Read the full judgment text of HCA 2279/2008 on BabelCite. This Court of First Instance judgment was delivered on 12 March 2013 before Deputy High Court Judge Pow, SC.
Banking law – private banking – banker-customer relationship – contractual terms – execution-only services – Equity KODAs (Knock-out Discount Accumulator Contracts) and APFCs (Accumulating Par Forward Contracts) – corporate and personal guarantees – misrepresentation – Wong's Representations – rescission – section 108 of the Securities and Futures Ordinance – common law misrepresentation – Misrepresentation Ordinance – breach of professional duties (fiduciary duties and duties of care) – express incorporation of SFC Code of Conduct – implied terms – tort of negligence – Interfoto argument – Control of Exemption Clauses Ordinance – conclusive evidence clauses – contractual estoppel – Internal Client Suitability Assessment Guidelines – Xinxin IPO subscription. DBS Bank (Hong Kong) Limited provided private banking services to San-Hot HK Industrial Company Limited and San-Hot BVI, a BVI company wholly owned by Madam Hao (郝婷). The case concerned the banking account of San-Hot BVI, into which Madam Hao transferred cash, mutual funds and listed shares, and which became the collateral for credit facilities. Between 20 September 2007 and 15 November 2007, San-Hot BVI entered into 17 Equity KODAs and 4 APFCs, leading to substantial losses when the contracts were unwound. DBS claimed the net sums of HK$92,648,489.83 and JPY23,545,784.77 with contractual interest. The defendants counterclaimed for rescission of the 17 Equity KODAs and the Guarantee, damages for misrepresentation at common law, under the Misrepresentation Ordinance, and under section 108 of the SFO, and damages for breach of alleged professional duties. The court held that the contractual terms of the Account Opening Form, the Private Banking Account Master Agreement, the Confirmations, the General Commercial Agreement, the Mortgage, the Charge, the Facilities Letter and the Facilities Terms and Conditions were incorporated into the banking services agreement and governed the relationship. By signing the account opening form and the Confirmations, San-Hot BVI acknowledged that DBS provided execution-only services, that no investment advice was offered, and that any decision was based on the customer's own judgment. The court applied the principle of contractual estoppel (recognised in Hong Kong) to preclude San-Hot BVI from alleging reliance on the so-called Wong's Representations, from denying understanding of margin and risk provisions, and from asserting that it did not make its own independent decision. The SFC Code of Conduct was held not to fall within the express incorporation clause (Clause I1) of the Private Banking Agreement. The court further held that the alleged professional duties could not be implied into the contract, that DBS did not owe the alleged tortious duties in an execution-only context, and that the Internal Client Suitability Assessment Guidelines did not create contractual or tortious duties. The court found that the Wong's Representations had not been made and that Madam Hao was not a credible witness, her evidence being contradicted by her own witness statements, her first complaint letter, and contemporaneous documents. Judgment was entered for the plaintiff in the sums of HK$92,648,489.83 and JPY23,545,784.77 with contractual interest from 3 November 2008. The defendants' counterclaim was dismissed with costs, and an order nisi was made for the defendants to pay the plaintiff's costs of the action and counterclaim on a party-and-party basis with a certificate for two counsel, the order to become absolute if no application for variation was made within 14 days.
Legal issues: Contractual terms and conditions governing the banking services agreement between DBS and San-Hot BVI · Contractual estoppel re Wong's Representations and Equity KODAs · Contractual estoppel re margin requirements and trading risks · Whether the Wong's Representations were made and entitle rescission of the 17 Equity KODAs · Claim under section 108 of the SFO · Whether DBS owed Professional Duties in contract or tort and whether they were breached · Guarantee Representations and rescission of the Guarantee
Outcome: Judgment for the plaintiff (DBS) against the 1st Defendant San-Hot BVI and the 2nd Defendant Madam Hao as guarantor in the sums of HK$92,648,489.83 and JPY23,545,784.77, with contractual interest from 3 November 2008. The defendants' counterclaim is dismissed with costs.
Cited by 4 cases · Cites 2 cases