Henderson J
IN THE CAYMAN ISLANDS COURT OF APPEAL
CIVIL APPEAL NO. 9 of 2004
(GCCI No. 75 OF 2004)
BETWEEN:
(1) Kazakhstan Asset Management Limited
(2) OJSC Central Asia Cement
Appellants (Plaintiffs)
(1) Kazakhstan Investment Fund, Ltd
(2) Cement Engineering Consultancy Ltd
(3) VISOR Investment Solutions OJSC
(4) Howard I. Golden
(5) John D. Chapman
(6) Eurosys Consulting LLP
(7) Kauzhar LLP
(8) ATF Bank JSC
Respondents (Defendants)
RULING DELIVERED BY The Honourable MR. JUSTICE
HENDERSON on the 9th day of July 2004, in
George Town, Grand Cayman.
APPEARANCES:
MR. E. SIMPSON For the Appellant Plaintiffs
MR. C. YOUNG For the 1st, 4th and 5th
Defendants
Friday, July 9, 2004
RULING
The plaintiff appellants seek, first, a stay of the order of Madam Justice Levers of June 11th, 2004, which was a refusal to continue certain injunctions the plaintiffs had obtained ex parte against Kazakhstan Investment Fund (a Cayman Islands company); and, second, continuation of those same injunctions.
The injunctions expired at the time Levers, J., refused to continue them. That is why the plaintiffs need, not only a stay, but a continuation of the ex parte injunctions. I am being asked, as a single judge of the Court of Appeal, not merely to stay the order appealed from but to grant injunctions. The requested injunctions are to be worldwide in scope.
To succeed before Madam Justice Levers, the plaintiffs had to demonstrate a good arguable case. To succeed now before me they must demonstrate that they have a good arguable appeal, a somewhat higher threshold. This point was made with clarity in Ketchum PLC vs.
Group Public Relations Ltd. [1997] WLR 4. In Ketchum, the Court of Appeal said:
"Moreover, I cannot see any reason in principle why the considerations which are applicable when the Court is considering the grant of a Mareva injunction should not be applied in favour of a plaintiff, even if he has lost in the court below, though the question will not be "Does he have a good arguable case?" but "Does he have a good arguable appeal?" This is likely to be a more difficult test to satisfy, and, if the case turns upon questions of fact which the judge has resolved against the complainant, may well be insuperable. This threshold must be at least as high as that which has to be satisfied when the court considers whether or not to grant leave to appeal
where that is required."
The facts and issues are described in brief in the decision under appeal. I will not repeat them here.
These plaintiffs seek a determination that a certain transfer of shares by the defendant KIF to the defendant Visor was in breach of a preemption right in a shareholders' agreement. They ask for specific performance or, alternatively, damages for breach of contract. They also allege a conspiracy between six of the defendants and seek damages for that.
Lying at the heart of these allegations is the shareholders' agreement. There were three parties to it: the defendant KIF, described in the agreement as "the fund"; the defendant CEC, described in the agreement as the "management company"; and the plaintiff CAC, whose shares were the subject of the agreement and which is described in the agreement as "the company".
The critical clause is clause 3.2, which reads:
"Each of the Fund and the Management Company shall have
the right to sell, transfer, or otherwise alienate part, or all, of its interest in the equity of the Company after providing the other party the right of first refusal upon the terms presented by the JSCL. The Fund may require that the Company take all steps reasonably necessary to secure the listing for trading of its share [sic] on a stock exchange acceptable to the Fund."
The first plaintiff, KAM, was not a party to that agreement. Clause 8.8 prohibits an assignment of rights under the agreement by any party without the consent of the other parties. There is no suggestion here that KAM has obtained an assignment with the consent of the other parties. In my view, KAM is highly unlikely to succeed in establishing at trial its standing to invoke the provisions of this shareholders' agreement.
CAC, the second plaintiff, was a party to
the agreement, but for a limited purpose. Its shares were the subject of that agreement. As one would expect, the preemption right provided for in clause 3.2 is for the benefit of the other two parties to the agreement - the shareholders. CAC derives no legal entitlement from that clause. There is an argument, which will apparently be advanced at trial, that KAM derives locus standi from its status as the beneficiary of a constructive trust imposed upon the trustee, CEC, by Malaysian law. The argument is speculative at best.
I am not able to see in any of this a good arguable case that either plaintiff has standing to claim the benefit of the shareholders' agreement.
The plaintiffs, perhaps in recognition of their difficulty, applied to Levers, J. to restructure the action. They wanted to remove CEC as a defendant and add it as a plaintiff. That request was refused. Had it been allowed, CEC's new-found status as a plaintiff might well have cured the standing issue at trial. It would not, however, have altered the decision of Levers, J. regarding the
continuation of these injunctions. They were obtained by KAM and by CAC and must stand or fall on the basis (inter alia) of KAM and CAC's standing to initiate the underlying action. CEC had no application before Madam Justice Levers and is not an appellant here today.
The conspiracy claim is at least partly dependent upon the allegations of breach of the shareholders' agreement. It can fairly be said to be ancillary to the claim for breach of contract. In addition, it appears to allege overt acts which took place largely in Kazakhstan. There was uncontroverted evidence before Levers, J., that there is no concept of conspiracy in the law of that jurisdiction. It seems likely that the law of Kazakhstan would be the applicable law.
For these reasons, the plaintiffs have failed to establish a good arguable case at first instance, and have certainly failed to establish a good arguable appeal. The application is therefore dismissed.
The Honourable Mr. Justice Henderson