Li Yuhong v. Ooo Securities (HK) Group Ltd (Formerly Known As Orientiert Xyz Securities Ltd) (Formerly Known As Amtd Global Markets Ltd) (Formerly Known As Amtd Asset Management Ltd)
Read the full judgment text of HCA 475/2020 on BabelCite. This High Court CFI judgment was delivered on 24 December 2025.
1. This is a case where the plaintiff Madam Li Yuhong (“P”) claims against the defendant (“D”), as investment adviser and asset manager, for (1) misrepresentation made and breaches of advisory duties before or at the time of investment of certain bonds (“the Relevant Bonds”) of a listed company by the name of China Agroforestry Low-Carbon Holding Company Limited [1] (“the Listco”); and (2) for breaches of duties after the investment was made and have been entrusted to D as the asset manager
Cited by 2 cases · Cites 24 cases
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HCA 475/2020 [2025] HKCFI 5270 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 475 OF 2020 ________________________ BETWEEN
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________________________ J U D G M E N T ________________________ INTRODUCTION 1. This is a case where the plaintiff Madam Li Yuhong (“P”) claims against the defendant (“D”), as investment adviser and asset manager, for (1) misrepresentation made and breaches of advisory duties before or at the time of investment of certain bonds (“the Relevant Bonds”) of a listed company by the name of China Agroforestry Low-Carbon Holding Company Limited[1] (“the Listco”); and (2) for breaches of duties after the investment was made and have been entrusted to D as the asset manager. BACKGROUND 2. In or about 2012, P and her husband Mr Liu Yueming (“Mr Liu”) wished to migrate to Hong Kong from the Mainland under the Capital Investment Entrant Scheme (“CIES”). In order to satisfy the requirements under the scheme, P initially invested in a fund called the Bank of China Hong Kong Dollars Income Fund (“the BOC Bond Fund”) through another agent. It is not in dispute that the BOC Bond Fund is a much safer product than the Relevant Bonds in question. 3.In 2014, Mr Liu came into contact with Ms Liu Lijia Ariel (“Ariel Liu”), an employee of D, which at the material time was known as AMTD Global Markets Limited (“AMTD”), through mutual friends. From that time onwards and up to 22 December 2015 (“the Pre-Engagement Period”), Ariel Liu, who was acting on behalf of D at all material time, tried to win over the family’s trust and obtain their business. In the meantime, D became the exclusive placing agent of the Relevant Bonds in July 2015 in the value of HK$50,000,000 issued by the Listco of which D would earn 10% commission for any amount placed by D on behalf of its clients. 4.P says that Ariel Liu had poured in substantial efforts to persuade Mr Liu and P to sell off their investment in the BOC Bond Fund and transfer the totality of those assets to the subscription of the Relevant Bonds in the sum of HK$10,500,000 (“HK$10.5 million”). In doing so, P alleges that Ariel Liu made various misrepresentations in order to induce P to invest in the Relevant Bonds during the Pre-Engagement Stage. They included:-
5.In December 2015, P withdrew her investment in the BOC Bond Fund and re-invested HK$10.5 million in the Relevant Bonds, via D acting as the placing agent. At the same time, parties signed a Discretionary Asset Management Agreement whereby P entrusted D to manage the Relevant Bonds for her. In doing so, not only D would receive the 10% commission as placing agent, D would also able to earn commissions and fees as asset manager. It is also assumed that Ariel Liu would able to earn commission on top of her basis salary due to the investment. 6.From December 2015 to December 2019 (“the Post-Engagement Stage”), P says that D failed to manage the Relevant Bonds, and in doing so was in breach of various common law, statutory and/or fiduciary duties owed to P. In particular, P says that D failed to exercise or consider exercising an early redemption option when it should have been aware of the Listco’s significant change in its core business from that of biomass fuel to that of container house, which took place against a backdrop of persistent financial distress of the Listco. 7.On 8 January 2020, the Listco failed to redeem the Relevant Bonds issued to P. 8.In late 2020, the Listco was the subject of a winding up petition and thereafter went through a series of restructuring arrangements. As a result, P received certain settlements (of very limited value) under a creditors’ scheme (“the Creditors’ Scheme”). 9.As such, P has lost the entire investment of HK$10.5 million in the Bonds, save for the entitlements received under the Creditors’ Scheme. 10.D’s defences are quite simple and straightforward. 11.In relation to the Pre-Engagement Stage, D denies that Ariel Liu had ever made those Representations. However, the problem with that is Ariel Liu was never called as a witness at the trial and no real attempt was made by D to call her to give evidence. Only Mr Winson Yuen (“Yuen”), who joined D in April 2019 (after Ariel Liu left the employment of D), was called as the solo factual witness for D at the trial. He has no personal knowledge of any of the material matters in dispute, in particular whether the Representations had been made by Ariel Liu or not. 12.In its pleaded case, D alleges that the duties owed by D at the Pre-Engagement Stage should be considered in the context of P’s alleged investing experience[2]. In this regard, D relies on a Declaration of Professional Investor, which was presented to P for execution by Ariel Liu at a meeting on 22 December 2015 in D’s office. 13.In relation to the Low Risk Representation, and the duty to advise, D’s case is that the Bonds should not be considered as risky or unfit for P’s investment objective. 14.In relation to the Early Redemption Representation, D did not put forward any positive case apart from denying that Ariel Liu had actually made such representation. 15.D also relies on the non-reliance or exemption clauses contained in the documents signed by P. 16.In regard to the allegations made against it during the Post-Engagement Stage, D’s case is that they had in fact monitored and kept the financial situation of the Listco under review following P’s subscription, had duly considered exercising the option for early redemption, but had made an “informed and fully considered decisions” not to elect for any early redemption. 17.Pursuant to the Order of K Yeung J dated 19 August 2024 for a split trial, the trial before me only concerned with the issue of liability. The issue of quantum will be decided at a later date before another judge. Issues in Dispute 18.The following are the agreed issues of liability in dispute between the parties as stated in the Statement of Agreed Issue of Liability filed by the parties on 27 August 2024 pursuant to the order of Master D To:-
Witnesses testified at trial 19.At the trial, 3 factual witnesses gave evidence in support of P’s case. They are P, Liu and Mr Lei Zhenfeng (“Lei”). Lei is a close friend, business partner and former employee of Mr Liu. Mr Victor Choi Wing Tak (“Mr Choi”) gave evidence in his capacity as P’s expert. 20.As said, the only factual witness called by D to testify at trial was Yuen. Mr Arnold Ip Tin Chee (“Mr Ip”) gave evidence as D’s expert. Significantly, as mentioned, Ariel Liu was not called by D to give evidence at trial and no convincing reason was provided by D as to why she could not be called. Another material witness Carlson Liao (“Liao”), who took over the job as Relationships Manager (“RM”) was not called by D also. Again, no plausible explanation was provided by D as why he was not called. Summaries of the Parties’ Respective Case 21.The parties’ respective case has been helpfully summarized by counsel in their written submissions. P’s case has been set out by P’s counsel Ms Rachel Lam SC (leading Ms Eva Leung and Mr Jason Fee) in P’s Closing Submissions (“P’s Closing”). Summary of P’s Case 22.In or about 2012, P wished to immigrate to Hong Kong under CIES. She initially applied for CIES status through another agent, investing family assets in the value of around HK$10 million in the BOC Bond Fund, which comprised a basket of diversified products. There is no real dispute that this was a safer product than the Relevant Bonds in question. 23.During the Pre-Engagement Stage (ie from 2014 up to 22 December 2015), P’s husband Mr Liu came into contact with Ariel Liu, an employee of D. Ariel Liu’s aim was to obtain their family’s business. By a Placing Agreement in July 2015, D became the exclusive placing agent of the Bonds in the value of HK$50,000,000 issued by the Listco. Ariel Liu allegedly poured in substantial efforts to persuade Mr Liu and P to sell off the investment in the BOC Bond Fund and transfer the totality of those assets to the subscription of the Relevant Bonds in the sum of HK$10.5 million. By doing so, D would earn commission from the Listco in the sum of HK$1,050,000, being 10% of the placing amount in this transaction.[3] Ariel Liu personally promised P and Mr Liu that she would provide a commission rebate in the amount of around HK$500,000. There is no contemporaneous evidence of payment of such sum, or whether this sum was to be paid by D itself or by Ariel Liu personally. In any event, it is an admitted fact in the pleading that D charged a commission of 10% of the total proceeds for placing the Relevant Bonds. 24.P claims that there was every reason for D and Ariel Liu to complete the deal. The placing period for the Bonds specified by the Listco was limited to a maximum of 6 months (from 14 July 2015 onwards). With the dual hats of placing agent and asset manager, P says that D was certainly motivated to sell its products, and secure the business of managing the portfolios thereafter. This dual role allowed them to earn substantial commissions and fees, over and above the level of typical shares or equities transactions. Ariel Liu, as the employee of D, would typically earn commission on top of her basic salary. This was acknowledged by Yuen, D’s only factual witness. 25.The Listco was in dire financial circumstances. In the years 2013, 2014 and 2015 leading up to the issuance of the Bonds, the Listco had recorded losses in net profits and negative cash flow for consecutive years. It did not possess sufficient liquid assets to pay off current liabilities. Although it held a significant number of forests in terms of assets, these could not be harvested due to permit problems. The management of the Listco decided to invest into a core business of biomass fuel. It was in such circumstances that the Listco sought to raise funds by issuing non-rated, non-investment-grade Bonds. 26.Despite the poor performance of the Listco and the high risk associated in the investment of the Relevant Bonds, Ariel Liu on behalf of D, being the exclusive placing agent of the Bonds, made inter alia two significant Representations to P in order to persuade and induce her (and her husband) to transfer the HK$10.5 million investment from the safer product of BOC Bond Fund to highly risky Bonds. The Representations were:-
27.P says that there is no doubt that the Early Redemption Representation was false, as there was no such term in the Placing Letter, which was entirely in English, a language that P and her husband could not read or understand. P says that the Low Risk Representation was similarly untrue, as the Relevant Bonds were a very risky investment that was unfit for P’s investment objective. 28.As a result of the misrepresentations and in reliance thereon, P agreed to subscribe for the Relevant Bonds in the sum of $10.5 million In other words, Ariel Liu succeeded in persuading P to take up 21% of the entire placing amount – a significant deal for her and for D by any measure. Whilst P’s husband Mr Liu was involved in the process of deciding the placing, and they had also asked Lei, Mr Liu’s former subordinate and business partner, to speak with Ariel Liu, it is clear from their evidence that they had placed their trust and confidence in Ariel Liu and her Representations. None of them had experience in bond investments in Hong Kong, and none of them had independently looked into the financial data or fundamentals concerning the Listco. P says that reliance was clearly placed on the Representations made by Ariel Liu, who repeatedly assured them that the Relevant Bonds were of low risk with early redemption option at P’s will. 29.On 22 December 2015, P went to D’s offices in Causeway Bay to execute documents prepared by Ariel Liu. These included the Placing Letter which was entirely in English and a bilingual Discretionary Asset Management Agreement to open an account with D for the purpose of entrusting the Relevant Bonds to D to manage for and on behalf of P (by which D would charge monthly management fees and performance fees), essentially deducting from the interest payments earned by P. 30.Upon attending at D’s offices, P was presented with a pile of documents and asked to sign all of them within a short period of time (less than 1 hour, as far as P could recall ). Neither Ariel Liu nor anyone from D had explained the content to her in detail, and no one had explained the non-reliance clauses in the Placing Letter that D now attempts to rely on in its AD. 31.After the subscription of the Relevant Bonds and the entrustment of them to D as P’s asset manager, during the Post-Engagement Stage (ie from around December 2015 to December 2019), despite charging substantial fees for supposed “asset management” and extra fees for D’s “performance”, P claims there was little to show for it by D. P says that D had even failed in performing basic tasks, such as contacting P to inform her that Ariel Liu had left and that her account manager had changed in 2016. Fundamentally, no one alerted P to: (1) the change in the Listco’s core business in 2017, (2) the continuously poor financial performance of the Listco whether before or after subscription, or (3) the Listco’s public announcement in deferring payment for promissory notes due in May 2018. As an asset manager, P says that D clearly had failed in its management duties owed to its client. 32.In December 2018, it was P herself who requested early redemption numerous times, only to be met with complete failure on the part of D to monitor, manage and assist in any real attempt at early redemption. D did not even seem to understand the terms regarding early redemption, and asked the Listco to explain the meaning to D in an email dated 12 December 2018. Worse still, after the Listco rebuffed such attempt, D failed to consider (let alone make any conscious decision) the possibility of early redemption on the ground of a significant change in core business, when the Listco had clearly terminated its biomass fuel business and shifted its efforts into constructing container houses, which are two entirely different types of business. 33.P claims that, worse still, even though D knew that P wished to redeem the Relevant Bonds early, and the Listco’s repayment ability was in serious doubt in 2018 to early 2019, D did not even begin to consider a possibility of early redemption when the Listco defaulted in the 2019 payment of interest which fell due on 8 January 2019. P says that this was an undeniable event of default pursuant to Clause 8(i) of the Terms and Conditions of the Bonds (“T&C”), entitling P to give notice to the Listco that the Relevant Bonds would be “immediately due and repayable”. Instead, D as P’s asset manager sat there and did nothing. 34.Ultimately, on 8 January 2020, the Listco failed to redeem the Relevant Bonds, and P lost the entirety of her original investment. Due to subsequent winding-up proceedings and restructuring of the Listco, P was granted certain entitlements (of limited values) in relation to her losses. However, as stated, the issue of quantum is not to be determined at this trial. It will be dealt with by way of an assessment of damages hearing, if liability can be established against D. Summary of D’s Case 35.D’s defences are quite simple and straightforward. 36.Regarding the Pre-Engagement Stage, D denies that Ariel Liu had ever made those Representations. However, as D’s only factual witness Yuen admitted, he has no knowledge of what had been said or not said by Ariel Liu to P. Yuen did not even attempt to check the emails of Ariel Liu in D’s email server in order to ascertain the position at the time, and had not considered it helpful to call or subpoena Ariel Liu as a witness. This was because Yuen speculated that Ariel Liu’s evidence would not support D’s case. 37.D further pleaded that the duties owed by D at the Pre-Engagement Stage should be considered in the context of P’s alleged investing experience. In this regard, D relies on a Declaration of Professional Investor, which was again presented to P for execution by Ariel Liu within the short meeting on 22 December 2015. P’s case is that she had been led to believe the documents were just formalities for the purposes of account opening with D. 38.In relation to the Low Risk Representation and the duty to advise, D’s key allegation is that the Relevant Bonds should not be considered as risky or unfit for P’s investment objective. In relation to the duty to advise in particular, D attempted to rely on an alleged Schedule 3 attached in addition to the original Schedule 3 in the Discretionary Asset Management Agreement (“D’s Alleged Sch 3”), to support its contention that P’s investment objectives should be viewed in light of the D’s Alleged Sch 3, which is an unpaginated 2-page document apparently additionally appended to the original document. 39.During Yuen’s oral testimony, he on behalf of D, had disowned D’s Alleged Sch 3, saying that he himself had preferred and acted according to the standard Schedule 3 (properly paginated and placed between Schedules 2 and 4, according to P’s version). Yuen was unable to explain the two inconsistent versions, nor shed any light on which version prior relationship managers were aware of or had followed, if any. Given the state of the evidence, P says that D’s Alleged Sch 3 does little to support D’s case. 40.In relation to the Early Redemption Representation, D did not put forward any positive case apart from denying that Ariel Liu actually made this representation. As mentioned above, D had no factual basis to make such denial. The available contemporaneous documentary evidence, the Client Analysis Report[4] prepared by Ariel Liu and signed by P on 22 December 2015, clearly had a description of an early redemption term in line with P’s understanding at the time that she could redeem the Relevant Bonds by giving advance notice. In December 2018, P also emphasized in her email the importance of redeeming 1 month prior to the subscription anniversary date of the Relevant Bonds, again consistent with what was represented in the Client Analysis Report. Without any positive case or any evidence in support, P says that D’s bare denial of the existence of Early Redemption Representation must be rejected. 41.Regarding the general defences on the non-reliance or exemption clauses, D bears the burden to show that they are reasonable. The statutory provisions on unreasonable terms seek to protect consumers like P from being exploited when dealing with service providers such as D. As the party relying on those clauses (which are found within standard form contracts drafted by those very service providers), D must persuade the court that they are reasonable and only then will they bind the client in P’s position. 42.In relation to the Post-Engagement Stage, D’s case is essentially that they had in fact monitored and kept the financial situation of the Listco under review following P’s subscription; had duly considered exercising the option for early redemption, but had made an “informed and fully considered decision” not to elect for an early redemption. 43.However, there is no evidence in support of D’s case that it had performed its duty in monitoring or reviewing the Relevant Bonds, nor is there any evidence on an “informed and fully considered decision” on early redemption. On the evidence available, P says it is apparent that D did nothing at all in supposed performance of its management duties. P says that there cannot be any doubt that D had breached its duties, which directly resulted in P’s loss of her original investment. DISCUSSION 44.In this judgment, I would like to deal with the issues arising out of the Pre-Engagement Stage in the following order:-
45.Then I would like to deal with the issues arising out of the Post-Engagement Stage in the following order:-
46.I would deal with the 2 expert issues directed by Master Phoebe Man on 18 July 2022 to the experts to give opinions on after hearing submissions from the parties on this matter together with Issue 1(b) and Issue 3. They are:-
47.Before delving into discussion of the above issues, I would like to firstly deal with the evidence given by the various factual witnesses and the experts on both sides, including my assessment on their evidence. Assessment of factual witnesses’ evidence General Principles on approach to assessment of evidence 48.The following principles in relation to the approach to the assessment of evidence and witness testimony are trite and not in dispute. 49.In assessing credibility of a witness, the court takes into account (1) inherent probabilities or plausibility; (2) consistency with contemporaneous documents or evidence; (3) if a witness is found to be untruthful or unreliable on one matter, that may affect his credibility and reliability in other matters; (4) demeanour of the witness; (5) a witness’s motives: see Triunion (HK) Cereal & Oil Co Ltd v APAC Investment Holdings Ltd [2022] HKCFI 3326 at §48 per Recorder Victor Dawes SC; see also Hui Cheung Fai v Daiwa Development (unrep., HCA 1734/2009, 8 April 2014) at §77-82 per DHCJ Eugene Fung SC (as he then was). 50.Where there are only two competing theories of events before the court, rejection of one may justifiably lead to the acceptance of the other: see Triunion§62 per Recorder Victor Dawes SC. 51.The more serious the allegation, the more inherently improbable it is regarded, and the more compelling and cogent evidence is required to prove it on a balance of probabilities: see Koo Ming Kown v The Baptist Convention of Hong Kong [2024] HKCFI 2869 at §102 per K Yeung J. 52.It is trite that giving evidence is not a memory test. The court will have regard to the difficulty of witnesses to recall clearly what happened in relation to events that took place a long time ago: see Triunion at §51 per Recorder Victor Dawes SC. 53.In assessing one’s credibility and reliability, the court is entitled to take into account not only his demeanour in the witness box, the coincidence of his testimony with other evidence and general plausibility, but also his conduct of the litigation: see Wilkie v Direct Line Insurance Plc [2009] SCLR 853 at §81 per Lord Carloway. Assessment on P’s evidence 54.I was very impressed by P’s as a witness and the evidence she gave at trial. In my view, not only P gave her evidence in a calm and collected manner, she was able to answer most if not all the questions asked of her in an honest, straightforward and direct way. I was not able to detect any element of exaggeration or dishonesty in her evidence, despite the lengthy, vigorous and meticulous cross-examination conducted by D’s counsel. When she was not able to answer some of the questions put to her, whether it was either due to the long lapse of time (the material events happened around 10 years prior to the trial) or her lack of understanding of technical issues in relation to the investment, P was readily prepared to admit them. She did not try to make up the answers. 55.Her evidence was also corroborated by the evidence of her husband Mr Liu and Lei, their close friend and former employee. Moreover, her case was, to a large extent, supported by the contemporaneous documentary evidence. Most importantly, the evidence she gave in my view is inherently probable, given her personal background, education level, unfamiliarity with the financial and legal system in Hong Kong; and the lack of expertise and experience in investment matters. 56.Mr Antony Chan SC, leading Mr Danny Tang and Mr William Wong, for D, in D’s Closing Submissions (“D’s Closing”) made a number of criticisms on P’s evidence. He submits that on the material aspects of her allegations, P’s recollection is nebulous and unreliable. For example, she could not recall the duration after first meeting with Ariel Liu or whether it took place in September or October 2015. Further, despite claiming that she remembered having met Ariel Liu twice during that period and that Ariel would repeat the Representations to her or Mr Liu via WeChat, no contemporaneous documentary evidence of Ariel Liu having made the Representations. He further made the criticism that P and Mr Liu were not able to retrieve any text messages on their mobile phones due to the alleged changes of their mobile phones over the years, when P was able to adduce WeChat messages dated 30 November 2015 from Ariel Liu to Mr Liu, which was about a month after the alleged Meetings in September and October 2015. In any event, D says that there was no documentary or objective evidence to suggest that P had in fact met Ariel Liu in September/October 2015. D therefore submits that, in the circumstances, it is plain that her memory was unreliable and it follows her bare assertion (which is unsupported by any contemporaneous documents) that Ariel Liu made the Representations must be “unreliable and rejected” on this ground alone. 57.With respect, these are only peripheral matters concerning a very narrow aspect of P’s evidence. To say that just because P could not produce any contemporaneous telephone messages to show when her first meeting with Ariel Liu took place would somehow equal to P’s memory being unreliable and the Representations were not made seem to me to be rather tenuous. In my judgment, P’s evidence must be viewed holistically and all her evidence, including the contemporaneous documents (or the lack of them), must be taken into account in order to test against P’s case. In my view, to merely take this single failure to produce the messages on WeChat and to say that the allegation that the Representations were unreliable (and therefore must be rejected) is too simplistic an approach. After all, giving evidence is not a memory test, the court will give allowance for the difficulty of witnesses to recall clearly what happened in relation to events that took place a long time ago: See Triunion at §51. 58.Further, contrary to Mr Chan SC’s submissions, in fact the Representations were supported by at least 2 important contemporaneous documents, ie the Client Analysis Report prepared by Ariel Liu and the email dated 6 December 2018. In this case, I accept P’s explanation that those WeChat messages had been lost during the change of their mobile phones over the years. Despite their best efforts, both P and her husband were not able to retrieve those messages in their old phones. In contrast, D chose not to call Ariel Liu to give evidence or to produce any contemporaneous documents like emails or phone message records between her and P to contradict P’s version of events. 59.Thus, unless otherwise stated, I would accept the following evidence given by P during the trial, including the Representations made by Ariel Liu to her. Summary of P’s evidence 60.P was educated up to vocational high school level in the Mainland. From 1999 to 2001, she managed a family restaurant with her husband Mr Liu. She then worked as an accounting clerk (she is not a qualified accountant) for a small business in the Mainland. From around 2008, she operated a small hotel in Kunming with some business partners where she was responsible for the financial management of the small hotel. It has a relatively modest annual turnover of RMB 3 million only. 61.Since 2012, due to her husband’s career development and their impending migration to Hong Kong, her family has moved to Shenzhen. Since then, she has become a full-time housewife. 62.Her personal investment experience however was rather limited. It confined to only purchasing and investing in some gold with her personal savings, with the total investment not exceeding a few hundred thousand RMB. Within the family, Mr Liu was responsible for all the affairs of the family business while P was responsible for the in and out of the money or fund. 63.In around 2012, P and her husband applied to migrate to Hong Kong through CIES. In order to satisfy the CIES requirements, P initially invested a sum of around HK$10 million in the BOC Bond Fund through another securities company by the name of Celestial Securities Limited. The primary purpose of investing in the BOC Bond Fund is to satisfy the CIES conditions in order for the family to migrate to Hong Kong. It was meant to be a safe investment as the bond fund comprised a basket of different financial products. Further, the subscribed BOC Fund was the first financial product that P and her husband had purchased, whether onshore or offshore. It also represented the family’s primary liquid asset following their immigration to Hong Kong. 64.During the CIES application process, P’s husband Mr Liu was mainly responsible for the day-to-day communication with Celestial Securities and the immigration agency while P handled the signing of contracts, account openings, various administrative matters and some communication matters. As both P and Mr Liu do not speak or understand English, their communication with the securities company and the immigration agency were conducted in Putonghua or in Chinese. The documents signed with Celestial Securities were all bilingual, with Chinese translations. 65.In relation to the Pre-Engagement Stage, P testified that Mr Liu first met Ariel Liu at a friends’ gathering in or around mid-2014. P became acquainted with Ariel Liu at meetings at the clubhouse operated by her husband (which happened also to be Mr Liu’s work place) in or around September to October 2015 (“the Meetings”). It was during the Meetings that the Representations were made by Ariel Liu on behalf of D, inducing P to invest in the Relevant Bonds. 66.P testified that during the Meetings, Ariel Liu focused on recommending the Relevant Bonds to her, and made the two significant Representations repeatedly. Ariel Liu also mentioned that there would be a rebate of around half a million Hong Kong dollars. After the purchase of the Relevant Bonds, Ariel Liu told P that the rebate would be from her own commission. There is however no documentary evidence that P actually received the rebate. On the other hand, D has admitted in pleading that it received a commission of 10%, instead of say 5% or anything less than the 10%. 67.P further testified that she received approximately HK$500,000 per year by way of return from the investment (this is to be distinguished from the one-off rebate which also promised to be in the purported amount of HK$500,000). The HK$500,000 per year figure was in fact the return she would receive from the investment, because although under the Relevant Bonds she was entitled to interest payment in the rate of 7% of her investment annually (ie HK$10.5 million x 7% = HK$735,000), the surplus on top of the HK$500,000 odd was taken away by D (charged as management fees and performance fees). The evidence shows that she only withdrew HK$1,052,100 for one-off payment of interest for the first two year, and around HK$520,000 each for 2018 and 2019[5]. 68.P’s evidence then covered the execution process for the relevant documents on 22 December 2015. In her oral testimony, P confirmed that neither Ariel Liu nor any staff of D explained the relevant terms of these documents to P. 69.In relation to the Post-Engagement Stage, P in her witness statement (“WS”), which was adopted as part of her evidence during examination-in-chief, mentioned D’s failure to properly monitor/manage the Relevant Bonds, in particular its ignorance of the possibility of early redemption, whether before or after the various requests/inquiries made by P for early redemption of the Relevant Bonds. As a result of D’s misconduct, upon the Listco’s default on the Relevant Bonds, P lost her investment of HK$10.5 million. 70.Importantly, P’s evidence in these aspects concerning the Post-Engagement Stage was never challenged under cross-examination. For example, it had not been suggested to her that D did conduct proper monitoring or review of the Relevant Bonds, or that they had made an informed and considered decision not to redeem the Relevant Bonds in 2017, 2018, or even after the default in payment on 8 January 2019. Assessment on Mr Liu’s evidence 71.I find Mr Liu as an equally impressive witness. He came across to me as a very intelligent and articulated man. He gave his evidence in a very measured and calm manner. He was not prone to any exaggeration, evasiveness or aggression. When he was not able to answer any questions under cross examination, whether it was due to the long lapse of time or genuinely not sure about the answers, he would frankly admit so. He never tried to argue or make up any answers as he went. While his evidence is not completely flawless or without minor discrepancies, on the whole, I find him to be an honest and credible witness. I accept his evidence. 72.His evidence basically is that he was involved with the CIES application from the beginning and attended the Meetings with Ariel Liu together with his wife, P. His evidence in all material aspects corroborates that with P’s evidence. They are supported and consistent with the contemporaneous documentary evidence produced by the parties at the trial. More importantly, they are in my view inherently probable, particularly in the conspicuous absence of Ariel Liu or any credible witness from D to give any evidence to contradict Mr Liu and P’s evidence. Assessment on Lei’s evidence 73.While I am fully conscious of the fact that Lei is a close friend and business partner (and former employee) of Mr Liu, I find him to be a credible witness. His evidence mainly concentrated on the Meetings that Ariel Liu had with P and Mr Liu’s which he also attended. He also gave evidence on the Representations. At the invitation of Mr Liu, Lei had a private meeting with Ariel Liu regarding P’s investment in the Relevant bonds. He gave evidence on what Ariel Liu told him at that meeting. 74.While it is true that Mr Lei might not be sure about the whether there were two or three meetings; nor was he clear about the day, month or even reason of the meetings (which are the main criticisms of D on his evidence), he has in my view generally given honest and credible evidence in support of P’s case. I accept Lei’s evidence. Assessment on Yuen’s evidence 75.Yuen was the only factual witness called by D. To say that his evidence has left a lot of room to be desired perhaps is an understatement. To start with, Yuen only joined D in April 2019 and become a Responsible Officer (“RO”) in June 2019. This was long after Ariel Liu had left D’s employment. Their time with D did not overlap. He therefore has no personal knowledge or involvement with P’s subscriptions of the Relevant Bonds back in 2015. He did not and could not know what Ariel Liu might have represented to P. As admitted by him under cross-examination, many parts of his WS had no factual or documentary support. They were bare assertions / denials / speculations when it came to dealing with the Representations made by D via Ariel Liu during the Pre-Engagement Stage and the so called monitoring and management of the Relevant Bonds during the Post-Engagement Stage. 76.Ms Lam SC has made the following general criticisms on Yuen’s evidence in P’s Closing of which I agree:-
77.Yuen’s evidence given at trial has been summarized by Ms Lam SC in D’s Closing as follows:-
78.I find the above as a fair and accurate summary of the evidence given by Yuen at trial. I further accept the criticisms made by Ms Lam SC on Yuen’s evidence. 79.Overall, I do not find Yuen’s evidence helpful. Nor do I find him to be a credible and/or reliable witness for the following reasons. 80.First, it is clear that the WS he has signed and produced at trial was not a statement prepared for him. At the beginning of examination-in-chief, Yuen has to make a number of corrections by changing “I” or “me” to “Carlson Liao”, one of the former staff of D who used to liaise with P and handled her account after Ariel Liu left the employment of D. It is apparent that the WS was originally prepared for Liao and not for Yuen. Only Liao has personal knowledge on a lot of the matters contained in that WS while Yuen did not. It is also clear that when Yuen signed the statement of truth, he did not notice or care about the fact whether the statement was drafted for Liao or not. What is astonishing is the fact that it took Yuen 3 years (from the date of him signing the statement of truth on 12 October 2021 to the date when he gave evidence on 28 November 2024 to realize that a substantial (and very material) portion of that statement (from §§18 to 23 – out of a 24-paragraph WS) in fact came from Liao and not him. At the end of the cross-examination, Yuen has effectively disowned those paragraphs and admitted that “they were not [his] evidence” (「不是我的證詞」). 81.For this reason alone, I have great reservation as to the truthfulness of the contents of Yuen’s WS and in turn the reliability of its contents. 82.Second, it is clear whether the WS was prepared for Liao or for Yuen, they both do not have personal knowledge on the dealings between Ariel Liu (made on behalf of D) and P or Mr Liu. §6 of Yuen’s WS has made this clear when he said that “(P)’s contact person when she first made contact with AMTD was Ariel. As Ariel is no longer with ATMD and did not agree to act as a witness for ATMD, I am not in an ideal position to give evidence about what transpired between Ariel and (P) at the material time.” (See §6 of Yuen’s WS at [A2/175]). Hence, at best, what Yuen could do is to “give anecdotal evidence about those matters from my general knowledge of AMTD’s operations, together with my reading and understanding of ATMD’s operations, together with my reading and understanding of the documentary evidence filed in these proceedings.” (See §6 of Yuen’s WS). In other words, all he could do was to tell the court of his own understanding of what D’s “company policy” and the usual practice of a RM like Ariel Liu according to his own understanding. 83.In my judgment, this is extremely unhelpful as they only amount to what Yuen considers as to what would normally happen in a case when all the staff acted in accordance with company policy and usual practice. That would be an ideal situation. But we are not talking about an ideal situation here as P’s allegations against Ariel Liu are serious and what she did certainly was not according to the company policy and usual practice, according to P and Mr Liu’s evidence of which I accept. 84.In relation to the Low Risk Representation, Yuen in §9 of his WS stated that a RM like Ariel Liu would not have make such a representation to a prospective client. However, this is no more than a bare assertion on his part as Yuen simply did not know what took place between Ariel Liu and P. Under cross-examination, Yuen admitted that he actually was unsure whether such representation was made by Ariel Liu to P and he was not personally involved in the case, and he had no basis to deny P’s case. 85.Third, I find Yuen’s evidence is inconsistent with the contemporaneous documentary evidence produced by the parties in this case. For example, Yuen stated in his evidence that “based on [his] experience” (「以我經驗」), D would not disclose to staff (such as Ariel Liu) contents of the Placing Agreement between D and the Listco, important information like the total amount of placement under Cl 3.3. However, he was shown to be wrong on this as the Client Analysis Report prepared by Ariel Liu clearly shows that she knew the total amount of the placement was at HK$50,000,000. A further example can be found in his allegation that no RM in Ariel Liu’s position would have made the alleged Early Redemption Representation (see §10 of Yuen’s WS). This is directly contradicted by the contemporaneous documentary evidence (including the Client Analysis Report prepared by Ariel Liu and email correspondence). Under cross-examination, Yuen admitted that he was wrong in view of the indisputable contemporaneous documentary evidence. 86.Fourth, his demeanour when giving evidence; the plausibility of his answers; and the conduct of his employer (ie D) in this litigation all demonstrate to me that his evidence cannot be safely relied upon. In terms of demeanour, it is apparent to me that Yuen was a reluctant witness. He was one of the remaining ROs left in D in the forever shrinking size of its staff over the years. He was not the person who signed the statement of truth in the AD; he was not the person whom the original WS was drafted for; he had never met P or Ariel Liu. He was simply asked by his employer to give evidence. With respect, he was being used as “cannon fodder” by his employer to give evidence on matters which he mostly did not have personal knowledge of. Not only he was ill prepared when giving evidence as he had not read his own WS thoroughly nor the WS of P and Mr Liu, he appeared to be rather nervous and uncomfortable when he first started giving his evidence. Then he became evasive and unhelpful in most of the material matters asked of him under cross-examination. He progressed into making up answers which went directly against the contemporaneous documents kept by his own company. In my view, his evidence was simply not credible and not reliable. I have no hesitation to reject his evidence. Failure to call Ariel Liu as a witness 87.I consider the failure on the part of D to call Ariel Liu to give evidence at the trial is critical if not fatal to its case. 88.The principles for drawing adverse inferences for failing to adduce evidence are well known and have been helpfully summarized by Ms Lam SC as follows:-
89.There is no question that some very serious allegations have been made by P against Ariel Liu right from the start of this case. They have been maintained throughout the proceedings and at the trial. Those allegations have been explained and fully laid out in details in the WSs of P, Mr Liu and Lei. Thus, it must be clear to D that Ariel Liu, who was its former employee, was the best if not the only person who could answer those serious allegations. In fact, she was the only person who could say exactly what representations had been made by her to P and Mr Liu when she tried to convince them to switch their product from the relatively safe investment in the BOC Fund Bonds to the Relevant Bonds. Conversely, if the Representations alleged by P and Mr Liu had not been made by her, she would be the best (and the only) person who could inform the court of that. In any event, one would have thought that Ariel Liu would be keen to give her side of the story to the court, if not for anything else, just to protect her own professional reputation as a financial consultant / advisor. But it was not the case. Ariel Liu never gave a WS. D did not call her to give evidence at the trial. 90.However, it was not so much the fact that Ariel Liu did not give evidence at trial that bothers me, it was the lack of any plausible explanation from D for failing to call her and ask her to give her version of the account that I find it perplexing. 91.There is no dispute that Yuen does not know what was discussed between Ariel Liu and P, Mr Liu and Lei, and what caused P to subscribe for the Relevant Bonds with D. It would only be natural for D to try to find out. Yet the only so called “explanation” given in Yuen’s WS for failing to call Ariel Liu to give evidence is that “Ariel is no longer with AMTD and did not agree to act as a witness for AMTD”. Yuen was not able to explain to the court what attempts, if any, had been made to contact Ariel Liu to ask her to at least give a WS or to testify at the trial. Yuen also could not explain why no consideration was given to subpoena Ariel Liu to attend court to give evidence if D is so confident that she had done nothing wrong. 92.In his oral evidence, Yuen admitted that he personally did not contact Ariel Liu but “heard from others” that Ariel Liu was unwilling to testify. However, he had not heard why Ariel Liu was unwilling to testify. Although as part of the senior management team, Yuen had the power to obtain Ariel Liu’s contact information, he had not tried to contact her with a view to ask her to give evidence on D’s behalf. In his evidence, Yuen accepted that if D’s case were true, Ariel Liu would have supported D’s allegations. In this respect, Ariel Liu will be a very material witness from D’s point of view. Yet, Yuen turned this around to say that D did not call Ariel Liu to testify at trial because he “speculated” that “Ariel Liu’s evidence would support P’s case”(「劉力嘉的說法可能會同、會是偏於李小姐的說法」). Yuen confirmed to the court that this was the only reason / excuse for not calling Ariel Liu to give evidence on D’s behalf. 93.In my judgment, this is a classic situation where the court can draw adverse inferences against a party for not calling a material witness when it knows that the evidence of such witness would potentially undermine its own case and in support of the other side’s case. I am entitled to and would draw adverse inferences against D for not calling Ariel Liu to give evidence in this case. 94.Lastly, I do not accept D’s argument that it is P who should have called Ariel Liu to give evidence. The reason given by D is that Ariel was, at one stage after she had resigned from D, P’s agent and was representing her in dealing with her enquires with the Listco. I find this as a rather absurd proposition as it is effectively asking P to call a witness to give evidence against her when serious allegations of fraudulent representations, amongst other things, have been made against this particular witness while she was under the employ of D and made those representations when trying to sell the Relevant Bonds to P: see Kazakstan Kagazy Plc v Zhunus [2017] EWHC 3374 (Comm) at §67 per Picken J. Failure to call Liao as a witness 95.Equally, I consider Liao as a material witness who could provide important evidence as to what happened after he took over the management of the account of P from Ariel Liu. Eventhough there might be a half year gap between Ariel Liu leaving her employment and Liao took over the account, in my view, he could still be able to provide important evidence – from the point of view of D – as to what happened after P had made the early redemption requests. D’s case is that it had provided proper monitoring and/or management of the Relevant Bonds during the Post-Engagement Stage. Yet it has failed to call one of the most crucial witnesses who could speak to this matter at trial when there was no credible documents to support its case that they had provided such monitoring or management. 96.In this regard, I notice that Yuen did not provide any reason in his WS why Liao could not be called as a witness in the case. In his oral evidence, Yuen only said that the reason not calling Liao was because he had left the employment of D and was physically in Beijing at the time of the trial. Yuen was not able to provide any good reason why Liao could not travel from Beijing to Hong Kong to testify. 97.I do not accept Yuen’s explanations as to why Liao could not be called to give evidence at the trial. I would draw adverse inferences against D insofar when it comes to the issue of lack of monitoring and management of the performance of the Relevant Binds during the Post-Engagement Stage are concerned. Failure to produce contemporaneous documents 98.The principles on drawing adverse inferences apply equally to the non-disclosure of documents: see Tullett & Tokyo International Securities Ltd v APC Securities Co Ltd [2001] 2 HKLRD 356 at 365C-366D per Le Pichon JA. In particular, it is not only in cases of deliberate suppression of documents that an adverse inference can be drawn. Even in cases where the documents were lost or destroyed, that can be a legitimate basis to draw adverse inferences in favour of the other party: see Infabrics Ltd v Jaytex Ltd (No.2) [1985] FSR 75 at 79-81 per J Jeffs QC (siting as a Deputy Judge). 99.In light of the dire lack of documentary evidence allegedly in support of D’s case, I agree with P that the court can and should draw adverse inferences against D in relation to the various respects where such evidence is missing. I agree with Ms Lam SC that it is no answer for D to say that by not admitting or by denying P’s case it puts P to strict proof; after all, D’s non-admission or denial did not lessen their duty to make discovery on Peruvian Guano basis: see Chan Wai Chung at §52 per Marlene Ng J. 100.As highlighted by P, the failure of D in producing the contemporaneous documents are multi-layers and multi-facets. The lack of any credible documentary evidence in my view has severely undermined whatever defences D might have in the case. 101.They included:-
102.Based on the above assessment and findings, I now move on to discuss the agreed issues during the (I) Pre-Engagement Stage; and (II) Post-Engagement Stage and my findings on them.
Duties owed by D to P 103.It is not disputed (and cannot be disputed in my view) by D that it owed the following duties to P at the Pre-Engagement Stage:-
104.While D admits the duties above, it denied that D, whether through Ariel Liu or otherwise, recommended that Relevant Bonds to P. Issue 1: Misrepresentation made by Ariel Liu during the Pre-Engagement Stage 105.The following principles on misrepresentation are trite and have been summarized in P’s Opening. For the sake of completeness, I shall reproduce them here for the record. 106.The elements of an action for fraudulent misrepresentation have been summarised in Xie Li Xin v Law Ka Yan Thompson [2022] HKCFI 1591 at §§183-185 per Wilson Chan J and Koo Ming Kown v The Baptist Convention of Hong Kong [2024] HKCFI 2869 at §115 per K Yeung J:-
107.Where there is a dispute as to the meaning conveyed by representations made, the court interprets the relevant words or conduct using an objective approach, viewing the communication from the perspective of a reasonable person in the position of the representee. The characteristics of the representee, including level of sophistication, are taken into account. The test is whether (1) the words or conduct in fact led the representee to believe the alleged false fact; and (2) it was reasonable for the representee to believe it from the words or conduct as he perceived them: see Joytex at §77(2) per DHCJ Alexander Stock SC; Koo Ming Kown at §117(b) per K Yeung J. 108.Where multiple representations were made, the court will not consider each representation in isolation, but will have regard to their cumulative effect. Later representations give added force to the earlier ones, and earlier representations give focus to the later ones: see Joytex at §80 per DHCJ Alexander Stock SC; Koo Ming Kown at §117(i) per K Yeung J. 109.In relation to “inducement” or “reliance”:-
110.Falling short of fraud, a misrepresentation may be actionable in the following circumstances:-
111.Further or in the alternative, P relies on s108 of the Securities and Futures Ordinance (Cap.571) (“SFO”). It retains the private right of action by investors to recover compensation by way of damages for any pecuniary loss sustained in reliance on any fraudulent, reckless or negligent misrepresentation (as defined in s108(7)(a), (b) and (c)) to induce others to invest. The differences between relying on s108 of the SFO as opposed to a claim based on common law misrepresentation or the MO are:-
Issue 1 (a): Did D make the Representations as pleaded 112.In the ASOC, P pleaded that Ariel Liu, on behalf of D (in the capacity of asset management advisor and on behalf of the Listco in the capacity of its placing agent), advised and represented to P and Mr Liu: (§ 5(3) of ASOC). P says that the Representations were made to them during the Meetings between P, Mr Liu and/or Lei and Ariel Liu in about mid-2015. They included the Early Redemption Representation and the Low Risk Representation. 113.D denies that the Representations were made at all. Further, D submits that the court should scrutinized the Misrepresentations with caution as they were made orally only: §42 of D’s Opening. D further submits that as the Representations were allegedly made by an agent, ie Ariel Liu, P is required to prove that an agent had actual or apparent authority to make them: Hockley Mint Ltd v Ramsden [2019] 1 WLR 1617 §§63-69; Armagas Ltd v Mundogas [1986] AC 717, 718D-783E (Lord Keith). In case of fraud, D says that the master can only be vicariously liable for the servant’s fraud where the servant has acted within his ostensible authority. And an employer will be liable only if the fraudulent conduct of the employee falls within the scope of the employee’s authority, actual or ostensible. The test is one of authority, rather than the course of employment: Luk Wing Yan v CMB Wing Lung Bank Ltd [2021] 279 §§132-136 (Coleman J). As to reliance, D says that, where a party has entered a contract after a misrepresentation has been made to him, he will not have a remedy unless he would not have entered the contract but for the representation: Chitty on Contract §10-04, 10-063. If the representee would have entered the contract without making further enquiries would have revealed the true situation, the “but for” test is not satisfied: Chitty §10-044. 114.In my judgment, the main problem with D’s case on this is that it has completely failed to produce any credible evidence to show that the Representations had not been made by Ariel Liu at all. Further, if they had been made, that they were made without the authority of D. 115.While D denies the Representations were made at all, all it can offer in terms of evidence is the rather speculative evidence of Yuen when he stated in his WS that, in relation to the Early Redemption Representation, no RM in Ariel Liu’s position would have made such representation that is not fully consistent with the terms of the investment (see Yuen WS §10). And in relation to the Low Risk Representation, a RM like Ariel Liu would not promote a bond investment with reference to its issuer’s low risk of default, or being a very safe investment. 116.Of course in an ideal world, this might be what D would like to think or believe that its employee like Ariel Liu would not do. But we all know that we do not live in an ideal world. An employee who is keen to sell a financial product to an unsuspected client might have made representations that his employer did not expect or think he would make. But that does not mean that they have not been made or that those representations were made outside his authority. What was being said by Ariel Liu on behalf of D in order to induce P and her husband Mr Liu to purchase the Relevant Bonds are something only knew by those who were present at the Meetings. Yuen was not one of them. In this regard, for the reasons stated above, I chose to believe P, Mr Liu and Lei’s evidence when it comes to what had been said and represented to them by Ariel Liu at the Meetings. Further, under cross-examination, Yuen admitted that he never attempted to find out what had been said between Ariel Liu and P by looking into the emails left by Ariel Liu in D’s computer server. No attempt was also made by D to call Ariel Liu to give evidence at trial as D thought that her evidence would be contradictory to D’s case. In other words, D has not produced any evidence to show that those Representations had not been made by Ariel Liu at all. This leaves the court with the evidence of the 3 factual witnesses who were present at the Meetings and the contemporaneous documentary evidence to consider only. 117.On the issue whether Ariel Liu had recommended the Relevant Bonds to P, I find on a balance of probabilities, it is most likely that she had done so due to the following reasons:-
Early Redemption Representation 118.Specifically, in respect of the Early Redemption Representation, D’s case is that no RM in Ariel Liu’s position would have made such representation suffers from several fatal defects. They include (1) this has never been pleaded (§5 of AD merely consisted of a bare denial); and (2) it was only speculation on part of Yuen when he stated this in his WS. 119.However, as submitted by Ms Lam SC, such allegation on D’s part are plainly against the contemporaneous documentary evidence:-
120.I further agree with Ms Lam SC’s submission that the early redemption clause contained in the Client Analysis Report is consistent with P’s email to Anselm Chen and Liao of D dated 6 December 2018 at 2125 and their response to her. In her email, P repeated her instructions to D to redeem all of the Relevant Bonds, mentioned specifically her understanding that notice had to be given 1 month in advance of the anniversary date (「因為要提早1個月通知。周年到期日是1月8日，明天就是最後一天了是麼？」) This reflected the precise understanding of P at the time, which significantly was not denied or contradicted by Anselm Chen or Liao or anybody from D, to say that her understanding that she could give 30-day notice prior to the anniversary day for the early redemption was wrong or had been mistaken. 121.In the aforesaid circumstances, I find the Early Redemption Representation had been made by Ariel Liu as stated by P, Mr Liu and Lei in their evidence. Low Risk Representation 122.Specifically, in respect of the Low Risk Representation, I also find that Ariel Liu had made such representation to P as stated in P, Mr Liu and Lei’s evidence. 123.The basis of which D says that such representation had not been made by Ariel Liu was that, according to D, a RM like her would not promote a bond investment with reference to its issuer’s low risk of default, or it being a safe investment; this is because even if D had done extensive due diligence on a product, it would not wish to be understood as somehow endorsing/guaranteeing the performance of the product. This can be found in Yuen’s WS of which he has adopted at the beginning of his evidence. 124.Of course the problem with this line of defence is that not only it is speculative but also does not make commercial sense. Under cross-examination, Yuen admitted that the licensed persons would know the terms of the Placement Agreement between D and the Listco, including the fact that only professional investors could invested in the Bonds and that the placing period is at most 6 months. Yuen also admitted that the commission for primary market transactions (such as the present placement) was generally much higher than that for secondary market transactions. Therefore, Yuen admitted that (1) a person in Ariel Liu’s position would want to procure placements on such primary market accordingly, within the time limit, in order to earn commission; and (2) the larger the amount of the transaction, the more commission she and D would earn. 125.Thus, in my view, it is only natural for a person in Ariel Liu’s position to try to paint a rosy picture about the Listco in order to induce P to purchase the Relevant Bonds. After all, if she can successfully convince P to switch their BOC Fund Bonds to the Relevant Bonds, it is not difficult to imagine that both D and she would able to earn substantial amount of commission. Thus, in my judgment, it is inherently more probable that someone in Ariel Liu’s position would in fact made the Low Risk Representation to P and Mr Liu. 126.My view is reinforced by the objective fact that there existed no documents produced by D showing that either D or Ariel Liu ever mentioning to P that the Listco in fact was a loss-making company. Obviously, investing unlisted bonds in a loss-making company cannot be said to be a low risk investment. 127.Again, the problem with D’s case on this it that they could have secured Ariel Liu to give evidence at trial to give her side of the story. Yet it had chosen not to do so. As said, the court is entitled and would draw adverse inferences against D on this matter. 128.Under cross-examination, Yuen admitted that he was actually “unsure” (「不肯定」) whether Ariel Liu on behalf of D actually made the Low Risk Representation to P as he personally was not involved in Ariel Liu’s dealings with P and he was not present at the Meetings when the alleged representation was made. Therefore, Yuen has “no basis to deny” (「無基礎否認」) P’s case, something which Yuen agreed in cross-examination. This only left the court with P and her two other witnesses’ evidence in relation to the Low Risk Representation of which I accept. 129.In summary, based on the above discussions, I find Ariel Liu, in her capacity as a RM and on behalf of D, made the Misrepresentations. 130.Mr Chan SC in D’s Closing submits that even if P were able to make out a case that Ariel did make the Low Risk Representation, she has failed to show it was false or actionable. 131.The first point D relies on is that an estimation of likelihood of default is a statement of opinion. D submits that any estimates, projections and figures about a company’s valuation and business objectives and plan had been held to at most constitute statements of intention, statements as to future or statements of opinions: Lim Yi Shenn v Wong Yuen Yee (HCA 1323/2010, 29.2.2015) at §34(2) per DHCJ Wilson Chan (as he then was); Shum Kin Yee v DBS Bank Hong Kong Ltd (DCCJ 1726/2011, 31.7.2013) at §85 where HHJ Leung (as he then was) held that a note issued by a bank grading the risk level of a financial product amounted only to a statement of opinion. 132.On this matter, I prefer P’s submission that (1) a statement of opinion/intention or as to the future may entail an implied statement of fact; (2) statements of opinion will generally carry with them an implied representation that the opinion is honestly held, or that the representor knows facts which justify his opinion or has reasonable grounds for expressing the opinion; (3) such an implication may more readily be drawn where the representor is in a stronger position than the representee to know of, or to ascertain, the relevant facts: see Joytex Development Ltd v Super Homes Ltd [2018] HKCFI 2286 at §77(1) per DHCJ Alexander Stock SC; Mabanga v Ophir Engergy Plc [2012] EWHC 1589 (QB) at §30 per Popplewell J; see also Chitty on Contracts (35th ed., 2023) at §10-009. 133.In the present case, I agree with P that the Low Risk Representation as pleaded at ASOC §5(3)(b) necessarily entails an express/implied representation of fact that “the existing financial state of affairs of the Listco was such that the Listco would unlikely default on the Relevant Bonds”. 134.Insofar as D’s claim that P has not sufficiently pleaded or particularized “what exactly Ariel (Liu) had said” and P’s understanding thereof in concerned, I accept Ms Lam SC’s submission that one only needs to plead facts, not evidence: see Hong Kong Civil Procedure 2025 (“HKCP 2025”) at §18/7/5. In terms of particulars of misrepresentation, one only needs to plead the “nature and extent” of the relevant representation; there is no requirement to plead the exact wording: see HKCP 2025 at §18/12/28. Whether Ariel Liu has authority to act on behalf of D? 135.This is an issue raised for the first time by D in D’s Opening (Section E2.1 at §55-58). D says that P has failed to plead a factual case that Ariel Liu had actual or apparent authority make the Representations on D’s behalf. D says that P is required to make it clear in her pleadings whether it is asserting a case of actual or apparent authority, and if apparent authority is relied on, it is essential to plead facts which shows a “holding out” by the principal that the agent has the authority to act on behalf of the principal: K&L Gates v Navin Kumar Aggarwal (HCA 1061/2011, 349/2012, 20.5.2016) §18 (Au-Yeung J). D submits that P has singularly failed to plead her case on authority. 136.I agree with Ms Lam SC that D’s assertion that P has failed to specifically plead whether Ariel Liu had actual or apparent authority must fail for the following reasons. 137.First, as Ms Lam SC has cited in P’s Opening, the relevant principles for liability of a principal for torts of misrepresentation committed by his agent have been summarised in Bowstead & Reynolds on Agency (23rd ed., 2024) at §§8-180 – 8-182:-
138.As pointed out buy Ms Lam SC in P’s Reply Note in response to D’s Opening, according to Hong Kong Civil Procedure 2025 at §18/8/6 and Achieve Goal Holdings Ltd v Zhong Xin Ore Material Holding Co Ltd[2020] HKCA 546 at §17 per Kwan VP, in the context of entering into agreements, the principal must specifically plead the defence of lack of authority. It is not, as alleged at D’s Opening §50, that the parties had reached any purported “common ground” on what to be pleaded. In my view, D’s allegation is plainly incorrect. 139.I agree with Ms Lam SC that the same reasoning must apply here. ASOC §5(3) already pleads that “Ariel Liu, on behalf of the Defendant”, made the Representations. On the other hand, as submitted in P’s Opening, D never challenges Ariel Liu’s authority to make the Representations on behalf of D (whether in D’s pleadings or otherwise). This is not even an issue in the Statement of Agreed Issues of Liability. D only took issue with Ariel Liu’s authority for the first time in D’s Opening. I agree with Ms Lam SC that it was D who failed to plead lack of authority. 140.In the aforesaid circumstances, I find it was D who has failed to take issue with Ariel Liu’s authority and to plead lack of authority. Before mentioning in D’s Opening, this was never an issue in the case and never a defence relied upon by D. 141.As stated in §8-182 of Bowstead, so long as Ariel Liu made the Representations within the scope of her actual/apparent authority, it is not necessary for D to specifically authorize or ratify the tort (ie the making of the Representations). In this case, I find Ariel Liu clearly had made the Representations in the course of her employment with D, to further D’s cause and to complete a significant business deal for D. I find her acts were fully within the scope of her actual and/or apparent authority. 142.Further, as submitted by Ms Lam SC, liability will be imposed on D on this basis regardless of whether the Representations were made for the benefit of Ariel Liu and not that of D (which is denied). Thus, even if D were as much an intended victim (which was obviously not the case here), this would not affect D’s potential liability: see Civil Fraud (2018) at §1-141. D, as the employer of Ariel Liu with actual/apparent authority at that time, is plainly liable vicariously for the tort of fraud committed by its employee with sufficiently “close connection”: see Luk Wing Yan v CMB Wing Lung Bank Ltd [2021] HKCFI 279 at §142 per Coleman J. 143.Moreover, in relation to the use of an innocent conduit to communicate the misrepresentation, of course Ariel Liu mostly made the Representations directly to P at the Meetings. Nonetheless, the fact that Ariel Liu passed some of the information to P via others (eg Mr Liu or Lei) who were innocent would also not detract from D’s vicarious liability: see Civil Fraud (2018) at §1-145. 144.Based on the above, I therefore find that there is no substance in this technical point raised by D. Issues 1(b), 2 and Expert Issue 1: Whether the Representations were false? 145.P submits that the Representations were false for the following reasons:-
146.This issue ties in with Expert Issue 1 which I shall now deal with. 147.In his report, D’s expert Mr Ip never denied that the Relevant Bonds was a risky investment. In fact, Mr Ip admitted during his evidence that it was “risky investment compared to government bonds and the bond fund”. 148.Further, D and/or Mr Ip admitted the following either in its pleadings or in evidence[7] as summarized by Ms Lam SC in P’s Closing:-
149.In my judgment, in light of the poor financial status of the Listco on multiple fronts, the Relevant Bonds must be regarded as a high-risk investment. This was confirmed by Mr Choi, P’s expert witness, both in P’s Expert Report and in his oral evidence, of whose opinions I would prefer than those expressed by Mr Ip. 150.Amongst other things, as highlighted by P, Mr Choi has identified the following matters in P’s Expert Report:-
151.In comparison, I do not find Mr Ip’s opinion as convincing and objective as that of Mr Choi’s. 152.I agree with Ms Lam SC that Mr Ip’s has imposed limitations on his own framework, rendering his analysis incomplete. He has further tried to reframe the questions / issues defined by Master Phoebe Man to suit D’s purposes in D’s Expert Report. 153.I agree with the following submissions made by P in relation to D’s expert evidence. 154.First, in light of the wide range of permissible investment assets for CIES, there is no justifiable reason for Mr Ip to limit his comparison to the Relevant Bonds, the Government Bonds, the BOC Bond Fund and the so-called comparables:-
155.Second, Mr Ip has placed undue weight on the coupon rate of the Relevant Bonds:-
156.Further, as admitted by Mr Ip under cross-examination, Mr Choi has conducted a systematic assessment of each of the aspects of risk as set out in the circular issued by the SFC (which included credit risk, liquidity risk, interest rate risk, etc). Mr Ip admitted that he has not carried out a similar exercise in his report. Although in his evidence he claimed that he had looked at the financials and was “fully aware” what those aspects of risk were, this was not apparent in D’s Expert Report. At least it was not set out in D’s Expert Report when he tried to answer Expert Issue 1. I have difficulty in accepting that Mr Ip did go through the same exercise as Mr Choi did in the circumstances. 157.Mr Chan SC in D’s Closing Submissions raised the general point that “the unfortunate and ambiguous Expert Issues” (which were formulated by P, and which application was opposed by D) has been exploited by P to elicit general criticisms of D’s performance from the experts.”[34] Mr Chan SC further submits that D’s expert should not be unfairly accused of not reaching a “clear-cut conclusions” when the formulation of Issue 1 left much to be desired[35]. 158.However, I would like to point out the fact that the Expert Issues were given by Master Phoebe Man after full argument by counsel before her. Thus, I agree with Ms Lam SC that D’s unsuccessful opposition to the application for expert directions is not an excuse for not answering the Expert Issues granted by the court[36]. The court had already scrutinized the relevance, necessity and formulation of the Expert Issues, it is not open for D to now to seek to challenge the definition and the scope of the Expert Issues now. 159.Mr Chan SC in D’s Closing also argues that P’s expert Mr Choi “has plainly displayed a partisan and hired-gun attitude and has permitted his zeal in arguing P’s case to override this duty of impartiality to the Court.”[37] He purportedly gave several examples of how Mr Choi had “strayed beyond the scope of the 2 expert issues,[38] 160.With respect, I do not agree. I do not find Mr Choi has displayed a partisan and hired gun attitude as submitted by Mr Chan SC. Equally, I do not find D’s expert Mr Ip has displayed such an attitude. I think it is only fair to describe that both experts have tried their very best to assist the court with their expertise and experience. They just adopted different approaches and used different criteria to deal with the expert issues asked of them. Having heard and studied both experts’ evidence carefully, I agree with Ms Lam SC that in fact the matters criticized by Mr Chan SC in his submissions were all relevant to the expert issues permitted by the court.[39] 161.Mr Chan SC in D’s Closing, in answer to P’s criticism that Mr Ip could have analyzed whether a wider range of products could have been commended to P, D submits that Mr Ip’s response was a logical and cogent one due to: (i) he used government bonds and the BOC Fund as the benchmarks because they were the two reference points mentioned in §5 of the ASOC; (ii) however, to provide more context, he also analysed a list of comparable non-rated bonds available in the market at the relevant time to assess the risk of the Bonds;(iii) the hypothetical postulated by P of how an RM should advise a client (on diversification) is beyond the ambit of his report; but (iv) insofar as relevant, the RM would look at the products his firm has on offer depending on the RM’s precise role, eg whether he/she specialises in certain products and which products were on sale; just because an intermediary holds a license to deal in a certain product does not mean it would necessarily sell it or carry those products at all times. 162.However, I agree with Ms Lam SC that the above submissions as well as the criticisms made by P that Mr Ip have not looked at the underlying financials of the Listco in answering to Expert Issue 1[40], neglects one of the fundamental flaws in Mr Ip’s evidence, namely, the undue weight placed on the “coupon rate” to the exclusion of other holistic factors. 163.In the aforesaid circumstances, I prefer Mr Choi’s opinions and reject those of Mr Ip on Expert Issue 1 and find the Relevant Bonds were in fact a highly risky instrument and/or investment. I further find that they were unfit for the investment objectives of P, rendering the Low Risk Representation false. Issue 1 (c): Did D make the Representations(s) fraudulently, recklessly and/or negligently? 164.P claims that D made the Representations fraudulently, recklessly and/or negligently, given D’s role as the placing agent of the Listco and information available to the public[41]. 165.P submits that by reason of D’s role as the placing agent of the Listco in relation to the Relevant Bonds, D knew that the Early Redemption Representation was false, had no honest belief in its truth, and/or was reckless whether it was true or not. 166.Similarly, D knew that the Low Risk Representation was false, had no honest belief in its truth and/or was reckless whether it was true or not:-
167.In light of the matters above, P says that Ariel Liu on behalf of D had no reasonable grounds for believing in the truth of the Representations. 168.In the premises, P submits that Ariel Liu on behalf of D made the Representations fraudulently, recklessly and/or negligently. 169.D’s case on this again is a technical one. D says that P’s pleadings of fraud are “defective and woefully bereft of particulars”: (§ 4.3 of D’s Opening). It also means that the Representations involved statements of opinion which cannot be made out. Mr Chan SC in D’s Opening submits that P’s case on fraud lacks particulars: (§62 of D’s Opening). 170.In respect of negligent misrepresentation, D says that P’s pleas are insufficient and it is difficult to see P being serious about pursuing a claim in negligent misrepresentation: (§63 of D’s Opening). 171.In relation to the claim under section 108 of the SFO, D says that P tried to introduce new claims belatedly and this section was briefly alluded to at §28 of the ASOC in the context of P’s plea on damages for misrepresentation, it cannot amount to a proper claim based on section 108 of SFO: (§64 of D’s Opening). Fraudulent Misrepresentation 172.First, D says that fraud has not been sufficiently pleaded by P. 173.I do not agree. I accept Ms Lam SC’s submission that P’s case on fraud has been sufficiently pleaded and particularized based on the following principles set out by her:-
174.Second, D claims that P has overlooked the basic principles concerning the standard of proof and cogency of evidence required for fraud. D cited the following authorities to say that an agent “going on a frolic of her own” is not enough: Lee Yuk Shing v Dianoor International Ltd (in liquidation) (CACV 185/2015, 23.5.2016) §§46 , 47 & 54 (Kwan JA as she then was); Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387 §§185-187 (Ribeiro PJ); and Tsang Jialin v Sinpoax Securities (Asia) Ltd [2019] HKCF1 2087 §§92-93 (DHCJ William Wong SC)[42]. 175.In particular, D submits that where a misrepresentation is made not by the defendant but by his agent who does not know it is false, if the defendant knows the circumstances which make the representation false but does not know the representation was being made by the agent, the tort of deceit is not committed, as neither the defendant nor the agent has the necessary fraudulent state of mind. Even on the assumption that the representation was made in the course of the agent’s employment or within the scope of his authority, the fact that the defendant would have the necessary state of mind had he known that the representation was being made does not make him in fact fraudulent: Lee Yuk Shing v Dianoor International Ltd (in liq) (CACV 185/2015, 23.5.2016) §46 (Kwan JA, as she then was). 176.Further, D submits that to establish the necessary fraudulent state of mind, it is insufficient that the agents were acting within the scope of their authority. It must be established that the principal knew that the representation was being made. It is not enough to say a defendant has consciously prevented the disclosure of the truth to the representees, or in the hope that the agents would make the false representations: Lee Yuk Shing §47. Likewise, in Joytex §127(3)-(5), DHCJ Stock SC held that the evidence did not establish that the defendant was actually aware of the alleged agent’s relevant statements. Accordingly, P failed to establish that D (through its officers) had a fraudulent state of mind. 177.D submits that gross want of caution cannot be stretched to constitute willful or wicked indifference that is necessary for a fraudulent state of mind: Lee Yuk Shing §54. 178.On this matter, I accept Ms Lam SC’s submission that D has wrongly insisted on D’s knowledge that Ariel Liu made the Representations. I accept her submission that there are in fact a range of scenarios where a principal can be liable for fraud even if he does not know that the agent made the representation as listed out in Bowstead & Reynolds on Agency (23rd ed., 2024) at §8-183. In particular:-
179.I am of the view that the present case falls squarely within the last category. I find the false Representations made by Ariel Liu fraudulently was something within the scope of her actual/apparent authority of her to make such representations. I further find the submissions made by Mr Chan SC as contained in §§174-177 above only applies outside the circumstances as stated by Ms Lam SC in the 3 situations above: see §8-183(d) of Bowstead (in previous edition cited in Lee Yuk Shing at §46 relied on by D). 180.D’s other complaint on fraud is that there is “not a shred of direct evidence” showing any knowledge on the part of D that Ariel Liu had made the Representations: cf Lee Yuk Shing §47. Further, D says that putting P’s case at its highest, her complaint is at best one of lack of attention. D submits that even “gross want of caution” on D’s part is not enough to establish fraudulent misrepresentation, short of any degree of “dishonesty or moral turpitude”: Lee Yuk Shing §54. 181.As Ms Lam has submitted, as direct evidence of fraud can be rare, fraud can be proved by way of inferences of dishonesty which are properly grounded in primary facts: see Guangdong Shunde Zhangwai Trading Ltd at §§39, 40 per Mimmie Chan J; Elite Dragon Ltd at §31 per Mimmie Chan J. 182.Hence, I accept P’s submission that in deciding whether to draw an inference of fraud: (1) the circumstances only need to raise a more probable inference of fraud over other explanations; and (2) it is not necessary for each individual fact to justify an inference of fraud, so long as all facts viewed as a whole would support such an inference. 183.In this particular context, I am of the view that the lack of a positive case on the part of D is of particular significance. Negligent Misrepresentation 184.Likewise, I do not consider P has failed to sufficiently plead a case for negligent misrepresentation as submitted by Mr Chan SC in D’s Opening: (See §63 of D’s Opening). 185.In §6 of ASOC, P has already pleaded assumption of responsibility: “… took on the responsibility of offering investment advice to the Plaintiff.” As to negligence, P relies on the same particulars in ASOC §10. Further, §10(3) has already pleaded that D “had no reasonable grounds for believing in the truth of the Representations.” 186.Thus, I am of the view that there is no substance in this technical objection raised by D on negligent misrepresentation. Section 108 of the SFO 187.In D’s Opening, D argues that s108 of the SFO is “another instance of P seeking to introduce new claims belatedly”. 188.I do not agree. As submitted by P, s 108 of the SFO has already been pleased in §28 of ASOC. I agree that the same findings of fact will equally apply to all claims whether under s 108 SFO, common law misrepresentation or the MO: see DBX Bank (Hong Kong) Ltd v San-Hote HK Industrial Co Ltd [2013] 4 HKC 1 at §16 per DHCJ Pow SC. More importantly, as stated by P, D had the opportunity to consider the claim contained in the above pleas, and able to pled its defence at AD §27, without the need to seek further or better particulars. 189.Thus, I am of the opinion that there is again no substance in this technical objection. Issue 1(d)): Did P rely on the Representations in purchasing the Relevant Bonds? 190.On this issue, I accept P’s evidence that she heavily relied on the Representations when she decided to withdraw her investment in the BOC Bond Fund and to re-invest HK$10.5 million into the Relevant Bonds. 191.P has not only mentioned this matter in her WS (§§26-27 of P’s WS), she has repeatedly reinforced that in her evidence as follows:-
192.I accept P’s above evidence without any reservation. It is clear that she has heavily replied on the Representations made by Ariel Liu on behalf of D when deciding to purchase the Relevant Bonds. On the other hand, D has not produced any evidence, particularly from Ariel Liu herself, to contradict P’s evidence above. 193.What is more is that P’s evidence on this issue is consistent with and supported by the evidence given by Mr Liu and Lei at the trial. 194.In his evidence, Mr Liu testified that: (1) P and Mr Liu “trust AMTD about the investment” in the Relevant Bonds; (2) Ariel Liu made the Representations and then P and Mr Liu decided to invest “without further investigation”; (3) it was thus not their direct or independent decision to make the investment; (4) Lei did not express his own views on the Relevant Bonds; (5) instead, Lei’s views were based on the communications between him and Ariel Liu after their meeting. 195.Lei also testified that he did not personally study the Listco. He did not personally conduct any independent research, draw any conclusion or express any opinion on the Relevant Bonds. This is of course understandable, as Lei was not a professional adviser licensed to advise on bond investment, unlike Ariel Liu who was the real professional acting on behalf of D – a company allegedly belonged to an established investment advisory group companies, as described by Ariel Liu to P, Mr Liu, and Lei. 196.Thus, in my judgment, the evidence has unequivocally shown that P relied on the Representations in making the investment. In my view, D's claim that P decided on her volition and based on her own analysis to invest in the Relevant Bonds is not only unsupported by any positive evidence D has adduced but it totally against the entirely plausible and highly probable evidence given by P, Mr Liu and Lei. Issue 1(e): Whether the Misrepresentation claim is precluded by the Contractual Terms between P & D? 197.D purportedly relies on the terms of the Placing Letter as pleaded in AD §8.4, namely Cl 7(g), 7(k), 8(a), 8(b), 8(h) and 8(i). D alleges that P’s case on her placing trust and confidence in D when deciding to invest in the Relevant Bonds (or being induced into investing in the Relevant Bonds) is contradicted by these terms:(Yuen WS §12). 198.I accept the following submissions made on behalf of P on this issue. 199.First, a person generally cannot exclude liability for fraudulent misrepresentation. The courts generally adopt an approach to construction which presumes that a clause was not, in the absence of clear words, intended to apply to exclude or limit liability for fraud: see Misrepresentation, Mistake and Non-Disclosure (6th ed., 2022) at §9-13. 200.Second, even if D relies on these clauses to defend the claim for negligent misrepresentation, they are liable to be struck down by virtue of various statutory provisions, designed to protect persons such as P: see s4 of the MO , ss7(2) and 8 of the Control of Exemption Clauses Ordinance (Cap.71) (“CECO”) and/or ss5 and 6 of the Unconscionable Contracts Ordinance (Cap.458) (“UCO”):-
201.Third, further or in the alternative, insofar as the Placing Letter is concerned, P also relies on the doctrine of non est factum.
202.I accept the evidence given by P in relation to this issue. She told the court that they were “normal documents to open a bank account”, and Ariel Liu did not explain the legal effect of the terms. The whole process took less than an hour. Apart from Ariel Liu, no other staff was involved. Meanwhile Yuen admitted that he did not know about the execution process for the documents dated 22 December 2015, and that he never tried to find that out from Ariel Liu. 203.Further, the fact that the Placing Letter is entirely in English is important in the context of this case. I agree with Ms Lam SC that this document has to be distinguished with other bilingual documents like the Discretionary Asset Management Agreement as it was this document which potentially created a contractual relationship between P and D to allow the placing of the Relevant Bonds. And P says that she was induced to sign this document by Ariel Liu due to the misrepresentations. 204.Unlike documents like the Discretionary Asset Management Agreement which terms govern the management of the Relevant bonds during the Post-Engagement Stage, the Placing Letter in critical in the sense that the clauses contained in this document govern the placing of the Relevant Bonds during the Pre-Engagement Stage. It was this document that P said she could not understand as it was written entirely in English and no translation was provided to her either by Ariel Liu or anybody else from D. 205.In the present case, there is no Chinese version of the Placing Letter – indeed D has not been able to disclose a copy of such. P disagreed that she was careless – instead, P trusted Ariel Liu and it did not cross P’s mind that Ariel Liu would deceive her. The Placing Letter also contains no clause to the effect that the contents have been properly translated/interpreted to P. There is no evidence that Ariel Liu or anyone properly translated the document to P. P also testified that Ariel Liu has not explained all four pages of the Placing Letter, and all 13 clauses therein clause-by-clause. 206.As held in Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 at §84 per Ribeiro PJ, parties are not bound by their signature if there was a recognised legal basis for concluding that their apparent consent had been vitiated. In the circumstances, based on the account given by P on this issue (which is not contradicted by evidence produced by D), I am of the view that the court is entitled to apply the doctrine of non est factum to negate the alleged binding effect of P’s signature in this case. Issue 4: Was there any breach of duty to advise during the Pre-Engagement Stage? 207.P further claims that, in offering the Relevant Bonds as a suitable investment for P, without pointing out its risks adequately or at all, D was in breach of its duty to advise in the following ways, 208.First, P says that D failed to point out to P that the Relevant Bonds were a risky investment. Here D does not dispute its failure to do so, but instead argues that the Relevant Bonds were not a risky investment in the first place. 209.Second, P says that D failed to offer products which were suitable for the investment objectives and risk appetite of P. D argues that the Relevant Bonds were actually suitable for the investment objectives and risk appetite of P, relying on the alleged Schedule 3 to the Discretionary Asset Management Agreement (“D’s Alleged Sch 3”).
210.D has heavily relied on D’s Alleged Sch 3 at the trial. However, since Yuen has essentially admitted in evidence that D’s Alleged Sch 3 should not be relied upon in considering the Investment Guidelines of a client, I agree that this should be the end of the matter. 211.In any event, as submitted by P, in D’s pleaded case, this is the only issue where D relies on D’s Alleged Sch 3 to try to argue that the Relevant Bonds were actually suitable for the investment objectives and risk appetite of P. 212.In my view, it is clear that there is no evidence that D’s Alleged Sch 3 forms part of the Investment Guidelines as defined in the Discretionary Asset Management Agreement as shown by the following evidence transpired during the trial:-
213.In light of the above evidence given by Yuen, I find D’s Alleged Sch 3 should be disregarded. Pre-Engagement Stage: Relief 214.In view of my findings on the various issues for the Pre-Engagement Stage above, I am of the view that P is entitled to:-
215.As said, the issue of damages will be dealt with separately under the split trial order. II. Post-Engagement Stage 216.At the start of her oral closing submissions, Ms Lam SC has reminded the court that P only needs to establish her claims either under the Pre-Engagement Stage or the Post-Engagement Stage in order to succeed. She says that the most direct route to establish liability is through proving the breaches on the part of D during the Post-Engagement Stage. 217.I agree with her. 218.When compared with the more complicated and multi-faceted issues arose out of the Pre-Engagement Stage, it appears to me that both the factual and legal issues which P needs to prove in order to establish liability against D are much more straightforward. 219.Under the Post-Engagement Stage, the court only needs to decide the following issues:-
220.Specifically under (2), whether:-
221.I shall deal with the above issues in turn below. Issue 5: Duties owed by D to P during the Post-Engagement Stage 222.First, in my view, by reason of Cl 2.1-2.3, 4.1-4.2, 14.2 and Sch 4 of the Discretionary Asset Management Agreement, it is indisputable that D was at all material times a trustee holding the Entrusted Assets (including the Relevant Bonds) on trust for P. These terms also confer wide and unfettered power upon D to manage P’s Entrusted Assets. Therefore, D owed P the following common law, statutory and/or fiduciary duties in the management of the Entrusted Assets :-
223.Second, pursuant to s5 of the Supply of Services (Implied Terms) Ordinance (Cap.457), it is an implied term (“Implied Term”) of the Discretionary Asset Management Agreement that D would manage the Entrusted Assets with reasonable care and skill, as D was acting in the course of its business, and P was dealing as a consumer. 224.As accepted by Yuen under cross-examination, under the Discretionary Asset Management Agreement, (1) D must regularly monitor the performance of the investment and proactively manage the portfolio to achieve the investment objectives of the client under Cl 4.2; and (2) D must regularly monitor the market value of the relevant assets under Cl 5.1. 225.One thing I would like to mention at this juncture is the fact that P’s evidence on this part of her case was not challenged by D under cross-examination. For example, it had not been suggested to P that D did conduct proper monitoring or review of the Relevant Bonds, or that they had made an informed and considered decision not to redeem the Relevant Bonds in 2017, 2018, or even after the default in payment on 8 January 2019. In my judgment, this can be treated as an acceptance of the truth of that part of their evidence as per the rule in Brown v Dunn (1893) 6 R 67. No fiduciary duties owed? 226.In D’s Closing at §109, Mr Chan SC submits that no fiduciary duties are owed by D to P. He submits that the other fiduciary duties (other than those owed under the contract) do not assist P as they add nothing in addition to the alleged duty to monitor. He cited the case of JP Morgan Chase Bank v Springwell Navigation Corp [2008] EWHC 1186 (Comm) §§571-577 in support of his contention. 227.With respect, I do agree with such submission. In my view, D was clearly a trustee by the very fact that the Relevant Bonds being registered in the name of D holding them for trust for P: see Peregrine at §9 per Kwan J (as she then was). Further, I agree with P that JP Morgan at §§571-577 relied on by D can be distinguished because the relationship between P and D here is not an ordinary “commercial banking relationship”. I agree with Ms Lam SC that D has also conveniently ignored the indisputable trustee-beneficiary relationship as well as the express terms on “fiduciary obligations” in the Discretionary Asset Management Agreement. Failure to adequately monitor and/or manage 228.Based on the evidence transpired at trial, I find D failed to, whether adequately or at all, monitor the financial situation of the Listco and/or manage the Relevant Bonds. 229.I find as a fact that, from December 2015 to December 2019, D adopted an attitude of indifference towards the management of the Entrusted Assets, including the Relevant Bonds. In particular, I find:-
230.Ms Lam SC has very helpfully summed up the contemporaneous documentary evidence in table form in P’s Closing which goes to support my finding above:-
231.I agree with P’s submission that it is clear from the above that Ariel Liu and/or Liao had adopted a delaying tactic or simply ignored P’s repeated requests and/or inquiries for the early redemption. In doing so, I find they failed to manage the Relevant Bonds on behalf of P at all or adequately. At the trial, D has failed to adduce any contrary evidence to counter P’s allegations above. As Ms Lam SC points out, the only thing that D did was send out one email on 12 December 2018 at 10:59 which merely asked the Listco to advise “the requirement and procedure of such early redemption”. They did not even bother to state the ground(s) for requesting the early redemption. Considering the fact that D charged a lot of money as “management fees” each year for managing the Relevant Bonds on behalf of P, it was not able to show by way of any evidence that they had done any “managing” at all. 232.Yuen in his WS §14 alleges that Liao (who took over Ariel Liu’s role as RM on D’s record) regularly monitored the Relevant Bonds. The problem with that is, like a lot of allegations made by Yuen in his WS, they are mere bare assertions and not supported by any contemporaneous documents. Further, those bare assertions are directly contradicted by the documentary evidence produced by P. On top of that, I have not ignored the fact that Liao was not called to testify without any good reasons. As said, I am entitled to and would draw adverse inferences from D’s failure to call him to give evidence at the trial. 233.The following evidence which has been summarized by Ms Lam SC in P’s Closing has highlighted the fact that D failed to show, by way of any credible evidence, that it has monitored or managed the Relevant Bonds on behalf of P:-
234.Based on the above evidence, I find D failed in its duty to monitor and manage the Relevant Bonds during the Post-Engagement Stage. In particular, I find D failed to consider whether there were any grounds for early redemption. I have no hesitation in rejecting Yuen’s excuse that Anselm Chen (who sent out the only email to the Listco about early redemption) was a junior staff members unfamiliar with the T&C. Such an excuse for a company which supposed to receive substantial annual fees to monitor and manage the Relevant Bonds on behalf of its clients in my view certainly is not acceptable for several reasons. They are matters which are admitted by Yuen under cross-examination:-
Issue 3 & Expert Issue 2: Whether D failed to exercise or consider exercising the Early Redemption Option under Cl 6(B) 235.On these issues, I accept P’s submissions that D failed to exercise or consider exercising the option for early redemption pursuant to Cl 6(B) of the T&C. This is especially in view of: (1) the significant change in core business of the Listco; and (2) the deteriorating financial situation of the Listco. 236.In this regard, it is important to note that both expert witnesses agree that if D were to elect for early redemption by reason of a significant change in core business, the triggering event could possibility be the cessation of the biomass fuel business which took place in or around the end of 2017: (See Joint Expert Statement §19). 237.Cl 6(B) of the T&C provides that a bondholder may give the Listco notice and redeem the Relevant Bonds before maturity at the value of 107% of the principal, if the Listco has a significant change in core business. 238.Thus, the question to ask is whether the Listco had undergone any significant change in core business in or around 2017. 239.This would require a closer examination of the evidence given by the experts during the trial. 240.Mr Choi P’s expert in his evidence explained that since the early redemption “conditions are open to debate” and there is “no black and white guideline” in the T&C, the investment manager’s job is to identify any relevant guidelines in the industry. In his view, the Guidelines to Industrial Classification from the Hang Seng Industry Classification System (“HSICS”) provides good guidance to what are things that contribute to industry practice. According to HSICS, the primary parameter of industrial classification is the sales revenue from each business area of a listed company: (see P Expert Report pp 33-34 at §5.22.3(b)-(c)). 241.Further, both experts agreed under cross-examination that it is important to consider the “trend” of information like the sales revenue (rather than cherry picking the data from any given year), as well as the intention of the company as announced in its reports. D’s claim that there is no duty to monitor/manage 242.Mr Chan SC in D’s Closing (at §110-114) submits that D has not assumed any “broad-brushed duty” to monitor and/or to manage as suggested by P. He relies on Cl 4.2 & 4.4 of the Agreement to try to make good of his point. 243.According to D, Cl 4.2, circumscribed the extent to review the Managed Portfolio:-
244.Cl 4.2 defined the scope of D’s obligations in respect of recovery arising from the investments it holds:-
245.With respect, I think while the above clauses gave a general discretion (albeit a broad discretion) for D to manage the portfolio on behalf of its clients, it does not mean that D can totally ignore their duties and not to act or perform at all. In my view, these clauses do not in any way take away D’s duties of care owed to P to monitor and/or manage the Relevant Bonds. 246.In this regard, the case of Natamon Protpakorn v Citibank N.A. (HCCL 5/2011, 5.7.2013) §§50-51 cited by D for the proposition that the circumstances in which a court will interfere with the exercise of such a discretion are extremely rare can be distinguished when the evidence shows in this case that D had not taken any steps to monitor or manage the Relevant Bonds on behalf of P at all. 247.Further, D’s submission that no duties are owed to P to monitor or manage has also ignored the implied term pursuant to s5 of the Supply of Services (Implied Terms) Ordinance. Early Redemption Option 248.D’s primary submission on this is it was reasonable for D (or it was not unreasonable for D) to have opted against requesting early redemption (even a “simple ask”), since it was not unlikely that this would not result in the recovery of P’s investment, without costly and time-consuming subsequent steps including litigation: See §7.2 of D’s Closing. 249.Mr Chan SC cited the following legal principles which I do not think P can dispute. 250.The standard of care expected from D as an asset manager is that formulated in Bolam v Friern Hospital Management Committee [1957] 1 WLR 582. A professional is not guilty of negligence if he has acted in accordance with a practice accepted as proper by a responsible body of professionals. He is also not negligent merely because there is a body of opinion who would take a contrary view: 587 (McNair J). 251.Mr Chan SC stresses that, in applying this test, (i) the standard must be applied by reference to what the defendant actually undertook to do; (ii) a court should be slow to find a professionally qualified man guilty of a breach without evidence from those within the same profession as to the standard expected and the failure to measure up: Lenderink-Woods §§75-76. 252.While I have no problem in accepting the above general principles cited by Mr Chan SC, it is in the application of these principles that I find myself not able to agree with him. 253.First, I agree with Ms Lam SC that D has only narrowly focused on the issue of whether to exercise or consider exercising the Early Redemption Option under Cl 6(B) without considering the wider duty of have regard to relevant considerations: See §§58-59 of P’s Opening and § 94 of P’s Closing. 254.Second, in relation to D’s conduct, where D alleges that it was reasonable for D to have opted against requesting early redemption[54] and D has acted in accordance with accepted industry practice[55], the evidence actually reveals that D failed to even consider exercising the option, let alone “option” against. Basically, D has done nothing at all, except to collect the management fees each year for doing nothing. 255.Third, I do not agree D’s submission that the court should prefer P’s expert Mr Ip’s evidence over D’s expert Mr Choi’s evidence.[56] I prefer Mr Choi’s evidence than that of Mr Ip’s evidence for the following reasons:-
256.Fourth, D submits that “short of an irrefutable occurrence of a triggering event of early redemption, it is unlikely that an issuer would be agreeable to any post-issuance negotiations if it has been complaint with all its obligations”. D relies on the following answer of Mr Choi under cross-examination to make good its point:-
257.Mr Chan SC submits that given the difficulties in establishing a “definite case” for early redemption, any attempt to do so would likely only result in arduous inconclusive deliberations with the Listco: (See D’s Expert Report §§30, 35). Thus, D submits that P’s expert opinion that it was also reasonable not to have made the ask. Unless there is “at least a strong case” before seeking early redemption, any next steps would be costly and impractical according to Mr Ip, D’s expert. Mr Ip’s opinion is that “simply asking is very easy”. However, it will not promote the objective of recovering the principal, why it should it be done at all. 258.P’s case is that D should have at least “made an ask”. I agree with the following submissions made by Ms Lam SC in P’s Closing in this regard:-
Causation 259.This is an issue raised by D in its Closing[59]. D says that P failed to plead the material facts in support of the causation and to prove the same by evidence: See Liu Hong Wong v Liu Chee Kwan [2023] HKCFI 1658 §122 (DHCJ MK Liu); Shown Wai Investment Co Ltd v Hui Yip Wing David [2024] HKCFI 1477 §137. 260.Mr Chan SC has particularly highlighted to following matters in the present case to argue why P’s allege failure to prove causation at this stage is fatal to its claim on liability:-
261.On this issue, I prefer P’s submissions as follows:-
262.I am however not persuaded that the court should take the “robust approach” on the issue of causation “to fill evidential gaps caused by the wrongdoing fiduciary” according to the principles in the cases set out in §§64 to 71 of P’s Reply Closing. Failure to exercise or consider exercising the option under Cl 8 (i) 263.Quite apart from the Early Redemption Option under Cl 6(B), the Listco’s default in interest payment on 8 January 2019 would in any event have provided another straightforward exit route pursuant to Cl 8(i) of the T&C because this is undeniably an event of default. 264.However, as submitted in P’s Opening Section H3 (§§69-70), despite the Listco’s default, D failed to exercise or consider exercising the option of giving notice to the Listco that the Relevant Bonds were immediately due and repayable pursuant to Cl 8(i), especially in light of the deteriorating financial situation of the Listco, and despite clear knowledge of P’s eagerness and repeated requests to redeem the Relevant Bonds as early as possible since December 2018. After all, the event of default happened on 8 January 2019, ie only less than a month after D sent an email to the Listco on the first attempt of early redemption. 265.However, upon the Listco’s default in January 2019, D virtually did nothing (whether by exercising the option under Cl 8(i) or otherwise) in breach of its duties. There was plenty of time during the entire year of 2019 for D to exercise the option or demand early redemption. It was only on 13 December 2019 that D wrote to P about the Listco not repaying the principal for other bonds. 266.In cross-examination, Yuen admitted that: (1) the Listco’s default would have provided an alternative basis for redemption of the Relevant Bonds; (2) however, there is no evidence that Liao ever informed P of the Listco’s default (this is also never mentioned in Yuen WS); and (3) there is no documentary evidence (eg no email ) showing that D ever gave notice to the Listco to exercise the option under Cl 8(i). There is in fact no evidence that D even considered this as an early redemption option for P, in light of the dire financial situation Listco was facing at the time of the default on 8 January 2019. 267.In the aforestated premises, I find D was in breach of inter alia the duty to have regard to relevant considerations, including but not limited to the following relevant considerations: (1) the deteriorating financial situation of the Listco; and (2) the possibility of exercising the option pursuant to Cl 8(i). In similar vein, I also find that D was also in breach of the Duty of Care and/or the Implied Term, in failing to take reasonable care in relation to the exercise of the relevant option. Breach of the No-conflict and No-profit Duties 268.D as placing agent received 10% commission from the total sale proceeds, but as manager of the Entrusted Assets subscribed for the Relevant Bonds on behalf of P, without first obtaining P’s fully informed consent. Thus, D breached the No-Conflict Duty (ie the duty not to place itself in a position of a conflict of interest/duty) and/or the No-Profit Duty (ie the duty not to profit from its position as the fiduciary of P). 269.Here D tries to mount two challenges against P’s case – both of which P submits as unsound. 270.First, D denies that it subscribed for the Relevant Bonds on behalf of P. I agree with Ms Lam SC that this is clearly a bad point. It is indisputable that D was entrusted with the custody of the Relevant Bonds for P under the Discretionary Asset Management Agreement. 271.Second, D alleges that D had explicitly informed P that D was the placing agent and that it would receive 10% commission, citing Cl 8(h) of the Placing Letter. However, I agree with P’s submission that D is not entitled to rely on the Placing Letter due to non est factum. 272.It is unclear how much placing commission D earned. Cl 8(h) of the Placing Letter provides for 10% commission, whereas Cl 8.1(a) of the Placing Agreement between D and the Listco provides for 14% commission. D failed to disclose any evidence on this. In any event, in the AD §7.3, D has already admitted that it was entitled to 10% of the proceeds of placement as commission, which was admitted significantly higher than other commissions earned by D in secondary-market investment. 273.As mentioned above, apart from the placing commission under the Placing Agreement, D also received substantial fees under the Discretionary Asset Management Agreement:-
274.I entirely agree with P’s submission that D was essentially wearing the “dual hats” as placing agent for the Listco and asset manager for P. By arranging P’s subscription for the Relevant Bonds and earning commission and substantial fees without obtaining P’s fully informed consent, I find D has breached the No-Conflict Duty (placing itself in a position of potential conflict of interest) and the No-Profit Duty (profiting from its position as fiduciary of P). Post-Engagement Stage: Relief 275.In the aforestated premises, I am of the view that P is entitled to the following relief for her claims under the Post-Engagement Stage:-
CONCLUSION 276.Based on the discussions and findings above, I would order judgment be entered against D. I would grant the relief stated in §214 and §275 above, with costs of the action (including all reserved costs) to be paid by D to P, to be taxed if not agreed, with certificate for 2 counsel. 277.I would further give the following directions for the conduct of trial on quantum, ie the assessment of damages:-
278.It remains for me to thank counsel on both sides for their very detailed and helpful assistance and submissions in this case.
Ms Rachel Lam SC, Ms Eva Leung and Mr Jason Fee instructed by Hugill & Ip for the plaintiff Mr Anthony Chan SC, Mr Danny Tang and Mr William Wong, instructed by Gibson Dunn & Crutcher, for the defendant [1] Its Chinese name was (中國農林低碳控股有限公司). That was the name known at the time of the issue of the Bonds. The company is now known as China Health Technology Group Holding Company Limited 中國健康科技集團控股有限公司) (Stock Code:1069). [2] See D’s amended defence (“AD”) §6 [3] As expressly admittedby D in AD §7.3. [4] at [CB/7/77] [5] As shown at p.55 of Appendix 1 of P’s Closing under “Cash Withdrawals”. [6]at [CB/7/77] [7] With reference to the date/time of the oral evidence given by Mr Ip in the “live note” record. [8] ASOC §7(1); AD §7.1. [9] ASOC §7(2) [A1/1/9 to 10]; AD §7.1 [A1/2/43]; [T7/50:19-21]. [10] D Expert Report §21]. [11] [T7/30:4-8]. [12] [T7/43:21-25]. [13] D Expert Report §18; see also Joint Expert Statement §9. [14] [T7/28:14-16]; see also [T7/26:21-24], [T7/44:5-8]. [15] D Expert Report §19 [16] [T7/44:1-4]. [17] [T6/39:20-40:6]. [18] [T7/44:9-12]. [19] [T7/60:3-4]. [20] P Expert Report pp21-22 §§5.1.2.1(m), see also P Expert Report p.40 §6.1. [21] P Expert Report p.13 §5.1.2.1(d). [22] ASOC §7(4). [23] P Expert Report pp16-17 §5.1.2.1(g). [24] P Expert Report pp17-18 §5.1.2.1(h). [25] P Expert Report pp18-19 §5.1.2.1(i). [26] P Expert Report pp19-20 §5.1.2.1(j). [27] P Expert Report pp20-21 §5.1.2.1(k)-(l). [28] P Expert Report pp22-23 §5.1.2.1(n)-(p), see also p.40 §6.1. [29] [T6/10:20-25]. [30] [T6/13:9-23]. [31] Joint Expert Statement §17. [32] P Expert Report pp41-42 §7.1. [33] ASOC §7(5); AR §5(1). [34] See §21 of D’s Closing [35] See §31 of D’s Closing [36] See §12 of P’s Reply Closing [37] See § 23 of D’s Closing [38] See §24.1 to 24.7 of D’s Closing [39] See §13 of D’s Reply Closing [40] see §§30-31 of D’s Closing [41] see D’s Closing at §77. [42] See §§72 to 73 of D’s Closing [43] [CB/9/111 to 130] [44] [CB/9/125] [45] [CB/8/107] [46] [CB/9/129 to 130] [47] [CB/8/94 to 110] [48] [CB/8/104] [49] [CB/9/122,124] [50] [CB/8/107, CB/9/125] [51] [CB/9/129 to 130] [52] [CB/8/96] [53] [CB/1/3] [54] See §7.2 of D’s Closing [55] See §118 of D’s Closing [56] See §118 125 of D’s Closing [57] See §113 of P’s Closings [58] See P’s Closing at §§109 and 113.2 [59] See §127-130 of D’s Closing |
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