Xue Xiaoyun v. Susan Yung and Another

HCA 2526/2018

[2025] HKCFI 4183

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2526 OF 2018

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J U D G M E N T

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A.  INTRODUCTION

1.This was the trial of the Plaintiff’s (“P”) claim against the 1^st and 2^nd Defendants (“D1” and “D2” respectively) for negligent misstatements allegedly made during the course of the opening of an account for P’s partner, Madam Xu Min Hua (“Madam Xu”), to invest into the Capital Investment Entrant Scheme (“CIES”).

2.D1 was at the material time an employee of D2. D2 is a securities firm that served inter alia high net worth clients who were interested in participating in the CIES.

3.The claim against D1 is for negligent misstatements, and the claim against D2 is for vicarious liability arising out of the alleged negligent misstatements.

4.During the trial, the Court received evidence from P, D1, and Mr Ronnie Kung (“Mr Kung”), the Managing Director, Head of Investment Services Department, Equity Sales and Derivatives Division of D2.

5.At trial, P was represented by Counsel Mr Samuel Wong and Mr Thomas Yeon. D1 was represented by Counsel Ms Esther Mak. D2 was represented by Counsel Mr Ambrose Ho SC and Mr Jeff Chan.

B.  FACTUAL BACKGROUND

6.The following factual matters are agreed and/or cannot be reasonably disputed.

7.P is a PRC resident. He was at all material times a customer of D2. He is a businessman and the director and shareholder of a Hong Kong incorporated company. His partner, Madam Xu, is also a PRC resident.

8.D1 was at all material times an employee of D2.

9.Since 2013, P held with D2: (i) an account for his own CIES investment and (ii) a general investment account.

10.In 2013, after P opened his own CIES and investment accounts with D2, he transferred HK$10.1 million from an HSBC bank account in his own name in Hong Kong to his investment account with D2. The bulk of this was then transferred into his CIES account with D2 and used to purchase the relevant qualifying CIES investment.

11.Over the course of the trial, the Court was presented with documentation which concerned P’s CIES investment and customer relationship with D2. This included inter alia:

(1)  A letter dated 30 November 2012 from the Immigration Department setting out his approval in principle for his CIES application.

(2)  An account opening form for his CIES account with D2 (“客戶協議資本投資者入境計劃指定帳戶附件”).

(3)  D2’s Customer Agreement (which was not signed by P).

(4)  A declaration addressed to the Immigration Department declaring that he was the sole beneficial owner of the investments in his own CIES account.

12.P successfully obtained a Hong Kong identity card as a result of this arrangement.

13.On 25 August 2017 Madam Xu was granted an approval in principle in respect of her own application under the CIES. She wished to set up a CIES account. Under the relevant rules, she was required to make the HK$10 million investment within six months (i.e. by 23 February 2018, a Friday).

14.In furtherance of this, P told D1 that he wished to assist Madam Xu in injecting HK$10.1 million into Madam Xu’s account. Certain elements of the time, circumstances and details of the conversation(s) surrounding this issue are in dispute between the parties. However, the following matters are tolerably clear:

(1)  In the evening of 21 February 2018, P approached D1 by telephone and asked for D1’s assistance in helping Madam Xu open a CIES account.

(2)  In the early morning of 22 February 2018, P and Madam Xu met D1 at the lobby of Harbourview Hotel.

(3)  At or around 10am on the morning of 22 February 2018, P and Madam Xu attended together with D1 in D2’s office to deal with the paperwork for opening a CIES account and investment account in Madam Xu’s name (“the Morning Meeting”). Madam Xu signed various documents in the course of opening these accounts.

(4)  After the Morning Meeting, P and Madam Xu proceeded to the Bank of China (Hong Kong) Limited (“BOCHK”) to open a Hong Kong bank account in Madam Xu’s name.

15.There is then a crucial dispute between the parties as to the subsequent chronology. D1 says that she and P met at a coffee shop near D2’s office after 12:44pm, where D1 says that P asked if D1 knew of any money exchangers or remitters who could assist in getting funds out of the PRC (“Alleged Coffee Shop Meeting”). P’s case is that this meeting never happened. The parties were cross examined on this during the trial. It is noted that from the WeChat messages before the court, at 12:44pm D1 received a WeChat voice message from P.

16.In the afternoon of 22 February 2018, D1 relayed account details of two PRC bank accounts (“PRC Accounts”) to P. Certain elements of the time, circumstances, details of the relaying of the information are in dispute between the parties. However, the following matters are tolerably clear:

(1)  There were WeChat messages exchanged at around 2:27pm. D1 messaged P that a route had been found, but because it was near the Chinese New Year holidays, the exchange rate would be higher because many companies were closed (“已找到門路但比較貴因春節期間很多公司未開”).

(2)  At 2:29pm, D1 sent a message to P with information on an exchange rate, saying that if this was accepted, account information could be provided (“匯率0.83，10,100,000 =人仔 8,383,000。如接受，可馬上提供銀行帳戶”).

(3)  P indicated agreement. (“可以!”).

(4)  At 3:29pm, D1 informed P that Madam Xu’s investment account had been approved in principle.

(5)  At about 4:20pm, P and D1 met in D2’s offices (“the Afternoon Meeting”).

(6)  At 4:32pm, WeChat messages in the form of screencaps were sent containing the account numbers and names for the PRC Accounts. The two accounts were in the name of Li Yang Xuan and Ma Yu Jun. Alongside the account details of the Li account were words indicating that this should be RMB5,000,000 sent to the said account (“人民幣500萬”).

(7)  At 4:46pm, D1 said to P that once the funds were remitted, P should send the screencaps to her, and that the counterparty would then immediately arrange the transfer (“薜總 : 明早匯好後請馬上截圖給我，對方會馬上轉帳，謝謝”).

(8)  P indicated his understanding. (“好的!”).

17.On 23 February 2018 at about 9:20am, P remitted two sums totaling RMB8,383,000 into the PRC Accounts. The remittance / deposit slips were screen captured and sent to D1 by WeChat at about 9:31am.

18.At about 12:07pm on the same day, P requested D1 for a photo of the remittance record and follow-up in order to avoid missing the investment deadline (“能否叫對方將滙單拍下發過來，叫銀行查下。不然真的來不及了！”). D1 replied that she was handling the matter (“正在處理”).

19.At about 12:33pm, D1 informed P not to worry and that she is handling the remittance/deposit which P allegedly made (“請放心，正在處理”).

20.A few hours later, at about 2:10pm, D1 informed P that the sums in the PRC Accounts went missing, and the remitted funds were not received in Hong Kong.

21.There were then various messages sent (at 2:31pm, 2:47pm, and 2:54pm) by D1 to P suggesting he should report the matter to the police in Mainland China.

22.P says he then reported the matter to the Shanghai Police on 23 February 2018 at about 3pm. D1 does not admit this.

23.D1 then reported the matter to the Hong Kong police on 25 February 2018, and P did the same on 28 February 2018.

24.The present action was commenced on 29 October 2018.

C.  THE PARTIES’ RESPECTIVE CASES

25.The parties’ respective cases can be broadly outlined as follows.

26.It is P’s case against D1 that a duty of care was owed by her to P, that this had been breached as there had been negligent misstatements made concerning the remittance arrangements, that P had relied on the misstatements, and that there had been loss suffered in the form of the remitted funds.

27.It is pleaded in paragraph 11 of the Re-Amended Statement of Claim (“SOC”) that D1 made oral representations to P during the Morning Meeting at D2’s offices that the investment for Madam Xu’s CIES investment could be completed on time:

(1)  if P agree to a Hong Kong dollar to Renminbi exchange rate;

(2)  if P were to follow D1’s instructions to transfer the Renminbi equivalent of HK$10 million to PRC bank accounts designated by D1 as soon as possible;

(3)  if, upon deposits being made to the designated accounts, P informed D1 about them; and

(4)  once the foregoing matters were done, a local bank account maintained by Madam Xu’s BOCHK Account would be credited with HK$10 million ready for transfer to her account with D2, and ready for making an investment in satisfaction of the CIES’s investment requirements.

(collectively, “D1’s Oral Representations”)

28.It is further pleaded in paragraph 12 of the SOC that the WeChat messages constituted written representations where D1:

(1)  informed P at 14:29 of the proposed exchange rate of 0.83 RMB to 1 HKD, and the required amount of RMB¥8.383 million (being the equivalent of approximately HK$10.1 million) for acceptance;

(2)  at 15:29, informed P that Madam Xu’s investment account had been approved in principle;

(3)  at 16:32 and 16:35, provided to P two designated account numbers and instructed P to remit RMB¥8.383 million (i.e. the Sums) into them: (1) an account maintained by one Li Yang Xuan (李揚宣) with the Shenzhen Futian Branch of the Agricultural Bank of China (“Li’s Account”) and (2) an account maintained by one Ma Yu Jun (馬玉俊) with the Tongxin Branch of Ningxia Agricultural Bank (account no.6228-4812-0809-9677773) (“Ma’s Account”); and

(4)  at 16:46 on 22 February 2018, directed P via WeChat to remit RMB$8.383 million (i.e. the Sums), to screencap the evidence of those remittances to D1 on the next day (i.e. 23 February 2018) (“薛總：明早匯好後請馬上截圖給我，對方會馬上轉帳，謝謝”).

(collectively, “D1’s Written Representations”)

29.It is said that D1’s Oral and Written Representations were negligently made inter alia because:

(1)  D1 knew the need and purpose of Madam Xu to make the investment in time and had offered to help;

(2)  She had directed P to make the deposits without any elaboration or explanation;

(3)  She had failed to investigate into the sources and identities of the account holders whilst advising that upon the deposits being made, Madam Xu’s account in Hong Kong would be credited with HK$10.1 million;

(4)  This was relied upon by P as advice being given in D1’s capacity as D2’s staff; and

(5)  There was no advice given by D1 on the risks.

30.P’s claim against D2 is for vicarious liability, on the basis that D1’s Oral and Written Representations arose out of her employment with D2 and was made in D2’s premises during office hours.

31.The crux of D1’s defence is as follows.

32.She denies that she owed any duty of care or otherwise assumed responsibility to P, as inter alia P knew or ought to have known that D1 had no knowledge on using a money exchanger.

33.She further says that did not make the alleged Oral or Written Representations, and in any event, P did not act in reliance on the same, as inter alia he was a seasoned businessman and an experienced investor with extensive experience in using money exchangers. Even if P had so relied on D1, P voluntarily assumed the risks involved in using money exchangers.

34.D1 also relies on P’s contributory negligence (by failing to make reasonable enquiries as to the PRC Accounts) and P’s failure to mitigate his alleged loss (by not reporting the matter to the police).

35.As to D2, the crux of their defence is as follows.

36.As to D1’s alleged, Oral and Written Representations, D2 denies that any duty of care was owed to P or that any advice was given to P.

37.Reference is made by D2 to the Customer Agreement, pursuant to which it is said:

(1)  P agrees that D2 does not provide “tax, legal or investment advice” or “give advice or offer any opinion or recommendation” with respect to the suitability of any securities or transaction and that he “independently and without reliance on [D2]” makes his “own decisions and judgments” with respect to his instructions (Clause 11.1).

(2)  D2 shall not be liable in respect of “any information rendered, whether or not such information was given at [P’s] request” (Clause 11.3).

(3)  P accepts full risk and responsibility for any loss or damage caused directly or indirectly by “theft, and other occurrences beyond [D2’s] reasonable control” (Clause 32.1).

38.There is also reliance placed on a 客戶協議資本投資入境計劃指定帳戶附件 (“Appendix”) related to P’s CIES Account, in particular Clauses 3 and 10 therein. Clause 10 provides inter alia that P agrees that D2 (including its directors, officers, employees and agents) does not provide, inter alia, any advice or suggestion as to whether any securities or transactions are suitable to P.

39.D2 further says that D1 had no authority (actual, implied or ostensible) to make any such representations to P, and that P had voluntarily assumed the risks.

40.D2 further takes issue with P’s capacity to claim, given the sum was meant to be an alleged assistance or advancement to Madam Xu. D2 suggests that if the advancement was a gift, then P is put to strict proof thereof, and queries whether it is Madam Xu rather than P who is the proper plaintiff.

41.If P suggests that the advancement was a loan, then again P is put to strict proof, and the loan would be contrary to the CIES rules, which requires the investor’s own assets to be used. The point is made that P’s attempt to transfer his own funds to Madam Xu for the purpose of fulfilling Xu’s required investments under the CIES means that Madam Xu would have made a false declaration to the Director of Immigration that she is the absolute beneficial owner of the investment assets under the CIES. P would have been complicit in an unlawful arrangement under s.42(1) of the Immigration Ordinance (Cap. 115) (false statement to an immigration officer) and/or s.159A(1) of the Crimes Ordinance (Cap. 200) (conspiracy) and is barred from recovery by reason of his own illegal conduct.

42.D2, like D1, also pleads contributory negligence and failure to mitigate.

43.Further, in relation to vicarious liability, D2 denies this and relies on the following:

(1)  Guidelines issued by D2 prohibiting relationship managers such as D1 from handling customers’ money;

(2)  The making of any alleged Oral and Written Representations were not in the same nature of activities done by D1 in the course of her employment;

(3)  As a sophisticated businessman, P was or ought to have been aware of how licensed securities instructions like D2 operated, as well as the substantial difference between P’s prior dealings with D2 and the ad hoc arrangement suggested by D1 for the purposes of assisting P in an urgent manner; as well as the fact that this could not have been an official arrangement given the nature of the informal banking channels being utilised.

44.In response to the above, P’s key positions are that:

(1)  He denies that the Alleged Coffee Shop Meeting ever took place (i.e. after 12:44pm).

(2)  He denies that he had ever “engaged any money exchanger and/or remitter” and alleges that he “does not have extensive experience in money exchange and/or foreign remittance”.

(3)  He does not admit the relevance or applicability of the various exemption clauses relied upon by D2 in the Customer Agreement and/or the Appendix. And in any event, he says the advice had no relation to his own CIES investment and is therefore not constrained by the terms of these documents.

(4)  He says that there was no declaration made to the Director of Immigration in relation to Madam Xu’s CIES application and that in any event this is irrelevant. He says that the sum, had it been successfully remitted, would have been beneficially Madam Xu’s.

(5)  He says that he had reported the matter to the Shanghai Police but they refused to initiate any investigation as D1 was based in Hong Kong. He says he also endeavoured to contact the relevant Mainland bank to stop the remittances.

D.  ISSUES

45.The following are agreed issues between the parties.

46.Issue 1: Whether the 1^st Defendant owed any duty of care to the Plaintiff.

47.Issue 2: Whether the 1^st Defendant made any of the representations to the Plaintiff as pleaded in paragraphs 11 and 12 of the Re‑Amended Statement of Claim (“Alleged Representations”).

48.Issue 3: If the answer to Issue 2 above is “yes”, whether the 1^st Defendant negligently breached her duty of care to the Plaintiff.

49.Issue 4: If the answer to issue 3 above is “yes”, whether the Plaintiff has relied on the Alleged Representations and suffered a loss of RMB 8,383,000 as a result (“Alleged Loss”).

50.Issue 5: Whether the 1^st Defendant has a defence of voluntary assumption of risks on the part of the Plaintiff.

51.Issue 6: Whether the Plaintiff took any reasonable step to mitigate the Alleged Loss.

52.Issue 7: Whether the Alleged Loss was wholly or partly caused or contributed by alleged negligence on the part of the Plaintiff.

53.Issue 8: Whether the Plaintiff is barred from any recovery of his loss, if the conduct which led to the aforesaid loss was illegal.

54.Issue 9: If the 1^st Defendant is liable to the Plaintiff for her alleged negligence, the extent to which the 1^st Defendant is liable for the Alleged Loss.

55.Issue 10: Whether the 2^nd Defendant is vicariously liable for the 1^st Defendant’s alleged negligence.

E.  WITNESS EVIDENCE

56.Over the course of the trial, the Court heard evidence from P, D1 and Mr Kung of D2. Whilst P and D1 were personally involved in the events in question, Mr Kung was not present at the relevant events and thus could only give evidence on D2’s general policies.

57.The following propositions are well-settled as regards the approach to witness evidence and documentary evidence:

(1)  The Court will have regard to the inherent probabilities of the parties’ respective cases, and the internal consistency of the witnesses’ evidence and their demeanor when testifying at trial. Further, the Court will have regard to the contemporaneous documents, circumstantial evidence tending to support one account rather than the other, and the overall impression of the character / motivation of the witnesses (Re B (Children) [2009] 1 AC 1).

(2)  The Court bears in mind not only the witnesses’ demeanor in court, but also the history of events, and the contemporaneous documents and the inherent probabilities of the witnesses’ accounts (Esquire (Electronics) Ltd v The Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439 at 494C).

(3)  Reference may also be made to the dicta of DHCJ Eugene Fung SC (as he then was) in Hui Cheung Fai v Daiwa Development Ltd (unrep., HCA 1734/2009, 8 April 2014) at §§77-83, wherein the principles governing the assessment of witness evidence were discussed. In essence:

(a)  Contemporaneous written documents and documents which came into existence before the issues in question emerged are of the greatest importance in assessing credibility.

(b)  In deciding whether to accept a witness’s account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events.

(c)  In determining a witness’ credibility, it is also important to have regard to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence.

58.The substance of the evidence given by the various witnesses as it relates to the issues in question will be considered as appropriate in the discussion below. However, as a matter of general observation, the following points are noted as to each witness.

59.As to P:

(1)  I did not find P to be a particularly consistent witness.

(2)  P often repeated the same story about D1’s provision of the cross-border remittance information whilst not directly addressing the questions put to him.

(3)  His story on what happened during the Morning Meeting shifted at various points. Originally in his witness statement, he said that D1’s Oral Representations were made at the Morning Meeting. Then, during cross examination, he said that there was no mention of cross-border remittances at that meeting. Later on, he said that D1 had told him at that initial meeting that there was a channel for such cross-border remittances.

(4)  In the course of his evidence he gave new information for the first time pertaining to a suggested oral guarantee by D1 on remittance channels during the Afternoon Meeting, as well as a suggestion that he had called a Deputy Director of the Wenzhou Public Security Bureau in attempted mitigation of his loss.

(5)  P was queried about the WeChat voice message sent at 12:44pm on 22 February 2018. He was unable to explain coherently what that message said.

60.Insofar as D1 was concerned, she does not deny (and indeed given the WeChat records it would be impossible to deny) that the information about the PRC Accounts and remittance mechanisms was provided. However, one of her main themes throughout her evidence was that she was helping a friend out when providing the information as to the cross-border remittance options. She also consistently emphasized that P was an educated individual.

61.Various aspects of her evidence concerned whether the Alleged Coffee Shop Meeting took place (she says it did, and emphasizes the relatively informal nature of the meeting where she simply provided information to P), as well as the steps taken after the disappearance of the funds (the WeChat records show a relatively high level of involvement and suggestions being given to P on how to deal with the situation).

62.Overall, I found D1 to be relatively frank as a witness.

63.Mr Kung’s evidence was of limited assistance given he was not present during the material meetings. He primarily spoke to the documents containing D2’s internal policies, the contents of which speak for themselves and are not further amplified by witness evidence.

F.  ANALYSIS OF THE ISSUES

64.There has been some wrangling over the order in which to address the issues. The way in which I approach them below are what has made the most sense upon considering the facts and circumstances of this case.

65.In terms of general legal principles concerning negligence and vicarious liability, the parties were substantially in agreement. The claim turns more on the assessment of the evidence and the way in which the general principles apply to the circumstances of this particular case.

F1.  General Legal Principles

66.There is no dispute over the elements that need to be established in a negligence claim. These can be found in Manchester Building Society v Grant Thornton UK LLP [2022] AC 783 at §6; Meadows v Khan [2022] AC 852 at §28:

(1)  The plaintiff has suffered a type of harm (e.g. financial losses) which can be the subject matter of a claim in negligence;

(2)  The existence in law of a duty of care, i.e. a case in which the law attaches liability to carelessness;

(3)  A breach of the duty of care by the defendant, i.e. a failure to measure to the standard set against the defendant;

(4)  A causal connection between the defendant’s careless conduct and the damage;

(5)  Whether there is a sufficient nexus between a particular element of the harm for which the plaintiff seeks damages and the subject matter of the defendant’s duty of care; and

(6)  The particular kind of damage to the plaintiff is not too unforeseeable as to be too remote.

67.As to vicarious liability, reference may be made to BXB v Trustees of the Barry Congregation of Jehovah’s Witness [2023] 2 WLR 953 at §58, where the court considers:

(1)  the relationship between the defendant and the tortfeasor; and

(2)  the link between the commission of the tort and that relationship.

68.The specific principles regarding each of the issues will be elaborated as necessary below.

F2.  Issue 1: Did D1 owe a duty of care to P? and Issue 2: Did D1 make any of the representations to P as pleaded in paragraphs 11 and 12 of SOC?

69.Reference is made to Desmond Yiu Chown Leung v Chow Wai Lam William (2005) 8 HKCFAR 592 at §7, where Chan PJ summarised the applicable principles as follows:

“… a duty of care arises where: (1) party A relies on party B to provide information, advice or services in circumstances where it is reasonable to rely on party B; and (2) party B takes it upon himself to provide such information, advice or services, when he knows or ought to have known that party A is relying on him. … In these circumstances, party B is said to have assumed responsibility to exercise care towards party A. … It is not necessary to show that party B has knowingly or deliberately assumed such responsibility. The test for the existence of such a duty is an objective one: whether it can reasonably be said that he has by his conduct accepted responsibility. …”

70.See further Customs and Excise Commissioners v Barclays Bank Plc [2007] 1 AC 181 at §35 (cited in Formosa Taffeta Co Ltd v Banque Indosuez [2009] 1 HKLRD 568 at §§123-124), where Lord Hoffmann said:

“ … In these cases in which the loss has been caused by the claimant’s reliance on information provided by the defendant, it is critical to decide whether the defendant (rather than someone else) assumed responsibility for the accuracy of the information to the claimant (rather than to someone else) or for its use by the claimant for one purpose (rather than another). The answer does not depend upon what the defendant intended but, as in the case of contractual liability, upon what would reasonably be inferred from his conduct against the background of all the circumstances of the case. …”

71.The question whether the furnishing of information is in any particular case to be treated as the equivalent to advice must depend on the facts of the case, and in particular upon the precise circumstances in which the relevant information has been given: Formosa at §§33 and 131.

72.As to reliance:

(1)  Some of factors to be considered by the Court is the dependence and vulnerability of P, the availability of independent advice, the contractual context and opportunity to secure contractual safeguards, the authority and status of the defendant, and the informal context in which the advice is given (Clerk & Lindsell on Torts (24^th Ed), §7-129);

(2)  A duty is unlikely to be owed where a professional is giving advice which is “clearly outside the scope of his expertise” (Clerk & Lindsell , §7-139); and

(3)  Where the advice is given informally it is unlikely to be sufficiently authoritative to entitle reliance (Clerk & Lindsell, §7-141).

73.In terms of the relevance of disclaimers, this is one of the facts relevant to answering the question whether there had been an assumption of responsibility by the defendant for the relevant statement. This question must be answered objectively by reference to what a reasonable person in the position of the plaintiff would have understood at the time that he finally relied upon the representation: Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320 (Comm) at §41.

74.See also, Credit Once Finance Ltd v Yeung Kwok Chi and others [2021] 1 HKC 598 at §§102–105, Recorder Eugene Fung SC summarised the relevant legal principles with regard to the existence of a duty of care:

(1)  In determining whether a duty of care should be imposed on a defendant, it is necessary to take a holistic view of (i) whether the defendant’s acts or omissions might reasonably be foreseeable to cause harm to another person, (ii) whether there exists between the defendant and the plaintiff a sufficiently close relationship, and (iii) whether it is fair, just, and reasonable to impose a duty of care on the defendant.

(2)  In a novel type of case where established principles do not readily provide an answer, courts need to go beyond the above to decide whether a duty of care should be recognised — it is only in the exercise of judgment in the novel type of case that involves consideration of what is fair, just, and reasonable.

(3)  A duty of care would be imposed upon a defendant, from whom information is sought, who is possessed of special skill, is trusted to exercise due care, and knew or ought reasonably to have known that reliance was being placed on his skill and judgment.

(4)  Whether a defendant has assumed responsibility is a legal inference to be drawn from his or her conduct against the background of all the relevant circumstances.

75.Both Defendants have denied that a duty of care was owed by D1 to P. They further deny that there was any assumption of such duty. They say that P placed no reliance on or that it was unreasonable for P to place reliance on any of the alleged representations. In so saying, they place emphasis on the following factors:

(1)  D1 did not have any special skill or knowledge when it came to cross-border remittances.

(2)  They information was communicated on an informal or non‑professional basis (citing the Alleged Coffee Shop Meeting, amongst other things).

(3)  P could hardly be considered a vulnerable person, given his level of education, wealth and business experience.

76.Furthermore, D2 cites the Customer Agreement and the Appendix in answer to the case on duty of care.

77.In order to locate the communications between P and D1 within their proper context it is necessary to understand the various factual aspects that go into the mix. The discussion below explores this.

78.For the reasons set out below, I find that there was no duty of care established as against D1 and/or that there was no such assumption of duty.

P’s Circumstances

79.First, P’s own background and circumstances, including his knowledge of cross-border remittance related issues:

(1)  P acknowledged that he holds a Doctorate in Business Administration from the University of Macau. He says that his annual income was approximately HK$5 million and that his total net worth was over HK$30 million. He is a man of substantial means and has operated in the business of real estate development for over two decades. He is at the helm of several companies. He has investments and shareholdings in Hong Kong and Taiwan.

(2)  Despite his attempts in the course of giving evidence to distance himself from financial matters, it is obvious that he is educated, familiar with the business environment in the mainland, and also well versed in the process for applying for CIES.

(3)  His experience and acumen would mean that he would and could critically assess information given to him. This included inter alia turning to his network of friends and advisers in the PRC. He had confirmed during cross examination that he had many such connections and that he had his own legal consultants in the Mainland.

(4)  He acknowledged that he was aware of the foreign exchange controls in the Mainland.

(5)  In this connection, however, he was unable to clearly articulate how he had previously sourced funds in his HSBC account in Hong Kong. When he was queried about this during cross‑examination, he said that the funds came from dividends remitted from China to Hong Kong by an entity named 寧波德泰化學有限公司.

(6)  He said that in connection with the receipt of these funds, he had received copies of the remittance application forms. It stands to reason that he would, therefore, have known that in order to arrange such remittances, there were a set of formalities and procedures that needed to be followed.

80.Second, P’s suggestion as to why he relied on D1 does not hold water. In his evidence, he returned repeatedly to her alleged title as a director of D2 (citing it’s “brand name”), and said that D1 had a large office. Neither of these is a cogent basis for reliance in the circumstances:

(1)  P acknowledged that D1 had never held herself out as a director in the sense that she sat on the board of D2 (which she clearly did not). As a sophisticated businessman, it would have been odd for him to think that her working title (Associate Director of part of the Equity Sales and Derivatives Division of D2, as set out on her business card) was anything more than a job title or designation.

(2)  The reliance on the supposed large office was also misplaced. From the evidence given, it was obvious that the meetings took place in D2’s conference rooms. D1’s own working space was in fact a cubicle in a larger open plan space.

(3)  Neither of the above would tend to indicate that D1 would have the kind of position of authority or skill and knowledge relevant to advising on cross-border remittances, which is a matter quite distinct from the CIES mechanics themselves.

81.Third, P’s conduct during the relevant two days was not indicative of any reliance:

(1)  At no point did he raise any inquiries, despite being presented with two accounts which were in the names of individuals. It would have been obvious, particularly to someone with P’s level of education and business experience, that these were not ‘official’ channels in the sense that they were company names or entitles related to or associated with D2.

(2)  During cross-examination, P acknowledged that the accounts were not in the name of D1, D2 or BOCHK, and that they were unknown counterparties. These were clearly intermediary accounts.

Contractual Context

82.The question of whether a duty of care exists or is assumed is also impacted by the contractual context between P and D2.

83.Where a customer has signed an account opening form (that itself refers to the Customer Agreement), the case law on this aspect is clear. In DBS Bank (Hong Kong) Ltd v San-Hot HK Industrial Co Ltd [2013] 4 HKC 1 at §44, Deputy High Court Judge Pow SC observed:

“An account-opening application form signed by a prospective customer is, as a matter of law, an offer made by the prospective customer to the bank. Although the terms on which the bank is willing to provide its services are invariably drafted, dictated and printed by the bank and are incorporated by reference in the application form, they nonetheless constitute integral parts of the offer made by the prospective customer to the bank. In a nutshell, the prospective customer is applying for the bank's services. By signing and submitting the application form, the prospective customer is offering to the bank that he is willing to be bound by those terms in relation to the services that the bank would be providing.”

(See also Ming Shiu Chung v Ming Shui Sum (2006) 9 HKCFAR 334 at §84; Ng Yuk Pui Kelly v Ng Lai Ling Winnie (2021) 24 HKCFAR 401 at §§25-26).

84.Where a contract contains provisions which disclaim liablity, this can, in the appropriate case, negate any suggestion that there has been assumption of responsibility.

85.Hence, in Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320 (Comm) at §41:

“The existence of the duty of care is tied up with the issue of the Disclaimer which would, if effective, negate any such duty. In my judgment, that is the correct analysis of the position as set out by Hobhouse LJ in McCullagh v Lane Fox & Partners Ltd [1996] PNLR 205 where, at paragraphs 223 and 227 he makes the point clear by reference the decision in Hedley Byrne v Heller & Partners Ltd [1964] AC 465. … It is to my mind self-evident that, if the ‘assumption of responsibility’ test for determining the existence of a duty of care is applied, no-one can be taken as assuming responsibility in circumstances where it is specifically negatived by him. The recipient is being told that, if he chooses to rely upon the representation, he must realise that the maker is not accepting responsibility to him for the accuracy of it.”

86.See also IFE Fund SA v Goldman Sachs International [2007] EWCA Civ 811:

“… it seems to me that the argument that there was some free standing duty of care owed by GSI to IFE in this case is in the light of the terms of the Important Notice hopeless. Nothing could be clearer than that GSI were not assuming any responsibility to the participants: Hedley Byrne v Heller & Partners [1964] AC 465. The foundation for liability for negligent misstatements demonstrates that where the terms on which someone is prepared to give advice or make a statement negatives any assumption of responsibility, no duty of care will be owed.”

(See further Shine Grace Investment Ltd v Citibank NA [2022] HKCA 1341 at §105).

87.In the present case, the relevant parts of the various documents stated as follows:

(1)  The Account Opening Form:

“本人/吾等确认已收取中银国际证券有限公司之客户协议（包括协议所有部份及附录）、风险披露声明、客户资料声明、帐户申请表格及买他与是次开户有关的协议及文件（如适用）（合称「客户协议」）及确认客户协议（包括风险披露声明）是按照本人/吾等所选择的语言（英文或中文）而提供，并已邀请本人/吾等阅读该客户协议（包括风险披露声明）·提出问题及征求独立的意见（如本人/吾等有此意愿）。本人/吾等确认本人/吾等已仔细阅读，充分理解并接受较于客户协议内（包括风险披露声明）的所有条款和规定，井同意遵守客户协议（包括风险披露声明）可能会不时修改的所有条款和规定。”

(2)  The Customer Agreement, Clauses 11.1 and 14.1:

“You agree that we (including our directors, officers, employees and the Agents) do not provide tax, legal or investment advice nor do we give advice or offer any opinion or recommendation with respect to the suitability of any Securities or Transaction, You agree that you, independently and without reliance on us, make your own decision and judgments with respect to your Instructions” (emphasis added)

(3)  The Customer Agreement, Clauses 28.3 and 33.3:

“No Disseminating Party shall be liable in any way to you or to any other person for: (a) any inaccuracy, error or delay in, or omission of, (i) any such data, information or message, or (ii) the transmission or delivery of any such data, information or message; or (b) any loss or damage arising from or occasioned by … any such inaccuracy, error, delay or omission … due either to any negligent act or omission by any Disseminating Party …”

(4)  The Customer Agreement, Clauses 32.3(a) and 37.3(a):

“Under no circumstances shall we (including, for the purposes of sub-Clauses 32.3. 32.4, and 32.5 the Agents and their and our respective directors, officers or employees, or any other person involved in creating, producing or delivering the Services or managing us for all of whom we hereby also act), including any negligence on their parts, be liable for any direct, indirect, incidental, special or consequential losses or damages that result from the use of or inability to use the Account(s) and the Services or out of any breach of any warranty.”

(5)  The Appendix, Clause 10:

“阁下同意，本公司（包括本公司的萤事、高级职员、雇员及代理人）不提供税务、法律、投资、移民或有关资本投资者入境计划方面的意见。本公司对于任何证券或交易是否适合投资者亦不给予任何意见或建议。阁下同意，阁下将在完全独立且对本公司无依赖的悄况下就阁下的指示自行作出决定及判断。阁下所作的任何投资决定，将完全是根据阁下对自身的财务状况及投资目标进行自行评估而作出的决定。”

88.The contractual provisions counter P’s claim that there was a duty of care and/or that there was an assumption of such duty.

89.As circumscribed by Clauses 11.1 and 14.1 in the Customer Agreement and Clause 10 of the Appendix, the parties were agreed as to the parameters of how they were to deal with each other. P would have understood that D2 (and D1 as D2’s employee and agent) were not advisors and he and Madam Xu were to make their own independent decisions about matters such including cross-border remittance transactions (noting in particular the phraseology in Clause 11.1 and 14.1). Having gone through the CIES process himself in 2013, P would have been aware of these parameters.

90.Further and in any event, it is questionable whether the provision of information as to the remittance channel constitutes ‘advice’. See DBS Bank Ltd (Hong Kong) v San-Hot Co Ltd (supra) at §224:

“It is clear from the evidence that staff of DBS did from time to time provide materials and information about investment products to Madam Hao. There were also discussions on the mutual funds portfolio of Madam Hao/San-Hot (BVI). They also provided Madam Hao with their opinions and suggestions that can loosely be described as ‘advice’. These activities were however clearly contemplated by Clauses I21 and I33 of the Private Banking Agreement that stated in no uncertain terms that in so doing, DBS was not providing investment advice; was not obliged to do so; and was not assuming any responsibility.”

91.Insofar as assumption of responsibility is alleged, Clauses 11.3, 28.3 and 32.3(a) of the Customer Agreement disclaim liability in respect of any information given to P, as well as to Madam Xu and her dealings with Ds. Following the rationale set out in the Grant Thornton case and IFE Fund case, it is clear that the Ds were not assuming responsibility as to any information conveyed on the money remittance channel or the methodology of such transfers.

92.Finally, the point that P makes that the contractual documents are irrelevant because they concern P’s CIES investment and advice associated therewith (and should only be confined to this sphere) is a non sequitur. This seems to be to be an attempt to pull the case up by the bootstraps in the face of the clear contractual provisions defining the parties’ overall dealings.

D1’s role and knowledge

93.Insofar as D1 herself was concerned, her role was as Relationship Manager for the relevant accounts for the CIES investments.

94.In her evidence in court, D1 confirmed that she did not have any legal training and that she had not worked previously in a bank.

95.Prior to the situation in February 2018, the evidence was clear from both P and D1 that she had not previously provided any information or advice to P in respect of cross-border remittances. As already explored above, the basis for P suggesting that he could rely on her position or skill does not withstand scrutiny.

Were the representations made? And if so, where and when?

96.As to D1’s Oral Representations, this is intertwined factually with the dispute over the Alleged Coffee Shop Meeting. I consider these matters together.

97.As outlined above, P’s pleaded case is that the Oral Representations were made at the Morning Meeting, alongside the account opening procedures for Madam Xu.

98.D1, on the other hand, says that she did not make any such representations at the Morning Meeting, and that any discussion over cross-border remittance channels had occurred at the informal setting of the Alleged Coffee Shop Meeting, which P denies.

99.P’s evidence in this regard was hard to pin down:

(1)  Initially in cross examination, he said that during the Morning Meeting he was on his phone a lot during that meeting, and that D1 was sorting out account opening procedures with Madam Xu at that time. His version is that he had called a friend to try and arrange a loan, but that D1 had overheard his conversation and offered to help find an exchange channel (渠道) for exchanging RMB to HKD if the loan would not materialise.

(2)  Then, when presented with a police statement that he had previously made, he said that D1 was the one who had asked him if he had any RMB, and that if the RMB were transferred to accounts designated by D1, then the equivalent could be credited to Madam Xu’s accounts in Hong Kong. There was confusion over whether currency exchange was the same as cross-border transfers, and his answers lacked clarity on this front.

(3)  Later on, P said that at the Morning Meeting the details of the remittance were not discussed and D1 had mentioned that she had a channel generally.

100.D1, on the other hand, says that the Morning Meeting was essentially for sorting out account opening logistics and explaining to Madam Xu the requirements of the CIES scheme.

101.She further says that there was the Alleged Coffee Shop Meeting which she attended after receiving P’s voice message at 12:44pm. The parties were at odds over whether the meeting happened and what was said:

(1)  P was unable to explain with much clarity what had happened after he sent the voice message. He had in fact confirmed in cross‑examination that he had asked D1 to meet him at the coffee shop in the lobby of D2’s office building. He says that D1 did not turn up because she was busy.

(2)  D1, on the other hand, says that she did turn up, and that during the meeting, P had brought up the issue of cross-border remittance transfers from the Mainland to Madam Xu’s account in Hong Kong, and further that he had said that he knew of contacts in the Mainland who could arrange such transfers via informal channels but that because of the rush, this could not be done in time. He then inquired, says D1, whether she knew of any channels, to which D1 said she didn’t know, but that she would ask around.

102.I find that this meeting took place, and that the content of the conversation was as D1 says. I disbelieve P’s version of events. D1’s version is more consistent with the 12:44pm voice message and the subsequent developments. It is corroborated by what happened afterwards in terms of the provision of the account details later that afternoon. It is also consistent with what I have found to be P’s general understanding and his level of sophistication as to how foreign exchange controls work and what avenues there were open to him given the rush.

103.I find therefore, that P does not prove his case as to D1’s Oral Representations.

104.Insofar as D1’s Written Representations are concerned, the raw information was contained in the WeChats summarised above, and there is little dispute that the content was sent. However, it is difficult to see how they amount to representations. The information was just that – information. There was no representation contained within the messages themselves. I find, therefore, that P’s case on the Written Representations also is not proved.

105.Further, for the reasons already explored above, I find that P was well aware of the context within which he was operating insofar as this issue of the cross‑border remittances was concerned, and I find that he did not rely on D1 for advice on such remittance. In any event, there was no reasonable reliance.

106.I would also note that I have been invited to draw adverse inferences against P for failing to call Madam Xu, who was present at the various meetings as well. I do not find it necessary to do so in circumstances where even on the facts as presented, it is clear that P does not come up to proof on a balance of probabilities on his own pleaded case.

107.In view of my findings above, the subsequent issues are moot. However, if I am wrong on the above, then I analyse briefly below each of the subsequent issues and what my findings would have been. Parties’ submissions on these issues as contained within the helpful opening and closing submissions have been considered in their entirety. What is set out below are the key aspects which I believe would be most pertinent.

F3.  Issue 3: Was there a breach of duty by D1?

108.The pleaded case as to breach is summarised in paragraph 29 above.

109.The standard of duty is considered by reference to what a reasonable relationship manager in D1’s position would have done (Jackson & Powell on Professional Liability (9^th Ed, 2021), §15-022). The question of what could or should have been reasonably done is necessarily specific to the facts of the case.

110.In the present case, the failures of D1 are said to be that she had given the alleged representations and provided information, but then did not give “any elaboration or explanation”, and further that she had “failed to investigate into the sources and identities of the account holders” and that there was “no advice given by D1 on the risks.”

111.In relation to each of the allegations of breach, it is noted that there are no further particulars of the duty itself pleaded in the SOC, which generally pleads that she “owed a duty to take reasonable care when giving information and/or advice to P and Madam Xu”. In light of this, the case on breach is somewhat half-baked and the scope of the duty itself is unclear.

112.It is unclear for instance what kind of elaboration, explanation, or warning D1 ought to have given. Was it that this was an informal and unregulated channel? Or that there was a risk that the money could go missing? To what level did the duty run and what kind of advice would have sufficed? This is unclear from the pleading.

113.Insofar as to the identities of the account holders, the allegation goes beyond a duty to advise P and implicit within it is a suggestion that D1 had to take active steps to verify the authenticity of the remittance channel herself. Again, the precise scope of the duty alleged is unclear.

114.In any event, regard must also be had to the urgency of the matter, which means that there was a limited window in which to take any further steps.

115.In the circumstances, I would have found that the case on breach was not established.

F4.  Issue 4: Was there reliance and if so whether P has suffered the Alleged Loss as a result?

116.P must show that (i) he actually relied on D’s words; and (ii) such reliance was reasonable: see Charlesworth & Percy on Negligence (15^th Ed, 2022), §§2-211, 2-212. If reliance is not shown then the case on causation will also fail (Misrepresentation, Mistake and Non‑Disclosure (6^th Ed, 2022), §6-55).

117.I do not consider that there was reliance. This has been explored in detail in the course of examining Issues 1 and 2 above. I would note in particular P’s own background and circumstances, as well as the contractual context, both of which lead to the clear conclusion that there could not have been reasonable reliance.

118.In the circumstances, I would have found that P’s case on reliance and causation was not established.

F5.  Issue 5: Was there a voluntary assumption of risk by P?

119.The pleaded defence is that there was a voluntary assumption of risk by P, in that he utilised his own judgment in deciding to use the cross‑border remittance channel information provided to him.

120.As a matter of conceptualising this defence, the current literature suggests that the defence of volenti non fit injuria is really better analysed as a denial that a duty of care exists (Charlesworth & Percy, §4‑81; cf. Morris v Murray [1991] 2 QB 6 at 14E-15B). In the circumstances, the reasoning above on the question of whether a duty of care arises is apposite and will not be repeated.

F6.  Issue 6: Did P take reasonable steps to mitigate the loss?

121.P is under a duty to take all reasonable steps to mitigate his loss. Losses which could have been reasonably avoided cannot be recovered. The legal onus to show a failure to mitigate is borne by a defendant. However, the plaintiff, as the person in possession of the information about how the loss would or should have been avoided, bears a heavy evidential onus. McGregor on Damages (22^nd Ed, 2024), §§10-004 & 10-020.

122.Ds’ case is that P failed to report the matter to any authorities whether in the Mainland or in Hong Kong, and no further steps were taken to freeze the PRC Accounts or pursue avenues against these parties.

123.P says he already endeavoured to file a report to the Shanghai police via a staff member surnamed Yu. He also says that he instructed a staff member named Huang to attend at the remitting bank in order to stop the remittance.

124.Aside from the bare assertion by P that he had given these instructions to Yu and Huang, there is no other evidence particularising this.

125.Whilst being cross examined on this issue, P also said that he had called a classmate from the Wenzhou police, and that he had spoken directly to the officer in charge of the Shanghai police. These matters were new and not contained in his witness statement.

126.P further says that he could not have taken the matter further because the reasons he would have had to give to the police were false (D1 had suggested he report that the funds were for investment and/or that he had been defrauded when doing business. He also said he did not want to be associated with the ‘fraudsters’.

127.Neither Huang nor Yu were called to give evidence.

128.Several days later, P did make a report to the Hong Kong police.

129.I disbelieve P’s version of events. There is no documentary evidence in support and neither staff member has been called to corroborate his case. The evidence regarding the Wenzhou call only surfaced at trial.

130.Further, and even if his version is to be believed, the alleged steps taken are insufficient:

(1)  For such a significant sum, it would have been incumbent on P to attend to the matter personally and lodge a report, rather than sending staff members to make tentative inquiries.

(2)  D1 had on 24 February 2018, subsequent to the loss of the funds, reported to P that certain amount of the funds could be traced. P did not take the matter further despite receiving this information. His explanation was that he could not find a proper reason to report (立案理由). However, this stance was inconsistent with his alleged prior attempted report via Yu.

(3)  P waited almost five days to report the matter in Hong Kong. By then it would have been clear that the funds were already dissipated.

131.I therefore would have found that P had failed to reasonably mitigate his loss.

F7.  Issues 7 and 9: Was P contributorily negligent and if so, to what degree?

132.Section 21(1) of the Law Amendment and Reform (Consolidation) Ordinance (Cap. 23) provides that where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage.

133.For the purpose of contributory negligence, “negligence” is used in the sense of careless conduct rather than in the sense of breach of duty. It connotes a failure by the claimant to use reasonable care for the safety of either itself or its property, so that to some extent, it becomes blameworthy as the “author of its own wrong”: Charlesworth & Percy, §4‑03.

134.Ds say that P:

(1)  Failed to make reasonable enquiries to study or verify the ability, reliability and/or credibility of the account holders of the PRC Accounts; and/or

(2)  Failed to look for more reliable alternatives to transfer his funds from Mainland China to Hong Kong.

135.The factors considered above relating to duty of care are equally apposite in this regard. In particular:

(1)  Taking into account P’s background and experience, it would and should have been obvious to him that the channel he chose to use was inherently risky.

(2)  He agreed to the channel and responded to the information provided by D1 almost immediately and without questioning any aspect of the arrangements.

(3)  He has not been able to provide any explanation as to why he (and Madam Xu) waited until the last minute to try and arrange this transfer, well knowing that this was in and around the Chinese New Year period.

136.P’s only answer to the above is that he trusted D1. However, this does not negate the factors above and is a weak answer to the fact that he was fully capable of and ought to have assessed the risks for himself.

137.Accordingly, I would have found that P had wholly contributed to his loss of the Sum, and as such the defence would be upheld in its entirety.

F8.  Issue 8: Illegality

138.D2 pursues two related points on this front, saying first that P in fact suffered no loss because the loss was actually suffered by Madam Xu (given the funds were advanced to her for the CIES investment); and then saying that even if the funds remained to be P’s, any recovery is barred by illegality.

139.As to the former point, P’s answer is that had the sum been successfully been remitted, it would be at that point that the funds became hers. But prior to that, the funds were his, and thus he remains the proper plaintiff. In this regard, I find for P as to the timing of when the funds were intended to become Madam Xu’s. He had said during cross examination that this was not formalised in any way because of the familial relationship (“都是一家人”). I accept this aspect of his evidence.

140.Insofar as the alleged illegality, the case put forward by D2 is that P and Madam Xu had conspired together to make a false statement or representation to the effect that the HK$10 million was absolutely beneficially hers. If in fact the assets belong to P, then D2 says that his and Madam Xu’s actions in amount to making of a false statement contrary to section 42(1) of the Immigration Ordinance, which provides that:

“(1) Any person who makes or causes to be made—

(a) to an immigration officer, immigration assistant or any other person lawfully acting under or in the execution of Part IB, II, III, IV or VIIC of this Ordinance;

(b) in any document furnished to an immigration officer or immigration assistant pursuant to this Ordinance or a requirement made thereunder; or

(c) for the purpose of obtaining, whether for himself or any other person, any travel document, certificate of entitlement, entry permit, re-entry permit, certificate of identity, document of identity, APEC business travel card, travel pass or Vietnamese refugee card, any statement or representation which he knows to be false or does not believe to be true shall be guilty of an offence.”

141.The declaration by Madam Xu was never actually made, but D2 says that this is irrelevant, and that P remains liable for conspiracy insofar as there remained any agreement to pursue the commission of the offence (S159A(1) of the Crimes Ordinance, Cap 200).

142.Citing then the case of Patel v Mirza [2017] AC 467, D2 says that the illegality doctrine applies, and that in considering whether it would operate to debar the claim, the Court should: (a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) to consider any other relevant public policy on which the denial of the claim may have an impact and (c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts: Patel v Mirza at §120 (Lord Toulson JSC).

143.D2 then points to the following factors in seeking to persuade the Court that the claim should be debarred:

(1)  The purpose underlying S.42 of the Immigration Ordinance is that investments under the CIES ought to be genuine in return for obtaining immigration status. The purpose, D2 says, will be enhanced by denial of P’s claim so that only genuine investments will be brought into Hong Kong.

(2)  It is said that there is no other countervailing public policy on which the denial of P’s claim may have an impact, since the negligence claim is a personal private matter.

(3)  D2 says that the denial of the claim is proportionate, given the egregiousness of the alleged conspiracy.

144.I was not persuaded that the illegality defence would apply. I would have found that the nature of the alleged illegality has limited link with the loss of the Sum suffered by P. P did not evince a deliberate intention to agree with Madam Xu to deceive the Immigration Department. The reality is that the funds, if duly received into Madam Xu’s account, would have been in Hong Kong and utilised as investment for her participation in the CIES scheme.

F9.  Issue 10: Is D2 vicariously liable?

145.As set out at paragraph 67 above, in considering the question of vicarious liability, the Court considers the relationship between the defendant and the tortfeasor, and then also the link between the commission of the tort and that relationship.

146.P’s position is that the representations were made in the course of D1’s employment with D2, and that D2 is therefore vicariously liable.

147.D2’s defences essentially centre on two aspects:

(1)  They say that D1’s representations were not made in the context of serving D2’s customers in the course of her employment; and/or

(2)  They say that owing to express prohibitions in the employee handbooks, etc, any tortious act committed by D1 is not susceptible to an attribution of vicarious liability to D2.

148.The starting point is whether D1’s tortious act has a “close connection” with her employment with D2. Reference is made to The Ming An Insurance Co (HK) Ltd v The Ritz-Carlton Ltd (2002) 5 HKCFAR 569, where Bokhary PJ (as his Lordship then was) said at §19:

“By ‘close connection’ is meant a connection between the employee’s unauthorised tortious act and his employment which is so close as to make it fair and just to hold his employer vicariously liable.”

149.As to the tortfeasor’s act:

(1)  A careful examination of all the relevant matters, including the time and circumstances in which the act is committed, is required: Century Insurance Co Ltd v Northern Ireland Road Transport Board [1942] AC 509 at 519.

(2)  The examination of all relevant matters must be conducted broadly, and that a court is not to “dissect the [employee’s] task into its component activities: Ilkiw v Samuels [1963] 1 WLR 991 (CA) at 1004 (cited with approval in The Ming An Insurance Co (HK) Ltd at [39]).

(3)  Even if an act is deemed to be incidental to the employment of the employee, the employer may nevertheless be vicariously liable: The Ming An Insurance Co (HK) Ltd at [29].

150.As to the closeness of the connection:

(1)  The question is a mixed question of fact and law (HSBC Bank Plc v 5^th Avenue Partners Ltd [2009] 1 CLC 503 (CA) at [56]).

(2)  It does not matter whether mere inadvertence or intentional wrongdoing is involved (The Ming An Insurance Co (HK) Ltd at [21]–[22]).

(3)  It is unnecessary to read any other requirements into the “close connection” requirement as a matter of law. This Court is to open confront the question of whether liability should lie against D2, rather than obscuring the analysis beneath semantic discussions of e.g. “mode of conduct” (The Ming An Insurance Co (HK) Ltd at [24]).

151.P says that there was a ‘close connection’ between the representations and D1’s employment because:

(1)  As set out in the employment contract, her duties as relationship manager non-exhaustively included maintaining relationships with clients and promoting D2’s business and products to them, introducing clients to open investment accounts with D2, and also processing orders.

(2)  The representations were made during office hours and at D2’s office premises.

(3)  Preparatory steps taken to facilitate investments into client accounts are of a sufficiently close nature to be fall within the scope of D1’s employment. This would include in this case the provision of the remittance channels.

(4)  D1 received commission depending on the amount of business she was able to generate.

152.D2, on the other hand, says that there was no such close connection:

(1)  D1 was never entrusted to engage in the same filed of activities as that of the making of the representations. They refer to the SFC Code of Conduct and various other guidelines regarding handling of client monies, saying that licensed individuals (such as D1) should act to ensure that client assets are essentially accounted for.

(2)  It then further relies upon various prohibitions in the employee guidelines to demonstrate the lack of such close connection. It cites inter alia the Handbook for Relationship Managers and Investment Services Representatives (“Handbook”), to delineate those aspects which it says are outside the scope of D1’s employment. These stated that:

(a)  To avoid a conflict of interest, relationship managers are prohibited from acting personally as a custodian for a customer’s securities, money or other property or acting in a personal capacity outside the scope of their employment (whether renumerated or not) for any customer (§§6.2.2.1 & 6.2.2.3).

(b)  Relationship managers are not allowed to handle customer moneys (§7.20.2).

(3)  It is said that D1 was off on a frolic of her own, and that she had personal motives to help P (to bring in more business for herself).

(4)  The suggestion that the oral representations were made at D2’s office premises is disputed, citing the Alleged Coffee Shop Meeting.

(5)  In essence, what D2 is saying is that the representations were not in the same nature of activities done by D1 in the usual course of her employment, and that P would have been well aware of this being an unusual step for D1 to be taking given his past experiences with her.

153.P says that:

(1)  The various provisions and guidelines are irrelevant, since D1 did not actually handle the client monies herself.

(2)  In any event, there is a distinction between (a) prohibitions which regulate conduct within D1’s sphere of employment with D2 and (b) prohibition which limit the sphere of D1’s employment. The latter will have the effect of absolving the employer of vicarious liability, but the former will not (Attorney General v Hartley [1964] NZLR 785 at 801). P’s position is that the various guidelines, insofar as they may be relevant, fall within the former category and not the latter.

(3)  He trusted D1 as D2’s employee.

154.Considering the above, I would have found that there was not a sufficiently close connection established. In so doing, I would note in particular the relatively unusual nature of the request that had been made by P to D1 and the informality of the discussions which took place at the Alleged Coffee Shop Meeting. As to the guidelines, I would consider those to be prohibitions regulating conduct within D1’s sphere of employment.

155.I would thus have dismissed P’s case in vicarious liability.

G.  CONCLUSION

156.I thus dismiss P’s claims against both D1 and D2, and make a costs order nisi that P shall bear Ds’ costs, to be taxed if not agreed, with certificate for two counsel for D2.

157.I thank counsel for their assistance.

Mr Samuel Wong and Mr Thomas Yeon, instructed by Wan Yeung Hau & Co., for the Plaintiff

Ms Esther Mak, instructed by Boase, Cohen & Collins, for the 1^st Defendant

Mr Ambrose Ho, SC and Mr Jeff Chan, instructed by Eversheds Sutherland for the 2^nd Defendant