Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

Fcl China Development Pte. Ltd And Another v Lai Yuen Ling And Others

Judgment Cited authorities 2 Cited in Precedent Map Related
Vincent
Judgment Date20 March 2015
Year2015
Judgement NumberCACV193/2014
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV193/2014 FCL CHINA DEVELOPMENT PTE. LTD AND ANOTHER v. LAI YUEN LING AND OTHERS

CACV 193/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 193 OF 2014

(ON APPEAL FROM HCA NO. 642 OF 2013)

________________________

BETWEEN

FCL CHINA DEVELOPMENT PTE. LTD. 1st Plaintiff
SHANGHAI FRASERS MANAGEMENT & CONSULTANCY CO. LTD. 2nd Plaintiff
and
LAI YUEN LING 1st Defendant
SAR INTERNATIONAL HOLDING LIMITED 2nd Defendant
FEDERATED GROUP HOLDINGS LIMITED 3rd Defendant
KEYLAND (HK) LIMITED 4th Defendant

________________________

Before: Hon Lam VP, Cheung and Yuen JJA in Court
Date of Hearing: 19 March 2015
Date of Judgment: 19 March 2015
Date of Reasons for Judgment: 20 March 2015

________________________

REASONS FOR JUDGMENT

________________________

Hon Lam VP :

1. I agree with the judgment of Cheung JA.

Hon Cheung JA :

2. Deputy High Court Judge David Lok gave summary judgment respectively to the 1st plaintiff against the four defendants for US$5,742,315.22 and to the 2nd plaintiff against the 1st, 3rd and 4th defendants for RMB 798,463.20.

3. The defendants appealed. We dismissed the appeal at the conclusion of the hearing.

Background

4. The background of the case is succinctly set out by the Judge which I will gratefully adopt with supplements where necessary.

1) Tri-Partite Agreement

5. On 25 October 2006, a tri-parte framework agreement (‘the Tri-Partite Agreement’) was entered into between Qingdao State Enterprise (of the Qingdao Provincial Government), Hong Kong Fung Choi Co Ltd (‘Fung Choi’) and Frasers Centrepoint Ltd (‘Frasers Centrepoint’). Under Clause 6 of the Tri-Partite Agreement, Fung Choi and Frasers Centrepoint were to incorporate a company with a minimum registered capital of US$50 million to carry out a development project in Qingdao (‘the Qingdao Project’) on terms to be agreed between them.

2) Joint Venture Agreement

6. On 16 March 2007, the 1st plaintiff (affiliate of Frasers Centrepoint) on the one hand and the 2nd, 3rd and 4th defendants (affiliates of Fung Choi) on the other hand entered into a joint-venture agreement to carry on the business under the Qingdao Project (‘the JV Agreement’). The 1st defendant was the sole shareholder of the 3rd defendant. The 3rd defendant was the controlling shareholder of the 2nd defendant which in turn was the sole shareholder of the 4th defendant. The 1st defendant was also the sole director of the 2nd, 3rd and 4th defendants.

7. The main provisions of the JV Agreement are as follows:

1) the 1st plaintiff was to subscribe for 65 shares in the 4th defendant, whilst the 2nd defendant was to subscribe for 34 shares in addition to the one share it already owned (Clause 6.01);

2) the funding of the 4th defendant would be US$50 million, to be provided:

i) subject to the subscriptions having been completed, initially by shareholders’ loans in the respective sums of US$6.5 million and US$3.5 million to be provided by the 1st plaintiff and the 2nd defendant by the end of March 2007; and

ii) the balance would be advanced by the 1st plaintiff and the 2nd defendant to the 4th defendant in the ‘specified proportion’ (initially the 1st plaintiff 65% and the 2nd defendant 35%: Clause 1.01) in the manner resolved by the board (Clause 8.01(a));

3) a wholly-owned foreign enterprise was to be established in Qingdao for the operation of the project (Clause 7.04);

4) the 1st plaintiff would be entitled to appoint four of the six board members of the 4th defendant which in turn controlled the wholly-owned foreign enterprise (Clause 9.02(a)); and

5) the 3rd defendant guaranteed the 2nd defendant’s obligations under the JV Agreement (Clause 12.11).

8. On 19 December 2006, Qingdao Fraser Real Property Development Co Ltd (‘Qingdao Fraser’) was incorporated as the wholly-owned foreign enterprise for the development project under the JV Agreement. The name of Qingdao Fraser was subsequently changed to ‘Qingdao Huidafeng Trading Co Ltd’.

9. In compliance with their obligations under Clause 8.01(a) of the JV Agreement, the 1st plaintiff and the 2nd defendant injected the respective sums of US$6.5 million and US$1.5 million into Qingdao Fraser.

10. Unfortunately, there was a breakdown of trust and confidence between the parties. The plaintiffs claimed that the 2nd to 4th defendants were in breach of the terms of the JV Agreement in that the 2nd to 4th defendants had failed to procure the issue of any shares of the 4th defendant to the 1st plaintiff, the 2nd defendant failed to appoint directors nominated by the 1st plaintiff to the 4thdefendant’s board and the 2nd defendant failed to inject the agreed sum of US$3.5 million into Qingdao Fraser (only US$1.5 million was paid). On the other hand, the defendants complained that there was mismanagement of Qingdao Fraser by the plaintiffs.

Settlement Deeds

11. In order to resolve the dispute between the parties, the defendants agreed to buy out the plaintiffs’ interests in the Qingdao Project. The parties therefore entered into two Settlement Deeds which are the subject-matters of the present claims.

12. The 1st Settlement Deed was made between the 1st plaintiff, the four defendants and Qingdao Frasers (‘the 1st Settlement Deed’). Its material provisions are as follows:

i) the 2nd to 4th defendants would pay the 1st plaintiff the Settlement Amount of US$5,737,216.68 (‘the Settlement Amount’) on or before 17 April 2012 (Clauses 3.1 and 3.2). The sum is the difference of US$6.5 million paid by the 1st plaintiff less certain deductions.

ii) the sums referred to in Clauses 3.2 and 3.3 were used only for the purposes of arriving at the Settlement Amount and the 1st plaintiff was under no liability in respect of Qingdao Fraser’s expenses or liquidation expenses, including any tax, fees and/or penalty (Clause 3.5);

iii) the 1st defendant guaranteed the performance of the obligations on the part of the 2nd to 4th defendants (Clause 4.1);

iv) the 2nd to 4th defendants would liquidate Qingdao Fraser and, without affecting the defendants’ liability to pay the Settlement Amount and the 1st defendant’s liability under the guarantee, would apply the proceeds obtained after the liquidation of Qingdao Fraser towards the payment of the Settlement Amount if the proceeds were received before 17 April 2012 (Clauses 5.3(a) and (b)); and

v) the liability of the 2nd to 4th defendants to pay the Settlement Amount under Clause 3.1, and the liability of the 1st defendant under the guarantee, were not dependent on or in any way affected by the liquidation of Qingdao Fraser or its progress (Clause 5.3(c)).

13. At the same time, the 2nd plaintiff entered into a Settlement Deed with the 1st, 3rd and 4th defendants and Qingdao Fraser (‘the 2nd Settlement Deed’). Its material provisions are :

i) Qingdao Fraser acknowledged that it was indebted to the 2nd plaintiff for the sum of RMB798,463.20 (as money paid by the 2nd plaintiff to discharge the expenses of Qingdao Fraser) (‘the Agreed Indebted Amount’), which it agreed to repay the 2nd plaintiff on or before 31 December 2011 (Clause 2.1); and

ii) the 1st, 3rd and 4th defendants guaranteed the due and punctual payment of the Agreed Indebted Amount to the 2nd plaintiff (Clause 3.1).

14. The Settlement Amount under the 1st Settlement Deed was subject to adjustment:

i) under Clause 3.3(a), if the defendants within one month from the date of the deed could prove to the satisfaction of the 1st plaintiff that any items set out in Appendix 1 were properly incurred by Qingdao Fraser, the Settlement Amount would be correspondingly reduced; and

ii) under Clause 3.3(b), if the 1st plaintiff within the same period proved to the satisfaction of the defendants that the legal expenses set out in Appendix 2 of RMB 91,800 had been properly incurred, the Settlement Amount would be increased by 35% of that amount.

15. The defendants did not provide the requisite proof under Clause 3.3 within the time specified and so they lost the right to adjust the Settlement Amount. On the other hand, the 1st plaintiff, by emails dated 4 September and 21 December 2011, provided proof relating to the propriety of the legal expenses. Accordingly, the Settlement Amount was increased by 35% of RMB 91,800 (RMB 32,130) = US$5,098.54, making a total of US$5,742,315.22 (US$5,737,216.68 + US$5,098.54). The settlement sum under the 2nd Settlement Agreement remained at RMB 798,463.20.

16. It is common ground that the defendants have not made any payment to the plaintiffs under any of the Settlement Deeds and the plaintiffs sued the defendants for these two sums.

Defence

17. The defendants opposed the summary judgment application on three grounds.

18. First, in August and September 2007, Dr Han Cheong Fong (‘Dr Han’), the former Chief Executive Officer of the 1st plaintiff, made a representation to the 1st defendant that Frasers Centrepoint had reached an agreement with the Qingdao State Enterprise and/or Qingdao Provincial Government that the latter would not claim against Frasers Centrepoint or Qingdao Fraser for breach of...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT