Section 46 of the Companies Act (2023 Revision) and Juniper Life Sciences Ltd Between: RBH Holdings Plaintiff v Juniper Life Sciences Ltd Defendant

• Jurisdiction: Cayman Islands
• Judge: Walters J.
• Judgment Date: 23 October 2023
• Docket Number: FSD0059 OF 2023 (AWJ)
• Court: Grand Court (Cayman Islands)

In the Matter of Section 46 of the Companies Act (2023 Revision)

And in the Matter of Juniper Life Sciences Ltd

Between:

RBH Holdings

Plaintiff

and

Juniper Life Sciences Ltd.

Defendant

Coram:

Walters J. (Acting)

FSD0059 OF 2023 (AWJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

Application for leave to appeal and stay. Principles to apply and whether to grant stay if application refused pending application to Court of Appeal

Appearances:

Mr Richard Millett KC instructed by Mr Jonathon Milne and Mr Jordan

McErlean of Conyers for the Plaintiff

Mr Alain Choo Choy KC instructed by Mr Denis Olarou and Ms Kalyani Dixit of Carey Olsen for the Defendant

Present: Mr Rudianto of the Plaintiff and Mr Shankar of Oon & Bazul LLP via Zoom

IN CHAMBERS

1 This is an application made by the Defendant (“ JLS” or the “ Company”) for leave to appeal against the order dated 30 June 2023 following my judgment dated 8 June 2023 (the “ Judgment”). In the Judgment, I gave my reasons for dismissing the application by JLS for an order staying an application made by the Plaintiff (“ RBH”) for an order pursuant to s.46 Companies Act rectifying the share register of JLS (the “ Rectification Proceedings” and the “ Stay Application”).

2 The nature of the relief sought in the Rectification Proceedings is as follows:

• 2.1 A declaration that the written resolution of the board of directors of the Company dated 27 October 2022, exercising the discretion under Article 9.1(c) of the Articles of Association dated 21 December 2021 to redeem the 5,000 ordinary shares held by RBH at the par value of USD 5,000 with effect from 27 October 2022 (the “ Resolution”) constituted an exercise of a power for an improper purpose and is void (or, alternatively, voidable);

• 2.2 An order that the Resolution be set aside ab initio;

• 2.3 A declaration that RBH has since 27 October 2022 been and continues to be a shareholder of the Company;

• 2.4 An order pursuant to section 46 of the Companies Act that the register of the members of the Company shall be rectified forthwith (including re-designating and/or cancelling shares as appropriate) such that it reflects the share register immediately prior to the passing of the Resolution with retroactive effect from 27 October 2022, and in the alternative, with effect from the date of the Court order such that RBH shall be recorded as the holder of 5,000 ordinary shares; and Sylvan Asia Growth Master Fund I Pte Ltd (the “ Sylvan Master Fund”) shall be recorded as the holder of the remaining 45,000 ordinary shares.

3 The stay was sought pursuant to section 4 of the Foreign Arbitral Awards Enforcement Act, or the Overriding Objective, or in the alternative, GCR O.12, r.8 (Forum Non-Conveniens), on the basis that the resolution of the dispute between the parties was subject to contractual terms providing for mediation and arbitration administered by the Singapore International Arbitration Centre.

4 RBH's general position is that the redemption was carried out by JLS as what has been described as a “self-help” remedy in relation to a wider dispute between Mr. Rudianto, the owner of RBH and the ultimate owners of JLS. JLS argues that all issues between the parties are covered by the relevant contractual dispute resolution clauses.

Background

5 In its skeleton argument, JLS summarized the background and issues as follows:

• 5.1 RBH's position is that the board of the Company had exercised its power under Article 9.1(c) improperly and that the share register of the Company should be rectified, such that RBH is reflected as the holder of 5,000 shares (the “ Article 9.1(c) Dispute”).

• 5.2 It is the Company's case that the Article 9.1(c) Dispute is intertwined with, and that Article 9.1(c) must be read subject to:

  • 5.2.1 an agreement dated 12 January 2022 between (1) the Sylvan Master Fund, (2) the Company, and (3) RBH, for the issuance and allotment of shares in the Company (the “ Subscription Agreement”;

  • 5.2.2 an employment agreement dated 16 July 2021 between Sylvan Capital Management Pte Ltd (“ SCM”) and Mr. Raymond Rudianto (“ Mr Rudianto”), who is the 100% shareholder and director of RBH (the “ Employment Agreement”);

  • 5.2.3 an agreement between Mr. Rudianto (and his corporate vehicles), the Sylvan Master Fund, and SCM concluded on or around 10 January 2022, as known and agreed to by the Company, for the shares in the Company to be issued to RBH, and to be held as part of a contemplated Employee Stock Option Plan programme (the “ ESOP Agreement”); and,

  • 5.2.4 an agreement between Mr. Rudianto (and his corporate vehicles), the Sylvan Master Fund, and SCM concluded on or around 5 August 2022, for the shares held by RBH to be returned to the Company (the “ Share Return Agreement”).

• 5.3 The Company's position is, it says, at least prima facie, supported by, amongst other things, the following salient facts. The Company was incorporated as an investment holding vehicle for the Sylvan Group (which included the Sylvan Master Fund, and SCM), and as part of a private equity venture focused on the healthcare industry (“ Project Juniper”).

• 5.4 Pursuant to the Employment Agreement, Mr. Rudianto had agreed to be employed as a full-time managing director of SCM, with the aim of achieving a profitable exit for the Sylvan Group from Project Juniper.

• 5.5 In view of Mr. Rudianto's contemplated employment with SCM, it was agreed, pursuant to the ESOP Agreement, that Mr. Rudianto would be rewarded with certain shares in the Company, as part of an Employee Stock Option Plan (the “ ESOP Shares”). It is also said that it was agreed that Mr Rudianto (or his corporate vehicles) would hold a portion of these ESOP Shares for the benefit of other incoming employees in the Project Juniper entities. The ESOP Shares (i.e., 5,000 ordinary shares) in the Company were subsequently issued and allotted to RBH (a corporate vehicle for Mr. Rudianto) at par value, pursuant to the Subscription Agreement. The Company contends that the Subscription Agreement gave effect to the ESOP Agreement (and the Employment Agreement), which meant that RBH was able to obtain its shareholding in the Company at a nominal value and at a significant discount (i.e., 0.1% of the consideration which had been paid for the other shares in the Company).

• 5.6 The Company alleges that Mr. Rudianto ultimately did not fulfil the terms of the Employment Agreement and was never employed by SCM.

• 5.7 Consequently, it is contended, Mr Rudianto, the Sylvan Group, and SCM entered into the Share Return Agreement, pursuant to which Mr. Rudianto is alleged to have agreed to return (and/or procure RBH to return) the ESOP Shares to the Company.

• 5.8 It is claimed that Mr. Rudianto did not fulfil the terms of the Share Return Agreement, and RBH did not return the ESOP Shares. As there was no longer any basis for Mr Rudianto (and RBH) to retain the ESOP Shares, it is said that the directors of the Company decided to exercise their power under Article 9.1(c) of the Articles of Association, to repurchase and redeem those shares. The redemption price was fixed by JLS at the same amount which RBH had paid to acquire these 5,000 shares in the first place.

6 There are plainly disputes between the parties in relation to the Subscription Agreement, Employment Agreement, ESOP Agreement and Share Return Agreement. However, the parties differ in the following regard:

• 6.1 RBH says that the Rectification Proceedings concern the Article 9.1(c) Dispute which is separate and distinct from the disputes arising in relation to the agreements referred to above.

• 6.2 The Company disagrees. It says that the Article 9.1(c) Dispute cannot be hived off from the other underlying disputes as they all concern the basis upon which the ESOP Shares were allocated to and were to be held by RBH; hence, the resolution of the Article 9.1(c) Dispute – and, specifically, the question whether the Board of the Company properly exercised its power under Article 9.1(c) – necessarily requires determination of the other disputes.

Legal principles on an application for leave to appeal

7 The test on an application for leave to appeal is well established and is set out in Telesystem International Wireless Inc v CVC/Opportunity Equity Partners LP 1:

“The general test of whether leave to appeal should be granted is: Does the appeal have a real (i.e. realistic, not fanciful) prospect of success? ….. In exceptional circumstances, leave will be granted even where no such prospect exists if the appeal involves an issue which should be examined by the Court of Appeal in the public interest, e.g. when a public policy issue arises or a binding authority requires reconsideration. The relative significance of the issues and the costs necessary to examine them will be a relevant factor. In an appeal on a point of law (including on the ground that a finding of the lower court is unsupported by evidence), leave should not be granted unless the court considers there is a real prospect that the Court of Appeal will come to a different conclusion that will materially affect the outcome of the case.

In appeals on questions of fact, leave will be appropriate if the lower court has drawn an untenable inference from primary facts or should have drawn a materially different inference, and no particular benefit has been received from the courts having seen the witnesses. Leave will nevertheless rarely be given for an appeal based on the judge's evaluation of oral evidence and requiring an examination of the detail of his factual investigation. The court must give its reasons for granting or refusing leave in all factual appeals. Leave will also rarely be granted to appeal on the basis of the courts wrongful exercise its discretion, unless the case raises a point of general principle requiring the opinion of the appellate court.

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