Deutsche Bank AG lost a bid to dismiss a lawsuit by a developer claiming he was coerced into covering a HK$279 million ($36 million) shortfall in a rental fraud, with a Hong Kong judge ruling a trial is required to resolve the case.
Tin Lik, the developer, sold the Gateway Plaza in Beijing to the bank’s RREEF China Commercial Trust in 2007 and alleged that investment bankers inflated rents from the property before the trust’s Hong Kong listing in June that year. His claim can’t be called imaginary, High Court Judge A.T. Reyes said.
“It seems we really need to go to trial and the court needs the benefit of cross-examination,” Reyes said at a hearing today. The trial is set to begin on June 3, according to the Hong Kong judiciary’s website.
RREEF China REIT Management Ltd., the manager of the trust, said it discovered in 2007 a discrepancy between rents set out in leases and the amount of money actually received by the trust. Tin is suing to get back a total of HK$289.4 million, including the HK$279 million he says Deutsche Bank’s investment bankers coerced him into paying to cover the rental shortfall.
Tin’s allegations amounted to a “tissue of lies” because building leases showing higher rents than actually collected were being used before the bankers began working on the deal, Martin Rogers, a lawyer representing Deutsche Bank, said today.
“The claims by Tin Lik are pure fiction and will be proven so when this matter goes to trial next year,” Michael West, a Deutsche Bank spokesman in Hong Kong, wrote in an e-mail today. West said the bank had obtained an independent report showing that a “complex fraud was perpetrated” against the trust and reported the matter to the authorities in 2007.
Tin’s claims are “wholly without merit and will continue to be vigorously defended” by the Deutsche parties as well as the trustee and co-defendant, HSBC Institutional Services (Asia) Ltd., RREEF China REIT said in a May stock exchange filing.
RREEF also said in May its board will delay final distributions in the liquidation and delisting of the trust pending the conclusion of the court case.
The case is Tin Lik and Deutsche Bank AG, RREEF China REIT Management Ltd., HSBC Institutional Trust Services (Asia) Ltd., HCCL17/2011, in the Hong Kong Court of First Instance.