Poosaala Ram Prasad v. The Hongkong and Shanghai Banking Corporation Ltd

HCA 279/2021

[2021] HKCFI 2816

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 279 OF 2021

________________________

________________________

Before: Deputy High Court Judge Leung in Chambers

Date of Hearing: 13 September 2021

Date of Decision: 11 October 2021

________________________

DECISION

________________________

1.The plaintiff is an account holder of the defendant bank. For the defendant’s refusal to execute his telegraphic transfer (“TT”) instruction, the plaintiff commenced the present action to claim against the defendant for alleged loss. The defendant applied for and succeeded in having the claim struck out and the action dismissed before the master. The plaintiff now appeals.

Background

2.On 3 February 2021, the plaintiff submitted an application for TT of HK$79,800 from his Hong Kong dollar bank account to the account of one P Sathya Prakash held with the Central Bank of India in India (“the Indian Bank”).  According to the plaintiff, the TT was supposed to settle the legal fees necessary for the processing of his intended purchase of a landed property in India.  His deadline was 10 February 2021.  Because no transfer was done, the intended purchase was cancelled.

3.The plaintiff filed his claim herein for “deficiency of service”, “unprofessionalism” and “breach of trust” on the part of the defendant.  The amount claimed is US$3,500,000 or HK$27,125,000 which, the defendant reckons, is roughly the purchase price of the property that the plaintiff allegedly failed to buy.

4.By summons filed on 26 March 2021, the defendant applied to strike out the claim on the grounds that (i) it disclosed no reasonable cause of action; (ii) it was scandalous, frivolous or vexatious; and/or (iii) it was an abuse of the process of the court.

5.On 6 July 2021, after hearing, the master allowed the defendant’s application and struck out the claim with costs of the action (“the Strike-out Order”).

6.On 16 July 2021, the plaintiff filed notice of appeal against the Strike-out Order.  On the same day, the plaintiff filed another summons for stay of execution of the Strike-out Order.  This was dismissed by the master after hearing on 26 July 2021 (“the 26 July Order”).

7.On 9 August 2021, the plaintiff filed a summons for leave to adduce further evidence.  This was dismissed by the master after hearing on 16 August 2021 (“the 16 August Order”).

8.Yet on 19 August 2021, the plaintiff filed another summons for leave to adduce further evidence, which is returnable before this court (“the New Evidence Summons”).

9.During the present hearing, this court was alerted to the fact that the plaintiff filed yet another affirmation on 9 September 2021, exhibiting his written representation and numerous documents. That affirmation was yet to reach this court prior to the commencement of the hearing.  However, the document was considered when this decision was reserved.

The principles

10.An appeal from the master pursuant to O58, r1 of the Rules of the High Court, Cap 4A is conducted as a re-hearing of the application that led to the order of the master under challenge.  This refers to the Strike-out Order.  There is no appeal against the 26 July Order or the 16 August Order, and therefore the matters covered by these two orders are not before this court.

11.Insofar as the application to strike out is concerned, the principles are trite.  An order to strike out is made only in clear and obvious case: see Hong Kong Civil Procedure 2021 (Vol 1) (“HKCP”) at §18/19/4(1).

12.An application on the ground that the claim discloses no reasonable cause of action will be considered with reference to the pleaded claim but not the evidence: see O18, r19(2).

13.Evidence however is admissible for the purpose of an application on the other grounds under the rule.  Among these grounds, “frivolous” claim is one that is incapable of reasoned argument while “vexatious” claim is one that is oppressive or in lack of bona fide: see HKCP at §18/19/7.  Abuse of process cannot be defined exhaustively, but claim entirely without substance may constitute abuse: see HKCP at §18/19/9.

14.The principles governing an application for leave to admit new evidence in an appeal are equally trite.  The starting point is that no further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal except on special grounds: see O58, r1(5).

15.Special grounds for the purpose of O58, r1(5) have been held to encompass the three conditions laid down in Ladd v. Marshall [1954] 1 WLR 1489 (see HKCP at §58/1/3), which must all be satisfied, namely:

(1)  the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(2)  the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3)  the evidence must be such as is presumably to be believed, ie, it must be apparently credible, though it need not be incontrovertible.

The appeal

16.Essentially, the defendant contends that it was entitled to refuse, cancel or not execute the TT application, and that it did so for legitimate reason.  Further, the plaintiff’s claim for the alleged loss is legally unsound.  In any event, the defendant was contractually exempted from liability for the alleged loss claimed by the plaintiff.

17.In view of the evidence, there is, and could be, no real dispute that the customer-bank relationship between the parties was at the material time governed by the Integrated Account Terms and Conditions as of May 2020 (“The IA Terms”) when the plaintiff opened his accounts.  The IA Terms contained, amongst others, the following provisions:

Clause 1.4.2(b)

“We [ie the defendant] have the right to accept or refuse any Instruction or to prescribe any condition for accepting an Instruction without giving any reason and we are not liable for any loss, cost or damage of any kind incurred or suffered by you as a result. We are entitled to act in accordance with our regular business practice and procedure and will only accept Instructions insofar as it is (in our reasonable opinion) practicable and reasonable to do so.”

Clause 1.4.5(b)

“An Instruction (or part of it) may not be executed. We may at our discretion cancel any Instruction (or any part of it) that has not yet been fully executed if, in our reasonable opinion, there are grounds for cancellation.”

Clause 2.7.10(i)

“A funds transfer Instruction is subject to the following (or any of them):

(i) the cut-off time of the place where payment is to be received;

(ii) the funding arrangement requirements of the settlement banks; and

(iii) the availability of the relevant services.  This may include the availability of the clearing system of the applicable currency or the location of the correspondent or beneficiary bank or the Participant.”

18.The evidence shows that the plaintiff’s TT application on 3 February 2021 requested for transmission of Hong Kong dollars from his bank account to the recipient account with the Indian Bank. Discovering that the TT instruction could not be processed due to the lack of an existing arrangement enabling Hong Kong dollars to be remitted out to the Indian Bank, the defendant did not, as it could not, proceed with the instruction.  Pursuant to the IA Terms mentioned above, the defendant was entitled to do so.

19.The defendant produced evidence that notice of the defendant’s refusal to proceed with the TT instruction of the plaintiff was given to the plaintiff by letter generated by the defendant’s computer on 5 February 2021.  The defendant says that the letter so generated was sent to the address of the plaintiff last known to the defendant, and the defendant does not keep copy of the actual form of such kind of letters so sent[1].  However, a screen snapshot of the defendant’s computer system interface showing the letter generated by the system template for the plaintiff on that date was produced.

20.There is dispute as to whether the plaintiff received the letter.  However, the defendant contends that in any event, the IA Terms mentioned above contractually did not require the defendant to give reason for refusing to execute the instruction.

21.The plaintiff argues to the contrary.  He refers to what was printed at the bottom of his TT application form which read:

“This receipt is issued only to facilitate the customer to enquire the transaction status and should not be regarded as transaction completion proof. An official debit advice will be sent to your/your company’s correspondence address at the Bank’s record by mail the next working day after the transaction is completed.”

22.The above provision in the standard TT application form is not relevant.  It was silent on the obligation or expectation of notification by the defendant where the transaction was not completed.  On the contrary, it referred to notification in case of completion of the transaction.  In the interim, the customer might enquire the transaction status after the submission of the application.  In the present case, and putting aside the actual practice of the defendant in issuing written notice of refusal or cancellation of a TT instruction, the plaintiff received no official debit advice in respect of completion of the TT after the submission of his application on 3 February.  He had days to make enquiries, if he so wished, before his personal deadline of 10 February fell.

23.The above circumstances aside, the defendant’s contention that the claim is in any event legally bad is not without basis.  The basis for the plaintiff’s claim is that the defendant failed to execute his TT instruction and further failed to inform him of the outcome of his application.  As a result, he lost the deal or the opportunity to purchase the property and his reputation.  Assuming for argument’s purpose that the defendant is liable as alleged, and that the plaintiff would have duly paid for and completed the purchase, but for the defendant’s fault, one would understand the plaintiff’s loss to have taken the form of loss of the capital gain from the purchase of the property if concluded as planned.  That would have been the difference in value of property between the time of purchase and now, assuming a rising local property market.

24.However, the plaintiff did not assert loss in such form.  What he could not do, as indeed what he did, was to claim for the price of the property, as if it had been fully paid by him and now lost.  Even according to him, the plaintiff has only made advance payments of a small fraction of the purchase price.  A claim framed this way was bad in law, and in that sense disclosed no reasonable cause of action just by considering the pleading.

25.In any event, irrespective of how he framed his claim, the defendant was indeed protected by the exemption of liability provision under the IA Terms mentioned above.  Pursing a claim, notwithstanding such terms indisputably binding on the plaintiff, would also be frivolous.

26.The alleged “deficiency of service” and “unprofessionalism” in the pleading may at their highest be understood to be complaint that the quality of the defendant’s service fell short of the customer’s reasonable expectation, whether considered in isolation or in comparison with other institutions in the banking industry.  That however is not to be equated with legal liability which was at the material times governed by contractual terms binding on the parties.  As to the alleged “breach of trust”, the allegations and evidence fail to make out such a cause of action properly understood under the applicable law either.

27.In the circumstances, I would come to the same conclusion as that of the master that the claim is liable to be struck out and the action be dismissed.

The New Evidence Summons

28.It is not surprising for the master to dismiss the plaintiff’s previous application to adduce further evidence, and hence the 16 August Order, because his affirmation in support of that contained a mere one-line statement of his intention to adduce further evidence without specifying or exhibiting what such further evidence was.

29.Now in support of the New Evidence Summons, the plaintiff relies on his affirmation filed on 19 August 2021 in support, which exhibited his written representation and the documents proposed to be adduced. The defendant fairly summarised such further evidence into the following categories:

(1)  letter from the defendant’s branch operations & control manager to the plaintiff dated 29 July 2021 and various application forms and letters of the defendant;

(2)  handwritten note in Chinese;

(3)  various application forms of and letters from other banks, namely Hang Seng Bank, Bank of China (Hong Kong)and Standard Chartered Bank; and

(4)  documents and correspondence in relation to what is said to be the landed property in India that the plaintiff intended to purchase.

30.Category (1) above consists of documents relating to another TT application of the plaintiff to the defendant for remittance of Hong Kong dollars from his bank account to the Indian Bank.  The plaintiff apparently placed the application on 7 July 2021, ie on the day following the Strike-out Order.  They therefore came into existence subsequent to the hearing before the master.

31.If this was a conscious attempt by the plaintiff to test the TT application with a view to contradicting the defendant’s case, the result turned out to be contrary to what he might hope for.  As with the TT application in question, the 7 July application was likewise rejected by the defendant for the reason that there was no existing arrangement enabling Hong Kong Dollar to be withdrawn from his bank account for outward TT to the Indian Bank.  Further, such reason was provided in the defendant’s subsequent letters to the plaintiff that were exhibited.  Those letters were actually in line with the defendant’s explanation in respect of the issuance and form of such kind of letters generated by its computer system template mentioned above.

32.The plaintiff refers to the defendant’s explanation by letter dated 29 July 2021 in response to his complaint.  Amongst others, the defendant explained that there were TT options for the plaintiff’s purpose.  However, where Hong Kong dollar was specified as the remittance currency, the instruction could not be proceeded with.  There is no basis for suggesting that the defendant as the bank might or should then proceed to other option at its initiative with the customer’s instruction.  In other words, there is no basis for attributing liability to the defendant for not turning to other option.

33.The plaintiff refers to the defendant’s explanation by the same letter that where a TT payment was unsuccessful, the funds remitted out would be returned in the foreign currency, which would then have to be converted back to Hong Kong currency.  As a result, there would be exchange difference.  However, the TT in February 2021 was aborted when there was no corresponding arrangement whereby Hong Kong dollars could be remitted from the plaintiff’s account to the Indian Bank as such.  There was no actual withdrawal from the plaintiff’s account and remittance to the Indian Bank. Hence no question of return of remitted money in the foreign currency, its conversion back to Hong Kong currency or the incidental exchange difference.  In other words, no material point can be made out of the reference to the remittance and return or the exchange difference, as the plaintiff might wish.

34.These documents could not have important influence on the outcome of this case for the purpose of the Ladd v Marshall test.

35.The document under category (2) above contained handwriting in Chinese on what appears to be a notepad sheet of the defendant.  It is undated and unsigned. Nor does it show when and how this came about and by whom. Apart from denial, the defendant is not fairly expected to be in a position to investigate in this respect to enable it to be fairly put in issue before the court.  More materially, the evidence does not explain how this document could not have reasonably been obtained or placed before the master.  Hence failure to satisfy condition (1) under Ladd v Marshall mentioned above.

36.Category (3) above suffers from handicap in terms of relevance.  If those documents may tend to demonstrate that a TT instruction like that in the present case would be or would have been processed by other banks in Hong Kong, they do not therefore become relevant to the present dispute between the parties.  Different banks have their own terms of dealings and practice with their customers as well as their banking counterparts in respect of TT.  Such terms and dealings concerning the other banks cast no light on the terms that actually bound the plaintiff and the defendant.

37.Category (4) above consists of documents in relation to the alleged landed property deal that the plaintiff would allegedly have concluded.  They apparently existed prior to the hearing before the master and, with reasonable diligence, would have been expected to made available then for the purpose of substantiating the plaintiff’s alleged loss.  The defendant did not have to dispute the existence of the plaintiff’s intended property deal in India or his advanced payments made.  In view of the discussion above in respect of the problems with the plaintiff’s claim, these documents would not have important, let alone decisive, influence on the viability of his claim for the loss that he alleges, and thus the outcome of the striking-out application.

38.Last, none of the categories of the proposed new evidence would address the defence on the ground of exemption of liability of the defendant by contractual terms binding on the parties.

39.In short, none of the categories of documentary evidence that the plaintiff now seeks to adduce satisfies all three conditions under the Ladd v. Marshall test.

The further affirmation filed on 9 September 2021

40.As to the further affirmation filed by the plaintiff on 9 September 2021, there was no justification for the plaintiff to break up his affirmation evidence in support of the New Evidence Summons into instalments, particularly when the affirmation in support was first filed 3 weeks before (on 19 August 2021).  Whilst the defendant complains about the unfairness to it having to deal with such newly filed affirmation in short notice, it did not therefore seek an adjournment.  I therefore also consider it.

41.It is noted that most, if not all, the documents sought to be adduced by the plaintiff’s latest affirmation are repetition of those under his previous affirmation filed on 19 August 2021.  Insofar as the documents falling into the categories of documents mentioned above are concerned, the plaintiff fails to satisfy the pre-conditions for them to be adduced as discussed.

42.By such latest affirmation, the plaintiff also refers to various provisions of the Evidence Ordinance, Cap 8 apparently for questioning the admissibility of the screen snapshot of the defendant’s computer system interface that shows the system template that generated its notice of the refusal to proceed with the plaintiff’s TT instruction in February 2021.  Suffice to say that there is no merit in such challenge in law.

43.The plaintiff also complains about violation of the Code of Banking Practice issued by the Hong Kong Monetary Authority on the part of the defendant.  It appears that the plaintiff seeks to rely on what he says is section 40.2 of the Code, which allegedly says that institutions should promptly notify the customer in the event that an outgoing cross-border payment could not be effected.  He argues that the IA Terms in this respect violated the Code.  However, insofar as the defendant’s legal liability is concerned, the plaintiff does not come close to making out a case that the alleged violation of such provision of the Code affords the plaintiff with an actionable civil cause for damages against the defendant.

44.In terms of relevance and impact on the outcome of the striking-out application under Ladd v Marshall, the attempt of the plaintiff to adduce further evidence by his latest affirmation filed on 9 September 2021, in my judgment, suffers the same fate as that of his earlier affirmation filed on 19 August 2021.

Conclusion

45.Considering all the materials, and for reasons including those discussed above, the New Evidence Summons is dismissed.  So is the appeal against the Striking-out Order.

Costs

46.Subject to the outcome of the present hearing, the plaintiff was heard on the questions of liability for the costs of and occasioned by these application and appeal as well as the quantum of costs claimed by the defendant as per its statement of costs submitted in advance of this hearing.  Following this event, there is no reason why the plaintiff should not be ordered to pay costs.

47.The defendant seeks costs on an indemnity basis.  It relies on clause 1.14 of the IA Terms:

“1.14.1 Except as set out in Clause 1.14.2, you will indemnify and reimburse (i) us, (ii) our agents and nominees, and (iii) our officers and employees and that of our agents or nominees for all actions, proceedings and claims which may be brought by or against us or them, and for all losses, damages and reasonable costs and expenses which we or they may incur or suffer as a result of or in connection with the following (or any of them):

(a) your use of the Services or our providing the Services to you, maintaining the Accounts for you, or effecting any transactions for or with you;

(b) our decision not to process any Instruction or our delay or failure to act on an Instruction in part or in full for any reason;

(c) any fluctuation in the price of the relevant asset between the time we receive an Instruction and the time we act on it;

(d) any default by you in performing your obligations under these Terms and Conditions…;

(e) the preservation or enforcement of our rights or exercise of our powers in connection with the Services and the Accounts; and

(f) your failure to provide complete, accurate and up-to-date information requested by us ….

This indemnity shall continue after the termination of the Service, the Accounts or these Terms and Conditions.

1.14.2  If it is proved that any actions, proceedings, claims, losses, damages or amounts set out in Clause 1.14.1 was caused by negligence or wilful default of (i) ours, (ii) our agents or nominees, or (iii) our officers or employees or that of our agents or nominees, then you are not liable under Clause 1.14.1 to the extent that it is direct and reasonably foreseeable arising directly and solely from such negligence or wilful default.”

48.The above sub-clauses of Clause 1.14, read together and in context, seem to cover situations where the defendant (or its agents, nominees, officers or employees) came to suffer loss and damage or incur expenses and costs in connection with or as a result of its provision of service to the plaintiff, including costs occasioned by legal action by or against the defendant.  It may be arguable if such indemnity or reimbursement applies to the defendant’s costs for defending the plaintiff’s action against it for breach in rendering such services.  That said, I do not need to rule on this.  Adopting a broad-brush approach in summary assessment, I come to the view that the statement of costs submitted by the defendant is on the whole reasonable even on a party and party basis.  I therefore order and summarily assess the costs of and occasioned by the appeal and the New Evidence Summons at a sum of HK$48,000 to be payable by the plaintiff forthwith.

The plaintiff appeared in person

Mr Peter So, of Deacons, for the defendant