Between: Jian Ying Ourgame High Growth Investment Fund (in Official Liquidation) Plaintiff v (1) Xiong Hui (2) Zhang Jian (3) Powerful Warrior Ltd (4) Shi Kaiyi (5) Hu Jing (6) Yang Dongmei (7) Ourgame International Holdings Ltd Defendants; and in the Matter Between: Jian Ying Ourgame High Growth Investment Fund (in Official Liquidation) Plaintiff v (1) Powerful Warrior Ltd (2) Shi Kaiyi (3) Hu Jing (4) Yang Dongmei Defendants
| Jurisdiction | Cayman Islands |
| Judge | Justice Parker |
| Judgment Date | 21 December 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | FSD CAUSE NO. 255 OF 2021 (RPJ) |
And In the Matter
The Hon. Justice Parker
FSD CAUSE NO. 255 OF 2021 (RPJ)
FSD CAUSE NO. 258 OF 2021 (RPJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Application to set aside service of proceedings out of the jurisdiction — GCR Order 11 rule 1(1) — serious issue to be tried — whether Cayman Islands clearly the appropriate forum — GCR Order 12 rule 8 — sections 3, 4, 9 and 27 Arbitration Act 2012 — Section 4 Foreign Arbitral Awards Enforcement Act 1997 — threshold issue — existence of agreement to arbitrate — whether Court should determine threshold issue — approach to determining threshold issue on written evidence without a trial and cross examination.
Mr. Matthew Goucke, Ms. Harriet Ter-Berg and Mr. Adrian Fourie of Walkers (Cayman) LLP on behalf of the Plaintiff
Mr. Alex Potts KC, Mr. Erik Bodden and Dr. Alecia Johns of Conyers Dill & Pearman LLP on behalf of the Third Defendant in FSD 255 of 2021 and the First Defendant in FSD 258 OF 2021
The claim that is the subject of these proceedings is, in summary, a claim for recovery 132 million shares which the Joint Official Liquidators of the Plaintiff (the “JOLs”) contend were wrongfully transferred away from the Plaintiff (the “Fund”) by its former directors (the First Defendant in FSD 255 of 2021, Xiong Hui, and the Second Defendant in FSD 255 of 2021, Zhang Jian) in breach of their fiduciary duties arising under Cayman Islands law, in what are alleged to be highly suspicious circumstances.
The claim alleges that these shares were wrongfully received and transferred by Powerful Warrior Limited (“PWL”) (a BVI company) in breach of trust and then wrongfully received by certain of the other Defendants from PWL and therefore held on trust by them for the Fund.
The JOLs were granted permission by this Court to serve PWL and the other defendants (who are in the People's Republic of China (the “PRC”)) out of the jurisdiction.
PWL now applies in the two related proceedings, the “Writ Proceedings” and the “Receivership Proceedings”, for the Court's ex parte Orders dated 2 September 2021 to be set aside, varied, or discharged, with consequential relief. PWL is the Third Defendant in the Writ Proceedings and the First Defendant in the Receivership Proceedings.
In his judgment following the ex parte hearing, Doyle J said: 1
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a. “ I am satisfied that the Plaintiff has a good arguable case on one or more of the Order 11, rule 1(1) grounds”;
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b. “[T] hat there are serious issues to be tried […] even as things presently stand”; and
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c. “ In my judgment, the Cayman Islands is clearly the appropriate forum”.
PWL challenges the jurisdiction of the Court pursuant to GCR Order 12, rule 8 and/or section 9 of the Arbitration Act 2012 and/or section 4 of the Foreign Arbitral Awards Enforcement Act 1997 on the grounds that:
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a. The claims asserted by the Plaintiff against PWL in the Writ Proceedings and the Receivership Proceedings fall within the scope of a valid and binding arbitration agreement concluded between the Plaintiff and PWL, as contained in section 3.7 of a written Share Purchase Agreement dated as of 31 March 2021 (the “Jian Ying SPA”).
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b. Alternatively, the most appropriate forum for the disputes between the Plaintiff and PWL is an arbitration in Hong Kong administered by the Hong Kong International Arbitration Centre (“HKIAC”), subject to supervisory review by the High Court of Hong Kong, having regard to the Arbitration Agreement, the choice of Hong Kong law as the applicable governing law, and the other connecting factors pointing clearly in favour of Hong Kong.
Alex Potts KC appeared for PWL.
He argued that PWL's answer to the claim was that the shares were not given wrongfully to PWL but were transferred pursuant to an SPA (the Jian Ying SPA) which contained a valid and effective arbitration clause. PWL was under no obligation as a foreign defendant challenging the jurisdiction to set out the details of its case on the merits.
He submitted that there was clearly an arbitration agreement in existence, or arguably in existence, between the Plaintiff and PWL 2. A hard copy wet ink original of the Jian Yang SPA had been made available for inspection and had been inspected by representatives for the JOLs. The document had been exhibited to an affirmation from Mr Zhang Shaopeng dated 11 January 2022 (Mr Zhang). There had been no application to cross examine him, nor is there any independent expert evidence put before the court to support any allegation or assertion or suspicion of forgery.
He submitted that it was strongly arguable that the arbitration agreement was valid and in existence, but if there was a genuine dispute as to the existence of the arbitration agreement that should be determined by the arbitration tribunal having regard to sections 4(5), 4(6) and 4(7) of the Arbitration Act 2012, as well as section 27(1) of the Arbitration Act 2012.
He also argued that the claims asserted by the Plaintiff against PWL fall within the scope of the arbitration agreement.
The arbitration agreement is contained at section 3.7 of the Jian Ying SPA, and provides (in the English version) as follows:
“Section 3.7 Governing Law; Disputes Resolution. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG. Any dispute, controversy, difference or claim arising out of or relating to this Agreement, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted. The number of arbitrators shall be one. The arbitration proceedings shall be conducted in Chinese (Mandarin).”
Mr Potts KC, in relying on Mr Zhang's affirmation, pointed the Court to the following passages of Mr Zhang's affirmation:
(i) At § 4:
“As an initial point, I make clear that at all material times my primary residence was in the People's Republic of China (“PRC”). My first, and native, language is Chinese, but I do read, speak and understand conversational English to some extent. In my daily life, I write and speak almost exclusively in Chinese, particularly with respect to most of my daily business dealings. Without waiving legal professional privilege, this Affirmation (which has been written in English) has been prepared on my instructions, with the assistance of PWL's Cayman Islands attorneys, Conyers Dill & Pearman LLP (“Conyers”), but without the use of formal translation or interpretation services (having regard to the time pressure under which this particular First Affirmation needs to be prepared, having regard to the deadline by which PWL's Summons needs to be filed and served).”
(ii) At §§ 14 and 15:
“Although I am not a Cayman Islands lawyer, it seems apparent from paragraphs 26 and 27 of the Amended Statement of Claim that the subject matter of the Plaintiff's claims in the Writ Proceedings relates to the transfer of certain shares in Ourgame International Holdings Limited (“Ourgame Holdings”) from the Plaintiff to PWL (“the Share Transfer”).”
“Although it is not referred to by the Plaintiff in the Amended Statement of Claim, the Share Transfer was made pursuant to the terms of a written Share Purchase Agreement dated as of 31 March 2021 (“Jian Ying SPA”). The Jian Ying SPA is now shown to me at pages 21 to 29 of ZS-1.”
(iii) At § 18:
“… PWL denies the allegations that have been made against it, and, subject and without prejudice to the outcome of PWL's jurisdictional challenge, PWL intends to contest the Plaintiff's claims in the appropriate forum for doing so, whether by way of defence or counterclaim. For the present purposes, however, PWL does not consider it necessary to seek to persuade the Court, through the medium of this First Affirmation, that there is no serious issue in dispute between the parties (while fully reserving its right to do so.)”
(iv) At § 20:
“….section 3.7 of the Jian Ying SPA between the Plaintiff and PWL contains an arbitration clause (“the Arbitration Agreement”) which expressly requires that any claims (broadly defined) which the Plaintiff might wish to make against PWL shall be determined by way of a Hong Kong arbitration to be administered by the Hong Kong International Arbitration Centre…”
(v) At §§ 21–24:
“Neither PWL nor I have any reason to believe the Arbitration Agreement is null and void, inoperative, or incapable of being performed, under applicable law.”
“As far as PWL, and I personally, are aware, the Arbitration Agreement was, and remains, contractually binding on (and enforceable against) the Plaintiff, having been signed by Zhang Jian in his capacity as a Director of the Plaintiff.”.
“PWL and I had no reason to believe, or to know, that Zhang Jiang was not duly authorized to enter into the Arbitration Agreement on behalf of the Plaintiff at the time that he did so (if that is what is now alleged by the Plaintiff).”
“[ I] n any event, the most appropriate forum for any dispute between the Plaintiff and PWL is an arbitration in Hong Kong administered by the Hong Kong International Arbitration Centre (subject to...
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