CITIBANK N.A. v. KUNG KWOK-WAI DAVID

BETWEEN

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J U D G M E N T

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Hunter, JA :

1. On 27 April 1989 Liu J gave judgment for the respondent Bank against the defendant appellant in the sum, of HK$550,000, and ordered the defendant to pay the Bank's costs of the proceedings (with the exception of one day's costs) on a common fund basis. From that decision the defendant appeals.

2. The first issue on liability at the trial was whether the defendant on 15 July 1987, on the telephone, orally instructed the Bank, acting by a Mr Eddie Leung, to acquire on his behalf Bear Bonds to the value of HK$20m which were then being offered by Paribas Investment (Asia) Ltd through its underwriters Paribas Asia (1986) Ltd. This telephone conversation which was conducted mostly in Cantonese, with the occasional use of English, was recorded on tape. An agreed translation was before the judge. The plaintiff's case at trial was that objectively assessed what the defendant said constituted an instruction to buy. Conversely the defendant argued that the words which the tape showed him to have used, constituted no more that an invitation to the Bank to make an inquiry.

3. The relationship between the parties can be said to have been equivalent to that of broker and customer. The defendant was not a customer of the Bank, but he had been introduced to it as the spokesman of a substantial account holder, his mother. Leung worked in the private banking department of the Bank, which was willing to give advice and assistance in relation to investments. 15 July was not the first occasion upon which he and the defendant had discussed investment. An earlier first occasion had resulted in what Leung regarded as an instruction to apply for British Airport Authority shares for the defendant. The defendant disputed this, and as the plaintiff was able to cancel the steps it had taken, the matter was left there. This incident was referred to by both speakers earlier in the course of this telephone conversation. Apart from illustrating the relationship, its significance is that the defendant did not dispute Leung's statement that the relationship between the defendant and the Bank was one of trust, and the Bank was prepared to act upon his oral instructions.

4. The taped conversation was transcribed into Chinese and English, and the parties agreed an English translation of this transcript. But a translation may not precisely reflect the original, and cannot record the inflection or manner in which the words are spoken. The impact of the voices recorded on the tape upon a Cantonese speaking person was potentially of decisive importance. The judge was invited to listen to the tape, and the parties jointly entrusted him with what was recorded as "a wider power of evaluation than what a Cantonese speaking juror legitimately has or possesses".

5. Having listened to the tape as well as to the oral evidence of the two speakers over a considerable period, the judge summarised his conclusion as follows : -

"As coming out from the played tape Exhibit 'P1'. decidedly an order was placed on the 15th. The message was explicit, and no other conversations, including subsequent bald denials, to which my attention has been directed, has cast any doubt on the clear order so placed by Mr Kung. Having listened to the played tape of the 15th July, any other conclusion would be perverse".

6. The appellant now invites this court to reverse this finding upon a reading of the translation of the transcript. The task of an appellant judge in such circumstances was simply expressed by Lord Shaw in Clarke v Edinburgh Tramways Co (1919) SC (HL) 37, (cited by Viscount Sankey in Powell v Streatham Manor Nursing Home [1935] AC 243. p 250) as follows: -

"In my opinion the duty of an appellant court in those circumstances is for each judge of it to put to himself, as I now do in this case, the question, Am I - who sit here without those advantages sometimes broad and sometimes subtle, which are the privilege of the judge who heard and tried the case - in a position, not having these privileges, to come to a clear conclusion that the judge who had them was plainly wrong?"

Before a non-Cantonese speaking appellant court, which is unable to share the trial judge's experience, an appellant's task is plainly extremely difficult.

7. Having each put Lord Shaw's question to ourselves, we are far from satisfied that the trial judge was "plainly wrong". On the contrary having each considered the translation as best we can, each, with varying degrees of conviction has come to the same conclusion as the Judge. The context and the relationship between the parties is crucial. Mr Edward Chan, QC, who has said everything that could be said for the appellant, admitted that in the course of the conversation the defendant was emphatic that he "wanted" at least HK$20m worth of these bonds. He invited us to construe the word "want", which was used several times, as an expression of an intent or desire by the defendant to acquire this stock by his own efforts. We disagree. In its context we think that it could reasonably have been understood by Leung as an instruction and request to the Bank for its assistance; especially when followed by an assurance from the defendant of the availability of the money. Accordingly upon the issue of liability this appeal fails.

8. The second issue here and below was quantum. Following the defendant's instruction, the Bank bought a parcel of HK$20m Bear Bonds direct from the underwriters. They originally quoted a price of 98.75 per cent, i.e., they offered a discount of 1.25 per cent from par the issue price. When however the defendant denied his instructions and the parcel was resold to underwriters, by agreement, the purchase price was reduced to 98.5 per cent, and the repurchase price was fixed by underwriters at 97 per cent. This resulted in a loss to the Bank of HK$300,000. Subject to liability, this head of damage was not disputed by the defendant.

9. In addition the judge awarded to the Bank HK$250,000 for loss of commission. He said : -

"I find that the actual discount (1.25 per cent) is a reasonable amount for the plaintiff to charge as commission. It was clearly understood by the parties that the plaintiff was to be reasonably remunerated. Commission at the rate of any discount offered by Paribas in the circumstances represents a reasonable rate of commission ... "

10. For the Bank, Miss Kwan admitted that apart from the terms of the oral agreement of 15 July, there was no evidence before the judge to justify a finding that this sum was in any general, sense "reasonable" in amount. It was, she submitted, reasonable here, because it was implicit in the conversation of 15 July that the defendant was to pay for these bonds at par, and that the Bank should be entitled to retain the difference between par and any discount it might obtain from underwriters. She invited us to read the judgment in this way.

11. We think that there are two fatal objections to this conclusion. Miss Kwan accepted that the relationship between the Bank and the defendant was fiduciary, and equivalent to that of broker and client; and that accordingly the Bank was only entitled to an indemnity, i.e. to recover the price actually paid by it, in the absence of an agreement to the contrary.There was admittedly nothing expressly to this effect said on 15 July and Miss Kwan contended for an implied term. Assuming that an implied term would suffice for this purpose, there was in our view quite insufficient in this conversation to support such a term.

12. Secondly this argument seems to us to have been advanced for the first time before this court. The pleaded case is very different, and the point does not seem to have been put in this way either to the defendant in evidence or to the judge in argument.

13. In our view the Bank simply failed to establish anything under this head of damage and the judgment ought to be reduced to the sum of HK$300,000.

14. The third issue before this court was the propriety of the judge's order not for party and party but for common fund costs. We take the relevant principles here from the unreported decision of this court in Dominga Elizabeth Ibironke Lakham v Wu Wing Tat and Tang Ying Choy, Civil Appeal No 104 of 1987. In that case this court : -

1. Adopted as appropriate to Hong Kong the analysis of Brandon LJ in Preston v Preston [1982] Fam 17 at p 38, particularly where he said : -

"On the true construction of paras (2) and (3) of Rule 28 taken together, however, I do not consider that he power to order costs to be taxed on a common fund basis is intended to be exercised arbitrarily or whimsically. On the contrary, it appears to me that it is necessary, before the court departs from the general basis of taxation laid down in para (2) and directs taxation on a more generous basis authorised by para (3) that there should be some special or unusual feature in the case to justify the court in exercising its discretion in that way".

2. Held that the court should only interfere with a judge's discretion on costs if it was plainly or clearly wrong within the tests in Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394, 400 and Eagil Trust Co Ltd v Pigott-Brown (1985) 3 All ER 119, 121.

15. From a reading of the whole judgment it seems to us that three factors influenced the judge's decision, namely : -

1. An unduly long trial. "Proceedings are protracted. The defendant was unjustifiably persistent".

2. The conduct of counsel for the defendant in taking a number of points for the first time in his final speech.

3. Dissatisfaction with the defendant whom he described as "simply a witness not worthy of credence". He saw no "merit at all in challenging the order so clearly placed on 15 July".

16. We are unable to accept Miss Kwan's submission that the judge did not rely upon considerations l and 2, which she felt unable to support. The circumstances when these two considerations would justify such an order must be extremely rare. One of a judge's duties is to keep the parties, to the relevant. It is difficult to reconcile performance of this duty with such prolongation of a trial as might justify an order of this type. This was not such a case. The trial was certainly and surprisingly prolonged. This stemmed from the conduct of both parties, who were determined to pursue every fringe and doubtful point. Nor can we see any grounds for the criticism of counsel for the defendant in taking points in what was both his first and final speech.

17. Miss Kwan principally relied upon the third circumstance in support of this order. She referred us to the decision of Blair-Kerr J in Hang Tak Co Ltd v Chu Ying-lun and others [1965] HKLR 650 where the judge made a similar order against parties whom he found to have given perjured evidence and to have proffered a falsified document. The judge's finding upon this defendant Miss Kwan submitted was tantamount or equivalent to a finding of deliberate lying.

18. We do not doubt that the presentation of what the court is able to find to be a totally false case, with or without the presentation of falsified or forged documents, might constitute a "special or unusual feature". It is commonplace for courts to prefer the evidence of some witnesses to others. But the occasions when a court is prepared to find the equivalent of perjury or forgery are rare and exceptional. This was not such a case. It did not turn on credibility but interpretation. The words used on 15 July were recorded on tape and not in dispute. Insofar as there was an issue of fact in relation to a later telephone conversation, the judge preferred the evidence of Leung to the defendant but this could have had no significant effect upon his decision.

19. We are unable to detect "any special or unusual feature" in this case which would justify the making of this order as to costs which we regard as clearly wrong.

20. It follows that this appeal succeeds in part. The judgment below must be set aside and replaced by a judgment in a sum of HK$300,000. The costs order below must be set aside, and replaced by an order that the defendant pay the plaintiff's costs on a party and party basis. We will hear the parties upon the costs of this appeal.