張才奎所託管中國山水投資有限公司股份相關員工 AND OTHERS v. 張才奎 AND ANOTHER

張才奎所託管中國山水投資有限公司股份相關員工 AND OTHERS v. 張才奎 AND ANOTHER

The receivership was discharged insofar as necessary because there had been a highly material change of circumstances and non‑disclosure of material facts: a large majority of plaintiffs had contracted to sell and been paid for their beneficial interests (thereby removing the primary beneficiaries the receivership was meant to protect), the purchase funds originated from an interested party (Tianrui), and material facts were not disclosed to the court when critical directions were given; accordingly the original justification for the receivership no longer existed and the court should discharge the receivership and make associated costs orders.

Citation
[2018] HKCFI 194
Parties
Plaintiffs: 1,077 Plaintiffs (represented by Stephenson Harwood); Plaintiffs: Other Plaintiffs (represented by K&L Gates); 1st Defendant: Zhang Caikui; 2nd Defendant: Li Yanmin; Receivers: Receivers (Stephen Liu, David Yen and Koo Chi Sum of Ernst & Young Transactions Ltd)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
31 January 2018
Case Number
HCA1766/2014
Procedural Posture
Civil (trusts, Company Law, Receivership, Shareholder Disputes) / Interlocutory Applications Concerning Discharge/replacement of Receivers; Decision on Interim Applications Prior to Trial and Concurrent With Judgment in Actions
Outcome
Interlocutory relief granted in part: appointment of Receivers discharged insofar as necessary; SH plaintiffs’ summonses dismissed; costs orders made on nisi basis; no order on Receivers’ strikeout summons except that Receivers’ costs be paid from assets in receivership
Legal Topics
Appointment of Receivers, Discharge of Receivership, Shareholder Voting Rights, Conflict of Interest of Receivers/directors, Share Transfer Agreements and Sale of Beneficial Interests, Champerty and Maintenance, Undertaking as to Damages, Non‑disclosure of Material Facts to Court
Source Language
EN
Trusts Company Law Equity and Fiduciary Duties Receivership Securities Law Civil Procedure Appointment of Receivers Discharge of Receivership +6 more

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Parties

1,077 Plaintiffs (represented by Stephenson Harwood)

Plaintiffs

Other Plaintiffs (represented by K&L Gates)

Plaintiffs

Zhang Caikui

1st Defendant

Li Yanmin

2nd Defendant

Receivers (Stephen Liu, David Yen and Koo Chi Sum of Ernst & Young Transactions Ltd)

Receivers

Procedural Posture

Civil (trusts, Company Law, Receivership, Shareholder Disputes) / Interlocutory Applications Concerning Discharge/replacement of Receivers; Decision on Interim Applications Prior to Trial and Concurrent With Judgment in Actions

Legal Issues

  1. 1 Whether the interim receivership should be discharged in light of material change of circumstances and non‑disclosure of material facts
  2. 2 Whether the Receivers should be replaced due to actual or perceived conflicts from their concurrent roles as receivers and as directors of CSI and CSCG
  3. 3 Whether individual shareholders of CSI should be given split voting rights over CSI’s holdings in CSCG

Ratio Decidendi

The receivership was discharged insofar as necessary because there had been a highly material change of circumstances and non‑disclosure of material facts: a large majority of plaintiffs had contracted to sell and been paid for their beneficial interests (thereby removing the primary beneficiaries the receivership was meant to protect), the purchase funds originated from an interested party (Tianrui), and material facts were not disclosed to the court when critical directions were given; accordingly the original justification for the receivership no longer existed and the court should discharge the receivership and make associated costs orders.

Court Disposition

Interlocutory relief granted in part: appointment of Receivers discharged insofar as necessary; SH plaintiffs’ summonses dismissed; costs orders made on nisi basis; no order on Receivers’ strikeout summons except that Receivers’ costs be paid from assets in receivership

Orders

  • Appointment of the Receivers discharged insofar as necessary pursuant to the 1st defendant’s summons dated 31 May 2017
  • As an order nisi, KLG plaintiffs and SH plaintiffs to pay the costs of the 1st defendant in relation to his summons of 31 May 2017