ANTHONY WEE SOON KIM v. UBS AG HONG KONG BRANCH

cacv 96/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 96 of 2006

(on appeal from HCA NO. 2005 of 2004)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from a judgment of Deputy High Court Judge Carlson given on 7 February 2006 whereby he ordered that the statement of claim in this action be struck out pursuant to Order 18 rule 19(1)(b), rule 19(1)(c) and/or rule 19(1)(d) of the Rules of the High Court and/or pursuant to the inherent jurisdiction of the court on the grounds that (i) it is scandalous and vexatious; (ii) it may prejudice, embarass or delay the fair trial of the action; and/or (iii) it is an abuse of the process of the court.  In consequence the action was dismissed with costs.

2.  At the conclusion of the hearing of this appeal, judgment was reserved which we now give.

Background

3.  The plaintiff was a customer of the defendant in Singapore.  He brought an action in Singapore against the defendant on a number of bases, including fraudulent misrepresentation, negligent misrepresentation, breach of duty of care, breach of mandate and breach of instruction arising out of foreign exchange transactions.  The facts in the following paragraphs are taken largely from the judgment at first instance in Singapore.

4.  On 28 August 1997 the plaintiff entered into a one month forward contract with the defendant to buy MYR35 million from the defendant at the rate of MYR2.8818 to US$1 for value on 2 October.  On 18 September the plaintiff entered another one month forward contract to buy MYR5 million from the defendant at the rate of MYR3.02 to US$1 for value on 20 October.  In October of that year the plaintiff took delivery of the MYR40 million and he used US dollars which he borrowed from the defendant to pay for it.  On a rough calculation that would mean that the defendant would have had to borrow something in the order of US$13.8 million.

5.  In December of the same year the plaintiff was said to have adopted the “DFF Strategy” by (1) converting the whole leveraged deposit of MYR48, 806,173.83 (inclusive of accrued interest) into US dollars and investing that in a fund named the SBC Dynamic Floor Fund (“the SBC Fund”), a US dollar denominated fund, and (2) entering into a 12-month forward selling US$10,439,832.63 and buying MYR41,493,114.79 “at 3.87 (spot plus 0.1045 (swop) i.e. 3.9745 for value 6 January 1999”.  It was then said that there was a transaction which the plaintiff disapproved of which resulted him in his incurring a US$63,500 loss.

6.  On 27 July 1998 the plaintiff sold the investment in the SBC Fund and received proceeds of US$11,361,215.57.  On the same day the defendant unwound the 12-month forward contract and incurred a loss of MYR2,442,561.03.

7.  For some reason, which remains unexplained, after the Malaysian government imposed foreign exchange measures on 1 September 1998 and fixed the spot exchange rate at MYR3.80 to US$1, the defendant converted the plaintiff’s deposit on the exchange rate of MYR4 to US$1.

8.  On those facts as set out in the judgment, it can be seen that whereas the plaintiff had borrowed US$13.8 million in October 1997 he only received some US$11.36 million in July 1998.  Taking into account the further loss it appears that on the defendant’s calculation the total eventual loss was US$4,179,509.

9.  As already indicated the plaintiff sued the defendant in Singapore.  The matter not only went to trial but went to appeal.  One of the matters that was pleaded in that action was that a sum of US$4,185,000 was debited from the Hong Kong bank account maintained by the plaintiff in the defendant’s Hong Kong branch.  In that action, the plaintiff pleaded that this had been authorised by Nicholas Wood, an employee of the defendant, contrary to the instructions of the plaintiff who had faxed specific instructions to the Hong Kong branch not to act on Mr Wood’s instructions.  As already noted, there was a prayer for relief in the Singapore action in respect of breach of instructions.  Upon enquiry in the course of the hearing of this appeal, the plaintiff informed the court that this sum in the plaintiff’s bank account in Hong Kong was the proceeds of the sale of shares which the plaintiff had had sold.

10.  The plaintiff’s action in Singapore against the defendant was dismissed.  Although the transfer of the money, which the plaintiff alleged was unauthorised, had been pleaded in the Singapore action as having been an unauthorised transfer, it apparently did not feature as a ground of complaint when it came to argument at trial.  Nevertheless, it was clearly taken into account because, as the judge below observed, had the payment not been made there would have been a large sum outstanding in Singapore and by the time the action had taken place, the amount of the Singapore loan, which would otherwise not have been paid off, would have increased substantially.  The plaintiff would then, no doubt, have become liable for such a sum on a counterclaim.  Furthermore, this court’s attention was drawn to the skeleton arguments on behalf of the plaintiff in the Singapore action where it is made clear that reference was indeed made to the amount of US$4,179,509 as being the loss incurred, at least on the defendant’s calculation.

11.  In the action in Hong Kong the plaintiff’s plea is that the transfer of the US$4,185,000 was made wrongfully and without authority.  The judge below held that if such a claim were to have been made it should have been pursued in the first action.  In my view the judge below was quite correct in holding that the plaintiff cannot now litigate this matter in Hong Kong as it should have been litigated in the Singapore action and, given the fact that the plaintiff’s claim in Singapore failed, the position of the plaintiff was simply that there was a debt which had to be paid off.  Clearly the plaintiff had had the shares sold in Hong Kong in order to have that debt paid off.

12.  Whilst I am content to uphold the judge on this basis, I would simply add that it is by no means clear, when taking into account paragraphs 46 and 47 and the prayer for relief (4) in the Singapore action, that this matter was not a specific claim in the Singapore action.

13.  The other part of the plaintiff’s claim as pleaded relates to various handling and custodian charges.  It is not disputed that these had, specifically, been raised in the Singapore action.  They were not adjudicated upon because the trial judge considered that they had been dropped as part of the claim.  When the matter went to appeal in Singapore the matter was not raised again.  As the judge below correctly pointed out, this must therefore constitute a matter of Res Judicata.

14.  Whereas one can have sympathy with the plaintiff to the extent that he considered that he had been ill served by his legal representatives in Singapore, given the history of the matter, that sympathy cannot avail him as a matter of law on this aspect.  I would add that the plaintiff indicated that there were other matters in respect of which he had complaint, not least matters surrounding the foreign exchange transactions.  Those matters are not pleaded and, in any event, should have been raised in the Singapore action as well.

15.  In those circumstances I see no alternative but to dismiss this appeal with an order nisi of costs in favour of the defendant.

Hon Le Pichon JA:

16.  I agree.