WYCOMBE INVESTMENT LTD v. EDWIN LEONG SIU HUNG

HCCL 66/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 66 OF 2004

(transferred from HCCA 5665 of 1997)

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J U D G M E N T

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Introduction

1. This is an action about an investment that went badly wrong.

2. It also an action which brings into dispute two erstwhile friends, wherein one is charged with responsibility for losing the other’s money.  Perhaps unsurprisingly, this friendship, like the money, no longer exists.

3. The plaintiff company is an investment vehicle chosen by Kennedy Wong, and his father Philip, well-known solicitors in Hong Kong, for the investment of family funds into a foreign exchange trading fund which was run by the defendant, Edwin Leong, himself the son of a prominent Hong Kong family.

4. This action is of some age.  It relates to events that took place from mid-June 1991 to mid-January 1992.

5. However, the writ was only issued in May 1997 shortly prior to the expiry of the limitation period, and in fact it was not served until the end of 1998, almost a year later.

6. For reasons which are not entirely clear, although apparently settlement has been canvassed intermittently over the years, this case has taken almost seven years to come to trial, during which there has been a transfer to the Commercial List in 2004 – hence the current action number.  In fact, it would not have come to trial even now had not this court, on 1 February 2005, dismissed an application by the defendant for the trial of a preliminary issue, and ordered that the entire action be tried at the first available date.

7. This lapse of time has had a signal effect upon the manner in which evidence has emerged at trial.  Understandably memories were nowhere near as sharp as they once were as to the key events, and a substantial part of the case has involved reliance upon documentary reconstruction in terms of what happened, when and why.

8. There have been three viva voce witnesses of fact : Mr Kennedy Wong was the sole witness for the plaintiff, whilst the defendant, Mr Edwin Leong, and his former employee, Mr Eddie Chow, each have given evidence on behalf of the defence.

9. Two expert witnesses also have been called : Mr Dennis Lam for the plaintiff, and Mr Colin Slatyer for the defendant.  In circumstances wherein there is an abundance of computer-generated information about the trading of the fund forming the substance of the plaintiff’s complaint, the experts have been able to discern a certain amount of common ground between their respective positions, although it is fair to say that in specific areas there remain significant differences of approach.

10. In addition to determining the issues of law arising in this case, this court is charged with having to make certain findings of fact and, in the process, in certain instances is required to choose between the respective accounts of events proffered by Mr Kennedy Wong and Mr Edwin Leong.

The factual background

11. Although this case is larded with detail, the broad factual outline is tolerably clear.

12. At the time of the events in question, Mr Kennedy Wong was a young solicitor of 28.  He had become acquainted with Mr Edwin Leong, some 13 years his senior, at a weekly lunch club.

13. Mr Leong also knew Mr Wong’s father, Philip, who had acted for him professionally some years before.

14. It appears that during the late 1980’s and into 1991 Mr Leong had been engaging in foreign exchange trading through the medium of his company, Tai Hung Fai Enterprise Co. Ltd.

15. In this endeavour Mr Leong had been doing extremely well : his evidence is that he had been making many millions of dollars at this activity, on both the foreign exchange spot and options markets, in connection with which he had developed a particular trading strategy which had been yielding a high success rate.

16. With the very significant profits thus generated, Mr Leong had ‘cashed out’ and had purchased substantial property interests in Canada.  Now, however, he wished to branch out and to start a foreign exchange trading fund, which would employ his particular, and hitherto highly profitable, technique for trading in forex options.  Ultimately he hoped to be in a position publicly to list this anticipated new fund on the Hong Kong market.

17. Mr Leong’s achievements on the forex markets had stimulated conversation at the particular lunch club to which both he and Mr Kennedy Wong then belonged.  Money talks, particularly in Hong Kong, and for his part Mr Leong does not appear to have been reticent about his considerable success to-date.

18. Unsurprisingly, therefore, Mr Kennedy Wong became interested.  And thus it was that Mr Leong, whom at this stage was seeking ‘seed money’ for that which he hoped ultimately would become a successful new publicly-listed fund, turned to Mr Wong and his family for initial capital.

19. At the same time Mr Leong turned also to two other individuals : Mr Thomas Kwok, Vice Chairman of Sun Hung Kai Properties, and to Mr Henry Fong, another wealthy individual and property owner, and the founder of the lunch club at which Mr Kennedy Wong and Mr Edwin Leong had become friends.

20. Mr Kwok, Mr Fong and Kennedy Wong’s family all put money into this new enterprise : the latter put in US$2 million, Mr Kwok the sum of US$1.77 million, and Mr Fong the sum of US$500,000.00.

21. So far as the Wong family money was concerned, this was remitted to the defendant’s company, Tai Hung Fai Enterprises Ltd, on 26 July 1991, receipt of this sum being acknowledged on 1 August 1991.

22. Trading on margin was conducted through the medium of the Tai Hung Fai Enterprises ‘B’ Account maintained with Messrs Wardley Thomson Ltd, (‘Wardley’); somewhat curiously, such trading actually commenced a few days prior to the receipt of the initial sum of US$2 million.

23. The monies respectively contributed by Mr Kwok and by Mr Fong were remitted subsequently to this Tai Hung Fai ‘B’ Account; indeed, Mr Kwok’s contribution appeared to have arrived at a particularly opportune time, since this capital injection served to keep this new venture afloat after it had sustained heavy early losses.

24. Be that as it may.  I deal with some of the detail later in this judgment.  For present purposes suffice to say that the glittering success that Mr Edwin Leong had achieved in the earlier years when trading on his own account sadly was not to be repeated.

25. At the turn of the year the market ‘whipsawed’ against the extremely large short United States dollar bets which then were in place, and Wardley made a margin call on the ‘B’ Account that could not be met from funds then available.

26. On the afternoon of Sunday 12 January 1992, at a meeting at the residence of Mr Thomas Kwok attended by all the investors, Mr Leong broke the ‘bombshell’ that, absent a further capital injection, the fund had been wiped out.  In fact, there had been a total loss of slightly in excess of US$8.4 million.  This news was not greeted with acclamation.

27. In the event Mr Kwok, Mr Fong and Mr Kennedy Wong declined to make any further contribution, and the open positions then subsisting were closed out by Wardley, thereby crystallizing the loss.  Mr Edwin Leong was required to make good the resultant US$4.185 million shortfall pursuant to his personal guarantee then in place in favour of Wardley.

28. This action is the much belated by-product of these unfortunate events.  It appears that Mr Kwok and Mr Fong have not engaged in litigation with Mr Leong or his company, Tai Hung Fai Enterprises.  In so far as it is relevant I understand that any dispute between them consequent upon the loss of their capital has been settled long ago.

The issues

29. The shape of the present action is thus : the plaintiff, Wycombe Investments Ltd, claims against Mr Edwin Leong in his personal capacity in terms of breach of contract, negligence and breach of trust and/or fiduciary duty.

30. As to the remedy pursued, the plaintiff says that in the circumstances it should be reimbursed the entirety of its initial US$2 million investment, together with compound interest and costs.

31. Notwithstanding the vast amount of raw data that this action has generated, in substance this case requires resolution of three primary issues, namely :

a.	Are the parties to this action the proper parties?
b.	If the action is properly constituted, is the defendant liable to the plaintiff, and if so, upon what basis?; and
c.	Whether the plaintiff has established that it has suffered consequential loss, and, if so, how much?

It is to these issues that I now turn.

Issue 1 : Is the action properly constituted?

32. Given the apparent absence of precise documentation in the circumstances of this case, it is far from clear why the pleader did not spread his net more widely when this litigation commenced some eight years ago; perhaps the action never was intended to come to trial, and the writ merely was issued in terrorem.

33. In any event, this is a case wherein it is firmly asserted on behalf of the defendant that not only is Mr Leong the wrong defendant, but that Wycombe Investments Ltd is the incorrect plaintiff also. 

34. If either of these contentions is correct, of course, this action falls at the first hurdle, given that there can be no question of amendment of parties at this late stage and well after expiry of the relevant limitation period – indeed, no such amendment has been sought.

35. No doubt it was this concern as to locus that prompted the defendant’s application, by amended summons dated 20 October 2004, for trial of a preliminary issue as to ‘whether the plaintiff and the defendant are the proper parties to this action’.  As earlier noted, this summons, which came on for argument on 1 February 2005, was dismissed in light of the availability of trial dates relatively shortly thereafter.

36. Decision between the respective contentions as to the correctness of the parties to this action must depend, in part at least, upon factual conclusions as to the events which transpired when Mr Leong had taken the idea for the establishment of a forex trading fund to Mr Kennedy Wong and to his father, Mr Philip Wong.

37. At bottom, there is not a great deal of difference between the respective accounts.  Both Mr Kennedy Wong and Mr Edwin Leong rehearsed this aspect of the case extensively in their evidence.

38. It is common ground that in June 1991 Mr Leong had approached Mr Wong with a proposal to set up a new venture to trade in foreign exchange.  The idea was to set up a specific management company vehicle to be called ‘THF Investment Management Company Limited’ – referred to throughout this trial by the acronym ‘TIM’ – which entity was to act as the manager in forex trading for clients who were envisaged to be local wealthy investors.

39. Mr Leong would supervise the forex trading activities, and would be assisted by his employee Mr Eddie Chow, himself a seasoned forex trader.  The broad division of labour was that Mr Leong, whose primary expertise was in the trading of forex options, would take care of the derivative side, and Mr Chow the ‘spot market’ transactions.

40. The detail of the manner in which this was broached with Mr Kennedy Wong, and his father Philip, together with the other ‘investors’, Mr Kwok and Mr Leong, in itself is not of great importance, albeit there have been certain factual differences upon which I should rule.

41. There are two such matters of specific debate.  The first is whether the note entitled ‘THF Fund Management Co. Ltd.’, which contained the defendant’s initial proposal as mooted to Mr Kennedy Wong, was proffered by the defendant at the first meeting in Mr Wong’s office, or whether it was drawn up by Mr Leong subsequent to that initial meeting and thereafter sent to Mr Wong.  The second aspect provoking factual argument is whether there was a meeting at 9.30 am on 29 June 1991, a Saturday morning, at Mr Wong’s office and attended by himself, Mr Fong and Mr Kwok, in order further to discuss the investment plan.

42. I do not consider that resolution of these matters is of particular significance in terms of the resolution of this case, but in the event I have concluded, upon the balance of probabilities and in light of the available evidence, that upon these two issues Mr Wong’s recollection is to be preferred to that of Mr Leong.

43. Accordingly I find as a fact that there was such a meeting on 29 June 1991, and further that the note containing Mr Leong’s investment proposal was proffered to Mr Wong when he first went to see Mr Wong to discuss the issue, and was not subsequently faxed or sent to Mr Wong after this first meeting.

44. Be that as it may.  It is incontrovertible that Mr Kennedy Wong, and his father, Philip – whom Mr Leong had been taken to see by Kennedy Wong on the day of the initial meeting – had agreed that participation in this new trading venture was an appropriate course to take with but a very small proportion of the Leong family assets.

45. Accordingly, on July 26 1991 the sum of US$2 million was uplifted from a London account held by the Wong family trust, Ho Kit Man Inc., and was remitted via New York to Wardley in Hong Kong, the remittance confirmation noting that these funds were for the credit of “Tai Hung Fai Enterprise Co. Ltd. ‘B’ Account No. 19922-87”.

46. At the bottom of this remittance advice, as issued by the Shanghai Commercial Bank Ltd, the undisputed evidence is that Mr Kennedy Wong had typed thereon a receipt clause in the following terms :

“RECEIVED from Wycombe Investment Limited the sum of US$2,000,000.00 being trust money to be managed by us for investment in Forex markets.

	-----------------------------------
	Tai Hung Fai Enterprise Co. Ltd.
	Date:                                         ”

Upon this receipt clause Mr Leong had appended his signature; he did not complete the date entry, although it is common ground that the signed document was sent back to Mr Kennedy Wong on or about 1 August 1991.

47. It is against this factual background that argument has proceeded upon whether Wycombe Investment Ltd is the correct plaintiff, and whether Mr Edwin Leong personally is the correct defendant.

The plaintiff’s position

48. I take the position of Wycombe first.

49. For the defendant Mr Sussex SC asserted that the relevant oral agreement which came into being must have been concluded with Kennedy Wong (and possibly also with his father Philip Wong), that this agreement must have been reached either at the end of June or the beginning of July, and that Wycombe had not appeared on the scene until the remittance confirmation, with the receipt clause added thereto, was sent to Mr Leong on or about 1 August 1991.  He noted that the Wong family did not make the decision to involve Wycombe until mid to late July, and that Wycombe had made no application for shares in the proposed investment vehicle, Tai Hung Fai Investment Management Co. Ltd, until 6 August 1991 – indeed, the shelf company, Pointrol Ltd, which was later to change its name to TIM, had not been acquired until 5 August 1991.

50. He further argued that even though the receipt was made out to Wycombe, this was not done until after the receipt of the funds, and by that time a binding contract had been concluded between Kennedy and/or Philip Wong and Tai Hung Fai, and that this receipt was insufficient to change the parties to this pre-existing oral contract, which itself remained conditional until becoming unconditional upon receipt of funds.

51. For the plaintiff, Mr Fung SC forcefully rejected this argument.  He observed that this was an entirely opportunistic point which never had been raised until seven years after the events in question, when it had appeared in the Defence and Counterclaim filed on 14 August 1998, notwithstanding that Mr Leong had been advised by solicitors as well as by leading counsel since at least February 1992.  It beggared belief, he said, that if Mr Leong really had considered that Kennedy or Philip Wong had participated in this venture in their personal capacities that there had been no attempt to join them as third parties in order to obtain reimbursement of the sums expended by the defendant on their behalf in light of his settlement with Wardleys upon the collapse of the fund.

52. In any event, Mr Fung argued, it was entirely clear that the defendant himself had envisaged that the investors whom he was approaching for ‘seed money’ to launch the fund would be investing through their respective corporate vehicles, as the ‘revised Memo’ prepared by Kennedy Wong, and faxed to Mr Leong on 14 June 1991, amply demonstrated; this document, which had been prepared by Kennedy Wong upon Mr Leong’s instruction in order to inject some form of legal structure into the original investment proposal, had made specific reference to the shareholders ‘or nominee’ within the proposed investment vehicle, TIM.

53. Further, said Mr Fung, it was the burden of Kennedy Wong’s evidence that it had been made abundantly clear to Mr Leong from the outset that any investment to be made on behalf of the Wong family would be made through a family corporate vehicle : in the event, the monies had come from the family trust Ho Kit Man Inc., whilst it had been Wycombe Investment Ltd which had been chosen formally to participate in the venture.

54. The defendant’s argument as to the plaintiff’s lack of locus does not find favour with the court. 

55. I accept the evidence of Mr Wong to the effect that in his communications to Mr Leong it was made clear that a family corporate vehicle would be involved.  In the circumstances revealed on the evidence it is difficult to see how or why the subsequent formal identification of the precise corporate vehicle to be thus involved should preclude this entity from being the contracting party, for whom Kennedy Wong throughout had been acting as agent.  Nor do I understand how this point can survive the undisputed fact that there is no doubt that it was appreciated by all concerned that the capital input to be made by the three core investors would be via corporate entities, which in turn may have become shareholders within the management vehicle, TIM.  The signed acknowledgment by Mr Leong of the receipt from Wycombe Investment in terms of the capital contribution of the Wong family merely serves to underline the point.

56. I thus reject the proposition that Wycombe is not the correct plaintiff, and the correlative proposition that no duties thus can have been owed to Wycombe in contract, tort or equity.

57. However, the argument as to Wycombe’s position is but the first arrow in Mr Sussex’s quiver in terms of the correct constitution of this action.

Mr Leong’s position

58. The defendant’s further submission is that, whatever may be the position regarding the plaintiff, demonstrably it is the case that the defendant, Mr Leong, himself had entered into no contract in his personal capacity, and that the counterparty to the agreement entered into by the Wong’s, whether by themselves or through Wycombe, was and can only have been Tai Hung Fai Enterprises Ltd, into whose ‘B’ account at Wardley the Wong family’s US$2 million had been deposited.

59. This aspect of the case is more difficult, and strikes me as a serious and fundamental point.  The matter requires consideration from the viewpoint both of contract and tort.

60. Mr Sussex argued that the “irresistible conclusion” to be drawn, both from the contemporaneous documentation and the witness evidence, is that the oral contract which undoubtedly was concluded regarding investment of the Wong family funds was concluded by Mr Leong on behalf of Tai Hung Fai Enterprises Co. Ltd (hereinafter ‘Tai Hung Fai’), and not on his own behalf.

61. He pointed out that although Mr Leong was the human agency through which Tai Hung Fai traded, it is clear that the company was trading for its own account and not for the account of Mr Leong; in this connection he noted that all correspondence and agreements relating to Tai Hung Fai’s accounts were expressed to be between Wardley and that company, and that when Mr Leong did trade for his own account he had maintained a quite separate account for that purpose.

62. Moreover, Mr Sussex submitted, from the very beginning of the discussions which had taken place between Mr Leong and those invited to contribute to the fund, it was clear that the fund would be held, and trading therein conducted by and through a corporate vehicle.  At the early stage this vehicle, of course, had been envisaged by all parties to be TIM, which was to be set up for the specific purpose of managing the fund – the name originally proposed by Mr Leong had been THF Fund Management Co. Ltd, although this name later had been changed to THF Investments Management Co. Ltd, that is, TIM; the shelf company, Pointrol Ltd, had been acquired for the purpose, and its name changed accordingly, but in the event it was never used.

63. This clearly is correct on the evidence.  In addition, I accept the contention that the terms upon which the trading was to be conducted by the intended corporate vehicle were the subject of a number of draft documents, and that there never was any suggestion that those contributing to the fund would be placing their money with Mr Leong personally.

64. For example, on 14 June 1991 Mr Kennedy Wong had faxed to Tai Hung Fai, for the attention of Mr Leong, a document setting out how the proposed fund would be operated by TIM.  This document expressly had identified the objects of the company as being to “maximize the return on money managed by the Company by investing and trading in the FEX market and FEX option market both in Hong Kong and overseas”; in this connection Mr Leong was identified as a permanent director, and Tai Hung Fai was to hold 85% of the shares in this new company, it being expressly provided that the fund was to be held by this company and that trading was to be conducted by it.

65. In addition, in terms of the actual remission of the Wong family funds of US$2 million, on 23 July 1991 Mr Leong had written to Kennedy Wong and, in asking him to remit money to Tai Hung Fai’s new ‘B’ account, had stated “I have asked Wardley Thomson to open a “B” A/C for Tai Hung Fai for the time being and the A/C’s name will be changed later to THF Investments Management Co. Ltd afterward”, this letter also enclosing the relevant instruction from Wardley.

66. Against this background, it strikes me that it is difficult to believe that the plaintiff, or indeed Kennedy (or Philip) Wong for that matter, had been under any illusion that the contractual counterparty for the investment of these funds would be other than Tai Hung Fai; in fact, a document disclosed by the plaintiff, bearing the date 25 July 1991, which was the day prior to the remission of the funds to the Tai Hung Fai ‘B’ account, contains a handwritten notation which reads : “Invest US$2 million in forex trading with Tai Hung Fai”, the latter name appearing in Chinese characters.

67. I have earlier made particular reference to the terms of the receipt clause for the funds thus remitted, a clause drawn by Mr Kennedy Wong specifying receipt of the money “to be managed by us”, and which was signed by Mr Leong as Managing Director of Tai Hung Fai; in fact, even after the loss of the funds was reported, in January 1992, the letter of 13 January 1992 signed by Kennedy Wong and the two other contributors, instructing that all further trading should cease, was addressed to Mr Leong as Managing Director of Tai Hung Fai.

68. It also should not be overlooked that it had been made clear to all parties that the ‘spot’ forex trading was to be conducted by Eddie Chow, an employee of Tai Hung Fai, nor is there any assertion or suggestion within the evidence that had TIM been used to manage the fund (which in the event it was not) that Mr Leong was to be held personally liable for that entity.

69. The use of Tai Hung Fai is, on the evidence, entirely consistent with Mr Leong’s established practice of conducting his business through that company, and I bear in mind, also, that had TIM in fact been used for the purpose, TIM was to be a subsidiary of Tai Hung Fai, and owned as to 85%.

70. It is also correct to say that almost all the correspondence emanating from Kennedy Wong, including the letter enclosing the company ‘kit’ relating to the establishment of TIM, together with the bill relating to professional services he had rendered (having during this period worn the dual hats both of investor and legal adviser) was addressed to Mr Leong as managing director of Tai Hung Fai, or to that company for the attention of Mr Leong.

71. Looked at in the round, therefore, I do not accept the contention put forward on behalf of the plaintiff that the oral agreement as to the investment of the monies thus deposited for forex trading was the result of an oral agreement made with Mr Leong personally, and that it was consequent upon a series of bipartite and undocumented telephone conversations between the two men which had taken place between the all parties’ meeting of 29 June 1991 and 23 July 1991, when Kennedy Wong was invited by Mr Leong to remit the relevant funds to Wardley Thomson.

72. Accordingly, having rejected that argument, I find that the oral agreement relied upon was made between the plaintiff, Wycombe Investment Ltd of the one part, and Tai Hung Fai Enterprises Co. Ltd, of the other.

73.  In the context of this particular argument, Mr Sussex’s observation to the effect that it was ironic that Mr Kennedy Wong was keen to retain the protection of the incorporated plaintiff, whilst at the same time specifically denying Mr Leong the like advantage, has considerable resonance.

Assumption of responsibility

74. This, however, is not the end of this debate.  In his resourceful address, Mr Fung sought to overcome the overwhelming difficulty inherent within the purely contractual analysis by submitting that it was open to the court, upon the particular facts of this case, to find that this was a signal example wherein a director of a counterparty contracting company had assumed personal responsibility for performance of the contractual obligations otherwise arising.

75. In this regard Mr Fung prayed in aid the principles laid down in the House of Lords decision in Williams v. Natural Life Health Foods Ltd [1998] 1 WLR 831 tothe effect that a director acting on behalf of a company will incur personal liability in tort in a situation wherein first, there has been an assumption of responsibility by the director towards the plaintiff, and second, wherein the plaintiff reasonably relied upon such assumption of personal responsibility by the director.

76. In this regard the test of responsibility is objective.  As Lord Steyn expressed the position in Williams v. Natural Foods, op cit., at 835F-H :

“The touchstone of liability is not the state of mind of the defendant.  An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff.  Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene.  Subject to this qualification, the primary focus must be on the exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff… The inquiry must be whether the director, or anybody on his behalf, conveyed directly or indirectly to the [plaintiff] that the director assumed personal responsibility towards the [plaintiff].”

77. In addition to this authority, Mr Fung cited three New Zealand cases : Centrepac Partnership v. Foreign Currency Consultants Ltd (1989) 4 NZCLC 940, a case in the High Court of Auckland wherein Gault J held the 2^nd defendant in breach of a personal duty of care owed to the plaintiffs concurrently with the duty owed to them by the 1^st defendant company, Fletcher v. National Mutual Life Nominees Ltd [1990] 3 NZLR 641, another High Court of Auckland decision, wherein directors of a money market operator were found to be personally in breach of their duty of care to investors therein, and further, Sim v. Global Equity Management (NZ) Ltd, [2001] NZDCR Lexis 142, a case in the Auckland District Court, wherein Judge Gittos found the sole director and shareholder of a company personally liable in deceit by making false and misleading representations as to his qualifications and expertise as an investment adviser and securities representative.

78. I have not found any of these cases to be persuasive authority for the propositions advanced, not least because Centrepac Partnership and Fletcher, op cit., were decided before Williams v. Natural Life, which must be regarded as the leading authority in this area of the law, whereas in Sim v. Global Equity Management, op cit., Williams v. Natural Life does not appear to have been cited to the court, and, perhaps even more oddly, the then leading New Zealand case of Trevor Ivory Ltd v. Anderson [1992] 2 NZLR 517, a decision of the New Zealand Court of Appeal, which antedated Williams and which was quoted with approval by Lord Steyn in Williams (at 836C-D), was not followed.

79. In any event, it was Mr Fung’s strong contention, having regard to the objective factors in this case, that if and in so far as Tai Hung Fai was the contracting party, nevertheless, in the terminology used by Lord Steyn, there had been such a ‘crossing of the line’, wherein Mr Leong, qua director, had represented to the plaintiff, or more particularly to the plaintiff’s agent, Kennedy Wong, that he had assumed personal responsibility for the investment of the Wong family funds as remitted to Tai Hung Fai.

80. In this context Mr Fung rehearsed the history of the relationship between Kennedy Wong and Edwin Leong.  He submitted that at all times Mr Leong was the founder, managing director and controlling shareholder of Tai Hung Fai.  As a ‘certified investment adviser’ it had been Mr Leong who had approached Kennedy Wong with a specific proposal to establish an investment fund, that he had solicited from the investors a position in which he would have “a free hand” to manage and trade their money, and that he had repeatedly represented that he was an experienced forex trader with an enviable and lucrative track record.

81. In addition, said Mr Fung, Mr Leong had reinforced his representations by presenting Kennedy Wong with summaries, obtained from Wardley Thomson, of the trading records of various accounts previously managed by himself, as well as trading records for Eddie Chow for the months of May and June 1991, all of which had revealed profitable results, albeit Tai Hung Fai in fact had suffered a loss after taxation of some HK$24 million for the year ending 31 October 1990, with forex losses close to HK$60 million.  In addition, he said, Mr Leong had represented that he would have “overall responsibility” for trading, and indeed plainly, on the evidence, he had exercised ultimate control over all forex dealings as were in fact carried out.  He also had warranted that he would invest his own personal monies in the fund, and, although this had not occurred, this was, said Mr Fung, entirely consistent with the plaintiff’s case that at all times the investors had looked to the defendant’s “personal pocket book”, and had been prepared to proceed with this venture only on this basis.  Indeed, Kennedy Wong had said that he had always regarded Mr Leong personally as his professional client rather than the corporate entity Tai Hung Fai, whilst all the trading ‘activity reports’ had been provided to the plaintiff in the defendant’s personal capacity.

82. Nor could there be any doubt, submitted Mr Fung, that Kennedy Wong and the plaintiff had relied upon the defendant’s skill, knowledge and expertise as an investment manager dealing in forex to carry out the task of managing the monies so deposited with him, and that Mr Leong well knew that he was discharging the functions and duties of a fund manager to all the investors in this fledgling fund.  Accordingly this was a clear case in which the defendant had “crossed the line” and had assumed personal responsibility toward the plaintiff.

83. To this contention Mr Sussex said two things : first, that the ‘assumption of responsibility’ issue had not been pleaded, and second and in any event, when looked at in the round that this contention plainly was self-serving nonsense.

84. Although is true that this issue has been but faintly pleaded, nevertheless in the Commercial Court, wherein all the facts are available, and wherein there has been no element of surprise, I am disinclined to decide this issue on a pleading point.

85. As to the substance of this particular debate, Mr Sussex emphasized, correctly, that this argument on the part of the present plaintiff, Wycombe, was premised upon the assumption that indeed it was Tai Hung Fai and not Mr Leong which was the contracting party.

86. He submitted that in this connection the focus is on “ a triangular position” – see Williams, op cit., at 835G – between Wycombe, Tai Hung Fai and Mr Leong, and that the primary focus is on things said or done by the defendant in his dealings with the plaintiff, the court being required to look at the exchanges which “cross the line” between the defendant and the plaintiff.

87. Accordingly, he argued, in this context the inquiry must be whether Mr Leong, or anybody on his behalf, had conveyed directly or indirectly to Wycombe that Mr Leong was assuming personal responsibility towards Wycombe.  Moreover, in the triangular position under consideration, he asserted, the contextual scene assumed considerable importance wherein it was sought to affix a director with personal liability for the negligent performance of services which the company has contracted to provide, not least because a director is capable of acting in two capacities, so that a director’s acts can be either corporate acts or his own personal acts, a distinction which in the present case it was vital to keep in mind.

88. In this connection Mr Sussex pointed to the observations of Hirst LJ in the Court of Appeal in Williams, op cit., to the effect thathaving regard to the importance of the status of limited liability, a company director is only to be held personally liable for negligent misstatements if the plaintiffs can establish “some special circumstances setting the case apart from the ordinary” and that in the instance of a one-man company “particular vigilance is needed, lest the protection of incorporation should be virtually nullified”, whilst in the same case in the House of Lords Lord Steyn had observed that the category of case in which a director will be fixed with personal liability for negligent misstatement “is a rare category, and a severely restricted one”, and that if this were not so, “representees could set at naught the protection which limited liability is designed to confer on those who incorporate their business activities”.

89. High authority, therefore, establishes that a court should hesitate before finding that a director has assumed personal responsibility for an act attributed by law to his company, and with this principle in mind, submitted Mr Sussex, there simply was no scope upon the facts of the present case to find any such assumption of responsibility.

90. In amplifying this argument counsel reiterated the factual matrix, rehearsed earlier in this judgment, underpinning the submission that it was with Tai Hung Fai and not Mr Leong with whom the investors had contracted.  In particular it was pointed out that virtually all the correspondence and documents emanating from Mr Leong in relation to the fund were expressly stated to be from Tai Hung Fai.

91. Mr Sussex further stressed that, on the evidence before the court, there never had been any representation by Mr Leong that he would be prepared to assume personal responsibility for holding or trading the fund; to the contrary, his evidence was to the effect that it was his express intention from the outset that the fund should be held and traded through a corporate vehicle, and whilst naturally he would be personally involved, this was very different from the notion of acceptance of personal liability in the event of failure.  In fact, the sole change to his original intention was that, as matters had developed, the fund throughout was held and traded by Tai Hung Fai pending the launch of TIM as the relevant corporate vehicle, which it is undisputed never had taken place, notwithstanding the change of name of Pointrol Ltd to TIM.

92. I accept this argument, as I also accept the evidence of Mr Leong in this regard.  Whilst I bear in mind that Mr Leong had said that he would personally supervise the trading of the fund, I do not consider that of itself this is sufficient in the circumstances to bespeak an assumption of personal responsibility, particularly within the context of a small ‘one man’ company such as Tai Hung Fai, wherein the only traders were to be Mr Leong himself, in terms of forex derivatives, and Mr Chow, a Tai Hung Fai employee, in terms of the ‘spot’ transactions.

93. On the evidence Mr Kennedy Wong plainly had appreciated that Mr Leong intended to enjoy the benefits of incorporatation, the receipt clause on the remittance document clearly importing that the fund was to be managed by “us”, that is, Tai Hung Fai, and I find it difficult to accept the suggestion that in the circumstances a “special relationship” had come into being between Wycombe (or, for that matter, between Kennedy/Philip Wong) and Mr Leong.

94. In short, therefore, I am able to discern no representation of personal involvement as distinct from the purely routine involvement of Mr Leong by and through the affairs of Tai Hung Fai.  To use the words of McGechan J in Trevor Ivory, op cit., the decision of the New Zealand Court of Appeal which pre-dated and was approved in Williams v. Natural Foods, there is in this case “no singular feature which would justify the belief that [the defendant] was accepting a personal commitment, as opposed to a known company obligation”.  McGechan J further observed that, if anything, given the high risk nature of the advice at issue in Trevor Ivory, namely crop spraying, that the “deliberate adoption of an intervening company structure would have pointed to a contrary likelihood”.

95. It strikes me that in the current circumstances the present case, involving the hazardous activity of dealing with forex trading, both in terms of options and ‘spot’, is a fortiori. 

96. I am able to discern no reason whatever why the defendant should have wished to assume personal responsibility for the corporate acts of Tai Hung Fai, and as a matter of objective analysis I am singularly unable to find that this occurred.  To the contrary, all the evidence points to the conclusion that Mr Leong wished to operate solely through the medium of his company, and that he did so.

97. This tendentious argument would not, of course, have been required to be mounted had the pleader chosen to plead the case more widely.  However it is a matter of record that he did not do so, and, as earlier noted, this is not a matter now susceptible to amendment, hence the strenuous efforts which have been made to bring Mr Leong into the frame under the ‘assumption of responsibility’ head.

98. At the end of the day the legal and evidential burden is on the plaintiff to establish that Mr Leong had assumed personal responsibility at law for the acts of his company, and in my judgment the plaintiff is unable to discharge that burden. 

99. In my view perhaps the most succinct expression of the difficulty of successfully mounting an argument in these terms is to be found in the judgment of Buckley J in Ojjeh v. Waller, Queen’s Bench Division, unreported,Lexis transcript dated 14 December 1998, wherein the judge commented as follows :

“Apart from cases in which the third party reasonably thought that he was dealing with an individual, it must be difficult to find circumstances, short of an express personal warranty, where the director has assumed personal responsibility.  Particularly in the case of a small, effectively one-man undertaking, all the sales talk, all the expertise will necessarily come from the proprietor.  However extravagant, it cannot, without more, lead to the personal liability of the individual.  If it did there would be no protection in incorporation.  There must be something to show that the proprietor is taking off his corporate hat so that the third party not only relies on his expertise but it is reasonable for him to look to the proprietor’s personal pocket book as opposed to the company’s …

It is inherently unlikely either that the proprietor will wittingly do so or that the third party will believe him to have done so …

The prima facie position must be that by incorporating his business, the proprietor not only intended to keep his ‘pocket book’ in his own pocket but has manifested that intention to those with whom he trades thereafter so that it cannot be reasonable for third parties to rely or subsequently to profess reliance upon a personal assumption of responsibility, save in unequivocal circumstances.  The onus must be firmly on the third party who wishes to displace the manifest intention of the proprietor.”

100. I respectfully agree with those sentiments.  I have little difficulty in finding, and so do, that the plaintiff’s contention as to the assumption of personal responsibility by Mr Leong must be rejected. 

101. Accordingly, on the basis of the earlier finding that the contracting party was Tai Hung Fai, and not Mr Leong, I have decided that the defendant’s contention as to locus is correct, that Mr Leong is not the correct defendant, and that no action lies against Mr Leong personally.

102. It follows, therefore, that I have concluded that this action is improperly constituted, and must be dismissed upon this basis alone.  I so hold.

103. It further follows that the defendant’s counterclaim, which had sought indemnification against losses he had incurred if and in so far as he were held to be personally liable, itself must fall away and be dismissed.  I so order.

104. This finding as to the constitution of this action is sufficient, without more, to dispose of this action.  However, if and in so far as I am wrong in this primary conclusion, I now proceed to deal more shortly with the other issues raised by this case.

105. Accordingly, although I have found this not to be the situation, the following part of this judgment is premised upon the basis that the correct parties in fact are before the court.

Issue 2 : Liability of the defendant

106. On behalf of the plaintiff, Mr Fung puts the case against the defendant in terms of breach of contract, negligence and breach of fiduciary duty.

107. In my view the touchstone for the liability analysis must be the contractual relationship, which for the purposes of the present discussion is to be assumed to have come into existence between the plaintiff, Wycombe, and the defendant, Mr Leong.  I bear in mind the principle that whilst a duty in tort may co-exist with duties in contract, such duties are co-extensive – see, for example, the observations of Lord Goff in Henderson v. Merrett Syndicates Limited [1995] 2 AC 146, at 193-194.

108. As to the allegation raised by the plaintiff that the funds remitted were trust funds, a proposition which is acceptable if by this is meant that the recipient was not entitled to misappropriate such funds nor to make an unauthorized profit from them, such duties as ‘trustee’ or ‘fiduciary’ equally fall to be determined by reference to the contract.  As Mason J (as he then was) expressed the position in Hospital Products Ltd v. United States Surgical Corporation (1984) 55 ALR 417, at 454-455 :

“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted.  Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship.  In these situations, it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties.  The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them.  The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

The oral contract

109. I turn immediately, therefore, to consider the terms of the oral contract between the parties.

110. As Mr Fung correctly observed, on the evidence the parties (by which he meant Kennedy Wong on the one hand and Edwin Leong on the other) are ad idem that it was agreed between them that the forex trading operation would be supervised personally by Mr Leong, that Mr Leong would be remunerated in terms of 30% of the net profits thus generated, and that Mr Leong would report regularly to the plaintiff upon the activity of the fund.  It was also agreed, I think – although little now is sought to be made of this – that Mr Leong warranted that he would be putting his own funds into the trading pot, thereby providing a measure of comfort to the contributors.

111. There is, however, one fundamental area of disagreement, the resolution of which is crucial to the analysis of this case.  It is this.

112. Mr Kennedy Wong asserts that it was agreed that the forex trading would be conducted upon a “conservative basis”, by which was connoted trading with a gearing ratio of no more than two to three times equity.

113. To the contrary.  It is Mr Leong’s unequivocal case that he had been subjected to no form of trading or gearing limitation whatever, and that the aim of the investment was to achieve a return of at least 40% per annum on the capital invested over and above the 5% which bank interest upon the same sum then would have yielded.

114. In fact, Mr Leong went further.  He told the court that he had told Kennedy Wong that he aimed to double the contributors’ money within one year.  In his evidence he expressed the position thus :

“I was aiming for more than 40%.  Probably close to 100%.  I told him we hoped to double the money.  I told Mr Kennedy Wong I aimed to double his money the first year, distribute the capital, and then play around with the profit …

My original intention when I first went to see him was to double your money within one year and then distribute the profit.  But then Mr Wong said ‘Do not put that down on paper, it does not look nice when you tell people you are going to double your money.  Why do we not settle for a figure of 40 per cent?’  Okay, fine.  After I go back to my office I draft this for him to do the legal work …”

115. The document to which Mr Leong therein was referring was that which I have found was that presented by him to Mr Wong at the first meeting between them to discuss the question of Mr Wong’s investment – the only point of difference being the relatively insignificant one of whether such document, entitled “THF Fund Management Co. Ltd”, had been prepared by Mr Leong prior to seeing Mr Wong or had been sent to Mr Wong by Mr Leong after that meeting, and consequent upon which Mr Wong in turn had prepared, in more structured form, a document relating to the proposed establishment of THF Investments Management Co. Ltd, that is, ‘TIM’.

116. Upon that minor factual issue, in terms of when Mr Leong prepared his initial document, I have found in favour of Mr Wong’s account.

117. However, upon the far more significant issue of the financial aim of the fund, and of the trading philosophy and gearing element to be adopted, I unhesitatingly prefer the account of Mr Leong, and specifically reject this element of the evidence of Mr Kennedy Wong.

118. I have come to this conclusion for a number of reasons, not least because, as was confirmed by the plaintiff’s own expert, Mr Lam, it is practically impossible to achieve, or to seek to achieve, a 40% plus return on a gearing of two to three times equity, and that in order to achieve such a return the fund would have to be subjected to very significant risk, and certainly a gearing element of far in excess of that which Mr Kennedy Wong asserts was agreed; in fact, Mr Lam suggested during his evidence that to attain the 40-45% return the gearing would have to be in the region of 20 times equity.

119. In addition, during his evidence before this court, Mr Kennedy Wong expressly resiled from that which was contained in his witness statement (at paragraph 13 thereof) on the point, and also the like allegation that had been levelled against Mr Leong by the three contributors in the ‘post bombshell’ complaint letter of 13 January 1999, wherein it was alleged that oral instructions had been given to him that the money would be “prudently” invested in the forex markets “on a mostly day trade basis to a gearing of a maximum two to three times our total capital only”.

120. This was not a version which under cross-examination Mr Kennedy Wong saw fit to maintain.  Not only did he resile from the assertion on the point in his witness statement in terms of the meeting on 29 June 1991, but he expressly accepted that “I personally had no discussion with Mr Leong [about gearing].  But Mr Fong and Mr Kwok could have said something …”.

121. In fact, the totality of Mr Wong’s evidence on this crucial issue amounted to the proposition that he had had discussions about conservative trading and two to three times gearing in a series of telephone conversations “between …early July and the third week of July [1991]…”.  Certainly there is no mention in any of the contemporaneous documents that trading was to be conservative and that the gearing was to be thus limited; as Mr Wong accepted in evidence, “everything was oral”.

122. It strikes me that there is much in the submission made on behalf of the defendant that in these circumstances, if indeed there had been any such restricted mandate in terms of any trading and gearing limitation, it is inherently implausible that such would have remained wholly undocumented, particularly bearing in mind the professional background of Mr Kennedy Wong and his father, Philip. 

123. To the contrary.  Such contemporaneous documents as exist tend to suggest that there was no such restriction.  The undated document prepared by Mr Leong for his meeting with Mr Kennedy Wong states clearly “Returns:- Aim at 40% on top of bank interest …” whilst the resultant document created by Kennedy Wong states :

“Objects of Company:  Maximize the return of money managed by the Company by investing and trading in the FEX market and the FEX option market both in Hong Kong and overseas.

Estimated return:  The aim is to obtain 40% return on the amount invested on top of bank interest collected from the bank”

Further, a draft Service Agreement prepared by Mr Wong further states :

“THF (defined to mean TIM) shall use best endeavours to maximize the return on the customer’s money…”

124. I accept the submission that it is overwhelmingly probable that the terms upon which the fund was to be managed by Tai Hung Fai were the same as those intended to apply to TIM, not least because it was TIM which was to take over when established, and I reject the idea, as pleaded on behalf of the plaintiff, that the stated aim of 40% return on top of bank interest was the defendant’s suggested proposal for the ultimate clients of TIM, but on the contrary was not to apply to the plaintiff and to the other core investors.  Not only is the concept of having two funds with differing objectives, one conservative and the other aggressive, inherently unlikely, but it is unsubstantiated on the basis of Mr Wong’s evidence, and I find as a fact that it was never the intention to have two such separate funds.

125. In addition to Mr Leong’s evidence, which I have indicated that I accept on this issue, the fact also remains that there is no doubt that when trading did start that it certainly was not conservative, and that the gearing ratio soon exceeded 3 times the fund invested, as a glance at the first ‘activity report’ of 23 October 1991 indicates.  Indeed, the first reference to any limitation in terms of trading according to limited gearing appears in the contributors’ complaint letter of 13 January 1992 after the fund had been lost.

126. In this connection two further aspects of the evidence are relevant : first, the handwritten calculations showing the returns achieved upon portfolios managed on behalf of Mr Leong’s mother, Rose Yang, Dr Lam and for Mr Leong himself indicated high returns inconsistent with a restrained trading strategy, and second, once again it is inherently improbable, on the basis of a ‘conservative investment’ of the type that Kennedy Wong espoused in his evidence, that such would have merited the extremely large ‘management fee’ of 30% of net profit achieved, which is the figure shown in the contemporaneous documents, including the document drafted by Kennedy Wong.  The short and ineluctable point is that a ‘management fee’ of such dimension can only be consistent with rewarding a very significant level of overall profit, and that profit of such anticipated dimension certainly cannot be achieved by ‘conservative’ trading.

127. Accordingly, I find as a fact that no trading or gearing restriction was imposed upon Mr Leong by Mr Wong, or by the other contributors to the fund in terms of that suggested by Mr Wong, or at all, and I have little difficulty in rejecting his suggestions to the contrary.

128. At the end of the day I have no hesitation in concluding, on the basis of that which he knew of Mr Leong’s highly successful forex trading history, that Mr Kennedy Wong was entirely open to putting into the fund but a very small proportion of his family assets for the specific purpose of aggressive punting on the forex markets.

129. In short, he saw Mr Leong’s figures, he knew the history, and he simply fancied having some of the action then offered to him as a ‘seed investor’.  There is no disgrace in deciding so to do, and the only issue for this court – and the issue to which I now turn – is whether Mr Leong went too far in his trading activities, even when such were not specifically trammelled by express contractual restriction?

130. In turn this question raises two issues : first, what is the standard of care to which Mr Leong should be held?; and second, was he in breach of that standard?

The standard of care

131. The plaintiff pleads that the standard of care to be implied into the contract is such as to require the “exercise of reasonable care in investing in the Fund in foreign exchange dealings”, whilst in opening the case the contention asserted was that the standard of care and skill is that expected of a “reasonably competent fund manager”.

132. Both propositions are unexceptional in themselves, but beg several questions.  It cannot be the case that the standard of care to be expected of a fund manager dealing with, for example, differing maturities of Treasury bills can be equated to that of a manager of an aggressive forex fund with an avowed aim of a 40%+ return.  Put simply, the playing field is vastly different, and the rules of the game plainly also are not the same in terms of exposure to risk.

133. In Lloyd v. Citicorp Australia (1986) 11 NSWLR 286, Rogers J equated venturing into the foreign exchange market with Russian roulette, and in the context of the appropriate standard of care he put the matter thus :

“Obviously, it will be necessary to discuss in the particular context of cases coming up for decision the precise extent of the duty owed.  It is sufficient for the present to point to the incongruity of identifying the duty in terms of confidence in the movements of the foreign exchange market or what a ‘prudent’ financial adviser would or would not do in that market …  In determining the extent of the duty, it is essential to have regard to the nature of the market to which the plaintiff committed his financial future …

The defendants submitted that the appropriate standard of care was correctly identified by Mocatta J in Stafford v. Conti Commodity Services Ltd [1981] 1 Lloyd’s Rep 466 …

Whilst I am willing to accept, for the purposes of this case only, that the duty called for the exercise of skill and diligence which a reasonably competent and careful foreign exchange adviser would exercise, by reason of the nature of the market to which I have already referred, I would take leave to doubt that the content of that duty would be very high.  That skill and diligence is of some assistance, I do not doubt.  However, the assistance to be derived from it in a market as volatile as the one for the Australian dollar has been is fairly minimal.”

134. I respectfully agree with that view, which was expressed within the context of a case involving a claim for negligence against a bank for failing to advise in terms of the hedging of a customer’s foreign currency loan.  In this connection Mr Sussex submitted that whereas Lloyd, op cit., merely had involved the hedging of a genuine commercial risk, the purpose of the fund in the present case simply was to bet on the movements of the forex markets themselves, and thus that the duty of a manager of a purely speculative fund must be even lower than that envisaged by Rogers J inLloyd.

135. It strikes me that this is essentially a matter of degree, and that little is to be gained by attempting to articulate a precise formulation of the standard of care to be applied.  That which is tolerably clear, however, is that the defendant, Mr Leong, is not to be judged upon standards of prudence which apply to managers of ‘conservative’ or even ‘medium risk’ funds, and that the extremely high risk nature of this particular endeavour must be reflected in terms of the standard to which ultimately he is held.

136. In terms of this discussion, however, one specific matter requires to be addressed.  There was running through the defendant’s case the beguiling suggestion that Mr Leong in effect was little more than an ‘amateur abroad’, and that he should not be judged by the standards applicable to ‘professional’ fund managers in the like field.  In his final submission Mr Sussex suggested that “at best, the outfit [that is, Tai Hung Fai] was a modest if not an amateur one” and that it must have been clear to Kennedy Wong that he was not engaging the services of an investment bank or merchant bank or sophisticated brokerage.

137. This approach was mirrored in the curious, and at times irritating, manner in which Mr Leong gave his evidence.  On numerous occasions, particularly in cross-examination, he affected a less than decisive, almost stumbling demeanour, wherein he appeared not to understand, and sought clarification of, the most straightforward of questions as to the operation of the fund with which he had been charged; in his closing submission, Mr Fung, not without justification, suggested that Mr Leong’s “evasive and convoluted answers to simple questions” reflected “a deliberate attempt to downplay his knowledge and experience in forex trading and financial markets.” I agree and in this regard, I have two observations to make.

138. First, I do not for a second consider that Mr Leong has anything but a sharp, analytical brain, and that the appearance thus sought to be projected was entirely calculated, and in many instances clearly was utilized to deflect and parry the thrust of the questioning.  It was noteworthy than on occasions, when responding to certain technical issues, he demonstrated a verbal fluency and acuity of thought significantly at variance with the general impression he otherwise sought to create in the witness box.

139. Second, and more broadly, in the circumstances of this case I do not accept that it is open to Mr Leong to seek refuge within the ‘talented amateur’ characterization.  On his own case he had been engaging in extensive forex trading for a number of years, and in this he had proved to be very successful indeed.  He had attended numerous seminars and conferences, he had opened at least seven trading accounts with various brokers, and had closely followed publications of various well-known advisers in the field.  The fund he introduced to Kennedy Wong and to Messrs Kwok and Fung was to be run on a professional basis, and was to yield an extraordinarily high management return in terms of 30% of the net profit.  In fact, the defendant intended to use that which he regarded, and which he described to the court, as his “innovative” and “unique” trading methodology which, in effect, was to run the fund as a “prototype hedge fund”. 

140. Accordingly, whilst Kennedy Wong and the other capital contributors obviously were not under the impression that they were employing a Goldman Sachs, this is very far from concluding, as the defendant apparently now would have it, that in the circumstances they were entitled to no, or to only the most minimal, standard of care in the manner in which this fund was to be operated, and it is tolerably clear that in evaluating his conduct of the operation of this fund that the defendant must be held to the standard of care of a reasonably competent fund manager in his position. 

141. To this latter proposition Mr Sussex complains that this case, which involves forex trading in 1991-1992, is complicated by the fact that, as the evidence reveals, in Hong Kong in these years foreign exchange speculation was in its infancy, that at that time there were very few professional funds in the local market, and that no regulation was introduced until mid-1993.

142. This may be so, but the absence of such regulation cannot be decisive of the issue, and the fact that fund activity of this nature was less widespread in Hong Kong at this time does not mean that in a case such as this that the court cannot essay a view as to the appropriate standard of care to be implied in the circumstances, or, more precisely, whether such standard has been breached.  Whilst absent a specific regulatory framework this exercise may be more difficult, it must be borne in mind that the argument as to the absence of formal local regulation is of limited significance in terms of an industry which, even at the beginning of the 1990’s, was conducted on a 24/7 global basis : the activity remains the same, and all that now is changed is that the amount of money thus traded is measured in trillions, not billions.

Operation of the fund

143. At this juncture I should say a little about the operation of this fund, trading in which Mr Leong, together with his employee, Mr Chow, embarked upon in late July 1991.

144. This matter is larded with reconstructed detail, upon which the respective experts have spend a good deal of time in terms of producing spreadsheet summaries, from the raw data within the Wardley computer printouts, in which the trades which the fund actually did are isolated and detailed, all of which forms the base material for the conclusions thereafter propounded by the experts.

145. For the purpose of this judgment little is to be gained by becoming enmeshed in such detail, and it is sufficient, I think, to describe the broad shape of the operation rather than its constituent parts.

146. The first point of note is that the sum of US$2 million remitted by the Wong family on 26 July 1991was not itself used to purchase foreign exchange or options.  The way in which this worked was that this sum, together with the funds thereafter contributed by Mr Kwok and Mr Fong, were deposited in an account with Wardley Thompson, earning interest therein, and were used as margin collateral to allow the fund to trade on credit – in fact, until the collateral was called in January 1992, prior to the closing of the open positions by Wardley, the US$2 million remitted from Ho Man Kit had remained intact during the duration of the life of the fund.

147. In terms of the margin trading permitted and made available to Tai Hung Fai, Wardley appear to have maintained a relaxed attitude, to say the least, towards the maintenance of appropriate margins.  On any view, the evidence demonstrates that the fund often took very large positions relative to its size, positions which apparently were permitted by Wardley absent restraint.  In fact, the evidence of Mr Leong, which is borne out by the objectively available data, and which in this regard I accept, is that he did not pay much attention to his relative margin position at any given time because he had been told by Wardley not to be concerned and to ignore margin deficits; whilst this is surprising on its face, the objective fact remains that no margin call was made at any time by Wardley until January 1992, immediately before the effective dissolution of the fund, which lends itself to the conclusion that whatever margin policy Wardley was applying in terms of the trading as was conducted by Tai Hung Fai, such policy clearly was not enforced until the time of the fund’s denouement.

148. In this connection I bear in mind the evidence of Mr Slatyer, the defendant’s expert, who opined that in its trading this fund was behaving in a manner common to aggressive speculators, and that it is entirely usual for such speculators to stretch the envelope and to trade to the extent that they are permitted, and simply to rely upon their broker to tell them when they are reaching (or have reached) their margin limits. 

149. I accept this evidence also.  It seems to me that it is only by trading in this fashion that huge profits can be made.  The other side of this coin, of course, is that huge losses can accrue if the trader gets the bet wrong, and the market moves against him.  As Mr Slatyer expressed the situation, speculation in foreign exchange is at the “most risky end” of the risk spectrum, and is particularly so in terms of the trading of foreign exchange options, wherein the trader speculates that the exchange rate will move beneficially until maturity of the option position.  The result is that the ability to contract large amounts in face value of the currency involved in the trade compared to the actual capital base allows beneficial moves to be highly profitable; however, the “unfortunate alternative” that occurs in such leveraged speculation is that any adverse movement in the exchange rate can extremely quickly cause losses far larger than the capital base.

150. I have earlier noted that between the experts in this case there is a good deal of common ground as to that which went on within this fund, when and why.  Both Mr Lam and Mr Slatyer have studied and reported upon the particular transactions that took place, the market movements forming the backdrop to such transactions, and after consultation they have been able to produce agreement on a wide-ranging list of issues, agreement that has been of considerable assistance to the court.

151. Although both experts clearly are fighting their own corner, and there remain differences of view between them as to the conclusions to be drawn as to the acceptable operation of this fund, in objective terms the primary difference of principle between Mr Lam and Mr Slatyer is as to the information of which a trader or fund manager of this type is required to be aware at any given time within the trading life of the fund.  In this context there are two specific bones of contention.

152. First, there is a major difference regarding the data of which a trader needs to be aware at the end of any trading day in order to assess his global risk position.  Is it the case, as Mr Slatyer would have it, that it is the net equity picture, together with the total unrealized profits and losses, which is sufficient to enable a trader to be aware of his overall position, or is Mr Lam correct in his alternative view that what a trader requires to know is the total value of all underlying currency positions, for both ‘spot’ and options, at any given time?

153. It is undisputed that the latter calculations were not done at the material time – in fact, Mr Leong’s evidence is that he did not fully know his fund’s overall position at any given time until he received the daily summaries, culled from the Wardley Combined Commodity Statements in computer print out form (which statements he further said that he did not fully understand), these daily summaries having been prepared by his assistant, Rose Yang, and which generally he had received upon a following day basis.

154. On this point, which in the event I do not consider crucial in terms of the overall analysis, I tend towards the view of Mr Slatyer.  Both experts impressed me in terms of their credibility and broad grasp of the subject, and if I am inclined to Mr Slatyer’s approach it is because he has spent much of his professional life in connection with forex trading, as direct participant and/or author, whilst it is also probably fair to say that Mr Lam’s wide experience within this field predominantly has been from a banking perspective.

155. The experts also differ on the methodology used to calculate the gearing element in play at any particular time and, further, and perhaps more to the point, whether gearing in itself, and a precise appreciation of the gearing levels adopted, is of relevance to a trader in Mr Leong’s position. 

156. Once again I do not think this conceptual argument greatly matters, since by the time of the fund’s demise the situation clearly had become so overextended that the finer points of this particular argument fall away.  In any event, I do not believe that, at bottom, there was very much between the experts given that Mr Slatyer appeared to accept the proposition which Mr Lam had chosen to express in numerical terms, namely that a proper balance should be maintained between the size of the capital of the fund and the extent of the risk exposure.  It is this element of balance, it seems to me, that ultimately is of importance within the liability analysis.

157. In terms of the operation of this fund, I should perhaps refer to one issue to which there has been considerable reference in this case, but which I do not consider is of particular relevance, although a good deal of forensic prejudice has arisen from it.  This is the issue of the ‘activity reports’ which it is common ground that Mr Leong had agreed to supply on a weekly basis to Mr Kennedy Wong, and which were to detail the activity/progress of the fund.

158. It is equally common ground that this did not occur.  There were only six such ‘reports’ issued in all, the first being dated 13 August 1991 – which revealed an initial profit in the order of some US$57,000 and which sum for some reason (perhaps pour encourager les autres, given that the other contributors were yet to come up with their funds) immediately was distributed to the Wongs – and the final one being on 10 January 1992, shortly before the Sunday afternoon meeting between Mr Leong and his three investors wherein he informed them that, absent further capital infusion, the fund effectively had been lost.

159. In so far as it matters, and I do not consider that it does, since I am unable to discern any causal potency in the point, I am in little doubt, and so find, that these reports (which the evidence reveals initially were prepared by Eddie Chow before being vetted by Mr Leong) were poorly prepared and uninformative as to the true overrall position, given that the dates of issuance appeared neatly to coincide with the relatively few occasions in which this fund was in the black and was not patently in difficulty; in fact, the objective observer would have cause to feel that these documents, both as to content and date of issue, were disingenuous at best, and in my view Mr Leong had good reason to be embarrassed, as clearly he was, when taxed upon these reports in cross-examination.

160. However, notwithstanding this conclusion, I do not consider that much is to be made of this.  No case has been attempted to be made out by the plaintiff as to that which would have occurred had these reports been accurate, and had there been compliance with the contractual obligation to report regularly, so that, for example, it might be said that Wycombe (or Kennedy Wong) would have taken steps to withdraw from the fund had it been known that there had been substantial losses rather than staying in the market and attempting to trade out of any difficulty; in this regard the court clearly will decline to speculate, and although there has been a good deal of forensic play with this issue at Mr Leong’s expense, ultimately the point does not lead anywhere.

161. Finally two other minor points are worthy of mention, if only because they have arisen during this case.  First, that Mr Leong had promised to put in his own money into the fund is a complaint which has been raised, but has not been pursued, doubtless for good reason since again, as with the issue of the reports, it does not get the plaintiff anywhere in terms of the case as now put forward.

162. Second, reference has been made to the alleged special treatment accorded to the funds contributed by Mr Kwok, and the alleged failure to segregate trades conducted on Mr Kwok’s behalf.  Once again, this has not been developed, and I refer to the point only to dismiss it.

Breach of the standard of care

163. The question of whether Mr Leong so conducted the operation of the fund as to be considered in breach of the appropriate standard/duty of care is, of course, the crucial issue under the liability head.

164. In light of the specific finding of this court that there was no contractual restriction in terms of ‘conservative’ trading at a level of two to three times gearing, this case cannot be approached, as perhaps initially may have been envisaged, simply as a breach of mandate case.  Had it been thus the issue of whether there had been a breach of the relevant standard of care would have been tolerably straightforward, given that it is not disputed that the fund was not traded on any such restricted basis during most, if not the entirety of, the period from July 1991 to January 1992.

165. In anticipation, perhaps, of the court rejecting (as it now has) the ‘conservative trading/gearing’ argument, which represented the plaintiff’s starting point under this head, nevertheless there was an attempt to retain this case within a broad ‘breach of mandate’ framework by means of the suggestion, through the plaintiff’s expert, Mr Lam, that the projected 40% plus return on capital could have been achieved by a gearing level of, say, 20 times equity, and that since on any basis the gearing ratios involved were very far in excess of that figure, there was in any event a breach of mandate, albeit upon a basis different from that of the primary ‘conservative trading’ case which was sought to be presented.

166. In my view this approach, whilst forensically ingenious, is flawed.  The court specifically has found that Mr Leong was not charged with any trading restriction, in terms of general philosophy or particular gearing guidelines, and whilst that which Mr Lam asserts was possible may be the case, I am strongly disinclined to elevate that hypothesis into the status of an implied mandate, which in effect is what the plaintiff seeks to achieve by this argument. 

167. The short point is that the projected 40% plus return could have been achieved in any number of ways, for example, by means of an outrageously risky, but ultimately successful, bet, wherein the entire equity of the fund was put on the line, and thereafter by retention of profit through the conservative strategy of the type mooted by the plaintiff, and in neither instance would a gearing ratio of 20 times have entered into the picture.  Even Mr Lam was constrained to accept in cross-examination that it is almost impossible to say what level of risk exposure would be consistent with an avowed aim of achieving a 40% return over and above bank interest, and equally to demonstrate what impact any different approach would have had on this fund in the market conditions then prevailing.  Accordingly I do not think that this alternative ‘breach of mandate’ submission can succeed.

168. However, the point does remain open to the plaintiff that whatever methodology for the calculation of gearing is to be preferred – and in this regard once again I am inclined towards the view, accepted by Mr Slatyer, to the effect that, if one is going to engage this concept at all, then the only relevant calculation is that of the division of the net open positions by the end of day equity – there can be no doubt but that, on any basis, the gearing element frequently invoked within the trading of this fund was extraordinary even by the standard of the most aggressive of punters: for example, at one point in its turbulent history, the gearing ratio of the fund theoretically attained infinity over a period of five consecutive trading days between 23 October to 29 October 1991 when it was trading in negative net equity, which at that stage – some ten weeks prior to the eventual denouement – meant that, for all practical purposes, the entirety of the Wong capital contribution and that of Mr Fong had been wiped out, within 3 months and 2 months respectively, of their respective capital contributions, and it was only the subsequent injection of the US$1.77 million by Mr Thomas Kwok which (unbeknownst to the core investors) had served to keep the ship afloat, and had permitted the fund to keep trading absent an inevitable margin call.

169. It strikes me that if and in so far as Mr Leong is to be held liable for breach of that standard of care which is applicable to a fund manager trading within this extraordinarily high risk field, then the plaintiff must have resort to wider principle which cannot reasonably be gainsaid, and which ineluctably demonstrates that the manager of this fund has gone off the rails in a quite unwarranted fashion sufficient to permit a finding of breach of the appropriate standard of care.

170. I take the opportunity to stress that in general principle this court is resistant to nice argument, constructed on the basis of hindsight – which is always 20/20 vision – by those who did not, in the heat and turbulence of the market, have to make the judgment calls now asserted to be wrong, and which subsequently are invoked to provide litigation ammunition for the disgruntled plaintiff.  The line between reasonable error in judgment and breach of duty is not always clearly discernible, and when in doubt in a case such as the present it seems to me that the court should exercise considerable caution before pronouncing liability to be established.

171. Having said that, undoubtedly there are occasions when the conduct of the trading within the circumstances prevailing in this case must be regarded as indefensible by any reasonable, objective criteria.  Can it properly be said that this case falls within this parameter?

172. Notwithstanding the high risk nature of this particular market, and an instinctive reluctance too easily to arrogate trading judgment calls within the sphere of conduct justifying the imposition of liability, after some reflection I have concluded that the answer is ‘yes’.

173. Despite differences of technical view – which, as earlier observed, I have concluded are not of great significance in this case – both experts are agreed that, at an irreducible minimum, managers of even the most aggressive of funds should pay due regard to all unrealized profits and losses on outstanding contracts, and in particular, and in my judgment of the greatest import, that at all times a proper balance should be maintained between the maintenance of the capital of the fund and the extent of the risk exposure of that fund.

174. It seems tolerably clear that Mr Leong not only failed to achieve this primary requirement, but also that it seems that it caused him no great concern.

175. The trading history reveals that at no time did Mr Leong impose trading limits on the fund, instead relying on Wardley’s margin limits effectively to act as a ‘brake’ on his upper trading limits – hardly an efficient ‘brake’ in any event, given Mr Leong’s ignorance of such limits together with Wardley’s curious reluctance to police his trading until, at the end, matters became totally out of hand and the exposure had become too great to tolerate – and nor did he retain any part of the fund as a cash reserve to cover future margin requirements, so that prior to the margin call as in fact was made (and could not be met), the entirety of the residual equity of the fund, and indeed much more, was being bet in terms of the open positions that had moved against him, and which eventually were forcibly closed out.

176. The evidence indicates that at the end of December 1991 Mr Leong had ignored Mr Eddie Chow’s advice to close his positions and to “have a merry Christmas”, instead opting to maintain his massive net open short US dollar positions in both options and spot, at gearing levels very far in excess of his ability to meet margin calls, whilst at the same time omitting to put into place any significant hedging mechanism in light of the continued appreciation of the United States dollar, a trend which he did not consider would be maintained.

177. The reality, therefore, is that Mr Leong bet the entire capital of this fund, and lost, and absent additional funding, the infusion of which would perhaps have enabled him to trade out of this situation (as earlier had occurred during the five day span between 23-29 October 1991), the inevitable margin call was made, his capital contributors (perhaps unsurprisingly) refused to kick in any more money, and accordingly the fund was extinguished.

178. The parlous nature of this situation specifically was recognized by the defendant’s expert, Mr Slatyer, in cross-examination :

“	Q:	No matter how aggressive a strategy, I think you have agreed in your earlier answers as well as in your report that no fund should trade beyond its capacity to survive to meet margin calls because every fund has to survive?
	A:	I have agree that he should not trade above his equity.  We have agreed, we have agreed to that.  He must take risk management measures to keep below that.
	Q:	And he should also trade in a manner which would allow him to meet margin calls?
	A:	He should.”

179. At the end of the day, therefore, the hard fact is that Mr Leong placed the very existence of this fund on the line, and continued to do so in terms of the bets he had placed and retained in the face of the adverse market movement in the US dollar, and it is this fact that underpins the conclusion of this court that there was a breach of the applicable minimum standard of care which in my view the law places upon a fund manager in his situation in this type of market. 

180. In my judgment it cannot be the case, by any reasonable yardstick, that bets which, if unsuccessful, will bring about the complete demise of the fund, can be excused or otherwise dismissed under the rubric of a mere error in judgment by the manager concerned.  Whilst I accept that there was a certain amount of end of year volatility, this was not exceptional, and neither excuses nor justifies that which occurred.  I fail to understand how it can be said that a manager who trades a fund into oblivion by making and maintaining bets far in excess of the fund’s residual equity, absent any ability to meet the inevitable margin call, is not thus in breach of the appropriate standard of care which the law imposes.

181. As Mr Fung observed in his final submission, the fact that a fund may have a very aggressive aim in terms of projected return does not mean that the rule book thereby is thrown out of the window.  Regrettably, in this case, in my view this is precisely what occurred at the end. 

182. In my judgment, during the period at the end of December 2001and early January 2002 leading to the loss of the fund, Mr Leong has been shown to have been in breach of the applicable duty of care and to have indulged in what, in opening, the plaintiff categorized as “reckless and irresponsible trading” even within the context of a market in which high risk ventures represent an everyday norm.

183. Accordingly, in terms of the second major issue with which this court is seized in this case, that of liability for breach, I find that if and in so far as Mr Leong personally had been the correct defendant (which in my judgment, for the reasons earlier propounded, he is not) he would have been liable to the plaintiff for breach of the standard of care to be implied in the circumstances.

184. For the purpose of the liability analysis it does not seem to me greatly to matter whether such liability is held to exist in contract and/or tort and/or breach of fiduciary duty, given the co-extensive nature of the duties thus owed to the plaintiff should Mr Leong have assumed the personal responsibility which the plaintiff maintains was the case, and given that the measure of damage, whether the claim is framed in common law or equity, is effectively the same.  As Millett LJ (as he then was) observed in Bristol and West Building Society v. Matthew [1998] Ch 1 at 17 :

“Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for that loss.  There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case…”

185. This, then, paves the way for consideration of the third and final issue, to which I now refer.

Issue 3: Has the plaintiff established consequential loss, and if so, how much?

186. I venture some brief observations as to this element of the case, once again in the event that I am held to be in error in concluding that in the circumstances it is Tai Hung Fai, and not Mr Leong personally, which is the correct defendant in this action.

187. For the plaintiff, Mr Fung submitted that in so far as he was successful upon the issue of liability, the plaintiff should be put in the same position as if the oral agreement had been performed and/or had the defendant not been guilty of negligence, misrepresentation and/or breach of fiduciary duty.  He further submitted that whilst the plaintiff clearly could not obtain double recovery, it had the right to choose one of a number of alternative remedies, and that in this case the plaintiff sought the return with interest of the original investment of US$2 million which had been entrusted to the defendant, together with compound interest thereon, with such periodic rests as the court deemed appropriate in the circumstances.

188. Mr Fung noted that that this approach apparently had found favour with the court in the case of Field v. Barber Asia Ltd, unrep., HCA 7119 of 2000, judgment dated 17 June 2003, wherein Deputy Judge Barma SC (as he then was) had awarded as damages the original sum invested plus an additional sum put up by way of ‘top-up’ security which in the circumstances of that case Ms Field had been required to furnish in terms of a margin call.

189. To this, on behalf of the defendant Mr Sussex made a number of observations.

190. His first point was that Wycombe had suffered no loss, and that the loss in fact was suffered by Ho Kit Man Inc., the family trust from whose deposits the Wong family’s US$2 million had been taken, and thereafter transferred to Tai Hung Fai under Wycombe’s name.  In effect, this is but the other side of the argument as to Wycombe’s locus, an argument that earlier this court has rejected.

191. Mr Sussex further submitted that even if Wycombe were able to demonstrate a breach of the duty of skill and care, whether in contract, equity or tort, it still was required to prove that any loss which is suffered was caused by the breach, and that Wycombe had failed to establish such causation, that is, that such loss would not have occurred ‘but for’ the breach.

192. He submitted that Wycombe had complained of two alleged breaches : first, in respect of the trading of the fund, and second, in respect of the reporting of the fund, and that in neither instance had Wycombe made out its case.

193. As to the ‘reporting issue’, I agree with the defendant’s contention.  I have earlier observed that, upon the evidence before the court, I am unable to discern any causal relevance in terms of the deficient reports produced as to the activity of this fund, and that there has been no attempt to make good any argument on the basis, had the true position been made known, that Wycombe, via Mr Kennedy Wong, would have elected to withdraw rather than opting to trade out of a loss-making situation.

194. So I have (or would have had) no difficulty in finding that, if and in so far as the reporting aspect of this case is put forward as a matter underpinning liability, such is (or would be) rejected.

195. As to the trading element, Mr Sussex maintained that the plaintiff had wholly omitted to plead or to prove causation: for example, there was no allegation in the pleading dealing with what the position of the fund would have been ‘but for’ the over-exposure of the fund to risk.  It was, he said, entirely possible that the fund in any event would have been lost, irrespective of whether there had been a breach of duty by Mr Leong, and that this was particularly important given the fact that trading in forex and forex options was an “inherently hazardous” activity.

196. This latter observation is true, of course, but in my view it is not determinative.  Many things indeed could have happened; in principle the court sets its face against speculation, and confines itself to that which follows, as a matter of law, from the facts as found.

197. In this case the court now has found that the conduct of Tai Hung Fai (or, as the plaintiff would have it, the defendant personally) in maintaining the massive short US dollar positions that remained in place at the end of December 1991 and which were continued into the beginning of January 1992, wherein the fund was infinitely geared and trading at negative equity, so that its very existence was, and remained at risk until its eventual closure in face of an unmet margin call, was conduct which constituted a breach of duty.  This is conduct which, in my judgment, would have been remediable in damages were this to have been a ‘live’ issue in this case.

198. However clearly this is not the approach to damages that has been adopted by the plaintiff.  In effect, the plaintiff in this case has said words to the effect that ‘ultimately this has all gone wrong, it is all your fault, and notwithstanding everything that has happened in the interim, I wish to revert to square one, and so please give me all my money back, and what is more, give it me back with compound interest’.

199. From the plaintiff’s viewpoint the desirability of such an approach is obvious, but I consider that it is neither correct nor appropriate, given that it serves to ignore the reality of a fund which has traded for good and bad (admittedly, it now seems, mostly for bad) for a period of some six months, and wherein at the outset, at least, some profit has accrued – vide the initial distribution at the end of July 1991of some US$57,000 to Kennedy Wong.

200. In short, I fail to understand how, given the history of events, the plaintiff is able to justify the ‘blanket’ argument now adopted in terms of its damages claim, forensically advantageous though that may be perceived to be.

201. It strikes me that absent identification of a specific transaction or transactions as constituting the relevant breach of the standard of care, a case for damages does not get off the ground; in this regard I bear in mind the observation of Mocatta J in Stafford and anr v. Conti Commodity Services Ltd, [1981] 1 All ER 691, at 698, a case involving allegedly negligent advice given by a broker in the London commodities futures market, wherein the judge observed that “with the best advice in the world, in such an unpredictable market as this, it would require exceedingly strong evidence from expert brokers in relation to individual transactions to establish negligence on behalf of the defendants.”  Nor do I consider that Field v. Barber Asia, op cit., is analogous, given the differing fact situation therein prevailing, and if and in so far as that case is illustrative of the broad approach now pressed by Mr Fung (the point certainly does not appear to have been argued by Mr Barber, who represented himself in that case), I have no hesitation in declining to follow it.

202. In my judgment, therefore, had the issue of consequential damage remained an issue requiring determination in this case, I would have rejected the plaintiff’s claim, as now put forward, in the principal sum of US$2 million. 

203. Whilst I have received no submissions on the point, and in the circumstances a decision thereon is not required to dispose of this case, it seems to me that the appropriate basis for the assessment of damage should have focused upon the differential between the value of the fund before and after the trades which constituted breach of the relevant standard of care, wherein the very existence of the fund recklessly was placed in jeopardy at the end of December 1991/beginning of January 1992, and which was the conduct which resulted, absent additional capital infusion, in the loss of the entire equity of the fund, leaving the defendant open to the claim against him by Wardley under his personal guarantee.  On the state of the evidence as it currently stands this court would have been in no position to undertake such an assessment, even had such been necessary, and in all probability such examination would have required further expert assistance.

204. In my view, therefore, the appropriate approach towards damages would have been to ask that the court decide the liability issue, and thereafter, if relevant and in light of such decision, to have proceeded with a damages assessment.  However this was not the course adopted and, as I have indicated, I am (or would have been) unable to grant to the plaintiff the ‘blanket’ damages claim that it sought at trial.

Order

205. On the basis of the foregoing judgment, therefore the order of this court is as follows :

(1)	The plaintiff’s action against the defendant is dismissed.
(2)	The defendant’s counterclaim is dismissed.
(3)	Subject to those orders for costs already perfected in the action herein, there is to be a costs order nisi that the costs of this action are to be to the defendant, to be taxed if not agreed.