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

CACV 296 /2018

[2019] HKCA 467

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 296 OF 2018

(ON APPEAL FROM HCA NO 826 OF 2014)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  This is the plaintiff’s appeal against the judgment of Recorder Coleman, SC (as he then was) handed down on 8 June 2018. The judge dismissed his claim in respect of the losses he suffered owing to high risk investment products traded by the defendant on his behalf. It was held there was no contractual relationship between them, nor was there liability in tort as the defendant did not assume a relevant material responsibility to the plaintiff. As noted by the judge, there was little dispute between the parties as to the legal principles. The real contest was how the principles should be applied to the facts found by the judge. That remains the same on appeal.

2.  At the conclusion of the hearing, we dismissed the appeal with costs to the defendant, with a certificate for two counsel.  These are the reasons for our judgment.

Background

3.  It is necessary to relate first the relevant background, taken largely from the judgment and supplemented by matters not in controversy.

4.  The plaintiff is a former practising solicitor, having been a senior partner in a well‑known firm in Hong Kong with a general practice.  He retired from full‑time practice in 1991, and did some consultancy work until 2001.  At the material time in 2011, he was 75 years old.

5.  The plaintiff had used the services of various private banks for many years.  One of his private bankers was Zau Ai Wei Audrey (“Ms Zau”), of whom he has been a client for about 20 years.  Ms Zau performed an advisory role, as opposed to a discretionary management role, and she and the plaintiff met regularly, during which meetings she discussed and reviewed with the plaintiff the portfolio of investments made with or through her.  The plaintiff generally trusted and had confidence in her and would usually take her recommendation on any investment strategy.

6.  The plaintiff had generally engaged in a conservative investment strategy.  He had no desire to change that strategy in 2011, at his age and after 20 years of retirement.

7.  In the early 1990s, the defendant and Ms Zau had been colleagues at an investment bank.  Ms Zau was subordinate to the defendant and knew him to be a “senior star” investment or fund manager.  His fund management activities included not just straightforward stock investments, but also warrants and options and other derivatives or structured products.  He left that employment in 1993.

8.  Ms Zau and the defendant did not keep in touch and only renewed their acquaintance at a chance encounter at the end of 2010 or early 2011.  The defendant told Ms Zau he was no longer employed by anyone but was trading on his own account and doing reasonably well.  He owned a company, Oriental Investors Company Limited (“OICL”), which he used to conduct his private financial investment.  He was not licensed in 2011 and 2012 to carry on a business in any “regulated activity” under Schedule 5 of the Securities and Futures Ordinance, Cap 571.  OICL was not engaged in business with persons other than the defendant.  Ms Zau knew that the defendant had not been investing for others as part of any business[1].

9.  After the defendant and Ms Zau became re-acquainted, Ms Zau asked him if he would do some financial investment for her relative, Madam L, and he agreed.  For that purpose, and at the defendant’s suggestion, Ms Zau opened an account with a US‑based online brokerage firm, Interactive Broker LLC (“IB”) for Madam L.  The defendant set up a master account with IB in his name and linked up with Madam L’s account which was converted to a sub-account.  He was provided with the necessary log‑in details and password to permit him to handle the transactions of the sub‑account.  Between 1 February and 3 June 2011, he made a profit of $170,000 for Madam L on her capital injection of $500,000, a 34% in just four months.  The judge found it unlikely that an experienced private banker like Ms Zau would have understood that to have been consistent with a conservative investment strategy[2].  Ms Zau accepted that by asking the defendant to invest, she sought for Madam L (and later for the plaintiff) a higher return than on conservative investment[3].

10.  In around June 2011, Ms Zau recommended to the plaintiff that he might place some funds with the defendant for the defendant to manage through investments operated online.  The plaintiff accepted Ms Zau’s advice without much persuasion and provided $6 million for this purpose.  The plaintiff and the defendant never met, never spoke and never communicated directly by any means.  Such contact as there was relating to the defendant’s operation of the plaintiff’s IB account was effected through Ms Zau, although the plaintiff did receive quarterly statements directly from IB by post.

11.  The plaintiff had not told Ms Zau how he wanted his money invested, and she had not told the plaintiff how she wanted or intended the defendant to invest the money for him[4].  The judge found that Ms Zau did not specifically tell the defendant that the plaintiff was a conservative investor, or give instructions for only conservative investments and that everything she did pointed to a desire for an investment which was on a different basis and intended to achieve a rather higher return than would be expected from a conservative investment[5].

12.  On 15 June 2011, the plaintiff, with the assistance of Ms Zau, opened an IB account in his own name and consented to the defendant being appointed as his “financial advisor” with authority to operate his IB account.  On 21 June 2011, he transferred $6 million to his IB account.

13.  The plaintiff paid very little attention to what was happening as the IB account was opened for him by Ms Zau using her personal and not her work computer.  The documents generated by the opening of the account included an Account Application form, a Customer Agreement and a Client FA[6] Agreement.

14.  In the Account Application form, the name of the defendant was typed into the box for “Name of Your Financial Advisor”.  Whilst the plaintiff’s personal details were typed in for the account holder’s name, residential address and phone number, Ms Zau’s personal email address was provided in the box for “E‑Mail Address for Account Correspondence”.

15.  An important part of the Account Application form related to account configuration.  It was necessary to choose between a cash or margin account and the option chosen was “Reg T Margin”, which was identified as “Borrowing to support equities trading, shorting of equities, full options trading, full futures/futures options trading, currency conversions, and securities/commodities trading in multiple currency denominations available”.  Part of the configuration related to the identification of Investment Objectives and Intended Purpose of Trading (for which Ms Zau ticked “Growth”, “Trading Profits”, “Speculation” and “Hedging”, and did not tick “Preservation of Capital” or “Income”), and Investment Experience (Ms Zau entered that the plaintiff had more than ten years trading experience with stocks, bonds and options, about which his knowledge level was “Good” and that he had three and five years trading experience with futures and forex respectively, about which his knowledge level was also “Good”).  On the page relating to advisor fee arrangements, Ms Zau ticked “No Fee.  No fees are charged by your advisor for managing your account”.

16.  The plaintiff had no idea about the identification of his purported investment experience or appetite or preferences in the Account Application form.  The judge found that Ms Zau could not realistically have thought that the account was being configured for simple conservative trading[7]. He rejected the idea that creating a margin account with permitted trading in speculation, growth, options and hedging (and not for preservation of capital and income) was merely to give the defendant flexibility in his dealings[8].

17.  There were several pages in the Account Application form relating to agreements and acknowledgments.  Essential terms in the Customer Agreement that the customer must understand were summarised.  Explanations and statements of varying degrees and types of risks were sent out, not least in relation to futures and options.  There was also a risk disclosure statement.

18.  The Customer Agreement had a specific section on margin trading and included the statement that “Margin trading is highly risky and may result in a loss of funds greater than Customer has deposited in the account”.  There was a similar section on the high risks of forex trading.  In signing the Customer Agreement electronically, the plaintiff acknowledged that he had read and understood all the information provided during the application process.

19.  The Client FA Agreement gave authority or power of attorney to the “financial advisor” and the plaintiff acknowledged that he had granted to the advisor full discretion to direct the trading in the account on his behalf, that he would not have access to IB’s electronic systems for placing orders for the account and only the advisor would be able to use the IB Trader Workstation to conduct trading in the account.

20.  The plaintiff also signed a form physically to make various acknowledgments in support of the application forms completed online, confirming that he had read the materials mentioned which had been fully explained to him, including risk disclosures.

21.  The plaintiff’s IB account was linked to the defendant’s master account as a sub‑account, permitting the defendant to trade on the plaintiff’s account.  The defendant purchased almost the same things for the plaintiff as he did for himself.  Nevertheless, there were occasions that the defendant made independent decisions for the plaintiff.

22.  Profit was made in the early days of the investment and it was immediately realised and withdrawn from the plaintiff’s IB account.  The quarterly statement in the period ended 30 June 2011, which covered activity over only the ten days before the end of the period, was sent to the plaintiff by post.  The first page had a section dealing with the Net Asset Value (“NAV”), identifying the cash and stock totals for the current period and the overall total, which stood at $6,058,428.  Beneath the NAV section was a list of positions under two sub‑headings “Stocks” and “Structured Products”.  The structured products were identified as “CBBC” (‘call bull bear credits’), a known high risk investment product that would have been understood by Ms Zau as such.

23.  The second page was a transaction summary by asset class.  For the asset class of structured products there were 247 trades, with total value bought of $59,715,967 and sold of $45,450,218.  Anyone reading those figures must have understood that the majority of trading was in structured products at a value totalling a multiple of ten times the capital placed in the account.

24.  In addition to the quarterly statement, a monthly activity statement for the IB account was sent to the designated e‑mail address (Ms Zau’s personal e‑mail address) and was available to anyone logging into the account.  The monthly statement for June 2011, covering only the period from 21 to 30 June, ran to some 50 pages.

25.  Between 27 June and 4 July 2011, the IB account was accessed for the purpose of withdrawing realised profit on eight occasions. The total withdrawals were $478,428 and directly credited into the plaintiff’s bank account and the judge found this was done by Ms Zau, who also issued a debit note purportedly by OICL dated 4 July 2011, seeking payment of $167,450 (35% of $478,428) as performance fees on profits generated between 27 and 30 June 2011[9]. The plaintiff was handed the debit note by Ms Zau and wrote a cheque dated 5 July 2011 in the sum of $167,450 payable to OICL.  Ms Zau passed on the cheque to the defendant.  The judge found that the payment was made as an offer after the profit was made, and not by virtue of any pre‑agreement for payment at the rate of 35%.[10]

26.  The monthly activity statements for July (51 pages) and August 2011 (35 pages) showed significant trading activity including by numerous structured products, especially CBBCs, and that the NAV dropped to $3,432,316 and further to $716,022 respectively.

27.  The total NAV for the quarterly statements from 30 September 2011 to 30 June 2011 continued to drop.  The figures were $255,858 (September 2011), $248,220 (December 2011), $108,413 (March 2012), and $11,899 (June 2012).  It was only when the plaintiff received the June 2012 statement that he was alarmed.  He decided to wait for the next quarterly statement and when the statement to 30 September 2012 showed no change in the NAV, he decided to act.

28.  The plaintiff mentioned to Ms Zau about the state of his IB account.  Ms Zau contacted the defendant and this resulted in what the defendant called an ex gratia payment of $30,000 that he made to the plaintiff.

29.  From November 2012 to July 2013, there was correspondence between the plaintiff (later he instructed solicitors) and IB.  On 31 May 2013, the plaintiff’s solicitors wrote on his instructions that his IB account was opened without his knowledge and approval and he had never agreed to the terms and conditions imposed by the account opening documents.  He denied that he had ever authorised the defendant to operate the account and suggested that the alleged profit was an illusion to lead him into believing that his money was safe and making profit.  It was further suggested that no report was made to the plaintiff of the type of product invested and the significant losses incurred.  None of these complaints were maintained in the present action commenced in 2014.

30.  On 31 May 2013, the plaintiff’s solicitors also wrote to the defendant and OICL.  The summary position taken was that the defendant had fraudulently and unlawfully misappropriated the plaintiff’s funds to trade on his own behalf without authorisation.  The allegation of fraud had not been pursued in this action.

The judgment below

31.  The primary case pleaded in the Re‑amended Statement of Claim was focused on alleged representations (“the Representations”) made by the defendant to Ms Zau, being (1) that he was an expert in investing for high net worth individuals in the Hong Kong market, and (2) that his specialty was to invest in stocks with good fundamentals, and it was his intention to do that for any client introduced by Ms Zau.  Ms Zau as agent for the plaintiff, and relying on the Representations, entered into an oral contract with the defendant on terms that: (1) the defendant would be engaged as the plaintiff’s financial advisor and make investments on his behalf; (2) the plaintiff would deposit $6 million into a trading account for this purpose; (3) the investment strategy would be based on the Representations and tailored to the plaintiff’s needs as a conservative investor; and (4) the defendant would be remunerated by being paid 35% of realised profit each month, with no fee charged if there was no realised profit for the portfolio for that month.

32.  The plaintiff also pleaded that these terms were implied into the oral contract, or that they existed on the proper construction of the contract: (1) the defendant would be under a duty to exercise reasonable care and skill in handling matters to the best interests of the plaintiff; (2) in particular the defendant would properly invest the portfolio in accordance with the plaintiff’s investment needs as a conservative investor, and avoid trading in any high‑risk financial products; and (3) the defendant would also keep the plaintiff reasonably informed of the status of his investments.

33.  Alternatively, it was pleaded that the defendant owed a duty in tort to the plaintiff in like terms to those pleaded in contract.

34.  In the further alternative, it was pleaded that if there was no term that the investment strategy would be based on the Representations and tailored to the plaintiff’s needs as a conservative investor, the defendant owed a duty (on the true construction of the oral contract, or under an implied term, or in tort) to ascertain the investment needs of the plaintiff and to tailor a suitable investment strategy addressing such needs.

35.  The breaches alleged are that the defendant traded in numerous high‑risk investment products, which were contrary to the plaintiff’s conservative investment strategy and was negligent in so doing.  Alternatively, he adopted the high‑risk strategy when he knew or ought to have ascertained the plaintiff’s investment needs.

36.  The defendant denied the Representations and pleaded that any contract that the plaintiff had was with IB or with Ms Zau.  He averred that he never held himself out as acting for Ms Zau’s clients in any professional capacity, but as her friend in a non-professional capacity.  He denied that Ms Zau had ever told him that the plaintiff was a conservative investor and/or that he had to avoid trading in any high risk financial products.

37.  The judge found that the defendant did not make the Representations to Ms Zau[11], nor was there any contractual relationship between the plaintiff and the defendant[12]. That left the duty in tort.  The judge posed the following as the “real and necessarily prior question” to finding that if there was a duty owed in tort:

“That question is whether the circumstances of this case, on the facts as I have found them, did create a relationship such that the defendant owed the plaintiff a duty of care in acting as a financial or investment advisor. Essentially this resolves around the question whether the defendant assumed or undertook a relevant responsibility towards the plaintiff as created that duty.”[13]

38.  The judge considered the authorities referred to by the parties, noting in particular two cases[14]: Susan Field v Barber Asia Ltd [2003] HKCU 712; and JP Morgan Chase Group v Springwell Navigation Corp [2008] EWHC 1186 (Comm).  The lack of any advisory agreement entered into between the parties was not determinative of whether the defendant owed tortious duties to advise, but the absence of any such contractual obligations were a factor to be given considerable weight.  Other relevant factors included (a) the factual matrix of the relationship between the parties (what was said between them at the outset of the relationship, what roles each played during the relationship, the context in which the advice was given, whether the giver was doing so gratuitously or was getting a reward in some direct or indirect form, and the like); (b) the extent of the parties’ financial experience and sophistication; (c) the extent of the claimant’s reliance on the defendant and the foreseeability of such reliance; and (d) whether or not there were express disclaimers of responsibility.

39.  The judge stressed that each case will be decided on its own facts, and on the facts of this case as found, he regarded the following as material, as set out in §166 of the judgment:

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

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

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

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

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

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

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

40.  The judge added that he did not think the defendant’s subsequent acceptance of remuneration (the defendant cashed the cheque paid by the plaintiff against the debit note created by Ms Zau) can retrospectively create a duty which did not previously exist.  Nor did the defendant’s payment of $30,000 to the plaintiff, which he described as ex gratia, create a duty if there was not already one imposed by the circumstances[15].

41.  On the facts, the judge held that the defendant did not assume a relevant material responsibility to the plaintiff.  He therefore dismissed the claim.

This appeal

42.  This appeal sought to attack only the holding that the defendant did not owe a duty in tort to the plaintiff.  Mr Bernard Man, SC[16] submitted that it is “startling” for the judge to have found that the defendant assumed no duty, when the defendant was given total discretion to, and did, invest the plaintiff’s money to the tune of $6 million.  The conclusion of no duty would mean that even if the defendant was grossly negligent in trading in the plaintiff’s money, such as when he did not bother to check the stock code and bought a wrong stock, he would not be liable and this cannot be right.

43.  Mr Man submitted that the judge’s conclusion is unsustainable in light of these undisputed or found facts:

(1)  The defendant had accepted in oral evidence that it was a fair description of his role to call him the plaintiff’s “investment advisor”[17].

(2)  The plaintiff and the defendant had not met and they were not in a friendly or social setting when the defendant was put in a position to conduct investment activity in the plaintiff’s IB account at the sole discretion and decision of the defendant, albeit within the permissions granted and the objectives stated by the accounting opening process[18].

(3)  The present factual situation where the defendant was given operative power of attorney over an account held in the plaintiff’s name is not so far different from the plaintiff “simply giving funds” to the defendant to manage[19].

(4)  The defendant accepted there was a “substantial responsibility” borne by him as the things he did could result in the plaintiff’s money in the IB account being wiped out and implied accepted that the service he was providing was “valuable”.[20]

(5)  The plaintiff, aged 75 in 2011, had retired for some 20 years and had generally engaged in a conservative investment strategy which he had no desire to change[21].

(6)  There was no positive plea by the defendant that he had been positively instructed by Ms Zau to trade for the plaintiff in high‑risk profits and/or in the same way that he had previously traded for Ms Zau’s relative, Madam L[22].

44.  Of the facts regarded by the judge as material to his conclusion, Mr Man pointed out that the most important one was the interposition of Ms Zau (§§166(b), (c) and (d) of the judgment).  He argued that the interposition of Ms Zau is immaterial.  The fact that the plaintiff may also have the benefit of Ms Zau’s assistance does not preclude the defendant from assuming responsibility, and it is not a defence for a financial advisor to say that he relied upon the advice or opinion of others as to the suitability of certain products if that advice or opinion was itself negligent, citing Seymour v Ockwell [2005] PNLR 758 at §98.  It cannot assist the defendant even if Ms Zau is also liable to the plaintiff because she owed a separate duty, as it is a familiar occurrence in the law that two advisors may owe parallel duties of care to a client, such as a solicitor and counsel both owing duties of care to a lay client.

45.  Mr Man further asserted that the dealings were in a business context, that the defendant was engaged in a “full discretionary investment service” of over $6 million, and that “obviously” the plaintiff relied “very heavily” on the defendant.  The judge was wrong in extrapolating from the “informal feel” of Ms Zau’s approach that no duty was owed by the defendant.

46.  We do not accept the above submissions.

47.  It does not follow from the judge’s conclusion of no duty in this instance that the defendant would not be liable even if he was grossly negligent in trading in the plaintiff’s money.  As rightly pointed out by Mr Martin Wong[23] for the defendant, one must focus on the true nature of the alleged wrongdoing.  The claimed wrongdoing was on a strategic level, namely, that the defendant was wrong to adopt a high‑risk strategy which was contrary to the plaintiff’s conservative investment needs.  The complaint was not that the defendant negligently executed the high risk investment strategy, it was rather that he should not have done it at all[24].  In the particular circumstances of this case, and weighing the facts as found, the judge came to the conclusion that the defendant owed no duty to the plaintiff to find out from the plaintiff his investment objectives and risk appetite as an investor.  It is pertinent to quote from §155 of the judgment regarding the circumstances by which the defendant was asked by Ms Zau to conduct investment activity in the plaintiff’s IB account:

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

48.  There is ample support for the conclusion arrived at by the judge.

49.  As for the contention that various undisputed or found facts should have led to the conclusion there was an assumption of duty, the judge was clearly aware of those matters and must have taken them into account[25]. How much weight should be given to them individually or cumulatively is a matter for the trial judge.  There is no basis for the Court of Appeal to interfere unless he is shown to be plainly wrong, and we do not think that is the case.

50.  The interposition of Ms Zau was a matter fully canvassed at the trial and the judge had considered similar arguments made by Mr Man[26]. An appeal is not the occasion to repeat arguments which have been advanced below unsuccessfully, without demonstrating in what way the judge had erred.  The judge is clearly right in taking the view that he cannot ignore the role of Ms Zau in the whole matter when he considered the defendant’s potential liability[27], as that was the factual matrix of the relationship between the parties.  We are not persuaded that the judge had erred in taking into account the facts found at §§166(b), (c) and (d) of the judgment and in attaching such weight to them as he sees fit.  Nor do we think the judge was wrong to take into account the facts mentioned at §166(g) (that the target of criticism was IB in the letter of the plaintiff’s solicitors dated 31 May 2013 and the nature of the criticism).  Although the letter was written after the parties’ relationship was terminated, the letter could provide cogent evidence of the plaintiff’s mindset earlier on, in particular that he could not have expected investment advice from the defendant or had relied on any such advice.

51.  Mr Man’s assertions that the dealings were conducted in a business context and that obviously the plaintiff relied very heavily on the defendant are contrary to the facts found by the judge.

52.  The other ground of appeal is a complaint that the facts found in §166(c) (that the defendant relied on what Ms Zau told him, or at least led him to believe, as to what the plaintiff wanted) and §166(d) of the judgment (that Ms Zau had considerable financial experience and represented to the defendant through the information provided in opening the IB Account that the plaintiff himself had considerable financial and investing experience, including in investment products which are not conservative) have not been pleaded in the defence.  As the judge had regarded these facts he found as material to his holding of no duty, they should have been pleaded.  Mr Man stressed that this is not an objection to the admissibility of evidence, but even if the evidence supporting the findings of fact was admissible, the judge is wrong to rely on unpleaded material facts in coming to his conclusion.  He further contended that if those facts were pleaded, discovery and cross-examination would have been focused on “precisely” whether Ms Zau had “unequivocally” made those representations to the defendant.

53.  This pleading objection must be approached with common sense.

54.  It should be borne in mind that only material facts are required to be pleaded, not evidence, and it is not necessary to plead points of law.  Whether a duty in tort is or is not owed to the plaintiff in the particular circumstances is a question of mixed fact and law, and the factual matrix of the relationship of the parties that the court is to take into consideration is a mixture of fact and evidence.

55.  We are inclined to think that the case of the defendant was adequately pleaded.

56.  It was averred in the defence that the defendant had never held himself out to Ms Zau as acting for her clients including the plaintiff in a professional capacity and that IB would send a statement of account on a transaction basis to each of its customers including the plaintiff, whose statement would be sent to Ms Zau with a copy to the defendant.  It was further pleaded that it is shown in such statement of account that the plaintiff has agreed to purchase “all kinds of investment including trading and speculation (High Risk Products)”.

57.  It was also specifically denied in the defence that the plaintiff or Ms Zau ever told the defendant that the plaintiff was a conservative investor or that he should avoid trading in any high‑risk financial products.  As the judge had noted, the contest on that pleading would permit the judge to consider what was or was not said by Ms Zau to the defendant about the intended operation of the IB account for the plaintiff[28].  And it is open to the defendant to point to matters of context which makes one side’s case more or less likely[29].

58.  Although the defendant has not pleaded in terms the facts found in §§166(c) and (d), it is sufficiently clear from the defence the nature of the case he sought to advance to counter the allegation that he owed a duty in tort in the terms as set out in the statement of claim.

59.  We note further there was only one representation to the defendant as found in §§166(c) and (d), namely, that the plaintiff himself had considerable financial and investing experience, including in investment products which are not conservative.  And this representation, as found by the judge, was through the information provided in opening the IB account.

60.  The plaintiff had sought further and better particulars whether the defendant “had sought to understand, and whether the Defendant had understood, the Plaintiff’s background, investment outlook and objective when the Defendant operated the Plaintiff’s account with IB”.  In the answers provided by the defendant, it was averred that the plaintiff “at all material times authorized the Defendant to trade/operate the Plaintiff’s account with IB on the terms of the mandate shown in the Account Opening Form signed by the Plaintiff” and “The Defendant expects the Plaintiff to make available for discovery the said IB Account Opening Form signed by the Plaintiff as the answer to the Plaintiff’s request can be gleaned from the said document”.

61.  The plaintiff did subsequently give discovery of the account opening documents, which provided support for the representation to the defendant as found by the judge.  We have set out in the earlier part of this judgment the discussion and analysis of the judge concerning the documents generated by the opening of the IB account.  There is nothing in the speculative suggestion of Mr Man that discovery and cross-examination would have been focused on “precisely” whether Ms Zau had “unequivocally” made the representation through the information provided in the account opening documents.

62.  The pleading objection is entirely without merit.

63.  As none of the arguments advanced on behalf of the plaintiff are of any merit, we have dismissed the appeal.  We did not find it necessary to consider the respondent’s notice which was raised only in the event of the appeal being allowed.