CHINA SHANSHUI CEMENT GROUP LTD AND OTHERS v. TIANRUI (INTERNATIONAL) HOLDING CO LTD AND OTHERS

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

[2025] HKCFI 3893

HCA 548/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 548 OF 2019

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AND

HCA 1013/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1013 OF 2023

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D E C I S I O N

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INTRODUCTION

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

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

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

The CSC Parties’ Primary Position

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

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

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

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

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

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

Tianrui’s Primary Position

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

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

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

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

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

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

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

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

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

D12’s Position

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

Other defendants’ Position   

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

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

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

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

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

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

BACKGROUND

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

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

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

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

The Parties

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Factual Background

The CSC Parties’ Case in the Shareholders’ Dispute Action

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tianrui’s Case in the Shareholders’ Dispute Action

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

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

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

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

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

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

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

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

46.  As to the reconstitution of the CSC Board:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

51.  As to the reduction of NAV:

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

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

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

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

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

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

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

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

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

53.  As to the pledging agreements and corporate guarantee:

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

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

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

54.  As to the Jinan Incident:

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

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

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

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

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

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

Tianrui’s Case in the Loan Action

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

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

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

The CSC Parties’ Case in the Loan Action

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

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

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

Procedural Background

The Shareholders’ Dispute Action

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

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

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

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

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

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

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

The Loan Action

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

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

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

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

(A)  The Striking Out Summons

Legal principles

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

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

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

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

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

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

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

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

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

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

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

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

Tianrui’s submissions on the Striking Out Summons

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

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

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

84.  In particular, Mr Li submits that:-

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

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

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

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

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

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

Ruling on the Striking Out Summons

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion on the Striking Out Summons

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

(B)  The Hearing Together Summons

Legal Principles

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tianrui’s Submissions

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

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

The CSC Parties’ Submissions

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

111.  I agree.

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

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

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

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

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

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

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

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

Ruling on the Hearing Together Summons

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

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

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

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

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

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

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

CONCLUSION

119.  In the aforestated premises, I order that:

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

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

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

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

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

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

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

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

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

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

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

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

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

HCA 548/2019

[2021] HKCFI 2745

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 548 OF 2019

________________________

________________________

________________________

DECISION ON COSTS

________________________

1.  By my decision handed down on 7 December 2020 (the “Decision”)[1], I dismiss §§4 and 5 of the 14/8/2019 Summons. In respect of the other paragraphs, I dismiss them also as they had not been pursued and had in effect been abandoned. On costs, whilst I saw no reason why costs should not follow the event, given parties’ submissions made to me towards the end of the hearing (which I recorded at §85 of the Decision), I did not make any costs order nisi, but simply invited parties to file submissions on costs. They have done so. Below is my ruling on costs.

2.  Ps seek:

(a)  in respect of the 6/11/2020 Summons, the costs of and occasioned by the same on an indemnity basis;

(b)  in respect of the 14/8/2019 Summons, 50% of the costs of and occasioned by the same on an indemnity basis, and 50% on a party-and-party basis, representing costs of and occasioned by §§1-3 and §§4-5 of the 14/8/2019 Summons respectively;

(c)  all the costs of and occasioned by both Summonses to be summarily assessed, or alternatively taxed if not agreed and payable forthwith; and

(d)  certificate for two counsel for all costs of and occasioned by both Summonses.

3.  The Tianrui Ds’ stance is as follows:

(a)  they accept that they have to pay costs of and occasioned by both Summonses, with certificate for two counsel;

(b)  indemnity costs are however not warranted for either of the Summonses;

(c)  in any event, even if any indemnity costs are to be awarded for §§1-3 of the 14/8/2019 Summons, the proper apportionment should be 25%;

(d)  costs should not be ordered to be paid forthwith, nor summarily assessed (even if the Court is minded to order payment forthwith);

(e)  the proper costs order in respect of both Summonses should be party-and-party costs to Ps in any event.

Applicable legal principles on indemnity

4.  I have been cited Commissioner of Inland Revenue v Poon Cho Ming John (No.2) (2020)  23 HKCFAR 74 at §4, which I apply.

The 6/11/2020 Summons

5.  I consider the costs position of the 6/11/2020 Summons first.

6.  The 6/11/2020 Summons was for leave to file the 4^th Affirmation of Siu Kai Yan (“Siu 4^th”)  exhibiting a Writ of Summons issued on 15 August 2017 (“FSDWrit”)  in the Grand Court of the Cayman Islands, FSD 166 of 2017 in respect of a derivative action by ACC, one of CSC’s shareholders, and certain of its subsidiaries, on behalf of CSC.

7.  I have considered parties’ submissions.  For the following reasons, I order indemnity costs in respect of the 6/11/2020 Summons.

8.  The 6/11/2020 Summons was filed and served late.  It was only served on Ps’ solicitors at around 4:08 pm on 6 November 2020.

9.  The lateness is particularly stark given the fact that the FSD Writ was issued in August 2017, and D8 (one of the Tianrui Ds)  acknowledged service of the same in October 2017. 

10.  At the time when the 6/11/2020 Summons was issued, no explanation or justification were offered explaining why it was filed late.

11.  Mr Suen submits that the 6/11/2020 Summons was merely an attempt to provide the full context in light of Ps’ arguments.

12.  But that attempt turned out, and must subsequently have been accepted to be unjustified, as the 6/11/2020 Summons was withdrawn in the course of the hearing.

13.  The following facts and conduct are also relevant:

(a)  At the time when the 6/11/2020 Summons was issued, and despite its lateness, no explanation was given on the relevance or necessity of the FSD Writ for the purpose of considering the 14/8/2019 Summons;

(b)  Ps’ invitation made on 9 November 2020 to the Tianrui Ds’ solicitors to withdraw the 6/11/2020 Summons was refused on 10 November 2020, one day before the commencement of the hearing;

(c)  Ps’ legal team had to divert their time and resources to deal with the 6/11/2020 Summons — see in particular the Notes dated 10 November 2020 prepared by Ps’ counsel team.

14.  Mr Suen submits that the 6/11/2020 Summons was withdrawn with a view to saving time and costs.

15.  The withdrawal of a summons which should not have been issued to start with hardly justifies or excuses its issue.  Further, and before its withdrawal, Ps’ and its legal team’s time and costs had been unnecessarily wasted, and its resources diverted.

16.  I accept Mr Dawes’ submission that in launching a late application, the Tianrui Ds should have carefully considered its merits, failing which they should be expected to be visited with an indemnity costs order — and see Wong Koon Wah v All persons in occupation of Lot No 775 in Demarcation District 216[2020] HKCFI 1260, per B Chu J at §63.

17.  On the facts, I find that there exist special and unusual features for an indemnity costs order to be made.

14/8/2019 Summons

18.  I next consider the 14/8/2019 Summons.

19.  The focus is the costs in respect of §§1-3 of the 14/8/2019 Summons.  In respect of §§4-5, the Tianrui Ds accept that they have to bear the costs on a party-and-party basis, and Ps are not seeking any enhanced costs.

20.  There is no dispute that indemnity costs may be ordered in respect of a part of the proceedings — Petrograde Inc v Texaco Ltd [2002] 1 Costs LR 60 at §64.

21.  §§1-3 of the 14/8/2019 Summons were not clearly and unequivocally abandoned until the hearing on 11 November 2020.

22.  I used the words “not clearly and unequivocally” for a reason:

(a)  At Section C of his Written Submissions, Mr Suen made extensive submissions under the heading of “No valid service in Hong Kong on [D1]”;

(b)  At Section D of his Written Submissions, Mr Suen made further extensive submissions under the heading of “No serious issue to be tried” in the context of Ps’ pleaded cause of action of unlawful means conspiracy, which submissions were made in support in particular of §2 of the 14/8/2019 Summons;

(c)  Whilst in the Written Reply dated 9 November 2020, it was stated (at §2)  on the Tianrui Ds’ behalf that they “will no longer rely on the ground of invalid service on [D1] as a basis for stay”, §§1-3 were not expressly abandoned.  On the other hand, in other parts of the Written Reply, §3 of the 14/8/2019 Summons continued to be addressed (§3 of the Written Reply), and the merits and elements of Ps’ pleaded cause of action of unlawful means conspiracy continued to be criticized;

(d)  Whilst this court accepts Tianrui Ds’ apology[2] for not having framed the Written Reply more clearly and for the inconvenience caused, a reader of the Written Reply, including this Court, would not have been able to conclude with confidence what remained to be pursued and what not;

(e)  I accept Mr Suen’s explanation that the Written Reply was prepared before receipt of his clients’ instruction not to dispute service.  But late receipt of instructions, whilst capable of exonerating the legal advisers, cannot in my view be relied upon to justify the late abandonment;

(f)  I do not accept Mr Suen’s submission that “[as] a matter of logic, without disputing service, the Tianrui Ds could not have relied on §§1-3 of the 14/8/2019 Summons any longer”[3].

23.  Mr Suen relies on Friston on Costs (3^rd ed)  at §16.44 and submits that if a party abandons arguments relating to discrete issues, an order of indemnity would be rare, “because mere abandonment would not generally justify such an award”.  Mr Suen, relying on Fabio Perini SPA v LPC Group plc [2010] EWCA Civ 525 at §119, per Lord Neuberger MR (as he then was), further invites this Court not to too readily penalize a party in costs for abandoning a (possibly bad)  point before trial, otherwise there is a danger that litigants would be reluctant to abandon (possibly bad)  points when they should.

24.  I note however that at §119 in Fabio Perini SPA, Lord Neuberger MR also said in the same breath that:

“ I should add that this should not be taken as intending to discourage judges from awarding costs on an indemnity basis when points are abandoned, if the circumstances justify it.”

And in Friston on Costs (3^rd ed), it is further said at §16.45 that:

“ … Timing can be important: if a party abandons issues or their case and delays doing so until a late stage, they may be found liable to pay costs on the indemnity basis, but this will not always be the case, especially where their opponent’s conduct was itself guilty of delay.”

I add immediately that there is no suggestion in the present case that Ps’ conduct was itself guilty of delay.

25.  Mr Suen further submits that the decision to abandon §§1-3 of the 14/8/2019 Summons was a strategic one, but was not the result of any concession of lack of merits.

26.  I fail to see how that assists the Tianrui Ds’ position on costs.

27.  Mr Suen then puts forward a “hypothetical counterfactual”, that had the Tianrui Ds pursued and failed in respect of the entire 14/8/2019 Summons, it is likely that costs would only be on a party-and-party basis.

28.  In that regard, I accept Mr Dawes’ submission that the pursuit of unarguable, weak or thin points, or points which are plainly wrong in law, can result in indemnity costs — Nintendo Co Ltd v The World Camera and Radio Co Ltd & Others [1999] 2 HKLRD 199, at 201E-G and 202D-E, and Dixon v Blindley Health Investments Ltd [2016] 4 Costs LO 627 at §26.

29.  Mr Suen submits that the abandonment of §§1-3 has resulted in some saving of the hearing time.  I accept that.  Those paragraphs were abandoned at the beginning of the hearing upon my invitation for clarifications.  But the result remains that the late abandonment has resulted in wastage of time, costs and judicial resources.  In particular, the costs, time and resources incurred by Ps’ team in dealing with those paragraphs could have been saved, and the distraction to them could have been spared.

30.  Such late and equivocal abandonment should be discouraged, and in my view constitutes on the facts of the present case special and unusual features which justify indemnity costs.

31.  On the other hand, given my observation above that the abandonment of §§1-3 did result in some saving of the hearing time, and on a broad brush approach, I apply the apportionment of 35% in respect of the costs of and occasioned by §§1-3 of the 14/8/2019 Summons, so that those percentage of the costs should be assessed on an indemnity basis.

Whether summary assessment, and whether forthwith

32.  The assessment of the costs concerned is not going to be complex.  No substantial grounds for disputing the sum claimed for costs has been shown. 

33.  I hold that this is an appropriate case for summary assessment.

34.  The costs of the 14/8/2019 Summons and 6/11/2020 Summons are severable and self-contained from the rest of the action.  Further, the trial will be some time away in the future.  I do not regard it as fair that Ps be kept out of a substantial sum till trial.

35.  There is no suggestion that the forthwith payment of the costs would prejudice the Tianrui Ds’ position in the action in any way.

Disposition

36.  For the above reasons, I order that:

(a)  in respect of the 6/11/2020 Summons, the costs of and occasioned by the same be borne by the Tianrui Ds on an indemnity basis;

(b)  in respect of the 14/8/2019 Summons, the costs of and occasioned by the same be borne by the Tianrui Ds, 35% of which be on an indemnity basis, and 65% of which be on a party-and-party basis, representing costs of and occasioned by §§1-3 and §§4-5 of the 14/8/2019 Summons respectively;

(c)  all the costs of and occasioned by both Summonses be summarily assessed, and payable forthwith; and

(d)  certificate for two counsel for all costs of and occasioned by both Summonses.

37.  On the further conduct of the summary assessment concerning the filing of statement of costs and objections, I give the directions set out at §35 of Mr Dawes’ written submissions of 21 December 2020.

38.  I order that the costs of this application should also be to Ps, to be summarily assessed and payable forthwith, which costs should be covered also by the statement of costs to be filed pursuant to the directions I have given in the paragraph immediately above, and be dealt with in one go.

Written Submissions and Reply by Mr Victor Dawes SC, Ms Bonnie Y K Cheng and Ms Leticia Tang, instructed by Withers, for the 1^st to 4^th Plaintiffs

Written Submissions by Mr Jenkin Suen SC and Ms Natalie So, instructed by Tanner De Witt, for the 1^st, 2^nd and 8^th Defendants

HCA 548/2019

[2020] HKCFI 3043

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 548 OF 2019

________________________

________________________

________________________

D E C I S I O N

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A. The application

1.  This is another action (“HCA 548” or the “Present Action”) involving the Shanshui Group of companies (the “CSC Group”).  The Plaintiffs are China Shanshui Cement Group Limited (“P1” or “CSC”), China Shanshui Cement Group (Hong Kong) Company (“P2” or “CSCHK”), China Pioneer Cement (Hong Kong) Company Limited (“P3” or “Pioneer”) and Shandong Shanshui Cement Group Company Limited (“P4” or “Shandong Shanshui”) (P1 to P4 collectively “Ps”).

2.  There are altogether 18 Defendants (“Ds”).  This hearing only concerns the 1^st Defendant (“D1” or “Tianrui International”), the 2^nd Defendant (“D2” or “Tianrui GroupCo”) and the 8^th Defendant (“D8”) (collectively the “Tianrui Ds”).

3.  In the pleadings, Tianrui International and Tianrui GroupCo have been referred together as “Tianrui”.  I will for ease of reference, and unless otherwise specified, adopt the same term.

4.  By summons dated 14 August 2019 (the “14/8/2019 Summons”):

(a)  Tianrui International seeks:

(i)  an order that the Writ issued herein (the “Writ”) and “purportedly served” on it on 15 April 2019 be set aside (§1);

(ii)  a declaration that that the Court has no jurisdiction over Tianrui International in respect of the subject matter of the claim or the relief sought on the grounds that:

(1)  Ps have failed to show any serious issues to be tried (§2.a.);

(2)  Ps have failed to demonstrate a good arguable case that their claims fall within any of the gateways under Order 11 rule 1(1) (§2.b.);

(3)  Ps have failed to demonstrate that Hong Kong is clearly and distinctly the more appropriate forum for the trial of the claims (§2.c.);

(4)  Tianrui International has presented a winding-up petition against CSC in the Grand Court of Cayman Islands (FSD 116 of 2018) (“Cayman Court” and “Cayman Petition”), that it is currently pending, that its issues substantially overlap with those raised by the Writ, and that in the best interests and convenience of the parties including the Cayman Petition, the present proceedings should be conducted in the Cayman Court (§§2.d. and 2.e.);

(iii)  alternative to the above, a stay of the action herein against Tianrui International “pending the final determination by the Cayman Court of the Cayman Petition and of all the issues raised therein, on the grounds as set out in paragraph 2 above” (§3 of the 14/8/2019 Summons);

(b)  further or alternatively, the action against the Tianrui Ds be stayed in favour of the Cayman Court as that is clearly and distinctly more appropriate forum, and/or that is in the best interests of the parties (§4);

(c)  further or alternatively, the action against the Tianrui Ds be stayed pending the final determination of the Cayman Petition on the grounds set out in §4, or alternatively on case management grounds (§5).

5.  This is the hearing of the 14/8/2019 Summons[1].

6.  Mr Jenkin Suen SC and Ms Natalie So appear for the Tianrui Ds. Together they have produced 3 sets of written submissions: their main one dated 28 October 2020 (“Mr Suen’s Written Submissions”), their Brief Note of Reply dated 9 November 2020 (“Mr Suen’s Written Reply”), and their Speaking Note for Tianrui Ds handed up in the course of the hearing (“Mr Suen’s Speaking Note”).

7.  Mr Victor Dawes SC together with Ms Bonnie Y K Cheng and Ms Leticia Tang appear for Ps.  Together they have filed 2 sets of written submissions: their main one dated 4 November 2020 (“Mr Dawes’ Written Submissions”) and a Note dated 10 November 2020 dealing with a new Summons filed by the Tianrui Ds on 6 November 2020 (the “6/11/2020 Summons”).  The 6/11/2020 Summons has subsequently (towards the end of this hearing) been withdrawn with leave from this Court.  I will come back to it when I deal with the costs of the hearing at the end of this Decision.

B.  Parts of the 14/8/2019 Summons abandoned

8.  Despite the contents of the 14/8/2019 Summons, Mr Suen in his Written Reply informs this Court that the Tianrui Ds will no longer rely on the ground of invalid service of the Writ on Tianrui International as a basis for stay, and that they are prepared to confine themselves to the grounds of stay which would, if successful, apply to all Tianrui Ds.  In the course of the hearing, Mr Suen clarifies further that Tianrui International will no longer pursue §§1, 2 and 3 of the 14/8/2019 Summons.

9.  Several sections of Mr Suen’s Written Submissions are hence no longer relevant.  In particular, section C (§§15 to 29 under the heading of “No valid service in Hong Kong on Tianrui International”) and section D thereof (§§30 to 77 under the heading of “No serious issue to be tried” concerning only whether leave to serve out under Order 11 rule 1(1) should be granted) are no longer relevant.

C.  The affirmatory evidence

10.  Quite a number of affirmations have been placed before me.  The main ones which were specifically filed for the purpose of the 14/8/2019 Summons are:

(a)  the 1^st and 2^nd affirmations of Liu Shihua of 14 August 2019 and 27 February 2020 (“Liu/1” and “Liu/2” respectively) filed in support, and

(b)  the affirmation of Chang Ming-cheng (“Chang”) of 20 December 2019 filed in opposition (“Chang/Aff”).

11.  Before me are also several affirmations that have been filed before the Cayman Court for the purpose of the Cayman Petition:

(a)  the 2^nd and 3^rd affirmations of Li Xuanqi of 7 September 2018 and 4 October 2018 (“Cayman Li/2” and “Cayman Li/3” respectively);

(b)  the 2^nd affirmation of Wu Ling-ling (“Wu”) of 26 September 2018 (“Cayman Wu/2”); and

(c)  the 2^nd affirmation of Chang of 13 June 2019 (“Cayman Chang/2”).

D.   Relevant facts

12.  The facts are complicated.  Set out below are only the core events which put the application in context.

13.  CSC was incorporated in the Cayman Islands.  Its primary business is as the holding company for various entities in the Shanshui Group.  The Shanshui Group is principally engaged in cement production, supply and distribution in the Mainland.

14.  CSC has been listed on the Main Board of the Stock Exchange of Hong Kong Limited (“SEHK”).  Trading of its shares had at one stage been suspended, but has subsequently been resumed.

15.  P2 to P4 are some of CSC’s subsidiary companies.  P4 has been the main operating entity.

16.  Tianrui International was incorporated in the BVI.  It belongs to a group of companies (the “Tianrui Group”) whose ultimate holding company is D2.  D2 was established in the Mainland.  D8 was at the material time the Chairman of D2.

17.  D3 to D17 were at various times appointed as the directors and/or officers of CSC (collectively the “Tianrui D&Os”).  It is Ps’ case that they were nominated by Tianrui International and/or the EY Receivers (defined below), or by those directors and/or officers so nominated.

18.  D18 was the Hong Kong transaction services arm of the Ernst & Young network of companies (“EY”).  The EY Receivers were its directors and/or managing directors.

19.  Coming back to CSC, its substantial shareholders included:

(a)  China Shanshui Investment Co., Ltd (“CSI”), which was incorporated in Hong Kong in 2005.  At all material times, CSI held 25.09% of the issued shares of CSC;

(b)  Tianrui International;

(c)  Asia Cement Corporation (“ACC”), a company incorporated in Taiwan; and

(d)  China National Building Material Co., Ltd. (“CNBM”), a company incorporated in the Mainland.

20.  ACC and CNBM are also in the cement industry, and are said to be direct rivals to Tianrui International.  It has also been suggested that by either taking control of CSC or through merger with it, CSC, CNBM, and ACC would substantially consolidate their respective positions as cement producers in the Mainland.  The same can also be suggested of Tianrui. 

21.  CSI was incorporated as an integral part of an Employees Stock Ownership Scheme (the “Scheme”) and public listing of the CSC Group.  Under the Scheme, most of the shares in CSI were held in trust for the employees of the CSC Group. 

22.  Pursuant to the Scheme, and upon transfer of some shares to him by another shareholder, Zhang Caikui (“Zhang Sr”) became holder of approximately 81.74% shares in CSI.  The majority of them were held for the employees who participated in the Scheme (the “CSI Employee Beneficiaries”). The balance of the shares was held by 7 minority shareholders (the “CSI Minority Shareholders”).

23.  Since about 2014, disputes developed between Zhang Sr and 2,631 of the 3,947 CSI Employee Beneficiaries and the CSI Minority Shareholders as to whether Zhang Sr held 45.63% of the CSI shares (the “Disputed CSI Shares”) on a fixed or discretionary trust for the CSI Employee Beneficiaries.  A number of legal actions before the High Court of Hong Kong ensued.  They have subsequently been consolidated and tried (the “CSI Trust Actions”). 

24.  Between about February and April 2015, Tianrui acquired on a number of days altogether 28.16% shares in CSC and became its largest shareholder[2]. Ps describe the acquisitions as having been aggressive.  It is further their case that the acquisitions reduced the percentage of public float of the CSC shares to below the requisite 25%, causing the suspension of trading of its shares[3].

25.  In the course of the CSI Trust Actions, on 20 May 2015 and 14 July 2015, D3, D4 (collectively the “EY Receivers” and together with the 18^th Defendant (“D18” or “EYTL”) the “EY Defendants”)) and Koo Chi Sum from Ernst & Young were appointed as receivers of the Disputed CSI Shares.

26.  When first appointed, the EY Receivers were directed not to seek to alter the composition of the board of directors of CSC without obtaining further directions of the Court.  They were there to hold the rings. 

27.  On 16 October 2015, the EY Receivers obtained from Deputy Judge Seagroatt a direction that they be free to cause CSI to vote to change the composition of the board of directors of CSC.

28.  Prior to 1 December 2015, Wu (said to have been appointed by ACC), Mr Chang Zhangli (said to have been appointed by CNBM) and Zhang Sr were amongst the board of directors of CSC (the “Pre-2015 CSC Directors” or “Pre-2015 CSC Board”).

29.  On 1 December 2015, during an EGM of CSC (the “2015 EGM”), the then Pre-2015 CSC Directors were removed.  They were replaced by another board (the “Former Board” or the “Former Directors”).  D8 was appointed the Chairman.  Tianrui as a result gained control of CSC[4].

30.  What the Former Board undertook having gained control, the purposes of those transactions and their effects on the CSC Group are subject to hot dispute.  Mr Suen summarizes[5] them as follows from the perspective of the Tianrui Ds:

“ After the Former Directors took office, they made various attempts to raise finance and/or increase the public float of CSC, including, inter alia, the ‘Open Offer’, the ‘First Proposed Placement’, and the ‘Second Proposed Placement’. In addition, the Tianrui group also provided the CSC Group with multiple loans totalling approximately HK$1.85 billion from December 2015 to May 2018. These loans are unsecured, interest free, and have no fixed repayment terms. These were acts to enhance the finance and cashflow of CSC, that nevertheless form the basis of many of the misguided allegations against the defendants in this case.”

31.  On the other hand, it is Ps’ case, as summarized by Mr Dawes[6], that throughout the period when the Former Board was in control, Tianrui did not honour the Cayman Undertaking[7].  Nor did the board seek to enforce the same.  Instead, according to Ps, the Former Board procured the CSC Group to raise funds on patently uncommercial terms which were to Tianrui’s benefit but the CSC Group’s detriment.

32.  On 31 January 2018, G Lam J handed down 2 judgments.  One relates to the CSI Trust Actions.  In the other judgment (which has been referred to as the Discharge Decision[8]), His Lordship discharged the appointment of the EY Receivers.  In one subsequent judgment dated 7 May 2018 in HCA 1282/2017[9] also relating to the Shanshui Group, G Lam J recorded at §16 that:

“ … I have expressed serious concerns in the Discharge Decision [2018] HKCFI 194 at §§62-66 that the transfer of the interests of the plaintiffs in CSI shares in August 2015 (of which Chen HQ now claims to be the beneficiary), among other vital information, had been withheld from the court (both DHCJ Seagroatt and the Court of Appeal on appeal from him) and that a misleading picture had been presented to the court when it granted orders for the Receivers to become involved in the management of CSCG, with the result that the board of the listed company became thereafter dominated by Tianrui and the Receivers …”

33.  On 23 May 2018, during an EGM of CSC (the “May2018 EGM”), there was another reconstitution of the CSC Board.  The Former Board was replaced, and was replaced by the “Current Board”.  Tianrui lost control of CSC.

34.  The purposes and effects of what were undertaken afterwards are again in hot dispute:

(a)  According to the Tianrui Ds, and as summarized by Mr Suen[10]:

“ …

(9)  On 8 August 2018 and 3 September 2018, CSC issued 2 series of CBs in the aggregate principal amount of US$531,600,000, with interest at 20% p.a. (respectively, ‘August CBs’ and ‘September CBs’). On 6 October 2018, CSC entered into conversion agreements with the holders of the CBs to permit early conversion of the CBs into shares in CSC, as well as into subscription agreements for issue of 85,845,636 new shares. As a result, 974,825,988 new shares were issued on 30 October 2018 resulting in a significant dilution of Tianrui International’s shareholding in CSC (to 21.85%). It is Tianrui International’s case that, inter alia, the CBs were issued on uncommercial terms to connected persons of ACC/CNBM and/or for improper purposes (and ought to be set aside) with the result of substantially diluting the shareholding in CSC held by Tianrui International (who was never approached to enquire if it would participate in subscribing for some or all of the CBs or to provide alternative financing, which Tianrui entities had provided in the past interest free) …

12.  Against that context (in particular, the issue of the CBs), on 30 August 2018, Tianrui International presented the Cayman Petition to wind up CSC on just and equitable grounds in FSD 161/2018.”

(b)  According to Ps, and as summarized by Mr Dawes[11]:

“ 37.  Upon its appointment, the Current Board had only five months to resolve the issues which the Former Board had failed to do in 2.5 years in order to prevent CSC’s delisting by the SEHK. The problems were exacerbated by the fact that KPMG, which recommenced its audit in June 2018 to resolve the audit issues, resigned in July 2018, citing threats by the Former Board.

38.  Nonetheless, the Current Board managed to fulfil the Resumption Conditions and achieved resumption of trading of CSC’s shares on 31 October 2018.  Through the issuance of convertible bonds (‘CBs’) on 8 August 2018 and 3 September 2018, the partial conversion of the CBs and the issuance of new shares, the Current Board restored the public float and raised funds for 100% of the Tendered 2020 Notes to be redeemed and for the New York Proceedings to be resolved.  The Current Board also resolved the audit issues.”

E.  Various proceedings in Hong Kong and the Cayman Islands

35.  While under the Pre-2015 CSC Directors, CSC in May 2011 and March 2015 issued respectively 2 series of 8.5% and 7.5% senior notes (the “2016 Notes” and “2020 Notes”).  They were to become due in 2016 and 2020 respectively.

36.  On 10 November 2015, the Pre-2015 CSC Board presented a voluntary winding up petition in the Cayman Court in an attempt to wind up CSC (the “2015 Winding Up Proceedings”).  The pleaded basis was that CSC would not be able to repay its debts.  Tianrui Ds on the other hand suggest that that application was ultra vires, and was brought for improper purposes[12].

37.  On 17 November 2015, in the context of the 2015 Winding Up Proceedings, D2 undertook to inter alios the Cayman Court, the Hong Kong High Court and CSC by deed poll to procure that CSC had sufficient funds to redeem the 2020 Notes in the event that it gained control of the board of directors of CSC (the “Cayman Undertaking”).

38.  As mentioned above, Tianrui gained control of CSC on 1 December 2015.

39.  On 4 December 2015, CSC (under the control of the Former Board), CSCHK, Pioneer and Shandong Shanshui commenced HCA 2880/2015 against inter alios the Pre-2015 CSC Directors, CNBM and ACC (“HCA 2880”).  The claims include breaches of fiduciary duties and conspiracies to injure the plaintiffs therein.  There are also allegations of misappropriation of funds, books and the corporate chop from Shandong Shanshui[13].

40.  The trial of HCA 2880 is due to commence in April 2021 before Coleman J.

41.  As mentioned above, Tianrui lost control of CSC on 23 May 2018.

42.  As have been mentioned above, on 8 August 2018 and 3 September 2018, CSC issued 2 series of Convertible Bonds (respectively the “Aug 2018 CBs” and “Sept 2018 CBs”, and collectively the “CBs”).  The total principal amount was US$531,600,000.  The interest was 20% p.a.

43.  It is Tianrui International’s case that the CBs were issued on uncommercial terms to connected persons of ACC/CNBM and/or for improper purposes, with the result of substantially diluting the shareholding of Tianrui International in CSC.

44.  On 30 August 2018, Tianrui International presented the Cayman Petition to wind up CSC on just and equitable grounds.  The Petition was formally issued and served on 4 September 2018.  The case of Tianrui International, according to the Cayman Petition as subsequently amended, is that there is a justifiable lack of confidence on its part in the management of CSC.  It alleges that CNBM and ACC have acted unfairly and/or oppressively towards it and/or that the affairs of CSC have been conducted with a lack of probity and that as a result it no longer has confidence in the management of CSC.

45.  On 11 September 2018, CSC applied for orders that the Cayman Petition be struck out.

46.  On 19 October 2018, Mangatal J of the Cayman Court dismissed the Cayman Petition on the basis that Tianrui International had an alternative remedy that it had unreasonably failed to pursue.

47.  On 16 January 2019, the Cayman Islands Court of Appeal (“CICA”) overturned the decision of Mangatal J.  CICA gave its reasons on 5 April 2019.  The application to the Privy Council for permission to appeal has subsequently been dismissed (on 20 February 2020).

48.  On 27 May 2019, Tianrui International took out a further writ action before the Cayman Court against CSC (the “Cayman Writ Action”). Declarations are sought to the effect that the CBs be treated as void together with an order setting aside the issue of those bonds, the related share conversion and the new shares consequentially issued.  The relationship between the Cayman Petition and the Cayman Writ Action was explained by Segal J at §81(e) of his Judgment delivered on 6 April 2020 (the “Segal J Judgment”, the history of which I will come to soon) as follows[14]:

“ …The commencement of the Cayman Writ Action is merely a procedural device to permit additional and alternative relief to be granted after the trial of the [amended Cayman Petition] if the claims made in the Cayman Writ Acton are made out. By bringing the Cayman Writ Action, [Tianrui International] is seeking to ensure that if it is unsuccessful on the [amended Cayman Petition], and so is unable to achieve the corporate divorce it seeks, it may be able to obtain the alternative relief that can properly be granted in the Cayman Writ Action. Alternatively, if it succeeds in showing that a winding up order should be made the Court can consider whether the claim in the Cayman Writ Action has been made out and whether relief in the Cayman Writ Action would provide Tianrui with an adequate alternative remedy. If a winding up order is made, and a declaration made that the board had acted unlawfully and abused its powers in issuing the bonds and the New Shares, it would be open to a liquidator appointed by the Court to decide what further action should be taken and claims brought.”

49.  On 12 August 2019, CSC filed 2 summonses making a number of applications before the Cayman Court.  CSC sought inter alia and in gist:

(a)  an order striking out or staying the Cayman Petition on the basis that it is an abuse for Tianrui International, having commenced the Cayman Writ Action, to continue to pursue the Cayman Petition;

(b)  an order that the writ in the Cayman Writ Action be struck out on the basis that it is defective in so far as a derivative claim is being pursued; and 

(c)  a temporary case management stay of the Cayman Petition and/or the Cayman Writ Action pending the conclusion of HCA 2880 and the Present Action in Hong Kong.

50.  By his Judgment delivered on 6 April 2020 (ie the Segal J Judgment mentioned above), Segal J dismissed all of CSC’s applications.

51.  In the meantime, on 29 March 2019, Ps took out the Writ in the Present Action.  It is endorsed with a Statement of Claim (the “SOC”). 

52.  In a nutshell, P’s pleaded causes of action[15] are conspiracy to injure the CSC Group by unlawful means, breaches of fiduciary, contractual and regulatory duties, dishonest assistance, knowing receipt and criminal intimidation.  The SOC is a 68-page long document.  Paragraphs 21 to 28 thereof contain a useful summary of Ps’ claim, that;

“ B1 Unlawful Means Conspiracy

21.  As particularised in Sections C, D and E below, the [Ds] conspired by acting in combination and in concert with one another using unlawful means with the intention of injuring the CSC Group by unlawful means, namely breaches of fiduciary and other duties, dishonest assistance and/or criminal intimidation and violence.

B.1.1 Object of the conspiracy

22.  The object of the conspiracy was to acquire control of the CSC Group, and illegitimately maximise economic benefit therefrom for the benefit of the co-conspirators (especially Tianrui) and at the expense of the CSC Group.

23.  The unlawful means conspiracy in relation to which [Ds] were parties was instigated and/or directed by Tianrui. [D7] … (former CEO of Tianrui GroupCo) and [D8] … (Chairman of Tianrui GroupCo) were also parties to the conspiracy at the outset.

24.  As a result of the conspiracy, the Tianrui D&Os and EYTL also received the property of the CSC Group (in the form of excessive remuneration paid them [sic]) with the unconscionable knowledge that the property was transferred in breach of fiduciary and other duties owed by the Tianrui D&Os to the CSC Group.

25.  The Tianrui D&Os were all former directors and/or officers of various companies within the CSC Group. During their tenure as directors and/or officers, they approved, caused and/or procured the decisions which had the effect of diverting the CSC Group’s assets away to Tianrui. They acted in breach of the fiduciary and other duties they owed to the CSC Group and did so dishonestly, enriching themselves personally and Tianrui in the process.

B.1.2 The different phases of the conspiracy

26.  The conspiracy was effected primarily through the breaches of fiduciary and other duties by the Tianrui D&Os to the CSC Group. The conspiracy evolved over time and eventually involved the following phrases:

26.1  acquiring shares in CSC so as to cause the public float of CSC to fall below 25%, thereby resulting in the suspension of trading of CSC shares …

26.2  acquiring control of the CSC Group through the appointment of the EY Receivers as receivers of the 2,631 CSI Employee Beneficiaries’ 45.63% shareholding of CSI …

26.3  installing directors and officers aligned to Tianrui on the boards of CSC and its subsidiaries to enable decisions beneficial to Tianrui and disadvantageous to the CSC Group to be approved …

26.4  embarking on litigation before the High Court of Hong Kong against those whose interests were opposed to Tianrui’s …

26.5  abandoning CSC’s investigation of Tianrui’s acquisition of the interests of the CSI Employee Beneficiaries …

26.6  procuring the CSC Group to raise funds through wholly uncommercial means which would have had the effects of …:

(i)  releasing Tianrui from the undertaking it had given on 17 November 2015 (‘Cayman Undertaking’) that CSC would have the financial means to repurchase the loan notes it had issued in the aggregate amount of US$500m and which would otherwise have been repayable on 10 March 2020 (the ‘2020 Notes’);

(ii)  diluting the shareholding of non-Tianrui shareholders, thus further cementing Tianrui’s control of the CSC Group which would, in turn, make it easier for the CSC Group’s assets to be diverted to Tianrui;

(iii)  driving down CSC’s share price so as to make it easier for Tianrui and its proxies/concert parties to buy up yet more CSC shares to reinforce its control and/or to justify the low prices in the share-issuance and placement orders;

26.7 releasing Tianrui from the Cayman Undertaking and instead raising funds for the repurchase of the 2020 Notes through various attempts at issuing share-issuance and placement offers …

26.8 releasing Tianrui from the Cayman Undertaking and instead causing the CSC Group to pay coupon interests on 85% of the 2020 Notes validly tendered (‘Tendered 2020 Notes’) and in the amount of some US$85 million …

26.9. pledging away the assets of [Shandong Shanshui] (i.e. most of the valuable assets of the CSC Group) …

26.10 procuring CSC to provide a corporate guarantee for a RMB400 million loan facility which had been extended by the Bank of China … to Tianrui …

26.11 orchestrating the acts of criminal intimidation and violence in Jinan on 8 April 2017 (‘Jinan Incident’) …

26.12 attempting to disguise or conceal Tianrui’s intention of not honoring the Cayman Undertaking and its involvement in the Jinan Incident …

27. The conspiracy which unfolded was one whereby Tianrui could seize control over its competitor (the CSC Group) and maximise economic benefit from its assets and businesses through the help of the Tianrui D&Os (including the EY Receivers) who were acting in breach of their fiduciary and other duties, and in circumstances which each of the [Ds] dishonestly assisted in the breaches of duties by the other [Ds].

28.  This conspiracy has caused and continues to cause substantial loss to the CSC Group.  Had Tianrui not lost control of the CSC Board at the EGM on 23 May 2018, the fraud against the CSC Group would have continued to the point that it would likely have stripped of its most valuable assets, rendered insolvent and/or permanently de-listed from the SEHK.”

53.  From the above, the following broad picture emerges:

(a)  The main disputes are between 2 camps of business rivals (Tianrui on the one side and ACC and CNBM on the other) over the control of CSC;

(b)  HCA 2880, the Cayman Petition and the Present Action were initiated at different stages when different camps were in control of the CSC Board:

(i)  HCA 2880 was initiated in December 2015 when Tianrui was in control;

(ii)  The Cayman Petition was issued and served in August/September 2018 after Tianrui lost control of the CSC Board upon the reconstitution of the CSC Board during the May 2018 EGM;

(iii)  The Present Action was commenced in March 2019 by the Current Board having gained control after the May 2018 EGM;

(c)  The focus of the main complaints and subject-matters of HCA 2880, the Cayman Petition and the Present Action are different[16]:

(i)  HCA 2880 covered Tianrui’s complaints about the conduct of the Pre-2015 CSC Board before they lost control of the CSC Board to Tianrui on 1 December 2015;

(ii)  The Present Action covers the complaints of CSC (and those of ACC and CNBM) against the conduct of Tianrui and its representatives during the period when Tianrui was in control (ie between 1 December 2015 and 23 May 2018); and

(iii)  The Cayman Petition covers conduct of the Current Board after the May 2018 EGM on 23 May 2018 and Tianrui International’s concern about them.  As Mr Suen puts it[17], the Cayman Petition:

“ … ventilate[s] [Tianrui International’s] concerns about the oppressive and prejudicial conduct committed by the majority in power, primarily arising out of the CBs.” (emphasis added)

F.  §4 of the 14/8/2019 Summons — the Forum Non-conveniens Ground

F.1.   The legal principles

54.  The legal principles applicable to an application for a stay on the basis of forum non-conveniens have been authoritatively confirmed by the Court of Final Appeal in SPH v SA (2014) 17 HKCFAR 364 at §51, that:

“ 1.  The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action ie in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

2.  In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action) and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.

3.  If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.

4.  If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer.  Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.”

55.  I warn and remind myself that the approach in forum non-conveniens is not just an exercise in loading up factors which point to any particular jurisdiction.  The court is required to focus on the appropriateness of a forum from the point of view of the trial of the action — see Rambas Marketing Co. LLC v Chow Kam Fai David [2001] 3 HKC 250 (per Recorder Ma (as the Chief Justice then was) at p 255B-C).

56.  In deciding forum non-conveniens, the existence or possibility of lis alibi pendens is a factor to be taken into account — see China Construction Bank (Asia) Corp Ltd v Shanghai Pudong Development Bank Co Ltd, unrep, CACV 14/2016, 3 February 2017 at §§5.2-5.3.  

F.2.  Stage 1

57.  Stage 1 of the consideration is whether Hong Kong is not the natural or appropriate forum and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong.

58.  The onus is on the Tianrui Ds to establish the above.

59.  The consideration of the appropriateness of a forum is from the point of view of the trial of the action.  To consider that, one needs to see what the cause of action is and what the issues are.

60.  Whether a conspiracy can be proved is in most cases a question of inference from the overt acts.

61.  In the Present Action, most of the alleged overt acts relied upon took place in Hong Kong.  I have set out §26 of the SOC above.  I refer in particular to the acts highlighted by Mr Dawes[18], namely acquisitions of CSC shares by Tianrui International, the appointment of the EY Receivers, the steps leading to 2015 EGM and the ousting of the Pre-2015 CSC Board, Tianrui’s alleged entrenchment of control over CSC, the Former Board’s management of CSC, and the prosecution of the various High Court Actions in Hong Kong.  They all took place in Hong Kong.

62.  Mr Dawes relies upon The Albaforth [1984] 2 Lloyd’s Rep 91, where Robert Goff LJ observed at 96:

“ If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum.”

63.  I do not see Robert Goff LJ as meaning that the place where a tort is committed is conclusive on the issue of forum non-conveniens.  Nor do I believe that it is a proposition put forward by Mr Dawes.  But it is a relevant starting point.  As Lord Mance JSC observed in VTB Capital plc v Nutritek International Corpn [2013] 2 AC 337 at §51:

“ The place of commission is a relevant starting point when considering the appropriate forum for a tort claim. References to a presumption are in my view unhelpful. The preferable analysis is that, viewed by itself and in isolation, the place of commission will normally establish a prima facie basis for treating that place as the appropriate jurisdiction. But, especially in the context of an international transaction like the present, it is likely to be over-simplistic to view the place of commission in isolation or by itself, when considering where the appropriate forum for the resolution of any dispute is. The significance attaching to the place of commission may be dwarfed by other countervailing factors.”

64.  In submitting that the Cayman Court is “evidently the more appropriate forum of trial” of the Present Action, Mr Suen submits that the disputes are primarily between 2 camps of rival shareholders, that discretionary powers of management was involved, so that the courts of the place of incorporation are, albeit not necessarily the exclusive forum, “very likely indeed to be the appropriate forum”: see Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 WLR 1269 at §§55, 66. He submits further that in deciding whether unlawful means have been employed, the nature and extent of the duties owed by the Former Directors to CSC are required to be considered, which are governed by Cayman law (see Dicey, Morris & Collins: The Conflict of Laws, 15^th ed, Vol 2, §30-028).  He also places emphasis on Ps’ case surrounding the Cayman Undertaking.

65.  In my view, Mr Suen’s submissions do not advance the Tianrui Ds’ case by much:

(a)  To start with, I agree with Mr Dawes’ submission[19] that it is a mischaracterization to say that the Present Action is one of internal disputes between two camps of rival shareholders.  The core of Ps’ claim remains one of unlawful means conspiracy;

(b)  Even in cases involving discretionary powers of management, the facts of the case and other countervailing factors may still be considered in deciding the appropriate forum.  As Collins J has pointed out at §66 of Konamaneni:

“ I also consider that the effect of Pergamon Press Ltd v Maxwell [1970] 1 WLR 1167 is, at the least, that if issues arise relating to the exercise of what Pennycuick J described as discretionary powers of management, then I should accord considerable weight to the potential role of the courts of the place of incorporation. I doubt whether they have exclusive jurisdiction to deal with such issues. For example it may be wholly unjust to require recourse to an offshore haven to pursue fraudulent directors in a case which has no connection with the jurisdiction other than that it is the place of incorporation.” (emphasis added)

(c)  Further, in the context of an application of a stay on forum non-conveniens ground, and given the incidence of the onus of proof, it is in my view not sufficient for the applicant to simply point to the applicability of foreign law.  The question remains whether the other forum is the appropriate forum for the trial of an action.  In the words of Mimmie Chan J in DP World Djibouti Fzco & Ors v China Merchants Port Holdings Co Ltd [2020] 1 HKC 224 at §85:

“ … it is incumbent on the defendant as the applicant for stay to identify and articulate what the disputed issue of foreign law is, why there is an issue, so that the court can decide whether the issue is indeed as substantial or difficult as defendant contends, to compel a stay of the action on the basis that there is an appreciable risk that justice will not be done, as the Court might reach a wrong conclusion on an aspect of foreign law.”

See in this regard also VTB Capital PLC v Nutritek Intl Corp [2013] 2 AC 337, per Lord Mance JSC at §§46-47;

(d)  In any event, with the appropriate assistance of expert evidence, the courts of Hong Kong are in a position to apply foreign law — Mehta v Mehta[2007] 2 HKLRD 520, per Recorder Rimsky Yuen SC at §39;

(e)  In the Present Action, the Tianrui Ds have not filed any expert evidence in any attempt to identify and articulate what the disputed issue of foreign law is or why there is an issue.  I accept in this regard Mr Dawes’ submissions at §83 of his Written Submissions;

(f)  Specifically in so far as the Cayman Undertaking is concerned:

(i)  Mr Suen, relying on Liu/1[20] and Cayman Li/3[21], submits[22] that there were various legitimate reasons why the Former Directors could not have enforced the Cayman Undertaking (including the alleged fact that it was unenforceable), as a matter of Cayman law, and the alleged fact that there had been various misrepresentations.  He submits hence that the determination of matters relating to the Cayman Undertaking would be more suitably dealt with by the Cayman Court, which is more familiar with Cayman law;

(ii)  However, the relevant Cayman law, and any difference between it and the relevant Hong Kong law, have not been identified or articulated;

(iii)  In any event, whether eg any misrepresentations had been made is factual.  It has not even been suggested that any witness from Cayman Islands is required to be called in that regard.  The court in Hong Kong is well positioned to hear the relevant evidence and reach its own factual findings on any factual disputes.  The Cayman law and legal principles, assuming that they are different from Hong Kong law, can then be applied with the appropriate assistance from Cayman law experts.

66.  Mr Suen then submits that the Cayman Petition involves the exercise of Tianrui International’s statutory right.

67.  I agree with Mr Dawes’ oral submission in this regard, that this limb of Mr Suen’s submission has little relevance.  The opposition of the present application by Ps does not involve them taking the stance that Tianrui International should not be permitted to continue with the Cayman Petition. They may.  Their statutory rights as a shareholder to seek a corporate divorce and to exit its investment are not going to be affected.

68.  On the other hand, as submitted by Mr Dawes which I accept, the following factors in fact suggest that Hong Kong is the natural and appropriate forum of the trial of the Present Action:

(a)  the majority of the overt acts of the alleged conspiracy pleaded against the Tianrui Ds (as summarized in §26 of the SOC and reproduced above) took place in Hong Kong;

(b)  the resulting losses and damage are predominately suffered by Ps situated either in Hong Kong or the Mainland;

(c)  other defendants in the Present Action are predominately in Hong Kong or the Mainland;

(d)  except the Tianrui Ds, D7 and D11, all other defendants have filed substantive Defences;

(e)  a substantial volume of documentary evidence will be in Chinese;

(f)  most witnesses will be in Hong Kong and the Mainland and will be giving evidence in Punti or Putonghua; and

(g)  there are already a number of pre-existing related proceedings in Hong Kong.

69.  For all reasons discussed above, I am not satisfied that the Tianrui Ds have discharged the burden on them to show that Hong Kong is not the natural or appropriate forum and that there is another available forum which is clearly or distinctly more appropriate than Hong Kong.

F.3.  Stage 2 and Stage 3

70.  In the light of my conclusion above, there is no need for me to proceed to Stage 2.  As confirmed by the Court of Final Appeal in SPH, failure by the party applying for a stay (Tianrui Ds on this occasion) to establish the two matters they are required to establish at Stage 1 is “fatal”.

71.  If necessary, I would have ruled that Ps would be deprived of a legitimate personal or juridical advantage if the Present Action were to be tried in the Cayman Islands, and that substantial injustice would be caused to Ps.  The main reasons are:

(a)  The present application for a stay is made only by the Tianrui Ds. Other defendants are not involved;

(b)  If I were to grant the stay sought by the Tianrui Ds, a number of scenarios could arise;

(c)  One possibility is that Ps may discontinue their claims against all the other defendants and re-institute the same claim against all 18 defendants in the Cayman Islands.  If that course were to be adopted, presumably, leave to serve the Cayman Islands process outside jurisdiction would have to be obtained from the Cayman Court.  I have not been explained what the law in the Cayman Islands is in that regard.  I do not know what the attitude of the other defendants would be.  They might resist any such application by Ps before the Cayman Courts. Ps would be left in a most invidious position.  In any event, a very substantial amount of costs will be wasted, and a further substantial amount be incurred to have the action re-instituted;

(d)  The other theoretical possibility is for Ps to proceed against the Tianrui Ds in the Cayman Islands and the other defendants in Hong Kong.  That would however deprive Ps of the juridical advantage of having the single alleged conspiracy and all the alleged co-conspirators tried before the same forum, and will cause grave injustice to Ps.  I borrow the observations of Lord Bingham in Donohue v Armco Inc & Ors [2002] CLC 440 at §34, that:

“ The Armco companies contend that they were the victims of a fraudulent conspiracy perpetrated by Donohue, Atkins, Rossi and Stinson. Determination of the truth or falsity of that allegation lies at the heart of the dispute concerning the transfer agreements and the sale and purchase agreement. It will of course be necessary for any court making that determination to consider any contemporary documentation and any undisputed evidence of what was said, done or known. But also, and crucially, it will be necessary for any such court to form a judgment on the honesty and motives of the four alleged conspirators. It would not seem conceivable, on the Armco case, that some of the four were guilty of the nefarious conduct alleged against them and others not. It seems to me plain that in a situation of this kind the interests of justice are best served by the submission of the whole dispute to a single tribunal which is best fitted to make a reliable, comprehensive judgment on all the matters in issue. A procedure which permitted the possibility of different conclusions by different tribunals, perhaps made on different evidence, would in my view run directly counter to the interests of justice.”

The same can be said about forcing Ps to have two separate trials against two different groups of parties in the same alleged conspiracy in two different jurisdictions.

F.4.  Conclusion

72.  For the above reasons, I dismiss §4 of the 14/8/2019 Summons.

G.   §5 of the 14/8/2019 Summons — the Case Management Ground

G.1.  The applicable legal principles

73.  I consider first of all the applicable legal principles.

74.  That the court has the inherent jurisdiction to grant a stay on case management grounds is not in dispute.  The source of power can also be s 16(3) of the High Court Ordinance.  The power is discretionary.

75.  I have been cited 2 local authorities: Linfield Ltd v Taoho Design Architects Ltd & Ors [2002] 2 HKC 204 and Joseph Ghossoub v Team Y&R Holdings Hong Kong Limited & Ors[2019] HKCFI 589.  The factors and considerations relevant to the court’s exercise of discretions are:

(a)  the power has been likened to and approximates that which the court may exercise to stay proceedings on the basis of lis alibi pendens, ie a stay on the basis that there are concurrent proceedings else dealing with the same or similar subject matter;

(b)  when considering whether to grant a stay, the court must consider what would serve the ends of justice between the parties to the litigation and the administration of justice generally;

(c)  a stay should not cause an injustice to the plaintiff;

(d)  the applicant for stay must satisfy the court that continuing the proceedings would be oppressive or vexatious to him or an abuse of process and unjust, and

(e)  where a plaintiff commences proceedings as of right, he should not be deprived of the right to continue those proceedings in the absence of “very good reasons to the contrary”;

(f)  when there is no identity of parties between two sets of proceedings, it may not be desirable or even possible to stay one set pending resolution of the other.  The reason is that the outcome of one is not binding upon the parties in the other.  There will be risk of inconsistent findings.  That however is inevitable.

76.  In MAD Atelier International BVv Manés [2020] 3 WLR 631, Bryan J observed at §164 that:

“ … the court has a discretion to stay an action pending the resolution of a claim pending in another forum, but a stay should only be granted in ‘rare and compelling circumstances’: Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173 , 186 …. A stay will not, at least in general, be appropriate if the other proceedings will not bind the parties to the action stayed or finally resolve all the issues in the case to be stayed, or the parties are not the same: Klöckner Holdings GmbH v Klöckner Beteiligungs GmbH [2005] EWHC 1453 (Comm) at [21] (Gloster J).”

77.  In International Commercial Litigation, 2^nd ed 2015, Professor Richard Fentiman has (at §§14.07 to 14.15) identified a number of further considerations relevant to the exercise of the court’s discretion, analyzed the relationship between a stay on case management grounds and a stay on the ground of forum non-conveniens, and explained why a stay on case-management ground will only be granted in “rare and compelling circumstances”:

“ … a stay may be granted on case-management grounds to regulate the conduct of English proceedings in the light of alternative foreign proceedings. In this context the power is parallel to, but distinct from, the court’s power to stay on forum conveniens grounds …

… In cross-border proceedings, it is not uncommon for a defendant to seek a stay of English proceedings pending the outcome of proceedings in another jurisdiction, but no such stay will be granted if justice and efficiency would be served by allowing the English proceedings to continue. Moreover, given that a stay of proceedings on forum conveniens grounds is permitted by CPR Part 11, and that the court’s jurisdiction and the appropriateness of proceedings are not in dispute, a stay on case-management grounds is regarded as exceptional, to be made only ‘in rare and compelling circumstances’, where the arguments for a stay clearly outweigh those any resulting disadvantage to the claimant …

The power to stay on case-management grounds is perceived by the courts as a valuable tool in cases where a claimant has embarked upon parallel proceedings in England and a foreign court. In that event, ‘justice and the efficient management of the case’ require that a claimant ‘be put to his election as to which of the two actions to pursue first’…

A stay on case-management grounds is distinct from a stay on forum conveniens grounds in several ways:

(i) The objective is not to determine the most appropriate forum according to forum conveniens principles …

(ii) … The existence of pending proceedings abroad may of course influence a court’s view of the forum conveniens, but it does so only as one factor in assessing appropriateness. The issue on a forum conveniens application is whether the English court or a foreign court is the more appropriate form [sic forum?]. On a case-management application it is whether the existence of parallel proceedings is appropriate.

(iii) Unlike forum conveniens stays, case-management stays may be granted merely because it would be unjust to allow English proceedings to continue in parallel with proceedings abroad. The oppression a defendant would suffer if exposed to parallel actions may justify such a stay …

…

A stay may be granted on case-management grounds in cases involving parallel English and foreign proceedings …

Such cases are fact-specific, and general principles are hard to discern.  A number of propositions may, however, be derived from the cases.  A stay is likely to be granted where the claimant initiated both sets of proceedings, and the same essential issues are involved in both, such that the effect of a stay is merely to require the claimant to choose which action to pursue.  However, a stay is likely to be denied where the effect of the stay is to require the claimant to bring, or participate in foreign proceedings.  Again, there is some evidence that the court will be inclined to decline a stay if the court has already concluded that it is the forum conveniens …”

78.  I will apply the principles and considerations discussed above.

G.2.  Discussion

79.  There are concurrent proceedings in two jurisdictions relating to CSC in the way as I have discussed above.

80.  The Tianrui Ds are seeking a stay of the Present Action pending “final determination” of the Cayman Petition.

81.  Given the existence of the two sets of proceedings, the jurisdiction and discretionary powers in this Court to order a stay of the Present Action on case management ground are engaged.

82.  However, for the following reasons, and in exercise of my discretion, I refuse the application:

(a)  There is no identity of parties between the two sets of proceedings. The result and findings of the Cayman Court upon adjudication of the Cayman Petition and the Cayman Writ Action are not binding on the other parties in the Present Action who are not before the Cayman Court;

(b)  The main subject matters of actions are different.  As I have explained above, and principally, HCA 2880 concerns the conduct of the Pre-2015 CSC Board before the 2015 EGM, the Present Action concerns the conduct of the Former Board between the 2015 and May 2018 EGMs, whereas the Cayman Petition and the Cayman Writ Action concern the conduct of the Current Board after the May 2018 EGM, and arose primarily out of the CBs;

(c)  There is therefore also no identity of issues.  As Segal J observed at §145(d) of the Segal J Judgment:

“ … it is not clear that there is a substantial overlap between the [Cayman Petition] and [the Present Action] …”

(d)  The forms of relief claimed are different.  In the way Mr Suen puts it, Tianrui International is before the Cayman Court seeking a corporate divorce to exit its investment.  Ps in the Present Action are seeking declarations to account, equitable compensation or alternatively damages;

(e)  Given the differences in the parties, the issues and the relief sought, the result and findings of the Cayman Court may not even be binding as between CSC and Tianrui International in the Present Action.  On this issue, Mr Suen fairly accepts that the most he can put it is that those result and findings “might” be binding as between CSC and Tianrui in Hong Kong.  That in my view is far from sufficient to justify any case management stay;

(f)  Mr Suen has referred me to §145(i) of the Segal J Judgment that:

“ …as matters currently stand, there is no reason to believe that the coronavirus will prevent a trial of the [Cayman Petition] in, say, one year’s time …”

He submits therefore any case management stay is not going to be for long.

(g)  I do not accept that submissions.  §5 of the 14/8/2019 Summons seeks a stay pending the “final determination” of the Cayman Petition.  Even after trial, there can be appeals, including one to the Judicial Committee of the Privy Council.  The duration of any stay is going to be uncertain.  Even assuming that a trial of the Cayman Petition is going to take place in one years’ time, with all appeals taken into account, the duration of any stay pending “final determination” of the Cayman Petition will most certainly be much longer than one year;

(h)  During such stay if there were to be one, the part of the Present Action against the defendants other than the Tianrui Ds would be in limbo.  If it were to be adjourned, the length of the adjournment would be highly uncertain. Proceeding without the Tianrui Ds would not be a real option.  I have dealt with above how a split trial is going to present unfairness to Ps;

(i)  Mr Suen submits that if Tianrui International is successful in the Cayman Petition, an independent liquidator may be appointed, so that the further conduct of the Present Action can be reviewed by an independent pair of eyes. In my view, what a liquidator, even assuming that one is going to be appointed, may do upon examination of the Present Action is highly speculative.  I see no sufficient benefit in that possibility which would warrant a stay for an uncertain period of time at this stage;

(j)  The Cayman Petition was issued by Tianrui International.  It was not as if multiple concurrent actions had been started by Ps in different jurisdictions such that justice would require them to be put to choose;

(k)  I do not see any case management benefit in granting the stay.  Quite the contrary, and as I have explained above, the part of the Present Action against the other defendants would be in limbo if I were to grant the stay as requested;

(l)  I do not find it unjust to allow the Present Action to continue in parallel with proceedings before the Cayman Court.  I on the other hand see injustice to Ps if I were to grant the stay.

G.3.  Conclusion

83.  For the above reasons, I refuse also §5 of the 14/8/2019 Summons.

H.   Overall disposition

84.  For the reasons set out above, I dismiss §§4 and 5 of the 14/8/2019 Summons.  In respect of the other paragraphs, I dismiss them also as they have not been pursued and have in effect been abandoned.

I.   Costs

85.  I see no reason why costs should not follow the event.  However, towards the end of the hearing, Mr Dawes informs me that given the circumstances in which §§1-3 of the 14/8/2019 Summons were in effect abandoned and the withdrawal of the 6/11/2020 Summons, he intends to seek costs on an enhanced basis and for that purpose requests the opportunity to make further submissions on costs.  The consensus reached ultimately is that I may consider not making any costs order even on nisi basis, but simply invite parties to file submissions on costs.  I adopt that course.  I now direct that Ps should within 14 days from the date of this Decision file submissions on costs, the Tianrui Ds to file their response within 14 days of receipt, and Ps their reply within 7 days.  The question of costs will then be dealt with on the papers.

Mr Victor Dawes SC, leading Ms Bonnie Y K Cheng and Ms Leticia Tang, instructed by Withers,for the 1^st to 4^th Plaintiffs

Mr Jenkin Suen SC leading Ms Natalie So, instructed by Tanner De Witt, for the 1^st, 2^nd and 8^th Defendants

Dentons Hong Kong LLP, for the 3^rd, 4^th and 18^th Defendants, attendance excused

P. C. Woo & Co., for the 5^th, 6^th and 17^th Defendants, attendance excused

Angela Ho & Associates, for the 10^th, 12^th to 16^th Defendants, attendance excused

The 7^th, 9^th, 11^th Defendants were not represented and did not appear