Kwek Hock Hee and Another v Tat Lee Securities Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 27 May 1999
• Neutral Citation: [1999] SGHC 143
• Court: High Court (Singapore)
• Year: 1999
• Published date: 06 March 2013
• Plaintiff Counsel: Harry Lee Wee and Leong Why Kong
• Defendant Counsel: Woo Bih Li and Tan Hui Teng
• Citation: [1999] SGHC 143

JUDGMENT:

GROUNDS OF DECISION

These two appeals from a decision of the learned deputy registrar Mr Ng Peng Hong raise similar issues. For the purpose of these appeals, the facts may be stated as follows. The plaintiffs in both these actions were clients of Tat Lee Securities Pte Ltd, the 1^st defendant, a firm of stockbrokers. The plaintiff Mr Tsang became a client and opened a trading account with Tat Lee in May 1991. Mr Kwek started earlier. He opened an account in 1987. In 1991, an additional account was opened in the name of his wife, he says as his nominee. Both Mr Tsang and Mr Kwek were serviced by a remisier attached to Tat Lee. He was Mr Koh, the second defendant. Both Mr Kwek and Mr Tsang say that on various dates, they instructed Koh to buy shares for them. The share scrips or some of them were left in Tat Lee’s custody. They have now discovered that these shares have at one time or another been sold without their knowledge through the accounts of some other clients of Tat Lee’s. In Mr Tsang’s case, the shares involved were purchased for him on various dates from November 1993 to November 1995, with a total value exceeding $158,000. In Mr Kwek’s case, the dates stretched from June 1994 to March 1995, and the total value on his two accounts was about $490,000.

Mr Tsang, but not Mr Kwek, has an additional complaint. He says that on various dates in 1996, he handed to Koh cheques for settlement of certain purchases of shares that Koh had made on his behalf. He has since discovered that these cheques, for a total of over $69,000, were not used for the purpose. They were applied to other clients’ accounts. As a result, the shares which Mr Tsang had bought were not paid for. They were force-sold without his knowledge.

It is assumed that the misapplication of the shares and cheques was the work of Koh. The plaintiffs claim that Koh was the agent of Tat Lee, and that Tat Lee is vicariously liable for the wrongs committed by Koh in respect of the shares and, in Mr Tsang’s case, in respect of the cheques as well. Tat Lee in its defence refers to a standard letter of authority which the plaintiffs had signed. On the basis of this letter of authority, Tat Lee contends that when collecting the share scrips and the cheques, the remisier was acting as the agent of the plaintiffs themselves. Tat Lee therefore is not liable for any misdeeds committed by the remisier without Tat Lee’s knowledge. It is the effect of this letter of authority which is in issue in the appeals.

Upon close of pleadings, Tat Lee took out a summons under O. 14 r 12 of the rules of court seeking to strike out these claims in a summary way on the basis of the letter of authority. Only the claims relating to the misapplication of the shares were sought to be struck out, and not the claims in relation to the cheques. It is not apparent, why. The learned deputy registrar determined the issue in favour of Tat Lee, and struck out the shares claims accordingly.

The letter of authority

Member companies of the Stock Exchange of Singapore ("SES"), of which Tat Lee is one, are bound by the rules, bye-laws and regulations of the exchange. The relevant part of Bye-law III cl. 11 of the exchange provides as follows:

(b) Without valid written authorisation by the client a Member Company shall not permit a Dealer’s Representative or anyone to take delivery of any share certificates, contract notes, credit or debit notes or any statements on behalf of the client.

I digress here to mention that the words "dealer’s representatives" occur often in the bye-laws. They refer to two categories of persons who are authorised to trade in securities in the name of a member company. One category consists of remisiers. They are agents, as opposed to employees, of the company. The other category consists of the company’s dealers and other employees. All this is provided for in Bye-law V, cl 1

A stock-broking firm like Tat Lee is also referred to as a "dealer" in the Securities Industry Act. That is why its dealers, like its remisiers, are referred to as "dealer’s representatives".

Back to the case at hand, it was apparently in compliance with the "written authorisation" requirement in the bye-law first mentioned that Tat Lee devised the letter of authority for their clients to sign. The letter of authority in question in this case reads as follows:

"(1) I hereby authorise you to release :-

Debit Notes

Credit Notes

Statement of Accounts

Scrips

to the undersigned Dealer/Remisier/and/or KOH LIK JIN for transactions executed on my account.

(2) I hereby authorise the undersigned Dealer/Remisier/and/or/the abovenamed to take delivery on my cheque(s) which is/are due to me from the proceeds of my sale(s) and contra gain(s) and that the said cheque(s) is/are to be used for the purpose of offsetting against the amount which may arise from time to time due to you for my purchase(s) and contra loss(es) and interest payable out of my share transactions with you.

...