Caselaw Digest
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FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands) Holding Corporation (Cayman Islands)

20 September 2023
[2023] UKPC 33
Privy Council
Two companies argued about who was right in their business deal. They had a deal saying to use arbitration if they fought. One company tried to shut down the business instead of using arbitration. The judge said that the part about the argument could be sent to arbitration, but the part about shutting down the business needed to stay in court.

Key Facts

  • FamilyMart China Holding Co Ltd (FMCH) and Ting Chuan (Cayman Islands) Holding Corporation (Ting Chuan) are shareholders in China CVS (Cayman Islands) Holding Corp (the Company).
  • A shareholders' agreement (SHA) between FMCH and Ting Chuan contains an arbitration clause.
  • FMCH petitioned to wind up the Company on 'just and equitable' grounds, alleging breaches of the SHA and loss of trust and confidence in Ting Chuan's management.
  • Ting Chuan sought to stay the winding-up petition for arbitration, relying on the SHA's arbitration clause.
  • The Cayman Islands Court of Appeal refused to grant a stay, finding the winding-up petition was not arbitrable.
  • Ting Chuan appealed to the Privy Council.

Legal Principles

Generally, Cayman Islands law, like English law, respects parties' right to arbitrate disputes.

Cayman Islands case law and the Arbitration Act 2012

Section 4 of the Foreign Arbitral Awards Enforcement Act (FAAEA) mandates a stay of legal proceedings if a matter is agreed to be arbitrated, unless the arbitration agreement is inoperative.

FAAEA, section 4

A court has exclusive jurisdiction to wind up a company on the 'just and equitable' ground.

Companies Act (2022 Revision), sections 90, 92, 95

An arbitration agreement is inoperative if the subject matter is non-arbitrable or the remedies sought are beyond the arbitrator's jurisdiction.

Privy Council case law

A 'matter' for the purposes of a stay under section 4 of the FAAEA is a substantial issue relevant to the claim or defence, capable of separate arbitration.

Privy Council case law, interpreting FAAEA, section 4 and drawing from various jurisdictions

Outcomes

The Privy Council allowed Ting Chuan's appeal.

While the court has exclusive jurisdiction to wind up a company, certain matters within the winding-up petition were arbitrable. The dispute centered around breaches of the SHA and loss of trust, which are capable of being resolved through arbitration without encroaching on the court's exclusive jurisdiction to order a winding up.

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