William Teh Yee Lee t/a Hongkong Kowloon First Securities Co v. The Nikko Securities Co (Asia) Ltd

HCA011152A/1982

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Commissioner M. Wong

Date: 31st May, 1983

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JUDGMENT

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1. On 22nd November, 1982 the Hong Kong Kowloon First Securities Co. issued a writ against the defendant for U.S.$384,044.32 being money allegedly due from the defendant on an account stated. A summons under Order 14 was taken out on 9th December and after a couple of adjournments the matter finally came before a Master on 25th March, 1983. At the hearing, it was argued as a preliminary point that Hong Kong Kowloon First Securities Co., being a sole proprietorship, was incompetent to bring the action under the firm name. The learned Master upheld the argument but nevertheless granted an application by Counsel for the plaintiff to amend despite strong objection by Counsel for the defendant. The title of the plaintiff on the writ was amended to "William Teh Yee Lee trading as Hong Kong Kowloon First Securities Co." The hearing continued and after arguments on merits judgment was entered for the plaintiff for the amount claimed with interest and cost.

2. The defendant appealed and two notices were filed on 30th March. One notice relates to procedure and the other relates to substance I will deal with the notices in the order Counsel have dealt.

3. On the procedural point, the complaint is that the learned Master was wrong to allow the plaintiff to amend at the time of the hearing without a summons having first been taken out. Mr. Lee, leading Counsel for the defendant, readily conceded that the amendment had not resulted in any prejudice to the defendant. Obviously there could not have been any. It was a simple exercise of adding the name of a person and the defendant was perfectly aware of this fact even before commencement of proceedings. The only ground of Mr. Lee's objection is that the Master lacks jurisdiction to grant leave without a summons.

4. Order 20 Rule 5(l) of the Rules of the Supreme Court states:

"Subject to Order 15, rules 6, 7 and 8 and the following provisions of this rule, the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just in such manner (if any) as may direct."

5. The words "at any stage of the proceedings" and "in such manner (if any) as it may direct" are of crucial importance.

6. Paragraph 20/5-8/4 of the explanatory notes in the White Book deals with application for leave to amend. It reads:

"In all cases except where leave to amend is allowed without leave under Rules l and 3,the party, seeking or requiring amendment of any pleading or document must apply for leave or order t amend.

7. The learned editor clearly draws a distinction by his clear and unambiguous choice of words. In a situation where a party seeks or requires amendment of his pleading, he must apply for leave to do so. In other words, this requirement is mandatory. But when it comes to the mode for application, the word "should" is used instead of "must" or "shall" and this, in my view, gives the Master a discretion to allow amendment in manner otherwise than those provided for under small paragraph (a). The requirement is therefore discretionary.

8. Paragraph 20/1/1A also has this to say :

"The overriding principle with regard to amendments is that contained in Rule 8, namely, that, generally speaking, all amendments will be allowed at any stage of the proceedings and of any document in the proceedings (other than a judgment or order) on such terms as to costs or otherwise as the Court thinks just. The principle is subject to the countervailing rule of practice that an amendment will be refused or dis-allowed when, if it were made, it would result in prejudice or injury which cannot be compensated for by costs."

9. It has been conceded that the amendment here has not caused any prejudice.

10. Near the bottom of the page the paragraph goes on:

"The general powers of amendment under this order are supplemented by Order 2, r.1, power to amend 'any proceedings', and Order 15, rr.6, 7 and 8, powers to amend, to add, substitute or strike out a party or to order proceedings to be carried on. All these powers are cumulative and are exercised on the same principles; and they apply when a party is seeking to amend his own proceedings or documents."

11. Having reviewed the relevant rules and authorities, I am satisfied that a Master not only has very wide powers to grant leave to amend any documents at any stage of proceedings but also in whatever manner he considers necessary and just. In the present case, the learned Master took the only sensible course open to him for to adjourn the matter just for six simple words to be added to the title does not seem to be either logic, justice or good common sense. The only result that would be achieved would be unnecessary delay, additional expense to the litigants and a complete waste of time for everybody bearing in mind that half a day had been set aside for arguments and both sides were represented by leading Counsel with juriors. I do not think that the learned Master can be criticised in the exercise of his discretion under the circumstances.  The appeal on this point fails and the notice is dismissed.

12. I turn now to the other notice. The defendant is and was a firm of brokers dealing in stocks and shares. It is common ground that at the material times, Mr. James Lee, the father of Mr. William Lee, maintained no less than four accounts with the defendant for the purposes of investment in stocks and shares, both local and foreign.

13. These accounts were operated either in U.S., Japanese or Hong Kong currencies and under the names of Peaceful Investment Inc., Company 1917, Lee Ding Kee Tong, James S. Lee & Co. Clothing Mill (H.K.) Limited. It is also common ground that on or about 1st February, 1979, the defendant remitted a sum of U.S.$630,000 to guam for the benefit and at the request of Mr. James Lee. It is not disputed that on 2nd February, 1979, Hong Kong Kowloon First securities Company opened an account with the defendant and Mr. William T.Y. Lee was named as the authorized signator. A sum of U.S.$309,581.23 was paid into that account on the same day and a further payment also in U.S. currency of $147,892.60 was made four days later on 6th February. The total amount of the two payments were U.S.$457,473.83. Both receipts issued by the defendant were made out in the name of Mr. William T.Y. Lee and subsequent statements of account were also sent to Mr. William T.Y. Lee c/o Hong Kong Kowloon First Securities Co. It is true to say that apart from one transaction for the purchase of 100 taels of gold involving H.K.$362,277.77 in July, 1980, this account had remained inactive throughout the material period.

14. Mr. Swaine, leading Counsel for the plaintiff, contended that the plaintiff's case is a very simple one. Mr. William T.Y. Lee is the holder and beneficiary of the account and he is entitled to the credit balance of U.S.$384,044.32 as shown in the statement of the Plaintiff's account rendered by the defendant dated 31st July, 1980. Mr. Swaine might be right had it not been for matters raised by the defendant. Mr. Swaine further argued that the specimen signature card, the receipts, the statements of accounts, which were all in the name of Mr. William T.Y. Lee constituted a written contract for which no extrinsic or parol evidence was admissible to contradict the written terms of that contract.

15. The case of the defendant is set out in the draft defence and verified by the affidavit of Mr. R. Suzuki. The important part appears in paragraphs 7-11. In essence, what it really says is that Mr. William T.Y. Lee was only acting as an agent of a disclosed principal, Mr. James Lee, his father and the money was deposited as additional security for the remittance of the U.S.$630,000 to Quam. It is not disputed that even without the deposit, there was ample security in the form of shares and stocks held by the defendant in Mr. James Lee's accounts. The defendant, however, says that unless all the stocks and shares were sold and the account settled at that time, the value of the stocks and shares might depreciate at some later stage and as an ordinary and prudent businessman the defendant would not take the risk of lending money on insufficient security. It was for this reason that arrangement was made between Mr. James Lee and one Ken Suzuki prior to the remittance to guam that money would be deposited with the defendant as additional security.

16. It was also the contention of Mr. Swaine that whatever oral agreement there might have been it was inadmissible to contradict the written terms of a written contract. To counter this argument, Mr. Lee asked, and in my view, quite justifiably, what written contract, what written terms? Mr. Lee's argument is that the specimen signature card, the two receipts, the two statements of accounts, although all made out in the name of Mr. William T.Y. Lee, do not constitute a binding written agreement because apart from the specimen authorized signature and the amount deposited there are no terms of the contract and one of the essential characteristics of a contract is lacking. He relied on a passage at page 439 of Chitty on Contract 25th edition under the heading of Memorandum in paragraph 806. It reads:

"If an instrument is not intended to be a contract or binding legal agreement, but is intended to be merely an informal memorandum of an agreement previously concluded, then extrinsic evidence may be admitted to show that this informal memorandum does not embody the terms contained in the previous agreement. Thus a receipt, an invoice, and even bills of lading, have been held to come within this exception."

17. In my view, there is substance in this argument. Of course, at this stage, he does not have to persuade me that he is entirely correct. All he has to show is that the point is arguable, and I am satisfied that he has discharged this onus. Once it can be argued that parol evidence may be admitted to prove the terms of the contract, then there must be triable issues of matters.raised in the draft defence bearing in mind that the defendant is not required to show at the hearing of an Order 14 application that he has a chance of success. Where there is "a fair probability of a defence" unconditional leave to defend ought to be given. Summary judgment is only granted where there is no reasonable doubt that a plaintiff is entitled to judgment. Having heard arguments and considered all the documents, I do not think I am in a position to say that I am free from such doubt.

18. It is not necessary for me to go into details of the arguments either on law or on the facts. In fact I must not because any attempt to do so would be an usurpation of the function of the trial judge. I would just say this. The fact that the account was opened at about the same time as the remittance to Quam, a large sum of money was dormant for a long period of time and Mr. William Lee is the person who could operate the account of Peaceful Investment Inc. (Panama) by signing alone, not Mr. James Lee, are factors which, in my view, are not so inconsistent with the allegations of the defendant.

19. The arguments before me took two full days and this in itself goes to illustrate the complexity and difficulty of the issues. I am greatly indebted to the very full and thorough arguments put before me by Mr. Swaine and Mr. Lee who also appeared before the learned Master. From what I gather from remarks by Counsel that the hearing before the Master only lasted half a day and if the learned Master had the advantage as I do of hearing much fuller arguments he might have come to a different decision.

20. The appeal is allowed on merits and the judgment entered by the learned Master is therefore set aside. The defendant will have unconditional leave to defend. Defence to be filed within 14 days I will hear arguments on costs.

Representation:

Mr. John J. Swaine Q.C., assisted by Mr. Lester Kwok instructed by Hastings and Co., for the Plaintiff

Mr. Martin Lee Q.C., assisted by Mr. Edward Chan, instructed by Woo, Kwan, Lee & Lo, solicitors for the Defendant