ZHANG XIUHONG v. LIU WENCHEN AND OTHERS

HCA 2118/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2118 OF 2012

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D E C I S I O N

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1.  This is an application for an anti-suit injunction by the plaintiff against the 1st defendant. The summons seeks an order that:

“(1) the 1st defendant herein, whether by agents, servants, or otherwise howsoever be restrained from continuing as against the plaintiff the 1st defendant’s suit commenced on 29 November 2012 in the Intermediate People’s Court of Shijiazhuang, the People's Republic of China (PRC 石家莊市中級人民法院) and known as（河北省石家莊市中級人民法院（案號 2013）石民三初字第0041號）or commencing any other legal proceedings against the plaintiff in the PRC in respect of the subject matter of this action, including the following issues (whether the plaintiff or the 1st defendant who is in breach of the shares transfer agreement (股份轉讓協議書) dated 19 December 2010 made between the plaintiff, the 1st defendant and Wang Jienwei (王建偉) in respect of, inter alia, the sale and purchase of the entire shareholding of the 4th defendant; and

(2) who is presently the rightful legal and beneficial owner of the entire shareholding of the 4th defendant.”

The action in the Intermediate People’s Court of Shijiazhuang is hereinafter called “the mainland action”.

The background

2.  The plaintiff started this action on 13 November 2012 against the 1st defendant and others in relation to the shares of the 4th defendant.  The claim, in gist, is for the rectification of the 4th defendant’s register of members and register of directors so that the plaintiff would be reinstated as the shareholder of all 4,000 shares of the 4th defendant and that the plaintiff and its nominee, Zhang Yianjie, be reinstated as the only directors of the 4th defendant. 

3.  The ground of claim is that the plaintiff’s ownership of the shares of the 4th defendant and the plaintiff’s directorship and that of his nominee in the 4th defendant had been divested by the 1st defendant in favour of the 2nd and 3rd defendants with the use of forged documents containing the forged signatures of the plaintiff.  The plaintiff’s signatures appearing in the transfer documents and board resolutions of the 4th defendant have been purportedly confirmed by the Public Security Office of Shijiazhuang City, Hebei Province to be forged.

4.  On 14 December 2012, I ordered in this action the appointment of receivers and managers over the shares of the 4th defendant. 

Background

5.  I now introduce the relevant parties and the background of this dispute.  The 4th defendant is a Hong Kong company incorporated on 9 May 1996.  Its authorised share capital is HK$40,000 and divided into 4,000 shares.  These shares were registered in the name of the 1st defendant as at 10 January 2011.  Its then directors were the 1st defendant and his nominees.  Its major asset is the 45 per cent shares it holds in a Sino-foreign joint venture in Shijiazhuang. 

6.  The joint venture is called Hebei Chengjin Real Estate Development Company Limited (“RED”).  RED was set up in April 1996 with a registered capital of US$2.8 million.  RED is to build and develop an office and commercial complex of 9,400.431 square metres in Shijiazhuang.  Its current market worth is said to be no less than RMB 100 million.

7.  At all material times, the 4th defendant is and was the foreign partner of the joint venture, having taken over the 45 per cent shares in RED from a Hong Kong company called China System Group Company Limited (“China System”) on 5 October 1998.

8.  The Sino partner of RED which holds the other 55 per cent of its shares is Shijiazhuang City Economic Development Company (“EDC”), a company owned by the Government of the Xinhua District of Shijiazhuang. 

9.  Another company of significance is Hebei Chengjin Asset Management Services Company Limited (“AMS”).  It is a mainland company established on 19 March 2007.  Its registered capital is RMB 1 million.  The purpose of setting up AMS was for it to manage the assets and operations of RED.  Fifty-five per cent of the interests of AMS are held by one Zhang Pingjie for EDC.  The remaining 45 per cent interest of AMS used to be held by the 1st defendant on behalf of the 4th defendant. 

10.  Hence, RED and its management company AMS were held as to 55 per cent by EDC directly and through Zhang Pingjie respectively and as to 45 per cent by the 4th defendant directly and through the 1st defendant respectively.  The 4th defendant was, as at 10 January 2011, owned by the 1st defendant. 

11.  On 19 December 2010, the 1st defendant entered into a Chinese share transfer agreement with the plaintiff to sell to the plaintiff all the shares of the 4th defendant together with the 45 per cent shares held by the 4th defendant in RED and the 45 per cent interest of AMS. 

12.  The share transfer agreement, in effect, was to sell the entire interest of 1st defendant in the Sino-foreign joint venture in the form of RED to the plaintiff.  The price was RMB 45 million.  This share transfer agreement was to be performed in the mainland and it ultimately concerned the 45 per cent interest in RED, the Sino-foreign joint venture situated in Shijiazhuang in the mainland.  The only Hong Kong element is the 4th defendant which is a Hong Kong company.  The share transfer agreement necessitated changes to be made to the registers of members and directors of the 4th defendant and notification of such changes to the Hong Kong Companies Registry. 

13.  The share transfer agreement required the plaintiff to pay RMB 15 million within three days of the agreement to a guarantor, Mr Wang Jianwei.  The 1st defendant should, within 10 days, transfer the right to control the companies to the plaintiff.  After the right to control has been transferred to the plaintiff, the RMB 15 million would be released to the 1st defendant. 

14.  The 1st defendant should, within 30 days, complete the procedures for the change of the industry and commerce records of the 4th defendant and AMS.  Within three days of the completion of the procedures for change, the plaintiff should pay the 1st defendant the balance at RMB 30 million through the guarantor Wang.

15.  In late December 2010, the 1st defendant represented to the plaintiff that the 1st defendant had completed the procedure for transferring the 45 per cent AMS interest from the 1st defendant to the plaintiff at the Bureau of Industry and Commerce of Shijiazhuang in accordance with the share transfer agreement.  Pursuant to the share transfer agreement, the plaintiff paid the 1st defendant RMB 15 million on about 5 January 2011.  I suppose this payment would mean that the right to control the companies should have been transferred to the plaintiff as the transfer of this right is a condition for payment in the agreement and the plaintiff has not alleged that the 1st defendant has breached this condition.

16.  On 11 January 2011, the 40,000 shares of the 4th defendant were transferred by the 1st defendant to the plaintiff and its nominees. 

17.  Then sometime in January 2011, when the plaintiff had just moved into the development of RED, commenced participation in the business of AMS and was about to pay the 1st defendant the balance of RMB 30 million, the plaintiff said he was told by a representative of the management committee of AMS, one Mr Fu Jin, that the 1st defendant’s transfer of the 45 per cent interest in AMS to the plaintiff was without the knowledge and approval of the management committee which did not recognise the transfer.  Mr Fu was a representative of EDC, the Sino partner of the joint venture (paragraphs 54 and 56(9) of the plaintiff’s affirmation filed on 13 November 2012).  The plaintiff had also been advised by his legal advisers that article 27 of the Articles of Association of AMS provides that: 

“(1) any intended transfer of shares to any person other than a shareholder must be approved by not less than half of the other shareholders;

(2) the other shareholders shall have a prior right to purchase such shares.”

18.  The 1st defendant later confirmed to the plaintiff in the presence of a mainland lawyer that the documents provided by the 1st defendant to the plaintiff to prove the transfer of the 45 per cent AMS interest to the plaintiff had not really been signed by the representative of EDC, Mr Zhang Pingjie.  The 1st defendant further promised to replace the documents filed at the Bureau of Industry and Commerce of Shijiazhuang with proper documents.  The plaintiff in turn promised that if the 1st defendant could replace the documents, he would pay the 1st defendant the balance of RMB 30 million.  The plaintiff also found out later that the 1st defendant’s purported transfer of the 45 per cent interest in AMS had not been, and would not have been, approved by EDC, the Sino partner of RED (paragraph 59 of the plaintiff’s affirmation).

19.  Despite the problem over the transfer of the 45 per cent interest in AMS, there did not appear to be any problem about the transfer to the plaintiff of the shares of the 4th defendant and right of control the companies.  Hence the plaintiff was in control of the 4th defendant and its interest in 45 per cent of the shares of RED.  The 1st defendant also held the 45 per cent interest in AMS for the 4th defendant.  There is some evidence from the 2nd and 3rd defendants that the 1st defendant had chased the plaintiff for payment of the RMB 30 million but to no avail.  The situation seemed to have remained as it was.  Though the plaintiff did not have the 45 per cent interest in AMS validly transferred to him and he did not pay the remaining RMB 30 million to the 1st defendant, he seemed to be still enjoying the control of the companies and was knowledgeable about the affairs of AMS. In fact, one of the two deputy general managers of AMS, Mr Yan Zhenyong, was his personal assistant. 

20.  However, on 16 February 2011, a group of people from one Hebei Boshi Investment Company Limited (“Boshi Investment”) evicted the AMS staff from the office of AMS and took over the operation of AMS.  Boshi Investment was allegedly authorised by the Xinhua District Committee, Xinhua District Government and Xinhua District Management Committee of Shijiazhuang to take over AMS.  On the evidence of the plaintiff, these entities did not seem to be on friendly terms with the 1st defendant as the cause of the 1st defendant’s difficulty in transferring the 45 per cent interest in AMS to the plaintiff was the disapproval of the transfer by the Xinhua District Government.

21.  The plaintiff further said that on 10 June 2011, the Intermediate People’s Court of Shijiazhuang gave a judgment to EDC saying that the court would deal with EDC’s application for the compulsory liquidation of RED.  The grounds were that RED had not been subject to corporate examination in 2001 resulting in the revocation of its business licence on 19 November 2002. 

22.  The staff of AMS also discovered that, on 24 August 2011, the Reinforcement Bureau of the Xinhua District Court had seized RMB 45,013,218 from the bank account of AMS and paid the same to the liquidation group of RED.  The plaintiff said that this move was without the prior knowledge of the 4th defendant.

23.  On 12 September 2011, RED, acting through its liquidation group, commenced proceedings against the 4th defendant alleging that the 4th defendant was not China System, the original foreign shareholder holding 45 per cent shares of RED.  The change of shareholder from China System to the 4th defendant was allegedly not in compliance with the procedures of the Articles of Association of RED and had not been approved by the necessary approving body.  If the claim of the liquidation group should succeed, the 4th defendant’s 45 per cent interest in RED would be extinguished.  The plaintiff said that if that should happen, his investment in the 4th defendant and RED would be lost completely. 

24.  The plaintiff then, on 5 December 2011, instructed a mainland lawyer, one Miss Lu, to defend the proceedings for the 4th defendant.  However, in late June 2012, Miss Lu was advised by the mainland court that there had been major changes in the ownership of the 4th defendant and her authority to act for the 4th defendant had been revoked. 

25.  Miss Lu was also given documents by the mainland court showing that the 1st defendant and other purported directors of the 4th defendant had resolved on 26 March 2012 that the 4th defendant would not contest the claim brought by the liquidation group in the name of RED against it and that its representation by Miss Lu and its deputy general manager, Yan Zhenyong (the plaintiff’s personal assistant) be discharged. 

26.  Furthermore, the 2nd and 3rd defendants, as directors of the 4th defendant, had purportedly resolved, on 18 June 2012, to appoint the 1st defendant as the agent of the 4th defendant and a mainland lawyer, Mr Zhong, to represent the 4th defendant to participate in the liquidation of RED. 

27.  To cut the story short, the plaintiff later discovered that his shares in the 4th defendant had, on 1 March 2012, been transferred to the 1st defendant and the directorship of his and his nominees in the 4th defendant had also been replaced by the 1st defendant.  These changes were effected by certain company documents containing forged signatures of his, purportedly signifying his consent thereto.

28.  He then, through his solicitors, issued demand letters to the 1st, 2nd and 3rd defendants for rectification of the situation. But the 1st defendant replied on 2 August 2012 that he had defaulted in paying the remaining RMB 30 million to the 1st defendant and the 1st defendant’s retaking the shares of the 4th defendant from him was lawful.  He then started this action on 13 November 2013 to have the 4th defendant’s registers of members and directors rectified so that all be restored to the status before the unlawful changes. 

29.  On 14 November 2013, I appointed receivers and managers over the shares of the 4th defendant with a view to preserve the value of these shares pending the resolution of the dispute between the plaintiff and the 1st defendant.  The receivers and managers were also allowed to defend, on behalf of the 4th defendant, the proceedings brought by RED to challenge the 4th defendant’s ownership of the 45 per cent shares of RED.  The writ of summons and application for appointment of receivers were served on the 1st defendant on 21 November 2012. 

The mainland action

30.  On 29 November 2012, the 1st defendant commenced the mainland action.  That is the action that the plaintiff wants this court to enjoin the 1st defendant from pursuing.  The issues that the 1st defendant wants the mainland court to decide in the mainland action is whether it was the 1st defendant or the plaintiff who was in breach of the share transfer agreement and who is the rightful beneficial owner of the entire shareholding of the 4th defendant. 

31.  I think these are the very same issues that the plaintiff would want this court to resolve in this action.  Mr Lam, counsel for the plaintiff, also agreed that the question of who was in breach of the share transfer agreement is the crux of the matter between the parties.  However, if this court is to resolve these matters, it will be necessary for this court to be enlightened on the relevant laws of the mainland that govern the meaning and performance of the share transfer agreement and the remedies for its breach. 

32.  After the 1st defendant has commenced the mainland action, the plaintiff on 13 January 2013 applied to the mainland court to dismiss the mainland action on the ground of want of jurisdiction and that the dispute should be determined according to Hong Kong law.  The application was dismissed on 19 March 2013.  The plaintiff appealed, but the appeal was dismissed on 17 June 2013. 

33.  On 18 November 2013, the plaintiff applied to the mainland court for stay of the mainland action on the ground that there is already this action in Hong Kong and receivers and managers have been appointed over the shares of the 4th defendant.  Before the result of this application was known, the plaintiff applied, on 25 November 2013, in this action, for the anti-suit injunction against the 1st defendant.  The 1st defendant has not responded to this application.  There appears to be substantial delay in the bringing of this application by the plaintiff. 

34.  It now seems that the plaintiff’s application before the mainland court for stay of the mainland action has not been successful as I am told that the trial of the mainland action will take place tomorrow.

The legal principles

35.  The legal principles have been set out by Lord Hobhouse in Turner v Grovit [2002] 1 WLR 107 (HL) which have been referred by Hartmann JA in Liaoyang Shunfeng Iron and Steel Company Ltd & Anor v Yeung Tsz Wang & Anor, CACV 234/2011 at paras 84, 88 and 89:

“84. The underlying principle is that under our law a person “has no right not to be sued in a particular forum, domestic or foreign, unless there is some specific factor which gives him that right: Turner v Grovitt [2002] 1 WLR 107 (HL) at 118 per Lord Hobhouse.

…

88. A distinction is to be drawn between cases where the application for an anti-suit injunction is founded upon a contractual right and other cases, that is, cases (such as the present case) in which it is asserted that the foreign proceedings have been commenced in bad faith for the purpose of frustrating proceedings in Hong Kong.  In this regard, see Turner v Grovitt (supra) per Lord Hobhouse (paras 27 and 28): 

‘The applicant for a restraining order must have a legitimate interest in making his application and the protection of that interest must make it necessary to make the order. Where the applicant is relying upon a contractual right not to be sued in the foreign country (say because of an exclusive jurisdiction clause or an arbitration clause), then, absent some special circumstances, he has by reason of his contract a legitimate interest in enforcing that right against the other party to the contract. But where he is relying upon conduct of the other person which is unconscionable for some non-contractual reason, English law requires that the legitimate interest must be the existence of proceedings in this country which need to be protected by the grant of a restraining order…

It is recognised that to make an order against a person who is a party to proceedings before a foreign court may be treated as an interference (albeit indirect) in the foreign proceedings.  Thus English law requires the applicant to show a clear need to protect existing English proceedings.  The protection of English proceedings is, understandably, regarded as a legitimate subject matter for an English court.  It is not the concern of any other court.  The order made operates in personam and relies for its enforcement solely upon the English court.  In the present case, the Court of Appeal [2000] QB 345, 364, were at pains to stress that their orders were directed to the defendants and not the Spanish court.’

89. Lord Hobhouse (para 29) summarised the essential features which made it proper, under English law, for a court to exercise its power to grant an anti-suit injunction.  These are: 

‘… (a) the applicant is a party to existing legal proceedings in this country; (b) the defendants have in bad faith commenced and propose to prosecute proceedings against the applicant in another jurisdiction for the purpose of frustrating or obstructing the proceedings in this country; (c) the court considers that it is necessary in order to protect the legitimate interest of the applicant in the English proceedings to grant the applicant restraining order against the defendants.’”

36.  Hartmann JA further referred to a statement by Lord Goff in Airbus Industries GIE v Patel at paragraph 85 of Liaoyang Shunfeng: 

“85. That the being the case, the jurisdiction to grant an anti-suit injunction must be exercised with caution and only when the ends of justice require it: see Airbus Industries GIE v Patel [1999] 1 AC 119 (HL) at 133 per Lord Goff –

‘The broad principle underlying the jurisdiction is that it may be exercised when the ends of justice require it.  Generally speaking, this may occur when the foreign proceedings are vexatious or oppressive… But, as was stressed in the Aerospatiale case [Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871], in exercising the jurisdiction regard must be had to comity, and so the jurisdiction is one which must be exercised with caution…’”

37.  Finally, I would also like to refer to the words of Lord Scarman also in Airbus Industries which Hartmann JA referred to at para 119 of Liaoyang Shunfeng: 

“119. In this regard, the plaintiffs’ reliance on the words of Lord Scarman in his speech in British Airways v Laker Airways Ltd [1985] AC 58, at 95, has particular force. Lord Scarman, in speaking of the power of the courts to grant protection to an applicant from a foreign suit that is unconscionable and thereby unjust, spoke of ‘wide and flexible’ principles of equity being employed to afford that protection. Put another way, as I see it, our courts are not to employ a narrow, technical approach, one that more often denies a just solution rather than ensures it, our courts are instead adopt a broader approach to better identify the true justice of the matter. Lord Scarman said:

‘The approach [to the granting of an anti-suit injunction] has to be cautious because an injunction restraining a person within the jurisdiction of the English court from pursuing a remedy in a foreign court where, if he proves the necessary facts, he has a cause of action is, however disguised and indirect, an interference with the process of justice in that foreign court. Caution is needed even in a ‘forum conveniens’ case, i.e., a case in which a remedy is available in the English as well as in the foreign court. Caution is clearly very necessary where there is no remedy in the English court in respect of the cause of action which, if the facts be proved, is recognised and enforceable by the foreign court.

Nevertheless, even in the latter case, the power of the English court to grant the injunction exists, if the bringing of the suit in the foreign court is in the circumstances so unconscionable that in accordance with our principles of a ‘wide and flexible’ equity it can be seen to be an infringement of an equitable right of the applicant.  The right is an entitlement to be protected from a foreign suit the bringing of which by the defendant to the application is in the circumstances unconscionable and so unjust.  This equitable right not to be sued abroad arises only if the inequity is such that the English court must intervene to prevent injustice.  Cases will, therefore, be few: but the jurisdiction exists and must be sustained.’” [Emphasis of Hartmann JA]

38.  Mr Lam, for the plaintiff, urged me to employ the “wide and flexible” principles of equity and to adopt a “broader approach to better identify the true justice of the matter” rather than a “narrow technical approach which more often denies a just solution rather than ensures it”. 

Grounds of the application and decisions thereon

39.  Mr Lam has advanced a number of grounds to say that the mainland action was commenced by the 1st defendant in bad faith to frustrate or obstruct this action - the second feature that would justify the granting of the injunction. 

40.  The first ground relates to the 1st defendant’s use of documents containing the forged signatures of the plaintiff in transferring the shares of the 4th defendant to him and then to the 2nd and 3rd defendants.  Mr Lam submitted that on the 1st defendant’s case, he had the cause of action for transfer of the shares since early 2011 when the plaintiff did not pay him the RMB 30 million, but he did not sue the plaintiff.  Instead, he used forged documents to perpetrate his cause on 1 March 2012.  But when he sued the plaintiff in the mainland action, he asked for an order that the shares be returned by the plaintiff to him.  Mr Lam said that this is inconsistent with his position in his reply letter to the plaintiff’s demand letter on 2 August 2013 when he said that he had already taken the shares back. 

41.  However, I cannot see any problem in this.  If the transfer of the shares of the 4th defendant on 1 March 2012 was indeed effected by the 1st defendant by using forged documents, then it is a good thing that he is no longer relying on the transfer effected by such means but is trying to vindicate his rights under the share transfer agreement by legal proceedings in a court of law.  This shows that he is willing to abide by the law now despite what he had allegedly committed previously.  I cannot see how this can be taken against him and be the basis of stopping him from pursuing the mainland action but to compel him to vindicate his rights by contesting this action in Hong Kong. 

42.  Furthermore, even if he should be compelled to vindicate his rights only in this action in Hong Kong, I cannot imagine that he will not be allowed to take the so-called inconsistent stance of not relying on the transfer effected by forged documents but to rely on his rights, if any, under the share transfer agreement.  I see no merit in this ground.

43.  The second ground is that the 1st defendant, in seeking the return to him of the shares of the 4th defendant, is trying to frustrate the receiver’s efforts to defend the interests of the 4th defendant. This ground is based on the 1st defendant’s attempt in procuring the 4th defendant, in March 2012, not to contest the action brought against it by the liquidation group of RED.  If the 4th defendant should lose the action, the plaintiff says that the 4th defendant’s 45 per cent interest in RED would be extinguished.

44.  I think the evidence shows that the 1st defendant wanted to procure the 4th defendant to withdraw from that action and then to have the 4th defendant to participate in the liquidation of RED. Whether such a cause of conduct would prejudice the interests of the 4th defendant is not known.  Assuming that such conduct would prejudice the interests of the 4th defendant, I do not think the 1st defendant can, at present, procure the 4th defendant to take such course now that the receivers and managers are there vigilantly protecting the interests of the 4th defendant.  Mr Lam also agrees that so far nobody has done anything to obstruct the work of the receivers.

45.  If the 1st defendant should pursue the mainland action and lose it, then, as Mr Lam also agrees, there is every likelihood that the appointment of the receivers and managers will remain and the 1st defendant will not be able to procure the 4th defendant to withdraw from the action brought against it by RED or to participate in the liquidation of RED. 

46.  Even if the 1st defendant should succeed in the mainland action and have the shares of the 4th defendant returned to him, the appointment of the receivers and managers will still remain but subject to further order of this court, which it may make in the event of any application to be brought by the 1st defendant.  In that event, the 1st defendant would be the rightful owner of the shares of the 4th defendant.  If he should then procure the 4th defendant to withdraw from the action brought by RED and to participate in RED’s liquidation, it would not then be a matter for the plaintiff to disagree as the plaintiff would have no right to disagree. 

47.  Hence, this second ground is also of no use in saying that the 1st defendant had commenced the mainland action in bad faith. I cannot see any bad faith simply because if the 1st defendant should succeed in the action, then he may and would be able to procure the 4th defendant to take a course that the plaintiff would not prefer.

48.  The third ground is the timing of the mainland action.  Mr Lam said that the 1st defendant only started the mainland action on 29 November 2012, which was merely eight days after the papers in this action had been served on him.  But that alone is not enough to establish bad faith on the part of the 1st defendant.  Bad faith is not to be decided on who sued whom first.  Mr Lam submitted that the 1st defendant brought the mainland action to frustrate or obstruct this action.  That may or may not be right, but the important thing is whether there is evidence that the 1st defendant did it out of bad faith.  I cannot see any.

49.  In fact, the share transfer agreement was made and supposed to have been performed in the mainland.  The subject joint venture is situated in Shijiazhuang.  Payment was supposed to be made in the mainland in renminbi.  The acts constituting the alleged breaches, including the filing of documents with the Bureau of Industry and Commerce in Shijiazhuang that contained the forged signatures of Zhang Pingjie, all took place in the mainland.  The only Hong Kong element is the fact that the 4th defendant is a Hong Kong company and the performance of the share transfer agreement would necessitate changes in the 4th defendant’s registers of members and directors and notification of such changes to the Hong Kong Companies Registry.  It is thus more convenient to have the meaning and effect of the share transfer agreement and the alleged breaches to be tried by a mainland court which is familiar with the laws of the mainland and the legal remedies to be given upon proof of breach.

50.  Mr Lam also submitted that the 1st defendant had delayed the commencement of the mainland action for almost two years.  That is indeed the case.  The 1st defendant might have been contented with what he had achieved by forged documents in March 2012, but when he knew that he was sued in Hong Kong, he turned around and sued the plaintiff in the mainland court and relies on his rights, if any, in the share transfer agreement, rather than the forged documents.  Even if he should have delayed the commencement of the action, that alone does not, in these circumstances, show bad faith. 

51.  Mr Lam, in a supplemental written submission filed after the hearing, submitted that matters like title, ownership, effectiveness of the transfer of shares and incidence of ownership of shares may be governed by the laws of Hong Kong which is the lex situs of the shares of the 4th defendant.  However, these are not issues in this action or the mainland action.

52.  Regarding the third feature for granting of the injunction - protection of the legitimate interest of the plaintiff in this action, Mr Lam submitted that the effectiveness of this action and the functions of the receivers and managers need to be protected.  I think this action is instituted not for its own sake but for resolving the dispute between the parties.  The mainland action is for the same purpose.  I do not think there is any legitimate interest of the plaintiff which can justify the 1st defendant to be enjoined from pursuing the mainland action.

53.  Regarding the appointment of receivers and managers, the appointment is to protect the shares of the 4th defendant.  The mainland action will decide who is the owner of these shares.  It is for the owner to decide whether such protection will continue to be required and until when. 

54.  Mr Lam also submitted that there may be a risk of inconsistent findings.  But this is not a matter that I can take into account on this application.

Decision and costs

55.  In the premises, I can see no basis for this application.  I therefore dismiss it. 

56.  Since the 1st defendant has not taken part in the application, I make a costs order nisi that there be no order as to costs.