Appeal Judgement on Thomas Lloyd Profit Participation Certificates

Law firm Greiter Pegger Kofler & Partners obtains judgement against CT Infrastructure Holding Ltd.

The appellate court strengthens the rights of the investors and legally orders CT Infrastructure Holding Ltd. to repay the profit participation certificate capital to the investor. The terms and conditions of the profit participation certificates are null and void.

In a ruling issued by the Innsbruck District Court at the end of May 2020, CT Infrastructure Holding Ltd. was ordered to repay a participation certificate (Thomas Lloyd participation certificates) to an investor. The investor, represented by the law firm Greiter Pegger Kofler & Partners, had subscribed to the Thomas Lloyd participation certificates “DKM Global Opportunities Fund” in 2005. The court came to the conclusion that several clauses in the profit participation certificate were unlawful and unclear to such an extent that they led to the nullity of the entire contract. As a consequence, CT Infrastructure Holding Ltd, which had issued these Thomas Lloyd profit participation certificates, was ordered to repay the invested capital to the investor.

Court of Appeal confirms invalidity of participation in profit participation certificates

CT Infrastructure Holding Ltd. appealed against this judgement. The decision of the Court of Appeal has now been presented. The Court of Appeal at the Innsbruck Regional Court confirmed the first instance judgement, adding detailed reasoning. The decision remains unchanged: The participation agreement is null and void, the paid-in participation capital for the Thomas Lloyd profit participation certificates less distributions already made must be repaid to the investor. The claim for repayment exists irrespective of whether CT Infra-structure Holding Ltd. is guilty of misconduct in the management of the profit participation certificates or not.

“Gross disproportion” to the detriment of the investor

In its reasons for the decision, the Appellate Court qualified a number of clauses in the profit participation certificates acquired by the investor as a “gross violation of legally protected interests” of the investor resulting in a “gross disproportion” to the investor’s disadvantage. Several clauses are unclear to such an extent that they open up inadmissible room for manoeuvre for CT Infrastructure Holding Ltd. As a result, the terms and conditions of the profit participation certificates are unethical, so that the entire participation agreement is null and void. As a consequence, CT Infrastructure Holding Ltd. has to repay the paid-in participation certificate capital minus the distributions already made to the investor in the past.

The decision of the Innsbruck Regional Court of Appeal is final. CT Infrastructure Holding Ltd. has not appealed to the Supreme Court – obviously in an effort to prevent this court practice, which protects investors, from becoming even more firmly established.