Lee Kim Wah v. Goldmann Commodities (HK) Ltd

Case No.HCA 1801/1980

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCA001801/1980

IN THE HIGH COURT

	1980 No. 1801

BETWEEN
	LEE KIM WAH	Plaintiff
	and
	GOLDMANN COMMODITIES (H.K.) LTD.	Defendant

Coram: Zimmern, J.

Date of Judgment: 30th October, 1980

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JUDGMENT

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1. In this case the plaintiff is a merchant and an experienced speculator in the gold market in Hong Kong. The defendant is a commodity broker dealing inter alia with gold. It had in its employ in the early part of this year an assistant sales manager by the name of Billy Nok. Billy Nok was looking for customers for the gold business and in December of 1979 canvassed the plaintiff who was then a stranger to them. Within the course of the next two or three weeks he no doubt gained the confidence of the plaintiff through constant telephone calls and visits giving the plaintiff the latest news about the gold market in Hong Kong. As a result the plaintiff on the 26th day of January 1980 opened an account with the defendant company by a deposit of $100,000 receipt of which was acknowledged and the execution of an agreement setting out the terms in respect of their gold transactions. On that day which was a Saturday the plaintiff bought through the defendant a hundred taels of gold at the price of $3,765. I do not in this case have to go into the intricacies of the gold market in Hong Kong save to say that neither the purchaser is expected to take delivery nor the vendor expected to deliver. There is no term set out as to payment either.

2. On Monday, the 28th of January, the plaintiff told the court that Billy Nok telephoned him and said that he wanted to sell forward a few hundred taels for the plaintiff and the plaintiff told him no and did not give his assent thereto. On the same afternoon Billy Nok rang up the plaintiff and told him that he had indeed effected sales of a few hundred taels on his behalf. Next day he tried to look for Billy Nok but apparently without success and he went to the offices of the defendant a few times and could not find Billy Nok and on the 30th he saw the manager or one of the managers, a Mr. Ip who told him Billy Nok would be available to see him the next day at 11 o'clock or 11.30 but Billy Nok did not turn up whereupon the plaintiff went to his solicitors office namely Messrs. T.S. Tong & Co. who forthwith wrote a letter to the defendant delivered by hand on that day and the letter reads:

"We have been consulted by our client Mr. K.W. Lee with reference to a Customer Agreement dated 26th January 1980 entered into between your company of the one part and our client of the other part. We are instructed by our client to give you notice which we hereby do that our client does not wish to further operate the above account with you and shall be glad if you will kindly let us have a statement of account relating to the said account as soon as possible. In the meantime you are requested to cease operating the said account on behalf of our client."

That was the 30th January but on the 30th January the plaintiff said he received from the defendant by post two orders in his name selling 200 taels of gold and repurchasing 200 taels of gold and on the 31st he received further orders confirming various purchases and sales which I shall deal with a little later.

3. He told the court he never agreed to these transactions and on the 1st February 1980 a further letter was written by his solicitors to the defendant company and this is in far more explicit terms. It reads:-

"	We refer to our letter to you dated 31st January 1980 written on the instructions of our client, Mr. K.W. Lee and are instructed that subsequent to our said letter our client has this morning received from you 3 copies of Confirmations all dated 30th January 1980 purporting to show certain sales and purchase of gold authorised by our client, copies of all of which are enclosed herewith for identification purposes. We are instructed that our client has never authorised you to enter into the transactions of sale and purchase shown in the said Confirmations and therefore cannot accept the Purchase and Sales Statement dated 30th January 1980 which you sent to your client this morning as being correct.
	We are further instructed to place on record that at all times our client has been dealing with your representative Mr. Billy Nok and that since 29th January 1980 our client has not been able to contact the said Mr. Billy Nok despite the several attempts made either by telephone or by calling at your office in person, it is therefore most surprising that according to the said Confirmation in question you purported to buy and sell gold on behalf of our client as per our client's instructions. In the circumstances our client will have to consider reporting the matter to the Commercial Crime Office for investigation."

The record shows that the defendant did not reply to either of these two letters and in April of this year the plaintiff issued a writ against the defendant company claiming the return of $100,000 deposit paid and further alternatively damages for breach of contract. The defence filed is that all the transactions dated 26th January the 28th January, the 29th January, the 30th January were entered into between the plaintiff and the defendant with the defendant's authority and consent and therefore they as brokers acting on behalf of the plaintiff were entitled to be indemnified for any losses sustained by them by reason of their agency. There is no dispute between the plaintiff and the defendant as to the law. This is a matter of fact to be decided by the court as to whose version of the evidence the court believes. Of course if the court believes the plaintiff's evidence the defendant will be liable to the plaintiff and I don't think this is disputed by counsel. On the other hand if the court believes the defendant's version then of course the plaintiff must indemnify the defendant for any loss sustained by them in respect of the contracts which they entered into on behalf of the plaintiff. I have already said the plaintiff gave evidence. I do not have to refer to his demeanour. The only doubt in my mind about his evidence is the first letter written by his solicitors which does not refer to what is obviously within his personal knowledge by the 31st January but having heard the only witness called by the defendant Billy Nok I do not have any doubt I prefer the evidence of the plaintiff. The records of the transactions as claimed by the defendants to have been entered into with the authority and consent of the plaintiff really do not bear a detailed examination. The one agreed transaction is the purchase of the 26th January of 100 taels. The transactions listed on the 28th, 29th and 30th January in the records of the defendant are all disputed by the plaintiff. The defendant said:

"On the 28th January Billy Nok telephoned the plaintiff and advised him that in his view the market will fall therefore the plaintiff agreed to go short 200 taels on that day."

The defendant sold 200 taels on his behalf and at the end of the day covered that position by repurchasing 200 taels. The court was told by Billy Nok that the defendant company did not like customers to have overnight position unless they were really well covered by margin as overnight position could be dangerous for instance prices have been known to rise or fall but by as much as 1000 dollars per tael overnight whereas during the day in Hong Kong the maximum if I can remember correctly is about $300. If that is so I find it difficult to understand why if the plaintiff were minded to go short 200 taels on the 28th he did not cover his position by buying only 100 taels as he had a hundred tael purchased on the 26th so that he can have a clean slate to commence again on the 29th. According to Billy Nok that position was carried over. When we come to the 29th Billy Nok told the court that in the morning he advised the plaintiff that in his opinion the market will rise therefore bought a hundred taels at $3,690. The plaintiff was then 200 taels long. Later in the morning he again advised the plaintiff that in his view the market will soon go down therefore the defendant sold for the plaintiff a hundred taels bought that morning and sold another 200 taels short for the plaintiff. Again no thought was given to the hundred taels purchased on the 26th and at the close on the 29th the plaintiff bought back a hundred taels carrying forward short 200 taels over the night of the 29th and the night of the 30th. It has never been explained satisfactorily to me why the defendant who did not like overnight positions will carry forward the position of the plaintiff on his margin. Billy Nok told the court that on the night of the 29th he heard at midnight that New York market had risen very substantially because of some Middle East trouble. He rang up at midnight to the plaintiff to warn him that there will be a big loss as he was short of 200 taels and he told the court that he rang the plaintiff up before the opening of the market in the morning and calculated to him how much loss he would suffer namely $40,000 odd in his position and he advised the plaintiff to go short another 600 taels the moment the market opened on that day, the morning of the 30th giving him a possession of short 600 taels and long 100 taels that of the 26th January. By the opening of the market on the 30th the plaintiff's balance of the margin was worth no more than $40,000 and I am completely unable to accept that any broker would enter into a transaction of this magnitude on behalf of a client on a small margin with the state of the market as it then was.

4. I do not want to do an injustice to anybody but I am just unable to accept the following transactions. 600 taels out of the 800 taels short on the 30th and by the end of the day 700 taels covered by purchase leaving a hundred taels. So according to the records of the defendants company the plaintiff on that day was a hundred taels long and a hundred taels short, inspite of the clear language of the letter of the plaintiff solicitors asking the defendant to close his account. According to the records of the plaintiff this was not done till about a month after the issue of the writ that is the 12th of May. The defendant has not bothered to call somebody in the company in authority to tell the court why the letters of the defendant were not answered. They did not bother to call somebody to explain to the court how the serious allegations made against Billy Nok by the plaintiff's letter of the 3rd February 1980 were dealt with within the company. Accordingly, I feel myself fully justified in accepting the evidence of the plaintiff and that is that he only ordered one transaction that is the purchase of 100 taels on the 26th January and no other and if the defendant entered the others purportedly on his behalf they did so without the plaintiff's authority and do not bind the plaintiff. The defendant relied on section 15 of the agreement reading:

"Confirmation of the customer's orders and Purchase and Sales Statement shall be conclusive but not objected in writing by the customer directed to the office of the company within three business days after transmission thereof to the customer by mail or otherwise."

It is in evidence that these confirmations were received by the plaintiff the earliest on the 30th January and they were objected to if not on the 31st of January then on the 1st February but I do not think that this particular clause can bind the plaintiff in as much as on the defendant's confirmation form shows:

"In accordance with Trading Instruction appointed by you, we hereby forward to confirm you that your Trading Instruction has been concluded with the above captioned particulars. Please check and examine the contents of this confirmation and raise your rejection to the Manager within three days from date of issue if there is any error. Otherwise this confirmation shall be deemed effect. Thank you."

5. I am satisfied that the plaintiff has raised his objection within time but I go further for in any event a party cannot rely on his own confirmation in respect of orders which were never placed.

6. Be that as it may there will be judgment for the plaintiff for the return of the deposit plus the profit of the 100 taels of gold purchased on the 26th at the price of $3,765 which ought to have been sold on the 31st January when the plaintiff closed his account with the defendant. This has been agreed between Counsel.

7. There will be judgment with costs in the sum of $117,400.00 for the plaintiff and the counterclaim of the defendant is dismissed with costs. There will be interest on this sum at 10% per annum from 1st February 1980 to date of payment.

Representation:

Patrick Chan (T.S. Tong & Co.,) for Plaintiff

Thomas Lai (Vincent Lo & Co.,) for Defendant