Re CVC Opportunity Equity Partners Ltd

• Jurisdiction: Cayman Islands
• Court: Grand Court (Cayman Islands)
• Judge: (Graham, J.)
• Judgment Date: 29 July 1999
• Date: 29 July 1999

IN THE MATTER OF CVC OPPORTUNITY EQUITY PARTNERS LIMITED

(Graham, J.)

Grand Court

Companies-compulsory winding up-petition-locus standi to petition-petitioner must have tangible interest in company”s assets-may consist of single share representing small percentage of valuable assets

Contract-implied terms-incomplete agreement-court unable to imply terms if contract omits details necessary for performance and no indication of parties” intentions

Companies-compulsory winding up-restraining winding up-inherent jurisdiction to restrain presentation of petition if abuse of process and unlikely to succeed-abuse if used to force settlement of dispute on petitioner”s terms despite existence of alternative, more satisfactory remedy

Held, restraining the defendant from presenting the petition:

(1) The defendant had locus standi to petition for the winding up of the plaintiff, even though he held only one share in it, since the fund it controlled was worth many millions of dollars, and the defendant had a tangible interest in the company”s assets whether his share was assessed at 1% or 3.5% of the fund (page 386, lines 31–43).

(2) The defendant had no means of realizing his interest in the company under the shareholders” agreement, since the parties had reached no agreement on the terms which were to govern the sale of shares to the other members of the company. Whilst the court could imply terms into a contract which contained the criteria for formulating the missing parts, it would be impossible to do so in this case, given the absence of any information as to the parties” intentions on that matter (page 386, lines 2–13; lines 24–30).

(3) The court could restrain the presentation of a winding-up petition under its inherent jurisdiction only if the company could show that the petition was an abuse of process and that a court would probably not wind up the company on the strength of it. Although the defendant had no remedy under the shareholders” agreement, his rejection of the plaintiff”s alternative, more satisfactory remedy proposed in the course of the present proceedings had not been made in good faith. His intention was to force a settlement of his claim on his own terms by threatening to wind up the company with consequential loss to investors, and the petition

therefore amounted to an abuse of process. Furthermore, the value of the shareholding could only be properly assessed by the court in conjunction with the hearing of the plaintiff”s writ action, since the issues overlapped, and separate proceedings might result in contradictory findings. Accordingly, a court would not find it ‘just and equitable,’ under s.94(d) of the Companies Law (1998 Revision), that the company should be wound up, and the defendant would be restrained from petitioning (page 387, line 16 – page 388, line 26; page 389, lines 3–29).

Cases cited:

(1) Anglian Sales Ltd. v. South Pacific Mfg. Co. Ltd., [1984] 2 NZLR 249.

(2) Bryanston Fin. Ltd. v. de Vries (No. 2), [1976] Ch. 63; [1976] 1 All E.R. 25, dicta of Buckley, L.J. applied.

(3) Company (No. 001363 of 1988), ex p. S-P, Re a, [1989] BCLC 579; (1988), 5 BCC 18, considered.

(4) Company (No. 003096 of 1987), Re aUNK(1987), 4 BCC 80, applied.

(5) Ebrahimi v. Westbourne Galleries Ltd., [1973] A.C. 360; [1972] 2 All E.R. 492, considered.

(6) Forte (Charles) Invs. Ltd. v. Amanda, [1964] Ch. 240; [1963] 2 All E.R. 940, followed.

(7) Hillas & Co. Ltd. v. Arcos Ltd.UNK(1932), 147 L.T. 503; 43 Lloyd”s Rep. 359, distinguished.

(8) Imperial Guardian Life Assur. Socy., In re, (1869), L.R. 9 Eq. 447; 39 L.J. Ch. 147; dictum of James, V.-C. applied.

(9) King”s Motors (Oxford) Ltd. v. Lax, [1970] 1 W.L.R. 426; [1969] 3 All E.R. 665, considered.

(10) Mann v. Goldstein, [1968] 1 W.L.R. 1091; [1968] 2 All E.R. 769, considered.

(11) May & Butcher Ltd. v. R., [1934] 2 K.B. 17n; (1929), 151 L.T. 246n, applied.

(12) Rica Gold Washing Co., In reELR(1879), 11 Ch. D. 36; 40 L.T. 531, applied.

Legislation construed:

Companies Law (1998 Revision) (Laws of the Cayman Islands, 1963, cap. 22, revised 1998), s.94(d): The relevant terms of this paragraph are set out page 389, lines 16–19.

The defendant sought to petition for the winding up of the plaintiff company.

The defendant was a director and minority shareholder of the plaintiff company, the general partner of a mutual fund. A shareholders” agreement prohibited the sale of shares other than to the company and gave each of the minority shareholders an irrevocable put option and the company a corresponding call option in respect of their shares, to be exercised in accordance with terms and conditions in a schedule to the agreement. The relevant schedule was blank.

In proceedings against the defendant following his dismissal from the company, the plaintiff and its majority shareholder alleged that pursuant to the shareholders” agreement, the company had advanced moneys to him to be invested, which were to be repaid in the event of his dismissal. The plaintiff claimed a beneficial interest in the defendant”s shares to the extent of the moneys advanced. The court granted a Mareva injunction against the defendant in respect of the shares.

The defendant drafted a petition to wind up the company on the ground that there were no other means by which he could realize his interest. He alleged that by a verbal agreement with the majority shareholder, his single share of the company”s 100 paid up shares gave him a 3.5% shareholding. The plaintiff obtained an interim order restraining the defendant from presenting the petition, and applied for a final order. In the course of the proceedings, the plaintiff made an offer of settlement under which the defendant would be paid what would be due to him on

liquidation without the company actually being wound up. The defendant declined this offer on the basis that as he was now excluded from the management of the company, he did not have confidence that the other shareholding directors would present a true statement of its value.

The plaintiff submitted that (a) since the defendant held only one share in the company, he lacked a tangible interest in its assets and therefore had no locus standi to petition for its winding up; (b) the petition was an abuse of process, since the defendant had alternative remedies (i) under the shareholders” agreement, to which the court should give commercial efficacy by implying terms for the sale of his shares, and (ii) under the proposal put to him in the course of these proceedings, which would afford him a greater return than if the company were actually in liquidation; and (c) in any event, the issues raised in the petition should not be tried in isolation from the existing litigation.

The defendant submitted in reply that (a) he had locus standi to present a petition, as his shareholding constituted at least a tangible interest in the assets of the fund; (b) he could not sell his shareholding under the shareholders” agreement, since it contained no indication of the payment terms and conditions which should apply, and no such terms could be implied; and (c) the proper persons to decide the size and value of his shareholding were liquidators appointed by the court.

N.R.F.C. Timms for the plaintiff;

S.R. Andrew for the defendant.

40	GRAHAM, J.: In Cause No. 389 of 1999, CVC Opportunity Equity
Partners Ltd. sues Luis Roberto Demarco Almeida (‘Demarco’). In this
Cause, No. 439 of 1999, Demarco seeks to wind up CVC Opportunity
Equity Partners Ltd. under s.94 of the Companies Law (1998 Revision).
CVC Opportunity Equity Partners Ltd. (‘CVC Opportunity’) was
45	incorporated under the Laws of the Cayman Islands on January 26th,

1996. Its directors on that date were Persio Arida (‘Arida’), Daniel
Valente Dantas (‘Dantas’), Rodrigo Andrade Bhering (‘Andrade’),
Arthur Joaquim de Carvalho (‘Carvalho’), Robert E. Wilson III
(‘Wilson’) and Demarco. In Cause No. 389 of 1999 (‘the writ action’)
5	CVC Opportunity is the first plaintiff and the second plaintiff is
Opportunity Invest II Inc. It is the holder of 96% of the shares in CVC
Opportunity. Andrade, Carvalho, Wilson and Demarco each own 1% of
the shares in CVC Opportunity.
CVC is the general partner of, and provides investment management
10	services to CVC Opportunity Equity Partners Ltd., a limited liability
partnership established in the Cayman Islands. In Cause No. 439 of 1999
I made a temporary order dated July 2nd, 1999 restraining Demarco from
presenting any petition to the court for the winding up of CVC
Opportunity. Mr. Timms now seeks to have that order made permanent or
15	for an alternative order for the dismissal of the petition. This is opposed
by Mr. Andrew on a variety of grounds. Cause No. 439 of 1999 is linked
to another matter before the court, as I have indicated. CVC Opportunity
has issued proceedings by way of writ against Demarco. In that action,
the plaintiff claims that it is the general partner in a mutual fund which
20	employed the defendant as a director with 1% of the issued shared capital
of the company. In para. 5 of the statement of claim it is alleged that the
plaintiff was separately engaged by the Cayman partnership and its
Brazilian parent as a deal maker for the Cayman partnership and the
Brazilian company. A shareholders” agreement dated December 30th,
25	1997 was entered into which reflects in part the relationship between the
parties. A series of verbal agreements are alleged as delineating the full
contractual relations between the parties.
The critical part of the statement of claim relates to the assertion that
the plaintiff, in pursuance of the agreement, advanced US$500,000 to
30	Demarco to be invested at his sole

...