MANCIPLE LTD. v. CHAR ON MAN

IN THE COURT OF APPEAL

1995, No. 64

(Civil)

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J U D G M E N T

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Nazareth V-P:

1. The plaintiff appeals from the judgment of Findlay J setting aside an order of Master Jennings by which the latter entered summary judgment for the plaintiff against the defendant for ￥ 33,947,374.00 together with interest.

2. The plaintiff's claim is for the net balance due by the defendant from margin trading in Japanese securities through the Sanyo group of stockbroking companies. The plaintiff is a wholly-owned subsidiary of that group, and the assignee of the debt originally due from the defendant to Sanyo Securities (Asia) Ltd ("Sanyo") the Hong Kong brokerage arm of the Sanyo Group.

3. The defendant opened a margin trading account with Sanyo by signing on 14 April 1987 both a Single Account Agreement and a Margin Account Agreement. These were signed on behalf of Sanyo by one Mr Hideshi Note ("Mr Note"). The defendant traded on margin in Japanese securities until about 1990 when the account went into margin deficiency. The deficit appears to have been caused by two successive purchases of lots of Nippon Telephone and Telegraph ("NTT") shares, the price of which subsequently fell. In August 1992, Sanyo closed out the account, as it was entitled to under the Margin Account Agreement, by selling the remaining securities. This left the account with a deficit of about ￥ 32m. By the time the writ was issued in August 1993, it had increased to about ￥ 33m. Sanyo sent the defendant monthly statements of his account addressed to his home at 37B Warwick Road, Kowloon, the address given on his account opening forms and in his affirmations, although the defendant disputes receiving those for 31st October 1989 to 30th September 1992.

4. The defendant's defences are, first, that he orally instructed Mr Note "on or about 8th September, 1989" to sell the securities which should have placed his account "about even"; and second, that under Japanese law, "it was illegal for anyone to sell NTT shares to anyone except Japanese nationals".

5. What this Court has to decide is whether the defendant has raised any triable or arguable issue. With reference to the defendant's first defence, the plaintiff contends that the defendant's evidence is inherently incredible and contradicted by his conduct and by contemporaneous documentation. The basis for that contention comes essentially from the evidence of Mr Ito, the Sanyo group's Hong Kong accountant, and the documents exhibited to his affirmations. The evidence for the defendant is contained in his own affirmations and documents exhibited to them.

6. According to Mr Ito, Mr Note was employed by Sanyo as a sales manager from 23rd January 1986 to 31st March 1988 when he resigned and went to join a company called Asian Dragon Investment Ltd ("Asian Dragon"), an investment advisory company. Asian Dragon was incorporated on 12th February 1988 in Hong Kong, and Mr Note was named in the annual return as a director. A business card of Mr Note describes him as the managing director of Asian Dragon. At the time, therefore, that the defendant said that he had instructed Mr Note to sell his remaining securities, it can be seen that Mr Note had already left Sanyo. However, Mr Mumford QC, who appears for the defendant with Mr B.K. Ho, explains that it is the defendant's case that Mr Note continued to be Sanyo's agent. Mr Ito also says that he understood that after Mr Note left, he maintained his contacts with a number of Sanyo's customers.

7. In that regard, the defendant in his affirmation says this:

"Mr Ito assumed that Mr Note maintained his contacts with Sanyo's customers to advise them on their investments. I disagree. At least as far as I was concerned, Mr Note not only advised me on my investment but continued to handle my account for me.

I was aware that Mr Note changed his telephone number and he further told me he would be spending some of his time with Asian Dragon but there was no question at all that he no longer worked for Sanyo. Quite to the contrary, he told me and I verily believed that he would continue to act as Sanyo's broker and take orders from me. Most of the time it was Mr Note who telephoned me, and for those calls I had no idea where he called me from. But on the occasion when I had to call him back to give him my decision about his advice, the telephone numbers he gave me were sometimes he is in Asian Dragon and sometimes in Sanyo.

When I had to call him on my own I either called him at Sanyo or Asian Dragon. Sometimes he was not there, but I was never once told by anyone from Sanyo who answer my calls that Mr Note was no longer working there or that he had resigned. As far as I was concerned I was still dealing with Sanyo, with Mr Note as Sanyo's broker handling my account. In fact, it never occurred to me that Mr Note had resigned from Sanyo as Sanyo continued to send me statements regarding my account."

8. Mr John Griffiths QC, who appears with Mr Barry Barlow for the plaintiff, submits that it is incredible and wholly inconsistent with reality that anyone in those circumstances would believe that Mr Note still worked for Sanyo and moreover that the defendant sometimes telephoned Mr Note in Sanyo. I agree that this part of the defendant's evidence casts very grave doubt upon his credibility. Moreover, as Mr Griffiths points out, there was no advantage to Mr Note in disobeying or disregarding any instructions to sell. Both Mr Note and Sanyo should have welcomed such instructions since they would keep down the customer's debt exposure in a falling market.

9. Moving then to the claimed inconsistency of the defendant's conduct with having instructed Mr Note to sell, the defendant produced as exhibits to his affirmation, monthly statements of account to be sent to him by Sanyo from 31st May 1987 to 30 September 1989. They showed varying deficiencies ending with a deficit of ￥ 33.9m in the 30th September 1989 statement. It was of course Sanyo's case, verified by Mr Ito, that Sanyo continued to send monthly statements to the defendant, copies of which from 31st October 1989 to 30th September 1992 were exhibited to Mr Ito's second affirmation. But the defendant affirms that he never received one single one of these.

10. The defendant says that the statement of 30th September 1989 (the last which he had admitted receiving) revealed to him that his securities had not been liquidated in compliance with his instruction to Mr Note. He immediately contacted Mr Note on the phone and was told by him that he had liquidated the defendant's account and that the NTT shares had been sold so that he did not owe Sanyo any money; also he says Mr Note told him that the information contained in the statement was probably due to mistakes on the part of the accounts department of Sanyo.

11. It is thus not in dispute that the defendant received all the statements up to that dated 31st July 1989, and that they were addressed to 37B Warwick Road which was his residence. But, as I have said, the defendant denies that he received any of the statements for the period after 30th September 1989, which can be seen from the copies exhibited to have been sent to that same address. Likewise, the defendant denied receiving a margin call letter which the plaintiff claims Sanyo sent to him on 13th August 1990 requiring a deposit of about ￥ 26m. The defendant says he was not in Hong Kong. However, it is clear from the defendant's own affirmation, and the Sanyo account statements exhibited to it, that he received his August and September 1989 account statements at the same address. The defendant stated he was absent from Hong Kong in July and August 1990. In support, he exhibited photocopies of some pages of his passport which show an 8th June 1990 entry into the United States but no date of exit. Furthermore, there appears to be no reason whatever why letters arriving at his residence should not have remained there safely awaiting his return. No explanation at all is given by him apart from his inconclusive passport entry. On the contrary, through his counsel, he suggests that the plaintiff should have put in evidence to prove that the account statements for the disputed period were posted, notwithstanding that Mr Ito affirmed in more than one paragraph that they were sent to his address. Furthermore, the defendant, through his counsel, questions whether there ever was a genuine margin call letter of 13th August 1990. Bearing in mind that there is no suggestion whatsoever that the plaintiff's Order 14 application for summary judgment does not meet the requirements of that Order, it is for the defendant to show some reasonable defence. But far from doing so, the defendant's response in respect of the foregoing matter implying fraudulent conduct on the part of the plaintiff compounds the grave reflections upon his own credibility.

12. The defendant's lack of credibility emerges in yet another respect. The account statement of 30th September clearly shows a deficit of some ￥ 33.9m. Yet the defendant affirms that if the securities had been sold about the 8th of that month, the loss would have been a "few thousand yens". Turning to the inconsistency of his conduct, notwithstanding that the defendant upon his own account had heard from Sanyo, that a considerable sum of money was due from him, moreover knowing, as he must have known, that interest would be accruing, yet did nothing until on his own evidence he raised the matter with Sanyo in October 1992, more than 2 years later. He did not need to, in his view, Mr Note had said it would be all right.

13. The judge dealt with the matter at p. 5 of his judgment in the following way:

"The defendant says that he did not receive copies of his customer's ledger account after September 1989. Of course, there are some unsatisfactory aspects to this. It might be argued that the defendant, if he is telling the truth, would have been put on guard when he saw that, apparently, his instructions had not been carried out, and he would have confirmed his instructions in writing, or, in some other way, satisfied himself that all was in order. Against this, the defendant saw for himself that part of his instructions - the transfer of his Hong Kong dollar account had been carried out - and that might well have reassured him that his message had got through. It might also be said that it is improbable that the defendant would cease receiving his copies of his customer's ledger. This would have greater strength if Mr Note had not been involved in handling the defendant's account in some other business. It is not unreasonable that, after Mr Note instructed Sanyo to transfer the defendant's Hong Kong dollar account, Sanyo sent the copy ledgers to him. And if, indeed, Mr Note realised that there was trouble brewing because he had not carried out the defendant's instructions, he might well have told Sanyo to send the copy ledgers to him. These matters, in my view, can be resolved properly only at trial.

The statement of claim pleads that, on 13 August 1990, Sanyo sent to the defendant a margin call letter requiring him to deposit Yen 26,295,559. Mr Ito confirms that "it was sent to the Defendant at his home address on 13th August 1990" and it was not returned by the Post Office. Mr Ito does not produce a copy of the letter. I would like to have seen this. If the defendant had received this letter, he would have had difficulties in explaining why he did not respond to it. He says he did not receive it. He says he was not in Hong Kong at the time. This is unsatisfactory, but the unsatisfactory features can be tackled properly only at trial. I do not think I am entitled to deprive the defendant of his day in court on this basis."

14. As to the letter of 13th August 1990 referred to by the judge (the margin call letter) there was some controversy before us as to the way in which it was referred to below by counsel for the defendant and whether he ought to have made any point upon its absence from the bundle. I see no need to go into those matters other than to say that the defendant had disclosed it and indeed the defendant's solicitors had inspected it. However, the plaintiff's solicitors did not put it in the bundle, believing it not to be in dispute. On those facts, we gave leave to the plaintiff to put it in evidence before us. It is of marginal value in any event, in my view. What is more to the point is that its absence should not have been held against the plaintiff. Had the judge been made aware or appreciated the actual position, he may not have come to conclusion he did; but whether or not he would have done so, this Court in the present O14 context and the solely affirmation documentary evidence is in as good a position as the judge to assess that evidence. In my view, the defendant's case is so incredible that it simply does not raise a triable issue or arguable defence. I would add that from his submissions, Mr Mumford seems to have regarded as his most powerful point on the defendant's first defence the reference to ADI in Sanyo's statements of account from March 1988. He submitted that this clearly pointed to some connection between Sanyo and ADI, and that the issue of agency should go to trial.

15. It will be recalled that March was the month Mr Note left Sanyo. Mr Ito deposed to that in his second affirmation. He also went on to say that "from 31st March 1988 the customer ledger statements sent to the defendant at the end of each month were all marked "Mr Char On Man, ADI" to indicate that the account was handled through Asian Dragon. From the extract already reproduced from one of his affirmations, it can be seen that the defendant makes no secret that Mr Note continued to advise him on his investment. I simply do not see how the reference to ADI suggests that Mr Note somehow remained as Sanyo's agent. The emphasis upon this point only serves to highlight the absence of any credible evidence to support the defendant's case.

16. Mr Mumford also submits that where a judge having addressed the matter has given leave to defence, this Court should be slow to interfere. I agree, but equally when it is satisfied that what the defendant says is incredible, it ought not to hesitate on that account.

17. I turn then to the second defence, i.e. the legality of the contract under Japanese law. The nature of the defendant's case and the way the judge dealt with it emerges from the following passage at p. 6 of his judgment:

"The defendant says that, according to Japanese law, it was illegal to sell NTT shares to anyone except a Japanese national. If this is so, various defences may be open to the defendant, including the voidability of the transactions relating to the NTT shares. In this respect, Mr Mumford relies on a statement in Libyan Arab Bank v. Bankers Trust Co. [1989] 1 Q.B. 728 by Staughton J. at 743F -

Performance of a contract I excuse if (i) it has become illegal by the proper law of the contract, or (ii) it necessarily involves doing an act which is unlawful in the place where the act has to be done.

Just what it is that the Japanese law prohibits is in dispute. I have evidence before me from two Japanese lawyers. They differ as to the effect of the Japanese law. One says that, although the law prohibits ownership of NTT shares by, in essence, non-Japanese legal persons, the Japanese government interpreted this to mean that a person whose shareholding was not registered was not an owner. The evidence of the other Japanese lawyer contradicts this. I must say I would be surprised if the Japanese law allowed ownership of shares in NTT to rest with a foreigner provided that the ownership was not registered. The usual purpose of legislation of this nature is to keep the control of communications out of the hands of foreigners. My experience of this type of legislation, including similar Hong Kong legislation, is that the law takes precautions to ensure that control cannot be exercised indirectly, as well as directly. However, I am not an expert in Japanese law, and I cannot resolve the dispute. Foreign law is a matter of fact in our courts, and, if there is a dispute as to the effect of that foreign law, this can be resolved only by evidence."

18. Turning to the evidence before us, it is plain that in this case the shares purchased were never registered in the name of the defendant nor is there any indication that that was ever the intention. On the contrary, it would seem that the shares of any sort bought on margin were held, if indeed, any change to the registered ownership was effected, in the name of some juridical entity in Japan, be it some company within the Sanyo group or some other Japanese entity. That is hardly surprising given the nature of trading on margin in general and what appears to have been Sanyo's procedure which was sanctioned by the Margin Account Agreement. Equally, it would be surprising if a group of stockbroking companies operated a system of purchase which resulted in contravention of Japanese law, i.e. that performance of the contract necessarily involved doing of an act which is unlawful by the law of the place where the act is to be done. I am satisfied therefore that the defence of "illegality" in the way relied upon was simply not engaged. Accordingly, I do not find it necessary to rely upon the positive evidence of the plaintiff's expert, i.e. that the official Japanese Government interpretation was that the sanction in the legislation was directed at registration rather than anything less like mere beneficial ownership. As against that, the defendant's expert's evidence seemed to be this, that he was unable to trace any official directive to that effect claimed. That seems to be too inconclusive to raise such doubts about the plaintiff's expert's evidence as to require or even justify a trial. Moreover, although the version of the Japanese law relied upon by the defendant is not the actual text of the legislation but some unofficial guidance, it seems to me even upon that, the effect contended for by the plaintiff is not materially undermined. For those reasons, in my view, the defence of "illegality" is not arguable.

19. For the reasons I have given, I would allow the appeal, set aside the order of the judge below and reinstate Master Jenning's order.

Mortimer JA:

20. I agree and would also allow this appeal and reinstate Master Jennings' order. But as we are differing from the judge below, I would add a few brief remarks of my own.

21. Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff.

22. There is a difficulty because the court cannot resolve issues of fact on affidavits. However, there are some cases in which the defendant's own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham.

23. Where a judge has granted leave to defend, as in this case, this Court is very slow indeed to interfere. It will only do so if it comes to a clear conclusion that the judge was wrong. In this case, for my part, I have come to such a conclusion. Justice requires in those circumstances that we should interfere.

24. There are two defences raised. The first is on the facts. This is utterly hopeless. I will not rehearse them all for they appear in the Vice President's judgment. The defence is based upon an instruction to Mr Note to sell the shares which the defendant held on margin. It was an oral instruction given late in 1989. The defendant contends that Mr Note was still at that time an agent of the plaintiff. In fact, Mr Note had left the plaintiff's employment nearly 18 months before. The defendant says that he was unaware. That is very difficult to accept. But the case cannot turn upon that point. Instructions were given and were partly carried out by Mr Note. There was a transfer of a Hong Kong dollar account to the defendant's margin account on Mr Note's instructions, but not the sale of the shares.

25. It is very difficult indeed to see for what reason Mr Note should not carry out all the instructions and to liquidate the shares as well - if they were given.

26. But that also is not a matter upon which I would find this case turns. After the instructions for sale, the usual letters of account sent by the plaintiff to the defendant continued to be sent. He received one and because it did not record the sale, he says he contacted Note and was satisfied by his reply.

27. The letters of account indicated that the shares had not been liquidated. Over 30 letters were sent out and the defendant says that he never received any one of them yet each would have indicated to him the true position. He says also that he never received the demand that led to these proceedings.

28. Mr Note, of course, is a vital witness. He has not been traced. The burden is on the defendant to demonstrate a defence. But there is no indication of any real efforts to trace Mr Note. Further, during the period after the supposed liquidation instructions, the defendant never inquired about his account. It would be incredible if the balance of that account after the sale was nil. So he must have thought there was either a balance in his favour or a balance against him. But there was no inquiry.

29. The judge was obviously troubled by this point. He thought it was not unreasonable to assume that after Mr Note had instructed Sanyo to transfer the defendant's Hong Kong account, Sanyo sent the letters to Mr Note. With the greatest respect to the judge, there is not a scintilla of evidence that those letters were being sent to Mr Note to explain why the defendant did not receive them.

30. For my part, I also reach the conclusion that the defence on the facts raised by the defendant is itself inherently incredible. The facts relied upon are plainly contradicted by his own admitted conduct and the contemporaneous documents.

31. I turn to his other contention that the margin contract agreement which he had with the plaintiff was void for illegality or unenforceable on the grounds of illegality so that the plaintiff cannot rely upon it to bring these proceedings.

32. The way in which it is put is this. The contract requires that the plaintiff should be the registered owner of the shares. The relevant contract is the "single account" agreement. It provides:

"... you [the plaintiff] are also authorised to act for me [the defendant] ... to register the securities in your name (as nominee for me)."

33. This is an authorisation by the defendant to the plaintiff to register the shares in the plaintiff's name. The defendant argues that the shares were in NTT and at the time only a Japanese person including juridical person - could be registered as a shareholder under Japanese law. The suggestion is that it would be illegal for the plaintiff to carry out the contract by registering the shares in its name in order to hold them as the Defendant's nominee and that therefore the contract is illegal and fails for that reason.

34. The single account agreement was not intended to cover just this type of transaction but many other transactions in which there could not be any question of the plaintiff being unable to register the shares.

35. The evidence appears to confirm that only Japanese persons or Japanese juridical persons could then be registered as shareholders of NTT under Japanese law.

36. Mr Ito dealt with the matter in his affirmation of 24th January 1994:

"I am informed by Mr Shinta Takeda, Manager of the International Administration Department of Sanyo Securities Company Limited and I verily believe that although the Defendant purchased the NTT shares, he never became the registered shareholder of the shares. This is because, prior to the May, 1992 amendments to the Nippon Telegraph and Telephone Corporation Law ... Sanyo Securities Company Limited set their internal arrangement not to allow the NTT shares acquired by foreign nationals and foreign juridical persons to be registered in their name in the register of shareholders but rather to be registered in the name of either the Japanese Securities Clearing Corporation (the clearing system through which the trading of the NTT shares was settled), the Minister of Finance or former shareholder (if such shareholder was a registered shareholder), so as to comply with the Law."

There is no suggestion that the shares concerned in this case did not remain registered with a Japanese juridical person.

37. The point was dealt with by the Japanese lawyers in more detail. Mr Hoshino describes the law in these terms:

"In the second stage, which occurred in November 1987, it [the law] became to be interpreted by the Japanese government that a shareholder whose name has not been registered in the register of shareholders is not an 'owner' within the meaning of the Law. This official government interpretation was intended to permit the sale and purchase of NTT stock by foreign nationals and foreign juridical persons for investment purposes, provided, however, that no such foreign national or foreign juridical person became the registered owner of the NTT stock."

That government interpretation was not located by the defendant's expert, Mr Mikasa. He agreed that the law was as deposed to by the other witness, but added:

"We are of the view that purchase of NTT shares by non-Japanese or entity at the relevant time was a contravention of Article 4 of the NTT Law and was illegal."

That simply expressed the broad view.

38. In the result, it seems to me to be quite clear that NTT shares could not be registered in the name of a foreign national. At the same time there is no reason whatever for thinking that the beneficial interest in those shares could not be traded in Hong Kong as suggested by Mr Hoshino. The beneficial interest in those shares was in fact traded. The plaintiff could not become the registered owner of those shares but there is nothing that flows from this to show any reason for thinking that the plaintiff was not holding the shares to the order of the defendant and that they held the necessary rights to the shares.

39. In my judgment, it is not arguable that there was a breach of Japanese law which renders this contract unenforceable or void. The contract was a simple authorisation for the plaintiff to hold shares as the defendant's nominee. It is nothing to the point, in my judgment, that it may be illegal in Japanese law for a foreign person to be the registered owner.

40. In the result it is my judgment that this also is a defence which has no chance of success. There is no issue to be tried.

41. For those reasons, I agree with the Vice President and would make the order he proposes.

Liu JA:

42. For the reasons the Vice-President gives and the analysis of events made by my Lord, Mortimer JA, I, too, would allow the appeal and make the orders the Vice-President proposes.

43. I merely wish to add a few observations of my own on the issue of illegality. The assignor of the plaintiff, Sanyo Securities (Asia) Limited, was the defendant's Hong Kong broker. I shall call it "Sanyo". Sanyo is a company incorporated in Hong Kong and it is a subsidiary of its parent company, Sanyo Securities Company Limited, a Japanese corporation. In his Single Account Agreement and Margin Account Agreement signed with Sanyo on 14 April 1987 for margin trading, the defendant gave Sanyo "full power of substitution to acquire ... for (his) account" shares in the Japanese stock market and "to register the securities in (Sanyo's) name (as nominee for (him))". Sanyo was authorised to "at any time at (its) sole discretion and without liability for loss sell all or any securities from time to time held by (Sanyo) for (the defendant's) account". With respect to his margin trading, it was further agreed that "all orders and transactions shall be (executed) in accordance with and subject to the constitution, rules, customs, and usages (then) or (thereafter) in effect of the Exchange or market and its clearing house (if any)". The defendant also agreed that "all securities held by (Sanyo) or carried in the account for (him) may without notice to (him) from time to time be loaned or used by (Sanyo) in making deliveries or substitutions in (Sanyo's) business or pledged by (Sanyo) either separately or with other securities irrespective of or for more than the amount of (the defendant's) liabilities to (Sanyo) without retaining in (Sanyo's) control a like amount of similar securities".

44. On or about 12 November 1987, the defendant placed with Sanyo an order for ten shares of Nippon Telephone and Telegraph and on or about 17 March 1988, the defendant placed a further order for another ten shares of the same corporation which I shall refer to as "NTT". The defendant "never became the registered shareholder" of these twenty shares. By a facsimile dispatched apparently on 19 April 1994, solicitors for the defendant invited their Japanese law expert to confirm the view that "to use an agent to hold prohibited shares would (be) as wrong as to hold the shares by the foreigner himself". That view was not confirmed and all that the defendant's Japanese law expert advised was in these terms:-

"(At the material times), it was considered appropriate that shareholders of NTT should be restricted to the Japanese government, local public entities, Japanese nationals or Japanese legal persons for the purpose of preventing possible interference from non-Japanese ownership.

We are of the view that purchase of NTT shares by non-Japanese or entity at the relevant time was a contravention of Article 4 of the NTT Law and was illegal."

45. Under the Single Account Agreement and the Margin Account Agreement, Sanyo alone could dispose of the NTT shares, and it would seem that the defendant could not have been vested with any beneficial interest. He never became the registered shareholder. Whilst NTT shares were acquired and held for the defendant's account, he had yet to become a purchaser. It should be constantly borne in mind that this is a case of margin trading.

46. It is worthy of note that the defendant's Japanese law expert did not deal with the manner in which the defendant's orders for these 20 NTT shares were executed in Japan. In fact, there is no evidence as to how these orders were processed or whether the execution of these orders must necessarily amount to an infringement of Japanese laws. In the defendant's margin trading, Sanyo was expressly instructed to execute all his orders and transactions "in accordance with and subject to the constitution, rules, customs and usages" in force in the Japanese Exchange. There was clearly no intention to violate any Japanese law.

47. It is not suggested that Sanyo could not have executed these orders without the commission of an act regarded by Japan as illegal or that Sanyo was in breach of the standing instructions to abide by the constitution and the rules of the Japanese Exchange or must have carried out the instructions for these orders in a legally prohibited manner. It has not been shown that potential breaches of Article 4 of the Nippon Telegraph and Telephone Corporation Law had not been successfully avoided.

48. Lastly it is not even claimed by the defendant's Japanese law expert that the defendant's alleged illegal purchases of NTT shares said to be in contravention of Article 4 of the Nippon Telegraph and Telephone Corporation Law were void or otherwise unenforceable in Japanese law. In the absence of expert opinion on this aspect, Japanese law is presumed to be the same as ours. In Hong Kong, not every form of an illegal contract is wholly ineffective or unenforceable. It is for the defendant to show an arguable case on illegality. These allegedly illegal purchases have not been said to vitiate the orders placed by the defendant in his margin trading with Sanyo. The defendant's expert has also not addressed himself to the nature of sanction, if any, which would flow from the alleged illegal purchases. No opinion was proffered by him as to whether these alleged illegal purchases would simply be refused registration or expunged from it without a penalty or whether the validity of these alleged illegal purchases would at all be affected in whatever way they were punishable.

49. On the documents and the advice of the defendant's Japanese law expert, the plea of illegality cannot be sustained.