HO KAI CHEONG AND ANOTHER v. WONG MAN YIU ANTHONY AND ANOTHER

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.6922 OF 1997

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JUDGMENT

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1. This is an appeal by the Defendants against the order of Mr Registrar Betts of 23^rd June 1998, when he gave summary judgment to the Plaintiffs in the sum of $302,612.67 together with interest at the judgment rate from 27^th June 1997 until payment, with costs to be taxed if not agreed.

2. The Plaintiffs' claim is for $250,000 which is said to have been paid over by the Plaintiffs to the Defendants. In the Amended Statement of Claim, the Plaintiffs sought an account of all stocks and shares allegedly purchased and sold for the benefit of the Plaintiffs.

3. The gist of the Plaintiffs' claim is that the 1^st Defendant invited the Plaintiffs to purchase shares and stocks through one South China Finance Company Limited ("South China"). It is averred that in order to induce the Plaintiffs to instruct the 1^st Defendant to purchase shares through South China, the 1^st Defendant represented to the Plaintiffs that he was a representative of South China and South China would purchase shares and stocks for the benefit of the Plaintiffs or open an account in the names of the Plaintiffs. It is then said that on 9^th June 1992, by an agreement made partly orally and partly evidenced in writing, contained in a receipt duly signed by the 1^st Defendant, the Plaintiffs agreed to purchase shares and stocks through South China at a total price not exceeding $250,000. The receipt of two cheques from the Plaintiffs, amounting to a total of $250,000, is not disputed by the Defendants. Then in the Statement of Claim, it is said that in breach of the agreement, South China and/or the 1^st Defendant has failed and/or refused to purchase any shares or stocks for the benefit of the Plaintiffs or at all. Then it is averred that in about February 1996, in a telephone conversation between the 1^st named Plaintiff and the 1^st Defendant, the 1^st Defendant admitted that he did not pay the said cheques to South China for the purpose of purchasing stocks and shares for the benefit of the Plaintiffs, but the said cheques were deposited into an account of the 2^nd Defendant, who is the 1^st Defendant's father-in-law and whose account was kept at South China.

4. In the Defence filed by the Defendants, the Defendants averred that the alleged agreement was in fact entered into between the Plaintiff and one Patrick Wong, the elder brother of the 1^st Defendant in a casual conversation. It is alleged by the Defendants that the agreement entered into was that the Plaintiffs would invest $250,000 with the 1^st Defendant who worked for South China, so that the 1^st Defendant could purchase shares of a particular company on behalf of the Plaintiffs. The particular company concerned was one Swilynn International Holdings Limited. It is averred in the Defence that the Plaintiffs did not give instructions to the 1^st Defendant as regards through which specific account the shares of Swilynn should be bought on their behalf; and it was averred that the 1^st Defendant understood and believed that the Plaintiffs would not object to the shares of that company being bought through the account of the 2^nd Defendant and that so many shares of the company as could have been bought for $250,000 would be bought on behalf of the Plaintiffs. It is said that the shares of that company were subsequently suspended from trading in the Stock Exchange of Hong Kong and, therefore, in the circumstances, the Defendants are not liable to the Plaintiffs.

5. It is clear from the affidavits which were filed for the various interlocutory applications, and for the application for summary judgment, that the alleged agreement was apparently entered into between Patrick Wong, the elder brother of the 1^st Defendant and the 1^st Plaintiff when the two of them, together with another person, were at a nightclub on the evening of 8^th June 1992. Throughout that evening, the two Defendants were never present. It is therefore clear from the affidavits that the 1^st Defendant, and indeed the 2^nd Defendant, never made any representations to the Plaintiffs which resulted in the Plaintiffs issuing the two cheques which came to a total of $250,000. The Statement of Claim is therefore defective in so far as it alleges that the 1^st Defendant had made certain representations to the Plaintiffs.

6. The credibility of the 1^st Plaintiff's evidence as contained in his various affidavits is attacked on the basis that if the arrangement was made in June 1992, for an account to be opened on the Plaintiffs' behalf with South China for shares to be bought through that account, then why did the Plaintiffs give no instructions to the Defendants as regards what shares the Plaintiffs wanted to buy. It is also submitted, on behalf of the Defendants by Mr Peter Ho, that the fact that the Plaintiffs never made inquiries of the Defendants shows that the Plaintiffs were leaving it to the Defendants to exercise their discretion as regards when the shares should be bought and when they should be sold. The first inquiry appears to have been made by the Plaintiffs in a letter to South China in 1995, some three years after the agreement was entered into.

7. On the other hand, the Defendants alleged in their Defence that the sum paid by the Plaintiffs to the Defendants was used to purchase the shares of this particular company, and these investments were mixed up with the investments in the same shares by members of the Wong family, namely Patrick Wong, the elder brother of the 1^st Defendant and perhaps the 2^nd Defendant, the father-in-law.

8. In my judgment, these are clearly triable issues which should be left for the trial judge to determine. In the summary judgment given by Mr Registrar Betts, the judgment was for the amount of $302,612,67 when the Plaintiffs' claim is only for $250,000. Apparently the basis for judgment being entered for that amount is that in a document which purports to have been an account rendered by the Defendants pursuant to an order by the Court, there was a remaining balance of $302,612.67. But in that account, transactions involving the shares of this particular company were entered into as early as 1^st June 1992, when the earliest the agreement between the Plaintiffs and Patrick Wong or the Defendants could have been entered into was 9^th June 1992. So clearly there were transactions in that statement of account which did not involve the Plaintiffs at all, namely transactions from 1^st June 1992 to 7^th or 8^th June 1992. So clearly, the learned Master was wrong to have given judgment in that amount.

9. For the reasons that I have allowed the appeal of the Defendants, I do not propose to say any more about the merits or demerits of each party's case, and I would leave the details of each party's case to be worked out by the trial judge. Suffice it for me to say that the appeal by the Defendants is allowed, the judgment of Mr Registrar Betts is set aside, and I grant unconditional leave to the Defendants to defend.

10. On application of the parties, I grant the Plaintiffs leave to amend the Amended Statement of Claim within 21 days and I grant to the Defendants leave to amend their Defence within 14 days of service of the Re-amended Statement of Claim. The costs of and occasioned by this appeal, including the costs of today's hearing be to the Defendants and to be taxed forthwith if not agreed. By consent, the costs of and occasioned by the application for summary judgment before Mr Registrar Betts be costs in the cause.