CHUNG NAM SECURITIES LTD v. CHAN FAN TAT

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2899 OF 1998

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JUDGMENT

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1. By an agreement dated 5^th July 1994 made between the Plaintiff and the Defendant, the Defendant agreed that he would act as a registered dealer representative ("Representative") for the Plaintiff broker company and that in respect of the transactions done by the Representative for clients of the Plaintiff broker, the Representative would be entitled to commission for each purchase or sale order obtained and completed by the Representative. This is in para. 3 of the agreement. Para. 4 of the agreement reads:

"The registered dealer representative/agent hereby covenants and agrees with the broker that he will at all times be personally responsible for and liable to the broker for all sums of money or securities owing to the broker by any of its clients in respect of any sale or purchase order obtained by the registered dealer representative/agent, and the registered dealer representative/agent hereby guarantees the due payment of any such amount or the due delivery of any such securities and further covenants to indemnify and save harmless the broker against due payment of all such amounts or due delivery for such securities."

2. The present action has been brought by the Plaintiff broker against the Defendant for sums owing by 5 clients. In relation to four of the clients, the Plaintiff no longer seeks summary judgment against the Defendants. In relation to one client, Chong Wai Ming, summary judgment application has been brought by the Plaintiff against the Defendant for the outstanding sum of $630,288.02. Chong Wai Ming, the client, in fact had been sued to judgment by the Plaintiff and a bankruptcy order had been made against Chong Wai Ming.

3. The hearing today consists of Mr. Chan, the Defendant, arguing before the court that he should not be liable. As I see it, the main dispute or defence raised by the Defendant is that he should not be liable because the sum owing arises out of the client, Chong, trading under a margin account. And the Defendant sought to make a distinction between a margin account and a cash account. There in no substance in such a defence. The wording of Clause 4, does not restrict the liability of the Defendant for cash accounts. All categories of clients whether they be margin or cash accounts were covered. Any of the clients handled by the Defendant were in fact covered by Clause 4 and examples of such clients would be Siu Lai Lai, at p. 114 which was a margin account and Chan King Kuen at p. 110 which was also a margin account.

4. Although the Defendant's signature did not appear in the margin account agreement signed by the client Chong, with the predecessor of the Plaintiff at p. 95, that is not surprising because when that document was signed at p. 92, it was made 1993 before the Defendant joined the Plaintiff's company. But that does not in any way detract from the Defendant's liability in relation to all clients that he had handled and from whom he obtained orders for the broker. What is then left of any defence against summary judgment. Reference was made to failure to close out the account or to sell the shares at earlier date. These are matters in respect of which there is no defence between the Plaintiff and the client.

5. I regret that there is no triable issue. No bona fide defence has been raised by the Defendant in relation of the money owing by the client, Chong Wai Ming. Accordingly judgment must be entered against the Defendant in the sum of $630,288.02 together with interest thereon at 2% above prime from the date of the writ until today. The Plaintiff is to have the costs of the Action including the costs of the application before the Master and the costs of this appeal.