WAYNE THOMAS DAVIS v. ALISON SUZANNE POCKETT AND ANOTHER

HCA 1215/2014

[2021] HKCFI 3641

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1215 OF 2014

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J U D G M E N T

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Introduction

1.  This is the assessment of damages following an Interlocutory Judgment dated 20 August 2014 (the “Interlocutory Judgment”).

2.  Back in 2007, the Plaintiff (“P”)  engaged the 1^st Defendant (“D1”)  to provide financial and investment advice in her capacity as a licensed independent financial advisor and as a director of the 2^nd Defendant (“D2”)  (the Defendants shall collectively be referred to as “Ds”).

3.  In short, P’s claim is that upon Ds’ negligent advice and/or fraudulent / reckless / negligent misrepresentation upon which P relied, P carried out 4 investments into LM Managed Performance Funds (the “1^st Fund”), particulars of which are as follows:

a.  A/C Number 100241785 – US$177,205.39 on 9 October 2007;

b.  A/C Number 100261312 – AU$270,891.21 on 9 October 2008;

c.  A/C Number 100273655 – US$123,804.84 on 6 July 2009;

d.  A/C Number 100284645 – US$106,814.51 on 12 April 2010.

4.  In addition, without P’s prior knowledge or consent, D1 caused US$30,000 to be withdrawn from Friends Provident Investment Plan 766950 (which belonged beneficially to P)  and to be invested into LM Management Currency Protected Australian Income Fund 3 Mths US Dollars (the “2^nd Fund”).

5.  Apart from negligence and misrepresentation, P also brings his claims based on breach of trust, breach of fiduciary duty and breach of statutory duty.

6.  Ds did not give notice of intention to defend.  The Interlocutory Judgment was therefore entered against Ds with damages to be assessed.  The Interlocutory Judgment recorded that P has abandoned his claim for a declaration as pleaded in prayer 2 of the Indorsement of Claim.

7.  The action seemed to have stood still afterwards until P filed a Notice of Intention to Proceed dated 6 May 2020.

8.  By letter dated 17 September 2020, P confirmed to the Court that he would no longer proceed with his claim against D2, on the basis that D2 had been dissolved on and since the date of the Interlocutory Judgment.  The present assessment of damages is therefore relevant only against D1.

9.  D1 did not attend the hearing before me.  I am satisfied that D1 has been properly notified of the hearing and therefore I would proceed in her absence.

P’s loss and damage

10.  In view of the Interlocutory Judgment, I am to proceed on the basis that P has established liability against D1 on the basis of P’s pleaded case.  I am only concerned with the quantum of damages that P suffered based on such pleaded case.

11.  Since D1 did not give notice of intention to defend and has not filed any witness statements / list of documents (especially upon the taking effect of the unless order made by Master J Wong dated 26 July 2021), P’s allegations are not challenged or contested.  I accept the evidence of P in full as stated in his affidavit dated 16 September 2021 filed pursuant to Order 38 rule 2 (which is taken as read at the assessment).  Pursuant to Order 38 rule 2(2), I do not consider necessary for P to be subject to cross-examination nor to attend trial.

12.  Both the 1^st Fund and the 2^nd Fund have gone into liquidation / receivership.  Based on the latest reports from the liquidators / receiver, the updated position is as follows:

a.  For the 1^st Fund, in the 22^nd Update to Unitholders dated 28 July 2020, the liquidators (KordaMentha)  advised that the return to unitholders was likely to be less than 5 cents in the dollar;

b.  For the 2^nd Fund, in the 34^th Report to Investors dated 30 June 2021, the receiver (BDO)  estimated a return of 2.7 cents in the dollar, but there were costs and expenses to be paid to certain feeder funds first before distributions were to be made available to the investors.

13.  On present evidence, for P’s investments in the 1^st Fund, I am unable to say that P will have nil recovery; rather, it would appear likely that some recovery would be made.  I therefore assess P’s loss in the 1^st Fund on the basis that he would recover 5 cents in the dollar as advised by KordaMentha:

A/C Number	Investment	Loss at 95%
100241785	US$177,205.39	US$168,345.12
100261312	AU$270,891.21	AU$257,346.65
100273655	US$123,804.84	US$117,614.60
100284645	US$106,814.51	US$101,473.78
TOTAL	AU$270,891.21 US$407,824.74	AU$257,346.65 US$387,433.50

14.  As for the 2^nd Fund, BDO has not set out the estimated costs and expenses that have to be paid first to the feeder funds.  I take the view that realistically P is most unlikely to have any recovery.  In any case, the difference between nil recovery and that at 2.7% is minimal (with P’s investment at US$30,000, the difference is merely US$810).  I will award the full US$30,000 as damages to P.  I pause here to note that from the primary documents, it seems that the book value of this investment was US$31,700.  Mr Ivan Lee, solicitor for P, was unable to explain the difference in the figures when I raised the query.  Nevertheless, since P’s present claim is US$30,000 which is less than the book value, I see no difficulty in awarding the smaller amount to P (as claimed).

Limitation

15.  At the assessment hearing I raised the issue as to whether limitation might apply, given that the Writ was issued on 30 June 2014 and the 1^st transaction concerning the 1^st Fund was carried out 6 years beforehand (on 9 October 2007).  Clearly, the negligent advice / misrepresentation must have been made or given by the time the transaction was implemented and time would have started to run against P.

16.  I am conscious of the fact that limitation is a matter that has to be specifically pleaded: O 18 r 8 RHC.  In the present case, of course there is no such plea from D1 when she has not indicated an intention to defend in the first place.  I am therefore satisfied that the limitation point should not be taken against P.

17.  Further and in any event, bearing in mind that P also brings his claim for fraudulent misrepresentation and breach of trust / fiduciary duty, there may be arguments that section 20(1)  of the Limitation Ordinance might apply to the claim.  Section 26 might also be available to P to postpone the limitation period.  The evidence seems to show that P only became aware of D’s wrongdoings some time in 2011.  In my view, these matters aptly explain why it is necessary for limitation defences to be specifically pleaded, because otherwise the plaintiff (and the Court)  would not be able to meaningfully assess the merits of the limitation argument.

Pre-judgment interest

18.  Pre-judgment interest is usually awarded at 1% over prime rate: Waddington Ltd v Chan Chun Hoo Thomas (unreported, CACV 10/2014, 20 May 2016 at paras 172-186).  I so order.

Conclusion

19.  In conclusion, I give judgment to P against D1 in the sum of AU$257,346.65 and US$417,433.50 (US$387,433.50 + US$30,000), together with interest on such sums at 1% over the prime rate of HSBC from the date of the Writ to the date of this judgment, and thereafter at judgment rate until payment in full.

20.  P is also entitled to costs of the action and this assessment.  I direct P to lodge and serve his Statement of Costs within 7 days.  D1 shall lodge and serve her List of Objections within 7 days thereafter (if any).  Costs will then be summarily assessed on paper.