EMIRATE DISTRIBUTORS LTD AND ANOTHER v. AALL & ZYLEMAN CO LTD AND OTHERS

EMIRATE DISTRIBUTORS LTD AND ANOTHER v. AALL & ZYLEMAN CO LTD AND OTHERS

D1 breached its tortious duty of care by failing to implement and follow adequate payment verification procedures and by permitting employees (Sandra) and a supervising signatory (D3) to process six unauthorised remittances without noticing multiple red flags; the nominee directors D2–D4 did not owe the asserted supervisory tortious duty in their limited, formal roles; Plaintiffs were contributorily negligent in failing to monitor accounts and secure email, so damages were reduced by 50%; D1 liable to Plaintiffs for 50% of loss (award: P1 USD70,000; P2 USD879,000).

Citation
[2020] HKCFI 851
Parties
1st Plaintiff: Emirate Distributors Limited; 2nd Plaintiff: Salam Corporation Limited; 1st Defendant: Aall & Zyleman Company Limited (奧利文有限公司); 2nd Defendant: Au Wai Kwan (區慧君); 3rd Defendant: Lee Pui Yee Anita (李佩儀); 4th Defendant: Pan Siu Ki Francis (潘瑞麒)
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
21 May 2020
Case Number
HCA1828/2015
Procedural Posture
Civil Action for Negligence and Breach of Duties Relating to Unauthorised Remittances / Judgment (trial Judgment Dated 21 May 2020)
Outcome
Judgment for Plaintiffs in part: Aall & Zyleman Company Limited liable in negligence for 50% of loss arising from six unauthorised remittances; claims against D2–D4 dismissed.
Legal Topics
Unauthorised Remittances, Email Fraud, Due Diligence / KYC, Standard of Care, Nominee Directors, Vicarious Liability, Contributory Negligence, Causation, Damages
Source Language
EN
Tort Contract Company Law Banking Law Directors' Duties Fraud Unauthorised Remittances Email Fraud +7 more

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Parties

Emirate Distributors Limited

1st Plaintiff

Salam Corporation Limited

2nd Plaintiff

Aall & Zyleman Company Limited (奧利文有限公司)

1st Defendant

Au Wai Kwan (區慧君)

2nd Defendant

Lee Pui Yee Anita (李佩儀)

3rd Defendant

Pan Siu Ki Francis (潘瑞麒)

4th Defendant

Procedural Posture

Civil Action for Negligence and Breach of Duties Relating to Unauthorised Remittances / Judgment (trial Judgment Dated 21 May 2020)

Legal Issues

  1. 1 Whether the six remittances were authorised by Plaintiffs or sent by a fraudster
  2. 2 Whether the disputed email address belonged to Mr Harvey Rogers
  3. 3 Whether there was a 'usual practice' permitting reliance on plain email instructions

Ratio Decidendi

D1 breached its tortious duty of care by failing to implement and follow adequate payment verification procedures and by permitting employees (Sandra) and a supervising signatory (D3) to process six unauthorised remittances without noticing multiple red flags; the nominee directors D2–D4 did not owe the asserted supervisory tortious duty in their limited, formal roles; Plaintiffs were contributorily negligent in failing to monitor accounts and secure email, so damages were reduced by 50%; D1 liable to Plaintiffs for 50% of loss (award: P1 USD70,000; P2 USD879,000).

Court Disposition

Judgment for Plaintiffs in part: Aall & Zyleman Company Limited liable in negligence for 50% of loss arising from six unauthorised remittances; claims against D2–D4 dismissed.

Orders

  • D1 to pay P1 damages USD 70,000 within 28 days
  • D1 to pay P2 damages USD 879,000 within 28 days