Global-IP Cayman Bronzelink Holdings Ltd v Global-IP Cayman and Four Others
| Jurisdiction | Cayman Islands |
| Judge | Parker, J. |
| Judgment Date | 31 December 2020 |
| Court | Grand Court (Cayman Islands) |
(Parker, J.)
GRAND CT.
Civil Procedure — judgments and orders — declaratory judgment — court has wide discretion — to consider justice to parties and whether declaration would have useful purpose and be most effective way to resolve issues — declarations granted as to identity of company's directors and officeholders
Held, granting the relief sought:
(1) The court had a wide discretion when deciding whether to grant declaratory relief. The court needed to determine whether justice to the parties would be served and whether the declaration would serve a useful purpose. The court should also ask itself whether declaratory relief was the most effective way of resolving the issues raised and should consider the other options available to resolve the issue. The court was willing in appropriate cases to make declarations as regarded rights which might arise in the future or which were academic as between the parties. These tests were satisfied and this was an appropriate case to consider granting the declaratory relief sought by the plaintiff. There remained some uncertainty as to the company's ability to restore itself to proper governance and compliance. It was also clear that the parties would benefit from the court's determination of the relief sought. The power struggles at the company had given rise to numerous disputes in the Cayman courts and elsewhere which should not be allowed to proliferate due to lack of clarity. The identity of the company's directors and principal officers, as well as the validity of recent resignations and removals, were important matters. In addition, although it was primarily a matter of compliance for the company, there was an obligation pursuant to s.55(1) of the Companies Law for the company to notify the Registrar of the correct date of appointment and removal/resignation of its directors. A failure to comply might result in a financial penalty. The register of directors was currently inaccurate both in respect of who the current Series A directors were and when they were appointed, and whether previous Series A directors ceased to be directors. It should be corrected. The Registrar could then update the register and enable the company to appoint a new registered office provider (paras. 29–34).
(2) The principles of contractual interpretation as applied to a company's constitutional documents were well-known. (i) The court would identify the objective meaning of the contract by reference to what a reasonable person, having the background knowledge which would have been available to the parties, would have understood the parties to have intended by the language they used. The court would use an iterative process that required checking each suggested interpretation against the provisions of the contract and its commercial consequences. (ii) The meaning of the language used must be assessed in the light of the natural and ordinary meaning of the clause, any other relevant provisions of the contract, the overall purpose of the clause in the contract, the facts and circumstances known or assumed by the parties at the time the contract was made, and commercial common sense, but disregarding the parties' subjective intentions. (iii) However, when construing articles of association, the surrounding circumstances would have very limited application. The focus was predominantly on the text itself. There must be close attention paid to the particular words. (iv) Where there were competing interpretations, the court might adopt the interpretation that was more consistent with business common sense. In doing so, the court must consider the quality of the drafting and the possibility that one side might have agreed to do something which, with hindsight, did not serve its interest. Similarly, the court must keep in mind the possibility that a provision was a negotiated compromise or that the parties could not agree more precise terms. Corporate constitutional documents must be construed in a way that gave them commercial efficacy. (v) The articles of association of a company should be regarded as a business document and should be construed so as to give them reasonable business efficacy where such a construction of the language was admissible, in preference to a result which would or might prove unworkable (para. 43).
(3) The relief sought by the plaintiff would be granted. The court accepted the plaintiff's argument that whilst the Series A directors were absent from three successive meetings of the board without special leave of absence, a proper construction of art. 150(d) did not lead to the construction contended for by the common directors. Both the articles and the shareholders' agreement required that a quorum of at least five directors of which at least three must be Series A directors was needed for the passing of a resolution by the company's board. It followed that the February 7th, 2020 meeting was not quorate, so that the transaction of any business of the directors and any resolutions passed at that board meeting were of no effect and were null and void. The February 11th, 2020 resolution purporting to remove NC as CTO was also null and void. Article 161 provided that a resolution in writing signed by all the directors for the time being would be valid and effective as if it had been passed at a meeting of the directors. As the February 11th, 2020 resolution was signed only by the common directors, it was of no effect (paras. 44–55).
(1) Ennismore Fund Management Ltd. v. Fenris Consulting Ltd., 2016 (1) CILR 282, referred to.
(2) FIA Leveraged Fund, In re, 2012 (1) CILR 248, referred to.
(3) Financial Servs. Auth. v. Rourke, [2002] C.P. Rep. 14; [2001] Lexis 2268, referred to.
(4) HSBC Bank Middle East v. Clarke, [2006] UKPC 31; [2007] 1 LRC 544, referred to.
(5) Holmes v. Keyes, [1958] 2 All E.R. 129, referred to.
(6) Jones v. BWE Intl. Ltd., [2003] EWCA Civ 298, referred to.
(7) Milebush Properties Ltd. v. Tameside Metrop. B.C., [2011] EWCA Civ 270; [2011] 12 EG 114; [2011] 2 EGLR 143; [2011] 2 P & CR DG5; [2011] NPC 31; [2011] PTSR 1654, referred to.
(8) Pavledes v. Hadjisavva, [2013] EWHC 124 (Ch), referred to.
(9) Rainy Sky SA v. Kookmin Bank, [2011] 1 W.L.R. 2900, referred to.
(10) Rolls-Royce plc v. Unite the Union, [2009] EWCA Civ 387; [2010] 1 W.L.R. 318; [2009] IRLR 576; [2010] ICR 1, referred to.
(11) Tempo Group Ltd. v. Fortuna East Asia Holding Corp., 2015 (2) CILR N [5], referred to.
(12) Wood v. Capita Ins. Servs. Ltd., [2017] UKSC 24; [2017] 1 A.C. 1173; [2017] 2 W.L.R. 1095; [2017] 4 All E.R. 615, referred to.
The plaintiff sought certain declarations.
The plaintiff, a company registered in the British Virgin Islands, was the 75% shareholder in Global IP Cayman (“the company”). It held a controlling interest through 30 million Series A preferred shares. Pursuant to a shareholders agreement the plaintiff had the right to appoint, and remove and replace, up to six Series A directors whose status was in some respects superior to that of the common directors whom the common shareholders had the right to appoint. On February 7th, 2020, at a meeting of the board attended only by common directors, the common directors purported to pass resolutions to remove the then Series A directors and a Mr. Bahram Pourmand (“BP”) as Chief Executive Officer and to replace him with a Mr. Shafigh Youssefzadeh (“SY”). The plaintiff alleged that the resolution was null and void. On February 11th, 2020, the common directors purported to pass a written resolution inter alia to remove a Mr. Nagib Chahine (“NC”) as Chief Technical Officer. The plaintiff alleged that this resolution was also null and void.
Article 150(d) of the articles of association provided that “the office of Director shall be vacated if the Director … (d) is absent … from three consecutive meetings of the board of Directors without special leave of absence from the Directors and they pass a resolution that he has by reason of such absence vacated office …” Article 154 provided: “The quorum necessary for the transaction of the business of the Directors shall be at least two (2) Common Directors and three (3) Series A Directors …” Clause 3.7 of the shareholders' agreement was to similar effect. Article 161 provided: “A resolution in writing … signed by all the Directors for the time being … shall be valid and effectual as if it had been passed at a meeting of the Directors … duly convened and held.”
The plaintiff sought declarations as to the identities of the current Series A directors of the company, the dates of their appointment as directors, the date of the resignation/removal of the previous Series A directors, the identities of the Chief Executive Officer and Chief...
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