EMINENT INVESTMENTS (ASIA PACIFIC) LTD v. DIO CORPORATION

HCA 1292/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1292 of 2011

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J U D G M E N T

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Nature of the claim

1.  The plaintiff in this action (“Eminent”) is a Hong Kong company which used to carry on the business of providing financial advisory and consulting services.  It ceased carrying on business in or around March 2010.  The defendant (“DIO”) is a South Korean company carrying on the business of producing and marketing dental implant devices, related equipment and accessories.

2.  In this action Eminent claims against DIO certain sums due pursuant to a Financial Advisory Agreement (“FAA”) dated 10 October 2008and an Addendum to the FAA (“Addendum”) signed on 15 January 2009.

3.  By way of defence DIO contended as follows:

(1)   The FAA was induced by misrepresentation and that the FAA (and the Addendum) has been rescinded on the ground of such misrepresentation.

(2)   The FAA and the Addendum had been terminated on the ground of repudiatory breach.

(3)   In any event as a matter of construction, Eminent is not entitled to the fees claimed.

4.  On the pleadings there was originally an illegality plea by way of defence, to the effect that the FAA and the Addendum was illegal and unenforceable because of contraventions by Eminent of certain provisions ofthe Securities and Futures Ordinance (Cap 571).  However, DIO indicated in its written opening that the illegality defence would no longer be relied upon.

5.  DIO also has a counterclaim against Eminent for refund of various amounts paid under the FAA and the Addendum, consequential upon rescission of the FAA and the Addendum.

Background facts

6.  The underlying facts of this case, insofar as they are undisputed or indisputable, are as follows.

7.  The key driving force behind Eminent is Mr Kane Yang (“Kane Yang”), a Korean who received his College education in the United States.

8.  The President and Chief Executive Officer of DIO is Mr Jin Beak Kim (“CEO Kim”).  His elder brother Mr Jin Cheol Kim (“Chairman Kim”)was the founder and Chairman of DIO.

9.  In June 2007, a company called DSI Co Ltd (“DSI”), the predecessor of DIO (the details of how DSI merged with another company to become DIO are not strictly relevant for present purposes) issued US$27,000,000 convertible bonds to raise cash (“the Bonds”).  A companycalled DKR Soundshore Oasis Hong Kong Limited (“DKR”) held some of the Bonds.  DKR’s holding of such Bonds would be the subject matter ofcertain transactions called Rain III and Rain IV as described further below.

10.  In about mid‑2008, DIO was exploring ways to raise additional capital and to expand its overseas business and brand.  To this end DIO wanted to obtain international (as opposed to domestic Korean) advice on fund raising matters.

11.  DIO was introduced to Eminent by a middleman called Mr Nam Eil Baek (“Mr Baek”).  Mr Baek worked at a securities companycalled Kyobo Securities (“Kyobo”), which had provided domestic financialadvice to DIO.  Mr Baek was also the host of a radio program in Busan, Korea where he gave financial advice to the public.

12.  Through the introduction of Mr Baek, Kane Yang met CEO Kim in DIO’s headquarters in Busan on 7 August 2008.  At that time Kane Yangtravelled to Busan to meet with a potential client called Samho Shipbuilding (“Samho”).  He was co‑operating with Kyobo on that occasion in serving Samho.  Mr Baek (representing Kyobo) was also at the meeting with Samho.

13.  Mr Baek mentioned DIO to Kane Yang and suggested that Kane Yang should meet with DIO to see whether Eminent could offer any advice to DIO.  Kane Yang agreed and it was against this background that Mr Baek introduced Kane Yang to CEO Kim at a meeting held at DIO’s headquarters in Busan.  That meeting was on the same day as (but subsequent to) Kane Yang’s and Mr Baek’s meeting with Samho.

14.  In September 2008, CEO Kim came to Hong Kong with Mr Baek and one of DIO’s senior management called Mr Tae Young Kim (“TY Kim”).  They visited Eminent’s office on 22 September 2009 and met with Kane Yang and Mr Roger Chung (“Roger Chung”) (managing partner of Eminent).  The meeting was also attended by Mr Jung Bok Lee (“Jung Lee”), executive director of Eminent, Mr Christopher Song (“Christopher Song”),Vice President of Eminent, and Mr Gerald Wu (“Gerald Wu”), Senior analyst of Eminent.  The purpose of this visit was for CEO Kim to inspect Eminent’soffice and better evaluate Eminent’s capacities.  There was a private meeting attended by a smaller number of people afterwards.

15.  On 7 October 2008, Christopher Song emailed a draft FAA to CEO Kim.

16.  The FAA was signed on 10 October 2008 in Busan. The parties gave it a code name “Rain I”.

17.  However, before the FAA was signed, a team from Eminent went to DIO’s headquarters in Busan on or around 9 October 2008 to conduct meetings.

18.  The FAA provided, where material, as follows:

“ WHEREAS, the Company hereto has retained the Financial Advisoron a sale and exclusive basis to advise the Company with respect toits corporate Governance, Equity Valuation, Financial & AccountingAnalysis, Corporate Financial Planning, Strategic Capital Raising and other Corporate Financing activities.

WHEREAS, the Parties hereto desire to specifically state the services mentioned above and under this agreement to be provided to the Company by the Financial Advisor, the compensation to be received by Financial Advisor from the Company for providing such services, and the terms and conditions that shall govern the relationship between the Parties.

NOW THEREFORE, the Parties, for good and valuable consideration, by executing this Agreement agree to be bound by its terms and conditions as follows:

1) TERM. This Agreement shall be for a term of eighteen (18) months. Notwithstanding the forgoing and except for earlier termination as otherwise provided for hereinafter, either Party hereto may terminate this Agreement upon thirty (30) days prior written notice.

2) ENGAGEMENT & FEE STRUCTURE.

i) SERVICES TO BE PROVIDED BY FINANCIAL ADVISOR:

(1) Study and review the business operations, Company’s historical financial performance, Company’s financial forecast and all related business and corporate information provide by the Company

(2) To assist in the design and writing of the company’s business plan to be presented to any potential investors and third parties

(3) On behalf of the Company, initiate the discussion and assist the Company to collect, analyze and organize business, financial, and legal information with third parties such as accountants, lawyers, auditor in order to achieve the goal

(4) On a best effort basis, advise the Company on Mergers & Acquisitions, Fund Raising, private placements or shareholder restricting prior to any IPO or Secondary Listing

(5) Starting in 2009, on a quarterly basis, provide independent research services to the Company in the form of equity research reports to be provided for institutional investors

(6) Advise the Company in appropriate investor relations and communications strategy with thefinancial community and financial public relations firm(s)

ii) RETAINER FEES: Upon the execution of this Agreement, the Company agrees to pay the Financial Advisor a fixed retainer of US Dollars One Hundred Thousand (USD100,000), paid in two installments. First installment,US Dollars Fifty Thousand (USD50,000) is due within seven (7) days upon signing of this agreement and second installment, US Dollars Fifty Thousand [USD50,000] is due sixty (60) days after the signing date of this agreement.

iii) INDEPENDENT EQUITY RESEARCH FEE: Uponthe execution of this Agreement, the Company agrees topay the Financial Advisor a quarterly fixed independentresearch fee in advance of US Dollars Thirty Thousand[USD30,000] due on first of each fiscal quarter whereas the payment due dates for 2009 are: January 1, 2009, April 1, 2009, July 1, 2009 and October 1, 2009.

iv) TRANSACTION FEE: Upon completion of any transaction for the Company. The Company agrees to pay the Financial Advisor a success fee including and notlimited to a three percent [3%] of the total transactionalamount tied to any financial transaction related to FundRaising or Private Placement or Shareholder restructuring, or Mergers & Acquisition for the Company.

3) OBLIGATIONS OF THE COMPANY:

a) The Company shall accept all liabilities arising from any wrongful assurances, warranties, guarantees or misrepresentation made by it and holds Financial advisorharmless from all claims, proceedings, loss and damages, costs and expenses arising there from.

b) The Company shall provide the Financial Advisor to access to key members of management and related staffduring the Company assessment and valuation phase and the remaining phases of the engagement.

c) The Company shall ensure proper accounting and risk control systems are in place

d) The Company shall allow the Financial Advisor full andcomplete access to accounting and financial information related to the Company

e) The Company shall disclose all material information thataffects proper accounting reporting, financial analysis and Company valuation including and not limited to actual and impending legal liabilities, off balance sheet loans, insider transactions and hidden liabilities

f) The Company shall responsible for all cost of obtainingfrom external sources or in house resources for industry and country research require for investor relations and fund raising purposes

g) The Company shall assist the Financial Advisor in the completion of a detailed business plan or investment prospectus.

h) The Company hereby agrees from time to time upon request to reimburse the Financial Advisor for all reasonable travel, and all other out‑of‑pocket expensesincurred in performing the services hereunder provided that the reimbursement for expenses in excess of USD two thousand (USD 2,000) shall be subject to the prior approval of the Company

i) The Company agrees that within a period of two (2) years after a termination of this Agreement, should the Company complete a transaction including and notlimited to an secondary listing or fund raising with only third parties or receive funds from a financing source introduced by the Financial Advisor, the Company shall pay Financial Advisor its fees according to this Agreement or and any executed amendments thereof or a generally accepted market compensation in case the transaction compensation method is not explicitly stated in this agreement.”

19.  In December 2008, DKR was holding Bonds in the value of US$19,000,000.  Under the conditions of the Bonds, DKR could require DIO to redeem all or part of the Bonds on 11 December 2008.  DKR had given notice for such redemption.  By an agreement dated 3 December 2008, DKR’s holding was restructured.  Out of the US$19,000,000 Bonds held by DKR, DIO would redeem US$3,000,000.  US$16,000,000 worth ofBonds would remain.  DIO would issue US$9,000,000 worth of new bonds (“the New Bonds”) to DKR.  The proceeds would be used to redeemUS$9,000,000 out of the US$16,000,000 (US$19,000,000 less US$3,000,000redeemed = US$16,000,000) Bonds still held by DKR.  For the balance of US$7,000,000, the dates for exercise of the put option in relation to them were deferred.  This was done with the assistance of Eminent.

20.  The Addendum was signed on 15 January 2009.  The parties gave it a code name Rain II.  It provides, materially, as follows:

“ WHEREAS, the Company and Financial Advisor entered into the Financial Advisory Agreement made on October 10, 2008 (hereinafter to as ‘the First Agreement’).

WHEREAS, to officially expand the role of the Financial Advisor,the Parties have agreed to amend certain terms and/or conditions of the First Agreement made on October 10, 2008.

WHEREAS, the under this Agreement, the role of the Financial Advisor has been appointed as sole and exclusive financial advisor for Financial Scenario(s) including and not limited to Secondary Listings in an overseas stock market, backdoor listings, Public Placements, Private Placements, Mergers & Acquisitions (‘M&A’), Management Buy‑outs (‘MBO’), Leverage Buy‑outs (‘LBO’) in one or series of Transaction(s) in any form including and not limited to loans, bonds, common stock, preferred stock, convertible securities or equity linked debt instruments of any kind conducted by the Company and its subsidiaries and affiliates directly or from any registered shareholder(s) of the Company.

WHEREAS, the following fees are excluded from the foregoing Success Fee and/or Financial Advisory Fee under the terms and condition of this Agreement and the First Agreement: All legal, accounting and audit costs for transactional due diligence and any specific circumstances required by the third parties, by law or by government regulations to retain professional services to complete a proposed transaction.

WHEREAS, this Agreement specifies the agreed terms and conditions which applies to certain roles and responsibilities that are not stated on the First Agreement and are to be included as part of the of the First Agreement.

WHEREAS, all terms and conditions of the First Agreement apply unless otherwise specified herein and in the event of any inconsistencies between the terms and conditions of the First Agreement and the terms and conditions of this Agreement, the latter shall prevail only to the extent of such inconsistencies. All defined terms used in the First Agreement apply to this agreement,unless otherwise defined herein. The confidentiality obligations of confidentiality agreements already in place are still in effect between the parties.

IT IS HEREBY AGREED AS FOLLOWS:

1. The following are to be an addendum to the existing ‘ENGAGEMENT & FEE STRUCTURE’, Section 2 on page two of the First Agreement.

1a. ‘Upon completion of the listing or Secondary Placementof the Company on the London Stock Exchange AlternativeInvestment Market or AIM (or such other stock exchange asagreed to by the Company), a success fee in cash equivalent to two percent (2%) of the transaction value will be paid to the Financial Advisor, within fourteen (14) days of the Transaction closing date. In addition, Upon completion of anInitial Public Offering or Secondary Placement on LondonStock Exchange Alternative Investment Market (AIM) or a Reverse Merger/Backdoor listing, the Company agrees to grant the Financial Advisor warrants representing one and a half percent (1.5%) of the fully diluted shares outstandingof the Company or its listing vehicles at the time of the listingor placement on a public stock exchange. The exercise price of the warrants will be the initial public offering price and warrant period will be for seven (7) years from grant date. In order to meet all the governing laws of Korea, UK and Hong Kong, however, without changes in the size of one and a half percent (1.5%) warrants a formal contract granting such warrant rights will be made between the Company and the Financial Advisor immediately after signing this Agreement.’

1b. ‘Upon successful completion of any mergers &acquisition transaction involving the Company and a third party,the Company agrees to pay the Financial Advisor withinfourteen (14 days) of the Transaction closing date, a success feein the amount equal to three percent 3% of the total transactionvalue in cash calculated based on enterprise value of the acquired company including any assumed liabilities.’

1c. ‘The following fees are excluded from the above and will be charged separately to the Company with prior approval not to be unreasonably withheld:

(i) All legal, accounting and audit costs for transaction due diligence

(ii) Any special circumstances required by third parties,by law or by government regulation to retain professional services to complete a proposed transaction

(iii) Local tax or duties levied by local regulatory and/or Government’

1d. ‘In addition to the advisory fee for the First Agreement,the Company agrees to pay the Financial Advisor another fixed retainer of US Dollars Four Hundred and Fifty Thousand (USD450,000), paid in four installments upon the execution of this agreement. First installment,US Dollars Fifty Thousand (USD 50,000) is due within seven (7) days upon this Agreement signed by both parties Second installment, US Dollars Eighty Five Thousand (USD 85,000) is due before February 20^th, 2009. Third installment, US Dollars Sixty Five Thousand (USD 65,000) is due upon the completion of any of the following events: (i) the Company signs an Engagement Letter or Letter of Proposal from a Nominated Advisor (‘Nomad’); (ii) the Company formally approves a potential mergers & acquisition transaction in the form of but not limited to an Official Letter of Intent (‘LOI’) or Memorandum of Understanding (‘MOU’) or an Official Merger Agreement related to a mergers & acquisition transaction with a third party; (iii) the Company received and accepted the term sheet for the Transaction(s) of any of the financial Scenario(s) under the terms and conditions of this Agreement. Fourth installment or final payment US Dollars Two Hundred and fifty Thousand (USD 250,000) is due within seven (7) days upon the completion of any of the Transaction(s) under the Financial Scenario(s).’

2. The following terms are to be removed from the existing ‘ENGAGEMENT & FEE STRUCTURE’, Section 2 on page two of the First Agreement.

2a. Section 2 (iii) ‘INDEPENDENT EQUITY RESEARCH FEE: Upon the execution of this Agreement, the Company agrees to pay the Financial Advisor a quarterly fixed independent research fee in advance of US Dollars Thirty thousand (USD30,000) due on first of each quarter whereasthe payment due dates for 2009 are: January 1, 2008, July 1, 2009 and October 1, 2009.’

2b. Section 2 (i)(5) SERVICES TO BE PROVIDED BY FINANCIAL ADVISOR ‘Starting in 2009, on a quarterly basis, provide independent research services to the Company in the form of equity research reports to be provided for institutional investors.’ ”

21.  Upon closer analysis of the provisions of the FAA and Addendum, it appears that the services contracted to be provided under the Addendum were already covered by FAA, except that the quarterly research was removed.  Additional fixed retainer fees were, however, charged.  No issue is raised about possible lack of consideration to support such additional fees and I say nothing in that regard.

22.  In January 2009, DKR requested to redeem the US$16,000,000 worth of Bonds it was then holding (comprising US$9,000,000 worth of New Bonds plus US$7,000,000 worth of Bonds the put option date of whichwas deferred as a result of the 3 December 2008 agreement described earlier).  DIO did not have sufficient cash to repay and therefore enlisted the help of Eminent in raising funds.

23.  As a result, and with Eminent’s help and advice, two agreements were entered into between DIO and Eminent, one dated 10 February 2009 (with addendum dated 27 March 2009) dealing with US$7,000,000 and another dated 27 March 2009 (with addendum dated 31 March 2009) dealingwith US$9,000,000.  These two agreements were given the codenames Rain IIIand Rain IV respectively.  Eminent charged separately for its services on these two agreements.

24.  In effect, what happened was that Eminent approached DKR and managed to negotiate to purchase the US$16,000,000 worth of Bonds from DKR at the discounted price of US$9,700,000 without informing DKR that it was in fact only an intermediary and that DIO would be the ultimatepurchaser of the Bonds.  By Rain III and Rain IV, Eminent agreed to on sell such Bonds to DIO.  DIO raised funds through its own efforts (withoutEminent’s involvement) to pay for the purchase price of US$9,700,000 as well as the fee of US$1,085,000 payable to Eminent for its services in this transaction.

25.  On 9 April 2009, a telephone conference took place among representatives of Eminent, DIO and a manufacturer and distributor of professional dental products called Dentsply International Inc (“Dentsply”).  It was attended by the following persons:

From DIO:

(1)   Chairman Kim.

(2)   CEO Kim.

(3)   TY Kim.

From Dentsply:

(1)   Bill Jellison, Senior Vice President and Chief Financial Officer of Dentsply.

(2)   JM Blanchard, Vice President of Corporate Planning and Business Development of Dentsply.

From Eminent:

(1)   Roger Chung.

(2)   Charlie Lee (“Charlie Lee”).

(3)   Jung Lee.

(4)   Christopher Song.

(5)   Arthur Yang (“Arthur Yang”), Kane Yang’s brother.

From UBS (UBS was the entity which had direct contact with Dentsply and which was Eminent’s contact point with Dentsply):

(1)   Jon Santemma.

(2)   Andy Clayton.

26.  On the same day (but before the telephone conference), a meeting took place between representatives of DIO and Eminent during which the attendees discussed matters preparatory to the telephone conference to be held later that day.  Two days prior to that (on 7 April) a telephone call tookplace among representatives of Dentsply, Eminent and UBS during which (among other things) representatives of Dentsply (Bill Jellison and JM Blanchard) asked questions, and representatives of Eminent (Roger Chung,Jung Lee, Charlie Lee and Christopher Song) provided information, about DIO.

27.  During the telephone conference on 9 April, representatives from DIO introduced their company and business and representatives fromDentsply asked questions.  Representatives from DIO also asked questions of representatives of Dentsply about their intention and interest.

28.  Towards the middle or end of April 2009, UBS informed Eminentthat Dentsply was not interested in DIO.  Christopher Song communicatedthis to CEO Kim.  There is a dispute between the parties whether this “lackof interest” was only temporary and whether any interest on the part of Densply was susceptible to be revived or revisited later after DIO had scaled down or removed the construction side of its business.  This is relevant in the context of DIO’s third defence.

29.  On 30 April 2009, Charlie Lee (a member of the Eminent team serving DIO) sent an email to Roger Chung saying that he was not interested in working for Eminent anymore.

30.  On 8 June 2009 Eminent terminated the employment of Jung Lee and Christopher Song. On 11 June 2009, Eminent Asset Management (not Eminent) published a job advertisement in JobsDB in respect of positions for managing distressed assets.

31.  On 16 June 2009, Roger Chung sent an email to DIO asking whether DIO was still looking for capitalization, and also informed DIO that Christopher Song and Jung Lee had been laid off earlier in the month and they had no authority to act for Eminent anymore.

32.  On 30 December 2009, TY Kim on behalf of DIO sent an email to Kane Yang referring to the Addendum and demanding return of US$70,000 paid by DIO under the Addendum.

33.  Discussions took place between DIO and Dentsply in 2010 and such discussions eventually led to a deal whereby:

(1)   Dentsply acquired less than 20% of the outstanding shares in DIO; and

(2)   Dentsply Germany Investments GmbH, a German subsidiary ofDentsply, acquired KRW56.6 billion worth of convertible bonds issued by DIO.

34.  The deal was announced on 9 December 2009.  Eminent issued its Writ in this action on 20 September 2011 claiming transaction fees pursuantto the FAA based on 3% of the value of the transaction in December 2009, as well as outstanding retainer fees payable under the Addendum.

General comments on witnesses

35.  Eminent called two witnesses: Kane Yang and Mr Baek.  DIO called three witnesses: CEO Kim, Jung Lee and Christopher Song.  Before I address the grounds of defence put forward by DIO, I would like to set out some general comments about the individual witnesses. Where necessary,when I discuss the defences, I will also mention specific points about their testimony relevant to the issue in hand.

Kane Yang

36.  He was educated in the West and it was obvious from his manner of giving evidence that he was what many would describe as a smoothbusiness talker.  When confronted with documentary evidence which called for explanation, he would often engage in a long process of ramblingand filibustering without attempting to address the point put to him.  That isrelevant to my assessment of his credibility.  Such rambling and evasive answers sometimes indicate that a witness is not being truthful on the main issue (see further below).

Mr Baek

37.  Mr Baek made two witness statements.  One was filed on 23 May 2013 on behalf of Eminent (which called him as a witness)(“Baek’s first statement”).  The other was made on 28 October 2013 and wasthe subject of a summons dated 3 December 2013 issued by DIO to file and serve it (“Baek’s second statement”).  At the end, Mr Baek was called as Eminent’s witness.  DIO did not call him.

38.  The gist of Baek’s first statement, material to the issues in this case, was that at the first meeting when he introduced Kane Yang to CEO Kim,there was no mention of Eminent being licensed to provide advisory services, or that Eminent had a licensed US$100 million fund which it could use to directlyinvest in DIO. The general “flavour” of the statement was in Eminent’s favour.

39.  The gist of Baek’s second statement, material to the issues in this case, was that he signed his first statement because of his business relationship with Kang Yang, that there were incorrect statements in it and that he had insufficient time to review it before signing.  As to the actual contents, he said that while at the first meeting that was no specific mention of the licence issue, Kane Yang did represent to CEO Kim that Eminent had a sizeable fund in Hong Kong and Eminent could use it to make a direct investment in DIO.  The general “flavour” of this statement was in DIO’s favour.

40.  When he was in the witness box, it was abundantly clear that Mr Baek was giving very guarded answers.  At times his approach to answersverged on being obstinate.  It was obvious that he did not want to be explicitor direct in answers, so as not to appear to offend, or be seen to be “stabbing”,any particular side.  One can readily understand, as a matter of common sense,how “torn” a businessman in the position of Mr Baek may feel when he was“squeezed” between two adversarial parties as in the present case.  I should be cautious in deciding to place weight on either of his witness statements (ie Baek’s first statement and Baek’s second statement).

41.  A good deal of time and effort was spent during Mr Baek’s live testimony to find out the precise circumstances under which he signed his second statement.  At the end of the day it did not matter under what circumstances the second statement (indeed the first one also) was signed.  What matters is what he said in the witness box.  Near the end of his cross examination by Mr Sussex SC, he said that he did not remember whether during the first meeting (in August) Kane Yang had said to CEO Kim that Eminent had a HK$100,000,000 fund in Hong Kong; he also said that he hadno recollection as to what was said in a second meeting held in Eminent’s office in Hong Kong in September in the same year.  In these circumstances, I do not think that Mr Baek’s evidence renders any assistance for me to decide whether the relevant representations had been made.

CEO Kim

42.  He was DIO’s key witness in establishing the fact of the alleged misrepresentations.  He was a law graduate and also held a degree in SocialWelfare.  He gave evidence in a shrewd manner, often foreseeing the point that was sought to be made and giving answers which dodged the point.  This is not a compliment, because this is the hallmark of a witness who was evasive and tried to avoid addressing a difficult question.  On numerous occasions he gave the impression of being deliberately obfuscating in the answers he gave.  This impacts negatively on the credibility of his evidence concerning the representations.

Jung Lee

43.  He was a rather peripheral witness.  It is not DIO’s case that he witnessed the making of the relevant misrepresentations.  The effect of his evidence was mainly to deal with his own interpretation of certain contemporaneous documents and to deal with a number of rather peripheral matters.  I do not find his evidence particular illuminating or probative as to the real issues I had to decide.

Christopher Song

44.  Like Jung Lee, Christopher Song was also a rather peripheral witness.

45.  He gave evidence about Kane Yang’s character and propensity to make false or misleading statements.  Of the examples he gave, two (those in paragraphs 10(a) and 10(b) of his witness statement) concerned his own interpretation of emails sent by Kane Yang in relation to work under the FAA and therefore does not really count as evidence of similar patterns of behaviour in other transactions.

46.  In the witness box he mentioned two other incidents: one related to an allegedly false statement said to him by Kane Yang during his job interview, about Eminent advising a NASDAQ listed company which he said was untrue.  The alleged falsity was disputed and I cannot resolve that collateral dispute without proper investigation.  In such circumstances I will not put this part of his testimony into the balance in assessing Kane Yang’s credibility.

47.  The other related to what Kane Yang has allegedly said to him about Eminent having a fund or going to establish a fund (which was false).  This is a point that had not received much focus or attention in subsequentcross examination or submissions.  Even DIO did not refer to this in its writtenclosing submissions.  Be that as it may, it has been brought out in evidenceand I shall deal with it when I address the credibility of the misrepresentation defence.

48.  But apart from this point, what Christopher Song said in witness statement or in his witness box testimony did not really take the matter any further.  He did not testify that he saw Kane Yang make any of the alleged misrepresentations to DIO.  Nor did he describe any subsequent incidents or discussion where the subject of direct investment by Eminent was brought up between Eminent and DIO (such as where representatives from DIO referred to a previous oral representation about a fund made by Eminent and following up or complaining about what had happened to the fund).  At times his evidence sounded like a rambling running commentary of various documents which I can read for myself.  Overall, his evidence has extremely limited (if any) probative value on the issues at stake.

Misrepresentation defence

49.  DIO’s pleaded defence of misrepresentation is that before entering into and/or by entering into the FAA and subsequently the Addendum, Kane Yang on behalf of Eminent made to representations to DIO either expressly or by conduct:

(1)   Eminent was licenced to provide the financial advisory services for the capital and fund raising under the FAA as varied by the Addendum.

(2)   Eminent had a US$100 million fully licensed investment fund in Hong Kong and had several investments in Korea which fund had sufficient proprietary capital to make investments directly into DIO.

50.  DIO’s case is that the representations were false in that Eminentdid not at any material time possess any required licences from the Securitiesand Futures Commission of Hong Kong for the carrying out of the services under the FAA and the Addendum and Kane Yang and Eminent pleaded guilty on 28 April 2011 for breaches of the Securities and Futures Ordinance (Cap 571) in carrying out business in regulated services without a licence.  Eminent ceased business in or around March 2010.  Further, Eminent did not have the investment fund as mentioned in the representations.

51.  DIO alleged that it did not discover that the representations were false until around February 2011 and by letter dated 17 January 2012 the FAA was rescinded by Eminent.

52.  DIO’s evidence concerning the alleged misrepresentation is given largely by CEO Kim.  According to his evidence, Mr Baek first mentioned to him that Eminent was an investment advisor and fund manager and had made several investments out of its licensed US$100 million fund.  It is not alleged that Mr Baek was making this statement on behalf of Eminent, but it was (among others) this statement that made CEO Kim interested.

53.  CEO Kim said that during the first meeting between him and Kane Yang in Busan in August 2008, Kane Yang represented to him (among other things) that Eminent had a US$100 million licensed fund in Hong Kong and Eminent could also call on many institutional investors and co‑investors and to influence them invest in DIO directly.

54.  According to CEO Kim, the representation about the US$100 million licensed fund was repeated by Kane Yang in the September 2008 meeting when CEO Kim flew to Hong Kong.  After the mainpresentation that day, CEO Kim, Kane Yang and Mr Baek had a more privatemeeting where Eminent’s potential investment out of its licensed investmentfund was discussed in greater detail.  It was agreed that due diligence by Eminent on DIO should be done so that Eminent could prepare an investment memorandum and background materials to be presented to Eminent’s investment committee and board to seek their approval to make a direct investment into DIO.

55.  CEO Kim also said that in a telephone conversation between him and Kane Yang in early October 2008, Kane Yang said that he would evaluate making a direct investment in the sum of around US$30 million in DIO by Eminent’s licensed fund.  Then after he had received the draft FAA from Christopher Song’s email on 7 October 2008, he spoke to Kane Yang by phone, during which they discussed the subject matter of Eminent’s possibleinvestment of up to US$30 million in DIO.  He said that Kane Yang told himthat the FAA had to be signed so that Eminent could complete its due diligence; they agreed that due diligence should be a top priority.

56.  Then, according to CEO Kim, there was another meeting on 10 October 2008 (the date of the FAA) involving himself, Roger Chung, Arthur Yang and Mr Baek.  In effect it was said that Roger Chung repeatedKane Yang’s previous representations about the existence of a licensed fund,Eminent’s ability to make a direct investment through such a fund, that it wasnecessary for Eminent to complete the due diligence and for DIO to sign the FAA.  Roger Chung also said that DIO had to sign the FAA because Eminentneeded to be compensated and paid for the financial advisory services rendered in order for the direct investment to be made by Eminent to be feasible.

57.  Kane Yang denied having made any representations that Eminent had a licenced fund or that it had the ability to make a direct investment.

58.  Roger Chung (who was mentioned by CEO Kim as having made a representation on 10 October 2008) has not given any witness statement and he did not testify.  DIO’s pleaded case did not name him as having madeany representations on behalf of Eminent.  I will not hold it against Eminent for not calling Roger Chung because Eminent could only proceed on the basis of the pleaded case.

59.  Whether the alleged misrepresentations had been made is a matter of primary fact.  It depends, in the present case, on disputed testimony.  In any case in a commercial setting involving disputed oral testimony, the courtassesses the credibility of witnesses by reference to inherent probabilities, undisputed background facts and contemporaneous documents.  This is really trite law but at the risk of repetition, I refer to what was said in Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Limited [2007] 3 HKLRD 439 at §135:

“ Comparison with contemporaneous documentation is always an aid to reliability of oral testimony, unless there is reason to believe that the documentation is contrived or materially incomplete; ‌... the truth, in so far as one is able to reach it or, ... can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to have been created, as well as to inherent probabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known.”

60.  Demeanour and manner of giving evidence can also be taken into account but has to be treated with caution.  Inherent probabilities and contemporaneous documents are safer guides to credibility.

61.  Witnesses often give unsatisfactory, evasive, rambling and filibustering answers on some parts of the case (say, in explaining some factor document away, or on some collateral issue).  Sometimes they even lie.  Sometimes a witness gives such answers because he is generally untruthful,or because he was lying on the main issue as well.  But that is not alwaysthe case.  There is no immutable rule of law or evidence that a witness who liesor gives unsatisfactory evidence on one issue (maybe a side issue or collateralissue) must therefore be lying on the central issue also or that his opponent must therefore be telling the truth.  Sometimes a witness gives such unsatisfactory evidence not because he is a general liar or because he is also lying on the main issue, but simply because (in a misguided way) he thinks that to say certain things would improve his case or because he wishesto avoid certain embarrassing or dishonourable matters (falling short of facts which are against him as a matter of law) from being revealed.  I have borne all these forensic possibilities in mind.

62.  Of course that witness (or counsel for him) would not explain what such reasons are (because they will be maintaining to the court that thewitness is telling the truth).  This is how ordinary common sense and forensicexperience comes in.  Much depends on the individual answers: the specific issue on which unsatisfactory answers are given has to be examined, as well as the evidence given by the opponent.

63.  Time and time again the court encounters situations where the witnesses on both sides have given such unsatisfactory evidence that it rejects the oral testimony of both sides and proceeds only on the basis of the contemporaneous contractual documents.

64.  During the course of the trial (when witnesses testified over many days and were subject to rigorous cross examination), the points that struck me about the way in which the battle over the credibility issue (on the misrepresentation front) had been fought were:

(1)   the complete absence of (i) inter partes contemporaneous documentation or (ii) internal documentation within DIO in direct support of the misrepresentation allegation;

(2)   the admirable skill and ability with which Mr Sussex SC was ableto deploy Eminent’s own internal documents to construct a line of cross examination about the making of the representation notwithstanding a complete absence of discovery of contemporaneous supporting documents within (or from) DIOitself where anyone from DIO had remotely hinted at or referred to the existence of such representation; and

(3)   the unsatisfactory and evasive answers and manner of both Kane Yang and CEO Kim when they were cross examined on their testimony relevant to this part of the case.

65.  Having reflected on the totality of the oral and documentary evidence, I have come to the view that DIO had failed to prove the pleadedand alleged misrepresentation.  I do so for the following reasons.

66.  I start off by looking for contemporaneous documentation.

67.  I accept Mr Suen’s submissions on behalf of Eminent that there was no contemporaneous complaint on the falsity of the alleged representationsuntil DIO filled its defence.  According to DIO, it discovered the falsity of the representations in about January / February 2011.  The closest contemporaneousdocument (in terms of time) emanating from DIO to Eminent was a letter fromits lawyers Jipyong & Jisung dated 2 March 2011.  The contents of this letter merit some scrutiny.

68.  It was written in reply to a letter of demand from Eminent’s lawyers Messrs Tsang and Lee dated 18 February 2011.  The FAA was expressly subject to Hong Kong law and it is not clear why DIO would choose to ask a firm of Korean lawyers to reply on their behalf.  The text of the lettershows that they did purport to deal with matters of Hong Kong law (see page 5 of that letter where the Korean lawyers quoted extensively from Hong Kongcase law).  I do not know whether, in preparing that letter, Jipyong & Jisunghave had the benefit of any Hong Kong law input (either by asking for Hong Kong law advice from a Hong Kong law firm or by conducting their own “in house” Hong Kong law research).  As an incidental point, I am extremely skeptical about DIO’s contention that (on the basis that there had been a misrepresentation) it only knew of its legal right to rescind when CEO Kim metwith DIO’s present lawyers DLA Piper in 2012, given its obvious access to a firm of lawyers who felt able to write letters based on Hong Kong law in 2011.

69.  But the purpose of looking at this letter in the present context is to test the credibility of DIO’s case that there had been misrepresentation in fact. I am prepared to proceed on the basis that in preparing this letter Jipyong & Jisung have not advised DIO on Hong Kong law about rescission.  I focus on the factual allegations contained in that letter.  In that letter fromJipyong & Jisung, numerous reasons were given as to why DIO was not liableto pay Eminent. Conspicuously, that letter did not contain any complaints aboutany misrepresentations having been made about the existence of a licensedfund or an intention to invest that Eminent had been licensed to provide advice(it did complain about illegality but that is a self standing and separate pointnot concerning any representation, and that defence of illegality is not pursued at trial anyway).

70.  One would have thought that when one engages a firm of lawyers to reply to a letter of demand, one would provide the lawyer with (and ask the lawyer to put on record) what one regards to be relevant and important items of information.  The omission of any mention or complaint about the misrepresentation in this letter is a pointer against the fact that such a misrepresentation has been made.

71.  CEO Kim was asked to explain this under cross examination on day 6, 9 December 2014 shortly before lunch, but he failed to explain it save by saying that he did not discuss it with his lawyers at the time.  Thatwas not an explanation at all.  He did not explain why he did not discuss it.

72.  Following up on the same point, it may be said (this is not the explanation given by CEO Kim: I am mentioning it out of an abundance of caution) that the client (DIO) was only providing answers to what the Korean lawyer had asked and if the Korean lawyer did not ask the correct questions, the client necessarily did not provide the material piece of information to be included in the letter.  However, quite apart from the fact that CEO Kim did not give this explanation himself, common sense dictates that seeing a lawyer is an interactive process and it rarely takes place by a strict question and answer format.  If (as DIO contends) there was in fact an important misrepresentation which induced it to enter into the FAA, one would have expected something of such magnitude of importance to be volunteered bythe client rather than for CEO Kim to wait till his lawyer elicits it from him.

73.  Second, there is a broader way of looking at the lack ofcontemporaneous documentation irrespective of the involvement of lawyers. If what CEO Kim said was true, then as time went by after the conclusion of the FAA there must have been numerous occasions when it must haveoccurred to CEO Kim to follow up on what was happening to the possibility of direct investment.  On his (and DIO’s) case, Eminent’s ability to make directinvestment was an important part of his consideration.  DIO was in need of cash(albeit perhaps less so after Rain III and Rain IV).  On DIO’s own case, Rain IIIand Rain IV were separate engagements and did not fall under the ambit ofRain I and Rain II.  On DIO’s own case, Eminent had not done anything after the telephone conference on 9 April 2009 (and reporting on Dentsply’s lack ofinterest).  Indeed as he said at §39 of his witness statement (which he adoptedas his evidence), even as early as December 2008 Kane Yang had told him that a direct investment would not be possible at that juncture but things couldchange quickly and that CEO Kim said that he had expressed his displeasure.  If a representation about existence of a US$100 million licensed fund and anintention to make a direct investment had in fact been made before the FAA,the most natural thing to do would have been for CEO Kim to follow up, or to make a complaint about the matter to Kane Yang or someone in Eminent.

74.  There does not appear to be any dispute that there had been no such complaint.  I will not go through the exercise of listing the possible documents / communications in which such complaints might / could have been made because that would have taken a long time.  And I do not needto go through this exercise to demonstrate a short and negative point namely that there is no such complaint (or even mention).  CEO Kim was in fact asked in cross examination why he had not complained to Eminent in writingby email.  The answer he gave was that in his experience he preferred to talkface to face because if he were to send an email, he had to type.  In Korea, CEOs would not send emails.  An email would take an hour but a phone call would take five minutes.

75.  I reject this explanation.  No doubt many big bosses did not like to move their hands in typing and some may even be not so technologicallysavvy.  But one need not type an email by oneself.  If a matter is sufficientlyimportant for something to be “put on record”, one can always ask one’s staff or subordinate to prepare an email or letter.  In any event the credibility of hisexcuse for not sending an email to put things on record is exposed by an email dated 6 January 2009 at bundle C12/tab 228/3414 which was sent by him to Kane Yang about domestic convertible bonds.  It shows that CEO Kim was perfectly ready and able to send his own emails directly to Kane Yang.

76.  On another occasion he was referred to the draft FAA sent to him by Christopher Song on 7 October 2008 which did not contain any provisions on direct investment.  He was asked why he did not email Kane Yang to follow up why the draft FAA had not contained a provision on direct investmentgiven that his discussions with Kane Yang had been on direct investment by Eminent.  The explanation given by CEO Kim is as follows:

“ MR SUEN: Mr Kim, if all you have been discussing with Kane Yang over the phone is direct investment, why didn’t you write any email in response to put on record anything about direct investment?

A. Hard to say. At first, when Kane Yang came to my office, I though he cannot speak Korean. I think he can speak but cannotspeak well. So I think instead of sending email to him, we ratherface‑to‑face, meet together, talk together. Same for Mr Baek Nam Eil.And sometimes I met with Arthur Yang, so for me, to write the email, I need to take time for typing.

And I think, because they want to receive the fee, so they said needto do the DD.  I also talk with Chris on the phone, because Roger, also, we cannot communicate well.  He doesn’t speak our language, so I did not send email.”

77.  I find the answers extraordinary.  I fail to understand how Kane Yang’s supposed inability to speak Korean well could impact on CEO Kim’s decision whether to send him an email.  CEO Kim was not referring to Kane Yang’s ability to read Korean.  And if Kane Yang could not speak Korean well, one wonders why CEO Kim would want to talk to him face to face (and in what language).

78.  I do not know whether in the extract above the reference to Kane Yang not “speaking” Korean might have been a mistranslation for not “reading” Korean (hence instead of emailing Kane Yang in Korean whichKane Yang could not read, CEO Kim was saying that he would rather speakto Kane Yang instead).  However, no one has taken any point on translation.  In any event, any attempt by DIO or CEO Kim to explain the lack of complaint by reference to any perceived inability by Kane Yang to read or understand Korean is in my judgment completely undermined by an emaildated 23 September 2008 sent by Kane Yang to CEO Kim in Korean.  This was sent to CEO Kim before CEO Kim received Christopher Song’s email dated 7 October 2008 attaching the draft FAA.  Therefore by the time CEO Kim received that draft he already knew that Kane Yang did know howto write and read Korean.  When this email was shown to him, CEO Kim’s only response to this was that the first time when Kane Yang came to CEO Kim’s office Kane Yang spoke Korean and also very good English.  This of course did not answer the question.

79.  I should pause and note that this point about lack of contemporaneous complaint and documentation is a separate and distinct point from the argument of whether DIO was still permitted to rescind the FAA for misrepresentation in 2012.  In the latter context, DIO’s argument was that a person does not lose his right to rescind until one was aware of the legal right to rescind and the facts giving rise to that right and then he doessomething to affirm the agreement.  That may well be so, but the immediatepoint being discussed here is not the nice legal point about losing a right torescind.  The point under discussion here is a common sensical factual pointabout how ordinary business people are expected to react to a certain factualscenario.  It does not depend on legal knowledge.  If one feels one had been let down, one raises one’s concerns (maybe one would raise it nicely in some cultures: but still one is expected to raise it).  It is as simple as that.  In any event CEO Kim did not justify his lack of written complaint by reference tohis lack of legal advice or by saying that he was not aware of the importance or significance of making complaints.

80.  Third, CEO Kim’s evidence as to how he discovered the falsity of the representation was highly unsatisfactory and this impacts on his credibility about the making of the representations in the first place.

81.  He was asked about how he found out about the falsity of the representation about the US$100 million fund in cross examination and he answered as follows:

“ MR SUEN: Mr Kim, you are saying in this case that Kane Yangmade a false statement that the plaintiff had a US$100 million fund. You said later on you discovered that this is untrue. How did you discover that the statement is untrue?

A. In the year 2011, January, Kane Yang came to me and said that, actually, there is no licence with his company.

Q. What about the US$100 million fund? How did you discover that the plaintiff did not have such a fund?

A. To have US$100 million fund should be — to operate with the US$100 million fund, then the company should have a licence.

Q. So all you are saying is that Kane Yang told you plaintiff had no licence?

A. In the year 2011, January, he told me that.

Q. But at that time, did you make any inquiry as to the US$100 million funds, whether it existed or not?

A. I don’t think it’s necessary to ask.

HIS LORDSHIP: I think the question was whether you asked, so your answer is — the question is whether you asked or not.

MR SUSSEX: And the answer is clear.

HIS LORDSHIP: Well, could I have a straightforward answer from him, because you cannot have answers raised in a rhetoric manner. The question is whether you asked.

A. No.

MR SUEN: Can I take it that after this meeting with Kane Yang,you did not ask anybody about the existence of the US$100 million funds?

A. I do not remember.

Q. So your real complaint is that the plaintiff had no licence, but you did not make any inquiry whether it had a fund; correct?

A. At the time, correct.

Q. What about after that time, did you ever find out anything about the fund? ‘Yes’ or ‘no’.

THE INTERPRETER: ‘Did you ever find out anything about the fund’?

HIS LORDSHIP: That is a bit general because the fund is non‑existent. He couldn’t have found out anything about the fund.

MR SUEN: Yes.

HIS LORDSHIP: Are you asking him what efforts he had made subsequent to this or —

MR SUEN: What efforts he had made subsequent to this.

After this, what efforts did you make, if any, on the existence of the US$100 million fund?

A. I asked several people who were related to this.

Q. When did you ask them?

A. I cannot remember exactly.  When I was preparing about this trial, this hearing, when I was preparing about materials about this hearing, at the time.”

82.  This does not appear to be the reaction of someone who had sensed that he might have been cheated.  I find it incredible that, if a representation had in fact been made to him about the existence about a licensed US$100,000,000 fund, he would not have rigorously asked anyoneabout it upon finding out that Eminent was not even licensed in the first place (or claim that he could not remember whether he had done so — ‌he gave one answer that he could not remember and another agreeing that at that time he did not ask anyone).

83.  Fourthly, it is inherently improbable that a senior businessman would want to retain someone as financial advisor and want that person as an investor at the same or a later time.  This is because of the potential conflicts of interests that would exist.  As financial advisor Eminent would have been made privy to a lot of strategic information which is internal to DIO(such as bottom lines and negotiation tactics) which would have put Eminent in an unjustifiably advantageous position when it comes to negotiating an investment with DIO.

84.  Fifthly, it is inherently incredible that CEO Kim or anyone in DIO never did any proper form of due diligence or investigation as to the “fund” operated or managed by Eminent and that he was prepared to act on the basis of a mere say‑so or mere assertion by Kane Yang.  CEO Kim is a seasoned businessman and it is incredible that he would operate on the basis of such bare assertions in respect of someone he knew very little about (even though he was introduced by Mr Baek).

85.  Sixthly according to CEO Kim he never discussed the structure or shape of the intended direct investment in any form of great detail, and only in very broad terms.  There was no mention of any fixed amount for investment or date of investment.  The tenor and form of investment were all left very open.

86.  Of course it is theoretically possible that a representation could be made merely that there was in fact a US$100,000,000 fund and that this could induce someone to enter into a contract with the representor (on the basis that even though no promises had been held out, at least there is a theoretical chance that if a fund in fact existed, he would be persuaded to utilise the fund to make an investment).  The absence of discussions or commitments on such details is therefore not a legal bar to such representations.  But in real life, if one hears such a representation and is minded to rely on it, one would reasonably expect the representee to press for more information from the representor by way of commitmentor assurance (as to terms of investment, exact amount etc).  Otherwise if one relies on the mere existence of a fund (which is the case for DIO here — ‌DIO does not rely on any promise to invest a specific amount at a particular time in a particular way), one could well end up with a nasty surprise that the representor would only decide to invest a minimal amount in DIO (or make no investment at all) and DIO would then have no recourse.  I am notbeing facetious in postulating this example.  I am testing the logical extent of DIO’s case.  I am unable to see any business sense in relying on merely the existence of a US$100,000,000 fund with no other discussions, representations or assurance as to possible size and form of investment.  This is something against the credibility of DIO’s case.

87.  Lest there be any misunderstanding and at the risk of repeating myself — ‌I am not saying that as a matter of law, a representation must be accompanied by a promise as to the future in order to be actionable.  I amsaying that I find it odd and incredible on the facts of this particular case and with sort of numbers we are dealing with that CEO Kim could rely on the pleaded representation without any attempt to probe or negotiate or discussions.

88.  There is a separate representation alleged, to the effect that Eminent possessed the requisite licence for it to carry out the advisory services.  CEO Kim’s evidence did not contain any express averment that this representation has been made.  The point was not pursued by DIO with any degree of enthusiasm by way of submissions.  The highest that Mr Sussex SC could put the matter in his written closing was that CEO Kimpresumed that Eminent had a licence in order to conduct business lawfullyfor it was a legal requirement.  That may well be so, but DIO’s case has notbeen put on the basis that there is some kind of a duty to speak out such thatsilence could amount to a representation.  In the absence of evidence of any such representation having been made, I reject DIO’s case based on this alleged representation as well.

89.  In any event I find it inherently improbable that someone would see it as necessary to expressly mention (or ask about) the existence of a licenceduring negotiations.  It may be something often assumed in negotiations, in the same way that when one is introduced to a barrister one would normallyassume that he had a practising certificate, but that is another matter (and inthe context of this case, I repeat that DIO has expressly dropped the challengebased on illegality).  I have never heard of a client asking counsel whether he had a practising certificate or counsel expressly telling a client that he had a practising certificate.

90.  In coming to the above conclusion and in rejecting DIO’s factual case, I have not lost sight of Mr Sussex’s remarkable and admirable effort in conducting a tenacious and damaging cross examination of Kane Yang.  I have taken full consideration of Mr Sussex’s challenges against Kane Yang’scredibility and his submissions made to me in that regard.  Those, however, do not avail him.

91.  Mr Sussex’s cross examination of Kane Yang can largely be divided into two major heads:

(1)   cross examination concerning the “Eminent group”; and

(2)   cross examination concerning certain documentation disclosed by Eminent.

92.  At the risk of over‑simplification, the purpose of cross examining Kane Yang on the “Eminent group” was to demonstrate that Kane Yang habitually engaged in the practice of boasting, business “sweet talking” and claiming to be something that he really was not.  Mr Sussex SC had considerable success in doing so.

93.  It was demonstrated that Kane Yang had, in an exaggerated and boastful manner, publicized the “Eminent Group” (of which Eminent was a member) as if it were a sophisticated financial group.  Kane Yang wastaken to a number of documents (such as internet printouts) which contained the names of Eminent entities.  Mr Sussex SC handed up a sheet of paper which contained the names of four Eminent entities (apart from Eminent) — ‌Eminent International (Asia Pacific) Limited (a Hong Kong company), Eminent Asset Management Limited (a BVI company), Eminent Investments Limited (either BVI or Samoa) and Eminent Investments Group Ltd (BVI).  However, none of these Eminent entities (apart from Eminent) were active or functioning.  Mr Sussex SC is also correct to suggest that Kane Yang had no (or little) investment banking experience and for him to call himself an investment banker (which he did) was misleading.

94.  I am unimpressed by Kane Yang’s attempt to explain away the misleading picture portrayed by the website printouts and other documentation put to him in cross examination.  He tried to shift the blame to others and disowned responsibility for the misleading contents.  I find his explanations incredible and reject them.

95.  But to show that Kane Yang was a sweet talking and boastful charlatan does not positively prove anything.  At most it shows propensity to exaggerate or to say things that suit his purpose at a particular point in time.  I dare say there are people in many occupations and professions whoshare the same characteristic (and maybe some of them were very successful).  A positive case cannot be proved by simply discrediting the other side’s evidence or by showing that the other side has a general propensity to boast or lie.  He who asserts must prove.  If DIO’s evidence had been moreplausible and satisfactory, then Kane Yang’s propensity to lie may be somethingto be thrown in the balance with some weight.  However, on the facts of this case DIO’s evidence of misrepresentation in this case is so weak that even if I were to throw Kane Yang’s propensity to boast or lie in the balance and even if I were to disbelieve his explanations concerning the “Eminent Group”in their entirety, I cannot legitimately turn that (whether by itself, or cumulativelywith the other points that Mr Sussex SC had urged upon me — see below) into a point which bolsters or improves DIO’s case.

96.  The same point applies to an email dated 20 March 2009 from Kane Yang to Simon Sew of Royal Bank of Scotland, in which Kane Yang said that Eminent (it was not clear which entity) was a Hong Kong based investment banking boutique and advisor to a US$100 million asset management and had purchased distressed as a (sic) sole or jointly, and in the coming week it was scheduled to buy US$7 million bond and US$9 million asset and also they were negotiating with hedge funds.

97.  The fact is that at that time none of the Eminent entities was advising any fund.  Kane Yang excused himself by reference to a possible transaction with Busan Mutual Savings Bank (eventually nothing came of it:in another part of his evidence he told me that Busan Mutual Savings Bank was under investigation and the senior officer eventually went to jail) that he was hoping to happen, his use of Blackberry and bad grammar.  He accepted it might be misleading grammatically but not a lie.

98.  The email was indeed misleading because it gave the false impression that it had already purchased distressed assets and was alreadyadvising a big fund which was already in existence.  There is a huge difference to talk about what you wanted to happen and what has in fact happened.  The former could just be a dream; the latter connotes real track record.  The email does show a propensity to boast.  However, for the same reasongiven above, even if I were to throw this into the balance (whether by itself orwith other points urged upon me by Mr Sussex SC — see above and below), it does not sufficiently boost DIO’s case or CEO Kim’s evidence about the misrepresentation so as to persuade me on a balance of probability that a misrepresentation has been made.

99.  The other strand of Mr Sussex’s cross examination was based on internal communications/e‑mails within Eminent (except two — an email sent from Mr Baek’s email address marked exhibit “D7” and another series of email between Kane Yang and Mr Baek dated 13 November 2008), on which Mr Sussex SC sought to place an interpretation which supports, or was consistent with, a scenario where Kane Yang had made a representation that it had a fund, or had promised to make a direct investment.

100.  For these documents, I make the broad point that all of them were ambiguous and ambivalent.  They were capable of different interpretations.  Kane Yang may not be able to explain most or all of them satisfactorily.  But at the end of the day the points against the credibility of DIO’s case are so strong that even if I were to place these statements (plus Kane Yang’s unsatisfactory explanation) in the balance, the totality of the evidence still does not amount to proof on a balance of probabilities that the representation has been made.

101.  By way of illustration, and to do justice to Mr Sussex SC’s carefully crafted case, I now address the more important points about these documents which were relied on by Mr Sussex SC in his written closing submissions.

102.  Mr Sussex SC first referred to an email which was disclosed by DIO during the course of the trial marked exhibit D7.  It was dated 12 September 2008 and sent from an email address bnl1202@hanmail.net to an address jbkim@dslko.com.  It is in the following terms:

“ Dear Mr. Kim

I really appreciate your all hospitality during the meeting and getimpressed your products and profitability. Please allow us to contact the Mr. Kim to follow up the possible information.

Since Put Option is just around corner faster information we got,early feedback we can get you our possible investment or another alternatives

1. CB Contract copy (eng)

2. Name of the CB Investor (eng)

3. overseas sales projection (eng)

4. Business information (eng)

5. analyst report from Korean security house like

Sincerely Yours

Kane Yang”

103.  According to CEO Kim, the email address of the recipient was his previous email address.  His current email address was different but at thetime of the email he was using both addresses.  The sender’s email address is said to be that of Mr Baek’s.

104.  This email, on its face, is an email sent by Kane Yang toCEO Kim. CEO Kim, however, testified that it was Mr Baek who forwarded theemail to him, the suggestion being that it was first sent by Kane Yang to Mr Baek (though addressed in its text to CEO Kim) and then Mr Baek passed it on.

105.  The point that Mr Sussex SC seized upon is this.  This email was sent after the meeting in August between the parties.  It referred to “our possible investment”.  It is said that read in context this could only be a reference to an investment by Eminent.  It is therefore said to support the suggestion that a representation has been made by Kane Yang to CEO Kim at the August meeting.

106.  The email (D7) was not disclosed by DIO prior to trial.  It was only produced by Mr Sussex SC on day 4 of the trial.  The late disclosure was explained by an affirmation of CEO Kim dated 8 December 2014. In essence, he said that when listening to the evidence of Mr Baek in the witness box in court, he remembered that he should have received some formof communication from Mr Baek after his introduction of Kane Yang to him.  He therefore called TY Kim (who was in Korea) and asked him to check his(ie CEO Kim’s) office email inbox.  TY Kim located the email (D7) during thissearch.  CEO Kim believed that the reason why D7 was not located in previous searches during the discovery process was because D7 was sent to his old emailaddress as opposed to his new email address (which new email address hebegan to use in August 2008).  The email in D7 was located during TY Kim’ssearch this time because, according to DIO’s IT Department, emails sent tohis old email address (which would have included D7) were previously keptin a separate email server and this server had merged with the server containingemails sent to his new (current) email address in November 2013.

107.  In the same affirmation, CEO Kim offered to make available a computer for inspection by Eminent with a view to showing that the email was sent to his old email address from Mr Baek’s email account.

108.  Kane Yang was shown this email (D7) when he was cross examined.  He said he had searched his “sent” box but could not find anything he sent to Mr Baek.  He said he could not remember whether he had sent this email.  He also made some comments about certain odd features of the email which I shall come to in due course.

109.  Eminent also served a notice to dispute the authenticity of D7, and DIO contends that authenticity had been proved by CEO Kim who confirmed that he did receive the email.

110.  Having considered the evidence and the arguments presented by the parties, I have decided that I should not place weight on D7, for the following reasons:

(1)   The appearance of the email is high questionable.  If (as CEO Kim suggested) it was an email forwarded by Mr Baek to him, then the email printout should contain the heading of the original email (ie texts showing “From” Kane Yang’s email address and “To” Mr Baek’s email address).

(2)   However, the printout of D7 did not contain this.  The offer of a computer for inspection does not solve this problem, as it could at most show an email from Mr Baek to CEO Kim.  If the computer screen had shown the original text “From” Kane Yang “To” Mr Baek” then one would have expected such a printout to have been produced.

(3)   In the absence of texts showing the original “To” and “From” fields, there is nothing to indicate that the origin of the email in D7 was Kane Yang.

(4)   It may be said that the body of the email purported to state (at the end) that it was from Kane Yang, but the name of the sender at the end is typed in by the person sending that email.  At most D7 shows an email from Mr Baek’s account to CEO Kim.  The text could well have been typed in by Mr Baek or someone having access to Mr Baek’s email account.

(5)   These are matters that could have been explored with Mr Baek while he was in the witness box.  But D7 was only produced after Mr Baek had left the witness box (I understand that Mr Baek was in a hurry to leave Hong Kong to go back to Korea after his evidence).  Arguably it would have been open to Eminent toseek leave to recall Mr Baek for him to be further cross examinedby DIO about this email; or it would have been open to DIO tocall Mr Baek to give evidence about the circumstances under which the email came to be sent to CEO Kim (eg whether he or someone in his office typed it and sent it, or whether he received it and forwarded it).

(6)   But all kinds of difficulties would have arisen — whether he would have been compellable because he might have left Hong Kong, and how the trial progress would have been affected,etc.  As I understand it, neither party is running any argument about adverse inference (in the sense that the other side ought to have called Mr Baek to explain this email).  Even if I had to consider the question of adverse inference, it would have been sufficient for me to hold — which I do — ‌that given the last‑minute and sudden manner in which D7 came be produced, it was not unreasonable for Eminent not to recall Mr Baek.  The fact therefore remains that there is a gap in the evidence concerning the originator of this email and I am not satisfied that I can safely treat this as a “forwarded” version of an email sent originally by Kane Yang to Mr Baek (which was what CEO Kim would have me accept).

(7)   It was odd for Kane Yang to send an email to Mr Baek for him to forward to CEO Kim instead of directly sending an email to CEO Kim.  There is no evidence that Kane Yang did not know CEO Kim’s email address at that time.

(8)   It was also odd for Kane Yang to prepare the email in English, given that he knew how to type in Korean and given that CEO Kim was not fluent in English.

(9)   The language of CEO Kim’s affirmation (at paragraph 6) was that he started to “recall” that he should have received some form of communication from Mr Baek.  The use of “recall”suggests that he was recalling something that he had seen contemporaneously (ie at the time of the original receipt) rather than speculating that he might/should have received something.  But if he had truly seen the email in D7 at the time itwas purportedly forwarded to him (and if he had truly interpreted/understood it in the sense that he now wants me to attach to it),it is inherently improbable that he could have forgotten about it at the time of preparing for discovery, or that his memory would only be triggered when he saw Mr Baek give evidence in the witness box.  Even if D7 is authentic (in the sense of being genuinely an email emanating from Mr Baek’s email account and ending in CEO Kim’s old emailaccount), this is still a highly suspicious and improbable feature that I take into account in discounting the weight that I can attach to it.

(10)   Kane Yang had said that he did not recall sending the email to Mr Baek and therefore there could not have been any meaningful cross examination as to what he had meant by the words used in the email.  But even on the face of it, the words“our possible investment” could well be referable to an investment not using Eminent’s own funds, but an investment arranged by Eminent.  While Kane Yang was educated in the West, from my observations of emails he had composed (and which are in the bundles) there are still occasional English grammatical or linguistic oddities here and there, and it may not be safe to “strictly construe” the word “our” as meaning “to be made from Eminent’s funds”.

I should make it clear that I am not making any positive findings of tampering of documents or emails or forgery.  CEO Kim’s offer to have his computer inspected at most shows that his “inbox” contained the D7 email from Mr Baek’s email address.  Even if D7 is “authentic” as being an email sent from Mr Baek’s email account to CEO Kim’s email account (which I find it to be), there was a lack of evidence as to how the message got to Mr Baek’s account in the first place and how it got sent to CEO Kim.  My point is lack of evidence.  The chain of evidence leading to the eventual sending of D7 is not proved.

111.  Mr Sussex SC next referred to an internal email dated 16 September 2008 at 9:59 pm sent by Arthur Yang to Kane Yang. It contained an agenda for a proposed conference call with DIO.  One of the items is “Whether or not [Eminent] is going to take part in the allotment to the 3^rd party of DIO”.

112.  In cross examination, Kane Yang said that the agenda was simply a word by word delivery of what DIO requested from Arthur Yang.  It was submitted by Mr Sussex SC that this was indicative of the fact that a fund and direct investment had been discussed before.

113.  I do not agree.  The email is consistent with the scenario (see eg Kane Yang’s witness statement at §9) that DIO had wanted Eminent to offer an investment into DIO (but Eminent declined).  The fact that DIO wanted Eminent to invest (or asked whether Eminent would invest) is not necessarily indicative of the fact that Eminent had previously made a representation that it had a fund that could be used to invest.

114.  Mr Sussex SC then referred to an internal email within Eminent sent by Kane Yang dated 7 October 2008.  The recipients were Jung Lee, Christopher Song and Roger Chung.  It consisted of a Korean part and an English part. The Korean part, translated into English, reads as follows:

“ 3 per cent is the basis, but the part of investment created by fund should be excluded, and if we make investors to invest, then we should receive 3 per cent, let’s reserve 2 per cent for negotiation. Would it be better to go to Busan for negotiation?”

115.  The English part reads as follows:

“ Team, Don’t you think you need to go and back up Arthur’s sales? My thought is that if investment made by Eminent Asset Mgt., then there is no fee but if we raised fund from 3^rd party who directly invest Eminent Asia Pacific will charge at lease (sic) 2%”

116.  Mr Sussex SC’s main point of attack against Kane Yang is that in this email he contemplated the scenario of Eminent (or the Fund, whatever that may mean) making an investment (in contradistinction with Eminent procuring a third party to invest).  Kane Yang responded by saying that this was just an internal brainstorming email and he was discussing the possible scenarios and one of the things he was thinking of was to ask people to put money into Eminent Asset Management Ltd, creating a fund.

117.  I have difficulty in seeing how this email supports Mr Sussex SC’s factual case on misrepresentation.

118.  To begin with, one must bear in mind several aspects of DIO’s case:

(1)   According to CEO Kim’s evidence, he did not mention the representation about the fund in front of Christopher Song or Jung Lee. He did not regard these to be influential people in Eminent.  He would only talk about it with more important role such as Kane Yang, Arthur Yang and Roger Chung.

(2)   Jung Lee and Christopher Song were called by DIO as witnesses.  None of them gave evidence that they heard Kane Yang make the representation about the fund, or that they heard anyone mention such a representation to them subsequently.

(3)   Therefore there is no evidence that Jung Lee or Christopher Song knew (from witnessing it, or from being told) that Kane Yang had made a representation that Eminent had a fund which could be used to invest in DIO.

119.  Mr Sussex SC was not submitting that because Kane Yang knew that he had made a false representation to DIO he was, ex post facto, trying to ask his team members to really try to get together a fund so as to fulfil his previous (false) representation.

120.  He was also not submitting that Kane Yang was telling his people that he had told a lie to DIO and everyone else in Eminent should “put on a show” vis‑à‑vis DIO as if there was really a fund.  As I said above, there isno evidence that Christopher Song or Jung Lee knew of the representation.

121.  On DIO’s own case, none of the Eminent entities had any fund.  None of them was able to invest.  Therefore if he is right, Eminent people should not be internally talking about possibly investing into DIO at all (because they had no fund from which to take money to invest).  Mr Sussex SC has not satisfactorily explained to me how such discussions in the email are supportive of his factual case.

122.  It is no doubt odd that Kane Yang should be sending out such an email to his own team talking as if there was a fund (when there was not,and when his own team should know that there was no fund).  But DIO bearsthe burden of proof and the burden of articulating a case theory.  It is one thingfor there to be an oddity in the evidence; it is another thing to be able to turn that oddity in DIO’s favour by a plausible line of reasoning and case theory.  Mr Sussex SC has not given me such a line of reasoning.  And in anyevent, I would not classify Kane Yang’s explanation as entirely implausible.

123.  Indeed, standing back and looking at the matter from a higher level of generality, this difficulty (namely the lack of a coherent case theory as to what exactly Kane Yang was telling his subordinates to do and how it fits into the pleaded representation — not just pointing out some wishy washy oddity) permeates many other attempts by Mr Sussex SC to rely on “internal” Eminent emails.  He had not directly addressed the question of what exactly was in the minds of (i) Kane Yang and (ii) the recipients (given that according to DIO and CEO Kim, the making of the representation about the existence of a Fund was a “small circle secret” among very few senior people in Eminent, and people such as Christopher Song, Jung Lee did not know of the representation).  As I said, it is not Mr Sussex’s case that Kane Yang was trying to “remedy” his misrepresentation by asking his internal people to “put on a false show”, or to attempt to put up a real fund. I am left bewildered as to how these emails, odd they might appear, can positively support a case of misrepresentation.

124.  Mr Sussex SC then referred to a chain of emails in Core Bundle 1, tab 4.

125.  Materially, it started off with the email from Christopher Song dated 7 October 2008 to CEO Kim attaching the draft FAA.  Then there was a reply from TY Kim to Christopher Song (copied, among others, to Kane Yang) dated also 7 October 2008.  The terms are as follows:

“ Dear Mr. Kane Yang

We basically agree with your suggestion and definitely think your support is necessary for DIO’s future globalization in terms of financing, investors relation and mostly $30,000,000 funding as Mr. Kim Jin Beak and Mr. Kane Yang agreed.

However, we consider the first installation fee for FA agreement ismore appropriate to be made when both parties mutually establishspecific plans and details regarding the funding mentioned above including the 3% of the transaction fee.

Please advise us with your opinion.

Also we wish to amend some of terms in FA agreement.  The amendment requests shall be forwarded soon.”

126.  Then there was an email from Kane Yang on 7 October 2008 to his “internal” team in Eminent (Roger Chung and Jung Lee) (on DIO’s case, Roger Chung knew of the misrepresentation but Jung Lee did not).  It is in the following terms:

“ As you can see DIO reply (I expected exactly), they want me to address firm commitment or exact output expectation by engage this agreement.

If we don’t negotiate it then this discussion will be a zero some however if we clearly differentiate between Eminent Asia Pacific and Eminent Asset Mgt., it will be winning game. They see me as whole this is the risky of this project.

If we signed this agreement (I don’t see much problem signing) but there is no funding it demolish my credit and reputation ethically but not legally.”

127.  Lastly Kane Yang followed up with another email on the same day (to Roger Chung only) as follows:

“ I really hope for T’s investment for Melfas so that I don’t have to jeopardize my reputation and credit.

I’m sure closing US$30M by end of November for DIO is impossible under current situation.”

128.  The key document in this chain on which a lot of time and effort was spent on “construing / interpreting” was the one sent by Kane Yang to Roger Chung and Jung Lee where he talked about “demolishing his credit and reputation ethically but not legally”.

129.  The language of this email is oblique.  The grammar (and even spelling) is not always ideal.  Mr Sussex has tried his best to put a “spin” (or interpretation) on this email which suits his factual case.  His interpretationwas that at some stage in the negotiations Kane Yang had mentioned the nameof Eminent Assets Management and had “dangled” before DIO the prospectof Eminent Assets Management investing its fund in DIO.  The case theorywas developed in a series of questions put to Kane Yang in cross examination:

“ Q. What it means is if we sign up to the agreement and the fundingthat you have dangled before DIO doesn’t eventuate there will be no legal problem. They enter into a contract with [Eminent], there is no funding, that reflects upon your credibility, but there is no legal problem.

I suggest to you that this is what you’re saying there. ...

...

Q. ... What you’re encouraging your team to do, I suggest, is toensure that a contract is entered into with [Eminent] so that when there is no funding, as you have indicated there may well be, from Eminent Asset Management, there will be no come back ....

Q. The reason why you say ‘We must clearly differentiate between[Eminent] and Eminent Asset Management’, is that you are requiring your team to conclude a contract on behalf of [Eminent] ...

Q. Therefore, when the indication that you have given that Eminent Asset Management can make a direct investment, when that doesn’t happen ... there’s no legal come back?

...

Q. What I’m suggesting to you is that in order to secure this investment advisory business for [Eminent], you held out for DIOthe prospect of a direct investment by Eminent Asset Management Ltd from a fund which it managed.

...

Q. What I am suggesting to you is that in this context what you’re saying is, let’s sign up in the name of [Eminent] so that when the prospect that I have dangled before DIO does not occur, no funding from Eminent Asset Management Ltd, there will be no legal problem. It will demolish your credit and reputation ethically,what you are doing is unethical, you recognise, but you’re saying there’s no legal problem ...

Q.     — but I suggest to you that the confusion between the two arises because you have held before DIO the prospect of a direct investment by Eminent Asset Management Ltd ...”

130.  The problem with this case theory, irrespective of Kane Yang’s answers (which are unsatisfactory, to which I shall come) is that it was not DIO’s factual case.  DIO’s factual case (both in the pleading and in the witness statement of CEO Kim) was that Kane Yang represented that Eminent had a licensed US$100,000,000 fund which it (ie Eminent) could use to invest in DIO.  DIO’s case was not that Kane Yang misrepresented that Eminent Asset Management had a fund which Eminent Asset Managementwould or could use to invest in DIO.  CEO Kim did not mention being misled about a fund owned by Eminent Asset Management at all.

131.  Mr Sussex SC could have a much better argument if the email had said something to the effect that “DIO thought that Eminent had a fund which it would use to invest in DIO (because I dangled this in front of him) but please make sure that the legal documentation did not mention such a binding commitment; that way, even if Eminent did not make any direct investment, it would only hurt my ethics and credibility but there would be no legal recourse against Eminent because on paper, Eminent did not promise any investment”.  But that was not what the email said.

132.  Let there be no mistake about it: Kane Yang’s performance under cross examination about this cluster of emails is unsatisfactory:

(1)   He stuttered; he had long pauses; he rambled; he gave evasive answers; he blamed the language of the email on the fact that he was using his Blackberry.

(2)   Kane Yang did not dispute that the name of Eminent Asset Management did come up in the course of his discussions with CEO Kim.

(3)   Given that Eminent Asset Management was a company whichhad no active business and had no funds nor advisory service, I find it difficult why he should mention its name.

(4)   Kane Yang, in a series of answers which amply demonstratedhis quality as a witness which was most difficult to pin down,said that he raised it in the context of explaining to CEO Kim what Kane Yang was doing in relation to the securitization of ships for Samho.

(5)   To put it most charitably, I am sceptical of this explanation.  Any explanation about what he was doing for Samho need not have involved any mention of a specific company name.  Since Kane Yang’s meeting with CEO Kim was about provision of advisory services and had nothing to do with ships,any explanation about Kane Yang’s work for Samho could onlyhave been in the nature of introductory small talk.  I could see noreason for mentioning the name of Eminent Asset Management (or mention it to such an extent that CEO Kim got confused with Eminent).

133.  But even if I were to reject Kane Yang’s explanation, I do not think I can make any positive findings that the true explanation (or frame of mind) underlying the sending of the email is one which favoursDIO.  As I said above, rejecting one side’s evidence is one thing; accepting the other side’s evidence is another.  For reasons I have already explained, the wording of this series of email does not fit DIO’s case.  Perhaps the truth is somewhere in between.  It may well be that Kane Yang did “dangle” the name of Eminent Asset Management a bit in front of CEO Kim as part of his boastful and bragging nature.  It may be that Kane Yang wantedto portray an image for himself as an American educated financial whiz kidwith a chain of companies carrying fancy respectable sounding names.  Andit may even be that he did not want to frankly admit that he had so “dangled” the name of Eminent Asset Management in front of CEO Kim because he perceived that this would be embarrassing or would show him to be a boastful person or would hurt his case.  However, all these do not avail the party who bears the burden of proof (namely DIO) to prove his pleaded case         . 

134.  I should also add that out of the recipients of this series of email, some of them (eg Christopher Song and Jung Lee) did not witness the representation or know about it.  Mr Sussex SC faces the same difficulty (which I mentioned above) of coming up with a case theory which fits the wording of these emails into the minds of these individuals.

135.  In his written closing Mr Sussex SC changed tack slightly on this chain of emails.  He submitted that when taken together with the previousemail (the one which talked about “3% is the basis”) the message was plain, namely that if Eminent invested that there would be no commission, but if investors were found then Eminent would earn 3%, ie that Kane Yang was telling his staff that DIO thought that Eminent had a fund but he wanted to earn commission by finding third party investors.

136.  This is a very simplistic way of looking at the matter (ie Kane Yang had wanted to do things in a way to result in a commission to his company).  But it leaves many questions unanswered.  For example, is Kane Yangthereby “sharing” the secret of the misrepresentation with his staff such asJung Lee and Christopher Song (who, according to DIO, were not part of thesmall circle of people who were privy to the representation).  It is not DIO’scase that Kane Yang explicitly shared this fact (ie the fact that he had made arepresentation about existence of a US$100,000,000 Eminent fund and ability to invest the fund in DIO) with Jung Lee or Christopher Song.  Rather, it was leftto the individuals to “interpret” the emails and form their own conclusions.

137.  When the email of 7 October 2008 (the one about demolishing credit and reputation ethically) was shown to Jung Lee, he said that by this email “he’s saying it’s [the misrepresentation] already done”.  But the same time Jung Lee did not say that he himself has heard Kane Yang makethe misrepresentation to CEO Kim.  That would be a most unnatural way ofconducting his affairs: either Kane Yang had guarded the misrepresentation as a well‑kept secret, in which case he would not even have asked his subordinates to — in effect — help him to “perfect” his scheme at all.  On the other hand if he did not mind sharing with his subordinates then one would expect to find more explicit language telling his subordinates which he had said to DIO and how he expected his subordinates to co‑ordinateor conspire with him in order to facilitate his scheme.  Rather, Mr Sussex SC would have me accept that Kane Yang had chosen to ask his subordinates (having different degrees of knowledge about the representation) to go along with his scheme by a series of obliquely and obscurely worded emails.  I find that hard to accept and I do not accept it.

138.  In any event there is this oddity about Mr Sussex SC’s theory.  It is common ground that Eminent had no fund.  There was therefore no need for Kane Yang to remind his staff that they should work towards getting third party investors to invest in DIO (thereby earning 3% commission) rather than arrange for Eminent to invest (because it simply had no fund).  And if Mr Sussex SC ripostes that Kane Yang was asking his staff not to arrange for an investment by Eminent Asset Investment, then he falls into the same difficulty I mentioned above, namely that it is not DIO’s pleaded case that any misrepresentation had been made about a fund of Eminent Asset Management.

139.  I cannot help but think that the reliance on this series of emails is an opportunistic attempt by DIO to capitalise upon an odd cluster of documents (with perhaps eye catching words such as “credit”, “reputation”, “ethically” and “legally” which could form a fertile ground for cross examination).  It did embarrass Kane Yang and put him in a bad light.  But once the dust had settled and once one had paused to reflect after all the dramatics with one’s eyes firmly on the issue, it is readily apparent that this line of emails does not support DIO’s case.

140.  Mr Sussex SC then referred to an email exchange between Mr Baek and Kane Yang dated 13 November 2008 where Kane Yang explained to Mr Baek what was happening in terms of procuring funding forDIO, in response to a request by Mr Baek for a progress report.  The email reads as follows:

“ I fully understand Mr. Kim’s feeling and as everybody knows, the situation is getting much worse.

We (Eminent Asset Management) and I also are both in a state of panic.

For example, I have to explain this situation to the investors.

As you know, we need to have an investment committee approval. We cannot casually invest on our own. Therefore, 1) we are lookingfor partners continuously; 2) to get investment decision easy, wemake various options; 3) trying to match the Korean investors.

Meanwhile, AIG reviewed the investment and finally rejected theinvestment. One of the reasons is Mr. Jin Baek Kim’s evaluation and reputation. I do not know why but may be his reputation is distorted (this is a little bit critical).

Our stance is changed to watching current and additional progress and we will make a decision with further progress.

1) The present discussion with others

a) Blackstone—Amount of investment ($30M) is too small. (In this case, control of company may be mentioned comparing to current market capitalization). We willcheck it again this week or in the beginning of next week .

b) Islamic Bank — Initial data has been sent to this bankand it is checking the data now. We expect to receive reply within next week.

c) Others — I have not received detailed report yet.

2) Above all, the important things are the conditions of the investment.

a) How we finally check them is crucial

3) If conditions of Kyobo are better, this can be another choice .

4) Business records of this year and that of next year are very important for Eminent Asset Management.

a) We made a request for the official data.

That’s all.”

141.  In cross examination, and again after a good deal of unsatisfactory and evasive filibustering, Kane Yang explained that there was in fact no investment committee at that time and that he was simply trying to tell Mr Baek that there was no way of doing it (ie any direct investment).

142.  The email, while consistent with the fact that DIO was hoping for some kind of direct investment from Kane Yang’s side and with the fact that Kane Yang thought it necessary to explain to DIO why no investment was forthcoming from his end, is again not supportive of DIO’s pleaded case of a misrepresentation by Eminent that it had a fund which could be used to invest in DIO.  In Kane Yang’s email he specifically mentioned that“We (Eminent Asset Management) and I also are both in a state of panic.”  (my emphasis)  It is consistent with a scenario where Kane Yang had previously mentioned Eminent Asset Management as being the entity having the capacity to invest.  That was why he had to mention Eminent Asset Management in this email.  But that is not the pleaded representation.

143.  It cannot be said that Eminent might still have made some kind of representation about someone having a fund which could be used to invest and it did not really matter who exactly was said to be the holder /‌owner / manager of the fund.  This is a wishy washy, sloppy easy of thinking to the effect that “as long as Kane Yang might have said something about a fund and about an Eminent entity then that is enough”.  The repercussions of this point are far wider than a mere matter of names:

(1)   The email was sent after the FAA.  It did not on its face mention the timing of any discussion which gave rise to DIO’s hope.  It could very well have arisen out of things said after the FAA.

(2)   Even if some sort of representation about Eminent Asset Management had been made by Kane Yang, the question arises as to on whose behalf it was made.  It does not necessarily follow that it must have been made by Kane Yang on behalf of Eminent.  It could very well have been made by Kane Yangon behalf of Eminent Asset Management.  Alternatively it could well have been made in his personal capacity (along the linesthat I, Kane Yang, can procure one of my companies namely Eminent Asset Management, to make a investment in DIO).  Indeed it would be rather unnatural for Kane Yang to be making a representation on behalf of Eminent but about Eminent Asset Management’s capacity to invest.

(3)   There is, of course, a huge question mark over what exactly was said about Eminent Asset Management which made DIO hopeful of an investment.

(4)   I have not lost sight of the fact that I had been critical of Kane Yang’s explanation of this email.  But I repeat: rejecting one side’s evidence does not necessarily add to the weight of the opposing case.

144.  The matter was also complicated by the fact that the communication was through the intermediary of Mr Baek and there is noevidence of any response from DIO.  If (as DIO pleaded) the representationwas that Eminent (not Eminent Asset Management) had a fund which couldbe used to invest in DIO, then one would have expected to see a response from DIO raising queries as to why Kane Yang should bring in the name ofEminent Asset Management at all.  For example, one would have expected CEO Kim to raise the query that he (CEO Kim) was expecting Eminent to invest and he did not understand why Kane Yang was suddenly dragging in Eminent Asset Management.

145.  As is often the case in the context of an adversarial fight in court (and as I have said above), the truth could well lie somewhere in between.  It could well be the case that more things are said by both parties than theyhad cared to put before me.  But that is just a fact of life and litigation —‌ I repeat: he who asserts must prove.  DIO bears the burden of pleading and proving its case that Kane Yang on behalf of Eminent had made certain representations about its fund and its ability to invest.  It failed to meet that burden.

146.  I have not forgotten the fact that other witnesses had given evidence as well.  In my view their evidence is of limited probative value.  Apart from the general comments on individual witness I have made above, I have the following further observations:

(1)   I had already described the situation about Mr Baek’s witness statements.  Mr Baek was clearly caught in a very difficult position and torn loyalty.  I place no weight on his evidence in relation to the issue of representation.

(2)   I accept Mr Suen’s submissions in §13 of his Opening submissions that as far as Jung Lee is concerned he said he had not personally heard Kane Yang make any representations to DIO, and as far as Christopher Song is concerned he was not involved in the negotiations regarding the co‑operation between DIO and Eminent.

147.  The above is sufficient to dispose of the point about misrepresentation.  But Mr Suen further submitted that in any event there was no causation, in that the evidence (in particular, CEO Kim’s answer in cross examination) shows that even if the representation about a US$100,000,000 fund had not been made, DIO would still have retained Eminent by signing the FAA.

148.  This point would only arise if I were wrong in my factual conclusion that Kane Yang had not made the misrepresentation about the existence of the fund as alleged.

149.  I do not accept Mr Suen’s submissions in this regard.  While it has been said that “but for” causation is required if one seeks to rescind a contract on the basis of negligent or innocent misrepresentation (Chitty on Contracts (32^nd ed) Vol 1 §7–038), the absence of “but for” causation is not a defence in cases of fraud (Chitty, supra, §7–039).  It is sufficient if there is evidence to show that it had some impact on the thinking of the representee.  If (contrary to my finding) CEO Kim’s evidence about the misrepresentation is to be accepted then I regard such evidence to be evidence which fulfilled the above requirement.

150.  Mr Suen further took a point about lapse of time, in that even if there was a right to rescind for misrepresentation, such right would have been lost within a reasonable time of discovering the misrepresentation.  To resolve the question of when DIO first discovered the misrepresentation, Mr Suen invited me to prefer Mr Baek’s evidence (who said that the misrepresentation was discovered in March 2009) to that of CEO Kim (who said that he discovered the misrepresentation in 2011 and only learnedof the legal right to rescind after seeing DIO’s lawyers DLA Piper in 2012)       .

151.  This calls for an almost impossible piece of mental gymnastics from me.  I have rejected CEO Kim’s evidence about the fact of the misrepresentation and this must carry with it a rejection of his evidence as to when he first found about that the representation was false.  I can only dealwith this aspect of the case by saying that if, contrary to my reasons above, I have wrongly rejected CEO Kim’s evidence on misrepresentation and his evidence on that is to be accepted, then there does not seem to me to beany basis for treating other parts of his evidence differently and therefore his evidence as to when he first discovered the falsity and DIO’s legal right to rescind should likewise be accepted.

152.  In relation to the misrepresentation defence, there are other documents, emails and arguments which the parties had referred to in the course of the trial (especially during cross examination).  I have highlighted and discussed what I regarded to be the more important ones.  Insofar as I have not mentioned any of the other documents, points or items of oral evidence that the parties had urged upon me, it is because in the overall scheme of things they did not add to or affect the points that I have already considered.  For the avoidance of doubt I have had regard to all the pointsthat the parties had urged on me by way of written and oral opening, writtenand oral closing, as well as points made during cross examination of witnesses.

Discharge by repudiatory breach

153.  I now turn to deal with the defence based on acceptance of repudiatory breach.

154.  The alleged repudiatory breach is said to consist of Eminent’s failure or inability or unwillingness to perform any of its duties under the FAA from around June 2009.  The alleged acceptance of the repudiatory breach was said to be by way of DIO’s email dated 30 December 2009 which is in the following terms:

“ Dear Kane Yang,

Subject to the Rain II addendum dated February 10, 2008 to the Financial Advisory Agreement between DIO and EIAP, DIO Corporation has paid EIAP US$70,000, as an advisory fee on February 27 2009 for services to be rendered. Accordingly, sincethis agreement has been entered into between both parties and theUS$70,000 payment has been made, virtually no activities and/or communications have been engaged by EIAP during the past 10 months with regard to the advisory assignment. DIO thereforeofficially notifies EIAP that the Rain II addendum as being invalidand in breach. DIO officially requests that EIAP refund immediatelythe full US$70,000 advisory fee to DIO as DIO’s year end accountingand external audit reporting is closing on December 31. DIO herebyofficially requests EIAP to respond to this request and to acknowledgethe invalidity of the agreement between DIO and EIAP and requests a full refund as soon as possible. Thank you.

Kind regards,

Tao Young Kim / Senior Director

DIO Corporation”

155.  Apart from the above email, there is another piece of contemporaneous documentary evidence of note.  That was an email dated16 June 2009 sent by Roger Chung on behalf of Eminent to DIO as follows :

“ Dear Chairman Kim, CEO Kim & DIO Team,

Hope that things going very well and by any chance if DIO is stilllooking for capitalization I would like to resume the conversation with you

If there is any capitalization needs let us know ASAP since Eminent Investments Asia Pacific or EIAP has been inquired from an Investor asking new condition of Investment.

By the way, our long years of employee, Chris Song and Jung Lee both being layoff this month thereafter, Chris, Charlie and Jung have no any further authority to represent and or to act on our behalf for any transactions whatsoever, and we will not be responsible or liable for any of his acts and activities since then.

Thank you for your attention.

Faithfully Yours,

Roger Chung”

156.  There is evidence that this is a standard form email which had been sent to other clients of Eminent.  The trial bundles contain an almost identically worded email from Roger Chung to Bong Woo Lee and others of a company called Melfas.

157.  There are two issues here, first, whether there had been any repudiatory breach and second, whether it had been accepted.  I shall first address whether there had been any repudiatory breach.

158.  In terms of whether there had been a repudiatory breach, DIO put the matter as follows:

(1)   No work was done after May 2009 by Eminent to seek funding for DIO as envisaged under the FAA. DIO was not even able to make contact with Eminent from May 2009 onwards.

(2)   Eminent was unable and/or unwilling to perform its duties under the FAA from June 2009 onwards because it terminated the key staff handling the DIO project and also changed the nature of its business to distressed fund management.

159.  It is important to appreciate the nature of work or services required of Eminent under the FAA.  The FAA does not, in terms, stipulate any particular items of work that must be rendered or delivered by anyparticular date or dates.  Most if not all the items of services required under the FAA would have required a collaborative process.

160.  On the facts of this case, the evidence of CEO Kim is that after the April 2009 telephone conference with Dentsply and Eminent, he had two conversations with Christopher Song (see §§65 and 66 of his witness statement) about whether Dentsply had any interest in investing in DIO and Christopher Song told him that Dentsply was not interested and he then reminded Christopher Song that DIO had paid Eminent significant fees and he expected renewed efforts by Eminent to find investors.  Those conversations were challenged in cross examination.  He maintained his evidence.  Christopher Song gave evidence about the first telephone call (when CEO Kim called him) but did not give any evidence about the second telephone call (which, according to CEO Kim, was one initiated by Christopher Song).

161.  CEO Kim also said that after receipt of the email dated 16 June 2009 he called Roger Chung and Kane Yang but could not reach them.  He called Christopher Song, and was told that Eminent was not exploring any other capital raising opportunities for DIO.  Christopher Song said he would ask Kane Yang to revert to CEO Kim but Kang Yang did not call at all.  He was told by Christopher Song in about mid‑July that he was no longer employed by Eminent and the entire financial advisory team of Eminent had been laid off and he did not know what Kane Yang was working on.  CEO Kim said that he then tried to contact Kane Yang directly but was unableto reach him even though he had left a message with Kane Yang’s assistant.It was as a result of the above that he asked TY Kim to send the email dated 30 December 2009.

162.  I reject DIO’s case that there had been a repudiatory breach.

163.  First, as I said above, performance of the FAA involved a collaborative process.  DIO could not just sit back for some time and then suddenly say that Eminent had not done any work for it.  DIO seemed to recognize this, and CEO Kim had given evidence (see above) as to the efforts he had made to ask Eminent to continue to look for investors.  However, I reject that evidence (including any evidence that he had asked Christopher Song to relay any message to Kane Yang).  There was no contemporaneous documentary support for that.  In this day and age of easywritten instant communications (such as email) it is difficult to accept that a senior businessman such as CEO Kim would be content to just keep trying to call someone without making some effort to put his demands in writing “for the record”.

164.  Second, DIO’s case is inconsistent with the 16 June 2009 email sent by Roger Chung of Eminent to DIO.  If Eminent had no intention to perform its duties under the FAA to look for investors it would not have sentthat email to DIO asking whether DIO was still looking for capitalization.

165.  It may be said that the 16 June 2009 email was a standard form email also sent to others (at least including Melfas), and that the main focusseemed to be to tell others that certain employees had already left Eminent and had no authority to represent Eminent.  That may be so, but that is nothing to the point.  Even if it is a standard form email and mentioned the departure of certain personnel, it did further offer to resume conversation if DIO had further capitalization needs.  There is nothing on the face of the email to suggest that the offer was not a genuine offer or that if the offer had been taken up by DIO, it would not be carried out by Eminent.  In any event there is no evidence that at the time CEO Kim actually knew thatthe email was a standard form email.  Reading it objectively, the email ought to have conveyed the message to CEO Kim that if he had any specific needs, he should convey those to Eminent.

166.  Third, if CEO Kim had really been trying to “reconnect” with Eminent about his demand for Eminent to look for investors there was no reason why he did not just reply to the email (rather than, as he said, to justmake phone calls for which there is no documentary proof).  No satisfactoryexplanation had been offered by CEO Kim as to why he had not undertaken this simple task.

167.  It is strictly not necessary for me to determine why DIO had not taken up Eminent’s offer to look for investors or otherwise provided instructions to Eminent to look for financing, but insofar as it is necessary for me to do so, I am of the view that this was because by the time of the 16 June 2009 email, DIO’s cashflow need had already been resolved (at least for the time being) by Rain III and Rain IV (ie the buy / sell agreements involving the options held by DKR).  CEO Kim said that after Rain III and Rain IV, DIO still had cash needs.  That may be so, but at least the key cashflow pressure posed by the bonds held by DKR had already been alleviated.  There is no objective documentary evidence that any other cash needs were urgent.

168.  Likewise I reject CEO Kim’s evidence that after the email hemade the phone calls after receipt of this email.  If (as he suggested) he had interpreted the email as indicating that Eminent had somehow “disabled”itself from performing the FAA, there was no reason why he did not or couldnot put his feelings or disappointment or frustration in writing to Eminent     . 

169.  Lastly I reject the argument that by terminating the employment of what DIO called the “key advisory staff” or by changing its direction towards managing a distressed fund, Eminent was evincing an intention not to be bound or to perform the FAA.  There is no evidence that Eminent had made a business decision completely to switch to managing distressed funds.  In any event even if it had so decided, the contractual obligations under the FAA would remain.  There was no stipulation in the FAA that the services must only be carried out by certain named individuals.  There were still staff members in Eminent who could carry out those services (for example Kane and Arthur Yang).

170.  There is nothing unusual in the business world for companies to change their business focus or direction and take on no new work under the “old” line of business, but still continuing to perform any outstanding obligations incurred under contracts entered into under the “old” line of business.  Of course if it did not perform those obligations when called upon, or did not perform the obligations up to contractual standards, the client may have whatever legal remedies it has under the law.  But that is a separate thing from saying that termination of staff or change of business direction by itself evinces an intention not to perform.  Anyway that was inconsistent with the 16 June 2009 email.  And as I said above, if this had really been something genuinely bothering CEO Kim, he ought to have, and would have, complained.  The fact is that he did not.

171.  In case I am wrong on the above and that there had indeed been a repudiatory breach by Eminent, I am of the view that the 30 December 2009 email, properly interpreted, was not an acceptance of the repudiatory breach        .

172.  That email did not refer to the FAA.  It referred to the Rain IIaddendum dated 10 February 2009.  That was in fact the wrong date because the Addendum was dated 15 January 2009.  Be that as it may, there is no dispute that the email referred to the Addendum.  It also referred(and referred only) to the US$70,000 paid under the Addendum.  It did not refer to services to be provided under the FAA, but just to those to be performed under the Addendum.

173.  The context of the email and the reference therein to the Addendum and the refund is this:

(1)   The Addendum mentioned, as part of the services covered, apossible secondary listing of DIO.  But afterwards the idea ofsecondary listing idea was dropped by DIO.  This was apparentfrom a meeting memorandum of a meeting held on 29 January 2009 among CEO Kim, JC Kim, Arthur Yang and Mr Baek.

(2)   DIO thought there was some room for revision of the Addendum.  There was an email dated 7 February 2009 from Kane Yang toRoger Chung and copied to CEO Kim, Kane Yang said that heknew that Chairman Kim wanted the Addendum to be revisedsince the secondary listing would no longer be pursued but he (Kane Yang) had copied the email to CEO Kim to ask him how exactly he would like to amend the Addendum.

(3)   In a trip report prepared by Eminent in respect of the telephone conference with Dentsply on 9 April 2009, there was a note which said chairman of Rain (that is, Chairman Kim of DIO) wanted to write a simple and revised Rain II contract but there had been no follow‑up since.

174.  The email dated 30 December 2009 should be viewed against the above background.  By referring only to the Addendum, it was perfectly consistent with it being an attempt (albeit a misguided one — work on secondary listing did not take place, not because of any unilateral breach by Eminent but because DIO changed its mind) to pull out of the Addendum on the ground that no work has been done on the secondary listing.  The request for refund only asked for a refund of US$70,000 but not for the refund of other sums paid under the FAA.  The reference to “no activity for ten months” clearly suggests that the focus of the complaint counted from February 2009 (10 months prior to the email), which was when any work for secondary listing was to have begun (but for the change of mind by DIO not to pursue it).  It could not have been a reference to any alleged lack of activity or work in respect of the FAA because as late as April (eight monthsprior to the email), work was still being done by Eminent on the FAA by way of lining up the telephone conference.  Therefore the 30 December 2009 email was, on its proper interpretation, not a clear and unequivocal statementthat DIO was treating the FAA and the Addendum (which amended the FAA)at an end because of repudiatory breach consisting of lack of work in finding in investors.

175.  Mr Sussex submitted that since the Addendum was not a self standing agreement but it only amended the FAA, a reference to terminating the Addendum must be taken as terminating the FAA as well.  I reject that submission.  On the facts of this case in view of the reference only to the Addendum and also the background of DIO’s attempt to revise the Addendum to take out secondary listing from its ambit, I do not think that the 30 December 2009 email can have the effect attributed to it by Mr Sussex SC      . 

176.  Lastly, although my decision has not been influenced by this point, my conclusion is reinforced by the fact that this defence was only added by way of amendment and was not in the original defence.  If at the time of first formulating its claim it did not even occur to DIO that by its own 30 December 2009 email it intended to call off the whole FAA, then I am rather reassured that I am not really doing DIO any injustice by ruling that objectively interpreted, the 30 December 2009 email did not have that effect.  (Lest there be any misunderstanding — I of course know full well that documents are to be objectively construed: the point I just made is realty a reality cross‑check.)

177.  I therefore reject the repudiatory breach defence.

“Effective cause” and contractual interpretation

178.  I now turn to the last of DIO’s defences, namely that in order to earn the success fee Eminent had to be the effective cause of the transaction with Dentsply, or that Eminent’s introduction of Dentsply in April 2009 was not to the transaction which ultimately took place.

179.  The first question to resolve in this context is the proper interpretation of the agreement.

180.  To recap, the clause which provides for the earning of success fee is clause 2(vi), which provides as follows:

“ TRANSACTION FEE: Upon completion of any transaction for the Company. The Company agrees to pay the Financial Advisor a success fee including and not limited to a three percent [3%] of the total transactional amount tied to any financial transaction related to Fund Raising or Private Placement or Shareholder restructuring, or Mergers & Acquisition for the Company.”

181.  As to earning of such a fee after the termination of the FAA, clause 3(i) of the FAA provides as follows:

“ The Company agrees that within a period of two (2) years after a termination of this Agreement, should the Company complete a transaction including and not limited to an secondary listing or fund raising with only third parties or receive funds from a financing source introduced by the Financial Advisor, the Company shall pay Financial Advisor its fees according to this Agreement or and any executed amendments thereof or a generally accepted market compensation in case the transaction compensation method is not explicitly stated in this agreement.”

182.  Clauses such as clause 3(i), providing for the earning of a transaction or success fee within a certain period after the termination of a contract, have colloquially been referred to as “tailgunner clauses” (see eg“In the Line of Fire” 160 NLJ 1370).  However, there is no automatic rule that applies immutably to such clauses.  The meaning of each tailgunner clause is ultimately a question of construction of the specific wordings used.  Different tailgunner clauses could well yield diametrically opposite constructions.  Case law has, however, laid down some basic principles governing the construction of such clauses.

183.  Mr Sussex SC referred first to Bowstead and Reynolds on Agency (18^th ed) at §7–027 where the editors remarked:

“ Subject to any special terms or other indications in the contract of agency, where the remuneration of an agent is a commission on a transaction to be brought about, he is not entitled to such commission unless his services were the effective cause of the transaction being brought about.”

(It should be noted right at the outset that this passage is not concerned witha tailgunner clause.  It concerns clauses governing the earning of success fees.  It is still relevant to the consideration of tailgunner clauses because if, on the proper construction of the relevant contractual clause or as a matter of implied term, a party is not entitled to claim success fee even during the pendency of an agreement, it is difficult to see how he can have a legitimate claim to the fee by relying on a tailgunner clause.)

184.  Sometimes cases speak of implying an “effective cause” requirement.  Sometimes they speak of an “interpretation” exercise to arriveat a requirement of “causal or proximity”.  Though it has been observed insome cases that sometimes these two concepts overlap, there had been cases where courts had explicitly refused to read in a “causal or proximity requirement” by a process of construction but yet are prepared to imply a term as to “effective cause” (see eg MSM Consulting Limited v United Republic of Tanzania [2009] EWHC 121 (QB) §§137 – 139 per Christopher Clarke J)     .

185.  The rationale of implying an “effective cause” requirement is often said to be the need to avoid the client having to pay commission to more than one agent, each of whom can be said to have “introduced” a purchaser but only one of whom can be said to be the effective cause of thetransaction: see County Homesearch v Cowham [2008] 1 WLR 909 at §13per Longmore LJ, citing Woolf LJ in Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18 (who, on the facts, refused to imply a term as to effective cause because the clause in that case contained the added words “with whom we have not been in previous communication”       ).

186.  The question of interpretation (as opposed to implied term) of clauses concerning earning of success fees has been considered in Foxtons Ltd v Pelkey Bicknell Ltd [2008] All ER (D) 328 (Apr).

187.  The clause in that case provided that:

“ Where Foxtons acts on your behalf as your sole agents, you will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time unconditional contracts are exchanged :–

with a purchaser introduced by us during the period of our sole agency or with whom we have had negotiations about the propertyduring that period; or with a purchaser introduced by or offering via another agent during that period. ...”

It was held that “purchaser introduced by us” in the clause meant, as a matterof construction, “a person who becomes a purchaser as a result of the agent’s introduction” and not “any person who at some time in the future become a purchaser”.  The difference is that under the latter (rejected) construction the agent would receive his fees even though the purchaser’s purchase, or even his interest which gave rise to the purchase, owed nothing whatsoever to Foxtons (the agent).  The former construction (accepted by the Court) involved requiring Foxtons (the agent) to have introduced the person to the purchase rather than to the property.

188.  Lord Neuberger in the Court of Appeal said:

“ 26.   Secondly, the consequences of Foxtons’ interpretation could be somewhat surprising.  If a client put his property on the marketthrough Foxtons (on a sole or multiple agency basis), then withdrew it and subsequently put it back on the market through other agents two years later, it would seem that, if those other agents happened to find a purchaser who had been introduced by Foxtons to the property two years earlier, Foxtons would nonetheless be entitled to their commission, even if that person may have had no interest in the property when introduced to it by Foxtons.  The fact that there was no connection between Foxtons’ efforts and the ultimatesale would be irrelevant, on Foxtons’ case, as would the passage of time, especially in the light of the words ‘at any time’.

...

29.   Thirdly, it appears to me that my preferred interpretationaccords better with such relevant guidance as there is in the casesas to the language used in the Terms.  In John D Wood at 25K–L,Nourse LJ considered ‘the familiar meaning of the word ‘introduction’ in the context of the phrase ‘introduction of a purchaser’.  He concluded that the phrase could ‘only mean the introduction of the person who ultimately purchases, not to the property, but to thepurchase, or, if you look at it from the vendor’s angle, to the sale;in either case to the transaction that takes place’.  While this was an observation made in the context of the estate agency contract in that case, it is to be noted that it immediately followed the quotation of a short passage in an earlier edition of Bowstead, which used the words ‘introduces’ and ‘introduction’.”

189.  In John D Wood & Co v Dantata [1987] 2 EGLR 23, a vendor (a Nigerian prince) was faced with competing claims for commission by two estate agency firms.  The provisions of the two agreements are similar.  One of them provided:

“ We should like to confirm that if we are successful in introducing a purchaser with whom a sale is completed you will be prepared to pay our fees, which are three per cent of the total sale price ...”

The other agreement provided:

“ Whilst writing we would also confirm that in the event of our producing a successful purchaser on the terms quoted or on suchterms as may prove acceptable to you a commission at the rate of two and a half per cent on the price realised plus VAT will become payable to us.”

190.  Nourse LJ said:

“ In truth I think that there is but a single question to be answered: which of the two firms introduced the chief to the sale? Both language and authority establish that that question must be answered by answering this further question: which of the two firms was the effective cause of the sale? Here I would gratefully adopt the following statement of the law in Bowstead on Agency,15^th ed, at p 230, to which the learned judge referred:

‘...the fact that one agent introduces a person who ultimately purchases after a later introduction by another agent will not necessarily entitle the first agent to commission. In such a case the court must determine which of the two agents was the effective cause of the transaction taking place.’

The difficulties in clarifying the mind on this question are, I think, caused by the familiar meaning of the word ‘introduction’ as the bringing together of two people who have not previously met.  Thus it is natural, when looking at the word in its present context,to attach significance to the first bringing together of the property and the person who ultimately purchases it.  But the full phrase is ‘the introduction of a purchaser’ and I think that that can only mean the introduction of the person who ultimately purchases, not to the property, but to the purchase or, if you look at it from the vendor’s angle, to the sale; in either case to the transaction which ultimately takes place.  And if you then apply the primarydictionary meaning of ‘introduction’, you find that what you are looking for is the leading or bringing in of the purchaser to that transaction.  That makes it clear that first acquaintance is not paramount and it explains why the test is expressed by reference to the effective cause of the transaction.”

191.  In MSM (supra), the clause was (see §28):

“...The Commission Fee will be payable by the Client upon completion of the purchase of a property which we have introduced to the client or representative of the Client. ...”

192.  The language of the clause is different from that in Foxtons in that the clause in MSM referred expressly to purchase of a “property which [MSM had] introduced to” the client.  This therefore precluded the court from construing the clause to mean that the property must be purchasedas a result of the introduction.  However, Christopher Clarke J was still able to imply a term as to effective clause into the agreement.  He articulated several reasons for it. One of them is as follows:

“ 144. Fourthly, if no such term is implied, some surprising consequences would, as in Foxtons’ case, follow. Tanzania could find itself having to pay commission years after the event in respect of a property originally introduced by MSM, in which Tanzania had had no interest whatever, but which it later purchasedin completely changed circumstances. Moreover it could find itself doing so if all that MSM had done was to assist representatives of Tanzania in viewing a property. This could amount to no morethan telephoning to arrange a single visit on a property introduced by another agent or already known to the High Commission.”

193.  I pause to note that this reason was separate and distinct from the “minimize risk of double payment of commission” reason often given in the cases (and which in fact was given by the judge as his third reason).

194.  An argument was made in that case that if such a term were to be implied, it could work detrimentally against the agent because after the agenthad introduced a property to the client, the client could terminate the agreement(pursuant to the contractual provisions in that case) and this would preventthe agent from being the effective cause of the eventual purchase.  A similarargument can be made in the present case against implication of an effectivecause requirement, especially in light of the existence of the tailgunner clausewhich explicitly contemplates that fees could still be payable for transactions entered into two years after termination.  It may be said that to imply an effective cause requirement would rob the tailgunner clause of effect because Eminent could not realistically be the effective cause of any transaction two years after termination.

195.  As to such an argument (on the facts of MSM), ChristopherClarke J said (at §§146 – 149):

“ 146. Mr Aliker, for MSM, submitted that the provision in clause 5— that the obligation to pay the commission fee does not extinguishon the termination of the agreement if the client purchases a property which was introduced to the client by MSM — is inconsistent with the implied term relied on.  A client could terminate the contract and thereafter purchase a property which MSM had introduced in circumstances where someone else was the effective cause of the purchase.  If the agreement contained the implied term allegedthe fee would not, in those circumstances, be payable.  In that casethe supposed entitlement to a commission fee in respect of a propertyintroduced by MSM, notwithstanding termination, would be nugatory.

147. I do not accept this submission.  It assumes the point in issue, namely that the parties intended MSM to be entitled to commission if it had introduced the property even if it was not the effective cause of the purchase.

148. The provision for termination on one month’s notice coupled with an implication that the agent must be the effective cause of the purchase could work disadvantageously to the agent  He mightintroduce a property and then find himself unable to be the effective cause of the purchase because the termination of the agreement deprived him of the ability to act on his client’s behalf.  It could be argued that that militates against the implication of an effective cause term.

149. As to that, the fact that there may be cases in which termination has precluded the agent from becoming the effective cause of the purchase does not mean that terminationwill always have that effect.  An agent is not to be deprived ofcommission on a property which he introduced to the purchaser and of whose purchase he was the effective cause simply on the ground that by the time that the property was purchased the agency had come to an end.  Clause 5 makes clear that that is so.  Further in many cases it is the discoveryof the property that will be the effective cause of its purchase.  I note, also, that in Foxtons, the Court was not deterred by the four week termination provision from construing the agent’s terms in a manner tantamount to requiring the agent to have been the effective cause of the transaction.  Further, the trial judge had found that Foxton’s were the effective cause of the sale.  Although the Court of Appeal overturned that finding it might well not have done so if the facts had been onlyslightly different (e.g. because Mrs Low, the eventual purchaser, had been interested in the house produced by Foxton’s from the start and, having initially decided on another property, reverted to it later).”  (my emphasis)

196.  In other words, the risk that a principal could unjustly preclude an agent from earning his fee by terminating the agreement cannot be overplayed.  If an agent has already done enough work to earn his fee beforethe termination (say, because the amount and/or quality of work done already amounted to “effective cause” for a transaction subsequently entered into), he will still be able to claim the fee despite termination.  If his work has not reached the threshold of “effective cause” at the time of termination then he simply cannot claim it and there is no injustice in precluding him from continuing to work on it.

197.  In the American context, Mr Sussex SC referred me to the decision of the US Court of Appeals in Vanguard Telecommunications Inc v Southern New England Telephone Company 900 F.2d 645 which provided guidance on the circumstances under which an “effective cause” term would be implied.  The Court observed as follows:

“ [37] The written agreement in this case does not contain a specificdefinition of how much effort would be required for Vanguard to earn a commission. New Jersey common law, though, presumes that when a brokerage contract is silent as to the servicerequired to earn a commission from a seller or buyer, a commissionwill be earned only if the broker was the ‘efficient producing cause’ of the sale. De Bendictis v. Gerechoff, 134 N.J. Super. 238, 339 A.2d 225, 228 (App. Div. 1975); Inventive Music Ltd. v. Cohen, 617 F.2d 29, 32 (3d Cir. 1980). This presumption is based on public policy intended to effectuate justice between the parties andis not intended to rewrite an agreement which the parties deliberately executed. See StevensonCo. v. Oppenheimer, 91 N.J.L. 479, 104 A. 88 (Sup.1918).

[38] To overcome this presumption, an agreement must containlanguage which explicitly negatives the presumption.  The contractlanguage presented must be ‘without qualification, and ... emphaticand specific in statement.’ Id. 104 A. at 88, see also Ettinger v. Loux, 96 N.J.L. 522, 115 A. 384 (1921); Martin Realty Co. v. Fletcher, 103 N.J.L. 294, 136 A. 498 (Sup.1927).  Absent language which specifically abrogates the common law presumption, that presumption prevails; commissions will only be awarded to a broker who was the efficient cause of the sale.”

198.  Likewise in Inventive Music Ltd v Cohen 617 F.2d. 29, Seitz CJof the United States Court of Appeals, Third Circuit stated the law as follows      : 

“ [10] On appeal, the defendants have conceded that the basis for the district court’s order was that, as a matter of law, Meadow was notthe procuring cause of the contract of sale. New Jersey applies the following test to determine whether a person has earned a finder’s fee:

‘ Ordinarily, for a broker to earn a commission ... he must establish that he was the ‘efficient producing cause’ in bringing about the sale — at least in the sense of causing the seller to negotiate with a customer, produced by the broker, who is ready, able and willing to perform, and where the transaction is later consummated without a substantial break in the ensuing negotiations.’ ”

199.  For Eminent, Mr Suen referred me to further authorities on the interpretation of or implication of terms in this context.

200.  First he referred me to what Lord Neuberger said in Foxtons at §31:

“ Fifthly, this case is concerned with Foxtons’ standard terms. Accordingly, one should lean in favour of a construction which favours their client, particularly in the field of domestic estate agency contracts, where the agent is an expert, often professionallyqualified, and normally legally advised, and the client will normallybe a lay person who will not seek legal advice on those terms. It is true that Foxtons’ freedom of manoeuvre in terms of draftingis cut down by the 1991 Regulations, but much of the drafting of estate agents' standard terms is still left to them.”

201.  In my view this passage cuts both ways.  On the one hand it is of course true that the relative position of the parties in the present case is notas imbalanced as in Foxtons in the sense that in the present case both partieswere business entities and DIO was not dealing as an underprivileged or ignorant consumer.  On the other hand, as DIO submitted at §64 of its opening submissions, the FAA was drafted by Eminent and, just like the standard terms in Foxtons, the court would construe the provisions contra proferentum in case of doubt or ambiguity.

202.  As to the need to imply an effective cause requirement in business contracts, Mr Suen referred me to Glentree Estates Limited & othersv Favermead Ltd [2010] EWCA Civ 1473 where Longmore LJ said at §18:

“ The judge came to the opposite conclusion because he thought that the cases (particularly Foxton) which required the introduction to be the effective cause of the transaction for which commission wasclaimed were too strong and the contrary indications in the contract were too weak to allow any other conclusion. He distinguished the Cooper case on the basis that the principal in that case had all the necessary staff and expertise to convert any introduction intoan agreed lease and he relied on the fact that Corfiducia at any rate initially, set out to purchase the property as a home for the Ecclestone family and must be treated as a residential consumer. As to the first point, all the cases recognise that the natural construction can be displaced by the express terms of the contract. The present contract is not a standard form of contract but made expressly for the purposes of the sale of a rather special property and in my view its terms do displace the normal construction. The second point derives from the first proposition in para 20 of Foxton where Lord Neuberger said that the implication that the introduction hadto be the effective cause of the transaction was very readily made‘especially in a residential consumer contract’. That is, of course, true but must be a somewhat weaker presumption when all the relevant parties are companies (no doubt created for business and/or tax purposes) and have access to sophisticated advice if they need it.”

203.  I take Mr Suen’s point that the presumption would be weaker in anon consumer context.  But on the other hand the judgment did not say that the presumption did not operate; only that it was weaker.  I shall bear that in mind.

204.  Mr Suen also referred me to Brian Cooper & Co v Fairview Estates (Investments) Ltd [1987] 1 EGLR 18 on another factor governing whether an effective cause requirement would be implied.  The clause in that case provided:

“ I confirm that, should your Company introduce a tenant by whomyou are unable to be retained, and with whom we have not been inprevious communication, then, should your applicants enter intoa lease, we are pleased to pay a double scale letting commission. ”

205.  Woolf LJ said:

“ However, Mr. Morrison, while not quarrelling in general with Mr. Chadwick’s construction, submits that in the case of a developerthe court should be substantially less ready to infer such an implied term. He points out a developer such as Fairview has its own sales staff and what they require is not so much the agent’s assistance to conclude a sale but the agent’s assistance in obtaining an introduction, and it is for the introduction that the commercial developer will beprepared to pay the commission. Mr. Morrison is unable to point toany authority which precisely supports his submission but insteadrelies upon the general approach laid down by the House of Lordsin the Luxor case as to the interpretation of clauses of this nature.

In particular he refers to another passage in the speech of Viscount Simon at page 119 where he says:

‘There is, I think, considerable difficulty, and no little danger,in trying to formulate general propositions on such a subject,for contracts with commission agents do not follow a singlepattern and the primary necessity in each instance is to ascertain with precision what are the express terms of theparticular contract under discussion, and then to consider whether these express terms necessitate the addition, by implication, of other terms ... in contracts made with commission agents there is no justification for introducing an implied term unless it is necessary to do so for the purpose of giving to the contract the business effect which both parties to it intended it should have.’

He also refers to passages in the speech of Lord Russell at page 124 and in Lord Wright’s speech in particular at page 130.

Adopting the approach laid down in these speeches in the House of Lords, but having as I must confess changed my mind more than once in the course of the admirable arguments which were presented on both sides in this court, I have ultimately come firmly to the conclusion that Mr. Morrison’s submissions and the decision of the learned judge are correct.  I can see no necessityin this case to imply a term.  On the contrary, I regard the relevantlanguage as being inconsistent with implication of a term imposing an additional implied requirement that the estate agent must be at least an effective cause of the lease being granted.”

206.  One specific point brought out by this case is that on the facts of some cases what a “principal” really needs is the act of introduction.  Once the introduction has been done, the principal has all the expertise and know‑how to continue and negotiate a contract: in these cases the principal should pay for the fact of the introduction.  However, in the present case, what Eminent had been trying to “sell” by way of its services was surely more than just making a mere introduction.  The scope of the services to beprovided by Eminent under clause 2 of the FAA was wide ranging and went beyond introduction.  DIO required advice and assistance in tapping (and structuring deals with) overseas parties.  Eminent offered to provide skills, advice and expertise, instead of the mere ability to arrange a telephone conference.  The facts of this case are a far cry from those articulated in thesubmissions of Mr Morrison which were accepted by Woolf LJ in that case      .

207.  One point that has been raised is difficulty of proof, the point being that after termination of contract, Eminent would not be privy to what had transpired between DIO and Dentsply and it would have no more role to play in bringing the parties together, and therefore it would be unfair to Eminent if it were required to prove effective cause.

208.  This is a point that was considered in the case of Edmond de Rothschild Securities (UK) Ltd v Exillon Energy PLC [2014] EWHC 2165 (Comm).  Boiled down to their essentials, the facts are that the defendant company had a shareholder which it regarded as troublesome and the defendant engaged the plaintiff to develop a strategy to persuade that shareholder to withdraw from activism against the defendant company.  The agreement provided for the payment of a success fee as follows:

“ 3 Fees and expenses

In consideration for the services set out herein, the Company agrees to pay to [Rothschild] a fee payable as follows:

a) a retainer of $50,000 per month, payable from [Rothschild’s] appointment (the date of this letter) and on the monthly anniversaries thereof, continuing for a minimum of 3 months or until the [Company’s] EGM, whichever is later;

b) a success fee of $500,000, net of the retainers paid under (a) if a resolution to the issues posed by Worldview’s requisition has been achieved, such achievement being assessed because one or more of the following has occurred:

i. Worldview has indicated a willingness to cease hostilities ;

ii. the prospect of future Worldview action is agreed between the Board and [Rothschild] to be remote;

iii. Worldview has reduced its shareholding in the Company to below 5%;

iv. a strategy has been developed that will be/can be implemented such that the negative impact of future Worldview action is agreed between the Board and [Rothschild] to be negligible; and

v. The Company has been able to successfully launch its proposed bond issue; ...

The Company agrees to reimburse [Rothschild’s] reasonable out‑of‑pocket expenses (including legal and travelling expenses) incurred in connection with the Transaction.  Such fees, costs and expenses will be payable within 10 days of [Rothschild’s] invoice and irrespective of whether the Engagement is completed.”

209.  Certain work was done by the plaintiff.  The agreement was then terminated.  The “troublesome” shareholder then sold its shareholding to a third party thereby reducing the shareholding to below 5%.  The plaintiff suedfor the success fee, claiming that the liability to pay success fee was triggered by the mere fact of reduction of the shareholder’s shareholding without the need to prove that the plaintiff was the effective cause of that reduction.

210.  The plaintiff’s submission was accepted by Males J, who said (at §§22 – 24):

“ 22. Save that I agree with Mr Midwinter that Rothschild derives no real assistance from clauses 7 and 14 which are capable of operating equally well on either party's construction, I accept Mr Twigger’s submissions as summarised above. In my judgmentthis is the natural meaning of clause 3(b)(iii). That natural meaning is powerfully supported by the considerations (a) that it will generally be difficult for Rothschild to prove that its work constituted an effective cause of a sale of Worldview’s shares even if that is in factthe case and (b) that it does not matter to Exillon why Worldviewdecides to sell its shares, what matters is simply that it has done so .

23. As to the difficulty of proof, the premise for the Engagement Letter was that Worldview was viewed as a hostile party whose co‑operation in explaining a decision to sell its shares was unlikelyto be available. The parties must therefore have contemplated that it would often be difficult, and might well be impossible, to tell whether a decision by Worldview to sell its shares was influencedto a greater or lesser degree, or indeed at all, by any strategy devised by Rothschild and that, even if Rothschild’s strategy played a part, it might well be impossible to evaluate how significant a factor that had been. No disclosure from Worldview would be availableand the only potential witnesses (the directors or senior managementof Worldview) would be unlikely to co‑operate. To construe theclause as limiting Rothschild’s right to a success fee to a case where it had been an effective cause would therefore condemn the parties (at best) to a dispute which it might be very difficult to resolve (the costs of which could easily be disproportionate to the relativelymodest sum at stake) and (at worst) to the injustice that even thoughRothschild’s work had in fact played a significant part in what might be a multifactorial decision, a claim to the success fee whichRothschild had therefore earned might well fail for want of proof .

24.   Mr Midwinter ripostes that any agent whose right to payment is dependent on proof that he was an effective cause of the transaction will face similar difficulties of proof, but I do not agree.  The typical agent will be able to point to his dealings with the third party and to the fact that the third party has concluded a transaction with his principal.  Even if there is no disclosure or witness evidence from the third party, the agent’s and the principal’s dealings with that third party together with evidence about the transaction finally concluded will be before the court.  In this case,however, these factors are not present.  There need be no dealings at all between Rothschild and Worldview, Rothschild’s role beingto provide advice to Exillon and to develop a strategy.  There will be no concluded transaction between Exillon and Worldview, butonly a sale of shares by Worldview to a third party in circumstances and for reasons which will often be largely unknown.”

211.  The “difficulty of proof” point influenced the court in that case to refuse to read in an “effective cause” requirement because of the special factual configuration in that case, namely that the shareholder in question was a hostile one and was unlikely to provide witnesses to explain whetherthe plaintiff’s work was an effective cause of the reduction of its shareholding.  The court in fact expressly contrasted the facts of that case with a “conventional” case (like the present) where the claimant for success fee makes a claim on the basis of a transaction between a third party (say, a purchaser found by him) and his contractual counterparty.  In such a case while there may be no evidence from the third party, there would still be evidence from the claimant as to the work it had done, and there would be disclosure and evidence from its contractual counterparty (often the defendant against whom a claim is made) as to the final shape of the transaction with the third party and how it was negotiated (thus casting light on whether the claimant was the effective cause).  Therefore “difficulty of proof” is not a factor which has much influence on me against implying an effective cause requirement in a “conventional” factual configuration such as the present.

212.  Drawing the strands together, I have the following observationsand views:

(1) It is at the end of the day a question of construction and implication of term on the facts of each case whether an agent or advisor can earn a “success fee” just by introducing a purchaser / investor, or whether there is any “effective cause” or “causal or proximity” requirement (whether as a matter of interpretation or as a matter of implied term).

(2) Where appropriate wording is used, parties could very well agreethat a fee is earned by the mere fact of introduction without more     .

(3) Case law and authorities cited by DIO in the context of agents are of relevance to the present case and I reject Mr Suen’s submissions in §199 of his closing submissions that those cases are inapplicable because Eminent was retained not as agent but as advisor.  In my view it matters not whether it was an “agent” or “advisor”.  The relevant point is that they concern situations where parties make claims for fees on the basis of transactions allegedly brought about by their work, whether by way of advice or introduction or otherwise.

(4) Subject to the terms and other indications in the contract, however, there is to be an implied term as to effective cause.

(5) One of the rationales (though not the only rationale) is the need to minimize the risk of multiple claims for commissions / success fees.  It may be said that on the facts of this case DIO was not faced with multiple claims and this rationale was not engaged, but this is not the way how the point (whether of construction or of implied term) should be approached.  As a matter of principle, points of construction / implied ought to be capable of resolved as at the time of formation of a contract.  At that time (namely time of formation of contract) it will not be known how the facts will unfold, or whether the principal would in fact face any multiple claims in future.  Therefore theconstruction / implied term exercise cannot depend on whethersubsequently the principal is faced with multiple claims.  Rather, it is the theoretical (or “in principle”) possibility of multiple claims that is relevant.  On the facts, looking at the matter as at the time of contracting, it was indeed possible for DIO to face multiple claims (say, if it were to terminate Eminent’s services and to engage a fresh advisor who then introduced DIO to Densply and then do a lot of work to complete a deal between them).  This rationale is therefore engaged.

(6) In any event, separate from the “multiple claims” rationale discussed above, another rationale is that mentioned by Christopher Clarke J as his fourth reason in MSM, namely the “surprising” consequence of having to pay commission for a transaction entered into in entirely changed circumstances (see also per Lord Neuberger in Foxtons §26, quoted above).  That would be apposite to the facts of this case (I am aware that Eminent has an alternative case that it is the effective cause anyway, but I am addressing the scenario where Eminent is not an effective cause).

(7) The factual configuration of this case is unlike Edmond de Rothschild.  Eminent and DIO can both provide testimony anddiscovery as to their dealings with Densply.  Difficulty of proof is not a point in Eminent’s favour.

(8) The facts of this case are also different from those in Brian Cooper(where a party had the necessary expertise to negotiate a contractafter the introduction has been effected and so what is importantis the fact of introduction itself).  In this case what DIO neededfrom Eminent was financial services and advice and not mereintroduction (and, as will be seen below, in fact a lot of further work had to be done in 2010 before the deal with Densply was finalised).

(9) On the wording of the transaction fee clause (clause 2(iv) in theFAA, and leaving aside the tailgunner clause for the time beingbecause one has first to work out how Eminent was to earn its feeduring the contract), the fee was earned “Upon completion of any transaction for the Company” (emphasis added).  This connotes active involvement and participation by Eminent in the transaction.  Therefore not only does it militate against a construction that mere introduction is enough, it in fact suggests that Eminent had to do something so as to enable to say that it has completed a transaction for DIO.  In my view either the clause should be interpreted as requiring Eminent to be an effective cause in completing the transaction (for which a fee is claimed);alternatively an implied term as to effective cause is to be implied . 

(10) This is bolstered by the two American cases discussed above (Vanguard and Inventive).  If the clause is silent on service required to earn a commission, the law would impose an “efficient producing cause” requirement (which I take to be equivalent to our equivalent of “effective cause”).

213.  I now turn to consider the effect of the tailgunner clause on Eminent’s ability to earn the transaction fee.

214.  First, in my view as a matter of common sense, Eminent cannot be in a better position (in terms of the need to prove effective cause) if the transaction in question took place after termination rather than before.  In other words if (say) a transaction took place in the eleventh month afterthe conclusion of the FAA (assuming no prior termination), Eminent wouldhave to prove effective cause (according to my ruling above).  Assuming thatthe transaction took place in the nineteenth month, or shortly after termination by notice, I can see no reason why Eminent can claim a transaction fee without having to prove effective cause also.

215.  Second, the language of the FAA suggests that Eminent’s entitlement to transaction fee is subject to the same requirements as if therehad been no termination.  This is because in the tailgunner clause after setting out the various examples (secondary listing, etc) it went on to say “[DIO] shall pay [Eminent] its fees according to this Agreement.”  This must mean Eminent’s fees as claimable and calculated according to clause 2(iv).

216.  Third, the cluster of scenarios mentioned in the tailgunner clause namely “a (sic) secondary listing”, “fund rising with any third parties” and“receive funds from a financing source introduced by [Eminent]” should be seen in their proper context.  They were mentioned not by way of exhaustive definition but by way of examples.  The defining phrase is “a transaction”.  However, it cannot mean any transaction.  In my view it can only hark back to the sort of transactions which, under the transaction fee clause (clause 2(iv) would have entitled Eminent to a fee had the FAA not been terminated.

217.  Fourth, even if one were to look at the content of those cluster of scenarios mentioned within the tailgunner clause, there is this feature:two of the three scenarios (namely secondary listing and fund raising with any third parties) did not contain any limiting phrase linking them to Eminent.  Only the third one (“receive funds from a financing source introduced by Eminent”) contained a reference to Eminent.  However, the examples cannot be taken literally because otherwise it would mean that if DIO entered into asecondary listing transaction which had absolutely nothing to do with Eminentor work done by it, Eminent would still be able to claim transaction fee against it.  Or it would mean that if DIO succeeded in raising funds with a third party that it identified without involving Eminent in any way, Eminentwould still be able to claim transaction fee.  That would make no sense.  Theonly way in which the scenarios can be rationalized is to read in the requirement that Eminent should be the effective cause for them.  And if the “effective cause” requirement is implied for the two scenarios of (i) secondary listing and (ii) fund raising from third parties, it must likewise be implied for the remaining one namely receiving funds from a financing source introduced by Eminent.  It is completely nonsensical and unnatural for the draftsman to want to internally distinguish among the three examples as to the application of the requirement of “effective cause”.  In my judgment the “effective cause” requirement is an overarching one, applicable to all three.

218.  It may well be said that if the contract contains a limiting factor of “effective cause” anyway, there would be no need to have a tailgunner clause because Eminent’s ability to earn a fee post‑termination would be taken care of by the “effective cause” argument.  It also raises the question of what would happen if a transaction was entered into (say) more than two years after termination but work done by Eminent prior to termination was the effective cause of that transaction — would Eminent still be able to claim success fee?  The point has not been argued before me but my tentative view is that the two year period could very well be a “long stop date” beyond which no fee would be payable for any services provided prior to termination.  This provides certainty to the parties and they would know that after two years there would be no more possibility of making or facing claims.  And in reality it would be rare for a transaction to be concluded two years after termination where the effective cause is work done by a party more than two years ago.  As I said, since the point has not been argued before me, this is my tentative view.  But on the facts and wording of the provisions in this case it makes more sense than a construction which awards a success fee to a party as long as a transaction occurs within two years of termination regardless of “effective cause”.

219.  Having made the above ruling on the real meaning and requirement of clauses 2(iv) and 3(i) of the FAA, the next step following from that is to ascertain on the facts whether Eminent was the effective causeof the transaction with Dentsply.  I accept Mr Sussex SC’s submission that on this, Eminent bears the burden of proving effective cause.

220.  The documentary evidence shows, and I am prepared to accept,that Eminent had liaised with UBS for the purpose of arranging for the telephone conference between Dentsply and DIO in April 2009.  Mr Sussex SCsubmitted that it was UBS which introduced Dentsply to Eminent in or aboutFebruary 2009.  However, while it is correct that Eminent liaised with Dentsply through the intermediary of UBS, DIO looked to Eminent to arrange for thetelephone conference with DIO.  It was up to Eminent to collate and organisefinancial and other information about DIO, and then utilise its connections(including such connections with UBS) to reach out to corporations to whichit would “sell” DIO and which it would introduce to DIO.  DIO might have known of Dentsply before that meeting (and irrespective of any work doneby Eminent), but that can be said of any big name corporations.  It does notmean that Eminent had not done work to introduce DIO to Dentsply in the sense of letting the senior management of DIO speak directly to senior management of Dentsply through the April 2009 telephone conference.

221.  It is submitted by Mr Suen that after the conference call, participants from Eminent and DIO thought that it went well; that even though Dentsply did not immediately enter into any transactions with DIO,the deal would only be held off for two quarters; that it was only put on hold(but not called off) because of Dentsply’s concerns over DIO’s constructionarm and that DIO intended to exit from construction industry in January 2010.  It was further submitted that the talks between DIO and Dentsply in 2010 were not talks on a fresh basis but a continuation of the discussions from April 2009.  Lastly it was submitted that Charlie Lee, who previously worked for Eminent on the Dentsply introduction in 2009, played a crucial role in concluding the transaction between DIO and Dentsply in 2010.

222.  To properly address the issue, it is important to “zoom in” on the events leading to, and after, the 9 April 2009 telephone conference in greater detail with specific focus on the discussions concerning DIO’s construction business.

223.  Prior to the telephone conference on 9 April 2009, Dentsply has apparently already indicated to DIO that it did not want to acquire DIO’s construction business and that it only wanted to acquire DIO’s dental implant business (see eg question 4 of a set of discussion questions — in effect a “crib sheet” — prepared in anticipation of questions that would be raised by Dentsply to DIO, and an email dated 3 April 2009 from Christopher Song to CEO Kim).

224.  Even earlier than that, before the Dentsply telephone conference was even on the horizon, Eminent had already raised with DIO the fact that potential investors were concerned about DIO’s construction business (see eg Christopher Song’s email to CEO Kim dated 17 November 2008).

225.  During the preparatory telephone meeting on 7 April 2009, Dentsply asked about the non dental side of DIO’s business.  Eminent explained to DIO that DIO planned to exit its non‑dental business completely and it was looking to “remove” such business completely in January 2010 (see a meeting memorandum recording the discussions that day).

226.  Then on 9 April 2009, a preparatory meeting took place in the morning, following by the telephone conference itself.  I can do no better than to set out the contents of a project update prepared by Eminent which recorded the contents of such discussions:

“ 9:30 am

At CEO’s room

Brief discussion about today’s schedule

+++++

10:00 am

At Conference room

Attendee:

Chairman Kim, Rain

CEO Kim, Rain

TY Kim, Rain

Charlie, Jung, Arthur, Chris, EI

Rain updates some recent developments

Rain’s Chain FDA is targeted to obtain by early June

Rain is about to sign up with a Chinese Dental distributor located in Ningbo, China (152 distributing offices + small manufacturing capability)

Dentium is in talk with a pharmaceutical company for sales, but Rain management is not interested

Regarding construction sector,

Rain’s management believes it is too difficult to separate now due to existing projects and asset separation.

Rain’s existing real‑estate asset and its value

Rain is trying to sell the Auto Gallary in Changwon area (valued price: KRW 25 bil, targeted selling price: KRW 20–22 bil )

Old factory at Yangsan: KRW 2 bil

Rain’s head office estimated: KRW 40 bil

Rain’s estimated effect if merged between RAIN–Diamond

Since Diamond sells high‑end priced implant, RAIN and contributeto fill the mid‑priced section to target emerging market such as China and India

In terms of domestic sales, Rain estimated about 1.5 × current sales”

227.  There was a short discussion at 1 pm involving DIO and Eminent but little turned on that.  Then the telephone conference took place at 8:00 pm    :

“ 08:00 pm

Conference‑call with Diamond

At CEO’s room

Attendee:

Mr. J.C. Kim, Chairman

Mr. J.B. Kim, CEO

Mr. TY KIM, Director

Mr. Bill Jellison, Diamond, SVP and CFO

Mr. JM Blanchard, Diamond, VP Corporate Planning &

Business Development

Mr. Roger Chung, Eminent

Mr. Charlie Lee, Eminent

Mr. Jung Lee, Eminent

Mr. Charis Song, Eminent

Mr. Arthur Yang, Eminent

Mr. Jon Santemma, UBS, Managing Director

Mr. Andy Clayton, UBS, Director

RAIN starts off

Following Chairman’s short intro

TY Kim delivers PPT

Question from Diamond focuses on

Rain’s implant products (i.e. type of rain’s main product being the submerged type)

Rain’s other dental products

Structure of typical construction projects and its profitability (Rain explains only 5 employees and outsources field employees. Also remaining liability and its plan to reduce liability going forward)

Rain questions about Diamond’s intention and rationale for interest

Diamond’s product is premium range like other top 5 market leaders

Reasoning for Diamond’s interest

In Korea, implant is well-penetrated and sizeable market

Lower cost alternative for low to mid price range product

Expand the product line in terms of pricing (Diamond also believes Dual‑Branding is needed, such as RAIN–DIAMOND )

After internal discussion among Diamond, EI and UBS will follow-up and possibly arrange a Rain and EI’s visit to Diamond in May

+++++

* other note: Rain’s Chairman wants to write a revised and simple RAIN II contract, no follow‑up since

Conclusion

Conference call cleared many details for both sides.  More detailedquestion will follow from Diamonds.  UBS and EI will follow up      ”

228.  Though Kane Yang was not recorded as being present in this document, he said that he was not in Korea that day and he dialled in.  I see no reason to reject that evidence.

229.  One point that can immediately be made about this telephone conference is that the discussions were very general and the parties were only at the stage of getting to know each other (and each other’s intentions) better.  No particular types of deals or transactions or manner of fund raising or financing or investment were raised or discussed.  It is a far cry from a simple case where an agent is asked to find a purchaser for a property and once a purchaser is found it is obvious to all that there is only one type of transaction contemplated namely a sale and purchase of property.

230.  After the telephone conference, there was a euphoric feel among DIO, UBS and Eminent.  They all thought the call went well.  However, things changed after Dentsply had informed them of its lack of interest.  I can do no better than to set out the contemporaneous emails because they are the best reflection of the mood prevailing at that time (and I so find).

231.  By an email from Jung Lee on 21 April 2009, he passed on a message from Dentsply:

“ From: Jung B. Lee

To: Charlie Lee

To: Kane Yang

To: Roger Chung

Cc: Christopher Song

Cc: Gerald Wu

Cc: Arthur Yang

Subject: Diamond Feedback

Sent: April 21, 2009 13:15

Per And Clayton’s phone call to me this afternoon.

Firstly, Diamond is appreciative of Rain time and effect in speak toDiamond two weeks ago. Also they see Rain as a very interesting opportunity with complementary factors.

The official feedback is that they would like to table this discussionfor the time being and would like to be kept in the loop as to theCompany’s development. For now, they are evaluating opportunities throughout the world and would like to keep this opportunity on hold given current market situations and other priorities.

Best regards,”

232.  Kane Yang wrote back on the same day:

“ So what is it? Plain English please.”

233.  Jung Lee replied on the same day to Kane Yang, copied to Charlie Lee and Roger Chung:

“ Soft drop language”

234.  Roger Chung replied:

“ This is a surprise for me as this is fairly different from the commentsthat I received from you. Anyway, what next and left for RAIN 2 please enlighten us.”

235.  Jung Lee replied to Roger Chung, copied to Kane Yang:

“ It is a surprise to me as well as CFO’s comments were quite positive at the end of the call. So it is not common that CEO or other senior executive had different thoughts than the CFO.

For next steps, Hurricane should get back to us this week as well.

After that we can speak to CEO and chairman about the current development and propose deal with control oriented funds like CVCI.  I think you went to that meeting with Charlie to see Gordon Cho right?”

236.  Kane Yang was unhappy and disappointed, as evident from his email in response on 22 April (copied to Jung Lee, Roger Chung and Charlie Lee):

“ This is real disappointment. Rain II was nearly 5 months of Eminent effort and how could possibly you guys let this happen .

I don’t understand answer of D and you said that Charlie can handle it well and he is the only long experienced bankers lead all development with confident.

I don’t’ see any positive synergy between cvci FROM Rain perspective. Make bullet points what possible scenario could be happened.

I’m not very happy with this.”

237.  Charlie Lee replied to Roger Chung, June Lee and Kane Yang:

“ Yes big disappointment to me as well. I did the best I could with Diamond. Both calls with Diamond went very well and everyone agreed. It is unfortunate but these things happen. Its not 100% dead but on hold for another few quarters (probably end of year) for Diamond.

Also, I heard back from Hurricane last night and they too will not be moving forward on Rain. They have non‑compete problems in s. korea because of their jv with chemlog. They expressed regret but it is a no go for hurricaine.

On cvci front, Roger and I met them as a last ditch effort to give them a chance to do something. They are not anxious to move quickly and would like to see q1 mkt shr data of rain vs ostem and dentium before they do anything. They are very impressed with what mgmt has accomplished and specifically our work on recapping to co. I think gordon is not able to make decision quickly. However, this would be a full buyout transaction if cvic did move forward and mgmt would be retained.

All in all bad news and disappointing but we did everything feasible in my view.”

238.  Then Jung Lee replied on 22 April to Charlie Lee, copied to Kane Yang and Roger Chung:

“ Dear Charlie,

Seem we need to clarify the situation and real status with the Chairman and CEO. Let us schedule a call tomorrow to inform them .

Our message from your e‑mail and Hurricane e-mail and UBS call should be below: (please add your comments)

Strategic Investors:

1) Diamond — CFO and Director of Business Development had high recommendation (since they presented the deal to CEO) to Diamond. However, the feedback was that Diamond is not able move forward at the moment due to their resource commitments and market environment. Likely after 2 quarters they can make more focused effort on this opportunity. They would like to be informed any developments at Rain in the meantime. 2) Hurricane— Director of Business Development also was positive about Rainand sent deal idea to his executive office and conducted legal checkwith respect to Camlog. Camlog is already selling their implants in Korea and therefore, Hurricane cannot proceed with this deal .

Private Equity:

CVCI and others may consider control acquisition given Rain’s credit profile has improved and sales growth in 2009 is high. There is a chance that PE may use Rain as roll-up vehicle to sell to Strategics in 2010 or 2011. Rain management team will be intact and will receive stock incentives.

Alternates:

From our Strategic List we should consider contacting the following companies this week:

1) Zimmer (appears to have no Asian presence)

2) Medtronics

3) Johnson & Johnson

Let me know what you think.  Ideally, we should do the call tomorrow.”

239.  A week later there was another chain of email correspondence.  On 29 April 2009 at 11:51 am, Roger Chung wrote:

“ From: Roger Chung (Maximus)

Sent: Wednesday, April 29, 2009 11:51 AM

To: Jung B. Lee

Cc: Amy Chan; kane@eminentinvest.com; Chris Song; Arthur Yang; Gerald Wu

Subject: Conference Call with Andy about RAIN April 29, 11.00–11.25 am

Spoke to Andy and he believes the rationales for Diamond does not want to move forward for RAIN discussion is:

1. They are still under early state development of International market penetration;

2. Early stage of emerging market penetration always posted high risk factors;

3. From a competitive dynamic point of view, even though RAIN is number 2 or 3 market player but they are far behind Osttem in terms of revenue and market shares;

4. Construction business always confused and complex the story, lower the transparency;

5. Deal size is too small.

I don’t think Andy is interest in continue to persuade RAIN project, more or less of the above reasons.”

240.  At 3:33 pm Christopher Song wrote back:

“ From: Chris Song

Date: Wed, 29 Apr 2009 15:33:35

To: Roger Chung

Cc: Amy Chan; kane@eminentinvest.com; Arthur Yang; Gerald Wu; Jung B. Lee

Subject: RE: Conference Call with Andy about RAIN April 29, 11.00–11.25 am

Dear Roger,

Please review the attached report.

Following is what I would suggest for next steps,

• Finish the report and send to RAIN

• Team have conf-call with Chairman and ask about next level of pursuit such as CVCI, Zimmer or else

• EI and Rain mutually decide on when to resume the project (now vs. in few quarters later)

Let me know your thoughts. Thanks

Regards,

Chris”

241.  The last word of Kane Yang on this chain of email is as follows   :

“ From: Kane Yang

Date: 4/29/2009 5:27PM

To: Christopher Song; Roger Chung

Cc: Arthur Yang; Gerald Wu; Jung B. Lee

My comment on these is simply, we won’t say nothing will be happen have them to say ‘holding’ ”

242.  The picture emerging from the contemporaneous communications is reasonably clear:

(1)   Dentsply’s response came as a surprise to everyone involved.

(2)   It was interpreted by Jung Lee as “soft drop”, ie a tactful way of turning down any request for investment.

(3)   DIO’s construction business was believed by Andy (of UBS) to be one of the reasons, though not the exclusive reason, why Dentsply did not want to move forward with any discussions with DIO.  Other considerations related to the condition of the market as well as DIO’s inherent attributes and Dentsply’s own resource commitments.

(4)   There is no suggestion or indication that a deal had already been hammered out or an understanding reached at the telephone conference, subject to DIO getting rid of its construction business by January 2010.  Nor is there any evidence that Densply had told anyone that this was what it had in its mind such that once this “obstacle” of DIO’s construction business has been removed, all would be well and then the parties could proceed to negotiate a deal.  In this regard I reject Mr Suen’s submission that “the deal” (whatever that “deal” may be — no details of any deal had even been hammered out) was merely put on hold due to concerns in DIO’s construction arm       .

(5)   Even for continuation of any discussions, it is not the case that it would or must resume upon DIO’s removal of its construction business.

(6)   Roger Chung did not think that Andy of UBS was interested in pursuing the project.

(7)   Christopher Song suggested that Eminent and DIO should mutually decide on when to resume the project.  It did not seem to be a case where a deal (or negotiations for a deal) was just put on hold pending the occurrence of a concrete event.

(8)   Kane Yang certainly did not interpret the events in a positive light, as if any negotiations would resume upon DIO removing its construction business.  He felt “awkward” in deciding what message to deliver to DIO.  His final message in the email loop(29 April) was an oblique “holding” message to be given to DIO.  I do not detect any hope or enthusiasm at all.

243.  The proof of the pudding is in the eating.  If it were genuinely thought that the only stumbling block was the removal of the construction business, then one would have expected Eminent to have followed up with DIO with specific reference as to how the removal was progressing (so that itcould report back to Dentsply).  It is not an answer that it (Eminent) had sentthe email to DIO on 16 June 2009.  As I mentioned above, from Eminent’sperspective and as a matter of language, it was a pro forma email and not “project specific”.  Had Eminent genuinely believed that the deal was just put on hold pending the removal of the construction business, one would expect it to have been more proactive in ascertaining the position.  After all, there was remuneration to be earned there.

244.  In any event, the fact of the matter is, as Mr Sussex SC had submitted based on CEO Kim’s evidence in this regard which accept, that when Dentsply invested in DIO in 2010 and even up till the time of trial, DIO still had a construction business.

245.  As to the deal that eventually materialised between Dentsply and DIO (there was at one time a suggestion from Mr Sussex SC that he would take a point that the investing party was a subsidiary of Dentsply but not Dentsply itself, but in the Re‑amended Defence and Counterclaim it was admitted by DIO that Dentsply made investment into DIO and therefore this point is not available to DIO), DIO’s case is that it started off from certain negotiations between Friadent (a Dentsply subsidiary) with DIO in around May 2010 in respect of an OEM arrangement and that it was Friadent which made the initial approach.  Charlie Lee (formerly with Eminent)had struck up a rapport with DIO during his time with Eminent and he was brought in by DIO to assist in communications with Friadant. Well into the parties’ work on the OEM front, in September 2010 Charlie Lee informed CEO Kim that Mr Bret Wise, CEO and Chairman of Dentsply, would like togo to Busan to visit DIO and DIO’s facilities.  It turned out after his visit to DIO’s facilities that Mr Wise wanted to explore a greater partnership with DIO because he was very impressed by what he saw at DIO.  Eventually the investment into DIO was made and an announcement was made.

246.  Mr Suen essentially seized upon three facts in his submissions     :

(1)   Many emails between the parties at that time involved very senior people of Dentsply (and not just management of Friadent   ).

(2)   Many communications between the parties could be read as referable to the initial contact they had during the telephone conference.  Even the codename “Diamond” was used.

(3)   Charlie Lee had played a crucial role in concluding the transaction between Dentsply and DIO.

247.  In my view none of these points assist Eminent in establishing that it was the effective cause of the Dentsply deal which eventually materialised.

248.  The fact that some of the emails at the time were copied to Mr Boehringer and Mr Sterkenburg (these are summarised in Mr Suen’s closing submissions at §230(1) and (2)) is not entirely unreasonable.  They were senior management of the parent company of Friadent.  In this day and age, to what individuals an email is “cc‑ed” could well be a matter of individual choice or corporate practice/habit.  The basic premise of Mr Suen’sargument is that it is an unusual (or remarkable) thing for email communicationsof a subsidiary to be copied to senior management of the parent and that suchcopying suggests that some other “deals” are contemplated with the parent as well.  I do not share that premise.  It depends on the “email culture” of the senders of the various emails.  Practical experience of email use tells me that there had been more indiscriminate use and copying of emails both in the legal world and the commercial world.

249.  In any event I accept Mr Sussex SC’s submission that Dentsply is a global company and it is common in such companies for those in management to have certain roles.  Both Sterkenberg and Boehringer had certain positions in the company which explained their receipt of the emails;put the other way round, Mr Suen had not shown me anything which made it odd or inexplicable for them to receive cc emails.

250.  Mr Suen referred to two emails (one from Bill Jellison dated 31 October 2010 and one from Charlie Lee dated 30 August 2009) where references were made to “[revisiting] the DIO opportunity” and “discussions have been spread out over a few years” and submitted that the parties were resuming negotiations that were put on hold after April 2009.

251.  I do not see how this point gets Eminent anywhere.  The emails did show that Dentsply recalled the introduction that had been made (and Bill Jellison even got the timeframe wrong — the telephone discussions were not “spread out over a few years” — there was just one phone call a year ago — and this shows how superficial and casual such courtesy phrases in emails can be) and that might make it easier for the parties to talk to each other.  But the fact is that they did not even embark on any “negotiations”in April 2009.  Any “opportunity” could only be on an extremely high level ofgenerality.  The fact is that no “deal” was on the table on 9 April.  The fact that they remembered each other from the telephone conference and they were renewing their old acquaintances is not enough: otherwise it means thata “but for” cause and a bare introduction is enough, but I have already held that “effective cause” is needed.  The fact remains that a good deal more workand discussions were needed before a deal took shape and was concluded.

252.  The same point applies to the use of the codename “Diamond”.  Such use cannot change the fact that no “deal” took shape on 9 April.

253.  Mr Suen’s point about Charlie Lee’s involvement in the discussions and negotiations is in fact a point against him. The evidence shows (and I accept) that Charlie Lee has done a good deal of work in liaising with DIO, Friadant and Dentsply.  Mr Suen’s points in paragraph 231of his written closing submissions demonstrated how much work had to be done in late 2010 to bring the parties closer to each other, as well as to structure and negotiate the eventual deal that materialised.

254.  For example there were emails:

(1)   dated 6 September 2010 from Markus Boehringer to Charlie Lee ;

(2)   dated 16 September 2010 from Charlie Lee to senior management of Dentsply; and

(3)   dated 20 September 2010 from Charlie Lee to Bill Jellison

in which an enormous amount of detail was gone into by way of provisionof further (and updated) information and discussion of the structure of the deal.  All these were not even on the horizon in April 2009.  It is quite clear that a lot of new work was done in 2010.  There was a visit to DIO facilities.  Up to date information was provided (financial fortunes of a company change all the time and it is a matter of common sense that businessman act on the basis of updated information, not on the basis of information seen a year ago).  Deal structure as to level of ownership was mooted and “dangled”.  It was such new work (and not that telephone conference plus any preparatory work that had gone before that in 2009) which effectivelycaused the deal in 2010.  To call that telephone call the “effective cause” of the deal would be an opportunistic misuse and abuse of the English language.

255.  Mr Suen asked me to find that the fee of US$400,000 paid by DIO to Charlie Lee was, contrary to CEO Kim’s evidence, not just for Charlie Lee’s role as a translator.  I accept that invitation.  I find that the US$400,000 was (at least in part) in respect of Charlie Lee’s help in assisting in the negotiation of the eventual deal.  But this is a point againstEminent.  It shows that a good deal of work (worth hundreds of thousand of US dollars) had to be done further in order to stitch up the deal.

256.  For the avoidance of doubt, I accept CEO Kim’s evidence that it was Friadant which made the first approach to DIO and then the negotiationsbetween the parties (whether between DIO and Friadant on the OEM front,or between DIO and Dentsply on the investment front) developed in the way he described: except that I think he had tried to downplay the role played by Charlie Lee.  As I said above, Charlie Lee’s role was more than that of atranslator.  He had done work to assist in the negotiation and completion ofthe deal but, for reasons I had already given, this fact does not assist Eminent.  It may even be that Charlie Lee had been assisting DIO in preparing its defence of Eminent’s claim but I cannot see how this can be material to whether Eminent (or work done by it) is an effective cause.

257.  Eminent therefore failed to show that any work done by it under the FAA is the effective cause of the eventual deal between Dentsply and DIO and it is therefore not entitled to the transaction fee.

Conclusion

258.  I reject the misrepresentation defence and the discharge by breach defence.  But I accept the interpretation defence and Eminent is not entitled to the transaction fee.  DIO’s counterclaim is dismissed.

259.  This is a case in which neither side is completely successful in terms of the issues raised.  I can well see scope for argument on the costs orderthat I should make.  The parties also had not addressed me in any great detail as to the form of order in the present scenario (ie where the FAA was not rescinded for misrepresentation or terminated for repudiatory breach, and DIO succeeded in resisting the claim to the transaction fee by reference only to the interpretation defence).  I shall leave it to the parties to work out the form of the order based on the holdings of law and fact set out above, and in default thereof they are at liberty to restore the matter before me (together with any costs argument).