CHEUNG CHI YUEN, FRANK v. YEUNG SIU WAI, ANTHONY

HCA 826/2014

[2018] HKCFI 1262

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 826 OF 2014

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J U D G M E N T

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Introduction

1.  On 21 June 2011, the plaintiff transferred $6 million to an online securities account (“IB Account”) he had just opened with Interactive Brokers LLC (“IB”).  It was his apparent intention that that sum be invested for him by the defendant, and the defendant did in fact then operate the IB Account.  At first, indeed within just 10 days, there was a quick profit of $478,428, which was realized and withdrawn.  But, by September 2011, namely within just 3 months or so of the start of the venture, almost all the $6million had been lost through a series of unsuccessful high-risk investments.  The account never recovered.  It is that loss which gives rise to this claim.

2.  The plaintiff had been ‘introduced’ to the defendant by one of his long-term private bankers, Ms Audrey Zau (“Ms Zau”).  I put ‘introduced’ in inverted commas as it is common ground that the plaintiff and the defendant never met, never spoke and never directly communicated by any means.  Such contact as there was relating to the defendant’s operation of the plaintiff’s IB Account was effected through Ms Zau, although the plaintiff did receive at least quarterly statements directly from IB by post.

3.  The quarterly statement for the 3-month period ending 30 September 2011 showed quite clearly that the net asset value (“NAV”) of the investments held in the account had dropped to $255,856, a drop of over 95% from the end of the previous period ending June 2011.  However, the plaintiff took no action to enquire about or to investigate the circumstances until 12 months later, when he received the quarterly account statement for the 3‑month period ending September 2012 which showed the NAV had dropped to $11,899.

4.  The plaintiff’s initial inquiries were directed at IB.  After provision by IB of various account documentation, and analysis of that documentation by his solicitors, the plaintiff’s solicitors wrote on his instructions to IB on 31 May 2013.  The letter essentially suggested that there might have been a fraud; that the plaintiff had not in fact opened the IB Account which had been opened without his knowledge and approval; that he had never seen nor signed (electronically or physically) any account opening or other documents; that he had never authorized the defendant to operate his account, that the apparent profit of $478,428 was an illusion; and that he had never been told about trading in high-risk products.

5.  Also on 31 May 2013, the plaintiff’s solicitors wrote to the defendant and a company (“OICL”), of which the defendant is the owner and which had received the sum of $167,450 by cheque from the plaintiff. This was the first contact or complaint made to the defendant by the plaintiff or anyone acting on his instructions. 

6.  The plaintiff had briefly spoken to Ms Zau about his IB account in around November 2012, and albeit not asked to do so Ms Zau appears to have contacted the defendant.  This contact resulted in what the defendant calls an ex gratia payment of $30,000 he made to the plaintiff. 

7.  I was not told of any protective steps that might have been taken by the plaintiff about Ms Zau’s acts or omissions.  Indeed, it seems that the plaintiff made no complaint about Ms Zau’s involvement in the whole matter, and she remained up to the trial one of his private bankers (even though she has since moved banks).The claim is directed against the defendant alone. 

8.  Likewise, the defendant has commenced no contribution proceedings against Ms Zau.  I have been reminded that contribution proceedings might yet be begun, so I should be careful about what I might say on any issue as between Ms Zau and the defendant.  But I cannot shy away from finding facts as seem to me might be relevant to the determination of this claim.

9.  The basis upon which the defendant came to act as operator of the IB Account, and the instructions given to him, or representations made by him, are at the core of the dispute.  All of the plaintiff, Ms Zau and the defendant gave oral evidence at trial, each having filed two witness statements which largely stood as their evidence in chief.  Ms Zau was called by the plaintiff.  There were no other witnesses.

10.  At trial, the plaintiff was represented by Mr Bernard Man SC, leading Ms Theresa Chow of Counsel, and the defendant was represented by Mr Martin Wong of Counsel.  I would like at the outset to commend the high level of oral and written advocacy that Mr Man and Mr Wong displayed.

The pleaded cases

11.  The claim is in the Re-Amended Statement of Claim.  As originally framed, the primary case was focused on alleged representations made by the defendant to Ms Zau (“Representations”), being (a) that he was an expert in investing for high net worth individuals in the Hong Kong market, and (b) that his specialty was to invest in stocks with good fundamentals, and it was his intention to do that for any client introduced by Ms Zau.

12.  It is said that relying on the Representations, Ms Zau mentioned to the plaintiff that the defendant was a capable investment advisor and suitable for him, which persuaded the plaintiff to set aside $6 million for the purpose of instructing the defendant to invest on his behalf.  As the plaintiff’s agent, Ms Zau communicated to the defendant the plaintiff’s intention to engage him as his financial advisor, and mentioned that the plaintiff was conservative and cautious about his investments.

13.  So it is pleaded that Ms Zau, as agent for the plaintiff, and relying on the Representations, entered into an oral contract with the defendant on terms that:

(1)   he would be engaged as the plaintiff’s financial advisor and make investments on his behalf;

(2)   the plaintiff would deposit a sum of $6 million into a trading account for this purpose;

(3)   the investment strategy would be based on the Representations and tailored to the plaintiff’s needs as a conservative investor; and

(4)   the defendant would be remunerated by being paid 35% of realized profit each month, with no fee charged if there is no realized profit for the portfolio for that month.

14.  The plaintiff also pleads that certain terms were implied into the oral contract, or that they existed on the proper construction of that contract, namely:

(1)   the defendant would be under a duty to exercise reasonable care and skill in handling matters to the best interests of the plaintiff;

(2)   in particular the defendant would properly invest the portfolio in accordance with the plaintiff’s investment needs as a conservative investor, and avoid trading in any high-risk financial products; and

(3)   the defendant would also keep the plaintiff reasonably informed of the status of his investments.

15.  Alternatively, it is said that the defendant owed a duty in tort to the plaintiff in like terms to those pleaded in contract.

16.  By a red amendment, the plaintiff pleaded the further alternative claim that if (which is denied) there was no term that the investment strategy would be based on the Representations and tailored to the plaintiff’s needs as a conservative investor, then the defendant owed a duty (on the true construction of the oral contract, or under an implied term, or in tort) to ascertain the investment needs of the plaintiff and to tailor a suitable investment strategy addressing such needs.  (In his opening submissions, Mr Man suggested this might be a short answer to the case, where it is common ground that the defendant and plaintiff never spoke.)

17.  Reference is made in the pleading to the initial trading activities which resulted in the realization of profit in the period between 27 June 2011 and 3 July 2011, taken by the plaintiff in 8 payments totalling $478,428, which were made from the IB Account to the plaintiff’s HSBC Account.  It is said that the plaintiff then paid to the defendant—by a cheque made payable to OICL‌—the sum of $167,450 as a performance fee, calculated at the agreed 35% of those profits realized.

18.  It is pleaded that given the initial success of the defendant’s investment activities, the plaintiff did not pay much attention to the IB Account.  It was only in or around November 2012, when the plaintiff sought to find out about the status of the IB Account, that he discovered that the NAV had dropped to a balance of $11,899.  The date of November 2012 was the green amendment,,changed from the originally pleaded date of June 2012, though I think little turns on this particular change, and the plaintiff was unclear on the dates when he gave evidence.

19.  The breaches alleged are that the defendant traded in numerous high-risk investment products including warrants and structured products, which were not investments in stocks with good fundamentals and were contrary to the plaintiff’s conservative investment strategy as a retired person; that the defendant never communicated the status of the portfolio, in particular the substantial loss, to the plaintiff and/or Ms Zau after claiming the performance fee in July 2011; and that he was negligent in adopting a high-risk trading strategy. 

20.  Alternatively, it is pleaded that the defendant adopted the high-risk strategy when he knew or ought to have ascertained the plaintiff’s investment needs.

21.  I accept Mr Wong’s submission that the pleadings identify the claimed wrongdoing by the defendant was on a strategic level, that is he was wrong to adopt a high-risk strategy as it was contrary to the plaintiff’s conservative investment needs.  Hence, the plaintiff’s complaint is not that the defendant negligently executed the high risk investment strategy; rather, the complaint is that he should have not done it at all.

22.  In his Re-Amended Defence, the defendant pleads that it was Ms Zau who approached him in 2011 to operate the plaintiff’s account for her, because she was aware of the defendant’s investment experience.  It is specifically denied that the plaintiff or Ms Zau ever told the defendant that the plaintiff was a conservative investor or that the defendant was to avoid trading in any high risk of financial products. The defendant relies upon the absence of any communication between the plaintiff and the defendant.

23.  The defendant pleads that the IB Account was opened by Ms Zau, who then requested the defendant operate it for her and the plaintiff.  The account opening documents identify that the plaintiff agreed to purchase all kinds of investment including trading and speculation, that is in high-risk products.  The authority given to the defendant to trade in such products was given by the opening of the IB Account.

24.  The defendant pleads that any contract that the plaintiff had was with IB or with Ms Zau, but not the defendant.  The defendant denies the Representations, and avers that the defendant never held himself out as acting for Ms Zau’s clients in any professional capacity, but as her friend in a non-professional capacity.

25.  Reference is made to the fact that the statements of accounts on each transaction would have been sent to the designated e-mail address, being the Yahoo address of Ms Zau, and that statements were also sent or copied to the plaintiff.

26.  As to the payment of $167,450, it is pleaded that it was Ms Zau who suggested that payment (and it was not on the basis of any pre-agreement).

27.  Though the point was perhaps not highlighted in his written opening submissions, in his oral opening submissions Mr Man emphasized the absence of any positive plea in the defence that the plaintiff was looking for high-risk investments and that the defendant had been positively instructed to trade for the plaintiff in high-risk profits and/or in the same way that he had previously traded for a relative of Ms Zau, who has been referred to in these proceedings as Madam L.

Amendment refused

28.  In light of that submission, Mr Wong made an application to ‘go to purple’ on the defence mainly by adding a proposed paragraph 7A to make an averment that “Ms Zau engaged the defendant to trade for the plaintiff in the way the defendant had previously traded for Ms Zau’s relative, Madam ‘L’, namely high-risk-high-return products, which included [the high-risk products he actually invested in]”. 

29.  I refused the application and said I would give reasons for the refusal in this judgment, which I now do.

30.  Paragraph 9 of the claim avers that Ms Zau “mentioned to the defendant that the plaintiff was conservative and cautious about his investments”. The defence to that paragraph, as it stood at the beginning of the trial, simply pleaded in paragraph 7 that the defendant had no knowledge of that matter. 

31.  Nevertheless, the plaintiff had previously raised a request for further and better particulars of paragraph 7 of the defence.  The request specifically sought clarification as to the defendant’s case on this area, by asking whether the defendant had sought to understand, and whether the defendant had understood, the plaintiff’s background, investment outlook and objective when the defendant operated the IB Account.

32.  The response provided to that request was at best oblique, being that the defendant had no knowledge of the matters in paragraph 9 of the claim because Ms Zau never communicated such matters to the defendant, save that the plaintiff at all material times authorized the defendant to trade/operate the IB Account on the terms of the mandate shown in the Account Opening Form signed by him.

33.  Therefore, it seems to me that the proposed purple amendment was a significant departure from what had already been pleaded. It is a shift from suggesting that the plaintiff and Ms Zau knew or ought to have known how the defendant was doing the investment to the positive assertion that he was instructed to do it in this particular way.

34.  It is obviously correct that the amendment application was made extremely late, at the trial itself.  In the post-CJR period, the lateness itself might constitute a reason to refuse the application.  I note that there was no real explanation proffered for the lateness of the application, which is perhaps understandable as against the way particulars were previously provided.  But, in any event, I accept there would be other possible prejudice to the plaintiff if the amendment were to have been permitted.

35.  I accept Mr Man’s submission first that the parties come to court on the pleaded cases, and are entitled to have prepared for trial on the basis set out in the pleadings. That preparation includes the approach taken to matters such as discovery. It is trite, and Hong Kong’s highest court has recently thought it necessary to remind practitioners, that it is the pleadings which govern the issues to be canvassed in the interlocutory process and at any trial, so that it is for the witness evidence to match the pleadings, and not the other way round.

36.  I accept that the amendment might set in train an enquiry as to the precise way in which Madam L’s portfolio was managed, and possibly an enquiry as to the source of the plaintiff’s $6 million (which I was told was a sum of cash left over from an investment after the Lehman collapse in 2008) and how that might have affected his investment appetite.

37.  I do not accept Mr Wong’s submission that there would be no real prejudice because the point had been canvassed in the witness statement of the defendant.  Also, that submission goes against the CFA authorities I have mentioned.  So I rejected the proposed amendment as being too much of a departure from the previous pleaded stance (not least where the defendant had been given fair opportunity to have explained his case in response to the request for particulars), very late without much explanation for the lateness, and prejudicial to the plaintiff in its lateness and the trains of enquiry as might have flowed from it.

38.  In any event, I note that the existing defence—in pleading elsewhere to the averment of the implied term that the defendant would properly invest the portfolio in accordance with the plaintiff’s investment needs as a conservative investor and avoid trading in any high-risk financial products—already specifically denies that the plaintiff or Ms Zau ever told the defendant that the plaintiff was a conservative investor or that he should avoid trading in any high-risk financial products.  The contest on that pleading would probably require, and certainly permit, me to consider what was or was not said by Ms Zau to the defendant about the intended operation of the IB Account for the plaintiff.

39.  So, whilst I have refused the proposed amendment to raise the positive case that the defendant was specifically engaged and instructed to trade in high risk and high return products, it remains open on the pleadings for the defendant to require the plaintiff to prove that he had been told that the plaintiff was a conservative investor and that the defendant should not trade in any high-risk financial products.  I think that, for that purpose, it is open to the defendant to point to matters of context which make one side’s case more or less likely, and that would include at least some reference to the trading for Madam L (albeit only by reference to materials already reasonably deployable).

Factual and legal questions

40.  It is said, sometimes unfairly, that if you cannot win on the facts, you should try the law.  In his succinct written opening submissions, Mr Wong focused on the facts, and indeed identified this as a case turning on my decision on facts.  He did not refer to any authorities in support of any proposition of law. By contrast, in his somewhat longer written opening submissions, Mr Man referred to and explained 14 authorities, copies of which were uncomfortably crammed into a wide lever arch file.

41.  But, as it happens, there ended up being little dispute between Mr Wong and Mr Man as to the legal principles identified by Mr Man. The real contest was whether any of those principles were applicable on the facts.  In those circumstances, it seems to me to be appropriate to deal first with the facts.  I can then, if and as appropriate, apply any relevant legal principle to those facts.

Factual analysis

42.  There are a number of factual matters which are not in dispute.  Insofar as there are matters in dispute, I shall try to resolve the disputes as I deal with them.

43.  In my analysis of the facts, I have taken account of the submissions as to how the witnesses gave their evidence.  I accept Mr Man’s submission that the plaintiff was generally straightforward doing his best to give accurate recollection of events, and Ms Zau gave mostly clear evidence. 

44.  The defendant was apparently less clear in some respects, and it might certainly be said he was less “impressive” or “polished”.  In giving evidence, he appeared awkward and not always straightforward, though in part that may be because, as I found him to be, he is a little eccentric.  In any event, where demeanour can be unreliable, I have sought to place more reliance on what seem to me to be the inherent likelihoods or plausibility of matters, including where apt by reference to the contemporaneous documents available to the parties.  I would note that I have also had in mind the absence of documents where I would have expected them to have been produced.

45.  The plaintiff is a former practising solicitor.  He retired from full-time practice in 1991, having been a senior partner in a well-known local firm with a general practice.  He did some consultancy work until 2001.  In 2011, he was 75 years old.

46.  The plaintiff had used the services of various private banks for many years.  One of his private bankers was Ms Zau, of whom he has been a client for about 20 years.  Ms Zau performed an advisory role, as opposed to a discretionary management role.  The plaintiff and Ms Zau met regularly, perhaps every 6 to 8 weeks, during which meetings Ms Zau discussed and reviewed with the plaintiff the portfolio of investments made with or through her.  Obviously, the purpose of the discussions was for the plaintiff to obtain advice as to whether to maintain existing investments, increase or decrease existing investments, or consider entering new investments.  It seems to me to be equally obvious that those discussions would only have been possible if Ms Zau had kept herself abreast of the status of the plaintiff’s investments, and I so find.  I accept that, based on the results achieved in the plaintiff’s portfolio over the years, he generally trusted and had confidence in Ms Zau and would usually take her recommendation on any investment strategy.

47.  It is not in dispute that the plaintiff had generally engaged in a conservative investment strategy. There was no evidence which suggested any reason why the plaintiff might change that strategy in 2011, at his age and after 20 years of retirement.  I accept that the plaintiff himself indeed had no desire to change that strategy.

48.  In June 2011, Ms Zau recommended to the plaintiff that he might place some funds with the defendant, or into an account which could be operated by the defendant.  The recommendation came about in the following circumstances.

49.  In the early 1990s, the defendant and Ms Zau had been colleagues at an investment bank.  Ms Zau, who was subordinate to him, knew the defendant to be a “senior star” investment or fund manager, managing large pension funds at that time. 

50.  The defendant left that employment in 1993. In the documentary evidence was a complimentary reference written at the time, which refers to his experience, albeit without specific reference to his experience with structured products.  Nevertheless, I accept the defendant’s evidence that his fund management activities in that employment included not just straightforward stock investments, but also warrants and options and other derivative or structured products.

51.  The defendant and Ms Zau did not keep in touch, and only renewed their acquaintance sometime in around 2011.  It does not seem to matter whether they bumped into each other at a social event (as she says) or in a shopping mall (as he says).  For reasons which will become apparent, I accept the chance meeting must have been much earlier than June 2011 (as she says), and was probably at the end of 2010 or very early 2011 (as he says).  The meeting was short and they had a casual discussion, catching up.  I think it likely each of the defendant and Ms Zau briefly informed the other as to what they were then doing.  I accept that the defendant told her that he was no longer employed by anyone, but was trading on his own account and doing reasonably well.

52.  Ms Zau said in evidence that the defendant told her he was an expert in investing for high net worth individuals in the Hong Kong market and had a very strong track record, and that his specialty was investing in stocks with good fundamentals.  She said that he indicated he would be considering taking in some new investors, and that he would manage the investment portfolios for any investors introduced by her within that framework.  She said that what he said reinforced her view, based on her previous acquaintance some 18 years before, that the defendant was good and experienced in equity trading.  This is said to be the basis of the Representations.

53.  The defendant denies much of that conversation.  I prefer his evidence in this regard.  Other than a reference to some mainland Chinese female investor, who Ms Zau said the defendant complained about as not having paid for his services (which the defendant denied), there is no evidence which really suggests the defendant was then engaged in any ongoing business of investing for other persons.  It is not likely he would have said so.  I reject the plaintiff’s case that the Representations were made as alleged (but in any event, there was no clear evidence that any such statements as were alleged to have been made to Ms Zau were in fact passed on to the plaintiff).

54.  I note in passing that though the defendant frequently used the expression “we” or “our” which he sometimes changed to “I” or “my”, he specifically denied that he was either engaged in the business of investing for high net worth individuals in 2011, or engaged in any business with other people.  Perhaps this use of language was consistent with his somewhat formal, almost written style, use of the Chinese language.

55.  Although the defendant owned OICL, there was no material which identified that OICL was the business vehicle for any business activities of the defendant in making or managing investments for others.  Other than a question in a Notice to Admit Facts which sought confirmation (which was given) that the defendant was not licensed in 2011 and 2012 to carry on a business in any “regulated activity” under Schedule 5 of the Securities and Futures Ordinance, this was not a line further pursued with any vigour before or at trial.  Where the defendant had previously been a licensed investment advisor, but had ceased to be licensed upon investing for his own account, that seems to me more likely to show the lack of any business in regulated activity for others.  Indeed, even the fact that later in the story the defendant either could not or did not (see below) produce any invoice from OICL tends to support the conclusion that it was not engaged in business with persons other than the defendant.

56.  It can also be noted in this context that Ms Zau said that the investment that was managed by the defendant for Madam L (see below) was necessary to enable the defendant to show her his prowess, as he did not otherwise have a track record.  That tends to show Ms Zau knew the defendant had not been investing for others as part of any business.

57.  The fact that the defendant may have mentioned to Ms Zau specific blue-chip stocks does not mean – though it may have been initially assumed by Ms Zau – that the defendant engaged only in what might be called ‘plain vanilla’  buying and selling of such stocks.  The reference could just as easily have been to the trading in structured products based on those stocks, or an index in which those stocks appear.  Indeed, I accept the defendant’s evidence that he mentioned he invested in equity and equity derivatives, though I did not find convincing the suggestion that he said to Ms Zau he did so “aggressively”,as that is not borne out by other evidence of his own previous trading on his own account.  I have also accepted that the defendant had experience of investing in equity derivatives in the previous employment when Ms Zau was a colleague.

58.  In her first witness statement, Ms Zau essentially relied just on the content of that one conversation as being the alleged basis of the Representations and her subsequent recommendation to the plaintiff that it would be beneficial for him to diversify his investments by placing funds with the defendant, which the latter could trade in real-time in Hong Kong.  She also stated that not only did she introduce the plaintiff to the defendant for investment, she also introduced her relatives and friends, and did so because of what she recalled about the defendant’s prowess and skills from their days together in previous employment.   One of the persons she introduced was an uncle, Mr Fung.

59.  In her second witness statement, Ms Zau took what seemed to me to be a somewhat different line. She did so in light of the fact that the defendant had detailed in his first witness statement (to which her second witness statement was a response) his involvement in investing funds for Ms Zau’s relative, Madam L.  The defendant had stated that after they became re-acquainted, Ms Zau asked him if he would do some financial investment for her relative, and he agreed.  For that purpose, he suggested Madam L open an account with IB.

60.  I accept that Ms Zau was instrumental in opening an account with IB for Madam L, using her own personal computer to do so, and the defendant was then provided with the necessary log-in details and password so that he could operate that account.  As the account was operated from at least 1 February 2011, that is why the re-acquaintance between the defendant and Ms Zau must have been well before June 2011, perhaps even in late 2010 as the defendant said.  Between 1 February and 3 June 2011, the defendant made a profit of $170,000 for Madam L on her capital injection of $500,000. 

61.  It is in issue as to the basis upon which the defendant agreed to help Madam L, not least where it is common ground that no question of charging for the services arose.  The defendant says he did so on a friendly basis for a former colleague, and that there was no discussion or even thought about charging Madam L.  Ms Zau says, in her second witness statement, that Madam L had put up the $500,000 in response to the defendant’s invitation for Ms Zau to test him so that he could prove how good he was.  I do not think this is likely, namely that she would risk a relative’s funds simply as a test (however much she might have had a historical regard for his skills).  Rather, I think Ms Zau thought she might be able to help a relative or friends by leveraging her renewed acquaintance with a person whose investment skills she clearly held in high regard.

62.  But in any event it seems to me that the important part of events is the level of profit that was made, being a 34% return in just 4 months.  I find it difficult to accept that an experienced private banker would have understood that to have been reasonably possible from the most basic of trading in blue-chip stocks, or any truly conservative investment strategy.  Indeed, Ms Zau’s evidence included that the defendant had contacted her to say he had made profits for Madam L that should be withdrawn, so that he could reinvest using the original capital only, on the basis that that would be a safe approach to investment.  Again, I find it difficult to accept that an experienced private banker would not have understood that that strategy identified taking precautions to protect any profit precisely because there was a risk of loss on the capital—and the profit if left in the account.  None of these matters seem to me to be, or would likely have been understood by Ms Zau to have been, consistent with a conservative investment strategy.

63.  Indeed, in her own witness statement, Ms Zau accepted in terms that by asking the defendant to invest, she sought for Madam L (and later for the plaintiff) a higher return than on conservative investment.

64.  For those reasons, I reject Ms Zau’s evidence that she emphasised to the defendant that Madam L was a conservative investor.  That finding seems to me to be relevant and informative as to what Ms Zau later did or did not say to the defendant about the plaintiff.

65.  In June 2011, Ms Zau recommended to the plaintiff that he should place some funds with the defendant for him to manage through investments operated online.  It is clear that the plaintiff would not have needed much persuasion or even explanation for him to agree to go along with the suggestion; he was used to accepting Ms Zau’s advice, and simply doing as advised.

66.  The plaintiff and Ms Zau opened the IB Account together.  This was mainly performed online, though a confirmation process was also required. The relevant documents included an Account Application form, a Customer Agreement and a Client FA Agreement (‘FA’ standing for financial advisor, and to give the advisor authority or power to operate the IB Account).

67.  Ms Zau’s assistance was required as the plaintiff was not comfortable, and probably not technically proficient, to have completed the online application process on his own.  Indeed, from his oral evidence, it seemed that the plaintiff in reality paid very little attention to what was happening as the account was opened.  He had no independent recollection how any of the documents came into existence, notwithstanding that they contain accurate information to some extent.  He even said that Ms Zau did not tell him what the FA Agreement was at the time.  As he put it, the forms were essentially filled in by Ms Zau, and he was “just sitting there”.

68.  In the overall picture, it seems to me to be of some weight that the process was performed on Ms Zau’s personal laptop computer, rather than on her work computer (even though the process may have taken place in her office). I presume that this means that the employer would not have had, or kept, the record of an investment by one of its clients supposedly made on the advice and recommendation of its employee private banker.  This point is linked to the further point (see also below) that if she was providing the recommendation in her role as private banker, I do not understand why on her own evidence she did not really do any follow-up after setting up the account.  That seems to me to be contrary to her stated ordinary advisory practice, not least in meeting with the plaintiff every 6 to 8 weeks for the purposes of going through his portfolio and making recommendations and giving advice as to continuing with investments or making potential changes.

69.  It may also be thought odd—if the defendant was to be engaged through Ms Zau’s professional capacity as the plaintiff’s private banker—that the involvement of the defendant should be on an entirely oral basis, save for the written material generated by the opening of the IB Account.

70.  In the Account Application form, the name of the defendant was typed into the box for “Name of Your Financial Advisor”.  Whilst the plaintiff’s personal details were typed in for the account holder’s name, residential address (and mailing address, which was the same) and phone number, it was Ms Zau’s personal Yahoo address that was provided in the box for “E-Mail Address for Account Correspondence”. 

71.  She explained the reason to do so was because the account set-up process required an e-mail address to be entered for the purposes of being sent a confirmation which was then to be typed in.  However, the plaintiff himself identified in his oral evidence that he had three different e-mail addresses at the time, and it was not adequately explained why one of his own should not have been used.  Further, even had it been convenient to use Ms Zau’s e-mail address for the account setting-up process, no convincing explanation was given for never having changed it to an address of the plaintiff himself.  Anyway, the box in which her address was typed was specifically to provide an address for email correspondence with the client.  It seems to me to make more sense that Ms Zau used her own address as it was originally intended that, in common with other investments, she would monitor this investment and discuss it with or report on it to the plaintiff.  But it was also her evidence that she opened the relevant account for Madam L, and had used her own email address for that account too.  This fact may tend to suggest a similar background and basis for the account operations.

72.  The Account Application form also required the provision of answers to 3 security questions which might be used for future verification purposes.  Obviously, as those answers, given to specific ticked questions, were typed in by Ms Zau, she would have known them. 

73.  An important part of the Account Application form related to account configuration.  In addition to choosing the base currency of Hong Kong dollars, it was necessary to choose between a cash or margin account.  The account option chosen was “Reg T Margin” which was identified as:

“ Borrowing to support equities trading, shorting of equities, full options trading, full futures/futures options trading, currency conversions, and securities/commodities trading in multiple currency denominations available. Margin requirements are computed real-time under a rules-based calculation methodology, with immediate position liquidation if the minimum maintenance margin requirement is not met. Purchase and sale proceeds are immediately recognised.”

74.  Part of the configuration also related to Account Financial Background, by the identification of Investment Objectives and Intended Purpose of Trading, and Investment Experience.  As to the objectives and purpose, Ms Zau ticked the boxes relating to “Growth”, “Trading Profits”, “Speculation”, and “Hedging”.  She did not tick the boxes for “Preservation of Capital” or “Income”. As to the investment experience, Ms Zau entered that the plaintiff had more than 10 years trading experience with stocks, bonds and options, about which his knowledge level was “Good” (as opposed to “Extensive” or “Limited”) and that he had 3 and 5 years trading experience with futures and forex respectively, about which his knowledge level was also “Good”.

75.  In his evidence, the plaintiff stated that these descriptions were not all correct.  He actually said he had “no idea” about the identification of his purported investment experience or appetite or preferences.  In her evidence, Ms Zau said that she filled in the account configuration exactly in accordance with the instructions given to her by the defendant.  However, it seems to me that she must have understood the nature of the account that she was creating.  I found it unconvincing that she simply went along with what she said were the defendant’s instructions, when those instructions were at odds with the setting up of an account to be used (she says) for merely conservative investment purposes.  Alternatively, even if those were the defendant’s instructions, Ms Zau could not realistically have thought that the account was being configured for simple conservative trading.

76.  The idea that creating a margin account with permitted trading in speculation, growth, options and hedging (and not ticking the boxes for preservation of capital and income) was merely to give the defendant flexibility in his dealings does not ring true.  I do not accept that the focus was simply to get through the account opening process as soon as possible so that the defendant could get to work.

77.  As to the suggestion that the defendant told Ms Zau what boxes to fill in the account opening document, he denied it saying that Ms Zau is a very experienced person who did not need him to teach her to do anything.  Indeed he said, and I accept it must be correct, that Ms Zau would have filled in numerous account and other opening forms with numerous institutions over her years as a private banker working with various clients.

78.  The suggestion put to the defendant in cross-examination that he told Ms Zau that ticking boxes was not important as he knew what the plaintiff’s needs were also does not seem to me to make sense or likely be true.

79.  I reject the evidence in Ms Zau’s first witness statement where she asserted that she had exhorted the defendant that the plaintiff was retired and was only considering taking a conservative approach in his investment and had in fact been adamant in that regard and had vehemently stressed to the defendant that “for all my friends, capital preservation is most important”.

80.  On the page relating to advisor fee arrangements, Ms Zau ticked the box “No Fee.  No fees are charged by your advisor for managing your account”.

81.  There were several pages in the Account Application form relating to agreements and acknowledgements.  One section relating to the fact that the customer must read the IB Customer Agreement in its entirety, of which there were certain essential terms that the customer must understand, then summarised. Explanations and statements of varying degrees and types of risk were sent out, not least in relation to futures and options.  There was also a risk disclosure statement, part of which read (in capital letters in the original):

“ Off-exchange foreign currency (‘forex’) transactions involve the leveraged trading of contracts denominated in foreign currency conducted with a futures commission merchant or a retail foreign exchange dealer as your counterparty. Because of the leveraged and the other risks disclosed here, you can rapidly lose all of the funds you deposit for such trading and you may lose more than you deposit.”

82.  Another part of the Account Application form identified that the form was not a substitute for an advisory agreement, and specifically creates a disclaimer and waiver of liability against IB for any acts or omissions by the advisor selected solely by the customer.

83.  The Customer Agreement has a section in which the customer warrants that his application is true and complete, that he will promptly notify IB of any information changes and authorise IB to make any enquiries to verify information.  The customer also warrants that he is over 18; is under no legal incapacity; and has sufficient knowledge and experience to understand the nature and risks of the products to be traded.

84.  A specific section on margin trading includes the following statement:

“ Risk of Margin Trading: Margin trading is highly risky and may result in a loss of funds greater than Customer has deposited in the account. Customer represents that he or she has read the ‘Disclosure of Risks of Margin Trading’ provided separately by IB.”

85.  There is a very similar section on the high risks of forex trading.  There is also a specific consent to accept electronic records and communications. The final page of the Customer Agreement has an electronic signature of the plaintiff which is expressly stated to be equivalent to a hand written signature, with the accompanying statement (in capitals in the original):

“ By typing my signature and sending it via the Internet, I acknowledge that I have read and understand all information provided during the application process; that I intend [IB] to rely upon it; that I intend to be bound thereby; and that I understand and agree that my electronic signature is the equivalent of a manual written signature.”

86.  The Client FA Agreement is essentially the document giving authority or power of attorney to the ‘financial advisor’.  As well as giving an indemnity to IB for the operation of the Account, the customer represents and acknowledges that he has granted to the advisor full discretion to direct the trading in the account on his behalf, and that he will not have access to IB’s electronic systems for placing orders for the account. Only the advisor will be able to use the IB Trader Workstation to conduct trading in the account.  That document also has a similar signature stated to be equivalent to a hand written signature against the same accompanying statement.

87.  IB had a requirement for its customers in Hong Kong, that they should manually sign and then post a form to make various acknowledgements in support of the electronic application forms completed online.  Though even within a very short time the defendant had absolutely no recollection of having done so, the defendant did in fact complete such a form.  The form provided the acknowledgements, amongst others, that the plaintiff had read carefully the IB Customer Agreement, the Hong Kong Risk Disclosure Statements and the Regulatory Information and Additional Provisions for Users from Hong Kong and Users Trading on Hong Kong Exchanges; that he understood those materials, which had been fully explained to him; that he had read and completed the Account Application and Supplemental Questions for Hong Kong Users and confirmed that the information provided is true and complete; that he agreed to electronically sign additional documents including during the account opening process and from time to time, including but not limited to risk disclosures and other agreements.  The acknowledgement form also specifically provided that its purpose was to evidence that the plaintiff had received it, read it and understood it and agreed to its terms.  It was physically signed by him and dated 13 June 2011.

88.  The acknowledgement form also contains a certification of true copy.  Slightly oddly, perhaps, there is no certification of the signature or of a copy of any identity document, but instead there is a ‘certified true copy’ chop or stamp of an accounting firm Fung Yu & Co CPA Limited (“FYC”), with a signature said to be an authorised signature of that firm.  However, the plaintiff gave evidence that Mr Fung is not his accountant, and that he does not know the man.

89.  As regards what was told to the defendant, the plaintiff emphasized in his evidence that he had never spoken to the defendant, but he “expected” Ms Zau to make clear to the defendant that he would not have anything to do with high risk products. Importantly, the plaintiff said in evidence that he had not told Ms Zau how he wanted the money invested, and that she had not told him how she wanted or intended the defendant to invest the money for him.  Also, he said in his discussions with her and in opening the IB Account, she had not referred to any trading permissions.

90.  As regards the alleged performance fee, the plaintiff said he had been given to believe clearly by Ms Zau that the defendant would charge 30%, although he accepts now that 35% might be right and he would not quibble.  In passing, I note that it would be surprising if the plaintiff had agreed such a payment structure for what he understood was a conservative investment.  However, he said in evidence that, as to whilst sitting with Ms Zau in front of the computer chatting, he in fact had no recollection of giving any particular agreement.  From the enquiries and statements the plaintiff later made (see below), it seems to me more likely that no fee agreement was actually discussed.

91.  In her oral evidence, Ms Zau accepted that on hindsight it was very stupid to have agreed how the defendant would deal with the matter, in the context of the alleged 35% fee, as she never considered the downside.  This seems to me to be an important point, as the suggested fee structure makes little sense commercially in that it is to be paid out of any profit made, immediately after it is made (and perhaps immediately realized in part for that purpose) and irrespective of the losses that might also be made or later be made, or made overall.

92.  As regards whether or not there was a pre-agreed method that he might charge, in his evidence the defendant placed reliance on the fact that the IB account opening form has been filled to state that there was no fee agreement between the account holder and the financial advisor.  I do not think this helps him much.  Despite being taken through the various payment options provided for in the account opening document, the defendant disagreed that if there have been an agreement for charging 35% of only realized profits, there was no ‘option’ which would have worked.  He suggested that he could simply have ticked the box to charge fees per quarter or year and did not need to fill out that the fees would have been paid out of profits made.

93.  Whilst I did not find this particular point convincing, nevertheless on balance I accept the defendant’s case that no specific fee structure was agreed between Ms Zau and the defendant in advance.  I take into account that had any specific fee agreement been made (perhaps particularly if it was unorthodox), it would likely have been recorded in writing by someone, and there was no suggestion that anyone had written it down—unless the invoice or debit note is said to be the written evidence.  I find that the debit note was used to justify a payment or incentive subsequently offered by Ms Zau and accepted by the defendant.

94.  Ms Zau said she was happy to use the defendant’s investment strategy, whatever that was for the plaintiff, but she was not aware of the details of that strategy.  She did not instruct the defendant as to what his portfolio strategy ought to be, albeit that she says she made it clear what type of investor the plaintiff was.  She says the defendant was secretive about his strategy, so there was not any detailed discussion as to how he made investments.  I find that evidence difficult to reconcile with the suggestion that he made a representation that he would invest in stocks with good fundamentals (which hardly requires any sophisticated ‘strategy’, which might need to be kept secret).

95.  Against the totality of evidence, I find that Ms Zau did not specifically tell the defendant that the plaintiff was a conservative investor, or give instructions for only conservative investments.  Indeed, everything she did pointed to a desire for an investment which was on a different basis and intended to achieve a rather higher return than would be expected from a conservative investment.

96.  In order to operate the plaintiff’s IB Account, the defendant opened an account with IB himself.  That became the ‘master’ account to which other accounts could be ‘linked’, permitting the defendant to trade on those linked accounts.  The account details for the defendant’s account, of course, gave his name and address and described his employment as “at home trader”, albeit his subscriber status was “professional”.  His own investment objectives were marked as “Trading Profits” and his trading permissions on a margin account included stocks, bonds, CFD, and FX conversion. His net worth and liquid net worth were stated to be between the Hong Kong dollar equivalent of US$100,000 and US$250,000.  His annual net income was stated to be less than HK$310,000.

97.  When asked in cross-examination, the defendant impliedly accepted the service he was providing was valuable, but said he only did it to help a friend at the same time he said he was doing the same thing for himself.  I take into account Mr Man’s submission that it is unlikely that the defendant would share valuable investment strategy with friends of a long-lost subordinate with whom he had lost touch for 18 years after a chance encounter and without payment.  Insofar as there were trades made for the plaintiff, which were not linked to those made for the defendant himself, the defendant said that was the result of there being a difference in the account size.  However, he denied that what was right for him might not have been right for the plaintiff (and vice versa), because he said that apart from the size of the accounts they purchased almost the same thing.  Nevertheless, the defendant accepted that he on occasions made independent decisions for the plaintiff.

98.  The defendant accepted in oral evidence that it was a fair description of his role to call him the plaintiff’s ‘investment advisor’. I agree, in that whatever precise activity occurred on the IB Account was decided at the sole discretion and decision of the defendant (albeit he did what he did within the permissions granted—and possibly the objectives stated—to him by the account opening process).  What this means as regards any duty owed will have to be considered later.

99.  The defendant also accepted the fact that he did not find out what assets the plaintiff had, nor any other features about the plaintiff, on the basis that the banker knew more clearly than he did.  Indeed, he expressly said that the details of the investor, including his investment appetite, were not known to him and that was a job for the banker.  It is not in dispute that the defendant never made any attempt to contact the plaintiff directly.

100.  The defendant accepted that there was a substantial responsibility borne by him as the things he did could result in the money being wiped out.  But he responded by pointing out his practice was that every time money was made it would be withdrawn, so as to reduce the risk.  I find that the plaintiff, through Ms Zau at least, was aware of that policy.

101.  Profit was made in the early days of the investment, and it was immediately realized and withdrawn from the IB Account for the plaintiff (see detail below).  I accept that the reason to realize and take the profit was not for the purposes of fixing a basis for charging a fee, but was to protect the profit made from potential loss on any reinvestment.

102.  The quarterly statement for the activity on the IB Account in the period ended 30 June 2011 was sent by post to the plaintiff, and would have been received by him sometime in the following month.  The statement in the bundle consists of two pages, though I think there might have been a third page with perhaps limited information on it.  In any event, the plaintiff said in evidence that he only looked quite quickly at the first page.  That page identifies the account information, including the name of the defendant as “Investment Advisor” and that the account capabilities are “Reg T Margin” and the trading commissions are “Stocks, Options, Warrants, Forex”.  Immediately below that was the point that the quarterly statement is a summary and is not a substitute for the account statement, as it does not include a listing of each transaction.  The customer (the plaintiff) was therefore advised to review daily or monthly account statements, and to do so by logging in to Account Management on the IB website.

103.  The first page has a section dealing with the NAV, identifying the cash and stock totals for the relevant current period, and the overall total, which then stood at $6,058,428 (ignoring odd cents).  As will be seen below, the last (8^th) withdrawal of profit, made on 4 July 2011, was to extract the $58,428 leaving exactly $6 million in the IB Account.  The person withdrawing that sum must have looked at the then total to know precisely how much to extract to leave only the exact original capital.

104.  Beneath the NAV section on the first page was a section headed “Current Account Positions”, followed by a list of positions under two sub-headings “Stocks” and “Structured Products”.  I would have thought that even a quick glance at the list of stocks and their number and value would have revealed that the total value at the then current price was nowhere near $6 million.  Further, there clearly were some structured products, albeit only two as at 30 June 2011, both of which were identified as “CBBC”.  Ms Zau would have understood that set of initials to designate ‘call bull bear credits’, a known high risk investment product.

105.  On the second page of the quarterly statement was a transaction summary by asset class, giving the total number of trades for each asset class, and the total value of shares or contracts bought and sold respectively.  For the asset class of stocks, there were 63 trades, with total value bought of $143,445 and sold of $76,684.  For the asset class of structured products there were 247 trades, with total value bought of $59,715,967 and sold of $45,450,218.  Any person reading those figures must have understood that the majority of trading was in structured products at a value totalling a multiple of 10 times the actual capital placed in the account.  It is also to be remembered that though this is a quarterly statement, the statement covered activity over only the 10 days before the end of the period.

106.  The second page of the statement also has a year-to-date performance summary in the base currency, a cash report, and a change in position value of the relevant period.

107.  In addition to the various quarterly statements, the trial bundle had monthly activity statements for the IB Account. The monthly statement for June 2011, but in reality covering only the period from 21 to 30 June, runs to some 50 pages. As I understand, that statement (or a link to it) would have been sent by e-mail to the designated e-mail address for the IB Account, namely Ms Zau’s Yahoo account.  In any event, the content of the statement would have been available to anyone logging into the IB Account.

108.  Ms Zau, and perhaps the plaintiff, did log on to the IB Account several times.  This is clear from the fact that on eight occasions between 27 June and 4 July 2011, the IB Account was accessed for the purpose of withdrawing realised profit.  The defendant could not have done this.  There were three withdrawals on 27 June ($30,000, $65,000 and $5,000), two on 28 June (each $50,000), one on 29 June (also $50,000), one on 30 June ($170,000) and the last on 3 July 2011 ($58,428).  Together, these totalled $478,428.

109.  In his witness statement, the plaintiff seemed to be saying that he knew nothing about these withdrawals at the time they were made, and had not been involved in making them.  This is because he said he noticed the 8 payments in his HSBC Account, and subsequently found out that they were directly credited to his HSBC Account through the IB Account.  In his oral evidence, he said that nobody told him about the account, but he noticed the various sums in his HSBC Account and assumed it was profit.

110.  In her first witness statement, Ms Zau said that although she knew the initial passwords for the IB Account, those passwords needed to be changed after the set-up and she did not access the IB account and had no reason to do so. In fact, there was no independent evidence that the passwords needed to be changed after the account had been set up, and I doubt the plaintiff could or would have done that anyway.  I have already noted the set-up process included setting specific security questions and answers. Anyway, in her second witness statement, Ms Zau changed her evidence to say that she now recalled that she might have assisted the plaintiff to log onto his account and withdraw the various amounts, but could not recall how she did it.  She said it was probably done by her sitting together with the plaintiff before a computer and arranging the withdrawal.

111.  I am quite satisfied that the plaintiff did not make the withdrawals, at least not on his own.  It also seems to me to be inherently unlikely that the plaintiff and Ms Zau would have sat down together in front of a computer on say five separate occasions, mostly over what appeared to be four consecutive working days.

112.  There is another feature of the evidence which also makes it unlikely the plaintiff was present when the sums were withdrawn. On the monthly activity statements for the plaintiff’s IB Account, each activity is dated and timed.  All the trading activity is timed as being essentially between 21:30 hours and 04:00 hours.  IB is based in Connecticut in the USA, and those times therefore seem to be United States Eastern Standard Time, which would be consistent with trading on the Hong Kong stock exchange between 9:30 am and 4 pm (it being remembered that it was Ms Zau’s evidence that the purpose of this investment was to allow live trading on the Hong Kong stock exchange).  The withdrawals are all but one timed on the June and July monthly activity statements at around 11:00 hours, with the remaining one at around 13:00 hours.  This would appear to translate to 11 pm and 1 am Hong Kong time.

113.  In his evidence, the plaintiff accepted that any activity on the IB Account would have required the log-in device.  Whilst he had no recollection of giving that device to Ms Zau, nor did he recall getting the device from her, and when he later looked for it could not find it at home.  He therefore accepted that it was logically possible that, as he had never had to find it, Ms Zau might have kept it all along.  I so find.

114.  One of the central disputes in the case relates to a debit note dated 4 July 2011, on its face issued by OICL, which seeks payment for services rendered in connection with the 35% performance fee on profits generated between 27 and 30 June 2011.  The total fee on the debit note is $167,450, which is arithmetically correct as 35% of sum of $478,428, the total profits withdrawn from the IB Account.  Each of the withdrawals is listed on the debit note, in amount and date, under the heading “Disbursements”.  I note that the word “disbursements” is the word used to describe the withdrawals on the monthly activity statements (ie those accessible online), and not on the quarterly statements.  To me, that identifies that the person who compiled the debit note had online access to and had had sight of the activity reports on the IB Account.

115.  The method of payment identified in the debit note is to make a cheque payable to OICL, or to make a bank wire transfer to the name and account number provided.  The account number given was the correct account number for OICL.  However, the address and telephone and fax numbers for OICL given on the debit note in fact have nothing to do with that company. Rather, they are the contact points for the CPA firm of Mr Fung, FYC.  It is common ground that the defendant had nothing to do with that firm, or that address, and that he had never been there.

116.  In those circumstances, it is unsurprising that the defendant formally challenged the authenticity of the debit note.  Mr Man at one point suggested that the challenge to authenticity was not understood, but I think it clear that challenge was around the true circumstances of the debit note coming into being, and hence the reason for it.

117.  In her oral evidence, Ms Zau said that she was definitely not the one who suggested the cheque be made out to OICL.  I accept this makes obvious sense; she must have obtained that information from the defendant, including the name of OICL and its bank account number.  But that does not mean that she must have produced the debit note on the defendant’s instructions.  That she had that information is, I think, equally consistent with the defendant’s version that a payment was offered which he gladly accepted, giving a payee and payment in details for any cheque.

118.  But the way the evidence came out is more telling.  The plaintiff had disclosed the debit note in his first list of documents filed on 31 October 2014.  The defendant challenged the authenticity of the debit note on 18 May 2015, before Ms Zau made her first witness statement on 30 June 2015.  Nevertheless, in that witness statement, Ms Zau said nothing about how the debit note was issued and rather stated that she had no involvement at all in the plaintiff’s paying the cheque to OICL.

119.  In his first witness statement, the defendant further substantiated his challenge to authenticity.  He also sought confirmation by a Notice to Admit Facts that the address on the debit note was actually that of FYC, the firm which certified the plaintiff’s acknowledgement form.  In response to that Notice, the only fact admitted was that that firm had certified the acknowledgement form.  That was not a full response.  It was only subsequently, in her second witness statement, that Ms Zau gave an account of her involvement in the debit note, admitting that her first statement was incorrect.  Her altered evidence (diametrically opposed to that previously offered) was that she had been fully involved in the preparation of the debit note, as she was the one who prepared it and decided to use FYC’s address. 

120.  She stated that she used that firm as it did some certification work for her bank, so she was familiar with it.  However, it was only towards the very end of her oral evidence when I asked her whether the Mr Fung of that firm was the same Mr Fung as her uncle, that she admitted that he was.  I am afraid it seemed to me that Ms Zau was seeking to put greater distance between her and FYC than was true, and she did so to hide some of the story of the whole matter relating to the debit note. (As an aside, and though this point was not explored in the evidence so I do not take it into account, it might appear from the debit note that Ms Zau had a soft copy of the firm’s debit note proforma to have been able to make the changes that she did, so that it looked as though it had come from OICL.)

121.  Ms Zau’s explanation was that she produced the debit note on the defendant’s instructions. She used FYC’s address, because the defendant refused to give her either his own address or that of OICL.  She agreed to do this task, she said, because the defendant said it was too menial for him and she was used to acting on his instructions from before.  Bearing in mind that she last worked as a subordinate of the defendant some 18 years earlier, and was by 2011 a senior private banker, and as against the less than candid way in which her evidence overall was given on this point, I found that explanation unconvincing.  I reject it. I also think it inherently unlikely that the defendant would have been happy to tell Ms Zau the details of OICL’s bank account but not its address, and I reject that part of the evidence too.

122.  I accept that the plaintiff was likely handed the debit note by Ms Zau on or about 4 July 2011 (so that it was contemporaneously created), and that he wrote a cheque dated 5 July 2011 in the sum of $167,450 payable to OICL, which he posted to the address on the debit note.  I accept he noted the date of 5 July 2011 on the debit note.  It is clear that OICL or the defendant received that cheque and presented it for payment.  It therefore seems to be an inescapable conclusion that the cheque must have been collected by Ms Zau, who then passed it by some means to the defendant.  The defendant said he got it by post, which incidentally would mean that Ms Zau did have an address for him.

123.  I therefore accept that the defendant had not seen the debit note, and that his challenge to its authenticity was made good. As stated above, I accept that the payment was made as an offer after the profit was made, and not by virtue of any pre-agreement for payment at that rate.

124.  If anyone looked at the monthly activity statements for July and August 2011, it was readily apparent that the then total NAV for those current periods had dropped to $3,432,316 and further to $716,022 respectively.  The specified percentage drops were minus figures of 43.35% and 79.14% as compared with the prior periods.  Both statements were lengthy (51 and 35 pages)and showed significant trading activity including by numerous structured products, especially CBBCs.

125.  The quarterly statement to 30 September 2011 was in the same format as the previous quarterly statement.  Under the heading relating to NAV on the first page, the total NAV shown for the current period was $255,858 (ignoring odd cents).  This was comprised of a negative cash figure of over $539,000, a small amount of stock of approximately $789,000, and two small amounts relating to interest and dividend accruals.  The percentage change as against the prior period was a minus figure of 95.78%. Nothing on the second or third pages of the statement gave any rosier picture, though it can be said that there was the list of warrants and stocks which together added up to the roughly $789,000.  The year to date performance summary had enormous negative figures.

126.  The plaintiff said in evidence that when he saw the September 2011 statement he was calm and did not really know he was losing money.  Though that is somewhat difficult to accept against the clear figures on the statement, it seems to me to be not inconsistent with an approach that the plaintiff might have taken had he simply assumed, as I accept he did, that the investment was being conservatively managed.  It is also consistent with the fact that he had not realised the risk to which the account trading permissions gave rise.  As he said in evidence in a way which rang true, it was only in June or September 2012 that he “woke up”.

127.  The plaintiff described himself as a “bottom line man”, and when receiving the statements looked only quickly at the NAV figure and the list of shares which started below it.  Thinking the account was in good condition, he put the account statement away.  Nevertheless, in cross-examination he accepted that the quarterly statements were his only source of information about the IB Account, and that from the quarterly statements he knew or had a pretty good idea how the IB Account was doing, and that he must have seen what products were being traded.

128.  The quarterly statement to 31 December 2011 showed the total NAV to be $248,220.  The quarterly statement to 31 March 2012 showed the total NAV to be $108,413, and even on the first page the list of stocks was rather small and of negligible value.  The quarterly statement to 30 June 2012 showed the total NAV to be just $11,899, but the area for current account positions showed no current positions.  It is this statement which the plaintiff says caused the real alarm, and made him wonder if something untoward was happening in the account.  He therefore decided to wait for the next quarterly statement, namely to wait for another three months, to check on position and before doing anything. When that quarterly statement to 30 September 2012 arrived, it showed no change of position as the NAV continued to stand at $11,899.

129.  Finally, the plaintiff took some action.  Probably just before he wrote to IB (see below), the plaintiff met Ms Zau and mentioned the IB Account to her and the apparent problem.  Implicit in that evidence is the fact that Ms Zau had not been keeping him abreast of the activity and status of the IB Account in the interim, notwithstanding their regular meetings.  He said in evidence that, to his knowledge, Ms Zau did not do anything to find out about the account after he raised his concern.  He says he did not push her as he found it somewhat embarrassing, saying that she had done so much to help him set up the account and he felt dwelling on it would not help.  To him, Ms Zau appeared very unhappy that a bad thing occurred in spite of the good intention.  So instead of finding out from Ms Zau or the defendant what happened, he decided to write to IB.

130.  To be fair, the plaintiff did also say later in his evidence that by the time he had heard from IB, he was not sure whether Ms Zau had been remiss about what happened in his account, or responsible for it, but he thought it would be embarrassing to raise it.  I find it very strange that the plaintiff did not raise any pertinent enquiry with his private banker who advised on this investment (or her employer), though it might be because it was outside her normal duties.  As I have pointed out earlier, it does not seem the plaintiff ever complained to Ms Zau or her employer.  I suppose that was his decision to make, but he must live by any consequences of it.

131.  On 27 November 2012, the plaintiff wrote to the manager of IB.  Having referred to the opening of the account and the deposit of $6 million, and that the account advisor was the defendant, the plaintiff stated that to his knowledge and belief since the opening of the account to the end of June 2011 there had been eight transactions, but he had received no advice on any of those transactions or any other transactions after June 2011.  He then referred to the recent account statement which showed a balance of just $11,899, and suggested that the discrepancy called for an investigation.  He also sought the supply and copy of various records and information.

132.  By an undated letter in response (though apparently sent on 20 December 2012), IB provided the Customer Agreement and the power of attorney agreement executed when the IB Account was opened.  IB also provided a CD-ROM containing quarterly account statements previously mailed to the residential address, and the trading activity on the account.  IB suggested that questions regarding the trading strategy or investments in the account should be directed to the defendant.  In answer to the question in cross-examination why he did not contact then the defendant, he expressed an inability to understand why he should have talked to him; it was, he said, “that simple”.

133.  The plaintiff then instructed solicitors, who wrote a short letter to IB on 4 February 2013, mainly suggesting that the power of attorney form had not previously been provided to the plaintiff.  By another undated response, IB provided another copy, but pointed out that it had previously been provided on 20 December 2012.  That response was received by the plaintiff’s solicitors on 11 March 2013.

134.  On 31 May 2013, the plaintiff’s solicitors wrote on his instructions to set out his position in relation to the matter.  In summary, the letter suggested that the plaintiff had never opened any log-in account on IB’s website; that such account was opened without the plaintiff’s knowledge and approval; and that he had never seen or signed (either physically or electronically) any account opening or other documents including the Customer Agreement and the PA Form (a reference to the Client FA Agreement).  Hence, it was stated that the plaintiff had never agreed to the terms and conditions imposed by those documents.

135.  The letter denied that the plaintiff had ever authorized the defendant to operate the account, yet the account had trading activities from the same day that $6 million was remitted to it, without any account opening and other documents signed by the plaintiff at the time or ever.  The letter went on to state that the plaintiff had then received a debit note for 35% of the profits allegedly made in June 2011 as a performance fee on profit allegedly made on the account.  But, the letter stated, the plaintiff had reasonable grounds to believe that no actual profit was made and that money was taken out from his own account which pretended to be profit made from the transactions, suggesting manipulation of the money in the account.  The letter suggested that the alleged profit was an illusion, to lead the plaintiff into believing that his money was safe and making profit so that no suspicion on the trading activities in his account would arise.

136.  Reference was also made to the type of product invested, and the significant losses incurred.  It was suggested that no report whatsoever was made to the plaintiff in respect of any of those matters.  Suspicion was raised that there might have been some fraudulent activities going on using the plaintiff’s account and his deposits.  Information was sought as to IB’s internal compliance procedures, and the letter asked IB to inform whether there had been any correspondence between it and the defendant and for identification of the person who withdrew the money from the plaintiff’s account as “disbursement” items in June/July 2011.  Finally, the letter threatened a report to the Securities and Exchange Commission in the US for further investigation.

137.  IB responded by its letter of 12 July 2013.  I think it fair to describe the response as a point by point demolition of the allegations made to it.  Indeed, practically none of the points made on the plaintiff’s then instructions, notably made with the benefit of all account materials and after legal analysis, were subsequently maintained by the plaintiff in this action.  This is rather telling.  When asked why his solicitors wrote such points, he gave the unconvincing evidence, bearing in mind he is a former senior partner in general solicitor’s practice, that he had no control over what his solicitors wrote in May 2013.

138.  In its response, IB identified that its review indicated the claims made in the letter were not supported by the plaintiff’s prior correspondence as well as the contemporaneous records, the account statements and the documents submitted by the plaintiff at the time he opened the IB Account.  IB confirmed that each of the required steps had occurred, and all applicable agreements and disclosures were signed before the account was opened.  IB emphasized it had provided the plaintiff with the ability to access and monitor his account online, as well as electronic and hardcopy account statements that were mailed to the address provided by him. Those statements fully detailed the trading, and expressly disclosed the fact that the account was being managed by the defendant.

139.  On 31 May 2013, the plaintiff’s solicitors had also written to the defendant.  The letter referred to Ms Zau’s managing the plaintiff’s financial affairs for many years and that he relied on her recommendation and was prepared to set aside $6 million for the purpose of instructing the defendant to invest on his behalf based on the defendant’s judgment and recommendation. The letter said that once the funds were remitted, the plaintiff expected that the defendant would send him the account opening and/or other documents for signature; would inform him what investments would be recommended and thereafter consult him and seek proper instructions and/or authorization; and that the plaintiff would then have told the defendant that he is a retired person and has all along been very conservative and cautious with his investment in that he would never be involved in high risk investment including, without limitation, margin and structured products.

140.  The letter further stated that having perused the documents provided by IB, it was discovered that there were various account opening documents which were not seen or signed by the plaintiff, suggesting the account opening and documents might have been created by fraud.  Similar suspicion of fraud was expressed in relation to the power of attorney, and indeed the letter said that the statement by IB that the defendant was authorised by the plaintiff as his trader was of course untrue.

141.  The summary position taken in the letter was that the defendant had fraudulently and unlawfully misappropriated the plaintiff’s funds to trade on his own behalf without his authorization; no authority had been provided; the plaintiff reasonably expected that the defendant would have properly advised and consulted him, upon which the defendant would have been given certain authority on the limitation of his investment options.  The letter said that the plaintiff had instructed the matter to be reported to the Commercial Crime Bureau of Hong Kong police and other US regulatory authorities, but sought the defendant’s explanation.

142.  Again, many of the allegations made in that letter, notably the allegation of fraud, are not now pursued.  It is at least unfortunate that the plaintiff instructed such allegations to be made, when he had not troubled first to seek any information from the two persons most able to have assisted with his enquiries, namely Ms Zau and the defendant.

143.  Also on 31 May 2013, the plaintiff’s solicitors wrote to OICL, copying to it the letter sent to the defendant, and seeking the immediate return of the $167,450.

144.  On 11 June 2013, the defendant’s solicitors wrote in response, essentially making the same points as the defendant now takes in his pleadings and in his evidence at trial.  The defendant’s case, at least, has been largely consistent from the outset.

Analysis of law to facts

145.  As it turned out, there was little dispute on the legal principles, including the general law on the scope of implied terms of the contract and/or of tortious duties.  I think it was also accepted that the scope of the duties can embrace relevant regulatory requirements, and even if those are not strictly applicable and the ambit of the duty at common law is not necessarily co-extensive with any duties owed under an applicable regulatory regime, it is permissible to have regard to the latter when considering what standards are to be expected of a reasonably competent investment advisor at common law: see, for example, Al Sulaiman v Credit Suisse Securities (Europe) Ltd [2013] 1 All ER (Comm) 1105 at [18]; Seymour v Ockwell [2005] PNLR 758 at [77].

146.  Further, if the right analysis of any relationship is that it is an advisory one, the scope of the duty in contract and tort would embrace the relevant regulatory requirement, including in particular as to the suitability of the product being recommended.

147.  When a professional person, such as a bank or financial advisor, agrees to render certain services in the course of the business to a client for a fee, there is implied into the contract a duty to exercise reasonable care and skill in the performance of the service: Susan Field v Barber Asia Ltd [2003] HKCU 712,DHCJ Barma SC (as he then was). There are three components of the scope of the advisory duty, being: firstly, the advisor has to have regard to the investor’s investment objectives and risk appetite; secondly, he must only offer products which are suitable to the investment objectives and risk appetite of the investor; and, thirdly, he has to warn of the risks inherent in the investments that are being offered: see Chang Pui Yin v Bank of Singapore Ltd [2016] 5 HKC 329 at [146]–[147].  The three elements must be observed cumulatively.

148.  Mr Man pointed out that on his own admission the defendant was in breach of the first and third elements.  Further, there can be no doubt that the investments chosen for the plaintiff (assuming for the moment that they were ‘chosen’ by the defendant) were not suitable for a conservative investor such as the plaintiff (whose investment had always been conservative, and who was long retired and living off investment income). Mr Man also pointed out that it was anyway not the pleaded case for the defendant that what he did was suitable for the plaintiff.

149.  As to the mandate given by the IB Account opening documents, which gave authority to trade in a number of high-risk investments, Mr Man said that would not bear on the question as to whether such investments were suitable, or the discharge of the duty to ascertain and trade in accordance with the client’s needs.

150.  Nor does it matter—if a defendant assumes giving advice to a plaintiff and knows that the plaintiff is likely to rely on that advice such that a duty of care arises—that the giver of advice is doing so completely gratuitously or is getting a reward: see Susan Field at [155] (see also below).  I accept Mr Man’s submission that the relationship in the Susan Field case was probably a looser one than that in this case, where the defendant was given direct access to and operational control over the plaintiff’s IB Account for the trading of the $6 million.  On the other hand, a factual situation where a person is given operative power of attorney over an account held in the name of another person is not so far different from simply giving funds to that other person to manage. 

151.  Many of the cases cited to me (which I need not rehearse) deal with what duties are owed, and how they might be breached, if an advisory role has been assumed.  On these authorities, I accept it may not be difficult to find that if there was a duty owed, there was a breach of that duty.  But I am not sure that answers the real and necessarily prior question.

152.  That question is whether the circumstances of this case, on the facts as I have found them, did create a relationship such that the defendant owed the plaintiff a duty of care in acting as a financial or investment advisor.  Essentially this revolves around the question whether the defendant assumed or undertook a relevant responsibility towards the plaintiff as created that duty. But the position in this case is made more complex by the imposition of Ms Zau between them, and where she was herself an admitted advisor to the plaintiff.

153.  In this regard, Mr Wong’s primary contention in closing was that the defendant was asked to do what he did for Madam L, and was not asked to advise the plaintiff in his IB Account.  But the argument on this primary contention is largely curtailed by my ruling on the amendment application (see above), and Mr Man has cautioned me against allowing this point to creep back in.

154.  I accept Mr Man’s submission that the case that the plaintiff is put to answer is to be found in the pleaded case of the defendant alone (not least because I have rejected the defendant’s application further to amend his defence). That pleaded case is in short that there was no contract between the plaintiff and the defendant at all, and no agreement as to payment of a fee; that the defendant did not hold himself out as a professional advisor, but acted merely as Ms Zau’s friend in a non-professional capacity; and that it was Ms Zau’s duty to inform the plaintiff of the status of his portfolio by reference to account statements which would be sent to him and Ms Zau.

155.  Nevertheless, I have accepted that the circumstances by which the defendant was asked by Ms Zau to assist the plaintiff (to put it neutrally) include the previous operation of the account for Madam L. I have concluded from the circumstances overall that: (a) Ms Zau must have known that the defendant’s strategy was not one of conservative investment, but was a high risk strategy; (b) that she cannot have given, and did not give, him instructions to conduct investments for the plaintiff on a conservative basis; (c) that Ms Zau indeed intended that the defendant should achieve higher returns than might be expected from conservative investment; (d) that the way in which Ms Zau opened the IB Account is consistent with her understanding that the defendant’s activity would involve higher risk strategies than conservative investments; and (e) that that understanding would have been reinforced by Ms Zau’s sight of the IB Account documents/statements accessed by her on line (showing significant activity in structured products on margin, and high returns at least to commence with), when she effected the removal of realized profit so as not to leave that profit at risk.

156.  In the context of the alleged Representations, which I have already held were not made as alleged, even had they been made at the first re-acquaintance of Ms Zau and the defendant, Ms Zau must have known before she asked the defendant to operate the plaintiff’s IB Account that she could not ‌— and she did not—rely on them.

157.  Even Ms Zau’s evidence as to what she says was the agreed fee structure must have given rise to recognition that what was intended was not a plain or simple conservative investment.  Overall, this gives some force to Mr Wong’s submission that it cannot realistically have been overlooked by Ms Zau (if not by the plaintiff himself) that, on the plaintiff’s case, the defendant had quickly gone against the instructions or intentions or understanding as to his strategy, and had even betrayed their trust, by trading in high risk products.  Yet, as Mr Wong points out, this was for some reason not immediately brought the intention of the defendant, as one might expect it to have been.

158.  These points do not rely on Mr Wong being permitted to pursue his primary contention.  They might arise in any event on what he called his ‘fall-back’ contention, namely that the defendant was not asked to and did not assume any duty to advise the plaintiff in his IB Account.  For, the submission goes, the defendant was engaged in a friendly, not a business, context.

159.  Mr Wong submitted that the answer to the plaintiff’s case that the defendant was engaged in carrying on a business of investment is that (a) there was no pre-agreed fee or commission as alleged, and (b) the relevant debit note was issued without his knowledge.  I have found for the defendant on both these points as matter of fact.  Whilst I have taken into account the sheer number of transactions conducted by the defendant on the IB Account (which must have required some effort on his part, different from the efforts expended on his own behalf), so that it might be said that there was consideration moving from the defendant, it seems to me in the overall circumstances as I have found them that there was no contractual relationship between the plaintiff and the defendant. It is, therefore, unnecessary for me to consider precisely what duties might have arisen had such a contract existed.  In particular, I do not need to consider the implication of terms as alleged in the claim.

160.  But that does not necessarily mean that no duty arose in the circumstances.  There might have been a duty in tort.

161.  Mr Wong submitted that any duty the defendant owed should be similar to running a discretionary portfolio for the plaintiff, meaning trading at the defendant’s discretion, but according to the plaintiff’s strategy (for example, conservative or high risk).  Mr Wong pointed out that in this case the strategy was already set by the time the defendant was engaged, and was not subject to or pending advice or recommendation from the defendant himself. 

162.  This was because of Ms Zau’s advisory role as the plaintiff’s private banker, and that it was she who recommended the defendant to the plaintiff and engaged him for and on behalf the plaintiff. This was a case in which the plaintiff’s own long-serving advising private banker engaged the defendant to trade using the plaintiff’s $6 million, in accordance with the objectives and permissions notified to him.  Hence, Mr Wong submitted that it would be wholly unreasonable to place on the defendant a positive duty, whether contractual or in tort, to ascertain the plaintiff’s investment needs or what his risk appetite was when he (the defendant) had been given a pre-set strategy through the plaintiff’s own financial and investment advisor; any relevant duty must have been that of Ms Zau, and the defendant’s role was merely to execute the strategy with reasonable care (and there is no wrong alleged against him in that respect).

163.  In the Susan Field case, DHCJ Barma SC stated (at [155]) that the principle on which liability in tort in respect of advice given, whether by an investment advisor, or some other professional, is well-established.  In general, where a defendant assumes the responsibility of providing advice to the plaintiff, and knows or ought to know that the plaintiff is likely to rely on that advice, a duty of care is likely to arise.  Pertinent factors to take into account will also include the relevant skills and knowledge of the parties, the context in which the advice is given, whether the giver of the advice is doing so completely gratuitously or is getting a reward (whether in some direct or indirect form), and whether or not there are any express disclaimers of responsibility.

164.  In that case, DHCJ Barma SC held that the circumstances in which the investment and financial advice was provided negative the possibility that such advice was provided in a social or other set that might indicate there was no assumption of responsibility on the part of the giver of advice.  In that case, the advice was clearly provided as part of the business, and it was clearly in the advisor’s contemplation that it would be rewarded for those services, albeit not directly by the receiver of the advice, but by being put in a position to earn fees and commissions from the investment products chosen as a result of the advice. It was also held to be clear that the receiver of the advice would rely on it.  Reference was also made by DHCJ Barma SC to the fact that the customer was seeking advice with a view to entering into an investment strategy on which to employ her savings. Hence, objectively, there was no doubt that the advisor had assumed responsibility to provide financial advice to its customer.

165.  Mr Man also referred me to a passage in Jackson and Powell on Professional Liability (8^th edition) §15-036, which referred to the case of JP Morgan Chase Bank v Springwell Navigation Corp [2008] EWHC1186 (Comm), which considered the inter-relationship of contractual and tortious duties.  That case was factually complex, but turned upon the nature of the relationship between the parties, and in particular whether the defendant owed duties to provide investment advice to the claimant in relation to certain investments.  Gloster J found that the lack of any advisory agreement entered into between the parties, and hence the lack of any express contractual duty to advise, was not determinative of whether the defendant owed tortious duties to advise.  But the absence of any such contractual obligations was a factor to be given considerable weight when considering the existence or otherwise of a tortious duty to advise. Other relevant factors identified included (a) the factual matrix of the relationship between the parties (what was said between them at the outset of the relationship, what roles each played during the relationship, and the like); (b) the extent of the parties’ financial experience and sophistication; (c) the extent of the claimant’s reliance on the defendant and the foreseeability of such reliance; and (d) the regulatory background to the relationship.

166.  As is pointed out in the text, each case will be decided on its own facts.  The facts in this case include that:

(a)   There was not only no direct contract between the plaintiff and defendant,   the level of contact between them was very little even through others (Ms Zau and IB).  This may have given rise to, and probably did give rise to, scope for the mismatch in what was said (or left unsaid) between the plaintiff and Ms Zau and between Ms Zau and the defendant. 

(b)   The individual roles played by each person shows that the plaintiff sought and relied on Ms Zau’s advice as to investment strategy, and precisely what the defendant would do in accordance with attempts to meet that strategy was not his concern.  I do not think he expected any contact from the defendant.

(c)   The defendant on the other hand relied on what Ms Zau told him, or at least led him to believe, as to what the plaintiff wanted. 

(d)   At the time when Ms Zau acted for the plaintiff in her contact with the defendant, she plainly had considerable financial experience, and represented to the defendant (through the information provided in opening the IB Account) that the plaintiff himself had considerable financial and investing experience, including in investment products which are not conservative. 

(e)   The whole circumstances had a very informal ‘feel’ about them.  There was no written material exchanged.  I was not even shown any written record kept by Ms Zau as to the plaintiff’s dealing with her in respect of this investment decision.  It was never suggested how Ms Zau’s employer might make anything or otherwise benefit from this arrangement.  Ms Zau used her personal computer.  She gave her personal email address for contact regarding the IB Account.  She was the one who accessed the IB Account, at least for the purposes of withdrawing the profit as soon as it was made (and I think she did so well outside office hours).  She created the invoice or debit note which was provided to the plaintiff to seek his payment of money given to OICL for the defendant.

(f)   The defendant was not holding himself out as carrying on investment business for others; he had given up his previous licences for the relevant regulated activity, and apparently had none of the trappings of such a business—such that (even on Ms Zau’s evidence) he could not even raise a debit note.

(g)   When complaint was first made by the plaintiff, even as an experienced solicitor and with the benefit of analysis of documents and legal advice, his target of criticism was IB.  Further, that criticism or complaint was specifically on the basis that the defendant was not acting for him, and had not been authorized to do so.  In other words, the plaintiff’s more contemporaneous stance was (almost) the opposite of an assertion that he had sought or expected advice from the defendant and/or had placed reliance on that advice.  I do not think this amounts, as Mr Man submitted, just to the plaintiff having mistakenly made a number of bad points.  I have noted above the plaintiff’s own oral evidence as to not understanding why it might be thought he should have contacted the defendant at the time he became concerned.

167.  I do not think that the fact that the defendant was later remunerated, in that he cashed the cheque paid by the plaintiff against the debit note created by Ms Zau, alters the analysis where I have held that there was no prior agreement for such remuneration.  I do not think subsequent acceptance of some payment (however it is termed) can retrospectively create a duty which did not previously exist.

168.  I bear in mind that the defendant made the payment to the plaintiff of $30,000, which he described as ex gratia. I accept that shows some acceptance of ‘responsibility’ for the loss of capital as the market plunged, as Mr Man submitted.  But I do not think that creates a duty if there was not already one imposed by the circumstances, and I do not think it sufficiently evidences circumstances of a duty having arisen.  The defendant was indeed ‘responsible’ in that his choice of particular trades led to the loss.  But, in one sense, the payment arose precisely out of the sudden plunge in the market which was foreseen by few, but which the defendant might have wished he had seen coming and felt sorry that he had not.

169.  I have considerable sympathy for the plaintiff. As I have held, I think he had intended that the $6 million he placed into the IB Account would be dealt with on a conservative basis.  He may well not have expressly said so, and probably did not, as it would (as he said) have been his expectation of Ms Zau that she would have known that requirement from their lengthy earlier dealings.  But it was her advice he looked to and relied upon.  Clearly, he placed trust in her.  He was badly let down.  To put it at its lowest, I do not think Ms Zau passed on the right message to the defendant, and the sheer informality of the arrangements has left her client in this difficult position.

170.  I accept that the plaintiff must be taken to have known that it would be the defendant who would operate the IB Account for him.  As it turned out, that operation was disastrous.  But I am afraid that, on the facts as I find them to be, that of itself does not make the defendant liable.

171.  I would also deal with the point which Mr Man described as a “red herring”.  He pointed to the recurring theme in the defendant’s evidence that it was Ms Zau’s duty to ascertain the plaintiff’s investment needs, and that she should be responsible for her decision to let the defendant trade in the plaintiff’s IB Account.  Mr Man said this would not assist the defendant, as even if Ms Zau was in breach of a duty she owed to the plaintiff, that does not mean that the defendant was not in breach. 

172.  Of course, I agree that I am not being asked in these proceedings to determine whether Ms Zau was liable in any way to the plaintiff.  But I cannot and do not ignore her role in the whole matter, when I consider the defendant’s potential liability.  I have in any event addressed the question of the defendant’s potential liability by reference to whether the circumstances identified that he assumed a relevant material responsibility to the plaintiff.  I have held, on the facts, he did not.

Result

173.  Albeit not without some regret, I dismiss the plaintiff’s claim.

174.  Though the quantification of damages does not arise, I might state for the sake of completeness that, had I found against the defendant, I would have awarded the sum of $4,000,000.  I would have done so on Mr Man’s acceptance that the defendant would have been permitted to have traded in some of the trades he made without breach of any duty owed, that the defendant would likely have also engaged in other permitted trades (in place of those which, for this purpose, are assumed to have been in breach of duty) and that they would have been affected by the significant market downturn which was shown in evidence by a chart covering the period June to December 2011.  I think it would also be necessary to give credit for the profit taken on trades which were (on this hypothesis) a breach of duty, and the ex gratia payment.  Doing the best I can with all this material, I think the sum of $4 million would have been appropriate as the damages figure.

175.  As to costs, I make a costs order nisi that the costs follow the event, meaning the defendant will be entitled to his costs of the action (save such time as was spent in the failed amendment application at trial).  The costs order will become absolute if neither party applies to vary it within 14 days. 

176.  Any application to vary can be made by letter and will be dealt with on paper.  If any application to vary is made, it shall include the argument for the specified variation, and the other party shall have 14 days to respond, followed by 7 days for any reply.