RICHARDSON GREENSHIELDS OF CANADA (PACIFIC) LTD v. ONG YIP CHUNG HENRY AND ANOTHER

1987 No. A7291
1987 No. A8573

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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Introduction

1. This is a claim by the Plaintiff stock broking company against the Defendants, who are husband and wife. The Plaintiff claims that it acted as broker for them jointly, or in the alternative for the 2nd Defendant, in share and futures contracts trading in account No. 04-67768 ("the account"), and that the balance owing on the account is HK$12,236,707.30. The claim was precipitated, as so many others since dealt with in this Court, by the stock market crash on Black Monday, the 19th October 1987. The 1st Defendant ("Mr. Ong"), denies that the Plaintiff acted as his broker and contends that any part he played in the matter was simply as a conduit to and from his wife. The 2nd Defendant ("Mrs. Ong") admits that the Plaintiff acted as her broker, but denies the claim contending, inter alia, that there would have been no balance due by her if the Plaintiff had not failed to liquidate her position as instructed on the 19th October 1987; that on the contrary she suffered loss and damage by reason of such failure, in respect of which she conterclaims.

2. The matter began about the 1st half of 1987, when Mr. David Ka, an accounts executive employed by the Plaintiff, met Mr. Ong. The circumstances in which that happened are not agreed and will be touched upon later. Suffice it to say at this stage that it led to Mrs. Ong signing a Customer Trading Agreement ("the Agreement") with the Plaintiff on 24th June 1987. This was done on a form of the Plaintiff's which was provided by David Ka. Again the precise circumstances are in dispute, and will be examined later, so far as necessary.

3. Transactions in Hong Kong shares ensued. Some of the instructions relating to them were conveyed to the Plaintiff by Mr. Ong. The shares were purchased on margin. It must be mentioned that Mr. Ong is the President of a company called High & Mighty, which was engaged in the China trade. For the last several years, however, he has been semi-retired. Mrs. Ong was a director of High & Mighty, and its deputy general manager. She was generally involved in correspondence and in entertaining customers of High & Mighty, building up contacts and looking after those visiting from China. She also visited Beijing quite often. There were several meetings between Mr. Ong, Mrs. Ong or both on the one hand, and David Ka on the other, mostly in the High & Mighty offices.

4. Later the account, was extended to trading on margin in Hang Seng Index futures contracts ("futures contracts"). The share market had been generally moving up during the period in question. A substantial amount of money had been put into the account and no profits taken out. By the 18th October 1987, the account was heavily invested in shares and committed to positions in futures contracts in very substantial amounts.

Mrs. Ong's evidence

5. On the 19th October both Mr. and Mrs. Ong were at the High & Mighty offices. Mrs. Ong's evidence of what happened is that in the morning they attended a meeting in the conference room with visitors from China. During the meeting she left to go to the washroom and on the way back peeped into Mr. Ong's room where there was a teletex monitor which displayed share prices on the Hong Kong Stock Exchange. She noticed there was a drastic drop. She immediately picked up the phone and tried to get David Ka, but could not get through. She then dragged Mr. Ong out of the meeting and told him to get David Ka on the phone as something big had happened. He tried, got through on the first attempt, and told David Ka to sell everything. The time was about 11.15 or 11.20 in the morning. They then went back to the meeting.

6. She did not hear from David Ka until about 2 days later, on the 21st October, when he came to her office about 4.30 in the afternoon. He explained the market was in a mess on the 19th and apologised that he was not able to get the things sold. They had a fairly long meeting. Having spoken for some time David Ka produced a letter in English which he explained to her in Punti. The gist was that her position being open, $600,000 was due in margin on her shares and some $5.5m on her index futures. After 1 or 2 hours she gave him a cheque for $1 million post-dated 23rd October 1987. He rose to leave and casually gave her some documents saying "Mrs. Ong please, by the way, sign this set of documents". She asked what they were and he answered "just futures contracts agreements". She refused to sign the documents which turned out to be the Plaintiff's pro forma risk disclosure and information statements.

7. Back at home later that evening having seen the TV news she got worried about the state of the stock market. She decided she did not want to pay in any margin and telephoned David Ka at home about 7.00 p.m. telling him not to pay in the cheque and return it to her. He said he had already given it to his financial controller. She knew that could not be true given the time he left her office. She told him she did not want to hold her account any more. As to her futures contracts, they should have been sold on the 19th. She wanted to force him to sell on the 26th when the market opened. He promised he would definitely not pay in her cheque. The market did open on the 26th. She tried to get David Ka on the 26th and 27th. On the 28th or 29th he rang her and told her everything was cleared up. She was most concerned about her index futures and asked at what point they were sold. He said 2,500. She asked about her account and was told she owed the Plaintiff roughly $9m. She was so exasperated she scolded him. He said it did not matter, it was negotiable.

8. About the 30th, 2 days later, her bank called her and told her the $1m cheque had been presented, and would bounce if she did not pay in the $1m. She immediately telephoned David Ka who said he did not know about it.

9. On the 3rd November David Ka telephoned her to attend a meeting on the following day, the 4th November, at the Plaintiff's office. She went. On the other side were Mr. David Ka, Mr. Francis Ka and Mr. Albert Leung. The latter asked her to make an offer in respect of $7m which he said she owed the Plaintiff. She queried the amount and asked for a statement, she was told it would be posted to her. She had been told a few days earlier by David Ka the amount was $13m, now they were saying $7m. She refused to make an offer. Mr. Leung's attitude was if she did not settle satisfactorily, they would sue her and Mr. Ong as well.

10. Thereafter she met David Ka twice. About 2 days later he telephoned and asked her to meet, which she did. He said the Plaintiff would be satisfied if she offered even a portion. She refused.

11. Finally she said she did not receive full statements and pointed to certain inconsistencies and sales stated to have occurred after she was told her shares had been sold and her positions had been cleared.

12. That outline suffices for the purpose of addressing the several issues, in relation to which the Plaintiff's version is, of course, very different in many respects. It is necessary first to consider the credibility of the 3 main withesses Mr. and Mrs. Ong and David Ka, since that, as will be seen, is the key factor in the determination of many of the factual issues.

Credibility of principal witnesses

13. All 3 of the main witnesses have a very great deal at stake in this action. The interests of Mr. and Mrs. Ong are obvious. As to David Ka, not only is he remunerated by commission, but he has to make good losses not recovered from his clients. And, as far as he and the Plaintiff are concerned, Mr. and Mrs. Ong are his clients.

14. As to the circumstances in which they met, Mr. Ong's version, upon which I have already touched, is intrinsically the more probable. David Ka played down his obvious interest in acquiring clients for the Plaintiff in a manner that cast down upon his veracity. At the end of his cross-examination he conceded that he could not recall the circumstances, and indeed could not recall several other matters as well, upon some of which he had already testified. That reflects strongly upon his evidence, since the stock market crash and the grave consequences it precipitated for him, followed closely upon the events in question and should have fixed them in his mind. The position is not dissimilar in respect of several other matters.

15. I am satisfied that in several instances his evidence was untruthful and in others he was clearly unreliable. I reject his version of the circumstances in which he met Mr. Ong. Generally his evidence must be approached with considerable caution.

16. Mr. Ong's evidence was rather more consistent, in that he did not, for instance, concede in the same manner that his memory was faulty, or that his evidence was questionable on some other grounds. However, that is not to say that I found all his evidence convincing. He seemed to me anxious to understate the part he played in the High & Mighty Co., and in dealing with the Plaintiff in relation to the account. In particular I am not convinced by and remain sceptic about the evidence he gave of the non-receipt of certain faxes concerning the account, addressed to him by the Plaintiff. I would not say his demeanor was such as to conclude that he was lying. Equally on the other hand, it was certainly not such that substantially upon it, I would accept the truth of his evidence. That said, his evidence, I think was greatly to be preferred to that of David Ka, certainly on the origins and early part of their relationship.

17. Likewise Mrs. Ong struck me as greatly concerned to advance her case. In addition she seemed, quite understandably I think, to be outraged at the outcome of her foray into the world of shares and futures contracts. Having put in a great deal of money, some $3m or more, and having made a good profit to boot, out of the blue she was confronted with a demand to make good over $12m when she, in her view was in no way to be blame and indeed, should have been due a substantial profit. In the light of that attitude compounded by her demeanor, her version of some of the events and her explanation of them, in particular the signing of the $1,000.000 cheque, her evidence in my view, could only be accepted with great caution and reserve. I am, however, not able to accept the main plank of the attack on her credibility by Mr. Clifford Smith for the Plaintiff i.e. that the account was not hers or hers alone, because her knowledge of share trading was more apparent than real. I shall return to this point.

18. Against that general overview of the credibility of the 3 main dramatis personae, I proceed to the several issues that have to be addressed.

Liability of Mr. Ong

Was the account a joint account?

19. It is convenient to deal first with the liability of Mr. Ong. In its pleading the Plaintiff avers that the agreement was partly in writing i.e. the Agreement, and partly oral i.e. in the exchanges between David Ka and Mr. Ong. The Agreement was signed only by Mrs. Ong and on the face of it solely on her own behalf and does not in any way that I can see avail the Plaintiff against the 1st Defendant Mr. Ong.

20. As to David Ka's evidence, I have already said I prefer Mr. Ong's version of the genesis of their relationship. Mr. Ong's version of knowing David Ka's father in Taiwan, being asked by him to help his son, followed by David Ka's efforts to obtain some business, has a certain ring of truth about it. On the other hand, David Ka's hesitant and uncertain version of meeting at some Christmas party, where and in what circumstances he could not remember, cannot be accepted, even if at the end of his cross-examination he only said he could not remember, because he was scared as Mr. Clifford Smith put it. I am not persuaded by David Ka's claim that right from the beginning the account was with Mr. Ong and Mrs. Ong was only to assist. A careful analysis of David Ka's evidence does not reveal any unequivocal evidence that the account was to be jointly that of Mr. and Mrs. Ong. Instead, he proffered a range of matters to support his claim, like the forms being given to Mr. Ong, his surprise when Agreement form was given back that it was only signed by Mrs. Ong, that information was to be given to Mr. Ong, and so on. I reject his evidence in that context as totally unreliable. Even if it were accepted it does not itself avail the Plaintiff for, as I have said, there is no unequivocal statement that the 2nd Defendant Mr. Ong was a party to the agreement. On the contrary there was much in it that points to only Mrs. Ong being the account holder.

21. Apart from David Ka's evidence, Mr. Clifford Smith relied upon the following matters in support of the Plaintiff's claim that Mr. Ong is liable in respect of the account:

22. First, that instructions were given frequently as to shares and exclusively as to futures contracts by the 1st Defendant, moreover that they were given in a way that points to his being liable. I have no nesitation in rejecting that submission. At best Mr. Ong's instructions were equivocal in the particular respect. But in truth they were entirely consistent with his being a conduit for Mrs. Ong. And as to David Ka's allegation that Mrs. Ong was uninterested on one particular occasion, I reject it.

23. Second, that David Ka himself believed that the account was a joint account. I will say at once that even if I believed David Ka in that respect his belief of itself is of very limited assistance; what that belief, if true, was based upon might have been of more value, but nothing that stands up to scrutiny has been proffered. It turns out to be essentially his assumption, which I reject.

24. Third, I am referred to faxes relating to the account and transactions in respect of it, which were addressed by the Plaintiff to Mr. Ong. I have already indicated my scepticism of Mr. Ong's evidence that he did not receive them. But his receipt of faxes addressed to him does not establish his being a party to the account, on the contrary it is entirely consistent with being a conduit to his wife.

25. Fourth, it is submitted that the attitude of Mr. and Mrs. Ong themselves when they were off guard, revealed that they regarded the account as their account, that on 21st October David Ka told them that, Mr. Ong had to pay further deposits, that the publication "Target" on 23rd December 1987 reported an interview with Mr. Ong from which it seemed that he regarded himself as being a party to the account; and that Mrs. Ong's version of the events of the morning of 19th October included Mr. Ong saying "get everything off our hands". I do not in the husband and wife relationship find these incidents of assistance on the issue; on the one hand they are equivocal and on the other equally consistent with the account being solely that of Mrs. Ong, with Mr. Ong, as her husband, acting as a conduit or even agent (but clearly disclosed) for his wife.

26. Fifth, Mrs. Ong's apparently superficial knowledge of share trading. Mr. Clifford Smith regarded this as a very central matter. He pointed to her apparent lack of appreciation of the strategy of hedging of share purchases on margin by taking the opposite position at the same time on futures contracts. Against that Mrs. Ong showed the sort of familiarity with the account and with share and even futures contracts transactions, that cannot simply be dismissed even if one accepts the possibility (which I do not necessarily do) suggested by Mr. Clifford Smith that she might have familiarised herself with the trading record during the adjournments, which it must be said, afforded her ample time. A quite disproportionate amount of time was spent on both sides on this matter and I have to say at the end of it all that I have derived very little if any assistance. To deduce from her knowledge of share trading and of the transactions, that Mrs. Ong could not or was unlikely to have been the sole holder of the account, was in any event both a rather ambitious and futile endeavour, given the circumstances.

27. Sixth, the placing of the teletex machine in Mr. Ong's room. I accept that this on its own does suggest that Mr. Ong was interested in share prices, notwithstanding that there may not have been much room for the machine in Mrs. Ong's office. But whichever way it is viewed; it does not take the matter very much further.

28. Seventh, Mrs. Ong's absence from Hong Kong and her heavy involvement in the business of Hign & Mighty and in looking after the representatives of clients. Because of all this, Mr. Clifford Smith submits, she would not have had time to immerse herself so fully in share trading. That is an argument that is clearly open on the facts. However the conclusion does not necessary follow. Nor is it anything like conclusive.

29. Eightn, that Mrs. Ong's allegation that she believed that her losses would be limited to the amounts she had paid in was naive or cannot be believed. I am inclined to agree, but I do not think it points to Mr. Ong being a joint account holder. It does however point to the need to approach her evidence with caution, as I have said.

30. Ninth, and finally, the source of the funding of Mrs. Ong's investment in the account. Two cheques amounting to some $670.000 came from her husband. She said they were loans. But she would not make her personal bank account statements available to the Plaintiff and I upheld her refusal in the particular circumstances and having regard to the pleadings. I do not accept that the outcome points to Mr. Ong being liable. Moreover, there is no evidence of any other funds being provided by Mr. Ong.

31. To revert to the pleadings, the Plaintiff further relies upon the following matters:

32. To any extent I may have not done so, I reject all these additional grounds. Most of them are so totally devoid of merit as to cast doubt upon the plaintiff's claim rather than promote it.

33. Lastly in the further alternative the plaintiff contends that the account was opened by Mr. and Mrs. Ong as a joint account. No evidence whatever of that was adduced, a fortiori, any evidence that was credible.

34. In the end it seems clear enough to me that Mr. Ong has done nothing more than any husband might do to assist a wife on one of her own share trading accounts. There are some indicators that are consistent with a joint account in an equivocal sense, but they are equally consistent with the account being solely Mrs. Ong's and are far from establishing that it was a joint account. What is clear beyond peradventure is that the Plaintiff has totally failed to prove that the account was a joint account or that Mr. Ong is in any other manner liable upon it. The Plaintiff's claim against Mr. Ong accordingly fails.

Instructions to Liquidate

35. I turn then to the Plaintiff's claim against Mrs. Ong. As I have already said she does not deny that she had an account with the Plaintiff and instructed it to purchase and sell shares and to acquire positions on futures in each case on margin. It is convenient to consider what Mrs. Ong had to say in respect of the claim and her several grounds of defence. I bear in that the onus is on the Plaintiff to prove its case, and not upon Mrs. Ong to disprove it. I begin with the instructions she says were given to David Ka on the morning of the 19th October 1987, to liquidate her shares and close out all her positions. I have already indicated the version she and, to the extent he was involved, Mr. Ong, have given.

36. David Ka's evidence was that on the 19th October things were quite busy, as well might be imagined, and initially that he did not try and get in touch with Mr. and Mrs. Ong that day, nor did they get in touch with him, subsequently he said he could not remember. He thought it was Mr. Ong who telephoned on the 20th asking what should be done, now that the market had so dramatically dropped. They agreed to meet on the following day the 21st October. He met, he first said, with both Mr. and Mrs. Ong; but later when it was put to him that he met only with Mrs. Ong, he said he could not recall. They discussed mainly the account (which he says they referred to as their account) being under margin. They gave him a cheque for $1m as a further margin deposit though, he said more than $1m were needed. Later that day about 7 or 8 p.m. Mr. Ong telephoned him telling him not to deposit the cheque as the funds were insufficient. He said he would seek further instructions. 2 or 3 weeks later Albert Leung, his superior, decided to present the cheque.

37. Between 21st October and 26th October, Mr. Ong asked for the cheque back at a meeting at the Penisula Hotel Coffee Shop. There were no further meetings before the stock market exchange opened again on the 26th October. He could not recall if Mr. or Mrs. Ong reminded him on the evening of 21st October 1987 to sell all to cut losses or if the same instruction had been given on the 19th October. That, Mr. Benjamin Yu for Mrs. Ong, submitted strenuously left uncontested Mr. and Mrs. Ong's unequivocal evidence of the instructions to sell all on the morning of the 19th October. However it is not a matter of the Defendant's evidence being uncontested, it is for Mrs. Ong to establish that she gave instructions to sell and close out. At that point in David Ka's evidence, he struck me as mindlessly resorting to successive incantations of "cannot recall", so that his response did not in my view give to Mrs. Ong's case the non-denial strength it might otherwise have received. But regardless of that, I have, as already indicated, reservations about Mr. and Mrs. Ong's evidence. I would not regard it as establishing a matter of that sort unless supported by other evidence. Here, there are other powerful indications to the contrary. Foremost, of course, is the cheque for $1m that Mrs. Ong says she gave David Ka on the 21st of October in respect of margin. If indeed instructions to sell all were given on the 19th and Mrs. Ong blames the Plaintiff for not carrying them out, it is quite astonishing that she should have signed and handed over that cheque knowing that it was to top up her margin. She suggests she was talked into it by David Ka. But she does not seem to me to be at all the sort of woman who would allow herself to be talked into anything and least of all by David Ka who struck me as anything but a forceful character. Mrs. Ong herself, in response to the suggestion that her husband ran her account for her pointed out that she was a dominant sort of person who would not allow that.

38. Then at the meeting on the 4th of November at the Plaintiff's offices when very senior officials of the Plaintiff were present, she did not make any mention or any complaint that instructions to sell had been given on 19th or the 21st October. Furthermore, there was a complete absence of any written complaint. At that same meeting on the 4th November Mrs. Ong, on evidence that I accept, suggested that the Plaintiff should allow itself to go bankrupt and let Government or the Exchange Company in effect pick up the bill. That suggestion is, in my view inconsistent with her having instructed the Plaintiff to sell everything on the 19th and the 21st October and the Plaintiff having failed to do so.

39. I should mention also a letter her solicitors faxed to the Plaintiff's solicitors on 29th December 1987 with reference to the Plaintiffs action on the $1 million cheque of the 21st October. It stated that "She had changed her mind about not liquidating her position on the same day the cheque was given and had telephoned David Ka to ask for the cheque back". There seemed to me to be a distinct possibility that there was some confusion in what was stated and I accordingly do not take that letter into account against Mrs. Ong.

40. Finally, David Ka stated in evidence, if he had been given instructions to sell there was no reason why he would not carry them out. Indeed whatever the doubts about his credibility, even if he had not said so, the question immediately arises as to why he would not have do so. As he himself said, as a broker his earnings came from purchases and sales. No reason or suggestion emerged as to why, if he had been given instructions to sell the shares and close out all positions, he should not have done so.

41. Maving regard to all the evidence and circumstances, it seems to me more likely than not that the instructions that Mr. & Mrs. Ong claim were given on the morning of the 19th October, were in fact not given. However, that may be, I am satisfied that Mrs. Ong has failed to establish on the probabilities that instructions to sell were given on the 19th October.

42. As to the instructions to sell claimed to have been given on the 21st October 1987, again, I cannot for the same reasons see why if they were indeed given, David Ka should deny them, even more why he should not have carried them out. It is also not without significance that it was on the 28th March 1990, only days before the trial that the Defence was amended to plead that such instructions were given. To put it at its lowest I am not satisfied on the probabilities that instructions to sell were given on the 21st October. Moreover, as to the request made on the 21st October for the cheque to be returned, it did not in my view impose upon the Plaintiff a duty to liquidate, nor would the Plaintiffs threat to do so, contained in the Plaintiff's letter of 21st October 1987.

43. Accordingly I reject the contention made on Mrs. Ong's behalf that there was a breach of duty on the Plaintiff's part in not liquidating Mrs. Ong's holdings promptly in compliance with instructions given on the 19th October and/or the 21st October, or in some way as a result of the request to return the cheque.

Non-disclosure of Futures Trading Risk

44. I turn next to the point taken in Mrs. Ong's defence in relation to the futures contracts. It is averred that the Plaintiff was in breach and is liable to her in negligence and/or breach of fiduciary duty and/or breach of contract on the following grounds:

 

(i)     that in breach of her contract and rule 431 of the Rules of the Hong Kong Futures Exchange, the Plaintiff failed to provide her with a risk disclosure statement detailing the manner in which "stop loss" orders may be utilized, and further the high risk nature of futures trading;

 

(ii)     further or in the alternative that the Plaintiff negligently and/or in breach of its fiduciary duty as her agent, failed to provide Mrs. Ong with information on the high risk nature of trading in such futures contracts in which it might not be possible to limit the extent of potential liability, and in particular that she could lose monies in addition to her margin deposit.

Rule 431 of the Hong Kong Futures Exchange Rules and Regulations provides that:

 

(a)    A Risk Disclosure Statement

 

The Risk Disclosure Statement shall include, as a minimum, all details as the Exchange shall prescribe from time to time and in particular, details of how a Client may utilise "stop-loss" orders in his trading.

The material part of the Customer Trading Agreement began in the following way.

GENTLEMEN.

In consideration of your agreeing, at my request, to open and maintain one or more accounts ("the account(s)") in the name of the undersigned and to act as brokers for the undersigned in respect of transactions in securities, commodities, precious metals, foreign exchange and any other investment services provided by you, as principal or agent of Richardson Greenshields of Canada Limited and/or its affiliates, as the case may be, whether on margin or otherwise ("hereinafter collectively referred to as "the said transaction") the undersigned hereby agrees, represents and comments as follows.

1.    All the said transactions made by you for me shall be subject to the constitution by-laws, rules, rulings, regulations, customs and usages of the exchange or market, and its clearing house, if any, where made, and to all laws, regulations and orders of any governmental or regulatory authority that may be applicable.

In wardley-Thomson Ltd v. Tai Chun Yung Edwin (CL102 of 1988) unreported, I was not persuaded that failure to comply with the Rules of the Futures Exchange would vitiate the similar consumers agreement in that case. It must be said, however, that the defendant in that case was unrepresented and there was no reliance upon any clause in the consumer agreement corresponding to that in the Agreement. In Wardley-Thomson Ltd. v Fan Mei Chu (CL101 of 1988), unreported, in not dissimilar circumstances, Barnett J. gave judgment against the defendant who was also unrepresented, although she alleged that matters including the risk disclosure statement were not explained to her, barnett J. held she was aware of the essentials and rejected her defence of non est factum, in the primary context of which he was addressing the matter. I remain unpersuaded that of itself, rule 431 would vitiate contracts entered into by members of the Exchange which did not comply with it, whatever other Exchange sanctions may have been attracted.

45. However Mr. Benjamin Yu, anticipating that reaction, contended that clause 1 of the Agreement requires compliance by the Plaintiff with rule 431. I think that on the plain meaning of rule 431 that must be right, at any rate, in relation to any account opened under the Agreement. As the account was opened under the Agreement, it would fall within the reference to "the said transactions" in paragraph 1 of the Agreement. I will return to the factual issue of whether that contractual obligation of the Plaintiff was met.

46. I proceed to Mr. Benjamin Yu's further submission that there was a similar duty on the Plaintiff to explain the risks involved as agent or trustee owing a fiduciary duty to the customer. In wardley Thomson Ltd. v Fan Mei Chu, Barnett J. simply stated that in his judgment there was no fiduciary relationship. There were apparently no arguments or submissions made, and as I have said, the defendant was unrepresented.

47. Mr. Yu relies upon 2 authorites. First Cornish v Midland Bank [1985] 3 All ER 513. That was a case in which a wife, who signed a second mortgage, complained that the bank did not explain that it also secured further advances to her husband and not merely the loan she sought for renovations. The bank conceded that as it had taken it on itself to give an explanation it was under a duty not to mistate the position. On appeal to the Court of Appeal, Croom Johnson L.J., held that the judge below was right in concluding that the bank having assumed the duty to give proper advice, was negligent in the way it discharged that duty (p. 517D). Glidewell L.J. found it unnecessary to decide whether the mere fact that the Plaintiff was a customer imposed a duty on the bank to advise her, since the bank undertook the duty to explain properly and fully, and one statement that it had made was misleading (p. 520G-J). Kerr L.J. held that because the bank embarked upon an explanation of the nature and effect of the 2nd mortgage, and because it rightly accepted that the Plaintiff was entitled to an explanation that was adequate, the bank was liable because the explanation was not adequate.

48. I think the point that the bank accepted that it was its duty to explain the nature and effect of the mortgage distinguishes that from the present case, notwithstanding the obligation imposed upon its members by the Futures Exchange by rule 431 to provide a risk disclosure statement. The latter, in my view, is an internal procedural matter which does not create a duty vis a vis customers of members. Moreover it seems to me that the relationship between a bank and its customers is rather more conducive to a fiduciary duty than that of an agent employed to buy and sell shares and futures contracts.

49. Elderkin v Merril Lynch [1977] 8 DLR 313, the other authority relied upon by Mr. Benjamin Yu, although recognising that a fiduciary relationship may exist between a stockbroker and its clients can be distingushed in that the relationship recognised there was founded upon the representation the stockbroker made that it was in close touch with the officers of the company whose shares it advised clients to purchase. I can find no corresponding factor in the circumstances before me.

50. I therefore remain unpersuaded that there was any fiduciary duty upon the Plaintiff to explain to Mrs. Ong the risk of trading in futures contracts before she commenced to do so.

51. I return now to consider whether the Plaintiff discharged its contractual obligation. It was the Plaintiff's practice, no doubt in compliance with rule 431, to include in its Consumer Trading Agreements for futures contracts, a risk disclosure statement. As Mrs. Ong began trading originally only in shares, and not also in futures contracts David Ka understandably may not have included such a statement with the Consumer Trading Agreement forms which he originally supplied the Ongs, and one of which became the Agreement on being signed by Mrs. Ong on the 24th June 1987. When Mrs. Ong decided to extend her trading to futures contracts, no further Consumer Trading Agreement was signed and returned to the Plaintiff. David Ka says that although he then had 3 years experience of index futures, he was not aware of rule 431 and did not know he had to supply a risk disclosure statement. As to whether a risk disclosure statement was given to Mrs. Ong before the first futures contracts were purchased in October 1987. David Ka says he left forms at the Defendants' office. However he was vague and could not remember when. Mrs. Ong denies she was given or signed any documents before she commenced trading in futures contracts. It is clear from Agreement forms discovered very late by Mr. Ong that David Ka did give or leave with him additional Customer Trading Agreement forms and that he signed them on or about the 31st July 1987 and left them in a drawer. It is not in dispute that on the 21st October 1987 David Ka did try and get Mrs. Ong to sign a Consumer Trading Agreement documents. That is not necessarily inconsistent with the documents being left at the Defendants' office; David Ka may have yet wanted Mrs. Ong's signature to the risk disclosure statement. One of the forms that it was suggested by David Ka he left at the Defendant's office appears from the date at the bottom, to have been printed in November 1967! However there was some confusion about the forms, and I do not attach much weight to this part of the evidence. On the probabilities it seems to me no risk disclosure statement was served on Mrs. Ong or on Mr. Ong as her agent, and I so find.

52. Mr. Clifford Smith submits that in any case there was sufficient disclosure by David Ka in that he told Mr. Ong, who told Mrs. Ong, that they could win or lose $50 on each point the index moved up or down. On the evidence I am satisfied that David Ka did explain this. Mr. Clifford Smith submits that anyone could work out the actual amount of loss on that information. That is clearly right, at any rate in the case of a businesswoman, as Mrs Ong was. Moreover it is clear that she used to discuss her trading with her husband. Altogether it is difficult to credit that she did not know and appreciate the highter risk involved in futures trading relative to share trading.

53. Mrs. Ong testified that had she known of the risk she would never have traded in futures contracts. That is all to easy a claim for those confronted with massive losses to make. Indeed, it would not be surprising if persons confronted with such losses or demands were able to persuade themselves that had they known the risk they would not have gone within a mile of futures contracts. I have already expressed my reservation about Mrs. Ong's evidence. In my view it is essential to examine the evidence to ascertain whether it was probable that she would or would not have traded in futures if warned of the risks.

54. Mrs. Ong was a businesswoman, intelligent, strong willed, dominant as she herself claimed, and with at least an adequate knowledge of share and futures trading (notwithstanding that she may have misunderstood Mr. Clifford Smith's questions about hedging by taking the opposite position in futures). As I have said, she used also to discuss some of her shares and futures transactions with Mr. Ong who also acted as a conduit between her and the Plaintiff. Mr. Ong himself was a businessman of some substance. As a businesswoman with knowledge of share trading and futures contracts, Mrs. Ong could not have been wholly unaware of the risks and of the size of her potential losses by simply working them out at $50 a point per contract. What she was likely not to have been aware of or appreciated, and what might have put her off, was the risk of the Futures Exchange closing for several days, as it did after the crasn on the 19th October 1987. But there is no suggestion that she should have had the latter risk disclosed to her or indeed whether it was even regarded by competent and reasonable stockbrokers as a risk that had to be reckoned with. Moreover she knew the stock market was going up and believed futures contracts would likewise go up. On the probabilities I think she would have gone on to speculate in futures contracts, bolstered with her success in share trading, regardless of whether or not she received a rule 431 risk disclosure statement or a warning from a stockbroker in pursuance of any fiduciary duty. Although she maintains she promptly sold shares which were dropping, the evidence to that effect or that she liquidated futures positions as soon as additional margin payments became due is equivocal. Accordingly in my finding, the failure to provide her with a risk disclosure statement or a warning of the risk involved has not been shown to be the cause of any loss in futures trading by Mrs. Ong. Moreover there is not the sligntest indication that Mrs. Ong attached the least bit of importance to the application of the Rules and Regulations of the Futures Exchange to the Agreement. In my judgment, the Plaintiff's failure to incorporate a risk disclosure statement in the Agreement does not afford Mrs. Ong a defence to the Plaintiff's claim.

Duty to Liquidate in Principal's Best Interest

55. I turn next to Mrs. Ong's contention that the Plaintiff failed to liquidate in her best interest and to exercise the proper degree of care. As Mrs. Ong's agent the Plaintiff would be under such a duty (see Bowstead on Agency 15th Ed. p. 146).

56. On the evidence, when Mrs. Ong did not put up the margin demanded at the 4th November meeting, the Plaintiff, as it was entitled to do under the Agreement, sold off her shares and liquidated her futures positions. The market having suffered a generally sustained fall the complaint, as I understand it, is that the liquidation was not carried out soon enough or at the best prices. It is accepted by Mr. Benjamin Yu that the onus is on Mrs. Ong to establish the failure alleged. The evidence does not show the Plaintiff in a favourable light in the context or that allegation. It is not clear who it was that directed the liquidation.

57. David Ka said he was not involved and that the decision was made by the Plaintiff's Assistant Vice President Mr. Albert Leung. Mr. Francis Ka the President and a director of the Plaintiff and others senior officers. Mr. Albert Leung, on the other hand, said he had nothing to do with the liquidation and that it should have been David Ka who was responsible. Mr. Francis Ka, likewise, said he was not involved. That is not very satisfactory, but it does not demonstrate that the liquidation was not carried out in Mrs. Ong's best interest and with due care.

58. In so far as both matters are concerned, it was a question of timing, and on the less than satisfactory evidence available, I am not able to say the liquidation was not carried out as quickly as possible or that within that general objective, not at particular times most favourable to Mrs. Ong.

59. In any case, in liquidating Mrs. Ong's account, the Plaintiff was not acting as her agent but in the capacity of a creditor. On the clear authority of China and South Sea Bank V. George Tan [1990] 2WLR 56, 60, the only duty upon a creditor in such circumstances is not to sell below price. Subject to that the Plaintiff in liquidating Mrs. Ong's account could sell on such date as it chose. It is not suggested that the Plaintiff sold or liquidated at below the prices current at the time of the relevant transactions and there is no evidence to support such a view.

60. In my judgment, accordingly, Mrs. Ong has not proved the failure alleged on the Plaintiff's part to act in her best interest and with a degree of proper care in disposing of shares and liquidating her futures positions.

Proof of Amount Due

61. I come now to the Defence submission that the Plaintiff has failed to prove the amount it claims i.e. the $12,236,707.38, it says was at the close of business on 30th November 1987 when the liquidation was completed, the balance on the said account. The position shown in the accounts as at the 19th October 1987 is not in dispute. It is what happened thereafter that is questioned by the Defence. Mr. Benjamin Yu founds his attack on the Plaintiff's accounts mainly on the absence of evidence showing that the transactions attributed to the account were in fact effected on her account, against the generally unsatisfactory evidence of the liquidation, which I have already touched upon. He submits that these transactions must be proved to have been carried out on the account, and are not some other customer's or indeed the Plaintiff's own transactions attributed to her. Furthermore he points to certain errors in the accounts and records. He submits that these cast such doubt upon the accounts that they should be altogether rejected, in short that the burden is upon the Plaintiff to prove the amount due and that it has failed to do so.

62. The evidence adduced by the Plaintiff does not establish that all the transactions it attributes to the account, and that all the documents it has produced in support of its statements of account, relate to the account in the manner and indeed to the very high standard of proof that is usually encountered in actions for moneys owing, or due on an account. The Plaintiff did not call any accountant or book-keeper to explain and prove the accounts and their accuracy or to trace transactions through the supporting documents. Of those of the Plaintiff's withesses who were called, only Mr. Albert Leung was able to give evidence in support of the accounts and that, only in a general way. There were errors and corrections in the accounts. There were documents that were not signed or chopped, and, as I have said, there were some that did not bear a manifest link or indeed any link to the account that was demonstrated in the usual way. Theoretically they could well have belonged to the accounts of other customers. In that regard the Plaintiff's withesses were not able to say positively when some individual liquidation sales or transactions took place.

63. On the other hand, I do not think it would be realistic or right to approach the account, documents and transactions in question in that way. The state of the account as at the 19th October 1987 is not in dispute. It is common ground that Mrs. Ong held on margin the shares and the futures contracts shown in the account. It is not disputed that the market crashed on the 19th October and kept falling for the next 3 or 4 weeks which would be the maximum period concerned. Whether the documents and statements of account relate to the account must be determined upon the probabilities judged in the light of the foregoing matters, the particular circumstances, and the conclusions I have already reached e.g. that no instructions to sell have been established and that there was no duty or obligation upon the Plaintiff to sell as soon as possible.

64. Clearly the accounts and supporting documents produced and discovered had been closely scrutinised on the Defendant's side. Notwithstanding that in some instances their link with the account was not established in the usual way by overt reference to Mrs. Ong or the number of the account, there was a fairly comprehensive range of documentation produced, much of it with such linkage. The significance of that scrutiny which was also pursued in cross-examination of the Plaintiff's withesses and even in counsel's detailed submissions, assisted with lists and schedules, was not that errors were detected but that they were so few and that, subject to the possibility that some documents, transactions and entries might not have belonged to the account, the account shares and futures balances survived intact.

65. Although it was not part of Mr. Albert Leung's duties to attend to the accounts of the Plaintiff and certainly not personally, he was reasonably familiar with the procedures and felt able to say on oath that he was satisfied that the monthly statements of account were correct.

66. He also gave evidence, which I accept, that when the stock exchange confirmed orders, it recorded the brokers' ticket numbers which enabled, the market transaction to be related to the order concerned; and likewise that the Plaintiff matched the confirmation notes it issued to its customers with the record sheets supplied to it by the Futures Exchange. Indeed Mr. Clifford Smith in his final address matched and linked a substantial number of documents which were, or which relate to transactions questioned by Mr. Benjamin Yu. I do not believe that deliberate misallocation is likely to have occurred. Nor do I believe that unintended misallocation of any significance is likely to have occurred. On the contrary, on the evidence, the foregoing considerations and in the circumstances I think both possibilities clearly improbable.

67. Given those considerations and factors, particularly that the shares and futures contracts would have had to be and must have been sold and closed out, that the Plaintiff as creditor was entitled to choose the times of liquidation, that misallocation of transactions was unlikely, that stock exchange confirmation documents enabled market transactions to be related to orders, and that the Plaintiff matched the confirmation notes it issued to its customers with the record sheets supplied to it by the Futures Exchange, I am satisfied that there is a clear probability that the shares and futures contracts trading balances in the account are correct. I reach that conclusion in the full knowledge that the probability must be of an appropriately high degree given the serioushess and gravity of the matter concerned, i.e. the amount of the balance which by any standard is a very large sum of money, which could have the most serious consequences for Mrs. Ong.

68. I should add that I have considered the alternatives indirectly suggested of assessing particular amounts at the lowest they might possibly have been, or at the median prices at which they could possibly have been liquidated, However I have reluctantly concluded that since a clear probability emerges from the circumstances and evidence, that the balances upon that basis are correct, notwithstanding the regrettable or perhaps unavoidable failure of the Plaintiff to adduce evidence that was more compelling, that it would be neither proper nor just to deny it the result of that probability.

Conclusion

69. For the reasons I have already given, the Plaintiff's claim against the 1st Defendant, Mr. Ong, fails and is dismissed.

70. As to the Plaintiff's claim against the 2nd Defendant, Mrs. Ong, it is common ground that the Plaintiff under the Agreement between it and Mrs. Ong, made on her behalf the purchases of the shares and futures contracts shown in the account as at the 19th October. In any case the evidence clearly established those matters. It accordingly follows from the conclusions I have reached upon the several matters raised in her defence and that the outstanding balance shown in the account is correct, that she is liable to the Plaintiff in the sum of $12,236,707.38 as claimed. There will be judgment to the Plaintiff accordingly.

71. For those same reasons Mrs. Ong's counterclaim fails and is dismissed.

72. That disposes of the claim and counterclaim in Action No. A7291 of 1987. Counsel have agreed, and I accept, that the Plaintiff's claim in Action No. A8573 of 1988 on the cheque drawn by Mrs. Ong on the 21st October 1987 for $1 million, will be subsumed in the judgment upon the first action and need not be dealt with.

73. I will now hear counsel upon interest and costs.