Civil Ruling (of First Instance) in Tian Xiaoling v. He Peiheng (Dispute over Joint Venture Contract)
Intermediate People's Court of Shenzhen Municipality, Guangdong Province
Reference: (2013) SHEN ZHONG FA SHE WAI CHU ZI No.26
Plaintiff: Tian Xiaoling.
Attorney: Rao Xiaomin, Lawyer of Beijing Zhonglun (Shenzhen Office) Law Firm.
Attorney: Zhu Peimin, Intern Lawyer at Beijing Zhonglun (Shenzhen Office) Law Firm.
Defendant: He Peiheng.
Attorney: Xing Xiaoping, Lawyer of Guangdong Radien Law Firm.
Attorney: Wu Shunfeng, Lawyer of Promise-U Law Firm.
The Intermediate People's Court of Shenzhen Municipality (hereinafter referred to as the court, or this court) established a collegial panel to adjudicate the case between Tian Xiaoling, the Plaintiff, and He Peiheng, the Defendant, after accepting it. Within the statutory period, the Defendant raised its objection to the jurisdiction of this court, which was rejected in the civil ruling of (2013) SHEN ZHONG FA SHE WAI CHU ZI No. 26 issued by this court. Because of its refusal to accept this ruling, the Defendant filed the appeal to the High People's Court of Guangdong Province (hereinafter referred to as the High Court), and then the High Court, by its civil ruling of (2013) YUE GAO FA LI MIN ZHONG ZI No. 468, decided to reject the appeal and uphold the ruling of (2013) SHEN ZHONG FA SHE WAI CHU ZI No. 26 issued by the Intermediate People's Court of Shenzhen Municipality. With respect to the application for property preservation filed by the Plaintiff, this court issued the civil ruling of (2013) SHEN ZHONG FA SHE WAI CHU ZI No. 26-1, sealing up the property of Hong Xiangwei, the third party, which was used as security, and the property of He Peiheng, up to RMB 2,500,000 in total. Afterwards the Plaintiff filed the application to this court, requesting to preserve the property of Shenzhen Rongda Financing Guarantee Co., Ltd., as security, and replace that of Hong Xiangwei. Therefore, the court issued its civil ruling of (2013) SHEN ZHONG FA SHE WAI CHU ZI No. 26-2, releasing the property of Hong Xiangwei. The court held public hearing to adjudicate the case. The attorneys on the Plaintiff's behalf, Rao Xiaomin, Zhu Peimin, and the attorney on the Defendant's behalf, Xing Xiaoping, attended the court hearing. The case now is closed.
The Plaintiff claims that, she concluded the Strategic Investment Agreement with the Defendant in the latter's office in Shenzhen, on March 2, 2011, where it was agreed that the Plaintiff will invest HKD 15 Million in Wuzhou Network XXXX Co., Ltd., (hereinafter referred to as the Company, or Wuzhou Network) in cooperation with the Defendant in the listing of the Company in the Hong Kong GEM (HK Growth Enterprise Market). On March 3, 2011, the Defendant signed the letter of entrusted payment, where the plan for the Plaintiff's payment was agreed. The Plaintiff then made the following payments of, HKD 5.65 Million and RMB 4.52 Million (equals to HKD 5.35 Million) on March 4, 2011, and HKD 4 Million on March 7, 2011, by which the Plaintiff fulfilled her contractual obligation of HKD 15 Million investment. On June 8, 2011, the Defendant signed the letter of commitment which confirmed that, the investment by Plaintiff through her payment of HKD 15 Million in March 2011 was all set and the Plaintiff now actually owns 35% shares of the Company which were transferred by the Defendant. The shares are temporarily held by the Defendant on behalf of the Plaintiff, and the Defendant promises to issue the certificate of such holding or entrustment within 20 days. The investment agreement concluded between the Plaintiff and the Defendant stated that, if the approval for the Company to be listed cannot be obtained from the Securities & Futures Commission (SFC) of Hong Kong, due to force majeure, within 12 months starting from the date agreed for signing this agreement, the Defendant will, in priority, repay the Plaintiff the principal and the profit (where the annual return is no less than 30%) with 100% profit of the Company or the asset and cashes the Company previously possessed. The investment agreement was signed on March 2, 2011, and the Company has not been listed in Hong Kong, up to today, thus exceeding 12 months. As agreed in the investment agreement, the Defendant shall return the principal of HKD 15 Million and the corresponding profit to the Plaintiff. So far, the Defendant has only repaid HKD 6.5 Million of the principal, leaving HKD 8.5 Million of principal and the corresponding profit to be paid to the Plaintiff. In order to safeguard her own legitimate rights and interests, the Plaintiff brought the suit before this Court requesting that, First, the Defendant perform his contractual obligations as prescribed in the Strategic Investment Agreement concluded between the parties, and return the remaining HKD 8.5 Million and the profit of HKD 7,180,685 to the Plaintiff (the profit is only calculated up to April 19, 2013, but the profit requested shall be calculated up to the date of actual pay-off by the Defendant); Second, the court costs be born by the Defendant. In the trial, Tian Xiaoling, the Plaintiff, confirmed that the "profit" referred to in the first claim should be calculated at the agreed annual rate of 30%.
The Defendant replied that, First, this case, by its legal nature, concerns the legal relationship in a foreign-related investment contract. Therefore, from the perspective of legal procedures, Hong Kong courts shall have jurisdiction over the case, and Hong Kong law shall be the applicable law. Article 4(4) of the Strategic Investment Agreement is valid, and does not violate the rules in the Law of the People's Republic of China (PRC) on exclusive jurisdiction and the jurisdiction by court level. The case concerns the legal relationship in a foreign-related investment contract, the Plaintiff herself also agreed on the investment contract relationship in the list of evidence. The case does not concern legal relationship in the Chinese-foreign equity joint venture contract, which, by definition, is foreign companies, enterprises, other economic organizations or individuals (hereinafter referred to as foreign joint venture) to joint with Chinese companies , enterprises or other economic organizations (hereinafter referred to as Chinese joint ventures) in establishing joint ventures in the People's Republic of China. Tian Xiaoling, as the investor, did not go through the approval procedures with the Commerce and Industry Bureau of Shenzhen Municipality. The case by its nature was neither a legal relationship in loan, as the Plaintiff was engaged in the investment, management, etc. Regarding the question whether Article 4(4) of the Strategic Investment Agreement was exclusive or not, the court held that, since it was agreed that Hong Kong courts have jurisdiction over the case with Hong Kong law as the applicable law, the jurisdiction of PRC courts and PRC law were then excluded. Otherwise, this Article would have no meaning. Article 41 of the "Law of the Application of Law for Foreign-related Civil Relations of the PRC" stipulates that the parties concerned may choose the laws applicable to contracts by agreement. If the parties do not choose, the laws at the habitual residence of the party whose fulfillment of obligations can best reflect the characteristics of this contract or other laws which have the closest relation with this contract shall apply. In the present case, the parties have agreed on the application of Hong Kong law explicitly. The case concerns legal relationship in investment contract, and it is not inconsistent with PRC law for the parties to agree on the applicable law.
II. The Plaintiff's claims on the repayment of the principal and the profit by the Defendant find no basis in facts and in law.
(1) The Defendant is not to bear the liabilities. According to Articles 1 and 2 in Part IV in the Strategic Investment Agreement concluded between the parties, which were relied upon by the Plaintiff in this case, it was agreed that it is with the profit of or the asset and cashes of the Company, i.e, Wuzhou Network, that the Defendant will, in priority, repay the Plaintiff the principal and the profit, however it was not clearly agreed that the Defendant shall repay the principal and the annual return profit with the his personal profit or asset. Hence, Wuzhou Network is to bear the liabilities toward the Plaintiff, and should be listed as the Defendant.
(2) Article 4(2) of the Strategic Investment Agreement is invalid clause: since both parties agreed on the disposal of a third party's property, and such agreement was invalid and the Plaintiff cannot rely on it to request that the Defendant bear the liabilities. Moreover, the agreement on the listing of the Company within 12 months was illegal and invalid.
(3) The investment by Tian Xiaoling, the Plaintiff, was an investment in a Hong Kong company, rather than loan between individuals. Investments involves risks, and investment ends up in failure for many reasons, thus the Defendant is not obliged to repay the investment principal and the fixed profit to the Plaintiff.
On March 2011, Tian Xiaoling, as the strategic investor, singed the Strategic Investment Agreement, which was an outbound investment contract, with He Peiheng. It was clearly stated in the agreement that for the investment in the Company, Tian Xiaoling engages in the planning of the program throughout the pre-stage, where she additionally entrusted Mr. Lin, the supervisor, as the representative to engage in the management of the program, and she took part in the winding up of the program in the post-stage. 1. In the pre-stage, Tian Xiaoling, for many times, participated in the investment and financing meetings of the digital trade industry program held in the Digital Trade Port Base Tech Park of Zhongshan City, and was quite familiar with the business model of the company to be invested in. The strategic investment by Tian Xiaoling is to replace the shares of the former investor Mr. Ma, which she was very aware of throughout the procedure. The strategic investment by Tian Xiaoling was directly transferred to Mr. Ma's private account in Hong Kong, to replace the investing and profiting of Mr. Ma. After Tian Xiaoling came to know that the shares held by Mr. Ma was 15%, she immediately demanded that the Defendant promise to help her processing the increase of shares to 30%, to which the Defendant's consented and obtained the formal document on the custodian of equity in overseas company through the accounting firm in Hong Kong. In this period, Tian Xiaoling attended the shareholders' meetings for many times and actually exercised her rights as a shareholder, with the facts that (1) Tian Xiaoling attended the New Year Party of the Century Union organization on February 18, 2011. From 2pm to 4pm, accompanied by He Peiheng and Cui Weidong, she attended the training of marketing teacher Wang Yu to introduce the digital trade and understand the Merchant' Bao project. (2) On February 28, 2011, accompanied by He Peiheng, 30 / F, east block of Futian Greater China Plaza, Shenzhen, Tian Xiaoling was introduced and explained the business model of the digital trade Merchant' Bao project by Guo fan, the industry mentor of the digital trade alliance. (3) Tian Xiaoling attended the three-day conference of the Century Union organization training and take a group photo on March 28, 2011. Tian Xiaoling's strategic investment funds were directly remitted to Ma Shao's private account in Hong Kong. There were two evidences: check and bank exchange memo.
2. On September 5, 2011, Mr. Lin was appointed by Tian Xiaoling to serve as a supervisor of the Hong Kong company for more than three months, and received a monthly salary of RMB 10,000 and a two-room-one-hall house for free. Mr. Lin participated in the operation of the company in this period of time. Mr. Lin still keeps a contract seal of the company.
3. On September 20, 2011, Tian Xiaoling attended the shareholders' meeting of overseas companies and jointly made the Decision on the Termination of Cooperation of the Luo Yanyu Team of Guangzhou Siyu Information Technology Co., Ltd., which includes: 1) Sealing up and freezing three accounts of the company in Guangzhou and taking back all seals. 2) Terminate the leasing contract of Zhongshan base and send a lawyer's letter. 3) Take back Hong Kong-branded Mercedes-Benz cars and deal with the other five cars of company. 4) Dr. He is responsible for the recovery of the entrusted and entrusted equity of Hong Kong companies. 5) The general meeting of shareholders agreed with Dr. He to reconsider the acquisition of a new excellent company, reorganization of the listed company structure, etc. From 12 noon to 3 pm on September 26, 2011, in the cafe room on the second floor of the Duty Free Building, Fuhua 1st Road, Futian District, Shenzhen, Tian Xiaoling, Tian Xiaoling, his representative Mr. Lin and Han Jun from Wanshang law firm participated in the last discussion and cooperation summit with Guo fan, He Peiheng and Mr. Lin. Until November 7, 2011, before Tian Xiaoling's representative Lin XX left Shenzhen, Mr. Lin had been handling the company's winding up work on behalf of Tian Xiaoling.
4. The financial expenditure management of Wuzhou Network (Hong Kong) is very standard and it is entrusted to Mr. Liang, partner and Tax Director of Hong Kong XXX accounting firm. The financial audit is in the charge of Chen Fang, an accountant sent by Hong Kong Pan-China Certified Public Accountants Co., Ltd.
From the detailed statement of financial expenditure of Wuzhou Network (Hong Kong), Ltd. provided by Hong Kong XXX certified public accountants and the summary of expenses from January 3, 2011 to March 2, 2012, it is clear that the financial expenditure of Wuzhou Network is transparent. He Peiheng also informed Tian Xiaoling many times of the financial status of Hong Kong companies: Tian Xiaoling was very aware of the financial status of Wuzhou Network and never raised any objections.
III. Clarifications on the payment of HKD 6.5 Million by the Defendant to the Plaintiff:
On the late night of October 11, 2011, Tian Xiaoling sent GE, QIAN, and YAND etc., to gather together around the building the Defendant's family lives in claiming for the payment. The Defendant was forced to leave Shenzhen and headed to Beijing. On November 9, 2011 (Wednesday), Tian Xiaoling sent three males and two females to LV's family (in Shenzhen, LV is a friend of He Peiheng), and the five people threatened LV to urge the Defendant to return the investment funds based on the ground that LV is the boss behind everything and kept sending seven threatening text messages to LV. Family members of LV reported this to the police office in Fudian District of Shenzhen, which was recorded. Regarding the investment by the Plaintiff, the Defendant held that reasons for investment failure are complex, and given that Tian Xiaoling was also actually engaged in the operation of the Company, the Defendant should not be to blame for the failure. Considering all relevant factors, the board of directors decided that the remaining HKD 5.5 Million in the book of Wuzhou Network will first be remit to Tian Xiaoling. It was held by the Defendant that the claim of the Plaintiff on the payment of profit was apparently not reasonable, as investment is with risks. Under the circumstance where the Defendant committed no fault, the Plaintiff's request for the return of the investment funds has no legal basis, and despite the fact that the Defendant returned part of the remaining amount to the Plaintiff, this does not mean that Tian Xiaoling is entitled to claim the return of the investment funds.
From the above, Hong Kong courts have jurisdiction over the case, and Hong Kong law should be applicable. The Defendant is not the subject of liabilities with respect to the claims of the Plaintiff. The investment by the Plaintiff was an investment in the Hong Kong Company, instead of a loan to the Defendant; the Plaintiff has engaged in the management of the Company throughout the process, and has no right to request the Defendant to take responsibilities for the investment failure. Therefore, the Defendant requests that the court reject the claims of the Plaintiff.
In order to prove her claims, the Plaintiff submitted the following evidence to the court: 1. The Strategic Investment Agreement signed by the Plaintiff and the Defendant on March 2, 2011. 2. The letter of commitment signed by the Plaintiff on March 3, 2011. 3. The power of attorney signed by the Defendant on March 3, 2011. 4. Issued a cashier's note of HKD 5.65 million dated March 4, 2011. 5. A receipt of 4.52 million yuan was issued on March 4, 2011. 6. Issued a promissory note of HKD 4 million dated March 7, 2011. 7. Letter of commitment signed by the Defendant on June 8, 2011. 8. Receipt and bank note signed by the Plaintiff on November 21, 2011. 9. Bank note signed by the Plaintiff on January 17, 2012. 10. Bank customer receipts and receipts signed by Yang X on February 8, 2013.
The Defendant submitted the following evidence to the court: 1. Notice on the establishment of Wuzhouweitong Network Communication (Shenzhen) Co., Ltd., a foreign-funded enterprise in Luohu District (SWZL [2006] No. 1289 approval certificate). 2. "Strategic Investment Agreement", "Cooperation Agreement", "Termination Cooperation Agreement". 3. Commitment signed by the Plaintiff, Defendant and Yang X on March 3, 2011. 4. The letter of appointment of Lin XX signed by Tian Xiaoling as the supervisor of the company, as well as the signature documents such as the salary table, pay slip and travel reimbursement form of Mr. Lin. 5. The original of the company's shares issued by XXX accounting firm, which were held by He Peiheng for Tian Xiaoling. 6. Testimony on Tian Xiaoling's instigation to threaten the Defendant's personal safety, bank receipt for refund and signature of the payee. 7. Accounting report of Wuzhou Network (Hong Kong) from January 3, 2011 to March 2, 2012, tax payment certificate of State Taxation Bureau of Shenzhen Municipality (SGS 2011 No. 8976) and accounting report description. 8. Financial due diligence report and 2011 audit report of Wuzhou Network Communication (Shenzhen) Co., Ltd. 9. The materials Defendant disclosed to the Department of Public Security of Guangdong Province, Public Security Bureau of Shenzhen Municipal and Public Security Bureau of Zhongshan Municipal about Guo Fan's duty infringement and illegal business. In addition, the witness Zeng XX testified in court to prove the authenticity of his testimony, upon the application by the Defendant.
This court has ascertained the following facts: on March 2, 2011, He Peiheng (Party A) and Tian Xiaoling (Party B) signed the Strategic Investment Agreement. The agreement stipulates that: I. In view of the fact that Party A owns 70% shares and equity in "Wuzhou Network Holdings Co., Ltd.". In Shenzhen in September 2006, the company established a wholly-owned company, "Wuzhouweitong XXXX (Shenzhen) Co., Ltd.". II. Cooperation: the 2010 annual total turnover of, Party A's the Company under Party A's control and its wholly-owned Shenzhen company, is HKD 35.5 million according to the audit report by Hong Kong XXX accounting firm. The after-tax-net profit is HKD 27.23 million; in 2011, the board of directors and the management team of the Company reached a resolution that according to the current market forecast, the total turnover is HKD 98 million, and the after-tax-net profit is HKD 58 million. It has fully met the listing requirements of Hong Kong Growth Enterprise Market, so Party A introduced Tian Xiaoling to participate in the IPO strategic investment plan of the Company. III. Liability of both parties. 1. Party A is now arranging relevant Hong Kong Professional arrangements for the listing of listed companies to teams, sponsors, underwriters, professional lawyers, accountants, etc., with a review to listing on the Hong Kong GEM by the end of 2011. 2. Party A is responsible for entrusting a Hong Kong accountant to handle Party B's participation as a strategic investor in the Company. According to the actual financial report, the price per share is HKD 0.05, which guarantees that after the listing, Party B has 30 million shares of the listed company, and the period beyond the repayment of the principal within 12 months is the period of prohibition. 3. Within three days after signing this agreement, Party B shall pay the Company strategic investment shares of HKD 15 million to the designated name of the Company. Party B also promises to abide by the relevant listed company norms and regulations and related matters. IV. Other matters. 1. With the joint efforts of Party A and Party B, if Party B is unable to obtain the approval of Hong Kong Securities Regulatory Commission for listing within 12 months from the date of signing this agreement due to force majeure, Party A shall repay Party B's principal and annual return of no less than 30% with 100% of the project company's income or original cash and assets. 2. This Agreement shall come into force after being signed by both parties and the witness. The matters not mentioned in this Agreement shall be supplemented by both parties through negotiation or in the form of meeting resolution. "Supplementary" or "meeting resolution" shall have legal effect. 3. This agreement is made in triplicate. Party A and Party B shall hold one copy respectively, which shall have the same legal effect. 4. This agreement applies to the protection and jurisdiction of the Hong Kong Special Administrative Region of the People's Republic of China.
On March 3, 2011, Tian Xiaoling, He Peiheng and Yang X signed a letter of commitment. It was agreed that Tian Xiaoling, introduced by Feng XX, would arrange Tian Xiaoling's strategic investment to become an IPO shareholder of Hong Kong Wuzhou XXXX Holdings Co., Ltd. with a share price of HKD 0.05 per share. Tian Xiaoling promised that when the shares of Hong Kong Wuzhou XXXX Holdings Co., Ltd. are sold after the expiration of one-year sales ban, if the share price is exceeding HKD 1 per share, with respect to the part exceeding HKD 1, Tian Xiaoling and Feng XX are willing to share half-half. When the listed share price of the above-mentioned company is less than HKD 1, He Peiheng, the shareholder, promises to offer to purchase all subscribed shares from Tian Xiaoling at HKD 1 per share. This letter of commitment is in triplicate.
On the same day, He Peiheng issued a letter of entrustment for payment: according to the "Strategic Investment Agreement" signed by He Peiheng and Ms. Tian Xiaoling on March 2, 2011, Ms. Tian Xiaoling made a strategic investment of HKD 15 million in Wuzhou XXXX Holding Co., Ltd. Ms. Tian Xiaoling is hereby entrusted to issue a cashier's check of HKD 9.65 million at the Bank of China in Hong Kong, signed by me, He Peiheng; the remaining HKD 5.35 million, which is calculated at the exchange rate (1: 0.846) on the signing date, equivalent to RMB 4.52 million, shall be remitted to Shenzhen East XX Investment Co., Ltd. (account number: 818180607810001, bank account: China Merchants Bank of Jinzhonghuan Sub-branch of Shenzhen Branch).
On March 4, 2011, Tian Xiaoling issued two promissory notes with the amount of HKD 5.65 million and HKD 4 million on March 7, respectively. The beneficiary of the two promissory notes is Ma XX, as indicated. He Peiheng signed and confirmed that "the original promissory notes were received". On March 4, 2011, RMB 4.52 million was transferred from the account of Shenzhen XX Investment Co., Ltd. to the account of Shenzhen East XX Investment Co., Ltd., and the receipt stated "Payment of IPO strategic investment of Wuzhou XXXX Holdings Co., Ltd. on behalf of Tian Xiaoling". He Peiheng "confirmed that the payment has been received" by signature.
On June 8, 2011, He Peiheng issued a letter of commitment: I hold 70% of the shares of Wuzhou XXXX Holding Co., Ltd., and now Tian Xiaoling obtains half of my shares with her investment of RMB 15 million in March this year (the investment money has been paid to each account according to my instructions, all in place), that is, Tian Xiaoling actually owns 35% of the shares of Wuzhou XXXX Holding Co., Ltd., which is currently held by me for Tian Xiaoling. Tian Xiaoling has all the rights and interests in the 35% shares in Wuzhou XXXX Holding Co., Ltd. I will make a certificate of holding or trusteeship within 20 days in Hong Kong certified public accountant building or lawyer building. In case of any conflict or difference between other agreements with Tian Xiaoling and this commitment, this commitment shall prevail.
On November 21, 2011, He Peiheng issued a promissory note of HK $5 million. Tian Xiaoling issued a receipt to confirm the receipt of the original promissory note, "the sum is the principal of the strategic investment shares in the strategic investment agreement signed by me and Mr. He Peiheng on March 2, 2011, which is HKD 5 million only". On January 17, 2012, He Peiheng issued a cheque with the amount of HKD 500,000. Tian Xiaoling confirmed her receipt of the original of the cheque, "the money is a partial refund of the money I invested in the listing of Wuzhou XXXX Holding Co., Ltd.". On February 7, 2013, He Peiheng issued a cheque with the amount of HKD 1 million. Yang X confirmed the receipt of the original of the cheque, "the money is the refund of Tian Xiaoling's investment in the IPO of Wuzhou XXXX Holding Co., Ltd.".
Wuzhou XXXX Holdings Co., Ltd. was not listed on the Hong Kong Growth Enterprise Market in 2011.
Both parties have no objection to the above facts.
The cooperation agreement submitted by He Peiheng with Ma XX and Guangzhou Siyu Information Technology Co., Ltd. on December 22, 2010 is that He Peiheng, Ma XX and Guangzhou Siyu Information Technology Co., Ltd. agreed to "take Wuzhou XXXX Holdings Co., Ltd. as the listed main company, and arrange the Merchant'Bao project to be listed on the Hong Kong GEM in accordance with the listing regulations of the Hong Kong Stock Exchange in late 2011". The agreement on termination of cooperation signed by He Peiheng and Ma XX on March 8, 2011 submitted by He Peiheng is a refund arrangement for Ma XX to terminate the above cooperation project. He Peiheng said the two evidences prove that Tian Xiaoling replaced Ma XX as a shareholder and Tian Xiaoling paid Ma XX the investment directly. Tian Xiaoling said that she was not a party to the contract and did not confirm its authenticity. He Peiheng did not submit the original.
He Peiheng submitted a trust statement to prove that Tian Xiaoling was a shareholder of Wuzhou XXXX Holding Co., Ltd., and had processed the legal documents for the company's shareholding, but the declaration was not signed by Tian Xiaoling. Tian Xiaoling did not confirm the authenticity of the statement.
In addition, with regard to the application of the law in this case, both parties advocate the application of Hong Kong law. And each submitted its own legal opinions, but these legal opinions only expressed opinions on how to deal with the case, and there was no content of Hong Kong Law on the contract.
The court entrusted BCI & BIMC to ascertain the following provisions in Hong Kong Law: 1. The provisions of Hong Kong Law on the validity of contracts? That is, how to identify a valid contract? 2. The parties involved in the case signed the strategic investment agreement. Is there any special provision in Hong Kong law for this type of contract? Mak, Andrew Y.S., a Barrister from Hong Kong, has issued a legal opinion, which involves the following contents of Hong Kong law required to be ascertained by the court:
1. Generally speaking, contracts are regulated by the common law and Hong Kong laws and regulations; 2. Under the common law, to decide whether a contract is valid or not, one can at least analyze the legal binding, legality and enforceability of a contract; 3. To be legally binding, a contract needs to have several basic elements: capacity to contract; intention to establish legal relations; act of offer; act of acceptance; and consideration; 4. Contract can be terminated due to breach of contract or revoked due to misrepresentation; 5. As far as the validity of the contract is concerned, if the contract needs to be performed in violation of the law, the contract is invalid; in the case of Waugh v Morris（1873）LR8QB202, the British court determined the legal principle that the contract is invalid due to the violation of the law. In Holman v Johnson (1775) 1 Cowp.341, the British court determined the legal principle of how to deal with the contract when the cause of action depends on any unethical or illegal act. 6. As far as the enforceability of the contract is concerned, if the act specified or necessarily involved in the performance of the contract is illegal according to the law of the place of performance specified in the contract, the contract will not be enforced; in a special case, when a legal contract governed by the laws of Hong Kong is performed in mainland China, if the partial performance violates the laws of mainland China, the contract The dispute about whether enforcement can be carried out in Hong Kong is discussed in the case of Rvder Industries Ltd. ( formerly Saitek Ltd.) v ChanShuiWoo (unreported, FACV12/2015，16 December, 2015) In paragraphs 37-39 of the judgment, Lord Lawrence Antony Collins, a non permanent judge of the court of final appeal, believes that the relevant dispute should be handled based on the rules of conflict of laws. 7. In addition to the special provisions of Hong Kong laws and regulations on contracts, Hong Kong laws have no special provisions on the effectiveness of contracts such as strategic investment agreements; 8. For contracts such as strategic investment agreements, even if the agreement is ruled by the court to be a valid contract, the agreement was ruled by the court as a valid contract. The two parties to the contract still need to pay attention to whether the agreement will violate the Securities and Futures ordinance, Chapter 571 of the Hong Kong Law and the Listing Rules of the Hong Kong Stock Exchange. Even if the contract is valid, it may affect the post conditions for the listing of the project company. 9. As far as the agreement is concerned, according to the principle of interpretation in Hong Kong law, the court may judge that the Plaintiff cannot claim repayment within twelve months of the signing of the agreement unless there is force majeure. 10. According to the principle of implied terms in Hong Kong law, the Plaintiff should have the right to request repayment 12 months after the signing of the agreement; However, as for the time of requesting repayment, further data should be provided before judgment. Tian Xiaoling has no objection to the legal opinion, and He Peiheng applies for the appearance of Mak, Andrew Y.S. barrister in court for examination because the legal opinion is inconsistent with the one issued by Chen Deyu law firm entrusted by He Peiheng. Since the court has entrusted experts to issue legal opinions on the validity of the contract in Hong Kong law, and both parties have no objection to this part of the legal opinions, which has also confirmed by the court. The discussion on the specific issues of this case in the legal opinions does not within the scope of the court's entrustment, so He Peiheng's application is dismissed.
The court holds that the Defendant is a permanent resident of Hong Kong, and this case is a dispute arising from the implementation of the strategic investment agreement by both parties. According to the provisions on the cause of civil cases, this case should be a contract dispute involving Hong Kong.
The law applicable in this case. According to Article 41 of the law of the Application of Law for Foreign-related Civil Relations of the People's Republic of China, the parties
concerned may choose the laws applicable to contracts by agreement. Article 4, paragraph 4 of the Strategic Investment Agreement stipulates that "this agreement is under the protection and jurisdiction of the laws in the Hong Kong Special Administrative Region", so the laws of Hong Kong shall apply. According to the legal opinion of lawyer Mak, Andrew Y.S., an expert appointed by the BCI & BIMC, under the entrustment by the court, there is no special provision in Hong Kong law for the strategic investment agreement. The validity of the Strategic Investment Agreement is the same as that of the general contract, that is, review from the binding, legality and enforceability of the contract. The strategic investment agreement involved in the case is an agreement between Tian Xiaoling and He Peiheng on Tian Xiaoling's acquisition of 30 million shares of the project company after listing with HKD 15 million. The agreement has the elements of legal binding force of contract under Hong Kong common law, and there is no situation that hinders the legality and enforceability of the contract. It is the true intention of both parties, so the agreement is legal and valid. Both parties Both parties shall abide by the agreement.
According to the agreement on strategic investment, Tian Xiaoling paid the project company HK $15 million. In this regard, He Peiheng issued a letter of commitment on June 8, 2011 to confirm that "the investment funds have been paid to all accounts according to my instructions and all are in place". Now Tian Xiaoling requests He Peiheng to return the corresponding funds according to the first paragraph of Article 4 of the strategic investment agreement on the grounds that the project company is not listed, while He Peiheng claims that He Peiheng should not return the corresponding funds on the grounds that the first paragraph of Article 4 of the strategic investment agreement is invalid, he is not the subject of responsibility, the investment is different from the loan, and there is a risk. Therefore, the main issue in this case is whether Tian Xiaoling has the right to ask He Peiheng to return the investment money and corresponding income. The court holds as follows：
The first paragraph of Article 4 of the strategic investment agreement stipulates that "if the approval for the Company to be listed cannot be obtained from the Securities & Futures Commission (SFC) of Hong Kong, due to force majeure, within 12 months starting from the date agreed for signing this agreement, the Defendant will, in priority, repay the Plaintiff the principal and the profit (where the annual return is no less than 30%) with 100% profit of the Company or the asset and cashes the Company previously possessed." This article is about returning the principal and profit to Tian Xiaoling. According to this article, the subject of the return shall be He Peiheng. Although the article stipulates that "in priority…100% profit of the Company or the asset and cashes the Company previously possessed", it is only an arrangement by He Peiheng and Tian Xiaoling for the repayment method, and the subject of payment obligation is still He Peiheng. Without the consent of the Company, "repay…with 100% profit of the Company or the asset and cashes the Company previously possessed" cannot be realized, and He Peiheng shall continue to perform the payment obligations stipulated in this article. He Peiheng's return of investment principal and profit shall be contingent on the Company's failure to obtain the approval of the Hong Kong Securities Regulatory Commission for listing within 12 months starting from the date agreed for signing this agreement, due to force majeure. Although the article describes the reason for the Company's failure to be listed as "force majeure", from the point of view of the purpose of signing the contract, no matter what factors affect it, as long as the Company fails to be listed, Tian Xiaoling's investment purpose will be frustrated, so as long as the project company fails to be listed according to the contract, He Peiheng should return the investment principal and income. According to Article 4, paragraph 1 of the strategic investment agreement, Tian Xiaoling claims that He Peiheng's return of investment principal and profit conforms to the agreement between both parties, and the court supports it. According to the contract, the listing period of the Company is March 2, 2012. On November 21, 2011, January 17, 2012 and February 7, 2013, He Peiheng has successively repaid HKD 6.5 million to Tian Xiaoling, so the principal left to be returned by He Peiheng is HKD 8.5 million. As for the investment income, it should be calculated based on the actual investment principal of Tian Xiaoling at an annual interest rate of 30%. To sum up, the Plaintiff's claim has factual and legal basis, which is supported by the court. According to Article 60 and Article 107 of the Contract Law of the People's Republic of China and Article 41 of the Law of the Application of Law for Foreign-related Civil Relations of the People's Republic of China, the judgment is as follows:
1. The Defendant He Peiheng shall return the Plaintiff Tian Xiaoling's investment of HKD 8.5 million within 10 days from the effective date of this judgment;
The Defendant He Peiheng shall pay the investment profit of the Plaintiff within ten days from the effective date of this judgment, calculated at an annual interest rate of 30% until the date of actual settlement. (from March 2, 2011 to November 21, 2011, the principal of investment fund is HKD 15 million; from November 22, 2011 to January 17, 2012, the principal of investment fund is HKD 10 million; from January 18, 2012 to February 7, 2013, the principal of investment fund is HKD 9.5 million; from February 8, 2013 to the date of actual settlement, the principal of investment fund is HKD 8.5 million.)
If the Defendant He Peiheng fails to perform the obligation of payment within the period specified in this judgment, He Peiheng shall double the interest on the debt during the period of delayed performance in accordance with Article 253 of the Civil Procedure Law of the people's Republic of China.
The case acceptance fee in this case was RMB 97,434.21, the interim measure fee was RMB 5,000, and the entrusted ascertainment fee was RMB 50,000, totaling RMB 15,234,421, which shall be borne by the Defendant He Peiheng.
If the Plaintiff is not satisfied with the judgment, Tian Xiaoling may, within 15 days from the date of service of the judgment, and He Peiheng, the Defendant, within 30 days from the date of service of the judgment, shall submit the application for appeal to the court, and submit copies whose number is the same as that of the opposing parties, and appeal is before the High People's Court of Guangdong Province.
Chief judge: Qiu Mingyan
Judge: Zhu Ping
Judge: Liang lele
August: 30, 2016
Clerk: Zhan Weiwen
Read the original: 蓝海查明案例 ▍田晓玲与何沛亨中外合资经营企业合同纠纷一审民事判决书
