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Yuen Kun Yeu And Others v Attorney General For And On Behalf Of The Commissioner For Deposit-taking Companies

Judgment Cited authorities 19 Cited in Precedent Map Related
Vincent
Judgment Date09 July 1985
Subject MatterCivil Action
Judgement NumberHCA1324/1985
CourtHigh Court (Hong Kong)
HCA001324/1985 YUEN KUN YEU AND OTHERS v. ATTORNEY GENERAL FOR AND ON BEHALF OF THE COMMISSIONER FOR DEPOSIT-TAKING COMPANIES

HCA001324/1985

A1324/1985

HEADNOTE

The plaintiff's invested their monies in a deposit-taking company which later collapsed and was eventually wound up. The plaintiffs instituted proceedings against the Attorney-General on behalf of the Commissioner for Deposit-taking Companies claiming payment of the sums invested together with interest general damages and damages for distress on the grounds of negligence and/or breach of statutory duty. The Attorney-General applied to strike out the Statement of Claim under Order 18 Rule 19 of the Rules of the Supreme Court and under the inherent jurisdiction of the Court on the grounds that it disclosed no cause of action. Held giving judgment for the Attorney-General.

(1) An action does not lie against the Commissioner in his capacity as a public officer if he fails to exercise a statutory, discretionary power in a particular way;

(2) There was no sufficient proximity of relationship between the Commissioner and the plaintiffs to give rise to a legal duty of care to avoid damage to the plaintiffs for economic loss;

(3) Foreseeability by itself is insufficient to give rise to a cause of action;

(4) As a matter of public policy the plaintiffs should have no right of action against the Commissioner;

(5) No statutory duty of care is owed by the Commissioner to give rise to civil liability for breach unless he acted ultra vires for example by reason of mala fides, wilful misconduct or deliberate failure to exercise his statutory powers or if he acted for some ulterior or improper motive.

1985 No. A1324

IN THE SUPREME COURT OF HONG KONG

HONG KONG

___________

BETWEEN

YUEN KUN YEU

LAU KA KEI

TING AH LAM

LIEM JEN DJIANG

1st Plaintiff

2nd Plaintiff

3rd Plaintiff

4th Plaintiff

and
THE ATTORNEY GENERAL for and on behalf of the Commissioner for Deposit-taking Companies Defendant

_________

Coram: The Hon. Mr. Justice Jones in Court.

Dates of hearing: 3rd, 4th, 5th and 8th July 1985.

Date of Delivery of Judgment: 9th July 1985.

___________

JUDGMENT

___________

1. This is an application by the Attorney General who is sued as defendant for and on behalf of the Commissioner for Deposit-taking Companies (the Commissioner) to strike out the plaintiffs' statement of claim under order 18 Rule 19 of the Rules of the Supreme Court and under the inherent jurisdiction of the court on the grounds that it discloses no reasonable cause of action.

2. As the case is one of considerable public interest and of particular concern to depositors who have lost their investments in deposit-taking companies which have collapsed in the past few years, I adjourned the application into open court. The decision that I have to make involves an important matter of principle as to whether a duty of care is owed by the Commissioner to the plaintiffs for negligence at common law and or breach of statutory duty for economic loss. As this is a preliminary point of law I must assume that all the facts that are pleaded in the statement of claim are true.

3. The four plaintiffs were depositors with the America and Panama Finance Company limited (the Company) which was registered as a deposit-taking company on the 22nd September 1980. The plaintiffs' investments were made between August and December of 1982. The authorised capital of the company was $10 million of which $5 million was issued and $2.5 million was paid up. The company ceased business on the 7th January 1983 and its registration as a deposit-taking company was revoked by the Commissioner on the 17th January 1983. A petition to wind up the company on the grounds of insolvency was presented on the 27th January 1983 and a winding-up Order was made on the 25th February 1983. The reasons for the failure of the Company are not known, but were not the fault of the Commissioner. As a result of the collapse of the company the plaintiffs lost their life savings which were represented by the sums that they had invested with the company on fixed deposit. The amounts lost were as follows: the 1st plaintiff US$9,565.22; the 2nd plaintiff US$10,000; the 3rd plaintiff HK$109,000 and the 4th plaintiff HK$140,000.

4. By the present action the plaintiffs claim payment of these sums together with interest, general damages and damages for distress on the grounds of negligence and or breach of statutory duty. Although deposit-taking companies have been operating in Hong Kong for about the past fourteen or fifteen years, no legislation was introduced to monitor their activities until 1976 when the Deposit-taking Companies Ordinance was passed. The preamble to the Ordinance reads as follows:-

"To regulate the taking of money on deposit and to make provision for the protection of persons who deposit money and for the regulation of deposit-taking business for monetary policy purposes."

It will be necessary for me to make reference to several sections in this ordinance. Section 6 deals with the restriction on the taking of deposits and provides that a registered deposit-taking company shall not repay any deposit within three months without the written permission of the Commissioner whilst section 8 provides that the minimum sum by way of deposit shall be the sum of HK$50,000. Section 9 sets out the requirements upon an application for registration of a deposit-taking company and section 10 deals with the registration of the deposit-taking company by the Commissioner. Section 10(1) reads:

"Subject to subsection (2) the commissioner shall on receipt of an application in accordance with section 9 register a company as a registered deposit-taking company."

Sub-section (2) then deals with matters which the Commissioner shall consider when he comes to make a decision as to whether he should refuse to register a company. Only one sub-paragraph, sub-paragraph (e) gives the Commissioner a right to exercise his discretion to refuse an application for registration if it appears that it is not a fit and proper body to be registered. Paragraphs 6 and 7 of the statement of claim refer to the application and registration of this deposit-taking company from which it can be inferred that the plaintiffs contend that the company should never have been registered, but no particulars have been given as to why the application should have been refused. In my judgment no cause of action is revealed by these two paragraphs.

5. I then come to section 14(1) of the Ordinance which refers to the powers of the Commissioner with regard to the revocation of a registration. Section 14(1)(d)(i) gives power to the Commissioner to revoke a registration if the company is not a fit and proper body to remain registered whilst Section 14(1)(d)(iv) gives power to the Commissioner to revoke a registration if the business of the company is being carried on` in a manner detrimental to the interests of its depositors. Section 17 provides for annual accounts to be lodged by a company with the Commissioner. Section 17A deals with the place of business in Hong Kong. Section 17B relates to the appointment of the Chief Executive. Section 18 requires deposit-taking companies to exhibit accounts at their places of business. Section 19 requires deposit-taking companies to notify certain changes to the Commissioner. Section 19A imposes a duty upon a deposit-taking company to report its inability if it should arise to meet its obligations. Section 20 provides for monthly and quarterly returns, to be submitted but with a discretion to the Commissioner to allow them to be made at less frequent intervals. The Commissioner may also require a deposit-taking company to provide further information including an auditors certificate if he considers it to be necessary. Section 21A requires a deposit-taking company to maintain reserves. Section 21C provides that a deposit taking company shall not grant any advance, loan or credit facility against the security of its own shares. Section 22 prohibits a deposit taking company from lending more than 25% of the company's paid-up capital and reserves to any person or company or any group of persons or companies controlled by that person or company. Section 23 prohibits deposit-taking companies from granting loans or other facilities which are unsecured to one or more private companies in which the Directors of the deposit-taking company have an interest either as a director or partner, manager or agent when the aggregate of such loans exceed 10% of the paid-up capital and reserves of the company. Section 23A provides for a limitation on advances to employees and sections 23B, C and E limit the acquisition of shares and land by reference to shareholders' funds. Section 24A provides that a company shall have a minimum amount in specified liquid assets. Section 31A gives power to the Commissioner to examine at any time the books accounts and transactions of the company. Section 31B provides for production of books to the Commissioner by the company. By section 38(1) the Commissioner may recommend that an investigation of a deposit taking company be made. The Financial Secretary has power to order an investigation under section 38(2) and also has power to wind up a company under section 40. Section 3B empowers the Governor to give directions to the Financial Secretary and to the Commissioner with respect to the exercise or performance of their powers, functions and duties under the Ordinance either generally or in a particular case. Criminal sanctions are provided or in the ordinance for breach of certain provisions by a company and...

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