XCHRX BHAGWAN SHANKARDAS MOORJANI v. THE KA WAH BANK LTD.

HCA16440/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 16440 OF 1998

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J U D G M E N T

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1. This is the plaintiff's appeal from a number of decisions made by a Master.

2. The plaintiff acts in person. On 9th July 1998, he opened an account with the defendant bank for the purpose of conducting margin trading of foreign currencies. The account number was 701-1-27428-6. By reason of agreements for the conduct of that account, he was required by the bank at all material times to maintain in the account a margin of 5% of the face value of extant trading contracts. In other words, it is said that his commitment should not exceed 80% of his margin.

3. The bank says that on 4th August 1998 it did exceed that percentage, and consequently in purported exercise of its alleged rights under agreements in writing between the defendant and the plaintiff, the defendant squared off the plaintiff's YEN position and there was a resultant loss, it is said, to the bank of HK$393,180.41. They recovered that suggested loss by debiting another account with the bank, or a sub-account, namely, a US dollar account No.701-1-27428-6-01.

4. The plaintiff then instituted these proceedings. The writ was issued on 25th September 1998. The plaintiff gave as his residence "KC PO Box No.71425, Kowloon, Hong Kong" and completed that part endorsed on the writ which states "if the plaintiff does not reside within the jurisdiction whose address for service is Plot No.123, Sindhi Society, Chember, Mumbai-40071, India".

5. As I understand it, in very broad terms, the plaintiff is saying that the defendant wrongfully squared off his position because there was in fact more than 5% margin available. He says that the authorization which he gave to the bank was that that margin would be credited as it were by such withdrawals as were necessary from Account 701-1-27428-6 which in fact covered US dollar, HK dollar and YEN accounts, but that the defendant has wrongfully separated, or sub-divided, or concentrated only on the US dollar account as the margin account. And the plaintiff has said that the defendant has in effect made admissions subsequently as to its error, and he says that he had suffered loss resulting from that error. Consequently, he sought summary judgment and that application for summary judgment was dismissed by the Registrar after a contested hearing.

6. A Defence was then filed setting out the terms of the relevant agreement, asserting the default and denying that any concession of fault has been made by the bank.

7. Then the defendant applied for security for costs. Their application was dated 14th November, and the ground of the application is that the plaintiff is ordinarily resident outside the jurisdiction.

8. Next, the plaintiff issued a summons on 23rd November 1998 by which he sought orders that the Defence be struck out "due", as he puts it, "to insufficient answers"; that judgment be entered upon admissions pursuant to the provisions of Order 27, rule 3, that the defendant be required to answer interrogatories and to admit facts, and that the defendant be ordered to deposit the full amount of the claim into Court and costs.

9. Madam Registrar Chu dismissed the plaintiff's summons with costs to the defendant in any event, and on the defendant's application, ordered the plaintiff, within 60 days, to give security for costs in the sum of HK$150,000, or by an irrevocable guarantee issued by a licensed bank to the satisfaction of the Court or of the defendant, and that in the meantime all further proceedings be stayed. She ordered costs to be to the defendant in any event.

10. The plaintiff now appeals to this court against all those orders and, if I may say so, has presented his arguments with courtesy and skill. I shall deal first with the plaintiff's applications, in other words, all those applications other than the application for security for costs by the defendant.

11. There is no basis upon which to strike out the Defence and there has in fact been no admission, in a sense to which the rules of court apply, upon which an order under Order 27 can properly be made.

12. The interrogatories served by the defendant, without an order, are dated 17th November 1998. The summons that the defendant be ordered to reply was dated 23rd November, less than one week after service, so that the time in which it was open to the defendant to consider them and seek an order for their variation or withdrawal had not expired. In other words, the summons was premature, and it is therefore inappropriate to come to this court today by an appellate procedure for an order that the interrogatories be answered. So, too, with the application to admit facts.

13. Accordingly, the appeal against the orders made in relation to the plaintiff's summonses are dismissed.

14. As for the application for security for costs, whilst it is not open to me to determine the merits of the matter, it is incumbent upon me to ascertain what the contending arguments are in order to see whether it can be said that there is a high degree of probability of success one way or the other. To that end, I asked Mr Ho, for the defendant, to specify as best he could quite what it was the defendant company was saying in the light of the authorization which I have seen signed by the plaintiff to the defendant bank to withhold margin deposit accounts, and the fact that the account number designated was 701-1-27428-6 without any sub-division. Mr Ho tells me that it is the defendant's case that as a matter of fact and as a matter of trading practice between the plaintiff and the bank, there were three separate accounts and that only the US dollar account was used for margin trading, and that when it transpired that the sums in the US dollar account, as it is called, was insufficient to support the contract, the bank started telephoning the plaintiff for instructions and no instructions were given to use the HK dollar or YEN divisions of the account, that the plaintiff undertook to send funds and that in fact US dollar funds were sent.

15. As I say it is not for me to determine the issues at this stage, but I am not in the position to say that that does not constitute a defence, if in due course it were proved.

16. Now, as for the application for security for costs, the amount of security sought by the defendant was HK$249,000 to include the costs of the Order 14 proceedings. The appellant is a national of India and I have seen a photocopy of the passport exhibited to an affirmation filed by Mr Ho. That passport was issued in 1994 in Tokyo where the plaintiff appears to have been residing, but the permanent address stated in that passport was Hong Kong. The plaintiff has permitted me to see today his actual passport and it is not the same as that exhibited and he tells me that the exhibited passport was lost in June or July of this year. The replacement passport, of necessity, shows very little in terms of travel in and out of Hong Kong. He last entered Hong Kong in September 1998 and has been permitted to remain as a visitor until 10th December 1998, in other words, until some day next week.

17. The evidence filed before me is that in November 1998, the plaintiff advised the defendant's solicitors that he was living at a hostel in Kowloon, and that service of papers in connection with these proceedings has been by prior arrangement. The plaintiff tells me today that he still resides at the hostel. That is, of course, not a matter of criticism. His financial circumstances, he says, are such that he cannot afford anything else. Nonetheless, in all the circumstances that are presented to me, I am satisfied that he cannot, as a matter of law, be said to be ordinarily resident in Hong Kong and that has been shown. The defendant also prays in aid the fact that there have recently been steady withdrawals from bank accounts and that in any event the balances are now very small.

18. The plaintiff, I note, has been refused legal aid. He has made an unsuccessful application for summary judgment and I do note a spate of applications from him since then.

19. I think that in all the circumstances the defendant is justified to be concerned about its position as to costs, and that an order for security is warranted. The order made was in the circumstances relatively modest and the time given again relatively generous. The appeal against the order for security for costs is dismissed save that I shall amend the time for the security to be deposited from 60 days from 1st December to one of 72 days from today.