Shing Shun Goldsmith Co Ltd v. Tang To

HCA001734/1976

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO.1734 OF 1976

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Coram: Li, J.

Date of Judgment: 6th May, 1977 at 4.07 p.m.

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JUDGMENT

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1. The plaintiff is a limited company dealing in silver and gold as a broker - purchasing and selling agents for clients. The defendant is a speculator in gold. From time to time they had dealings in gold transactions for some eight to nine months before the present dispute arose. The defendant was at one time a holder of 10% shares in the plaintiff company. The parties agree that the normal trade practice in such dealings is that when a client places an order to purchase gold the client is required to pay a deposit of 10% of the purchase price and if the price of the gold so purchased falls then the client will be required forthwith to pay to the plaintiff company, the purchasing agent, the difference between the purchase price and the current price which has fallen. However, as the defendant was a close friend of the majority shareholder and the manager of the plaintiff and further that he himself being a shareholder of the plaintiff the defendant was given special terms. The special terms were that the defendant was never required to pay any deposit on any purchase and the defendant, although notified of the difference in price when the market fell, he was not pressed immediately to pay the difference in price. This continued until a few months before June last year when through his speculation the defendant has suffered a loss of some $14,000 plus. Negotiations then took place between the defendant and Mr. Ho Siu-wing, the majority shareholder of the plaintiff as to how the debt should be repaid to the company. After months of negotiations it was agreed that the defendant should sell his 10% shareholdings in the plaintiff to Mr. Ho and Mr. Ho would then pay the debt that was owing by the defendant to the plaintiff together with payment in part in cash of some $10,000 plus. However, up to the 30th of June last year the defendant still owed the plaintiff the sum of $2,998.20 which debt the defendant admits. The special terms accorded to the defendant had not been determined. On the 25th of June 1976 the defendant purchased through the plaintiff 100 taels of gold at $741.30 per tael, the price totalling $74,130. No deposit was paid and despite the falling market, in that by the 6th of July 1976 the price of gold went down to $729.30 per tael no payment had been made by or demanded from the defendant to make up the difference. On the 6th of July the defendant placed an order to buy another 300 taels of gold at the price of $729.30 per tael. That again was done for the defendant without payment of deposit and the total price in the purchase was $218.790. By that time the total purchasing price of the two purchases in 400 taels of gold came to $292,920. Then it was made known by the defendant to one Mr. Choi of the plaintiff that he would be leaving for the United States of America for some two weeks. At that point Mr. Choi of the plaintiff asked the defendant to put a deposit of $30,000 in order to protect the falling prices of gold during his absence. The defendant had not sufficient money to pay a deposit of $30,000 but could only offer $5,000. As a result, Mr. Choi had to take instructions. Mr. Ho Siu-wing, the manager, was away at that time and Mr. Choi telephoned Mr. Ho Siu-wing's wife. Having taken instructions Mr. Choi insisted that a deposit of $30,000 should be paid. He further informed the defendant that if the $30,000 deposit was not forthcoming the plaintiff company would be entitled to sell the gold forthwith.

2. I shall come to the different versions of the conversation between the defendant and Mr. Choi. Continuing on the facts which are not in dispute I say that the plaintiff did not actually sell the 400 taels of gold on behalf of the defendant. The defendant left for America on the 7th of July 1976 without finding out whether the gold had actually been sold on the 6th or the 7th of July. He returned to Hong Kong by the end of July or near the end of July. After his return he had a meeting with Mr. Ho Siu-wing at lunch in Central. At that lunch Mr. Ho Siu-wing told him that the price in Gold had fallen and that he should make up the difference. There was a difference of some twenty odd thousand dollars. The defendant refused to accept the proposition saying that the gold should have been sold on the 6th of July or the 7th of July and if it had been sold at that time he would not have suffered the loss of some twenty odd thousand dollars. For this reason then on the 5th of August the plaintiff's solicitors wrote a formal letter giving the defendant notice that he should pay up the full price of the gold and take delivery or else the plaintiff would sell the gold at or before 12 noon on Saturday the 7th of August. There was no reply to this letter so the plaintiff on the 7th of August sold the 400 taels of gold at $665.10 per tael and found that the deficiency to be $26,880. These including commission and handling charges come to a total of $25,671.60. This sum is arrived at after an allowance is made as to interest payable to the defendant. The plaintiff based its claim on that the defendant should suffer the loss. The defence is that on the 6th of July the price of gold was then $728.00 per tael. The defendant when asked to pay a deposit of $30,000 made it quite clear to Mr. Choi of the plaintiff that all he had was $5,000 and having taken instructions from Mrs. Ho Mr. Choi informed the defendant that if the $30,000 was not forthcoming then he would sell the gold at $728 per tael and the defendant then left the premises. This is particularly evident in view of the last sentence in paragraph 5 of the Defence which reads:

"Apparently the counter offer of $5,000:00 was refused and Mr. Choi Hung then informed the defendant that the said order would be sold at $728.00 per tael and the defendant left the shop premises."

The defendant relies on the trade practice that if there was no deposit and the market fell and the defendant or the client also failed to pay into his account to store up the margin the plaintiff company must sell or was entitled to sell and unless there was express instruction to the contrary. In this instance, the plaintiff should have sold out the order on the 6th of July at $728. In paragraph 7 of the Defence the defendant worked out the difference to be $1,700 - the difference between the purchase price and the selling price on the 6th of July should be only $1,720. This, coupled with the handling charges and commission, comes to the total sum of $2,038. Thus, the issue is a comparatively simple one. It depends on which version of the incident that took place on the 6th of July should be accepted.

3. According to Mr. Choi of the plaintiff company when he demanded the $30,000 he said that if it's not forthcoming the order placed by the defendant would be re-sold or could be re-sold. He said in his own words that the plaintiff was entitled to sell the order. At this stage the defendant threatened that if his gold were sold he would not and he would refuse to settle any account with the plaintiff over the transaction of the 400 taels of gold. Choi was merely an employee. He could not make a decision. Despite the instructions or the conversation Choi had with Mrs. Ho he had no specific instructions to do things one way or the other. The defendant then left. So Choi waited until Mr. Ho Siu-wing of the plaintiff returned and the gold was kept until it was re-sold on the 7th of August 1976.

4. The defendant's version is different. He said that when he said that he had no more than $5,000 to offer as a deposit Mr. Choi was adamant that it should be $30,000. If the defendant could not put up $30,000 Mr. Choi said that he would sell the 400 taels of gold forthwith. However, in his evidence which is at variance with paragraph 5 of the Defence he said that he left in that note without Mr. Choi telling him that he Mr. Choi, would sell the 400 taels of gold at the price of $728.00 per tael. He said in his evidence that he told Mr. Choi that since the $5,000 deposit was not accepted they had a right to do anything they liked. That again was not a specific instruction to do anything. In other words, what the attitude of the defendant was that he was rather annoyed at the request for a $30,000 deposit and he was leaving to the plaintiff to do whatever he liked. If that was the case, the plaintiff company should have sold the 400 taels of gold forthwith. However, it is not true as alleged in the Defence that Mr. Choi told the defendant that the order would be sold at $728.00 per tael.

5. When it comes to resolving this issue one must have regard to the conduct of the parties. On the one hand, it can be said that the plaintiff company through Mr. Choi had known that the defendant was unable to pay a deposit. Mr. Choi had evinced an intention to terminate the special treatment accorded to the defendant to dispense with the payment of deposit or payment of marginal difference. Therefore, the plaintiff should have sold forthwith the 400 taels of gold on the 6th or the 7th of July. It was owing to the plaintiff's indecision and inaction that such substantial loss as much $25,671.60 was the result. On the other hand, the plaintiff says that the defendant at no time gave instructions to sell. The plaintiff did not terminate the special terms accorded to the defendant because up to the 6th of July no marginal deposit had been required of the defendant. The $30,000 was merely asked from the defendant owing to the fact that he was leaving for the United States for more than two weeks and that was to protect the fluctuation of prices. However, the defendant when he heard this threatened not to settle any account should the 400 taels of gold be sold and for this reason the plaintiff retained the gold forthwith until the 7th of August.

6. Taking into consideration the whole evidence I find that the plaintiff or Mr. Choi of the plaintiff company did not inform the defendant that he would sell the gold forthwith. This is apparent from the conduct of the defendant. The defendant said that he left in the afternoon on the 7th of July. The plaintiff company never gave him the accounts of the sales or if the plaintiff had sold the gold at all. He made no attempt before he left in the afternoon on the 7th of July to find out from the plaintiff how much he made or how much he lost over the sale of the 400 taels. He was complacent about the whole matter and he took the "couldn't-care-less" attitude. On his return he had a conversation with Mr. Ho who told him that the gold had not been sold and asked him to pay the difference. He in his answer to Mr. Wong in cross-examination he said:

The answer was "Yes". Then the further question:-

His answer was that:-

That was his assumption. That obviously did not satisfy Mr. Ho Siu-wing. On the 5th of August a letter was written to the defendant in these terms. (in document No.1 in that big bundle) It reads:-

"We act for the captioned Messrs. Shing Shun Goldsmith Co. Ltd. and are instructed that in your sale and purchase account with our client you are indebted to our clients the sum of $2,998.20 particulars of which appear as follows:-....."

then it goes on to the account.

The defendant said that he received this letter and he immediately passed it onto his solicitor. However, in his answer in cross-examination he said he really did not know much about the contents of this letter. Obviously on receipt of such a letter I cannot believe that an experienced solicitor like Mr. Hon would fail to ask him as to the details of facts, as to why this letter was written, how it came about and all the facts concerning this case. Yet no reply was given to this letter at all. The gold was sold on the 7th of August and on the 10th of August 1976 another letter was addressed to the defendant. It reads:-

Again no reply had been given to this letter. Had the defendant's version been true, I would have expected that at least a letter to the effect that the plaintiff had informed the defendant that they would exercise their right and would sell the 400 taels of gold on the 6th of July 1976.

7. Taking into consideration the combination of these factors I believe on the balance of probability that the special terms so accorded to the defendant were not terminated on the 6th of July 1976 and with the defendant's threat of refusing to settle any accounts, the implication to be drawn was that he would not instruct the plaintiff to sell the gold forthwith and that he would settle the matter later on on his return. In these circumstances, I find that the gold was justifiably retained and not sold until the 7th of August.

8. Perhaps I should also mention a word on the argument addressed to me by learned counsel for the defendant that the plaintiff company was under a duty to mitigate the loss. That might be so if the contracting party was dealing as principals. In this dealing I understand that being a purchasing agent the plaintiff was purchasing on behalf of the defendant who was a client. Unless there were specific instructions to sell, there was no obligation on the plaintiff and in fact it would not be prudent for the plaintiff, to sell unless formal notice had been given. For this reason I would end the judgment in favour of the plaintiff to the sum of $25,671.60 plus the sum of $2,998.20 which had been admitted and interest at the usual rate from the date the debt was due until judgment of today and there will be costs for the plaintiff.

Representation: