Lim & Tan Securities Pte v Sunbird Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 08 November 1991
• Neutral Citation: [1991] SGHC 164
• Docket Number: Suit No 470 of 1990
• Date: 08 November 1991
• Published date: 26 December 2003
• Year: 1991
• Plaintiff Counsel: Chua Lee Ming (Lee & Lee)
• Citation: [1991] SGHC 164
• Defendant Counsel: Harry Elias and Regina Quek (Harry Elias & Partners)
• Court: High Court (Singapore)
• Subject Matter: Summary judgment,Sale and purchase of shares,Novel points of law raised,Rights of agent,Financial and Securities Markets,Stockbroker and client,Indemnity,Uncertainty of factual issues,Time is of the essence,Agency,Civil Procedure,Sufficient triable issues raised,Securities,Unconditional leave to defend should be granted,Trading,Delivery of shares

Cur Adv Vult

This is an appeal by the plaintiffs against the decision of the senior assistant registrar giving unconditional leave to the defendants to defend this action.

The facts

The plaintiffs are stockbrokers and are a member of the Stock Exchange of Singapore (`the SES`). The defendants were their clients. The plaintiffs` claim against the defendants is for $590,237.52 and interest thereon, being the loss they suffered upon the sale of 1,840,000 shares in Dayapi Industries (M) Bhd (`Dayapi shares`) which the plaintiffs have alleged they had bought on the instructions of the defendants and which the defendants had refused to take delivery of and pay for. The defendants deny liability and have counterclaimed against the plaintiffs for breach of duty as stockbrokers.

Sometime in January 1990, the defendants instructed the plaintiffs to buy Dayapi shares for them. The plaintiffs` dealer in charge of the defendants` account was one KCG. The defendants received two bought contract notes, the first being No 422777/099 dated 16 January 1990 for 940,000 Dayapi shares at the price of $2.7937 per share for delivery on 23 January 1990, and the second No 424017/001 dated 17 January 1990 for another 900,000 Dayapi shares at the price of $2.985 per share for delivery on 24 January 1990. I shall refer to these two contract notes as `bought notes`.

The subsequent events up to 30 January 1990, which the plaintiffs have not denied, are set out in a letter dated 30 January 1990 from the defendants to the plaintiffs. As the contents of the letter are important, I shall quote it in full. It read:

We refer to the following contracts with your firm for the purchase of shares in DIMB.

Contract date Contract No Quantities Contract due date

16 January 1990 422777/099 940,000 23 January 1990

17 January 1990 424017/001 900,000 24 January 1990

On 24 January 1990, we asked for delivery of 940,000 DIMB shares due under contract No 422777/099 but were told by you that 97,000 DIMB shares were delivered to your firm. We instructed you to buy-in for the balance but you refused to do so.

On 25 January 1990, we wrote to you and pressed for the delivery of the 940,000 DIMB and another 900,000 DIMB shares due under contract No 424017/001. You informed that on this date only 544,000 DIMB shares were delivered and therefore would not be in the position to effect delivery to us. We instructed you to buy-in but you said that buy-in would only be carried out by the Stock Exchange of Singapore Ltd. No buy-in was effected by Stock Exchange of Singapore Ltd for the balance quantity to complete the above contracts.

On 26 January 1990, we again pressed for delivery of DIMB shares under the above contracts but were told only 992,000 DIMB shares were available and that you were not able to effect delivery. Again we pressed you to buy-in but you refused saying that the buy-in would be done by Stock Exchange of Singapore Ltd which you wrote to on this date at 11.15am but not earlier in spite of our instructions.

Today, we telephoned the Stock Exchange of Singapore Ltd and spoke to one Ms [IT] of market surveillance department responsible for buying-in for outstanding contracts. She informed us that according to her record the buying-in for oustanding contracts for DIMB as of today is about a couple of thousands.

She informed that the above contract Nos 422777/099 and 424017/001 were not in her book as outstanding and believed that these contracts could be `married` contracts done in-house by your firm and that your firm had the duty and obligation to do the buying-in immediately when same were due for delivery.

In the light of the above, it seems to us that your firm may be in the short position and hence refused to exercise buying-in. Your refusal to exercise buying-in is a breach of contract on your part and we are therefore not liable to you for the above contract Nos 422777/099 and 424017/001.

In addition to this letter, there is produced in evidence a copy of a memorandum which the plaintiffs had purportedly faxed on 26 January 1990 to the SES. It read:

Reference our client`s letter dated 25 January 1990 on Dayapi Industries (M) Bhd shares, please take the necessary action to ensure timely delivery from SCCS to us for any outstanding ...

The letters `SCCS` referred to the Securities Clearing & Computer Services Pte Ltd, the company to whom delivery of securities had to be made under the byelaws of the SES and which was the agency for instituting the buying-in of securities not delivered by selling members on due date.

On 31 January 1990 the plaintiffs informed the defendants by letter that `your 940,000 Dayapi under contract Nos 422777/099 was ready for collection since yesterday`. On 1 February 1990, the plaintiffs informed the defendants by letter that the 1,840,000 Dayapi shares were ready for collection and that if the defendid not inform them by 12.30pm of their intention to accept and pay for them, the plaintiffs would exercise their rights under byelaw II-7 to sell the said shares. In the event, selling-out was effected by the plaintiffs between 2 February 1990 and 9 February 1990, resulting in a loss of $590,237.52. The plaintiffs have claimed the recovery of this loss on the basis that they had acted as agents for the defendants in the purchase of the Dayapi shares.

The bought contracts issued by the plaintiffs were subject, and were so expressed, to the rules and byelaws of the SES. The Dayapi shares were traded in the over-the-counter market called CLOB International. Trading in such shares was subject to byelaw X which, inter alia, incorporated the buy-in procedures under byelaw II. Byelaw II-2 provided that buying-in would start at 11am of the market date following the due date for the delivery of any particular share. Under byelaw II-4(d), the SES had the discretion not to buy-in any security where delivery to the SCCS was effected by 11am. The buy-in provision applied only to shares bought through SCCS. The SCCS was not concerned with shares not bought through it. In this case, on the evidence before me, the buying-in of Dayapi shares should have commenced on 25 January 1990 and on 26 January 1990 in respect of the balance of the shares not delivered to the SCCS under the two bought contracts.

It is, however, not disputed by the plaintiffs that no buying-in was initiated by the SCCS in respect of any of the Dayapi shares. Accordingly, the defendants raised the defence that the plaintiffs had failed to buy any Dayapi shares through the SCCS. The plaintiffs were coy in explaining why there was no buying-in. They say that they had sent the memorandum of 26 January 1990 to the SES. They also say that they had bought Dayapi shares through the SCCS and as evidence they produced two computer-generated documents from the SES in respect of the plaintiffs` dealings in Dayapi shares for the two trading days in question. They say that as buying-in was...