HK Council enters minibond fray

The Consumer Council for the first time will use its Consumer Legal Fund to help a Lehman Brothers minibond investor sue a bank to recover losses amounting to HK$500,000. Johannes Chan Man-mun, chair of the action fund, yesterday said the case has the potential to be used as a test case to clarify important legal principles and establish precedents for better consumer protection.

He said it was chosen as it involved four major factual and legal issues found in the buying of Lehman Brothers- related products.

"It involves misrepresentation, the exemption clause in the bank, inadequate disclosure of material facts, and the fiduciary relationship between the bank and its consumers."

He declined to disclose any details except that the case does not involve elderly people or the underprivileged.

Chan said they have to be very careful in bringing the case to court as public money is involved, but he is optimistic about the outcome.

He said the litigation might take 1 to two years before being heard at the High Court, and perhaps two years if it goes to the Court of Final Appeal.

Asked if the case will end up like 11 of the 82 applications for legal assistance that were withdrawn after the bank decided to settle, Chan said settlement would be a good thing for the consumer to get at least part of the money back.

The 11 applications were withdrawn after settlement that involved about HK$4.8 million.

He said litigation can begin as early as one or two months from now, as the investor had signed and returned an agreement with the Consumer Legal Action Fund yesterday.

The council up to last Friday received 11,229 complaints related to Lehman Brothers, with 624 out of 943 cases processed reaching settlement with the banks involving HK$217.8 million.

According to the council, the remaining 319 cases are unresolved as the banks have declined to settle.

The council was criticized for taking so long to process the applications after the collapse of the US firm in September last year.

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