KO WANG MING v. HONG KONG FOREX INVESTMENT LTD AND ANOTHER

HCA 2320/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2320 OF 2008

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BETWEEN

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JUDGMENT

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Introduction

1.  At all material times the 1^st defendant was a company incorporated with limited liability in Hong Kong.  It was at all material times a leveraged foreign exchange trader licensed by the Securities and Futures Commission (“the SFC”) under the Securities and Futures Ordinance Cap 571 (“the SFO”).  The 1^st defendant was permitted to carry on a business in leveraged foreign exchange trading which is a  Type 3 regulated activity under the SFO.

2.  At all material times the 2^nd defendant (“Ng”) was an executive director and employee of the 1^st defendant. Ng was a responsible officer and a licensed representative of the 1st defendant, licensed by the SFC.

3.  The plaintiff is and was at all material times a businessman.  He was in the garment business with a business in Hong Kong and a factory in the Mainland.

4.  By a written Client Agreement in Chinese made on 26 June 2007 between the 1^st defendant as the trader and the plaintiff as the client (“the Client Agreement”), the plaintiff became a client of the 1^st defendant upon the terms and conditions contained therein.

5.  Ng was the account executive in respect of the plaintiff’s account with the 1^st defendant.  The plaintiff’s account number 63889 with the 1^st defendant (“the account”) was opened on 26 June 2007 after the Client Agreement was signed.

6.  The plaintiff deposited a cheque for $1,000,000 with the     1^st defendant which he handed to Ng when he opened the account. 

7.  There is no dispute that the plaintiff received daily statements and monthly statements for the transactions in the account.

8.  According to the daily statement dated 26 June 2007 an order was executed in the account for 10 lots of CHF with a sell order in the evening of 26 June 2007.

9.  The account was active from 26 June 2007 until 14 November 2007 when the 1^st defendant liquidated all remaining open positions in the account for failure on the part of the plaintiff to put up sufficient margin to keep the remaining positions open in the account.

10.  There is no dispute that the following transactions were made in the account as set out in the evidence of Alex Lai Chi Wai at  paragraph 3.3 of his witness statement as follows:

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11.  The above transactions are reflected in the daily as well as the monthly statements sent by the 1st defendant to the plaintiff.

12.  The last 2 transactions on 14 November 2007 were liquidated by the 1^st defendant as the 1^st defendant exercised its discretion to liquidate all open positions of the account pursuant to clause 11 of the Client Agreement.

13.  The plaintiff’s claims are as pleaded in the re-re-re-amended statement of claim (“the final SC”).  The plaintiff has made various amendments to his statement of claim until the final SC on 31 May 2012.

14.  The plaintiff’s case is that Ng made fraudulent misrepresentations to the plaintiff to induce him to enter into the Client Agreement. 

15.  As pleaded at paragraph 6A(d) of the final SC, the representation relied on was that the investment on foreign exchange trading was safe and just like investments in shares, but could gain higher interest rate (“the 1^st representation”).

16.  The plaintiff also relies on the confirmation of Ng as pleaded at paragraph 6 of the final SC that the 1^st defendant was only the plaintiff’s agent (“the confirmation”), and the undertaking of Ng as pleaded at paragraph 6B of the final SC that he would look after and take utmost care in the account and the related trading (“the 1^st undertaking”).

17.  The plaintiff relies also on a representation by Ng that the 1^st defendant had an excellent track record for procuring its clients to earn substantial profits by entering into foreign exchange trading through the 1^st defendant (“the 3^rd representation”).

18.  The plaintiff’s case is that as a result of the inducements by Ng, he entered into the Client Agreement.  The inducements relied on are the confirmation, the 1st representation, the 1^st undertaking, and the 3^rd representation.

19.  The plaintiff also asserts that on 26 June 2007 Ng requested him to sign a pile of blank dealing instruction forms for handling the foreign exchange trading in the account.  The plaintiff relies on a representation by Ng to him that such blank dealing instruction forms had to be signed for the purposes of dealing in foreign exchange trading (“the   2^nd representation”).  In reliance on the 2^nd representation the plaintiff avers that he did sign a pile of blank dealing instruction forms and handed them to Ng as requested.

20.  It is also the plaintiff’s case that upon enquiry by his solicitors in February 2008, it was discovered by the plaintiff from the   1^st defendant’s letter dated 28 February 2008 that the 1^st defendant was the principal on the other side of the transactions traded in the account.  Until such discovery by the letter dated 28 February 2008, the plaintiff avers that he had been unaware of the fact that the 1^st defendant was acting as the principal on the other side of the transactions.

21.  The plaintiff also relies on implied terms in the Client Agreement (paragraph 15 of the final SC).

22.  A further  implied term relied on is that the 1^st defendant should comply with all the applicable provisions in the SFO and the subsidiary legislation made under the SFO and all the applicable provisions in codes, guidelines, rules and regulations issued by the SFC from time to time (paragraph 21E of the final SC).  It is averred that the 1^st defendant impliedly represented (“the compliance representation”) and warranted (“the compliance warranty”) that all the applicable provisions, all codes, guidelines, rules and regulations issued by the SFC and all the applicable provisions in the SFO and the subsidiary legislation made under the SFO had been and should be complied with.

23.  It is also alleged that the 1^st defendant and Ng owed fiduciary duties to the plaintiff and that as a result of the breach of the same the plaintiff has suffered loss and damage.

24.  In the written undertaking signed on behalf of the 1^st defendant and also by the plaintiff in the Client Agreement, the 1^st defendant and the plaintiff undertook to each other that they should promptly inform and notify the other of any change or new circumstances which would materially change the information in the Client Agreement (“the 2^nd undertaking”).  It is averred that the 1^st defendant was in breach of the 2^nd undertaking for failing to disclose to the plaintiff the revocation of the 1st defendant’s licence by the SFC.

25.  In November 2007 there were margin calls made by the 1^st defendant on the account.  Ng’s case is that he informed the plaintiff to deposit money into the account to meet the margin calls.  However, the plaintiff alleged that he had difficulties in depositing the money into the account immediately.  On the plaintiff’s assurance to him that the money would be paid in the following day, the 1^st defendant booked in the amounts to be deposited to the account on Ng’s undertaking that if the plaintiff did not deposit the money into the account on the following day, the 2^nd defendant would have to do so.  According to Ng, the plaintiff failed to deposit the money that was booked in and Ng made the payments on 8, 9 and 13 November 2007 respectively, to the account in the total sum of $290,000 which has not been repaid by the plaintiff to Ng.

26.  The plaintiff’s case is that he made total payments of $1,950,000 into the account and that he has withdrawn $70,843.12.  He therefore claims loss and damage in the sum of $1,879,156.88 ($1,950,000-$70,843.12) against the 1^st defendant and Ng, alternatively damages for breach of contract and/or fiduciary duty and/or duty of care to be assessed.  Interest and costs are also claimed.

27.  The 1^st defendant and Ng deny that the plaintiff is entitled to any relief against them.

28.  Ng also counterclaims $290,000 against the plaintiff in respect of deposits made by Ng into the account as requested by and on behalf of the plaintiff.  Interest and costs are also claimed.

29.  There are also proceedings for contribution and indemnity brought by the 1st defendant and Ng against each other.

The issues

30.  It seems to me that the main issues are:

(1) Whether Ng ever made fraudulent misrepresentations to the plaintiff before or at the time of the signing of the Client Agreement;

(2) Whether the 1^st defendant or Ng owed any fiduciary duty to the plaintiff and if so, whether the 1^st defendant acting as the principal on the other side of the transactions in the account  would amount to a breach of fiduciary duty to the plaintiff;

(3) Whether the 2^nd undertaking has been breached by the 1^st defendant;

(4) Whether the account was a virtual discretionary account;

(5) Whether the booking in arrangement affected the interest of the plaintiff and whether the 1^st defendant has breached its duties in relation thereto;

(6) Whether there was the compliance representation and the compliance warranty and if so, whether the 1^st defendant and/or Ng has breached the same and/or failed to proved services with reasonable skill and care;

(7) Whether the plaintiff had ever paid $1,950,000 in total to the   1st defendant and/or Ng;

(8) Whether the 1^st defendant is vicariously liable for the acts or omissions of Ng, if Ng is held to be liable;

(9) Whether Ng as the plaintiff’s account executive is liable for the plaintiff’s loss;

(10) Whether the plaintiff is estopped or has waived his right to claim against the 1st defendant for the whole or part of his claim;

(11) If the plaintiff’s claim is established, whether the plaintiff’s loss was wholly or partly caused by or contributed by his negligence;

(12) If the plaintiff’s claim is established, what is the quantum of damages;

(13) In relation to Ng’s counterclaim, whether the plaintiff is liable to Ng in the sum of $290,000.

The witnesses

31.  I heard evidence from the plaintiff. 

32.  I also heard evidence from Alex Lai Chi Wai (“Lai”) who gave evidence on behalf of the 1^st defendant.  Lai was another executive director of the 1st defendant at all material times.  He was the supervisor in the dealing room of the 1^st defendant and did not have any contact or dealing with the plaintiff at any material time.

33.  Ng also gave evidence.  I also heard evidence from     Carman Lau Hiu Hiu (“Carman”) and Yuen King Cheung (“Yuen”), who gave evidence on behalf of Ng.

34.  I found Lai, Carman and Yuen to be honest and credible witnesses. 

35.  I found the plaintiff to be a dishonest, evasive, incredible and unreliable witness.  I found Ng to be a credible, honest and reliable witness.  I have no hesitation in preferring the evidence of Ng to the evidence of the plaintiff where their evidence is at variance.

Findings

36.  There is no dispute that the plaintiff was known to Ng before the plaintiff entered into the Client Agreement.  Ng was not a relative or a close friend of the plaintiff.  The plaintiff first met Ng in about 1986 or 1987 socially.  However, they lost contact with each other about a year or two after they first met.

37.  In 2007, the plaintiff was a successful businessman who was also an investor in stock trading.  He had and used a tele text machine so that he could check financial information including stock trading prices.  The plaintiff’s business was successful and he wanted to make some investments in forex trading.  He saw Ng on television giving his views on financial matters.  He called Ng and went to visit Ng at the offices of the 1^st defendant.  They had not seen each other for about 20 years when they met up again in or about May 2007.

38.  There is no dispute that the plaintiff was invited to lunch in or about May 2007 with some colleagues of Ng, including Carman.  It is clear from the evidence of Ng, which I accept, that the plaintiff was not interested in investing in the bullion market but wanted to invest in foreign exchange.  On the evidence of Ng and Carman, which I accept, I am satisfied and find that the plaintiff did visit the 1^st defendant’s offices in Central and was present at briefing sessions or talks held by Ng at the offices.

39.  Ng said, and I accept, that before the Client Agreement was entered into, the plaintiff had visited the offices of the 1^st defendant and on his second visit he gave him some leaflets of the 1^st defendant in respect of foreign exchange.  On the plaintiff’s third visit to the 1^st defendant’s offices, Ng also gave the plaintiff a copy of the Client Agreement for the plaintiff to take with him and peruse before signing the Client Agreement.  On his evidence the documents in Chinese namely, leaflets and a copy of the Client Agreement were provided to the plaintiff before the time when the Client Agreement was entered into.  Although this was denied by the plaintiff, I have no hesitation in believing Ng and disbelieving the plaintiff.

40.  Ng said that the visit on 26 June 2007 by the plaintiff at the offices of the 1st defendant was the fourth visit by the plaintiff although this was denied by the plaintiff.  Ng gave evidence, which I accept, that he had explained to the plaintiff the nature of the Client Agreement before the plaintiff signed the same.  The plaintiff denied that Ng had explained the Client Agreement to him or that he knew that he was entering into a leveraged foreign exchange trading agreement.  I believe Ng and disbelieve the plaintiff.

41.  I am satisfied and find that on 26 June 2007 at the offices of the 1^st defendant, Ng did explain the nature of the Client Agreement to the plaintiff before he asked the plaintiff to sign the same.  As Ng said, the financial product promoted by the 1^st defendant was of a leveraged nature.  Ng also explained to the plaintiff what his risk of loss was.  In my judgment the plaintiff could not have been mistaken about this when he entered into the Client Agreement.  Ng also explained to the plaintiff the Foreign Exchange Trading Rules (Head Office) document which the plaintiff signed.  That document clearly explains the margin requirements of the initial margin and the maintenance margin and when margin calls would be made.   By signing that document, the plaintiff agreed and accepted the trading rules set out therein.  

42.  Although prior to entering into the Client Agreement the plaintiff had not invested in leveraged foreign exchange trading, I have no hesitation in finding that by the time the plaintiff entered into the Client Agreement he knew that he was going to invest in leveraged foreign exchange trading under the Client Agreement.

43.  It is clear from the Client Agreement that the account of the plaintiff with the 1^st defendant was for leveraged foreign exchange trading.

44.  By Recitals (3) and (4) of the Client Agreement it is clear that the plaintiff requested the 1st defendant to open and maintain for him the account and to execute his instructions for forex trading.  The 1^st defendant agreed to open and maintain the account and to execute all instructions given or authorized by the plaintiff.

45.  And by clause 3.1 of the Client Agreement, subject to the terms and conditions thereof, the plaintiff instructed and the 1^st defendant accepted the plaintiff’s instructions to open and maintain the account in the plaintiff’s name for the purpose of selling, purchasing, exchanging, disposing of or otherwise dealing in forex.

46.  It is also clear that by clause 5.1 of the Client Agreement the 1^st defendant declared that none of its employees should accept any appointment to act as the plaintiff’s agent to operate the account unless a separate agreement was entered into between the 1^st defendant and the plaintiff in accordance with the rules as defined in the Client Agreement.  It is common ground that no such separate agreement was ever entered into.

47.  I would also refer to clause 8.8 of the Client Agreement whereby the 1^st defendant declared and the plaintiff acknowledged that none of the employees of the 1^st defendant was authorised to give any representation or advice on behalf of the 1^st defendant on forex trading.  By the said clause the plaintiff also confirmed, acknowledged and declared that he would in no event hold the person giving the advice liable for loss resulting from the plaintiff’s reliance upon such advice.

48.  The plaintiff further acknowledged by clause 8.8 that

“any recommendations and/or market information communicated to the Client by the Trader’s agents, employees and representatives do not constitute either advice on which the Client is meant to rely on or an offer to sell or a solicitation to buy any Forex. The Trader shall not be liable in respect of any such recommendations and information may be incomplete, inaccurate or changed without notice to the Client and the Trader makes no representation, warranty or guarantee with respect thereto or with respect to any financial or tax consequences of the Client’s transactions.”

49.  Clause 9 of the Client Agreement is under the heading “Trading with the Client”.  Clause 9.1 provides that

“In respect of any Forex transaction, contract or instruction, the Trader may accept, conduct or trade in the capacity as principal and/or agent for any party or parties without the prior consent of the Client”

50.  And clause 9.2 clearly provided that

“The Trader may itself take opposite position to match the Client’s trading orders.”

51.  The plaintiff knew that the 1^st defendant could act as principal without his prior consent and that the 1^st defendant could itself take an opposite position to match the plaintiff’s trading orders. He agreed to this by clauses 9.1 and 9.2 of the Client Agreement.

52.  Clauses 11.1 and 11.2 under the heading “Margin Requirements” set out the margin requirements of the 1^st defendant from the plaintiff under the account.

53.  The Risk Disclosure Statement contained in the Client Agreement makes it plain that the risk of loss in leveraged foreign exchange trading can be substantial.  The client is expressly told in the risk disclosure statement that, inter alia, the loss sustained may be in excess of the client’s initial margin funds, that the client may be called upon at short notice to deposit additional margin funds, that if the required funds are not provided within the prescribed time the client’s position may be liquidated at a loss and the client would be responsible for any resulting deficit in the account.  It ends with an express warning that the client should carefully consider whether such trading was suitable in the light of his own financial position and investment objectives.

54.  The plaintiff also signed the Risk Disclosure Statement at the same time as the Client Agreement.  He also signed the client information statement, schedule 1 to the Client Agreement where it is stated, inter alia, that the plaintiff’s investment strategy was for “short term speculation”.

55.  Ng also signed the declaration in the Client Agreement declaring that he had fully explained and provided the contents of the Client Agreement and the Risk Disclosure Statement to the plaintiff and had invited the plaintiff to read, ask questions and take independent advice if he wished.

56.  The plaintiff also signed a confirmation that he had read and understood the contents of the Risk Disclosure statement which had been provided and explained to him by the licensed representative of the 1^st defendant. 

57.  And by the entire agreement clause in clause 27.1 it was provided and agreed that

“This Agreement contains the entire understanding between the parties and supersedes any prior understanding and/or agreements between the parties with respect to the subject matter of this Agreement. There are no representations, agreements, arrangements, or understandings oral or written between the parties relating to the subject matter of this Agreement which are not fully expressed herein.”

58.  The plaintiff said that he did not read the Client Agreement before signing it and that Ng did not explain it to him.  He signed at the places indicated because he trusted Ng.  I do not believe him.  I see no reason why the plaintiff should trust Ng in any event.  They were neither relatives nor close friends.  They had not seen each other for about 20 years before the Client Agreement was entered into.  It is inconceivable, in my view, that he would trust Ng to the extent of signing the Client Agreement and the accompanying documents without knowing their contents.

59.  There is no dispute that a copy of the signed Client Agreement was sent to the plaintiff after subsequently by the 1^st defendant.  After he received a copy of the same, the plaintiff did not complain to the 1^st defendant or to Ng about any part of the Client Agreement.

60.  In evidence the plaintiff was evasive when cross-examined about the contents of the Client Agreement, and whether he had the opportunity to read it either before or after he signed the same.  He said that he did not need to read the same as he trusted Ng.  But it was clear from his evidence that even if he had the time and opportunity to read it, he would not have done so.  I do not believe him.

61.  I would refer to what was said by Ribeiro PJ in Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006) 9 HKFCAR 334 at paragraph 84:

“Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.”

62.  I do not believe the plaintiff’s evidence that he did not know the contents of the Client Agreement when he signed the same.

63.  When cross-examined, the plaintiff initially confirmed that he had understood the contents of the client information statement in the Client Agreement which he said was correct when he signed it.  He was evasive and later contradicted his earlier evidence as to this by saying that he did not take the time to read the contents before signing the Client Agreement. The plaintiff is not a credible witness.  I do not believe him.

64.  When cross-examined about the Risk Disclosure Statement, the plaintiff accepted that he saw the words “Risk Disclosure Statement” and that he knew at the time that the risk could be great and that he could lose all the money that he invested.  He later contradicted his earlier evidence.  Although he said that he saw the words “Risk Disclosure Statement” in the box, he went on to say that he did not read what was in the box as he trusted Ng and left all matters for him to handle on his behalf.  I do not believe him.

65.  The plaintiff also said that he left it to Ng to decide what to invest for him.  He also said when he received the daily statements from the 1^st defendant he did not read them as he left it all to Ng.

66.  In his second supplemental witness statement, the plaintiff said that Ng did not mention that the 1^st defendant operated leveraged foreign exchange trading until around end July 2007 when he started to realize that the 1^st defendant was a company that was operating in leveraged foreign exchange trading.  He said that it was at the end of   July 2007 that he noticed that his account was for leveraged foreign exchange trading.  I do not believe the plaintiff.

67.  It is clear, and I find, that the plaintiff was supplied by the 1^st defendant with daily statements of the transactions in the account.  There is no dispute as to this.  The daily statements show clearly that the transactions were of a leveraged nature.  The plaintiff admitted in     cross-examination that the daily statement dated 2 July 2007 sent to him a few days after the account was opened and which he said he read one or two days thereafter, showed a loss of $212,816.41 over a matter of a few days.  He admitted that it was only a few days after the account was opened and not at the end of July 2007 that he spoke to Ng about the loss.  He also admitted that he then knew that the loss was over 20% of his initial $1,000,000 investment and that was a substantial loss.  In evidence the plaintiff said that at the time of his enquiry in July 2007 with Ng about the loss in his account, Ng did not mention anything about the foreign exchange transaction in the account being leveraged or on margin.  He said that he was told that there was an over purchase in the account.  I do not believe the plaintiff.

68.  The plaintiff received the daily statements which show clearly in the section under the heading “statement summary”, the position of the initial margin, the maintenance margin and usable (call) margin.  The plaintiff claimed not to have noticed that part of the daily statements when he received them but I do not believe him.  It is inconceivable that he would notice a loss in the daily statement but not notice what is contained in the rest of the same daily statement.  He was evasive when giving evidence about this.  He also contradicted his own evidence in his second supplemental witness statement at paragraph 16 where he said that when he phoned Ng in July after seeing a loss in the daily statement he was told by Ng that the account was for margin trading.  He also contradicted his evidence at paragraph 20 of his second supplemental witness statement where he said that at the end of July 2007 he knew that the account was subject to the effect of margin trading.

69.  I find that at all material times the plaintiff knew that his account was for leveraged foreign exchange trading and that there were margin requirements which he knew about and agreed to.

70.  Although he knew that by early July he had already suffered a loss in leveraged foreign exchange trading, the plaintiff did not complain either to the 1^st defendant or to Ng about this.  The reason he gave was that he trusted Ng.  However, he admitted that all along he knew that risk was involved and it was his evidence that he did not blame Ng for his loss.

Dealing instruction forms

71.  The plaintiff’s evidence was that on 26 June 2007 Ng gave him a pile of blank dealing instruction forms and asked him to sign them so that Ng could carry out transactions in the account on his behalf.  He said he did so as requested.  This is denied by Ng who said that the plaintiff was never requested to sign any blank dealing instruction forms and did not do so.  Ng said that he carried out the instructions of the plaintiff to place orders in the account with the dealing room and the plaintiff was asked to sign dealing instruction forms after the trade was made.  In respect of the first trade which was made in the evening of      26 June 2007 on the plaintiff’s instructions after the account was opened the plaintiff was requested to and did sign the dealing instruction form on the following day.  This is contained in the upper portion of exhibit D1a.

72.  I have no hesitation in preferring the evidence of Ng to that of the plaintiff.  I believe Ng and disbelieve the plaintiff.

73.  Exhibits D1a, D1b, D1c and D1d are the dealing instruction forms which have been signed by the plaintiff.

74.  Exhibit D1a consists of 2 dealing instruction forms on one sheet.  The upper portion is dated 26 June 2007 and the lower portion is dated 29 June 2007. 

75.  Exhibit D1b also consist of 2 dealing instruction forms on one sheet.  The upper portion is dated 13 July 2007 and the lower portion is dated 20 July 2007.

76.  Exhibit D1c also consists of 2 dealing instruction forms on one sheet.  The upper portion is dated 25 July 2007 and the lower portion is dated 26 July 2007.

77.  It is clear on the evidence of Ng that the lower portion of exhibit D1b was signed by the plaintiff only after it had been faxed on     6 September 2007 to the plaintiff for him to sign the same.  Both the upper and lower portions of exhibit D1c were signed by the plaintiff only after that sheet had been faxed on 6 September 2007 to the plaintiff for him to sign.  Thus 3 dealing instruction forms on 2 sheets were faxed to the plaintiff on 6 September 2007 and the plaintiff only signed the same after that date.  Ng said, and I accept, that he had asked the plaintiff to sign those dealing instruction forms after the transactions were done but the plaintiff had failed to go up to the 1^st defendant’s offices to sign the same despite having been pressed by Ng to do so as soon as possible.  Ng said that eventually the plaintiff asked him to fax the form to him so that he could see it before going over to sign the same which he did after having received the fax.  The date of the fax transmission as shown in the copy dealing instruction forms in evidence supports Ng’s evidence that as at 6 September 2007 the plaintiff had not signed the dealing instruction form in the lower portion of exhibit D1b and the two dealing instruction forms in exhibit D1c.

78.  It seems to me that if, as the plaintiff said, he had signed a pile of blank dealing instruction forms on 26 June 2007, Ng could simply have used one of those forms instead of pressing the plaintiff to go up to the 1^st defendant’s offices to sign the dealing instruction forms in the lower portion of exhibit D1b and the two dealing instruction forms in exhibit D1c after the unsigned copies had been faxed to the plaintiff on   6 September 2007.

79.  I would also observe that if the dealing instruction form in the upper portion of exhibit D1b had been signed in blank by the plaintiff on 26 June 2007, it is inconceivable that the plaintiff was not asked to also sign in blank the dealing instruction form in the lower portion of exhibit D1b at the same time on 26 June 2007.  They were both on the same sheet.  The plaintiff was evasive when questioned about these matters.  The plaintiff’s evidence is, in my view, incredible.  I disbelieve him.  I believe Ng.

80.  I am satisfied on the evidence of Ng, which I accept, that the transactions in the account were made by Ng on behalf of the plaintiff after having obtained the plaintiff’s instructions to do so.  I believe Ng and disbelieve the plaintiff.  I find that the plaintiff was never asked by Ng to sign and he never signed any blank dealing instruction forms.

The representations

81.  The plaintiff’s case is that as a result of the confirmation, the 1^st representation, the 1^st undertaking and the 3^rd representation the plaintiff was induced to enter into the Client Agreement and to open the account with the 1^st defendant. It is also the plaintiff’s case that Ng made the 2^nd representation on or about 26 June 2007.  The plaintiff’s case is that the 1^st, 2^nd, and 3^rd representations were fraudulent misrepresentations made by Ng.

82.  As to the confirmation, I reject the plaintiff’s case that Ng confirmed to the plaintiff that the 1^st defendant would only be the plaintiff’s agent when carrying out foreign exchange trading in the account.  I believe Ng and disbelieve the plaintiff.  In view of the express terms of the Client Agreement, it is inconceivable that Ng would have given the confirmation to the plaintiff.

83.  As to the 1^st representation, Ng denied have made the representation that the investment on foreign exchange trading was safe and just like investment in shares but could gain higher interest rate.

84.  In his evidence in his witness statement the plaintiff said that at the lunch gathering in May 2007 with Ng and his colleagues, Ng said that investing in forex was relatively stable and was similar to investing in stock and it offered a high yield.  There is no evidence that the 1^st representation was made at the time the Client Agreement was entered into or shortly before then.  What was discussed at a casual conversation over lunch a month or so before the opening of the account cannot, in my view, be elevated to a representation made to the plaintiff to induce him to enter into the Client Agreement.  In any event, as the plaintiff said in evidence, he did not rely on a statement that the investment was safe.  Even if there was such a representation made, there was no reliance on it by the plaintiff.  I so find. 

85.  The Risk Disclosure Statement in the Client Agreement made it plain that the risk of loss in leveraged foreign exchange trading can be substantial. 

86.  As regards the 2^nd representation, I reject the plaintiff’s case that on 26 June 2007 Ng requested the plaintiff to sign a pile of blank dealing instruction forms for Ng to handle the foreign exchange trading in the account, and that the plaintiff did so pursuant to Ng’s representation that such blank dealing instruction forms had to be signed for the purposes of dealing in foreign exchange trading.  I have already found that Ng did not request the plaintiff to sign blank dealing instruction forms and the plaintiff did not do so.

87.  As regards the 3^rd representation, I also reject the plaintiff’s case that Ng represented to him that the 1^st defendant had an excellent track record for procuring clients to earn substantial profits by entering into foreign exchange trading through the 1^st defendant.  This was denied by Ng.  I believe Ng and disbelieve the plaintiff.  In any event, there was no evidence adduced to show that the 3^rd representation was false.

88.  As regards the 1st undertaking that Ng orally undertook that he would look after and take utmost care in the account with the 1^st defendant and the related trading, I am satisfied that Ng did not give such an undertaking to the plaintiff.  It would have been contrary to the express terms of the Client Agreement.  It is inconceivable, in my view, that Ng would have given such an undertaking.

89.  I am not satisfied that the plaintiff entered into the Client Agreement as a result of fraudulent misrepresentations. Issue (1) is resolved against the plaintiff.

 The implied terms

90.  The plaintiff relies on implied terms of the Client Agreement as pleaded at paragraphs 15 and 21E of the final SC.

91.  The relevant test as to whether a term should be implied into a contract was succinctly summarized by Gibbs CJ in Re Hospital Products Ltd v United States Surgical Corp and Others 4IPR 291 at 304

“The principles governing the implication of terms in contracts have recently been stated by the Judicial Committee in BP Refinery Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26-7, and by this court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 605-6, and Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, at 345-7 and 403-4. It was said by the majority of the Judicial Committee in the first of those cases, and accepted in this court in the others, that for a term to be implied the following conditions (which may overlap) must be satisfied: “(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

92.  Paragraph 15 of the final SC pleads that there were the following implied terms:

“15. It was the implied terms of the Client’s Agreement between the Plaintiff and the 1^st Defendant that the 1^st and/or 2^nd Defendants:-

(a) would carry out their duty with due care, skill and diligence;

(b) would report to the Plaintiff at reasonably regular intervals depending on the conditions of the markets at the material time viz. the more volatile the markets, the more frequent the reporting;

(c) would alert the Plaintiff to the occurrence of any adverse development in the markets concerned;

(d) would not expose the Plaintiff to any hazardous transaction with exceedingly high risk;

(e) would take any reasonable and appropriate measures to protect the financial interests of the Plaintiff;

(f) would be responsible for the acts or omissions of their employees and agents in respect of the conduct of their business;

(g) would indemnify the Plaintiff of their negligence and/or other breaches; and

(h) ‘to provide the services with reasonable skill and care’ under the Supply of Services (Implied Terms) Ordinance, Cap. 457.”

93.  As Reyes J said in Kwok Wai Hing Selina v HSBC Private Bank (Suisse) SA (HCCL 7/2010, 21 June 2012) at paragraph 105, it is an elementary principle of contract law that one cannot imply obligations which are contrary to the express terms of an agreement.

94.  Paragraph 21E pleads an implied term that the 1^st defendant should comply with all the applicable provisions in the SFO and the subsidiary legislation made under the SFO and all the applicable provisions in codes, guidelines, rules and regulations issued by the SFC from time to time.

95.  I am satisfied that there was an implied term that the 1^st defendant and Ng would carry out their duty with due care, skill and diligence.  Apart from this, I am satisfied that the other implied terms relied on are not to be implied into the Client Agreement.  They are contrary to the express terms of the Client Agreement.

96.  By the implied term the 1^st defendant agreed to execute the plaintiff’s instructions promptly with due care and skill.  There is no evidence that the 1^st defendant or Ng was in breach of this duty.  The plaintiff has also failed, in my view, to establish that the 1^st defendant or Ng failed to take reasonable care when carrying out the instructions of the plaintiff in relation to the transactions in the account.

97.  By clause 20.1 there was already an express term in respect of the liability of the 1^st defendant. It was provided that neither the 1^st defendant nor any its employees should be liable to the plaintiff for any loss or damage suffered by the plaintiff arising out of or in connection with any act or omission in relation to the account unless it is proved by the plaintiff that any of such loss or damage is the result of acts of bad faith or gross negligence of the 1st defendant.

98.  I am satisfied and find that the Client Agreement was not an agency agreement whereby the 1^st defendant was to act as the agent of the plaintiff in forex transactions.  It was an agreement for the provision of services as set out in the Client Agreement.  The 1^st defendant was to open and maintain the account for the plaintiff and the obligation on the 1^st defendant was to execute the plaintiff’s instructions in accordance with the terms and conditions of the Client Agreement.

99.  No doubt the 1^st defendant and Ng as licensed persons would be subject to regulatory control by the SFC under the SFO, including the Code of Conduct for persons licensed by or registered with the SFC (“the Code “).  That does not, however, assist the plaintiff in his case that there was the implied term relied on in the   Client Agreement.

100.  As Deputy Judge Pow SC said in the recent case of DBS Bank (Hong Kong) Ltd v San-Hot HK Industrial Co Ltd & Another [2013] 4 HKC 1 at paragraph 216

“The Code was promulgated and published pursuant to s399(1) of SFO. The stated objectives of the Commissioner’s power to publish codes and guidelines are for providing guidance:- (1) for the furtherance of any of its regulatory objectives; (2) in relation to any matter relating to any of the functions of the Commission…; (3) in relation to the operation of any provision in the Ordinance. Section 399(6) specifically provides as follows:-

‘A failure on the part of any person to comply with the provisions set out in any code or guideline published under this section that apply to him shall not by itself render him liable to any judicial or other proceedings, but in any proceedings under this Ordinance before any court the code or guideline shall be admissible in evidence, and if any provision set out in the code or guideline appears to the court to be relevant to any question arising in the proceedings it shall be taken into account in determining that question.’[emphasis added]

Sub-section (8) then states that ‘any code or guideline published under this section is not subsidiary legislation’. In the Explanatory Notes of the Code, it is stated that:-

(1) The Commission will be guided by this Code in considering whether a licensed or registered person satisfies the requirement that it is fit and proper to remain licensed or registered;

(2) To reflect the realities of today’s markets, the Commission recognizes that conduct of business principles should be flexible enough to differentiate between professional and non-professional investors and some provisions of the Code need not be observed in the case of professionals;

(3) The Code does not have the force of law and should not be interpreted in a way that would override the provision of any law.

In Ever-long Securities Co Ltd v Wong Sio Po, Cheung JA accepted, albeit obiter, that the Code did not have the force of law.  Furthermore, under s 1.5 of the Code, a failure by any person to comply with any provision of the Code that applies to it shall not by itself render it liable to any judicial or other proceedings and the wordings in s 399(6) of SFO were reiterated.  In my view, the Code was primarily promulgated for the purpose of determining whether a person is a fit and proper person to be or to remain as a licensed or registered person under SFO.  Section 399(6) does not make the Code admissible in all proceedings.  Only in proceedings under SFO is the Code admissible.  And in such proceedings, the Code may become relevant to certain issues arising therein.”

101.  I respectfully agree with the observations of Deputy Judge Pow SC.  This action is not a proceeding under the SFO.  Only in proceedings under the SFO is the Code admissible.

102.  I reject the plaintiff’s case that there was the implied term relied on as pleaded in paragraph 21E of the final SC.

Any fiduciary duties?

103.  The plaintiff’s also asserts that the 1^st defendant and/or Ng being agents of the plaintiff owed to the plaintiff fiduciary duties as pleaded at paragraph 16 of the final SC.  Principally, what is averred is that there was a duty not to place themselves in a position where there is conflict between their duty to the plaintiff and their personal interests.  There is also an allegation of a duty not to make a secret profit in the management of the account.  By way of a late amendment to paragraph 16 of the final SC it was also alleged that in the event the 1^st defendant took an opposite position of any leveraged foreign exchange transaction, there was a duty to disclose the same to the plaintiff and to give notice thereof to the plaintiff.

104.  In Libertarian Investments Ltd v Thomas Alexej Hall (FACV Nos 14 & 16 of 2012; 6 November 2012) Ribeiro PJ when dealing with obligations importing fiduciary duties said at paragraph 64 that in Breen v Williams (1996) 186 CLR 71 at 82

“Brennan CJ helpfully suggested that fiduciary duties arise in two broad, overlapping situations:

‘Fiduciary duties arise from either of two sources, which may be distinguished one from the other but which frequently overlap.  One source is agency; the other is a relationship of ascendancy or influence by one party over another, or dependence or trust on the part of that other.’”

105.  And at paragraphs 67 and 68 in Libertarian Investments, Riberio PJ said

“67. It is in the context of such ‘ascendancy’ cases that the courts have identified as an essential feature of the fiduciary relationship, an obligation on the fiduciary to exercise discretionary powers in the interests of another, highlighting the vulnerability of that other person to any potential abuse of such powers.

68. In Hospital Products, one of the questions was whether the relationship between distributor and supplier was such a ‘power-dependency’ relationship and it was in that context that Mason J stated:

‘The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.  The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.  The expressions ‘for’, ‘on behalf of’ and ‘in the interests of’ signify that the fiduciary acts in a ‘representative’ character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.  It is partly because the fiduciary’s exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed…’”

106.  I have found that the obligation of the 1^st defendant under the Client Agreement was to execute the orders of the plaintiff and not to act as the plaintiff’s agent.  The 1^st defendant did not agree to act for or on behalf of the interests of the plaintiff in the exercise of a power of discretion.

107.  By the express terms of the Client Agreement the 1^st defendant was entitled to act as the principal taking an opposite position in the transactions without the plaintiff’s consent.  By agreeing that the 1^st defendant may act as principal and take an opposite position to the plaintiff the 1^st defendant was permitted to act in its own interest and against the plaintiff’s interest. 

108.  There is no merit in the allegation of the fiduciary duties relied on.  By the express terms of the Client Agreement the 1^st defendant and Ng were not managing the account on behalf of the plaintiff.  There was no separate agreement authorizing Ng to operate the account on behalf of the plaintiff.  Ng was the account executive of the plaintiff who placed orders after obtaining instructions from the plaintiff to do so.  Ng was never given the secret password for the account.  There is also no merit in the plaintiff’s assertion that Ng held himself out as a fund manager.  I disbelieve the plaintiff and believe Ng.

109.  The plaintiff gave evidence that he did not blame Ng for his loss as he knew that risk was involved in his investments.  From his evidence in cross-examination the plaintiff’s main complaint was that the 1^st defendant acted as the principal who took an opposite position in the transactions.  However, under the Client Agreement by clauses 9.1 and 9.2, the 1^st defendant was entitled to do just that.  There was no requirement that for each and every transaction notice should be given to the plaintiff that the 1^st defendant was acting as the principal taking an opposite position in the transaction.

110.  Also, by clause 5.1 the 1st defendant was only to execute the instructions given by the plaintiff.

111.  It was also the plaintiff’s evidence that at the time when Ng asked him to sign the Client Agreement he agreed to give Ng a bonus of 20% of any profits he would make in the transactions in the account.  This was denied by Ng.  I disbelieve the plaintiff and believe Ng.  The plaintiff accepted that he did not pay any bonus to the Ng even after he had made profits in some of the transactions in the account.  In my view, the plaintiff has not been telling the truth.

112.  I am satisfied and find that plaintiff never appointed Ng to act as his authorized person.  The plaintiff never completed and signed the notice of appointment of authorized person as required by clause 4.2 of the Client Agreement.

113.  I am not satisfied that the 1^st defendant or Ng owed the plaintiff the fiduciary duties relied on.  Issue (2) is resolved against the plaintiff.

114.  Issue (4) is also resolved against the plaintiff.  I find that the account was not a virtual discretionary account. 

115.  As regards issue (9), Ng is not liable for the plaintiff’s loss in my judgment.

116.  Issue (6) is also resolved against the plaintiff.  In my judgment there was no compliance representation and no compliance warranty.  There was also no failure to provide services to the plaintiff with reasonable skill and care.

Affirmation

117.  It seems to me, and I so find, that although by early July 2007 he knew that the transactions in the account were of a leveraged nature and that there was a risk of substantial loss in his investments, the plaintiff did not seek to avoid the Client Agreement.

118.  The effect of a misrepresentation is to make the contract voidable.  This means that the contract is valid unless and until it is set aside by the representee.  I have found that the plaintiff was not induced by misrepresentations to enter into the Client Agreement.  However, if, contrary to my findings, the plaintiff was induced by misrepresentations to enter into the Client Agreement, the plaintiff has affirmed the Client Agreement after he found out that the account was for leveraged foreign exchange trading and that there was a risk of substantial loss.  It is clear that the plaintiff has elected to affirm the Client Agreement rather than to rescind the same.

119.  I would also observe that under clause 18 of the Client Agreement, the account may be terminated by either party giving a notice of termination in writing to the other party not less than 1 working day before the date of termination.  Even after the plaintiff discovered that he had sustained a substantial loss of over 20% of his initial investment in a few days after the account was opened, the plaintiff did not seek to give notice of termination of the account.  There was nothing to stop the plaintiff from giving one day’s notice to terminate his account as he was entitled to do under clause 18.1 of the Client Agreement.  Instead, the plaintiff maintained the account with the plaintiff.

120.  The undisputed evidence shows that there were further transactions in the account carried out on 13 July, 20 July, 25 July,        26 July and 12 November, 2007.  These have been confirmed by the plaintiff by signing the dealing instruction forms exhibits D1a to D1d.

121.  The plaintiff also earned interest for the whole period that the account was in operation.  Ms Tsang, for Ng, has helpfully provided a table of the total interest earned by the plaintiff as reflected in the monthly statements of the account.  This has not been disputed.  The table shows that a total sum of $91,652.88 was earned by the plaintiff from the transactions in the account most of which was interest earned from July 2007 to November 2007.

122.  The daily statements of the account also show that on 29 June 2007 by liquidating or closing the position of the first transaction in the account the plaintiff made a profit of $23,827.52.

123.  As shown in the monthly statement of the account dated 31 July 2007, the plaintiff also made a profit of $1,958.42 on 13 July 2007 and a profit of $8,399.74 on 25 July 2007.  The plaintiff was evasive when asked about these profits and said that he didn’t pay attention to the fact that he had made profits in those transactions.  That is incredible.  I do not believe him.

124.  On his own pleaded case, the plaintiff paid in $300,000 on  13 September 2007 to the 1^st defendant by his cheque for that sum.  On the evidence of Ng, which I accept, the said payment of $300,000 made by the plaintiff by cheque to the 1^st defendant was to answer a margin call made on the account on 13 September 2007.  Ng was not challenged as to this when he gave evidence.

125.  As I have said, rather than electing to rescind the Client Agreement, the plaintiff affirmed the same.

126.  It was the plaintiff’s case that it was only by the letter dated 28 February 2008 from the 1^st defendant to his solicitors that he discovered that the plaintiff was the principal on the other side of the transactions traded in the account.  I do not believe him.

127.  There is no merit in the plaintiff’s case that he only found out that the plaintiff was acting as principal in February 2008. Even after he found that out, the plaintiff did not make any complaint to the 1^st defendant or to Ng about the fact that the plaintiff had been acting as principal in the transactions in the account on the opposite side.

128.  The plaintiff brought proceedings in the District Court in February and March 2008 against the 1^st defendant. He did not bring any proceedings against Ng until this action was commenced in November 2008.

129.  In DCCJ 594 of 2008 issued on 12 February 2008 the plaintiff brought proceedings against the 1st defendant for an order for delivery up of copies of contract notes, statements of account and receipts in respect of the account and damages for failure to deliver the said documents.  There was no other complaint or claim at that time against either the 1^st defendant or Ng.

130.  After he received the said letter of 28 February 2008 from the 1^st defendant to the plaintiff which he said was when he discovered that the 1^st defendant was the principal on the opposite side in the transactions in the account, the plaintiff brought DCCJ 1268 of 2008 against the 1^st defendant on 26 March 2008.  His complaint and claim was for the sum of $180,000 which he claimed was the total of 4 payments made by him to the 1^st defendant as particularized and which he claimed had not been reflected in the daily statements from the 1^st defendant.  There was no other complaint or claim made against the 1^st defendant at that time.  There was also no complaint or claim against Ng at that time.

131.  I would also observe that by a complaint letter signed by the plaintiff to the SFC dated 18 November 2008, the plaintiff made a complaint to the SFC against the 1^st defendant.  The complaint was about his payment of $180,000 to the 1^st defendant which he claimed had not been reflected in the statements of the account.  There was no complaint of the 1^st defendant having acted as the principal on the opposite side in the transactions in the account.

132.  Ng gave evidence that on 7 November 2007 there were 4 margin calls made by the 1^st defendant on the plaintiff’s account.  The first was for $150,000, the second for $70,000, the third for $60,000 and the fourth for $20,000.  The total sum was $300,000.

133.  Ng said that he informed the plaintiff of these margin calls on 7 November 2007.  The plaintiff was asked to arrange for the deposits to be made on the following day.  On the following day, the plaintiff told Ng that he did not have sufficient funds and could only manage to pay $50,000.  The plaintiff asked Ng to make payment of the rest on his behalf first.  Ng arranged to pay in $140,000 on 8 November 2007 into the bank account of the 1^st defendant on behalf of the plaintiff. Ng said that on 9 November 2007 he managed to pay in another $110,000 to the 1^st defendant’s bank account on behalf of the plaintiff.  Thus, to answer the margin calls on 7 November 2007, Ng paid in a total of $250,000 on   8 and 9 November 2007 into the 1^st defendant’s bank account, and the plaintiff paid in $50,000.

134.  Ng also said that on 8 November 2007 there was a margin call in the account for $30,000.

135.  On 9 November 2007 there was 2 margin calls each for $70,000.  He informed the plaintiff of these margin calls.

136.  Ng said that on 10 November 2007 the plaintiff came to his offices and told him that he could only pay $50,000 as he did not have sufficient funds available.  The plaintiff gave him a post-dated cheque for $50,000 post-dated to 15 November 2007.  Ng said that he told the plaintiff that was not acceptable.  The 10^th was a Saturday. The due date for the margin call was 12 November.  The plaintiff altered the date of the cheque to 13 November 2007.  The total sum of the margin calls on 8 and 9 November was $170,000.  The plaintiff had given the sum of $30,000, plus $50,000 and the post-dated cheque of $50,000.  That left a shortfall of $40,000 which Ng paid into the 1^st defendant’s account on behalf of the plaintiff.

137.  On Ng’s evidence, he paid in a total of $290,000 on behalf of the plaintiff into the 1^st defendant’s bank account which he said the plaintiff requested him to do so as the plaintiff did not have sufficient available funds to answer the margin calls made by the 1^st defendant.

138.  Although the plaintiff denied Ng’s version of the events, I believe Ng and accept his evidence.  I disbelieve the plaintiff and reject his evidence.  Ng’s evidence is supported by the bank pay-in slips showing the payments into the bank account of the 1^st defendant being exhibit D3.

139.  Ng said, and I accept that he explained the booking in arrangement to the plaintiff.  Although the words “booking in” were not used in the explanations to the plaintiff, I am satisfied on Ng’s evidence that the booking in arrangement was explained to the plaintiff.  I so find.  Ng explained to the plaintiff that the 1^st defendant permitted the plaintiff to mark a booking into the account of the amount to be met by the margin call on the undertaking of Ng to pay the same in case of any non-payment into the account when the margin call was due.  Although the plaintiff denied that he knew of the booking in arrangement, I am satisfied that the transcripts of the audio recordings in evidence of the conversations between the plaintiff and Ng on 12 November 2007 show that the plaintiff knew of the booking in arrangement.  The transcripts also support Ng’s evidence that the plaintiff requested Ng to make payments to the 1^st defendant on his behalf to meet the margin calls.  I accept the evidence of Ng and reject the evidence of the plaintiff on these matters.

140.  The plaintiff’s case is that he gave $300,000 cash on 8 November 2007 and $170,000 cash on 10 November 2007 to Ng for onward payment to the account for covering margin shortfalls as particularized in paragraph 13 of the final SC.  I would observe that these allegations were only made in later amendments to the SC but not earlier.  These allegations are denied by Ng.  There is no documentary evidence at all to support the plaintiff’s allegations.  The plaintiff claims to have brought the cash in RMB from his factory in the Mainland and to have converted the same into Hong Kong currency.  No documentary evidence has been adduced to support this.  I do not believe the plaintiff.  I believe Ng.  I much prefer the evidence of Ng to that of the plaintiff.  I find that the plaintiff did not give to Ng cash in the sum of $300,000 on 8 November and $170,000 on 10 November 2007.  As regards issue (7) I find that the plaintiff did not pay $1,950,000 in total to the 1^st defendant or to Ng.

141.  As Ng said, and as I accept, on 14 November 2007 the 1^st defendant closed the remaining two positions in the account by selling USD and buying CHF as the plaintiff failed to deposit sufficient money to fully cover the two positions.   I find on Ng’s evidence, which I accept, that the plaintiff informed Ng that he did not have sufficient funds to meet the margin calls and would leave it to the 1^st defendant as to when it would liquidate the remaining positions in the account.  As regards issue (5), I find that the booking in arrangement did not affect the interests of the plaintiff and that the 1^st defendant has not breached its duties in relation thereto.

142.  It was also submitted on behalf of the plaintiff that the 1^st defendant was in breach of the 2^nd undertaking. On 27 August 2007 the SFC made a decision to revoke the 1^st defendant’s licence and the plaintiff’s case is that by the 2^nd undertaking the 1^st defendant was obliged to inform the plaintiff of any change or new circumstances which would materially change the information contained in the Client Agreement.  The 1^st defendant applied for a review of the decision of the SFC.  The review first came before the Securities and Futures Appeals Tribunal (“SFAT”) on 28 January 2008.  It was adjourned and the final determination was made on 20 March 2009.  On 28 January 2008, it was ordered that pending the determination there should be an interim suspension of the license of the 1^st defendant. 

143.  I do not regard the findings of the SFAT in the determination dated 20 March 2009 as being relevant to the information contained in the Client Agreement.  It is not clear to me how it can be said that the facts as set out in the determination in respect of unlicensed forex activities in Macau can be of relevance.  In any event, the remaining transactions in the plaintiff’s account had already been liquidated by the 1^st defendant on 14 November 2007 before the interim suspension on 28 January 2008.  There is no merit in the plaintiff’s case that there was a breach of the     2^nd undertaking.  Issue (3) is resolved against the plaintiff. 

144.  Issues (8), (10), (11) and (12) do not arise in view of my findings.

Conclusion

145.  I dismiss the plaintiff’s claims against the 1^st defendant and Ng.

146.  As regards Ng’s counterclaim, I am satisfied that the said sum of $290,000 is due and owing by the plaintiff to Ng.  I give judgment to Ng on his counterclaim against the plaintiff for $290,000 with interest on the said sum from the date of the counterclaim 29 December 2008 until judgment at 1% above the best lending rate of HSBC and from judgment until payment at judgment rate.

147.  As regards the contribution proceedings between the 1^st defendant and Ng, I dismiss their claims against each other.

148.  I also make an order nisi

(a) that the plaintiff should pay the 1^st defendant its costs of the action, such costs to be taxed if not agreed,

(b) the plaintiff should pay Ng his costs of the action and of the counterclaim, such costs to be taxed if not agreed,  and

(c) that there be no order as to costs of the contribution proceedings between the  1^st defendant and Ng.