The Section 92 of the Companies Act (2022 Revision) and Global Cord Blood Corporation
| Jurisdiction | Cayman Islands |
| Judge | Justice Kawaley |
| Judgment Date | 08 September 2023 |
| Docket Number | CAUSE NO: FSD 108 of 2022 (IKJ) |
| Court | Grand Court (Cayman Islands) |
The Hon. Justice Kawaley
CAUSE NO: FSD 108 of 2022 (IKJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Jurisdiction to set aside or vary a judgment before the order giving effect to it is drawn up-inherent jurisdiction-proof fraud not required-Grand Court Act (2015 Revision), section 11(1)
Mr David Chivers KC and Ms Fleur O'Driscoll and Mr Alan Quigley of Forbes Hare on behalf of Blue Ocean Structure Investment Limited (the Petitioner)
Mr Victor Joffe KC, Mr David Lewis-Hall, Mr Damon Booth and Ms. Yuan Wen of Appleby for the Litigation Steering Committee
Mr Hamid Khanbhai of Campbells for the Joint Provisional Liquidators (“JPLs”)
Shakespeare's words “ Defer no time, delays have dangerous ends”, written over 400 years ago, echo down the years. Roughly a year ago, the Petitioner sought to list an ex parte on notice application as soon as possible to appoint the Joint Provisional Liquidators (the “ JPLs”) having discovered what appeared to be clear evidence that the Judgment I delivered on 29 July 2022 had been based in part on a forged bank statement relied upon by the Company. While the Court was seeking to fix a date which would suitably accommodate the Company's fair hearing rights, it now appears that the listed Company's management was, during this very window of time, disposing of the Company's most valuable assets. This was purportedly done pursuant to undisclosed security arrangements entered into for the benefit its shareholders. At the time of the present hearing, the Litigation Steering Committee (the “ LSC”), comprised of members of that same management, was reportedly opposing the JPLs' attempts to recover these assets for the benefit of the Company.
In my Ex Tempore Judgment of 22 1 September 2022 appointing the JPLs, I expressed the provisional view that my 29 July 2022 Judgment was liable to be set aside on the grounds of fraud. Ignoring the adage “ once bitten twice shy”, I resisted the Petitioner's entreaties to urgently list its present application, a Summons dated 9 December 2022 seeking to set aside the 29 July 2022 Judgment (the “Set Aside Summons”). An improbable application was made by a company linked to the former majority shareholder, Mr Kam, to intervene and strike-out the Petition, by Summons dated 18 January 2023. I decided to hear that Summons first, for reasons I explained in my Judgment dated 31 March 2023 dismissing it:
“ 3. This application was on its face a surprising one which at first blush appeared to be, as the Petitioner complained, an attempt by the ‘Kam camp’ to make a desperate last-ditch
attempt to prevent the EGM Resolutions being deployed to change control of the Company's Board. There was a battle in correspondence in relation to the priority in which the Petitioner's and GMSCL's Summonses should be heard. Whilst the Petitioner contended it was obvious that GMSCL lacked standing to intervene in the present proceedings to enforce contractual rights against third parties, it made no sense to proceed with the Petition while an application to strike-out or stay was waiting in the wings. Therefore, on 1 February 2023 I directed that the GMSCL standing issue should be determined first…”
Having concluded that GMSCL lacked standing to intervene to enforce third party contractual rights, I recorded the following further findings:
“ Even if GMSCL's proposed intervention is motivated solely by a desire to vindicate the sanctity of strict adherence to contractual rights, this would still provide a compelling basis for the conclusion that it should not be permitted to intervene in the present proceedings. GMSCL is unabashedly not seeking to intervene to advance the interests the Company's shareholders at all by seeking to throw a spanner into the works of the present proceedings and to legally restrain the Petitioner's attempts to use its significant shareholding to restore probity to the Company's management by seeking to, inter alia, (a) change the Board and (b) set aside an Order which I have expressed the provisional view was obtained by fraud…”
It was against this background that I felt entirely justified in viewing the LSC's attempts, actively supported by Mr Kam himself, to postpone adjudicating the Petitioner's Set Aside Summons in order to undertake a fuller inquiry into a beneficial owner level dispute, with a leery eye. Mr Kam had founded the Company and sold his majority stake to the Petitioner's beneficial owner; his apparently plausible complaint about not receiving the full purchase price had no direct bearing on the merits of the present Petition. This was particularly the case when the grounds upon which the present Summons were based were carefully scrutinised. Although I had invited the Petitioner to consider applying to set aside the 29 July 2022 Judgment on the grounds of fraud, the Order had never been perfected and the Set Aside Summons primarily sought relief in the following broad terms:
“ 1. That the Judgment made by this Honourable Court on 29 July 2022 (the ‘July Judgment’) be set aside pursuant to the Court's inherent jurisdiction…”
The latest iteration of delaying tactics quite transparently in service of the commercial interests of Mr Kam (advanced by a former management which seemed to consider it unnecessary to make plausible attempts to advance bona fide shareholder interests) took the following form. By the LSC's Rejoinder Summons dated 4 August 2023, leave was sought to rely upon a new raft of evidence elaborating upon the hypothesis (first postulated several months after the forgery was first revealed by the Petitioner) that the forged Bank Statement had been cunningly placed before the Court by the Petitioner's beneficial owner, using the Company's then management as naively innocent pawns. The Petitioner sensibly did not formally oppose the Summons, contending that the Court could easily consider the new materials and reject the case they purported to support at this stage.
Although the Petitioner invited the Court to find without hearing oral evidence that the Judgment was liable to be set aside on the grounds of fraud, I ultimately declined to do so. Nonetheless, I also declined to risk denying justice through delay. Twice bitten, thrice shy. Instead, I decided at the end of the two-day hearing on 16 August 2023 that:
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(a) the Judgment was liable to be set aside, in part, under the more flexible inherent jurisdiction of the Court to reconsider its decisions based on either a material change of circumstances or the discovery that the judgment or order was based on a misstated version of the true factual position and/or that a fundamental legal mistake had been made;
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(b) instead of discharging the Transaction Injunction restraining the Company from completing the Cellenkos Transaction, that injunction should be continued; and
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(c) instead of continuing the EGM Injunction of 15 June 2022 restraining the implementation of the resolutions purportedly passed at the 16 June 2022 EGM, that injunction should be discharged.
These are the reasons for that decision.
In the Petitioner's Skeleton Argument dated 7 August 2023 the following jurisdictional arguments were advanced:
“ 45. The Petitioner asks that the Court set aside (or review) the July Judgment. No sealed order was made and hence the Court has a complete (albeit judicial) discretion in that respect. The Petitioner does not need to show that the order (because there was none) is interlocutory subject to an express or implied liberty to apply, or that the Judgement was tainted by fraud, although both of these tests could, if necessary, be satisfied as set out below.
46. If the July Judgment was considered as an order, it would be interlocutory and the EGM injunction is subject to further order of the Court, necessarily containing an implied liberty to apply on change of circumstance – see ArcelorMittal (below) at para 65. Accordingly, the order can be set aside under the inherent jurisdiction of the court, for material change in circumstance, or on the grounds that the facts upon the original decision being made were misstated. Further, the EGM Injunction was granted in (significant) part due to the Court's concern that the Petitioner lacked standing, a point disposed of in the Petitioner's favour in the JPL judgment.”
The LSC's Skeleton Argument exchanged on the same date pivotally submitted:
“ 2.1 The Set Aside Summons seeks to set aside the July Judgment in light of developments in respect of a bank statement which had been exhibited to the Fourth Affidavit of Chen Bing Chuen Albert…on the basis of fraud – namely that the Guangfa Statement was a forgery knowingly adduced in evidence by Albert…
20. The starting point is what exactly the Petitioner's case is in respect of the application to set aside.
21. At Chen 9, §87.1, it was expressly stated that the Petitioner sought an Order that: ‘the July Judgment be set aside on the basis that the decisions made by [this Court] were procured by, or alternatively, were influenced by fraud’ (Emphasis added)”
The failure to address the inherent jurisdiction ground could only sensibly be viewed as a tactical omission. The fraud ground is not to be found on the face of the Set Aside Summons at all. The 9 th Chen Affirmation made on 15 December 2022 in support averred as follows:
“ 2. I am authorised to swear this affirmation on behalf of the Petitioner in support of its summons dated 9 December 2022 in which it seeks that the Honourable Justice Kawaley's Judgment dated 29 July 2022 (the ‘July Judgment’) be set aside pursuant to the Court's inherent discretion and, further, on account...
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