The Hong Kong Court of First Instance today handed down its judgment in DBS Bank (Hong Kong Limited) v San-Hot HK Industrial Company Limited and Hao Ting. This decision continues the general trend of recent pro-bank Hong Kong and overseas rulings on mis-selling cases.
The claim began with DBS seeking to recover debts owed to it in the sums of HK$92,648,489.83 and JPY23,545,784.77. The debts were due to losses incurred on equity and currency accumulator contracts in San-Hot's account (with the second defendant Madame Hao as San-Hot's owner and guarantor). It then became an investment mis-selling claim when San-Hot alleged that it purchased the accumulators after misrepresentations by DBS' staff, claiming damages from DBS for losses from those investments and rescission of the equity accumulator contracts.
In short, the Court's main factual and legal conclusions included the following:
- on a proper interpretation of the legal relationship between DBS and San-Hot, DBS owed no contractual or tortious duties to San-Hot. In this regard, the Court cited and followed, amongst other non-Hong Kong mis-selling cases, the Hong Kong Court's decision in June 2012 in Kwok Wai Hing Selina v HSBC Private Bank (Suisse) SA (in which Herbert Smith Freehills acted for the successful Defendant bank);
- even though the DBS's agreement with San-Hot contained a clause which made its relationship subject to applicable laws and regulations in Hong Kong, the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission has no force of law and is relevant only in proceedings under the Securities and Futures Ordinance;
- the allegations of mis-selling were unfounded, as Madame Hao was a sophisticated businesswoman, for whom accumulator contracts were not unsuitable;
- if Madame Hao "had not been so greedy, she could also have accepted DBS's repeated suggestions of disposing of the accumulated shares to lock-in her profits and improve her cash flow. She did not have to stretch her credit line to its limit."
As a result, the Court held that San-Hot was liable to pay the debts it owed to DBS as claimed.