Relevant Employees Whose Shares in China Shanshui Investment Company Limited Held By Zhang Caikui on Trust (Please Refer To Schedule 1 Attached To the Writ of Summons for Names of the Relevant Employees) and Another v. Zhang Caikui and Another

HCA 1661, 1766, 2191/2014 &
HCA 623, 939, 1564/2015 (Consolidated)

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

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(Consolidated pursuant to the Order of
The Honourable Mr Justice G Lam dated 20 August 2015)

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D E C I S I O N

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1.I have to give directions for the further conduct of a summons taken out by K & L Gates (“KLG”) to strike out the Notices of Changes of Solicitors filed by Stephenson Harwood (“SH”) on behalf of 1,072 of the plaintiffs[1] in these consolidated actions.

2.KLG had been solicitors on record for all the 2,631 plaintiffs[2] in these 6 consolidated actions.  In January 2017, SH informed KLG that certain plaintiffs had decided to instruct SH as their solicitors in place of KLG.  In February 2017, Notices of Changes of Solicitors were filed by SH on behalf of 2,319 specified plaintiffs in these actions. 

3.On 15 February 2017, KLG filed the summons to strike out, apparently on behalf of all the plaintiffs.  It is common ground that some of the plaintiffs have since signed documents to cancel their instructions to SH and to “switch back” to KLG as their solicitors.  SH do not dispute the validity of such steps and now claim only to represent 1,072 plaintiffs, in addition to 5 other plaintiffs who had come to Hong Kong in person in May 2017 and signed documents terminating KLG’s appointment as their solicitors.  There is no dispute that those 5 plaintiffs are now represented by SH (who have since transferred their claims to a new action to achieve “de-consolidation” with the plaintiffs represented by KLG).  Accordingly, KLG’s summons is to be taken to be directed at the 1,072 plaintiffs.

4.KLG rely on a clause in their retainer signed by the plaintiffs back in 2015, which provides:

“如有關本人與貴所的相關委托代理關係存在任何改變，務必以本人親自與貴所律師於香港見面明示，並於其時由本人親自簽署及貴所律師所見証等相關書面指示為依歸。”

(which may be freely translated as:

“If there is any change to the relevant appointment relationship between myself and your firm, I must come to give such instructions in person to your firm’s solicitors in Hong Kong and confirm by personally signing the relevant written instructions in front of your solicitors.”)

5.Many affidavits and affirmations have been filed, including those of solicitors of SH, detailing the manner in which they obtained their written retainer personally from the 1,072 plaintiffs in the Mainland.

6.KLG have also filed several affirmations, in which allegations were made that the plaintiffs were misled or coerced and that SH had conflicts of interests.  However, the allegations of duress and pressure are vague and without particulars of the perpetrators or victims or specific source of information. 

7.Allegations have also been made about the source of funds for SH’s fees.  I do not think this is central to the question of authority.  In fact, questions have also been raised about the source of funds for KLG’s fees and allegations have been made that KLG had conflicts of interests in connection with Tianrui.

8.In contrast to the situation in 2015 (see my decision dated 20 May 2015), none of the 1,072 plaintiffs has taken any step to revoke the instructions given to SH.  Nor has any of them filed any notice to withdraw the claim.  In fact, it seems clear now that none of those plaintiffs had directly contacted KLG and instructed them to take out the present strike-out application either prior to the summons or after the call‑over hearing on 24 May 2017 when I enquired about the basis of the summons.  Instead, KLG have relied on their own retainer with the special mandate and on one Mr Gao Yong who says he had written authorisation from the plaintiffs back in 2015 to give instructions to KLG generally and who claims that the (unidentified) coerced plaintiffs had also recently requested him to “set aside the invalid appointment of SH”. 

9.Although KLG purport to take out the summons on behalf of all the plaintiffs, it has not been suggested that the other 1,554 KLG plaintiffs (2,631 – 5 – 1,072) or the 5 SH plaintiffs have any interest or standing in the issue at hand.

10.In these circumstances, I think the real question is the validity of the retainer of SH in the light of the previous written instructions or authorisations given to KLG and Gao Yong and in particular the special mandate.  I do not consider this warrants a multiple‑day trial with cross‑examination of all the allegations raised as KLG proposed.

11.The first of these consolidated actions was commenced in August 2014.  Receivers have been appointed over the shares in dispute since May 2015.  The delay in the progress of the actions has been regrettable, though they have now been set down for trial starting late November 2017.  There is no doubt, as Ms Eu SC submitted, that the court has certain supervisory jurisdiction over solicitors but, in my view, this strike-out summons is not the proper platform for a roving inquiry into the conduct of SH or KLG in this litigation.

12.I direct that:

(1)   KLG’s strike-out summons be set down for argument on a date to be fixed as early as possible in consultation with counsel’s diaries with an estimate of half a day. 

(2)   No further evidence may be filed without leave of the court. 

(3)   The claims made by the 1,072 plaintiffs be stayed pending the outcome of KLG’s strike-out summons.

(4)   Costs of the hearing on 30 June 2017 be in the cause of the strike-out summons.

Mr Jose Maurellet SC and Mr Alexander Tang, instructed by Stephenson Harwood, for 1,072 Plaintiffs

Ms Audrey Eu SC and Mr Law Man Chung, instructed by K&L Gates, for the Plaintiffs