Dr. Matthew Yung v. Maruyu Commodities Co Ltd
Read the full judgment text of HCA 2071/1974 on BabelCite. This High Court CFI judgment.
1. The plaintiff in this case is a dental surgeon practising in Hong Kong and the defendant company is a limited company dealing in commodities in Japanese Exchanges in Japan.
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HCA002071/1974 IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 2071 OF 1974 -----------------
----------------- Coram: Li, J. in Court Date of Judgment: 14th April, 1975 at 2.43 p. m.
----------------- JUDGMENT ----------------- 1. The plaintiff in this case is a dental surgeon practising in Hong Kong and the defendant company is a limited company dealing in commodities in Japanese Exchanges in Japan. 2. On the 7th of June last year, the plaintiff signed an agreement with the defendant whereby the plaintiff opened an account with the defendant for the purposes of buying and selling commodities in advance through the defendant in the Japanese Exchanges. Exhibit 1 is the contract signed by the plaintiff of which only two clauses appear to be relevant for the purposes of these proceedings. Clause 2 of the agreement reads this:
Clause 9 of the agreement reads this :
3. In addition to this, the plaintiff signed exhibit 2, an authorisation letter which is addressed to the defendant company. It reads:
4. A sum of $10,000 was deposited with the defendant company which would enable the plaintiff to buy or to sell in advance to the value of ten times the deposits currently with the defendant company. 5. The procedure for such dealings was that verbal instructions to buy or to sell any commodity in the Japanese Exchanges would be given to Borwnie Fan, alias FAN Kar-man. An order was then placed within the defendant company which would send the message to the Tokyo office by telex or by long distance telephone call. When the buying or selling had been effected by the Tokyo office, then the Tokyo office would reply by telex or long distance telephone call to confirm such a deal to the defendant company. The defendant company then would telephone the plaintiff that the instructions or order had been effected, and then send, by mail, a written confirmatory advice, either in the form of a bought slip, or a sale slip, to the plaintiff. 6. Everything went well since the opening of the account until the end of June. During the period of the 8th of June and the end of June last year, a profit was made by the plaintiff to the sum of $6,990. Again, between the 8th of June and the end of June last year, there was a total of $110,505.15 deposited by the plaintiff as Marginal Deposits with the defendant for the purposes of such dealings. These facts are not disputed or challenged. 7. The plaintiff's case is that between the 29th of June and the 1st of July last year, he instructed FAN Kar-man to purchase, in advance, forty-five units of eighty sacks each of red beans at the price specified by him as pleaded in paragraph 5 of the Statement of Claim. Mr. FAN, however, instead of buying the forty-five units as instructed, sold forty-five units of white beans for the plaintiff. In due course a confirmatory advice of sale of the white beans was received by the plaintiff, but there was no confirmatory advice of purchase of the red beans as instructed. The plaintiff complained to Mr. FAN who confirmed on the telephone that he had already purchased the forty-five units of red beans and promised that he would investigate as to the sale of the white beans. 8. On the 4th of July there was a further advice of some further unauthorised dealings in other commodities. As Mr. FAN could not be readily located in that morning, the plaintiff contacted the Manager of the defendant company Mr. Peter CHAN. However, in the afternoon he located Mr. FAN and made the same complaint. Mr. FAN then said there was an error in the plaintiff's account and confirmed that there had been no unauthorised purchase or execution of any order of sale or purchase, bearing in mind that he had previously confirmed that he had already purchased forty-five units of the red beans to the plaintiff. 9. And on the 5th of July, at about 2.30 in the afternoon Mr. FAN arrived at the plaintiff's surgery. He brought with him two documents, exhibits 29 and 30, which were in blank. At that moment the plaintiff was just finishing a complicated surgical work, or in the course of carrying on a surgical work, and he was extremely busy. He was given to understand by FAN that his signature on these two documents was necessary to close the existing account and to open a new account, so as to clear up the whole confusion as to the sale of the white beans, and as to the mix-up with other accounts. He was very busy, very tired, and he had a patient waiting for him. He just signed the forms in blank, thinking that Mr. FAN would take care of the rest, to clear up the matter. To his surprise, on the 8th of July, a further unauthorised dealing was reported to him in the form of a confirmatory advice slip. Prior to that viz: on the 6th of July, he had instructed Mr. FAN to sell the forty-five units of red beans. Yet he had no confirmatory advice as to this sale. There was a further complaint to Mr. FAN by the plaintiff on the 8th of July, and Mr. FAN confirmed that forty-five units of the red beans had been sold. 10. The next following days FAN disappeared. The plaintiff was obliged to telephone Mr. William LAI, the other man whom he authorised to transact business for him and the Section Manager of the defendant company, about these confusions. MR. LAI then promised to investigate. An appointment was made for them to meet on the 17th of July, but somehow or other Mr. LAI could not make it. 11. Eventually an appointment was made to meet Mr. FAN at the Hong Kong Hotel, sometime in the evening at about 7.30 on the same day. The plaintiff brought with him a tape-recorder, concealed in a travelling bag, to tape the conversation between himself and Mr. FAN. In the course of this conversation Mr. FAN admitted that he had received the instructions in error, or rather, he had misunderstood the instructions and he sold forty-five units of white beans instead of purchasing forty-five units of red beans on the 1st of July. As the prices for the white beans and the red beans both started to rise, he was in a panic. He was hoping to cover up this error and correct it in the term of monetary loss of profit, and he started to execute orders without instructions. Hence all those dealings and transactions as between the 2nd or 3rd of July, up to the 18th of July were done by himself without authority from the plaintiff. Unfortunately not all these speculations were right. In the end the plaintiff lost heavily without knowing that such losses had taken place. This tape was subsequently made into a transcript and admitted as exhibit 31 with the translation of it as exhibit 31A. 12. Having heard this news on the18th of July, the plaintiff went home and, for the first time, read the contract that he signed, that is exhibit 1. That prompted him to cause a letter to be sent to the Managing Director of the defendant company Mr. CHOI in terms of exhibit 21. There was no reply for a couple of days and he wrote another letter, exhibit 23, again. It was after this that a reply was made. 13. The plaintiff's case was that: had the defendant company followed his instructions and purchased forty-five units of red beans on the 1st of July and sold it on the 8th of July as instructed, he would have made a profit of $49,680. However, as the defendant had failed to obey his orders, he lost this profit of $49,680. The plaintiff also claims this sum. His solicitors wrote to the defendant company another letter - exhibit 27. 14. The defence case is simple and straightforward. The defence says that every purchase and sale was made for the plaintiff strictly in accordance with the plaintiff's verbal instructions. It further alleges that between the 1st of July and the 18th of July, there were many more transactions or orders effected on behalf of the plaintiff than those enumerated in the plaintiff's Statement of Claim. In those transactions the plaintiff lost heavily. The plaintiff closed his account only on the 19th of July and signed a Payment Instruction in the form of exhibit 30. At that time the plaintiff's account showed only a credit balance of $5,411.15, which was properly paid into the plaintiff's account with a bank nominated by the plaintiff. There had been no complaint whatsoever of any unauthorised dealings by the plaintiff, and the plaintiff closed the account solely because he had lost money in his speculations. 15. All the transactions as recorded in exhibit 3 up to exhibit 8 (inclusive) had not given rise to any dispute. All the other transactions as recorded in exhibit 9 to exhibit 20 (inclusive) were confirmed by advice slips and sent to the plaintiff with out any complaint from the plaintiff although now the plaintiff disputes that these were ever authorised. Furthermore, the defence produced the Account Ledger of the plaintiff's accounts in exhibit 32 to exhibit 35 (inclusive). 16. Thus the issue between the two parties is whether the dealings, as evidenced in exhibit 9 to exhibit 20 (inclusive) were ever authorised by the plaintiff. If they were authorised, the accounts show only a credit balance of $5,411.15 which had already been paid on the 19th of July last year to the plaintiff's account. On the other hand, if the transactions were never authorised by the plaintiff, then the picture is very different. 17. I have heard the evidence of both parties. The plaintiff has called witnesses and has given evidence himself in support of his allegations in the Statement of Claim. So have the defendants. I must confess that, having heard the evidence of the parties, I have no hesitation in accepting the plaintiff's evidence and to reject the defence evidence. 18. As to the defence witness, Mr. CHOI, I can say that, by and large, he is an honest witness, but his evidence does not come to very much. He only says that he had been ignorant of any complaint until after the 19th of July last year. All the evidence he gives relates to the procedure in buying and selling shares for clients and keeping accounts for clients. Unfortunately, Mr. Peter CHAN has not been called as a witness. He has left the defendant company. Mr. CHOI, the Managing Director, says that he had full knowledge of the contents of exhibits 21 and 23, the complaint letters written by the plaintiff, as told to him by Mr. Peter CHAN. He did not know English himself. He asked Mr. Peter CHAN to reply and Mr. Peter CHAN replied in such terms in exhibit 26, dated the 23rd of July. It reads:
19. It is a surprising reply indeed in view of the terms of the complaint that had been made in exhibit 21. I need only refer to one or two paragraphs of this letter, exhibit 21. In the paragraph under the date "5th of July" the plaintiff wrote in this term:
Further, in another paragraph which referred to the meeting in the evening at the Hong Kong Hotel with Mr. FAN, the plaintiff wrote that:
In view of the terms of the complaints in exhibit 21 and the details given as to the reason why the complaints were made, it is surprising indeed that a reply as in exhibit 26 was made in such a complacent manner. 20. However, that is not all. The most damning evidence, of course, is the transcript of the tape conversation. This, without going into the detail of such conversation, amounts to a frank confession on the part of Mr. FAN who said, in so many words, that he had completely misunderstood the order that was given to him on the 1st of July by the plaintiff to buy red beans and instead he sold the white beans. He then categorically said that he was trying to make up the loss for the plaintiff and started on a series of speculations without the plaintiff's consent or instructions. Such speculations failed and he was so scared of the whole matter that he dared not go back to his own home for a few days. That accounted for his disappearance for those few days. Mr. Fan said that he was doubtful whether he was the person who made such conversation or such confession. He gave a variety of reasons except the most cogent and the most obvious one. If he had not made the confession and he had done nothing wrong in the execution of the plaintiff's verbal instructions the obvious thing for him to say to me would be that he never said such a thing as recorded in this tape. However he never denied the contents of the transcript. I gave him chance after chance to deny this. At least he had the decency not to jump at it and he merely said that since there were so many gaps in the conversation and the voices were so low and blurred, that he could not be certain the voice was his. However, in view of the evidence of the plaintiff and his technician who was present and saw the defendant present, I have no hesitation in accepting that the tape evidence is a true record of the conversation between the plaintiff and Mr. FAN Kar-man, particularly having heard evidence as to how the tape was taken back and replayed and the transcriptions made by the plaintiff's witnesses. 21. Mr. William LAI, does not occur to me to be an honest witness either. He is the Section Manager. His evidence is that he heard no complaint whatsoever from the plaintiff and that he had never heard of any complaint at all until October or November in 1974. This would be highly improbable. One must remember that exhibit 21, the letter of complaint written by the plaintiff, at least reached Mr. Peter CHAN some time in the latter part of July. Having received a complaint that was made against the company and Mr. Fan, who worked directly under Mr. Lai, it would be most unlikely that Mr. Lai was not aware of such a complaint. Otherwise the defendant company must have been operating in such a slack manner that everybody was just pursuing their daily affairs without knowing what was going on in the company. I find that Mr. Lai was certainly not telling me the truth when he said that there was no complaint that he knew of until October or November 1974. 22. I find that the whole of the defence case has to depend on the evidence of Mr. Fan who has made a frank admission of acting without authority. It leaves me to consider the defendant's liability. It is all very well to say that Mr. Fan had acted without authority, but Mr. Fan had been given a blanket order in the form of exhibit 2. But that is not the defence case. Mr. Choi, in his evidence in chief, said that Fan, despite the authorisation letter, he had no authority to buy or sell unless he had the customer's consent and instructions. As I understand him, exhibit 2 was signed as a matter of convenience to cover the plaintiff's dealings. As far as Clause 9 is concerned, the defence never relied on the issue that there had been no complaint in writing. To the contrary. I accept the plaintiff's evidence that he had made numerous verbal complaints to the defendant which should have put the defendant company into inquiry as to the conduct of their own officer Mr. Brownie Fan. 23. Having regard to the aforesaid, I find, as a fact, that the plaintiff had never authorised the sale of white beans. Indeod he had never given any instructions to the defendant company either to buy or to sell as from the 2nd of July, except one transaction, namely, that he had authorised FAN to sell forty-five units of red beans for him on the 8th of July, while the plaintiff was still labouring under the mistaken belief that Mr. FAN had acquired that forty-five units of red beans for him on the 1st of July. Consequontly, the accounts, as shown in the Ledgers, exhibits 32 to 35, do not reflect the true position in so far as the plaintiff is concerned. The defendant had no authority to act for the plaintiff as from the 5th of July; and in any event, the plaintiff had never given any authority to deal except to those transactions not indispute. I also find that the plaintiff had, on the 1st of July, instructed FAN to acquire forty-five units of red beans and to sell them on the 8th of July. The plaintiff should have accumulated a further profit of $49,680. 24. In view of the aforesaid reasons I give judgment to the plaintiff in the sum of $167,175.15, less the sum of $5,411.15 paid into his account thus making the sum of $161,764. Costs follow the events. There will be costs to the plaintiff. It leaves the matter of the rate of interest, Mr. Lee.
Representation: Mr. Martin Lee (Deacons ) for plaintiff Miss Jacqueline P. Leong ( H. M. So. & Co. ) for defendant |