The dispute arose under a shareholders’ agreement which gave the plaintiffs the right to require the company to redeem their shares if its chairman was removed without cause. Following his removal, the plaintiffs sought redemption, but the company disputed that the contractual trigger had occurred, maintaining that he had been removed for cause. The plaintiffs commenced proceedings in the Grand Court of the Cayman Islands. Shortly thereafter the opposing party iniaited arbitration in Hong Kong under the same agreement.
The Grand Court had to decide whether (1) the substance of the dispute and the claim advanced genuinely concerned the enforcement of an established redemption right, or whether the parties still disputed whether that right had arisen; and (2) even if the claim genuinely concerned specific performance, the exception to the arbitration clause, read with section 10.3, headed “Specific Performance” and containing the words “a non-breaching Party will have the right to seek an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach”, permitted the Court to grant final relief, rather than merely interim protection.
On the first point, the Court reviewed the circumstances of the case and concluded at paragraph 75 that:
The substance of the controversy in this case is whether Mr Chow was removed as chairman without cause and consequently whether a redemption event has occurred which has triggered a redemption right. The substance is not whether specific performance should be granted or not. The substance is whether a redemption right has been triggered. If so the Plaintiffs would, prima facie, be entitled to money for their shares. That does not appear to be in dispute between the parties. Whether a redemption event has occurred is hotly disputed.
Regarding the second point, the Court concluded that:
1. The agreement itself said that headings should not be relied upon for interpretation. Section 10.11 provided:
The titles of the sections and sub-sections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
2. The reference to equitable relief, read in its contractual context, was limited to interlocutory protection against breaches. The Court relied on the wording concerning relief “enjoining” breaches, rather than treating the provision as an exception for all substantive claims seeking specific performance. As it explained at paragraph 82:
It is also right to note that the title to section 10.3 is “Specific Performance” but it does not provide for a general carve out for all claims for specific performance. Firstly they must be genuine claims and not contrivances. Secondly, as is clear from the express wording of Section 10.3 of the SHA the carve out is limited to interlocutory relief “enjoining” any breaches rather than a main claim in substantive proceedings for specific performance.
Result
The Cayman proceedings were stayed in favour of arbitration in Hong Kong, with costs against the plaintiffs. The Court did not determine whether the redemption rights had arisen.