HONG KONG ZHIXIN FINANCIAL NEWS AGENCY LTD v. CHINA MAPLE LEAF EDUCATIONAL SYSTEMS LTD

HCA 2973/2016

[2021] HKCFI 3398

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2973 OF 2016

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BETWEEN

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DECISION

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1.  This is the PTR review of this action. The trial is set down for 8 days commencing on 16 May 2022. Other than the usual directions to facilitate the proper preparation of the trial, before the court is also the plaintiff’s contested summons dated 19 October 2021 for leave to adduce a supplemental witness statement of Mr Guo Xinlin, a draft of which can be found at Tab 6A of the PTR review bundle (“Application”).

2.  Having given consideration to all the factors identified as material to the exercise of the discretion for the admission of witness statements at this stage of the proceeding as set out or summarised in, for example, Parsad v Great Wealthy Engineering Company Limited [2012] 3 HKLRD 705 and Cao Chung [2021] HKCFI 3143, I think the following matters, looked at cumulatively, determine the Application against the plaintiff.

3.  First, although the trial is still 6 months away, the Application is seriously delayed. This action was set down for trial on 6 May 2020. Prior to that, witness statements were exchanged in February 2019. The plaintiff had confirmed to the court and the defendant that all witness statements had been filed and no further interlocutory application would be made on 11 February 2021 by its CMC questionnaire. There were repeated directions by the Master which gave the parties time to obtain counsel’s advice. The lack of witness evidence on quantum is patent and should have been picked up long ago.

4.  Second, Mr Guo could have included all the matters covered in his purported supplemental statement in his previous witness statement. There is not even an attempt, whether on oath or otherwise, to explain why this was not done and why the plaintiff has taken such a long time to tidy up Mr Guo’s written evidence. The plaintiff has not provided the court with any evidence on this important factor to exercise the discretion in its favour. I duly note that in the course of the hearing, Mr Bryon Chiu, counsel for the plaintiff, invited the court to entertain submissions which informed the court the instructions of the reasons for delay from his client, but for obvious reasons, the court refused to receive such submissions.

5.  Third, there is no or no proper pleading of the loss and damage now sought to be raised by Mr Guo. The only averment that the plaintiff has suffered loss and damage is to be found in paragraph 32 of the re-amended statement of claim. The only loss and damage there identified was the deprivation of the 17.5 million option shares in the defendant at the exercise price of $4. There is no allegation of any loss of opportunity to sell the 17.5 million shares in the defendant at a profit within 6 months to 2 years of their issue to the plaintiff.

6.  Fourth and most importantly, Mr Guo’s intended evidence of what the plaintiff would have done with the subject shares had they been allotted to the plaintiff is, in my view, misconceived and unmeritorious. The plaintiff’s primary claim as pleaded is for specific performance of the agreement and supplemental agreement mentioned in paragraphs 3 and 9 of the re-amended statement of claim. The plaintiff claims damages only in addition to or in lieu of specific performance without identifying the basis on which the court would be invited to assess such damages.

7.  The ultimate subject matter of those agreements were shares in the defendant. The defendant is a listed company. Its shares are freely traded at, and can at all material times be purchased through, the Hong Kong Stock Exchange Limited. There is certainly no suggestion that the plaintiff could not, for any reason, have acquired the requisite number of shares in the defendant in the open market. Indeed, the historical statistics disclosed by the parties show the active trading of this share in substantial quantity at the material times. It is trite that specific performance is not to be granted where damages is an adequate remedy. It is therefore generally not available to compel an allotment or sale of publicly-listed shares as the plaintiff in the instant case seeks to do.

8.  The true and correct analysis should be that upon the defendant’s successive breaches of the subject agreements on 11 October 2016 and 21 November 2017, the plaintiff came under a duty to mitigate its loss and damage. The most obvious way of mitigation would be to immediately acquire the same number of shares in the defendant under each of the First Batch Option and Second Batch Option in the open market. The plaintiff would suffer loss only if the replacement shares should cost more than the option price of $4. And the plaintiff’s loss is just the difference between $4 and the price at which it bought or should have bought the replacement shares. What the plaintiff should not have done at the defendant’s expense was to sit back and theorise about the profit that it would have made if it had been allotted the subject shares and then sold them within 6 months to 2 years at a price much higher than the option price of $4 when the market was rising.

9.  For these reasons, I dismiss the plaintiff’s summons dated 19 October 2021.

(Discussion re costs)

10.  The plaintiff’s summons dated 19 October 2021 be dismissed with costs to the defendant with certificate for counsel.

(Discussion re summary assessment of costs)

11.  Now, for the purpose of summary assessment of costs, the defendant should provide the court and the plaintiff with its statement of costs to be prepared on a party-and-party basis within 3 days. The plaintiff is to submit its objections, if any, within 3 days thereafter.