The Companies Act (2022 Revision) Seahawk China Dynamic Fund
| Jurisdiction | Cayman Islands |
| Judge | Justice David Doyle |
| Judgment Date | 01 December 2023 |
| Docket Number | FSD 23 of 2022 (DDJ) |
| Court | Grand Court (Cayman Islands) |
The Hon. Justice David Doyle
FSD 23 of 2022 (DDJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Determination of issues as to whether an undertaking in damages to the Company, by an applicant who had obtained an ex parte on short notice order appointing joint provisional liquidators and in circumstances where such appointment had since been discharged and a winding up petition dismissed, should be “amended”, “extended”, “treated as given” or “implied” in favour of an individual who wished to claim damages against the applicant — whether inherent jurisdiction can be prayed in aid — directions in respect of an inquiry as to the Company's damages and costs
Robert Levy KC for Hao Liang
Clare Stanley KC, Katie Pearson and Alexia Adda of Claritas Legal for Lau Chun Shun
Alistair Abbott and Alan Quigley of Forbes Hare for Seahawk China Dynamic Fund
I heard submissions in respect of this matter on 22 November 2023 and reserved judgment which I now deliver.
By summons dated 3 February 2022 (the “JPL Summons”) Mr Lau Chun Shun (“Mr Lau”) applied for an order for the appointment of joint provisional liquidators (“JPLs”) over Seahawk China Dynamic Fund (the “Company”).
The JPL Summons came on for hearing on 10 February 2022 ex parte on short notice. I delivered an ex tempore judgment that day recording at paragraph 2 that “[a]t short notice Paul Smith appears on behalf of the Company and Hao Liang (“Mr Liang”).” At paragraph 6, I noted that the Company and Mr Liang “were provided on Monday, 7 February 2022 with short notice of this hearing which is taking place today, Thursday, 10 February 2022.”
By order made on 10 February 2022 (the “February 2022 Order”) I appointed JPLs and recorded:
“AND UPON Mr. Lau Chun Shun by his counsel undertaking for and on behalf of the Applicant [Mr Lau] to compensate for any loss or damage suffered by the Company as a result of this order if the Court considers it just in the event that the winding up petition is ultimately withdrawn or dismissed” (the “Undertaking”) (my underlining)
The February 2022 Order was amended on 23 March 2022 to delete the word “Company” where it first appeared in paragraph 9(b) and to insert the word “country”.
I should record that Mr Lau in his second affirmation affirmed on 9 February 2022 at paragraph 300 referred to the need to give an undertaking to cover any damage suffered by the Company and the remuneration and expenses of the provisional liquidators in the event that the winding up petition was ultimately withdrawn or dismissed. At paragraph 301 Mr Lau stated:
“I hereby confirm that I offer such an Undertaking to the Court to pay the remuneration and expenses of the JPLs and any damages suffered by the Company as a result of the appointment of the JPLs, should the Court so order.” (my underlining)
It can be seen that the undertaking as to damages offered by Mr Lau and accepted by the court was limited to any loss or damages “suffered by the Company” and it made no reference to Mr Liang, other shareholders or other third parties.
In respect of the winding up petition dated 3 February 2022 (filed on 7 February 2022) presented by Mr Lau as petitioner a consent order was made on 24 February 2022 and under paragraph 1 the Company was to be treated as “the subject matter of” the proceeding and “the proceedings shall be treated as inter partes proceeding between the Petitioner and [Mr Liang] as the holder of the management shares.”
The winding up petition was heard on 21–29 June and 29 July 2022 and dismissed by order made on 18 August 2022 for the reasons stated in my judgment delivered on 9 August 2022. The February 2022 Order was stated to be set aside and the appointment of the JPLs terminated and discharged on 18 August 2022 with immediate effect.
By notice of appeal dated 31 August 2022 Mr Lau appealed and by notice of withdrawal of appeal dated 16 January 2023 Mr Lau withdrew his appeal.
By summons dated 10 June 2022 Mr Liang applied for the discharge of the February 2022 Order and for an inquiry as to the loss and damage suffered by the Company as a result of the JPLs' appointment which he said Mr Lau was liable to compensate the Company for. Mr Liang did not apply in that summons for an inquiry as to any loss and damage he had suffered.
By amended summons dated 5 October 2023 (the “Amended Summons”) Mr Liang and the Company applied for an inquiry as to the loss and damage suffered by the Company and Mr Liang as a result of the JPLs' appointment and which they say Mr Lau was liable to compensate them for.
The Amended Summons was listed for hearing commencing at 10am on 22 November 2023 with an estimate of 1 day and was duly heard that day.
By email dated 27 September 2023 9:02AM from my PA, counsel were required “to file an agreed list of issues in respect of the hearing listed on 22 November 2023 @ 10am, within the next 21 days.”
A 3 page agreed list of issues was filed on 18 October 2023 (the “Agreed List of Issues”). In substance the main contentious issue is as to whether Mr Liang was or should be covered by the Undertaking. I set out a summary of the issues in the List of Issues as filed as follows:
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(1) should the court exercise its discretion and order that there be an inquiry as to the loss and damages suffered by Mr Liang? In particular
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(a) in the circumstances, including the order made on 24 February 2022, does the Undertaking extend to Mr Liang?
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(b) if so, did Mr Liang suffer loss and damage that was prima facie or arguably caused by the February 2022 Order?
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(c) if so, are there any special circumstances that might justify the court refusing to order an inquiry?
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(2) alternatively, if the court does not wish to determine these issues at this stage, should directions be given to allow Mr Liang to participate in the inquiry in order to establish (with the benefit of all the evidence) whether or not the Undertaking extends to Mr Liang and whether or not he suffered loss and damage that was prima facie or arguably caused by the February 2022 Order?
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(3) what case management directions should be given to progress the inquiry?
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(4) the costs of the Amended Summons to be determined.
I have considered all the written and oral submissions put before the court.
Mr Levy KC, with his characteristic robustness, relied heavily on Gee on Commercial Injunctions (7 th Ed. 2021) (“Gee”) in particular paragraphs 11–004 to 11–006 and 11–031, and 11–034 to 11–035, and seemed reluctant to dig into the underlying caselaw. Mr Levy also relied on the findings against Mr Lau in my judgment delivered on 9 August 2022 and in effect submitted that the justice of the case demanded that Mr Liang have a remedy against Mr Lau for the loss and damage suffered personally by Mr Liang as a result of the February 2022 Order. He did not refer to it but one is reminded of Lord Mansfield's iconic statement that “[t]here is no injury or wrong for which the law does not provide a remedy” ( Taylor v Horde (1757) 1 Burr 292 at 303). Mr Levy submitted that the proceedings in this case were inter partes Mr Lau and Mr Liang and in such circumstances an undertaking to Mr Liang could be regarded as “usual”.
Mr Levy emphasised paragraph 11–034 of Gee “[w]henever the court grants an injunction, unless the contrary is expressly said, the applicant will be taken to have given the usual undertakings in damages by implication.” Mr Levy submitted that an undertaking to cover Mr Liang should be regarded as the “usual” undertaking in the circumstances and that would arise by “implication”.
Mr Levy also emphasised paragraph 11–035 of Gee which suggested, without citing any authority in support, that the “jurisdiction to amend the order” arises “whenever through a breach of duty to the court by the applicant an undertaking which otherwise would have been required has been omitted from the order.” An undertaking, of course, is not an “order”, although it usually forms part of the recitals or is recorded in a schedule to an order. Gee argues that the jurisdiction “to amend” arises because of a number of points, including the applicant's duty to obtain “informed decisions by the court on that application in relation to the provision of undertakings to protect the respondent and anyone else who may be affected by the order. The applicant's duty includes drawing the judge's attention to any practice of the court relevant to undertakings ( Frigo v Culhaci [1998] NSWSC 393, Court of Appeal of NSW) disclosing facts which are material to what undertakings should be required, and ensuring everything material to the draft order laid before the court is drawn specifically to the attention of the judge”. In somewhat sweeping terms Gee adds:
“(3) the applicant's agreement to perform his duties owed to the court on the ex parte application implicitly includes agreement that any undertaking, which is omitted from the order as a result of his breach of duty to the court, is to be treated as given by him. Alternatively, the duty of utmost good faith, which applies to the applicant on the ex parte application, precludes him from denying that the omitted undertaking was provided by him.”
Gee cites no authority to support the sweeping statements quoted in (3) above. Mr Levy, however, grabs hold of them and submits that Mr Lau should “be treated” as having given an undertaking for the benefit of Mr Liang. Mr Levy says that the court can “amend the Undertaking to be in the form that extends to Mr Liang” under its inherent jurisdiction. There are a number of difficulties with those submissions which I will come to later in this judgment.
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