Qianhai Xinhuakang Financial Holdings (Shenzhen) Ltd v. Chen Jiarong and Others

HCA 377/2018

[2018] HKCFI 2113

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 377 OF 2018

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Before: Deputy High Court Judge Keith Yeung SC in Chambers

Date of Hearing: 6 September 2018

Date of Decision: 14 September 2018

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DECISION

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1.On 25 July 2018, the plaintiff took out a summons for speedy trial directions (the “Summons”). The hearing took place before me on 6 September 2018. Though the summons was only set down for 15 minutes, I have had the benefit of full written submissions from the parties. They are supplemented to orally by Mr Benjamin Yu SC (who together with Mr Keith Lam and Mr Danny Tang appeared for the plaintiff), Mr Victor Dawes SC (who together with Mr Joshua Chan appeared for the 1^st, 3^rd, 4^th and 8^thdefendants (“D1/3/4/8”)) and Ms Eva Sit (appearing for the 2^nd, 5^th, 6^th and 7^th defendants (“D2/5/6/7”)). I have considered all those submissions. I have also considered all the authorities and evidence placed before me. I decline to make any speedy trial directions. These are my reasons.

The plaintiff’s claim

2.The plaintiff filed its Statement of Claim on 22 March 2018.  It was subsequently amended on 6 April 2018.  The plaintiff’s pleaded case, as summarized by Mr Yu in his written submissions, is as follows. 

3.The 2^nd defendant and 1^stdefendant are father and son.  They hold various shareholding and directorship in a group of corporate entities which may loosely be called the Kingkey Group.  The Kingkey Group includes the 3^rd to 7^th defendants (collectively “Kingkey Parties”).

4.Since July 2017, the plaintiff began to participate in a bidding process for AXA Wealth Management (HK) Limited (“Target”).  The vendor was AXA China Region Limited (“Vendor”).  This acquisition is referred to as the “Acquisition”.

5.In late October 2017, the plaintiff decided to seek a joint venture partner for the Acquisition.

6.In or around November 2017, the plaintiff and the Kingkey Parties entered into an agreement which was partly oral, partly written and partly inferred from conduct (“Agreement”) that they would join together in a venture to (i) pursue the Acquisition, (ii) if successful, operate the Target with a view to sharing the profit therein, (iii) pursue an IPO in five years’ time, and (vi) respectively hold shares in the Target in 20%/80% (“Joint Venture”).  The written component of the Agreement consists of two agreements called the 1^st and 2^nd Framework Agreements.  The stated parties of the 1^st Framework Agreements were the plaintiff and the 5^th defendant, and those of the 2^nd Framework Agreements were the plaintiff and the 6^thdefendant.  It is the plaintiff’s case that those two agreements were entered into on behalf of each of the Kingkey Parties.

7.After signing the 1^st Framework Agreement, the plaintiff introduced the Kingkey Parties’ representatives to the professionals (namely Morgan Stanley, Davis Polk & Wardwell (“Davis Polk”) and PricewaterhouseCoopers (“PWC”)) who therefrom acted on behalf of some or all of the Kingkey Parties and the plaintiff (collectively “Professionals’ Clients”).  On 13 November 2017, the Professionals’ Clients made a joint final offer to the Vendor at a price of HKS2.1 billion (the “Joint Final Offer”). On 15 December 2017, the Kingkey Parties instructed Morgan Stanley to submit a revised bid of HK$2.2 billion on behalf of the Professionals’ Clients.  On the same day, the Professionals’ Clients were informed that they were successful in their bid.

8.On 15 December 2017, Jeneration Holdings Limited (ie the 8^th defendant) was incorporated.  The 3^rd defendant was its sole shareholder.  To the plaintiff’s understanding, the 8^thdefendant was intended to be the special purpose vehicle to hold the parties’ respective shares pursuant to the Agreement.

9.On 22 December 2017, the 4^th defendant, the 8^thdefendant and the Vendor executed a share sale agreement in respect of the Target (“SSA”).  The plaintiff gave consent to the execution of the SSA on the understanding that it would receive its entitlements pursuant to the Agreement.  However, immediately after the execution of the SSA, the Kingkey Parties informed the plaintiff that they would no longer co-operate with the plaintiff and would proceed with the Acquisition alone.

10.On 26 December 2017, the Kingkey Parties informed the plaintiff that they were willing to offer compensation.

11.To date, the Kingley Parties have refused to procure 20% interest in the Target or the 8^th defendant be transferred to the plaintiff.

12.The plaintiff claims against the Kingkey Parties:

(a)  a constructive trust based on the Pallant v Morgan equity;

(b)  breach of fiduciary duty arising from their position as joint venturers with the plaintiff;

(c)  knowing receipt; and

(d)  breach of contract.  

The defendants’ pleaded defences

13.Three Defences have been filed: one dated 8 June 2018 by D1/3/4/8, a separate one on the same day by the 5^th and 6^thdefendants, and one dated 24 July 2018 by the 2^nd and 7^thdefendants.

14.The issues raised by D1/3/4/8 in their Defence have been summarized by Mr Dawes in his written submissions.  Broadly speaking, two areas of factual dispute have been raised:

(a)  The first area relates to the initial discussions between representative of the plaintiff and the Kingkey Group concerning the signing of the 1^st and 2^nd Framework Agreements.  The existence of the Joint Venture is disputed.  The specific issues raised include whether the 1^st and 2^nd Framework Agreements are uncertain and unenforceable agreements to agree, whether D1/3/4/8 are parties to the alleged Agreement with the plaintiff, whether they entered into a fiduciary relationship with the plaintiff, and whether they and the plaintiff had a Pre-Acquisition Arrangement under which the plaintiff would be entitled to a 20% interest in the Target even if the negotiations between the parties broke down;

(b)  The second area relates to the tripartite negotiations which took place in November and December 2017.  Those negotiations involved the parties and the professionals they engaged (on the purchaser side there were Morgan Stanley, Davis Polk and PWC, and on the Vender’s side Citi Group and Linklaters).  They were intensive and “round-the-clock”.  It is the case of D1/3/4/8 that over the course of those negotiations, the relationship between them and the plaintiff broke down becausethe parties disagreed on a number of critically important matters.  Those matters included the identity of the corporate entity which would be nominated by the plaintiff to hold shares in the Target, whether the purchasers were to be responsible for any capital injection into the Target requested by the Hong Kong Insurance Authority (“HKIA”), the terms of the shareholder agreement, the bid price to be submitted to the Vendor, and whether the plaintiff was required to pay its share of the deposit under the SSA to the Vendor’s bank account in Hong Kong upon execution of the SSA.  D1/3/4/8 plead that as a result of (inter alia) that and hence the lack of agreement on those key matters relating to the Acquisition, the Kingkey Parties decided, with the knowledge of the plaintiff (or least the plaintiff ought to have known), to pursue the Acquisition on their own. 

15.Ms Sit has also summarized in her written submissions the issues that D2/5/6/7 have raised in their Defences.  They include whether there was in fact any Agreement reached, whether D5/D6 were parties to the same, whether the two Framework Agreements were intended to be legally binding, whether they were agreements to agree, whether there had been anybreach by D5/D6, whether there was any part performance of the Agreement, whether any Pallant v Morgan equity could apply to D5/D6, whether they owned any fidicuary duties to the plaintiff, and given the absence of any contact between D2/D7 and the plaintiff, whether they were parties to the Agreement.  The allegation that some of the defendants have made admission (paragraph 10 above) will also be hotly contested.

The Replies, Requests for Further and Better Particulars, and other interlocutory applications

16.Three Replies have been filed, two dated 16 August 2018, and one dated 31 August 2018.

17.Respectively on 5 July and 6 July 2018, D1/3/4/8 and D5/6 made two sets of Requests for Further and Better Particulars of the Amended Statement of Claim. Answers were supplied on 31 August 2018.

18.In the meantime:

(a)  on 30 May 2018, D2 and D7 took out an application to strike out the Writ and the Amended Statement of Claim against them.  The hearing took place on 4 September 2018 before Deputy Judge P Fung SC. Ruling is pending;

(b)  two separate applications for security for costs have been taken out by some of the defendants.  They will be heard on 7 November and 7 December 2018.  I have been informed by Mr Yu that the issues will be quantum only.

The Summons

19.On 25 July 2018, the Summons was taken out.  Leave is sought under paragraph 1 thereof “for a speedy trial of this Action, with 10 days reserved to be fixed with consultation with Counsel’s diaries (the parties be at liberty to fix such dates immediately and the trial should not commence before 1 March 2019)”.  A time table for the procedural steps to follow is also sought, which includes (1) the filing and service of lists of documents within 28 days after the service of Reply, (2) mutual inspection within 7 daysthereafter, (3) exchange of witness statements within 56 days thereafter; and (4) all interlocutory applications be taken out within 21 days thereafter.

Relevant legal principles

20.The question of expedition is essentially one for the discretion of the Court.  In exercising that discretion, the Court should take into account four factors, namely: (1) whether the applicants have shown good reason for expedition; (2) whether expedition would interfere with the good administration of justice; (3) whether expedition would cause prejudice to the other party; and (4) whether there are any other special factors — WL Gore & Associates GmbH v Geox SpA [2008] EWCA Civ 622, per Lord Neuberger at paragraph 25), and JW Spear & Sons Ltd v Zynga Inc [2013] FSR 15, per Henderson J at paragraph 20.

21.When considering an application for expedition, Factor 1 is the most important factor.  It has been rightly described as the “threshold issue” —see JW Spear & Sons Ltd v Zynga Inc [2013] FSR 15, where Henderson J observes at paragraph 20 that:

“ … it is emphasised that the first question which always has to be answered is whether urgency is justified at all. That may aptly be termed a threshold issue, and it is only if it is answered in the applicant’s favour that one gets on to the next stage of considering what degree of expedition would be appropriate. It can be seen, therefore, that the question is not simply one of comparing competing timetables which are put before the court,and expedition will be granted only if the threshold test is duly satisfied.”

22.The onus is on the party making the application to make out a clear case that there is real and objective urgency which justifies expedition:

(a)  I respectfully adopt the observations made by Mann J at paragraph 8 of his judgment in Intervet (UK) Ltd v Merial [2009] EWHC 1065 (Pat), which Mr Dawes relied upon, that:

“ It behoves a litigant who wishes to have his or her trial on quickly and, therefore, to leapfrog other litigants (leaving aside the difficulties it causes to the other side) to make a clear case to the court. If a case is to be made on commercial uncertainty, then the court is entitled to expect some details—I would say some more details, but in fact there are virtually none—of what that commercial uncertainty is, how it operates and how it is that the three months which would be saved between November and February is somehow a degree of commercial uncertainty on top of the existing uncertainty which justifies the leapfrogging.”

(b)  In Daltel Europe Ltd v Makki [2004] EWHC 1631 (Ch) (also cited and relied upon by Mr Dawes), Lloyd J (as he then was) observed at paragraph 13 of his judgment that:

“ Expedition is not a question of choosing a slightly faster over a slightly slower method of the proceeding to trial. Expedition involves an application and, if granted, an order that the case should proceed to trial on a seriously accelerated timetable and can only be justified on the basis of real, objectively viewed, urgency of the case, which justifies, first of all, giving preference in the allocation of court time to this case over the other cases in the court’s list and, correspondingly, requiring the lawyers to drop everything else and devote their time to the expedited case.”

(c)  In this regard, I also accept Ms Sit’s submission that in considering an application for expedition, a principled approach should be adopted.  The Rules of the High Court contains comprehensive sets of procedural timetable for all litigants to follow.  To displace their application, good reason has to be shown, and the onus to do so has to be on the party seeking expedition.

23.In respect of Factor 2, and as explained by Lord Neuberger in WL Gore (at paragraph 30), it includes having a sensible timetable leading up to the hearing, and it also includes the interests of parties to other cases.  On the latter point, the Court will have to bear in mind that there are parties to other cases in the queue waiting for trials, and ordering expedition means that the parties in the instant case are permitted to jump the queue.  This is the consideration of “leapfrogging” discussed by Mann J in Intervet.  That should, as a matter of fairness and good administration of justice, only be permitted with good reason.

24.Factor 3 focuses on the prejudice to the other party in the instant case.  To be able to gauge that, the Court will need to have some understanding of the issues involved.  What are their nature?  Are they complicated?  What is the quantity of the discoverable materials involved?  Will the opposing party be required to go through a lot of materials to put its case together?  Who are the potential witnesses?  Are there third party witnesses whose expeditious assistance might not be readily forthcoming?  Upon expedition, would the party be left with sufficient time to prepare for its case?  Again, a principled approach has to be adopted.  A party is entitled to expect to have the time stipulated by the Rules of the High Court to put its case together.  That should not be cut short without good reason, and a fortiori, ought not be cut short if that could result in prejudice.

25.When considering Factor 3, the Court should also heed the relative nature of the parties’ respective cases.  Prejudice is relative.  The case which the party seeking expedition may be simple and straightforward.  That of the opposing party may not.  A seller suing for unpaid purchase price will need to prove nothing except delivery and non-payment.  The purchaser seeking to prove defective quality will need much more time to put together evidence to prove the defects. Expedition may hence favour the suing seller.  This is only an example.  The important point is that expedition should not be allowed to be used to the unfair advantage of the applying party, thereby and in that sense causing prejudice to the other party.  As observed by Males J in Apache Beryl I Ltd v Marathon Oil UK LCC [2017] EWHC 2258 (Comm) (at paragraph 13), in respect of the approach to be applied when considering an application for expedition:

“ … it is important to note the emphasis not only on assisting commercial people in resolving their disputes but also doing so in a way which is consistent with the interests of others and with justice and fairness. Once again a critical matter is whether a fair trial is possible.”

26.In respect of Factor 4, as explained again by Lord Neuberger in WL Gore (at paragraph 34), the most important component is often the conduct of the applying party.  Relevant are for example whether there has been any delay on its part, and whether, in particular in a case where theapplying party is the plaintiff, the action since initiation has been prosecuted with expedition.

Factor 1—Good reason for expedition

27.Clause 5.1 of the SSA provides that completion of the sale and purchase is conditional upon the obtaining of necessary approvals from the HKIA and Securities and Futures Commission (“SFC”).  They are referred to in the SSA as “Regulatory Conditions”.

28.The Insurance Ordinance, Cap 41 (“IO”) provides that no authorized insurer shall appoint a managing director / chief executive (section 13A) or allow a person to become a shareholder with more than 15% voting rights (section 13B) without first having served notice on the HKIA and received approval / non-objection on the part of HKIA.

29.Clause 5.3 of the SSA provides that:

“ At any time after 5.00 p.m. on the Long Stop Date, if the Regulatory Conditions in Clause 5.1 have not been satisfied, each of the Seller and the Purchaser shall have the right to terminate this Agreement … and if this Agreement is so terminated all obligations of the parties under this Agreement … shall cease and no party (including any third party which may have rights under this Agreement) shall have any claim against any other party under it save for any claim arising from a breach of any obligation under this Agreement prior to such termination…”

30.“Long Stop Date” is defined in Clause 1.1:

“ Long Stop Date means the date falling 15 months after the date of this Agreement or such other date as may be agreed in writingby the Seller and the Purchaser from time to time, it being agreedthat the Parties will enter into good faith discussion to extend the Long Stop Date so as to fall on a date no more than 18 months after the date of the Agreement if it appears to any Party (acting reasonably) that any conditions set out in Clause 5.1 will not be satisfied within 15 months after the date of this Agreement but would be likely to be satisfied within 18 months after the date of this Agreement.”

31.The SSA is dated 22 December 2017.  15 months from then would be 22 March 2019.  An extension of three months, if agreed upon, would take the Long Stop Date to 22 June 2019.

32.The Summons is supported by the 3^rd affirmation of Mr Li Qiming, the Officer-in-charge of Investment, Merger and Acquisition, Strategic Development Department of the plaintiff.  On the issue of urgency, he states:

“ 7. I have been advised and believe that if this dispute is not resolved soon, the completion of the SSA, and consequently the Plaintiff’s 20% interest in the Target, would be jeopardized.

…

11. The outcome of the present proceedings would affect who are the “controllers” of the Target.

…

17. As indicated in the joint final offer (LQM-1) (p.11), based on precedents, the HKIA approval/non-objection process is expected to take 12 months from the date of signing. The SFC approval is expected to be granted shortly after the IA approval.

18. The above estimation did not factor in the present dispute. It is unlikely that the HKIA and the SFC would proceed with the approval process when these proceedings remain on foot, since they will not be in a position to determine who are the controllers of the Target within the meaning of the IO.

19. In the circumstances, there is a real risk that the Regulatory Conditions would not be satisfied on the Long Stop Date (even factoring in the possible 3-month extension), after which the Vendor would be entitled to terminate the SSA and refuse to complete.  Both parties would lose their entitlements tothe shares in the Target and their efforts spent on the Acquisition would go to waste.”

33.The part of the Joint Final Offer referred to by Mr Li in his 3^rd affirmation contains the following terms:

“ HKIA Approval

Around the time of signing of the definitive agreements, we willinform the HKIA about this transaction, and we expect to submit the relevant application documents in relation to the change of ‘controller’ of [the Target] as soon as possible.

Based on recent precedent, HKIA approval is expected within 12 months from signing.”

34.The main evidence in opposition in this regard comes from the3^rd affidavit of Mr Mark Hughes, a partner in Slaughter & May, the solicitors to D1/3/4/8.  At paragraph 18 thereof, he says:

“ The assertion that the IA and SFC will unlikely proceed with the regulatory approval process until judgment is rendered is mere conjecture and speculation. We are instructed that the approval process for the Acquisition is ongoing and there is no indication that it will be suspended until determination of the present Proceedings.”

35.On the basis of Mr Li’s evidence, Mr Yu submits that unless steps are taken to expedite the proceedings, there is a real risk that the requisite approval will not be obtained before the Long Stop Date since (i) HKIA is unlikely to proceed with the approval process when it does not even know who the incoming CEO and/or shareholder with more than 15% voting rights would be; and (ii) the approval process usually takes up to 12 months. He submits that “[all] that P needs to establish is a real risk that the Acquisition will fail if the dispute is not resolved by around the Long Stop Date or at least if an imminent resolution is not in sight, and that the risk is considerably higher than if steps are not taken to resolve this dispute much sooner than if the action is required to take its ordinary place in the queue”.  He criticizes the evidence of Mr Hughes as being extremely vague, that he gives the evidence based upon instructions he has received, that no document has been produced to demonstrate that the approval process has been ongoing, and that “the inference should be drawn against the Kingkey Parties for not producing those documents without explanation.”

36.Mr Dawes’ principal submissions in this regard is that the application is unfounded, and that plaintiff has failed to discharge its onus to show good reason for expedition.  His submissions can be summarized as follows.  The ordering of speedy trial will not preserve the parties’ interest in the Target.  His clients are in the process of applying for the necessary approvals.  There is no basis to suggest that that process will be suspended pending the resolution of these proceedings.  Even if the plaintiff wins, D1/3/4/8 are still indisputably entitled to an 80% interest in the Target and will have to apply for regulatory approval for the transfer.  There is no reason for the regulatory authorities to suspend the application.  Once that application has been completed, the Vendor will not be able to terminate the SSA.  In the event that the plaintiff succeeds in the present action, the parties will put in a fresh application to reflect its interest.  In contrast, the plaintiff will not be able to obtain regulatory approval before the Long Stop Date even if a speedy trial is ordered.  Ms Sit’s submissions on behalf of D2/5/6/7 are to similar effects.

37.On the issue of urgency, and for the following reasons, I accept the submissions of Mr Dawes and Ms Sit that the threshold test has not been satisfied:

(a)  I start by reiterating that the onus is upon the plaintiff to make out a clear case of real and objective urgency which justifies expedition;

(b)  Mr Li says that he has been “advised and believe that if this dispute is not resolved soon, the completion of the SSA, and consequently the Plaintiff’s 20% interest in the Target, would be jeopardized.”  The sources and bases of the advice which he has received have not been made clear;

(c)  I note the interest to be sold under the SSA and the nature of the disputes between the parties.  I note the issues relating to the voting rights and identities of “the controllers”.  However, those matters do not necessarily support the inference or conclusion stated at paragraph 18 of Mr Li’s 3^rd affirmation that “It is unlikely that the HKIA and the SFC would proceed with the approval process when these proceedings remain on foot”.  There is no evidence which suggests that the regulatory authorities cannot or will not proceed with the application on the basis of the Acquisition/SSA as it is, leaving any change to be dealt with when (and if) it happens.  This is particularly so in the light of the fact, as highlighted by Mr Dawes and Ms Sit, that even if the plaintiff is successful in the action, some of theKingkey Parties (D1/3/4/8 according to their cases) will still beentitled to 80% in the Target, and their application for approval will still have to be processed;

(d)  I note further that if the Regulatory Conditions could not indeed be fulfilled by the Long Stop Date, and if the Vendor terminate the SSA as a result, the Kingkey Parties stand to lose more than the plaintiff.  No rational commercial reason has been put forward as to why the Kingkey Parties would prevent the completion of the SSA.  There is no objective sense for a party in the Kingkey Parties’ position to do so;

(e)  There is no serious dispute that D1/3/4/8 have put in an application for the necessary approval.  The fact that they have is also consistent with the wording of the Joint Final Offer.  Mr Hughes has stated on oath his instruction that “the approvalprocess for the Acquisition is ongoing and there is no indication that it will be suspended until determination of the present Proceedings.”  He is an officer of the Court.  If he had seen or were otherwise aware of any matters (eg correspondence between the regulatory bodies and the Kingkey Parties) which might suggest that the instruction which his firm had received was untrue, the Court is entitled to expect that he would not have stated what he has, even though that was the instruction from his clients. In my view, although it is preferable to have the evidence given by his clients, Mr Hughes’ evidence that “the approval process of the Acquisition is ongoing” cannot be ignored;

(f)  I see good sense in the submissions of Mr Dawes and Ms Sit that the best way to preserve the parties interest in the Target is to allow D1/3/4/8 to secure the necessary approvals.  Should the plaintiff be successful in the present action, a fresh application can be made to reflect that.  There is no evidence before me to the effect that such a course is not feasible, or that the plaintiff’s interest would be in any way prejudiced thereby;

(g)  Mr Yu attacks Mr Hughes’ evidence as being extremely vague.  He criticizes the defendants for failing to produce any documents about the application.  He submits that “the inference should be drawn against the Kingkey Parties for not producing those documents without explanation”.  Mr Yu has not spelt out exactly what inference he invites the Court to draw.  But the crux of the matter remains whether the plaintiff can make out a clear case of real and objective urgency by showing, in the context of this case, that “It is unlikely that the HKIA and the SFC would proceed with the approval process when these proceedings remain on foot”.  That entails the making by the Court of a positive finding to that effect.  The non-production of the related application documents is in my view not sufficient to support that inference.  I refuse to draw it;

(h)  The Court also should not lose sight of one important consideration which Mr Dawes and Ms Sit have both emphasized, namely the likely futility of the expedition sought.  The plaintiff is seeking a trial which should not commence before 1 March 2019.  To be of any use, and even discounting any appeal, the judgment will need to be handed down before 22 June 2019.  That would be tight.  But more importantly, even after pronouncement of the judgment, the Regulatory Conditions will still need to be satisfied.  The evidence suggests that that is likely to take 12 months.  I agree with Mr Dawes’ submissions that “even if the trial judge manages to hand down judgment before 22 June 2019, there is virtually no chance for P to suggest that it will be able to secure Regulatory Approval before the Ultimate Long Stop Date”;

(i)  Mr Yu submits that “[all] that P needs to establish is a real risk that the Acquisition will fail if the dispute is not resolved by around the Long Stop Date or at least if an imminent resolution is not in sight, and that the risk is considerably higher than if steps are not taken to resolve this dispute much sooner than if the action is required to take its ordinary place in the queue”.  He relies on Apache Beryl (per Males J at paragraph 16).  The issue as to whether any good reason for expedition has been shown is facts sensitive, and I do not believe that Males J meant to lay down any test in Apache.  In any event, given my analysis of the evidence above, and in particular the absence of any evidence in support of Mr Li’s assertion that “It is unlikely that the HKIA and the SFC would proceed with the approval process when these proceedings remain on foot”, I am not satisfied that the plaintiff has established the real risk it is contending for;

(j)  Mr Yu submits that a fixed timetable will enhance the chance of the Vendor agreeing to an extension beyond the three-month period envisaged in the SSA.  With respect, there is no evidence in that regard;

(k)  In the end, I am not satisfied that the plaintiff has established a case of objective urgency which justifies expedition. 

Factor 2—whether interference with the good administration of justice, and Factor 3—whether prejudice to the other party

38.The two factors are related.  I consider Factor 3 first.

39.Mr Yu submits that the action has proceeded to a stage when it is ripe to give speedy trial direction.  The issues are defined.  The material events are confined to a short time span.  The witnesses are readily identifiable.  The scope of discovery is narrow.  Speedy trial causes no prejudice and is indeed beneficial to all parties.

40.Both Mr Dawes and Ms Sit submit that expedition will cause serious prejudice to their clients.  They submit that the action is complex and involves a substantial number of complex and fact-sensitive reasons.  Whether it is inequitable for the Kingkey Parties to pursue the Acquisition without the plaintiff (central to the Pallant v Morgan claim) has been highlighted as one of such issues.  Given the intensive negotiations between the parties (described to be round-the-clock between November and December 2017) and the involvement of third party professionals, the discovery process is likely to be complicated.  A lot of materials would have to be gathered and considered.  Third party witnesses will be involved whose expeditious assistance might not be readily forthcoming.  The expedited timetable will, they submit, leave their clients with insufficient time to prepare for the case.

41.I have summarized the parties’ claim and defences above.  I have considered the pleadings.  I have also considered the evidence before me.  I agree with the submissions of Mr Dawes and Ms Sit that the causes of actions are multiple, and their resolution will involve the resolution of a substantial number of factual issues.  What in my view bears in particular upon the issue is the likely complicated and difficult discovery process.  The fact that the material events are confined to a relatively short time span is not a complete answer to that concern.  In this regard, I note the evidence of Mr Suraj Sajnani.  He is a solicitor at Messrs King & Wood Mallesons, solicitors for D2/5/6/7.  At paragraph 6 of his 2^nd affirmation, he explains the likely difficulties as follows:

“ In paragraph 28 of [the 3^rdaffirmation of Li Qiming (“Li 3^rd”)], Mr Li states that the material events are confined to a short time and seems to imply that the documents for discovery will only relate to those between the Plaintiff and the Defendants. However, in paragraph 29 of Li 3^rd, Mr Li acknowledges that persons from Morgan Stanley, Davis Polk and PWC may also be called as witnesses. The discovery review process will very likely require reviewing documents involving those parties as well. It is unclear at this stage whether those parties will co-operate voluntarily, or whether relevant court orders will be required in order to procure documents and testimony from those parties. Additionally, I am instructed that throughout the relevant period of time, there has been extensive discussions between the relevant parties and their professional advisers,including those listed above, as well as Citi Group and Linklaters. One significant and time-consuming matter is going to be for theparties to trawl through extensive WeChat discussions (includingmulti-party WeChat groups) and determine the relevance of those discussions to the matter.”

42.I also accept the submissions of Mr Dawes that lengthy statements are likely to be required from those third party professional advisers.  The preparation of statements by or for them requires time.

43.I heed the relative nature of the parties’ cases.  The factual basis of the plaintiff’s claim is less complicated.  Its preparation may not be affected by the expedition sought.  But the same cannot be said about the pleaded defences of the defendants and the preparation therefor.  Their case that they will be prejudiced by the proposedexpedition is supported by the facts, and ought not to be likely brushed aside.  As I have observed above, expedition should not be allowed to be used to the unfair advantage of the applying party.

44.In all the circumstances of the case, I am of the view that the expedition sought will cause prejudice to the defendants.  A trial so expedited will not be a fair one.

45.I come back to the related Factor 2.  I am accordingly of the view that the proposed timetable is not a sensible one.  Requiring the defendants to adhere to a timetable which may lead to an unfair trial is not conducive to good administration of justice.  In the circumstances, I also see no basis to allow the parties in the instant case to jump the queue. 

46.That leaves one point—the extant interlocutory applications.  In my view, the mere fact that there are extant (and may be further) interlocutory applications is not by itself a factor against expedition.  The nature of the interlocutory applications is more important.  In the present case, D2 and D7 have filed their Defence.  If their application to strike out is successful, the trial will simply involve less issues.  That should not be counted against expedition.  In so far as the applications for security for costs are concerned, I have been told that the only remaining issues are quantum.  Again, their existence should not affect expedition.  Had my views on the other issues been any different, I would not refuse expedition due only to the existence of those applications.

Factor 4—other special factors

47.It has been urged upon me that the time taken by the plaintiff tofile their Replies and Answers to Requests for Further and Better Particulars demonstrates conduct on the part of the plaintiff which is inconsistent with a true case of urgency.  On the facts of this case, those matters are of much lesser significance.  I do not base my decision on them.

All or nothing?

48.Mr Yu submits that the plaintiff’s application for expedition is not all or nothing.  In particular, he makes the point that the defendants can propose longer timelines if they say any particular step requires more time.

49.Mr Yu relies on Law Debenture Trust Corp Plc v Elektrim SA [2008] EWHC 2187 (Ch).  But the facts in that case is again very different.  There, if the dispute was not resolved soon, the claimant would be deprived of its right to participate in creditors’ meeting of an insolvent company in Poland.  The assets of that company would then be distributed to creditors on the list of creditors to the exclusion of the claimant.  Any judgment which the claimant might subsequently obtain might turn out to be an empty one.  It was in the lights of those facts that timetables were set by the Court.

50.In the present case, I am not satisfied that good reason for expedition has been shown.  In particular, and as said, should the plaintiff be successful in the action, a fresh application may be made to the regulatory authorities to reflect its interest.  I am therefore not satisfied that a case has been shown for the application of the Rules of the High Court to be displaced.  The defendants are entitled to expect to have the time permitted under the Rules to put their cases together.  I am not prepared to give any different directions at this stage.

Disposal

51.Primarily on the basis that the plaintiff has failed to satisfy the threshold issue, but in any event on the basis of prejudice and all the circumstances as explained above, and in the exercise of my discretion, I refuse to make the order for expedition or the other directions sought.  The Summons is accordingly dismissed.

Costs

52.I make a costs order nisi that the costs of and occasioned by the Summons be to the defendants, with certificate for two counsel in the case of D1/3/4/8, to be taxed if not agreed.  Should any parties seek variation or summary assessment, I direct that submissions by the applying party be filed and served within 7 days from the date of handing down, responses within 7 days of receipt, and replies within 7 days of receipt.

53.I thank counsel for their invaluable assistance. 

Mr Benjamin Yu SC, leading Mr Keith Lam and Mr Danny Tang, instructed by Anthony Siu & Co, for the plaintiff

Mr Victor Dawes SC, leading Mr Joshua Chan, instructed by Slaughter & May, for the 1^st, 3^rd , 4^th and 8^th defendants

Ms Eva Sit, instructed by King & Wood Mallesons, for the 2^nd, 5^th, 6^th and 7^th defendants

The 9^th defendant was not represented and did not appear