DMT FINANCE LTD. v. SHAMDASANI NAINA PISHU

HCCL74/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO.74 OF 1998

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J U D G M E N T

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1. There is before the Court an amended Order 14 summons whereby the Plaintiff herein, DMT Finance Limited, a finance company, seeks final judgment against the Plaintiff for the amount claimed in the Re-Amended Statement of Claim. The precise amount claimed is the sum of $155,479.75.

2. Pursuant to a Loan Agreement, a Securities Trading Agreement and a Margin Agreement, the Plaintiff allowed the Defendant to open a margin trading account No.8800679 with the Plaintiff for the purchase and/or sale of securities in accordance with the terms contained in those Agreements. The Plaintiff also entered into a Customer Trading Agreement with Dharmala Securities, which I understand to be an associated broker which works in connection with the Plaintiff. I hesitate to describe it at this stage as a "broking arm" of the Plaintiff because Mr Hart, who appears for the Plaintiff in this application, disputes any claim of agency. But it is quite clear to me, whatever the precise juridical relationship, that the way the scheme of things was arranged was that the Plaintiff finance company would lend potential 'investors' money which could then be used in the purchase and sale of securities via Dharmala Securities as broker.

3. In this application, Mr Hart runs two alternative causes of action. First, on behalf of the Plaintiff, he asserts the Plaintiff's claim to the debit balance in the Defendant's margin account : this is the aforesaid sum of $155,479.75; second, he runs causes of action based on certain dishonoured cheques : There are nine such cheques which were presented by the Defendant to the Plaintiff on a post-dated basis, and these are particularised in the prayer to the Statement of Claim.

4. What actually happened in this case, in broad terms, is that during the period 22nd September 1997 to 16th October 1997, Dharmala Securities bought and sold securities in the margin account on behalf of the Defendant upon the oral instructions of the husband of the Defendant, Mr Pishu, which instructions were given to the staff of Dharmala Securities. The resultant debt, which is claimed in this Court today on a summary judgment basis, is the figure consequential upon Dharmala Securities selling out the securities in the Defendant's account consequent upon the failure of the Defendant to meet margin calls.

5. Both the Defendant, Mrs Pishu, and her husband appeared in person before the Court this morning. At the outset of this hearing, a Mr K.K. Tsui of Messrs Eli K.K. Tsui & Co. appeared, as the current solicitor of record. He had issued a summons dated 17th December 1998 asking for leave to cease acting in this action, and the Court elected to hear this summons at the outset. Upon Mr and Mrs Pishu confirming that they no longer retained Mr Tsui because of financial difficulties and the general expense of litigation, I permitted Mr Tsui to depart, thereby leaving Mr Pishu to conduct the Defence of this application on behalf of his wife, who is in real terms is the formal Defendant only; in this connection, Mr Pishu was kind enough to tell me that his wife was but the figure head and that he was the moving spirit behind the trading in this margin account.

6. Mr Hart, for the Plaintiff, has conducted with great fairness what in the circumstances was a difficult application. He concedes, as he properly must, that given that causes of the action on dishonoured cheques do not arise until the date of such dishonour, he is in difficulties on the face of this writ, at least, in asking for judgment on any more than three of these cheques which were dishonoured respectively on 28th December 1997 (in the sum of HK$12,000), on 28th January 1998 (in the sum of HK$15,000) and on 28th February 1998 (in the sum of HK$10,000). I pause to note that the writ was issued on 20th March 1998.

7. As is often the situation in cases of this type, the pleadings, and indeed the evidence, contain accusation and cross-accusation. In this case, the Order 14 application was taken out after a Defence and Counterclaim had been filed on behalf of the Defendant. In that Defence and Counterclaim, and also in the affidavit filed by Mr Pishu, on his wife's behalf, reference is made to a course of dealing with a Mr Peter Miles, an account executive with Dharmala Securities, wherein it is alleged, inter alia, that Mr Miles either failed to, or negligently complied with, instructions that were given by Mr Pishu. I am bound to say that I think there is considerable force to Mr Hart's submission that some of these allegations suffer from the defect of being unparticularised, although Mr Pishu this morning forcefully argues that if Mr Miles (whom I understand is no longer in the Plaintiff's employ) had done what he was told to do, Mr Pishu's loss would have been in the region of HK$40,000, and not the HK$150,000 or so as claimed.

8. In the context of the present argument, I formally remind myself of the principles pertaining to Order 14 applications. These are well-known and I will not repeat them here. Suffice to say that, unless I am of the view that the allegations made are complete 'moonshine', I should send the case to trial.

9. I am bound to say that I have great difficulty, despite the dignified manner with which Mr Pishu presented his case this morning, in accepting his argument as to the conditional delivery of these post-dated cheques. I think that he has problems with this argument, and, as I have explained to him, the cardinal rule is that a cheque is as good as cash save in the most extreme circumstances. I am less able to dismiss quite as easily the allegations about the defalcations of Mr Miles, because there is at any rate some evidence of initial mistakes made by this gentleman, albeit mistakes subsequently corrected.

10. Be that as it may. After considering this case in the round, and after reading the entirety of the evidence therein together with the pleadings - and in this regard I was greatly assisted by Mr Hart's patient and precise submissions - I have decided upon this summary judgment application that I will grant judgment to the Plaintiff against the Defendant on a limited basis, namely, that the Plaintiff is to have judgment for the three dishonoured cheques antedating the date of the issue of the writ, the face amounts of which amount to the sum of HK$37,000. Such sum is to attract interest at the rate of 8% from the date of dishonour to the judgment date, that is today, and thereafter at the judgment rate of interest from time to time prevailing until payment.

11. I give unconditional leave to the Defendant to defend as to the balance of the claim. I know not whether the Plaintiff will elect to continue with the present case or issue further proceedings in connection with the dishonoured cheques. That must be a matter for the Plaintiff to consider with its advisors. I will hear the parties as to the costs of and occasioned by this application.

[Submissions from the parties]

12. I have now had the advantage of hearing the parties as to costs. Mr Pishu leaves the matter to the Court. Mr Hart draws my attention, again fairly, to the provisions of Clause 8 and Clause 2 of the General Loan and Securities Agreements signed by Mrs Pishu. However, I am disinclined to award costs on a contractual indemnity basis, as he asks. I am far from sure in my own mind that in the circumstances the cheques which were proffered to the Plaintiff were in fact pursuant to this loan documentation; so far as I am concerned, I have simply given judgment on three dishonoured cheques which were delivered by the Defendant to the Plaintiff. Rightly or wrongly, I am going to award costs on the normal party-and-party basis. I also think it a pity and a signal waste of time (and money) that Order 14 should have been run against this factual background without waiting for the maturity of the causes of action upon the other dishonoured cheques. But that is by the by. In all the circumstances, I am going to give the Plaintiff the costs of and occasioned by this application, to be taxed if not agreed.

13. I thank the parties for their assistance.