Tat Lee Securities Pte Ltd v Kang Lian Nam (Moh Swee Liang, Third Party)

JurisdictionSingapore
CourtHigh Court (Singapore)
Judgment Date26 March 1998
Docket NumberSuit No 907 of 1995
Date26 March 1998

[1998] SGHC 83

High Court

Lim Teong Qwee JC

Suit No 907 of 1995

Tat Lee Securities Pte Ltd
Plaintiff
and
Kang Lian Nam (Moh Swee Liang, third party in counterclaim)
Defendant

Woo Bih Lih SC and Tan Hui Teng (Bih Li & Lee) for the plaintiff

Jeffrey Beh and Bernard Sahagar (Gwen Teo De Souza & Sahagar) for the defendant

Thomas Lei (Chor Pee & Partners) for the third party in the counterclaim.

A K A S Jamal v Moolla Dawood, Sons & Co [1916] 1 AC 175 (distd)

City Securities Pte Ltd (in liquidation) v Associated Management Services Pte Ltd [1996] 1 SLR (R) 410; [1996] 1 SLR 727 (distd)

Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80; [1985] 2 All ER 947 (distd)

Contract–Remedies–Damages–Mitigation–Securities trading–Client defaulting on payment–Dealer force sold securities resulting in losses–Dealer claiming losses from client–Whether dealer in breach of duty to client by acting unreasonably in delaying its right to force sell–Financial and Securities Markets–Securities–Cheque given to dealer's remisier not credited in account holder's account but into third party's account–Whether cheque given to dealer for client's credit for purchase of securities or for payment to another party as sharing profits–Whether arrangement between client and other party to share profits –Whether dealer could claim indemnity against third party

The defendant (“Kang”) had an account with the plaintiff (“Tat Lee”) who was a securities dealer and a member company of the Stock Exchange of Singapore Ltd (“SES”). Kang did not pay for the securities within the time permitted. Tat Lee sold the securities and claimed the outstanding sum of $466,546.66 against Kang. Kang admitted liability for this sum but alleged that Tat Lee should have sold the securities at the earliest opportunity to mitigate its loss. Kang also counterclaimed against Tat Lee for the sum of $700,000 which was paid by cheque to one Michael, Tat Lee's remisier. The amount was not placed to the credit of Kang, but to the credit of a third party. As a result of the counterclaim, Tat Lee claimed an indemnity against the third party.

Held, allowing the claim:

(1) In the absence of any provisions to the contrary, Kang's failure to pay Tat Lee sounded in damages as of the date that he was bound by the by-laws to make payment. The defence of mitigation failed as there was no submission on the delay (if any) being unreasonable, nor was there any evidence of the market price of the securities at the relevant times: at [26] and [30].

(2) On the totality of the evidence, Kang had an arrangement with one Tony for sharing profits on the securities recommended by Tony and bought in Kang's name through Michael the remisier. The $700,000 was Tony's agreed share of profits and was made payable to Tat Lee at Michael's request. Accordingly, the defence arising out of the payment of $700,000 therefore failed and Tat Lee's claim against the third party was dismissed: at [60] and [61].

Lim Teong Qwee JC

1 This is a claim by a securities dealer against its client. The plaintiff is a member company of the Stock Exchange of Singapore Ltd (SES) and carries on the business of dealing in securities. The defendant has had an account as its client since May 1992. Arising out of the counterclaim the plaintiff claims an indemnity against the third party.

2 Paragraph 1 of the statement of claim between the plaintiff and the defendant describes the plaintiff and para 2 alleges the agreement for opening the account. In para 3 it is alleged that all transactions under or in relation to the account would be “in accordance with … the Rules and Regulation [sic] of the [SES] and/or any regulatory body governing the sale and purchase of shares quoted on the SES …” and the plaintiff refers to an express term in the account opening form. This is incorrect as the term referred to provides that the client would abide by the rules and regulations and not that any transactions would be in accordance with them but nothing turns on this.

3 Paragraph 5 (there is no para 4) refers to cl 5.2 (a) of by-law II of the by-laws of SES which provides that the defendant must pay the plaintiff for the securities bought by him by 5.00pm on the next market day following the due date of the contract and para 6 refers to cl 4.7 (a) of the same by-law which it is alleged provides that the plaintiff is entitled to force sell the securities bought if the defendant fails to pay for them on the due date.This is also incorrect as cl 4.7 (a) only entitles the plaintiff to take such action after 12.30pm on the second market day following the due date. The defendant had until 5.00pm on the next market day following the due date to make payment as pleaded in para 5. Nothing turns on this either.

4 In para 7 it is alleged that the plaintiff is entitled to interest and in para 8 it is alleged that:

Between about 21 February 1994 and 11 May 1994, the defendant incurred losses arising from the purchase and sale of securities in respect of the defendant's account, particulars of which the defendant is aware.

The particulars given refer to statements and sums of money for “unpaid losses arising out of forced/contra sales” and interest. The total of the losses and interest was alleged to be $466,546.66 as at 18 May 1995 and this is the amount claimed by the plaintiff.

5 Paragraph 5 of the defence between the plaintiff and the defendant states:

… if, which is not admitted, the defendant is liable to the plaintiffs, the defendant avers that the plaintiffs in breach of their duty to the defendant and/or contract have acted unreasonably in delaying their rights under bye-law II cl 4.7 (a) of the bye-laws of [SES].

and

The plaintiffs have delayed their right to force-sell in some cases for more than four months when under the SES bye-laws they could have done so after six days from the purchase and minimised the defendant's losses.

This is of course incorrect as “due date” is the same day in the week following the date of the transaction and if that day is a market holiday then the next business day. A “bought” contract effected on Monday (day 1) is “due” on the following Monday (day 1 + 7) and under cl 5.2 (a) of by-law II the buying client must pay by 5.00pm on Tuesday (day 1 + 7 + 1) assuming that day (1 + 7) and day (1 + 7 + 1) are not market holidays. The plaintiff could not force sell until Wednesday (day 1 + 7 + 2) but nothing turns on this also.

6 Paragraph 2 of the defence also states:

On or about 26 January 1994, the defendant gave the plaintiffs, their servant or agent, a POSBank cheque no 291027 for the sum of $700,000 for the use of the defendant, but the said cheque/sum has not been placed to the credit of the defendant.

It was agreed between the parties at the commencement of the trial that the value of the POSBank Cheque No 291027 was credited to the account of the third party with the plaintiff. This is the subject matter of the plaintiff's claim against the third party. The agreement is contained in a statement of agreed facts which was amended at the commencement of the trial and I shall refer to the facts in that statement as the “agreed facts”.

7 It was an agreed fact that:

Arising from the purchase and sale of securities from the defendant's account, there is an outstanding sum of $466,546.66 as at 18 May 1995 in respect of his account. The defendant admits liability for this sum subject to (1) mitigation of loss and (2) claim to $700,000.

This is the question in controversy between the plaintiff and the defendant which they have agreed should be tried.

8 After the case for each of the parties had been closed and indeed after counsel for the defendant had concluded his closing speech Mr Woo applied to amend the statement of claim. There was a minor amendment which I allowed. The substantial amendment was to add a new para 5A and to remove the reference to “unpaid losses arising out of forced/contra sales” in the particulars given. The application was not surprisingly opposed by the defendant.

9 The proposed para 5A would refer to cl 7 (b) of by-law II which provides that where a client of a member company having sold securities fails to deliver them by the due date of the contract the member company may instruct the SES to buy in against the selling client. Read together with the removal of the reference to “unpaid losses” in the particulars the effect of the amendment would be to change the cause of action in respect of contra statements 0096217 to 0098795. It would no longer be for losses arising out of selling out against the defendant for securities bought but not paid for but for buying in against him for his failure to deliver securities sold. I disallowed the application to amend.

10 At the conclusion of the trial I found that the two grounds of defence had not been proved. No cause of action was pleaded in respect of the contra statements 0096217 to 0098795 (which for convenience I shall refer to as the “excluded statements”) and notwithstanding the parties' agreement as to the amount of the liabilities I gave judgment for the plaintiff for the amount of the contra statements (other than the excluded statements) and interest as claimed and I dismissed the counterclaim. I also dismissed the plaintiff's claim against the third party.

Mitigation

11 The particulars given in the statement of claim refer to statements each of which is called a “contra statement”. Each is addressed to the defendant and it gives details of the contracts for securities bought by the plaintiff for the account of the defendant. The details include the date of each contract, the number, description and price of the securities bought and the amount due to the plaintiff and debited to the defendant's account. The contra statement in each case also gives details of the date of each contract for the subsequent sale of the same number and description...

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