William White Brian Henry Witcombe and Another v. Dr Pr Rao

HCA000326/1974

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO.326 OF 1974

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Coram: Trainor, J.

Date of Judgment: 19th November, 1976.

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JUDGMENT

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1. The plaintiffs are a firm of stockbrokers, and the defendant was one of their clients. On the 31st January, 1974 the plaintiffs caused a writ to be issued against the defendant claiming $138,970.55 being money due for work done and money paid in the buying and selling of shares, and for interest thereon. Paragraph 4 of the Statement of Claim reads:

"The Plaintiffs have charged and the Defendant has accepted interest at the current rate charged by the Plaintiffs on their outstanding accounts. The current rate of interest charged by the Plaintiffs is 13% per annum."

2. Properly to set the back-drop to this case I think it is necessary to quote from the Defence that was delivered by the defendant, and endorsed as filed on the 6th March, 1974, and some of the multitude of amendments that were made to it:

3. Paragraph 5, admitted paragraph 4 of the Statement of Claim but denied that the plaintiffs were entitled to interest. The Defence continues:

14. If, which is denied, the Plaintiffs are entitled to relief as claimed or at all, the Defendant will set-off the damages to which he is entitled against such relief in abatement or extinguishment thereof and seek to recover the excess by way of counterclaim."

4. It would appear from that that the defendant is alleging that pursuant to the agreement between the parties the plaintiffs were under an obligation to the defendant forthwith to sell all securities held for him should the value of those securities fall below the permitted margin and the defendant fail to deposit a sum of money to reduce the margin to the agreed level. There appears to be two further grounds in this confused and somewhat contradictory pleading. The first is that the defendant gave instructions on or about the 29th March, 1973 to the plaintiffs, through Mr. Robins, forthwith to liquidate the shares held as security and the plaintiffs failed to do so. The somewhat contradictory element is that the peremptory order is qualified by the instruction that the liquidation was to be in accordance with Mr. Robins' skill and judgment. The other ground appears to be that the defendant relied on the plaintiffs to exercise reasonable skill and judgment which they failed to do by not selling his shares; but it is not easily discernible as to whether the sale should have been effected when the margin limit was exceeded or on the 29th March. The defendant counterclaimed and I considered two paragraphs of the Counterclaim to be of the greatest importance in assessing the overall position of this case. The paragraphs read:

"17. The Plaintiffs have purchased certain shares as set out below on behalf of the Defendant without being instructed to do so by the Defendant.

18. The Defendant also claims the purchase price of the following shares which were transferred from the joint account with his brother Mr. P.R. Tilak to his first account with the Plaintiffs. The Plaintiffs have failed or refused to deliver the said shares to the Defendant, and have failed to credit his account in respect thereof.

5. It is, I suppose, pointing out the obvious to say that it is to be assumed that that Defence was drafted on the instructions of the defendant and did not emanate from the imagination of the draftsman.

6. On the 22nd November, 1974 the Defence was amended. Paragraph 5 of the original Defence, which admitted that the plaintiffs had charged and the defendant had accepted interest to be at the current rate of 13% as set out in paragraph 4 of the Statement of Claim was deleted and the following substituted:

7. Paragraph 7 of the original Defence was deleted and a new paragraph, paragraph 8, was substituted. This paragraph set out with precision the basis on which the defendant alleged he dealt with the plaintiffs. In it the defendant said that he commenced dealing with the plaintiffs on the 27th April, 1972 on the basis, and this I considered of importance, that he would orally instruct Mr. Robins to buy or sell shares, or that Mr. Robins would suggest buying or selling and the defendant would orally instruct him how to act. It alleges that in January 1973 the credit of $100,000 afforded the defendant was increased to $400,000.

8. Paragraph 10 of the original Defence was deleted and new sub-paragraphs(a), (b) and (c) were added to paragraph 9. In those sub-paragraphs the defendant stated that by a letter dated the 22nd March, 1973, the plaintiffs informed him: that he had a debit balance in excess of $2,000,000; that he had no right to have any margin; and to take steps to bring his account into order. The defendant alleged that in compliance with that letter and in order to terminate his dealings with the plaintiffs he instructed Mr. Robins about the 29th March to sell immediately all stocks and shares held on his behalf by the plaintiffs. He said Mr. Robins undertook to make the sales immediately.

9. Once again I draw attention to the departure from the original Defence. There is not the reference there to the skill and judgment that Mr. Robins was to exercise in carrying out the instruction to liquidate the shares forthwith as originally alleged.

10. The amended Defence sets out three groups of shares alleged to be held to the order of the defendant (I do not think it is necessary to go into the reasons for the shares being in three groups) which it is alleged should have been sold immediately.

11. Paragraph 12 of the original Defence was deleted and in the paragraph substituted there for it is alleged that the plaintiffs failed to carry out the defendant's instructions to sell immediately his holding in that some shares were only sold over a period stretching from the 29th March to the 3rd August, 1973; and the 20,000 Kao Shing shares, 30,000 World Wide shares were never sold nor were 22,000 Wah May shares.

12. The Defence then pleaded that the plaintiffs were in breach of contract and were not entitled to the relief claimed, and were liable to the defendant as he had suffered damage "by reason of such breach, namely deprivation of the proceeds of such stocks and shares which would be due to him if the same had been liquidated with reasonable skill and judgment either immediately on as soon thereafter as is practicable".

13. The counterclaim was also amended. The allegation in the original counterclaim, paragraph 17, that the plaintiffs had purchased 20,000 Kao Shing shares without instructions was deleted, as was paragraph 18, that the plaintiffs had failed or refused to deliver 30,000 World Wide shares to the defendant or oredit his account in respect thereof. The new paragraph 17 set out what all the shares (including the Kao Shing and World Wide) would have realised on the 29th March "and taking into account such further market days as may be deemed reasonably necessary for shares not traded daily ....". From the figure arrived at is deducted the price realised on the shares actually sold and the balance, $778,901.60, is counterclaimed together with interest.

14. The plaintiffs delivered a Reply and Defence to the Counterclaim. Among other things the plaintiffs referred to the written agreement of the 28th April, 1972 referred to in paragraph 6(b) of the defendant's amended Defence and pleaded that the plaintiffs had the right to adjust interest rates according to that document. (It might be mentioned here that the last sentence of the first paragraph of that letter reads: "We reserve the right to adjust interest rates as market conditions dictate"). It went on to state that circulars in standard form were sent to the defendant from time to time as interest rates were adjusted and that he was duly notified that the rate had been increased to 13%. The plaintiffs denied that the defendant gave instructions to Mr. Robins to sell all his shares immediately, and alleged that it was only on the repeated persuasion of Mr. Robins that the defendant agreed to instruct the plaintiffs to sell. As to the 20,000 Kao Shing shares and the 30,000 World Wide shares the plaintiffs pleaded they never held them as collateral security, or at all.

15. There were other matters pleaded in the Defence and dealt with in the Reply but having regard to the judgment I pronounced I do not propose to go into them.

16. The defendant re-amended his Defence on the 16th July, 1975. So far as my decision was concerned the only matter of importance in the amendment was that the defendant added 10,000 Michaelson shares to the list which he alleged the plaintiffs held for him and did not sell and claimed a further $75,000.00 in respect of them.

17. The plaintiffs delivered an amended Reply and Defence to counterclaim. In it they stated that they received 20,000 Michaelson shares from the defendant on the 1st February, 1973, sold 10,000 of them for him on the 14th February and returned the sorip for the remaining 10,000 about the same day.

18. It can be seen, therefore, that the defendant initially instructed his solicitors that the plaintiffs had purchased 20,000 Kao Shing shares without being instructed so to do. This allegation was withdrawn in the first amended counterclaim and in substitution therefor it was simply claimed that they had not been sold. It will also be seen that the claim for 30,000 World Wide shares was persisted in, and that was the position until the case reached court on the 3rd May, 1976. It should, however, be noted that by a letter dated the 31st March, 1976 the defendant's solicitors advised the plaintiffs' solicitors that at the hearing an application would be made further to amend the Defence by reducing the number of World Wide shares claimed from 30,000 to 4,000. This was duly done, and it was conceded during the hearing that 26,000 of the shares had been delivered to the defendant and sold by him through another stockbroker. But he maintained, almost to the death, that he had never received the remaining 4,000 or their value. In the same letter the plaintiffs' solicitors were informed that the claim with respect to the 10,000 Michaelson shares, added to the counterclaim when it was further amended, was to be abandoned and that an application further to amend to this effect would also be made. The defendant in his evidence told me that after the re-amendment his secretary discovered that he had in fact received the Michaelson shares and sold them, but I shall deal further with that later.

19. Other amendments to the Defence were aprlied for in Court but they related to the values of shares and monies received when the shares were sold but, although they reduced the defendant's counterclaim by approximately $200,000, they did not affect my decision.

20. When the case came on for hearing counsel for the defendant conceded that the sum of $138,970.55 claimed by the plaintiffs was owing subject to the defendant's claim to set off and his counterclaim, and Mr. Eddis opened the case for the defendant.

21. The issues before the court, then, were:

22. The defendant told me he commenced dealing in shares towards the end of 1971, and before engaging the plaintiffs to act for him in April, 1972 he had availed of the service of a firm called Kevin Securities and as he put it, "a couple of others" whose names he had "unfortunately" forgotten (though he subsequently remembered them on cross-examination). He said he went to the plaintiffs on the recommendation of friends and there met Mr. Robins. He said they had a general discussion including the question of margin facilities. He was asked what was the basis on which the client/stockbroker relationship between them was to proceed and he told me that as he was a novice and Mr. Robins an expert Mr. Robins would tender advice which he would carefully consider. He said he was interested simply as a speculator, and the registration of shares in his name was of no interest to him. He said "I was dealing with them on a margin basis so they would handle the shares for me. They would hold them and sell it according to my instruction". I interpreted that to mean that he would carefully consider any advice Mr. Robins would give and having done so he would direct Mr. Robins what to do. The defendant admitted receiving the letter of the 28th April, 1972, the agreement referred to in paragraph 8(b) of the final Defence. It reads as follows:

23. The defendant said that in 1972 he exceeded the limit of $100,000 from time to time without comment from Mr. Robins. At the end of January, 1973, however, his debit balance had risen to $358,985.30 and in February it had further risen to $1,697,000. The defendant said that at this time there "possibly" were discussion between himself and Mr. Robins about the situation. In any case, and undated handwritten letter was sent by Mr. Robins to the defendant:

24. It was assumed by Mr. Eddis, if I understand him correctly, that this letter indicated an authorisation by Mr. Robins of increased margin facilities up to $400,000, an authorisation which, on his evidence, Mr. Robins had no power to grant. With respect, I cannot accede to Mr. Eddis' interpretation. The letter, with its mistakes, merely states what is the limit the plaintiffs are prepared to grant to their clients generally: up to $400,000. There is nothing to suggest that the margin facilities to the defendant were changed Be that as it may, the letter which must have been sent about the 22nd February, produced little result. The defendant's indebtedness was reduced to $761,894 by the 24th but increased thereafter until the 22nd March when it had risen to about $1,600,000.

25. On the 22nd March, 1973 a Mr. Witcombe, of the plaintiffs, telephoned the defendant. The defendant said he was shocked when Mr. Witcombe told him the amount owed and said that he had no margin facilities. He said he told Mr. Witcomber he could not make head nor tail of what he was saying. He said he was very angry as Mr. Witcombe did not take into account two recent payments amounting to $600,000, and 8,000 shares in Asia Insurance delivered for sale. The defendant said he asked Mr. Witcombe to write to him. This Mr. Witcombe did as follows:

26. Enclosed with the letter was a rough, handwritten statement of the defendant's indebtedness and a similar statement of the securities held. The defendant told me that when he got the letter he was very cross. He said he could not understand the substance of the letter and the statement of the account did not take into consideration two payments of $300,000 each nor did it make allowances for the proceeds of the sale of the 8,000 Asia Insurance shares. He said the position of the margin advance had been mentioned on the phone, but that he had not made any comment when Mr. Witcombe referred to it. The defendant summed up the position by saying he considered the conversation and the letter were based on ignorance and he did not want to speak to Mr. Witcombe about it further, but intended to see Mr. Robins.

27. In fact the accompanying statement made full allowance for the Asia Insurance shares as could easily be seen, but not for the $600,000. Taking that omission into consideration the amount in the letter stated the position very accurately as the plaintiffs' statements of account show.

28. On receipt of the letter the defendant went to see Mr. Robins who was in hospital. He said he told Mr. Robins he was "fed up" with the whole position and wanted him to liquidate his entire holdings as soon as he left hospital. He said that Mr. Robins was sympathetic and said that what had happened was no way to treat a professional man. He said Mr. Robins expected to leave hospital in the next week, so he told Mr. Robins to contact him then and he would repeat the instructions to sell. He said he tried to telephone Mr. Robins on the 27th but was informed he had not returned. He did, however, contact Mr. Robins by telephone on the 29th. The telephone call, he said, was made at about 9.45 a.m. in the presence of a patient, a Mr. Thakore, and in the hearing of his secretary, Mrs. Wu. He said he was angry at having to wait almost a week to hear from Mr. Robins and he told him in a loud voice that he was to sell his "entire holdings at once". He said the conversation was brief and that Mr. Robins was co-operative and said "I will try".

29. That answer "I will try" I considered of importance. I was told by the defendant that there was no difficulty at that time in selling shares; I think he said it was "as easy as dropping off a log". Mr. Robins also said there was no difficulty in selling the shares at that time. I was at a loss to understand how a man, confessedly so angry that his voice was raised, should so placidly accept that reply to a peremptory order to sell his holding of shares.

30. It might be helpful to have a glance at the other side of the picture. Mr. Robins was called by the plaintiffs. He is a man of considerable experience, it would appear, in the financial world. In 1962 he joined the Hong Kong & Shanghai Bank in London and was with it until 1970. During that time he was in the Registrar's department and dealt with such things as transfers of shares, and bonus issues. In 1966 he was transferred to the Securities Department as assistant to the investment manager, during which time he was in daily contact with clients and stockbrokers. He advised on buying and selling shares and became familiar with the London Stock Exchange, and the Hong Kong Exchange also.

31. In 1970 he was employed by the plaintiffs firm and was initially engaged in advising clients who wished to deal in Australian and overseas shares, and buying for them. From the beginning of 1970 he was authorised to sign documents including contracts, though they were normally reserved for execution by Mr. White on Mr. Witcombe. He was authorised to sign letters, but not to grant margin facilities or sign letters granting such facilities. He told me that if a client sought such facilities he would put the case before Mr. White and later, I presume if Mr. White agreed, refer the matter to Mr. Witcombe.

32. Towards the end of 1972 Mr. Robins ceased to be an employee of the plaintiffs and became what is called a "Runner". This meant that on introducing a client he received ¼% of the consideration for which the shares were bought or sold. When his status changed he retained an office with the plaintiffs and he informed all those persons with whom he had dealt of the change. Among those informed were the defendant and Mr. Thakore.

33. Despite the change Mr. Robins continued to assist in the office work of the plaintiffs and to sign cheques and contracts as previously.

34. Mr. Robins first met the plaintiff on the introduction of Mr. Thakore, a client of the plaintiffs and at the time sub manager of the Bank of India in Hong Kong. He said that he concluded the defendant was a client of the bank and as he was introduced by the sub manager he considered him a first class risk. He said he considered the defendant to be conversant with the operation of the stock exchange. He said he could not remember a specific conversation with the defendant about margin facilities but was satisfied there was such, in which circumstances he would have put the matter to Mr. White and would also have notified Mr. Witcombe. That the defendant was granted the margin facilities set out in the letter of the 28th April, 1972 he had no doubt

35. Mr. Robins said that at the end of January 1973 the volume of trading generally had increased considerably and the defendant was trading very substantially. He said the result of the general increase was that the posting of accounts fell into arrears and it was impossible properly and promptly to check them. He said he was constantly on the phone from 8.30 a.m. until 7.30 p.m. after which he did his paper work; this included hand-written letters to clients. Indeed, the witness said, on occasions he spent the whole night in his office, and worked every week end.

36. Mr. Robins said that the plaintiffs introduced a "crash programme" early in 1973 to bring all accounts, including the defendant's, up to date. He said that although he was not keeping a constant check on the defendant's account he was aware that he was operating beyond the limit, and frequently reminded him of it. He said that as a result of the orash programme it was discovered that on the 22nd February the defendant was indebted to the plaintiffs to the extent of $1,059,978. Mr. Robins said he contacted the defendant immediately about this and as a result $300,000 was paid in two days later. (This is one of the payments of $300,000 to which I have earlier referred). About this time the plaintiffs decided to have all margin accounts regularised and limited to $400,000 as a result of which Mr. Robins wrote the undated letter which I have already quoted.

37. Mr. Robins said that the defendant came to see him in hospital and showed him the letter from Mr. Witcombe. The defendant was annoyed about the writer saying he had no margin facilities and asked the witness for advice. The witness said he told the defendant the letter was in error on that. He said he explained to the defendant the seriousness of the situation generally: the professional investor was getting out of the market and people were coming in who had not been investors before. He said he told the defendant he was "bearish", or pessimistic, about the market and that he felt the defendant would have to sell. He said the defendant, like so many others, was optimistic and seemed loath to do so and he, Mr. Robins, tried to stress that the defendant had no alternative. The witness said he advised the defendant to see Mr. Witcombe and he agreed so to do.

38. Mr. Robins said that on his return to the office on the 26th March he enquired if the defendant had contacted Mr. Witcombe and having ascertained that he had not he telephoned the defendant. He said the defendant gave no reason for not contacting Mr. Witcombe. The witness said he did most of the talking and pointed out, inter alia, that the account could not be debited any further. His great concern, he said, was that the defendant sell. His concern for all his clients was such that after the close of business on the Hong Kong Stock Exchange on the 26th he phoned all his clients and told them he was bearish about the future. (It will be remembered that the defendant said he tried unsuccessfully to contact Mr. Robins on the 27th and only succeeded on the 29th). He said he received orders from the defendant during that week to sell and did sell shares, but he never received an order on the 29th March to sell all the defendant's shares. He said he would have welcomed such, an order as the defendant was in debt in excess of $2,000,000.00 and the value of his holding was about $2,500.00. As he put it there was no lee-way should the market drop sharply.

39. Mr. Robins told me that he was concerned for the defendant personally as well as professionally: he stood to lose a lot of money. He said there would have been no difficulty in selling all the defendant's shares, on the 29th March and he would have earned the not insignificant commission of ¼% on the sales affected on the Hong Kong Stock Exchange. He said, however, he never got such instructions, nor did he ever receive any complaint from the defendant that all his shares had not been sold.

40. Mr. Robins referred to the letter which he wrote to the defendant on the 29th March and said this was written after the market closed. I have quoted that letter earlier, it is the letter in which the witness said he was writing it to keep the defendant "up to date with events regarding your account". It referred to certain transactions, and in particular to a sale of shares that day. With regard to that sale there is the observation "....... I had to effect this transaction in view of payment being called for". It occurred to me to ask myself, why should the writer give such an explanation for the sale of one block of shares to the person who, that morning, had given instructions, in a raised voice, to sell everything immediately. The letter finishes with an invitation to the recipient to telephone to the writer if he did not understand the position or had any problems.

41. The witness said that he received instructions from the defendant on the 2nd April to sell certain shares at the best price available and he did so and sent the relevant sale document to him. He said he received no query with regard to the letter of the 29th March, nor was any complaint made on the 2nd April that the entire holding had not been sold on the 29th March.

42. Let us now consider what the defendant said of those days. He said that he did not check up later on the 29th nor on Friday the 30th as to what had happened. He said that he had made arrangements to go to Japan with his wife for a holiday and had arranged for a locum tenens. That doctor took ill and he was frantically looking for a replacement. He said the letter of the 29th March was delivered by hand but he did not read it. When asked why, he said "At that time when I gave him the liquidate order, .... selling anything was like dropping off a log. I didn't think they would have the slightest difficulty in getting rid of my holding. So having given them the order to sell I wanted to forget about it. I had a lot of other problems at that time in my mind". The defendant went on to explain that he had very large properties in Burma and that he had received information that the caretaker had been arrested, and that he did not know what this man would say under pressure. Moreover, he did not know what was the position with regard to his assets in that country. However, he went off to Japan, and he explained that he felt he could deal with his problem in Burma better in Tokyo where Burma was diplomatically represented. It might be noted, however, that in March, 1973, and before, there was a Consul-General for Burma in Hong Kong. But, and I thought this to be of importance, between the 29th March and his departure to Japan the defendant said there was no communication between him and Mr. Robins and he did not try to contact him.

43. He said he telephoned Mr. Robins on his return on the 19th April. He said that he learned that some shares had been sold, as notes of sale had been sent to his surgery during his absence, and he expected to hear that all had been sold. He said that he was told, to his disappointment and frustration, by Mr. Robins that he had done his best to sell all but it had been possible to sell only some shares but not others, and not to worry. He said he knew what shares had been sold but he did not know what had not been sold though he had a vague idea. The defendant said he did not discuss the market with the plaintiffs nor did he challenge Mr. Robins on his failure to sell.

44. There was some doubt as to when in fact the defendant went to and returned from Japan but after this evidence was concluded it was established that he left Hong Kong on the 12th April and returned on the 24th and not on the 19th as he said. In other words between the 29th March and the 12th April the defendant was in Hong Kong and information of sales was delivered to the defendant, but he made no effort to contact Mr. Robins.

45. I would have expected the defendant to have bristled with indignation if, having given explicit instruction to sell his shares immediately in a market in which there was no difficulty in selling, he found his instructions had not been carried out. Had he given those instructions he would have been perfectly entitled to be very angry indeed as the market was falling considerably at the time. But he did not do anything, not even to establish what shares remained unsold and what were the prospects of the market and the possibility of selling them.

46. I have reviewed the evidence of the defendant and the principal witness for the plaintiffs concerning the period from 22nd March to 24th April in order to set the background and establish the atmosphere against and in which I had to decide had the defendant established that he had given explicit instructions to the plaintiffs to sell his share-holding immediately. May I say that I had not a moment's hesitation in accepting Mr. Robins as being a witness of unquestionable veracity. Some of his answers appeared vague, and at one time I thought his vagueness would have a serious impact on his reliability as a witness, but facts, subsequently conceded, and with which I shall deal later, confirmed that, while the organisation in the plaintiffs' firm might have left a lot to be desired, Mr. Robins was in fact telling the truth.

47. When the defendant received the letter of the 22nd March from Mr. Witcombe one can easily understand some of his indignation. However, I felt that he overdid it somewhat when he told me of the effect on him. There were three things that annoyed him he said: no allowance for the two payments of $300,000; the allegation that he had no margin of oredit; and that no allowance was made for certain shares he had left with the plaintiffs for sale. As I said earlier an examination of the hand written account enclosed with the letter would have shown that an allowance for the shares had been made. I was at a loss to understand how a man like the defendant who got a letter saying he owed more than $2,000,000, and an account to show how, and who did not believe he owned nearly so much, could fail to scrutinise that account and, if he did so, miss the reference to the sale of those shares. It was typical of various unfounded allegations carelessly and recklessly (if not worse) made by the defendant from the beginning of the proceedings. The abandoned allegation that the plaintiffs purchased 20,000 Kao Shing shares without instructions is the earliest example. As to the margin facilities he had the letter of the 28th April.

48. However, when the defendant saw Mr. Robins in hospital he was assured that he had a margin allowance. Indeed, the defendant was in possession of the letter of 28th April, 1972, the basis of the business relationship between him and the plaintiffs, as he pleaded in his amended Defence, which confirmed that. What was more natural than for Mr Robins to advise the defendant to see Mr. Witcombe and point out the position to him? Particularly was this so as Mr. Witcombe had asked to be advised by the 24th March what action the defendant intended to take to bring the account into order failing which such action would be taken as might be considered necessary. In view of that threat one could understand the defendant's attitude being let him sell if he likes; but if he was as incensed as he says it is difficult to understand him instructing Mr. Robins to sell when he came out of hospital, since it was not known when he was coming out of hospital, and adding that Mr. Robins should telephone him when he got out of hospital and he would repeat the instructions.

49. I believed Mr. Robins' version of what took place that he told the defendant of the seriousness of the position and advised him to sell. I believed him when he said that on his return to his office on the 26th March he telephoned the defendant when he discovered that the defendant had not contacted Mr. Witcombe. A characteristic of Mr. Robins which struck me was a genuine concern for his clients. When he told me that on the evening of the 26th March he telephoned all his clients to tell them that he was bearish of the market, as professional dealers were getting out, and they should sell I believed him and I do not think he overlocked the defendant.

50. I have referred earlier to the experience Mr. Robins had in the financial world. Is it likely that such a person had he received an imperative order to sell would have ignored it; particularly in a market of which he had a pessimistic opinion? I just do not believe it. To look at the position from the lowest point of view there was a hand some commission as a reward for carrying out the instructions. On the other hand there was the possibility of a claim for damages if he failed to carry them out should the market fall. I cannot visualise Mr. Robins turning his back on an easily gained commission to risk the possibility of considerable damages being awarded against him or the firm with which he was associated. To add to that there was the attitude of the plaintiffs to be taken into account as indicated by Mr. Witcombe's letter. Further, there was the possibility of a very considerable loss to the plaintiffs if the market should decline and it was forced to sell the shares of the defendant they held as security.

51. Mr. Eddis in his cross-examination and address suggested that Mr. Robins had in some way held himself out to be a partner of the plaintiffs and sent the letter of the 28th April, 1972 without the plaintiffs' knowledge or consent. Some support for this is to be found in Mr. Robins' admission that he had no power to authorise margins nor sign letters of such authorisation though he did have authority to sign, inter alia, circular letters. There is no doubt that he did sign the letter of the 28th April but I believe he did that in error. The letter to which I have referred was sent with another letter of the same date. It informed the defendant that the plaintiffs in order to fix an equitable service for all clients and set a limit to the maximum facilities they would afford clients and went on: "Details of this limit and the conditions attached thereto are set out in the accompanying letter (i.e. the letter of the 28th April). We ask you to sign one copy and return it to us the other copy should be retained for your records". I do not believe those letters would have been sent out if no arrangements had been made for the defendant to have been sent out if no arrangements had been made for the defendant to have margin facilities. If no such facilities had been authorised Mr. Robins was leaving himself wide open to the reaction of his superiors were the enclosures signed and returned. The defendant admitted receiving those letters but said he did not sign and return a copy.

52. In my opinion the failure of the defendant to sign and return the copy explains Mr. Witcombe's observation in his letter of the 22nd March, 1973 ...... we are unable to trace in our records having agreed to make you a make you a margin advance of any amount whatsoever ....". Moreover, the format of those letters, and the absence of any saluation suggest that they were a stereotyped document for general use, like a circular, to which was added the name of the addressee.

53. I believe that Mr. Robins did get authority for the margin set out in the letter pleaded, but that Mr. Witcombe overlooked this by reason of the absence of the copy signed by the defendant. The existence of margin facilities was however acknowledged by a letter from the plaintiffs dated the 27th July, 1973 although it places the limit at $85,000.

54. When the defendant gave evidence I was of the impression he left for Japan in the week following Thursday, 29th March. Had this been so his inactivity so far as the sale of his shares was concerned might have been understandable, but as I said earlier, it transpired much later in the case that he went to Japan on the 12th April. I could not accept that he was unaware of the contents of the letter of the 29th March during that period. Moreover, shares were sold during that fortnight and he was notified of that. For example 2,000 Slater Walker shares were sold on the 2nd April leaving a balance of 3,000 which were not sold until the 11th April. Other shares were sold on the 3rd April and on the 6th, but many still remained unsold.

55. The impression the plaintiff endeavoured to convey was that he took it for granted that everything would be sold; and between the 29th March and his de arture he was oblivious of what was happening. He said he did not see any Sold Notes until his return from Japan. Having regard to what I was told of the method of dealing on the Stock Exchange and in particular Mr. Robin's evidence that "Sold Notes" and "Bought Notes" are immediately sent out to clients and the defendant's admission that he saw them, but after his return from Japan, I was satisfied that Sold Notes reached the defendant in the fortnight before his departure. I do not believe that his concern for his affairs in Burma would have kept him from taking action if he found his shares were not being sold, at a time when it was so easy to sell them, had he given the imperative instructions he would have me believe he gave. The unsold Slater Walker shares on the 3rd April represented $45,000, (they were sold on 11th April for $26,000) a substantial sum of money. One would have thought that the worries of Burma would have stimulated a concern for his finances generally.

56. Earlier I referred to some vagueness in the evidence of Mr. Robins. This was particularly so when dealing with the shares of 30,000 World Wide shares and the 20,000 Kao Shing shares. The vagueness and unsatisfactory element was that he maintained that he had handed over those shares to the defendant and received receipts for them but no receipts were produced. He was adamant, however, that receipts were received. The defendant was equally adamant that he had not received any of the Kao Shing shares, and only 26,000 of the 30,000 World Wide.

57. Let me depart from then for a moment and examine the evidence of the defendant regarding his activities on the Stock Exchange. It was his evidence that he was a neophyte; that he was simply a speculator and even at the time of the hearing his knowledge of the stock broking business was minimal. He said his sole idea was to buy shares and sell them at a profit. (May I say that when I discovered that he had availed of the services of about half a dozen different brokers who bought thousands of shares for him worth millions of dollars - with one of whom he had margin facilities up to a limit of $100,000 - I was somewhat sceptical of his protestations of innocence and ignorance of the stock market). At an early stage in his evidence he said he did not keep any record of his purchases or sales when dealing with the plaintiffs. On his return from Japan he said he had only a vague idea as to what his position was when he received sold notes for the shares sold when he was away. But later he admitted he did keep a record of his share-holdings and this enabled him to realise that the list of his holdings sent by Mr. Witcombe on the 22nd March, 1973 was incomplete. When cross examined by Mr. Jackson Lipkin as to why that list was not disclosed on discovery his answer was: "(It) is for my own personal knowledge, sir. It is not meant for an exhibit in this Court.". Later, his contradictory answers were pointed out to him and he was asked to explain. His answer was "I did not keep detailed records referred to, but I had a vague idea about what the situation was". Again, later, he said "I cannot really swear to-day one way or the other. I knew that the shares were missing, that's it. I can't definitely say whether I had this complete list, I had a list and I knew the shares were missing, but, I am not very certain about the details". I considered that on this matter, not by itself of startling significance, the defendant was prevaricating. But taken in conjunction with other elements of his evidence it assumed a larger dimension.

58. I return now to the World Wide shares.

59. The defendant it will be remembered amended his claim for World Wide shares from 30,000 to 4,000. This, he said, was as a result of finding a page from a loose-leaf desk diary. Mr. Taylor, the solicitor handling the defendant's case gave evidence concerning the amendment. He told of a phone call from the defendant to say he had discovered a page from an old desk-diary on which was noted "W.W. sold 26,000". He told of a record of a subsequent phone call in which the defendant said that he thought that "W.W." meant "World Wide". The page of the diary was not included in the list of documents discovered but when it was produced in Court it did not have "W.W. sold 26,000" but "World Wide Sold 26,000". In addition it had the words "balance to receive - 4,000". The date of that day was the 11th January, 1973. It ultimately transpired that the defendant had received the 4,000 shares and had given them to a stockbroker to be sold; and they were. Indeed, a cheque dated the 24th January, 1973 was given to the defendant for the proceeds and cashed by him. That fact was only discovered towards the end of the case and long after the defendant's evidence had been completed. In fact the defendant had received 20,000 of the shares on the 4th January and 10,000 on the 5th.

60. I found it difficult to believe that the defendant could have been in doubt as to what World Wide shares he had received from the plaintiffs. I did not believe that he made an entry on his diary to say he had only received 26,000 World Wide shares and that there was a balance of 4,000 to be received one week after he received the entire 30,000.

61. I was satisfied that the defendant was lying about the entry in the diary. He received the 30,000 shares, as finally conceded, and that fact corroborated the evidence of Mr. Robins who had maintained throughout that those shares had been given to the defendant, despite the absence of a receipt.

62. I think it is of some importance to recall here the Michaelson shares. That was another example of the defendant originally claiming for shares for which, he said, the plaintiffs failed to account. When the counterclaim was amended to include them it was when the case had been under way for some time. It was at a time when the defendant had every opportunity of checking the position before adding it to his claim. Whether or not he did so I do not know but much later he abandoned the allegation because, as he said, he was reminded by his secretary (a Mrs. Wu to whom I shall later refer) that he had received and sold them through a friend of hers. That, together with the World Wide incident demonstrates how utterly unreliable the defendant was generally.

63. As I said earlier, Mr. Robins maintained that the defendant never gave him instructions to liquidate his holdings. An inter office memorandum dated the 20th June, 1973 from Mr. Robins to his colleagues in the office of the plaintiffs was produced. Referring to the account of the defendant Mr. Robins wrote: "We hold 1,200 Bank Ldn. 22,000 Wah May. I intend to sell the Wah May as soon as there are dealings and suggest holding Banks until market improves". Another memorandum dated 10th July, 1973 addressed to Mr. Witcombe referring to the defendant reads:

When market picks up sell him out and clear account. He wanted us to keep his holding of Banks as he has been wiped out I have said No."

Those documents certainly do not suggest that the writer already had imperative instructions to sell. On the contrary they indicate that the writer is suggesting that the shares should be sold on the initiative of the plaintiffs despite the wishes of the defendant. There is of course the possibility suggested by Mr. Eddis to be considered: That Mr. Robins was himself a gambler and a person activated by a desire to exalt himself. Mr. Eddis suggested that Mr. Robins held himself out as a member of the plaintiffs firm and, in order to impress the defendant, offered him credit facilities which he had no right to grant. He suggested that Mr. Robins allowed the defendant to trade far in excess of even the credit he had said was permitted in order to impress the client, and for his own benefit. He suggested that the plaintiffs were left in ignorance of the position. Mr. Eddis said that even after a memorandum from the plaintiffs to various Runners, including Mr. Robins, directing that credit margins be restricted to a maximum of $400,000, Mr. Robins in disregard of it permitted the defendant to trade far in excess of that margin. He suggested that Mr. Robins had received imperative instructions from the defendant to sell everything but, believing that the market would improve, he refused to carry them out expecting to show the defendant how knowledgeable and clever he was thereby acquiring his very valuable client's gratitude for the unexpected increase to his wealth. Against that background, Mr. Eddis suggested, those memoranda were written by Mr. Robins as a cover up for his failure to comply with the defendant's instructions.

64. Mr. Robins indignantly rejected the suggestions.

65. I did not for an instant accept as approaching the truth of the position any of those suggestions. It might be noted that at the time when the letter offering the margin facilities was sent Mr. Robins was an employee of the plaintiffs. Every transaction had to go through the plaintiffs' accounts and did. Mr. Robins, as I saw him, was neither a fool or a knave. He certainly was not the person who would jeopardise his position with the plaintiffs when he was an employee, nor the relationship that prevailed after he became a Runner for the reasons suggested.

66. This case was set down for five days. It commenced on the 4th May of this year and continued until the 7th when it was adjourned to the earliest available date, the 2nd November. It ended on the 19th November when I announced my decision. During the hearing over a thousand documents were produced and about 10 witnesses were heard. It is, I think, to be deplored that a case of such dimensions should have to be heard in two parts separated by six months. That the Clerk of Court was informed that the case could be disposed of in five days suggests to me utter carelessness, indeed irresponsibility, on the part of those setting the case down for trial. Since announcing my decision I have had to consider the transcript of the evidence of the first part of the hearing and my own notes of the second part. I have also examined so far as I was able practically every document produced to enable me to produce the reasons for my decision announced at the conclusion of the hearing. I would like to say that my work was made extremely difficult by the state of many of the documents produced. In some of them dates and figures were quite illegible by reason of blurred reproduction in others, dates were obliterated by perforations made in the documents in order to attach them to folders. In a case such as this, where figures and dates were of such considerable importance, to present the documents in the way they were was, to say the least, careless in the extreme; they might well be considered an insult to the Court. Fortunately, at the end of the case my recollection of the position was much better than when I commenced this judgment, but in the meantime it is only as a result of considerable cross checking that it has been possible to re-establish in my mind many important details. That documents should be presented in this way is deplorable and it may well be that the Registrar on taxation will in future examine documents and disallow those that are illegible or partly so. It is my intention hereafter in the event of the production of unsatisfactory documents rigidly to apply Order 66 of the Rules of the Supreme Court.

67. I do not now intend to go into all the details of the evidence, but they were prominent in my mind when I made my decision. I was conscious of the lack of positiveness in some of the answers of Mr. Robins. I was conscious of the fact that the defendant had told Mr. Witcombe on the telephone that he previously had instructed Mr. Robins to liquidate his holdings; and I accept as true that the defendant heard Mr. Witcombe speak to someone over an inter-communication system and say that the defendant alleged that instructions to liquidate had been given. Despite such considerations I was quite satisfied that the defendant never gave those instructions. In arriving at that decision I had considered the evidence of Mr. Thakore and Mrs. Wu. As to the evidence of the former I was not impressed by his evidence; even before cross-examination and produced documents showed that his association with the plaintiffs was not entirely satisfactory from the plaintiffs' point of view (although he does not owe them any money) and that the plaintiffs had recently refused to accept him again as a client.

68. Mrs. Wu commenced working for the defendant in 1970 and ceased in October or November 1975. She said that she connected the defendant by telephone with Mr. Robins about 4-5 days before the defendant was due to go to Japan and heard him in a loud voice instruct Mr. Robins to sell everything at once. This lady was asked when was she first asked to give a statement about the case and she said she met the defendant about March or April of this year and he told her what the case was about and asked her if she remembered the occasion when the order to sell was given. She said she told him that she did. She said nothing else was discussed and she promised to be a witness. She said she subsequently met the defendant once or twice in Central but never discussed the case except "roughly". As to a written statement she said she never made one.

69. My impression of the witness was that she was not as forthcoming as she might have been. It occurred to me that as she was still working with the defendant in October or November, 1975 it was most unlikely that she would have been allowed to leave without the defendant ascertaining if she remembered the telephone conversation of the 29th March, 1973 After all, at that time the case was approaching hearing. The defendant swore his affidavit of documents on the 30th September, 1975 and the case was set down for trial on the 17th November. She was the secretary of the defendant and it was his secretary, the defendant said, who reminded him that he had sold Michaelson through a friend of hers. I found it very hard to believe that it should have been necessary for the defendant to have to ask the witness in March or April, 1976 if she remembered the telephone conversation of 1973. I did not find enough weight in this witness's evidence to outweigh the evidence to the contrary that the defendant did not give instructions to Mr. Robins to sell. I could put the position in another way: the evidence of the defendant and his witnesses did not satisfy me that he had given those instructions and, I so held. Did the plaintiffs return to the defendant the certificates for 20,000 Kao Shing shares.

70. In deciding that there was certain documentary evidence to be considered. There was a letter from the plaintiffs to the defendant dated the 27th July, 1973 in which the writer informed the defendant that there was a sum of $460,784.72 due by him to the plaintiffs. It went on to say that the plaintiffs held on behalf of the defendant: 12,000 Hong Kong & Shanghai Banking Corporation shares, 12,000 New World shares and 27,500 Wah May, with a market value of $523,000. It also stated that the defendant had an agreed margin limit of $85,000. The letter finished by giving the defendant notice that unless he settled his outstanding account by the 31st July sufficient of his shares as would be necessary to liquidate his indebtedness and interest would be sold.

71. I do not comment on anything in that letter save to point out that there is no reference to Kao Shing shares.

72. On receipt of that letter the defendant said he telephoned the writer immediately. He told me that he informed him that he had given instructions on the 29th March to sell everything, but said nothing about the shares or the reference to the margin limit. When asked if he had raised the matter of the margin limit he said: "No sir, their letters and information were so full of ignerance. I didn't want to take them up on every occasion". It did occur to me that one would expect a person in the defendant's position to enlighten the writer's ignorance by telling him that there were also 20,000 Kao Shing shares in the plaintiffs' possession, if such were the case.

73. There was no further communication between the parties until the plaintiffs wrote to the defendant on the 7th August. The letter said, inter alia:

"We have today received a letter from Wonderful and Co. Far Wast Exchange Brokers who confirm having purchased on your behalf 20,000 Kao Shing on the 7th March for which a cheque made payable to yourself but endorsed over to Wonderful & Co. is in settlement. We enclose a copy of the cheque for reference."

74. The defendant said when he received that letter he just wrote it off saying to himself, as he told me, "This has nothin to do with me". He did however write to the plaintiffs on the 17th August:

75. The plaintiffs replied on the 23rd August saying that the 30,000 World Wide shares had been delivered to the defendant or his brother on the 4th and 5th January 1973. As to the Kao Shing shares they listed the shares purchased on the 7th March and said they understood these were delivered to the defendant the day after they were bought and no selling instructions were received.

76. It would appear from the letter of the defendant and that reply that 20,000 Kao Shing shares were bought and sold, and 20,000 shares were bought on the 7th March and, according to the plaintiffs, delivered to the defendant.

77. The defendant said he contacted Mr. Everitt the writer of the letter from the plaintiffs. He said he had sought "specific information" but the reply was "beating around the bush" and he told Mr. Everitt "for then ^th time" that he had directed his shares to be sold on the 29th March. He said he specifically raised the question of the Kao Shing shares with Mr. Everitt who told him that he, the defendant, knew the sorip numbers and that the shares had been delivered to him after the urchase.

78. There was no written reply to the plaintiffs' letter nor further contact, and on the 15th November Mr. Robins wrote to the defendant on behalf of the plaintiffs and demanded what they said the defendant owed them. The defendant said that after receiving the letter he spoke to Mr. Robins on the phone but made no reference to him about either the World Wide shares or the Kao Shing. He did however write to Mr. Robins on the 3rd December complaining that he had not received a specific answer to his letter of the 17th August. To that the plaintiffs replied enclosing a copy of their letter of the 23rd August and said it explained the position with regard to those shares purchased on the 7th March, i.e. the scrip had been delivered to the defendant, and that those purchased on the 19th March had been sold on the 3rd April and the defendant's account credited with the proceeds.

79. That ended the communication between the parties.

80. It seemed to me from the letter of the 17th August that the defendant was aware of what had happened to one lot of shares - they had been sold - and was enquiring about the other, those bought on the 7th March. It also seemed to me that the plaintiffs answered that question - the scrip for the shares had been delivered to the defendant on the 8th March. One would think that that reply was sufficiently specific to evoke an indignant denial from the defendant that the shares had ever been delivered to him if such were the case. I was not impressed by the defendant's explanation for his inactivity: that he wanted to deal with Mr. Robins, who was the only person who would understand the position, but he was out of Hong Kong When he did have an opportunity of doing so after the letter of the 15th November he did not do so.

81. Despite this correspondence the defendant instructed his legal advisers some time between the 31st January, 1974, when the writ was issued, and the 6th March, when the Defence and Counterclaim was delivered, that the shares were purchased without his consent. It was, I thought, of importance that the defendant did not then allege that the Kao Shing shares were wrongfully detained by the plaintiffs; though that is what he did with respect to the World Wide shares. It was not until the 25th November that the Defence and Counterclaim was amended so far as the Kao Shing shares were concerned to the form in which it was when the case was tried.

82. I am not going to dwell on the defendant's evidence with regard to those shares. At one stage he resurrected the story that one lot of the shares were purchased without his permission. I considered the allegation in the original Defence and Counterclaim about the Kao Shing shares and the suggestion in his evidence to the same effect a further example of the reckless and irresponsible allegations he was prepared to make; the greatest of which was that the plaintiffs wrongfully detained the 30,000 World Wide shares ultimately discovered to have been received and sold by him.

83. There is no doubt that the Kao Shing shares were received by Mr. Robins the admitted agent of the plaintiffs. They were purchased on the Far East Exchange by a stockbroker who had a seat on that Exchange; the plaintiffs had not. Because they had not, and because of the delay in selling that would result from that - they would have to instruct another broker to act - the plaintiffs were unwilling to retain custody of shares traded on a stock exchange other than the Hong Kong Stock Exchange where they had a seat. They were also unwilling to hold such shares as a security against margin, and I was told they did not take them into consideration in calculating a client's position with them. Indeed an inter-department memorandum to that effect was issued. It was Mr. Robins' evidence that when such shares were acquired on a client's behalf they were handed over to him on his paying for them unless he particularly requested them to be held for him.

84. There was ample evidence to show that instructions contained in memoranda were not always strictly followed. Indeed, Mr. Robins told me that so far as handing over such shares were concerned that was not always done immediately; but was ultimately. It was for those reasons that Mr. Robins was certain that he had handed over the shares of World Wide. For the reasons given the plaintiffs would not have kept Kao Shing shares; and Mr. Robins was certain he would not have kept them, and he was the person who dealt with the defendant's shares. He was certain he had the shares delivered and got a receipt.

85. Despite the vigorous cross-examination of Mr. Eddis I was satisfied that Mr. Robins had the Kao Shing shares, like the World Wide and Michaelson, delivored to the defendant as he said, and got an acknowledgment of their receipt.

86. The only other matter was the question of the rate of interest which the defendant in his original Defence admitted to be at the rate of 13%. The defendant admitted receiving the letter of the 28th April, 1972 in which a reference was made to interest. He also admitted receiving the last letter raising it to 13%. As to that letter, he said that as he had already terminated his association with the plaintiffs it was of no concern to him. As to an earlier increase he said he never received a notice like the one produced. May I say that I did not believe that of all the letters and notes sent out by the plaintiffs to the defendant that one should have gone astray.

87. I found for the plaintiffs on their claim in the sum arrived at by counsel to include interest and dismissed the counterclaim with costs to the plaintiffs on both.

Representation:

Mr. Jackson-Lipkin Q.C. & Mr. W. Waung (Deacons) for plaintiff.

Mr. F. Eddis (Johnson, Stokes & Master) for defendant.