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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Representation of Galasys Plc [2017] JRC 105 (03 July 2017) URL: http://www.bailii.org/je/cases/UR/2017/2017_105.html Cite as: [2017] JRC 105 |
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Before : |
Sir Michael Birt, Commissioner, and Jurats Olsen and Sparrow |
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Between |
(1) Galasys Plc (2) The Kim Seng (3) Vincent Lai Tak Yuen |
Representors |
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And |
(1) Seah Kok Wah (2) Chuah Teong Mingh (3) Hee Chee Keong (4) Chin See Seong |
Respondents |
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IN THE MATTER OF THE REPRESENTATION OF GALASYS PLC
Advocate M. L. Preston for the First Representor.
Advocate B. J. Lincoln for the Second Representor.
The Third Representor did not appear and was not represented.
Advocate P. D. James for the Respondents.
judgment
the commissioner:
1. This is an application by the First Representor ("the Company") for leave to discontinue the present proceedings as First Representor and thereafter to be re-designated as a Party Cited, with consequential orders as to amendment of pleadings and other matters.
2. The real issue between the parties concerns the terms upon which it should be permitted to do so. The Company, supported by the Respondents, submits that there should be no order as to the costs incurred to date in these proceedings whereas the Second Representor ("Mr Teh") submits that leave should only be granted on the basis that the Company pays all its legal costs to date together with other amounts owed to Mr Teh. The legal costs of the Company are either outstanding or have been funded by way of loans from Mr Teh and the Second Representor ("Mr Lai").
3. The factual background appears from three previous judgments of this Court namely Representation of Galasys Plc [2016] JRC 013 ("the January judgment"); Representation of Galasys [2016] JRC 149A ("the August judgment"); and Representation of Galasys Plc [2016] JRC 188 ("the October judgment").
4. The Company is incorporated in Jersey. It is a holding company of a group of companies which carry on business primarily in China and Malaysia. At all material times, the shares in the Company were listed on AIM.
5. As at 21st October, 2015, the board of directors comprised Mr Teh (as non-executive chairman), Mr Lai, the four Respondents (whom we shall refer to as Mr Seah, Mr Chuah, Mr Hee and Mr Chin) and Mr Gary Peagam ("Mr Peagam") as non-executive director. The largest shareholder was a company called Well Oriental Investments Limited ("WOI") which holds 34.99% of the shares. WOI is owned substantially by Mr Seah and Mr Chuah, although Mr Hee is also a shareholder.
6. Pursuant to the requirements of AIM, the board had constituted a sub-committee known as the Nomination Committee, which comprised of Mr Teh, Mr Lai and Mr Peagam. Following a recommendation from the Nomination Committee that the employment of Mr Hee and Mr Chin should be terminated, a board meeting took place on 21st October, 2015. There is a dispute as to what occurred at that meeting. According to Mr Teh (and Mr Lai) resolutions to terminate the employment of Mr Hee and Mr Chin were passed, whereas according to the Respondents the meeting was adjourned prior to voting upon the resolutions to remove Mr Hee and Mr Chin.
7. There then followed a number of further board meetings at which resolutions and counter-resolutions were purportedly passed. Most of these are disputed as there is a fundamental disagreement as to whether Mr Hee and Mr Chin were still directors, and whether or not various directors had a conflict of interest.
8. Mr Hee and Mr Chin subsequently commenced proceedings before the High Court in Malaysia against the Company and the members of the Nomination Committee. The proceedings sought declaratory relief regarding the validity (or otherwise) of various resolutions of the board, including those to terminate the employment of Mr Hee and Mr Chin.
9. On 9th December, 2015, Mr Seah and Mr Chuah purported to convene an EGM for 29th December, 2015, to remove Mr Teh and Mr Peagam, to confirm the appointment/reappointment of Mr Hee and Mr Chin and to appoint three new directors. As part of the listing on AIM, the Company had entered into a 'Relationship Agreement' with WOI and others because of the perceived risk of WOI having too much control over the Company to the detriment of other shareholders. A board meeting was held on 18th December which purported to authorise the Nomination Committee to appoint lawyers in England, Jersey and Malaysia to issue or defend proceedings in the name of the Company. The Nomination Committee believed that the resolutions of the proposed EGM would breach the Relationship Agreement and accordingly decided to institute proceedings before the High Court in England to restrain the holding of such a meeting.
10. On 23rd December, 2015, the High Court granted an interim injunction preventing the EGM from going ahead and restraining WOI and other defendants (including the Respondents) from taking steps to reconstitute the board. In the English proceedings, WOI and the Respondents argued that the Nomination Committee had no authority to commence the English proceedings in the name of the Company. They argued that all four Respondents were still directors and that accordingly they outvoted the three man (later two man) Nomination Committee. In the circumstances the English Court required an undertaking from the Company to bring proceedings in Jersey (as the jurisdiction in which the Company was incorporated) with all due expedition to resolve that dispute before returning to England to decide the merits of the claim under the Relationship Agreement.
11. The Jersey proceedings were therefore commenced in January 2016 in order to resolve the issue of whether the Nomination Committee was properly authorised to pursue the English proceedings in the name of the Company. This required the Court to consider what happened at the meeting of 21st October, 2015, and the subsequent meetings so as to ascertain who the directors of the Company were.
12. Mr Peagam had resigned as a director of the Company on 18th December, 2015. This left Mr Teh and Mr Lai as the members of the Nomination Committee and also left the board evenly divided between Mr Teh and Mr Lai on the one hand, and Mr Seah and Mr Chuah on the other (assuming that Mr Hee and Mr Chin were no longer directors).
13. The Representation was originally brought by the Company alone but, following an application by the Respondents and for the reasons set out in the January judgment, Mr Teh and Mr Lai were added as Co-Representors. The proceedings were originally listed as a cause de briéveté and were listed for trial with an estimate of 5 - 8 days in April 2016. It was at that stage envisaged that the trial would be concerned only with what actually happened at the various disputed board meetings. However, the Respondents were granted permission to amend their defence so as to allege that the members of the Nomination Committee were not acting bona fide in the best interests of the Company and that accordingly, even if the decisions were taken on 21st October, 2015, and thereafter as the Representors alleged, they were voidable because of this improper purpose. This meant that the proceedings immediately became very much more complex and detailed discovery was ordered. The April trial date was vacated to facilitate certain discussions but these were unsuccessful. The trial was re-fixed to begin on 20th September, 2016, but this time with an estimate of three weeks.
14. The next relevant event is that on 10th August, 2016, Mr Lai resigned as a director of the Company. This meant that Mr Teh was the only remaining member of the Nomination Committee in circumstances where the terms of reference of that Committee required two directors for a quorum. It also meant that the deadlock at board level was broken as there were now three undisputed directors, namely Mr Teh on one side and Mr Seah and Mr Chuah on the other. The latter two purported to pass a board resolution on 18th August, revoking any authority of the Nomination Committee or Mr Teh to continue giving instructions to lawyers on behalf of the Company and to confer such authority upon Mr Seah. They wrote to the lawyers acting on behalf of the Company on the instructions of the Nomination Committee (i.e. Nabarro LLP in England, Mourant Ozannes in Jersey and Zaid Ibrahim and Co. in Malaysia) purporting to terminate the Company's retainer with those firms.
15. On 26th August, the board received notices from the requisite percentage of shareholders calling for an EGM to be held in order to consider resolutions in broadly the same terms as the resolutions purportedly passed by the board on 18th August. That EGM was convened for 12th September.
16. On 30th August, there was a pre-trial review before the Commissioner in connection with the present proceedings. This had originally been intended as a conventional hearing to give any final directions necessary for the trial, which was due to commence on 20th September. However, in the light of the developments just referred to, Mr Teh asked the Court to make various rulings, including that what had happened was contrary to an interim agreement reached between the parties concerning the management of the Company pending resolution of the litigation in Jersey, that there was also a breach of the English injunction, and that the board resolutions of 18th August were invalid. He further asked for a ruling that he was still entitled to give instructions on behalf of the Company.
17. The Commissioner declined to make any such ruling at such short notice in the absence of satisfactory evidence and submissions but noted that an EGM had been called. He indicated that, if the Company in general meeting were, with no votes on the part of WOI, to vote to discontinue the proceedings, he would be willing to vacate the trial date and hear an application on behalf of the Company to discontinue the proceedings.
18. At the EGM on 12th September various resolutions were passed. Resolution 1 was in the following terms:-
"The proceedings involving the Company in the courts of England and Wales, Jersey and Malaysia, in respect of the disputes between the directors as to the lawfulness of certain decisions and actions of the directors of the Company during the period from October 2015 onwards are not in the best interests of the Company and shall be discontinued as soon as possible on the best terms as to costs as may be achieved."
19. Mr Teh subsequently challenged the validity of the resolutions passed at the EGM but this challenge was dismissed by the Court in the October judgment.
20. A listing on AIM requires there to be a Nominated Advisor (Nomad). The Nomad of the Company resigned following the board meeting of 18th August. No new Nomad has been appointed with the result that the Company's shares were delisted from AIM shortly after the EGM. This resulted in the automatic termination of the Relationship Agreement, so that WOI and those who support it have since been free to vote without restriction. Following this development, an AGM was held on 26th November, 2016, at which a majority of members (including WOI) voted against Mr Teh being re-elected to the board and appointed Mr Hee. The result is that the board now consists solely of three of the Respondents, namely Mr Seah, Mr Chuah and Mr Hee.
21. In relation to the English proceedings, the injunction was set aside on 27th September, 2016, on the basis that the Relationship Agreement (which underpinned the injunction) had terminated. On 25th October, 2016, Mr Seah filed a notice of change of solicitor to record that Nabarro LLP were no longer on the record for the Company in the English proceedings.
22. The new board subsequently instructed Advocate Preston to act for the Company in the present proceedings in place of Mourant Ozannes. The Company issued a summons which came before the Court on 6th January, 2017, seeking leave to discontinue the proceedings. The summons had originally envisaged that the Company would play no part thereafter and that (unless Mr Teh continued) the proceedings would come to an end - we should explain that, since his resignation as a director on 10th August, 2016, Mr Lai has played no part in these proceedings. At the hearing on 6th January, Advocate Preston applied for leave to amend his summons so that the Company would remain a party but would be re-designated as a Party Cited. The Court agreed that he could amend but adjourned the hearing of the summons on the basis that the parties needed more time to consider this new proposal. It is that summons (as amended) which is now before the Court.
23. Rule 6/31(1) of the Royal Court Rules provides as follows:-
24. There was no dispute as to the applicable principles which are conveniently set out in the 1999 Supreme Court Practice at 21/5/10 as follows:
25. The White Book goes on to say at 25/1/11:-
26. These principles have been applied in this jurisdiction; see Baron Everlo v Fitel Limited [1987-88] JLR 687 and Stock v Pantrust International SA [2016] JRC 075.
27. It is to be recalled that the only reason that the present proceedings were commenced was to determine whether the directors led by Mr Teh had the ability to cause the Company to commence the English proceedings. It was necessary therefore to determine who in fact the directors were and that was a matter for this Court as the Company was incorporated in Jersey. Following the termination of the Relationship Agreement as a result of the delisting from AIM, the English proceedings have come to an end. Furthermore, as a result of the resignation of Mr Lai and the subsequent AGM in November 2016, there is now no doubt as to the makeup of the board.
28. On the face of it therefore, there is no longer any need for the present proceedings. Whether Mr Hee and Mr Chin were validly dismissed on 21st October, 2015, and the validity of various resolutions passed thereafter is of no continuing significance. However, there remains a live issue which will have to be resolved at some stage. It arises in the following way.
29. It was agreed between the rival parties that, until it was ascertained who were the directors of the Company, neither side would draw money from the Company. As a result, the Respondents have borne their own costs and the Company's costs as Representor have been funded by Mr Teh and Mr Lai. According to Mr Teh's 7th affidavit, the total fees and expenses incurred on behalf of the Company in the various legal proceedings in Malaysia, England and Jersey as at 16th September, 2016, were some £2,482,000. Of this sum £1,049,195 has been paid to the lawyers but the balance is outstanding. The sum which has been paid has been provided by loans to the Company from Mr Teh and Mr Lai. The loan from Mr Teh is £578,867 and the loan from Mr Lai is £470,327. Furthermore, according to Mr Teh, the Company has not paid him his director's fees of £34,500 and expenses of £4,621 making a total of £39,121. The total of all these sums is just over £2.5m.
30. Prior to the hearing of the summons in January 2017, the parties appeared to accept that these proceedings should be discontinued completely and the only issue between them was as to the terms. Mr Teh submitted that, as a term of being allowed to discontinue, the Company should be ordered to pay the total sum of £2.5m so as to enable Mr Teh and Mr Lai to be repaid and the outstanding legal fees to be settled, but on the understanding that the Company could institute proceedings against the lawyers or against Mr Teh and Mr Lai to recover these sums if it felt that they had been incurred without authority. The Respondents, on the other hand, submitted that the Company should be allowed to discontinue without payment of these sums on the understanding that Mr Teh and Mr Lai could sue the Company for recovery of their loans and the lawyers could sue for their outstanding fees.
31. The result would be that in either case, the very issues presently before the Court would need to be resolved, i.e. what had happened at the meeting on 21st October, 2015, who were the continuing directors thereafter and accordingly were Mr Teh and Mr Lai entitled to instruct lawyers on behalf of the Company? The only difference between the parties was as to who would have to take the initiative. On Mr Teh's case, it would be up to the Company to institute proceedings to recover any sums which it said should not have been paid; on the Respondents' case, it would be up to Mr Teh, Mr Lai and the lawyers to sue the Company for the monies said to be owed to them.
32. At the hearing in January, Advocate Preston raised a concern that this would lead to unnecessary expense and indeed delay. It would require new proceedings to be instituted by one or other of the parties in which the very same issues as were currently before the Court would need to be resolved. He submitted that a more sensible solution was for the present proceedings to be allowed to continue so as to resolve these issues, but with the Company no longer being a Representor because the present board of the Company, in accordance with the resolution of the EGM, did not wish the Company to continue with its present stance.
33. That remained the Company's position at the adjourned hearing of the summons. Advocate Preston submitted that it is necessary to resolve the issue of whether Mr Teh and Mr Lai had the appropriate authority to instruct the various lawyers in the three jurisdictions. If they did, then subject only to questions of quantum, the Company would have to repay the loans to Mr Teh and Mr Lai and settle the outstanding liabilities to the lawyers. If, on the other hand, Mr Teh and Mr Lai did not have the relevant authority, they would not be entitled to repayment of their loans and the lawyers would not have valid claims to their fees as they would have acted without proper instructions. The Company would therefore not have to pay any sums.
34. He submits that it would be far better for this issue to be resolved in the present proceedings (which were ready for trial in September 2016) rather than put the parties to the time and expense of new proceedings which would have to resolve the same issue.
35. He submitted that these proceedings were in reality a dispute between two groups of directors, Mr Teh (and formerly Mr Lai) on one side; the Respondents on the other. The Company was a passive bystander. Although it had brought the proceedings as the Representor, this was when Mr Teh was in control of the board. Now that three of the Respondents constituted the board, the Company did not wish to continue the proceedings and certainly did not wish to maintain the stance in the Representation to the effect that Mr Teh and Mr Lai had the necessary authority to instruct the lawyers in the three jurisdictions. Arguably, he said, this should have been the position at the outset with the Company being a party cited and the Representors and Respondents being the competing sets of directors. But, whatever the position might have been originally, that should certainly be the position now to reflect the reality of the situation. The Company should remain a party so as to be bound by the outcome but this dispute should now be fought at the expense of Mr Teh on the one hand and the Respondents on the other, so that it could in due course be established whether or not the various lawyers had been instructed with due authority.
36. It would be quite wrong in those circumstances, he submitted, to order the Company at this stage to pay all the costs and expenses incurred when Mr Teh was in control because that would be to pre-judge the very point at issue. Advocate Preston's submissions were supported by Advocate James on behalf of the Respondents. He emphasised that the Respondents were not seeking payment of their costs as a term of the Company being permitted to discontinue as a Representor.
37. Advocate Lincoln, on the other hand, submitted that the Company should only be given leave to discontinue the proceedings on condition that it pays the sum of £2.5m so as to settle the outstanding legal fees, directors' fees and directors' loans. His reasons for so submitting are contained in his detailed skeleton argument supplemented by his oral submissions, which we have carefully considered. We would summarise those briefly as follows:
(i) The discretion conferred on the Court by Rule 6/31(1) to impose such terms as to costs or 'otherwise' as the justice of the case may require was wide enough to impose the terms sought by Mr Teh.
(ii) It was the Respondents who had caused the need for the Jersey proceedings. Instead of simply engaging in the English proceedings with the issue of whether the Relationship Agreement did or did not prevent the proposed EGM, they raised the question of the Nomination Committee's authority to cause the Company to bring the proceedings, with the result that the High Court required the Jersey proceedings to be brought.
(iii) The requirement of the High Court was for the Company to institute the Jersey proceedings and accordingly it had to be the Representor.
(iv) It was the Respondents who caused the present proceedings to increase dramatically in complexity. The trial was originally fixed for April 2016 for 5 - 8 days when the Court would simply have considered what happened at the various board meetings. The Respondents changed the complexion of the proceedings by raising at a late stage the issue of whether Mr Teh and his colleagues were acting bona fide in the best interests of the Company and therefore whether, even if they had otherwise taken valid decisions, those decisions could be attacked as being in breach of duty.
(v) Even then, the matter could have been resolved in September when all parties were ready for trial. Instead, the Respondents had in effect bought off Mr Lai so that they regained control of the board and had then procured that the members voted to discontinue the proceedings. Whilst it was acknowledged that Mr Teh ultimately consented to the adjournment of the proceedings in September in the light of the resolutions passed at the EGM, the fact remained that it was the Respondents who had brought this about. If they had not done so, the whole issue would have been resolved by now. The actions of the Respondents in obtaining control of the board was contrary to the understanding between the parties that, until the case was resolved, the previous position would be retained.
(vi) The present proposal of the Company (supported by the Respondents) was inconsistent with the terms of the resolution passed by the EGM, which was that the present proceedings should be discontinued on the best terms as to costs as may be achieved. Mr Teh had made it clear to the EGM that he believed the Jersey proceedings would only continue if the Company did not discontinue.
(vii) Indeed, the previous position of the Respondents had been that Mr Teh had no locus to continue the proceedings on his own if the Company discontinued. Thus in a letter from Collas Crill dated 22nd August, 2016, this point was made in a number of ways:-
"Whilst your letter [of 22nd August] makes the bare assertion that the proceedings can continue in [Mr Teh's] name alone, this proposition makes no sense when the relief sought is considered."
The letter then proceeded to analyse the declarations sought in the Amended Representation, concluding:-
"With the sole possible exception of the last, each of these declarations concern the internal affairs of the Company in which [Mr Teh] has no independent interest or locus to pursue."
Later in the letter Collas Crill said:-
"None of the reasons in any way justifies [Mr Teh] being permitted to continue the proceedings when the Company is no longer seeking any of the relief in the prayer and the proceedings have become otiose. ...".
Furthermore Mr Seah in his 4th affidavit dated 30th August, 2016, said:-
"... it would appear to be recognised that [Mr Teh] himself has no locus to continue these proceedings if the Company has no authority to pursue them and/or elects to discontinue them."
Advocate Lincoln argued that, now that it suited them, the Respondents and the Company were arguing the complete opposite.
(viii) Total discontinuance was clearly contemplated by all the parties until the very last moment when Advocate Preston suggested to the contrary at the hearing of the summons to discontinue in January 2017. It would be wrong at this stage to allow the Company and the Respondents to change course.
(ix) Total discontinuance was in fact the correct approach. Whilst the proceedings could continue to determine whether Mr Teh and his colleagues had the authority to instruct the various lawyers and whether they acted in breach of duty, the proceedings would not be directly focussed on the liability of the Company to its lawyers, on who should pay the costs of the Jersey proceedings or on whether any director had acted in breach of fiduciary duty so as to be personally liable for costs incurred on behalf of the Company. It would be more efficient for those issues to be determined in proceedings specifically brought for that purpose.
(x) The fair course was only to allow discontinuance if the sum of £2.5m was paid. Mr Teh had incurred these expenses and, had the Respondents not procured the change in control of the Company and the adjournment of the trial, the matter would by now have been resolved. The fact that they had now assumed control of the board should not mean that the Company could discontinue the present proceedings without cost and force Mr Teh to continue to fund further litigation. He pointed out that this accorded with the Court's preliminary view, when the Commissioner said at paragraphs 16 and 17 of the August judgment:-
(xi) The justice of the situation was that the Respondents had engineered a situation whereby the trial had become unnecessary and the Company should not therefore be allowed to choose to discontinue the proceedings under its new management unless it settled the amounts due to the lawyers and to the directors who had funded the litigation to date. It would always be open to the Company to then institute proceedings against Mr Teh and/or the lawyers to say either that the amounts were too much or that the directors had had no authority to instruct the lawyers with the consequence that the full sums were repayable.
(xii) Furthermore, as set out in the 7th affidavit of Mr Teh, he had concerns about the cash position of the Company. There were real concerns that the Respondents would seek to make the Company 'judgment proof' with the result that even if Mr Teh were successful, he would be unable to recover the sums due from the Company.
38. We agree with Advocate Preston that the best course is for these proceedings to continue in order to determine the outstanding issues as described above. In many cases where proceedings are discontinued, the only outstanding issue is whether the withdrawing party should pay the defendant's costs, but the position is more complicated here. If the proceedings are discontinued completely, then as all parties agree, there will inevitably be further proceedings. If the discontinuation is on the basis put forward by Mr Teh, the Company is likely to institute new proceedings against both Mr Teh and the various firms of lawyers in order to reclaim sums paid to them on the basis that Mr Teh (and Mr Lai) had no authority to instruct the lawyers on behalf of the Company. If, on the other hand, discontinuation is on the basis of no payment to Mr Teh at this stage, the lawyers and Mr Teh would have to institute proceedings against the Company claiming their fees and/or repayment of loans, as the case may be. In either event, these new proceedings would have to determine the very issues currently before the Court i.e. what happened at the board meeting on 21st October, 2015, and, as a result, who were the directors entitled to act on behalf of the Company in the autumn of 2015.
39. We think it would be highly undesirable to put the parties to the time and expense of instituting new proceedings to resolve the issues which arise in the present proceedings. The case was ready for trial in September. Discovery has taken place and presumably all witness statements have been prepared. We accept that there would need to be some amendment to the pleadings but otherwise there is no reason why the case could not be heard the moment the Court is able to fit it in to the diary. It is an important principle that courts should, wherever possible, follow the course which enables matters to be resolved at the least cost to the parties and we have no doubt that allowing the present proceedings to continue would be consistent with that objective.
40. Furthermore, we are satisfied that it would not be right to prevent the Company from discontinuing as a Representor. As the passage from the White Book makes clear, it is generally not desirable that a plaintiff should be compelled to litigate against his will and the Court will normally grant him leave to discontinue if he wants to. In this case the Representation was filed at a time when Mr Teh and Mr Lai were in charge and it puts forward a positive case as to the events on 21st October, 2015, and thereafter to the effect that Mr Teh and Mr Lai had the appropriate authority to instruct lawyers on behalf of the Company in connection with the various legal proceedings. Now that three of the Respondents constitute the board that is no longer the Company's position. It cannot be right therefore to force the Company to continue as a Representor.
41. However, the Company must remain a party to the proceedings if they are to continue. It must be bound by any findings as to Mr Teh's authority so that it can be ordered to pay any sums or costs which may be found to be payable. It could be made a Respondent but we think the simpler course is to make it a Party Cited, as suggested by Advocate Preston.
42. The question then is as to the terms upon which leave should be given for the Company to discontinue as a Representor and be appointed a Party Cited instead. We have come to the conclusion that it would not be right to impose the terms requested by Mr Teh. We would summarise our reasons as follows:-
(i) Contrary to Advocate Preston's submission, we think that the Court has jurisdiction to impose the requested terms. The wording of Rule 6/31(1) is extremely wide and we see no reason to cut down or limit that wide wording. The wording is wide enough to cover the terms suggested on behalf of Mr Teh.
43. However, the requested terms are certainly very unusual. Normally, the sort of term which the Court imposes on a discontinuing party will relate to the costs of the adverse party who has been brought before the Court by the discontinuing party or to the need to protect the adverse party from being harassed by subsequent proceedings to the same effect as those which are being discontinued. We have not had our attention drawn to any previous case where, as a condition of allowing discontinuance, a court has imposed a condition relating to the payment by the discontinuing party of its own legal costs. Whilst, as we have said, we consider there is jurisdiction to make such an order, the fact that it is so unusual should certainly cause the Court to think very carefully before doing so.
(i) The issue in the proceedings is whether Mr Teh was duly authorised to act on behalf of the Company and resolution of that issue will determine whether he and Mr Lai are entitled to repayment of their loans and whether they were entitled to instruct the lawyers and therefore in principle whether the lawyers are able to recover their outstanding fees from the Company. If these were original proceedings brought by Mr Teh for repayment of his loan and by the lawyers for payment of their fees, it is inconceivable that the Court would order the Company to pay the loan to Mr Teh and the fees to the lawyers as an interim measure prior to adjudicating upon whether those amounts were due. The fact that the format here is different, in that the Court has been asked to impose terms on discontinuance by the Company so that it may change from a Representor to a Party Cited, should not lead to a radically different approach and to the making of an order which would never be granted if this were a more conventional action.
(ii) The effect of imposing terms as requested by Mr Teh would in practice be to bring the proceedings to an end. Mr Teh and the lawyers whom he has instructed on behalf of the Company would have been paid in full and there would therefore be no incentive to continue with the proceedings. Thus in reality the Company would then have to institute proceedings for recovery of any sums which it said were not due. This would be contrary to the decision which we have described above, namely that the most cost effective and proportionate way of resolving the outstanding issues in this case is for the present proceedings to continue until adjudication.
(iii) If we were to impose the terms requested by Mr Teh, it is by no means clear what the effect would be. It is entirely possible that the Company would simply fail to pay. If so, then on the face of it the proceedings would remain as presently constituted. The Company would presumably take no steps to progress the proceedings (as it no longer supports the Representation) in which event, if they were to proceed, they would have to be pursued by Mr Teh personally at his expense. This would of course be exactly the effect of the order requested by Advocate Preston. We appreciate that the Court has other weapons at its disposal for enforcing compliance with its orders but it is not easy to see how these would be effectively or fairly applied in the very unusual circumstances of this case.
(iv) Although it is clear that the position has changed as a result of the Respondents assuming control of the board, we do not think there has been a dramatic effect on Mr Teh's position. Prior to the anticipated trial in September, he was having to fund the litigation either by lending the Company money or by prevailing upon the Company's lawyers to continue to act without being paid until conclusion of the proceedings. He would have had to continue to do this until adjudication at the end of the anticipated trial in September. It is hard to envisage the Court making an order at that stage that he should be given some form of interim payment in the sum of £2.5m when the issue of whether he was entitled to that sum was still to be resolved. It seems to us that the effect of what Advocate Preston proposes is not so very different. Mr Teh will now be left as the sole effective Representor and he will have to fund the proceedings until adjudication. If he is successful he will be able to recover these sums from the Company (or the Respondents) but if he is unsuccessful he will be left to bear the costs himself and/or the lawyers would be out of pocket. That seems to be much the same as the position he and the lawyers were in as the September trial date approached.
(v) We appreciate the point that it was the Respondents who caused the need for the present proceedings in the first place (by reason of their stance in the High Court) and that they have previously asserted that Mr Teh has no locus to continue the proceedings on his own. However, we must deal with the situation as it appears to us now. Given the outstanding issues concerning the loans and the fees, we consider that Mr Teh does have locus to continue the proceedings on his own and the Respondents' (and the Company's) stance now is preferable to their earlier stance. The fact that it was their stance in the English proceedings which caused the need for the present proceedings is not material at this stage, although it may be relevant when issues of costs come to be considered. Similarly, the fact that the board may not be acting in a manner wholly consistent with the resolution passed at the EGM is a matter between the board and the members. It is not relevant to the decision which we have to make, namely what is the best way of achieving determination of the outstanding issues and what terms would it be fair to impose on the Company as a condition of its changing from a Representor to a Party Cited.
(vi) We also note the point concerning the preliminary view expressed by the Commissioner in the August judgment as set out at para 37(x) above. However, that was only a preliminary view on a possible course of action expressed during an ex tempore judgment delivered at the hearing. We have now had the benefit of detailed argument and explanation of the full factual position and have concluded that it would not be right to proceed as originally floated as a possibility in the August judgment.
(vii) For these reasons, we do not think it proportionate or appropriate to impose a term that the sum of £2.5m be paid to Mr Teh as a term of the Company being given leave to discontinue as a Representor and re-designated as a Party Cited.
(viii) Advocate Lincoln's fall-back position was that the payment of £2.5m should be into Court rather than to Mr Teh. But this too would be an unusual order. The sole ground for suggesting it is a risk of dissipation. However, the limited evidence put forward by Mr Teh would be insufficient to achieve such an unusual order (i.e. that the person said to owe money is to pay the full amount into court pending trial).
44. In summary, for the reasons which we have outlined, we grant leave for the Company to discontinue the proceedings as a Representor and to be re-designated as a Party Cited and we do not impose any term as to payment, whether of costs or otherwise, as a condition of giving such leave. However, in order that there can be no misunderstanding, we emphasise that, although the Company will now be a Party Cited, it may still be made the subject of orders as to costs, amounts due to directors etc. The fact is that Mr Teh alleges that he was carrying out all these necessary actions with due authority as a director. If he is found to be correct, he will be entitled to be indemnified by the Company. Furthermore, even though it is a Party Cited, the Court will retain jurisdiction to order the Company to pay the costs of these proceedings if it considers that that is an appropriate order.
