Chiang v Versa Die Cast Inc. and Others

• Jurisdiction: British Virgin Islands
• Judge: Bannister J
• Judgment Date: 10 July 2009
• Docket Number: CLAIM NO. BVIHCV 0341 of 2008
• Court: High Court (British Virgin Islands)
• Date: 10 July 2009

IN THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

CLAIM NO. BVIHCV 0341 of 2008

IN THE MATTER OF THE BVI BUSINESS COMPANIES ACT, 2004

And

IN THE MATTER OF THE INSOLVENCY ACT, 2003

And

IN THE MATTER OF LEADING MANUFACTURERS LIMITED

BETWEEN

Janet Chiang

Claimant/Respondent

and

(1) Versa Die Cast Inc

First Defendant/Applicant

(2) Leading Manufacturers Limited

Second Defendant

Versa Die Cast Inc.

Counterclaimant

and

(1) Janet Chiang

(2) Clement Chiang

(3) Leading Manufacturers Limited

Defendants to counterclaim

Appearances: Daniel Saoul of Conyers Dill & Pearman for the First Defendant/Applicant

Paul B Dennis and Willa Tavernier of O'Neal Webster for the Claimant/Respondent

[Injunction continued inter partes; application to vary; whether material change in circumstances; whether jurisdiction to vary]

JUDGMENT IN CHAMBERS

1 Bannister J[ag]: This is an application made by the first Defendant in these proceedings, Versa Die Cast Inc. (“Versa”), to vary an injunction continued inter partes by Olivetti J on 19 January 2009. I infer, but have seen no material in support of this, that the injunction granted originally ex parte by Justice E Anthony Ross, QC and subsequently varied inter partes, must have been continued by agreement between its original return date of 27 November 2008 and the decision of Olivetti J.

Bannister J

2 The background to these proceedings is fully set out in the judgment of Olivetti J and I shall set out only a very brief summary for present purposes. The Claimant, Janet Chiang, was until June 1999 the sole owner of the second Defendant (“LML”). LML is a BVI registered company and acted as the holding company of another company, En Yao. En Yao is a Chinese company with its registered office at Shanghai in the People's Republic of China (“PRC”). Its business is the production of top end die casts for the telecommunication and related industries. On 16 June 1999 the Claimant sold 51% of the shares in issue in LML to Versa and at the same time the two parties entered into a shareholders agreement and a letter of understanding. Since this matter has yet to come to trial the less I say about the purpose and effect of these documents the better, but it is common ground that they provided for equal representation at board level in both LML and En Yao and equal sharing of profits and that their overall effect was to constitute a joint venture between the parties such that their relationship as the holders of the issued shares of LML amounted to what is commonly referred to as a quasi partnership. In addition to En Yao, mentioned above, a second wholly owned operating company, En Jia, was incorporated in January 2005 as a subsidiary ofLML and a distribution company, Versatile Manufacturers Limited, was formed by the Claimant and Versa in 2002. There was also a company incorporated by the claimant and Versa in Finland which dealt with sales. I shall where appropriate refer to these companies as “the group”.

3 The relationship between the parties collapsed in September 2008. Versa says that the blame lies on the Claimant, because she and her associates were failing to play the part allotted to them in the joint venture. The Claimant says that Versa simply excluded her from participation in the management and control of the group. Those matters are for the trial.

4 There is no dispute that what Versa actually did in September 2008 was to use its 51% shareholding in LML to dismiss the Claimant and her nominee directors from the boards of LML, En Yao and En Jia, leaving directorial and operational control of LML, En Yao and En Jia in Versa's hands. Further, in October 2008 Versa caused LML to open a new bank account for LML in the United States of America, which the Claimant believed was intended to be used instead of LML's existing bank account in Taiwan to disburse dividends from LML, as well as royalty payments paid up to LML by En Yao as licensee under a sub-license agreement and then passed on to the two participators under license agreements made between the Claimant and LML on the one hand and Versa and LML on the other.

5 On 6 November 2008 the Claimant applied for and Justice Ross, QC granted an ex parte injunction until 27 November 2008. The broad effect of the injunction was to restrain Versa from making further alterations to the constitutions of the boards of LML, En Yao or En Jia; to restrain Versa from representing that any persons other than the original appointees were members of the boards of those three companies; to restrain Versa from representing that its chairman and CEO (“Mr Moffat”) was general manager of En Yao or En Jia; to restrain Versa from obstructing the Claimant from entering the business premises of the LML, En Yaoor En Jia or from participating in their day to day management or control; to restrain Versa from changing the identity of LML's registered agent; (by subparagraphs (ix) and (x) of the order) to restrain Versa from disposing of or “diminishing” the value of any of the assets of any of LML, En Yao or En Jia; and (by sub-paragraph (xi) of the order) to restrain Versa from causing the distribution of any cash from any of the group companies' bank accounts for the purpose of paying dividends, royalties or other payments “to the shareholders of LML”.

6 On 11 November 2008 Versa applied inter partes before Ross J for a variation of his ex parte order. The principal reason for the variation sought was the perception that the original order prohibited payments in the ordinary course of business. I do not think that that was actually its effect, but one well understands the need for caution in these matters and Versa cannot be criticized for seeking the clarification which it did. The variations sought were as follows:

• ‘3. Paragraph (x) of the ex parte Order of this Court dated 6 November 2008 (‘the ex parte Order’) be varied as follows (the variation being shown with underlining):

  • (x) [The Respondents are hereby restrained until further Order, whether by themselves, or by their servants and/or agents, directly or indirectly, or in any way whatsoever from]…. Disposing of, encumbering, or diminishing the value of, any of the assets of any of the subsidiaries of LML, including En Yao and Den Jia,save that nothing in this Order shall prevent the First Respondent from procuring that the said subsidiaries make any payments and deliver products bona fide, in the ordinary course of business.

• 4. Paragraph (xi) of the ex parte Order be varied as follows (the variation being shown with underlining), namely either:

  • (xi) [The Respondents are hereby restrained until further Order, whether by themselves, or by their servants and/or agents, directly or indirectly, or in any way whatsoever from]…. Causing the distribution of any cash from any of LML's En Yao' En Jia's or VersatileManufacturers Limited's bank accounts located in the US or elsewhere, for the purpose of paying dividends, royalties or any other payments to the shareholders of LML, save that nothing in this Order shall prevent the First Respondents from procuring that Versatile Manufacturers Limited, from making payments the ordinary course of business.

  Or (variation shown by strike out):

  • (xi) [The Respondents are hereby restrained until further Order, whether by themselves, or by their servants and/or agents, directly or indirectly, or in any way whatsoever from]…. Causing the distribution of any cash from any of LML's En Yao' En Jia's or Versatile Manufacturers Limited's bank accounts located in the US or elsewhere, for the purpose of paying dividends, royaltiesor any other payments to the shareholders of LML.’

7 On 12 November 2008 Ross J varied the material parts of his order as follows (with the variation actually made shown underlined):

• ‘(x) Disposing of, encumbering, or diminishing the value of, any of the assets of any of the subsidiaries of LML, including En Yao and EnJia, save that nothing in this Order shall prevent the First Respondent from procuring that the said subsidiaries make any payments and deliver products bona fide, in the ordinary course of business. For the avoidance of doubt, the foregoing shall be without prejudice to such rights as the Applicant might have (any right not being admitted by the First Respondent) for her and/or her designated representative or representatives to audit all accounts of the subsidiaries of Leading Manufacturers Limited, together with all supporting vouchers, invoices, commercial papers, correspondence and other documents related to any of their finances, upon giving reasonable notice, during business hours.

• (xi) Causing the distribution of any cash from any of LML's, En Yao's en Jia's or Versatile Manufacturers Limited's bank accounts located in the U.S. or elsewhere, for the purposes of paying dividends, royalties or any other payments to the shareholders of LML,save that nothing in this Order shall prevent the First Respondent from procuring that Versatile Manufacturers Limited, make payments in the ordinary course of business.

• (xii)for the avoidance of doubt, and notwithstanding any provision in this Order, Mr. John W. Moffat may continue to perform his duties bona fide as legal...