IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 18300 OF 1999
Before: Deputy High Court Judge Carlson in Chambers
Date of Hearing: 27 July 2006
Date of Ruling: 28 July 2006
R U L I N G
1. On 19 July, I gave the 2nd Defendant leave to serve a series of interrogatories on the 1st Defendant. The 1st Defendant’s solicitors had failed to attend and so the order was made unopposed. This is a summons to revoke that order. It issupported by a lengthy affirmation from the solicitor who had conduct of the case, explaining why she did not appear. I do not proposeeven to attempt to summarise her reasons. Clearly it was a mistake on her part. Had she scrutinised the cause list more closelyshe would have found the matter listed before me and would have attended to argue the summons. I regard this as a matter which goesto costs. I do not think that the 1st Defendant should be penalised for his solicitor’s unfortunate, but avoidable, absence. Mr Ting, who was not the solicitor in questionand who appears for the 1st Defendant today, has argued very forcefully that I should not have made the order because the interrogatories asked for are simplynot relevant on the parties respective pleaded cases.
The nature of the claim
2. This is an action by the Plaintiffs, the 1st Plaintiff, being a securities house, against the 1st Defendant to recover the sum of $6.356 million together with an amount of interest exceeding $4 million, on a margin trading account,the Plaintiff, also being a licensed money lender, having granted the 1st Defendant a margin trading loan facility to enable him to trade on that basis. The 1st Plaintiff has also sued the 2nd Defendant who placed the orders for the sale and purchase of shares on the margin account on the 1st Defendant’s behalf. The 1st Defendant’s case is that he had not authorized the 2nd Defendant to enter into a margin account on his behalf but only on a cash trading account. This being the position between the twoDefendants, the Plaintiffs have sued the 2nd Defendant in the alternative for breach of his warranty of authority that he had the 1st Defendant’s authority to deal on a margin account. It seems clear that they are bound to succeed against one or other of these Defendantsdepending on the court’s view as to whether the 1st Defendant had authorised to the 2nd Defendant to enter into a cash or a margin trading account. If it was the latter, the Plaintiffs will recover against the 1st Defendant, if it is the former then they will succeed against the 2nd Defendant for breach of warranty of authority.
How the right to the interrogatories is said to arise
3. There are no contribution or indemnity proceedings between the Defendants which, given the nature of the dispute between them, mustbe right. The 1st Defendant’s plea is to the effect that the margin trading account with the 1st Plaintiff was not authorised, consequently the 1st Plaintiff is not entitled to recover under it. The 2nd Defendant’s defence to the claim is that he had been authorised to establish this account by his disclosed principal (the 1st Defendant) and therefore, as agent, he can have no liability under it. The 1st Defendant says that he was inexperienced in terms of trading in shares. He only wished to make one particular $10 million investmentin one share and therefore only gave authority for a cash account which suited his purpose perfectly well.
4. As to the 1st Defendant’s experience or otherwise it is clear that he held, or holds a securities account with a company called OSK SecuritiesCompany Limited. He says so in his witness statement. On 11 January 2006, the 2ndDefendant’s solicitors wrote to the 1st Defendant’s solicitors to ask for production of the statements relating to that account. No reply has been forthcoming. Nothingwas done by the 2nd Defendant to produce a reply to that enquiry until the summons for these interrogatories on 17 July.
5. The interrogatories are all designed to show the 1st Defendant’s level of experience in trading of securities particularly, I suppose, on a margin account.
6. Mr Yau, in pressing for an order, submits that where the trial judge will have to decide where the truth lies as to what type ofaccount the 2nd Defendant was authorised to open and operate for the 1st Defendant, he will necessarily have to consider the 1st Defendant “experience, sophistication and propensity to trade”. The answers to the interrogatories will serve a very properpurpose in enabling the 2nd Defendant to prepare his case. He will be better prepared and not have to issue a subpoena to third parties such as stockbrokersin order to get them to produce the 1st Defendant’s account statements.
The 1st Defendant’s reply
7. Mr Ting says that these interrogatories do not meet the requirement of relevance having regard to the pleaded issues. At best theycan only come in as a matter purely going to credit which the 2nd Defendant will have to limit and content himself with cross-examination at the trial. He draws particular attention to the requirementof relevance as well as to the embargo on fishing interrogatories. The issue is whether on or not he authorised the opening of acash or, a margin account. The fact that the 1st Defendant may or may not have operated a margin account in the past is neither here nor there. This is a stark issue of fact asto what instruction was given.
8. I am afraid that I disagree with Mr Ting’s analysis. Whilst, I suppose that logically just because a man may be an experiencedmargin trader does not mean that this makes it more likely that he gave instructions, on this occasion, to open a margin account. The whole flavour of his case is that he was inexperienced, certainly in Hong Kong, in this activity. The fact that it has emergedfrom his witness statement that he does or did have an account with another securities broker does bring into sharper focus the leveland extent of his experience in this field. Mr Ting accepts that his client will be susceptible to answering questions about thisin cross-examination. Once that quite proper concession is made, which is correctly made by Mr Ting, then it becomes very clearthat the court ought to have the full documentary picture before trial, as must his opponent. This aspect of the level of the 1st Defendant’s trading experience really lies at the heart of the dispute between these two parties. Without these answers the courtwill be proceeding on a restricted view of the evidence. This is relevant to the pleaded issue. Just because the question is posedin a narrow form: did he or did he not authorise a cash account as opposed to a margin account, does not mean that a view of the1st Defendant’s previous trading experience is irrelevant or unnecessary. For my part I consider it an important part of the overallpicture which the 2nd Defendant and, as a result, the court should have a sight of before trial.
9. I will therefore direct the 1st Plaintiff to answer all of these interrogatories within 28 days of today. Whilst the trial is only a few weeks away, the natureof the interrogatories is such that the task of marshalling the information asked for will not be onerous. These will not thereforebe “oppressive” as understood by the rule which prohibits the administration of oppressive interrogatories.
10. I will now hear the parties as to costs.
The Plaintiffs did not appear and were not represented
Ting Koon Hung, of Messrs Wong & Chan, for the 1st Defendant
Albert Yau, instructed by Messrs David Lo & Partners, for the 2nd Defendant