In Tianrui (International) Holding Company Limited v China Shanshui Cement Group Limited the Cayman Islands Court of Appeal confirmed that a shareholder presenting a winding-up petition on the just and equitable ground did not have to have the purpose of advancing a class remedy on behalf of all shareholders.
At first instance, Justice Mangatal said “it is plain that this Petition was not presented with the purposes of advancing a class remedy on behalf of other shareholders”. Her Ladyship appeared to find Tianrui’s petition was an abuse of process because it was not advancing a class remedy for shareholders, based on the decisions in Ctrip Investment Holding Ltd v eHi Car Services Limited and Re Torchlight Fund LP:
- In Ctrip, Justice Kawaley found that the shareholder was seeking to use its just and equitable winding-up petition to further its own commercial interests and not for a class remedy for the benefit of the shareholders generally. The petition was struck-out for being an abuse of process on a number of bases, including improper collateral purpose.
- In Torchlight, when considering whether the petition was brought for an improper purpose Justice McMillan held “the Petitioners must demonstrate that the Petition has been pursued in the interests of the Limited Partners”.
The Court of Appeal disagreed with Justice Mangatal. It accepted that if a creditor’s petition is not invoking a class remedy the petition may be an abuse of process, but doubted the same principle would apply in respect of a contributory’s just and equitable winding-up petition. The latter will likely include complaints particular to that contributory, which may not be relevant to other contributories. The Court of Appeal found such a fact alone cannot be a reason for restraining a petition.
The Court held it was clear any such principle did not justify striking out Tianrui’s petition for two reasons. First, there was only one class of shares. Second, the idea that Tianrui could not petition in respect of acts of the company promoted by a majority of the other shareholders because Tianrui was not seeking a class remedy on behalf of those same shareholders (amongst others) was self-evidently wrong.