CHEN HONGQING v. ASIA CEMENT CORPORATION

HCA 1304/2017

[2024] HKCFI 438

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1304 OF 2017

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DECISION ON COSTS

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1.  For reasons set out in my Decision handed down on 10 November 2023[1] (the “10/11Decision”), this Court allowed ACC’s Summons, struck out Chen HQ’s Writ and SoC, and dismissed his claims against ACC as pleaded therein. In §41 thereof, I made a costs order nisi that the costs of the entire action, including those of and occasioned by the Summons (with certificate for 2 counsel in that regard) be to ACC, to be taxed if not agreed (the “Costs Order Nisi”).

2.  By letter of 15 November 2023 from its solicitors, ACC seeks a variation of the Costs Order Nisi, to the effect that all costs be taxed on the indemnity basis.

3.  Pursuant to directions this Court subsequently handed down, Mr Abraham Chan SC leading Mr Joshua Chan have lodged their written submissions in support and reply (“ACC/Sub” and “ACC/Reply” respectively), and Mr Law Man-Chung SC leading Mr Danny Tang have lodged their submissions in opposition (“Chen/Sub”).  I have considered them.  I have also considered the authorities referred to therein.

4.  For the following reasons, I accede to ACC’s application to vary and order that the costs of the entire action, including the costs of and occasioned by the Summons for striking out, be taxed on the indemnity basis:

(a)  Both parties have cited to me Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327.  It is true, as submitted by Mr Law, that to depart from the usual taxation basis, it is incumbent on ACC to show some special or unusual feature.  But as highlighted by Mr Chan:

“A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitutes that party’s proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis.”[2]

(b)  Once and so long as that is recognised and acknowledged, it serves little purpose in going through previous cases involving abuse of process to say that indemnity costs were not awarded in any particular cases, as Mr Law does in §§3-5 of Chen/Sub with reference to inter aliaWu Yang v Dayuan International Development Ltd (HCCW 103/2015, 30 July 2015) and Chan Chun Chuen v Kao, Lee & Yip[2018] HKCFI 1933.  Chan Chun Chuen in any event involved very different facts, which I have explained in the 10/11 Decision;

(c)  The nature and seriousness of the abuse involved in each case will of course have to be gauged;

(d)  The abusive litigation conduct involved in this case is significant.  I repeat what I have observed in section E of the 10/11 Decision. I repeat my acceptance of Mr Chan’s submissions, that Chen HQ’s motive behind the numerous changes to his story is an opportunistic one to gain what he or his backers believed to be strategic advantages in the fight for overall control over CSCG and CSI;

(e)  I note this as also material.  The version put forward in the SoC from day one of this action is already the third version that Chen HQ had run.  I repeat §17 of the 10/11 Decision.  Chen HQ did so in the face of the criticisms made by Lam J in the 31/5 Reasons.  It were not as if Chen HQ’s case only changed after the issue and filing of the Writ and SoC herein, though his case indeed changed further afterwards.  Viewed from this angle, abusive litigation conduct was involved from the very outset;

(f)  The inconsistent cases were put forward by Chen HQ on oath;

(g)  As I have observed in §21 of the 10/11 Decision, Chen HQ has failed to even tender any explanation for the multiple shifts;

(h)  Mr Law submits that ACC has not been successful on all grounds.  That with respect misses the point, as ACC succeeded on the Abusive Litigation Conduct Ground, which was in any view the main ground.  I accept Mr Chan’s submission in this regard[3];

(i)  In ACC/Sub[4], Mr Chan refers this Court to other cases (though part of the Shanshui matters) wherein Chen HQ’s litigation conduct was subject to adverse judicial criticisms.  Mr Law takes issue with such references[5]. On the matters before this Court, I do not need to refer to those other criticisms in deciding this application;

(j)  Mr Law submits that it is important to have regard to the realities of hostile litigation.  In my view, it is even more important to bear firmly in mind that whatever the extent of the hostility, parties are not permitted to resort to abusive litigation conduct of the type which Chen HQ has been found to have engaged in;

(k)  I accept Mr Chan’s submission that this is precisely the type of cases where it is appropriate for the Court to mark its strong disapproval of such litigation conduct by way of an indemnity costs order.

5.  For the above reasons, I vary the Costs Order Nisi from what it is to the following, that Chen HQ shall pay to ACC the costs of the entire action, including for avoidance of doubt those of and occasioned by ACC’s Summons of 20 March 2023, including in turn those of and occasioned by the present application for variation of the Costs Order Nisi, with certificate for 2 counsel in those regards, to be taxed on the indemnity basis if not agreed. 

HCA 1304/2017

[2023] HKCFI 2769

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1304 OF 2017

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D E C I S I O N

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A. The Summons

1.  This is the hearing of the Summons of 20 March 2023 (the “Summons”) taken out by the defendant (“ACC”) against the plaintiff (“P” or “Chen HQ”) for an order that Chen HQ’s Writ of Summons of 5 June 2017 (the “Writ”) and Statement of Claim of 30 August 2018 (the “SoC”) be struck out and his claims against ACC as pleaded therein be dismissed, on the grounds that the claims are frivolous or vexatious, disclose no reasonable cause of action, or are otherwise an abuse of process of the Court.

2.  Mr Abraham Chan SC leading Mr Joshua Chan[1] and Mr Alexander Burg for ACC. Mr Law Man-Chung SC leading Mr Danny Tang for Chen HQ.

B.  The affirmations

3.  Specifically for the Summons, ACC has caused to be filed in support and in response the 3^rd and 4^th affirmations of Wu Ling-Ling (“Wu”, and “Wu/Aff3” and “Wu/Aff4”), and Chen HQ has filed in opposition his 5^th affirmation (“Chen/Aff5”).

4.  Placed before me also are a number of other affirmations that have been filed previously in the present action. They are the 2^nd affirmation of Wu (“Wu/Aff2”) and Chen HQ’s 1^st to 4^th affirmations (“Chen/Aff1” to “Chen/Aff4”).

C.  The Factual background

5.  For the background facts and history leading to the present application:

(a)  I refer to without repeating my Decision herein of 16 March 2021[2] (the “16/3 Decision”):

(i)  I adopt in so far as appropriate the same terms used therein;

(ii)  I refer further to the number of other Decisions mentioned in §3 of the 16/3 Decision, namely the Judgment[3] and Decision[4] of G Lam J (as G Lam JA then was) in HCA 1661, 1766, 2191/2014 and HCA 623, 939, 1564/2015 (Consolidated) dated 31 January 2018 (the “Trust Actions”, the “Trust Actions Judgment”, and the “Trust Actions Discharge Decision”), the Decision of Mimmie Chan J of 27 June 2017 in HCMP 962/2017 (the “962 Proceedings”, and the defendants therein “962 Ds” (or the “4 Shareholders” as Mr Chan calls them[5])) acceding to Chen HQ’s application for appointment of interim receivers (the “Interim Receivers”), and the Reasons for Decision of G Lam J of 31 May 2018[6]subsequently discharging the same (the “Lam J 31/5Reasons”);

(iii)  For the reasons set out in the 16/3 Decision, I inter alia dismissed Chen HQ’s application in the present action for amendment so as to join the 962 Ds as defendants (the “Joinder Application”), and his further application for an injunction to restrain ACC from causing any transfer or registration of 104,908 shares in China Shanshui Investment Company Limited (“CSI”, and the “Subject CSI Shares” or “CSI Shares”), and the 962 Ds from transferring, voting upon or otherwise dealing with the Subject CSI Shares (the “Injunction Application”);

(b)  I refer further to my Decision of 23 September 2021[7] refusing Chen HQ’s application for leave to appeal against my decision dismissing the Joinder Application and the Injunction Application, and the Judgment of the Court of Appeal of 22 July 2022 refusing Chen HQ’s renewed application for leave to appeal[8] (the “CA Refusal”).

D.  Parties’ stances

6.  Mr Chan’s submissions, as summarised by him in §§3 and 4 of his written submissions, are that (emphasis added for ease of presentation):

“3. … the Writ and SOC should be entirely struck out because of:

(1) P’s abusive litigation conduct, with P having advanced diametrically contrary cases on oath on whether there is some agreement or understanding between him and (inter alios) the 4 Shareholders entitling him to some right or interest to the Subject [CSI] Shares.[9]

(2) P’s hopeless factual case, which is fatally contrary to (a) the terms of the written agreements between him and the 4 Shareholders, and (b) the evidence which P previously gave on oath.[10]

(3) P’s gross and cynical delay, with the Writ issued in 2017 but matters still languishing at the pleadings stage, causing substantial prejudice to D as legal owner of the Subject [CSI] Shares.[11]

4. Alternatively, P’s inducement of breach claim should be struck out because it discloses no reasonable cause of action. P must show that the alleged tortious acts have caused him to suffer loss, but P has not pleaded (and in fact has not suffered) any loss.[12]”

7.  In the course of the hearing, Mr Chan clarified that the Factual Ground and the Delay Ground are supportive of the Abusive Litigation Conduct Ground. He stated that while they are also standalone grounds, that is not a position that he would push.

8.  Mr Law’s submissions may be summarised as follows:

(a)  In relation to Abusive Litigation Conduct Ground (which Mr Law calls the Inconsistency Ground):

(i)  Mr Law calls the part of §3(1) of Mr Chan’s written submissions as underlined above the “Impugned Element”, which term I will adopt as appropriate for ease of presentation;

(ii)  Mr Law submits that it is common ground that Chen HQ had entered into the Loan Agreements and 11 Share Pledge Agreements with the 11 Representatives (or the “11 Nominees” as Mr Law calls them);

(iii)  Chen HQ’s case is more sophisticated than what ACC has understood it to be:

“4.4 … [P’s case] consisted of the written contracts and the unwritten Impugned Element. Together, P argued that they gave rise to a legal arrangement which enabled P to acquire interest in the CSI shares held by the 11 Nominees and the Employees.

4.5. Granted, this Court has previously held that the Impugned Element (and hence P’s overall case) has morphed across different proceedings and on that basis rejected it as incredible.

4.6. However, any inconsistency (and accordingly any abuse arising from such inconsistency) only applied to the unwritten Impugned Element. Hence, any abuse would be removed or subverted by preventing P from relying on the Impugned Element.

4.7 This means P must be allowed to pursue a case based on the written agreements alone (“Documents-based Case”). This part of P’s case was never subject to inconsistency, and consequently abuse. It is also not dependent on P’s testimony.

…

4.10 Assuming P is permitted to proceed with the Documents-based Case, there are clearly triable issues arising from this case. First, P will contend that on the true construction of the Loan Agreements and the Share Pledge Agreements, they amount to an agency agreement between P and the 11 Nominees ... This has been confirmed in recent arbitration awards between P and 10 of the 11 Nominees. Alternatively, even if the relationship was only one of a secured loan (as D contends) …, there are disputes as to whether the deposits with the Jinan Quancheng Notary Office amounts to a good discharge under Mainland law.

4.11 If need be, P undertakes to amend the SOC to align the pleadings with the above position …”

(b)  On those same bases, in respect of the Factual Ground, “even if the Impugned Case is thought to be incredible, P may still proceed with the Documents-based Case”[13].

(c)  In relation to the Proof of Loss Ground:

“This is a quia timet action commenced to prevent damage from arising in the first place. Hence, it is nonsensical to require P to show loss. There is no need to prove particular loss where it can be readily inferred. In any case, P only needs to show damages at large.”[14]

(d)  In relation to the Delay Ground:

“There was no undue delay. P (and it can be reasonably inferred that D was of the same view) considered that the issue of joinder should be resolved first before the action should proceed any further. In any case, D has suffered no prejudice from the delay.”[15]

E.  The Abusive Litigation Conduct Ground

9.  I consider the Abusive Litigation Conduct Ground first.

10.  As noted above, Mr Law gives this ground the label of Inconsistency Ground.

11.  I do not want the label to cause any distraction to the true issue involved. Neither side advocates the proposition that mere inconsistency in a party’s case would per se justify striking out[16]. This should be stated so that it does not get in the way of the discussion proper.

12.  The scope of ACC’s complaint in the present regard is much more than one on mere inconsistency. The main basis is the abusive conduct on the part of Chen HQ of having put forward “diametrically contrary cases on oath” on a particular issue, namely “whether there is some agreement or understanding between him and (inter alios) the 4 Shareholders entitling him to some right or interest to the Subject [CSI] Shares”.

13.  That complaint has been identified and made clearly in Wu/Aff3[17], that:

“… Chen HQ has advanced multiple inconsistent cases as to the nature and scope of his alleged rights over the Subject Shares, and the circumstances in which he allegedly came to acquire such rights.”

14.  As submitted by Mr Chan in his written reply[18], which I agree, the cases which Chen HQ has put forward are both factually inconsistent, and legally “mutually exclusive or impossible”[19]. I refer to my discussions in the 16/3 Decision.

15.  That issue is also crucial to Chen HQ’s case against ACC because, depending on the answer to the same, the 4 Shareholders might not have acted in breach in the SPGA at all, and if not, there would have been no breach for ACC to have procured, procurement of breach being the cause of action which Chen HQ is suing ACC for[20]. It is also crucial to Chen HQ’s pleaded case that ACC has “otherwise wrongfully interfered with [P’s] contractual rights under the SPGA, with full knowledge of the existence and terms of the SPGA and that [P] held security interests over the SPGA Shares.”[21]

16.  In his written submissions, Mr Law says that this Court has previously held that “the Impugned Element (and hence P’s overall case) has morphed across different proceedings” (emphasis added).

17.  The word “morphed” was not used by me. My view of Chen HQ’s conduct was worse than that. I observed and found in the 16/3 Decision that he in the 962 Proceedings ran the Loan/Conditional Purchase Case. When sought to be joint in the Trust Actions, he put forward the Purchasing Agent Case. I found that the contradictory versions were both given by way of affirmation, and are irreconcilable. I found further that in the SoC, Chen HQ is no longer alleging that the 11 Representatives were purchasing on his behalf[22]. He claims at §6.5 that he has an option “to choose between repayment of the Loans by cash and by transferring to the Plaintiff all the CSI Shares and interests therein acquired under their respective SPAs with the Employees”. I found that the Option Case is again irreconcilable with the Purchasing Agent Case.

18.  The changes did not simply morphed, if that word was used to represent any gradual change of Chen HQ’s cases. Different, contradictory and irreconcilable cases have simply been put forward in different proceedings.

19.  I reiterate the fact that the Court of Appeal has refused Chen HQ’s application for leave to appeal against my decision refusing the Joinder Application and the Injunction Application. In particular, in the CA Refusal:

(a)  Chu JA recited my findings that the different cases run by Chen HQ were contradictory and irreconcilable, that the various contradictory and inherent incredible cases run by Chen HQ impacted directly on his case against the 962 Ds and ACC, and that it was plan and obvious that the proposed claim against the 962 Ds was not viable. Her Ladyship concluded that Chen HQ had failed to demonstrate that this Court erred in law or was plainly wrong in refusing the Joinder Application;

(b)  Chu JA further recited my explanation as to why the contradictory and inherently incredible cases put forward by Chen HQ adversely impacted his case against both the 962 Ds and ACC, and that they demonstrated that there was no basis for granting injunctive relief against ACC. Her Ladyship went on to conclude that Chen HQ had also failed to demonstrate that this Court was plainly wrong in refusing the Injunction Application.

20.  Chen HQ’s change of cases continues even after my 16/3 Decision and the CA Refusal. In Chen/Aff5, he abandons his pleaded Option Case, and changes it to the Purchasing Agent Case[23].

21.  He has failed to tender any explanation for the multiple shifts. In Chen/Aff5, he simply says[24]:

“9. In paragraph 9 [sic.][25] of [Wu/Aff3], Madam Wu alleges that I have advanced multiple inconsistent cases as to the nature and scope of my rights over the Subject Shares, and the circumstances in which I came to acquire such rights. Madam Wu then alleges that the Defendant’s legal representatives will make submissions on such inconsistencies and refuses to elaborate on the ground.

10. Without prejudice to any legal submissions to be advanced on my behalf, there is no dispute that the Loan Agreements and the SPGAs, the two key sets of documents in this action, have been signed and hence irrespective of any inconsistencies in my oral testimony, it is clear that the parties must have entered into some binding rights and obligations and incredibility cannot be a complete answer to this dispute.”

22.  He then seeks to rely on the arbitration awards that he has obtained in the arbitrations which he started in the Mainland against 10 of 11 Nominees. His cases were that each of those 10 Nominees was “my purchasing agents to purchase the CSI Shares from the Employee Shareholders”[26]. He says that awards were in February 2022 made in his favour, the effects of which are that “the Loan Agreements were, on true construction or in substance, agency agreements whereby the Nominees were appointed as my purchasing agents.”[27]

23.  But if the Nominees were in fact his purchasing agents, Chen HQ would have upon the purchases acquired through them as his agents interest in CSI Shares. He has however on another previous occasion, also on oath, denied that. As observed by G Lam J in Lam J 31/5 Reasons at §20[28]:

“… if Chen HQ had indeed acquired the employee-plaintiffs’ interests in the CSI shares in question from the outset, there might be requirements under securities regulations such as for disclosure of interest, since CSI held a 25.09% interest in the listed company, China Shanshui Cement Group Ltd. In the receivership application before Mimmie Chan J, when faced with the criticism that he had not made any disclosure of interest filings, Chen HQ categorically said he had ‘not yet acquired the Purchased Shares’, which is to be contrasted with his statement in the joinder application in the Trust Actions that he had ‘become the full beneficial owner of the CSI Shares … from around March 2017’. Moreover, the point had been raised by the defendants before Mimmie Chan J that Chen HQ was a front-man for Tianrui. If in fact Chen HQ had already purportedly acquired interests in CSI shares, that would bring into sharp focus whether or not the whole transaction was an attempt by Tianrui to circumvent any obligation to make a mandatory general offer under the Takeover Code, which would be relevant to whether the court’s discretion should be exercised to assist Chen HQ by appointing interim receivers.”

24.  Mr Chan submits[29] that the motive behind the numerous changes to Chen HQ’s story is an opportunistic one to gain what Chen HQ or his backers believed to be strategic advantages in the fight for overall control over CSCG and CSI. In my view, Mr Chan is justified in the making of those submissions, which I accept.

25.  Mr Law cannot argue against those findings and conclusions. To be fair, he does not seek to. He contends that the “inconsistency”, and accordingly any abusing arising, only applied to the unwritten Impugned Element, so that any abuse would be removed by preventing P from relying on the Impugned Element, and that as the existence of the Loan Agreements and the Share Pledge Agreements is not in dispute, Chen HQ must be allowed to pursue his Documents-based Case, in respect of which there are triable issues.

26.  Mr Law hence effectively accepts that there has indeed been abusive conduct on Chen HQ’s part – just that according to Mr Law’s submissions, the abuse can be “removed or subverted”.

27.  In the context of a party running inconsistent cases, the rationale behind and scope of the doctrine of abuse of process has been considered in the Canadian decision of Mystar Holdings Ltd v 247037 Alberta Ltd [2009] ABQB 480, which has in turn been considered and applied by Deputy Judge Anson Wong SC in Chan Chun Chuen v Kao, Lee & Yip (HCA 597/2015, 12 October 2017). That doctrine assists inter alia in the promotion of the integrity of the administration of justice. As summarised by the learned Deputy Judge:

“28. In Mystar, the plaintiff sued the defendants for 100% interest in a hotel purchased pursuant to a joint venture agreement. The defendants argued that the plaintiff had abused the legal process by adopting a position that was inconsistent with the position taken by it in a previous action where it asserted that it had lost 50% interest in the hotel.

29. In dealing with the defendants’ objection, Brooker J made the following observations:

"[44] I agree that an applicant who alleges that certain pleadings constitute an abuse of process bears a heavy burden. I also agree with the Court's comments in Brewers Distributors that it must be plain and obvious that the claim amounts to an abuse of process of the court before it can be struck [out].

…

[46] I agree with the Ontario Court of Appeal that ‘abuse of process is essentially a fairness doctrine’. The Court must also ask itself whether, in the circumstances, it would be fair to allow the action in question to proceed.

…

[49] In general, I am persuaded that a party is not free to deliberately argue diametrically inconsistent facts in various actions, thus knowingly advancing irreconcilable positions which are not articulated as alternative claims. Whether this pronouncement has any application to the facts of this case remains to be determined.

…

[53] I am in agreement with the Court's finding in Chevron that in certain circumstances, taking contrary positions on the same issue in separate proceedings may constitute an abuse of process and that ‘what constitutes an abuse of process may vary with the circumstances of each case’.

…

[[61] [30] Finally, I not agree with the Respondent's assertion that the effect of an inconsistent pleading must be somehow ‘discounted’ if the action in which it is plead is not pursued to judgment. The Respondent submits that the loss of the 50% interest claimed in the Bad Faith Claim was not pursued past service of the Notice to Produce and that the claim was subsequently discontinued. The Respondent submits that it therefore made no use of the Court's process to recover this amount. As such, the Respondent submits that it did not obtain any ‘benefit’ on account of these pleadings. In so claiming, it also asserts that it did not use the allegations in the Bad Faith Action to obtain a more favourable settlement in the Coverage Action.]

[62] The doctrine of abuse of process assists in promoting the ‘integrity of the administration of justice’. On the facts before me, [the Respondent], with full knowledge of the facts, should not be able to advance a claim that is diametrically opposed to its earlier position. In these circumstances, the integrity of the justice system would be no less compromised simply because the initial claim was not followed though [sic.] to judgment.

[63] This does not mean, as the Respondent suggests, that a factual pleading will forever and irrevocably bind a party in all subsequent pleadings. Rather, it means that, if a party, with full knowledge of the facts (thus distinguishing itself from a Potter scenario) chooses to argue irreconcilable facts in its pleadings, and where such pleadings are clearly not made in the alternative, allowing such a party to continue pursuing an incompatible claim may constitute an abuse of process." ”

28.  In the above regard, I respectfully refer also to Chu Yue Bun v Lai Shiu Woon[2021] HKCA 1929 at §35(2), that:

“It may be an abuse of process for a party, with full knowledge of the facts, to advance a claim that is diametrically opposed to its position taken in an earlier set of proceedings. The abuse lies in its effect on the integrity of the administration of justice, which would be no less compromised even if the previous inconsistent allegation was not followed through to judgment, particularly when such previous allegation was of some significance. (Chan Chun Chuen v Kao, Lee & Yip[31] at §§ 30, 78)”

29.  Subject to Mr Law’s submissions on the removal or subversion of the abuse so that he submits Chen HQ should be allowed to run his Document-based Case (which submissions I will consider next), Chen HQ’s conduct falls plainly within the category of abuse such that the SoC is liable to be struck out.

30.  In support of his submission, Mr Law relies on the decisions of Chan Chun Chuen v Kao, Lee & Yip before the Court of First Instance[32] and the Court of Appeal[33]:

(a)  In that case, the learned Deputy Judge was concerned with an application by the defendant to strike out the plaintiff’s statement of claim therein. Materially, the plaintiff pleaded in §4 that “By an agreement between the Plaintiff and the Defendant (in particular via Mr Yip Wan Tak) concluded orally in or around mid-1993 and/or to be inferred from conduct between the Plaintiff and the Defendant (in particular via Mr Yip Wan Tak) since around mid-1993, the parties agreed on the following terms …”[34]. The learned Deputy Judge held that whilst the plaintiff’s plea on the conclusion of an oral agreement was diametrically inconsistent with his case and allegations advanced in a previous set of judicial review proceedings (the “JR Application”)[35], his allegation that he placed trust and confidence on the defendant was not. In the end, the learned Deputy Judge ordered only the underlined portion of §4 be struck out;

(b)  The defendant appealed. They contended that the whole of §4 of the statement of claim should be struck out so as to include the further or alternative allegation of an agreement “inferred from conduct between the Plaintiff and the Defendant (in particular via Mr Yip Wan Tak) since around mid-1993”;

(c)  The Court of Appeal refused leave, the main reasons for which were set out by Kwan JA in §§10 to 12, that:

“10. The judge had also said in the Decision (at §43) that ‘Ms Eu[36] is plainly right in not making such suggestion [that the alleged agreement to be inferred from conduct is directly contrary to the plaintiff's case in the JR Application] since … reference was in fact made to the existence of the Informal Arrangement in the JR Application.’

11. In raising this contention in the intended appeal, the defendant is in effect seeking to retract from its previous position.

12. The judge does not think it is open to the defendant to appeal against the Decision so as to strike out an allegation it had chosen not to pursue. We agree entirely with the judge. Where the basis of striking out is that the position adopted in present proceedings is ‘diametrically inconsistent’ with the case adopted in previous proceedings, it is incumbent on the applicant to identify with clarity specifically which parts of the pleading are said to be so inconsistent. It is no answer at all to say that the summons seeks to strike out the entirety of the statement of claim, or that another part of the supporting affidavit mentioned the Informal Arrangement referred to in the JR Application, or that parts of the skeleton submissions of both parties deployed before the judge covered the Informal Arrangement. There is no getting away from §17 of the supporting affidavit and §13 of the defendant's skeleton argument that the defendant had stated clearly that the ‘relevant pleas … which run contrary to the Plaintiff's case in the judicial review proceedings’ are only in respect of the alleged oral agreement made in or around mid-1993, and had deliberately excluded the other allegation concerning the agreement to be inferred from conduct.”

(d)  Hence, the plaintiff’s pleas in that case comprised one based on the existence of an oral agreement, and alternatively one based on an agreement inferred from conduct. They were expressly pleaded to be in the alternative. The defendant did not say that that alterative plea was inconsistent with the plaintiff’s case in the JR Application, was outwith the plaintiff’s application to strike out, and was hence not struck out.

31.  The above are to be contrast with Chen HQ’s case as pleaded in the SoC. He has not pleaded any so-called Document-based Case. The “common understanding” and the documents are inextricably linked. The following may specifically be noted:

(a)  In §§4 and 5 of the SoC, Chen HQ pleads certain discussions between him, the Minority Shareholders[37] and the 11 Nominees, whereby he and the Minority Shareholders devised a mechanism such that “whether to acquire the Employees’ CSI Shares acquired via the sale and purchase agreements or to recover the loans would be at the option of [P]”[38];

(b)  In §§6, 9 and 10 of the SoC, Chen HQ then pleads, relevantly:

“6. In or around August 2015, the Minority Shareholders, the 11 Nominees and [P] reached the following common understanding and the mechanism to give effect to such common understanding:-

6.1. It was a common understanding that the 11 Nominees would enter into separate sale and purchase agreements with the Employees (“SPAs”) and, in the event that the Trust Action were successfully determined in favour of the Employees against Zhang, the 11 Nominees would procure the transfer to the Plaintiff of all the CSI Shares and the interests therein acquired via the SPAs.

6.2. Further, it was part of the said common understanding that, for the purpose of paying the consideration for the Employees’ CSI Shares (“Share Consideration”), the Plaintiff would make loans to the 11 Nominees in an aggregate amount equivalent to 70% of the total Share Consideration (“Loans”). This was implemented by means of 11 loan agreements entered into between [P] on the one hand and the 11 Nominees respectively on or about 17 August 2015 (“Loan Agreements”).

…

6.4. The 11 Nominees further entered into 11 Share Pledge Agreements respectively with [P] on or about 17 August 2015 (“Share Pledge Agreements”), whereby the 11 Nominees agreed to mortgage or charge all their respective CSI Shares and interests therein to [P] as security in respect of the Loan Agreements.

6.5. The combined effect of the aforesaid common understanding, the Loan Agreements and the Share Pledge Agreements is that, in the event of the Trust Action being successfully determined in favour of the Employees, [P] would have an option to choose between repayment of the Loans by cash and by transferring to [P] all the CSI Shares and interests therein acquired under their respective SPAs with the Employees (including their respective CSI Shares).

6.6. As an additional security for the 11 Nominees’ obligations under the Loan Agreements, each of the Minority Shareholders entered into and/or agreed to enter into a Share Pledge and Guarantee Agreement dated 17 August 2015 (“SPGA”) with [P], whereby the Minority Shareholders agreed to mortgage and/or charge their respective shares in CSI (“SPGA Shares”) to [P].

6.7. The 11 Nominees, by conduct, assented to the aforesaid common understanding …

…

9. Pursuant to the common understanding and agreements as pleaded in Paragraph 6 above, on or around 17 August 2015 [P] and the Minority Shareholders entered into the SPGA dated 17 August 2015.

…

10. By reason of the SPGA, [P] has by or around 17 August 2015 acquired a security interest in and/or in respect of the SPGA Shares (including the Subject Shares), in the form of an equitable mortgage and/or charge …”

(c)  As can be seen from the above, at various places, the documents are pleaded to be entered into to give effect to the common understanding, or to implement it;

(d)  When looking at the documents, and when considering Chen HQ’s case arising, one simply cannot ignore any unwritten common understanding, and the factual background which he says led to them;

(e)  The documents cannot be looked at in isolation, as Mr Law is seeking to ask the Court to do;

(f)  Further, I have set out ACC’s basis of the present application as stated in Wu/Aff3. This is not like the position in Chan Chun Chuen wherein the plea of agreement by conduct had become, as a result of the affirmatory evidence before and submissions made to the Court, outwith the application;

(g)  Mr Chan submits that P’s attempt to confine his abuse to what he (P) calls the “unwritten” aspects of the contractual relationship is wholly artificial and unsustainable. In my view, Mr Chan’s submissions are justified, which I accept.

32.  Related to the above is Mr Law’s submissions that Chen HQ should be afforded the opportunity to amend, even though the formulation of the amendment is not at this stage before the Court:

(a)  Mr Law relies on Total Lubricants Hong Kong Ltd v Christophe de la Cropte de Chanterac (HCA 1694/2008, 15 December 2009) §14. That paragraph should however be read in conjunction with §15, which 2 paragraphs read as follows:

“14. First, if a pleading is capable of being cured by amendments, it should not be struck out. An opportunity to amend should be given instead. However, if the pleading is so defective that no amendment can cure it or if the proposed amendment is incapable of improving the defects, the pleading is liable to be struck out and the proposed amendment should be refused.

15. Second, when a party seeking to amend his pleadings in order to save it from being struck out, the proposed amendment should be properly and exactly formulated, includes all necessary averments or mandatory particulars and constitutes a full and complete plea of a reasonable cause of action.”

(b)  No proposed amendments are before this Court;

(c)  No reason has been put forward to explain the absence of any proposed amendments. I can hardly see any. The Summons was taken out more than 6 months ago. As mentioned above, Mr Law effectively accepts that there has been abusive conduct on the part of Chen HQ. He seeks to avert striking out by asking the Court to consider a case different from what he has pleaded. According to his pleaded case, the common understanding and the documents are intertwined and inextricably linked. If there is any case in which the production of a proposed amended statement of claim is vital, this would be the one;

(d)  The failure to produce any draft amendment renders any request for a chance to amend a hollow one;

(e)  Mr Law further submits that if Chen HQ is to be allowed to run his Document-based Case, there would have been triable issues. But with respect, that is putting the cart before the horse. Issues are to be identified and framed by pleadings. No Document-based Case has been formulated by any draft pleadings. One simply cannot even start to consider what the issues are, or whether they are triable ones;

(f)  For the above reasons, on the facts before this Court, I have been shown no justification or utility in affording Chen HQ any opportunity to put forward any proposed amendments.

33.  There is a further point as to whether any abuse on the part of Chen HQ can in any event be cured by amending his case[39]. In my view, this is again not a point which can be considered and decided in vacuum without the formulation of the proposed amendment before the Court. The consideration of the issue may include balancing the harm to the integrity of the administration of justice by allowing the culpable party to continue, and the possible injustice of shutting him out, particularly if a viable amended case has been demonstrated. But in the present case, no proposed amendment has been placed before the Court. The previous abusive conduct on the part of Chen HQ has been significant. As has been pointed out above, he continues to shift his case even after the 16/3 Decision and the CA Refusal. Doing so is abusive. On the state of the case before this Court, the mere putting forward of a (at best) theoretic Document-based Case without any precise formulation does not negate or diminish Chen HQ’s previous abusive conduct. Acceding to any request for a chance to attempt to run an unformulated and hitherto unpleaded case through simply overlooking the previous significant abuse in the name of removing or subverting them is no less abusive, and the integrity of the administration of justice no less compromised (see by way of illustration [61]-[62] of Mystar).

34.  For the above reasons, on the Abusive Litigation Conduct Ground alone, even in the absence of any support by the other grounds, I am of the view that the SoC ought to be struck out and the claims made therein dismissed.

F.  The Factual Ground, the Delay Ground and the Proof of Loss Ground

35.  The discussions and reasoning above equally apply to the Factual Ground. It clearly supports the Abusive Litigation Conduct Ground.

36.  However, if the Factual Ground is to be looked at in isolation, the disputes could become facts-sensitive, and the case may not be a clear and obvious only for striking out.

37.  As I have recorded above, Mr Chan is not pushing the position that the Factual Ground, Delay Ground and Proof of Loss Ground may each by itself support an order of striking out.

38.  Specifically in relation to the Delay Ground, given the procedural history of the case, I do not find the delay to be of an extent which whether by itself or when considered together with the other grounds renders the case a clear and obvious one for striking out.

39.  Equally, in respect of the Proof of Loss Ground, given the involvement of Mainland law, the issue of “double actionability”[40], and the quia timet nature of the action, I do not find it to be of sufficient clarity whether by itself or when considered together with the other grounds renders the case a clear and obvious one for striking out.

G.  Overall disposition

40.  For the above reasons, I order that the Writ and SoC be struck out and Chen HQ’s claims against ACC as set out therein be dismissed.

41.  On costs, I make a costs order nisi that the costs of the entire action, including those of and occasioned by the Summons (with certificate for 2 counsel in that regard) be to ACC, to be taxed if not agreed (which counsel agreed, if the Summons is to be allowed, should be the better course compared with summary assessment given the involvement of the costs of the entire action).

42.  Any application for variation should be made by letter to this Court within 7 days from the date of the handing down of this Decision, upon receipt further directions would be handed down with the view of dealing with the application on the papers.

Mr Law Man-Chung SC leading Mr Danny Tang, instructed by Gallant,
    for the Plaintiff

Mr Abraham Chan SC leading Mr Alexander Burg, instructed by Dechert,
    for the Defendant

HCA 1304/2017

[2022] HKCFI 3106

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1304 OF 2017

______________

______________

____________________

DECISION ON COSTS

____________________

1.  By my Decision of 16 March 2021, I amongst other matters dismissed the Joinder and Injunction Summons taken out by Chen HQ in HCA 1304. By my Decision of 23 September 2021[1], I dismissed further Chen HQ’s application by Summons of 30 March 2021 (the “LOA Summons”) for leave to appeal against that Decision. Subsequently, Chen HQ applied to the Court of Appeal for leave to appeal. In the light of that, I directed that the assessment of costs in relation to the LOA Summons be deferred until final disposition of Chen HQ’s application (or appeal should leave be granted) before the Court of Appeal.

2.  By Judgment handed down on 22 July 2022, the Court of Appeal refused Chen HQ’s application for leave to appeal and dismissed his application.

3.  Subsequent to the dismissal by the Court of Appeal of Chen HQ’s application for leave to appeal, and upon my directions, parties have filed their respective Statements of Costs, Lists of Objections, and Replies before this Court for summary assessment of the costs of the LOA Summons.

ACC’s Statement of Costs

4.  ACC’s claim totals HK$289,920.  The total number of man-hours claimed for the 2 fee earners (“SSTM” and “SKW” admitted in 2003 and 2018 respectively) is 38.1 (SSTM x 14.4 and SKW x 23.7).  The total amount of counsel fees is HK130,000.

5.  Chen HQ disputes only the amount of work claimed to have been undertaken by the 2 fee earners.  Counsel fees are agreed.

6.  Having considered the objections, ACC in its reply reduces the total amount of costs claimed to HK$271,200.

7.  Given the background and intricacies of the matters, and adopting a broad brush approach, I am of the view that the adjusted sum is necessary, proper and reasonable. 

8.  I summarily assess ACC’s costs of and occasioned by the LOA Summons at HK$271,200.

The 962Ds’ Statement of Costs

9.  The 962D’s claim totals HK$266,060.  The total number of man-hours claimed for the 4 fee earners (“IN”, “EL”, “GL” and “TS”, the first 3 admitted in 1992, 2012 and 2018 respectively, and TS being a trainee solicitor) is 30 (IN x 1.5, EL x 10, GL x 16.5 and TS x 2). The total amount of counsel fees is HK$155,000 (HK$80,000 for Senior Counsel, and HK$75,000 for Junior Counsel called in 2017).

10.  Chen HQ disputes the amount of work claimed to have been undertaken by the 4 fee earners.  Senior Counsel’s fee is agreed. The fee of Junior Counsel is suggested to be reduced to HK$45,000

11.  Having considered the objections, the 962Ds in reply make some concession in respect of the fees of the 4 fee earners.  They maintain that the fee of the Junior Counsel, equivalent to 2.5 days of work, is reasonable.  The total amount of costs claimed is reduced to HK$248,110.

12.  I find that the fees charged by counsel are overall reasonable.  The fee claimed by Junior Counsel is in my view and in the circumstances of the present case within the range of reasonableness.

13.  Again, given the background and intricacies of the matters, and adopting a broad brush approach, I am of the view that the adjusted sum is necessary, proper and reasonable. 

14.  I summarily assess the 926Ds’ costs of and occasioned by the LOA Summons at HK$248,110.

Overall disposition

15.  I summarily assess ACC’s and 926Ds’ costs of and occasioned by the LOA Summons at HK$271,200 and HK$248,110 respectively.

16.  I make no further costs order in respect of this assessment.

HCA 1304/2017

[2021] HKCFI 2861

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1304 OF 2017

______________

BETWEEN

______________

______________

DECISION

______________

A. The application for leave to appeal

1.  By my decision of 16 March 2021 (the “Decision”), I amongst other matters dismissed the Joinder and Injunction Summons taken out by Chen HQ in HCA 1304.

2.  By summons of 30 March 2021 (the “LOA Summons”), Chen HQ seeks leave to appeal against that decision.

3.  Pursuant to a consent order of 9 June 2021, the application was agreed to be disposed of on the papers. For that purpose, directions on the filing of submissions have been given.

4.  Pursuant to those directions:

(a) Mr Law Man-Chung SC filed his submissions of 9 July 2021 on Chen HQ’s behalf (“Mr Law’s Submissions”);

(b) Mr Simon Westbrook SC and Ms Sharon Yuen filed their submissions of 6 August 2021 in opposition on behalf of the 962 Ds (who are the same as the Intended 2^nd to 5^thdefendants in HCA 1304) (“Mr Westbrook’s Submissions”);

(c) Mr Abraham Chan SC and Mr Joshua Chan filed their submissions of 6 August 2021 in opposition on behalf of ACC (“Mr Chan’s Submissions”); and

(d) Mr Law filed his submissions of 20 August 2021 on Chen HQ’s behalf in reply (“Mr Law’s Reply”).

5.  I have considered the submissions. I have considered also the authorities cited before me. For the reasons below, I refuse Chen HQ leave to appeal.

B. Leave to appeal – the applicable legal principles

6.  The Decision being interlocutory in nature, leave to appeal is required — High Court Ordinance (Cap 4), section 14AA, and Order 59 rule 2B(1).

7.  The threshold for granting leave is governed by section 14AA(4) of the High Court Ordinance. It is “a reasonable prospect of success”, or “some other reason in the interests of justice why the appeal should be heard”. Relevant to the interpretation of that section I have been referred to SMSE v KL [2009] 4 HKLRD 125 at §17, Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515 at §19, Ho Yuen Ki Winnie v Stanley Ho, unrep, HCMP 1009/2009, 24 August 2009 at §16, and Green Laconic Ltd v Fan Chin Wa[2021] HKCFI 1884 at §6, which I have considered.

C. The facts

8.  I refer to the Decision for the relevant facts, which I will not repeat.

D. The revised draft Notice of Appeal

9.  A draft Notice of Appeal is attached to the LOA Summons.

10.  In Mr Law’s Submissions, he seeks leave to revise the same. He attaches to his submissions a copy of the revised draft Notice of Appeal (“Revised NOA”).

11.  The proposed revisions are minor. I grant Chen HQ leave to rely on the Revised NOA.

12.  The proposed grounds set out in the Revised NOA are under two headings:

(a) Heading A, which relates to “The Judge’s refusal of the Plaintiff’s application to amend the Statement of Claim to join the Intended Defendants”; and

(b) Heading B, that “The learned Judge erred in refusing the Plaintiff’s application for interlocutory injunction”.

13.  I consider the grounds under the two headings in turn.

E. Proposed grounds under Heading A

14.  There are 3 proposed grounds under Heading A.

E.1. Proposed ground 1

15.  Proposed ground 1 seeks to argue that Chen HQ should be entitled to amend the Statement of Claim without leave pursuant to Order 20 rule 3(1), and this Court erred in dismissing his application to do so.

16.  Whilst Order 20, rules 1(1) and 3(1) provide respectively that the writ and pleadings may be amended once before deemed close of pleadings, Order 20 rule 1(3) stipulates that Order 20 rule 1 shall not apply in relation to an amendment which consists of the addition of a party.

17.  As explained in §20/1/4 of Hong Kong Civil Procedure 2021:

“ The statement of claim and the writ should correspond in the names of the parties, in the number of the parties, and in the capacities in which they sue or are sued …

…

A plaintiff may not amend the writ after service without leave where the amendment consists of the addition, omission or substitution of a party to the action …”

18.  By §1 of the Joinder and Injunction Summons, Chen HQ sought “leave to amend the Writ of Summons endorsed with the Indorsement of Claim… and the Statement of Claim”.

19.  The purpose of the proposed amendments was to effect the joinder of the 962 Ds.

20.  In my view, given the purpose of the amendments, and given the requirement that the statement of claim and the writ should correspond in the names and number of the parties, Chen HQ could not have relied upon Order 20, rule 3(1). That rule was in fact not relied on by Mr Mak when he argued the matter before me.

21.  Proposed ground 1 in my view is not reasonably arguable.

22.  In Mr Law’s Reply, Mr Law in effect abandons proposed ground 1. It is no longer proposed to be argued that Chen HQ was entitled to amend without leave pursuant to Order 20, rule 3(1). Instead, Chen HQ seeks to argue that this Court erred in dismissing his application to amend the Statement of Claim when “there are serious issues to be tried and the Court cannot resolve the matters on affidavits alone”.

23.  This proposed re-revised ground 1 raises issues which overlap with proposed ground 4, which I for the reasons set out in the latter part of this Decision hold to be not reasonably arguable.

24.  I refuse leave on the proposed ground 1.

E.2. Proposed ground 2

25.  By proposed ground 2, Chen HQ seeks to rely on Order 15 rule 4 to argue that this Court erred in refusing him leave to join the 962 Ds when the joinder should be allowed as of right.

26.  In §20/1/4 of Hong Kong Civil Procedure 2021 referred to above, it is further explained that:

“ If either party desires to add a new plaintiff or a new defendant, he must apply under O.15 rr.6 and 7 unless the amendment is made before the service of the writ on any party to the action.”

27.  I accept Mr Westbrook’s submissions that in light of Order 20 rule 1(3)(a), one would not be allowed to invoke Order 15, rule 4(1) to add a party without leave if a writ has already been issued and served.

28.  In my view, the proposed ground 2 is not reasonably arguable, and I refuse leave on the same.

E.3. Proposed ground 3

29.  By proposed ground 3, Chen HQ seeks to argue that even if leave to amend is required, such leave should be granted under Order 15 rule 6(2)(b).

30.  In Mr Law’s Submissions, Mr Law develops the ground by arguing that this Court erred in §20 of the Decision when this Court, relying upon the cases cited therein, observed that there is no point in granting Chen HQ leave to join the 962 Ds if his case against them is bound to fail or not viable at all.

31.  Mr Westbrook has cited a number of authorities in support of the following proposition, that while there is no requirement for the applicant for joinder to show merits in his case, it is nevertheless open to the proposed defendant to show that it is plain and obvious that the applicant has no properly arguable case against the proposed defendants. Those authorities include Yeung Pui Ying Anna v Day & Chan, unrep, CACV 67/2010, 20 July 2010, at §11 per Ma CJHC (as the ex-Chief Justice then was), Advanced Connection Ltd v Able Technology (Hong Kong) Ltd & Ors[2018] HKCFI 2465 at §§16 to 22, affirmed on appeal in Advanced Connection Ltd v Able Technology (Hong Kong) Ltd & Ors[2019] HKCA 1092 at §§20-21, Pang Kwok Lam v Schneider Electric Asia Pacific Ltd, unrep, HCPI 90/2010, 5 January 2011 at §§73 and 82 per Master Marlene Ng (as Her Ladyship then was), and Green Laconic Ltd v Fan Chin Wa[2021] HKCFI 749 at §46 per DHCJ Paul Lam SC.

32.  In my view, the proposition put forward by Mr Westbrook is supported by the above-mentioned authorities, and is consistent with Wong Shan Shan v The Incorporated Owners of Yue Wah Mansion, unrep, HCA 1086/2013, 28 January 2015 and Koo Ming Kown v Rev Mok Kong Ting & Ors[2018] HKCFI 967, which Mr Law relies upon.

33.  This Court is also said to have erred in applying at §20(a) of the Decision Goldbay Fortis Ltd v Rich Resource Development Ltd[2018] HKCFI 2684.

34.  I do not find it reasonably arguable that this Court erred in referring to Goldbay Fortis:

(a) In Goldbay Fortis, at §15, this Court referred to Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 (CA) where Cheung JA observed at §25 inter alia that:

“ Leave is readily granted to amend before the trial unless it can be demonstrated that the new claim based on the proposed amendment is bound to fail (see Hancock Shipping Co Ltd v Kawasaki Heavy Industries Ltd [1992] 1 WLR 1025). While the court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation (see eg Kings Quality Homes Ltd v AJ Paints Ltd [1997] 3 All ER 267).

(b) as submitted by Mr Westbrook, Kings Quality Homes was a case on substitution of parties, and Staughton LJ observed at 31G-H that:

“ … a judge … is entitled to have some regard to the merits of the case if they are readily visible to him.”

35.  Mr Law relies on TSB Private Bank International SA v Chabra [1992] 1 WLR 231 for the proposition that a party could be added as a relevant party in an action even though there is no cause of action against that party.

36.  In my view, TSB does not assist Chen HQ. As Mr Westbrook has submitted, that case concerns the Court’s power to join a third party holding assets which may be amenable to enforcement based on the Chabra jurisdiction even if there is no cause of action against the third party. In the present case, Chen HQ does propose to plead a case against the 962 Ds. As I have summarised at §19 of the Decision, the bases and proposed bases of Chen HQ’s case are that the 962 Ds were in breach of the terms under the SPGA, and that the breaches were procured by ACC. I have explained at §§40 and 41 of the Decision why I have formed the view that it is plain and obvious that Chen HQ’s proposed claim against the 962 Ds is not viable at all, and how the contradictory and inherently incredible cases that Chen HQ has run impact directly not just on his case against the 962 Ds but also on his case against ACC.

37.  In my view, the proposed ground 3 is not reasonably arguable, and I refuse leave thereon.

F. Proposed grounds under Heading B

38.  There are 4 proposed grounds under Heading B.

F.1. Proposed grounds 4 and 5

39.  Proposed grounds 4 and 5 both complain that this Court has erred in holding that there are no serious issues to be tried. They may be taken together.

40.  As Mr Chan has submitted, supported by Gu Zhouheng v Huang Wei Cheng[2019] HKCFI 381 at §§67-68, Chen HQ must lay a proper evidential foundation in support of the claim that there is a serious issue to be tried, and bare allegations are insufficient.

41.  I have explained in the Decision why I have formed the view that Chen HQ has failed to show any serious issue to be tried.

42.  As Mr Westbrook has pointed out[1], which is indeed the case, Chen HQ has not challenged this Court’s conclusion that Chen HQ had put forward clearly contradictory cases, and that his case is inherently highly incredible and contrary to written documents, including the various versions which Chen HQ had put forward under oath in his affirmations.

43.  Similarly, Mr Chan points out[2] that critically, in Mr Law’s Submissions, Chen HQ has not even attempted to grapple with the facts and evidence forming the basis for this Court’s findings that Chen HQ has failed to show any serious issue to be tried.

44.  Rather, Chen HQ refers to certain observations made by Mimmie Chan J in her decision in HCMP 962/2017 on 27 June 2017 (“27.6.2017 Decision”), and by G Lam J (as he then was) in his reasons for decision in HCMP 962/2017 on 31 May 2018 (“31.5.2018 Reasons”) in seeking to show that there are serious issues to be tried.

45.  The reliance on those decisions is misplaced. I accept Mr Westbrook’s and Mr Chan’s submissions that the issues in those proceedings were different. More importantly, one of the main reasons why I have reached the conclusion that Chen HQ has failed to show serious issues to be tried is that Chen HQ has put forward different cases before different Courts in different proceedings. For example, as found by G Lam J at §13 of the 31.5.2018 Reasons, Chen HQ presented a misleading case to Mimmie Chan J when applying for interim receivership.

46.  Mr Law submits[3] that certain issues which even ACC says the present action gives rise to have nothing to do with the credibility of Chen HQ’s oral evidence, and given the governing law being Mainland law, this Court erred in holding that there are no serious issue to be tried.

47.  In this regard, I accept Mr Westbrook’s submissions that whatever the governing law, Chen HQ’s case on the facts and the nature of the contractual arrangement between Chen HQ and the 11 Representatives remain important, and that Chen HQ’s case is, as I have observed, inherently contradictory and incredible.

48.  I am not satisfied that proposed grounds 4 and 5 are reasonably arguable. I refuse leave thereon.

F.2. Proposed ground 6

49.  Proposed ground 6 complains that in determining the balance of convenience, this Court erred in taking into account the erroneous rulings that there are no serious issues to be tried and that Chen HQ’s claims against the 962 Ds are doomed to fail.

50.  I repeat the discussions above under proposed grounds 4 and 5. Proposed ground 6 is premised upon my conclusion that there are no serious issues to be tried being erroneous. I am not satisfied that the premise is reasonably arguable.

51.  In so far as it is complained that this Court has made no determination as to where the balance of convenience lies[4], I repeat §§42 to 44 of the Decision.

52.  I am not satisfied that proposed ground 6 is reasonably arguable.

F.3. Proposed ground 7

53.  Proposed ground 7 is just a catch-all ground which adds nothing to the earlier proposed grounds.

G. Disposition

54.  For the above reasons, I refuse Chen HQ leave to appeal.

H. Costs

55.  I make a costs order nisi that Chen HQ shall bear the costs of and occasioned by the LOA Summons, with certificate for 2 counsel for both the 962 Ds and ACC, to be taxed if not agreed. The costs order nisi is to become absolute within 21 days from the date of this Decision, unless any party seeks variation or summary assessment in the meantime, and for that purpose parties are granted liberty to write to my clerk, in which case I will give directions on the papers for further conduct of the same.

Written Submissions and Reply by Mr Law Man-Chung SC, instructed by Gallant, for the Plaintiff

Written Submissions by Mr Abraham Chan SC and Mr Joshua Chan, instructed by Dechert, for the Defendant

Written Submissions by Mr Simon Westbrook SC and Ms Sharon Yuen, instructed by Stephenson Harwood, for the Intended 2^nd to 5^th Defendants

HCA 1304/2017 and
HCMP 962/2017
(Heard Together)

[2021] HKCFI 2747

HCMP 962/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 962 OF 2017

________________________

________________________

________________________

AND

HCA 1304/2017

ACTION NO 1304 OF 2017

________________________

________________________

(Heard together)

________________________

DECISION
ON COSTS

________________________

1.  I refer to my decision handed down on 16 March 2021 (the “Decision”)[1]. The 962 Ds and ACC have made applications for summary assessment of the costs involved. For those purposes, Statements of Costs have been filed. Chen HQ has filed his statements of objections. Replies have also been filed. Below are my decisions.

The 962 Ds

2.  I deal first with the applications by the 962 Ds.

3.  They were successful in the Dismissal Summons and the Joinder and Injunction Summons.

4.  In respect of the Dismissal Summons, I made a costs order nisi in terms of §3 of the same, that the costs of the Originating Summons, including all costs reserved and of the Dismissal Summons, be paid by Chen HQ forthwith, such costs to be taxed if not agreed.

5.  In respect of the Joinder and Injunction Summons, I made a costs order nisi that Chen HQ shall bear the costs of and occasioned by the same, to be taxed if not agreed, with certificate for 2 counsel for both the 962 Ds and ACC.

6.  By letter of 7 April 2021 (with submissions of Mr Maurellet and Mr Tang attached), the 962 Ds seek summary assessment of the costs involved.

7.  I on 8 April 2021 gave directions on the further conduct of the application.

8.  Given the interlocutory and discreet nature of the applications, and that Chen HQ is not resident within the jurisdiction, I agree that the costs involved should be summarily assessed.  Chen HQ has filed no submission seeking to argue the contrary.

9.  I have considered the Statement of Costs, objections and reply filed by the parties.  The parties’ respective positions are close.  The total costs originally claimed by the 962 Ds is HK$1,304,588.  The total costs Chen HQ proposes to be allowed is HK$1,152,388.  The adjusted total costs the 962 Ds finally claim is HK$1,220,678. 

10.  Adopting a broad brush approach, I summarily assess the costs at HK$1,208,000, made up of Part 1: HK$58,000, Part 2: HK$800,000 and Part 3: HK$350,000.

11.  I accordingly vary the costs order nisi to the extent that the 962 Ds’ costs be summarily assessed, which amount I assess as above.

ACC

12.  At §53 of the Decision, in addition to the costs order nisi I have summarised at §5 above, I further ordered on a nisi basis that Chen HQ do bear the costs of the Security for Costs Application, to be taxed if not agreed, with certificate for 2 counsel.

13.  By letter of 26 March 2021, ACC seeks summary assessment of their costs.

14.  I on 8 April 2021 gave directions on the further conduct of the application.

15.  Again, given the interlocutory and discreet nature of the applications, and that Chen HQ is not resident within the jurisdiction, I agree that the costs involved should be summarily assessed.  Chen HQ has filed no submission seeking to argue the contrary.

16.  I have considered the Statement of Costs, objections and reply filed by the parties.

17.  In relation to the Dismissal Summons (Part 1):

(a)  ACC claims total costs of HK$400,035;

(b)  Chen HQ proposes HK$272,165;

(c)  I agree that the claim for Professional Work (Section D)  in the total amount of HK$188,100 is on the high side, and involves duplications;

(d)  Adopting a broad brush approach, I summarily assess the total costs at HK$320,000.

18.  In relation to the Joinder and Injunction Summons (Part 2):

(a)  ACC claims total costs of HK$997,807.50;

(b)  Chen HQ proposes HK$613,647.50;

(c)  The claim for Professional Work (Section D)  in the total amount of HK$529,150 is in my view excessive, and involves duplications;

(d)  Adopting a broad brush approach, I summarily assess the total costs at HK$730,000.

19.  In relation to the Security for Costs Application (Part 3):

(a)  ACC claims total costs of HK$601,522.50;

(b)  Chen HQ proposes HK$164,620;

(c)  The claim for Professional Work (Section D)  in the total amount of HK$291,620 is in my view too high, and involves duplications;

(d)  I agree that the claim for Counsel’s Fee (Section E)  in the total sum of HK$244,762.50 is on the high side given the fact that only quantum is in dispute;

(e)  Adopting a broad brush approach, I summarily assess the total costs at HK$380,000.

(f)  I therefore summarily assess the total costs as above in the sum of HK$1,430,000 (HK$320,000 + HK$730,000  + HK$380,000).

20.  I accordingly vary the costs order nisi to the extent that ACC’s costs be summarily assessed, which amount I assess as above.

Costs of these applications

21.  I make no further order as to costs in respect of these applications.

Statement of Objections by Gallant, for the Plaintiff in HCMP 962/2017 and HCA 1304/2017

Statement of Costs and Reply by Stephenson Harwood, for the 1^st to 4^th Defendants in HCMP 962/2017 and the Intended 2^nd to 5^th Defendants in HCA 1304/2017

Statement of Costs and Reply by Dechert, for the Intervener in HCMP 962/2017 and the Defendant in HCA 1304/2017

HCA 1304/2017 and
HCMP 962/2017
(Heard Together)

[2021] HKCFI 648

HCMP 962/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 962 OF 2017

______________

______________

______________

ACTION NO 1304 OF 2017

______________

______________

(Heard Together)

____________________

DECISION

____________________

A.   The Summons

1.  There are a number of matters before me:

(a)  the Summons (the “Dismissal Summons”) taken out by the Defendants in HCMP 962/2017 (the “962 Ds”) for the dismissal (or permanent stay) of the HCMP 962/2017 proceedings (the “962 Proceedings”) and their release from the undertaking (the “Undertakings”, as defined below) they have given therein;

(b)  the Summons (the “Joinder and Injunction Summons”) taken out by the Plaintiff (“Chen HQ”) in HCA 1304/2017 (“HCA 1304”) for amendment so as to join the 962 Ds as defendants (the “Joinder Application”), and an injunction restraining Asia Cement Corporation (“ACC”, the only current defendant in HCA 1304 and the Intervener in the 962 Proceedings) from causing any transfer or registration of 104,908 shares in China Shanshui Investment Company Limited (the “Subject CSI Shares” and “CSI”), and the 962 Ds from transferring, voting upon or otherwise dealing with the Subject CSI Shares (the “Injunction Application”); and

(c)  the Summons (the “ACC Summons”) taken out by ACC for security for costs against Chen HQ (the “Security for Costs Application”).

2.  Mr Bernard Mak with Mr Issac Chan and Mr Ho Lok Hin appeared for Chen HQ.  Mr Simon Westbrook SC leading Ms Sharon Yuen appeared for the 962 Ds.  Mr Abraham Chan SC leading Mr Joshua Chan appeared for ACC. 

B.   The Dismissal Summons

B.1.  THE BACKGROUND

3.  For background of the Shanshui matters I refer to G Lam J’s judgment in HCA 1661, 1766, 2191/2014 and HCA 623, 939, 1564/2015 (Consolidated) dated 31 January 2018[1] (the “Trust Actions”, and the “Trust Actions Judgment”).  For background of the 962 Proceedings, I refer to the Decision of Mimmie Chan J of 27 June 2017 acceding to Chen HQ’s application for appointment of interim receivers (the “Interim Receivers”), and the Reasons for Decision of G Lam J of 31 May 2018[2] discharging the same (the “Lam J 31/5 Reasons”).  Unless specified otherwise, I also use the same terms as used in those Judgment and Decisions.

4.  For the purpose of these applications, it is relevant to note, from §29 of the Lam J 31/5 Reasons, that upon the discharge of the Interim Receivers on 17 May 2017 (for reasons given in the Lam J 31/5 Reasons), the 962 Ds and ACC each gave an undertaking (ie the Undertakings) in the following terms:

“ The [962 Ds] were willing, pending the arbitration, to undertake not to dispose of the relevant shares or to vote them provided they may be counted towards the quorum. ACC was also willing to undertake not to cause any transfer or registration of the shares in its name. In my view these undertakings, which I accepted, afforded ample protection to Chen HQ.”

5.  According to the sealed Order granted by G Lam J (the “Lam J Order”), the Undertakings were given:

“ …pending the determination of the [Arbitration] … or further order of the Court.”

B.2.  PARTIES’ STANCES

6.  Mr Westbrook’s principal submissions are that as the arbitration which the 962 Proceedings were initiated to aid has come to an end, so should the 962 Proceedings.  The 962 Ds should also be released from the Undertakings.

7.  Mr Mak submits that the HCA 1304 was commenced to preserve the status quo created by the 962 Proceedings.  He accepts that the arbitration has resulted in an award (the “SPGA Arbitration Award”).  He argues that the award has not however resolved the actual dispute between Chen HQ and the 962 Ds.  While he accepts[3] that the technical basis for continuing the 962 Proceedings has ceased to exist, he argues that the grant of the award in the arbitration is not a material change of circumstances.

8.  Mr Chan submits that given the terms of the Lam J Order, the Undertakings have lapsed.  The Dismissal Summons is also technically unnecessary as there are no pending applications or causes of action in the 962 Proceedings which need to be stayed or dismissed. Mr Chan however invites this Court to rule on the matter for the avoidance of doubt and given Chen HQ’s stance.

B.3.  DISCUSSION

9.  The 962 Proceedings were commenced pursuant to Sections 45(2) and 45(5) of the Arbitration Ordinance (Cap 609).  The arbitration which the 962 Proceedings were initiated in aid of (the “Arbitration”) was, as stated in the Re‑Amended Originating Summons, “the Arbitration between [Chen HQ] and [the 962 Ds] in Beijing pursuant to the Application for Arbitration dated 10 February 2017 and an Amended Application for Arbitration to be submitted…”.

10.  The interim relief which Chen HQ sought thereby was the appointment of receivers for the Subject CSI Shares registered in the name of the 962 Ds.

11.  On 27 June 2017, Mimmie Chan J appointed Interim Receivers as sought.

12.  However, those appointments were discharged by G Lam J on 17 May 2018 (for reasons stated in the Lam J 31/5 Reasons).

13.  The Undertakings were given pending the determination of the Arbitration or further order.

14.  The Arbitration had been finally determined by a Final Award dated 12 June 2018[4].

15.  The alleged failure on the part of the arbitral tribunal to deal with the actual dispute between Chen HQ and the 962 Ds does not affect the above.

16.  Given the legal basis upon which the 962 Proceedings were commenced, and the terms of the Undertakings, I agree with Mr Chan that technically, the Dismissal Summons might not strictly be necessary.

17.  However, given the stance taken by Chen HQ, I find it reasonable for the 962 Ds and ACC to seek formal rulings from this Court.  I rule that the 962 Proceedings be dismissed, that the Undertakings had lapsed upon the determination of the Arbitration, and that both the 962 Ds and ACC be released therefrom.

C.   The Joinder Application and the Injunction Application

18.  The Joinder Application and the Injunction Application may be considered together because, as will be clear from the discussion below, the merits of Chen HQ’s claim (or proposed claim in the case of the 962 Ds) is an issue pivotal to both applications.

C.1.  THE BACKGROUND

19.  A proposed Amended Statement of Claim is attached to the Joinder and Injunction Summons (the “Proposed SOC”).  The basis of Chen HQ’s proposed claim in HCA 1304 may be summarised as follows[5]:

(a)  By 11 Loan Agreements (the “Loan Agreements”) entered into on about 17 August 2015 between Chen HQ and 11 representatives selected from the Employee Shareholders (the “11 Representatives”), the 11 Representatives obtained loans (the “Loans”) which they used to purchase CSI Shares from the Employee Shareholders;

(b)  Also on about 17 August 2015, Chen HQ and the 962 Ds (together with another minority shareholder) entered into the Share Pledge and Guarantee Agreement (the “SPGA”) whereby the 962 Ds charged/mortgaged the Subject CSI Shares to Chen HQ as securities for the performance of the agreements between Chen HQ and the 11 Representatives;

(c)  The combined effect of a “common understanding” between Chen HQ, the 962 Ds (inter alios), and the 11 Representatives that (the “Common Understanding”), the Loan Agreements and the SPGA is that in the event that the Trust Actions were successfully determined in favour of the Employee Shareholders, Chen HQ would have an option to choose between repayment of the Loans by cash or by transfer to him of all the CSI Shares acquired by the 11 Representatives;

(d)  In breach of the terms under the SPGA, the 962 Ds exercised the voting rights attached to the Subject CSI Shares, and on around 23 March 2017 sold them to ACC through certain agreements (the “ACC SPAs”);

(e)  The breaches by the 962 Ds were the subject matters of the Arbitration and the 962 Proceedings;

(f)  Chen HQ commenced HCA 1304 on 5 June 2017. ACC is currently the only defendant.  He sues ACC principally for procurement of the 962 Ds’ breach of the SPGA.  He avers that in the event that ACC may have acquired any interests in those shares, his security interests as equitable mortgagee and/or charge in the Subject CSI Shares would take priority, and ACC would be bound by the same;

(g)  He now applies to add the 962 Ds as additional defendants;

(h)  Chen HQ claims, principally, a declaration that the ACC SPAs are invalid and/or null and void, or alternatively an order setting aside the same;

(i)  He also claims (and intends to claim) an injunction restraining the ACC and the 962 Ds from transferring the Subject CSI Shares, and the latter from voting upon the same.

C.2.  THE MERITS OF CHEN HQ’S CASE

20.  The merits of Chen HQ’s case is an issue important to both the Joinder Application and the Injunction Application:

(a)  In respect of the Joinder Application, there is no point in granting Chen HQ leave to amend to join the 962 Ds if his case against them is bound to fail or not viable at all — see Goldbay Fortis Ltd v Rich Resources Development Ltd[2018] HKCFI 2684 at §15, and Pang Kwok Lam v Schneider Electric Asia Pacific, HCPI 90/2010 (5 January 2011) at §§73 and 82;

(b)  In respect of the Injunction Application, the American Cyanamid test requires Chen HQ to demonstrate, in so far as merits are concerned, that there is a serious question to be tried as to whether he is entitled to a permanent injunction at trial.

21.  Mr Westbrook’s principal submissions in this regard are that the proposed claim against the 962 Ds are bound to fail.  He submits, with reference to Pang Kwok Lam, that it is plain and obvious that Chen HQ’s proposed claim against the 962 Ds is not viable at all, for the following reasons:

(a)  By way of preliminary objections:

(i)  even if Chen HQ’s proposed claim against the 962 Ds could be established, it would at most be a matter of priority over the shares, but not validity of the ACC SPAs;

(ii)  the 962 Ds had already sold the Subject CSI Shares to ACC.  There is nothing left to restrain;

(iii)  Chen HQ sought in the Arbitration an anti-voting injunction against the 962 Ds, which he failed.  He cannot have a second bite at the cherry;

(b)  In respect of Chen HQ’s core case on purchasing the Employee Shareholders’ shares, he has no coherent, credible case on the nature of the contractual relationship between himself and the 11 Representatives in relation to the Loans and the shares of the Employee Shareholders.  The 962 Ds’ case is consistent with the Loan Agreements.  Chen HQ on the other hand has at different stages run inconsistent cases.  In particular, in the 962 Proceedings, he ran the case that the 11 Representatives purchased from the Employee Shareholders as principals, and that they would sell them to Chen HQ if the Employee Shareholders were to be successful in the Trust Actions (the “Loan/Conditional Purchase Case”).  It was criticised in the SPGA Arbitration Award.  Then in HCA 2648/2017 (“HCA 2648”), Chen HQ ran the case that his relationship with the 11 Representatives, based on a so‑called share acquisition and loan agreement (“SALA”), was one of agency, so that he has become full beneficial owner of the CSI Shares purchased from the Employee Shareholders (the “Purchasing Agent Case”).  The contradictions are irreconcilable.  Then, in HCA 1304, he further runs the case that he has an option to choose whether to get the Employee Shareholders’ shares or repayment of the Loans (the “Option Case”).  Chen HQ has no viable case against the 962 Ds.

22.  Mr Chan’s principal submissions in this regards are that Chen HQ’s application for injunctive relief against ACC and the 962 Ds should be dismissed, as Chen HQ’s case is clearly without merits, so that there is no serious issue to be tried.  He in particular submits that:

(a)  The restriction imposed by Clause 5 of the SPGA upon the 962 Ds against transfer of the Subject CSI Shares operated pending the 11 Representatives’ discharge of their obligations under the Loan Agreements.  That clause does not bind ACC and the 962 Ds given that the 11 Representatives have undisputedly acted to repay the Loans in discharge of their Loan Agreements obligations;

(b)  In an attempt to avoid the above, Chen HQ relies on the alleged Common Understanding;

(c)  the alleged Common Understanding is without merits, in that:

(i)  it is inherently incredible on its face:

(1)  it is inherently incredible that parties would have been content to rely on an unwritten understanding when the shares at stake are worth multi‑millions;

(2)  the alleged Common Understanding is inconsistent with the wording and structure of the Loan Agreements, and in particular Clauses 1 and 6(2) thereof;

(3)  the alleged Common Understanding would have rendered the Share Pledge Agreements signed by the 11 Representatives otiose, and is further commercially and practically nonsensical, given the interest payments involved;

(4)  the alleged Common Understanding is also inconsistent with Chen HQ’s earlier case that the 11 Representatives purchased the CSI Shares from the Employee Shareholders as principals;

(5)  Clauses 6(1), (3) and (4) of the Loan Agreements, which Chen HQ relies heavily on, do not suggest that he has a free‑standing option to choose as alleged;

(ii)  Chen HQ is estopped from relying on the alleged Common Understanding.  He is not permitted as a matter of law to discard the written agreement (ie the Loan Agreements) and rely on what he claimed to be the “true bargain” as against third parties;

(iii)  the alleged Common Understanding utterly fails to advance Chen HQ’s position in law, in that the question is whether the 11 Representatives have performed their obligations under the Loan Agreements, as required by Clause 5 of the SPGA, but not the terms of any alleged Common Understanding.

23.  Mr Mak submits that the lack of merits of the criticisms of Chen HQ’s case of SALA is obvious if the latter is to be fairly understood.  He points out that SALA involves 2 stages, before and after the Employee Shareholders’ success in the Trust Actions.  The criticisms based on the SPGA Arbitration Award was caused by unfair reading of the same. A simple comparison of the parties’ respective case reflects that the balance of probabilities clearly tilts in favour of Chen HQ’s case of SALA.  It gets support from the Lam J 31/5 Reasons.  It is also supported by the terms of the Loan Agreements.

C.3.   MERITS OF CHEN HQ’S CASE — DISCUSSION 

24.  In my view, Chen HQ’s cases on the nature of the contractual relationship between himself and the 11 Representatives in relation to the Loans and the shares of the Employee Shareholders at different stages are clearly contradictory.

25.  The terms of the Loan Agreements suggest that they are straightforward loan agreements (see §§1 and 2 of the Recitals thereof)[6].

26.  The 11 Representatives have tendered repayments of the Loans.  They did so in August 2017.

27.  In the 962 Proceedings, Chen HQ ran the Loan/Conditional Purchase Case.  That is clear from the contents of the number of affirmations he filed in that action, and in particular §§10[7]-13, 17 and 24 of his 2^nd, and §18 of his 4^th.

28.  After the 11 Representatives had tendered repayments of the Loans, in September 2017, when Chen HQ sought to be joined into the Trust Actions, he based his application on the existence of SALA, which he said was a “common agreement and understanding” between him,the 11 Representatives and inter alios the 962 Ds.  He stated that the various agreements were entered into pursuant thereto.  He put forward a Purchasing Agent Case, to the effect that the 11 Representatives acquired the CSI Shares from the Employee Shareholders as his “nominees”, so that he could claim that he had already been the beneficial owners of those shares purchased from the Shareholder Employers.  The way he ran his application was clear from the several affirmations he filed in support of his application, and in particular §53.4 of his 1^st and §17[8] of his 4^th in HCA 2648. 

29.  The two contradictory versions were both given by way of affirmation.

30.  I accept Mr Westbrook’s submissions that the differences are irreconcilable.

31.  When discharging the Interim Receivers in the 962 Proceedings, one reason given by G Lam J in the Lam J 31/5 Reasons was the “drastic” differences between the cases that Chen HQ had put forward, as follows (with emphasis added):

“ 18. After obtaining the order for receivership in these proceedings, in September 2017, Chen HQ made an application to be joined as a party to the Trust Actions. There, in contrast to what he had said before Mimmie Chan J in these proceedings,Chen HQ claimed that pursuant to what he termed the ‘Share Acquisition and Loan Agreement’ (‘SALA’) the 11 ‘representatives’ (no longer labelled ‘borrowers’) acquired the employee‑plaintiffs’ interests in the CSI shares ‘as nominees acting for and on [his] behalf’ in August 2015, that he made payment of the remaining 30% of the price in March 2017, and that he had ‘become the full beneficial owner of the CSI Shares previously held by 2,248 of the relevant employees … from around March 2017’.^[9] He exhibited a copy of a Confirmation, which was in materially identical terms to the ‘blurry’ copy exhibited by the defendants in these proceedings in June 2017, and which Chen HQ had clearly had in his possession or power since March 2017. According to Chen HQ, at least 1,014 employees had executed such Confirmation in his favour.

19. Mr Mok SC, who appeared for Chen HQ, submitted that the defendants’ reliance on the discrepancies between Chen HQ’s different versions was a mere forensic point and that in substance his case had not changed throughout.  With respect, I cannot agree. These drastic differences were substantively material in at least two respects.  First, if the 11 representatives acted indeed as agents and nominees at the outset through whom Chen HQ agreed to purchase the employee‑plaintiffs’ interests in CSI shares in August 2015, it is difficult to see how they could be said to have ever had beneficial receipt of the money in their hands, and how they could be held liable for repayment of any ‘loans’.  In fact, it has been revealed in Chen HQ’s new case that, according to him,he obtained the 11 representatives’ bank cards and online banking devices at the time so that he retained full control of the money.  Further, in light of the Confirmation which stated that Chen HQ ‘irrevocably’ purchased the employee-plaintiffs’ interest in the CSI shares, it is difficult to see how Chen HQ could revert to a claim that the 11 representatives were ‘borrowers’.  The artificiality of the ‘Loan Agreements’ can indeed be seen from Chen HQ’s own 5^th affirmation herein (at §29) where he stated it was in his view ‘beyond belief’ that the 10 Borrowers, who were mere employees of the group, would have the necessary funding to repay him [10].  At the hearing Mr Mok was hard put to offer an explanation how Chen HQ could (to use Mr Westbrook SC’s word) ‘flip‑flop’ between electing to have the shares and still trying to recover the ‘loans’.  Of course, if there were no real loans and real borrowers, then the pledges of the defendants’ shares under the SPGAs as security might well be said to be ineffective because, as Mr Mok accepted, the security interest asserted by Chen HQ was for the repayment of the loans.  It is, however, not necessary for present purposes to determine the precise effect of these arrangements, which may anyhow be a matter governed by Mainland law.  It is sufficient to say—which I do—that these are highly material matters which should have been frankly placed before the original judge hearing the receivership application.” 

20. Secondly, if Chen HQ had indeed acquired the employee- plaintiffs’interests in the CSI shares in question from the outset, there might be requirements under securities regulations such as for disclosure of interest, since CSI held a 25.09% interest in the listed company, China Shanshui Cement Group Ltd.  In the receivership application before Mimmie Chan J, when faced with the criticism that he had not made any disclosure of interest filings,Chen HQ categorically said he had ‘not yet acquired the Purchased Shares’,[11]which is to be contrasted with his statement in the joinder application in the Trust Actions that he had ‘become the full beneficial owner of the CSI Shares … from around March 2017’.[12]  Moreover, the point had been raised by the defendants before Mimmie Chan J that Chen HQ was a front‑man for Tianrui. If in fact Chen HQ had already purportedly acquired interests in CSI shares, that would bring into sharp focus whether or not the whole transaction was an attempt by Tianrui to circumvent any obligation to make a mandatory general offer under the Takeover Code, which would be relevant to whether the court’s discretion should be exercised to assist Chen HQ by appointing interim receivers.”

32.  I do not accept Mr Mak’s submissions that Chen HQ’s case based on SALA found favour with G Lam J.

33.  Chen HQ’s case was also criticised in the SPGA Arbitration Award, in its original simplified Chinese, that:

「 (二) 关于本案主法律关系性质的分析与认定

申请人认为，申请人与付元伟等人于2015年8月17日签订的《借款协议》系名为借款合同、实为委托购股的合同。《股权质押担保协议》系申请人和四被申请人为了委托购股能够履行和实现而签订，是付元伟等人向申请人履行委托购股协议义务的担保，而不是借款合同的担保。」[13]

「其三，本案中，从申请人作为证据提交的十份《借款协议》分析，其性质应当属于借款合同。申请人主张该案所涉《借款协议》系名为借款合同、实为委托购股合同，但在本案中未能举出相应证据予以証明，即申请人未能提供充足的证据以使仲裁庭合理相信当事人之间名为借款实为委托购买权的合同。仲裁庭认为，当事人若主张名义上的合同与实际上的合同关系性质不一致，必须提供足以推翻名义合同性质、并証明当事人之间实际权利义务关系性质的证据。」[14]

34.  I do not accept Mr Mak’s submission that the criticisms made against Chen HQ’s different cases based on the SPGA Arbitration Award was caused by any unfair reading of the same.

35.  Next, Chen HQ put forward a case based on a mixture of agency and option.  In his 12^th Affirmation filed in HCA 2648, at §18(b)[15], he claimed that the 11 Representatives (who he called therein the 11 Nominees) were selected “to purchase the CSI shares on behalf of me”, but that the “peculiar wordings of the Loan Agreements show that it could not have been a simple lending.  The Nominee Agreements were so drafted so as to allow me to request for repayment of the funds if the plan to acquire the CSI shares through the 11 Nominees on my behalf could not work or was no longer desirable (i.e. the ‘SALA’ arrangement)”. (Emphasis added)

36.  In the Proposed SOC:

(a)  Chen HQ is no longer alleging that the 11 Representatives were purchasing on his behalf — see in particular §§5.2 and 6.1 of the same;

(b)  he claims at §6.5 that he has an option “to choose between repayment of the Loans by cash and by transferring to the Plaintiff all the CSI Shares and interests therein acquired under their respective SPAs with the Employees”.

37.  The Option Case is again irreconcilable with the Purchasing Agent Case.  As Mr Westbrook has submitted, which I accept, that on the Purchasing Agent Case, Chen HQ had already acquired beneficial interests in the shares purchased from the Employee Shareholders upon purchase and prior to the determination of the Trust Actions; on the Option Case, he would have an option to choose after the outcome of the Trust Actions is known.

38.  I accept Mr Chan’s submissions that the terms of the Loan Agreements relied upon by Chen HQ do not begin to suggest that he would have a free‑standing option as alleged.

39.  In addition to the above, I accept Mr Chan’s submissions as summarised above that it is inherently highly incredible that parties would have been content to rely on overarching unwritten understanding when the shares at stake are worth multi‑millions.

40.  The contradictory and inherently incredible cases that Chen HQ has run in respect of the contractual relationship between himself and the 11 Representatives in relation to the Loans and the shares of the Employee Shareholders impact directly not just on his case against the 962 Ds but also on his case against ACC:

(a)  as Mr Chan has submitted, Chen HQ’s case against the 962 Ds for injunction relief is based on Clause 5 of the SPGA;

(b)  Clause 5 of the SPGA provided that pending the 11 Representatives’ discharge of their obligations under the Loan Agreements, the 962 Ds (inter alios) are not permitted to transfer the Subject CSI Shares without prior written consent from Chen HQ;

(c)  Chen HQ’s contradictory and inherently incredible cases go directly to the core issue as to what the obligations of the 11 Representatives are under the Loan Agreements;

(d)  If the terms of the Loan Agreements mean what they say, so that the obligations of the 11 Representatives were to repay the Loans, which they had tendered, Chen HQ would have no case for any injunctive relief against ACC.

D.   Conclusion on the Joinder Application and Injunction Application 

41.  For the reasons set out above, I accept Mr Westbrook’s submissions and conclude that it is plain and obvious that Chen HQ’s proposed claim against the 962 Ds is not viable at all.  I accept also Mr Chan’s submission that Chen HQ has failed to establish a serious question to be tried as to whether he is entitled to a permanent injunction at trial.  I refuse both the Joinder Application and the Injunction Application against both ACC and the 962 Ds.

42.  Given the above, there is no need for me to consider the balance of the submissions made by the parties in relation to the Injunction Application.  Out of deference, I make the following observations.

43.  On the question of balance of convenience:

(a)  I accept Mr Mak’s submissions that it is the 962 Ds’ case that they have sold the Subject CSI Shares.  If necessary, I would hold that balance of convenience would have tilted in favour of a grant in so far as they are concerned;

(b)  In respect of ACC:

(i)  I would have accepted Mr Chan’s submissions that given the analysis above, it is likely that the Court will find after trial that injunction relief should not be granted, and that this is a material factor to be taken into account — National Commercial Bank of Jamaica v Olint [2009] 1 WLR 1405, at §§16-17 and DBS Bank v Tian Wen Quan, HCA 3228/2016 (12 October 2017), at §12;

(ii)  I would also have accepted Mr Chan’s submissions that on Chen HQ’s own evidence, he advanced the Loans to the 11 Representatives for two reasons, (1) he saw value in the shares of CSI and took the view that it would be commercial viable to invest his money in the group, and (2) he wanted to assist the Employee Shareholders;

(iii)  The balance of convenience tilts strongly against the grant of injunctive relief:

(1)  given the lack of merits of Chen HQ’s claim for a permanent injunction;

(2)  should injunctive relief be wrongly granted, the harm to ACC is likely to be significant;

(3)  in contrast, if injunctive relief is wrongly refused, the irreparable harm which Chen HQ would suffer is likely to be relatively minimal;

(4)  in the circumstances, dismissing the application for injunctive relief is likely to cause the least irremediable prejudice to one party or the other.

44.  On the question of clean hand, Chen HQ had been a mid‑level manager of a subsidiary of Tianrui.  G Lam J has in a previous Decision under HCA 1282/2017[16] expressed serious concerns as to whether the source of the funds for the Loans came from Tianrui as opposed to him.  Chen HQ has consistently refused to clarify that, saying in a number of affirmations that he did not wish to disclose too much of his personal financial information.  I see great force in the submissions of both Mr Westbrook and Mr Chan that the evidence gives rise to concern as to whether Chen HQ might have been fronting for some other entity, why that was deemed necessary, and as a result whether Chen HQ has come to court for equitable relief with clean hands.  

E.   The Security for Costs Application

45.  This application concerns only Chen HQ and ACC.

46.  Mr Mak does not dispute that security is payable. The only issue is the amount.

47.  The consensus is that the Court is to award security of an amount which will cover the defendant’s recoverable costs of defending the action, estimated as accurately as possible, applying the standard party‑and‑party basis — Iskandar v Leo, unrep, CACV 117/1987 (28 September 1987), §19.  In estimating the amount of recoverable costs, the court should adopt a broad‑brush approach.  There is no need to subject the costs claimed to a microscopic scrutiny Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd, unrep, HCA 1957/2005, (26 October 2007), §§46-47.

48.  Mr Chan urged me to take into account the exceptionally complicated factual background, the likely involvement of complicated foreign law and conflict of law issues, the value of the shares involved, and the fact that most witnesses are in the Mainland.

49.  Mr Chan informed this Court that the skeleton Bill of Costs annexed to the ACC Summons contains an error (in that two sums in the total amount of HK$390,000 in Part D relating to the Security for Costs Application have been counted twice).  After the correction, the estimated amount from Concurrent Writ up to Defence (Part A), from Reply up to and including discovery (Part B), the Joinder and Injunction Application (Part C) and the Security for Costs Application (Part D) is HK$2,740,016 + RMB300,000 (the RMB300,000 being fees for providing Mainland expert’s opinion).

50.  Mr Mak has urged me to consider the following factors, namely:

(a)  the change of solicitors’ firm representing ACC,

(b)  the disposal of the Security for Costs Application in this combined hearing, resulting in reduction of costs (eg counsel fees).  I note in this regard that the error mentioned above in the total amount of HK$390,000 in fact related to counsel’s fees for the Security for Costs Application, which has now been corrected;

(c)  the estimate in Part A, including in effect 120 hours to be spent by solicitors (in addition to counsel’s input) is excessive;

(d)  the estimate in Part B, amounting to 110 hours of solicitors’ work, is excessive;

(e)  Parts C and D will only be engaged if ACC is successful in both (which I have ruled that they are), and that they are excessive.

51.  The respective estimates of the parties are set out below:

Item	ACC’s estimates	Chen HQ’s estimates
Part A	HK$732,023 + RMB300,000	HK$300,000 (including Mainland expert)
Part B	HK$452,200	HK$100,000
Part C	HK$986,108	HK$400,000
Part D	HK$569,685	HK$200,000
	HK$2,740,016 + RMB300,000	HK$1,000,000

52.  In my view, Chen HQ’s estimates for Part A and Part B are unrealistic.  But ACC’s estimates for those same Parts are on the high side.  ACC’s estimates for Parts C and D are also on the high side. Adopting a broad brush approach, I estimate Part A to be HK$500,000 + RMB 200,000, Part B to be HK$250,000, Part C to be HK$600,000, and Part D to be HK$300,000, giving the total of HK$1,650,000 + RMB 200,000.

F.   Disposition

53.  For the reasons set out above:

(a)  In respect of the Dismissal Summons:

(i)  in respect of §1, I order that following the SPGA Arbitration Award, the Originating Summons be dismissed;

(ii)  in respect of §2, I order that the 962 Ds and ACC be forthwith released from the Undertakings given on 17 May 2018;

(iii)  a costs order nisi in terms of §3, with certificate for 2 counsel for both the 962 Ds and ACC;

(b)  In respect of the Joinder and Injunction Summons, I dismiss the same in its entirety, both in respect of the Joinder Application and Injunction Application, and make a costs order nisi that Chen HQ shall bear the costs of and occasioned by the same, to be taxed if not agreed, with certificate for 2 counsel for both the 962 Ds and ACC;

(c)  In respect of the Security for Costs Application, I allow the same, and made an Order in terms of §§1 to 4 of the same, save that the amount of the security should be HK$1,650,000 + RMB 200,000.  I make a costs order nisi in terms of §5 of the same, to be taxed if not agreed, with certificate for 2 counsel.

54.  All orders nisi are to become absolute within 21 days from the date of these Decisions, unless any party seeks variation or summary assessment in the meantime, and for that purpose parties are granted liberty to write to my clerk, in which case I will give directions on the papers for further conduct of the same.