Dbs Bank (Hong Kong) Ltd v. Sit Pan Jit

FAMV No. 45 of 2016

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 45 OF 2016 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 91 OF 2015)

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REASONS FOR DETERMINATION

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Mr Justice Ribeiro PJ :

1.We dismissed this application at the hearing and now provide our reasons.

2.The applicant (“Sit”) sought leave to appeal against the judgment given in favour of the respondent (“DBS”) by Deputy High Court Judge Marlene Ng,[1] upheld by the Court of Appeal,[2] whereby Sit was ordered to pay to DBS US$3,429,724.27 with interest and costs and whereby his counterclaim for misrepresentation at common law and under section 108 of the Securities and Futures Ordinance[3] was dismissed.

3.Sit was a customer of DBS and was granted credit facilities which he used to purchase structured investment products known as Equity-Linked Notes (“ELNs”).  These were instruments linked to the prices of underlying equities and potentially yielded high rates of interest but which would put the investor’s principal investment at risk if those prices fell below certain designated levels.  Sit’s claim related to 10 ELNs purchased between February 2007 and January 2008.  When the stock market collapsed in October 2008 in the wake of the failure of Lehman Brothers, DBS issued a margin call which Sit did not meet.  DBS then liquidated his position resulting in its US$3,429,724.27 claim as representing Sit’s outstanding indebtedness to the bank. 

4.Sit brought a counterclaim for declarations and damages, alleging that he had been induced to purchase the 10 ELNs by misrepresentations made by one Dicky Tak-lap Kong (“Kong”) who was employed by DBS and dealt with Sit as relationship manager, on the bank’s behalf.

5.DBS’s claim was simply for debt.  However, the counterclaim mounted on Sit’s behalf was, as the Judge pointed out, “heavily lawyered”, with multiple alternative claims advanced.  Each of those claims was meticulously dealt with by the Judge in a judgment in which myriad arguments of fact and law advanced on Sit’s behalf were conscientiously addressed and comprehensively resolved.  By the time the case arrived in the Court of Appeal, no doubt thanks to the Judge’s industry, the issues had been whittled down to what were referred to as the “1^st and 6^th representations” so that the Court of Appeal was able to deal concisely and clearly with the Judge’s findings and legal rulings, upholding them in their entirety.

6.The present application was further narrowed down so that leave to appeal was sought solely on the basis of a claim for misrepresentation under section 108 constituted by the “6^th representation”.  To succeed, Sit had to prove that DBS had (through Kong) made a reckless or negligent misrepresentation by which Sit was induced to purchase the 10 ELNs, such a misrepresentation being relevantly defined as involving a statement which, at the time when it was made, was false, misleading or deceptive.

7.Sit seeks leave to contend that DBS should have been found liable on the basis that Kong had recklessly or negligently made the following misrepresentations (which were false, misleading or deceptive) to him, namely, that:

(a)   “investing in notes, including ELNs, being merely interest-generating products, was safe, conservative and traditional (and this was reinforced by his use of phrases such as ‘insurance line’ or ‘protection’); [‘the conservative statements’] ... [and]

(b)   the ELNs were ‘structured’ or tailor-made by Kong for Sit. [‘the Words’];”

whereby he was induced to purchase the 10 ELNs.

8.Although the issues sought to be raised are framed as three questions of law of great general or public importance, this part of the application essentially seeks to challenge the concurrent findings of the Judge and the Court of Appeal, namely their findings rejecting Sit’s case regarding the making of the misrepresentations and the inducement to purchase the 10 ELNs. Four other questions formulated in the application as questions of law, relating to the doctrine of contractual estoppel and the applicability or otherwise of the Interfoto principle,[4] only arise if the proposed challenge to the concurrent findings succeeds.  There is a residual application on the “or otherwise” ground which merely rehearses points raised in connection with the Judge’s findings.

9.The practice of the Court and the underlying principles relating to concurrent findings are summarised in Chinachem Charitable Foundation Ltd v Chan Chun Chuen.[5] As this Court established in Sky Heart Ltd v Lee Hysan Co Ltd,[6] citing Lord Thankerton in Srimati Bibhabati Devi v Kumar Ramendra Narayan Roy,[7] concurrent findings will not be reviewed unless it is shown that they were arrived at as a result of some miscarriage of justice or a violation of some principle of law or procedure involving “such a departure from the rules which permeate all judicial procedure as to make that which happened not in the proper sense of the word judicial procedure at all”. 

10.As the Appeal Committee pointed out in Chinachem Charitable Foundation Ltd:[8] “Unless the Applicant is able to surmount the hurdle raised by the Court’s practice on concurrent findings, the Court will refuse to embark upon any exercise of reviewing findings of fact...” Expanding on this: “... the Court should not embark on a review of concurrent findings unless there is a reasonable basis for thinking that there has been a miscarriage of justice or a critical violation of some principle of law or procedure, in other words, unless there is good reason to believe that the review will lead to reversal of the findings made below.”[9]  Concurrent findings are therefore only reviewed in rare and exceptional cases. 

11.It was a concurrent finding that Kong never made the alleged misrepresentation referred to above as “the conservative statements”.  It was a finding of fact that depended largely on Sit’s credibility.  As Poon JA pointed out,[10] the Judge gave ample reasons for finding that Sit was 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.  Her Ladyship provided detailed reasons for rejecting allegations Sit had made to buttress his supposed ignorance of the terms of the relevant transactions, disbelieving him regarding his alleged inability to understand English, his practice of signing documents without reading them, his lack of understanding of the banking documents and his “anchor arguments” whereby he claimed to have reposed absolute trust in Kong and to have made it clear that he was only interested in “principal protected” investment products. 

12.No valid basis for challenging those concurrent findings has been provided.  Mr Martin Lee SC,[11] endeavoured to argue that they were findings that had miscarried in that the Courts below had failed to draw adverse inferences against DBS because Kong had not been called as a witness; that Sit had not been cross-examined on material aspects of the case; that the significance of a document referred to as the Call Report relating to a meeting between Kong and Sit on 19 April 2007 had not been properly understood; and that proper account had not been taken of audio-recordings of conversations between Kong and Sit.  The failure to call Kong was carefully considered below and found to have been properly explained on the basis of legitimate reasons (relating to a corrupt relationship between Kong and Sit leading to their criminal convictions and Kong’s dismissal by the bank) so that adverse inferences were not called for.  The failure to cross-examine is considered below. Complaints about the way the Judge assessed the significance of the Call Report and audio-recordings amounted to no more than an invitation to the Court to embark on a review of the evidence without establishing any basis for overturning the concurrent findings.   

13.As to the alleged misrepresentation comprising “the Words” referred to above, Mr Lee SC’s main argument was that the Courts below had gone wrong in failing to have regard to Sit’s subjective understanding of the Words, as contained in the Call Report and in certain audio-recordings and in failing to treat the Words so understood as the misrepresentations which induced Sit to purchase the 10 ELNs.  A related argument (that had also been advanced in relation to the abovementioned “conservative statements”) was that it was unfair to attribute a different – objective – meaning to the Words without having cross-examined Sit, putting that meaning to him and putting it to him that he had not been induced to make the purchase by the Words objectively understood.

14.Those arguments were rightly rejected in the Courts below, holding that the meaning of the relevant words is an objective question, not to be determined by what Sit says he understood by them.  For reasons developed at length in both judgments, the Judge’s conclusion as to the meaning of the Words was amply justified and no basis for overturning the concurrent findings arises.  Mr Lee SC was at pains to submit that meaning had to be determined in the context in which the statement were made.  That is in fact the course followed by the Judge.  Having noted that Sit knew that neither Kong nor DBS were the issuers of the ELNs and that Kong, as a mere relationship manger would not have been in a position to cause ELNs issued by third parties to be specially tailored for Sit, her Ladyship stated:

“In my view, no reasonable private banking customer in the position of Sit would have understood the Words to mean the ELNs were specifically created, ‘structured’ or tailor-made by Kong for him. I find on balance that in all the circumstances the only objective and reasonable interpretation of the Words in the context they were used and bearing in mind the characteristics of and the relationship between Sit and Kong must be that Kong hand-picked and selected for introduction to Sit the ELNs (with particular features that Kong believed Sit might be interested in), and the Words used in such context were not false, misleading or deceptive.”[12]

15.Since it was for the Judge to decide what, objectively, the meaning of the words relied on was, it was unnecessary and irrelevant to cross-examine Sit on what he subjectively understood by those words.  On the Judge’s interpretation, they did not bear the meaning pleaded: they did not mean that Kong had somehow caused to be created ELNs which were structured or tailor-made to fit Sit’s alleged requirements as “safe” and “principal protected” investments.  On the meaning found by the Judge, the statements were not false, misleading or deceptive.  Since Sit’s subjective understanding of the words differed from their objective meaning, any reliance placed by Sit on the Words as he had understood them was not relevant to proving an actionable misrepresentation against DBS based on the statements objectively understood.

16.When refusing leave to appeal, the Court of Appeal was right to hold that in his attempt to challenge the concurrent findings, Sit had not come “anywhere near to meeting the high threshold for leave to be granted to appeal to the Court of Final.”[13]

17.The other proposed questions of law do not arise given the persistence of the concurrent findings.  Nor do the matters canvassed under the “or otherwise” heading provide an independent basis for an appeal.

18.We accordingly dismissed the application and, applying the usual rule, we order that it be dismissed with costs.

Mr Martin Lee SC, Mr. Lee Siu Him and Mr Jeffrey Chau, instructed by Zhong Lun Law Firm, for the Applicant

Mr Horace Wong SC, Mr Victor Dawes SC and Mr Roger Phang, instructed by Wilkinson & Grist, for the Respondent