CA-2025-000010 - [2025] EWCA Civ 933

This is an appeal by Wuhu Ruyi Xinbo Investment Partnership Enterprise (Limited Partnership) (“Xinbo”) against an order of Stephen Houseman KC (sitting as a Deputy High Court Judge) (“the judge”) dated 13 December 2024, made in proceedings in which Xinbo had been joined as the fourth defendant.

The judge’s order barred Xinbo from defending the proceedings unless it met certain conditions by 4pm on 21 January 2025. In addition to filing its defence, these conditions were a) procuring that the second defendant, Dynamic Treasure Group Limited (“Dynamic”), comply with an order made by Robin Knowles J on 12 July 2024 that it transfer certain shares (the “Transfer Condition”), and b) paying €10m into court (the “Payment Condition”). Xinbo challenges the judge’s decision to impose both the Transfer Condition and the Payment Condition and further claims that the judge failed to give any or any adequate reasons for doing so.

Permission to appeal was refused by the judge but was granted by Snowden LJ, who also stayed the judge’s order pending determination of the appeal.

In outline, the factual background is as follows. The claimant (and respondent to the appeal), GLAS SAS, is the Trustee in respect of €250m of exchangeable bonds (the “Bonds”) issued by the first defendant, European Topsoho S.à R.L. (“ETS”), in September 2018. ETS is a Luxembourg incorporated company that at the material times was part of the Shandong Ruyi group, a Chinese industrial group. The third defendant, Chenran Qiu, is the daughter of Shandong Ruyi’s chairman and was a manager of ETS.

Xinbo is a PRC established limited partnership that is majority owned by the Shandong Ruyi group. Dynamic is a BVI incorporated company which was established and originally owned by Ms Qiu. It remained controlled by her until it became an indirect subsidiary of Xinbo in May 2023. The Trustee believes that Dynamic’s current sole director is a Shandong Ruyi group executive.

At the time the Bonds were issued ETS’s main asset was a majority shareholding in SMCP S.A., a French listed company. Approximately 70% of the shareholding was pledged to the Trustee (the “Pledged Shares”) as security under the Bonds, while the remainder was unpledged (the “Unpledged Shares”).

The Bonds matured in September 2021, but ETS defaulted. The value of the Pledged Shares did not cover the outstanding amount due under the Bonds. The Trustee served a petition for ETS’s bankruptcy. Shortly thereafter, in October 2021, Ms Qiu caused ETS to transfer the Unpledged Shares to Dynamic for €1, purportedly pursuant to a Share Sale Agreement (“SSA”). Dynamic converted the Unpledged Shares into bearer form and deposited them with JP Morgan in Singapore.

The rationale put forward for the transfer is that Dynamic received the Unpledged Shares as the nominee of Xinbo, and that Xinbo was entitled to the shares as security for a debt owed by the Shandong Ruyi group, guaranteed by ETS and secured by a pledge over ETS’s entire shareholding in SMCP. The guarantee and pledge are said to have been given pursuant to an agreement entered into in July 2018 (the “2018 Agreement”), shortly before the issue of the Bonds.

The Trustee commenced proceedings in this jurisdiction against ETS, Dynamic and Ms Qiu in November 2021 and obtained a freezing order against ETS and Dynamic. As well as a debt claim against ETS, the Trustee made a claim against ETS and Dynamic under section 423 of the Insolvency Act 1986 for an order reversing the transfer of the Unpledged Shares to Dynamic, and a claim against all the defendants in unlawful means conspiracy. Freezing orders were also obtained in Singapore and the BVI. Summary judgment was obtained against ETS for its debt claim under the Bonds in October 2022. ETS was declared bankrupt and a curator was appointed by the Luxembourg court in February 2023. After investigation, the curator concluded that ETS’s defence should be withdrawn.

In January 2023 an arbitration award was made in Xinbo’s favour in Beihai, purportedly pursuant to the 2018 Agreement (as amended by a later memorandum which changed the arbitration venue), but apparently without substantive argument. Xinbo initially took steps to enforce the arbitration award in England and Singapore, but the English proceedings were never served and the Singapore proceedings were struck out in July 2024 for failure to comply with an order for disclosure of documents relevant to the validity of the award.

In November 2023 Dynamic and Ms Qiu became active in the proceedings for the first time. This occurred shortly before the hearing date of the Trustee’s application for summary judgment in respect of the outstanding claims. Following a hearing on 18 January 2024, Bright J handed down a reserved judgment on 26 January ([2024] EWHC 83 (Comm), the “Bright J judgment”). By his order dated 2 February 2024 (the “Bright J order”), Bright J refused to allow a jurisdiction challenge out of time and granted permission to defend the proceedings on condition that each of Dynamic and Ms Qiu pay €9m into court by 15 March 2024. He also set a deadline of 22 March for any application to join Xinbo to the proceedings. Dynamic made such an application, but the payments into court were not made and costs orders were also not met. Males LJ refused applications by Dynamic and Ms Qiu for permission to appeal.

On 12 July 2024 Robin Knowles J granted the Trustee’s further application for partial summary judgment against ETS and Dynamic by ordering the return of the Unpledged Shares to ETS by 26 July 2024. His order (the “Knowles J order”) reserved for trial the question of whether, and if so what, further relief should be granted. Dynamic’s application for permission to appeal against this order was refused by Males LJ. The Knowles J order has not been complied with.

Xinbo was ultimately joined to the proceedings by a consent order of Andrew Baker J dated 5 September 2024. That order set a deadline of 7 October for Xinbo’s defence. The deadline was not met and on 16 October the Trustee applied for conditions to be imposed on Xinbo’s ability to defend the proceedings. On 24 October Xinbo in turn applied for a retrospective extension of the deadline for filing its defence. By an order dated 25 October, Robin Knowles J made directions in relation to both applications and also required Xinbo to serve its defence in draft by 15 November (which it duly did). It is worth noting that, as well as directing that the two applications should be listed together, the order specified a hearing length of half a day.

The applications were heard by the judge on 13 December 2024 in the Commercial Court Friday list, a list reserved for shorter applications of up to 2.5 hours (that is, half a day). The transcript of the hearing indicates that its total length was around 1 hour 10 minutes, well short of the time estimate.

Paragraph 1 of the judge’s order imposed the conditions already referred to on Xinbo’s ability to defend the proceedings. Paragraph 2 provided that any application by Xinbo in relation to compliance with the conditions should be made by 21 January 2025, “supported by written evidence demonstrating the reasons why it says it cannot comply”.

For the reasons that follow, I have concluded that the judge erred in failing to provide adequate reasoning, but that there is no need to set aside the judge’s order. The consequence is that I would dismiss the appeal.