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Jane Moir

An arm of Xinhua news agency must pay Sumitomo Bank $217 million after it stalled the repayment of funds used to finance the failed $1.72 billion purchase of Pearl Oriental Centre.

  As far as Xin Hua Estate was concerned, 'delay is, and always has been, the overriding objective', Mr Justice William Stone ruled.

 The Hong Kong company - 100 per cent-owned by Xinhua News Agency Beijing - was to buy the property as its flagship building before the handover in 1997 as a symbolic gesture.

 This had been decided 'at the highest political levels in Beijing', the judge noted.

 Sumitomo advanced a $217 million bridging loan to Xin Hua in March 1997. Two months later, Xin Hua entered into a sale and purchase agreement to buy Pearl Oriental Centre in Wan Chai for $1.72 billion.

 A deposit of $172 million was met from the bridging loan, with the balance to be paid in December that year. However, execution of the deal did not take place.

 The vendors of the property retained the deposit, and launched litigation against Xin Hua for failing to complete the purchase of the building.

 No repayment to Sumitomo was ultimately made.

 The bank launched legal proceedings in October 1998 seeking full repayment of the $217 million loan.

 Arguments put forward on behalf of Xin Hua by Jin Peng - who had been overseeing the Pearl Oriental project - were thrown out by the judge.

 'The stakes in this case, both in economic and political terms, were and are clearly very high for Mr Jin, and I have no doubt whatever that his mindset was of a man who was tempted to say whatever he perceived was necessary in order to establish his case,' Mr Justice Stone ruled.

 He further dismissed a characterisation of Mr Jin as a 'commercial naif, preyed upon by experienced bankers in Hong Kong and unknowingly subject to the vagaries of the Hong Kong property market'.

 However, the judge also stressed that 'this case would never have seen the light of day' had it not been for the onset of the Asian financial crisis and the dramatic drop in the Hong Kong property market.

 Mr Justice Stone continued: 'That said, I have been able to find nothing in the case put up by the defendants which serves to justify the non-payment to the plaintiff of the monies undoubtedly owed.'  A further hearing will take place to determine how much interest must be paid by Xin Hua on the loan.

 Sumitomo claims this sum is $14.57 million.



Xinhua property arm to pay $217m over stalled HQ purchase