Eugene Kwok of Prince’s Chambers was trial counsel for the 3rd Defendant in Macro Charm Ltd v Phoenix Nicaragua S.A. & Others [2022] HKCFI 1822.

The case concerned a contract to conduct logging operations in Nicaragua over forests affected by Hurricane Felix in 2007, entered into by the Plaintiff (a special purpose vehicle set up by a natural resources conglomerate) and the 1st and 2nd Defendants (both Nicaraguan companies). The contract envisaged that the 1st and 2nd Defendants would provide the Plaintiff with access and logging rights to 150,000 hectares of forest land belonging to indigenous landowners known as the “10 Communities”, who were said to have legal rights over a total 339,900 hectares of forest land. However, the Plaintiff alleged that the 10 Communities only had title to 31,958 hectares, and sued the 1st and 2nd Defendants for breach of contract.

The 3rd Defendant – who signed the contract on the 1st and 2nd Defendant’s behalf – was sued for fraudulent misrepresentation (or the tort of deceit). The Plaintiff alleged that the 3rd Defendant had fraudulently made false statements concerning, amongst other things, the extent of the 10 Communities’ land ownership rights.

Neither the 1st nor 2nd Defendant entered an appearance and default judgment was entered against them in 2012. The case proceeded to trial against the 3rd Defendant, which took place in September 2017. Judgment was handed down in June 2022.

There were a number of elements which the Plaintiff had to prove in its claim against the 3rd Defendant, including: (1) whether the 3rd Defendant had made the alleged statements (or representations) in question; (2) if so, whether they were false; (3) if so, whether he had made them fraudulently; (4) if so, whether the fraudulent misrepresentations had induced the Plaintiff into entering the contract; (5) if so, the loss or damage suffered by the Plaintiff as a result.

A number of factual and expert witnesses were called to testify on, amongst other things, who said what, the extent of the Plaintiff’s knowledge, and the 10 Communities’ land ownership rights under Nicaraguan law. Ultimately, however, much of the Plaintiff’s case came undone during cross examination of the Plaintiff’s sole factual witness, as he ended up accepting that it was possible that another person – rather than the 3rd Defendant – had made the alleged false statement which formed the crux of the Plaintiff’s case.

There were also a number of alleged misstatements said to have been made by the 3rd Defendant in email. However, the judge accepted that not all misstatements are actionable. For instance, where the circumstances are such that a certain amount of hyperbole in the description of goods, property or services would be expected such that a reasonable person would take such descriptions “with a large pinch of salt”. In this case, the judge did not consider any of the 3rd Defendant’s statements in his
emails to give rise to an actionable representation.