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Eton Properties Limited And Another v 廈門新景地集團有限公司 Formerly Known As 廈門市鑫新景地房地產有限公司

Judgment Cited authorities 35 Cited in Precedent Map Related
Vincent
Judgment Date09 October 2020
Neutral Citation[2020] HKCFA 32
Year2020
Judgement NumberFACV3/2019
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV3/2019 ETON PROPERTIES LIMITED AND ANOTHER v. 廈門新景地集團有限公司 formerly known as 廈門市鑫新景地房地產有限公司

FACV Nos. 3 and 5 of 2019

[2020] HKCFA 32

FACV No. 3 of 2019

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 3 OF 2019 (CIVIL)

(ON APPEAL FROM CACV NO. 158 OF 2012)

________________________

BETWEEN
廈門新景地集團有限公司 Plaintiff (Respondent)
formerly known as
廈門市鑫新景地房地產有限公司
and
ETON PROPERTIES LIMITED 1st Defendant
(裕景興業有限公司) (1st Appellant)
ETON PROPERTIES (HOLDINGS) LIMITED 2nd Defendant
(裕景興業(集團)有限公司) (2nd Appellant)
ETON PROPERTIES GROUP LIMITED formerly known as ETON PROPERTIES (INTERNATIONAL) LIMITED 3rd Defendant
LEGEND PROPERTIES (XIAMEN) 4th Defendant
COMPANY LIMITED (利景興業(廈門)有限公司), a limited company incorporated in Hong Kong
LEGEND PROPERTIES (XIAMEN) COMPANY LIMITED (利景興業(廈門)有限公司), 5th Defendant
a foreign-owned enterprise incorporated in the People’s Republic of China
TAN LUCIO C (陳永栽) 6th Defendant
CHUA DOMINGO (蔡黎明) 7th Defendant
TAN ENG LIEN MARIANO (陳永年) 8th Defendant
KWAN KIE YIP (關基業) 9th Defendant
CHEUNG CHI MING (張志明) 10th Defendant
MOK PUI HONG (莫沛杭) 11th Defendant

________________________

FACV No. 5 of 2019

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 5 OF 2019 (CIVIL)

(ON APPEAL FROM CACV NO. 158 OF 2012)

________________________

BETWEEN
廈門新景地集團有限公司 Plaintiff
formerly known as (Appellant)
廈門市鑫新景地房地產有限公司
and
ETON PROPERTIES LIMITED 1st Defendant
(裕景興業有限公司) (1st Respondent)
ETON PROPERTIES (HOLDINGS) LIMITED 2nd Defendant
(裕景興業(集團)有限公司) (2nd Respondent)
ETON PROPERTIES GROUP LIMITED formerly known as ETON PROPERTIES (INTERNATIONAL) LIMITED 3rd Defendant
(3rd Respondent)
LEGEND PROPERTIES (XIAMEN) 4th Defendant
COMPANY LIMITED (利景興業(廈門)有限公司), a limited company incorporated in Hong Kong (4th Respondent)
LEGEND PROPERTIES (XIAMEN) COMPANY LIMITED (利景興業(廈門)有限公司), 5th Defendant
a foreign-owned enterprise incorporated in the People’s Republic of China
TAN LUCIO C (陳永栽) 6th Defendant
(5th Respondent)
CHUA DOMINGO (蔡黎明) 7th Defendant
TAN ENG LIEN MARIANO (陳永年) 8th Defendant
KWAN KIE YIP (關基業) 9th Defendant
CHEUNG CHI MING (張志明) 10th Defendant
MOK PUI HONG (莫沛杭) 11th Defendant

________________________

(HEARD TOGETHER)
Before: Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Cheung PJ, Mr Justice Bokhary NPJ and Lord Sumption NPJ
Dates of Hearing: 25-26 August 2020
Date of Judgment: 9 October 2020

________________________

J U D G E M E N T

________________________

Mr Justice Ribeiro PJ:

1. The present cross-appeals arise out of the same transaction. The first appeal, FACV3 of 2019, is brought by Eton Properties Limited and Eton Properties (Holdings) Limited, both Hong Kong companies. I will refer to them as D1 and D2 respectively and jointly as D1-D2, this being how they were referred to as defendants in the first instance proceedings and throughout. Their appeal is brought against the Plaintiff, Xiamen Xinjingdi Group Co Ltd,[1] a PRC corporation.

2. The second appeal, FACV5 of 2019, is brought by the Plaintiff as appellant against D1 and D2 as well as three others who were also named as defendants at first instance. They are Eton Properties Group Limited, a BVI company (D3), Legend Properties (Xiamen) Company Limited, a Hong Kong company (D4) and Mr Lucio C Tan (D6), an individual who established and controlled the Eton Group.

3. Another entity and five other individuals were previously joined as defendants but are no longer parties. Two of them will, however, be mentioned and can conveniently continue to be referred to as D5 (Legend Properties (Xiamen) Company Limited, a foreign-owned enterprise incorporated in the PRC) and D10 (Cheung Chi Ming, D6’s brother-in-law, a director of D4 and D5 and described as one of the key senior management personnel of the group).

4. These are appeals from the judgment of the Court of Appeal[2] which allowed in part an appeal from DHCJ Stone QC who had entirely dismissed the Plaintiff’s claims.[3]

5. In this judgment, I set out the somewhat lengthy course of events leading to these appeals and deal with the issues arising in FACV3, the first appeal. Lord Sumption NPJ deals with FACV5, the second appeal. I have read his judgment in draft and respectfully agree with his reasons and conclusion.

A. The transactions between the parties

A.1 The Agreement

6. On 4 July 2003, D1-D2 and the Plaintiff entered into an agreement which lies at the root of these proceedings (“the Agreement”). In it, D1 and D2 declared that each owned one share in D4, comprising the whole of D4’s issued capital and that D4 had incorporated and owned D5 which had the right to develop and use Lot 22, a piece of land in Xiamen comprising an area of 11,994.59 sq m. D1-D2 warranted that they had “absolute control” over D4 and D5. The Plaintiff agreed to purchase those development and use rights by acquiring the shares in D4 and thus D5. Article 3 provided:

“[The Plaintiff] for the purpose of obtaining the right to develop [Lot 22] in the name of [D5] and obtaining the right to profits, and at the same time for the purpose of compensating [D1-D2] the investment which it has put into the two companies [D4] and [D5] and [Lot 22], agrees to pay [D1-D2] the transfer price of RMB 120,000,000. After [the Plaintiff] has settled the transfer price in full, [D1-D2] agree to transfer all the shares in [D4] for HK$2 to a legal entity or individual outside the territory of China designated by [the Plaintiff] and exempt repayment of all shareholders’ loans advanced to [D4] and [D5].”

7. The Agreement provided for the Plaintiff’s payment of a deposit of RMB5,000,000 on signing (which was duly paid) and payment of the balance of the transfer price by instalments. Delivery of the land was to take place within 6 months of the date of the Agreement,[4] after current residents had moved out and certain structures had been demolished. The Agreement provided for a significant degree of supervision by D1-D2 in the event that the development process should occur. Their consent would, for instance, be required for construction plans, “project finance index” and “change of land use area”.[5] Pending payment of the transfer price in full, D1-D2 would have the right to “supervise [the Plaintiff’s] development and operation activities”, in respect of a series of specified matters.[6]

8. As provided by Article 8, after full payment, D1-D2 were to transfer their shares in D4 to the Plaintiff’s nominee:

“When [the Plaintiff] has settled the total transfer price and fulfilled the obligations according to the Agreement, [D1-D2] will agree to transfer all the shares of [D4] to an approved individual or an approved legal entity outside the territory of China designated by [the Plaintiff], the two parties shall jointly sign the ‘Sale and Purchase Agreement for Transfer of Shares and Debts of [D4] [annexed].”

9. Importantly for present purposes, Article 13 provided for arbitration and choice of law:

“1. Parties shall make every effort to negotiate to resolve the disputes arising from the performance of this Agreement. In the case where no agreement is reached through negotiation, any party has the right to submit the dispute to the China International Trade Arbitration Commission [“CIETAC”] in Beijing for arbitration, the arbitration rules of the Arbitration Commission effective at the time when the dispute occurs should be adopted.

2. The Agreement is governed by the laws of the People’s Republic of China, but the procedure and validity related to the transfer of shares of [D4] is governed by the laws of Hong Kong Special Administrative Region.”

A.2 Renunciation of the Agreement

10. D6 did not give evidence. However, D10 testified that in September 2003, a mere two months or so after concluding the Agreement, D6 decided to terminate it and instructed D10 to implement his decision.[7] D10 also testified that at around this time, he proposed setting up a real estate investment holding company in the PRC and D6 agreed, leaving it up to D10 to determine when this should be done.[8]

11. On 14 November 2003, D1-D2 wrote to the Plaintiff giving notice that performance of the Agreement would be discontinued, alleging that issues of illegality had arisen and seeking to return the deposit. The Plaintiff replied on 8 December 2003, refusing to accept the termination or return of the deposit.

12. The land should have been delivered to the Plaintiff by 4 January 2004, being six months after the date of the Agreement. That did not occur and, on 17 January 2004, the Plaintiff wrote making a demand for delivery which was not met.[9]

13. Instead, the Defendants took steps to develop Lot 22 themselves, obtaining regulatory and town planning approvals between November 2004 and February 2005. In March 2005, D10 set about incorporating a real estate holding company as discussed with D6 back in September 2003. This led to D3 being incorporated and introduced into the scene.

A.3 The restructuring

14. On 8 August 2005, the Plaintiff commenced the CIETAC arbitration in Beijing against D1 and D2.[10] And on 24 October 2005, the tribunal served notice that the first hearing would take place on 23 November 2005.

15. On 16 November 2005, a week before that...

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