On 17 February 2017, the Hong Kong Court of Final Appeal brought to a close the long-running case of DBS Bank (Hong Kong) Limited v Sit Pan Jit (FAMV 45/2016).
The dispute concerned a claim by DBS Bank (Hong Kong) Limited (DBS) against its former customer, Sit Pan Jit, for failing to meet margin calls in respect of certain investments, and a counterclaim by Mr Sit against DBS for mis-selling such investments based on misrepresentation, breach of duties in contract and/or tort (common law and statutory) and breach of fiduciary duties.
The Court of First Instance (CFI) ruled in favour of DBS, and ordered Sit to pay DBS over US$3.4 million with interest and costs. Mr Sit's counterclaim was dismissed as the CFI found no misrepresentation made by DBS (our e-bulletin on the CFI judgment can be found here). Mr Sit's appeal to the Court of Appeal (CA) was also unsuccessful. In essence, the CA concurred with the CFI's findings of fact, in particular, that no misrepresentation was made by DBS (our e-bulletin on the CA judgment can be found here).
After an unsuccessful application in the CA for leave to appeal to the Court of Final Appeal (CFA), Mr Sit filed an application for leave to appeal with the CFA directly. Last Friday, the CFA handed down its reasons for dismissing Mr Sit's leave application.
Mr Sit had raised several questions said to be of "great general or public importance". A number of these questions sought, in essence, to challenge the concurrent findings of fact made by the CFI and the CA. The CFA found no valid basis for such challenge. It agreed with the CA that Mr Sit "had not come anywhere near to meeting the high threshold for leave to be granted to appeal to the [CFA]".
The other questions raised by Mr Sit concerned (i) the doctrine of contractual estoppel and (ii) the application of the Interfoto principle (which requires a contracting party seeking to endorse a particularly onerous or unusual condition in the contract to show that it had been brought fairly and reasonably to the attention of the other party). These questions only arose if Mr Sit's challenge to the concurrent findings succeeded. Given the CFA's decision on the concurrent findings, these questions did not arise and the CFA did not consider them.
Those questions in any event are likely to have been academic in the context of the relationship between banks and investors as a result of the SFC's new professional investor regime and client agreement requirements. Amongst other things, where a written client agreement is required under Securities and Futures Commission (SFC) regulations, a financial institution subject to such regulations will be obliged to include a mandatory "suitability" clause in the agreement, which states that if it solicits or recommends a financial product to a client, the product must be reasonably suitable for such client having regard to the client's financial situation, investment experience and investment objectives. The deadline for incorporating this mandatory clause is 9 June 2017. Further details of the above reforms as well as the SFC's guidance are set out in our e-bulletins of 30 September 2014, 21 December 2015, 22 March 2016, 28 September 2016 and 6 January 2017.