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Beijing New Auto Group v. China
Huarong Asset Management Corporation
(Dispute over Contract on Stock Right Assignment)
Civil Judgment of the Supreme People’s Court
No. 143 (2003)
Appellant (Plaintiff of the First Instance): Beijing New
Auto Group Limited Company, domiciled at 6th Floor, Silicon
Valley Computer Plaza, No.1 Xicaochang, Haidian District,
Beijing.
Legal Representative: Chen Chongyu, chairman of the board of
the Group.
Authorized Agent: Zhang Chenyang, lawyer at Beijing King &
Partners.
Authorized Agent: Zhang Xiaozhe, lawyer at Beijing King &
Partners.
Appellant (Defendant of the First Instance): China Huarong
Asset Management Corporation, domiciled at No. 10 Baiyun
Road, Xicheng District, Beijing.
Legal Representative: Yang Kaisheng, president of the
Company.
Authorized Agent: Li Dan, employee of the Company.
Authorized Agent: Yang Huaijun, employee of the Company.
With respect to the case on dispute with China Huarong Asset
Management Corporation (hereinafter referred to as CHAMC)
over contract on stock right assignment, Beijing New Auto
Group Limited Company (hereinafter referred to as New Auto
Group) was dissatisfied with the civil judgment No. 1 (2003)
of the Higher People’s Court of Beijing Municipality
(hereinafter referred to as Beijing Higher Court), and
appealed to the present court. After accepting the case on
August 14, 2003, the present court legally formed a
collegial panel composed of Xu Ruibai as the chief judge and
Wang Xiansen and Yang Yongmei as the acting judges, and then
heard the case. Kong Lin as the court clerk made the
records. The case has now been finalized.
It was verified by Beijing Higher Court through the hearing
that:
On June 28, 2002, CHAMC, Bit Technology Holding Limited
Company (a party not involved in the present case,
hereinafter referred to as Bit Technology) and New Auto
Group concluded an agreement on assignment of the stock
rights of Beijing BBEF Electronics Group Limited Company
(hereinafter referred to as BBEF Group). The agreement
mainly set forth that Bit Technology and New Auto Group
should jointly form a purchase group to purchase 55.081% of
CHAMC’s stock rights in BBEF Group, with the final price of
the stock right assignment to be no lower than 300 million
Yuan, which should be paid by installments; within 3 days as
of conclusion of the agreement, Bit Technology and New Auto
Group should pay 100 million Yuan to CHAMC’s account, and
should pay off the remaining amount within 3 months as of
conclusion of the agreement or within 7 days as of archival
filing of the valuation report in the state’s competent
department. After Bit Technology and New Auto Group paid the
100 million Yuan pursuant to the agreement, CHAMC should
assist in going through the stock right assignment
registration procedures. The assignees completely knew the
risks if other shareholders did not cooperate in going
through the procedures of industrial and commercial
registration of the stock right modification, and promised
that they would not propose any demurral against the
assignor in this regard; meanwhile, the assignees would not
be affected in paying the stock right assignment price, and
the assignor would not refund the stock right assignment
price it had received. In addition, the agreement also set
forth pledge of stock rights, liabilities for breach of the
agreement, and applicable laws, etc. On June 28 of the same
year, CHAMC proposed convening BBEF Group’s first temporary
session of the shareholders’ meeting in 2002 to make a
resolution regarding the relevant matters on CHAMC’s
assignment of its stock rights in BBEF Group once for all to
the purchase group composed of Bit Technology and New Auto
Group. Beijing Electronics Holding Limited Company (another
shareholder of BBEF Group, hereinafter referred to as BEHC)
did not sign or ratify the resolution. On September 27 of
the same year, CHAMC concluded the “Agreement on Relevant
Issues concerning the Stock Right Assignment (I)” with
Xinjiang International Trust and Investment Limited
Liability Company (a party not involved in the present case,
hereinafter referred to as XITIC), New Auto Group and Bit
Technology; and meanwhile concluded the “Agreement on
Relevant Issues concerning the Stock Right Assignment (II)”
with New Auto Group and Bit Technology. The two agreements
mainly confirmed the following facts: New Auto Group and Bit
Technology totally paid 100 million Yuan of stock right
assignment price to CHAMC on July 22, August 6 and August
30. XITIC agreed to provide financing supports to New Auto
Group and Bit Technology by way of trust, and should remit a
total amount of 200 million Yuan of funds into the account
appointed by 12 o’clock on September 28. The agreement also
included the contents that, since another shareholder of
BBEF Group had initiated arbitration procedures on the
ground that CHAMC infringed upon its preemptive right, New
Auto Group and Bit Technology agreed to make commitments on
continuing performing the agreement on stock right
assignment as concluded on June 28 of the same year. That
is, if CHAMC lost the case in the arbitration, and resulted
in inability to register the stock right assignment or to
continue performing the agreement, neither New Auto Group
nor Bit Technology should claim against CHAMC for the
interest of the 200 million Yuan of funds, the financing
costs, the foreseeable interests or compensation, etc.,
which CHAMC ought to bear or might bear due to conclusion of
the foregoing agreements. Meanwhile, the agreements also set
forth other obligations that New Auto Group and Bit
Technology should perform to CHAMC under the foregoing
conditions. On December 10 of the same year, XITIC, New Auto
Group and Bit Technology sent a letter to CHAMC, requiring
CHAMC to, along with XITIC, go through all procedures for
drawing 200 million Yuan from the account of funds under
joint custody within the relevant time limit; among the 100
million Yuan funds paid by New Auto Group to CHAMC, 5
million Yuan should be paid to XITIC. CHAMC did so pursuant
to the letter. Later, CHAMC’s Beijing Representative Office
sent a letter to New Auto Group and Bit Technology claiming
refundment of the remaining 95,500,000 Yuan (including
500,000 Yuan of prepaid amount for the stock right
assignment), and served the notification on refundment along
with notaries of Beijing No. 2 Notarial Office, but got no
reply. New Auto Group denied the receipt of the foregoing
notification on refundment. On April 16, 2003, CHAMC
refunded the 95,500,000 Yuan of stock right assignment
price, which was paid by New Auto Group and Bit Technology,
to New Auto Group’s account.
Bit Technology issued a power of attorney to New Auto Group,
stating that Bit Technology fully authorized New Auto Group
to hold 0.5% of lawfully obtained stock rights in BBEF
Group, to exercise any shareholder’s rights corresponding to
such stock rights, and to perform the obligations
accordingly.
On September 23, 2002, BEHC as the claimant filed a petition
to Beijing Arbitration Commission against CHAMC for an award
on the preemptive right to be enjoyed by BEHC as a
shareholder of BBEF Group. On December 9, Beijing
Arbitration Commission made a final award containing the
following main contents: “Before December 31, 2002, BEHC
shall be entitled to, as a shareholder of BBEF Group,
exercise the preemptive right under equal conditions over
the 55% of the stock rights in BBEF Group, which are to be
assigned to CHAMC. The 300 million Yuan of total assignment
price shall be paid to CHAMC in a lump sum by December 31,
2002.” Pursuant to the foregoing award, BEHC concluded an
agreement with CHAMC on December 20 and made the payment to
CHAMC on December 23.
Since CHAMC did not continue performing the agreement it
concluded with New Auto Group and Bit Technology on stock
right assignment, New Auto Group brought a lawsuit to
Beijing Higher Court on December 19 of the same year,
pleading with the court for ordering CHAMC to continue
performing the agreement on stock right assignment, to
compensate 19,816,077 Yuan of losses due to breach of the
agreement on stock right assignment, and to bear the
litigation costs and legal retainer.
Beijing Higher Court was of the following opinions through
the hearing that:
The agreement on stock right assignment, which was concluded
between CHAMC, Bit Technology and New Auto Group on June 28,
2002 concerning BBEF Group was the true expression of
intentions of all parties, hence each party to the agreement
should perform their respective obligations pursuant to the
agreement. Beijing Arbitration Commission awarded prior to
the effective award in question that BEHC, another
shareholder of BBEF Group, should have the preemptive right
under equal conditions over the stock rights to be assigned
by CHAMC, and BEHC concluded an agreement with CHAMC within
the time specified in the arbitrary award and made the
payment, therefore, the purpose of the agreement between
CHAMC, Bit Technology and New Auto Group on stock right
assignment was unable to be achieved, the basic conditions
for performing the agreement did no longer exist, and the
agreement should be terminated. Consequently, New Auto
Group’s litigation claim for continuing performing the
agreement on stock right assignment was not supported. Under
the circumstance that BEHC clearly expressed its
disagreement on assigning the stock rights, and did neither
clearly express waiver of the right of purchase nor sign any
relevant shareholders’ resolution to ratify the stock right
assignment, CHAMC concluded the agreement with New Auto
Group on stock right assignment and several attached
agreements despite the fact that it clearly knew that the
agreement on stock right assignment might meet with failure
in performance, and received 200 million Yuan of stock right
assignment price even after BEHC applied for arbitration.
CHAMC should bear the principal liabilities for the cause of
the dispute in question, and should bear the consequences
accordingly. New Auto Group knew the uncertainty and risks
of the stock rights it purchased in the process of
concluding the agreement with CHAMC, and thus should also
bear the liabilities for partial losses caused from the
failure in performing the agreement on stock right
assignment. New Auto Group’s claims for compensation of the
receivable proceeds and the purchase project team’s relevant
expenses, etc. under the circumstance that the agreement on
stock right assignment was performed in a normal way were
not supported. As for the partial losses caused to New Auto
Group from the expenses for achieving the contractual
purpose and urging both parties to perform the agreement,
they should be compensated by CHAMC. Whereas both parties
did not have specific covenants in this regard, nor did they
reach a consensus, it was appropriate to, on the basis of
the performance by both parties of the agreement, the
reasonable losses, and their respective liabilities in the
present case, determine the amount of losses to be
compensated by CHAMC to New Auto Group as 3 million Yuan.
Therefore, Beijing Higher Court rendered the following
judgment in accordance with Article 91 of the Contract Law
of the People’s Republic of China:
I. The agreement concluded between CHAMC, Bit Technology and
New Auto Group on assignment of the stock rights concerning
Beijing BBEF Electronics Group Limited Company and other
relevant agreements should be terminated.
II. CHAMC should compensate 3 million Yuan of losses to New
Auto Group (which should be paid within 10 days as of
effectiveness of the judgment, and in case of overdue
payment, CHAMC should pay the overdue fines according to the
relevant provisions of the People’s Bank of China). The
1,510,010 Yuan of case acceptance fee of the first instance,
and the 1,501,020 Yuan of property preservation fee, should
be borne by CHAMC.
CHAMC was dissatisfied with Beijing Higher Court’s foregoing
civil judgment, and appealed to the present court by
alleging that:
Beijing Higher Court was short of legal basis to order CHAMC
to bear the liabilities for compensation. CHAMC had no fault
for its failure to perform the agreement on stock right
assignment and had taken a series of measures to guarantee
BEHC’s preemptive right. CHAMC believed prior to the
arbitrary award that the stock right assignment and the
registration of the assignment completely conformed to the
relevant laws. New Auto Group clearly knew and also
recognized the measures taken by CHAMC, and meanwhile
thought that BEHC had waived the preemptive right. As
Beijing Arbitration Commission awarded BEHC to enjoy the
preemptive right under equal conditions over the stock
rights to be assigned by CHAMC, CHAMC had no way to perform
the agreement with New Auto Group on stock right assignment
but had to perform the effective arbitrary award, hence
CHAMC had no fault and should not bear the losses of New
Auto Group. CHAMC had truthfully informed the situation on
the stock right assets and the risks of the stock right
assignment. New Auto Group completely understood, knew and
accepted the risks of the stock right assignment. Both
parties agreed that the risks of inability to register the
stock right assignment should be borne by New Auto Group,
and CHAMC should bear no liability for compensation of
losses for termination of performance of the agreement on
stock right assignment. It was not supposed to be fair for
Beijing Higher Court to, under the circumstance of rejecting
New Auto Group’s main litigation claims, order CHAMC to bear
all the litigation costs.
Therefore, CHAMC pleaded with the present court for
overruling Item (2) of the principal text of the judgment of
the first instance, for adjudicating that CHAMC should bear
no liability and that the case acceptance fees and
preservation fees of the first and second instances should
be borne by New Auto Group.
New Auto Group was dissatisfied with Beijing Higher Court’s
foregoing civil judgment, and appealed to the present court
by alleging that:
1. CHAMC should be liable for the failure to perform the
agreement on stock right assignment, and should bear the
liabilities for compensating the losses. Pursuant to the
agreement on stock right assignment, CHAMC warranted that
its stock rights in BBEF Group were complete and sole, and
did not involve any pledge or any other third party
interests. However, BEHC’s actual exercise of the preemptive
right showed that the said stock rights did not exclude the
preemptive right, nor were they complete and sole.
2. CHAMC was short of legal basis to claim immunity on the
ground of the preemptive right that BEHC enjoyed. CHAMC
should not be exempted from the liability for compensation
in accordance with Article 1 of the “Agreement on Relevant
Issues concerning the Stock Right Assignment (II)”. As set
forth in the agreement, if CHAMC lost the case in the
arbitration, and caused the assigned stock rights unable to
be registered and the agreement on stock right assignment
unable to be performed, New Auto Group should not claim
against CHAMC for the interest of the 200 million Yuan of
funds, the financing costs, the foreseeable interests or
compensation, etc. which CHAMC ought to bear or might bear
due to conclusion of the agreement on stock right assignment
and the “Agreement on Relevant Issues concerning the Stock
Right Assignment (I)”. The arbitrary award did not rule
CHAMC to assign the stock rights to BEHC, nor did it
necessarily cause the assignment of the stock rights to be
registered in the name of New Auto Group. Moreover, the
arbitrary award ruled BEHC to exercise the preemptive right
at the price of 300 million Yuan, which was the lowest
purchase price agreed upon between New Auto Group and CHAMC
without the upper limit. CHAMC should, by providing New Auto
Group and BEHC with the public, fair and just bidding
opportunity, continue performing the agreement with New Auto
Group on stock right assignment. Only when New Auto Group
waived its price bidding with BEHC, could CHAMC suspend
performing the agreement on stock right assignment.
Otherwise, CHAMC’s behavior constituted breach of the
agreement, and should bear the liabilities accordingly.
CHAMC’s refusal to perform the agreement on stock right
assignment caused heavy losses to New Auto Group, and CHAMC
had no right to be exempted by covenants from the losses due
to the 200 million Yuan received from New Auto Group.
3. The amount of compensation as determined by Beijing
Higher Court was short of basis. Neither party was exempted
from the losses caused from the 100 million Yuan of funds.
CHAMC should compensate New Auto Group a total amount of
19,816,077 Yuan, including 6,435,750 Yuan of expenses paid
to XITIC, 3,044,884.93 Yuan of loan interest payable to
Kinghing Trust and Investment Joint Stock Limited Company (a
party not involved in the present case, hereinafter referred
to as Kinghing Company), 2,248,265.75 Yuan of financial
consulting fee, 2 million Yuan of consulting fee paid to
Sound Management Limited Company, 55,000 Yuan of auditing
fee paid to Mingze Accounting Firm, 4,590,000 Yuan of stock
right proceeds receivable from August to December 2002 due
to performance of the agreement, 502,590 Yuan of wages for
the employees engaging in purchase of the stock rights, and
939,586.32 Yuan of other losses.
Therefore, New Auto Group pleaded with the present court for
overruling Item (2) of the principal text of the judgment of
the first instance, as well as for ordering CHAMC to
compensate 19,816,077 Yuan of losses to New Auto Group and
to bear the litigation costs and property preservation fees
of the first and second instances.
In addition to the facts ascertained by Beijing Higher
Court, the present court also verified that:
On June 12, 2002, New Auto Group authorized a lawyer to
issue a legal letter to CHAMC, saying that New Auto Group
concluded a “Framework Agreement on Stock Right Assignment”
with CHAMC in December 2001 regarding the stock right
assignment. On April 15, 2002, CHAMC informed BEHC by a
formal “Notification” of the relevant stock right
assignment, the proportion of stock rights under intended
assignment, the assignment price, the time limit for
payment, etc., and requested BEHC to make a clear reply by
April 24 on whether to exercise the priority under the
foregoing conditions; if BEHC failed to clearly expressed
its intention of purchase by that date, it would lose the
preemptive right. BEHC replied by letter and expressed it
would not waive the preemptive right. The legal letter held
that BEHC’s expression of refusal to waive the preemptive
right failed to satisfy CHAMC’s requirement for clearly
expressing the purchase or not, and BEHC’s counter
requirement on the conditions for assignment was the refusal
of the equal conditions, hence BEHC had lost the preemptive
right, and CHAMC did not have to, and should not discuss
with BEHC about priority. The legal letter finally held that
once CHAMC concluded the stock right assignment with Bit
Technology and New Auto Group, the substantive conditions of
the agreement were determined and the procedural elements
were fulfilled. On June 13, CHAMC sent a notarized
“Notification” to BEHC, again informed it of the conditions
agreed upon between CHAMC and New Auto Group on assignment
of the stock rights, and requested BEHC to promise in
writing by 9:00 am on June 28 whether to exercise the
preemptive right under equal conditions or not; if it
promised to exercise the right, it should conclude the
agreement on stock right assignment on the same day,
otherwise it should be deemed to waive the priority. BEHC
did not make a reply in this regard. At 11:30 am on June 28,
CHAMC concluded the agreement with New Auto Group and Bit
Technology on stock right assignment. Paragraph 6.1 of the
agreement stipulated: should BBEF Group or any other
shareholder of BBEF Group fails to cooperate with the
assignees in going through the procedures for industrial and
commercial registration of modification of the stock rights,
the industrial and commercial registration of the
modification might be delayed, and the assignment of the
assignor’s stock rights to the assignees might not be
registered in time; the assignees completely knew the
foregoing risks, and the assignor should bear no liability
for the risks which might occur therefrom. Paragraph 7.1
stipulated: CHAMC warranted that it had complete and sole
right over its stock rights in BBEF Group; and up to the
effectiveness date of the agreement, the stock rights
involved no pledge or other third party interests. After
that, CHAMC and New Auto Group began to perform their
respective obligations pursuant to the assignment agreement.
New Auto Group paid RMB 20 million Yuan, 10 million Yuan and
70 million Yuan of the assignment price to CHAMC separately
on July 22, August 6 and August 30. On September 2 of the
same year, CHAMC sent a letter to BBEF Group, asking BBEF
Group to assist in going through the relevant procedures for
registration of the assignment of the stock rights.
Following New Auto Group’s requirement, CHAMC drew 5 million
Yuan from the 100 million Yuan of funds received from New
Auto Group, and paid it to XITIC on December 18.
On April 15, 2002, New Auto Group concluded an agreement
with Sound Management Limited Company, a party not involved
in the present case. The agreement set forth that New Auto
Group retained Sound Management Limited Company as the
consultant for purchase of the target assets. New Auto Group
paid RMB 2 million Yuan of consulting fee to Sound
Management Limited Company for the first time, and if the
purchase failed not due to reasons of New Auto Group, Sound
Management Limited Company should refund 1 million Yuan to
New Auto Group. On the same day, Sound Management Limited
Company issued a receipt on receiving RMB 2 million Yuan
from New Auto Group. On August 29, New Auto Group and
Kinghing Company concluded a contract on borrowing current
funds, which set forth 70 million Yuan of loans, with the
monthly interest rate at 5. 2525‰, and the term of the loans
commencing from August 29 and ending on September 29 of the
same year. Also on the same day, New Auto Group and Kinghing
Company concluded the “Agreement on Financial Consulting of
Project Financing”, which set forth that Kinghing Company
should provide New Auto Group with financing consulting on
the project of purchasing 55% stock rights from BBEF Group,
and draft the specific financing scheme, etc.; the term of
financial consulting service should commence on August 29 of
the same year and end on June 29, 2003; and New Auto Group
should pay 2,980,000 Yuan of financial consulting fee
accordingly. On September 5, 2003, Kinghing Company asked
New Auto Group for payment of 3,044,884.93 Yuan of loan
interest and 2,248,265.75 Yuan of financial consulting fee.
On September 25, 2002, Beijing Mingze Accounting Firm issued
an audit report on BBEF Group upon entrustment of New Auto
Group. The report showed that BBEF Group’s net profits from
January to August 2002 were 4,024,318.56 Yuan. New Auto
Group held two invoices issued by Beijing Mingze Accounting
Firm on October 22, 2002, with the amount at 55,000 Yuan.
The wages paid by New Auto Group to the staff of the
purchase team from April to December 2002 were 386,490 Yuan.
During the hearing of the present case, New Auto Group
provided evidence to prove that its name was changed from
“Beijing New Auto Group” into “Beijing New Auto Group
Limited Company”.
The present court was of the following opinions:
The agreement concluded between CHAMC, New Auto Group and
Bit Technology on stock right assignment was the true
expression of intentions of the parties, and did not violate
any prohibitive provision in relevant laws and
administrative regulations, hence it was an effective
contract. The reasons for the failure to continue performing
the agreement on stock right assignment lied in that the
effective award of Beijing Arbitration Commission ruled that
BEHC (a party not involved in the present case) enjoyed the
preemptive right under equal conditions over the stock
rights to be assigned by CHAMC, and that BEHC concluded the
agreement with CHAMC within the time specified in the
arbitrary award and paid 300 million Yuan stock right
assignment price to CHAMC. Due to BEHC’s actual exercise of
the priority, the subject matter of the agreement between
CHAMC and New Auto Group on stock right assignment did no
longer exist, and it was impossible to continue performing
the agreement. It was not inappropriate for Beijing Higher
Court to adjudicate that the agreement on stock right
assignment should be terminated, and neither party appealed
regarding this point, hence the present court sustained this
item of content of the judgment of the first instance.
One of the focuses in dispute in the present case was how to
bear the losses caused to New Auto Group after the agreement
on stock right assignment was terminated. When CHAMC and New
Auto Group concluded the agreement on stock right
assignment, both parties knew that under the Company Law,
any other shareholder enjoyed the preemptive right under
equal conditions, and they also knew BEHC’s attitude of not
waiving the priority. Since the law did not clearly
prescribe the method or time limit, etc. for a shareholder
to exercise the priority, CHAMC requested BEHC by
notification to exercise the priority within a time limit,
and the overdue exercise should be deemed as a waiver. New
Auto Group completely agreed that CHAMC had, in this way,
excluded BEHC’s right to exercise the priority. Both parties
concluded the agreement on stock right assignment under the
circumstance of considering that BEHC had lost the priority.
The subsequent arbitrary award did not support the viewpoint
of CHAMC and New Auto Group on the priority, but ruled that
BEHC should have the right to exercise the priority. BEHC’s
actual exercise of the priority finally resulted in the
termination of the agreement on stock right assignment. When
concluding the agreement, CHAMC and New Auto Group ought to
foresee that the agreement might be terminated due to BEHC’s
exercise of the priority, but they did not foresee it, and
thus caused the termination of the agreement, for which both
parties were faulty. The losses caused to New Auto Group due
to preparation for the performance of the agreement and the
actual performance should be borne by CHAMC and New Auto
Group on a 50-50 basis. Beijing Higher Court’s ascertainment
that CHAMC should bear more liabilities than New Auto Group
did not conform to the fact, and should be corrected by the
present court. CHAMC asserted that it was unable to continue
performing the agreement with New Auto Group on stock right
assignment due to performance of the effective arbitrary
award, and should bear no loss to New Auto Group because it
had no fault. This assertion was not supported by the
present court as the ground did not conform to the facts.
CHAMC also asserted that it should bear no loss caused from
termination of the agreement on the ground that the risks of
inability to register the assignment of stock rights under
the agreement should be borne by New Auto Group. CHAMC’s
this ground for appeal was not tenable and was not supported
by the present court, because CHAMC and New Auto Group only
determined in the agreement the risks of delaying the
registration of the assignment of the stock rights, but did
not determine how to bear the risks of inability to register
the assignment. The preemptive right is a legally prescribed
priority for a shareholder to, under equal conditions,
purchase the shares under intended assignment by another
shareholder, and is the right to guarantee the harmonious
cooperation among shareholders of a limited liability
company. The provisions on priority were not the
restrictions on the stock rights of the shareholder who
intends to assign its shares or on its free assignment of
the shares. BEHC’s lawful exercise of the priority could not
prove that CHAMC did not enjoy complete and sole right over
the stock rights it held. New Auto Group’s claim in the
appeal against CHAMC for its bearing the full liabilities
for compensation on the ground of breach of the agreement
was short of factual or legal basis, and was not supported
by the present court.
Another focus in dispute in the present case was how to
calculate the losses caused from termination of the
agreement on stock right assignment. (1) On the losses due
to New Auto Group’s payment of the 200 million Yuan of stock
right assignment price: The “Agreement on Relevant Issues
concerning the Stock Right Assignment (II)” clearly set
forth that, if CHAMC lost the case in the arbitration, and
resulted in inability to register the stock right assignment
or to continue performing the agreement on stock right
assignment, New Auto Group should not claim against CHAMC
for the interest of the 200 million Yuan of funds, the
financing costs, the foreseeable interests or compensation,
etc. which CHAMC ought to bear or might bear due to
conclusion of the foregoing agreement. This consensus was
the expression of true intention between both parties, and
did not violate any law or administrative regulation, hence
should be effective. The premise of exemption of liabilities
was that CHAMC lost the case in the arbitration, not New
Auto Group’s assertion that New Auto Group and BEHC should
bid for the assignment even when CHAMC lost the case. New
Auto Group’s recovery of the 200 million Yuan of funds after
CHAMC lost the case in the arbitration also showed that it
did not have the intent of bidding. New Auto Group’s
voluntary waiver of the compensation relevant to the 200
million Yuan was its disposal of the right. Therefore, New
Auto Group’s claim in the appeal against CHAMC for
compensation of the 6,435,750 Yuan of losses due to its
payment of the 200 million Yuan of stock right assignment
price was not supported by the present court. (2) On the
losses caused to New Auto Group due to payment of the 100
million Yuan of stock right assignment price: The way of
raising funds to purchase the stock rights was to be
determined by New Auto Group itself, and there might be
several sources of funds. The reasonable losses which CHAMC
could foresee should only be the interest losses during its
actual possession of the funds, not including New Auto
Group’s actual expenses for financing. Therefore, this part
of losses should be calculated on the basis of the time of
CHAMC’s actual possession of the funds and the amount
thereof and at the interest rate of the People’s Bank of
China for half-year fixed-term deposits. (3) The consulting
fee, auditing fee, financial consulting fee and wages, etc.
paid by New Auto Group for performing the agreement were the
actual or indispensable funds paid for the contractual
purpose and for bona fide performance, and should be
ascertained as the losses from inability to perform the
agreement. Among those funds, 2 million Yuan of the
consulting fee had been paid. However, pursuant to the
agreement between New Auto Group and Sound Management
Limited Company, New Auto Group should be entitled to claim
refundment of 1 million Yuan from Sound Management Limited
Company, hence the actual consulting fee losses should be
ascertained as 1 million Yuan. The wage losses should be
calculated on the basis of the number of staff who worked
for the purchase of stock rights and the time of their work,
i.e., 386,490 Yuan. The auditing fee should be calculated as
55,000 Yuan of actually paid amount, and the financial
consulting fee should be calculated as the 2,248,265.75 Yuan
to be paid by New Auto Group. The losses of the foregoing
consulting fee, auditing fee, financial consulting fee and
wages totaled to 3,689,755. 75 Yuan, and CHAMC should bear
50%, i.e., 1,844,877.88 Yuan. As for New Auto Group’s claim
for 4,590,000 Yuan of stock right proceeds, it was not
supported by the present court due to insufficiency of
evidence.
To sum up, the judgment of the first instance did not
specifically ascertain the amount of New Auto Group’s
losses, and inappropriately ascertained the proportion of
liabilities to be borne by CHAMC, hence should be corrected
by the present court. New Auto Group’s ground for appeal for
compensation of 19,816,077 Yuan of losses was not tenable,
and thus was not supported by the present court. CHAMC’s
ground for appeal for exemption of the liability for
compensation was not tenable either, and was not supported
by the present court either. The present court adjudicated
as follows in accordance with Items (1) and (3) of Paragraph
1 of Article 153 of the “Civil Litigation Law of the
People’s Republic of China”:
I. Item (1) of the principal text of civil judgment No. 1
(2003) of Beijing Higher Court shall be sustained;
II. Item (2) of the principal text of civil judgment No. 1
(2003) of Beijing Higher Court shall be modified into: China
Huarong Asset Management Corporation shall compensate
Beijing New Auto Group Limited Company 1,844,877.88 Yuan of
losses, and 50% of interest losses for possession of the 100
million Yuan of funds (The interest is calculated at the
coterminous interest rate of the People’s Bank of China for
half-year fixed-term deposits and on the basis of the time
sections of actual possession of the funds and the
respective amounts of funds, i.e., 20 million Yuan from July
22 to December 18, 2002; 15 million Yuan from December 19,
2002 to April 16, 2003; 10 million Yuan from August 6, 2002
to April 16, 2003; and 70 million Yuan from August 30, 2002
to April 16, 2003).
Performance of the abovementioned payments shall be limited
within 10 days as of service of the present judgment. If the
payment is delayed, Article 232 of the “Civil Litigation Law
of the People’s Republic of China” shall apply.
In the present case, 1,510,010 Yuan of case acceptance fee
of the first instance shall be borne by China Huarong Asset
Management Corporation and Beijing New Auto Group Limited
Company on a 50-50 basis, i.e., each party shall bear
755,005 Yuan; the 1,501,020 Yuan of property preservation
fee shall be borne by China Huarong Asset Management
Corporation and Beijing New Auto Group Limited Company on a
50-50 basis, i.e., each party shall bear 750,510 Yuan; and
the 109,090 Yuan of case acceptance fee of the second
instance shall be borne by China Huarong Asset Management
Corporation and Beijing New Auto Group Limited Company on a
50-50 basis, i.e., each party shall bear 54,545 Yuan.
The present judgment shall be final.
Chief Judge Xu Ruibai
Acting Judge Wang Xiansen
Acting Judge Yang Yongmei
November 7, 2003
Court Clerk Kong Ling |
