(A) Introduction
In a significant judgment clarifying the boundaries of duty of care in financial services, the Hong Kong Court in Xue Xiaoyun v Susan Yung and another, HCA 2526/2018, date of judgment: 12 September 2025, [1] dismissed a claim for negligent misstatement brought by a sophisticated investor against a securities firm and its relationship manager. The claim arose from the alleged loss in an informal cross-border remittance arranged to meet a investment deadline under Hong Kong’s Capital Investor Entrant Scheme (“CIES”).
This decision provides useful guidance on the enforceability of contractual disclaimers, the assumption of duty of care and the assessment of reliance in financial advisory relationships, and the limitations of vicarious liability.
(B) Facts
In a significant judgment clarifying the boundaries of duty of care in financial services, the Hong Kong Court in Xue Xiaoyun v Susan Yung and another, HCA 2526/2018, date of judgment: 12 September 2025, [1] dismissed a claim for negligent misstatement brought by a sophisticated investor against a securities firm and its relationship manager. The claim arose from the alleged loss in an informal cross-border remittance arranged to meet a investment deadline under Hong Kong’s Capital Investor Entrant Scheme (“CIES”).
This decision provides useful guidance on the enforceability of contractual disclaimers, the assumption of duty of care and the assessment of reliance in financial advisory relationships, and the limitations of vicarious liability.
(B) Facts
The Plaintiff (“P”) is a mainland Chinese businessman. The 1st Defendant (“D1”) was a relationship manager employed by the 2nd Defendant (“D2”), which is a securities firm. [2]
In 2013, P opened his own CIES account with D2. [3] In 2018, his partner, Madam Xu, obtained an approval in principle for her own CIES application and was required to invest HK$10 million by 23 February 2018. [4] On 22 February 2018, P and Madam Xu met D1 at D2's offices to open a CIES account and investment account in Madam Xu’s name. D1 alleged that later that day, she and P met a coffee shop near D2’s office, which D1 claimed P asked for assistance in finding a money exchanger (the “Alleged Coffee Shop Meeting”). [5]
That afternoon, D1 provided P with the details of two personal bank accounts in mainland China and an exchange rate via WeChat, instructing him to remit RMB 8,383,000 to them. P transferred the funds the next morning. The money was subsequently lost and never appeared in Madam Xu's Hong Kong account. [6]
P claimed against D1 on the ground that D1 owed him a duty of care, that this had been breached as there had been negligent misstatements made regarding the remittance arrangements, that P had relied on the misstatements, and that there had been loss suffered in the form of the remitted funds. [7] P also claimed against D2 on the ground of vicarious liability as D1’s representations arose out of her employment with D2 and was made in D2’s premises during office hours. [8]
(C) Issues
The following are the agreed issues between the parties: [9]
(1) Issue 1: Whether D1 owed any duty of care to P.
(2) Issue 2: Whether D1 made any of the representations to the Plaintiff as pleaded in paragraphs 11 and 12 of the Re -Amended Statement of Claim (“Alleged Representations”).
(3) Issue 3: If the answer to Issue 2 above is “yes”, whether D1 negligently breached her duty of care to P.
(4) Issue 4: If the answer to issue 3 above is “yes”, whether P has relied on the Alleged Representations and suffered a loss of RMB 8,383,000 as a result (“Alleged Loss”).
(5) Issue 5: Whether D1 has a defence of voluntary assumption of risks on the part of P.
(6) Issue 6: Whether P took any reasonable step to mitigate the Alleged Loss.
(7) Issue 7: Whether the Alleged Loss was wholly or partly caused or contributed by alleged negligence on the part of P.
(8) Issue 8: Whether P is barred from any recovery of his loss, if the conduct which led to the aforesaid loss was illegal.
(9) Issue 9: If D1 is liable to P for her alleged negligence, the extent to which D1 is liable for the Alleged Loss.
(10) Issue 10: Whether D2 is vicariously liable for D1’s alleged negligence.
(D) Decision
The Court dismissed P's claim against D1 and D2 with costs to D1 and D2 (together with certificate for two counsel for D2) on the following grounds:
That afternoon, D1 provided P with the details of two personal bank accounts in mainland China and an exchange rate via WeChat, instructing him to remit RMB 8,383,000 to them. P transferred the funds the next morning. The money was subsequently lost and never appeared in Madam Xu's Hong Kong account. [6]
P claimed against D1 on the ground that D1 owed him a duty of care, that this had been breached as there had been negligent misstatements made regarding the remittance arrangements, that P had relied on the misstatements, and that there had been loss suffered in the form of the remitted funds. [7] P also claimed against D2 on the ground of vicarious liability as D1’s representations arose out of her employment with D2 and was made in D2’s premises during office hours. [8]
(C) Issues
The following are the agreed issues between the parties: [9]
(1) Issue 1: Whether D1 owed any duty of care to P.
(2) Issue 2: Whether D1 made any of the representations to the Plaintiff as pleaded in paragraphs 11 and 12 of the Re -Amended Statement of Claim (“Alleged Representations”).
(3) Issue 3: If the answer to Issue 2 above is “yes”, whether D1 negligently breached her duty of care to P.
(4) Issue 4: If the answer to issue 3 above is “yes”, whether P has relied on the Alleged Representations and suffered a loss of RMB 8,383,000 as a result (“Alleged Loss”).
(5) Issue 5: Whether D1 has a defence of voluntary assumption of risks on the part of P.
(6) Issue 6: Whether P took any reasonable step to mitigate the Alleged Loss.
(7) Issue 7: Whether the Alleged Loss was wholly or partly caused or contributed by alleged negligence on the part of P.
(8) Issue 8: Whether P is barred from any recovery of his loss, if the conduct which led to the aforesaid loss was illegal.
(9) Issue 9: If D1 is liable to P for her alleged negligence, the extent to which D1 is liable for the Alleged Loss.
(10) Issue 10: Whether D2 is vicariously liable for D1’s alleged negligence.
(D) Decision
The Court dismissed P's claim against D1 and D2 with costs to D1 and D2 (together with certificate for two counsel for D2) on the following grounds:
(1) Duty of Care: The Court held that D1 did not owe a duty of care to P and/or that there was no such assumption of duty based on the following findings:
(a) P was educated, familiar with the business environment in the Mainland, and well versed in the CIES application process. Given his experience and acumen, the Court found that he was capable of critically assessing information given to him. P acknowledged that he was aware of the foreign exchange controls in the Mainland as well as the formalities and procedures required for remittances.
(b) P acknowledged that D1 had never held herself out as a director of D2, undermining his claim of relying on her authority.
(c) The contractual context between P and D2 contained clear disclaimers that negated any assumption of a duty of care, including: [10]
(i) The Account Opening Form:
“本人/吾等确认已收取中银国际证券有限公司之客户协议（包括协议所有部份及附录）、风险披露声明、客户资料声明、帐户申请表格及买他与是次开户有关的协议及文件（如适用）（合称「客户协议」）及确认客户协议（包括风险披露声明）是按照本人/吾等所选择的语言（英文或中文）而提供，并已邀请本人/吾等阅读该客户协议（包括风险披露声明）·提出问题及征求独立的意见（如本人/吾等有此意愿）。本人/吾等确认本人/吾等已仔细阅读，充分理解并接受较于客户协议内（包括风险披露声明）的所有条款和规定，井同意遵守客户协议（包括风险披露声明）可能会不时修改的所有条款和规定。”
(ii) The Customer Agreement, Clauses 11.1 and 14.1:
“You agree that we (including our directors, officers, employees and the Agents) do not provide tax, legal or investment advice nor do we give advice or offer any opinion or recommendation with respect to the suitability of any Securities or Transaction, You agree that you, independently and without reliance on us, make your own decision and judgments with respect to your Instructions”
(iii) The Customer Agreement, Clauses 28.3 and 33.3:
“No Disseminating Party shall be liable in any way to you or to any other person for: (a) any inaccuracy, error or delay in, or omission of, (i) any such data, information or message, or (ii) the transmission or delivery of any such data, information or message; or (b) any loss or damage arising from or occasioned by … any such inaccuracy, error, delay or omission … due either to any negligent act or omission by any Disseminating Party …”
(iv) The Customer Agreement, Clauses 32.3(a) and 37.3(a):
“Under no circumstances shall we (including, for the purposes of sub-Clauses 32.3. 32.4, and 32.5 the Agents and their and our respective directors, officers or employees, or any other person involved in creating, producing or delivering the Services or managing us for all of whom we hereby also act), including any negligence on their parts, be liable for any direct, indirect, incidental, special or consequential losses or damages that result from the use of or inability to use the Account(s) and the Services or out of any breach of any warranty.”
(v) The Appendix, Clause 10:
“阁下同意，本公司（包括本公司的萤事、高级职员、雇员及代理人）不提供税务、法律、投资、移民或有关资本投资者入境计划方面的意见。本公司对于任何证券或交易是否适合投资者亦不给予任何意见或建议。阁下同意，阁下将在完全独立且对本公司无依赖的悄况下就阁下的指示自行作出决定及判断。阁下所作的任何投资决定，将完全是根据阁下对自身的财务状况及投资目标进行自行评估而作出的决定。”
The above contractual provisions counter P’s claim that there was a duty of care and/or that there was an assumption of such duty. As defined by Clauses 11.1 and 14.1 in the Customer Agreement and Clause 10 of the Appendix, the parties were agreed as to the parameters of how they were to deal with each other. D2 and D1 (as D2’s employee and agent) were not advisors and P and Madam Xu should make their own independent decisions about matters including cross-border remittance transactions. Having gone through the CIES process himself in 2013, P would have been aware of these parameters and the nature of his relationship with D2.
(2) Alleged Representations: The Court held that the Alleged Representations were not made as pleaded. The Court believed D1's account of the "Alleged Coffee Shop Meeting" and found P's evidence inconsistent and unreliable. The WeChat messages were merely the provision of information, not advice or representations.
(3) Reliance and Causation: The Court found that there was no reasonable reliance on the ground that P was fully aware of the context and the risks of the cross-border remittances and that he did not rely on D1 for advice on such remittance.
(4) Breach: The Court found that the pleadings insufficient, as the Statement of Claim lacked clear particulars defining the scope of the duty alleged. As such, the claim for breach of duty was not established.
(5) Voluntary Assumption of Risk by P: The Court viewed that this defence was a denial of the duty of care and relied on its reasoning under the issue of duty of care.
(6) Mitigation: The Court found that P failed to take reasonable steps to mitigate his loss, for example, promptly and properly reporting to police.
(7) Contributory Negligence: Had liability been established, the Court would have found P 100% contributorily negligent for his own careless conduct in pursuing the informal transfer without due diligence.
(8) Illegality: The Court found that the illegality defence was not applicable to this case as there was no evidence to show that P had a deliberate intention to deceive the Immigration Department jointly with Madam Xu.
(9) Vicarious Liability: The Court found that D2 was not vicariously liable as D1's actions did not have a sufficiently "close connection" to her employment given the unusual and informal nature of the request and the fact she was effectively on a “frolic of her own” for personal motives.
(E) Key Takeaways
In conclusion, this decision is significant for both investors and financial institutions on the following grounds:
(1) The Enforceability of Contractual Disclaimers: Clearly drafted disclaimers in customer agreements are effective in negating any assumption of a duty of care. Courts will uphold these clauses to define the boundaries of the relationship, making it clear that the institution is not acting as an advisor and that the investor is making independent decisions. Therefore, investors should review carefully all the contracts with the financial institutions before execution. Financial institutions should also regularly review their customer agreements and account opening forms in order to ensure that disclaimer clauses are unambiguous and written in plain language.
(2) The Standard for Reasonable Reliance: The Court will consider the investor's background, education, and business experience when assessing whether it was reasonable for him to rely on informal advice. Sophisticated investors are expected to exercise their own judgment.
(3) The Limitation of Vicarious Liability: An employer will not be held vicariously liable for an employee's actions if those action did not have sufficiently close connection to their employment. Financial institutions should educate their employees on the boundaries of their roles, including prohibitions on providing advice or information outside the scope of the employer's official products and services.
[1] https://legalref.judiciary.hk/doc/judg/word/vetted/other/en/2018/HCA002526_2018.docx
[3] Ibid, §10
[4] Ibid, §13
[5] Ibid, §15-16
[6] Ibid, §20
[7] Ibid, §26
[8] Ibid, §30
[9] Ibid, §45-55
[10] Ibid, §87
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