LUK WING YAN v. WING LUNG BANK LTD

HCA 1249/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1249 OF 2016

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J U D G M E N T

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1.   There are two applications before me, first is an application for a further and better list of documents, of certain documents or classes of documents; second, an application for leave to adduce expert evidence and directions for such expert evidence. 

2.   The plaintiff is a customer of the defendant bank, she says she was induced by a Ms Liu King-yee (“Ms Liu”), a securities services manager of the North Point branch of the defendant bank, to pay money into Ms Liu’s personal account with the bank, so that Ms Liu could invest the money on the plaintiff’s behalf, taking advantage of investment plans available only to the defendant’s employees. 

3.   The plaintiff, in reliance on the inducement of Ms Liu, paid some $35 million to Ms Liu got back about a little over $11 million, leaving a net balance of nearly $24 million owing from Ms Liu to the plaintiff. 

4.   Subsequently, it was discovered that no such investment plan existed. 

5.   Ms Liu had, on her own admission, lost all the money on her own warrant trading.  The plaintiff claims against the defendant, saying that the defendant is vicariously liable for the fraud of Ms Liu.  Further or  alternatively, the plaintiff claims against the defendant on the basis that Ms Liu’s fraudulent acts were caused by the defendant’s negligence, and the negligence is particularised as the failure to comply with various statutory and other duties. 

6.   By summons dated 31 July 2017, the plaintiff seeks discovery by further and better list of documents in relation to a number of documents or classes of documents which are set out in the schedule to the summons.  Disclosure of such documents is resisted by the defendant bank.  Mr Lawrence Li for the bank says that as a general proposition, that the requests are too wide, vague, and in any event, irrelevant to the issue, or even if they are barely relevant to the issue, discovery is not necessary for disposing fairly of the matter and in any event, it is not proportionate to the determination of the issues at hand. 

7.   Mr Li also says that they are not putting forward any positive case that there was no “breach of duty”, or that the bank had complied with relevant standards expected of it, and so he says the scope of the issues in the case and the scope of discovery is limited, and so he says the documents requested by the plaintiff need not be disclosed.

8.   However, I note that there is no admission in the pleadings, (even for the limited purpose of these proceedings) of a breach of duty, or purported breach of duty or even admission of the facts which may constitutee a breach of duty, if such duty exists.  It is therefore still incumbent on the plaintiff to prove not only the duty, but also the failure of the defendant to come up to the relevant standard.  In other words, all the elements of negligence are still required to be proved by the plaintiff. 

9.   Having said that, Mr Li has adopted a pragmatic approach to various items in the list, and as a result of this pragmatic approach, very many of the matters need not be the subject of any orders.  With that in mind, I turn to the schedule and the individual requests under that schedule.  Paragraph 1 of the schedule seeks discovery of the defendant’s policies, procedures, manuals, circulars and guidelines on a number of matters which are listed in sub-paragraphs (a) to (o).  A complaint was made that policies are not necessarily documents and therefore not the subject of discovery, so on the invitation of this court, Ms Kong has amended that to the defendant’s written policies, procedures, manuals, circulars and guidelines on all these different matters. I will deal, then, with each and every one of them. 

10.   1(a), which is the Defendant’s written policies, procedures, manuals, circulars, and guidelines on risk management of staff’s fraud, improper conduct, handling customers’ money and dishonesty.  Mr Li says that they have already given disclosure or discovery of all relevant documents under this heading, this having been done by the defendant’s supplemental list of documents which is dated 10 January 2017, as well as the defendant’s 4th supplemental list of documents dated 6 July 2017. Nevertheless, there are certain documents which are still outstanding, apparently, the guideline on anti-money laundering and counter terrorist financing, which was disclosed in the 4th supplemental list is the guideline applicable in October 2016, the relevant period should be the period covered in the statement of claim, which is from around September 2010, all the way to May 2014.  In any event, even if the defendant has already disclosed all that it need to, there should be no objection to the defendant saying so that there are no documents which need to be further disclosed. 

11.   The same position would apply to the request under 1(b) (as amended), that is, the defendant’s written policies, procedures, notices, circulars and guidelines on the fitness and propriety requirement of the defendant’s staff, as required under SFC guidelines.  It is very likely that the matters have been dealt with under the various staff dealing policies, conducts, human resources department, training records and guidelines on anti-money laundering, and so on and so forth, which have already been disclosed, but insofar as there are any specific policies, procedures, manuals, circulars or guidelines on the application, of the fitness and proprietary guideline, the requirements under the SFC should be disclosed as well. 

12.   1(c) and 1(d), the defendant’s written policies, procedures, notices, circulars and guidelines on employee training, Ms Kong withdraws those requests and I make no order. 

13.   In respect of 1(e) to 1(i), the policies, procedures, manuals, circulars and guidelines on defendant’s responsibility of monitoring staff account to identify and monitor improper transactions of staff accounts, staff account opening, staff account tagging, staff account monitoring, and internal audit review of staff account transactions, I am of the view that these are relevant, if they exist, and they should be disclosed, and I note here that the 1(i), being the internal audit review staff account transactions, this is not their request for the audit review itself, but what I would call the “standard operating procedures” for this sort of review.  So these sort of documents, if they exist, should be disclosed. 

14.   1(j) and 1(k)--  1(j)is requests the written  policies, procedures, manuals, circulars and guidelines on control and use of bank chops, and/or stamps in controlling the use of bank forms, and/or documents.

15.   Mr Li’s objection to these are that they are too wide, but he would be content to disclose them if they are limited to general policies, procedures, manuals, circulars and guidelines issued by the headquarters, and by the North Point branch. Otherwise, to require the defendant to disclose every single entity which may have issued guidelines or may have issued policies or other correspondence in relation to these matters would be too wide, and would be too onerous on the defendant bank. 

16.   I accept Mr Li’s position, and I make an order in terms of 1(j) and 1(k) limited to general policies, procedures, manuals, circulars and guidelines issued by headquarters and the North Point branch only, for the relevant period.

17.   For 1(l), that is the policies, procedures, manuals, circulars and guidelines on the defendant’s responsibility of monitoring staff accounts to identify and monitor significant and/or suspicious transactions of staff accounts.  Ms Kong is unable to justify that such documents or classes of documents  more likely than not exist.  When asked on this aspect, Ms Kong was only able to point to the requirements of the defendant bank to “know your client”, but this request is not specific towards monitoring staff accounts.  In the circumstances, without any basis to believe that such a document or class of documents exist, I decline to make that order. 

18.   1(m), 1(n) and 1(o) is, the written policies, procedures, manuals, circulars and guidelines on the defendant’s responsibility of monitoring client’s account to identify and monitor significant and/or suspicious transactions of clients’ account, reviewing and monitoring of significant transaction reports, and review and monitoring of suspicious transaction reports and review the monitoring of suspicious transaction reports.  These, of course, would be generally recognised as procedures and manuals which would exist and I so order.  

19.   In relation to all those in paragraph 1 of the schedule, which I have ordered, I do not consider that the disclosure of those documents would be disproportionate.  All that is required to be disclosed are the written policies, procedures, manuals, circulars and guidelines, in other words, as I have attempted to use as a shorthand, a sort of “standard operating procedures” in relation to each of these matters and that these should not be overly onerous.

20.   I will then deal with paragraphs 2 to 6 in one go.  Paragraph 2 seeks the defendant’s internal audit report on suspicious transaction monitoring, paragraph 3 the defendant’s internal audit report on significant transaction monitoring, paragraph 4 the defendant’s internal audit report on the Bank’s system on suspicious transactions tracking, paragraph 5 the defendant’s internal audit report on the Bank’s system on significant transaction tracking, and paragraph 6 the defendant’s daily suspicious transaction reports, and the defendant’s daily significant transaction reports for the North Point Branch Retail Banking Department for the days on which there had been transactions between the Plaintiff Ms. Liu, and a whole list of dates are set out in that paragraph. 

21.   Mr Li’s position is that the request, as currently stands, is too wide-ranging and to fulfil those requests would be too onerous, and would involve very many matters which are irrelevant to the present proceedings.  I agree.  Mr Li, suggests that the information requested can be provided, and  the defendant bank is willing to provide the information, provided that the request for that information is more limited. He suggests that if the plaintiff asks or seeks information by correspondence, by eg. a request stating the defendant bank to confirm whether there are any internal audit report on suspicious transaction monitoring as regards the accounts of the plaintiff or Ms Liu, and if so to produce those documents, that would be acceptable to the defendant bank. 

22.   I consider that such suggestion would be a proper limit to the otherwise much too wide request, and similar wordings can be used for each of 2, 3, 4 and 5.  In light of Mr Li’s concession, I decline to make an order for discovery in terms of the request made in the summons and I will expect that the parties will use their good sense in getting the relevant information and not more than the relevant and necessary information before the parties and the court. 

23.   Similarly for paragraph 6 of the schedule, Mr Li says that whether or not there are daily suspicious transaction reports, or daily significant transaction reports, is in question, and in any event, these reports may affect or may impinge on other transactions, which have no bearing at all whatsoever with the issues in the present case.  I agree.

24.   Again, the defendant suggests that if asked through correspondence, they will answer whether there was any suspicious transactions or significant transaction report in relation to each of the transactions identified in paragraph 9 of the statement of claim, and if there was such a suspicious or significant transaction report, to disclose the same.

25.   Again, I consider that this is a proper limit on the otherwise overly wide request. In light of the defendant’s concession on this point, I also decline to make an order under paragraph 6. 

26.   Paragraph 7 requests all bank statements of Liu King-yee’s bank account and securities accounts with the defendant.  Mr Li’s position is that the defendant bank is subject to various regulations which do not allow them to voluntarily disclose any of these particulars in relation to their client’s accounts. 

27.   Ms Kong says that these bank statements are necessary to trace the funds which went into and may well still be in Ms Liu’s account.  If that is the purpose of this exercise, I would have thought that the proper way would be to go against Ms Liu, instead of asking the defendant bank for that information.  After all, Ms Liu would have, or should be entitled to raise any objections that she may have against such disclosure. As it is, the plaintiff is asking for such disclosure against the defendant bank, which disclosure may well affect Ms Liu, and/or any other person who may have any dealings with Ms Liu. 

28.   I am not satisfied that those statements, redacted copies of which have already been supplied to the plaintiff, are necessary for the fair disposal of this case, and I decline to so order. 

29.   Paragraph 8 is a request for documents showing the amount of commission or other charges charged or received by the defendant from all securities transactions made by Ms Liu under her own bank account and securities account with the defendant.  Ms Kong says that this request is made in order to bolster the plaintiff’s case that Ms Liu was actively trading on her own account to an extent which would raise inquiries with the bank’s management as to why its employee was doing this active trading, when she should have actually been attending to the bank’s business.  Mr Li points out that this is not what was said to be the reason for this request in the affidavit or affirmation of the plaintiff. 

30.   What was originally stated to be the reason for the documents in paragraph 8 is to confirm that the defendant has been unjustly enriched at the plaintiff’s expense, and if yes, the amount involved.  I note that there is no clear plea of unjust enrichment in the statement of claim, although there is a claim for declarations of liability to account, holding on constructive trust, accounts, equitable compensation, profit, tracing orders, and so on.  However, there is no claim for unjust enrichment. 

31.   I am not satisfied, in the circumstances, that the plaintiff has made out a proper case for the documents in paragraph 8.  As an aside, the plaintiff may wish to revisit the statement of claim, as it stands, what I see is a claim that the defendant is vicariously liable for the acts of misappropriation by Ms Liu, and alternatively, damages for negligence. 

32.   The very wide and perhaps, if I may say so, unfocused approach in the prayer for relief does not seem to reflect the reality of the two bases of claim, and the plaintiff may well wish to refocus her case on the matter which had already been pleaded.  I will say no more about that.

33.   Paragraph 9 of the schedule requests the salary statement or pay slips of Liu King-yee, with breakdown listing her basic salary, bonus, commissions, sales relation, advance and/or other remuneration, Mr Li’s position is that he is not in a position to consent, but neither does he press the point very strongly.  The bank owes duties to its customers, and so he is not in a position to just hand these documents over to the plaintiff.

34.   I am of the opinion that these documents are relevant, given the way that their case has been pleaded, and I will make an order in terms of paragraph 9.

35.   Paragraph 10, which requests the number of staff in the securities service department of the defendant’s North Point branch, Mr Li says is not a request for discovery, this is a request for information.  I agree with Mr Li, but Mr Li has said that he is willing to provide the information, but should not be required to disclose documents which may not exist. 

36.   In view of the defendant’s willingness to provide the information applied, I will make no order on paragraph 10. 

37.   As to paragraph 11, which is the defendant’s internal auditor’s report to the bank audit committee on the subject of anti-money laundering, this stands in the same position as paragraphs 2 to 5 and Mr Li takes exception to this, saying it is over wide, may touch upon matters which have not been identified in these proceedings, is patently an attempt at fishing. 

38.   Mr Li says that if this request were limited in the same way as what has been done in relation to paragraph 2 to 5, by the plaintiff seeking from the defendant information as to whether there has been any internal auditor’s report to the bank’s audit committee on the subject of anti-money laundering in relation to transactions involving the plaintiff and/or Ms Liu, that would be a properly restricted ambit of discovery which the defendant bank would be more willing and able to comply with.  I agree.  In light of the concession made by the defendant bank, I decline to make an order under paragraph 11. 

39.   Paragraph 12, job description in view of staff responsible for the defendant’s bank security operation department/division/section, this is withdrawn.

40.   Paragraph 13, that is a request for job description and the role of the defendant’s compliance department, Ms Kong is happy to amend that request to being documents setting out the job descriptions and the role of the defendant’s compliance department.  Mr Li does not take a serious objection to provision of those documents or information concerning the job description and the role of the defendant’s compliance department.  In the circumstances, I will make that order.

41.   Paragraph 14 also is withdrawn.

42.   So, to recap:

(1) In relation to paragraph 1, Written policies, procedures, manuals, circulars and guidelines, I make the order in respect of 1(a), 1(b), 1(e) to 1(i); 1(j) and 1(k) being restricted to documents issued by the headquarters and the North Point branch of the bank only, and 1(m) to 1(o).  I make no order in relation to 1(c) , 1(d) and 1(l);

(2) Paragraph 2 to 6, I make no order;

(3) Paragraph 7 is dismissed;

(4) Paragraph 8 is dismissed;

(5) Paragraph 9, I make an order in those terms;

(6) Paragraph 10, I make no order;

(7) Paragraph 11, again, I make no order;

(8) Paragraph 12 is withdrawn, I make no order;

(9) Paragraph 13, I make an order for documents containing job description and role of the defendant’s compliance department;

(10) Paragraph 14 has been withdrawn, and I make no order. 

43.   Parties will notice that I draw a distinction between those where I make no order because there has been concession by the defendant as to the proper way that the information requested should be supplied, and paragraphs of the order which I dismissed because they are not justified. 

44.   The second summons, is for leave to be granted to the plaintiff to adduce expert evidence on the issues set out in the list of issues for experts, as attached by Mr Benny Kwok. 

45.   The authorities on expert evidence is to the effect that leave will be granted to call expert evidence if the expert evidence proposed is in a recognised discipline, is reasonably required to enable the court to resolve the issue in dispute, and proportionate to the issues.  If any authorities are needed, these principles have been set out in Lau Kwai Yin v Tak Sin Restaurant (London) & Anor [2016] 4 HKC 460.   

46.   I consider that there is no recognised discipline of an expert in banking/regulatory practice.  It is true that someone may have considerable experience in banking practice, and in regulatory practice through regularly dealing with compliance matters, but that is not to say that it is a discipline of science, or particular discipline of knowledge that can be described to be an area of knowledge with its own expertise. 

47.   Nor do I consider that the matters which are listed out, are evidence on the matter that are reasonably required to enable the court to resolve the issues in dispute.  The issues which have been listed are over wide, some of them are ultimate issues for the court, others are issues which the court would simply be able to find as a matter of general ruling without any need for any assistance from an expert.  After all, it must be remembered that expert opinion evidence is an exception to the rule that the opinion evidence is inadmissible, and the reason why expert opinion evidence is allowed as an exception to the rule is that the opinion of the expert is able to enlighten the court on a matter which the court would not be able to generally understand.  I do not consider that that applies in the present case to the issues which had been set out. 

48.   Nor do I consider that it is proportionate in the issues of this case for expert evidence of the sort which has been listed out in the list of issues attached to the plaintiff summons. 

49.   In the circumstances, I dismiss the plaintiff’s application. 

(Discussion re costs)

50.   On the summons for specific discovery, I consider that neither party can be considered to be the winner in the application. The parties are happy to have their costs in the cause and I so order.

51.   On the costs of the application for leave to adduce expert evidence, the defendant is entitled to its costs. Taking a broad brush approach, given that the authorities and the skeleton in respect of the expert evidence summons is actually pretty sparse, not that much time needed to have been spent on it, I make a summary assessment in favour of the defendant in the sum of $60,000.