TAI FOOK FUTURES LTD v. CHEUNG MOON HOI JEFF

bjbj SEQ CHAPTER \h \r 1 CACV 103/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 103 OF 2005 (ON APPEAL FROM HCA 9932 OF 1999) ______________________ BETWEEN: TAI FOOK FUTURES LIMITED Plaintiff (Respondent) and CHEUNG MOON HOI JEFF Defendant (Appellant) Before: Hon. Yuen JA and Hon Kwan J in Court Date of hearing: 19 October 2006 Date of Judgment: 23 October 2006 ---------------- JUDGMENT ---------------- Hon. Yuen JA: This is the Defendant s appeal from a decision of Chu J given on 7 March 2005 dismissing two summonses issued by the Defendant in February and March 2005. Before I deal with the summonses, it is necessary to summarize the background against which they arose. The parties respective cases The action was commenced in 1999 by the Plaintiff, a broker on the Futures Exchange, for a debt of about $800,000 allegedly owing in the Defendant s account as a result of his trading in Hang Seng Index Futures. Very briefly summarized, the defence is that: (1) the Plaintiff was in breach of the Client Account Agreement, and/or the HKFE Rules, and/or the Defendant s standing instructions to implement a Risk Control Device, when it executed trades instructed by the Defendant s wife when he had insufficient collateral and did not have sufficient net worth, and the Plaintiff also failed to inform the Defendant that his positions could be closed out without his consent; (2) alternatively, the Defendant s wife had on 28 April 1999 given "stop l N7 t level), but the Plaintiff failed to inform the Defendant or to close the Defendant s positions when the Index reached that level and fell below it. The Defendant denies liability and counterclaims for about $1,100,000 which he says was wrongly debited in his account. In reply, the Plaintiff denied the Defendant s allegations and in particular, pleaded that there were 4 telephone conversations on the morning of 28 April 1999 between the Defendant s wife and Miss Mak, in the course of which the Defendant s wife gave various instructions to close the positions when the Index goes above 13,700 and then drops to 13,700 and below, and also gave instructions to purchase additional contracts, which specific instructions deferred the "stop loss" instructions. Obviously it will be necessary at trial to determine what were the instructions given by the Defendant s wife according to the true meaning of the words spoken. Audio records The Plaintiff has audio records of the telephone conversations between Miss Mak and the Defendant and his wife, which conversations were captured and stored on computer in audio files. These records were disclosed on discovery and the Defendant has been supplied with copies. 28 April 1999 In relation to what occurred on 28 April 1999, it is not disputed by the Defendant that he has been supplied with a complete record of the telephone conversations between his wife and Miss Mak. What is disputed is what was meant by the words used, in particular whether the instructions referred to the Index reaching 13,700 or going above 13,700. 29 April 1999 What occurred on the next day (29 April 1999) however also came into the picture because the Defendant alleges his wife had a telephone conversation with Miss Mak in which Miss Mak said words to the effect that "had the Hang Seng Index Futures reached 13,700, the plaintiff would have executed the said instruction already" ("Miss Mak s disputed statement"). The Defendant says that statement reinforces his case that his wife s instructions meant the Index reaching that level, not going above it. And because the Index in fact reached 13,700 after his wife s order on 28 April 1999, in response to that statement, his wife faxed a Reuters futures index trade recap ("the trade recap") the same day (29 April 1999) to Miss Mak to prove it to her. Discovery In 2003, the Plaintiff provided to the Defendant a copy on cassette tape of the audio recordings of the telephone conversations between Miss Mak and the Defendant s wife on 28 April 1999. The Plaintiff also provided to the Defendant a copy on CD-Rom of the audio recordings of the telephone conversations between Miss Mak and the Defendant s wife on 29 April 1999. The Plaintiff also filed an affirmation by a director "confirming that the recordings of telephone conversations supplied to the Defendant are a complete record of all the telephone conversations between Miss Mica Mak of the Plaintiff and the Defendant and/or the Defendant s wife on 28th April and 29th April 1999". The recording of 29 April 1999 did not contain Miss Mak s disputed statement. Summonses In February and March 2005 the Defendant issued 2 summonses. (1) The 1st summons was for an order that the Plaintiff disclose the vendor, brand name and model number of the recording system used to record the telephone conversations on 28-29 April 1999. (2) The 2nd summons can be divided into 3 parts. (i) The 1st part arises from a complaint that the Defendant had made against the Plaintiff to the Hong Kong Futures Exchange on 30 April 1999. The HKFE concluded its investigations in July 1999 and an investigation report was disclosed by the Plaintiff in discovery. In the 2nd summons, the Defendant sought an order that the Plaintiff be compelled to apply to Hong Kong Exchanges (HK Futures Exchange having merged with it) for copies of correspondence, documents and tapes passing between them in connection with the complaint. (ii) The 2nd part arises from the involvement of the Securities and Futures Commission. It is not clear on the materials before this court whether the Defendant had also made a complaint against the Plaintiff to the SFC, but counsel for the Plaintiff informed the court on instructions that there was correspondence between the Plaintiff and the SFC which has not been disclosed on discovery and he has undertaken on behalf of the Plaintiff that his solicitors will file a supplementary list of documents to disclose the correspondence by the close of business on 20 October 2006. (iii) In the 3rd part, the Defendant sought an order that the Plaintiff verify on oath that it did not receive and possess copies of the trade recap which the Defendant s wife said she had faxed to Miss Mak in the afternoon of 29 April 1999. Chu J s order After a hearing on 7 March 2005, Chu J dismissed both summonses for reasons given in writing on 30 March 2005. Appeal from Chu J s order Chu J s order was made in the exercise of her discretion. It is well-established law that an appellate court should not interfere with the exercise of a judge s discretion unless it is satisfied that the judge has erred in law or in principle, or if she has taken into account some matter which she should not have taken into account, or has left out of account some matter which she should have taken into account, or if the decision was so plainly wrong that it must have been reached by a faulty assessment of the weights of the different factors which have to be taken into account (cf Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394, applied in Lakhan v Wu Wing Tat [1987] 3 HKC 54). 1st Summons I have found it very difficult understanding the basis of this summons because parts of the Defendant s affirmation in support of his summons and his two skeleton submissions before this court appeared to be self-contradictory. I do not intend to go through what would appear to be different versions of his case as to whether the recordings supplied to him were incomplete or had been tampered with. It is not necessary to do so because his final position was this: (i) he does not challenge the Plaintiff s affirmation deposing that the recordings supplied to him were complete recordings of the telephone conversations on 28-29 April 1999; (ii) however he has a right under Order 24 rule 2 to inspect the audio files in the Plaintiff s computer which constitute the original recording; (iii) before he exercises that right, he wishes to know the vendor, make and model of the system so that he could find an expert in that system - hence this summons; (iv) he wishes to retain an expert in that system so that he could see if the original audio files had been tampered with. In dismissing this summons, Chu J gave 4 reasons. It is only necessary for me to say that as the Plaintiff s director has on oath "confirmed that the recordings of telephone conversations supplied to the Defendant are a complete record of all the telephone conversations between Miss Mica Mak of the Plaintiff and the Defendant and/or the Defendant s wife on 28th April and 29th April 1999", in the absence of evidence from the Defendant that the audio files in the Plaintiff s computer had been tampered with, the judge was entitled to exercise her discretion in refusing to make an order on the summons which was clearly for the purpose of "fishing". In arriving at this conclusion I have taken into account the Defendant s allegation that at a meeting between the parties on 5 May 1999, his wife had alleged that Miss Mak did make the disputed statement saying: Mica l gZPN ce that the audio recording had been tampered with. I have also taken into account the Defendant s allegation that there was a gap of 7 seconds between 2 audio files recorded on 29 April 1999, the gap being said to be between 10:08:14 and 10:08:21. Even if I assume in favour of the Defendant that the earlier conversation ended abruptly at 10:08:14 and the later conversation started abruptly at 10:08:21, that is not evidence that the gap was in the course of one conversation, nor is it evidence that that was when the disputed statement was made. The Defendant has adduced no evidence showing that the 2 audio files constituted one continuous telephone conversation. In the absence of evidence showing that the original audio files in the Plaintiff s computer has been tampered with, the exercise which the Defendant proposes to undertake (as set out in para. 16 above) is clearly a fishing expedition. The judge labelled it as such in para. 25 of the judgment and she was entitled in the exercise of her discretion to so find. I would add that after the decision of Chu J from which this is the appeal, the Defendant issued another summons for inspection of the original audio files in the Plaintiff s computer. That was dismissed by Chu J on 7 April 2006. I refer to this simply as a matter of completeness as this appeal is not concerned with that order. 2nd Summons - 1st part: HKFE I start with the 1st part of the 2nd summons. The Plaintiff had already provided copies to the Defendant of correspondence and documents passing between it and HKFE. The Defendant s purpose was to obtain the copy of the recording of the telephone conversations the Plaintiff supplied to the HKFE, so as to see if it contained Miss Mak s disputed statement. However the HKFE (now the HKE) has already stated that it has destroyed the material in question. The order for discovery would therefore have been futile and the judge was entitled in the exercise of her discretion to refuse to make it. - 2nd part: SFC As for the 2nd part of the 2nd summons involving the correspondence with the SFC, I have in para. 13(ii) set out the undertaking given by counsel for the Plaintiff relating to the filing of a supplementary list of documents. No order is necessary from the court at this stage. As a matter of completeness, I would add that I do not understand the Defendant s submissions vis-a-vis the SFC providing expert evidence, because as I understand it, no directions have been given that anything from the SFC is to stand as expert evidence. - 3rd part: trade recap Finally I deal with the 3rd part of the 2nd summons (i.e. the application for an affirmation to be filed by the Plaintiff that it does not have the trade recap). It was noted by the court that item 15 in the Plaintiff s list of documents is said to be "Copy of Trade Recap of Hang Seng Index Futures for 28th April 1999". The Defendant says that he has not inspected the original item 15 but he did not think that it was the one faxed by his wife to the Plaintiff because the photocopy did not contain a fax header. The Plaintiff s position is that it "does not admit" that the Defendant s wife had faxed the trade recap to it. The first point is that the Defendant ought first to have inspected the original item 15 before taking out proceedings relating to the trade recap. The Defendant indicated that he would inspect the original item 15 within 3 working days. The question then arose what should be done if, after that inspection, the Defendant considers that the original item 15 was not the trade recap faxed by his wife. Would he be entitled to the order he sought? In Chu J s judgment, there is a reference to an admission that this part of the 2nd summons was "for the purpose of showing Mica Mak is not credible" (para. 30). Presumably that was a reference to an admission made by the Defendant. The judge s statement that specific discovery is not allowed for the sole purpose of discrediting a party or his witness is of course correct. However, I think the Defendant is entitled to argue that the trade recap was relevant to the issue of what Miss Mak understood by the instructions given on 28 April 1999, as shown by the fact that on the next day, she (allegedly) said that had the level of 13,700 been reached, she would have executed the order, an allegation which (if accepted) advances the Defendant s case on the meaning of the words. The trade recap, allegedly faxed by the Defendant s wife to Miss Mak soon after the 29 April 1999 conversation, can be said to be part of the "res gestae" of the conversation of 29 April 1999. So considered, the trade recap would not simply have been for the purpose of discrediting Miss Mak but would also be relevant to an issue in the case the issue being what the words meant. This appears to have been a factor not taken into account by the judge, and as such, this court must exercise its discretion afresh. The evidence supporting the case that the Defendant s wife had faxed a document to Miss Mak can be found in the telephone conversation between the Defendant and Miss Mak on 29 April 1999 at 5:54 pm, of which the Defendant has produced a transcript, which should be read together with the transcript of the telephone conversation between his wife and Miss Mak on the same day at 3:57 pm. Miss Mak s witness statement does not deal specifically with the issue whether she received the fax, and as I have said the Plaintiff has simply "not admitted" the allegation that the fax was sent to it. Having said that, the order sought by the Defendant in his summons of 2 March 2005 (that the Plaintiff do file affirmations of certain named directors and senior representatives to affirm that the Plaintiff did not receive and possess copies of the trade recap as faxed by the Defendant s wife to Miss Mak in the afternoon of 29 April 1999) is unconventional. Given that the Defendant was unrepresented, I think the proper order to make, assuming that he is not satisfied that the original item 15 is the trade recap his wife sent, is to allow him to amend his summons to ask for an order for specific discovery of the trade recap in question in accordance with Order 24 rule 7(1), i.e. that the Plaintiff be required to make an affirmation by a director stating whether a Reuters Index Futures trade recap said to have been faxed by the Defendant s wife on 29 April 1999 is, or has at any time, been in its possession, custody or power, and if not then in its possession, custody or power, when it parted with it and what has become of it. Counsel for the Plaintiff has raised no objection to complying with an order in that form within 7 days after inspection (assuming that after inspection the Defendant considers that he needs to proceed with his application as amended). Order Save that there be an order as set out in the preceding paragraphs, the appeal is dismissed. Taking into account the matters discussed above, I would make an order nisi that the costs of the appeal be borne by the Defendant. Hon. Kwan J: 35. I agree. ( MARIA YUEN) (SUSAN KWAN) Justice of Appeal Judge of the Court of First Instance The Defendant (Appellant) in person, present Mr Norman Hui instructed by T.S. Tong & Co for the Plaintiff (Respondent) - PAGE - - PAGE - - PAGE - r4sR @\\Hc-oa-ws-656\HP LaserJet 1200 Series PCL 6 Ne00: winspool \\Hc-oa-ws-656\HP LaserJet 1200 Series PCL 6 \\Hc-oa-ws-656\HP LaserJet 1200 Letter HP LaserJet 1200 Series PCL 6 Hjc)b 97wfj B]gT )Yn@{i9Z -9]pVvr) \\Hc-oa-ws-656\HP LaserJet 1200 Letter HP LaserJet 1200 Series PCL 6 Hjc)b 97wfj B]gT )Yn@{i9Z -9]pVvr) Normal.dot setup Microsoft Word 9.0 Judiciary Hong Kong Title Microsoft Word Document MSWordDoc Word.Document.8