DU GUORONG v. BANK OF CHINA INTERNATIONAL LTD AND ANOTHER

HCA 467/2017

[2024] HKCFI 2499

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 467 OF 2017

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DECISION

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Introduction

1.  This is the Defendants’ application to expunge from the Court’s record the “Voluntary Particulars of the Re-Amended Statement of Claim (“RASOC”)” (“VP”) filed by the Plaintiff to the Court.

2.  The Plaintiff is a Mainland citizen. In the period between 2010 and 2011, the Plaintiff opened securities accounts in the Defendants. In the RASOC, the Plaintiff alleged that the Defendants were in breach of their fiduciary duties owed to him for the improper acts/conducts of an employee (“Lau”) of the 1^st Defendant (“D1”), who was the relationship manager responsible for the Plaintiff’s accounts.

3.  The Plaintiff instituted the present proceedings against the Defendants in February 2017 and pleadings closed on 23 October 2019. Pursuant to the order of Master Rita So dated 23 March 2021, parties shall take out all interlocutory applications by 12 April 2021. Leave to set down for trial was granted by Master Phoebe Man on 8 November 2022 and on 16 February 2023, this case was set down for trial to begin on 28 October 2024 for 10 days.

4.  On 7 November 2023, without first seeking consent from the Defendants nor applying for leave from the Court, the Plaintiff filed the VP and served it to the Defendants. Thereafter, there has been correspondence exchanges between the parties and subsequently, the Defendants issued the present summons[1] seeking to expunge the VP from the Court’s record.

Applicable principles

5.  In Christian Emil Toggenburger and Ors v Luu Hung Viet Derrick and Ors[2], DHCJ Au-Yeung (as she then was) summarized the relevant principles regarding serving of voluntary particulars as follows:

“39. The practice of serving voluntary particulars without request is intended to show the readiness of the party concerned to inform the opposite party of the material facts upon which he intends to rely, to narrow the issues, to prevent surprises and to reduce costs: Hong Kong Civil Procedure 2011, para 18/12/65.

40. It is not intended as a device for a party to introduce new particulars to vary its case unilaterally or to introduce a new cause of action: Hong Kong Civil Procedure 2011, para 18/12/64-65.

41. It is also not the function of particulars to take the place of necessary averments in the pleadings nor to state the material facts omitted in order by filling the gaps, to make good an inherently bad pleadings: Hong Kong Civil Procedure 2011, para 18/12/1.

42. The Court has a discretion. Where there has been inexcusable delay in making the application so as to place a trial at risk of adjournment, the Court may refuse the application: Hong Kong Civil Procedure 2011, para 18/12/54.”

6.  The editors of the Hong Kong Civil Procedure observed that, “If no objection is taken by the opposite party to the filing of the voluntary particulars, they will presumably stand as part of the pleadings in the action; but if objection is taken, the party concerned must apply for leave to serve the particulars under an order of the court. The device of voluntary particulars must not be used unilaterally to amend or add to particulars or vary the case of a party, in a way which the court would not sanction[3].

7.  The abovementioned principle and practice are straight commonsense which are in line with the underlying objectives under O.1A of the Rules of High Court. There shall be no issue regarding them.

The VP

8.  There are in total 27 items of particulars given in the VP. As described by the Plaintiff in the first page, they are intended to be particulars of the breach of duties and misrepresentations on the part of the Defendants which have been pleaded under paragraphs of 17(a)-(j), 19(b) and 20(a)-(m) of the RASOC.

9.  Mr Jat Sew-Tong SC[4], counsel for the Defendants, classified the 27 items of particulars into 5 categories :

(i)  Allegations pertain to a phone conversation between the Plaintiff and Lau in respect of a 5.55% bond transaction (item 3);

(ii)  Allegations pertain to certain phone conversations between the Plaintiff and Lau/another bank staff on the rolling over of bank loans (items 6, 8, 22 and 23);

(iii)  Documents which the Plaintiff claims he was induced to sign by Lau’s misrepresentations (items 24 to 26);

(iv)  Allegation of misrepresentation against Lau concerning her visit of the Plaintiff in Zhongshan in April 2015 (item 27); and

(v)  Allegations pertain to certain phone conversations between the Plaintiff and Lau on some of the transactions in Schedules I and II of the RASOC (items 1, 2, 4, 5, 7, 9-21).

10.  It is Mr Jat’s submission that the particulars given do not support the RASOC, and it is in fact an attempt by the Plaintiff to introduce new causes of action and allegations and to alter the Plaintiff’s case through the backdoor.

11.  On the other hand, Mr William Wong SC[5], counsel for the Plaintiff, maintained that the particulars given are within the RASOC and they disclosed no new cause of action. Mr Wong submitted that, the VP plays a constructive role by crystalizing the issues for trial and thereby reducing the likelihood of surprises and hence enhancing the overall efficiency of the trial.

Discussion

12.  The alleged breach of duties and misrepresentations are pleaded under paragraphs 17 to 20 of the RASOC:

“Breach of Duties by the Defendants and Lau

17. In breach of the duties as pleaded hereinabove, the Defendants and Lau:-

(a) Failed to follow the instructions of the Plaintiff in respect of, inter alia, transfer from the Accounts, payment from the Accounts, purchase or subscription of banking products of the Defendants or otherwise, decisions and/or steps of dealing with the banking products of the Defendants or otherwise;

(b) failed to ascertain and/or refused to acknowledge the financial circumstances and investment objectives of the Plaintiff;

(c) failed to give advice and making recommendations regarding the Plaintiff’s investment using reasonable care, skill and diligence in accordance with the financial circumstances and investment objectives of the Plaintiff;

(d) failed to give proper explanation to the Plaintiff of the risks and consequences of any recommended investment and failed to ensure the Plaintiff reasonably understood such risks and consequences;

(e) failed to periodically review the Plaintiff’s portfolio of investments;

(f) failed to take steps to ensure that the Plaintiff's portfolio of investments was consistent with the Plaintiffs investment objectives and risk profile;

(g) failed to allow and to inform the Plaintiff to choose during the initial transaction of the Plaintiffs option to bring along a companion to witness the sale process and/or to have a second front line staff member of BOCIL and/or BOCIS to handle the sales;

(h) enticed and/or pressured the Plaintiff to make hasty investment decision;

(i) failed to duly ensure the Plaintiff had full knowledge of and understood the applicable derivative position and reporting limits; and

(j) failed to ensure Plaintiff had full knowledge of and understood the status of the Plaintiff’s Accounts.”

18. Further or in the alternative, the 1^st and 2^nd Defendants are vicariously liable for the breaches of Lau as pleaded hereinabove.

19. Further, pending further discovery, the Plaintiff avers that in respect of the transactions as set out in Schedules I and Il hereto, Lau had, prior to confirmations of most transactions:-

(a) made phone calls to the Plaintiff coaching the Plaintiff what to say for the recorded confirmation and that the Plaintiff would follow what Lau had coached;

(b) misrepresented to the Plaintiff that the intended transactions would be safe with no risk and that the investments would be closely supervised by the team of staff of Bank of China ("the Misrepresentation");

20. At all material times, Lau made the Misrepresentation:-

(a) with the intention of inducing the Plaintiff to enter into or offer to enter into the acquiring, disposal of, subscription of or underwriting of the banking product of the Defendants or otherwise;

(b) knowing that the Misrepresentation was false, misleading or deceptive;

(c) did not have any intention of fulfilling, or to the knowledge of Lau not capable of the Misrepresentation being fulfilled;

(d) to the knowledge of Lau not justified on the facts then known to her and made the Misrepresentation recklessly;

(e) intentionally omitted a material fact, with the result that the Misrepresentation was rendered false, misleading or deceptive;

(f) recklessly as to whether the Misrepresentation was false misleading or deceptive;

(g) reckless as to whether the Misrepresentation was capable of being fulfilled;

(h) reckless as to whether the Misrepresentation was justified on the facts then known to Lau and made the Misrepresentation recklessly;

(i) recklessly omitted a material fact, with the result that the Misrepresentation was rendered false, misleading or deceptive;

(j) without reasonable care having been taken to ensure the accuracy of the Misrepresentation;

(k) without reasonable care having been taken to ensure the Misrepresentation can be fulfilled;

(l) without reasonable care having been taken to ensure the accuracy of the facts the Misrepresentation was purportedly justified thereon;

(m) without reasonable care having been taken to ensure there was no omission of any material fact.

Item 3

13.  Under item 3 of the VP, the plaintiff alleges that Lau solicited the Plaintiff via a phone conversation on 7 June 2011 to enter a bond transaction of trading a “5.55% Bond” without fully disclosing the risk in it and a relevant document in English was subsequently faxed to the Plaintiff which the Plaintiff could not understand.

14.  Mr Jat submitted that this particular transaction is not pleaded in the RASOC and forms no part of the Plaintiff’s claims. On the other hand, Mr Wong submitted that it falls under para.17(d) of the RASOC.

15.  I agree with Mr Wong. In my view, the allegations under item 3 seek to particularize the conducts complained of in para. 17(d) where the Defendants and Lau were alleged to have “failed to give proper explanation to the Plaintiff of the risks and consequences of any recommended investment and failed to ensure the Plaintiff reasonably understood such risks and consequences”. It may have come late but not be regarded as pleading a new cause of action.

Items 6, 8, 22 and 23

16.  The items under this category are allegations relating to the making of bank loans by the Plaintiff with Bank of China. The allegations are basically that Lau and another staff member (one Maggie Lam) of the bank had in various telephone conversations induced the Plaintiff to create or roll over loans with the bank without explaining to the Plaintiff the reason for making these huge amount loans.

17.  Under item 23, it is alleged that Lau had requested the Plaintiff to transfer $2,000,000 to his accounts to cover the short position of his margin lending without explaining or disclosing to the Plaintiff his accounts were in a loss position.

18.  Mr Wong suggested that all these items fall within para. 17(j) of RASOC that the Defendants and Lau had “failed to ensure the Plaintiff had full knowledge of and understood the status of the Plaintiff’s Accounts”.

19.  For items 6, 8 and 22, they are clearly relating to the creation or rolling over of loans. As submitted by Mr Jat, these loan transactions had not been pleaded in the RASOC and I do not find para. 17(j) wide enough to cover these transactions even in view of its generic wordings.

20.  Moreover, the Plaintiff had abandoned all previous pleas relating to bank loans by amendments made on 14 September 2018. Mr Jat is right in saying that the Plaintiff must be precluded from reviving such claims by way of the VP.

21.  However, item 23 is different. The loss position of an account can be regarded as “the status” of the account and I find that item 23 can fall within para.17(j).

Items 24 to 26

22.  In these items, the Plaintiff alleges that he was induced to sign various documents by Lau’s misrepresentations to the effect that they were “procedural routine”. A list of documents has been given as examples.

23.  The misrepresentations allegedly made by Lau are specifically pleaded under para. 19(b) of the RASOC. The allegations in items 24 to 26 can hardly fall within the paragraph. These are new allegations which may give rise to new causes of action.

24.  However, I agree with Mr Wong that items 25 and 26 specifically refer to risk assessment documents and are relevant to the alleged breach of duties pleaded under para. 17(b) and (f).

25.  In my view, these two items should be allowed not for standalone claims but to support the allegations under 17(b) and/or (f).

Item 27

26.  Item 27 concerns a visit by Lau to the Plaintiff in Zhongshan in April 2015. The Plaintiff alleged that on that occasion Lau only informed the Plaintiff generally what his portfolio consist of but did not tell him that he was then suffering from a significant loss of over $176 million and incurred a bank overdraft of over $19 million.

27.  I agree with Mr Wong that item 27 can be particulars for para. 17(i) and (j).

Items 1, 2, 4, 5, 7, 9-21

28.  These items pertain to telephone conversations between Lau and the Plaintiff on some of the transactions in RASOC Schedules I or II.

29.  Mr Jat’s complaints against these items are that they have the effect of materially varying the Plaintiff’s existing case, rather than serving to narrow the issues, prevent surprises or reduce costs.

30.  Mr Wong submitted that as they are in relation to the impeached transactions already pleaded in the RASOC, they ought to be allowed.

31.  I agree with Mr Wong. These items can help particularizing the claims of the Plaintiff which are essential to the Plaintiff’s existing case.

32.  To conclude, items 6, 8, 22 and 24 should not be allowed in that they are new allegations not seeking to particularize the Plaintiff’s existing claims.

Abuse of process

33.  It is Mr Jat’s submission that the purported filing of the VP is a blatant attempt to bypass the rules of Court and the order of Master So and is plainly an abuse of process. He said this may cause prejudice to the Defendants and possible delay to the trial.

34.  I agree with Mr Jat to the extent that the Plaintiff should not have filed the VP to the court without first seeking the consent from the Defendants. Pleadings is closed and the deadline given by Master So to take out interlocutory applications has past. If the Defendants do not consent to the filing of the VP the Plaintiff should seek leave from the court to take out an application for filing of the VP. The Plaintiff is clearly procedurally at fault.

35.  However, I find many of the particulars in the VP helpful in narrowing the issues and hence facilitating the trial. Although the trial date is approaching I am of the view that there is still sufficient time for the Defendants to respond to the VP if they find it necessary.

36.  Therefore, despite the Plaintiff’s procedural fault I would allow the filing of the VP except items 6, 8, 22 and 24.

Disposition

37.  Retrospective leave be granted for filing of the VP. Items 6, 8, 22 and 24 of the VP be expunged. The Defendants be at liberty to file a witness statement or supplemental witness statement in response to the VP within 21 days.

38.  The Defendants succeeded partly in their application. In consideration of the procedural fault on the part of the Plaintiff I make an order nisi that 25% of the Defendants costs of this summons be borne by the Plaintiff. This costs order nisi will become absolute upon the expiry of 14 days.