Champ Prestige International Ltd v. China City Construction (International) Co., Ltd

HCA 279/2018

[2019] HKCFI 2537

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 279 OF 2018

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J U D G M E N T

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A.      Introduction

1.By Summons dated 2 August 2018 (“Summons”), the plaintiff applies for summary judgment against the defendant for: –

(1)  Specific performance of clauses 1.1.1, 1.1.3.1-1.1.3.3 and 1.3 of the Framework Agreement dated 26 June 2017 (“Framework Agreement”), so as to effect a joint sale of all of the plaintiff’s and the defendant’s shares in, and shareholder’s loan owed by, Dingway Investment Limited (“Dingway”) to a third party (“Joint Sale”) (§1(a));

(2)  Alternatively, specific performance of clause 1.3 of the Framework Agreement, so as to require the defendant to purchase the plaintiff’s 45% shareholding in, and 45% of the shareholder’s loan owed by, Dingway for US$46,274,420, (§1(b)).

2.As the defendant is admittedly insolvent and has been put into voluntary liquidation, the plaintiff proceeded at the hearing on the basis that the only practical relief available would be to seek specific performance of the contractual clauses requiring a Joint Sale.

B.      Background facts

3.The background fact leading to the claim is not in dispute or is indisputable.

4.The plaintiff and the defendant respectively holds 45% and 55% of the shares of Dingway, following completion of a sale and purchase agreement dated 2 October 2015 (“SPA”) (as amended by a supplemental sale and purchase agreement dated 5 February 2016 (“SSPA”), whereby the plaintiff purchased from the defendant 45% of the shares in, and 45% of the loan owed by, Dingway (“45% Shares and Loan”) for US$40,509,371. 

5.Dingway’s sole purpose is to invest in and hold a “Miami Project”, which involves acquisition of a piece of land (through its direct and indirect wholly owned subsidiaries in the United States) in Miami (“Land”) for the purpose of developing a 59-storey building which qualifies under the United States’ Employment-based Fifth Preference Immigrant Investor Program(“EB-5”).

6.The plaintiff, the defendant and Dingway also entered into a Cooperation Agreement dated 30 April 2016 (“Cooperation Agreement”) to regulate their cooperation in Dingway.

7.Under clause 6.6 of the SPA (as amended by the SSPA) if, by the end of 1^st Quarter 2017, the EB-5 could not reach the level stipulated in clause 5.1(9), or the parties could not reach a consensus on the financing limit,the plaintiff had a right to require the defendant to re-purchase the 45% Shares and Loan within 14 days upon receipt of a written notice from the plaintiff exercising such right.

8.As a result of, inter alia, the suspension of the Miami Project, the plaintiff exercised its right to require the defendant to re-purchase the 45% Shares and Loan by notice issued on 31 March 2017.  The defendant failed to comply with the notice whereupon the plaintiff commenced HCA 1153/2017 against the defendant on 17 May 2017.

9.After commencement of HCA 1153/2017, parties attempted to negotiate to resolve their dispute.  On 26 June 2017, the Framework Agreement was entered into between the plaintiff and the defendant which provided, inter alia: –

(1)  The plaintiff and the defendant agree to jointly sell the 100% of the shares in, and shareholders’ loan owed by, Dingway (“Dingway Shares and Loan”) according to the arrangements set out thereunder (“中城建國際與冠譽現同意以下的安排一同出售合共100%鼎匯投資的股份及股東貸款”) (Recital (D));

(2)  Within 6 months from the date of the Framework Agreement (ie by 26 December 2017) (“First Deadline”), the plaintiff and the defendant would jointly appoint (a) a professional surveying and valuation company to value the Dingway Shares and Loan; and (b) a professional estate agent to procure and complete such sale (clause 1.1.1);

(3)  The mechanism for accepting offers from third parties for purchase of the Dingway Shares and Loan, as well as how the plaintiff and the defendant’s pre-emption rights would operate (clauses 1.1.3.1 – 1.3.3.3);

(4)  Within 3 months from the expiry of the First Deadline (ie by 26 March 2018) (“Second Deadline”), (a) the defendant should, upon receipt of a written notice from the plaintiff, buy back the plaintiff’s 45% Shares and Loan at the price agreed in the SPA, and indemnify the plaintiff against all expenses incurred in connection with Dingway and all interest accrued since the date of the SPA; or (b) both parties should sell the Dingway Shares and Loan to a third party (unless either party exercises its pre-emption right to buy the other’s shareholding and shareholder’s loan) (clause 1.3); and

(5)  Within 10 business days of signing the Framework Agreement, the plaintiff and the defendant should jointly apply for a stay of HCA 1153/2017 until the Second Deadline.  Within 10 business days of completion of the sale of the Dingway Shares and Loan, the plaintiff (together with the defendant) should jointly apply to withdraw or terminate HCA 1153/2017.  Each party should bear its own costs.  If parties are unable to sell and complete the sale of the Dingway Shares and Loan within the First and Second Deadline, the plaintiff may continue the HCA 1153/2017 proceedings (“如雙方未能於第一期限及第二期限內出售代售股份及貸款及完成交割 ，冠譽國際可繼續HCA 1153案件的訴訟”) (clause 1.4); and

(6)  This agreement constitutes the entire agreement between the plaintiff and the defendant; it replaces all previous related oral or written agreements or arrangements (if any) (clause 6.1).

10.Pursuant to clause 1.4 of the Framework Agreement, parties jointly applied for a stay in HCA 1153/2017 until the Second Deadline (ie by 26 March 2018).

11.Despite the plaintiff’s repeated requests from late July 2017 onwards, the defendant failed to respond to the proposed appointment of CBRE Limited (“CBRE”) to conduct valuation of the Dingway Shares and Loan and as agent for selling the same, as required under clause 1.1.1 of the Framework Agreement.  Thus, on 29 December 2017 (3 days after expiry of the First Deadline), the plaintiff issued a notice (“Notice”) under clause 1.3 of the Framework Agreement requiring the defendant to buy back the 45% Shares and Loan or to effect the Joint Sale.

12.Shortly after the expiry of the Second Deadline, parties agreed to an extension of time for the defendant to file its Defence and Counterclaim in HCA 1153/2017.

13.On 1 February 2018, the plaintiff commenced the present action and presented a just and equitable winding-up petition against Dingway (“J&E Petition”).

14.By a consent order dated 15 May 2018, HCA 1153/2017 was stayed in favour of arbitration.  Thereafter, the plaintiff has not commenced any arbitration against the defendant to enforce its rights under the SPA and SSPA or pursued HCA 1153/2017.

15.On 19 June 2018, a winding-up petition was presented by Value Partners Hong Kong Limited (“Value Partners”) against the defendant on insolvency ground in HCCW 166/2018 (“WU Petition”).  After the defendant had settled with Value Partners, on 7 January 2019, Amuse Peace Limited (“Amuse”) was substituted as petitioner.

16.On 16 January 2019, the plaintiff discovered that the defendant had been put into creditors’ voluntary liquidation pursuant to a special resolution dated 11 January 2019, on the basis that the defendant was “unable to continue its business due to its liabilities”.

C.      Application by the defendant to stay and/or adjourn the plaintiff’s summary judgment application

17.By Summons belatedly issued by the defendant on 5 June 2019 (“Stay Summons”), the defendant applied for (i) “sanction” to defend this action; and (ii) stay and/or adjournment of the plaintiff’s application for summary judgment, on the grounds set out in the Affidavit of Patrick Cowley (“Cowley 1^st”) filed on the same day.

18.As stated above, the defendant by special resolution passed on 11 January 2019 (“Special Resolution”) put itself into voluntary liquidation and appointed Cowley and Wong as liquidators (the “Liquidators”).

19.By the time the Special Resolution was passed, the defendant had already been subject to the WU Petition for compulsory winding up for 7 months.  On 7 January 2019, Amuse was substituted as petitioner and sought a compulsory winding up order against the defendant.  On 18 February 2019, Harris J ordered the Liquidators not to dispose of the defendant’s assets without leave of the Court.  On 10 May 2019, Harris J declined to make a compulsory winding-up order against the defendant and stayed the WU Petition.

20.Contrary to the Liquidators’ suggestion, neither the defendant nor the Liquidators has ever sought “confirmation” of the court in respect of the Liquidators’ appointment.  This is unsurprising, as the Liquidators’ appointment was made by the Special Resolution, and did not require “confirmation” of the Court.

21.The plaintiff submitted that the Stay Summons should be dismissed because:

(1)  There was inordinate and inexcusable delay on the part of the defendant in making the application.

(2)  The Liquidators do not need to seek the court’s sanction in defending the action.

(3)  There was no basis for seeking a stay or adjournment.

C1.    Inordinate and inexcusable delay

22.The court has repeatedly emphasised that last minute application would not be entertained in the absence of exceptional circumstances or good cause, having regard to the underlying objectives of the Civil Justice Reform: Motorola Solutions Credit Company LLC v Kemal Uzan, HCA 2232/2013, 23.5.2014 at §§22, 24-25, per DHCJ Le Pichon.

23.This hearing on 12 June 2019 was fixed on 19 September 2018 (9 months ago).  The defendant was fully aware of the plaintiff’s application and filed Yuan 1^st in opposition on 4 January 2019.  As is clear from the Liquidators’ letter of 31 January 2019, they were aware of the plaintiff’s application for summary judgment, the present hearing and that the defendant was due to file affirmation on 30 January 2019.

24.I agree the Liquidators’ allegation that the plaintiff somehow “significantly contributed” to their delay is unfounded.  The meeting which the plaintiff was allegedly not inclined to attend concerned a separate action, HCA 2343/2018 (“HCA 2343”), not this action.

25.As submitted by the plaintiff, the Liquidators’ inaction for some 5 months is inexcusable.  The plaintiff had been prejudiced by the delay as it was forced to deal with a late application and the allegations set out in Cowley 1^st in great haste.  The court should not and do not allow the Liquidators to derail the plaintiff’s application by an application issued on the eve of the hearing of the plaintiff’s application.  For this reason alone, the Stay Summons should be dismissed in limine.

C2.    No need to seek sanction

26.I agree paragraph 1 of the Stay Summons is misconceived.  As is clear from section 251(1)(b) of the Companies (Winding Up and Miscellaneous Proceedings) Ordinance (Cap 32) (“CWUMPO”), a liquidator in voluntary winding up may exercise any of the powers in CWUMPO (other than those specified in Part 1 of Schedule 25) without sanction.  The power to defend any action or other legal proceedings in the name and on behalf of the company is a power specified in §1, Part 2 of Schedule 25 and, hence, does not require sanction.

C3.    No basis for stay/adjournment

C3.1  Purpose of a stay under section 181 not shown

27.The principle underpinning the discretion to grant a stay under section 181 where the company is under voluntary liquidation was stated by Collins MR (as he then was) in Currie v Consolidated Kent Collieries Corp [1906] 1 KB 134 (CA), 139: –

“....in the case of a voluntary liquidation the onus appears to be thrown on the liquidator of shewing that an order should be made staying an action brought against the company. One looks for some basis in principle for this distinction being made, and it would seem that it must have been because the Legislature thought that prima facie, in the case of voluntary liquidation, the ordinary tribunal was the proper one to decide upon a claim against the company. The Court had no doubt stayed the action in cases where the liquidator could shew some sufficient reason for its not being decided in the ordinary way. Where, for instance, the existence of a debt or liability was substantially admitted, though there might be some question of the exact amount due, the ordinary practice seems to have been that, liability not being really contested, but only the exact amount due, the matter was treated as one which might properly, and ought to, be determined in the liquidation. But that practice does not appear to apply to a case like the present, where there is a real dispute as to the existence of any liability ...”. (emphasis added)

28.The question to be asked by the court was put by Romer LJ in Currie v Consolidated Kent Collieries Corp, ibid,at 139:

“Is it a case in which any good would be done, or expense saved, by staying an action which has been properly brought, and in effect sending the claim to be determined in the Chancery Division?”

29.As correctly submitted by the plaintiff, as the defendant denies the plaintiff’s entitlement to specific performance, the dispute should be determined in the usual way in this action.

30.The defendant relies on 2 cases where the court (in the context of compulsory liquidation) described the purpose of a stay under section 181 as follows:

(1)  “to maintain the status quo, to preserve the company’s assets and put all unsecured creditors on an equal footing”; and

(2)  “to avoid the judgment creditors getting priority over other creditors”.

31.I agree the cases do not assist the defendant at all.  This is because ordering a Joint Sale would not give the plaintiff any priority over other unsecured creditors.  Rather, it would allow the plaintiff and the defendant to convert their respective 45% and 55% interest in the Dingway Shares and Loan into sale proceeds.  As submitted by the plaintiff, the Liquidators can deal with the sale proceeds payable to the defendant as they see fit.   

C3.2  China City Construction & Development Co, (Hong Kong) Limited (“CCCDHK”)’s claim in HCA 2343 is irrelevant

32.CCCDHK has commenced HCA 2343 to lay claim to the 55% shares in Dingway held by the defendant.  However, I agree with the plaintiff that the defendant’s contentions that (a) the subject matter of this action is “identical” to that in HCA 2343, and (b) if CCCDHK made out its case in HCA2343, the plaintiff’s claim for specific performance “is simply unsustainable/futile”, are wholly without merit.

33.First, no one (including CCCDHK) has sought to impugn the Framework Agreement, which remains valid and binding upon the defendant.  In this action, the defendant has admitted in its Amended Defence that the defendant owns 55% shares of Dingway. Thus the ownership of the shares is not in dispute.   

34.Second, CCCDHK filed the Writ with the Statement of Claim in HCA 2343 against the defendant on 5 October 2018 (3 months before voluntary liquidation).  The defendant did not consider CCCDHK’s claim to be a ground in opposition to the plaintiff’s application, and the same was not mentioned in Yuan 1^st filed on 4 January 2019.

35.Third, CCCDHK has also been aware of the plaintiff’s application since October 2018.  There is no reason why the court should have regard to the alleged breach of trust when the alleged beneficiary chose not to intervene in or oppose the plaintiff’s application in this action.

36.Fourth, in any event, in the Amended Statement of Claim filed in HCA 2343, CCCDHK only alleges to be the beneficial owner of 55% in Dingway and the “Sale Proceeds” paid by the plaintiff for acquiring the 45% Shares and Loan.  It does not claim the 45% Shares and Loan owned by the plaintiff.

37.I agree that CCCDHK’s claim (at its highest) is a private matter between CCCDHK and the defendant.  It does not bind the plaintiff, nor override the Framework Agreement, where the defendant agreed that a Joint Sale should take place in the manner stipulated.  Putting it in another way, the plaintiff was entitled to hold the defendant to its contractual obligations on the basis that it was a company with full authority to enter into an agreement to deal with its assets and, as such, was the apparent owner of its property: Bowstead & Reynolds on Agency, 21^st ed, at §§8-125–8-127.

38.Fifth, even if (which is not accepted) the defendant were allowed to advance CCCDHK’s contention, a possible breach of trust due to specific performance is not an absolute bar, especially where there has been delay or negligence by alleged beneficiaries.  This is because the court order itself modifies the trust: Spry on Equitable Remedies, 9^th ed, pages 155-156.

C3.3  Payment Agreement

39.Finally, the Liquidators further assert, boldly, that the plaintiff has a hidden reason for insisting on summary judgment, due to the Payment Agreement, where the defendant agreed to “preferentially pay” HK$148 million from any proceeds of sale of the Dingway Shares and Loan as payment of China Chengjian Investment Limited’s debt, which, it is said, may prejudice unsecured creditors of the defendant.  I agree with the plaintiff that the assertion is wholly without merit. 

40.The defendant was aware of, and never raised the Payment Agreement as a defence or a ground in opposition to the plaintiff’s application.

41.As to the alleged “recent discovery” of the Payment Agreement by the Liquidators, it is the result of their own inaction and, as such, is not a reason for the court to allow the defendant to raise it at this late stage.

42.In any event, it is impossible to see how the Payment Agreement may affect unsecured creditors of the defendant, as the Liquidators would be the persons receiving the proceeds of sale of the defendant’s 55% shares and loan after the Joint Sale.

43.Further still, if there is any scope for the Liquidators to apply to the court for the avoidance of a “transaction at undervalue”, the target would only be the Payment Agreement, and not the Framework Agreement.

C4.    Conclusion on the defendant’s stay application

44.For the reasons stated above, I agree that the Stay Summons is wholly without merit and should be dismissed.  I further order that the costs of the Stay Summons should be borne by the defendant on the indemnity basis.  It is a satellite application the outcome of which could achieve no benefit to the parties and did not decide any issue between them.

45.The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

D.      Legal principles on the plaintiff’s application for summary judgment

46.The principles governing an application for summary judgment are well known:

(1)  The burden is on the defendant to satisfy the court that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial.

(2)  The defendant must show that he has a real or bona fide defence, or a fair probability or reasonable grounds that a bona fide defence exists.

(3)  In the affidavit filed in opposition to the application, the defendant must condescend upon particulars and state clearly and concisely what the defence is, and what facts are relied on to support it.

(4)  If a point of law raised by the defendant is clear and the court is satisfied that it is really unarguable, leave to defend will be refused.  

47.These principles are equally applicable to an application under Order 86 of the Rules of the High Court, ie summary judgment for specific performance should only be given where it is a clear and obvious case, and therefore ought not be tried: Super Town Investments Ltd v Ives Developments Ltd & ors, unrep., HCA 86/2006, 22.5.2007 at §§5-6.

48.The equitable jurisdiction to order specific performance of a contract is founded upon the inadequacy of common law judgment for damages as a remedy to the claimant.  Thus:

“Some of the early authorities approach this problem by asking whether damages would in fact adequately compensate the claimant. At a later stage in the development of the subject, the courts tended to rather ask whether damages were likely to be an adequate remedy for breach of the type of contract before the court. Later again, the courts have asked whether specific performance was the most appropriate remedy in the circumstances of each case and whether specific performance will ‘do more perfect and complete justice than an award of damages’....... ‘The standard question..... ‘Are damages an adequate remedy?’ might perhaps, in the light of the authorities in recent years, be rewritten: ‘Is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?’” (emphasis added) (Chitty on Contracts, 32^nd ed, at §27-005).

49.Further, a plaintiff who seeks specific performance must show that (a) he has in the past performed, or been ready to perform all the essential terms and conditions of the contract to be performed by him, and (b) that he is ready, willing and able to perform all such terms and conditions thereafter to be performed by him: Lau Suk Ching Peggy v Ma Hing Lam (2010) 13 HKCFAR 226 at §§46, 49-56.

E.      Merit of the plaintiff’s application

E1.    The plaintiff’s claim

50.The plaintiff’s claim is straightforward.  The Framework Agreement sets out a mechanism for the plaintiff to sell its 45% Shares and Loan, either by a sale to the defendant, or by Joint Sale of the Dingway Shares and Loan to a third party.

(1)  The plaintiff has all along endeavoured to comply with the terms of the Framework Agreement, including by procuring CBRE to be the valuer and sale agent.  Upon the defendant’s failure to respond to the proposed appointment of CBRE, the plaintiff has by the Notice dated 29 December 2017 communicated its readiness and willingness to agree to a sale of the 45% Shares and Loan or a Joint Sale.

(2)  In breach of the Framework Agreement, the defendant failed to repurchase the 45% Shares and Loan or to agree to a Joint Sale.

51.I agree specific performance requiring the defendant to comply with its obligations under the Framework Agreement to effect a Joint Sale is the most appropriate remedy in the circumstances of this case, for the following reasons.

52.First, the defendant has since 11 January 2019 been under voluntary liquidation and, as such, could not use its funds to repurchase the plaintiff’s 45% Shares and Loan.

(1)  This is in line with the pari passu principle, as described in Roy Goode, Principles of Corporate Insolvency Law, 4^th ed, at §8-02:

“The most fundamental principle of insolvency law is that of pari passu distribution, all creditors participating in the common pool in proportion to the size of their admitted claims. In the case of voluntary winding up, this principle is expressed in [s.107 of] the Insolvency Act itself”.

(2)  In Hong Kong, the requirement of pari passu distribution for company in voluntary liquidation is stated in section 250 of the CWUMPO.

53.Second, as the defendant is admittedly insolvent and has been put into creditors’ voluntary liquidation, it would not be just that the plaintiff should be confined to its remedy in damages: see paragraph 48 above.

54.Third, a Joint Sale would enable the plaintiff to sell its 45% Shares and Loan in accordance with the terms of the Framework Agreement.  This accords with the principles that:

(1)  Corporate insolvency law recognises and respects rights accrued under the general law prior to liquidation(Roy Goode, §3-02); and

(2)  In asserting rights in the name of the company, the liquidator stands in no better position than the company itself; he takes as they stand, warts and all (Roy Goode, §3-05).

55.Finally, although not a matter which concerns the plaintiff or this court, through a Joint Sale, the 55% shares in, and the loan owed by, Dingway currently held by the defendant would also be sold.  The sale proceeds would go to the defendant and be dealt with by its liquidators as they see fit.

E2.    No real or bona fide defence

56.The defendant raises the following points in its Amended Defence and Yuan 1^st:

(1)  In HCA 1153/2017, the plaintiff claims against the defendant for breach of the SPA and SSPA and payment pursuant to a “Put Option” under clause 6.6 of the SPA (as amended by SSPA).  Clause 1.4 of the Framework Agreement made express reference to HCA 1153/2017 and the parties obtained a consent Order to stay such proceedings until 26 March 2018.

(2)  Upon “true construction” of clauses 1.3 and 1.4 of the Framework Agreement, the “proper course” available to the plaintiff is to continue the claim in relation to the Put Option in HCA 1153/2017 (Construction Point).

(3)  By issuing the Notice, the plaintiff has unequivocally represented its intention and/or elected the claim under the Put Option and, therefore, is estopped from claiming specific performance of clause 1.3 of the Framework Agreement (Election Point).

(4)  The relief sought by the plaintiff in this action is inconsistent with the plaintiff’s stance in the J&E Petition (Inconsistency Point).

(5)  The plaintiff has recently filed a statutory demand in which it elected to rely on a claim under clause 1.3 of the Framework Agreement.  Therefore, the plaintiff’s claim for specific performance under clause 1.1 must fail (Statutory Demand Point).

57.I agree that, as submitted by the plaintiff, none of the points raised by the defendant constitutes a bona fide defence to the plaintiff’s claim.

E2.1  Construction Point

58.I agree with the plaintiff’s submission that the defendant’s contention is wholly without merit:

(1)  Clause 1.4 of the Framework Agreement provides that the plaintiff may continue HCA 1153/2017 if parties are unable to sell the Dingway Shares and Loan within the agreed time-frame.  This provides an option for the plaintiff to continue the proceedings in HCA 1153/2017 (ie to enforce its rights under the SPA and SSPA), or to enforce its rights under the Framework Agreement.

(2)  That the plaintiff has a right to enforce the Framework Agreement is reinforced by clauses 9.1-9.3 thereof, which provide that the parties can bring proceedings in the Hong Kong courts to resolve any dispute arising out of the Framework Agreement, including seeking specific performance against the party in default. 

(3)  There is nothing in the Framework Agreement which curtails or limits the plaintiff’s remedy to pursuing HCA 1153/2017, as the defendant suggests.

(4)  The defendant’s reliance on the Notice is misplaced, as the Notice was issued by the plaintiff for the purpose of exercising its rights under the Framework Agreement.  The reference to resuming HCA 1153/2017 was merely a recitation of the option under clause 1.4 of the Framework Agreement.

E2.2  Election Point

59.The principles relating to election are well established. Election refers to the situation where a party, by words or conduct, unequivocally evince a choice between inconsistent alternatives: Oliver Ashworth (Holdings) Ltd v Ballard (Kent) Ltd [2000] Ch 12 (CA), at 27F-G and 32D.

60.It is impossible to see how the Notice can amount to any unequivocal representation, let alone election, to a claim under the Put Option, as opposed to a claim under clause 1.3 of the Framework Agreement.

61.Contrary to the defendant’s assertions, the plaintiff has not continued to pursue, or “renewed its pursuit of” HCA 1153/2017.  Instead, the plaintiff consented to a stay in favour of arbitration on 25 April 2018.  Following the stay, the plaintiff has not taken any steps to commence arbitration against the defendant, and was content to rely on the Framework Agreement.

62.Further and in any event:

(1)  I agree there is no inconsistency between (a) resumption of HCA 1153/2017 (a claim under the SPA and SSPA); and (b) the present action (a claim under the Framework Agreement). Without any inconsistency, there is no relevant “election”.

(2)  Nor was there any “unequivocal” choice made by the plaintiff – the Notice expressly preserves all of the plaintiff’s rights in the relevant matters.

(3)  Clause 6.2 of the Framework Agreement provides that the exercise by a party of any right thereunder shall not prejudice that party’s ability to exercise further or additional rights under the same Agreement.  Thus, the parties clearly agreed that the resumption of HCA 1153/2017 (a right given by clause 1.4) shall not affect the plaintiff’s further rights to claim specific performance under clause 1.3.  In these circumstances, the law will respect the parties’ intentions and find that there is no waiver: Chitty on Contracts,32^nd ed,§22-045.

E2.3  Inconsistency Point

63.The defendant argues that the commencement of this action is inconsistent with the plaintiff’s stance in the J&E Petition and constitutes an abuse of process.  In Yuan 1^st, the defendant bolsters the argument by asserting, for the first time, that the J&E Petition “clearly constitutes a repudiatory breach” of the Framework Agreement, which it accepts and, as such, the Framework Agreement has been terminated.

64.I agree with the plaintiff’s submission that the argument is wholly misconceived:

(1)  The plaintiff presented the J&E Petition on 1 February 2018 in order to extricate its investment in Dingway, in circumstances where the defendant had repeatedly failed to comply with its obligations under the SPA, SSPA and Cooperation Agreement, such that the substratum in Dingway had effectively been destroyed.

(2)  Commencing the J&E Petition was not repudiatory.  As the plaintiff made clear in the Notice dated 29 December 2017 and the Amended Statement of Claim herein, the plaintiff remained ready, willing and able to sell its 45% Shares and Loan to the defendant or to effect a Joint Sale, despite the J&E Petition.

(3)  The J&E Petition has since 19 June 2018 become not viable, as the defendant has been subject to the WU Petition presented by Value Partners on insolvency ground, which was later substituted by Amuse.

(4)  Further, on 11 January 2019, the defendant put itself in creditors’ voluntary liquidation.  In the defendant’s Statement of Affairs, it admitted that as at 14 January 2019, it had deficiency (net liabilities) of HK$147,326,989 (per book value) or HK$4,979,463,328 (per estimated realisation).

E2.4  Statutory Demand Point

65.I agree the point is a non-starter.

(1)  The Statutory Demand was issued on 26 November 2018 to require the defendant to perform its obligations under clause 1.3 of the Framework Agreement by repurchasing the 45% Shares and Loan and paying the requisite amount within 21 days.

(2)  In the Statutory Demand, the plaintiff referred to (a) the entire clause 1.3 and (b) the Notice, both of which referred to the options of a sale of the 45% Shares and Loan or a Joint Sale.

(3)  These are also the claims in this action.  As there are no inconsistent alternatives, there can be no relevant “election”.

(4)  In any event, the plaintiff did not communicate any election to insist on only a sale of the 45% Shares and Loan to the defendant, let alone “in clear and unequivocal terms”, as required in establishing waiver by election: Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313, at §15.

F.      Conclusion

66.For the reasons stated above, I order specific performance of the Framework Agreement in terms of paragraph 1(a) of the Summons.

67.I further order that the defendant do pay the plaintiff the costs of this action including the costs of the Summons, such costs are to be taxed on the party-and-party basis if not agreed.

68.The above order as to costs isalso nisi and shall become absolute in the absence of any application within 21 days to vary the same.

69.Lastly I express my gratitude to counsel on both sides for their helpful assistance in this matter.