Commercial Law — High Court finds no duties owed by defendant who helped his friend with company administration as a non-contractual agent
The Court stressed that not all agents are fiduciaries. The facts and circumstances must be carefully examined to see whether in fact a purported agent is in a fiduciary relationship to his principal.
Wong Chak Wing and Another v Camelo Investment Ltd and Others
|Reference:||HCA 65/2011;  HKCFI 3710|
|Court:||Court of First Instance|
|Before:||Hon K Yeung J|
|Appearance:||Jason Ko (with Ms Astina Au), instructed by Kwok, Ng & Chan, acted for the successful 7th Defendant in HCA 65/2011|
|Date of Decision:||8 December 2021|
The deceased (“the Deceased”) sought the help of his long-term friend, the 7th Defendant (“D7”), to provide administrative assistance related to the Deceased’s companies without remuneration. The joint administratrix of the Deceased’s estate (“the Estate”) claimed that D7 owed fiduciaries duties or other duties as a gratuitous agent to the Deceased, and breached the same in failing to return the company kits.
Applying the legal principles on non-contractual agency, the Court dismissed the Estate’s claim, holding that it failed to establish any duty on the part of D7. There was no evidence of assumption of responsibility by D7 or reliance by the Deceased.
This case concerns disputes between the Estate (jointly administered by the Deceased’s widow and her sister) and some of the Deceased’s siblings. There are two actions heard together, namely HCA 1390/2020 which relates to a business undertaking, and HCA 65/2011 which relates to certain landed properties.
The Claim Against D7
In HCA 65/2011, D7 was the Deceased’s long-term friend. The Estate claimed that the Deceased engaged D7 to assist him in relation to his business operation, including setting up, maintaining and organizing a group of offshore companies (“the Group Companies”) and its corporate structure. D7 was appointed as the Deceased’s agent for the administration of the Group Companies, and as the authorised person of certain companies therein responsible for filing corporate records. Upon the Deceased’s death, D7 failed to hand over the company kits (and hence control over the Group Companies) to the Estate in breach of his duties as an agent to the Deceased.
In defence, D7 argued that he never owed any duty to the Deceased or his Estate, whether by virtue of his role as an agent or as a fiduciary. Even if he owed any of the alleged duties, there was no breach. He never in fact possessed or knew the company kits’ whereabouts.
The Estate claims that as an agent of the Deceased, D7 owed fiduciary or other duties to the Deceased as the principal, and upon the latter’s death, to the Estate.
On parties’ pleadings, it is undisputed that D7 had never been paid any remuneration. He merely acted on a gratuitous basis to help the Deceased as a personal friend. In the absence of any contractual agreement between the Deceased and D7, the Estate’s case is therefore confined to non-contractual agency.
In respect of the claim against D7, the issues are:
(1) Whether D7, on the basis of non-contractual agency, owed any fiduciary or other duties to the Deceased and/or the Estate regarding the administration of the Group Companies;
(2) If so, whether D7 acted in breach of his duties to the Deceased and/or the Estate;
(3) If so, what relief should be granted against D7?
Non-contractual Agency: Relevant Legal Principles
It is common ground that duties may arise even in the case of a gratuitous agent. The Court sets out the relevant legal principles in Judgment §§107-112.
As explained in Chitty on Contracts: Hong Kong Specific Contract (6th Edn) §1-135:
“Where there is no contract between an agent and her principal, or where the agent is not paid for the services rendered, the agent is said to be a gratuitous agent. Liability of such agents arises under tort only, but only where it can be shown that she assumed responsibility for the action in question.” (emphasis added)
In Henderson v Merrett Syndicates Ltd  2 AC 145, the House of Lords considered Hedley Byrne & Co Ltd v Heller & Partners Ltd  AC 465 and held that an assumption of responsibility by a person rendering professional or quasi-professional services, coupled with a concomitant reliance by the person for whom the services were rendered, could give rise to a tortious duty of care. The standard of that duty is objective, having regard to what is reasonably to be expected of him in all the circumstances: Chaudhry v Prabhakar  1 WLR 29.
The Court applied these principles as summarized in Bowstead & Reynolds on Agency (22nd Edn) at §§6-027 to 6-028:
• A gratuitous agent will be liable to the principal if in carrying out the work, the agent fails to exercise the degree of care which may reasonably be expected of the agent in all the circumstances.
• There is no general requirement in the law of agency that an agent has a contract with the principal. Where there is no contract between principal and agent, it would seem that the alleged agent cannot be liable for pure failure to do what was undertaken without consideration.
• However, where he assumed responsibility to exercise care and skill, the agent can be liable in tort for negligently failing to complete, or to complete with due care, work that was undertaken and upon which the agent has embarked.
The Court’s Judgment
Applying the above principles, Hon K Yeung J accepted D7’s submissions that the Estate failed to plead any assumption of responsibility by D7 or any reliance by the Deceased, both of which were “constituent facts of the cause of action” against D7. It is incumbent upon the Estate to plead them. On this basis alone, the Court held that the Estate’s case against D7 must fail. (Judgment §§116-117)
Further, the learned Judge found no factual evidence as to how D7 had assumed responsibility in relation to the company kits, and what responsibility he had assumed. No objective reliance on the part of the Deceased could be inferred from the evidence either. (Judgment §§126-127)
The Estate argued that the relationship between the Deceased and D7 was more akin to a fiduciary relationship than just a matter involving the tortious duty of care and skill, since D7 was given an important responsibility involving a degree of trust and confidence. Rejecting this argument, the learned Judge remarked (Judgment §128):
“Not all agents are fiduciaries. The facts and circumstances must be carefully examined to see whether in fact a purported agent is in a fiduciary relationship to his principal – Boardman v Phipps  2 AC 46 at 127. Further, … the evidence is insufficient to show that D7 in fact had any of the Company Kits.”
The Court concluded that D7 did not owe fiduciary or other duties to the Deceased and/or the Estate regarding the administration of the Group Companies.
In any event, the Court accepted D7’s submissions that there could be no breach unless the Estate could establish that D7 factually had the company kits (Judgment §137). The Court held that the evidence fell short of establishing that D7 had been entrusted with any of the company kits (Judgment §141). The Estate’s claim against D7 was dismissed with costs.
Jason has been developing a broad civil practice since joining Chambers in 2019. He has acted as sole advocate in various commercial law matters, including successfully resisting an application for summary judgment in Sun Shine Investment Holdings Limited v Pure Living Inc Limited (HCA 913/2020) and successfully setting aside a default judgment in Aabitta Company Limited v Pure Living Inc Limited (HCA 175/2021).
In Kyocera Corp v W Haking Enterprises Ltd, a sale of goods dispute concerning the identity of contracting parties, Jason acted for the successful Plaintiff both at trial ( 1 HKLRD 121) and on appeal ( 2 HKC 1), running arguments concerning the role of pleadings and the availability of the limitation defence (with Mr Richard Yip).
A seasoned mooter during his studies, Jason has represented the University of Hong Kong in the Philip C. Jessup International Law Moot Court Competition (2018), where his team won the Hong Kong Champion and he was ranked among the top 100 oralists internationally, and in the Red Cross International Humanitarian Law Moot (2017), where his team captured the international 1st runner up.
Find out more from Jason’s profile.
This article was first published on 3 March 2022.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photograph which appears in this article is included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related.