Civil Action2002

MAN CHEUNG INTERNATIONAL TRADERS LTD AND ANOTHER v. CLSA LTD

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71926-EN-2010-06-29

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DCCJ6778/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6778 OF 2002

________________________

BETWEEN

	MAN CHEUNG INTERNATIONAL TRADERS LIMITED	1st Plaintiff
	ASIACORP NOMINEES LIMITED	2nd Plaintiff
and
	CLSA LIMITED formerly known as CREDIT LYONNAIS SECURITIES (ASIA) LIMITEDformerly known as CREDIT LYONNAIS SECURITIES (ASIA) LIMITED	Defendant

________________________

Before: His Honour Judge Chow in Chambers (Open to Public)

Date of Hearing: 29 June 2010

Date of Delivery of Decision: 29 June 2010

________________________

D E C I S I O N

________________________

1. Under paragraph 8(iv) of the plaintiffs’ submission, the plaintiff’s counsel argues that there is no doubt that both parties had all along understood the word “sell” in paragraph 10(i) as referring to “shares being sold to buyers”, and not referring to the buyers being able to sell shares. That simply is not correct. In the original paragraph 10(i) of the defence, it reads:

“It is admitted that for a short period of time sufficient buyers existed in the NASDAQ market to sell all 3,000 shares at US$75 on 3 November 2000.”

2. The phrase “shares being sold to buyers” are shares to be sold by “buyers” according to the original context of paragraph 10(i) of the defence, because in the noun clause “that for a short period of time sufficient buyers existed in the NASDAQ market to sell all 3,000 shares”, the phrase “to sell all 3,000 shares” is governed by the subject “buyers”. You cannot detach this phrase out from the “buyers”, the subject of this noun clause; so it is the “buyers” to sell all 3,000 shares.

3. That is exactly the opposite of what is submitted under paragraph 8(iv) of the plaintiff’s submission. If that is the intention and understanding of all the parties in this case, as alleged by the plaintiff, then that is good reason for making the amendment because the original defence under paragraph 10(i) does not reflect the understanding of the parties. The purpose of amendment is to reflect such an understanding correctly in the pleading.

4. Under paragraph 9(v) of the plaintiffs’ submission, the plaintiff’s counsel submits that the deletion of the word “all” amounts to a withdrawal of an admission that all of the plaintiffs’ 3,000 shares could have been sold at US$75 on 3 November 2000. I have dealt with this point in my decision.

5. I repeat that if the original paragraph 10(i) is nonsensical, then there cannot be any admission of fact. I specifically dealt with the meaning of withdrawal. Withdrawal must be a withdrawal of fact. I make an analysis in my Decision that there cannot be a withdrawal of a piece of fact because that piece of fact as written under paragraph 10(i) could not exist. The plaintiff’s counsel simply does not deal with that point.

6. I am not convinced at all, for one moment, by paragraph 9(v). Under paragraph 10(v), the plaintiff’s counsel submits that this court failed to properly consider the extent of the prejudice to the plaintiffs. There would be costs as a result of the proposed amendment being allowed. Again, in my decision, I have already said that it is the onus for the parties to gather proof to support what they allege in their pleading. If the plaintiffs simply failed to note the nonsensical fact under paragraph 10(i) and failed to prepare for the evidence, then they cannot blame the defendant for causing such a failure, because the defendant is under no duty to help the plaintiffs. Again, the plaintiffs’ counsel has not dealt with this point.

7. The whole crux of this application depends on whether there is a real prospect of success in the Court of Appeal if I allow the application. I cannot see any prospect of success, not to mention a real prospect. I cannot see any chance of the plaintiffs’ being successful in their argument. I dismiss this application.

(Submissions on costs)

8. Costs of this application be to the defendant, to be taxed if not agreed, with certificate for counsel.

	(Chow)
	District Court Judge

Miss Sara Tong, instructed by Messrs Robertsons, for the 1st and 2nd Plaintiffs

Mr Roger Beresford, instructed by Messrs Jones Day, for the Defendant

71197-EN-2010-05-27

MAN CHEUNG INTERNATIONAL TRADERS LTD AND ANOTHER v. CLSA LTD

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DCCJ 6778/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6778 OF 2002

--------------------

Between

	Man Cheung International Traders Limited	1^st Plaintiff
	Asiacorp Nominees Limited	2^nd Plaintiff
	AND
	CLSA Limited formerly known as Credit Lyonnais Securities (Asia) Limited	Defendant

--------------------

Coram : H.H. Judge Chow

Date of Hearing : 26^th April 2010

Date of Handing Down Decision : 27^th May 2010

--------------------

DECISION

--------------------

1. This is the Plaintiffs’ appeal against the order of Master C. Lee dated 22.3.2010 allowing the Defendant’s application for leave to amend its defence. By this appeal the Plaintiffs seek an order that the said order, in so far as it relates to paragraph 10(1) of the defence, be set aside, and that the Defendant’s application for leave to amend paragraph 10(1) of the defence be dismissed.

2. Paragraph 10 of the Statement of Claim reads:-

“On that day sufficient buyers existed in the NASDAQ market to buy all 3,000 shares at US$75, but for reasons then unknown to the Plaintiffs, the Defendant only executed the order for 1,000 shares at a price of US$75.”

3. The Plaintiffs argue that the amendment constitutes a withdrawal of admission, because paragraph 10(1) as originally pleaded contains an unequivocal admission by the Defendant that there were sufficient buyers in the market on 3.11.2000 such that the Defendant could have sold all of the Plaintiff’s 3,000 shares of Gemstar at HK$75 on that day if it had intended to do so. However, paragraph (1) as amended would completely change the meaning of the plea, namely, to the effect that the Defendant only admits that there were sufficient buyers in the market on 3.11.2000 for 3,000 shares to be bought but without any admission that the Defendant could have sold all 3,000 of the Plaintiffs’ Gemstar shares.

4. Before the amendment paragraph 10(1) of the defence reads:-

“(1) It is admitted that for a short period of time sufficient buyers existed in the NASDAQ market to sell all 3,000 shares at US$75 on 3 November 2000 and that on 3 November 2000 the Defendant executed an order to sell 1,000 shares at a price of US$75.”

5. Paragraph 10(1) of the amended defence reads:-

“(1) It is admitted that for a short period of time sufficient buyers existed in the NASDAQ market to buy 3,000 shares at US$75 on 3 November 2000 and that on 3 November 2000 the Defendant executed an order to sell 1,000 shares at a price of US$75.”

6. The Plaintiffs argue that if one reads the entirety of paragraph 10(1) of the defence, it is beyond dispute that the Defendant made an express and unequivocal admission that it could have sold the Plaintiff’s 3,000 shares at US$75 on 3.11.2000.

7. In the defence there cannot be any admission. People are called “buyers” because they buy; they are called sellers because they sell. Buyers only buy; they do not sell. Only sellers sell; they do not buy. Thus in the original defence it is illogical to say “sufficient buyers existed …… to sell all 3,000 shares”. The situation embraced in the sentence cannot and does not exist. It requires an amendment for the sentence to make sense. It would only be logical and sensible to say that “sufficient sellers existed …… to sell all 3,000 shares”, or “sufficient buyers existed …… to buy all 3000 shares”. The amendment takes the latter form.

8. If there is an admission, it must be an admission of a piece of fact. A withdrawal of admission must be a withdrawal of an admission of fact. But “sufficient buyers existed to sell …… all 3,000 shares” cannot and does not exist as a piece of fact, because buyers do not sell. Hence there cannot be any withdrawal of an admission, because the Defendant, on its pleading, has not made any admission of fact. The amendment to paragraph 10 is required so as to make it sensible. The amendment must reflect what the Defendant, and not the Plaintiff, intended to put into the defence. According to the Defendant, what was intended in the original paragraph 10(1) was “an admission that there were generally buyers of at least or more than 3,000 Gemstar shares at US$75 or better on that day.”

9. The Plaintiffs argue that if the application for amendment is allowed, they would suffer prejudice, because they can only rely on proof by deduction/inference by relying on a certain trading report rather than direct proof that would have gleaned from screen-shots of the trading conditions on 3.11.2000. The former is less forceful than the latter. Back in 2002, full dealing records (in particular screen-shots) in respect of the trades in Gemstar shares on 3.11.2000 could have been available to enable the Plaintiffs to prove the issue conclusively without the necessity of making inferences or deductions. However, such screen-shots relating to the trades in Gemstar shares on 3.11.2000 are no longer available, but could have been available back in the end of 2002 when the Defence was filed. Without the screen-shots, the Plaintiffs are considerably more restricted in terms of evidentiary material available to them to prove the issue in question. It would be grossly unfair if the Plaintiffs are left to suffer the effects of an evidentiary impediment just because the Defendant has chosen to withdraw an admission after a gross delay of 7 years.

10. The burden is on the Plaintiffs to prove their case, and it is up to them to gather all the available evidence at the material time. They were under the misapprehension that the Defendant made an admission in the defence, when in fact it could not and did not do so. The prejudice, if any, cannot be caused by the Defendant, but caused by their own misapprehension of paragraph 10(1) of the defence. The green shots were not available a long time ago. So whether the amendment is allowed or not, it cannot make any difference. It is not that because the application is allowed, then the green shots are not available. They were no longer available, when the Defendant applied for the amendment. Accordingly the argument that they will suffer prejudice cannot be sustained.

11. For the reasons stated above, I adjudge that the order made by Master Lee is correct. Accordingly I dismiss the Plaintiffs’ appeal.

Costs

12. I make an order nisi, to be made absolute in 14 days’ time, that the Plaintiffs do bear costs of this appeal, to be taxed, if not agreed, with certificate for Counsel.

( S. Chow )
District Judge

The Plaintiffs: represented by Miss Sarah Tong, instructed by M/S. Robertsons, Solicitors.

The Defendant: represented by Mr. Roger Beresford, instructed by M/S. Jones Day, Solicitors.

70341-EN-2010-03-24

MAN CHEUNG INTERNATIONAL TRADERS LTD AND ANOTHER v. CLSA LTD

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DCCJ6778/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6778 OF 2002

_________________________

BETWEEN

	MAN CHEUNG INTERNATIONAL TRADERS LIMITED	1st Plaintiff
	ASIACORP NOMINEES LIMITED	2nd Plaintiff
	and
	CLSA LIMITED formerly known as CREDIT LYONNAIS SECURITIES (ASIA) LIMITED	Defendant

_________________________

Before: Her Honour Judge Mimmie Chan in Chambers (Open to Public)

Date of Hearing: 24 March 2010

Date of Delivery of Decision: 24 March 2010

_________________________

D E C I S I O N

_________________________

1. Having heard the parties, I am satisfied that the tape for which discovery is sought is relevant in the Peruvian Guano sense to whether or not there was an agreement to sell all the 3,000 shares on 3 November 2000, or to the parties’ understanding of an ‘or better’ order.

2. Bearing in mind proportionality and weighing the costs of the exercise now involved of producing the original tape for inspection of a relevant document as is now sought, I am prepared to exercise my discretion to make the order for production. After this inspection, however, I doubt if any further step can be considered to be necessary to pursue this issue of the transcript, without extremely convincing reasons. All that remains to be done appears to be cross-examination of witnesses and submissions on the reliability or otherwise of the transcript, all of which are matters for trial.

3. My order is not to suggest that the parties will be entitled to further orders for discovery or for leave to adduce expert evidence following on the order now made. The making of such further orders will depend on another process of examination, taking into consideration factors such as proportionality, necessity and efficiency of the conduct of the case to a speedy trial without further delay and unnecessary interlocutory skirmishes.

4. Both parties, in my opinion, have been guilty of protracted and unnecessary delay in bringing the matter to an early trial. At the same time as making the order for discovery, I will impose a timetable to minimise further distraction from the proper focus on bringing the case to trial.

5. The orders I make are:-

(1)  The Defendant is to produce the original tape identified as Item 52 in the Defendant’s Second Supplemental List (I will hereinafter refer to it as “the Tape”) within 7 days from the date hereof.
(2)  The Plaintiffs do within 21 days of the delivery up of the Tape inform the Defendant whether directions are required for the filing of expert reports relative to the tape, and if yes, to apply to the court for leave within 7 days thereafter.
(3)  If no directions for expert evidence are required, the parties do within 21 days of the delivery up of the Tape file their respective questionnaires and comply with Order 25 rule 1 and obtain directions relating to the further management of the case to trial, including the exchange of witness statements no later than 10 weeks from today.

6. On costs, having considered the conduct of both parties, I consider that the appropriate order to make is that each party is to bear its own costs of this application and the appeal. The Plaintiffs’ representatives have listened to the tape in March 2006. There is no reason, in my opinion, to delay this application until July 2009.

(Discussion re leave to appeal)

7. I am not going to give leave to appeal. Even if the Defendant can succeed in establishing that there are reasonable prospects of success, the court still retains a discretion, and I am not persuaded from what I have seen so far that there is any reason why this matter should be delayed further by interlocutory appeals, one after another. This case should go on to trial. Leave is not granted.

(Mimmie Chan)
District Judge

Mr Simon Westbrook, SC, instructed by Messrs Robertsons, for the 1st and 2nd Plaintiffs

Mr Jin Pao, instructed by Messrs Jones Day, for the Defendant

56495-EN-2007-03-23

MAN CHEUNG INTERNATIONAL TRADERS LTD AND ANOTHER v. CLSA LTD

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DCCJ 6778/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6778 OF 2002

BETWEEN

	MAN CHEUNG INTERNATIONAL TRADERS LIMITED	1^st Plaintiff
	ASIACORP NORMINEES LIMITED	2^nd Plaintiff
	and
	CLSA LIMITED formerly known as CREDIT LYONNAIS SECURITIES (ASIA) LIMITED	Defendant

______________________

Coram: Deputy District Judge Anthony Chow in Chambers (open to public)

Date of Hearing: 23^rd March 2007

______________

DECISION

_____________

1. This is an application by the defendant for leave to appeal against my decision dismissing it’s appeal of Master T Chen’s dismissal of the defendant’s summons for specific discovery under Order 24 r.7, rules of the District court.

2. The applicable test is set out in Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538. Lord Woolf, MR stated the relevant principles as follows:

“ i) The court will only refuse leave if satisfied that applicant has no realistic prospect of succeeding on the appeal. The test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case. Why however this court has decided to adopt the former phase is because the use of the word “realistic” makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.
ii) The court can grant the application even if it is not satisfied. There can be many reasons for granting leave even if the court is not satisfied that the appeal has any prospect of success. For example, the issue may be one which the court considers should in the public interest be examined by this court or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying.”

3. Clearly the test has a low threshold, the defendant is only required to show an arguable case.

4. In his skeleton arguments filed for this application, Mr. Beresford, counsel for the defendant, listed seven draft grounds of appeal.

5. I am not going to list out the grounds of appeal here, but having read Mr. Beresford’s skeleton arguments, I am not satisfied that there is no realistic prospect of success. Accordingly, leave of appeal should be given.

6. Costs of and incidental to this application be costs in the cause of the appeal, with certificate for counsel.

(Anthony Chow)
Deputy District Judge

Representation:

Mr. Simon Westbrook SC, instructed by Messrs. Robertsons, for the Plaintiffs

Mr. Rogers Beresford, instructed by Messrs. Jones Day, for the Defendant

Orders set aside: see CACV97/2007 dated 25 September 2007

55080-EN-2006-11-16

MAN CHEUNG INTERNATIONAL TRADERS LTD AND ANOTHER v. CLSA LTD

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DCCJ 6778/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6778 OF 2002

------------------------

BETWEEN

	MAN CHEUNG INTERNATIONAL TRADERS LIMITED	1^st Plaintiff
	ASIACORP NOMINEES LIMITED	2^nd Plaintiff
	and
	CLSA LIMITED formerly known as CREDIT LYONNAIS SECURITIES (ASIA) LIMITED	Defendant

------------------------

Coram : Deputy District Judge Anthony Chow in Chambers (open to public)

Date of Hearing : 9^th November 2006

Date of Handing down of Decision : 16^th November 2006

------------------------

DECISION

------------------------

1. This is an appeal of the Master’s decision dismissing the defendant’s summons for specific discovery under Order 24 r.7, Rules of District Court.

2. Prior to this hearing, the defendant applied to amend the original summons by adding an order to the plaintiff to serve a further and better list of documents under Order 24 r.3.

3. Mr. Westbrook SC, representing the plaintiffs did not object to the amendment and the hearing proceeded on the amended summons.

Background:

4. This is a relatively simple claim by the client of a securities broker for damages in failing to properly execute a sell order at a specified price “or better”.

5. The defence as pleaded are:

(1) No contractual relationship between the 1^st plaintiff and the defendant.
(2) The defendant did not breach any duty, contractual or otherwise, to the plaintiffs.

6. The defendant seek an order for specific discovery against the plaintiff on 2 categories of documents:

(i) The opening and operating of the securities trading account with the Defendant on behalf of the 1^st plaintiff by the 2^nd plaintiff; and
(ii) The trading of the shares listed with the Australian Stock Exchange and the Nasdaq Exchange by the defendant on the instructions of the 2^nd plaintiff on behalf of the 1^st plaintiff, including but not limited to trading in the shares in Gemstar-TV Guide Intl Inc, Climax Mining, Woolworths Limited, Aeroflex Inc., Misonix Inc. and Citrix Systems Inc.

The Law:

7. The applicable law as stated in Berkeley AdministrationIncv. McCelland [1990] F.S.R. 381 and succinctly summarized by Cheung JA in Paul’s Model Art GMBH & Co KG v UT Ltd & Ors, [2006] 1 HKC, as follows:

“ (1) There is no jurisdiction to make an order under RSC, O.24, r.7, for the production of documents unless
(a) there is sufficient evidence that the documents exist which the other party has not disclosed;
(b) the document or documents relate to matters in issue in the action;
(c) there is sufficient evidence that the document is in the possession, custody or power of the other party.
(2) When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure.
(3) The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.”

8. The tests are therefore: (1) existence, (2) relevancy and (3) possession, custody and control.

The issues:

9. In paragraph 4 of the Learned Master’s decision, she defined the issues for trial as follows:

“ (1) whether there was contractual or otherwise relationship between the 1^st Plaintiff and the Defendant to render the Defendant liable to the 1^st Plaintiff for its loss if any;
(2) whether the Defendant was in breach of their contractual duties and/or negligent in performing their duties in relation to selling the shares in question.”

10. Mr. Beresford, counsel for the defendant, in his skeleton argument identified the issues for trial as follows:

“ (1) Whether P2 opened an account or a sub-account in the name of P1 (ie whether P2 was acting as principal or agent) and whether P1 entered into a contractual relationship with D (Statement of Claim, para. 4 [6/24]; Defence, paras. 4, 5(1), 5(6) [7/30-31]);
(2) Whether D owed a duty of care in tort to either or both of P1 and P2 (Statement of Claim, para. 6 [6/25]; Defence, para. 6 [7/32-33]) and, if so, whether it was discharged;
(3) What were the terms of D's contract with P2 and, if there was a contract, with P1 (Statement of Claim, para. 5 [6/24]; Defence, para. 5 [7/31-32], whether those terms included a term express or implied that an instruction to sell at a price "or better" had the meaning attributed to it by D or by Ps, and if not incorporated whether there was a practice or technical meaning as contended for by D which was brought to the attention of Ps (Statement of Claim, paras. 7, 13, 15 [6/25-27]; Defence, paras. 7, 8(3),13, 15 [7/33-38].”
I will deal with the 2 categories of documents separately.

Category (i) Documents:

11. Mr. Westbrook, admitted the Master was correct in holding there was sufficient evidence that such document exist and are probably in the plaintiff’s possession, custody and control. The real dispute was with relevance.

12. The defendant’s case was that it never had any contractual relationship with the 1^st plaintiff. In paragraph 2 of the Statement of Claim, the plaintiffs pleaded that the 2^nd plaintiff carried on the relevant share trading with the defendant on behalf of the 1^st plaintiff. The defendant answered with a general denial. Additionally, in paragraph 4(3) of the Statement of Defence, the defendant stated no agreement was ever signed between the 1^st plaintiff and the defendant “…because the 1^st plaintiff was not, and has never been, a client of the Defendant.” Furthermore, in paragraphs 5(1) and 5(6) of the Statement of defence, the defendant stated: “It is denied that the Defendant entered into the alleged or any contract as alleged or at all with the 1^st Plaintiff” and “It is averred that no such customer relationship had or had been established between the Defendant and the 1^st Plaintiff and that the Defendant had and has not otherwise agreed in writing.”

13. Irrespective of the defendant’s case, Ms. Eleanor Sin Chee Lam stated in paragraph 5(2) of her affidavit in support of the defendant’s application for specific discovery: “It is indisputable – and it is not disputed – that the 1^st Plaintiff instructed the 2^nd Plaintiff to place orders of various different kinds with the Defendant…”. The learned Master rightly interpreted from this passage that the defendant no longer disputed the authority of the 2^nd plaintiff.

14. In fact Ms. Sin’s affidavit in support had clearly conceded that the 2^nd plaintiff was an agent of the 1^st plaintiff and the Learned Master’s decision could not be faulted in anyway.

15. Mr. Beresford now argues that the real issue is not whether the 2^nd plaintiff had any authority to open and operate the account for the 1^st plaintiff, but whether the 1^st plaintiff authorized the 2^nd plaintiff to operate the account as principal or as agent. This point was however not pleaded by the parties and certainly not relevant to any issue for trial.

16. The only other point relevant to whether the defendant is liable to the 1^st plaintiff was pleaded in paragraph 5(5) of the Statement of Defence, where the defendant averred that one of the expressed, or alternatively implied term, of their agreement was the defendant would not be liable to any other person on whose behalf the 2^nd plaintiff may act, unless there is a separate customer relationship and the defendant had agreed in writing.

17. This is of course a matter that can only be decided by examining the agreements between the 2^nd plaintiff and the defendant. Nothing contained in category (i) documents can remotely be relevant to this issue.

Category (ii) Documents:

18. Ms. Sin in paragraph 5(2) of her affidavit justified the defendant’s request for specific discovery of these documents by stating:

"Documentation passing between the Plaintiffs and attendance notes of conversations between the Plaintiffs in respect of the Trades will serve to show whether the 2nd Plaintiff fully or properly discharged its duties by passing onto the 1st Plaintiff information as to how the Defendant would and did execute an "or better" order such that the 1st Plaintiff would understand the potential consequence of it instructing the 2nd Plaintiff to place an "or better" order with the Defendant, on its behalf."

19. The learned Master held: First, although there might have been documents in relation to instructions on trading of shares exchanged between the 1^st and the 2^nd plaintiff, she was not satisfied that there was any documents that contained explanation of the nature or consequence of different types of orders. Second, whether the 2^nd plaintiff had properly discharged its duties to the 1^st plaintiff was not raised in any of the pleadings and therefore not relevant to the issues for trial.

20. In this hearing, Mr. Beresford raised, for the first time, that if category (ii) documents disclosed the 2^nd plaintiff had explained the nature and consequence of different types of orders to the 1^st plaintiff, it would undermine the 2^nd plaintiff’s case that such a term of practice was never incorporated in the agreement between the defendant and the 2^nd plaintiff.

21. I agree with the Learned Master’s findings that nothing suggest that there exist any documents exchanged between the 1^st and 2^nd plaintiff, where the nature or consequence of different types of order were explained; and whether the 2^nd plaintiff had properly discharged its duty to the 1^st plaintiff is not a matter at issue.

22. In respect to the new argument raised by Mr. Beresford, whether any terms of practice was incorporated into the agreement between the defendant and the 2^nd plaintiff can only be discovered from communications between the defendant and the 2^nd plaintiff. Nothing relevant can be discovered in documents exchanged between the 2^nd plaintiff and the 1^st plaintiff.

23. Mr. Beresford also stated the existence of other “or better” instructions between the 1^st and 2^nd plaintiffs are relevant to previous course of dealings and the question of whether the defendant’s practice of carrying out “or better” instructions has been incorporated into the contract between the 2^nd plaintiff and the defendant.

24. With respect, the only instructions that may be relevant to whether the defendant’s practice of carrying out “or better” instructions (or any other instructions for that matter) had been incorporated into their contract, can only be those instructions from the 2^nd plaintiff to the defendant. Communications between the 1^st and 2^nd Plaintiff could be relevant to previous course of dealings between the 1^st and 2^nd plaintiffs but they surely cannot be relevant to previous course of dealings between defendant and the 2^nd plaintiff.

25. I do not see any evidence that the category (ii) documents the defendant seeks to discover, i.e. documents from the 2^nd plaintiff explaining the nature or consequence of different types of order, had ever existed. In any event, even if these documents did exist, I also find they are not relevant to the issues at trial.

Order:

26. Appeal is dismissed.

27. Costs to the plaintiffs, with certificate for counsel, to be taxed if not agreed.

(Anthony Chow)
Deputy District Judge

Representation:

Mr. Simon Westbrook SC, instructed by Messrs. Robertsons, for the Plaintiffs

Mr. Roger Beresford, instructed by Messrs. Jones Day, for the Defendant

52820-EN-2006-06-13

MAN CHEUNG INTERNATIONAL TRADERS LTD AND ANOTHER v. CLSA LTD

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DCCJ 6778/2002

IN THE DISTICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6778 OF 2002

____________

BETWEEN

	MAN CHEUNG INTERNATIONAL TRADERS LIMITED	1^st Plaintiff
	ASIACORP NOMINEES LIMITED	2^nd Plaintiff
	and
	CLSA LIMITED formerly known as CREDIT LYONNAIS SECURITIES (ASIA) LIMITED	Defendant

____________

Before: Master Tracy Chan in Chambers

Date of Hearing: 7 June 2006

Date of handing down Decision: 13 June 2006

__________________

D E C I S I O N

__________________

1. This is an application made by the Defendant herein under Order 24 r.7 of the Rules of the District Court for Plaintiffs to file and serve on the Defendant an affidavit stating whether they have or have at any time had in their passion, custody or power any communications, including correspondence, attendance notes and memoranda, passing between them in relation to :

i. the opening and operating of the securities trading account with the defendant on behalf of the 1^st P and the 2^nd P,

ii. the trading of the shares listed with the Australian Stock Exchange and the Nasdaq Exchange by the Defendant on the instructions trading in the shares in Gemstar – TV guide Intl. Inc. Climax Mining, Woolworths Limited, Aeroflex Inc., Misonix Inc and Citrix Systems Inc. of the 2^nd P on behalf of the 1^st P, including but not limited to

Nature of the Claim

2. The two Plaintiffs claim against the Defendant for loss and damages caused by the Defendant’s negligence and/or breach of contractual duties in failing to exercise skill and due care when conducting securities transaction on the Plaintiffs’ behalf.

Defence as pleaded

3. In the Defence the Defendant denies:

1. any contractual relationship between the 1^st Plaintiff and the Defendant. (paragraphs 4(3), 5, and 16 (1) of the Defence refer), and

2. negligence and/or breach of contractual duty to exercise due care.

Issues to be tried:

4. The issues defined at the hearing by parties are not the same. Upon reading the pleadings, I am of the view that the two main issues for trial are:

i) whether there was contractual or otherwise relationship between the 1^st Plaintiff and the Defendant to render the Defendant liable to the 1^st Plaintiff’s for its loss if any;

ii) whether the Defendant was in breach of their contractual duties and/or negligent in performing their duties in relation to selling the shares in question.

Present Application:

5. Parties do not dispute that the tests to be applied in this application should be (i) whether the documents do exist; (ii) whether they are relevant to the issues to be tried; and (iii) whether they are in the possession of the plaintiffs.

The existence of the documents asked for under para 1(i) of Summons and whether they are in the possession and custody of the Plaintiffs:

6. Mr. Powell for the Defendant submits that from the circumstantial evidence, they believe that the documents listed in paragraph 1(i) exist because both Plaintiffs are in the business of securities trading. The 1^st Plaintiff is client of the 2^nd Plaintiff in a business context; it is therefore inherently probable that there are in existence documents recording instructions given by the 1^st Plaintiff.

7. I agree that given the nature of the business of the two Plaintiffs, there should, prima facie, be record or correspondence of some kind noting the instructions of the 1^st Plaintiff to the 2^nd Plaintiff, or that there should be records of deals done for and on behalf of the 1^st Plaintiff kept by the 2^nd Plaintiff. I note that the Plaintiffs have produced and marked as exhibit “JDV- 2” in Mr. Levy’s Affirmation dated 13 May 2006 a document and that to some extent supports the assertion and belief of the Defendant that, prima facie, such kind of documents do exist and are in the possession of the Plaintiffs.

Relevance of documents asked for under para 1(i)

8. It is the Defendant’s contention that such documents would tend to prove the authority of the 2^nd Plaintiff to open an account with the 1^st Plaintiff and if the 2^nd Plaintiff has not been duly authorized, there would be no relationship between the 1^st Plaintiff and the Defendant.

9. I note that the Defence has all along been that there was no contractual and/or customer relationship between Defendant and the 1^st Plaintiff. Further, in Paragraph 5 (5) of the Defence, it is stated that as provided by the agreement between the Defendant and the 2^nd Plaintiff that any responsibility towards any person on whose behalf the 2^nd Plaintiff may act, unless a separate customer relationship had been established between the Defendant and that person and that person or the Defendant otherwise agreed in writing. As seen from the pleadings, however, it does not seem that the Defendant has ever raised the issue on whether the 2^nd Plaintiff has authority from the 1^st Plaintiff to open and an account with the Defendant and operate the same to deal with the transaction in question or otherwise. The line taken by the Defendant has been that there was no contract, in writing, or at all, between the Defendant and the 1^st Plaintiff.

10. Paragraph 2 of the Defence is the only paragraph dealing with the Plaintiffs’ assertion that the 2nd Plaintiff was conducting share trading business for and on behalf of the 1st Plaintiff. It was dealt with by way of simple non-admission. I have no intention to criticize the Defendant for adopting this style of pleading. It is however unfortunate that in paragraph 5(2) of the Affirmation of Ms. Sin, she specifically says that “it is indisputable – and – it is not disputed – that the 1st Plaintiff instructed the 2nd Plaintiff to place orders of various kind with the Defendant,….”. From the plain language of this passage, one could take that there is no dispute on the authority of the 2^nd Plaintiff.

11. In these circumstances, I am not satisfied that, prima facie, the documents asked for are relevant to the issues as defined.

The existence of the documents asked for under para 1(ii) of Summons and whether they are in the possession and custody of the Plaintiffs:

12. In paragraph 5 (2) of her 2^nd Affirmation, Ms. Sin says that such documents would tend to show whether the 2^nd Plaintiff had fully and properly discharged its duties by passing onto the 1^st Plaintiff information as to how the Defendant would and did execute an “or better” order such that the 1^st Plaintiff would understand the potential consequence of it instructing the 2^nd Plaintiff to place an “or better” order with the Defendant.

13. In my view, there might be documents in relation to the trading of shares in the two exchanges as those mentioned in paragraph 7 hereinabove. I am however not satisfied that, prima facie, such documents would contain information indicating how the 2nd Plaintiff has explained the nature and consequence of different types of order to the 1^st Plaintiff or that the 2nd Plaintiff has failed to do so.

Relevance of documents asked for under para 1(ii)

14. As I could see from paragraphs 7-9 of the Statement of Claim, it is the Plaintiffs’ case that the order placed by the 2^nd Plaintiff with the Defendant was an “or better order”. There was no dispute on this point. Further, from the Defence as pleaded, it is never the case of the Defendant that if there is any loss or damages caused by the transaction in question, it was the fault of the 2^nd Plaintiff. In fact no notice has been issued under O16 r.8 or otherwise. Whether the 2^nd Plaintiff has discharged their duties in relation to the 1^st Plaintiff is therefore not a matter to be tried to determine the claim.

15. For reasons given in the above, the application of the Defendant is refused and I make an order nisi that the Defendant should pay costs of this application to the Plaintiffs, to be taxed if not agreed.

(original signed)
(Tracy Chan)
Master, District Court

Mr Jeremy Levy, of Messrs Robertsons, for the 1^st & 2^nd Plaintiffs

Mr Simon Powell, of Messrs Jones Day, for the Defendant

(1)	No contractual relationship between the 1^st plaintiff and the defendant.
(2)	The defendant did not breach any duty, contractual or otherwise, to the plaintiffs.

(i)	The opening and operating of the securities trading account with the Defendant on behalf of the 1^st plaintiff by the 2^nd plaintiff; and
(ii)	The trading of the shares listed with the Australian Stock Exchange and the Nasdaq Exchange by the defendant on the instructions of the 2^nd plaintiff on behalf of the 1^st plaintiff, including but not limited to trading in the shares in Gemstar-TV Guide Intl Inc, Climax Mining, Woolworths Limited, Aeroflex Inc., Misonix Inc. and Citrix Systems Inc.

“	(1)	There is no jurisdiction to make an order under RSC, O.24, r.7, for the production of documents unless
		(a)	there is sufficient evidence that the documents exist which the other party has not disclosed;
		(b)	the document or documents relate to matters in issue in the action;
		(c)	there is sufficient evidence that the document is in the possession, custody or power of the other party.
	(2)	When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure.
	(3)	The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.”

“	(1)	whether there was contractual or otherwise relationship between the 1^st Plaintiff and the Defendant to render the Defendant liable to the 1^st Plaintiff for its loss if any;
	(2)	whether the Defendant was in breach of their contractual duties and/or negligent in performing their duties in relation to selling the shares in question.”

“	(1)	Whether P2 opened an account or a sub-account in the name of P1 (ie whether P2 was acting as principal or agent) and whether P1 entered into a contractual relationship with D (Statement of Claim, para. 4 [6/24]; Defence, paras. 4, 5(1), 5(6) [7/30-31]);
	(2)	Whether D owed a duty of care in tort to either or both of P1 and P2 (Statement of Claim, para. 6 [6/25]; Defence, para. 6 [7/32-33]) and, if so, whether it was discharged;
	(3)	What were the terms of D's contract with P2 and, if there was a contract, with P1 (Statement of Claim, para. 5 [6/24]; Defence, para. 5 [7/31-32], whether those terms included a term express or implied that an instruction to sell at a price "or better" had the meaning attributed to it by D or by Ps, and if not incorporated whether there was a practice or technical meaning as contended for by D which was brought to the attention of Ps (Statement of Claim, paras. 7, 13, 15 [6/25-27]; Defence, paras. 7, 8(3),13, 15 [7/33-38].”
I will deal with the 2 categories of documents separately.