HCA964/2012 YINGGAO RESOURCES LTD v. ECO METAL (HONG KONG) LTD AND ANOTHER - LawHero
HCA964/2012
高等法院（民事訴訟）Recorder Whitehead SC15/3/2016
HCA964/2012
A A
HCA 964/2012
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF FIRST INSTANCE
D D
ACTION NO 964 of 2012
E __________________ E
F BETWEEN F
G YINGGAO RESOURCES LIMITED Plaintiff G
H H
and
I I
ECO METAL (HONG KONG) LIMITED 1st Defendant
(綠色金屬(香港)有限公司)
J J
CITIBANK, N.A. (花旗銀行) 2nd Defendant
K K
__________________
L L
Before: Recorder Whitehead SC in Court
M M
Date of Hearing: 23 February 2016
N
Date of Handing Down of Decision: 16 March 2016 N
O O
DECISION
P P
Q 1. This is an appeal against a Master’s decision in relation to Q
the plaintiff’s application to amend its pleadings by which the Master
R R
ordered:
S S
T T
U U
V V
- 2 -
A A
B B
(i) The application for amendment as per the draft Amended
C Statement of Claim against the 2nd defendant is disallowed. C
(ii) There be an order nisi that the costs of and occasioned by the
D D
application be paid by the plaintiff to the 1st and
E 2nd defendants, with certificate for counsel payable forthwith, E
to be taxed forthwith if not agreed.
F F
BACKGROUND
G G
2. On 14 December 2011 the plaintiff, through its nominee,
H H
entered into a preliminary sale and purchase agreement to purchase a
I house at Regalia Bay. This was followed by a formal sale and purchase I
agreement on 28 December 2011 with completion fixed for 8 February
J J
2012.
K K
3. By an agreement dated 6 January 2012, the 1st defendant
L L
agreed to sell and deliver copper scrap to the plaintiff for sub-sale to the
M plaintiff’s buyer. The plaintiff and 1st defendant’s eventual agreement M
was on the basis that the sale and sub-sale of the copper scrap should be
N N
completed well before the completion date of the aforesaid purchase of
O the house at Regalia Bay. O
P P
4. On this basis and on 17 January 2012 the plaintiff remitted
Q two sums of HK$26 million and US$2,240,000 to the designated account Q
of the 1st defendant as pre-payment (“the Prepayment”).
R R
S 5. On or about 18 January 2012 the 1st defendant tried to utilize S
the pre-payment funds in his accounts with the 2 nd defendant bank but on
T T
U U
V V
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A A
B B
or about 20 January 2012 the 2nd defendant, according to the plaintiff,
C represented to the 1st defendant that the accounts were frozen by the C
Customs and Excise Department (“the C&E”), which representation was
D D
passed on to the plaintiff.
E E
6. The plaintiff asserts that it was subsequently discovered that
F F
the accounts were not in fact frozen by the C&E, and thus the plaintiff
G takes out its present claims for loss and damage. In this context the G
plaintiff seeks to amend its Statement of Claim to add two new causes of
H H
action, namely claims in misrepresentation and in negligence, against the
I 2nd defendant. I
J J
APPLICABLE PRINCIPLES
K K
7. The principles relevant to an application to amend by adding
L
new causes of action are well established. The amendment must arise L
out of the same facts or substantially the same facts as a cause of action in
M M
respect of which relief has already been claimed, and the amendment
N must be necessary either for disposing fairly of the cause or matter, or for N
saving costs.
O O
P
8. If these two conditions are satisfied, then leave is readily P
granted to amend before trial unless it can be shown that the new claim
Q Q
based on the proposed amendment is bound to fail. Mr Ronny Tong SC,
R who appears together with Mr Justin Tong on behalf of the plaintiff, has R
stressed that for the purposes of an application to amend, the facts
S S
pleaded in the Statement of Claim are assumed to be true and correct, and
T the court will take the applicant’s proposed pleaded case at its highest. T
U U
V V
- 4 -
A A
B B
Mr Eugene Fung SC, who appears together with Ms Theresa Chow on
C behalf of the 2nd defendant, accepts that he cannot dispute the facts that C
appear in the pleadings, and that such facts are assumed to be true. Both
D D
Mr Tong and Mr Fung are clearly correct in this approach, and it is the
E approach that I will adopt in this matter. E
F F
9. In short Mr Tong says that on the assumption that the facts
G pleaded in the proposed Amended Statement of Claim are true, that the G
proposed amendments are at least arguable and not bound to fail, that the
H H
amendments involve factual or legal issues requiring investigation at trial,
I and thus the amendments should be allowed. I
J J
THE PLAINTIFF’S CASE UPON THE AMENDMENTS
K
The misrepresentation claim K
L 10. In summary, the plaintiff has pleaded a factual background L
from which it is said that the 2nd defendant, through the 1st defendant,
M M
knew that the monies in question came from the plaintiff, and that the
N N
plaintiff required these monies to purchase the house at Regalia Bay.
O
Furthermore, that it must be inferred and reasonably foreseeable that O
nd st
whatever the 2 defendant informed the 1 defendant as to the
P P
availability of the funds, that the same would be repeated to the plaintiff,
Q
and the plaintiff would rely upon the same. Q
R 11. The plaintiff says that the 2nd defendant’s representation as R
S
to the unavailability of the funds was indisputably false. The S
nd
representation being untrue and known to the 2 defendant to be untrue is
T T
sufficient, says Mr Tong, to support an allegation in fraud.
U U
V V
- 5 -
A A
B B
12. Alternatively, the plaintiff says that the representation was
C made recklessly or negligently. In this regard Mr Tong has relied upon C
the seminal case of Hedley Byrne & Co Ltd v Heller & Partners Ltd
D D
[1964] AC 465 in which it was said:
E E
“… if, in the ordinary course of business, including
professional affairs, a person seeks advice or information from
F another, who is not under any contractual or fiduciary F
obligation to give it, in circumstances in which a reasonable
man so asked would know that he was being trusted or that his
G skill or judgment was being relied on, and such person then G
chooses to give the requested advice or information without
H clearly disclaiming any responsibility for it, then he accepts the H
legal duty to exercise such care as the circumstances require in
making his reply.”
I I
Accordingly, says Mr Tong, the claim of misrepresentation is at very
J J
least arguable.
K K
The negligence claim
L L
13. In summary, the plaintiff’s case is that the 2 nd defendant
M M
owed a duty of care to the plaintiff when it refused to release the
N Prepayment which caused the loss of the agreement and forfeiture of the N
purchase of the house at Regalia Bay. This, says Mr Tong, is also a
O O
question of mixed law and fact. In respect to the question of proximity
P in the context of a negligence case, Mr Tong relies upon Caparo P
Industries plc v Dickman & others [1990] 2 AC 605 per Lord Oliver at
Q Q
p 638C:
R R
“… What can be deduced from the Hedley Byrne case,
therefore, is that the necessary relationship between the maker
S of a statement or giver of advice (‘the adviser’) and the S
recipient who acts in reliance upon it (‘the advisee’) may
T
typically be held to exist where (1) the advice is required for a
T
purpose, whether particularly specified or generally described,
U U
V V
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A A
B which is made known, either actually or inferentially, to the B
adviser at the time when the advice is given; (2) the adviser
C knows, either actually or inferentially, that his advice will be C
communicated to the advisee, either specifically or as a
member of an ascertainable class, in order that it should be used
D by the advisee for that purpose; (3) it is known either actually D
or inferentially, that the advice so communicated is likely to be
E
acted upon by the advisee for that purpose without independent E
inquiry, and (4) it is so acted upon by the advisee to his
detriment. …”
F F
14. Mr Tong submits that whether the 2nd defendant owed a duty
G G
nd
of care to the plaintiff would depend upon whether the 2 defendant’s
H H
acts might reasonably be foreseeable to cause harm to the plaintiff, and in
I
this regard he relies upon a meeting between the plaintiff and the I
st nd
1 defendant during which a telephone call was made to the 2 defendant,
J J
and what he describes as “correspondence between the 2 nd defendant and
K the plaintiff”. Mr Tong further relies upon Wells v First National K
Commercial Bank [1998] PNLR 552 in which the facts were similar to
L L
the present case save that there was no communication between the
M intended beneficiary and the bank. Mr Tong points to the judgment of M
Evans LJ at p 563D that:
N N
“Finally, I would add this: if the plaintiff had communicated
O with the bank then it could be, I say no more, a situation which O
was in Lord Devlin's words ‘equivalent to contract’. It may
be that in such a situation it would be arguable that a
P Hedley Byrne duty would arise. …” P
Q Q
THE 2ND DEFENDANT’S CASE UPON AMENDMENT
R R
15. Mr Eugene Fung SC takes five primary points in objecting to
S the proposed amendments. S
T T
U U
V V
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A A
B B
16. First, in relation to the fraud plea, he submits that none of the
C particulars pleaded in the proposed amendments go anywhere to C
supporting a case of fraud against the bank.
D D
E
17. Second, Mr Fung says that the plaintiff’s case in negligent E
misrepresentation must fail because the bank cannot be said to be in a
F F
Hedley Byrne type relationship with the plaintiff.
G G
18. Third, in relation to misrepresentation, Mr Fung submits that
H H
none of the pleaded particulars establish the bank, when making the
I
alleged representation to the 1st defendant, intended or expected for that I
representation to be passed on to the plaintiff.
J J
K
19. Fourth, in respect of the negligence claim, Mr Fung submits K
that a bank which receives funds from a third party and credits a
L L
customer’s account cannot also owe any tortious duty of care to the third
M
party; and that Wells v First National Commercial Bank is a clear M
authority that foreseeability of harm to a plaintiff alone would not give
N N
rise to any duty of care on the part of the bank towards the plaintiff.
O O
20. Fifth, in relation to a plea made in respect of section 3 of the
P P
Misrepresentation Ordinance (Cap 284), that it is well established that
Q
section 3 has no application where the representor is neither himself the Q
other contracting party nor the agent of the other contracting party.
R R
S S
T T
U U
V V
- 8 -
A A
B B
ANALYSIS
C Fraud C
D 21. It is well established that fraud must be pleaded distinctly D
and with the utmost particularity, and must be distinctly proved.
E E
F 22. In the present case, the particulars of fraud relied upon by F
the plaintiff are found in §25 of the proposed amendments, as follows:
G G
“(1) The 2nd Defendant knew or ought to have known there
H was no restraint order issued by any court restraining the H
use of the Accounts.
I I
(2) The 2nd Defendant ought to, but failed, to take steps to
ascertain if the mode and operation of the payer of the
J funds, namely, the Plaintiff, was the subject matter of J
investigation of the C&E and that there was any legal
justification at all for freezing the Accounts.
K K
nd
(3) The 2 Defendant accordingly knew or ought to have
L known that the investigation by the C & E was not a L
matter that was caused by the Plaintiff or its making of
the Prepayment.
M M
(4) The 2nd Defendant accordingly knew or ought to have
known that the investigation by the C & E was not
N N
directed at the Prepayment made by the Plaintiff, but the
legality of the operations of the 1 st Defendant.
O O
(5) In the premises, the Representation was made
fraudulently without any honest belief that the same was
P true.” P
Q Q
23. Mr Tong has confirmed that the above particulars are the
R only particulars advanced by his client in support of an allegation of R
fraud.
S S
T T
U U
V V
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A A
B B
24. Mr Fung has relied on the judgment of Millett LJ in
C Armitage v Nurse [1998] Ch 241 at 256–257. Mr Fung submits and I C
accept, that an allegation that the defendant “knew or ought to have
D D
known” is not a clear and unequivocal allegation of actual knowledge and
E will not support a finding of fraud. E
F F
25. Furthermore, Mr Fung submits and I agree, that the plea that
G the 2nd defendant ought to but failed to make certain enquires with the G
C&E about the plaintiff has no basis as to why this should be so, and in
H H
any event at best supports an allegation of negligence.
I I
26. In short, I find that the plea of fraud made against the
J J
2nd defendant and the particulars provided do not in any way support a
K case of fraud against the bank. In my view the allegation of fraud is K
unarguable, and is bound to fail.
L L
M
Negligent misrepresentation M
27. Mr Tong submits that in order to maintain his cause of
N N
action in misrepresentation, that he does not need fraud to succeed. In
O
answer to Mr Fung’s submission that the bank cannot be said to be in a O
P
Hedley Byrne relationship with the plaintiff, Mr Tong refers to P
Charlesworth & Percy on Negligence at §2/190 as follows:
Q Q
“A person is under no general duty to speak or act but by
R
undertaking to speak or to act or by inducing reliance in some R
way, responsibility is assumed, and the basis for a duty of care
comes into existence.”
S S
T T
U U
V V
- 10 -
A A
B B
28. In my view and upon the assumption that the matters
C pleaded in the proposed amendments are true, the factual circumstances C
in which the representation is said to have been made and have been
D D
imparted to the plaintiff, together with the subsequent conduct of the bank,
E raises in my view at least an arguable case that a Hedley Byrne E
relationship between the 2 nd defendant and the plaintiff did in fact arise.
F F
As such I find that the proposed amendments in relation to the claim for
G negligent misstatement are maintainable and should be allowed. G
H H
The negligence claim
I I
29. The distinction between Wells v First National Commercial
J Bank and the present case is that there appears in this case to be J
nd
communication between the 2 defendant and the plaintiff, albeit indirect
K K
and perhaps inferentially. I take Mr Fung’s point that some of the
L communications relied upon were made after the alleged representation L
was made, but on the basis that the present averments in the Amended
M M
Statement of Claim are correct, there are pleas to the effect that the 2nd
N Defendant knew of the agreement made between the Plaintiff and the 1 st N
Defendant, and when the representation was made the same was
O O
communicated with the 2nd defendant’s knowledge, by the 1st defendant
P to the plaintiff. Mr Tong has relied upon Commissioners of Customs P
and Excise v Barclays Bank plc [2007] 1 AC 181 that issues of fact are
Q Q
plainly questions for trial and are not to be determined at an interlocutory
R stage. I also bear in mind the dicta of Evans LJ in Wells v First National R
Commercial Bank as noted, that where there is a communication between
S S
the plaintiff and the bank it may be that in such a situation it would be
T arguable that a Hedley Byrne duty would arise. T
U U
V V
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A A
B B
30. In these circumstances I cannot say that the plea in
C negligence is unarguable, and thus the amendments in respect of this plea C
will be allowed.
D D
E
Section 3 of the Misrepresentation Ordinance E
31. I accept Mr Fung’s submission that the plaintiff’s reliance
F F
upon section 3 is misconceived. It is not pleaded that bank has ever
G G
been a party to any contract allegedly entered into by the plaintiff as a
H
result of the alleged representation. The section 3 representation plea is H
disallowed.
I I
CONCLUSION
J J
32. My decision is as follows:
K K
(i) The proposed amendments in respect of the claim in fraud
L L
and any consequential amendment thereto are disallowed.
M (ii) The proposed amendments in respect of negligent M
misrepresentation and any consequential amendments
N N
thereto are allowed.
O (iii) The amendments in respect of the claim in negligence and O
any consequential amendments thereto are allowed.
P P
(iv) The amendment in respect of section 3 of the
Q
Misrepresentation Ordinance is disallowed. Q
R R
33. The Master’s decision orally delivered on 17 July 2015 is
S accordingly set aside. S
T T
U U
V V
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A A
B B
COSTS
C C
34. The plaintiff has substantially but not entirely succeeded in
D
its appeal. Regard must be had to the fact that the 2 nd defendant has D
succeeded in resisting the plaintiff’s proposed amendments in fraud, and
E E
also in respect of section 3 of the Misrepresentation Ordinance.
F
Accordingly, I make an order nisi to become absolute in 14 days of the F
date of this decision that 50% of the costs of and occasioned by this
G G
appeal, and in the application to the Master below, be paid forthwith by
H the 2nd defendant to the plaintiff with certificate for two counsel, to be H
taxed if not agreed.
I I
J J
K K
L (Robert Whitehead SC) L
Recorder of the High Court
M M
N Mr Tong Ronny SC and Mr Tong Justin, instructed by Ng & Partners, N
for the plaintiff
O O
Mr Fung Eugene SC and Ms Chow Theresa, instructed by
Wilkinson & Grist, for the 2nd defendant
P P
Q Q
R R
S S
T T
U U
V V
YINGGAO RESOURCES LTD v. ECO METAL (HONG KONG) LTD AND ANOTHER
A A
HCA 964/2012
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF FIRST INSTANCE
D D
ACTION NO 964 of 2012
E __________________ E
F BETWEEN F
G YINGGAO RESOURCES LIMITED Plaintiff G
H H
and
I I
ECO METAL (HONG KONG) LIMITED 1st Defendant
(綠色金屬(香港)有限公司)
J J
CITIBANK, N.A. (花旗銀行) 2nd Defendant
K K
__________________
L L
Before: Recorder Whitehead SC in Court
M M
Date of Hearing: 23 February 2016
N
Date of Handing Down of Decision: 16 March 2016 N
O O
DECISION
P P
Q 1. This is an appeal against a Master’s decision in relation to Q
the plaintiff’s application to amend its pleadings by which the Master
R R
ordered:
S S
T T
U U
V V
- 2 -
A A
B B
(i) The application for amendment as per the draft Amended
C Statement of Claim against the 2nd defendant is disallowed. C
(ii) There be an order nisi that the costs of and occasioned by the
D D
application be paid by the plaintiff to the 1st and
E 2nd defendants, with certificate for counsel payable forthwith, E
to be taxed forthwith if not agreed.
F F
BACKGROUND
G G
2. On 14 December 2011 the plaintiff, through its nominee,
H H
entered into a preliminary sale and purchase agreement to purchase a
I house at Regalia Bay. This was followed by a formal sale and purchase I
agreement on 28 December 2011 with completion fixed for 8 February
J J
2012.
K K
3. By an agreement dated 6 January 2012, the 1st defendant
L L
agreed to sell and deliver copper scrap to the plaintiff for sub-sale to the
M plaintiff’s buyer. The plaintiff and 1st defendant’s eventual agreement M
was on the basis that the sale and sub-sale of the copper scrap should be
N N
completed well before the completion date of the aforesaid purchase of
O the house at Regalia Bay. O
P P
4. On this basis and on 17 January 2012 the plaintiff remitted
Q two sums of HK$26 million and US$2,240,000 to the designated account Q
of the 1st defendant as pre-payment (“the Prepayment”).
R R
S 5. On or about 18 January 2012 the 1st defendant tried to utilize S
the pre-payment funds in his accounts with the 2 nd defendant bank but on
T T
U U
V V
- 3 -
A A
B B
or about 20 January 2012 the 2nd defendant, according to the plaintiff,
C represented to the 1st defendant that the accounts were frozen by the C
Customs and Excise Department (“the C&E”), which representation was
D D
passed on to the plaintiff.
E E
6. The plaintiff asserts that it was subsequently discovered that
F F
the accounts were not in fact frozen by the C&E, and thus the plaintiff
G takes out its present claims for loss and damage. In this context the G
plaintiff seeks to amend its Statement of Claim to add two new causes of
H H
action, namely claims in misrepresentation and in negligence, against the
I 2nd defendant. I
J J
APPLICABLE PRINCIPLES
K K
7. The principles relevant to an application to amend by adding
L
new causes of action are well established. The amendment must arise L
out of the same facts or substantially the same facts as a cause of action in
M M
respect of which relief has already been claimed, and the amendment
N must be necessary either for disposing fairly of the cause or matter, or for N
saving costs.
O O
P
8. If these two conditions are satisfied, then leave is readily P
granted to amend before trial unless it can be shown that the new claim
Q Q
based on the proposed amendment is bound to fail. Mr Ronny Tong SC,
R who appears together with Mr Justin Tong on behalf of the plaintiff, has R
stressed that for the purposes of an application to amend, the facts
S S
pleaded in the Statement of Claim are assumed to be true and correct, and
T the court will take the applicant’s proposed pleaded case at its highest. T
U U
V V
- 4 -
A A
B B
Mr Eugene Fung SC, who appears together with Ms Theresa Chow on
C behalf of the 2nd defendant, accepts that he cannot dispute the facts that C
appear in the pleadings, and that such facts are assumed to be true. Both
D D
Mr Tong and Mr Fung are clearly correct in this approach, and it is the
E approach that I will adopt in this matter. E
F F
9. In short Mr Tong says that on the assumption that the facts
G pleaded in the proposed Amended Statement of Claim are true, that the G
proposed amendments are at least arguable and not bound to fail, that the
H H
amendments involve factual or legal issues requiring investigation at trial,
I and thus the amendments should be allowed. I
J J
THE PLAINTIFF’S CASE UPON THE AMENDMENTS
K
The misrepresentation claim K
L 10. In summary, the plaintiff has pleaded a factual background L
from which it is said that the 2nd defendant, through the 1st defendant,
M M
knew that the monies in question came from the plaintiff, and that the
N N
plaintiff required these monies to purchase the house at Regalia Bay.
O
Furthermore, that it must be inferred and reasonably foreseeable that O
nd st
whatever the 2 defendant informed the 1 defendant as to the
P P
availability of the funds, that the same would be repeated to the plaintiff,
Q
and the plaintiff would rely upon the same. Q
R 11. The plaintiff says that the 2nd defendant’s representation as R
S
to the unavailability of the funds was indisputably false. The S
nd
representation being untrue and known to the 2 defendant to be untrue is
T T
sufficient, says Mr Tong, to support an allegation in fraud.
U U
V V
- 5 -
A A
B B
12. Alternatively, the plaintiff says that the representation was
C made recklessly or negligently. In this regard Mr Tong has relied upon C
the seminal case of Hedley Byrne & Co Ltd v Heller & Partners Ltd
D D
[1964] AC 465 in which it was said:
E E
“… if, in the ordinary course of business, including
professional affairs, a person seeks advice or information from
F another, who is not under any contractual or fiduciary F
obligation to give it, in circumstances in which a reasonable
man so asked would know that he was being trusted or that his
G skill or judgment was being relied on, and such person then G
chooses to give the requested advice or information without
H clearly disclaiming any responsibility for it, then he accepts the H
legal duty to exercise such care as the circumstances require in
making his reply.”
I I
Accordingly, says Mr Tong, the claim of misrepresentation is at very
J J
least arguable.
K K
The negligence claim
L L
13. In summary, the plaintiff’s case is that the 2 nd defendant
M M
owed a duty of care to the plaintiff when it refused to release the
N Prepayment which caused the loss of the agreement and forfeiture of the N
purchase of the house at Regalia Bay. This, says Mr Tong, is also a
O O
question of mixed law and fact. In respect to the question of proximity
P in the context of a negligence case, Mr Tong relies upon Caparo P
Industries plc v Dickman & others [1990] 2 AC 605 per Lord Oliver at
Q Q
p 638C:
R R
“… What can be deduced from the Hedley Byrne case,
therefore, is that the necessary relationship between the maker
S of a statement or giver of advice (‘the adviser’) and the S
recipient who acts in reliance upon it (‘the advisee’) may
T
typically be held to exist where (1) the advice is required for a
T
purpose, whether particularly specified or generally described,
U U
V V
- 6 -
A A
B which is made known, either actually or inferentially, to the B
adviser at the time when the advice is given; (2) the adviser
C knows, either actually or inferentially, that his advice will be C
communicated to the advisee, either specifically or as a
member of an ascertainable class, in order that it should be used
D by the advisee for that purpose; (3) it is known either actually D
or inferentially, that the advice so communicated is likely to be
E
acted upon by the advisee for that purpose without independent E
inquiry, and (4) it is so acted upon by the advisee to his
detriment. …”
F F
14. Mr Tong submits that whether the 2nd defendant owed a duty
G G
nd
of care to the plaintiff would depend upon whether the 2 defendant’s
H H
acts might reasonably be foreseeable to cause harm to the plaintiff, and in
I
this regard he relies upon a meeting between the plaintiff and the I
st nd
1 defendant during which a telephone call was made to the 2 defendant,
J J
and what he describes as “correspondence between the 2 nd defendant and
K the plaintiff”. Mr Tong further relies upon Wells v First National K
Commercial Bank [1998] PNLR 552 in which the facts were similar to
L L
the present case save that there was no communication between the
M intended beneficiary and the bank. Mr Tong points to the judgment of M
Evans LJ at p 563D that:
N N
“Finally, I would add this: if the plaintiff had communicated
O with the bank then it could be, I say no more, a situation which O
was in Lord Devlin's words ‘equivalent to contract’. It may
be that in such a situation it would be arguable that a
P Hedley Byrne duty would arise. …” P
Q Q
THE 2ND DEFENDANT’S CASE UPON AMENDMENT
R R
15. Mr Eugene Fung SC takes five primary points in objecting to
S the proposed amendments. S
T T
U U
V V
- 7 -
A A
B B
16. First, in relation to the fraud plea, he submits that none of the
C particulars pleaded in the proposed amendments go anywhere to C
supporting a case of fraud against the bank.
D D
E
17. Second, Mr Fung says that the plaintiff’s case in negligent E
misrepresentation must fail because the bank cannot be said to be in a
F F
Hedley Byrne type relationship with the plaintiff.
G G
18. Third, in relation to misrepresentation, Mr Fung submits that
H H
none of the pleaded particulars establish the bank, when making the
I
alleged representation to the 1st defendant, intended or expected for that I
representation to be passed on to the plaintiff.
J J
K
19. Fourth, in respect of the negligence claim, Mr Fung submits K
that a bank which receives funds from a third party and credits a
L L
customer’s account cannot also owe any tortious duty of care to the third
M
party; and that Wells v First National Commercial Bank is a clear M
authority that foreseeability of harm to a plaintiff alone would not give
N N
rise to any duty of care on the part of the bank towards the plaintiff.
O O
20. Fifth, in relation to a plea made in respect of section 3 of the
P P
Misrepresentation Ordinance (Cap 284), that it is well established that
Q
section 3 has no application where the representor is neither himself the Q
other contracting party nor the agent of the other contracting party.
R R
S S
T T
U U
V V
- 8 -
A A
B B
ANALYSIS
C Fraud C
D 21. It is well established that fraud must be pleaded distinctly D
and with the utmost particularity, and must be distinctly proved.
E E
F 22. In the present case, the particulars of fraud relied upon by F
the plaintiff are found in §25 of the proposed amendments, as follows:
G G
“(1) The 2nd Defendant knew or ought to have known there
H was no restraint order issued by any court restraining the H
use of the Accounts.
I I
(2) The 2nd Defendant ought to, but failed, to take steps to
ascertain if the mode and operation of the payer of the
J funds, namely, the Plaintiff, was the subject matter of J
investigation of the C&E and that there was any legal
justification at all for freezing the Accounts.
K K
nd
(3) The 2 Defendant accordingly knew or ought to have
L known that the investigation by the C & E was not a L
matter that was caused by the Plaintiff or its making of
the Prepayment.
M M
(4) The 2nd Defendant accordingly knew or ought to have
known that the investigation by the C & E was not
N N
directed at the Prepayment made by the Plaintiff, but the
legality of the operations of the 1 st Defendant.
O O
(5) In the premises, the Representation was made
fraudulently without any honest belief that the same was
P true.” P
Q Q
23. Mr Tong has confirmed that the above particulars are the
R only particulars advanced by his client in support of an allegation of R
fraud.
S S
T T
U U
V V
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A A
B B
24. Mr Fung has relied on the judgment of Millett LJ in
C Armitage v Nurse [1998] Ch 241 at 256–257. Mr Fung submits and I C
accept, that an allegation that the defendant “knew or ought to have
D D
known” is not a clear and unequivocal allegation of actual knowledge and
E will not support a finding of fraud. E
F F
25. Furthermore, Mr Fung submits and I agree, that the plea that
G the 2nd defendant ought to but failed to make certain enquires with the G
C&E about the plaintiff has no basis as to why this should be so, and in
H H
any event at best supports an allegation of negligence.
I I
26. In short, I find that the plea of fraud made against the
J J
2nd defendant and the particulars provided do not in any way support a
K case of fraud against the bank. In my view the allegation of fraud is K
unarguable, and is bound to fail.
L L
M
Negligent misrepresentation M
27. Mr Tong submits that in order to maintain his cause of
N N
action in misrepresentation, that he does not need fraud to succeed. In
O
answer to Mr Fung’s submission that the bank cannot be said to be in a O
P
Hedley Byrne relationship with the plaintiff, Mr Tong refers to P
Charlesworth & Percy on Negligence at §2/190 as follows:
Q Q
“A person is under no general duty to speak or act but by
R
undertaking to speak or to act or by inducing reliance in some R
way, responsibility is assumed, and the basis for a duty of care
comes into existence.”
S S
T T
U U
V V
- 10 -
A A
B B
28. In my view and upon the assumption that the matters
C pleaded in the proposed amendments are true, the factual circumstances C
in which the representation is said to have been made and have been
D D
imparted to the plaintiff, together with the subsequent conduct of the bank,
E raises in my view at least an arguable case that a Hedley Byrne E
relationship between the 2 nd defendant and the plaintiff did in fact arise.
F F
As such I find that the proposed amendments in relation to the claim for
G negligent misstatement are maintainable and should be allowed. G
H H
The negligence claim
I I
29. The distinction between Wells v First National Commercial
J Bank and the present case is that there appears in this case to be J
nd
communication between the 2 defendant and the plaintiff, albeit indirect
K K
and perhaps inferentially. I take Mr Fung’s point that some of the
L communications relied upon were made after the alleged representation L
was made, but on the basis that the present averments in the Amended
M M
Statement of Claim are correct, there are pleas to the effect that the 2nd
N Defendant knew of the agreement made between the Plaintiff and the 1 st N
Defendant, and when the representation was made the same was
O O
communicated with the 2nd defendant’s knowledge, by the 1st defendant
P to the plaintiff. Mr Tong has relied upon Commissioners of Customs P
and Excise v Barclays Bank plc [2007] 1 AC 181 that issues of fact are
Q Q
plainly questions for trial and are not to be determined at an interlocutory
R stage. I also bear in mind the dicta of Evans LJ in Wells v First National R
Commercial Bank as noted, that where there is a communication between
S S
the plaintiff and the bank it may be that in such a situation it would be
T arguable that a Hedley Byrne duty would arise. T
U U
V V
- 11 -
A A
B B
30. In these circumstances I cannot say that the plea in
C negligence is unarguable, and thus the amendments in respect of this plea C
will be allowed.
D D
E
Section 3 of the Misrepresentation Ordinance E
31. I accept Mr Fung’s submission that the plaintiff’s reliance
F F
upon section 3 is misconceived. It is not pleaded that bank has ever
G G
been a party to any contract allegedly entered into by the plaintiff as a
H
result of the alleged representation. The section 3 representation plea is H
disallowed.
I I
CONCLUSION
J J
32. My decision is as follows:
K K
(i) The proposed amendments in respect of the claim in fraud
L L
and any consequential amendment thereto are disallowed.
M (ii) The proposed amendments in respect of negligent M
misrepresentation and any consequential amendments
N N
thereto are allowed.
O (iii) The amendments in respect of the claim in negligence and O
any consequential amendments thereto are allowed.
P P
(iv) The amendment in respect of section 3 of the
Q
Misrepresentation Ordinance is disallowed. Q
R R
33. The Master’s decision orally delivered on 17 July 2015 is
S accordingly set aside. S
T T
U U
V V
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A A
B B
COSTS
C C
34. The plaintiff has substantially but not entirely succeeded in
D
its appeal. Regard must be had to the fact that the 2 nd defendant has D
succeeded in resisting the plaintiff’s proposed amendments in fraud, and
E E
also in respect of section 3 of the Misrepresentation Ordinance.
F
Accordingly, I make an order nisi to become absolute in 14 days of the F
date of this decision that 50% of the costs of and occasioned by this
G G
appeal, and in the application to the Master below, be paid forthwith by
H the 2nd defendant to the plaintiff with certificate for two counsel, to be H
taxed if not agreed.
I I
J J
K K
L (Robert Whitehead SC) L
Recorder of the High Court
M M
N Mr Tong Ronny SC and Mr Tong Justin, instructed by Ng & Partners, N
for the plaintiff
O O
Mr Fung Eugene SC and Ms Chow Theresa, instructed by
Wilkinson & Grist, for the 2nd defendant
P P
Q Q
R R
S S
T T
U U
V V