PONY HK WORLD LTD v. VAND PETRO CHEMICALS (BVI) CO LTD AND ANOTHER

HCA 996/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 996 OF 2010

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  Pony (a Cayman Islands company) belongs to the Istithmar World group.  The group is majority-owned by the Government of Dubai.

2.  Vand (a BVI company) is entirely owned by Mr An.  Mr An is the Chairman and a director of Hans Energy Company Limited (a company listed on the Hong Kong Stock Exchange).  Through Vand and a company named Extreme Wise Investments Ltd, Mr An is Hans’ majority shareholder.

3.  By a Share Purchase Agreement (SPA) dated 12 July 2007 Pony agreed to buy, and Vand to sell, 370 million shares in Hans for $407 million.

4.  By these proceedings, Pony seeks to enforce an obligation on Vand’s part to buy-back the 370 million Hans shares.  According to Pony, the obligation arises as a result of Pony’s exercise of a put option conferred by SPA cl. 6.2C.

5.  The exercise of the put option (Pony contends) means that Vand must buy back the 370 million Hans shares at a stipulated purchase option price.  Pony brings this action for payment of that price of $510,708,649.03 (the amount originally paid by Pony for the shares plus 12% annual compound interest from 13 July 2007 to 12 July 2009).

6.  Mr An is sued as guarantor under the SPA of Vand’s performance of its contractual obligations.

7.  Vand and Mr An deny that Pony was entitled to exercise the put option.

II.      BACKGROUND

8.  At the time of the SPA, Hans indirectly owned a petrochemical dock construction project in the Guangdong Humen Bay Shatian Bay Region.  The Dock Construction Project was operated by Dongguan Dongzhou International Petrochemical Storage Company Ltd (Donguan Dongzhou).

9.  At the time of the SPA, Dongguan Dongzhou was a Mainland domestic joint venture company, owned as to 85% by Guangzhou Economic & Technology Development Zone Zhongsui Petrochemical Development Company Ltd (Zhongsui) (a Mainland company) and as to 15% by Guangdong (Panyu) Petrochemcial Storage & Transportation Ltd (Yuehai) (a Mainland company).

10.  92% of Yuehai is owned by Guangdong Petro-Chemicals Company Ltd (GPC) (a Hong Kong company).  GPC is 100% held by Union Petro-Chemicals (BVI) Company Ltd, which in turn is 100% held by Hans.

11.  The Mainland’s National Development and Reform Commission (NDRC) approved the Dock Construction Project on 5 September 2005.

12.  The 2005 Approval issued by the NDRC recorded that the Dock Construction Project would be undertaken by Dongguan Dongzhou (then yet to be incorporated).  The 2005 Approval further stated that Dongguan Dongzhou would be 85% owned by Zhongsui and 15% owned by Dongguan Humen Port Holdings Company Ltd (DHPHC).  That reflected what had been envisaged at the time of original application to the NDRC for approval of the Dock Construction Project.

13.  These proceedings arise because, by the time of the SPA, the shareholding of Dongguan Dongzhou (incorporated in April 2006) was different from that envisaged in the 2005 Approval.  In particular, the 15% interest supposed to be held by DHPHC came to be held by Yuehai instead.

14.  When entering into the SPA, Pony was concerned that the discrepancy between Dongguan Dongzhou’s actual shareholding and what was stated in the 2005 Approval might lead to problems.  Pony was worried that, unless NDRC approval for Yuehai’s 15% shareholding was secured, Mainland officials could stop the Dock Construction Project from proceeding, at least until the discrepancy was rectified.  Stoppage of construction work could be hugely expensive in terms of time and money.

15.  To address Pony’s concern, cl. 6.2A(ii) (drafted by Clifford Chance for Pony) was inserted into the SPA.  That clause provided that:-

“[Vand] covenants with [Pony] that it will procure Hans to carry out all reasonable steps ... to obtain the necessary approval from ... [the NDRC] in respect of the change in ownership of the [Dock Construction Project] as soon as possible...”

16.  The covenant in cl. 6.2A(ii) was backed up with the put option conferred by SPA cl. 6.2C.  The put option entitled Pony to require Vand to buy back the 370 million shares upon the happening of “triggering events” specified in cl. 6.2D.  Those events included (by cl. 6.2D(2)):-

“the failure of Yuehai to obtain the necessary approval from … [the NDRC] … for the change in ownership of the [Dock Construction Project] at the fault of, or arising from an act or omission of [Vand] or Yuehai”.

17.  SPA cl. 6.2E stipulated the mechanism for exercising the put option.  The put option had to be exercised “[w]ithin 30 Business Days upon the occurrence of any of the triggering events as referred to in clause 6.2(D)”. Within the time frame of 30 business days, Vand had to deliver a notice to Vand “specifying the date upon which completion of the sale and purchase of the Put Option Interest shall take place which date shall not be less than five Business Days from the date of the Put Option Notice (Put Closing Date)”.

18.  On the Put Closing Date, Vand would be obliged “to pay to [Pony] the Put Option Price in full in cash by telegraphic transfer in same day available funds” to a designated account and Pony “shall deliver signed instrument of transfer and sold note … and the relevant share certificate(s) to [Vand]”.  Stamp duty in connection with the share transfer would be borne by Vand alone (SPA cl. 6.2G).

19.  SPA cl. 6.2F provided that, “[n]otwithstanding any provisions herein contained to the contrary,” the put option would lapse upon the expiry of 2 years from the SPA completion date of 13 July 2007.

20.  Vand did not submit any application for approval of the change in Dongguan Dongzhou’s shareholding until 14 November 2008.

21.  By letter dated 8 February 2010 the NDRC confirmed its approval of the change in shareholders.

22.  But, well before then, by notice dated 6 July 2009 Pony claimed to exercise the put option.  Pony’s notice stated:-

“As a result of the failure of Yuehai to obtain the necessary approval from or carry out the necessary filing with, [NDRC] for the change in ownership of the [Dock Construction Project] …, [Vand] is in breach of its covenant in clause 6.2(A)(ii) of the SPA. Such failure arises from the fault of, or an act or omission of, [Vand] or Yuehai. Owing to the occurrence of the event set out in clause 6.2(D)(2) of the SPA, the Put Option Notice is being served on you.

[Vand] is also in breach of its covenant that, inter alia, ‘it shall furnish to [Pony] copies of all relevant official receipts, confirmations or such other documents from the relevant government authorities with respect to the Approvals’ and shall ‘keep [Pony] informed with respect to the application procedures’ in respect of the ‘Approvals’ under clause 6.2(B) of the SPA (as ‘Approvals’ is defined in clause 6.2(A) of the SPA).

In accordance with clause 6.2(E) of the SPA, the Put Closing Date shall be 13 July 2009, on which the completion of the sale and purchase of the Put Option Interest shall take place.”

23.  The put option notice refers to SPA cl. 6.2B.  That was a provision whereby Vand covenanted to furnish relevant documents in relation to the obtaining of NDRC approval.  By that clause Vand further agreed to keep Pony “informed with respect to the application procedures” and to allow Pony “the right to access all relevant information and any communications with the relevant government authorities as may be reasonably required by [Pony] and the right to enquire the progress of the applications [for NDRC approval] from time to time”.

24.  Pony additionally alleges that the SPA was subject to 2 implied terms.

25.  One implied term (Term A) is that Vand would furnish the information specified in cl. 6.2B to enable Pony to determine whether or not the failure specified in cl. 6.2D occurred at the fault of, or arising from an act or omission of [Vand] or Yuehai.

26.  The other implied term (Term C) is that it was feasible for Vand to, and Vand would, carry out all steps to be carried out pursuant to cl. 6.2A(ii) within 2 years from 13 July 2007 (that is, before the put option lapsed).

27.  Finally, in the course of the trial, reliance was placed by one party or the other on SPA cls. 8.3 and 12.2.  For convenience, I set them out here:-

(1) Clause 8.3

“Neither [Vand] nor [Mr. David An] shall have any liability in respect of any Relevant Claim [defined in SPA cl. 1.1 as ‘any claim under this Agreement’] unless [Pony] shall have given notice in writing to {Vand] of such claim specifying (in reasonable detail) the matter which gives rise to the claim and the nature of the claim, and if practicable, the amount claimed in respect thereof such notice to be given as soon as reasonably practicable and in any event not later than 24 months from [13 July 2007].”

(2) Clause 12.2

“(A) This Agreement constitutes the whole agreement between the parties relating to its subject matter and supersedes and extinguishes any prior drafts, agreements, and undertakings, whether in writing or oral, relating to such subject matter.

(B) Each party acknowledges that it has not been induced to enter into this Agreement by any representation or warranty other than those contained in this Agreement and, having negotiated and freely entered into this Agreement, agrees that it shall have no remedy in respect of any other such representation or warranty except in the case of fraud. Each party acknowledges that its legal advisers have explained to it the effect of this clause 12.2.

(C) No variation of this Agreement shall be effective unless made in writing and signed by each of the parties.

(D) Nothing in this Clause 12.2 excludes liability for fraudulent misrepresentation.”

III.     DISCUSSION

28.  The specific issues to be considered are as follows:-

(1) What is the proper construction of SPA cl. 6.2A(ii)?

(2) Are Terms A and C implied by the SPA?

(3) Was SPA cl. 6.2A(ii) breached?

(4) Was there a triggering event within the meaning of SPA cl. 6.2D and (if so) what event?

(5) Does SPA cl. 8.3 apply to the exercise of the put option and (if so) did Pony comply with it and give reasonable detail when exercising the put option?

(6) Did Pony validly exercise the put option?

A. Issue (1): Proper construction of SPA cl. 6.2A(ii)

A.1 SPA cl. 6.2A(ii) generally

29.  Mr Charles Sussex SC (appearing for Pony) advances 3 possible constructions of cl. 6.2A(ii).

30.  First, Mr Sussex suggests that by the clause the parties were agreeing that, for the purposes of the SPA, they would deem the obtaining of NDRC approval for the change in share ownership as something necessary (whether or not as a matter of strict Mainland law it was actually necessary to obtain NDRC approval).

31.  Second, Mr Sussex suggests as a variation on his first construction that the expression “necessary approval” in cl. 6.2A(ii) reflects the parties’ agreement that it was necessary under Mainland law to obtain NDRC’s approval for the change in share ownership (whatever the true position might be under Mainland law as to the need for obtaining NDRC approval).

32.  I think that there is little to distinguish between Mr Sussex’ first 2 suggested constructions of cl. 6.2A(ii).  I doubt that much will be lost if I treat those 2 variants as practically identical for the purposes of this analysis.

33.  Third, Mr Sussex suggests that “necessary approval” refers to the reality (regardless of any residual doubts on the question harboured by Vand when entering into the SPA) that it was necessary to obtain NDRC approval for the change in share ownership under Mainland law.

34.  For this third construction of cl. 6.2A(ii), Mr Sussex relies on expert evidence to the effect that it was necessary under Mainland law to obtain NDRC approval for the change in share ownership.

35.  Mr Adrian Huggins SC (appearing for Vand and Mr An), however, contends that “the necessary approval” means that Vand was covenanting to obtain NDRC approval for the change of ownership only insofar as the obtaining of such approval was necessary under Mainland law.

36.  Mr Huggins further contends that the parties (Vand acting through Mr An and Pony acting through Ms Jane Shao) had actually agreed when entering into the SPA that Vand would only be required to obtain NDRC approval if such was necessary under Mainland law.  Ms Shao was a Managing Director of Istithmar World based in Shanghai. Following execution of the SPA, she acted as Pony’s observer at meetings of Vand’s board.

37.  Mr Huggins says that, as a matter of Mainland law, it was not actually necessary to obtain NDRC approval.

38.  At trial, Mr Huggins objected to the first 2 of Mr Sussex’ constructions.  But (as I indicated in the course of Mr Huggins’ submissions) the objection seemed unwarranted since Pony had pleaded the 2 constructions in its Reply.  Agreement among the parties that there would be expert evidence in relation to Mr Sussex’ third construction did not (as Mr Huggins suggested) estop Pony from advancing the first 2 constructions.

39.  Let me then begin with the evidence which Mr Huggins adduces in support of an alleged understanding among the parties that, by cl. 6.2A(ii), Vand was only required to obtain NDRC approval insofar as necessary under Mainland law.

40.  Mr Huggins relied here on the evidence of Mr Nicholas Fung.

41.  In a Revised Witness Statement, Mr Fung deposed that, shortly before the SPA was executed, Ms Shao and Mr An had agreed that Vand would only be required to take such reasonable steps to obtain the approval regarding the discrepancies in the shareholding structure [of Dongguan Dongzhou] as might be necessary under Mainland law.

42.  Mr Fung further asserted that it had been agreed between Ms Shao and Mr An that there would be no time limit for the obtaining of any necessary approval from the NDRC.  In his oral evidence, Mr Fung clarified that this understanding between Ms Shao and Mr An had been reached on 10 July 2007.

43.  But I did not find Mr Fung’s evidence to be compelling.  Cross-examined on the alleged agreement between Ms Shao and Mr An, Mr Fung was vague.  Consider, for instance, the following exchange between Mr Sussex and Mr Fung:-

“Q: So, am I right that you are not suggesting that it was agreed between the plaintiff and the 1st defendant that the defendant would only be obliged to obtain NDRC approval if it was necessary under PRC law?

A: Well, I’m in no position to speculate whether they thought it was a necessary to apply for the NDRC or not but, in -- on our side, first, we didn’t think that it was necessary to get the approval or go about applying for that at all.  So I dare not say whether, at that stage, both parties agreed to that or not.”

44.  Unfortunately, neither Ms Shao nor Mr An gave oral evidence.  Ms Shao long ago ceased to work for Istithmar World and efforts to locate her for this trial were in vain.  Mr An, on the other hand, could have given evidence on behalf of Vand and himself, but opted not to.

45.  I am therefore not persuaded that there was an agreement between Ms Shao and Mr An that “the necessary approval” in SPA cl. 6.2A(ii) was to be understood in the limited sense of “any necessary approval”.  Nor am I persuaded that it was understood between Ms Shao and Mr An that there would be no time limit for any necessary approval application.

46.  Even if there was some understanding between Ms Shao and Mr An as Mr Fung alleges, it is unlikely that the understanding (whatever it was) continued beyond 10 July 2007.

47.  On 11 July 2007 Clifford Chance forwarded a draft of what eventually became cl. 6.2A(ii) to Vand’s lawyers Fried Frank.  That draft was prompted by concerns, expressed internally by Clifford Chance to Pony, that it was necessary under Mainland law to obtain NDRC approval for Yuehai’s having become a shareholder of Dongguan Dongzhou after the issue of the 2005 approval.

48.  Just before Clifford Chance’s proposed cl. 6.2A(ii) was circulated to Fried Frank, the draft SPA contained a provision obliging Vand to acquire NDRC approval only if required.  It was not until after Clifford Chance’s draft was circulated to Fried Frank that the draft SPA incorporated a provision similar to what is now cl. 6.2A(ii).

49.  In those circumstances, it is difficult to believe that, whatever Ms Shao and Mr An may have understood on 10 July 2007 about NDRC approval, such understanding continued until the signing of the SPA on 13 July 2007.  The intervention (and eventual adoption) of Clifford Chance’s draft cl. 6.2A(ii) suggests instead that, immediately before the signing of the SPA, the parties had agreed to treat the obtaining of NDRC approval as something necessary under Mainland law.

50.  In other words, the factual matrix supports the first or second construction of cl. 6.2A(ii) advanced by Mr Sussex.  It is improbable (as Mr Sussex points out) that the parties would substitute Clifford Chance’s draft cl. 6.2A(ii) for what was previously in the SPA (namely, a provision that NDRC approval be obtained only to the extent required) if the parties regarded the former as saying the same thing as the latter.

51.  It is more likely that the parties accepted Clifford Chance’s cl. 6.2A(ii) because they were treating NDRC approval as “necessary”.  This was even though Vand may privately have doubted whether NDRC approval really had to be obtained under Mainland law.  Given its receipt of Clifford Chance’s opinion, in all likelihood Pony throughout believed that NDRC approval was necessary and insisted that a provision along the lines of Clifford Chance’s draft be incorporated into the SPA to cater for this perceived necessity of obtaining NDRC approval.

52.  Mr Huggins submits that, if I accepted the first or second constructions of cl. 6.2A(ii) advanced by Mr Sussex, Vand must be allowed to rectify the SPA.  This would be on the footing that cl. 6.2A(ii) as finally incorporated into the SPA did not reflect what the parties (acting through Mr An and Ms Shao respectively) had actually orally agreed.

53.  However, there is no strong evidence of a continuing understanding along the lines advocated by Mr Huggins from 10 July 2007 to the time just before the SPA was executed.  The absence of “irrefragable evidence” to that effect rules out rectification as a remedy.

54.  There is no need for me to consider whether Mr Sussex can rely on SPA cl. 12.2 as ruling out reliance on any understanding between Ms Shao and Mr An reached on 10 July 2007.

A.2  Mainland law on NDRC approval

55.  In light of my conclusion on the construction of cl. 6.2A(ii), it is strictly unnecessary to determine whether Mainland law required NDRC approval to be obtained. Nonetheless, as I heard extensive expert evidence on that matter (from Mr Wang for Pony and Mr Huang for Vand and Mr An), I shall set out my conclusions.

56.  I make 3 prefatory observations on the expert evidence.

57.  First, plainly, the necessity or otherwise of NDRC approval is a grey area within Mainland law.  As with many legal questions, there is no obvious answer to the question.  No law or authority explicitly states that approval is required in the circumstances of this case.

58.  At the time of the events here, the establishment of Development and Reform Commissions (DRCs) at the municipal, provincial and national levels was relatively recent within the Mainland.  The law and practice relating to DRCs was accordingly uncertain.  It is understandable if, as a result, there was (as seems to have been the case) uncertainty even among staff of DRCs at different levels whether NDRC approval was necessary for Yuehai’s shareholding in Dongguan Dongzhou.

59.  Any conclusion on the question of NDRC approval for the purposes of this trial can only be the result of my consideration of the expert evidence adduced before me in light of common sense and the balance of probabilities.  My conclusion can only be regarded as definitive on that basis.

60.  Second, I did not find either expert to be of real help on the question of NDRC approval.

61.  Both struck me as not much more than advocates for their clients’ respective causes.  Both were argumentative and repetitive, much like lawyers (which they were) seeking to persuade the Court of the validity of their position.  Both would repeat whatever points they perceived to be in their favour at every opportunity, even in response to questions which had nothing to do with the points which they wished to highlight.

62.  In short, neither expert struck me as wholly impartial.  I should therefore exercise extreme caution before adopting any view expressed by only one or other expert.

63.  Third, given their propensity to argue between themselves on just about every point, it is regrettable that the experts could not agree on much in their Joint Report.  That document stated what would have been self-evident upon a superficial perusal of relevant legislation and so was of only marginal assistance to the Court.

64.  But, in the body of their final reports, there was a measure of agreement among the experts as to how Mainland statutes and regulations should be interpreted.

65.  Mr Wang espoused a “logical” approach.  He suggested that interpretation “shall not be confined to the literal meaning of the provision”.  To the contrary, “one should look at the overall meaning of a law in the light of its underlying purpose in order to interpret the meaning of any particular clause or article”.

66.  Mr Huang endorsed this approach.  He stated that “we should understand laws through the potential purposes thereof and interpret certain legal clauses accordingly”.  He echoed Mr Wang’s statement that “in Mainland China, the understanding and interpretation of laws should be associated with the ‘background of legislation’ and ‘purpose of legislation’ ”.  Mr Huang confirmed that “such law interpretation method complies with the theory of legal hermeneutics”.

67.  Given the agreement between the experts on interpretation, I propose to adopt a purposive approach when construing Mainland legislation relating to NDRC approval.  This means that I should eschew a literal reading and favour a broad construction which will facilitate the achievement of the underlying objectives of a statute.

68.  I accept the experts’ evidence on this specific matter, especially since the purposive approach is one typically employed in the construction of statutes in civil law jurisdictions (such as the Mainland). In the latter jurisdictions, legislation is often couched in general terms and it is left to the Court to interpret the same in light of the spirit or objectives of the relevant statute.  This is in contrast to the approach adopted in common law jurisdictions where the preference is for statutory provisions to identify in detail precisely when they are to apply.

69.  Let me move to the substantive question whether NDRC approval is required.

70.  The key document is NDRC’s Decree No. 19 of 15 September 2004 entitled “Interim Measures for Examination and Approval of Enterprises’ Investment Projects”.  That provides as follows (in translation):-

Article 5

“The applicant entity shall submit to the project approving organ a project application report and in quintuplicate….”

Article 6

“A project application report shall mainly contain the following contents:-

(1) profile of the applicant entity;

(2) details about the project to be constructed;

(3) land for construction and related planning;

(4) an analysis of utilization of resources and consumption of energy;

(5) an analysis of impact on ecological environment; and,

(6) an analysis of economic and social effects.”

Article 18

“The project approving organ conducts examination of the project [mainly] on the basis of the following conditions:-

(1) Compliance with laws and regulations of the State;

(2) Compliance with the national economic and social development planning, planning of the industry, industrial policy, standards for admittance into the industry and overall land use planning;

(3) Compliance with the macro control policies of the State;

(4) Reasonable regional distribution;

(5) The major products of the project constitute no monopoly in the domestic market;

(6) Having no adverse impacts on the State’s economic security;

(7) Rational exploitation and effective utilization of resources;

(8) Effective protection of ecological environment and natural and cultural heritage;

(9) No serious adverse effect on public interests, especially those in the place where the project is to be located.”

Article 21

“After a project has been approved, if any [prescribed] content of the project approval document needs to be adjusted, the project entity shall promptly submit a written report to according to the specific circumstances of such adjustments, issue a confirmation letter or demand the project entity to go through the approval procedures anew.”

Article 27

“…. For a project subject to examination and approval, if no submission for approval has been submitted, or the construction work begin before approval has been granted, or that the construction work for the project is carried out in an way not conforming to the approval document, once discovered, the approving organ shall promptly order to the construction to cease and the responsible person shall be investigated for any legal and administrative liabilities.”

71.  In the course of discussing Decree No. 19, it will be useful to compare the NDRC’s Decree No. 22 of 9 October 2004 entitled “Interim Measures for the Administration of Examination and Approval of Foreign Investment Projects”. That provides (in translation):-

Article 18

“The application for alteration of an approved project by the [NDRC] shall be filed with the [NDRC] in case the project is under any of the following circumstances:-

(1) the alteration of construction site;

(2) the alteration of investors or their shareholdings/equitable interest;

(3) the alteration of the main construction details and the principal products;

(4) the total amount of investment exceeds the originally approved investment amount by 20 percentage or more;

(5) other circumstances in respect of which an alteration application is required according to related laws and regulations and the industrial policies.”

72.  The experts were agreed that the 2005 Approval by the NDRC constituted an administrative licence.  The Mainland’s Administrative Licence Law (ALL) (promulgated on 1 July 2007) provides as follows (in translation):-

Article 5

“The principle of openness, fairness and impartiality shall be observed in the establishment and implementation of an administrative licence.

The relevant regulations on an administrative licence shall be announced to the public; those undisclosed shall not be the basis for the implementation of the administrative licence. The implementation of the administrative licence and the results thereof, except for those that concern the state secrets, commercial secrets or individual privacy, shall be disclosed.

The applicants who meet the legal conditions and standards are entitled to obtain the equal right under an administrative licence, and the administrative organs shall not discriminate against any of them.”

73.  I start with the 2005 Approval.

74.  The 2005 Approval is a short document.  Its terseness suggests that the NDRC regarded every detail in the document as a relevant or important consideration.  Otherwise, it would be difficult to understand why the NDRC should focus on certain matters to the exclusion of others in such a brief document.

75.  Item 1 of the document highlights the purpose behind the Dock Construction Project.  The project will “relieve the problem of insufficient number of berths for petrochemical products in the Pearl River Delta Region, reduce the safety hazard brought about by the transfer of oil products to barges and improve the overall design of large-scale oil and chemical terminals”.

76.  Item 2 of the document describes the ambitious scale of the project.  The works will result in an 80,000-ton oil product berth and a 50,000-ton oil and gas product berth with capacity to accommodate two 5,000-ton vessels simultaneously.  Reference is made to “related safety and environmental facilities with a 650m long coastline” and to the “designed handling capacity of 4.7 million tons”.

77.  Item 3 of the document names Dongguan Dongzhou as the entity which will construct, operate and manage the project.  Dongguan Dongzhou’s then envisaged shareholders are specified.  The whole investment in the project will be RMB 826.61 million of which 35% (RMB 289.61 million) will be contributed by the shareholders of Dongguan Dongzhou (RMB 246.17 by Zhongsui and RMB 43.44 million by DHPHC).  The remaining RMB 537 million will be raised by the parties contributing from their own resources or by borrowing.

78.  The documents filed on behalf of Dongguan Dongzhou to obtain the 2005 Approval were not before the Court at trial.  Nor were the parties or the Court privy to the deliberations which took place within the NDRC when considering whether to approve the Dock Construction Project.

79.  But it is evident from the preamble to the 2005 Approval that the Court considered at least the 3 documents mentioned in the preamble.  Since those 3 documents are singled out for mention, it would be reasonable to suppose that the NDRC attached weight to their contents.

80.  What is apparent from a reading of the 2005 Approval is that the Dock Construction Project is (as Mr Sussex put to Mr Huang in cross-examination) a very large project with significant national and local implications as identified in Item 1.  A corollary to this (evident from Item 3) is that the Dock Construction Project would require the financial clout to raise a large amount of capital over a short period of time.  This would be needed to enable the project to proceed smoothly to its successful completion.

81.  Given the importance of the Dock Construction Project to the future development of the Pearl River Delta Region, Mr Sussex must be right to suggest that the NDRC “would have had very much in mind the environmental disaster that would occur if the project were undertaken by an entity that didn’t have the financial resources to complete the project”.  Mr Huang agreed with this proposition.

82.  Then, especially since Dongguan Dongzhou had yet to be incorporated in 2005, the identities of the joint venture’s envisaged shareholders must have been of significance to the NDRC.  NDRC could only look to the identities of Dongguan Dongzhou’s backers if it was realistically to assess Dongguan Dongzhou’s financial ability to carry out the Dock Construction Project to a successful conclusion.

83.  For instance, assume the shareholders were known to have poor safety, employment, or credit records.  The NDRC might then reasonably doubt whether Dongguan Dongzhou would have the technical expertise, available manpower or financial capability to carry out the Dock Construction Project.

84.  A further pointer to the NDRC having attached importance to the identities of Dongguan Dongzhou’s shareholders is to be found in the preamble.

85.  The 2005 approval refers to a “Request for instruction on adjustment of investing parties of Dongguan Shatiangang Oil, Gas and Chemical Terminal and their shareholdings”.  The Dock Construction Project was part of the Oil, Gas and Chemical Terminal just mentioned.  That the NDRC in all likelihood regarded the shareholding in Dongguan Dongzhou as important is supported by its having gone out of its way to identify this particular Request in the preamble to the 2005 Approval.

86.  I conclude, based on the face of the 2005 Approval, that the identities of Dongguan Dongzhou’s shareholders must have been an important factor in the NDRC’s decision to approve the Dock Construction Project.

87.  Is there anything in Decree 19 to suggest otherwise?  Does Decree 19 mean that, as a matter of Mainland law, the NDRC should not or could not have attached weight on the identities of Dongguan Dongzhou’s shareholders?

88.  As far as the application for the 2005 Approval was concerned, the NDRC must have received information about Dongguan Dongzhou’s envisaged shareholders.  That information would have been part of the “profile” of the applicant entity which the approval application report was required to include by Decree 19 Art. 6(1).

89.  Decree 19 Art. 18 does not expressly mention the shareholding of an applicant entity as a factor which a DRC is to take into account when considering whether to approve an application report.  But it will be noted that Arts. 18(1) to (3), in particular, are drafted in general and wide terms that can embrace almost any factor.

90.  Thus, for instance, on a macro policy level, it would not be conducive to the environment of the Pearl River Delta Region if the Dock Construction Project proved abortive due to a lack of financial resources on the part of the entity undertaking the same.  If so, it may well be relevant from the standpoint of the “macro control policies of the State” mentioned in Art. 18(3) for a DRC to consider the financial resources and creditworthiness of those backing the anticipated joint venture which would be constructing, managing and operating the Dock Construction Project.

91.  This would mean that, a change in Dongguan Dongzhou’s profile arising from a change in the identity of its shareholders, could be a significant alteration in the “prescribed content” of the 2005 Approval.  Such change would therefore need to be reported to the NDRC for confirmation under Decree 19 Art. 21.

92.  In the course of cross-examining Mr Wang, Mr Huggins queried whether every minor change in shareholding needed to be reported to the NDRC.  It would be absurd (Mr Huggins suggested) if NDRC approval had to be sought (say) simply because Zhongsui eventually acquired 86% and DHPHC only eventually held 14% of Dongguan Dongzhou.

93.  Mr Huggins may be right in relation to minor changes in shareholding.  One cannot read the NDRC’s mind.  In a given case, a lawyer can only make an educated guess, based on the available documents (especially the relevant project approval), as to what the NDRC regards as important and what the NDRC is likely to view as trivial.  At the end of the day, a Mainland lawyer advising a client on the necessity of seeking the NDRC’s approval would have to use prudence and common sense.

94.  Here, looking at the 2005 Approval and adopting a broad purposive approach in construing Decree 19, I do not think that a Mainland lawyer could safely or reasonably discount the importance of the identities of Dongguan Dongzhou’s shareholders to the NDRC.  In light of the complete change in identity of the 15% shareholder, a prudent Mainland lawyer would probably advise that in all likelihood it was necessary to obtain the NDRC’s confirmation of the change in shareholding.

95.  This should be all the more so in light of the potentially serious consequences (mentioned in Decree 19 Art. 27) if approval for a significant change in prescribed content has not been sought.  There is a risk that the authorities might stop a project until the lack of approval is rectified.  That stoppage could be a significant setback to the project.

96.  Mr Huang suggests that Art. 27 should be read restrictively as only applying where construction work is carried out in inappropriately.  But, adopting a purposive approach in the construction of Art. 27, I think that Mr Huang’s reading of the provision is too narrow.

97.  Mr Huang contrasts Decree 19 Art. 18 with Decree 22 Art. 18.  Decree 22 applies to Foreign-Owned Enterprises (FOE) as opposed to Domestic-Owned Enterprises (DOE).  We are concerned here with a DOE (that is, Dongguan Dongzhou).

98.  Decree Art. 22 expressly specifies that changes in the shareholding of an FOE should be reported to and approved by the NDRC.  The expression of such requirement in Decree 22 and its absence in Decree 19 (Mr Huang argues) confirms that it is unnecessary to report a change in the shareholding of a DOE.

99.  I do not agree.  Mr Huang fails to adopt the broad purposive approach to interpretation which he himself espouses.

100.  Contrary to what Mr Huang contends, the specific requirement in Decree 22 is indicative that the shareholding of an entity (whether FOE or DOE) can legitimately be a matter of concern to the NDRC, especially where the financial capabilities of the shareholders may impact on macro policy considerations.  Given the generality of the items already listed in Decree 19 Art. 18, it may have been thought unnecessary or otiose to spell out that shareholding can be an important factor in relation to a DOE.

101.  Finally, Mr Huang relies on ALL Art. 5.  In light of the principle of transparency enshrined there, Mr Huang contends that shareholding could not be a relevant consideration for the NDRC under Decree 19 Art. 18.  This is because shareholding has not been expressly specified among the items listed in Decree 19 Art. 18.

102.  The problem with that argument is again that it reads Decree 19 Art. 18 too literally.  It fails to take into account that the items listed in the article are broadly expressed and should be read purposively.  That the list is not more specific is unsurprising as it would be difficult, if not impossible, to list out in detail every single matter which might conceivably be of importance to the NDRC in any given case.

103.  In summary, the NDRC might well attach importance to the identities of a domestic joint venture’s shareholder in the course of deciding whether to grant an approval.  The consideration by the NDRC of such factor is implicit in one or more of the generally-expressed items in Decree 19 Art. 18.

104.  There is no inconsistency with ALL Art. 5 (which itself must be construed purposively).  Nothing in ALL Art. 5 suggests that Decree 19 Art. 18 should only be read literally, ignoring what may be implicit in the items there set out.

105.  In the circumstances of this case, I believe that it was necessary as a matter of Mainland law to seek NDRC approval for the change of shareholding.

B.      Issue (2): Implied terms

106.  I do not think that Terms A and C are implied by the SPA.

107.  Term A seems unnecessary in light of SPA cl. 6.2B.  The latter expressly entitled Pony to enquire about the progress of any approval application, including for the purposes (say) of determining whether Vand was seeking to obtain the same as soon as possible. In that case, it would be for Pony, if it so wished, to keep abreast of what was going on by make such inquiries as it saw fit.

108.  There would then be no need to imply a positive obligation on the part of Vand regularly to furnish information to enable Pony to determine whether Vand was failing, acting or omitting to act, in accordance with Vand’s covenants.  The SPA would be commercially efficacious even without the implication of Term A.

109.  Term C also strikes one as more than necessary to give the SPA business efficacy.

110.  Even where there has been a failure to obtain approval, there may be no relevant fault or omission of Vand or Yuehai within the 2 year life of the put option.  The put option would then simply expire without a triggering event having occurred. Consequently, contrary to what Implied Term C asserts, the availability of the put option for 2 years does not have any obvious bearing on the time by which Yuehai has to be approved or the necessary filing has to be carried out.

C.      Issue (3): Breach of SPA cl. 6.2A(ii)

111.  Reliable evidence as to how precisely Vand progressed the application for NDRC approval is scanty.

112.  Vand called Mr Li Lihong (Administration Manager at Hans) to give oral evidence.  But Mr Li did not actually handle matters himself.  His evidence consisted largely of hearsay, recounting what he had been told at different times by Ms Wang Min (Administration Manager at Dongguan Dongzhou) and Mr Li Xiaohui (General Manager of Dongguan Dongzhou).  I am unable to attach any significant weight to Mr Li’s evidence.

113.  Mr Li produced a chronology said to have been retrieved from Ms Wang’s computer.  Ms Wang was not available to give evidence herself, because she lacked a visa to come to Hong Kong.

114.  The chronology was only recently discovered as a result of a telephone conversation between Ms Wang and Mr Li.  The chronology records what Ms Wang had been told at different times by Mr Li Xiaohui or by Mainland officials processing the approval application.

115.  The chronology is said to be a contemporaneous record, updated by Ms Wang as and when the events happened.  But the computer record for the chronology establishes that the document (in Excel format) was first created in 1996.

116.  The explanation given for this by Mr Li was that Ms Wang had used a pre-existing document as the template for the chronology.  That document had been created in 1996.  Ms Wang simply replaced entries in that earlier document with the entries of her chronology.

117.  The chronology is essentially hearsay or even multiple hearsay evidence.  I am therefore unable to attach any significant weight to it.

118.  The parties agree that the proper procedure for applying to the NDRC was to move up the chain of government offices, starting from lower level municipal and provincial government bureaus.

119.  One first has to apply to the Dongguan Humen Bay Management Committee (DHBMC).  Having approved the application, DHBMC passes the same to the Dongguan Municipal Development and Reform Bureau (DMDRB).  From there, the application proceeds to successive higher levels (including the Development and Reform Commission of Guangdong Province).  Eventually, the application reaches the NDRC.

120.  Dongguan Dongzhou did not submit any application until 14 November 2008.

121.  According to the chronology, Ms Wang checked with DHBMC on the progress of the application on 4 December 2008 and 21 January 2009.

122.  On 21 April 2009 Dongguan Dongzhou re-submitted its application to the DHBMC.  This was because the DHBMC had mislaid the original application.  According to the chronology, Dongguan Dongzhou only learned of the missing application on 20 April 2009 when Mr Li Xiaohui visited the DMDRB.

123.  The chronology refers to follow up activity by Dongguan Dongzhou in respect of the application on 22, 23, 27 and 29 April and on 5, 11, 15, 18 and 21 May 2009.  The follow up included liaising with the Dongguan Municipal Transport Department (DMTD) and Yuehai for documents or approvals in support of the application.

124.  The chronology records that DMTD approved the application on 22 May 2009.  The DMTD approval was apparently forwarded (according to the chronology) that afternoon to the General Planning Division of the Transport Department of Guangdong Province.

125.  The next entry in the chronology is for 23 June 2009 when Dongguan Dongzhou is said to have “prepared [an] Explanation [of the shareholding change] … according to the requirements of the Development and Reform Commission of Guangdong Province” and submitted the same.  This is said to have been sent to the Transport Department of the Development and Reform Commission of Guangdong Province.  It is unclear from the chronology or available evidence why there should be a delay of a month from 22 May to 23 June 2009.

126.  As at 12 July 2009 Dongguan Dongzhou was still gathering documents in support of its application for approval.  For example, there is a letter dated 15 July 2009 from Dongguan Dongzhou to DHPHC noting that the Development and Reform Commission of Guangdong Province required certain matters connected with the shareholder change to be explained.  The information was provided on 16 July 2009.

127.  The chronology records that the Development and Reform Commission of Guangdong Province approved the shareholding application on 6 August 2009.

128.  NDRC approval was itself finally given by letter dated 8 February 2010.

129.  Pony submits that essentially Dongguan Dongzhou did nothing substantive in relation to the application between 13 July 2007 and 14 November 2008.  On the evidence, that appears to have been the case.

130.  Thereafter, Pony contends that Dongguan Dongzhou only followed up the application in a sporadic and lack-a-daisical manner.  For example, Dongguan Dongzhou (Pony says) did not find out until April 2009 that the original application had gone missing.  Had Dongguan Dongzhou been more assiduous in pushing through the application, it should have (Pony argues) discovered much earlier that the original had been lost.

131.  Plainly, in my judgment, Dongguan Dongzhou did not act (and Vand did not press Dongguan Dongzhou to act) with dispatch to obtain NDRC approval.  There is no good explanation for the failure to submit an application until 14 November 2008.

132.  Afterwards, Dongguan Dongzhou did little (if anything) concrete in respect of the application between January 2008 and April 2009.  That seems to be true, even if one were to accept the chronology as reliable evidence.  In this connection, it does seem that, if Dongguan Dongzhou had pressed harder between January 2008 and April 2009, it should certainly have found out much earlier that the application document had been misplaced.

133.  Dongguan Dongzhou appears to have monitored the application with more attention between April and May 2009.  The chronology (on the assumption that it is reliable) records some form of activity every 3 or 4 days during that period.

134.  But, following approval by the DMTD on 22 May 2009, it is unclear why Dongguan Dongzhou waited for a month until 23 June 2009 before making a submission to the Development and Reform Commission of Guangdong Province.  If Dongguan Dongzhou were acting promptly, why could it not have made a submission within half that time, at the latest, say, by 5 June 2009?

135.  The evidence is that Pony through Mr David Jackson (Istithmar World’s then CEO) and Ms Shao had been pressing at least orally for news about the progress of the approval application.  Although he denied this in his evidence-in-chief, Mr Fung seems to me to have conceded the matter in cross-examination.  One would therefore have expected Dongguan Dongzhou to have proceeded with greater alacrity in applying to the Development and Reform Commission of Guangdong Province for approval.

136.  On 6 July 2009 Vand received Pony’s put option notice.  At that point, there would have been no doubt about Pony’s dissatisfaction with the time taken to secure NDRC approval.

137.  The foregoing analysis of the available evidence leads to a conclusion that there was a breach of SPA cl. 6.2A(ii).

138.  Vand cannot be said to have acted in such a way as to cause Hans to take all reasonable steps to obtain NDRC approval as soon as possible.  Had Vand acted in accordance with cl. 6.2A(ii), it should have procured Hans (acting down the corporate line through Hans’ subsidiaries) to cause Dongguan Dongzhou to act with greater speed.

D.      Issue (4): Triggering event

139.  That the covenant in cl. 6.2A(ii) was breached does not automatically mean that Pony’s exercise of the put option on 6 June 2009 was valid.

140.  To justify exercise of the put option, Pony has to point to a “triggering event” within the meaning of cl. 6.2D.  Pony would also have to show that it sent out its put option notice within 30 business days of that triggering event.

141.  Mr Sussex’ analysis (which I summarise below) begins by distinguishing between SPA cls. 6.2A(ii) and 6.2D(2).

142.  The former entails an obligation to do a definite act, namely, apply for approval as soon as possible.  It is not a continuing covenant to maintain a state of affairs such that a breach arises at every moment of time during which the state or condition is not as promised.  Once cl. 6.2A(ii) is breached, it is breached once and for all.

143.  The latter defines what constitutes a “triggering event”.  In contrast to breach of the cl. 6.2A(ii) covenant, a triggering event under cl. 6.2D(2) may either be a once and for all failure or an ongoing failure.

144.  This is apparent from cl. 6.2D(2) referring to “the failure of Yuehai to obtain the necessary approval” and from the requirement that such failure be attributable to “the fault of, or arising from an act or omission of, [Vand] or Yuehai”.

145.  The reference in cl. 6.2D(2) to “the failure of Yuehai” (in contrast to a simple reference to “the breach of SPA s. 6.2A(ii)”) indicates that the parties envisaged the possibility of a continuing failure to obtain the necessary approval.

146.  For example, it would be odd if, the necessary approval not having been obtained at the soonest possible date (date X) and Pony having decided not to exercise the put option within 30 business days of date X in order to give Vand more time, Vand should be under no further obligation to obtain the NDRC requisite approval as soon as possible.

147.  The once and for all breach of the covenant in cl. 6.2A(ii) does not also mean that the obligation there is discharged.  The failure to obtain approval as required by cl. 6.2A(ii) continues, albeit the continuing failure does not at law amount to a fresh breach of cl. 6.2A(ii).  See Bell v Peter Browne & Co. [1990] 2 QB 495 (CA), at 500-1 (Nicholls LJ).

148.  The reference to “omission” among the final words of cl. 6.2D(2) reinforces the contention that “the failure of Yuehai” in the initial words of cl. 6.2D(2) can involve a continuing state of affairs.  One may omit to do a one-off act.  But one can also continue to omit to do some act over a period of time.

149.  Now assume that date X is less than 2 years from 13 July 2007.

150.  As a matter of fact, this assumption reflects what must be the case.  The actual approval process took less than 2 years (that is, from 14 November 2008 (when Dongguan Dongzhou first made its submission) to 8 February 2010 (when NDRC gave its confirmation)), even ignoring that the application was lost and had to be re-submitted.  The whole process (including time for the lost application) took about 15 months. If one disregards the time before resubmission of the application in April 2009, the whole process took about 10 months.  A more accurate reckoning of date X would therefore be somewhere between 10 and 15 months from 13 July 2007, give or take a week or so here and there.  For the purposes of this Judgment, I do not think that one needs to be more precise than that.

151.  If (on failing to obtain NDRC approval by date X) Vand was under no further obligation, it could take all the time in the world thereafter to acquire the approval, free of the threat of the put option being exercised by reason of Vand’s later dilatoriness.  That could not be what the parties intended.  Such a reading of cl. 6.2D(2) would not make commercial sense, especially where the parties were treating NDRC as necessary, that is, something that had to be obtained.

152.  The expression “the failure of Yuehai” must instead be a recognition by the parties that the put option could be exercised as a result of Vand’s continuing failure to obtain the necessary approval even after date X.  The breach of cl. 6.2A(ii) through the failure to obtain the necessary approval by date X would not discharge Vand from the obligation to act as soon as possible.  There would remain a continuing necessity for Vand to remedy the situation (that is, to act positively to obtain NDRC approval) on pain of triggering the exercise of the put option by some negative act or omission after date x but before 13 July 2009.

153.  The mere failure (even continuing failure) to obtain NDRC approval would not be enough to trigger the put option.  It must be shown that the failure or continuing failure to obtain NDRC approval arises from one or other of the following: the fault of Vand; an act by Vand; or an omission by Vand.  The end words of cl. 6.2D(2) acknowledge the possibility of the put option being triggered by something apart from “fault” on Vand’s part.  An omission by Vand can trigger the put option if as a direct result of that omission there is a failure to obtain the necessary NDRC approval.

154.  Having breached the covenant in cl. 6.2A(ii) by failing to secure NDRC approval “as soon as possible”, Vand (acting through Dongguan Dongzhou) failed to take appropriate prompt measures to remedy the position over a period of time.  For example, we have seen that, having obtained DMTD approval on 22 May 2009, Dongguan Dongzhou apparently omitted to take the next step in the process for 4 weeks.  It did not seek the approval of the Development and Reform Commission of Guangdong Province until 23 June 2009.

155.  The failure to remedy the breach of cl. 6.2A(ii), by taking prompt action to advance the application even after date X, can amount to an “omission” within the meaning of cl. 6.2D(2).  I agree with Mr Sussex that by June 2009 Dongguan Dongzhou (and hence Vand) had by its lack of activity behaved in such a way as to lead a reasonable person to conclude that it would not be possible to obtain NDRC approval by 13 July 2009.  There being a continuing omission to act promptly in June 2009, there would be a triggering event within cl. 6.2D(2).

156.  It is possible to be more specific in relation to triggering event.  For example, the apparent omission to act promptly, even as late as end May or early June 2009, to submit the application to the Development and Reform Commission of Guangdong Province, could by itself constitute a triggering event within cl. 6.2D(2). I say “apparent” because the actual evidence on the matter (consisting essentially of the chronology) is obscure.

157.  I accept Mr Sussex’ analysis just summarised.

158.  Mr Huggins criticises the analysis in 3 key respects.

159.  First, Mr Huggins stresses that the trigger event must literally involve a culpable failure by Yuehai to obtain approval.  But, since Yuehai (Mr Huggins reasons) was not even a party to the SPA, it cannot ever be said that Yuehai breached any obligation owed to Pony.  More particularly, it cannot be said (Mr Huggins notes) that Yuehai culpably breached any obligation to Pony insofar as obtaining NDRC approval was concerned.

160.  If Mr Huggins is right, one would have a strange result.  Mr Huggins’ argument, carried to its logical conclusion, would mean that the put option could never be exercised.  On Mr Huggins’ reasoning, not owing any obligation to Pony under the SPA, Yuehai could never fail to obtain the necessary approval or carry out the necessary filing.  The condition for the put option to be exercised can never be met.  That cannot be what the parties had in mind.

161.  As Mr Sussex counters, Yuehai is the direct and indirect parent of Dongguan Dongzhou.  Hans in turn controls Yuehai through various intermediaries.  Under SPA cl. 6.2A Vand was to procure Hans to carry out all reasonable steps to obtain NDRC approval as soon as possible.  In the circumstances, in the SPA, the parties were treating a failure by Dongguan Dongzhou to take all reasonable steps to obtain NDRC approval as soon as possible as equivalent to a failure by Yuehai, Hans and Vand.

162.  Second, Mr Huggins submits that a “triggering event” must be a one-off happening.  Accordingly, a continuing failure or omission to remedy a breach of cl. 6.2A(ii) cannot constitute a “triggering event” entitling one to exercise the put option.

163.  I disagree.  For the reasons I have given above, it seems to me that the parties intended the reference “triggering event” in cl. 6.2E to include both one-off as well as continuing happenings.

164.  Third, Mr Huggins warns that I should guard against assimilating the obligation to obtain NDRC approval “as soon as possible” with an obligation to obtain NDRC approval “within a reasonable time”.  The 2 obligations (Mr Huggins suggests) are not synonymous, the former implying a shorter time frame than the latter.  Mr Sussex (Mr Huggins says) tended to elide the 2 different obligations and to treat them as interchangeable.

165.  If Vand breached the covenant in cl. 6.2A(ii) by failing to obtain approval by date X and the put option was not exercised within the stipulated time after such failure (date X + 30 business days), the put option is lost forever.

166.  It is not possible (Mr Huggins observes) thereafter to resurrect the put option by reason only of a continuing omission to remedy the situation before 13 July 2009.  That would turn the obligation to obtain approval “as soon as possible” into something more akin to acting “within a reasonable time”.

167.  It is true that, on occasion in his written submissions, Mr Sussex treats “as soon as possible” as equivalent to “within a reasonable time”.  But I do not believe such equivalence is essential to his submissions.  In this respect, it will be seen that, in my own summary of Mr Sussex’ analysis, it has not been necessary to refer to Vand or Dongguan Dongzhou acting “within a reasonable time”.

168.  The treatment of a continuing omission to act as a “triggering event” is a consequence of the final words of cl. 6.2D(2) read as commercial persons are likely to have understood the same.  I do not think that the reading transforms SPA cl. 6.2A(ii) into an obligation to act “within a reasonable time”.

169.  In summary, I find that there was a “triggering event” within the meaning of cl. 6.2D(2).

170.  The triggering event was Vand’s continuing omission to remedy the failure of Hans, Yuehai or Dongguan Dongzhou to obtain NDRC approval as soon as possible for the change in shareholding.  That dilatoriness manifested itself (among others) in the apparent failure (omission) to procure Dongguan Dongzhou to act promptly (within a week or so (as opposed to a month) of obtaining DMTD approval on 22 May 2009) when applying to the Development and Reform Commission of Guangdong Province for approval.

171.  In those premises, Pony was entitled to serve a put option notice on 6 July 2009 (that is, within 30 business days from (say) 5 June 2009).

E.      Issue (5): Application of SPA cl. 8.3

172.  Mr Huggins argues that the put option notice was invalid because it failed to provide the detail required by cl. 8.3.

173.  I disagree. SPA cls. 6.2C, D and E are self-contained and exhaustive provisions agreed between the parties in relation to the exercise of the put option.  One is either entitled to exercise the option because one complies with the specific terms stipulated there or one is not so entitled.

174.  In contrast, in referring to “Relevant Claims”, cl. 8.3 must mean claims for damages or other legal remedies for breaches of contractual obligations under the SPA.  The clause does not relate to the exercise of the put option.

F. Issue (6): Validity of the put option notice

175.  It follows that Pony validly exercised the put option on 6 July 2009.

IV. CONCLUSION

176.  There will be judgment for Pony against Vand and Mr An for the put option price of $510,708,649.03.

177.  Mr Huggins argued that the 12% compound interest on which that price is based constitutes a penalty which should not be enforced.  But that issue has not been pleaded.  Consequently, it is not open to Vand and Mr An belatedly to take the point.  In any event, there is no evidence in support of the penalty allegation.

178.  The parties are to agree within 14 days a protocol for the payment of the put option price to Pony and for the corresponding transfer by Pony to Vand of the 370 million shares which are the subject of the put option.

179.  Interest is to run on the amount of the put option price at 1% over prime from 13 July 2009 up to the date of this Judgment and thereafter at the judgment rate until payment.

180.  There will be an Order Nisi that Vand and Mr An pay Pony’s costs (including all reserved costs), such costs to be taxed if not agreed.  There will be certificate for 2 counsel.

181.  There will be liberty to apply.