Wong Man Hon Frederick v. China Times Securities Ltd

HCA 2715/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2715 OF 2016

_______________________

_______________________

__________________________________________

REASONS FOR JUDGMENT

__________________________________________

1.This is an application by the plaintiff for leave to appeal from my judgment dated 3 February 2017 where in effect I dismissed the plaintiff’s application to continue an injunction against the defendant to prevent the defendant dealing in 30,130,000 shares in Agritrade Resources Limited which the defendant was holding on behalf of the plaintiff pursuant to the terms of a Collateral Agency Agreement dated 6 September 2016 (“the CAA”) and various other contractual documents entered into when the plaintiff opened a securities trading account with the defendant.

2.Three grounds of appeal have been put forward in the draft notice of appeal.  They may be summarised as:

(i) the construction of the CAA;

(ii) the equity of redemption; and

(iii) evidence.

3.On the first point, it is said there is a serious question to be tried as to the true construction of the CAA and whether it permits the defendant to transfer the pledged shares from the account it has opened in the name of the plaintiff to a third party.

4.Nothing that has been said by Mr Kim on behalf of the plaintiff has caused me to change my view that this contention is simply unarguable.  When one construes a contractual document, one reads its clear words. There can be no other construction of the CAA and the various documents signed by the plaintiff when he opened a securities trading account with the defendant than that they permit the defendant to alienate the shares in question in any way it wishes.

5.Secondly, it is suggested the plaintiff and the defendant do not stand in the relationship of mortgagor and mortgagee and therefore the references in my judgment to the equity of redemption are misplaced and erroneous.  This, however, appears to me to misunderstand what I said in my judgment.  It is correct the defendant is not the mortgagee per se but the defendant is the agent of the mortgagee lender 360 HK Ltd.  The simple fact is that the plaintiff is not entitled as mortgagor to demand the return of the pledged shares until he repays the loan to the lender.  That date of repayment is the date when the plaintiff exercises his equity of redemption.  Until that date is reached, the lender, as mortgagee, and the defendant, as agent of the mortgagee, are entitled to deal with the shares in accordance with the terms of the contractual documentation entered into by the plaintiff with each of them.

6.Lastly, it is suggested there is a serious issue to be tried as to whether there is credible evidence that the shares have been sold as alleged by the plaintiff.  As I pointed out in my judgment, there is in fact no direct evidence before the court as to the sale of the shares.  The evidence is based upon assumptions that shares registered in the name of Standard Chartered Bank must belong to certain individuals but these assumptions are unsupported by any corroborating evidence.  Indeed, the only direct evidence before the court is to the effect the shares are still in the custody of the defendant’s custodian, Beaufort Securities Limited.

7.Even if, however, there was anything in any of the above three grounds of appeal, the plaintiff is unable to overcome the fatal obstacle to his case in respect of an injunction, namely that damages are clearly an adequate remedy.  There is simply no evidence before the court to gainsay that damages would not be an adequate remedy and in such circumstances it is clear from all the authorities that an injunction will not lie.  In such circumstances, I have no hesitation therefore in dismissing this application for leave to appeal.

8.I order that the plaintiff pay the defendant’s costs of this application on a party and party basis such costs to be assessed on a gross sum basis. The defendant do file its statement of costs within 7 days, and the plaintiff do file its list of objections within 7 days thereafter.

Mr Minju Kim, instructed by Lam & Co, for the plaintiff

Mr Jose Maurellet SC, instructed by DLA Piper Hong Kong, for the defendant