YUEN KUN YEU AND OTHERS v. ATTORNEY GENERAL FOR AND ON BEHALF OF THE COMMISSIONER FOR DEPOSIT-TAKING COMPANIES

HEADNOTE

The plaintiff's invested their monies in a deposit-taking company which later collapsed and was eventually wound up. The plaintiffs instituted proceedings against the Attorney-General on behalf of the Commissioner for Deposit-taking Companies claiming payment of the sums invested together with interest general damages and damages for distress on the grounds of negligence and/or breach of statutory duty. The Attorney-General applied to strike out the Statement of Claim under Order 18 Rule 19 of the Rules of the Supreme Court and under the inherent jurisdiction of the Court on the grounds that it disclosed no cause of action. Held giving judgment for the Attorney-General.

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JUDGMENT

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1. This is an application by the Attorney General who is sued as defendant for and on behalf of the Commissioner for Deposit-taking Companies (the Commissioner) to strike out the plaintiffs' statement of claim under order 18 Rule 19 of the Rules of the Supreme Court and under the inherent jurisdiction of the court on the grounds that it discloses no reasonable cause of action.

2. As the case is one of considerable public interest and of particular concern to depositors who have lost their investments in deposit-taking companies which have collapsed in the past few years, I adjourned the application into open court. The decision that I have to make involves an important matter of principle as to whether a duty of care is owed by the Commissioner to the plaintiffs for negligence at common law and or breach of statutory duty for economic loss. As this is a preliminary point of law I must assume that all the facts that are pleaded in the statement of claim are true.

3. The four plaintiffs were depositors with the America and Panama Finance Company limited (the Company) which was registered as a deposit-taking company on the 22nd September 1980. The plaintiffs' investments were made between August and December of 1982. The authorised capital of the company was $10 million of which $5 million was issued and $2.5 million was paid up. The company ceased business on the 7th January 1983 and its registration as a deposit-taking company was revoked by the Commissioner on the 17th January 1983. A petition to wind up the company on the grounds of insolvency was presented on the 27th January 1983 and a winding-up Order was made on the 25th February 1983. The reasons for the failure of the Company are not known, but were not the fault of the Commissioner. As a result of the collapse of the company the plaintiffs lost their life savings which were represented by the sums that they had invested with the company on fixed deposit. The amounts lost were as follows: the 1st plaintiff US$9,565.22; the 2nd plaintiff US$10,000; the 3rd plaintiff HK$109,000 and the 4th plaintiff HK$140,000.

4. By the present action the plaintiffs claim payment of these sums together with interest, general damages and damages for distress on the grounds of negligence and or breach of statutory duty. Although deposit-taking companies have been operating in Hong Kong for about the past fourteen or fifteen years, no legislation was introduced to monitor their activities until 1976 when the Deposit-taking Companies Ordinance was passed. The preamble to the Ordinance reads as follows:-

"To regulate the taking of money on deposit and to make provision for the protection of persons who deposit money and for the regulation of deposit-taking business for monetary policy purposes."

It will be necessary for me to make reference to several sections in this ordinance. Section 6 deals with the restriction on the taking of deposits and provides that a registered deposit-taking company shall not repay any deposit within three months without the written permission of the Commissioner whilst section 8 provides that the minimum sum by way of deposit shall be the sum of HK$50,000. Section 9 sets out the requirements upon an application for registration of a deposit-taking company and section 10 deals with the registration of the deposit-taking company by the Commissioner. Section 10(1) reads:

"Subject to subsection (2) the commissioner shall on receipt of an application in accordance with section 9 register a company as a registered deposit-taking company."

Sub-section (2) then deals with matters which the Commissioner shall consider when he comes to make a decision as to whether he should refuse to register a company. Only one sub-paragraph, sub-paragraph (e) gives the Commissioner a right to exercise his discretion to refuse an application for registration if it appears that it is not a fit and proper body to be registered. Paragraphs 6 and 7 of the statement of claim refer to the application and registration of this deposit-taking company from which it can be inferred that the plaintiffs contend that the company should never have been registered, but no particulars have been given as to why the application should have been refused. In my judgment no cause of action is revealed by these two paragraphs.

5. I then come to section 14(1) of the Ordinance which refers to the powers of the Commissioner with regard to the revocation of a registration. Section 14(1)(d)(i) gives power to the Commissioner to revoke a registration if the company is not a fit and proper body to remain registered whilst Section 14(1)(d)(iv) gives power to the Commissioner to revoke a registration if the business of the company is being carried on` in a manner detrimental to the interests of its depositors. Section 17 provides for annual accounts to be lodged by a company with the Commissioner. Section 17A deals with the place of business in Hong Kong. Section 17B relates to the appointment of the Chief Executive. Section 18 requires deposit-taking companies to exhibit accounts at their places of business. Section 19 requires deposit-taking companies to notify certain changes to the Commissioner. Section 19A imposes a duty upon a deposit-taking company to report its inability if it should arise to meet its obligations. Section 20 provides for monthly and quarterly returns, to be submitted but with a discretion to the Commissioner to allow them to be made at less frequent intervals. The Commissioner may also require a deposit-taking company to provide further information including an auditors certificate if he considers it to be necessary. Section 21A requires a deposit-taking company to maintain reserves. Section 21C provides that a deposit taking company shall not grant any advance, loan or credit facility against the security of its own shares. Section 22 prohibits a deposit taking company from lending more than 25% of the company's paid-up capital and reserves to any person or company or any group of persons or companies controlled by that person or company. Section 23 prohibits deposit-taking companies from granting loans or other facilities which are unsecured to one or more private companies in which the Directors of the deposit-taking company have an interest either as a director or partner, manager or agent when the aggregate of such loans exceed 10% of the paid-up capital and reserves of the company. Section 23A provides for a limitation on advances to employees and sections 23B, C and E limit the acquisition of shares and land by reference to shareholders' funds. Section 24A provides that a company shall have a minimum amount in specified liquid assets. Section 31A gives power to the Commissioner to examine at any time the books accounts and transactions of the company. Section 31B provides for production of books to the Commissioner by the company. By section 38(1) the Commissioner may recommend that an investigation of a deposit taking company be made. The Financial Secretary has power to order an investigation under section 38(2) and also has power to wind up a company under section 40. Section 3B empowers the Governor to give directions to the Financial Secretary and to the Commissioner with respect to the exercise or performance of their powers, functions and duties under the Ordinance either generally or in a particular case. Criminal sanctions are provided or in the ordinance for breach of certain provisions by a company and section 31 sets out the details of the criminal liability of directors and other executives of the company.

6. A number of allegations are pleaded in the statement of claim which the plaintiffs contend amount to a breach of statutory duty by the Commissioner. These include monies invested by the company in land which exceeded the statutory limit of 25% of the paid-up capital, improper loans and withdrawals of deposits within the minimum statutory period. The plaintiffs also allege that the Commissioner was aware of large accumulated losses during the period from February to November 1982 which showed that the financial position of the company was unstable. In addition allegations are made that although inspectors were appointed by the Commissioner to investigate the affairs of the company, they were not appointed promptly whilst the eventual investigations were not carried out properly or thoroughly. As a result the plaintiffs contend that the Commissioner failed to regulate the company properly, did not exercise prudential supervision and failed to ensure that the provisions of the Ordinance were being fully complied with. In particular it is alleged that the Commissioner failed to revoke the registration of the company when it became apparent that it was not fit to remain registered or upon inspection of the various returns or accounts which would have revealed the company's financial position. Reliance is placed on section 14(1)(d)(iv) which gives power to the Commissioner to revoke the registration when the business is being carried on in a manner detrimental to the interests of its depositors.

7. The Attorney General made the following propositions in support of the application to strike out the statement of claim. Firstly no action lies against a public official for his failure to exercise statutory discretionary powers in a particular way. Secondly there was not a sufficient proximate relationship between the Commissioner and the plaintiffs to give rise to a legal duty of care to avoid damage to the plaintiffs of the type complained of, that is, loss of money. Thirdly the mere fact that it was reasonably foreseeable that another person is likely to suffer pecuniary loss as a result of lack of care is not enough to give rise to a cause of action. Fourthly there are good policy reasons for denying the plaintiffs as depositors a right of action against the Commissioner. Fifthly the Commissioner is under no civil liability for breach of statutory duty. In his reply the Attorney General modified his stance with regard to the fifth proposition for he conceded that liability could arise in certain circumstances having regard to the decision in Cutler v. Wandsworth Stadium (1949) AC 398 and the speech of lord Diplock in Leung Chow Public Car Company v. Attorney General PC App. 30/81.

8. Mr. Kaplan, Counsel for the plaintiffs, in his reply commented that there was something inherently unattractive about the Attorney General trying to strike out the plaintiffs claim. He emphasized that the plaintiffs have lost their life savings and that they are legally aided. In the circumstances the action should be allowed to proceed to trial on its merits as it is a matter of public importance and there are complex issues of law involved. However I am unable to accede to this submission. The Attorney General is perfectly entitled to make this application irrespective of any sympathy that one has for the plaintiffs in their plight or any views that might be held with regard to the state of the financial sector in Hong Kong. The court must not shrink from its duty to strike out a statement of claim just because a case is of public importance and also if it has complex legal issues to determine. The test that I have to adopt in considering the application is whether the plaintiffs' case is unsustainable or in the words used in Drummond Jackson v. BMA (1970) 1 WLR 688 that it is a plain and obvious case that the statement of claim should be struck out. For the purposes of this application as I have already said I assume that all the allegations contained in the statement of claim are true. If the plaintiffs have no reasonable cause of action the statement of claim will be struck out otherwise the action will proceed to trial.

9. During the course of their most helpful submissions I have been taken by the Attorney General and Mr. Kaplan through a number of authorities from which copious passages were read showing how the law of negligence has developed in such cases as Donoghue v. Stevenson (1932) A.C. 562, East Suffolk Rivers Catchment Board v. Kent (1941) AC 74, Ministry of Housing and Local Government v. Sharp (1970) 2 QB 223, Home office v. Dorset Yacht Co. Ltd. (1970) AC 1004, Dutton v. Bognor Regis Urban District Council (1972) 1 QB 373, Anns v. Merton London Borough Council (1978) AC 728, Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson and Co. Ltd. (1984) 3 WLR 953.  A number of other authorities including some from the Commonwealth were also cited. The duty of care was explained by Lord Wilberforce in Anns v. Merton London Borough Council (1978) AC 728 at 751 - 752 where he said:

        "Through the trilogy of cases in this House - Donoghue v. Stevenson (1932) A.C. 562, Hedley Byrne & Co. ltd. v. Heller Partners ltd. (1964) A.C. 465, and Dorset Yacht Co. Ltd. v. Home office (1970) A.C. 1004, the position has now been reached that in order to establish that a duty of care arises in a particular situation, it is not necessary to bring the facts of that situation within those of previous situations in which a duty of care has been held to exist. Rather the question has to be approached is two stages. First one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter- in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give riser see Dorset Yacht case (1970) A.C. 1004, per Lord Reid at p.1027. Examples of this are Hedley Byrne's case (1964) A.C. 465 where the class of potential plaintiffs was reduced to those shown to have relied upon the correctness of statements made, and Weller & Co. v. Foot and Mouth Disease Research Institute (1966) 1 Q.B. 569; and (I cite these merely as illustrations, without discussion) cases about "economic loss" where, a duty having been held to exist, the nature of the recoverable damages was limited: see S.C.M. (United Kingdom) Ltd. v. W. J. Whittall & Son ltd. (1971) 1 Q.B. 337 and Spartan Steel & Alloys ltd. v. Martin & Co. (Contractors) Ltd. (1973) Q.B. 27."

10. In the case of Dorset Yacht the House of Lords held that the Home Office was liable for damage to a yacht caused by inmates of a Borstal institution when supervision became lax. I quote from lord Reid's judgment at p.1030 to 1031:-

Two passages by Lord Diplock are particularly apposite. Firstly at page 1065 he referred to the powers of the Home Secretary with regard to Borstal training in the following words:

The second passage at page 1067 reads:-

       "It is, I apprehend, for practical reasons .... that over the past century the public law concept of ultra vices has replaced the civil law concept of negligence as the test of the legality, and consequently of the actionability, of acts or omissions of government departments or public authorities done in the exercise of a discretion conferred upon them by parliament as to the means by which they are to achieve a particular public purpose. According to this concept Parliament has entrusted to the department or authority charged with the administration of the statute the exclusive right to determine the particular means within the limits laid down by the statute by which its purpose can best be fulfilled. It is not the function of the court for which it would be ill-suited, to substitute its own view of the appropriate means for that of the department or authority by granting a remedy by way of a civil action at law to a private citizen adversely affected by the way in which the discretion has been exercised. Its function is confined in the first instance to deciding whether the act or omission complained of fell within the statutory limits imposed upon the department's or authority's discretion. Only if it did not would the court have jurisdiction to determine whether or not the act or omission, not being justified by the statute, constituted an actionable infringement of the plaintiff's rights in civil law."

I cite a passage from the judgment of Lord Denning in Meade v. Haringey (1979) 2 WLR 637 where he deals with the statutory duty of a local authority at p.647 as follows:-

"If a statute imposes a duty on a public authority-or entrusts it with a power-to do this or that in the public interest, but expresses it in general terms so that it leaves it open to the public authority to do it in one of several ways or by one of several means, then it is for the public authority to determine the particular way or the particular means by which the performance of the statute can best be fulfilled. If it honestly so determines-by a decision which is not entirely unreasonable-its action is then intra vires and the courts will not interfere with it: see especially by Lord Diplock in Dorset Yacht Co. Ltd. v. Home Office (1970) A.C. 1004, 1067-1068. But if the public authority flies in the sate of the statute, by doing something which the statute expressly prohibits, or by failing to do something which the statute expressly enjoins, or otherwise so conducts itself-by omission or commission-as to frustrate or hinder the policy and objects of the Act, then it is doing what it ought not to do-it is going outside its jurisdiction-it is acting ultra vices. Any person who is particularly damnified thereby can bring an action in the courts for damages or an injunction, whichever be the most appropriate."

In a more recent case heard by the Privy Council from a decision of our own Court of Appeal Leung Chow Public Car Co. v. Attorney General PC App. 30/81 Lord Diplock in his speech at p.7 said:-

"    Their Lordships accept the principle stated by Viscount Simonds in Cutler v. wandsworth Stadium (1949) A.C. 398, 407 (as summarised by Megaw L.J. in Thornton v. Kirklees Borough Council (1979) Q.B. 626, 638) that where primary or subordinate legislation "imposes a duty on a public authority ... for the benefit of a specified category of persons but prescribes no special remedy for breach of that duty, it can normally be assumed that a civil action for damages will lie". /sc. at the suit of a member of that specified category of persons who has suffered loss in consequence of a breach of that duty by the public authority upon whom it is imposed. But the right of action for damages is dependent upon the person seeking to assert it being able to establish that upon the true construction of the legislation the duty was imposed for the benefit of a special category of persons of which he is a member."

11. A distinction must be drawn between thoses cases which are concerned with a private Act of Parliament and where as in this case a public official is involved. In the case of a private Act an action will lie if an act authorised by the legislature is done negligently.

12. Mr. Kaplan relies on a New Zealand authority Takaro Properties Ltd. v. Rowling (1976) 2 NZLR 314 where the plaintiff had issued a writ claiming damages in respect of losses alleged to have been caused by an ultra vires decision of the defendant bile acting as Minister of Finance. It had already been established in proceedings between the parties that the Minister's decision was invalid. Upon an application to strike out the judge at first instance struck out the plaintiff's pleading in which he had alleged that the Minister had acted without reasonable care and in breach of a common law duty of care owed by him to the appellant. This decision was reversed on appeal as it was held that there was insufficient material before the court to satisfy it that the cause of action based on negligence would not succeed. In the judgment the court considered that there could be cases where the issue of ultra vires will be decided solely upon negligence where the discretion exercised had been exercised with such a lack of care that the court would be compelled to hold that there had been no valid exercise of the power. However in this case as I have said there was an act that was ultra vires.

13. From the cases cited it is clear that no liability falls upon a public authority if an act done within its authority is performed negligently. I accept the submission made by the Attorney General that an action will only lie if the authority has acted, ultra vires for example by way of wilful misconduct, mala fides or for an ulterior motive. No allegation is made by the plaintiffs in the statement of claim that the Commissioner acted outside the ambit of his operational authority.

14. I shall now turn to the issue of economic loss. The case of Hedley Byrne & Co. Ltd. v. Heller and Partners Ltd. (1964) A.C. 465 is authority for the proposition where liability is based on negligence the recovery of damages is not limited to physical damage, but extends also to economic loss. Although the law with regard to economic loss has been developing in the past twenty years it appears from the authorities that there is no prima facie duty of care owed to take care in respect of pure economic loss caused, by acts where no physical damage arises.

15. Mr. Kaplan cited another New Zealand authority Rutherford v. Attorney General (1976) NZLR 403 which held that where only economic loss is claimed it does not necessarily exclude liability for the tort of negligence. This case however does not take the matter any further as the facts were very different from those in the instant case.

16. I drew the attention of Counsel to two Canadian cases. The first one Can. Pac. Airlines Ltd. v. R. (1979) 1 F.C. 39, 87 D.L.R. (3d) 511, 21 N.R. 340, affirming (1977) 1 F.C. 715, 71 D.L.R (3d) 421 (C.A.) where the plaintiff airline suffered economic loss as a result of the cancellation of certain scheduled commercial flights due to the forced closure of the runways due to snow. It was held that the Minister of Transport only owed a public duty imposed by statute to maintain the runway free of snow but this did not give rise to a private action. In the second case Baird v. R. (1982), 135 D.L.R. (3d) 371 (Fed. Ct.) where the plaintiffs alleged economic loss resulting from the negligence of the Minister of Finance and the Superintendent of Insurance in performing statutory duties in the licensing and inspection of a trust company. The plaintiff's statement of claim was struck out on the basis that the claim to compensation for economic loss was not within the scope of Crown liability when the statutory duties were imposed and there was nothing in the legislation indicating an intention of Parliament to create a category of Crown liability which was previously unknown. This decision however was reversed on appeal Baird v. R. (1985) 143 D.L.R. (3d) 1, the court holding that it was not a plain and obvious case that justified the claim being struck out. That case can be distinguished from the instant case for the powers conferred on the Minister and the Superintendent were very much wider than those conferred upon the Commissioner of Deposit-taking Companies.

17. The Attorney General cited Leigh and Sillivan Ltd. v. Aliakmon Shipping Co. Ltd. (1985) 2 WLR 289 where the Court of Appeal considered the duty of care for economic loss and in which the authorities were reviewed. In that case it was held that there can be no general right of recovery for economic loss on the basis of proximity in cases of damage to persons or property and that recovery should be limited to certain specific cases. I quote from the judgment of Robert Goff L.J. at p.324:-

"But it has been widely accepted for a long time that there are very serious objections to allowing recovery for purely economic loss on the simple basis of foreseeability. These objections have been articulated in a number of judgments, most notably perhaps in the judgments of Blackburn J. in Cattle v. Stockton Waterworks Co., L.R. 10 Q.B. 453; 457-458; of Lord Penzance in Simpson & Co. v. Thomson, 3 App. Cas. 279, 289-290; of Cardozo C.J. in Ultramares Corporation v. Touche (1931) 255 N.Y. 170, 179; of Lord Reid in Dorset Yacht Co. Ltd. v. Home Office (1970) A.C. 1004, 1027, and of Lord Denning M.R. in Spartan Steel & Alloys Ltd. v. Martin & Co. (Contractors) Ltd. (1973) 1 Q.B. 27, 38-39. There are perhaps two strands in this line of thought. The first is the fear of an unreasonable imposition of liability on too great a scale to be tolerable. This is the so-called "floodgates" argument, which has recently been criticised (by lord Roskill in Junior Books Ltd. v. Veitchi Co. Ltd. (1983) 1 A.C. 520, 539). I only comment that there are, perhaps, some of us who prefer a controlled opening of the gates, permitting the flooding of a reasonably foreseeable area, rather than a wholesale inundation of unforeseeable and uncontrolled proportions. But in any event it is also necessary to consider whether the "floodgates" argument is, in the particular circumstances, founded upon blind conservatism, or has a rational basis. And, in the case of liability in negligence for economic loss the second strand in the line of thought that limits must be imposed upon a generalised liability is indeed based on good sense. This is the theme of lord Reid's speech in the Dorset Yacht case (1970) A.C. 1004, and of Lord Denning M.R.'s judgment in the Spartan Steel case (1973) Q.B. 27, a theme which is taken up in the current edition of Salmond & Heuston on Torts, 18th ed. (1981), p.191. It is to the effect that the philosophy of the market place presumes that it is lawful to gain profit by causing other economic loss, and that recognised wrongs involving interference with others' contracts are limited to specific intentional wrongs such as inducing a breach of contract or conspiracy. Certainly there seems to have developed an understanding that economic loss at the hands of others is something we have to accept without legal redress, unless caused by some specifically outlawed conduct such as fraud or duress; though how far this is the outcome of our reasoning, or the product of our law, is not altogether clear. But a striking result of this line of thought is that criticism of the absence of recovery for economic loss tends to be concentrated on those cases where liability has in fact been caused to person or property, though not to the person or property of the plaintiff himself."

18. Mr. Kaplan referred to an American authority Indian Towing v. USA (1955) 350 US 60 but I did not find this case to be of any assistance as facts were quite different from the present case. He also cited Ross v. Caunters (1980) Ch. D. 297 but this case was decided on its own facts and was a case where there was a direct relationship or proximity.

19. Mr. Kaplan argued that the loss suffered by the plaintiffs was not economic loss but was based on the loss or diminution in value of their chose in action. I found no merit in this submission for in the context of an action in negligence the damages quite clearly come within the definition of economic or pecuniary loss.

20. An accurate summary of the law after examining the cases spanning over a century was given by Robert Goff J. as he then was in Fellows v. Rother District Council (1983) 1 AER 513 at p.522:-

"From these authorities the following principles can, as I understand it, be derived. Where a plaintiff claims damages for negligence at common law against a public body or official purporting to act in pursuance of a power conferred by statute or other legislation, he can only succeed if he can show (1) that the act complained of was not within the limits of a discretion bona fide exercised under the relevant power, (2) that having regard to all the circumstances, including the legislation creating the relevant power, there was sufficient proximity to create a duty of care on the defendant to avoid damage to the plaintiff of the type complained of, and no ground for negativing (or reducing or limiting) such duty of care, (3) that it was reasonably foreseeable by the defendant, or by those for whom he was vicariously responsible, that the act complained of was likely to cause damage of the type in fact suffered by the plaintiff by reason of such act."

21. I will now turn to consider the submissions that have been made and set out my conclusions. It is contended by the plaintiffs that as depositors they form part of a special category whom the legislature intended to protect when the Ordinance was passed. They therefore contend that they were in a direct relationship or proximity with the Commissioner and the Commissioner must have had them within his contemplation when they became depositors so that there is a duty of care owed to them upon breach. In order to determine whether any duty is owed to the depositors it is necessary to consider as I have said before the provisions of the Ordinance. Mr. Kaplan submits that the Ordinance was passed for the protection of investors or depositors. However from the preamble it is clear that the purposes of the Ordinance are threefold. Firstly to regulate the taking of money on deposit which means that only a deposit-taking company which is registered or licensed can accept deposits on the terms provided for in the Ordinance. Secondly it incorporates provisions for the protection of depositors by imposing safeguards, designed for the better management of deposit-taking companies. Thirdly the Commissioner acts as a regulatory body for monetary policy purposes. Apart from the duty to register the company and such other duties ac to maintain a register of deposit-taking companies, to Gazette each year the names of deposit-taking companies and to maintain secrecy no other specific duties are imposed upon the Commissioner. The way in which the Commissioner carries out his duties is a matter for his discretion dependent upon such matters as the numbers employed on his staff and what prorities he adopts. He is under no specific duty to carry out inspections as contended by Mr. Kaplan, but he is free to carry them out as and when necessary. It is in fact pertinent to observe that there are about three hundred and thirty registered deposit-taking companies operating in Hong Kong so that there is obviously a limit to the number of investigations that can be carried out at any one time.

22. When the plaintiffs decided to invest their monies they entered into a contract with the company. No representations had been made by the Commissioner to the plaintiffs that they should invest their monies in that company to come within the situation of Hedley Byrne. The Commissioner has no right of control over a deposit-taking company nor can he interfere in the day to day management of the company which of course is exercised by the company's directors and executives. There is nothing in the ordinance which indicates that the plaintiffs were to form part of a special category of persons to enable them to take civil proceedings for damages, for a breach of a statutory duty to take care. Further I am unable to accept that the statements made by the Commissioner and the Financial Secretary that the role of the Commissioner was one of prudential supervision, can be engrafted as Mr. Kaplan suggested onto the Ordinance. These words were uttered in a political context and cannot form the basis of a cause of action. The object of the legislation is quite clear. It is to provide safeguards to the public at large for the general administration and operation of deposit-taking companies. It does not create a duty of care by the Commissioner in favour of an individual depositor in his private capacity to give rise to a civil action in damages if he carries out his duties negligently. Further there was no direct relationship or proximity between the plaintiffs and the Commissioner to come within the neighbour principle enunciated in Donoghue v. Stevenson. The Commissioner's duty is to act in a supervisory role and to exercise his powers in accordance with the discretion vested in him. His accountability is to the Government. Foreseeability by itself does not establish a duty of care and here I refer again to Leigh and Sillivan Ltd. v. Aliakmon Shipping Co. Ltd (1985) 2 WLR 289. In any event I agree with the Attorney General's submission that the Commissioner could not possibly have foreseen in 1980 that the company would eventually be wound up with a consequential loss to the plaintiffs in 1983.

23. Finally upon the matter of public policy I am in entire agreement with the Attorney General that there are very good policy reasons why the plaintiffs should not be permitted to pursue this action. It would lead in my opinion to the opening of the flood gates for the Commissioner would find himself faced with unlimited claims from an unascertained class it was well expressed by Cardozo C.J. in the United States in the well-known case of Ultramares Corporation v. Touche (1931) 255 NY 170 NE 441 at 444:

"Liability in an indeterminate amount for an indeterminate time to an indeterminate class."

By analogy the Commissioner of Police and the Commissioner of I.C.A.C. with regard to the prosecution of criminals could find themselves subject to legal proceedings for damages by a failure on their part to exercise their powers in the manner that has been contended for in this case whilst other departments of government could also be exposed to claims for damages where it acts as a regulator or as an inspector. As the Attorney General submitted where would it end? The consequences to the Treasury if a duty of care is owed and damages are awarded could be quite alarming.

24. The plaintiffs invested their monies with the company at a time when it was on the brink of collapse. They were placed there voluntarily by the plaintiffs who were no doubt attracted by the higher rates of interest offered than those offered by the more conservative institutions. The plaintiffs were under no obligation to put their monies in a deposit-taking company for they could have placed their funds in shares, or in property or commodities or even on fixed deposit with a bank. All forms of investment carry some element of risk. The higher the stakes the greater the risk. Not only is the Commissioner required to exercise prudence in carrying out his duties by way of prudential supervision, but the ordinary depositor must also act with prudence in conducting his business affairs. These were commercial transactions so that the maxim caveat emptor applies.

25. Mr. Kaplan postulated that if the case goes to trial evidence may be forthcoming concerning the Commissioners inactivity at a time when he may have become aware that fraud had been perpetrated by officers of the company. This submission is however irrelevant for I can only consider the application on the basis of the pleading and not on the realms of speculation. There is no allegation in the statement of claim that the Commissioner acted outside the ambit of his authority. Whilst sympathy must be expressed to the plaintiffs they are not entitled to reimbursement for their losses out of the Treasury at the expense of the taxpayers. There is no duty upon the defendant to insure the plaintiffs against their losses.

26. With regard to the Attorney General's five propositions I answer them as follows:-

27. Clearly improvements are necessary for the supervision and regulation of deposit-taking companies, but they can only come about as a result of legislation.

28. The case presented by the plaintiffs is wholly misconceived and untenable. There is no reasonable cause of action with the result that the plaintiffs' statement of claim will be struck out with costs to the defendant. The plaintiffs are legally aided so their costs will be taxed in accordance with the legal Aid (scale of Fees) Regulations.