SECRETARY FOR JUSTICE v. CHUN KAM CHIU

HCA919/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE ACTION

NO.919 OF 2002

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J U D G M E N T

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1. This is Day 3 of a trial that started on Monday, three days ago.  At the end of hearing after the submissions made by Mr Chun, the defendant and Mr Mok, acting for the plaintiff Secretary for Justice, I have come to the conclusion that the application for amendment of the defence to introduce a new plea of misrepresentation must be rejected.  

2. The case involves a claim by the Government in the form of the Inland Revenue against the defendant in relation to a guarantee given by Mr Chun in the year 2000 in relation to judgment entered by the Inland Revenue against a company which we have in the trial called Keen Lloyd (Holdings) Ltd (hereinafter called “Holdings”),for a sum in excess of some $20 odd million. 

3. The guarantee was given in circumstances in March 2000 as part of a package agreed between the Government on the one side and Holdings on the other, whereby in return for the government agreeing to accept the paying-off of the judgment sum by instalments, the company with Mr Chun being the beneficial owner agreed to put forward firstly, the personal guarantee of Mr Chun, secondly, a basket of properties to be charged, and thirdly, a sum of $100,000 in the form of a cheque.  That was pursuant to the acceptance of a letter of offer dated 14 March 2000.  

4. The Defence that had been filed was filed as long ago as May 2000.  A number of points were pleaded in Defence but there was certainly no plea of misrepresentation.  There were the filing of witness statements and the main defence that was relied upon was what was called, throughout the hearing so far, as a global settlement defence.  I do not need to go into the detail of the question of that defence for the purpose of considering the application for amendment of Mr Chun to rely on misrepresentation.  

5. Yesterday morning, as a result of the very fair and clear opening by Mr Mok on the global settlement defence, seeing that there is really no substance in the alleged defence on global settlement, Mr Chun in one of his constant interruptions stood up and said to the court that he wished to abandon the global settlement defence but wished to rely on a new defence of misrepresentation.  He admitted that the new defence of misrepresentation had not been pleaded, he admitted that the new defence of misrepresentation was not the subject matter of his witness statement, but he nevertheless said he wished to rely on it.  He did not elaborate what was the misrepresentation defence and I directed that he should put it down on a piece of paper so that we could have the details of that misrepresentation defence.

6. Today, notwithstanding what he had said he would do — to put it down on a piece of paper, as a result of question and answer, he had informed the court and it would seem that the substance of this defence was this, that some time in February and March, at the office of Holdings, two male staff of Deloitte Touche Tohmatsu had made representation to him, which thereby caused him to sign the guarantee, and the misrepresentation was wrong and, therefore, he was entitled to be relieved from the guarantee. 

7. The misrepresentation was in relation to the enforcement as to when the guarantee would be in force.  It was described to him by the Deloitte Touche Tohmatsu men that it was only after the Government could not obtain any money from the company and only after they had sold all the properties that had been charged and still did not obtain sufficient money would the guarantee be then be enforced with written notice.  This, of course, was quite contrary to the terms of the guarantee that was actually signed and that is now been enforced. 

8. The real question it seems to me is that, notwithstanding the lateness, whether there is any real prospect of this plea of misrepresentation succeeding.  I can categorically say that in my view, there is no chance of that plea succeeding.  In order for the plea to succeed, it must be established that the persons making the misrepresentation were acting on behalf of the Inland Revenue and that they were authorized to so act and in the course of so acting on behalf of the Inland Revenue, they made the misrepresentation. 

9. It was clear from the documents that is now before the court,  in particular the opening correspondence letter dated 3 January 2000, from Deloitte to the Inland Revenue, at p.167 of the bundle, that they were appointed by the company (and not by Inland Revenue) to act for the company in relation to the question of tax, and the letter of 3 January also enclosed two letters of appointment by the two respective companies, that is Holdings and its sister company Ever Lucky, whereby Deloitte was appointed to act on behalf of Holdings and Ever Lucky to deal and negotiate and discuss with the Inland Revenue about the tax affairs of Holdings and Ever Lucky.  

10. There is, whether on the documents or by common sense, no possibility ever of Deloitte, the accountants acting on that occasion or any occasion on behalf of Inland Revenue to discuss tax of this kind.  So, factually, there is no way that there is a possibility of this plea of misrepresentation ever succeeding. 

11. On that basis alone, it would be sufficient to reject the plea.  If there is any substance in the plea, of course Mr Chun could have a cause of action against Deloitte, but that does not mean that it gives rise to any defence to the claim.  In any event, at this late stage when we are already into Day 3 of the trial, it would be grossly unjust to allow this last-minute plea to be accepted.  Inevitably it would have to involve a long adjournment of the trial so that there could be further pleadings, further witness statements, possibly a joinder of Deloitte. 

12. The question that has always to be asked is : could this amendment have been made earlier?  Mr Chun was well represented by lawyers for a long time and this only stopped last Wednesday.  The plea of misrepresentation, if it has any substance, could have been made a long time ago — it was not, and we are now into Day 3 of the trial and this new application can only suggest that it was a desperate last-minute attempt to create further delay.  There is, therefore, in my view, no basis on which any court can grant the application sought. 

12. The application therefore is dismissed and the defendant must pay the costs of the application.  I will hear Mr Mok on the gross sum assessment of what is the estimated time spent in dealing with this matter.