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Dbs Bank (Hong Kong) Ltd v Sit Pan Jit

Judgment Cited authorities 58 Cited in Precedent Map Related
Vincent
Judgment Date02 April 2015
Subject MatterCivil Action
Judgement NumberHCA382/2009
CourtHigh Court (Hong Kong)
HCA382E/2009 DBS BANK (HONG KONG) LTD v. SIT PAN JIT

HCA 382/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 382 OF 2009

____________

BETWEEN

DBS BANK (HONG KONG) LIMITED Plaintiff
and
SIT PAN JIT
 Defendant

____________
Before : Deputy High Court Judge Marlene Ng in Court
Dates of Hearing : 11-14, 18-21 and 24-26 February and 7 May 2014
Date of Handing Down Judgment : 2 April 2015

___________________

J U D G M E N T
__________________

Index

Section

Paragraphs

I

INTRODUCTION

1-7

II

PARTIES’ RESPECTIVE CASE

(a) DBS’ claim

8-9

(b) Sit’s defence and counterclaim

10-23

(c) DBS’ reply and defence to counterclaim

24

III

ISSUES

25-26

IV

WITNESSES

27

(a) Leung

28-31

(b) Kong

32-41

(c) Other bank staff

42-46

(d) Sit

47-51

(e) Malik and Chung

52

(f) T/C Recordings

53-55

V

SIT’s BACKGROUND

(a) Personal and business background

56-57

(b) Ability to understand English

58-62

(c) Dealing with contractual documents

63-64

(d) Investment background – 1993-1994

65-69

(e) Investment background – 1999-2001

70-82

VI

1ST REPRESENTATIONS, ORAL CONTRACT AND ACCOUNT OPENING

(a) Undisputed facts

83-84

(b) Sit’s case

85-89

VII

1ST FACILITIES LETTER, CHARGE, MORTGAGE AND GENERAL AGREEMENT

(a) Undisputed facts

90-92

(b) Sit’s case

93

VIII

2ND FACILITIES LETTER AND 2ND REPRESENTATIONS

(a) Undisputed facts

94

(b) Sit’s case

95

IX

3RD FACILITIES LETTER AND 3RD REPRESENTATIONS

(a) Undisputed facts

96-97

(b) Sit’s case

98

X

4TH FACILITIES LETTER AND 4TH REPRESENTATIONS

(a) Undisputed facts

99-100

(b) Sit’s case

101-102

XI

ISDA AGREEMENT

103

XII

SIT’s ACCOUNT, ELNs AND 5TH/6TH REPRESENTATIONS

(a) Investment history

104-107

(b) Sit’s case

108-114

XIII

MISCELLANEOUS POINTS

(a) Additional facilities under 3rd and 4th Facilities Letters

115

(b) Conditions precedent

116

(c) Kong unlicensed until 28 June 2008

117-120

XIV

SECTION 108

121

(a) Parties’ respective stance

122-124

(b) Legislative history

125-127

(c) Section 108(6)

128-140

(d) Section 107

141-142

(e) Setting up an estoppel in face of a statute

143-144

(f) Contracting out

145-147

XV

MISREPRESENTATION – OVERVIEW

148-150

XVI

SIT’s ANCHOR ARGUMENTS

151

(a) Trust in Kong

152-162

(b) “Principal protection”

163-169

XVII

1ST REPRESENTATIONS

170-175

XVIII

CONTRACT vs ORAL CONTRACT

(a) Findings of fact

176-190

(b) Customer Declarations

191-192

(c) Effect of signing Banking Documents

193-195

(d) Entire Agreement Clause

196-197

XIX

2ND, 3RD AND 4TH REPRESENTATIONS

198-201

(a) Margin financing

202-217

(b) 2nd, 3rd and 4th Representations made?

218

XX

5TH AND 6TH REPRESENTATIONS

(a) Parties’ respective stance

219-222

(b) 5th Representations - 27/4/07 Call Report

223-236

(c) 6th Representations – the Words and rule in Browne v Dunn

237-246

(d) Other 6th Representations made?

247-279

(e) 6th Representations - inducement/reliance?

280-292

(f) Falsity of representations?

293

XXI

CRIMINAL PROCEEDINGS

294-303

XXII

CONTRACTUAL ESTOPPEL

(a) “Execution only” service

304-311

(b) Authorities

312-327

(c) Equal bargaining power?

328-340

(c) No separate doctrine?

341-348

(d) Doctrine applicable to local context?

349-352

XXIII

BREACH OF DUTIES

(a) Duties in tort?

353-367

(b) Duties in contract?

368

(c) Fiduciary duties?

369-370

(d) Code

371-376

(e) Interfoto principle

377-395

(f) Professional duties?

396-406

XXIV

CECO AND MO

(a) Exclusion/exemption of liability?

407-437

(b) Reasonableness

438-450

XXV

MARKET COLLAPSE

451-458

XXVI

QUANTUM OF DBS’ CLAIM

459-472

XXVII

CONCLUSION

473-474

I. INTRODUCTION

1. The plaintiff (“DBS”) was/is a licensed bank in Hong Kong. The defendant (“Sit”) was/is a businessman/investor and former customer of DBS. The present action concerned alleged “mis-selling” of financial products. DBS claimed Sit sustained losses caused by adverse market conditions in 2008, but wrongfully failed/refused to meet margin calls for losses he sustained. But Sit claimed DBS committed wrongs against him, including inter alia misrepresentation, breach of duties in tort (common law and statutory) and contract, and breach of fiduciary duties, in respect of ten equity-linked notes (“10 ELNs”).

2. In April 2004 Sit opened a private banking account with DBS (“Sit’s Account”), and between April 2004 and March 2008 he signed various banking documents, including (a) “Account Opening Form – Individual Account” dated 20 April 2004 (“Account Opening Form”), (b) facilities letter dated 28 April 2004 (“1st Facilities Letter”), (c) “Charge on Cash Deposit(s) to Secure Liabilities of the Depositor(s)” dated 3 May 2004 (“Charge”), (d) “Mortgage over Stocks, Shares and Other Securities to Secure Liabilities of the Depositor” dated 3 May 2004 (“Mortgage”), (e) “General Commercial Agreement” dated 3 May 2004 (“General Agreement”), (f) facilities letter dated 27 July 2004 (“2nd Facilities Letter”), (g) facilities letter dated 26 May 2006 (“3rd Facilities Letter”) with “Terms and Conditions Governing Banking Facilities and Services” attached (“T&C”), (h) facilities letter dated 18 June 2007 (“4th Facilities Letter”) with the T&C attached, (i) “ISDA Master Agreement for DBS Bank (Hong Kong) Limited” dated 3 March 2008 (“ISDA Agreement”). Such banking documents together with the pre-July 2007 DBS Private Banking Account Master Agreement as varied from time to time (“Master Agreement”), which variation included amendments in July 2007, are referred to as the “Banking Documents” and the 1st to 4th Facilities Letters are referred to as the “Facilities Letters” in this Judgment.

3. Some express terms/conditions of the Banking Documents are set out in Schedule A to this Judgment (“Schedule A”). Except for certain clauses on “remote channel” and KODA accumulators, the terms/conditions of the Private Banking Agreement in DBS Bank (Hong Kong) Limited v San-Hot HK Industrial Company Limited & anor (“San‑Hot”)[1] were the same as or similar to those in Part B of Schedule A. Mr Wong SC (and Mr Dawes with him), counsel for DBS, collated various provisions of the Banking Documents under different categories. For convenience, I adopt their categorisation in Schedule B to this Judgment (“Schedule B”), and such provisions are referred herein as set out in the first column in Schedule B.

4. Between June 2004 and March 2008, Sit utilised credit facilities granted by DBS to purchase inter alia 69 equity-linked notes (“ELNs”) via Sit’s Account, and the ELNs were mortgaged/pledged to DBS as securities. Particulars of the 10 ELNs are set out in Schedule C to this Judgment, and are referred individually as the “1st to 10th ELNs”. The workings of the ELNs were explained in the reports by DBS’ expert Pawan Malik (“Malik”) and Sit’s expert Ronald Chung (“Chung”).

5. Basically, an ELN is a structured product with the final payout based on the return of the underlying equity (single stock or basket of stocks). A “basket” ELN pays an attractive coupon provided the price of the equity stocks does not fall dramatically during its life, and the investor will benefit if the referenced basket of equity stocks stays above a pre-designed threshold level. But if one of them falls below the pre-designed threshold level, the investor will receive reduced coupon or be exposed up to 100% loss of principal. The 2nd to 10th ELNs were callable bull notes (“CB Notes”), and the 1st ELN was a target accrual range note (“TARN”).

6. For the CB Notes, each had a maturity of two years and its performance was linked to a basket of three locally listed equity stocks. They had the following structural similarities: (a) the investor would earn an attractive coupon if all stocks in the basket stayed above a pre‑designed threshold level, (b) the ELN would redeem early at par if all stocks in the basket were above an agreed trigger threshold, and (c) if at final maturity all stocks were above an agreed knock-in threshold, the investor would receive par, otherwise he would receive...

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