Yinggao Resources Ltd and Another v. The Hongkong and Shanghai Banking Corporation Ltd
Read the full judgment text of CAMP 94/2023 on BabelCite. This Court of Appeal judgment was delivered on 6 December 2024.
1. In February 2015, the plaintiffs commenced the proceedings below against the defendant for breach of bank mandates and negligence, seeking damages in the sum of US$43.5 million. More than 6 years later, in August 2021, they applied to re-amend their amended statement of claim by, inter alia , adding a new paragraph 49 (“Para 49”). Para 49 sought to raise a new claim based on the plaintiffs’ loss of opportunities to invest in certain gold mines in the Mainland which they suffered as a result
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CAMP 94/2023, [2024] HKCA 1130 On an intended appeal from [2022] HKCFI 3597 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL MISCELLANEOUS PROCEEDINGS NO 94 OF 2023 (ON AN INTENDED APPEAL FROM HCA 329 OF 2015) ________________________ BETWEEN
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________________________ D E C I S I O N ________________________ The Court: A. Introduction 1.In February 2015, the plaintiffs commenced the proceedings below against the defendant for breach of bank mandates and negligence, seeking damages in the sum of US$43.5 million. More than 6 years later, in August 2021, they applied to re-amend their amended statement of claim by, inter alia, adding a new paragraph 49 (“Para 49”). Para 49 sought to raise a new claim based on the plaintiffs’ loss of opportunities to invest in certain gold mines in the Mainland which they suffered as a result of the defendant’s same breach of mandates and negligence. The application was allowed by the master. 2.By a judgment dated 7 December 2022.[1] Peter Ng J (“the Judge”) allowed the defendant’s appeal and refused the plaintiffs’ application to add Para 49 to its pleadings. The Judge also dismissed the plaintiffs’ subsequent application for leave to appeal, holding that since Para 49 raised new issues, his order fell within the ambit of Order 59, rule 21(2)(i) of the Rules of the High Court,[2] which entitled the plaintiffs to appeal as of right pursuant to rule 21(1)(a) of the same Order. In any event, the Judge indicated that he would dismiss the leave application on merits. 3.The plaintiffs now apply to this Court for extension of time to appeal, which the defendant opposes. The plaintiffs filed an affirmation of their manager, Ms Chun Yuet Ming Jessica, dated 2 March 2023, to explain the delay in taking out the present application. 4.By two letters dated 26 September and 12 October 2023, Mr Chin Kam Chiu (“Mr Chin”), a director of the plaintiffs, who claimed to be their authorized representative, asked the court to postpone the determination of the present application for a number of reasons. However, Mr Chin has not obtained any leave from the court to represent the plaintiffs. Moreover, on the court’s record, the plaintiffs are still represented by Messrs Tung, Ng, Tse & Lam, who as their solicitors have the sole conduct of these proceedings. In the circumstances, we will not entertain Mr Chin’s two letters. 5.Having considered the parties’ written submissions, we take the view that the application can be properly dealt with on paper without an oral hearing under Order 59, rule 2A of the Rules of the High Court. We now hand down our decision. B. The parties’ pleaded case B1. The plaintiffs’ case 6.The plaintiffs’ pleaded case in the amended statement of claim is straightforward, which may be outlined as follows. 7.The 1st plaintiff is a Hong Kong company trading in metal products. The 2nd plaintiff is a BVI company, which is wholly owned by Winko Foundation Limited (“Winko”). The plaintiffs had been the defendant’s customers since 2010 and 2011/2012 respectively. 8.The plaintiffs held respective USD Accounts and HKD Accounts with the defendant pursuant to a written mandate governing their relationship as bank customers (“the Mandate”), including the defendant’s obligations to comply with the directions given in respect of the accounts on behalf of the plaintiffs. Implied in the Mandate were terms that (1) the defendants would exercise all reasonable skills and care and/or use its best endeavor in the execution of the plaintiffs’ orders; and (2) the defendant would have the plaintiffs’ best interest in mind and render such assistance as might be necessary to achieve the purpose and effect of the Mandate. 9.The plaintiffs’ claims arose out of two sums of HK$26 million and US2.24 million (“the Sums” collectively”). 10.On 17 January 2012, the 1st plaintiff remitted the Sums to the accounts of ECO Metal (Hong Kong) Limited (“ECO”) with Citibank. ECO subsequently tried to transfer the Sums back to the 1st plaintiff whereupon Citibank refused to execute that instruction on the ground that the former’s accounts were restrained by the Customs and Excise Department (“C&E”) when no restraint order was issued. Legal proceedings then ensued.[3] Following the judgment of the Court of Appeal on 25 September 2014 (“the CA Judgment”), the Sums were remitted from ECO’s accounts with Citibank to the 1st plaintiff’s accounts with the defendant on 25 and 26 November 2014. 11.In anticipation of the remittance of the Sums, the 1st plaintiff on 30 October and 21 November 2014 entered into two sale and purchase contracts with Midas Connective Trading Inc (“Midas”) for the purchase of certain quantity of No.1 Scrap Copper (“the Midas Contracts); and the 2nd plaintiff shortly thereafter entered into two back-to-back sale and purchase contracts with Guandong Hongsen Group Co Ltd (“Hongsen”) for sale of the same quantity of copper to Hongsen, with the 1st plaintiff as guarantor (“the Hongsen Contracts”). The plaintiffs intended to honour their payment obligations under those Contracts by the Sums remitted to the 1st plaintiff’s accounts with the defendant as aforesaid. Instructions were given by the plaintiffs’ representatives to the defendant on 28 November 2014, to transfer to Sums out of the 1st plaintiff’s accounts to the named transferee. However, the defendant did not carry out those instructions, which constituted a breach of the Mandate and/or a breach of duty of care. The plaintiffs gave repeated instructions to the defendant on 3 and 22 December 2014 for the transfer which were to no avail. 12.Consequently, the plaintiffs were unable to advance any payment to Midas for the sale of the copper under the Midas Contracts on or before 30 November and to deliver the same to Hongsen on or before 20 December 2014 under the Hongsen Contracts. Both Midas and Hongsen accepted the plaintiffs’ repudiation of those contracts and demanded compensation. In turn, the plaintiffs claimed against the defendant a total sum in the region of US$43 million, being the compensation they had to pay Midas and Hongsen and the profits that they would have made under the sale and purchase contracts in connection with the copper. B2. The defendant’s case 13.The defendant’s case is that it had received a letter of no consent from C&E on 25 November 2014 that the funds in the 1st plaintiff’s accounts were believed to represent proceeds of an indictable offence; and that it reasonably believed that any dealings in the Sums would constitute an offence under section 25(1) of the Organized and Serious Crimes Ordinance (“OSCO”).[4] As a result, the defendant was not to allow any transfers out of the 1st plaintiff’s accounts. 14.On 16 March 2015, a restraint order was granted prohibiting the 1st plaintiff from dealing with the funds in its accounts with the defendant. C. The new claims raised by Para 49 15.Para 49 is a lengthy plea consisting of 14 sub-paragraphs. As observed by the Judge, it is convoluted and difficult to understand.[5] It sought to raise a new case against the defendant based on an “unlawful deprivation of a mine owner’s rights in respect of his ownership title in accordance with the law” thus:
16.For present purposes, we highlight the more pertinent events chronologically based on the Judge’s summary of the new pleaded case supplemented by the supporting evidence as follows:[6]
17.Relevantly, to finance Winko’s payment of RMB200 million to Xu, Winko entered into an arrangement with Hongsen whereby Hongsen would obtain a RMB200 million loan from banks in the Mainland on condition that Winko would provide a RMB20 million deposit; and Hongsen would use part of the purchase price payable under the Hongsen Contracts as such deposit (“the Special Arrangement”). However, because of the defendant’s breach of the Mandate and/or duty of care, the Midas Contracts and the Hongsen Contracts could not be completed and the Special Arrangement could not be performed. Consequently, Winko failed to fulfil its payment obligations under the Gold Mining Supplemental Agreement 2, resulting in the loss of the gold mining rights with an estimated asset value of more than RMB34 million. D. The Judge’s reasons 18.The Judge refused to give leave to the plaintiffs to add Para 49 because the new claim was bound to fail on lack of causation[9] and remoteness.[10] 19.On remoteness, the Judge first set out the well-established legal principles.[11] He went on to observe that the issue of causation does not necessarily have to be determined at trial as long as the facts are sufficiently clear to enable the court to make a proper determination of it: Galoo Ltd and Others v Bright Grahame Murray (a firm) and Another [1994] 1 WLR 1360 (CA) and Mulvenna v Royal Bank of Scotland Plc [2003] EWCA Civ 1112.[12] After going through the facts relied on by the plaintiffs,[13] he pointed out that the plaintiffs knew of the defendant’s breach on 28 November 2014 and the reasons for it. The plaintiffs had no grounds at all to believe that the Sums could be released to kick start the Special Arrangement, insofar as it actually required the 1st plaintiff/Winko to fork out RMB20 million, and to perform the other obligations under the Gold Mining Supplemental Agreement 2. He accepted that it might be normal and reasonable for the 1st plaintiff to seek from Xu extension of time for Winko’s performance of its various obligations under the Gold Mining Agreement; and that it was understandable that that the 1st plaintiff wished to rescue the gold mining investment. However, it did not mean that Winko should enter into the Gold Mining Supplemental Agreement 2 when it had no grounds to believe that the Sums could be released soon or that it could actually pay its capital contribution of RMB280 million by 30 January 2015. The Judge held that in the circumstances it was wholly unreasonable, verging on recklessness, for the 1st plaintiff/Winko to enter into the Gold Mining Supplement Agreement 2. The chain of causation had therefore been broken by the 1st plaintiff.[14] 20.On remoteness, the Judge first summarized the law on remoteness relevant to the present case.[15] Applying the law to the present case, the Judge held that the second limb of Hadley & Another v Baxendale & Others (1854) 9 Ex 341, 156 ER 145 was not engaged. Indeed, as indicated by the plaintiffs’ counsel, they principally, if not exclusively, relied on the first limb of Hadley v Baxendale.[16] Such a concession was clearly rightly made. For the plaintiffs were not alleging that defendant was ever aware of the Gold Mining Agreement or the Gold Mining Supplemental Agreement 2 at all.[17] Further, the defendant’s knowledge of the general nature of the plaintiffs’ trading operations and the general consequence of its breach of the Mandate could not possibly be translated into actual knowledge of the special circumstances giving rise to damage, that is, the loss of the exploiting and operating rights of the gold mine. 21.Next, the Judge held that the first limb of Hadley v Baxendale did not apply either for the simple reason that there was no way that the defendant’s failure to comply with the transfer instructions resulting in the loss of the exploitation rights of the gold mine, through the Special Arrangement, might fairly and reasonably be considered as arising naturally, that is, according to the usual course of things and that the knowledge of such loss could be imputed to the defendant.[18] 22.Lastly, the Judge held that there was no basis to suggest that the defendant had assumed responsibility for the plaintiffs’ losses under the Gold Mining Agreement or the Gold Mining Supplemental Agreement 2 when there was no plea or evidence that the defendant knew of the plaintiffs’ involvement in the gold mine business in the Mainland or the existence of the two Agreements. Again, the plaintiffs’ counsel did not seek to rely on the assumption of responsibility based on the defendant’s knowledge of special facts.[19] E. Discussion 23.The Court’s approach to an application to extend the time for appeal is well settled. In the exercise of its discretion, the Court will take into account the length of the delay, the reasons for the delay, the chances of the appeal succeeding if an extension of time is granted, and the degree of prejudice to the other party of the application is granted. Where the delay is substantial and not wholly excusable, the applicant must show a real prospect of success on the merits, not merely a reasonable prospect of success. See Progetto Jewellery Co Ltd v Lau Chiu Ying [2022] 2 HKLRD 845, per Lam VP (as he then was) at [6]. E1. Length of delay 24.Here, the time for filing the appeal expired on 21 December 2022 and the present application was taken out on 2 March 2023. So there was a delay of more than 2 months. Ms Tanie Toh, counsel for the plaintiffs,[20] accepts, rightly in our view, that the delay cannot be said to be insubstantial. E2. Reasons for delay 25.Plainly, the delay is occasioned by the time taken to bring the wholly misconceived application for leave to appeal before the Judge, which according to the plaintiffs was based on the erroneous advice of their former solicitors. There is however no explanation from the solicitors why they would so advise the plaintiffs in light of clear terms of section 14AA(1) of the High Court Ordinance[21] and Order 59, rule 21(1)(a) and (2)(i) of the Rules of the High Court. Ms Toh asserts that such an explanation is unnecessary. Further, she argues that their intention to appeal was evident from the outset and the defendant did not raise any issue of “leave” until their written submissions before the Judge. She relies on Gatti v Shoosmith [1939] Ch 841 in support. Lastly, counsel contends that there is no prejudice to the defendant. With respect, we disagree. 26.In Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & ANOR [2001] 1 HKC 125, this Court (differently constituted) held that the absence of any explanation of how the solicitors acting for the applicant had formed a wrong view on the applicable rule on the time for appeal made the solicitors’ conduct inexcusable. The same applies here with full force. 27.Ms Toh’s reliance on Gatti v Shoosmith is misplaced as it is distinguishable on the facts. There, the English Court of Appeal extended the time for appeal without considering the merits because the delay only involved a few days; the appellant’s solicitors had informed the respondent’s their intention to appeal within time; and the reasons for the delay was “a mere misunderstanding, deposed to on affidavit by the managing clerk of the appellant’s solicitors – a misunderstanding which, to anyone who was reading the rule without having the authorities in mind, might very well have arisen”: p.846. In other words, there was explanation for the delay, which the Court seemed to have accepted to be self-explanatory anyway. Here, the delay is not insubstantial. The effect of the relevant provisions in Order 59, rule 21 are plain and obvious: no leave to appeal is required. Any contrary view is unsupportable and cries for a cogent explanation. The indication of the intention to appeal did not assist the plaintiffs because when it is objectively understood with the rules in mind, it could not have meant that the plaintiffs’ former solicitors were going to take out a leave application. The solicitors’ mistake was inexplicable on the facts and remains unexplained, which makes their conduct inexcusable. 28.On prejudice, as again held in Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd, while the existence of prejudice to a would-be respondent is a ground for refusing an extension of time, the converse is not true. The absence of prejudice to a would-be respondent is not a ground for extending time. 29.In the circumstances, the plaintiffs must show a real prospect of success on their appeal. This brings us to the merits of their case. E3. Merits of the appeal 30.The plaintiffs raised three grounds of appeal. The first concerns the Judge’s ruling on lack of causation; the second and third, his ruling on remoteness. E3.1 Lack of causation 31.Ms Toh complains that the Judge erred in his analysis of the issue of causation. She harks back to the CA Judgment, because of which the plaintiffs expected to be able to use the Sums (a) in connection with the Midas Contracts and the Hongsen Contracts; and by extension, to support Winko’s payment obligations under the Gold Mining Supplemental Agreement 2. The plaintiffs were given to understand that C&E had no objection to the Sums being dealt with as the court might think appropriate. It was thus reasonable for the plaintiff to believe that C&E did not suspect or no longer suspected the Sums to represent proceeds of crime. After referring to the correspondence between the plaintiffs and the defendant on 1 and 8 December 2014, Ms Toh submits that there is evidence to show that the plaintiffs reasonably believed that they were able to show to the defendant that the Sums were not proceeds of crime; and that it had no reason to freeze the Sums but should follow their instructions for transfer instead. It is thus reasonably arguable that the Judge made an erroneous assumption the plaintiffs must have accepted the defendant’s case that it was unable to execute their instructions to transfer the Sums and the reasons for it; and that entering into the Gold Mining Supplemental Agreement 2 without grounds to believe that the Sums could be released on time constituted a novus actus intervenes. It is also reasonably argue that the Judge failed to take into account the plaintiffs’ genuine belief that, following the CA Judgment, the Sums did not represent proceeds of crime and that the defendant should have executed the transfer instructions. 32.It is trite that a claimant may recover damages for loss only when the breach of contract was the effective or dominant cause of that loss: Chitty on Contracts, 35th Edition, Vol 1, §30-075 at p.2277. And there may be a break in the chain of causation where the claimant, following the defendant’s breach of contract, has suffered loss through his own voluntary act or omission even though the loss was not a kind that was unforeseeable, so that it was not too remote: Chitty on Contracts, §30-080 at p.2279. A helpful summary of the general principles can be found in Gross LJ’s judgment in Borealis AB v Geogas Trading SA [2010] EWHC 2789 at [43] – [47]. 33.Here, the central issue is whether on the plaintiffs’ pleaded case, as augmented by the evidence filed in support, it was reasonable in the circumstances for the 1st plaintiff/Winko to enter into the Gold Mining Supplemental Agreement 2 and the Special Arrangement with Hongsen. This in turn depends on whether it was reasonable for the plaintiffs to believe that the Sums could be released as per their instructions to enable them to fulfil their obligations under the Gold Mining Supplemental Agreement 2 and the Special Arrangement. In our view, the answer is clearly “no”. 34.First, the following facts distilled from the chronology of events set out above are beyond dispute. Before the Gold Mining Supplemental Agreement and the Special Arrangement were entered into on 16 December 2014:
35.Viewed against such factual circumstances objectively, the plaintiffs’ assertion that they reasonably believed that the defendant would execute the transfer instructions when the 1st plaintiff/Winko entered into the Gold Mining Supplemental Agreement 2 and the Special Arrangement is contrary to common sense and difficult to accept. 36.Second, such assertion does not sit well with the plaintiffs’ own pleaded case at [42] of the amended statement of claim. There, it is pleaded that in view of the defendant’s unlawful restraint of the 1st plaintiff’s accounts and unlawful deprivation of the Sums, the 1st plaintiff took steps to mitigate the potential loss in the Midas Contracts and tried to arrange payment through different methods by a letter to Midas dated 16 December 2014 and another letter to Hongsen dated 18 December 2014 but to no avail. Implicit in such a mitigation plea must be the plaintiffs’ belief that the defendant would not execute the transfer instructions, contrary to their contention in support of Para 49. 37.For the above reasons, we agree with the Judge’s ruling on causation. E3.2 Remoteness 38.Ms Toh submits that the Judge erred in ruling that the loss sought in Para 49 was too remote, because on proper analysis the first limb of Hadley v Baxendale does not preclude the possibility of special, in particular, long term, transactions with such terms or nature that certain types of uncommonly seen damages may result from the breach. She cited National Australia Bank Ltd v Nemur Varity Pty Ltd [2002] VSCA 18, at [49], an Australian case in support. In the present case, the defendant accepts that the plaintiffs’ accounts were business accounts. It is necessary to consider the reasonably arguability of Para 49 on the basis that the Gold Mining Supplemental Agreement 2 did provide for the method of arranging finance to acquire the exploration rights of the gold mine as pleaded. Since the anticipated RMB200 million flowed directly from the completion of the Midas and Hongsen Contracts, it is reasonably arguable that the Judge erred in ruling that the loss of the exploration rights could not be something which might fairly and reasonably be considered as arising naturally according to the usual course of things between the defendant and the plaintiffs. We disagree. 39.First, as noted by the Judge, the binding authority on the subject in this jurisdiction is the Court of Final Appeal’s judgment in Richly Bright International Ltd v De Monsa Investments Ltd (2015) 18 HKCFAR 232. The Australian authority is of little assistance. 40.Second, contrary to Ms Toh’s complaint, the Judge did have in mind the banking relationship between the parties.[22] 41.Third, in Richly Bright International Ltd v De Monsa Investments Ltd, the Court of Final Appeal at [15] – [23] held that the objective of an award of damages for breach of contract is to place the innocent party, so far as a monetary award could do, in the same position as if the contract had been performed. Both limbs of the rule in Hadley v Baxendale are the practical expression of a single principle that parties should only be liable for damages which were within their contemplation at the time they contracted. The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realized that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation. 42.Applying those principles pertinent to the issue of remoteness at hand, we entirely agree with the Judge’s views on the first limb of the rule in Hadley v Baxendale. There is nothing in the pleadings or the evidence that the information available to the defendant when the parties entered into the bank/client relationship in 2010 and 2011, to suggest that the loss of the exploration rights arising from the inability to implement the Special Arrangement would be properly considered as loss flowing naturally from the breach of the Mandate. 43.Lastly, on remoteness, the plaintiffs assert that the Judge failed to take into account section 94 of the Banking Ordinance[23] and article 105 of the Basic Law. However, Ms Toh makes no submission on either provision. In any event, there is no merit in such assertion. As to section 94, it is not pleaded in the proposed re-amendment. It is further a new point not argued before the Judge. As such, raising it on appeal is objectionable: Flywin Co Ltd v Strong Associates Ltd (2002) 5 HKCFAR 356. As to article 105, the master had already ruled that it is not applicable to the present case. The plaintiffs did not take issue on that point on appeal before the Judge which must mean that they no longer wished to pursue it. It is impermissible to do so now before us. E4. Conclusion 44.In conclusion, the grounds of appeal are wholly unmeritorious. There is simply no prospect of success in the intended appeal. F. Dispositions 45.Accordingly, we dismiss the plaintiffs’ leave application with costs, summarily assessed at HK$200,000.00. 46.As the application is totally without merit, we further make an order under Order 59 rule 2A(8) of the Rules of the High Court that no party may request our determination to be reconsidered at an oral hearing inter partes.
Written Submissions by Ms Tanie Toh and Mr Thomas Yeon, instructed by Tung, Ng, Tse & Lam, for the 1st and 2nd plaintiffs Written Submissions by Ms Eva Sit SC and Mr Brian Lee, instructed by Mayer Brown, for the defendant [1] [2022] HKCFI 3597, reported in [2023] 1 HKLRD 784 (“Judgment”). [2] Cap 4A. [3] HCA 964/2012 and CACVs 219 & 223 /2013. [4] Cap 455. [5] Judgment, [4]. [6] Judgment, [21] – [28]. [7] The Judge noted that such allegation is factually incorrect: see footnote 9 of the Judgment. [8] See Judgment, [31], for the date of the Gold Mining Supplemental Agreement 2. The date is not apparent from the plea in Para 49(12). [9] Judgment, [29] – [39]. [10] Judgment, [40] – [57]. [11] Judgment, [29]. [12] Judgment, [36]. [13] Judgment, [30]. [14] Judgment, [37] – [39]. [15] Judgment, [41] – [48]. [16] Judgment, [52]. [17] Judgment, [50]. [18] Judgment, [55]. [19] Judgment, [56]. [20] Together with Mr Thomas Yeon. [21] Cap 4. [22] Judgment, [5] – 17], [20] – [28]. [23] Cap 155. Section 94 establishes the tort of inducing persons to make a deposit of fraudulent, reckless or negligent misrepresentation. |
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