China Cinda (Hk) Asset Management Co., Ltd v Linca Industry (Hong Kong) Holdings Co Ltd

Court:High Court (Hong Kong)
Judgement Number:HCA1428/2018
Judgment Date:22 Oct 2019
Neutral Citation:[2019] HKCFI 2565
HCA1428/2018 CHINA CINDA (HK) ASSET MANAGEMENT CO., LTD v. LINCA INDUSTRY (HONG KONG) HOLDINGS CO LTD

HCA 1428/2018

[2019] HKCFI 2565

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1428 OF 2018

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BETWEEN
CHINA CINDA (HK) ASSET MANAGEMENT CO., LIMITED Plaintiff
and
LINCA INDUSTRY (HONG KONG) HOLDINGS COMPANY LIMITED 1st defendant
CHAN RONG JI 2nd defendant

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Before: Deputy High Court Judge William Wong SC in Chambers
Date of Hearing: 11 September 2019
Date of Decision: 11 September 2019
Date of Reasons for Decision: 22 October 2019

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REASONS FOR DECISION

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1. This is an appeal against the orders of Master Vincent Lung dated 15 April 2019 (“the Master’s Orders”) whereby the 2nd defendant was granted unconditional leave to defend whilst summary judgment was granted in favour of the plaintiff against the 1st defendant.

2. Both the plaintiff and the 1st defendant appealed against the Master’s Orders. Before the hearing, the 1st defendant filed a Notice of Discontinuance. There is no objection from the plaintiff. Accordingly, I made the following orders:

(1) Leave be granted to the 1st defendant to discontinue its appeal against the Orders of Master Vincent Lung of the Court of First Instance, High Court, Hong Kong dated 15 April 2019;

(2) Costs of and occasioned by the appeal be paid by the 1st defendant to the plaintiff on an indemnity basis, to be taxed, if not agreed.

3. So what remained to be decided by this Court is the plaintiff’s appeal against the Master’s decision to grant unconditional leave to defend to the 2nd defendant. At the end of the hearing, I allowed the plaintiff’s appeal and granted summary judgment against the 2nd defendant. I now give my reasons.

Background

4. This is a very simple and straightforward case.

5. The plaintiff’s claim against the 1st defendant is for specific performance of a put and call option deed dated 1 March 2017 (the “Option Deed”) entered between the plaintiff and the 1st defendant pursuant to a put option exercise notice issued by the plaintiff to the 1st defendant on 19 October 2017 (the “Put Option Exercise Notice”).

6. The plaintiff’s claim against the 2nd defendant is for payment of the sum of HK$800,000,000 (the “Put Option Consideration”) pursuant to a personal guarantee dated 1 March 2017 signed and executed by both the plaintiff and the 2nd defendant qua guarantor (the “Personal Guarantee”).

7. On 2 December 2016, the plaintiff and Guoyan Capital (Hong Kong) Limited (the “Placing Agent”), placing agent for International Business Settlement Holdings Limited (the “Listco”), signed a placing confirmation letter, pursuant to which the plaintiff agreed to subscribe for 640,000,000 ordinary shares at HK$1.25 each in the Listco (the “Placing Shares”).

8. The plaintiff authorized two of its British Virgin Islands companies, both wholly owned by the plaintiff, to hold 554,000,000 and 96,000,000 of the Placing Shares respectively.

9. Under the Option Deed:

(1) The 1st defendant granted the plaintiff a put option to which the plaintiff may require the 1st defendant to purchase all of the shares in the first BVI company or both BVI companies (Clause 4.1 and Schedule 2).

(2) The plaintiff granted the 1st defendant a call option pursuant to which the 1st defendant may require the plaintiff to sell all the shares in the first BVI company (Clauses 4.2, 4.3 and Schedule 4).

10. On 14 July 2017, the plaintiff issued a margin call notice to the 1st defendant stating that (a) a margin call event has occurred; (b) the margin cash in the amount of HK$844,800,000 (the “Outstanding Margin Cash”) is immediately due and payable by the 1st defendant; (c) the 1st defendant shall pay the Outstanding Margin Cash into the Margin Cash Account within five days; and (d) failure to make the requested payment would constitute an event of default.

11. There is no dispute that the 1st defendant failed to pay the Outstanding Margin Cash as requested. Thus, an event of default has occurred pursuant to Clauses 6.4, 8.4(a) and (b) of the Option Deed.

12. On 19 October 2017, the plaintiff exercised the Put Option and issued the Put Option Exercise Notice to the 1st defendant pursuant to Clause 8 of the Option Deed.

13. Under Clause 5 of the Option Deed, the 1st defendant is required to pay the plaintiff a call option fee (the “Call Option Fee”) computed and accruing on a daily basis at the rate of 8% per annum on the amount equal to HK$1.25 per share times the number of shares in the Listco indirectly held by the plaintiff from the date of the Option Deed to the specified completion date of the Put Option Exercise Notice, namely,25 October 2017. The Call Option Fee of HK$9,468,493.16 is required to be paid on 25 October 2017.

14. Under the Personal Guarantee:

(1) The 2nd defendant irrevocably and unconditionally agreed to,inter alia, (a) guarantee to the plaintiff punctual performance by the 1st defendant of the Secured Liabilities (as defined in the Option Deed); and (b) be liable as principal debtor and primary obligor to indemnify the plaintiff against any cost,loss or liability it incurs as a result of the 1st defendant not paying any Secured Liabilities on the date it is stated to be due (Clause 2.1).

(2) The amount specified in a demand made by the plaintiff as to the amount of any Secured Liabilities or the amount due from the 2nd defendant under the Personal...

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