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Hz Capital International Ltd v China Vocational Education Co., Ltd And Others

Judgment Cited authorities 10 Cited in 1 Precedent Map Related
Vincent
Judgment Date27 November 2019
Neutral Citation[2019] HKCFI 2705
Year2019
Judgement NumberHCCT48/2016
Subject MatterConstruction and Arbitration Proceedings
CourtCourt of First Instance (Hong Kong)
HCCT48/2016 HZ CAPITAL INTERNATIONAL LTD v. CHINA VOCATIONAL EDUCATION CO., LTD AND OTHERS

HCCT 48/2016

[2019] HKCFI 2705

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 48 OF 2016

_____________

IN THE MATTER of an Arbitral Award of the Hong Kong International Arbitration Centre dated 29 July 2016

and

IN THE MATTER of section 84 of the Arbitration Ordinance (Cap 609)

and

IN THE MATTER of Order 73, rule 10 of the Rules of the High Court (Cap 4A)

_____________

BETWEEN
HZ CAPITAL INTERNATIONAL LIMITED Applicant
(滙致資本 (國際) 有限公司)

and
CHINA VOCATIONAL EDUCATION CO., LTD. 1st Respondent
(中國瑞豐教育集團有限公司)
BEIJING RUNCHANG CO., LTD. 2nd Respondent
(北京润昌有限公司)
BEIJING RUI HE LIMITED 3rd Respondent
(北京瑞和有限公司)
Beijing Ruiming Co., Ltd. 4th Respondent
(北京瑞明有限公司)
Beijing Ruichang Co., Ltd. 5th Respondent
(北京瑞昌有限公司)
Beijing Rui Hong Limited 6th Respondent
(北京瑞宏有限公司)
Beijing Rui Jing Limited 7th Respondent
(北京瑞景有限公司)
Beijing Rui Kui Limited 8th Respondent
(北京瑞魁有限公司)
北京万润鹏科技有限公司 9th Respondent
北京万瑞发科技有限责任公司 10th Respondent
北京万瑞升科技有限责任公司 11th Respondent
天津万瑞丰科技有限责任公司 12th Respondent
北京北科昊月科技有限责任公司 13th Respondent
北京科技职业学院 14th Respondent
哈尔滨商业大学广厦学院 15th Respondent
厦门华天涉外职业技术学院 16th Respondent
周继庭 17th Respondent
周孟奎 18th Respondent
郑向红 19th Respondent
陈文合 20th Respondent
李景彪 21st Respondent

_____________

Before: Deputy High Court Judge Raymond Leung SC in Chambers
Date of Hearing: 12 June 2019
Date of Decision: 27 November 2019

____________________

DECISION

____________________

1. By a Summons dated on 10 April 2017 (the “Summons”), the 5th to 8th Respondents seek to set aside an Order made by Mr Justice Chow herein on 24 February 2017 (the “Order”) granting leave for the Applicant to enforce as a judgment an arbitration award made on 29 July 2016 (the “Award”).

PROCEDURAL MATTERS

2. On the face of it, the Summons was issued more than 14 days from the date of service of the Order as prescribed by Order 73, rule 10(6) of the Rules of the High Court.

3. Further, the Summons was only filed together with a two‑page affirmation of the handling solicitor of Messrs Fan Wong & Tso representing the 5th to 8th Respondents explaining that instructions were only received on 9 April 2017. This is hardly sufficient as an affirmation in support of the application pursuant to the Summons as required by Order 73, rule 10(6A).

4. Subsequently, a detailed Affirmation of Zhou Ji-ting (“Zhou”), the 17th Respondent, was filed on 23 May 2017. The Summons was listed before Mr Justice Chow on 25 May 2017, which was however vacated upon the Applicant and the 5th to 8th Respondents agreeing on the directions for filing of evidence. Thereafter, the Applicant filed its affirmation in opposition from Mr Zhao Wen-yao (“Zhao”) on 21 September 2017 and,in reply thereto, the 5th to 8th Respondents filed the 2nd Affirmation of Zhou on 29 January 2018.

5. In due course, the Summons was listed for substantive argument before Mr Justice Chow on 30 April 2018 with very detailed written submissions having been served by both the Applicant (represented by Mr Raymond Fong of Counsel) and the Respondents (represented by Mr Ernest Ng together with Mr Mike Yeung of Counsel). The hearing was however adjourned with direction given for cross-examination of Zhou and Zhao as deponents of the respective affirmations in order to resolve the factual disputes.

6. At the present hearing on 12 June 2019, Mr Lawrence Cheung of Counsel appeared for the Applicant (instead of Mr Fong) with limited instructions only to inform the Court that the Applicant would no longer advance any argument to oppose the Summons. However, Mr Cheung made clear that he had no instructions to consent to an order in terms of the Summons. This is a rather anomalous situation. It is therefore necessary for the Respondents to satisfy the Court that the Order ought to be set aside.

7. In the absence of any opposition, I accept the 5th to 8th Respondents’ explanation that the Order was only sent by post on or about 24 March 2017 and was not received by them until 27 March 2017 [1]. Hence, the Summons was within time.

8. Further, I accept the 5th to 8th Respondents’ explanation that due to problems with translation and the time needed to seek legal advice from a firm of solicitors in Hong Kong, a substantive affirmation in support of the Summons could not be filed until 23 May 2017.

FACTUAL BACKGROUND

9. Zhou was an experienced educationalist. He, together with the 18th to 21st Respondents, were the founders of the 13th Respondent (a limited company incorporated in the Peoples’ Republic of China), which in turn established educational institutions in the PRC including the 14th to 16th Respondents. In so far as may be appropriate, Zhou and the 18th to 21st Respondents are collectively referred to as the “Principals” hereinafter.

10. Since about 2008, various investors have expressed interests to participate in the business opportunity afforded by the proposed expansion of the said educational institutions operated through a web of overseas companies organized in the form of Variable Interest Entities (“VIE”).

11. There was also a plan to have the 1st Respondent (China Vocational Education Co Ltd (“CVE”),a Cayman Island company) listed in the United States Stock Market through a process of Initial Public Offering (“IPO”).

12. The 5th to 8th Respondents were companies incorporated in Hong Kong, which were wholly owned by the 2nd Respondent (Beijing Runchang Co Ltd, a BVI company). In turn, the 2nd Respondent was wholly owned by CVE, which was wholly owned by the 4th Respondent (Beijing Ruiming Co Ltd (“Ruiming”), another BVI Company).

13. Hence, the beneficial ownership of the 5th to 8th Respondents could be traced back to the 4th Respondent of which the Principals were the only shareholders.

14. For the sake of completeness, the 3rd Respondent (Beijing Rui He Limited) was a Hong Kong company, which was also wholly owned by the 2nd Respondent. As said, the 2nd Respondent was wholly owned by CVE, which was in turn wholly owned by Ruiming.

15. On 30 May 2008 and 3 September 2008, two fund investors (ie Carlyle and Pinebridge) entered into separate agreements with, amongst others, CVE to subscribe for and purchase certain newly issued shares of CVE (known as “Series A Shares” and “Series B Shares” respectively).

16. Likewise, on 22 April 2011, Fresh Gain Limited (新博有限公司) contracted with, amongst others, CVE to subscribe for and purchase 273,261 newly issued shares in CVE at a price of US$33,800,000, which is known as “Series C Shares”. Fresh Gain Limited was owned by and/or related to a consortium in Hong Kong known as “New World” (新世界). Hence, Fresh Gain Limited was treated as being synonymous with New World in the dealings between the parties herein.

17. Thereafter, an agreement dated 30 June 2011 (the “C2 Agreement”) was entered into between the Applicant (acting in concert with another investor, IP Cathay II, LP (hereinafter “Cathay”)) and the 1st to 21st Respondents herein (including, in particular, CVE, 5th to 8th Respondents and the Principals) along with other earlier investors (including Carlyle, Pinebridge and Fresh Gain Limited (see Annex 1 to the C2 Agreement [2]) whereby the Applicant agreed to:

(a) subscribe to 47,144 newly issued shares of CVE at a price of US$5,400,000;

(b) accept transfer from Ruiming, 5,238 shares of CVE at a price of US$600,000.

18. Likewise, pursuant to the C2 Agreement, Cathay agreed to:

(a) subscribe to 78,573 newly issued shares of CVE at a price of US$9,000,000;

(b) accept transfer from Ruiming, 8,730 shares of CVE at a price of US$1,000,000.

19. All the shares referred to in paragraphs 17 and 18 hereinabove under the C2 Agreement are collectively referred to as “Series C2 Shares”.

20. For various reasons, progress for the intended IPO, which was supposed to take place no later than 31 December 2012 [3], had come to a halt in about October 2011 since there had been a reported or suspected shortage of fund in the various companies (ie the 1st to 16th Respondents) leading to disputes between the relevant parties in respect whereof various arbitration and legal proceedings were commenced:

(a) On 7 October 2011, Fresh Gain Limited at the instigation of New World obtained an injunction[4] in Hong Kong to prohibit disposal of the assets belonging to CVE and the 2nd to 3rd Respondents to the extent of US$33,800,000 [5].

(b) On 10 October 2011, Fresh Gain Limited commenced arbitration proceeding in Hong Kong (HKIAC/A11141) against, inter alia, CVE for return of the investment sum of US$33,800,000 [6].

(c) On 18 February 2013 [7], Cathay commenced arbitration proceeding in Hong Kong (HKIAC/A13027) under the C2 Agreement against all Company Warrantors [8] for the return of the investment sum of US$10,000,000.

(d) On or about 5 June 2013, the Applicant served the Notice of Arbitration (subsequently HKIAC/A13079) on the all the Respondents herein [9].

(e) On 10 June 2013, Pinebridge commenced arbitration proceeding in Hong Kong (HKIAC/A13085) against the said Company Warrantors under the C2 Agreement for return of the investment sum of US$50,000,000 [10].

21. No issue was taken by the 5th to 8th Respondents as to the appointment of the tribunal made on 26 August 2013 (the “Tribunal”), which comprised of Mr Cao Lijun, Miss Elaine Liu and Miss Priscilla Leung...

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1 cases
  • C v D
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 24 May 2021
    ...de novo of the challenge (see §6). 47. Company C has also referred to HZ Capital International Ltd v China Vocational Education Co Ltd [2019] HKCFI 2705. There it was argued that a contractual requirement for mutual consultation among the parties was a condition precedent to arbitration, an......

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