BUSINESS

HKMEx founder Barry Cheung sued for HK$40m debt

Founder of the failed HKMEx is in yet another legal wrangle, this time over promise to repay company loans for which he is guarantor

PUBLISHED : Friday, 02 August, 2013, 6:20pm
UPDATED : Saturday, 03 August, 2013, 5:25am

Former executive councillor Barry Cheung Chun-yuen sank deeper into trouble yesterday as he was sued for HK$40 million arising from loans his company took out. The lawsuit, mounted by the director of a listed company, is the latest twist to a saga over his failed Hong Kong Mercantile Exchange (HKMEx).

Cheung is being sued as the guarantor of two loans taken out by his wholly owned company, through which he owns 56 per cent stake of the exchange. The lender is Leung Chee-hon, director and shareholder of Hong Kong-listed Sunley Holdings, which deals mainly with construction foundation works.

In a High Court writ, Leung, 68, claims Cheung owes him the money in the capacity of a loan guarantor for New Effort Holdings. Company filings show New Effort is a British Virgin Islands company wholly owned by Cheung and the majority shareholder of HKMEx.

Leung claims Cheung guaranteed to indemnify him for any loss if New Effort defaulted on its loans and interest under four agreements made in January, February and April this year.

Leung's lawyers say in the writ that the legal wrangle will end if Cheung or New Effort repays the outstanding amount within 14 days and another HK$10,545 for Leung's legal costs.

Cheung quit his official posts in May after he came under police investigation over the collapse of HKMEx, which traded gold and silver contracts. Since May, HKMEx has been suspended from trading after it failed to meet Securities and Futures Commission (SFC) financial requirements. Police have arrested seven people, not including Cheung, and four have been charged.

A source close to Cheung quoted him as saying the loan was not related to HKMEx.

The source told the South China Morning Post that New Effort was now restructuring its debts. Cheung believed the debt row would be settled after the restructuring was completed by the end of the month.

Cheung also told the source he was fully aware of his responsibility as a guarantor and would fulfil his duty. He declined to answer the Post's queries.

In a separate financial dispute, Hong Kong Cyberport Management has obtained a High Court order for HKMEx to settle its outstanding rents of some HK$7 million - accumulated since March last year - by Tuesday.

Cyberport had in June sued HKMEx for failing to pay the rent and threatened to evict it from its office. If HKMEx failed to meet the deadline, Cyberport had the right to apply to repossess the premises, a spokesman for Cyberport said yesterday.

In May, HKMEx surrendered its licence to the SFC after it failed to generate sufficient income. A few days later, the watchdog alerted the police to suspected serious financial irregularities at the exchange.