Landmark Victory secured for Asia Cement Corporation in Hong Kong High Court

Background

The full background of the saga is complicated and captures events that stretch across almost a decade. The pertinent facts of this action are:

• Shanshui is a company incorporated in the Cayman Islands. It holds a group of subsidiaries, with the 2^nd to 4^th Plaintiffs being three of these subsidiaries. Shanshui’s shares were listed for trading on the Main Board of the Stock Exchange of Hong Kong (“HKEx”) but trading of those shares had been suspended since 16 April 2015.
• Shanshui has a number of substantial shareholders. They are China Shanshui Investment Company Limited (holding 25.09%), Tianrui (International) Holding Company Ltd (“Tianrui”, holding 28.16%), CNBM (holding 16.67%) and ACC (holding 26.72%).
• Among these four shareholders, Tianrui was the last entrant, and its acquisition of 28.16% shareholding in Shanshui in just a matter of eight weeks caused the public float of Shanshui to drop to 9.18%, far below the HKEx’s 25% public float requirement, leading to Shanshui’s suspension since 16 April 2015.  There were other knock-on effects of Tianrui’s acquisition of Shanshui shares, including triggering redemption under the 2016 Notes issued by Shanshui.   Tianrui reconstituted the Shanshui board on 1 December 2015.
• Shortly after the reconstitution of the Shanshui board, Shanshui initiated the present action. The Defendants were its former directors of the old board prior to 1 December 2015, including the 1^st and 2^nd Defendants, as well as  ACC and CNBM, who were two substantial shareholders of Shanshui.

There were multiple issues in dispute. For the purposes of this update, the key issues are:

• Whether the Defendants unlawfully conspired to assist the 1^st Defendant (formerly the Chairman and founder of the Shanshui group) in prolonging control of Shanshui and acquiring control of Shanshui by unlawful means, with the intent to and resulting in, damage to Shanshui; and
• Whether certain directors breached their fiduciary duties to Shanshui.

In the 236-page judgment handed down on 12 May 2025, the Court ruled against the Plaintiffs on both issues, and dismissed all claims.

Unlawful means conspiracy - the principles

A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful actions taken pursuant to a combination or agreement between the defendant and another person or persons to injure them by unlawful means, whether or not it is the predominant purpose of the defendant to do so.

The Court helpfully clarified that the core elements of unlawful means conspiracy are:

• An express or tacit agreement or understanding between the defendant and another or others; 
• An intention to injure the claimant by unlawful means, whether or not the intention to injure is the predominant purpose; 
• Unlawful acts are carried out pursuant to the agreement or understanding and such intention; and 
• Resulting loss or damage to the claimant. 

Unlawful means conspiracy - the Court’s findings

Shanshui’s unlawful means conspiracy claim failed through a lack of evidence.

On this issue, the Court found:

• The abandonment of the Plaintiff’s allegations of the 4^th to 8^th Defendants’ dishonesty and bad faith, and acceptance that they acted in the best interests of the Company was fatal to the conspiracy claim. Accepting that the Defendants acting bona fide in the best interests of the company must therefore involve the abandonment of alleged improper motives and intentions. In turn, this meant that the claims for conspiracy and breach of proper purpose duties must fail. 
• The abandonment was fatal to the claim as the Plaintiffs cannot attempt to save their conspiracy claim by presenting a fundamentally different case in their closing submissions than what was originally pleaded. They are not allowed to suggest new objects of the conspiracy at trial which were different to pleadings or not pleaded at all.
• The pleaded conspiracy was “deeply counter-intuitive”, “repugnant to common sense”, and “disproved on the evidence”. It was contrary to common sense that reputable companies like CNBM and ACC would conspire with the 1^st Defendant to allow him to retain control of Shanshui without being required to account for his previous or future misconduct. It made even less sense to suggest that they would provide the 1^st Defendant with an immunity as regards future misconduct, which might cause damage to a company in which they had substantial investments. 
• The conspiracy allegation was disproved by evidence that was clearly contrary to the alleged conspiracy, including appointing independent accountants to investigate the 1^st Defendant’s alleged misconduct, opposing improper remuneration, and reforming corporate governance practices. There was also evidence of conflicts of interest between CNBM and ACC, further undermining the conspiracy claim.
• The Court saw no evidence that Shanshui’s listing status was jeopardized by the Defendants’ conduct or that Shanshui faced criminal or civil proceedings due to the alleged conspiracy. Without proof of damage, the conspiracy claim failed. In the words of Coleman J, “no damage, no tort”.

Breach of fiduciary duty by alleged shareholder-affiliated directors

The Plaintiffs argued that the alleged shareholder-affiliated directors were agents for or creatures of the respective shareholders on Shanshui’s board. 

Nonetheless, evidence from the alleged shareholder-affiliated directors that they have conducted themselves independently convinced the Court that they were not agents for or creatures of the respective shareholders. The Court did not find that the shareholder-affiliated directors of Shanshui breached their fiduciary duties for various factual reasons.

For completeness, the fact that no allegation of dishonesty or bad faith was put against the alleged shareholder-affiliated directors also meant that the conspiracy claim involving them failed.

Conclusion

The conclusion to HCA 2880/2015 marks the end of just one chapter in the ongoing Shanshui saga. Notably, Coleman J’s judgment is a landmark decision, underscoring the Court’s stringent stance on unlawful means conspiracy and the high threshold required to establish such a claim. 

Authored by Maria Sit and Jonathan Lu.