Read the full judgment text of HCCL 17/2011 on BabelCite. This Court of First Instance judgment was delivered on 15 February 2016 before Bharwaney J.
Commercial law – civil fraud – REIT listing – false documentation scheme – set-off – sale and purchase agreement – breach of warranty – indemnity – dismissal of plaintiff's claims – Whether the Bank and Manager had knowledge of the False Documentation Scheme – Whether set-offs were properly established – Gateway Plaza property in Beijing – Tin's claim for HK$270,955,000 balance of Price under the SPA and HK$289,426,166 balance of sums refundable – Damages for wrongful intimidation and fraudulent misrepresentation – Property developed by Tin through Beijing Bestride – Reit listing of RREEF CCT on SEHK on 22 June 2007 – Acquisition Value of HK$3,822 million based on DTZ valuation of HK$3,978 million – Warranties in SPA regarding accuracy of rental information – Discovery in August 2007 of discrepancies between High Rent (warranted) and Low Rent (actual) – Tin signed 7 September 2007 Letter (deed) and paid HK$278,526,708 – Whether Tin was aware of or involved in the False Documentation Scheme – Court rejected Tin's evidence as untruthful – Court gave no weight to hearsay evidence of Yuan, Chen and Zhang – Court accepted evidence of Charles Wang, Li Lei, Su and Keogh – Held that the Bank and Manager did not have knowledge of the False Documentation Scheme – High Rent information provided to the Bank consistently from the start, derived from Legacy Transaction – Due diligence exercise was robust – Tenant interviews and confirmations did not detect the fraud – Fraud was perpetrated by members of the Vendor's team – Set-off claims – Set-off for diminution in value of HK$69,663,000 properly established – Set-off for legal fees, professional costs and investor relations costs of HK$29,283,112 properly established – Set-off for loss of Manager's fees of HK$5,471,682 properly established – HK$50 million dividend waiver effective pursuant to clause 9B of SPA – Set-off for loss of rental under Advertising Right Agreement of HK$19,634,602 properly established – Set-off for rental receivables collected by Tin and amount due from related party of HK$41,171,392 properly established – Set-off for defective equipment expenses of HK$19,874,750 properly established – Set-off for listing expenses of HK$1,102,177 properly established – Set-off for rental receivables from Tin's affiliates of HK$32,857,825 properly established – Set-off for stamp duty, URET and penalty interest of HK$7,033,392 properly established – Total set-offs unrelated to 7 September 2007 Letter or breach of warranty amounted to HK$122,078,877 – Total set-offs including those related to 7 September 2007 Letter amounted to HK$226,596,671 – Tin's entitlement after dividend waiver of HK$50 million: HK$237,496,398 – Balance due to Tin: HK$10,899,727 – Tin entitled to judgment against Manager and Trustee for HK$10,899,727 – Tin to pay costs of dismissed claims on indemnity basis – Leave to apply under slip rule for calculation errors – Submissions on interest and costs to be exchanged.
Legal issues: Knowledge of False Documentation Scheme by Bank and Manager · Tin's entitlement to repayment of HK$278,526,708 · Tin's entitlement to other payments under SPA · Set-off for diminution in value of property and Certificate in Writing · Set-off for legal fees, professional costs and investor relations costs · Set-off for loss of Manager's fees from rental discrepancies · Set-off for HK$50 million dividend waiver · Set-off for loss of rental under Advertising Right Agreement · Set-off for rental receivables collected by Tin and amount due from related party · Set-off for defective equipment expenses · Set-off for listing expenses · Set-off for rental receivables and related sums from Tin's affiliates · Set-off for stamp duty, urban real estate tax and penalty interest · Tin's credibility as a witness
Outcome: Tin's claims for the balance of the Price under the SPA and damages for wrongful intimidation and fraudulent misrepresentation were dismissed. Tin was found entitled to judgment in the sum of HK$10,899,727 against the Manager and the Trustee (jointly and severally) after accounting for the dividend waiver and properly established set-offs.
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