Gao Haiyan and Another v. Keeneye Holdings Ltd and Others

HCMP 12/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 12 OF 2013

(on an intended appeal from HCA NO. 1315 OF 2009)

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J U D G M E N T

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Hon Yuen JA (giving the judgment of the Court):

1.This is the plaintiffs’ application for leave to appeal against a decision of Deputy Judge Mayo on 12 November 2012. Leave to appeal was refused by the judge on 20 December 2012.

2.1The application for leave to appeal relates to the plaintiffs’ application for summary judgment in HCA1315/2009. 

2.2In fact at the hearing on 1 November 2012 the judge was seized of 2 summonses:        

- the first in that action for summary judgment, and

- the second for HCA1315/2009 to be heard together with HCA466/2012. 

2.3The second summons was adjourned on 1 November 2012, but at the adjourned hearing on 20 December 2012 the judge made an order that the two actions be heard together.

2.4There has been no application for leave to appeal this latter order.     

Background

3.Briefly, Gao and Xie the plaintiffs in HCA1315 claim to be the legal and beneficial owners of 100 issued shares (“the Shares”) in a company called Baijun (the 5^th defendant) a company registered in Hong Kong. 

4.The plaintiffs’ claim briefly is as follow.

4.1In 2004, they had transferred certain valuable investments they had in a joint venture to the 5^th defendant.

4.2However after a dispute with the joint venture partner, they were detained on the mainland from May to November 2008 for ordering an assault on the joint venture partner’s representative, a person called Zhang. 

4.3During this period (in July 2008) an influential person called Liu falsely represented to them that he could secure their release if they transferred the Shares to him at a price to be agreed upon their release, and failing agreement, he would return the Shares to them. 

4.4The plaintiffs say that was why they signed various documents transferring the Shares and the control of the 5^th defendant to the 1^st and 2^nd defendants (BVI companies controlled by Liu).

4.5Shortly thereafter the 1^st and 2^nd defendants transferred the Shares to the 6^th and 7^th defendants (also BVI companies controlled by Liu).

4.6According to the plaintiffs, after their release Liu refused to return the Shares to them.  Instead the control of the Shares was subsequently transferred to Zhang who then agreed to transfer them to a person called Ma (who is now the plaintiff in HCA466/2012).  

4.7The plaintiffs thereupon started proceedings in Hong Kong against the defendants (but not against Ma).

5.1In the meantime in the PRC, the 1^st and 2^nd defendants started arbitration proceedings for a declaration that the transfer agreements were valid.  The plaintiffs counterclaimed for a declaration that the transfer agreements were null and void.

5.2On 3 June 2010 the Arbitral Tribunal at the Xian Arbitration Commission held in favour of the plaintiffs, and ordered the revocation of the agreements (“the arbitral award”).      

6.The plaintiffs initially obtained leave from Saunders J to enforce the arbitral award in Hong Kong against the 1^st and 2^nd defendants in August 2010.  However that was set aside by an order of Reyes J in April 2011.   Eventually in December 2011 the Court of Appeal restored Saunders J’s order and gave leave to enforce the arbitral award in Hong Kong.    

7.The 1^st, 2^nd, 6^th and 7^th defendants’ defence in HCA1315/2009 is briefly as follows.

7.1Liu had not made any false representations about securing the plaintiffs’ release;

7.2the plaintiffs had agreed to transfer the Shares to the 1^st and 2^nd defendants because they were in need of funds to compensate the victims of the assault which they had instigated;

7.3the arbitral award only served to revoke the share transfer agreements from the date of its publication (3 June 2010) and did not affect the validity of the transfer of the Shares between the 1^st and 2^nd defendants of the one part and the 6^th and 7^th defendants of the other part which had taken place in October 2008;

7.4in any event, the plaintiffs had entered into a number of agreements with Ma, the first entered into in 2009 (before the decision in the arbitration), and the last being an oral agreement in May 2011 (after Reyes J had set aside leave to enforce the award in Hong Kong), whereby the plaintiffs agreed to transfer control of the BVI companies to Ma.

8.Ma (who is now in control of the 1^st, 2^nd, 6^th and 7^th defendants) has alleged the following.

8.1Under the agreements in 2009-2010 and the May Agreement in May 2011, the plaintiffs had agreed to sell the Shares to him for RMB380m (later reduced to RMB285m);

8.2he advanced RMB5m to the plaintiffs on 16 October 2009;

8.3on 7 June 2010 the plaintiffs signed instruments of transfer and board resolutions to effect the transfers;

8.4on 11 June 2010 he paid a further RMB62m to the plaintiffs;

8.5after the Court of Appeal decision in December 2011, the plaintiffs reneged on their agreement;

8.6therefore on 21 March 2012 he commenced HCA466/2012 for specific performance of the share transfer agreements.

9.Regarding the agreements with Ma, the plaintiffs say that it was Ma who had breached the agreements as he had failed to make payments on time.  They also alleged that Ma had deliberately withheld from them a settlement with Zhang.  There is also a dispute as to the substance of the agreements, including whether there ever was an oral agreement in May 2011, as well as disputes over the amounts which were to be paid.     

Deputy Judge Mayo’s decision

10.It was in the context of the above allegations and counter-allegations that the plaintiffs sought an order for summary judgment from Deputy Judge Mayo.  The judge was aware that the application for summary judgment was to enforce an arbitral award and that the scope for ventilating issues the subject of an arbitration was severely circumscribed.  However he found that the issues in this case were lengthy and complex and that the defences before him “certainly could not be described as frivolous or moonshine”.  He held that “it would certainly appear to be desirable that there should be a trial so that all of the relevant circumstances can be considered.  This is not a case where it is appropriate for the matter to be resolved as a mini trial and on affidavit evidence”.    

11.Accordingly the judge dismissed the application for summary judgment with costs to the defendant.

Application for leave to appeal

12.The plaintiffs have proffered various grounds of appeal in their draft Notice of Appeal.  They contend that Ma’s claims in HCA466 were irrelevant to the enforcement of the arbitral award because the 1^st and 2^nd defendants (as well as the 6^th and 7^th defendants) are separate corporate entities, and in any event even on Ma’s case he has not fully paid the purchase price for the transfer of the Shares so that at least the plaintiffs should be entitled to have the legal title in the Shares.    

13.We have read the plaintiffs’ written submissions as well as those in opposition from the defendants. 

Discussion

14.We are not persuaded that there is any reasonable prospect of the plaintiff succeeding in the proposed appeal.  It is well established that an appellate court would not lightly interfere with a judge’s exercise of discretion.  The plaintiff has failed to show that the judge has exercised his discretion on wrong principles or that the exercise was demonstrably flawed.

15.It is apparent from the pleadings in both actions that there is a lengthy and complex history of transactions between many parties over the Shares.  Ma who is now in control of the 1^st, 2^nd, 6^th and 7^th defendants has alleged that the plaintiffs have, before and after the arbitral award, entered into agreements under which they have passed control of the companies to him.  In our view it is simply unrealistic for the court to ignore these allegations of what has happened after the award.  That the matters in the two actions are intertwined is recognized by the order made after the decision in question that the two actions be heard together, which order has not been appealed.       

Order

16.1The application is dismissed.

16.2Pursuant to Order 59 rule 2A(8) RHC, we order that no party may request this determination to be reconsidered at an oral hearing inter partes. 

16.3We make an order nisi that the plaintiff is to pay the costs of the application to the defendants.  If there is no application to vary the costs order nisi within 14 days after the date appearing on this Judgment, the following directions shall apply:

(1) the parties should seek to agree the quantum of costs;

(2) if the parties are unable to agree the quantum of costs within 28 days after the date appearing on this Judgment,

(a) the defendants may lodge within 14 days thereafter a skeleton bill of costs for the purpose of a summary assessment of costs;

(b) the plaintiff may within 14 days thereafter lodge written submissions in opposition to the skeleton bill;

(c) the court will then carry out a summary assessment of costs.   

Mr Edward Chan, SC, Mr Laurence Li & Mr Eric Chow, instructed by CL Chow & Macksion Chan, for the Plaintiffs

Mr Benjamin Yu, SC & Mr Calvin Cheuk, instructed by Li & Partners, for the Defendants