This case concerns the duty of a financial institution to ascertain the true market value of a property when exercising its powers of sale. 

 

In this case, Sun Holding (together with its directors) sued Exim for wrongfully selling the company’s properties at a grossly undervalued price of US$ 36 million. In this regard, the secured property included the Don Chan Palace Hotel, a 5-star international hotel valued at US$149.4 million and constructed on a plot of land measuring almost 176,000 sq metres along the Mekong River, Laos (“Hotel”).

 

Sun Holding contended in its counterclaim that Exim had exercised its power of sale improperly because Exim had made no attempt to determine the prevailing market value at the time of sale. This was highly prejudicial as Exim’s conduct had resulted in the company being deprived of the true value of the secured property, which was valued to be significantly higher than Exim’s sale price.

 

Allowing the counterclaim, the High Court found that Exim was grossly negligent and had acted in complete disregard of Sun Holding’s rights and interests. Further, by selling the secured property to a special purpose vehicle which Exim partly owned, Exim had stood to gain substantial secret profits without the company’s knowledge, as the sale transaction had ultimately led to Exim having a “collateral advantage”, namely recovering the entirety of the US$36 million debt while also acquiring 51% beneficial ownership of the Hotel and its land. In the circumstances, the High Court ordered for damages to be assessed against Exim to determine the losses suffered by Sun Holding following Exim’s misconduct.  

 

Alvin Tang acted for Sun Holding and its directors.