EQUIS (HONG KONG) LTD (formerly known as EQUIS FUNDS GROUP (HONG KONG) LTD) v. GEORGE ALLEN COWAN

HCMP 1424/2019

[2021] HKCFI 768

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1424 OF 2019

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D E C I S I O N

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Applications

1.  This is an application by the Defendant (“Mr Cowan”) to strike out paragraphs 1 and 2 of the Originating Summons dated 5 September 2019 (“OS”) issued by the Plaintiff (“Equis HK”). 

2.  Equis HK seeks the following relief in these proceedings:

(1)  Under §1 of the OS, an order that Mr Cowan be declared a “Bad Leaver” pursuant to an Executive Agreement dated 5 March 2012 (“Executive Agreement”) at the sole discretion of Equis HK; and

(2)  Under §2 of the OS, nominal damages of HK$1 to be awarded with respect to an alleged breach of the Executive Agreement by Mr Cowan by reason of alleged misconduct discovered subsequent to the termination of the Executive Agreement.

3.  Mr Cowan submits that these paragraphs, which form the entirety of the substantive relief sought by Equis HK, should be struck out on the basis that they disclose no reasonable cause of action, are frivolous or vexatious and/or are an abuse of process of the court.  The application is opposed by Equis HK which maintains that there is no basis to strike out the claim.

4.  Mr Cowan was represented by Mr Victor Joffe and Ms Natalie So, and Equis HK was represented by Mr Edward Chan SC leading Ms Joyce Leung.  I am grateful to them for their assistance.  

The Relevant Factual Background

5.  Mr Cowan commenced work with the Equis Group in March 2011. 

6.  Mr Cowan was one of the founding partners of Equis Asia Funds Special LP (“Equis Special LP”), which was a Cayman entity within the Equis group holding a portfolio of investment funds.  Equis Asia Funds Special GP (“Equis Special GP”) was the general partner of Equis Special LP.

7.  Equis HK is a company incorporated in Hong Kong, and employs individuals charged with investing, managing and operating gas pipeline assets in the PRC.  It belongs to the Equis Group of companies. 

8.  On 5 March 2012, Mr Cowan entered into the Executive Agreement with Equis HK.  This replaced a previous agreement dated 5 December 2011.  It is agreed that the relevant agreement for present purposes is the Executive Agreement.

9.  The Executive Agreement is governed by Hong Kong law.

10.  On 20 June 2013, Mr Cowan entered into an Amended Limited Partnership Agreement (“Equis LPA”).  This was entered into between Equis Asia Fund Special GP, Equis Funds Group Holdings Limited and the founding partners, including Mr Cowan.  Equis HK is not a party to the Equis LPA.

11.  As a founding partner of Equis Special LP, Mr Cowan was entitled to receive certain distributions of its profits based on its investments pursuant to the terms of the Equis LPA.

12.  The Equis LPA is governed by Cayman Islands law and there is also an exclusive jurisdiction clause in favour of the courts of the Cayman Islands to settle any disputes arising under the agreement.

13.  On 29 September 2017, Equis HK terminated Mr Cowan’s employment by providing 30 days’ written notice and it was terminated with effect from 29 October 2017.  The letter states that although Equis considered that there were grounds for termination for cause, it opted to treat Mr Cowan as a “Good Leaver” and “Good Retired Partner” under the Executive Agreement and Equis LPA respectively.  Equis specifically reserved its rights to treat Mr Cowan as a “Bad Leaver” and “Bad Retired Partner” in its sole discretion. 

14.  On 19 February 2018, Mr Cowan commenced legal proceedings in the Financial Services Division in the Grand Court of the Cayman Islands in FSD 022 of 2018 against Equis Special LP and Equis Special GP (“Equis Cayman Defendants”).  Mr Cowan seeks relief against the Equis Cayman Defendants under the Equis LPA.

15.  On 14 February 2019, Equis HK’s solicitors in Hong Kong informed Mr Cowan that Equis HK had been conducting an investigation since Mr Cowan’s departure on 29 October 2017.  As a result of the investigation, Equis HK reversed its decision to treat Mr Cowan as a “Good Leaver” and now considered that he was a “Bad Leaver” based on the express reservation of rights by Equis HK in its letter dated 29 September 2017.  The details of various types of alleged misconduct on the part of Mr Cowan were also set out. 

16.  By an e-mail dated 19 February 2019, Mr Cowan denied breach of any obligations on his part and disputed the allegations made against him.

17.  By a letter dated 1 March 2019, Maples & Calder (the Equis Cayman Defendants’ solicitors) informed Walkers (Mr Cowan’s Cayman solicitors) that in view of his alleged misconduct while an employee of Equis HK, Mr Cowan was now designated as a “Bad Retired Partner” under the Equis LPA.  The Equis Cayman Defendants stated that they would apply for leave to re-amend their Amended Defence in the Cayman proceedings to reflect Mr Cowan’s re-designation as a “Bad Retired Partner”.

18.  On 7 March 2019, Walkers disputed that the designation of Mr Cowan as a “Bad Leaver” under the Executive Agreement automatically meant that he could be designated as a “Bad Retired Partner” under the LPA.  Walkers stated that the two were separate issues, and that in any event, the re-designation under the Executive Agreement was governed by Hong Kong law which would need to be decided by a tribunal in Hong Kong. 

19.  The relevant proposed re-amendments to the Amended Defence in the Cayman proceedings appeared at §§10.4 to 10.8.  For present purposes, the following extract is relevant: 

“10.4 … However, in light of information discovered by Special GP in early 2019, relating to Mr Cowan’s conduct during his employment at Equis HK, Equis HK, through its Hong Kong legal counsel, Haldanes, wrote to Mr Cowan on 14 February 2019 (the “Equis HK Letter”) to notify him of its decision to treat him as a “Bad Leaver” under the Executive Agreement. The Equis HK Letter sets out a number [sic] serious breaches of the Executive Agreement by Mr Cowan, including breaches of clause 2(e) (fiduciary duties owed to Equis HK), clause 12 (confidentiality) and clause 17 (non-disparagement), as well as several grounds on which Mr Cowan’s employment with Equis HK could have been terminated for cause (clause 6(b)(ii) of the Executive Agreement.

10.5 As a result, Mr Cowan is also now designated as a “Bad Retired Partner” under the LPA. The further information in question was obtained by an internal investigation conducted by Equis HK, including a forensic search of Mr Cowan’s laptop computer by an independent third party and evidences the extremely serious breaches by him of the Executive Agreement … in summary, Equis HK has uncovered the following:

(a) Mr Cowan has stolen property owned by Equis HK, including two hard drives containing confidential information relating to the business of Equis Pte that were taken by him on 2 August 2015 and 28 September 2017 respectively. Mr Cowan is still in possession of these hard drives;

(b) Mr Cowan has disclosed confidential information relating to the business, listing strategy and internal administration of Equis HK to third parties;

(c) Mr Cowan has engaged in voluminous sexually explicit chats with unknown third parties from a laptop computer owned by Equis HK, including soliciting and sending vulgar pornographic material;

(d) Mr Cowan has made numerous disparaging remarks to investors in Equis Pte and other third parties relating to these proceedings; and

(e) Mr Cowan has demonstrated extreme incompetence and underperformance throughout the duration of his employment with Equis HK to the detriment of Special LP and Equis Pte.”

20.  This action was commenced on 5 September 2019 by way of Originating Summons.  As Mr Joffe pointed out, this was shortly before the Cayman Amendment application was heard on 11 September 2019.

21.  The alleged conduct on the part of Mr Cowan identified as relevant by Equis HK in the supporting evidence filed in this action is identical to what the Equis Cayman Defendants sought to rely on by way of re-amendment at paragraph 10.5 of the Amended Defence in the Cayman Proceedings.

22.  On 3 October 2019, the Grand Court of the Cayman Islands allowed the re-amendments to the Amended Defence.  In its written decision, the court held that the proposed defence had real prospects of success and there was no basis to conclude that the application involved strategic maneuvering.  There has been no appeal against this ruling.

The Executive Agreement

23.  Clause 6 of the Executive Agreement deals with termination and sets out the circumstances in which the agreement may be terminated.  Under clause 6(b)(ii), the agreement may be terminated “for cause” and it defines what conduct falls under that definition.  Clause 6(b)(iii) provides for termination upon 30 days’ written notice to the Executive for any other reason apart from those stated in Clause 6(b)(i)-(ii). 

24.  Clause 7 of the Executive Agreement deals with the effect of termination, and in particular, Equis HK’s obligations towards Mr Cowan after termination.  Clause 7(iv) deals with “any equity ownership in Equis or vested general partnership interests in Equis managed funds”. 

25.  The definitions of a “Bad Leaver” and “Good Leaver” are respectively set out under Clause 7 of the Executive Agreement:

“‘Bad Leaver’ means, in respect of an executive, the occurrence of any circumstance which does not constitute a Good Leaver.

‘Good Leaver’ is where Executive permanently retires from the private equity industry or dies or suffers (other than a result of an abuse of alcohol or recreational drugs), poor health or disability which materially inhibits Executive from fulfilling his duties or any other event agreed by the Equis Board.”

26.  Clause 7 provides that if an Executive leaves the employment of Equis HK as a “Good Leaver” then he is entitled, at the Equis Board’s option, to either retain his shares subject to lock up and transfer restrictions or sell his shares back to Equis HK in one or more transactions at Fair Value (as defined under Clause 7).  On the other hand, if the Executive leaves as a “Bad Leaver”, he is required to sell any or all of his shares at the “Bad Leaver Price” which is also set out under Clause 7.

27.  Under the Executive Agreement, the practical consequence of being designated as a “Good Leaver” or “Bad Leaver” depends on whether the Executive held any equity ownership in Equis HK or vested general partnership interests in Equis managed funds.  In essence, the Executive is conferred a benefit if he leaves the employment of Equis HK as a “Good Leaver” in the sense that he may either retain his shares or sell them at Fair Value, as opposed to being required to sell at the Bad Leaver Price under Clause 7 of the Agreement.

The Equis LPA

28.  The definition of a “Bad Retired Partner” and “Good Retired Partner” is contained in Schedule 2 of the Equis LPA:

29.  A “Bad Retired Partner” is defined as:

“a Founding Partner who ceases to be an Eligible Person, or whose Related Person ceases to be an Eligible Person, and is not a Good Retired Partner”.

30.  An “Eligible Person” is defined as:

“an employee or director of Equis Funds Group Pte Ltd, the General Partner or any Associate”.

31.  A “Good Retired Partner” is defined as any Founding Partner, or such Founding Partner’s Related Person, who ceases to be an Eligible person by reason of:

“(i) permanently retiring from the private equity industry following the end of the Investment Period;

(ii) death or suffering (other than as a result of an abuse of alcohol or recreational drugs);

(iii) poor health or disability which materially inhibits that limited partner from fulfilling his or her duties;

(iii) termination without cause and in such case, such Founding Partner shall remain a Good Leaver where the Founding Partner or its Related Person subsequently becomes an employee, adviser or consultant to a Direct Competitor[1];

(iv) the Founding Partner or its Related Person terminating its employment with Equis Funds Group Pte Ltd for cause with regard to the actions of Equis Funds Group Pte Ltd …

(v) such other reason as the Compensation Committee may from time to time determine.”

32.  Clause 5 and 6 of the Equis LPA set out the consequences of a retired partner who becomes a “Good Retired Partner” and “Bad Retired Partner” respectively.  It is unnecessary to delve into these provisions in detail, but it suffices to say that there is a material difference in profit entitlements depending on which designation is applied.

33.  Clause 9 of the Equis LPA sets out the definition of “Termination for Cause”.  These include the following grounds:

“(a) any serious act or omission which brings or is likely to bring the General Partner or any Associate into disrepute;

(b) any fraudulent or materially dishonest act or omission committed against the General Partner or any Associate or investor or client or customer (current or potential);

(c) disclosing or misusing any confidential information relating to the General Partner or any Associate or Investor or client or customer to any outside third party except where so authorised to do; …

(f) negligence, incompetence or dereliction of duty; and

(g) any other act pursuant to which the General Partner or any Associate would be entitled to summarily dismiss the Eligible Person under such person’s employment agreement, service agreement or similar.”

34.  There is no dispute that Equis HK is an “Associate” within the meaning of the Equis LPA, and that Mr Cowan ceased to be an “Eligible Person” as defined in Schedule 2.  In view of the re-amendments allowed by the Cayman court, one of issues in dispute there is whether the re-designation of Mr Cowan on 1 March 2019 from a “Good Retired Partner” to a “Bad Retired Partner” under the Equis LPA was validly made.  The Equis Cayman Defendants rely on the alleged underlying conduct on Mr Cowan’s part stated at §10.5 of the Re-Amended Defence to justify his re-designation to a “Bad Retired Partner”.

35.  Clause 16.5 of the Equis LPA provides for an exclusive jurisdiction clause in favour of the courts of the Cayman Islands in relation to the rights, obligations and relationship of the parties to the agreement.

Legal Principles on Striking Out

36.  The applicable legal principles on a striking out application are not disputed.  Striking out is only justified in plain and obvious cases.  The burden to establish this high threshold is on the party applying to strike out, and disputed facts are generally assumed in favour of the party resisting the strike out.  In order for a claim to be struck out, it must be obviously unsustainable, and not just improbable, for the claim to succeed before the court will strike it out : White Book 2021 at §18/9/4; Lau Wing Yan v Pacific Bulk Investment Ltd [2020] HKCFI 769 at §51 per Ng J.

Legal Principles on Declaratory Relief

37.  The power to grant declaratory relief is derived from the inherent jurisdiction of the court.  The broad power to grant declaratory relief is reflected under RHC Order 15, rule 16 which provides that:

“No action or other proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.”

38.  An applicant for declaratory relief is not necessarily required to have a cause of action against the adverse party, but needs to establish that he has a real interest in the subject matter of the declaration.  In determining whether an applicant has the necessary interest, the court adopts a practical utility approach by asking whether the court’s jurisdiction is properly exercisable instead of applying nice legal tests.  An applicant must also show that he has a real interest of a material character to be enforced or to protect a genuine and legitimate interest in obtaining a decision against an adverse party: Koo Ming Kown v Mok Kong Ting [2018] HKCFI 967 at §§16-19 per DHCJ To.

39.  If a declaration would not serve any practical purpose, this will weigh heavily in the scales against the grant of declaratory relief.  A practical purpose means that the declaration should “solve a real difficulty” with which the claimant is faced, but there is no requirement that a claimant must be in a position to demonstrate that he will benefit in a material or tangible way as a result of the declaration: Zamir & Woolf: The Declaratory Judgment (4^th ed) at §4-99 & 4-104.

40.  With respect to declaratory relief sought solely for the benefit of foreign proceedings, in S v G [2020] HKCFI 2201, A Chan J held at §45 (citing Fujifilm Kyowa Kirin Biologics Co Ltd v AbbVie Biotechnology Ltd (No. 4) [2018] RPC 1 at §377 with approval) that the court is concerned with whether the declaration sought will serve a useful purpose in Hong Kong, and that a declaration which is sought solely for the benefit of foreign courts will rarely be justified.

41.  One of the issues in S v G was whether the declarations sought would have a practical purpose in the sense that they would assist a Spanish court in any dispute over the enforcement of a PRC CIETAC arbitral award.  There was, however, no evidence in relation to how a local judgment would assist the Spanish court.  A Chan J concluded that the value of the declarations in the Hong Kong proceedings would be confined to the opinion of the court on the issues, and that the resources of the court should not be used for advisory purposes (at §§60-61).

42.  I consider that the principles stated in S v G to be in line with the approach of the English courts on the matter.  For example, in Stati v Republic of Kazakhstan [2019] 1 WLR 897, David Richards LJ held at §53 that:

“The jurisdiction of the English courts in civil matters is invoked for the purpose, and only for the purpose, of obtaining relief in the form of orders of the court, including where appropriate declarations. It is not the function of our courts to hear cases which have no relevant result.”

43.  Although in some circumstances it might be appropriate for an English court to give what amounted to an advisory ruling for the benefit of a foreign court on issues of English law arising in foreign proceedings, there was no evidence in Stati that such a ruling would be relevant to the foreign enforcement proceedings in question (§56).  Moreover, the court would not make unsolicited findings of fact for the supposed benefit of courts of other countries.  This was described as a “novel idea” (§§57-58).

44.  Mr Chan SC placed reliance on BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2020] EWHC 2436 (Comm) as an example where an English court decided to grant declaratory relief with a view to assisting foreign proceedings.  Mr Joffe, on the other hand, submitted that I should follow S v G, and decline to adopt the approach in BNP Paribas SA.

45.  Properly understood, I do not consider that there is a real conflict between the approach taken in those cases. 

(1)  First, S v G did not decide that it would never be appropriate for a Hong Kong court to grant a declaration solely for the benefit of foreign proceedings.  What was stressed is that such declarations would “rarely be justified”, which in my mind, highlights the need for a careful approach where the only benefit of the declaration sought in Hong Kong is for foreign proceedings.  In my judgment, this is sound in principle because one is proceeding on the basis that there is no useful purpose for the declaration in Hong Kong, which is a matter that weighs against the grant of declaratory relief.

(2)  Second, the declarations sought in BNP Paribas SA concerned the interpretation of documents governed by English law.  In other words, that case involved a determination of English law by the English courts, and not the making of findings of fact.  As seen in Stati, there might be some limited circumstances where a ruling on a pure question of law in Hong Kong of an “advisory” nature may be granted. 

(3)  Third, on the facts in BNP Paribas SA, the Court was satisfied that the determination of English law would be of assistance to the Italian judge, and that an English judgment on the legal issue in question was enforceable in Italy under the Brussels Regulation (at §149).  Therefore, there was a solid basis in BNP Paribas SA to conclude that the English judgment would be of assistance in Italy.

The Arguments on §1 of the OS

46.  Mr Joffe submitted that §1 of the OS should be struck out because it is clear that no practical purpose would be served by the declaration.  The only substantive consequence of being designated as a “Bad Leaver” under the Executive Agreement was the potential impact on Mr Cowan’s entitlement under Clause 7 regarding his right to retain or sell his relevant equity ownership.  Since Mr Cowan did not have any equity ownership at the time of his termination, or any other interest in Equis managed funds, the declaration would not have any practical effect. Accordingly, Equis HK did not have a real interest in obtaining the declaration sought.

47.  Mr Joffe further submitted, relying on S v G, that it would be inappropriate to grant the declaration sought in §1 of the OS solely for the benefit of those proceedings.  Moreover, the resolution of the dispute in the Cayman Proceedings did not require any declaration to be granted in relation to the Executive Agreement.  In particular, there is no correlation between Mr Cowan’s designation as a “Bad Leaver” under the Executive Agreement, and his designation as a “Bad Retired Partner” under the Equis LPA.  The Executive Agreement and the Equis LPA are separate contracts entered into between different parties and subject to different governing laws.  Bearing these differences in mind, and relying on S v G, it was pointed out that Equis HK did not adduce any evidence to demonstrate in what manner the declaration granted in Hong Kong in terms of §1 of the OS would be of any assistance to the Cayman Proceedings.  Ultimately, Mr Joffe submitted that the real contest was in the Cayman Proceedings, and that was the appropriate forum for the disputes to be resolved.

48.  Mr Chan SC contended that these proceedings had a practical purpose irrespective of the potential benefit to the Cayman Proceedings.  His major argument in this regard was that these proceedings could assist in a claim in Hong Kong against Mr Cowan under the tort of conversion.  The potential findings of misconduct on the part of Mr Cowan regarding his alleged refusal to return the hard drive and the secure wiping of data stored his laptop may amount to the tort of conversion if and when damages were ascertained.  Mr Chan SC accepted that damages for the tort have not been ascertained at the present stage, and that damages are an essential element of the cause of action in conversion.  However, he reasoned that securing the declaration would ‘preserve the position’ against Mr Cowan in relation to a potential claim for conversion in the future, and thus, there is practical utility in every sense for Equis HK. 

49.  Mr Chan SC further contended that the declaration would be of potential assistance to the Cayman Proceedings because the Hong Kong court would need to address whether the alleged misconduct on the part of Mr Cowan amounted to a breach of the Executive Agreement, and whether his re-designation as a “Bad Leaver” was properly made.  In this regard, it was at least arguable that the Executive Agreement and the Equis LPA (and the respective designations thereunder) were inter-related, and it was pointed out that Walkers in its letter of 7 March 2019 stated that matters in relation to Mr Cowan’s misconduct would have to be resolved as a matter of Hong Kong law in Hong Kong.  It was also stressed that the Hong Kong court was best placed to determine issues arising under the Executive Agreement, and the Cayman court is likely to be assisted by that determination.  It was said that the issue of if and how the Cayman court would later make use of the findings in the Hong Kong proceedings is a question to be decided in the Cayman proceedings. 

Analysis on §1 of the OS

50.  In my view, the starting point must be whether there is practical utility in the grant of the declaration in Hong Kong as between the contracting parties to the Executive Agreement, namely, Equis HK and Mr Cowan.

51.  In my evaluation, I have borne in mind the high threshold involved in a strike out application, and if were to accede to Mr Joffe’s arguments, I must be satisfied that it is plain and obvious that the declaration sought does not have practical utility.  Moreover, because the court does not conduct a mini-trial by affidavit, this is not the occasion to determine whether the serious factual allegations made against Mr Cowan by Equis HK are substantiated.  I have proceeded on the basis that these are arguable allegations, noting they are disputed by Mr Cowan.      

52.  In considering the issue of practical utility, it is useful to start first with the Executive Agreement.  The parties to the Executive Agreement are Equis HK and Mr Cowan. In practical terms, as Mr Joffe submitted, the consequence of being re-designated as a “Bad Leaver” is the impact on Mr Cowan’s rights under Clause 7 regarding any equity interest held in Equis HK or vested general partnership interests in Equis HK managed funds. I was not referred to any other material consequence under the Executive Agreement flowing from Mr Cowan’s re-designation as a “Bad Leaver”. 

53.  In this regard, the undisputed evidence is that at the time of his termination, Mr Cowan did not have either of the relevant interests which would trigger the application of Clause 7 of the Executive Agreement.[2] Therefore, Mr Cowan’s re-designation has no relevant effect under the Executive Agreement.  On this basis, I agree with Mr Joffe that the declaration sought is academic in the sense that it does have any practical consequence as between Equis HK and Mr Cowan under the Executive Agreement. 

54.  Mr Chan SC did not disagree with the above analysis, but his main submission was that the impact on Mr Cowan’s entitlements under Clause 7 was not the only consequence of the re-designation. 

55.  Mr Chan SC stressed that there is a real dispute between the parties in relation to the allegations of misconduct by Mr Cowan, and that this is a live issue contested by the parties.  It was reasoned that both Equis HK and Mr Cowan would be affected by the determination of that issue.  Naturally, I understand that there are factual disputes between the parties, but this does not provide an answer as to whether the grant of the declaration sought in §1 of the OS has any practical utility to the parties to this action.  The function of the court is not to resolve questions of fact which do not lead to any relevant result merely because they are disputed by the parties. 

56.  Mr Chan SC further argued that there was practical utility between the contracting parties in Hong Kong because the proceedings could potentially assist in a claim against Mr Cowan for the tort of conversion.  For the reasons below, I do not accept this submission. 

(1)  First, this is not a matter which featured in the evidence filed by Equis HK in opposition to this application.  From Tony Gibson’s evidence, Equis HK was clearly aware of the nature of the objection taken by Mr Cowan, but he did not refer to the potential utility for a claim in conversion in response.  If this was genuinely believed to be a real reason for the claim to proceed in Hong Kong, I would have expected this to have been addressed in Equis HK’s evidence. 

(2)  Second, I do not consider that seeking the declaration is the appropriate way to “preserve the position” against Mr Cowan in tort.  As Mr Joffe submitted, the normal way to preserve a claim is to issue a protective writ.  I reject the submission that these proceedings might provide an avenue through which further information and details regarding Mr Cowan’s conduct in relation to the hard drive and wiping of laptop data can be obtained in order to for Equis HK to be able to plead a case for conversion. That, in my view, is not an appropriate use of court procedure.  In objection, Mr Joffe described this as ‘litigation by instalments’.  The burden is on Equis HK to frame a viable case in conversion, and it is unsatisfactory to allow these proceedings to continue in the hope that Equis HK might uncover something that may make such a claim viable in the future. 

(3)  Third, the underlying conduct relied upon in these proceedings by Equis HK to support its re-designation of Mr Cowan as a “Bad Leaver” is significantly wider than that involved in the suggested claim for conversion.  For example, these include allegations of incompetence, disparaging remarks to third parties and disclosure of confidential information.  These have nothing to do with a potential claim in conversion.

(4)  Fourth, the relevant inquiry should, in my view, be directed at to the practical utility of the relief sought in these proceedings, not whether any incidental benefit can be derived through the conduct of the litigation.  In my judgment, the declaration sought in §1 of the OS simply does not have any bearing on the potential claim for conversion.

57.  In view of my reasons above, I agree that it is plain and obvious that the declaration sought does not have any practical utility in Hong Kong as between Equis HK and Mr Cowan. For the purposes of this application, it is unnecessary for me to, and I do not, form a view on Mr Joffe’s oral submission that there is simply no right to re-designate under the Executive Agreement.  I now turn to consider the argument that the declaration sought would be of assistance in the Cayman proceedings.

58.  I do not accept Mr Joffe’s submission that it would be appropriate to strike out §1 of the OS purely on the basis that the declaration sought is solely for the benefit of foreign proceedings.  In fairness, this was not a point pressed in oral submissions.  In my view, such an approach is too formulaic and it is wrong to approach the matter in the abstract.  S v G does not say that a declaration will never be granted where its sole objective is to benefit foreign proceedings.  Though the grant of such declarations may be rare, it is still necessary to evaluate precisely how, and in what concrete terms, a declaration with no practical meaning in Hong Kong is said to be of assistance in the foreign proceedings.  This will depend on, among other things, the nature of the issues which the Hong Kong court is asked to decide, the issues arising in the foreign proceedings, and whether there is an identity of parties.

59.  Turning to this case, Equis HK is not a party to the Cayman proceedings and the Equis Cayman Defendants are not parties to this action.  The Executive Agreement, governed by Hong Kong law, is the subject matter of this action.  The Equis LPA, governed by Cayman law, is in issue in the Cayman proceedings.  In view of the different parties, contracts and governing law involved, it is not obvious to me how a conclusion of a Hong Kong court on §1 of the OS would be of assistance in the Cayman Islands.  Equis HK has not filed evidence to explain how a local judgment would assist the foreign court (S v G at §§60-61).  In the absence of evidence, it appears to me to be speculative how a local judgment would actually render assistance to the Cayman proceedings.

60.  Moreover, there is no evidence before me to suggest that these proceedings would conclude before the Cayman proceedings. There is also no suggestion that the Cayman proceedings would be stayed pending the outcome of this action.  This intention was expressly disclaimed by the Equis Cayman Defendants.[3] That being the case, and in view of the fact that the Cayman proceedings have progressed since their commencement in February 2018, it is entirely possible that the Cayman proceedings would be completed even before this action was concluded.  In this regard, I also take into account that although these proceedings were commenced by way of Originating Summons, that if these proceedings were to continue it seems quite clear to me that in view of the factual disputes involved that an order that this action to continue as if begun by writ, with pleadings and discovery, would have to be made.  In short, these proceedings are still at a very early stage and there is a long way to go.  In my judgment, it is unsatisfactory to allow these proceedings to continue without any assurance that the outcome would actually be known before the Cayman proceedings were concluded.  The fact that the Equis Cayman Defendants have disavowed an intention to apply for a stay of the Cayman proceedings pending the determination of this action fortifies my view.

61.  It is also important that the underlying conduct relied upon to support the re-designation of Mr Cowan as a “Bad Leaver” and “Bad Retired Partner” is the same in the Cayman Islands as it is in Hong Kong. In this regard, the position of the Equis Cayman Defendants was that the same evidence was relied upon in the Cayman proceedings (principally in a Forensics Investigation Analysis Report) for both the re-designation under the Equis LPA and the Executive Agreement.  Their position was that it was irrelevant that Equis HK relied on the same evidence to support its own re-designation under the Executive Agreement.[4] This, in my mind, supports the fact that the re-designations are to be treated separately.  

62.  On 3 October 2020, the Cayman Court allowed the re-amendments including those which appear at §10.5 of the Re-Amended Defence.

63.  Accordingly, the disputed questions of fact relating to Mr Cowan’s conduct will be addressed in the Cayman proceedings, and they are put squarely in issue in the pleadings.  It would be inappropriate for a Hong Kong court to make unsolicited findings of fact in relation to the same alleged conduct which is in dispute in the Cayman Islands, and all the more so where the parties to the respective proceedings are different.  In my view, this is not only wrong as a matter of principle, but would also lead to a potential wastage of time, costs and judicial resources, and gives rise to potential inconsistent findings of fact.  In addition, I have not been referred to any particular question of Hong Kong law arising under the Executive Agreement which is required to be determined by a Hong Kong court for the necessary and fair determination of the Cayman proceedings.  

64.  I am not persuaded that there is a necessary correlation between the declaration sought at §1 of the OS and the proper resolution of the Cayman proceedings.  Even if Mr Cowan was properly re-designated as a “Bad Leaver” under the Executive Agreement, this does not mean that he was properly re-designated under the Equis LPA.  There is nothing in the Equis LPA which makes a designation under that contract conditional upon a designation under the Executive Agreement.  Schedule 2 of the Equis LPA does not refer to a designation under the Executive Agreement as one of the listed circumstances which can be taken into account in deciding whether a person is a “Good Retired Partner”. 

65.  At its core, and in my judgment, the ‘linkage’ argument essentially boils down to the fact the same underlying factual conduct is relied upon to support both re-designations.  Although the underlying allegations of fact are identical in both proceedings, I consider that the question of whether Mr Cowan was properly re-designated a “Bad Retired Partner” under the Equis LPA is a separate one from his re-designation under the Executive Agreement.  As I have explained above, the making of unsolicited findings of fact for the supposed benefit of foreign courts is inappropriate. 

66.  It must be for the Cayman court, applying Cayman law, to determine the real question in controversy which is a matter of practical consequence in the Cayman Islands.  That issue arises squarely under the Equis LPA, not under the Executive Agreement, and in this regard, there is an exclusive jurisdiction agreement under Clause 16.5 of the Equis LPA in favour of the courts of the Cayman Islands.  For all practical purposes, the real contest is in the Cayman Islands where the proceedings are ongoing and to allow this action to continue would lead to an unnecessary multiplicity of proceedings.  Even if the Court were eventually to make a declaration in terms of §1 of the OS, it remains unclear to me what the impact of that declaration would be on the Cayman proceedings.  Mr Chan SC submits that this would be a matter for the Cayman court at the end of the day to decide on the matter. With respect, I do not think this is correct approach particularly since I am unable to see the practical utility of the declaration sought in Hong Kong as between Equis HK and Mr Cowan.  There is no evidence before me to suggest that the Cayman court would be unable to effectively and fairly determine those proceedings in the absence of a determination in Hong Kong in this action.

67.  Mr Chan SC, in oral submissions, submitted that the Equis LPA and the Executive Agreement were inter-related.  This was because Mr Cowan’s status under the Equis LPA depended upon his status as an employee of Equis HK under the Executive Agreement.  Specifically, it was argued that if the complaints of misconduct against Mr Cowan were established, this would have justified Equis HK to terminate Mr Cowan for cause under Clause 6(b)(ii) of the Executive Agreement.  Under Schedule 2 of the Equis LPA, a “Good Retired Partner” includes a founding partner who ceases to be an Eligible Person by reason of termination without cause.  Since Equis HK is an “Associate” within the meaning of the Equis LPA, a termination for cause by Equis HK would qualify as termination for cause for the purposes of the Equis LPA by virtue of Clause 9.

68.  I am unable to accept this submission.  First, as a matter of fact, Mr Cowan was not terminated by Equis HK for cause.  The termination letter of 29 September 2017 makes it clear that although Equis HK believed that there were grounds to do so, it elected to provide 30 days’ notice under Clause 6(b)(iii) of the Executive Agreement.  Clause 6(b)(iii) deals with a termination for “any other reason whatsoever” and therefore, by definition, it not was a termination for cause.  Second, the terms of the declaration sought in §1 of the OS seeks to declare Mr Cowan as a “Bad Leaver” under the Executive Agreement at Equis HK’s sole discretion.  This does not change the fact that Mr Cowan was not terminated for cause.  A “Bad Leaver” is simply defined as someone who is not a “Good Leaver”.  There is no correlation under the Executive Agreement between a termination for cause and being declared “Bad Leaver” by Equis HK.  Third, the Equis Cayman Defendants rely on Mr Cowan’s overall conduct while employed with Equis HK to support his re-designation to a “Bad Retired Partner”.  The key issue in the Cayman proceedings is whether, in view of such conduct found to be established at trial, the re-designation was a valid one under the Equis LPA.  In my view, whether this conduct could have amounted to grounds for summary dismissal or termination for cause by Equis HK is a matter of hindsight, and is not a question which is required to be resolved for the fair determination of the Cayman proceedings. 

69.  For completeness, I do not accept Equis HK’s argument that it was Mr Cowan who put his status under the Executive Agreement in issue.  His position is that he does not consider that his status under the Executive Agreement has any bearing on his status under the Equis LPA. 

70.  Mr Cowan’s position is made clear in correspondence from his solicitors,[5] his supporting evidence filed in these proceedings,[6] in written submissions filed on his behalf in opposition to the Cayman Amendment application,[7] and in his pleadings in the Cayman proceedings.[8]  Equis HK relies on the letter of 7 March 2019 from Walkers which stated that the re-designation issue under the Executive Agreement would have to be determined in Hong Kong.  This, however, ignores the previous statement in that letter which states that any attempt to re-designate Mr Cowan as a “Bad Retired Partner” under the Equis LPA should be considered separately from his designation under the Executive Agreement.  The entire letter should be read in context.  Even if there was any ambiguity, I agree that Mr Cowan’s position after the letter of 7 March 2019 was set out in clear terms.  Overall, this struck me as a forensic argument, and for the reasons I have set out above, I do not think it has merit.

71.  For the reasons I have given above, I am satisfied to the requisite high standard applicable in a strike out application that this is an appropriate case to strike out §1 of the OS. 

§2 of the OS

72.  Under §2 of the OS, Equis HK seeks nominal damages of HK$1 to be awarded with respect to an alleged breach of the Executive Agreement by Mr Cowan by reason of alleged misconduct discovered subsequent to the termination of the Executive Agreement.

73.  Mr Joffe relies on section 7 of the Labour Tribunal Ordinance (Cap 25).  His contention is that §2 of the OS is in effect a claim for a sum of money under a contract of employment, and the claim falls within the exclusive jurisdiction of the Labour Tribunal.  The claim is not actionable in any other court: Gain Hill (Hong Kong) Ltd v Li Kin Yip [2006] 4 HKLRD 186 at §26 per Sakhrani J.  It was argued that the claim for damages is liable to be struck out irrespective of whether the grant of declaratory relief in §1 of the OS is within the jurisdiction of the Labour Tribunal. 

74.  Mr Chan SC’s submission is that a mixed claim for monetary and non-monetary relief, even if based on a breach of an employment contract, falls outside the exclusive jurisdiction of the Labour Tribunal: Woo Kwok Ping v Incorporated Management Committee of Tsuen Wan Trade Association Primary School (No 2) [2020] 1 HKLRD 717 at §21.  In this regard, the court will look at the substance of the dispute and not the labels in the pleadings.  In this regard, the court will ignore ‘window dressing’ non-monetary claims: Ho Chee Sing James v Secretary for Justice [2015] 4 HKLRD 311.  Mr Chan SC submits that the main focus here is to obtain the declaratory relief in §1 of the OS.  The principal prayer for relief is one for declaratory relief and not for nominal damages. 

75.  Since I have decided to strike out the claim for declaratory relief under §1 of the OS, it follows that §2 of the OS must be considered independently. 

76.  In my view, it is plain that the claim under §2 of the OS is a claim based on a breach of employment contract.  Although only nominal damages are sought, it is nevertheless a monetary claim.  In my judgment, this falls within the exclusive jurisdiction of the Labour Tribunal and it is not actionable in the High Court.  It is unnecessary for me to decide whether §2 of the OS would be struck out in the event that §1 of the OS had survived the striking out application.

Conclusion

77.  For all the above reasons, I make an order to strike out §§1-2 of the OS of these proceedings.  This means that these proceedings are struck out in their entirety.  I make a costs order nisi that the costs of this action, and of the striking out application, be paid by the Plaintiff to the Defendant, to be taxed if not agreed, with certificate for two counsel.  Although indemnity costs were sought, I am provisionally of the view that this is not an appropriate case for taxation on that basis.