LIAOYANG SHUNFENG IRON AND STEEL CO LTD AND ANOTHER v. YEUNG TSZ WANG AND ANOTHER

CACV 234/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 234 OF 2011

(ON APPEAL FROM HCA NO. 1415 OF 2010)

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BETWEEN

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J U D G M E N T

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Hon Hartmann JA:

Introduction

1.  The plaintiffs in this matter appeal the decision of Au J given in his judgment of 13 July 2011 to refuse to grant them interlocutory relief by granting them what is commonly called an anti-suit injunction restraining the defendants from prosecuting or assisting others in the prosecution of certain litigation in the courts of the Mainland, more specifically in the courts of Liaoning Province.

2.  The first plaintiff, Shunfeng Iron and Steel, is a Sino-foreign joint venture company incorporated in Liaoning Province.  It is the holder of a licence giving it the right to extract iron ore from a number of mines in the Province.

3.  The position of the plaintiffs is that there were, and continue to be, three members of the Sino-foreign joint venture, each holding a share in Shunfeng Iron and Steel.  The majority shareholder, holding 80% of the issued shares, is the second plaintiff, Hawkins Development.  It is an investment company incorporated in Hong Kong and represents the ‘foreign’ interest in the joint venture.  The remaining 20% of the shares are held by two companies incorporated in Liaoning Province, seemingly representing the interests of the local authorities.

4.  The position of the defendants - most certainly before us at the hearing of the appeal – is that, as a result of the failure of Hawkins Development to meet its financial obligations under the joint venture, by automatic exercise of Mainland law that joint venture came to an end in June 2006.  Steps were then taken to create a new joint venture which remained the same as the earlier one except for the fact that the second defendant, Sunny Growth, a BVI company, took the place of Hawkins Development, agreeing to inject the necessary capital in consideration for which it was given an 80% shareholding in the joint venture company, Shunfeng Iron and Steel – the same shareholding earlier enjoyed by Hawkins Development.

5.  The dispute, therefore, although complex in its details, may – at this time – be encapsulated perhaps in the single question: which company is lawfully entitled to hold the majority interest in the joint venture and thereby to hold the 80% holding in the joint venture company, Shunfeng Iron and Steel; is it Hawkins Development or Sunny Growth?

6.  Earlier in the history of this matter, however, the dispute appears to have revolved around a more limited issue, namely, who had lawful control of Hawkins Development and thereby of Shunfeng Iron and Steel and through that company of the joint venture?

7.  Although there has been a proliferation of actions – a matter to which I shall turn shortly – it would appear that the issue of who has lawful control of Hawkins Development is an issue which has always fallen to the Hong Kong courts to resolve.  This is natural enough: Hawkins Development is a Hong Kong registered company.

8.  This interlocutory appeal lies in respect the following action instituted in the Court of First Instance in September 2010, namely, HCA 1415/2010 .  It is one of three Hong Kong actions which have sought to determine who has lawful control of Hawkins Development.

9.  Some four months after the plaintiffs commenced this action, they applied for an interlocutory injunction to restrain the defendants either continuing litigation already commenced or instituting new litigation in Liaoning Province if such actions went to the issues of who controlled Hawkins Development and/or Shunfeng Iron and Steel.  As I have said, in a judgment dated 13 July 2011, Au J dismissed that application.  The present appeal is from that judgment.

10.  However, matters have not remained static since that time.  There have been further developments which have shifted the context in which matters now fall to be considered and which have resulted in a redrafting of the injunctive relief sought by the plaintiffs.

Background

11.  In order to determine this appeal, it is necessary to set out in some detail the relevant history of events.

12.  It appears that the Sino-foreign joint venture to operate the iron ore mines in Liaoning Province was entered into in about 1996. 

13.  At about that time, Wong Kam Sang, a businessman, made Hawkins Development the vehicle for holding his 80% shareholding in Shunfeng Iron and Steel.

14.  There were originally just 100 issued shares in Hawkins Development. These were held in trust for Wong by his wife and his assistant.

15.  In March 2000, Wong transferred 25 shares to a BVI company controlled by himself.  At the same time he issued one share to a man named Yeung Wing Keung and the remaining 74 shares to a company called Zhao Kai Investment.

16.  According to Wong, he was persuaded by Yeung to transfer the 75% shareholding in order to facilitate the listing of Hawkins Development on the Growth Enterprise Market Board of the Hong Kong Stock Exchange.  According to Wong, it was agreed that the shares would be held for him in trust.

17.  In 2004, Wong fell out with Yeung and demanded the return of the 75 shares. It was Yeung’s defence that the shares had been transferred to be held on trust for a third party, an investor named Zhao Ahping who had lent money to Wong in order to help finance the joint venture.

18.  In order to get the return of the 75% shareholding, Wong instituted action in the Court of First Instance: HCA 1653/2004.

19.  Before the final resolution of that action, when the 75% shareholding in Hawkins Development was held by Yeung, it appears that the following actions were taken:

(i) Yeung appointed himself, his wife and his sister as directors of Hawkins Development, backdating these appointments to 1998, seemingly well before they had had any dealings with the company.

(ii) The transfer of shares to Yeung and Zhao Kai Investment was also backdated to 1998, a false report thereby being made to the Stamp Duty Office.

20.  It further emerged that, when the litigation instituted by Wong to seek the return of the shares was on-going, the following happened:

(i) An extraordinary general meeting of Hawkins Development was held on 14 July 2005.  At this meeting, Yeung’s sister (Madam Kan Siu Wan) was invited to subscribe for shares in the company so that she would become its major shareholder.  In this regard, the board was authorized to approve the allotment of 9,900 shares in the company to her at par.

(ii) On 25 July 2005, just a few days after she had been allotted the 9,900 shares, Madam Kan transferred those shares to Sunny Growth.  As I understand it, at that time – although it is not the case now – it was said that Sunny Growth was fully owned by independent persons, a man named Chan Che Sing and his son.  However, in later litigation, when the issue became of direct relevance, the assertion was rejected that in or about 2005 neither Yeung nor his family members had any interest in the company: see the judgment of Lam J in HCA 2036/2005, particularly paras. 99, 100 and 108.

(iii) In August 2005, Yeung’s son and daughter were also appointed directors of Hawkins Development.

(iv) In September 2005, Yeung himself resigned as a director of Hawkins Development, a bankruptcy order being made against him a few days later.

(v) In November 2005, Chan (on behalf of Sunny Growth) appointed two companies controlled by him as directors of Hawkins Development.

21.  In October 2005, when Wong became aware of the allotment of the 9,900 shares in Hawkins Development, he brought a second action in the Court of First Instance: HCA 2036/2005.  In this second action, Wong sought to have the allotment of 9,900 shares set aside for procedural irregularity and also on the substantive basis that the allotment had been made with the ulterior motive of defeating his claim in his first action (HCA 1653/2004) by diluting his shareholding in the company.

22.  In April 2006, Deputy Judge Louis Chan gave judgment in favour of Wong in the first action: HCA 1653/2004.  He declared that the 75% shareholding had been held in trust for Wong and was to be transferred back to him.

23.  It is important to note that the judge made a further order: the granting of an injunction on the following terms:

“I also grant an injunction to restrain each of the second to seventh defendants, whether by themselves or their servants or agents or otherwise howsoever from interfering with the business of Hawkins [Development] or the business of the joint venture or the mining operation.”

24.  The granting of the injunction makes plain that the judge at first instance had not been impressed by the actions of Yeung, his family and associates during the time that they held the 75% shareholding in Hawkins Development.

25.  The judgment was appealed, the Court of Appeal dismissing the appeal in a judgment dated 31 January 2007.  As to the granting of the injunction, the Court of Appeal said (para. 72):

“Since there is a continuing risk the … defendants would purport to act as directors of Hawkins [Development], we see no good reason not to uphold the injunction.”

26.  The injunction therefore remained in force and continues in force to this time.

27.  In respect of the second action instituted by Wong (HCA 2036/2005), in a judgment dated 11 April 2007, Lam J set aside the allotment of the 9,900 shares to Madam Kan, finding in favour of Wong on both procedural and substantive grounds.  It was held that there was no commercial justification for the allotment of shares to Madam Kan and that Sunny Growth was not a bona fide investor in Hawkins Development without notice.  Lam J drew the inference that the allotment of shares had been part of a scheme by Yeung, his family and associates to prevent Wong regaining control of the company.

28.  This judgment too was appealed but was dismissed.  Again, the court was less than impressed with the machinations of Yeung, his family and associates.  In the judgment of the Court dated 9 May 2008, Rogers VP commented:

“I can only conclude this judgment by saying that these appeals were a disgrace and should never have been brought, still less pursued to a hearing. Whilst appeals to this Court are as of right, that does not prevent the bringing of appeals such as these from being tantamount to an abuse of that right.”

29.  Wong’s control of Hawkins Development and of Shunfeng Iron and Steel had been removed from him in late 2005.  However, in early 2007, as a direct result of the Hong Kong judgments in his favour, he was able to regain control of both companies.

30.  In a judgment dated 21 August 2009 (to which I shall refer shortly), Kwan J, as she then was, recorded that, when Wong was able to resume effective control, “he discovered that a substantial number of documents and materials of Shunfeng including its books and accounts and bank statements were removed from its office premises.”  In the result, said Kwan J, “on 19 and 20 April 2007 the solicitors of [Hawkins Development] wrote to Chan, Yeung and their family members seeking delivery up of all documents belonging to Shunfeng and [Hawkins Development].”

31.  The failure to deliver up the books and materials resulted in further legal action being instituted.

32.  At this juncture it is important to recognize the current position concerning both Hawkins Development and Shunfeng Iron and Steel.  During the course of the appeal hearing we were assured that Wong and his associates have since 2007 remained in full control of both companies and thereby the on-going mining operations of the joint venture.  It must follow, of course, that since 2007 they have been working with the minority shareholders, the two Mainland companies which represent the interests of the local authorities in Liaoning Province.

33.  The history of the litigation, however, does not end here.

34.  Before us, it was (effectively) submitted on behalf of the defendants that, whatever steps were taken by the ‘Yeung camp’ in the past to secure control of Hawkins Development had been taken because the ‘Wong camp’ had failed to meet their obligations under the joint venture agreement to adequately fund the mining operations in Liaoning Province and that it had been necessary to save the joint venture from collapse by reconstituting it.  Integral to that reconstitution was the choice of Sunny Growth as the ‘foreign’ partner to replace Wong as the majority shareholder in Hawkins Development, or to replace Hawkins Development itself.  It was said that only by this method was sufficient funding guaranteed.

35.  However, on my reading of the various judgments thrown up by this dispute, evidence of such funding to ‘rescue’ the joint venture has been less than convincing.

36.  To date, creditors appear to have come and gone.  A prime example is to be found in litigation that commenced in 2007.

37.  In April of that year, the solicitors for a company called Walford International Holdings, a BVI company, served a demand on Hawkins Development for payment of a debt of HK$29.97 million.  It was asserted that the funds had been provided to assist (in various ways) in the financing of the joint venture.  A month later Walford presented a petition for the winding-up of Hawkins Development on the basis that it was unable to pay its debts: HCCW 215/2007.

38.  The petition was opposed by Hawkins Development, the contention being made that there was no indebtedness as claimed and that the claim was an abuse of process.  In a judgment dated 21 August 2009, Kwan J dismissed the application, making an order nisi that Walford pay the costs of Hawkins Development on an indemnity basis.

39.  The judge said that at the very least “it was difficult to escape the conclusion that the petition was presented in the knowledge of a serious dispute” as to the true nature and extent of the debt claimed by Walford and it should therefore have pressed its claim by way of writ, a course still open to it.

40.  No such writ appears to have issued.

41.  In her judgment, Kwan J recorded the gist of the defence by Hawkins Development in the following terms:

“Mr Coleman [counsel for Hawkins Development] submitted forcefully that the situation before this Court is one where Walford, whose name has never been mentioned during all the years of hostile litigation between Yeung and Wong, suddenly appeared out of nowhere to petition for the winding up of the company for an indebtedness on the basis of documents signed by Yeung and his associates on behalf of the company when they were found in previous litigation to be in wrongful control of it. The provision of the expenses of [Hawkins Development] and Shunfeng had been canvassed in evidence in previous litigation. Not only did Yeung not mention Walford, his evidence was contrary to the case now put forward by Walford. Evidence of propensity must go into the balance in assessing and weighing the evidence now adduced before this Court.”

42.  The issue of propensity led Kwan J to look at the earlier litigation.  In doing so, she noted that in the two Hong Kong actions instituted by Wong to recover the 75 shares in Hawkins Development and to set aside the allotment of 9,900 shares to Madam Kan, the evidence of Yeung and Chan had in the main been rejected.  It was also notable, she said, that in the two judgments the defendants had been “roundly criticized by the courts for not calling witnesses who could and should have testified on pertinent issues”.

43.  While Kwan J had little reason to doubt the need for the joint venture business to be funded, she observed that the identity of those people who held themselves out as providing funding had been:

“… kept opaque deliberately from day one, so much so that the court in HCA 1653/2004 doubted the existence of Zhao, who was alleged by Yeung to represent a group of investors while in HCA 2036/2005 the court was of the view that the monies injected by Chan into [Hawkins Development] were likely to have come from a source connected with Yeung.” [my emphasis]

44.  By way of illustration, in HCA 1653/2004 (the action instituted by Wong for the return of the 75 shares in Hawkins Development), Yeung’s case was that the 75% majority shareholding had been passed to Zhao Kai Investment in part for taking on the obligation to fund the joint venture.  However, no evidence whatsoever was put forward by Yeung to evidence any such funding and Yeung was constrained to suggest that, as it had turned out, no funding had been required.  This was rejected by the trial judge as a “blatant lie”.

45.  Chan, the man who purported to own Sunny Growth with his son and to be independent of Yeung, claimed to have injected sums of money exceeding HK$38 million into Hawkins Development on various dates pursuant to a loan agreement. In November 2006, he presented a petition for the winding-up of Hawkins Development but then withdrew it, reserving his right to file a fresh petition. Close to six years has passed since then and no fresh petition has been filed. 

46.  As I have said, creditors appear to have come and gone.

47.  This brings us to the third action instituted in the Court of First Instance by Wong, the action which gives rise to this appeal.

48.  Central to that action, indeed the very focus of it, is the fact that in June 2006, when Wong and his associates were excluded from the management and control of both Hawkins Development and Shunfeng Iron and Steel, those two companies purportedly entered into what is described as an ‘investment agreement’.  In terms of that agreement, Sunny Growth replaced Hawkins Development as the 80% foreign shareholder in Shunfeng Iron and Steel by agreeing to invest a sum of RMB246.82 million by way of an increase in Shunfeng Iron and Steel’s capital, this seemingly being for the purpose of funding the joint venture operations.  This agreement was purportedly supported by the necessary internal share transfer agreement, company minutes and the like.

49.  It appears that certain of the relevant papers were signed by persons who were (and remain) injuncted from ‘interfering with the business of Hawkins Development or the business of the joint venture or the mining operation’.  For example, minutes and resolutions were signed on behalf of Shunfeng Iron and Steel by Yeung’s sister, Madam Kan.

50.  On 11 August 2010, Sunny Growth filed a writ in the Higher People’s Court of Liaoning Province seeking the following:

(i) A declaration that the investment agreement was a lawful agreement;

(ii) a declaration that Sunny Growth (and no longer Hawkins Development) was the owner of 80% of the shares in Shunfeng Iron and Steel, and

(iii) an order that Shunfeng Iron and Steel do pay Sunny Growth a sum of RMB103.37 million, this being 80% of the company’s joint venture profits for the previous three years and eight months.

51.  In support of its case that it had met its side of the bargain by injecting funds into the joint venture business, that is, into Shunfeng Iron and Steel, more particularly, the sums of US$800,000 and HK$32,460,110 purportedly paid between June and December 2006, Sunny Growth exhibited to its claim a total of 11 remittance slips.

52.  Whoever may have controlled Sunny Growth originally, the assertion then being that it was Chan and his son, when this litigation was commenced in Liaoning Province, Chan held just 42 out of 840 issued shares in the company, the balance of 798 shares being held by Yeung Tsz Wang, the son of Yeung Wing Keung.

53.  When notice of the litigation in Liaoning Province was received, Wong instituted his third action in the Court of First Instance, that is the action which is the subject of this appeal: HCA 1415/2010.  The plaintiffs in this action are Hawkins Development and Shunfeng Iron and Steel, the two companies which – by reason of the earlier Hong Kong actions – Wong now controls again.  The defendants are Yeung’s son, Yeung Tsz Wang, and the company that he now controls: Sunny Growth.

54.  In this action, Wong has sought:

(i) a declaration that the ‘investment agreement’ together with its associated share transfer agreement, company minutes, resolution and the like be declared null and void and of no legal effect;

(ii) an injunction restraining Sunny Growth (and its officers) from continuing the litigation in Liaoning Province or commencing any other litigation in those courts which covers “the same or substantially the same subject matter”, and

(iii) an injunction restraining Yeung Tsz Wang (or his associates) from assisting Sunny Growth in prosecuting the present litigation in Liaoning Province or any future litigation in those courts covering “the same or substantially the same subject matter”.

55.  Wong’s present action is based on the assertions that:

(i) the ‘investment agreement’ and accompanying documents have been entered into in contravention of the articles of Hawkins Development and the bylaws of Shunfeng Iron and Steel;

(ii) the making of the ‘investment agreement’ and accompanying documents is, in respect of a number of persons, in direct breach of the injunction ordered by Deputy Judge Louis Chan in HCA 1653/2004;

(iii) the remittance slips purporting to support the contention that Sunny Growth has injected funds into the joint venture agreement are of no evidential value on the basis that “in previous legal proceedings in Hong Kong and the PRC, Sunny Growth and/or a party closely related to it, viz, Chan, had relied upon the same or substantially the same remittance slips in support of cases contradictory to Sunny Growth’s case aforesaid”.  In blunt terms, therefore, the allegation is that the 11 remittance slips, or any combination of them, have been used to support whatever case Yeung and his associates have chosen to bring without regard to the fact that in one case their purported use contradicts their purported use in another.

56.  In the result, it is contended that the action in Liaoning Province had been instituted in “bad faith and/or was unconscionable and/or frivolous and vexatious and/or oppressive”.

57.  As it transpired, in December 2010 the Higher People’s Court of Liaoning Province dismissed the action instituted by Sunny Growth.  From a reading of the English translation of its ruling, the Court appears to have done so on two grounds; first, that the formal authority to commence the action filed with the Court had no validity and, second, that at a preliminary hearing, Yeung Tsz Wang had admitted that the writ filed with the Court “did not genuinely show our company’s intention”.  I read that to mean that in some unspecified way the action was legally or factually misconceived.

58.  Although the action had been dismissed, a few days later the solicitors for Yeung Tsz Wang and Sunny Growth informed the solicitors representing Wong (i.e. Hawkins Development and Shunfeng Iron and Steel) that their clients still intended to pursue their claims in “the PRC Court” when it was considered appropriate.  

59.  It was in January 2011, after these last events were made known to Wong, that the application for the interlocutory injunction was made.  That application was heard in June 2011, the judgment dismissing the application being given in the following month.

60.  That being said, events relevant to this appeal did not end there.

61.  On the day after Au J dismissed the application for an interlocutory injunction, Sunny Growth (represented by Yeung Tsz Wang) entered into an agreement in Liaoning Province with a company named Liaoning Shengyuan Investment Company.  That agreement, in English translation, bears the heading: ‘investment equity transfer agreement’.

62.  In essence, the agreement purports to transfer all of Sunny Growth’s “investment interests” in Shunfeng Iron and Steel to Liaoning Shengyuan for a sum of RMB50 million.

63.  The lengthy preamble to the agreement records a number of assertions, namely that –

(i) Hawkins Investment had failed to meet its funding obligations in respect of the joint venture, Wong being guilty of “professional embezzlement”.  In this regard, the agreement states: “Due to the withdrawal of capital contribution, the failure to inject the undertaken investment on the part of Hawkins and the professional embezzlement by Wong Kam San (the former legal representative of the company), the operation and production of Shunfeng was facing great difficulties.  Hence, Shunfeng convened two board meetings on 8 June 2006 and 26 June 2006 and passed the resolution: ‘Sunny Growth shall substitute Hawkins Development to proceed with the investment and registration shall be made to the Liaoyang Administration for Industry and Commerce for the change of new shareholder of Shunfeng.’”

(ii) In June 2006, in the face of pressing financial difficulties, Shunfeng Iron and Steel had resolved that Sunny Growth should take the place of Hawkins Development – being a reference to the ‘investment agreement’ and accompanying documents, the subject of Wong’s current Hong Kong action.

(iii) Between June and December 2006 Sunny Growth had met its obligations under the ‘investment agreement’ (investing US$800,000 and HK$32.46 million and paying a fine of RMB5 million to the provincial authorities).  In this regard, the agreement states: “On 24 July 2008, the state-owned shareholder of Shunfeng [the 20% shareholder in the joint venture], Dengta Metallurgical Mining Corporation, issued the Investment Cooperation Confirmation and confirmed that: “Hong Kong Sunny Growth Enterprises Group Limited has injected the first investment equivalent to RMB50 million to the account of the joint venture Shungeng Iron and Steel before December 2006 in accordance with relevant provisions, which was confirmed error-free by capital verification.  We hereby confirm the above.”

(iv) However, due to “interference by Hawkins Development”, the registration of the transfer by Hawkins Development of its 80% shareholding in Shunfeng Iron and Steel had not been registered.

64.  In light of these matters, what was agreed was that:

(i) Sunny Growth would within 60 days be responsible for securing the registration of its 80% shareholding in Shunfeng Iron and Steel (and thereby of the joint venture) and of its transfer of that interest to Liaoning Shengyuan, and

(ii) that Liaoning Shengyuan would then (within 10 working days) pay the purchase price of RMB50 million.

65.  As for Liaoning Shengyuan, it was apparently incorporated in the Mainland in January 2010 in order to carry on the business of “asset investment”, there being three shareholders who have between them invested cash in a total sum of RMB30 million.

66.  No direct evidence was placed before us to indicate that Liaoning Shengyuan is other than an independent third party.

67.  As it is, in November 2011 Liaoning Shengyuan instituted legal proceedings in Liaoning Province, the defendants being Sunny Growth, Shunfeng Iron and Steel and Hawkins Development.  What is claimed in those proceedings is an enforcement of the ‘investment equity transfer agreement’.

The amended injunctions

68.  As a result of the institution of proceedings in the Mainland by Liaoning Shengyuan, the plaintiffs have sought to amend the nature and scope of the two interlocutory injunctions which they say this Court, in allowing the appeal, should grant in their favour.

69.  The first injunction seeks to restrain the first defendant, Yeung Tsz Wang, the second seeks to restrain the second defendant, Sunny Growth.

70.  Both injunctions seek the same remedies.  They are, first, that the defendants be restrained from commencing, or assisting each other or Liaoning Shengyuan in the commencement of, any action in the Mainland courts that covers the same or substantially the same subject matter as the legal proceedings, now dismissed, which were instituted in August 2010 by Sunny Growth and, second, this being a material extension of the scope of the injunctions, that they be restrained from assisting Liaoning Shengyuan in prosecuting the action instituted by it in November 2011.

The issues as they appeared to be before us

71.  The Hong Kong litigation to date has been focused on two issues.

72.  First, there have been three sets of litigation concerning control of Hawkins Development and, through that company, control of Shunfeng Iron and Steel.  The two completed sets of litigation have been resolved in favour of Wong and his associates.  In the result, Wong and his associates now have active day-to-day control and management of both companies which means that they have control of the on-going joint venture mining operations.  The third set of litigation has not yet come to trial.

73.  Second, there have been two attempts to seek the winding-up of Hawkins Development.  The petitions were brought by separate parties: both, however, alleging that Hawkins Development was indebted to them for monies advanced to finance the joint venture.  In respect of both matters, the petitions for winding-up were dismissed and certainly in respect of the second petition, the one brought by Walford, the court expressed concerns as to its integrity.

74.  As to the litigation in Liaoning Province, Ms Lisa Wong SC, leading counsel for the defendants, has argued that, in the on-going litigation commenced by Liaoning Shengyuan in the Mainland in November of last year, issues going to the shareholdings held in Hawkins Development will be essentially incidental.  This litigation, she said, would not be dependent on finding that the defendants are the lawful holders of the majority shares in Hawkins Development.  It would be focused, she said, on the issue of whether the plaintiffs had failed to honour the terms of the Sino-foreign joint venture agreement and, if so, what were the consequences under PRC law of that failure.

75.  By way of an overview, I have understood Ms Wong’s submissions to be as follows.

76.  First, PRC law states that, if the foreign party to a Sino-foreign joint venture agreement fails to honour its obligations under the agreement, then, by that default, the agreement is brought to an end.

77.  Second, there is evidence that the plaintiffs, by their failure to meet their financial obligations, breached the terms of the joint venture agreement. That being the case, no formal pronouncement of the dissolution of the joint venture was necessary either by the injured parties to the joint venture or by any court.  The breach by the plaintiffs resulted in an automatic termination of the joint venture.

78.  Third, there is evidence that the minority shareholders in the joint venture acted to keep the joint venture operations running by seeking a new partner.  It was in this regard that Sunny Growth was approached and agreed to inject funds into the joint venture in consideration for being given an 80% share in the new joint venture.

79.  Fourth, there is evidence that Sunny Growth duly paid the financial contribution demanded of it.

80.  Fifth, in the result Sunny Growth became entitled to an 80% shareholding in the joint venture, that share being in the joint venture company registered in Liaoning Province: Shunfeng Iron and Steel.

81.  Sixth, having acquired these rights in the joint venture, Sunny Growth was entitled to dispose of them to a third party.

82.  For the plaintiffs, Mr Anthony Chan SC, their leading counsel, submitted that this was an overly simplistic approach.  What could not be avoided was that the document entitled ‘investment equity transfer agreement’ was still based on Sunny Growth having its purported 80% shareholding in Shunfeng Iron and Steel registered with the relevant authorities.  As the litigation instituted by Liaoning Shengyuan sought an enforcement of that agreement, it meant that its litigation too was focused on the issue of which party in law was entitled to the majority shareholding in Shunfeng Iron and Steel, Hawkins Development or Sunny Growth.  It was wrong therefore to suggest that the control of Hawkins Development was at best incidental to the litigation instituted by Liaoning Shengyuan.  The issue also remained central to that litigation because Hawkins Development – based on the findings of the Hong Kong courts – remained the majority shareholder in Shunfeng Iron and Steel, the joint venture company. 

Injunctions restraining foreign litigation: the governing principles

83.  Before us, and before the Court of First Instance, there was little dispute as to the principles that must be taken into account in determining whether to grant an anti-suit injunction.

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.

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…”

86.  Before us, Ms Wong, for the defendants, emphasised that caution must be exercised because the granting of an anti-suit injunction more often than not has the consequence of being final not merely temporary in its effect.

87.  Ms Wong further emphasized that, as the authorities themselves make clear, as the court is concerned with the ends of justice, account must be taken not only of injustice to the applicant if the respondent to the application is permitted to pursue foreign proceedings which are vexatious or oppressive, but also of injustice to the respondent if, by granting the injunction, he is deprived of any advantage in the foreign forum of which it would be unjust to deprive him.

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.”

Looking to the judgment at first instance

90.  Before Au J, the plaintiffs had no difficulty in demonstrating the first of Lord Hobhouse’s ‘essential features’.

91.  The plaintiffs had instituted proceedings in Hong Kong which in almost all essential elements mirrored the proceedings instituted by the defendants in the Higher People’s Court of Liaoning Province, proceedings that had just been dismissed.  The defendants, having submitted to the jurisdiction of the Hong Kong courts, were resisting those proceedings.

92.  There were, therefore, on-going proceedings in Hong Kong set to determine essentially the same issues as the defunct proceedings in Liaoning Province or any further proceedings to be instituted by the defendants based on the same contentions.

93.  That, however, gave only half the story because the Hong Kong proceedings had arisen out of two earlier sets of proceedings directly related to the control of the Sino-foreign joint venture.  The defendants and/or their associates had submitted to the jurisdiction of the Hong Kong courts in respect of those earlier actions.

94.  In those actions – their history being set out above – numerous findings of fact had been made, the majority of them in favour of the plaintiffs and their associates, leading to orders of fundamental importance in respect of who has lawful control of Hawkins Development and Shunfeng Iron and Steel.

95.  It was, however, in respect of the second and third ‘essential features’ defined by Lord Hobhouse that the Au J dismissed the application for the anti-suit injunctions.

96.  In respect of the second ‘essential feature’, the judge found that the plaintiffs had failed to demonstate that the proceedings instituted before the Higher People’s Court in Liaoning Province had been instituted in bad faith, being vexatious and oppressive, and that the institution of any future litigation in the Province on the same subject matter would likewise constitute vexatious and oppressive conduct designed to frustrate the plaintiffs’ Hong Kong proceedings.

97.  The plaintiffs sought to demonstrate that any action to be instituted would be designed to frustrate the Hong Kong proceedings by asking the court to consider certain matters in the context of the long and bitter history of the Hong Kong litigation in which the good faith of the defendants in the conduct of that litigation had been roundly criticised.

98.  The principal platform of attack was founded on certain evidence used by the defendants in the recent Mainland action in an attempt to prove that Sunny Growth had discharged its financial obligations (while Hawkins Development had not)and was therefore entitled to an 80% share in Shunfeng Iron and Steel and thereby in the joint venture.  That evidence consisted of the 11 remittance slips to which I have made reference.

99.  The plaintiffs were able to show that the same remittance slips, or portion of them, had been used in other related litigation in an attempt to prove different, indeed contrary matters.  By way of example, it was shown that the same 11 remittance slips had been used in an earlier action by Chan (once the majority shareholder in Sunny Growth) in an attempt to demonstrate that he – not Sunny Growth - had made a loan to Shunfeng Iron and Steel. Eight of the same remittance slips had also been used by Chan in an attempt to demonstrate that he had lent and advanced money to Hawkins Development.  Evidence was also led that eight of the remittance slips had been used by Sunny Growth in an attempt to demonstrate that it too had lent money to Hawkins Development rather than investing it in the joint venture in return for a shareholding.

100.  As it was put by plaintiffs’ counsel, the ill-fated litigation before the Higher People’s Court in Liaoning Province was the fourth time that the remittance slips had been used in an attempt to support a claim, the story changing on each occasion.  This blatant misuse of evidence, said counsel, was compounded by the fact that no attempt had been made to put forward any explanation.

101.  These matters on their own, it was argued, clearly demonstrated a prima facie case that the litigation recently dismissed by the Higher People’s Court of Liaoning Province, and any future litigation based on the same subject matter, was intended as a cynical exercise to outflank the advantages already gained by the plaintiffs in the Hong Kong litigation and to outflank the current Hong Kong litigation; it was plainly a bad faith exercise, one in which evidence was used for whatever purpose suited the moment, and was thereby unconscionable.

102.  The judge described the submission in less forthright terms (para. 42)

“Mr Ng [counsel for the plaintiffs] describes this as the ‘recycling’ of the same evidence, which is clearly unreliable. He therefore submits that the defendant’s claims in the PRC litigation are entirely without merit and bound to fail. The claims are therefore clearly brought in bad faith, vexatious and on oppressive. This applies with equal force to any fresh actions intended to be brought by the defendants for the same purpose.”

103.  But, while the judge recognised the force of the argument, he did not think it sufficient.  He said (para. 43):

“… I do not think on this basis alone I could conclude summarily at this stage that the defendants’ claims are bound to fail in the PRC courts. In particular, the mere fact that the 11 remittance slips have been used in previous litigation to support different cases does not per se mean that the way they are now used in the PRC litigation must be the failed or wrong one.”

104.  The judge continued:

“The Court cannot and should not, for the present purpose at interlocutory stage, engage in a mini-trial on this issue based on the affirmation evidence. Whether the defendants could eventually rely on these 11 remittance slips to support their case of investment in Shunfeng has to be left to trial, if any, after proper cross-examination of witnesses.”

105.  With respect, I have difficulty with this reasoning.  I say so for the following reasons.

106.  First, as I see it, the judge was not required to make a determination – certainly not any sort of final determination – to the effect that the remittance slips could never be given any weight in the PRC courts.  That would require the judge to step into the shoes of the PRC courts, judging matters according to PRC law.  The judge was required instead to consider whether the use of the remittance slips, considered in the context of all relevant matters, provided evidence that the proceedings upon which they are, or will be, based have been, or will be, instituted in bad faith, being designed to frustrate and obstruct the current Hong Kong proceedings.

107.  Second, in order to make that determination, in my view, no form of ‘mini-trial’ was required.  The judge was determining an interlocutory application; he was required to come to a finding on the material before him.  That material included the pronouncements of our courts in respect of the long and complex litigation that had already taken place.  More particularly, the judge had before him seemingly cogent evidence – unexplained by the defendants – that the remittance slips had been employed on earlier occasions by the defendants and/or their integral associates to support differing, indeed contradictory, claims.  What was required of the judge, in my view, was to determine whether, on the material that was before him, he was in a position to conclude that those remittance slips, by reason of their past contradictory use by different parties, were now so devoid of any evidential value that their continued use in actions to be instituted by the plaintiffs in the PRC – based on essentially the same contentions as those contained in their first, now defunct action – could lead only to the inference (for the purposes of the anti-suit injunction) that the proceedings upon which they were based must be entirely tactical, intended to subvert the Hong Kong proceedings, and therefore must be vexatious and oppressive.

108.  I pause at this juncture to consider the issue of the standard of proof imposed on the plaintiffs in respect of their application for an anti-suit injunction.

109.  Mr Chan, plaintiffs’ counsel, submitted that the plaintiffs were required to do no more than demonstrate a prima facie case.  Ms Wong, for the defendants, submitted that a higher standard was required and that matters needed to be proved to a high degree of probability.

110.  The authorities which were referred to us have not adopted a unified approach.  I am satisfied, however, that something more than a prima facie case is required.  It is to be remembered that anti-suit applications are to be considered with caution.  As Lord Hobhouse observed in Turner v Grovitt (supra), an anti-suit injunction may be treated as an interference in foreign proceedings. An applicant for such an injunction must therefore be able to show a “clear need” to protect existing local proceedings.  In my view, certainly in the present case, it has always been incumbent on the plaintiffs to demonstrate a strong prima facie case; put another way, a convincing prima facie case.

111.  I move now to the third of Lord Hobhouse’s ‘essential features’, namely, that a restraining order should only be granted when it is necessary to protect the legitimate interests of the applicants in the local proceedings.

112.  Au J was not persuaded that plaintiffs had a legitimate interest in the local proceedings that required to be protected.

113.  It would seem that in the application before Au J considerable emphasis was placed by the plaintiffs on the assertion that, unless the anti-suit injunction was granted, their rights under the injunction granted by Deputy Judge Louis Chan in April 2006 (in HCA 1653/2004) would be undermined.  That injunction restrained the defendants in that case, whether acting directly or through their servants or agents, from interfering with the business of Hawkins Development or the business of the joint venture or of the mining operations.

114.  In this regard, Au J pointed to the fact that the plaintiffs were not themselves parties to the HCA 1653/2004 litigation and had no locus to enforce the injunction.

115.  While that is the case, it was, and remains, integral to the defendants’ claims which they seek to have affirmed in the PRC courts that Madam Kan, one of those who was restrained by the injunction issued in HCA 1653/2004, put her signature to a number of documents purportedly on behalf of Shunfeng Iron and Steel which sought to give effect to the so-called ‘investment agreement’, the agreement that itself sought to strip Hawkins Development of its 80% shareholding in Shunfeng Iron and Steel.

116.  In addition, as Mr Chan, counsel for the plaintiffs, pointed out, even if Yeung Tsz Wang, the first defendant, was never himself subject to the injunction, the evidence indicates that he aided and abetted Madam Kan in her breach, doing so in order to advance his own interests.  As such, it is arguable that he placed himself in contempt of our courts: see, for example, Attorney General v Punch Limited [2003] 1 AC 1046.

117.  In my judgment, in disposing of what I will call the ‘injunction issue’ on the basis of locus, the judge at first instance adopted too narrow an approach.

118.  In considering matters on a broader basis, it must be borne in mind that the history of all relevant litigation has over an extended period of time involved the tactical use of numerous companies and individuals by both sides.  That being the case, while there may, on the basis of what in the circumstances is a technical distinction, be no locus to seek enforcement of the injunction itself, it does not prevent the court, if it is satisfied that the ends of justice require it, from taking into account such tactical circumventions in determining whether some other form of restraint – in this case, the anti-suit injunction – is justified.

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.” [My emphasis]

120.  In further considering whether the plaintiffs had any legitimate interest in the local proceedings to protect, Au J rejected the submission that any future litigation instituted by the defendants in the PRC courts (based on their earlier action dismissed in December 2010 by the Higher People’s Court of Liaoning Province) would undermine the plaintiffs’ current Hong Kong proceedings in HCA 1415/2010.  He rejected the submission on the basis that any future proceedings instituted by the defendants in the PRC would be founded on substantially the same issues raised in their earlier proceedings and those earlier proceedings had of course been instituted before the plaintiffs had commenced action HCA 1415/2010 in Hong Kong.  In respect of those earlier proceedings, the judge appears to have been of the view that there was no evidence – no direct evidence at least – that they had been designed to subvert proceedings that were not yet issued in Hong Kong.  As it was expressed by the judge:

“As such, it could not be in any way shown that at the time when the PRC litigation was issued, it was for the purpose of obstructing or frustrating the not yet issued HCA 1415/2010.”

121.  Again, with respect, I have difficulties with that reasoning.

122.  The defendants had submitted themselves to the jurisdiction of the Hong Kong courts in respect of several actions, all of which had been determined in favour of the plaintiffs (and their integral associates).  All of those actions, directly or indirectly, had looked to the same issue, namely, who was lawfully entitled to hold the controlling interest in Hawkins Development and thereby in Shunfeng Iron and Steel.  In those actions the defendants (and their integral associates) had been criticised in strong terms, findings being made to the effect that they had not acted in good faith.  That being the case, it had to follow, in my view, that the following matters would be taken into account.

123.  First, the possibility (indeed probability) that the PRC proceedings instituted by the defendants had been instituted to pre-empt mirror proceedings being instituted in Hong Kong by the plaintiffs.  Proceedings are regularly commenced in one jurisdiction in order to pre-empt the institution of proceedings in another.  Chronology by itself is therefore a poor indicator of intent.

124.  Second, having been the subject of numerous unfavourable findings in the Hong Kong proceedings, the possibility (indeed probability) that the defendants would seek to gain some form of advantage by instituting proceedings in the new jurisdiction, using evidential material that had already been demonstrated to be of deeply questionable value in the Hong Kong proceedings.

125.  If those matters were taken into account, as, in my view, they should have been, it was open to the judge at first instance to hold not only that the plaintiffs had legitimate interests to protect in respect of the Hong Kong proceedings but that the defendants, in putting forward seemingly discredited evidential material in the PRC proceedings, had been seeking in bad faith, and would continue to seek in bad faith, to subvert the Hong Kong proceedings.

Should the appeal be allowed?

126.  A judge sitting at first instance enjoys a wide discretion in determining whether to grant or refuse an interlocutory injunction.  This Court will generally be slow to interfere in the exercise of that discretion.  Well settled principles make it clear that we will only do so if the judge has taken into account matters which he ought not to have done or failed to take into account matters which he ought to have done or if his decision is plainly wrong.

127.  The issues that faced the judge at first instance were far from simple; he had to come to his decision in the context of long and complex litigation that had already taken place, doing so in light of the fact that all parties involved were pushing each and every tactical advantage to the limit, sometimes regrettably well over the limit.  However, for the reasons which I have set out above, I have been drawn to the conclusion that the judge’s reasoning failed to take into account matters which should have been taken into account, that failure constituting a material misdirection in the exercise of his discretion.

128.  In my judgment, having regard to the material that was before the court at first instance and having regard to the nature and extent of the injunctions sought at that time, I am of the view that the plaintiffs did make out a strong prima facie case – indeed, I believe they were able to demonstrate matters to a high degree of probability – and were therefore entitled to the issue of the injunctions that were then sought.

129.  I would therefore grant the plaintiffs injunctive relief as it was sought at first instance.  The question, of course, is whether, having regard to events since the judgment at first instance, there is any value remaining in that relief.  I believe there is.  The history of the litigation to date indicates that the exact nature and extent of future litigation cannot be anticipated.

The extended relief now sought

130.  The injunctive relief now sought takes into account the institution of proceedings in the Mainland by Liaoning Shengyuan seeking to enforce its purported rights under the agreement described as the ‘investment equity transfer agreement’ entered into with Sunny Growth in July 2011.

131.  The first difficulty that presents itself in considering whether the defendants should be restrained from in any way assisting the Mainland corporation, Liaoning Shengyuan, in its action is the fact that Sunny Growth, one of the two defendants, has not been joined as a plaintiff with Liaoning Shengyuan in its action.  To the contrary, it has been cited as one of the defendants in that action, the three defendants being Sunny Growth, Shunfeng Iron and Steel and Hawkins Development.

132.  It is, in my view, a doubtful proposition that anti-suit injunctions extend so far as to restrain a party from defending an action in a foreign jurisdiction, certainly when the plaintiff in that action is, on all the evidence, an independent third party.

133.  I appreciate, of course, that in the present case the issue is not so simply defined.  Sunny Growth, in entering into the agreement with Liaoning Shengyuan, was able to do no more than transfer its asserted rights to an 80% shareholding in Shunfeng Iron and Steel.  The shares were not registered in its name at the time nor are they so registered now.  More accurately perhaps, it can be said that Sunny Growth was able to do no more than transfer its litigation rights against Shunfeng Iron and Steel and Hawkins Development.  I say that because, absent some complete surrender on the part of Wong and his integral associates, any attempt by Sunny Growth to secure the 80% shareholding in its name is bound to be opposed in the courts.  It follows ironically that, although cited as a defendant, it is very much in the interests of Sunny Growth (and Yeung Tsz Wang) to ensure that Liaoning Shengyuan is successful in its action.

134.  On behalf of the plaintiffs, it has been submitted that we should harbour very real concerns as to the good faith of the ‘investment equity transfer agreement’.  There are a number of factors, it has been said, which point to the fact that it is a tactical sham.  One of the factors advanced on behalf of the plaintiffs is that Sunny Growth purportedly sold its interests in the joint-venture for a price of only RMB50 million, this being a fraction of the value of the joint-venture mining operations themselves.

135.  With even half an eye focused on the history of earlier litigation, there must be deep concerns as to whether this new agreement was entered into ‘at arms length’ and in good faith or whether it is another tactical ploy, one that has been created in bad faith.

136.  If, as submitted by Ms Wong on behalf of the defendants, an entirely new joint-venture agreement was entered into, the question must be asked: why was it necessary to continue to use Shunfeng Iron and Steel as the company holding the joint-venture interests; why not incorporate a new company in which the new joint-venture partners could each hold their respective shares?

137.  I also agree that on its face the price at which Sunny Growth purportedly sold its economic interests in the joint-venture was surprisingly low. But little or nothing was put before us as to the economic health of Sunny Growth.  Financial constraints do sometimes force the sale of assets at prices which, in economic terms, do not make sense.

138.  What must also be taken into account is the fact that, at this stage, there is no evidence that Liaoning Shunfeng is the alter ego of the defendants.

139.  Taking these factors into account, I have come to the view that anti-suit injunctions which include provisions restraining the defendants from assisting Liaoning Shengyuan in its action should not be granted.

140.  I would add that another factor that has influenced me is that, on the basis of Ms Wong’s submissions, the core issue which will fall to be determined in this latest PRC litigation will be different from the more limited issues which have to date fallen for determination in the Hong Kong courts.  What will fall for determination will be the issue, not of who controls Hawkins Development, but whether Hawkins Development did or did not fail to meet its financial obligations under the joint venture agreement and whether, if there was such a failure, a new joint-venture agreement was entered into in accordance with PRC law, the Mainland joint venture partners taking an active role in that process.  That issue does not appear to have been the subject of direct and close analysis in any of the Hong Kong proceedings even if it was given indirect consideration.  It is an issue, I believe, that the courts in Liaoning Province are well positioned to determine.  The minority joint-venture partners are situated there as are the witnesses who are able to give direct evidence as to financial matters affecting the mining operations.

Resolution

141.  For the reasons given, I would allow the appeal, granting the anti-suit injunctions in the form that they were placed in draft before the Court of First Instance.  I would decline to grant them in the amended form brought before us.

142.  As to the costs of the appeal, I see no reason why the plaintiffs should not be awarded their costs.  They were successful in the appeal, obtaining the anti-suit injunctions originally sought.  For myself, having regard to the history of the conduct of the defendants (and their integral associates) I can well see why the plaintiffs felt compelled to seek what is a highly unusual remedy.  If the past findings of the Hong Kong courts are to be given any weight, the defendants have conducted themselves so far in a manner which falls below that expected of good faith litigants.

Hon Bharwaney J:

143.  I agree with the judgment of Hartman JA and with the proposed orders.

144.  It was common ground that an applicant who seeks an interlocutory anti-suit injunction must establish more than an arguable case before he can obtain such an injunction.  Both counsel made cogent submissions on the burden of proof.  Ms Lisa Wong SC submitted, relying on Midgulf International Ltd v GCT [2009] 2 Lloyd’s Rep 411 at §36 and American International Specialty Lines Insurance v Abbott [2003] 1 Lloyd’s Rep 267 at §§7-8, that since the effect of an interlocutory anti-suit injunction was final in that it prevented the party to be restrained from taking any foreign proceedings, it ought not to be granted unless the applicant could establish his case to “a high degree of probability”.  Mr Anthony Chan SC agreed that in a case such as Midgulf International Ltd v GCT, where the parties were in dispute as to whether or not their contract contained an exclusive jurisdiction clause, a high degree of probability was required since a decision by the court at the interlocutory stage in favour of the applicant was likely to be final on the point.  However, he submitted, citing the statement of Dillon LJ in Midland Bank v Laker Airways [1986] 1 QB 689 at 707C-E, that the standard of a prima facie case applied in other cases, such as the present one, where the applicant relied, not on an exclusive jurisdiction clause, but upon conduct that was unconscionable for some non-contractual reason. 

145.  I am persuaded by Ms Wong, and I conclude, that in every case, whether based on an exclusive jurisdiction clause or on unconscionable conduct, the applicant seeking an interlocutory anti-suit injunction has to establish his case to a high degree of probability or, in the words of Hartmann JA, that he must demonstrate a strong or convincing prima facie case.  After all, a breach of an exclusive jurisdiction clause is a species of wrongful misconduct.  But above all, it seems to me that the court must have regard to the effect of the interlocutory anti-suit injunction.  If its effect is likely to be final, the applicant seeking such an injunction must establish a convincing prima facie case before the court would be moved to grant such an injunction.

146.  I am satisfied that the plaintiffs here have established a convincing prima facie case, not only on the grounds set out in §§98-101 and §§124-125 of the judgment of Hartman JA, but also on the grounds that the defendants have deployed documents of dubious validity in a manner that amounts to unconscionable conduct.  These key documents, namely, the Investment Agreement of 28 June 2006, the Share Transfer Agreement of 8 December 2006, the 8 June 2006 Resolution and the 26 June 2006 Minutes, which are the subject matter of the current proceedings, were relied upon by Sunny Growth in the PRC litigation and were also referred to in the “investment equity transfer agreement” with Liaoning Shengyuan Investment Company.  The plaintiffs have established a convincing prima facie case that these key documents are documents of dubious validity and that, if they were genuine and had actually existed in June and December 2006, that the failure to disclose them in the previous litigation amounted to wrongful and unconscionable conduct. 

147.  The contest before Deputy Judge Louis Chan in HCA 1653/2004 was whether the 75 shares transferred to the Yeung Camp ought to be returned to Mr Wong Kam San.   After trial in April 2006, the learned judge granted a declaration that those shares were held on trust for Mr Wong Kam San and he ordered their return.  If the allotment and transfer of 9,900 shares in July 2005 were valid, the contest over the 75 shares in April 2006 would have been academic and yet the allotment of July 2005 was not brought up at the trial before Deputy Judge Louis Chan. More importantly, the key documents of June and December 2006, if they existed, were clearly material documents but were never referred to at the trial before Lam J in March 2007 in HCA 2036/2005 that concerned the legality of the allotment and transfer of the 9,900 shares to Sunny Growth in July 2005.   

148.  Moreover, if, as Sunny Growth contended before Lam J in March 2007 that it was the 99% shareholder of Hawkins (by virtue of the allotment and transfer of 9,900 shares to Sunny Growth in July 2005), it made no commercial sense for Sunny Growth to enter into the Investment Agreement in June 2006 to replace Hawkins as the foreign shareholder of Shunfeng.

149.  I am not persuaded that Hong Kong is not the proper forum to determine the validity of the June 2006 Resolution and Minutes, the Investment Agreement of 28 June 2006 and the Share Transfer Agreement of 8 December 2006.  Hawkins, probably the most interested party, is a Hong Kong company.  The evidence adduced in the previous actions, from witnesses with Hong Kong addresses, will be relevant in providing the context to assess the authenticity of the key documents.  Given the ease of travel to Hong Kong, the location of possible witnesses in the Mainland can hardly be a reason, these days, to support a finding that Hong Kong is not the natural forum.

150.  I also agree that the injunctions sought ought to be granted in their original terms and without the inclusion of provisions restraining the defendants from assisting Liaoning Shengyuan in its PRC action.  Quite apart from the difficulties posed by the fact that Sunny Growth is a defendant in those proceedings, which Hartman JA has identified in §§131-132 of his judgement, there is the added difficulty of ascertaining what acts of the defendants can be said to constitute “assisting” Liaoning Shengyuan in its PRC action and which the injunction sought purports to restrain.  The current application for an interlocutory injunction to restrain the defendants from “assisting” Liaoning Shengyuan in its PRC action is akin to an attempt to bolt the cage door after the bird has already flown the coop.

Hon Hartmann JA:

Conclusion

151.  For the reasons given, the appeal is allowed. Anti-suit injunctions in the form presented to the Court of First Instance are granted to the plaintiffs.

152.  Costs of the appeal and at first instance, are awarded to the plaintiffs.