Read the full judgment text of CACV 000201/2000 on BabelCite. This Court of Appeal judgment was delivered on 21 March 2001 before Rogers VP, Keith JA, Le Pichon JA.
Civil law – agency – actual authority – apparent authority – frolic of his own – matched principal trading – grey market shares – Initial Public Offering – Securities Ordinance (Cap 333) – sections 2, 3(1), 3(1A), 20, 48, 50, 76, 80 – bringing together buyers and sellers – dealer registration – holding out as dealer – civil unenforceability of unlawful contracts – omnia praesumuntur contra spoliatorem – On 9 October 1997 Tulletts, a UK broker trading on a matched principal basis, orally agreed with Dharmala to sell Dharmala one million China Telecom grey market shares at $18.10 per share for settlement after listing; the market then fell sharply, Dharmala denied the trades and Tulletts suffered a loss of HK$7,569,572.38. Held, dismissing the appeal (1) that RS, Dharmala's registered dealer's representative, had actual authority to place the two trades in Dharmala's name in the course of his employment and that, as a matter of law following Mackay v Commercial Bank of New Brunswick and Lloyd v Grace, Smith & Co., an agent acting for his own personal benefit is not thereby stripped of actual authority, distinguishing Kooragang Investments v Richardson & Wrench on the facts. The maxim omnia praesumuntur contra spoliatorem applied to Dharmala's non-production of a statement of facts RS had refused to sign. (2) Tulletts did not breach section 20 because it dealt on a principal-to-principal basis and did not 'bring together' buyers and sellers. (3) Tulletts did not breach section 48 because its offers, made as principal to a registered dealer (Dharmala) and dealer's representative (RS), fell within the exemption in section 3(1); section 3(1A) did not apply. (4) (Obiter) Even if sections 20 and 48 had been breached, those sections carry criminal sanctions only; section 76(4) is the sole provision in the Ordinance attaching civil unenforceability to a breach, and following Richardson Greenshields v Chow Paul, Shaw v Groom and James Capel v So, no civil consequences were intended for breaches of the other sections. Appeal dismissed with an order nisi for costs to the plaintiff/respondent.
Legal issues: Whether RS had actual authority to place the two grey market trades for Dharmala · Whether Tulletts breached sections 20 and 48 of the Securities Ordinance · Whether breaches of sections 20 and 48 would render the contracts unenforceable
Outcome: Appeal dismissed. The Court of Appeal upheld Waung J's findings that RS had actual authority to place the two trades on behalf of Dharmala and that Tulletts was not in breach of sections 20 or 48 of the Securities Ordinance, with the result that Dharmala remained liable for the loss of HK$7,569,572.38.
Cited by 3 cases