Court now looms for bitter dispute

Developers falling out is a regular part of the property sector’s landscape

“We may file a lawsuit against Ho Chi Minh City-based Hong Phat Real Estate Joint Stock Company because it has designs on appropriating our company’s $15.6 million,” said Eric Nguyen, a senior China Policy Limited (CPL) advisor.

However, Hong Phat’s vice general director Thai Thi Hong Hau said: “All the information that we are appropriating CPL’s cash is just a made-up story. We have told it many times that we will pay all of the money to it, plus interest. But, it refused and kept asking us to give it the right to use the project’s land. It is quite unreasonable.”

In October 2003, Hong Phat got approval in principle by Long An provincial People’s Committee to develop a 493 hectare project in Tan My and Duc Lap Thuong communes in Duc Hoa district.

The project’s first phase would include a 273 hectare high-end urban area and the second phase of 220ha would include a modern horse-racing course, a horse-racing club and a resettlement area.

However, the company was required by local authorities to undertake site clearance before the project could be licenced by local authorities.

In 2007, CPL clinched a framework agreement to cooperate with Hong Phat to implement this project. Under the agreement, Hong Phat contributed 30 per cent of capital via land use rights and the remaining capital from CPL would be used for site clearance and compensation. Long An’s centre for real restate consultancy was entitled to receive money from the investors to pay for the project’s site clearance and compensation.

Under the agreement, CPL twice gave $15.6 million to Hong Phat for site clearance and compensation. After that the project was licenced for using the land in 2008.

However, Nguyen said the licence “somehow” only named Hong Phat and did not include CPL.

But, Hong Phat said that at that time, after receiving $15.6 million from CPL, an increase in site clearance and compensation fees had prompted it to ask CPL to negotiate to find solutions.

“However, CPL ignored our proposals and has taken no action so far. We have had to find our own ways to continue site clearance and obtain such a licence,” Hau said.

But Nguyen said Hong Phat had asked it to advance another $20 million to pay for site clearance and compensation and this sum would be a condition for the two sides to establish a joint venture. “Then we asked Hong Phat for specific evidence related to the increase in site clearance fees and compensation, but it could not,” Nguyen said.

However, his opinion was negated by Hau: “We have never asked CPL for such a sum. It is quite wrong,” Hau said.

“CPL does not have sufficient capital for the project. CPL itself is nothing but a land speculator. It wants this project just because it wants to sell it to other investors to reap profits,” Hau said.

Hau said after the agreement was inked, CPL faced financial difficulties. As a result, it advertised the project in Hong Kong and its stock prices increased.

“After such an action, which meant that they violated the agreement’s clauses that no information in the agreement was allowed to be publicised, it asked us to sell this project [to other investors]. But, we refused,” Hau said.

According to Hanoi-based law firm Bross & Partners, it was a civil economic dispute and CPL could file the lawsuit, but it depended on whether the lawsuit was brought to a court or an arbitration unit. So could Hong Phat, in the case CPL had violated the agreement by illegally announcing the agreement’s information.

The Ministry of Police has asked Long An People’s Committee to solve the case. At present, Hong Phat is looking for another partner for the project.

Hong Phat is completing the detailed planning of this project, whose detailed capital and scales are yet to be publicised.