PT ASURANSI TUGU PRATAMA INDONESIA TBK (formerly known as PT PRATAMA INDONESIA) v. CITIBANK N.A.

CACV 548/2018

[2022] HKCA 1202

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 548 OF 2018

(ON APPEAL FROM HCCL NO 1 OF 2007)

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J U D G M E N T

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

1.  On 12 April 2022, judgment was handed down by this Court (“the CA Judgment”)  in which we dismissed the plaintiff’s appeal against the decision of Anthony Chan J on 12 October 2018 (“the Judgment”). This is the plaintiff’s application for leave to appeal to the Court of Final Appeal.

2.  By the Judgment, the judge held that the defendant was in breach of its duty of care to the plaintiff (“the Quincecare duty”)  in that defendant was put on inquiry when transferring payments out of the plaintiff’s account at the defendant (“the Account”)  to the rogue directors, as the defendant should have reasonable grounds for believing that the payment instructions were attempts to misappropriate funds of the plaintiff but had taken no action to make inquiry about the propriety of the instructions.  However, the judge dismissed the plaintiff’s claim on the ground it was time-barred in that time ran from the closure of the Account in July 1998 when the relationship of banker and customer was terminated and the money thereupon became payable. 

3.  By the CA Judgment, this court held that the relationship of banker and customer can be terminated by unilateral act, whether by notice given by the customer or the banker, or without reasonable or any notice.  Where the banker purported to terminate the relationship in breach of contract, one of the consequences is that the customer is relieved from the implied term of making a demand for payment to give rise to the banker’s liability to repay the debt.  Thus, by different reasoning, we upheld the judge’s ruling that the plaintiff’s cause of action accrued with the termination of the relationship of the parties when the Account was closed in July 1998 and therefore the plaintiff’s claim was time-barred[1].

4.  The judge had also ruled, if the plaintiff’s claim were not dismissed on limitation ground, the defence of contributory negligence is available when the contractual duty of care co-exists with one owed in tort[2]. On appeal, the plaintiff argued inter alia that contributory negligence is not available as this is a claim in debt and the rules on damages on the apportionment of liability in section 21 of the Law Amendment and Reform (Consolidation)  Ordinance, Cap 23 do not apply.  We rejected the argument and upheld the judge on this ruling[3].

5.  The plaintiff seeks leave to appeal to the Court of Final Appeal on the two rulings mentioned above.  The questions for determination in the intended appeal are framed in the notice of motion filed on 10 May 2022: 

“1. In the context of a contract between banker and customer (debtor/creditor), if the banker invalidly terminates the contract, thereby evincing an intention no longer to be bound by the banker/customer relationship, whether the invalid termination (unless and until accepted by the customer as bringing the contract to an end)  is of any relevance in identifying (for the purpose of the Limitation Ordinance)  the date of accrual of the customer’s cause of action to recover back the amount which ought to be standing to his credit in his account, or any cause of action for damages for breach of the banker’s Quincecare duty.”

“2. Whether a customer’s claim to recover the balance which ought to be standing to his credit in his account with banker, which account has been emptied by unauthorised payments, ought properly to sound in debt (to which contributory negligence is not a defence).”

Question 1

6.  The argument of Mr Sussex, SC for the plaintiff on this question may be stated shortly as follows.  This court is in error in holding that the banker-customer relationship has been terminated by repudiatory breach where the breach has not been accepted by the innocent party. Unless and until the banker-customer relationship has been terminated by the innocent party accepting the repudiation, the ordinary incidents of that relationship apply including the requirement that a customer must make a demand before his debt becomes payable.  The question for the intended appeal is whether the bank’s repudiatory breach of contract by the unauthorised closure of the Account brought about the ‘automatic’ termination of the relationship.

7.  Mr Jat, SC submitted for the defendant that the judge and this court have held that the banker-customer relationship was terminated when the Account was closed in July 1998.  The plaintiff cannot get away from the undeniable reality there was no longer any such relationship between the parties after that date and any contrary view would be startling.

8.  Mr Jat also submitted that the principles of law involved arose out of unique and highly unusual facts of the present case, which the judge described as “stark”[4], and do not give rise to questions of great general or public importance.

9.  We think it is appropriate to give leave to appeal for Question 1.  We are satisfied about its arguability and it affects the banking industry and its customers generally.

Question 2

10.  Mr Sussex submitted that the express premise of the plaintiff’s claim was that the unauthorised debits and closing of the Account were ineffective and that the plaintiff simply claimed repayment of the balance which, in the eyes of the law, was still in the Account.  The plaintiff did not need to rely on the Quincecare duty.  Accordingly, contributory negligence – which is a defence to a Quincecare claim pure and simple and which sounds in damages – is not a defence to a claim to recover the debt owed by the defendant.

11.  As we understand his submission, Mr Sussex does not propose to take any issue as to whether the English authorities or the decision of the High Court of Australia should be followed regarding the availability of contributory negligence when the contractual duty of care co-exists with the duty owed in tort, which was the main focus of the discussion in the Judgment and the CA Judgment.

12.  Mr Jat submitted that the heart of the plaintiff’s claim is the defendant’s breach of the Quincecare duty, and there is no principled reason why contributory negligence should not be available in respect of that cause of action. 

13.  We would add that the plaintiff’s pleaded case is premised on breach of contractual and/or common law duties owed to the plaintiff by the defendant. 

14.  All things considered, it would be appropriate to grant leave for Question 2 as well, as this question has not been adequately addressed in the CA Judgment and appears to be reasonably arguable.

15.  We grant leave to appeal on the two questions in the notice of motion and make an order that the costs of this application be in the cause of the appeal.