you had never been told that Musst was not to be paid back in February 2015? A. That's not true.”

[324]I do not accept Mr Holdom’s evidence in relation to the correspondence on 4 February 2015. He had no direct recollection of any of the relevant emails and in my judgment he was speculating in a way which was most favourable to Astra. I consider it improbable that he would not have taken instructions from the Investment Team before sending out his first email that day but would have taken instructions before replying to Galligan’s second email later that day. I also consider it improbable that he would have replied to Ms Galligan in the way in which he did if Mr Mathur or Mr Thomas had told him that Musst was not entitled to be paid for Crown II. Finally, I consider it improbable that he would have forgotten those instructions by April and sent Astra’s invoice for Crown II to Musst (or not checked before doing so).

[325]In my judgment, it is more probable than not that Mr Holdom sent the emails dated 4 February 2015 to Ms Galligan and the email dated 27 April 2015 to Ms Imiolek enclosing the invoice for Crown II because he had been instructed to do so by Mr Mathur or Mr Thomas and that he was only instructed by Mr Thomas that Musst was not entitled to be paid for Crown II on 28 April 2015 (as reflected in his email to himself). Astra adduced no documentary evidence to suggest that anyone in the Investment Team took such a view before that date and Mr Holdom sent the email to himself recording his instructions that Musst should not be paid on Crown II. Accordingly, I find on a balance of probabilities that Mr Holdom sent the emails dated 4 February 2015 and 27 April 2015 on the instructions of either Mr Mathur or Mr Thomas or both of them and that those emails reflected their instructions to him.

[326]It is more difficult to assess how much significance to attach to the fact that Musst was asked to invoice Astra for the full amount of US $32,500 and then paid that figure. By my calculation the sum of US $32,051.32 was due to Musst in relation to Crown I and the sum of US $448.68 can only be attributed to Crown II. It is quite possible, therefore, that Mr Mathur and Mr Thomas did not consider it worth arguing about this sum in February 2015 but once it became clear that the fees for Crown II could be substantial, they instructed Mr Holdom to deny Musst’s entitlement. However, it is unnecessary for me to make any findings of fact as to the motivation of either Mr Mathur or Mr Thomas because the subjective understanding and intention of the parties is not admissible to determine the terms on which the novation of a contract have taken place: see the Trial Judgment, [329]. (4). The Parties’ Submissions

[327]In their written closing submissions Mr Knox and Ms Bailey submitted in the alternative that on 4 February 2015 the parties agreed to a further novation of the Octave Contract and to extend it to Crown II as well as Crown I:

“52. In the alternative, if we have to go this far: (1) Holdom was authorised by Astra LLP (whether Mr Mathur or Mr Phillips – see T2/99) to send the invoice in relation to Crown 2 in February 2015 and to ask Musst to invoice Astra LLP. (For documents F3/175-173) That was an offer by Astra LLP to transfer the Octave Contract in relation to Crown 2 as well as Crown I. And anyway, to extent Freedman J did not hold in previous proceedings a novation by the November 2014 correspondence, he necessarily found that it was bound by a novation on this occasion, which necessarily involves the proposition that Holdom had the requisite authority from Astra LLP to request Musst to send an invoice on Crown II… 54. By Musst’s reply sending the invoice (if the novation had not already taken place in November 2014), Musst now agreed to novation of Octave LLP’s obligations to Astra LLP, but in relation to both Crown 2 and Crown 1. (1) The whole premise of the correspondence in February 2015, and of Murray’s 19.2.15 email, and Holdom’s further correspondence in April 2015 was that Astra LLP was bound by the Introduction Agreement, and in relation to any contract with Crown which followed the Current Strategy. (2) Further, Astra UK became bound by clause 3.1 by reason of the novation from Astra LLP in May 2016.”

[328]Astra’s answer to Musst’s case was to rely upon Mr Holdom’s email dated 30 April 2015 and Ms Galligan’s acceptance in evidence that Musst was only ever paid for Crown I and not for Crown II. For ease of reference I set out Mr Spalton and Mr Mo’s submissions in full (references omitted): 203.1. First, a key point of distinction between the Current Claim and the Contract Claim is that the parties always understood that there were never any payments made in respect of Crown II or Crown III: see Ms Galligan’s oral evidence, set out above. This is critical. The payments in the Contract Claim were performance of the novated contract—that is what allowed Freedman J to say it was a fait accompli in the face of no express novation. No such performance occurred here, and therefore, the same cannot follow. Stepping back, a novation is an agreement to substitute and replace a prior contract. If the parties never said, understood, or did anything to found an agreement, it cannot be established… 203.3. Second, the novation alleged in the Contract Claim was specific and limited, relating to the Crown Contract. No broader novation was pleaded or found. Indeed, it was noted in cross-examination to Ms Galligan that she had not put any suggestion in her evidence that there was a wider novated agreement encompassing Crown II or Crown III. 203.4. Third, the only positive evidence relied on is a misconstruction of the Crown II invoice correspondence in February-April 2015 which ignores everything that occurred in April. 203.5. Musst says that “in these emails of 4 February 2015, Mr Holdom accepted that [Musst] was entitled to be paid in relation to Crown II”. Ms Galligan’s own evidence, however, was that she never understood either that a payment had been made in respect of Crown II or that Musst were entitled to be paid. Further, on 30 April 2015, Mr Holdom said expressly to Ms Imiolek “I sent you the Crown AAM 2 invoice in error. The Crown 2 account was setup for a new strategy (primarily CLO and CRE) and therefore is not covered by the existing Introduction Agreement as it does not “substantially replicate the investment securities and risk profile of ASSCF”. 203.6. The whole point of Mr Holdom’s April email was because Musst was not entitled to be paid in relation to Crown II. It cannot be said there was objective consent to novate the obligations of the Octave Contract in relation to Crown II—the April correspondence shows exactly the opposite. That is also why Musst never understood any payment to have been made in respect of Crown II. In Astra’s submission a novation contrary to the expressly stated understandings of the parties—and which cuts across the chronology of the contracts said to be relevant to the novation—is incomprehensible.204. No other correspondence is relied on by Musst in its pleaded case on the alleged novation to Astra LLP. While a date of November 2014 is also pleaded, that relates to the transfer of business in respect of Crown I (set out above) and those communications contain no reference to Crown II which, at that point, did not exist. Ms Galligan’s evidence on this point was unequivocal: the November 2014 correspondence related only to Crown I.

205. In the circumstances, there is no basis for any alleged novation being necessary to give business efficacy to the parties’ conduct. On the contrary, a novation would be inconsistent with the parties’ express intentions and would not explain the parties’ conduct.” (5). Novation

[329]I accept Musst’s submissions and reject Astra’s submissions on this issue. In my judgment, the significance of the emails dated 4 February 2015 and 27 April 2015 and the payment of the full amount of US $32,500 is that, viewed objectively, they demonstrate that the parties did not intend the novation of the Octave Contract to extend only to the Crown I and 2B Contracts but to extend to any Revenue Share due to Musst under clause 3.1 and, in particular, to Musst’s Revenue Share for Crown II. If I am wrong and the Judge either did not determine the scope of the obligations which Astra LLP assumed on 5 November 2014 or, alternatively, he found that the obligations which it assumed were limited to Crown I and 2B, then I find that on 4 February 2015 the parties agreed to novate the Octave Contract again and to extend its scope to any Revenue Share payable to Musst under clause 3.1 of the Octave Contract. In reaching this conclusion, I place particular reliance upon the factual context which the Judge set out in the Trial Judgment, [372] to [375].

[330]In my judgment, it is no answer to Musst’s claim for Astra to rely on the fact that it made no payments to Musst or that Mr Holdom later told Ms Galligan both orally and by email that he had sent the invoices in relation to Crown II in error and that it was not covered by the Octave Contract. I consider below whether these were actionable representations but on the basis of the findings of fact which I have made to date they were plainly inaccurate. I have held in terms that Crown II was designed substantially to replicate the investments and risk profile of ASSCFL. Moreover, Ms Galligan had no means of verifying the accuracy of Mr Holdom’s representations.

[331]I am also satisfied that this further novation of the Octave Contract took place on 4 February 2015 when both offer and acceptance took place and at a time when I have held that Mr Holdom was instructed by Mr Mathur or Mr Thomas to send the invoices relating to Crown II to Ms Galligan and to pay the fees of US $32,500. Further, I am satisfied that consideration moved from Musst to Octave and Astra for the reasons which the Judge gave in the Trial Judgment at [391]. In particular, Musst’s fees formed part of the price for acquiring the income stream from Crown II, Octave was discharged from paying them and Musst agreed to release Octave from that liability or to accept the payments made by Astra in discharge of its liabilities.

[332]Finally, I find that when the subsequent novation of the Octave Contract took place from Astra LLP to Astra UK in July 2016, Astra UK stepped into the shoes of Astra LLP and assumed all of the obligations which Astra LLP had already undertaken to Musst on the basis set out by the Judge in the Trial Judgment, [394]. Accordingly, if I am wrong to hold that Astra is bound by the Judge’s findings or unable to adopt them myself, I hold in the alternative that on 4 February 2015 the Octave Contract was novated with the agreement of all parties so that Astra LLP assumed the obligations of Octave in relation to Crown II and that on 28 July 2016 it was novated again so that Astra UK assumed the obligations of Astra LLP under the Octave Contract in relation to Crown II as well as Crown I and 2B. (6). Estoppel by Convention

[333]If I had reached the conclusion that the novation which took place on 5 November 2014 was limited to Crown I and 2B, I would also have held that the correspondence on 4 February 2015 gave rise to an estoppel by convention. In particular, I would have applied the principles set out in the CA Judgment at [61] and held as follows:(1) The parties shared a common assumption that Astra LLP’s obligations under the Octave Contract (as novated) extended to any Revenue Share payable under clause 3.1 and that this common assumption crossed the line in the communications on 4 February and 27 April 2015.

(2) Musst relied on this common assumption by submitting an invoice and accepting payment for US $32,500 and taking no further action to enforce its legal rights under clause 9.4 or clause 17 or to finalise and execute the draft agreement produced by Mr Murray.

(3) Astra assumed responsibility for this common assumption (and, in support of this conclusion, I would have relied on the evidence and my findings in relation to negligent misrepresentation below).

(4) Musst’s reliance occurred in connection with the mutual dealings between the parties and, in particular, the payments due to Musst under the Octave Contract.

(5) Musst suffered detriment and it would be unjust or unconscionable for Astra to assert that Astra LLP and Astra UK are not bound by the Octave Contract to pay the Revenue Share in relation to Crown II and Crown III for the same reasons given by the Judge in the Trial Judgment at [400] and [401].

(6) Mr Holdom’s email dated 30 April 2015 did not prevent such an estoppel by convention from arising because he led Ms Galligan to believe that no Revenue Share was payable under clause 3.1 in relation to Crown II when this was inaccurate and incorrect.

[334]If I had made these findings in Musst’s favour, it would then have become necessary for me to consider whether the Judge’s findings of fact in the Trial Judgment at [398] gave rise to an issue estoppel which prevented Musst from arguing that any estoppel by convention extended beyond Crown I and 2B. I do not find this an easy issue given that the Judge relied on Mr Holdom’s email dated 30 April 2015 and I have found it to be misleading. However, since it is unnecessary for me to do so, I have not reached a final conclusion on this issue. V. Breach of Contract (1). The Statements of Case

[335]Musst’s case was that wrongfully and in breach of the Octave Contract (as novated) Astra LLP and then Astra UK failed to comply with clause 4.1 and send Statements to comply with clause 4.5 and make the relevant payments and to comply with clause 11.3 and permit Musst to give access to the Records in relation to both Crown II and Crown III: see the Amended Particulars of Claim, paragraphs 15 and 20. I set out the pleaded case in relation to Crown II:

“15. Wrongfully, however, and in breach of the Octave Contract as novated (or of the obligations as taken on): (1) Astra LLP and then Astra UK, in breach of clause 4.1, failed to send any statement to the Claimant which showed (a) the particulars of all Eligible Investments in Crown II, (b) the revenue share to the Claimant due from Crown II, and (c) the net asset value of the investments in Crown II, or any of these things; (2) Astra LLP and then Astra UK failed, in breach of clause 4.5, to make any payments (save for the said small payment by Astra LLP on February 2015) in relation to the sums received from the Crown II account; (3) Astra UK, despite requests from the Claimant’s solicitors made on 14 August 2018, 3 September 2018 and 29 October 2018, in breach of clause 11.3 refused to allow the Claimant on reasonable notice to attend the premises where its records are located, or to procure access to the same, in order that the Claimant might verify the correct amounts payable to it in respect of investments made by Crown, under the Octave Contract, which investments included Crown II.”

[336]Astra admitted that in relation to both Crown II and Crown III it did not send Statements, make payments or allow access to the Records but denied that it was liable to do so. It also alleged that the obligation to provide Statements under clause 4.1 did not arise because no requests were made: see paragraphs 32 and 37. Again, I set out the pleaded case in relation to Crown II:

“32.As to paragraph 15: 32.1 It is admitted that the Defendants did not send statements, or make payments or allow the Claimant to attend its premises, in relation to Crown II. For the reasons aforesaid in this Defence, there was no obligation on them to do so. 32.2 The obligation under Clause 4.1 to provide a statement only arises upon a request being made. No requests are pleaded and, accordingly, this allegation of breach fails in limine. 32.3 Save as aforesaid, paragraph 15 is denied.”

[337]In reply, Musst denied the allegation that it had not requested statements under clause 4.1 and it relied on a number of documents including the email dated 28 July 2016 to which I have already referred: see [287] (above). That email was pleaded in paragraph 14(1) of the Amended Particulars of Claim in the context of novation and the relevant text of both was as follows: “I write in relation to our contract dated 18 April 2013 under clause 3 of which you are obliged to pay management and performance fees. In breach of that contract we have not received the management fees for May and June, which are overdue, and shortly those for July which are now due. Please make payment of these fees immediately as default interest is now accruing. In addition, please provide the usual statements confirming the NAV’s in relation to our mutual clients immediately or in any event within 10 days as required under clause 4.1.” (2). Crown I: the Evidence

[338]Ms Galligan gave unchallenged evidence in her witness statement that since judgment in the First Claim she had been emailing Mr Holdom on a quarterly basis in order to obtain Musst’s entitlement to its fees for Crown I. In particular, she gave the following evidence in paragraphs 126 to 129:

“126. In September 2024, I received an email from Michael effectively stating that there was nothing left in the account and the remaining assets had been sold in Q1 of 2024. The email also explained that Astra did not anticipate any performance fees being paid until 2025. 127. I politely gave Michael some breathing room but then sent multiple emails asking for an update. I asked whether he could at least tell us what the assets had sold for and what fees would ultimately be due to Musst. I also wanted him to explain why it would take until 2025 for performance fees to be paid. 128. This was the part that made the least sense as the performance fees automatically crystallise when assets are sold. From an accountancy perspective, it was not clear to me whether they simply had not invoiced LGT, as these performance fees should have been payable at this stage. 129. I would estimate that I have sent as many as 10 emails asking for an update in the meantime, but without getting any proper response or clarification.”

[339]Mr Knox showed Mr Holdom a number of emails in cross-examination, which included an email from Ms Galligan asking him to explain why performance fees had not been paid on the sale of the remaining assets in Crown I. Mr Knox then asked him to confirm that paragraph 129 in the passage above was correct. Mr Holdom did so, although he could not remember the precise number of emails which Ms Galligan had sent:

“A. I don't know whether it was ten, but there have been periodic emails.”

Mr Knox also asked Mr Holdom to explain why Astra had not invoiced LGT for performance fees in relation to Crown I:

“I want to ask you this: have LGT, even now, been invoiced by Astra for this particular performance fee? A. No. Q. Why not? A. My understanding −−and, again, I'm not involved in the conversations, these are front oﬀice things −−is that there are talk of using those monies to seed another fund. Q. But the obvious effect of Astra not invoicing for the performance fees is that Astra then doesn't have to pay Musst its 20%; would you accept that? A. I don't know the details of −−sorry ... Q. That is the obvious effect of it ; would you not accept it? You know that. A. Okay, I accept it. Yes. Q. Why did you never explain to Ms Galligan that this was why LGT had not submitted any invoices? Sorry, Astra had not submitted invoices for those performance fees. A. I think the knowledge that I have now is contemporaneous rather than at the time and that the situation is somewhat fluid −− Q. Mr Holdom −− A. I know −−I think I can go further. I know that originally the monies were not −−actually, I might be confusing two things here. The −−the monies in the fund, as I understand it, were not allowed to be released until the audit had been completed in the first instance. And then I think I might be confusing what's going on in terms of the seeding of another fund. I 'm not involved in that.” “MR KNOX: Can I just say, as it were, what the amount was. You would accept, I think, Mr Holdom, that as the net asset value is about 7.5 million−odd, that Astra would have been entitled to 20%, more or less, of that, by way of performance fee from L −−or from Crown; is that right? A. Yes. Q. So that comes to −−my maths −−about 1.5 million−odd; would that be right? A. About that. Q. And Musst, at 20%, would be entitled to about 320,000−odd? A. Yes, about that. Q. 300,000−odd or whatever. So the effect of what has happened is −−the constant −−the non−invoicing of LGT is Musst has been deprived of access to $300,000? A. I don't think that's the case. I think, as I said the invoice hasn't been presented to Crown because they had not completed their audit. Q. Why, if that is the case, was that never explained by you in response to any of Ms Galligan's numerous e−mails? A. We −−I don't know. Q. Can I suggest the real reason was −−is that Mr Mathur −−first of all, this has all been done presumably on Mr Mathur's −− MR SPALTON: My Lord, none of this is pleaded. MR JUSTICE LEECH: Look, let him answer the question. MR SPALTON: Okay. I'm just troubled by it, my Lord. Mr Knox can't advance his case through the back door. MR JUSTICE LEECH: No. MR KNOX: Mr Mathur has instructed you not to reply, hasn't he? A. The instructions not to reply come from legal counsel.”

[340]I am satisfied that Mr Holdom accepted in cross-examination both that Astra had failed to comply with clause 4.1 of the Octave Contract in relation to Crown I and 2B and that this was a deliberate course of conduct taken on legal advice. Mr Holdom did not suggest either in his witness statement or in cross-examination that Astra would have complied with requests by Musst to provide Statements under clause 4.1 in relation to either Crown II or Crown III.

[341]Musst sought no further relief in relation to Crown I in this action and it would not, therefore, be appropriate for me to address the question whether Astra’s failure to invoice LGT for performance fees in relation to Crown I in 2024 was a further breach of the Octave Contract. However, I am satisfied that this conduct is relevant to the question whether I should make orders against Astra compelling it to comply with its obligations in relation to Crown II and Crown III and also to the question whether a duty of care existed in relation to Mr Holdom’s statements on 30 April 2015.

[342]Further, I found Mr Holdom’s evidence on this issue unsatisfactory and he was unable to put forward a coherent commercial explanation for Astra’s failure to invoice LGT once Crown I had been closed. He suggested first that it was connected with the setting up of a new fund and then that Astra was waiting for an audit to be completed. Neither made sense and, in the absence of a sensible explanation, I draw the inference that the failure to invoice LGT was a deliberate ploy intended by Astra’s management to defeat Musst’s claim or to starve it of funds. I am also satisfied that it is no coincidence that Astra also served a statutory demand on Musst in relation to the payment of expenses under clause 3.2. (3). Clause 4.1

[343]In my judgment, Mr Siddiqi’s email dated 28 July 2016 was a sufficient request for the purposes of clause 4.1 and Mr Spalton and Mr Mo did not suggest otherwise. Nor did they take the pleading point that it had only been pleaded in the Reply rather than in the Amended Particulars of Claim. But even if (which I do not accept) it was necessary to plead the request in order to perfect its cause of action under clause 4.1, Musst cured that defect in the Reply. Although it ought to have applied for permission to amend as a matter of pleading, the failure to do so was no more than an irregularity which the Court may waive under its case management powers: see Maridive & Oil Services (SAE) v CNA Insurance Company (Europe) Ltd

[2002] EWCA Civ 369

at [34] to [37] (Mance LJ).

[344]If it is necessary for me to do so, therefore, I waive the failure to plead the request in the Amended Particulars of Claim. The request was specifically pleaded in paragraph 14(1) of the Amended Particulars of Claim and Musst expressly claimed the production of the required Statements under clause 4.1 in the prayer for relief. On 28 July 2016 Astra UK became bound by Musst’s acceptance of its offer to novate the Octave Contract and it also became bound by clause 4.1 to provide Statements within 10 working days. On 11 August 2015 that period expired and I find, therefore, that Astra UK has been in breach of its obligation to provide Statements under clause 4.1 since that date.

[345]I have also read the pre-action correspondence pleaded in the Amended Particulars of Claim and in the light of that correspondence and Mr Holdom’s evidence about Astra’s conduct in relation to Crown I, I am satisfied that there is a very significant risk that Astra will not comply with clause 4.1 unless ordered to do so by the Court. I will give Astra an opportunity to give an appropriate undertaking both to Musst and to the Court. But if it is not prepared to do so, I will make an Order compelling it to comply with clause 4.1. (4). Clause 4.5

[346]By contrast, clause 4.5 does not impose an obligation upon Musst to serve a demand before Octave (and now Astra) is liable to make payments and the obligation to pay fees arose within 10 days of receipt of payment. Astra admits that it has made no payments to Musst but it has not advanced a positive case that it has received no fees in relation to Crown II or Crown III. Indeed, it is clear from the correspondence in February to April 2015 that Astra LLP received management fees for both December 2014 and the period between 1 January 2015 and 31 March 2015.

[347]Because Astra UK has not complied with the request dated 28 July 2016 or the request set out in the Amended Particulars of Claim (and any other intervening requests), it is not possible for the Court to ascertain what payments Astra LLP or Astra UK have received in relation to Crown II and Crown III. To the extent that Astra LLP or Astra UK has received management or performance fees in relation to Crown II or Crown III at any time up until 10 working days before the hand down of this judgment, then they have committed breaches of clause 4.5 by failing to pay its Revenue Share to Musst. If Astra does not pay Musst its Revenue Share of all fees which it has received within 10 days of the hand down of this judgment, I will give Musst permission to apply for further relief. (5). Clause 11.3

[348]By letter dated 14 August 2018 Bird & Bird LLP (who were then acting for Musst) wrote to PHB reserving the right to invoke clause 11.3 of the Octave Contract and by letter dated 3 September 2018 they wrote to PHB again inviting them to confirm that Astra UK would permit Musst to attend its premises on reasonable notice and to access, inspect and take copies of relevant Records. There is no suggestion that Astra UK was ever willing to agree to such a request and in the Amended Particulars of Claim, Musst sought an order requiring Astra to comply with clause 11.3: see the prayer, paragraph (3). In the Defence, Astra denied Musst’s entitlement to that relief but on the basis that Crown II and Crown III were not Eligible Investments.

[349]In my judgment, clause 11.3 required Musst to give reasonable notice that it wished to attend Astra’s premises on a particular date and at a particular time and from the limited pre-correspondence which I have seen, I am not satisfied that Musst ever made such a request or that Astra failed to comply with it. Accordingly, I make no finding of fact that Astra has committed breaches of clause 11.3 of the Octave Contract in the past. But given Astra’s conduct in relation to Crown I and its failure to comply with clause 4.1 since July 2016, I am not satisfied that Astra can be relied upon to comply with clause 11.3 in the future now that the Court has resolved the dispute. I will give Astra an opportunity to give a suitable undertaking. But if it fails to do so, I will give Musst permission to apply for an Order requiring Astra to comply with clause 11.3. VI. Misrepresentation M. The Representations (1). Email dated 30 April 2015

[350]In his email dated 30 April 2015 Mr Holdom made the following representations to Ms Galligan:(1) that Crown II was set up for a new strategy,

(2) that this new strategy primarily involved the acquisition of CLO and CRE,

(3) that Crown II was not covered by the Octave Contract and

(4) that Crown II did not substantially replicate the investment securities and risk profile of ASSCFL:

“The Crown 2 account was setup for a new strategy (primarily CLO and CRE) and therefore is not covered by the existing Introduction Agreement as it does not “substantially replicate the investment securities and risk profile of ASSCF”.”

[351]Mr Holdom’s evidence in his witness statement was that this sentence suggested a knowledge of trading strategies which he did not have at the time. When he was cross-examined about this email, his evidence was that Mr Thomas wrote these words. However, because Mr Thomas did not give evidence and Mr Holdom professed to have no understanding of them, Astra adduced no evidence about the meaning of the words “primarily CLO and CRE” or their context. I therefore turn to the expert evidence. Mr Malik gave the following definition of a CLO in Malik 1:

“Collateralised Loan Obligations (CLOs) are securitisations backed by portfolios of loans, typically syndicated senior secured loans to sub-investment grade corporates. The portfolios are actively managed during a specified reinvestment period, allowing the manager to buy and sell loans to sustain credit quality or capitalise on market conditions. CLO structures include over-collateralisation and interest-coverage tests that divert cash away from junior tranches if the collateral weakens, thereby safeguarding senior noteholders.” senior noteholders.”

[352]I am confident that Mr Thomas would have had either this definition, or something very similar in mind when he used the term CLO. There was no dispute that the term CRE was an acronym for “Commercial Real Estate”. But in this context it might have meant either securities which were backed by commercial property assets or the assets themselves. For example, Mr Malik also referred in Malik 1 to CRE CDOs:

“Commercial Real Estate CDOs (CRE CDOs) are securitisations backed by a mix of commercial real estate assets, including whole commercial real estate loans, B-notes and CMBS tranches. They often involving transitional or bridge financing. Some include reinvestment rights, allowing managers to recycle capital. Their main risks involve the execution of property business plans, refinancing ability at loan maturity, and exposure to concentrated property types or tenants. Liquidity is generally limited, especially for mezzanine and equity tranches, which are typically held by specialist funds in closed or locked-up vehicles designed to suit the long-term nature of the risk.”

[353]By contrast, Dr Adler used the acronym CRE to refer to physical real estate assets. He gave the following evidence about the AEO Fund in his witness statement (and I have already set out his oral evidence about the fund above in the context of the Current Strategy). For present purposes, the significance of his evidence is that he described the AEO Fund as the “CRE Fund”:

“In line with what I have explained in the previous paragraph, during this period Astra structured and marketed the Astra European Opportunities Fund LP, a fund focusing on commercial real estate assets in Europe (the "CRE Fund"), to investors including LGT. In addition to real estate debt, it was envisaged that the CRE Fund would also acquire physical properties. Astra appointed two portfolio managers - Mr. O'Leary and Mr. Assys - in Q4 2014 to help identify suitable assets in the latter category.”

[354]In my judgment, Mr Thomas intended to refer to the AEO Fund and commercial real estate assets when he dictated the 30 April 2015 email to Mr Holdom or wrote it out for him to send. This is certainly what Mr Holdom understood him to mean when he spoke to Ms Galligan later that day (see further below) and Astra did not plead a different meaning of CRE or call Mr Thomas to give evidence that he meant anything different. (2). Oral representations

[355]On the same day, 30 April 2015, Mr Holdom spoke to Ms Galligan by phone and she taped the conversation. In the course of that conversation Mr Holdom repeated representations(1) and

(2) above. In particular, he stated that Crown II had been set up for a “different strategy” and that Crown II had been set up to facilitate investment in “the real estate fund” in conjunction with investments in CLOs:

“MH: Hello. AG: Hi MH, it's AG. Hello. MH: How are you? AG: Good. Thank you. Good. So, what happened? What is going on? MH: Well when I responded to the initial request for invoices I just didn't think it through as to what the invoices should relate to and because technically LGT are doing something funny in splitting the invoices to us across the two accounts just because of the way the cap operates. AG: Ok. MH: I erroneously sent you those two invoices from LGT instead of just applying the maximum fee amount which is what we will get. AG: What are the two accounts? MH: What do you mean? AG: Well one in the managed account. Why are they splitting into Crown 1 and Crown 2? What's the… MH: Crown 2 is a different strategy. AG: Crown 2 in the new strategy, or? MH: Yes. Crown 2 is the new strategy and Crown 3 is going to be launched soon with another new strategy as well. AG: Ok because before there was, I've seen like a Crown 2 but I don't know. I'm just, I'm still a bit confused by it all. What are the assets in Crown 1? MH: So Crown 2 was created to facilitate their investments into the real estate fund. AG: Ok. MH: In conjunction with investments in the CLO space. AG: Ok, and Crown 1 is? MH: Crown 1 is the original strategy. AG: Ok. MH: Distressed CMBS. AG: And in which case, do you know what the assets are in Crown 1? MH: Actually I don't off the top of my head. I'm sitting in an office right now.”

MH: How are you? AG: Good. Thank you. Good. So, what happened? What is going on? AG: What are the two accounts? MH: What do you mean? AG: Crown 2 in the new strategy, or? AG: Ok, and Crown 1 is?

AG: And in which case, do you know what the assets are in Crown 1?

[356]Mr Holdom confirmed in cross-examination that:

“I'm only repeating what I've been told, effectively − on the telephone call repeating what I've said in the email.”

He also confirmed that there was only ever one real estate fund, namely, the AEO Fund. In the light of this evidence I find, therefore, that he intended to refer to the AEO Fund and to a fund which owned or held interests in commercial real asset assets. Again, Astra did not plead a different meaning or call Mr Thomas to explain what he meant. (3). Letter dated 5 December 2019

[357]By letter dated 5 December 2019 PHB wrote to Collyer Bristow LLP, who acted for Musst in the First Claim, repeating all four representations above. They repeated representation (3) by stating that Crown II was not an Eligible Investment for the purposes of the Octave Contract (which was effectively the same as saying that it was not covered by the Octave Contract):

“If your clients wish to bring a claim in relation to Crown II, they will need to seek permission to amend their Particulars of Claim. It is only if such permission were to be granted that they could seek further disclosure in relation to Crown II. If they seek to make any such application, it will be opposed, not least because (without prejudice to our client’s primary position) that managed account was set up for a new strategy (primarily Collateral Loan Obligations and Commercial Real Estate) such that it was not “designed to substantially replicate the investment securities and risk profile of ASSCF” and contributions into it were not made “for the Current Strategy” with the result that investments into that account could on no basis constitute Eligible Investments for the purposes of the Octave Contract.”

[358]Astra’s pleaded defence was that this letter communicated one of the grounds on which the Defendants intended to oppose an application for permission to amend that was never made and did not constitute a representation (as opposed to a statement of Astra’s position). I reject that defence. PHB no doubt sent the letter on the express instructions of Astra and their motive may well have been to avert an application for permission to amend. But in my judgment they made the same representations of fact to Musst (through its own legal representatives), which Mr Holdom had made in his email dated 30 April 2015. N. Falsity (1). Crown II was set up for a new or different strategy

[359]Mr Aldama’s evidence was that 65% of the assets in Crown II as at that date were synthetic ABSs and 69% were synthetic ABSs (including hybrids). Mr Malik also accepted that Crown II held 66.53% of synthetic ABSs for the first quarter of 2015 and 56.21% of synthetic ABSs for the second quarter. I find, therefore, that the funds in Crown II were primarily invested in synthetic ABSs as at 30 April 2015. I have already found that Astra was following the Current Strategy in January 2015 and was still following the Current Strategy a year later in February 2016. I find as a fact that Astra was following the Current Strategy as at 30 April 2015 and that the representation that Crown II was set up for a new or different strategy was false. It was following the same strategy as both ASSCFL and Crown I. (2). The new strategy primarily involved the acquisition of CLO and CRE

[360]I have also found that Crown II was primarily invested in synthetic ABSs as at 30 April 2015. Further, I have also found that Astra did not invest any of the funds in Crown II in the AEO Fund and that the AEO Fund never attracted sufficient investment to become operational and no investors invested in the AEO Fund. Finally, Mr Aldama gave evidence that 15% of Crown II’s assets consisted of CLOs as at 30 April 2015 and Mr Malik gave evidence that less than 10% of Crown II was invested in CLOs during the first and second quarters of 2015. I find, therefore, that Crown II’s strategy did not primarily involve the acquisition of either CRE (as intended by Mr Thomas and understood by Mr Holdom) or CLOs and that the representation that its strategy primarily involved the acquisition of those assets was false. (3). Crown II was not covered by the Octave Contract

[361]I have held that Crown II was an Eligible Investment for the purposes of the Octave Contract. I find, therefore, that the representation made by Mr Holdom in the 30 April 2015 that it was not covered by the Octave Contract was false. I also find that the representation made by PHB in the letter dated 5 December 2019 that on no basis could the assets in Crown II constitute Eligible Investments for the purposes of the Octave Contract, was also false. (4). Crown II did not substantially replicate the investment securities and risk profile of ASSCFL

[362]I have found that when Crown II was set up it was designed by Astra to replicate the investment securities and risk profile of ASSCFL and that this remained Astra’s design in March 2016. I have also accepted Mr Aldama’s evidence that 14 of the 16 investment securities which were held in ASSCFL were replicated in Crown II between December 2014 and February 2016. I find, therefore, that the representation on 30 April 2015 that Crown II did not substantially replicate the investment securities and risk profile of ASSCFL was untrue. I do so on the basis that not only was it the intention of Mr Mathur and the Investment Team to replicate the investments and risk profile of ASSCFL in Crown II but also that the assets which they acquired for Crown II did in fact do so.

O. Reliance

[363]Astra’s case was that Musst did not rely on the representations made by Mr Holdom or PHB and, in particular, that trust had broken down between Mr Siddiqi and Mr Mathur and that Musst asked LGT to confirm the truth of the representations which Mr Holdom had made. Astra’s case was based on a number of individual emails and I deal with them in chronological order. (1). Email dated 8 December 2014

[364]By email dated 8 December 2014 Mr Siddiqi wrote to Mr Rigter to arrange a call. It is apparent from the email thread that the call did not take place immediately because on 12 December 2014 Mr Siddiqi wrote to Mr Rigter again asking to speak to him the following week. Mr Siddiqi’s evidence in his witness statement was that he could not remember whether the call took place. When he was cross-examined about this, his evidence was as follows: “Q. And so here we are in December. December 2014. Just a few days after the Crown II fund had been set up. And you say, in paragraph 91 of your witness statement about this: "I cannot recall when this call took place but I do remember that I spoke with Bert Rigter at the end 2014 as he wanted both my and ’Shamils thoughts on ’Anishs new fund..." You say: "told Bert Rigter when we spoke that we did not feel this strategy was ’Anish’s forte ... " So this is the discussion you're having with LGT at that time about the new fund? A. About Mr Mathur's CRE offering, correct. Q. And this same right at the beginning of December by −−the same time −−exactly the same time that Crown II had been put in place. And I suggest that Mr Rigter would have mentioned Crown II on that phone call? A. No. Why would he suggest that? Q. Because it's just been set up. You're having discussions about the new real estate fund. You were a trusted friend of his; and I suggest that you were having an open conversation about the fund and you knew about Crown II? A. No, my conversation is very specific, because he asked me to go find out what Mr Chandaria was going to do with this fund; and that's what I reported back to him. We didn't have any discussions about Crown II. Q. What I suggest is that throughout this time what Mr Holdom was telling you about a new strategy was supported by your conversations with LGT? A. What Mr Holdom was telling me about a new strategy? Q. Mr Holdom told you that Crown II and Crown III were new strategies? A. Yes. Correct. Q. And I'm suggesting that LGT told you the same thing? A. No, LGT did not tell me the same thing. LGT told me, "Can you please find out what Mr Chandaria is doing with the CRE fund?" That's it. We did not discuss Crown II. Q. And, throughout this time, you were, in fact, relying on your close relationship with LGT, not with Astra, because you thought Astra were fobbing you off? A. No, no, no. Q. Do you understand the question I put to you? A. Yes, I did. I do. I certainly do. I think I also I gave you some context earlier counsel, which is, once the investor has made an investment, we don't keep needling him or her about that. We go to the investment manager, which is what I did, which is the due process. The investment manager. Astra came back. Both the Chief Risk, their Chief Investment Oﬀicer and said, "This is entirely for different thing, CRE". I knew, end of 2014/2015, in the ether the CRE conversation is going on. I had even seen a one page document on it. I think I may have even seen the presentation on it. And that's the question to me and I answered that question to LGT. I had no discussion on C2.” (2). Email dated 30 April 2015

[365]By email dated 30 April 2015 and timed at 19.05 Mr Siddiqi wrote to Mr Rigter asking to speak to him again. By email dated 4 May 2015 Mr Rigter replied and on 5 May 2015 Mr Siddiqi responded to that email. I set out the email chain below: “I trust you are keeping well. I wanted to see if I could schedule a quick call with you please? It is nothing urgent and hence at your convenience. Are you heading to the GS Rome conference this year? I trust you are keeping well.” (Siddiqi to Rigter, 30 April 2015) “All well here, how are you? I’m in this week, please call me at your convenience.” (Rigter to Siddiqi, 4 May 2015) “We are all well at our end and getting ready to launch our India project. I will tell you a bit more about it when we speak. I unfortunately am a bit manic with meetings for the next two days and hence if I may, I will give you a call on Thursday. Look forward to it and thank you.” (Siddiqi to Rigter, 5 May 2015)

[366]Mr Spalton put it to Ms Galligan that Musst arranged a call with LGT in order to confirm what Mr Holdom had said. He also put it to Ms Galligan that LGT told Musst the same thing as Mr Holdom had done, that Musst was relying on LGT and that LGT believed that Crown II and Crown III were following a different strategy. Ms Galligan did not accept this and clearly affirmed that Musst was relying on what Mr Holdom (and later Astra’s solicitors) had said:

“If you would now get F4, please, and it's page 12 to 13. Do you see at the bottom of F4/12 an email from Mr Siddiqi right at the bottom? A. Yes. Q. And it's dated 30 April? A. Yes. Q. 7.05 pm. Do you see that? A. Yes. Q. And it's to Albertus Rigter. Just remind us who he is? A. Albertus Rigter was the partner at LGT who was responsible for the investment into Astra and who had then subsequently joined Astra and is a member of the Astra's team at the moment. Q. Thank you. So he was responsible at that time for the investment into what we just loosely call Astra? A. Yes. Q. Let's be more precise, into the Crown accounts? A. Yes. Q. And 7 pm, so within two hours of Mr Holdom's email and presumably an even shorter period of time after that telephone call we have just looked at, you have dropped him a line and you say in the next page: "Dear Bert, "I trust you are keeping well. I wanted to see if I could schedule a quick call with you please? It is nothing urgent and hence at your convenience." And you say: "Are you heading to the [Goldman Sachs] Rome conference ... " Do you see that? A. I do. Q. So you're in the dark, you're confused, you're worried about your commission, your entitlement to management and performance fees. Despite speaking to Mr Holdom, almost immediately you contacted LGT. Do you see that? A. I do, but if we keep going up the chain on the same page you have just given me, it's obviously Saleem writing this and he's talking about an India project. Q. Let's take this in stages, Ms Galligan. It's important. A. Apologies. Q. LGT were a trusted and long−term contact, weren't they? A. Yes. Q. You knew them well? A. We did. Q. You spoke to them relatively regularly? A. When we were onboarding Astra in the due diligence −−sorry, Crown I, should I say, the due diligence process was going on, then we were in regular contact. Once they invested, contact was hugely diminished because I suppose we didn't have as much value and Astra and LGT wouldn't include us in meetings or emails or that sort of thing, but we did bump into them at conferences but we weren't in −−I wouldn't say we were in regular contact. Q. So this was a special thing to reach out to them? A. A special −−I would not call it special, but, yes, we reached out to them. Q. You reaching out to them within, I suggest, minutes of speaking to Mr Holdom because you wanted chapter and verse on Crown II and Crown III? A. I don't recall the email at the time, but I do recall that we never spoke to them about Crown II and III. Most of all it sort of would have looked quite unprofessional I think to go to the investor and ask them what Astra were doing when we were supposed to be working with Astra. Q. I 'm surprised by that answer because you give evidence elsewhere that you did ask them occasionally about Astra and talk about Astra's investments? A. Yes, but didn't ask them what the difference was between Crown I, II and III.” “Q. I suggest that doesn't stack up and the reason you emailed minutes after a phone call with Mr Holdom is to find out what was going on with Crown II and Crown III. That's the only plausible explanation? A. As I say, I don't remember the email at the time, but I do recall we didn't speak to LGT about −− Q. And what it shows is that I suggest you would have spoken to them, you did speak to them and what they told you must have been consistent with what Mr Holdom told you? A. We didn't speak to LGT about Crown II and III. I do believe Saleem spoke to LGT because they wanted to know was a gentlemen called Shamil Chandria, who was very close to us and was the initial investor in the Astra strategy, they wanted to know would he be investing in the real estate fund which we believed was this new strategy and Saleem spoke to them about the real estate fund and said that Shamil wouldn't be investing and that's what they wanted to know. Q. And what I'm going to suggest is you spoke to them, they told you the same thing because they hadn't told you the same thing as Mr Holdom. You had included Crown II and Crown III in the first claim. A. If I had any evidence that Crown II and Crown III was the same strategy, I completely would have included it in the first claim. There is no way that I would have wanted to spend many years in litigation. Q. Exactly. A. I didn't know. Q. And the point is LGT supported what Mr Holdom said, I suggest? A. We didn't speak to LGT about what Crown II was or Crown III. Q. What that shows is two things. First, the fact you were reaching out to them in this manner indicates that you weren't relying on Mr Holdom, you weren't relying on my client for chapter and verse, unless you reached out to your friends at LGT? A. I relied on what Mr Holdom and what Mr Mathur told us. Q. Focus on Mr Holdom, because that's the evidence you have given. A. I relied on what Mr Holdom told me. Q. And the second thing it shows is what my client −−later on indeed through their solicitors in 2019, what they told you about Crown II and Crown III and a different strategy was (a) true or (b) at the very least reasonable, because that's what LGT thought as well? A. As I said, I don't know what LGT thought, but I would take the word of a lawyer and I fully believed −−believe it was Jones Day at the time who said it was a different strategy.”

[367]When Mr Spalton cross-examined Mr Siddiqi about the email dated 30 April 2015 which he sent to Mr Rigter, he confirmed that he had sat in on the call to Mr Holdom earlier that day and had, therefore, listened to the oral representations which he made. But he also rejected the suggestion that he had got in touch with LGT immediately afterwards to verify what Mr Holdom had said:

“Q. I suggest the reason you did that within minutes of finishing the call with Mr Holdom, you thought he was fobbing you off, was to find out what was going on. And so you asked LGT, in that subsequent call, about Crown II? A. No, sir. I was discussing with LGT. And what I was trying to do was my next deal. My first deal was Astra. I was working on an Indian sort of idea, a fund, if you will. I wanted to speak to LGT about it. And I had been trying to find out who the right person in LGT is to do India. Q. Ah. So you're saying that you were trying to find out here who the right person was? A. Yes, because LGT is a very large institution. They have their Asian exposure, as I discovered, run out of Hong Kong, a gentleman called Mr Deepak Rasgotra, who Mr Rigter asked me to go and speak to. Q. And so you say this was just about India? A. Yes, that was what I was discussing what my keenness to talk to LGT was about. Q. And you raised that, that day, with Mr Rigter, for that very reason? A. Yes, I can't remember right now whether that call occurred or not; but that was what head space was, because I want to talk to LGT about India.”

[368]Mr Spalton challenged this explanation and put an email dated 13 June 2014 to Mr Siddiqi which suggested that he had learned about the existence of Mr Rasgotra some ten months before putting his case to Mr Siddiqi: “Q. You sigh, I suggest that in fact what happened is that you e−mailed LGT on 30 April to speak about Crown II and that's exactly what happened. They had no interest in talking to you about India. A. I don't think we −−this call even happened. Q. You say, on 5 May, "I will give you a call on Thursday". A. I may have said it. Again, I don't know whether the call actually transpired. Q. Moreover, Mr Siddiqi, I suggest you spoke to LGT, they're a long−term trusted contact; and what happens is they provide exactly the same information about Crown II and indeed the new strategy of Crown III that Mr Holdom provided, because that was honest and correct information −− A. Absolutely not. No, we have never had a discussion. That's incorrect. We never had a discussion about Crown II or Crown III with LGT. That's the kind of information that Mr Holdom provided me. That's incorrect.” (3). Email dated 30 November 2016

[369]By email dated 30 November 2016 Mr Siddiqi wrote to Ms Galligan reporting on a conference at Deutsche Bank which he had attended on the day before. He stated that he was seated opposite Mr Rigter and that they had spoken about Astra as part of a wider conversation. He then reported the following details about their conversation:

“● Bert said their portfolio was going well and they had sold a few assets and bought a few more. I asked if they were still synthetic ABS and he said yes. ● He asked how things were for us and asked if we had taken our money out? I suggested to him that as he knew I was not an investor but integral to bringing the deal together, taking Anish out of DB, putting it under the Octave umbrella and introducing it to them. I also said I had hoped the portfolio had been good for them. ● He brought up my conversation with Ralf at the GS conference in Rome and wanted to know if all was well with Astra? I re-iterated to him that all I had said to Ralf was LGT were the last remaining investor and since MUSST was integral to the deal construct and coupled with our fiduciary responsibility to LGT, we knew Shamil had redeemed and 2B was in the process of redeeming. ● He then told me to make sure to tell him if things were not well and I promised him that I would do the same given we had known each other for a near decade.”

[370]Mr Spalton took Ms Galligan to this email and, in particular, to the first bullet point. He suggested to her that Musst had discussed the assets which LGT held with Astra. I set out the exchanges between Mr Spalton and Ms Galligan in full because Astra relied on the two lines which are highlighted in bold below:

“Q. So you did discuss Astra, you did discuss the assets? A. The thing I would say in context of this we had a different hat on then, the litigation had started. We realised June −− from June we'd started the letters before action, we knew something shady was going on. At that stage, we wanted to try and have a conversation with LGT or find out as much as we could, but we were obviously very careful not to prejudice proceedings in any shape or form, given that we're also facing a defamation claim that Mr Mathur had put LGT at the centre of. Q. So wait a moment, so you say by this time a dispute had arisen, yes? A. Yes. Q. So you knew that your entitlement to fees was in play? A. Yes. Q. You have asked about assets in this exchange here or Mr Siddiqi has and they said, yes, there's still synthetic assets? A. Yes. Q. And you say you thought something shady was going on. What did you think was shady at that time? A. That they were in litigation. Q. No, no, no, litigation is a commercial dispute. It's not shady. "Shady" implies dishonest or −− A. Maybe I shouldn't have used the word "shady", I apologise, but Mr Mathur was −−and Astra were withholding information from us at that stage and they were −−and we had this potential defamation claim in addition. Q. You see you're accusing one individuals of my clients of deliberately concealing information from you in this litigation which is a serious allegation, isn't it ? A. Yes. Q. And yet at this time you say you thought something shady was going on and you're asking LGT about it and LGT were giving you information. So you had the means of finding out what was going on and you're talking to your trusted friends. It was on them on whom you were relying? A. This gentleman Mr Rigter, who Saleem met, shortly after this conversation joined Astra? Q. At this point in time, he was still a longstanding trusted friend of yours? A. And he shortly joined Astra. Q. Answer the question. Answer the question, Ms Galligan. At this time, he was a longstanding trusted friend of yours? A. He was a −−"friend" is a strong word, but he was somebody that we knew in the industry well, yes. Q. Mr Siddiqi explains you built up a relationship with him as early as 2011/2012? A. Yes. Q. What I'm putting to you is that in the context of this serious allegations you are making about Mr Holdom, a claim for negligent misstatement, amongst other things, you were relying on LGT. You were speaking to them and they were giving you information. You weren't relying on what my client was telling you. A. That's not correct. We were relying on what Mr Holdom told us and what Mr Mathur told us and, prior to this, we didn't really have any conversation with LGT to try and gain an understanding of what the assets were and this, as Saleem said, was at a conference and was a brief conversation. Q. By mid−2016 go to paragraph 90 of your witness statement −− A. Sorry, paragraph? Q. Nine−zero, 90, you say by this time, by 2016, mid−2016, you concluded that "Anish was not the man of honour that he kept telling us he was." So you didn't trust or rely on Astra at the time? A. Did you say paragraph 90? Q. Yes, 90 on page D40. You may still be in your husband's statement. A. I think I was, sorry. Q. Do you see that? You say "Anish was not a man of honour". So the point is you were not relying on Astra by mid−2016? A. Correct. But the reason we, at that stage, couldn't have gone to LGT or did not go to LGT was, one, the defamation claim that was putting LGT at the centre of it and Mr Rigter joined from LGT and joined Astra. Q. And not only have you fairly accepted you weren't relying on Astra at that time, you wouldn't have relied on anything said on behalf of Astra by that time? A. By the lawyers? Q. On behalf of Astra, yes? A. But the only people who spoke on behalf of Astra were the lawyers so I relied on what the lawyers said, yes. Q. They are Astra's agent. They are Astra's mouthpiece. A. And I relied on what they said. Q. But nevertheless you weren't relying on Astra? A. I relied on what Mr Holdom and Mr Mathur said until we had disclosure in the defamation claim and, as we know, we saw the email from Mr Adler saying the strategies were identical. Q. I suggest that's wrong. But moreover you didn't need to rely on Astra, did you? You had the right to exercise rights to information under the introduction agreement? A. I did and, as you pointed out, I repeatedly asked for the breakdown of assets. I asked for statements which I didn't get. Q. Under clause 4.1 there's provision to obtain information. Under 4.2.4 provision for Musst to approve or object to statements, dispute resolution mechanism. You didn't exercise any of those? A. Not without trying. I have −−there's emails, there was verbal requests for statements for breakdown of assets, of which none was forthcoming. Q. You didn't put in place that contractual mechanism though, did you? A. What does it mean "put in place"? Q. You issued a claim many years later? A. From many years later from when, sorry? Q. Sorry. Rather than putting in place and taking advantage of that contractual mechanism, you waited to issue proceedings a number of years later, the Crown I proceedings? A. I believe I asked for the information by email.”

[371]When Mr Siddiqi was asked about this email, Mr Spalton suggested to him that before the First Claim Musst knew that LGT was still buying synthetics and could have bought a claim in relation to those investments. Again, I highlight one particular question and answer in this exchange: “Q. Can I take this again in stages. So trust had broken down with Mr Mathur? A. Correct. Q. You didn't believe him by this time? A. No. Q. You were speaking to LGT, however; you still trusted them? A. Well, I spoke to them to the extent of this chat. So it's Deutsche Bank −− Q. Just answer my question: did you trust them? A. I trusted them. Q. And they told you there were synthetic assets? A. Yes. Q. So a long time prior to the Crown I proceedings, you'd been told by LGT that in their different −−across their portfolio they were still investing in synthetic assets? A. Sorry. When was this? Q. 2016, that e−mail? A. Yes, by 2016 they had confirmed they were still with Astra. They were still buying synthetics. Q. Therefore, you knew, before Crown I, if that was right, you could have brought a claim in relation to that? A. No. I didn't know that. We didn't have fact. I just had Mr Rigter saying to me, "Yes, we're still involved with synthetics", but we had no facts. All we had at this point of time was Mr Mathur and Mr −−what's his name −−denying and saying, "It's completely different". And so my conversation, "Well, you're still involved with Astra; you're still buying synthetics", yes. Q. You didn't trust Mr Mathur by this time; you couldn't possibly have been relying on anything Astra said or, indeed, anything said by anyone on Astra's behalf, whether their solicitors or otherwise. You didn't trust Astra, did you? A. No.” (4). Astra’s submissions

[372]Mr Spalton and Mr Mo made four submissions in support of their case that Musst did not rely on any of the representations above. First, they submitted that both Ms Galligan and Mr Siddiqi had accepted that by 2016 they were not relying on Astra. I reject that submission in relation to Ms Galligan’s evidence. Astra relied on the two lines from the transcript which I have highlighted in bold taken out of context. In my judgment, she did not accept that Musst was no longer relying on the specific representations made by Mr Holdom but only that Musst no longer trusted Astra. She was not asked specifically about Mr Holdom’s representations and it is clear from the entire passage (which I have set out above) that her evidence was that Musst was relying on those representations.

[373]I also reject that submission in relation to Ms Siddiqi and for a very similar reason. Mr Spalton put two different propositions to Mr Siddiqi and when the four lines of the transcript are put in context, I am satisfied that he was only assenting to the second proposition, namely, that Musst did not trust Astra. Further, immediately before he had given this answer, he had made the obvious point that Mr Mathur was continuing to deny that there were any synthetic ABSs in either Crown II or Crown III and that Musst had no evidence with which to challenge the contrary position which he had taken (and which PHB later confirmed in correspondence).

[374]Mr Siddiqi accepted in his witness statement that Ms Galligan and he “had suspicions” but even if he tried to check the position by asking Mr Rigter directly, I am not satisfied that those suspicions negated Musst’s reliance on the representations made by Mr Holdom and for the reason which he gave. The obvious analogy is with the well-known case of Zurich Insurance Co plc v Hayward

[2016] UKSC 48

[2017] AC 142

where an insurer was induced to settle a personal injury claim by a fraudulent statement in which the insured exaggerated his injuries. The judge found that the insurer’s claims manager and solicitor did not believe him but that they did believe that there was a real risk that the Court might accept them. The Supreme Court held that the requirement of reliance was made out. Lord Clarke JSC (with whom the other members of the Court agreed) stated as follows at [40]:

“As explained above, the questions whether Zurich was induced to enter into the settlement agreement and whether doing so caused it loss are questions of fact, which were correctly decided in its favour by the judge. I accept the submission that the fact that the representee (Zurich) does not wholly credit the fraudster (Mr Hayward) and carries out its own investigations does not preclude it from having been induced by those representations. Qualified belief or disbelief does not rule out inducement, particularly where those investigations were never going to find out the evidence that subsequently came to light. That depended only on the fact that Mr and Mrs Cox subsequently came forward. Only then did Zurich find out the true position. As Mr Hayward knew, Zurich was settling on a false basis.”

[375]Secondly, Mr Spalton and Mr Mo also submitted that on or after 30 April 2015 Musst did not rely on Mr Holdom’s representations but immediately called LGT which confirmed what he said. I also reject that submission and I accept the evidence of Ms Galligan and Mr Siddiqi that they did not speak to Mr Rigter or any other representative of LGT about the composition of Crown II and Crown III. I do so for the following reasons:(1) There was no record of such a conversation taking place and I am not prepared to draw the inference that Mr Siddiqi must have spoken to Mr Rigter about Mr Holdom’s email or the oral conversation simply because he sent an email to LGT two hours later.

(2) Moreover, I accept Mr Siddiqi’s evidence that he would have treated it as a breach of confidence to approach one of Astra’s clients to discuss the investments which Astra had made on its behalf without Astra’s permission. I accept that in November 2016 Mr Siddiqi asked Mr Rigter whether he was still investing in synthetics. But in my judgment, that supports Mr Siddiqi’s evidence. Even after trust had broken down, he was only willing to ask about LGT’s investments in very general terms.

(3) Finally, if Mr Siddiqi and Ms Galligan had believed that Crown II and Crown III were not Eligible Investments and had discounted Mr Holdom’s representations as untrue, I can see no reason why they would not have pursued additional claims in relation to Crown II and Crown III in the First Claim (as they did in the Second Claim). Astra gave no reason why they did not do so.

[376]But even if (contrary to the finding of fact which I have made) Mr Siddiqi or Ms Galligan did speak to Mr Rigter in early May 2015 and he repeated Mr Holdom’s representations, it does not follow that Mr Holdom’s representations ceased to have any causative effect. In Zurich Insurance Co plc v Hayward Lord Clarke accepted the proposition that “just as belief in the misrepresentation is not required, so also belief in other inducing causes is irrelevant”: see [28] and [32] to [33]. Both were inducing causes and, indeed, it is more likely that Mr Rigter’s confirmation only served to give Mr Siddiqi and Ms Galligan more confidence in Mr Holdom’s representations and to strengthen their belief in them.

[377]Thirdly, Mr Spalton and Mr Mo submitted that Mr Siddiqi gave evidence that Musst would not have brought a claim in relation to Crown II or Crown III until the disclosure of Dr Adler’s email dated 3 February 2016 in the Defamation Claim and would not, therefore, have brought a claim even if Mr Holdom had not made the representations above. I reject that submission. Mr Siddiqi did not say this in evidence and Mr Spalton did not put the counterfactual to him. I therefore attribute little weight to the following evidence upon which Mr Spalton and Mr Mo relied:

“Q. Wait a moment. Sorry. Forgive me for labouring this. If you were getting the maximum fee for the Crown accounts then there would be no basis on which to claim further sums in this claim. There is a separate fee across the accounts, if you are right, isn't there? A. We later discovered what Astra were doing. At that point in time we have no idea. At −−later on, Astra is saying, you know, "I'm charging this for Crown I, Crown II", which is −−we only got that in discovery. At that point of time, we didn't know it.”

[378]Fourthly, and finally, Mr Spalton and Mr Mo relied on the fact that Musst had contractual rights to obtain information which they did not exercise. I also reject that submission. I have already found that from 28 July 2016 Astra failed to provide Statements to Musst in breach of clause 4.1 and when Mr Spalton put this point to Ms Galligan, her evidence was that she asked for the information by email but did not receive it. I accept that evidence (which is consistent with my finding of breach of contract). (5). Finding of Fact

[379]Having rejected Astra’s submissions, I accept the evidence of Ms Galligan and Mr Siddiqi that they relied on Mr Holdom’s representations and the later representation made by PHB. I found them both to be honest witnesses and I find that they relied on Mr Holdom’s representations, which induced them not to assert claims for fees in relation to Crown II and Crown III in the First Claim. I also find that PHB’s continuing representation induced them not to apply to amend to pursue those claims. P. Negligence (1).

(i) Musst’s case

[380]In the Amended Particulars of Claim, paragraph 32, Musst’s pleaded case was that Astra LLP assumed a common law duty of care in tort to it in making the representations on 30 April 2015:

“Further, in making the statements, Astra LLP owed a common law duty of care to the Claimant, because, as Astra LLP, through Mr Mathur and Mr Holdom, knew (because it was obvious) the Claimant had an interest in the accuracy of the information being provided, and it was intended by Astra LLP or reasonably foreseeable to it that the Claimant would rely upon it.”

[381]Astra denied that Astra LLP owed such a duty to Musst. In particular, Astra relied on the fact that clause 4 created a contractual mechanism for checking “the status of possible Eligible Investments” and that it was unreasonable for Musst to rely on Mr Holdom’s representations. In the Defence, Astra pleaded as follows (so far as relevant):

“49.3 Neither Mr Holdom nor Payne Hicks Beach LLP were told or understood that the Claimant might seek to rely on the alleged representations for the purpose and to the extent now claimed. They had no special knowledge or instructions, and did not intend and were not understood by the Claimant to be giving any representation or otherwise assuming responsibility on behalf of the Defendants for the accuracy of what they said. 49.4 The Octave Contract provided the contractually agreed means by which information as to the status of possible Eligible Investments could be requested and obtained by the Claimant, namely by seeking a statement under clause 4.1. It also provided the contractually agreed means for querying such information, namely by instigating a dispute within clause 4.2 within 10 days, referring the matter to auditors under clause 4.4 or accessing records under clause 11.3. 49.5 The Octave Contract made no provision and left no room for these obligations to be carried out by reference to a common law duty of care. By contrast, the Defendants were subject to a duty of care as regards the provision of its contractual duties pursuant to clause 5.3. There was and is no basis to vary or supplant that contractually agreed scheme. 49.6 It would not have been reasonable for the Claimant to rely on Mr Holdom or Payne Hicks Beach LLP, when it had the means to check the information for itself, either by communicating with Astra’s investment team, by invoking the contractual mechanisms, or by communicating with Crown, or by resorting to legal means.”

[382]In the Reply, paragraph 74, Musst alleged that it was an implied term of the Octave Contract that Astra LLP would exercise reasonable care. But there was no express plea of an assumption of responsibility. Further, Musst did not allege that Astra UK owed a separate duty of care in relation to PHB’s letter dated 5 December 2019 or that it assumed responsibility for the earlier statements made by Mr Holdom on behalf of Astra LLP. These would not have been easy issues to resolve and it would have been necessary for Musst to plead them expressly and address them in some detail in submissions. They did not do so and I, therefore, dismiss the claim for negligence against Astra UK on the basis of Musst’s pleaded case. (ii) The Law

[383]Both parties cited the decision of the House of Lords in NRAM Ltd v Steel

[2018] UKSC 13

[2018] 1 WLR 1190

(a Scottish appeal). The question in that case was whether the borrower’s solicitor owed a duty of care to the lender for the accuracy of a statement that the whole loan was to be repaid and the security discharged which the lender then failed to check. The Supreme Court held that no duty of care arose. Lord Wilson JSC (with whom the other members of the Court agreed) emphasised the need for the representee to establish that it was reasonable to rely on the relevant representations and he stated as follows at [18] and [19]:

“18. In Customs and Excise Comrs v Barclays Bank plc [2007] 1 AC 181, Lord Mance at para 85 described Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 as “the fountain of most modern economic claims”

. In the Hedley Byrne case the appellant asked its bankers to inquire into the stability of a company and, in response to the inquiry, the company's bankers, acting (so it was assumed) carelessly, gave false information about the company, which it expressed as “without responsibility” but on which the appellant relied to its detriment. Because of the disclaimer the appellant's claim against the company's bankers failed. The House of Lords held, however, that in the absence of the disclaimer the bankers would have owed a duty of care to the appellant. At p 529, Lord Devlin held that, in the absence of a contract between a representor and a representee, a duty of care in making the representation arose only if the representor had assumed responsibility for it towards the representee; and he proceeded to interpret all five of the speeches delivered in that case as requiring that the responsibility should have been voluntarily accepted or undertaken. The assumption of responsibility could, he explained at pp 529 and 530, be express or implied from all the circumstances. Lord Pearce added at p 539 that liability in such circumstances could arise only from “a special relationship”. 19. What is noteworthy for present purposes is the emphasis given in the decision in the Hedley Byrne case to the need for the representee reasonably to have relied on the representation and for the representor reasonably to have foreseen that he would do so. This is expressly stressed in the speech of Lord Hodson at p 514. In fact it lies at the heart of the whole decision: in the light of the disclaimer, how could it have been reasonable for the appellant to rely on the representation? If it is not reasonable for a representee to have relied on a representation and for the representor to have foreseen that he would do so, it is difficult to imagine that the latter will have assumed responsibility for it. If it is not reasonable for a representee to have relied on a representation, it may often follow that it is not reasonable for the representor to have foreseen that he would do so. But the two inquiries remain distinct.

[384]Lord Wilson also pointed out that in Caparo Industries plc v Dickman

[1990] 2 AC 605

the House of Lords identified “the need for a representee to establish that it was reasonable for him to have relied on the representation and that the representor should reasonably have foreseen that he would do so”: see [23]. He then went through the many cases in which it has been held that a firm of solicitors acting for a client either in litigation or in a transaction owes no duty of care to the opposing party unless it steps outside its role and assumes responsibility directly for the accuracy of the information: see [25] to [32]. Finally, he concluded that the trial judge had been right to hold that it was not reasonable for the lender to rely on the borrower’s solicitor’s representation without enquiry: see [38].

[385]In JP SPC4 v Royal Bank of Scotland International Ltd

[2022] UKPC 18

[2023] AC 461

two investment funds brought a claim against a bank in the Isle of Man for the losses which they suffered as a consequence of an alleged fraud and argued that the bank owed them a duty of care. The Privy Council rejected that argument on the basis that a bank owed no tortious duty beyond its contractual Quincecare duty not to execute a customer’s order if it was on notice of fraud. Lord Hamblen JSC set out the legal principles relevant to the assumption of responsibility at [60] to [64] and then dealt with the issue at [65] to [68]: “64. An examination of the case law indicates (see Clerk & Lindsell on Torts , 23rd ed, paras 7–113 to 7–137) that the factors which have been of particular relevance in determining whether there is an assumption of responsibility in relation to a task or service undertaken include:(i) the purpose of the task or service and whether it is for the benefit of the claimant;

(ii) the defendant's knowledge and whether it is or ought to be known that the claimant will be relying on the defendant's performance of the task or service with reasonable care; and

(iii) the reasonableness of the claimant's reliance on the performance of the task or service by the defendant with reasonable care. 65. In the present case no express assertion of an assumption of responsibility is made in the amended particulars of claim and none of the relevant factors are alleged to be present on the facts. It is not alleged that the Bank undertook to perform any task or service for the Fund or that there were any exchanges crossing the line between them. The only service the Bank undertook to provide was for its customer, SIOM. The Fund and the Bank are not alleged to have dealt with each other at all. 66. Regardless of the pleaded case, Mr Auld submitted that the Bank arguably assumed responsibility to the Fund when it re-designated the Accounts with titles that indicated the funds were held for and beneficially owned by the Fund. There is, however, no suggestion that the redesignation of the Accounts arose from any dealings between the Fund and the Bank. Indeed, the Fund's evidence is that it was Turnstone (as the director of SIOM) which dealt with the Bank in respect of the renaming of the Accounts (as made clear in Mr Royle's witness statement). There is no evidence to suggest that the Bank did anything other than act as instructed by its customer. 67. Mr Auld further submitted that the Fund's reliance on the Bank could be inferred from the fact that the Fund was unable to monitor the Accounts whereas the Bank was managing them day-to-day and in a position to prevent suspicious (or obviously fraudulent) payments. The Fund has, however, produced no evidence of reliance or indeed of anyone within the Fund giving any thought to the possibility of the Bank owing any responsibility to the Fund. Nor is it alleged that the Bank knew or ought to have known of relevant reliance by the Fund. 68. In all the circumstances, the Board concludes that the Fund has pleaded no factual basis (and there is nothing in the assumed facts) upon which a duty of care based on assumption of responsibility could be established. The Fund has also been unable to identify any or any sufficient actual or prospective evidence which could establish such a duty.” (iii) Findings of fact

[386]Mr Knox put to Mr Holdom squarely that the information which he was providing to Ms Galligan was important and that he expected her to rely on it. Mr Holdom ultimately accepted that he intended her to rely on it and that he wanted Musst to understand the basis on which it was to be paid:

“Q. Can I just suggest −−this was obviously an important email that you're sending to Ms Galligan, isn't it? Because you're explaining why Musst are not entitled to Crown (overspeaking) −− A. (overspeaking) important at all; it's just part of my day−to−day activity, but it seems to be quite important to date. Q. Objectively it's obviously an important email, for one person, qualified person in the financial services world, writing to another, to make sure that they inform them of the truth. That must be right? A. Somewhat right. Q. And it must be important to give them an accurate account of what is the position when you're saying, "I'm afraid you're not entitled to the money". It must be important to give an accurate account. A. Okay. Q. It must also be important that you, yourself, understand what you're saying −− A. Why? Q. −−when the email is going out under your name? A. I don't understand why (overspeaking) −− Q. Well, no, forgive me. A. I 'm able to rely −− Q. Sorry. A. I 'm able to rely on various parties inside Astra to give their expertise to help me perform whatever role I'm asked to perform. That's the same with the General Counsel; it's the same with the CFO; it's the same with the investment team. Q. You intended Musst to rely on what was said in this email; that must be right? A. I wanted them to understand the basis upon which they were going to get paid. Q. Could you answer my question? You intended (overspeaking) them to rely on what you were telling them. A. To the extent that it matches the payment that they're going to receive , yes. I don't know what you mean by rely on, I 'm sorry. Q. Well, no. You intended them to believe what you were saying. A. I didn't expect them to think it was a lie, for sure. Q. No, forgive me. You intended them to believe what you were saying? A. I suppose so.”

[387]Mr Holdom accepted that it was “somewhat right” that his email dated 30 April 2015 was important. If he did not accept this in evidence, I find that his email was important. Indeed, I find as a fact that it was obvious to Mr Holdom that his email was of particular importance to Musst for two reasons: first, because he wanted Musst to understand the basis on which it was going to be paid (as he accepted above) and, secondly, because Ms Galligan called him the very same day to discuss its contents. Finally, Mr Holdom accepted grudgingly that he intended Musst to rely on his email but if there is any doubt I find that he did intend Musst to rely on both the contents of his email and also its accuracy. (iv) Application of the law to the facts

[388]In my judgment, Mr Holdom assumed a tortious duty of care to Musst on behalf of Astra LLP for the accuracy of the representations in his email dated 30 April 2015 and his oral representations later that day. I have reached this conclusion for the following reasons:(1) I have found that it was obvious to Mr Holdom that his email was of particular importance to Musst and that he intended Musst to rely on its contents and its accuracy. Furthermore, all of the relevant information about Crown II and Crown III was exclusively within Astra’s knowledge and Mr Holdom knew (or ought to have known) that Ms Galligan had no means of verifying what he said.

(2) If I had been satisfied that Mr Holdom had made a genuine mistake in his earlier emails to Ms Galligan and Ms Imiolek, I might have been prepared to accept that it was not reasonable for Musst to rely on his representations. However, I have found that Mr Holdom took instructions from the Investment Team before completing the LGT Questionnaire and that he sent the emails dated 4 February 2015 and dated 27 April 2015 on the instructions of either Mr Mathur or Mr Thomas (or both of them) and also that those emails reflected their instructions to him. In my judgment, he made no mistake in his earlier communications with Musst.

(3) Astra’s principal defence to the claim for negligent misstatement was that the imposition of a duty of care was inconsistent with the contractual mechanism for the provision of information in clause 4 of the Octave Contract. Mr Spalton and Mr Mo advanced this argument as follows in their written opening submissions: “167.1 Tortious duty inconsistent with contract: There was a mechanism within the Octave Contract which allowed Musst to obtain information about inter alia particulars of Eligible Investments upon Musst’s request (the Statements in clause

4.1 ). There was also provision for Musst to approve or object to the contents of any Statements and a dispute resolution mechanism in that event (clauses

4.2 to 4.4). The existence of this mechanism was an agreed allocation of risk. Imposing a duty of care for informal correspondence which fell outside the contractual mechanism would be tantamount to imposing more onerous obligations than the Octave Contract provided for, thereby cutting across the contractual scheme. 167.2. No reasonable reliance by Musst: Given the existence of the contractual power referred to in the previous paragraph, it was not reasonable for Musst to rely on the pleaded representations. Further, the extent of Musst’s knowledge about Crown II will be explored at trial inasmuch as it affects the misstatement claim.”

(4) If I had accepted that the imposition of a duty of care was inconsistent with Astra LLP’s contractual duties under the (novated) Octave Contract, then I might well have accepted the argument that it was not reasonable for Musst to rely on the representations made by Mr Holdom on 30 April 2015. However, I do not accept that the imposition of such a duty of care is inconsistent with those obligations. In my judgment, Mr Holdom was doing no more than volunteering information which Astra LLP was obliged to provide under clause 4.1 and once he had volunteered the information it was reasonable for Musst to rely on it without serving a formal notice under clause 4.1.

(5) Clause 4.1 does not specify that a request should be given in writing and Ms Galligan asked a series of questions in the follow up call on 30 April 2015 effectively asking for the particulars to which Musst was entitled under clause 4.1. The purpose of clause 4.1 was to enable Musst to police Astra’s performance of its obligations under the Octave Contract and in substance that is what Ms Galligan was doing on 30 April 2015. I see no inconsistency between Astra performing those obligations and assuming a duty of care for the information which it provided voluntarily.

(6) Furthermore, it hardly lies in Astra’s mouth to pray in aid the contractual mechanism in clause 4 if it was not prepared to comply with its contractual obligations or do so truthfully. I have found that on 28 July 2016 Musst made a request under that clause in relation to Crown II and Crown III, that Astra committed deliberate breaches of clause 4.1 after the conclusion of the First Claim and decided not to invoice LGT in order to defeat Musst’s entitlement to performance fees or to starve it of funds.

[389]Given this conclusion, it is unnecessary for me to consider whether the Octave Contract contained an implied term requiring Astra LLP to disclose whether Crown II or Crown III was an Eligible Investment. I also add that I have not considered either whether the duty of good faith in clause 6.1 of the Octave Contract (as novated) required Astra LLP to disclose that Crown II or Crown III was an Eligible Investment because the case was not pleaded or argued in this way. It is unnecessary for me to decide those issues and they would not have been easy to resolve: see Re Compound Photonics Group Ltd

[2022] EWCA Civ 1371

[390]Finally, I make it clear that I have considered whether I should dismiss the negligent misstatement claim because Musst did not expressly plead that Astra LLP assumed responsibility for the accuracy of the information which Mr Holdom gave to Ms Galligan. However, I am satisfied that the claim was adequately pleaded. As both parties recognised in their statements of case, the key questions for the Court were whether it was reasonable for Ms Galligan to rely on Mr Holdom’s representations and, in particular, whether the contractual mechanism in clause 4.1 precluded the imposition of a duty of care. (2). Breach of Duty

[391]Mr Holdom’s evidence was that he relied on Mr Thomas for the accuracy of the statements which he made and that he made no attempt to verify them either then or later. Although he was the Chief Operating Officer of Astra, he accepted that he was “just the messenger” and that he made no attempt to satisfy himself that what he told Ms Galligan was correct even before coming to give evidence:

“MR JUSTICE LEECH: −−of this organisation. So one question I was going to ask you at the end, but I'll now ask you it, which is that Mr Knox put the question to you, said: you know, you don't give positive evidence to me that there was a reasonable basis for the −−even now, reasonable basis for the belief that what you said was true on that occasion. And the question I wanted to ask you is: well, why not go back and −−you're the Chief Operations Oﬀicer of this organisation, even now. Why not go back and satisfy yourself that you were −−you were actually right, before you come to give evidence? A. It hasn't crossed my mind to do so. I trust Mark Thomas' judgment on these things implicitly. MR JUSTICE LEECH: So effectively your evidence to me is you just relied −−you relied on other people? A. That's true. MR KNOX: Could I call it you're just the messenger? A. In this instance, yes.”

[392]I find that Mr Holdom acted negligently and in breach of the duty of care which I have held that Astra LLP owed to Musst because he failed to take any steps to verify the representations which he made to Ms Galligan both orally and in writing. I make this finding for the following reasons:(1) I have found that in January 2015 Mr Holdom was informed by the Investment Team that Astra was not following a new strategy in relation to any of the funds set out in Box A1, namely, ASSCFL, ASCIL and Astra’s managed accounts including Crown II before answering question 2.2 of the LGT Questionnaire. I find, therefore, that on 30 April 2015 he either knew or ought to have known that Crown II had not been set up for a new or different strategy from ASSCFL or any of Astra’s other managed accounts.

(2) I find that Mr Holdom permitted Mr Thomas to write out the contents of the 30 April 2015 email on his computer or cut and pasted that text into his email without giving its contents any independent thought. I also find that Mr Holdom repeated its contents to Ms Galligan orally later that day without giving it any independent thought.

(3) In my judgment, a reasonably competent Chief Operating Officer would not have made representations of fact to a contractual counter-party such as Musst on an important issue such as fees without taking reasonable steps to verify those representations. Mr Holdom failed to take any steps to verify them at all.

(4) If Mr Holdom had remembered his answer to the LGT Questionnaire, Q2.2 and had appreciated that Mr Thomas was giving him conflicting or inconsistent information, he would and should have taken further steps to investigate the accuracy of Mr Thomas’s proposed form of words and, if necessary, asked Mr Murray for legal advice. If the Investment Team had answered his questions accurately and truthfully and Mr Murray had given him reasonable advice, then he would not have made any of the four representations above.

(5) Even if it was reasonable for Mr Holdom to rely on the explanation given by Mr Thomas, I am satisfied that Mr Thomas was also negligent. Given the findings which I have already made, I am satisfied that there was no reasonable basis for him to make any of the four representations which I have set out above. Further, since he did not give evidence before me, Astra was unable to offer any reasonable explanation for his conduct.

Q. Causation

[393]Mr Siddiqi’s evidence was that Musst only discovered that the representations made by Mr Holdom were untrue when it obtained disclosure of Dr Adler’s email dated 3 February 2016 in the Defamation Claim. It was also his evidence that if it had been disclosed earlier, Musst would have tried to have all claims heard together (references removed):

“76. It was only when we got disclosure of the email sent by Christian Adler to Ralph Plotke on 2 February 2016 which said "all our credit vehicles have pursued a very similar if not identical strategy so far" that what we realised that what we had had been told before was not true. 77. By this time, it was too late, as I understood it, to amend the Crown I claim to bring a claim alleging that Crown II and Crown III also consisted of Eligible Investments, and so a claim making this allegation had to be issued separately, as it then was in April 2021. (I understand that we sought to make other, lesser, amendments to the Crown I claim but these were eventually withdrawn). 78. Had the Alder email been disclosed to us earlier, we would most certainly have tried to have all claims heard together. Instead, we have had to initiate a second litigation, and secure new funding to do so, at substantial cost.” 79. I understand and consider that any sums owing to Musst could and should have been ordered in one combined claim. Musst has had to secure two separate litigation funding deals, one for each trial, has had to pay out a litigation funder and ATE insurer already following its success in Crown I and if successful at trial in these proceedings will have to do so again. There has also been a huge time commitment to a second case which has had an impact on Musst's ability to do it's 'day job' closing deals. This is in addition to vastly increased legal costs for having to litigate issues in a second trial that would have been dealt with in the first trial. I find it galling that Astra sought to have this claim struck out as an abuse when only reason it has had to be brought is because information was withheld.”

[394]I accept Mr Siddiqi’s evidence which was not challenged and I find that if Dr Adler’s email or, more accurately, its contents had been disclosed by Astra earlier, then Musst would have brought the claims relating to Crown I, Crown II and Crown III together. In particular, I am satisfied that Musst would have issued a single claim in relation to all three managed accounts if Astra had complied with its obligations under clause 4.1 by 11 August 2016 or at any time before the commencement of the First Claim and had stated that Crown II and Crown III were Eligible Investments or provided copies of the invoices which it had submitted in respect of both accounts.

[395]Moreover, Mr Spalton and Mr Mo did not challenge Mr Siddiqi’s evidence that if the email itself had been disclosed earlier, the same outcome would have been achieved. In particular, they did not suggest that it would not have been possible to amend the Particulars of Claim and introduce the claims in relation to Crown II and Crown III in the First Claim if Dr Adler’s email had been produced on disclosure and PHB had not continued to represent to Musst that Crown II and Crown III were not Eligible Investments. I find, therefore, that as a consequence of Mr Holdom’s negligent misrepresentations Musst lost the opportunity to bring the claims in relation to Crown II and Crown III in the First Claim. R. Assessment of loss (1). Costs as damages

[396]Mr Siddiqi’s evidence (which was again unchallenged) was that Musst was advanced £1.7 million in funding for the Second Claim and will be obliged to pay £3.4 million and a second issue fee of £10,000 if successful. It was also his evidence that Musst has taken out an ATE policy under which it will pay a deferred premium of £557,760 if successful. His evidence was that Musst would have avoided these costs if it had been able to pursue the claims in relation to Crown II and Crown III in the First Claim. He accepted, however, that Musst would have to give credit for the additional fees which it would have incurred in the First Claim to the litigation funder and the additional premium which it would have had to pay to the ATE insurer.

[397]This gives rise to a complex issue on which the parties made only brief written submissions. Mr Knox and Ms Bailey relied on McGregor on Damages 22nd ed (2024) at 22—017 to 22—027 where the editor sets out the cases in which a claimant who relies on an independent cause of action may be able to recover damages for additional costs which it has incurred in earlier proceedings against the same party. Mr Spalton and Mr Mo relied on the decision of the Supreme Court in Hirachand v Hirachand

[2024] UKSC 43

[2025] AC 599

and the article “Costs as Damages” by Professor Louise Merrett published in (2009) 125 LQR 468 which Lord Richards JSC cited at [38] to [41] of that decision.

[398]Berry v British Transport Commission

[1962] QB 306

is one of the cases upon which McGregor relies for the proposition that one party may recover extra costs as damages from the same party if there is a separate and independent cause of action arising out of a different breach of contract or wrong. For example, Devlin LJ found as follows in Berry at 322 in support of this proposition:

“I find it difficult to see why the law should not now recognise one standard of costs as between litigants and another when those costs form a legitimate item of damage in a separate cause of action flowing from a different and additional wrong.”

[399]In Hirachand v Hirachand, however, the Supreme Court held that a claimant who had made a claim for financial provision under the Inheritance (Provision for Dependants) Act 1975 could not recover an additional sum for the success fee which was payable under a CFA as part of the financial provision to be made for her by the Court. They did so because the success fee payable under the CFA was part of the claimant’s costs and was not recoverable under the CPR costs regime.

[400]A brief analysis of these competing authorities demonstrates that the present case gives rise to a novel point (and one which is unlikely to arise very often). Thus, McGregor does not go so far as to state that a claimant is able recover costs as damages in the same action even if that party has an independent cause of action. On the other hand, Hirachand is not authority for the proposition that a claimant is not entitled to recover costs as damages in the same action if they have a separate and independent cause of action and those costs constitute the loss which flows naturally from the relevant breach of contract or wrong.

[401]In my judgment, it is not appropriate for me to reach a final decision on this issue in the absence of full argument and since it appears to be common ground that there will have to be a consequential hearing to fix the amount of any sums owed to Musst and of any damages, I consider it appropriate to direct further written and oral submissions on this point if the parties wish to argue it. If Mr Siddiqi’s evidence is accurate, then the amount at stake could be very substantial. It may also be that this point is no longer a live one because I have only found Astra LLP and not Astra UK liable for negligent misrepresentation. But if they wish to take it, the parties should have the opportunity to present further argument on this issue. (2). Revenue Share from December 2014 to April 2015

[402]I am satisfied, however, that as a consequence of Astra’s misrepresentations, Musst did not issue the Claim Form in the Second Claim until 29 April 2021 and lost the opportunity to issue a claim for its share of fees which accrued due over six years before. I, therefore, consider that Astra is liable to Musst for its share of any fees which LGT paid to Astra in relation to Crown II from its inception on 1 December 2014 until 19 April 2015. This is because Astra was liable to pay Musst its Revenue Share within 10 days of receipt and any claim to fees which were received after that date is not barred by limitation. For the reasons which I set out below it is probable that any damages under this head are limited to US $715.81. However, I will give the parties permission to make further submissions at the consequential hearing in relation to this head of loss.

VII. Deliberate Concealment

[403]Unusually, Musst also brought a claim for deliberate concealment in the Amended Particulars of Claim. Its case was that Astra committed breaches of the obligation to provide statements under clause 4.1 in circumstances where this was unlikely to be discovered for some time for the purposes of section 32(2) of the Limitation Act 1980. Musst also pleaded that this concealment amounted to a breach of the duty of good faith in clause 6.1 of the Octave Contract. Mr Knox and Ms Bailey dealt with these issues in their written opening submissions as follows:

“In addition, Musst claims that Astra deliberately breached its obligation to provide statements in relation to the Crown II account and deliberately concealed that the account followed the Current Strategy. See (A/25/37-39). The particulars of deliberateness are given at (A/25/38). So far as limitation is concerned, it would seem from disclosure that in fact no further sums accrued due before 29 April 2015 which Astra was obliged to pay in relation to Crown II, because Astra LLP paid the maximum capped fee to Musst on 30 April 2015 in any event. But Musst does say, for the reasons set out in those particulars, that the inference is that Astra deliberately kept Musst in the dark about Crown II in breach of its duty of good faith under clause 6 of the Octave Contract (CB/3/151), when it must have known that it did follow and was intended to follow the Current Strategy. In particular, as at 30 April 2015, it is clear from the portfolio transaction reports that 69% (including hybrids) or 65% (excluding them) of the sum of US $26,142,950 invested had been spent in acquiring synthetic instruments for Crown II (E/3/884/3.3.6). So for this reason too, Musst claims damages as it does in its negligent misstatement claim.”

S. Bad Faith

[404]I begin with the claim that Astra acted in breach of the contractual duty of good faith. I have held that Astra LLP is liable for negligent misstatement. If Astra UK were contractually liable for concealing that Crown II and Crown III were Eligible Investments, this would (or might) entitle Musst to recover its additional costs from Astra UK as well as from Astra LLP assuming that those costs are recoverable as a matter of law. I therefore focus my consideration of this issue to Astra UK. (1). The Law

[405]In Re Compound Photonics Group Ltd

[2022] EWCA Civ 1371

the Court of Appeal recently considered the scope of a contractual duty of good faith in a shareholders’ agreement. Snowden LJ (with whom Carr and Newey LJJ agreed) held that the breach of a duty of good faith could be committed by conduct motivated by bad faith but that bad faith could include not only dishonest conduct but also conduct which would be regarded as commercially unacceptable to reasonable and honest people even though they would not necessarily regard it as dishonest: see [241].

[406]Snowden LJ also accepted that a contractual duty of good faith could impose a duty of “fidelity to the bargain” or “adherence to the spirit of the agreement” but that the content of such a duty must be derived from the other terms of the contract as a matter of interpretation or implication: see [212] and [243]. In my judgment, this second question does not arise in the present case. Mr Knox and Ms Bailey did not argue that breaches of clauses 4.1, 4.5 and 11.3 either individually or cumulatively could themselves amount to a breach of the contractual duty of good faith. Their case was that Mr Mathur deliberately broke the terms of the contract and this is the issue which I must determine.

[407]Further, in approaching the question whether the Court should draw the inference that Astra acted in bad faith, I remind myself of the approach which the Court should take to inferences of dishonesty. In Suppipat v Narongdej

[2023] EWHC 1988 (Comm)

Calver J identified the following four principles to be applied in approaching inferences of fraud or dishonest conduct generally (and for simplicity I exclude the citations):

“a. It is not open to the Court to infer dishonesty from facts which are consistent with honesty or negligence, there must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved. b. The requirement for a claimant in proving fraud is that the primary facts proved give rise to an inference of dishonesty or fraud which is more probable than one of innocence or negligence. c. Although not strictly a requirement for such a claim, motive "is a vital ingredient of any rational assessment" of dishonesty. By and large dishonest people are dishonest for a reason; while establishing a motive for conspiracy is not a legal requirement, the less likely the motive, the less likely the intention to conspire unlawfully. d. Assessing a party's motive to participate in a fraud also requires taking into account the disincentives to participation in the fraud; this includes the disinclination to behave immorally or dishonestly, but also the damage to reputation (both for the individual and, where applicable, the business) and the potential risk to the "liberty of the individuals involved" in case they are found out.”

[408]The parties did not cite these principles but they are very familiar to me because I recently had to consider and apply them in Transworld Payment Solutions Ltd v First Curaçao International Bank NV

[2025] EWHC 2480 (Ch)

: see [76]. Although I accept that the Court may find that a party has acted in bad faith without finding dishonesty, I take the view that the Court should adopt and apply the same principles to an inference of bad faith which either connotes dishonesty or commercially unacceptable conduct. Such an allegation involves serious conduct and, in the present case, Musst invites me to infer that Mr Mathur deliberately acted in a way which he knew to be in breach of the Octave Contract. I set out Musst’s case immediately below. (2). Musst’s Case

[409]Mr Knox and Ms Bailey invited me to draw the inference that Mr Mathur made a conscious decision to not to provide Statements under clause 4.1 to Musst for the following reasons set out in the Amended Particulars of Claim, paragraph 38: “(1) Mr Adler was in charge of (or one of the people in charge of) managing Crown’s investments, and as evidenced by his said email of 3 February 2016, he believed that the Crown II account followed the same or a very similar strategy to the Crown I account. (2) His belief was therefore likely to have been shared by Mr Mathur, and so he or they must have realised that the Crown II account followed the “Current Strategy” for the purposes of the Octave Contract, or at least that it was likely that it followed the Current Strategy. (3) Mr Mathur knew or suspected (from his knowledge of the Octave Contract) that Astra LLP, and then Astra UK, was under an obligation, by virtue of clause 4.1 of the Octave Contract, to provide statements to the Claimant relating to accounts which followed the Current Strategy. (This knowledge or suspicion is also evidenced by Mr Holdom’s initial provision of information to the Claimant in relation to Crown II in February 2015 before he said that it followed a different strategy on 30 April 2015.) (4) Despite this, no such statements were provided. This could only have been the result of a conscious decision by Mr Mathur not to provide them despite his said knowledge.” (3). The Evidence

[410]Dr Adler accepted in cross-examination that Mr Mathur was aware of the terms of the Octave Contract and that he knew the nature of the individual investments which were being acquired for Crown II. He also accepted that it was both likely and probable that Mr Mathur had made a conscious decision not to pay Musst within a month or two of April 2015: Q Okay. Okay, that's enough for the moment. Now, I just have one more subject. Now, Dr Adler, you say you did not know of the terms of the Octave contract. A Not until much later. Q I'm not disputing that, Dr Adler, why should you? I know you have other things to do in your life, but would you accept this? Mr Mathur did know of the terms of the Octave contract. A Again, I can't really speak for him, but I (inaudible) very plausible, yes. Q Very? A Plausible. Q Plausible. Second, would you accept that Mr Mathur knew what investments had been made or were being made for Crown 2? A Is he aware? Q No, was he, as the investments were made, was he aware of the investments that were being made for Crown 2? A As a general rule, yes. There may be some exceptions but, yeah, almost all of them. As I earlier said, we usually agree on positions to buy, so we're not trying to sneak things past them. Q So by April 2015, let 's say four months into the fund −−life of the fund, four/five months, he would have known, basically, what investments had already been made, wouldn't he? Probably. A Yes, I guess. Q Now, he would have decided, would he not, that no payment should be made to Musst in relation to Crown 2? A How can I answer that? Q Well, because we know that no payments −−we know there was one very small payment made, but leave that on one side, apart from that, we know that no payments at all were made from the beginning to the end, to Musst in relation to Crown 2, all right? Take it from me for the moment. We know that, subject to one small wrinkle. A Yes. Q Now, surely it must have been Mr Mathur who decided that no such payment should be made. A I would think usually Mr Holdom takes care of invoicing, but – Q Mr Holdom takes care of invoicing, but he's never going to invoice −− But are you suggesting that Mr Mathur would have happily invoiced or happily requested invoices from Musst in relation to Crown 2? A Sorry, say again? Q Well, I'll rephrase the question. Mr Mathur, surely, we know that Mr Holdom said no more invoices should be sent in relation to Crown 2 after one had been, all right? A Yes. Q I'm suggesting to you, Mr Mathur would have known that no monies were being paid by Crown 2 in relation to Musst in relation to Crown 2. That much he would probably have known, surely? Would you accept that? A Probably. Q Yes, and would you accept too, he must have made a conscious decision not to pay Musst in relation to Crown 2? A Again, asking how Mr Mathur's brain works is not really for me, is it ? But −− Q Is it likely ? A I think it's likely. Q That he would have known and that he would have decided that Musst should not be paid on Crown 2? A Decided, I −−I don't know. I mean, I have looked at the emails that went back and forth with Mr Holdom and Musst. It looked like a mistake was made and then an attempt to swiftly correct it. I don't know if and at what stage Mr Mathur would get involved in that in the first place. I really don't know. Q He must have known, let us say, within a month or two of this happening, surely? In other words, he must have known within a month or two of April 2015 that Musst was not being paid on Crown 2? A As I said, it's probable. I can't know. Q And he must have decided −− You can't know, okay. A But it is still a difference from a decision, and his decisions are not made by me. So I can't know about them. Q And as far as you're concerned, you certainly −−as your position, as I understand it, you didn't know about the terms of the Octave contract? A That's right, and I didn't know about the whole issue in early '15 at all. Q Yes, yes. A So it was not brought to my attention. I don't know whether it was brought to Mr Mathur's attention. Q. I see.”

[411]I have already drawn inferences that Mr Mathur and the Investment Team intended to use the funds in Crown II and Crown III to purchase the same investments and to adopt the same risk profile as they had done for ASSCFL before it was restructured in December 2015. I have also found that Mr Holdom completed the LGT Questionnaire on 23 January 2015 stating that no new strategies had been added and provided information about Crown II to Musst on 4 February 2015 acting on both occasions on the instructions of the Investment Team. Mr Holdom also gave evidence that Mr Thomas composed the email dated 30 April 2015. Finally, I have held that much more recently the failure to invoice LGT for performance fees in relation to Crown II was a deliberate ploy intended by Astra’s management to defeat Musst’s claim or to starve it of funds.

[412]Although Dr Adler’s evidence and these findings of fact provide support for an inference that Mr Mathur deliberately withheld any further information about Crown II and Crown III from Musst knowing that this was a breach of clause 4.1, I am not satisfied that such an inference is more probable than an inference of negligence or innocence or that I should draw such an inference in the present case. I have reached that conclusion for the following reasons:(1) The strongest evidence of deliberate concealment consists of Mr Holdom’s email dated 30 April 2015 and his oral representations later that day. However, Musst did not advance a case that he made fraudulent representations and I was not asked to find and have not found that either Mr Holdom or Mr Thomas knew that those representations were untrue or were reckless as to their truth or falsity. I have found that Mr Holdom made them negligently because he failed to check before repeating what Mr Thomas had told him. But this is not the same thing.

(2) Furthermore, there was no clear evidence to link Mr Mathur to those representations and Dr Adler did not go that far. He was prepared to accept that Mr Mathur knew that Musst was not being paid for Crown II within a couple of months of April 2015 but his evidence was that he was personally unaware of the issue in early 2015 and that he did not know when the issue was brought to Mr Mathur’s attention. I accept that evidence. Dr Adler was candid about Mr Mathur’s involvement in answer to all of Mr Knox’s questions in the passage above.

(3) I have also found that Astra committed a deliberate ploy in failing to invoice LGT for performance fees and responding to Ms Galligan’s emails in relation to Crown II. But this conduct took place some years later and after the conclusion of the First Claim. Moreover, Mr Holdom’s evidence was that Astra took legal advice in relation to that conduct and I have no reason to doubt that this evidence was true.

(4) The question whether Crown II and Crown III were Eligible Investments and the question whether the Octave Contract were novated are both complex and have given rise to a number of factual and legal issues which have been the subject matter of two lengthy first instance judgments and a judgment in the Court of Appeal. It is quite possible that Mr Mathur was advised that Crown II and Crown III were not Eligible Investments or that the Octave Contract had not been novated or, perhaps more likely, that Astra had a real prospect of defending a claim by Musst successfully on either basis.

(5) I take the view that Mr Mathur was not acting in bad faith if he received and accepted positive legal advice to this effect. I also take the view that it would be necessary for the Court to explore the advice which Astra received over the period from 30 April 2015 until at least the First Trial before the Court could properly draw the inference that Mr Mathur committed or directed Astra UK to commit breaches of the Octave Contract knowing that it was acting in breach of contract. It might also be necessary for the Court to consider the without prejudice communications which the Judge ruled admissible in the First Judgment at [174] to [178] and the negotiations at [212] to [233].

(6) Musst did not invite me to undertake such an inquiry or to make findings of fact either about the legal advice which Astra received or about Mr Mathur’s understanding or beliefs in reliance on that advice. Without investigating and deciding those issues, I am satisfied that Astra’s failure to provide Statements under clause 4.1 for Crown II and Crown III is consistent with Mr Mathur acting in good faith. T. Limitation (1). Negligent Misrepresentation

[413]I have held that on 30 April 2015 Astra LLP made actionable representations although the damage which Musst claims to have suffered did not arise until the commencement of the Second Claim. But even if Musst suffered damage immediately, the claim for misrepresentation was brought within time because the Claim Form in the Second Claim was issued on 29 April 2021. It follows that no defence of limitation arises (and this does not appear to be disputed). I have also held that Musst is entitled to recover as damages any fees payable by Astra under clause 4.5 in relation to Crown II for the period 1 December 2014 to 29 April 2015 (to the extent that any claim to recover them is barred by limitation). (2). Breach of Contract

[414]I have held that Astra committed a breach of clause 4.1 for the first time on 11 August 2016 and, therefore, well within the limitation period and that Astra has not committed any breaches of clause 11.3. This leaves sums payable under clause 4.5. Clause 9 of the Crown II Contract provided that Astra was entitled to an Advisory fee of up to US $650,000 payable quarterly in arrear and billed on the last day of the quarter allocated between both Crown I and Crown II. In his email dated 4 February 2015 Mr Holdom stated that the management fees due from LGT in relation to Crown II for December 2014 was US $3,579.06 although no invoice had been submitted. On 27 April 2015 he sent the invoice which Astra had submitted that day to LGT for Crown II showing that the management fees in relation to Crown II were US $120,551.02.

[415]Musst was entitled to 20% of each sum as its Revenue Share, i.e. US $715.81 in respect of December 2014 and US $24,110.20 in respect of the first quarter of 2015. Assuming that LGT paid Astra $3,579.06 more than 10 days before 27 April 2015, then the claim for US $715.81 is now barred by limitation. But even if LGT paid Astra’s invoice dated 27 April 2015 the same day, Musst’s Revenue Share did not fall due for payment under clause 4.5 until ten days after receipt. The claim for Musst’s Revenue Share in relation to the sum of US $24,110.20 is not, therefore, barred by limitation.

[416]But whatever the position, there is no evidence that Mr Holdom (or, for that matter, any other representative of Astra) concealed any fees which it had received from LGT before 29 April 2015. Mr Holdom disclosed the fees payable by LGT in respect of Crown II in his emails dated 4 February 2015 and 27 April 2015 and, as I have held, on the instructions of either Mr Mathur or Mr Thomas. I find, therefore, that before 29 April 2015 Astra did not conceal from Musst any fact relevant to Musst’s cause of action for the payment of fees under clause 4.5 for the purposes of section 32(1)(b) of the Limitation Act 1980.

[417]It would have been open to Musst to advance a case that on 30 April 2015 the limitation period for any cause of action was suspended because on that day Mr Holdom concealed the fact that Crown II was an Eligible Investment and that the limitation period started to run again only when Dr Adler’s email dated 3 February 2016 was disclosed: see Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd

[1996] AC 102

. But this case was not pleaded or put this way. But in any event, given my decision not to make a finding of bad faith, I reject Musst’s argument based on section 32(1)(b) and I hold that any claim by Musst in contract or tort which accrued before 29 April 2015 is now barred by sections 2 and 5 of the Limitation Act 1980. I note that the claim is likely to be limited to the relatively modest sum of US $715.81 and I have already found that this sum is recoverable as damages for negligent misrepresentation.

VIII. The Further Claims

[418]Finally, Musst advanced a number of further claims for an account, unjust enrichment and damages for breach of contract. These claims only arose if the Court found that the Octave Contract was not novated to Astra UK (or Astra was not estopped from denying that it was so novated). These claims gave rise to a number of difficult issues which Mr Spalton and Mr Mo identified in their opening submissions and which Mr Knox and Ms Bailey did not address in their closing submissions (whether written or oral). The Judge decided that it was not necessary for him to decide these issues in relation to Crown I and 2B: see the Trial Judgment, [402]. I take the same view and having determined the issue of novation in favour of Musst, it is not necessary for me to reach any findings in respect of these further claims.

IX. Disposal

[419]The parties agreed a List of Issues for trial which I set out in the Appendix to this judgment together with my answers on each issue. There were two headings “C” which I have repeated in the Appendix. It will be necessary for a consequential hearing to take place to determine not only the usual consequential matters such as costs and permission to appeal but also to decide whether I should make orders against Astra to comply with the substantive obligations in clauses 4.1 and 11.3 of the Octave Contract. I will also have to decide whether to order Astra to give further disclosure of all the management and performance fees which it has received since 1 December 2014 (if it has not already done so) and to fix the Revenue Share due to Musst (if it has done). I invite the parties to file brief written submissions setting out the directions which they invite the Court to make for the consequential hearing or in the meantime.

Cited in 1 later judgment

Musst Holdings Limited v Astra Asset Management UK Limited & Anor 2026