Hong Kong recently saw four first-instance decisions (Kwok v HSBC [2012] HKCFI 964, DBS v San Hot [2013] HKCFI 387, Shum v DBS [2013] HKDC 971, and Ko v Hong Kong Forex Investment [2013] HKCFI 2195), while Singapore saw one appeal decision (Deutsche Bank v Chang [2013] SGCA 49), all involving alleged misrepresentations by banks in selling financial products.
Although each case turns on its own details, the following common facts were present:
- a customer signed, without having fully read or understood, an account-opening application, incorporating terms characterizing the account as execution-only;
- the bank recommended a product to the customer;
- the customer signed, without having fully read or understood, a product-purchase form, incorporating representations that the customer appreciated the risks and purchased the product based on his/her own judgment;
- the product performed badly; and
-
the customer alleged that the bank:
- breached its duty as a financial advisor; and
- misrepresented the product’s risk profile.
The Hong Kong and Singapore courts observed, inter alia, that:
- the terms and representations to which the customer appended his/her signature were binding, regardless of whether he/she read or understood them – following Ming v Ming [2006] HKCFA 59 and Kincheng Bank v Kao CACV 160/1985;
- the bank did not assume any responsibility or owe any duty towards the customer – implying otherwise would exceed or violate the express term that the bank was in an execution-only relationship with the customer; and
- the representations in the product-purchase form contractually estopped the customer from (a) asserting his/her ignorance of the risks and therefore (b) raising the misrepresentation claim – following Peekay Intermark v ANZ [2006] EWCA Civ 386 and Springwell Navigation v JP Morgan [2010] EWCA Civ 1221.
While the cumulative effect of these observations has thus far enabled the banks to escape liability, the Singapore Court of Appeal nevertheless cautioned that cleaning up the paperwork and identifying to customers exactly what services will be provided remain a worthwhile exercise for the banks, regardless how competitive the marketplace is.
- Peter Chang, Associate, Freshfields Bruckhaus Deringer
