張才奎所託管中國山水投資有限公司 and Another v. 張才奎 and Another
Read the full judgment text of HCA 1661/2014 on BabelCite. This High Court CFI judgment was delivered on 26 October 2015.
1. I have read the submissions of the 1 st defendant and the other parties and listened to the oral additions of all.
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HCA 1661, 1766, 2191/2014 & IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NOS 1661, 1766, 2191 OF 2014 AND 623, 939, 1564 OF 2015 ________________________ BETWEEN
________________________ (Consolidated pursuant to the Order of
________________________ DECISION 1.I have read the submissions of the 1st defendant and the other parties and listened to the oral additions of all. 2.I do not propose to elevate the grounds of the application for leave before me to a level which justifies detailed consideration. They can be ventilated, if allowed, before the Court of Appeal. My written decision is clear enough as to the basis of my findings. I do not consider that they call for reconsideration by me on any basis. 3.The defendant’s written submissions and re‑drafted and/or extended grounds of appeal are peppered with repeated misunderstandings of my judgment, and non‑sequitur arguments. They have in fact been fully dealt with in the submissions in reply of the counsel for the Receivers, independent directors, the plaintiffs and Mr Yu Yuchuan who have comprehensively and meticulously taken apart the 1st defendant’s submissions and revealed the critical defects and lack of substance, to any extent to which I had failed to do so. 4.The Court of Appeal was informed by counsel for the appellant/1st defendant that there were two broad grounds of appeal, the first being bias on the part of the judge — myself. The second is that I failed to give adequate reasons for my decision. 5.It is not for me to enter into any unseemly argument concerning the grounds advanced, in particular those alleging bias and disregard of the law or erroneous findings. The Court of Appeal has already delivered its forthright views on the merits of the defendant’s grounds of appeal. 6.I need say only this in addition. Of the ground that alleges that the judge, ie myself, was biased, it is to be noted that more often than not it is the last resort and refuge and frustrated cry of a litigant who has lost because a judge took the view that there was no merit in its contentions and said so forthrightly, interspersed with criticism of the tactics and allegations deployed. I leave this to the objective consideration of the Court of Appeal, having noted and taken into account the approach of that court in its Written Reasons for Judgment handed down on 22 October 2015. I am well aware of the test applied by the Privy Council in Mitchell v Georges [2015] 3 LRC 392, that of the “fair‑minded and informed observer”. The factual matrix is clearly different. In Lord Clarke’s words: “Thus, as ever, all depends upon the context.” 7.A further matter raised by the 1st defendant, which was not ventilated before the Court of Appeal, concerned my inquiry into the reasons for the absence of the 1st defendant, in person, from the hearing of his application to injunct the Receivers and the independent directors and my comments. I made it clear that it was a matter of interest and surprise but not material to any issue. The suggestion that his absence in any way affected my decision is naïve verging on the irrational. 8.In view of the nature of the defendant’s contentions and allegations it was highly likely that his counsel would not have instructions available directly from the absent defendant to deal with any matters raised by me. 9.More importantly, however, was the fact that having made, as they turned out to be, wild and unsubstantiated allegations of mala fides, “improper and collateral purpose to circumvent the court’s supervision” and “abuse of process”, seemingly acquiesced in by his lawyers when they were put into print, thereby questioning the professional probity of the court’s officers and its appointees, he did not have sufficient conviction in the force of these allegations to be present in court when they were, on the face of it, to be considered as a significant part of his case. Nor was he present in court to hear his own counsel abandon them formally as being inappropriate and insupportable. 10.My comment concerning the defendant’s credibility as illustrated by the content of affirmations, is hardly surprising in view of these allegations. 11.Somewhat surprisingly there appeared to be something of a “volte face” when the application was made before the Court of Appeal. The allegations made by the defendant against the Receivers and independent directors which his counsel formally, in open court before me, had abandoned, appear to have been resurrected (see paragraph 29 of the Court of Appeal’s Reasons for Judgment); one is reminded of Alexander Pope’s words: “willing to wound and yet afraid to strike”. 12.The defendant and his lawyers are in my view labouring under a fundamental misconception which has characterised the wasteful litigation involving to date 11 hearings and more than 30 hours of argument and court time, excluding that before Harris J. So much for proportionality. I shudder to think about the costs so far. 13.The purpose of the action is to seek recognition of the existence of the plaintiffs’ equitable or legal interest in a quantity of shares of which the defendant contends that they are mere discretionary beneficiaries, and effect the necessary steps to record that. 14.The recent litigation is concerned with the need to preserve those disputed assets. The arguments advanced by the defendant and his lawyers miss the point entirely. Hence my reference to a “paper filibuster” and delaying tactics, and my assertion that the defendant’s repeated arguments do not merit repeated responses. The abuse directed towards the Receivers and the independent directors, articulated on paper by the defendant’s lawyers, is at the very least unconstructive and obstructive. 15.The fundamental concern of the court pending the resolution of the principal conflict — quite apart from the entirely reasonable concern of the plaintiffs and other involved parties including the Receivers and independent directors — is the preservation of the share value against depredations and irresponsible wastage. The value of the shares in Shanshui Investment is its minority holding in Shanshui Cement which has already been reduced. Whatever happens to the financial position of Shanshui Cement affects the value of that shareholding. Any dilution of the minority shareholding by further issue of shares will have an additional adverse effect. 16.Corporations exist to make money unless they are used as a vehicle for some legitimate taxation benefits, or for fraud. 17.Money earned by the company in terms of profit, is for the benefit, inter alios, of the shareholders who have invested in the capital of a company. That profit is to be turned directly or indirectly into dividends and capital growth for and of shares. It may be turned into growth of the company itself again with a view to the shareholders’ interests ultimately. 18.Sometimes a company’s profitability is affected by obvious extraneous factors. These receivers are not concerned with management in those circumstances. At other times intrinsic or internal factors within the control of the directors threaten the shareholders’ asset value for a variety of reasons. These receivers are there to see that any such intrinsic factors, intended or otherwise, do not jeopardise those assets if it can be avoided. They must also be in an effective enough position to distinguish between those types of factors — extrinsic and intrinsic. 19.They are not company “doctors” ministering to a corporation affected by ailments generated by wholly external, detached influences, such as competition or government legislation. They are essential caretakers in respect of the financial aspects which are or may have been affected by actions of vested interests which threaten the assets and interests of, for example, minorities. A caretaker means what it says. It is empowered to take care of, to look after, those interests. It may necessarily involve a wide area of activity. Finance is at the heart of corporate activity. It may be necessary to go to the heart. In my view, given their purpose as approved and indorsed by the court, it matters not whether the company is a private or public one. 20.The Receivers are entitled to call for explanations where, for example, there are indications of a decline in profit, or drawings of or use of money for questionable reasons, which jeopardise or may jeopardise the value of Shanshui Cement and/or its shares. Resistance to that concern and the actions essential to carry it into effect are not simply obstructive, but can give rise to adverse inferences. 21.The court has a duty to aid those genuine concerns by ensuring that its officers and those appointed by the latter to aid them in that legitimate objective, have the powers they need to achieve that. 22.That independent authority is exercised through skilled and experienced professionals to preserve those assets for the benefit of all shareholders and restore them where there has been irresponsible wastage for possibly ulterior motives. 23.The applications by the defendant and the arguments developed and persisted in, have, to my mind, only one discernible objective — to resist all investigations and hide the financial activities. As I referred to earlier there is a number of dispositions of money which need to be explained and as but one aspect of that, is the extent to which the defendant has used corporate moneys of Shanshui Investment and/or Shanshui Cement to pay for his personal legal fees. 24.Someone, sometime soon must pull the wool of blind obstinacy away from the eyes and get to grips with the reality of this straightforward process. He or they must stand back and ask themselves “What are we doing?” “What are we a party to?” 25.The fair‑minded objective observer might well say to him or herself — “This is an abuse of the adversarial system!” even though Mr Chan has tried hard to put the cloak of respectability on the arguments advanced. 26.I knew that I would have some trenchant observations to make in writing and so, as I indicated on 30 September 2015, I decided to deliver my reasons in open court, which I did, rather that hide behind a handing down of my Reasons for Decision. It also gave the opportunity to the defendant of hearing what I had to say openly, albeit in translation, if he so wished. I have now added to those in the vain hope that the proper perspective may prevail. 27.This application for leave to appeal is dismissed with costs. There is no reasonable prospect of success, in my judgment, and there is no other reason in the interests of justice why the appeal should be heard. Costs 28.I adopt the approach of the Court of Appeal in respect of its award of indemnity costs. If I do not award indemnity costs it means that the parties who have unreasonably and inconsiderately been brought to court time and time again at significant expense may have to pay some costs out of the very assets they seek to preserve. That would be inequitable and is a further justification. The order is for the defendant to pay the costs of all the other parties on an indemnity basis, to be taxed and paid forthwith. Certificate for two counsel where required.
Ms Audrey Eu SC, leading Mr Law Man Chung, instructed by K&L Gates, for the plaintiffs Mr Frederick Chan, instructed by Deacons, for the 1st defendant Mr Barrie Barlow SC, instructed by P C Woo & Co, for the receivers Ms Queenie Lau, instructed by ONC Lawyers, for Mr Chong Cha Hwa and Mr Hwa Guo Wai Godwin Mr Victor Joffe, instructed by Wong & Lawyers, for Mr Yu Yuchuan |
Further hearings and rulings under HCA 1661/2014