Hoa Binh Construction Group struggles to collect debt from condotel developer

The 31-hectare Cocobay Da Nang, one of the largest condotel projects in Vietnam, was launched in 2016 with a total investment of VND11 trillion ($464.04 million).

Hoa Binh, one of the largest construction companies in the south, said recently that in December last year it had won a legal case against Thanh Do, the developer of Cocobay Da Nang.

The Vietnam International Arbitration Center (VIAC), based in Ho Chi Minh City, on Dec. 6 ruled that Thanh Do had to pay Hoa Binh nearly VND368 billion in debt, interest, and lawyer and arbitration fees.

According to the ruling, Thanh Do had 30 days to compete the payment, and any delay after that would result in a penalty interest of 11.5-14.6% annually on the VND242 billion in original debt and 10% on the remaining amount.

But winning the lawsuit did not guarantee payment from Thanh Do, Hoa Binh has learned.

The company told VnExpress that the VND368 billion ruling was unfair as the laws have not been followed thoroughly.

Le Thanh Son, legal director of Thanh Do, said VIAC had violated the self-defense rights of Thanh Do as it did not call the company to participate in the final meeting concerning the lawsuit on Nov. 15.

He added that as no Thanh Do representative was called to attend the meeting, VIAC resolved the lawsuit based on only the documents that Hoa Binh provided, thereby making an unfair ruling.

Son said that the company only learned about the conclusion of the meeting after the meeting was over. He said further that the company had requested a new meeting, but that this request was not approved.

Thanh Do has filed a complain with the court to remove VIAC’s ruling. If approved, the lawsuit will be transferred to a court to start the arbitration from the beginning.

Son said that before Hoa Binh and Thanh Do brought the matter to VIAC for a ruling, the two companies had agreed that the latter would pay the debt using Cocobay properties.

All Cocobay assets are now mortgaged at lender SHB, which is the only creditor of the project.

“But Hoa Binh did not follow through with this agreement and filed a lawsuit against my company,” Son said.

Concerning the request of Thanh Do to remove the decision of VIAC, lawyer Dang Hoan My of the HCMC Bar Association said that the arbitration center is known for its strict procedures in handling these cases, and therefore it is rare that a VIAC decision will be overturned.

My said this would only happen in some special cases, such as if the evidence provided by one party was found to be faked, or if a VIAC arbitrator was found to have accepted a bribe, she said.

But whatever happens, it will take a long time for Hoa Binh to receive the payment from Thanh Do, she added.

The Hoa Binh arbitration only adds to the controversy around Cocobay Da Nang, which was once known to be the most famous condotel project in Vietnam; Thanh Do spent large amounts of money on advertising the project, and even hired football legend Cristiano Ronaldo to promote it.

Thanh Do in 2016 promised owners a 12% annual interest rate for eight years. However, by the end of 2019 the company said it would stop paying the interest in 2020 due to problems with an incomplete condotel legal framework.

Buyers soon fell into trouble as most of them borrow from banks to invest in the project.

Empire Group, a subsidiary of Thanh Do which is in charge of operating Cocobay Da Nang, fell into losses in 2017 and 2018.

By the end of 2018, the Empire Group had total assets of VND11 trillion, but over 50% of this amount was debts and inventory. It also had a debt obligation of 92% of total assets.

Thanh Do said that most buyers have agreed to liquidate the contracts to get their money back or to convert the condotels into apartments.

A minority of customers did not agree with these negotiations and therefore are pursuing lawsuits, the company added.