AKTIESELSKABET DANSK SKIBSFINANSIERING (body corporate) v. WHEELOCK MARDEN & COMPANY LIMITED

IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 25 OF 1998 (CIVIL)

(ON APPEAL FROM CACV NO. 107 OF 1997)

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JUDGMENT

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Chief Justice Li :

I agree with the judgment of Lord Hoffmann NPJ.

Mr Justice Ching PJ:

I agree with the judgment of Lord Hoffmann NPJ.

Mr Justice Bokhary PJ:

I am in entire agreement on all points with Lord Hoffmann NPJ's judgment.

Mr Justice Fuad NPJ:

I agree with the judgment of Lord Hoffmann NPJ.

Lord Hoffmann NPJ:

1. A liquidity crisis

In 1982 the Wheelock Marden group was one of the great commercial houses of Hong Kong. It was involved in shipping, insurance, transport, retailing and property and had assets of over HK$6 billion. But the shipping subsidiary, Wheelock Maritime International Ltd ("WMI"), was in trouble. At a time when freight rates were high, it had ordered 22 new ships. In 1982 rates fell sharply and the company had difficulty in finding the cash to meet its commitments. By February 1983 it was facing a liquidity crisis.

The director principally responsible for the conduct of the business of WMI was Mr Robert Brothers. It fell to him to try to negotiate a moratorium with banks that had lent money for the purchase of existing vessels and to negotiate cancellations, deferral of deliveries or better financial terms with the yards from which new ships had been ordered and the institutions that had agreed to finance them.

2. Danish ship finance

The crisis coincided with the imminent delivery of a ship which had been ordered from a Danish yard. The financing was complicated because it included a substantial subsidy from the Danish government structured in a way which was thought not to offend the prohibition on state aid under European law. Putting the matter briefly, a state owned corporation called Aktieselskabet Dansk Skibsfinansiering ("ADS"), which is now the plaintiff in this action, agreed to lend WMI the full purchase price at a concessionary rate of interest, repayable in half-yearly instalments over 8 1/2 years. The loan was to be fully secured by a back to back deposit of a smaller sum by WMI, which carried a commercial rate of interest. The amount of the necessary deposit (which WMI agreed to borrow from Midland Marine Bank ("MMB") on the security of the vessel) was calculated so that the interest differential would enable the larger sum to be repaid over the 8 1/2-year term. Thus in effect WMI was to receive a subsidy represented by the difference between the price payable to the yard and the amount it actually had to borrow from MMB.

In March 1983 Mr Brothers negotiated a revision of these terms. MMB agreed to accept a deferral for three years of the commencement of capital repayments on its loan. But it lent a smaller sum. ADS agreed to bridge the gap by accepting a smaller deposit as security. The rest of its loan, amounting to about US$8 million, would be left substantially unsecured and repayable in a single instalment at the end of the 8 1/2-year period. On these terms the vessel, called the "Sealock", was delivered on 7 April 1983. A similar arrangement was made to allow the delivery of a second vessel ("Annalock") on 22 March 1984 except that the amount of the loan which ADS left deferred and unsecured was about US$4 million.

3. Insolvency and litigation

In the event, WMI was unable to trade out of its difficulties. In February 1985 there was a take-over bid for the Wheelock Marden group by Wharf, a group controlled by Sir Y.K. Pao which had shipping interests of its own. WMI was allowed to go into creditors' voluntary liquidation. Unsecured creditors like ADS were paid 16 cents in the dollar. In 1988 ADS commenced proceedings against the directors of WMI, including its parent company Wheelock Marden & Co. Ltd ("WM"), which it alleged had been a de facto director. It claimed that the directors had been guilty of fraudulent trading, contrary to s. 275 of the Companies Ordinance, Cap. 32 and should be held personally liable for the company's debts. It also claimed that Mr Brothers had induced ADS to enter into the revised arrangements by certain fraudulent representations about WMI's financial position and that WM was vicariously liable.

During the course of a trial which lasted over a year, it became apparent and was agreed that the question of whether the directors could be said to have traded with fraudulent intent turned upon whether they honestly believed that WM would provide the necessary support to enable the company to trade through the trough in the trade cycle and return to prosperity. The judge (Barnett J.) found that they did and dismissed the claim. He found, however, that Mr Brothers had been guilty of fraudulent misrepresentation by the deliberate concealment of certain information (a cash flow projection) which would have falsified the impression given by the rest of what he had said during the negotiations. The judge therefore held Mr Brothers and WM liable in damages.

The Court of Appeal, by a majority (Godfrey and Liu JJ.A, Le Pichon J. dissenting) declined to interfere with the judge's acquittal of the directors on the issue of fraudulent trading. But they unanimously allowed the appeal against his finding that there had been a misrepresentation, on the ground that there was no previous representation which had been falsified by the information withheld. They were unwilling, however, to reverse the finding of fact that Mr Brothers had deliberately and dishonestly concealed the cash flow.

4. The fraudulent trading appeal

In presenting an appeal against the dismissal of the claim based on fraudulent trading, ADS is faced with two formidable obstacles. First, the lower courts have made concurrent findings of fact, namely, that the directors honestly believed that WM would provide the necessary support to sustain WMI through its difficulties. Secondly, this Court is being invited, on the basis of the written record, to make a finding of fraud, which the judge who heard the evidence of the directors did not. The difficulties which face an appellant in either of these situations are well known. In Sky Heart v. Lee Hysan (1997-98) 1 HKCFAR 318, this Court expressly adopted (subject to an immaterial qualification on the relevance of local conditions) the Privy Council practice on concurrent findings of fact as stated in Devi v Roy [1946] A.C. 508. In the absence of special circumstances, the court will decline to review the evidence for a third time. As for the finding that there was no fraud, I need refer only to Akerhielm v De Mare [1959] A.C. 789, where the question was also whether an appellate court should have reversed a finding by the trial judge that a defendant had honestly believed in the truth of a representation. Lord Jenkins said (at p. 806):

"their Lordships are satisfied that this is not one of those exceptional cases in which an appellate court is justified in reversing the decision of a judge at first instance when the decision under review is founded upon the judge's opinion of the credibility of a witness formed after seeing and hearing him give his evidence...Their Lordships can hardly imagine a case in which the credibility of a witness could be more vital than a case like the present where the claim is based on deceit, and the witness in question is one of the defendants charged with deceit. Their Lordships would add that they accept, and would apply in the present case, the principle that where a defendant has been acquitted of fraud in a court of first instance the decision in his favour should not be displaced on appeal except on the clearest grounds."

Mr Purle Q.C., who appeared for ADS, nevertheless invited the court on three grounds to take the exceptional course of reviewing the findings of fact in the lower courts and substituting a finding of fraud. First, he said that the judge had applied the wrong standard of proof. Secondly, he had misunderstood the concept of dishonesty in fraudulent trading. Thirdly, his other findings of fact were inconsistent with any conclusion other than dishonesty. I shall consider these points in turn.

5. The standard of proof

Until the recent case of Re H. (Minors) [1996] A.C. 563 the leading English case on the standard of proof in civil cases in which serious allegations of misconduct such as fraud were in issue was Hornal v Neuberger Products Ltd [1957] 1 Q.B. 247. In a passage (at p. 266) often quoted in later cases, Morris L.J. approved the dictum of Denning L.J. in Bater v Bater [1951] P. 35, 37 that there must be a "degree of probability which is proportionate to the subject-matter". Lord Denning repeated the same formula in the House of Lords in Blyth v Blyth [1966] A.C. 643, 669. In R v Home Secretary, ex parte Khawaja [1984] A.C. 74, 114 Lord Scarman examined all the previous cases and said the same: "A preponderance of probability suffices but the degree of probability must be such that the court is satisfied."

The judge followed this line of authority. He said (at para. 5.3.1) that the civil standard of a balance of probabilities was appropriate but that "the degree of probability must be commensurate with the occasion and proportionate to the subject matter". He commented that in a case of fraud, this meant that in effect the standard was no different from "beyond reasonable doubt".

In Re H. (Minors) [1996] A.C. 563, 586-587 Lord Nicholls of Birkenhead pointed out that if proof is required on a preponderance of probabilities (i.e., a probability of >0.5 on a scale from 0 (impossibility) to 1 (certainty)), it is inconsistent to require a "degree of probability commensurate with the occasion". This suggests some other degree of probability, higher than >0.5, somewhere between the civil standard and the criminal standard, which the courts have wisely never attempted to define as a point on the probability scale. The correct analysis is that the court is not looking for a higher degree of probability. It is only that the more inherently improbable the act in question, the more compelling will be the evidence needed to satisfy the court on a preponderance of probability.

As an exercise in terminological hygiene, this analysis is, if I may respectfully say so, timely and faultless. But does it mean that the judge applied the wrong standard of proof? Did Lord Denning and Lord Scarman? I think that Barnett J. understood perfectly well what was required. In Hornal v Neuberger Products Ltd [1957] 1 Q.B. 247, 266, Morris L.J. put the matter in exactly the same way as Lord Nicholls of Birkenhead when he said:

"Though no court and no jury would give less careful attention to issues lacking gravity than to those marked by it, the very elements of gravity become a part of the whole range of circumstances which have to be weighed in the scale when deciding as to the balance of probabilities."

But he then went on to cite with approval Denning L.J.'s formulation in Bater v Bater [1951] P. 35, 37 and made the comment that there was no difficulty "if the words which are used to define that approach are the servants but not the masters of meaning". In R v Home Secretary, ex parte Khawaja [1984] A.C. 74, 112, Lord Scarman said that the argument was largely a matter of words and in Re H. (Minors) [1996] A.C. 563, 586 Lord Nicholls of Birkenhead said that his analysis substantially accorded with the approach adopted in the earlier authorities and provided -

"a means by which the balance of probability standard can accommodate one's instinctive feeling that even in civil proceedings a court should be more sure before finding serious allegations proved than when deciding less serious or trivial matters."

In my view there are no grounds for thinking that Barnett J.'s failure to adopt the analysis in Re H. (Minors) [1996] A.C. 563 (which does not appear to have been cited to him) meant that he adopted too high a standard of proof.

6. Dishonesty in fraudulent trading

The next point is that the judge misunderstood the notion of fraud in s. 275(1) of the Companies Ordinance, Cap.32. This reads as follows:

"If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the application of the Official Receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in manner aforesaid, shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct."

It is well established that the section requires proof that someone carried on the business of the company with a fraudulent intent and that the other directors sought to be held liable were knowingly party to his fraud. The judge dealt with and rejected a submission that the question of whether the business was being carried on with intent to defraud was an "objective" matter. He held, correctly, that the question of whether the person carrying on the business was fraudulent was subjective in the sense that he personally must have been dishonest. He said at para. 5.1.16:

"Fraudulent intent must be established subjectively after a careful examination of all the evidence. Even in what appear to be water-tight cases, fraud may not be found - simply an unjustified albeit honest 'chasing of the rainbow'."

and at para. 5.1.24:

"It is not, I think, necessary to dwell overlong on dishonesty or to conduct a lengthy analysis of the many cases to which I was referred. There is really no dispute about the law. The further a person departs from objective standards of honesty, the more likely it becomes that he is dishonest."

Both of these statements seem to me impeccable and merely form a background to what the parties and the judge agreed was the critical issue, namely whether the directors honestly believed that sufficient support from WM would be forthcoming.

The criticism of the judge's understanding of the law is based upon his citation of the Australian case of Hardie v Hanson (1960) 105 C.L.R. 451, from which the phrase about "chasing the rainbow" was derived. This was a case in which the judge had held a director of a company carrying on a retailing business liable because, according to the decree, he had caused the company to continue to trade and incur liabilities "without any reasonable prospect of being able to pay or provide payment therefor". The High Court of Australia said that this was not enough. The question was not whether there was a reasonable prospect of payment but whether the director was personally dishonest. Dixon C.J. said (at p. 461) that although he had "struggled on with the business after a time when in fairness to others and in wisdom" he should have wound it up, he had not been shown to be fraudulent. Kitto J. said (at p. 464) that "although he was clearly unjustified in his chasing of the rainbow" he was not shown to have had any intent other than to try to carry the business through its difficulties. Menzies J. said (at p. 467) that -

"even if the chances of payment of all creditors in full were so remote that it belonged to the realms of hope rather than belief, it seems to me that the fault, grievous though it may be, falls short of fraud unless it is coupled with something else, such as misrepresentation of the position or an intention to use goods purchased on credit for the purposes of dishonest gain, which gives it a fraudulent character."

The Australian judge whose decision was reversed by the High Court had applied a dictum of Maugham J. in In re William C. Leitch Brothers Ltd [1932] 2 Ch. 71,77:

"In my opinion I must hold with regard to the meaning of the phrase carrying on business "with intent to defraud creditors" that, if a company continues to carry on business and to incur debts at a time when there is to the knowledge of the directors no reasonable prospect of the creditors ever receiving payment of those debts, it is, in general, a proper inference that the company is carrying on business with intent to defraud."

The High Court did not think that this was a very helpful generalisation. I am bound to say that I agree. The question of whether a person carrying on the business was dishonest must depend, as Barnett J. said, upon an assessment of all the facts. In cases in which fraud is inferred, there is almost always, as Menzies J. said, "something else": a misrepresentation to creditors of the company's position or their prospects of payment or a dishonest intent to gain some personal advantage. In Re William C. Leitch Brothers Ltd [1932] 2 Ch. 71 itself, Maugham J. did not find fraud solely on the basis that there was no reasonable prospect of the creditors being paid. The defendant director, at a time when the company could not pay its debts, had ordered goods greatly in excess of the company's normal requirements so that they would be subject to the bank's floating charge and reduce the amount for which he would be personally liable on his guarantee of the company's overdraft. On these facts, it was not difficult to find that he had been dishonest. In R. v Grantham [1984] Q.B. 675, a case much relied upon by Mr Purle, the company had ordered potatoes from a supplier on 28 days credit for a total of ￡88,000. The company had no assets and no credit facilities. It sold the potatoes for ￡68,000 and distributed most of the proceeds among the directors. Lord Lane C.J. said:

"it was open to the jury to find, if not inevitable that they would find, that whoever was running this business was intending to deceive or was actually deceiving [the supplier] into believing that he would be paid in 28 days or shortly thereafter, when they knew perfectly well that there was no hope of that coming about."

So there was both an intention to gain a personal advantage and deception of the supplier. The judge had directed the jury as follows:

"Members of the jury, if a man honestly believes when he obtains credit that although funds are not immediately available he will be able to pay them when the debt becomes due or within a short time thereafter, no doubt you would say that is not dishonest and there is no intent to defraud but if he obtains or helps to obtain credit or further credit when he knows there is no good reason for thinking funds will become available to pay the debt when it becomes due or shortly thereafter then, though it is entirely a matter for you this question of dishonesty, you might well think that is dishonest and there is an intent to defraud."

The appellants in R. v Grantham [1984] Q.B. 675 argued, on the authority of Maugham J.'s dictum in In re William C. Leitch Brothers Ltd [1932] 2 Ch. 71, that it was not enough that the defendants knew there was no good reason for thinking that the debt would be paid when it became due or shortly thereafter. They could be liable only if, as Maugham J. said, " there is to the knowledge of the directors no reasonable prospect of the creditors ever receiving payment." They likewise relied upon a statement by Buckley J. in In re White and Osmond (Parkstone) Ltd. (unreported), 30 June 1960:

"In my judgment, there is nothing wrong in the fact that directors incur credit at a time when, to their knowledge, the company is not able to meet all its liabilities as they fall due. What is manifestly wrong is if directors allow a company to incur credit at a time when the business is being carried on in such circumstances that it is clear that the company will never be able to satisfy its creditors. However, there is nothing to say that directors who genuinely believe that the clouds will roll away and the sunshine of prosperity will shine upon them again and disperse the fog of their depression are not entitled to incur credit to help them to get over the bad time."

Arguments of this kind are a misuse of authority and the Court of Appeal in R. v Grantham [1984] Q.B. 675 treated them accordingly. Whether the directors have been dishonest is a question of fact in each case. Whatever the validity of Maugham J.'s generalisation that directors who carry on business when they know there is no prospect of the creditors ever receiving payment have an intent to defraud, he certainly did not mean that they could never have such an intent in any other circumstances. When Buckley J. said that it was manifestly wrong for directors to incur credit when it is clear that the company will never be able to satisfy its creditors, he too was not saying that there was no other way in which they could carry on business with intent to defraud. Likewise, as it seems to me, Mr Purle's reliance on R. v Grantham [1984] Q.B. 675 in this case is a misuse of authority. The fact that the judge could properly instruct the jury that it was open to them to find dishonesty in that case is of no assistance on the facts of this one.

In my view, therefore, Barnett J. was not misled by Hardie v. Hanson (1960) 105 C.L.R. 451 into adopting a heretical test for the fraudulent intent required by s.275. It seems to me an entirely orthodox decision. In fact, the very idea that a judge should consider himself compelled by statute or precedent to make a finding of dishonesty which he would not otherwise have made seems to me contrary to justice and common sense.

Finally, Mr Purle submitted that Barnett J. simply took too relaxed a view of the concept of honesty. In Royal Brunei Airlines Sdn v Tan [1995] 2 A.C. 378, 389 Lord Nicholls of Birkenhead said, in the context of accessory liability for a breach of trust, that:

"acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour."

So, Mr Purle says, it is not enough that the directors were acting honestly according to their own lights. They should have acted according to the objective standard of what an honest person would have done in the circumstances. He said that, by this standard, the judge's other findings showed that they had lamentably failed. Le Pichon J., in her dissenting judgment, took much the same view. She cited a remark of Maugham J. in Re Patrick and Lyon Ltd [1933] 1 Ch. 786, 790 to the effect that dishonesty was something which "according to current notions of fair trading among commercial men, [involves] real moral blame." That is, of course, true, but it seems to me that Le Pichon J. may have transposed the dictum into a proposition that conduct which involved real moral blame amounted to dishonesty for the purposes of s.275. For example, she says at one point in her judgment:

"Given the knowledge, were the Respondents stepping beyond the bounds of what ordinary decent people engaged in business would regard as honest? According to current notions of fair trading among commercial men, would gambling with a creditor's money be regarded as acceptable, involving no real moral blame?"

The first sentence is unexceptionable but the second can be answered in the negative without drawing any conclusion of dishonesty. While I quite accept that a defendant cannot be allowed to shelter behind some private standard of honesty not shared by the community, I think that there is a danger in expressing that proposition by invoking the concept of the hypothetical decent honest man. The danger is that because decent honest people also tend to behave reasonably, considerately and so forth, there may be a temptation to treat shortcomings in these respects as a failure to comply with the necessary objective standard. It seems to me much safer, at least in the context of an allegation of fraud, to concentrate upon the actual defendants and simply ask whether they have been dishonest. Judges or juries seldom have any conceptual difficulty in knowing what is meant by dishonesty.

In the present case, there is no suggestion in the judgment of Barnett J. that he thought the defendants had been honest merely according to some private standard of their own. Nor does he appear to have taken too relaxed a view of the requirements of commercial morality. Rather the contrary. I shall in due course come to his treatment of Mr Brothers in the matter of the missing cash flow projection, but in dealing with the question of costs he described the conduct of the directors as "cavalier" and said that ADS had been "shabbily treated". The fact that he did not go so far as to convict the directors of dishonesty does not mean that he did not understand what it meant.

7. Inconsistent findings

Mr Purle next submitted that the judge's findings of fact were inconsistent with any conclusion except that the directors were dishonest. In fact, he went so far as to say that in the light of those findings, the conclusion that there was no fraudulent trading was perverse. The matters relied upon are detailed at some length in the judgment of Barnett J., where they are said to reinforce a "powerful case" against Mr Brothers. They are summarised by Le Pichon J. in her dissenting judgment and spaciously developed by the appellants in their Case of 57 pages and a further Supplemental Case of 177 pages lodged in response to the respondents' Case. The practice of the Privy Council as stated in Devi v Roy [1946] A.C.508 is that the Board will not review concurrent findings of fact merely on the ground that the courts below did not accord appropriate weight to the evidence but that "the question whether there is evidence on which the courts could arrive at their finding" is a question of law. So, for example, in the recent case of Kwan v Ozer (1997-98) 1 HKCFAR 343 this court held that there was simply no evidence upon which the lower courts could find (as they had done) that a certain oral contract had been made. In view of the fact that the court was well acquainted with the findings of fact relied upon by Mr Purle, he was invited in the first instance to confine his submissions to the question of whether they excluded any conclusion other than dishonesty or whether they merely showed that, in his submission, the judge and the Court of Appeal had not given them sufficient weight. At the end of these submissions the court was of the opinion that a case of perversity had not been made out and as the court was also not satisfied that the judge had made any error of law, it did not find it necessary to call upon the respondents to the fraudulent trading appeal.

One of Mr Purle's matters of complaint was that the Court of Appeal had expressed its agreement with the judge's finding that there was no dishonesty without dealing in detail with counsel's criticisms of the reasoning. He compared the brevity of their judgment to the industry of Le Pichon J., who analysed the evidence in some depth, and the celebrated judgment of Robert Goff L.J. in Armagas Ltd v Mundogas S.A. [1985] 1 Lloyd's Rep. 1, in which he explained in detail why he felt obliged to differ from the trial judge on a question of credibility. It seems to me obvious that if an appellate judge is differing from the conclusion of the trial judge on a question of fact, he will feel obliged to explain his reasons in detail. If he agrees, there is often little point in rehearsing the reasons given by the judge. For my own part, on a reading of the judge's findings, I agree entirely with the conclusion to which he came. Indeed, it seems to me that the case on fraudulent trading was always hopeless. Highly reputable accountants, merchant bankers and lawyers advised the directors at every stage. There is no suggestion that the directors concealed any facts from their advisers. From time to time they obtained legal advice on the specific question of whether they might be charged with fraudulent trading. At other times the question was not specifically raised but the advisers were fully aware of what the company was doing. It never seems to have occurred to anyone that the directors were being dishonest. As the judge said at para. 5.4.4:

"The facts show the inherent implausibility of the defendants being dishonest or, not to put too fine a point on it, swindlers. If fraudsters or swindlers they were, then the defendants indulged in what must be one of the most transparent frauds ever recorded. For fraud is not normally meticulously recorded nor carried out under the advice and scrutiny of legal and financial advisers."

The common sense of this proposition is so evident that I am surprised that the judge said, when ruling on costs, that "because of the standard of proof...the defendants just got home". The judge was irritated, and perhaps justifiably so, by the fact that the directors had taken what he considered to be a number of bad points in their defence. But that does not assist the plaintiff's case, which I do not think came within a mile of proving dishonesty.

Mr Purle's contrary argument is based upon the inferences which he says can be drawn from the contemporary documents about the likelihood of WM providing support. There was, as one might imagine, much discussion among the directors of WMI and WM about the possibility of WM providing support, the amount that might be required and the form that it would take. Not all the directors were of one mind. Mr Brothers was in a difficult position with some of his colleagues because he had been the author of the expansionist policy which had landed WMI in trouble when the market turned against him. Mr Peter Griffiths and Mr Ortiz-Patino were the most vociferous of his critics. They lost no opportunity to say that they had never been in favour of ordering new ships and had not been sufficiently consulted. Much reliance has been placed upon telexes which they sent as showing implacable opposition to support of any kind. On the other hand, there was obviously a certain amount of posturing and internal politics going on and Mr Ortiz-Patino said as much by way of explaining his telex when he came to give evidence. The significance which should be attributed to such statements must depend upon an assessment of the group dynamics of the board, the reasons why particular members should have adopted a certain kind of rhetoric and the weight they would have carried in decision-making. The judge, who saw all of them who were still alive and able to come to court, was uniquely well placed to form a view on these matters.

It was clearly the policy of WM that save in very exceptional circumstances it would not guarantee the obligations of subsidiaries. The policy was based upon the perfectly sensible business ground that once it was known that such guarantees were on offer, everyone would want them. In dealing with creditors such as the banks, Mr Brothers himself was inclined to stress this policy of non-support. He wanted to discourage any notion that they might be able to persuade WM to provide some form of comfort. For similar reasons, he tended in March 1983 to emphasise WMI's parlous state and the absolute necessity of having a moratorium in place before the accounts were published on 13 April.

But WM's policy of not providing guarantees made it difficult for WMI to raise money from financial institutions by sale and leaseback transactions and was the cause of at least one falling through. Such transactions are in substance advances on the security of the vessels and, in the depressed market of the time, the institutions were reluctant to make them on that security alone. WM took this policy to the extent of being unwilling to incur even the moral obligation involved in giving a non-binding letter of comfort, which might be thought somewhat fastidious on the part of a company engaged in defrauding its subsidiary's creditors.

On the other hand, there was no similar objection in principle to support in the form of a temporary facility or permanent injection of capital from the parent company and it was this form of support which was the subject of serious debate among the directors. In fact, in September 1983, after the failure of a more ambitious scheme to recapitalise WMI, WM did provide a US$4 million facility. It was not enough to assure WMI's future. The chairman Mr Marden described it as a drip feed. But it was enough to keep the company in business while it looked for other solutions. The judge found that the directors were entitled to regard it as a significant gesture. The judge obviously regarded Mr Marden as a person whom the directors reasonably regarded as influential at the material time and found that he "intended to ensure support by WM". More significantly, he found that "but for the unexpected take-over by Wharf, Mr Marden's plans and intentions should have proved well-founded".

In my opinion none of the matters relied upon was inconsistent with the judge's finding or, I would say, sufficient to overcome the overwhelming improbability that the directors were conducting a fraud in the broad light of day. The judge gave seven reasons for saying that despite the "powerful case" against Mr Brothers, he accepted that he had not been dishonest. Mr Purle criticised them all and so I shall deal with them. The first was that until 8 October 1984 there had been "no clear and unequivocal signal from WM that there would be no more support". Mr Purle said that this was circular. WM was the party responsible for the management of WMI and it was irrelevant that it had not given a signal to itself. This seems to me a piece of formalism. The judge obviously meant that until then the directors had not reached any settled collegiate conclusion that no support should be given and that individual directors were entitled to assume that it was still on the cards. Secondly, he said that the "drip feed" indicated that WM remained committed to the principle of support. The judge, as it seems to me, must have been entitled to find that the directors could legitimately think so. Thirdly, he referred to the unlikelihood of a fraud which was disclosed to the company's financial and legal advisers. I have already laid some stress upon this point. Fourthly, he said that the general tone of the boardroom documents indicated an expectation that there would be a future. Fifthly, he said that the directors could rely upon the fact that a listed public company was generally expected, in its own commercial interests, not to allow a subsidiary to go into liquidation, leaving its creditors unpaid. Mr Purle said that generalisations of that kind were irrelevant. What mattered was the attitude of this parent company to this subsidiary. Of course that is true, and if WM had made it clear that it would not in any circumstances provide support for WMI, it might have been unwise for the directors to rely on expectations of what would normally happen. But while the matter remained very much an open one, I think the directors were entitled to consider that the enormity of allowing WMI to go insolvent (which was repeatedly stressed by Rothschilds as WM's financial advisers) would influence WM's ultimate decision. Sixthly, the judge found that Mr Brothers had worked very hard to keep WMI afloat without any ulterior motive and that he had a genuine belief in its future. This is a finding of fact by a judge who heard Mr Brothers in the witness box for many days and is in my opinion unassailable. Likewise, he found that apart from the matter of the missing cash flow (to which I shall return) and what he regarded as some tiresome bad points which Mr Brothers had made in his own defence, he was "for the most part a sincere and honest witness". This again is not open to serious challenge.

Finally, I must comment on a point made by Le Pichon J. in her dissenting judgment. She said that the question was not whether the directors believed that WM might support WMI but whether they believed it would support WMI. There must, she said, be a sufficiently high degree of confidence, which, in the circumstances, she thought that the directors could not honestly have had. It seems to me that the notion of a degree of probability that the company will, one way or another, trade out of its difficulties, is built into the notion of honesty. The directors must honestly believe that there is a reasonable prospect that the company will be able to pay the debts which it incurs. But, for the reasons I discussed when dealing with the law of fraudulent trading, the fact that the likelihood of survival is objectively low is not inconsistent with honesty.

For these reasons I consider that all the complaints about the way in which the judge and the Court of Appeal had dealt with the evidence did not reveal any inconsistency or error of principle which could bring the case within an exception to the Court's practice on concurrent findings of fact. I would therefore dismiss the fraudulent trading appeal.

8. The misrepresentation appeal

The judge found that Mr Brothers had been guilty of fraudulent misrepresentation during the negotiations in March 1983 by dishonestly concealing a cash flow projection. A failure to provide information is of course not in itself a representation at all. Unless there is a duty of disclosure, such as exists in contracts of insurance, an omission to provide information, for whatever motive, does not give rise to any liability. However, as Lord Macnaghten remarked in Gluckstein v Barnes [1900] A.C. 240, 250-251, "everybody knows that sometimes a half truth is no better than a downright falsehood". A statement that is literally true may give a misleading impression. It may imply a state of affairs that other facts would show to be false. Those facts may exist at the time of the statement, in which case the statement is, upon its true construction, false at the time it is made. Or the facts which falsify the representation may come into existence later, but before the representation has been relied upon. In such a case the representor is under a duty to correct what he said and not allow the other party to rely upon a statement which has become false.

In the present case, the judge said that Mr Brothers should have disclosed the cash flow to correct a misleading impression given by the financial information that he had previously given ADS. The facts disclosed by the cash flow made the earlier statements about WMI's financial position false.

What Mr Brothers had done was to divide the cash flow projection into two parts. The first part dealt only with liabilities secured on WMI's existing ships. This showed that if there were a moratorium, the relevant cash flow would be positive or neutral until mid-1986. The second dealt with payments to unsecured creditors and for newbuildings. This showed that US$4.5m would be required in 1983 and US$7.5m in 1984. Thereafter, if nothing further were done, increasingly large sums of cash would have to be found each year. On the footing that interest was payable on the cumulative deficit, it showed that in 1992 some US$60m would have to be found. It was prepared on the assumption that certain "remedial measures" in relation to newbuildings had been taken: the success of the negotiations under way with ADS, the deferral of delivery of ships ordered from a Chinese yard, a renegotiation of the terms for the purchase of some ships in Spain and a sale and leaseback of a ship on order in the Philippines.

The first projection was ready at the beginning of March and Mr Brothers sent it to the banks from whom he was seeking a moratorium and to Mr Edelmann of ADS. The second was not ready until 18 March, just as Mr Brothers was about to set off for Europe. He sent it to the banks and took a copy to a meeting with Mr Edelmann in London on 24 March.

Mr Brothers' evidence at the trial was that he had handed a copy to Mr Edelmann at the meeting. But the judge did not believe him. He found that the implications of the cash flow were so disastrous that Mr Brothers knew that if Mr Edelmann saw it, he would break off the negotiations. So he decided to conceal it. And this meant that the information he had previously supplied to ADS gave a false impression of WMI's financial position.

The Court of Appeal was asked to reverse the judge's finding that Mr Brothers had withheld the document. But they refused to do so. They said they might well have come to a different conclusion but could not say that there was no evidence to support the judge's finding. But they allowed the appeal on the ground that, even so, there had been no misrepresentation. Nothing that Mr Brothers had previously told ADS was falsified by the later cash flow. The first cash flow and the accompanying correspondence made it absolutely clear that it related only to existing ships. It could not have conveyed any impression about what the position in relation to unsecured creditors and newbuildings was likely to be.

The judge said that ADS had been given the impression that newbuildings would be "cash neutral". But no such representation had been pleaded. The further and better particulars of the alleged "representations by omission" said that the failure to disclose the cash flow "distorted" the first cash flow, "falsifying the indication in such projections that no substantial cash deficit would arise before mid-1986." So the only earlier representation alleged to have been falsified was the first cash flow. The judge correctly rejected this claim as "totally unsustainable". The first cash flow did not indicate that there would be no cash deficit before mid-1986. It said only that there would be no such deficit in relation to existing ships. But no other representation was pleaded and, in a case in which fraud is alleged, it seems to me quite wrong to allow a party to rely upon an unpleaded representation.

In any case, it is hard to see how such a representation could have been pleaded. The grounds upon which the judge found that Mr Brothers had made such a representation are extremely vague. It is true that at para. 6.13.31 the judge said that he had "already found that Mr Brothers had made it clear that his intention was that newbuildings should be or should substantially be cash neutral." But there is no such finding in the judgment. At para. 6.11.7(3) the judge said that WMI's purpose in seeking accommodation from ADS was "to render newbuildings as cash neutral as possible". Of course. At para. 6.11.12 he said that it was "not unreasonable to infer" that Mr Edelmann anticipated that the newbuildings cash flow was "unlikely to be too alarming because of what WMI was doing to try and achieve cash neutrality". Well, perhaps. But that would not have been on account of anything Mr Brothers had said. No doubt he was trying to negotiate the best revised terms he could get on the whole newbuildings programme. He may well have said so. But that is a long way from representing that he had actually achieved or was going to achieve cash neutrality. Not even the revised terms for Sealock were going to make it cash neutral. At para. 6.11.24 the judge said that "all the indications were" that newbuildings would be essentially cash neutral. He does not specify what these indications were. But nowhere does he say that they included a representation by Mr Brothers that he had in fact negotiated or was about to negotiate terms under which the newbuildings would be cash neutral, substantially cash neutral or anything else.

As I have said, no such representation was pleaded. It does not appear in any document and no witness testified to it being made. Nor was it put to Mr Brothers in cross-examination. If it had been, he would no doubt have asked when and where he was alleged to have made it. I therefore do not think that it was open to the judge to find a misrepresentation outside the one that had been pleaded, namely the earlier cash flow. I therefore agree with the Court of Appeal that the plaintiff's case on misrepresentation failed and ought to have been dismissed.

9. The finding of dishonesty

That is sufficient to dispose of the appeal on both points. But Mr Oliver QC, who appeared for Mr Brothers, invited this Court to do what the Court of Appeal refused to do and reverse the finding that Mr Brothers had concealed the cash flow. He said that it was a grave injustice to Mr Brothers, who had a previously unblemished record in business and whom the judge found to be for the most part a sincere and honest witness, that he should have to live with a finding of dishonesty against him. In making this submission, Mr Oliver of course faced the same difficulties as Mr Purle in challenging concurrent findings of fact based upon an assessment of credibility by the judge. Nevertheless, for the reasons I shall explain, I think that on this point there has been a miscarriage of justice that requires this Court to re-examine the finding.

Mr Brothers, as I have said, testified to his clear recollection that he had handed the cash flow to Mr Edelmann at a meeting in London on 24 March 1983 at the offices of WMI's solicitors, Messrs Norton Rose. There was no direct evidence to contradict this statement because Mr Edelmann, the only person who could have given such evidence, was dead. So the rejection of Mr Brothers' testimony must be based upon inferences from circumstantial evidence. Of course a judge does not have to accept evidence merely because it is uncontradicted. He may consider the witness so lacking in credit that he is unwilling to accept anything he says without corroboration. But that was not the case here. The judge found that he was "for the most part a sincere and honest witness".

The principal ground upon which the judge found that Mr Brothers had concealed the cash flow was that it revealed that WMI's financial position was hopeless. He knew that if ADS saw it, they would break off the negotiations. Mr Edelmann would "pack his bags and go home". So, for this purpose, a critical finding was that Mr Brothers knew that disclosure of the cash flow would have this effect.

But the reasoning could not stop there. If Mr Brothers knew that a disclosure of WMI's commitments would put an end to his hopes of negotiating terms with ADS, one is bound to ask why he promised them the cash flow in the first place. A person intent on fraudulent concealment would surely have been more circumspect. Yet Mr Brothers, who had an intimate knowledge of WMI's commitments, wrote to Mr Edelmann on 28 February telling him that the cash flow was in preparation and would be sent when ready. The judge was well aware of the need to explain this. After noting that Mr Edelmann was expecting it, he said: "That, I accept, is hardly a sound basis for suppression of a document." The explanation found by the judge was that when the cash flow was produced, it turned out to be far worse than Mr Brothers had expected when he promised to send it. He had originally meant to disclose it, but when it came to the meeting in London, decided to "keep it in his briefcase".

The judge's reasoning thus involved two vital findings about Mr Brothers' state of mind: first, that he knew that Mr Edelmann' reaction to the cash flow, with whatever explanations Mr Brothers might offer, was likely to be very adverse, and secondly, that he himself had not realised this before the cash flow had actually been produced. These two facts are the foundation of the finding of dishonesty against Mr Brothers.

It is well established that an allegation of fraud has to be pleaded with sufficient particularity to give the defendant fair notice of the case he has to meet. This is true of pleadings in general but especially so if the charge is one of fraud. But nothing was pleaded as to either of the points I have mentioned. The further and better particulars simply alleged that there had been a "misrepresentation by omission" because of a failure to supply the cash flow. Mr Brothers' answer was that, on the contrary, he had supplied it. He could hardly have guessed from the pleadings that he was alleged to have concealed it because he knew it was disastrous or promised it earlier because he had not yet realised this to be the case.

In addition to particularity in the pleadings, fairness requires that the adverse findings which the judge will be invited to make should have been put squarely to the witness in cross-examination, so that he can have the opportunity to offer an explanation. The court has examined in detail the relevant parts of the cross-examination of Mr Brothers and I cannot find any place in which the two allegations about his state of mind were adequately put to him.

Mr Cullen QC, who appeared for ADS at the trial, said in the course of his opening speech that in endeavouring to "paint as optimistic a position as possible", Mr Brothers "left out the 18 March cash flow". (Transcript Day 1, p. 24). So there is a suggestion of deliberate concealment, without condescending to any particularity about Mr Brothers' state of mind. When he was cross-examined over a period of some 20 days, Mr Grossman QC (also for ADS) at one point put to him (Transcript Day 96, pp. 95-96) that "the 18th March cash flow...showed a very drastic situation with a huge deficit". Mr Brothers replied: "It was the one that showed a 10 or 11 million deficit by 1984". Mr Grossman said: "It was the one that showed that a deficit of about $75 million had to be funded somewhere along the line." To which Mr Brothers replied "On the particular assumption, my Lord." And there the matter was left. It was clear from Mr Brothers' answer that he regarded the cash flow as significant for what it showed about the position by 1984. He obviously regarded the figures for the later years as less significant because of an assumption on which they were based. But the nature of the assumption was not explored. Mr Grossman never put to him that the later figures were important and that he must have known that he would be unable to persuade Mr Edelmann to the contrary. Nor was it put to him that the figures were worse than he had previously been expecting.

The nearest that Mr Grossman came to dealing with the alleged motive for concealment was in the following passage that was cited by the judge (at para. 6.13.41):

"Q.	Mr Brothers, I must suggest to you that you deliberately did not hand over this document.
A.	We always made a point of giving all of the information to all of the creditors. We did not deliberately withhold information from anybody at any time. It would have been totally out of character and totally unnecessary to have held back any information from DSKF.
Q.	Perhaps it was just a negotiating stance not to give it to them?
A.	It was not a negotiating stance at all. In fact, it would probably help our negotiations to give it to them, not the opposite."

Once again, there the matter was left. There was no exploration of the question of why Mr Brothers thought disclosure would have helped the negotiations rather than abort them. At no stage was it put directly to Mr Brothers that he knew that disclosure would have such an effect. Nor was there any hint of a suggestion that the cash flow had come as a surprise to him. The judge said that he found the suggestion that disclosure would have helped Mr Brothers incredible. It must of course be borne in mind that Mr Brothers was answering the question against the background of his insistence that he had actually handed over the cash flow. But the point is not so much whether Mr Brothers' assessment of the position was plausible or not but whether it was fairly put to him that he knew it was false. In my view it was not.

It follows that I think that the finding of dishonesty against Mr Brothers cannot stand. Although he was examined and cross-examined for many days, he was not given a fair opportunity to explain himself on the two vital points about his state of mind on which the judge based the finding against him. There has accordingly been a "miscarriage of justice or violation of some principle of law or procedure" (see Lord Thankerton in Devi v Roy [1946] A.C. 508, 521) which entitles, and, in fairness to Mr Brothers, obliges this Court to look at the evidence again.

The main circumstantial evidence to contradict Mr Brothers' testimony that he handed over the document was the fact that it was not found in ADS's records and that Mr Edelmann did not mention it in any of the documents which he wrote for his board. The fact that it was not in the records is not inconsistent with Mr Edelmann having been given it. All kinds of other explanations suggest themselves. As for Mr Edelmann's reports, it is not clear what can be made of them. On receipt of the letter of 28 February and the first cash flow, Mr Edelmann prepared a note for the board dated 4 March. It said:

"If an arrangement cannot be reached very soon, WMIHK is likely to be hit by a serious liquidity crisis in the very near future. Reference is made to Appendix 1 which is part of a bigger batch of documents sent to the banks".

Appendix 1 was the graph included in the first cash flow. It said nothing to indicate that it dealt only with existing ships. That was made clear in other parts of the document and the accompanying letter, none of which were put before the board. There was nothing in Mr Edelmann's note to alert the board to the restricted value of the cash flow. Mr Nielsen, who was Mr Edelmann's superior and spoke to his note at the board meeting held on 7 March 1983, said in his witness statement that "Mr Edelmann was always very able and conscientious in his work and took care to pass on any information which might be of interest and/or relevance to matters pending before the Board of the Fund." If that is right, the only conclusion is that Mr Edelmann for some reason did not think it relevant to point out to the board that the graph related only to existing ships and that he was expecting another cash flow which would complete the picture of WMI's commitments.

Later documents prepared by Mr Edelmann after the meeting in London make no reference to the 18 March cash flow or to WMI's newbuilding commitments. On the other hand, the fragmentary notes taken by Mr Donald Freeland, a partner in Norton Rose who was present for part of the two hour meeting between Mr Brothers and Mr Edelmann in his office, show that Mr Edelmann must have known that even with a moratorium, WMI would have to fund cash deficits of $US4m and US$7m in 1983 and 1984 respectively and was hoping to obtain the money from WM. As the first cash flow was positive or neutral for those years, Mr Edelmann must have known that the deficits related to unsecured creditors or newbuildings. But he made no mention of these commitments in his reports either. He seems to have given a version to Mr Nielsen that became somehow garbled in transmission, because the latter's contemporaneous note said that WMI would have a cash requirement of $10m over the whole period of the loan. But none of this was thought worthy of communication to the board. It seems to me, therefore, that one can only speculate about the reasons why the 18 March cash flow did not find its way to the board.

Mr Freeland, as I have said, noted that Mr Brothers had disclosed the newbuilding cash requirements for 1983 and 1984. Indeed, the judge accepted that these figures had come from the missing cash flow. But, he said at para. 6.13.38, "Mr Brothers could have mentioned these relatively small deficits" without causing undue alarm. This does, however, pose the question of how he managed to introduce into the conversation selected extracts of a 10-year cash flow that Mr Edelmann was expecting to receive without arousing his curiosity about the rest. For my part, I would regard Mr Freeland's note as some corroboration of Mr Brothers' evidence that the document was produced and discussed.

If one then turns to the question of whether Mr Brothers would have known that the cash flow could not be presented as anything other than a revelation of disaster, the contemporary documents suggest explanations which Mr Brothers, if examined on the point, might have been able to give. In a report for the board of WMI which was in preparation during March and completed early in April, Schroders & Chartered Ltd, WMI's financial advisers, said:

"It is extremely difficult to make meaningful projections of income and expenditure over more than the short term. We therefore put little reliance on the cash flow projections beyond 31 December 1984."

Similarly Mr Brothers himself, in a report to the board on 30 March 1983, said of the new buildings cash flow:

"The cash flows show a cumulative deficit in the region of US$10m by 1984. To look further than this is, I believe, misleading. I have discussed the problem with the unsecured creditors [Natwest and Royal Bank of Scotland] who are relaxed and will probably remain so if parent company support can be seen coming into the company in some form or other. It is wrong to view the most difficult aspect of survival as being on the newbuildings side. Special credit arrangements can be worked out, deliveries are already spread across a period of over two to three years and as we sell off our remaining 13 'old' vessels realising considerable cash, these newer and more efficient vessels built in 1981 and later will represent the core of our fleet."

It was these reservations about the significance of the cash flow projections after 1984 which may explain why, according to Mr Freeland's note, only the figures for 1983 and 1984 were discussed with Mr Edelmann in London. It may also explain why, in cross-examination, Mr Brothers characterised the cash flow as the document which "showed a 10 or 11 million deficit by 1984" rather than one which showed a much greater deficit in 1992. Again, the point is not whether Mr Brothers was or was not being over sanguine in his view that the later figures were less significant. The question concerns his own state of mind: did he think that the real significance of the cash flow related to the first two years and that he could explain to Mr Edelmann or anyone else that too much attention should not be paid to the later projections? If that was his state of mind, the supposed motive for concealment disappears.

A finding that Mr Brothers must have known that the cash flow presented a picture of inevitable insolvency is also contradicted by the reactions of the others who saw it. Standard & Chartered had seen it. They had probably helped with the calculations. There is nothing to indicate that they were appalled. The passage from their report which I have quoted suggests that they agreed with Mr Brothers in thinking that the figures for what might happen after 1984 were not of any value one way or the other. The Shipping Committee of WMI saw the cash flow, according to their minutes, on 23 March 1983. At that time Mr Brothers was actually in negotiation with Mr Edelmann and MMB in London. They registered no reaction. Two members of the Committee gave evidence. No one asked them whether they had been surprised or horrified at the revelations of the cash flow. They both agreed that WMI was at the time in a difficult position. But everyone knew that. The banks involved in the moratorium negotiations saw it. It is true that they were secured creditors but no particular comment is recorded.

The only adverse reaction relied upon by the judge was that of Mr Ortiz-Patino, who saw the document in Geneva. It is true that Mr Ortiz-Patino later sent an inflammatory telex, to which I have already referred, to two directors of WMI on 31 March 1983, after meetings with them in Hong Kong and after the negotiations with ADS had been concluded. It was highly critical of Mr Brothers and said that he had brought WMI to the verge of insolvency. But there was no reference at all to the cash flow. Nor do we know what comment, if any, Mr Ortiz-Patino made to Mr Brothers in Geneva. Mr Brothers was trying to enlist Mr Ortiz-Patino (who was a close friend of Mr Marden) as an ally on the board. The result was that Mr Ortiz-Patino, who felt that Mr Brothers had previously treated him with scant consideration, found himself favoured with a four-hour lecture on WMI's situation. He could not remember afterwards whether anything in particular had been said about the 18 March cash flow. All that he was clear about was that WMI was in poor shape and that it was Mr Brothers' fault. But Mr Brothers must have left thinking that his advocacy had not been ineffective because he said that Mr Ortiz-Patino's later telex came as an unpleasant surprise.

So the evidence that Mr Brothers must have known that production of the cash flow would put an end to his negotiations with Mr Edelmann is not very convincing. As for the finding that Mr Brothers was surprised by the cash flow, there was simply no evidence whatever to support it. Mr Purle says there was no need for evidence; it was obvious from the contents of the cash flow itself. As it represented the position after all remedial measures, it must have meant that the most favourable projection for WMI was a disastrous deficit in 1991. But that is to ignore what Mr Brothers told the board in his report of 30 March 1983. The cash flow assumed such remedial measures as it seemed possible to negotiate in the short term and the market conditions of the time. But another assumption in the cash flow was that the trough would bottom out and that market conditions would steadily improve. If the projected increase in freight rates did happen, it seems obvious that there would be an increase in the capital values of ships, an atmosphere of greater optimism in the market and possibilities of negotiating credit which would not have been available earlier. This would not be, as the judge suggested, to bank upon an unexpected rise in the market. It would simply be a result of the improvement in market conditions predicated by the cash flow itself. Nor, of course, did the cash flow take into account the possibility of support from WM, which Mr Brothers hoped (and, as the judge found, honestly believed) would enable the deficit in the first two years to be met.

In my opinion, therefore, the evidence to contradict Mr Brothers is insubstantial. It is hard to escape the conclusion that when the judge made his finding at para. 6.13.45 that Mr Brothers "deliberately withheld the cash flow and, notwithstanding his belief in support, he was dishonest in doing so", he must have forgotten what he had said 250 pages earlier in his judgment about the standard of proof required to sustain a finding of dishonesty. The onus was on ADS to prove by compelling evidence that Mr Brothers concealed the cash flow. The evidence must be sufficient to overcome the inherent improbability that he would have done so. In my view, they produced nothing more than a speculative theory. They did not discharge the burden of proof and for that reason also the misrepresentation appeal must be dismissed.

In FACV No. 25 of 1998 i.e. the misrepresentation appeal as against Mr Brothers, I would make the following orders:

1.	That this appeal be dismissed.
2.	That ADS do pay to Mr Brothers his costs of this appeal and in the Court of Appeal to be taxed.
3.	That Mr Brothers is released from his obligation to provide security for ADS's costs in Mr Brothers's appeal to the Court of Appeal pursuant to the Order of the Court of Appeal dated 2 December 1997, and that ADS do return such security to Mr Brothers.
4.	That each of the parties do have liberty to apply to a Judge of the Court of First Instance to determine all questions as to ADS's liability if any to compensate Mr Brothers for its costs incurred in providing such security, including guarantee fees.

In FACV No. 26 of 1998 i.e. the misrepresentation appeal as against WM, I would make the following orders:

1.	That this appeal be dismissed.
2.	That ADS do pay to WM its costs of this appeal and in the Court of Appeal to be taxed.
3.	That the money paid into court by ADS pursuant to the Order of the Court of Appeal dated 2 December 1998 be paid out to WM or its solicitors together with interest accrued thereon.
4.	That all questions as to ADS's liability if any to compensate WM for its costs incurred in respect of the payment in, including any exchange loss and loss of interest, be heard and determined by a Judge of the Court of First Instance.
5.	That WM is released from its obligation to provide security for ADS's costs in WM's appeal to the Court of Appeal pursuant to the Order of the Court of Appeal dated 2 December 1997, and that ADS do return such security to WM.
6.	That each of the parties do have liberty to apply to a Judge of the Court of First Instance to determine all questions as to ADS's liability if any to compensate WM for its costs incurred in providing such security, including guarantee fees.

In FACV No. 27 of 1998 i.e. the fraudulent trading appeal, I would make the following orders:

1.	That this appeal be dismissed.
2.	That ADS do pay to the respondents their costs of this appeal and in the Court of Appeal to be taxed.

Chief Justice Li:

The Court unanimously dismisses the appeals and makes the orders set out at the conclusion of Lord Hoffmann's judgment.