China Shanshui Cement Group Ltd and Others v. Tianrui (International) Holding Company Ltd and Others

HCA 548/2019 & HCA 1013/2023
(Heard together)

[2025] HKCFI 3893

HCA 548/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 548 OF 2019

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AND

HCA 1013/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1013 OF 2023

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D E C I S I O N

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INTRODUCTION

1.This is the decision in relation to the following two summonses:

(a)  The summons taken out by the plaintiff Tianrui Group Company Limited (“Tianrui”) in HCA 1013/2023 (“the Loan Action” or “1013 Action”) dated 28 February 2024 to strike out the counterclaim (“the Counterclaim”) of the defendants China Shanshui Cement Group Limited & Others (“the CSC Parties”) (“the Striking Out Summons”); and

(b)  The summons taken out by the CSC Parties dated 25 April 2024 in HCA 548/2019 (“the Shareholders’ Dispute Action” or “548 Action”) for that action and the Loan Action to be heard at the same time or one immediately after the other before the same judge, or for the two actions to be consolidated (“the Hearing Together Summons”).

The CSC Parties’ Primary Position

2.There is no dispute between the CSC Parties and Tianrui that there are substantial overlaps between the Shareholders’ Dispute Action and the Loan Action (at least in respect of the Counterclaim). As Mr Victor Dawes SC, leading Ms Bonnie Cheng and Mr Harrison Miao, for the CSC Parties submits, the cross-applications boil down to one core issue, ie how these overlaps should be addressed.

3.The CSC Parties submit that the two actions should be heard together to ensure the efficient and just resolution of the disputes:

(a)  The loans which form the subject of Tianrui’s shareholders’ dispute claim in the Loan Action (“the Loans”) have all along been part of the disputes in the earlier Shareholders’ Dispute Action. Tianrui could have claimed for the Loans in the Shareholders’ Dispute Action.

(b)  Instead, Tianrui elected to commence the separate Loan Action to pursue the Loans. It also forces the CSC Parties to bring the claims already raised in the Shareholders’ Dispute Action as the Counterclaim in the Loan Action and to raise a set-off defence.

(c)  The proper resolution is for the two actions to be heard together (whether at the same time or one immediately after the other). Tianrui would only have to repeat its response to the CSC Parties’ claims in the Loan Action. The parties’ disputes can then be resolved in one go.

(d)  Given that there are other parties involved in the Shareholders’ Dispute Action, allowing the actions to be heard together would be more efficient than to formally consolidate the actions.

Tianrui’s Primary Position

4.According to Mr Laurence Li SC, leading Ms Natalie So, for Tianrui, the Loan Action is a simple debt recovery action by Tianrui against the CSC Parties.

5.Tianrui seeks repayment under a series of loan agreements it had entered into with the CSC Parties. The debts are not in dispute. The CSC Parties’ only responses to the loans are limitation and standing, and nothing else.

6.Yet, belatedly, after 3 extensions of time that spanned around 6 months, the CSC Parties “copied and pasted” their claims in the Shareholders’ Dispute Action into the Loan Action, and sought to run the whole of that action as a purported counterclaim in the Loan Action, to bring in a defence of set-off.

7.Mr Li contends on behalf of Tianrui that, raising the exact same claim in two separate actions is an abuse of process. That is all the more apparent when the CSC Parties’ “copy-and-paste” job is blatantly to delay the progress of the otherwise straightforward Loan Action, to impede Tianrui’s ability to seek repayment on the outstanding debts – by sweeping in the mess that is the Shareholders’ Dispute Action, with its numerous parties and amorphous conspiracy claim.

8.Tianrui claims that the court cannot allow this to happen. This is why Tianrui seeks to strike out the CSC Parties’ Counterclaim by way of the Striking Out Summons. This is allegedly to enable the parties to remove any purported connection between the two actions. In this way, Tianrui says that the actions can be allowed to progress at their own pace, without one holding up the other.

9.For similar reasons, Tianrui claims that the Hearing Together Summons to have the two abovementioned tried together at the same time, or one after the other (or to have the actions consolidated) ought to be dismissed.

D12’s and Other Defendants in the 548 Action’s Position

10.The 12^th defendant (“D12”) in the Shareholders’ Dispute Action has indicated a neutral position for the actions to be heard together: See 548 Action Ho 1^st §3(1). At the hearing, D12 was represented by Mr Felix Ng of counsel who appeared together with Ms Polly Li. He made oral submissions on behalf of D12.

11.Several defendants in the Shareholders’ Dispute Action also attended the hearing either through solicitors or in person. They have not expressed any strong views on the summonses issued by Tianrui and the CSC Parties. Some of them have lodged written submissions with the court to express their views. I shall briefly deal with Mr Ng’s submissions as well as other defendants’ position here before I discuss the two main parties’ submissions under the two summonses.

D12’s Position

12.In gist, Mr Ng submits that his client is a “small player” caught in the fight between two camps of shareholders with substantial resources. D12 does not want to be dragged into a prolonged litigation battle between the two camps. In particular, as she is not one of the parties of the Loan Action, she does not want to be part of a consolidated action nor does she wants to appear at the trial of the Loan Action. Mr Ng therefore urges the court to allow the two actions to be heard by the same judge, with the Shareholders’ Dispute Action to be tried first and the Loan Action to be heard later so that his client does not have to participate in that part of the proceedings.

Other defendants’ Position   

13.D3, D4 and D18 of the Shareholders’ Dispute Action were represented by Messrs Dentons Hong Kong LLP at the hearing but did not make any submissions.

14.D5, D6 and D17’s attendance at the hearing was excused pursuant to the request made by their solicitors Messrs P C Woo & Co to the court prior to the hearing. They adopted a neutral positon in so far as the two summonses are concerned.

15.D11 who was serving a custodial sentence in Beijing wrote to the court prior to the hearing and excused himself from attending the hearing. He sent a friend to the court to represent him. This was not accepted by the court as his friend has no locus standi in the case.

16.D10, D14 to D16 who were represented by Messrs Angela Ho & Associates did not appear at the hearing nor did they instruct their solicitors to make representation on their behalf at the hearing.

17.D7 was not represented and did not appear at the hearing.

18.D9 and D13 appeared in person at the hearing but did not make any submissions.

BACKGROUND

19.There is no denying that the Shareholders’ Dispute Action is a very complex piece of litigation involving multiple parties and very complex factual and legal issues, with pleadings of the parties running into hundreds of pages long. There are also thousands pages of documents involved. One can say that the Loan Action is merely an “off shoot” of that very complex main branch of the litigation.

20.Thankfully, what I have been asked to hear and to determine at the hearing are two relatively simple summonses in the midst of that very complex web of litigation, namely, (i) whether the Counterclaim should be struck out; and (ii) whether the two actions should be heard together.

21.However, it would still require the court to set out the background of the case in order for all concerned parties to understand the context against which those two summonses has been taken out and the basis on which the court decides on the issues raised therein.

22.For that purpose, I shall respectfully adopt the factual background and procedural background summarised by Mr Dawes and his team under the CSC Parties’ written submissions (“the CSC Parties’ Submissions”) in §§23-75 hereinbelow. Most of those background facts can be found in the parties’ pleadings and are not controversial. Where appropriate, I shall make some modifications of my own. However, I am fully aware that these are facts as summarized by the CSC Parties and seen through their prism. They do not necessary represent Tianrui or other parties’ position or their understanding of the facts or events. They certainly are not findings of facts made by this court. Nonetheless, they are useful summaries for all parties concerned to understand the general background to this otherwise very complex case.

The Parties

23.The CSC Parties are plaintiffs in the Shareholders’ Dispute Action and defendants (“Ds”) in the Loan Action. They consist of:

(a)  P1 (“CSC”), a company incorporated in the Cayman Islands and listed on the Main Board of the Stock Exchange of Hong Kong Limited (“SEHK”) (Stock Code: 691). It is primarily a holding company of the CSC group of companies (“CSC Group”) which operates in the cement industry in mainland China.

(b)  P2 to P4 (“CSCHK”, “Pioneer” and “SDSS” respectively), which are CSC’s subsidiaries. SDSS is the main operating entity in the CSC Group. It owns most of the CSC Group’s fixed assets and are responsible for most of the CSC Group’s revenue: 548 Action ASOC §§1-4.

24.Tianrui is D2 in the Shareholders’ Dispute Action and P in the Loan Action:

(a)  Tianrui and D1 (“Tianrui International”) (Tianrui’s wholly-owned subsidiary), are part of the Tianrui group of companies which also operate in the cement industry in mainland China and which compete with the CSC Group.

(b)  Tianrui International is one of the significant shareholders of CSC. According to its own disclosure, it held 28.16% of CSC shares as at 15 April 2015: 548 Action ASOC §§5-7.

25.D3 to D17 were former directors and/or officers of the CSC Parties. They occupied the CSC board at various times between 1 December 2015 and 23 May 2018.[1] A summary of their positions is set out in Annex 2 of the 548 Action ASOC. In particular:

(a)  D3 and D4 were respectively managing director and director of D18, the Hong Kong transaction services arm of Ernst & Young. D3 and D4 were among the persons appointed as receivers (“EY Receivers”) of certain shares in China Shanshui Investment Co Ltd (“CSI”), which in turn held 25.09% of CSC shares. The relevant CSI shares were the subject of litigation involving CSC’s founder (Zhang Caikui, “Zhang Sr”) and the CSC Group’s employees (“CSI Employee Beneficiaries”) (“CSI Trust Actions”). After the EY Receivers were appointed over the CSI shares, they were also appointed as CSI directors in July 2015: 548 Action ASOC §§8B, 8C, 90C-90G, 93F.

(b)  D5 and D6 were also former directors of CSI who were added to the CSI board after the EY Receivers: 548 Action ASOC §§8D, 8E, 93J.2.

(c)  D7 was a director and senior management member, and D8 was chairman and a majority shareholder, of Tianrui: 548 Action ASOC §§8F-8G.

(d)  D9 to D16 were former non-executive or purported independent non-executive directors[2] of CSC: 548 Action ASOC §§8H-8O.

26.D17 was the former (joint) company secretary of CSC, CSCHK and Pioneer: 548 Action ASOC §8P.

27.The CSC Parties’ case is that D3 to D17 were recommended or nominated by Tianrui, the EY Receivers, and/or other directors and officers so recommended or nominated. They were referred to as the “Tianrui D&Os” in the 548 Action ASOC: §8A.

28.D18 was engaged by CSC to conduct investigations. The CSC Parties’ case is that some of the service fees charged by D18 were in fact fees charged by the EY Receivers for works performed as directors and officers of entities in the CSC Group: 548 Action ASOC §20.

Factual Background

The CSC Parties’ Case in the Shareholders’ Dispute Action

29.The Shareholders’ Dispute Action concerns the CSC Parties’ claims against Ds for, inter alia, unlawful means conspiracy, breach of duties, dishonest assistance and knowing receipt.

30.In gist, the CSC Parties’ case against Tianrui is that it had engaged in a conspiracy with the other defendants to take control over the CSC Group and to maximise economic benefits for themselves (“the Conspiracy”).[3] Tianrui allegedly first began by taking advantage of the disputes in CSI to pave the way to taking over control and operation of the CSC Group. It also acquired a substantial stake in CSC. By aligning with some of the minority shareholders of CSI (“CSI Minority Shareholders”) and conspiring with the EY Receivers and the Tianrui D&Os, the CSC Parties claim that it reconstituted the CSC board on 1 December 2015. Tianrui then allegedly caused the Tianrui D&Os to act in breach of their duties inter alia by not enforcing the Cayman Undertaking (defined below) against Tianrui, by attempting to divert SDSS’s assets for Tianrui’s benefit, and by using criminal and violent acts to acquire control over SDSS. The co-conspirators’ actions have allegedly caused substantial loss and damage to the CSC Group: 548 ASOC §§88-90A; see also 1013 Action D&CC §§71-76.

31.Between February 2015 and April 2015, according to Tianrui’s disclosure, Tianrui (which did not hold any CSC shares before) acquired 28.16% of CSC shares, which made it the largest shareholder of CSC: 548 Action ASOC §§92A-93B.

32.On 16 April 2015, as Tianrui’s acquisition had caused CSC’s public float to fall below the level required for continuation of trading, the trading of CSC shares became suspended: 548 Action ASOC §93.4. In addition, Tianrui’s acquisition also triggered substantial liabilities for CSC to redeem notes which would otherwise only have been due in 2016 (“2016 Notes”): 548 Action ASOC §93.5.

33.Prior to the acquisition, the CSI Employee Beneficiaries and CSI Minority Shareholders had been in dispute with Zhang Sr over the beneficial ownership in CSI shares which culminated in the CSI Trust Actions. Tianrui provided funding and support for the CSI Employee Beneficiaries including through its legal representatives (K&L Gates, who also acted as CSI Employee Beneficiaries’ legal representatives in the CSI Trust Actions): 548 Action ASOC §§90C, 90H, 90I.

34.On 20 May 2015 and 14 July 2015, D3, D4 and Koo Chi Sum (ie the EY Receivers) were appointed as receivers over the CSI shares in dispute in the CSI Trust Actions. The CSC Parties’ case is that Tianrui had through its legal representatives took steps to procure the appointment of the EY Receivers: 548 Action ASOC §§93D-93F.

35.The court specified at the time that it was not contemplated that the appointment would lead to an immediate change of management of CSI and CSC, and ordered the EY Receivers not to change the composition of the CSC Board without first obtaining the court’s directions: 548 Action ASOC §§93G, 95A, 95B.

36.Nonetheless, the EY Receivers were appointed to CSI’s board in July 2015 with the help of one of the CSI Minority Shareholders: 548 Action ASOC §§8B.3, 8C.3, 93J.1, followed by D5 and D6 in August 2015: 548 Action ASOC §§8D.2, 8E.2. The CSC Parties’ case is that D5 and D6 were not in fact independent from the EY Receivers: 548 Action ASOC §§93J.2, 98E.

37.Thus, the EY Receivers, D5 and D6, together with the CSI Minority Shareholders who were also CSI directors at the time, were able to dominate the CSI board’s decisions and thereby control CSI’s 25.09% shares in CSC. Combined with Tianrui’s own shares in CSC, the bloc had effective control over 53.25% of CSC shares: 548 Action ASOC §§93J.3-93K.

38.According to the CSC Parties, Tianrui and the EY Receivers then allegedly collaborated in taking steps to reconstitute the CSC Board:

(a)  Between 18 June 2015 and 28 October 2015, Tianrui International and Bliss Talent Investments Limited (“Bliss Talent”) issued a series of requisitions for extraordinary general meetings (“EGMs”) to reconstitute the CSC board: 548 Action ASOC §95.

(b)  The EY Receivers, in spite of the court’s indication referred to in §35 above, applied to the court on multiple occasions for directions to vote on the replacement of CSC directors: 548 Action ASOC §§95J-95N, 95S-95V, 95Z.

(c)  On 16 October 2015, after repeated attempts, the EY Receivers finally obtained directions to vote on the replacement of CSC directors from DHCJ Seagroatt. It is the CSC Parties’ case that the directions were obtained without making material disclosures to the court: 548 Action ASOC §§95Z-97.

(d)  D4 (acting as CSI’s director) then proposed to Tianrui International that D3, D5, D6 and D10 should be appointed as CSC directors. Tianrui International amended the 3^rd Requisition accordingly: 548 Action ASOC §§97A-97B.

39.At CSC’s EGM on 1 December 2015, Tianrui and CSI voted for the removal of the existing directors of the CSC board (“Pre-2015 Board”) and appointment of their proposed candidates. The CSC board was thereby reconstituted with the Tianrui D&Os (“the December 2015 Board”): 548 Action ASOC §97C.

40.After the reconstitution, the December 2015 Board allegedly carried out the following acts in furtherance of the Conspiracy:

(a)  It procured CSC to replace the directors and officers of CSC’s subsidiaries: 548 Action ASOC §97D.

(b)  Just 3 days after the December 2015 Board was constituted, the Tianrui D&Os commenced litigation in HCA 2880/2015 against some members of the Pre-2015 Board: 548 Action ASOC §99. During its tenure, the December 2015 Board initiated various other legal proceedings against persons who did not cooperate with Tianrui: 548 Action ASOC §§103, 104B, 104C.

(c)  It abandoned or failed to diligently pursue investigation which had been initiated by the Pre-2015 Board in relation to Tianrui’s acquisition of the CSI Employee Beneficiaries’ interests in CSI: 548 Action ASOC §§104-104A.

(d)  Tianrui made an undertaking to the Grand Court of the Cayman Islands and CSC on 17 November 2015 (“Cayman Undertaking”) that, upon reconstitution of the CSC Board, it would procure CSC to have the financial means to redeem notes issued in the aggregate amount of US$500 million originally due in 2020 (“2020 Notes”). The 2020 Notes constituted a substantial portion of the CSC Group’s liabilities. On the CSC Parties’ case, CSC became liable to repurchase the 2020 Notes upon the reconstitution of the CSC Board: 548 Action ASOC §§105-115.

(e)  CSC announced its offer to repurchase the 2020 Notes in January 2016. The December 2015 Board did not secure the funding promised by Tianrui (including by enforcing the Cayman Undertaking) or obtain assurance that the funding would be forthcoming. CSC was unable to redeem the 2020 Notes throughout the tenure of the Tianrui D&Os, and had continued to incur interests thereupon. The CSC Group thus became the subject of numerous legal claims by the noteholders, and continued to suffer from impaired ability to raise funds: 548 Action ASOC §§116-118, 134-137.

(f)  Instead, various purported loan agreements were made with entities within the Tianrui group of companies (including agreements relating to the Loans). The loans were purportedly made on an unsecured, interest-free and no-fixed term basis. Some of the loans included back-to-back transactions whereby a CSC Group entity would pay Tianrui as repayment for a purported loan, and Tianrui would then extend a new loan for a similar amount to a CSC entity. Some of the loans were made after Tianrui had taken out bank loans with guarantees provided by CSC: 548 Action ASOC §§118A-118E.

(g)  By exaggerating the extent of Tianrui’s financial support under the purported loans, the December 2015 Board created an impression that the CSC Group was dependent on Tianrui for continuous funding. It then used Tianrui’s funding to justify not enforcing the Cayman Undertaking. As CSC continued to fail to repay its liabilities for redeeming the 2020 Notes, its ability to raise funds continued to be stifled. The December 2015 Board then used the inability to raise funds from other sources to justify its subsequent proposals: 548 Action ASOC §118E.

(h)  The December 2015 Board also sought to reduce the net asset value (“NAV”) of the CSC Group by recognising substantial impairment losses. It then used the reduced NAV as an excuse for its subsequent proposals: 548 Action ASOC §§118F-118I.

(i)  The December 2015 Board purported to raise funds and to restore CSC’s public float through various means which were on plainly uncommercial terms and which were beneficial to Tianrui rather than the CSC Group, including:

(i)  purported funding proposals through an open offer (“4-for-1 Open Offer”) and share placements (“First and Second Proposed Placements”), whereby CSC shares would be sold or placed at substantially discounted prices: 548 Action ASOC §§119-132A;

(ii)  pledges of SDSS and/or its subsidiaries’ assets including to Tianrui: 548 Action ASOC §§138-148; and

(iii)  corporate guarantee by CSC to secure Tianrui’s loan from the bank: 548 Action ASOC §§149-154.

(j)  After Tianrui and the December 2015 Board later fell out with the CSI Minority Shareholders (including Mi Jingtian and his associates), they took steps to exclude the relevant individuals from the management of SDSS including by organising a violent attack on SDSS’s headquarters in Jinan, Shandong Province (“Jinan Incident”): 548 Action ASOC §§154-160C.

(k)  The December 2015 Board also failed to disclose disagreements among the board members and caused CSC to make inaccurate, misleading or false announcements as to the trigger of CSC’s obligations to repurchase the 2020 Notes and Tianrui’s financial support during its tenure: 548 Action ASOC §§160F-167.

41.The Tianrui D&Os have acted in breach of duties owed to the CSC Parties as directors and/or officers: 548 Action ASOC §§168-209.

42.The CSC Parties also contend that Ds are liable for dishonest assistance of each other’s breach of duties and for knowing receipt. Specifically against Tianrui, the CSC Parties contend that Tianrui has knowingly received purported repayments which had been paid out in breach of fiduciary duty: 548 Action ASOC §§211-213.

Tianrui’s Case in the Shareholders’ Dispute Action

43.Tianrui denies that it was part of a conspiracy: 548 Action D1D2D8 ADef §8A.

44.As to the acquisition of CSC shares, Tianrui claims that:

(a)  Tianrui International acquired CSC shares through lawful commercial activities: 548 Action D1D2D8 ADef §§9, 13.1.

(b)  Tianrui International’s acquisition was not the only cause for CSC’s public float to drop below the requisite level for continuation of trading: 548 Action D1D2D8 ADef §§13.1, 22B, 25.3.

(c)  Tianrui was not aware of the terms of the 2016 Notes or the effect of its acquisition on CSC’s obligations thereunder. CSC would in any event have become liable to redeem the 2016 Notes due to the other shareholders’ actions: 548 Action D1D2D8 ADef §§28A, 28C.6.

45.As to the support for the CSI Employee Beneficiaries:

(a)  Tianrui did not pay for, or procure anyone else to pay for, any funds remitted to the EY Receivers: 548 Action D1D2D8 ADef §11F.5.

(b)  K&L Gates did not act as the legal representative of the CSI Employee Beneficiaries in the CSI Trust Actions and of Tianrui at the same time: 548 Action D1D2D8 ADef §11F.1.

46.As to the reconstitution of the CSC Board:

(a)  Tianrui International’s actions in requisitioning meetings and voting for the appointment or removal of CSC directors are legitimate exercise of its shareholders’ rights: 548 Action D1D2D8 ADef §§13.3, 28K.

(b)  D3 to D16 were not Tianrui’s agents or nominees. They had exercised their powers as CSC directors legitimately and properly and were not acting in pursuance of any conspiracy: 548 Action D1D2D8 ADef §12.

(c)  Other than D7 and D8, the other directors of CSC were not nominated by, and were independent of, Tianrui: 548 Action D1D2D8 ADef §6.4.

(d)  Tianrui relies on a number of matters which form the subject of dispute in HCA 2880/2015 to argue that it was the former directors’ actions which had injured the CSC Parties: 548 Action D1D2D8 ADef §§27-28.

(e)  The replacement of the Pre-2015 Board was also justified and was made in accordance with what the majority of CSC shareholders considered to be appropriate and in the interest of CSC having regard to the alleged misconduct of the Pre-2015 Board: 548 Action D1D2D8 ADef §28K.

47.The December 2015 Board was not aligned to Tianrui and did not make decisions beneficial to Tianrui: 548 Action D1D2D8 ADef §13.3(b).

48.The December 2015 Board commenced litigation against CSC’s former directors in accordance with CSC’s interests: 548 Action D1D2D8 ADef §§13.4, 34, 35, 35A.

49.As to the repurchase of the 2020 Notes and Cayman Undertaking:

(a)  CSC had become obliged to repurchase the 2020 Notes (and remaining 2016 Notes) even before the reconstitution of the CSC board on 1 December 2015: 548 Action D1D2D8 ADef §49.

(b)  The December 2015 Board had to announce an offer to repurchase the 2020 Notes in January 2016 to avoid triggering an event of default on the 2020 Notes: 548 Action D1D2D8 ADef §§82.1, 84.3.

(c)  Tianrui GroupCo did not breach the Cayman Undertaking: 548 D1D2D8 ADef §54.5. CSC’s financial and asset position was substantially different from what the Pre-2015 Board had disclosed, such that Tianrui GroupCo was no longer obliged to perform the undertaking: 548 Action D1D2D8 ADef §54.3.

(d)  The December 2015 Board was justified not to enforce the Cayman Undertaking in view of Tianrui’s potential defences: 548 Action D1D2D8 ADef §§54.5-54.9.

50.Instead, Tianrui provided interest-free loans to the CSC Group either by itself and by taking out loans from financial institutions (with CSC’s guarantee) to cover part of the payments under the 2020 Notes. As of 31 December 2019, the total balance of the loans amounted to RMB 897,539,000 (which were part of the Loans claimed in the 1013 Action): 548 Action D1D2D8 ADef §§54.4, 54E-54Q. According to Tianrui, the Loans were provided in the following circumstances:

(a)  CSC was liable to redeem the 2016 Notes and 2020 Notes but lacked the requisite financial means to do so.

(b)  Tianrui was not obliged to provide credit facilities for CSC’s use under the Cayman Undertaking.

(c)  CSC was unable to raise funds as the 4-for-1 Open Offer, First and Second Proposed Placements were not carried out successfully: 548 Action D1D2D8 ADef §§54R, 54T.

51.As to the reduction of NAV:

(a)  The December 2015 Board was unable to make a final assessment of the NAV with the benefit of detailed supporting computation as it did not have complete books and records. It nonetheless made a reasonable and bona fide recognition of impairment losses of goodwill: 548 Action D1D2D8 ADef §§54V.4, 54V.5.

(b)  In any event, the recognition did not cause actual loss to the CSC Group: 548 Action D1D2D8 ADef §54V.5(c).

52.As for the purported fund-raising exercises (including 4-for-1 Open Offer and First and Second Proposed Placements):

(a)  CSC could only repurchase part of the 2020 Notes tendered as they were unable to raise sufficient funds. If the 4-for-1 Open Offer, First and Second Proposed Placements had been carried out, they would have raised substantial funds for CSC: 548 Action D1D2D8 ADef §§57.4, 83.

(b)  The funding proposals were necessary and in CSC’s best interests. CSC had been in dire financial straits and was not able to redeem the 2020 Notes; and Tianrui GroupCo was unable to provide the credit facilities as described in the Cayman Undertaking for CSC’s use. The proposals would have raised substantial funds and/or restored CSC’s public float: 548 Action D1D2D8 ADef §§57, 64, 83.

(c)  The price of the 4-for-1 Open Offer was set upon independent advice. While Tianrui International was a potential underwriter under the 4-for-1 Open Offer, the offer price was not substantially discounted and Tianrui International was not thereby uniquely or specifically enabled to subscribe for CSC shares at the discounted price: 548 Action D1D2D8 ADef §§57A, 58.2.

(d)  The price of the First and Second Proposed Placements was arrived at after arm’s length negotiations with the placing agents. The First and Second Proposed Placements had to be placed to no less than 6 independent places and not to Tianrui International and its proxies: 548 Action D1D2D8 ADef §65.

(e)  The 4-for-1 Open Offer had to be withdrawn due to poor market sentiment and feedback: 548 Action D1D2D8 ADef §58C.1. The First Proposed Placement had to be replaced by the Second Proposed Placement as it could not be completed by the long stop date set due to intervention from other shareholders: 548 Action D1D2D8 ADef §63.

(f)  Instead, the New Board had acted wrongfully by issuing Convertible Bonds, which were issued on uncommercial terms and otherwise than at arm’s length: 548 Action D1D2D8 ADef §§84.6, 86-90B.

53.As to the pledging agreements and corporate guarantee:

(a)  The pledge and guarantee were necessary and in CSC’s best interests: 548 Action D1D2D8 ADef §§96, 98.3.

(b)  The pledges were not effective as they did not bear SDSS’s seal and/or as SDSS was in Mi Jingitan and his associates’ illegal occupation. They did not cause any loss to the CSC Parties: 548 Action D1D2D8 ADef §§92, 95.

(c)  The corporate guarantee was part of an arrangement whereby Tianrui GroupCo obtained a bank loan of RMB 400 million and then extended a loan of RMB 479 million to CSC to make partial repayment of the 2020 Note: 548 Action D1D2D8 ADef §98. Tianrui repaid the bank loan in full. No detriment was caused to CSC: 548 Action D1D2D8 ADef §98B.

54.As to the Jinan Incident:

(a)  Mi Jingtian and his associates refused to cooperate with CSC, CSCHK and Pioneer since around December 2016: 548 Action D1D2D8 ADef §99.1. They were dismissed from SDSS but they continued to occupy SDSS’s headquarters. The December 2015 Board therefore sought to physically regain possession of the headquarters but was unsuccessful: 548 Action D1D2D8 ADef §100.

(b)  The December 2015 Board had undertaken acts which were necessary and in CSC and its shareholders’ best interests in order to obtain full control of SDSS: 548 Action D1D2D8 ADef §100.2.

55.Tianrui also denies the December 2015 Board had issued false announcements: 548 Action D1D2D8 ADef §§100G-100H.

56.The claim for breach of duties does not concern Tianrui as they did not owe fiduciary duties to CSC: 548 Action D1D2D8ADef §2.4.

57.As to dishonest assistance and knowing receipt, Tianrui argues that the CSC Parties’ case is under-particularised and is inconsistent with the case of unlawful means conspiracy. Tianrui also claims they did not receive any monies which belonged to the CSC Group: 548 Action D1D2D8 ADef §§186, 188.

58.The CSC Parties’ losses were caused by the actions of the Pre-2015 Board and the new board which replaced the December 2015 Board after 23 May 2018: 548 Action D1D2D8 ADef §14.2.

Tianrui’s Case in the Loan Action

59.Between 30 December 2015 and 8 May 2018, Tianrui (either by itself or through Tianrui International) extended various loans to the CSC Parties (or CSC agreed to shoulder liabilities) under various written loan agreements or otherwise (ie the Loans). The Loans were interest-free, unsecured and repayable within 5 days on demand: 1013 Action SOC §§4, 9, 11, 14.

60.The CSC Parties and/or its associates have acknowledged the Loans through partial repayments: 1013 Action SOC §§16-24 and written acknowledgements: 1013 Action SOC §27, such that limitation periods did not run until the times of these acknowledgements: 1013 Action SOC §28.

61.Tianrui claims a total outstanding sum of RMB 928,597,837.37, ie the Loans: 1013 Action SOC §26.

The CSC Parties’ Case in the Loan Action

62.The CSC Parties contend that the Loans were made when Tianrui and other co-conspirators were in control of the CSC Parties’ respective boards; the Loans lacked commercial probity and were made as part of the Conspiracy: 1013 Action D&CC §3.

63.There was no acknowledgement whether by the alleged partial repayments or written acknowledgements. At least some of the Loans had become time-barred: 1013 Action D&CC §§27-28.

64.The CSC Parties also contend that the Loans should be set off against Tianrui’s liabilities under their Counterclaim: 1013 Action D&CC §33. The Counterclaim relates to the same Conspiracy and which substantially replicates their claim in the Shareholders’ Dispute Action. The CSC Parties also made it clear that they intended to apply for the two actions to be consolidated or be heard together or one after the other: 1013 Action D&CC §37.

Procedural Background

The Shareholders’ Dispute Action

65.On 29 March 2019, the CSC Parties issued the original writ.

66.On 14 August 2019, Tianrui and Li Liufa made a jurisdictional challenge in the Shareholders’ Dispute Action. The challenge was dismissed on 7 December 2020: K Yeung J’s decision in [2020] HKCFI 3043, §§4, 84.

67.On 2 March 2021, Tianrui and Li Liufa filed their defence in the Shareholders’ Dispute Action.

68.On 17 February 2022, in light of discoveries in its ongoing investigation into the matter, the CSC Parties amended the writ and the SOC: 1013 Action Chang 1^st §26.2; 548 Action ASOC.

69.On 27 September 2022, Tianrui and Li Liufa filed the Shareholders’ Dispute Action defence: 548 Action D1D2D8 ADef.

70.The 11^th defendant filed his amended defence in the Shareholders’ Dispute Action on 8 January 2024: 548 Action D11 ADef.

71.The CSC Parties have since filed all replies / amended replies. Pleadings in the Shareholders’ Dispute Action have now closed.

The Loan Action

72.On 28 June 2023, Tianrui issued the Writ in the Loan Action.

73.The writ was issued shortly before the expiry of the 6-year period of repayments made by CSC or its subsidiary in 2017, which Tianrui claimed to constitute acknowledgement of the relevant Loans and would have extended the limitation period: 1013 Action SOC §§24, 28.

74.On 3 January 2024, the CSC Parties filed the defence and counterclaim in the Loan Action.

75.The time for Tianrui to file its reply and defence to counterclaim has been extended until 28 days after the final determination of the Striking Out Summons: Registrar Kwang’s Order dated 8 March 2024 §6.

(A)  The Striking Out Summons

Legal principles

76.The following well-established legal principles have been summarized by Mr Dawes in his submissions and they are not in dispute.

77.A proceeding may be struck out for being vexatious when it is oppressive and/or lacks bona fides: See Hong Kong Civil Procedure 2025 (“HKCP”), §§18/19/6-18/19/7; Chinachem Charitable Foundation Limited v Chan Wai Tong Christopher [2022] HKCA 1907, §6; 謝紅玲 v 李偉斌律師行 [2024] HKCFI 3578, §40.

78.For striking out a pleading on the ground that it tends to prejudice, embarrass or delay the fair trial of the action:

(a)  It would prejudice, embarrass and delay the fair trial of an action should a party introduce a plea that is unnecessary or irrelevant.

(b)  Nonetheless, a statement will not be struck out merely because it is unnecessary, so long as it is otherwise harmless: HKCP, §18/19/8.

79.For striking out a claim as an abuse of process:

(a)  Motive and intention as such (save only where ‘malice’ is a relevant plea) are irrelevant.

(b)  The institution of proceedings with an ulterior motive is not of itself enough to constitute an abuse: an action is only abusive if the court’s processes are being misused to achieve something not properly available to the plaintiff in the course of properly conducted proceedings in:

(i)  The achievement of a collateral advantage beyond the proper scope of the action to secure to the plaintiff something he has no legitimate claim whatever;

(ii)  The conduct of proceedings not so as to vindicate a right but rather in a manner designed to cause the defendant the problems of expense, harassment, commercial prejudice or the like beyond those ordinarily encountered in the course of properly conducted litigation.

(c)  Only in the most clear and obvious case will it be appropriate upon preliminary application to strike out proceedings as an abuse of process so as to prevent a plaintiff from bringing an apparently proper cause of action to trial: 謝紅玲, §41.

80.For duplication of actions, it is well-established that a strike out is a draconian step of last resort, and the court should consider other, less robust, case management directions such as an order that the actions be heard together: Power Securities Company Limited v Sin Kwok Lam & Ors [2023] HKCA 594, §76.4; Lo Kai Shui v HSBC International Trustee Ltd & Ors (No 2) [2023] 6 HKC 411, §§112, 115.

Tianrui’s submissions on the Striking Out Summons

81.Mr Li’s primary submissions on the Striking Out Summons is that the Counterclaim in the Loan Action is a de facto duplication of the Shareholders’ Dispute Action and therefore it is an abuse of process and in itself justifies the strike-out.

82.Further, Mr Li submits that given the CSC Parties’ track record with the dilatory approach in prosecuting the Shareholders’ Dispute Action, coupled with the fact that repeating those claims in the Loan Action purportedly as a counterclaim significantly muddles the waters and over- complicates what Tianrui considers otherwise is a very straightforward loan action. In Mr Li’s submissions, what the CSC Parties are trying to do is to buy time by wasting parties’ and the court’s time to sort through (and possibly litigate) parallel claims, so that they can avoid the Loan Action.

83.Insofar as the CSC Parties’ reliance on the plea of equitable set-off, Mr Li submits that this should not be allowed as the Loan Action and the Shareholders’ Dispute Action are not so closely connected that the former cannot be enforced without the conspiracy claims being taken into account: Geldof Metaalconstructive NV v Simon Carves Ltd [2010] 4 All ER 847 at §43(i), (iv), per Rix LJ.

84.In particular, Mr Li submits that:-

(a)  The Loan Action is a straightforward claim for repayment of monies extended to the CSC Parties by the (then) largest shareholder of CSC.

(b)  This is contrasted with the much more complicated Shareholders’ Dispute Action, where all major actions which took place during Tianrui’s control of CSC are alleged to be a part of an overarching conspiracy, facilitated by the various directors who were on CSC’s Board at the material time: (See §26 (1) & (2) of Tianrui’s Submissions).

85.Further, Mr Li submits that whilst the claims take place against the same factual backdrop, they operate at different levels. Hence, properly analysed, he submits that they do not truly intersect: (See §27 of Tianrui’s Submissions).

86.In addition, Mr Li submits that it would not be “manifestly unjust” for the Loan Action to proceed without the Shareholder’s Dispute Action being taken into account and they should not be allowed or need to be tied together: (See §28 of Tianrui’s Submissions).

87.Mr Li says that injustice will be caused to Tianrui if the CSC Parties were allowed to derail a simple debt claim by “shoehorning their cross-claim in to muddy the waters”.

88.Last but not the least, Mr Li submits that allowing the cross-claim to be relied on as equitable set-off would involve considerable delay which keeps Tianrui (or China Orient) from its money, for which they should not be adequately compensated for: See Abignano and Another v Wenkart and Another (1998) 9 BPR 16,765, 16,774; Derham at §4.77.

Ruling on the Striking Out Summons

89.In my judgment, there is no sufficient or solid basis for Tianrui to strike out the CSC Parties’ Counterclaim in the Loan Action.

90.It is clear that Tianrui does not argue that the CSC Parties’ claims / counterclaims should be struck out for want of reasonable cause of action or on merits grounds. The objection is solely procedural in nature, ie the CSC Parties should not be allowed to ventilate their claims in both actions.

91.It is trite that only in the most clear and obvious cases that a proper cause of action should be struck out for being an abuse of process: 謝紅玲, §41. Thus, Tianrui case is no more than that it is “embarrassing and/or inconvenient” for the claims to be litigated in two separate proceedings. I agree with the CSC Parites’ submissions that this cannot possibly meet the high threshold required for striking-out.

92.I agree with the following submissions made by Mr Dawes on behalf of the CSC Parties on the Striking Out Summons.

93.First, I agree with Mr Dawes that any concerns of parallel proceedings can be addressed by case management directions ordering the Shareholders’ Dispute Action and the Loan Action to be tried at the same time or one after the other:

(a)  The same judge will hear the two actions in one go. There is no risk of inconsistent findings or duplication of proceedings.

(b)  The CSC Parties and Tianrui are already parties to both actions. There is no concern that they would have to be brought into either action.

(c)  The Loans have already featured in the Shareholders’ Dispute Action:

(i)  The CSC Parties claim that the Loans were part of the scheme to entrench Tianrui’s influence by portraying CSC Group as being dependent on Tianrui’s financial support and to facilitate the co-conspirators’ purported fund-raising exercises: 548 Action ASOC §118E, and that Tianrui is liable for knowing receipt of the purported repayments of the Loans: 548 Action ASOC §213.

(ii)  Tianrui claims that the Loans showed that, despite that Tianrui was not liable to honour the Cayman Undertaking, it continued to provide valuable financial support to the CSC Group in circumstances where the CSC Group was in dire financial needs and unable to raise funds through other means: 548 Action D1D2D8 ADef §§54.4, 54E-54R.

(iii)  Thus, issues such as existence and purposes of the Loans would have to be decided in the Shareholders’ Dispute Action in any event, including Tianrui’s claim for the Loans in the Shareholders’ Dispute Action would only give rise to one additional issue, ie the time bar defence.

(d)  No prejudice would be caused to other parties in the Shareholders’ Dispute Action if the actions are heard together or one after the other:

(i)  The fact that the Loans have already featured in the Shareholders’ Dispute Action means that the other defendants have had to (and did already) address the same issues in any event.

(ii)  To this end, at least one of the other defendants, ie D12, has indicated no objection to hearing both actions together: 548 Action Ho 1^st §3(1).

(e)  At most, allowing the Counterclaim to proceed would mean that Tianrui would have to plead to the Counterclaim in its reply and defence to counterclaim in the Loan Action. Tianrui would not suffer any hardship in doing so:

(i)  Tianrui has already prepared its response to the Conspiracy claim in the Shareholders’ Dispute Action.

(ii)  It also acknowledged that the CSC Parties’ Counterclaim was basically the “exact same claim” as their claim in the Shareholders’ Dispute Action: 1013 Action Liu 1^st §20.

(iii)  Tianrui has engaged the same solicitors and junior counsel for both actions: 548 Action D1D2D8 ADef; 1013 Action SOC. It would have little difficulty in repeating its response in the Loan Action.

94.Second, I further agree with Mr Dawes that the CSC Parties should not be deprived of their entitlement to a legal set-off:

(a)  An independent or legal set-off is a remedy available only in judicial proceedings; it enables a defendant to require his cross-claim to be tried together with the plaintiff’s claim and in this way ensures that judgment will be given simultaneously, thereby relieving him from having to satisfy the judgment before his cross-claim has been determined: Stein v Blake [1996] 1 AC 243, 251C-D.

(b)  If the Counterclaim in the Loan Action is struck out, the CSC Parties would not be able to require Tianrui’s claim for the Loans to be decided at the same time as their counterclaims, ie they would no longer have a defence of legal set-off.

95.However, I consider that the CSC Parties’ set-off is more in the nature of an equitable set-off rather than a legal set off due to the fact that: (i) their claim against Tianrui was for knowing receipt of the purported repayment to the Loans: (548 Action ASOC §213; 1013 Action D&CC §340); and (ii) the CSC Parties’ claims against Tianrui are unliquidated: (548 Action ASOC §§214-220; 1013 Action D&CC §§341-346).

96.The mechanism of set-off (in the context of an independent or legal se-toff) was explained in Stein v Blake 251C-D, ie it ensures that the defendant’s cross-claim and the plaintiff’s claim would be tried together such that judgment will be given simultaneously; and the defendant will be relieved from having to satisfy the judgment before his cross-claim has been determined.

97.As Mr Dawes has explained in the CSC Parties’ Supplemental Skeleton Submissions, the above mechanism is also reflected in the requirements of an equitable cross-claim, ie the claim and cross-claim should be so closely connected that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into account the cross-claim: Geldof §§43(i)-(vi); citing The Nafri [1978] QB 927, 975; see also Karpex (HK) Ltd and Yasmine Printing (China) Ltd [2008] 1 HKLRD 199 §10.

98.As Rix LJ highlighted in Geldof, close connection does not necessarily require the cross-claim to arise out of the same dealings as the claim. Otherwise, very few claims and cross-claims which arise out of different contracts could be fitted within the language: §43(vi).

99.Tianrui seeks to undermine the connections between its Loans claim and the CSC Parties’ Counterclaim: Tianrui’s Submissions §§26-27 (see §§84-85 above).

100.I agree with Mr Dawes that Tianrui’s arguments on this should be rejected for the following reasons:

(a)  Even Tianrui accepts that the Loans arise out of the same factual backdrop as the Counterclaim: Tianrui’s Submissions §27.

(b)  In fact, the Loans are an inseparable part to the CSC Parties’ case on the Conspiracy, ie the purportedly unsecured, interest-free and no-fixed term Loans (which included transactions effected through back-to-back payments between Tianrui and the CSC Group entities and with guarantee provided by CSC) were the means by which the December 2015 Board allegedly was able to exaggerate Tianrui’s contribution and to engineer the CSC Group’s dependence on Tianrui, thus enabling the co-conspirators not to enforce Tianrui’s obligation to provide sufficient funding to CSC to pay for the 2020 Notes, and to carry out the subsequent steps in the Conspiracy.

(c)  Thus, in considering the Conspiracy claim, the court would necessarily have to investigate into the Loans including the background in which they were purportedly made.

(d)  As such, the Loans clearly arise out of the same series of dealings or transactions which constitute the CSC Parties’ Counterclaim. There can be no denial that the Loans claim and Counterclaim satisfy even the stricter reading of close connection.

(e)  Tianrui’s objections boil down to that the CSC Parties are not impugning the act of lending, but only the rationale for lending: cf Tianrui Submissions §27(3). I agree with Mr Dawes that this is unwarranted hair-splitting. The purported lending according to the CSC Parties’ case is part of the means of carrying the Conspiracy; and the court would have to consider both the act and purpose of lending in dealing with the Conspiracy claim.

(f)  Further, the objection that there is no claim against Tianrui for loss that it specifically caused is neither here nor there: cf Tianrui’s Submissions §27(5). A conspiracy claim would by its nature involve multiple co-conspirators who have combined together and caused loss to the claimant: Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537 §14. Tianrui would be jointly and severally liable for damages for unlawful means conspiracy as with other defendants: Grant & Mumford, Civil Fraud: Law, Practice & Procedure (1^st edition, 2022), §§2-129.

(g)  The allegation that the CSC Parties’ cross-claim is for a highly speculative quantum is also incorrect: cf Tianrui Submissions §27(6). While the defendants are liable for damages at large once some pecuniary loss is shown: Noble Resources SA and Another v Philip Seth Gross [2009] EWHC 1435 (Comm), §223, the CSC Parties have quantified at least part of the loss and damage suffered as a result of the co-conspirators’ actions: 548 Action ASOC §214; 1013 Action D&CC §341. The first head of loss (ie interests paid on the remaining 2020 Notes) amounts to US$93,982,175 (or around RMB 685 million). This alone would net off Tianrui’s Loans claim of RMB 928,597,837.37 substantially.

101.I further agree with Mr Dawes that the close connection also means that it is manifestly unjust for the respective claims to be dealt with separately:

(a)  The argument that the CSC Parties are not precluded from seeking damages against the co-conspirators in the Shareholders’ Dispute Action is a doomed to fail: cf Tianrui Submissions §§28(1)-(2). Any cross-claim may be brought separately. The focus should be on whether the cross-claim is sufficiently connected with the claim so as to make it manifestly unjust for them not to be decided together.

(b)  In light of the close connections between the respective claims, it is manifestly unjust for Tianrui to sever the issues in the hope that the Loans claim would be litigated first, and that the CSC Parties would be subject to substantial liabilities before Tianrui could be made to answer for the Conspiracy.

102.Third, insofar as Tianrui’s complaints about the possible delays caused by the Counterclaim rasied by the CSC Parties in the Loan Dispute are concerned, I also agree with Mr Dawes that it lies ill in their mouth to complain of any possible delay in recovering the Loans due to the following:

(a)  The CSC Parties are claiming for substantial compensation against the various defendants in the Shareholders’ Dispute Action. They have no reason to delay the resolution of the Shareholders’ Dispute Action.

(b)  Tianrui specifically pleaded to the Loans in the defence and amended defence in the Shareholders’ Dispute Action on 2 March 2021 and 27 September 2022 respectively, and claimed that the balance of RMB 897,539,000 remained outstanding from the CSC Group: 548 Action D1D2D8 ADef §54Q; cf original §79.

(c)  Hence, Tianrui has all along maintained its case that the Loans were outstanding. It could have pursued the Loans by raising a counterclaim in the Shareholders’ Dispute Action but chose not to do so.

(d)  Tianrui waited until June 2023 to issue the Loan Action, which was more than 6 years after some of the relevant loan agreements were made. Tianrui thus had to allege that the limitation periods were extended through partial repayments or written acknowledgements: 1013 Action SOC §28.

(e)  In any event, pleadings for the Shareholders’ Dispute Action have now closed. There is no reason to contemplate that, after the court has decided on how to case manage the Shareholders’ Dispute Action and the Counterclaim in the Loan Action, the parties would not proceed with prosecuting the actions diligently.

Conclusion on the Striking Out Summons

103.Based on the above discussions, I consider that there is no merits in Tianrui’s application. Hence, I would dismiss the Striking Out Summons with costs in favour of the CSC Parties and other defendants, such costs to be taxed if not agreed with certificate for 2 counsel.

(B)  The Hearing Together Summons

Legal Principles

104.The following trite principles in relation to whether actions should be heard together or consolidated have been highlighted by the parties in their submissions. I shall reproduce them here for the record.

105.The court is empowered under Order 4 rule 9 of the Rule of the High Court (“RHC”) to, inter alia, order matters to be consolidated, or be tried at the same time or one immediately after the other. The power is engaged if it appears to the court that:

(a)  Some common question of law or fact arises in both or all of them;

(b)  The rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions; or

(c)  For some other reason it is desirable to make an order under the rule.

106.The relevant principles were summarised in Komal Patel & Ors v Chris Au & Ors, HCA 183/2014 & 2063/2015, 14 January 2016, §§11-17; Yong Li Investments Limited v Lee Sing Leung Robin [2018] HKCFI 1711, §§16-17, 22, 25-27:

(a)  The court has a wide and unfettered discretion under Order 4 rule 9 of the RHC.

(b)  The court should take a practical and common sense approach to ensure that justice is best served, but there is no hard and fast rule on how the discretion ought to be exercised.

(c)  The court must be satisfied that it would be proper and expedient to make such an order, having regard to all the circumstances, including that the objective of the rule is to save time and costs, and where there is substantial overlapping of issues and parties, it is desirable to resolve the disputes in different actions on one occasion before the same judge.

(d)  Following the Civil Justice Reform, the emphasis is on ensuring the efficient and just resolution of disputes.

107.In Convoy Collateral Limited v Cho Kwai Chee & Ors [2022] HKCFI 3406 at §12, Coleman J set out the following principles on Order 4 rule 9 of the RHC:

(a)  The court has an unfettered discretion in deciding whether to make a consolidation order, and the power is to be exercised in a flexible way with regard to the particular circumstances of the situation.

(b)  The court must nevertheless be satisfied that it would be proper and expedient to make the order, having regard in particular that:

(i)  one primary objective of such an order is to save time and costs;

(ii)  where there is a substantial overlapping of issues and parties, it is desirable to resolve the disputes in the different actions on one occasion by the same judge;

(iii)  the court is seeking the avoidance of unnecessary delay, undue complexity and overloading of issues; and

(iv)  the court is seeking the avoidance of creating a risk of irreconcilable decisions which would arise from trying actions separately.

(c)  There is no hard and fast rule that, just because the parties are identical and some common question of fact or law is involved in both actions, it would be expedient and proper to order consolidation.

(d)  The court should take a practical and common sense approach to meet the justice of the particular situation, in light of the underlying objectives in Order 1A of the RHC.

(e)  The emphasis is on ensuring the efficient and just resolution of disputes before the courts.

Tianrui’s Submissions

108.Much of Mr Li’s submissions on this issue is based on the premise that the court will strike out the Counterclaim of the CSC Parties in the Loan Action. Obviously, if the Counterclaim is struck out, then the issues in the Loan Action and the Shareholders’ Dispute Action could become rather different and there might be be no real overlapping issues between them, even if they both take place against the same broad factual context.

109.However, as I have concluded above, the Counterclaim should not be struck out and the Striking Out Summons issued by Tianrui has been dismissed. Therefore, Tianrui’s submissions on the Hearing Together Summons have lost most of their attractions.

The CSC Parties’ Submissions

110.Mr Dawes submits that the present case is on all fours with the circumstances identified under Order 4 rule 9 of the RHC.

111.I agree.

112.It is beyond dispute that the two actions (especially how that the Counterclaim is not struck out) substantially overlap with each other, such that they give rise to common questions of fact and law; and the rights of relief arise out of the same series of transactions:

(a)  The two actions turn on the same fundamental disputes, ie the Conspiracy.

(b)  Tianrui itself characterises the CSC Parties’ claim in the Shareholders’ Dispute Action and the Counterclaim in the Loan Action as basically the “exact same claim”: 1013 Action Liu 1^st §20.

(c)  Even in respect of the Loans specifically, the Loans have always been an inseparable part to the parties’ respective cases on the Conspiracy. The CSC Parties’ entitlement to set-off in the Loan Action is also critically dependent on its success on its claims of unlawful means conspiracy, dishonest assistance and/or knowing receipt against Tianrui.

(d)  Thus, especially given the complex and voluminous disputes involved in the actions, ordering the actions to be tried together would avoid duplication of time and resources.

113.Mr Dawes also points to other circumstances which show that it would be proper, expedient and desirable for the two actions to be tried together:

(a)  The legal representatives for the parties in both actions overlap substantially: 548 Action ASOC; 1013 Action D&CC; 548 Action D1D2D8 ADef; 1013 Action SOC.

(b)  Ordering the actions to be tried together now would ensure that the upcoming preparatory works (eg discovery, witness statements) can be undertaken at the same time, thus ensuring that there be no duplication in time and costs.

Ruling on the Hearing Together Summons

114.In my judgment, this is not a suitable case for consolidation as it will only unnecessary increase the costs and causing further delays to all parties concerned, especially to the other defendants in the Shareholders’ Dispute Action who do not immediately belonged to Tianrui or the CSC Parties, like D12.

115.In my judgment, ordering the actions to be heard together by the same judge should be preferred to ordering them to be consolidated for the following reasons:

(a)  Consolidated pleadings are not necessary in the present case. The parties’ cases in the Shareholders’ Dispute Action and the Loan Action are not likely to differ. The CSC Parties have essentially repeated their claims in the Loan Action, and Tianrui could do the same in its reply and defence to counterclaim. It would be relatively straightforward for the trial judge to refer to the two sets of pleadings of the CSC Parties and Tianrui in the two actions.

(b)  Ordering the actions to be heard together would ensure that the other defendants to the Shareholders’ Dispute Action would not have to take extra steps in light of Tianrui’s claim for the Loans. This is a more sensible and practicable approach given that the other parties have already filed comprehensive pleadings in the Shareholders’ Dispute Action. This will also save them from incurring considerable amount of unnecessary costs.

116.Thus, in my view, this case should be ordered to be heard together by the same judge, either at the same time or one after the other. I consider that the trial judge would be in the best position to assess whether the actions should be tried at the same time or one after the other during the case management stage of the proceedings.

117.In the circumstances, I order that the Shareholders’ Dispute Action and the Loan Action to be heard together, whether at the same time or one immediately after the other, before the same judge, pursuant to the terms stated in §1 of the Hearing Together Summons.

118.Costs should follow the event. As Tianrui is the only party who has opposed to the CSC Parties’ Hearing Together Summons with all the remaining defendants either took a neutral stance or did not make any submissions at the hearing, I consider that Tianrui should be ordered to pay for the costs of this application. I so order that they should pay the CSC Parties and other defendants costs of the Hearing Together Summons, such costs to be taxed if not agreed, with certificate for 2 counsel.

CONCLUSION

119.In the aforestated premises, I order that:

(a)  The Striking Out Summons issued by Tianrui be dismissed;

(b)  The Hearing Together Summons issued by the CSC Parties be allowed; and

(c)  Costs of the Striking Out Summons and the Hearing Together Summons be borne by Tianrui, to be taxed if not agreed, with certificate for 2 counsel.

120.It remains for me to thank all counsel involved in this case for their very helpful submissions.

Mr Victor Dawes SC leading Ms Bonnie Cheng and Mr Harrison Miao, instructed by C Y Tsang & Co, for the 1^st to 4^th plaintiffs in HCA 548/2019 and the 1^st to 4^th defendants in HCA 1013/2023

Mr Laurence Li SC leading Ms Natalie So, instructed by Tanner De Witt, for the 1^st, 2^nd and 8^th defendants in HCA 548/2019 and the plaintiff in HCA 1013/2023

Mr Felix Ng and Ms Polly Li, instructed by Angela Ho & Associates for the 12^th defendant in HCA 548/2019

Ms. Choksuwanlert Rattikan of Dentons Hong Kong LLP for the 3^rd, 4^th and 18^th defendants in HCA 548/2019

Attendance of P C Woo & Co, for the 5^th, 6^th and 17^th defendants in HCA 548/2019, was excused

Attendance of Chong & Yen, for the 11^th defendant in HCA 548/2019, was excused

The 7^th, 10^th, 14^th to 16^th defendants in HCA 548/2019 were not represented and did not appear

The 9^th defendant in HCA 548/2019 appeared in person

The 13^th defendant in HCA 548/2019 appeared in person