LIN MING v. JOINTA LTD

HCA 866/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 866 OF 2011

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

BETWEEN

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

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

D E C I S I O N

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

1.  Mr Lin claims in HCA 866/2011 that he had advanced a sum of Hong Kong $62,248,190 to Jointa Ltd (“Company”). The alleged loan is denied by the Company.

2.  Mr Lin relies on the minutes of a meeting of the board of directors of the Company dated 3 August 2009 (“Minutes”) as evidence of the loan, as well as on the unaudited balance sheets or management accounts of the Company for the year ending 31 December 2009 which refer to the amount due from the Company to Mr Lin.

3.  Lengthy affidavits have been filed by the parties for the purpose of the application made by Mr Lin for summary judgment to be entered against the Company for the sum of US$6,562,500, which Mr Lin claims to be the part of the loan which is clearly evidenced.

4.  I do not consider that this is a case fit for summary judgment.

5.  The Minutes relied upon by Mr Lin as evidencing the alleged loan of HK$62,248,190 is disputed by the Company.  It is claimed that at the time of the alleged meeting which took place, Mr Lin was not a director of the Company.  The Company has produced documents filed at the Companies Registry on 24 December 2009 which record the fact that on 17 July 2009, Mr Lin had ceased to be a director, and that Mr Chen Shu Quan had been appointed in his place.  It is claimed that Mr Lin had no authority to pass the resolution whereby the loan of HK$62 million was acknowledged.

6.  In reply, Mr Lin refers to a series of fraudulent acts perpetrated by Mr Chen and others to remove Mr Lin’s control and beneficial ownership of the Company and other entities within a group, during a period of his imprisonment in China from 27 October 2009 to 22 December 2010.  It is claimed that he had been defrauded into signing documents which eventually divested him of his directorship in the Company, and to the shares in the Company being transferred out of Mr Lin’s control.

7.  In relation to the sum of US$6,562,500, which is the only part of the loan which Mr Lin says he is able to produce documents to support his claim, the Company claims that under a Subscription and Investment Agreement which was signed by Mr Lin, the Company, and other parties on 7 March 2007 (“Agreement”), which was part of an exercise to inject capital and funds into the group of companies in which Mr Lin had an interest, there are restrictions on the Company’s borrowing or entering into contracts with persons connected with the Company and the group such as Mr Lin, which casts doubt on the loan alleged to have been made by Mr Lin to the Company in 2009.

8.  In relation to the unaudited balance sheets or management accounts of the Company which refer to the debt of HK$62 million due to a director, the authenticity of the accounts is called into question by the Company, and the accuracies of the entries are disputed.  On the evidence produced by Mr Lin, it is, first, unclear that the debt of US$6,562,500 is part of the debt of HK$62 million shown in the accounts.  Further, it is unclear how and when the management accounts (ie exhibit LM5) were produced, whether they were compiled by Mr So on 16 May 2011, or earlier.  The Company claims further that the entries in the unaudited statements are unreliable, bearing in mind Mr Lin’s own evidence as to the value of the Company being over 1 billion RMB, contrasted with the negative net asset value of HK$7,542,780 as shown in the unaudited balance sheet (exhibit LM 42) and in exhibit LM 5 itself.

9.  As for the bank statements relied upon by Mr Lin, as the company has pointed out, these do not support or show clearly that the sums were loans made by Mr Lin to the Company.

10.  At this summary stage, it is impossible to decide on the affidavit evidence filed whether Mr Lin’s version of events, or the version of events put forward on behalf of the Company, should be believed in relation to the Minutes and in relation to the accounts.

11.  Having considered the evidence, I am not satisfied that there is sufficient evidence to show that the Company is clearly indebted to Mr Lin for the sum of US$6,562,500 which he claims he had advanced to the Company.  There are triable issues as to whether Mr Lin had indeed advanced the alleged loans to the Company, and whether the debts are payable, which issues can only be determined at trial after cross‑examination of the relevant witnesses and examination of the documents produced.

12.  I will give unconditional leave to the Company to defend the action.  I will make an order nisi that the costs of the Order 14 summons will be in the cause, since the Defence filed on 22 September 2011 essentially contained denials of Mr Lin’s claims and putting him to proof.  I will say however that by the time evidence was filed on behalf of the Company to oppose the application for summary judgment, it should have been clear to those advising Mr Lin that this is not an appropriate case for summary judgment to be entered and that further costs should have been avoided.

[Directions]