Kerr claims win in Torchlight case

The Grand Court of the Cayman Islands has ruled that investors in the Torchlight Fund abused process in trying to wind it up.

Thursday, September 27th 2018, 6:00PM

Aurora Funds Management, Crown Asset Management and ACC had petitioned to have the Torchlight entity would up because they had lost faith in Pyne Gould (PGC)’s George Kerr as manager of the $250 million fund.

They alleged related-party transactions involving Kerr's interests were damaging to the fund and that there was a lac of audited accounts for the 2013 year.

They reached a deal to exit the fund before the judgment was released.

But PGC Managing Director George Kerr said the judgment represented a complete vindication of the Torchlight Fund, its performance, and its management.

“The judgment confirms not only that the petition had no merit and was an abuse of process, but also that a wind-up of Torchlight would not be in the best interests of its investors. The judge said it was beyond dispute that the fund’s investments have ‘real and substantial value’, noting that the petitioners’ claims to the contrary were ‘entirely without foundation’,” he said.

“The judgment reveals that while a Crown agency was alleging that Torchlight was losing money and being managed in a way that was not in the best interests of its investors to auditors, regulators in New Zealand and Australia, and the media on both sides of the Tasman, its own independent professional valuation concluded the fund had considerable value.

Justice Robin McMillan said the investors abused court process by bringing the petition for an improper purpose to "obtain accelerated liquidity". A court should only wind up an entity in an extremely serious situation, he said.

Claims made about Kerr were deemed to be unfounded and unfair and showed personal animosity, he said.

The judge said Kerr employed means of communication that were not structured or as formal as were ideal but this was more a reflection of his enthusiasm and commitment to his investors than evidence of an ulterior motive.

“At best there is a very small sum of particular instances where in its day to day management the GP has fallen short of perfection. While perhaps the same can be said of many commercial undertakings, this in itself is nowhere near enough."

The judgment said, had there not been an order by consent withdrawing the petition, that it would have been refused and default notices issued would have been deemed valid.

Kerr said final outcome in terms of the settlement that was agreed between the Torchlight Fund and the petitioners was substantially below the book value for the petitioners’ limited partnership interests.

Tags: PGC