Aquapoint LP (in Official Liquidation) (Appellant) v Xiaohu Fan (Respondent) (Cayman Islands)

Hearing listed

Case summary
Appeal

Case summary

Case ID

JCPC/2024/0007

Jurisdiction

Cayman Islands

Parties

Appellant(s)

Aquapoint LP (in Official Liquidation)

Respondent(s)

Xiaohu Fan

Issue

1) Whether the just and equitable winding-up jurisdiction may be used to alter, amend or supplement the normal effect of the law of contract in circumstances where the parties have entered into a contract regulating their relationship and where that contract expressly makes provision for the matter or matters giving rise to the Respondent’s complain. (2) Whether the Respondent’s complaint is governed exclusively by the law of contract. (3)Whether it was a breach of the duty to act in good faith for the General Partner to rely on entire-agreement clause in the 2017 Agreement to decline to give effect to assurances made outside of that Agreement. (4) Whether the reliance by the General Partner on the terms of the 2017 Agreement in not transferring the shares was misconduct in the management and affairs of the Partnership giving rise to a loss of trust and confidence as to justify the making of a winding up order on the just and equitable ground. (5) Whether the General Partner has breached its duty to act in good faith by refusing to transfer the shares in Legend Cayman to the Respondent so as to justify the making of a winding up order on the just and equitable ground. (6) Whether there is an adequate alternative remedy available to the Respondent by bringing an action for breach of duty under Section 19(1), Exempted Limited Partnership Act.

Facts

In 2017, the Appeallant limited partnership, Aquapoint LP, was formed to hold shares in Legend Biotech Corporation, a Nasdaq-listed parent of a group of companies that develop novel cell therapies for oncology. The Respondent, Dr Xiaohu Fan, holds a 69.96-percent interest in the Appellant, as a limited partner. To become a partner, the Respondent executed three contractual documents (referred to, collectively, as the ‘2017 Agreement’). The Respondent alleged that, based on an understanding with the other limited partners, he had a legitimate expectation that he would become entitled to a further 10 percent of the shareholding in Legend Biotech, once six months had elapsed from the company’s initial public offering. Once this period passed, the Respondent requested transfer of the shares but the partnership’s General Partner refused. The Respondent applied to wind up the partnership on the just-and-equitable basis, claiming that (a.) the General Partner had, in bad faith, frustrated his legitimate expectation and/or (b.) he had justifiably lost trust and confidence in the Appellant’s management. The Appellant argued that the Respondent’s complaint was exclusively governed by the law of contract, given that the 2017 Agreement exhaustively and specifically addressed the circumstances in which share transfers would occur. The Grand Court upheld the Respondent’s complaint and ordered that the Aquapoint be wound up, and the Court of Appeal affirmed this decision on appeal. The Appellant now appeals to the Privy Council.