MALAHON SECURITIES LTD. v. WONG TUNG SHAN

HCA 1593 & 2560/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1593 of 1998

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JUDGMENT

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1. In these consolidated actions, the plaintiff claims against the 2 defendants for the balance of the purchase price of 2 million shares. The actions had been consolidated by the Order of Master Poon made on 3 September 1998. Subsequently, the plaintiff obtained judgment against the defendant in HCA2560 of 1998. The Third Party proceedings brought by the defendant in HCA 2560 of 1998 had not been proceeded with. The 2 actions have not been deconsolidated. The present trial only concerns the plaintiff and the defendant in HCA 1593 of 1998 (hereafter referred to as "the defendant").

Background

2. The Plaintiff is a member of The Stock Exchange of Hong Kong and carries on the business of securities brokerage. Mr Chan Kam Wing ("CKW"), the defendant in HCA2560 of 1998, was an Account Executive and licensed agent employed by the plaintiff. By a Cash Trading Agreement dated 19 March 1997 ("the Agreement"), the defendant became a customer of the plaintiff. CKW was the agent in charge of the defendant's account.

3. The plaintiff's claim against the defendant is in breach of the Agreement and in dishonoured cheque. The plaintiff's case is that on 12 January 1998, the plaintiff purchased on the defendant's behalf 2 million shares of Billion International Holdings Limited ("BIHL") with stock code no. 0736 ("the Shares") at the unit price of $0.495. The total amount that the defendant has to pay, inclusive of brokerage fee, stamp duty and transaction levy, came up to $994,113.45. A cheque in that amount was issued by the defendant drawn on its account with Hongkong bank ("the Cheque"), but it was dishonoured when being presented for payment. In the meantime, the plaintiff sold 400 Hongkong Bank Shares held under the defendant's account ("the HKSB Shares"). The plaintiff says that the sale was with the consent of the defendant. After the sale, the indebtedness of the defendant was reduced to $928,190.06. The plaintiff therefore sues on this amount.

4. The defendant denies that the purchase of the Shares was ordered or authorized by him. The defendant's case is that the purchase was carried out by CKW on the instruction of one Mr Lam Yuen Fai ("Mr Lam"). The defendant accepts that he had issued the Cheque and it was dishonoured upon presentation. His case is that he issued the Cheque involuntarily and under threats from the plaintiff's representative. The defendant says that the sale of the HKSB Shares was without his prior approval. It is also the defendant's case that he had on 16 January 1998 arranged for a sum of $15,000 to be paid to the plaintiff through CKW. The plaintiff denies having received this sum of $15,000.

5. The issues in this case are therefore:

(1) Whether the defendant is liable for the purchase price of the Shares on the basis that it was made or authorized by him;

(2) Whether the defendant is liable to pay under the Cheque he issued; and

(3) In the event that the defendant is liable to the plaintiff, whether his liability should be reduced to take into account the $15,000 paid over to CKW.

The Evidence

6. The plaintiff called only one witness, Mr Yan Fat Sun ("Mr Yan"), who is its House Manager. He testified that on 12 January 1998, he came to know that CKW had on behalf of a client purchased 2 million shares of BIHL and that payment was outstanding. On the following day, 13 January 1998, he accompanied CKW to collect payment from the client's office. There he was introduced to the defendant by CKW. He also realized then the office where the defendant worked was the office of Billion Finance Limited, a company related to BIHL. Mr Yan said this startled him because previously CKW had been warned by Mr Yan's superior not to allow staff of BIHL to trade in the shares of BIHL through the plaintiff. Mr Yan said that while at the office of the defendant, CKW told him that the defendant claimed that the shares were bought for Mr Lam. There was a discussion between CKW and the defendant about how payment was to be made and Mr Yan told the defendant that cheque other than that of the defendant's would not be accepted. Eventually, CKW and Mr Yan left without obtaining any payment or cheque from the defendant. Later that day at sometime after 7 p.m., CKW went down to the management office where the plaintiff's office was and returned with the Cheque. In cross-examination, Mr Yan said that when the Cheque was handed by CKW to him, the amount and the name of payee were already filled in, but he could not be sure who wrote them. Mr Yan then gave the Cheque to his superior, Mr Hui. Mr Yan denied having spoken to the defendant on the telephone, threatening the safety of the defendant or his family.

7. In the following morning, namely, 14 January 1998, a man came to the plaintiff's office looking for CKW. It is common ground that this man is Mr Chan Ying Ming, the boss of the defendant and also the chairman of BIHL ("Mr Chan"). CKW requested Mr Yan to join them at a meeting at Fairwood Fast Food Shop to discuss about the settlement of the price of the Shares. The defendant was also present at the fast food shop. According to Mr Yan, Mr Chan, after staying for about 10 minutes, left without saying anything. In cross-examination, Mr Yan explained that what he meant was Mr Chan had not said anything relating to the settlement of the price of the Shares. Mr Yan said that the defendant told CKW that Mr Chan would settle the payment for the Shares and the two of them discussed about how payment was to be made. They then left the fast food shop and returned to the plaintiff's office. Mr Yan said in the early part of his examination-in-chief that at the plaintiff's office, the defendant wrote out and signed a Chinese note in his presence. In this note, the defendant acknowledged that he purchased the Shares and had issued the Cheque, but requested the plaintiff to withhold presentation of it, and agreed to pay the outstanding amount by 2 instalments. The note was later handed by CKW to Mr Hui. There was considerable confusion in the evidence of Mr Yan over the events in the morning of 14 January 1998 and those surrounding the making out of this note, which I shall return to deal with later.

8. Mr Yan said that on 16 January 1998, he witnessed the defendant signing another Chinese note authorizing the plaintiff to sell the HKSB Shares. The note was prepared and written by CKW before the defendant turned up. He denied he had threatened the defendant into agreeing to sell the shares. Then on 17 January 1998, Mr Yan and CKW attended a meeting with Mr Chan at Macao Jockey Club in relation to the settlement of the payment for the Shares. The meeting was also attended by other brokers, and it was to discuss about payment by Mr Chan of shares he had bought. The defendant was also present at the Macao Jockey Club. Subsequent to this meeting, the plaintiff received some draft letters of undertaking and personal guarantees to be given by the defendant and Mr Chan. These documents were eventually not executed.

9. The defendant had testified and called one witness. At the material time, he was an employee of Billion Finance Limited and Mr Lam was his colleague. The defendant stated that he received a telephone call from CKW in the morning of 12 January 1998, telling him that Mr Lam wanted to place order for the purchase of BIHL shares through his account and seeking his permission to do so. According to the defendant, he had neither refused permission nor agreed to the request, and the conversation was cut off because the line was very poor. Later in the afternoon, CKW called him again informing him that Mr Lam had placed 2 bid orders. The first one of 2 million shares at $0.495 had been met and the order was executed. As for the second, CKW had arranged for it to be withdrawn. The defendant said he queried why CKW allowed Mr Lam to carry out such substantial transaction, and CKW replied that it was because the defendant had not refused permission. According to the defendant, CKW asked him for help and pleaded with him not to escalate the matter. CKW also told him that Mr Lam had accepted responsibility for the payment of the Shares.

10. Then on 13 January 1998 at about 4 to 5 p.m., CKW and Mr Yan waited for the defendant in his office. CKW asked the defendant for a cheque whereupon the defendant told him to go after Mr Lam. Mr Yan told the defendant that cheque other than that of the defendant would not be accepted and CKW also told him to send the cheque that evening. The defendant said he had a telephone conversation with CKW later that day, during which he made it clear that the purchase was made by Mr Lam. He said Mr Yan took over the conversation from CKW and asked the defendant to send a cheque right away; otherwise he would go to the defendant's home immediately. The defendant became alarmed and feared for the safety of his home. He therefore issued the Cheque, which he only signed, but left the other details blank, and left it with the management office of the building where the plaintiff's office was. He then telephoned CKW telling him to collect it from the management office. Moments later, CKW telephoned him demanding him to go to the plaintiff's office to fill out the name of the payee and the amount and also to endorse at the back of the Cheque. The defendant refused, and eventually offered to go in the following morning. According to the defendant, he received a telephone call from his wife moments later informing him that CKW had called and said something. As a result of this, the defendant telephoned CKW and spoke to him and then Mr Yan. It was eventually agreed with Mr Yan that the defendant would go to the plaintiff's office the following day.

11. In the following morning, the defendant went with Mr Chan to the plaintiff's office and was told to go to the Fairwood Fast Food Shop. CKW and Mr Yan later arrived. The defendant said he went to buy some drinks, and on his return, he noticed that the other three were chatting friendly. Mr Chan told him that the matter was all settled, and he then left. After Mr Chan left, Mr Yan said that Mr Chan had accepted liability for the payment of the Shares and he was given 1 week's time to settle it. Mr Yan then asked and persuaded the defendant to write a note as a temporary measure and to help out CKW. Though he was hesitated, the defendant wrote and signed the Chinese note at the dictation of Mr Yan while they were at the fast food shop. In this note dated 14 January 1998, the defendant acknowledged having bought the Shares through the plaintiff, stated that he had issued a cheque for payment of the price, but requested the plaintiff not to present it for payment, and further undertook to pay $450,000 on 16 January 1998 and the balance on 21 January 1998 ("the Chinese Note").

12. Then in the following evening, CKW telephoned the defendant, informing him that he was instructed by the plaintiff to sell the HKSB Shares. The defendant disagreed, saying that the shares belonged to his sister. In the following morning, CKW informed the defendant over phone that the HKSB Shares had been sold and promised that he would make good any loss if Mr Chan did honour his promise to settle payment for the Shares. Later in the evening, CKW and Mr Chan waited for the defendant at the defendant's office. Mr Yan demanded that the defendant raised fund for paying the Shares, claiming also that his superior was going on a trip and he could not tell what the new management would do to the defendant. The defendant related this to his wife and a colleague, Miss Cora Leung, afterwards. Miss Leung then offered to lend him $15,000. In the following morning, CKW went to the defendant's office and collected $15,000 from Miss Leung.

13. The defendant also testified about the meeting on 17 January 1998 at the Macao Jockey Club between Mr Chan and the brokers from other securities firms. He said he had mentioned this meeting to CKW and Mr Yan in the evening of the 16th when they were at the defendant's office. The defendant said he did not know what was discussed between Mr Chan and the others at the meeting, but Mr Yan telephoned him afterwards saying that Mr Chan had offered no concrete proposal for payment. On Mr Yan's request, the defendant asked Mr Chan for a cheque, but was refused. Mr Chan told him that a deal had been struck. Several days later, CKW came to see Mr Chan and collected some documents drafted by Mr Chan's solicitors. The defendant understood that these documents were not executed by either the plaintiff or Mr Chan.

14. Miss Cora Leung gave evidence for the defendant. She confirmed she had lent $15,000 to the defendant and this amount was collected by CKW in the morning of 17 January 1998. CKW had given a receipt for the amount and it was given to the defendant. This receipt has been seized and kept by the police.

15. I am of the view that neither Mr Yan nor the defendant had been totally forthcoming and candid in their evidence and that neither of them had been telling the whole truth. In the case of Mr Yan, he is evasive and has been trying very hard to distance himself from any contact or dealing with the defendant. Although admittedly he had accompanied CKW to meet with the defendant on various occasions, he could barely tell what had happened or was said between CKW and the defendant. He was at pain to stress that he had no active involvement and no role to play in the whole matter. He even described himself as no more than "a middleman". He also said he had no conversation with the defendant either when he was at the defendant's office on 13 January or at the fast food shop and the plaintiff's office on 14 and 16 January. The impression he gave is that he had no interest in the matter, especially the dealings between CKW and the defendant. But if he was so disinterested, one wonders why he was asked to go along to these meetings, whether by CKW or the management of the plaintiff, and what is the purpose of it. Further, even if his role is confined to that of an observer or witness, it does not explain why he seemed to have no recollection or idea of the events that happened between CKW and the defendant.

16. In addition, Mr Yan's evidence concerning the meeting at the fast food shop and the events surrounding the making out of the Chinese Note is highly unsatisfactory. When led by the plaintiff's counsel in chief, Mr Yan said that Mr Chan came to the plaintiff's office and then left with CKW for the Fairwood Fast Food Shop, and he also went with them. Later on, in answer to my question, he clarified that he only joined CKW and Mr Chan at the fast food shop later. Mr Yan's evidence in chief is that Mr Chan stayed for about 10 minutes before he left the fast food shop. During these 10 minutes, Mr Chan was said to have said nothing and he left without offering a reason for his departure. Mr Yan said that he was surprised by the fact that Mr Chan left without saying anything. In cross-examination, Mr Yan initially said that nothing was said between him and Mr Chan and Mr Chan left right after he was introduced by CKW to him. When being asked how that could take up 10 minutes, Mr Yan then said this was a mere estimate. Even if that is so, it is difficult to understand how he could come to an estimate of 10 minutes when, according to him, Mr Chan left right after the introduction.

Mr Yan went on to say in examination-in-chief that the defendant requested for payment by instalments, but he only came to know the terms of the proposal after the Chinese Note had been written and signed. He said he was present, sitting in the plaintiff's office and saw the defendant write out the Chinese Note, although he could not see what was written. This is blatantly different from what he said in his witness statement. In the witness statement, Mr Yan stated that while at the fast food shop and after Mr Chan had left, the defendant told him that Mr Chan would take up the matter. Mr Yan then reiterated that the plaintiff needed to have the personal cheque of the defendant and shortly after that, he left CKW and the defendant. Afterwards at noontime, CKW handed him the Chinese Note. When the discrepancies were put to him in cross-examination, Mr Yan initially said he was not referring to the Chinese Note, but the other note authorizing the sale of the HKSB Shares. He went on to say that he did not see the Chinese Note being written out and it was only given to him by CKW after the meeting at the fast food shop. Then in the same breath, he said that he could not see what the defendant was writing and he could not be sure if it was the Chinese Note that the defendant was writing since he was sitting at a distance from the defendant. When he was specifically asked whether he left with CKW and the defendant, he said he left with CKW first. It was then pointed out to him that he had given different accounts on this, Mr Yan said that all in all, they left in such a way that the defendant was not with them. Then in re-examination, Mr Yan said they left together and because it was so crowded, it was difficult to tell who left first, but anyhow, they left for the plaintiff's office at the same time. This part of Mr Yan's evidence is so confusing that one cannot make out what in fact are his evidence, let alone the truth. It also demonstrates that Mr Yan was prepared to shift his evidence as and when it suited him.

17. There are also a number of aspects of Mr Yan's evidence that I find it difficult to understand. It is Mr Yan's evidence that CKW had previously been warned not to allow employee(s) of BIHL to maintain account(s) with the plaintiff for trading in the shares of BIHL and that it startled him to learn that the defendant was an employee of a related company of BIHL. Despite this, Mr Yan was adamant in cross-examination that CKW was trustworthy and had acted properly throughout. It is also Mr Yan's evidence that when he received the Cheque from CKW in the evening of 13 January, he had expected it to be honoured and paid. Yet in the following morning, when he was asked by CKW to go to the fast food shop to meet Mr Chan regarding the payment of the Shares, he raised no query. Not only that, there was, according to him, hardly any discussion or conversation between him and Mr Chan on the payment of the Shares while they were at the fast food shop. On Mr Yan's account, Mr Chan left right after he was introduced to Mr Yan. All these events are very strange and extremely unnatural. If the Cheque was in order and there was no reason to expect that it would not be paid, there was simply no need to have any more discussion on the payment of the Shares in the following morning. It is even more odd to have a discussion with someone who on the face of it is a third party to the transaction. Mr Yan, however, was obviously happy to go along with CKW's suggestion to meet and have a discussion at the fast food shop, to the extent that he did not even ask or query CKW the reason and purpose for meeting the boss of the defendant. In my view, the fact that Mr Chan came to meet CKW and Mr Yan the morning right after the Cheque was issued, and the fact that Mr Yan was prepared to meet him without raising any query show that, despite the giving of the Cheque, the issue about the payment of the Shares remained unsettled by 14 January 1998, and that Mr Yan was fully aware of this. This also suggests that there is a lot more to the events leading to the giving of the Cheque by the defendant. I am also of the view that something more must have taken place at the meeting in the fast food shop, just that Mr Yan chose not to relate them in his evidence.

18. As for the defendant, there can be no doubt that he is a clever and alert person. He is very articulate and competent, and displays great care and skill in the conduct of his case and in the cross-examination of Mr Yan. His testimony in Court, both in chief and under cross-examination, contains a great deal of important matters that did not feature in his fairly detailed witness statement. One of these matters was in relation to Mr Lam. The defendant's evidence suggests that Mr Lam was with him on most of the occasions when he met with CKW and Mr Yan and also when he went to deliver the Cheque to the plaintiff. It is also the defendant's evidence that he had demanded Mr Lam to settle the payment of the Shares. None of these was, however, mentioned in the defendant's witness statement. According to the defendant, he understood from CKW that Mr Lam was the one who had ordered the purchase of the Shares and therefore had an important role to play in the matter. There is therefore no good reason why the defendant, alert and careful as he is, would omit to mention Mr Lam's presence and role in the witness statement. Another matter is about the content of the Chinese Note. The defendant said for the first time in his cross-examination that the Chinese Note was written out at the dictation of Mr Yan. This is obviously a very important matter, especially in view of the contents of the Chinese Note. Yet it was not pleaded in the Defence nor mentioned in the witness statement. He had also not cross-examined Mr Yan on this and he made no mention in his evidence in chief. It is unlikely that such an important part of his case would have escaped the defendant's attention when he prepared his pleading, witness statement and generally for the case. In my view, these examples are indications of the defendant's attempt to improve on his evidence as the trial went along.

19. There are also aspects of the defendant's evidence that I find disturbing and difficult to understand. The defendant said that when CKW sought his permission for Mr Lam to trade under his account, CKW did not relate the details to him and he had neither approved nor declined the request. Despite that, there was no follow-up call from either him or CKW. It seems that CKW was happy to proceed with the transaction in the absence of clear indication from the defendant. If so, it is difficult to understand why he had to telephone the defendant to seek permission in the first place. It is equally strange that the defendant was likewise contented to leave the matter to CKW and Mr Lam when he had no idea about the details of the intended transaction. Although Mr Lam had previously traded under the defendant's account, that was an isolated incident in September 1997, when the defendant was on vacation. Also on that occasion, it was the defendant who told CKW that he would let Mr Lam use his account to deal in BIHL shares. In my view, the defendant had not been candid or completely candid about the telephone conversation(s) he had with CKW.

20. I also find it odd that the defendant would see fit to enlist the assistance of his boss, Mr Chan, with regard to the payment of the Shares. As far as the defendant's information and understanding go, the Shares were purchased at the order of Mr Lam. Although Mr Chan was the chairman of BIHL, he, on the face of it, had nothing to do with the transaction in question. The defendant said that it was Mr Lam who suggested asking the boss for help, but in going along with it, the defendant must have thought that it was worth trying. The question is what was the basis for the defendant thinking or even believing that Mr Chan might be prepared to offer his personal assistance. This is particularly puzzling when the evidence shows that trading of BIHL Shares was suspended on 13 January 1998 and both the Billion group of companies and Mr Chan were in some troubles. Again, I do not regard the defendant had presented the true position or the whole picture to the Court.

21. Indeed, looking at the case and the evidence of Mr Yan and the defendant as a whole, I am left with a distinct impression that both the plaintiff and the defendant have been economizing with the truth. The heavy involvement of Mr Chan personally in the matter is something that puzzles me. On either the plaintiff's or the defendant's case, there is no apparent reason for Mr Chan to be willing to shoulder personal responsibility for the payment of the Shares. It is to be noted that not only was he prepared to meet with CKW and Mr Yan at the fast food shop, he was also prepared to involve them in the meeting he held with the other brokers. He even went to the extent of instructing solicitors to prepare letters of undertakings and personal guarantees in favour of the plaintiff in relation to the payment of the Shares. The eagerness and readiness of Mr Chan to shoulder the liability for the Shares are inexplicable. What is more inexplicable is the plaintiff's readiness to negotiate and deal with Mr Chan in relation to this transaction, when it is the plaintiff's case that it was the defendant's responsibility to pay for the Shares and that the plaintiff would only accept the defendant's cheque. Notwithstanding that, there were meetings between CKW and Mr Yan and Mr Chan to discuss about payment of the Shares, and draft legal documents for compromise were collected from Mr Chan. It is also of interest to note that the plaintiff had kept the Cheque and withheld presentation until a week later and after the various attempts to negotiate and settle with Mr Chan came to no avail. Under the Chinese Note, the defendant, in return for the request to withhold presentation of the cheque, promised to pay $450,000 by 16 January and the balance by 21 January 1998. The plaintiff did not present the Cheque when the first payment was not forthcoming on 16 January, but proceeded to present it the day before the second payment was due. It would appear that the plaintiff had very little regard for the Chinese Note and was looking more to Mr Chan than the defendant for payment of the Shares. All in all, I am of the view that the evidence of both Mr Yan and the defendant has to be approached with extreme caution.

22. As for Miss Cora Leung, I am convinced that she was telling the truth and I accept her evidence. I accept that she did hand over $15,000 to CKW and received a receipt from him acknowledging this.

Authorization for the Purchase of the Shares

23. The evidence before the court clearly establishes that the Shares were purchased on 13 January 1998 under the defendant's account. There is, however, no evidence as to who in fact ordered the purchase. The suggestion that this was done at the request of Mr Lam is hearsay since neither CKW nor Mr Lam had testified. Similarly, there is no direct evidence on whether the defendant did authorize the transaction. However, looking at the evidence of the defendant and the other objective evidence, I am satisfied, on a balance of probabilities, that the defendant was aware of the transaction before it was carried out and he had agreed to it. My reasons are as below.

24. I had pointed out in the early part of this Judgment that it is most unusual for the defendant not to follow up on the matter when his telephone conversation with CKW about allowing Mr Lam to use his account was cut short due to the poor telephone line. He could have either called CKW or contacted Mr Lam. The inference must be that he was happy to allow Mr Lam to use his account to trade. In fact, it is not the defendant's evidence that he had objected to the request. On the defendant's evidence, he did not take issue with CKW's subsequent explanation that it was because the defendant had voiced no objection that Mr Lam was allowed to use the defendant's account. The defendant had pleaded in his Defence that CKW was negligent in allowing Mr Lam to trade in excess of the $500,000 limit agreed between him and CKW. In his evidence, the defendant, relying on an internal memo of the plaintiff dated 12 August 1997, said that there was an agreement between him and CKW that cash deposit(s) had to be made before a transaction in excess of $500,000 could be effected. The defendant complained that CKW was acting in breach of the agreement between them. On the other hand, the defendant accepted that as at 12 January 1998, his account had a share portfolio comprising BIHL and Hongkong Bank shares, producing a credit balance, and that the transaction was only marginally in excess of the $500,000 limit. The exact figures are not before the Court and the credit balance of about $480,000 quoted by the defendant in evidence was based on the price of Hongkong Bank shares a few days later. The evidence therefore falls short of making out a case of CKW acting negligently or beyond his actual authority so as to negative any consent given by the defendant for Mr Lam to use his account.

25. Quite apart from the defendant's own evidence, there is also other evidence which shows that the defendant had acknowledged and accepted responsibility for the transaction. The making out and giving of the Chinese Note is the most telling one. There is no dispute that the Chinese Note was in the defendant's handwriting and signed by him. The defendant said that he wrote out the document at the dictation of Mr Yan, which, for the reasons indicated in the earlier part of this Judgment, above, I do not accept. It is also the defendant's evidence that he was persuaded into writing and signing it in that Mr Yan told him that the plaintiff had suspended CKW's authority to trade and the Chinese Note will serve as a temporary measure, presumably to pacify the plaintiff. The defendant is an intelligent man and had previous experience working in foreign exchange brokerage firm and trading in stock trading. I do not believe he would be so na?ve as to accept these words of Mr Yan. He must have appreciated that by giving the Chinese Note, he was acknowledging in writing and for the first time his liability for the payment of the Shares. Without this document, it would basically be CKW's words against his as to whether he did authorize the transaction. The fact that he nevertheless went on to write and sign the Chinese Note goes a long way to show that he did accept responsibility for the transaction. And he would not have accepted responsibility if he did not knew about it beforehand and had never authorized it.

26. The plaintiff had sought to rely on the contents of the draft letters of undertaking and the recitals to the draft personal guarantees prepared by the solicitors of Mr Chan as proving that the defendant acknowledged that the Shares were bought by him and as establishing the defendant's liability for the purchase price of the Shares. I do not agree that these documents can assist the plaintiff in the manner suggested. The solicitors for Mr Chan had prepared 2 sets of letter of undertaking and personal guarantee, the former document to be given by the defendant and the latter to be given by Mr Chan. The 2 sets of documents are similar in contents with 2 major differences. The first is that one set was drafted on the basis that the defendant's account was a cash account whereas the other set assumed the account to be a margin account. The other difference rests in the timetable for payment. It is true that the 2 sets of draft letter of undertaking stated that the defendant confirmed his liability for the debit balance of his account with interest, and that the draft personal guarantees also recited the defendant's liability under the account. But these documents are prepared on Mr Chan's instructions and unless being executed by the defendant, they cannot be held against the defendant. Counsel for the plaintiff argued that it was the defendant's evidence that he had related to Mr Chan the whole incident an background leading to the purchase of the Shares, and these compromise documents must have been prepared on the basis of what the defendant told Mr Chan. I am unable to agree to this submission. Even if the defendant had told Mr Chan everything, it does not follow that Mr Chan had in turn related all the matters to his solicitors. The fact that 2 sets of documents were drafted is a good indicator that the solicitors were not even sure of a very basic fact, namely, the nature of the defendant's account, whether it was a margin or cash account. It is also pure conjecture to suggest that the defendant was closely involved in the preparation of these documents.

27. Leaving aside the draft compromise documents, on the basis of the other evidence and for the reasons set out above, I hold that the defendant did authorize the purchase of the Shares on 12 January 1998. By reason of this and the terms of the Agreement, the defendant is liable to pay the plaintiff the price of the purchase.

The Cheque issued by the Defendant

28. The defendant's case is that he issued the Cheque involuntarily in that Mr Yan had threatened to go to his home and he was therefore worried about the safety of his home and his family member. Mr Yan denied uttering any threat. On an objective assessment of the evidence, I am of the view that it is more probable than not that the defendant issued the Cheque reluctantly and under compulsion.

29. It is common ground that the defendant delivered the Cheque well after office hour on 13 January 1998 and to the management office of the building where the plaintiff's office was. Under the "T+2" rule, the last day for settlement of payment is 14 January. There is therefore no urgency that necessitates the defendant delivering the Cheque in the evening of the 13th. There is also no apparent reason why the defendant did not deliver the Cheque directly to the plaintiff's office, but had to ask CKW to pick it up from the management office. Counsel for the plaintiff suggests in his submissions that a possible reason is that it was after office hour and the defendant was not allowed by the management office to visit the plaintiff's office. There is firstly no evidence in support of this proposition. Secondly, even if that is a possible reason, either the defendant or the management office could have asked CKW or somebody from the plaintiff to come to the management office to receive the Cheque. The fact that the defendant simply deposited the cheque with the management is a strong indication that he was avoiding CKW or even Mr Yan. This also lends support to the defendant's case that the Cheque was incomplete in that the date, amount and name of payee were not filled out. It suggests that he was merely complying with the demand and wishes of CKW and Mr Yan in giving the Cheque.

30. From the fact that CKW and Mr Yan met with Mr Chan and the defendant in the morning following the giving of the Cheque, it is abundantly clear that neither CKW, Mr Yan nor the defendant believed that the defendant would be able to meet his obligation under the Cheque. I have observed that the defendant is a clever and experienced man. He would not have given the Cheque, which he knew he could not honour, before the deadline for settlement and when intervention by his boss was being contemplated, unless he was at his wit's end and under some form of compulsion.

31. The threat related by the defendant, namely, that Mr Yan would go up to the defendant's home, however does not have the effect of avoiding the binding force of the cheque in law. It is established legal principle that a contract, of which a cheque is one, entered as the result of duress may be avoided by the party who has been threatened. But not all forms of pressure and threat amount to duress in law. Actual or threatened violence or imprisonment and wrongful threats to seize and detain goods are recognised by the law as amounting to duress: see Chitty on Contracts (28th edition) vol.1 paras. 7-006 to 7-009.

32. The words of Mr Yan as related by the defendant does not take the form of a threat of violence or imprisonment to the defendant or even his spouse or family. Nor does it take the form of threat to seize or detain the defendant's properties. These words therefore do not amount to duress in law. The defendant had said that because he did not know Mr Yan before, he did not know what Mr Yan was up to, and he therefore feared for the safety of his home and family. The defendant might be justified in harbouring that fear, but that is different from an express or implied threat to cause violence or to imprison the family member or to detain and seize the defendant's properties. In the circumstances, notwithstanding the utterance of those words by Mr Yan, the defendant cannot avoid the cheque on the ground of duress.

The Extent of the Defendant's Liability

(1) Sale of the HKSB Shares

33. In quantifying the amount of the claim herein, the plaintiff has given credit for a sum of $65,923.39, being the proceeds of the sale of the HKSB Shares. The plaintiff's case is that the sale was with the defendant's consent and for the purpose of reducing the defendant's indebtedness. The defendant says that the sale was without his consent. In support of its case, the plaintiff relied on the Chinese authorization written out by CKW, signed by the defendant and witnessed by Mr Yan. Mr Yan's evidence is that the defendant was asked to sign this authorization for fear that he would go back on his consent. The defendant's evidence is that he was informed of the sale by CKW over telephone, and CKW promised to make good any loss if Mr Chan did pay up as promised, but it is unclear from his testimony as to how he came to sign the Chinese authorization. The tenor of his evidence suggests that he only signed after the sale was concluded. If the shares had already been sold and they were sold against his wish, there is no reason or incentive for the defendant to sign the authorization afterwards. The defendant did not say in his evidence that he was coerced into signing it. Rather he said he let the matter rest there having regard to CKW's promise to make good any loss and the fact that Mr Chan would be meeting CKW and Mr Yan at the Macao Jockey Club. In the light of all these, I am of the view that the probability is that the defendant signed the Chinese authorization out of his free will, which in turn indicates that he did agree to the sale of the HKSB Shares in the first place. I find as a fact that the sale of the HKSB Shares was with the agreement of the defendant, and the proceeds derived therefrom has been properly applied to reduce the defendant's liability.

(2) Payment of $15,000

34. On the basis of the evidence of Miss Cora Leung, I have found that CKW did on 17 January 1998 receive $15,000 from Miss Leung. The plaintiff's case is that it has not received the sum from CKW. There can be no doubt that CKW was authorized by the plaintiff to recover payment of the Shares from the defendant. Counsel for the plaintiff also does not dispute that CKW had ostensible authority to receive payment and to issue receipt on behalf of the plaintiff. It is therefore immaterial that the plaintiff has never acknowledged receipt of this sum. The evidence before the Court does not afford any basis for inferring or contending that the money handed over to CKW by Miss Leung was for purpose other than partial settlement of the payment of the Shares. On a balance of probabilities, I accept that the $15,000 was part payment for the Shares, and ought to be taken into account in reckoning the sum which the defendant is liable to pay to the plaintiff.

Conclusion

35. For the reasons given above, I am satisfied that the plaintiff has made out its claim against the defendant. There will accordingly be judgment for the plaintiff against the defendant for the sum of $913,190.06 together with interest thereon at judgment rate from the date of judgment until payment. I also make an order nisi that the defendant pays the plaintiff the costs of this action, to be taxed if not agreed. The order nisi to be made absolute at the expiration of 14 days after the handing down of this Judgment.