Capital Wealth Corporation Ltd v. Mayer Holdings Ltd

HCA 522/2012
& HCA 524/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 522 OF 2012

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BETWEEN

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AND

ACTION NO 524 OF 2012

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Before : Mr Recorder Jat, SC in Chambers

Date of Hearing : 26 September 2012

Date of Decision : 12 October 2012

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D E C I S I O N

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1.The plaintiffs in these two actions are related private companies. The plaintiff in HCA 524/2012 (“Capital Wealth Finance”) is a wholly‑owned subsidiary of the plaintiff in HCA 522/2012 (“Capital Wealth Corp”).

2.The defendant in both actions (“Mayer”) is a Cayman Island company, the shares of which are listed on the Hong Kong Stock Exchange.

3.The plaintiffs claim that they have advanced two loans in the respective sums of $10,000,000 and $5,500,000 to Mayer on 28 June 2011.  Mr Lam Chin Chun (“Mr Lam”), the plaintiffs’ Chief Executive Officer, says that he has agreed to provide the loans at the request of Mr Lai Yueh Hsing (“Mr Lai”), a director of Mayer.  Mr Lam says that Mr Lai on behalf of Mayer has promised to repay the loans in 6 months. Mayer having failed to honour its obligation to repay, the plaintiffs commenced these actions seeking recovery of the two sums.  They now seek summary judgment.

4.There is no dispute that the two sums were paid into Mayer’s account with HSBC on 28 June 2011.  But Mayer denies the alleged loans.  Its case is that the sums were payments made on behalf of one Golden Tex Limited (“Golden Tex”) for the payment of the entire issued share capital of Advance Century Development Limited (“Advance Century”), a wholly owned subsidiary of Mayer.  Advance Century in turn held an interest in a Taiwanese company called Bridge Semiconductors Corporation.

5.Mayer produced a written Agreement between Mayer and Golden Tex dated 28 April 2011 for the sale and purchase of the shares in Advance Century.  The consideration provided in that agreement was precisely $15,500,000.

6.Mayer has also produced a notice from Golden Tex dated 28 June 2011, informing Mayer that the “full consideration of HK$15,500,000.00 (US$2,000,000) has been fully settled to your HSBC saving account (A/C no.: 640‑115994‑001) today”.

7.I pause to note that the two sums were in fact paid into Mayer’s combined “Business Direct” account held with HSBC, with account number 640‑115994‑838.

8.Mayer’s evidence is that following the receipt of the $15,500,000, the sale and purchase of Advance Century’s shares was completed and all the company documents, company chop and seal were transferred to Golden Tex.  Thereafter, nothing unusual happened until about 9 months later when Mayer suddenly received a letter dated 22 March 2012 from the Plaintiffs’ solicitors demanding repayment of the alleged loans.

9.As may be expected, counsel for both sides (Mr Anderson Chow, SC leading Miss Kitty Tsang for the plaintiffs and Mr Colin Wright for the defendant) castigated their opponents’ case as incredible.  Both sides made detailed forensic submissions and criticisms of the other side’s evidence, with a view to persuading me that the other side’s case is incapable of belief.

10.Having considered all the evidence and counsel’s submissions, I have come to the view that this is not an appropriate case for summary judgment.

11.In the light of my conclusion that the matter should proceed to trial, I think I should say as little as possible on the contested issues at this stage.  I would refer to only a few matters in this judgment.

12.Firstly, the exact amount of the alleged loans and the consideration for the Advance Century shares is one of the unusual features of the case.  The total sum involved was not a round figure but an odd sum of $15,500,000.  It seems to me, at this stage, that it is at least arguable that it was not a mere coincidence.

13.The plaintiffs, through Mr Lam’s affirmation, assert that the sale and purchase agreement was not genuine.  However, I am not persuaded that the untested evidence before me is of such quality that I can confidently accept that submission.

14.Secondly, the circumstances of the loans as alleged by Mr Lam seem to be somewhat odd.  The Plaintiffs, according to Mr Lam, carried on investment business, and Capital Wealth Finance held a money lender licence.  It seems to me unusual (although not impossible) that the plaintiffs, or at least Capital Wealth Finance, would have agreed to provide the substantial loans on an undocumented, interest free and unsecured basis.

15.Thirdly, given that whether the sums were indeed loans was the main issue, it seems surprising that the plaintiffs have not produced documentary evidence to show how the transactions were recorded in their own books and accounts.  The same can also be said of Mayer, although in this regard it has at least shown documentary evidence in the form of the sale and purchase agreement and the notice from Golden Tex which is consistent with its version of events.

16.There are other issues between the parties.  It is unnecessary, undesirable even, to comment on all of them at this stage.  Suffice to say that taking everything into account, I do not think I can dismiss Mayer’s defence summarily.

17.As to the order I should make, I am not minded to dismiss the summonses.  Mr Chow (as a fallback position) argued that any leave to defend should be conditional upon Mayer paying the amount claimed into court, because the defence raised is shadowy.  I do not agree.  I would grant Mayer unconditional leave to defend.

18.Pursuant to O.14, r.6(1), I also make an order that the plaintiffs may file replies (if so advised) within 14 days of the order.  The parties should apply to court for further directions as may be appropriate.

19.As to costs, it seems to me that a fair order would be costs in the cause, with certificate for 2 counsel.  I so order.

Mr Anderson Chow, SC & Ms Kitty Tsang, instructed by Fred Kan & Co,for the plaintiffs

Mr Colin Wright, instructed by ONC Lawyers, for the defendant