Cayman Grand Court rules on the natural and ordinary meaning of fund constitutional documents in preference to following common practice in the funds industry.

In the unreported judgment delivered 17 July 2018, In the matter of Ardon Maroon Asia Master Fund (in official liquidation) Cause no. FSD 18 of 2015, the Hon Justice Robin McMillan found that, in a master-feeder fund structure, a feeder fund redemption was ineffective on the basis that there was a failure by the feeder fund to serve a further redemption notice on the master fund in accordance with the procedures set out in the master fund constitutional documents.


Ardon Maroon Asia Dragon Feeder Fund (the “Feeder Fund”) was a feeder fund into Ardon Maroon Asia Master Fund Limited (the “Master Fund”) (together, “the Funds”), a structure by which investors would subscribe for shares in the Feeder Fund and the Feeder Fund would use this capital to subscribe for shares in the Master Fund. The Feeder Fund did not retain any liquidity or own any assets other than its Master Fund shareholding and (as is common in such structures) both the Feeder Fund and Master Fund appointed the same service providers including the Investment Manager, Administrator and directors. This structure is one which is common in the Cayman Islands.

On 11 August 2014, an investor in the Feeder Fund (the “Investor”) submitted an electronic copy redemption notice for a US$15 million redemption for the 3 October 2014 redemption day (the “Redemption Request”) to the Transfer Agent. The Transfer Agent acknowledged receipt on 12 August 2014 and notified the Investment Manager of the Funds that it had received the same on 19 August 2014.

The Master Fund’s assets were illiquid and could not be readily realised to meet the Redemption Request. Consequently, on 30 October 2014, the directors of the Funds resolved to suspend redemptions and the payment of redemption proceeds from both Funds. In December 2014, the directors of the Feeder Fund resolved by written resolution that the Administrator should be instructed to record the redemption as a debt due to the investor and adjust the net asset value of the Feeder Fund accordingly.

On 30 December 2014, the Funds passed special resolutions that the Funds should be wound up voluntarily and that joint voluntary liquidators (the “Master Fund JOLs”) should be appointed. In 2015, the Investor lodged a proof of debt in the liquidation of the Feeder Fund which was ultimately admitted by the joint official liquidators of the Feeder Fund (the “Feeder Fund JOLs”) by consent on 23 March 2016. However, the Master Fund JOLs rejected the Feeder Funds’s ‘back-to-back’ proof of debt. The rejection was on the basis that the Feeder Fund had not completed the redemption process to redeem its shares in the Master Fund as it had not submitted a written notice to do so (as required by the constitutional documents of the Master Fund). An appeal against the rejection of the Feeder fund proof of debt was filed on 1 April 2016.

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