Sze to Gin Nam v Yuen Philp
| Jurisdiction | Cayman Islands |
| Judge | Justice David Doyle |
| Judgment Date | 13 June 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 97 OF 2022 (DDJ) |
The Hon. Justice David Doyle
CAUSE NO. FSD 97 OF 2022 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Interim injunction to preserve the status quo pending the determination of substantive proceedings.
Mr Stephen Moverley Smith QC and Mr Paul Goss of Ogier for the Plaintiffs
Ms Clare Stanley QC and Ms Jessica Williams and Mr Luke Fraser of Harneys for the Defendants
I would like at the outset to express my thanks to the legal teams involved in these proceedings for their assistance to the court. It has been a real treat over the weekend to go through the hearing bundles and focus on the first class written advocacy in the skeleton arguments filed last Thursday. It took a little longer than the 2 hours pre-hearing reading estimate of the parties. Today I have benefited from the well-focused oral advocacy skills of Clare Stanley QC for the First Defendant and Stephen Moverley Smith QC for the Plaintiffs. I mean it when I say that it has been a real privilege and pleasure to preside over these proceedings in the Cayman Islands today. Such written and oral advocacy skills further enhance this jurisdiction as a leading international finance centre and it is right that I acknowledge them.
The parties in the proceedings presently before this court in the Cayman Islands are as follows. The Plaintiffs are Sze To Gin Nam (“Roger”) and his wife Lo Shuk Yee (“Pamela”). The Defendants are Yuen Philip (“Philip”) and his wife Kwok Lai Yi (“Ms Kwok”) and a company incorporated under the laws of the Cayman Islands called Aurabeat Technology International (the “Cayman Company”). The Cayman Company is the holding company of several subsidiaries in Hong Kong including Aurabeat Technology Holdings, Aurabeat Technology Limited, Aurabeat Engineering Limited and Air Lab Global Limited (the “Hong Kong Subsidiaries”). The Cayman Company and the Hong Kong Subsidiaries together are referred to as the “Group”. The business of the Group is the manufacture and sale of air purifiers and related equipment.
Roger, Pamela, Philip and Ms Kwok appear to reside in Hong Kong and they have fallen out. Legal proceedings have been brought in the Cayman Islands and Hong Kong in respect of the fallout. Put simply, there are serious grievances between the parties. Roger and Pamela say that their shareholding has been wrongly diluted and they have been wrongly removed as directors of the Cayman Company and Ms Kwok wrongly appointed. Roger and Pamela believe Philip to be untrustworthy and dishonest. Philip believes that Pamela's presence within the Group has become intolerable and that Roger and Pamela have no management skills. Philip further believes that if he is not reinstated as a director of the main Hong Kong subsidiary “this will nullify one of the primary protections for external investors” (paragraph 54 of his skeleton argument).
Until March 2022 Roger and Pamela were majority shareholders of the Cayman Company (56.6%) and were directors. Their case is that Philip and/or Ms Kwok have tried improperly to seize control of the Group by (a) invalidly and for improper purposes diluting their collective majority shareholdings and (b) thereafter improperly removing Roger and Pamela as directors and employees of companies within the Group and invalidly appointing Ms Kwok a director of the Cayman Company. Philip's case is that the Cayman Company validly issued shares which allowed the majority of shareholders to vote to remove Roger and Pamela as directors and appoint Ms Kwok as director. A crucial question is whether or not the shareholding of Roger and Pamela has validly and properly been diluted from 56.6% to 48.26%. Relevant to that crucial issue is whether the SAFE Note Resolution dated 16 March 2022 (“Resolution”) is authentic which Philip says it is. Roger and Pamela say they never agreed to or signed the Resolution and that their signatures were affixed without their knowledge or consent. I am not able to resolve that issue today. It will have to await determination at trial after discovery, exchange of evidence and the testing of such evidence by way of cross examination. What I can decide today is what should be done in respect of two interlocutory applications that have recently been filed, but before I come to them I should mention the writ that has been filed and the position in Hong Kong.
By writ of summons dated 14 April 2022 (the “Writ”) the Plaintiffs seek relief against the Defendants, namely orders setting aside the allotment of shares made on or after 9 February 2022, declarations that the Plaintiffs have not been validly removed as directors of the Cayman Company and that Ms Kwok was not validly appointed and that the notice of the general meeting dated 7 April 2022 is null and void, and a declaration that the resolutions purportedly passed at the general meeting on 13 April 2022 are null and void and an order for the rectification of the register of members and register of directors and a declaration that the actions of Philip constitute a breach of fiduciary duties.
I have also considered the Statement of Claim dated 17 May 2022 and the Defence and Counterclaim dated 1 June 2022.
On 11 April 2022 the Plaintiffs sought urgent ex parte on notice injunctive relief from the High Court of Hong Kong (the “Hong Kong Court”) restraining Philip and Ms Kwok from implementing, inter alia, the Aurabeat Holdings Limited resolution of 6 April 2022. Philip and Ms Kwok gave certain undertakings in respect of some of the Hong Kong Subsidiaries. No undertakings were given by the Plaintiffs.
I now turn to a very brief description of the two interlocutory applications presently before the court for determination.
By ex parte summons dated 14 April 2022 (the “Injunction Application”) Roger and Pamela sought orders that until further Order Philip, Ms Kwok and the Cayman Company be restrained from implementing resolutions passed at a general meeting of the Cayman Company on 13 April 2022 to remove Roger and Pamela as directors of the Cayman Company and appointing Ms Kwok as a director of the Cayman Company. Further relief is sought to, amongst other matters, preserve Roger's registered shareholding at 48.5% and Pamela's at 8.1% (total 56.6%) as at 9 February 2022.
The Injunction Application came on for hearing at relatively short notice on 27 April 2022. I heard submissions and adjourned the matter to see if the parties could agree undertakings. Counsel who then appeared for the Plaintiffs returned to court and stated according to the transcript (which I have studied in detail) “the parties have agreed to provide mutual undertakings to essentially take things back to when they were all on the board, and will provide mutual undertakings not to, amongst other things, convene meetings, allot shares, and otherwise take steps without the consent of the other parties. The attorneys are happy to negotiate the specific terms of the undertakings between themselves, but in substance, everyone will be bound by the same terms.” I asked if we would have a draft Order reciting agreed undertakings and counsel then appearing for the Plaintiffs stated: “We will provide you with a draft once it's agreed, probably later this afternoon.” I asked if counsel had the wording of the undertakings and counsel replied in the negative. I asked if counsel needed more time to work out the wording and the answer was in the affirmative. It was in those circumstances that I left court in the hope that a draft of an agreed Order reciting agreed undertakings would be provided to the court. Sadly, it was never forthcoming.
There is a dispute as to whether there is an enforceable agreement that the undertakings cover not only the Cayman Company but also extend to the Hong Kong Subsidiaries as well. Counsel then appearing for the Plaintiffs says in effect that there was a misunderstanding in respect of her instructions. The Plaintiffs in effect say that their counsel had no authority to agree undertakings in respect of the Hong Kong Subsidiaries. Philip says there was authority (and indeed the Plaintiffs concede ostensible authority) and a binding and enforceable agreement was arrived at on 27 April 2022 (which the Plaintiffs strongly dispute).
By summons dated 9 May 2022 (the “Enforcement Application”) Philip sought an order “in accordance with the agreement entered into by counsel” on 27 April 2022 to cover the position of the Hong Kong Subsidiaries and not just the Cayman Company.
The Enforcement Application was listed for hearing on 20 May 2022 but it was adjourned to permit evidence to be filed and skeleton arguments to be produced. Further evidence has now been filed (which I have considered) and skeleton arguments have been produced.
I should add that Philip says that on 18 May 2022 the Plaintiffs...
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