ROSEFORD RESOURCES LTD. v. DATO LIM HUI BOON

HCA21850/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.21850 OF 1998

------------------

-------------------

-------------------------

J U D G M E N T

-------------------------

The plaintiff's claim

1. The plaintiff is claiming a sum of $33 million together with interest from the defendant.

The evidence

2. I accept the evidence of Mr Chan Boon Teong ("Mr Chan"), the plaintiff's witness, to be a truthful account of the events that had occurred in this case. He was not shaken in cross-examination. The defendant had chosen not to call evidence and there is no contrary evidence to the case of the plaintiff.

The finding

3. I make the following findings :

(1) the defendant proposed to Mr Chan to enter into a joint venture by investing in Malaysian shares;

(2) the terms of the agreement between the parties were set out in the Deed of 18 December 1997 and the Agreement of 19 December 1997;

(3) Mr Chan's company, Kings Crown Holdings Limited ("Kings Crown"), would invest $30 million. The defendant had to repay Kings Crown $33 million on or before 23 March 1998. In other words, Kings Crown would have an agreed return or profit of 10% on the investment. If any profit was made above the $3 million, the defendant would be entitled to $1.5 million himself and any further profit above that would be shared equally between Kings Crown and the defendant. These clearly indicated that the agreement in question was an investment by Kings Crown;

(4) Mr Chan accepted that there was no security given to Kings Crown and there was no provision of control by Kings Crown over the investment. I accept the evidence of Mr Chan that he was talked out of such requirement by the defendant. Mr Chan trusted the defendant had the expertise to achieve the agreed return and also by the defendant's reputation. Clearly the fact that the defendant was listed amongst the 303 richest Chinese in the Chinese Forbes magazine impressed Mr Chan who admitted that he had made an error of judgment in this case.

(5) Kings Crown had paid $30 million to the defendant who instructed it to make the cheque payable to Longo Investments Limited, a company of which Mr Chan or his companies had no interest or control whatsoever.

(6) The sum of $30 million was an investment and not a loan. The two agreements were not sham agreements disguising the real nature of the transaction.

(7) The defendant had raised the suggestion that in order to simplify things, the $30 million could be treated as a loan. Mr Chan had expressly asked the defendant if he needed a loan. The defendant had expressly said "no" and that the money was to be for investment. The idea of a loan was merely a method suggested by the defendant for the formality of the transaction. This suggestion was rejected by Mr Chan after he had consulted his lawyers and was advised that such a transaction would require a money lender licence.

(8) The transaction was not a money lending transaction vitiated by the Money Lender Ordinance ("the Ordinance").

(9) The return of $3 million was the profit that the defendant had agreed to pay to Kings Crown for the investment. It was not an interest of any alleged loan.

(10) The defendant had received the whole of the $30 million. There was no deduction by Mr Chan or his companies of $8.5 million from the $30 million.

(11) The question of excessive or extortionate interest rate prohibited by the Ordinance did not arise in this case.

(12) Mr Michael Lam was the nephew of the defendant. He introduced the defendant to Mr Chan and agreed to act as the process agent for the defendant in Hong Kong. Likewise, he was an agent for the defendant in respect of the transaction in question.

(13) The parties had signed subsequent agreements dated 28 March 1998 and 22 June 1998 respectively which extended the time of repayment by the defendant of the $33 million. The plaintiff, which was a private company, took over the rights of Kings Crown in respect of the $33 million so as to avoid Mr Chan's public company being affected by the bad debt. There might be inter-company loans and interest paid to achieve the purpose of the transfer but they did not render the transaction itself to be a money lending transaction.

(14) The only sum repaid by the defendant was $3 million sometime in May 1998. He had not specified the nature of the repayment when the sum was paid. The plaintiff treated the sum of $3 million as a repayment of the agreed return on the investment of $30 million, although in the Reply it was pleaded that it was to be treated as compensation for extending the time to the defendant to repay the money.

(15) Under clause 5 of the Agreement dated 22 June 1998, the defendant agreed to repay $3 million on or before 30 June 1998 as consideration of the plaintiff agreeing to extend the repayment to 30 April 1998 as contained in the Supplemental Deed of 28 March 1998 and to further extend the repayment date to 30 June 1998. The defendant had not paid either $30 million or $3 million on 30 June 1998. The plaintiff is entitled to $33 million from the defendant.

Judgment

4. Accordingly, I will give judgment to the plaintiff for the sum of $33 million. Under clause 5 of the Deed of 18 December 1997, the sum not paid by the defendant shall carry interest at the rate of 2% per annum above the best lending rate quoted by The Hongkong and Shanghai Banking Corporation Limited from time to time. The plaintiff is entitled to such interest on $33 million from 1 July 1998 to date and thereafter at judgment rate until payment.

[Argument on costs]

Costs

5. By virtue provision of clause 10 of the Deed of 18 December 1997, I will give costs to the plaintiff to be taxed on indemnity basis. In any event, despite the very serious allegation of illegality raised by the defendant, he had chosen not to call any evidence at the trial, the conduct of the defendant's case clearly justifies the making of such a costs order.