UNION GLORY FINANCE INC. AND OTHERS v. MERRILL LYNCH INTERNATIONAL BANK LTD AND ANOTHER

CACV 205/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 205 OF 2016

(ON APPEAL FROM HCA NO. 2494 OF 2013)

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REASONS FOR JUDGMENT

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Hon Lam VP :

1.  I agree with the Reasons and Judgment on Costs given by Cheung JA.

Hon Cheung JA :

I.  The appeal

2.   The plaintiffs sought damages for negligent misstatement by the defendants.  Their action was dismissed by Deputy High Court Judge Cooney SC.  The plaintiffs appealed.  We dismissed the appeal at the conclusion of the hearing.  I now give reasons for our judgment.

II. Background

3.1.   The gist of the plaintiffs’ case was summarised by the Judge as follows.  The plaintiffs were moneylenders.  They claimed that they relied upon and were induced to lend money to Tack Fat Group International Limited (‘Tack Fat Group’) by certain representations made to them by a Mr Chuang Yue‑chien, Eugene (‘Mr Chuang’) (a witness for the plaintiffs), that Merrill Lynch had agreed to lend Tack Fat Group HK$200,000,000.  Mr Chuang said that representatives of the defendants made the representations to him, that he believed the representations and passed them on to the plaintiffs.  Tack Fat Group went into liquidation and failed to repay the loans in full.  The plaintiffs allege the representations were false.

3.2.   The representation was said to be made on 2 June 2008 and confirmed again on 6 June 2008. 

3.3.   In order to put the alleged representation in context it is necessary to go back in time.  The 1^st defendant (‘MLI’) engages in banking and financial services.  The 2^nd defendant (‘MLAP’) engages in financial advisory and investment banking services.  Mr John C Lee (‘Mr Lee’) was the head of the Hong Kong and Managing Director of the Investment Banking Division of MLAP and he was assisted by Mr Samson Lo (‘Mr Lo’), the Vice‑President of the Investment Banking Division.  Mr Lee and Mr Lo maintained a business relationship with Mr Kwok Wing (‘Mr Kwok’), the founder and Chairman of Tack Fat Group.  Mr Kwok was also the chairman of Tack Fat Group’s majority shareholders, Efulfilment Enterprises Limited (‘Efulfilment’) and Sharp Asset Holdings Limited (‘Sharp Asset’).

3.4.   In March 2008 Mr Lee had discussions with Mr Kwok about a potential ‘take private’ or management buy‑out of Tack Fat Group’s issued shares.  Efulfilment and Sharp Asset required debt and equity financing for the management buy‑out.  In respect of this, a confidentiality agreement, an advisory engagement letter and a financing engagement letter respectively, were executed on 2 April 2008.  By the financing engagement letter, MLAP agreed to act for Efulfilment and Sharp Asset as the exclusive mandated lead arranger for the financing of the management buy‑out.  An internal email, dated 6 June 2008, indicated that ‘Merrill Lynch’ would earn a total fee of US$14,000,000.

3.5.   Subsequently, Tack Fat Group contemplated a rights issue to raise funds to pay down two mandatory loan amortisations due in June and August 2008 respectively.  A 3 June 2008 payment (later extended to 10 June 2008) was due to Citic Ka Wah Bank in the sum of HK$65,000,000 (‘the Citic loan’).  Discussions regarding the management buy‑out were put on hold whilst Tack Fat Group considered the rights issue.

3.6.   Around 6 May 2008, Mr Kwok telephoned Mr Lee asking him for MLAP’s help to obtain a bridging loan of HK$200,000,000 because he did not think he could get the rights issue completed in time to pay the loans falling due in June and August 2008. 

3.7.   In order to avoid any conflict of interest, since the investment banking division was the mandated lead arranger for the management buy‑out, Mr Lee arranged another colleague from the credit trading team to discuss the bridging loan while he and Mr Lo continued to work on the management buy‑out.

3.8.   On 19 May 2008, Mr Lo met with Mr Kwok who told him that Tack Fat Group had ‘pretty much’ agreed the bridge loan terms orally and would allow access to due diligence that week and expected to execute a finalized term sheet by the end of the following week.

3.9.   Tack Fat Group eventually received a draft Facility Agreement from MLAP’s solicitors.  The loan, however, had to be approved by the Debt Markets Commitment Committee (‘DMCC’) at its meeting on 3 June 2008 which held a negative view towards the proposed loan due to the concerns about Tack Fat Group’s credit and ability to repay.  DMCC required evidence from Tack Fat Group that it would carry out the rights issue, specifically, commitment letters from Tack Fat Group’s advisers.

3.10.   On 2 June 2008 Mr Lee and Mr Lo were asked to attend a meeting with Mr Kwok and then meeting with Mr Chuang of CU Corporate Finance Limited (‘CUCF’).  CUCF was licensed to carry out businesses under Type 6 of the Securities and Futures Ordinance and regulated by the Securities and Futures Commission.  Type 6 permitted CUCF to carry out corporate advisory business, including advising lenders and borrowers in arranging syndicated loans.

3.11.   According to the evidence, Mr Kwok had earlier approached Mr Chuang and his colleague Mr Chan Shek Wah, Dickson (‘Mr Chan’) of CUCF in mid-May 2008.  The Judge summarised their discussion as follows :

‘ 44. During the meeting, Mr Kwok told Mr Chuang and Mr Chan that Tack Fat Group faced short term financial difficulty, namely, one of its creditors, Citic Ka Wah Bank Limited, had threatened to petition to wind up Tack Fat Group if it failed to meet its demand for payment of a loan which was due on 9 June 2008. Mr Kwok also said that Merrill Lynch had agreed to lend Tack Fat Group HK$200,000,000 to enable it to repay most of its loans to various creditors, including Citic Ka Wah Bank. Mr Kwok said that the agreed loan was not forthcoming as Merrill Lynch had to undergo certain internal processing procedures before the loan was available but the repayment to Citic Ka Wah Bank was imminent. Mr Kwok asked if CUCF could arrange a short term loan to meet Citic Ka Wah Bank’s demand.

45. Mr Chuang investigated Tack Fat Group and thought it was in a poor financial position. He did not take Mr Kwok at his word and asked him to arrange a meeting with Merrill Lynch representatives.’

3.12.   Going back to the meeting of 2 June 2008, it was at this meeting that the alleged representations were said to be made by Mr Lee.  The Judge summarised the evidence of Mr Chuang about the representation made by Mr Lee at this meeting.

‘ 47. It was said that Mr Lee did most of the talking for the defendants’ representatives during the meetings. Mr Chuang could not remember exactly what was said during the meetings but he provided what he termed as the “gist”:

“… Mr. Lee told me that the Defendants had carried out extensive studies of TF Group and were convinced that it had a solid fundamental, and that the Defendants were prepared to lend a total sum of HK$200 million to TF Group to meet its short term liabilities. To support his assertion, Mr. Lee showed me the Facility Agreement, the draw down notice and the relevant board minutes of TF Group, which had not been executed by the parties. … he told me that although the Hong Kong office of the Defendants had agreed to lend the sum of HK$200 million to TF Group, it was natural that it should require certain process through internal system in London to complete before the loan could come to hand. I understand those were required as part of the control system by major international financial institutions. According to Mr. Lee, it would require little time to complete the process and the said loan of HK$200 million would reach TF Group and by then, TF Group would be in a position to repay the bridging loan.

I was further assured by Mr. Lee, and Mr. Lo, for the Defendants that if CUCF succeeded in arranging the bridging loan …, in the event the Acquisition proceeded, CUCF would be invited to participate so that CUCF would benefit from the arrangement fees.” ’

3.13.   During cross-examination, Mr Chuang said that Mr Lee and Mr Lo ‘told me that the loan has been approved and it just takes time for internal processes’.  He also said that he was told that the loan would be forthcoming within a number of days, meaning within a few days.

3.14.   Mr Chuang said another meeting was held with Mr Lee and Mr Lo on 6 June 2008.  The Judge further referred to Mr Chuang’s evidence about this meeting.

‘ 48. ...

“ ...Mr. Lee told me that he could call London office to confirm the internal process was underway. That was done on speaker phone …, and I remember a person on the other end on the UK number provided by Mr. Lee who spoke English with a strong Indian accent actually confirmed what Mr. Lee had said about the internal processing and the Defendants’ commitment to the loan.” ’

3.15.   The Judge also referred to the evidence of Mr Chan :

‘ 49. Mr Chan’s evidence as to the gist of Mr Lee’s statements was:

“ The Defendants had studied the finance of TF Group and agreed to lend HK$200 million to help sustain its status quo;

However, due to some process through internal system in London required, the agreed loan could not be available on time before the deadline to repay TF Group’s loan to Ka Wah, hence a bridging loan was required urgently;

Once Ka Wah’s threat of petition for winding up discontinued, the Defendants would advance the loan of HK$200 million as agreed, otherwise, the Defendants would have no choice but to withdraw their commitment. Therefore, it was important to obtain the bridging loan to satisfy Ka Wah’s demand of repayment;

If the Acquisition went forward, the Defendants would invite CUCF to participate in the exercise and that would give profits to CUCF.

In one of the meetings, most probably in the first meeting, Mr. Lee produced an unsigned Facility Agreement, with draw down notice and draft relevant board minutes evidencing a loan of HK$200 million to be advanced to TF Group by the Defendants.

I remember there was one meeting on a Friday after working hours at around 6 p.m., Mr. Lee and Mr. Lo, Mr. Kwok and Mr. Lam as well, attended …. A call was made to London office of the Defendants on a number provided by Mr. Lee on speaker phone. A gentleman with strong Indian accent on the line confirmed that it would require little time to process the agreed loan.” ’

3.16.   Mr Lee stated that, on 2 June 2008, at Mr Kwok’s request, he and Mr Lo attended a meeting with Mr Kwok and Mr Chuang at North Point.  He recalled that Mr Chuang’s colleagues were present but he could not recall their names.  A flavour of this meeting from the point of view of the defendants can be seen from the e-mail Mr Lo sent to a colleague on 2 June 2008:

‘ Tack fat’s chairman [Mr Kwok] dragged john [Lee] and me to meet w a hedge fund in north point. Totally non‑legit. Looks like a boiler room type operation.’

3.17.   Mr Lee denied that he had represented that the defendants had agreed to advance a loan of $200 million.  The judge summarised Mr Lee’s evidence as follows :

‘ 81. ...... Mr Lee stated that he understood that the purpose of the meeting “was to discuss the funding gap faced by TF Group, in light of the Citic Loan due for repayment ….” He said that during the meeting two solutions already being considered by Tack Fat Group to fill the “financing gap” were discussed, namely, the rights issue and the proposed loan by Merrill Lynch. Mr Lee also stated that neither he nor Mr Lo presented or recommended any lending opportunity to Mr Chuang and that Mr Kwok never discussed with them the idea of Mr Chuang’s involvement in providing alternative third party funding. Mr Lee’s understanding was that Mr Kwok anticipated that Mr Chuang would assist Tack Fat Group by underwriting the rights issue. In particular, Mr Lee stated in his witness statement:

“ I recall stating that I hoped ML would be able to provide the Proposed Loan and that I would try my best to facilitate the obtaining of the necessary internal approvals. At all times, I made clear that the provision of the Proposed Loan was contingent upon the internal approvals being granted by the DMCC.” ’

3.18.   The Judge also referred to the evidence of Mr Lo :

‘ 83. Mr Lo’s written statement corroborates Mr Lee’s written statement and is in essentially the same terms. Mr Lo stated that he understood that the purpose of the meeting was to discuss the financing gap faced by Tack Fat Group in light of the Citic Ka Wah Bank repayment.’

3.19.   Neither Mr Lee nor Mr Lo recalled showing Mr Chuang or anyone else a copy of the draft Facility Agreement.

3.20.   Mr Lee denied that there was a meeting on 6 June 2008 and said that no one with an Indian accent was involved in the transaction.  Mr Lo accepted in cross‑examination that it was possible there was another meeting on 6 June 2008 but he did not recall hearing from someone with an Indian accent.

3.21.   Mr Chuang subsequently contacted the plaintiffs asking whether they were interested in providing bridging loans to Tack Fat Group.  The Judge referred to the plaintiffs’ witness statements in relation to what Mr Chuang had told them about the defendant agreeing to lend to Tack Fat Group.

‘ 51. ...... Mr. Chuang presented to me an opportunity of lending money at attractive interest rate to a listed company called Tack Fat Group International Limited (‘TF Group’). As a matter of adopted procedure, I then ran the financial background of TF Group from the Stock Exchange’s web site and noticed that TF Group was not in good shape. Mr. Chuang explained to me that Merrill Lynch, the Defendants, had agreed to salvage the company by lending a sum of HK$200 million to meet its dire need to repay debts to one of its creditor banks Citic Ka Wah Bank Limited (‘Ka Wah’), which threatened to petition for its winding up if the repayment was not made by certain deadline. I remember Mr. Chuang mentioned 9 June, 2008 was the deadline. Mr. Chuang told me that he had met senior staff members of the Defendants, who produced a copy of the Facility Agreement together with some ancillary documents such as draw down notice and relevant board minutes, to persuade him that the Defendants were committed to lend a total sum of HK$200 million to TF Group after certain internal process in little time were completed. According to Mr. Chuang, albeit the Facility Agreement was not signed, the Defendants’ representatives had unequivocally assured him that the Defendants had committed to the lending. Mr. Chuang further said, which I agreed, that the Defendants were an internationally renowned bank and would not make that representation lightly and casually without bearing consequence. …

I was therefore persuaded by Mr. Chuang that it was a good deal for the [plaintiff] to be part of the loan syndicate to TF Group.  I then reported to the board of directors of [the plaintiff] and relying on what the Defendants had represented to Mr. Chuang about their commitment in lending HK$200 million to TF Group, subsequently the board of the [plaintiff] unanimously approved and consented to take part in the loan syndicate and extend the loan to TF Group.’

3.22.   The plaintiffs eventually advanced a total of HK$70.5 million to Tack Fat Group. 

3.23.   As far as the loan from Merrill Lynch is concerned, the long and short of it is that the management declined to offer the loan.  There was evidence that Mr Lee had repeatedly tried to persuade the management to advance the loan to Tack Fat Group. 

3.24.   On 30 July 2008, trading in the shares of Tack Fat Group on the main board of the Stock Exchange was suspended and, on 11 September 2008, provisional liquidators were appointed to Tack Fat Group as a result of Tack Fat Group filing a petition for winding‑up, supported by Bank of America.

III.  The Judge’s decision

4.  The Judge dismissed the plaintiffs’ claim for the following reasons :

1)  the plaintiffs failed to prove that either Mr Lee or Mr Lo had made the representations as alleged (the ‘representation issue’);

2)  the plaintiffs had not established the necessary relationship to give rise to a duty of care in this case (the ‘relationship issue’); and

3)  the plaintiffs’ reliance upon Mr Chuang’s representations was unreasonable (the ‘reliance issue’).  

IV.  The representation issue

1)  The reasons

5.1.   The plaintiffs’ case was confined to negligent misrepresentation and the appeal was focused on the representation issue.  As accepted by Mr Barlow SC (together with Mr Chan Pat Lun) for the plaintiff, unless he can overcome the first issue of representation, the other two issues, namely, relationship and reliance, will not arise.  The Judge did not accept the alleged representation by Mr Lee and Mr Lo for the following reasons :

‘ 84. The evidence is clear from the emails to which I have referred above that, when they met with Mr Chuang on 2 June 2008, Mr Lee and Mr Lo both knew that the loan had not been approved; on 29 May 2008 they knew that only a draft facility agreement had been sent to Mr Kwok and, on 30 May 2008, they had been advised that there would be a DMCC meeting 3 June 2008 to discuss loan approval. They may have been confident that the loan would be approved and the emails demonstrate that they were keen for the loan to be approved, to the extent of making representations after 3 June 2008 in favour of the loan, but I do not accept, on the balance of probabilities, that either Mr Lee or Mr Lo told Mr Chuang, on 2 June 2008, negligently that the loan had been approved. To state that the loan had been approved would be a statement of an existing fact and not a statement of intention. It was not part of the plaintiffs’ evidence that either Mr Lee or Mr Lo said that the loan would be approved. The loan was either approved or it was not, this is not something on which Mr Lee or Mr Lo could have been mistaken.’ (emphasis added)

5.2.   In respect of the meeting of 6 June 2008, the plaintiffs did not say there was any representation made at that meeting, rather there was a confirmation by the man with the Indian accent of what Mr Lee had allegedly said about internal processing and the defendants’ commitment to the loan.  This confirmation was used to corroborate the representation made on 2 June 2008.

5.3.   The Judge, however, rejected the contention that there was corroboration of the alleged representation :

‘ 87. … First, confirmation of the defendants’ “commitment to the loan” is different from the alleged representation that the loan had been approved, such that I cannot rule out, on the plaintiffs’ witnesses’ own evidence, that the man with the Indian accent was conveying a different message…...’

5.4.   In respect of the plaintiffs’ argument that prior to meeting Mr Lee and Mr Lo, Mr Chuang had assessed Tack Fat Group’s prospects and considered that it was too dangerous to lend and, so, there was no way the plaintiffs would have lent without Mr Lee and Mr Lo’s representation to Mr Chuang, the Judge held that :

‘ 88. ......I consider that this does not help Mr Chuang because whatever it was that he understood from meeting Mr Lee and Mr Lo, he was not told that Merrill Lynch had agreed to lend money to Tack Fat Group.’

5.5.   Further, in respect of Mr Chuang, the Judge held that ：

‘ 89. The plaintiffs’ representatives were people Mr Chuang knew and he described them as “like friends”. This event has caused problems between Mr Chuang and his friends. His demeanour was of a man who was angry and he was impatient. This is not to suggest that Mr Chuang was lying but, given his personal involvement and that his witness statement was prepared more than six years after June 2008, I consider his recollection as to what was said to him by Mr Lee and Mr Lo about the proposed loan is unreliable.’

2)  The challenges

5.6.   Mr Barrie Barlow attacked the Judge’s finding that the plaintiffs had failed to prove either Mr Lee or Mr Lo had made the representations on three grounds :

(1) The Judge ignored the inherent improbability of experienced moneylenders placing HK$70 million of their funds at risk, effectively on an unsecured basis, with a known distressed borrower – without any identified ‘exit plan’ such as Merrill Lynch’s loan having been agreed.

(2) The Judge did not properly address the direct evidence in depth :

(i) He did not address or discuss the detail of Mr Chuang’s evidence nor the corroborating contemporaneous documentary evidence and direct witness evidence, namely, Mr Chuang, Mr Chan and Mr Lam Tang (an independent witness), nor the factual elements of the clash between Mr Chuang’s evidence and that of Mr Lee and Mr Lo; or

(ii) He did not address or discuss (or accept or reject either in whole or in part) the direct evidence of Mr Chan and the independent witness, Mr Lam.

(iii) He did not accept or reject (apart from his rejection of Mr Lee’s denial of the 6 June 2008 meeting when Mr Lee called London) the evidence of Mr Lee and Mr Lo.

(3) The Judge’s rejection of the plaintiffs’ case is illogical. He seems to have illogically adopted the starkly false dichotomy that a misstatement of fact can only be either wholly inadvertent or fraudulent.  That approach disregards the obvious reality that misstatements of fact can be consciously or deliberately made without any intention to defraud, for example, (a) where a misstatement is made in the genuine belief that the state of affairs then misdescribed will inevitably later come into being; (b) where a misstatement is made by the careless use of language.  It also effectively denies the existence of the tort of negligent misstatement e.g. in the Hedley Byrne case.

3)  My view

5.7.   This is an unusual case in that the alleged representation was made by the defendants not to the plaintiffs directly but through Mr Chuang without any specific pleading on the relationship between the parties.  The challenge to the Judge’s findings on the representation issue is a challenge to the findings of fact by a trial judge. The well‑established principle is that the Court of Appeal will not interfere unless the findings by the trial judge, who had the opportunity of seeing and hearing the evidence at first hand, are plainly wrong in the sense that the conclusion was (1) which there was no evidence to support, (2) which was based on a misunderstanding of the evidence, or (3) which no reasonable judge could have reached, per Lord Neuberger in In re B (A Child) [2013] 1 WLR 1911, at paragraph 53. 

5.8.   One is to ask, why is the Judge’s finding that Mr Lee and Mr Lo did not make the alleged representation so plainly wrong in the sense as discussed in the cases?  It cannot be said that there was no evidence to support this finding.  The evidence came from Mr Lee and Mr Lo themselves.  It is within the purview of a trial judge to accept the evidence of a witness and reject that of another.  In this case the Judge rejected the evidence of Mr Chuang and Mr Chan who alleged the representation.  The stark fact of this case is that the representation allegedly made by Mr Lee and Mr Lo was that the 1^st defendant had agreed to lend $200 million to Tack Fat Group.  As summarised by the Judge the plaintiffs’ case is as follows :

‘ 76. I shall proceed to consider this case on the basis of the pleading (“… the 1^st Defendant had agreed to lend … a sum of HK$200 million … the 1^st Defendant had agreed to advance the said loan of HK$200 million …”) and the gist of the representation as put by Mr Chuang, ie, that he was told that the loan had been approved and all that remained were internal processes (Mr Lee and Mr Lo “told me that the loan has been approved … officer of the bank said we have credit approval to lend 200 million bucks … they promised to lend money … basically checks …”). Indeed, in the plaintiffs’ written closing, the same representation is adopted:

“ The Representation that the Facility Agreement was agreed was untrue. The Facility Agreement had not been agreed ….” ’

5.9.   By the time of the meeting on 2 June 2008, Mr Lee and Mr Lo knew that the loan had not been approved and required the approval of the management.  As the Judge pointed out in paragraph 84 of his judgment ‘the loan was either approved or it was not, this is not something on which Mr Lee or Mr Lo could have been mistaken.’  On this basis it is not arguable that no reasonable judge would have come to the conclusion that the alleged representation was not made. 

5.10.   It is said that the Judge ignored the inherent improbabilities of local moneylenders lending the loan to Tack Fat Group which was not in a financially healthy state unless there was this representation coming from Mr Lee and Mr Lo.  Although the Judge did not use the term ‘inherent probability’ to describe this argument, he had in substance considered this point at paragraph 88 of the judgment, but, nonetheless, he held that this would not assist the plaintiffs because he had accepted the evidence from the defendants that no such representation was made.  I can see no fault with this finding.

5.11.  No doubt Mr Lee and Mr Lo were anxious to secure the loan from Merrill Lynch to Tack Fat Group.  This can be seen from the internal correspondence prior to the meeting of 2 June 2008 and afterwards.  But this is not something that would preclude the Judge from finding against the making of the representation.  If anything, the correspondence only reinforces the Judge’s finding that either Mr Lee and Mr Lo had told Mr Chuang on 2 June 2008 that the loan had been approved or they had not.  

5.12.   Relying on the case of Oriental Daily Publisher Ltd. v. Commissioner for Television and Entertainment Licensing Authority (1997-1998) 1 HKCRAR 279 per Li CJ at 290J-291H, Mr Barlow submitted that the Judge failed to discharge his judicial duty to address, compare and analyse the conflicting direct evidence of the trial witnesses (Mr Chuang, Mr Chan and Mr Lam against Mr Lee and Mr Lo) considered in the light of any relevant documentary evidence plus the inherent probabilities and thereupon to set out his reasons for preferring the evidence of particular witnesses over that of other witnesses.

5.13.   I disagree that the Judge had decided the case without proper analysis.  As discussed earlier he had already provided reasons for not accepting the plaintiff’s case.  At a later part of his judgment when he was dealing with the relationship issue, the Judge referred again to the topic of discussion in the meeting of 2 June 2008 :

‘ 102. Mr Egan submitted that I should infer that the funding gap to which Mr Lee and Mr Lo referred was the gap between the anticipated approval by the DMCC on 3 June 2008 and the drawdown of the loan which was anticipated to be 10 June 2008, with the Citic loan falling due on 9 June 2008, ie, falling due in the gap. Hence, the meeting’s topic was third party lending to provide a bridging loan until the Merrill Lynch loan was available.

103. I am not prepared to draw the inference which Mr Egan invites me to draw because, in the context of the evidence, the funding gap referred to is the fact that the rights issue would not be in place in time to meet the Citic loan.  This is clear from the evidence discussed in paragraphs 8 and 9 above and Mr Lee’s evidence that, during the meeting on 2 June 2008, the two solutions already being considered by Group to fill the financing gap, namely the rights issue and the proposed loan, were discussed.’

5.14.   In my view it is a matter of degree in each case as to how detailed the analysis should be.  As this Court observed in Wong Man Tat v Chan Yuen Man & Ors (unreported) CACV 347/2007, 17 April 2008 at paragraph 23 :

‘ ... a judge does not need to set out each and every piece of evidence adduced by the parties and evaluate it. As Lord Hoffmann said in Biogen Inc v Medeva plc [1997] RPC 1 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360:

“The need for appellate caution in reversing the trial judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impressions which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance .... of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation”.’

5.15.   In this case despite the relative brevity of the reasons, the Judge had adequately addressed the conflict of evidence and the inherent probabilities of the parties’ case. 

5.16.  The Judge indeed had not referred to the evidence of Mr Lam but his evidence only corroborated that of Mr Chuang and Mr Chan.  If the Judge was not satisfied in the first place with the evidence of Mr Chuang, it served no useful purpose for him to refer to the evidence of Mr Lam and then reject it.

5.17.   The so-called false dichotomy referred to by Mr Barlow does not exist in this case because of the nature of the representation.  There was no grey area in the context of this case.  

5.18.  Accordingly the plaintiffs failed in their attempt to upset the Judge’s findings of fact on the representation issue.  

V.  Conclusion

6.  As the Judge’s findings on the representation issue were affirmed, it was not necessary to consider the second and third issues in this appeal.  Accordingly the appeal was dismissed.

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JUDGMENT ON COSTS

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7.  There is no dispute that the defendants are entitled to the costs of this appeal.  Mr Lam SC (together with Ms Rachel Lam)asked for a higher costs order in this case.  I am of the view that, despite the inadequacy of the appeal, costs on party and party basis is the appropriate order with certificate for two counsel.

Hon Kwan JA :

8.  I agree with the reasons for judgment and the judgment on costs of Cheung JA.