Overcooked Litigation and Underseasoned Claim: The Failed Recipe in the Power Struggle of China Shanshui Cement
Commercial Law
This case of China Shanshui Cement Group Ltd & Ors v Zhang Caikui & Ors [2025] HKCFI 1868 is a landmark judgment arising from an acrimonious corporate dispute over the control of China Shanshui Cement Group Limited (“CSC”). The litigation formed part of a broader battle for dominance among major shareholders and directors, with power struggles that spilled over into multiple jurisdictions and proceedings.
The plaintiffs – entities within the CSC group, alleged that former senior executives and directors, including the company founder Zhang Caikui and his son Zhang Bin, conspired to maintain control of the company through dishonest and unlawful conduct.
The action was ultimately dismissed by Coleman J after a trial that lasted for 35 days and with 17 counsel representing the parties. The Court’s analysis of unlawful means conspiracy, fiduciary duties, and evidentiary standards sheds critical light on the limits of director liability in hostile corporate environments. Coleman J’s metaphor of “overcooked food with bad ingredients” sets the tone for a case that ultimately collapsed under its own weight.
Simon Wong acted for the 7th defendant, an independent non-executive director.
Chris Wong provides his analysis on the judgment below.
Background
CSC is a Hong Kong-listed company at the head of a complex PRC-based cement conglomerate. By 2015, several major shareholders had emerged, including Tianrui Group, Asia Cement Corporation (ACC), and China National Building Material Company Limited (CNBM). A struggle for control of the board unfolded through a series of shareholder meetings and competing boardroom appointments.
Tianrui, after becoming CSC’s largest shareholder in April 2015, sought to restructure the board through a series of three extraordinary general meetings (EGMs). Following the third EGM on 1 December 2015, Tianrui-backed directors gained control of the board and promptly commenced these proceedings on 3 December 2015.
The plaintiffs accused former directors – particularly the founder Zhang Sr, his son Zhang Jr, and other aligned directors – of engaging in an unlawful conspiracy to entrench themselves in power. Alleged misconduct included: initiating Cayman Islands litigation to frustrate shareholder rights, authorising excessive legal expenses, conducting sham meetings, and amending articles of a PRC subsidiary (Shandong Shanshui) for improper purposes.
The plaintiffs advanced their claims under several grounds: –
• Unlawful means conspiracy;
• Breach of fiduciary duties;
• Dishonest assistance;
• Knowing receipt; and
• Abuse of corporate power and misuse of company funds.
Legal issues
The main legal issues before the Court included:
1.What constitutes an unlawful means conspiracy in the context of corporate governance disputes;
2.Whether the defendants breached fiduciary duties, particularly the duties of food faith, proper purpose, and exercising independent judgment;
3.Whether serious allegations of dishonesty and conspiracy were pleaded and proven to the required standard; and
4.Whether the plaintiffs were entitled to relief, including restitution and damages, as a result of the alleged unlawful conduct.
Unlawful Means Conspiracy
The Court reaffirmed that to establish an unlawful means conspiracy, the plaintiff must prove (1) a combination or agreement between two or more persons; (2) an intention to injure the plaintiff; (3) the use of unlawful means; and (4) resulting loss or damage.
The alleged conspiracy in this case was based on purported coordination among former directors to use corporate procedures and litigation to entrench their control. The unlawful means were said to include breaches of fiduciary duty. It was held that the pleadings lacked specificity and clarity, and there was no cogent evidence of an agreement or intention to injure. The plaintiffs conflated breach of duty with conspiracy without clearly identifying any specific unlawful act that all defendants agreed to commit. Coleman J criticised the plaintiff’s case as relying on a “bootstrap” approach – seeking to build a conspiracy claim solely on the same breaches of duty they were simultaneously trying to prove.
Fiduciary Duties
The Court emphasised that allegations of breach of fiduciary duties must involve more than retrospective disapproval of poor decision. The Court should be slow to interfere with honest business judgment. It was found that many of the defendants, including Chang Zhangli, Doris Wu, and Shen Bing acted with genuine concern for the company’s financial position. Actions such as initiating litigation, approving expenses, or amending articles were not inherently improper and were, in the circumstances, reasonable board-level decisions. The plaintiffs failed to prove that these actions were done dishonestly or without regard to the company’s best interest.
Among the fiduciary duties considered, the duty to exercise independent judgment played a significant role, especially in evaluating the conduct of Independent Non-Executive Directors (INEDs) such as Zeng Xuemin. The duty to exercise independent judgment is heightened for INEDs, who are appointed specifically to offer objective oversight, particularly where conflicts of interest or shareholder disputes exist.
Coleman J emphasised that independence is not judged by whether the director always disagreed or voted against the majority, but by whether they engaged in critical thought and exercised autonomous judgment in decision-making. Importantly, the absence of dissent does not prove dependence, especially in complex commercial settings where consensus may reflect reasoned alignment rather than coercion. This aspect of the judgment underscores that while INEDs are subject to fiduciary scrutiny, the Court will assess their performance based on a contextual evaluation of their actions, rather than merely the outcomes or optics of the board decisions.
Dishonesty and Pleading Standards
The Court reiterated that allegations of dishonesty and bad faith must be pleaded with precision and supported by strong and particularised evidence. Coleman J criticised the case as advanced by the plaintiffs for (1) failing to plead essential particulars, such as dates, participants, and specific acts; (2) relying on inference rather than direct or contemporaneous evidence; and (3) alleging dishonesty in a sweeping manner without distinction between individual defendants. The Court declined to draw adverse inferences from silence or absence of witnesses unless a prima facie case had been made out.
Findings
In dismissing the bulk of the plaintiff’s claims, Coleman J found that: –
• The conspiracy claim failed entirely due to insufficient pleading and lack of probative evidence.
• The breach of fiduciary duty claims also failed in most instances, as the defendants appeared to be acting in accordance with their duties, and dishonesty was not made out.
• Many of the alleged “unlawful” acts were in fact legitimate board decisions taken in a time of financial stress and uncertainty.
• Several of the plaintiff’s claims were inconsistent with positions they had taken in other related litigation, which undermined their credibility.
Conclusion
The judgment of China Shanshui Cement is a cautionary tale about aggressive shareholder warfare and poorly constructed litigation. It reaffirms that fiduciary breaches and conspiracy claims must be grounded in precise facts and sound legal foundations. Coleman J’s judgment reinforces the judicial reluctance to intervene in internal boardroom battles absent compelling evidence of abuse or fraud. This case serves as a reminder that courtroom is not a battleground for business politics and that robust evidential and pleading standards will continue to act as a safeguard against weaponised litigation.
Simon Wong
“Simon is very meticulous and his advocacy is very good. His advice is practical and easy to follow whilst his preparation is unquestionable.” “Excellent communication skills with the ability to articulate arguments in a concise, professional and persuasive manner.”
Legal 500 Asia-Pacific 2025, Commercial Disputes, Labour and Employment — Leading Juniors
Simon is qualified to practise law both in Hong Kong and California USA. He specializes in commercial dispute resolution and personal injury litigation. In his commercial litigation practice, he has been instructed in company matters, shareholders’ disputes, banking disputes, insolvency matter and contract claims. Simon has extensive personal injury experience. He has been instructed in more than 600 personal injury and medical negligence cases and has significant experience representing both claimants and defendants.
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Chris Wong
Before joining Chambers in 2024, Chris was a Judicial Assistant at the Hong Kong Court of Final Appeal, where he assisted judges in substantive appeals and leave applications.
Chris is developing a broad mixed practice and accepts instructions in all areas of Chambers’ work.
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This article was first published on 14 May 2025.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.