China Industrial Securities International Brokerage Ltd v. So Calvin Jik To (Formerly Known As So Calvin Hiu To)
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DCCJ 295/2022 [2026] HKDC 1268 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 295 OF 2022 ——————————
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—————————— JUDGMENT —————————— Introduction 1.This is the trial of a claim by the plaintiff (“P”), a Hong Kong brokerage company, seeking to recover outstanding deficit in the sum of HK$1,048,214.46 (as at 31 December 2021) together with subsequently accrued interest in a margin account the defendant (“D”) maintained with P. 2.Such deficit essentially represented the outstanding balance of margin loan (and the capitalised interest) previously lent by P to D for the purchase of 9 million shares of Asian Television Holdings Limited ("ATV"), which was listed on the Hong Kong Stock Exchange under stock code 707 (“707 shares”). However, the market value of 707 shares deposited in D's margin account since their purchase in January 2019 (at the average purchase cost of HK$0.2761 per share) had drastically depleted by around 85% when P forced liquidated these shares in August 2020 (at HK$0.041 per share) and October 2020 (at HK$0.044 per share) respectively. 3.A salient feature of this case is that D was wearing two hats at the time: on the one hand, he was a client of P trading securities through cash and margin accounts under a client's agreement entered into with P in or about May/June 2015 ("the Client Agreement"). On the other, he was P's account executive under a broker co-operation agreement (經紀⼈合作協議) entered into with P on or about 19 May 2015 ("the Broker Cooperation Agreement"), which entitled him to commission share on trades of securities in accounts opened by clients through D. Overview of D’s case 4.D denied he was responsible for paying the outstanding deficit as claimed. His defence is essentially basing on promises and representation allegedly made by P’s senior management via Mr Simus Wong, a former director and the then Deputy CEO of P (“Simus”), to him and three clients whom D dealt with (i.e. Mr Guo Weihua ("Mr Guo"), Mr Xie Zhen ("Mr Xie") and Mr Xu Pushen ("Mr Xu") (collectively called "the three Clients"), that P would not pursue against D and the other 3 Clients to be responsible for any loss arising from holding of the 707 shares in their margin accounts provided they did not on their own initiatives sell their 707 shares, and they would only pursue the third party buyer to be responsible for the loss. Apart from that, Simus further represented to him that the alleged buyer was one Mr Deng Jun Jie (“Mr Deng”), the then chairman of ATV’s board of directors, and he had already executed guarantees to be responsible for the losses in favour of P. 5.Relying on the alleged promises and representation allegedly by made Simus on P's behalf, D refrained from selling the 707 shares in his margin account. 6.D’s fallback contention is that he also made requests upon P through Simus on different occasions since March 2019[1] until about October 2019[2] requiring P to force liquidate the 707 shares in his margin account or to complete the purchase, but he was allegedly informed by Simus each time that P’s senior management refused. P was therefore in breach of the Client Agreement by refusing to following his instructions (qua P's client). 7.The resultant position, as per D’s case, is that P wrongfully set off against the then prevailing outstanding margin loan his commissions income in the sum of HK$681,870.26 and sale proceeds of other shares in his margin account in the total sum of HK$771,034.11 ("the commissions and proceeds") to which he would otherwise be entitled to claim for their refund. 8.Alternatively, he claims for the loss and damages allegedly suffered (basically the difference between the market value of the 707 shares in March 2019 and the sale proceeds from the forced liquidation, and the interest accrued since March 2019 until the closure of his account in February 2022) as a result of P’s failure to comply with his requests mentioned in paragraph 6 above. Gist of P’s case 9.P denies that Simus ever made the alleged promises or representation as alleged. In any event, Simus would not have P’s authority to make such promises and representation on its behalf. 10.P also denies that D had ever made such alleged requests upon P to force liquidate the 707 shares in his margin account, hence no question of P’s refusal to comply would arise. Rather, D was free to liquidate the 707 shares in his margin account at all material times. 11.Hence, the defences raised are unfounded, and D remains fully liable for the outstanding deficit in the margin account. The witnesses 12.One Mr Tang Siu Kei, P's current head of Risk Management Department (“Mr Tang”), attended trial to testify on P’s behalf. 13.On D’s side, apart from himself, D also called his former colleague, one Mr Yip Hon Tak (“Mr Yip”) to give evidence on his behalf. 14.A witness statement was prepared for Mr Guo dated 1 September 2019, but he did not attend court to give evidence for D. Hence, the contents of such witness statement do not constitute any part of the evidence for this trial. Findings on the background facts 15.After carefully considered all the evidence and the parties’ submissions, this Court finds the following background facts and matters established, which are largely undisputed or otherwise indisputable under the circumstances before this Court:-
Crux of D’s testimony 16.It is D's testimony that in January 2019, he had accumulated 9 million 707 shares in his margin account (#21805111). At the beginning of that month, Simus informed D at P’s office that an unidentified buyer would purchase these ATV Shares from P’s clients at HK$0.30 per share, and asked D to confirm the number of 707 shares he and the clients served by him would hold for the purchase (“the alleged share purchase arrangement”). 17.Simus also said that the alleged buyer would execute guarantees to absorb all their holding losses, and the expected completion of the purchase would be within seven trading days after the beginning of the lunar New Year, i.e. between 8 and 18 February 2019[9]. 18.D further said in his witness statement that, according to Simus, this waiver of losses would cover all margin interest accrued from early January 2019 until P completed the purchase deal, or called it off, or executed a forced liquidation, as well as any net shortfall between the sale proceeds of the 707 shares and their acquisition costs[10]. But notably, these material matters of what the losses would cover and how they are being hinged on the alleged conditions for terminating the deal were never expressly pleaded in the Amended Defence and Counterclaim (“AD&CC”). 19.D subsequently notified Mr Xu, Mr Guo and Mr Xie of the purchase as mentioned by Simus. After they confirmed the quantity of 707 shares held in their respective accounts to be sold, D informed Simus that he and the three Clients agreed to sell the 707 Shares in their margin accounts to the alleged buyer. 20.It is undisputed that, as of 31 January 2019, there were 9,000,000 707 shares in D’s margin account[11], 27,000,000 707 shares held in Mr Xu’s account[12], and 87,242,000 707 shares held by Mr Guo and Mr Xie in their joint account[13]. 21.On or about 8 February 2019, since the transaction had yet to materialize, D followed up on its progress, and indicated that they did not want to wait, and would trade the 707 shares. Simus replied that there was no problem about the purchase deal and disclosed that the alleged buyer was in fact Mr Deng (the then chairman of ATV). 22.On or about the same date (i.e. 8 February 2019), Simus told D that P's senior management had a discussion and promised that provided that D and the three Clients did not sell the 707 shares on their own initiatives, P would not hold D or the three Clients responsible for their losses arising from the holding of the 707 shares (“the alleged Promise”). 23.On the same occasion, Simus persuaded him to believe in the earlier promise, and further promised D that P would only pursue the alleged buyer to be responsible for the losses (“the alleged Inducement Promise”), and further represented to him that the alleged buyer had assets more than sufficient to cover the loss of P as he already signed the guarantees to be responsible for the potential losses in favour of P (“the alleged Reinforcement Representation”). 24.Later, during the Lunar New Year, D met Mr. Guo for lunch and recounted Simus' statements, including that the alleged buyer was Mr. Deng and that there was no problem about the purchase. Expressing confidence in P, Mr. Guo instructed D to represent him and Mr. Xie in the matter. 25.Since then, D refrained from selling the 707 shares in his margin account on my own initiative, and he also knew that the three Clients did likewise. 26.On 11 or 12 February 2019, Simus told D that documentation was complete and P was merely awaiting the alleged buyer to deposit funds to complete the deal. D believed Simus made those statements to persuade him that P was very confident in the purchase deal and that there would be no problem of enforcing the alleged promises. 27.D continued to trade stocks in his cash account as usual, and some other stocks (though much less frequently) in his margin account which has nothing to do with the 707 shares. However, he could not withdraw net proceeds of these other traded stocks from his margin account because it recorded deficit balance arising from holding the 707 shares in such account without selling. 28.In this connection, between March 2019 and March 2020, D traded other stocks in his margin account, generating HK$771,034.11 in net proceeds (which breakdown was set out in paragraphs 42 and 43 of his witness statement). 29.At or about the beginning of March 2019, D made a request upon Simus that P either complete the deal or force liquidate the 707 shares and pursue the alleged buyer to be responsible for the loss, as he really wanted to use the margin facilities for normal trading again. 30.Simus on P’s behalf refused, stating P was awaiting the deposit and would not pursue the alleged buyer in the meantime as it had no concerns regarding his ability to bear the losses. Simus repeated the alleged promises. Shortly thereafter, D informed Mr. Guo and Mr. Xu of such request and refusal. Mr. Guo agreed to making the request, stating he would contact Simus directly, and asked D to continue to follow the case on their behalf. At that time, D still believed P would honour the alleged promises. 31.D renewed this request on or about 22 March 2019, but receiving an identical refusal. Simus indicated that D would be responsible for the loss if he acted otherwise. 32.On or about 22 March 2019, D made similar request to Simus again and he repeated the refusal, and further made an indication that D would be responsible for the losses if he acted otherwise. Around the same time, in order to soothe D, P’s Credit Department allegedly showed D three original guarantees ("the alleged Guarantees") and bought and sold notes ('the alleged B&S Notes") for his inspection. All these documents were undated and revealed the true buyer was actually Honghu (instead of Mr Deng as represented to him by Simus earlier). In the alleged Guarantees, Mr Deng signed on behalf of Honghu, who unconditionally agreed to pay and discharge all the indebtedness to P as incurred by the principal debtors, i.e. D, Mr Xu, Mr Guo and Mr Xie respectively. Under the alleged B&S Notes, D saw that Honghu was the buyer/transferee purchasing from the sellers/transferor, that is D for 9,000,000 707 shares, Mr. Xu for 27,000,000 707 shares and Mr. Guo and Mr. Xie for 87,242,000 707 shares at $0.3 per share. The alleged B&S Notes were also signed by Mr Deng on behalf of Honghu, leaving the signing spaces for buyer/transferee blank. 33.On the same date, following his inspection, D prepared to arrange for himself and the three Clients to sign the alleged B&S Notes to complete the purchase. However, an unidentified staff of the Credit Department took back the alleged Guarantees and B&S Notes before anyone could sign, without providing copies. D believed the purpose of letting him to inspect the documents was to persuade him to drop the request, signalling that P remained confident in the purchase deal and would honour the alleged promises. 34.D later informed Mr. Guo that P had shown him the alleged Guarantees and B&S Notes to reassure them that P would honour its promises. In response, Mr. Guo disclosed that he had already seen the alleged B&S Notes and witnessed the alleged Guarantees during an earlier visit to Mr. Deng, who had asked him to sign as a witness to the documents prepared by P. 35.D repeated requests upon Simus in April and May 2019 requesting P to force liquidate the 707 shares in their respective accounts, but was met with the same reply that it was P's senior management not to comply with the request, and if he acted otherwise, P would not keep the alleged promises. 36.D also testified that in April 2019, Simus asked him to sell 200,000 707 shares in his margin as a means to “pretend” a response to the outstanding margin call to satisfy P’s internal compliance requirements. On the other hand, D under cross-examination nonetheless admitted that he had repeatedly issued notices to P between April to June 2019 requesting to suspend any intended forced liquidation of the portfolio in his margin account. 37.In about June 2019, P unilaterally (and without prior notice to him) raised collateral ratio of the 707 shares from 0% to 30%. This effectively reduced the mounting margin calls in D’s and the three Clients' accounts, despite ATV’s annual reports reflecting the company had incurred heavy losses for both 2018 and 2019. 38.Meanwhile, the market price of 707 shares dropped drastically from HK$0.26 per share (as at 31 January 2019)[14] to HK$0.05 per share (as at 31 July 2019)[15], roughly a fall of 81%. 39.D continued to chase Simus concerning his request, but likewise met with similar refusal. 40.In or about October 2019, Simus informed D that a senior representative from Mainland headquarters, Mr. Xia (夏總), was arriving to negotiate with Mr. Deng. Simus instructed D to await P's decision on whether to cancel the purchase deal and/or force liquidate the Stock 707 shares. 41.Around December 2019, the share price of 707 shares rose from HK$0.05 to HK$0.12 per share. Simus informed D that P decided not to call off the purchase deal, nor to execute a forced liquidation, since P would complete the deal before early 2020. Simus further highlighted a public announcement by ATV on 17 December 2019 disclosing that Mr. Deng had subscribed for HK$200 million convertible bonds of ATV. D said he could do nothing at that time. 42.In 2020, P’s management changed hands. In about 2021, P’s new management refused to abide by the alleged promises. 43.On or about 20 December 2021, P applied a sum of HK$681,870.26 being D's earned commission income, to offset the then mounting margin account deficit, reducing it to a net deficit of HK$1,040,214.46 by the end of December 2021[16]. By the time D's margin account was closed, as at 28 February 2022, the outstanding deficit in D's margin account was stated to be in the sum of HK$1,054,090.32. Mr Yip’s testimony 44.Mr Yip attended court to give evidence by simply adopting his witness statement, without any challenge from P’s side. 45.According to Mr Yip, he served as P’s responsible officer during the period between January 2015 and March 2020, whose primary duty was to monitor the regulated activities within P’s department(s). 46.Mr Yip confirmed that under Simus’ instruction, certain colleagues were specifically tasked with monitoring a group of margin account clients whose indebtedness were guaranteed by Honghu, as well as tracking changes in those specific accounts. Mr Yip routinely forwarded the margin call reports, which had been duly signed by the respective brokers, to P's risk management department on a daily basis for further action. 47.In paragraphs 6 and 7 of Mr Yip’s witness statement[17], he further stated that, after May 2019, while he was on one occasion present inside Simus’ room, he heard that D raised the issue of his own outstanding account deficit, and requested the then-Chief Operating Officer (COO), Jack Miao, and Simus to instruct the risk management department to enforce the guarantee. In response, both Jack Miao and Simus stated that they would forward his request to the risk management department. However, Mr Yip had no personal knowledge of how Simus and Jack Miao actually handled the matter. Mr Yip also said that after May 2019, D frequently complained to him about his frustration, since his requests upon Simus for P to enforce the guarantee were not met with any satisfactory response. 48.Given the materiality of Yip’s evidence (which would become apparent in the analysis of the evidence below), the original version of the said paragraphs 6 and 7 in Chinese is quoted as follows:-
Crux of Tang’s testimony 49.Mr Tang joined P around February 2020[18], and he was the head of Risk Management Department of P at the time of trial. 50.Until October 2020, P operated through two main divisions: the Mainland Business Department (previously headed by one former director, Mr. Kwok Kei Chi ("Mr Kwok") serving clients based in Mainland who directly approached P to open securities accounts, whereas the Hong Kong Brokerage Department (formerly headed by Simus until his resignation in September 2020) serving local clients and those based in Mainland. 51.Following a 2020 corporate reorganization, Mr. Kwok in May 2020 was arranged to head P’s Clientele Department, which handled client complaints and internal investigations. 52.By October 2020, the two departments of P was mentioned in paragraph 50 above were merged into a single department called the "Wealth Management Department". 53.Mr Kwok previously made a witness statement dated 29 February 2024 on P's behalf for this action. However, Mr Kwok has since left P and is no longer able to attend as a witness. Accordingly, Mr Tang was nominated to provide his witness statement for P instead. 54.Mr Tang did not have any personal knowledge of the events that occurred in 2019. However, he testified to the findings of an internal investigation subsequently conducted by P’s Clientele Department under Mr Kwok's supervision. 55.Tang testified that, apart from being P’s client, D was also engaged by P (pursuant to the Broker Cooperation Agreement) as one of its account executives in its then Hong Kong Brokerage Department, who was tasked with, among other things, referring new clients to open securities accounts with P and serving clients so referred by him. Alongside with D, another account executive named Irene Lou (“Ms Lou”) and various other clients, had actively traded the 707 shares during 2019. 56.Tang further pointed out that, according to P’s records, Mr Xu, Mr Guo and Mr Xie were clients referred and/or served by D at the material times, as corroborated by the monthly statements issued for their respective margin accounts, which all bear D’s account executive number A0060. All of these three clients were also active traders of penny stocks. 57.Following the filing of the Defence and Counterclaim (on 4 July 2022), Mr Tang was personally tasked to meet with Simus at a restaurant in IFC, Central. In that meeting, Simus strongly denied D’s allegations. Specifically, Simus denied promising D or his clients that a buyer would purchase their ATV Shares at HK$0.30 per share, and further denied representing that P would look solely to this alleged buyer for any resulting trading losses. 58.According to Simus, many margin accounts managed by D and Ms Lou had fallen into deficit due to a drop in the price of ATV Shares. To prevent a forced liquidation by P that might cause the stock price to collapse entirely, the then-chairman of ATV, Mr Deng, reached an agreement with a group of heavily invested clients, including D and Lou, under which, Mr Deng and Honghu, provided guarantees in favour of D to secure the outstanding liabilities owed by these clients to P. 59.Mr Tang explained that P’s “internal margin policy” permitted P to take into account external credit factors and third-party credit enhancement measures (“增信手段”), such as personal or corporate guarantees, when deciding whether to suspend an intended forced liquidation. 60.Consequently, upon receiving the guarantees from Mr Deng and Honghu, P temporarily withheld executing forced liquidations on D’s margin account and some other affected portfolios. However, by August 2020, P no longer considered that these third-party guarantees to be sufficient. P therefore proceeded to carry out a forced liquidation of the stocks in D’s margin account in two tranches: 4,000,000 707 shares were sold on 14 August 2020, and the remaining 4,800,000 707 shares were sold on 21 October 2020. 61.Because the liquidation proceeds were insufficient to cover the total deficit, P exercised its rights under clause 3.2 of the Broker Cooperation Agreement to apply D’s earned commission income toward the debt. A deficit still remained after this offset, leading P to initiate the present action to recover the remaining indebtedness and accrued interest. The said clause 3.2 states thus:-
Analysis 62.The testimony as given by Mr. Tang as summarised in paragraphs 49 to 56 above are largely undisputed or indisputable background materials, or this Court otherwise finds them withstood cross-examination and remain credible, such testimony is accepted by this Court. The matters mentioned in paragraphs 57 to 61 above are however controversial and hotly contested between the parties, they would be dealt at the appropriate juncture below in this Court’s further analysis on the evidence. 63.Having carefully considered all evidence and counsel’s submissions on both sides, the Court finds D’s account in relation to the alleged share purchase arrangement, the alleged Promise, alleged Inducement Promise and Reinforcement Representation all to be fundamentally incredible, repugnant to commercial sense, and unsupported by any or credible contemporaneous record. Accordingly, this Court rejects D’s account in its entirety. Total absence of supporting contemporaneous documents 64.First, there is not a scintilla of documentary evidence to corroborate the existence of the alleged share purchase arrangement at HK$0.30 per share. For an experienced trader and SFC-licensed representative, it is extraordinary that an alleged agreement of such magnitude, and the related alleged promises from P through Simus (which would supposedly absolve D and the three Clients of immense trading liabilities with respect to their substantial holdings of the 707 shares) were never reduced into writing or recorded in any memorandum of whatever kind. 65.D’s claim of inspecting the alleged B&S Notes and Guarantees shown by an unidentified staff of P’s Credit Department is a self-serving bare assertion that lacks credibility. Despite failing to obtain copies, D never bothered to put Simus’ oral representation of the alleged share purchase arrangement or alleged promises on record, whether via message(s) on his smartphone apps, email(s), formal correspondence(s), etc., not even after the lapse of the alleged February 2019 completion deadline. 66.In the Court's view, D's inaction to secure evidentiary proof of the alleged share purchase arrangement and the alleged promises (but relying instead on his sheer trust and confidence in P and Simus) defies commercial logic given the immense financial exposure he and the three Clients would be facing by holding volatile penny stocks over such extended period. Under cross-examination, D admitted that he did not even try to find out from Simus what actually held up the alleged buyer from completing the transaction with them according to the original deadline, notwithstanding he was allegedly eager to complete the purchase deal and release the occupied margin facility for trading again. 67.It is equally dubious that after the Credit Department allegedly refused to provide copies of the alleged Guarantees and B&S Notes, D never inquired of the credit staff or Simus why these key transaction documents were being withheld from him and the other clients. 68.By 31 July 2019, according to the relevant monthly statements, huge trading losses in relation to 707 shares can be discerned from their respective margin accounts as set out below:-
69.That aside, it is also evident that D knew or ought to have known that the alleged blanket waiver of P’s right to pursue him and the three Clients for trading deficits would directly conflict with the core mandate of P using the stocks in his and the three Clients’ margin account as collateral. Clause 1.3 and 2.9 the Client’s Agreement expressly provide that:-
70.In light of the aforesaid, D’s failure to secure any documentation from P to corroborate his account strongly demonstrates that no such alleged share purchase arrangement or the alleged promises and representation from P (via Simus) ever existed. Inherent improbability/incredibility of the alleged promises, and D’s alleged requests upon P to force liquidate since March 2019 D’s contradictory move 71.Second, D’s assertion of the alleged promises made by the P’s senior management through Simus, and his subsequent alleged requests upon Simus requesting P to force liquidate the 707 shares in his margin account are flatly contradicted by D’s own contemporaneous conduct. 72.P’s internal records reveal that, among other things, between April and June 2019 (which falls within the very period during which D claims he was repeatedly demanding that P to force liquidate the 707 shares in his margin account), D actually issued multiple internal “suspension notices” to P, explicitly requesting P to suspend (暫緩), rather than execute, any intended forced liquidation of his portfolio in his margin account by P[25]. 73.When these suspension notices were put to him under cross-examination, D admitted that they were indeed issued by him and that they are incompatible with his account for the alleged requests made upon Simus to force liquidate the 707 shares in his margin account in April and May 2019. This Court does not find D could offer any credible explanation at the trial for such fundamental contradictory move. D was free but chose not to sell 707 shares in early March 2019 74.Third, D’s answer given in response to this Court’s question raised concerning the price fluctuations of 707 shares in early March 2019 further exposes the incredibility of his account. D agreed that the average purchase cost for his purchase of the 707 shares in his margin account was HK$0.2761 per share. On 5 and 6 March 2019, the market price for 707 shares peaked at HK$0.3, and the market close on those two days are HK$0.295 and HK$0.28 respectively. The market close prices in the following days between 8 and 12 March 2019 are within the range of HK$0.27 to HK$0.285. The aforesaid period was already well after the original deadline for completion set by the alleged buyer. 75.Against such a background, in this Court’s view, D was totally free to sell his 707 shares on the open market during these days to recover his costs and he would have suffered absolutely no loss, and may even reap a handsome profit.[26] Or else, he would be facing very significant risk of suffering great loss if the market subsequently turned against him on such stock (which this later turned out to be so). 76.Especially, being an experienced trader in penny stocks, D knew full well the price of these stocks could fluctuate tremendously within a relatively short period of time. In fact, D in his own witness statement (at paragraph 22) described an incident on about 15 November 2018, when the opening price of 707 shares was HK$0.275 but later fell quickly by 62.2% to 0.104, but rebounded to close at HK$0.295 on the same date. Further, D gave evidence in court that by early March 2019 he was already very eager to use his margin account for trading, to earn commissions, and to make his living[27]. 77.Yet, D did not sell away the 707 shares back then, and claimed that he abstained because he wanted to honour his promise and feared that he might have to compensate the alleged buyer if the market price rose later. This explanation defies commercial sense. In this Court’s view, the alleged buyer had already failed to comply with its originally indicated completion timeline, which was between 8 and 18 February 2019, D was under no legal obligation to preserve the portfolio at his own financial peril. 78.Upon closer examination, D’s alleged fear of liability to the buyer does not make commercial sense in the context of this case. In this Court’s view, even if the alleged promises were made by P’s 'senior management' (which this Court rejects for the reasons explained in this judgment), they merely induced D and the three Clients to hold the shares pending completion of the sale. Neither individually nor collectively can these alleged promises or representation be reasonably construed to form a new agreement obligating D or any of the three Clients to hold the 707 shares for the buyer indefinitely, or else, they have to compensate the buyer for the lost upside if the share price exceeded HK$0.30 per share. 79.In fact, the reason as given by D under paragraph 47 of his witness statement[28] for not selling away the 707 shares in early March 2019 is different: he only stated that he still trusted that P would honour the alleged promises and he was afraid that if he sold the 707 shares without P’s consent, P would not keep their promises and this means P (not the alleged buyer) would go after him for the loss, and therefore would not enforce the alleged promises. But this presupposes he suffered a loss, and yet if he sold the 707 shares away in early March 2019, he would at least have made a breakeven or even a handsome gain! In this light, this reveals the fundamental inherent contradiction in his own case. 80.In light of the aforesaid, by looking at the evidence dispassionately and carefully in the round, this Court has no hesitation to reject D’s explanation given in court of his choice of not selling away the 707 shares in his margin account out of his alleged fear or concern at the time, or his earlier alleged reason provided in his witness statement. Rather, these wholly incredible explanations point to the fundamental inherent improbability of D's account, and also reflects adversely his general credibility as a witness. D’s alleged lack of knowledge of Mr Deng’s involvement in ATV is dubious 81.Fourth, D’s testimony (as given in court) of his dearth of knowledge about Mr Deng before Simus allegedly told him that Mr Deng was the alleged buyer in February 2019 exhibits another unsettling feature of his account. 82.In this connection, Mr Timothy Lam, counsel appearing for P, rightly drew this Court’s attention to ATV’s annual report for 2018[29], which shows that Mr Deng joined ATV in June 2018 and became its Chairman of the board of directors of ATV. According to that report, Mr Deng then held 21.76% of 707 shares through Honghu (which was wholly and beneficially owned by him[30]), and held another 0.29% in his own name. 83.However, D claimed that he did not even know Mr Deng was the chairman of ATV’s board of directors, and his company Honghu was its substantial shareholder before Simus allegedly revealed the identity of the buyer, notwithstanding that D had already began trading 707 shares since the opening of his margin account with P in 2015[31] (when ATV was still in its former name of Co-Prosperity Holdings Ltd 協盛協豐控股有限公司). 84.Further, the available monthly statements of D’s margin account[32] produced in the Trial Bundle show that D had been trading 707 shares actively since April 2018. According to the another set of monthly statements (starting from August 2018 onwards) concerning the margin accounts of Mr Xu and Mr Guo/Mr Xie, they also appeared to have traded 707 shares frequently and had substantial holdings of 707 shares in their accounts[33]. 85.In fact, according to yet another set of monthly statements for the margin account of Mr Xu, and the joint margin account of Mr Guo/Mr Xie, and Mr Xie’s individual margin account (#21806815), it can be readily seen that these three clients in fact already actively traded the 707 shares back in 2016. They held substantial holdings of 707 shares in their respective margin accounts (as at 31/10/2016)[34] as follows:- (1) Mr Xu: 17,500,000 shares (market value HK$3,850,000) (2) Mr Guo/Mr Xie: 29,464,000 shares (market value HK$6,482,080) (3) Mr Xie: 97,000,000 (market value HK$21,340,000)[35] 86.Therefore, it is quite inconceivable that an experienced account executive like D (frequently trading penny stocks for substantial period of time according to his background) would profess such ignorance regarding a key figure of a listed company which he had been heavily speculating in its shares, and the three Clients as served by him had drawn down massive margin facilities to trade and hold substantial 707 shares in their portfolios. 87.As shown in the relevant monthly statements of the margin accounts of D, Mr Xu and Mr Xie/Mr Guo[36], the respective outstanding margin loan amounts (as at 31 January 2019) verses the market values of their respective holdings of 707 shares are set out below:-
Honghu’s monthly statements 88.Furthermore, D managed to produce confidential internal account statements belonging to Honghu, claiming they were handed over to him by one Mr. Wan Chi Yung (“WCY”) and another Mr. Tang Wai Kuen (“TWK”), both of whom were Mr Deng’s drivers according to D. D also produced the Statement of Claims filed by P under each High Court action (namely, HCA 1688/2021 and HCA 1760/2021) against WCY and TWK and their respective Defences in purported support of his own case. 89.However, D’s oral testimony that Honghu’s monthy statements obtained from these two drivers of Mr Deng is again self-serving, and does not sound credible. For, this begs the question why these two drivers of Mr Deng would come into possession of Honghu’s monthly statements in the first place, and such inexplicable feature just add further rather than resolve doubts surrounding D’s account. The broader picture Honghu borrowed heavily from P to trade and hold 707 shares 90.The monthly statements of Honghu’s margin accounts produced (which spanned over an extensive period between July 2015 and October 2022) nonetheless reveal that it had borrowed heavily from P to use very margin facility to trade and hold 707 shares in its margin account. Among other things, it can be discerned that Honghu already held 600 million 707 shares (at market price of HK$0.255 per share in the total value of HK$153 million as at 29 April 2016)[37], and the outstanding margin loan at the time was about HK$95.4 million. 91.The number of 707 shares held in such margin account was further increased to about 765.3 million since June 2017[38] (at market price of HK$0.27 per share in the total value of about HK$206.63 million as at 30 June 2017, and the average costs was HK$0.2534 per share by then). The then outstanding margin loan became about HK$114.63 million.[39] 92.The number of the 707 shares in Honghu’s margin account remained the same thereafter till about July 2020[40], and in the following month, P began to force liquidate the 707 shares in Honghu’s account. Through sales by different tranches on different dates in the market, all shares in Honghu’s margin account were completely sold by December 2020[41]. 93.Remarkably, the market price of ATV shares plunged deeply over a period of two months from HK0.194 per share (i.e. the market close on 31 May 2019) to HK$0.05 per share (i.e. the market close on 31 July 2019), causing Honghu’s margin account to run into a negative net asset value of about HK$6.27 million by then. The changes between 31 May and 31 July 2019 in relation to the market value of the 707 shares held in Honghu’s margin account, the corresponding outstanding margin loan amount, and the net asset value (NAV) are set out below[42]:-
94.Correspondingly, the net asset values in the respective margin accounts of D, Mr Xu and Mr Guo/Mr. Xie likewise dropped drastically from May 2019 to July 2019:-
95.In between July and December of 2019, the maximum deficit in the margin accounts of Honghu, D, Mr Xu, Mr Guo/Mr Xie (according to their resepective monthly statements) occurred on 31 October 2019 when the market price of 707 shares dropped to only HK$0.04 per share on that date, and their corresponding net asset values as shown in the monthly statements for these accounts are set out below:-
ATV’s public announcements 96.In fact, according to a public announcement made by ATV on 11 April 2019, showing that ATV intended to enter into a certain deal with some third party movie company, and the consideration of HK$67.5 million for such transaction was intended to be paid by ATV through allotment and issuance of its own shares at the issue price of HK$0.25 per consideration share[50]. The market close of the 707 shares on 11April 2019 was HK$0.222 per share[51]. In other words, on the face of such announcement, the ultimate success of such transaction as intended to be undertaken by ATV may to a certain extent be affected by the subsequent performance of market share prices. 97.On 30 May 2019, ATV further announced to appoint placing agent to procure placees to subscribe for convertible bonds in the aggregate principal amount of HK$260.75 million. According to the relevant announcement, the maximum net proceeds from the placing would amount to approximately HK$252.6 million, resulting in the estimated net price of approximately HK$0.243 for each conversion share[52]. On 30 May 2019, the market close of the 707 shares was HK$0.202 per share[53]. 98.Given such factual matrix, one would not be surprised to expect that prima facie Mr Deng may particularly want to see the 707 market share prices could float within a rather stable range, and certainly not be desirous of watching it dive so deeply causing hefty losses in Honghu (his wholly-owned company) since the 30 May announcement. Deed of indemnity signed by Mr Deng 99.Notably, a document addressed to P entitled 連帶責任書 (in Chinese) was seen produced by P’s side in the Trial Bundle[54]. It was signed, sealed and delivered by Mr Deng in 2019 (without stating the month and date of its execution) whereby he agreed to indemnify P against all the indebtedness of 19 margin accounts maintained by individuals/corporations listed out therein (with their corresponding margin account numbers provided) (“the deed of indemnity”). The operative clause in its original wordings in Chinese is quoted as follows:-
100.The names of D, Mr. Xu, Mr. Guo, and Mr. Xie, along with their respective margin account numbers, are also included in the deed of indemnity. For completeness, D produced an unsigned draft of the deed during trial which omitted several margin accounts. However, as P’s version was signed by Mr. Deng and its contents are substantially undisputed by D, the Court would focus on P’s version in its further deliberations. 101.According to paragraph 8 of P’s Amended Reply and Defence to Counterclaim, P effectively pleads that the deed of indemnity is the product resulted from a group of margin accounts holder (including but not limited to D, Mr Xu, Mr. Guo and Mr Xie) reaching an agreement/common understanding with Mr Deng, in order to persuade or induce P not to enforce margin calls on their accounts on short notice. This pleading (for reasons as shall be further discussed below) did not highlight Honghu was one of the margin holders as referred to in the deed of indemnity. 102.Having considered the totality of the evidence, this Court does not accept such contention of P. Rather, this Court finds that, more likely than not, the deed of indemnity is a product of negotiation between P and Mr Deng conducted somewhere in the latter half of 2019, and that it was P who took the initiative requesting Mr Deng to execute such document. 103.This is because within the two months between the end of May and July 2019, the net asset value in Honghu’s margin account plummeted from approximately HK$175 million to a deficit of around HK$6 million, representing a staggering loss of about HK$181 million. This severe decline naturally raised grave concerns for P, making it eager to secure as much collateral as possible from Mr. Deng and Honghu to cover their outstanding margin liabilities and hedge against further price drops in 707 shares. Consistent with this, Simus signed as one of the two attesting witnesses to Mr. Deng’s execution of the deed of indemnity.[55] 104.This is especially the case when there is evidence pointing to a real possibility some other individuals/corporation whose names appeared in the deed of indemnity may also be holding 707 shares in the their margin accounts maintained with P for Mr Deng as well. These persons include:-
105.For, these individuals/corporations are also shown to have maintained margin accounts with P back in 2016, and the corresponding monthly statements reveal that they retained substantial holdings of 707 shares in their margin accounts as at 31 October 2016:- 106.All clients of these margin accounts were served by Madam Lou Yi (as can be seen from her account executive number A0063 being shown in the monthly statements for these accounts). In passing, the outstanding indebtedness of Madam Lou Yi’s own margin account was also covered by the deed of indemnity. 107.Further, according to ATV’s annual reports for 2018 and 2019, Mr Deng was stated to be the chairman and executive director of China Water Industry Group Limited, i.e. 中國水業集團有限公司 (stock code 1129) from 21 April 2017 and 4 September 2018[62]. Also, these two annual reports show that one KCC Capital SPC held 5.94% and 5.45%[63] of shareholding in ATV in 2018 and 2019 respectively. The margin account of KKC Capital SPC is likewise covered by the deed of indemnity. 108.It is noteworthy that according to the two Statement of Claims issued by P under the other two High Court actions mentioned above, it was recovering an outstanding indebtedness of HK$17,934,279.91 (as at 5 November 2021)[64] against WCY and another indebtedness of HK$12,530,198.24 (as at 19 November 2021)[65] against TWK, as accrued in their respective margin accounts. 109.At the material times, taking a balanced view of evidence before this Court, it appears likely that WCY and TWK were indeed holding substantial ATV shares in their margin accounts at the time of the signing of the deed of indemnity by Mr Deng, particularly in light of their averments made at paragraphs 3.3 and 8.1 of their respective Defences filed under HCA 1688/2021 and HCA 1760/2021, quoted as follows:-
The deed of indemnity was signed by Deng at P’s request 110.In light of the aforesaid, this Court is also inclined to think that the deed of indemnity was executed by Mr Deng at per P’s request sometime around June to August 2019. This view is supported by the following matters:
Timeline for signing the guarantees
111.Given this Court’s finding that the two guarantees in relation to D and Mr Xu were signed by Mr Deng not earlier than June 2019, it would be virtually impossible for an unidentified staff of P’s Credit Department to show the alleged Guarantees (concerning D and all the three Clients) to D in March 2019. Accordingly, this Court finds that D’s case on the alleged Reinforcement Representation would collapse altogether in the circumstances. Purpose of signing the deed of indemnity and guarantees 112.Taking a fair and balanced view of the evidence in light of the above analysis and findings, this Court is inclined of the view that there is a real possibility that D, Mr Xu, Mr Guo/Mr Xie were holding the 707 shares in their respective margin accounts at all material times directly or indirectly (and in the case of D, whether through Simus or otherwise) for Mr Deng or ultimately at his directions, without the existence of the alleged share purchase agreement, nor the alleged promises and representation. 113.This is because the inclusion of their names, alongside with Honghu’s and those listed in paragraph 104 above, in the deed of indemnity[75] (when construed together with the other material documents discussed above) would provide prima facie evidence that all these individuals/corporations were holding 707 shares in their respective margin accounts ultimately at Mr. Deng’s directions. Otherwise, Mr. Deng would not have undertaken indemnity for such substantial aggregated margin debts as given rise by their holdings of the 707 shares. 114.In this Court’s view, Mr Deng apparently had a massive financial incentive to see that P would not force liquidate the 707 shares held by these persons (including those by D, Mr Xu, Mr Guo and Mr Xie under specific consideration action) so that the 707 share prices could be stabilised to facilitate the announcements of the intended deal or convertible bond placement by ATV (as mentioned in paragraphs 96 and 97 above) to be put forward, or even the ultimate success of the announced transaction(s). 115.D’s conscious decision not to sell his substantial holding of 707 shares in early March 2019, despite a prime opportunity to reap a profit (as discussed in paragraphs 74 to 80 above), can also be consistent with a case of him holding the 707 shares for Mr Deng or ultimately at his directions without the existence of the alleged share purchase arrangement or the alleged promises and representation. On the other hand, D’s inaction is fundamentally at odds with his experience and usual trading pattern as a penny stock speculator. Had D held the 707 shares purely for speculation, he would not have left them idle in his margin account without trading, save for the “token” sale of 200,000 shares in April 2019 (see paragraph 36 above). 116.In fact, the case that WCY and TWK were holding shares at Mr Deng’s directions were well borne out by these two persons’ averments made in paragraph 3.3 and 8.1 of their respective Defences filed under HCA 1688/2021 and HCA 1760/2021 (as pointed out in paragraph 109 above). 117.But strictly speaking, this Court needs not speculate. While there can be a myriad of possibilities behind why D refrained from selling his substantial holding of 707 shares after January 2019 (save for the “token” sale in April 2019), this Court is not obliged to find for the precise underlying cause. D chose to advance a specific narrative for the Court’s determination, and upon careful scrutiny of all the evidence, this Court finds such account fundamentally flawed, incredible and rejects the same. The legal burden rests squarely on D, and he has plainly failed to discharge it in circumstances. 118.This Court therefore rejects D’s account (and his defense and counterclaim built upon it) in its entirety. In particular, on a balance of probabilities, the Court finds that the alleged share purchase arrangement, the alleged Promise, the alleged Inducement Promise, and alleged Inducement Representation never existed. D’s alleged consequential reliance on such alleged promises and representation and other assertions, including all the subsequent alleged requests he made upon P (through Simus or otherwise) to complete the deal or to force-liquidate the 707 shares in his margin account, are also rejected accordingly. D’s points of submissions 119.This Court would now turn to deal with the main points of submissions by D (which this Court also have fully considered before coming to the above findings and conclusion). Point 1 120.D’s counsel seem to have relied heavily on the unchallenged evidence of Mr Yip, who heard D asking Simus and Mr Jack Miao (P's then COO) after May 2019, to instruct P’s Risk Management Department to enforce Honghu’s guarantee with a view to ‘corroborate’ D’s account. But according to this Court’s above findings, the guarantees of both D and Xu were executed by Honghu after 21 June 2019, hence Yip’s testimony is not supportive of D’s account. 121.Further, one also needs to examine Yip’s evidence more closely. Yip only said that D made requests after May 2019 upon P to enforce the guarantee executed by Honghu. But this is not the same as (or identical to) requesting P (through Simus and/or Jack Miao or otherwise) to force liquidate the 707 shares in his margin account. The difference between the two is significant in the context of this case. 122.In light of the above analysis, it appears to this Court that D’s prime concern in making his post-May 2019 request(s) for P to enforce his guarantee was aimed at mitigating his personal financial exposure arising from holding the shares on Mr. Deng's behalf against the context as discussed in paragraphs 112 to 116 above. In such a context, in this Court’s view, if P then chose to enforce the guarantee, it would be up to P to decide whether it would also force liquidate the 707 shares in D’s margin account or continue the suspension or otherwise, and this would appear to be a matter negotiable between P and Mr Deng as their important client. 123.As mentioned in paragraph 94(1) above, the deficits in D’s margin account repayable to P already amounted to HK$512,223 (as at 28 June 2019) and HK$1,356,450 (as at 31 July 2019) respectively. 124.In these circumstances, this reinforces this Court’s finding that, more likely than not, D never requested P (whether through Simus or otherwise) to force liquidate the 707 shares in his margin account pursuant to the alleged promises or representation. This Court also finds that, in any event, P was free to liquidate the 707 shares in his own margin account by himself both before and after May 2019, but he chose not to do so. Point 2 125.Apart from this, D's counsel point to P’s prolonged inaction to force liquidate the 707 shares (despite it could have done so much earlier before October 2020) to seek to argue that this was likely due to the existence of the alleged promises. In my judgment, this does not necessarily follow. 126.In terms of inherent probabilities, as pointed out earlier, making a promise to waive recovery against D is entirely inimical to the commercial interests and core mandate of P as a revenue-driven brokerage firm. This is all the more so given the absence of any guarantees or collateral from Honghu or Mr. Deng prior to June 2019 (as so found by this Court) to secure the substantial indebtedness incurred by D, Mr. Xu, and Mr. Guo/Mr. Xie through heavy margin borrowing to facilitate their holding of the 707 shares. 127.D’s counsel submit that Honghu (as controlled by Mr Deng) was a major, highly influential client for P, generating huge interest income from the very substantial margin loan lent by P to Honghu over the years, in order to construct a commercial rationale for the alleged promises and representations by submitting that P stood to benefit from Mr. Deng/Honghu leveraging margin loans to fund the 707 holdings in the margin accounts of D, Mr. Xu, and Mr. Guo/Mr. Xie. 128.Apart from that, D’s counsel further submits that the following conducts of P’s also support the existence of the alleged share purchase arrangement and promises, as well as P’s refusal to execute forced liquidations upon D’s request:-
129.However, these submissions cut both ways. 130.In light of the above analysis, this Court would tend to think that it was precisely because Mr. Deng/Honghu was such important clients to P’s business that P refrained from force-liquidating the 707 shares in the margin accounts of D, Mr. Xu, and Mr. Guo/Mr. Xie until much later, even at the costs of breaching its own internal margin policy and/or SFC guidelines (as contended by D). 131.This Court however needs not go into the evaluation of the exhaustive arguments and substantial materials submitted by both sides to determine whether these internal policy or guidelines were indeed violated. Because even assuming (but no actual finding is required to be made here) such violations did occur at the material times, this would not detract from the conclusion reached by this Court in paragraph 118 above after carefully considering the totality of evidence in this case. 132.On the other hand, the available evidence tends to indicate that prior to May 2019, there appeared no imminent need for P to request collateral from Deng or Honghu to secure indebtedness owed by Honghu and other relevant parties to P. Notably, Honghu’s margin account retained a substantial positive net asset value (NAV) of HK$175.08 million as of 31 May 2019[76]. The NAV figures in respect of D’s margin account[77], Mr Xu’s account[78] and Mr Guo/Mr Xie’s joint account[79] from January to April 2019 are all positive, and those for May to July 2019 are already set out in paragraph 94 above. 133.As analysed above, Mr. Deng and Honghu’s lucrative relationship with P however does not necessarily establish the existence of the alleged promises or representation. In this Court’s view, while D and the three Clients may well have held the 707 shares in their margin accounts for Mr. Deng through various arrangements and subject to different terms and conditions as negotiated with Mr Deng directly or indirectly through any intermediary(ies), more likely than not, they were not due to the alleged share purchase arrangement and the alleged promises and representations as portrayed by D, which this Court rejects as commercially nonsensical and seriously at odds with or even directly contradicted by the contemporaneous documents as discussed above. Point 3 134.D’s counsel spent substantial coverage in their written closing submissions to challenge P’s account (as related to Mr Tang by Simus) as sheer hearsay evidence, which is not believable and ought not be accepted by the Court. 135.Such submission cannot salvage D’s case. This Court’s analysis in rejecting D’s account as incredible after carefully examining the inherent probabilities or improbabilities of the respective parties’ evidence and gauging their veracity against the objective documents or pointed out above, without the need to resort to any hearsay evidence as sourced from Simus. 136.Among other things, this Court specifically finds that the deed of indemnity was executed by Mr Deng as per P’s request in such circumstances as analysed in detail above basing on the company’s written record and documents which fully withstood cross-examination, rather than accepting P’s case in this regard which based on Simus’ hearsay account. 137.All in all, in light of the above analysis, any incredible or unsatisfactory aspects of P’s case would not turn the wholly incredible account of D into a credible one, and therefore would not detract the correctness of this Court’s refusal to accept D’s account. 138.In light of the aforesaid, it also follows that D’s contention that this Court should draw an adverse inference against P for failing to call Simus, and/or any other key persons of P (as mentioned in paragraph 36 of D’s Closing Submissions) is simply a non-starter. 139.Without prejudice to anything aforesaid, it is undisputed that Simus was no longer an employee of P at the time of the trial, and Mr Tang gave uncontradicted evidence that P attempted to contact him but he refused to cooperate. Also, even D’s own closing submissions implicitly recognize, Simus’ actions implicated himself in serious corporate wrongdoings and deviations from SFC guidelines in permitting a group of margin accounts with substantial holdings of 707 shares to operate in breach of P’s internal policy and SFC guidelines. Simus therefore had every motive to be defensive and hide himself away from the judicial scrutiny over his wrongdoings. Also, there is nothing to stop D from subpoenaing Simus to attend court to give evidence, but apparently this was not done. 140.In these circumstances, there is no basis for D to invite this Court to draw an adverse inference against P. 141.Lastly, for completeness sake, I have considered the other submissions from Mr Tsui and Ms Leung also, they cannot advance D’s case any farther in defending P's claim, let alone his counterclaim. With respect, they are largely tangential, neither here nor there, or are otherwise effectively addressed by way of the foregoing analysis. It is therefore unnecessary for this Court to list out and deal with each of them separately, so as to avoid unduly lengthening this judgment. Conclusion 142.Due to the above reasons, after carefully considering all the evidence and the parties’ submissions, this Court finds that D fails to establish each and every element of estoppel as pleaded in the AD&CC. All the submissions made by D’s counsel in purported support of the AD&CC are rejected. 143.Without prejudice to the generality of the foregoing, this Court rejects D’s account on the alleged purchase arrangement, the alleged Promise, the alleged Inducement Promise, and the alleged Inducement Representation in their entirety, and also all his other testimony flowing from these alleged arrangement, promises and representation. 144.Any other evidence as given by D whether as stated in his witness statement or given in court which is inconsistent with the findings and observations made by this Court in this judgment would also be rejected. 145.Further, this Court specifically finds that D had not requested P (whether through Simus or otherwise) to force liquidate the 707 shares in his margin account on different occasions as alleged. Rather, this Court is of the view that D was free to liquidate the securities (including the 707 shares) in his margin account on his own initiative at all material times. 146.Accordingly, D fails to establish that P was in breach of the contractual or tortious duties as pleaded in the AD&CC to hold P responsible for the loss or depreciation in value of the 707 shares in his margin account at the time of their forced liquidations. 147.In light of the aforesaid, this Court also rejects D's contention that margin loan interest accrued since March 2019 (as listed out in paragraph 228 of his closing submissions) was wrongfully deducted. It is noteworthy that, apart from his defences raised (which are now dismissed), D has not otherwise challenged the applicable interest rates or other figures as shown in the monthly statements for his margin account at the trial. 148.For completeness, D’s pleaded claim for loss of profit for HK$196,380 that he could have reaped by selling away the 707 shares in his margin account when the market price for 707 shares peaked at 0.3 per share in early March 2019 is likewise wholly unjustified in the circumstances and rejected. 149.All of D’s defences are therefore rejected, and his counterclaim is fully dismissed. It is therefore unnecessary for this Court to rule on P’s fallback alternative contention that Simus had no authority of whatever kind to make the alleged promises and representation on P’s behalf. 150.In light of the aforesaid and having carefully surveyed all the evidence and circumstances in this case, and also the terms and conditions of the Client Agreement and the Broker Cooperation Agreement, this Court finds that P is entitled to force liquidate the 707 shares in D’s accounts in August and October 2020 respectively, and also to set off D’s commission income of HK$681,870.26 (as pleaded under paragraph 7.101 of AD&CC[80]), and the net sale proceeds of the other stocks in the margin account in the total sum of HK$771,034.11 (as pleaded under paragraph 7.44 of AD&CC) against the then prevailing outstanding indebtedness as owed by D. 151.Consequently, D’s claim that P’s refusal to pay or refund the commissions and proceeds wholly fail. 152.Accordingly, this Court finds that P is entitled to recover the outstanding deficit amount in D’s margin account as shown in the monthly statement dated 28 February 2022, together with interest (subject to a caveat as shall be discussed further below) in accordance with the Client Agreement. Interest 153.But for his defences (which are dismissed by this Court), D did not otherwise dispute that P was entitled to charge upon him interest for the prevailing outstanding margin loan at such rate and sum as stated in the monthly statements for his margin account all along. 154.In fact, D admitted that his margin account had a deficit balance of HK$1,054,090.32 (as at 28 February 2022[81]) as pleaded in the paragraph 12 of AD&CC. This figure matches with the same figure as shown in the monthly statement dated 28 February 2022[82]. 155.On the other hand, P effectively pleaded under paragraph 11 of the SOC that D was indebted to P for an amount of HK$1,048,057.96 (as at 19 January 2022), which comprises of the principal sum of HK$1,040,214.46 (inclusive of all accrued interest capitalised at 31 December 2021), and interest in the sum of HK$7,843.50 accrued from 1 January 2022 to 19 January 2022. Nonetheless, Mr Tang did not in his witness statement, nor Mr Lam in his submissions made clear how such interest element was calculated, and D disputes such figure. 156.In these circumstances, after considering the totality of evidence, this Court finds the outstanding principal amount of indebtedness as owed by D to P (as at 31 January 2022) to be HK$1,049,862.04, as shown in the monthly statement dated 31 January 2022[83]. The Court also finds the interest accrued for the whole month of February 2022 in the sum of HK$4,228.28, as shown in the monthly statement dated 28 February 2022[84], is payable by D. 157.Further, since neither party has provided any appropriate applicable interest rate for this Court to consider for charging on the outstanding principal of indebtedness since 1 March 2022 onwards, this Court considers it prima facie just and fair under the circumstances of this case to allow interest to accrue on the outstanding principal sum of HK$1,049,862.04 at prevailing HSBC best lending rate plus 1% on simple interest rate basis from 1 March 2022 onwards until judgment, and thereafter at judgment rate until payment. Disposition 158.In the premises, judgment is entered in favour of P in the sum of HK$1,054,090.32 (i.e. HK$1,049,862.04 + HK$4,228.28), together with interest on the principal amount of HK$1,049,862.04 at prevailing HSBC best lending rate plus 1% from 1 March 2022 onwards up to the date hereof, and thereafter at judgment rate until full payment. 159.D’s counterclaim is dismissed in its entirety. Costs 160.Costs should normally follow the event. This Court makes a costs order nisi that D shall pay P costs of this action vis-à-vis both P’s claim and D’s counterclaim (including all previous reserved costs, if any), with certificate for counsel, to be taxed if not agreed. Such costs order nisi shall become absolute in the absence of any application within 14 days to vary the same. 161.Lastly, it remains for me to thank counsel on both sides for their assistance rendered to the Court.
Mr Timothy Lam, instructed by GH Legal, for the Plaintiff Mr Adex Tsui & Ms Teresa Leung, instructed by Hau, Lau, Li & Yeung, for the Defendant [1] See paragraph 46 of D’s witness statement. [2] see paragraphs 83 and 84 of D's witness statement. [3] i.e P’s name as appeared in the title of this action. [4] C3/457-597 [5] C3/451-456; see also : AD&CC, para 3 [6] C1/3-6, see also : AD&CC, para 7.1 [7] C3/455 [8] C1/2 [9] D's witness statement, para 24 [10] D's witness statement, para 25 [11] C2/363 [12] C4/824 [13] C4/886 [14] C2/363 [15] C2/379 [16] C2/440 [17] B/47 [18] See D’s Closing Submissions, para 16 citing Mr. Tang’s relevant evidence given at trial. [19] i.e. referring to D [20] i.e. referring to P [21] For D, a trading loss of HK$(0.2761 – 0.05) per share was prima facie suffered by then, and number of 707 shares as held by D on 31 July 2019 was 8.8 million. HK$0.2761 was the average purchase cost per share, and HK$0.05 per share was the market price as at 31 July 2019. [C3/363, 379] [22] Under Mr’s Xu’s account, a trading loss of HK$(0.3369 – 0.05) per share was prima facie suffered by then, and number of 707 shares in such account was 27 million as at 31 July 2019. HK$0.3369 was the average purchase cost per share. [C3/824, 838] [23] Under Mr’s Guo/Mr Xie’s account, a trading loss of HK$(0.274 – 0.05) per share was prima facie suffered by then, and number of 707 shares in such account was 87.242 million as at 31 July 2019. HK$0.274 was the average purchase costs. [C3/886, 900] [24] C3/487 [25] See the nine enlarged pages of P’s internal document (each of A3 size) which run from January to June 2019 produced by P’s side during the trial, marked as Court Exhibit P-1. Five out of these nine enlarged pages which marked 74.5 to 74.9 (dated 3/4/19, 11/4/19, 16/4/19, 7/5/19 and 24/6/19 respectively) correspond to those pages (of A4 size) exhibited in Tang’s witness statement at B/70-74. [26] As stated in paragraph 46 of his witness statement, D said he could have made a profit of HK$196,380 if he managed to sell at the best market price of HK$0.3 per share at the beginning of March 2019. [27] D’s own words in Punti is “去維生” [28] B/15-16 [29] C5/1098 [30] C5/1099A [31] AD&CC, para 7.12 (A/49) [32] C2/306, 313, 317-320, 324-326, 330, 332, 334-336, 338, 340, 344-346, 349-350, 352-353, 356-357, 360, 362-363 [33] C4/809+ and C4/870+ [34] C4/975-976, 978 [35] Prima facie, Mr Xie’s individual margin account was also taken care of by D since the monthly statement also shows D’s account executive number : A00060 [C4/978] [36] C2/363, C4/824, 886 [37] C6/1292 [38] C6/1327-1328 [39] C6/1328 [40] C6/1402 [41] C6/1425 [42] See C6/1374, 1376, 1378 [43] C2/375, 377, 379 [44] C4/833, 836, 838 [45] C4/896, 898, 900 [46] C6/1384; see also C6/1378-1388 [47] C2/385; see also C2/377-389 [48] C4/844; see also C4/838-848 [49] C4/906; see also C4/900-910 [50] C4/981-984 [51] The figure is discerned from an excel table showing the historical share prices of the 707 shares as prepared by D’s side without any challenge by P (“the historical share prices table”) (C5/1154) [52] C4/994 [53] C5/1154 [54] C5/1049 [55] C5/1051 [56] C4/965-966 [57] C4/967 [58] C4/968 [59] C4/969 [60] C4/970-971 [61] C4/973 [62] C5/1098, 1102 [63] C5/1099, 1103 [64] C6/1190 : This pleaded figure comprises of $9,656,189.51 (as the principal sum) and $8,278,090.40 (as interest) [65] C6/1234 : This pleaded figure comprises of $5,243,661.50 (as the principal sum) and $7,286,536.74 (as interest) [66] i.e. referring to WCY in HCA 1688/2021 and TWK in HCA 1760/2021. [67] ibid [68] C5/1117 [69] C5/1156 [70] C5/1103-1103A; 1107-1110 [71] C1/28, 29-43 (42); C1/44-58 (57) [72] C1/59, 60-74 (73) [73] C1/75, 76-90 (89) [74] B/76, 77-91 [75] C5/1049-1051 [76] See paragraph 93 above. [77] C2/363, 366, 369, 372 [78] C4/824, 826, 828, 830 [79] C4/886, 888, 890, 892 [80] See also : C2/440 [81] In this Court’s view, the date of 28 January 2022 as pleaded under that paragraph is a typo, and it ought to be 28 February 2022 instead according to the available monthly statements and context of this case. [82] C2/444 [83] C2/442 [84] C2/444 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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