A Kitchen Nightmare – China Shanshui Cement Group Ltd and Ors v. Zhang Caikui and Ors

“When a chef makes a dish using a few possibly good ingredients, but mixes them with many clearly bad ingredients and then seriously overcooks the whole thing, even the taste of the possibly good ingredients will likely be lost. Something similar can happen in litigation.”

This was the opening remark of the Honourable Mr. Justice Coleman in the long-anticipated judgment of China Shanshui Cement Group Ltd and Others v. Zhang Caikui and Others [2025] HKCFI 1868, handed down on 12 May 2025 – a case which commenced in 2015, involving 4 Plaintiffs and 10 Defendants.

The judgment addresses a complex dispute arising from the fight for control of China Shanshui Cement Group Limited (“CSC”) and its subsidiaries. The Plaintiffs’ case was centered around allegations of unlawful means conspiracy and breaches of fiduciary duties against former directors and major shareholders. The Plaintiffs’ claims against all of the Defendants were dismissed in their entirety.

In dismissing the Plaintiffs’ claims, his Lordship continued with the culinary analogy throughout the judgment, by observing:-

• The Plaintiffs’ claims were described to be an “objectionable … moving feast”; and
• The “[p]laintiffs’ claim in this action has been rather like trying to grab a forkful of blancmange”.

His Lordship also made the following remarks:-

• Just 2 days after CSC’s new board was appointed (which comprised of the Receivers), instructions were given to commence the proceedings. This was “almost certainly in a fit of pique arising from the fact” that Tianrui (International) Holding Co Ltd (“Tianrui”) and the Receivers had been “frustrated in their combined attempts to wrest control of the CSC Board from their predecessors, apparently blind or uncaring as to the damage that might be caused to CSC by their activities”;
• “This action was commenced in the most cavalier of fashions, with undue haste, without performing anything approaching a fair and proper analysis”; and
• “Though it should have been recognised and acted upon much sooner, by the end of the plaintiffs’ own case it was clear that the claim formulated was essentially unsustainable and should never have been advanced.  Nevertheless it was still continued, with considerable attempted fluidity or ‘wriggling’, and admittedly with rather less enthusiasm”.

Not Holding the Ring – Activities of the Receivers

The trial lasted 35 days and during its course, the Court focused at length on the examination and review of the activities of the appointed receivers (over shares in China Shanshui Investments Co Ltd (“CSI”), a shareholder of CSC). Effectively, it became somewhat of a trial within a trial.

Although the judgment touched upon a myriad of issues, his Lordship scrutinized  the actions of the Receivers to a great degree, making the following observations:-

• “Amongst other things, it is now tolerably clear that [the dispute over CSI shares] provided the entry point for Tianrui to combine with the Receivers (as engineered and facilitated by their lawyers) to launch a hostile takeover for CSC”;
• The Receivers were the Plaintiffs’ only factual witnesses;
• In their witness statements, the Receivers “unhelpfully and improperly blurred the distinction between fact and opinion” by signing Statement of Truths to their witness statements – “not least when they were called only as witnesses of fact. But there was a more fundamental problem”;
• During cross-examination, the Receivers made numerous concessions inconsistent with the Plaintiffs’ case, which they “hastily” advanced. This was suggested to be “driven, it seems, by the motive of revenge” and an assumption of “conspiratorial breach”;
• His Lordship queried how there was “good reason” to ask how the Receivers, “both officers of the Court – could ever have thought it appropriate to sign statements verifying the truth of the pleadings and the content of their witness statements” when it was “difficult to understand how they could possibly have been either believed to be true facts or even expressed as honest opinion”;
• Due to the inconsistency between the pleading (the Statement of Claim and subsequent amendments) and what was eventually accepted in evidence by one the Receivers, his Lordship questioned why such Receiver “could ever have thought it appropriate to sign the statement of truth of the pleading”. This was “unprecedented”;
• The Receivers’ evidence at trial was “very poor quality”, which caused the Plaintiffs’ Counsel to “abandon much of the claim as pleaded” and submitting in closing that the credibility of the Receivers was of “marginal, if any, relevance to the issues in dispute”;
• The Receivers did not have “any personal knowledge in respect of many of the events which form[ed] the subject of the complaints in the action”. Accordingly, their “subjective state of mind, motives and beliefs” were of “marginal relevance”;
• It “is simply not possible to brush under the carpet”, the fact that the Receivers’ “highly subjective and partial (as in not impartial) view taken on a deliberately incomplete and skewed selection of contemporaneous documentary evidence, was shown up for what it was”;
• The Receivers did not attempt to seek “potentially relevant information available from other sources, perhaps because of a fear that the answers thereby obtained might not fit their desired case theory”;
• The Receivers “were supposed to have acted impartially in accordance with their duties”, but they failed to do so. They worked with Tianrui (CSC’s new board also comprised of senior executives of Tianrui) to combat against two of the Defendants and “anyone who they thought took [their] side”. In fact, his Lordship went so far even to state that “[i]ndeed, it is evident to me that the Receivers were acting as Tianrui’s advocate, for reasons which have later become apparent”;
• The Receivers cherry-picked “only those things that might appear (or might be twisted) to support their chosen narrative.  The rest was either ignored, or criticised as being a facade.  The liberally-scattered claims of dishonesty and bad faith were largely imagined, and in reality nothing but the reflection of those who caused this action to be brought”;
• “As officers of the Court, the Receivers were supposed to act impartially and in accordance with the directions of the Court in administering the [CSI shares]”. This was a way to “hold the ring between warring litigants until the disputed issues could be finally determined”;
• The Receivers’ witness statements were “not really ‘drafted’ by the witnesses or on the witnesses’ instructions, but rather ‘crafted’ by the lawyers”, which “only emphasises [their] failures”; and
• During cross-examination, “when pressed, or when faced with documents which clearly showed their own witness statements to be either unfair, misleading or flatly untrue”, the Receivers resorted to the “deeply unimpressive attempt to pass the blame to the lawyers”.

What Lessons can be Learnt from this decision?

His Lordship’s comments regarding the Receivers’ actions serve as an important reminder to receivers (as well as other professional third parties, including lawyers) of their duties.

Below is a list of red flags which professional third parties (not being a party to the litigation) should be wary of:-

• Act impartially and objectively and in accordance with their duties / Court’s directions;
• Undertake a fair and proper evaluation before commencing any Court action;
• Avoid giving a misleading picture when making a Court application;
• Have personal knowledge of relevant matters, and do not blindly rely on your lawyers’ drafts of witness statements;
• Make a clear distinction between fact and opinion, and only sign a Statement of Truth when you believe in the truth of the facts stated in documents required to be verified by a Statement of Truth in accordance with Rules of the High Court Order41A (e.g. pleading, witness statement or expert report);
• Seek all potentially relevant information available, even if answers obtained do not fit the desired case theory;
• Stop a claim when it is evident that the claim is unsustainable;
• Avoid being persuaded to make representations that could be construed as acting on behalf of the appointee’s advocate; and
• Avoid blaming lawyers when the evidence is shown to be unfair, misleading or flatly untrue.

Failing to comply with the above risks possible adverse costs consequences. While his Lordship reserved his decision on costs, he noted “[t]here was even a suggestion that an order might be sought relating to payment of costs by a third party or parties”.

Our Involvement

Hauzen LLP acts for 2 of the defendants (the 4^th and 9^th Defendants) who were also represented at trial by Counsel, Mr. Charles Sussex SC, who led Mr. Jason Yu and Mr. Avery Chan of Des Voeux Chambers.  Please see the link for the judgment here: HCA002880S_2015.doc.

His Lordship ended the judgment with “[t]o continue the culinary analogy with which I began this Judgment, most of the claim had more holes than a sieve.  Despite [Plaintiffs’ Counsel] best but late efforts to patch it up, it was never going to hold water.” His Lordship could well have added that the claim was a “dog’s dinner” but may have been too polite to say so.

Stay tuned for a further update, once the costs award is handed down.

If you have any questions on this case, liquidators’ and receivers’ duties, or litigation and arbitration in general, please contact Nigel Binnersley of our firm.