Cachet Multi Strategy Fund SPC on behalf of Cachet Special Opportunities SP v Feng Shi and others

Cachet Multi Strategy Fund SPC, a Cayman Islands hedge fund, invested US$20m in Haven Global Network Pte Ltd in September 2018 under a Subscription Agreement in return for a 10% stake. Haven was co-founded by Feng Shi and Alex SK Liu, both directors. Cachet says it was induced to invest by representations made by Shi. It brought an SIAC arbitration against Haven, the only other party to the agreement's arbitration clause, and the tribunal found that all but one of the representations were false and fraudulently made by Shi, declared the agreement rescinded and ordered repayment. A separate arbitration against Shi to enforce a deed for his unpaid capital contribution also succeeded. Cachet then pursued enforcement in Hong Kong and California, recovering the investment but, it says, not its costs and interest.

In HC/OC 10/2022, Cachet sued Shi, Liu and Haven, alleging among other things that the three had conspired to mislead it into investing and then to siphon off the money, and seeking the unrecovered arbitration costs, interest and enforcement expenses. Default judgment had been entered against Shi and Haven, so only Liu remained. Liu applied in HC/SUM 2215/2023 to strike out the claims against him under O 9 r 16 of the Rules of Court 2021. He was not a party to the Haven arbitration or to its arbitration agreement.

1. Whether the extended doctrine of res judicata can apply when the court defendant was not a party to the earlier arbitration or its arbitration agreement
2. Whether the conspiracy claims against Liu were an abuse of process because they should have been raised in the Haven arbitration
3. Whether the conspiracy claims were legally unsustainable because of the Said v Butt principle protecting directors
4. Whether the conspiracy claims were factually unsustainable on Liu's evidence or for lack of particulars

On the first issue, the Assistant Registrar held that the extended doctrine can in principle apply in this situation. Identity of parties is not required where both sets of proceedings are litigation, and the consensual basis of arbitration does not change this, because a defendant invoking the doctrine is not relying on any rights established by the award. The policy of encouraging a claimant to bring all related claims in one forum applies to arbitration too, especially as institutional rules allow joinder with consent. The doctrine is relevant where the later claims fall within the scope of the arbitration agreement, with the defendant bearing that burden, and whether there is an abuse then depends on all the circumstances.

Applying this, the conspiracy claims, so far as they concerned events before the arbitration began, fell within the broad clause in the Subscription Agreement. But they were not abusive. Cachet had acted urgently to protect the investment, Shi had refused to be joined, and it was reasonable to see no point in seeking Liu's joinder since the conspiracy claim had to be run against both. Liu's later assertion that he would have agreed to join carried little weight. Parts of the claims concerned events after the arbitration began, and the claims did not attack the tribunal's findings. Seeking to recover unrecovered sums was not an improper collateral purpose.

On Said v Butt, the court held that a director must first show the claim rests solely on the company's breach of contract. Here the alleged conspiracy also relied on fraudulent misrepresentation, breaches of fiduciary duty and other acts, so the principle gave no basis for striking out either conspiracy claim. On factual sustainability, complaints that the pleading lacked particulars belonged under a ground Liu had expressly disclaimed, and Liu's affidavits merely gave a conflicting account of disputed facts, which should be resolved at trial.

Assistant Registrar Perry Peh dismissed Liu's striking-out application. The claims against Liu were not an abuse of process and were neither legally nor factually unsustainable, so they would proceed. Costs were to be heard separately.