XCHRX Phillip Securities (HK) Ltd. v. Chan Si Kin

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 16075 OF 2000

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J U D G M E N T

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1. This is an application for summary judgment by the Plaintiff against the Defendant for a sum of $275,578.06, being alleged outstanding balance in a margin securities trading account maintained or said to have been maintained by the Defendant with the Plaintiff. The Plaintiff also applies to strike out the so-called counterclaim of the Defendant.

2. According to the Plaintiff's pleaded case, as backed-up by two affirmations filed for the purpose of these applications, the Defendant opened a margin securities trading account with the Plaintiff on 15 February 2000. All the documents were signed on that day but because on that day the deposit for the opening of the account was not paid, the agreement was only dated 18 February 2000 when on that day a sum of HK$100,000 was paid into the account. But it is noteworthy that according to the Plaintiff's pleaded case, the money was not paid by the Defendant into the account, but rather by a Mr Yan, apparently a friend of the Defendant, who accompanied the Defendant to the office of the Plaintiff to sign all the documents for the opening of the account in the first place.

3. According to Miss Usman, the Account Executive serving this account, on 18 February 2000, the Defendant came to the Plaintiff's office with Mr Yan, Mr Yan gave instructions to her concerning the account, the Defendant did not raise any objection, and she was therefore under the impression that Yan had authority from the Defendant to deal with the account. Thereafter, according to Miss Usman, the Defendant and Mr Yan came to the Plaintiff's office two or three times. Either the other staff of the Plaintiff or Miss Usman dealt with them on those occasions and again it was Mr Yan who gave instructions to Miss Usman or the other staff of the Plaintiff there concerning the account. The Defendant did not raise any query. Subsequently as the account was making losses, the Plaintiff called up the Defendant several times and demanded him to pay deposits to the Plaintiff. The Defendant indicated that he had to discuss with Mr Yan first but the money never came.

4. Mr Jim, counsel for the Defendant, pointed out to me that the above description of what allegedly happened in relation to the account departed from what had been pleaded in the Reply and Defence to Counterclaim by the Plaintiff to the extent that in the pleading, it was pleaded that all transactions under the account were conducted pursuant to the instructions of the Defendant, but it now appears from Miss Usman's affirmation that, in fact, the instructions were given by Mr Yan in the presence of the Defendant who raised no query or objection.

5. On the other hand, the Defendant said in his affirmation filed in opposition to this application as well as in his defence, that originally he did intend to open a margin trading account with the Plaintiff but after all the relevant documents had been signed by him, he was told by the Account Executive, a Mr Raymond Chan, the husband of Miss Usman who was attending to the documentation at the time, that the deposit for opening the account had been increased to $80,000 and since the Defendant did not have enough money, Mr Chan told him that he could not open the account. He told him further that he could come back when he had enough money to open the account. So according to the Defendant, he never opened the account successfully with the Plaintiff and further, he never traded in the alleged account which was never opened successfully. So, he denied all the transactions which resulted in a loss and an outstanding balance, the subject of the present action, as being his dealings.

6. In this hearing, Ms Lee, counsel for the Plaintiff, accepted that apart from the affirmation of Miss Usman, there was no direct documentary evidence to back-up what Miss Usman alleged in her affirmation about how the account was opened and how subsequently the account was operated by Mr Yan in the presence of the Defendant. But Ms Lee pointed out that after each transaction, there were bought and sold notes, there were daily statements and there were also monthly statements. All these were mailed to the address of the Defendant as a matter of normal operation of the Plaintiff, so the Defendant must have been aware of all these transactions and by not objecting to any of them at the material times, the Defendant must have accepted all these transactions. And that also backed-up Miss Usman's story about Mr Yan and the Defendant going up to the office together on several occasions to give instructions relating to the account.

7. Ms Lee also pointed out to me that all profits earned through trading in the margin account would only be payable to the Defendant and not anyone else by crossed cheques, so there was no reason for anybody, including Mr Yan or the Account Executive, to make use of the Defendant's account for his or her own trading because any profit so made would only be payable to the Defendant, but not the person responsible for the trading.

8. This is an Order 14 application. Of course, the Defendant has to satisfy the court that there is an arguable case but as I described above, the Defendant said the account was never successfully opened and he never traded in the account. He denied ever going together with Mr Yan to the office of the Plaintiff to operate the account by giving instructions for trading. This is clearly a dispute of fact which, in my judgment, cannot be satisfactorily resolved by affidavit evidence and in a hearing of an application of this nature. My hands are tied, I am not here to evaluate the respective strengths or lack of it of the parties' cases.

9. If what the Defendant said was true, then given the nature of Miss Usman's story, the Account Executive in question, either Miss Usman or both Miss Usman and Mr Chan would be implicated in the matter. If the Defendant's story was true, then Miss Usman must have been lying in her affirmation about witnessing both Mr Yan and the Defendant attending the office of the Plaintiff together to give instructions for dealing in the account, and the most likely reason for Miss Usman's lying in her affirmation, assuming for the sake of argument that that was indeed the case, would be that Miss Usman, and perhaps her husband, Mr Chan, as well, were colluding with Mr Yan in operating an account which had never been successfully opened.

10. Now, of course, this is a serious matter and Ms Lee reminded me that for such sort of allegation amounting to fraud and collusion, the Defendant had to put in materials. But given the nature of the case and the circumstances of the case, it is understandable that the amount of materials which the Defendant could usefully put in in opposing this application along those lines would be very limited. Apart from suggesting possibilities, it is difficult to see what else the Defendant could do. Everything, according to the Defendant's story, would be within the peculiar knowledge of Miss Usman, Mr Yan, Mr Chan and the staff of the Plaintiff in general.

11. I note also that apart from Miss Usman, no one else, in particular Mr Chan, made any affirmation in support of the Plaintiff's case. In so saying, I am excluding Mr Lee, a director of the Plaintiff who does not seem to me to have any personal knowledge about the whole affair.

12. Following from what I have just said, if the Defendant's story was true and if, as I analysed above, quite likely according to this story, the Account Executive or Executives or perhaps other staff of the Plaintiff as well were implicated in the whole affair, then the possibility of the documents, i.e. the bought and sold notes, the daily trading statements and the monthly trading statements, not having been sent by mail or otherwise to the Defendant which would otherwise have alerted the Defendant to the unauthorised trading in this so-called account of his, cannot be safely excluded at this stage. All these would be matters for trial, discovery of documents and full examination of witnesses.

13. As to Ms Lee's point that any profits made in the account could only be paid out to the Defendant and no one else, I can see the force of the argument, but in the light of my analysis of the situation above, if the story of the Defendant was true, then the internal management of the Plaintiff may well not have been most satisfactory and again, if the Account Executive or Executives were implicated in the matter, the possibility of their holding out a hope that somehow profits earned through their ex hypothesi unauthorised trading in the so-called account of the Defendant could be paid out to somebody other than the Defendant by whatever means they may have in mind, cannot be ruled out either.

14. Of course, I am not here to speculate on what has or has not happened. That is not my function. I am here to see whether the Defendant has put forward in the context of the present case an arguable defence on the facts, and I have merely pointed out that there are possibilities in the present case which cannot be excluded at this stage when my hands are tied, and when I am not here to make any findings of fact based on the affidavit evidence and circumstantial evidence alone unless the Defendant's case is totally incredible. That is something which I cannot conclude at this stage with any degree of confidence at all, and, in fact, quite to the contrary, I am positively of the view that there is an arguable defence here as to whether the account had been successfully opened and whether the dealings in the account based on a sum of money, i.e. HK$100,000, paid into the account, not by the Defendant but by Mr Yan, were indeed transactions instructed, as the pleadings would seem to suggest, or acquiesced in, as the affirmation of Miss Usman suggests, by the Defendant.

15. So for all those reasons, I am not minded to grant summary judgment in favour of the Plaintiff.

16. And as regards the counterclaim, a look at the so-called defence and counterclaim will reveal that, in fact, there is no counterclaim made by the Defendant at all. All the matters set out in the so-called defence and counterclaim relate to the raising of a defence against the Plaintiff. So although I note with interest that in fact a defence to counterclaim has been filed by the Plaintiff in response to the defence and counterclaim which does not even pray for any relief by way of counterclaim, I am not sure if it would make any sense for me to simply strike out the two words "and counterclaim" in the heading of the document entitled "Defence and Counterclaim" filed by the Defendant in this regard. I do not think any good purpose would be served by my doing so at this stage.

17. That brings me to this last matter. This application was taken out by the Plaintiff on 4 June 2001, almost one year after the filing of the defence and counterclaim in which the Defendant, then acting in person, set out sufficiently clearly the gist of his defence which, as I have said, succeeded before me today. I see no reason why I should not dismiss the application, not only for the striking out of the counterclaim which perhaps does not really matter at all, but summary judgment as well.

18. So for all these reasons,

1) I dismiss the application for summary judgment;

2) I dismiss the application for strike out of the counterclaim.

(Submissions on costs)

19. Having heard counsel's submissions as to costs, I also order that the Plaintiff pay the costs of these applications to the Defendant in any event, together with a certificate for counsel, to be taxed if not agreed.

20. In fact I would add the same phrase to the last costs order I made in the other action, i.e. "to be taxed if not agreed."

21. The reason why I am not ordering the payment of costs forthwith is that if the case is prosecuted expeditiously and with due diligence, a trial of the action will not be very far away given the condition of listing in this court, regard having had to the stage which these proceedings have reached. And there is nothing before me really to suggest that after this unsuccessful application the Plaintiff will not proceed with the prosecution of its claim against the Defendant with due diligence and, of course, in case this assumption should turn out to be incorrect, there would be ways to redress the matter available to the Defendant. So I do not think there should be in the meantime a side show of the taxation of the costs of these unsuccessful applications. That is why I ordered as I did that the costs should be paid by the Plaintiff to the Defendant in any event.