YTL LLP successfully represented Hong Kong Zhixin Financial News Agency Limited in a matter against a HK listed company, China Maple Leaf Educational Systems Limited
On 31 August 2022, the High Court of Hong Kong gave a judgment in favour of our client, Hong Kong Zhixin Financial News Agency Limited against China Maple Leaf Educational Systems Limited (“the Listco”). In January 2023, our client recovered over HK$100 million for damages with enhanced rate of interest plus legal cost.
Our client is a Hong Kong company engaging in investor and media relations work.
The Listco’s shares are listed for trading on The Stock Exchange of Hong Kong. It principally engages in the operation of kindergarten, primary and secondary school education.
In 2015, our client entered into an agreement to provide investor relations services to the Listco for a term of 3 years. In return, the Listco agreed to grant our client an option to subscribe for the Listco’s option shares (the “Option”) as remuneration, upon the Listco’s share prices meeting certain market conditions. The Listco obtained its shareholders’ specific mandate for the grant of the Option and successfully applied to the Stock Exchange for permission to list and to deal with the option shares.
After a year, the Listco terminated the agreement and refused to accept our client’s exercise of the Option when the market conditions specified in the agreement were met. The Listco argued that the Option had not been granted and that the granting was subject to satisfactory performance of the work. The Listco alleged unsatisfactory performance of services under the agreement.
Our client sued and claimed specific performance of the contract and/or damages instead. The Listco’s share prices had fallen substantially since the termination of the agreement, to lower than the exercise price of the Option. The Listco argued that damages should be assessed as at the date of the trial in 2022, and that specific performance of the contract would mean that our client would have to pay an exercise price higher than the share prices in 2022, making a loss rather than a gain by subscribing the option shares.
The Court found, among others, that the Option had been granted and the conditions relating to the exercise of the Option were satisfied. Satisfactory performance of services under the agreement was not a condition to the grant of the Option. In any event, based on the contemporaneous documentary evidence, the Court found that our client provided the required services.
On the compensatory principle, the Court assessed the damages based on the difference between the share price at the time of the breach of the agreement and the exercise price multiplied by the number of option shares provided in the agreement. The Court awarded our client damages at HK$70,840,000 together with interests and costs and dismissed the Listco’s counterclaims.
Before the trial preparation, our client made a sanctioned offer to settle at a sum lower than the damages it eventually achieved. The Listco refused to settle and failed to beat the sanctioned offer. As a result, our client obtained an enhanced rate of interest on the damages and indemnity costs for the hearing and its preparation.