RICHARDSON GREENSHIELDS OF CANADA (PACIFIC) LTD. v. PAUL CHOW

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H E A D N O T E

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Claim by brokers for $645,206.32 due on a margin account. Correctness of claim accepted by customer subject to defences and counterclaims based on breach of instructions, negligence, conversion and illegality.

Breach of instructions

There was breach of instructions to sell shares at best on October 26, 1987. Difference between price at which shares eventually sold and price they would have fetched if sold at mean prices for such shares on October 26, 1987, is $227,991.00. Cross-claim for $227,991.00 operated by way of set-off to reduce brokers' claim from $645,206.32 to $417,215.32 rounded off to $417,215.30. Armory v. Delamirie (1722)1 Strange 506 applied by analogy.

Negligence

Did not arise (because based on argument that if there was no breach of instructions to sell at best because brokers had advised against that course, then advice would have been negligent).

Conversion

Even if brokers, had sold at best on October 26, 1987, margin account would have been in debit. Brokers liquidated customer's position. Contention that sale of shares wrongful because: (i) carried out in violation of promise, binding under rule in Hughes v. Metropolitan Railway (1877)2 App. Cas. 439, not to do so yet; (ii) conditions precedent to right to sell under Agreement not satisfied; and (iii) right to sell under Agreement bad for failure to comply with s.81 of Securities Ordinance, Cap. 333. Contention failed because: (i) customer had repudiated obligation to pay for shares thus abandoning right to time; (ii) repudiation gave brokers right to liquidate; (iii) in any event, conditions precedent had been satisfied; and (iv) also in any event, failure to comply with s.81 did not vitiate right to sell.

Illegality

Dealer's representatives who dealt with customer were not registered. Breach of s.50 of Securities Ordinance, Cap. 333 accordingly. Case did not fall within first principle in St. John Shipping Corporation v. Joseph Rank Ltd [1957]1 Q.B. 267 at p. 283 since object was not to break the law. Question was therefore one of legislature's intention. Shaw v. Groom [1970]2 Q.B. 504; Yango Pastoral Co. v. First Chicago Australia Ltd (1978)139 C.L.R. 410; Chintung Commodities Ltd v. Cheng, Civil Appeal No. 106 of 1985, October 23, 1985, (unreported) and James Capel (Far East) Ltd v. So, High Court Action No. A3171 of 1987, May 31, 1988, (unreposted) considered. Contract enforceable despite breach. If it had not been, there would have been a right of recovery (because customer not in pari delicto and within class protected by statute, but not on basis of mistake: Home & Colonial Insurance Co. Ltd v. London Guarantee Accident Co. (1928)45 TLR 134). Legitimate in circumstances to consider later statute, namely, Commodities Trading Ordinance, Cap. 250: In re MacManaway [1951] A.C. 161. That ordinance reinforces view already arrived at that breaches in present case do not render contracts unenforceable.

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BETWEEN

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J U D G M E N T

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1. In 1987, the plaintiff company ("the Brokers") acted for the Defendant ("the Customer") as his brokers in respect of his dealings initially in unit trusts and subsequently in quoted shares.

2. He started dealing, in unit trusts in July 1987, having been approached with suggestions that he do so by a Mr John Russell, an acquaintance of his who was then a sale executive with the Brokers but who has since left their employ. Mr Russell got him to sign an agreement dated July 2, 1987, in the Brokers' standard form headed – accurately in my view - `Customer Trading Agrrement'.

3. By the latter part of the following month, August 1987, the Customer had gotten out of unit trusts. He did so at a profit.

4. However, by the beginning of September 1987, he started to deal in shares. Here his business was not handled by Mr Russell whose field was unit trusts. He was passed on by Mr Russell to another employee of the Brokers', a Mr Dennis Luk, who was and is their administration manager.

5. At first, Mr J.J.E. Swaine, who appears for the Customer, disputed the contention of Mr Clifford Smith, who appears for the Brokers, that the Customer Trading Agreement governed the Customer's dealings in shares even as, it had governed his dealings in unit trusts Later on however, Mr Swaine - rightly in my view - accepted that contention.

6. The Customer's dealings in shares were on margin. Activity on his margin account with the Brokers ceased on December 15, 1987. By that time he was, on the basis of the dealings reflected in that account, $645,206.32 in debit.

7. The Brokers claim this sum, together with interest, against him.

8. A number of defences and counterclaims have been raised by the Customer. Subject to these, he accents the correctness of the Brokers' claim for $645,206.32.

Failure to_carry out instructions

9. The first line of defence - in the form of a cross-claim relied upon by way of set-off - arises in this way :

10. As is notorious, October 1987, saw the worst global market crash since 1929.

11. In Hong Kong, the stock exchange was - as the result of a decision taken after the day's trading on 'Black Monday', as October 19, 1987, has come to be called - closed for the four trading days from and including Tuesday, October 20, 1987, to and including Friday, October 23, 1987. Trading resumed on Monday, October 26, 1987.

12. It is admitted by the Brokers that the Customer had, during the stock exchange's closure, instructed them to, sell all his shares at best as soon as trading resumed, and that he had confirmed such instructions on the morning of such resumption on the 26th.

13. According to Mr Dennis Luk the matter was not, left on that footing. He says that just before trading began on the morning of the 26th, he telephoned the Customer to advise him to place limits on his sell orders so as to limit the prices at which he would sell his shares to 70% of their last closing prices. And, he says, the Customer accepted such advice, and changed his instructions accordingly.

14. The Customer denies receiving, let alone accepting, any such advice.

15. Mr John Russell also gave evidence on this issue. What he says - with which the Customer disagrees - tends to support Mr Luk's account rather than the Customer's. But it is capable of being reconciled with either.

16. Having seen and heard the witnesses on this issue, I accept the evidence of the Customer thereon.

17. The Brokers made no attempt to sell any of the Customer's shares at best on the 26th. A separate question arose over certain of the Customer's shares, namely, his Huey Tai shares. Those shares had been made the subject of a 2 for 1 split, and had been submitted for registration accordingly. The Brokers argue that they cannot, in any event, be faulted for not selling those shares. This is because, they argue, they did not have the scrips. I have, however, unchallenged evidence from the registrars of those shares that if a broker who had submitted such shares for registration wanted them back he could have sent someone round to the registrars offices to collect them. Mr Luk says that he did not know this. However, the Customer's instructions to sell all his shares at best were given during the closure of the stock exchange. Even if Mr Luk's lack of knowledge is excusable, he ought at least to have made enquiries - upon receipt of such instructions – as to whether or not he could get the shares back. "In my view, the probability is that had he done so lie would have had the shares in hand by the time trading resumed on the 26th. Thereupon, they could have been sold as 'Huey Tai Old', each of which represented two `Huey Tai New'.

18. In my judgment, the Brokers' failure to make any attempt to sell the Customer's shares at best on the 26th puts them in breach of their contractual duty to carry out his instructions so to do

19. I will revert, in due course, to the consequences of such breach.

Negligence

20. The Customer has pleaded alternative case in negligence. It runs thus: if the Brokers had indeed dissuaded him from selling at best, then they were negligent in so doing. On the facts I have found; the question of claim in negligence does not arise.

Conversion

21. At the end of the day's trading on the 26th the Customer attended a meeting at the Brokers' offices. Among the Brokers' employees present at the meeting was a Mr Albert Leung, an assistant vice-president of theirs.

22. The question of the Customer paying what was due on his account, and the question of his position being liquidated if he did not, were discussed. These questions would arise whether or not the Brokers were at fault in not selling his shares at best on the 26th. This is because even if they had done so his account would still be heavily in debit. The upshot was that the Brokers, through Mr Leung, promised to give the Customer until a further meeting to be arranged to come up with settlement proposals.

23. However, on the next day, October 27, 1987, the Brokers started to liquidate his position by selling off his shares.   With the exception of his Huey Tai shares - some of which were sold in November 1987, and the rest of which were sold in December 1987 - all his shares were sold during the period October 27-29, 1987.

24. Thus were all the Customer's shares sold by the Brokers to arrive at the figure of $645,206.32 which I have already mentioned.

25. It is the Customer's case that the Brokers had no right to sell his shares and that, by wrongfully so doing, they had converted the same.

26. Here a crucial issue of fact arises. Mr Dennis Luk says that following the meeting of the 26th, the Brokers' president - who had come to know that the Customer had been promised time - expressed his disapproval of that course. So, on the morning of the 27th, Mr Luk, according to his evidence, telephoned the Customer and raised the question of repayment with him.

27. The Customer denies that any such conversation took place.

28. While they were in the witness-box giving conflicting evidence on the issue as to limit orders, I found Mr Luk's demeanour shifty and the Customer's demeanour forthright. However, while they were in the, witness-box giving conflicting evidence, on the issue which I am now addressing, the very opposite was true: it was the Customer whom I found shifty and Mr Luk whom I found forthright. On this issue I accept Mr Luk's evidence; and. on such evidence the facts as I find them are as follows: On the morning of the 27th, Mr Luk contacted the Customer on the telephone. He told the Customer that, if he made such payment as would meet his margin his shares would not be sold, and that if he paid up all that was outstanding on his account - which was not much more than what had to be paid to meet the margin call of over $1 million – he could take his shares away. The Customer informed Mr Luk that he did not wish to make any payment to the Brokers. In response to his, Mr Luk told the Customer that if he did not pay up his position would be liquidated starting that very day. The Customer voiced no objection to this. Accordingly, the liquidation proceeded.

29. One of the bases on which the Customer challenges the liquidation which took place runs thus: By reason of the promise made by Mr Albert Leung at the meeting of the 26th, the Brokers had waived and/or were precluded by the rule in Hughes v. Metropolitan Railway (1877)2 App. Cas. 439 from selling off his shares before he had an opportunity to present settlement proposals at a second meeting to be arranged. On the facts I find, this basis of challenge must fall to the ground because, quite plainly, the Customer had abandoned the opportunity given to him. He said he was not going to make any payment.

30. Equally, the remaining bases of his challenge to the liquidation must also fail. On the facts I find, the Customer had repudiated his obligation to make payment to the Brokers. In such circumstances, he is not entitled to hold the Brokers to the conditions precedent to sale contained in clause 4 of the Customer Trading Agreement. But it would not help him even if he was so entitled. This is because, in any event, the Brokers are able to bring themselves within that clause if they have to the Customer did fail to maintain his margin although requested - by Mr Luk on the telephone on the 27th - so to do. And, by virtue of clause 4(d), such failure on his part gave the Brokers the right to liquidate his position under the terms of that clause. If necessary, the Brokers could probably also rely on clause 4(f), which entitles them to liquidate if '… any other event occurs or circumstance arises which, in [their] opinion, is likely materially and adversely to affect the ability of the [Customer] to perform any of the [Customer's] obligations.

31. Such repudiation - on which the Brokers acted by liquidating the Customer's position- also destroys the somewhat more involved challenge to the liquidation which the Customer advances by reference to section 81 of the Securities Ordinance, Cap. 333. In any event, I do not consider this challenge - described by Mr Swaine as a "lawyer's point" - a sound one even, leaving repudiation aside. I do not propose to deal with it at length. All I propose to say is this: I do not think that the entitlement to sell under the Customer Trading Agreement is an authority caught by section 81(3). And even if it was, the failure to specify a period during which it is current would not destroy the entitlement, such failure being no more than disobedience of a directory provision in section 81(4). The only result would be - by virtue of section 81 (4) – that the period of the entitlement's currency is one year from the date of the Customer Trading Agreement, which is July 2, 1987. By section 81 the legislature intended to regulate contractual rights and obligations, not to destroy them. On the facts, nothing of any relevance occurred beyond the one year period commencing on July 2, 1987.

Illegality

32. In the course of the trial it emerged that, although each of them had acted as a dealer's representative within the meaning of the Securities Ordinance, Cap. 333, neither Mr Dennis Luk nor Mr John Russell had been registered as such. Illegality was then pleaded: by re-re-re-re-amendments in brown as far as Mr Luk is concerned, and by re-re-re-re-re-amendments in pink is far as Mr Russell is concerned.

33. The Customer relies on contraventions of sections 50(1)(a) and/or 50(1C) of the Securities Ordinance, Cap. ??33. Section 50(1)(a) provides that no person shall act as a dealer's representative in Hong Kong unless he is registered as such under Part VI of the Ordinance. Section 50(1C) provides, in so far as is material to the Customer's plea, that a dealer's, representative shall not act as a dealer's representative on behalf of any person other than the person specified in the register in accordance with subsection (1B).

34. Section 50(2) provides that any, person who knowingly acts in contravention of subsection (1) or (1C) shall he guilty of an offence and shall be liable on conviction to a fine of $10,000 and, in the case of a continuing offence, to a further fine of $100 for each day during which the offence continues.

35. Naturally, I dislike having to pronounce that anyone who is not on trial before me for a criminal offence has committed such an offence. Nevertheless, I feel bound in the present circumstances, to proceed on the basis that offences contrary to sections 50(1)(a) and 50 (1 C,) have been committed by Mr Luk, Mr Russell and – as counsellor, procurer, aider or abettor - by the Brokers themselves.

36. Mr Swaine argues that such illegality has two consequences: first, that it provides the Customer with a defence to the present claim; and, secondly, that it provides him with a right to recover a sum of $200,000 which he had paid the Brokers on October 21, 1987, to reduce the debit on his account with them. Mr Swaine had pleaded three other sums as sums which can be recovered; but he has not pursued the point that those, other three sums are recoverable. So the right to recover advanced in this case is a right to recover the $200,000 paid on October 21, 1987.

37. In my judgment, in the circumstances of this case, there would be a right to recover if there is a defence based on illegality. The right to recover would be on the bases that the Customer would not be `in pari delicto' or, indeed, in delicto' at all (see the discussion in 'Chitty on Contracts', Vol. 1, 25th ed. (1983), paras. 1168 and 1974) and that he is within the class which the statute is designed to protect (see the discussion ibid. para. 1172). It would not, in my view, be - or have to be - on the basis suggested by Mr Swaine, namely, money paid under a mistake. This basis of recovery - apart from being unnecessary – is, in my view, unavailable on the facts of this case upon an application of the following proposition stated in para. 1951 of 'Chitty on Contracts' (supra) on the authority of Home & Colonial Insurance Co. Ltd v. London Guarantee Accident Co. (1928) 45 T.L.R. 134:-

"Where, however, the payer would not have appreciated the materiality of a fact recovery may be refused on the ground that the payment was made in settlement of a claim or that the mistake was one of law. The mistake of fact must be the effective cause of the payment."

There is no evidence that the Customer would have appreciated the materiality of the fact that neither Mr Luk nor Mr Russell were registered.

38. Is the contract which underlies the transactions here in question unenforceable?

39. In St. John Shipping Corporation Joseph Rank Ltd [1957]1 Q.B.267 at p. 283, Mr Justice Devlin stated two principles. The first principle is he said, "... that a contract which is entered into with the object of committing an illegal act is unenforceable." (Emphasis supplied). The second is, he said, "… that the court will not enforce a contract which is expressly or impliedly prohibited by statute."

40. Mr Swaine argues that the present case comes within the first principle, so that I should conclude that the contract here in question is unenforceable without, in coming to my conclusion, any consideration of the intention in that regard of the legislature which enacted the statute, the contravention of which is said to give rise to such unenforceability. I do not agree. The case before Mr Justice Devlin involved the overloading of a ship. At p. 287, he said: "Of course, if the parties knowingly agree to ship goods by an overloaded vessel, such a contract would be illegal; but its illegality does not depend on whether it is impliedly prohibited by the statute, since it falls within the first class of the two general heads of illegality I have noted above where there is an intent to break the law;" In other words, the object of the contract in that case was the carriage by sea of a load which both parties knew was beyond the ship's capacity as laid down by merchant shipping legislation which made overloading a crime.

41. The object of the contract in the present case, which is dealing in securities, is not illegal. What happened was that in the carrying out of that object - including the signing of a standard form agreement to govern the rights and obligations of broker and customer unregistered persons functioned in capacities in which it is laid down by statute that unregistered persons should not function - and in which it is, by statute, made punishable for such persons to function. In my judgment, the question in such a case is whether or not the statute, on its true construction, renders rights acquired and obligations incurred pursuant to the contract unenforceable.

42. That was the approach of the High Court of Australia in Yanpo Pastoral Co. v. First Chicago Australia Ltd (1978)139 C.L.R. 410. That case concerned the carrying on of banking business without statutory authority to do so. Such conduct was forbidden, and made punishable, by statute. The High Court of Australia looked to the true construction of the statute for the answer to the question whether or not contractual rights and obligations acquired and incurred in the course of such unauthorised banking business were enforceable. In the result, it was held that they were enforceable.

43. I take a serious view of the present case, being one in which the Customer was throughout in the hands, so to speak, of dealer's representatives who were unregistered (although I do not consider them disreputable). From my reading of the older cases, it would seem that contracts have been struck down for less. But I must not forget the point which Lord Justice Sachs made so cogently in Shaw v. Groom [1970]2 Q.B. 504 at pp. 523H-524A when he said that:-

"Today's generation is dominated by that ever mounting mass of legislative control to which reference has already been made: in support of that control numerous offences have been created each with its appropriate penalty, and it is for the courts to see that this does not result in additional forfeitures and injustices which the legislature cannot have intended."

44. It is not lightly to be inferred that the legislature intended sanctions beyond the penalties it laid down. Within the range of punishment laid down, a sentencing court can tailor its sentence to the circumstances of each case. But a construction which renders co contracts unenforceable amounts to a very blunt instrument. On occasions it could have consequences of unwarranted seriousness. This is how Mr Justice Murphy put it in Yango Pastoral Co. v. First Chicago Australia Ltd (supra) at p. 436:-

"As s.8 stands, however, the assistance of the courts to a bank in enforcing the transaction would not directly defeat the object of the section, although it tends to do so. Should a federal common law rule be adopted to forbid, recovery in these circumstances? Objections are the unmerited windfall to the borrowers from the bank, with Possible consequential insolvency of the bank and loss to innocent, lenders and other creditors. These objections are not preculiar to these circumstances but apply whenever recovery is denied by a drastic rule. However, the dominant consideration is that adoption of such a rule is not required to ensure observance of the Act. The penalty in s.8 is heavy (although inflation has reduced its severity) and sufficient to secure observance if this were desired by those responsible for its enforcement. My conclusion is that such a rule should not be adopted."'

There is, if I may say so, a wealth of wisdom in what Mr Justice Murphy said. When the legislature sets out to regulate an industry, enacting rules and penalties by which to enforce them, the courts must be very careful not to adopt an over-zealous construction of the enactment, for that may have highly counter-productive consequences, possibly including insolvency within the industry and all the ills that follow in its wake.

45. There is another factor which tends to point away from unenforceability in the present case. As pointed out in para. 1145 of 'Chitty on Contracts' (supra): "Statutes often provide expressly for the civil consequences of breach of their provisions and this is by far the preferrable colution." This course is not alien to the Securities Ordinance, Cap. 333. Sections 72, 73, 76 and 143 provide for penalties in regard to offers, calls, options or forward trading and investment advisor contracts Section 72(4)gives customers a right to rescind. So does section 73(4). Section 76(4) provides that neither party, may enforce an offending Contract. Section 143(5) gives the client a right to avoid the offending contract.

46. The fact that a statute expressly provides for civil consequences in regard to some breaches tends to suggest that the legislature did not intend civil, consequences in regard to breaches for which no such consequences are expressly provided. This is the view taken by the Court of Appeal, in Chintung Commodities Ltd v. Cheng, Civil Appeal No. 106 of 1985, October 23, 1985, (unreported), which deals with Commodities Exchanges (Prohibition) Ordinance, Cap. 82 and the Commodities Trading Ordinance, Cap. 250. It is also the view taken by Mr Justice Duffy in James Capel (Far East) Ltd v. So, High Court Action No. A3171 of 1987, May 31, 31, 1988, (unreported), which deals with the Securities Ordinance, Cap. 333. Lord Justice Sachs took the same view in Shaw v. Groom (supra) at p. 525E where he uses the illuminating formula, "any intended result on civil liabilities".

47. Turning to, another matter, Mr Swaine relies on section 57 of the Securities ties Ordinance, Cap. 333. That section deals with the effect of the suspension or the revocation of the registration of a dealer or a dealer's representative. Subsection (1) provides that for the purposes of sections 48 to 50 a person whose registration is revoked or suspended shall he deemed not to be registered. Subsection, (2) provides that subsection (1) shall not operate so as to avoid or affect any agreement, transaction or arrangement entered into before or after suspension or revocation, or any right, obligation or liability arising under such agreement, transaction or arrangement.

48. Mr Swaine argues that unless the legislature thought that 'actual' non-registration would render contracts unenforceable, it would not have seen any need to provide that 'deemed' non-registration would not.

49. I have given this point very careful thought. And, having done so, I have come to the conclusion that the answer to it suggested by Mr Smith is correct. A deemed non-registration could arise upon revocation for misconduct. The misconduct in question could be so serious as to be fraudulent. Yet the legislature intends that even agreements entered into after revocation for such misconduct remain enforceable (unless of course there is some reason apart from deemed non-registration why it should not be). It is not difficult to see why the legislature would feel the need to spell this out in terms even though non-registration simpliciter would not - in its view and according to its intention - render contracts unenforceable.

50. In my judgment, the Customer's case on illegality fails.

51. As I come to this conclusion without any need to consider Mr Smith's point based on a comparison of the Securities Ordinance, Cap. 333 with the Commodities Trading Ordinance, Cap. 250, it is not really necessary for me to deal with the point. However, as I have heard full argument on it, I propose to indicate my views on the point.

52. Mr Swaine submits that I should not have regard to the Commodities Trading Ordinance, Cap. 250 when considering the offect of the Securities Ordinance, Cap. 333. Here he drew my attention to In re MacManaway [1951] A.C. 161, in which the Privy Council laid down the strict conditions under which a later statute may he resorted to for the interpretation of an earlier one. Shortly stated, those conditions are: that both statutes must be on the same subject; and that the earlier statute to be construed must be 'fairly and equally open to divers meanings' (see p. 177). Since I have come to a firm conclusion on the Securities Ordinance, Cap. 333 without reference to the Commodities Trading Ordinance, Cap. 250, it is open to question - for that reason alone - whether the second condition is satisfied in the present case. However, it maybe that the formula I have quoted is met simply by the intensity of the rival submissions I have received. The first condition is, in my view, fulfilled. Both statutes deal with the regulation of exchanges on which members of the public and institutions invest. This is how Lord Justice Sachs put it in Shaw v. Groom (supra) at p. 523E: "One must look at the relevant statute or, series of statutes as a whole and then assess whether the legislature intended to preclude the plaintiff recovering in the action, even when an essential act is under consideration".

53. Further justification for looking at the Commodities Trading Ordinance, Cap. 250 would seem to arise in this way. First of all, the exercise will be a well-ordered one since the section therein which is involved, namely, section 26 was considered by the Court of Appeal in Chintung Commodites Ltd v. Cheng, (supra). So one would not he, as it were sailing into uncharted waters. Secondly, there have been amendments to section 50 of the Securities Ordinance, Cap. 333 which come later than the enactment of the provision in the Commodities Trading Ordinance, Cap. 250 on which Mr Smith relies the most heavily, namely, subsection (6) of section 26 thereof.

54. Section 26(2) provides that no corporation that is a dealer shall carry on business as a dealer unless every director or employee who is accredited to the corporation is registered as a dealer under the Ordinance. Subsection (5) lays down penalties for contravention. Subsection (6) provides that any futures contract made by any person, whether as principal or agent, who is required to he registered under subsection (1) and who is not registered as so required, may be rescinded by any other party to the contract who, upon so doing, shall be entitled to recovery of any money or other thing he may have paid or delivered under the contract.

55. Mr Smith says that breaches of section 26(2) of the Commodities Trading Ordinance, Cap. 250 and breaches of the Securities Ordinance, Cap. 333 are so alike that the legislature is unlikely to have viewed the automatic result of breach on enforcement as different in each case. There is, I think, force in this argument. Continuing, Mr Smith submits that the provision of the remedy contained in section 26(6) is inconsistent with automatic unenforceability upon breach of section 26(2) since the latter would render the former unnecessary. I agree. Mr, Swaine says that, the remedy under section, 26(6) - which carries a right of recovery in the innocent party as well as a defence for him - may go further than his rights under the ordinary rules relating to illegality of contracts applicable in such circumstances. I do not agree. I have already dealt with recovery by innocent panties. Moreover - and more significantly - we have what Mr Justice Cons said in Chintung Commodites Ltd v Cheng (supra) at p. 6, where he described the result contended for under such rules as 'similar' to the one brought about by section 26(6). I do not think that Mr Justice Cons would describe the results as 'similar' if one only provided the innocent party with a defence while the other provided him with a right of ?? as well as a defence.

56. If it is legitimate to make a comparison with the Commodities Trading Ordinance, Cap. 250 - and I am inclined to think that it is - such comparison fortifies my conclusion, reached independently of it, that the Customer's plea of illegality fails and avails him nothing.

Consequences of failure to carry out instructions

57. The Brokers' submission is that the Customer has failed to adduce any evidence upon which I can award him any damages, or anything more than nominal damages, for breach of his instructions to sell at best on October 26, 1987. I disagree. The stock exchange's quotation sheets for that day are before the court; and the Brokers do not dispute their accuracy as a record of that day's trading.

58. Based on such record, Mr Swaine has advanced two alternative submissions as to what the Brokers could have achieved if they had attempted to sell all the Customer's shares - including those in Huey Tai - on the 26th. The first submission involves taking the first prices at which the relevant shares were sold on that day. But it ignores the fact that the number of shares sold at those prices was less than the number of such shares which the Customer had for sale. So does the second submission, which involves taking, a median figure between the opening and closing transactions in each counter.

59. If Mr Swaine's first submission prevails, the Brokers could have sold the Customer's shares for $441,311.00 more than they did. If his second submission is right the figure would be $306,686.

60. But, as I have said, Mr Swaine's figures ignore the number of shares sold at the prices on which he seeks to rely.

61. Mr Smith has also produced figures, based on the mean prices at which the relevant shares were traded on the 26th. He did not do so by way of concession that the Customer is entitled to damages or more than nominal damages. Rather he did it to illustrate the flaw in Mr Swaine's figures to which I have adverted.

62. On the basis of those figures of Mr Smith's, the difference between what the Brokers could have sold the Customer's shares for and what they actually sold them for is either $227,991.00 or $212,991.00: It would be the smaller figure if the Brokers are entitled to single out the Customer's shares in Law's Fashion, and rely on the fact that they ultimately sold?them from more than the mean price of those shares on the 26th. If the position has to be looked at in the round - as L think it does - it would be the higher figure of $227,991.00 which is appropriate.

63. Mr Smith says that while the figure cannot be higher than $212,991.00 or $227,991.00., it does not mean that the Customer has managed to prove damages on his cross-claim of even either of those amounts. This is because, he says, what the Customer had to do, but has failed to do, is call an expert, probably a stockbroker, to say what the Brokers could have achieved had they attempted to sell all his shares at best on the 26th.

64. In my judgment, the Customer's failure to call such an expert is not fatal.

65. I invited counsel to address me on the famous case of the chimney sweeper's boy's jewel, the decison of Chief Justice Pratt in Armory v. Delamirie (1722)1 Strange 506; and they have done so. The report of that case is so brief that it is convenient to set out the body of the report in full:-

"The plaintiff being a chimney sweeper's boy found a jewel and carried it to the defendant's shop (who was a goldsmith) to know what it was, and delivered it in to the hands of the apprentice, who under pretence of weighing it, took out the stones, and calling to the master to let him know it came to three halfpence, the master offered the boy the money, who refused to take it, and insisted to have the thing again; whereupon the apprentice delivered him back the socket without the stones: And how in trover against the master these points were ruled:

1. That the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover.

2. That the action well lay against the master, who gives a credit to his apprentice, and is answerable for his neglect.

3. As to the value of the jewel several of the trade were examined to prove what a jewel of the finest water that would fit the socket would be worth; and the Chief Justice directed the jury, that unless the defendant did produce the jewel, and skew it not to be of the finest water, they should presume the strongest against him, and make the value of the best jewels the measure of their, damages: which they accordingly did."

66. In my judgment, the Customer, as the party wronged, has, by putting before the court evidence from which the mean prices can be found, carried the matter as far as he has to in order to recover compensation on the basis of those prices, in the absence of evidence that the Brokers could not have achieved even what are after all no more than mean prices. By analogy with Armory v. Delamirie (supra) he Customer has, by producing the mean prices, produced the seeket. Even as the defendant in that case knew best what the jewel was like, the Brokers in the present know best what they could probably have achieved in carrying out the Customer's instructions if they had not ignored them. He did not produce the jewel; and they have not said what they could have done or suggested that they were below average in their ability as stockbrokers to sell their customers' shares. I do not think that they have any cause for complaint if I assess damages on the cross-claim arising out of their failure to carry out the Customer's instructions at $227,991.00

Conclusion

67. This sum of $227,991.00 will be set off against the Broker's claim of $645,206.32, reducing such claim to $417,215.32, which I will round down to the nearest 10 cents to arrive at $417,215.30. There will he judgment for the Brokers on the claim in the sum of $417,215.30. The counterclaim is dismissed.

68. It only remains for me to thank counsel for their assistance, and to indicate that I will now hear them as to interest, costs and any other ancillary matters which may arise.

69. [Argument as to interest, costs and stay of execution]

Court : Interest at 8% p.a. from issuance of writ to today; costs to the Plaintiff; stay of execution for 14 days; liberty to apply.