ROSSINGTON INVESTMENTS LTD v. LAM PING KWONG & ANOTHER

CACV185/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 185 OF 2002

(ON APPEAL FROM HCA 9120 OF 2000)

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J U D G M E N T

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Hon Mayo VP (giving the judgment of the Court):

1. This is an appeal from a judgment of Deputy High Court Judge Muttrie where he dismissed the plaintiff's claim against the defendant and allowed the defendant's claim against the third party. He dismissed the defendant's counterclaim against the plaintiff.

2. The plaintiff's claim against the defendant is for the repayment of a loan of $1,300,000. There is no dispute that the defendant received the money. However his defence is that the moneys were not a loan but represented part payment of a commission which the plaintiff had agreed to pay him for services he had provided. He counterclaimed for the balance of the commission payable of $116,667.00, an account and damages. His claim against the third party is in the same amount as the amount claimed in the counterclaim.

3. It is pertinent to add that the third party is the sole director of the plaintiff company.

4. Both the defendant and the third party are financial consultants. They have apparently entered into a number of negotiations and discussions concerning various deals they were involved in themselves and when they were acting for other parties.

5. At the material time the defendant acted as an assistant to the Chairman of a Luen Cheong Tai International Holdings Ltd. (LCT) a company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange. In January 2000 he became Chief Executive Officer of the company. He resigned from this position in March 2000.

6. There was undisputed evidence that LCT was "desperately in need of working capital".

7. It appears also to have been accepted that the main role and function of the defendant in his work with LCT was to alleviate this problem.

8. Also it was accepted that there was an agreement evidenced in writing that if the third party was able to introduce an investor in LTC the defendant would pay a commission of 1% to the third party.

9. The third party did introduce a company called Taiwan Star Securities Ltd (Taiwan Star) to purchase 17 million shares at par in LCT and as a consequence of this $170,000 was payable by the defendant to the third party.

10. However following this the evidence which was before the Judge becomes much less clear and is hotly disputed.

11. The case run by the defendant in his defence was that there was a further agreement between the parties that if the defendant was able to arrange for the issuance of the 17 million shares at $1.25 when the actual price was $1.00 per share the difference in price should be divided three ways between the third party, the defendant and a Mr Ng.

12. The actual amount of the excess above referred to was HK$4.25 million which when divided three ways would amount to $1,416,667.00. This was the so-called commission which the defendant was claiming was payable to him.

13. A further service which was to be performed by the defendant would be ensuring that the purchaser of the 17 million shares had sufficient funds available for this purpose. To this end he had discussions with Mr Victor Chan of Rexcapital Ltd an underwriter on the possibility of Rexcapital providing a bridging loan to the purchaser of the shares.

14. Mr Westbrook SC for the plaintiff and the third party was able to point to numerous discrepancies and other unsatisfactory aspects of the evidence which had been given by the defendant and which formed part of the case he was advancing.

15. Not least of these was the suggestion that the parties should have agreed that a commission should be payable to the defendant at the same time as one was payable to the third party.

16. However the main line of attack adopted by Mr Westbrook was to submit that it was evident from a perusal of the transcript of the defendant's evidence at the trial that his evidence in no way supported his pleaded defence and the particulars which were given on the request for further and better particulars.

17. He argued that it was apparent from the pleadings that the only service which he was claiming to have provided was to agree to arrange for the bridging loan from Rexcapital. It was apparent from the transcript that the defendant accepted in his evidence that in fact no bridging loan had ever been made. His explanation for this was that at the last minute before the time limit for the issuance of the shares the purchaser was able to get together the necessary purchase price so it was no longer necessary to have the bridging loan.

18. We were taken through the pleadings and the transcript of the relevant parts of the defendant's evidence.

19. Paragraph 4 of the Defence is as follows:

"4. Paragraph 3 is denied. The Defendant avers that:-

(i)	At the material times, the Defendant was working as an advisor of Luen Cheong Tai International Holdings Limited ('LCT'), a company incorporated in Cayman Islands with its shares traded in the United Stock Exchange of Hong Kong ('the Stock Exchange').
(ii)	LCT, in about November, 1999, has an underwriting agreement with an investment and stockbroking company Rexcapital Limited ('Rexcapital') whereby, it was agreed, inter alia, that Rexcapital would underwrite and/or be authorized to place LCT's new shares of not exceeding 64,086,100 shares. The said underwriting exercise was approved by the relevant regulatory bodies and the Stock Exchange in Hong Kong.
(iii)	The deadline of the said underwriting exercise was on or about 14th January 2000 ('the said deadline').
(iv)	Shortly before the said deadline, a Mr. Patrick Wai Man Yip ('Yip'), who at the material times held himself out as a director of a Beili Overseas Holdings Limited ('Beili') approached the Defendant and expressed its prospective client's interests to subscribe about 17 million shares of LCT.
(v)	Yip informed the Defendant that the commission and/or service fees of the said subscription by Beili's client should be HK$0.25 per share to be divided between Yip, alternatively Beili, the Defendant, and a third party which was not disclosed to the Defendant at the material times.
(vi)	Shortly thereafter, Yip informed the Defendant that its client was not able to put forward the sum of money for the purpose of subscription of the LCT's shares forthwith.
(vii)	As the said deadline was approaching, the Defendant then was asked by Yip that whether the Defendant could arrange a bridging loan, alternatively short term financing, for its prospective client for the purpose of subscribing the LCT's shares.
(viii)	In relying on the said representations of Yip, the Defendant approached the Rexcapital Limited for the purpose of arranging the said short-term financing to the prospective client of Beili.
(ix)	The said Rexcapital Limited was then agreed and able to provide the said short-term financing for about HK$17 million. On or about 33rd December l999, the said prospective client of Beili, was then made known to the Defendant by Yip as Hand Yu International (Holding) Limited ('Hand Yu'). Hand Yu then subscribed the shares of LCT.
(x)	Pursuant to the said agreed services provided to Hand Yu, Yip agreed to provide the service fees to the Defendant as pleaded hereinabove."

20. It can be seen from this that the defendant was not solely placing reliance upon arranging for the bridging loan. He was also referring generally to the arrangements earlier referred to whereby he would facilitate the issuance of the new capital.

21. While it is true that there were unsatisfactory aspects of the defendant's evidence it cannot be said that there was no evidence to support the case being run by the defendant on his pleadings.

22. Mr Westbrook made other criticisms of the Judge but we do not consider it to be necessary for us to deal with these in this judgment as in our view the criticisms even if well founded would fall far short of persuading us that they would constitute grounds which would justify us in interfering with findings of fact which are made by a judge hearing a case at first instance.

23. On the other hand Mr Bell for the defendant was also able to point to a number of unsatisfactory aspects of the case being advanced by the third party.

24. Amongst these was the evidence which the Judge accepted that the defendant had received from the third party an account which indicated the payment in question being commission.

25. The account was as follows:

"Share Prices Difference Received from LTC		4,250,000.00
Less:	Commission to Related Parties 5%	212,500.00
	Working Cost Reimbursements	150,000.00
Net Income for distribution		3,887,500.00
1/3 of share		1,295,833.33
Payment made on 31/1/2000		(1,300,000.00	)
Cash Advance in 1999		(10,000.00	)
A/C balance		(14,166.67	)"

26. There was further evidence which reinforced the validity of this account.

27. Also produced as part of the documentary evidence was a bank pass sheet of the plaintiff for the relevant period which showed the receipt of HK$4.25 million on 29 January 2000 and payments out on 31 January of $1.2 million and $1.3 million.

28. What is even more important than individual points which were made by Mr Bell is that it is apparent from reading the judgment as a whole that the Judge did not accept that the third party had been telling the truth.

29. There was no reason why the Judge should accept the evidence of any of the witnesses.

30. What he attempted to do was to make the best of the evidence which was before him and then try on the balance of probabilities to see whether the moneys which had been received by the defendant were a loan or whether they represented part payment of a commission which was to become payable to the defendant.

31. After reviewing the relevant evidence the Judge analysed his findings in this way at page 9 of his judgment:

"20. There is no dispute that the money has been paid and I accept that it is for Mr Lam, who avers that it was paid to him as agreed commission, to prove that. Now while it is true that there are discrepancies between what Mr Lam says and what he has pleaded it is to be noted that if one reads the pleadings closely it is not averred that there was a loan to Hand Yu but only that he arranged one. In any event it is difficult to find much discredit in discrepancies between pleadings and evidence given that the pleadings are never in the witness's own words. It is also not difficult to see why he might have thought that Mr Yip's principal was Hand Yu, and told that to his lawyers.

21. Overall, given that Mr Lam was working for LCT and obviously did have a hand both in arranging the share subscription and at least an agreement in principle to a loan, it is easy enough to see that he might have been offered a commission for his part in it. Mr Yip says that that commission was only to become due if and when the 'package deal' was negotiated but although he says that the commission, when due to Mr Lam would come to $1,600,000 or so it is not clear how that would be worked out. Further there is the account which Mr Lam says he received by post from Mr Yip; he saw a return address on the envelope which he did not keep. Mr Yip says that he did not send this account but it is difficult to see how Mr Lam could have made it up; if he did, why put in fictitious deductions which he would then have to dispute in his third party claim? Also Mr Yip says that the refund was to be shared entirely between himself and Mr Ng but in fact as appears from his evidence Mr Ng has not seen a penny of it, but only the repayment of a separate loan. Furthermore, if this was an advance of expected commission on the 'package deal' or that part of it which had not come to fruition, one wonders why there is nothing in writing to that effect, especially since once it was agreed that the share subscription would go ahead on its own, there was in no longer any package deal but, if the land exchange agreement was still alive, two separate agreements.

22. Overall it seems to me more probable than not that this payment was not a loan to Mr Lam but was indeed a payment to him of a commission agreed between him and Mr Yip for his part in negotiating the share subscription. The plaintiff's claim against the defendant must accordingly fail. The defendant's claim against the third party for the balance of the commission must succeed."

32. What is clear is that the Judge has weighed and considered the relevant evidence in some detail. It is also clear that he was mindful of the criticisms of the defendant's case which are referred to by Mr Westbrook.

33. The question then arises as to the extent to which it is permissible for this court to interfere with the Judge's findings.

34. The Court of Final Appeal considered this question in some detail in Ting Kwok Keung v Tam Dick Yuen & Ors [2002] 1 HKC 601.

35. The approach to be adopted was referred to by Bokhary PJ at p. 613:

"41 'On an appeal against a judgment of a judge sitting alone' - Lord Sankey LC said in Powell v. Streatham Manor Nursing Home at p.249 - 'the Court of Appeal will not set aside the judgment unless the appellant satisfies the Court that the judge was wrong and that his decision ought to have been the other way'. I would reinforce that by respectfully adopting what Lord Hoffmann said in Biogen Inc v. Medeva Plc [1997] RPC 1 at p.45 and repeated in Piglowska v. Piglowski at p.1372 D-F:

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

42. Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact. And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state. Such advantages can be, as Lord Shaw of Dunfermline put it in Clarke v. Edinburgh Tramways at p.36, 'sometimes broad and sometimes subtle'. The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong. The Court of Appeal should intervene if so satisfied. But if not so satisfied, the Court of Appeal should defer to the trial judge's conclusion even if in some doubt as to its correctness."

36. Bokhary PJ then went on to consider some of the situations where a Court of Appeal might be justified in interfering with the findings of fact which have been made by a judge hearing a case at first instance.

37. Mr Bell also referred us to a passage at p. 663 from the judgment of Godfrey JA (as he then was) in Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657:

"The approach of an appellate court to appeals on fact is well-established. An appeal to this court is by way of re-hearing. Accordingly, it is the duty of this court to re-consider all the materials before the judge, to make up its own mind, not disregarding the judgment below but carefully weighing and considering it, not shrinking from overruling it, if on full consideration, it comes to the conclusion that the trial judge's finding was wrong.

But that does not mean that this court will re-try the case. The re-hearing is a re-hearing on the papers. This court will not usurp the function of the trial judge, i.e. to find the facts. It will certainly not disturb his findings of primary fact where these are based on the credibility of the witnesses or the preference of the evidence of one witness for that of another (although of course it may be willing to disturb inferences of fact drawn from the primary facts, because an appellate court is in as good a position as the trial judge to draw such inferences).

It is important for counsel and solicitors (and for the legal aid authorities) to remember the very limited extent to which this court will interfere in a case in which the appellant seeks to dispute the judge's findings of fact. If it is necessary to disturb an adverse finding of primary fact, the appellant has to demonstrate either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence which the judge overlooked. It is not enough to show there is little evidence to support the judge's finding, or that it was 'contrary to the weight of the evidence'. The weight of the evidence is a matter for the trial judge. It does not matter how many witnesses say one thing, and how few say the contrary. The judge is perfectly entitled to prefer the evidence of the few to that of the many."

38. We agree that these passages accurately state the law and that the threshold which has to be surmounted by a party seeking to upset findings of fact made by a trial judge is a formidable one.

39. In order that this appeal should succeed Mr Westbrook must satisfy us that the Judge was plainly wrong in making the findings of fact he did.

40. In our view this cannot be demonstrated. This whole case turned upon the Judge's assessment of the credibility of the witnesses who were before him.

41. Undoubtedly it was the case that there were unsatisfactory aspects of the cases being run by both parties. As earlier indicated the Judge was fully aware of this. He has given reasons why he was prepared to accept that the payment was on account of commission and in our view this court should not interfere with his conclusions.

42. The appeal is accordingly dismissed. We make an order nisi that the defendant will have the costs of this appeal.