Yuanta Securities (Hong Kong) Co Ltd v. Ng Yin Lam
Read the full judgment text of HCA 1415/2017 on BabelCite. This High Court CFI judgment was delivered on 22 February 2021.
1. Before the court is the summons taken out by the abovenamed plaintiff (“ Yuanta ”) on 28 July 2017 for summary judgment against the abovenamed defendant (“ Ms Ng ”) for HK$134,688,809.99 plus contractual interest from 1 June 2017, but giving credit for any sums withdrawn by Yuanta from Ng’s account numbered 135606-M-000 with Yuanta.
Cited by 1 case · Cites 10 cases
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HCA 1415/2017 [2021] HKCFI 435 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1415 OF 2017 __________________________
__________________________ Before: Hon Lisa Wong J in Chambers (Open to Public) Date of Hearing: 17 April 2018 Date of Decision: 22 February 2021 _______________ D E C I S I O N _______________ Application 1.Before the court is the summons taken out by the abovenamed plaintiff (“Yuanta”) on 28 July 2017 for summary judgment against the abovenamed defendant (“Ms Ng”) for HK$134,688,809.99 plus contractual interest from 1 June 2017, but giving credit for any sums withdrawn by Yuanta from Ng’s account numbered 135606-M-000 with Yuanta. The facts 2.Unless otherwise stated, the following facts are not in dispute. As I see it, what require determination are the legal conclusions to be drawn from such facts. The parties 3.Yuanta is and was at all material times a Hong Kong company carrying on the business of securities brokerage, asset management and corporate finance, having been registered with the Securities and Futures Commission (“SFC”) and licensed to conduct Types 1, 2, 4, 5, 6 and 9 regulated activities. 4.Ms Ng was a consultant and licensed representative of the plaintiff from 29 April 2013 to 30 May 2017. Contractual documents governing Ms Ng’s work relationship with Yuanta 5.On 25 March 2013, a few weeks before she started working for Yuanta, Ms Ng signed a document (“Guarantee”) addressed to Yuanta and providing as follows[1]:
6.The signing of the Guarantee was followed by the execution by Ms Ng and Yuanta on 8 April 2013[3] of an “Independent Contractor Agreement” (“ICA”) on Yuanta’s standard form. The ICA, commencing on 29 April 2013, contained these express terms which have been highlighted by the parties:
Yuanta’s explanation of its different contractual and operational arrangements for employees and independent contractors 7.To put the aforesaid contractual documents in context, according to Yuanta, it has different contractual and operational arrangements for employees and independent contractors (“IC” or “ICs”). 8.For employees, Yuanta would pay a fixed salary and in some cases a discretionary bonus or commission. Yuanta would also pay mandatory provident fund (“MPF”) contributions for employees. 9.On the other hand, ICs do not get paid a fixed salary. Nor does Yuanta pay MPF contributions for ICs who should contribute to their own MPF. ICs derive their remunerations in the form of pre-agreed percentages of the commission and interest generated by the security trading activities and margin borrowings of their clients. 10.ICs are expected to build their own client portfolio. That is to say, in order to generate income for themselves, ICs would have to go out and find clients for themselves. The clients found by the ICs would then be introduced and brought to Yuanta by the ICs. The clients would sign an account opening form with Yuanta in order to open an account to trade in securities through Yuanta. As the clients were found and brought to Yuanta by the ICs, the relationships with the clients would be managed and looked after by the ICs who would treat those clients like their own clients. 11.Further, some senior ICs would also introduce junior ICs to Yuanta for Yuanta to enter into ICAs with them. The junior ICs brought into Yuanta by a senior IC would then be organised into a team under the senior IC who acts as a team leader. The team leader would also receive additional commissions from Yuanta calculated with reference to the net commissions earned by the junior ICs under him. 12.Yuanta’s business model in relation to ICs gives much autonomy to ICs who, by and large, build their own client portfolio, manage the client relationship on their own and run their own business, save for compliance with Yuanta’s internal policies and external regulatory requirements. ICs are only remunerated by pre-agreed percentages of the commissions and margin interest earned from the trading activities and borrowings of their clients. 13.While Yuanta retains the ultimate discretion in relation to acceptance of clients brought in by the ICs and approval of credit limits, Yuanta would also give weight to and is guided by the relevant ICs’ views on their clients because ordinarily the ICs would know their clients’ circumstances and financial situations best. 14.Given that the clients were found, introduced and brought to Yuanta by the ICs; that the ICs should know the clients best; and that the ICs earned their income mainly from the commissions and interest rebates generated by their clients’ trading of stocks and borrowings, as an added protection of Yuanta’s interest, Yuanta would ordinarily require the ICs to sign a guarantee (same as the Guarantee), guaranteeing all the losses of their clients. 15.From Yuanta’s perspective, first, the imposition of such a guarantee would provide a certain level of check and balance over the conduct of the ICs who would have to bear risks financially in performing their work as independent contractors. It would minimise Yuanta’s exposure to acts or omissions on the part of the ICs which may compromise or even put Yuanta’s interest and financial position into jeopardy. 16.Second, such a guarantee reflects the agreed allocation of risk between Yuanta and the ICs. Since the ICs earn their commissions (at a rate significantly higher than that of Yuanta) and interest rebates (despite not advancing the margin loans themselves) from the trading activities and borrowings of their clients, the ICs should also assume the risk of losses for the trading activities and insufficient margin of their clients. Of course, Yuanta still has to shoulder such risk ultimately insofar as the ICs are not capable of honouring their liability under the guarantee. 17.It has been the general practice of Yuanta’s Human Resources Department, when taking an IC on board, to give both a guarantee and an independent contractor agreement to the IC at or around the same time and the IC would be asked to sign and return both documents to Yuanta. Ms Ng’s work with Yuanta 18.Pursuant to the ICA, Ms Ng served as a “consultant” of Yuanta, and was assigned the Account Executive Code 00173, from 29 April 2013. Ms Ng was given the title of “Sales Director” in the Brokerage Department of Yuanta. 19.From 28 April 2013 to 30 May 2017, notwithstanding clause 3.2 of the ICA (see [6(6)] above), Ms Ng worked exclusively for Yuanta. 20.Ms Ng relies on the fact that she worked under Yuanta’s team head who was Ms Rita Sun until late 2013 and Mr Stanley Wan thereafter. The team head led the team (including Ms Ng) to meet Yuanta’s sales target. According to Ms Ng, she consulted her team head on various matters from sales to customer service matters like delay in account opening. According to Yuanta, Ms Sun and Mr Wan were Yuanta’s employees who played an administrative and facilitative role. 21.Ms Ng worked from her own room in Yuanta’s office. She was assigned a direct telephone line by Yuanta and used Yuanta’s telephone system for her work. Clients who placed orders through her called Yuanta’s telephone number so that there would be audio recordings of conversations for the protection of the interests of Yuanta and the clients, and also for compliance purpose. She also used the email system of the Yuanta group and was assigned the email address [email protected]. She was assisted on administrative and secretarial matters by an assistant employed by Yuanta. 22.Yuanta did not “assign” any clients to Ms Ng. Ms Ng found her own clients. She built and served a portfolio of 198 clients as listed in “CMJ-3” to the affirmation of Chen Miao-ju[4] dated 2 November 2017. All such clients were found, introduced and brought to Yuanta by Ms Ng herself. 23.Ms Ng received remuneration which was earned and calculated in the following ways:
In the course of the 4 or more years with Yuanta up to 31 March 2017, Ms Ng had earned HK$34,041,757[5] in commissions and interest rebates from her clients’ trading and borrowing. Yuanta reported Ms Ng’s income to the Inland Revenue Department by the form entitled “Notifications of Remuneration Paid to Persons Other Than Employees” which is used only for non-employees such as ICs. 24.Ms Ng mentioned the involvement of “other employees” of Yuanta in taking care of the accounts of the clients served by her. For example, the risk management department considered applications for margin financing and makes recommendations on credit limits for senior management’s consideration. It also monitored accounts and liquidates collaterals as may be necessary. Ms Ng claims that an account executive like her does not have any role in the decision-making process when it comes to the credit limit to be granted to a client. 25.Ms Ng resigned on 24 May 2017 with effect on 30 May 2017. Mr Ng’s own securities margin trading account with Yuanta 26.After Ms Ng started working for Yuanta, in May 2013, she herself opened a securities margin account numbered 135606-M-000 (“Ms Ng’s Account”) with Yuanta on Yuanta’s Terms and Conditions for Securities / Futures / Options / Leveraged / Foreign Exchange Trading Accounts effective since February 2014 and revised in January 2017 (“Yuanta’s Terms & Conditions”). Clause 16.5 of Part B of Yuanta’s Terms and Conditions is an “entire agreement clause” stipulating that: “This Agreement, including any schedules and appendices (as may be amended from time to time), contains the entire understanding between the Client and [Yuanta] and supersedes all previous agreements and arrangements (if any) made between [Yuanta] and the Client in relation to the Account.” (emphasis added) 27.In Ms Ng’s account opening form dated 3 May 2013, she declared Yuanta to be her employer. Such form was signed off by Yuanta’s management. 28.After the opening of Ms Ng’s Account, Ms Ng transferred her share portfolio to such account. The 11 Clients and their trading 29.Between July and September 2015, Ms Ng brought to Yuanta and Yuanta opened securities margin accounts (“11 Clients’ Accounts”) for, inter alios, the following 11 clients (“11 Clients”) also on Yuanta’s Terms and Conditions:
With the exception of Champ Harvest Limited (“Champ Harvest”), the 11 Clients were resident in the People’s Republic of China. With regard to Champ Harvest, it is a British Virgins Islands company, with 90% of its issued share capital held directly and indirectly by one Yang Kai (楊凱) (“Yang”), also a PRC resident. Yang guaranteed Champ Harvest’s liabilities to Yuanta. 30.In the 11 Clients’ account opening forms, Ms Ng declared Yuanta to be her employer. Such forms were signed off by Yuanta’s management. 31.Ms Ng mentioned specifically that she did not know any of the 11 Clients or Yang when she signed the Guarantee. 32.From the opening of their respective accounts until 24 March 2017, the 11 Clients traded in securities on margin through such accounts. From 27 July 2015 to 30 May 2017, the 11 Clients were served by Ms Ng as their Account Executive under her said account executive code. 33.One of the securities traded in by the 11 Clients was China Huishan Dairy Holdings Company Limited (中國輝山乳業控股有限公司) (stock code: 6863) (“Huishan”), of which Champ Harvest was a substantial shareholder. 34.Shares in Huishan were traded at between HK$2.80 per share to HK$2.95 per share in March 2017 and closed at HK$2.80 per share on 23 March 2017. However, the share price of Huishan fell sharply to HK$0.25 per share before noon and closed at HK$0.42 per share on 24 March 2017. Huishan has been suspended from trading since 1 pm on 24 March 2017. 35.After force liquidating some Huishan shares in the 11 Clients’ Accounts within the 1-hour window before the suspension of trading at 1 pm on 24 March 2013[6], the following quantities of Huishan shares still remained in the 11 Clients’ Accounts:
36.As of 24 March 2017, there were outstanding margins in the 11 Clients’ Accounts. On the same day, Yuanta issued margin call notices (“Margin Call Notices”) to the 11 Clients requesting them to settle the outstanding margins immediately. 37.Despite the Margin Call Notices, the 11 Clients had not paid or settled any of the outstanding margins or at all. 38.Since no payment had been received from the 11 Clients despite the Margin Call Notices, Yuanta through its former solicitors, Yu, Chan & Yeung (“YCY”), issued demand letters to the 11 Clients on 27 and 28 April 2017 to demand repayment of all outstanding amounts including accrued interest in the 11 Clients’ Accounts, then standing at HK$133,599,794.22 in aggregate as at 27 April 2017. 39.The 11 Clients did not settle the said outstanding amounts in their respective accounts. 40.As at 16 June 2017, the amounts of principals and interest owed by the 11 Clients to Yuanta added up to HK$135,190,664.19, a breakdown of which is as follows:
41.Yuanta has since taken legal proceedings against the 11 Clients and Yang on 6 and 14 June 2017. Yuanta’s claim against Ms Ng based on the Guarantee 42.By a letter dated 28 April 2017 from Deacons, Yuanta’s solicitors, to Ms Ng, Yuanta demanded Ms Ng to pay the said outstanding amount of HK$133,599,794.22 pursuant to the Guarantee within 7 days from the date of the letter. 43.Ms Ng did not comply with such demand. 44.Pursuant to the second paragraph of the Guarantee, beginning from June 2017, Yuanta had sought to reduce Ms Ng’s liabilities under the Guarantee by resorting to the funds, shares and income in Ms Ng’s Account so that, as at 30 June 2017, Ms Ng’s liabilities under the Guarantee, compounded monthly, stood at HK$66,904,105.75, calculated as follows:
45.According to Yuanta, as at the date of the first affirmation of Hui Hon Wa (i.e. 28 July 2017) in support of the Summons, after taking into account 3 dividend payments credited on 7, 18 and 27 July 2017 and interest accrued after 30 June 2017, Ms Ng’s liabilities under the Guarantee, compounded monthly, stood at HK$67,249,986.00, calculated as follows:
Evolution of Ms Ng’s stance 46.Ms Ng seeks the dismissal of the Summons, contending that Yuanta well knew that she has valid defences. Her position has, however, changed over the course of the dispute. 47.First, prior to the issue of the Summons, in reply to Deacon’s said demand letter, Ms Ng’s former solicitors, Paul CK Tang & Chiu (“PTC”) asserted in a letter dated 8 May 2017 that the signing of the Guarantee was
48.In another letter dated 2 June 2017 to Deacons, PTC said the following about the Guarantee:
49.After the issue of the Summons, in opposition thereto, Ms Ng has filed and served an affirmation on 8 September 2017, which was then expanded upon by the defence and counterclaim dated 29 March 2018, the filing and service of which is much objected to by Yuanta. 50.In his written submissions dated 13 April 2018, Mr Jose Maurellet SC (leading Mr Lau Ka Kin), counsel for Ms Ng, sought to argue only the following 4 defences raised in Ms Ng’s affirmation and/or the defence and counterclaim:
51.At the hearing, Mr Maurellet SC began his oral submission by raising an issue as to the nature of the Guarantee, suggesting that it was actually an indemnity, the enforceability of which is dependent on Yuanta having suffered a loss or losses, which Yuanta has not shown. Ms Ng’s counterclaim 52.Insofar as the enforcement actions taken against Ms Ng’s Account are concerned, it is Ms Ng’s case that the Guarantee had also been superseded by Yuanta’s Terms and Conditions by the “entire agreement” clause in the latter (see [26] above). Ms Ng has suffered substantial loss as a result of Yuanta’s dealing with the assets in Ms Ng’s Account, thereby giving rise to a counterclaim by her against Yuanta. In particular, Yuanta countermanded payment of a cheque for pyment out of Ms Ng’s Account in the sum of HK$25 million, which sum Ms Ng would have utilised for a money lending business in which she held a 50% interest. Principles governing the grant or refusal of summary judgment 53.The principles governing the grant or refusal of summary judgment under Order 14 are well settled and do not require extensive citation. Insofar as it is material to the present case (where there appears to be few disputes by the parties as to the facts asserted by the other and the questions raised go more to the proper legal conclusions to be drawn on those facts), these are the applicable principles:
See Hong Kong Civil Procedure 2021, Volume 1, notes under Order 14. 54.On these notes, I turn to consider whether each of the defences argued for Ms Ng at the hearing could support leave to defend. Guarantee not superseded by ICA 55.Ms Ng’s case on the supersession of the Guarantee by the ICA was premised upon:
“Entire agreement” clause 56.The issue raised is one of law, being the proper construction of the “entire agreement” clause under clause 11.1. 57.As submitted by Mr Benjamin Yu SC (leading Mr Jenkin Suen), counsel for Yuanta, first, context and purpose is the key to the construction of contractual terms: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912H-913F per Lord Hoffmann; Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, 296D-I per Lord Hoffmann NPJ; River Trade Terminal Co Ltd v Secretary for Justice(2005) 8 HKCFAR 95, [34]-[35] per Ribeiro PJ; Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351, [15] per Ma CJ. 58.As stated by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995, no contracts are made in a vacuum; there is always a setting in which they have to be placed. In a commercial contract, the court should know the commercial purpose of the contract, which, in turn, presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. 59.One must have regard “to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve”: Jumbo King, supra, 296E per Lord Hoffmann NPJ. 60.The court’s overriding concern is to ascertain the objective intention of the parties: Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, [14] per Lord Hoffmann. 61.The question in each case is what the “entire agreement” clause in question would convey to a reasonable person having all the background knowledge (including knowledge of the object and purpose of the transaction) which would reasonably have been available to the parties in the situation in which they were at the time of the contract. See McMahon v National Foods Milk Ltd[2009] 259 ALR 20, [39] per Nettle JA. 62.In Cheverney Consulting Ltd v Whitehead Mann Ltd [2007] EWHC 3130, which involved the acquisition of a French business by an English company, the issues arising were (1) whether there had been agreement between the parties in terms of an unsigned side letter; (2) if so, whether the side letter should be part of the package of documents to be executed by the parties and (3) if so, whether that letter had contractual effect notwithstanding that (a) it was unsigned and (b) the entire agreement clause in another contractual document which was signed[13]. With regard to the issue in (3)(b), the entire agreement clause provided that the agreement shall have effect to the exclusion of any other memorandum agreement or understanding of any kind between the parties “preceding the date of the agreement.” At the retrial before Sir Donald Rattee, his Lordship adopted what was said by Carnwath LJ (dissenting) in the earlier appeal [2007] 1 All ER (Comm) 124 at [91]: “Against that background, the words “any other … agreement … preceding the date of this Agreement” are to be read as not excluding agreements which were part of that agreed package.” The background spoken of by Carnwath LJ was that the side letter was designed as one part of a package of agreements intended to be concluded at the same time. 63.I refer to the letters of PTC, Ms Ng’s former solicitors, quoted in [47] and [48] above. Those letters must have been written on the basis of Ms Ng’s instructions to PTC. They were never retracted. It was therefore Ms Ng’s own case that:
64.I further observe that such position is consistent with Yuanta’s case that each of the Guarantee and the ICA is intended to have effect but that the purpose and objective of the two documents are different. The Guarantee’s primary aim and objective is to allocate to the IC the risk of all the losses of his/her clients while the ICA deals with the engagement of the IC and his/her duties and obligations. See paragraph 16 of Chen Miao-ju’s affirmation. 65.It can be seen that the Guarantee and the ICA were admittedly executed as part and parcel of a composite transaction, and the parties intended that both the Guarantee and the ICA would co-exist and each has its effect. In this regard, in addition to Ms Ng’s initial position that the Guarantee was a “condition precedent” or “pre-requisite” to the execution of the ICA:
66.Applying Cheverney Consulting Ltd v Whitehead Mann Ltd, as a matter of construction, the words “prior agreements” in the entire agreement clause in the present context should, in light of the factual matrix and commercial object, be construed as not including the Guarantee. 67.If Ms Ng were right about the supersession of the Guarantee by the ICA, the Guarantee would be entirely redundant. Ms Ng signed the Guarantee on 25 March 2013, protecting “[Yuanta] from the risk of customers’ default of repayments of margin loans”. However, for reasons that are not gone into by the parties, she was not engaged by Yuanta until 8 April 2013 as she did not sign the ICA until that date. Further, she did not serve any customers of Yuanta until she reported duty on 29 April 2013. By then, according to Ms Ng, the Guarantee had already ceased to have any effect. This is illogical and plainly against the parties’ objective intention, which Ms Ng initially did not dispute and frankly asserted until she realised that such position was not to her advantage. To quote paragraph 20 of Mr Yu SC’s written submissions dated 12 April 2018, it would be logical to infer that the parties intended the Guarantee to have legal effect alongside the ICA as otherwise “the very reason why one party entered into the (ICA) - the willingness of the other to enter into the (Guarantee) - would count for nothing.” See McMahon v National Foods Milk Ltd, supra,at [39]. Ms Ng’s construction makes no commercial sense also because it means that the validity of the Guarantee would rest solely on the fortuity of whether it was signed on the same day as the ICA, or days/hours ahead. In Cheverney Consulting Ltd v Whitehead Mann Ltd, Carnwath LJ continued to say at [91]: “I do not see it as material that the final signatures on the consultancy agreement[14] were not achieved until some time later, that was a matter of mechanics not substance.” (footnote added). Clause 13.1 of ICA (written variation clause) 68.The reference to, and reliance on, Clause 13.1 is puzzling. On Ms Ng’s own evidence, the Guarantee predated the ICA and cannot be read as purporting to vary the ICA. Anyway, the Guarantee was in writing signed by Ms Ng. I fail to see the relevance of clause 13.1. Clauses 4.1 and 4.2 of the ICA (indemnification clause) 69.The Guarantee and clauses 4 of the ICA are not inconsistent simply because the latter, being fault-based, was narrower in scope than the former. The 2 documents were intended to co-exist and just made available to Yuanta 2 options for recourse against Ms Ng provided that there should be no double recovery. Alleged breach of the Code 70.The provisions of the Code allegedly breached by the existence of the Guarantee are:
71.Ms Ng stressed that the existence and terms of the Guarantee were never disclosed to the clients served by her and they did not know that she would be personally exposed to very substantial financial risks when serving as their account executive. 72.The Guarantee was said by Ms Ng to give rise to an actual or potential conflict of interest in that it may compel the guarantor to adopt an unjustifiably conservative approach, even if it is in the client’s interest to pursue more ambitious investments. Conversely, when the guarantor is unable to meet his alleged liabilities under the Guarantee, he will have a powerful incentive to “gamble” with the client’s money, in the hope that such “gamble” may reduce his liabilities. 73.Mr Maurellet SC, in his usual fair and realistic manner, accepted that this defence was “probably the most ambitious of the four defences” dealt with in his written submission. 74.I am afraid I cannot discern any actual or potential conflict of interest on the part of an account executive arising from a commitment such as the Guarantee, which, I think, should provide a powerful incentive to the account executive to provide reasonably prudent investment advice and services to his clients to monitor and keep his risk exposure within reasonable bounds. It is common ground that the imposition of an obligation on account executives in terms similar to the Guarantee is an industry-wide practice. 75.None of the provisions of the ICA that reference the Code, such as clause 3.3.3 (see [6(9)] above), assisted Ms Ng. Such terms at the most imposed an obligation on Ms Ng to observe the SFO, its subsidiary legislation and SFC rules and regulations such as the Code, without imposing any corresponding duty on Yuanta. 76.More importantly, the Code expressly states that it does not have the force of law and is not to be treated as law[15]. It cannot override the express contractual obligation under the Guarantee. Paragraph 16(a) of the defence and counterclaim rightly conceded that a person’s failure to comply with the Code “shall not by itself render it or him liable to any judicial or other proceedings”, as opposed to regulatory proceedings. See s 169(4) of the SFO. As stated by Reyes J in Kwok Wai Hing Selina v HSBC Private Bank (Suisse) SA, HCCL 7/2010, unreported, 21 June 2012, at [133]-[135], the Code sets out “high level” general principles without distinction as to the near infinite variety of relationships which might exist between bankers and customers. It cannot override express contractual provisions. 77.There is nothing in the second defence. Yuanta’s alleged breaches of implied duties as Ms Ng’s employer - Ms Ng was not Yuanta’s employee 78.The third defence was premised upon Ms Ng being an employee of Yuanta. The modern approach to the question whether a person is in business on his own or another’s employee is to examine all the features of their relationship against the background of the indicia developed in the relevant case law with a view to deciding whether, as a matter of overall impression, the relationship is one of employment, bearing in mind the purpose for which the question is asked. This involves a nuanced and not a mechanical approach. See Poon Chau Nam v Yim Siu Cheung (2007) 10 HKCFAR 156, [9]-[18] per Riberio PJ. 79.The parties unsurprisingly pointed to different aspects of Ms Ng’s work at Yuanta. In this regard, in support of an employment relationship with Yuanta, Ms Ng relied on the matters set out in [6(3)], [6(7)], [6(8)], [6(9)], [6(11)], [19], [20], [21], [24], [27] and [30] above. On the other hand, in putting forward Ms Ng as an independent contractor, Yuanta lay emphasis on the matters mentioned in [6(2)], [6(6)], [6(15)], [6(18)], [9]-[17], [22] and [23]. 80.Given that he was resisting summary judgment, Mr Maurellet SC understandably suggested that all the court has at this stage is a snapshot, rather than the painting. Without disrespect to leading counsel, one does not expect a defendant raising an issue as to whether she was engaged as an employee or an independent contract in opposition to an application for summary judgment to hold any material fact or circumstance back until the trial. And, indeed, the parties had been most thorough in identifying relevant features of Ms Ng’s work at Yuanta. I do not believe one could realistically expect more to come out at trial. 81.On this premise, the question for the court is not the ascertainment of the presence of the indicia developed in the relevant case law for the determination whether a relationship is one of employment, but the proper legal conclusion as to the nature of the parties’ relationship to be drawn from all the facts and circumstances placed by the parties before the court. 82.In my opinion, as a matter of economic reality, Ms Ng was carrying on a business on her own, using the platform provided to her by Yuanta. Ms Ng was the one who actually looked for and found clients. She built up her own portfolio of clients and team of more junior account executives (from whom she earned additional commission at a fixed percentage of their net commissions). She did not receive any base salary or MPF contribution from Yuanta. Her earnings depended primarily on the trading and borrowing activities of her clients. She decided, subject to the final approval of Yuanta, the commission and the interest rates that were being charged on her clients. Yuanta got a fixed share of the commission and the margin interest whereas the rest went to Ms Ng. In the case of the former, Ms Ng took the bulk (76% to 86%) of the commission generated by her clients’ equity trading. She also bore the financial liability in the case of default by her clients. There was therefore the very important element of the taking of a risk. 83.For these reason, I have no difficulty in finding Ms Ng to be an independent contractor of Yuanta. Given that the implied duties alleged to have been breached by Yanta rested upon the existence of a relationship of employment between Yuanta and Ms Ng, the third ground of defence is unarguable in light of my finding. Meaning of “the Investors” 84.The fourth defence can be disposed of shortly. Ms Ng is taking an unnecessarily truncated and narrow view of the shorthand expression “the Investor”, focusing only on the words “in connection with your assignment of clients under my AE Code(s) to serve from time to time from the date hereof”. 85.I repeat the general principles for the interpretation of a commercial document summarised in [57] to [60] above. Bearing in mind the important background that Ms Ng was engaged by Yuanta as an account executive to find her own clients and to build her own portfolio of customers and the preceding words of the Guarantee “[i]n consideration of your having agreed at my request to open trading and/or investment accounts for the clients of [Yuanta] to whom I served from time to time commencing from the date hereof”, I take the view that the expression “the Investors” simply encompassed the clients served by Ms Ng and, for that purpose, assigned to her under her AE code, which clearly included the 11 Clients. 86.The fourth defence has no merits. Yuanta had suffered loss as claimed 87.It is unnecessary to enter into an in-depth discussion as to whether the Guarantee is a guarantee or indemnity. On the face of the Guarantee, Ms Ng did agree to be responsible to Yuanta for the losses that Yuanta may sustain by reason of insufficient margin or otherwise. 88.Ms Ng does not admit that Yuanta suffered the alleged losses in relation to the 11 Clients’ Accounts as Yuanta simply assumes that the Huishan shares in the 11 Clients’ Accounts are completely worthless which is incorrect. At the closing price of HK$0.42 on 24 March 2017, they would have a total value of HK$109,841,760 (i.e. 261,528,000 shares x HK$0.42 per share). At the historical low price of HK$0.25, they would have a total value of HK$65,382,000 (i.e. 261,528,000 shares x HK$0.25 per share). 89.One has to approach the situation that Yuanta finds itself in vis-à-vis the 11 Clients with a sense of reality. Yuanta had advanced to these customers margin loans that has not been repaid or recovered. The only securities now held by Yuanta for the outstanding margin loans are Huishan shares, the trading of which had been suspended since 24 March 2017. Looking at the matter realistically, Yuanta has suffered the losses for which it claims against Ms Ng in such a situation. Ms Ng’s counterclaim 90.The basis of Ms Ng ‘s counterclaim is the supersession of the Guarantee by Yuanta’s Terms and Conditions by reason of the latter’s entire agreement clause (see [26] Above). 91.As I see it, the short question raised is whether the Guarantee fell within “previous agreements and arrangements (if any) made between [Yuanta] and the Client[16] in relation to the Account[17]” (emphasis added). The Guarantee was not made in relation to Ms Ng’s Account and the answer to this question should be in the negative, having regard to the aforesaid context in which Ms Ng signed the Guarantee and the aforesaid commercial purpose that the Guarantee was intended to achieve. 92.Consequently, Ms Ng’s counterclaim is groundless. Disposition 93.For the reasons stated above, I give summary judgment against Ms Ng for principal and interest up to and including 16 June 2017 in the sum of HK$67,249,986 (see [45] above) with interest at 3.25% per annum above the Standard Chartered Bank Hong Kong Dollar Prime Rate from 17 June 2017 up to the date of judgment and thereafter at judgment rate. Yuanta should give credit to Ms Ng for any further dividends and any other profit and income received by Ms Ng’s Account after 16 June 2017. 94.It follows from the summary judgment that I should dismiss Ms Ng’s counterclaim, which I now do. 95.I also make an order nisi that Ms Ng should pay Yuanta’s costs of the action, to be taxed on a party and party basis, if not agreed, with certificate for 2 counsel.
Mr Benjamin Yu SC and Mr Jenkin Suen, instructed by Deacons for the plaintiff Mr Jose Maurellet SC and Mr Lau Ka-kin, instructed by Fan Wong & Tso for the defendant [1] See paragraph 5 of Ms Ng’s affirmation dated 8 September 2017. [2] Defined as Yuanta [3] See paragraph 7 of Ms Ng’s affirmation. [4] Yuanta’s President. [5] The figure given by Ms Ng is HK$4 million. See paragraph 21 of her affirmation. However, Ms Ng’s figure is unsupported any documentary evidence whereas Yuanta has produced the “Notifications of Remuneration Paid to Persons Other Than Employees” filed in respect of the earnings paid by it to Ms Ng for the years up to and including 31 March 2017. [6] See the monthly statements for the 11 Clients’ Accounts for March 2017 at “HHW-8” to the affirmation of Hui Hon Wa (Yuanta’s Head of Legal and Compliance Department) dated 28 July 2017. [7] Being 3.25% per annum over and above P, which was notified by Yuanta to the 11 Clients by monthly account statements pursuant to Clause 6.2 of Schedule 2 to Part C of Yuanta’s Terms and Conditions which stipulated that Yuanta would from time to time notify the client of the interest rate which would be subject to Yuanta’s discretion and would be binding on the client. [8] Citing Semana Bachicha v Poon Shiu Man [2000] 2 HKLRD 833 (CA) (in which a domestic helper was subjected to an oppressive work regime and physical and psychological abuse of a degrading and frightening nature); Grant David Vincent Williams v Jefferies Hong Kong Limited, HCA 320/2011, unreported, 8 July 2013, per Deputy High Court Judge Seagroatt at [8]-[10] which referred to Lord Steyn’s speech in Malik v Bank of Credit and Commerce International SA [1998] AC 20, accepting the emergence of the implied obligation of mutual trust and confidence in an employer and employee relationship. [9] Citing Wong Wai Ming v The Hospital Authority [2001] 3 HKLRD 209, in which a nurse at a psychiatric clinic was assaulted in the course of her employment by a visitor to the clinic. The Court of Appeal held at [8] that an employer is under a duty to take reasonable care to protect employees from risks of physical danger. [10] Citing Indian Overseas Bank v Seabulk Systems Inc [2018] HKCFI 112, per Bebe Chu J at [207]-[225]. [11] Despite the report, the share price of Huishan was maintained and remained stable until the morning of 24 March 2017. After the report, Mr Alfred Tsai, Director of Risk Management, Risk Management Department Yuanta and Ms Ng visited Huishan’s office in Shenyang, PRC in December 2016 and found the company to be in normal operation. While there was no imminent concern as to the viability of Huishan, Yuanta took the precaution of lowering the stock margin ratio (which is the collateral value assigned to a stock representing the amount of the margin that can be extended to the client against the market value of the stock, usually at a large discount of the market value) applicable to Huishan from 50% to 45% since 13 February 2017 and from 45% to 30% since 21 March 2017. With such measure, a margin call would be more readily triggered if the share price of Huishan dropped and hence the credit extended to the 11 Clients was tightened. [12] Yuanta did force liquidate some Huishan shares in the 11 Clients’ Accounts within the 1-hour window before the suspension of trading at 1 pm on 24 March 2017. See the monthly statements for the 11 Clients’ Accounts for March 2017 at “HHW-8” to Hui Hon Wa’s affirmation dated 28 July 2017. [13] Which was a consultancy agreement whereby the person running the business acquired was to provide advice and assistance to the company formed to acquire the business. [14] The document containing the entire agreement clause. [15] See the last paragraph of the explanatory notes to the Code. [16] Ms Ng [17] Ms Ng’s Account | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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