China City Construction (International) Co Ltd (in Creditors’ Voluntary Liquidation) and Another v. China City Construction & Development Co (HK) Ltd

HCMP 1883/2024

[2025] HKCFI 710

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1883 OF 2024

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________________________

BETWEEN

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J U D G M E N T

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1.By way of this Originating Summons (“the present proceedings”), the applicants China City Construction (International)  Co Ltd (in creditors voluntary liquidation)  (“CCCI”)  and Dingway Investment Ltd (in compulsory liquidation)  (“Dingway”)  apply for an anti-suit injunction order (“ASI”)  against China City Construction and Development Co (HK)  Ltd (“CCCDHK”)  to restrain CCCDHK from continuing proceedings it commenced in the People’s Court of Beijing Xicheng District (“the Beijing court”)¹ in Case No.(2024)  京 0102 民初 7017 號 against CCCI (“the Beijing proceedings”).

General legal principles

2.1.To avoid any misunderstanding, the following general legal principles should be stressed from the outset:

-  an ASI does not deny or pre-empt any jurisdiction of the foreign court²;

-  it is not an order directed at the foreign court;

-  it is binding only on the individual or company who has commenced proceedings in the foreign court, who is subject to the in personam jurisdiction of the domestic court³.

2.2The domestic court has power, and would exercise its discretion, to grant an ASI against that individual or company if the applicant has a legitimate interest in making the application, and it is clearly necessary to protect that legitimate interest in proceedings where the domestic court is the natural forum, and where the conduct of commencing the foreign proceedings was vexatious and oppressive, such that it would be unconscionable for the individual or company to pursue the foreign proceedings and the ends of justice require the domestic court to grant an ASI.  As was noted in Stichting Shell Pensioenfonds v Krys and another⁴, “the ‘ends of justice’ is a deliberately imprecise expression.  It encompasses a number of distinct legal policies whose application will vary with the subject matter and the circumstances”. 

2.3.In deciding whether to exercise that discretion, caution is always required for reasons of comity with the foreign court⁵, but the possibility of interference with the normal process of the foreign court should be weighed in the light of the particular factors of the case, such as the time and circumstances in which those foreign proceedings were begun, the scope of the issue(s)  before it, and the stage those proceedings have reached (if any).

3.Accordingly, in the present proceedings, it is important to examine the conduct of CCCDHK and others against the backdrop of the underlying facts in this case.  The facts are complex and span many years, but the following summary suffices for the present proceedings.

Parties

4.1.CCCDHK and CCCI are both Hong Kong companies, CCCDHK having been incorporated in 2003 and CCCI in 2013⁶.

4.2.Dingway was incorporated in the BVI on 19 December 2014 with CCCI as its sole shareholder. Harris J has held⁷ that Dingway was a Hong Kong business entity as ownership and management of this company were more closely connected with Hong Kong than with either the BVI or the United States. 

4.3.CCCI remained Dingway’s sole shareholder until 2 October 2015 when it sold 45% of Dingway to Champ Prestige International Ltd (“Champ Prestige”), a BVI company.  I shall set out below subsequent events relating to Champ Prestige⁸. 

Acquisition of Miami land

5.1.Shortly after Dingway was incorporated, on 26 December 2014, real property in Miami (“the Miami land”)  was acquired by CCC International USA (“the titleholder”)  for USD86,740,000 (“the purchase price”). 

5.2.The titleholder was incorporated in Delaware.  Dingway held this company through two intermediary companies, also incorporated in Delaware.  Dingway wholly owned CCC Holdings LLC (“the 1^st intermediate company”), which in turn wholly owned CCC USA Holdings Corp (“the 2^nd intermediate company”), which in turn wholly owned the titleholder⁹.

Payment of the purchase price

6.1.On 18 December 2014, a sum equivalent to the purchase price was transferred from CCCDHK’s bank account in Hong Kong to a company called CCCC US International Corp, which was the original purchaser of the Miami land under sale and purchase agreements made in October 2014.  It is common ground that this sum made its way to the vendors of the Miami land.

6.2.Regarding this sum,

-  CCCDHK’s case is that it paid the purchase price for the Miami land because it was the beneficial owner of Dingway under a trust arrangement with CCCI (“the alleged trust arrangement”);

-  CCCI’s case is that the sum was part repayment by CCCDHK of a loan evidenced by an “Interest Bearing Loan Agreement” dated 18 November 2014 between CCCI as lender and CCCDHK as borrower[10];

-  as far as the titleholder was concerned, its accounts apparently recorded the sum as an amount due to CCCI.

I shall refer later to the documents relied upon by CCCDHK in support of its alleged trust arrangement[11].

Sale of 45% Dingway to Champ Prestige

7.About a year later, by a sale and purchase agreement dated 2 October 2015 and a shareholder’s loan agreement dated 16 February 2016, CCCI agreed to transfer to Champ Prestige 45% of the shares, and 45% of its shareholder loan, in Dingway for a total consideration of USD40,509,371.  The sale was completed in March 2016.  

CCCI’s financial difficulties

8.At this time (2016), CCCI was in financial difficulties and defaulted on bonds it had issued in 2014 with a face value of RMB2.5 billion. 

HCCW166/2018 (Petition to wind up CCCI)

9.In June 2018, a bondholder presented a petition to wind up CCCI. 

HCA2343/2018 (CCCDHK v CCCI and Champ Prestige)

(Commenced 5 Oct.2018, discontinued 17 Dec.2019)

10.1.Shortly after the petition was presented, on 5 October 2018 CCCDHK commenced HCA2343/2018 against CCCI alleging (among other things)  that:

-  on 28 November 2014, CCCDHK and CCCI executed a 股權代持協議書 (literally, “agreement to hold shares on behalf”, which has been referred to as “Trust Agreement”)[12] in which CCCI agreed to hold on trust for CCCDHK shares in a proposed BVI company intended to hold land in Miami;

-  on 18 December 2014, CCCDHK paid the purchase price for the Miami land;

-  on 20 January 2015, CCCI made a declaration of trust (“the Declaration of Trust”)  declaring that it held the shares in Dingway for CCCDHK based on the terms of the Trust Agreement;

-  on or about 2 October 2015, “pursuant to the instructions of [CCCDHK] given to [CCCI] in accordance with [CCCDHK’s] rights and powers under the Trust”[13], CCCI sold 45% of Dingway to Champ Prestige[14];

-  part of CCCDHK’s instructions to CCCI was to immediately transfer to CCCDHK the proceeds of sale of 45% of the Dingway shares, but CCCI failed to do so; and

-  CCCI holds the remaining 55% of Dingway for CCCDHK.

10.2.CCCDHK claimed against CCCI (among other things):

-  an order vesting legal ownership of CCCI’s shares in Dingway;

-  an order for the transfer of the proceeds from the sale of 45% in Dingway.

11.It would be noted that:

-  it was CCCDHK which was the first party to commence proceedings in respect of the alleged trust, and it initiated proceedings in Hong Kong, not on the Mainland; and

-  there was no reference in its statement of claim (whether original or amended)  to any trust documents other than the Trust Agreement and the Declaration of Trust.

12.On 11 January 2019, CCCI was placed in creditors’ voluntary liquidation, with accountants from KPMG appointed as liquidators.

13.On 28 February 2019, CCCDHK amended the statement of claim to include Champ Prestige as 2^nd defendant.  CCCDHK alleged that in June 2018 it discovered that CCCI and Champ Prestige had entered into a framework agreement in June 2018 for the sale of the Miami land without CCCDHK’s authorization.

14.In its Defence filed on 11 July 2019 (after the appointment of liquidators), CCCI:

-  denied there was any trust;

-  pleaded that the sum transferred from CCCDHK in December 2014 was part repayment of the Interest Bearing Loan Agreement; and

-  denied it was liable to pay CCCDHK the proceeds from its sale of the Dingway shares.

15.CCCDHK did not file a Reply. 

16.About 4 months later, on 17 December 2019, CCCDHK discontinued HCA2343/2018 without prejudice to the bringing of subsequent actions for the same cause of action (“the 2343 Discontinuance”).  

Transfer of Dingway’s shares in the 1^st intermediate company to CCCDHK

17.1.It transpired that about two months before the 2343 Discontinuance, on 15 October 2019, Dingway transferred all the shares it held in the 1^st intermediate company to CCCDHK for no consideration in what has been called a “self-help remedy”. 

17.2.The transfer was signed on behalf of Dingway by a director Zeng Yuqi (“Zeng”)  at the request of CCCDHK[15], and on behalf of CCCDHK by Sze Wai Suen (“Sze”).  CCCDHK alleged that this transfer was approved and/or ratified by CCCI’s liquidators.  This was denied in affirmations filed by the liquidators. The issue was conceded by CCCDHK’s leading counsel at the hearing before Anthony Chan, J which I shall refer to later in this Judgment[16].  (As a matter of completeness, the allegation that the liquidators agreed to the transfer has been revived by CCCDHK in the present proceedings[17]). 

Sale by CCCDHK of the 1^st intermediate company’s shares to Rega

18.1.About three weeks after this transfer, on 8 November 2019 CCCDHK sold the 1^st intermediate company’s shares to Rega Center LLC (“Rega Center”)  for USD70 million (“the 1^st intermediate company sale proceeds”).  It is CCCI’s case that the persons who controlled Rega Center were associates of CCCDHK. 

18.2.The liquidators of CCCI discovered CCCDHK’s sale of the 1^st intermediate company’s shares on 8 February 2020.

HCA163/2020 (Champ Prestige v CCCDHK, Zeng and Sze)  

(Commenced 13 Feb.2020, ceased March 2020)

19.1.Shortly afterwards, on 13 February 2020 Champ Prestige (which held 45% of Dingway)  commenced HCA163/2020 against CCCDHK, Mr Zeng and Ms Sze for damages for conspiracy to defraud Champ Prestige by disposing of Dingway’s shares in the 1^st intermediate company without Dingway’s authority. 

19.2.On the same day, a Mareva injunction was granted against those three defendants.  (As a matter of completeness, Champ Prestige had in 2018 commenced HCA279/2018 against CCCI to enforce the framework agreement[18], and Champ Prestige alleged in HCA163/2020 that the above disposal of shares was in breach of orders given in that action). 

19.3.However, HCA163/2020 ceased shortly after its commencement when Champ Prestige was itself acquired by CCCDHK the day before the return day of the Mareva injunction.

Sale of the Miami land

20.After Dingway’s disposal of its shares in the 1^st intermediate company to Rega Center, in March 2021 the titleholder sold the Miami land to US purchasers for USD103 million (“the land sale proceeds”), the sale being completed on 22 December 2021.  CCCI’s liquidators discovered this on 30 December 2021.  CCCDHK received part of the land sale proceeds directly[19].

HCCW30/2022 (Petition to wind up Dingway)

21.1.On 24 January 2022, CCCI’s liquidators presented a petition in Hong Kong to wind up Dingway.  On the same day, Ng J appointed provisional liquidators for Dingway, and granted a proprietary injunction in the sum of the 1^st intermediate company sale proceeds against CCCDHK, and a Mareva injunction against CCCDHK, Mr Zeng and Ms Sze.

21.2In March 2022, Dingway was wound up by the BVI court on the ground of insolvency and on the just and equitable ground.  It was wound up by the Hong Kong court on 15 August 2022.

HCA309/2022 (Dingway v CCCDHK and 8 others)

(Commenced 1 April 2022)

22.1.On 1 April 2022, Dingway commenced HCA309/2022 against CCCDHK, Mr Zeng, Ms Sze, Rega Center and other defendants who were involved in the sale of the 1^st intermediate company and the subsequent sale of the land, for damages and equitable compensation.  CCCI was not a party to this action. 

22.2.The previous day, Cheng J had granted proprietary and Mareva injunctions against two defendants, viz Golden Gate International Investment Co Ltd and Rega Holdings Ltd, allegedly associates of CCCDHK.

HCA356/2022 (CCCDHK v CCCI)

(Commenced 12 April 2022, discontinued 7 May 2024)

23.1.On 12 April 2022, CCCDHK commenced HCA356/2022 against CCCI.  This was the second action commenced in Hong Kong by CCCDHK against CCCI (the first having been HCA2343/2018).

23.2.In the statement of claim,

-  as in HCA2343/2018, CCCDHK alleged that CCCI had executed the Trust Agreement and the Declaration of Trust, that it (CCCDHK)  was the beneficial owner of the shares in Dingway, and that it had paid the purchase price of the Miami land;

-  however, it seems inconsistently with its pleading in HCA2343/2018[20], CCCDHK alleged that CCCI’s sale of 45% of Dingway to Champ Prestige was “in breach of the Trust and without the prior consent of CCCDHK”[21];

-  CCCDHK claimed a declaration that CCCI held 55% of Dingway and the proceeds of the 45% sale of Dingway shares to Champ Prestige on trust, an order for delivery up or transfer thereof, and a declaration that CCCDHK was entitled to repayment by Dingway of the sum transferred for the purchase of the Miami land.  

24.It would be noted that:

-  CCCDHK had, for the second time, chosen to commence proceedings in the Hong Kong court to enforce the alleged trust arrangement;

-  again, the statement of claim did not mention any trust documents other than the Trust Agreement and the Declaration of Trust.

Anthony Chan J’s Decision (29 July 2022)

25.1.The next relevant event is that on 15-16 June 2022, Anthony Chan J heard seven summonses in HCA309/2022 and HCCW30/2022.  These were summarized in §35 of the learned judge’s Decision given on 29 July 2022, and I will not repeat them here. 

25.2.In relation to the trust issue, at §40, the judge recorded the evidence adduced by CCCDHK of the alleged trust arrangement including the Trust Agreement and the Declaration of Trust, and noted at §46 that “there is no independent proof of the provenance of either the Trust Agreement or the Declaration of Trust”, and “no contemporaneous document in support of the Trust Arrangement”.  He said at §47 that he was “far from convinced on the evidence before the court that the Trust Arrangement is one which the court can rely upon”. 

25.3.On the contrary, at §48, the judge found “ample contemporaneous evidence which undermines the existence of a Trust Arrangement”. 

25.4.One example given was a Business Review conducted by KPMG in late 2018.  Yuan Qing, a director of CCCI who CCCDHK says had been appointed to the Dingway board by CCCDHK’s parent company, engaged KPMG to conduct a business review of CCCI’s financial position for CCCI to consider the viability of a debt restructuring[22].  Under the section of the Review entitled “Key observations and findings - Assets”, the Miami land was included as a “major asset”, and there were two diagrams showing CCCI’s interest in it through its Dingway shares.  The Review did not say that CCCI only held the Dingway shares as a trustee.

25.5.On 11 December 2018, Mr Yuan signed a letter stating “we are not aware of any factual inaccuracies within the report” and “we are not aware of any material facts or information which have been omitted from the report which may cause the view it gives of [CCCI] to be misleading”.

25.6.Mr Yuan subsequently alleged that when the Review was being conducted, he had orally told KPMG about the trust, but he had not noticed its absence from the Review when he signed the letter confirming its factual accuracy “without carefully reviewing the contents”[23]. 

25.7.In light of this and other evidence on the issue of the alleged trust arrangement, Anthony Chan J said at §52 of the Decision “I do not believe that evidence of the Trust Arrangement  impacts on the veracity of the Dingway’s case”.  He found Dingway had a good arguable case on the facts and ordered the continuation and regrant of various injunctions.  There was no appeal by CCCDHK from this Decision.

Proceedings in HCA309/2022 and HCA356/2022 

28.HCA309/2022 (Dingway’s action against CCCDHK and others)  and HCA356/2022 (CCCDHK’s action against CCCI)  proceeded in the normal course.

29.1.In November 2022, the parties filed various summonses which were heard by Cheng J on 5 June 2023. Dingway and CCCI applied to stay CCCDHK’s action (HCA356/2022)  pending resolution of Dingway’s action (HCA309/2022), or alternatively, for both actions to be tried together.  CCCDHK and Ms Sze also issued various summonses, but by the time of the hearing before Cheng J, they took the position that:

-  the two actions should be heard together;

-  there should first be a trial of a preliminary issue between Dingway, CCCDHK and CCCI, with the other defendants in the Dingway action being agreeable to be bound by its result.

It would be noted that CCCDHK did not apply for the actions to be stayed in favour of any other court.

29.2.The preliminary issue before the learned judge was termed “the Title/Trust Issue” and was as follows:

-  As of October 2019 (when Dingway transferred the shares in the 1^st intermediate company to CCCDHK for no consideration), was Dingway or was CCCDHK the beneficial owner of the shares in the 1^st intermediate company and/or the Miami land, and/or was CCCDHK or was CCCI the beneficial owner of the entire shareholding in Dingway?

Cheng J’s Decision (12 July 2023)

30.1The learned judge considered the principles governing the court’s exercise of discretion whether to order a stay, or to order that two actions be tried together, and whether to order the trial of a preliminary issue[24].  She held that there were no exceptional circumstances or special grounds to justify ordering a trial of the Title/Trust Issue as a preliminary issue between Dingway, CCCI and CCCDHK. 

30.2.First, the judge noted that even if the shares in Dingway were held on trust for CCCDHK, that would not necessarily mean that CCCDHK would have the right to direct Dingway to transfer the shares in the 1^st intermediate company to it, because Dingway was a BVI company and under BVI law, any disposition of more than 50% of a company’s assets if not made in the usual course of business, was subject to various procedural requirements.  CCCDHK did not suggest that these requirements had been complied with[25], and as Dingway was wound up on (among other things)  the ground of insolvency, CCCDHK’s arguments of ratification or the Duomatic principle did not avail it where at least arguably the impugned transaction rendered the company insolvent[26]. The Title/Trust Issue could not be said to be dispositive of the legitimacy of Dingway’s transfer of shares in the 1^st intermediate company to CCCDHK in October 2019.

30.3.Secondly, more material to the present proceedings, the judge also considered that the other defendants in HCA309/2022 (the Rega defendants)  were involved in an “interconnected series of events”.  If only the Title/Trust Issue was decided as a preliminary issue, and it was decided against CCCDHK, there would be an unnecessary delay in the resolution of the action against the other defendants if the decision is taken on appeal. 

30.4.The judge considered that staying HCA356/2022 (CCCDHK’s action against CCCI)  was preferable to having it heard together with HCA309/2022 (Dingway’s action against CCCDHK and the Rega defendants etc)  for saving time and costs.

30.5.Importantly, in relation to CCCDHK’s submission that CCCI was not a party in HCA309/2022, the judge noted:

-  CCCI’s liquidators had agreed to abide by any decision in HCA309/2022 as regards the Trust Claim, so that CCCI would be bound as if it were a party [§36.2];

-  “no reason has been given as to why CCCI could not have been (or could not now be)  joined as a party to HCA309 by counterclaim if it was (or is)  thought necessary” [§36.2];

-  as an alternative, CCCDHK had also itself proposed the issue of a third party notice to CCCI, so that CCCI would be obliged to give discovery and evidence and otherwise participate in HCA309/2022 [§36.3].

30.6.Accordingly, Cheng J ordered (among other things)  that HCA356/2022 be stayed pending resolution of HCA309/2022, upon the giving of CCCI’s undertaking to be bound as above.  

31.There was no appeal from that order.  CCCDHK did not join CCCI by way of a counterclaim, and it did not issue a third party notice against it.

Beijing proceedings

32.1.On 17 January 2024, CCCDHK filed a complaint in the Beijing court, the cause of action being stated as “Contractual Dispute”.  

32.2.The order sought was that the Trust Agreement between CCCDHK and CCCI be discharged from the date of service of the complaint, and for CCCI to return 55% of the Dingway shares to CCCDHK. 

32.3.The complaint referred among other things to a document entitled “Supplementary Agreement to Trust Agreement” (“Supplementary Agreement”)  which was said to have been signed on 4 December 2014 between CCCDHK and CCCI.  CCCDHK relied on Clause 3 therein to support its commencement of proceedings in the Beijing court.

Trust Documents

34.1.Pausing here, the material term of the Trust Agreement (dated 28 November 2014)  for the purposes of the present proceedings is clause 8 which provided:

“8. 爭議的解決

凡因履行本協議所發生之爭議，甲、乙雙方應友好協商解決，協商不能解決的，任一方均有權將爭議提請所在地法院起訴。

[Resolution of dispute

Any disputes arising from the performance of this agreement should be resolved by both parties A and B through friendly negotiations, if not resolved through negotiations, either party is entitled to submit the disputes for litigation in the local courts].”

34.2.This document was incorporated by reference in the Declaration of Trust dated 20 January 2015 in which CCCI declared that it holds all shares in Dingway for CCCDHK “based on the terms of [the Trust Agreement] dated 28 November 2014".

34.3.This incorporation by reference was pleaded in CCCDHK’s statement of claim in HCA356/2022 at §14.  In §15, CCCDHK pleaded that it “shall rely on the full terms and conditions of the 2014 Trust Agreement and the 2015 Declaration of Trust at trial”.  

35.1.The Supplementary Agreement:

-  was not referred to in the Declaration of Trust incorporating the terms of the Trust Agreement, even though the latter was purportedly superceded by the Supplementary Agreement in the event of inconsistency;

-  had not been referred to in any of CCCDHK’s pleadings or evidence in any proceedings in the courts of Hong Kong in the past six years;

-  was only included in CCCDHK’s list of documents in HCA309/2022 after its absence was pointed out in the affidavit of Patrick Cowley filed on behalf of the applicants, and less than a week before the hearing of the present proceedings[27].

35.2.Material to the issues in the present proceedings is clause 3 of the Supplementary Agreement:

“3.  鑒於«股權代持協議書»簽訂地為北京市西城區，乙方主要經營地亦在北京市西城區。雙方同意對第八條爭議的解決之條款進行變更:“凡因履行本協議以及後續補充協議發生的爭議，甲乙雙方應友好協商解決，協商不能解決的，任一方均可向北京市西城區或香港有管轄權的法院提起訴訟。”  

[As the Trust Agreement was signed in Xicheng District, Beijing and CCCDHK’s main place of business was in Xicheng District, Beijing, both parties agree that clause 8, the clause on the resolution of disputes, shall be amended: “any disputes arising from the performance of this agreement and subsequent supplementary agreement should be resolved by both parties A and B through friendly negotiations, if not resolved through negotiations, either party may bring proceedings in the Xicheng District of Beijing or a Hong Kong court with jurisdiction” (emphasis added).

Events after CCCDHK commenced Beijing proceedings 

36.1.The Beijing complaint was accepted for filing in the Beijing court on 13 March 2024.

36.2.On 16 April 2024 CCCI’s liquidators received an email from the Beijing court providing links to some documents, which were apparently incomplete.

36.3.On 26 April 2024, CCCDHK’s solicitors wrote to CCCI’s solicitors saying that they have been instructed to discontinue HCA356/2000 (which had been stayed by Cheng J pending the resolution of HCA309/2022).  HCA356/2022 was then discontinued on 7 May 2024 without prejudice to the bringing of subsequent actions for the same cause of action. 

36.4.On 16 May 2024, following a request from CCCI’s liquidators to the Beijing court, they received an email with a complete set of documents.  They were informed by the court staff that it did not constitute valid service.  Service was effected subsequently on 23 August 2024.

37.In the meantime, in HCA309/2022, CCCDHK and Ms Sze filed an amended defence on 19 June 2024 which was re-amended on 23 July 2024.  The Trust Agreement and the Declaration of Trust were pleaded, but not the Supplementary Agreement.  The pleadings have closed.  CCCDHK has given discovery.  As noted above, the Supplementary Agreement has only recently been included in discovery, which Ms Sze says was due to miscommunication between herself and CCCDHK’s lawyers. 

CCCI’s and Dingway’s application for Anti Suit Injunction  

38.1About a month after service of the Beijing proceedings, on 30 September 2024 the applicants issued the present proceedings for an anti-suit injunction against CCCDHK.  The parties have agreed that it would not be necessary to proceed with an interim ASI on CCCDHK’s undertaking not to expedite the Beijing proceedings before a summons on 3 March 2025. 

38.2.The liquidators filed two affidavits of Mr Cowley on 10 October 2024 and 6 December 2024.  CCCDHK filed an affirmation of Ms Sze on 15 November 2024, and two affidavits of its solicitor Tsui Ming Lun, including one exhibiting a signed draft affirmation of a PRC lawyer Song Ming Yuan. 

38.3.Regarding Mr Song’s affirmation, CCCDHK filed a summons on 11 December 2024 (served on the plaintiffs on 13 December 2024)  to apply for relief from sanction from the order of Master SP Yip of 13 November 2024 and for leave retrospectively to file and serve Mr Song’s affirmation on 5 December 2024.  In the plaintiffs’ speaking note of 16 December 2024, they indicated they had no objection.

Issues

39.The issues are as follows:

(A)  Was there delay in the making of this application?

(B)  Do the applicants need to be parties to make an application for an ASI?

(C)  Must the applicants first apply to the Beijing court?

(D)  (1)  Concerns raised by the applicants about the authenticity of the Supplementary Agreement;

(2)  Effect of clause 3 of the Supplementary Agreement; 

(3)  Other relevant factors in deciding whether to grant an ASI.

Discussion

(A)  Delay?

40.I shall first deal with CCCDHK’s submission that the applicants had delayed in the issue of the present proceedings.  I do not accept that submission.  CCCI was not properly served with the documents in the Beijing proceedings until 23 August 2024. Until service was properly effected, it would have been premature for CCCI or Dingway to have taken any action.  The present proceedings were commenced on 30 September 2024.  I consider the time taken was reasonable and there was no delay.

(B)  Need to be party to proceedings?

41.CCCDHK relied on a passage in §27 of Turner v Grovit in support of its submission that the applicant for an ASI must be a party in the proceedings in the domestic court, arguing that CCCI is no longer a party in proceedings in Hong Kong after CCCDHK discontinued HCA356/2022. 

42.1In Turner v Grovit, the plaintiff was employed by D2, an Irish company.  D2 and D3, a Spanish company, were in a group of companies controlled by D1, an individual.  The plaintiff ordinarily worked in England but was temporarily working in Spain when he was dismissed.  He issued proceedings against D2 in England in the employment appeal tribunal.  D3 then issued proceedings against the plaintiff in Spain for damages for breach of contract of service. 

42.2.The plaintiff applied in England for an ASI to restrain the three defendants from commencing proceedings against him outside England, on the ground that such proceedings were designed to harass him and an abuse of the process of the English court.

42.3The House of Lords held[28] that the Court of Appeal was entitled to grant an ASI.  The power of an English court to grant an ASI depended on there being wrongful conduct of the party to be restrained of which the applicant was entitled to complain and which he had a legitimate interest in seeking to prevent, and that unconscionable conduct on the part of the party to be restrained would support an ASI. 

42.4.At §27, Lord Hobhouse said that where the applicant has a contractual right not to be sued in the foreign court (e.g. an exclusive jurisdiction clause permitting proceedings in England only), he has a legitimate interest[29] in enforcing that right by way of an ASI.  Where there is no such contractual right, but he is relying on unconscionable conduct of the other person, “English law requires that the legitimate interest must be the existence of proceedings in this country which need to be protected by the grant of a restraining order”, as derived from the House of Lords decision in Airbus Industrie GIF v Patel [30]. 

43.1In Airbus, English passengers were killed or injured in an air crash in India.  They sued Indian Airlines and the Bangalore airport authority in proceedings in India. Having settled with Indian Airlines, they then sued Airbus (the manufacturer of the aeroplane)  in Texas[31].

43.2.Airbus could not apply for a stay in Texas on the ground of forum non conveniens as the Texas court did not recognize that principle. 

43.3.Airbus obtained an order from the Indian court which made an order restraining the passengers from suing otherwise than in India, but the passengers proceeded with the Texas proceedings. 

43.4.Airbus then sought an ASI in England.  It would be noted that Airbus had not been sued in England, nor indeed were there any proceedings against anyone in England arising from the crash, nor was the English court being asked to enforce the jurisdiction of the Indian court.  

43.5.The House of Lords held that the English forum had no sufficient interest in, or connection with, the matter to justify an ASI.

44.Coming back to Turner v Grovit, it was after a lengthy discussion of the facts and holding in Airbus that Lord Hobhouse said at the end of §27:

“The House held that the English passengers should not be restrained from suing in Texas. There were no English proceedings (other than the application to the English court for the injunction). Airbus Industrie had no sufficient interest in asking the English court for a remedy. This is a striking example of the important restriction upon the willingness of the English courts to grant restraining orders in relation to foreign legal proceedings. The applicant for the restraining order must be a party to litigation in this country at which the unconscionable conduct of the party to be restrained is directed. It is not sufficient for the applicant to say that there is another foreign forum which is the appropriate forum”. (Emphasis added).

45.It is clear from the context above that Lord Hobhouse was not stating that there was an absolute rule of law that an applicant cannot apply for an ASI unless it is a party in pending English proceedings.  Rather, he was pointing out that in Airbus, there were no, and there was not likely to be, proceedings in the English court such as to vest Airbus with an interest to apply for an ASI.  In Dicey Morris and Collins on The Conflict of Laws[32], the editors said (§12-135):

“It is submitted that Lord Hobhouse was not endeavouring to give an exhaustive statement of the circumstances in which the injunction will be granted, that the law is not be so confined, and that the power to restrain by an injunction should be capable to adjust to new circumstances”.

46.Of course, an applicant who is a party to actual proceedings in the domestic court would have an interest to protect, but in my view, there is no reason why an applicant who can show that it would be bound by those proceedings would not have a similar legitimate interest to protect against unconscionable conduct of the entity pursuing foreign proceedings.  To insist that CCCI needs to be a party would be to elevate form over substance.  As was held in Masri[33], once the court has jurisdiction over the substance of the case, it has jurisdiction to make ancillary orders, including an ASI to protect the integrity of its process. 

47.As a matter of completeness, it would be noted that in Glencore, Moore-Bick J observed at §23 that “even in the absence of some explicit procedural rule on which to hang Glencore’s anti-suit injunction as an incident of the shipowners’ litigation”[34], the court “has an inherent jurisdiction to protect its own proceedings and to take steps to restrain the parties from acting in ways which would undermine them”[35]. 

48.1.Coming back to the present proceedings, CCCI clearly has such a legitimate interest.  It has given an undertaking to the court to be bound by the determination of the trust issue in HCA309/2022.  CCCDHK does not dispute that the undertaking is valid. Insofar as CCCDHK regards such an undertaking to be inadequate for procedures such as discovery, it can join CCCI as a defendant to a counterclaim, or issue third party proceedings, as foreshadowed by its counsel in the hearing before Cheng J. 

48.2.As for Dingway, it seems to me that it is not necessary to further lengthen this Judgment with a fuller examination of Dingway’s position, in light of my holding that CCCI does have a legitimate interest.  

(C)  Must the applicants first apply to the Beijing court?

49.CCCDHK submitted that the applicants should first have applied to the Beijing court to stay or terminate the Beijing proceedings before issuing the present proceedings in the Hong Kong court.

50.However, CCCDHK accepts that there is no absolute rule in law that an application to the foreign court must be made before applying to the domestic court for an ASI: Dicey, Morris and Collins §12-135; Raphael, The Anti-Suit Injunction[36] §§5.42-5.44.

51.Further, insofar as CCCDHK has suggested that it would be an affront to the foreign court if no application for a stay is made to it first, prior to an application to the domestic court for an ASI, Leggatt LJ held to the contrary in The Angelic Grace[37]:

“I can think of nothing more patronising than for the [domestic court ] to adopt the attitude that if the [foreign court] declines jurisdiction, that would meet with the approval of the [domestic court ], whereas if the [foreign court] assumed jurisdiction, the [domestic court] would then consider whether at that stage, to intervene by injunction. That would be not only invidious but the reverse of comity”.

52.Further, making an application to the foreign court first has its risks, not only because it would lead to delay in making an application to the domestic court.  As noted in Dicey, Morris and Collins[38]:

“ ... a combination of delay and participation before the foreign court might well lead to the conclusion that it is too late for the applicant to ask for relief from the [domestic] court. Moreover, the application may well be defeated, as a matter of discretion, if the applicant has already submitted to the foreign court otherwise than for the purpose of contesting the existence or exercise of its jurisdiction”.

53.CCCDHK submits that in the present case, the fact that the applicants have not applied to the Beijing court is “at least relevant to, if not decisive in, the Court’s exercise of discretion”.

54.I consider that it is a matter that should be weighed in the balance, but as will be explained later in this Judgment, I find that:

-  Hong Kong is the natural forum;

-  CCCDHK is carving out for the Beijing proceedings only one issue out of multiple issues in multi-party Hong Kong proceedings;

-  CCCDHK’s commencement and participation in a number of Hong Kong proceedings over a long period of time shows that its conduct in now commencing the Beijing proceedings is plainly vexatious or oppressive;

-  it is unconscionable for CCCDHK to pursue the Beijing proceedings and, after giving due regard to comity, the ends of justice require the Hong Kong court to grant an ASI without the applicants having to apply to the Beijing court first.

(D)  Whether the court should grant an ASI

55.The relevant matters arising in the present proceedings may be considered in the following order:

(1)  concerns raised by the applicants about the authenticity of the Supplementary Agreement;

(2)  effect of clause 3 of the Supplementary Agreement ; 

(3)  other relevant factors.

(1)  Applicants’ concerns about authenticity of the Supplementary Agreement

56.1.As CCCDHK has commenced the Beijing proceedings in reliance on clause 3 of the Supplementary Agreement, it would be logical to first consider the applicants’ concerns as to the authenticity of this document.

56.2.These concerns arise from the following.  First, as far as documentary evidence is concerned, it would be noted that the Declaration of Trust only incorporated the terms of the Trust Agreement.  It did not mention the Supplementary Agreement, which is surprising as the latter stated that it had the same legal effect as the Trust Agreement and superceded it in case of inconsistency.  

56.3.The Supplementary Agreement  was not produced until early 2024 even though, as shown in the summary of proceedings in this Judgment, the issue of the alleged trust arrangement had been raised many years ago.  As noted earlier, CCCDHK’s pleadings in Hong Kong proceedings expressly pleaded that it “shall rely on the full terms and conditions in the 2014 Trust Agreement and the 2015 Declaration of Trust at trial”[39], and the Supplementary Agreement was not relied upon.

56.4.Ms Sze, who was the company secretary and later director of CCCDHK, said she was not aware of the Supplementary Agreement until January 2024 when PRC lawyers contacted by Yang Xu (“Yang”)  of CCDA gave it to her[40].  She said she was told that the execution of the document had been arranged by CCDA, which kept it but did not give copies to the signatories, even though it was the second (in point of time)  in a series of three documents concerning the alleged trust arrangement.

57.Be that as it may, the Supplementary Agreement was signed on behalf of CCCDHK by its director Xu Juncheng (“Xu”).  In Mr Xu’s statement on 13 November 2024, he said he signed it, but he failed to explain why he had not informed Ms Sze about it in the nearly 10 years between the date of its execution (2014)  and its production by CCDA (2024).

58.1.Further, CCCDHK’s case is that Mr Yang of CCDA the ultimate shareholder gave instructions for the transactions between CCCDHK and CCCI throughout, including the alleged trust arrangement[41], the transfer of Dingway shares from CCCI to CCCDHK[42], and the subsequent disposal of the Miami land[43].  Mr Yang was also aware of the dispute regarding the alleged trust arrangement between CCCDHK and CCCI, as he gave a statement on 13 May 2022. 

58.2.And yet there is no explanation why, despite his being aware of all these matters, Mr Yang did not disclose the Supplementary Agreement to CCCDHK until January 2024.  Nor is there any explanation why Mr Yang did not direct CCCDHK to commence its proceedings in 2018 and 2022 in Beijing rather than Hong Kong, and did not direct it to apply to stay the Hong Kong proceedings against it on the basis that they should have been commenced in Beijing. 

59.However, whilst I can understand the applicants’ concerns about the authenticity of the Supplementary Agreement arising from the above matters which have not been adequately answered, it is well-established that originating summons proceedings are not appropriate proceedings in which to make findings on disputed facts.  Accordingly I do not propose to do so, and have approached the case on the assumption that the Supplementary Agreement is an authentic document. 

60.That does not mean of course that the Supplementary Agreement is to be treated as having only existed when it came to Ms Sze’s attention in January 2024.  CCCDHK is a company.  It must be deemed to know the terms of its own contracts[44], which had been executed by its director, even if that director failed to inform his successor.

(2)  Effect of clause 3 of the Supplementary Agreement

61.The next matter for consideration is the effect of clause 3 of the Supplementary Agreement.  The material words for the present proceedings are that “either party may bring proceedings in the Xicheng District of Beijing or a Hong Kong court with jurisdiction” (emphasis added).

62.The applicants have submitted that once proceedings had been brought in one jurisdiction (Hong Kong)  by CCCDHK and it had submitted to that jurisdiction in HCA309/2022, it is precluded from resorting to the other jurisdiction (Beijing)  as a matter of election. 

63.I do not accept that submission.  As a matter of language, the clause does not go so far as to make the jurisdiction in which proceedings have been begun and submitted to an exclusive jurisdiction.  It did not clearly indicate that subsequent parallel proceedings would be prohibited.  And it is unlikely to have been the intention of the parties that the party who was first to act in a dispute may in effect turn the jurisdiction it chose into an exclusive jurisdiction once the other party submitted to it. 

64.1.The consequence is that there exist parallel proceedings.  The effect of parallel proceedings in an ASI application was discussed in Deutsche Bank v Highland Crusader.

64.2.In that case,the contract between the parties (the claimants being a German bank with its principal place of business in Germany and a US associate with its principal place of business in the US, and the defendants being US companies)  provided that the parties submit to the jurisdiction of the English court, but expressly provided that “nothing ... shall limit the right of any party to take proceedings in the courts of any other country of competent jurisdiction”.  

64.3.When the claimants served default notices on the defendants, the defendants started proceedings in Texas alleging misrepresentation.  The claimants then started proceedings in England for the amounts said to be in default, and applied for an ASI. 

64.4.The court of appeal refused the application, holding[45] that since the clause did not clearly indicate that parallel proceedings in a non-selected forum (i.e. Texas)  were prohibited, the parties would usually be taken to have anticipated and accepted the possibility of parallel proceedings.  There was no general presumption that proceedings brought in the non-contractual forum (i.e. Texas)  were vexatious or oppressive unless strong grounds which had been unforeseeable at the time the contractual jurisdiction was agreed or were otherwise exceptional could be demonstrated. Only foreign proceedings which were vexatious and oppressive for some reason independent of the mere presence of the non-exclusive jurisdiction clause (i.e. England)  should be restrained by an ASI. 

65.Thus, whilst the prosecution of parallel proceedings in different jurisdictions was undesirable (due to the possibility of conflicting judgments[46]), it was not necessarily vexatious or oppressive.  As to what constitutes vexatious or oppressive conduct, the court of appeal set out in §50 the usual key principles for ASI which I have encapsulated in §2.1-2.3 above and which I will not repeat here.  In Deutsche Bank v Highland Crusader, the court of appeal held that there was little to connect the dispute with England, and declined to grant an ASI in favour of the claimants.

66.Accordingly, I turn to examine the relevant factors in the present proceedings.

(3)  Other relevant factors

67.I find that Hong Kong is the natural forum, being the forum with which the action has the most real and substantial connection. 

Place of incorporation

68.First, both CCCDHK and CCCI are companies incorporated in Hong Kong. 

Principal place of business

69.1The evidence shows that their principal places of business were in Hong Kong.

69.2.Ms Sze has not alleged that CCCI’s principal place of business was other than Hong Kong. 

69.3.Although she has alleged in her recent affirmation that CCCDHK’s principal place of business was in Xicheng and has exhibited a tenancy agreement for a unit in Xicheng, that unit appears to be only a small one (32.5 sq m).  There is no evidence showing the number of employees or any operations there. 

69.4.In contrast, on CCCDHK’s own evidence[47], it had seven employees in Hong Kong, and incurred around $270,000 a month for its monthly operations, eg for office premises, car parking, and miscellaneous operational expenses.  It operated a bank account in Hong Kong from which substantial funds were transferred to the USA, allegedly for the purchase price for the Miami land. 

70.Ms Sze also alleged that Xicheng was CCCDHK’s principal place of business because CCDA was the ultimate shareholder of both CCCDHK and CCCI.  The public searches exhibited to Mr Cowley’s affidavit[48] have thrown doubt on that allegation.  Besides, even on CCCDHK’s own case, there have been changes of shareholders at various times.  Generally, where a company has its own employees and substantial operations, its shareholding (where changes may be frequent)  would not affect the location of its principal place of business. 

71.Then there is the subject-matter of the alleged trust.  Although Dingway was a BVI company, Harris J found that it was a Hong Kong business entity[49].  

Governing law

72.1.It had never been CCCDHK’s assertion (prior to the Beijing proceedings)  that the governing law was any other than Hong Kong law.

72.2.It was only recently that Mr Song stated his opinion that Mainland law applied, but this was based on the principal place of business of CCCDHK being in Beijing and the trust documents occurring in Beijing[50].

72.3.In any event, at §13(11)  of Mr Song’s opinion, he said:

“Where a legal person’s principal place of business is inconsistent with the place of registration, the law of the principal place of business may apply. The legal person’s habitual residence is its principal place of business”.

72.4.It cannot be disputed that the place of registration of CCCDHK and CCCI is Hong Kong.  Ms Sze did not allege that CCCI’s principal place of business was other than Hong Kong.  And as discussed above, the evidence is clear that CCCDHK’s principal place of business was Hong Kong.

Proceedings

73.As summarized earlier in this Judgment, CCCDHK had commenced two sets of proceedings in Hong Kong.  It had not sought to stay the proceedings against it in Hong Kong.  That is a clear indication that it accepted that Hong Kong is the natural forum. 

74.Further, the Hong Kong courts’ engagement with the various disputes concerning the Miami land is longstanding.  Two judgments have been delivered by two High Court judges who have demonstrated that they are familiar with the issues between the parties. 

75.Certainly, the stage to which the Hong Kong proceedings have progressed is far more advanced than the embryonic stage of the Beijing proceedings which have just started, with no hearings so far.  As for Ms Sze’s allegation that the Xicheng court would have more experience in dealing with “factual questions concerning the operation of state-owned entities, given the fact that many state-owned entities are headquartered in Xicheng”, I accept that there may well be many SOEs with headquarters in Xicheng, and some may have brought litigation in that court, but Ms Sze’s general reference to “operations” of SOEs is obscure to say the least.

76.The multi-party, multi-issue HCA309/2022 is not concerned with a dispute over the “operation” of any SOEs, but with whether a trust existed between CCCDHK and CCCI, and Dingway’s disposal of the 1^st intermediate company’s shares and the subsequent disposal of the Miami land.

77.It is in my view, vexatious and oppressive for CCCDHK, after failing on the preliminary issue and well knowing the nature of the action from Cheng J’s Decision, to deliberately carve out[51] one specific issue from those longstanding, multi-issue, multi-party Hong Kong proceedings for proceedings it has very recently commenced in Beijing based on a document (the Supplementary Agreement)  of which it was or should reasonably have been aware a decade ago. 

Witnesses

78.As a matter of completeness, this may be dealt with quickly.  CCCDHK has not indicated who it proposes to call as witnesses.  Even if any witness is unable to come to Hong Kong, video-link facilities are available.  There is no evidence that CCCDHK would need to resort to compelling any witnesses to testify.  

Conclusion

79.For the above reasons, I am satisfied that

-  there has been no delay in this application,

-  the applicants have a legitimate interest in making the application and need not have applied to the Beijing court first,

-  Hong Kong is the natural forum,

-  CCCDHK’s conduct, in commencing the foreign proceedings now based on a document of which it was or should have been aware a decade ago, carving out only one issue from multi-issue, multi-party proceedings in Hong Kong which have progressed for many years, having failed in its preliminary issue submission before the Hong Kong court, was vexatious and oppressive and unconscionable, and

-  with due regard to comity, in the above circumstances, the ends of justice require the grant of an ASI against CCCDHK.

Order

80.I would make an order in terms of paragraphs 1, 3 and 4 of the Originating Summons, with an order nisi that costs follow the event.  If the plaintiffs wish to apply for costs to be assessed on an indemnity basis as per paragraph 6 of the OS, they may provide written submissions (limited to 5 pages)  within 14 days of the date of this Judgment.  The defendant may provide written submissions (limited to 5 pages)  in opposition within 14 days thereafter, and the matter will be decided on paper.  The decision will include directions on the provision of a statement of costs.

81.I thank all counsel for their assistance.

Mr Derek J Y Chan, instructed by Messrs. Tanner De Witt, for the 1^st and 2^nd Plaintiffs

Mr Bernard Man SC and Mr Jonathan Fung, instructed by Messrs. Jun He Law Offices, for the Defendant