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In the Grand Court of the Cayman Islands — Financial Services Division

[2019] CIGC (FSD) 57

Cause No. FSD 0057/2019 (IMJ); FSD 0073/2019 (IMJ)

Between

XiO GP Limited

- v -

Pacini and Ors; Pacini and Ors v XiO GP Limited - Judgment

Before
Mangatal J

Judgment delivered 2019-08-12

```html IN THE GRAND COURT OF THE CAYMAN ISLANDS FINANCIAL SERVICES DIVISION AND GWYNN HOPKINS AND GORDON MACRAE IN THEIR CAPACITY AS JOINT AND SEVERAL INTERIM RECEIVERS OVER XIO FUND 1 LP AND ITS ASSETS HEARD AT THE SAME TIME WITH： 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) - Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment ```
```html OPEN COURT Appearances： Mr. Robert Levy QC instructed by Mr. Alistair Abbott of Forbes Hares for XiO GP Limited and Xiang (Athene) Li. Mr. Michael Bloch QC instructed by Mr. Ben Tonner QC and Mr. Alex Davies of McGrath Tonner for Joseph Pacini，Carsen Geyer and Fei (Murphy) Qiao (collectively“JCM”) Mr. Tom Smith QC instructed by Mr. Adam Crane of HSM Chambers for the Interim Receivers/Intervenors. Observing the Mr Charles Kimmins QC instructed by Mr. Colin McKie of Maples，for Proceedings： Shanghai Li Hong (“SLH”) Mr. Michael Wingrave of Dentons on behalf of Interested Party Laguna Netherlands BV Before： The Hon. Justice Ingrid Mangatal Heard： 31 May，3 and 4 June 2019 Written Closing Submissions and Replies were subsequently received from the parties in mid-June in accordance with the Directions of the Court Draft Judgment Circulated： 2 August 2019 Judgment Delivered： 12 August 2019 HEADNOTE Company Law Partnership Law. Declarations. JUDGMENT uction stsen Gever (Murphy) M” XiO GP") an Intro FSD 57 of Writ action Oi XiO GP LiO 1. Pacini，Car and Fei (M that preliminary points in FSD 57 of 2019 and arising in FSD 73 of 2019，would be heard together.

XiO GP is a company incorporated in the Cayman Islands. The sole registered member and the sole registered director of XiO GP is Xiang (Athene) Li, (“Ms. Li”) (paragraph 1 of the Statement of Claim).

Under XiO GP’s memorandum and articles of association, new or additional directors can only be appointed by a special resolution of the members or by the existing directors. An existing director can only be removed by a special resolution of the members (paragraph 2 of the Statement of Claim).

XiO GP avers that, on 2 April 2019, without any lawful basis for doing so, JCM purported to appoint themselves as directors of XiO GP (“Appointment”) and also purported to remove Ms. Li as a director (“Removal”) (paragraph 3 of the Statement of Claim).

The Statement of Claim goes on to state that also on 2 April 2019, by a purported resolution of “XIO Group Partners” (an entity which Ms. Li says is unknown to XiO GP), JCM, among other things, purported to resolve (“Resolutions”) as follows: (i) To cause XiO GP to issue three new shares, with one share to be issued to each of JCM; (ii) To cause XiO GP to engage the law firm Willkie Farr & Gallagher (“WFG”) to be retained by XiO Fund 1 LP (“Fund”) (of which the Plaintiff is the sole general partner), to represent it in certain arbitration proceedings; and (iii) To approve any payment by XiO GP and/or the Fund of the costs and expenses of WFG. Further, on 19 April 2019, JCM purported to pass a resolution (1) retaining the Fund as the Fund’s (“Board”) representative to represent the Fund in arbitration proceedings and (2) approving payment by XiO GP and/or the Fund of the costs and expenses of WFG (paragraph 5 of the Statement of Claim).

On 2 April 2019, XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) – Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) – Judgment 3 of 42

XiO GP claims that JCM had no right, power or authority to appoint themselves as directors of XiO GP and accordingly the Appointment was a nullity.

Further, XiO GP argues that JCM had no right power or authority to remove Ms. Li as a director of XiO GP and accordingly the Removal was a nullity.

In the premises, each of the Resolutions and the Board Resolution was a nullity. Further, it is pleaded that JCM had (and have) no right, power or authority to engage WFG in any capacity on behalf of XiO GP or the Fund.

XiO GP claims as follows: 1) A declaration that none of the Defendants is a director of the Plaintiff; 2) A declaration that each of the Appointment, Removal Resolutions and Board Resolutions is a nullity; 3) A permanent injunction restraining each of the Defendants from: (a) In any way holding themselves (or any of them) out as, or purporting to act as directors of the Plaintiff; (b) Purporting to appoint any legal representatives (of any nature and in any jurisdiction and in respect of proceedings in any court or tribunal) to act on behalf of the plaintiff; 4) Purporting to give instructions to any legal representatives (of any nature and in any jurisdiction) and in respect of proceedings in a tribunal) in respect of any other matter or affairs of the Plaintiff (without limitation to what may be legal proceedings or tribunals, or the exercise of any powers or rights of the Plaintiff) including, without limitation, any court or tribunal of any kind, to which the Plaintiff or any court 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```html (a) Causing or permitting or taking any steps to cause the register of directors of the Plaintiff to be altered so as to show any person other than the existing registered director (Xiang (Athene) Li) as being a director of the Plaintiff or to show her directorship as having been terminated in any manner； and/or (b) Causing, permitting or taking any steps to cause the register of members of the Plaintiff to be altered in any manner howsoever. 5) A declaration that Wilkie Farr & Gallagher is not and has not at any time been retained by either the Plaintiff or XIO 1 Fund LP in either of the ICC ARBITRATIONS 23050/PTA AND 23051/PTA. 6) Costs; 7) Further or other relief."

JCM have filed a Defence and Counterclaim. The pleading opens with a statement that Ms. Li has provided an undertaking through Forbes Hare to be bound by the outcome of these proceedings. That undertaking is recorded in the Order of Directions in these proceedings and in Cause No FSD 73 of 2019, which was filed 18 April 2019. JCM say that the true effect of that undertaking is that Ms. Li may be treated as a party against whom the Court has jurisdiction to grant relief. The Defence and Counterclaim was served without prejudice to JCM's contention that these proceedings have been instigated by Ms. Li and that she should not have brought them in the name of XiO GP.

The Defence pleads that XiO Group is a group of companies which includes the following. following: (a) Xi LP (“the registered on Cayman Isapt

ed limit O Fund 1 XiO F (b) The Plaintiff (“XiO GP”), a Cayman Islands exempted company incorporated on 16 July 2014. XiO GP is the general partner of the XiO Fund. ```
(c) XiO Cayman Limited (“XiO Cayman”) was incorporated as a Cayman Islands exempted company on 17 June 2014. On or around 21 September 2018, XiO Cayman redomiciled to Nevis and continues to exist as a Nevis international business company. (d) XiO Partners HK Limited (“XiO HK”), is a limited company incorporated in Hong Kong on 16 July 2014. (e) XiO (UK) LLP, a UK limited liability partnership formed on 1 August 2014 (“XiO UK”).

The Defence claims that the XiO Group was established pursuant to an alleged partnership between Joseph and Ms. Li which was latterly expanded to include Carsten and Murphy (“the Partnership”). JCM say that any and all shares Ms. Li holds or has held in any of the XiO Group of companies were held for and on behalf of the Partnership.

The Defence has a heading “The Partnerships”, broken down as follows: (1) Joseph and [Ms. Li] (2) Joseph, [Ms. Li], Carsten and Murphy (3) The equal partnership. ### Joseph and Ms. Li

JCM say that in or around 2014, it was agreed orally between Joseph and Ms. Li that they would establish a partnership in which they each held a 50% equity interest (“the Partnership”). Further or alternatively, it was averred that the Partnership was formed by conduct. In particular (paragraph 5): 5.1 In or around February 2011, Joseph and Ms. Li discussed selling up [Ms. Li] and Joseph a company structure and private tutoring commenced. 5.2 The proposal was that [Ms. Li] would source the initial capital for the new venture, and Joseph would be principally in charge of operations. 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) – Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment 6 of 42
```html 5.3. In a telephone call on 9 April 2014, Joseph confirmed to [Ms. Li]that he would join her as a partner within the new venture. 5.4 In the premises, it was the mutual understanding or agreement ofJoseph and [Ms. Li] that they would carry on business in commonwith a view to profit with each being entitled to a 50% share in theequity of the business, and that the relationship between them wasthat of partners."

JCM refer to the following as evidence supporting the alleged mutual understanding or agreement: The email from [Ms. Li] to Carsten on 13 August 2014 welcominghim to XiO on behalf of the “founding partners” (being areference to herself and Joseph); The email from [Ms. Li] to Joseph on 17 August 2014 stating (inreference to Joseph’s former employer Blackrock: “U can tell them ustart your own business, you are the real founder too. and eventuallyboth u and I will be proud for the rest of our life that we started thisventure.); The email from [Ms. Li] to Mr. Zhu of Zhongzhi (a Chinese assetmanagement group) on 22 September 2015 referring to XiO as “atrue partnership” and asking him to copy in Joseph in all futurecorrespondence.”

that JosephLi subse 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) - Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment

In relation to Carsten, the Partnership engaged a recruitment consultant who in turn recommended Carsten. Joseph subsequently met Carsten in New York in around August 2014. Carsten stipulated as a condition of agreeing to join business that he be a partner. On 14 August 2014, Carsten accepted the offer of partnership and signed an offer of employment with XiO UK.

It is said that Murphy met Ms. Li in person for the first time in or around March 2014 when he was Executive Director of the Investment Banking Department at China International Capital Corporation.

According to the Defence, Carsten and Murphy joined the partnership with a 10% equity interest each and the expectation that their respective equity interests would increase over time as the Partnership achieved its objectives. From such time as they joined the Partnership, the respective interests of Joseph and Ms. Li reduced to 40% each, with the expectation that the four partners would have a 25% interest each in the event that the Partnership achieved its objectives. ## The Equal Partnership

The following is pleaded under the third head: The equal partnership: ### (3) The equal Partnership

By around November 2018, the Partnership had achieved its objectives and it was acknowledged by the founding partners that Carsten and Murphy were entitled to an increased equity share.

In the premises, the Partnership shares are 25:25:25:25; alternately, 40:40:40:40.

It is claimed that the following duties are owed by Ms. Li to the Partnership: ### "14. At all material times [Ms Li] owed fiduciary duties to the Partnership including but not limited to the following: 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) – Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment ``` This transcription accurately reflects the content of the provided text, using Markdown for headings and paragraph structure, HTML for tables (if any were present), and LaTeX for math (none in this case).
Breach of duty It is alleged that Ms. Li has breached her duties to the partnership by: - **15.1** Transferring funds to herself and/or charging monies to XiO GP - **15.2** Failing to hand over the Share after being requested to do so by her partners - **15.3** Seeking to assert that she was a director of XiO GP after being requested not to do so by her partners, and failing to facilitate the appointment of other directors as directed by her partners. - **15.4** Using her position as shareholder and director of XiO GP and XiO GP’s position as controller of the XiO Fund to conduct the defence of arbitrations ICC Case No.2350/PTA and ICC Case No. 230 51/PTA (“the Arbitrations”) in a manner which is not in the best interests of the XiO Fund or XiO GP and the Partnership in the manner in which she conducted the proceedings. # Consequences of Breach 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) – Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment 9 of 42
```markdown # Response to Statement of Claim

JCM suggest that Ms. Li retains any such legal interest as she does retain in the Share in breach of her fiduciary duty to the Partnership and the Partnership is entitled to claim and has a proprietary interest in any profit that she may make thereby. Further, they assert that equity treats as done that which ought to have been done, and Ms. Li is to be treated as between the parties as having registered the Share jointly in the names of herself and JCM, and to have handed it over when required to do so. ## Response to Statement of Claim

As to Paragraph 1 of the Statement of Claim: JCM admitted that the state of the register is as XiO GP alleges; and it is contended that it is for XiO GP to establish its entitlement to any acknowledgment as to the legal effect of the same, and, by reason of the foregoing, XiO GP is unable to do so.

As to Paragraph 2 of the Statement of Claim: JCM admitted the contents of the memorandum and articles of association therein pleaded.

As to Paragraph 3 of the Statement of Claim: JCM admitted that JCM took steps to appoint themselves as directors in place of Ms. Li; JCM maintain that they did so on the basis of their rights under the Partnership and that it is for XiO GP to establish its entitlement to any acknowledgment as to the legal effect of the same, and, by reason of the foregoing, XiO GP is unable to do so.

As to Paragraphs 4 and 5 of the Statement of Claim: it was denied that Ms. Li was unaware of the Partnership; it is admitted and averred that the Resolutions and Board Resolution; and it is at Ms. Li was obliged anything reflect them.

As to the Prayer for Relief, JCM takes the position that XiO GP is not entitled to the declaratory relief sought at (1), (2) and (4) in circumstances where the purpose of XiO GP ```
```markdown Counterclaim

By way of counterclaim, JCM claim that they are entitled to an order for specific performance against Ms. Li to do whatever is required to perfect the transfer of the Share and an order of the Court that XiO GP perform the same on her behalf if she declines to do so.

Further or alternatively, JCM say they are entitled to register a charge over the Share and/or seek the appointment of a receiver.

Further, it is pleaded that, unless restrained by the Court, Ms. Li will continue to hold herself out as a director of XiO GP and deny the entitlement of her partners to be appointed as directors, in breach of her fiduciary duties and causing loss and damage to XiO GP and the Partnership.

JCM counterclaim as follows: (1) A declaration that Ms. Li holds and at all material times held the Share on trust for the Partnership; (2) A declaration that Ms. Li was in breach of her duties as a partner of the Partnership in not doing whatever was necessary to perfect the transfer of the Share to the Partnership and ceding her directorship of XiO GP as requested by ship; (3) Away of specific performance by whatever may be necessary to perfect the transfer of the Share to the Partnership and cede her directorship of XiO GP; (4) An order that XiO GP do in the name of Ms. Li whatever may be ``` This document is a legal document related to a case involving XiO GP Limited and Joseph Pacini & Ors., specifically Judgment 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) - Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ).
```html 18/17 GRAND COURT CAYMAN ISLANDS GOVERNMENT necessary to perfect the transfer of the Share to the Partnership and cede her directorship of XiO GP; (5) An order for the registration of an equitable charge over the Share and/or the appointment of a receiver; (6) Costs; (7) All necessary accounts and enquiries; (8) Further or other relief. Statement of Claim in FSD 73 of 2019

The Statement of Claim in this matter sets out as follows: (1) XiO GP is the general partner of XiO Fund I L.P (Fund), which is a Cayman Islands exempt limited partnership and is part of the XiO group of companies (XiO Group). (2) The XiO Group is a general partnership of which JCM and Ms. Li are partners (XiO Partners). The XiO Partners are beneficial owners of the XiO Group, including XiO GP, each with an equal interest of 25% in the share of XiO GP and the XiO Group. (3) The Fund is the Second Respondent to an arbitration proceeding in Hong Kong. XiO Cayman Limited is the manager of the Fund and is under receivership in Nevis. (4) Between early December 2018 and 2 April 2019, Ms. Li was the sole registered director of XiO GP.

As a result of allegations made in the Hong Kong arbitration and in proceedings in Nevis pertaining conduct ithe business to Ms. Li's carrying (O Group, J CM, in their alleges partners as partners from her oector of Xi Group, sol ed capacity in the X ove Ms. L ``` This is a faithful transcription of the provided document, using Markdown for headings and paragraph structure, HTML for tables, and LaTeX for math.
```html 18/17 JCM contend that Ms. Li has a significant conflict of interest and cannot reasonably act in the best interests of XiO GP and/or the Fund and/or act in good faith as Director of XiO GP. JCM assert that, as partners of the XiO Group with a beneficial interest in XiO GP, they validly removed Ms. Li from her office as Director of XiO GP to protect the XiO Group, and the assets under the control of XiO GP, including the Fund and for the benefit of its stakeholders. JCM say that the effect of the relief sought in Cause Number FSD 57 of 2019 would severely prejudice the Plaintiffs' beneficial ownership interests in XiO GP and the XiO Group. In her First Affirmation filed in support of the Writ of Summons in FSD 57 of 2019, Ms. Li denies that the Plaintiffs (who are the named Defendants in FSD 57 of 2019) are beneficial owners of XiO GP or the XiO Group and denies that a partnership exists. JCM contend that Ms. Li is in breach of her fiduciary duties to them as her co-partners by wrongfully denying the existence of the partnership and their beneficial ownership of the share in XiO GP so as to exercise control over the XiO Group and thereby causing the Plaintiffs as well as the XiO Group to sustain irreparable losses and damages. JCM seek declaratory relief so as to give effect to their beneficial ownership interests in XiO GP and the Partnership (including a declaration as to the existence of the Partnership). JCM contend that this preliminary issue ought to be resolved before the issue in FSD 57 of 2019 asdity of the oval of Ms. Li from o to the vali Plaintiffs' rffice of Dir emector of XiO GP cabe determin un properly ned. 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) - Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment 13 of 42

JCM also seek the appointment of a receiver and/or an injunction as an interim measure to protect the Plaintiffs' interests in the share of XiO GP and to preserve value in the underlying assets.

JCM claim the following final declarations and relief: (i) that a partnership exists between the Second Defendant and the Plaintiffs and that each of the XiO Partners hold a beneficial interest in the partnership in equal amounts; and (ii) for an equitable charge over the share in XiO GP for the benefit of the Plaintiffs in the aggregate amount of 75% (each Defendant holding a 25% interest in the aggregate amount).

In addition, they claim the following interim relief: (i) The appointment of a receiver over the charge in XiO GP; and (ii) An application for an injunction incidental or ancillary to the appointment of a receiver to restrain the First and/or Second Defendant from assigning, charging or otherwise dealing with the share in XiO GP, pending the determination of the beneficial ownership interests in XiO GP and the validity of the removal of the Second Defendant from office of Director of XiO GP. The Defence of XiO GP in FSD 73 of 2019 XiO GP fice which itwithout prejudice to XiO GP’s con that the SF Claimant’s li cause is

led a Defence says is filed a closeable statement of particulars ruck out action, able to b. cause is 190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) – Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment 14 of 42

The Defence essentially denies that there is a "XIO group of companies", also denies that the term "XIO Group" has any legal significance and further denies that the Fund (which in any event is not a company) is part of any group of companies.

It also specifically denies that there is any partnership between JCM and Ms. Li and further denies that JCM have any beneficial interest in XiO GP, whether of 25% each or of any other percentage. Essentially, the Defence repeats the assertions made in FSD 57 of 2019, in which XiO GP is the Plaintiff. The Timing

These two claims which were just recently filed, and form part of a whole series of complex contentious issues between these and related parties, were at the parties' request heard urgently by me in very pressing conditions. They were heard whilst the Court also had to deal with an application by Hong Kong appointed Receivers for recognition by the Cayman Courts (FSD 78 of 2019). The urgency is that there are arbitrations set to take place in Hong Kong in the latter part of July. I indicated to the parties that what they really seem to be trying to do is to squeeze these two Writ trial matters into an impossibly short period, this Court having no control over the timetabling in Hong Kong, and that the only theoretically possible way for the Cayman Court to handle this in a helpful way at this stage, would be for them to agree some preliminary issues. The Agreed Preliminary Issues

Cooperatively, the parties did agree preliminary issues, and principles, as follows: (1) The Court shall determine whether the Plaintiff (in FSD 57 of 2019) is entitled to a that JCM is in FSD 57 of 2019 validly reappointed as director of XiO GP Limited on the assumption that Ms. Li and JCM were partners; and whether the Defendant was validly appointed as director of XiO GP Limited on or as a result of the events that have happened and on the assumption (if it makes any difference and which is denied by Ms. Li) that Ms. Li and JCM were partners; ```
```markdown **(2) If the existence of a partnership does make a difference and might preclude the grant of declaratory relief, then the Court shall determine whether there was any such partnership; and** **(3) If there was no such partnership, whether in any event declaratory relief should be refused.** **(4) All issues which are not determined in accordance with (1) - (3) above shall be for further hearing.**

I have granted the application recognising the Hong Kong Receivers, and in my view that should take care of some of the urgency, certainly as far as the arbitrations are concerned. However, the Parties have nevertheless continued to press the Court for its decision and so I have tried to oblige in these highly condensed and pressing circumstances. **The Summons filed on behalf of JCM in FSD 73 of 2019 seeking Interlocutory Relief**

A summons was filed on behalf of JCM and set down for hearing, seeking that an alternative receiver be appointed over the sole share of XiO GP Limited (the “Share”) pending the determination of the claim in FSD 73 of 2019 for a declaration of an equitable charge over 75% of the Share in favour of and shared equally between JCM. However, that is no longer being pursued, because as Leading Counsel for JCM Mr. Bloch announced, a Form of Protocol has been agreed between JCM and the Hong Kong Receivers. **IP’s Case** **XiO GP**

It is Ms. Li’s case that the Defendants, JCM, are impostors to the Board of XiO GP. It is XiO GP’s case that the purported self-appointment on 2 April 2019 is a nullity, whether ```
analysed in corporate terms or (if there was any partnership, which is denied), in partnership terms. It was submitted that: (1) The only person who could appoint any additional directors was Ms. Li; (2) The Defendants, who were neither registered directors (nor directors in any other sense) nor registered members (or members in any other sense) as at that date, had no power or standing, in any capacity, to appoint directors; (3) Even if there is a partnership (and there is no partnership) that does not affect the analysis, since at best the Defendants might have a beneficial interest in the sole issued share in XiO GP, but Article 9 expressly negates any argument that they may thereby have voting rights; and (4) The purported partnership meeting on 2 April 2019 would have been invalid as a partnership meeting in any event.

Mr. Levy QC, on behalf of the XiO GP, advances that it flows from the above, that the purported removal of Ms. Li as a director (by the Defendants purporting to act as directors), is a nullity, and the purported engagement of WFG is also a nullity. It was further submitted that in any event the result would be the same if JCM were purporting to act as “partners”, since only registered members have any power to remove directors and the Defendants have never been registered members.

Having seen the closing submissions of JCM, learned Counsel goes on to say that it is not clear when the alleged partnership was formed, as the main thrust of the Defendant's case now appears to be that the Court should refuse declaratory relief in the exercise of its discretion.

It was submitted that, in that regard, there is no valid reason not to grant declaratory relief in respect of the matters sought, and every reason why, no matter what the Court’s views
```html of the players may be，declaratory relief should be granted. According to Mr. Levy，"an invitation to deny declaratory relief is an invitation to conceal the correct legal position from the Registrar of Companies， regulators and third parties. It should not be countenanced. It is also an invitation to ignore well established company law，at the request of impostors. However， should it be determined that the question of whether a partnership existed between Athene and the Defendants makes some difference to the question of whether declaratory relief should be granted， then the Court can and should determine that there was in fact no such partnership..." JCM's Position 57. Mr. Bloch QC，in his closing submissions，submitted that there are circumstances in which the Court will decline to grant declaratory relief，even assuming that the declaration sought would be true. He argued that the Court will decline to grant declaratory relief in circumstances in which the plaintiff lacks the standing to be granted such relief because of (1) his or her past conduct in relation to the matter to which the declaration would relate，(2) his or her behaviour in the proceedings or (3) the purpose for which he or she intends to use the declaration. 58. Interestingly，JCM submit that it is unnecessary for them to show that the declarations which Ms. Li is seeking would be false，and they say they do not seek to do so. 59. Mr. Bloch refers to the fact that Ms. Li is seeking declarations that she was a director and that JCM were not directors of XiO GP. It is contended that Ms. Li lacks the standing to be granted such declaratory belief because (JCM allege) (1) any such state of affairs would render Ms. Li a delinquent fiduciary，(2) she has given knowingly false testimony and (3) she the declaration，giving false testimony to further the purpose of fiduciary breach. 60. The further submission is that the memorandum and articles of association of a company serve two distinct purposes；(1) they govern the dealings between those with a direct or ```
190812 XiO GP Limited v Joseph Pacini & Ors. FSD 57 of 2019(IMJ) – Joseph Pacini & Ors. v XiO GP Limited FSD 73 of 2019(IMJ) - Judgment 19 of 42 indirect interest in the company, and (2) they govern dealings between the company and third parties.

Accordingly, JCM contend that an innocent third party who has dealt with Ms. Li as a director of XiO GP might have the standing to obtain a declaration as to her status as a director in circumstances where it would on the other hand be an affront to justice to grant the same relief to Ms. Li. (1) The general principles for the grant of declaratory relief

It was submitted that declaratory relief is a discretionary remedy. Reference was made to Zamir & Woolf: The Declaratory Judgment (4th ed.), at paragraph 4-01 as authority for the proposition that this is a “most important feature of the declaratory judgment.”

JCM takes the position that the general principle demonstrating the Court’s broad powers is set out in Financial Services Authority v Rourke [2002] CP Rep 14 (per Neuberger J), which was recently cited by Marcus Smith J in Bank of New York Mellon, London Brach v Essar Steel India Ltd [2018] EWHC 3177 (Ch) at [21] (per Marcus Smith J): "It seems to me that, when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration."

It was further submitted that the Court’s approach as to how it exercises its discretion to grant declaratory relief "will be guided by the equitable principles governing all discretionary remedies": Zamir & Woolf at 4-31. It was submitted that this includes the following principles: