LIND ASIA LTD. v. WONG FUK WAH, GEORGE

1997, No. A12892

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A12892 OF 1997

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J U D G M E N T

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1. The Defendant, George Wong Fuk Wah, was a customer of the Plaintiff Lind Asia Limited. On 30th January 1999, Master Kwan gave summary judgment against the Defendant and struck out the Defendant's counterclaim. This is the Defendant's appeal.

2. The Defendant who appears in person has argued that appeal as well as it can be argued. He had in his skeleton submission reminded me of the Court of Appeal's decision in Man Earn Ltd. v. Wing Ting Fong [1996] 1 HKC 225. I accept that unless it is obvious that the defence put forward by the Defendant is "frivolous and practically moonshine, Order 14, ought not to be applied". Naturally, the counterclaim should not be struck out unless I am similarly satisfied.

3. Now the claim arose out of certain transactions in Hang Seng Index Futures Contracts. As is normally the case the Defendant was trading on margin. The relationship between the Plaintiff and the Defendant is governed by an agreement dated 31st July 1997 made between them. The Plaintiff's case is that on 21st October 1997, the Defendant instructed the Plaintiff to purchase three Hang Seng Index Futures Contracts and two Hang Seng Index Options Contracts. There is no dispute over the Options Contracts. The Defendant had counterclaimed that he had instructed the Plaintiff to sell and not buy three Hang Seng Index Futures Contracts. The Plaintiff has produced a transcript and a tape of recorded conversations between the Defendant and their employees on 21st October and 22nd October. They showed quite clearly that the Defendant had bought three Hang Seng Index Futures Contracts and not sold them. Moreover, when there was a dispute about it, the Defendant, after listening to the tape, which was played back to him on 21st October, accepted that he had bought those contracts.

4. Furthermore, the transcripts show that on 22nd October at 14:32 hours, the Defendant received a margin call for $223,000.00. That was repeated at 3:30 p.m. and the Defendant promised to make the necessary deposit before 5:00 p.m. He was told that he might have another margin call the next day. In fact, the Plaintiff made no deposit. His positions were closed out on 23rd October. There was a deficit of $242,415.00. Hence the Plaintiff's claim. The Defendant has alleged that the taped conversations "are no more than an arbitrary edition of the telephone conversations which I had with various staff of the Plaintiff on the matter tailor made to justify the Plaintiff's claim". The Defendant, however, does not deny that the taped conversations were conversations which he had with the Plaintiff's staff. And in his submissions before me he accepted that he did make the purchases on 21st October. I have also listened to the tape myself. I believe that it shows clearly that the Defendant did buy three contracts on 21st October and that he also promised to provide further margin on 22nd.

5. I have noted the allegations made by the Defendant in relation to the taped conversations. I have to ask myself whether it is believable that they had been edited, if so, the Defendant is entitled to leave to defend. I have come to the conclusion that given the taped conversations, the Defendant's allegations are not believable. I believe it is not believable that instead of buying three contracts, he was selling three contracts on 21st October 1997. That appears quite clear on the transcript. And at the hearing before me, I do not think that the Defendant is really disputing the reliability of the transcripts. Also I do not believe that any amount of editing could have achieved the result which is obvious on the tape.

6. Now the Defendant also complained that his positions were not closed out until 23rd October. However, as the taped conversations show, on 22nd October, the Defendant led the Plaintiff to believe that he would put up further margin by 5:00 p.m. on 22nd. The Defendant failed to do so and his positions were closed out on 23rd.

7. The Defendant had also raised two other matters. First, a representation by the Plaintiff that he was a member of the Hong Kong Futures Exchange. I do not believe that can help him. This would not entitle him to rescind the futures contracts.

8. Secondly, he was told on 20th October that he could not buy any more futures contract. But the fact was he was allowed to and did.

9. It was also said that the Plaintiff was negligent both in the purchase and the subsequent disposal of the Hang Seng Index Futures Contracts. I do not think it can be right so far as the purchase is concerned. The evidence shows quite clearly that the purchase orders were placed by the Defendant. As for the disposal, the complaint is that they were not disposed of on 21st. But again as the transcripts show that the Defendant was conducting himself as if he was going to provide further margin on the 22nd October. Had he done so, there would have been no reason to close out his position on 22nd. So eventually, the matter boils down to whether leave to defence should be given because of the Defendant's allegation that the taped conversations are unreliable. And as I said in the submissions before me he seemed to be less insistent that the transcripts or the tapes are unreliable.

10. As for his allegation that he was told on 20th October that he could not buy any more futures contract, this presumably is made in support of his case that he could not have placed any order to buy any Hang Seng Index Futures Contracts on 21st October because he had been told that he could not. But as I have concluded there was no mistake made about the contracts on 21st October that cannot help him either.

11. Now, the Defendant also complained, I think for the first time before me, about the quantum of the Plaintiff's claim. However, he had not disputed that before, not specifically in his letter dated 23rd October 1997, nor in his defence. And also the Plaintiff's present complaint about quantum is totally unparticularised. I am told by the Defendant that between the 21st and 23rd October, the Hang Seng Index dropped about 2,000 points. He complained that even if it was right for the Plaintiff to close out his positions on 23rd October, his contracts were closed out at prices which were disadvantageous to him. He said it is obvious that the Plaintiff had not closed out his positions promptly or fairly. And had the Plaintiff done so there would not have been any deficit or that that deficit would not have been so large.

12. Now, if it is obvious, one might ask why was it the Defendant had not raised it before. I must give due allowance to the Defendant for the fact that he is acting in person but so far as I can see the Defendant had conducted his defence competently. That even after giving due allowance to the Defendant, I think there is force in what Mr. Harris, who appears for Plaintiff has submitted, namely that the Defendant has failed to condescend upon particulars. There must be some reasons to show that the Plaintiff might have closed out the positions at the wrong time or that there was something wrong with the quantification of the Plaintiff's claim. But as it is, the Defendant's complaint is totally unparticularised.

13. I think in all the circumstances, I am of the opinion that the learned master was right in entering summary judgment against the Defendant. The counterclaim which depends on the allegation that the Defendant did not place

the purchase orders on 23rd October must accordingly also be struck out. That being the case, the appeal is dismissed.