CHEN HONGQING v. LIU YIU KEUNG STEPHEN AND OTHERS

HCA 1699/2019

[2026] HKCFI 5023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1699 OF 2019

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(by Original Action)

(by Counterclaim)

(by Counterclaim)

__________________

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D E C I S I O N

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A.  Introduction

1.  This is the hearing of Chen HQ’s summons of 28 January 2026 (the “2026 Amendment Summons”) for leave to re-amend his ASoC (or “ASOC”) as per the draft Re-Amended Statement of Claim (“DRASOC”) annexed thereto.

2.  This case has a complicated background. It also has a substantial number of related proceedings:

(a)  For general background of this case, I refer the CHQ Injunction Decision this Court handed down on 23 June 2021[1], and the many other Judgments and Decisions referred to at §§1 and 2 therein;

(b)  For the immediate background leading to the present application, I refer to the decision this Court handed down on 21 August 2025[2] (the “Interrogatory Decision”), and in particular:

(i)  the clarifications I gave in relation to the parties[3];

(ii)  the summary of the core facts, including parties’ respective pleaded cases as per the pleadings filed up to then[4]. I will not repeat them. I will however in the latter part of this judgment give further details on Chen HQ’s pleaded claims based on the “Ruzhou Judgments” and the “Nominee Awards”. I will explain both terms below;

(iii)  my references to and observations[5] on the absence of any pleaded alternative case by Chen HQ for repayment of loans should his agency case be rejected after trial (“Alternative Claim”);

(iv)  my references to and observations[6] on Clause 7(1) of the Loan Agreements (“Negative Pledge Clause”);

(c)  Unless otherwise specified, I adopt the same terms and abbreviations used or adopted in the Interrogatory Decision.

3.  Parties’ respective teams of counsel have remained the same, save that Ms Stephy Lo has been engaged as an additional counsel for Jinan Group.

B.  The proposed amendments

4.  The proposed amendments are of divers natures, as follows:

(a)  §8.10(1), which is formal and cosmetic;

(b)  In section E (bearing the heading “Purported Jinan 2017 SPAs”):

(i)  §§19.1, 19.1(1), 19.1(3A), and 19.1(4), which relate to what Chen HQ says Jinan Group has pleaded in its Re-Amended Defence and Counterclaim (“JG/RAD&C”);

(ii)  §19.2(5), which are minor amendments in relation to Chen HQ’s case in relation to the 2017 Jinan SPAs;

(c)  In section K1[7] (bearing the heading “[P’s] entitlement to the Jinan Disputed Shares”):

(i)  §40, which adds the plea that the Termination Agreements were “in any event in beach of Clause 7(1) of the Loan Agreements as pleaded in paragraph 8.10(4) above”; 

(ii)  For ease of reference, I reproduce again §8.10(4) of the ASOC, and repeat that Clause 7(1) has been referred to as the “Negative Pledge Clause”:

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

(d)  In section K2 (bearing the heading “Jinan Group has no interest in the Jinan Disputed Shares”), §§46A to 46I;

(e)  The addition of section L which bears the heading “Alternative case against the 11 Nominee (save Liu Dequan)”, (which contains §§60-66), and the addition of the related prayers (§§(36)-(39));

5.  Mr Law in his written submissions summarises the proposed amendments as follows (which terms parties have adopted):

20.  The disputed proposed amendments are as follows:  

20.1  DRASOC §40 … makes clear that the Purported Termination Agreements were null and void not only because they were entered into by the 10 Nominees without authority from P as principal to enter into them, but also because they were in breach of the Negative Pledge Clause (“Negative Pledge Amendment”).

20.2  The Jinan 2017 SPAs did not transfer interest in the Jinan Disputed Shares to Jinan Group because the conditions for transferring title in the CSI Shares under Clause 2 of the Purported Jinan 2017 SPAs have not been satisfied, and in any event Jinan Group has not discharged its payment obligation (“No Entitlement Amendment”): DRASOC §§46A-46I …

20.3  An alternative claim against the 10 Nominees for the unpaid principal and interest, but only if:-

(i)  the Court accepts the Loan Case and finds the Loan Agreements to be genuine loan agreements as opposed to constituting the written part of the Agency Agreements, such that the monies advanced to the 11 Nominees were the Purported Loans instead of Purchase Funds; and

(ii)  the Nominee Awards are not binding on the 10 Nominees, and the arbitration agreement on which the Nominee Awards was based was invalid as contended by the SHDs in 8 Reps RRAD&C Section IIB …, such that it would open to the 10 Nominees to relitigate as against P the dispute over the nature of the Loan Agreements in this action (“Alternative Claim Amendment”): DRASOC §§60-66, prayers 36-39 …

C.  The opposing parties’ stances

6.  In respect of the SHDs:

(a)  The SHDs object to the proposed amendments. Mr Maurellet summarises their positions at §3 of his written submissions, that the Alternative Claim Amendment is abusive, and that the No Entitlement and Negative Pledge Amendments are unarguable;

(b)  I deem it necessary to mention on record one matter. In their affirmation in opposition, the SHDs raised a limitation issue which the “relation back” rule may give rise to. Chen HQ has subsequently via Mr Law[8] offers an undertaking to the following effects:

77.  … as recently held by the [Court of Appeal], the Court has jurisdiction to order the “relation back” rule not to take effect on granting amendments with limitation issues, in which case the defendant will not be deprived of a limitation defence to the proposed claim. In an era when the Court is expected to take a proactive role in case management, the Court is entitled to adopt a more flexible approach in amendment applications involving limitation issues. This new approach avoided the wasteful nature of duplicity of proceedings and costs: BGA Holdings Ltd (in liq) v Chu Kong [2025] 5 HKLRD 422 §§37-45 …

…

79.  P is willing to undertake that he would not rely on relation back and would treat the Alternative Claim Amendment as effective from the date that it was made.

(c)  Given that offer, the SHDs no longer pursue any limitation issue as a ground of objection.

7.  Mr Wong summarises Jinan Group’s stances as follows:

(a)  They object to the Negative Pledge and No Entitlement Amendments, on the basis that they disclose no reasonable cause of action:

(b)  Further, the No Entitlement Amendment is premised on the inconsistent contention that the Loan Agreements were genuine loans and therefore amounts to an abuse of process and/or contravenes Order 18 rule 12A;

(c)  Given the serious and inexplicable delay and substantial prejudice of the proposed amendments, leave to amend should be refused;

(d)  In respect of the Alternative Claim Amendment, whilst the proposed Alternative Claim is not directed against Jinan Group, it nonetheless maintains that it is abusive and impermissible for Chen HQ to contend that the Loan Agreements involved genuine loans and to bring a claim for such loans on an alternative basis.

8.  The three heads of proposed amendments will be considered in turn.

D.  The applicable legal principles

9.  Parties have cited to me a number of authorities on the legal principles and considerations relevant to amendments. Mr Law in the course of his oral submissions highlighted Re Hin-Pro International Logistics Ltd [2016] 1 HKLRD 1367 §8. I have read and considered them. They are not in dispute.

E.  The Alternative Claim Amendment

10.  I consider the Alternative Claim Amendment first.

11.  The Alternative Claim Amendment relates to DRASOC §§60-66, and prayers §§(36)-(39).

12.  In advancing Chen HQ’s proposed amendments to add the Alternative Claim, Mr Law emphasises the alternative nature of the Alternative Claim (§60 of the DRASOC). He stresses that Chen HQ’s case remains that the Loan Agreements were or were in substance agency agreements (“Agency Agreements”), and that it is the Jinan Group and the 8 Reps and SHDs (Excluding) which plead and say that the Loan Agreements had given rise to a lender / borrower relationship between Chen HQ and the 11 Nominees. Mr Law submits that the addition of the Alternative Claim is to cater for the scenario of the Court upon trial rejecting Chen HQ’s agency case and accepting the other sides’ loan case. He submits that it is not right that Chen HQ would in that scenario be left with no remedy. On the authority of Poon Hau Kei v Hsin Chong Construction Co Ltd, Taylor Woodrow International Ltd Joint Venture (2004) 7 HKCFAR 148, he submits that Chen HQ is entitled to obtain relief based on the other sides’ factual case.

13.  At §10 of his written submissions, Mr Maurellet elaborates upon his objection based on abuse of process. He gives 3 reasons:

(a)  It is an abuse of process for Chen HQ to advance the Alternative Claim in view of his inconsistent positions in other proceedings;

(b)  It is an inconsistent alternative which Chen HQ has no reasonable ground to advance; and

(c)  It is an abuse of process for Chen HQ to advance it in view of his conduct earlier in the present proceedings, principally because he could have and should have run it earlier.

14.  Whilst the Alternative Claim is not proposed to be added against Jinan Group, Mr Wong maintains that it is abusive and impermissible for Chen HQ to contend that the Loan Agreements involved genuine loans and to bring a claim for such loans on an alternative basis. I can see why Mr Wong takes that stance, as the basis of Chen HQ’s Alternative Claim is closely linked to the No Entitlement Amendment proposed against Jinan Group. I will come back to this.

E.1  The Ruzhou Judgments and the Nominee Awards

15.  To understand the true implications of any addition of the Alternative Claim, it is necessary to go into further details on Chen HQ’s pleaded claims. For this purpose, I go by his ASOC.

16.  In Chen HQ’s ASOC:

(a)  He pleads first of all some introductory matters (section A), and then the Trust Actions (section B);

(b)  He then pleads his beneficial interest in the Shares (section C). He says that the Loan Agreements were or were in substance the Agency Agreements, such that he has acquired beneficial interest in the Shares;

(c)  In section D, he pleads that he started 4 sets of proceedings in the People’s Court of Ruzhou City (the “Ruzhou Proceedings”) and obtained judgments (i.e. the Ruzhou Judgments) against divers defendants (the “Ruchou Defendants”). He pleads further that the Ruzhou Judgments held that he is entitled to the beneficial interest and ownership in the Shares on the basis that the Ruzhou Defendants had sold the beneficial interest in the corresponding shares in CSI to him;

(d)  In section F, Chen HQ pleads that he in September 2017 commenced CIETAC arbitration (“Nominee Arbitrations”) against 10 of the 11 Nominees. He sought a declaration that each of the 10 Loan Agreements between him and each of the 10 Nominees was in substance an agreement under which he entrusted each of them as his purchasing agent to purchase the relevant Shares. He pleads that Nominee Awards were in February 2022 obtained in his favour, each holding that the Loan Agreements were, on true construction or in substance, agency agreements whereby the Nominees were appointed as his purchasing agents. He specifically pleads that “The Plaintiff will rely on the Nominee Awards for their full terms and effect at trial”[9];

(e)  In sections G, H, I and J, Chen HQ pleads that by virtue of the Ruzhou Judgments obtained by him against the specified defendants set out therein, he was at all material times and still is the owner of the corresponding shares, and that they have been holding those shares on trust for him;

(f)  In section K, Chen HQ pleads his case against Jinan Group. Specifically, he pleads at §39 that he “has since September 2015 been and is still the owner of and entitled to the beneficial interest in and title to the Jinan Disputed Shares”.

17.  As is obvious from the above, the Ruzhou Judgments and Nominee Awards feature heavily in Chen HQ’s claims. They were all obtained on the basis of and premised upon his purchasing agency case.

18.  In defence, the 8 Reps and SHDs (Excluding) plead, principally, that properly construed under Mainland law, the Loan Agreements created a lender / borrower relationship and not any relationship of entrustment or agency. They have put forward from that perspective several other further or alternative limbs of defence – unenforceability under Mainland law as being sham contracts if agency relationship were indeed meant to be created, illegality under Hong Kong law, breach of the Securities and Futures Ordinance (Cap. 571), failure on Chen HQ’s part as undisclosed principal to acquire any rights, abuse of process, etc. There is no need for resolution of this application to go into their details.

19.  In defence, and as summarised by Mr Wong[10], Jinan Group disputes the existence of the Agency Agreements, and avers in any event that it is an abuse of process for Chen HQ to enforce the Ruzhou Judgments which were obtained on the strength of his agency case.

E.2.  Permissible alternative case?

20.  With the above context clarified, I can come back to the Alternative Claim Amendment.

21.  The first point to note is this. Whether the Loan Agreements were agency or loan agreements is not just a legal conclusion that flows from the pleaded facts. It is also factual. The factual matrix is always important on issue of such a nature. Chen HQ has at §8.5 of his ASOC pleaded that he, the Minority Shareholders and the 11 Nominees “agreed on” the arrangements whereby “the 11 Nominees shall act as the [P’s] agents (受托人) for the purposes of acquiring the HCA Employee’s beneficial interest in the Employees’ Shares…”. It is not as if he were not aware of the crucial facts which gave rise to the Loan Agreements.

22.  Not only has he pleaded a factual basis in support of his agency case, he seeks to rely on the Ruzhou Judgments and the Nominee Awards which he has obtained on that basis.

23.  As Mr Wong puts it[11], which I agree, this action was at the outset framed as an action in effect to enforce the Ruzhou Judgments. Not only that, Chen HQ further relies on the same and the Nominee Awards to establish his beneficial ownership of the Shares.

24.  Clearly, in pursuing his claims herein, Chen HQ has in his ASOC firmly committed to his agency case.

25.  It is against that pleaded case which the 8 Reps and the SHDs (Excluding) have pleaded their defences. They deny Chen HQ’s agency case. They say that the Loan Agreements indeed gave rise to a lender / borrower relationship.

26.  If the defendants’ pleaded defence is established, Chen HQ’s claims based and premised on an agency claim fail.

27.  Chen HQ now says that to protect himself against that scenario, though it is not his case, he wants to add the Alternative Claim.

28.  But allowing him to make the Alternative Claim Amendment would mean not only that he be allowed to run a case factually inconsistent with his own. It would also mean something much more draconian – that he be allowed to run and potentially obtain judgment in Hong Kong on a basis different from the one on which he has obtained the Ruzhou Judgments and the Nominee Awards. That would mean that he could in different courts and different tribunals seek and obtain reliefs on different and inconsistent factual and legal bases. In my view, allowing him to do so would be completely wrong. For him to seek to do so is an abuse.

29.  If any authority is required for the above, I refer to Chu Yue Bun v Lai Shiu Woon [2021] HKCA 1929 where the Court of Appeal observsed at §§35(2)-(3) as follows (emphasis added for ease of presentation):

(2)  It may be an abuse of process for a party, with full knowledge of the facts, to advance a claim that is diametrically opposed to its position taken in an earlier set of proceedings. The abuse lies in its effect on the integrity of the administration of justice, which would be no less compromised even if the previous inconsistent allegation was not followed through to judgment, particularly when such previous allegation was of some significance…

(3)  What constitutes an abuse of process in the type of case referred to in (2) may vary with the circumstances of each case. An important factor in determining whether it is an abuse of process is to see whether there is any explanation why diametrically inconsistent cases have been advanced by a party in different proceedings…

In my view, it is an a fortiori case if the party who seeks to run inconsistent cases has in fact obtained judgments in those different proceedings on the strength of that inconsistent basis. That remains so even though those proceedings took place in a different jurisdiction.

30.  So far, I have not taken into account the different and inconsistent cases which Chen HQ had advanced in divers proceedings in Hong Kong. I have considered them in various judgments which I have previously handed down (notably the Jurisdiction Decision at §§93-111). Taking those into account reinforces the conclusion that it would be an abuse for Chen HQ in the present case to rely on the Alternative Claim.

31.  Running alternative cases of course can be permitted. O.18 r.12A provides that:

A party may in any pleading make an allegation of fact which is inconsistent with another allegation of fact in the same pleading if—

(a)  the party has reasonable grounds for so doing; and

(b)  the allegations are made in the alternative.

32.  But as explained in Herostar Properties Ltd v Cheung Yu Ping [2018] 6 HKC 165 at §38:

… the purpose or objective of O 18 r 12A of the Rules of the High Court is to exclude dishonest or opportunistic and speculative claims. It is not intended to exclude honest claims reasonably advanced on the basis of incomplete information which points to alternative sets of fact, each of which would be legally viable as part of the party’s case.

33.  In my view, the attempt on Chen HQ’s part to add the Alternative Claim is at best opportunistic and speculative. He himself had personal knowledge of the facts.

34.  Mr Law relies on Poon Hau Kei. That is however a different case. There was a genuine factual dispute as to whether the appellant was standing on an unsuitable folding ladder or on a fluorescent light trough. The respondent itself pleaded alternative cases, that the claimant was standing on a ladder, alternatively, on the light trough, and that either way, he caused or contributed to the accident. There was no abuse there.

35.  Mr Law further suggests that inconsistency abuse is often explained as cases on election (relying on Nexus Communications Group Ltd v Michael Lambert [2005] EWHC 345 (Ch) §45), or that there must be an unfair advantage obtained or unfair detriment imposed for inconsistencies to constitute an abuse (relying on Skymist Holdings Ltd v Grandlane Developments Ltd [2018] EWHC 3504 (TCC) §61 and Re Shanghai Huaxin Group (Hongkong) Ltd [2026] HKCFI 1780 §§56-57, 61-68). But even assuming validity of those submissions, it is plainly inequitable to allow Chen HQ to go back and rely on the loan case which he disavows, and that he would further obtain unfair advantages if he were permitted to do so.

36.  Mr Maurellet and Mr Wong have raised other and further objections to the Alternative Claim Amendment – notably Chen HQ’s conduct in the present proceedings, his failure to seek to effect the amendment when he could and should have done so, and the overall delay involved. There are clear forces in those further objections. But I do not feel the need to specifically deal with them. In my view, what have been discussed above are more than sufficient for this Court to deal with this limb of the application.

E.3.  Conclusion on the Alternative Claim Amendment

37.  For the above reasons, I refuse Chen HQ leave to effect the Alternative Claim Amendment.

F.  The Negative Pledge Amendment

F.1.  §40 of the DRASOC

38.  The Negative Pledge Amendment relates to §40 of the DRASOC.

39.  The entirety of §40 of the DRASOC reads as follows (the underlined part is in green and is proposed to be added (i.e. the Negative Pledge Amendment), while the rest is pre-existing in red):

Insofar as necessary, it is averred that the Purported Termination Agreements were null and void, in that they were purportedly entered into by 10 of the 11 Nominees and a Feng Cunwei (馮存偉), who was not one of the 11 Nominees appointed by the Plaintiff, without authority from the principal namely the Plaintiff, and in any event in breach of Clause 7(1) of the Loan Agreements as pleaded in paragraph 8.10(4) above.

40.  The structure of section K1 of the DRASOC is also important:

(a)  As I have noted above, §40 of the DRASOC is in section K1;

(b)  Section K1 comprises 6 paragraphs, which are §§38 to 43;

(c)  Amongst those 6 paragraphs, §40 is the only paragraph sought to be re-amended (by the addition of the part underlined above). The rest are pre-existing;

(d)  §38 simply repeats §§1 to 19.6 pleaded earlier;

(e)  §39 pleads that Chen HQ has since September 2015 been the owner of and been entitled to the beneficial interest in and title to the Jinan Disputed Shares;

(f)  §40 follows;

(g)  §41 pleads an alternative plea, that under certain Mainland law, the Termination Agreements were null and void;

(h)  §42 pleads a further or alternative plea of breach of duty by the 1,838 Sellers as constructive trustees for Chen HQ;

(i)  Section K1 is concluded by §43, that:

As a result, the Purported Termination Agreements are invalid against the Plaintiff.

F.2.  Parties’ stances

41.  In his written submissions, Mr Law submits that the Negative Pledge Amendment only seeks to introduce a further ground, viz. that they were entered into by the 11 Nominees in breach of the Negative Pledge Clause.

42.  In his written submissions, Mr Wong submits that the Negative Pledge Amendment is bound to fail. As a matter of privity, a covenant between party A and party B prohibiting the latter from doing a certain act does not without more invalidate a subsequent contract between party B and party C pursuant to which party B agrees to do that very act. Hence, even assuming any breach of the Negative Pledge Claim, Chen HQ’s recourse at most lies in a personal claim for damages against the 11 Representatives.

43.  Mr Maurellet’s objections are to similar effects.

44.  In his written Reply, Mr Law submits that the question is not only of privity, but one of priority. In the course of the hearing, and relying on De Mattos v Gibson (1859) 4 De G & J 276, Mr Law laid emphasis upon the possibility of Chen HQ seeking and obtaining an injunction restraining both the vendor and purchaser from acting in breach of the Negative Pledge Clause.

F.3.  Discussion

45.  I have summarised section K1 of the DRASOC above.

46.  The wording of §40 itself, and more so when read in the context of section K1, makes it clear that the Negative Pledge Amendment is proposed to be added as a limb of the pre-existing plea that the Termination Agreements were null, void and/or invalid.

47.  That in fact is also the way Mr Law originally explains and justifies the insertion of the Negative Pledge Amendment. At §20.1 of his written submissions, he submits (emphasis added):

DRASOC §40 … makes clear that the Purported Termination Agreements were null and void not only because they were entered into by the 10 Nominees without authority from P as principal to enter into them, but also because they were in breach of the Negative Pledge Clause …

48.  I have heard no valid answer from Chen HQ to the primary objections made against the Negative Pledge Amendment on the basis of the doctrine of privity. Even assuming any breach of the Negative Pledge Clause, there is no legal basis to suggest that the Termination Agreements would thereby be rendered null, void or invalid.

49.  In Mr Law’s reply, both written and oral, the relevance of the Negative Pledge Amendment shifts from what has been pleaded towards priority and enforcement against breach via injunction.

50.  But neither is Chen HQ’s pleaded case.

51.  On this basis alone, the Negative Pledge Amendment is bound to fail.

52.  In any event:

(a)  On priority:

(i)  No priority has been pleaded in section K1;

(ii)  In fact, as pointed out by Mr Wong during oral submissions, there are already pre-existing pleas by Chen HQ based on priority, and they are not related to the Negative Pledge Clause;

(b)  On injunction:

(i)  That is again not the case as pleaded in section K1;

(ii)  CSI is only a holding company. It had no other business. Even assuming any breach of the Negative Pledge Clause, it has not been demonstrated why damages would not be adequate remedy.

53.  For completeness, I add this. It appears, in the course of oral submissions, that Mr Law sought to argue that the null and void plea and the Negative Pledge Amendment should be read disjunctively. I am not persuaded that such disjunctive construction is supported by the clear wording of §40 and the structure of section K1. But in any event, if the Negative Pledge Amendment is to be so read, Chen HQ would need to base the effects of the Negative Pledge Amendment upon his alternative loan case. I repeat the discussion in section E above. He should not be permitted to do so.

F.4.  Conclusion

54.  For the reasons set out above, I refuse leave to effect the Negative Pledge Amendment.

G.  The No Entitlement Amendment

G.1.  What the No Entitlement Amendment is about

55.  The No Entitlement Amendment relates to DRASOC §§46A-46I, and concerns the 2017 Jinan SPAs.

56.  The No Entitlement Amendment contains 2 limbs. Their purports are not straightforward. Mr Law in his written submissions explains them as follows (the emphasis being original):

49.  First, the subject matter to be transferred to Jinan Group is the “标的股份权益” under cl.2 of the Purported 2017 Jinan SPAs …, which is in turn defined as the 1,838 Sellers’ beneficial interest in the Jinan Disputed Shares under cl.1 … However, if the 1,838 Sellers’ beneficial interest had already been acquired by P under the 2015 SPAs, and the Purported Termination Agreements are invalid, then the 1,838 Sellers would have no interest to transfer to Jinan Group: DRASOC §46A …

50.  Second, Jinan Group had not discharged its payment obligation under the Purported Jinan 2017 SPAs, hence it has not yet earned its entitlement to the Jinan Disputed Shares: DRASOC §§46A-E …

51.  Jinan 2017 SPAs Clause 2.8 … provides that Jinan Group shall make refunds under the 2015 SPAs on behalf of the 1,838 Sellers in a manner to be agreed between the relevant Nominee and the relevant Seller …

52.  As mentioned above, Jinan Group’s pleaded case is that the obligation is limited to making payment to the 11 Nominees, which it completed by making the Notary Deposit on their behalf … The obligation did not go so far as to providing that the Notary Deposit would have discharged the 11 Nominees’ obligations owed to P the Loan Agreements is irrelevant …

53.  DRASOC §§46C-46D … challenges this assertion by contending that:

53.1  Clause 2.8 did not provide that mere payment of the Notary Deposit would suffice. Instead, the particulars of payment required would be as per the agreement between the relevant Nominee and the relevant Seller.

53.2  They must have agreed to something more than mere payment to the 11 Nominees. Instead, the payment must be one which was capable of discharging the Nominee’s obligation under the Loan Agreements.

53.3  This is supported by Clause 4(2) of the Termination Agreement cl.4(2) … which requires repayment to P (资金垫付方):

“有关售价的返还，甲、乙双方同意由甲方指定的第三方向乙方及及资金垫付方予以返还，具体返还事宜由相关方另行约定。”

53.4  In light of the above, the 11 Nominees would have sought an agreement whereby Jinan Group’s payment should be one to P which would have the effect of discharging their obligations under the Loan Agreement. This is also consistent with common sense. In the absence of an effective discharge of their obligations to P, the 11 Nominees would remain on the hook. They must have intended for a clean break, and that Jinan Group’s payment obligation is discharged only when that is achieved (rather than assuming the risk of an ineffective discharge themselves).

54.  On the above premise, DRASOC §§46F-46I … goes on to plead why the Notary Deposit could not have discharged the 11 Nominees’ obligations under the Loan Agreements. In broad terms:

54.1  The Nominees’ obligation under the Loan Agreement was not just to repay the consideration for the 2015 SPAs, but to procure the transfer of the CSI Shares to P: §46F.

54.2  In any event, the Notary Deposit was not a valid payment under Mainland law because it should have been made to the notary office in P’s residence instead: §46G.

54.3  The Notary Deposit had been withdrawn by September 2022, with the effect that it shall be deemed to have not been made at all: §§46H-I.

57.  §46C of the DRASOC is important in understanding the No Entitlement Amendment. It is, materially, in the following terms:

It is to be inferred from the following facts and matters that pursuant to the aforesaid clause[12], the Nominees and Jinan Group had agreed that there shall be refund (退还) under the 2015 SPAs on behalf of the 1,838 Sellers upon a payment to the Plaintiff which is valid under PRC law to discharge the Nominee’s obligations under the Loan Agreements …

58.  In my view, Mr Wong accurately summarises the No Entitlement Amendment in his written submissions as follows (the emphasis being original):

45.  [Chen HQ] … claims that the No Entitlement Amendment comprises two distinct limbs:

(1)  The No Interest limb (DRASOC §46A …): by which [Chen HQ] contends that if the Termination Agreements are invalid and [Chen HQ’s] primary case on the Alleged Agency Agreements is correct, the 1,838 Shanshui employees had no interest to transfer to Jinan Group under the 2017 Jinan SPAs.

(2)  The “Payment Discharge” limb (DRASOC §§46A-46I …): by which [Chen HQ] contends that, on the proper construction of Clause 2.8 of the 2017 Jinan SPAs, Jinan Group’s refund of the consideration paid under the 2015 SPAs must be one which is capable of validly discharging the 11 Representatives’ obligations under the Loan Agreements (the “Inferred Term”), and that the Notary Deposit did not discharge the Loan Agreements.

59.  Purely for the ease of discussion, I will adopt the terminology Mr Wong has adopted.

G.2.  Parties’ stances

60.  Mr Law submits that the No Entitlement Amendment is at least reasonably arguable.

61.  Mr Wong submits that:

(a)  In relation to the No Interest limb, it has already been pleaded in the ASOC at §§38-46, such that the No Entitlement Amendment adds nothing of substance;

(b)  In relation to the Payment Discharge limb, it is bound to fail on a proper construction of the 2017 Jinan SPAs.

62.  Mr Maurellet submits as follows:

(a)  The No Interest limb adds nothing to Chen HQ’s pre-existing claim;

(b)  Insofar as the Payment Discharge limb is concerned:

(i)  It is unclear how Chen HQ has any locus to intervene in the 2017 Jinan SPAs between Jinan Group and the relevant employees;

(ii)  The Inferred Term is no different from an implied term, and on the law (Lo Yuk Sui v Fubon Bank (Hong Kong) Limited [2019] HKCA 261, §§30-32), it should not be inferred or implied.

G.3.  Discussion

63.  I agree that the No Interest limb is redundant and adds nothing to the pre-existing claims. As I have observed at §39(g) of the Interrogatory Decision, in a complicated action like the present one, it is particularly important for parties to focus on the real issues, and for the court to exercise its case management power and discretion in ways which lead parties towards that. In my view, allowing Chen HQ to unnecessarily complicate his case by pleading redundant facts and matters would achieve the contrary.

64.  I turn to the Payment Discharge limb.

65.  The Payment Discharge limb hinges upon Chen HQ successfully establishing the existence of the Inferred Term. Whilst the Payment Discharge limb itself contains a number of alternatives (§§46F-46I), in the way Mr Law himself puts it at §54 of his written submissions, §§46F-46I are “[o]n the above premise”.

66.  The existence or otherwise of the Inferred Term is a matter of interpretation of contract.

67.  I agree with Mr Maurellet that given the nature of the Inferred Term, principles applicable to the implying of contractual terms are relevant.

68.  I have considered Lo Yuk Sui:

(a)  Therein, the Court of Appeal referred to Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 wherein the Court of Final Appeal adopted the requirements identified by Lord Simon in BP Refinery v Shire of Hastings (1978) 52 ALJR 20, that:

… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.

(b)  The Court of Appeal then referred to with agreement Lord Neuberger’s comments on those requirements in Marks & Spencer plc v BNP Paribas Securities Services [2016] AC 742, that, relevantly, requirements (2) and (3) can be alternatives, and that:

It may well be that a more helpful way of putting Lord Simon’s second requirement is … that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.

(c)  The Court of Appeal then referred to the more recent decision of the Privy Council in Nazir Ali v Petroleum Company of Trinidad and Tobago [2017] UKPC 2, wherein Lord Hughes (with whom Lord Neuberger, Lord Clarke and Lord Carnwath agreed) summarised the law at §7 as follows:

It is enough to reiterate that the process of implying a term into the contract must not become the re-writing of the contract in a way which the court believes to be reasonable, or which the court prefers to the agreement which the parties have negotiated. A term is to be implied only if it is necessary to make the contract work, and this it may be if (i) it is so obvious that it goes without saying (and the parties, although they did not, ex hypothesi, apply their minds to the point, would have rounded on the notional officious bystander to say, and with one voice, “Oh, of course”) and/or (ii) it is necessary to give the contract business efficacy. Usually the outcome of either approach will be the same. The concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is an essential but not a sufficient pre-condition for inclusion. And if there is an express term in the contract which is inconsistent with the proposed implied term, the latter cannot, by definition, meet these tests, since the parties have demonstrated that it is not their agreement.

69.  I have also considered Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 at §§43 and 45(e) wherein the importance of the language of the contract was emphasised.

70.  The following 2 clauses in the 2017 Jinan SPAs[13] are material:

Clause 1.2

甲方在BVI 信托的构成文件和适用法律法规项下拥有对标的股份权益充分的权力和权利。甲方曾与［郝广祥］签订《有关买卖China Shanshui Investment Company Limited的股份买卖协议》（以下简称 “《股份买卖协议》”），约定向其转让山水投資股份权益，该协议业经双方同意解除。目前不存在有效的甲方出售、转让或貭押其全部或部分标的股份权益的协议文件或安排。

Clause 2.8

… 乙方代甲方退还《股份买卖协议》项下的转让价款[3,750,887.00]元即为已经履行了其在本协议项下支付标的股份权益对价款的义务。具体退款时间、金额及期次由乙方与［郝广祥］及其他方自行协商确定，甲方均予以认可。

71.  Clause 1.2 is an express term which acts to satisfy Jinan Group that it would acquire and have good title to the relevant Shares. I accept Mr Maurellet’s submissions that Clause 1.2 already fulfils the function that the Inferred Term allegedly serves (or arguably needs to serve).

72.  I accept Mr Wong’s submissions that there is no reference, whether generally in the 2017 Jinan SPAs or specifically in Clause 2.8, to the Loan Agreement, or Chen HQ, or any need that the refund shall be effective under the applicable law to discharge the Nominees’ obligations to him.

73.  I accept Mr Maurellet and Mr Wong’s submissions that the Inferred Term contradicts the plain language of the 2017 Jinan SPAs, and in particular Clause 2.8 thereof.

74.  In my view, it is unarguable to try to suggest that the 2017 Jinan SPAs would lack commercial or practical coherence without the Inferred Term.

75.  In my view, inferring or implying the Inferred Term into the 2017 Jinan SPAs amounts to impermissibly re-writing the same.

76.  Mr Law addresses the above objections at §16 of his written reply (or at least he starts there), wherein he says:

Insofar as the second part of DRASOC §46A is concerned, the objection is based on an attempt to distort P’s argument from one of a collateral agreement (P Skel §53.2) to an implied term (SHDs Skel §§43-46) or construction of the 2017 Jinan SPAs (JG Skel §45(2)).

77.  In my view, that reply actually highlights the weakness and unarguability of the No Entitlement Amendment. The imply term route is blocked. Chen HQ then seeks to open another “collateral agreement” route. But that route is actually not mentioned at §53.2 of Mr Law’s written submissions. Nor has it been pleaded. What was the offer, or acceptance, or consideration? None has been pleaded. Allowing Chen HQ to proceed down this “collateral agreement” route is tantamount to allowing him to pursue a claim based on the existence of an un-pleaded agreement acting in variation of the clear terms of the 2017 Jinan SPAs in which he was not a party.

78.  In my view, the Payment Discharge limb is unarguable, and is bound to fail.

G.4.  Conclusion

79.  For the reasons set out above, I am of the view that the No Entitlement Amendment is plainly unarguable, and is bound to fail. I refuse Chen HQ leave to effect the same.

H.  Overall disposition

80.  For the above reasons, I refuse Chen HQ leave to effect any of the Alternative Claim Amendment, Negative Pledge Amendment, and No Entitlement Amendment.

81.  Without those disputed amendments, the other cosmetic and minor amendments, and those which plead what Chen HQ says Jinan Group has pleaded, become insignificant and non-consequential. Proceeding to make them nonetheless would be a waste of time and costs. It also has not been formulated before me specifically what amendments Chen HQ in any event seeks to effect even in the absence of the disputed amendments.

82.  Overall, I refuse Chen HQ leave to amend, and dismiss the 2026 Amendment Summons.

I.  Costs

83.  I make a costs order nisi that Chen HQ shall bear the costs of the 2026 Amendment Summons, with certificate for 2 counsel for both the SHDs and Jinan Group (even if 3 at any stage have been engaged), to be summarily assessed on the papers. Any application for variation shall be made within 14 days from the date when this Decision is handed down, upon receipt of which further directions will be given. In the absence of any, SHDs and Jinan Group shall within 21 days from the date hereof lodge their respective Statement of Costs, Chen HQ to lodge his Statements of Objections within 14 days thereof, and SHDs and Jinan Group their replies within 7.