LIMING CAPITAL LTD v. CLSA LTD

HCA 2055/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2055 OF 2008

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J U D G M E N T

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INTRODUCTION

1.  This is a civil litigation between two companies in the investment business.  The plaintiff is described in the re-amended statement of claim (“statement of claim”) as:

“… carrying on business of investing and providing consulting services in the field of corporate finance” (para 1 thereof).

The individual who actually carried on the plaintiff’s business is Mr Weber, a Swiss resident (“Weber”).

2.  The defendant admits that it carries on the:

“… businesses of, inter alia, equity brokerage, investment banking … ” (para 3, re-re-amended defence and counterclaim (“defence and counterclaim”)).

3.  The plaintiff’s claim concerns the fee payable for services connected with the stock placement in mid-2007 of A-Max Holdings Ltd, a publicly listed company in Hong Kong (now Amax International Holdings Ltd) (“Amax”).  The plaintiff says that the defendant owes it part of the fee whereas the defendant says that the fee has been paid in full.

4.  Amax’s principal area of activity was investing in the gaming and entertainment industries.

BACKGROUND

5.  In mid-2007, Amax entered into an agreement with another party to lend money to finance a junket business in Macau (“the said loan”).  Proceeds from a stock placement would be used for the purpose of financing the said loan.  The placement exercise was announced by Amax in September 2007 (“the Amax placement”). The major events relevant to this action took place in late-2007.

6.  Amax looked for a placement agent, and began negotiating with the defendant (through the introduction of Weber) for such role.  The negotiations took place between Weber and a director of the defendant, Mr Wilson (“Wilson”).

7.  The negotiations resulted in a placement agreement between the defendant and one of Amax’s subsidiaries (which will be called Amax below nonetheless for convenience), as well as an agreement between the plaintiff and the defendant regarding the fee to be paid by the defendant. The agreement is the main issue in this action (the plaintiff contends for a verbal agreement while the defendant contends for a written one; see below for more details).

8.  On 10 January 2008, the defendant transferred about 151 million of the new shares to the plaintiff as payment (or, according to the plaintiff, part-payment) of the fee payable under the agreement (“the transferred shares”).

9.  By a summary judgment (by consent) dated 4 November 2013 the defendant consented to judgment to be entered in the sum of about $3 million.  The defendant says that this was the outstanding balance of the payment to which the plaintiff was entitled (the earlier payment having previously been wrongly calculated).

ISSUES IN THIS ACTION

10.  The agreement heavily relied on by the defendant, as the basis of its defence and counterclaim, is a written agreement dated 17 October 2007 between the parties herein.  The fee payable to the plaintiff thereunder was in short “… 40% of [the defendant’s placing commission and brokerage less OMM fees]” (“the Oct 2007 written agreement”).

11.  On the other hand, the plaintiff asserts that there was a prior verbal agreement, reached between Weber and Wilson, on about 8 October 2007, whereby the defendant was to pay to the plaintiff a fee calculated at 50% of the defendant’s net fee instead (“the Oct 2007 verbal agreement”).

12.  The defendant denies the Oct 2007 verbal agreement whereas the plaintiff contends that the Oct 2007 written agreement:

(a) lacked consideration (because it was executed after the Oct 2007 verbal agreement has already been made);

(b) was in any event unenforceable because it was procured by economic duress which the defendant exerted on the plaintiff.

13.  Further, the plaintiff claims that the time for delivering the transferred shares should be earlier than 10 January 2008 (the date when the transferred shares were actually delivered).  It claims in effect the loss suffered as a result of stock price drop between those dates and the actual transfer.

14.  Thus, on the quantum of its claim, the plaintiff’s case is that:

(1) the number of Amax shares which should be transferred to the plaintiff as payment was wrongly calculated, because the defendant has delayed in delivering the transferred shares;

(2) further, the sum awarded by the summary judgment was calculated on the basis the plaintiff was only entitled to 40% of the defendant’s net fee. If the plaintiff’s quantum claim also succeeds, the award should also be “readjusted” taking into account that erroneous earlier calculation.

15.  The defendant also counterclaims that the plaintiff has breached a warranty given in the Oct 2007 written agreement; namely, the plaintiff cannot receive any sum other than that payable under the Oct 2007 written agreement (“the non-receipt warranty”).

WITNESSES’ CREDIBILITY AND FINDINGS OF FACT

16.  The plaintiff himself testified at trial.  Wilson has left the defendant’s employment and was not called to testify (he used to be Director of Investment Bank, Head of Equity Syndicate).  Instead, the defendant’s trial witnesses were:

(a) Mr David Tam, a Director of Investment Banking employed by an associated company of the defendant (“Tam”), was an Associate Director before April 2008.  Tam was legally trained and used to work closely with Wilson;

(b) Mr Taylor, Head of Equity Capital Market employed by an associated company of the defendant (“Taylor”), and the direct supervisor of Wilson before Wilson left the defendant.

17.  The approach adopted by the courts for assessing credibility has been set out in my earlier decisions.  The relevant passages are repeated below to facilitate comprehension:

“The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’.

(See, for example, the decisions in Chiu Chi Tong v. Lau Chong Sai & Another, HCA 765/2002 (para 28), Yu Ming Investment Ltd. v. Peng Ru Chuan, Richard, HCA 814/2002 (para. 13) and 林傳龍對謝巧玩 HCA 1443/2011 (19 December 2014))”

(Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA 3523/2002 (13 August 2005), para 12).  This approach appears to be similar to the court’s observations in Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439, para 135.  The above will be adopted in this action.

(a)   The Oct 2007 verbal agreement

18.  The first important matter requiring an assessment of credibility (especially that of Weber (because Wilson has not testified)) concerns the Oct 2007 verbal agreement.

19.  The defendant, naturally, contends that Weber’s testimony about this is incredible and should not be accepted:

(1) the Amax placement, and the engagement of a placement agent, was admittedly a complex and sustained process, and one involving detailed documentation.  It is unlikely for such a deal to be agreed verbally;

(2) there is no contemporaneous document which evidences the Oct 2007 verbal agreement;

(3) instead, the contemporaneous documents indicate the Oct 2007 verbal agreement did not exist;

(4) Weber’s affidavit (sworn on 22 September 2008) referred to, and relied on, the Oct 2007 written agreement;

(5) the plaintiff has not yet been identified as a contracting party at the time of the Oct 2007 verbal agreement (and was then unknown to the defendant).  The identity of a contracting party is essential to the formation of a binding contract;

(6) Weber should still be onboard a flight from California to Hong Kong at the time of the Oct 2007 verbal agreement.

20.  Despite the defendant’s skillful cross-examination, and forensic criticisms of Weber’s testimony (see above), I do not find any of the matters summarized above to justify an adverse finding to be made against Weber’s testimony relevant to this aspect.

21.  As regards para 19(1) above, it is true the Amax placement, and the defendant’s role as an agent, was a sustained process.  But that does not make it inherently unlikely for an agreement about an important term such as the amount of agent fee payable (and, for present purpose, how the agent fee was to be “split” between the plaintiff and the defendant) to be reached verbally.  In fact, it is common experience, in many aspects of commerce, for substantial transactions to be agreed to verbally in the beginning, and then reduced into written form subsequently (agreeing to the sale price of valuable real properties is an obvious example).  It is of course also common experience that detailed terms (such as jurisdiction clauses, non-competition clauses and the like) are agreed to in writing, but that is something far removed from verbally agreeing how to “split” the agent fee.

22.  As regards para 19(2) to (5) above, the defendant specifically mentions:

(a) the initial drafts of the Oct 2007 written agreement (where there was no reference to any verbal agreement);

(b) the plaintiff was first named as a contracting party only several days after the Oct 2007 verbal agreement (in an email dated 12 October 2007);

(c) Weber did not say there was an Oct 2007 verbal agreement in his email to Wilson on 10 October 2007 (this email was only days after the Oct 2007 verbal agreement);

(d) Weber never asserted during the negotiation (after 8 October 2007) that the non-receipt warranty has never been made part of the Oct 2007 verbal agreement;

(e) Weber never challenged the defendant’s indications (between 8 and 17 October 2007) that internal approval of the fee “split” was needed.  He would have done so if there had already been the Oct 2007 verbal agreement;

(f) Weber mentioned the Oct 2007 verbal agreement for the first time on 17 October 2007 (about 10 days or so afterwards). Further, in (i) emails dated 8 November and 21 December 2007, and (ii) an affidavit dated 22 September 2008, Weber placed reliance on the Oct 2007 written agreement instead;

(g) in an email dated 7 October 2007, Weber effectively said he would be back to Hong Kong either on 8 or 9 October 2007.

23.  It is true the initial drafts of the Oct 2007 written agreement did not mention any verbal agreement (para 22(a) above).  But the fee “split” percentage stated therein was 50%, which is consistent with the plaintiff’s case.  Bearing this in mind, the lack of a reference to a verbal agreement is not necessarily adverse to the plaintiff’s case.  In fact, one may reasonably argue the initial drafts could be treated as written evidence of an essential term of the Oct 2007 verbal agreement.

24.  In this connection, the email correspondence between Weber and Wilson from about 27 September to 5 October 2007 are consistent with Weber seeking a 50% “split” fee agreement.  Wilson, on the other hand, did not counter-propose a less favourable “split” (such as 40% for Weber).

25.  Whether the plaintiff’s name was mentioned at the initial stage of discussion concerning the agent fee agreement is of no moment (para 19(5) and 22(b) above).  It is trite law:

“An agreement is not incomplete where it provides machinery for resolving matters originally left open” (Chitty on Contracts (2015) 32^nd Ed, para 2-138).

An example of the above proposition is where one party has not been named in the contract, but there is an expressly agreed manner in which that party can be identified (using phrases as “to the direction of” or “as directed by” some known third party, such as one of the negotiating parties of the contract).  See, for example, Fong Yee Lan v Yiu Yau Ping, CACV 128/1991 (28 January 1992).

26.  In this action, the plaintiff’s case is that it was a term of the Oct 2007 verbal agreement a corporate vehicle would be nominated by Weber to enter into the agent fee agreement.  That would amount to a stipulation of the mechanism for identifying a contracting party.

27.  The 10 October 2007 email (para 22(c) above) does not cast doubt on the plaintiff’s case, nor does it take the defendant’s case further.  It was in gist a progress-reporting email (“We have reached agreement with h&s.  6% of the placement to be sent their way …” (“h&s” was the earlier placement agent being replaced by the defendant)).  There was a mere casual query as to when the agent fee agreement could be signed (“separately, when would we sign the agreement …?”).

28.  Likewise, that Weber did not object to the non-receipt warranty in the negotiation (para 22(d) above) is neither here nor there.  It is not the plaintiff’s case either the plaintiff or Weber would be entitled to receive additional payment from Amax, or its subsidiaries or associated companies (the plaintiff’s case is rather that it has not done so).

29.  Wilson mentioned “drafts … being reviewed internally” (12 October 2007), “kick off our [that is, the parties’] signing authority process” (12 October 2007) and “trying to get DRC approval to sign it” (17 October 2007) (para 22(e) above).  From an outsider’s point of view, these would look like Wilson’s report of what needed to be done within the defendant itself.  They were not remarks which necessarily should require Weber’s comment.

30.  As regards para 22(f) above:

(1) although there was no express reference to the Oct 2007 verbal agreement in the 8 November 2007 email (para 22(f)(i) above), Weber wrote to Taylor “… during our meeting in your offices on 29 oct we discussed … cut my share in our consulting agreement to 40% from the agreed 50% just 30 minutes before signature … ” (emphasis supplied);

(2) it is also true the 21 December 2007 emails (para 22(f)(i) above) did not mention the Oct 2007 verbal agreement either.  But the context in which it was written has to be taken into account.  The line of correspondence from Weber in early December 2007 was still about the earlier agreed 50% fee “split” and the unilateral change to 40% by the defendant.  But by about 14 December 2007, the topic has changed to discussing the terms relating to the transfer of shares as part-payment of the plaintiff’s fee;

(3) Weber’s affidavit dated 22 September 2008 (para 19(4) and 22(f)(ii) above) was filed in an action brought by the plaintiff against a third party (related to the Amax placement but unrelated to the defendant) (HCA 1818/2008). The Oct 2007 written agreement was mentioned by way of background only.

31.  As regards para 19(6) and 22(g) above, whether Weber was already in Hong Kong on 8 October 2007 (the date of the Oct 2007 verbal agreement) requires some analysis of the related detailed facts.

32.  The defendant considers it to be unlike for Weber to be in Hong Kong on that day because of the following.  In an email dated 7 October 2007 (a Sunday) from Weber to Wilson, Weber indicated in effect he should be back to Hong Kong on Monday night (8 October 2007) or Tuesday (9 October 2007).  This email is consistent with:

(a)    Weber’s testimony that he was in California on 7 October 2007 and planned to fly back to Hong Kong.  Because Hong Kong is 16 hours ahead of California, and the flight back would take about 16 hours, Weber should probably arrive two days after his flight departed (that is, on 9 October 2007);

(b)    the lack of email correspondence from Weber throughout 8 October 2007.

33.  The plaintiff’s reply to the above criticisms is essentially this.  The date and time shown in the 7 October 2007 email may be Swiss time or California time.  Irrespective of which of the two places, and even bearing in mind the time difference between these places and Hong Kong, and the duration of the flight to Hong Kong (para 32(a) above), Weber could well have returned to Hong Kong by evening of Monday 8 October 2007 (at around 6pm to 8pm) (for example, a flight from California departing on the morning of 7 October 2007, and a flight from Switzerland on the evening of 7 October 2007).  There is therefore nothing inherently unbelievable in Weber’s testimony about the Oct 2007 verbal agreement.

34.  By reason of the conclusion reached in para 20 above, I consider that there is sufficient evidential basis to find the parties have made the Oct 2007 verbal agreement as regards the agent fee “split” ratio.

(b)   The Oct 2007 written agreement

35.  The issues raised by the defendant related to this aspect are:

(1) the Oct 2007 verbal agreement has been superseded by the Oct 2007 written agreement;

(2) the Oct 2007 written agreement is valid and enforceable.

36.  Both of the above would have to be considered in the light of the plaintiff’s case regarding economic duress.  This part of the plaintiff’s case is as follows.

37.  By September 2007, Amax has already engaged a placement agent.  Despite this, Weber recommended the defendant to Amax for the Amax placement.  Negotiations concerning the Amax placement, and the defendant’s role as a placement agent, was then carried out among Amax, Weber and the defendant during September and October.  At the same time, Weber and Wilson (who acted for the defendant) were also discussing the agent fee “split” for the Amax placement.

38.  Weber testified Wilson called him by telephone in Hong Kong on about 8 October 2007.  Wilson informed him the defendant had given final approval for:

(a) Weber to be appointed as a consultant to the defendant;

(b) the agent fee to be distributed in equal halves between them.

This was the evidential basis for the Oct 2007 verbal agreement.

39.  After the above telephone conversation, Weber performed various work as a consultant to assist the defendant to become the placement agent for the Amax placement, such as arranging the defendant to replace the earlier placement agent (especially the terms for the earlier placement agent’s withdrawal), arranging for compliance with the relevant regulations, arranging for a better brokerage fee to be paid to the defendant, and ceasing negotiations with other potential placement agents.

40.  The relationship between Weber and Wilson apparently deteriorated in mid-October 2007 as a result of Wilson objecting to Weber obtaining additional payment (called “success fee”) from Amax.

41.  17 October 2007 was the date scheduled for the signing of several documents:

(1) the placement agreement (between Amax and the defendant);

(2) the termination agreement (between Amax and the earlier placement agent);

(3) the Oct 2007 written agreement.

42.  It may be imagined (and Weber’s testimony is consistent with) there being frequent contacts among the parties concerned (that is, Amax, Weber and the defendant) during the period leading up to the execution of the above documents on 17 October 2007.

43.  Weber testified that up until the morning of 17 October 2007, and despite the above contacts, and amendments to various terms, the agent fee “split” remained at 50% and there was no indication of any need for change.  About half an hour before Weber was to meet Wilson, Wilson telephoned him and said a committee meeting had just decided to reduce the “split” to 40%.

44.  Weber and Wilson met shortly later at somewhere near the place for executing the above documents.  Weber objected to the “split” change, to which Wilson said if Weber did not agree, the defendant “would simply walk away” from the Amax placement.  Weber felt that he had no choice but to sign the Oct 2007 written agreement:

(a) a great deal of Weber’s resources had been committed to the Amax placement;

(b) there was practically no way to find another placement agent;

(c) the Amax placement has become known in the market and the defendant’s involvement as the placement agent has been disclosed to potential investors;

(d) the Amax placement was of great importance to the Macau casino industry (the Macau government, the casinos and the junket business operators).  Weber could easily be made the target at fault should the placement fail;

(e) the failure of the Amax placement in such circumstances would effectively ruin Amax’s credibility and its ability to raise capital in the financial market.

45.  Weber said he signed the Oct 2007 written agreement under protest and felt being forced into doing so.

46.  For reasons similar to those set out in para 19 to 33 above, I accept the above factual account to be truthful and reliable.

47.  There seems to be a divergence in legal thinking as to whether duress results from:

(1) the victim’s will having been “overborne” and so was incapable of a free choice, or of acting voluntarily; or

(2) the victim’s will having been “deflected” because he was left with a choice between evils (even though he still had a choice).

Chitty, para 8-003 to 8-009.  The modern legal thinking tends to lean towards duress constituted by a “deflection” of the victim’s will.

48.  Looked at in this manner, two other questions require consideration:

(a) whether the pressure or threat exerted is legitimate;

(b) the effect of the pressure or threat on the victim.

Thus, it was said:

“The legitimacy of the pressure must be examined from two aspects: first, the nature of the pressure and secondly, the nature of the demand which the pressure is applied to support … Generally speaking, the threat of any form of unlawful action will be regarded as illegitimate. On the other hand, that fact that the threat is lawful does not necessarily make the pressure legitimate.”

R v Her Majesty’s Attorney-General for England and Wales [2003] UKPC 22, para 16 quoted in Chitty, para 8-008.  See also Adam Opel GmbH v Mitras Automotive (UK) Ltd [2007] EWHC 3252, para 25 and 26.

49.  In this action, the legitimacy of Wilson’s pressure or threat should be looked at in this way:

(1) despite Wilson’s threat to such effect (para 44 above), there is no contemporaneous record from the defendant stating:

(a) the defendant had a change of heart regarding the agent fee “split”;

(b) the defendant would cease to be the placement agent if the “split” was not reduced by Weber;

(2) no valid reason has been given as to why Wilson mentioned the reduction only at such late stage.

Such being the case, there was no legitimate basis to support Wilson’s pressure or threat, which was exerted at a critical time, and which involved a menacing consequence.

50.  In such light, it can be inferred that the pressure or threat was intended to put Weber under duress.  And, as things turned out, it achieved what was intended.

51.  The defendant contends that only Amax would suffer if the Amax placement fell through.  This contention ignores the plaintiff’s loss by way of (i) an immediate loss of a portion of the agent fee, as well as the loss of credibility in the eyes of Amax, and (ii) the longer term loss of the plaintiff’s reputation as a deal maker in the refinancing business.  To put the consequence as a mere delay of the Amax placement would be to over-simplify and/or understate the situation.

52.  The defendant’s second argument is that the plaintiff (through Weber) has had ample opportunity on 17 October 2007 to consider the defendant’s 40% “split” proposal.  This has no merit.  The plaintiff’s position in the Amax placement has to be borne in mind; it was not one of the principal parties (as Amax was).  Because of its role in the Amax placement (as one of the consultants), any hiccup in the exercise would reflect extremely badly on the plaintiff’s reliability and credibility (para 44(d) and 51 above).

53.  The defendant’s third argument is that it was legally entitled to refuse to enter into the Oct 2007 written agreement, but this argument conveniently ignores the fact that it has earlier entered into the Oct 2007 verbal agreement, as well as Weber/the plaintiff having carried on with the preparation of the Amax placement based on this fact (para 39 above).  The defendant’s threatened refusal to take part further, except on the reduced agent fee “split” it dictated, would at least amount to unconscionable conduct.

54.  The defendant’s fourth argument is the lack of instant protest by Weber or the plaintiff.  But Weber’s testimony is to the contrary.  What the defendant in fact means is probably that there is no independent evidence (either documentary or from third parties) to support Weber’s assertion.  This has been taken into account when assessing the credibility of Weber, but I do not find his credibility to be significantly affected by this having also considered the whole of the evidence before the court.

55.  Finally, the defendant argues that the plaintiff has affirmed the Oct 2007 written agreement by commencing this action after the lapse of more than a year.  I do not find a mere lapse of time to commence legal action is an act of affirmation.

56.  There are certain parts of Taylor’s testimony which assert, for example, that the defendant’s internal meeting minutes were incomplete and/or inaccurate, and the reasons for the defendant reducing the agent fee “split” payable to the plaintiff.  Taylor’s testimony should not be given much weight: insofar as it is not based on, or supported by, contemporaneous records, it concerns events which took place long ago, and it is unlikely the witness can have a clear and/or accurate memory; insofar as it is inconsistent with contemporaneous records, for the same reason the records should prevail.

57.  Having reached the above conclusion, it follows that the Oct 2007 written agreement (insofar as it purports to reduce the plaintiff’s agent fee “split” from 50% to 40%) is of no legal effect; such being the case, it also follows that the Oct 2007 written agreement cannot supersede the Oct 2007 verbal agreement.

58.  The plaintiff also argues that, irrespective of whether there was duress, the Oct 2007 written agreement was not binding for want of consideration.  Although it is strictly unnecessary to consider this argument, I shall do so for completeness.

59.  In short, I do not agree with this argument. Compared to the Oct 2007 verbal agreement, the terms of the Oct 2007 written agreement were more in number, in kind and in complexity.  The defendant correctly relies on clauses such as the confidentiality provisions as an example of new obligations having been agreed upon.  These additional obligations, especially those on the defendant’s part, would constitute the necessary consideration in support.

(c)   Non-receipt warranty

60.  The non-receipt warranty was a term of the Oct 2007 written agreement:

“[The plaintiff and Weber] (the ‘Covenantors’) jointly and severally represent, warrant and undertake to [the defendant] that … (ii) save and except the fees and expenses payable under this Agreement, none of the Covenantors … has received or will receive, directly or indirectly, any fees or payments from [Amax], any of its subsidiaries or associated companies (including Greek Mythology (Macau) Entertainment Group Corporation Limited), Ace High Group Limited … in connection with (i) the Placing … ”.

61.  The defendant complains that:

(a) one Ms Yeung was Weber’s business partner;

(b) Ms Yeung reached an agreement with a Mr Ng in June 2007 for Mr Ng to pay a sum to Ms Yeung if the Amax placement were effected;

(c) Mr Ng was the true owner of Amax.

Even though Ms Yeung refused to pay the plaintiff’s share (despite an agreement to do so) after she obtained payment from Mr Ng, the plaintiff was able to obtain judgment against Ms Yeung to recover the sum.

62.  This dispute bores down to whether the non-receipt warranty is wide enough to cover payment made by an individual who is said to be in control of Amax.  To support its complaint, the defendant argues that the purpose underlying the non-receipt warranty was to ensure that the capital raised by the Amax placement would be used for investment, and not payment to other parties (such as the plaintiff). This would preserve the attractiveness of the Amax placement.

63.  I agree with the plaintiff that the language chosen by the drafter of the Oct 2007 written agreement does not expressly cover individuals connected to Amax; this, coupled with the background leading to the Oct 2007 written agreement, shows that there was no intention to include such individuals. 

64.  Here it is important to bear in mind Mr Ng (and his relationship with Amax) was already known to the defendant even before the Oct 2007 written agreement was finalized. Further, the possibility of payment from Mr Ng to Weber was a matter discussed among the defendant’s directors (in a meeting held on 17 October 2007).

65.  In coming to this conclusion, I have not taken into account the defendant’s email of 21 December 2007 where Tam asked Wilson:

“Can we find out whether he has actually received any other fees from anyone so that we fish for some breaches on his side?”

DEFENDANT’S PAYMENT OBLIGATIONS

66.  The discussion under this heading proceeds on the basis the agreement between the parties was for the agent fee to be “split” between them equally.

67.  Another term of the Oct 2007 written agreement provides:

“In consideration of the provision of the Services, [the defendant] agree to pay [the plaintiff] a fee (the ‘Fee’) as calculated below within 14 business days from the completion of the Placing … ”.

(“the fee payment term”)

But the fee payment term has been changed; the plaintiff would be paid by way of the transferred shares instead of a monetary sum.  At issue is what that change should involve.

68.  This part of the plaintiff’s case has been so put in its closing submissions:

“This issue arises out of … a telephone call between [Wilson] and [Weber] … on or about 24 November 2007.

… [Wilson] told [Weber] that [the defendant] was ‘taking its fees’ in A-Max shares and that [the plaintiff] would also be ‘paid in shares’, to which [Weber] reluctantly agreed” (para 21 and 22 thereof).

(“the share transfer variation”)

69.  In short, the plaintiff argues in its closing submissions the fee payment term has been superseded by the share transfer variation so that the defendant was obliged to:

“… transfer [the plaintiff’s] percentage of the A-Max shares to [the plaintiff] immediately on acquisition (or as early as possible on that date) … ” (para 36 thereof).

70.  The reasons put forth in support of the last-mentioned argument are:

(1) the fee payment term was not made with payment in kind (that is, share transfer) in mind;

(2) it was not usual for the defendant (or the plaintiff) to receive placement agent fee by share transfer instead of monetary payment;

(3) the fee payment term, if applicable to a share transfer within a 14-business day period, would mean the recipient (that is, the plaintiff) having to bear the risk of share price fluctuation (because there could effectively be a “lock up” of the shares) during that period.

71.  In determining this issue, it seems necessary to first examine the issue of what the parties intended should be the share price under the share transfer variation.  This aspect has not been expressly discussed (or agreed upon) between the parties at the time.

72.  Both parties must have vast experience in and good knowledge of the stock market (and the volatility of share price) because they have been operators in finance and investment for quite some time before November 2007.  For this reason, it is unlikely for them to agree to a share price which would only be known in future; that would be an unnecessary risk (arising out of share price fluctuations) for both sides. 

73.  On the other hand, the background leading to the share transfer variation was the Amax placement.  At the time of the share transfer variation (24 November 2007), a share price was already made known; namely, the share placement price (as stated above, the defendant has all along used that as the basis of calculation).

74.  With the above background in mind, it can be inferred that the parties must have intended that the share transfer variation would imply a share transfer which was to be calculated based on the share placement price.

75.  Having dealt with the share price under the share transfer variation, the next issue is when the obligation on the defendant’s part to transfer the shares should arise.

76.  The plaintiff’s stance before this action was commenced, as reflected by the correspondence from about mid- to late-December 2007, appears to be the same as the defendant’s.  Both parties communicated seemingly on the basis the 14-business day period stipulated in the fee payment term was still applicable.

77.  However, the plaintiff did not agree with the defendant as regards the number of shares to be transferred at the end of that stipulated period (see, for example, Weber’s emails of 21 December 2007, 00:52, 21 December 2007, 16:55, 22 December 2007, 7:33pm, 3 January 2008, 07:44 and 3 January 2008, 18:31).

78.  The plaintiff’s earlier stance (para 76 and 77 above) is incomprehensible.  If the share transfer variation should mean simply that (i) the share price was the placement price, and (ii) the latest delivery date was 14-business days after placement, the plaintiff should not be complaining about the number of transferred shares even if they were delivered later.  Whatever the delivery date might have been, the number of transferred shares should remain exactly the same.

79.  In this connection, the plaintiff submits:

“This Court will therefore disregard, as a matter of law, how the parties later argued their respective liabilities and entitlements as to the date for payment and the number of shares to be paid over … ” (para 26, plaintiff’s closing submissions).

In view of the comments of the learned authors in Chitty, para 13-129 (and the authorities cited therein in support), I accept as a correct statement of the law that subsequent acts are inadmissible to interpret a written agreement.  With this in mind, the plaintiff’s earlier stance (para 76 and 77 above) should not be taken into account.

80.  For the reasons put forth by the plaintiff (summarized in para 70 above), and when those reasons are considered together with the conclusion that the share transfer was to be based on the placement price (para 74 above), I agree with the plaintiff that the defendant’s obligation to transfer the shares to the plaintiff should arise immediately when the defendant was in a position to transfer them (rather than any later date, be it 7 January or 10 January 2008).  This appears to have happened on 13 December 2007.  To conclude otherwise would effectively mean that the plaintiff was willing to accept the full risk of the price fluctuations between the placement date and the date when the transferred shares were actually delivered.  I do not see any basis to justify such a construction of the share transfer variation.

LOSS AND DAMAGES

81.  Because the defendant has not transferred the Amax shares on time (the quantity of which were calculated based on the placement price), and has delayed in delivering to the plaintiff a quantity of shares only on 10 January 2008 (which quantity was not agreed to by the plaintiff after mid-December 2007), it is necessary to examine whether loss has been caused to the plaintiff, and if so, what the quantum of loss should be.

82.  It is undisputed the plaintiff only sold the transferred shares in July 2008, about 6 months after their delivery. Further, it seems Weber was quite optimistic about the Amax share price in mid-December 2007.  In his email of 12 December 2007, Weber wrote:

“… even though I am confident the price will rise either now or in the medium term I don’t want to take the additional risk …

… I would like to receive my shares into my account as quickly as possible … and decide when to sell the shares myself if at all”.

83.  Based on the above, the defendant contends that, in any event, no loss has been caused to the plaintiff.

84.  I do not agree with the above contention.  It is a contention premised on an assumption that, even if the transferred shares had been delivered to the plaintiff as agreed (that is, upon the defendant being able to effect a transfer), the plaintiff would still have waited until much later (say, July 2008) before selling the transferred shares.  Because stock price fluctuations, which are well known to stock traders, would result in vastly different trading strategies being adopted by stock traders, that assumption has no valid basis.  The evidence shows that the price of the transferred shares (when delivered) was lower than the placement price.  It is far from certain whether the plaintiff would still have decided to postpone the sale if the transferred shares had in fact been delivered on, say, 13 December 2007.

85.  For the above reason, I consider that no weight should be given to the plaintiff’s decision to sell the transferred shares in July 2008 (rather than much earlier (for example, on or shortly after 10 January 2008)).

86.  The defendant also complains that the delay in delivering the transferred shares was caused by the plaintiff.  But that was only because the parties disagreed over the number of shares to be transferred (para 77 above).  In view of the conclusion reached in para 80 above, the plaintiff was entitled to refuse to accept the number of shares offered by the defendant.

87.  Accordingly, the loss caused to the plaintiff by the delay is in effect the price difference between the value of the transferred shares at placement price and the proceeds obtainable from the sale of those shares on 10 January 2008. 

CONCLUSION

88.  To conclude:

(a) judgment is entered in the plaintiff’s favour in a sum equal to the plaintiff’s fee under the Oct 2007 verbal agreement less:

(1) the sum which the plaintiff would have received from the sale of transferred shares on 10 January 2008.  However, I agree with the defendant that it is more appropriate to use the closing price on 10 January 2008;

(2) the sum which the plaintiff has received pursuant to the summary judgment of 4 November 2013 ($3,490,157);

(b) the counterclaim is dismissed;

(c) interest on the above judgment sum (the parties are to attempt to agree on the period and rate of pre-judgment interest within 21 days, failing which, they are at liberty to lodge with court and serve written submissions thereon (without the need for further hearing unless otherwise directed).  Post-judgment interest shall be at judgment rate).

The parties are to attempt to agree to the judgment sum referred to in sub-para (a)(1) above within 21 days, failing which, they are at liberty to lodge their respective draft judgment sum for approval by the court.

OTHER MATTERS

89.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the judgment and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

COSTS ORDER NISI

90.  There is no apparent reason to depart from the usual rule that costs should follow the event.  There will accordingly be a costs order nisi pursuant to Ord 42 r 5B(6) that the costs of this action (claim and counterclaim) be paid by the defendant to the plaintiff to be taxed if not agreed.