Lean Tye Hin v. Malayan Banking Berhad and Others

HCA006101/1991

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Coram: The Hon. Mr. Justice Waung in Court

Date of Hearing: 22 to 26 September, 4 and 6 October 1997

Date of Handing Down of Judgment: 18 December 1997

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JUDGMENT

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1. The Plaintiff Lean Tye Hing ("Dr. Lean") is a medical Doctor by profession who practiced his calling successfully in Singapore. He did not live in Hong Kong. His sister, the 1^st Third Party ("Sister Lean") is also a medical doctor. She lived and practiced general medicine in Hong Kong. Dr. Lean is a man of financial substance. Apart from his considerable wealth in Singapore, he also owned properties and shares in Hong Kong. Dr. Lean had been banking in Hong Kong with the 1^st Defendant ("Bank") since 1984 and he was given substantial banking facilities by the Bank. Dr. Lean deposited with the Bank his Hong Kong shares and also his foreign shares. Some of these shares were held by the Bank as security for banking facilities granted to Dr. Lean but some of these shares were held by the Bank purely in a custodian capacity. This Action is about the release of various lots of shares by the Bank on three occasions in January 1990. Dr. Lean said that these releases were unauthorised by him and contrary to his express written mandate given to the Bank in July 1989 restricting release only to Sister Lean whereas the Bank said that the releases were authorised by him and confirmed by his sister, Sister Lean and that at no time did he give to the Bank the July 1989 mandate.

2. Long and full evidence was given by Dr. Lean and by Sister Lean. The Bank's relevant staff, Mr. Wong the General Manager, Mr. Chong, the credit manager and Miss Sin, the credit securities department clerk all gave evidence to the Court. The handwriting experts of each side, Mrs. Ng from Singapore for Dr. Lean and Mr. Radley from the United Kingdom for the Bank gave extensive evidence before me on the authenticity of the signatures on the relevant withdrawal forms. All the oral evidence and the written documentation put before me bear on three Issues which were debated at the Trial, namely:-

Issue 2 is the central issue and a decision favourable to the Bank on this Issue 2 would render Issue 1 and Issue 3 largely academic.

3. The first and third Issue is each largely a matter of credibility. Issue 1 turns on the credibility of Dr. Lean and Issue 3 turns on the credibility of Sister Lean. The result of Issue 2 will depend on a combination of the credibility of Dr. Lean, the inference to be drawn from various documents, a consideration of the surrounding circumstances and if necessary, my assessment of the value of the evidence of the two Experts. But before I turn to a detailed consideration of each Issue, it is convenient to set out the history of this matter.

4. Dr. Lean had been depositing his shares with the Bank in Hong Kong since he started being its customer in 1984. In relation to such deposit of shares, the Bank maintained a system of Confirmation of Shares under which the Bank sent out to its customers twice a year at the end of June and at the end of December, Confirmation of Shares setting out the number of each share held by the Bank for that customer and requiring the customer to sign and return such Confirmation of Shares as acknowedlement of the accuracy of the number of shares held by the Bank stated in the document. The Bank sent out to Dr. Lean 2 Confirmations of Shares dated 30th June 1988 ("June 1988 Confirmations of Shares") and these Dr. Lean signed, dated 7th July 1988 and returned to the Bank. The Bank sent to Dr. Lean another 2 Confirmations of Shares dated 31st December 1988 ("December 1988 Confirmations of Shares") and these Dr. Lean signed, dated 12th January 1989 and returned to the Bank.

5. By letter dated 28th February 1989 from Dr. Lean addressed to Mr. Wong Kim Ling, General Manager of the Bank ("Wong"), Dr. Lean gave to Sister Lean the authority to transact all the shares of Dr. Lean deposited with the Bank. There is no dispute that this February 1989 authority letter was received by the Bank.

6. Dr. Lean is apparently a very careful customer who looked after his own affairs meticulously as can be seen from his three letters to the Bank dated 9th February 1988 (Telephone charges), 2nd September 1988 (Swire Shares) and 9th June 1989 (HK Bank shares) and his signed Confirmations of Shares in July 1988, January 1989 and subsequently in 1989 and 1990 as will be shown below.

7. In June 1989, Dr. Lean received the end of June 1989 Confirmations of Shares ("June 1989 Confirmations of Shares") from the Bank and theses he signed, dated 27th July 1989 and returned to the Bank.

8. In July 1989, Dr. Lean made one of his irregular trips to Hong Kong. It seems that it was during this trip that he met Candy and Kenny Kok of the stockerbroker firm, Fortnum Securities ("Broker") and he agreed to open a margin account with the Broker. For that purpose he was going to deposit shares with the Broker to enable him to do margin trading. This aspect is not controversial and Dr. Lean did not seek to dispute it. But it was suggested by Dr. Lean that during this Hong Kong visit in early July 1989 that he talked to Wong. Dr. Lean said that he indicated his concern for the safety of his shares lodged with the Bank and he wished to make sure that no one could obtain possession of his shares and he told the Court that Wong recommended Dr. Lean to limit the Bank's authority to deliver the shares to Sister Lean only and Wong asked Dr. Lean to reduce his new authority to the Bank in writing. The evidence of Dr. Lean is that the conversation was on a Saturday and he went from the Bank to the office of his sister and there and then he typed out the letter dated 11th July 1989 ("July 1989 Letter") restricting the receipt of the shares to Sister Lean. He said because it was a Saturday and he could not deliver that July 1989 Letter to Wong in the afternoon, he mailed that July 1989 Letter and he also gave a copy to his sister. Wong denied having ever received that Letter. He was not even sure that he talked to Dr. Lean about restricting authority to the sister. He did not think he had ever seen that July 1989 Letter but he is sure that the Bank had no record of ever receiving it and he said that if the Bank had received it then the Bank would naturally act on it.

9. On 31st July 1989, a substantial block of Dr. Lean's shares were withdrawn by Sister Lean from the Bank with two Withdrawal Forms dated 31st July 1989 bearing the signatures of Dr. Lean. There is no dispute that Dr. Lean authorised the release of the shares and that the signatures on the July 1989 Withdrawal Forms were genuine. It was accepted at the Trial that the shares which were released by the Bank to Sister Lean on the 31st July 1989 were given to the Broker for the operation of Dr. Lean's margin account with the Broker.

10. The Bank at the end of December 1989 again sent its usual Confirmation of Shares to Dr Lean and on 30th December 1989 Dr. Lean signed, dated 30th December 1989, confirmed the correctness of the Confirmation of Shares and returned the same to the Bank. It is to be noted that the shares released on 31st July 1989 to Sister Lean naturally did not appear in the December 1989 Confirmations of Shares and by his signing and returning to the Bank the December 1989 Confirmations of Shares, Dr. Lean agreed and Confirmed to the Bank that the release of the shares in July 1989 was authorised by Dr. Lean.

11. It is not disputed that on 3 different days in January 1990, namely on the 2nd January, 15th January and 19th January 1990, various lots of shares belonging to Dr. Lean held by the Bank were released by the Bank to a Mr. Law Man Wai ("Law"), an employee of or a person associated with the Broker, against 6 Withdrawal Forms ("6 Withdrawal Forms") bearing what appeared to be signatures of Dr. Lean. The substantial withdrawals were made on the 2^nd of January 1990 with 4 Withdrawal Forms bearing that date, whereas the withdrawal on 15^th January 1990 was for the Malayan Genting shares and the withdrawal on 19^th January 1990 was for the Singaporean OCBC shares. The Bank's case is that the signatures on the 6 Withdrawal Forms are those of Dr. Lean and that further the Bank had also obtained from Sister Lean the oral authority for such releases to Law. Dr. Lean denied the 6 Withdrawal Forms were signed by him and said that at no time did he authorise Law or the Broker to obtain these shares. Sister Lean also said that she did not authorise orally the releases of the Shares.

12. By the end of June 1990, the Bank again sent out to Dr. Lean 2 half yearly Confirmations of Shares ("June 1990 Confirmations of Shares") and these were again signed, dated 10th July 1990 by Dr. Lean and returned by Dr. Lean to the Bank. The June 1990 Confirmations of Shares are crucial because all the shares which were released in January 1990 by the Bank to Law did not appear in the June 1990 Confirmations of Shares. The vital significance of the June 1990 Confirmations of Shares will be apparent when Issue 2 is considered.

13. What happened next is also significant. Some 7 days after Dr. Lean sent to the Bank his signed June 1990 Confirmations of Shares, he sent a Telex dated 19th July 1990 ("July 1990 Telex") to Wong of the Bank. The Telex said this:-

The Bank received that July 1990 Telex and the Bank naturally complied with its mandate. What is however significant is that after sending this Telex there was no communication from Dr. Lean at all until 14th November 1990 when he wrote a letter to Wong asking for assistance as to the dates and names of persons to whom the shares held by the Bank since October 1989 were released. He also said that he would be sending to the Bank a Mr. Balti as his representative in Hong Kong and all communication about this inquiry should be given to Mr. Balti. Mr. Balti is a person from North Africa who was working for Dr. Lean in Hong Kong looking after Dr. Lean's property interests in Hong Kong. Subsequently it would seem that the Dr. Lean accused Mr. Balti of being a dubious and unreliable character.

14. There then followed steps taken by Dr. Lean to ascertain his position in the margin account with the Broker and to obtain various documents and information from the Bank and the Broker. In December 1990, Dr. Lean demanded the Broker the return of the Shares released by the Bank in January 1990 to Law. Just before Christmas 1990, Dr. Lean commenced proceedings against the Broker for the value of the January 1990 Shares. Dr. Lean's Action against the Broker did not result in any recovery notwithstanding the commencement of Winding-Up procedings against the Broker in June 1991. Demand was then made against the Bank for the return of the January 1990 Shares released by the Bank. Then in August 1991, the present Action was issued by Dr. Lean against the Bank.

Assessment of the Witnesses

15. As so much of this Action depends on credibility, I will first give my assessment of the credibility of the relevant factual witnesses before I consider in detail the Issues,

16. Dr. Lean is the key and most important witness. He gave his evidence over a number of days and at the end I formed a definitely unfavourable view of Dr. Lean. I have no doubt Dr. Lean is a very clever and capable man. In addition to being clever, he is shrewd and most significantly sharp in a pejorative sense. He is aggressive, not someone who will sit back and peacefully accept an adverse situation. He is someone who will take unfair advantage if he is given the chance. He is no doubt very much attached to money which is very important to him and he is a meticulously careful man. But he struck me also as being someone who is supremely confident of himself and prepared to take big risks. His opening a margin account with a Broker he hardly knew is merely one example of his gambling instinct. Having seen him at close quarters, I am not convinced that he is a reliable witness either as to his memory or as to his veracity. For me, he is a witness who is prepared to change his story to suit his convenience and his interest. I reject his evidence in all the material parts where they mattered and where he wished to persuade me to accept his version. In so far as they might be any conflict between his evidence and that of the Bank, I reject his evidence and prefer the case of the Bank.

17. Sister Lean is weaker and meeker but this does not mean she is more reliable than Dr. Lean. She is more truthful than her brother but then this is only relative. On the crucial aspects of her evidence such as her involvement with the oral authority to the Bank to release the Shares given, I reject her evidence and prefer the evidence of Miss Sin.

18. Wong, the General Manager of the Bank gave evidence in a somewhat confusing manner. I do not believe he is very bright but I have no doubt he is honest. In fact he is often so honest that out of sheer timidity or stupidity he would say things which are quite accurate, which are against the Bank's interest but which he said just so that he did not need to cope with the pressure of need to think. Whenever there is any conflict between his evidence and that of Dr. Lean or Sister Lean, I prefer his evidence.

19. Miss Sin is an important witness both on Issue 2 and 3. She is a delightful witness and she gave her evidence well. She is no doubt a hard working and able lady who is good at her job. I accept her as a witness of truth and I prefer her evidence to that of Sister Lean or Dr. Lean.

Issue 1- 11th July Letter Restricting Bank Authority

20. The question under this Issue is whether Dr. Lean wrote the July 1989 Letter and sent it to the Bank. I can decide that Issue very simply and easily against Dr. Lean by holding that I believe and accept Wong's evidence that the Bank had no record of ever receiving such a Letter and that if such Letter was sent it would be received and acted upon.

21. Dr. Lean said he wrote it and sent it the same day which is a Saturday and yet 11th July 1989 the date of that Letter was not a Saturday. Dr. Lean had no credible explanation as to this and this is simply one aspect of the unsatisfactory nature of the evidence of Dr. Lean on this July 1989 Letter. The existence of this Letter was nowhere referred to by Dr. Lean until at an advanced stage of litigation. It seems to me extraordinary that someone of Dr. Lean's sharp mind would overlook such an important matter and not push this Letter in front of the Bank as soon as the loss was discovered. It is also relevant to point out that at the trial despite my asking for it, Dr. Lean did not produce either his original copy of that Letter or the copy which he said he gave to Sister Lean. In my judgment, there was never such a Letter written in July 1989 or sent to the Bank as alleged by Dr. Lean. On the first Issue, I therefore hold against Dr. Lean. I hold as a fact that the 11th July 1989 Letter was never written by Dr. Lean, never sent by Dr. Lean to the Bank and never received by the Bank.

Issue 2-Release of Shares with Authority of Dr. Lean

22. Although much time had been spent at the trial on the authenticity of the signatures on the 6 Withdrawal Forms, the real question under this Issue is whether the releases of the Shares in January 1990 were with the authority and consent of Dr. Lean. The authenticity of the signatures on the 6 Withdrawal Forms is merely a means of proving the authority and consent of Dr. Lean.

23. The evidence of Dr. Lean is that he did not authorise the releases of the Shares in January 1990 and that he did not sign the 6 Withdrawal Forms. I had indicated earlier that I do not accept the evidence of Dr. Lean and I do not accept him as a witness of truth. In my view, Dr. Lean had authorised the releases of the Shares by the Bank. By his conduct, Dr. Lean had shown that he authorised the releases and that he recognised the releases as being validly made by the Bank. This is borne out by the crucial June 1990 Confirmations of Shares signed by Dr. Lean. It is not disputed by Dr. Lean at the trial that he did sign the June 1990 Confirmations of Shares and that he did send the signed June 1990 Confirmations of Shares back to the Bank. The June 1990 Confirmations of Shares clearly did not include amongst the shares held by the Bank on the 30th June 1990, those lots of different shares which were released in January 1990. The question is then why did Dr. Lean sign the June 1990 Confirmations of Shares.

24. In his Witness Statement, Dr. Lean said that he did not review the June 1990 Confirmations of Shares when he signed them. At the trial, a somewhat different answer was given. Dr. Lean admitted in evidence that he read the June 1990 Confirmations of Shares and he realised that many lots of shares from his holding were missing from the June 1990 Confirmations of Shares. His explanation is that he thought he was only signing his agreement to page 1 and that page 2 would come from the Bank later which page 2 would contain the missing shares. I do not accept either of the two explanations. It is inconceivable that a man of Dr. Lean's shrewd intelligence would have signed a document without reading it carefully. Even the most casual glance at the June 1990 Confirmations of Shares would bring home to any person (let alone someone of the sharpness of mind of Dr. Lean) that large lots of shares were missing from that document. Something as crucial as several million dollars worth of shares suddenly disappearing from his portfolio at the Bank will never escape the attention of Dr. Lean. So I do not believe the explanation given in the Witness Statement. As for the second explanation given at the trial, it is equally difficult to believe or accept. It is not essential or mandatory for Dr. Lean to sign the June 1990 Confirmations of Shares and there is no set time limit for him to do so and return them to the Bank. He could have waited if he genuinely believed that page 2 would come and that page 2 would contain the missing shares. He could therefore sign and return to the Bank the Confirmations of Shares only after he had received page 2. But all this second explanation for me is just nonsense because it would be totally out of character for Dr. Lean to wait for page 2 or to sign without page 2. If he was genuinely concerned as to the large number of shares missing from the June 1990 Confirmations of Shares, as any person would be, he could simply send a fax or make a telephone call to the Bank and ask what had gone wrong with his June 1990 Confirmations of Shares. A man as sharp as Dr. Lean would probably do more and take even more drastic and immediate steps to confront the Bank. Dr. Lean did not do so, because he knew what was set out in the June 1990 Confirmations of Shares of his shares held by the Bank, was accurate and it was for that reason he signed and sent off the signed June 1990 Confirmations of Shares. For me his signatures on the June 1990 Confirmations of Shares can only mean one thing, namely that he acknowledged that the shares not appearing on the June 1990 Confirmations of Shares had been validly released. He acknowledged by signing and returning to the Bank the documents, that he had authorised lease of the January 1990 shares. On the basis of the signed June 1990 Confirmations of Shares, I hold against Dr. Lean on Issue 2.

25. But I am fortified in my view that Dr. Lean had knowledge and approved the January 1990 Share Release because of the second step taken by Dr. Lean, namely his sending the July 1990 Telex. The justification advanced by Dr. Lean at the Trial for sending that Telex, rather than a telex asking what had happened as to cause the large lots of shares to be missing from the June 1990 Confirmations of Shares, is that he wanted to do his investigation quietly and did not want to alarm anyone and his main concern was to stop any further releases. This Telex could only be consistent with Dr. Lean not questioning the authority of shares already released. What it purported to do is to cancel the authority of Withdrawal Forms already signed and issued but not yet presented to the Bank and it seeks to put a stop to any further release based on these already issued signed Withdrawal Forms but not yet presented. This Telex suggests to me a person who is not concerned as to the lack of authority of previous releases but is only seeking to prevent future releases based on signed Withdrawal Forms. He was not concerned with lack of authority of previous releases because he knew that they were releases base on his signed Withdrawal Forms.

26. The surrounding circumstances of the withdrawal of the shares in January 1990 should also be briefly examined. It is to be noted firstly that whoever came to seek the withdrawal of the various lots of shares knew precisely the Bank's holdings of Dr. Lean's shares. How would Law know this. This was not covered in Dr. Lean's statement and it was upon my asking this question at the trial that an answer was meekly given that someone at the Broker's office must have copied the list of his shareholding which Dr. Lean took with him to his meeting with the Koks. It was for me simply a made-up story at the spur of the moment. I do not accept the explanation given by Dr. Lean that he brought to his Broker a list of his shares held by the Bank. Why would he do it unless he was giving at the same time to the Broker or shortly afterwards signed Withdrawal Forms for otherwise it makes no sense. It makes no sense for him to show a copy of the Bank's holding of his shares to the Broker. It seems to be even more far fetched for Dr. Lean to suggest that someone in the Broker's office must have secretly copied the list as though someone back in July 1989 was already planning this illegal act in January 1990. In my view, the knowledge of the exact number of each share set out in the 6 Withdrawal Forms indicate that these documents were created by Dr. Lean or with the knowledge and authority of Dr. Lean.

27. The fact that the withdrawals in January 1990 were made on three different occasions rather than on one occasion also suggests that the withdrawals were done with authority and not illegally and secretly. There was nothing secret about the withdrawals. Not only was it done openly but Law had to come back in the afternoon when the formalities were checked. If Law and/or the Koks were doing the withdrawals without authority and illegally, then this must be the most brazen kind of fraud. Why would the person perpetuating the fraud take three risks on three occasions to do the withdrawals when he could have done it on one occasion, namely all on the 2^nd January 1990. This suggests to me that the withdrawals were done with authority.

28. I find therefore as a fact that the January 1990 releases of Shares by the Bank to Law were authorised and it follows strictly speaking that the proof of the signatures on the 6 Withdrawal Forms is irrelevant. But as much evidence had been given on this aspect, I will also briefly state my reasons why I hold in favour on the Bank on this matter of authenticity of the signature.

29. On the question of authenticity, I start first with the observation that there are many common areas between the two experts and of the common areas the most relevant one is their common view that no two signatures even of the same person is identical in every way. Every person signs his signature just slightly differently every time. Common experience in fact tells us that if I am presented with 9 of my genuine signatures mixed with one forged signature and covered up the documents which bear such signatures are covered up leaving only the signatures to be seen, it would be impossible for me to tell which 9 are my genuine signatures and which one is the forged signature. The evidence suggest to me ultimately that the experts have as much difficulty as lay men in not being sure whether certain signatures are genuine or forgeries.

30. As a matter merely of impressions from looking and studying the 6 signatures on the 6 Withdrawal Forms and comparing them to the numerous genuine signatures of Dr. Lean, I must say that I would conclude that the 6 signatures in question are genuine and not forgeries. However a detailed consideration of the evidence and the material also convince me that the opinion of Mr. Radley is to be preferred to that of Mrs. Ng taking into account the following:-

In a way it is of course easier for an expert to say the signatures all appear within the range of possible variations and therefore he believes the 6 Signatures on the 6 Withdrawal Forms are genuine than for an expert such as Mrs. Ng to come out and say positively that she believed Signature 1 or 2 or 3 or whatever to be forged. But this I believe also illustrates the difficulty which Mr. Swaine has to face, namely to be able to persuade the Court in the face of his witness being not believed that the signatures of that witness are forged. In my judgment, his expert had not helped to persuade me that the signatures were not authentic. I hold as a fact that the 6 Withdrawal Forms were genuinely signed by Dr. Lean. It follows therefore that for all the above reasons stated above that the Plaintiff fails on Issue 2.

31. As a background and not as a reason for my conclusion on Issue 2, it is of interest to note that a possible explanation for what happened is that Dr. Lean was indulging in the same kind of high risk gambling (stemmed from greed) as Sister Lean did in December 1989/January 1990. The Brief for Litigation prepared by Dr. Lean for his sister reveals how Sister Lean gave her shares to the Koks for high risk profits. The timing of this was late December 1989 and January 1990, more or less the same time as the 2^nd, 15^th and 19^th January 1990 dates of the 6 Withdrawal Forms. Being a gambler and greedy, Dr. Lean could be an investor who gave his shares to the Broker/Law as did his sister. This would fit in with everything and would provide much of the explanation for the way he acted and the timing of his actions.

Issue 3-Oral Approval by Sister Lean

32. As I have found against Dr. Lean on Issue 1 and 2, I will briefly state my conclusion on Issue 3 even though strictly speaking, it is not necessary to consider this Issue. The evidence shows that Sin and Sister Lean have totally different recall of the events of January 1990. Sister Lean said she was never contacted by the Bank or Sin and she certainly did not give any oral approval of the Bank's releases of shares to Law. Sin said she did contact Sister Lean as she had previously dealt with her when the July 1989 releases took place and because Sister Lean was given authority by the February 1989 letter to deal with his shares. As I indicated earlier, I found Sin to be a good witness and I prefer her evidence to that of Sister Lean.

33. There is one aspect of the case which I must mention apart from the general credibility of the two ladies and that is the so called after-event remedial steps taken by Sin. It is of course true that Sin took extra steps vis-a-vis the Broker and also in relation to the notations put on the 6 Withdrawal Forms. But I do not find anything sinister in what she did and I accept her explanation of the steps taken by her. There is in my view nothing in the criticism made against her and notwithstanding the steps she had taken after the events, I still find her a truthful witness and I accept her evidence. I find as a fact that Sin of the Bank did obtain on each occaasion in January 1990 the oral approval of Sister Lean to release the shares to Law. It follows therefore that the Bank also succeeds on Issue 3.

34. In my judgment, the Bank is justified in releasing the shares in January 1990. The Action of the Plaintiff must be dismissed and the Third Party claim therefore does not arise. The Plaintiff must pay the costs of the Defendants in the Action as well as the costs of the Defendants in the Third Party proceedings.

Representation:

Mr. J.J.E. Swaine instructed by Messrs Vivien Chan & Co. for the Plaintiff and the 1st Third Party

Mr. Warren Chan, S.C. and Mr. M.K. Liu instructed by Messrs Lo and Lo for the Defendants