CHEN HONGQING v. LIU YIU KEUNG STEPHEN AND OTHERS

HCA 1699/2019

[2025] HKCFI 5033

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

__________________

BETWEEN

(by Original Action)

AND BETWEEN

(by Counterclaim)

AND BETWEEN

(by Counterclaim)

__________________

__________________

DECISION ON COSTS

__________________

The costs order nisi

1.  I refer to my Decision handed down on 21 August 2025. At §49 thereof, I made a costs order nisi that Chen HQ shall bear the costs of the Appeal and the Striking Out Application, with certificate for 2 counsel for both the SHDs and Jinan Group, to be summarily assessed on the papers.

2.  Pursuant to directions, Stephenson Harwood and Linklaters respectively for SHDs and Jinan Group have lodged their Statements of Costs and Replies (“SHD/SC”, “SHD/Reply”, “Jinan/SC” and “Jinan /Reply”). Gallant for Chen HQ have lodged 2 Statements of Objections, one against each (“CHQ/SHD” and “CHQ/Jinan”). I have considered them.

Costs claimed by SHDs

3.  In SHD/SC, SHDs claim costs and disbursements in the total sum of HK$1,015,674.

4.  The main objection raised on behalf of Chen HQ is that as the Appeal is in the nature of a hearing de-novo, the sums claimed by SHDs under various items are excessive. He also objects to the amount of the counsel fees charged.

5.  Stephenson Harwood have in SHD/Reply made some concessions to narrow the issue. They have reduced the costs claimed for some of the items. They maintain that counsel fees should be allowed in full.

6.  I consider the reduced amounts under Items D1 (Professional Work) and D2 (Perusal of Documents) reasonable. I allow counsel fees in full (save part of those incurred for the 17 April 2025 hearing, which were reserved and conceded).

7.  Adopting a broad brush approach, I assess SHDs’ costs at HK$950,000.

Jinan Group’s costs

8.  In Jinan/SC, Jinan Group claims costs and disbursements in the total sum of HK$1,342,638.50.

9.  I have considered CHQ/Jiann:

(a)  I agree that the hourly rates claimed by Linklaters for their Partner (HK$12,240 subsequently increased to HK$12,985), Managing Associate (HK$8,264 subsequently increased to HK$10,413), Associate (HK$6,743) and Trainee (HK$3,575) are all excessive. I accept Gallant’s objections and suggestions that the Solicitor Rates for Taxation (Party and Party Basis) should be adopted;

(b)  I agree that Items C (Communication including conferences, telephone calls, letters and emails, for HK$367,205.60) and D (Professional work, for HK$430,052.90) are excessive and unreasonable. This is particularly so given the facts that 2 counsel have been engaged, and that the Striking Out Application was not taken out by Jinan Group but by the SHDs. The high costs are also the results of the high hourly rates adopted, which I do not allow;

(c)  Whilst Linklaters have in Jinan/Reply made some concessions under Items C and D, I am the of view that the conceded sums remain unreasonable;

(d)  For Item C, I allow only HK$120,000. For Item D, I allow only HK$150,000;

(e)  I allow counsel fees claimed.

10.  Adopting a broad brush approach, I assess Jinan Group’s costs at HK$810,000.

HCA 1699/2019

[2025] HKCFI 3612

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

________________________

________________________

(by Original Action)

AND BETWEEN

________________________

________________________

(by Counterclaim)

AND BETWEEN

________________________

________________________

(by Counterclaim)

________________________

DECISION

________________________

A. Terminology

1.  For the long and convoluted background of this case, I refer the CHQ Injunction Decision this Court handed down on 23 June 2021[1] and the many other Judgments and Decisions referred to in §§1 and 2 therein.  Unless otherwise specified, I adopt the same terms and abbreviations used in that Decision.

2.  I set the following matters out at the outset to facilitate understanding of the terminology used:

(a)  As can be seen from the case title, there are in this action:

(i)  the original action by Chen HQ (the “Original Action”).  There are now 1190 defendants;

(ii)  the counterclaim by Jinan Group (the “JG Counterclaim”).  There are now 1189 defendants; and

(iii)  another counterclaim by 10 named plaintiffs (the “Rep Counterclaim”):

(1)  The first 8 of those 10 named plaintiffs are D4, D327, D703, D191, D667, D1086, D503, and D663 in the Original Action (the “8 Representatives” or “8 Reps”);

(2)  The last 2 are respectively D1189 and D1190 in the Original Action (“Wang” and “Jin”);

(3)  There are now 241 defendants.  The first 4 are respective Chen HQ and D1 to D3 to the Original Action.  I call the balance the “Rep Counterclaim/D5-D241”;

(b)  The term “SHDs” and “SH Defendants” have not been used consistently by the parties, not even on the face of the relevant summonses:

(i)  The term SH Defendants is used to denote a group of parties represented by Messrs Stephenson Harwood;

(ii)  D4 to D1168, D1170 to D1188, D1189 (i.e. Wang)  and D1190 (i.e. Jin)  in the Original Action are all SHDs (at least treated to be so by Messrs Stephenson Harwood – see the “Striking Out Summons” of 2 January 2025 detailed below);

(iii)  The term SH Defendants, used as such, covers and include the 8 Reps, Wang and Jin;

(iv)  But in the earlier Summons of 14 March 2024 (the “14/3/2024 Summons”)[2], the term SH Defendants is used in a sense which excludes the 8 Reps, Wang and Jin;

(v)  In his written submissions, Mr Maurellet uses the term Remaining Employees to denote those SHDs excluding the 8 Reps, Wang and Jin;

(vi)  Unless otherwise specified, I use the term SHDs or SH Defendants in this Decision to denote all of D4 to D1168, D1170 to D1188, D1189 (i.e. Wang)  and D1190 (i.e. Jin)  (i.e. inclusive of the 8 Reps, Wang and Jin).  When the 8 Reps, Wang and Jin are not meant to be included, I use the term SHDs (Excluding).

B.  Introduction

3.  This is the hearing of:

(a)  The appeal (the “Appeal”)  by Chen HQ against Master Lewis Law’s decision of on 2 August 2024 (the “Master Law Order”)  allowing:

(i)  The Amendment Applications made by the 8 Reps and the SHDs (Excluding)  via the 14/3/2024 Summons to amend their respective defences; and

(ii)  The I/G Withdrawal Applications made by the 8 Representatives (via also the 14/3/2024 Summons)  and the Jinan Group (via its summons of 24 January 2024 (the “24/1/2024 Summons”)  for an order that Chen HQ withdraw his Interrogatories (as defined below); and

(b)  The Striking Out Summons (the “Striking Out Application”)  issued by the SHDs.

4.  Mr Law Man-Chung SC leading Mr Danny Tang appeared for Chen HQ.  Mr Jose Maurellet SC leading Mr Alexander Tang and Mr Kevin Lau appeared for the SHDs. Mr Anson Wong SC leading Mr Lai Chun Ho appeared for Jinan Group.

C.  The core facts

5.  As said, the history of these matters is long and convoluted.  For fully background, I refer to the Decisions mentioned in §1 above.

6.  I only set out here the core events to make sense out of these Appeal and divers applications.

7.  The subject matter of the dispute is the beneficial ownership of certain percentage of CSI Shares.

8.  In respect of Chen HQ’s case:

(a)  As summarised by Mr Law[3], Chen HQ’s case as pleaded in this action is that in 2015, by way of documents titled “Loan Agreements”, he appointed 11 representatives (“11 Nominees” or “11 Representatives”, which included the 8 Representatives)  to acquire beneficial interest in those Shares from some of the employee shareholders on his behalf;

(b)  During the hearing, Mr Law reminded this Court of the “big picture” of the disputes between the parties.  He read out a number of paragraphs from section C of the Amended Statement of Claim (“ASoC”).  I was invited to read them further.  I have.  Below are some of those paragraphs:

8.3  … The Minority Shareholders arranged for the Plaintiff 11 representatives … (“11 Nominees”)  to carry out the Acquisition on behalf of the Plaintiff ...

…

8.5  By around August 2015, the Plaintiff, the Minority Shareholders and the 11 Nominees … agreed on the following arrangement:

(1)  The 11 Nominees shall act as the Plaintiff’s agents … for the purposes of acquiring the HCA Employee’s beneficial interest in the Employees’ Shares …

(2)  Pursuant to the said agency:

(a)  The 11 Nominees shall do all things necessary to complete the Acquisition …

(b)  The Plaintiff shall provide the funds required for the Acquisition.

…

8.6  The agency agreements …were partly written and partly by conduct …

8.7  The written part of the Agency Agreement was contained in 11 loan agreements entered into between the Plaintiff and each of the 11 Nominees … (“Loan Agreements”)  …

…

8.9  Notwithstanding references to “loan” and words of like effect, the Loan Agreements were, on true construction, the Agency Agreements.  Alternatively, the Loan Agreements, construed together with the conducts of the Plaintiff and the 11 Nominees, were in substance the Agency Agreements.

8.10  The Plaintiffs relies on the following matters:-

…

(4)  Clause 7(1)  of the Loan Agreements provides that the Nominees shall not transfer or create any incumbrance over the interests acquired without the Plaintiff's consent[4].

…

8.11  Pursuant to the Agency Agreements, between August to September 2015, the 11 Nominees (on the Plaintiff's behalf)  entered into sale and purchase agreements (“2015 SPAs”)  with 2,091 HCA Employees …

8.12  Each of the 2015 SPAs provided, inter alia, that:-

(1)  70% of the price shall be payable to the relevant Seller within 15 days …; and

(2)  upon such payment, the relevant Seller’s interest in his corresponding Employees’ Shares is forthwith transferred to the corresponding Nominee.

8.13.  Between August to September 2015, through the 11 Nominees, the Plaintiff paid a total of RMB 737,500,000, representing 70% of the total price under the 2015 SPAs, to the Sellers.

(c)  Chen HQ seeks inter alia declarations to the effects that he is the beneficial owner of those shares, such that they are now being held on trust for him;

(d)  Having read Jinan Group’s original Defence and Counterclaim, Chen HQ amended his Statement of Claim so as to plead to it.  He pleads what he says Jinan Group’s case is, and his own case against it.  In particular, he pleads in §19.2(5)  as follows:

On 16 August 3017 [sic], Jinan Group deposited a sum of RMB828,100,000 into the Jinan Quancheng Notary Public Office of Shandong for the purposes of repaying the “loans” owing to the Plaintiff under the Loan Agreements by the 11 Nominees …, and with a view to extinguishing the Plaintiff’s rights and interests in the Employees’ Shares.  The repayment was not accepted by the Plaintiff by reason of the fact that the 11 Nominees were purchasing agents and not borrowers, and thus their obligations could not be discharged by repayment of the monies advanced by the Plaintiff for the Acquisition.

(e)  As can be seen on the face of the pleadings, and in any event as confirmed by Mr Law in the course of the hearing, Chen HQ has not pleaded any alternative case to any effect that should his agency case be rejected upon trial, such that the monies he had advanced to the 11 Nominees were in fact loans, he claims repayment of those loans. 

9.  The true nature of those Loan Agreements is very much in dispute.  Chen HQ’s cases have not been consistent in the various actions he has been involved in.  Those disputes have been considered at some length in some of the Decisions mentioned above, and have been raised in pleadings in the present case by some of the parties.  But there is no need to revisit them for resolution of the matters presently before this Court.

10.  In respect of Jinan Group’s case:

(a)  Mr Wong summarises Jinan Group’s position in his written submissions as follows:

14.  Between August and September 2015:-

(1)  11 individuals (“11 Representatives”)  entered into sale and purchase agreements (“2015 SPAs”)  with about 2,090 Shanshui employees to acquire the Shanshui employees’ shares in CSI.  

(2)  The 11 Representatives settled 70% of the purchase price due under the 2015 SPAs using funds advanced pursuant to certain loan agreements entered into with CHQ (“Loan Agreements”).

15.  It is Jinan Group’s case that in about mid-2017, Jinan Group was approached by the representatives of the Shanshui employees [and received certain proposal]…

16.  Jinan Group’s case is that Jinan Group agreed to the above proposal.   Against the aforesaid background:-

(1)  Between 9 and 22/9/2017:-

(a)  1,838 Shanshui employees entered into termination agreements (“Termination Agreements”)  with the 11 Representatives to terminate the 2015 SPAs such that the CSI shares held by these Shanshui employees became available for purchase by Jinan Group.

(b)  1,838 Shanshui employees then entered into sale and purchase agreements (“2017 Jinan SPAs”)  with Jinan Group for the sale of an aggregate of 264,664 CSI shares (“Acquired Shares”)  to it.  

(2)  It will be recalled that these 1,838 Shanshui employees have previously received consideration from the 11 Representatives under the 2015 SPAs.  Such consideration received under the 2015 SPAs would need to be refunded to the 11 Representatives pursuant to the Termination Agreements: 

(a)  Instead of asking these 1,838 Shanshui employees to refund the consideration received under the 2015 SPAs to the 11 Representatives, it was logistically more efficient for Jinan Group under the 2017 Jinan SPAs to pay such amount to the 11 Representatives.  Jinan Group shall elaborate on this aspect of its case below.

(b)  On 16/8/2017, Jinan Group deposited RMB830,500,000 (“Notary Deposit”)  into the Jinan Quancheng Notary Public Office (“Notary Office”).   The Notary Deposit was made on behalf of the 11 Representatives.

(b)  §§4E(3)  and 4G of Jinan Group’s Amended Defence and Counterclaim[5] (the “JG/AD&C”)  are of particular relevance (we will very soon see why).  They are in the following terms:

4E.  Between 9 and 22 September 2017 and on the same day as the relevant Termination Agreements were signed, Jinan Group entered into [the 2017 Jinan SPAs] with the said 1,838 Shanshui employees holding a total of 264,664 CSI shares (“Acquired Shares”).  In the 2017 Jinan SPAs, it is stated that:-

…

(3)  Jinan Group should perform its payment obligation in respect of the consideration payable for the purchase of the Acquired Shares by refunding the payments received under the 2015 SPAs on behalf of the 1,838 Shanshui employees, to the relevant 11 Employees or other parties as required under the Termination Agreements.

…

4G.  By September 2017, Jinan Group had paid a total of RMB830,500,000 to the 11 Employees, by way of deposits into the Jinan Quancheng Notary Public Office on behalf of the 11 Employees, RMB810,399,785 out of the aforesaid sum was, pursuant to the 2017 Jinan SPAs, used to refund the payments received under the 2015 SPAs on the 1,838 Shanshui employees’ behalf.  Such RMB810,399,785 represented the aggregate sum of (i)  the full consideration for the Acquired Shares then owned by the 1,051 Shanshui employees, and (ii) 70% of consideration for the Acquired Shares then owned by the remaining 787 Shanshui employees.  In respect of the latter, Jinan Group has been and is willing, able and ready to repay the remaining 30% consideration of RMB92,898,447 in relation to the said 787 Shanshui employees for purposes of their effecting refund of any payments to be made by them.  Jinan Group has thus obtained the beneficial interest to the Acquired Shares by virtue of the 2017 Jinan SPAs in or around September 2017.

(c)  Jinan Group at §38C(3)  pleads to §19.2(5)  of the ASoC as follows:

As to Paragraph 19.2(5), it is admitted that Jinan Group deposited RMB828,100,000 into the Jinan Quancheng Notary Public Office on 16 August 2017 on behalf of the 11 Employees. Jinan Group understood that the deposit would be used to discharge the repayment obligations under the Loan Agreements.  The rest of paragraph 19.2(5)  is not admitted.

11.  In relation to the position of the 8 Reps and SHDs (Excluding):

(a)  The 8 Reps on the one hand and the SHDs (Excluding)  on the other have filed their separate defences.  Their cases are however broadly identical, and are along the same line as pleaded by the Jinan Group.  Unless otherwise specified, I will refer only to the pleadings filed by the 8 Reps;

(b)  §§6G, 6H, 6I and 6J of the 8 Reps’ Re-Amended Defence and Counterclaim[6] (the “8Reps/RAD&C”)  are of particular relevance (and again the reason will be clear soon).  They are in the following terms:

6G.  The loans made pursuant to the Loan Agreements had a term of 24 months, i.e. they would fall due in or around August 2017.

6H.  In or about August 2017, [Jinan Group] agreed to provide funds to repay the loan due under the Loan Agreements.  In consideration therefor, the 2015 SPAs would be terminated and/or rescinded, and the Employees would enter into agreements to sell their interests in CSI to [Jinan Group].

6I.  Pursuant thereto, the 11 Representatives took steps to make repayment to Chen HQ.  Chen HQ however refused to engage with the 11 Representatives or to accept the offer of repayment.

6J.  In the premises, in mid-August 2017, [Jinan Group] on behalf of the 11 Representatives (save for Liu DQ)  paid a sum of RMB828,100,000 plus notary fees into the Jinan Quancheng Notary Public Office (the “Notarial Repayment”).  Under PRC law, the Notarial Repayment is effective to discharge a loan in the event of uncertainty regarding the identity and/or whereabouts of the creditor and/or where the creditor refuses to accept payment.  As such, by way of the Notarial Repayment, the Loan Agreement had been discharged.

(c)  At §27(ab)(v), the 8 Reps plead to §19.2(5)  of the ASoC as follows:

As to Paragraph 19.2(5), it is admitted that [Jinan Group] deposited RMB838,500,000[7] into the Jinan Quancheng Notary Public Office on 16 August 2017 for the purpose of repaying the loans due under the Loan Agreement.  Save as aforesaid, paragraph 19.5 is denied by reason of the matters pleaded above.  In particular, it is averred that Chen HQ’s refusal to accept the Notarial Repayment is itself unlawful and invalid.

D.  The procedural history

12.  In respect of the Appeal:

(a)  On 27 December 2023, Chen HQ filed separately a set of interrogatories against each of Jinan Group and the 8 Reps (the “JG I/G” and “8 Reps I/G” respectively, and “Interrogatories” collectively);

(b)  The 2 sets of Interrogatories are administered in connection with different pleadings:

(i)  The JG I/G concern what Jinan Group has pleaded at §§4E(3)  and 4G of its JG/AD&C, which I have set out above;

(ii)  The 8 Reps I/G concern what the 8 Reps have pleaded in §§6H, 6I and 6J of their 8Reps/RAD&C, which I have also set out above;

(iii)  It is noted that whilst the SHDs (Excluding)  have separately filed their Re-Amended Defence (the “SHDs/RAD”), no interrogatory has been administrated against them;

(c)  The 8 Reps I/G make 5 requests (“Request (a)” to “Request (e)”). The JG I/G contain 2 additional requests (“Request (f)” to “Request (g)”):

(i)  Requests (a)  to (c)  concern information on the current whereabouts of the Notarial Repayment;

(ii)  Requests (d)  and (e)  ask whether any deposit further to those (“Further Deposit”)  had been made, and if so, their details; and

(iii)  Requests (f)  and (g)  ask Jinan Group whether the remaining consideration (after the Notarial Repayment)  had been paid, and if so the particulars;

(d)  By the 24/1/2024 Summons, Jinan Group seeks an order that Chen HQ shall withdraw the JG I/G (i.e. one of the I/G Withdrawal Applications);

(e)  Separately, by the 14/3/2024 Summons, the 8 Reps and the SHDs (Excluding)  seek inter alia:

(i)  leave to re-re-amend respectively their 8Reps/RAD&C and SHDs/RAD as per the drafts attached thereto (i.e. the Amendment Applications); and

(ii)  an order that Chen HQ shall withdraw the 8 Reps I/G (i.e. the other of the I/G Withdrawal Applications);

(f)  Having heard parties, Master Lewis Law on 2 August 2024 allowed the Amendment Applications and the I/G Withdrawal Applications, and made the Master Law Order;

(g)  By 2 Notices of Appeal both dated 16 August 2024, Chen HQ appeals against the Master Law Order;

(h)  Hence the Appeal.

13.  In respect of the Striking Out Summons:

(a)  Pursuant to the Master Law Order, the 8 Reps and the SHDs (Excluding)  on 5 August 2024 separately filed their amended pleadings (the “8Reps/RRAD&C”[8] and “SHDs/RRAD” respectively);

(b)  After a number of extensions, Chen HQ on 17 December 2024 filed his Re-Re-Amended Reply and Defence to Counterclaim to the 8Reps/RRAD&C (“CHQ/RRAR&DC”), and his Re-Re-Amended Reply to the SHDs/RRAD (“CHQ/RRAReply”);

(c)  On 2 January 2025, the SHDs[9] filed the Striking Out Summons and sought an order that Paragraphs 4CA to 4F, the last sentence of paragraph 10F, and paragraph 10G(2A)  of both of the CHQ/RRAR&DC and CHQ/RRAReply be struck out (the “Impugned Paragraphs”);

(d)  Hence the Striking Out Application before this Court.

E.  The Appeal and the Striking Out Application related

14.  The Appeal and the Striking Out Application are clearly related, beyond the fact that they arose out of the same action.

15.  The Amendment Applications and I/G Withdrawal Applications were both triggered by the Interrogatories.  In Mr Maurellet’s own words, the SHDs “responded” to the same by issuing those applications.

16.  The Amendment Applications bear upon the scope of the pleadings, which in turn bears upon the I/G Withdrawal Applications and the Striking Out Application. 

17.  For this Decision, I regard as logical and sensible to consider the Amendment Applications first, then the I/G Withdrawal Applications, and then the Striking Out Application.

18.  I pause here and record one matter.  Parties (Chen HQ, SHDs and Jinan Group)  on 17 April 2025 came before this Court for directions.  Parties requested various interlocutory matters, inter alia the Appeal, the Striking Out Application, and certain applications for adducing expert evidence (the “Expert Evidence Applications”)  be heard together before this Court.  However, my enquiries during that hearing revealed that certain processes and documents had not in fact been served upon certain parties to the action (notably the Rep Counterclaim/D5-D241, who I was told are not likely to be amongst the SHDs).  The view was taken that some of those interlocutories intended to be heard together could not be proceeded with until proper service.  The attending parties were however adamant that the Appeal and the Strike Out Application could nonetheless be proceeded with, as all the parties involved were and would be before the Court.  I hence directed that the Appeal and the Striking Out Application be heard together – and therefore the present (in effect)  consolidated hearing.

F.  Chen HQ’s draft 5^th affirmation

19.  With leave, and for the purpose of resisting the Strike Out Application, Chen HQ has filed his draft 5^th affirmation.  The Striking Out Summons was taken out by the SHDs, not the Jinan Group.  Mr Wong objects to Chen HQ’s use of his draft 5^th affirmation in support of his Appeal.  Chen HQ has put forward no reason as to why further evidence should pursuant to O.58 r.1(5)  be admitted for the purpose of the Appeal.  In the course of the hearing, upon request by this Court for clarification, Mr Law confirmed that Chen HQ does not seek to rely on the same for the purpose of the Appeal.

G.  The Amendment Applications

20.  I have set out above §§6I, 6J and 27(ab)(v)  of the 8Reps/RAD&C.

21.  The disputed amendments relate to those 3 paragraphs, being:

(a)  The proposed addition of the following underlined words to §6I:

Pursuant thereto, the 11 Representatives took steps to make repayment to Chen HQ by way of [Jinan Group] paying on behalf of the 11 Representatives (save for Liu DQ)  a sum of RMB828,100,000 plus notary fees into the Jinan Quancheng Notary Public Office.  Chen HQ however refused to engage with the 11 Representatives or to accept the offer of repayment.

(b)  The deletion of the entire §6J; and

(c)  The following additions (as underlined)  and deletions (as struck through)  to §27(ab)(v):

As to Paragraph 19.2(5), it is admitted that [Jinan Group] deposited RMB838,500,000 into the Jinan Quancheng Notary Public Office on 16 August 2017 as an offer to repayfor the purpose of repaying the loans due under the Loan Agreement.  As pleaded in paragraph 6I above, the offer was not accepted by Chen HQ; and sSave as aforesaid, paragraph 19.5 is denied by reason of the matters pleaded above.  In particular, it is averred that Chen HQ’s refusal to accept the Notarial Repayment is itself unlawful and invalid.

22.  The reasons for the Amendment Applications, as put forward by Mr Maurellet, may be summarised as follows.  The Amendment Applications and the I/G Withdrawal Applications were indeed triggered by the Interrogatories.  Mr Maurellet refers to §§19.1 and 19.2 of the ASoC.  §19.2(5)  pleads only factual background.  It is not an integral part of Chen HQ’s case.  Chen HQ’s own case is that the Loan Agreements were not actually agreements for loans.  He did not accept any repayment.  He has not pleaded any alternative case on the basis of they being loans.  As such the SHDs only plead §§6I, 6J and 27(ab)(v)  out of completeness in response to Chen HQ’s own pleas.  The legal effect of the Notary Deposit as a matter of Mainland law is in fact irrelevant.  But it had given rise to confusion and misunderstanding.  The SHDs hence on reflection applied to take it out.  

23.  Mr Law summarises his response at §73 of his written submissions, that:

P does not oppose the Deletions, save and except if (1)  the 8 Reps rely on the Deletions to resist the Interrogatories, and (2)  the Court does not accept the analysis above that the issue of Notary Deposit remains live notwithstanding the Deletions.

He also submits that the proposed amendments were “strategic maneuvering done to avoid the Interrogatories”, and that the principles relating to withdrawal of admissions are applicable by analogy.

24.  For the following reasons, I allow the Amendment Applications:

(a)  What the SHDs want to plead in defence of the case against them is primarily a matter for them;

(b)  Of course, if they seek to amend by withdrawing admissions they have made, there are requirements which they need to satisfy.  But this is not the case here, and I do not accept Mr Law’s submissions that the related principles apply;

(c)  I accept Mr Maurellet’s submissions that §19.2(5)  of the ASoC pleads only factual background, and does not form an integral part of Chen HQ’s case. Chen HQ has also pleaded no alternative case based on loans;

(d)  SHDs in the circumstances want to limit and delineate their cases by taking out the plea in relation to the legal effects of the Notary Deposit, which they do not regard as relevant.  I do not accept that it amounts to any “strategic maneuvering”;

(e)  I see no basis to force SHDs to run a defence which they do not want to.

25.  I hence dismiss the part of the Appeal in relation to the Amendment Applications.

H.  The I/G Withdrawal Applications

H.1.   The legal principles

26.  The applicable legal principles are not in dispute.  The differences between the parties are matters of emphasis.

27.  The starting point is O.26 rr.1(1)  and (3), that:

(1)  A party to any cause or matter may in accordance with the following provisions of this Order serve on any other party interrogatories relating to any matter in question between the applicant and that other party in the cause or matter which are necessary either—

(a)  for disposing fairly of the cause or matter; or

(b)  for saving costs.

(2)  …

(3)  A proposed interrogatory which does not relate to such a matter as is mentioned in paragraph (1)  may not be administered notwithstanding that it might be admissible in oral cross-examination of a witness.

28.  As explained by Au J (as His Lordship then was)  in Ng Shek Wai v Hong Kong Institute of Certified Public Accountants[2019] HKCFI 2439 at §§31-32:

31.  The relevant principles governing whether interrogatories should be permitted are not and cannot be disputed.  They can be conveniently summarized as follows:

(1)  The interrogatories must relate to a matter in question between the parties: Order 26, rule 1(3)  of the Rules of the High Court (Cap 4A).

(2)  The interrogatories must be necessary either for disposing fairly of the cause or matter or for saving costs: Order 26, rule 1(1)  of the Rules of the High Court.

(3)  Even where the interrogatories comply with the requirements of the rules, the Court nevertheless retains an overriding discretion as to whether or not to allow them to be administered: Lee Nui Foon v Ocean Park Corp (No 2) [1995] 2 HKC 395.

32.  In determining whether the interrogatories relate to a matter in question between the parties, the court applies a test which is akin to the Peruvian Guano test in discovery.  The right to interrogate is not confined to the facts directly in issue, but extends to any facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly in issue: Lee Nui Foon at 398F-G, Kao Lee & Yip v Koo Hoi Yan (unreported, HCA 8847/1993, 26 February 2002)  at paragraph 7(1).

29.  On the Peruvian Guano relevance test, Mr Law refers to the observations of Deputy Judge H Wong SC at §24 of Chan Hung v Yung Kwong Chung (HCA 216 & 217/2004, 15 January 2009), that a document is relevant if it relates to the matters in question in the sense that it may either directly or indirectly enable a party either to advance his own case or to damage his adversary’s case, and that it is sufficient if the document may fairly “lead to a train of inquiry” that may produce such a consequence.  That is not controversial.  Mr Law relies further on the learned Deputy Judge’s observations at §27, that for discovery purposes, the pleadings have to be looked at broadly.

30.  On the requirement of necessity and the court’s discretion:

(a)  Whilst the general principle is that interrogatories are admissible where they go to support the applicant’s case or destroy the opponent’s, that only goes to the question of admissibility.  Whether a court will in its discretion allow interrogatories is entirely a different matter.  It is wrong to order interrogatories once admissibility is demonstrated.  In the exercise of its discretion, the court must bear in mind that interrogatories will be ordered only where they are necessary, in the sense as stipulated in O.23 r.1(1)  – per Ma J (as the former CJ then was)  in Kao Lee & Yip at §§7(1)  to (3);

(b)  In the exercise of its wide and unfettered discretion, the key consideration for the court is the factor of necessity – per Coleman J at §16 of Wang Pengying v Ng Wing Fai[2019] HKCFI 2430, applying Kao Lee & Yip;

(c)  Necessity is a stringent test, and the interrogator must be able to show that his interrogatories will serve a clear litigious purpose – per Deputy Judge Raymond Leung SC stated at §90(6)  of New Shipping Ltd v Lau Wing Yan[2020] HKCFI 2933, and Deputy Judge H Au-Yeung (as he then was)  at §4(3)  of Wong Ying Grace v Dr. Ho Wing Chiu Clement[2022] HKCFI 3109.

31.  Mr Law placed emphasis upon the observations of Deputy Judge Raymond Leung SC in New Shipping at §91.  In that case, it was the defendant who was seeking interrogatories.  They related to matters likely to be in the plaintiff’s possession (as opposed to the defendant’s).  The learned Deputy Judge observed hence that “As such, care should be taken to maintain a level playing field so that the Defendant would not be stonewalled in the conduct of his defence.”

32.  I have considered all the authorities that were cited to me, and in particular those above.  I apply them.

H.2.   Parties’ stance

33.  I have considered the totality of Mr Law’s submissions.  On the question of relevance, the crux of his stance can be gleaned from §§34, 35, 37, 49, 50 and 51 of his written submissions, with reference to the Mainland law he summarises at §§51 and 52 of the same, that (with emphasis added):

34.  … it is patent that a fundamental tenet of Jinan Group’s case is that it had refunded (through the 11 Nominees)  the consideration paid by P under the 2015 SPAs by way of the Notary Deposit, which in turn:

34.1  discharged its own obligations under the Purported 2017 Jinan SPAs, and “earned” its entitlement to the Jinan Disputed Shares;

34.2  unwound the 2015 SPAs and enabled the signing of the Purported Termination Agreements, which in turn extinguished P’s entitlement to the Jinan Disputed Shares; and

34.3  discharged the Loan Agreements (or the Agency Agreements), otherwise the 11 Nominees would have entered into the Purported Termination Agreements without authority (whether by virtue of their duties as agents or P or cl.7(1)  of the Loan Agreements).

35.  If this fundamental tenet cannot be made out, it is difficult to see how Jinan Group could establish its title to or proprietary interest in the Jinan Disputed Shares, or alternatively, it should have priority over P.

…

37.  Therefore, it must also be central to Jinan Group’s case that the Notary Deposit (despite not accepted by P)  amounts to a valid payment to P, and accordingly a good discharge / termination of the 3 contractual documents in §34 above.

…

49.  As shown above, it is a critical plank of both Jinan Group’s and the SHDs’ cases that the Notary Deposit amounted to payment to P (even though not accepted by P), and in turn a good discharge of the Loan Agreements, termination of the 2015 SPAs and performance under the 2017 Jinan SPAs.

50.  But the position would be different if the Notary Deposit had been withdrawn by Jinan Group or the 11 Nominees from the Jinan Notary Office.

51.  The basis for thinking that the Notary Deposit has been withdrawn is that under Mainland law, where the creditor had proper reasons to refuse accepting payment (which would be the case if P is right on his characterization of the Loan Agreement as agency agreements), the notarial deposit will be escheated to the Government by its 5-years’ mark.  Therefore, there was incentive for Jinan Group / 11 Nominees to do so to avoid the risk of losing the Notarial Deposit whilst the Loan Agreements would remain undischarged ….

Mr Law proceeds to give greater details of what he calls the relevant Mainland provisions at §52 of his written submissions, with reference to the expert opinion of 譚潔.  He submits further at §56 that:

56.  The withdrawal before the 5-year mark (the effect of which is as if the deposit had never been made at all) is significant because if the Notary Deposit has not been re-deposited into the notary office, the fundamental tenet of Ds’ case would not be made out, and accordingly, there is no basis for them to argue that the 2015 SPAs had been terminated; or that they were entitled to enter into the Purported Termination Agreements (when the negative pledge obligation in the [Loan] Agreement remained intact and had not been discharged); or that Jinan Group had provided consideration for the acquisition of the beneficial interest in the Jinan Disputed Shares under the Purported Jinan 2017 SPAs.

34.  On necessity, Mr Law submits that the Interrogatories are necessary for disposing fairly of the cause or matter, as Chen HQ has no access to the Notary Office.  They also save costs as, as the Interrogatories are simple and straightforward, and the answers will allow parties to focus on the real issues.

35.  I have dealt with SHDs’ stance above.  They are not relying on the legal effect of the Notary Deposit.  They have made that clear via the amendment of their pleadings, and re-confirmed its stance in the course of the hearing emphatically.

36.  Jinan Group’s stance is that Chen HQ has fundamentally mischaracterizes their position.  Their pleaded case in relation to the Notary Deposit, as submitted by Mr Wong in answer, is as follows:

(a)  Under the 2017 Jinan SPAs, Jinan Group shall pay the consideration for the Acquired Shares to the 11 Representatives;

(b)  They did so, as required, by making the Notary Deposit on behalf of the 11 Representatives.  Their payment obligations under the 2017 Jinan SPAs had already been discharged thereby, and what the 11 Representations decided to do subsequently with the Notary Deposit has no bearing on Jinan Group’s obligations;

(c)  Chen HQ has not pleaded or advanced any case that Jinan Group’s performance of the 2017 Jinan SPAs would be dependent upon the Notary Deposit remaining with the Notary Office;

(d)  Whilst not Chen HQ’s case, and not even an alternative one, but even if the Loan Agreements conferred genuine loans, whether those loans had been discharged are matters between the lender and borrowers of those Agreements, and had nothing to do with Jinan Group’s entitlement to the Acquired Shares;

(e)  In relation to the negative pledge clause, that is not Chen HQ’s pleaded case, and he should not be permitted to administer interrogatories on that basis.

37.  On necessity, the SHDs’ and Jinan Group’s stance is that if the Interrogatories are not relevant, they cannot be necessary for disposal of the cause of matter.

H.3.   Discussion

38.  On the question of relevance:

(a)  In my view, the position has become clear once the parties’ respective cases have been properly identified;

(b)  Chen HQ himself does not rely on the Notary Deposit, or they remaining with the Notary Office, as part of his case.  He is not claiming those sums. The Interrogatories hence do not advance his case;

(c)  Chen HQ has formed his view as to what SHDs’ and Jinan Group’s cares are.  I have set out above §19.2(5)  of his ASoC.  It is also relevant to note in this regard what he has pleaded in §2.3 of his Re-Amended Reply to JG/RAD&C, that (emphasis added)  “… insofar as the same is alleged, it is denied that the purported deposits into the Jinan Quancheng Notary Public Office by Jinan Group… discharged the obligations under the Agency Agreements or Loan Agreements.”

(d)  But the legal effects of the Notary Deposit is not part of SHDs’ case.  If not clear before, that is made clear by the Amendment Applications;

(e)  Nor is it Jinan Group’s case that the Notary Deposit effected any discharge, as Chen HQ says Jinan Group is saying.  That in my view is clear on the face of Jinan Group’s pleadings;

(f)  Nor is it Chen HQ’s case that Jinan Group’s performance of the 2017 Jinan SPAs would be dependent upon the Notary Deposit remaining in the Notary Office[10], so that Jinan Group’s case may be damaged if they have ceased to be;

(g)  Nor does the negative pledge clause assist Chen HQ:

(i)  At §5.2 of his written submissions, Mr Law says:

There is a dispute between P on the one hand and SHDs on the other as to the true nature of the Loan Agreements.  The latter argue that instead of agency agreements, the effect of the Loan Agreements was for P to provide loans to the 11 Nominees who would acquire the Shares on their own behalf.  Regardless of who is right, the Loan Agreements contain an express negative pledge clause which prohibits the representatives from creating any encumbrance over the Shares.

(ii)  But it is not a matter of “regardless of who is right”.  No matter how broadly one looks at the pleadings, it is a fundamental plank of Chen HQ’s case as pleaded in the present action that the Loan Agreements did not provide for the advancing of loans, but were the written part of the Agency Agreements;

(iii)  This renders it important to note again, as emphasized by Mr Wong[11], that Chen HQ has pleaded only one case, and has pleaded no alternative case cased on the scenario of the Loan Agreements being genuine loan agreements;

(iv)  There is further no plea, on the basis of Mainland law or otherwise, that if the Loan Agreements were in fact genuine loan agreements, the Termination Agreements would be invalid for breach of the negative pledge clause;

(v)  I will come back to this when I consider the question of necessity;

(h)  On the parties’ respective cases, the whereabouts of the Notary Deposit is simply not an issue.  During the trial, the court will not be required to make any finding on that factual issue.  I accept Mr Maurellet’s submissions in this regard;

(i)  Viewed as above, the Interrogatories may not advance Chen HQ’s case, nor damage those of SHDs and Jinan Group.  Either way, the Peruvian Guano relevance test is not demonstrated.  This is the big picture.  This is also what the pleadings inform us, even when read broadly;

(j)  Specifically in relation to Requests (f)  and (g), I accept Mr Wong’s submissions that they are similarly irrelevant.  Jinan Group has never pleaded that it had paid the remaining consideration.  Their case is that they remain willing, able and ready to do so;

(k)  The need to “maintain a level playing field” does not assist Chen HQ.  Deputy Judge Leung’s observations are that “care should be taken to maintain a level playing field so that the Defendant would not be stonewalled in the conduct of his defence” (emphasis added).  Chen HQ is seeking to interrogate the 8 Reps and Jinan Group on matters which do not form part of their case.  He does not need them “in the conduct of his defence.”  He would not be “stonewalled” without them.

39.  The above takes me to the issue of necessity:

(a)  I repeat that necessity is a stringent test;

(b)  I repeat the wide and unfettered discretion that this Court retains;

(c)  The Interrogatories are not as simple as Mr Law describes them to be, as to only whether the Notary Deposit had been withdrawn.  They ask that if they had been, the dates of withdrawal, by whom, whether withdrawn orally or in writing, and further details either way.  Request (b)6)  asks further:

The full and precise contents of the request(s), including the basis or reasons for withdrawal of the Alleged Deposit.

(d)  Expert evidence on Mainland law would also be required to be adduced on those matters.  I have mentioned above the Expert Evidence Applications.  Whilst those applications are at this stage not before this Court, I was informed by counsel in the course of the hearing that part of those applications relate to the issues raised in the Interrogatories.  That is in fact apparent on the face of the Impugned Paragraphs, as we shall see;

(e)  In my view, on the overall facts of this case, the stringent test of necessity has not been met;

(f)  In my view, even if this Court were wrong above on the question of relevance, and that the Peruvian Guano relevance test had perhaps been marginally made out, perhaps on the effects of the negative pledge clause based on a very board reading of the pleadings, the stringent necessity test remains in my view not met;

(g)  This action is a complicated one.  The introduction I have given in paragraph 2 gives a taste of it.  There will be a multitude of issues which are much more important towards resolution of parties’ disputes.  In a case of this nature, it is particularly important for parties to focus on the real issues, and for the court to exercise its case management power and discretion in ways which lead parties towards that.  In my view, allowing Chen HQ to administer the Interrogatories is neither necessary for disposing fairly of the case, nor for saving costs.  In my view, ordering them would achieve the contrary.

40.  For record, I have considered all the matters which Mr Law has raised.  I have in particular also considered the procedural history which he submits confirms the relevance of the Interrogatories.  I have weighed them. They are inconsequential against those principal matters discussed above.

H.4.   Conclusion on the I/G Withdrawal Applications

41.  For the reasons set out above, I dismiss the part of the appeal in respect of the I/G Withdrawal Applications.

I.  Conclusion on the Appeal

42.  For the above reasons, I dismiss the Appeal in its totality.

J.  The Striking Out Application

43.  As introduced above, the Striking Out Application concerns the Impugned Paragraphs in the CHQ/RRAR&DC and CHQ/RRAReply.

44.  The Impugned Paragraphs in the CHQ/RRAR&DC and CHQ/RRAReply are the same.

45.  What has happened is that despite the Master Law Order, and despite the amendments which SHDs (Excluding)  and the 8 Reps had accordingly made to their pleadings, Chen HQ nonetheless inserted or amended the Impugned Paragraphs to plead to the Notary Deposit.  §§4CA to 4F of the Impugned Paragraphs span over some 7 pages.  §4CA is entirely new.  §4D is the amended version of the original paragraph 4D pleaded in reply to §6J of 8Reps/RAD&C and SHDs/RAD. §§4E and 4F are also entirely new.  Their nature can be gleaned from the main paragraphs of each of those paragraphs:

4CA.   Insofar as the same is alleged, it is denied that the deletion of paragraph 6J renders the issue of whether the Notarial Repayment discharged the obligations under the Loan Agreements irrelevant or obsolete … [followed by 9 subparagraphs].

4D.  Further, the second and third sentences of paragraph 6J are denied.  It is denied that the Notarial Repayment did not discharged the obligations under the Agency Agreements or Loan Agreements … [followed by 5 subparagraphs, several of which relate to Mainland law].

4E.  Further or alternatively, even if (which is not admitted)  the Notarial Repayment had been made, it is to be inferred from the facts and matters pleaded hereinbelow that it had been withdrawn by September 2022 … [followed by 7 subparagraphs, several of which relate to Mainland law].

4F.  Where a notarial deposit is withdrawn, the initial deposit shall be deemed to have not been made at all, such that the payment obligation would remain undischarged.  [P] relies on Article 3 of the Notary Deposit Regulation, which provides … [Article 3 is then pleaded].

The last sentence of paragraph 10F and paragraph 10G(2A)  of the Impugned Paragraphs repeat §4CA.

46.  For the following reasons, I accede to the Striking Out Application:

(a)  The leave given to Chen HQ to file his CHQ/RRAR&DC and CHQ/RRAReply is only to effect amendments consequential to those amendments which the SHDs had been permitted to make.  Whilst this is not expressly provided to be so on the face of the Master Law Order, this must be implicitly so – see Chow Ching Yee v Wong Hung Kee[2020] HKCFI 2555 at §14 per G Lam J (as his Lordship then was);

(b)  §4CA is clearly in the nature of arguments, seeking to justify the opening proposition therein that “Insofar as the same is alleged, it is denied that the deletion of paragraph 6J renders the issue of whether the Notarial Repayment discharged the obligations under the Loan Agreements irrelevant or obsolete”. 

(c)  I accept Mr Maurellet’s submissions that against SHDs (Excluding)’s and the 8 Reps’ act of deleting pleas, the appropriate forum for Chen HQ to raise arguments against was when he was before Master Lewis Law, but whose opposition had been unsuccessful;

(d)  Mr Law submits[12] that despite the deletion of §6J, the SHDs continue to maintain the averment that the 2015 SPAs had been terminated by reason of the Termination Agreements and the cancellation clause in the 2015 SPAs.  I reject that argument in any event.  That averment is different from any averment of the Notary Deposit having the legal effects of discharging the 11 Nominees’ obligations under the Loan Agreements, which averment the SHDs have expressly disavowed;

(e)  In his written reply, Mr Law reiterated his submissions on the relevance of the Notary Deposit.  For the reasons set out in the discussions above on the I/G Withdrawal Applications, I am of the view that the matters pleaded in the Impugned Paragraphs are simply not relevant;

(f)  Further, as explained above, the amendments made by the SHDs are to narrow down the scope of their pleaded case.  Chen HQ does not only retain §4D.  He expands on its scope;

(g)  Viewed as such, and considered in the round, the Impugned Paragraphs are clearly not amendments consequential to the amendments allowed by Master Lewis Law. Chen HQ has no leave to do so.

47.  For all the reasons set out above, I strike out the Impugned Paragraphs on all the bases which the SHDs relies on.  In particular, I for the above reasons find that the Impugned Paragraphs disclose no reasonable defence or reply, are irrelevant, will prejudice, embarrass or delay the fair trial of the action, and are an abuse of the process of the Court in the sense that they were filed without leave.

K.  Overall disposition

48.  For the reasons set out above, I dismiss the Appeal, and allow the Striking Out Application.

L.  Costs

49.  I make a costs order nisi that Chen HQ shall bear the costs of this Appeal and the Striking Out Application, with certificate for 2 counsel for both the SHDs and Jinan Group, to be summarised assessed on the papers. Any application for variation shall be made within 14 days from the date when this Decision is handed down, upon receipt of which further directions will be given. In the absence of any, SHDs and Jinan Group shall within 21 days from the date hereof lodge their respective Statement of Costs, Chen HQ to lodge his Statements of Objections within 14 days thereof, and SHDs and Jinan Group their replies within 7.

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

Mr Jose Maurellet SC, leading Mr Alexander Tang and Mr Kevin Lau, instructed by Stephenson Harwood, for the SH Defendants (SHDs)

Mr Anson Wong SC, leading Mr Lai Chun Ho, instructed by Linklaters, for the Jinan Group

P.C. Woo & Co., for the 1^st to 3^rd Defendants (by Original Action), attendance was excused

HCA 1699/2019

[2021] HKCFI 2746

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

________________________

________________________

________________________

D E C I S I O N

O N  C O S T S

________________________

1.  By my decision handed down on 23 February 2021 (the “Decision”)[1], I allow the Jinan Summons and inter alia granted leave to Jinan Group to be joined as a defendant.  I, as per the terms of the Jinan Summons, made an order nisi that the costs of and occasioned by this application be reserved (the “Costs Order Nisi”).

2.  By letter of 3 March 2021, Messrs Linklaters on behalf of Jinan Group made an application for an order that the Costs Order Nisi be varied.

3.  On 12 March 2021, I gave directions on the filing of submissions, and directed further that the matter be dealt with on the papers.

4.  Parties have since filed their submissions:

(a)  of Mr Vincent Lung and Ms Astina Au of 29 March 2021 for Chen HQ; and

(b)  of Mr Anson Wong SC and Mr Ross Li of 7 April 2021 for Jinan Group.

5.  In Mr Wong’s submissions, he sets out at §4 the costs order which Jinan Group seeks to vary the Costs Order Nisi to:

(a)  Costs of the [Jinan Summons] incurred after 25 March 2020 be paid by [Chen HQ] to Jinan Group forthwith, to be taxed if not agreed with certificate for two counsel; and

(b)  Save as aforesaid, costs of [the Jinan Summons] be in the cause of the Action.

6.  Mr Lung’s primary position is that Jinan Group’s interest in the Subject Shares and its exact role it will play in the action are matters to be investigated at trial.  It is therefore fair and appropriate to reserve costs until all intricacies in the dispute are finally resolved.  As a fallback, he submits that the costs of the Jinan Summons should be in the cause of the Action.

7.  At the time when I made the Costs Order Nisi, I felt restricted by §5 of the Jinan Summons which asks for costs to be reserved.

8.  But as has been explained by Messrs Linklaters in their letter of 3 March 2021, at the time when the Jinan Summons was issued, it was not certain whether Chen HQ would oppose the same.  Costs was proposed to be reserved against that background.  Subsequently, by letter of 25 March 2020, Messrs Gallant on behalf of Chen HQ indicated that the application would be opposed.

9.  As pointed out by Mr Wong in his submissions, the single issue before this Court in considering the Jinan Summons was whether Jinan Group had satisfied the relevant threshold such that it ought to be joined as a party at the stage of the determination of the Jinan Summons.

10.  I have ruled at §43 of the Decision that Jinan Group had clearly made out a case for it to be joined. 

11.  I have also observed that Chen HQ’s characterization of the present action in opposing the application had led to some very strained and technical legal arguments which were, with respect, hardly necessary (§§34-35).  I was not satisfied that those arguments were engaged (§40).  I observed further that even on the arguments that were run on Chen HQ’s behalf, there were potentially complicated matters which take the case out of those “plain and obvious” ones which may justify a scrutiny of merits or an adjudication of facts at the interlocutory stage (§39).

12.  I am of the view that the opposition of the Jinan Summons was unmeritorious. 

13.  I derive assistance from Midland Business Management Ltd v Lo Man Kui [2011] 2 HKLRD 667, per Lam J (as the Permanent Judge then was)  at §§7, 9-12.

14.  Given the severable and self-contained nature of the Jinan Summons, and my view that the opposition of the Jinan Summons has been unmeritorious, I accede to Jinan Group’s application for variation.  I vary the Costs Order Nisi as per the terms set out in §5 above.

15.  Chen HQ should also bear the costs of this application for variation, to be dealt with as part of and together with the costs of the Jinan Summons (but with certificate for one counsel only).

Written Submissions by Mr Vincent Lung and Ms Astina Au, instructed by Gallant, for the Plaintiff

Written Submissions by Mr Anson Wong SC and Mr Ross Li, instructed by Linklaters, for Jinan Group (the 1,169^th Defendant)

HCA 1699/2019

[2021] HKCFI 1804

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

______________

BETWEEN

______________

______________

D E C I S I O N

______________

The

“CHQ Injunction Decision”

A. The Three Decisions

1.  I call this decision the “CHQ Injunction Decision”.  It is my decision on the CHQ Injunction Summons (defined below).  It may be read in context together with two other related decisions this Court hands down at the same time (namely the “Leave & Directions Decision”[1] and the “FR Lien Decision”[2]).

B. The Claim, and the background facts

2.  In respect of the nature of Chen HQ’s claim herein and the relevant background facts, I refer to my two earlier Decisions in this action handed down on 31 October 2019[3] and 23 February 2021[4], my Jurisdiction Decision handed down on 30 August 2019 in HCA 2648/2017[5], and the Trust Actions Judgment[6] and Trust Actions Discharge Decision[7] of G Lam J (as he then was) both handed down on 31 January 2018.  I will unless otherwise specified adopt the same terms as used in those Judgments and Decisions.

3.  To recapitulate the procedural background so as to set the scene:

(a) On 17 November 2017, soon after his unsuccessful application to be joined in the Trust Actions, Chen HQ commenced HCA 2648/2017 (“HCA 2648”). He claimed to be the owner of those Employee Shareholders’ interests in their CSI Shares, so that should those Employee Shareholders become successful in the Trust Actions, the related shares, then held by the EY Receivers, should be passed to him but not the successful Employee Shareholders;

(b) On 30 August 2019, I handed down the Jurisdiction Decision in HCA 2648.  For reasons set out therein, I set aside the Service Out Order, the concurrent Writ and concurrent Amended Writ issued pursuant thereto and the service out permitted thereby, and discharged the ASI (the “Jurisdictional Orders”).  For reasons set out in the Receivership Decision, I also dismissed Chen HQ’s Receivership Summons; 

(c) On 13 September 2019, Chen HQ started the present action (“HCA 1699” or the “Present Action”).  Instead of seeking to have the matter tried in Hong Kong, as he had been seeking to do in HCA 2648, this time he seeks to rely on the decisions he has obtained in the Mainland (the “Ruzhou Judgments”) against certain of the Employee Shareholders.  The Present Action has been described on his behalf as one “by a beneficiary solely entitled to an asset to call for the trust property by asking the trustee to execute a conveyance or transfer of the legal estate”[8];

(d) On the same day, he took out a summons for leave to appeal against the Jurisdictional Orders and the dismissal of his Receivership Summons;

(e) On 3 October 2019, two of the SHDs took out a summons for leave to be joined in the Present Action.  By order of this Court of 25 October 2019, they were joined, and are now D4 and D5;

(f) By summons dated 4 October 2019 under the Present Action and returnable on 31 October 2019 before this Court (the “CHQ Injunction Summons”), Chen HQ sought against the EY Receivers an interim injunction to restrain them from disposing of the 368,168 CSI Shares pending trial or further order (the “CHQ Injunction”);

(g) During the hearing on 31 October 2019, and having heard respective Senior Counsel appearing for the parties, I refused Chen HQ’s application for interim/interim relief (see [2019] HKCFI 2720).  I adjourned the matter for substantive argument.  That hearing was originally fixed before me on 3 March 2020.  That was vacated due to the COVID-19 pandemic.  I on 28 February 2020 ordered paper disposal, and gave directions on the further conduct of the matter, including the filing of written submissions and extension of time for the filing of further evidence as requested by Chen HQ;

(h) Pursuant to the directions I gave, the following submissions were filed between 6 and 20 March 2020 in support or opposition of the CHQ Injunction Summons, they being:

(i) The submissions of Mr Ambrose Ho SC and Mr Law Man Chung of 6 March 2020 on behalf of Chen HQ (“CHQ#1”);

(ii) The submissions of Mr José-Antonio Maurellet SC, Mr Alexander Tang and Mr Kevin Lau of 13 March 2020 on behalf of D4 and D5 (“SHD Sub”);

(iii) The submissions on behalf of Chen HQ of 20 March 2020 in reply (“CHQ#2”);

(i) In the meantime, before the close of submissions for the CHQ Injunction Summons:

(i) By summons of 16 March 2020 (“Jinan Group Joinder Summons”), Jinan Group sought leave to be joined as a defendant in the Present Action, and other consequential directions relating to the CHQ Injunction Summons should it be so joined;

(ii) By summons dated 9 December 2020 (the “SHD Joinder Summons”), a group of SHDs sought leave to intervene and/or be joined;

(j) The Jinan Group Joinder Summons and the SHD Joinder Summons came to be heard before me on 5 January 2021:

(i) the SHD Joinder Summons was ultimately not contested.  The applicants were joined, and are now D6 to D1168;

(ii) the Jinan Group Joinder Summons was contested.  Having heard respective leading counsel for the parties, and for reasons set out in my Decision of 23 February 2021[9], I allowed the application, and gave certain directions in relation to the further conduct of the CHQ Injunction Summons.  Jinan Group is now D1169;

(k) Pursuant to the directions I gave on 23 February 2021, the following submissions in further support or opposition of the CHQ Injunction Summons have been filed:

(i) The submissions of Mr Anson Wong SC, Mr Ross Li and Mr Lai Chun Ho of 23 March 2021 on behalf of Jinan Group (“Jinan Sub”);

(ii) The submissions of Mr Law Man Chung of 16 April 2021 on behalf of Chen HQ in reply (“CHQ#3”).

C. The submissions in gist

4.  CHQ#1 may be summarized as follows:

(a) The CHQ Injunction aims at protecting the status quo;

(b) D4 and D5 do not act for the other Employee Shareholders.  There are no objections from the others;

(c) The arguments made by D4 and D5 are groundless, not substantiated by admissible evidence, and in any event show precisely that there are serious issues to be tried;

(d) The balance of convenience tilts firmly in favour of the grant.

5.  SHD Sub may be summarized as follows:

(a) the reasons in my decision refusing interim/interim relief are relied upon;

(b) the Ruzhou Proceedings which led to the Ruzhou Judgments are tainted with serious procedural defects;

(c) the injunction should not be granted on the grounds that Chen HQ has engaged in impermissible re-litigation, he has been blowing hot and cold, because of the operation of Henderson estoppel, that public policy precludes recognition of the Ruzhou Judgments, that necessary parties are not before the Court, and that balance of convenience is against any grant.

6.  For Jinan Group, it is submitted that:

(a) in respect of the Ruzhou Judgments, Jinan Group not being a party, there is no res judicata against Jinan Group;

(b) the Present Action is liable to be struck out as an abuse of process given the inconsistent position Chen HQ has taken;

(c) Chen HQ is estopped from enforcing the Ruzhou Judgments;

(d) In any event, the injunction should not be granted upon the Court’s proper exercise of its discretion, because:

(i) Chen HQ’s case is dubious;

(ii) Chen HQ has failed to come to court with clean hands;

(iii) there is no evidence of credible undertaking.

7.  The main themes of Chen HQ’s replies are that:

(a) The causes of action in HCA 2648 and the Present Action are different, the former contractual, and the latter proprietary;

(b) Whilst Chen HQ accepts that his stances in HCA 2648 and the Present Action are different, SHDs’ and Jinan Group’s submissions involve the erroneous assumption that the adoption of inconsistent arguments or positions without more attracts legal consequences, including the draconian effect of depriving a party of his right to sue;

(c) There is therefore no estoppel, nor abuse;

(d) The fact that Jinan Group was not a party to the Ruzhou Proceedings does not lead to any conclusion that Chen HQ has raised no serious issue to be tried.

D. Applicable principles for interlocutory injunction

8.  On the applicable principles for interlocutory injunction, I have been cited and reminded of the discussions in American Cyanamid Co v Ethicon Ltd (No. 1) [1975] AC 396, 406-408, per Lord Diplock, HL, Music Advance Ltd v Incorporated Owners of Argyle Centre Phase 1 [2010] 2 HKLRD 1041, §12(d), per Ma J (as he then was), and National Commercial Bank Jamaica Ltd v Olint Corpn [2009] 1 WLR 1405, §§16-17, per Lord Hoffmann.  They are not controversial.  Nor do they need to be repeated.

E. Whether serious issue to be tried

9.  I deal with two matters first.

10.  At various places of his submissions, Mr Maurellet refers to my decision of 31 October 2019 refusing Chen HQ’s application for interim/interim relief.  The test for interim/interim relief is balance of fairness — see China Shanshui Cement Group Limited v Zhang Caikui[2018] HKCA 409, per Lam VP at §13.  It is different from the test I am to apply here.  Any observation I made in that Decision is also necessary preliminary in nature.  The value in relying on that Decision at this stage is limited.

11.  The second matter is this.  One facet of the SHDs’ case in resisting the CHQ Injunction Summons has been set out at §22 of SHD Sub.  It is submitted that the Ruzhou Proceedings are tainted with serious procedural defects. Substantial evidence has been adduced in support.  Chen HQ has in turn filed “voluminous evidence” in rebuttal.  As Mr Maurellet has realistically accepted, “at this interlocutory stage, it is not possible for these issues to be determined conclusively”[10]. Reference to them at this stage is again of limited value.

12.  Stripped of all the technicalities, the 2 principal features of the case which ground Mr Maurellet’s and Mr Wong’s submissions that Chen HQ has failed to establish any serious issue to be tried are as follows:

(a) Chen HQ has changed of his stances from what he has adopted in HCA 2648 (that Hong Kong is the appropriate forum for his claim, and that the 3^rd and 4^th Ruzhou Proceedings were only for preserving the status quo) to what he adopts in the Present Action (reliance of the Ruzhou Judgments which he is seeking enforcement of in Hong Kong); and

(b) Chen HQ obtained the ASI, and has benefited from it.

13.  That there has been a change of stance is accepted by Chen HQ.  At §25 of CHQ#2, Mr Ho states that:

“ It is true that P has commenced HCA 2648 and taken a number of steps in the belief that Hong Kong is the appropriate forum, including seeking O.11 leave, obtaining [the ASI] and commenced the proceedings in Ruzhou. It is also true that by reason of the Jurisdiction Decision, P now acts in the belief that PRC is the appropriate forum for the disputes in HCA 2648.”

14.  In effect, Chen HQ is saying that he changes his stance and belief as a result of the Jurisdiction Decision. 

15.  In the Jurisdiction Decision:

(a) I observed that the issue of ownership over the CSI Shares is merely consequential upon resolution of the contractual relationship between Chen HQ and the 11 Representatives, and that the same can also be said about the dispute between Chen HQ and the Employee Plaintiffs from whom he allegedly purchased some shares directly[11];

(b) I observed that relevant proceedings have been and could legally be initiated in the Mainland on the very dispute which HCA 2648 is concerned with[12];

(c) having taken an overall examination of the claim and the issues involved, I observed as follows[13]:

“ … The only connection which Chen HQ could realistically rely upon is the involvement of a Hong Kong company in the form of CSI. That connection is however, on the facts of this case, neither real nor substantial. It is in my view in fact tenuous. All relevant events took place in the Mainland. The related alleged agreements and understanding (the SALA, the Loan Agreements, the Share Pledge Agreements, the SPGAs and the SPAs) were all according to Chen HQ’s case reached in the Mainland. They all contain a choice of law clause choosing Mainland laws as the governing law. I have discussed above the issues involved. They are in my view contractual in nature. The case raises no issue of Hong Kong company law. The applicable law is in my view Mainland law. All the witnesses were Mainland parties and residents. If there had been any improprieties in the form of coercion as alleged by Chen HQ, they took place in the Mainland which the Hong Kong Courts are ill-equipped to handle. Chen HQ has himself started multiple court and arbitral proceedings in the Mainland on the very same issues.”

(d) In the end, I concluded that Chen HQ had failed to show a serious question that Hong Kong is not only the appropriate forum to try the case but that this is clearly so[14].

16.  Chen HQ also accepts that “[in] taking the benefit of the [Ruzhou] Judgments, there may be implications for HCA 2648.  However, that is a matter to be resolved in that action”.

17.  The core of SHDs’ and Jinan Group’s positions are in fact this: They say that Hong Kong is not the forum conveniens for the claim in HCA 2648. They made the jurisdiction challenge.  They have been successful.  They say that I am correct in the Jurisdiction Decision.  Then, given the prior steps Chen HQ had undertaken in HCA 2648, they submit that Chen HQ should further not be permitted to prosecute his claim via the Ruzhou Proceedings and to seek to enforce the Ruzhou Judgments in Hong Kong.  Not only that.  They are submitting that the position is so clear even at this stage that Chen HQ has in the Present Action raised no serious issue to be tried.

18.  Whilst Chen HQ accepts that his stance has changed upon my Jurisdiction Decision, the overarching submissions made on his behalf are these:

(a) Mere inconsistent argument or position without more may not attract any legal consequence — see Chinachem Charitable Foundation Ltd v Chan Chun Chuen & Anor [2009] 5 HKC 190, at §§45-47, and in particular §45 of Nexus Communication Group v Michael Lambert [2005] EWHC 345 (Ch) cited therein;

(b) Parallel claims on the same subject matter in 2 different jurisdictions are not inherently wrong, especially when there are substantial reasons of benefit to the plaintiff: Airbus Industrie v Patel [1999] 1 AC 119 at 132H, per Lord Goff, and Societe Aerospatiale v Lee Kui Jak [1987] 1 AC 871 at 894B-C, per Lord Goff;

(c) the causes of action in HCA 2648 and the Present Action are different.

19.  I see force in those arguments.

20.  The following submissions have also been made on behalf of Chen HQ in answer to the specific grounds of opposition raised by SHDs and Jinan Group.

21.  Impermissible re-litigation:

(a) Relying on Buckland v Palmer [1984] 1 WLR 1109 at 1114H, Mr Maurellet submits that Chen HQ is abusing the process by simultaneously pursuing parallel proceedings based on the same set of facts;

(b) In reply, Mr Ho submits that the causes of action in HCA 2648 and in the Present Action are not the same.  In any event, I have made the Jurisdictional Orders.  There is no option on Chen HQ’s part to amend and continue HCA 2648.  There is no basis to dismiss P’s claim in the Present Action as impermissible re-litigation.  This is particularly so in the event of this Court refusing P’s leave application to appeal[15];

(c) I again see force in Mr Ho’s submissions.  I repeat Chen HQ’s acceptance that “[in] taking the benefit of the [Ruzhou] Judgments, there may be implications for HCA 2648”.  But at this stage, I do not find the position to be so clear to the extent that there is no serious issue to be tried.

22.  Blowing hot and cold:

(a) Mr Maurellet refers to the inconsistent stances that Chen HQ has adopted.  Relies on Express Newspapers Plc v News (UK) Ltd [1990] 1 WLR 1320 at 1329F-G and Chan Chun Chuen v Kao, Lee & Yip, unrep, HCA 597/2015, 12 October 2017 at §30(4), he submits that Chen HQ has been blowing hot and cold;

(b) I have considered §30 of Chan Chun Chuen.  As Mr Maurellet has submitted, the relevant doctrine is essentially a “fairness doctrine”;

(c) I have considered the distinction which Mr Ho has drawn, based on Handley, Estoppel by Conduct and Election (2^nd ed) §15-029 and Evans v Bartlam [1937] AC 473, between election between inconsistent rights/duties and election in procedure, the latter being usually regarded as not final;  

(d) On the facts of the Present Action, and in particular in the light of the reasons for Chen HQ’s change of stances as set out in §§12-17 above, I cannot conclude at this stage, as a matter of fairness, that Chen HQ has blown hot and cold to the extent that no serious issue to be tried has been raised.

23.  Henderson estoppel:

(a) Mr Maurellet relies on Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 at §§82-83;

(b) I have considered the various facets of the doctrine explained by Ma CJ at §83 of the judgment.  I regard as having particular relevance the following facets.  The starting point is to recognise that the doctrine is founded on an abuse of process.  But a party ought not lightly to be deprived of the right to have serious matters litigated.  In examining aspects such as abuse, the court is concerned with balancing interests.  The assessment of different factors and balancing competing interests can be said to be an exercise of a discretion;

(c) Again, I come back to the background leading to the change of stance on Chen HQ’s part, and the reasons for him not relying on the Ruzhou Judgments before.  I have to balance against it the harshness of depriving him of the right to have the enforcement of the Ruzhou Judgments litigated in Hong Kong;

(d) At this stage, I am not satisfied that the doctrine of Henderson abuse renders the position such that there is no serious issue to be tried.

24.  Public policy:

(a) Mr Maurellet’s submission in this regard is based on Philip Alexander Securities & Futures Ltd v Bamberger [1997] ILPr 73 at 115, that prima facie, if someone proceeds in breach of, and with notice of, an injunction granted by the English court to obtain judgments abroad, those judgments should not, as a matter of public policy, be recognised in the United Kingdom;

(b) But the Ruzhou Judgments were not obtained in breach of the ASI.  Mr Maurellet’s submission in this regard is that “Chen HQ took the benefit of the [ASI] and stopped the Jinan Proceedings, which paved the open path upon which he could, and did, race to obtain the 3^rd and 4^th Ruzhou Judgments”;

(c) It should be noted that there was only 11 ASI Defendants who were subject to the ASI;

(d) Mr Maurellet is in effect seeking to extend Philip Alexander to covering judgments obtained by a party who has been somehow aided by an anti-suit injunction;

(e) I am not satisfied that the position is as clear as Mr Maurellet has submitted.

25.  Not all parties before the Court:

(a) Mr Ho’s position is that in the Present Action, Chen HQ is seeking to enforce the Ruzhou Judgments, and that the only necessary defendants are those who are in possession of the CSI Shares;

(b) In any event, various parties have subsequently been joined into the action;

(c) I do not find the position to be such that no serious issue to be tried has been established.

26.  Jinan Group is not party to the Ruzhou Proceedings:

(a) A point distinct to Jinan Group is that it was not a party to the Ruzhou Proceedings.  The principle of res judicata is inapplicable vis-à-vis Jinan Group;

(b) Mr Law’s submissions in reply is that the mere fact that Jinan Group is not party to the Ruzhou Proceedings does not mean that the Statement of Claim filed in the Present Action discloses no serious issue to be tried, and that Jinan Group’s argument is a non sequitur;

(c) As I have set out above, Jinan Group has only been recently granted leave to join the Present Action.  I have set out its alleged interest in the CSI Shares in my Decision of 23 February 2021 (see in particular §23 thereof).  Jinan Group’s case is that it has itself obtained certain judgments in its favour in the Mainland in respect of the CSI Shares in dispute.  The exact nature of the contest between it and Chen HQ over the CSI Shares is yet to be clear.  I am not prepared to conclude at this stage that by reason only of Jinan Group not being a party to the Ruzhou Proceedings, Chen HQ has raised no serious issue to be tried.  This is particularly so given the fact that there are multiple parties who are before the Court, notably the EY Receivers.

27.  Chen HQ estopped from enforcing the Ruzhou Judgments:

(a) Mr Wong submits that Chen HQ is estopped from enforcing any of the Ruzhou Judgments given Chen HQ’s prior representation that he would not enforce the Ruzhou Judgments;

(b) But again, on the facts of the Present Action, and in particular in the light of the reasons for Chen HQ’s change of stances as set out in §§12-17 above, I cannot conclude at this stage that Chen HQ should be held to have estopped from enforcing the Ruzhou Judgments, to the extent that no serious issue to be tried has been raised.

28.  In all the circumstances, and on the matters and authorities before me, I conclude that there are serious issues to be tried.

29.  However, in respect of the specific grounds of objections discussed above, I state for the avoidance of doubt that it is not my view that they are of no merits.  My view is that they should if deemed appropriate be raised and considered during the trial of the Present Action.  At this stage, and on the materials and authorities before me, I am not satisfied that they either individually or cumulatively render the position such that no serious issue to be tried has been established.

F. Balance or convenience and discretionary matters

30.  Mr Maurellet and Mr Wong have raised a number of matters under this heading.

31.  Based primarily upon the history of the matters (the most important of which as discussed above), Mr Maurellet and Mr Wong submit that Chen HQ has failed to come to Court with clean hands, or that it would be inequitable to grant the injunction sought.

32.  Mr Wong has raised in particular the points that Chen HQ’s case is dubious, that he has failed to provide full details about the sources of his funds said to have utilized to purchase the CSI Shares, that he has put forward inconsistent cases.

33.  I have considered those submissions.  On the question of clean hands, Mr Ho and Mr Law submit that in the Present Action, the underlying claim is a call for trust property under the rule in Saunders v Vautier.  The misconduct complained of is not sufficiently connected to Ruzhou Judgments.  I see force in those submissions.

34.  Both Mr Maurellet and Mr Wong submit that damages are adequate remedy for Chen HQ.  The CSI Shares are shares of a private company.  They are not available in the market.  I have also considered, in view of the shareholdings held by CSI in CSCG, what may be described as the kingmaking status of CSI.  Further, as Mr Law has submtted[16], the shares involved constitute a block large enough to block the passing of any special resolution.  On the facts, I am not persuaded that damages are adequate remedy.

35.  Mr Wong submits that there is no evidence of credible undertaking offered by Chen HQ.

36.  In reply, Mr Law submits that the objection has been made late, and that Jinan Group has failed to adduce any evidence on any likelihood of a significant loss arising as a result of the injunction granted.  Mr Law further points to 100,488 shares in CSI which Chen HQ has obtained judgment against Zhang Snr in HCA 500/2019[17]. I am not persuaded by Mr Wong’s submissions that I should ignore such shareholding simply on the basis that Chen HQ has previously refused to disclose the source of his funds.

37.  I also remind myself of the observation of Ma J (as he then was) in Music Advance, that in considering applications for interlocutory injunctions, the Court aims to adopt a course which carries the lower risk of injustice.  In the Present Action, and on the materials before me, granting the injunction sought in my view carries the lower risk of injustice.

G. Conclusion

38.  For the reasons set out above, I grant the injunction as sought at §1 of the CHQ Injunction Summons (except that the reference to “the Defendants” there should be updated to “the 1^st, 2^nd and 3^rd Defendants”).

H. Costs

39.  I make a costs order nisi that the costs of the CHQ Injunction Summons be Chen HQ’s costs in the cause of the Present Action, to be taxed if not agreed. 

Written Submissions by Mr Ambrose Ho SC, leading Mr Law Man Chung (on 6 and 20 March 2020), and Mr Law Man Chung (on 16 April 2021), instructed by Gallant, for the Plaintiff

Written Submissions by Mr José-Antonio Maurellet SC, leading Mr Alexander Tang and Mr Kevin Lau, instructed by Stephenson Harwood, for the 4^th and 5^th Defendants

Written Submissions by Mr Anson Wong SC, leading Mr Ross Li and Mr Lai Chun Ho, instructed by Linklaters, for the Jinan Group (the 1169^th Defendant)

HCA 1699/2019

[2021] HKCFI 440

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

______________

______________

________________

D E C I S I O N

________________

1.  I will in this Decision refer to the plaintiff as Chen HQ, and the existing defendants as D1 to D5 respectively.

2.  There are two Summonses before the Court:

 (a)     The Summons of the Intended Interveners (the “Employee Interveners”) dated 9 December 2020 (the “EI Summons”) to intervene in the proceedings herein and/or be joined as the defendants to this action; and

 (b)     The Summons of Jinan Industrial Development Investment Group Co., Ltd (“Jinan Group”) dated 16 March 2020 (the “Jinan Summons”) for:

 (i)     leave to be joined as a defendant to this action (§1);

 (ii)     should leave be so granted, consequential directions on the further conduct of the present action (§2);

 (iii)     leave to Jinan Group to file and serve the affirmation of Deng Xiaoning (exhibiting the draft affirmation of Hou Jianguo) filed on 16 March 2020 in opposition to Chen HQ’s summons of 4 October 2019 for an injunction (the “CHQ Injunction Summons”) (§3); and

 (iv)     consequential directions on the disposal of this Jinan Summons and the CHQ Injunction Summons (§4).

3.  Mr Paul Lam SC leading Mr Vincent Lung and Ms Astina Au appeared for Chen HQ.  Mr Jose Maurellet SC leading Mr Alexander Tang and Mr Kevin Lau appeared for the Employee Interveners.  They also act for D4 and D5.  Mr Anson Wong SC leading Mr Ross Li appeared for Jinan Group.

The EI Summons

4.  I deal with the EI Summons first.

5.  Mr Lam for Chen HQ does not oppose the same.

6.  D1 to D3 are neutral to the application.  They have sought and been granted leave to be excused from the present hearing.

7.  Jinan Group consents to the Employee Interveners being joined[1].

8.  I grant leave for the Employee Interveners to be joined as defendants to this action.  They will be assigned the appropriate defendant numbers.  I also, in terms of §2 of the EI Summons, direct that the Writ of Summons herein be amended accordingly, and that the Employee Interveners be at liberty to acknowledge service thereof.  The Rules of the High Court should be followed for the further conduct of the proceedings.

9.  I order that costs be in the cause, to be taxed if not agreed.  On the costs of the Employee Interveners, I allow a certificate only for 2 counsel.

The Jinan Summons

10.  This is another action involving the Shanshui Group of companies (the “CSC Group”).

11.  These matters have a complicated history.  For background 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[2] (the “Trust Actions”, and the “Trust Actions Judgment”) and G Lam J’s Decision in the Trust Actions also dated 31 January 2018 discharging the receivers appointed in those Actions[3](the “EY Receivers”, and “Trust Actions Discharge Decision”).  I refer also to my “Jurisdiction Decision” handed down on 30 August 2019 in HCA 2648/2017[4], and my Decision in the present action given on 31 October 2019 when the CHQ Injunction Summons first came before me[5].  Unless specified otherwise, I also use the same terms as used in those Judgments and Decisions.

12.  I recite below the core events so that this Decision may be read in context.

13.  On 25 September 2017, Chen HQ filed a summons for leave to be joined as an intervener or as an additional defendant to the Trust Actions.

14.  By his Decision of 10 November 2017, G Lam J refused that application.

15.  After that refusal, Chen HQ on 17 November 2017 commenced HCA 2648/2017 (“HCA 2648”).

16.  In February 2018, Jinan Group successfully applied to be joined in HCA 2648 as an additional defendant.  

17.  On 21 March 2018 and 26 April 2018, the SHDs and the Jinan Group respectively took out an application for jurisdiction challenge in HCA 2648.

18.  On 30 August 2019, this Court handed down the Jurisdiction Decision and ruled in favour of the jurisdiction challenge.  Chen HQ has subsequently sought leave to appeal against that decision. 

19.  On 13 September 2019 Chen HQ commenced the present action.  At that stage, D1 to D3 herein were the only defendants.  In the Indorsement of Claim, Chen HQ:

 (a)     refers to the CSI Shares and the Trust Actions (§1);

 (b)     pleads that the Employee Shareholders were successful in the Trust Actions;

 (c)     refers to the legal actions commenced by him against 2,258 of the Employee Shareholders (the “PRC Employee‑litigants”) before the Ruzhou People’s Court in Henan Province (the “Ruzhou Proceedings”).  He pleads:

“ … In such [Ruzhou Proceedings], [Chen HQ] as the purchaser sued the PRC Employee‑litigants as the vendors of 368,135 CSI Shares … (‘Subject Shares’) seeking a determination on the beneficial interests in the Subject Shares. The Ruzhou People’s Court entered judgments against the PRC Employee‑litigants holding that [Chen HQ] is entitled to the beneficial interest and ownership in the Subject Shares …”

 (d)     seeks:

 (i)     a declaration that D1 to D3 hold those CSI Shares on trust for him; and

 (ii)     an order that D1 to D3 do forthwith transfer those CSI Shares to him or to persons nominated by him.

20.  On 4 October 2019, Chen HQ took out the CHQ Injunction Summons.  He seeks thereby an injunction restraining D1 to D3 from dealing with the CSI Shares concerned.

21.  On 31 October 2019, the CHQ Injunction Summons first came before me.  Having heard leading counsel for parties, I refused Chen HC’s application for interim-interim relief.

22.  The substantial hearing of the CHQ Injunction Summons has subsequently been vacated due to the COVID‑19 pandemic.  I have ordered paper disposal instead.

23.  In the meantime, and as summarized by Mr Wong:

 (a)     Jinan Group claims to have acquired via a number of Sale and Purchase Agreements entered into in 2017 (“Jinan Group SPAs”) 264,664 CSI shares (approx 71.9%) of the shares in which Chen HQ seeks to obtain by way of this Action from 1,838 of the Employee Shareholders;

 (b)     In or around August 2018, Jinan Group commenced proceedings at the Tianqiao Court seeking performance of the Jinan Group SPAs against the relevant Employee Shareholders (the “Tianqiao Proceedings”).  So far, out of the 1,829 cases commenced before the Tianqiao Court, Jinan Group has obtained 1,657 judgments in its favour (“Tianqiao Judgments”);

 (c)     Since around November 2018, Chen HQ commenced proceedings at the Tianqiao Court seeking to set aside the Tianqiao Judgments on the basis that he was the alleged beneficial owner of the CSI Shares in question;

 (d)     Out of Chen HQ’s 1,413 set‑aside applications, 1,410 have been dismissed by the Tianqiao Court (“Tianqiao Set‑aside Decisions”).  Chen HQ has lodged an appeal in 1,404 cases to the Jinan Intermediate Court in Shandong.  So far, 897 appeals have been heard and dismissed by the Jinan Intermediate Court.  Out of such 897 dismissed appeals, Chen HQ has further applied to the Shandong Higher People’s Court to review 309 of the appeal decisions.

The applicable principles on joinder

24.  The Rules of the High Court that are relevant to this application are Order 15, rule 6(2)(b)(i) and (ii), that:

“ (2) Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application—

…

(b) order any of the following persons to be added as a party, namely—

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon[6], or

(ii)     any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.[7]”

25.  The wordings of Order 15, rule 6(2)(b) are wide.  I highlight the fact that Limb 1 refers to “all matters in dispute in the cause or matter”, and Limb 2 refers to “a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter”.

26.  Relying on Securities and Futures Commission v Mo Shau Wah[2018] HKCFI 596 at §§20-21 and Man Whi Chung v Man Ping Nam [2003] 1 HKC 549 at §§14-22 and the authorities cited therein, Mr Wong submits, which I accept, that:

 (a)     A liberal approach should be given to this rule so as to ensure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided[8];

 (b)     Under Limb 1, a party might be added if his rights against or liabilities to any party to the action in respect of the subject matter of the action will be directly affected by any order which may be made in the action[9];

 (c)     Specifically, under Order 15 rule 6(2)(b)(ii), the intervener is required to show that he has some interest which in some way directly related to the subject matter of the action.  A mere commercial interest in its outcome, divorced from the subject matter of the action is not enough[10];

 (d)     Whilst some interest which in some way directly related to the subject matter of the action is necessary, the existence of a cause of action between the intervener and one of the parties is not a necessary perquisite for the purpose of joinder[11];

 (e)     Even where the interest in the subject matter alleged by the intervener is doubtful, the court is nevertheless prepared to exercise its discretion to allow the joinder so that the alleged interest could be properly tested at trial[12].

27.  Mr Lam does not dispute those principles.  Any difference between him and Mr Wong is more a matter of emphasis than substance.  What Mr Lam highlights is that whilst the Court will not at the joinder stage engage itself in a scrutiny of merits or an adjudication of facts, it does not mean that the Court would take an intervener’s assertion of sufficiency of interest at face value and ignore any obvious legal impediments to its claim.  He further submits that it will disallow a joinder application if it is “plain and obvious” that there can be no claim between the original parties and the party proposed to be joined.  He relies by way of illustration on Yeung Pui Ying Anna v Day & Chan (a firm) & Ors, unrep, CACV 67/2010, 20 July 2010, wherein the Court of Appeal, having approached the matter “as thoughit had been an application to strike out”, held that the plaintiff’s application to join the 2^nd defendant should be refused as the plaintiff’s intended claim against him had been time‑barred.

28.  Mr Lam’s submissions are in my view not controversial.  It stands to reason that the Court will not exercise its discretion in favour of joinder if it is plain and obvious that the joinder of the proposed intervener would be pointless and futile.  This is not unlike the approach which the Court adopts when approaching an application for amendment of pleadings.

29.  I apply the above when considering the Jinan Summons.

Mr Wong’s submissions in summary

30.  Mr Wong’s submissions may be summarized as follows:

 (a)     by reason of the Jinan Group SPAs, Jinan Group has legitimate interest in the subject matter of this action, namely, the CSI Shares which Chen HQ seeks to obtain by way of this action (Limb 2);

 (b)     given that Chen HQ and Jinan Group are asserting competing claims over the CSI Shares in question, Jinan Group’s presence in this Action is necessary for purposes of resolving the disputes between Chen HQ and Jinan Group effectually (Limb 1);

 (c)     as a matter of reality, Jinan Group is the only party that is in a position to protect its own interest in this Action.  The other defendants’ interests do not necessarily and/or completely align with those of Jinan Group;

 (d)     in the light of the above, as a matter of natural justice, Jinan Group should be allowed to participate in and be heard on CHQ Injunction Summons;

 (e)     no prejudice will be caused to Chen HQ even if Jinan Group is joined and allowed to be heard on the CHQ Injunction Summons; and

 (f)     In the premises, Jinan Group should be allowed to be joined as an additional defendant in this Action and that consequential directions be given for, inter alia, the disposal of CHQ Injunction Summons.

Mr Lam’s submissions in summary

31.  In the course of the hearing, Mr Lam helpfully reduced his submissions to two main points (the second one being his fallback position), that:

 (a)     Jinan Group should not be allowed to be joint as it does not have sufficient interest in the subject matter of the present action, ie the judgments that Chen HQ has obtained in the Ruzhou Proceedings (the “Ruzhou Judgments”).  He submits that Jinan Group is not only not a party to those proceedings, they in fact took a deliberate decision not to take part in those proceedings;

 (b)     The Ruzhou Proceedings and the Tianqiao Proceedings have resulted in two sets of inconsistent Judgments.  According to the evidence filed on behalf of Jinan Group, the Henan Higher People’s Court and the Shandong Higher People’s Court have made a joint report in June 2020 to the enforcement department of the Supreme People’s Court (“SPC”) for guidance.  Pending such guidance, which has not been available, Jinan should be not allowed to be joined, and the Jinan Summons should be adjourned.

Discussion

32.  The fundamental difference between Mr Wong and Mr Lam when approaching the Jinan Summons is their characterization of the nature of the present action:

 (a)     Mr Wong’s focus is upon the Subject Shares.  He points to the prayer in the Writ.  Chen HQ is seeking a declaration that D1 to D3 hold the Subject Shares on trust for him.  But Jinan Group has a competing and rival claim over a substantial percentage of the Subject Shares.  Any interest which Jinan Group has in those Shares will be directly affected by the order and remedy which Chen HQ is seeking;

 (b)     Mr Lam on the other hand focuses upon the Ruzhou Judgments.  He characterizes the present action as an enforcement action to enforce the Ruzhou Judgments.  He regards the Ruzhou Judgments as the subject matters of the present action.  He then submits that as Jinan Group is not a party to those proceedings, and has deliberately made a decision not to participate in the Ruzhou Proceedings, it does not have any interest in those subject matters to enable it to be joined as a party.

33.  On the characterization of the present action, I do not accept Mr Lam’s submissions.  The Ruzhou Judgments are the basis on which Chen HQ is seeking the declaration that D1 to D3 have been holding the Subject Shares on trust for him.  Whilst that is so, he is ultimately seeking to get hold of the Subject Shares.  In my view, it is unrealistic and unduly technical to stop at the Ruzhou Judgments and call them the subject matters or the “cause or matter” of the present action.

34.  Characterizing the Ruzhou Judgments as the subject matter or the “cause or matter” leads to some very strained arguments.  In developing his submissions, Mr Lam relies very heavily on what he described as Jinan Group’s deliberate decision not to participate in the Ruzhou Proceedings.  He submits that that point goes to the issue as to whether Jinan Group has sufficient interest to be joined, as opposed to the exercise of any residual discretion which this Court may otherwise have[13]. Mr Lam further submits, upon my invitation for clarification, that if that point is taken out of the equation (eg by assuming that Jinan Group in fact had had no knowledge of the Ruzhou Proceedings), he would not be able to make good his objection.  But in my view, Jinan Group either has or does not have sufficient interest to be joined.  That issue should not be dependent upon Jinan Group’s knowledge of the Ruzhou Proceedings or the reasons for its decision not to participate[14].

35.  Characterizing the Ruzhou Judgments as the subject matter or the “cause or matter” leads further to some very technical legal arguments which are in my view, and with respect, hardly necessary.  At §43 of his written submissions, Mr Lam submits that Jinan Group’s reliance on the Tianqiao Proceedings and Tianqiao Judgments raises the important legal question as to how the Hong Kong Courts should approach two inconsistent foreign judgments.  He then refers the Court to Showlag v Mansour [1995] 1 AC 431.  It was a case from the Judicial Committee of the Privy Council on how the Courts should approach two conflicting decisions from two different sovereign states (namely England and Egypt in that case).  Mr Lam submits that primarily on res judicata considerations, the Privy Council held that the earlier of the conflicting judgments should be recognised.  Mr Lam then further develops (a) the point that the Showlag principle is subject to the exception of estoppel, and (b) the issue as to whether Jinan Group can invoke and rely on the doctrine of “cross‑estoppel”[15].

36.  To start with, there are practical difficulties in applying the Showlag principle to the present case.  Potentially, the Court will be concerned with quite a number of Ruzhou Judgments and Tianqiao Judgments.  It is not a straightforward case of looking at the dates of only two judgments.

37.  Secondly, Showlag concerned conflicting judgments from two sovereign states.  I have reservations as to whether it has application to the facts of this case, which involve conflicting decisions from two local People’s Courts both in the Mainland.

38.  Further, as submitted by Mr Wong, Showlag related to two judgments between the same parties.  But in the present case, Chen HQ chose not to sue Jinan Group in the Ruzhou Proceedings.  Mr Lam is in effect submitting that because Jinan Group chose not to apply to be joined in the Ruzhou Proceedings, it has somehow become disentitled to being joined in the present action.  That is quite an extension of the Showlag principle which is, as submitted by Mr Wong, not supported by authority.

39.  All these are potentially complicated matter which takes this case out of those “plain and obvious” ones which may justify a scrutiny of merits or an adjudication of facts at this stage.

40.  But most importantly, I am not satisfied that those legal principles and considerations are engaged.  They are only perceived to be engaged upon Mr Lam’s characterization of the Ruzhou Judgments as the subject matter or “cause or matter”.

41.  In any event, even if the Ruzhou Judgments may technically be regarded as the subject matter or “cause or matter”, one should not lose sight of the wide wordings under Limb 1 and Limb 2.  The main considerations are to “ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon” (Limb 1), and whether there “may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter” (Limb 2). Focusing only upon the “cause or matter” is in my view not justified, and is contrary to the liberal approach which should be given to both Limbs.

42.  Further, as the authorities discussed above clearly suggest, for an intervener to be joined, there does not even need to exist a cause of action between him and the existing parties.  It is sufficient if his rights against or liabilities to any party to the action in respect of the subject matter of the action will be directly affected by any order which may be made in the action.

43.  In the present case, given the Jinan Group SPAs, the Tianqiao Judgments, and the rival and competing claims Jinan Group as in respect of the Subject Shares, I am of the view that Jinan Group has clearly made out a case for it to be joined.

44.  For completeness, I mention that Mr Lam refers this Court to the reasons given by G Lam J for refusing Chen HQ’s application to be joined in the Trust Actions, and submits that for similar reasons, Jinan Group should not be permitted to be joined.  I accept Mr Wong’s submissions in this regard that the 2 applications are very different.  In Chen HQ’s case, his interests in the Trust Actions were contingent upon G Lam J’s findings in the Trust Actions.  In the present case, Jinan Group’s alleged interests in the Subject Shares are not.  Further, the application for joinder was made by Chen HQ at a very late, shortly before the trial of the Trust Actions was due to commence.  This is not the case here.

45.  In respect of Mr Lam’s fallback position, I note that there is no guarantee that the SPC will give the guidance sought, and if so when.  I see no basis to adjourn the Jinan Summons pending such an uncertain event.  I accept Mr Wong’s submission in this regard that for case‑management reasons, it is much more desirable to adjudicate on the Jinan Summons first, allow the joinder sought should this Court so rule, and consider a disjoinder should there be a change of circumstances in the future. 

Conclusion and disposition

46.  For the reasons set out above, I allow the Jinan Summons.  I make the following Orders:

 (a)     Leave be granted to Jinan Group to be joined as a defendant.  Again an appropriate defendant number can be assigned to it;

 (b)     Order in terms of §2 of the Jinan Summons, with the necessary change relating to the defendant number to be assigned.  Jinan Group is at liberty to acknowledge service of the Writ within 7 days thereof.  The Rules of the High Court are to be followed for the further conduct of the proceedings;

 (c)     Order in terms of §3 of the Jinan Summons;

 (d)     Jinan Group do file its written submissions in opposition to CHQ Injunction Summons within 14 days after service of such documents on Jinan Group as per(b) above;

 (e)     Chen HQ do have leave to file his written submissions in reply within 14 days thereafter;

 (f)     The CHQ Injunction Summons be substantively determined by way of paper disposal.

47.  In so far as costs are concerned, Jinan Group at §5 of the Jinan Summons seeks an order that the costs of and occasioned by this application be reserved.  I make a costs order nisi to that effect.  Any party who seeks any variation is given liberty to write in, in which case I will give directions on the further conduct of the matter.

HCA 1699/2019

[2019] HKCFI 2720

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

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BETWEEN

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D E C I S I O N

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1.  Given the highly convoluted background of the matter, filing a summons for an interim injunction with estimated hearing time of 30 minutes is entirely unrealistic. There will not be sufficient time even to consider the appropriateness of any interim interim relief. Leading counsel for P pushes for a ruling. The Court does the best it can. I emphasize however that whatever views expressed below will necessarily be provisional. I also would not able to deal with all the submissions that have been made before me.

2.  The test to be applied when deciding whether to grant any interim interim relief is balance of fairness — see China Shanshui Cement Group Limited v Zhang Caihui[2018] HKCA 409, per Lam VP at §13.  Ms Eu submits that as the application will be set down for hearing, and that directions save interim interim relief have been agreed upon, that means that the application is not doomed to fail.  I hasten to add that whether an application is “doomed to fail” is not the test for interim interim relief.

3.  I form the provisional view that the stance of Chen HQ is extraordinary, verging on being an abuse.

4.  In HCA 2648/2017 (“HCA 2648”):

(a) as submitted and framed by counsel then acting on his behalf, “Chen HQ “brings the present proceedings to enforce his proprietary right over the SHDs’ shares that he acquired either through SALA with the ASI Defendants, or directly from the some other SHDs” ^[1];

(b) Chen HQ maintained that Hong Kong was clearly and distinctly the appropriate forum for that action against the 2265 Ds named therein (I exclude Jinan for this purpose), so much so that he sought and obtained the ASI against the ASI Defendants;

(c) He sought amongst others a Declaration that the 2265 Ds be obliged to procure and to take all necessary steps and actions to ensure that the CSI Shares be transferred to him;

(d) The EY Receivers were however not sued as defendants, but only became involved subsequently as interested parties. They could have been joined based on Chen HQ’s own case, so that, should Chen HQ become successful in his claim, an appropriate order could be made against them for transfer of the relevant shares to him;

(e) In the meantime, he started various proceedings in the Mainland, which led to inter alia the Mainland Judgments which he is now seeking to enforce by this action (ie HCA 1669/2019).

5.  Upon my handing down of the Jurisdiction Decision:

(a) Chen HQ then started the present action;

(b) Instead of seeking to have the matter tried in Hong Kong to “enforce his proprietary right over the SHDs Shares”, this time he seeks to rely on the Mainland Judgments he obtained while the ASI was in force;

(c) Whilst in HCA 2648, he sued the 2265 Ds but not the EY Receivers, this time, he sues the EY Receivers but not the 2265 Ds.

6.  Chen HQ pursues the present action whilst HCA 2648 is still on foot, and whilst he is actively pursuing an appeal against the Jurisdiction Decision. And to make the point more apparent, whilst I do not venture any view as to what Chen HQ could do if his appeal against the Jurisdiction Decision become successful, I can see in that eventuality that there would be two parallel proceedings in Hong Kong with basically the same cause of action, but against different defendants. I accept Mr Westbrook’s submissions in this regard.

7.  The situation in my provisional view fall foul of the principle explained in Buckland v Palmer [1984] 1 WLR 1109 and applied in Choy Gain Chee v Kowloon Development Co Limited (CACV 371/2005, 13 June 2006) at §65 per Yeung JA (as the learned VP then was). The facts and decision in Buckland are in my view enlightening. In that case, P and D were involved in a traffic accident. On the strength on the arrangement between P’s insurer and D’s insurer, and upon the belief that D had been properly insured, P’s insurer accepted liability to paid P for the repair costs less the uninsured excess. P then sued D for the uninsured excess. D made a payment into court, which P accepted, leading to the action being stayed. Subsequently, it became apparent that D in fact had not been insured. P’s insurer started a new action in the name of P against D to claim back the full repair costs less the excess. The Court of Appeal held that since both actions were in the name of the plaintiff and were based upon the same cause of action, application could have been made to lift the stay of the first action and for amendments. The second action was hence struck out.

8.  I bear in mind also that those available Mainland Judgments had mostly been available to Chen HQ by December 2018. Throughout, and until recently, Chen HQ maintained that Hong Kong was clearly and distinctly the appropriate forum for the trial, that the legal proceedings he initiated in the Mainland were only defensive measures, and that he chose to contest the Jurisdiction Challenges in Hong Kong. Now, he takes a different turn. He initiated the present action on 13 September 2019. He now further seeks an urgent interim interim relief.

9.  Mr Westbrook has also raised an additional and genuine concern. As mentioned above, Chen HQ only named the EY Receivers as the defendants in the present action. Order 15 rule 14 is sought to be relied upon. It is submitted that the present action is therefore properly constituted. But Chen HQ’s alleged interests derived from the Employee-litigants ^[2]. He said that much in his latest affirmation ^[3]. There is this concern as to whether a receiver is a trustee for the litigants whose assets he receives — see Company Law in Hong Kong (Insolvency)(Looseleaf Edn) at §11.023. Ms Eu’s reply is that the EY Receivers are now bare trustees. That might be so, but there is also and in any event the concern that Chen HQ is not suing as a stranger to the trust, but as an “insider”, in which case “it may be found expedient and even necessary to join beneficiaries” — see Hong Kong Civil Procedure 2019 at §15/14/2.

10.  Further, as Mr Westbrook has pointed out, I have not issued directions under HCA 2648, and that until I do so, the CSI Shares are safe in court. I bear in mind that we are not dealing with interim relief, but interim interim relief.

11.  Having considered and balanced the above, I form the view that the balance of fairness is against the grant of any interim interim relief. I refuse to make any.

12.  I will hear submissions on costs and further directions on the hearing of the summons.

Ms Audrey Eu SC, leading Mr Law Man Chung and Mr Issac Chan, instructed by Gallant, for the Plaintiff

P C Woo & Co, for the 1^st to 3^rd Defendants, attendance excused

Mr Simon Westbrook SC, leading Mr Alexander Tang and Mr Kevin Lau, instructed by Stephenson Harwood, for the 4^th and 5^th Defendants