MOSCOW NARODNY BANK LIMITED v. C.K. POON & CO. (a firm)

1984 No.A7939

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

____________

__________________________

ASSESSMENT OF DAMAGES

___________________________

1. By its Statement of Claim, the Plaintiff Bank claimed the Defendant firm of stockbrokers at some time prior to April, 1978, held on the Plaintiff's behalf shares in four Hong Kong companies. The Plaintiff confirmed that the bulk of the shares had been returned by the Defendant to the Plaintiff, with the exception of the following -

            (i)      1,000 shares in Sun Hung Kai Securities Ltd.

            (ii)      500 Wheelock Marden "A" shares.

            (iii)      6,600 shares in the Hong Kong and Shanghai Bank.

2. The Plaintiff claimed return of the shares certificates, an account of dividends received by the Defendant and an order that they he paid over to the Plaintiff, damages, interest and costs. At first, one partner only in the Defendant firm acknowledged service of the writ with notice of intention to defend. That partner was then represented by solicitors and remained so until 11th June, 1997, when he gave notice of intention to act in person. By that time, on 9th March, 1987, the Plaintiff had entered Interlocutory Judgment that the Plaintiff return the outstanding share certificates or pay the Plaintiff their value to be assessed, and that the Plaintiff pay damages to be assessed.

3. The purpose of this hearing is to assess the damages.

4. The evidence for the Plaintiff consisted of an affidavit from an officer of the Plaintiff Bank briefly describing how the shares concerned belonged to Queensland Nominee Ltd. who had pledged the shares to the Plaintiff, the shares being deposited with the Defendant. Requests for returns of the shares were never met. I also had before me a Hearsay Notice consisting of a bundle of correspondence, company reports from the three companies whose shares were involved, stockbrokers' reports about the companies etc.

5. I was satisfied from the documentary evidence that at the end of 1978 the Defendant was indeed in possession of the shares I have listed earlier, and ignored several requests to return them.

6. In assessing appropriate damages, the main decision to be made is whether the measure of damages is to be the value of the shares at the time of failure to return them on demand, i.e. the end of December, 1978, or the date of judgment. Although Miss Cheng was unable to refer me to any authority on a situation exactly the same as the one before me, it seemed to me that the general principles relevant to my considerations are set out in Chapter 23 of "McGregor on Damages" (14th Ed.) and particularly para. 842 the final sentence - "the measure of damages is the market price at the time of breach or at the time of trial at the option of the plaintiff."

7. Miss Cheng opted for the second alternative, i.e. that the damages should he based upon what the Plaintiff would have been left with had it held the three blocks of shares all the way through from when their return was demanded until the date of judgment. The Plaintiff would at that time, on this hypothesis, have possessed the original three blocks of shares, plus any bonus or rights issues, plus dividends declared during the period - except that the Wheelock Marden "Ai" shares had ceased to exist in March, 1985, on a takeover bid.

8. Once the Plaintiff opted for this method of calculating the damages which I consider entirely proper, it then became a matter of tracing the history of each company's dividend and share issues. In this I am indebted to Miss Cheng for her detailed guidance through the various company annual reports and stockbrokers' reports.

9. I will deal separately with the hypothetical history of holding on to the three blocks of shares-

        (i) Sun Hung Kai Securities Ltd.

    The 1,000 shares original holding, there being no bonus or rights issues, were valued at $2.70 per share on the date of judgment. The value of the shares at judgment was, therefore, $2,700.00.

    The total sum of dividends declared up to judgment was $1,470.00.

          (ii) Wheelock Marden "A" shares

    The original holding was 500 shares, but in the year ending 31/3/80 there was a bonus issue of 1:10 shares, bringing the holding to 550 shares. In the 9-month period to 31/12/80 there was a further 1:10 bonus issue bringing the total holding as at 28/3/85 to 605 shares.

    On that date, there was an offer for the Wheelock Marden "A" shares by Wharf Company of $7.40 per share, which means that the holding at that time would have realised $4,477.00.

    The total sum of dividends declared during the period to 28/3/85 was $1,234.50.

(iii) Hongkong & Shanghai Bank shares

    The original holding was 6,600 shares. Up to the date of judgment there had been bonus and rights issues of shares bringing the total holding to 49,593 shares, which were valued at $10.70 per share, giving a total value of $530,645.00.

10. During the relevant period dividends were declared attributable to the notional holding from time-to-time of $181,334.50, but from this sum must be deducted the cost of taking up the two rights issues of $74,212.38, leaving dividends in band of $107,122.12.

11. I award damages in respect of the withholding of the three blocks of shares as follows -

12. I award interest on the sum of $5,711.50 from 28/3/85 to judgment at the rate of 1% over prime rate from time-to-time, and on all three sums at judgment rate from judgment until payment.

13. I award costs of this assessment to the Plaintiff, with certificate for counsel, to be taxed if not agreed.