Aquapoint LP (in Official Liquidation) v Xiaohu Fan (Cayman Islands)

The statutory just and equitable winding-up jurisdiction permits equity to restrain exercise of otherwise valid legal rights where personal considerations between participants make insistence on those rights inequitable. The inquiry is fact-sensitive and is not confined to quasi-partnerships, mutual participation in management, or closed categories. Contractual terms, including negotiated entire-agreement provisions, are highly relevant but not conclusive. A general partner’s contractual power remains subject to any statutory good-faith obligation, and an express relaxation of that obligation does not itself exclude equitable restraint. The court must examine the relationship and the circumstances in which the parties contracted. Winding up may be ordered where assurances induced entry into the arrangement and the legal power is then used inconsistently with them, particularly where no adequate alternative remedy exists.

Aquapoint LP, an exempted limited partnership, was ordered to be wound up by Doyle J on 10 June 2022 on the just and equitable ground. The Court of Appeal of the Cayman Islands dismissed Aquapoint’s appeal in its judgment dated 4 October 2023, Civil Appeal No 14 of 2022.

Dr Fan, a substantial limited partner, relied on assurances that he could obtain shares attributable to his partnership interest after the underlying company’s IPO. The general partner refused consent under a clause giving it a sole and absolute discretion to permit withdrawals. The appeal concerned whether equitable considerations could constrain that contractual power despite entire-agreement provisions, whether a quasi-partnership or participation in management was required, and whether alternative remedies made winding up inappropriate.

Appeal dismissed. Lord Richards delivered the judgment of the Board, which advised His Majesty accordingly.

1. Jurisdiction and framework. The Board’s present view was that the jurisdiction to wind up an exempted limited partnership on the just and equitable ground arose directly under section 36(3)(g) of the Exempted Limited Partnership Act. The issue had not been argued and was immaterial to the parties’ common position. The Board nevertheless applied the principles developed for company winding up, while recognising the special characteristics of an ELP.
2. Equitable restraint. The analysis in Ebrahimi v Westbourne Galleries Ltd ([1973] AC 360) and the related reasoning in O’Neill v Phillips ([1999] 1 WLR 1092) establish that the just and equitable ground introduces equitable principles into a statutory scheme. The court must examine the particular relationship and circumstances. It is not confined by fixed categories.
3. Contractual provisions. Carefully negotiated terms and entire-agreement clauses are highly relevant, but they cannot alone demonstrate that equitable considerations are excluded. The Board assumed, without deciding, that the clauses might prevent contractual reliance on the assurances. That did not oust the winding-up jurisdiction.
4. Quasi-partnership. The typical indicia identified in Ebrahimi v Westbourne Galleries Ltd are examples, not essential requirements. A quasi-partnership, an agreement to participate in management, or exclusion from management is not necessary. A restriction on transfer alone is insufficient, but other personal circumstances may engage equity.
5. Application and remedies. The assurances induced Dr Fan to enter the 2017 Agreement and were the agreed basis of the parties’ arrangement. It was therefore inequitable for the general partner to rely on its withdrawal power inconsistently with those assurances. The contractual power was subject to the statutory good-faith obligation in section 19 and was not immune from equitable restraint. A contractual claim was not a reasonable alternative on Aquapoint’s case that no contract had been breached. A derivative claim would at best provide relief to Aquapoint, not Dr Fan personally. The Board was satisfied that no adequate alternative remedy was reasonably available.

1. Privy Council: In Aquapoint LP (in Official Liquidation) v Xiaohu Fan, [2025] UKPC 56, the Board dismissed Aquapoint’s appeal.
2. Court of Appeal of the Cayman Islands: In its judgment dated 4 October 2023, Civil Appeal No 14 of 2022, the Court dismissed Aquapoint’s appeal.
3. First instance: Doyle J, in a judgment dated 10 June 2022, ordered Aquapoint to be wound up on the just and equitable ground.