Re C.A. Pacific Securities Ltd (in Liquidation)

HCMP000197/2002

HCMP 197/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 197 OF 2002

(On an intended appeal from High Court Companies (Winding-up) Action No. 37 of 1998)

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Coram: Hon Cheung JA in Chambers

Date of Hearing: 18 April 2002

Date of Judgment: 18 April 2002

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J U D G M E N T

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1.The applicant Mr. Yuen Chan Ming applied to appeal against the order of Yuen J. made on 31 October 2001. The judge directed the liquidators of C.A. Pacific Securities Ltd. ("C.A. Securities") and C.A. Pacific Finance Ltd. ("C.A. Finance") to treat the account of Madam Kam Chung Fong (who is represented by the applicant) to be a margin account. The order was perfected on 28 November 2001. The present application was filed on 17 January 2002.

2.In considering whether extension of time should be granted, the court should regard the length and reason of the delay, the merits of the appeal and the prejudice on the proposed respondent of the appeal.

3.The applicant stated that he was always dissatisfied with the order, but because he did not understand the legal procedure, so he wrongly applied on 14 November 2001 to restore the hearing. On 27 November 2001 he lodged a further affirmation. At the hearing on 10 January 2002, the judge told him of the wrong procedure and that he should appeal to the Court of Appeal and not restore the hearing. The applicant then lodged the application for extension of time to appeal.

4.According to the written decision of the judge, Madam Kam's account was treated as a margin account because she had signed a Memorandum of Deposit to C.A. Finance. Even if the client had not used the margin facilities, the liquidators should still classify the account as a margin account. If the client signed the document as a result of misrepresentation by the staff of C.A. Finance the remedy is to seek damages against the estate of the company.

5.The applicant stated that Madam Kam signed the document unknowingly. She acquired the five types of shares with cash and she did not use margin facilities to carry out transactions.

6.I consider that the applicant had provided a reasonable explanation for the delay which is of a short period. The ground advanced is not without merit. If the two companies involved, C.A. Securities or C.A. Finance, actually knew Madam Kam did not trade on margin and bought the shares with her own money, I think it is arguable that they should not be entitled to charge the shares.

7.Mr. Karliner for the liquidators argued that the applicant has no prospect of success in the appeal because the classification of cash and margin clients was already made in an earlier decision of the judge on 20 December 2000. The court on 31 October 2001 was only applying the earlier classification.

8.It is true that the classification had been made earlier, but the treatment of those clients who had signed the Memorandum of Deposit but had not relied on the finance provided by C.A. Finance as margin account clients was only made in the decision of 31 October 2001. If these clients should not have their shares charged then obviously further directions would have to be sought on their status. One really has to look at the substance of the matter.

9.As to the question of prejudice, the liquidators referred to the question of costs of the appeal and setting aside of shares to meet the applicant's case. I accept these are practical problems involved with the appeal. But in my view leave should be granted to the applicant to have the matter argued in the Court of Appeal.

10.I shall grant extension of time to the applicant to appeal. The notice of appeal is to be served and filed within seven days. The costs of the application be in the cause of the appeal.

Representation:

Applicant, in person, present

Mr. D. Karliner of M/s Herbert Smith for the Respondent