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Peconic Industrial Development Ltd And Another v Chio Ho Cheong And Others

Judgment Cited authorities 40 Cited in Precedent Map Related
Vincent
Judgment Date01 June 2006
Subject MatterCivil Action
Judgement NumberHCA16255/1999
CourtHigh Court (Hong Kong)
HCA016255B/1999 PECONIC INDUSTRIAL DEVELOPMENT LTD AND ANOTHER v. CHIO HO CHEONG AND OTHERS

HCA 16255/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16255 OF 1999

____________

BETWEEN

　 PECONIC INDUSTRIAL DEVELOPMENT LIMITED 1st Plaintiff
　 　STAR GLORY INVESTMENT LIMITED 2nd Plaintiff
　 and
　 CHIO HO CHEONG (陳繼杰) alias
CHAN KAI KIT (陳繼杰) 		1st Defendant
　 ELSIE CHAN YIK-SZE 2nd Defendant
WONG HING HANG 3rd Defendant
LEUNG HIU LING 4th Defendant
WONG SHIU-WAI 5th Defendant
CHEN JUN-YI 6th Defendant

____________

HCA 3083/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3083 OF 2002

____________

BETWEEN

　 PECONIC INDUSTRIAL DEVELOPMENT LIMITED Plaintiff
　 and 　
　 LAU KWOK FAI 1st Defendant
　 ALBERT K K LUK & CO (A FIRM) 2nd Defendant
　 K F LAU & CO (A FIRM) 3rd Defendant

____________

(HEARD TOGETHER)

Before: Hon A Cheung J in Court

Dates of Hearing: 23-25 & 28-30 November, 1-2, 5-6, 8-9, 12-16 & 19-20 December 2005, and 9-13, 16-20 & 23-25 January, 10, 13, 15-17 & 28 February, 1-2 March 2006

Date of Judgment: 1 June 2006

_______________

J U D G M E N T

_______________

INDEX

TOPIC
INTRODUCTION
Peconic's acquisition of land in Mai Po
Peconic's case against Chio Ho Cheong
Default judgment against Chio
Peconic's case against Elsie Chan – Chio's girlfriend at the time
Peconic's case against Leung Hiu Ling – common law wife of Chio's brother
Peconic's case against Wong Shiu-wai – Elsie Chan's mother
Positions of Mickey Wong and Chen
Discovery of fraud and criminal prosecution
Peconic's case against Danny Lau – Elsie Chan's solicitor
Peconic's case against Albert K K Luk and K F Lau – Danny Lau's firms
Limitation defence
Defence of illegality – infringement of Mainland rules and regulations
Relief sought
CLAIM AGAINST CHIO
Representations made
Falsity of the representations
– Golf course –
– Taiwanese businessmen –
– Development potential –
– True ownership of Asiagreat –
– Role of middleman and huge price difference –
Chio's state of mind
– $185 per square foot –
– Poon Kam's role in Asiagreat –
– Golf course –
– Taiwanese businessmen –
– Development potential –
– Representees and reliance –
Conclusion on misrepresentations
Breach of fiduciary duty – making of secret profits
Chen: a co-conspirator or victim of misrepresentations?
Mickey Wong
CLAIM AGAINST ELSIE CHAN
Law on dishonest assistance
– Dishonesty as the sole criterion –
– Test of dishonesty –
– Extent of knowledge required –
Elsie Chan's evidence
Discussion
Findings of fact
Findings on dishonest assistance
Conspiracy
Unconscionable receipt
CLAIM AGAINST WONG SHIU-WAI
Essence of claim
Discussion
Findings on dishonest assistance
Conspiracy
Unconscionable receipt
CLAIM AGAINST LEUNG HIU LING
Basic facts
Leung's explanation
Leung's ICAC statement
Discussion
Findings on dishonest assistance
Conspiracy
Unconscionable receipt
CLAIM AGAINST DANNY LAU AND THE TWO SOLICITORS FIRMS
Danny Lau's evidence
Discussion
– Deed of indemnity by Chio and Elsie Chan to Poon Kam –
– Macau cheques –
– Solicitors' undertakings –
– The JSM offer –
– Knowledge of Chio's involvement behind Asiagreat's acquisition of the properties: further considerations –
– Knowledge of Chio's involvement in Peconic –
– Chio's and Elsie Chan's names “being everywhere” –
– Other considerations –
Findings on knowledge, dishonesty and other matters
– Knowledge –
– Dishonesty –
– “Blind eye dishonesty” –
– Timing –
– Causation –
– Secret reward? –
Conclusion on dishonest assistance
Vicarious liability of the two firms of solicitors
ILLEGALITY
The argument
Mainland rules and regulations
– Regulations on the Administration of Foreign Exchange Business of the Foreign Exchange Designated Banks (“the 1990 Regulations”) –
– Interim Regulations on Foreign Exchange Control (“the Interim Regulations”) –
– No. 62 Circular/Guo Fa 62 –
– Implementation Rules of the Administrative Measures regarding Foreign Exchange of Overseas Investments (“the Implementation Rules”), implementing the 1989 Administrative Measures on Foreign Exchange (“the 1989 Administrative Measures”) –
– Overseas Investment Opinion –
– 1989 Notice of the Opinion on the Issues relating to the Registration of Titles etc. and 1991 Regulations on the Handling of Notarization of Trust Agreements etc. –
– Financial Audit Rules –
Was the Guangdong Branch a mere moneylender or an investor/co-investor?
Breach of the Mainland rules and regulations
A side argument – Bank's awareness of falsity of Chio's representations
Is Peconic's claim affected by the Bank's illegality?
Illegality under foreign law
Is Peconic's claim so connected or inextricably bound up with the Bank's illegality that the Court could not permit Peconic to recover without appearing to condone that illegality?
The “public conscience” test
Conclusion
LIMITATION AND OTHER EQUITABLE DEFENCES
Parties' positions on limitation
Limitation Ordinance, ss. 4 & 20
Nub of the dispute – position of the dishonest assister
Paragon Finance – two classes of constructive trust
Importance of the distinction in terms of limitation
Directors as constructive trustees of the first category
Chio as constructive trustee of the first category
– Secret profits as constructive trust property –
– Confidential information and corporate opportunity as constructive trust “property”? –
– Gwembe Valley: a difficult case –
– On the facts, Chio is a constructive trustee of the first category –
But what about the limitation position of the dishonest assister?
Is the dishonest assister himself a constructive trustee of the first category?
Paragon Finance was not a case on a dishonest assister's limitation position
A question of statutory construction in light of the legislative history – section 8 of the 1888 Act
Section 19 of the 1939 Act and the “in respect of” argument
Limitation by analogy
Conclusion on the dishonest assister's limitation position
Statutory abolition of the distinction of two classes of constructive trust?
Positions of other Defendants
Postponement of limitation period
– Fraud –
– Deliberate concealment –
Conclusion on limitation defence
Laches, acquiescence and delay
QUANTUM
Valuation of the properties
Secret profits
OUTCOME

INTRODUCTION

Peconic's acquisition of land in Mai Po

1. Between October 1991 and January 1993, Peconic Industrial Development Limited (“Peconic”), the 1st Plaintiff in HCA 16255/1999 and the Plaintiff in HCA 3083/2002 (“the first action” and “the second action” respectively), acquired 32 contiguous agricultural lots in the Deep Bay area, at the north western corner of the New Territories (“the properties”). The properties fall within the Mai Po and Fairview Park district, which is dominated by mud flats, fish ponds and “gei wais” (intertidal shallow ponds for shrimp rearing). The properties comprise mainly fish ponds. They also include a three-storey village-type house erected on one of the lots as residence for a fish pond operator. The acquisition cost a sum of $515,211,914 in total purchase price. The total site area is approximately 2,672,634 square feet (or 248,293.76 square metres).

2. The original purpose of the purchase was the quick resale of the properties to some supposed Taiwanese buyers for a huge profit estimated at $200 million. When the anticipated resale did not materialise, Peconic tried to develop the properties into a golf course or a low-rise residential development. As to the latter option, it should be noted at the outset that right adjacent to the properties were (at the time of acquisition) two well known large scale low-rise residential developments, namely Fairview Park to the south, and Palm Springs (then under construction) at the south-eastern corner of the properties.

3. But the problem with Peconic's development intention was that the properties are located right next to the Mai Po Nature Reserve at Deep Bay, lying to the west of the properties. At its nearest point, the properties are just 100 metres from the Mai Po Nature Reserve.

4. According to government documents and indeed as is well known, the Mai Po Nature Reserve in Deep Bay is one of the world's most important nature reserves. It is internationally renowned as an extensive area of unaffected wetland habitats for many species of birds and mammals and is a stopover point for thousands of migratory birds. It is for this reason that the nature reserve has been zoned “Site of Special Scientific Interest” (SSSI)...

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