Yuen Kun Yeu v Attorney General of Hong Kong

JurisdictionUK Non-devolved
Judgment Date1987
Date1987
Year1987
CourtPrivy Council
[COURT OF APPEAL] YUEN KUN YEU AND OTHERS. APPELLANTS AND ATTORNEY-GENERAL OF HONG KONG RESPONDENT [APPEAL FROM THE COURT OF APPEAL OF HONG KONG] 1987 May 5, 6, 7, 11; June 10 Lord Keith of Kinkel, Lord Templeman, Lord Griffiths, Lord Oliver of Aylmerton and Sir Robert Megarry

Negligence - Duty of care to whom? - Commissioner of deposit-taking companies - Statutory protection in Hong Kong for depositors - Commissioner registering company - Company's affairs allegedly conducted fraudulently, speculatively and to detriment of depositors - Whether commissioner in discharge of statutory powers owing duty of care to potential depositors - Deposit-taking Companies Ordinance (Laws of Hong Kong, 1983 rev., c. 328), ss. 10(1)(2)(e), 14 (1)(d)

The Commissioner of Deposit-taking Companies registered a company as a deposit-taking company pursuant to section 10 of the Deposit-taking Companies Ordinance.F1 The company subsequently went into liquidation. The plaintiffs, who lost the moneys they had deposited with the company, brought an action for damages for negligence against the Attorney-General of Hong Kong, representing the commissioner, alleging that they had made the deposits in reliance upon the company's registration and that the commissioner knew or ought to have known had he taken reasonable care that the company's affairs were being conducted fraudulently, speculatively and to the detriment of its depositors, that he should have ensured the company's compliance with the Ordinance, and that he ought not to have registered the company or that he should have revoked its registration, under section 14(1) of the Ordinance before the plaintiffs made their deposits.* On an application by the Attorney-General to the High Court of Hong Kong under R.S.C., Ord. 18, r. 19, the judge ordered the plaintiffs' statement of claim to be struck out as disclosing no reasonable cause of action. The Court of Appeal of Hong Kong affirmed that decision.

On the plaintiffs' appeal to the Judicial Committee: —

Held, dismissing the appeal, (1) that a close and direct relationship between the parties had to be established before liability in tort for negligence could arise, and in determining that question all the circumstances had to be taken into consideration including the reasonable contemplation of harm being caused to the plaintiff by the defendant's failure to take reasonable care, although foreseeability of injury by itself was insufficient to create a duty of care; that although, on the plaintiffs' allegations, information about the company giving rise to the suspicion that its business was being conducted to the detriment of its depositors was available to the commissioner but not to members of the public, the commissioner had no power under the Deposit-taking Companies Ordinance to control the management of deposit-taking companies, and there was no special relationship between the commissioner and the company and its managers which placed the commissioner under a duty to take reasonable care to prevent the company and its managers causing financial loss to future depositors with the company; and that, therefore, in all the circumstances the relations between the commissioner and the plaintiffs were insufficiently close and direct for him to owe them, as members of an unascertained class of potential depositors with deposit-taking companies in Hong Kong, a duty in performing his functions under the Ordinance to take reasonable care to prevent the suffering financial loss by reason of the fraudulent and improvident conduct of the company's affairs (post, pp. 783C–D, 785G–786B, G–787B, B–D).

Dicta of Lord Atkin in Donoghue v. Stevenson [1932] A.C. 562, 580, 581, H.L.(Sc.) applied.

Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004, H.L.(E.) distinguished.

Dictum of Lord Wilberforce in Anns v. Merton London Borough Council [1978] A.C. 728, 751–752, H.L.(E.) considered.

(2) That the commissioner was under no liability to the plaintiffs for negligent misrepresentation since the Ordinance merely placed him under a duty to supervise deposit-taking companies in the public interest and imposed no special responsibility on him towards individual potential depositors, and that by registering the company and allowing it to remain registered the commissioner was in fact making no representation as to the credit-worthiness of the company on which the plainiffs were entitled to rely; and that, accordingly, the plaintiffs' statement of claim had properly been struck out as disclosing no reasonable cause of action (post, pp. 787H–788A, B–C, 789F–G).

Hill v. Chief Constable of West Yorkshire [1987] 2 W.L.R. 1126, C.A. applied.

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, H.L.(E.) distinguished.

Per curiam. For the future it should be recognised that the two-stage test in Anns v. Merton London Borough Council [1978] A.C. 728, 751–752, is not to be regarded as in all circumstances a suitable guide to the existence of a duty of care (post, p. 785F–G).

Decision of the Court of Appeal of Hong Kong [1986] H.K.L.R. 783 affirmed.

The following cases are referred to in the judgment of their Lordships:

Anns v. Merton London Borough Council [1978] A.C. 728; [1977] 2 W.L.R. 1024; [1977] 2 All E.R. 492, H.L.(E.)

Baird v. The Queen (1983) 148 D.L.R. (3d) 1

Council of the Shire of Sutherland v. Heyman (1985) 59 AL.J.R 564

Curran v. Northern Ireland Co-ownership Housing Association Ltd. [1987] 2 W.L.R. 1043; [1987] 2 All E.R. 13, H.L.(N.I.)

Cutler v. Wandsworth Stadium [1949] A.C. 398; [1949] 1 All E.R. 544, H.L.(E.)

Donoghue v. Stevenson [1932] A.C. 562, H.L.(Sc.)

Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004; [1970] 2 W.L.R. 1140; [1970] 2 All E.R. 294, H.L.(E.)

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963] 3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.)

Hill v. Chief Constable of West Yorkshire [1987] 2 W.L.R. 1126; [1987] 1 All E.R. 1173, C.A.

Jaensch v. Coffey (1984) 58 AL.J.R 426

Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 A.C. 520; [1982] 3 W.L.R. 477; [1982] 3 All E.R. 201, H.L.(Sc.)

Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986] A.C. 785; [1986] 2 W.L.R. 902; [1986] 2 All E.R. 145, H.L.(E.)

McLoughlin v. O'Brian [1983] 1 A.C. 410; [1982] 2 All E.R. 298, H.L.(E.)

Peabody Donation Fund (Governors of) v. Sir Lindsay Parkinson & Co. Ltd. [1985] A.C. 210; [1984] 3 W.L.R. 953; [1984] 3 All E.R. 529, H.L.(E.)

Rondel v. Worsley [1969] 1 A.C. 191; [1967] 3 W.L.R. 1666; [1967] 3 All E.R. 993, H.L.(E.)

Smith v. Leurs (1945) 70 C.L.R. 256

States of Guernsey v. Firth (unreported), 14 May 1981, Court of Appeal of Guernsey (Civil Division) (Appeal No. 10 Civil)

The following additional cases were cited in argument:

Candlewood Navigation Corporation Ltd. v. Mitsui O.S.K. Lines Ltd. [1986] A.C. 1; [1985] 3 W.L.R. 381; [1985] 2 All E.R. 935, P.C.

East Suffolk Rivers Catchment Board v. Kent [1941] A.C. 74; [1940] 4 All E.R. 527, H.L.(E.)

Fellowes v. Rother District Council [1983] 1 All E.R. 513

Muirhead v. Industrial Tank Specialities Ltd. [1986] Q.B. 507; [1985] 3 W.L.R. 993; [1985] 3 All E.R. 705, C.A.

Smith v. Littlewoods Organisation Ltd. [1987] 2 W.L.R. 480; [1987] 1 All E.R. 710, H.L.(Sc.)

Takaro Properties Ltd. v. Rowling [1978] 2 N.Z.L.R. 314

Tate & Lyle Food Distribution Ltd. v. Greater London Council [1983] 2 A.C. 509; [1983] 2 W.L.R. 649; [1983] 1 All E.R. 1159, H.L.(E.)

APPEAL (No. 56 of 1986) by the plaintiffs, Yuen Kun Yeu, Lau Ka Kei, Ting Ah Lam and Liem Jen Djiang, with leave of the Court of Appeal of Hong Kong, from the judgment of the Court of Appeal of Hong Kong (Huggins V.-P., Fuad and Kempster JJ.A.) given on 7 March 1986 dismissing the appeal of the plaintiffs from the judgment of Jones J. on 9 July 1985 in the High Court of Hong Kong whereby it was ordered that the plaintiffs' statement of claim against the Attorney-General of Hong Kong for and on behalf of the Commissioner of Deposit-taking Companies be struck out under R.S.C., Ord. 18, r. 19, as disclosing no reasonable cause of action.

The facts are stated in the judgment of their Lordships.

Michael Beloff Q.C., Nicholas Pirie (of the English and Hong Kong Bars) and Paul Stinchcombe for the plaintiffs.

Michael Thomas Q.C., A.-G.(Hong Kong), and Nigel Jacobs for the Attorney-General of Hong Kong.

Cur. adv. vult.

10 June. The judgment of their Lordships was delivered by LORD KEITH OF KINKEL.

This is an appeal from an order of the Court of Appeal of Hong Kong made on 7 March 1986, whereby that court dismissed an appeal by the plaintiffs (the present appellants) against an order dated 9 July 1985 of Jones J. in the High Court of Hong Kong directing that the plaintiffs' statement of claim be struck out under R.S.C., Ord. 18, r. 19, was as disclosed no reasonable cause of action. The appeal is brought with leave of the Court of Appeal.

The plaintiffs are four residents in Hong Kong who between August and December 1982 made substantial deposits with a registered deposit-taking company called American and Panama Finance Co. Ltd. The company went into liquidation on 25 February 1983 and as a result the plaintiffs have lost all the money which they deposited with it. The respondent is the Attorney-General of Hong Kong as representing the Commissioner of Deposit-taking Companies. The plaintiffs' claim against him is for damages on the ground of negligence in the discharge of the commissioner's functions under the Deposit-taking Companies Ordinance. An alternative ground of breach of statutory duty was not argued. The damages claimed are quantified by reference to the amount of the plaintiffs' lost deposits with interest at the rates contracted for.

The Ordinance was originally enacted in 1976 and has since been amended on a number of occasions. The preamble reads:

“To regulate the taking of money on deposit and to make provision for the protection of persons who deposit money and for the regulation of...

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