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Latest investor's lawsuit in Hong Kong

09 December 2013

As stated in our blog of 19 April 2013, investors are facing some rather strong headwinds in trying to sue banks and financial institutions in Hong Kong.

The most recent failed lawsuit demonstrates as much: Great City Enterprises Ltd v UBS AG [2013] HKEC 1898 (29 November 2013). 


In the Great City case, the plaintiff BVI company sued the bank for alleged losses arising out of certain share trades that took place just before the financial crisis in the second half of 2008. In short, the plaintiff (an investment vehicle for two wealthy individuals) claimed that a director of the bank's wealth management division operated its account with the bank on a discretionary basis and without authority to conduct the share trades. 

The plaintiff attempted to portray itself as (among other things) risk averse and only interested in keeping substantial funds on deposit with the bank.  


In a rather robust judgment, of the sort seen before in investors' lawsuits in Hong Kong in the last couple of years, the plaintiff's claim was dismissed outright.  The court considered that the evidence did not support the claim that the share trades were unauthorised. In particular, according to the evidence, various on-line banking records, electronic records and telephone transcripts suggested that the plaintiff was aware of the share trades and was looking to invest.

However, the judgment leaves a number of questions unanswered and it would not be surprising if the plaintiff appeals; particularly, as regards the bank's reliance on a verbal agreement that it could conduct the share trades on the plaintiff's behalf.

Some key points

For now, a number of points are worth noting:

  • there is a difference developing in how unsophisticated (Susan Field v Barber Asia Ltd [2004] 3 HKLRD 871) or "consumer" type investors (Rubenstein v HSBC Bank Plc [2012] EWCA Civ 1184) fare in lawsuits against financial institutions, compared to professional investors who trade their investments (Hobbins v Royal Skandia Life Assurance Ltd & Anor [2012] 1 HKLRD 977; Kwok v HSBC Private Bank (Suisse) SA [2012] 4 HKC 260; DBS Bank (HK) Ltd v San-Hot Industrial Co. Ltd & Anor [2013] 4 HKC 1);
  • despite their run of success in defending so-called "mis-selling" claims in Hong Kong, the banks and financial institutions do have certain "pressure points"; knowing what they are and when to press them helps;
  • of course, the banks' apparent run of success in defending claims at trial in Hong Kong does not tell of those cases that are settled;
  • on the basis that "a bird in the hand is (usually) worth two in the bush", a decent settlement beats losing at trial, particularly given that litigation in Hong Kong can be expensive, the loser generally pays the considerable legal costs and access to funding sources is limited (compared to some other common law jurisdictions, such as England & Wales and Australia);
  • that some of these cases are going to trial might suggest an element of "overreach" by some investors;
  • as the time bar comes to a head for commencing claims arising out of the excesses before the financial crisis, we are seeing a number of new lawsuits begin in Hong Kong;
  • the courts in Hong Kong are tending to take a rather strict view of the contractual documents between banks and their clients and sophisticated professional investors are often shown to have been cognisant of certain risks (or to have ignored them). However, professional investors will be watching with interest the outcome of the Securities and Futures Commission's consultation on professional investors and client agreements.  To date, the SFC's Code of Conduct has not given rise to contractual duties that override the express terms of a client agreement but the regulator is looking to address that.

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