MA YIQIANG v. ONEPLATFORM ASSET MANAGEMENT LTD AND ANOTHER

HCA 2097/2020 & HCA 2098/2020
(Heard together)

[2026] HKCFI 5489

HCA 2097/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO HCA 2097 OF 2020

_____________________

_____________________

AND

HCA 2098/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2098 OF 2020

_____________________

_____________________

(Heard together)

__________________

JUDGMENT

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A.   Introduction

1.  These consolidated actions arise out of the subscription by Mr Ma Yiqiang (“Mr Ma”) and Mr Liang Bin (“Mr Liang”) (collectively, “Ps”) for the corporate bonds issued by China Wah Yan Healthcare Limited (“Wah Yan”) through the 1^st Defendant, OnePlatform Asset Management Limited (formerly known as Convoy Asset Management Limited) (“D1”).

2.  At the material time, D1 was a subsidiary of Convoy Global Holdings Limited (“Convoy Global”), a company listed on the Stock Exchange of Hong Kong Limited (Stock Code 1019), and was licensed to carry on business in Types 1, 4 and 9 (i.e. dealing in securities, advising on securities and asset management) under the Securities and Futures Ordinance, Cap. 571 (“SFO”).

3.  At the material time, Mr Ma and Mr Liang were clients of D1.  The 2^nd Defendant, Ms Shi Jingzhen (“Ms Shi”), was one of the licensed representatives of D1.  There is no dispute that Mr Ma and Mr Liang were served by Ms Shi in respect of their accounts maintained with D1.

4.  On 10 July 2024, Mr Ma and Mr Liang discontinued the proceedings against Ms Shi with no order as to costs.  Thus, this trial only concerns Ps’ claim against D1.

5.  At the trial, Ps were represented by Mr Sik Chee Ching and Mr Alvin Cheung; whereas D1 was represented by Mr Lai Chun Ho and Mr Han Sheng Lim.

B.   Background

6.  Both Mr Ma and Mr Liang were at all material times businessmen in the Mainland before they moved to Hong Kong. They were good friends with each other.

7.  Mr Liang met Ms Shi in early 2010. Ms Shi was then Mr Liang’s relationship manager at HSBC Shanghai.

8.  In or around 2012, Mr Liang decided to apply for residency in Hong Kong under the Capital Investment Entrant Scheme (“CIES”).  Soon after, Mr Ma followed suit.

9.  Under the rules of the CIES, the applicants were required to invest a minimum of HK$10 million in certain permissible asset classes. 

10.  In order to fulfil the CIES requirements, Mr Liang upon Ms Shi’s advice set up a securities account with Convoy Investment Services Limited (“CIS”)[1] in around 2012.  

11.  Mr Liang also introduced Mr Ma to Ms Shi. In around June 2013, Mr Ma also opened a securities account with CIS.

12.  In order to satisfy the CIES requirements, Ps had invested in some corporate bonds and funds through their securities accounts with CIS:-

(1)  As of 6 October 2014, Mr Ma invested in a corporate bond issued by Town Health International Group Limited (respectively “Town Health” and “Town Health Bond”) in the principal sum of HK$7 million and the Voyage China Fund in the principal sum of around HK$3 million[2];

(2)  As of 11 November 2014, Mr Liang invested in the Town Health Bond in the principal sum of HK$6 million, the Voyage China Fund of the principal sum of around HK$300,000 and a corporate bond issued by Blue Sky Power Holdings Limited (the “Blue Sky Bond”) in the principal sum of HK$4 million[3].

13.  In 2014, Mr Ma and Mr Liang became the clients of D1.  In this connection, Mr Ma and Mr Liang had since 2014 signed the following documents: -

(1)  Financial Needs Analysis Form (Bilingual) (“FNA Form”);

(2)  KYC Application Form and Investment Experience Questionnaire (Bilingual) (“1^st KYC Form”);

(3)  Professional Investor Addendum / Assessment Form for Professional Investor (Bilingual) (“1^st PIA”);

(4)  Notice of Treatment as a Professional Investor (“1^st NTPI”);

(5)  Further Notice of Treatment as a Professional Investor (“2^nd NTPI”).

14.  On 30 May 2016, Wah Yan, another company listed on the Stock Exchange of Hong Kong Limited under stock code 648, announced that it would issue a bond in the principal amount of up to HK$100 million for a term of 6 years at the annual coupon rate of 6.5% (the “Wah Yan Bond”).

15.  On 31 May 2016, Mr Ma and Mr Liang redeemed their Town Health Bonds due to a mandatory redemption event. Under rule 7.2 of the CIES Rules, Mr Ma and Mr Liang were required to re-invest the proceeds arising from the redemption in permitted asset classes within 14 days.

16.  In late May or early June 2016, each of Mr Ma and Mr Liang had a call with Ms Shi in which Ms Shi introduced the Wah Yan Bond to them.  

17.  Later, respectively on 1 June 2016 (at 21:29) and 2 June 2016 (at 07:15), Ms Shi issued an email to each of Mr Liang and Mr Ma[4]. The said two emails (the “June 2016 Emails”) were under the same caption “投資移民資金的投資建議” and had essentially the same contents.  Ms Shi also attached the term sheet of the Wah Yan Bond (the “Term Sheet”) to the June 2016 Emails.

18.  It is Ps’ case that certain representations were made by Ms Shi in the June 2016 Emails, the Term Sheet and her telephone conversations with them, which induced them into subscribing for the Wah Yan Bond.

19.  In connection with the subscription of the Wah Yan Bond, Ms Shi sent an email on 2-3 June 2016 to each of Mr Ma and Mr Liang enclosing the following documents:

(1)  The Term Sheet;

(2)  The placing letter (the “Placing Letter”);

(3)  The form of acknowledgment (the “Form of Acknowledgement”);

(4)  The structured products / bonds /funds application form (CAM 101) (the “Application Form”);

(5)  The KYC & RPQ Form (CAM001RPQ) (Bilingual) (“2^nd KYC Form”).

20.  Each of Mr Ma and Mr Liang signed (i) the Form of Acknowledgement, (ii) the Application Form, and (iii) the 2^nd KYC Form.  As a result, Mr Ma and Mr Liang subscribed for the Wah Yan Bond in the principal sums of HK$7 million and HK$6 million respectively. 

21.  On 13 June 2016, Ps’ subscription was completed and Wah Yan issued bond certificates to Mr Ma and Mr Liang in respect of their respective subscription.

22.  In 2017, Wah Yan began to default in making coupon payments under the Wah Yan Bond.  On or around 27 November 2017, the Securities and Futures Commission (the “SFC”) suspended trading of Wah Yan’s shares.

23.  It is Ps’ case that they were informed by CIS in around March 2020 that Wah Yan would be in default, and that they could at most get back about 1.5% of the principal.

24.  On 22 and 28 October 2020, Messrs. George Hui Legal issued pre-action letters on behalf of Mr Ma and Mr Liang (respectively “Mr Ma’s Pre-Action Letter” and “Mr Liang’s Pre-Action Letter”; and collectively, the “Pre-Action Letters”), alleging that D1 was liable to them for misrepresentations and negligence and demanding D1 to pay compensation in respect of their investments in the Wah Yan Bond.

25.  On 15 December 2020, Ps commenced these actions to seek recovery against Ms Shi, the claims against whom were discontinued on 10 July 2024, and D1.

C.   Ps’ Pleaded Case 

26.  Although Mr Ma and Mr Liang each started his own action, their cases against D1 as pleaded in their respective Amended Statement of Claim (“ASOC”) are essentially the same.  

27.  At the trial, Mr Sik sought to hold D1 liable on the basis of two causes of action[5]: namely, (1) fraudulent misrepresentation; and (2) breach of duty to advise.

C1.  Fraudulent Misrepresentation

28.  In respect of the fraudulent misrepresentation claim, it would be fair to say that a very significant part of the Plaintiffs’ claims is rested upon the allegations that D1, Convoy Global and some other companies (including Wah Yan and Town Health) were part of the “Enigma Network” under the control of Dr Cho Kwai Chee, Roy (“Dr Cho”), and that to the knowledge of D1, the proceeds raised from the subscription of the Wah Yan Bond were to confer a windfall on Town Health and thereby indirectly on Dr Cho and his associates (collectively, the “Enigma Allegations”).

29.  In his oral opening, Mr Sik confirmed that Mr Ma and Mr Liang would not pursue their claims based on the Enigma Allegations.  No questions were asked by Mr Sik in respect of such allegations during his cross-examination.

30.  Further, in the original Statements of Claim, Ps relied on six representations allegedly made by Ms Shi on behalf of D1.  In Ps’ Amended Statement of Claim (“ASOC”)[6], one of the six alleged representations was deleted and abandoned[7].  At the trial, Mr Sik on behalf of Ps further narrowed down their case and dropped their first two alleged representations.  Mr Sik only invited this Court to consider the remaining three alleged representations[8], namely: -

(1)  Wah Yan was a company backed by solid assets (公司資產強), with a good prospect for future business growth (“Rep 3”);

(2)  The Wah Yan Bond was very popular and could be over-subscribed, with Ps at risk of losing out if they did not make their investment decision promptly (“Rep 4”);

(3)  The Wah Yan Bond was an investment suitable for Ps, taking into account the fact that the primary investment objective was one of capital preservation (“Rep 5”).

31.  It is Ps’ pleaded case that: -

(1)  Rep 3 was an express or implied representation made by way of the June 2016 Emails and the Term Sheet attached thereto[9];

(2)  Rep 4 was an express or implied representation during the course of the telephone conversations between Ms Shi and each of Mr Ma and Mr Liang[10];

(3)  Rep 5 was an express or implied representation made by way of the June 2016 Emails, the Term Sheet attached thereto, and/or during the course of the said telephone conversations[11].

32.  In respect of Ps’ pleaded case as to why these three alleged representations were false and fraudulently made, I will address it in detail when I consider each of these alleged representations below.

33.  Ps allege that they were induced by the said alleged representations (or any one or more of them) into subscribing for the Wah Yan Bond, and are therefore entitled to claim damages in respect of their loss and damage arising from such subscription.

C2.  Breach of Duty

34.  Separately, Ps allege that D1 at the material time owed a contractual duty and/or duty of care to provide them with suitable investment advice in respect of their CIES portfolio.

35.  According to Ps’ pleaded case, the said contractual duty and/or duty of care arose “by virtue of a course of dealings between [Ps] and Ms Shi on behalf of [D1] since [2014] arising from Ms Shi’s conduct of providing investment advice to [Ps] in relation to (amongst other things) the CIES portfolio and [Ps] conduct of considering and (if [they] considered appropriate) acting on such investment advice”[12].

36.  As far as breach of duty is concerned, putting aside those particulars that are rested upon the Enigma Allegations[13] (on which Ps no longer rely), Ps’ pleaded particulars are that D1 acted in breach of its duty by: -

(1)  “refusing or failing to adopt any adequate measure to prevent its … officers, employees and other staff from making any false or misleading representations concerning the Wah Yan Bond”[14]; and

(2)  “refusing or failing to advise [Ps] that [their] investment objective (i.e. that of capital preservation) could be better achieved by investing in investment-grade bonds”[15]

37.  At the trial, Mr Sik focused on the alleged breach of duty of care, as opposed to contractual duty.  Ps allege that as a result of such breach of duty, they are entitled to damages in respect of their loss and damage arising from their subscription for the Wah Yan Bond.

D.   D1’s Pleaded Case

38.  In its Re-Re-Amended Defence filed in respect of Mr Ma’s and Mr Liang’s claims (“RRA-Defence”)[16], D1 denies (i) the making of the alleged representations, (ii) the falsity of the alleged representations, (iii) the existence of any fraudulent intent and (iv) any reliance by Ps on such alleged representations. D1 also disputes Ms Shi’s authority to make the alleged representations on its behalf. It also denies the existence of any contractual duty or duty of care to advise Ps on their investment in the Wah Yan Bonds.

39.  Further, D1 advances the positive case that Ps were at all material times professional, experienced, knowledgeable and high-risk investors, and that their claims are precluded by various contractual provisions binding between the parties. In this regard, I gratefully adopt and reproduce the tables summarising the relevant contractual provisions attached to D1’s written opening as Annex 1 hereto.

40.  In relation to such contractual provisions, Ps dispute their enforceability on the bases that they were (i) unconscionable for the purposes of Unconscionable Contracts Ordinance (Cap. 458) (“UCO”); and/or (ii) unreasonable for the purposes of Control of Exemption Clauses Ordinance (Cap. 71) (“CECO”).

E.   Issues to be resolved at trial

41.  Having regard to the manner in which the trial was conducted and the way in which Ps and D1 respectively narrowed their cases in opening and closing, the issues involved in this trial are as follows: -

(1)  In respect of the “fraudulent misrepresentation” claim: -

(a)  Whether Rep 3, Rep 4 and/or Rep 5 were made by Ms Shi;

(b)  If so, whether Ms Shi had actual or ostensible authority to make such representation(s) on behalf of D1;

(c)  Whether such representation(s) were false;

(d)  If so, whether such representation(s) were made fraudulently, that is, without an honest belief in their truth, or recklessly, not caring whether they were true or false;

(e)  Whether Ps were induced by such representation(s) into subscribing for the Wah Yan Bond;

(2)  In respect of Ps’ “breach of duty” claim:-

(a)  Whether D1 owed Ps a contractual and/or tortious duty to advise them as to the suitability of the Wah Yan Bond;

(b)  If so, whether D1 acted in breach of such duty;

(3)  In respect of D1’s “contractual” defence:-

(a)  Whether the contractual provisions relied upon by D1 (as summarised in Annex 1 hereto) operate, whether by way of contractual estoppel or otherwise, to defeat Ps' claims in fraudulent misrepresentation and/or breach of duty;

(b)  If and insofar as any of the said contractual provisions would otherwise operate to defeat Ps' claims, whether such provisions are unenforceable for unconscionability under the Unconscionable Contracts Ordinance (Cap. 458) or for unreasonableness under the Control of Exemption Clauses Ordinance (Cap. 71); and

(4)  What is the quantum of damages (if any) recoverable by Ps.

42.  That said, for the reasons explained below, it is unnecessary for this Court to resolve the parties’ disputes on all the above issues for the purposes of determining the outcome of these actions.

F.   Witnesses and Observations on their General Credibility

43.  In terms of witnesses, Mr Ma and Mr Liang testified at trial in support of their respective cases.  D1 only called Ms Wong Suet Fai (“Ms Wong”), who has no personal knowledge of the dealings between Mr Ma / Mr Liang on the one hand and Ms Shi on the other hand at the material time.

F1.  Assessment of Credibility

44.  Useful judicial observations were made by DHCJ Eugene Fung SC (as he then was) in Hui Cheung Fai v. Daiwa Development Ltd HCA 1734/2009, 8 April 2014 (unrep) at §§77-83 and Coleman J (as he then was) in Yu Man Fung Alice v. Chiau Sing Chi Stephen [2020] HKCFI 2923 at §§56-61 on assessment of credibility.

45.  In the interest of brevity, those judicial observations (which I firmly bear in mind in assessing the credibility of the parties’ respective case and evidence) are not repeated here.  For the present purposes, it is only necessary for me to highlight the following: -

(1)  A witness’s memory, whilst can be reliable, is also fallible (Yu Man Fung Alice (supra) at §§56-57);

(2)  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility (Hui Cheung Fai (supra) at §77; Yu Man Fung Alice (supra) at §59);

(3)  In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events (Hui Cheung Fai (supra) at §78;

(4)  A sensible approach may be to limit (or at least be cautious about) the reliance placed on the witnesses’ individual recollection of the conversations, and to give more weight and make factual findings on inferences drawn from the documentary evidence as well as known or probable facts, in particular objective facts (Hui Cheung Fai (supra) at §81; Yu Man Fung Alice (supra) at §58).

(5)  Evaluation of a witness’s evidence may, depending on the particular circumstances, also include having regard to factors such as: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleadings, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure (Yu Man Fung Alice (supra) at §61).

F2.  Mr Liang

46.  Mr Liang is a well-educated and sophisticated businessman.  He graduated from Shanghai Second Medical University in 1992 and obtained an executive MBA degree from the China Europe International Business School in 2004.  He worked for a number of international pharmaceutical companies (including AstraZeneca at which he was for a time Mr Ma's superior) before starting his own company with a Swiss business partner.  During the trial, Mr Liang demonstrated that he had reasonably good command of English and was able to understand the questions put to him in English, even without much assistance from the court interpreter.  

47.  Regrettably, Mr Liang did not appear to me to be a reliable witness.  

(1)  For example, Mr Liang during cross-examination was asked whether he understood that the higher the coupon rate of an investment product, the higher its credit risk. As I see it, a sophisticated and educated person with business or investment experience similar to Mr Liang would have no difficulty in understanding that this must be the case. To my surprise, Mr Liang claimed that he was not good at investment and that he did not know this at the time.

(2)  Another telling example is that Mr Liang’s answers about his knowledge of government bonds as one of the eligible investments in the CIES scheme.  When he was asked about it, Mr Liang initially stressed that he did not quite know it at the time.  When he was asked again whether he knew or did not know, he then said that he did not quite know about these things in 2012.  It was after a further question that Mr Liang eventually accepted that he knew that government bonds were one of the eligible investments in 2014.  The significance of these answers has to gauged by reference to Mr Liang’s own case that his investment objective was capital preservation.  When it was suggested to him that he should have invested in government bonds if his investment objective was capital preservation, Mr Liang answered by saying that he would have done so, if Ms Shi made such recommendation which she did not.  I find Mr Liang’s answer to be evasive and incredible. Given his knowledge that government bonds were an eligible investment and that they (as so admitted by him) were the safest assets to invest, Mr Liang simply could have insisted on investing in government bonds, irrespective of whether Ms Shi made such recommendation.

48.  The above examples go to the credibility and reliability of Mr Liang’s case regarding his alleged investment objective and his alleged reliance on Ms Shi’s recommendation. In light of the evasive and incredible answers given by Mr Liang on these important matters, I am of the view that this Court should exercise considerable caution in assessing Mr Liang’s oral evidence, particularly where such oral evidence lacks support of written documents and undisputed or proven objective facts.

F3. Mr Ma

49.  Mr Ma is a well-educated and sophisticated professional. He graduated from Shanghai Chinese Medicine University and occupied senior positions at reputable pharmaceutical companies (including AstraZeneca). He has substantial means, including at least three properties in Shanghai, and had prior experience investing in Mainland A-shares and Shanghai property before he became a CIES investor.

50.  For the most part I found him to be a witness who tried his best to answer the questions put to him. However, I am not satisfied that his recollection of matters occurring almost ten years before trial, and in particular of what was or was not said during his telephone conversations with Ms Shi, can be relied upon without considerable caution.

51.  In this regard, it is of some significance that it can hardly be disputed that large portions of Mr Ma's witness statement mirror Mr Liang's witness statement, almost verbatim.  As pointed out by Mr Lai[17], one glaring example is that §30 of Mr Ma’s Witness Statement[18] essentially copied §30 of Mr Liang’s Witness Statement[19], save that the date in Mr Ma’s Witness Statement is 3 June 2016 (instead of 2 June 2016).  In §30 of his Witness Statement, Mr Liang said that Ms Shi emailed him a Professional Investor Assessment Form and told him over the phone that he did not need to pay attention to that document.  Whilst reproducing the same passage in his Witness Statement, Mr Ma in his oral evidence corrected himself and said that Ms Shi did not email him the document and she also did not have the said telephone conversations with him.  Despite such correction, I consider this a significant matter going to reliability of Mr Ma’s evidence because it demonstrates that his witness statement was not a product of his own independent recollection but was, at least in part, constructed by reference to Mr Liang's account of events.

52.  Another example of Mr Ma being influenced by Mr Liang’s evidence concerns his understanding of whether he had to top up his CIES portfolio if its value fell below HK$10 million. In §§2.2 & 2.3(5) of Mr Ma’s Pre-Action Letter[20], §12 of his ASOC[21] and §21 of his Witness Statement[22], Mr Ma described his understanding of his CIES investment requirement as an ongoing one such that he would need to top up at any time when the value of the portfolio fell below HK$10 million. Yet during the trial, after having heard Mr Liang’s oral evidence of a different understanding, Mr Ma shifted his oral evidence to align with Mr Liang's oral account. This once again shows that Mr Ma’s evidence lacks apparent reliability as his evidence was, to a material extent, shaped by what had been said by Mr Liang.

F4.  Ms Wong

53.  Ms Wong joined D1 on 1 May 2018 and accordingly had no personal knowledge of any of the alleged misrepresentations made and acts done by Ms Shi at the material time.  Because of her lack of personal knowledge, I find Ms Wong’s evidence is of very limited assistance, save insofar as it is corroborated by the contemporaneous documents.  That said, I found her to be a candid witness, who made appropriate concessions where the documentary record required her to do so.

F5.  The Non-Attendance of Ms Shi

54.  Mr Sik (on behalf of Ps) invited me to draw an adverse inference against D1 for its failure to call Ms Shi, who until 10 July 2024 was a co-defendant in these proceedings and had filed witness statements in these actions.

55.  The principles governing when adverse inferences can be drawn from non-attendance of a witness are summarised by McWalters JA in Tjang Siu Thu v. Profield Construction Engineering Ltd [2015] 5 HKC 22 at §33:-

(1)  The mere failure of a party to call a witness does not automatically confer an evidential benefit on the opposing party.

(2)  Whether any inference is drawn will depend upon the quality of the primary facts on which the inference is based; this is necessarily a fact sensitive matter and will vary from case to case.

(3)  The primary facts must allow of the inference to be drawn in the sense that the inference logically flows from those facts.

(4)  In the circumstances of the case the judge must be persuaded that it is appropriate to draw the inference.

(5)  One circumstance where it will not be appropriate to draw the inference is where there is an explanation for the party’s failure to call the witness.

(6)  Other relevant circumstances include (i) where the adverse inference is sought to be drawn on the basis of a bare assertion from a plaintiff who was found to be an unreliable witness; and (ii) where the plaintiff’s assertion is found to be unsupported by other evidence or contrary to the plaintiff’s own conduct

56.  In Mohammad Rafiq v. Kin Hong Transportation Co Ltd [2023] HKCA 185, G Lam JA (at §21) citing Tjang Siu Thu (supra) held that there is no presumption for an adverse inference to be drawn from the mere absence of a witness or documents.  He further observed whether an adverse inference should be drawn in a particular case is a matter of discretion for the trial judge based on all the relevant circumstances of the case

57.  Applying the above principles, I would exercise my discretion to refuse drawing any adverse inference against D1 for the following two principal reasons: -

(1)  First, there is no dispute that Ms Shi left D1's employment in December 2017[23].  Ps also confirmed in their cross-examination that Ms Shi had returned to live in the Mainland.  Indeed, the last known address of Ms Shi shown on the face of the Writs of Summons in these actions is an address in the Mainland[24].  Accordingly, during the entire course of these actions, Ms Shi is not someone within D1’s control and is also outside this Court's compulsory process.  There is no means by which D1 could compel Ms Shi to attend and give evidence at this trial.

(2)  Second, it was Ps who voluntarily discontinued their claims against Ms Shi on 10 July 2024, after she had filed her witness statements denying the allegations made against her. During cross-examination, Ps explained that they decided to discontinue their claims against Ms Shi out of their concerns that she was outside the jurisdiction of Hong Kong, that she might not have the financial means to satisfy the claims, and that the discontinuance might save costs. It is unnecessary for me to form any conclusive view on the credibility of Ps’ explanation, albeit that I have to admit frankly that I do harbour some doubts about it. The fact, however, is that Ms Shi was not required to attend trial to testify on her witness statements as a result of Ps’ own choice to discontinue their claims against her. In the circumstances, I consider that it would be unfair and inappropriate to draw any adverse inference against D1 by reason of Ms Shi’s absence at this trial.

G.   Fraudulent Misrepresentation Claim: Analysis of Rep 3 and Rep 5

58.  For reason which will become apparent, it is more convenient for this Court to deal with Rep 3 and Rep 5 in one go.

G1.  Can Ps make out their case without the Enigma Network Allegations?

59.  In relation to Rep 3 and Rep 5, D1’s threshold objection is that, having abandoned the Enigma Network Allegations, Ps have no viable case of fraudulent misrepresentations based on Rep 3 and Rep 5.  

60.  To understand D1’s objection, it would be helpful to focus on §25 of the ASOC[25] in which the falsity of Rep 3 and Rep 5 is pleaded:-

(1)  At §25(3) of the ASOC, it is pleaded that Rep 3 is false because “in view of (amongst other things) the matters in sub-paragraph (1) above, [D1] and Ms Shi did not honestly hold the opinion that Wah Yan was a company backed by solid assets with a good prospect for future business growth and they had no ground or reasonable ground for such opinion”.

(2)  At §25(5) of the ASOC, it is pleaded that Rep 5 is false because “in view of (amongst other things) the matters in sub-paragraph (1) above, [D1] and Ms Shi did not honestly hold the opinion that the Wah Yan Bond was a suitable investment for Mr Ma and they had no or no reasonable ground for such opinion”.

(3)  “The matters in sub-paragraph (1)” in the above pleas are references to the Enigma Network Allegations, which Ps no longer pursue.

61.  As to the plea of fraudulent intent, save for particular (2) which only concerns Rep 4 (but not Rep 3 and/or Rep 5), the remaining particulars pleaded under “Particulars of Fraud” in §26 of the ASOC also relate to the abandoned Enigma Network Allegations.

62.  Mr Lai (on behalf of D1) submitted that it is trite law that allegations of fraud must be pleaded with utmost particularity.  Specific reliance is placed by Mr Lai on the dictum of Tsui J in Christine Ruth Ong v. Lam Kin Chung [2025] HKCFI 3857.  

63.  In Christine Ruth Ong (supra), the plaintiffs alleged that they were induced to invest by a misrepresentation relating to a valuation.  Tsui J (at §§489-490) held that falsity and fraudulent intent were essential pleaded facts; and hence the plaintiffs had to plead why the valuations were false and why defendants knew of falsity or were reckless as to whether they were false or not.

“489. As a matter of pleadings, it is incumbent on the plaintiffs to set out their case on the essential elements of the misrepresentation.  One key element is the falsity of the representation.  Put simply, the plaintiffs should set out their case explaining this – why do they say the representation was false? Another essential element is the fraudulent intent when the defendants made the representation.  Again, in their pleadings, the plaintiffs should spell out why they say the defendants knew that the representation was false or might be false or was reckless as to whether it was false or not.  These are material facts which must be pleaded…

499. Going back to the purpose of pleadings, it is for the plaintiffs to explain why they say the representation was false.  If they want to run the working capital point at the trial, it is for them to plead that eBiz in fact did not have the availability of working capital to generate the projected sales figures.  It is also for the plaintiffs to then spell out why they say the defendants were dishonest when they provided the projected figures to the valuers.  These pleas are completely absent.  In the circumstance, it is impossible for KC Lam and eBiz to answer the working capital point.  The issue of whether the projected figures lacked factual basis because eBiz did not have the working capital to generate them is simply not before the court.” (emphasis added)

64.  In the present case, Mr Lai submitted that the only particulars of falsity pleaded by Ps in relation to Rep 3 and Rep 5 are “the matters mentioned in sub-paragraph (1)”, i.e. the Enigma Network Allegations.  If Ps wish to rely on other matters to establish falsity of representations and knowledge of (or recklessness as to) such falsity, the materials facts must be expressly pleaded.  Having abandoned the Enigma Network Allegations (which are the only particulars pleaded in support of both of these two elements), there is no viable case of falsity and fraudulent intent against Ms Shi, let alone D1.

65.  It is plain from Ps’ Closing that they do not seek to hold D1 liable for Rep 3 and/or Rep 5 based on the Enigma Network Allegations.  Instead, Mr Sik submitted that Rep 3 and Rep 5 were opinion falsely and fraudulently made for some other reasons: -

(1)  As to Rep 3 (i.e. Wah Yan was a company backed by solid assets with good prospect for future growth), Mr Sik submitted that Ms Shi did not honestly hold such opinion as it was unclear why she considered Wah Yan to have a strong asset position and how that would benefit its business growth[26].

(2)  As to Rep 5 (i.e. the Wah Yan Bond was an investment suitable for Ps), Mr Sik submitted that Ms Shi did not hold such opinion honestly as she never conducted a suitability assessment with Ps before recommending the bond to Ps[27]; further, she had also lied about the reason for recommending the bond to Ps in an internal form and she had lied in her WeChat conversations with Mr Liang[28].  

66.  Plainly, the matters on which Ps now seek to rely to establish their case of falsity and fraudulent intent in respect of Rep 3 and/or Rep 5 are not pleaded or particularised in the ASOC.  This is not disputed by Mr Sik.  Instead, Mr Sik submitted that it had been pleaded in §25 of the ASOC that Ms Shi did not hold an honest opinion in respect of Rep 3 and Rep 5, or had no reasonable grounds to hold such opinion — this would be sufficient for pleading purposes and the phrase “in view of (amongst other things) the matters in sub-paragraph (1) above” could have been deleted[29].  

67.  With respect, I am unable to accept Mr Sik’s submission for the following reasons: -  

(1)  In Kwok Chin Wing v. 21 Holdings Ltd & Anor (2013) 16 HKCFAR 663, the Court of Final Appeal (at §21) authoritatively stated that the basic objective of pleadings is to “fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible”. 

(2)  In this case, Ps took the trouble of specifically pleading that Rep 3 and Rep 5 were false because of the Enigma Network Allegations and they were made with fraudulent intent because of Ms Shi’s and D1’s knowledge of such matters, Ms Shi and D1 had every reason to prepare their respective cases and evidence on the basis that these were the allegations that they had to answer at trial.  

(3)  More importantly, Ps’ case involves the allegations that Ms Shi and D1 made Rep 3 and Rep 5 with “fraudulent intent”, i.e. they knew of the falsity of such representations or were reckless as to whether they were true or not. In view of the seriousness of such allegations, it is even more important for Ps to plead and particularise their case with clarity and precision. However, as stated above, the only relevant particulars pleaded under “Particulars of Fraud” in §26 of the ASOC concern the abandoned Enigma Network Allegations.

(4)  In my view, it is unfair to D1 for Ps to try to establish the alleged “falsity” of Rep 3 and Rep 5, let alone the alleged “fraudulent intent” behind the making of such representations, based on matters which are not pleaded and properly particularised. It is no answer for Mr Sik to suggest that the phrase “in view of (amongst other things) the matters in sub-paragraph (1) above” in §§25(3) and 25(5) of ASOC could have been deleted[30]. Nor can the words “amongst other things” in those paragraphs be read as a general licence to enable Ps to rely on unpleaded particulars to substantiate their case on the “falsity” and “fraudulent intent” of Rep 3 and Rep 5.

(5)  In Ps’ Closing, Mr Sik also submitted that there is no unfairness to D1 because in §§31(e) and 31(h) of the RRA-Defence[31], D1 explained why Rep 3 and Rep 5 were opinions honestly held by Ms Shi[32].  I, however, noted that in the Re-Re-Amended Reply (“RRA-Reply”), when Ps plead their case in response to the said paragraphs of the RRA-Defence[33], Ps fail to plead any alternative case that even if the Enigma Network Allegations are not made out, Rep 3 and Rep 5 were false and fraudulently made based on the explanation pleaded in RRA-Defence.  Accordingly, I also reject Mr Sik’s submission that there was no unfairness for D1 for Ps to shift the goalposts and to rely on unpleaded particulars.

68.  It follows from the above analysis that as Ps do not pursue the Enigma Network Allegations, their case of “fraudulent misrepresentation” in respect of Rep 3 and Rep 5 must fail.  

69.  For completeness, and on the assumption that I am wrong on D1’s pleading objection, I will go on to consider other aspects of Ps’ fraudulent misrepresentation claim based on Rep 3 and Rep 5 respectively.

G2. Is Ps’ case on Rep 3 Viable?

70.  Rep 3 concerns the alleged representation that Wah Yan was a company backed by solid assets with a good prospect for future business growth. It is Ps’ pleaded case that Rep 3 was made by way of the June 2016 Emails and the Term Sheet attached thereto[34].  

71.  As far as the Term Sheet is concerned, both Mr Liang and Mr Ma accepted in their oral evidence that they in fact did not read the Term Sheet before subscribing for the Wah Yan Bond.  Even if any representations were made by reference to the materials in the Term Sheet, there could not be any reliance by Mr Liang or Mr Ma on such representations.

72.  With regard to the June 2016 Emails, the relevant passage reads as follows: -

“坦白說，該公司正在轉型中，目前業務體系較模糊，因此營收不會太強，但公司資產強，有利未來發展業務…債券雖然也高風險，只要不違約，收益固定，債息也有一定現金流。”[35]

73.  I accept Mr Lai’s submission that on its proper construction, this passage cannot be read as representing that Wah Yan had “good prospects for future business growth” in unqualified terms. On the contrary, it was expressly stated that Wah Yan was in the midst of a transition, its then business structure was unclear and that its revenue would not be too strong. The statement that its assets were “beneficial to future business development” (有利未來發展業務), read fairly and in its proper context, is considerably more qualified and nuanced than a representation that Wah Yan had “a good prospect for future business growth” as pleaded.

74.  As to the alleged representation that Wah Yan was “backed by solid assets”, I accept that such representation was made in the June 2016 Emails when Ms Shi used the phrase “公司資產強” to describe Wah Yan. That said, I am not satisfied on the evidence before me that such representation is proven by Ps to be false, still less that it was made with the requisite “fraudulent intent”. 

75.  D1's own product due diligence document recorded that Wah Yan had a “decent overall net financial position of over HK$400m”, including short-term and long-term financial assets exceeding HK$470m and investment properties exceeding HK$150m[36].  The same information appeared in D1's training materials for the Wah Yan Bond, with which Ms Shi confirmed she had been provided[37].  Such information is also corroborated by the 2016 Wah Yan Annual Report, which recorded net assets of HK$551.6m, available-for-sale and fair-value financial assets totalling HK$478m, and investment properties of HK$150.6m as at 31 December 2015[38].  On this evidence, I am satisfied that there was a proper basis for one to opine that Wah Yan's assets were “strong”; and there was no basis to infer that such opinion was not honestly held.

76.  For the above reasons, independently of the pleading objection addressed in Section G1 above, I find that Ps have failed to prove their case on Rep 3.

G3. Is Ps’ case on Rep 5 Viable?

77.  Rep 5 concerns the alleged representation that the Wah Yan Bond was an investment suitable for Ps, taking into account that their primary investment objective was one of capital preservation. 

78.  Rep 5 is framed on the basis that, as a matter of fact, Ps’ primary investment objective was one of “capital preservation”. For the reasons explained below, I am unable to accept the evidence of both Mr Liang and Mr Ma that their primary investment objective was one of “capital preservation”.

(1)  First, Ps’ case about their investment objective being one of “capital preservation” is heavily anchored in the understanding that they “would be required to top up the CIES portfolio if its value fell below HK$10 million at any time during the application process”.  However, Mr Liang changed his case in §21 of his Witness Statement[39], where he claimed that his understanding was that he needed to top up only when the composition of his CIES portfolio was altered.  As observed in paragraph 52 above, Mr Ma also changed his evidence at trial and claimed that his understanding was same as Mr Liang’s latest understanding.  I accept Mr Lai’s submission that such shift of evidence casts doubts on the alleged investment objective of “capital preservation” [40].

(2)  Second, the alleged investment objective of “capital preservation” is sharply contradicted by Ps’ investment pattern in their respective CIES portfolios. Instead of investing in government bonds or investment-grade bonds, Ps had all along invested in high-yield corporate bonds and funds.

	Mr Ma	Mr Liang
Stage 1 Statement[41]	70% Town Health Bond 30% Voyage China Fund	39% Blue Sky Bond 58% Town Health Bond 3% Voyage China Fund
Stage 2 Statement[42]	72% Town Health Bond 24% China Financial Bond 4% Voyage China Fund	59% Town Health Bond 38% Blue Sky Bond 3% Voyage China Fund

(3)  Third, it is worth noting that Mr Liang accepted in his oral evidence that by 2014, he knew that government bonds were eligible assets for investment under the CIES. Had Mr Liang’s investment objective been one of “capital preservation”, he could have chosen to invest in government bonds as part of his CIES portfolio. 

(4)  Fourth, as far as Mr Ma is concerned, he claimed in his oral evidence that he at the time was not aware that government bonds were eligible assets for investment under the CIES. I doubt this aspect of his evidence since Mr Ma also accepted that immigration to Hong Kong through the CIES was an important decision for him, and he would have been interested to know what kinds of assets he could invest in under the CIES. More importantly, in §25 of his Witness Statement[43], Mr Ma mentioned that during his call with Ms Shi in early June 2016, he suggested to Ms Shi that instead of investing the entire HK$7m in the Wah Yan Bond, part of that HK$7m could be used to invest in stocks. It must be known to any sophisticated person like Mr Ma that the price of any stock could go down. Had Mr Ma’s investment objective been one of “capital preservation”, it would have been most unlikely for him to suggest on his own volition to invest part of his CIES portfolio in stocks.

(5)  Fifth, even in her June 2016 Emails to Ps [44], Ms Shi expressly mentioned that bonds were “high risk (高風險)”.  Had it been known to Ms Shi that Ps’ investment objective was “capital preservation”, it would have been most unlikely for her to ask them to consider investing in such “high risk” products.  This, in my view, militates strongly against Ps’ evidence that their primary investment objective, as known to Ms Shi, was one of “capital preservation”.

(6)  Sixth, in addition to the Wah Yan Bond, Ms Shi in the June 2016 Emails also asked Ps to consider investing in the bond issued by Ever International (長興國際) (the “Ever International Bond”), a bond which she had previously recommended. The Ever International Bond, however, carried coupon rates (i.e. 4.75% - 5.25%) which were lower than that offered by the Wah Yan Bond (i.e. 6.5%). The evidence before me shows that Ps had some risk appetite to invest in a product which offered them a better return, despite knowing that the same carried a higher risk. Thus, whilst both Mr Liang and Mr Ma stressed that they chose to invest in the Wah Yan Bond because of Ms Shi’s recommendation, I find that it was more probable that they chose to invest in the Wah Yan Bond, instead of Ever International Bond, because the former offered a higher coupon rate.  

79.  For the above reasons, I reject Ps’ allegations that their primary investment objective was one of “capital preservation”.  I find that both of them were sophisticated investors who at the material time had some risk appetite to invest for better returns, and would make their own decisions as to whether an investment would meet their investment objective. 

80.  In light of these findings, I am of the view that there is no basis for Ps to allege that Ms Shi or D1 represented to them that “the Wah Yan Bond was an investment suitable to [Ps], taking into account the fact that [their] primary investment objective was one of capital preservation”. One of the essential premises of the alleged representation (i.e. the primary investment objective being one of capital preservation) is not proven to the satisfaction of this Court.

81.  Further, it is Ps’ pleaded case that Rep 5 was made by way of the June 2016 Emails, the Term Sheet attached thereto and/or during the course of the said telephone conversations[45].  For the reasons explained below, I am not satisfied that such alleged representation was made by Ms Shi or D1 in such manner as pleaded: -  

(1)  With regard to the June 2016 Emails[46], when they are read as a whole, what Ms Shi did was simply to introduce the Wah Yan Bond to Ps and to provide them with some facts known to her. Further, she also invited Ps to consider investing in the Ever International Bond, which she had “previously recommended (之前推薦)”. In my judgment, it cannot be said that Ms Shi, by the June 2016 Emails, represented on the suitability of the Wah Yan Bond to Ps, let alone doing so after taking into account their alleged investment objective of capital preservation.

(2)  As to the Term Sheet, both Mr Liang and Mr Ma accepted in their oral evidence that they in fact did not read it before subscribing for the Wah Yan Bond.  Even if it contained the alleged representation, it would be irrelevant as no reliance was placed by Mr Liang or Mr Ma on it.

(3)  As to the telephone conversations, by reason of the matters explained in Section F above, I consider that very little weight (if any) can be placed on what Ps claim to have been said by Ms Shi at the relevant telephone calls, unless the same is corroborated by contemporaneous documents. In fact, I find Ps’ evidence about the relevant telephone calls incredible. In their witness statements, both Mr Liang and Mr Ma alleged that Ms Shi told each of them at the relevant telephone calls that the Wah Yan Bond had been approved by the SFC[47].  Such allegation, however, was deliberately withdrawn by amendment from the ASOC[48].  The deliberate withdrawal of this material allegation, which was not properly explained[49], further undermined the credibility and reliability of Ps’ evidence about what was said by Ms Shi at those relevant telephone calls.  

82.  In the circumstances, independently of the pleading objection addressed in Section G1 above, I find that Ps have failed to prove that Rep 5 was made. Hence, it is unnecessary for me to consider whether Rep 5, if made, would have been false and fraudulent.

H.   Fraudulent Misrepresentation Claim: Analysis of Rep 4

83.  Rep 4 concerns the alleged representation that the Wah Yan Bond was very popular and could be oversubscribed, with Ps at risk of losing out if they did not make their investment decision promptly.  It is Ps’ pleaded case that such alleged representation was made orally during telephone conversations between Ms Shi and each of Ps[50].

84.  For the reasons explained below, I am not satisfied on the balance of probabilities that Rep 4 was made: -

(1)  First, for matters such as what was said in the relevant telephone calls, I have explained in paragraph 81(3) above why I would give very little weight (if any) to what Ps claim to have been said by Ms Shi at the relevant telephone calls unless the same is corroborated by contemporaneous documents, and also why I find Ps’ evidence about the contents of the relevant telephone calls lacks credibility and reliability.

(2)  Second, as far as contemporaneous documents are concerned, there is no reference in the June 2016 Emails to the popularity of the Wah Yan Bond, still less to any risk of oversubscription, notwithstanding that those emails did address the comparative availability of two other bond products (including the Ever International Bond) that had previously been recommended to Ps.  Had Ms Shi intended to convey urgency by reference to the popularity of the Wah Yan Bond itself, I would have expected some trace of that message would have found its way into the June 2016 Emails, but there is none.

(3)  Third, and more significantly, Rep 4 was not alluded to at all in the Pre-Action Letters sent on Ps' behalf in October 2020[51]. The Pre-Action Letters were, on Ps' own evidence, the product of a thorough investigative exercise conducted with the assistance of solicitors. Indeed, Mr Liang confirmed in his oral evidence that he had told his solicitors about the relevant phone call. Whilst I agree with Mr Sik’s submission that the contents of pre-action letters may not be perfect[52], if Ms Shi had told Ps at the phone call that the Wah Yan Bond was popular and at risk of oversubscription, I would have expected it to feature prominently in the Pre-Action Letters since it was apparent from public documents that the Wah Yan Bond was undersubscribed and that only HK$29m was raised from it[53].  Its complete absence from the Pre-Action Letters causes me to doubt that Rep 4 was made at all.

(4)  In passing, I note that it was Mr Sik’s submission that Ps’ evidence on Rep 4 was not seriously challenged in cross-examination[54].  With respect, I am unable to accept this submission.  During their cross-examination, Mr Lai and Mr Lim respectively put to Mr Liang and Mr Ma that they did not tell their lawyers that Ms Shi had told them about the popularity and the risk of oversubscription of the Wah Yan Bond because Ms Shi in fact had not said this to them.  In my view, it is incorrect, or at least inaccurate, to suggest that Ps’ evidence on Rep 4 was not seriously challenged.

85.  For these reasons, I find that Ps have failed to prove on the balance of probabilities that Rep 4 was made. It is therefore unnecessary for me to consider whether Rep 4, if made, would have been false and fraudulent.

I.   Breach of Duty Claim

86.  Having concluded that Ps have failed to make out their case of fraudulent misrepresentation based on Rep 3, Rep 4 and/or Rep 5, I now move on to consider their separate claim of breach of duty.

I1.  Did D1 owe to Ps the alleged Duty to Advise?

87.  In the pleadings[55], Ps allege that D1 owed them a contractual duty and/or duty of care to advise them on “the most suitable financial arrangements in respect of (amongst other things) the [CIES] portfolio”, and such duty is said to have arisen from Ms Shi’s conduct of providing investment advice in relation to Ps’ CIES portfolio during her course of dealing with Ps since 2014.

88.  In this regard, Mr Lai referred this Court to the Court of Appeal’s decision in Shine Grace Investment Ltd v Citibank N.A. [2022] HKCA 1341 in which Kwan VP observed (at §104) that the “starting point is that the bankers are not normally under a duty to advise customers on the prudence of their investments or warn them of the risks involved”. Mr Lai submitted that D1 was in a position analogous to that of bankers and, hence, the starting point is that no duty to advise was owed by D1.

89.  In his oral closing submission, Mr Sik emphasised that Shine Grace (supra) is a case concerning the duty owed by bankers; whereas D1 in this case is not a bank but a financial institution carrying out activities that were under the regulatory regime of the SFO.

90.  In my view, it is a rather barren exercise to debate whether this Court should adopt the said “starting point” mentioned at §104 of Shine Grace (supra) on the basis that D1’s position is analogous to that of a bank.  

91.  As noted by Kwan VP at §105 of Shine Grace (supra), the question of duty of care is “fact sensitive” and it “turns on what responsibilities were assumed having regard to all aspects of the objective evidence of its relationship with the customer and the inference that may reasonably be drawn”; and “one important aspect of the objective evidence is the terms of the contract between the parties. Where the parties have agreed on their respective rights and duties by way of contract, this will normally preclude any wider duty of care from arising at common law, and is especially true if the relevant duty has been expressly precluded by contract” (emphasis added).

92.  In the earlier decision of Cheung Chi Yuen Frank v. RuthSiu Wai Anthony [2019] HKCA 467, the Court of Appeal also stressed that whether a defendant owed tortious duties to advise requires the Court to consider various factors. The lack of any advisory agreement, though not determinative, would be a factor to be given considerable weight.  The other relevant factors included (a) the factual matrix of the relationship between the parties, (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 (b) whether or not there were express disclaimers of responsibility.

93.  It is important to note that the mere giving of “advice” does not necessarily mean that there was assumption of legal responsibility for it.  A clear distinction has to be drawn between giving some advice and assuming legal responsibility for that advice.  The fact that a salesperson gives some investment advice tells us nothing about what, if any, obligations were in fact owed: see Zhang Xiaochen v. PC Securities Ltd [2026] HKCFI 1975 at §§84-86; JP Morgan Chase Bank v. Springwell Navigation Corporation [2008] EWHC 1186 (Comm) at §§449-451.

94.  In the present case, there was never any advisory agreement signed between D1 and Ps.  Quite on the contrary, the contractual documentation signed by Ps from as early as 2014 consistently disclaimed any advisory relationship: -

(1)  First, the FNA Forms (respectively signed by Mr Ma and Mr Liang on 22 September 2014 and 20 November 2014) clearly stipulated that D1 was not supposed to give investment advice. They recorded (in both English and Chinese) that Ps were “not relying on [D1] to provide [them] with any investment advice”; and that there was “no need” for D1 “to advise on or consider if an investment will be suitable” for Ps[56].

(2)  Second, in the 1^st NTPI (respectively signed by Mr Ma and Mr Liang on 22 October 2014 and 3 December 2014)[57] and 2^nd NTPI (respectively signed by Mr Ma and Mr Liang on 17 November 2015 and 16 February 2016)[58], it was stated that D1 was “not required to ensure that a recommendation or solicitation is suitable” for Ps. It is fair to say that it was also stated that the above was applicable only to the extent that there was no prohibition by the SFO and the relevant law and regulations. I accept Mr Lai’s submission that these documents still provide highly relevant objective evidence of the relationship between Mr Liang / Mr Ma on the one hand and D1 on the other.

(3)  Third, and specifically in relation to the subscription of the Wah Yan Bond, the relevant contractual documentation (including the Term Sheet[59], the Placing Letter[60], the Application Form[61] and the 2^nd KYC Form[62] signed or accepted by Ps) also contained clauses summarised in Annex 1 hereto, which are to the effect that no recommendation was given by D1 on the Wah Yan Bond, and that Ps should decide for themselves whether it was a suitable investment for them.

95.  I agree with Mr Lai’s submission that, as a whole, the contractual regime governing the parties’ relationship gives rise to a consistent and commercially coherent picture that throughout the entire course of dealing since 2014, D1 owed no advisory duty and Ps made their own decisions as to the suitability of any investment product put forward to them by D1. 

96.  For the avoidance of doubt, I wish to stress that the contractual clauses are relied upon in the present context for the purpose of gauging the parties’ relationship at the material time; they are not relied upon to exclude a duty which would otherwise be found to have arisen: see McCullagh v. Lane Fox & Partners Ltd [1996] PNLR 205 at p.237 (per Hobhouse LJ).  

97.  That said, I also remind myself of the Court of Appeal decision in Chang Pui Yin v. Bank of Singapore [2017] 4 HKLRD 458, in which Lam VP (at §§100, 106) held that whether a contractual clause merely defines the extent of responsibility assumed by a party, as opposed to one which operates to exclude liability, is a matter of substance.  Thus, I must also look at the substance of the parties’ relationship.  

98.  In support of Ps’ case that D1 acted as an investment advisor and for this reason owed advisory duty to Ps, Mr Sik in his written closing[63] placed reliance on the evidence given by Ms Wong that she considered that Ms Shi was providing investment advice; and that Ms Shi also confirmed in the Application Form[64] that she had provided investment advice.  Mr Sik further stressed that what Ms Shi did was to offer investment advice voluntarily and she, therefore, assumed legal responsibility voluntarily.

99.  Whilst I accept that the matters highlighted by Mr Sik are relevant to this Court’s assessment as to whether the parties’ dealings and relationship gave rise to a duty of care to advise, they are by no means determinative and must be viewed in their proper context.  In this regard, my attention was drawn by Mr Lai to the following judicial statements: -

(1)  In Shine Grace (supra) at §106, Kwan VP held that when one objectively analyses the things said and done by a bank staff to a customer throughout their dealings, “it is pertinent to bear in mind the contractual context under which those things were said and done”; and the proper question is “whether such things were said and done within the framework contemplated by the terms and scope of the banking services agreement as oppose (sic) to [the bank] assuming responsibilities over and above their contractual obligations stipulated in the express terms of the banking services agreement”. At §102, Kwan VP further observed that there is an “important distinction between the provision of ideas and suggestions (what might loosely be called ‘advice’) and the assumption of legal responsibility to provide investment advice”.

(2)  In Standard Chartered Bank v. Ceylon Petroleum Corporation [2011] EWHC 1785 (Comm), Hamblen J (as he then was) held that “the fact that a witness accepts that they were giving investment advice to a customer (as was the case in Springwell) does not constitute an admission as to the existence of an ‘advisory relationship’ in the relevant sense of that phrase”.

(3)  In Chang Pui Yin v. Bank of Singapore [2017] 4 HKLRD 458 (at §46), Lam VP (as he then was) held that it was neither implausible nor uncommercial for a bank to recommend products as part of its services without assuming legal responsibility for such recommendation.

100.  For reasons explained in paragraphs 78-79 above, I have already found that Ps were sophisticated investors who at the material time had some risk appetite to invest for better returns and would make their own decisions as to whether an investment would meet their investment objective.  Further, for reasons in paragraph 81 above, I have also found that Ms Shi in fact did not make any alleged representation that the Wah Yan Bond was an investment suitable for Ps.  In my judgment, these are matters of substance which go to negate the existence of any duty to advise as between D1 and Ps. 

101.  In these circumstances, and bearing in mind the contractual context (as set out in paragraphs 94-95 above), I am not satisfied that Ps have discharged their burden of proving the existence of such relationship which would give rise to a duty of care to advise.  I am not persuaded that Ms Shi's conduct went beyond the giving of ideas and suggestions of the kind ordinarily incidental to the sale of a financial product.

102.  It follows from my above findings that Ps’ breach of duty claim must fail as they have failed to prove on the balance of probabilities that a duty to advise was owed by D1.

103.  In passing, I should also mention that Mr Sik in his oral closing submitted that the contents of the “Circular to Licensed Corporations” dated 31 March 2016 issued by the SFC (the “Circular”)[65] are relevant to this Court’s assessment of whether there was assumption of responsibility to advise. With respect, I am unable to accept Mr Sik’s submission: -

(1)  First, the Circular issued by the SFC is not pleaded as part of the factual background giving rise to the duty to advise. Indeed, it was not even referred to in Ps’ written opening. In my judgment, it is not open to Ps to belatedly buttress their case based on matters which are not properly pleaded.

(2)  Secondly, and in any event, even if the Circular were taken into account, it would not per se establish the advisory duty alleged in this case. The question remains whether, viewed objectively and having regard to all aspects of the parties’ relationship, D1 assumed legal responsibility to advise Ps as to the suitability of the Wah Yan Bond.  For the reasons already given, I am not satisfied that there was such assumption of legal responsibility by D1.

(3)  Thirdly, whilst the Circular was relevant to regulatory obligations owed by a licensed corporation to the SFC, it does not follow that every breach or alleged breach of such regulatory obligations gives rise to the particular contractual or tortious advisory duty pleaded by Ps. Therefore, even putting aside the pleading point, I do not consider that the Circular alters my conclusion that no duty to advise has been established.

I2.  Did D1 Act in Breach of its Duty to Advise (if any)?

104.  For completeness, and on the assumption that I am wrong in concluding that no advisory duty was owed by D1 to P, I will move on to consider whether Ps are able to make out their case of breach of duty against D1.  In this regard, the particulars of breach of duty are pleaded under §30 of the ASOC[66].

105.  It is clear that those particulars pleaded under §30(1), (1A), (2) and (3) of the ASOC are dependent on the Enigma Network Allegations being made out.  Because of Ps’ abandonment of the Enigma Network Allegations, there is no basis for Ps to pursue and prove such particulars of breach of duty.

106.  With regard to the particular of breach pleaded under §30(4) of the ASOC, it was dependent upon Ps’ case of misrepresentation being made out. For the reasons explained in Sections G and H above, I find that Ps have failed to discharge their burden to prove on the balance of probabilities that Ms Shi or D1 had made any of the alleged misrepresentations; and Ps accordingly have failed to make out this particular.

107.  The remaining particular of breach pleaded under §30(5) of the ASOC is that D1 refused or failed to advise Ps that their investment objective of “capital preservation” could be better achieved by investing in investment-grade bonds. With regard to such particular, I (for the reasons explained in paragraphs 78-80 above) have already rejected Ps’ case that their investment objective was “capital preservation”.  Further, Ms Shi in the June 2016 Emails expressly mentioned that bonds (including the Wah Yan Bond) were “high risk (高風險)”. Thus, Ps in my judgment have also failed to make out this remaining particular.

108.  Out of an abundance of caution, I should also mention that Mr Sik in his written closing invited this Court to find that Ms Shi acted in breach of her duty to advise by failing to conduct the “suitability assessment”[67].  I accept Mr Lai’s submission that this complaint is not one of the particulars of breach pleaded in the ASOC. In my judgment, it is not open to Ps to run this argument, which would involve a completely different factual inquiry, without making any attempt to properly plead and particularise it by way of a proper amendment to the pleadings before trial.  

109.  Thus, even if I am wrong in concluding that D1 owed no duty to advise, I would still reject Ps’ breach of duty claim on the basis that they have failed to prove to my satisfaction that D1 had acted in breach of such duty as pleaded.

110.  In light of my findings that no duty to advise was owed by D1 and that even if such duty existed, Ps have failed to prove their case of breach of duty, it is unnecessary for me to deal with the parties’ disputes about whether Ps are contractually estopped from arguing that a duty to advise existed and, if so, whether the relevant contractual clauses should be held unenforceable or of no effect under UCO or CECO.

J.   Conclusion and Disposal

111.  For the reasons given above, I must reject Ps’ fraudulent misrepresentation claim and breach of duty claim.  

112.  Accordingly, I order that Ps’ claims in these actions be dismissed.

113.  As far as costs are concerned, I make an order nisi that D1’s costs of these actions (including all reserved costs orders) be paid by Ps on party-to-party basis with certificate for two counsel, to be taxed if not agreed.

114.  It remains for me to thank Mr Sik and Mr Cheung (appearing for Ps) as well as Mr Lai and Mr Lim (appearing for D1) for their valuable assistance in this trial.

ANNEX 1

Reference List of Documents

Relevant Contractual Clauses and Acknowledgements

A.  Clauses confirming that Ps were professional, experienced, knowledgeable and high-risk investors

B.  Clauses providing that D1 did not / was not required to consider whether a given investment was suitable for Ps

C.  Clauses confirming that Ps reviewed the relevant documents, carried out their own risk assessment and made their own decision to invest

D.  No-Representation Clauses

E.  No-Reliance Clauses

F.  Exclusion Clauses