ZHU BEI v. SOUTH CHINA SECURITIES LTD AND ANOTHER

HCA 494/2023

[2026] HKCFI 2798

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 494 OF 2023

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J U D G M E N T

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I. INTRODUCTION

1.  The Plaintiff claims against the 1^st Defendant and the 2^nd Defendant for refund of the various sums paid by the Plaintiff to the 1^st and 2^nd Defendants respectively.  The Plaintiff paid those sums in relation to the investment made by the Plaintiff in support of her application for residency in Hong Kong under the Capital Investment Entrant Scheme (the “CIES”).  During the trial before me, the 2^nd Defendant was absent.

II.  BACKGROUND

2.  The 1^st Defendant was a Type 1 (dealing in securities)  licensed corporation under the Securities and Futures Ordinance (Cap. 571)  (the “SFO”). It was at the material times, and still is, required by the SFO to comply with the Code of Conduct (the “SFC Code”)  for Persons Licenced by or Registered with the Securities and Futures Commission (the “SFC”)  as well as the Circulars, Reports and Guidelines issued by the SFC (collectively, the “Regulatory Codes”).

3.  The 2^nd Defendant was a Hong Kong limited company.  Its sole director and shareholder have always been one Cheng Yee Man Elaine (“Cheng”). It carried on the business of providing immigration agency and related services.

4.  The Plaintiff has been a citizen of the People’s Republic of China (the “PRC”), but, prior to 8 August 2014, she was not a Hong Kong resident. She is a university graduate.  Since 2007, she has been the Chairperson of a Shanghai real estate sales agency.  In the course of her business, she had a lot of contracts to sign.

5.  On 16 May 2013, the Plaintiff paid HK$500,000 to the 2^nd Defendant as the first instalment of service fee.  On or around 10 June 2013, the Plaintiff and Cheng of the 2^nd Defendant signed an agreement titled “顾问服务委托协议书” (the “Jiayu Service Agreement”).  The Jiayu Service Agreement provided, among others, that the 2^nd Defendant shall assist the Plaintiff in applying for Hong Kong residency, and the service fee should be paid in two instalments of HK$500,000 each, with the first instalment already paid and the second instalment to be paid upon grant of her application for Hong Kong residency.

6.  The next episode took place in March 2014.  In March 2014, the record shows that the Plaintiff came from the PRC to Hong Kong on 17 March 2014, and left Hong Kong back to the PRC on 19 March 2014.

7.  In March 2014, the Plaintiff issued and deposited a cheque drawn in favour of the 1^st Defendant in the sum of HK$10,100,000 (the “Cheque”).

8.  Also in March 2014, the Plaintiff signed a bilingual (Chinese and English), pro-forma Client Information Statement dated 17 March 2014 (the “Client Information Statement”). 

(1)  Under “Investment Objectives 投資目的”, the item “Capital Investment 資本投資” and “Dividend/Interest Income 股息/利息收入” were ticked. 

(2)  Under “Investment Experience 投資經驗”, “Debentures or Other Securities 股票、債券及其他證券” was ticked and the “Years of experience 投資年資” was handwritten to be “10”.

(3)  Under “Investment Characterization 投資者分類”, “No 否” was ticked as the answer to “Has the Client adequate knowledge on derivative products? 客戶是否對衍生產品有認識?”.

9.  At the end of the Client Information Statement was the following statement and declaration (for convenience, I quote the English parts):-

“CLIENT’S DECLARATION

I declare that the contents and information provided by me in this Client Information Statement are true, complete and correct and that the representations made by me herein are accurate. You may or are entitled to rely entirely upon such contents information and representations for all purpose, unless you receive notice in writing from me of any change thereof. I hereby undertake to notify you in writing forthwith upon any material change(s)  in the information provided herein.

I hereby also confirm mv request for opening the Account(s)  indicated in Part 1. I have been invited to read the South China Securities Trading Agreement, and/or the South China Commodities Trading Agreement, and the terms and conditions posted on the SCtrade.com website in a language I prefer and I fully understand and agree to be bound by them in full. I also have been invited to ask questions and take independent advice if I wish.

I acknowledge and confirm that the following Licensed Person has already explained (1)  Risk Disclosure Statements as set out in clause 15, the 2^nd Schedule, the 3^rd Schedule, the 4^th Schedule of the South China Securities Trading Agreement; (2)  Risks Associated with Exchange-Traded Derivative Products; (3)  Supplemental Agreement for US Stock Trading Services (if applicable); and/or (4)  Risk Disclosure Statement and Disclaimer as set out in clause 13 of South China Commodities Trade Agreement including, but not limited to, Risk Disclosure Statement for Futures and Options, Risk Disclosure Statement on On-line Trading Service, and Additional Risk Disclosure for Futures and Options Trading in a language of' mv choice. I hereby read, fully understood and accepted all the aforesaid contents and provisions, and was invited to ask question and take independent advice if I wish.

…

You are further and hereby authorized to accept any fax and/or email message from me as the original instruction, and I shall fully indemnify you from and against all losses, damages, interest, costs, expenses, actions, demands, claims, proceedings whatsoever which may incur, suffer or sustain as a result of or arising from the exercise of' that instruction. I hereby waive any liabilities for you that may arise from these authorizations.”

10.  Correspondingly, there was a “Declaration by Licensed Person”, that is, a declaration by the 1^st Defendant.  It stated that one Teh Chou Yuen (“Teh”)  explained the documents (collectively, the “Documents”)  mentioned in the Client’s Declaration to the Plaintiff in a language the Plaintiff understood.  Teh of the 1^st Defendant signed this declaration on behalf of the 1^st Defendant.

11.  One of the Documents referred to in the Client Information Statement was the South China Securities Trading Agreement (the “SCS Trading Agreement”). It provided both in Chinese and English (and for convenience, I quote the English parts)  that:-

“WHEREAS

(1)  The Client [that is, the Plaintiff] intends to open one or more accounts (“Account”)  (as indicated in the Client Information Statement)  with the Broker [that is, the 1^st Defendant] for the purpose of trading in stocks, shares and other securities (collectively referred to as “securities”).

(2)  The Broker has agreed to open and maintain the Account on the terms and conditions set out hereunder and the Client has agreed to observe, perform and comply with the said terms and conditions.

…

2.2 The Client warrants that the information supplied by the Client as contained in the Client Information Statement is complete, true and accurate in each and every aspect. The Client undertakes promptly to inform the Broker [that is, the 1^st Defendant] in writing of any changes to those information. The Client authorises the Broker to conduct credit enquiry on the Client and to verify the information from financial institutes including the client's bankers, brokers or any credit agency for the purpose of ascertaining the financial stipulation and investment objectives of the Client and if the consent of the Client is required for the release of information by such financial institutes. the consent of the Client is hereby given.

…

8. Client’s own judgment

The Client undertakes that the Client shall solely make and rely upon the Client's own judgment and decisions with respect to each Transaction or with respect to refraining from making a Transaction, and will not rely upon any advice or information or suggestion rendered by any of the directors, officers, employees or agent of the Broker and hereby waives the Client’s right (if any)  to claim against the Broker, the Group, their directors, officers, employees or agent for loss or damages arising therefrom.

…

14. Statements etc. deemed to be correct

14.1 Every Transaction indicated or referred to in a notice, statement, confirmation or other communication shall be deemed as correct and confirmed by the Client unless the Broker shall receive from the Client written notice to the contrary within seven (7)  days after the date after such notice, statement, confirmation or other communication is deemed to have been received by the Client.

14.2 Every statement of account shall, in the absence of manifest error, be conclusive and binding on the part of the Client as to the amount standing to the debit or credit of the Account.

15. Risk Disclosure Statements

15.1 The Client confirms and acknowledges that the Broker has fully explained the Risk Disclosure Statement as set out below to the Client in a language of the Client's choice and the Client was invited to read the Risk Disclosure Statement and to ask questions and take independent advice if the Client wishes and the Client accepts such risks.

…

3^rd Schedule

…

3. Risk Disclosure Statement

The Client confirms and acknowledges that the Broker has fully explained the Risk Disclosure Statement as set out below to the Client and the Client accepts such risks.”

12.  On the same occasion of signing the Client Information Statement, the Plaintiff signed a Chinese, pro-forma Professional Investors Declaration dated 17 March 2014 (the “PI Declaration”), witnessed by a Michelle Li of the 1^st Defendant.  The following items were handwrittenly ticked:-

“是。客户拥有不少于8,000,000港元（或任何其它等值货币）的投资组合。

…

产品	每年交易次数	投资经验（年）
上市股票	≥40	>5
债务证劵	10-39	>5

”

13.  Further, at the end, the PI Declaration provided that:-

“本人/吾等下述签属人(各自或共同称为「客户」)，向南华证券及/或南华期货声明并确认:

(1)  客户具资格作为根据证券及期货条例与证券及期货(专业投资者)规则所定义的专业投资者;

(2)  客户希望被视为专业投资者;

(3)  被视为专业投资者之风险及后果已向客户作出解释;
(4)  其权利提出不再被视为专业投资者亦已向客户作出解;及
(5)  所提供的内容及附加文件的内容在各方面均是真实、完整和正确的

客户明白及同意在本公司将现有的专业投资者视为另一类产品或另一个市场的专业投资者前，本公司将会对该客户另外进行评估…

客户承诺会于其所提供的数据不再被视为正确时立即通知本公司。客户亦进一步承诺提供本公司不时要求下有关其专业投资者的状况，包括但不限于客户与其他金融机构持有的投资组合。”

14.  Another document the Plaintiff signed, also dated 17 March 2014, is titled “客戶收妥文件聲明書” (the “Declaration of Receipt of Documents”).  The documents listed which were allegedly received by the Plaintiff are:-

(1)  The SCS Trading Agreement;

(2)  交易所買賣的衍生產品補充條文, which the Plaintiff signed but does not seem to have much relevant in the present proceedings;

(3)  A copy of the Client Information Statement; and

(4)  A copy of the PI Declaration.

15.  There are two other relevant documents signed by the Plaintiff.  The Plaintiff’s case is that she signed all these documents on the same occasion, while the 1^st Defendant’s case is that she signed around the dates of these two documents:-

(1)  The Subscription Agreement dated 4 April 2014 (the “Subscription Agreement”)  between the Plaintiff and China Agroforestry Low-Carbon Holdings Limited (the “Bond Issuer”)  (subsequently renamed China Bozza Development Holdings Limited), a Cayman Islands limited company.  Under the Subscription Agreement, the Plaintiff subscribed for, and the Bond Issuer issued, bonds in the sum of HK$10,000,000 with interest at 4% per annum, for a term of 96 months until 7 April 2022 (the “Bonds”).  Annex 3 thereto is the Certificate of the Bonds dated 8 April 2014 printed in Chinese.

(2)  The Plaintiff signed a document titled “資本投資者入境計劃合約” dated 23 May 2014 (the “CIES Service Agreement”).  It provided that the Plaintiff opened an account with the 1^st Defendant for the purpose of the Plaintiff’s application under the CIES, and that the 1^st Defendant would from time to time provide information of the account to the Immigration Department.

16.  Between April 2015 and April 2019, the Plaintiff received interest payment on the Bonds deposited into her bank account in Hong Kong maintained with HSBC (the “Plaintiff’s HSBC Account”)  as follows:-

(1)  21 April 2015: HK$400,000;

(2)  7 April 2016: HK$400,000;

(3)  6 April 2017: HK$400,000;

(4)  6 April 2018: HK$400,000; and

(5)  15 April 2019: HK$150,000, HK$130,000 and HK$120,000 totaling HK$400,000.

17.  In April 2020, the Plaintiff was in the PRC and was unable to remotely access the Plaintiff’s HSBC Account due to the malfunctioning of the security device for online banking.

18.  On 20 April 2020, Ko Ming Shan of the 1^st Defendant emailed the Plaintiff, informing her that the auditor of the Bond Issuer had been trying to contact her and sending the Plaintiff the telephone number of Vincent Fong of the auditor.  The Plaintiff contacted Vincent Fong, and was told that the interest payment for 2020 would be delayed until June 2020.

19.  In May 2020, a winding up petition was presented against the Bond Issuer in the High Court on the basis that the Bond Issuer was insolvent.  In December 2020, the Bond Issuer obtained a court order from the Cayman Islands for appointment of provisional liquidators for restructuring purposes.

20.  In early December 2020, the Plaintiff came to Hong Kong.  She obtained a replacement security device for online banking, and discovered that the Bond Issuer did not make the interest payment for 2020 at all.

21.  As at 25 April 2023, the expected recovery rate to creditors, among whom is the Plaintiff, in the event of the liquidation of the Bond Issuer was nil to 9.12% only.  For the Plaintiff, this translates to HK$0 to HK$912,000.

III.  THE PLAINTIFF’S CASE

22.  I shall summarise the Plaintiff’s case in this Part.

23.  According to the Plaintiff, she met, among others, Cheng of the 2^nd Defendant in June 2013 for discussing potential options for the Plaintiff to obtain Hong Kong residency.  Cheng proposed two options for her, namely, the Investment as Entrepreneurs Scheme and the CIES.  During the meeting, Cheng gave the Plaintiff the Jiayu Service Agreement, which she signed on or around 10 June 2013.

24.  Subsequently, between August and October 2013, the Plaintiff met Cheng (and one staff member named Brian Leung from an insurance company, which has no relevance to the present proceedings)  a few times.  During those meetings, according to the Plaintiff, the Plaintiff “repeatedly told Cheng… that she was only prepared to invest money in a bond that was for a fixed and one-off amount, which had no risk and was backed by the government (the “Instructions”)” (emphasis added): see Statement of Claim filed on 7 June 2023 (the “Statement of Claim”)  §10(d).

25.  In early 2014, Cheng asked Zhu to travel from the PRC to Hong Kong to finalise her application for Hong Kong residency.  As mentioned above, the record shows that the Plaintiff came to Hong Kong on 17 March 2014 and left Hong Kong on 19 March 2014.  According to the Plaintiff, she met Cheng on 18 March 2014 morning.  They then deposited the Cheque into the 2^nd Defendant’s bank account in a HSBC branch near Regal Hotel in Hong Kong. 

26.  After that, Cheng asked the Plaintiff to meet her in the office of the 1^st Defendant in the afternoon, make a representation to the Plaintiff, set out and defined as the “1^st Representation” in §16 of the Statement of Claim, that:-

(1)  the 1^st Defendant “is the largest brokerage firm in Hong Kong”;

(2)  the 1^st Defendant “was very safe” (or words to that effect);

(3)  the Plaintiff “could trust [Cheng]”; and

(4)  the Plaintiff “could leave all the decision maker to [Cheng] and [the Plaintiff] should follow [Cheng’s] instructions’ when meeting [the 1^st Defendant]” (or words to that effect).

27.  In the afternoon of 18 March 2014, the Plaintiff, Cheng, the Plaintiff’s cousin Wan Wai Ting Shirley (“Wan”)  and an employee of the 1^st Defendant (the “D1’s Employee”)  met in the office of the 1^st Defendant.  At that meeting (the “March 2014 Meeting”), the Plaintiff said to Cheng and the D1’s Employee that “she wanted a ‘risk-free’ investment and repeated the Instructions to them”: see Statement of Claim §18.

28.  The Plaintiff was then given a pile of documents (defined as the “Account Opening Documents” in §19 of the Statement of Claim)  to sign.  §19 of the Statement of Claim particularise the Account Opening Documents as:-

(1)  The Client Information Statement;

(2)  The PI Declaration;

(3)  The CIES Service Agreement;

(4)  The Declaration of Receipt of Documents; and

(5)  A fee declaration.

29.  Cheng told the Plaintiff just to sign and not to read the documents. Then, according to Plaintiff, as set out in §§21-22 of the Statement of Claim:-

“21. [The Plaintiff] asked Cheng and the [D1’s Employee] if the Account Opening Documents were for an investment that satisfied her investment requirements as per the Instructions.

22. Cheng and the [D1’s Employee] told [the Plaintiff] that the Account Opening Documents were for a fixed investment in bonds that ‘was backed by the government’ and that the bonds met her ‘capital safety requirements’ i.e. was ‘low risk’ (or words to that effect)  (the “2^nd Representation”).” (emphasis added)

30.  According to §23 of the Statement of Claim, the Plaintiff then followed “the directive from Cheng” and in reliance upon the 1^st Representation and the 2^nd Representation, she signed the Account Opening Documents without any opportunity to read them, without having the contents of the documents explained to her, without any opportunity to seek advice and to ask further questions.

31.  As mentioned above, the Plaintiff and the Bond Issuer entered into the Subscription Agreement.  In relation to this, at §28 of the Statement of Claim, the Plaintiff pleads that the Bond Issuer “agreed to sell” the Bonds to the Plaintiff.  I mention this because “sell” carries some significance, because, as shall be seen later, one of the Plaintiff’s claim is in relation to the “selling” of the Bond.

32.  As mentioned above, provisional liquidators have been appointed to the Bond Issuer, and the value of the Bonds has become at most HK$912,000 only. The Plaintiff has suffered loss.

33.  Based on the above, the Plaintiff makes the following claims.

34.  First, she claims that the Account Opening Documents are not genuine and contain false information.  In particular, the 1^st Defendant did not carry out any assessment of her investment experience and knowledge and the information in the PI Declaration about the number of transactions and investment experience, set out in §12 above, is false.  The Plaintiff also claims that the information in the Declaration of Receipt of Documents is false, given that she has received none of the documents or any copies of documents from the 1^st Defendant.  In terms of relief, the Plaintiff seeks a declaration that the PI Declaration and the Declaration of Receipt of Documents are null and void.

35.  Second, the Plaintiff claims that the 1^st Defendant provided “investment services” (§2(d)  of the Statement of Claim)  to the Plaintiff and was a fiduciary to the Plaintiff, and that the 1^st Defendant knew or ought to have known that the Plaintiff would rely upon the 1^st Defendant’s information and advice in relation to her investment.  The Plaintiff claims that the 1^st Defendant was negligent, in tort and in contract, in that it failed to comply with the terms of the Regulatory Codes.  Various particulars are provided.  The gist is that had the 1^st Defendant carried out these terms properly, the 1^st Defendant would have known, according to §57 of the Statement of Claim, that:-

(1)  The Bonds were of “an unacceptable risk to [the Plaintiff]”;

(2)  “[Selling] the Bonds to [the Plaintiff] was contrary to the Instructions”;

(3)  “[Selling] the Bonds to [the Plaintiff] was not in [the Plaintiff’s] best interests”;

(4)  The Plaintiff did not have the requisite investment experience and knowledge to invest in the Bonds; and

(5)  The Plaintiff was not a professional investor.

36.  Pausing here, I immediately note that the 1^st Defendant did not sell the Bonds to the Plaintiff.  As pointed out above, it was the Bond Issuer who sold the Bonds.  Thus, strictly speaking, (2)  and (3)  are inherently defective, but for the sake of completeness, I am prepared to consider “selling” here to mean “recommending” or “advising to buy”.

37.  Third, the Plaintiff claims that the 2^nd Defendant provided immigration agency and related services to the Plaintiff: see §3(d)  of the Statement of Claim, and the 2^nd Defendant knew or ought to have known that the Plaintiff would rely on the 2^nd Defendant’s advice in relation to her investment.  The Plaintiff claims that the 2^nd Defendant was negligent, in tort and in contract.  In gist, the Plaintiff claims that the 2^nd Defendant failed to take reasonable steps to ensure that the 1^st Defendant would offer an investment that would satisfy the Instructions.  The Plaintiff claims at §62 of the Statement of Claim that had the 2^nd Defendant acted with reasonable care, the 2^nd Defendant would have known that the 1^st Defendant was negligent, the Bonds was an unacceptable risk to the Plaintiff, and the sale of the Bonds to the Plaintiff was contrary to the Instructions and her best interest.

38.  Fourth, the Plaintiff claims that the 1^st and/or 2^nd Defendants received commissions from the Bond Issuer in respect of the Plaintiff’s purchase of the Bond.  The Plaintiff claims that this constituted breach of fiduciary duties.

39.  Fifth, the Plaintiff claims that the 1^st Representation and the 2^nd Representation were false in that, according to the particulars set out in §73 of the Statement of Claim:-

“(c)  [the 1^st Defendant] was not the largest brokerage firm in Hong Kong at the time;

(d)  [the 1^st Defendant] was not very safe because it had been reprimanded by the SFC on several occasions for serious misconduct as publicized in the monthly SFC Enforcement Reporter;

(e)  [the 1^st Defendant] and [the 2^nd Defendant] had conspired to implement the Plan [a plan of conspiracy to injure the Plaintiff, as explained below] and Cheng was determined to carry it out regardless of the possible impact on [the Plaintiff];

(f)  Cheng was not a professional investment broker;

(g)  Cheng knew or ought to have known that the only investment option being presented to [the Plaintiff] was the Bonds, and that this investment was not in accordance with the Instructions”.

40.  Sixth, the Plaintiff claims at §69 of the Statement of Claim that the 1^st Defendant and the 2^nd Defendant conspired to implement a plan “with the intent to procure, induce or otherwise cause [the Plaintiff] to invest in the Bonds for the sole or predominant purpose of receiving the Commissions (“Plan”)  by unlawful means including by making the Misrepresentations [that is, the 1^st and 2^nd Representations] to [the Plaintiff] and/or the breach of [the fiduciary duties] and/or the wrongful conduct…”

IV.  THE 1^ST DEFENDANT’S DEFENCE

41.  The 1^st Defendant’s defence is that under the SCS Trading Agreement, it only provided custodian services to the Plaintiff, and under the CIES Service Agreement, it provided custodian services and services of providing information to the Immigration Department for the Plaintiff’s CIES application.  It did not make any recommendation or solicitation or advice on any financial products to the Plaintiff.  The 1^st Defendant avers that it is the Plaintiff’s own decision to purchase the Bonds, referring to Clause 8 of the SCS Trading Agreement.

42.  The 1^st Defendant denies the existence of the March 2014 Meeting that took place on 18 March 2014.  Instead, according to the 1^st Defendant, a meeting took place on 17 March 2014, and at that meeting, the 1^st Defendant enquired about, explained and completed the Client Information Statement and the PI Declaration in accordance with the information provided by the Plaintiff.  Further, at that meeting, the Plaintiff signed the Declaration of Receipt of Documents to acknowledge the receipt of the Client Information Statement and the PI Declaration.

43.  The 1^st Defendant has no knowledge as to the Instructions and denies the existence of the 2^nd Representation.  The 1^st Defendant also has no knowledge as to whether the Bonds were contrary to the Instructions.  The 1^st Defendant denies owing any duty of care or fiduciary duty to the Plaintiff, any misrepresentation, any receipt of any commission in relation to the Bonds and any conspiracy.

44.  The 1^st Defendant also raises the defence of limitation.

V.  THE 2^ND DEFENDANT’S DEFENCE

45.  Although the 2^nd Defendant was absent from the trial before me, it filed a Defence. 

46.  According to its Defence, in early 2014, the Plaintiff made enquiry with the 2^nd Defendant about investment for the purpose of the CIES. Cheng told the Plaintiff that the 2^nd Defendant was not an expert in investment and had no relevant knowledge, and that the Plaintiff may contact her own securities firm and lawyers in making such investment.  Cheng also suggested that if the Plaintiff would like, the 2^nd Defendant could introduce a securities firm to her.  The Plaintiff did like to, and thus the 2^nd Defendant introduced the 1^st Defendant to her.  The 2^nd Defendant denies making the 1^st Representation.

47.  In relation to the March 2014 Meeting, the 2^nd Defendant’s defence is not so firm about the date as the 1^st Defendant.  In §19 of the 2^nd Defendant’s Defence, it avers “on around 17 March 2014”. However, like the 1^st Defendant, the 2^nd Defendant denies the existence of the 2^nd Representation.  The 2^nd Defendant avers that the Plaintiff had the opportunity to read documents, ask questions and take independent advice.

48.  The 2^nd Defendant denies owing any duty of care and fiduciary duty to the Plaintiff.  The 2^nd Defendant avers that it had no duty in relation to the Plaintiff’s investment.  It also denies any conspiracy as alleged.

49.  The 2^nd Defendant also raises the defence of limitation, averring that the Plaintiff should have discovered any alleged wrongful conduct in March 2014.

VI.  ISSUES

50.  From the parties’ respective cases, the issues are, broadly:-

(1)  Whether the Plaintiff gave the Instructions to the 1^st and/or 2^nd Defendants;

(2)  Whether the 2^nd Defendant made the 1^st Representation;

(3)  Whether the 1^st Defendant and the 2^nd Defendant made the 2^nd Representation;

(4)  Whether the Bonds were contrary to the Instructions and/or the 2^nd Representation;

(5)  Whether the Plaintiff should be held to the PI Declaration and the Declaration of Receipt of Documents;

(6)  Whether the 1^st and/or 2^nd Defendants received any commission in relation to the Bonds;

(7)  Whether the 1^st and/or 2^nd Defendants breached any duty of care and/or fiduciary duties owed to the Plaintiff (if any);

(8)  Whether the 1^st and/or 2^nd Defendants made false representations in making the 1^st and/or 2^nd Representations, fraudulently or negligently or at all;

(9)  Whether the Plaintiff has suffered any loss and damage as a result of the above breaches (if any)  and/or misrepresentations (if any); and

(10)  Whether the Plaintiff’s claim is in any event time-barred.

VII.  WITNESSES

51.  For the Plaintiff, the Plaintiff herself and Wan were the witnesses.

52.  For the 1^st Defendant, Wong Ding Pong Allan (“Allan Wong”), a director of the 1^st Defendant, was the witness.

53.  The 2^nd Defendant has filed a witness statement of Cheng. However, as I point out at the outset, the 2^nd Defendant was absent from the trial, and Cheng did not give evidence.  So, I disregard Cheng’s witness statement.

VIII.   WHETHER THE PLAINTIFF GAVE THE INSTRUCTIONS TO THE 1^ST AND/OR 2^ND DEFENDANTS

54.  To determine this question of whether the Plaintiff did give the Instructions to the 1^st and/or 2^nd Defendants, the first question to ask is what are the contents of the Instructions.  It is important to examine how the Instructions have been described since the pre-action letter issued by the Plaintiff’s then solicitors Tanner De Witt to the 1^st Defendant on 20 February 2023 (“P’s Pre-Action Letter”).

55.  In P’s Pre-Action Letter, it was stated that at the meeting on 18 March 2014:-

“(a)  [The Plaintiff] (who had earlier told Cheng that she only wanted to invest in a low-risk bond backed by the government (“Instruction”))  repeated the Instruction to those present.

…

(e)  Cheng and Teh [of the 1^st Defendant] told [the Plaintiff] that bonds being issued by [the Bond Issuer] were backed by the government and that [the Bond Issuer] was promoted as a low-carbon and environmentally friendly business (or words to that effect). They further told [the Plaintiff] that the bonds issued by [the Bond Issuer] met her ‘capital safety requirements’ i.e was a low-risk bond backed by the government.” (emphasis added)

56.  In the general endorsement of the Writ of Summons (that is, 12 days after the issuance of P’s Pre-Action Letter), the Instructions were defined in this way:-

“At all material times the 1^st and 2^nd Defendants (and their respective employees and/or officers)  did or ought to have known that the Plaintiffs investment risk tolerance or investment objectives and/or capital safety requirements was for an investment that allowed her to apply and qualify for the CIES but which carried no risk and was an investment that was ‘government backed’ or similar (“Instructions”).” (emphasis added)

57.  Then, in the Statement of Claim:-

“10. [The Plaintiff] met with Cheng and Leung several times between about August and October 2013 at Jiayu’s offices in Hong Kong. During these meetings:

…

(d)  [The Plaintiff] repeatedly told Cheng and Leung that she was only prepared to invest money in a bond that was for a fixed and one-off amount, which had no risk and was backed by the government (the “Instructions”).

…

21. [The Plaintiff] asked Cheng and [the D1’s Employee] if the Account Opening Documents were for an investment that satisfied her investment requirements as per the Instructions.

22. Cheng and [the D1’s Employee] told [the Plaintiff] that the Account Opening Documents were for a fixed investment in bonds that ‘was backed by the government’ and that the bonds met her ‘capital safety requirements’ i.e. was ‘low risk’ (or words to that effect)  (the “2^nd Representation”).” (emphasis added)”

58.  In her Witness Statement dated 22 September 2024, she said:-

“11. 2013年8月至10月期间，我几次前往香港会见[Cheng]和Brian，讨论将为CIES方案购买的金融产品。具体而言：

…

(3)  我反覆向Elaine和Brian强调，我只愿意投资一笔固定且一次性的、没有风险并且是由政府支持的债券。这是因为在我印象中，政府支持的债券是有保障的，是安全的。我还多次和Elaine表示，产品的利息低一点没关系，我看重的是资金的安全性。我的立场是，这笔投资并不是以赚钱为目的，而是在确保资金安全的前提下让我和我女儿能够顺利申请到香港居留权。

…

20. 以下是我对会议(“2014年3月会议”)期间所发生的情况的回忆…

…

(3)  在签署《认购协议》之前，我和Elaine和南华职员重申了我的投资要求，即我 (i)只愿意投资一笔固定且一次性的、没有风险并且是由政府支持的债券；及(ii)债券的资金安全性是我最大的考量，利息的高低对我来说不重要。Elaine和南华职员一致向我保证他们为我选择了一款政府支持的债券，并且公司是政府着重推广的低碳环保事业，并且完全符合我对‘资金安全’的要求…要我完全不必担心” (emphasis added)

59.  In the written Opening Submissions prepared by her counsel, Mr Jeffrey Sham (leading Ms Lee Lok Man):-

“11. Between August and October 2013, the Plaintiff met with Cheng and [Brian] several times at the 2^nd Defendant’s office in Hong Kong, during which the below conversation occurred:- [P’s WS…§11]

…

(c)  The Plaintiff repeatedly told Cheng and [Brian] that she was only prepared to invest money in a bond that was for a fixed and one-off amount, which had no risk and was backed by the government (“Instructions”).

…

21. The Plaintiff asked Cheng and Teh if the Account Opening Documents were for investment that satisfied her investment requirements as per the Instructions, while Cheng and Teh assured her that the Account Opening Documents were for:-

A fixed investment in bonds that ‘was backed by the government’ and that the bonds met her ‘capital safety requirements’ i.e. was ‘low risk’ (or words to that effect)  (‘2^nd Misrepresentation’). [P’s WS…§20(3)]” (emphasis added)

60.  In cross-examination, the Plaintiff’s explanation for:-

(1)  the inconsistency between (a)  the Instructions defined in P’s Pre-Action Letter with reference to “low risk” rather than “no risk” and (b)  the Instructions defined in the Statement of Claim and her Witness Statement with reference to “no risk” rather than “low risk”; and

(2)  the inconsistency between the Instructions defined in §10(d)  the Statement of Claim and Cheng and Teh’s response to the Instructions with reference to “low risk” pleaded in §§21-22 of the Statement of Claim;

is that she only read the Chinese translation of P’s Pre-Action Letter and the pleadings provided to her by her lawyers.  However, no such Chinese translation has ever been produced to verify whether her such explanation is accurate or not.

61.  I consider the following matters:-

(1)  I am aware that no evidence from the Defendants has been adduced to traverse the evidence of “no risk”.  Allan Wong, the only witness for the 1^st Defendant, did not attend any meeting with the Plaintiff, and so, as he himself had to admit during the cross-examination, he has no personal knowledge of the matter.  For the 2^nd Defendant, there is no evidence from the 2^nd Defendant.  This lack of evidence is a consideration I should bear in mind, but I should also consider the inherent probability or improbability of the Plaintiff’s own evidence and how her case has been presented or evolved.

(2)  “Low risk” and “no risk” in the context definitely bore much significance.  It is inherently improbable that the Plaintiff’s then solicitors Tanner De Witt would make up instructions as to “low risk” as opposed to “no risk”.  It is also inherently improbable that Tanner De Witt would translate or interpret “low risk” in a way that somehow the Plaintiff would understand to mean “no risk”.

(3)  The significance of the contents of the Instructions for the Plaintiff’s case is self-evident.  It is inherently improbable that the Plaintiff would just ignore any difference between “no risk” and “low risk” if it is true that the Instructions were meant to refer to “no risk”.

(4)  P’s Pre-Action Letter is in my view more reliable than the Writ of Summons, the Statement of Claim and her Witness Statement.  Although the Writ of Summons was issued less than two weeks after P’s Pre-Action Letter, one would understand that when the cause(s)  of action were thought through because these had to be put into a legal document to be filed with the Court, then one may start to appreciate that “low risk” may be insufficient to sustain the Plaintiff’s claim.  As a result, one would have more tendency to “refresh” the memory or re-construct the event in a way that would sustain the action.  I say this without any finding that there is any deliberate dishonesty.  It may well be just in the nature of things, people’s memories may be affected in litigation: see Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 at §56 per Coleman J.

(5)  The pleaded response of Cheng and Teh to the Instructions at the March 2014 Meeting in §22 of the Statement of Claim was a response with reference to “capital safety requirements i.e. was low risk”.  In other words, the pleaded response of Cheng and Teh to the Instructions is that the capital safety requirements under the Instructions was “low risk”, not “no risk”.  If the Instructions were “no risk”, the response would not be “low risk” only.

(6)  “Low risk” accords more with commercial and common sense than “no risk” does.  Commercial and common sense tells that even a bond issued by a government, or simply savings deposited in a bank, cannot be “no risk”.  There can always be a risk, however minimal it may appear, that the government or the bank would go heavily indebted, go broke or go completely liquidated. The bond, or the savings, may then be discounted or wiped off.  This is why there is credit-rating of bond issuers (including governments)  and why there are deposit protection schemes to guarantee the savings deposited in banks up to a certain limit.

(7)  Insofar as the Plaintiff apparently says that she has all along relied on her legal advisers and so has not noticed the difference, I am unable to accept this.  First, Tanner De Witt must have taken instructions from the Plaintiff and would not make up instructions.  “Low risk” must have come from the Plaintiff.  Second, on the Plaintiff’s own case, she relied upon the 1^st and 2^nd Defendants in signing documents without knowing the contents, and suffered loss.  Now, she was sending a pre-action letter and subsequently making legal claims, and it is inherently improbable that she would still give instructions, sign off and/or approve documents without paying more attention to the contents, especially when “low risk’ and “no risk” would make significant difference to her claim.

62.  Having considered the above, I find that the risk level mentioned in the Instructions was “low risk”, not “no risk”.

63.  Another aspect of the question is whether the Plaintiff mentioned “backed by the Government” in the Instructions.  In my view, given the Plaintiff’s requirement of “low risk”, it is inherently probable that the Plaintiff required the bond to be “backed by the Government”, and in the absence of any evidence to the contrary, I find that the Instructions included the “backed by the Government” requirement.  What was meant, objectively, by “backed by the Government” shall be considered below in the question of whether the Bonds were contrary to the Instructions.

64.  As to whether the Plaintiff gave the Instructions to the 1^st and 2^nd Defendants, in my view, it would be natural for the Plaintiff to give the Instructions when she knew she was going to invest such a significant sum of money.  In the absence of any evidence to the contrary, I find that the Plaintiff did give the Instructions to the 1^st and 2^nd Defendants at a meeting in March 2014, be the March 2014 Meeting defined by the Plaintiff or a meeting in March 2014 mentioned by the 1^st Defendant.

65.  As a footnote, Mr Sham asks me to draw adverse inference from the 1^st Defendant’s failure to produce Teh or any staff who would have personal knowledge of the matters.  Allan Wong in his Witness Statements explained that those staff had left the employment.  This may not be a reason good enough to explain the failure because the 1^st Defendant may subpoena them.  However, no question was asked in the cross-examination about why the 1^st Defendant did not do so.  No question was asked at all about why those staffs were not asked to give evidence.  Mr Chan Hei Ching, counsel for the 1^st Defendant, rightly points out that without giving the 1^st Defendant a chance to explain, no adverse inference should be drawn.  I only need to refer to Perpetual Wealth (Hong Kong)  Limited v Be Solutions Company Limited and Others [2023] HKCFI 2505 at para 37(b)  for this legal proposition.  Therefore, I refuse to draw any adverse inference as sought by Mr Sham.

IX.  WHETHER THE 2^ND DEFENDANT MADE THE 1^ST REPRESENTATION

66.  In considering whether the 2^nd Defendant made the 1^st Representation to the Plaintiff, I consider that:-

(1)  It is inherently probable that in order to keep the Plaintiff as its client, Cheng of the 2^nd Defendant would make such representation as the 1^st Representation.

(2)  There is no evidence to the contrary.

67.  Having considered the above, I find that Cheng of the 2^nd Defendant did make the 1^st Representation to the Plaintiff.  As to the legal effect of the 1^st Representation, I shall consider below in the question of whether the 1^st Representation was false.

X. WHETHER THE 1^ST DEFENDANT AND THE 2^ND DEFENDANT MADE THE 2^ND REPRESENTATION

68.  For the question of whether the 1^st Defendant and the 2^nd Defendant made the 2^nd Representation, I consider the following:-

(1)  I have found that the Plaintiff gave the Instructions to the 1^st and 2^nd Defendants in the meeting in March 2014.

(2)  It would be natural for the 1^st and 2^nd Defendants to respond to the Instructions.

(3)  It would be natural for the 1^st and 2^nd Defendants to respond in a way of the 2^nd Representation.

(4)  There is no evidence to the contrary.

69.  Having considered the above, I find that the 1^st and 2^nd Defendants did make the 2^nd Representation in the meeting in March 2014.

XI.  WHETHER THE BONDS WERE CONTRARY TO THE INSTRUCTIONS AND/OR THE 2^ND REPRESENTATION

70.  To determine whether the Bonds were contrary to the Instructions and/or the 2^nd Representation, it is useful to remind oneself of the contents of the Instructions and the 2^nd Representation, namely:-

(1)  The Bonds had to be “low risk”; and

(2)  The Bonds had to be “backed by the Government”.

71.  To determine whether the Bonds were contrary to the Instructions and/or the 2^nd Representation, the time reference should be when the Instructions were given and the 2^nd Representation was made, because neither of them was pleaded as any guarantee or promise (which would not make sense at any rate)  that it shall at all times be “low risk” and/or “backed by the Government”, but simply as some instructions to be complied with and a statement of fact to be relied upon.

72.  The burden lies upon the Plaintiff to prove a positive answer to this question.  However, there is no plea and no evidence at all as to how the Bonds were not “low risk” (or even on the Plaintiff’s own case, “no risk”).  The mere fact that the Bond Issuer eventually went insolvent in 2020 does not mean that at the time when the Instructions had to be complied with and the 2^nd Representation was made back in March 2014, the Bonds were not “low risk” or “no risk”.

73.  As regards “backed by the Government”, one has to determine what was meant by “backed by the Government”.  The standard should be objective standard.  “Backed by the Government” is not “guaranteed by the Government” or “issued by the Government”.  In cross-examination, when asked about this, the Plaintiff explained her experience back in the PRC that she had once purchased bonds issued by the PRC Government and the bonds were fully repaid.  Therefore, even from her subjective mind, she did understand the difference between “backed” and “issued”.  It was just that, according to her evidence, she did not know that the Bonds were not issued by Government.  There is, however, no evidence that she explained to the 1^st and/or the 2^nd Defendants that by “backed by the Government”, she meant “guaranteed or issued by the Government”.

74.  In the circumstances, “backed by the Government”, objectively understood when the Instructions were given and the 2^nd Representation was made, just mean “supported by the Government”. 

75.  Again, the burden lies upon the Plaintiff to establish that the Bonds were not backed by the Government.  There is, however, again, no plea and no evidence as to how the Bonds were not backed by the Government.  The mere fact that the Government, be the Hong Kong Government or any other government, did not cover the depreciated value of the Bonds does not mean that the Bonds were not backed by the Government.  On the contrary, from the Plaintiff’s own evidence that the 1^st and 2^nd Defendants told her that the Bond Issuer carried out low-carbon and environmentally friendly business and the Government supported such business, the Bonds could, in my view, be regarded as “backed by the Government”.

76.  Having considered the above, I find that the Bonds were not contrary to the Instructions and the 2^nd Representation.

XII.  WHETHER THE PLAINTIFF SHOULD BE HELD TO THE PI DECLARATION AND THE DECLARATION OF RECEIPT OF DOCUMENTS

77.  To answer this question of whether the Plaintiff should be held to the PI Declaration and the Declaration of Receipt of Documents, I have to stress that the answer, be it in the affirmative or in the negative, would be binding upon the Plaintiff and the 1^st Defendant only because these documents were documents between the Plaintiff and the 1^st Defendant only.

78.  The second matter I have to stress is that among the pile of documents the Plaintiff was given to sign, according to the Plaintiff, on the one single occasion in the March 2014 Meeting, she only claims for a declaration of nullity in relation to these two documents only, but not any other document.

79.  The third matter is that the Plaintiff does not run any plea of non est factum, undue influence, duress or unconscionability.  As regards her plea of fraud and misrepresentation, it is in relation to the 1^st and 2^nd Representations, but not any fraud or misrepresentation in relation to the PI Declaration or the Declaration of Receipt of Documents.

80.  The starting point for this question must be the legal principle stated by the Court of Final Appeal in Bank of China (Hong Kong) Ltd v Fung Chin Kan and Another (2002)  5 HKCFAR 515 at §51, which in is a substantive legal principle rather than a rule of evidence, that:-

“…generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood. But there are special circumstances where the burden is thrown on the other party, under the principles of what are broadly called equitable fraud.” (emphasis added)

81.  Similarly, in Ming Shiu Chung & Others v Ming Shiu Sum & Others [2006] 2 HKLRD 831 at §84, the Court of Final Appeal stated that:-

“Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large)  print and therefore sign without actually knowing the terms (or all the terms)  of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.” (emphasis added)

82.  I quote the above two oft-cited passages to explain specifically to the Plaintiff, who appeared in her oral evidence to be disappointed with the legal environment in Hong Kong, that in signing a document, it is not just the signatory who is involved, but also involved is the side who relies on the signature and who has no means to know what the signatory is thinking subjectively in his or her mind.  This rule, in my view, is a manifestation of the objective standard applied throughout in contract law, fundamental to achieving certainty essential to parties’ consideration of their legal positions in agreed transactions, be it commercial or not.  This, in turn, is fundamental to the rule of law – parties can know with sufficient certainty how to arrange their own affairs without being subjected to others’ unknown subjective thoughts.

83.  There are exceptions to this general principle, notably, non est factum, undue influence, duress, unconscionability, fraud and misrepresentation.  Absence of any such exceptions means that the signatory has the opportunity to read, understand and refuse to sign the document.  He or she may feel it troublesome, time-wasting or embarrassing to ask, read, understand and/or refuse to sign the document until a later time.  He or she may feel it embarrassing to look as if he or she does not trust the other side.  He or she may feel the time pressure to proceed with the transaction as quickly as possible.  However, absence of any such exceptions means that despite all such feelings, he or she is actually able to choose, on his or her own volition, to read, understand, and refuse to sign.  In such circumstances, if he or she still chooses to sign the document, the other side would be put into a very uncertain and impossible situation if he or she could later come back to say that he or she should not be held to the document simply for the reason that she chose not to read, understand and refuse to sign.  From the other side’s point of view, the other side may think that he or she may simply not care about whatever terms there are to bind him or her, and from this point of view, the other side is legitimate to think that the document would indeed bind him or her.

84.  Mr Sham refers me to §56 of Phoneyork Company Limited v Chesson International (Holdings) Limited, HCA 2192/2007, 28 May 2012, where Recorder Yuen SC stated that:-

“… parties signing contracts or documents of a contractual nature in a commercial context are generally regarded to have signed the same with an intention to be legally bound. Not only does the defendant in this case bear the burden of showing that there was no intention to be legally bound, a ‘high degree of probability’ is required. However, where the requisite burden of proof is satisfied, the agreement will have no contractual effect. See: Orion v Sphere Drake [1992] 1 Lloyd’s Rep 239, per Stuart-Smith LJ at pp 274-275.”

85.  In that case, although the defendant signed a provisional sale and purchase agreement and signed and delivered a cheque in the sum stated in the agreement, the defendant at the same time endorsed at the back of the cheque (§22)  that if the sale and purchase did not go through within 30 days, then the cheque shall be returned within 10 days thereafter.  All these read together could only objectively mean that the provisional sale and purchase agreement had yet to become effective.  Further, in my view, the defendant there was still in a sense held to the documents he signed, but just that those documents had to be read and understood as a whole to mean that the provisional agreement had yet to become effective.  Applying the legal principle at §56 quoted above, Recorder Yuen SC held that the requisite burden was satisfied.

86.  In the present case:-

(1)  I accept the Plaintiff’s evidence, which is not traversed and challenged, and find that she was given a pile of documents to sign at the meeting in March 2014. 

(2)  This means that among the documents, she accepts that she would be legally bound by the documents other than the PI Declaration and the Declaration of the Receipt of Documents. 

(3)  The Plaintiff has not made any plea or given any evidence as to how the 1^st Defendant would know which documents were intended to be legally binding and which not.  There was simply no way for the 1^st Defendant to know that among the documents, the Plaintiff chose not to be bound by two of them.

87.  The only basis for the Plaintiff to say that she should not be bound by these two documents is that the 1^st Defendant knew or ought to have known that the information there was false. 

88.  In respect of the information in the PI Declaration, I accept the Plaintiff’s evidence, which is not traversed and unchallenged, and find that the information there did not reflect her actual investment experience. However, in my view, this does not follow that the 1^st Defendant knew or ought to have known that the information there was false.  First, it is not clear who filled in the PI Declaration, and based on what it was filled in.  Would it be Cheng, or based on what Cheng had told the 1^st Defendant?  If so, was there any basis for the 1^st Defendant to doubt Cheng, who had been provided services to the Plaintiff in relation to her CIES application?  Second, even assuming that it was the 1^st Defendant who filled in the PI Declaration without any basis, it filled in there for the Plaintiff to confirm and sign, and absence of any vitiating factors means that the Plaintiff could change the information there if this did not reflect her experience accurately.  Nonetheless, the Plaintiff signed it and objectively viewed, the 1^st Defendant could only take it that the Plaintiff agreed to what was filled in there.  I add that the PI Declaration here is akin to representations and warranties set out in some standard contracts like loan agreements or guarantees.  The draftsmen of the standard contracts would not have any basis to know whether the representations and warranties stated there to be accurate or not.  But once the standard contracts are signed, all the parties are held to them.  It would lie ill in any party’s mouth to say that he or she did not make or would not have made the representations and warranties (e.g. warranty as to the ownership of the security assets)  because they were not true, and so he or she should not be held liable to breach those representations and warranties.

89.  In respect of the Declaration of Receipt of Documents, this, in my view, is evidence of acknowledge of receipt of documents rather than documents of legal effect.  Therefore, I would consider this as a piece of evidence in determining whether the Plaintiff did receive the documents stated therein.  It is thus unnecessary in any event for me to make any declaratory relief sought by the Plaintiff that this Declaration of Receipt of Documents is null and void, just like that the Court would not make a declaratory relief that certain pieces of evidence support or do not support a party’s case.

90.  While in the circumstances, it may not be necessary to determine whether the Plaintiff did receive the documents as stated in the Declaration of Receipt of Documents, for the sake of completeness, I should still make a finding in this regard.  For this purpose, I consider the following:-

(1)  There is evidence suggesting that the dates stated on the documents were not the actual dates of execution.  I accept the Plaintiff’s evidence, against which the 1^st and 2^nd Defendants have no positive evidence, that the only occasion she signed all the documents was the March 2014 Meeting, and I accept that the March 2014 Meeting took place on 18 March 2014, but not 17 March 2014, because from the travel record shown by her passport, she came to Hong Kong on 17 March 2014 and left Hong Kong on 19 March 2014.  The likelihood is, and the Plaintiff would find it memorable, that she signed the documents the next day she came to Hong Kong, and left Hong Kong the next day she signed the documents.  However, as I expressed in §§40-41 of Yardley Finance Limited v Rong Xiuli [2026] 1 HKLRD 30, it is not unusual for the parties to post-date (and in the same rationale, to pre-date)  a contract for legitimate reason.  The most one can get out of this is that the Plaintiff did not carefully or in detail read the documents she was signing. 

(2)  However, as accepted by the Plaintiff in her oral evidence, (a)  the CIES application was important to her; (b)  she knew that in her CIES application she would provide information to the Hong Kong Government; (c)  the sum of investment of HK$10,000,000 was a significant sum to her.  I also bear in mind that she was a university graduate and has been doing real estate agency business since 2007.  In such circumstances, in my view, whatever degree of trust she may have placed upon the 1^st and/or the 2^nd Defendants, it is more probable than not that she would like to at least check what the documents she was signing.  In particular, in signing those documents, the Chinese documents would, more probable than not, catch her attention more readily given that she reads Chinese.

(3)  In fact, on the Plaintiff’s own evidence, she did make enquiries about the reliability of the Bonds, namely, whether the Bonds met her capital safety requirements and was backed by the Government.  In her oral evidence, she also said that she did ask for some time to read the documents, but was told not necessary and was asked to sign. 

(4)  (3)  and (4)  above all show that she in fact had every interest to know what documents she was signing, and to keep copies of the documents she was signing. 

91.  Having considered the above, I find that the Plaintiff did receive the document stated therein.  I also find that she also received other documents she signed at the March 2014 Meeting.

XIII.   WHETHER THE 1^ST AND/OR 2^ND DEFENDANTS RECEIVED ANY COMMISSION IN RELATION TO THE BONDS

92.  The Plaintiff raises a mere allegation that the 1^st and/or 2^nd Defendants received commission in relation to the Bonds.  No particulars and no evidence have been provided.  Mr Sham put the suggestion to Allan Chan that the 1^st Defendant received such commission, and Allan Chan denied. 

93.  I am not satisfied that there is sufficient evidence, if any, that the 1^st and/or 2^nd Defendants received such commission.

XIV.   WHETHER THE 1^ST AND/OR 2^ND DEFENDANTS BREACHED ANY DUTY OF CARE AND/OR FIDUCIARY DUTIES OWED TO THE PLAINTIFF (IF ANY)

94.  With respect to the question of whether there were any breaches of duties, in the light of my finding that the Bonds were not contrary to the Instructions and the 2^nd Representation, I fail to see any breaches of duties. 

95.  More fundamentally, neither the 1^st nor the 2^nd Defendant owed any duty of care to advise the Plaintiff on what investment product to invest in.  For the 1^st Defendant, I accept that the Plaintiff account opened with the 1^st Defendant was a mere custodian account for the following reasons:-

(1)  The 1^st Defendant was a Type 1 licensee only, for dealings in securities, but not a Type 4 licensee, for advising on securities.

(2)  Recital (1)  of the SCS Trading Agreement (quoted in §11 above)  shows that the Plaintiff intended to open an account for trading.  Clause 8 of the SCS Trading Agreement (quoted in §11 above)  stated that the Plaintiff would rely on her own judgment in the transaction in the account but not on the 1^st Defendant.

(3)  The sale of the Bonds was by the Bond Issuer, but not the 1^st Defendant.

96.  For a mere custodian account, I am not satisfied that the 1^st Defendant owed any duty of care to the Plaintiff, let alone fiduciary duty, in respect of the Plaintiff’s investment in the Bonds.

97.  The 1^st Defendant had a duty to comply with the Regulatory Codes, and in the pleading, the Plaintiff pleads at §56 of the Statement of Claim that the 1^st Defendant failed to take reasonable steps to establish the proper identity of the Plaintiff, to ensure that the documents were properly filled out and completed by the Plaintiff, to ensure that the documents were properly dated and so on.  However, in the light of the Instructions and the 2^nd Representation, I cannot see how failure to take reasonable steps in all these respects would cause the loss now allegedly suffered by the Plaintiff.  After all, even on the Plaintiff’s own case and evidence, it was the Plaintiff’s Instructions and the 2^nd Representation relied upon by the Plaintiff that led to the purchase of the Bonds.  Whether these reasonable steps were taken or not would have no effect on the Instructions and the Plaintiff’s reliance on the 2^nd Representation.

98.  As regards the 2^nd Defendant, in my view, the 2^nd Defendant’s position is even more remote.  It was to assist the Plaintiff’s CIES application, and at most, also to recommend the 1^st Defendant for the Plaintiff’s investment to satisfy the CIES application.  I cannot see how the 2^nd Defendant owed any duty of care, let alone fiduciary duty, to the Plaintiff with respect to the Plaintiff’s investment in the Bonds.

99.  In the circumstances, I find that the 1^st and 2^nd Defendants did not breach any duty of care and fiduciary duty to the Plaintiff.

XV.  WHETHER THE 1^ST AND/OR 2^ND DEFENDANTS MADE FALSE REPRESENTATIONS IN MAKING THE 1^ST AND/OR 2^ND REPRESENTATIONS, FRAUDULENTLY OR NEGLIGENTLY OR AT ALL

100.  Given my finding above that the Bonds were not contrary to the 2^nd Representation, I find that the 2^nd Representation was not false.

101.  In respect of the 1^st Representation, made by the 2^nd Defendant, there are four components, as set out in §26 above:-

(1)  the 1^st Defendant “is the largest brokerage firm in Hong Kong”;

(2)  the 1^st Defendant “was very safe” (or words to that effect);

(3)  the Plaintiff “could trust [Cheng]”; and

(4)  the Plaintiff “could leave all the decision maker to [Cheng] and [the Plaintiff] should follow [Cheng’s] instructions’ when meeting [the 1^st Defendant]” (or words to that effect).

102.  For (1)  and (2), such words as “largest” and “safe” are ambiguous. “Largest” in what sense?  In terms of the number of employees?  In terms of the number of clients?  In terms of the number of the transactions?  In terms of the volume of the transactions?  “Safe” in what sense?  In terms of the safety of making transactions through the accounts maintained with it?  In terms of the safety of communication with the 1^st Defendant?  Where the representation is ambiguous, the representee must prove that he understood the statement in a sense in which it was in fact false: see China Jianxin Credit Services Limited v China Wah Yan Healthcare Limited [2024] HKCFI 1461 at §18 per Recorder Abraham Chan SC.  However, the Plaintiff has not pleaded and has not given any evidence as to how such ambiguous words should be understood.  There is simply no benchmark to see whether (1)  and (2)  were false.  Insofar as there is any reliance on the plea at §73(d)  (quoted in §39 above)  that the 1^st Defendant had been reprimanded by the SFC, there is no evidence in sustain this plea at all.

103.  For (3)  and (4), there are mere puffs but not any statement of fact one would reasonably rely upon.  In any event, there is also no evidence at all to suggest that when Cheng asked the Plaintiff to trust her and follow her instructions, she did not honestly think so, or she should not have thought so. 

104.  In the circumstances, I also find that the 1^st Representation was not false.

105.  Given my findings above, there was neither fraud nor any negligence.

XVI.   WHETHER THE PLAINTIFF HAS SUFFERED ANY LOSS AND DAMAGE AS A RESULT OF THE ABOVE BREACHES (IF ANY)  AND/OR MISREPRESENTATIONS (IF ANY)

106.  Given my findings above, this question of loss and damage is unnecessary.  Suffice to say that the amount claimed in the relief in the Statement of Claim, more than HK$20,000,000, is no longer pursued.  Instead, Mr Sham rightly pursues the return of the HK$10,000,000 subject to any deduction of the returns (interests and dividends under the restructuring of the Bond Issuer)  received upon the Bonds.

XVII. WHETHER THE PLAINTIFF’S CLAIM IS IN ANY EVENT TIME-BARRED

107.  Given my findings above, this question of time limit is unnecessary. 

108.  For the sake of completeness, I should however make a fact-finding that the Plaintiff did receive a copy of the Subscription Agreement and the certificate of the Bonds in or around March 2014, given that the Bonds, and the underlying agreement, were the main and only subject investment made for the Plaintiff’s CIES application.  It would be inherently more probable than not, and so I do find, that she did receive a copy of the Subscription Agreement and the certificate of the Bonds in or around March 2014.  With these two documents at the very least, I would find that the Plaintiff would have discovered that the Bonds were not risk-free and not issued by the Government, and time should have started to run from then.

XVIII. CONCLUSION

109.  In the circumstances, I dismiss the Plaintiff’s claim, and make a costs order nisi that the Plaintiff shall pay the costs of the 1^st Defendant and the 2^nd Defendant respectively, to be taxed, if not agreed.

110.  Lastly, I thank Mr Sham and Ms Lee, counsel for the Plaintiff, and Mr Chan, counsel for the 1^st Defendant, for their assistance.