Bonds Stock & Investment Co (A Firm) v. Leung Tsi-neng

HCA001761/1973

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 1761 OF 1973

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Coram: Cons, J.

Date of Judgment: 8 November 1974

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JUDGMENT

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1. The plaintiff is a stock broking firm which purchased certain shares on the instructions of the defendant. The defendant refused, and still refuses, to take delivery of those shares. The plaintiff brings this action to enforce completion of the purchase or, alternatively, for damages.

2. Much of the matter is common ground. On 11th April last year the defendant placed an order with the plaintiff for 1,000 shares in Hong Kong Land Co., Ltd. On 13th April he placed a further order, this time for 1,000 shares in Jardine Securities Ltd. and for another 1,000 Land shares. The earlier shares had not yet been delivered to him. At the same time he gave orders to sell certain shares that he held on the Park Hotel Ltd. and Ruby Holdings Ltd. On each occasion that an order was placed the defendant drew cheques in favour of the plaintiff for the purchase price and other charges.

3. The 13th April was a Friday. The Kam Ngan Exchange, in which the plaintiff operates, does not open on Saturdays. That particular weekend was a long weekend. Monday was also a public holiday. The next working day following Friday, 13th, was thus Tuesday, 17th. On that day the plaintiff was unable to deliver any of the share certificates to the defendant. The reason was unfortunate. The plaintiff company was then a partnership of two persons, a Mr. Chan and a Mr. Kwong. Mr. Kwong was purely a sleeping partner. Mr. Chan was the active one and more importantly, was the only person authorised to sign cheques upon the partnership account. During that weekend he died suddenly. Thus on the Tuesday the staff of the plaintiff company found themselves without any money and virtually unable to do any business. In particular they had no funds to pay for the shares they had ordered from other brokers on behalf of the defendant, nor could they hand to him the proceeds of his shares they had already sold. The same situation appears to have continued on the following day although some time during that day Mr. Kwong opened a new bank account for the partnership. Business seems to have started moving again on the following day, i.e. the 19th. The plaintiff company then delivered 1,000 Land shares to the defendant. But by lunch time at any rate it was still unable to deliver the Jardine Securities or the further 1,000 Land shares.

4. At this stage I should mention the conflicting stories that were put before me. One is told mainly by a Mr. Chow, who at that time was employed by the plaintiff company. He says that on the Tuesday, i.e. the 17th, the defendant told him that he was unable to meet the cheques that he had already drawn in favour of the plaintiff unless the plaintiff were able to pay him the proceeds of the shares he had sold. This it could not do and the defendant therefore requested Mr. Chow not to present those cheques until payment was possible. This was apparently not until the end of April. On 30th the proceeds were paid over, but the defendant did not take delivery of the share certificates then proffered on the pretext that he had not brought along the temporary receipt already issued to him.

5. The defendant's story on the other hand was that he became sickened by the failure of the plaintiff to produce the bulk of his shares despite repeated calls at the office and that therefore at lunch time on the 19th demanded immediate payment of the monies owing to him and suggested that the unfilled orders should be cancelled. After a heated argument Mr. Chow agreed to this provided that the defendant would agree to wait for his money until the end of April, which eventually he did.

6. I have no hesitation in preferring the defendant's evidence to that of Mr. Chow. He was more impressive in demeanour, his story generally more plausible. There seems to me no reason on Mr. Chow's story why the defendant would have been willing to wait nearly two weeks for the transaction to be concluded. Nor why he should ask the defendant to wait and see Mrs. Chan, the wife of the deceased partner, on 30th April if, as he says was the case, matters were then proceeding very amicably between them. Nor why prior to that date Mrs. Chan, as she said she did, should telephone the defendant to take immediate delivery of the shares. Finally, I can think of no explanation, consistent with Mr. Chow's version, of the defendant's having gone in person to his bankers on the 19th in order to stop the cheques that were still outstanding in the plaintiff's favour. It was suggested that the defendant was in any event not in a financial position to go through with the contract had the plaintiff produced the shares at that time, but I am satisfied on the evidence of the gentleman from his bank that there would have been no difficulties in this respect, although the defendant may have been forced to sell the shares very shortly after their acquisition.

7. If the defendant had pleaded cancellation of the purchase orders by mutual consent I would have entered judgment immediately in his favour. I find it difficult to understand why this was not done. His defence was drafted by counsel and the matter had already been raised in correspondence by the defendant's solicitors. I should say that the defence was not drafted by counsel who appeared at the trial but I have to add that no application for amendment was made. The only defence pleaded is that the defendant repudiated the contract and I therefore have to decide whether he was entitled so to do. I have come to the conclusion that he was. This is not by virtue of any notice posted in the plaintiff's office whereby a specific time may have become of the essence of the contract. No satisfactory evidence of the contents of that notice was produced. It is because in the sale of shares prompt and proper delivery is on any occasion essential and one of the vital terms of the contract: per Sankey J. in Barnard v. Foster⁽¹⁾. It is perhaps even more important when the market is in as unstable a condition as it was in April last year. I do not propose to lay down the limits of prompt and proper delivery. However, I note in passing that the members of the Kam Ngan Exchange expect their colleagues to complete all internal transactions by 2.45 p.m. of the following business day, and after that there is little for a broker to do. It is sufficient for me to say that in my opinion delivery more than 2 ½ working days after the day on which the order is placed is not prompt and proper delivery. I should add as a caveat that I have come to this conclusion without the benefit of any evidence as to the trade customs or practice of experienced and reputable brokers in this Colony.

8. In view of this conclusion it is not necessary for me to deal with other matters of law that were mentioned in argument. There shall be judgment for the defendant with costs.

Representation:

Kenneth Kwok (Woo, Kwan, Lee & Lo) for plaintiff.

Miss I. Cheung (Yung, Yu, Yuen & Co.) for defendant.

(1) [1915] 2 K.B. 288 at 293