"Too good to be true" – Hong Kong court finds bank not liable for fraudulent investment introduced by employee

The court in Luk Wing Yan v. CMB Wing Lung Bank Ltd. [2021] HKCFI 279 found the defendant not liable for the actions of one of its employees who fraudulently offered investments which caused loss to the plaintiff.

The ruling represents a comprehensive review of the law in the area, and when banks can be liable to customers under so-called Quincecare duties, derived from an English case of the same name.

The investments were explained as "internal" in that they were only available to the bank's staff/employees (not to outsiders) and would generate high monthly yield (around 100 times the amount banks were otherwise paying on deposits). By forged receipts and online records created by Ms. Liu, the plaintiff was led to believe that all HK$24 million that she had transferred to Ms. Liu's account with the defendant, was placed in the investment.

The fraud was brought to light in March 2014, with Ms. Liu being convicted of three counts of fraud in October 2015 and sentenced to 10 years in prison. The plaintiff lost all her money.

The issue before the court was whether the bank could be held legally responsible for the losses sustained by the plaintiff as a result of the fraud perpetrated by the bank's employee.

The plaintiff made various claims against the bank, primarily in vicarious liability and negligence. The court rejected all of them.

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