Jian Ying Ourgame High Growth Investment Fund v Xiong Hui
| Jurisdiction | Cayman Islands |
| Judge | Justice David Doyle |
| Judgment Date | 22 July 2022 |
| Year | 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: 255 OF 2021 (DDJ) |
(In Official Liquidation)
And in the Matter Between
(In Official Liquidation)
The Hon. Justice David Doyle
CAUSE NO: 255 OF 2021 (DDJ)
FSD CAUSE NO. 258 of 2021 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Application of the recusal test namely whether a fair-minded and informed observer, having considered all of the facts, would conclude that there was a real possibility the judge was biased
Alex Potts QC, Erik Bodden and Alecia Johns of Conyers Dill & Pearman LLP for the Third Defendant
Matthew Goucke, Harriet Ter-Berg and Adrian Fourie of Walkers (Cayman) LLP for the Plaintiff
In a reply skeleton argument of Powerful Warrior Limited (“Powerful Warrior”) dated 15 July 2022 and filed in proceedings FSD 255 and 258 of 2021 (DDJ) just after 3 p.m. on Friday 15 July 2022 in respect of a hearing scheduled to commence today 19 July 2022 at 10 a.m., Alex Potts QC, Erik Bodden and Alecia Johns on behalf of Powerful Warrior raised, for the first time in these proceedings, the issue of recusal.
The hearing today was set down many months ago to deal with two applications made by Powerful Warrior dated 9 December 2021 in FSD 255 and 258 of 2021 (DDJ). Proceedings under reference FSD 255 of 2021 have been referred to as the writ proceedings in which the substantive claims will be determined and proceedings under reference FSD 258 of 2021 have been referred to as the receivership proceedings in which I appointed, on an ex parte basis, receivers in respect of certain shares defined as the Subject Shares. Powerful Warrior now seeks relief that the ex parte permission to serve out of the jurisdiction and other orders granted by me on 2 September 2021 be discharged, the writ be set aside, and the ex parte Order of 2 September 2021 appointing interim receivers in FSD 258 of 2021 (DDJ) be discharged and a declaration be made that the court has no jurisdiction over Powerful Warrior, a company incorporated under the laws of the BVI.
The grounds of these two applications were not specified in the applications themselves but from the supporting evidence and the skeleton argument of Powerful Warrior filed on 12 July 2022 it appears now to be an argument based on an arbitration agreement the authenticity of which is challenged by the Plaintiff. The honesty of Powerful Warrior and Zhang Shaopeng, who says he is its sole director, and who exhibits the document which is said to contain the arbitration agreement is in dispute. In the Amended Writ of Summons (28 October 2021) the Plaintiff, Jian Ying Ourgame High Growth Investment Fund (in official liquidation) (the “Company” or the “Fund”), seeks a declaration that the purported transfer of 132,464,336 shares in Ourgame International Holdings Limited, a company incorporated under the laws of the Cayman Islands, (the “Subject Shares”) to Powerful Warrior on 31 March 2021 was entered into as a result of the breach of fiduciary duty of directors Xiong Hui and Zhang Jian, without proper authority and was void and/or voidable.
Counsel for Powerful Warrior in their reply skeleton filed on Friday reminded me that nearly a year ago now on 14 September 2021, upon the application of Kinetic Creation Global Investments Limited, I made an Order and delivered an ex tempore judgment in FSD 90 of 2021 (DDJ).
In the Order I made on 14 September 2021 in FSD 90 of 2021 (DDJ), I referred to the evidence I had read and noted also that the court had read the report of the joint provisional liquidators of the Company. In the Order made on 14 September 2021, I ordered that the Company be wound up and I appointed joint official liquidators (“JOLs”). I authorised the JOLs at paragraph 7 of the Order, without further sanction or intervention from the court, to exercise amongst others the power “to bring or defend any action or other legal proceeding in the name and on behalf of the Company.” I am not aware of any appeal against that Order.
In my ex tempore judgment delivered on 14 September 2021 with the transcript of the judgment approved on 16 September 2021 (in FSD 90 of 2021 (DDJ)):
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(1) I recorded at paragraph 5 that: “No notice of appearance has been received from anyone and no one has appeared to oppose the relief sought by the Petitioner. The application has been made with the agreement and support of the JPLs and all procedural requirements in respect of the winding up of the Fund pursuant to the Petition have been met.”;
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(2) At paragraph 10 I stated that I was satisfied that the grounds for winding up had been established. At paragraphs 11 – 14 I dealt with the section 92(c) duration expiration ground and at paragraphs 15 – 28 I dealt with the section 92(e) just and equitable ground;
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(3) At paragraph 15 I stated that:
“There are many issues of concern which require further investigation. It is crystal clear that the Petitioner has justifiably lost trust and confidence in the conduct of the affairs of the Fund by its management and the acts and omissions by one or more of the directors of the Fund.”;
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(4) At paragraph 16 I stated:
“It warrants the Fund being placed into official liquidation so that independent liquidators can take appropriate steps to investigate and remedy the situation insofar as possible. The JOLs will be able to pursue the recovery of the Subject Shares for the benefit of those entitled to such and the Fund's stakeholders.”;
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(5) At paragraph 21 I stated:
“The serious matters of concern in respect of mismanagement and misconduct are outlined in the Petition, and subsequent events have further justified the lack of confidence.”;
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(6) At paragraph 22 I referred to some law and at paragraph 23 I added:
“Suffice to say there is no doubt that subsequent developments have confirmed the Petitioner's pleaded concerns that there has been serious mismanagement and misconduct.”;
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(7) At paragraph 27 I agreed that in view of the loss of trust and confidence and “the Petitioner's concerns in respect of breaches of duty that there is a real need for a thorough investigation into the affairs of the Fund and its officers.”; and
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(8) At paragraph 31 I stated:
“I am satisfied that the powers that remain in paragraph 7 of the draft Order following my exchanges with Counsel are necessary, specific powers in the particular circumstances of this case.”
Powerful Warrior does not in its skeleton argument make reference to my ex tempore judgment delivered in FSD 258 of 2021 (DDJ) on 2 September 2021 which is also online. It was delivered at an ex parte hearing and is included in today's hearing bundles. Powerful Warrior does not however rely upon it and says it accepts, as is well established, that it is normally proper for a judge who grants ex parte Orders to deal with any applications to discharge or vary such Orders on an inter partes basis.
In that judgment I stated:
(1) “The transfer of the shares to Powerful Warrior and then to the Individual Recipients, and the lack of explanations in that respect, causes this Court some considerable concern. It is unfortunate that the JPLs and Segal J were not aware at the hearing on 27 July 2021 that Powerful Warrior had transferred the Subject Shares to the Individual Recipients on 2 July 2021” (paragraph 10);
(2) “Frankly, the circumstances in which the Subject Shares have been transferred on two occasions, excites suspicions.” (paragraph 12);
(3) “In summary, if notice is given, I am satisfied that there is a real risk that the Subject Shares could be further transferred and as such may frustrate or defeat the Fund's claim. If notice is given, further steps may be taken to defeat the efforts being made by the JPLs in respect of the Subject Shares” (paragraph 13);
(4) “An objective bystander might reasonably and rhetorically ask the question, “Exactly what is going on here?”” (paragraph 33);
(5) “It appears from what I have read and heard to date that something irregular is happening in respect of the Subject Shares …. It is no wonder that the suspicions and concerns of the JPLs have been excited and aggravated” (paragraph 34);
(6) “There has been no openness or transparency in respect of the March Transfer or the subsequent transfers and any justifications for them …” (paragraph 41); and
(7) “The appointment of receivers will, of course, impact on the ability of the persons claiming entitlement to the Subject Shares to exercise the rights attaching to those shares, whether by voting or by selling them. I am satisfied however that this intrusion is necessary to preserve the position, pending the determination of the dispute.” (paragraph 46).
Powerful Warrior at paragraph 11 of its reply skeleton “respectfully submits that Mr Justice Doyle would need to consider recusing himself from any substantive determination of the Jurisdiction Summonses in FSD 255 and 258 of 2021 (DDJ) on an inter partes basis, given:
“11.1 his role as the Liquidation Judge [in FSD 90 of 2021 (DDJ)];
11.2 the documents he has reviewed on an ex parte basis but which are not available to [Powerful Warrior]; and
11.3 the contents of the Order dated 14 September 2021... and the Judgment dated 16 September 2021...”
The reply skeleton puts a little more meat on the bones at paragraph 9 by stating that:
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(1) the judge...
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