EAA SECURITIES LTD v. FATTYDAD ALICE PUI YAN, the Administratrix of the Estate of Fattydad Henry, Deceased

EAA SECURITIES LTD v. FATTYDAD ALICE PUI YAN, the Administratrix of the Estate of Fattydad Henry, Deceased

On the balance of probabilities the Court found most trading on Henry's account was unauthorized and concealed by Anita; Henry did not have requisite knowledge of the cheque deposits and intercepted statements so EAA could not rely on contractual deeming provisions or deemed receipt when its employee knew instructions were unauthorized; EAA had been negligent in supervision and cannot recover the claimed debit or the cheque proceeds from Anita or Henry; Henry's counterclaim for conversion/loss of portfolio succeeds and damages are assessed at $3,286,511 with pre-judgment interest awarded; third party indemnity and Anita's counterclaims are dismissed.

Citation
EAA SECURITIES LTD v. FATTYDAD ALICE PUI YAN, the Administratrix of the Estate of Fattydad Henry, Deceased
Parties
Plaintiff: EAA Securities Limited; Defendant Administratrix of the Estate of Fattydad Henry, Deceased (2nd Defendant): FATTYDAD ALICE PUI YAN; 1st Defendant: So Tai Fai
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
15 June 2017
Case Number
HCA2507/2003
Procedural Posture
Civil: Recovery of Margin Account Balance, Fiduciary/trust and Counterclaims in Securities Context / Trial Judgment (court of First Instance)
Outcome
EAA's primary and alternative claims dismissed; EAA's claims against Anita dismissed; Estate/Henry's counterclaim succeeded; Anita's counterclaims dismissed; EAA's third party claim for indemnity against Anita dismissed; costs orders made as below.
Legal Topics
Margin Account, Unauthorized Trading (churning), Knowing Receipt, Breach of Fiduciary Duty, Conversion and Sale of Securities, Equitable Set Off, Indemnity Under Guarantee, Limitation Period, Damages Assessment, Discovery and Disclosure
Source Language
EN
Contract Law Fiduciary Law Equity and Trust Securities Regulation Limitation Law Civil Procedure Margin Account Unauthorized Trading (churning) +8 more

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Parties

EAA Securities Limited

Plaintiff

FATTYDAD ALICE PUI YAN

Defendant Administratrix of the Estate of Fattydad Henry, Deceased (2nd Defendant)

So Tai Fai

1st Defendant

Procedural Posture

Civil: Recovery of Margin Account Balance, Fiduciary/trust and Counterclaims in Securities Context / Trial Judgment (court of First Instance)

Legal Issues

  1. 1 Whether the vast majority of transactions were authorized by the account holder (Henry) or unauthorized by Anita
  2. 2 Whether EAA can rely on account terms/deeming provisions when its employee knew transactions were unauthorized
  3. 3 Whether Henry (and/or the Estate) was a knowing recipient of cheque proceeds deposited to a joint account

Ratio Decidendi

On the balance of probabilities the Court found most trading on Henry's account was unauthorized and concealed by Anita; Henry did not have requisite knowledge of the cheque deposits and intercepted statements so EAA could not rely on contractual deeming provisions or deemed receipt when its employee knew instructions were unauthorized; EAA had been negligent in supervision and cannot recover the claimed debit or the cheque proceeds from Anita or Henry; Henry's counterclaim for conversion/loss of portfolio succeeds and damages are assessed at $3,286,511 with pre-judgment interest awarded; third party indemnity and Anita's counterclaims are dismissed.

Court Disposition

EAA's primary and alternative claims dismissed; EAA's claims against Anita dismissed; Estate/Henry's counterclaim succeeded; Anita's counterclaims dismissed; EAA's third party claim for indemnity against Anita dismissed; costs orders made as below.

Orders

  • Judgment for the Estate (Henry) on the counterclaim in the sum of HKD 3,286,511 for loss of portfolio
  • Pre-judgment interest awarded at simple interest 5% per annum from 11 October 2003 for six years in the sum of HKD 985,953