Kimmorley v Johnson Taylor Potter Ltd
[2002] QDC 12
•22 February 2002
DISTRICT COURT OF QUEENSLAND
CITATION:
Kimmorley v Johnson Taylor Potter Ltd [2002] QDC 012
PARTIES:
DUNCAN JOHN KIMMORLEY
Plaintiff-v-
JOHNSON TAYLOR POTTER LIMITED
DefendantFILE NO/S:
509/01
DIVISION:
Civil jurisdiction
PROCEEDING:
ORIGINATING COURT:
Brisbane
DELIVERED ON:
22 February 2002
DELIVERED AT:
Brisbane
HEARING DATE:
21 and 22 January 2002
JUDGE:
Judge Samios
ORDER:
Claim dismissed.
CATCHWORDS:
PROFESSIONAL NEGLIGENCE – Stockbroker – day trading – no breach of duty of care owed to client
COUNSEL:
Mr D Campbell for the plaintiff
Mr G Newton for the respondentSOLICITORS:
Boyce Garrick Lawyers for the plaintiff
Flower and Hart for the defendant
The plaintiff’s claim against the defendant is for damages for breach of contract and further or in the alternative for negligence.
At all material times the defendant was a member corporation of the Australian Stock Exchange Limited and carried on business as stockbrokers in Brisbane. The defendant employed Mr Kristopher Ridgway (Mr Ridgway) as a stockbroker.
In about March 2000 the plaintiff (Mr Kimmorley) decided to purchase shares. He decided to use the defendant after seeing the defendant’s advertisement in the Yellow Pages. At that time he had over $300,000 in a savings account with a bank.
Mr Kimmorley’s evidence was that he spoke to Mr Ridgway in February 2000. He informed him that he was interested in buying and selling shares and how could he go about doing so and if Mr Ridgway could help him. Mr Ridgway said he could help and that he should come in and set up an account and basically bring in a bank statement to show that he had the funds available. Mr Kimmorley met Mr Ridgway at the end of February at the defendant’s office in Brisbane. In this meeting Mr Kimmorley told Mr Ridgway he was ignorant about buying and selling shares as he had never done it before. He explained to Mr Ridgway that he had some practice runs using the Courier Mail phone service. In these practice runs he decided to buy shares at a price and waited a little while and then rang back to see how they were doing. Mr Kimmorley told Mr Ridgway that he wanted to buy and sell shares within the same day and he wanted to do large volumes of share transactions. Mr Ridgway’s response was that was okay. Mr Ridgway said he would give Mr Kimmorley his advice and a fee would only be charged when shares were bought or sold. Mr Kimmorley was also given a sheet containing stocks the defendant recommended. Mr Kimmorley completed an application form to become a client of the defendant. He also applied to be sponsored through the CHESS system. This meant that once he was sponsored by the defendant he could buy shares and did not have to pay for them for three or four days later.
Mr Kimmorley subsequently purchased some shares through the defendant in a company called Takoradi Gold. This was in March 2000. He was not intending to undertake a day trade with regard to these shares.
Then in early April 2000 Mr Kimmorley met with Mr Ridgway at the defendant’s office. The purpose of the meeting was that Mr Kimmorley wanted to see how shares were traded on a computer screen and to see what actually happens and how it would work. He was taken to a small room in which there was a computer. He and Mr Ridgway talked about different stocks and these were brought up on a screen.
Then on Friday morning on 14 April 2000 at about 10.30 a.m. Mr Kimmorley spoke with Mr Ridgway by telephone. In this telephone conversation Mr Kimmorley told Mr Ridgway he was interested in buying some shares in a company called Davnet Limited. Mr Kimmorley told Mr Ridgway he wanted to buy and sell the shares within the same day. He told Mr Ridgway to purchase the shares and to put a bid in for $3.25 for 40,000 shares. He told Mr Ridgway that he did not want to own the shares by the end of the day. Mr Ridgway replied “how much do you want to sell them for?” Mr Kimmorley said he plucked a figure out of the top of his head and said to Mr Ridgway “what about $3.55?” to which Mr Ridgway replied “okay”. Mr Kimmorley said he told Mr Ridgway “I don’t want to own them by the end of the day”.
Mr Kimmorley then spoke to Mr Ridgway by telephone between 11 and 11.30 a.m. on that day. In this telephone conversation Mr Ridgway told Mr Kimmorley the shares had been purchased. Mr Kimmorley told Mr Ridgway that he would be home all day so that he could be contacted at home. Mr Kimmorley said he told Mr Ridgway “I do not want to own the shares by the end of the day”.
Then after one o’clock in the afternoon that day Mr Kimmorley rang Mr Ridgway. He said to Mr Ridgway that he had noticed that the shares had gone up or were going up in price and he asked Mr Ridgway whether the shares would reach $3.55 which was the price Mr Kimmorley had set in the first conversation. Mr Kimmorley said this was discussed a little and he came up with a figure of $3.45 and asked Mr Ridgway what he thought about that. Mr Ridgway said that was okay. Mr Kimmorley said he told Mr Ridgway after he had set the new price he did not want to own the shares by the end of the day.
Then at approximately 3.45 pm on that day Mr Ridgway rang Mr Kimmorley and told him that the shares reached $3.44 but he had not sold them. Mr Kimmorley said in his evidence he was a bit dumbfounded when Mr Ridgway said he had not sold the shares. Mr Kimmorley asked Mr Ridgway why he had not sold the shares. Mr Ridgway said it was too late now. If he wanted to sell them he would have to wait until Monday. Mr Kimmorley said he spoke to Mr Ridgway on the Tuesday and asked Mr Ridgway what would he do now. Mr Ridgway said not to worry about it as the shares had just got overhit and he recommended to Mr Kimmorley he should hang on to them.
Mr Kimmorley did hold on to the shares and even at the hearing of these proceedings still owns the shares.
For the purposes of these proceedings the parties agreed that the shares opened at $2.50 on the Monday morning and reached a low of $2.15 on that day and closed on that day at $2.24. Further, on the Friday before the hearing of these proceedings the shares were valued at 3.6 cents per share.
When cross examined Mr Kimmorley said he purchased the Takoradi Gold shares on 27 March 2000. He purchased 900,000 shares in Takoradi Gold for 10.5 cents. Within a couple of trading days that stock rose to 16 cents per share. He agreed that he spoke with Mr Ridgway about the wisdom of selling these shares. He agreed the shares were not sold for 16 cents per share and that he told Mr Ridgway that he thought the stock was going to 20 cents per share. He agreed that if the shares had been sold for 16 cents per share that he would have made a profit of about $52,000 within a couple of trading days. Mr Kimmorley though retained those shares and still retains those shares. At the hearing of these proceedings these shares were valued at 1.5 cents per share.
Further, he agreed that before he purchased the Davnet shares he was aware that on 28 March 2000 Davnet shares had reached $6 per share. He agreed he was aware then by 14 April that those shares had come down from $6 to the price he purchased those shares, namely $3.25 per share. He was aware therefore that Davnet shares had a very significant percentage fall in excess of 40% within a fortnight. He was aware of that before he purchased the shares.
Regarding his instructions to Mr Ridgway that he wanted to sell the shares on the same day, he agreed that it would not be logical for Mr Ridgway to have bought the shares for him at $3.25 per share and immediately have sold the shares at $2 per share. He said that what he had done was to give Mr Ridgway a guideline by nominating the price $3.55 and had given him final instructions to sell that day. He agreed he had not given Mr Ridgway an exact time at which the shares were to be sold. Mr Kimmorley said that he had instructed Mr Ridgway to sell the shares by the end of the day believing he would do that. When asked at what time did he want Mr Ridgway to stop trying to get $3.55 and abandon $3.55 he said when he rang Mr Ridgway at around about 1.20 p.m. that day and revised it down to $3.45. He agreed at that time he could have obtained $3.42. He agreed that he assumed from being told what the shares were trading that what Mr Ridgway was telling him was that if he wanted to sell at $3.42 he could do that. Mr Kimmorley said that he asked Mr Ridgway what he thought about $3.45 and he said okay. Mr Kimmorley said that he told Mr Ridgway again he did not want to own the shares by the end of the day. He also said that he did not give Mr Ridgway instructions to take $3.42 because the discussion between himself and Mr Ridgway was to the effect that they believed that $3.45 would be reached. He repeated his view of his instructions to Mr Ridgway that the shares would be sold before the end of the day’s trade. When it was suggested that it might have been at 3.59 pm he replied “I’m not the expert when it is to be done. I don’t know”. He agreed there were discussions which included changing the price down to $3.45 and that Mr Ridgway believed that it could be reached. However, he would not accept that Mr Ridgway in the last conversation with Mr Kimmorley told him that the shares were trading at about $3.30 and $3.35. He would not accept that Mr Ridgway identified the then current prices to him. He said the only price that was discussed was that the shares had reached $3.44 but that he had not sold them. He agreed that it did not sound realistic that he could have a conversation with Mr Ridgway where he told Mr Kimmorley that the shares had not reached $3.44 but Mr Kimmorley did not ask Mr Ridgway or Mr Ridgway did not volunteer the then current prices. He said that when he was told the shares had not been sold at $3.44 and he asked why not Mr Ridgway said that he would have to wait until Monday. He denied that Mr Ridgway said to Mr Kimmorley that he would have to wait until Monday if Mr Kimmorley still wanted to get $3.45. He denied that in that last conversation Mr Ridgway identified that the shares had gone as high as $3.44 and then had gone down to trade between $3.30 and $3.55 and that if he wanted to insist on trying to get $3.45 he would not get it that day. Mr Kimmorley said his impression of the conversation was that Mr Kimmorley could not sell the stock that afternoon at all. Mr Kimmorley said all that Mr Ridgway said was that it was too late and he would have to wait until Monday. When asked why he would think the shares could not be sold in the last 15 minutes of trading he said he did not know what was going on the other side of the fence.
As the evidence shows on the Friday night Brisbane time which was 14th April in New York, the New York Stock Market had a “very severe correction”. The Dow Jones had “crashed” about 600 points and the Nasdaq much more proportionally. As has been agreed the Davnet shares opened at $2.50 on Monday in Brisbane. However, within a couple of days the shares had reached a price of $3.00. Mr Kimmorley said he had held on to the shares because he was encouraged to do so by Mr Ridgway as it was thought by the defendant it was a worthwhile stock. Mr Kimmorley changed brokers on 17 July 2000. However, he retained the shares.
Further, in cross examination Mr Kimmorley denied that Mr Ridgway explained to him how the stock market worked in that Mr Kimmorley could nominate a specific price for a share he wanted to buy or sell or he could just buy and sell at current market price. He would not accept these were the two options. Mr Kimmorley also said he did not recall Mr Ridgway prior to 14 April giving him a caution against the risks involved in day trading. Mr Kimmorley would not accept that he was warned of the risks involved and that he should play the stock market as a beginner and invest in blue chip stocks and in effect see how he would go before doing anything like day trading. Mr Kimmorley accepted the possibility that “blue chip” stock for the long term was discussed. However, Mr Kimmorley said that most of his meetings were about day trades whereas the emphasis on diversification and long term were not the subjects of conversation. Mr Kimmorley denied that he set out to make a specific profit with the purchase and the sale of the Davnet shares. When asked again when he thought it might have been the time to sell the shares on that day Mr Kimmorley said he thought it would have been reasonable for the shares to have been sold around 3 o’clockish for safeguard reasons. He thought the critical time on that day was around 3 o’clock. Mr Kimmorley said what he wanted to achieve on that day was to buy and sell the shares within the same day. Mr Ridgway told him it was too late to sell the shares that day.
Mr Kimmorley agreed he made no complaint to the defendant until some months later when he phoned Mr Ridgway on 22 June.
Mr Kimmorley told me that when he bought the shares he would describe himself as a self-funded retiree having retired from the business of selling video and audio equipment.
Mr Kimmorley called Michael James Willis as an expert witness. Although when cross examined Mr Willis was questioned about his experience, I accept Mr Willis has the necessary expertise to express an opinion upon the issues in these proceedings.
In his opinion an instruction to sell listed securities at a price limit, subject to the condition that the securities must be sold by the end of the day’s trading, has the same effect as an instruction to sell at “market” but with a preferred price target, in this case $3.45. As a result Mr Ridgway received an instruction from Mr Kimmorley on the morning of 14 April to sell the securities “at market” on that day, with a preferred price of $3.55. Subsequently, Mr Ridgway received an amended instruction, from Mr Kimmorley at around 2.30 p.m. to sell the securities “at market” on that day, with a preferred price of $3.45.
Therefore, on the assumption Mr Kimmorley’s evidence about what happened before the 3.45 p.m. conversation was accepted, in his opinion the defendant had a responsibility to Mr Kimmorley to:
(i)sell the securities if they reached the preferred price of
$3.45; or
(ii)sell the securities at the best price they could achieve on the day, if, in the judgment of the defendant, they did not reach or were not likely to reach the preferred price of $3.45; or
(iii)contact the client to advise him and seek revised instructions from him if, for some reason, the sale could not proceed or the broker was uncertain of any aspect of the instruction.
In his opinion in accepting such an instruction, a reasonably prudent broker would attempt to sell the securities at the prevailing market price on the day, provided that there was a reasonably liquid and tradeable market on the day in question. In the absence of any claim by either party that there was an illiquid market in the Davnet Ltd securities in question (and there has been no such claim made in these proceedings) on the assumption the market was reasonably liquid on 14 April, in his opinion the securities could have been sold at a market price on that date.
Again on the assumption Mr Kimmorley’s evidence is accepted that Mr Ridgway telephoned Mr Kimmorley at 3.45 p.m. and advised him that the securities had not been sold and trading in the securities had peaked at $3.44, as this telephone conversation occurred 15 minutes prior to the close of the day’s trade, in Mr Willis’ opinion this telephone call could be considered to constitute both:-
(i)a request for further instruction or for clarification of the client’s instruction regarding the sale, and
(ii)an opportunity for the client to sell the securities at the market price prior to the close of the day’s trading.
Mr Willis says if this had been the case and if Mr Ridgway had advised the client that an opportunity still existed to sell the securities, then the defendant could be considered to have fulfilled its responsibility to Mr Kimmorley, as it would have advised Mr Kimmorley and sought revised instructions to clarify any uncertainty about the existing instruction. However, it was Mr Willis’ understanding Mr Ridgway failed to advise Mr Kimmorley that the shares could still be sold on that day and he was told that it was then too late to sell the shares that day and that the sale would have to wait until the following Monday. In Mr Willis’ opinion such advice would be inconsistent with the actions of a reasonably prudent stockbroker, in that it is inaccurate and misleading. In his opinion as a reasonably prudent authorized representative of a stockbroker Mr Ridgway would have been fully aware that an opportunity still existed to sell the securities, either prior to the close of the market at 4 p.m., or within the late trading facilities of the Australian Stock Exchange. It would also be reasonable for Mr Kimmorley to:
(i)expect that a reasonably prudent authorized representative of a stockbroker would know the times of opening and closing of trading on the Australian Stock Exchange; and
(ii)have relied on the knowledge and competence of such a representative in accepting that representative’s advice that the market had closed and there was no opportunity to sell the securities.
It was Mr Willis’ opinion that as Mr Kimmorley had not previously invested in the stock market, apart from the initial purchase of the Takoradi shares in March 2000, and that the defendant was aware of his lack of stock market experience, a prudent authorized representative of a stockbroker would have been aware that Mr Kimmorley would be likely to rely on the stockbroker’s advice concerning the closing times for the trading of listed securities.
On the assumption Mr Kimmorley’s evidence about the 3.45 p.m. conversation was accepted, in Mr Willis’ opinion the defendant did not fulfil its responsibility to Mr Kimmorley. In his opinion the circumstances as known to him a reasonably prudent stockbroker would have contacted Mr Kimmorley after 2.30 p.m. and prior to the close of trading on 14 April to advise that the securities had not been sold and to advise that an opportunity existed to sell the securities at the prevailing market price if the client wished to sell. In his opinion the advice of the defendant in the 3.45 p.m. conversation was not consistent with the actions of a reasonably prudent stockbroker in that Mr Kimmorley was not advised that he had an opportunity to sell the securities on 14 April in the remaining trading time at the prevailing market price.
In his evidence in chief Mr Willis said that if the price had not achieved the target price that was indicated it would have been appropriate and prudent to contact the client to advise the client of the prevailing market price and seek further instructions from the client. When cross examined he agreed that he would have no criticism of a stockbroker having been given instructions to sell at $3.55 reporting in to the client and telling him that the prevailing price was $3.42 and asking for instructions about what to do. He also agreed that if the response by the client to a query by the stockbroker was not to sell at the prevailing price of $3.42 but to list the shares for sale at $3.45 then clearly the stockbroker could not effect a sale at $3.42.
When cross-examined Mr Willis agreed that what a broker should do when it was close to the market closing and the sale had not been perfected was that he would contact the client and get instructions and in doing so the stockbroker would no doubt identify the prevailing price at the time and ask for instructions from the client about what to do. He agreed that if the stockbroker did that he would have no complaint and he thought that would be reasonable conduct. When asked when the stockbrokers ought to have transacted the sale he said he could not pass a comment on that because that would be a matter for the stockbroker’s judgment and the market on the day in conversation perhaps with the client.
Mr Ridgway gave evidence. He completed a Bachelor of Business degree in 1991 in accounting and law. He worked in finance and banking for a number of years prior to joining Potter Warburg in 1996. He has been advising clients since 1996 in investments in shares, managed funds, assisting them with their self-managed superannuation funds, trading in options and all general areas of investment. He has recently completed a graduate diploma in applied finance which is a course run by the Securities Institute of Australia. He has also been authorized by his employers to represent them as a dealer for the purposes of the securities industry.
In his evidence Mr Ridgway said in the first meeting with Mr Kimmorley he explained a number of matters to Mr Kimmorley. Included was an explanation that Mr Kimmorley could purchase shares either at market or he could purchase shares at a price specific. He said he explained that if he was wishing to buy shares at market that would be the cheapest selling price that people were willing to sell shares at and likewise if he was going to sell at market, it was the best price that people were prepared to offer for those particular shares. He also informed Mr Kimmorley that the share market opened at 10 o’clock in the morning and closed at 4 o’clock in the afternoon. He said he also showed him a computer screen in relation to share trading and explained how that operated. Mr Ridgway said at this meeting he could not recall Mr Kimmorley saying anything about being a day trader. He believed Mr Kimmorley understood everything that Mr Ridgway told him.
Mr Ridgway said that Mr Kimmorley had another meeting with him on 2 March 2000 when Mr Kimmorley wanted to see the computer screen again to understand how shares were bought and sold on the share market during the day. Mr Ridgway said he explained again so that he could have in his mind exactly what an at market order was and buying at a specific price, so it was clear that if he wanted to buy at a specific price what Mr Ridgway would be seeing in front of him and how Mr Ridgway could explain to him and likewise, if he wanted to buy at market what would be the normal occurrence. Mr Ridgway said that he thought towards the end of the meeting Mr Kimmorley started talking about day trading and wanted to know what it was. He said he explained to Mr Kimmorley that it was a very short-term trading strategy which some people undertook where they were trading to purchase shares and sell shares on the one day for a profit. He said he told Mr Kimmorley that he believed it would be better investing in a well-diversified portfolio with blue chip shares. Further that day trading was very complicated and was reasonably high risk. He said it was complicated in that one has to have a really good feel for a particular share in the marketplace and one really starts to be at the whim of the market when you are doing day trade. Mr Ridgway said he thought it would be more suitable for Mr Kimmorley’s level of experience to get the feel for some shares by buying BHP and some other shares. He said he made his views clear to Mr Kimmorley. He thought Mr Kimmorley listened to what he had to say.
Mr Ridgway said that at the third meeting on 27 March 2000 Mr Kimmorley did bring up day trading. Mr Kimmorley asked Mr Ridgway was he able to do day trades for Mr Kimmorley. Mr Ridgway answered in the affirmative and that he had done them in the past but told Mr Kimmorley he did not recommend them for Mr Kimmorley. He said Mr Kimmorley expressed his view that there was a lot of money to be made in the share market. He had an opinion that short-term trades could be successfully done in technology stocks. He expressed an interest in doing day trading on technology or telecommunications stocks. Mr Ridgway told Mr Kimmorley that it could be done. He said there were risks involved in doing that and he certainly could not guarantee Mr Kimmorley’s success in those endeavours. Mr Kimmorley told Mr Ridgway that he had done some paper trades and he believed that he could successfully buy and sell shares on a given day. Mr Ridgway said that he expressed to Mr Kimmorley the difficulties in trying to pick the bottom of the market at any given day. He said Mr Kimmorley also asked about trading options. Mr Ridgway explained options to Mr Kimmorley.
Mr Ridgway also gave evidence about Mr Kimmorley’s purchase of the Takoradi Gold shares. He said after they were purchased Mr Kimmorley contacted him and enquired as to the price and whether there had been any major announcement that had been put to the market about the future of the company. Mr Kimmorley said this announcement would be positive for the share price. Mr Ridgway suggested Mr Kimmorley should take some profits as the shares were selling at 16 cents per share. However, Mr Kimmorley’s view was that an announcement was going to make the share price go to around 20 cents and he wished to hold on to the stock until the announcement came out or the price went up to that sort of level.
Mr Ridgway said there was possibly another meeting on about 10 April and in that meeting amongst other things he expressed to Mr Kimmorley that he should not put all his eggs in one basket.
Regarding the telephone calls from Mr Kimmorley on 14 April Mr Ridgway said that on the Friday morning Mr Kimmorley rang him and said he was sick of watching the market. He wanted to make a trade. He believed he could make a day trade on that particular day and he wanted to do so. The American market had been going down for a couple of days and he believed it was due to rebound that night and he believed that if he purchased shares on that particular day the Australian share market would go up and he would hopefully make a profit out of his decision. He enquired about the company Davnet. He wanted to know if Mr Ridgway would undertake to help him with the day trade in that particular stock. Mr Ridgway said that he would help him, but Mr Ridgway could not guarantee success in that endeavour. Mr Ridgway gave him information about what the market looked like, if it was going to open up, what the price of Davnet shares were trading at, the time, volume, that sort of information. Mr Kimmorley told Mr Ridgway he was aware of the significant falls which had taken place in the preceding days on the share market in New York. He would like to try and buy and sell Davnet shares and that he would like to make a significant or reasonable profit from his endeavours. He would like to try and buy and sell the shares on the same day if possible. He would like to buy 40,000 Davnet shares at a limit of $3.28 or better. Mr Ridgway said Mr Kimmorley did not express any desire to purchase at market. According to Mr Ridgway it was a price specific order. After the shares were purchased Mr Kimmorley rang to confirm the transaction had been completed. Mr Ridgway said at that time Mr Kimmorley expressed his desire to be out of the shares before the end of the day.
Regarding the third conversation on the day Mr Ridgway said that Mr Kimmorley expressed his desire to try and sell the shares by the end of the day. He told Mr Kimmorley in order for him to be able to do that part of the order he would need guidance as to what he would like Mr Ridgway to try and sell the shares. Mr Kimmorley said he would like to try and make a significant profit and he gave him a price of $3.55. The selling order was then placed for $3.55. Mr Ridgway said that around quarter to two in the afternoon Mr Kimmorley rang him. Mr Kimmorley asked Mr Ridgway if he had sold the shares yet. He explained to him that the shares were trading at $3.42. It appeared that the share market was not increasing at quite the rapid or reasonable rate that it was in the morning. He expressed his concern that if Mr Kimmorley wanted to sell his shares that day that he might consider reducing his price limit from $3.55 to $3.45. He believed that was a more attainable target. Mr Kimmorley was happy to accept his advice and he requested Mr Ridgway change the selling order to $3.45. He also told Mr Kimmorley that the shares had traded as high as $3.42. However, Mr Kimmorley did not give him any instructions to sell at $3.42. According to Mr Ridgway Mr Kimmorley had given him instructions to sell at $3.45. Mr Ridgway said the shares had traded as high as $3.44 during the afternoon.
Regarding the conversation at 3.45 p.m. Mr Ridgway said he was busy that afternoon but he contacted Mr Kimmorley as soon as he could. He explained to him that the share price was currently trading at between $3.30 and $3.35 per share. He explained that at no stage in the afternoon had the share price gone to $3.45 or better. He asked Mr Kimmorley in light of his earlier comments that he wanted to sell the shares before the end of the day what he wanted to do. Mr Ridgway explained to Mr Kimmorley that if he sold the shares at market, which Mr Ridgway believed Mr Kimmorley understood what that meant, he could probably sell the shares for between $3.30 and $3.35. However, if he wished to sell them at $3.45 he did not believe he would be successful that afternoon. Mr Ridgway said that he gave Mr Kimmorley the option of selling and Mr Kimmorley chose to hang on and leave the order in at $3.45. Mr Ridgway said that Mr Kimmorley did not instruct him to change the order. When asked whether there was any suggestion from Mr Kimmorley of trying again on Monday, Mr Ridgway said that Mr Kimmorley’s view was that if he did not achieve the price that day he would try again Monday. Mr Ridgway said he asked Mr Kimmorley if he wanted to sell he could sell at market at $3.30 and $3.35 or he could keep his price where it is. Mr Ridgway said he did not at any time during this conversation say anything to the effect that it would not be possible in the remainder of the day to trade the stock at all. He said he expressed to Mr Kimmorley that he could sell the shares at market at $3.30 to $3.50. He said the prices were jumping up and down a little bit at the time so that was roughly where the market was. Mr Ridgway said he spoke to Mr Kimmorley after close of business to basically tell him that the share price had closed at $3.30. The shares had not jumped up to $3.45 in the last 15 minutes of trade and that his order to sell the shares had not in fact been completed. Mr Ridgway denied that Mr Kimmorley asked why he had not yet sold his stock and why Mr Kimmorley still owned the stock.
Mr Ridgway said that the stockmarket went down significantly in the US on that day.
Mr Ridgway said the first time Mr Kimmorley complained was a number of months later when he made a complaint on 22 June. He saw Mr Kimmorley in his office. Mr Kimmorley said he believed that there had not been enough attention paid to his account on the day of 14 April and in the time following that until the point of the meeting. He believed there had been several opportunities to trade out of his difficulties and Mr Ridgway had basically told him to hold on to the stock. Mr Ridgway said there had been no statement to the effect “why did you not sell my shares”. Mr Ridgway said that Mr Kimmorley expressed his concerns why did not the defendant tell him the share price was going to go down. Mr Ridgway explained the nature of the market.
When Mr Ridgway was cross examined he agreed to do a day trade there needed to be a plan. He also agreed that Mr Kimmorley had expressed a desire to get out at a particular price and he would like to get out at the end of the day. Mr Ridgway agreed it was a very busy day for him.
Mr Ridgway said his understanding of Mr Kimmorley’s order was that if it was profitable and he was able to achieve his price he was happy to sell that day. However he did not say he had to be out at the end of the day no matter what. Mr Ridgway said he has clients doing a day trade who set upper and lower limits and they get out no matter what. In this instance Mr Kimmorley instructed him to purchase shares because he believed he was going to make a profit. He set his sell price according to that level of profit which he wanted to make and he did not express any urgency in the afternoon when he had a number of opportunities to sell them at quite a significant profit to get out because he wanted to put a price limit on it, he wanted a certain amount of money. Mr Ridgway accepted that Mr Kimmorley was a novice. Further, that the terms “at price limit” and “at market” were not terms defined or discussed in any written material given to Mr Kimmorley.
Further in Mr Ridgway’s cross examination he expressed his position to be that he did not have a discretion in the circumstances to sell the shares at the best price he could achieve on the day. He accepted that if the client had given him the instruction at the start of the day that it was totally up to him to decide when the shares were to be sold he would assume that he had a discretion. However, in this instance, Mr Kimmorley wanted to be kept up to date with what was happening with the price and wanted by his actions to take some control of what the price was. He had set a price for $3.55 and when he was informed that the price was $3.42 he then put the price down to $3.45. According to Mr Ridgway, Mr Kimmorley was working the price more than Mr Ridgway was. Mr Ridgway was merely following orders. He did not believe Mr Kimmorley intended to get out at any cost at the end of the day. Mr Ridgway said that he was simply following what Mr Kimmorley was instructing him to do and Mr Kimmorley had an opportunity to change the price. Mr Ridgway said that he did not retain any discretion between 3.45 p.m. and 4.00 p.m. to just sell the shares because Mr Kimmorley had instructed him not to change the price. Mr Ridgway said that Mr Kimmorley had given him price limits and wanted to try and achieve those price limits, so he did not have the opportunity to take it upon himself to go above the client’s head and change it without him being aware and also approving those changes. As Mr Kimmorley did not give him the option of exercising a discretion, Mr Ridgway said he had the other option which was to contact Mr Kimmorley and advise him and seek revised instructions from him as to whether or not the sale could take place at a lower price. It is this that Mr Ridgway said he did at 3.45 p.m.
Later in Mr Ridgway’s cross examination he said that he said to Mr Kimmorley if he wanted to reach a price target of $3.45 he would probably have to try again on Monday. He said he told him if he wanted to sell the shares now at market he would achieve a price of between $3.30 and $3.35 based on what was on the screen at the time of the conversation.
Mr Ridgway said that he did not explain to Mr Kimmorley in that final conversation before 4.00 p.m. that the shares could be traded after the market closed. Mr Ridgway said that stockbrokers are not encouraged by his employer to pursue after hours trading as a normal function of clients simply because after the market shuts there usually are a number of announcements made by companies and that is usually the time it is made. There may be people at a disadvantage because they have not heard the announcement or they are doing something else. There was another difficulty and that had to do with on line broking.
The defendant called Peter David Evans as an expert witness. He is a stockbroker. He too, like Mr Willis, has the necessary expertise to express an opinion upon the issues in these proceedings.
Mr Evans assumed for the purposes of his opinion Mr Kimmorley gave an instruction to Mr Ridgway that he wanted to be “out of” the shares which he was about to purchase at the end of that day and also an instruction to sell those shares at a nominated price if that could be achieved and Mr Ridgway accepted both of those instructions. On that basis it is Mr Evans’ opinion there is an inherent potential inconsistency in those instructions. On the one hand, a named selling price was given and on the other hand, there was a direction to sell (if necessary at less than the nominated selling price) so that Mr Kimmorley would not hold those shares after the end of that day. Mr Evans states the difficulty for Mr Ridgway would have been to determine when Mr Ridgway’s authority became operative to entitle (and in fact oblige) him to sell the shares at less than the nominated price. Mr Evans questions whether this was to be determined by the time of day and was it also to be determined by the current price being offered on the stock exchange. According to Mr Evans instructions such as these are not infrequently given by clients and accepted by client advisers early in the day because the advisers know that they will later in the day be in contact with the clients and be able to clarify with them whether or not, in the circumstances then present including the prevailing price and the volumes of the shares being traded, the clients would want the advisers to sell even though the previously nominated price (or amended nominated price) had not been achieved. In Mr Evans’ opinion if there had been no such further instruction authorizing such a sale so that the earlier instructions remained current, there would have been an obligation on Mr Ridgway to sell the shares as late as possible whilst at the same time getting as reasonably close to the previously nominated price as possible. This would mean the client adviser would have to juggle two competing factors. Firstly, he would have to wait as long as possible before selling the shares in case there was a sudden rise in the price offered for the shares through the stock exchange. This price could change significantly within a minute. Secondly, he would have to leave sufficient time to ensure that a sale could be effected of the number of shares that Mr Kimmorley wanted to sell. If the current offers disclosed on the computer screens were for only a few shares, the adviser would have to move earlier in the day to sell the shares to ensure that the total number of shares could be sold. Mr Evans states that if the number of shares for which offers were in place could easily accommodate the number of shares the client wished to sell, the adviser would not have been justified in selling at less than the nominated price prior to 3.55 p.m. He said there is plenty of time in the five minutes thereafter to arrange for a sale on the stock exchange prior to its closure at 4 p.m. In his opinion if there were current offers for considerably more shares than Mr Kimmorley had to sell and a sale was arranged by Mr Ridgway prior to 3.55 p.m. at less than the nominated price and subsequently there had on that day been a rise in the market price of those shares, Mr Kimmorley would have been entitled to claim the amount of that rise from Mr Ridgway or the defendant.
Mr Evans was of the view that were Mr Ridgway’s evidence in these proceedings to be accepted there would be no question of any liability on the part of Mr Ridgway.
In his evidence in chief Mr Evans said that if the instruction from the client was the client wanted to do a day trade and be out of the stock at the end of the day and a price was mentioned at $3.55 he would see those instructions as inconsistent with each other and he would always only take that as the feeling at that part of the day. He would always expect to talk to the client later in the day because of that inconsistency. That is a price given and a day trade. He said one must win over the other at some stage during the day so he would take it as an interim instruction to be clarified later in the day.
Regarding the timing of any sale when sale prices are nominated at various times throughout the day but are not achieved Mr Evans said a broker would abandon those prices and try and get whatever price he or she could for the client not until around about five to four. He did not think it was a defendable position for a stockbroker to go earlier and just say “blow it” at 3.30 p.m., “I’ll just sell them” because of an instruction to get out before the end of the day. He said the shares could move 20 or 30 cents in 5 or 10 minutes. In his experience he would only turn to that action at around about 5 to 4 and if there was a lot going through he would actually delay it a bit longer than that. He said clients feel very let down if the stockbroker is seen to take the easy way of getting them out very early and then the shares “kick”. He said if the last instruction to sell these shares was to sell at $3.45 he would not have abandoned the attempt to get that price before 5 to 4. He said with these shares they were actually up on the day and $3.30 to $3.35 at quarter to four. So even then there was some chance.
Mr Evans’ evidence was when you take an order early in the day his experience is that many people, particularly people new to the market, change their mind during the day. He would absolutely think that the $3.45 limit stands and the suggestion early in the day, or at various times earlier in the day that the client would really like to be out before the end is completely overridden. He did not accept that he would be permitted to ignore an instruction to sell at a fixed price and settle at any price after such a conversation at quarter to four. He believed the quarter to four conversation as related by Mr Ridgway in these proceedings completely negated earlier conversations.
When cross examined about a day trade he accepted they involved a considerable amount of work. Further they require contact in some form later in the day. Further that you have to be fairly constantly aware of the situation during the day but that is not constant because the stockbroker has other clients to attend to.
Later in his cross examination Mr Evans was asked to consider if a day trade was being done and the client said “I don’t want to own the shares by the end of the day”, but had given a sell order and the price had not been achieved, whether that activated a discretion to sell the shares towards the end of the day. He agreed with that proposition. He said there is an activation (of the discretion) if that happens. However, he said it must be remembered always with the proviso of the later conversations would be firming that up. Then he was asked if the latter conversations did not alter that, that should happen, the shares should be sold. He said he would put it more strongly than that. He would say the later conversation would absolutely have to reiterate that the main instruction was to get out by the end of the day, not the price and he would insist that that happened as the last thing said in the last conversation.
When asked to comment on Mr Willis’ opinion where there is a sell order and instructions that the client did not want to hold the stock at the end of the day that placed an obligation on the security adviser to contact the client before the close of trading and to advise that the securities had not been sold and that they had an opportunity to sell them whether he considered that to be correct. He said he thought that was a bit cut and dried. He thought that what would be needed would be definitely a much later conversation. He did not think a dual instruction order early in the day could be taken in any way as something to be referred back to when you have had several other conversations. In his experience there were just so many things that change in the clients feelings during the day that the stockbroker really has to develop it and have a later conversation. He agreed with Mr Willis’ opinion that there is a need to speak to the client before the close of trading really to clarify what the instructions are. He said in developing the instructions there would have to be a conversation before the end of the day.
There is no dispute in these proceedings that the defendant owed to Mr Kimmorley a duty to act as a reasonable, prudent and competent stockbroker with regard to the sale of the shares. Further, that there was an implied term of the agreement that the defendant would act as a reasonable, prudent and competent stockbroker with regard to the sale of the shares.
It is Mr Kimmorley’s case that the defendant breached the agreement and the duty owed to Mr Kimmorley.
Mr Kimmorley claims damages in the sum of $113,872.24 calculated on the
following basis:
Sale at 3.45 p.m. 40,000 x $3.36 $134,000.00
Less brokerage on that sale $806.40
Less stamp duty on that sale $195.00
Less cost of purchase $130,975.00
(Sub-total profit on the day) $2,423.60
Plus net cost of original purchase $130.00
Less present value 40,000 x 03.6 $1,440.00
Less brokerage on sale of present value $8.64
Total Loss $113,872.24
As I understood Mr Willis’ evidence whether Mr Ridgway breached his responsibility to Mr Kimmorley that day has to be considered in the context of there having been a 3.45 p.m. conversation and what was said in that conversation.
That is, whether Mr Ridgway met the standard expected of a reasonable, prudent and competent stockbroker, depends in this case on what was said in the 3.45 p.m. conversation.
I consider that was also Mr Evans’ evidence. Like Mr Willis, he too considered the dual instructions given by Mr Kimmorley to Mr Ridgway earlier in the day. His opinion was consistent with that of Mr Willis, that Mr Ridgway’s obligations and whether he breached those obligations would depend upon whether, later in the day Mr Ridgway received further instructions, and if so, the content of those instructions. If Mr Ridgway did not receive further instructions so that the earlier instructions remained current, then Mr Ridgway was obliged, in his opinion, to sell the shares as late as possible whilst at the same time selling as reasonably close to the previously nominated price as possible. Mr Evans thought that would be done no earlier than 3.55 p.m.
Therefore, I consider the expert witnesses were in agreement that the content of the 3.45 p.m. conversation would determine Mr Kimmorley’s claim in these proceedings. Mr Willis nor Mr Evans suggested in their evidence that Mr Ridgway had breached his obligation to Mr Kimmorley because the shares had not been sold before the 3.45 p.m. conversation. Mr Willis said he would not comment on when Mr Ridgway ought to have sold the shares. He said that would be to the broker’s judgment and to the market on the day in conversation perhaps with the client. Mr Kimmorley’s case was not put on the basis that Mr Ridgway breached his obligations to Mr Kimmorley because he failed to recognize the market price of the shares was falling and therefore he should have sold the shares without reference to Mr Kimmorley. When Mr Kimmorley was cross examined he expressed himself in a way that suggested he thought the shares should have been sold at about 3.00 o’clock. However, Mr Kimmorley’s view on that was not supported by the expert witnesses.
Therefore, I consider to determine liability in these proceedings it is necessary to resolve what was said during the 3.45 p.m. conversation.
When Mr Kimmorley gave his evidence in chief and was cross examined there was no dispute between the parties the next relevant telephone conversation between Mr Kimmorley and Mr Ridgway was after 4.00 p.m. However, during re-examination of Mr Kimmorley, his phone records were tendered. These show Mr Kimmorley made a telephone call to the defendant at 3.55 p.m. Nothing was made of this during the trial. I find the fact of this telephone call does not assist me to resolve the issues between the parties. It is possible Mr Kimmorley telephoned the defendant by mistake at that time and realising his mistake hung up. I am unable to conclude anything from this record of a telephone call from Mr Kimmorley to the defendant at 3.55 p.m.
I have considered Mr Kimmorley’s evidence.
Mr Kimmorley denied that in the 3.45 p.m. conversation Mr Ridgway identified the then current prices of the shares for Mr Kimmorley. Mr Kimmorley said the only price that was discussed was the price reached of $3.44. However, in a letter from Mr Kimmorley’s solicitors to the defendant dated 28 July 2000 (Exhibit 21) the plaintiff’s solicitors said – “At 3.45 p.m. Mr Kimmorley again spoke with Mr Ridgway. He was informed by Mr Ridgway that the share prices were dropping and that it was too late to sell the Davnet stock.” To say that he had been informed by Mr Ridgway that the share prices were dropping is not precisely the same as Mr Ridgway identifying the then current prices for Mr Kimmorley. However, the statement in the letter is inconsistent with Mr Kimmorley’s evidence in chief about this telephone conversation (T16/45-50). Further, I find it difficult to accept that if Mr Ridgway said the share prices were dropping that there would be no mention to what price the shares had dropped to or what price the shares were then trading at.
Secondly, it is Mr Kimmorley’s case that Mr Ridgway, despite having been told several times that he wanted to sell the shares that day, told Mr Kimmorley it was too late to sell the shares and if Mr Kimmorley wanted to sell the shares he would have to wait until Monday. It is difficult to accept that Mr Ridgway would say that when there was still another 15 minutes before the market closed for the day. Mr Ridgway agreed Friday afternoon is a very busy time, more busy than any other day of the week and that stockbrokers are under considerable stress. He volunteered that before the 3.45 p.m. conversation he had been under considerable stress to resolve a margin call for another client. However, nothing specific emerged in the evidence to explain why Mr Ridgway would say that to Mr Kimmorley at that point in time. To say it was too late to sell is also arguably contrary to Mr Ridgway’s own interests. That is by selling the shares he would obtain a commission. On the other hand he could still have obtained a commission if the shares were sold on the Monday. I consider it cannot be overlooked that Mr Ridgway did telephone Mr Kimmorley at about 3.45 p.m. It was not as if during that day Mr Ridgway was unavailable to the extent that I could infer he was floundering from work pressures.
When considering Mr Kimmorley’s evidence about the 3.45 p.m. conversation, I have considered whether Mr Ridgway may have acted out of frustration with Mr Kimmorley. That is, Mr Kimmorley was accepted to be a novice. Mr Ridgway knew he had accessed the Courier Mail service and had engaged in paper trades. Mr Kimmorley had been told by Mr Ridgway to take a more conservative approach to investing in the stock market at the beginning. Mr Kimmorley was making decisions without reference to Mr Ridgway. For example the purchase of the Takoradi gold shares. Despite being advised to take some profits, Mr Kimmorley did not do so. Mr Kimmorley wanted to do day trades which were risky and he did not accept the advice to buy “blue chip” stocks.
I have considered this possible explanation for Mr Kimmorley’s version of the conversation. I do not accept Mr Ridgway was motivated by frustration or any other motive adverse to Mr Kimmorley that might explain why Mr Ridgway would say to Mr Kimmorley something that was contrary to the actual position at the time.
Another possibility I have considered is whether, the 3.45 p.m. conversation was as short as Mr Kimmorley’s evidence suggests it was. That is, Mr Ridgway on Mr Kimmorley’s version of the 3.45 pm. conversation said very little. The effect being that having been given instructions earlier to sell the shares before the end of the day and not receiving any further instructions in the 3.45 p.m. conversation, Mr Ridgway failed to meet his obligations to Mr Kimmorley. I find it difficult to accept Mr Ridgway would say to Mr Kimmorley he would have to wait until Monday without any qualification. In the context of waiting until Monday a qualification to the effect of achieving $3.45 per share would be understandable in the context of the previous conversations including the setting of the price at $3.45 per share. That qualification was not part of Mr Kimmorley’s evidence.
Another matter I have considered about Mr Kimmorley’s evidence is that although it was accepted he was a “novice”, I consider he at least had some knowledge about what he intended to do and was making decisions on his own initiative.
In the first meeting Mr Kimmorley told Mr Ridgway he wanted to buy and sell shares in the same day and he wanted to do large volume share transactions. The source of that idea and other instructions he gave to Mr Ridgway and the defendant were not explored with Mr Kimmorley when he gave his evidence. However, on the face of the evidence before me Mr Kimmorley of his own accord came up with that idea and other instructions he gave to Mr Ridgway and the defendant.
For example, Mr Kimmorley instructed the defendant in early March 2000 to purchase for him 900,000 Takoradi gold shares. These were the first shares purchased by Mr Kimmorley for a not insubstantial sum, namely in round figures, $100,000 at 10.5 cents per share. Mr Kimmorley did not sell those shares in a day trade. However, it was Mr Kimmorley who initiated the purchase. Further, he did so without seeking Mr Ridgway’s advice. Although he subsequently discussed with Mr Ridgway the wisdom of selling those shares, when advised by Mr Ridgway to sell some of the shares to make a profit, he declined to sell and told Mr Ridgway he thought the stock was going to go to 20 cents per share.
Further, Mr Ridgway’s evidence about the Takarodi gold shares, which was not challenged, was that Mr Kimmorley told Mr Ridgway it was a small mining company which Mr Kimmorley believed was going to change to a technology or dot.com company. Mr Kimmorley believed that an announcement was pending and he believed it would be positive for the share price. Mr Kimmorley was interested in purchasing the shares before that announcement came out so he could make a profit. Again these were matters put forward by Mr Kimmorley.
Davnet Limited was one of the companies the defendant recommended. However, it was Mr Kimmorley who rang up and instructed Mr Ridgway to buy for him 40,000 shares at a cost of about $130,000 which he wanted to sell in the same day. Mr Kimmorley’s evidence was when asked by Mr Ridgway how much did he want to sell them for, he “plucked a figure out of the top of my head” and said $3.55. Regarding one of the telephone conversations on 14 April Mr Kimmorley said he asked if the shares had reached $3.55 which was “the price I set in the first conversation”. Mr Kimmorley said further “I set the new price”. I consider these were decisions Mr Kimmorley made. He said he plucked a figure out of the top of his head. Subsequent events on that day show he did not choose an entirely unrealistic figure.
Mr Kimmorley agreed in cross-examination he knew before he bought the shares in the previous fortnight the shares had fallen from $6 per share to $3.25 at which he bought them.
Further, he agreed he knew that afternoon of 14 April he could have sold the shares for $3.42 per share.
Mr Kimmorley may have been obtaining information on his own initiative from sources such as the newspaper. However, I conclude he was making decisions he regarded were in his interests regarding the buying and selling of shares.
It was submitted by the defendant that I should prefer Mr Ridgway’s evidence because Mr Kimmorley did not complain until some months later. That is, if Mr Kimmorley’s instructions were to sell that day and it was not done as he expected, and on the Monday morning the value for his shares had fallen to $2.50 a share, a loss of $30,000, one would expect he would make a more timely complaint. In these circumstances I find it difficult to accept Mr Kimmorley would not have complained sooner than he did even if Mr Ridgway advised Mr Kimmorley to hold onto the shares.
I have also considered Mr Ridgway’s evidence.
In the letter from the defendant to Mr Kimmorley’s solicitors dated 21 August 2000 (Exhibit 22), the following appears:
“Mr Ridgway denies Mr Kimmorley instructed him at the time of placing the order or any subsequent time during the day that he did not wish to hold the shares at the end of the day”.
Further, by paragraph 5 of the defendant’s defence, the defendant denied Mr Kimmorley told Mr Ridgway during the first telephone conversation on 14 April he did not wish to own the shares “by the end of the day’s trade” and on two further occasions that he did not wish to own the shares beyond the day.
Paragraph 5 of the defence goes on to plead –
“... the plaintiff advised Ridgway he would like to sell the shares by the end of the day’s trade but wanted to make a profit of $10,000 from the share transaction.”
The letter from the defendant to Mr Kimmorley’s solicitors asserts Mr Kimmorley said to Mr Ridgway he wanted to make a profit of $10,000.
One view of Mr Ridgway’s evidence given by him at the hearing is that his evidence was inconsistent with the denial in the letter and the defence. I consider another view of the denial in the letter and the defence is that when giving instructions for the letter and the defence Mr Ridgway was possibly taking issue with the language used to express Mr Kimmorley’s allegations. That is, he was taking issue that what Mr Kimmorley said was an instruction. Earlier in the letter in the last paragraph on the first page there is a reference to “selling Davnet shares on the same day for a profit.” Therefore it would appear Mr Ridgway instructed the author of the letter that a profit on the same day was raised in the conversation. Further, as to the “$10,000 profit” statement allegedly made by Mr Kimmorley and referred to in the defence, I consider it is possible Mr Ridgway was giving instructions based on an assumption that what Mr Kimmorley said was what he was trying to achieve. Although Mr Kimmorley may not have said the words “$10,000”, he may have said he wanted to make a profit based on a price per share which Mr Ridgway calculated could be $10,000, if after asking $3.55 per share the shares were sold for $3.50 per share. The difference between $3.25 and $3.50 per share would yield a profit of $10,000.00. Again the phrase “selling Davnet shares on the same day for a profit” in the letter I consider can suggest Mr Ridgway did instruct the author of the letter “a profit” was raised at some stage during the conversations that day.
Another aspect about Mr Ridgway’s evidence is that the defence admitted paragraph 3 (c) of the further amended statement of claim. That was an admission by the defendant that at a meeting on or about 24 February 2000 Mr Kimmorley told Mr Ridgway he was interested in buying and selling shares on the same day. At the start of the trial Counsel for the defendant told me that admission was not correct. Mr Ridgway’s evidence was that was discussed in a meeting on or about 2 March. I was also told the position was similar with respect to an admission of paragraph 4 (a) of the further amended statement of claim which was an admission that at the meeting on 24 February 2000 Mr Ridgway told Mr Kimmorley that the defendant was able to undertake “day trades”.
Further, Mr Ridgway accepted his day book in which it was his practice to record at least the existence of conversations with clients, recorded very little detail of what was discussed with Mr Kimmorley before 14 April but more importantly there were seven conversations with Mr Kimmorley on 14 April and yet his day book records only three conversations with Mr Kimmorley. Importantly, there is no entry for the 3.45 p.m. conversation. Hence, without any notes recorded by Mr Ridgway in his day book Mr Ridgway does not have a record to refresh his memory about what was discussed with Mr Kimmorley at 3.45pm.
The lack of notes recorded in his day book does place Mr Ridgway in the position of having to rely upon his memory. I accept there can be in those circumstances a possible tendency to reconstruct the content of conversations that may have taken place. However, Mr Kimmorley also was relying upon his memory about relevant conversations. The cross examination about the lack of notes implied Mr Ridgway was not as careful as he ought to have been as a reasonable, prudent and competent stockbroker. More notes would be of assistance. However, in this case I do not accept this favours acceptance of Mr Kimmorley’s evidence nor do I accept that supports a conclusion Mr Ridgway breached his obligations to Mr Kimmorley.
Mr Kimmorley said in his evidence before me that in the 3.45 p.m. conversation Mr Ridgway said “If you wanted to sell them you have to wait till Monday”. Mr Ridgway said in his evidence before me that in the 3.45 p.m. conversation Mr Kimmorley’s view was “if he didn’t achieve the price today he would try again Monday”. However, in Mr Kimmorley’s solicitor’s letter to the defendant dated 28 July 2000 and in the defendant’s reply dated 21 August 2000 there is no claim that in the 3.45 p.m. conversation Mr Ridgway or Mr Kimmorley said words such as waiting until Monday or trying again on Monday. The defendant’s reply dated 21 August 2000 states after the market closed Mr Kimmorley was advised it was possible to sell the shares on Monday. Mr Ridgway prepared a report regarding his dealings with Mr Kimmorley dated 31 October 2000. In that report Mr Ridgway does not state that in the 3.45 p.m. conversation Mr Kimmorley said words to the effect if he did not achieve his price that day he would try again on Monday.
The two letters dated 28 July 2000 and 21 August 2000 and Mr Ridgeway’s report do not contain a verbatim record of what each party claimed was said in the 3.45pm conversation. However, the two letters and Mr Ridgeway’s report are closer in time to the 3.45pm conversation than the further amended statement of claim and the defendant’s defence and the evidence given in this hearing. Despite being closer in time to the 3.45 p.m. conversation and could therefore possibly be a more reliable record of what each party claimed was said in the 3.45 p.m. conversation and perhaps other conversations, I find it difficult from those letters and Mr Ridgway’s report without more to come to a conclusion about the evidence of Mr Kimmorley or Mr Ridgway.
However, regarding Mr Kimmorley’s solicitor’s letter to the defendant dated 28 July 2000 in which it is stated Mr Kimmorley was informed by Mr Ridgway “it was too late to sell the Davnet stock”, that statement appears to have been made, according to Mr Kimmorley’s instructions to his solicitors in the context that in the previous conversation a price of $3.45 was set and in the 3.45pm conversation the share prices were dropping. I consider the statement that “it was too late to sell the Davnet shares” in that context could be understood to mean “it was too late to sell the Davnet shares” if Mr Kimmorley wanted $3.45 per share that afternoon. That statement on its own without that meaning was contrary to the actual position at the time.
Whereas the reference in that letter to Mr Ridgway informing Mr Kimmorley that the share prices were dropping is consistent with Mr Ridgway telling Mr Kimmorley the current prices for the shares, which were then below the $3.45 that was the price set by Mr Kimmorley. The defendant’s reply dated 21 August 2000, although not expressly stating Mr Kimmorley said if he did not achieve his price that day he would try again on Monday, does state Mr Kimmorley had the choice of holding the stock or selling at the market price of $3.30 and that it would appear that he wanted to achieve his profit and he did not place an order to sell “at market”.
Therefore, to the extent the letters and Mr Ridgway’s report can be of assistance in assessing the evidence of Mr Kimmorley and Mr Ridgway, I consider these documents, although of limited use, support Mr Ridgway more than Mr Kimmorley.
Finally, when Mr Ridgway was asked in his evidence in chief what was Mr Kimmorley’s response to Mr Ridgway’s view expressed to Mr Kimmorley that if he wished to sell the shares at $3.45 Mr Ridgway did not believe he would be successful that day, Mr Ridgway said “I gave him the option of selling and he chose to hang on and leave the order in that $3.45”. Mr Ridgway did not say how he gave Mr Kimmorley that option. Further, when asked was there any suggestion of trying again on Monday, Mr Ridgway replied “Mr Kimmorley’s view was if he didn’t achieve the price today he would try again Monday”. Again, Mr Ridgway did not say what Mr Kimmorley said.
Despite the way Mr Ridgway answered those questions in his evidence in chief, I consider his answers are open to the inference because he was asked earlier in his evidence in chief to give the gist of the conversation, that Mr Kimmorley replied to Mr Ridgway in words to the effect to leave the price at $3.45 and if it was not achieved that afternoon he would try again on Monday.
Therefore, having considered the evidence in these proceedings, and the matters I consider relevant to an evaluation of the evidence of Mr Kimmorley and Mr Ridgway, I prefer the evidence of Mr Ridgway to the evidence of Mr Kimmorley.
I find in the 3.45 p.m. conversation Mr Ridgway did not say to Mr Kimmorley that “it’s too late now” to sell the shares and if he wanted to sell them he would have to wait until Monday. I find Mr Ridgway explained to Mr Kimmorley that the share price was currently trading at between 3.30 and 3.35 per share. He explained to Mr Kimmorley at no stage in the afternoon had the share price gone $3.45 or better. He asked Mr Kimmorley in light of his earlier comments that he wanted to sell the shares before the end of the day what he wanted to do. He explained to Mr Kimmorley if he sold the shares at market he could probably sell the shares for between $3.30 and $3.35. However, if he wished to sell the shares at $3.45 Mr Ridgway did not believe he would be successful that afternoon. I find Mr Ridgway gave Mr Kimmorley the option of selling the shares at market and Mr Kimmorley chose to not sell the shares at market and to leave the price at $3.45. I find Mr Kimmorley expressed his choice to Mr Ridgway which was that if he did not achieve the price of $3.45 that day he would try again on Monday. I find Mr Kimmorley understood what selling ‘at market’ meant as that had been explained to him by Mr Ridgway on an earlier date. I find Mr Kimmorley knew he could sell the shares that afternoon after the 3.45pm conversation “at market” if he instructed Mr Ridgway to do so. I find Mr Kimmorley knew the market closed at 4.00 p.m. as that had been explained to him by Mr Ridgway on an earlier date.
I find Mr Kimmorley did not instruct Mr Ridgway to sell the shares “at market” because he decided to see if he could get his price of $3.45 per share that afternoon, and if he did not he would try again on Monday. I find that because of what was said in the 3.45 p.m. conversation Mr Ridgway was not under an obligation nor did he have the responsibility to sell the shares before 4.00 p.m. that day. That is, Mr Kimmorley’s earlier instructions that he did not want to own the shares by the end of the day were no longer operative as an obligation upon Mr Ridgway to sell the shares before the market closed.
Further, I find Mr Ridgway was not under an obligation to advise Mr Kimmorley he could try to sell the shares after the market closed nor was Mr Ridgway under an obligation to sell the shares after the market closed. I accept Mr Ridgway’s evidence it is not customary to do so. Further, I find the content of the 3.45pm conversation would not call for a sale of the shares after the market closed. Further, I find it was not a breach of the agreement nor a breach of the duty owed to Mr Kimmorley to not sell the shares after the market closed.
I consider the opinions of the expert witnesses Mr Willis and Mr Evans do not warrant different findings to the findings I have made.
Therefore, I find the defendant did not breach the agreement with Mr Kimmorley nor breach the duty of care to Mr Kimmorley.
I therefore dismiss the plaintiff’s claim against the defendant.
Submissions were made about the proper assessment of damages in this case were the defendant liable to Mr Kimmorley for damages. I could not accept the basis put forward by Mr Kimmorley. His entitlement to damages would be to be placed in the position he would have been in had the agreement been performed. On the basis of the shares being sold at the end of the day they could have been sold for $3.30 per share. The shares opened at $2.50 on the Monday morning. Hence the difference is $0.80 per share. The loss therefore that I would assess is $32,000 less brokerage and stamp duty.
I will hear the parties on the question of costs.
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