DASHIN SECURITIES LTD v. SUPER SINO INVESTMENTS LTD & OTHERS

CACV 751/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 751 OF 2001

(ON APPEAL FROM HCA 9614 OF 2000)

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J U D G M E N T

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Hon Mayo VP (giving the judgment of the Court):

1. This is an appeal from a decision of Deputy High Court Judge Woolley who in turn dismissed an appeal from a decision of Master Mary Yuen who on the plaintiff's Order 14 application granted leave to the 2nd defendant (D2) to defend the proceedings conditional upon her paying into court $10,200,000.00. This is D2's appeal against this decision.

2. This is a rather extraordinary case. The plaintiff is a dealer and broker in securities and provides financial facilities enabling its clients to trade on margin.

3. The plaintiff's claim against D2 is based upon a guarantee it claims D2 entered into as a security for margin trading undertaken by D1 a British Virgin Island company. It is claimed that D2 was a director of D1 at the time when the margin trading was undertaken. The debit balance due to the plaintiff was $10,344,347.74 on 10 October 2000.

4. D2 is a 57-year-old housewife. She claims in her affirmations to have no knowledge whatever of the transactions in question. She affirmed that she never consented to be a director of D1 and never executed the guarantee. In fact she is saying that the document was a forgery.

5. The Judge in his Reasons for Decision refers to a number of unsatisfactory aspects of the defence which D2 is attempting to advance. These relate particularly to the lack of detail that the lady is prepared to condescend to. It is undoubtedly true that there are a number of highly unsatisfactory matters. For example she does not specifically deny that she ever attended at the plaintiff's office. Nor does she deny that the financial statements which were delivered to the registered office of the company were ever seen by her. In this connection it is the plaintiff's contention that the registered office of D1 is a residential flat registered in the name of a Madam Chu who appears to be D2's daughter.

6. Perhaps the most cogent evidence tending to undermine the veracity of the case which D2 is attempting to run is a letter exhibited to an affirmation made by Mr Siu the managing director of the plaintiff from a firm of solicitors.

7. This is a letter sent by the solicitors purportedly acting for D2 making inquiries of the plaintiff concerning the matter. It makes reference to the fact "D2 might have agreed to act as a guarantor". The plaintiff contends that this statement is inconsistent with the case now being advanced that she has no knowledge concerning the signing of the guarantee. D2 denies ever having attended at the solicitors offices.

8. While this might justify anyone considering this matter to conclude that D2's defence was "shadowy" and thus justify the imposition of a conditional defence this does not in our view satisfactorily dispose of the matter.

9. The plaintiff itself is in some considerable difficulty. Mr Siu is unable to give any direct evidence concerning the execution of the guarantee.

10. All of the discussions and negotiations were undertaken by a Mr Lam. Mr Lam has not sworn any affidavit and no explanation has been forthcoming as to why he does not do so particularly having regard to the nature of the defence that D2 is attempting to run. If the defence is indeed a total fabrication one would expect an affidavit from Mr Lam to this effect.

11. Over and above this there are some very unusual features concerning this case. If Mr Siu is to be believed the plaintiff appears to have been prepared to enter into a contract for margin trading with a British Virgin Island company with no known assets in Hong Kong where the sole director at the relevant time was a 57-year-old housewife who was not known to be in possession of any assets. The amount involved in the margin trading ranked in millions of dollars. It is true to add that D3 also signed a guarantee but there is no evidence that he was seised of any assets. All that is known about him is that he presented a cheque for $7,000,000.00 to the plaintiff and that it was dishonoured on presentation.

12. There was a further problem. The guarantee in question does not bear a date. Absent evidence from Mr Lam it cannot automatically be assumed that the guarantee and the commencement of the margin trading was contemporaneous.

13. What seems to be clear from all of this is that the court is only seeing the tip of an iceberg so far as the background to this litigation is concerned.

14. D2 has made an affirmation stating that there is no way that she would be able to raise $10,200,000.00 which would enable her to defend this action.

15. In our view there are a number of features surrounding this case which should be ventilated at a trial. This does not seem to be a case which can satisfactorily be disposed of on a summary basis. This being so it is our view that the appeal should be allowed and we allow the appeal and the 2nd defendant is granted unconditional leave to defend.

16. On being addressed on costs we were advised that the Master declined to grant a certificate for counsel. We are of the view, having regard to the difficulties of the issues which have arisen, that a certificate should have been granted and we so order.

17. We are also satisfied having regard to the unusual features in the case that we should make a different order to the order made customarily. We consider that the appropriate order should be that the order for costs made by the Judge should be varied and that both the costs before him and the costs before us should be costs in the cause.

18. We also understand that in fact judgment has been entered against D2. Having regard to our judgment in this matter we order that this judgment must be set aside.

19. Any costs involved in the enforcement of the judgment are also costs in the cause.