CHINA SHANSHUI CEMENT GROUP LTD AND OTHERS v. ZHANG CAIKUI AND OTHERS

CAMP 58/2018

[2018] HKCA 409

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 58 OF 2018

(ON AN INTENDED APPEAL FROM HCA NO 2880 OF 2015)

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REASONS FOR JUDGMENT AND
DECISION ON COSTS

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Hon Lam VP (giving the Reasons for Judgment and Decision on costs of the Court):

1.  This is an application for leave to appeal against the decision of Deputy High Court Judge Keith Yeung SC on 3 May 2018 refusing to grant interim interim relief to the Plaintiffs. The relief was sought by way of interim interim arrangement pending the hearing of the application for appointment of interim receivers and managers of 361,096 shares in China Shanshui Investment Co Ltd [“CSI”]. As formulated before the judge, the interim interim relief basically sought to prevent a shareholders’ meeting being held pursuant to a requisition by the 1^st Defendant for appointment and removal of directors in CSI. At that time, a meeting was scheduled to be held on Tuesday 8 May 2018.

2.  The history of the matter has been set out in great details by the learned judge and we would not repeat the same in this judgment. 

3.  The substantive hearing for the appointment of interim receiver has been adjourned and we are given to understand no date for the hearing has yet been fixed. The judge will hear another application for the appointment of interim receivers in HCA 2648/2017 in respect of a parcel of shares in CSI (the action was brought by another party Chen Hongqing) on 30 to 31 May 2018.

4.  Application for appointment of interim receiver should be heard promptly. Whatever may be the reasons for dates not yet being fixed for the Plaintiffs’ application, it is difficult to envisage an appeal (if leave were granted) could be heard prior to the disposal of that hearing.      

5.  The Plaintiffs sought leave to appeal against the refusal of interim interim relief and leave was refused by the judge in the afternoon of 4 May 2018.

6.  The Plaintiffs renewed the application for leave to appeal to this Court and sought interim interim injunctive relief before us on an urgent basis as the meeting in question was scheduled to be held on 8 May 2018.

7.  As the papers of the case were only placed before us in the late Friday afternoon of 4 May 2018 after office hours, we arranged for a hearing in the Monday afternoon of 7 May 2018.  Given other judicial commitments of members of this Court and the limited time for the preparation of this matter, we indicated to counsel at the hearing on 7 May 2018 that we would entertain the application for interim interim application for injunction pending our consideration if leave to appeal should be granted. We indicated that we were minded to hear the leave application on 18 May 2018. 

8.  After hearing Mr Joffe (appearing together with Ms Lam and Mr Chen for the Plaintiffs) on 7 May 2018, we refused to grant interim interim injunction as counsel failed to persuade us that it was appropriate to grant injunction regarding the exercise of right to requisition meeting and to vote at such meeting in respect of shares not beneficially owned by the 1^st Defendant.

9.  After that decision, Mr Joffe asked for time to consider if the Plaintiffs would proceed with the application for leave.  On 8 May 2018, solicitors for the Plaintiffs wrote to the Court indicating that they would proceed with the application for leave on 18 May. 

10.  As it turned out, the meeting of 8 May 2018 was aborted due to the rejection of some proxies by the chairman of the meeting. With such rejection, there was insufficient quorum. 

11.  For the preparation of the hearing on 18 May, we gave directions for the filing of supplemental submissions by the Plaintiffs. Supplemental submissions were lodged on 11 May 2018. 

12.  In the leave application, the Plaintiffs confined to an intended appeal in respect of the injunction concerning the voting rights of the shares beneficially owned by the 1^st Defendant. Be that as it may, it is still a very strong thing for a court to interfere with the exercise of voting rights at corporate meeting by shareholders (including the exercise of rights to vote on those on the board) and a cautious approach is called for: see Pringle v Callard [2008] 2 BCLC 505; Re Chime Corp Ltd [2003] 2 HKLRD 905; H v H [2011] 1 HKLRD 1048.  Mr Joffe’s argument based on the diminution of values of the 1^st Defendant’s shares (which were subject to Mareva injunction) does not strike us as sufficiently cogent to support such strong measure. On this reason alone, leave to appeal should not be granted.

13.  The intended appeal is an appeal against the refusal to grant interim interim relief. It has to be reiterated that interim interim relief is meant to be an urgent temporary stop-gap measure and the circumstances were such that the court has to do practical justice on the balance of fairness even though it may not have sufficient time to consider the matter fully: see NPYJ v SMRC [2018] 1 HKLRD 573 at [3] and [4].

14.  Thus, in the recent decision of Cyberland (China) Ltd v Zhang Wei Bing [2018] HKCFA 19, Ribeiro PJ granted a stay on payment out of money in court pending the Appeal Committee having the opportunity to hear the application for leave to appeal.  His Lordship adopted the test of balance of fairness at [7] of that decision.

15.  Given the short lifespan of interim interim relief and the high discretionary nature of a first instance decision on the grant and refusal of relief, the Court of Appeal would rarely interfere with such decision: see NPYJ v SMRC [2018] 1 HKLRD 573.

16.  As we said, the court will only consider granting interim interim relief when it does not have sufficient time or fair opportunity to consider an application for interlocutory relief fully. Hence whatever views formed at such hearing and whatever decisions made must be provisional, open for further arguments and revisiting in the future. But it does not follow that it would be wrong for the court to form some provisional view on the arguability or merit of a plaintiff’s case. We do not think the judge were wrong to consider this aspect of the case in deciding whether interim interim relief should be granted.

17.  The extent to which a judge give weight to the merit on an issue in a particular case depends very much on the context and there are obviously other factors at play including the effect of the grant or refusal of the relief and the subject matter at stake. It is a multi-facet assessment and, as we said, an exercise with high discretionary margin accorded to the first instance judge.

18.  We believe this approach is consistent with the one adopted by Ma J (as the Chief Justice then was) in Music Advance ltd v Incorporated Owners of Argyle Centre [2010] 2 HKLRD 1041 at [12], in particular (d), which bears repeating by way of reminder:

“ At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The Court will therefore take whichever course appeals to carry the lower risk of injustice if it should turn out that it is wrong.”

19.  This observation applies equally at the interim interim stage. It is noteworthy that at sub-para (e) at [12], Ma J referred to the need to have regard to the merit in terms of a serious issue to be tried and explained how it relates to the risk of injustice,

“ … there must be a risk of injustice if the plaintiff cannot even establish a serious question to be tried …”

20.  In the present case, Mr Joffe took issue with the judge’s view on the Plaintiffs’ case. The assessment of the merit of the Plaintiffs’ case in an interim interim context is very much an evaluative judgment.  In this particular instance, it was not plain to us that the judge was wrong in any material respect.

21.  There have been some developments since the judge’s decision of 3 May 2018. In an appeal, this Court primarily focuses on the decision of the judge based on the then prevailing circumstances. Generally, appeal against the refusal or grant of interim interim relief is not a suitable route for making fresh applications based on new developments. As discussed in the course of hearing, it is uncertain if the 13% beneficially owned by the 1^st Defendant would make any difference. Actually, the judge did not deal with an application confined to the voting rights of the 13% shareholding. These are also factors militating against the entertainment of the intended appeal.  

22.  It may be that the Plaintiffs were concerned if some of the reasons given by the judge on finding that there was no serious issue to be tried may impact adversely on the judge’s assessment of the application for receivership.  With respect, that would not be a reason for granting leave to appeal.  First, a decision on interim interim basis can only be a provisional one and as explained in NPYJ v SMRC [2018] 1 HKLRD 573 at [4], the unsuccessful party is at liberty to make the same point in light of further evidence and further submissions with additional citation of authorities.  Second, if the outcome in the receivership application remains unsuccessful, depending on the merits of the case in that substantive application, the Plaintiffs can seek to appeal against that decision.

23.  For these reasons, we dismissed the application for leave with costs. Having considered the statement of costs of the 1^st Defendant of 21 May 2018 and the response of the Plaintiffs of 9 July 2018, we summarily assess the costs payable by the Plaintiffs to the 1^st Defendant at $678,500.