In an interesting judgment handed down on 21st June 2012, in the case of Kwok Wai Hing v HSBC Private Bank (Suisse) SA, HCCL 7 of 2010, the Court of First Instance in Hong Kong has dismissed another apparently wealthy investor's claim against a financial institution. Several years after the 2008 financial credit crisis, several cases are now going to trial in the High Court of Hong Kong and they have their roots in the bull market excesses leading up to the financial crisis. In the Kwok Wai Hing case, the claim relates to substantial alleged losses apparently arising out of a large number of so called risky "forward accumulator" and other high-risk structured products.
As we alluded to in our e-bulletin on 12 January 2012, concerning the case of Hobbins v Royal Skandia Life Assurance Ltd & Anor [2012] 1 HKLRD 977 (in which this firm acted and which was decided by the same judge), claims by wealthy and sophisticated but disappointed "adult" investors are likely to receive relatively short shrift in the Hong Kong courts. Successful claims by individual investors in Hong Kong are not that common; Field v Barber Asia Ltd [2004] 3 HKLRD 871 being a rare example.
Several lessons can be drawn from these cases, including the recent Kwok Wai Hing case. They include:
(i) investors bear a heavy onus to check that they understand the investments they enter into and the documents pertaining thereto. If an investor (otherwise free from undue influence or duress) does not understand an investment she/he should not enter into it. Otherwise, as the judge notes in the Kwok Wai Hing case, the investor will only have her/himself to blame;
(ii) in cases involving investors such as Ms Kwok (referred to in passing by the judge as not giving him the impression that she was the "helpless housewife" she might want to portray in court) and Mr Hobbins (referred to by the judge as "far from being a babe in the woods in matters of financial investment"), and in the absence of egregious conduct on the part of a financial institution or financial adviser, the courts in Hong Kong are usually reluctant to go behind the contractual and related investment documents. Such documents include, for example, the account opening form, the risk disclosure statement, the product's terms and conditions, the client agreement, the security documentation;
(iii) the relevant documents are put in place as much for the financial institution's protection as the investor's. Such documents will seek to limit the scope of the institution's or adviser's duty and the amount of any liability.
We will write more about these and related developments in due course.
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