YINGGAO RESOURCES LTD AND ANOTHER v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

CAMP 94/2023, [2024] HKCA 1130

On an intended appeal from [2022] HKCFI 3597

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 94 OF 2023

(ON AN INTENDED APPEAL FROM HCA 329 OF 2015)

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D E C I S I O N

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The Court:

A. Introduction

1.  In February 2015, the plaintiffs commenced the proceedings below against the defendant for breach of bank mandates and negligence, seeking damages in the sum of US$43.5 million.  More than 6 years later, in August 2021, they applied to re-amend their amended statement of claim by, inter alia, adding a new paragraph 49 (“Para 49”).  Para 49 sought to raise a new claim based on the plaintiffs’ loss of opportunities to invest in certain gold mines in the Mainland which they suffered as a result of the defendant’s same breach of mandates and negligence.  The application was allowed by the master.

2.  By a judgment dated 7 December 2022.[1] Peter Ng J (“the Judge”)  allowed the defendant’s appeal and refused the plaintiffs’ application to add Para 49 to its pleadings.  The Judge also dismissed the plaintiffs’ subsequent application for leave to appeal, holding that since Para 49 raised new issues, his order fell within the ambit of Order 59, rule 21(2)(i)  of the Rules of the High Court,[2] which entitled the plaintiffs to appeal as of right pursuant to rule 21(1)(a)  of the same Order.  In any event, the Judge indicated that he would dismiss the leave application on merits.

3.  The plaintiffs now apply to this Court for extension of time to appeal, which the defendant opposes.  The plaintiffs filed an affirmation of their manager, Ms Chun Yuet Ming Jessica, dated 2 March 2023, to explain the delay in taking out the present application.  

4.  By two letters dated 26 September and 12 October 2023, Mr Chin Kam Chiu (“Mr Chin”), a director of the plaintiffs, who claimed to be their authorized representative, asked the court to postpone the determination of the present application for a number of reasons.  However, Mr Chin has not obtained any leave from the court to represent the plaintiffs. Moreover, on the court’s record, the plaintiffs are still represented by Messrs Tung, Ng, Tse & Lam, who as their solicitors have the sole conduct of these proceedings.  In the circumstances, we will not entertain Mr Chin’s two letters.

5.  Having considered the parties’ written submissions, we take the view that the application can be properly dealt with on paper without an oral hearing under Order 59, rule 2A of the Rules of the High Court.  We now hand down our decision.

B. The parties’ pleaded case

B1. The plaintiffs’ case

6.  The plaintiffs’ pleaded case in the amended statement of claim is straightforward, which may be outlined as follows.

7.  The 1^st plaintiff is a Hong Kong company trading in metal products.  The 2^nd plaintiff is a BVI company, which is wholly owned by Winko Foundation Limited (“Winko”).  The plaintiffs had been the defendant’s customers since 2010 and 2011/2012 respectively.

8.  The plaintiffs held respective USD Accounts and HKD Accounts with the defendant pursuant to a written mandate governing their relationship as bank customers (“the Mandate”), including the defendant’s obligations to comply with the directions given in respect of the accounts on behalf of the plaintiffs. Implied in the Mandate were terms that (1)  the defendants would exercise all reasonable skills and care and/or use its best endeavor in the execution of the plaintiffs’ orders; and (2)  the defendant would have the plaintiffs’ best interest in mind and render such assistance as might be necessary to achieve the purpose and effect of the Mandate.

9.  The plaintiffs’ claims arose out of two sums of HK$26 million and US2.24 million (“the Sums” collectively”).

10.  On 17 January 2012, the 1^st plaintiff remitted the Sums to the accounts of ECO Metal (Hong Kong)  Limited (“ECO”)  with Citibank.  ECO subsequently tried to transfer the Sums back to the 1^st plaintiff whereupon Citibank refused to execute that instruction on the ground that the former’s accounts were restrained by the Customs and Excise Department (“C&E”)  when no restraint order was issued.  Legal proceedings then ensued.[3]  Following the judgment of the Court of Appeal on 25 September 2014 (“the CA Judgment”), the Sums were remitted from ECO’s accounts with Citibank to the 1^st plaintiff’s accounts with the defendant on 25 and 26 November 2014.

11.  In anticipation of the remittance of the Sums, the 1^st plaintiff on 30 October and 21 November 2014 entered into two sale and purchase contracts with Midas Connective Trading Inc (“Midas”)  for the purchase of certain quantity of No.1 Scrap Copper (“the Midas Contracts); and the 2^nd plaintiff shortly thereafter entered into two back-to-back sale and purchase contracts with Guandong Hongsen Group Co Ltd (“Hongsen”)  for sale of the same quantity of copper to Hongsen, with the 1^st plaintiff as guarantor (“the Hongsen Contracts”).  The plaintiffs intended to honour their payment obligations under those Contracts by the Sums remitted to the 1^st plaintiff’s accounts with the defendant as aforesaid.  Instructions were given by the plaintiffs’ representatives to the defendant on 28 November 2014, to transfer to Sums out of the 1^st plaintiff’s accounts to the named transferee.  However, the defendant did not carry out those instructions, which constituted a breach of the Mandate and/or a breach of duty of care.  The plaintiffs gave repeated instructions to the defendant on 3 and 22 December 2014 for the transfer which were to no avail.

12.  Consequently, the plaintiffs were unable to advance any payment to Midas for the sale of the copper under the Midas Contracts on or before 30 November and to deliver the same to Hongsen on or before 20 December 2014 under the Hongsen Contracts.  Both Midas and Hongsen accepted the plaintiffs’ repudiation of those contracts and demanded compensation.  In turn, the plaintiffs claimed against the defendant a total sum in the region of US$43 million, being the compensation they had to pay Midas and Hongsen and the profits that they would have made under the sale and purchase contracts in connection with the copper.

B2. The defendant’s case

13.  The defendant’s case is that it had received a letter of no consent from C&E on 25 November 2014 that the funds in the 1^st plaintiff’s accounts were believed to represent proceeds of an indictable offence; and that it reasonably believed that any dealings in the Sums would constitute an offence under section 25(1)  of the Organized and Serious Crimes Ordinance (“OSCO”).[4]  As a result, the defendant was not to allow any transfers out of the 1^st plaintiff’s accounts.

14.  On 16 March 2015, a restraint order was granted prohibiting the 1^st plaintiff from dealing with the funds in its accounts with the defendant.

C. The new claims raised by Para 49

15.  Para 49 is a lengthy plea consisting of 14 sub-paragraphs.  As observed by the Judge, it is convoluted and difficult to understand.[5] It sought to raise a new case against the defendant based on an “unlawful deprivation of a mine owner’s rights in respect of his ownership title in accordance with the law” thus:

“49. By an agreement (開採黃金礦產協議)  dated 23 February 2011 (‘Gold Mining Agreement’) between Winko (representing the first plaintiff)  and one 徐基川 (‘Mr Xu’), the owner of mining and ownership rights of certain mines in Qie Mo County (‘且末縣’)  in the Mainland China (‘Mines’), Winko and Mr Xu agreed to invest in and set up a joint venture (‘JV’) in furtherance of a gold mining project in respect of the Mines (‘Gold Mining Proiect’).

49.1. Letter from Mr. Xu Jichuan to Winko on February 18, 2011:

‘I have received the ‘Declaration of Trust’ signed between Yinggao Resources Limited and Winko Foundation Limited, which authorizes Winko to enter the agreement of the ‘Mining and Operation of the Gold Mining Area in Qie Mo County Project’. Winko and Yinggao have to perform the corresponding obligations underlying in the agreement. After the obtain of PRC legal advice, I believe the above ‘Declaration of Trust’ complies with the Human Trust Authorization Act. However, we will require Yinggao to confirm its fulfillment and legal responsibility of the correspondence obligation of the agreement of the ‘Mining and Operation of the Gold Mining Area in Qie Mo Country Project’.

49.2. Pursuant to Clauses 2(2)  and 3(4)  of the Gold Mining Agreement, Winko had, inter alia, the following obligations:

1). Within 12 months of the execution of the Gold Mining Agreement (i.e. by 23 February 2012), Winko should, on behalf of the JV, make payment in 3 tranches (the first in the amount of RMB 40,000,000, the second in the amount of RMB 30,000,000 and the third in the amount of RMB 30,000,000)  (the ‘1^st Tranche’, ‘2^nd Tranche’ and the ‘3^rd Tranche’ respectively; collectively, the ‘3 Tranches’)to Mr Xu for the purposes of settling all fees and expenses associated with and in furtherance of (a)  the requisite due diligence in order to obtain the ‘exploration reports’ (勘探報告)  for the Mines (‘Exploration Reports’);(b)  the expansion and construction of the sites of the Mines as well as (c)  the application and obtaining of the ‘mining permit’ (採礦許可証).

2). Upon Mr Xu’s notification that the Exploration Reports are completed and issued, Winko shall send representatives to the 新疆維吾爾自治區工商局 (‘Bureau’)  to deal with the business registration procedures in respect of the JV (‘Registration’),and appoint 4 persons to be directors of the JV.

3). Within 30 days of the Registration of the JV and the obtaining of business registration licence (營業執照)  for the JV (‘JV BR License’),Winko should make payment of the first instalment of RMB 400,000,000 into the bank account of the JV (‘1^st JV Instalment’).

4). Within 120 days of the Registration of the JV and the obtaining of JV BR License, Winko should make payment of the second instalment of RMB 400,000,000 into the bank account of the JV (‘2^nd JV Instalment’).

49.3. In performance of the Gold Mining Agreement as supplemented by the Gold Mining Supplemental Agreement (collectively, ‘Gold Mining Agreements’),Winko made payment of the 1^st Tranche on or about 12 April 2011, the 2^nd Tranche on or about 18 August 2011 and partial payment of the 3^rd Tranche (in the amount of RMB 10,000,000)  on or about 10 November 2011, with RMB 20,000,000 remaining outstanding under the 3 Tranches (‘Outstanding Amount under 3 Tranches’).

49.4. On 9 December 2011, Mr Xu informed Winko in advance about the (then)  imminent completion of the Exploration Reports by31 December 2011. The Exploration Reports were eventually completed and issued on 31 December 2011.

49.5. On 25 January 2012, Winko informed Mr Xu that there had been a raid by the C & E relating to the unproven and unwarranted allegations of, inter alia, money laundering, and that these circumstances required Winko to cancel the trip to the Bureau originally scheduled on 9 February 2012 to handle the Registration of the JV.

49.6. By 23 February 2012, Winko had not made payment of the Outstanding Amount under 3 Tranches pursuant to Clause 3(4)(1)  of the Gold Mining Agreement due to the fact that the source of payment, being funds in the 1^st Plaintiff’s Accounts, cannot be utilised due to the said actions and freezing of the accounts by the C & E.

49.7. On 28 February 2012, Mr Xu wrote to Winko informing that there were, and Mr Xu accepted, the allegedly repudiatory breaches of the Gold Mining Agreements insofar as Winko had failed to (a)  make payment of the Outstanding Amount under 3 Tranches by the stipulated deadline, and (b)  send representatives to the Bureau to deal with the Registration in respect of the JV(collectively, ‘Relevant Failures’).

49.8. On 6 March 2012, Winko responded by explaining that the Relevant Failures was attributable to the unlawful acts of the C & E as aforesaid. Winko sought an extension of 12 months for Winko’s performance of the various obligations under the Gold Mining Agreements, and requested Mr Xu to apply to the relevant regulatory authorities in Mainland China for an exceptional extension of 12 months the validity period and retention period of the exploration rights in respect of the Mines (探礦權有效期和保留期)  (‘Exploration Rights’).

49.9. Subsequent correspondence between Winko and Mr Xu followed. On 26 March 2013, Mr Xu replied and confirmed that the validity of 3 of the 10 exploration permits (探礦權證)  have been extended until 25 January 2014, whereas the applications for extension of validity of the remaining 7 were pending payment of application fees, which Mr Xu requested Winko to settle. By Mr Xu’s conduct, Mr Xu is also taken to have agreed to an extension of time for Winko’s performance of the various obligations under the Gold Mining Agreements until the same.

49.10. By 25 January 2014, the Relevant Failures remained unaddressed due to the unlawful acts of the C & E. On 27 January 2014, Mr Xu wrote to Winko informing that there were, and Mr Xu accepted, the allegedly repudiatory breaches of the Gold Mining Agreements in respect of the Relevant Failures.

49.11. On 28 January 2014, Winko requested a further extension of time (of 12 months)  for Winko’s performance of the various obligations under the Gold Mining Agreements, and requested Mr Xu to explore with the relevant regulatory authorities in Mainland China for an exceptional extension of time in respect of the validity period and retention period of the Exploration Rights.

49.12. There were ensuing correspondence and resulting in ‘Gold Mining Supplemental Agreement 2’between Winko and Mr Xu, whereby:

1)  Winko indicated that Hongsen was willing to assist Winko in taking out a loan of RMB 200 million from banks in Mainland China on the condition that Winko provides a 10% (i.e. RMB 20 million)  deposit, and that Hongsen was willing to use part of the sums payable by Hongsen under the 1^st and 2^nd Sales Contracts as such deposit.

2)  Clause I to III of Gold Mining Supplemental Agreement 2 is set out below:

Clause I ‘Amends Clause III (2)  of the ‘Agreement on the Exploitation of Gold Minerals’:

1. The content of the original clause ‘Party A contributed RMB 200 million to account for 20% of the equity’ is now revised to ‘Party A contributes RMB 70 million to account for 20% of the equity.’ 2. The content of the original clause ‘Party B contributes RMB 800 million to account for 80% of the equity’ is now revised to ‘Party B contributes RMB 280 million to account for 80% of the equity’.’

Clause II ‘According to the amendment of Clause I above, the joint venture now has a total investment of RMB 350.000,000.’

Clause III ‘Based on the judgement of the appeal judgement of the High Court of HK (CACV 219/2013), and the ‘confirmation for credit transaction’ of USD 2,240,000 and HKD 26,000,000 issued HSBC, Department of Land and Resources (‘国土资源厅’)  specially approved the ‘Exploration Right’ to be extended from 26 January 2014 to 30 January 2015, Party and Party B shall attended the Xinjiang Uygur Autonomous Region Department of Land and Resources (‘新疆维吾尔自治区国土资源厅’)  for the application and obtaining of the ‘mining permit’ before the expiration and retention dates.’

49.13. At the material times in November and December 2014, Winko, as the owner of the mining rights was entitled to the mineral rights in accordance with the law in the joint exploration and operation of the ‘Project for the exploitation of resources in the copper and gold mining area of the Qie Mo County’ provided that it fulfilled its corresponding obligations under the Gold Mining Agreement according to the amount of its capital contribution.

49.14.  As a result of the defendant’s breach of the above mandate and duty of care and unlawful deprivation of property (namely the funds from ECO), the plaintiffs failed to fulfill its obligations according to the amount of its capital contribution during the term of the prospecting rights and the retention period under the Gold Mining Agreement. As a result, the Xinjiang Department of Land and Resources revoked Winko as the rights of mine owners in respect of their mineral titles in accordance with the law in the joint exploration and operation of the ‘Project for the exploitation of resources in the copper and gold mining area of Qie Mo County’, resulting in losses to the plaintiffs.”

16.  For present purposes, we highlight the more pertinent events chronologically based on the Judge’s summary of the new pleaded case supplemented by the supporting evidence as follows:[6]

23/2/2011  Winko on behalf of the 1^st plaintiff and Xu entered into the Gold Mining Agreement.

Sometime after 23/2/11 Winko and Xu entered into the Gold Mining Supplemental Agreements.

12/4 – 10/11/2011  Winko made 3 Tranches of payment, leaving RMB20 million outstanding under the 3^rd Tranche.

By 23/2/2012  Winko had not paid the outstanding amount because the funds in the 1^st plaintiff’s accounts with the defendant were frozen by C&E.[7]

Between 28/2/2012 &  Correspondence between Winko and Xu.

  28/1/2014

28/11/2014  Defendant’s breach of the Mandate/duty of care.

1 – 8/12/2014  Further instructions to defendant for transfer of the Sums to no avail.

16/12/2014  Winko and Xu entered into Gold Mining Supplemental Agreement 2.[8]

  PRC authorities had extended the exploration rights and the time for the application for the requisite mining permit to 30/1/1015.

  The time for Winko to pay its capital contribution of RMB280 million under Clause I was extended to 30/1/2015.

  Winko should pay RMB200 million to Xu for him to discharge various fees under Clauses IV and V.

17.  Relevantly, to finance Winko’s payment of RMB200 million to Xu, Winko entered into an arrangement with Hongsen whereby Hongsen would obtain a RMB200 million loan from banks in the Mainland on condition that Winko would provide a RMB20 million deposit; and Hongsen would use part of the purchase price payable under the Hongsen Contracts as such deposit (“the Special Arrangement”).  However, because of the defendant’s breach of the Mandate and/or duty of care, the Midas Contracts and the Hongsen Contracts could not be completed and the Special Arrangement could not be performed.  Consequently, Winko failed to fulfil its payment obligations under the Gold Mining Supplemental Agreement 2, resulting in the loss of the gold mining rights with an estimated asset value of more than RMB34 million.

D. The Judge’s reasons

18.  The Judge refused to give leave to the plaintiffs to add Para 49 because the new claim was bound to fail on lack of causation[9] and remoteness.[10]

19.  On remoteness, the Judge first set out the well-established legal principles.[11]  He went on to observe that the issue of causation does not necessarily have to be determined at trial as long as the facts are sufficiently clear to enable the court to make a proper determination of it: Galoo Ltd and Others v Bright Grahame Murray (a firm) and Another [1994] 1 WLR 1360 (CA)  and Mulvenna v Royal Bank of Scotland Plc [2003] EWCA Civ 1112.[12]  After going through the facts relied on by the plaintiffs,[13] he pointed out that the plaintiffs knew of the defendant’s breach on 28 November 2014 and the reasons for it.  The plaintiffs had no grounds at all to believe that the Sums could be released to kick start the Special Arrangement, insofar as it actually required the 1^st plaintiff/Winko to fork out RMB20 million, and to perform the other obligations under the Gold Mining Supplemental Agreement 2.  He accepted that it might be normal and reasonable for the 1^st plaintiff to seek from Xu extension of time for Winko’s performance of its various obligations under the Gold Mining Agreement; and that it was understandable that that the 1^st plaintiff wished to rescue the gold mining investment.  However, it did not mean that Winko should enter into the Gold Mining Supplemental Agreement 2 when it had no grounds to believe that the Sums could be released soon or that it could actually pay its capital contribution of RMB280 million by 30 January 2015.  The Judge held that in the circumstances it was wholly unreasonable, verging on recklessness, for the 1^st plaintiff/Winko to enter into the Gold Mining Supplement Agreement 2.  The chain of causation had therefore been broken by the 1^st plaintiff.[14]

20.  On remoteness, the Judge first summarized the law on remoteness relevant to the present case.[15] Applying the law to the present case, the Judge held that the second limb of Hadley & Another v Baxendale & Others (1854)  9 Ex 341, 156 ER 145 was not engaged.  Indeed, as indicated by the plaintiffs’ counsel, they principally, if not exclusively, relied on the first limb of Hadley v Baxendale.[16]  Such a concession was clearly rightly made.  For the plaintiffs were not alleging that defendant was ever aware of the Gold Mining Agreement or the Gold Mining Supplemental Agreement 2 at all.[17]  Further, the defendant’s knowledge of the general nature of the plaintiffs’ trading operations and the general consequence of its breach of the Mandate could not possibly be translated into actual knowledge of the special circumstances giving rise to damage, that is, the loss of the exploiting and operating rights of the gold mine.

21.  Next, the Judge held that the first limb of Hadley v Baxendale did not apply either for the simple reason that there was no way that the defendant’s failure to comply with the transfer instructions resulting in the loss of the exploitation rights of the gold mine, through the Special Arrangement, might fairly and reasonably be considered as arising naturally, that is, according to the usual course of things and that the knowledge of such loss could be imputed to the defendant.[18]

22.  Lastly, the Judge held that there was no basis to suggest that the defendant had assumed responsibility for the plaintiffs’ losses under the Gold Mining Agreement or the Gold Mining Supplemental Agreement 2 when there was no plea or evidence that the defendant knew of the plaintiffs’ involvement in the gold mine business in the Mainland or the existence of the two Agreements.  Again, the plaintiffs’ counsel did not seek to rely on the assumption of responsibility based on the defendant’s knowledge of special facts.[19] 

E. Discussion

23.  The Court’s approach to an application to extend the time for appeal is well settled.  In the exercise of its discretion, the Court will take into account the length of the delay, the reasons for the delay, the chances of the appeal succeeding if an extension of time is granted, and the degree of prejudice to the other party of the application is granted.  Where the delay is substantial and not wholly excusable, the applicant must show a real prospect of success on the merits, not merely a reasonable prospect of success.  See Progetto Jewellery Co Ltd v Lau Chiu Ying [2022] 2 HKLRD 845, per Lam VP (as he then was)  at [6].

E1. Length of delay

24.  Here, the time for filing the appeal expired on 21 December 2022 and the present application was taken out on 2 March 2023.  So there was a delay of more than 2 months.  Ms Tanie Toh, counsel for the plaintiffs,[20] accepts, rightly in our view, that the delay cannot be said to be insubstantial.

E2. Reasons for delay

25.  Plainly, the delay is occasioned by the time taken to bring the wholly misconceived application for leave to appeal before the Judge, which according to the plaintiffs was based on the erroneous advice of their former solicitors.  There is however no explanation from the solicitors why they would so advise the plaintiffs in light of clear terms of section 14AA(1)  of the High Court Ordinance[21] and Order 59, rule 21(1)(a)  and (2)(i)  of the Rules of the High Court.  Ms Toh asserts that such an explanation is unnecessary.  Further, she argues that their intention to appeal was evident from the outset and the defendant did not raise any issue of “leave” until their written submissions before the Judge.  She relies on Gatti v Shoosmith [1939] Ch 841 in support.  Lastly, counsel contends that there is no prejudice to the defendant.  With respect, we disagree.

26.  In Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & ANOR [2001] 1 HKC 125, this Court (differently constituted)  held that the absence of any explanation of how the solicitors acting for the applicant had formed a wrong view on the applicable rule on the time for appeal made the solicitors’ conduct inexcusable.  The same applies here with full force.

27.  Ms Toh’s reliance on Gatti v Shoosmith is misplaced as it is distinguishable on the facts.  There, the English Court of Appeal extended the time for appeal without considering the merits because the delay only involved a few days; the appellant’s solicitors had informed the respondent’s their intention to appeal within time; and the reasons for the delay was “a mere misunderstanding, deposed to on affidavit by the managing clerk of the appellant’s solicitors – a misunderstanding which, to anyone who was reading the rule without having the authorities in mind, might very well have arisen”: p.846.  In other words, there was explanation for the delay, which the Court seemed to have accepted to be self-explanatory anyway.  Here, the delay is not insubstantial.  The effect of the relevant provisions in Order 59, rule 21 are plain and obvious: no leave to appeal is required. Any contrary view is unsupportable and cries for a cogent explanation.  The indication of the intention to appeal did not assist the plaintiffs because when it is objectively understood with the rules in mind, it could not have meant that the plaintiffs’ former solicitors were going to take out a leave application.  The solicitors’ mistake was inexplicable on the facts and remains unexplained, which makes their conduct inexcusable.

28.  On prejudice, as again held in Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd, while the existence of prejudice to a would-be respondent is a ground for refusing an extension of time, the converse is not true.  The absence of prejudice to a would-be respondent is not a ground for extending time.

29.  In the circumstances, the plaintiffs must show a real prospect of success on their appeal.  This brings us to the merits of their case.

E3. Merits of the appeal

30.  The plaintiffs raised three grounds of appeal.  The first concerns the Judge’s ruling on lack of causation; the second and third, his ruling on remoteness.

E3.1 Lack of causation

31.  Ms Toh complains that the Judge erred in his analysis of the issue of causation. She harks back to the CA Judgment, because of which the plaintiffs expected to be able to use the Sums (a)  in connection with the Midas Contracts and the Hongsen Contracts; and by extension, to support Winko’s payment obligations under the Gold Mining Supplemental Agreement 2.  The plaintiffs were given to understand that C&E had no objection to the Sums being dealt with as the court might think appropriate.  It was thus reasonable for the plaintiff to believe that C&E did not suspect or no longer suspected the Sums to represent proceeds of crime.  After referring to the correspondence between the plaintiffs and the defendant on 1 and 8 December 2014, Ms Toh submits that there is evidence to show that the plaintiffs reasonably believed that they were able to show to the defendant that the Sums were not proceeds of crime; and that it had no reason to freeze the Sums but should follow their instructions for transfer instead.  It is thus reasonably arguable that the Judge made an erroneous assumption the plaintiffs must have accepted the defendant’s case that it was unable to execute their instructions to transfer the Sums and the reasons for it; and that entering into the Gold Mining Supplemental Agreement 2 without grounds to believe that the Sums could be released on time constituted a novus actus intervenes.  It is also reasonably argue that the Judge failed to take into account the plaintiffs’ genuine belief that, following the CA Judgment, the Sums did not represent proceeds of crime and that the defendant should have executed the transfer instructions.

32.  It is trite that a claimant may recover damages for loss only when the breach of contract was the effective or dominant cause of that loss: Chitty on Contracts, 35^th Edition, Vol 1, §30-075 at p.2277.  And there may be a break in the chain of causation where the claimant, following the defendant’s breach of contract, has suffered loss through his own voluntary act or omission even though the loss was not a kind that was unforeseeable, so that it was not too remote: Chitty on Contracts, §30-080 at p.2279.  A helpful summary of the general principles can be found in Gross LJ’s judgment in Borealis AB v Geogas Trading SA [2010] EWHC 2789 at [43] – [47].

33.  Here, the central issue is whether on the plaintiffs’ pleaded case, as augmented by the evidence filed in support, it was reasonable in the circumstances for the 1^st plaintiff/Winko to enter into the Gold Mining Supplemental Agreement 2 and the Special Arrangement with Hongsen.  This in turn depends on whether it was reasonable for the plaintiffs to believe that the Sums could be released as per their instructions to enable them to fulfil their obligations under the Gold Mining Supplemental Agreement 2 and the Special Arrangement.  In our view, the answer is clearly “no”.

34.  First, the following facts distilled from the chronology of events set out above are beyond dispute.  Before the Gold Mining Supplemental Agreement and the Special Arrangement were entered into on 16 December 2014:

(1)  The plaintiffs knew of the defendant’s breach as early as 28 November 2014 and the reasons why.

(2)  The plaintiffs also knew that the defendant persisted in refusing to execute the transfer instructions despite their repeated instructions.

(3)  The defendant maintained their stance despite the reasons put forward by the plaintiffs, which essentially are those advanced before the court in support of their genuine belief that the Sums were not proceeds of crime and the defendant should have followed the transfer instructions.  In other words, the defendant did not accept those reasons as sufficient for them to execute the transfer transactions.

35.  Viewed against such factual circumstances objectively, the plaintiffs’ assertion that they reasonably believed that the defendant would execute the transfer instructions when the 1^st plaintiff/Winko entered into the Gold Mining Supplemental Agreement 2 and the Special Arrangement is contrary to common sense and difficult to accept.

36.  Second, such assertion does not sit well with the plaintiffs’ own pleaded case at [42] of the amended statement of claim.  There, it is pleaded that in view of the defendant’s unlawful restraint of the 1^st plaintiff’s accounts and unlawful deprivation of the Sums, the 1^st plaintiff took steps to mitigate the potential loss in the Midas Contracts and tried to arrange payment through different methods by a letter to Midas dated 16 December 2014 and another letter to Hongsen dated 18 December 2014 but to no avail.  Implicit in such a mitigation plea must be the plaintiffs’ belief that the defendant would not execute the transfer instructions, contrary to their contention in support of Para 49.

37.  For the above reasons, we agree with the Judge’s ruling on causation.

E3.2 Remoteness

38.  Ms Toh submits that the Judge erred in ruling that the loss sought in Para 49 was too remote, because on proper analysis the first limb of Hadley v Baxendale does not preclude the possibility of special, in particular, long term, transactions with such terms or nature that certain types of uncommonly seen damages may result from the breach.  She cited National Australia Bank Ltd v Nemur Varity Pty Ltd [2002] VSCA 18, at [49], an Australian case in support.  In the present case, the defendant accepts that the plaintiffs’ accounts were business accounts.  It is necessary to consider the reasonably arguability of Para 49 on the basis that the Gold Mining Supplemental Agreement 2 did provide for the method of arranging finance to acquire the exploration rights of the gold mine as pleaded.  Since the anticipated RMB200 million flowed directly from the completion of the Midas and Hongsen Contracts, it is reasonably arguable that the Judge erred in ruling that the loss of the exploration rights could not be something which might fairly and reasonably be considered as arising naturally according to the usual course of things between the defendant and the plaintiffs.  We disagree.

39.  First, as noted by the Judge, the binding authority on the subject in this jurisdiction is the Court of Final Appeal’s judgment in Richly Bright International Ltd v De Monsa Investments Ltd (2015)  18 HKCFAR 232.  The Australian authority is of little assistance.

40.  Second, contrary to Ms Toh’s complaint, the Judge did have in mind the banking relationship between the parties.[22]

41.  Third, in Richly Bright International Ltd v De Monsa Investments Ltd, the Court of Final Appeal at [15] – [23] held that the objective of an award of damages for breach of contract is to place the innocent party, so far as a monetary award could do, in the same position as if the contract had been performed. Both limbs of the rule in Hadley v Baxendale are the practical expression of a single principle that parties should only be liable for damages which were within their contemplation at the time they contracted.  The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realized that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

42.  Applying those principles pertinent to the issue of remoteness at hand, we entirely agree with the Judge’s views on the first limb of the rule in Hadley v Baxendale. There is nothing in the pleadings or the evidence that the information available to the defendant when the parties entered into the bank/client relationship in 2010 and 2011, to suggest that the loss of the exploration rights arising from the inability to implement the Special Arrangement would be properly considered as loss flowing naturally from the breach of the Mandate.

43.  Lastly, on remoteness, the plaintiffs assert that the Judge failed to take into account section 94 of the Banking Ordinance[23] and article 105 of the Basic Law.  However, Ms Toh makes no submission on either provision.  In any event, there is no merit in such assertion.  As to section 94, it is not pleaded in the proposed re-amendment.  It is further a new point not argued before the Judge.  As such, raising it on appeal is objectionable: Flywin Co Ltd v Strong Associates Ltd (2002)  5 HKCFAR 356.  As to article 105, the master had already ruled that it is not applicable to the present case.  The plaintiffs did not take issue on that point on appeal before the Judge which must mean that they no longer wished to pursue it.  It is impermissible to do so now before us.

E4. Conclusion

44.  In conclusion, the grounds of appeal are wholly unmeritorious.  There is simply no prospect of success in the intended appeal.

F. Dispositions

45.  Accordingly, we dismiss the plaintiffs’ leave application with costs, summarily assessed at HK$200,000.00.

46.  As the application is totally without merit, we further make an order under Order 59 rule 2A(8)  of the Rules of the High Court that no party may request our determination to be reconsidered at an oral hearing inter partes.