DOC

CACV-3682004-Legal-Reference-System

By Brandon Rodriguez,2014-08-01 11:22
13 views 0
CACV-3682004-Legal-Reference-System

由此

A A CACV 368/2004 B B IN THE HIGH COURT OF THE C C HONG KONG SPECIAL ADMINISTRATIVE REGION D D COURT OF APPEAL CIVIL APPEAL NO. 368 OF 2004 E E (ON APPEAL FROM HCCL NO. 145 OF 1999) F F ______________ G G BETWEEN H H ADVERTASIA STREET FURNITURE LIMITED Plaintiff I I and J J CHINA OUTDOOR MEDIA INVESTMENT K K (HONG KONG) COMPANY LIMITED Defendant L L ______________ M M Before: Hon Le Pichon, Cheung and Tang JJA in Court N Dates of Hearing: 6-8 September 2005 N Date of Judgment: 7 October 2005 O O _______________ P P J U D G M E N T _______________ Q Q R Hon Tang JA (giving the judgment of the Court): R S S T T U U V V

由此

- 2 - A A B B Introduction C C 1. Stone J ordered specific performance of the contract (the D D contract), dated 21 April 1999, by which, the Plaintiff, Advertasia, agreed to sell to the Defendant, China Outdoor, the entire share capital of 4 E E companies, for HK$68 million. Only 2 of these companies TM (Beijing) F F (TMB) and TM (Guangzhou) (TMG) are relevant to this appeal. It is Advertasias case that these companies were parties to certain joint venture G G contracts (JV contracts) in Beijing and Guangzhou respectively. H H Background I I J J 2. Sopex International SA (Sopex) and Sedona International K Holdings Limited (Sedona) have since 31 August 1998 been the owners K of the issued share capital of Advertasia. Since 1996, Advertasia has been L L the owner of all the issued share capital of TMB and TMG. M M 3. Solothurn Limited (a BVI company) was owned or controlled N N by Messrs Du and Deparis. Solothurn Limited was the owner of the entire O O share capital of Transit Media Network Limited. TMB and TMG (both Hong Kong companies) were in turn wholly owned by Transit Media P P Network Limited. Q Q st 4. As a result of a 1 Shareholders Agreement dated 23 January R R 1996, Transit Media Network Limited transferred its shares in TMB and S S TMG to Advertasia. Advertasia became wholly owned by Cloud Peak Enterprises Limited (Cloud Peak). Cloud Peak in turn were owned as to T T 55% by Sopex International SA and 45% by Solothurn Limited. U U V V

由此

- 3 - A A B ndB 5. As a result of a 2 Shareholders Agreement dated 31 January 1997, shares in Advertasia became owned as to 43.54% by Sopex C C International SA, 20.83% by Sedona International Holdings Limited and D D 35.63% by Solothurn Limited. E E 6. Du and Deparis, in turn owned or controlled Rapidventures F F International Limited or the so-called Rapidventures group. Rapidventures S.A.P.A.H. Limited was one of the Rapidventures International Limiteds G G subsidiaries and in any event, a member of the Rapidventures group. H H stnd Under both the 1 and 2 Shareholders Agreements, Rapidventures I International Limited was appointed manager, whose responsibilities I included ―organizing and managing (Cloud Peaks subsidiaries (which J J included Advertasia, TMG and TMBs) and joint ventures (which K included the joint ventures in Guangzhou and Beijing) day to day K stnd activities. Clause 6.07(c), 1 Shareholders Agreement, Clause 6.7, 2 L L Shareholders Agreement. Thus, in effect, Du and Deparis were M responsible for the day to day management of the joint ventures business, M as well as Advertasia. N N O O 7. As explained by Mr Preston, a Director of Advertasia, Sopex and Sedona were passive investors. The relationship between Sopex and P P Sedona, and the management (Du and Deparis) deteriorated as 1997 Q Q progressed, such that it had become untenable to Sopex and Sedona. A Deed of Reorganisation Agreement dated as of 12 December 1997, was R R made by Solothurn, Deparis, Du, Sopex, Sedona, Cloud Peak, Advertasia, S S Rapidventure International Limited and Transits Media Network Limited. Mr Preston said in paras. 27 and 28 of his witness statement: T T 27. The Deed of Reorganisation Agreement provided that the U investors would loan Advertasia a sum of approximately U V V

由此

- 4 - A A B B HK$19.3 million (i.e. US$2.5million) which could be converted into shares. Deparis and Du were then given the option to buy out Sopex and Sedona for a sum of C C about US$12.5 million at any time between the date of signature of the Deed of Reorganisation Agreement and stD D 31 August 1998. According to the agreement, failure to do so would result in Sopex and Sedona having the option to acquire the shares in Advertasia beneficially owned by E E Deparis and Du for a nominal sum. This agreement also included provisions for the resignation as directors of F Deparis and Du. F 28. Between the end of December 1997 and August 1998 the G G relationship between the management and the investors deteriorated yet further. The investors suspected that Deparis and Du were attempting to commit a fraud by H H setting up a parallel structure in Hong Kong, Macau and China to commercialise the assets of the joint ventures, i.e. I I the bus shelters, and to deprive Advertasia of the revenues derived therefrom as well as information in respect of all their commercial activities in China. Deparis and Du J J moved from Hong Kong to Macau and became almost impossible to communicate with, and had refused to give K the board details of their whereabouts. K L L 8. In August 1998, a complaint was made to the Commercial Crimes Bureau (CCB) by Mr Preston against Du and Deparis. M M N N 9. On 31 August 1998, Sopex and Sedona exercised their options O to purchase all the shares in Advertasia pursuant to the Deed of O Reorganisation Agreement. P P Q 10. Pursuant to the Deed of Reorganisation, 2 promissory notes, Q one for US$7,253,252 payable to Sopex and one for US$5,276,118 in R R favour of Sedona were issued jointly and severally by Solothurn, Deparis S S and Du. Clause 4.2. It is to be noted that these 2 promissory notes were to be transferred to China Outdoor under the Article 4.1(i)(c) of the contract. T T U U V V

由此

- 5 - A A B B 11. China Outdoor is a member of the Clear Media Group of Companies and is owned by Clear Media Limited which is a main board, C C Hong Kong listed company. The largest shareholder of Clear Media D D Limited is Clear Channel Communication Inc, which is listed on the New York Stock Exchange. E E F F Events leading to the contract G G 12. According to Mr Preston, Hainan White Horse Advertising H H Media Investment Co. Ltd., a subsidiary of China Outdoor was the largest outdoor media owner/operator in China. Mr Preston said: I I 31. We subsequently discovered that Hainan White Horse J J Advertising Media Investment Co. Ltd (HWH), a subsidiary of COMI [China Outdoor Media Investment (Hong Kong) Company Limited], had signed an agreement K K with a company controlled by Deparis and Du (called Beijing Honglang Commercial and Trade Company L L Limited) to transfer the business and assets Advertasia had th in China to HWH. The agreement was dated 16 September 1998 and the total consideration was some M M US$19 million. At the time this agreement was executed, HWH had apparently paid to Deparis about US$2 million N by means of a deposit. We understood that Peter Cosgrove N had personally negotiated this deal with Deparis and Du. O O th 33. On 12 October1998, Peter Cosgrove of COMI, Peter P P Dyloco of Quilvest and myself met at the offices of Lovell White Durrant (Advertasias previous lawyers) with the Q lawyer Dale Fischer to discuss the situation. At this Q meeting Peter Dyloco and I made full disclosure of Peter Cosgrove of the issues facing us. These included the R R details of the first and second Shareholders Agreements that had been entered into, details of the Deed of Reorganisation Agreement and Advertasias complaint to S S the Commercial Crime Bureau. Peter Cosgrove, in the same meeting, asked many questions as to how the T T situation had arisen all of which we answered fully and frankly. U U V V

由此

- 6 - A A B B 36. During this time, Peter Cosgrove stressed that COMIs C C operation in China was well placed, and indeed the only company able, to resolve the issues both with Deparis and D Du and the relevant Chinese authorities. Peter Cosgrove D also said that COMI had relationships with the same joint venture partners and municipal authorities in China as E E Advertasia and, indeed, were Advertasias major competitor in China. F F 13. There was an attempt to reach a tripartite agreement involving G G Deparis and Du but that came to nothing. But it is perhaps relevant to note H H that on 14 November 1998, Cosgrove and Preston met with Deparis and Du in Macau. This is what Mr Preston said at paras. 40 and 41 of his I I witness statement: J J 40. We met with them at the Mandarin Oriental Hotel and spent a substantial part of the day discussing how a K K tripartite deal might be achieved. We also discussed in detail now they operated their parallel company structure, the issues with the joint venture partners relating to such a L L structure, how they would continue to ensure that Advertasia would not be able to regain operating control of M M the business in China without COMI and so on. 41. These discussions terminated as Deparis and Du believed N N that they would not receive sufficient money under COMIs tripartite proposal to warrant their co-operation. At this point any hope that a tripartite deal could be O O achieved was dropped and it was decided that COMI and Advertasia would try to reach an agreement together. P P Q 14. That was followed by an attempt by China Outdoor to buy the Q advertising and bus shelter operating rights under the joint venture R R contracts from Advertasia. But nothing came of that, because Mr Preston S S told Mr Cosgrove that Advertasia was not able to offer any warranties as to those rights. It was Mr Prestons evidence in chief, that Advertasia did not T T have, as China Outdoor knew, control over the joint ventures in China, and U U V V

由此

- 7 - A A B B that Advertasia could not give any representations, warranties or guarantees at all in respect of what was going on in China. That China C C Outdoor knew a lot more about what was going on in our joint ventures in D D China than they did. That is why in the first draft Heads of Agreement in November 1998, there was a provision about Advertasia using their best E E endeavours to terminate joint ventures so that the rights to the bus shelters F F could be granted to White Horse by means of an auction system which Mr Preston did not understand. G G H H 15. It is common ground that Mr Preston told Mr Cosgrove of I China Outdoor of the type of problems which were referred to in the I complaint to the CCB and that China Outdoor was aware: J J They knew that if they acquired TMB and TMG, there might well be at an operational level various problems that they were K K going to have to solve. They were acquiring, so they anticipated, an interest in the two joint ventures, fully aware of that potential L problem. (See Court Transcript Day 1, page 113, Mr Jonathan L Harris, counsel for Chinese Outdoor) M M 16. Then, at a meeting with Mr Preston and others on 21 April N N 1999: O O It was decided that we would sign an agreement that night (which Mr Preston would draft) without having our lawyers thoroughly negotiate its terms so that the transaction could P P finally be done. (See para. 72 of Cosgroves witness statement dated 14 March 2003) Q Q 17. There were not the warranties which one would expect to find R R in this type of contract. It is clear that the only protection to China S S Outdoor in relation to the assets of the companies which shares it was T acquiring was to be found in Article 1.1. T U U V V

由此

- 8 - A A B B Article 1.1 C C 18. Article 1 of the contract is important and provides: D D CONDITIONS PRECEDENT E E 1.1 The consideration shall be paid and the Shares transferred providing that no party has received on or before Completion a valid notice or a copy of a notice stating that F F the joint venture licences and/or the bus shelter advertising operating rights have been terminated in respect of the G businesses of the PRC joint ventures owned by the G Subsidiaries in respect of the cities of Beijing and Guangzhou only. Or it is otherwise discovered that the JV H H contract attached in Appendix B are not valid or have been terminated. If any party becomes aware of such notice prior to Completion it shall provide a copy of such notice to I I the other party. J J 19. It is common ground that no JV contracts were ever attached, K K but that they referred to the Beijing and Guangzhou JV contracts. These were Sino-Foreign Contractual Joint Ventures and were regulated by the L L Sino-Foreign Contractual Joint Venture Law of the PRC. The JV contracts M M required the approval of the Ministry of Foreign Trade and Economic N Cooperation (Moftec), or its provincial equivalent in Guangzhou, GFTEC. N Pursuant to the JV contracts, joint venture companies owned by the Sino O O and foreign parties were formed. The Chinese and English names of the P P joint venture company in Beijing were 北京市公交候車亭廣告有限公 and Beijing Public Traffic Waiting Kiosk Advertising Company Q Q Limited. In Guangzhou, 廣州薩柏候車亭廣告有限公司 and SAPAG R R Guangzhou Transportation Media Limited were the Chinese and English S names of the joint venture company. S T T 20. There were Chinese and English versions of these JV contracts U which were signed by the parties thereto. The Guangzhou JV contract was U V V

由此

- 9 - A A B B dated 25 December 1994 and the certificate of approval by GFTEC issued on 26 December 1994. The Beijing JV contract was dated 2 July 1995 and C C Moftecs certificate of approval was dated 19 October 1995. Essentially, D D the joint venture companies were formed to carry on the business of operating street advertising in bus shelters in the respective cities. E E F F 21. At the heart of China Outdoors appeal is their complaint that these JV contracts were not valid. It is common ground that Moftecs G G approval of the JV contracts was essential to the validity of these contracts. H H 22. China Outdoor has argued that these JV contracts were invalid I I as at the date of completion, either because they were null and void or J J voidable because of the potential of future declaration of invalidity of these K contracts. K L L 23. It is Advertasias case that the foreign parties to these JV M contracts were TMB and TMG respectively. The Sino parties were Beijing M Municipality Transport Advertising Company (北京市公交廣告公司) and N N Guangzhou Municipality Service Centre (廣州市機關服務中心) O O respectively. P P 24. China Outdoors case below was that the JV contracts as Q Q approved by Moftec were not made by TMB or TMG but by Rapidventures S.A.P.A.H. Limited (Rapidventures), or that because of R R what the Judge described as approval irregularities, Moftec could withdraw S S its approval or set aside the JV contracts, or that such irregularities could T be exploited by the Sino parties or Rapidventures. T U U V V

由此

- 10 - A A B B 25. Mr Anthony Neoh SC, who appeared for China Outdoor before us, but not below, submitted that the true issue is not whether TMB C C or TMG entered into the JV contracts but whether they had been approved D D by the approving authorities (for the purpose of the appeal, the Court is only concerned with Moftec), as the foreign parties to those JV contracts. E E He also repeated the submission, made on behalf of China Outdoor below, F F that given the irregularities and doubt over the identity of the foreign contracting parties, by analogy with conveyancing cases, there was more G G than a fanciful risk that the validity of the JV contracts could be H H challenged by the Sino parties, Rapidventures and/or Moftec. I I 26. It is common ground that in the approval process only the J J Chinese versions of the JV contracts were submitted to the authorities. K There are some important differences between the Chinese and English K versions, which will be dealt with later in the judgment. In the Chinese L L version, the names of the foreign parties were given in Chinese only. M M 27. Since the dispute is over the identity of the foreign parties N N approved by Moftec, it is helpful to note that in the Guangzhou JV contract, O O Articles 1 and 2 provide as follows: 「第一章 总则 P P 1 广州市机关服务中心;作为广州市政府机关直属单 Q Q 位:注册地点广州:广州市政府对其有担保地位,和埃威伊 国际集团亚洲候车亭广告有限公司;作为埃威伊国际集团的 R 子公司:注册地点香港:埃威伊国际集团对其有担保地R 位,:根据一九八八年四月十三日《中华人民共和国中外合 作经营企业法》:根据中国广告事业管理条例和中国其它有S S 关法律规定:本着平等互利的原则:通过友好协商:同意在 中华人民共和国广州市建立合作经营企业:双方同意签署本 T T 合同。, U U V V

Report this document

For any questions or suggestions please email
cust-service@docsford.com