Olalekan Akinsoga Akinyanmi v Lekoil Ltd
| Jurisdiction | Cayman Islands |
| Judge | Justice Kawaley |
| Judgment Date | 14 April 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 382 OF 2021 (IKJ) |
The Hon. Justice Kawaley
CAUSE NO. FSD 382 OF 2021 (IKJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Ex parte interim injunction-application to discharge-irreparable harm-balance of conveniencesufficiency of evidence as to Plaintiff's ability to comply with cross-undertaking as to damages-natural justice-duty of Court to ensure that information forming part of the basis for an ex parte order is shared with the respondent to the application-effect of direction that respondent to ex parte injunction order may apply on short notice to discharge the order
Ms Gemma Lardner and Ms Nour Khaleq, Ogier, on behalf of the Plaintiff
Ms Clare Stanley QC, Mr Brett Basdeo, Mr Chaowei Fan, and Mr Barnaby Gowrie, Walkers, on behalf of the Defendant (the “Company”)
By his Amended Generally Indorsed Writ dated January 26, 2022, the Plaintiff sought declaratory relief including declarations that Resolutions 8 and 9 purportedly passed at the Company's Annual General Meeting for 2021 (“AGM”) were void. In the Plaintiff's Statement of Claim of the same date, the case for seeking declarations that, inter alia, the “ Share Allotment Resolutions” were invalid was fully set out. By a Notice of Motion filed on St Valentine's Day and issued returnable for March 21, 2022, the Plaintiff sought the following interim relief on an inter partes basis, namely an Order that:
“ 1. Until further Order of the Court, Lekoil Limited (the ‘Company’) be restrained from acting on Resolutions 8 and 9 passed at the annual general meeting of the Company held on 21 December 2021.”
This somewhat sedate opening ‘passage of play’ in the contest was sharply interrupted when the Plaintiff filed an urgent Ex Parte Summons on February 28, 2022, issued returnable for the following day, March 1, 2022. The Ex Parte Summons primarily sought an Order that:
“ Until further order of the Court, Lekoil Limited (the “ Company”) be restrained from issuing or allotting any shares in the Company pursuant to:
(a) a convertible facility agreement entered into by the Company on 2 September 2021;
(b) a convertible facility and option agreement entered into between the Company and Savannah Energy Investments Limited on 28 February 2022; and
(c) a tripartite agreement entered into between the Company and Savannah Energy Investments Limited and others on 28 February 2022.”
On March 1, 2022 I granted an ex parte Order substantially in those terms (the “Ex Parte Injunction”). On March 10, 2022, I discharged the Ex Parte Injunction and reserved costs until the present reasons had been delivered. These are the reasons for that decision.
Notice was properly given of the application and although Mr Basdeo for the Company attended, he elected to keep his powder dry and merely observed the hearing. The Plaintiff is the registered owner of 0.21% of the Company's shares although he beneficially owns a further 7.39 %. He is a former Chief Executive Officer of the Company who essentially complains in this action that the Share Allotment Resolutions contravene constitutional guarantees designed to protect against the dilution of existing shareholdings. In his Second Affidavit, he explained that a recent development was the discovery that the Company had, further to the September 2, 2021 convertible facility agreement (“CFA1”) entered into a February 28, 2022 agreement (“CFA2”) which would result in Savannah Energy Investments Limited (“Savannah Investments”) holding 25.2% of the diluted share capital of the Company. He expressed surprise that the Company would decide to allot further shares while an application for an injunction to restrain any allotments (due be heard on an inter partes basis on March 21, 2022) was pending before this Court.
Two issues were of particular significance to me at the ex parte hearing. First, Ms Lardner persuaded me that the CFA2 clause providing for a $5million penalty if the conversion right was not honoured was at least arguably, as she put it, “ wholly uncommercial”. Secondly, because the risk of the injunction potentially causing commercial damage to the Company seemed obvious, the Plaintiff's offering a cross-undertaking (in the final paragraph of his Second Affidavit) as to damages without addressing his financial ability to honour it set off bells of alarm. Apart from the penalty clause, it seemed clear that the Company was in financial difficulties and that remediating these challenges likely provided a materially significant part of the reason for the consummation of CFA2. I was satisfied that there was a serious question to be tried on the merits of the Plaintiff's claim but felt it was more difficult to decide where the balance of convenience lay.
At the end of the ex parte hearing, I indicated that I would grant the Order sought subject to two conditions:
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(a) the Company should be heard and were at liberty to apply to discharge the Ex Parte Order on 24 hours' notice; and
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(b) the Plaintiff should satisfy me that I could safely accept his cross-undertaking in damages based on his financial means before the Order was perfected.
The Plaintiff's counsel emailed an unsworn Third Affidavit of Mr Akinyanmi to the Court at 5.07pm that same day, March 1, 2022. This was forwarded to me at 5.13pm together with a letter from Walkers which, inter alia, contended that the Plaintiff owed the Company $1.5 million and that both evidence of his means and fortification should be required before the Order was made. I did not take the contents of this letter into account because it seemed to me to be inconsistent with the Company's counsel's position of merely having a watching brief at the ex parte hearing. I did not review the Plaintiff's Third Affidavit very critically, in large part because I was relying on it to justify granting an injunction which might potentially be in force for too short a time for any significant damage to be occasioned by it.
At 6.57pm, I administratively approved the Ex Parte Order (the “Ex Parte Injunction”) in the following terms:
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“ 1. Until further order of the Court, Lekoil Limited (the “Company”) be restrained from issuing or allotting any shares in the Company pursuant to:
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(a) a convertible facility agreement entered into by the Company on 2 September 2021;
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(b) a convertible facility and option agreement entered into between the Company and Savannah Energy Investments Limited on 28 February 2022; and
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(c) a tripartite agreement entered into between the Company and Savannah Energy Investments Limited and others on or around 28 February 2022.
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2. Costs be reserved.
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3. The Company is at liberty to apply to discharge this order on not less than 24 hours' notice to the Plaintiff.”
For those familiar with the Christian calendar, March 1, 2022 was Shrove Tuesday and the following day, March 2, 2022, was the Ash Wednesday public holiday. As a result the Ex Parte Injunction was not perfected until March 3, 2022. However, the fact that the Ex Parte Injunction had been made was communicated to counsel by the FSD Registry on March 2, 2022, the public holiday notwithstanding.
The Plaintiff filed his draft Third Affidavit by email at 5.07pm on March 1, 2022 to explain his means but requested that this not be disclosed to the Company, proposing a confidentiality clause be included in the Ex Parte Injunction. Via email I signified that this request was unprecedented and required a formal confidentiality application to be filed before granting any confidentiality directions. The Plaintiff on March 3, 2022 filed a Summons seeking the following substantive relief:
“ 1. The third affidavit of Olalekan Akinsoga Akinyanmi and its exhibit OAA-3 be sealed pursuant to Order 63, rule 3 of the Grand Court Rules until further order of the Court.”
The Third Affidavit referred to monies (less than US$5 million) in a Cypriot bank account held by Lekoil Nigeria Ltd. (“Lekoil Nigeria”) and exhibited a resolution passed by that company's board on March 1, 2022, which provided:
“ 1.3 IT WAS RESOLVED THAT the Company continue to provide financial support to the CEO, and to pay the legal fees incurred in his ongoing legal proceedings in jurisdictions including Cayman Islands, United Kingdom, and United States.”
The Third Affidavit concluded by averring that the information was “ commercially sensitive” to both the deponent and Lekoil Nigeria and asked that the entire document be sealed. The Plaintiff's Fourth Affidavit was sworn in support of the Confidentiality Summons and most importantly contained the following averments:
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“ 7 On the basis that this is a question for the Court alone, Akinyanmi 3 provided confidential and commercially sensitive information as to my financial means. It is common ground between the parties that there are numerous outstanding disputes between me, the Company and Lekoil Nigeria in addition to these proceedings (which are listed by the Company in their 28 February 2022 announcement…) and I am concerned that the Company may use this information against me and/or others in the context of those disputes.
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8. To the extent that any application for fortification is made by the Company in due course, I understand from Ogier (without waiving privilege) that the application will be determined on an inter partes basis and as such, any evidence that I may wish to file and rely upon in defence of such an application will need to be made available to the Company.”
My initial impression was that this evidence provided very slender support for the Confidentiality Summons. It was easy to understand why the Plaintiff would...
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