YICKO GA NETWORK SECURITIES LTD v. ORIENTAL PATRON ASIA LTD

CACV 7/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 7 OF 2003

(ON APPEAL FROM HCA NO. 9848 OF 2000)

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J U D G M E N T

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Hon Le Pichon JA:

1. This is an appeal from the judgment dated 2 December 2002 of Deputy High Court Judge Carlson dismissing the plaintiff's claim. The short issue of fact before the judge below was whether the defendant had agreed orally to purchase from the plaintiff 3 million shares in i-Wood Limited ("the company") a company which was being listed on the stock exchange of Hong Kong through an Initial Public Offering ("IPO"). The defendant was the sponsor and lead underwriter for that flotation.

Background

2. By a Letter of Confirmation dated 15 September 2000, the plaintiff, through its dealing director Alice Yu, accepted the defendant's invitation to participate in the IPO as a placing underwriter, with an underwriting commitment of 3,750,000 placing shares. It entered into an Underwriting and Placing Agreement as well as an Agreement Between Underwriters to that effect on 9 October 2000 (collectively, "the Agreements"). Dealings in the company's shares on the Stock Exchange were to commence on 23 October 2000. The plaintiff claimed that on 12 October 2000, acting through Mike Poon ("Mr Poon"), it reached the oral agreement referred to above with the defendant acting through Rabo Leung ("Mr Leung") which was confirmed by subsequent telephone conversations between Mr Poon and Mr Leung on 14 and 17 October.

3. As the judge explained in his judgment, IPOs are underwritten by public offer and placement underwriters. A public offer underwriter is able to allot shares to members of the general public as well as to institutional investors. A placing underwriter, on the other hand, is required to "place" his allocation of shares with his clients, who, essentially, would be a different type of investor, being private investors who trade shares on a regular basis or who might be expected to take a larger allocation of shares than an investor applying through the public offer allocation. Normally, they would be institutional clients such as pension funds, mutual funds or other companies interested in acquiring a substantial tranche of the issue for their investment portfolio. The placing underwriter stands to earn a more substantial commission (i.e. an additional 1%) than a public offer underwriter.

4. It is to be noted that the IPO in question was not a first line issue. The judge below found that from the outset the defendant was not "bullish" about this issue which was the smallest allowable, in terms of value and size, under the listing rules. According to the Agreements as well as the prospectus, the issue involved 62,500,000 shares. 48,750,000 shares or 22% of the issue were underwritten by a total of 5 public offer underwriters and the balance of 13,750,000 shares or 68% of the issue were spread among 11 placing underwriters.

5. So far as the issue under consideration is concerned, whilst both the defendant and the plaintiff were placing underwriters for the issue, the defendant's commitment to 750,000 shares only for placing underwriting is to be contrasted with the plaintiff's commitment to 3,750,000 shares. Although the defendant was committed to another 1,250,000 shares as a public offer underwriter, its total commitment in respect of this issue, totaling 2 million shares was still significantly less than the commitment of the plaintiff.

6. It would be convenient to mention a few key dates here. The closing date for public subscriptions was 13 October: that was the cut off date for applications for the shares from the public. A placing underwriter was able to continue to place the shares up until the first day of trading which was 23 October 2000. As the judge noted, switching unwanted placing shares to public offer shares is not possible unless there has been a very substantial over-subscription of shares. In the case of the company, the over-subscription was not significant: it was less than 4% of the entire issue and, as the judge found, it had no effect on the price of the shares on the first day of trading. In fact, on the first day, the shares were trading at a price below the offer price of 80 cents per share.

The judgment below

7. The judge described how the plaintiff came to be involved in the IPO. Mr Joseph Chan ("Mr Chan") and Mr Leung were two of four principals of the defendant. Whilst Mr Chan knew Mr Poon and had made the initial contact in early September 2000, it was Mr Leung who was in charge of the IPO and dealt with the defendant subsequent to the initial contact. Mr Poon left for the United States having made the arrangements with the defendant. In his absence, the plaintiff's dealing director of 10 years' standing, Miss Alice Yu, was briefed on the matter and was to be responsible for the arrangements in Mr Poon's absence. Mr Poon maintained that he had never agreed to become a placing underwriter: he was looking to be an "IPO underwriter but not a placing underwriter". He returned on 9 October but it was not until 12 October that he allegedly discovered the "mistake". As Miss Yu was never called to give evidence, the judge felt unable to come to a safe conclusion as to Mr Poon's version of events and made no finding as such that there had been a mistake or how it had come about. As the judge rightly pointed out, what was absolutely certain was the fact that the plaintiff had committed itself to being a placing underwriter.

8. The judge noted that even Mr Poon acknowledged that the mistake was the plaintiff's. At that time, i.e. 12 October, the plaintiff had only divested itself of some 600,000 to 800,000 shares. In round terms, it had 3 million shares still to offload. As the judge put it, the question he had to decide was "whether Mr Leung, having been approached by Mr Poon once he had discovered Miss Yu's error, agreed to unscramble their arrangements as reflected in the underwriting agreements and to purchase the remaining 3,000,000 i-Wood shares which the plaintiff had not divested itself of."

9. The plaintiff's case was that in the late afternoon of 12 October, Mr Poon spoke to Mr Chan on the telephone and as they started to speak, Mr Leung happened to come past Mr Chan's office and he was invited in and Mr Chan told Mr Poon to speak to Mr Leung directly. The purpose of the call, as the judge found, was that Mr Poon, having discovered a 'mistake' as to the nature of the plaintiff's underwriting commitment, was doing his level best to unscramble what had occurred and tried to persuade the defendant to relieve him of his shares. Apart from Mr Leung and Mr Chan, a Mr Harold Kwan ("Mr. Kwan") who was a broker from another firm who had come to see Mr Chan on an unrelated matter was also in the room. The speaker phone had been turned on. At paragraph 20 of his judgment, the judge summarised the evidence of Mr Poon relating to this speaker phone conversation:

"As to this conversation, Mr Poon's evidence was that Mr Leung had told him that many people wanted the shares and that if he did not want them then he (Mr Leung) would take them. Mr Poon told him that he did not want the risk and Mr Leung said that if the plaintiff did not want them he could sell them to the defendant at $0.80 per share on the first day of trading - 3,000,000 shares. Mr Poon told Mr Leung that he would do so and that he would not mind paying for the handling charges, commission and transaction levy. Presumably, he was prepared to pay those charges as a small price to release himself from the risk of holding unwanted, and as he saw it, risky shares. He says that he then repeated himself and said that if there was a gain that the gain would go to the defendant, adding 'I hope you make money, I don't need it'. When that was clear in his mind, he then went on to discuss the allocation of shares in the public offer section. He asked Mr Leung to discuss this with Miss Yiu to see what could be done with those shares. He indicated that they had disposed of 800,000 shares under this scheme. He was certain that 600,000 of those shares would be taken up by the subscribers who had applied for them, leaving in round terms 3,000,000 shares which Mr Leung said he would buy off him on the first day at $0.80 each. So that is how, on his case, the agreement was arrived at."

10. On or before the closing date for allocations, the custodian bank would allow public offer applications to be retrieved and allocated to the "placing" allocation if dealt with by the lead underwriter. It was agreed between Mr Poon and Mr Leung that this would be done the following day i.e. 13 October. 600,000 odd shares were retrieved in this way and after allowing for the 3 million shares said to be the subject of the alleged agreement, there remained a balance of some 94,000 shares which the plaintiff had to take into its House account under the placing agreement.

11. It was Mr Poon's evidence that shortly after that conversation, Mr Chan rang him to confirm the agreement. It was alleged that when Mr Poon asked why the defendant did not wish to keep the shares as House shares, he was told that this was because the defendant was having cashflow problems and could not afford to hold so many shares.

12. On 17 October, the plaintiff paid for its entire subscription of 3,750,000 shares pursuant to the terms of the issue. Mr Poon wrote out a cheque and then tried to speak to Mr Chan who was not available. He then spoke to Mr Leung. The English translation of the transcript of that conversation was set out in full by the judge at paragraph 23. The relevant part reads:

"...

Mike Poon: Is Rabo Leung here?

Madam: Rabo is here, looking for him? Hold on ....

Rabo Leung: Hello

Mike Poon: Rabo, this is Mike!

Rabo Leung: Yes ....yes....what?

Mike Poon: That is - I still haven't given you the Placing List yet. And we have only get 600,000 odd tickets, should the remainder be put into House?

Rabo Leung: Use House then

Mike Poon: House, no problem with it?

Rabo Leung: No problem, no problem, no problem

Mike Poon: Then I'll give them back to you at the original price on the first day, 80 cents

Rabo Leung: You just go ahead and sell them, someone will want them

Mike Poon: O.K. Anyway, I'll give them back to you at 80 cents, so to avoid .... to avoid .... that is .... I won't take the risk - I don't really want to, sorry

Rabo Leung: Never mind, you just go ahead and sell them

Mike Poon: Fine! Thank you, thank you.

Rabo Leung: OK .... OK. Bye"

According to Mr Poon, the jargon of the industry such that when Mr Leung said to him "just sell it", it meant that he, Mr Leung, would buy it.

13. As noted above, the issue was oversubscribed but only to a limited extent. The defendant exercised its overallotment option which under the terms of the prospectus was exercisable within 30 days of 10 October 2000, the date of the prospectus, to require the issue of another 2.9 million shares to satisfy the over-subscription. In fact, that option was exercised on a date after the speaker phone conversation but before 16 October 2000 which was the date of the Stock Exchange announcement.

14. The judge then referred to Mr Poon's evidence that the plaintiff had made no attempt to place the shares between the time of the speaker phone conversation and the first day of trading and to the plaintiff's submission that that inactivity could only be explained by the fact that the shares were spoken for and not available for placement.

15. In resolving the issue of fact before him, the judge reviewed the evidence of the key witnesses, namely Mr Poon, Mr Kwan, Mr Leung and Mr Chan which he set out in some detail. He then dealt with miscellaneous issues before setting out his conclusions and on the critical issue of whether Mr Leung did agree to take the 3 million shares on the first day of trading through the market, he concluded (at paragraph 44 of his judgment) that:

"[o]n the basis of the evidence as a whole the plaintiff has fallen well short of persuading me on a balance of probabilities that such an agreement was arrived at ..."

16. The judge's reasons for rejecting the plaintiff's claim were that, first, there was no conceivable rational commercial advantage in the defendant agreeing to the sort of transaction. All the inherent probabilities militated against that. Second, after hearing the evidence, the judge was "left completely unconvinced by the plaintiff's case." He cited the fact that the statement of claim in its unamended form pleaded an oral agreement on 17 October relying on the transcript of the conversation between Mr Poon and Mr Leung. He found that the shift from 17 October to 12 October was very damaging to the overall credibility of the plaintiff's case and found that Mr Poon's explanation for that state of affairs, namely, that his former solicitors had got it wrong in not referring to the speaker phone conversation of 12 October unconvincing. Moreover, the judge remarked that had there been a firm agreement on 12 October, the conversation of 17 October would not have taken the form that it did. When read as a whole, that conversation indicated that there had been "simply no meeting of minds" between Mr Poon and Mr Leung who were "speaking in parallel lines".

17. When it came to the speaker phone conversation, the judge accepted the reasons given by Mr Leung as to why he would not have given such a commitment to purchase 3 million of the shares. They were not attractive to him, he had no legal responsibility for it, and if there had been a mistake it was entirely the plaintiff's fault and that a commitment of that kind would have required a board resolution. Although the judge found Mr Kwan to be a fundamentally honest witness, he was not prepared to accept his evidence "against the background of all the other evidence in the case." He went on to say this:

"... It is important to remember that this was not a matter that directly concerned Mr Kwan and although he says he understood everything that was going on, he was a disinterested party and so perhaps his level of concentration would not be that of someone in the position of Mr Leung or of Mr Chan. It is not surprising that in the course of his evidence he rather lost his way on two occasions, evidenced by notable pauses. He was a witness who was struggling with his recollection and that is something that I am bound to have regard to. It was relatively simple for him to get the wrong end of the stick, as a disinterested listener, not aware of the complete background or context of the conversation and now two years on he was having difficulties in recollecting it in a way that I could feel able to be comfortable with. Accordingly, as between him and Mr Leung and Mr Chan and having regard to all the evidence of the case, I prefer the evidence of the other two. Having said that I acquit Mr Kwan of any suggestion that he was wilfully trying to mislead the court. I do not, for one moment, think that was the case."

This appeal

18. In summary, counsel for the plaintiff put his case thus:

(1) The judge failed to consider the evidence of Mr Poon that he had not gone to find placees after the speaker phone conversation and to draw the inference from that fact that an agreement had been reached.

(2) In relation to Mr Poon's credibility, the judge's criticisms of Mr Poon's evidence was unwarranted. Moreover, there was independent evidence of the speaker phone conversation of 12 October.

(3) Having found that Mr Leung had given a number of confused and indeed incorrect answers, the judge failed to have regard to them when he came to assess the veracity of Mr Leung's evidence.

Placees

19. Mr Hingorani submitted that it was the plaintiff's evidence that he had not gone to find any placees after the speaker phone conversation. He asked rhetorically: with what scenario was that most compatible? He criticised the judge for failing to consider this piece of evidence and to draw the inference that it must be that there had been a concluded agreement as the plaintiff has alleged.

20. At paragraph 24 of his judgment, the judge summarised Mr Poon's evidence in this regard at some length. Unless the fact that the plaintiff did not get placees after the speaker phone conversation necessarily meant that there must have been an agreement between the parties, the fact that this piece of evidence was not specifically mentioned by the judge in stating his reasons is neither here nor there. It certainly does not have the effect of undermining the correctness of the judgment. Whilst the plaintiff's inactivity since 12 October is consistent with the fact of an agreement reached on 12 October, it is equally consistent with other scenarios. Despite Mr Poon's suggestion that the issue was reasonably lively, the evidence before the court was that at the time of the IPO, market sentiment for second and third line issues of which the present was one, was generally poor. There was simply no evidence that the market displayed any enthusiasm for this particular IPO. It was, decidedly, not a 'hot' issue. Therefore, Mr Poon's inactivity is equally consistent with the fact that he did not even try to get placees because market sentiment was so poor. How else could it be explained that (leaving aside the 3 million shares) there was no evidence that the plaintiff ever attempted to find placees for the remaining 94,000 shares which it was obligated to take? Another real possibility was that Mr Poon misunderstood Mr Leung's response and whether or not it was wishful thinking on his part, he wrongly thought that there had been a concluded agreement when, in truth, there had been none.

21. Whilst Mr Poon gave evidence to the effect that had there not been any agreement the plaintiff would have been able to divest itself of its entire allocation, that has to be seen in the context of the plaintiff's case. The fact that Mr Poon's evidence was unchallenged did not mean that the judge necessarily had to accept it and disregard the rest of the evidence. It has to be borne in mind the judge's finding that Mr Poon was particularly anxious to unscramble what he considered to have been a mistake in the type of underwriting to which the plaintiff had committed itself. That was the point of the speaker phone conversation which took place on 12 October. The judge was perfectly entitled to take into account the fact that this was inconsistent with Mr Poon's suggestion that the plaintiff would not have had any difficulty in divesting itself of its entire allocation.

Mr Poon's credibility

22. Mr Hingorani submitted that the judge was in error in questioning Mr Poon's credibility because of the amendment of the statement of claim shifting the date of the oral agreement from 17 October (based on the transcript of the telephone conversation of 17 October) to the speaker phone conversation of 12 October. Mr Poon's explanation of why the amendment had come about was that his former solicitors had got it wrong inasmuch as it was allegedly their view that there was no evidence to substantiate the speaker phone conversation despite his account of it and the fact that a third party i.e. Mr Kwan had heard the conversation. Mr Hingorani submitted that what the judge was seeking to do was to look into the mind of the plaintiff's former solicitors.

23. But what the judge did not consider credible was Mr Poon's explanation as to how the amendment had come about. There was no written evidence to show any discrepancy between what had originally been pleaded and the client's instructions to the solicitors. It was inconceivable to the judge that had the plaintiff's former solicitors been told about the speaker phone conversation and Mr Kwan's knowledge of it, they would not have made any reference to that conversation in the pleading. It would appear that the judge did not believe Mr Poon's account of his instructions to the plaintiff's former solicitors. That was plainly a matter for the judge.

24. Further, what the judge found damaging by the amendment was not, as Mr Hingorani suggested, to the credibility of Mr Poon. Rather, the amendment was damaging to the overall credibility of the plaintiff's case. In this connection, sight should not be lost of the fact that, leaving aside for the moment the type of underwriting, the plaintiff does not dispute the fact that it had a commitment in respect of 3,750,000 shares of the issue. If, according to Mr Poon, what the plaintiff had committed to was public offer underwriting as opposed to placement underwriting, the plain fact is that as at 12 October, the date when Mr Poon allegedly tumbled onto the nature of the underwriting commitment of the plaintiff, it had only divested itself of no more than approximately 600,000 or a mere 16% of its commitment. The speaker phone conversation took place at around 6 pm on 12 October. There was hardly another day to go since, according to the prospectus, subscriptions for the public offer was due to close at 12 noon on 13 October. Therefore assuming that the plaintiff was labouring under the impression that its commitment was as a public offer underwriter, with only a few hours to go, 84% of its commitment remained in its hands. What this demonstrates is that the plaintiff was singularly unsuccessful in offloading the shares to which it had committed itself to underwrite. So, what purpose would this speaker phone conversation have served other than a last-ditch effort to rid itself of its commitment?

25. The effect of the plaintiff's case amounted to this: whilst as lead underwriter and sponsor the defendant saw fit to commit itself to no more than an aggregate of 2 million shares (750,000 shares as public offer underwriter and 1,250,000 shares as placement underwriter) out of an issue of 62.5 million shares, in other words, to 3.2% of the issue, it agreed to take on a further 4.8% (aggregating 8% of the issue), thereby more than doubling its total commitment in the IPO when, if there had been any mistake, it was entirely the mistake of the plaintiff for which the defendant was in no way, morally or otherwise, responsible. It is to be noted that there is no challenge to the other limb of the judge's reasoning, namely, that all the inherent probabilities militated against there having been an agreement of the kind alleged given the absence of any conceivable rational commercial advantage in such an arrangement for the defendant. The point made earlier underlines the validity of the judge's conclusion. Moreover, the exercise by the defendant of its overallotment option mentioned in paragraph 13 above is inexplicable had it agreed to take up another 3 million shares from the plaintiff.

26. Then it was said there was independent evidence of the oral agreement reached on 12 October. Mr Hingorani pointed out that the judge found as a fact that Mr Kwan was present at the speaker phone conversation. As the judge had found Mr Kwan to be an honest witness, he could not and should not have found Mr Kwan's evidence to be unreliable.

27. At paragraph 26 of his judgment, the judge set out, at considerable length, the evidence given by Mr Kwan. He noted that Mr Kwan had tried to refer to his witness statement as an aide-memoire. On being instructed that he would not be able to do so, Mr Kwan "then proceeded, doing his best, from memory". The judge's summary of Mr Kwan's evidence contained the following observations:

"... The witness then paused for some time as he tried to get the evidence out. I have made a marginal note to this effect in my notebook because it made an impression that he should have come to a halt. Again, this cannot possibly be a criticism of a witness in such circumstances. I considered that he was trying to do his best in a difficult situation. ... The witness then paused again - he was obviously thinking about the evidence that he was giving. I have made another marginal note to this effect. I wondered whether perhaps he had forgotten, but after a clear pause he was then able to go on with what he wished to say which was that Mr Poon then asked Mr Leung about the remaining 3,000,000 shares. ..."

28. As noted above, the judge doubted the accuracy of Mr Kwan's evidence. Mr Hingorani does not disagree that the judge's characterisation of Mr Kwan as "a disinterested party" was accurate. That being so, the judge's further characterisation that Mr Kwan was "a disinterested listener" must also be accurate since the sense in which the word "disinterested" was used was the same i.e. that Mr Kwan had no stake in the subject matter. But Mr Hingorani referred the following passage from the transcript (at pages 215P-216A):

"Q.	... Now, would it be correct for me to say that if you did hear the conversation or even if you did hear the conversation, there was no particular reason for you to pay particular attention to it at the time?
A.	I disagree.
Q.	And why would you disagree?
A.	Because the three parties to the conversation, that is Mr Poon, Mr Leung and Mr Chan, those three persons, I knew them. And the topic of the conversation I knew it at the very beginning of the conversation that they were talking about underwriting, something of my daily work. So once I knew that they were talking about this topic, I was quite interested to know what they are going to tell. It is quite interesting."

I do not see how that extract helps the plaintiff. It does not follow from the fact that Mr Kwan was interested in the conversation that his recollection of it must necessarily be accurate. The judge was perfectly entitled to come to an overall view as to the reliability of a witness's evidence, taking into account his view that the witness "rather lost his way on two occasions, evidenced by notable pauses" and that he was "struggling with his recollection". It is not appropriate for the Court of Appeal to substitute its own view simply from reading the transcript which, necessarily, is silent as to these matters which are material elements in a judge's assessment of a witness's evidence. As the judge explained:

"[i]t was relatively simple for [Mr Kwan] to get the wrong end of the stick, as a disinterested listener, not aware of the complete background or context of the conversation and now two years on he was having difficulties in recollecting it in a way that I could feel comfortable with."

29. As Miss Cheng pointed out, it would appear that despite his alleged "interest" in the topic, Mr Kwan had no recollection of anything being said by Mr Chan about the defendant having some difficulty in relation to its cashflow. According to Mr Poon's evidence, that was part of the telephone conversation that took place between Mr Chan and Mr Poon shortly after the speaker phone conversation. In that connection, it should be mentioned that the judge found that the evidence did not support the plaintiff's allegation that the defendant had cashflow difficulties.

30. In any event, Mr Kwan's evidence was not as to the fact of there having been an agreement as alleged by the plaintiff. Rather, his evidence was:

"... the impression I got was that there was an understanding between the two parties that on the first trading day Mr Poon would sell those 3 million shares in the market at a price of 80 cents and Mr Leung or somebody arranged by Mr Leung or some arrangement would be made by Mr Leung to buy those shares." (emphasis supplied)

(Transcript, p.207 Q-R)

The evidence was thus of Mr Kwan's views or opinion rather than of fact. In re-examination, his evidence as to the identity of the buyer was:

"... Mr Leung or his company or any investor arranged by him or anyone else would buy the shares."

(Transcript 223D)

It is apparent that there was an absence of certainty as to the identity of the buyer.

Mr Leung's evidence

31. The criticism here was that the judge failed to deal with and resolve the confusion and inconsistency of Mr Leung's evidence in the context of assessing Mr Leung's veracity. Mr Hingorani highlighted the fact that although the judge had found that there was only one speaker phone conversation and that that took place on 12 October, Mr Leung had gotten the sequence of the telephone conversations wrong in that he thought the speaker phone conversation did not take place until 17 October. Mr Hingorani also referred to three critical elements in 'material probabilities' on Mr Leung's version of events. This I set out below.

32. The first was said to be that if Mr Poon had offered the shares to the defendant, there was simply no possibility that Mr Leung could have replied "No need. You can sell it to the market." It was said that in the context of the plaintiff being a placing underwriter, for Mr Poon to sell it to the market did not make sense since what he had to do was to find placees. But Mr Leung's response was nothing more than that if one did not want to hold so many shares (as was the plaintiff's position), then as far as Mr Leung was concerned, that person has to sell them. Further, the logic of Mr Hingorani's argument was difficult to follow since, in the first place, as a placing underwriter, the plaintiff had no business "selling" its allocation, or the undivested part of it, to the defendant. Mr Leung gave evidence (which was not challenged) to the effect that had he agreed to take the shares from the plaintiff, he would have invited the plaintiff to give him a sub-underwriting agreement. (See the transcript at 254R)

33. Mr Hingorani then referred to Mr Leung's evidence that Mr Poon had said that if he (Poon) could make any profit in the market he would return the profit to the defendant. Mr Hingorani submitted that this statement was totally illogical and made no sense and hence was a good reason for discounting Mr Leung's evidence altogether. But the point is that, here, Mr Leung was simply recounting what Mr Poon had said so, if that be nonsense, then it was Mr Poon who was talking nonsense. The following exchange between the court and Mr Poon is telling:

"COURT:	... And would that therefore tend to indicate that on the first day of trading you would expect that the share price would go up from the starting price of 80 cents?
A.	That's not the way I see it, but Rabo kept telling me this way. That's why I told him repeatedly that 'Even if there would be any profit, you take it, I don't want it.'"

(Transcript, p. 60 ll P-S)

It shows the context of Mr Poon's remark which I read as having been made sarcastically, against the backdrop of his attempt to 'unscramble' an underwriting commitment. Mr Poon did not think that the issue would be a success. He did not believe it would yield a profit.

34. The third element was said to be Mr Leung's evidence that after suggesting that the shares be sold in the market, Mr Poon asked Mr Leung "Might there be a problem with selling the shares on the market?" Mr Leung had understood that observation to mean that Mr Poon was worried about dumping the shares on the market as it might depress the price and so affect other underwriters who also had a shareholding. For my part, I have difficulty in seeing what was unbelievable about this piece of evidence. It was merely Mr Leung's understanding of what he thought Mr Poon had meant.

35. In his written submissions, Mr Hingorani gave 'particulars' of no less than 40 instances of fallacies and inaccuracies in Mr Leung's evidence. It was a singularly tiresome exercise, 'nit-picking' through endless pages of transcript in a form that was entirely 'indigestible'. It was hardly directed at showing that 'the judge had failed to use or has palpably misused his advantage - for example that he had failed to observe inconsistencies or disputable fact or material probabilities.' Where that has not been shown, the higher court ought not to take the responsibility of reversing conclusions so arrived at merely as the result of their own comparisons and criticism of the witnesses, or of their own view of the probabilities of the case. See Hong Kong Civil Procedure 2002 at 59/1/48 citing Lord Summer's speech in SS Hontestroom v SS Sagaporack [1927] AC 37 at 47.

36. For my part, I take the view that this appeal should never have been brought.

Conclusion

37. I would dismiss this appeal and propose that there be an order nisi as to costs in favour of the defendant.

Hon Cheung JA:

38. I agree with the judgment of Le Pichon JA.

Hon Seagroatt J:

39. I agree in every respect with my Lady.