RICHARDSON GREENSHIELDS OF CANADA (PACIFIC) LTD v. TZE YIM

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HEADNOTE

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ILLUSTRATION OF THE DANGERS OF DEPARTING FROM ESTABLISHED PROCEDURE.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. This is yet another dispute between stockbrokers and client arising out of the crash of 1987.

2. The plaintiff stockbrokers' claim is for $64.8m plus interest on an account rendered. The defendant client denies liability and cross-claims for damages for the conversion of his shares and an account of all his dealings with the stockbrokers.

3. The stockbrokers had bought and sold shares on margin on the client's behalf from December 16, 1986, to October 19, 1987 (the day of the crash).

4. On October 27, 1987, the stockbrokers liquidated the client's position. It is his case that they did so at an undervalue. They credited the proceeds of such liquidation to his account with them. Nevertheless, the last statement rendered on that account - which statement was rendered on October 31, 1987 - showed it in debit to the tune of $64.8m.

5. In addition to his complaint as to undervalue, the client says that the stockbrokers have to show that they had at all times sufficient shares for all their clients but have failed to do so.

6. Difficulties and disputes arose over discovery. On September 24, 1988, the client took out a summons for specific discovery.

7. On June 15, 1989, my brother Sears made a Consent Order in this case. Paragraphs 1 - 6 of that Order deal with discovery or, it may be more accurate to say, inspection under some rather innovative arrangement which I will not attempt to describe but will permit to speak for itself. Those paragraphs read :-

SPECIFIC DISCOVERY

                   over the period from 16th December 1986 to 27th October 1987 showing :-

or alternatively:-

such records of the Plaintiff evidencing that it has, at all times, in its possession, custody or control, sufficient stocks of shares for all its clients.

                between the period from 16th December 1986 to 27th October 1987.

2.(b)    The maximum number of persons who may ordinarily be present in the Plaintiff's offices on a day to day basis for the purposes of the inspection exercise described in sub-paragraph 2(a) hereof shall be four provided that one other supervisory staff of the Defendant's representatives may also be present occasionally.

 

2.(c)     Subject to the limitation described in this sub-paragraph, the Defendant may appoint a stockbroker to assist the Defendant's other representatives who are to conduct the inspection exercise described in sub-paragraph (a) hereof. The stockbroker shall only be entitled to attend the Plaintiff's office on the first two days of the said exercise, or for such agreed longer period as is reasonably necessary, and then only for the purposes of the Plaintiff advising and/or briefing the Defendant's representatives on the Plaintiff's practices and procedures and documentations in relation to all aspects of its Hong Kong Stock Market business.

 

8. On November 13, 1989, the client took out a summons (which I will call "the Summons to Dismiss") which asks for - to quote from it - "... an Order that this action be dismissed for want of prosecution, the Plaintiff having failed to comply with the Order of the Honourable Mr Justice Sears dated the 15th day of June 1989 in that the Plaintiff failed and neglected to permit the Defendant's representatives to inspect and peruse the documents specified in the schedule herewith, to make notes of their contents, to make photocopies of the documents and to supply the Defendant's representatives with documents in document form ...". I do not propose to recite the terms of the schedule referred to. It is there to be read.

9. In so far as the Summons to Dismiss seeks dismissal for want of prosecution, it is misconceived and is itself doomed to dismissal because there simply has not on any view been any want of prosecution on the stockbrokers' part rendering their claim liable to dismissal on that ground.

10. Having said that, I will now consider what ought to happen upon treating the Summons to Dismiss not as one to dismiss for want of prosecution but rather as one summarily to terminate proceedings as against a party who, having brought the proceedings, disobeys an interlocutory order made therein.

11. The inspection exercise under the Consent Order did not run smoothly. A great number of disputes arose in the course of the exercise. And - as is evidenced by among other things the very fact of the Summons to Dismiss - such disputes have if anything grown since the conclusion of the exercise.

12. The client has presented detailed complaints of non-compliance with the Consent Order on the part of the stockbrokers. For their part, the stockbrokers have presented a detailed rebuttal of those complaints. Neither side has stopped short of questioning the bona fides of the other.

13. No less than 37 categories of documents are involved. One finds them described in a table which accompanies the skeleton argument of counsel for the stockbrokers, which skeleton and table are to be looked at together with the bundle marked "Defendant's Categories of Documents listed in the Summons of November 13, 1990" which was handed up in aid of the submissions of counsel for the client.

14. Not every category is relied upon by the client as having been witheld or suppressed by the stockbrokers so as to make them liable to have their claim dismissed. Categories 16, 17, 18, 25, 26, 32, 34, 36 and 37 are not so relied upon. As far as categories 16, 17, 36 and 37 are concerned, there is a dispute as to whether they are covered by the Consent Order. As far as category 18 is concerned, there is a dispute as to whether the stockbrokers are obliged at their own expense to print for the client hard  copies of documents on microfiche. As far as categories 25 and 26 are concerned, there is a dispute as to whether the stockbrokers are obliged to indicate to the client which bought and sold tickets relate to which transactions. As far as categories 32 and 34 are concerned, there is a dispute as to whether the stockbrokers are obliged to mark up the bank statements in question for the client as he wishes them to do and says that they have to do.

15. So much for the time being for categories 16, 17, 18, 25, 26, 32, 34, 36 and 37.

16. The remaining categories are relied upon by the client as having been withheld or suppressed by the stockbrokers so as to make them liable to have their claim dismissed.

17. Now I wish to make it clear beyond question that I make no criticism whatsoever of my brother Sears who made a Consent Order which the parties had taken some 3 months to work out. With the benefit of hindsight, one might be, inclined to view the fact that 3 months were taken to work out the Order as an indication of serious trouble to come. At the time, however, it might have suggested only that the arrangement was one which had been fashioned with great care.

18. Having said all that, however, I feel driven to accept the argument of counsel for the stockbrokers that the Consent Order is unsatisfactory and prone to generate disputes involving issues of fact which the Court cannot resolve on affidavits. Such disputes have risen, and such issues have been generated.

19. On the evidence before me, I am unable to find any breach at all of the Consent Order on the part of the stockbrokers let alone any contumelious disregard by them of any of their obligations thereunder. I find no basis for making even an "unless order" against them let alone for dismisssing their claim outright. To the extent that I am able to form any view of the matter, it seems to me on the whole that the stockbrokers have behaved reasonably in regard to the inspection exercise. The Summons to Dismiss is itself dismissed.

20. I consider this worth saying : This case provides a very salutary illustration of the dangers of departing from established procedure. Our Rules of Court are based on the English Rules. Those contain provisions going back to the reign of King Henry V; and they are the product not of pedantry but of practical experience. Agreed departures of a minor type are one thing. Innovations of a fundamental character - which is what the Consent Order here involves - are, I cannot help thinking, best left to the Rules Committee.

21. As far as categories 16, 17, 18, 25, 26, 32, 34, 36 and 37 are concerned, I will leave the client free to see if he can reach some accomodation with the stockbrokers (which his counsel thinks is possible) or, if he sees fit, to apply for directions thereon at a later stage if and in so far as no such acommodation can be reached. The application for such directions, if there is to be one, need not be before me. I am aware of course that the client's stance is that I have been told something by counsel for the stockbrokers which a judge dealing with this matter should not have been told. In any event, I am inclined to think that any application for directions as to the scope of the Consent Order should be to the judge who made it, albeit by consent only.

22. I revert now to the client's summons dated September 24, 1988, seeking specific discovery. I will call it the "Specific Discovery Summons". As one can see from paragraph 1 of the Consent Order, the Specific Discovery Summons was adjourned sine die with liberty to restore.

23. Counsel for the stockbrokers asks me to dismiss the Specific Discovery Summons. Counsel for the client says that it is not before me so that I cannot disimiss it. He says that it has been superseded by the Consent Order. I have already ruled that the Specific Discovery Summons is before me because my brother Mayo ordered and directed on March 19, this year, that it be heard at the same time as the Summons to Dismiss and that both be heard before me - and no appeal has been brought against that order or direction.

24. The Specific Discovery Summons is before me; and it has not been pursued. That being so, I think it right to dismiss it; and I do so.

25. I wish to express my indebtedness to counsel for their assistance throughout this matter; and I now seek their assistance as to costs.

[Submissions on costs]

26. I award the costs of the Summons to Dismiss and of the Specific Discovery Summons to the stockbrokers. Some of the costs incurred before me between April 25, this year, and this resumed hearing were made costs in the Summons to Dismiss. Those are therefore disposed of by my awarding to the stockbrokers the costs of the Summons to Dismiss. Some of the costs incurred before me between April 25, this year, and this resumed hearing were reserved. I now award those costs to the stockbrokers. I certify the matter fit for two counsel whenever two counsel have appeared, save in relation to the appearance before me on May 18, this year, when two counsel appeared on behalf of the stockbrokers (who were awarded costs but expressly disclaimed any entitlement to a certificate for two counsel for that appearance).

27. The client took out a summons by which he sought relief against the stockbrokers which could hardly have been more radical since it sought the dismissal of their claim for $64.8m. It seems to me, in all the circumstances, that it is right to order that the stockbrokers be at liberty to proceed forthwith to the taxation and the recovery as taxed of the costs which I have awarded them. I so order.