Li Ming and Others v. Zhang Caikui and Another

HCA 1282/2017

[2018] HKCFI 1042

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1282 OF 2017

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BETWEEN

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HCA 2648/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2648 OF 2017

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BETWEEN

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Before: Hon G Lam J in Chambers

Date of Hearing: 7 May 2018

Date of Decision: 7 May 2018

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D E C I S I O N

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1.An urgent application has, once again, been sought to brought on this morning in this matter which has a complicated history.

2.On the basis of my judgment in the actions (“trust actions”) dated 31 January 2018 [2018] HKCFI 195, as between Zhang Snr and the plaintiffs (ie those of the employees who participated in the Employees Stock Ownership Scheme and who had brought actions in Hong Kong), the plaintiffs are now absolute beneficial owners of the relevant CSI shares.  The receivers’ appointment has been discharged, though they are still subject to the jurisdiction of the court as its officers pending the transfer of the legal title over the shares: Glatt v Sinclair [2013] 1 WLR 3602, §§41‑43.

3.Meanwhile, on 20 March 2018, Zhang Snr made a requisition for an EGM of CSI for the purposes of considering proposed resolutions to remove the Receivers and those they nominated as directors of CSI and to appoint new directors.  Notice was given to all shareholders of CSI on 10 April 2018 of an EGM to be held on 8 May 2018, that is, tomorrow, at 3pm.

4.At the listed company level, ACC also requisitioned for an EGM of CSCG. A public announcement of that requisition was made on 18 April 2018.  As I understand it, the EGM is now fixed to be held on 23 May 2018.

5.There are all together 2,630 (or 2,631)[1] plaintiffs in the trust actions.  As stated in my judgment in the trust actions [2018] HKCFI 195 at §§39-43, 2,019 plaintiffs were then represented by Stephenson Harwood (“SH”) whereas 611 (or 612) plaintiffs were represented by K & L Gates.  Pursuant to my judgment, 2,012 of the 2,019 SH plaintiffs have since nominated 3 persons to receive the transfer of shares from the Former Receivers.

6.However, following my decision on 10 November 2017 refusing leave for Chen Hong Qing (“Chen HQ”) to be joined as an intervener or additional defendant in the trust actions (“Joinder Decision”), Chen HQ had started an action of his own (HCA 2648/2017) on 17 November 2017 against 2,265 of the 2,630 employee plaintiffs in the trust actions, claiming to be owners of their interests in the relevant CSI shares.  He had also issued a summons in that action on 8 February 2018 for interlocutory relief including appointment of interim receivers and injunctive relief, against those 2,265 of the employee plaintiffs, 1,878 of whom were among the SH plaintiffs.

7.On 15 February 2018, despite Chen HQ’s contention for receivers to be immediately appointed, Deputy Judge K Yeung SC refused to make an immediate appointment of receivers or grant any interim relief, on the undertaking given by the 1,878 SH plaintiffs:

“ (1) Not to take any steps to cause or procure the transfer, charge or assignment of the Shares (defined below) or any of them, or from otherwise encumbering or dealing with the Shares (defined below) or any of them; and

(2) Not to take any steps to cause, procure or apply for registration of the Shares (defined below), or any of them, in their names or the names of their nominees”.

8.Chen HQ’s summons is now fixed for substantive hearing on 30‑31 May 2018 before Deputy Judge K Yeung SC (together with a summons by Jinan Industrial Development Investment Group Co., Ltd (represented by Wong SC today) for joinder into Chen HQ’s action, which can be left aside for present purposes).

9.The position seems to be that, of the 2,012 SH plaintiffs who have named nominees for the transfer of their shares:

(1) 1,691 SH plaintiffs were among those sued as defendants in Chen HQ’s action.  Because of the interim undertaking given on their behalf on 15 February 2018, the CSI shares could not be transferred to and registered in their names in the meantime.

(2) 321 SH plaintiffs were not sued in Chen HQ’s action.  The necessary documents for transfer of the CSI shares to them either had been signed by the Receivers and submitted to the Stamp Duty Office, or were being considered by the Receivers for signature.

10.By a summons dated 20 April 2018, the 2,012 SH plaintiffs apply for an order for the Receivers (i) to act in accordance with their directions in relation to, inter alia, the voting of the CSI shares; and (ii) to make a requisition for an EGM of CSI for the purpose of passing certain resolutions stated in Appendix II of the summons, being for the removal of the existing directors of CSI and appointment of new ones.

11.By 2 summonses taken out only on 4 May 2018 Friday, ie the working day before today, Chen HQ applied:

(1) to be joined as an intervener in HCA 1282/2017 (“Joinder Summons”); and

(2) for an order in HCA 2648/2017 that the Receivers exercise their rights in relation to the shares of the 1,878 defendants (ie SH plaintiffs) (Schedule A to the Order of 15 February 2018) and another 385 defendants (Schedule B) with a view to seeking an adjournment of the EGM of CSI to be held on 8 May 2018, pending the final determination of Chen HQ’s application for receivership and injunction, alternatively to vote against all the resolutions (“Directions Summons”).

12.The Joinder Summons can be shortly dealt with.  The trust actions have nothing to do with Chen HQ — see my Joinder Decision especially §§10‑12 & 14‑19.  Chen HQ asserts he has rights against the plaintiffs by virtue of certain agreements, but these do not affect or involve Zhang Snr, the defendant in the trust actions, or the Receivers who had been appointed to hold the assets pending the litigation between the plaintiffs and Zhang Snr which has already been determined (from which there is no appeal).  Chen HQ has already started his own action — HCA 2648/2017; which is subject to jurisdictional challenge on the ground, inter alia, of forum non conveniens.  Chen HQ cannot try to circumvent that challenge by trying, yet again, to squeeze himself into the trust actions which have essentially come to an end.  Insofar as Chen HQ seeks to get interim relief regarding the CSI shares, it is for him to apply, if he can, separately against the relevant participating employees — which he has indeed embarked upon in HCA 2648/2017.  As far as joinder of Chen HQ is concerned, the situation now is in principle no better than that in November 2017 when I refused his application for joinder into the trust actions. There was no appeal from that refusal.  The present summons seems to me to be an attempt at a second bite of the cherry, and an abuse of process.

13.As to Chen HQ’s Directions Summons in HCA 2648/2017, it was made very late.  As pointed out by Mr Wong SC, Zhang Snr’s requisition for EGM was made on 20 March 2018, and made known to Chen HQ at the latest by 3 April 2018.  Yet Chen HQ failed to apply until 4 May. The SH plaintiffs’ application was issued on 20 April, but as Mr Mok SC accepted, his client needed his own summons to succeed, and not just to succeed in opposing the SH plaintiffs’ summons, in order to achieve his objective.  So the date of the SH plaintiffs’ application is not an excuse for or a valid explanation of the delay.  In any event, there was still a considerable delay, in the present context, after the SH plaintiffs’ application was taken out and came to the notice of Chen HQ.  Any apparent urgency in his application was of his own making.

14.This lateness has deprived the court and the other parties of the time to consider the application together with relevant evidence, including proper evidence of the recent developments that have taken place including various attempts by those controlling the listed company to prevent the reconstitution of the board of CSI.

15.To justify applying with such urgency it is usually necessary to show some irreparable prejudice.  But there is none suggested.  All that Mr Mok said was the reconstitution of the board should be done on a proper basis.  But there can be EGMs after EGMs, and directors appointed can be removed, and those removed, re‑appointed.  The EGM to be held tomorrow, if not adjourned, will not render Chen HQ’s application for receivership or injunction nugatory.

16.Further, I have expressed serious concerns in the Discharge Decision [2018] HKCFI 194 at §§62‑66 that the transfer of the interests of the plaintiffs in CSI shares in August 2015 (of which Chen HQ now claims to be the beneficiary), among other vital information, had been withheld from the court (both DHCJ Seagroatt and the Court of Appeal on appeal from him) and that a misleading picture had been presented to the court when it granted orders for the Receivers to become involved in the management of CSCG, with the result that the board of the listed company became thereafter dominated by Tianrui and the Receivers.  I have also both in the Joinder Decision (at §21) and in the Discharge Decision (§§35‑37) referred to the evidence including banking documents that the RMB700 million (paid to a large number of plaintiffs as the first tranche (70%) of the price) came from Tianrui, not Chen HQ.

17.Chen HQ has not addressed any of these concerns.  What he said in his latest affirmation dated 4 May 2018 (for joinder in the trust actions) is that “I do not wish to disclose too much of my personal financial information”, saying he will address that matter in the CIETAC arbitration in due course.  But by simply parroting he paid the money and he was independent from Tianrui in his affirmations, he cannot expect this court to suspend its critical faculty and simply to believe anything that has been penned for him to sign.

18.Mr Mok said the court should not allow the status quo to be changed pending Chen HQ’s application for receivership and injunction.  But as far as I am concerned, this so‑called “status quo” — as regards CSCG — was the result of someone withholding crucial information from the court and presenting a false picture in the course of obtaining directions which had the effect of allowing the Receivers to vote, together with Tianrui, to overhaul the board of directors of CSCG in December 2015.  That situation persisted during the 2 years when the action failed to be brought on for trial, until the court stepped in to expedite it at the end.  I do not see why the court should bend over backwards, on this urgent application, to try to maintain this management structure.

19.Chen HQ’s Directions Summons must therefore also be dismissed. 

20.As to the SH plaintiffs’ summons, Mr Mok confirmed that Chen HQ has no basis to oppose the application of the 321 SH plaintiffs against whom Chen HQ has no claim.  I consider that the court retains jurisdiction to direct the Receivers how to vote, pending the mechanical exercise of completing the transfer and registration of the shares as directed by those plaintiffs.  There will be an order in terms of the summons in relation to these 321 plaintiffs, save that for paragraph 2 they will have liberty to reconsider whether such requisition should be made.

21.As to the other 1,691 SH plaintiffs, I think that given the dispute over the title to the relevant shares, the merits of which I have not had a proper opportunity of going into, their application for directions to the Receivers to vote in accordance with their instructions (and the implicit application by Chen HQ for injunctive relief against them in relation to the voting of the shares) should not be dealt with now, but be adjourned to the hearing of 30‑31 May 2018 to be dealt with subject to the directions of DHCJ K Yeung SC.

22.For the avoidance of doubt, subject to the above, and save in relation to any undisputed shares, the Former Receivers are not to vote the CSI shares registered in their name at the EGM of CSI tomorrow.

Mr Jose Maurellet SC and Mr Alexander Tang, instructed by Messrs Stephenson Harwood for the SH EPs in HCA 1282/2017 and the SHDs (as defined in Summons filed on 21 March 2018) in HCA 2648/2017

Mr Johnny Mok SC, Mr Martin Kok and Ms Stephanie Wong, instructed by Messrs ONC Lawyers for CHEN HONGQING (陳宏慶), the Intended Intervener in HCA 1282/2017 and the Plaintiff in HCA 2648/2017

Messrs PC Woo & Co for the Former Receivers in HCA 1282/2017 and the 1^st to 3^rd Interested Parties in HCA 2648/2017, were excused from attendance

Messrs Deacons for the 1^st Defendant in HCA 1282/2017, did not appear

Li Yanmin (李延民), the 2^nd Defendant in HCA 1282/2017, was not represented and did not appear

Mr Anson Wong SC and Mr Ross Li, instructed by Messrs Linklaters, for the 2,266^th Defendant in HCA 2648/2017