High stakes, higher standards: Navigating duty of care in financial services

In Xue Xiaoyun v Susan Yung & Another [2025] HKCFI 4183, the Court clarified the principles on negligent misstatements arising from informal communications between a securities firm's relationship manager and their client.

This decision underscores the stringent threshold for imposing a duty of care on financial institutions.  

Summary of facts

• The Plaintiff and his partner ("Madam Xu") are both PRC residents. Madam Xu made an application under the Capital Investment Entrant Scheme ("CIES") which required her to make a HK$10 million investment within 6 months (the "Investment"). 

• In order to facilitate Madam Xu's investment, the Plaintiff sought the assistance of the 1st Defendant, a relationship manager ("RM") of the 2nd Defendant for assistance with remitting funds from the Mainland to Hong Kong. 
• In response, the RM provided information regarding exchange rates and specifically details of two Mainland bank accounts to the Plaintiff via WeChat to facilitate the remittance (the "Remittance Information"). 
• The Plaintiff later remitted funds totalling RMB8,383,000 (equivalent to HK$10 million) to the designated Mainland accounts, but the corresponding amount was never received in Hong Kong. 
• The Plaintiff claimed against the RM for negligent misstatement and against the 2nd Defendant for vicarious liability arising from such negligent misstatements.
  
  

Decision

The Court dismissed the entirety of the Plaintiff's claim and held that the Defendants did not owe a duty of care to the Plaintiff.

A duty of care arises only if the Plaintiff reasonably relied on the 1st Defendant ("Reasonable Reliance") and the 1st Defendant assumed responsibility to exercise care towards the Plaintiff ("Assumption of Responsbility"). 

Reasonable reliance

The Court conducted a holistic assessment of the facts and concluded that there was no reasonable reliance by the Plaintiff based on the following factors:

• The Plaintiff is a sophisticated businessman and investor who had prior experience with cross-border remittance procedures. 
• The RM never represented that she was in a position of authority, skill or knowledge to advise on cross-border remittance. This is vastly distant from her scope of work as a relationship manager handling clients' CIES investment accounts.  
• In addition, the Remittance Information was provided in an informal context and beyond the scope of professional advice that the RM could give under her employment with the 2nd Defendant. 
  
  

Assumption of responsibility

The account-opening documents between the Plaintiff and the 2nd Defendant contains disclaimers stating that the 2nd Defendant does not provide financial advice and the Plaintiff is responsible for his own decisions.  

On this basis, the Court found that the RM did not assume responsibility for the Remittance Information provided. 

The Plaintiff's voluntary assumption of risk 

The Court also accepted that the Plaintiff voluntary assumed the risk of the Remittance Information as he failed to raise any queries about the Mainland accounts which are clearly intermediary and inherently risky in nature and proceeded with payment regardless. 

Vicarious liability not established against the 2nd Defendant

Even if the claim against the RM had succeeded, the 2nd Defendant would not be vicariously liable as the provision of the Remittance Information was beyond the scope of her employment and not sufficiently connected to her role.

Conclusion

This judgment underscores the crucial distinction between merely providing information and offering advice in determining the existence and scope of a duty of care. It also highlights the importance of contractual disclaimers and the stringent threshold for imposing a duty of care against financial institutions.