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Stanley Yeung Kai-yung And Another v Hongkong & Shanghai Banking Corporation

Judgment Cited authorities 10 Cited in Precedent Map Related
Vincent
Judgment Date26 October 1977
Year1977
Judgement NumberCACV21/1977
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV000021/1977 STANLEY YEUNG KAI-YUNG AND ANOTHER v. HONGKONG & SHANGHAI BANKING CORPORATION

CACV000021/1977

IN THE COURT OF APPEAL
on appeal from the High Court

1977 No. 21

(Civil)

BETWEEN
Stanley YEUNG Kai-yung Stanley Yeung & Co. Ltd. Appellants
and
Hongkong & Shanghai Banking Corporation Respondent

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Coram: Briggs, C.J., Pickering, J.A. & Leonard, J.

Date of Judgment : 26th October, 1977.

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JUDGMENT

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Leonard, J.:

1. The appellants in this appeal were the first and second third parties in the court below while the respondent was the defendant there.

2. The plaintiff in the court below was the administrator in Hong Kong of the Catholic Mission of Macao effectively the Bishop of Macao to whom I will refer hereafter as "the Bishop". The Bishop was the registered holder of inter alia 12,557 shares in the respondent company (to which I will refer hereafter as "the Bank") represented by four certificates. The Bishop held shares in the Bank in addition to the 12,557 shares and the certificates for these were held by the Bank's Securities Department which had in its records a specimen signature of the Bishop. Some time prior to the 3rd May 1973 the four certificates in question were apparently stolen from the Bishop but he remained in ignorance of the theft. In May 1973 the four certificates in question were presented to the Bank by Stanley Yeung Stock Brokers Co. ("the brokers") together with completed share transfer forms. The presentation was made by the brokers under cover of standard forms of letter addressed to the Bank's registrar which stated that the certificates were enclosed "with duly completed transfer deeds attached in favour of Mr. WONG Kwan-man as transferee." This standard form of letter requested the registrar of the Bank to effect the transfer and to send the new certificates to the brokers. The staff of the Bank's registry placed no stock upon the personality of those who submitted requests for transfer whether those requests were made by letter as in this case or in person over the counter. Although the Bank had been supplied with a specimen of the Bishop's signature, when they received the certificates and transfer deeds from the appellants, the staff of the Bank failed to compare the signatures on the transfers with the Bishop's signature on the specimen cards. Had they done so, they would have immediately realised that the Bishop's signature on the transfer was not genuine because the discrepancies between the signatures on the transfers and the genuine signature were immediately obvious to the naked eye and would as the learned trial judge found as a fact have been noticed even by a layman. Neither the Bishop nor WONG Kwan-man was a regular client of the appellants and the appellants had not taken part in any transaction of sale and purchase. They received no consideration from WONG Kwan-man for presenting the scripts to the Bank for registration nor there is any indication on the instruments of transfer themselves (as distinct from the covering letter) that they were acting as brokers in presenting them. On the 2nd June1973 the Bank advised the Bishop that the transfers purporting to be signed by him together with the relative certificates had been lodged for registration and that if the Bank did not hear from him by return it would assume that the transfers were in order. The Bishop did not reply to this letter. Almost immediately after its despatch the Bank informed the appellants that new share certificates in the name of WONG Kwan-man were ready for collection. It would appear that the new certificates were in due course collected by the appellants. The true position became apparent a few months later and eventually the Bishop brought this action to require the Bank to reinstate him on the register and make good the lost dividends, bonus shares etc. which should have been made available to the Bishop between the date of the new registration and the date of the commencement of the action. The Bank defended the action taken by the Bishop but the only defence which it offered was that the signatures of the Bishop to the deeds of transfer were not forged. This was readily disposed of by the Bishop in whose favour an order was made for the relief which he had claimed. The Bank, however, had issued, with leave third party notices against, inter alia, the first and second appellants claiming that the first appellant was the sole proprietor of the brokers at all material times and that the second appellant having become a partner in the brokers on the 21st January 1974 without having given notice pursuant to the provisions of the Fraudulent Transfer of Businesses Ordinance Cap. 49 was liable for the debts and liabilities of the first appellant as at 21st January 1974. This was not disputed before us so that the appeal proceeded on the basis that the appellants were liable for the debts and liabilities of the brokers at relevant times. It was the Bank's case that by presenting the deeds of transfer the brokers had warranted that the signatures on the deeds of transfer were genuine and that the transactions evidenced by the instruments of transfer were of a genuine nature. It was on the basis of this warranty that the Bank sought to be indemnified against the loss occasioned to it by its liability to reinstate the Bishop as the holder of the shares in question. The Bank is a corporation, created by the Hong Kong & Shanghai Bank Ordinance 1866 and continues to be incorporated by the Hong Kong & Shanghai Banking Corporation Ordinance Chapter 70. By section 4 of that Ordinance the regulations of the Bank for the time being in force replace the original deed of settlement. Section 4 also provides that the regulations shall be binding in all respects upon the Bank and upon all persons whatsoever, whether shareholders or not, and shall regulate the rights and liabilities of all the above persons inter se their heirs, executors, administrators, assigns or successors. The regulations claimed to be relevant to this case are regulations 46, 48 53 and 54. Regulation 46 reads as follows :

"The Bank shall keep at its head office or at such other place as the board may approve and at any establishment where a local register of shares is kept records to be called 'registers of transfers' and therein shall respectively be fairly and distinctly entered particulars of every transfer or transmission of any shares on those respective registers. Such records may in the sole discretion of the board be copies of information maintained elsewhere with the sanction of the Board whether by devices for storing and processing of information or otherwise."

Regulation 48 reads:

"The board may in its discretion and without assigning any reason therefor, refuse to register the transfer of any share to any person of whom it does not approve as transferee, or whilst the shareholder making the same is, either alone or jointly with any other person, indebted to the bank on any account whatsoever. The board may also refuse to register any transfer of shares on which the Bank has a lien; and the board shall also be entitled without assigning any specific reason therefor to refuse to register any transfer of shares made to a corporation, sole or aggregate or to a firm or to a limited partnership or to any person, firm or corporation holding shares in trust or otherwise than in his or their own right, whether already a shareholder or not."

Regulation 53 paragraph 1 reads:

"Save as provided in paragraph 2 shares in the Bank shall be transferred by an instrument under hand signed by the transferor and the transferee in the form set out in Appendix II or in any usual or common form which the board may approve."

Regulation 53 paragraph 4 reads:

"Every instrument of transfer shall be left with the Bank or at any other place from time to time designated by the board for registration in that one of the registers in which the shares are entered accompanied by the certificate of the shares to be transferred and such other evidence as the board or the deputed person or persons referred to in regulation 52 may require to prove the title of the transferor or his right to transfer the shares."

Regulation 54 provides:

"Where the instrument of transfer has been so registered the transferee shall be and be deemed a shareholder and shall from the date of such registration be entitled to the same privileges and advantages and ... be subject to the same liabilities in respect of the shares as the shareholder from whom he derived his title."

The form of transfer set out in Appendix II of the rules provided for the following matters : the name and address of the transferor; the consideration; the name and address of the transferee; the number of shares to be transferred and an agreement by the transferee to take the shares subject to the conditions on which they had been held by the transferor; the form requires the signature of the parties but does not provide for their signatures to be witnessed. The forms of transfer which were actually used in this case with which I will deal later were provided by the Bank and required the signatures of the transferor and the transferee to be witnessed and for the witnesses to state their address and calling. The purported signatures of the Bishop and of WONG Kwan-man were purportedly witnessed by a Mr. WONG Man whose address and calling did not appear. The Bank then have a statutory duty to keep the register, a duty which entails registering as shareholders those whom they accept as shareholders under transfers which they may at their discretion accept or refuse. There was no duty to register these transfers made in...

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