The Hong Kong Court of First Instance has recently handed down its judgment in Shine Grace Investment Ltd v. Citibank, N.A. and Another (HCCL 28/2008), a case relating to alleged mis-selling of equity accumulator contracts by Citibank.
In dismissing the plaintiff’s claim, Mr Justice Peter Ng applied the Hong Kong Court of Appeal’s (CA’s) reasoning in Chang Pui Yin & Ors v Bank of Singapore  4 HKLRD 458 that a bank-customer relationship alone does not without more give rise to a duty to advise on the part of the bank. Instead, whether the bank has assumed any such duty or legal responsibility will be assessed objectively, for instance through the contractual terms and any other relevant factual circumstances concerning the bank and its customers.
This is another welcome decision for banks, affirming the central importance of the contractual terms themselves. As a matter of contractual interpretation, the court rejected an argument that the SFC’s main code of conduct had been incorporated by the express terms of the relevant contractual documents. Apart from the contractual terms, the relative sophistication and character of the customer in question was also highly relevant to the court’s decision.
Going forward, financial institutions will no longer be able to rely on their contractual terms to exclude or limit liability in relation to investments entered into after 9 June 2017. Since that date, where a written client agreement is required under SFC regulations (ie, primarily where individual investors and inexperienced corporate investors are involved), a financial institution subject to the regulations is required to include a mandatory suitability clause in the agreement, and may not derogate from this requirement by way of any other contractual arrangement. In the longer term, this is likely to mean fewer mis-selling cases along the lines of Shine Grace.
For our full briefing on the matter please click here.
The Hong Kong Court of Appeal (CA) has recently affirmed a decision of the Court of First Instance (CFI), in which a ruling was made in favour of the plaintiff investors in a mis-selling claim against a bank, albeit on different grounds to that of the CFI (click here for the full judgment and here for our e-bulletin on the CFI decision). Overturning the CFI’s ruling on contractual interpretation, the CA held that the exclusion clauses in the bank’s services agreement did apply to the plaintiffs’ non-discretionary accounts. The CA however went on to find that the exclusion clauses the bank sought to rely on to limit its liability were unconscionable under the Unconscionable Contracts Ordinance and did not satisfy the requirement of reasonableness under the Control of Exemption Clauses Ordinance. This is the first decision of its kind where the court considered unconscionability in a banking context. Our recent e-bulletin examines the decision in more detail. If you wish to discuss this further, please do not hesitate to contact our Hong Kong team as listed on the e-bulletin, or your usual Herbert Smith Freehills contact.
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.
Earlier this week, the Hong Kong Court of First Instance handed down its judgment in relation to a mis-selling claim against a bank, ruling in favour of the plaintiff investors. This departs from the trend in respect of post-financial crisis mis-selling claims against banks, which have all been unsuccessful at the courts.
In Gary Ronald Marshall v Barclays Bank plc  EWHC 2000 (QB), the bank applied to strike out a claim against it for alleged mis-selling of an interest rate hedging product (or to obtain summary judgment), the basis that the claim was barred by a general release in a pre-existing settlement agreement between the bank and the claimant. Continue reading
In a landmark decision dated 18 June 2015, the German Federal Supreme Court (Bundesgerichtshof, “BGH”) decided that pro-forma applications for conciliation (Güteverfahren) do not suspend the limitation period for misselling claims if the applications are too generic and do not contain details of the financial product concerned, the amount invested, the advice given and of the relief sought by way of the application. The cases determined by BGH related to private investors who had used model form applications for conciliation which had been drafted by lawyers, and offered to the wider public; they have been adopted by a significant number of investors. The BGH announced that the judgment will mean that a large number of misselling claims by private investors will now potentially be time-barred.
Mathias Wittinghofer, Friso Heukamp and Tilmann Hertel from our Frankfurt office consider the decision further below. Continue reading
Further to the brief post we published on the April judgment in DBS Bank (Hong Kong) Limited v Sit Pan Jit (HCA 382/2009), our team in Hong Kong have published some more detailed comments on this most recent of cases upholding the principles of contractual estoppel and enforcing the terms of the written contract between the parties. Given that that case turned upon its specific facts, we also consider some steps that can be taken to help banks protect themselves from customer claims in circumstances where investments go wrong.
The Court of First Instance has recently handed down its judgment in DBS Bank (Hong Kong) Limited v Sit Pan Jit (HCA 382/2009), which 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 those investments. Continue reading
We have published our latest Banking Litigation Update, summarising some of the more important cases and developments affecting UK financial institutions over the first half of 2014, including: Continue reading
On 9 October 2013, the Court of Appeal handed down its decision in Green & Rowley v Royal Bank of Scotland plc  EWCA Civ 1197, the first interest rate swap mis-selling case to come before the English courts since June 2012 when the FSA (now the FCA) announced a review into the sales of interest rate hedging products. In a ruling that will be welcomed by financial institutions, the Court of Appeal has rejected the proposition that, in non-advised transactions, a bank’s common law duty not to mis-state is informed by the relevant COB rules. The decision effectively rejected an attempt to widen the category of individuals who can bring a claim for breach of the COB/COBS rules. To read our more detailed briefing, click here.