SUN HUNG KAI INVESTMENT SERVICES LTD. AND ANOTHER v. FUNG TAK SING

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J U D G M E N T

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Kempster, JA:

1. This is an appeal by the defendant in these proceedings, Mr Fung Tak-sing, from the reserved judgment and order of Godfrey J, given and made on 24 October 1991 declaring and adjudging him liable to reimburse and indemnify the plaintiffs, Sun Hung Kai Investment Services Ltd ("the brokers") and International Bank of Asia Ltd ("the bank") for and against the cost of shares bought on his instructions. The judge made no order as to the costs of the proceedings. By his conditional leave, the condition being the continued prosecution of the defendant's appeal, the plaintiffs cross appeal; seeking an order for costs in their favour. Both parties, it may be remarked, are in breach of the terms of 059 r9 in relation to the lodging of documents for the purposes of appeal.

2. The learned judge found that on 15 October 1987 the defendant directed the bank to buy for him 200,000 shares in Keng Fong Sun Kee Construction and Investment Co Ltd "at best". He was well aware from the stock purchase order form, which he signed, that his instructions would be executed by the brokers. The bank was not a registered dealer in securities. This is what happened and the shares were bought though at first, by mistake, the defendant was misinformed as to the price. This morning the defendant sought to challenge these findings but advanced no valid grounds in support. The legal effect is that, with the defendant's authority, the bank, his agent, appointed the brokers his "sub-agent" or "substitute" for the purpose of acquiring the shares; thereby giving rise to direct privity of contract between the defendant and the broker who "becomes as responsible to (the defendant) for the due discharge of the duties which his employment casts upon him, as if he had been appointed agent by the principal himself" per Thesiger LJ delivering the judgment of the English Court of Appeal in De Bussche v Alt (1878) 8 Ch D 286 at p 311. This judgment was referred to with approval by Viscount Cave LC in Tarn v Scanlan [1928] AC 34 at p 48:

"Thesiger LJ ... pointed out that in certain cases, where the exigencies of business require it, an agent must be deemed to have authority to constitute a direct-privity of contract between a substitute appointed by him and his principals."

In the premises the brokers or their assigns were entitled to look to the defendant for reimbursement for and indemnity against the price of the shares. Those shares, which had cost $247,415.50, were sold by the plaintiffs, after notice to the defendant, for $70,091.91 leaving the quantum of their claim at the figure of $177,322.59. The Order drawn up and filed on 19 November 1991 and which purports to give judgment for the larger sum is therefore defective and muststand amended pursuant to RSC 020 r11 upon the undertaking of the plaintiffs' solicitors to issue and file a pro-forma summons.

3. How then, in the light of the judge's findings of fact, does the defendant put his case before us?

4. The grounds in the Notice of Appeal read:

"(1) that neither the broker nor the bank ever issued any form of contract note or confirmation to the customer about this transaction.

(2) that it took them over 15 months to make any sort of claim against the customer in relation to it.

(3) that only in the course of the trial were the September/October 1988 arrangements between the broker and the bank revealed for the first time to the customer and to the court.

(4) the the judge relied on the witnesses made by the bank's employees the reliability of which are doubtful. (sic)

(5) that the judge has not considered the case if the mistake was made by fraud."

Grounds (1) to (3) inclusive state further findings of the judge while ground (4) relates to the question of the credibility of the witnesses which was well within his province. None of such considerations vitiates the judge's conclusions. It is ground (5), however, which causes me particular concern as fraud, originally alleged against the bank in para. 8 of the Defence, was withdrawn by the defendant on the afternoon of the first day of the trial and the pleading amended accordingly.

5. The defendant seeks to resurrect the charge of fraud; now as against the brokers. In the absence of any application to reamend his pleading this constitutes an abuse of the process. I would dismiss the defendant's appeal.

6. Turning to the cross-appeal the original plea of fraud again falls for consideration as it was not, apparently, taken into account by the judge albeit relied upon by the plaintiffs' counsel in argument, when in the exercise of his discretion he declined to award the successful plaintiffs their costs. This entitles us, in my view, to substitute our discretion for his. For my part I do not believe that the matters appearing in grounds (1), (2) and (3) of the Notice of Appeal prejudiced the defendant in any way or otherwise warranted a departure from the usual approach. Having regard also to the fraud factor I would allow the cross appeal and order the defendant to pay the costs of the action.

Sir Derek Cons, V-P:

7. I agree entirely with my Lord and with the orders he has proposed. I would only add one small point. During the course of his submissions this morning the defendant appeared to have added one further ground of appeal, that is that the mistake of the broker as to the price vitiated the transaction. This point was taken before the judge below. He took the view that the mistake was not so serious or of so fundamental a character as to deprive the broker of his right to reimbursement. I agree.

Mayo, J:

8. I am in entire agreement. There is nothing that I wish to add.