HANTEC BULLION LTD (formerly known as HANTEC BULLION INVESTMENTS LTD) v. GOYAL MUKESH KUMAR AND ANOTHER

DCCJ5668/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5668 OF 2007

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BETWEEN

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DECISION

1.  The Defendants appeal out of time against Registrar Poon’s decision on 27 August 2007 entering judgment against the 1^st Defendant in the sum of $765,801.70 with interests; and against the 2^nd Defendant for the sum of $500,000 with interests and costs of the action against both Defendants with Certificate of Counsel and dismissing the Defendants’ counterclaim against the Plaintiff with costs.

2.  In the morning of the hearing of the appeal, the Defendants filed two affirmations into Court and sought the Court’s leave to receive and read them at the hearing of the appeal. The late application was opposed by the Plaintiff.

3.  I have refused the application to admit and read the Defendants’ two affirmations at the hearing and given my reasons which I shall not repeat here save that the Defendants have attempted to lead in the same evidence before Registrar Poon at the 27 August 2009 hearing which was rejected by Registrar Poon.

4.  The Defendants claimed they have a good defence to the Plaintiff’s action against them. It is the 1^st Defendant’s defence that the Plaintiff had wrongfully liquidated his trading account. The 1^st Defendant relied on an email sent by the Plaintiff to the 1^st Defendant on 1 August 2007. This email was sent to the 1^st Defendant before the 1^st Defendant signed a client’s agreement with the Plaintiff on 27 August 2007. The 21 August 2007 email referred to a ‘Client’s Deposit Guarantee Facility’ provided by the Plaintiff to its clients to prevent an ‘autocut’ situation outside banking hours on condition of the deposit of a sum of $300,00 per investment account with the Plaintiff.

5.  It is the 1^st Defendant’s defence that the Plaintiff has failed to utilize the $300,000 credit the 1^st Defendant deposited with the Plaintiff to protect his account when the margin level fell below the required level. It resulted in the Plaintiff’s liquidation of the 1^st Defendant’s trading account on 27 October 2007 and 29 October 2007.

6.  The Defendants further argued that the 1^st liquidation on 27 October 2007 was wrongly executed, it follows that there was failure of consideration for the $500,000 paid by the 2^nd Defendant’s cheque on 26 October 2007 to cover the 1^st Defendant’s margin account with the Plaintiff. The Defendants argued at the appeal hearing that the Plaintiff had wrongly based its calculation of the 1^st Defendant’s account on 29 October 2007 at 52.2 lots. The 1^st Defendant claimed there should have been only 50.2 lots traded on 29 October 2007, for the extra 2 lots were traded after the Plaintiff had liquidated the 1^st Defendant’s account at 00.15 hours on 27 October 2007.

7.  Mr. Law, Counsel for the Plaintiff, objected to the Defence’s change of position at the Order 14 stage of the proceedings. He pointed out, the 1^st Defendant had admitted and relied on the position of 52.5 lots were traded on 27 October 2007 in his defence and under para. 37 of his affirmation of 23 January 2009 exhibiting his own calculations of his net credit position on 27 October 2007 based on 52.5 lots (p. 156-158 of bundle B).

8.  Mr. Law pointed out that the 1^st Defendant has been changing his evidence and attempting to lead in fresh evidence through the back door after failing to persuade the Court to receive the fresh evidence set out in the two new affirmations at the appeal hearing (see Order 58, r.1 (4) R.D.C.).

9.  Miss Mak, Counsel for the Defendants, admitted the 1^st Defendant has indeed changed his position since his affirmation on 23 January 2009. She argued that in the interest of justice and fairness to the Defence, the court should allow the 1^st Defendant leave to defend. Her submission is based on the 1^st Defendant’s changed position regarding the two lots of gold traded on 00:36:07 on 27 October 2007 after the liquidation on 27 October 2007 at 00:15 hours.

10.  According to the evidence of Mr. Law Ming Lap, the assistant general manager of the Plaintiff deposed in para. 60 of his second affirmation of 20 April 2009, the 1^st Defendant’s account was liquidated before 00:15 hours on 27 October 2007 based on 50.5 lots traded in his account. The account was re-opened after the 1^st Defendant’s request to the Plaintiff’s Jackrey Ng applying $150,000 credit facility to cover his position. Consequently, the two lots traded was made at 00:36:07 on 27 October 2007 after the 1^st Defendant’s request for credit facilities after liquidation.

11.  So far as the liquidation of 1^st Defendant’s account on 29 October 2007 is concerned, the Plaintiff claimed the 1^st Defendant’s account margin level had again fallen below HK$1,000 per contract thus leading to the liquidation on 29 October 2007 at 08:08 hours. Mr. Law referred to the transcript of the recording of the telephone conversation between Mr. Ng of the Plaintiff and the 1^st Defendant at 01:15 hours on 27 October 2007 when Mr. Ng explained to the 1^st Defendant the application of credit facility had to be specifically requested by the client on each occasion (p. 312 of bundle B).

12.  Further reference of the events leading to the Plaintiff’s liquidation of the 1^st Defendant’s trading account can be found at para. 6 of Mr. Ng’s affirmation of 20 April 2009 where he stated that he had attended the 1^st Defendant’s office in Tsim Sha Tsui to collect a cheque of $500,000, $300,000 of which was to be applied to settle the credit he requested earlier that day. Mr. Ng claimed he had again reminded the 1^st Defendant that credit facility must be requested on a case by case basis. He further explained he had requested the 1^st Defendant to deposit further funds in the morning of 29 October 2007 by SMS and by phone. The transcript of the telephone conversation between them at 07:47 hours on 29 October 2007 (p. 79 of bundle A) supported Mr. Ng’s request to the 1^st Defendant to deposit more funds before the market opened on 29 October 2007.

13.  Evidence deposed in the Plaintiff’s affirmations clearly showed the 1^st Defendant had failed to maintain his credit position on time before the two liquidations on 27 October and 29 October 2007.

14.  It is clear from the record of transactions and the transcript of the telephone conversation, the defence case is devoid of merits. Furthermore, the Defendants have failed to lodge an appeal within time and no reason for the delay was given. The Court of Appeal in Secretary for Justice v. Hong Kong Yaumatei Ferry [2001] 1 HKC 125 at p. 128H held that “where the delay is inexcusable, the party seeking on extension of time must show a real prospect of success on the merits”. I find the Defence has failed to show a real prospect of success on the merits.

15.  As to the claim against the 2^nd Defendant, the Defence was based on failure of consideration due to the Plaintiff’s wrongful liquidation of the 1^st Defendant’s trading account. The 1^st Defendant’s trading was dependent on the deposit of funds by the 1^st Defendant with the Plaintiff, as the Plaintiff did re-open the 1^st Defendant’s account upon receipt of the 2^nd Defendant’s cheque, it follows that when the 2^nd Defendant stopped payment of the cheque the day after it was paid to the Plaintiff (Saturday 27 October 2007), the 2^nd liquidation on Monday 29 October 2007 was not wrongful. Furthermore, the records showed the cheque payment on 26 October 2007 by the 1^st Defendant to the Plaintiff was fully justified the payment was required to keep his trading account from being liquidated.

16.  For the aforesaid reasons, I dismiss the Defendants’ application for leave to appeal out of time with costs to the Plaintiff to be taxed if not agreed. I certify the hearing to be fit for counsel’s certificate.