Wong Ching t/a Sam Wo Stock Co v. Cheung Ping-yin and Another

HCA001527/1980

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Coram: Bewley, J.

Date of Judgment: 22nd December, 1980

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JUDGMENT

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1. The plaintiff, who is a stock broker, claims the sum of $144,725.75 from a former employee, Mr. Cheung Ping-yin and his guarantors, Messrs Lo & Yu Associates. None of the parties was represented and 1st defendant did not appear at the trial.

2. In December, 1979, the plaintiff advertised for staff. 1st defendant replied, seeking the post of 'runner'. He was accepted, subject to his finding a suitable guarantor.

3. A few days later he handed the plaintiff a form of guarantee signed by Mr. Yu on behalf of 2nd defendant. The plaintiff visited the latter's premises, met Mr. Yu and satisfied herself that she was justified in employing 1st defendant.

4. The English version of the guarantee is in the following terms:

5. The wording of the Chinese version is similar.

6. 1st defendant had a number of contacts and brought satisfactory business to the plaintiff's firm (see Ex.P.3) until, in March, he told the plaintiff that he had sold 20,000 New World shares and 3,000 Cheung Kong shares on behalf of his brother, Cheung Pit-yiu. On 6th March the plaintiff asked 1st defendant to obtain the relevant share certificates. He told the plaintiff that his brother would bring them to the office and asked her to prepare the payment cheques. This was done (Ex.P.6-8) and the cheques were handed to an employee, Miss Au.

7. That afternoon the plaintiff went to the Hong Kong Stock Exchange. While she was out, a man claiming to be Cheung Pit-yiu came to the office, where Miss Au was alone. He handed her two Hang Seng Bank delivery orders, which indicated that the bank held the share certificates in respect of the New World and Cheung Kong shares belonging to Cheung Pit-yiu. On the strength of these documents, Mr. Cheung asked Miss Au to give him the cheques.

8. Miss Au had been working for the plaintiff for only a few weeks and was uncertain how to proceed without the share certificates. She tried unsuccessfully to telephone Madam Wong. Mr. Cheung asked her to telephone Cheung Ping-yin. She did so and, although she cannot remember the exact words, he indicated that it was alright to hand over the cheques. She gave them to Mr. Cheung and he left the office. It was soon after this that Madam Wong rang Miss Au, who told her what she had done.

9. The plaintiff returned to her office at 3.40 p.m. Miss Au handed her the two delivery orders (Ex.P.9-10). The plaintiff was suspicious, because the account number on the orders ended in 001, instead of the Hang Seng Bank's usual 085 ending. She rang the bank, ostensibly to find out if it was too late to collect the certificates, but in reality to check if the account and certificates existed.

10. The bank, however, refused to divulge any information. The plaintiff told 1st defendant, who was in the office, that she was going to stop payment on the three cheques. She again rang the bank, but 1st defendant kicked the telephone switch, which was on the floor, and succeeded in putting the apparatus out of action. He asked her why she was suspicious of his brother and she told him about the number on the order forms.

11. They went together to the bank, where they discovered that the cheques had already been passed for payment. They then went to the police. Payment was made on the cheques next day by the bank. No share certificates were ever received by the plaintiff. She has not seen 1st defendant since that day.

12. On 19th March letters were written by H.M. So & Co., on the plaintiff's instructions, to both 1st and 2nd defendants, but there was no response from either.

13. Madam Wong was asked only 2 - 3 superficial questions in cross-examination and it was not suggested to her that her evidence was untrue. Miss Au on the other hand was cross-examined at some length.

14. It transpired that Cheung Ping-yin arrived back at the office about 10 minutes before Madam Wong that afternoon. Miss Au told him what she had done and that Madam Wong had just telephoned and said she had acted wrongly. He replied that the purpose of delivery orders was to take delivery of share certificates. A further call was made to Madam Wong, who instructed them both to remain in the office until she arrived.

15. Cheung Ping-yin, however, disobeyed this order and left the office. After the plaintiff returned, Miss Au also left, to deposit some cheques in the bank. She met 1st defendant while she was waiting for the lift on her way back to the office. Both arrived back at the office shortly before 4.00 p.m. Miss Au went home soon after 4.00 p.m. and did not hear the telephone calls made by Madam Wong to the bank.

16. She was asked if the telephone was working, next day and said she could not remember. During the few remaining days that she worked for the plaintiff, it was functioning normally.

17. Mr. Yu Ka-piu, who is the sole proprietor of 2nd defendant, gave evidence but called no witnesses. He does not dispute that he signed the guarantee, nor does he attempt to minimize its effect. He says he signed only the Chinese version. In view of the similarities of the signatures on each page, this is unlikely. It matters not, however, as the Chinese version, of which a certified translation has been made, is sufficiently wide to cover the alleged behaviour of 1st defendant.

18. Mr. Yu's defence is that 1st defendant was not guilty of misconduct. He was responsible only for what took place on the floor of the exchange: the subsequent paperwork was a matter between the client and the company. Mr. Yu submits that, if the delivery orders are forgeries, which he does not admit, the finger may be pointed only at Mr. Cheung Pit-yiu. 1st defendant was carrying out his routine duties that day. A mistake was made in the plaintiff's office, for which the plaintiff must take responsibility.

19. The plaintiff must prove that 1st defendant was a party to the conversion by Cheung Pit-yiu of the proceeds of the three cheques. This would clearly be sufficient misconduct to bring into operation 2nd defendant's guarantee.

20. I am satisfied that Madam Wong and Miss Au have told the truth. Mr. Yu casts doubts on the plaintiff's veracity concerning her allegation that 1st defendant attempted to disrupt her telephone call to the bank. It is true that the telephone was working during the next few days, but we do not know how badly damaged it was, nor if it was repaired forthwith. In the absence of evidence to the contrary, I accept as true everything Madam Wong has said. On several matters her evidence is corroborated by Miss Au, who is no longer employed by the plaintiff and has no reason to lie.

21. The conversion of the cheques is proved by the evidence of Madam Wong and Miss Au, together with the documentary exhibits. The question is whether 1st defendant's behaviour is sufficient to prove he was acting in concert with Cheung Pit-yiu. If he was indeed his brother, which is not proved, it might be argued that all he was doing was trying to stop Madam Wong from casting aspersions on his character and motives. This would be a natural reaction. The fact that Cheung Pit-yiu was a crook might be a complete coincidence. This thesis, however, does not explain certain other aspects of the case.

22. In particular, 1st defendant authorized Miss Au to hand over the cheques, when he had not seen the withdrawal orders and was expecting the actual certificates to be delivered. If he thought it was a genuine transaction, this was a very risky thing to do. I also query Cheung Pit-yiu's action in taking the documents to the office, when the more natural thing to do would have been to give them to 1st defendant. He had never been to the plaintiff's office before and knew no one there except 1st defendant. On the other hand, if he had been advised that the cheques were available and that Madam Wong was out, the tactic makes sense. How did Cheung Pit-yiu know that the cheques were ready? He could only have been told this by 1st defendant.

23. Even when Miss Au told 1st defendant about Madam Wong's reaction, he persisted in reassuring her that she had acted correctly. Finally, he deliberately disobeyed the order to remain in the office. If he were acting in concert with the culprit, this is time he might have used to warn him to waste no time in getting to the bank.

24. When 1st defendant's behaviour, while Madam Wong was telephoning the bank, is considered in the light of this evidence, it is not possible, in my judgment, to draw the inference that his motives were innocent and his action the outcome of righteous indignation. The evidence as a whole points strongly to a plot between the two Cheungs.

25. I find therefore that the plaintiff has proved her case and I give judgment against both defendants for $144,725,75, with costs.

Representation:

Plaintiff in person

Mr. Yu Ka-piu on behalf of 2nd defendant in person