Zhu Bei v. South China Securities Ltd and Another
Read the full judgment text of HCA 494/2023 on BabelCite. This High Court CFI judgment was delivered on 14 May 2026.
1. The Plaintiff claims against the 1 st Defendant and the 2 nd Defendant for refund of the various sums paid by the Plaintiff to the 1 st and 2 nd Defendants respectively. The Plaintiff paid those sums in relation to the investment made by the Plaintiff in support of her application for residency in Hong Kong under the Capital Investment Entrant Scheme (the “ CIES ”). During the trial before me, the 2 nd Defendant was absent.
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HCA 494/2023 [2026] HKCFI 2798 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 494 OF 2023 ________________________ BETWEEN
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________________________ J U D G M E N T ________________________ I. INTRODUCTION 1.The Plaintiff claims against the 1st Defendant and the 2nd Defendant for refund of the various sums paid by the Plaintiff to the 1st and 2nd Defendants respectively. The Plaintiff paid those sums in relation to the investment made by the Plaintiff in support of her application for residency in Hong Kong under the Capital Investment Entrant Scheme (the “CIES”). During the trial before me, the 2nd Defendant was absent. II. BACKGROUND 2.The 1st Defendant was a Type 1 (dealing in securities) licensed corporation under the Securities and Futures Ordinance (Cap. 571) (the “SFO”). It was at the material times, and still is, required by the SFO to comply with the Code of Conduct (the “SFC Code”) for Persons Licenced by or Registered with the Securities and Futures Commission (the “SFC”) as well as the Circulars, Reports and Guidelines issued by the SFC (collectively, the “Regulatory Codes”). 3.The 2nd Defendant was a Hong Kong limited company. Its sole director and shareholder have always been one Cheng Yee Man Elaine (“Cheng”). It carried on the business of providing immigration agency and related services. 4.The Plaintiff has been a citizen of the People’s Republic of China (the “PRC”), but, prior to 8 August 2014, she was not a Hong Kong resident. She is a university graduate. Since 2007, she has been the Chairperson of a Shanghai real estate sales agency. In the course of her business, she had a lot of contracts to sign. 5.On 16 May 2013, the Plaintiff paid HK$500,000 to the 2nd Defendant as the first instalment of service fee. On or around 10 June 2013, the Plaintiff and Cheng of the 2nd Defendant signed an agreement titled “顾问服务委托协议书” (the “Jiayu Service Agreement”). The Jiayu Service Agreement provided, among others, that the 2nd Defendant shall assist the Plaintiff in applying for Hong Kong residency, and the service fee should be paid in two instalments of HK$500,000 each, with the first instalment already paid and the second instalment to be paid upon grant of her application for Hong Kong residency. 6.The next episode took place in March 2014. In March 2014, the record shows that the Plaintiff came from the PRC to Hong Kong on 17 March 2014, and left Hong Kong back to the PRC on 19 March 2014. 7.In March 2014, the Plaintiff issued and deposited a cheque drawn in favour of the 1st Defendant in the sum of HK$10,100,000 (the “Cheque”). 8.Also in March 2014, the Plaintiff signed a bilingual (Chinese and English), pro-forma Client Information Statement dated 17 March 2014 (the “Client Information Statement”).
9.At the end of the Client Information Statement was the following statement and declaration (for convenience, I quote the English parts):-
10.Correspondingly, there was a “Declaration by Licensed Person”, that is, a declaration by the 1st Defendant. It stated that one Teh Chou Yuen (“Teh”) explained the documents (collectively, the “Documents”) mentioned in the Client’s Declaration to the Plaintiff in a language the Plaintiff understood. Teh of the 1st Defendant signed this declaration on behalf of the 1st Defendant. 11.One of the Documents referred to in the Client Information Statement was the South China Securities Trading Agreement (the “SCS Trading Agreement”). It provided both in Chinese and English (and for convenience, I quote the English parts) that:-
12.On the same occasion of signing the Client Information Statement, the Plaintiff signed a Chinese, pro-forma Professional Investors Declaration dated 17 March 2014 (the “PI Declaration”), witnessed by a Michelle Li of the 1st Defendant. The following items were handwrittenly ticked:-
13.Further, at the end, the PI Declaration provided that:-
14.Another document the Plaintiff signed, also dated 17 March 2014, is titled “客戶收妥文件聲明書” (the “Declaration of Receipt of Documents”). The documents listed which were allegedly received by the Plaintiff are:-
15.There are two other relevant documents signed by the Plaintiff. The Plaintiff’s case is that she signed all these documents on the same occasion, while the 1st Defendant’s case is that she signed around the dates of these two documents:-
16.Between April 2015 and April 2019, the Plaintiff received interest payment on the Bonds deposited into her bank account in Hong Kong maintained with HSBC (the “Plaintiff’s HSBC Account”) as follows:-
17.In April 2020, the Plaintiff was in the PRC and was unable to remotely access the Plaintiff’s HSBC Account due to the malfunctioning of the security device for online banking. 18.On 20 April 2020, Ko Ming Shan of the 1st Defendant emailed the Plaintiff, informing her that the auditor of the Bond Issuer had been trying to contact her and sending the Plaintiff the telephone number of Vincent Fong of the auditor. The Plaintiff contacted Vincent Fong, and was told that the interest payment for 2020 would be delayed until June 2020. 19.In May 2020, a winding up petition was presented against the Bond Issuer in the High Court on the basis that the Bond Issuer was insolvent. In December 2020, the Bond Issuer obtained a court order from the Cayman Islands for appointment of provisional liquidators for restructuring purposes. 20.In early December 2020, the Plaintiff came to Hong Kong. She obtained a replacement security device for online banking, and discovered that the Bond Issuer did not make the interest payment for 2020 at all. 21.As at 25 April 2023, the expected recovery rate to creditors, among whom is the Plaintiff, in the event of the liquidation of the Bond Issuer was nil to 9.12% only. For the Plaintiff, this translates to HK$0 to HK$912,000. III. THE PLAINTIFF’S CASE 22.I shall summarise the Plaintiff’s case in this Part. 23.According to the Plaintiff, she met, among others, Cheng of the 2nd Defendant in June 2013 for discussing potential options for the Plaintiff to obtain Hong Kong residency. Cheng proposed two options for her, namely, the Investment as Entrepreneurs Scheme and the CIES. During the meeting, Cheng gave the Plaintiff the Jiayu Service Agreement, which she signed on or around 10 June 2013. 24.Subsequently, between August and October 2013, the Plaintiff met Cheng (and one staff member named Brian Leung from an insurance company, which has no relevance to the present proceedings) a few times. During those meetings, according to the Plaintiff, the Plaintiff “repeatedly told Cheng… that she was only prepared to invest money in a bond that was for a fixed and one-off amount, which had no risk and was backed by the government (the “Instructions”)” (emphasis added): see Statement of Claim filed on 7 June 2023 (the “Statement of Claim”) §10(d). 25.In early 2014, Cheng asked Zhu to travel from the PRC to Hong Kong to finalise her application for Hong Kong residency. As mentioned above, the record shows that the Plaintiff came to Hong Kong on 17 March 2014 and left Hong Kong on 19 March 2014. According to the Plaintiff, she met Cheng on 18 March 2014 morning. They then deposited the Cheque into the 2nd Defendant’s bank account in a HSBC branch near Regal Hotel in Hong Kong. 26.After that, Cheng asked the Plaintiff to meet her in the office of the 1st Defendant in the afternoon, make a representation to the Plaintiff, set out and defined as the “1st Representation” in §16 of the Statement of Claim, that:-
27.In the afternoon of 18 March 2014, the Plaintiff, Cheng, the Plaintiff’s cousin Wan Wai Ting Shirley (“Wan”) and an employee of the 1st Defendant (the “D1’s Employee”) met in the office of the 1st Defendant. At that meeting (the “March 2014 Meeting”), the Plaintiff said to Cheng and the D1’s Employee that “she wanted a ‘risk-free’ investment and repeated the Instructions to them”: see Statement of Claim §18. 28.The Plaintiff was then given a pile of documents (defined as the “Account Opening Documents” in §19 of the Statement of Claim) to sign. §19 of the Statement of Claim particularise the Account Opening Documents as:-
29.Cheng told the Plaintiff just to sign and not to read the documents. Then, according to Plaintiff, as set out in §§21-22 of the Statement of Claim:-
30.According to §23 of the Statement of Claim, the Plaintiff then followed “the directive from Cheng” and in reliance upon the 1st Representation and the 2nd Representation, she signed the Account Opening Documents without any opportunity to read them, without having the contents of the documents explained to her, without any opportunity to seek advice and to ask further questions. 31.As mentioned above, the Plaintiff and the Bond Issuer entered into the Subscription Agreement. In relation to this, at §28 of the Statement of Claim, the Plaintiff pleads that the Bond Issuer “agreed to sell” the Bonds to the Plaintiff. I mention this because “sell” carries some significance, because, as shall be seen later, one of the Plaintiff’s claim is in relation to the “selling” of the Bond. 32.As mentioned above, provisional liquidators have been appointed to the Bond Issuer, and the value of the Bonds has become at most HK$912,000 only. The Plaintiff has suffered loss. 33.Based on the above, the Plaintiff makes the following claims. 34.First, she claims that the Account Opening Documents are not genuine and contain false information. In particular, the 1st Defendant did not carry out any assessment of her investment experience and knowledge and the information in the PI Declaration about the number of transactions and investment experience, set out in §12 above, is false. The Plaintiff also claims that the information in the Declaration of Receipt of Documents is false, given that she has received none of the documents or any copies of documents from the 1st Defendant. In terms of relief, the Plaintiff seeks a declaration that the PI Declaration and the Declaration of Receipt of Documents are null and void. 35.Second, the Plaintiff claims that the 1st Defendant provided “investment services” (§2(d) of the Statement of Claim) to the Plaintiff and was a fiduciary to the Plaintiff, and that the 1st Defendant knew or ought to have known that the Plaintiff would rely upon the 1st Defendant’s information and advice in relation to her investment. The Plaintiff claims that the 1st Defendant was negligent, in tort and in contract, in that it failed to comply with the terms of the Regulatory Codes. Various particulars are provided. The gist is that had the 1st Defendant carried out these terms properly, the 1st Defendant would have known, according to §57 of the Statement of Claim, that:-
36.Pausing here, I immediately note that the 1st Defendant did not sell the Bonds to the Plaintiff. As pointed out above, it was the Bond Issuer who sold the Bonds. Thus, strictly speaking, (2) and (3) are inherently defective, but for the sake of completeness, I am prepared to consider “selling” here to mean “recommending” or “advising to buy”. 37.Third, the Plaintiff claims that the 2nd Defendant provided immigration agency and related services to the Plaintiff: see §3(d) of the Statement of Claim, and the 2nd Defendant knew or ought to have known that the Plaintiff would rely on the 2nd Defendant’s advice in relation to her investment. The Plaintiff claims that the 2nd Defendant was negligent, in tort and in contract. In gist, the Plaintiff claims that the 2nd Defendant failed to take reasonable steps to ensure that the 1st Defendant would offer an investment that would satisfy the Instructions. The Plaintiff claims at §62 of the Statement of Claim that had the 2nd Defendant acted with reasonable care, the 2nd Defendant would have known that the 1st Defendant was negligent, the Bonds was an unacceptable risk to the Plaintiff, and the sale of the Bonds to the Plaintiff was contrary to the Instructions and her best interest. 38.Fourth, the Plaintiff claims that the 1st and/or 2nd Defendants received commissions from the Bond Issuer in respect of the Plaintiff’s purchase of the Bond. The Plaintiff claims that this constituted breach of fiduciary duties. 39.Fifth, the Plaintiff claims that the 1st Representation and the 2nd Representation were false in that, according to the particulars set out in §73 of the Statement of Claim:-
40.Sixth, the Plaintiff claims at §69 of the Statement of Claim that the 1st Defendant and the 2nd Defendant conspired to implement a plan “with the intent to procure, induce or otherwise cause [the Plaintiff] to invest in the Bonds for the sole or predominant purpose of receiving the Commissions (“Plan”) by unlawful means including by making the Misrepresentations [that is, the 1st and 2nd Representations] to [the Plaintiff] and/or the breach of [the fiduciary duties] and/or the wrongful conduct…” IV. THE 1ST DEFENDANT’S DEFENCE 41.The 1st Defendant’s defence is that under the SCS Trading Agreement, it only provided custodian services to the Plaintiff, and under the CIES Service Agreement, it provided custodian services and services of providing information to the Immigration Department for the Plaintiff’s CIES application. It did not make any recommendation or solicitation or advice on any financial products to the Plaintiff. The 1st Defendant avers that it is the Plaintiff’s own decision to purchase the Bonds, referring to Clause 8 of the SCS Trading Agreement. 42.The 1st Defendant denies the existence of the March 2014 Meeting that took place on 18 March 2014. Instead, according to the 1st Defendant, a meeting took place on 17 March 2014, and at that meeting, the 1st Defendant enquired about, explained and completed the Client Information Statement and the PI Declaration in accordance with the information provided by the Plaintiff. Further, at that meeting, the Plaintiff signed the Declaration of Receipt of Documents to acknowledge the receipt of the Client Information Statement and the PI Declaration. 43.The 1st Defendant has no knowledge as to the Instructions and denies the existence of the 2nd Representation. The 1st Defendant also has no knowledge as to whether the Bonds were contrary to the Instructions. The 1st Defendant denies owing any duty of care or fiduciary duty to the Plaintiff, any misrepresentation, any receipt of any commission in relation to the Bonds and any conspiracy. 44.The 1st Defendant also raises the defence of limitation. V. THE 2ND DEFENDANT’S DEFENCE 45.Although the 2nd Defendant was absent from the trial before me, it filed a Defence. 46.According to its Defence, in early 2014, the Plaintiff made enquiry with the 2nd Defendant about investment for the purpose of the CIES. Cheng told the Plaintiff that the 2nd Defendant was not an expert in investment and had no relevant knowledge, and that the Plaintiff may contact her own securities firm and lawyers in making such investment. Cheng also suggested that if the Plaintiff would like, the 2nd Defendant could introduce a securities firm to her. The Plaintiff did like to, and thus the 2nd Defendant introduced the 1st Defendant to her. The 2nd Defendant denies making the 1st Representation. 47.In relation to the March 2014 Meeting, the 2nd Defendant’s defence is not so firm about the date as the 1st Defendant. In §19 of the 2nd Defendant’s Defence, it avers “on around 17 March 2014”. However, like the 1st Defendant, the 2nd Defendant denies the existence of the 2nd Representation. The 2nd Defendant avers that the Plaintiff had the opportunity to read documents, ask questions and take independent advice. 48.The 2nd Defendant denies owing any duty of care and fiduciary duty to the Plaintiff. The 2nd Defendant avers that it had no duty in relation to the Plaintiff’s investment. It also denies any conspiracy as alleged. 49.The 2nd Defendant also raises the defence of limitation, averring that the Plaintiff should have discovered any alleged wrongful conduct in March 2014. VI. ISSUES 50.From the parties’ respective cases, the issues are, broadly:-
VII. WITNESSES 51.For the Plaintiff, the Plaintiff herself and Wan were the witnesses. 52.For the 1st Defendant, Wong Ding Pong Allan (“Allan Wong”), a director of the 1st Defendant, was the witness. 53.The 2nd Defendant has filed a witness statement of Cheng. However, as I point out at the outset, the 2nd Defendant was absent from the trial, and Cheng did not give evidence. So, I disregard Cheng’s witness statement. VIII. WHETHER THE PLAINTIFF GAVE THE INSTRUCTIONS TO THE 1ST AND/OR 2ND DEFENDANTS 54.To determine this question of whether the Plaintiff did give the Instructions to the 1st and/or 2nd Defendants, the first question to ask is what are the contents of the Instructions. It is important to examine how the Instructions have been described since the pre-action letter issued by the Plaintiff’s then solicitors Tanner De Witt to the 1st Defendant on 20 February 2023 (“P’s Pre-Action Letter”). 55.In P’s Pre-Action Letter, it was stated that at the meeting on 18 March 2014:-
56.In the general endorsement of the Writ of Summons (that is, 12 days after the issuance of P’s Pre-Action Letter), the Instructions were defined in this way:-
57.Then, in the Statement of Claim:-
58.In her Witness Statement dated 22 September 2024, she said:-
59.In the written Opening Submissions prepared by her counsel, Mr Jeffrey Sham (leading Ms Lee Lok Man):-
60.In cross-examination, the Plaintiff’s explanation for:-
is that she only read the Chinese translation of P’s Pre-Action Letter and the pleadings provided to her by her lawyers. However, no such Chinese translation has ever been produced to verify whether her such explanation is accurate or not. 61.I consider the following matters:-
62.Having considered the above, I find that the risk level mentioned in the Instructions was “low risk”, not “no risk”. 63.Another aspect of the question is whether the Plaintiff mentioned “backed by the Government” in the Instructions. In my view, given the Plaintiff’s requirement of “low risk”, it is inherently probable that the Plaintiff required the bond to be “backed by the Government”, and in the absence of any evidence to the contrary, I find that the Instructions included the “backed by the Government” requirement. What was meant, objectively, by “backed by the Government” shall be considered below in the question of whether the Bonds were contrary to the Instructions. 64.As to whether the Plaintiff gave the Instructions to the 1st and 2nd Defendants, in my view, it would be natural for the Plaintiff to give the Instructions when she knew she was going to invest such a significant sum of money. In the absence of any evidence to the contrary, I find that the Plaintiff did give the Instructions to the 1st and 2nd Defendants at a meeting in March 2014, be the March 2014 Meeting defined by the Plaintiff or a meeting in March 2014 mentioned by the 1st Defendant. 65.As a footnote, Mr Sham asks me to draw adverse inference from the 1st Defendant’s failure to produce Teh or any staff who would have personal knowledge of the matters. Allan Wong in his Witness Statements explained that those staff had left the employment. This may not be a reason good enough to explain the failure because the 1st Defendant may subpoena them. However, no question was asked in the cross-examination about why the 1st Defendant did not do so. No question was asked at all about why those staffs were not asked to give evidence. Mr Chan Hei Ching, counsel for the 1st Defendant, rightly points out that without giving the 1st Defendant a chance to explain, no adverse inference should be drawn. I only need to refer to Perpetual Wealth (Hong Kong) Limited v Be Solutions Company Limited and Others [2023] HKCFI 2505 at para 37(b) for this legal proposition. Therefore, I refuse to draw any adverse inference as sought by Mr Sham. IX. WHETHER THE 2ND DEFENDANT MADE THE 1ST REPRESENTATION 66.In considering whether the 2nd Defendant made the 1st Representation to the Plaintiff, I consider that:-
67.Having considered the above, I find that Cheng of the 2nd Defendant did make the 1st Representation to the Plaintiff. As to the legal effect of the 1st Representation, I shall consider below in the question of whether the 1st Representation was false. X. WHETHER THE 1ST DEFENDANT AND THE 2ND DEFENDANT MADE THE 2ND REPRESENTATION 68.For the question of whether the 1st Defendant and the 2nd Defendant made the 2nd Representation, I consider the following:-
69.Having considered the above, I find that the 1st and 2nd Defendants did make the 2nd Representation in the meeting in March 2014. XI. WHETHER THE BONDS WERE CONTRARY TO THE INSTRUCTIONS AND/OR THE 2ND REPRESENTATION 70.To determine whether the Bonds were contrary to the Instructions and/or the 2nd Representation, it is useful to remind oneself of the contents of the Instructions and the 2nd Representation, namely:-
71.To determine whether the Bonds were contrary to the Instructions and/or the 2nd Representation, the time reference should be when the Instructions were given and the 2nd Representation was made, because neither of them was pleaded as any guarantee or promise (which would not make sense at any rate) that it shall at all times be “low risk” and/or “backed by the Government”, but simply as some instructions to be complied with and a statement of fact to be relied upon. 72.The burden lies upon the Plaintiff to prove a positive answer to this question. However, there is no plea and no evidence at all as to how the Bonds were not “low risk” (or even on the Plaintiff’s own case, “no risk”). The mere fact that the Bond Issuer eventually went insolvent in 2020 does not mean that at the time when the Instructions had to be complied with and the 2nd Representation was made back in March 2014, the Bonds were not “low risk” or “no risk”. 73.As regards “backed by the Government”, one has to determine what was meant by “backed by the Government”. The standard should be objective standard. “Backed by the Government” is not “guaranteed by the Government” or “issued by the Government”. In cross-examination, when asked about this, the Plaintiff explained her experience back in the PRC that she had once purchased bonds issued by the PRC Government and the bonds were fully repaid. Therefore, even from her subjective mind, she did understand the difference between “backed” and “issued”. It was just that, according to her evidence, she did not know that the Bonds were not issued by Government. There is, however, no evidence that she explained to the 1st and/or the 2nd Defendants that by “backed by the Government”, she meant “guaranteed or issued by the Government”. 74.In the circumstances, “backed by the Government”, objectively understood when the Instructions were given and the 2nd Representation was made, just mean “supported by the Government”. 75.Again, the burden lies upon the Plaintiff to establish that the Bonds were not backed by the Government. There is, however, again, no plea and no evidence as to how the Bonds were not backed by the Government. The mere fact that the Government, be the Hong Kong Government or any other government, did not cover the depreciated value of the Bonds does not mean that the Bonds were not backed by the Government. On the contrary, from the Plaintiff’s own evidence that the 1st and 2nd Defendants told her that the Bond Issuer carried out low-carbon and environmentally friendly business and the Government supported such business, the Bonds could, in my view, be regarded as “backed by the Government”. 76.Having considered the above, I find that the Bonds were not contrary to the Instructions and the 2nd Representation. XII. WHETHER THE PLAINTIFF SHOULD BE HELD TO THE PI DECLARATION AND THE DECLARATION OF RECEIPT OF DOCUMENTS 77.To answer this question of whether the Plaintiff should be held to the PI Declaration and the Declaration of Receipt of Documents, I have to stress that the answer, be it in the affirmative or in the negative, would be binding upon the Plaintiff and the 1st Defendant only because these documents were documents between the Plaintiff and the 1st Defendant only. 78.The second matter I have to stress is that among the pile of documents the Plaintiff was given to sign, according to the Plaintiff, on the one single occasion in the March 2014 Meeting, she only claims for a declaration of nullity in relation to these two documents only, but not any other document. 79.The third matter is that the Plaintiff does not run any plea of non est factum, undue influence, duress or unconscionability. As regards her plea of fraud and misrepresentation, it is in relation to the 1st and 2nd Representations, but not any fraud or misrepresentation in relation to the PI Declaration or the Declaration of Receipt of Documents. 80.The starting point for this question must be the legal principle stated by the Court of Final Appeal in Bank of China (Hong Kong) Ltd v Fung Chin Kan and Another (2002) 5 HKCFAR 515 at §51, which in is a substantive legal principle rather than a rule of evidence, that:-
81.Similarly, in Ming Shiu Chung & Others v Ming Shiu Sum & Others [2006] 2 HKLRD 831 at §84, the Court of Final Appeal stated that:-
82.I quote the above two oft-cited passages to explain specifically to the Plaintiff, who appeared in her oral evidence to be disappointed with the legal environment in Hong Kong, that in signing a document, it is not just the signatory who is involved, but also involved is the side who relies on the signature and who has no means to know what the signatory is thinking subjectively in his or her mind. This rule, in my view, is a manifestation of the objective standard applied throughout in contract law, fundamental to achieving certainty essential to parties’ consideration of their legal positions in agreed transactions, be it commercial or not. This, in turn, is fundamental to the rule of law – parties can know with sufficient certainty how to arrange their own affairs without being subjected to others’ unknown subjective thoughts. 83.There are exceptions to this general principle, notably, non est factum, undue influence, duress, unconscionability, fraud and misrepresentation. Absence of any such exceptions means that the signatory has the opportunity to read, understand and refuse to sign the document. He or she may feel it troublesome, time-wasting or embarrassing to ask, read, understand and/or refuse to sign the document until a later time. He or she may feel it embarrassing to look as if he or she does not trust the other side. He or she may feel the time pressure to proceed with the transaction as quickly as possible. However, absence of any such exceptions means that despite all such feelings, he or she is actually able to choose, on his or her own volition, to read, understand, and refuse to sign. In such circumstances, if he or she still chooses to sign the document, the other side would be put into a very uncertain and impossible situation if he or she could later come back to say that he or she should not be held to the document simply for the reason that she chose not to read, understand and refuse to sign. From the other side’s point of view, the other side may think that he or she may simply not care about whatever terms there are to bind him or her, and from this point of view, the other side is legitimate to think that the document would indeed bind him or her. 84.Mr Sham refers me to §56 of Phoneyork Company Limited v Chesson International (Holdings) Limited, HCA 2192/2007, 28 May 2012, where Recorder Yuen SC stated that:-
85.In that case, although the defendant signed a provisional sale and purchase agreement and signed and delivered a cheque in the sum stated in the agreement, the defendant at the same time endorsed at the back of the cheque (§22) that if the sale and purchase did not go through within 30 days, then the cheque shall be returned within 10 days thereafter. All these read together could only objectively mean that the provisional sale and purchase agreement had yet to become effective. Further, in my view, the defendant there was still in a sense held to the documents he signed, but just that those documents had to be read and understood as a whole to mean that the provisional agreement had yet to become effective. Applying the legal principle at §56 quoted above, Recorder Yuen SC held that the requisite burden was satisfied. 86.In the present case:-
87.The only basis for the Plaintiff to say that she should not be bound by these two documents is that the 1st Defendant knew or ought to have known that the information there was false. 88.In respect of the information in the PI Declaration, I accept the Plaintiff’s evidence, which is not traversed and unchallenged, and find that the information there did not reflect her actual investment experience. However, in my view, this does not follow that the 1st Defendant knew or ought to have known that the information there was false. First, it is not clear who filled in the PI Declaration, and based on what it was filled in. Would it be Cheng, or based on what Cheng had told the 1st Defendant? If so, was there any basis for the 1st Defendant to doubt Cheng, who had been provided services to the Plaintiff in relation to her CIES application? Second, even assuming that it was the 1st Defendant who filled in the PI Declaration without any basis, it filled in there for the Plaintiff to confirm and sign, and absence of any vitiating factors means that the Plaintiff could change the information there if this did not reflect her experience accurately. Nonetheless, the Plaintiff signed it and objectively viewed, the 1st Defendant could only take it that the Plaintiff agreed to what was filled in there. I add that the PI Declaration here is akin to representations and warranties set out in some standard contracts like loan agreements or guarantees. The draftsmen of the standard contracts would not have any basis to know whether the representations and warranties stated there to be accurate or not. But once the standard contracts are signed, all the parties are held to them. It would lie ill in any party’s mouth to say that he or she did not make or would not have made the representations and warranties (e.g. warranty as to the ownership of the security assets) because they were not true, and so he or she should not be held liable to breach those representations and warranties. 89.In respect of the Declaration of Receipt of Documents, this, in my view, is evidence of acknowledge of receipt of documents rather than documents of legal effect. Therefore, I would consider this as a piece of evidence in determining whether the Plaintiff did receive the documents stated therein. It is thus unnecessary in any event for me to make any declaratory relief sought by the Plaintiff that this Declaration of Receipt of Documents is null and void, just like that the Court would not make a declaratory relief that certain pieces of evidence support or do not support a party’s case. 90.While in the circumstances, it may not be necessary to determine whether the Plaintiff did receive the documents as stated in the Declaration of Receipt of Documents, for the sake of completeness, I should still make a finding in this regard. For this purpose, I consider the following:-
91.Having considered the above, I find that the Plaintiff did receive the document stated therein. I also find that she also received other documents she signed at the March 2014 Meeting. XIII. WHETHER THE 1ST AND/OR 2ND DEFENDANTS RECEIVED ANY COMMISSION IN RELATION TO THE BONDS 92.The Plaintiff raises a mere allegation that the 1st and/or 2nd Defendants received commission in relation to the Bonds. No particulars and no evidence have been provided. Mr Sham put the suggestion to Allan Chan that the 1st Defendant received such commission, and Allan Chan denied. 93.I am not satisfied that there is sufficient evidence, if any, that the 1st and/or 2nd Defendants received such commission. XIV. WHETHER THE 1ST AND/OR 2ND DEFENDANTS BREACHED ANY DUTY OF CARE AND/OR FIDUCIARY DUTIES OWED TO THE PLAINTIFF (IF ANY) 94.With respect to the question of whether there were any breaches of duties, in the light of my finding that the Bonds were not contrary to the Instructions and the 2nd Representation, I fail to see any breaches of duties. 95.More fundamentally, neither the 1st nor the 2nd Defendant owed any duty of care to advise the Plaintiff on what investment product to invest in. For the 1st Defendant, I accept that the Plaintiff account opened with the 1st Defendant was a mere custodian account for the following reasons:-
96.For a mere custodian account, I am not satisfied that the 1st Defendant owed any duty of care to the Plaintiff, let alone fiduciary duty, in respect of the Plaintiff’s investment in the Bonds. 97.The 1st Defendant had a duty to comply with the Regulatory Codes, and in the pleading, the Plaintiff pleads at §56 of the Statement of Claim that the 1st Defendant failed to take reasonable steps to establish the proper identity of the Plaintiff, to ensure that the documents were properly filled out and completed by the Plaintiff, to ensure that the documents were properly dated and so on. However, in the light of the Instructions and the 2nd Representation, I cannot see how failure to take reasonable steps in all these respects would cause the loss now allegedly suffered by the Plaintiff. After all, even on the Plaintiff’s own case and evidence, it was the Plaintiff’s Instructions and the 2nd Representation relied upon by the Plaintiff that led to the purchase of the Bonds. Whether these reasonable steps were taken or not would have no effect on the Instructions and the Plaintiff’s reliance on the 2nd Representation. 98.As regards the 2nd Defendant, in my view, the 2nd Defendant’s position is even more remote. It was to assist the Plaintiff’s CIES application, and at most, also to recommend the 1st Defendant for the Plaintiff’s investment to satisfy the CIES application. I cannot see how the 2nd Defendant owed any duty of care, let alone fiduciary duty, to the Plaintiff with respect to the Plaintiff’s investment in the Bonds. 99.In the circumstances, I find that the 1st and 2nd Defendants did not breach any duty of care and fiduciary duty to the Plaintiff. XV. WHETHER THE 1ST AND/OR 2ND DEFENDANTS MADE FALSE REPRESENTATIONS IN MAKING THE 1ST AND/OR 2ND REPRESENTATIONS, FRAUDULENTLY OR NEGLIGENTLY OR AT ALL 100.Given my finding above that the Bonds were not contrary to the 2nd Representation, I find that the 2nd Representation was not false. 101.In respect of the 1st Representation, made by the 2nd Defendant, there are four components, as set out in §26 above:-
102.For (1) and (2), such words as “largest” and “safe” are ambiguous. “Largest” in what sense? In terms of the number of employees? In terms of the number of clients? In terms of the number of the transactions? In terms of the volume of the transactions? “Safe” in what sense? In terms of the safety of making transactions through the accounts maintained with it? In terms of the safety of communication with the 1st Defendant? Where the representation is ambiguous, the representee must prove that he understood the statement in a sense in which it was in fact false: see China Jianxin Credit Services Limited v China Wah Yan Healthcare Limited [2024] HKCFI 1461 at §18 per Recorder Abraham Chan SC. However, the Plaintiff has not pleaded and has not given any evidence as to how such ambiguous words should be understood. There is simply no benchmark to see whether (1) and (2) were false. Insofar as there is any reliance on the plea at §73(d) (quoted in §39 above) that the 1st Defendant had been reprimanded by the SFC, there is no evidence in sustain this plea at all. 103.For (3) and (4), there are mere puffs but not any statement of fact one would reasonably rely upon. In any event, there is also no evidence at all to suggest that when Cheng asked the Plaintiff to trust her and follow her instructions, she did not honestly think so, or she should not have thought so. 104.In the circumstances, I also find that the 1st Representation was not false. 105.Given my findings above, there was neither fraud nor any negligence. XVI. WHETHER THE PLAINTIFF HAS SUFFERED ANY LOSS AND DAMAGE AS A RESULT OF THE ABOVE BREACHES (IF ANY) AND/OR MISREPRESENTATIONS (IF ANY) 106.Given my findings above, this question of loss and damage is unnecessary. Suffice to say that the amount claimed in the relief in the Statement of Claim, more than HK$20,000,000, is no longer pursued. Instead, Mr Sham rightly pursues the return of the HK$10,000,000 subject to any deduction of the returns (interests and dividends under the restructuring of the Bond Issuer) received upon the Bonds. XVII. WHETHER THE PLAINTIFF’S CLAIM IS IN ANY EVENT TIME-BARRED 107.Given my findings above, this question of time limit is unnecessary. 108.For the sake of completeness, I should however make a fact-finding that the Plaintiff did receive a copy of the Subscription Agreement and the certificate of the Bonds in or around March 2014, given that the Bonds, and the underlying agreement, were the main and only subject investment made for the Plaintiff’s CIES application. It would be inherently more probable than not, and so I do find, that she did receive a copy of the Subscription Agreement and the certificate of the Bonds in or around March 2014. With these two documents at the very least, I would find that the Plaintiff would have discovered that the Bonds were not risk-free and not issued by the Government, and time should have started to run from then. XVIII. CONCLUSION 109.In the circumstances, I dismiss the Plaintiff’s claim, and make a costs order nisi that the Plaintiff shall pay the costs of the 1st Defendant and the 2nd Defendant respectively, to be taxed, if not agreed. 110.Lastly, I thank Mr Sham and Ms Lee, counsel for the Plaintiff, and Mr Chan, counsel for the 1st Defendant, for their assistance.
Mr Jeffrey Sham, leading Ms Lee Lok Man, instructed by Christine M. Koo & Ip, Solicitors & Notaries LLP, for the Plaintiff Mr Chan Hei Ching, instructed by Chow & Chow Solicitors, for the 1st Defendant The 2nd Defendant is not represented and absent |
Cases cited in this judgment