POOSAALA RAM PRASAD v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

CACV 466/2021

[2022] HKCA 1876

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 466 OF 2021

(ON AN APPEAL FROM HCA NO 279 of 2021)

____________

____________

_________________

J U D G M E N T

_________________

Hon G Lam JA (giving the Judgment of the Court):

1.  The plaintiff’s statement of claim indorsed on the writ of summons was struck out and the action dismissed by a Master. His appeal to a judge in chambers was dismissed. He now appeals to this court.

Background

2.  The plaintiff was the holder of a Premier account at the defendant bank. On 3 February 2021, he submitted an application for telegraphic transfer of HK$79,800 to a person in India with an account with Central Bank of India. On 5 February 2021, the defendant rejected the application because there was no existing arrangement enabling funds in Hong Kong Dollar to be remitted to Central Bank of India. The defendant sent a system-generated letter with the remark “No HKD Drawing” by post to the plaintiff’s correspondence address last known to the defendant. The plaintiff said he did not receive that letter or any other notice that his instruction for the remittance was not carried out.

3.  The money to be remitted was, according to the plaintiff, for the document-processing and legal fees for the purchase of a prime property in Banjara Hills, Hyderabad, India, which he had agreed to pay by 10 February 2021. Because the funds were not transferred, the deal was cancelled by the vendor.

4.  On 19 February 2021, the plaintiff issued a writ of summons against the bank, indorsed with a statement of claim, suing the defendant for “deficiency of service, unprofessionalism and breach of trust” and for loss of reputation and loss of opportunity to buy prime property at Banjara Hills. The claim was stated to be for the amount of HK$27,125,000, which was roughly equivalent to the price of the property the plaintiff intended to purchase (US$3,500,000).

5.  In response, the defendant applied for the statement of claim to be struck out on the ground that it disclosed no reasonable cause of action, was scandalous, frivolous or vexatious, and/or was otherwise an abuse of the process of the court, and for the action to be dismissed. On 6 July 2021, Master Kent Yee struck out the plaintiff’s statement of claim and ordered him to pay the costs of the action and of the application to the defendant. The plaintiff appealed to a judge in chambers.

6.  The plaintiff also applied for leave to submit further evidence for the purposes of his appeal, which fell into these categories: (1) letter from the defendant’s branch operations & control manager to the plaintiff dated 29 July 2021 and various application forms and letters of the defendant; (2) a handwritten note in Chinese; (3) various remittance application forms of and letters from other banks, namely Hang Seng Bank, Bank of China (Hong Kong) and Standard Chartered Bank; and (4) documents and correspondence in relation to what appears to be the property in India the plaintiff intended to purchase.

7.  In a decision handed down on 11 October 2021 (“Decision”),[1] Deputy High Court Judge Leung dismissed both the plaintiff’s appeal and his application to adduce further evidence. The judge’s reasons for dismissing the appeal in relation to the striking out were as follows:

(1)  The judge stated that the customer-bank relationship between the parties was governed by the Integrated Account Terms and Conditions as of May 2020 (“IA Terms”). The IA Terms contained provisions that the defendant had “the right to accept or refuse any Instruction” and was “not liable for any loss, cost or damage of any kind incurred or suffered by [the plaintiff] as a result” (clause 1.4.2(b)); that the defendant “may at [its] discretion cancel any Instruction (or any part of it) that has not yet been fully executed if, in [the defendant’s] reasonable opinion, there are grounds for cancellation” (clause 1.4.5(b)); and that a “funds transfer Instruction” is subject to the availability of the relevant services including the availability of the clearing system of the applicable currency (clause 2.7.10(i)). On the basis of these contractual provisions, the judge considered that the defendant was entitled not to proceed with the plaintiff’s instruction for remittance due to the lack of an existing arrangement enabling Hong Kong dollars to be remitted to the bank account in India.[2]

(2)  The judge also considered that the defendant was protected from liability by the exemption provision in the IA Terms (apparently referring to clause 1.4.2(b)), and that pursuing a claim notwithstanding such binding provision was frivolous.[3]

(3)  Separately, the judge considered that even if there was any breach of duty on the part of the defendant, the plaintiff’s claim should have been for the loss of any gain that he would have made from the purchase of the property, such as a rise in its market value since the time of purchase. The claim actually advanced, being for the entire price of the property, was bad in law and disclosed no reasonable cause of action.[4]

(4)  The judge considered that the plaintiff’s allegations of “deficiency of service” and “unprofessionalism” are, at their highest, complaints that the defendant’s service fell short of the customer’s reasonable expectations, and could not be equated with legal liability. As to the allegation of “breach of trust”, the judge considered that the plaintiff’s allegations and evidence failed to make out such a cause of action.[5]

(5)  Accordingly, the judge concluded that the statement of claim was liable to be struck out and the action be dismissed.[6]

8.  In his Decision, the judge also explained in detail why he refused to permit the plaintiff to adduce the further evidence exhibited to his affirmation of 19 August 2021.[7]

The appeal

9.  Dissatisfied with the outcome, the plaintiff now appeals to this court against the Decision. In his notice of appeal, the plaintiff complains of the following matters:

(1)  The judge ignored and overlooked the telegraphic transfer form agreement.

(2)  The judge did not clarify whether the telegraphic transfer was rejected or refused or not sent.

(3)  The judge ignored HKMA rules.

(4)  The judge overlooked the issue concerning the authenticity of the screenshot evidencing the system-generated letter of 5 February 2021.

(5)  The judge ignored sections 18, 19 and 20 of the Evidence Ordinance (Cap 8).

10.  In his skeleton submissions, the plaintiff stated that the terms and conditions on the reverse side of the application form for the telegraphic transfer were of paramount importance and argued that the judge had overlooked the terms and conditions on the form.

(1)  On the front of the form, the plaintiff has identified the following terms as being relevant:

In Box no. 9, under the name of Debit Account Holder

“ Note: Your email address and contact number maintained in the bank’s record will be used for correspondence in respect of this instruction. Please ensure that your email address and contact number with the bank are up-to-date.”

At the bottom, after the “Customer Receipt”:

“ This receipt is issued only to facilitate the customer to enquire the transaction status and should not be regarded as transaction completion proof. An official debit advice will be sent to your / your company’s correspondence address at the Bank’s record by mail the next working day after the transaction is completed”

(2)  On the reverse side of the form, the plaintiff has referred to the following provision:

Under “Important Notes”:

“ Please ensure that all information you provided on page 1 is clear, complete and accurate as any incomplete or insufficient information given may result in this TT … instruction being delayed, rejected, or returned by the correspondent and/or beneficiary bank with charges imposed. The Bank accepts no responsibility for any loss or damage suffered by any person arising out of such rejection, return and/or delay. Any charges imposed by the correspondent and/or beneficiary bank shall be deducted from the payment amount or any of your accounts.”

11.  The plaintiff also stated that he did not receive any message from the defendant about the status of the telegraphic transfer, and that he was not given notice by telephone or email in accordance with the form. He argued that the defendant was inconsistent in saying both that the transfer was rejected and that it was cancelled. He submitted that the judge should not have admitted the screenshot of the defendant’s computer system as evidence since it had not been authenticated by a senior officer of the defendant. In addition to the legal complaints mentioned in the statement of claim, the plaintiff stated that the defendant was guilty of negligence and breach of contract.

12.  The defendant, opposing the appeal, essentially seeks to uphold the decision below based on the judge’s reasoning.

Discussion

13.  There is no dispute that the power to strike out pleadings is only to be exercised in plain and obvious cases. The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out: Hong Kong Civil Procedure 2023, Vol. 1, §18/19/4.

14.  The plaintiff has not challenged the applicability of the contractual provisions in the IA Terms identified by the judge. As such, there is force in the defendant’s submission, which the judge accepted, that there was no breach of duty by the defendant in not having made the telegraphic transfer pursuant to the plaintiff’s instruction. Whether the transfer was “rejected or refused or not sent” does not affect the question of legal liability, even if the plaintiff had found the defendant’s response confusing.

15.  This is not the end of the matter, however. It seems to us arguable that where a telegraphic transfer applied for by a customer has not been proceeded with or has been rejected by the correspondent or beneficiary bank, it is incumbent on the defendant to give notice to the customer within a reasonable time. As the Code of Banking Practice provides in relation to cross-border payments: “Institutions should promptly notify the customer if an outgoing payment could not be effected.”[8] This is certainly not within the scope of the matters of which, by virtue of clause 2.7.10(j) of the IA Terms, the defendant did not have to inform the plaintiff.[9]

16.  The defendant has not, for the purposes of this appeal, contended that no obligation to give notice existed in this case. In fact, the defendant did seek to give the plaintiff notice, but it did so by a letter which was sent by post to the plaintiff’s address, rather than by telephone or email.

17.  That a letter was sent is evidenced in part by the screenshot from the defendant’s computer. There is in our view nothing in the Evidence Ordinance (Cap 8) that prevents the screenshot adduced by the defendant from being admitted into evidence. The plaintiff’s complaint that it was not authenticated by signature by a senior bank officer is misconceived, as there is no such requirement in order for the document to be admissible.

18.  The problem for the defendant, however, is that the telegraphic transfer form stipulated that the plaintiff’s email address and contact number “will be used for correspondence in respect of this instruction” and specifically asked the plaintiff to ensure that his email address and contact number with the bank were up-to-date. As a matter of fact, the defendant did not follow this stipulation in the form.

19.  Mr Lai, appearing for the defendant, drew attention to clause 1.11 of the IA Terms relating to “communications” generally. There is no dispute that those terms were applicable to the plaintiff’s instruction for telegraphic transfer. Indeed the telegraphic transfer form made specific reference to the IA Terms. In particular, clauses 1.11.1 and 1.11.2 provided as follows:

“ 1.11.1. You agree that we may use any contact information provided by you and kept on our records (including address, telephone number, email address and fax number) from time to time to communicate with you (whether through letters, telephone calls, SMS, fax, email or other means).

1.11.2. Unless we specify otherwise, you will be considered as having received any notice given by us:

…

(b) forty-eight (48) hours after posting it to the above address if that addresses in Hong Kong … (if sent by post);

…”

20.  Notwithstanding the general provisions in clause 1.11 of the IA Terms, however, it seems to us arguable that the more specific provisions in the telegraphic transfer form prevail where they are applicable – generalia specialibus non derogant;[10] see Lewison, The Interpretation of Contracts (7^th ed), §7.46. In particular, it is arguable that where the telegraphic transfer was not effected, the defendant’s notice to the plaintiff ought to have been given by email or telephone as envisaged in the form, as it might have been of importance in that situation for the customer to be informed as soon as reasonably practicable. In contrast, we note that it was stated in the form that, where the transfer was completed, the debit advice would be sent to the customer’s correspondence address “by mail”.

21.  The plaintiff says that he did not receive the computer-generated letter from the defendant, and that he did not know the transfer was not effected until he was informed by the vendor after the deadline on 10 February 2021. For the purposes of the application for striking out, this allegation, which is not incredible, must be assumed to be true. It seems to us arguable that, had notice been given by the defendant by telephone or email instead on 5 February 2021 or within a reasonable time, the plaintiff could well have been able to remedy the situation immediately by, for example, purchasing Indian rupees or other currencies which could be remitted to India without difficulty for telegraphic transfer to the beneficiary account in India and/or seeking a slight extension of time from the vendor.

22.  Admittedly, this does not address the defect in the plaintiff’s claim for the price of the property in the sum of HK$27,125,000. The normal measure of damages is one that puts the plaintiff in the position he would have been in had the relevant duty not been breached by the defendant. On the above analysis, it may be that, if the defendant had given him notice by email or telephone in accordance with the terms of the form, the plaintiff could have taken steps that would have enabled him to complete the purchase of the property. That means he would have paid the price and acquired the property. On no conceivable basis, however, can he simply claim the entire price from the defendant. Recognising this difficulty, the plaintiff said at the hearing that he would not insist on recovering the amount of HK$27,125,000 and would be content with damages assessed by the court as appropriate. What concrete loss the plaintiff has actually suffered in the events that transpired is a matter that he may need to focus and elaborate upon. There is no information at present as to whether he has suffered a forfeiture of deposit, or a loss of the benefit of a rise in the market value of the property since February 2021. But if there was a breach of contract, there was a cause of action, and the plaintiff would be entitled to nominal damages even if he could not prove loss. This point is not therefore a reason for dismissing his action altogether.

23.  Finally, as regards the exemption clause in clause 1.4.2(b) of the IA Terms, it is in our view arguable that it only covers the loss or damage suffered as a result of the defendant’s refusal to accept an instruction and does not cover any loss incurred as a result of the defendant’s failure to give notice by email or telephone that the instruction could not be proceeded with.

24.  In his submissions Mr Lai referred to another exemption clause in clause 1.13.6, which provided:

“ In no circumstances will we be responsible to you or any other person for any loss of profit or interest, indirect or consequential loss arising from or in connection with our providing, of failure or delay in providing, the Services.”

Quite apart from the fact that the defendant has not served any respondent’s notice to rely on this provision as an additional reason in support of the judge’s decision, it is arguable that this clause is only concerned with limiting the damages by excluding certain types of losses from the defendant’s responsibility, rather than with excluding liability altogether. Within clause 1.13, which dealt with limitation on liability generally, clause 1.13.3(a) set out six specific matters in respect of which the defendant was, as stated, not liable for any loss, damage or expense. Clause 1.13.3(b) however provided that in those six cases, where there was “negligence or wilful default” on the defendant’s part, the defendant “will be liable for any loss and damage … that is direct and reasonably foreseeable arising directly and solely from such negligence or wilful default”. It seems to us arguable, if there was a breach of contract for failing to use the stipulated means of communication with the customer as set out in the telegraphic transfer form, that such failure had arisen from negligence, and that there is consequently liability under clause 1.13.3(b).

25.  Furthermore, it is arguable that the plaintiff dealt as consumer on the defendant’s written standard terms of business. On this basis, by virtue of section 8 of the Control of Exemption Clauses Ordinance (Cap 71), even if the wording of an exemption clause prima facie covers the plaintiff’s claim, the defendant cannot by reference to such term exclude or restrict its liability for breach of contract unless the term satisfies the requirement of reasonableness: see Chang Pui Yin & others v Bank of Singapore Limited [2017] 4 HKLRD 458, §§93-114. This requirement is satisfied “only if the court … determines that the term was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made”: section 3(1). The burden lies on the defendant to prove that the term satisfies the requirement of reasonableness: section 3(6). Neither the judge nor the defendant has said that the Ordinance does not apply to the clauses in question because they are not exemption clauses, or that the exemption clauses so plainly and obviously satisfied the requirement of reasonableness that this could be taken as proved beyond argument for the purposes of the application for striking out. In fact the defendant’s affirmations did not address the requirement of reasonableness at all.

26.  Having said the above, we consider that the master and the judge were correct in finding the statement of claim defective. The claims for “deficiency of service, unprofessionalism and breach of trust” are inapt for the reasons given by the judge. The pleading did not even mention the telegraphic transfer form or its terms, did not identify the potential breach of contract described above, and erroneously claimed the sum of HK$27,125,000 instead of damages for actual loss. We shall not, therefore, disturb the order below striking out the statement of claim itself.

27.  It follows from what is stated above, however, that in our judgment the plaintiff has an arguable cause of action for breach of contract, and that consequently his action should not be dismissed outright. The plaintiff did complain in his affirmation below about the defendant’s failure to inform him of the status of the transfer.[11] In all the circumstances we consider that the plaintiff should be given an opportunity to amend his statement of claim to plead, in particular: (i) the telegraphic transfer form, and specifically the term regarding correspondence by email or telephone; (ii) the alleged breach of that term by the defendant by giving notice by letter which the plaintiff did not receive and by failing to give prompt notice by email or telephone to the plaintiff that the transfer of funds was not or could not be effected; (iii) what the plaintiff would have done if he had received timely notice from the defendant; and (iv) what losses the plaintiff has suffered as a result of the alleged breach for which he claims damages to be assessed by the court.

28.  Finally, as regards the judge’s refusal of leave for the plaintiff to adduce further evidence, the plaintiff has not specifically challenged this decision either in his notice of appeal or his skeleton submissions for the appeal. In any event we do not think the judge’s reasons for not admitting the further evidence can be faulted.

Disposition

29.  For the above reasons, we make the following orders:

(1)  The plaintiff’s appeal be allowed in part. The order for dismissal of the action is set aside.

(2)  The plaintiff do within 28 days hereof file in the Court of First Instance and serve on the defendant’s solicitors a summons returnable before a master, seeking the court’s permission to file an amended statement of claim in the form of a draft attached to the summons.

(3)  There be liberty to apply to the Court of First Instance.

30.  As a provisional order (which will become absolute unless either party applies within 14 days for it to be varied), we order that:

(1)  there be no order as to costs below except that

(a)  the order dated 16 August 2021 for the plaintiff to pay the costs of his summons for leave to adduce further evidence dated 9 August 2021 assessed at $1,040 shall remain intact; and

(b)  the plaintiff is to pay the costs of and relating to his summons dated 19 August 2021 for adducing further evidence;

(2)  the defendant do pay the plaintiff’s costs of the appeal in the Court of Appeal; and

(3)  the costs are to be taxed if not agreed.