DAT CHEE ROBERT v. RADLAND INTERNATIONAL LTD

HCA1264/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1264 OF 2008

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DECISION

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1. This is a summons for summary judgment pursuant to Order 14, RHC. 

2. Since 1997 the plaintiff has been a client of the defendant firm, a firm of stockbrokers.  In March 2006, two of the defendant’s employees surrendered themselves to the police for misappropriation of shares.  The two employees were named “Ma” and “Leung”.  Leung had been the person responsible for the plaintiff’s portfolio and trading. 

3. In October 2008, both Ma and Leung pleaded guilty in the District Court to a charge involving theft of shares.  The exact charges to which they pleaded guilty was not made clear.  However Mr Jonathan Wong, counsel for the defendant, helpfully brought the matter up to date by informing the court that Leung had pleaded guilty to the misappropriation of shares which are the subject of the plaintiff claim. 

4. Over a number of years Leung and Ma had created false statements of clients’ accounts and had interfered with the computer system within the firm.  However, it is not suggested that the plaintiff has in any way claimed for the return of shares which he did not originally pay for or to which he was not entitled. 

5. Mr Wong, again helpfully, stated that the defendant was unable to ascertain, without further discovery from the plaintiff, the “extent” of the loss.  In short, the defendant is not in a position to concede the accuracy of the claim.  Their position is further complicated by the fact that they are currently engaged in difficult discussions with their insurers. 

6. Mr Wong also makes a preliminary submission on a matter of law which, if correct, would mean that the plaintiff’s summons, in its present form was misconceived and should be dismissed. 

7. He submits that the plaintiff’s claim is solely based on the tort of conversion.  The claim seeks the delivery up of the shares.  He argues that the shares themselves are choses-in-action and as such cannot be converted.  The shares themselves were never within the defendant’s custody or possession.  Thus if, in truth, the claim is purely one of in conversion, it is totally flawed.

8. However, I agree with Mr Andrew Mak, counsel for the plaintiff, who submits that the claim should not be construed so narrowly.  It is true that the plaintiff’s primary claim is for the delivery up of shares which have been misappropriated.  However the statement relies also on a contractual relationship between the parties, based on a “Cash Client’s Agreement”.  It also pleads breaches of fiduciary duty. 

9. Further, the Order 14 summons seeks an inquiry into damages and an assessment of the loss suffered by the plaintiff in the event that delivery of the shares is impossible. 

10. I am satisfied that the claim, as framed, is wider than as contended for by Mr Wong and accordingly I am satisfied that it is appropriate to consider the arguments within the parameters of an Order 14 application.  

11. Returning then to the current factual situation, I consider that Leung’s guilty plea seals the defendant’s fate on liability.  Beforehand the plaintiff had a strong case.  The addition of the guilty plea, in my judgment, has turned a strong case into an unanswerable one. 

12. Blocks of shares in six companies have been misappropriated.  Documentary evidence shows that two of those six have been in the plaintiff’s name since 1998.  There is evidence that the remaining four were purchased in 2000 and 2001.  Mr Mak has then been able to trace the lives of those shares by reference to the monthly statements of the defendant.  In each case there is a history of them appearing, then disappearing, then re-appearing.  Ultimately, in each case, they have disappeared.  There is no suggestion that the plaintiff was aware of any such activity in the movement of the shares until he learnt of Leung’s criminal activities in 2006.  

13. Given the present state of affairs I am satisfied that this is a proper case for interlocutory judgment being entered at this stage with damages to be assessed by a Master in due course.  Whatever uncertainty or confusion may be present at the moment, it is relevant only to quantum and not liability. 

14. Accordingly I so order with costs reserved to the assessment.