DAIMLER AG v. HERBERT HEINZ HORST LEIDUCK AND ANOTHER

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

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D E C I S I O N

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1.  This is an application for leave to appeal against my decision given on 8 April 2010 upholding a decision of Master Lung, which ordered the withdrawal of six interrogatories administered by the defendants on the plaintiff and refused an oral application by the defendants to amend their points of claim. 

2.   Section 14A(a)(4) of the High Court Ordinance, Cap. 4, provides that I should not grant leave unless I am satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interest of justice that the appeal should be heard.  I am only concerned with whether the defendants have a reasonable prospect of success in the appeal.  The facts have been set out in my decision of 8 April.  This decision should be read together with that decision. 

3.  The 2nd defendant now wants to plead that the settlement agreement was made as a result of the plaintiff’s fraudulent misrepresentation in that the plaintiff had failed to disclose to the 2nd defendant the Lefort fraud and had thereby fraudulently misrepresented to the 2nd defendant that the injunction against the 2nd defendant was obtained by a bona fide mistake.

4.  I said in paragraphs 32 and 33 of my last decision:

“32.   The facts in the present case are different.  The plaintiff’s solicitors, in their letter dated 14 May 1994 to the defendants’ solicitors, only said that the report by the plaintiff’s Paris lawyers on the banking records in the possession of the magistrate indicated that the loan of US$6 million had not been repaid out of the US$20 million, and that was contrary to the earlier information provided by the magistrate.  The letter did not say how or why the wrong information was given earlier on by the magistrate.  There is also no evidence that the then solicitors of the defendants had asked how or why the magistrate had erred.  I do not think the plaintiff was then under any duty to explain to the 2nd defendant how or why the Mareva injunction was wrongly obtained and its solicitors did not do so.  There is also nothing to suggest that it was a material circumstance for Yip to consider whether the 2nd defendant should enter into the settlement agreement.

33.    Since there was no duty to explain and the plaintiff’s solicitors had made no representation that the injunction was obtained by a bona fide mistake or otherwise, there is no basis for the 2nd defendant to say that a non-disclosure of the alleged Lefort fraud by the plaintiff amounted to the plaintiff’s fraudulent misrepresentation of a bona fide mistake.  In the premises, the defendants will not be able to establish the alleged fraudulent misrepresentation as sought to be pleaded in the proposed paragraph 13A.”

5.  In this application the 2nd defendant asked me to consider an earlier letter from the plaintiff’s solicitors to the defendants’ then solicitors and dated 11 May 1994 together with the letter dated 14 May 1994 also from the plaintiff’s solicitors to the defendants’ then solicitors.  Paragraph 2 of the first letter reads:

“2.     Our client’s Paris lawyer is now permitted (as charges have just formally been laid against the 1st defendant in Monaco) to inspect documents in the possession of the investigating magistrate which support the evidence in Mr Carolan’s affidavit of 29 April (namely to the effect that the loan in question was repaid).”

6.  The first to third paragraphs of the second letter read:

“We have now received instructions from our client following a report by its Paris lawyer on the banking records in the possession of the Investigating Magistrate. 

This report indicates (contrary to earlier information which had been provided by the Magistrate) that the loan in question has not been repaid out of the funds advanced to the 1st Defendant by our client. 

Accordingly, we will discharge the Mareva injunction against the 2nd Defendant.  …  We will confirm the position to the Court at the hearing on 17 May and we have asked Counsel not to attend in order to avoid unnecessary costs.”

7.  Mr Wong, leading counsel for the defendants, submitted that an objective reading of these two letters as quoted above gives a clear indication that the mistake that led to the application for injunction was an innocent mistake.  Counsel further submitted that if the plaintiff was aware of the mistake from the beginning (as the mistake was the result of the plaintiff’s bribery to the magistrate Mr Lefort), then it was wrong for the plaintiff’s solicitors to have said in the second letter that the report from the Paris lawyers indicated that the earlier information provided by the magistrate was wrong.  Counsel said that this gave the impression that the plaintiff was not aware of the falsity of the information until the report was given by the Paris lawyers, but the fact is that the plaintiff was aware of it right from the start because of the Lefort fraud.

8.  In other words, the 2nd defendant is saying that the plaintiff was pretending not to know the falsity and thereby induced the 2nd defendant to believe in its innocence, and hence the 2nd defendant, in the mistaken belief that the plaintiff had merely made an innocent mistake, entered into the settlement agreement with the plaintiff.

9.  I, however, do not think an objective reading of the two letters can give rise to an understanding that the plaintiff’s solicitors were saying that the mistake that led to the application for injunction was an innocent one.  The letters, whether read alone or together, do not amount to an explanation of how the mistake was made.  The second letter only said that the report by the plaintiff’s Paris lawyers indicated that the earlier information provided by the magistrate was wrong.  It did not seek to explain whether the information was erroneous because it was the result of negligence, or recklessness, or the deceit of someone. 

10.  I have already held in my last decision that the plaintiff’s solicitors had no duty to explain how or why the injunction was wrongly obtained, and Mr Wong accepts this conclusion.  I also do not think the plaintiff’s solicitors had tried to provide an explanation in the second letter.  I think the 2nd defendant is reading too much into this letter when it says that this letter, whether read alone or together with the earlier letter, somehow says that the mistake was an innocent one.

11.  I therefore do not think the proposed appeal of the 2nd defendant has a reasonable prospect of success.  I therefore dismiss the application. 

(Discussion re costs)

12.  So I make a costs order nisi that the defendants do pay the costs of this application to the plaintiff.  If there is no application for variation of the costs order nisi after 14 days, then an appointment should be made and I do direct an appointment to be made then for gross sum assessment of the costs of the appeal as well as this application.  That will reduce the overall costs.