CL-2024-000186 - [2025] EWHC 1895 (Comm)

I begin with the language of clause 2.7. It contemplates an application “to the relevant exchange or body for the admission of and grant of permission to deal in any shares allotted pursuant to any exercise of the SGHL Put Election in the relevant exchange.”

It is therefore necessary to know what the “SGHL Put Election” is. It is explained in clause 2.2 as an election by SGHL (or, in the events which have happened, CPC) to receive as consideration for the exercise of the Put Option “either .........(a) cash in US Dollars to an account nominated by SGHL or (b) where law and regulation permits, the issue and allotment of Quotation Shares in the Quotation Entity representing 49% of the Quotation Percentage (or, at SGHL's option, a mix and match part cash, part shares basis with a corresponding reduction in the percentage received by SGHL of the Quotation Percentage).”

Thus CPC was entitled to receive, at its election, either cash or the issue and allotment of “Quotation Shares in the Quotation Entity” or a mix of cash and shares.

It is to be observed that the phrase “where law and regulation permits” in clause 2.2 applies only to the issue and allotment of Quotation Shares in the Quotation Entity. Thus the parties expressly contemplated that law or regulation may not permit the issue and allotment of such shares. There was no such express contemplation in the case of a payment in cash.

Clause 2.7 contemplates an application being made with regard to “any shares allotted pursuant to any exercise of the SGHL Put Election in the relevant exchange.” The reference to “any shares allotted” appears to be a reference back to clause 2.2 where it refers to the allotment of Quotation Shares in the Quotation Entity. That is also consistent with the circumstance that the words “where law and regulation permits” in clause 2.2 refer only to the issue and allotment of Quotation Shares in the Quotation Entity. Clause 2.7 appears to identify Wanda as the person who must make the necessary application so that, if successful, the issue and allotment of Quotation Shares is permitted by law and regulation.

Thus the language of clauses 2.2 and 2.7 suggests that the reasonable person would understand clause 2.7 to have the meaning for which CPC contends.

Wanda’s case on the construction of clause 2.7 is that “clause 2.7 is clear in placing Wanda under an obligation to obtain Regulatory Approval for “any exercise of the SGHL Put Election”, which includes a situation where SGHL (or CPC) elects to receive cash consideration for the Option Shares. The Regulatory Approval so referred to is not limited to approval from the “relevant exchange”, but also includes approval from the “relevant … body” (suggesting that the “body” is something different to a securities exchange). In light of the admissible factual matrix (set out above), the body being referred to was clearly the “relevant PRC governmental authorities” (see Wanda’s Skeleton Argument at paragraph 27). It is also Wanda’s case that where CPC elects to receive cash “the “grant of permission” referred to in clause 2.7 must be a grant of permission for Wanda to deal in the option shares” (see Wanda’s Skeleton Argument at paragraph 28).

There are, as it appears to me, real difficulties with this case.

First and foremost is the difficulty in reading the words “any shares allotted pursuant to any exercise of the SGHL Put Election” as encompassing not only the allotment of Quotation Shares in the Quotation Company but also the transfer of the Option Shares to CPC. Counsel for Wanda said that this was a possible meaning of clause 2.7 in circumstances where there was a reference to “any” shares and also a reference to “any” exercise of the SGHL Put Election which must include not only a choice to receive the allotment of Quotation Shares in the Quotation Company but also a choice to receive cash.

This was an imaginative submission but I was not persuaded that it enabled a reasonable person to read “any shares allotted” as including a transfer of the Option Shares. I do not consider that that is a permissible reading of “any shares allotted” in the context of clauses 2.2 and 2.7. I say that for several reasons. First, the word “allotment” in clause 2.2 refers to an allotment of Quotation Shares and so the phrase “any shares allotted” in clause 2.7 naturally takes its meaning from clause 2.2. Second, the word “allotted” in clause 2.7 does not naturally encompass the transfer of the Option Shares pursuant to a sale of them. (It is to be noted that when the parties refer to a transfer of the Option Shares they do so in terms; see clause 2.5.) Third, as explained above in paragraph 33, when one reads clauses 2.2 and 2.7 together the natural meaning of “any shares allotted” is that they refer to the shares which are allotted when CPC exercises its option to receive consideration for the exercise of the Put Option in the form of the allotment of Quotation Shares. Reading “any exercise of the SGHL Put Election” in clause 2.7 as including a choice to receive cash is not consistent with the meaning of clauses 2.2 and 2.7 when read together.

The second difficulty, closely related to the first difficulty, relates to counsel’s reliance on the reference in clause 2.7 to the need to apply to the “relevant exchange or body” and the suggestion that it can include a body which gives permission for the use of cash to purchase the Option Shares. That sits uncomfortably with the description in clause 2.7 of the nature of the application to be made to the relevant exchange or body, namely, an application for the admission of and grant of permission to deal in any shares allotted pursuant to any exercise of the SGHL Put Election in the relevant exchange.

Having considered the language of clause 2.7, in the context of clause 2.2, it is next necessary to consider the factual matrix, the background knowledge reasonably available to both parties. Both parties made a submission under this head.

CPC relied upon the terms of the SPA and in particular upon the warranty given by Wanda (and/or its predecessor) that it has obtained all necessary consents to perform its obligations under the Option Agreement, being one of the Transaction Documents. It was said that in that context it would not be possible to construe clause 2.7 of the Option Agreement as requiring Wanda to apply for permission to pay the agreed price for the transfer of the Option Shares.

Wanda relied upon the evidence of Mr. Liao, its Chief Financial Officer, that the PRC is subject to strict foreign exchange and regulatory capital controls. Mr. Liao said that it would have been “perfectly obvious” to both parties that the performance of the Put Option (even where CPC had elected to receive cash) was conditional upon Wanda obtaining approval from the PRC authorities for the relevant funds to be transferred from the Wanda Group in the PRC to Wanda in Hong Kong. This was disputed by CPC who relied upon the evidence of their English solicitor and what he had learnt from discussions with PRC local counsel. However, it is to be noted that when CPC exercised its option to receive the consideration for the Put Option in cash CPC stated that “completion of the sale and purchase of the Option Shares is conditional on receipt of relevant regulatory approvals.” That was said by counsel for CPC to be “incorrect.”

I do not consider that on this application for summary judgment the court can resolve that particular dispute. I have noted the arguments rehearsed at paragraphs 22-24 of CPC’s Skeleton Argument and at paragraph 29 of Wanda’s Skeleton Argument. To resolve these arguments would amount to a “mini-trial” (as that phrase is used in Easyair v Opal Telecom). Counsel for CPC relied upon the circumstances that (a) Mr. Liao had not mentioned the circumstance that only certain investments fell within the outbound investment regime, (b) the initial purchase of 51% of shares in VSP was not, apparently, within that regime and (c) until CPC commenced proceedings no mention had been made of the need for approval from the PRC authorities. Counsel submitted that in those circumstances Wanda’s evidence was very weak. I have noted those points but remain of the view that that I cannot resolve the question on this application.

But even if Wanda’s case on the factual matrix is correct (or should be assumed to be so on this application) it does not, in my judgment, enable the words used by the parties in clauses 2.2 and 2.7 of the Option Agreement to bear the meaning attributed to them by Wanda. For the reasons I have sought to express above I do not consider that the meaning which Wanda seeks to give clause 2.7 (in the context of clause 2.2) is an available meaning or construction of the words used by the parties to express their agreement.

Furthermore, the natural construction of clause 2.2 is that, assuming that Wanda’s case on the factual matrix is correct (or should be assumed to be so on this application), CPC did not bear the risk that “law or regulation” might not permit the payment of the price where CPC had elected to receive cash. Wanda’s case seeks to make CPC bear that risk when clause 2.2 does not do so.

In reaching my conclusion I have not relied upon the Buyer’s warranty in the SPA. My conclusion is based upon the clear meaning of the words used by the parties in clause 2.7 and clause 2.2 of the Option Agreement.

The Option Agreement bears the hallmarks of being drafted by commercial lawyers instructed by sophisticated business people. Had there been an intention that where CPC elected to receive cash Wanda would only be obliged to do so if law or regulation permitted, such an intention would have been clearly expressed.

For these reasons I have reached the conclusion that there is no realistic prospect of Wanda succeeding on its defence based upon the true construction of the Option Agreement. This is the sort of “short point of law or construction” which may properly be the subject of a summary judgment application; see EasyAir v Opal Telecom.

In my judgment a reasonable person with the background knowledge alleged by Wanda would understand clauses 2.7 and 2.2 of the Option Agreement to have the meaning for which CPC contends.