Au Choung Kit t/a Forex Security Co. v. C.T. Jotwani

HCA000073/1974

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 73 OF 1974

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Coram: Li, J.

Date of Judgment: 11th October, 1974

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JUDGMENT

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1. On the 2nd of November, 1973, the defendant instructed the plaintiff company to acquire Rights of Hutchison International Limited to subscribe for 2,000 shares. The document entitling the defendant to subscribe for 2,000 shares in a letter of allotment in favour of the defendant was not tendered until at least 10 days after the 2nd November to the defendant, whereupon the defendant denied that he had ever authorised the plaintiff company to purchase such Rights for him at the price mentioned and refused to take delivery. Thus the plaintiff company issued a writ claiming against the defendant for the purchase price for the Rights at $8 each, totalling $16,000; brokerage fees at $80, contract stamp duty at $64, plus a subscription fee the 2,000 shares at $5.20, totalling $10,400. These figures form a grand total sum of $26,544; and the plaintiff also claims interests.

2. The plaintiff's case is that on the 2nd November last year the defendant went to the plaintiff's office and gave authority in writing to the plaintiff company for an account clerk of the plaintiff company to acquire the Rights to subscribe for 2,000 shares of Hutchinson International Ltd. at $7.90 cents each. The plaintiff company failed to acquire those Rights at that price and in the defendant's presence the account clerk asked him to amend the authority to $8, whereupon the defendant agreed. The authorisation was changed to $8 for the Rights to each share. This is put in evidence as Exhibit 1 in the agreed bundle. Shortly after giving such amended authority the defendant left the plaintiff company's premises and the transaction was completed.

3. The accountant clerk, Mr. Lau, who gave evidence, said that the then telephoned the defendant at the defendant's office, but failed to locate the defendant. He left a message with one gentleman who appeared by accent to be of Indian race to pass on the message to the defendant that the transaction was completed. Mr. Lo - a clerk of the plaintiff company in the delivery department - said that he saw the defendant on the 5th November - or at least two or three days after the transaction in the plaintiff company premises. The defendant enquired whether any transaction was completed. He checked and found the invoice for this transaction which was completed on the 2nd November and showed it to the defendant. The defendant said nothing and left the premises, indicating that he was going to Macau.

4. There is produced before me Exhibit 27 and 28, the two circulars by the Hong Kong Stock Exchange to their member companies to the effect that Hutchinson International Limited would not issue their letters of allotment until the 31st October, 1973, and therefore there would be delay as to the delivery of the Rights to the various members and all transactions would be delayed. However, member companies were allowed to trade as from the 1st November, 1973. Ultimately the transaction for the defendant that was completed on the 2nd November was entirely completed with the delivery of the letters of allotment on or about the 12th or the 13th November to the plaintiff company. When the plaintiff company took the letters of allotment to the defendant for payment the defendant denied liability on the ground that he never authorised the plaintiff company to purchase for him at $8 each, that the delivery was far too late and that he didn't ask them to purchase as late as the 15th November when the defendant was finally located and presented with the letters of allotment in his favour.

5. The defence case is that the defendant only authorised in writing, as originally written down in Exhibit 1, that the plaintiff company should acquire Rights to 2,000 shares at $7.90 cents. He never varied that price. In any event the confirmation of the transaction was never notified to the defendant on the 6th November the defendant went to the plaintiff company to see Mr. Lo and asked whether any transaction had been completed. The only completed transaction the defendant was told was not on the 2nd November and not the Rights of Hutchison International but some other shares he bought on another occasion. No mention was made of the transaction for the Hutchison International Limited Rights on that day. He never knew of any transaction on the 2nd November being completed until the 15th November when he was confronted with the letters of allotment for the 2,000 shares. Furthermore he gave no authority whatever to the plaintiff company to exercise the privilege to subscribe for 2,000 shares and paid the $10,400 on his behalf. In the course of the proceedings Mr. Bunting, learned Counsel for the plaintiff, quite fairly informed me that in all fairness there was no evidence that the defendant authorised the subscription and, therefore, he would abanden the claim for $10,400. The only issues between the plaintiff company and the defendant are (1) whether the defendant did authorise on increase of 10 cents in price on the 2nd November and (2) whether the transaction was completed upon the 2nd November, and finally, whether the defendant was informed of that transaction one way or the other. If the answers to the three questions are in the affirmative, whether the letters of allotment were delivered to the defendant at such a late stage constitutes a breach of contract so as to enable the defendant to repudiate such a contract.

6. Having heard the evidence as a whole, I come to the following conclusions. As regards the first question I find as a fact that the defendant must have given the authority to amend, even though he says whenever there was any amendment, normally he would initial it or write the amendment on the chit himself. It is true that in Exhibit 1 the defendant never initialled the amendment, nor did he write down the amendment. However, in the course of cross-examination of the defendant, learned Counsel put to the defendant a bundle of documents, which were not produced, the defendant admitted that such a bundle was the buying notes or chits he gave at one time or another in the course of business dealings with the plaintiff company to acquire or sell shares for him at a certain price, and that in all these transactions there had been a variation in prices without the writing or the initial of the defendant's on them. The defendant's argument was that in those cases the transaction was immediately confirmed. It is sufficient on a balance of probability for me to find as a fact that there had been cases where the price variation was made without his initial or his writing, and I find that the present case is one of the instances where the variation of price, which is only a matter of 10 cents, that the defendant authorised the variation without making a big fuss over it after all the difference was only 10 cents. As regards the second issue, I am also of the opinion that the transaction was completed on the 2nd November, which is evidenced in Exhibit 2 of the agreed bundle. There is, in Exhibit 3, a receipt from another member of the Hong Kong Stock Exchange that they have sold Rights for 2,000 shares of Hutchison International to the plaintiff company at $8 on the 2nd November. There are other documents in the bundle, the authenticity of which have been agreed showing that the plaintiff company did purchase Rights for 2,000 shares for and on behalf of the defendant. I also accept the evidence of Mr. Lau, the accountant clerk who said that he rang the defendant and left a message so as to confirm the sale. In addition to that, there is the evidence of Mr. Lo, the clerk in the delivery department of the plaintiff company, who said that the defendant went to see him on about two or three days after the transaction on the 2nd November. That meeting is corroborated by the defendant's own evidence when he said he went to see Mr. Lo only on the 6th November. It was put to Mr. Lo by the defendant that he, the defendant, never saw Mr. Lo on the 5th November. However, it is apparent in the defendant's own evidence that he must have been in touch with the plaintiff company between the 2nd November and the 6th November because he said that he also asked the plaintiff company to acquire some other shares after the 2nd November. The purpose of going to the plaintiff company on the 6th November was to enquire whether such transactions were completed. This goes against the defendant's own evidence when he said that in the course of dealings the plaintiff company always telephoned and confirmed the transaction if the transaction was completed. If that were so there would be no necessity for the defendant to go on the 6th November himself to confirm whether the transaction was completed. Further, the defendant never put to Mr. Lo that the latter never showed him the invoice of the transaction on the 2nd November after I had explained to him that whatever evidence he disputed he should question the witness. I am driven to the conclusion that this particular transaction was completed on the 2nd November and must have been confirmed to the defendant between the 2nd and the 6th November.

7. Then I come to the last issue. It is said that he never knew about the transaction until the 15th November. Having regard to the findings I made in respect of the previous points I have come to the conclusion that he knew of the transaction well before the 15th November, although from the documents in Exhibits 8, 9 and 10, the letters of allotment in his favour were not tendered to him until after the 13th November - probably the 15th November. The question is this: does that entitle the defendant to repudiate the contract? The defendant's evidence is that he wanted these rights to be delivered to him in a couple of days' time, namely around the 5th or the 6th November. He had previously sold the Rights for 2,000 shares to one firm of brokers by the name of Krishna Securities or Murli Krishna Securities. He bought these Rights for the 2,000 shares in order to cover what he sold. He premised delivery to Murli Krishna on or about the 5th or 6th November and therefore a late delivery on the 15th November was of no use to him. That may be so. He did not disclose this to the plaintiff company. There is no evidence that at the time the instructions were given to the plaintiff company the defendant demanded delivery on or about the 5th or 6th November. There is also evidence that the Hong Kong Stock Exchange had already warned their members that delivery of these letters of allotment would be delayed. On the 5th and 6th November, when these letters of allotment were not delivered to the defendant, there was no revocation of his authority for the plaintiff company to buy the shares for him. Having regard to the fact that there had been no revocation of the authority the authority stood. In fact the transaction was completed on the 2nd November. Perhaps as a matter of observation it is rather strange to see that the members of the Hong Kong Stock Exchange, having transacted in these Rights, should have taken such a long time to deliver. I observe in Exhibits 8, 9 and 10, the transactions over these Rights between various companies. Some started as early as the 5th November and some were delayed until the 12th November. It appears that they have taken a long time to deliver these documents. The fact remains that there was no revocation of the authority and the transaction in any event was completed on the 2nd November; it was confirmed on that day and it was reconfirmed on the 6th November to the defendant without any demur on the part of the defendant. In the circumstances I am of the opinion that the defendant is not entitled to repudiate this contract.

8. For the reasons that I have given judgment must be given to the plaintiff in the sum of $16,144 that is the sum of $26,544 minus the sum of $10,400 and that costs should follow the events and must be awarded to the plaintiff company.

Representation: