GURDAS S CHOITHRAMANI v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

CACV 117/2014

[2019] HKCA 941

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 117 OF 2014

(ON APPEAL FROM HCA 2073 OF 2011)

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JUDGMENT

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Hon Poon Ag CJHC:

1.  I agree with the Judgment of Hon Yuen JA.

Hon Kwan VP:

2.  I agree with the Judgment of Hon Yuen JA.

Hon Yuen JA:

3.  This is the plaintiff’s application by Notice of Motion for leave to appeal to the Court of Final Appeal (“CFA”) from the Judgment given by this court on 21 July 2017 (“the Judgment”). 

4.  The Judgment was in respect of the plaintiff’s appeal from a Ruling given on 28 April 2014 (“the Ruling”) by DHCJ Whitehead SC (“the judge”) striking out the plaintiff’s claim in HCA2073/2011 (“the 2011 Action”).

Background

5.  The background to the 2011 Action and the Ruling have been summarized in our Judgment at §§2-10. 

- Essentially, the plaintiff controlled a company called Esquire which was a customer of amongst others, HSBC (“the bank”).  In 1994, Esquire sued the bank (“the Esquire action”). The plaintiff was not a party. 

- In 2006 the Esquire action was dismissed. 

- In the meantime, the plaintiff had been made bankrupt in 1996, which bankruptcy was discharged in 2003 (“the 1^st bankruptcy”). The OR was the trustee in bankruptcy.

- In the 2011 Action, the plaintiff sued HSBC. 

- The 2011 Action was struck out by the judge for reasons set out in the Ruling.

6.1. The plaintiff lodged a notice of appeal from the Ruling but he was made bankrupt again on 9 March 2015 (“the 2^nd bankruptcy”).  The 2^nd bankruptcy order was not stayed.

6.2. As for the hearing of the appeal from the Ruling, it was initially stayed as the OR had just been appointed trustee in the 2^nd bankruptcy.

6.3. On 23 September 2016, this court gave directions that the appeal from the Ruling be restored for hearing.  The original notice of the hearing (which was fixed for 14 February 2017) indicated incorrectly that the hearing was “for directions”.  This notice was corrected the day before the hearing, stating that it was the appeal itself which was restored for hearing.

7.1. In any event, even before the corrected notice of hearing was sent to the parties, counsel for the OR1 had on 10 February 2017 filed written submissions asserting that the plaintiff’s right of appeal from the Ruling had been vested in the OR and thus the plaintiff himself had no locus standi to pursue the appeal.     

7.2. As for the plaintiff, his counsel2 filed written submissions on 13 and 14 February 2017 arguing that the plaintiff did have locus standi to pursue two causes of action in the claim3:

(a)  wrongful procurement of the plaintiff’s 1^st bankruptcy causing him loss of business reputation, which was personal to the plaintiff and thus was not vested in the OR, reliance being placed on cases including Wilson v United Counties Bank4;

(b)  wrongful procurement of the judgment5, which occurred after the date of the 1^st bankruptcy.

8.1. At the hearing on 14 February 2017, counsel for the plaintiff asked for an adjournment, relying on three grounds (§§15.1-15.2).  The last of those grounds was that, despite having filed the written submissions referred to in the preceding paragraph, she had not had sufficient time to prepare as the original hearing notice was said to be for directions only.

8.2. This court reserved its decision on the application for adjournment, and directed that if the application were to be dismissed, the parties would have 7 days after our decision to provide written submissions on the issues arising on the appeal.

8.3. On 17 February 2017, we handed down our decision on the plaintiff’s application for adjournment, which was dismissed with costs.

9.1. Pursuant to the directions referred to in §8.2 above, on 23 February 2017 the OR indicated she had no further submissions to those provided on 10 February 2017.  On 24 February 2017, solicitors for the bank filed written submissions.  On 27 February 2017, the plaintiff filed written submissions. 

9.2. Further submissions were filed by the OR on 22 May 2017 and by the plaintiff on 29 May 2017. 

10.  On 21 July 2017, we gave Judgment which the plaintiff seeks to appeal to the CFA by way of the Notice of Motion.  Written submissions were provided (in accordance with the automatic directions in Practice Direction 2.1) which we have considered.

Question (1)

11.  The plaintiff submits that, in relation to cause of action (a) above6, the 1^st question of law of great general or public importance which he wishes to submit to the CFA for decision is as follows:

“(1) whether the scope of the rule decided in Wilson v United Counties Bank Ltd [1920] AC 102 (PC)7 (that a bank’s negligence which caused a customer’s bankruptcy and thus loss of business reputation gave rise to a cause of action personal to the bankrupt which was not vested in the trustee) as applied in Hong Kong is confined to where the bank is in breach of an express agreement to maintain the customer’s personal credit and reputation, or extends to a situation where a bank in breach of contract alternatively in breach of fiduciary duty alternatively by tortious acts foreseeably caused the bankruptcy and loss of credit and business reputation of the bankrupt?”

12.1. As discussed in our Judgment (§§21.3-24), in the action instituted against the bank by Major Wilson and his trustee in bankruptcy as co-plaintiffs8, the jury found that “under the peculiar language of the agreement”9, the bank had an “express obligation”¹⁰ not only to supervise Wilson’s business while he was on military service, but also to “maintain his credit”¹¹.  Thus, although arising from the same breach by the bank¹², there were “two heads of damages, 1. that relating to the business and estate; and 2. that relating to the plaintiff Wilson’s loss of credit and reputation”¹³.    

12.2. Accordingly, apart from Wilson’s estate, Wilson himself had a “personal” claim, meaning “claims which relate to the bankrupt’s body, mind or character without immediate reference to his rights of property”.  Thus, personal claims include claims for damages for personal injuries and defamation.  The rationale here is that compensation awarded for personal injuries or defamation will represent, in monetary terms, that part of a person (for example, his limbs or the use of them) or his reputation that has been lost or harmed.  These types of claim do not involve his property”¹⁴. Therefore the House of Lords upheld the award of 45,000 pounds in damages to Wilson’s estate, and the separate award of 7,500 pounds to Wilson himself as damages for loss of reputation.

12.3. Lord Birkenhead LC justified the personal award due to “the exceptional language of an exceptional contract”¹⁵. It is clear from this and other speeches in the House of Lords that Wilson’s personal claim was a “stand-alone” cause of action founded on the express contract made with him to “maintain his credit and reputation”.  The award of 7,500 pounds was not a relief which was consequential to, or follow from, the bank’s breach of the agreement regarding his business.

12.4. So analysed, the plaintiff’s reliance on Wilson is misplaced.  The plaintiff seeks to rely on a personal guarantee that he had signed in favour of the bank¹⁶ guaranteeing Esquire’s liabilities.  But it is not alleged that this guarantee contained any obligations undertaken by the bank to maintain his personal reputation.  All that the plaintiff has alleged is that the bank had acted wrongfully and dishonestly in making it impossible for Esquire to meet its obligations, which led to the plaintiff’s guarantee being called upon, resulting in the 1^st bankruptcy order¹⁷.  In other words, there is no “stand-alone” cause of action based on the bank’s contractual obligation to maintain the plaintiff’s own reputation as found in Wilson, and as discussed above, a “personal” claim in the Chung Kau sense does not follow from a breach of the bank’s contractual or tortious duties under the commercial transaction.

13.  As for the plaintiff’s argument that “given the [plaintiff’s] capacity as a party was stated as a personal guarantor, the obligation owed to him could not be other than ‘personal’”¹⁸, the guarantee relates to his property, not his “person” as the term is explained in Chung Kau and the cases cited therein¹⁹.

14.  For the reasons set out above, we do not consider question (1) to be reasonably arguable, nor is it a question of great general or public importance. 

Question (2)

15.  The plaintiff submits that, in relation to cause of action (b) above²⁰, the 2^nd question of law of great general or public importance is as follows:

“(2) Does the rule against reflective loss established in Johnson v Gore Wood & Co [2002] 2 AC 1 and as stated in Landune International Ltd v Cheung Chung Leung [2006] 1 HKLRD 39 debar a shareholder from suing to recover a loss suffered by the company only where there is a risk of double recovery, or is it an absolute bar to such action by a shareholder so as to entitle the alleged wrongdoer to strike out the shareholder’s action regardless of other circumstances including the likelihood of double recovery?”

16.  The plaintiff alleged that he is entitled to pursue the cause of action of “wrongful procurement of judgment”, that judgment being the dismissal of Esquire’s action against the bank in 2006.  As noted earlier, the plaintiff was not a party to the Esquire action.  As discussed in our Judgment (§27), even if the judgment in the Esquire action was procured wrongfully, the party to sue in respect of that wrong would be Esquire, and any loss suffered by the plaintiff would be merely reflective loss.  This bar to the plaintiff’s cause of action had been raised before the judge.  In this connection it is significant that there was no pleading at all in the Statement of Claim of any facts which placed the situation outside the double recovery rule.

17.  It is noteworthy that the section of the Statement of Claim pleading wrongful procurement of judgment (§§179-195) was not referred to at all in the pleading of the plaintiff’s losses (§§208-216).  This may be contrasted with other specific causes of action which were stated to have led to specific losses (eg the cause of action in §§136-138 allegedly led to the loss pleaded in §208, and the causes of action in §§58-129 and §§140 - 178 allegedly led to the loss pleaded in §209, etc).  The plaintiff’s allegations now that Esquire has gone into liquidation and “no action had been or would be brought against HSBC”²¹ because the assignee has been dissolved²² were never pleaded.

18.  For the reasons set out above, we do not consider question (2) to be reasonably arguable in this case, nor is it a question of great general or public importance.

“Or otherwise” ground

19.  Finally, it is the practice of this court to leave it to the CFA to decide whether or not to give leave under the “or otherwise” ground, and we are not persuaded that any exception has been shown in §§15-20 of the plaintiff’s written submissions or §§16-18 of his submissions in reply.

Order

20.  For the reasons set out above, the Notice of Motion is dismissed with costs.  Upon a summary assessment of costs, the defendant’s costs of $41,125 are reasonable and the plaintiff is ordered to pay that sum.  The time taken to prepare this Judgment is regretted.