Dbs Bank (Hong Kong) Ltd v. Sit Pan Jit
Read the full judgment text of CACV 91/2015 on BabelCite. This Court of Appeal judgment was delivered on 10 June 2016.
1. This is the appeal against the judgment and order of Deputy High Court Judge Marlene Ng dated 2 April 2015, whereby she entered judgment for the plaintiff, DBS Bank (Hong Kong) Limited against Mr Sit Pang Jit, a former client, in the sum of US$3,429,724.27 with interest and costs; and dismissed Sit’s counterclaim.
Cited by 1 case · Cites 6 cases
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CACV 91/2015 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 91 OF 2015 (ON APPEAL FROM HCA 382 OF 2009) _______________
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_______________ JUDGMENT _______________ Hon Poon JA (giving the Judgment of the Court) : 1.This is the appeal against the judgment and order of Deputy High Court Judge Marlene Ng dated 2 April 2015, whereby she entered judgment for the plaintiff, DBS Bank (Hong Kong) Limited against Mr Sit Pang Jit, a former client, in the sum of US$3,429,724.27 with interest and costs; and dismissed Sit’s counterclaim. 2.The background may be summarized as follows. A. Background A1. Sit – a wealthy businessman and seasoned investor 3.Sit was a very successful and wealthy businessman. According to Sit’s personal profile kept by DBS, as at April 2004, the estimated annual sales volume of Sit’s businesses was US$100 million and the estimated annual net income was US$6 million. Sit’s case was that in 2004 he had about HK$100 million in cash and his and his family’s net worth was about HK$ 1billion. 4.Sit was a seasoned investor, too. The Judge recounted his investment history in some details,[1] which we need not repeat here. For present purposes, we just need to highlight a few points. 5.Sit began his investments in the stock market in 1993. He employed Dicky Tak-lap Kong (“Kong”) as his personal assistant in that regard. When the stock market crashed in 1994, Sit left and terminated Kong’s employment. 6.In 1999, when the stock market recovered Sit went right back in through the accounts he opened with Overseas Trust Bank and DBS. Significantly, the Judge rejected Sit’s evidence that he was then only interested in “principal protected” investments or that he all along adopted a conservative/prudent approach to investments. On the contrary, she found that Sit was quite prepared to take risks in the stock market for potential returns and that he only left the stock market upon market downturn following the burst of the dot-com bubble in about 2001. 7.The Judge went on to say:[2]
8.Sit’s re-entry into the financial market took place when he opened a private banking account with DBS (“Sit’s Account”) on 20 April 2004. A2. Trading in ELNs via Sit’s Account 9.Kong, by then a DBS’s relationship manger, served Sit and handled trades for Sit’s Account at all material times. 10.Between February 2007 and January 2008, Sit utilized facilities granted by DBS to purchase investment products including 69 equity-linked notes (“ELNs”). The ELNs were mortgaged/pledged to DBS as securities. 11.Very briefly, an ELN is a structured product with the final payout based on the return of the underlying equity (single stock or basket of stocks). A “basket” ELN pays an attractive coupon provided the price of the equity stocks does not fall dramatically during its life. The investor will benefit if the referenced basket of equity stocks stays above a pre-designed threshold level. But if one of them falls below the pre-designed threshold level, the investor will receive reduced coupon or be exposed up to 100% loss of principal. 12.What gave rise to the present disputes were 10 ELNs that Sit purchased between February 2007 and January 2008 (“the 1st ELN” to 10th ELN” respectively). 13.The 1st ELN was a target accrual range note. Its performance was linked to the performance of a basket of six Japanese equity stocks with a guaranteed first coupon of 16% and a cap of 18% on the maximum coupon. The investor needed to earn a further 2% coupon to reach the cap before the note structure would terminate early. If the note was not terminated early, and one/more of the equity stocks fell considerably, the investor would be exposed to the possibility of loss of principal on the investment. 14.The 2nd to 10th ELNs were callable bull notes. Each of these notes had a maturity of two years and its performance was linked to a basket of three locally listed equity stocks. They were structured in a similar way. The investor would earn an attractive coupon if all stocks in the basket stayed above a pre‑designed threshold level. The ELN would redeem early at par if all stocks in the basket were above an agreed trigger threshold. If at final maturity all stocks were above an agreed knock-in threshold, the investor would receive par, otherwise he would receive shares of the worst performing stock. In short, the callable bull notes would pay an attractive contingent coupon and subject the investor to risk of reduced coupon and principal loss based on the performance of the underlying stocks measured by the relative difference between the price of each stock on the trade date and its current price. A3. Collapse of the market in 2008 15.Lehman Brothers collapsed in October 2008, which triggered a financial tsunami worldwide. Sit, like many other investors, was engulfed when the mark-to-market value of his investments dropped significantly resulting in material depreciation of the securities held by DBS. 16.Between October and December 2008, DBS demanded Sit to settle the outstanding indebtedness in the Account but to no avail. B. Proceedings below B1. DBS’s claim 17.On 13 February 2008, DBS commenced the action below to sue Sit for recovery of US$3,429,724.27, being the outstanding indebtedness in the Account with interest and costs. Their claim was simple and straightforward. It was based on a written contract constituted by the following banking documents signed by Sit in the course of his dealings with DBS :
18.It was DBS’s case they granted credit facilities to Sit pursuant to the terms as contained in the Banking Documents. And Sit was contractually bound to settle the outstanding indebtedness in the Sit’s Account. B2. Sit’s defence and counterclaim 19.Sit raised a host of defence. 20.Sit first alleged that Kong made oral representations to him in April 2004 that :
21.It was said that what governed the parties’ relationship was an oral contract with terms as contained in the 1st Representations, and not the Banking Documents. 22.Sit raised another five heads of Representations. The 2nd to 5th Representations are immaterial for this appeal because Sit no longer relied on them. On the 6th Representations, Sit alleged that Kong represented to him that :
23.Further, the 6th Representations were false and (as DBS knew or ought to have known) made without reasonable grounds in support in that (1) the true nature, mechanism and risks of investing in ELNs were not adequately stated, (2) mutual funds were less risky as compared with ELNs, (3) the ELNs were not “structured” or tailor-made by Kong for Sit, and (4) the ELNs were intended to be investment products for professional investors in general and were not designed for Sit. 24.Sit claimed he was induced by the 1st to 6th Representations to deposit about HK$90 million with DBS and to use the investment services of DBS as proposed by Kong to purchase investment products, including the 1st to 10th ELNs. Sit claimed that the Representations, which were made recklessly or negligently, were false and made without reasonable grounds in support. 25.Sit further alleged that by making the misrepresentations, DBS was in breach of section 108 of the Securities and Futures Ordinance, Cap 571 (“Section 108”). 26.In reply, DBS relied on the doctrine of contractual estoppel, arising from the Banking Documents, to defend Sit’s claim of misrepresentation, whether based on common law or Section 108. 27.Sit also complained that DBS was in further breach of their duties in tort (common law and statutory) and in contract and/or fiduciary duties. Sit relied on various provisions in the Supply of Services (Implied Terms) Ordinance, Cap 457, Control of Exemption Clauses Ordinance, Cap 71 and Misrepresentations Ordinance, Cap 284. Sit also disputed the amount of his indebtedness even if he were held liable. 28.Finally, Sit counterclaimed for various declarations and damages with interest and costs. B3. The trial 29.The trial took place before the learned Judge in February 2014. 30.There were two factual witnesses, Vicky Leung Wai-kay, DBS’s senior vice president and Sit himself. Leung had no personal knowledge of the matters. Her evidence was based primarily on DBS’s available documents and records. DBS did not call Kong. We will deal with Sit’s complaint about that in a moment. 31.Both parties also called an expert each but their evidence, according to the Judge, had limited significance only. 32.The transcripts and records of various telephone conversations (“Recordings/Transcripts”) between Sit and Kong were produced as evidence. Sit placed heavy reliance on parts of the Recordings/Transcripts. We will examine them in greater detail below. 33.The trial was hard fought to the bitter end. To quote the Judge, “the industry of Sit’s legal team left almost no factual, legal or evidential stone unturned”.[3] Eventually, the trial took 12 days to finish. C. The Judge’s major findings 34.On 6 April 2015, the Judge handed down a lengthy and meticulous judgment, the main body of which ran to 284 pages with 5 Appendixes, dealing with all the issues raised comprehensively. 35.Thanks to the industry of the Judge, the landscape of litigation now takes a much more settled form and the “sea of allegations and counter-allegations”,[4] once rolling vehemently before the Judge, has calmed down considerably. 36.As will be seen shortly, the issues raised on appeal have been significantly reduced, in terms of both number and nature. They are now more focused. So we are spared the unenviable task of revisiting all the findings made by the Judge. We only need to address those which are relevant to this appeal. We will not detail her reasoning and analysis in support of those findings at this juncture, as they will be discussed where necessary below. The major findings made by the Judge are as follows. C1. Terms of the contract 37.The Judge roundly rejected Sit’s case on the oral contract. She found that the written terms and conditions in the Banking Documents formed the banking services agreement between the parties. She further found that Sit knew that the Banking Documents were binding contractual documents that governed his banker-customer relationship with DBS, the operation of Sit’s Account and the use of the credit facilities granted by DBS.[5] C2. Misrepresentations 38.The Judge rejected Sit’s two anchor arguments in support of his case on misrepresentations, namely (1) he reposed absolute trust in Kong ever since April 2004 and was thereby induced to rely on the 1st to 6th Representations, and (2) Sit was only interested in products that were “principal protected” and Kong assured him his investments would be safe on such basis.[6] 39.The Judge next found that Sit had failed to establish each of the 1st to 5th Representations.[7] There is no appeal against the Judges’ findings in connection with the 1st to 5th Representations. Sit’s appeal is directed against the Judge’s findings made in connection with and on the existence of the 6th Representations. 40.On the 6th Representations, DBS did not dispute that the Telephone Recordings/Transcripts in relation to the 10 ELNs and some other transactions showed that Kong did use “砌咗一隻” or similar words (collectively, “Words”), they did not accept Kong made the other statements that formed the 6th Representations, ie the ELNs were “safe, conservative and traditional” and “less risky than mutual funds”. The Judge found that apart from the Words, Kong did not make the 6th Representations.[8] 41.On the meaning of the Words, the Judge found that :[9]
42.She also found that the alleged 6th Representations could not have played any real or substantial or any effective part in inducing Sit into investing in the 1st to 10th ELNs.[10] 43.In light of her findings above, the Judge did not find it necessary to deal with the question if the 6th Representations were false, misleading or deceptive.[11] C3. Section 108 and contractual estoppel 44.Turning to Section 108, the Judge noted that the real debate between the parties was whether or not contractual estoppel would be applicable to a claim under Section 108.[12] The Judge devoted considerable efforts in discussing the case law and the parties’ submissions on this question.[13] She then held that the doctrine of contractual estoppels applied to Hong Kong and to the contract between the parties.[14] She specifically found that :
C4. Other matters 45.The Judge found that when Kong made the alleged Representations to Sit, he did not do so as agent on behalf of DBS, but was performing his part-time investment advisory moonlighting service to Sit, who had bribed him to do so.[16] 46.The Judge found that Sit had failed to establish that DBS was in breach of the various duties complained of[17] or that he was entitled to rely on the various statutory provisions invoked.[18] 47.Finally, the Judge rejected Sit’s case on quantum and found that he was liable to DBS as per their claim.[19] D. Grounds of appeal 48.Although Sit has raised a total of 20 grounds of appeal (“GOA(s)”) , the scope of his appeal is much narrower than what had transpired before the Judge. The GOAs can be conveniently grouped under the following heads :
49.In opening his appeal, Mr Lee SC, for Sit submitted that Sit’s case was based on Section 108. Section 108 reads :
50.Section 108(7) contains definitions for fraudulent, reckless and negligent misrepresentations. 51.Like his case based on misrepresentation under the common law, in order to succeed under Section 108, Sit has to establish factually that (a) DBS had made the 6th Representations or (b) misrepresentation as contended by him arose out of the utterance of the Words. That being the case, Sit’s appeal would not get off the ground until he can satisfy us that the Judge erred in her finding that Kong did not make the 6th Representations, other than the Words, and on the meaning of the Words. If he cannot, his appeal must fail. The other grounds of appeal, which are all dependent on such a successful challenge, would not even arise for our determination. So to the Judge’s findings on the 6th Representations and the meaning of the Words we first turn. We will discuss the 6th Representations in Parts E to F and the meaning of the Words in Part G respectively. E. Why the Judge rejected Sit’s case on the 6th Representations E1. Sit’s credibility generally 52.The Judge rightly pointed out that whether the Representations were in fact made would be a matter of Sit’s credibility as witness.[21] On his overall credibility, for the reasons that she gave, the Judge found Sit to be an unimpressive and inherently unreliable witness who was prepared to craft his evidence to suit his purpose and to make up his evidence as he went along in response to perceived difficulty in answering questions in a manner consistent with his case. She found him to be untruthful and rejected his evidence on the core matters.[22] E2. Some specific matters 53.We further highlight the following specific matters on which the Judge found against Sit before we come to the 6th Representations. E2.1 On his ability to understand English 54.The Judge found that Sit clearly had no difficulty in understanding ordinary and/or business English but he tried to downplay his ability to understand English used in business contracts despite his extensive experience in the trade.[23] E2.2 On his usual practice of signing documents 55.The Judge rejected Sit’s evidence that his usual practice was to sign documents, including contractual documents, without reading them at all and/or (at the very least) without understanding their nature and effect.[24] E2.3 On the Banking Documents 56.The Judge found that Sit had no difficulty in understanding the contents of the Customer Declarations on the Accounting Opening Form. She did not believe Sit’s evidence that he had not read the Customer Declarations or had not found out about them. She found Sit’s contention inherently hollow and improbable.[25] 57.The Judge found that Sit did read and understand the Customer Declarations, and knew the Banking Documents were binding contractual documents that governed his banking-customer relationship with DBS, the operation of the Sit’s Account and the use of the credit facilities granted by DBS.[26] E2.4 On Sit’s two anchor arguments 58.The Judge pointed out that it was a running theme in Sit’s case that (a) ever since April 2004 he reposed absolute trust in Kong and was thereby induced to rely on the Representations and to enter into the Oral Contract; and (b) he was only interested in products that were “principal protected” and Kong assured him his investments would be safe on such basis. These two matters were crucial to Sit’s credibility, and any failure to establish either matter would seriously undermine his testimony.[27] For the reasons that she gave, the Judge found against Sit on both matters.[28] E2.5 On the oral contract 59.The Judge rejected Sit’s case on the oral contract. She found his assertion of oral contract an unconvincing and poor attempt to wriggle out of the obvious conclusions evidenced by the Banking Documents that bore his signatures.[29] She was not persuaded that Sit placed HK$90 million cash deposit with DBS pursuant to the oral contract or because he relied on the 1st Representations or because he reposed absolute trust in Kong. She found that Sit did so for the purpose of obtaining the term loan facility of DBS in order utilize it to make investments.[30] E2.6 On the 2nd, 3rd and 4th Representations 60.For the reasons that she gave, the Judge found that Sit failed to prove that Kong had made the 2nd, 3rd and 4th Representations as alleged.[31] E3. The 5th and 6th Representations 61.The Judge dealt with the 5th and 6th Representations together in Part XX. Before her, Mr Lee heavily relied on the Call Report dated 27 April 2007 (“the Call Report”) and the Recordings/Transcripts to support Sit’s case on the 5th and 6th Representations. We will set out how the Judge disposed of them in greater details. 62.The Call Report was prepared and signed by Kong to cover his lunch meeting with Sit on 19 April 2007, which was between the trade dates of the 1st and 2nd ELNs. The relevant parts read :
63.It was Sit’ evidence that he understood ELNs were “very dangerous” because the volatility of share price fluctuation in respect of an ELN linked to one underlying stock/share would be magnified for an ELN with three underlying stocks/shares. The danger was obvious to Sit given his substantial investments in ELNs over the years. That was why at the meeting on 19 April 2009 Sit queried the economic/market outlook. Kong managed to convince him he should not worry about short-term fluctuation that would not affect his investments because (a) ELNs were bought for their interest coupons so market fluctuations would not affect their performance, and (b) even if he had to take up the worst performing share upon maturity of the ELNs it would be 1½ to 2 years later. Sit claimed that Kong’s representations were false because the financial crisis in 2008 led to forced sale of his investment assets. 64.The Judge summarized Mr Lee’s arguments pertaining to the Call Report thus :
65.However, the Judge disagreed with Mr Lee. She pointed out that it was Sit’s pleaded case that the 5th Representations were made during telephone conversations and such representations addressed the 10 ELNs. That was reiterated in Sit’s witness statement. In other words, the Call Report did not feature in Sit’s pleadings or witness statement as grounding either of the 5th or 6th Representations. More importantly, Sit said Kong made the 5th Representations since July 2007. And the 5th Representations, which concerned alleged “invariable” assurance that the 10 ELNs would yield positive return at the end of the investments, were quite different from what Kong mentioned at the meeting on 19 April 2007 about short-term market fluctuations as noted in the Call Report.[32] In the circumstances, the Judge concluded that Sit’s arguments based on the Call Report were recent opportunistic contentions made to embroider his case. Nothing turned on whether Sit was not cross-examined in respect of the Call Report and Sit’s reliance on the rule in Browne v Dunn[33] was misplaced.[34] The Judge went on to find that the Call Report could not have documented or recorded the 5th Representations.[35] 66.Mr Lee argued that nevertheless the Call Report was a powerful contemporaneous record that showed DBS had previously given advice/opinion to Sit and Sit was “again” satisfied and relied on Kong’s advice. But the Judge found that it was of no assistance in establishing the 5th Representations that were allegedly made since July 2007. She found that notwithstanding any house view or trade opinion given by Kong, Sit exercised his own judgment in making investment decisions and he was not influenced by Kong’s explanation made at the meeting.[36] 67.As to the Recordings/Transcripts, the Judge remarked that they showed that from time to time Kong reminded Sit of the risk of exposure and “top up”, so it was not the case that in respect of the 10 ELNs Kong “invariably orally assured Sit that there was no problem and the investment would yield positive return at the end of the investment. Sit well knew that ELNs were not “principal protected” and he himself had experience of receiving the underlying shares instead of the principal upon maturity of 3-4 ELNs. Time and again Kong explained to Sit the strike price and the consequence of “接貨”. Against these matters and bearing in mind Sit’ poor credibility overall, the Judge did not believe Kong made the 5th Representations as alleged. 68.Turning to the 6th Representations, the Judge started her discussion with Sit’s pleaded case, that is, the 6th Representations were allegedly made by Kong during telephone conversations when he informed Sit about “the product he intended to purchase for Sit”.[37] The Judge then said :
69.The Judge referred to Pacific Electric Wire & Cable Company Limited v Gold Global Limited & Ors[38] and LWYA v KYW and LLP (intervenor)[39] to support the view. She went on to say :
70.The Judge next addressed the crucial question of whether additional to the Words, other parts of the 6th Representations had been made. In the course of doing so, she examined various parts of the Recordings/Transcripts relied upon by Sit and Mr Lee’s arguments thereon. Since Mr Lee has taken us to this part of the Judge’s judgment quite extensively and has more or less repeated his arguments made to the Judge, we will set out in full this part of the judgment (with the footnotes removed) :
71.For completeness, we note that for the reasons that she gave, the Judge found that there was no reliance by Sit on the 6th Representations.[40] She found it unnecessary to decide the issue whether the 6th Representations were false, misleading or deceptive.[41] She finally dealt with DBS’s case that even if Kong did make the Representations to Sit, Kong did not do so as agent or employee of DBS because Sit (but not DBS) paid Kong to serve him. She found that DBS would not have authorized and did not in fact authorize Kong to give investment advice to Sit, and Kong’s part-time investment advisory moonlighting service was done for Sit rather than on behalf of DBS.[42] F. Applicability of the “plainly wrong” test 72.The Judge’s finding that, other than saying the Words, Kong did not make the 6th Representations is eminently a finding of fact. It is well settled that an appellate court will disturb a finding of fact made by a trial judge only if the appellant can demonstrate that it is plainly wrong : Ting Kwok Keung v Tam Dick Yuen.[43] The authorities, whether local or from other common law jurisdiction, all speak with one voice. They are familiar and need no repetition. 73.Mr Lee accepted that the “plainly wrong” test applies to findings of primary facts. But he argued that the “plainly wrong” test does not apply here. He took two points. F1. Wrong approach to the evidence 74.First, Mr Lee submitted that the Judge had misdirected herself in law as to the correct approach to the evidence so that the “plainly wrong” test does not apply : LCYP v JEK,[44] per Kwan JA at §20, quoting Arden LJ in Henwood v Barlow Clowes International Ltd (in liquidation) & Ors,[45] at §6 :
75.Mr Lee argued that the Judge applied a wrong approach in assessing the credibility of Sit in respect of the issues concerning the 6th Representations. Even if Sit’s evidence was found to be unsatisfactory in some respects, which he did not accept,[46] that only means the Judge should approach his general evidence with caution, but she must consider his evidence on the 6th Representations in light of contemporaneous documents. Mr Lee further referred to what he described as the highly unusual features in the present case, namely, (a) DBS’s case on the 6th Representations is based on bare denial and non-admission; and DBS called no relevant factual witness, in particular Kong, to contradict Sit; (b) the 6th Representations were contained in and largely corroborated by contemporaneous documents produced by DBS; and (c) DBS chose not to cross-examine Sit on his understanding of, and reliance on, the 6th Representations and the Call Report. Mr Lee submitted that having regard to these unusual features, the Judge was clearly wrong to hold that the 6th Representations were not made. 76.Mr Lee relied heavily on a judgment of the Supreme Court of New South Wales in Lee & Ors v Westpac Banking Corporation & Ors.[47] There, Lee claimed that Westpac engaged in misleading and deceptive conduct in inducing him to invest in certain financial products. Harrison AsJ found that Lee was prepared to be untruthful to the bank in order to borrow money to invest in the stock market; that Lee made two false statements in his testimony, namely, he read the documents he signed and he received advice from his own lawyer, when in fact he did not; that he was evasive and not prepared to make obvious concessions. The judge in §46 decided to treat Lee’s evidence with caution and went on to consider it in light of contemporaneous documentations. He accepted Lee’s evidence on the representations which founded his claim, since the representor was not called to give evidence and Lee’s evidence on the representations was unchallenged in cross-examination. Mr Lee drew support from what he considered to be the similar features in that case to criticize the Judge in her approach to the evidence in the present. 77.To recap, Mr Lee’s submissions consist of the following major building blocks :
78.We will consider them in turn. F1.1 Sit’s general credibility 79.The relevant grounds of appeal on Sit’s general credibility are GOAs 9 to 12. Mr Lee did not really develop them in either his written or oral submissions. They can be disposed of shortly. 80.GOA 9 complained that the Judge erred in finding that “Sit did try to downplay his ability to understand English used in business contracts despite his extensive experience in the trade”,[48] in that there was no evidence whatsoever to support it. We disagree. There was ample evidence available to enable the Judge to come to that finding : see [58] – [61] of her judgment. 81.GOA 10 concerned the signing of the Bank Staff Declaration on the Accounting Opening Form by a bank officer Kim-chuan Tew. Sit’s case was that Tew and Kong made a false declaration in the Accounting Form. As presently couched, GOA 10 simply does not concern this appeal. We fail to see how any of the things complained of in GOA 10 would advance Sit’s case on his general credibility or on the 6th Representations. 82.GOA 11 complained that the Judge erred in rejecting, without any or any sufficient evidence, Sit’s evidence that the was not required to sign contracts generally in his trade as nothing but a poor attempt to distance himself from the signed Banking Documents, in that the Judge completely failed to address Sit’s Closing Submissions in this regard, at §66. We have read §66 of Sit’s Closing Submissions, which need not be repeated here. Suffice it to say that the points made in the Closing Submissions and Sit’s evidence relating to those points must be firmly in the mind of the Judge when she rejected Sit’s story. The Judge had also given ample reasons for doing so. We fail to see how her rejection of Sit’s story can be flawed simply because she did not deal with every single point raised in Sit’s Closing Submissions. 83.GOA 12 complained that the Judge erred in finding that Sit tried to shy away from his knowledge of margin financing and in drawing adverse inferences against Sit on his credibility. It was said that the Judge failed to direct herself either properly or at all on the following matters :
84.GOA 12 is in substance no more than a repetition of Sit’s submissions on this point below. But it has failed to convince us that the Judge’s finding is plainly wrong. 85.In sum, we are not satisfied that Mr Lee has demonstrated that the Judge’s findings on Sit’s credibility were plainly wrong which entitles this Court to disturb. On the contrary, we are satisfied that the Judge, having regard to all the evidence before her, is well entitled to find that Sit is a poor and unreliable witness and to reject his evidence on the core matters. F1.2 Failure to call Kong 86.This is GOA 8. 87.Undoubtedly Kong, if called, might be expected to give material evidence on the 6th Representations. Since DBS did not call him, Mr Lee argued that adverse inference should be drawn against DBS on the 6th Representations. 88.But there is no inflexible rule that whenever a party fails to call a witness who might be expected to give material evidence on an issue adverse inference should be drawn against him. It depends on the actual circumstances of the case. Generally speaking, there must be a prima facie case on the issue before the court can draw the adverse inference. If there is a plausible explanation as to why the witness was not called, then the court is entitled not to draw the adverse inference. See Polarpark Enterprises Inc v Rupert Allason,[49] per Briggs J at §30; R (on the application of Stapleton) v Revenue & Customs Prosecuting Office,[50] per Sir Thomas Morrison at §39; and Ip Man Shan Henry & Anor v Ching Hing Construction Co Ltd & Ors (No 2),[51] per Deputy Judge Lam (as Lam VP then was) at §155. Ultimately, it is a matter for the trial judge, whose view the Court of Appeal will not lightly disturb. 89.Here, DBS did not call Kong to testify for legitimate reasons. 90.In November 2008, when DBS demanded Sit to “top up” his margin shortfall, Sit disclosed to DBS that in the past, due to good performance and yield, on various occasions, he had paid a total sum of HK$1,300,000.00 to Kong as a gift for his managing Sit’s investment. DBS reported the matter to the HKMA and at HKMA’s request made a report to the ICAC. What ensued were criminal proceedings against both Sit and Kong. 91.In about April 2010, Sit was charged with the offence of offering an advantage to an agent in DCCC525/2010. Sit testified he had asked Kong to make investment decisions for him, which arrangement would be like Kong was working for him as a part-time employee, and he paid money to Kong when the results of his investments were good. Sit was convicted of the offence in November 2010. 92.On 26 April 2012, Kong was convicted after trial in DCCC1038/2011 of three counts of accepting advantage from Sit without lawful authority or reasonable excuse as inducement/reward for doing or having done any act in relation to the affairs or business of DBS as his principal. On 11 May 2012, Kong was sentenced to imprisonment for 26 months. He was further ordered to pay to DBS HK$1.15 million, being part of the advantage received by him. 93.Back in December 2008, Kong left DBS’ employ. A senior vice president Ms Katherine Yim telephoned Kong on 21 February 2011 with a view to ascertaining his willingness to be a witness for DBS. No one answered her call. On 9 March 2011, Ms Yim by telephone invited Kong to give evidence for DBS, but he said he did not want to be involved in this case and refused to assist. DBS did not contact Kong after 9 March 2011. According to Ms Vicky Leung, who had by then replaced Ms Yim, she thought Kong was still imprisoned given the length of his sentence. 94.The Judge first dealt with Mr Lee’s criticism about DBS’s failure to approach Kong after 9 March 2011 to persuade him to give evidence. It was Mr Lee’s submission that Kong would have been released in/about October 2013 due to ⅓ remission of sentence for good behaviour. The Judge did not accept his submission. She pointed out that without evidence as to whether (and if so when) Kong was released or whether he was on good behaviour during imprisonment, his alleged availability as a freed person to give evidence was mere surmise. There was no basis for her to doubt that Ms Yim did approach Kong who indicated unwillingness to give evidence for DBS. Thus she concluded that there was little evidence that Kong was willing and able to give evidence at the time of the trial.[52] 95.The Judge next considered the very conflict between Kong’s employment with DBS and his relationship with Sit that eventually resulted in Sit’s and Kong’s convictions. She opined that it was understandable why DBS (which also fielded quite a few prosecution witnesses against Kong in DCCC1038/2011 from amongst their own staff) made no further attempt to secure Kong as their witness, especially during the sensitive period from the time he was charged up to the conclusion of his criminal trial. Kong’s subsequent conviction, incarceration and requirement to reimburse DBS after a defended trial would not have eased (and indeed might have heightened) any likely hostility. In such context it was readily understood why DBS did not call Kong as witness.[53] 96.We agree with the Judge that DBS’s decision not to call Kong to testify had been credibly and satisfactorily explained. She was perfectly entitled not to draw any adverse inference against DBS for not calling Kong. We can see no basis to disturb her decision at all. F1.3 Sit not cross examined – Browne v Dunn 97.At trial, Mr Lee took the Browne v Dunn point in relation to the Call Report, his subjective understanding of the meaning of the Words and inducement. They are now contained in GOAs 4 and 7. They strictly do not concern the question whether Kong made the 6th Representations, other than the Words. But since it is a major plank of Mr Lee’s submissions on his attack against the Judge’s approach to the evidence, we will deal with the point here. 98.Briefly stated, the rule of Browne v Dunn is that if it is intended to suggest that a witness is not speaking the truth, his attention must be directed to it by cross-examination so that he has a chance to explain : see Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation,[54] per Hunt J at pp 623-624. This again is not an inflexible rule. The applicability of the rule depends on the actual circumstances of the case. 99.In relation to the Call Report, as rightly pointed out by the Judge, it could not have documented or recorded the 5th or the 6th Representations. And as will be seen shortly, we are unable to accept Mr Lee’s submissions on the relevance of the Call Report. That being the case, there is nothing wrong for Mr Wong not to cross-examine Sit on the Call Report. 100.In relation to the meaning of the Words, as the Judge had rightly held,[55] it is an objective test. Sit’s subjective interpretation and understanding of the meaning of the Words are irrelevant. It really serves no purpose to cross-examine Sit on those matters. 101.In relation to inducement, Sit’s case was premised on his subjective understanding of the Words. If his subjective understanding of the Words is irrelevant and hence does not call for cross-examination, the same must be true for the question of inducement based on his subjective understanding of the Words. 102.We agree with the Judge that Sit’s reliance on the rule in Browne v Dunn is misplaced. F1.4 The Call Report 103.This is GOA 1. 104.As said, the Judge found that the Call Report could not have documented the 5th Representations. Mr Lee submitted that the Judge misunderstood the relevance of the Call Report. Referring to the contents of the Call Report and the timing of the meeting (19 April 2007), Mr Lee submitted that the Call Report documented an occasion where (a) Sit sought opinion from Kong; (b) Kong gave an erroneous opinion; and (c) Sit relied on it yet again. Its contents constituted similar fact evidence supporting the making of the 6th Representations, and Sit’s reliance on Kong’s representations. The Call Report is both highly relevant and probative as it was contemporaneous and was DBS’s own internal documents and DBS chose not to cross-examine Sit on it. But for the Judge’s misapprehension of its nature, she could not have disregarded the Call Report entirely. 105.To be fair to the Judge, she was fully cognizant of and had carefully considered Sit’s contention that the Call Report supported his case on the 5th and 6th Representations. For the reasons that she gave, she was entitled to find that the Call Report did not support Sit’s case. Even assuming that the Call Report did record an occasion that Sit sought advice from Kong; Kong gave an erroneous advice and Sit relied on it yet again, it is a far cry from Sit’s allegation that on some other occasions Kong made the 6th Representations to him concerning the 10 ELNs. With respect, we fail to see how the Call Report can be said to be relevant to Sit’s case on the 6th Representations. F1.5 The Recordings/Transcripts 106.This is GOA 5. 107.Essentially, Mr Lee argued that the 6th Representations were all recorded in the Recordings/Transcripts. His submissions are a repetition of his submissions before the Judge. 108.In §70 above, we have quoted in extenso the relevant part of the Judge’s judgment on the Recordings/Transcripts. The Judge rightly considered the contents of the Recordings/Transcripts relied on in context and in light of Sit’s evidence as a whole. She also comprehensively dealt with Mr Lee’s submissions, now repeated before us. We agree with the Judge’s analysis of the Recordings/Transcripts and her conclusion that they do not contain the 6th Representations, other than the Words, as contended. F1.6 Reliance on Lee v Westpac 109.With all the major building blocks in his submissions dismantled, it can be readily seen that Mr Lee’s reliance on Lee v Westpac is misplaced. F1.7 The Judge’s approach impeccable 110.In any event, how a trial judge approaches the evidence before him is case-specific. It is entirely a matter for him. Here, a careful reading of the Judge’s judgment shows that she had taken a holistic approach in determining whether Kong made the 6th Representations by taking into account all the evidence and relevant circumstances, including Sit’s pleadings, what he said or did not say in the witness statements and oral testimony, the inherent improbabilities in his evidence and, contrary to Mr Lee’s submissions, all contemporaneous documents including the Call Report and the Recordings/Transcripts. Her approach to the evidence is impeccable. F2. Inferences as opposed to primary facts 111.The second point taken by Mr Lee on the applicability of the “plainly wrong” test is this. He submitted that the Judge’s finding that other than the Words Kong had not made the 6th Representations is not a finding of primary facts, but only inferences. For inferences, a less stringent test applies. So the “plainly wrong” test does not apply. He cited Ting Kwok Keung v Tam Dick Yuen, supra, at §34 in support. Again, we respectfully disagree. 112.The applicable principle is well explained by Lord Hodge in Beacon Insurance Company Limited v Maharaj Bookstore Limited.[56] There, after surveying the relevant authorities and reiterating the rationale behind the “plainly wrong” test as it applies to primary findings of fact,[57] his Lordship continued :
113.In Hong Kong, this Court has adopted a similar approach on an appeal against inferences based on primary facts : see Pang Ketian Sally v Tam Yuk Hung Annie,[58] per Cheung CJHC at §§26–32; and Ageas Insurance Co Ltd v Lam Hau Wah Inneo,[59] per Kwan JA at §§27–30. 114.In Ting Kwok Keung v Tam Dick Yuen, supra, at §34, Bokhary PJ said :
115.The effect of Bokhary PJ’s judgment was explained by the Chief Judge in Pang Ketian Sally v Tam Yuk Hung Annie thus :
116.Properly understood, neither Bokhary PJ’s judgment at §34 of Ting Kwok Keung v Tam Dick Yuen nor Cheung CJHC’s judgment at §31 of Pang Ketian Sally v Tam Yuk Hung Annie supports the argument that the “plainly wrong” test does not apply to challenges against inferences drawn from primary facts. In fact recently a similar argument had been rejected by this Court (differently constituted) in Ageas Insurance Co Ltd v Lam Hau Wah Inneo, supra, where Kwan JA said :
117.Accordingly, whether the Judge found that Kong did not make the 6th Representations, other than the Words, as primary facts or inferences based on primary facts does not matter. The same and only “plainly wrong” test applies to Sit’s challenge against such a finding. F3. Applying the “plainly wrong” test 118.Applying the “plainly wrong” test, Mr Lee must pinpoint the palpable errors made by the Judge, that is, errors of such nature which warrant intervention from this Court : see China Gold Finance Limited v CIL Holdings Limited & Others,[60] per Lam VP at §16 and §27. Mr Lee must convince us that the Judge did make those errors as he contended. Mr Lee relied on all the complaints which we have discussed in Part F1 above. Mr Lee went so far as submitting that the Judges’ finding that Kong did not make the 6th Representations, other than the Words, was perverse. 119.We have already explained in Part F1 why Mr Lee’s complaints cannot stand. In the circumstances, we are not satisfied that the Judge’s finding on the 6th Representation was “plainly wrong” or perverse. On the contrary, we agree with her finding and reasoning entirely. 120.We next turn to the meaning of the Words. G. Meaning of the Words 121.This concerns GOA 2. 122.To recap, the Words read “砌咗一隻” or similar words. It was Sit’s case that the 10 ELNs were “structured” or tailor-made by Kong for Sit. The Judge roundly rejected Sit’s case. She held that Sit’s own subjective interpretation and understanding of the meaning of the Words were neither here nor there. For it is an objective exercise to be undertaken by the court.[61] The Judge further rejected Sit’s evidence that it was unreasonable for him to understand the Words to mean that the 10 ELNs were tailor-made for him as alleged. She found the no reasonable private banking customer, in the position of Sit, would have understood the Words to mean the 10 ELNs were tailor-made (or created specifically) for him. Significantly, she also found that Sit knew well that neither Kong nor DBS were the issuers of the ELNs and Kong could not have created the ELNs specifically for him.[62] She said at the end of [244] :
123.She rejected Sit’s case that Kong represented to him the ELNs were “structured” or tailor-made for him and found that there was no misrepresentation by use of the Words.[63] 124.Mr Lee argued that the Words could not objectively bear the meaning ascribed to them by the Judge. Referring to what Kong said in the Recordings/Transcripts concerning the 4th ELN :
125.Mr Lee submitted that Kong clearly referred to his ability to customize certain features of an ELN for Sit, that is, Kong structured an ELN for Sit. With respect, we think what Kong said on particular occasion(s) must be understood in context and in light of all the relevant circumstances. Objectively viewed, what Kong said (as quoted) did not mean that he could structure or tailor-make an ELN in the way as suggested by Sit. It did not detract from the correctness of the Judge’s finding on the meaning of the Words after a careful consideration of all the evidence and relevant circumstances. 126.Further, as rightly submitted by Mr Wong, SC, for DBS, Sit did not seek to challenge the Judges’ finding that he knew well that neither Kong nor DBS were the issuers of the ELNs and Kong could not have created the ELNs specifically for him. Mr Wong submitted and we agree that it is manifestly implausible that a customer like Sit, knowing full well that his relation manager could not have tailor-made the ELNs, could possibly have understood the Words to mean that he would tailor-make the ELNs for him. 127.Mr Lee argued that the Judge’s finding on the meaning of the Words was inconsistent with her findings elsewhere on Sit’s ability to negotiate the terms with banks. We do not agree. The Judge held that if Sit found the terms governing his banking relationship with DBS unacceptable, he could have gone to other private banks to negotiate whatever terms that were acceptable to him as there were other financial institutions that offered discretionary account or investment advisory services.[64] Mr Wong submitted and we agree that it cannot be reasonably suggested that this finding is in any way related to, let alone inconsistent with, Sit’s case of Kong tailor-making the ELNs for him. 128.We uphold the Judge’s finding on the meaning of the Words. H. Other grounds 129.In light of our conclusions on the 6th Representations and the meaning of the Words, Sit’s appeal must fail. The need to consider other GOAs does not arise. Out of deference to the very thorough and extensively researched submissions made by Mr Lee and his legal team, we would like to mention this. 130.DBS relied on contractual estoppel to defeat Sit’s claims of misrepresentation. The Judge held that contractual estoppel is part of the laws of Hong Kong and it was available to DBS as a defence to a claim brought under Section 108. Mr Lee argued that contractual estoppels as proferred in Spingwell Navigation v JP Morgan Chase (SA)[65] was wrong in principle, and lacks proper juridical basis as the cases which supposedly recognized the doctrine in fact involved conventional legal principles such as estoppel by convention. It is also argued that the doctrine was inconsistent with the Privy Council’s judgment in Prime Sight Ltd v Lavarello,[66] and that its effect has been much watered down in the light of the Singapore Court of Appeal decision in Deutsche Bank AG v Chang Tse Wen.[67] 131.Mr Lee further argued that on a proper construction of Section 108, contractual estoppel, even if it is good law, would not defeat a statutory claim brought thereunder. In particular, it is submitted that Section 108(6) does not support such a construction, and that the changes from section 8(4) of the Protection of Investors’ Ordinance to Section 108(6) did not indicate a legislative intent to allow contracting out. 132.We can see the force in the above legal submissions. However, as Sit has failed to overcome the threshold of persuading us to overturn the Judge’s finding on the 6th Representations and the meaning of the Words, we would refrain from expressing a view on these interesting legal issues. I. Dispositions 133.We dismiss Sit’s appeal. Costs should follow the event. We make an order nisi that Sit should pay DBS the costs of the appeal, with a certificate for two counsel, to be taxed if not agreed. 134.Lastly, we thank counsel for their able assistance.
Mr Horace Wong, SC, Mr Victor Dawes, SC, & Mr Phang Y W, Roger, instructed by Zhong Lun Law Firm, for the Plaintiff (Respondent) Mr Martin Lee, SC, Mr Lee Siu Him & Mr Chau C F, Jeffrey, instructed by Wilkinson & Grist, for the Defendant (Appellant) [1] [65] – [82]. Unless otherwise stated, [X] and Part [Y] refer to the quoted paragraph(s) and Part(s) of the Judge’s judgment handed down on 2 April 2015. [2] [82]. [3] [25]. [4] [25]. [5] Part XVIII. [6] Part XVI. [7] Part XVII on the 1st Representations, Part XIX on the 2nd to 4th Representations, and [223] – [236] in Part XX on the 5th Representations. [8] [237] – [279]. [9] [244]. [10] [280] – [292], in particular [288]. [11] [293]. [12] [124]. [13] Part XXII. [14] [352]. [15] Those schedules summarized various provisions of the Banking Documents under different categories. [16] [300]. [17] Part XXIII. [18] Part XXIV. [19] Part XXVI. [20] Derived from Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433. [21] [47]. [22] [47] – [51]. [23] [60]. [24] [61]. [25] [62]. [26] [192]. [27] [151]. [28] [152] – [169]. [29] [178]. [30] [197]. [31] [198] – [218]. [32] [226] – [227]. [33] (1894) 6 R 67. [34] [228]. [35] [232]. [36] [233] – [235]. [37] §15(ba) of Sit’s Re-Re-Amended Defence and Counterclaim. [38] CACV 90-96/2012, unreported, 17 September 2013. [39] CACV 151-152/2013, unreported, 4 December 2014. [40] [280] – [292]. [41] [293]. [42] [294] – [303]. [43] (2002) 5 HKCFAR 336. [44] [2015] 4 HKLRD 798. [45] [2008] EWCA Civ 577. [46] See the discussion at [79]-[85] below. [47] [2012] NSWSC 899 ; affirmed on appeal in [2013] NSWCA 375. [48] [60]. [49] [2007] EWHC 1968. [50] [2008] EWHC 1968 (QB). [51] [2003] 1 HKC 256. [52] [39]. [53] [40] and [41]. [54] (1983) 44 ALR 607. [55] [242]. [56] [2014] UKPC 21. [57] At [11] to [15] of his judgment, citing among other cases, Thomas v Thomas [1947] LC 484; Yuill v Yuill [1945] P 15; and In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] 1 WLR 1911. [58] CACV 147 of 2013, 25 April 2014. [59] CACV65/2014, 9 January 2015. [60] CACV 11/2015, unreported. [61] [241]. [62] [244]. [63] [245]. [64] [339]. [65] [2012] 2 CLC 705. [66] [2014] AC 436. [67] [2013] SGCA 49. | ||||||||||||||||||
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