Tianjin Jinfu Expressway Co Ltd v. Lucky Money Ltd and Others

HCA447/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 447 OF 2006

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BETWEEN

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Before : Hon Waung J in Chambers (Open to Public)

Dates of Hearing : 30 July 2007

Date of Judgment : 30 July 2007

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J U D G M E N T

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1.This is an order 14 application by the plaintiff against the defendant for some RMB 176 odd million plus interest.  It is resisted.  The defence put forward by Mr Ng in a strong argument is twofold : one, there is a defence; two, for some other reasons, under Miles v Bull, leave to defend be given. 

2.I think it is important first to have a little bit of the background of the case.  This is a case involving the plaintiff company, Tianjin Jinfu Expressway Company Limited, which is a joint venture formed between the Chinese side, Tianjin Highway Development Corporation and the Hong Kong side which I will call, for ease of convenience, as Lucky Companies.  There are in fact three sections of a highway to be built by three joint venture companies.  Lucky Money Limited, one of the defendants, is the joint venture partner under one of the joint ventures and the other two defendants are the joint venture partners in relation to the two other sections. 

3.The Hong Kong side has 60% and Chinese side has 40% in the plaintiff.  In turn the Hong Kong side, the Lucky Companies, has two major shareholders : the shareholding under Golden Tree headed by Mr Ho and shareholding under what is known as Kwong Ian. 

4.The matter that is now brought before me is the recovery of some RMB250 million loan made in 2001 which is said to be made by the plaintiff to the defendants.  Kwong Ian, has pursuant to the provision in the Companies Ordinance, obtained leave from Madam Justice Kwan to come in as minority shareholder of the Lucky Companies to defend the claim.  The defendants having themselves taking a view that there is no defence to the claim have admitted to the liability for the loan.

5.The money that was available to be given as a loan in 2001 came from a loan taken up by the plaintiff company from Citic Bank, and it was part of the arrangement at the time with the consent of the banker that a large part of the drawn down loan could be used by the plaintiff to advance to its shareholders companies because there was no immediate need by the plaintiff for those funds. 

6.A key document in the whole case is at page 135 which is the Board Minutes on 1 March 2001 of the plaintiff attended by both the Chinese side directors as well as the Hong Kong side directors.  Among the Hong Kong side directors, there were Mr Ho and two key directors, Mr Chan and Mr Shek, who were directors of Kwong Ian as well as being appointed by Kwong Ian the minority shareholders of Lucky Companies to sit on the board of the plaintiff.  The Minutes of that Board meeting recited that the plaintiff company, because of the progress of the works, could lend RMB 280 million (out of the loan obtained from Citic Bank) and it specified that the Chinese side would have RMB 30 million and the Hong Kong side, namely the three defendants, would be given the loan of RMB 250 million.  This was signed by Mr Chan and Mr Shek, as well as by Mr Ho and all the Chinese directors. 

7.The authenticity of this document is not in any way disputed.  This is the key document because if this is accurate then it identifies the four key factors in this case :

(i)	the amount is RMB 250 million;
(ii)	the identity of the borrower, namely the three defendants;
(iii)	the timing in March 2001; and
(iv)	the most importantly, it is expressed as a loan to these companies by the plaintiff.

8.I will start by taking a possible defence that might be raised that was discussed at the hearing but which I think was not raised and is not a viable defence.  By a combination of looking at paragraphs 34, 35, 37 and 39 of the affirmation of Mr Lao of 11 August 2006, it could be read that there might be a suggestion that, because of the Inter Ease loan (referred to at paragraph 34 of the affidavit) from Kwong Ian to Inter Ease, that money (this is way back in 1998) then flowed on eventually to the plaintiff and that the 2001 subject matter of the loan by the plaintiff to the defendants could be said to be a repayment by the plaintiff, of the loan received by the plaintiff way back in 1998.  

9.Now, as Mr Yu has pointed out, if that is the defence then it could be said clearly in evidence (which it was not), it could be said clearly in the skeleton argument (which it was not) and furthermore it would be necessary to have positive averment to say that was the case, namely that this was a repayment made in 2001 by the plaintiff authorised by the board in March 2001 in repayment of the loan that the plaintiff had obtained in 1998. 

10.The Board Minutes of 1 March which was referred to earlier by me at page 135 contradicts squarely and fairly the possibility of such a defence.  The Board minutes says very clearly and it is not a dispute what it says.  What it says is that there was a loan by the plaintiff in 2001 made to the defendants.  The Board Minutes did not read, “We, the board, authorised the repayment of a loan given to us in 1998 and this is our authority”.  The traffic of the loan is the other way round.  The traffic is money going out of the company as a loan to the defendants in 2001 under the Board minutes at page 135.  I respect Mr Ng’s very guarded submissions to me on this aspect.  It is guarded because he has got no material to build on.  That case of repayment of loan in 2001 that might have been made was never made.  So therefore I must disregard that as an arguable ground of defence. 

11.What is then left.  Despite everything that has been said really what is left is very little.  The red herring that is thrown by paragraphs 34, 35, 37 and 39 really does not in anyway impact on a viable defence being raised.  It is, as Mr Yu pointed out, perfectly consistent with there being an Inter Ease loan by Kwong Ian to Inter Ease.  There may had been money movements which could be partly pursuant to liability of the Hong Kong shareholders to fund the project with capital injections.  The sum which Mr Ng has cast a doubt on (of RMB 76 million odd) in terms of the quantum question mark could be part of that same picture.  So really in my view there is nothing in these allegations of an Inter Ease loan or restructuring that has given me doubt that there should be no judgment. 

12.A number of other matters being referred to by Mr Ng in his skeleton (although he has kindly not spent too much time at the hearing on these) were dealt with by Mr Yu and I agree with what Mr Yu has said about these points not giving rise to arguable defence.

13.So far as Miles v Bull is concerned, it seems to me that this is certainly in my days described as scraping the bottom of the barrel.  Mr Ng has said everything that he can say.  I do not think this is a case which comes anywhere near the two examples of “for some other reasons” which have been cited to me of possible fraud or collusions requiring investigation.  I appreciate what Mr Ng that said to me about Mr Ho being in charge, in control and there may be possibility of things that are not quite right, but the evidence is nowhere sufficient to bring into play a case of “for some other reasons.” 

14.I think the overwhelming evidence are all against the defendants, and here I must stress two things : one is contemporaneous documentation, the other is the likely probabilities, the inherent probabilities.  The commercial reality is that consistently the plaintiff by its written demands regarded these money paid as loan to the defendant companies.  There has never been a contrary voice until when I think things had gone wrong in 2006.  It seems to me that the overwhelming evidence point to there being no defence.  I have no doubt that therefore I should enter judgment in the sum claimed plus interest thereon at 2% above prime. 

Mr Benjamin Yu, SC & Mr Kenneth C.W. Chow, instructed by Messrs Ho & Yip, for the Plaintiff

Mr Peter Ng, SC & Mr Victor Dawes, instructed by Messrs Gallant Y.T. Ho & Co., for Kwong Ian