WAN KWOK LING BONNIE AND ANOTHER v. HOU TAK SECURITIES LTD AND ANOTHER

WAN KWOK LING BONNIE AND ANOTHER v. HOU TAK SECURITIES LTD AND ANOTHER

Court held Hou Tak vicariously liable for Miss Chan's fraud because Chan acted as an account executive/settlement clerk held out with actual or ostensible authority, used company stationery, contract notes and company systems, and Hou Tak's systemic failure to supervise and maintain internal controls (as found by the SFC and PwC) made it just to place loss on the employer; Hou Tak was also negligent for failing to implement and enforce proper account opening and segregation of duties; the 2nd Plaintiff's claim failed for lack of standing as the account and dealings were in the 1st Plaintiff's name.

Citation
WAN KWOK LING BONNIE AND ANOTHER v. HOU TAK SECURITIES LTD AND ANOTHER
Parties
1st Plaintiff: Wan Kwok Ling Bonnie; 2nd Plaintiff: Cheung Chu Kwan; 1st Defendant: Hou Tak Securities Limited; 2nd Defendant: Chan Hing Fung Katie; Third Party: Chan Hing Fung Katie
Court
District Court
Jurisdiction
Hong Kong
Judgment Date
15 November 2006
Case Number
DCCJ1437/2004
Procedural Posture
Civil Action (securities/fraud) / Judgment Delivered at Trial
Outcome
Judgment for 1st Plaintiff against 1st Defendant; 2nd Plaintiff's claim dismissed
Legal Topics
Misappropriation of Client Funds, Internal Controls and Supervision, Account Opening Procedures, Vicarious Liability for Employee Fraud, Breach of Duty by Broker, SFC Disciplinary Findings
Source Language
EN
Securities Law Tort (fraud and Negligence) Vicarious Liability Regulatory Enforcement Misappropriation of Client Funds Internal Controls and Supervision Account Opening Procedures Vicarious Liability for Employee Fraud +2 more

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Parties

Wan Kwok Ling Bonnie

1st Plaintiff

Cheung Chu Kwan

2nd Plaintiff

Hou Tak Securities Limited

1st Defendant

Chan Hing Fung Katie

2nd Defendant

Chan Hing Fung Katie

Third Party

Procedural Posture

Civil Action (securities/fraud) / Judgment Delivered at Trial

Legal Issues

  1. 1 Whether employer (Hou Tak) is vicariously liable for employee Chan's fraudulent acts/misrepresentations
  2. 2 Whether Hou Tak was negligent in failing to implement internal controls and supervision causing or contributing to loss
  3. 3 Whether the 2nd Plaintiff has standing to claim when account was in 1st Plaintiff's name

Ratio Decidendi

Court held Hou Tak vicariously liable for Miss Chan's fraud because Chan acted as an account executive/settlement clerk held out with actual or ostensible authority, used company stationery, contract notes and company systems, and Hou Tak's systemic failure to supervise and maintain internal controls (as found by the SFC and PwC) made it just to place loss on the employer; Hou Tak was also negligent for failing to implement and enforce proper account opening and segregation of duties; the 2nd Plaintiff's claim failed for lack of standing as the account and dealings were in the 1st Plaintiff's name.

Court Disposition

Judgment for 1st Plaintiff against 1st Defendant; 2nd Plaintiff's claim dismissed

Orders

  • Judgment for the 1st Plaintiff against the 1st Defendant in the sum of HK$609,450.82
  • Interest on the judgment sum from date of writ to date of judgment at half judgment rate and thereafter at full judgment rate until full payment