A A

CACV 234/2011
B B

IN THE HIGH COURT OF THE

C C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D COURT OF APPEAL D

CIVIL APPEAL NO. 234 OF 2011

E E
(ON APPEAL FROM HCA NO. 1415 OF 2010)
F F

G BETWEEN G

Liaoyang Shunfeng Iron and Steel Company Limited 1st Plaintiff

H H
(遼陽順鋒鋼鐵有限公司)
I I
Hawkins Development Limited (順勤發展有限公司) 2nd Plaintiff

J And J

Yeung Tsz Wang (楊梓鈜) 1st Defendant

K K

Sunny Growth Enterprises Group Limited 2nd Defendant

L L

M M
Before: Hon Hartmann JA and Bharwaney J in Court
N Dates of Hearing: 10 and 11 May 2012 N

Date of Handing Down Judgment: 14 June 2012

O O

P
JUDGMENT P

Q Hon Hartmann JA: Q

R R
Introduction
S S
1. The plaintiffs in this matter appeal the decision of Au J given in his
T T
judgment of 13 July 2011 to refuse to grant them interlocutory relief by granting

U
them what is commonly called an anti-suit injunction restraining the defendants U

V V
A
- 2 - A

from prosecuting or assisting others in the prosecution of certain litigation in the

B B
courts of the Mainland, more specifically in the courts of Liaoning Province.
C C

2. The first plaintiff, Shunfeng Iron and Steel, is a Sino-foreign joint

D D
venture company incorporated in Liaoning Province. It is the holder of a
E licence giving it the right to extract iron ore from a number of mines in the E

Province.
F F

3. The position of the plaintiffs is that there were, and continue to be,
G G
three members of the Sino-foreign joint venture, each holding a share in
H H
Shunfeng Iron and Steel. The majority shareholder, holding 80% of the issued

I
shares, is the second plaintiff, Hawkins Development. It is an investment I
company incorporated in Hong Kong and represents the ‘foreign’ interest in the
J J
joint venture. The remaining 20% of the shares are held by two companies

K
incorporated in Liaoning Province, seemingly representing the interests of the K
local authorities.
L L

4. The position of the defendants - most certainly before us at the

M M
hearing of the appeal – is that, as a result of the failure of Hawkins
N Development to meet its financial obligations under the joint venture, by N

automatic exercise of Mainland law that joint venture came to an end in June
O O
2006. Steps were then taken to create a new joint venture which remained the
P same as the earlier one except for the fact that the second defendant, Sunny P

Growth, a BVI company, took the place of Hawkins Development, agreeing to

Q Q
inject the necessary capital in consideration for which it was given an 80%
R shareholding in the joint venture company, Shunfeng Iron and Steel – the same R

S
shareholding earlier enjoyed by Hawkins Development. S

T 5. The dispute, therefore, although complex in its details, may – at T

this time – be encapsulated perhaps in the single question: which company is

U U

V V
A
- 3 - A

lawfully entitled to hold the majority interest in the joint venture and thereby to
B B
hold the 80% holding in the joint venture company, Shunfeng Iron and Steel; is
C it Hawkins Development or Sunny Growth? C

D D
6. Earlier in the history of this matter, however, the dispute appears to
E have revolved around a more limited issue, namely, who had lawful control of E

Hawkins Development and thereby of Shunfeng Iron and Steel and through that
F F
company of the joint venture?
G G
7. Although there has been a proliferation of actions – a matter to
H
which I shall turn shortly – it would appear that the issue of who has lawful H

I
control of Hawkins Development is an issue which has always fallen to the I
Hong Kong courts to resolve. This is natural enough: Hawkins Development
J J
is a Hong Kong registered company.

K K
8. This interlocutory appeal lies in respect the following action
L instituted in the Court of First Instance in September 2010, namely, L

HCA 1415/2010 . It is one of three Hong Kong actions which have sought to
M M
determine who has lawful control of Hawkins Development.
N N

9. Some four months after the plaintiffs commenced this action, they
O O
applied for an interlocutory injunction to restrain the defendants either
P continuing litigation already commenced or instituting new litigation in P

Liaoning Province if such actions went to the issues of who controlled Hawkins
Q Q
Development and/or Shunfeng Iron and Steel. As I have said, in a judgment
R dated 13 July 2011, Au J dismissed that application. The present appeal is R

from that judgment.

S S

T
10. However, matters have not remained static since that time. There T
have been further developments which have shifted the context in which matters
U U

V V
A
- 4 - A

now fall to be considered and which have resulted in a redrafting of the

B B
injunctive relief sought by the plaintiffs.
C C

Background
D D

11. In order to determine this appeal, it is necessary to set out in some

E E
detail the relevant history of events.
F F

12. It appears that the Sino-foreign joint venture to operate the iron ore
G G
mines in Liaoning Province was entered into in about 1996.
H H
13. At about that time, Wong Kam Sang, a businessman, made
I I
Hawkins Development the vehicle for holding his 80% shareholding in

J
Shunfeng Iron and Steel. J

K 14. There were originally just 100 issued shares in Hawkins K

Development. These were held in trust for Wong by his wife and his assistant.
L L

M 15. In March 2000, Wong transferred 25 shares to a BVI company M

controlled by himself. At the same time he issued one share to a man named
N N
Yeung Wing Keung and the remaining 74 shares to a company called Zhao Kai
O Investment. O

P 16. According to Wong, he was persuaded by Yeung to transfer the P

75% shareholding in order to facilitate the listing of Hawkins Development on

Q Q
the Growth Enterprise Market Board of the Hong Kong Stock Exchange.
R According to Wong, it was agreed that the shares would be held for him in trust. R

S S
17. In 2004, Wong fell out with Yeung and demanded the return of the
T 75 shares. It was Yeung’s defence that the shares had been transferred to be T

U U

V V
A
- 5 - A

held on trust for a third party, an investor named Zhao Ahping who had lent
B B
money to Wong in order to help finance the joint venture.
C C

18. In order to get the return of the 75% shareholding, Wong instituted
D D
action in the Court of First Instance: HCA 1653/2004.
E E
19. Before the final resolution of that action, when the 75%
F shareholding in Hawkins Development was held by Yeung, it appears that the F

following actions were taken:

G G

H (i) Yeung appointed himself, his wife and his sister as directors of H

Hawkins Development, backdating these appointments to 1998,

I I
seemingly well before they had had any dealings with the
J company. J

K K
(ii) The transfer of shares to Yeung and Zhao Kai Investment was also

L backdated to 1998, a false report thereby being made to the Stamp L

Duty Office.
M M

20. It further emerged that, when the litigation instituted by Wong to

N N
seek the return of the shares was on-going, the following happened:
O O

(i) An extraordinary general meeting of Hawkins Development was

P P
held on 14 July 2005. At this meeting, Yeung’s sister (Madam
Q Kan Siu Wan) was invited to subscribe for shares in the company Q

so that she would become its major shareholder. In this regard,

R R
the board was authorized to approve the allotment of 9,900 shares
S in the company to her at par. S

T T
(ii) On 25 July 2005, just a few days after she had been allotted the

U
9,900 shares, Madam Kan transferred those shares to Sunny U

V V
A
- 6 - A

Growth. As I understand it, at that time – although it is not the

B B
case now – it was said that Sunny Growth was fully owned by
C independent persons, a man named Chan Che Sing and his son. C

However, in later litigation, when the issue became of direct

D D
relevance, the assertion was rejected that in or about 2005 neither
E Yeung nor his family members had any interest in the company: E

see the judgment of Lam J in HCA 2036/2005, particularly

F F
paras. 99, 100 and 108.
G G

(iii) In August 2005, Yeung’s son and daughter were also appointed
H H
directors of Hawkins Development.
I I
(iv) In September 2005, Yeung himself resigned as a director of
J J
Hawkins Development, a bankruptcy order being made against

K
him a few days later. K

L (v) In November 2005, Chan (on behalf of Sunny Growth) appointed L

two companies controlled by him as directors of Hawkins

M M
Development.
N N

21. In October 2005, when Wong became aware of the allotment of the
O O
9,900 shares in Hawkins Development, he brought a second action in the Court
P of First Instance: HCA 2036/2005. In this second action, Wong sought to have P

the allotment of 9,900 shares set aside for procedural irregularity and also on the
Q Q
substantive basis that the allotment had been made with the ulterior motive of
R defeating his claim in his first action (HCA 1653/2004) by diluting his R

shareholding in the company.

S S

T
22. In April 2006, Deputy Judge Louis Chan gave judgment in favour T
of Wong in the first action: HCA 1653/2004. He declared that the 75%
U U

V V
A
- 7 - A

shareholding had been held in trust for Wong and was to be transferred back to
B B
him.
C C

23. It is important to note that the judge made a further order: the
D D
granting of an injunction on the following terms:
E E
“I also grant an injunction to restrain each of the second to seventh
defendants, whether by themselves or their servants or agents or
F otherwise howsoever from interfering with the business of Hawkins F
[Development] or the business of the joint venture or the mining
operation.”
G G

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

Development.
J J

K 25. The judgment was appealed, the Court of Appeal dismissing the K

appeal in a judgment dated 31 January 2007. As to the granting of the

L L
injunction, the Court of Appeal said (para. 72):
M M
“Since there is a continuing risk the … defendants would purport to act
as directors of Hawkins [Development], we see no good reason not to
N uphold the injunction.” N

O 26. The injunction therefore remained in force and continues in force O

to this time.
P P

Q
27. In respect of the second action instituted by Wong Q
(HCA 2036/2005), in a judgment dated 11 April 2007, Lam J set aside the
R R
allotment of the 9,900 shares to Madam Kan, finding in favour of Wong on both

S
procedural and substantive grounds. It was held that there was no commercial S
justification for the allotment of shares to Madam Kan and that Sunny Growth
T T
was not a bona fide investor in Hawkins Development without notice. Lam J

U drew the inference that the allotment of shares had been part of a scheme by U

V V
A
- 8 - A

Yeung, his family and associates to prevent Wong regaining control of the
B B
company.
C C

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

commented:
F F

“I can only conclude this judgment by saying that these appeals were a
G disgrace and should never have been brought, still less pursued to a G
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
H an abuse of that right.” H

I 29. Wong’s control of Hawkins Development and of Shunfeng Iron I

and Steel had been removed from him in late 2005. However, in early 2007,
J J
as a direct result of the Hong Kong judgments in his favour, he was able to
K regain control of both companies. K

L L
30. In a judgment dated 21 August 2009 (to which I shall refer shortly),
M Kwan J, as she then was, recorded that, when Wong was able to resume M

effective control, “he discovered that a substantial number of documents and

N N
materials of Shunfeng including its books and accounts and bank statements
O were removed from its office premises.” In the result, said Kwan J, “on 19 and O

20 April 2007 the solicitors of [Hawkins Development] wrote to Chan, Yeung

P P
and their family members seeking delivery up of all documents belonging to
Q Shunfeng and [Hawkins Development].” Q

R R
31. The failure to deliver up the books and materials resulted in further

S legal action being instituted. S

T 32. At this juncture it is important to recognize the current position T

concerning both Hawkins Development and Shunfeng Iron and Steel. During
U U

V V
A
- 9 - A

the course of the appeal hearing we were assured that Wong and his associates
B B
have since 2007 remained in full control of both companies and thereby the
C on-going mining operations of the joint venture. It must follow, of course, that C

since 2007 they have been working with the minority shareholders, the two
D D
Mainland companies which represent the interests of the local authorities in
E Liaoning Province. E

F F
33. The history of the litigation, however, does not end here.
G G
34. Before us, it was (effectively) submitted on behalf of the
H
defendants that, whatever steps were taken by the ‘Yeung camp’ in the past to H

I
secure control of Hawkins Development had been taken because the ‘Wong I
camp’ had failed to meet their obligations under the joint venture agreement to
J J
adequately fund the mining operations in Liaoning Province and that it had been

K
necessary to save the joint venture from collapse by reconstituting it. Integral K
to that reconstitution was the choice of Sunny Growth as the ‘foreign’ partner to
L L
replace Wong as the majority shareholder in Hawkins Development, or to

M replace Hawkins Development itself. It was said that only by this method was M

sufficient funding guaranteed.

N N

35. However, on my reading of the various judgments thrown up by

O O
this dispute, evidence of such funding to ‘rescue’ the joint venture has been less
P than convincing. P

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

S S
37. In April of that year, the solicitors for a company called Walford

T
International Holdings, a BVI company, served a demand on Hawkins T
Development for payment of a debt of HK$29.97 million. It was asserted that
U U
the funds had been provided to assist (in various ways) in the financing of the

V V
A
- 10 - A

joint venture. A month later Walford presented a petition for the winding-up
B B
of Hawkins Development on the basis that it was unable to pay its debts:
C HCCW 215/2007. C

D D
38. The petition was opposed by Hawkins Development, the
E contention being made that there was no indebtedness as claimed and that the E

claim was an abuse of process. In a judgment dated 21 August 2009, Kwan J

F F
dismissed the application, making an order nisi that Walford pay the costs of
G Hawkins Development on an indemnity basis. G

H
39. The judge said that at the very least “it was difficult to escape the H

I
conclusion that the petition was presented in the knowledge of a serious I
dispute” as to the true nature and extent of the debt claimed by Walford and it
J J
should therefore have pressed its claim by way of writ, a course still open to it.

K K
40. No such writ appears to have issued.
L L
41. In her judgment, Kwan J recorded the gist of the defence by
M M
Hawkins Development in the following terms:
N N
“Mr Coleman [counsel for Hawkins Development] submitted
forcefully that the situation before this Court is one where Walford,
O whose name has never been mentioned during all the years of hostile O
litigation between Yeung and Wong, suddenly appeared out of
nowhere to petition for the winding up of the company for an
P indebtedness on the basis of documents signed by Yeung and his P
associates on behalf of the company when they were found in previous
Q litigation to be in wrongful control of it. The provision of the Q
expenses of [Hawkins Development] and Shunfeng had been
canvassed in evidence in previous litigation. Not only did Yeung not
R mention Walford, his evidence was contrary to the case now put R
forward by Walford. Evidence of propensity must go into the balance
in assessing and weighing the evidence now adduced before this
S S
Court.”

T T
42. The issue of propensity led Kwan J to look at the earlier litigation.

U
In doing so, she noted that in the two Hong Kong actions instituted by Wong to U

V V
A
- 11 - A

recover the 75 shares in Hawkins Development and to set aside the allotment of
B B
9,900 shares to Madam Kan, the evidence of Yeung and Chan had in the main
C been rejected. It was also notable, she said, that in the two judgments the C

defendants had been “roundly criticized by the courts for not calling witnesses
D D
who could and should have testified on pertinent issues”.
E E

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

H “… kept opaque deliberately from day one, so much so that the court H
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
I court was of the view that the monies injected by Chan into [Hawkins I
Development] were likely to have come from a source connected with
J
Yeung.” [my emphasis] J

44. By way of illustration, in HCA 1653/2004 (the action instituted by

K K
Wong for the return of the 75 shares in Hawkins Development), Yeung’s case
L L
was that the 75% majority shareholding had been passed to Zhao Kai

M
Investment in part for taking on the obligation to fund the joint venture. M
However, no evidence whatsoever was put forward by Yeung to evidence any
N N
such funding and Yeung was constrained to suggest that, as it had turned out, no

O funding had been required. This was rejected by the trial judge as a “blatant O
lie”.
P P

45. Chan, the man who purported to own Sunny Growth with his son
Q Q
and to be independent of Yeung, claimed to have injected sums of money
R exceeding HK$38 million into Hawkins Development on various dates pursuant R

to a loan agreement. In November 2006, he presented a petition for the

S S
winding-up of Hawkins Development but then withdrew it, reserving his right
T to file a fresh petition. Close to six years has passed since then and no fresh T

petition has been filed.

U U

V V
A
- 12 - A

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

B B

C 47. This brings us to the third action instituted in the Court of First C

Instance by Wong, the action which gives rise to this appeal.

D D

48. Central to that action, indeed the very focus of it, is the fact that in
E E
June 2006, when Wong and his associates were excluded from the management
F and control of both Hawkins Development and Shunfeng Iron and Steel, those F

two companies purportedly entered into what is described as an ‘investment

G G
agreement’. In terms of that agreement, Sunny Growth replaced Hawkins
H H
Development as the 80% foreign shareholder in Shunfeng Iron and Steel by

I
agreeing to invest a sum of RMB246.82 million by way of an increase in I
Shunfeng Iron and Steel’s capital, this seemingly being for the purpose of
J J
funding the joint venture operations. This agreement was purportedly

K
supported by the necessary internal share transfer agreement, company minutes K
and the like.
L L

49. It appears that certain of the relevant papers were signed by

M M
persons who were (and remain) injuncted from ‘interfering with the business of
N Hawkins Development or the business of the joint venture or the mining N

operation’. For example, minutes and resolutions were signed on behalf of

O O
Shunfeng Iron and Steel by Yeung’s sister, Madam Kan.
P P

50. On 11 August 2010, Sunny Growth filed a writ in the Higher

Q Q
People’s Court of Liaoning Province seeking the following:
R R
(i) A declaration that the investment agreement was a lawful
S S
agreement;

T T

U U

V V
A
- 13 - A

(ii) a declaration that Sunny Growth (and no longer Hawkins

B B
Development) was the owner of 80% of the shares in Shunfeng
C Iron and Steel, and C

D D
(iii) an order that Shunfeng Iron and Steel do pay Sunny Growth a sum
E of RMB103.37 million, this being 80% of the company’s joint E

venture profits for the previous three years and eight months.
F F

51. In support of its case that it had met its side of the bargain by
G G
injecting funds into the joint venture business, that is, into Shunfeng Iron and
H H
Steel, more particularly, the sums of US$800,000 and HK$32,460,110

I
purportedly paid between June and December 2006, Sunny Growth exhibited to I
its claim a total of 11 remittance slips.
J J

52. Whoever may have controlled Sunny Growth originally, the

K K
assertion then being that it was Chan and his son, when this litigation was
L commenced in Liaoning Province, Chan held just 42 out of 840 issued shares in L

the company, the balance of 798 shares being held by Yeung Tsz Wang, the son
M M
of Yeung Wing Keung.
N N

53. When notice of the litigation in Liaoning Province was received,

O O
Wong instituted his third action in the Court of First Instance, that is the action
P which is the subject of this appeal: HCA 1415/2010. The plaintiffs in this P

action are Hawkins Development and Shunfeng Iron and Steel, the two
Q Q
companies which – by reason of the earlier Hong Kong actions – Wong now
R controls again. The defendants are Yeung’s son, Yeung Tsz Wang, and the R

company that he now controls: Sunny Growth.

S S

T
54. In this action, Wong has sought: T

U U

V V
A
- 14 - A

(i) a declaration that the ‘investment agreement’ together with its

B B
associated share transfer agreement, company minutes, resolution
C and the like be declared null and void and of no legal effect; C

D D
(ii) an injunction restraining Sunny Growth (and its officers) from
E continuing the litigation in Liaoning Province or commencing any E

other litigation in those courts which covers “the same or

F F
substantially the same subject matter”, and
G G
(iii) an injunction restraining Yeung Tsz Wang (or his associates) from
H H
assisting Sunny Growth in prosecuting the present litigation in

I
Liaoning Province or any future litigation in those courts covering I
“the same or substantially the same subject matter”.
J J

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

K K

L (i) the ‘investment agreement’ and accompanying documents have L

been entered into in contravention of the articles of Hawkins
M M
Development and the bylaws of Shunfeng Iron and Steel;
N N
(ii) the making of the ‘investment agreement’ and accompanying
O documents is, in respect of a number of persons, in direct breach O

of the injunction ordered by Deputy Judge Louis Chan in

P P
HCA 1653/2004;
Q Q

(iii) the remittance slips purporting to support the contention that Sunny
R R
Growth has injected funds into the joint venture agreement are of
S no evidential value on the basis that “in previous legal S

proceedings in Hong Kong and the PRC, Sunny Growth and/or a

T T
party closely related to it, viz, Chan, had relied upon the same or
U substantially the same remittance slips in support of cases U

V V
A
- 15 - A

contradictory to Sunny Growth’s case aforesaid”. In blunt terms,

B B
therefore, the allegation is that the 11 remittance slips, or any
C combination of them, have been used to support whatever case C

Yeung and his associates have chosen to bring without regard to

D D
the fact that in one case their purported use contradicts their
E purported use in another. E

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

and vexatious and/or oppressive”.

H H

I
57. As it transpired, in December 2010 the Higher People’s Court of I
Liaoning Province dismissed the action instituted by Sunny Growth. From a
J J
reading of the English translation of its ruling, the Court appears to have done

K
so on two grounds; first, that the formal authority to commence the action filed K
with the Court had no validity and, second, that at a preliminary hearing, Yeung
L L
Tsz Wang had admitted that the writ filed with the Court “did not genuinely

M show our company’s intention”. I read that to mean that in some unspecified M

way the action was legally or factually misconceived.

N N

58. Although the action had been dismissed, a few days later the
O O
solicitors for Yeung Tsz Wang and Sunny Growth informed the solicitors
P representing Wong (i.e. Hawkins Development and Shunfeng Iron and Steel) P

that their clients still intended to pursue their claims in “the PRC Court” when it
Q Q
was considered appropriate.
R R

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

being given in the following month.

U U

V V
A
- 16 - A

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

C 61. On the day after Au J dismissed the application for an interlocutory C

injunction, Sunny Growth (represented by Yeung Tsz Wang) entered into an

D D
agreement in Liaoning Province with a company named Liaoning Shengyuan
E Investment Company. That agreement, in English translation, bears the E

heading: ‘investment equity transfer agreement’.

F F

62. In essence, the agreement purports to transfer all of Sunny

G G
Growth’s “investment interests” in Shunfeng Iron and Steel to Liaoning
H H
Shengyuan for a sum of RMB50 million.

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

K K
(i) Hawkins Investment had failed to meet its funding obligations in

L respect of the joint venture, Wong being guilty of “professional L

embezzlement”. In this regard, the agreement states: “Due to the
M M
withdrawal of capital contribution, the failure to inject the
N undertaken investment on the part of Hawkins and the N

professional embezzlement by Wong Kam San (the former legal

O O
representative of the company), the operation and production of
P Shunfeng was facing great difficulties. Hence, Shunfeng P

convened two board meetings on 8 June 2006 and 26 June 2006

Q Q
and passed the resolution: ‘Sunny Growth shall substitute
R Hawkins Development to proceed with the investment and R

registration shall be made to the Liaoyang Administration for

S S
Industry and Commerce for the change of new shareholder of
T Shunfeng.’” T

U U

V V
A
- 17 - A

(ii) In June 2006, in the face of pressing financial difficulties,

B B
Shunfeng Iron and Steel had resolved that Sunny Growth should
C take the place of Hawkins Development – being a reference to the C

‘investment agreement’ and accompanying documents, the

D D
subject of Wong’s current Hong Kong action.
E E

(iii) Between June and December 2006 Sunny Growth had met its
F F
obligations under the ‘investment agreement’ (investing
G US$800,000 and HK$32.46 million and paying a fine of RMB5 G

million to the provincial authorities). In this regard, the

H H
agreement states: “On 24 July 2008, the state-owned shareholder
I of Shunfeng [the 20% shareholder in the joint venture], Dengta I

Metallurgical Mining Corporation, issued the Investment

J J
Cooperation Confirmation and confirmed that: “Hong Kong
K Sunny Growth Enterprises Group Limited has injected the first K

investment equivalent to RMB50 million to the account of the

L L
joint venture Shungeng Iron and Steel before December 2006 in
M accordance with relevant provisions, which was confirmed M

error-free by capital verification. We hereby confirm the

N N
above.”
O O

(iv) However, due to “interference by Hawkins Development”, the

P P
registration of the transfer by Hawkins Development of its 80%
Q shareholding in Shunfeng Iron and Steel had not been registered. Q

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

S S
(i) Sunny Growth would within 60 days be responsible for securing
T the registration of its 80% shareholding in Shunfeng Iron and T

U U

V V
A
- 18 - A

Steel (and thereby of the joint venture) and of its transfer of that
B B
interest to Liaoning Shengyuan, and
C C

(ii) that Liaoning Shengyuan would then (within 10 working days) pay
D D
the purchase price of RMB50 million.
E E
65. As for Liaoning Shengyuan, it was apparently incorporated in the
F Mainland in January 2010 in order to carry on the business of “asset F

investment”, there being three shareholders who have between them invested
G G
cash in a total sum of RMB30 million.
H H

66. No direct evidence was placed before us to indicate that Liaoning

I I
Shengyuan is other than an independent third party.
J J
67. As it is, in November 2011 Liaoning Shengyuan instituted legal
K K
proceedings in Liaoning Province, the defendants being Sunny Growth,

L Shunfeng Iron and Steel and Hawkins Development. What is claimed in those L
proceedings is an enforcement of the ‘investment equity transfer agreement’.
M M

The amended injunctions

N N

O 68. As a result of the institution of proceedings in the Mainland by O

Liaoning Shengyuan, the plaintiffs have sought to amend the nature and scope
P P
of the two interlocutory injunctions which they say this Court, in allowing the
Q appeal, should grant in their favour. Q

R 69. The first injunction seeks to restrain the first defendant, Yeung Tsz R

Wang, the second seeks to restrain the second defendant, Sunny Growth.
S S

T 70. Both injunctions seek the same remedies. They are, first, that the T

defendants be restrained from commencing, or assisting each other or Liaoning

U U

V V
A
- 19 - A

Shengyuan in the commencement of, any action in the Mainland courts that
B B
covers the same or substantially the same subject matter as the legal
C proceedings, now dismissed, which were instituted in August 2010 by Sunny C

Growth and, second, this being a material extension of the scope of the
D D
injunctions, that they be restrained from assisting Liaoning Shengyuan in
E prosecuting the action instituted by it in November 2011. E

F F
The issues as they appeared to be before us
G G
71. The Hong Kong litigation to date has been focused on two issues.
H H

72. First, there have been three sets of litigation concerning control of
I I
Hawkins Development and, through that company, control of Shunfeng Iron
J and Steel. The two completed sets of litigation have been resolved in favour J

of Wong and his associates. In the result, Wong and his associates now have
K K
active day-to-day control and management of both companies which means that
L they have control of the on-going joint venture mining operations. The third L

set of litigation has not yet come to trial.

M M

N 73. Second, there have been two attempts to seek the winding-up of N

Hawkins Development. The petitions were brought by separate parties: both,

O O
however, alleging that Hawkins Development was indebted to them for monies
P advanced to finance the joint venture. In respect of both matters, the petitions P

for winding-up were dismissed and certainly in respect of the second petition,
Q Q
the one brought by Walford, the court expressed concerns as to its integrity.
R R
74. As to the litigation in Liaoning Province, Ms Lisa Wong SC,
S S
leading counsel for the defendants, has argued that, in the on-going litigation

T
commenced by Liaoning Shengyuan in the Mainland in November of last year, T
issues going to the shareholdings held in Hawkins Development will be
U U
essentially incidental. This litigation, she said, would not be dependent on

V V
A
- 20 - A

finding that the defendants are the lawful holders of the majority shares in
B B
Hawkins Development. It would be focused, she said, on the issue of whether
C the plaintiffs had failed to honour the terms of the Sino-foreign joint venture C

agreement and, if so, what were the consequences under PRC law of that
D D
failure.
E E

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

F F
to be as follows.
G G
76. First, PRC law states that, if the foreign party to a Sino-foreign
H H
joint venture agreement fails to honour its obligations under the agreement, then,

I
by that default, the agreement is brought to an end. I

J 77. Second, there is evidence that the plaintiffs, by their failure to meet J

their financial obligations, breached the terms of the joint venture agreement.
K K
That being the case, no formal pronouncement of the dissolution of the joint
L venture was necessary either by the injured parties to the joint venture or by any L

court. The breach by the plaintiffs resulted in an automatic termination of the

M M
joint venture.
N N

78. Third, there is evidence that the minority shareholders in the joint
O O
venture acted to keep the joint venture operations running by seeking a new
P partner. It was in this regard that Sunny Growth was approached and agreed to P

inject funds into the joint venture in consideration for being given an 80% share
Q Q
in the new joint venture.
R R
79. Fourth, there is evidence that Sunny Growth duly paid the financial
S S
contribution demanded of it.

T T

U U

V V
A
- 21 - A

80. Fifth, in the result Sunny Growth became entitled to an 80%

B B
shareholding in the joint venture, that share being in the joint venture company
C registered in Liaoning Province: Shunfeng Iron and Steel. C

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

F 82. For the plaintiffs, Mr Anthony Chan SC, their leading counsel, F

submitted that this was an overly simplistic approach. What could not be
G G
avoided was that the document entitled ‘investment equity transfer agreement’
H H
was still based on Sunny Growth having its purported 80% shareholding in

I
Shunfeng Iron and Steel registered with the relevant authorities. As the I
litigation instituted by Liaoning Shengyuan sought an enforcement of that
J J
agreement, it meant that its litigation too was focused on the issue of which

K
party in law was entitled to the majority shareholding in Shunfeng Iron and K
Steel, Hawkins Development or Sunny Growth. It was wrong therefore to
L L
suggest that the control of Hawkins Development was at best incidental to the

M litigation instituted by Liaoning Shengyuan. The issue also remained central M

to that litigation because Hawkins Development – based on the findings of the

N N
Hong Kong courts – remained the majority shareholder in Shunfeng Iron and
O Steel, the joint venture company. O

P Injunctions restraining foreign litigation: the governing principles P

Q Q
83. Before us, and before the Court of First Instance, there was little
R dispute as to the principles that must be taken into account in determining R

whether to grant an anti-suit injunction.

S S

T
84. The underlying principle is that under our law a person “has no T
right not to be sued in a particular forum, domestic or foreign, unless there is
U U

V V
A
- 22 - A

some specific factor which gives him that right: Turner v Grovitt [2002] 1
B B
WLR 107 (HL) at 118 per Lord Hobhouse.
C C

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

Lord Goff –
F F

“The broad principle underlying the jurisdiction is that it may be

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

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

L L
87. Ms Wong further emphasized that, as the authorities themselves
M make clear, as the court is concerned with the ends of justice, account must be M

taken not only of injustice to the applicant if the respondent to the application is
N N
permitted to pursue foreign proceedings which are vexatious or oppressive, but
O also of injustice to the respondent if, by granting the injunction, he is deprived O

of any advantage in the foreign forum of which it would be unjust to deprive

P P
him.
Q Q

88. A distinction is to be drawn between cases where the application

R R
for an anti-suit injunction is founded upon a contractual right and other cases,
S that is, cases (such as the present case) in which it is asserted that the foreign S

proceedings have been commenced in bad faith for the purpose of frustrating
T T
proceedings in Hong Kong. In this regard, see Turner v Grovitt (supra) per
U Lord Hobhouse (paras 27 and 28): U

V V
A
- 23 - A

“The applicant for a restraining order must have a legitimate interest in

B making his application and the protection of that interest must make it B
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
C C
an exclusive jurisdiction clause or an arbitration clause), then, absent
some special circumstances, he has by reason of his contract a
D legitimate interest in enforcing that right against the other party to the D
contract. But where he is relying upon conduct of the other person
which is unconscionable for some non-contractual reason, English law
E E
requires that the legitimate interest must be the existence of
proceedings in this country which need to be protected by the grant of
F a restraining order… F

It is recognised that to make an order against a person who is a party to

G proceedings before a foreign court may be treated as an interference G
(albeit indirect) in the foreign proceedings. Thus English law
requires the applicant to show a clear need to protect existing English
H H
proceedings. The protection of English proceedings is,
understandably, regarded as a legitimate subject matter for an English
I court. It is not the concern of any other court. The order made I
operates in personam and relies for its enforcement solely upon the
English court. In the present case, the Court of Appeal [2000]
J QB 345, 364, were at pains to stress that their orders were directed to J
the defendants and not the Spanish court.”
K K
89. Lord Hobhouse (para 29) summarised the essential features which
L made it proper, under English law, for a court to exercise its power to grant an L

M
anti-suit injunction. These are – M

“… (a) the applicant is a party to existing legal proceedings in this

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

Q Looking to the judgment at first instance Q

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

T 91. The plaintiffs had instituted proceedings in Hong Kong which in T

almost all essential elements mirrored the proceedings instituted by the

U U

V V
A
- 24 - A

defendants in the Higher People’s Court of Liaoning Province, proceedings that

B B
had just been dismissed. The defendants, having submitted to the jurisdiction
C of the Hong Kong courts, were resisting those proceedings. C

D D
92. There were, therefore, on-going proceedings in Hong Kong set to
E determine essentially the same issues as the defunct proceedings in Liaoning E

Province or any further proceedings to be instituted by the defendants based on

F F
the same contentions.
G G
93. That, however, gave only half the story because the Hong Kong
H H
proceedings had arisen out of two earlier sets of proceedings directly related to

I
the control of the Sino-foreign joint venture. The defendants and/or their I
associates had submitted to the jurisdiction of the Hong Kong courts in respect
J J
of those earlier actions.

K K
94. In those actions – their history being set out above – numerous
L findings of fact had been made, the majority of them in favour of the plaintiffs L

and their associates, leading to orders of fundamental importance in respect of

M M
who has lawful control of Hawkins Development and Shunfeng Iron and Steel.
N N

95. It was, however, in respect of the second and third ‘essential

O O
features’ defined by Lord Hobhouse that the Au J dismissed the application for
P the anti-suit injunctions. P

Q 96. In respect of the second ‘essential feature’, the judge found that the Q

plaintiffs had failed to demonstate that the proceedings instituted before the
R R
Higher People’s Court in Liaoning Province had been instituted in bad faith,
S S
being vexatious and oppressive, and that the institution of any future litigation

T
in the Province on the same subject matter would likewise constitute vexatious T
and oppressive conduct designed to frustrate the plaintiffs’ Hong Kong
U U
proceedings.

V V
A
- 25 - A

97. The plaintiffs sought to demonstrate that any action to be instituted

B B
would be designed to frustrate the Hong Kong proceedings by asking the court
C to consider certain matters in the context of the long and bitter history of the C

Hong Kong litigation in which the good faith of the defendants in the conduct of
D D
that litigation had been roundly criticised.
E E

98. The principal platform of attack was founded on certain evidence

F F
used by the defendants in the recent Mainland action in an attempt to prove that
G Sunny Growth had discharged its financial obligations (while Hawkins G

Development had not)and was therefore entitled to an 80% share in Shunfeng

H H
Iron and Steel and thereby in the joint venture. That evidence consisted of the
I 11 remittance slips to which I have made reference. I

J J
99. The plaintiffs were able to show that the same remittance slips, or

K
portion of them, had been used in other related litigation in an attempt to prove K
different, indeed contrary matters. By way of example, it was shown that the
L L
same 11 remittance slips had been used in an earlier action by Chan (once the

M majority shareholder in Sunny Growth) in an attempt to demonstrate that he – M

not Sunny Growth - had made a loan to Shunfeng Iron and Steel. Eight of the
N N
same remittance slips had also been used by Chan in an attempt to demonstrate
O that he had lent and advanced money to Hawkins Development. Evidence was O

also led that eight of the remittance slips had been used by Sunny Growth in an
P P
attempt to demonstrate that it too had lent money to Hawkins Development
Q rather than investing it in the joint venture in return for a shareholding. Q

R 100. As it was put by plaintiffs’ counsel, the ill-fated litigation before R

S
the Higher People’s Court in Liaoning Province was the fourth time that the S
remittance slips had been used in an attempt to support a claim, the story
T T
changing on each occasion. This blatant misuse of evidence, said counsel, was

U U

V V
A
- 26 - A

compounded by the fact that no attempt had been made to put forward any
B B
explanation.
C C

101. These matters on their own, it was argued, clearly demonstrated a

D D
prima facie case that the litigation recently dismissed by the Higher People’s
E Court of Liaoning Province, and any future litigation based on the same subject E

matter, was intended as a cynical exercise to outflank the advantages already

F F
gained by the plaintiffs in the Hong Kong litigation and to outflank the current
G Hong Kong litigation; it was plainly a bad faith exercise, one in which evidence G

was used for whatever purpose suited the moment, and was thereby
H H
unconscionable.
I I
102. The judge described the submission in less forthright terms
J J
(para. 42)

K “Mr Ng [counsel for the plaintiffs] describes this as the ‘recycling’ of K

the same evidence, which is clearly unreliable. He therefore submits
L that the defendant’s claims in the PRC litigation are entirely without L
merit and bound to fail. The claims are therefore clearly brought in
bad faith, vexatious and on oppressive. This applies with equal force
M to any fresh actions intended to be brought by the defendants for the M
same purpose.”
N N
103. But, while the judge recognised the force of the argument, he did
O not think it sufficient. He said (para. 43): O

P “… I do not think on this basis alone I could conclude summarily at P

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
Q Q
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
R the failed or wrong one.” R

S 104. The judge continued: S

T “The Court cannot and should not, for the present purpose at T
interlocutory stage, engage in a mini-trial on this issue based on the
affirmation evidence. Whether the defendants could eventually rely
U on these 11 remittance slips to support their case of investment in U

V V
A
- 27 - A

Shunfeng has to be left to trial, if any, after proper cross-examination

B of witnesses.” B

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

following reasons.
D D

E
106. First, as I see it, the judge was not required to make a E
determination – certainly not any sort of final determination – to the effect that
F F
the remittance slips could never be given any weight in the PRC courts. That

G would require the judge to step into the shoes of the PRC courts, judging G

matters according to PRC law. The judge was required instead to consider
H H
whether the use of the remittance slips, considered in the context of all relevant
I matters, provided evidence that the proceedings upon which they are, or will be, I

based have been, or will be, instituted in bad faith, being designed to frustrate
J J
and obstruct the current Hong Kong proceedings.
K K
107. Second, in order to make that determination, in my view, no form
L of ‘mini-trial’ was required. The judge was determining an interlocutory L

M
application; he was required to come to a finding on the material before him. M
That material included the pronouncements of our courts in respect of the long
N N
and complex litigation that had already taken place. More particularly, the

O
judge had before him seemingly cogent evidence – unexplained by the O
defendants – that the remittance slips had been employed on earlier occasions
P P
by the defendants and/or their integral associates to support differing, indeed

Q contradictory, claims. What was required of the judge, in my view, was to Q

determine whether, on the material that was before him, he was in a position to
R R
conclude that those remittance slips, by reason of their past contradictory use by
S different parties, were now so devoid of any evidential value that their S

continued use in actions to be instituted by the plaintiffs in the PRC – based on

T T
essentially the same contentions as those contained in their first, now defunct
U action – could lead only to the inference (for the purposes of the anti-suit U

V V
A
- 28 - A

injunction) that the proceedings upon which they were based must be entirely
B B
tactical, intended to subvert the Hong Kong proceedings, and therefore must be
C vexatious and oppressive. C

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

injunction.
F F

109. Mr Chan, plaintiffs’ counsel, submitted that the plaintiffs were

G G
required to do no more than demonstrate a prima facie case. Ms Wong, for the
H H
defendants, submitted that a higher standard was required and that matters

I
needed to be proved to a high degree of probability. I

J 110. The authorities which were referred to us have not adopted a J

unified approach. I am satisfied, however, that something more than a prima

K K
facie case is required. It is to be remembered that anti-suit applications are to
L be considered with caution. As Lord Hobhouse observed in Turner v Grovitt L

(supra), an anti-suit injunction may be treated as an interference in foreign

M M
proceedings. An applicant for such an injunction must therefore be able to show
N a “clear need” to protect existing local proceedings. In my view, certainly in N

the present case, it has always been incumbent on the plaintiffs to demonstrate a
O O
strong prima facie case; put another way, a convincing prima facie case.
P P

111. I move now to the third of Lord Hobhouse’s ‘essential features’,

Q Q
namely, that a restraining order should only be granted when it is necessary to
R protect the legitimate interests of the applicants in the local proceedings. R

S S
112. Au J was not persuaded that plaintiffs had a legitimate interest in

T
the local proceedings that required to be protected. T

U U

V V
A
- 29 - A

113. It would seem that in the application before Au J considerable

B B
emphasis was placed by the plaintiffs on the assertion that, unless the anti-suit
C injunction was granted, their rights under the injunction granted by Deputy C

Judge Louis Chan in April 2006 (in HCA 1653/2004) would be undermined.
D D
That injunction restrained the defendants in that case, whether acting directly or
E through their servants or agents, from interfering with the business of Hawkins E

Development or the business of the joint venture or of the mining operations.

F F

G 114. In this regard, Au J pointed to the fact that the plaintiffs were not G

themselves parties to the HCA 1653/2004 litigation and had no locus to enforce
H H
the injunction.
I I
115. While that is the case, it was, and remains, integral to the
J J
defendants’ claims which they seek to have affirmed in the PRC courts that

K
Madam Kan, one of those who was restrained by the injunction issued in K
HCA 1653/2004, put her signature to a number of documents purportedly on
L L
behalf of Shunfeng Iron and Steel which sought to give effect to the so-called

M ‘investment agreement’, the agreement that itself sought to strip Hawkins M

Development of its 80% shareholding in Shunfeng Iron and Steel.

N N

116. In addition, as Mr Chan, counsel for the plaintiffs, pointed out,

O O
even if Yeung Tsz Wang, the first defendant, was never himself subject to the
P injunction, the evidence indicates that he aided and abetted Madam Kan in her P

breach, doing so in order to advance his own interests. As such, it is arguable

Q Q
that he placed himself in contempt of our courts: see, for example, Attorney
R General v Punch Limited [2003] 1 AC 1046. R

S S
117. In my judgment, in disposing of what I will call the ‘injunction
T issue’ on the basis of locus, the judge at first instance adopted too narrow an T

approach.
U U

V V
A
- 30 - A

118. In considering matters on a broader basis, it must be borne in mind

B B
that the history of all relevant litigation has over an extended period of time
C involved the tactical use of numerous companies and individuals by both sides. C

That being the case, while there may, on the basis of what in the circumstances
D D
is a technical distinction, be no locus to seek enforcement of the injunction itself,
E it does not prevent the court, if it is satisfied that the ends of justice require it, E

from taking into account such tactical circumventions in determining whether

F F
some other form of restraint – in this case, the anti-suit injunction – is justified.
G G

119. In this regard, the plaintiffs’ reliance on the words of Lord

H H
Scarman in his speech in British Airways v Laker Airways Ltd [1985] AC 58, at
I 95, has particular force. Lord Scarman, in speaking of the power of the courts I

to grant protection to an applicant from a foreign suit that is unconscionable and

J J
thereby unjust, spoke of “wide and flexible” principles of equity being
K employed to afford that protection. Put another way, as I see it, our courts K

are not to employ a narrow, technical approach, one that more often denies a
L L
just solution rather than ensures it, our courts are instead adopt a broader
M approach to better identify the true justice of the matter. Lord Scarman said: M

N “The approach [to the granting of an anti-suit injunction] has to be N

cautious because an injunction restraining a person within the
jurisdiction of the English court from pursuing a remedy in a foreign
O O
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
P justice in that foreign court. Caution is needed even in a ‘forum P
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
Q necessary where there is no remedy in the English court in respect of Q
the cause of action which, if the facts be proved, is recognised and
R enforceable by the foreign court. R

Nevertheless, even in the latter case, the power of the English court to
S grant the injunction exists, if the bringing of the suit in the foreign S
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
T T
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
U the defendant to the application is in the circumstances unconscionable U

V V
A
- 31 - A

and so unjust. This equitable right not to be sued abroad arises only if
B the inequity is such that the English court must intervene to prevent B
injustice. Cases will, therefore, be few: but the jurisdiction exists and
must be sustained.” [My emphasis]
C C

120. In further considering whether the plaintiffs had any legitimate

D D
interest in the local proceedings to protect, Au J rejected the submission that any
E future litigation instituted by the defendants in the PRC courts (based on their E

earlier action dismissed in December 2010 by the Higher People’s Court of

F F
Liaoning Province) would undermine the plaintiffs’ current Hong Kong
G G
proceedings in HCA 1415/2010. He rejected the submission on the basis that

H
any future proceedings instituted by the defendants in the PRC would be H
founded on substantially the same issues raised in their earlier proceedings and
I I
those earlier proceedings had of course been instituted before the plaintiffs had

J commenced action HCA 1415/2010 in Hong Kong. In respect of those earlier J

proceedings, the judge appears to have been of the view that there was no
K K
evidence – no direct evidence at least – that they had been designed to subvert
L proceedings that were not yet issued in Hong Kong. As it was expressed by L

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

O O
121. Again, with respect, I have difficulties with that reasoning.
P P
122. The defendants had submitted themselves to the jurisdiction of the
Q Hong Kong courts in respect of several actions, all of which had been Q

determined in favour of the plaintiffs (and their integral associates). All of

R R
those actions, directly or indirectly, had looked to the same issue, namely, who
S S
was lawfully entitled to hold the controlling interest in Hawkins Development

T
and thereby in Shunfeng Iron and Steel. In those actions the defendants (and T
their integral associates) had been criticised in strong terms, findings being
U U
made to the effect that they had not acted in good faith. That being the case, it

V V
A
- 32 - A

had to follow, in my view, that the following matters would be taken into
B B
account.
C C

123. First, the possibility (indeed probability) that the PRC proceedings
D D
instituted by the defendants had been instituted to pre-empt mirror proceedings
E being instituted in Hong Kong by the plaintiffs. Proceedings are regularly E

commenced in one jurisdiction in order to pre-empt the institution of

F F
proceedings in another. Chronology by itself is therefore a poor indicator of
G intent. G

H H
124. Second, having been the subject of numerous unfavourable

I
findings in the Hong Kong proceedings, the possibility (indeed probability) that I
the defendants would seek to gain some form of advantage by instituting
J J
proceedings in the new jurisdiction, using evidential material that had already

K
been demonstrated to be of deeply questionable value in the Hong Kong K
proceedings.
L L

125. If those matters were taken into account, as, in my view, they
M M
should have been, it was open to the judge at first instance to hold not only that
N the plaintiffs had legitimate interests to protect in respect of the Hong Kong N

proceedings but that the defendants, in putting forward seemingly discredited

O O
evidential material in the PRC proceedings, had been seeking in bad faith, and
P would continue to seek in bad faith, to subvert the Hong Kong proceedings. P

Q Q
Should the appeal be allowed?
R R
126. A judge sitting at first instance enjoys a wide discretion in
S S
determining whether to grant or refuse an interlocutory injunction. This Court

T
will generally be slow to interfere in the exercise of that discretion. Well T
settled principles make it clear that we will only do so if the judge has taken into
U U

V V
A
- 33 - A

account matters which he ought not to have done or failed to take into account
B B
matters which he ought to have done or if his decision is plainly wrong.
C C

127. The issues that faced the judge at first instance were far from
D D
simple; he had to come to his decision in the context of long and complex
E litigation that had already taken place, doing so in light of the fact that all E

parties involved were pushing each and every tactical advantage to the limit,
F F
sometimes regrettably well over the limit. However, for the reasons which
G I have set out above, I have been drawn to the conclusion that the judge’s G

reasoning failed to take into account matters which should have been taken into
H H
account, that failure constituting a material misdirection in the exercise of his
I discretion. I

J J
128. In my judgment, having regard to the material that was before the

K
court at first instance and having regard to the nature and extent of the K
injunctions sought at that time, I am of the view that the plaintiffs did make out
L L
a strong prima facie case – indeed, I believe they were able to demonstrate

M matters to a high degree of probability – and were therefore entitled to the issue M

of the injunctions that were then sought.

N N

129. I would therefore grant the plaintiffs injunctive relief as it was

O O
sought at first instance. The question, of course, is whether, having regard to
P events since the judgment at first instance, there is any value remaining in that P

relief. I believe there is. The history of the litigation to date indicates that the
Q Q
exact nature and extent of future litigation cannot be anticipated.
R R

The extended relief now sought

S S

T
130. The injunctive relief now sought takes into account the institution T
of proceedings in the Mainland by Liaoning Shengyuan seeking to enforce its
U U

V V
A
- 34 - A

purported rights under the agreement described as the ‘investment equity

B B
transfer agreement’ entered into with Sunny Growth in July 2011.
C C

131. The first difficulty that presents itself in considering whether the
D D
defendants should be restrained from in any way assisting the Mainland
E corporation, Liaoning Shengyuan, in its action is the fact that Sunny Growth, E

one of the two defendants, has not been joined as a plaintiff with Liaoning
F F
Shengyuan in its action. To the contrary, it has been cited as one of the
G defendants in that action, the three defendants being Sunny Growth, Shunfeng G

Iron and Steel and Hawkins Development.

H H

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

K
independent third party. K

L 133. I appreciate, of course, that in the present case the issue is not so L

simply defined. Sunny Growth, in entering into the agreement with Liaoning
M M
Shengyuan, was able to do no more than transfer its asserted rights to an 80%
N shareholding in Shunfeng Iron and Steel. The shares were not registered in its N

name at the time nor are they so registered now. More accurately perhaps, it
O O
can be said that Sunny Growth was able to do no more than transfer its litigation
P rights against Shunfeng Iron and Steel and Hawkins Development. I say that P

because, absent some complete surrender on the part of Wong and his integral
Q Q
associates, any attempt by Sunny Growth to secure the 80% shareholding in its
R name is bound to be opposed in the courts. It follows ironically that, although R

S
cited as a defendant, it is very much in the interests of Sunny Growth (and S
Yeung Tsz Wang) to ensure that Liaoning Shengyuan is successful in its action.
T T

U U

V V
A
- 35 - A

134. On behalf of the plaintiffs, it has been submitted that we should

B B
harbour very real concerns as to the good faith of the ‘investment equity transfer
C agreement’. There are a number of factors, it has been said, which point to the C

fact that it is a tactical sham. One of the factors advanced on behalf of the
D D
plaintiffs is that Sunny Growth purportedly sold its interests in the joint-venture
E for a price of only RMB50 million, this being a fraction of the value of the E

joint-venture mining operations themselves.

F F

G 135. With even half an eye focused on the history of earlier litigation, G

there must be deep concerns as to whether this new agreement was entered into
H H
‘at arms length’ and in good faith or whether it is another tactical ploy, one that
I has been created in bad faith. I

J J
136. If, as submitted by Ms Wong on behalf of the defendants, an

K
entirely new joint-venture agreement was entered into, the question must be K
asked: why was it necessary to continue to use Shunfeng Iron and Steel as the
L L
company holding the joint-venture interests; why not incorporate a new

M company in which the new joint-venture partners could each hold their M

respective shares?
N N

137. I also agree that on its face the price at which Sunny Growth
O O
purportedly sold its economic interests in the joint-venture was surprisingly low.
P But little or nothing was put before us as to the economic health of Sunny P

Growth. Financial constraints do sometimes force the sale of assets at prices

Q Q
which, in economic terms, do not make sense.
R R

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

U U

V V
A
- 36 - A

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

D D
140. I would add that another factor that has influenced me is that, on
E the basis of Ms Wong’s submissions, the core issue which will fall to be E

determined in this latest PRC litigation will be different from the more limited
F F
issues which have to date fallen for determination in the Hong Kong courts.
G What will fall for determination will be the issue, not of who controls Hawkins G

Development, but whether Hawkins Development did or did not fail to meet its
H H
financial obligations under the joint venture agreement and whether, if there
I was such a failure, a new joint-venture agreement was entered into in I

accordance with PRC law, the Mainland joint venture partners taking an active
J J
role in that process. That issue does not appear to have been the subject of
K direct and close analysis in any of the Hong Kong proceedings even if it was K

given indirect consideration. It is an issue, I believe, that the courts in

L L
Liaoning Province are well positioned to determine. The minority
M joint-venture partners are situated there as are the witnesses who are able to give M

direct evidence as to financial matters affecting the mining operations.

N N

O Resolution O

P 141. For the reasons given, I would allow the appeal, granting the P

anti-suit injunctions in the form that they were placed in draft before the Court
Q Q
of First Instance. I would decline to grant them in the amended form brought
R before us. R

S S
142. As to the costs of the appeal, I see no reason why the plaintiffs
T should not be awarded their costs. They were successful in the appeal, T

obtaining the anti-suit injunctions originally sought. For myself, having regard
U U

V V
A
- 37 - A

to the history of the conduct of the defendants (and their integral associates)
B B
I can well see why the plaintiffs felt compelled to seek what is a highly unusual
C remedy. If the past findings of the Hong Kong courts are to be given any C

weight, the defendants have conducted themselves so far in a manner which

D D
falls below that expected of good faith litigants.
E E

Hon Bharwaney J:
F F

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

144. It was common ground that an applicant who seeks an

I I
interlocutory anti-suit injunction must establish more than an arguable case
J before he can obtain such an injunction. Both counsel made cogent J

submissions on the burden of proof. Ms Lisa Wong SC submitted, relying on

K K
Midgulf International Ltd v GCT [2009] 2 Lloyd’s Rep 411 at §36 and
L American International Specialty Lines Insurance v Abbott [2003] 1 Lloyd’s L

Rep 267 at §§7-8, that since the effect of an interlocutory anti-suit injunction
M M
was final in that it prevented the party to be restrained from taking any foreign
N proceedings, it ought not to be granted unless the applicant could establish his N

case to “a high degree of probability”. Mr Anthony Chan SC agreed that in a

O O
case such as Midgulf International Ltd v GCT, where the parties were in dispute
P as to whether or not their contract contained an exclusive jurisdiction clause, a P

high degree of probability was required since a decision by the court at the
Q Q
interlocutory stage in favour of the applicant was likely to be final on the point.
R However, he submitted, citing the statement of Dillon LJ in Midland Bank v R

S
Laker Airways [1986] 1 QB 689 at 707C-E, that the standard of a prima facie S
case applied in other cases, such as the present one, where the applicant relied,
T T
not on an exclusive jurisdiction clause, but upon conduct that was

U
unconscionable for some non-contractual reason. U

V V
A
- 38 - A

145. I am persuaded by Ms Wong, and I conclude, that in every case,

B B
whether based on an exclusive jurisdiction clause or on unconscionable conduct,
C the applicant seeking an interlocutory anti-suit injunction has to establish his C

case to a high degree of probability or, in the words of Hartmann JA, that he
D D
must demonstrate a strong or convincing prima facie case. After all, a breach
E of an exclusive jurisdiction clause is a species of wrongful misconduct. But E

above all, it seems to me that the court must have regard to the effect of the
F F
interlocutory anti-suit injunction. If its effect is likely to be final, the applicant
G seeking such an injunction must establish a convincing prima facie case before G

H
the court would be moved to grant such an injunction. H

I 146. I am satisfied that the plaintiffs here have established a convincing I

prima facie case, not only on the grounds set out in §§98-101 and §§124-125 of
J J
the judgment of Hartman JA, but also on the grounds that the defendants have
K deployed documents of dubious validity in a manner that amounts to K

unconscionable conduct. These key documents, namely, the Investment

L L
Agreement of 28 June 2006, the Share Transfer Agreement of 8 December 2006,
M the 8 June 2006 Resolution and the 26 June 2006 Minutes, which are the subject M

matter of the current proceedings, were relied upon by Sunny Growth in the
N N
PRC litigation and were also referred to in the “investment equity transfer
O agreement” with Liaoning Shengyuan Investment Company. The plaintiffs O

have established a convincing prima facie case that these key documents are
P P
documents of dubious validity and that, if they were genuine and had actually
Q existed in June and December 2006, that the failure to disclose them in the Q

previous litigation amounted to wrongful and unconscionable conduct.

R R

S 147. The contest before Deputy Judge Louis Chan in HCA 1653/2004 S

was whether the 75 shares transferred to the Yeung Camp ought to be returned to
T T
Mr Wong Kam San. After trial in April 2006, the learned judge granted a
U declaration that those shares were held on trust for Mr Wong Kam San and he U

V V
A
- 39 - A

ordered their return. If the allotment and transfer of 9,900 shares in July 2005
B B
were valid, the contest over the 75 shares in April 2006 would have been
C academic and yet the allotment of July 2005 was not brought up at the trial before C

Deputy Judge Louis Chan. More importantly, the key documents of June and
D D
December 2006, if they existed, were clearly material documents but were never
E referred to at the trial before Lam J in March 2007 in HCA 2036/2005 that E

concerned the legality of the allotment and transfer of the 9,900 shares to Sunny
F F
Growth in July 2005.
G G

148. Moreover, if, as Sunny Growth contended before Lam J in March

H H
2007 that it was the 99% shareholder of Hawkins (by virtue of the allotment and
I transfer of 9,900 shares to Sunny Growth in July 2005), it made no commercial I

sense for Sunny Growth to enter into the Investment Agreement in June 2006 to
J J
replace Hawkins as the foreign shareholder of Shunfeng.
K K
149. I am not persuaded that Hong Kong is not the proper forum to
L L
determine the validity of the June 2006 Resolution and Minutes, the Investment

M Agreement of 28 June 2006 and the Share Transfer Agreement of 8 December M

2006. Hawkins, probably the most interested party, is a Hong Kong company.
N N
The evidence adduced in the previous actions, from witnesses with Hong Kong
O addresses, will be relevant in providing the context to assess the authenticity of O

the key documents. Given the ease of travel to Hong Kong, the location of
P P
possible witnesses in the Mainland can hardly be a reason, these days, to
Q support a finding that Hong Kong is not the natural forum. Q

R 150. I also agree that the injunctions sought ought to be granted in their R

S
original terms and without the inclusion of provisions restraining the defendants S
from assisting Liaoning Shengyuan in its PRC action. Quite apart from the
T T
difficulties posed by the fact that Sunny Growth is a defendant in those

U
proceedings, which Hartman JA has identified in §§131-132 of his judgement, U

V V
A
- 40 - A

there is the added difficulty of ascertaining what acts of the defendants can be
B B
said to constitute “assisting” Liaoning Shengyuan in its PRC action and which
C the injunction sought purports to restrain. The current application for an C

interlocutory injunction to restrain the defendants from “assisting” Liaoning

D D
Shengyuan in its PRC action is akin to an attempt to bolt the cage door after the
E bird has already flown the coop. E

F F
Hon Hartmann JA:
G G

Conclusion
H H

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

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

M M

N N

O O

P (M J Hartmann) (Mohan Bharwaney) P

Justice of Appeal Judge of the
Q
Court of First Instance Q

R R

Mr Anthony Chan SC, Ms Elizabeth Cheung & Mr Eric Chow, instructed by

S C.L. Chow & Macksion Chan, for the1st Plaintiff and 2nd Plaintiff S

T Ms Lisa K Y Wong SC and Mr Calvin Cheuk, instructed by Li & Partners for T

1st Defendant and 2nd Defendant
U U

V V