Weili Su and Flash Bright Power Limited v. Shengkang Fei and others

At a glance

Parties

Weili Su and Flash Bright Power Limited (plaintiffs; respondents in the arbitration) v. Shengkang Fei, Richard Yuqiang Lu and Ranran Xu (defendants; claimants in the arbitration)

Case no.

HCCT 54/2018; [2019] HKCFI 1257

Court

High Court of the Hong Kong SAR, Court of First Instance (Construction and Arbitration Proceedings), Hon Mimmie Chan J in Chambers

Underlying award(s)

Award of 25 May 2018, HKIAC Case No HKIAC/PA15047

Forum and rules

Set-aside application under section 81 of the Arbitration Ordinance (Cap 609) and Article 34 of the UNCITRAL Model Law; security sought under section 86(4) of the Ordinance and O 73 r 10A RHC

Treaty

None. The arbitration clause is clause 15 of a Shareholders Agreement dated 22 January 2010.

Sector

Solar energy; shareholder dispute; IPO

Outcome

Security ordered (decision of 7 May 2019, reasons of 15 May 2019). The plaintiffs had to provide security of 50% of the Award within 7 days, or their set-aside application would be dismissed.

Amount

Award: USD 7,552,500, USD 4,531,500 and USD 377,625 to the three claimants, with interest and costs, totalling USD 13.7 million. Security ordered: USD 6,850,000. Costs of the security application (order nisi): to the defendants, on an indemnity basis.

The dispute

The defendants were minority shareholders in Sky Solar Holdings Co Ltd, a Cayman Islands company. Weili Su was its founder and Flash Bright Power Limited was its controlling shareholder. In an HKIAC arbitration the minority shareholders claimed that Su and Flash Bright had restructured the company through a share swap, so that a new subsidiary (Listco) was listed instead of the company. They said this shut them out of the IPO and breached the duty in the Shareholders Agreement to use commercially reasonable best efforts to facilitate an IPO of the company. The tribunal found a breach and awarded about USD 13.7 million. Su and Flash Bright applied to set the award aside on four grounds: there was no valid arbitration agreement, the tribunal was improperly composed, the tribunal decided unpleaded claims, and it made findings without evidential basis, contrary to public policy. The award creditors counterclaimed for leave to enforce and asked for security as a condition of the set-aside application going ahead. This judgment gives the reasons for the decision on security.

Key holdings

1. Any irregularity in bringing the security application other than by summons did not nullify it. The plaintiffs had consented to directions and to a contested hearing, had filed evidence, and so waived the irregularity. They suffered no prejudice. ¶ 11
2. On a brief consideration under the Soleh Boneh test, the Award is manifestly valid. Clause 15 of the Agreement covers the minority shareholders, who signed the Agreement and are 'Parties' to it. A right to arbitrate is distinct from a right to appoint an arbitrator. ¶¶ 13–26
3. Two objections were never raised in the arbitration: that the company had not joined in nominating the plaintiffs' arbitrator, and that the 3rd defendant's Deed of Adherence did not adopt the arbitration clause. The plaintiffs probably waived both, and no prejudice was shown in any event. ¶¶ 27–30
4. The complaints about unpleaded claims, excess of jurisdiction and findings without evidence are attempts to challenge the merits of the Award. Errors of fact or law are not grounds for setting aside. The public policy ground is construed narrowly and adds nothing once the primary grounds fail. ¶¶ 35–40
5. The court did not accept Su's claim that he had no assets in Hong Kong, and found him a totally unreliable witness. It relied on: - his listing as a 'Dishonest Person Subject to Enforcement' by the Supreme People's Court; - his transfer of his SS HK shares to Chen on 2 November 2018, shortly after notice of enforcement; - the sale of Flash Bright's Sky Solar shares for about USD 27 million after the New York enforcement proceedings began. On this record, delay would make enforcement more difficult. Karaha Boda was distinguished. ¶¶ 41–75
6. Security of 50% of the Award was ordered: USD 6,850,000, paid into court or covered by a Hong Kong bank guarantee within 7 days. If it was not provided by 4 pm on 14 May 2019, the set-aside application would be dismissed with indemnity costs. The plaintiffs were to bear the costs of the security application on an indemnity basis (order nisi). ¶¶ 76–78
7. The court criticised the practice of solicitors swearing affidavits on disputed facts for their clients. It warned that it may in future refuse such affidavits unless a satisfactory explanation is given. ¶¶ 79–81

Procedural history

1. 22 January 2010Shareholders Agreement concluded, with an arbitration clause at clause 15.
2. 25 May 2018HKIAC award (Case No HKIAC/PA15047) finds Su and Flash Bright in breach and awards about USD 13.7 million.
3. 24 August 2018Su and Flash Bright issue an Originating Summons to set the Award aside.
4. 24 October 2018The award creditors serve evidence and counterclaim for leave to enforce. On 2 November 2018 Su transfers his SS HK shares to Chen.
5. 20 November 2018Ex parte Hong Kong injunction granted against Su and Chen.
6. January–April 2019Enforcement steps abroad. New York enforcement proceedings begin on 29 January 2019. In March 2019 the award creditors obtain a US restraining order and attachment order and a BVI worldwide freezing order. In April 2019 they obtain an English freezing order.
7. 7 May 2019Security ordered after a hearing on 3 May 2019. The set-aside hearing is fixed for 30 May 2019.
8. 15 May 2019Reasons for Decision delivered.

Tribunal, counsel and experts

Decided by

• Mimmie Chan Judge, High Court of the Hong Kong SAR, Court of First Instance

For the claimant

Kobre & Kim

For the respondent

Dentons Hong Kong LLP

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Keywords

• set-aside
• security for award
• section 86(4) Arbitration Ordinance
• Soleh Boneh
• enforcement
• Hong Kong
• HKIAC
• Sky Solar
• IPO
• shareholders agreement
• minority shareholders
• non-signatory arbitration clause
• waiver of objection
• composition of tribunal
• public policy
• dissipation of assets
• Dishonest Person Listing
• New York Convention

Summary generated with AI from the published documents — refer to the award for the authoritative text.