CHINA WEAL LTD. v. LAM SAU WAH

CACV000187A/2000

CACV 187 & 199/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 187 & 199 OF 2000

(ON APPEAL FROM HCA NO. 12281 OF 1997)

 

BETWEEN
	CHINA WEAL LIMITED	Plaintiff
	AND
	LAM SAU WAH	Defendant

 

Coram: Hon Rogers VP, Le Pichon JA and Stone J in Court

Date of Hearing: 13 February 2001

Date of Judgment: 13 February 2001

Date of Handing Down Reasons for Judgment: 20 February 2001

 

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REASONS FOR JUDGMENT

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Hon Rogers VP :

1. This is an appeal from a judgment of Deputy Judge Woolley given on 18 April 2000. At the conclusion of the hearing, the appeal in CACV 187/2000 was dismissed and the appeal in CACV 199/2000 was not pursued. An order for costs was accordingly made in favour of the defendant, who was the respondent to the appeal. It was indicated that the reasons would be given later in writing.

The Background

2. The plaintiff's claim was that Flat G, 27th floor, Yee Shan Mansion, Kao Shan Terrace, Tai Koo Shing which had been purchased in the name of the defendant in 1992 was held on trust for the plaintiff absolutely.

3. The judge below dismissed the plaintiff's claim. In doing so he held, amongst other things, that the plaintiff had not established its claim that the flat had been purchased by the plaintiff, but if anything, the purchase money had been provided by Mr Deng Liu Gen who is the chief executive officer of the plaintiff as a personal matter but in any event Mr Deng was repaying a loan from the defendant.

4. In summary, the plaintiff's pleaded case was that the flat had been purchased at the behest of Mr Yuen Hau Ting who was, in early 1992, the "Chief" of the Foshan Branch of the Bank of China in Guangdong. It was said that in early 1992, Mr Yuen had requested Mr Deng to help him purchase a flat because Mr Yuen expected to be able to come to Hong Kong on a one-way permit. It was then pleaded that it was "inconvenient" for Mr Yuen to purchase a property in Hong Kong whilst he was living in the Mainland and that Mr Deng himself did not wish to become the legal owner of a property in which he was not living. The arrangement it is said was come to was that the property would be purchased in the name of the defendant. It was agreed between Mr Yuen and Mr Deng that when Mr Yuen could immigrate to Hong Kong he would purchase the property from the plaintiff.

5. There is no doubt that the flat was purchased in early 1992. However, the initial deposit of $50,000 was provided from the defendant's own resources. The further deposit of $190,500 was provided by means of a cheque from the plaintiff company as was a cheque for the final payment including the costs of the transaction of $2,249,147.50.

6. In this respect a number of matters should be observed. In the first place, it was the defendant's evidence that she had loaned to Mr Deng a sum of $2,440,000 in cash and that Mr Deng had procured the plaintiff to provide the cheques in repayment of that loan. It was the defendant's case that she had been earning large sums of money in commission from conducting a business which comprised "arranging emigration" for residents of her home area in the Mainland namely Fujian Province. It was said that the defendant's role in the business was to introduce would be emigrants and to collect the commission when they passed through Hong Kong. The commissions were all paid in cash and ranged from US$5,000 to US$10,000. The defendant said that she kept no records and paid no tax. As a result, she had a large accumulation of cash in her possession which she was in a position to pass to Mr Deng. She said that Mr Deng came round to her apartment and counted the cash, taking a considerable time to do so. He had given her a receipt. That receipt was later returned to Mr Deng at the defendant's residence after the purchase monies for the flat had been provided and that Mr Deng had burned the receipt.

7. The defendant's evidence was that she had been asked by Mr Yuen to assist Mr Deng and that in return for her assistance she would be able to make an investment in some shares which were anticipated to make a considerable profit. There is some evidence that the defendant was able to put some $680,000 towards the purchase of shares but it would seem that no profit was derived from that transaction.

8. On the other side of the coin there is no documentary evidence emanating from the plaintiff company indicating that the plaintiff had indeed purchased this property i.e. Flat G. Indeed, such documentary evidence as exists would appear to go the other way. The plaintiff's internal accountant gave evidence. She explained that the flat which had been purchased had not been put into the company's accounts because the flat was not in the plaintiff's name. Be that as it may, it also has to be observed that there was no declaration of trust by the defendant that the flat belonged to the plaintiff, nor was there any other indication such as a minute of a board meeting or a memo to show that the plaintiff had purchased that flat. None of the expenses of ownership of that flat were ever paid by the plaintiff. They were all paid by the defendant, including not only the decoration costs but also the management fees and other costs of upkeep. Indeed, there is no suggestion that the initial deposit of $50,000 was reimbursed to the defendant.

9. Fundamental to the plaintiff's case is the question of whether the purchase money was in fact provided by the plaintiff or, on the evidence adduced by the plaintiff, was provided by Mr Deng. In this respect, two matters, which emerge from the documents, are relevant. In the first place, it is agreed that a piece of paper showing the essential financial calculations in relation to the purchase of the flat had been provided to Mr Deng. It is the defendant's evidence that this sheet was prepared by the defendant's husband in relation to the defendant and her husband's assessment of the cost of purchase of the flat. At the side of that document was written a notation "agree to pay charge it to my account" that was signed by Mr Deng. That was apparently a note to the plaintiff's accounts department. On the face of it, that note would indicate that it was Mr Deng's direction that the sums required to be paid for the purchase of this property would come from Mr Deng's account with the plaintiff. As the judge recorded the only entry in the plaintiff's account was under "amounts due from directors". That showed a debit due from Mr Deng to the company. There was no reference to the flat. Neither was the precise amount paid for the flat recorded in the plaintiff's account. Furthermore, the plaintiff's account showed that on 1 April 1992 Mr Deng owed the company $8,400,000. Not only had that amount been discharged within a year but exactly a year later there was a credit due from the plaintiff to Mr Deng of $714,424. This would all go to show that it was Mr Deng's funds which were used to provide the balance of the purchase monies and not the plaintiff's.

10. It is the plaintiff's case on this appeal that the matter should be decided on the inherent probabilities. Mr Chan, SC, who appeared on behalf of the plaintiff said that the plaintiff's story was more believable than the defendant's and that accordingly it was open to this court to reverse the judge's findings. In my view that cannot be the correct approach. Since this is an appeal on a question of the judge's findings of fact, it is necessary for the plaintiff to show that the judge's findings of fact were wrong. It is also necessary for the plaintiff to show that it has a good cause of action on the face of its own case.

11. Pausing there, I fail to see how it could be said that the judge should have been satisfied that the flat was held on trust for the plaintiff. On the face of the evidence adduced, the plaintiff paid no money; it was Mr Deng who paid the money from his own account with the plaintiff, he subsequently repaid the plaintiff in full. In the absence of any documentary evidence supporting the fact that the plaintiff had purchased the flat or that the flat had been purchased for the plaintiff, it seems to me that the plaintiff's case must fail at that hurdle at the very least.

12. Going further, however, this is not a case where it can be said that this court is in an equal position to the judge at first instance to decide a question of fact.

13. The co-signatory of the two cheques who was also a director of the plaintiff was not called when, presumably, he could have given evidence as to the reason for issuing the cheques.

14. Mr Yuen was not called as a witness for the reason that he was in prison in the Mainland. He had been arrested in August 1992 and was sentenced to 15 years imprisonment in January 1998. In those circumstances the only witness apart from the accountants on behalf of the plaintiff was Mr Deng. In the course of his cross-examination, Mr Deng was forced to admit that he drew no distinction between Mr Yuen or the Bank of China. He said : "I treated him and the bank as the same thing because he represented the bank."

15. It seems that at one stage that Mr Deng was giving evidence that the money had been loaned because the bank needed the plaintiff to provide $2.5 million. His answer was :

"It's not surprising at all because at that time in China, there was the foreign currency control."

Later on, there is a passage :

"Q. So you believed there was somehow, some way, the Bank of China, Fo Shan Branch, could not provide $2.5 million now, in two months' time would be -- therefore you had to borrow from, effectively, asked for financial assistance from China Weal Limited?

A. Yes, I believe that it was only a temporary flow of funds problem."

16. Mr Deng could provide no satisfactory explanation as to why the plaintiff would be prepared to lend the Bank of China money interest free and yet would at the same time be borrowing money from the Bank of China and paying interest.

17. In summary, Mr Deng's explanation as to why money should be provided effectively for the Bank of China interest free and never demanded from them, in respect of the purchase of a flat in an arrangement which would entail the flat being transferred to Mr Yuen or the Bank of China at cost price, simply, in my view, fails to attract any ring of truth. Indeed, I would go further. There are passages in the transcript of the cross-examination of Mr Deng from page 186 onwards which could only be regarded as being absurd.

18. Whilst I appreciate that the defendant's version of events may itself have credibility problems, if it be true that the defendant had been generating large sums of money in cash from what would be a dubious business the proceeds of which were not reported to the Inland Revenue, I can see every incentive for the defendant wishing that the proceeds be converted into a tangible asset purchased ostensibly by funds coming from a company which would provide a respectable cover.

19. Whilst, in my view, it can legitimately be said that it is more than likely that the full truth in this matter has not emerged, I cannot regard the plaintiff's case as either believable or as a sound foundation for its claim that the defendant holds the flat on trust for the plaintiff.

20. Whether it is to the ultimate benefit of the parties that there has been an airing of those facts which have emerged, and whether further investigations might be made by the appropriate authorities, remains to be seen.

 

Hon Le Pichon JA :

21. I agree.

 

Hon Stone J :

22. I agree with the judgment of the Vice President.

23. For my own part, I am unable to see how it can begin to be said, in the circumstances disclosed in this case, that the learned trial judge was plainly wrong, which is the benchmark Mr Chan SC recognised that he was required to attain.

24. Other considerations apart, it seems to me clear that the plaintiff was but a conduit for the funds advanced, which fact negates the plaintiff's reliance upon the presumption of trust relied upon. Absent such evidential assistance, the plaintiff has signally failed to discharge the legal burden of demonstrating that the defendant's legal title should be displaced, and a resulting or constructive trust found or imposed in favour of the plaintiff.

In my view, the learned trial judge was more than justified, in a case in which the evidential waters are particularly murky, in coming to the conclusion which he did.

 

 

 

Representation:

Mr Warren Chan, SC & Miss Linda Chan, instructed by Messrs Pang Wan & Choi for Plaintiff/Appellant

Mr Kenneth C L Chan and Mr Raymond Tsui, instructed by Messrs Peter Mo & Co. for Defendant/Respondent

 

CACV000187/2000

CACV 187/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 187 OF 2000

(ON APPEAL FROM HCA NO. 12281 OF 1997)

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BETWEEN
	CHINA WEAL LIMITED	Plaintiff
	AND
	LAM SAU WAH	Defendant

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Coram: Mayo CJHC (Ag.), Leong JA and Keith JA in Court

Date of Hearing: 20 September 2000

Date of Judgment: 20 September 2000

 

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J U D G M E N T

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Keith JA (giving the judgment of the Court):

Introduction

1. In 1992, the Defendant bought a flat in Tai Koo Shing. The Plaintiff claims that the Defendant holds the flat on trust for it. The Defendant denies that. Accordingly, the Plaintiff brought proceedings in the Court of First Instance seeking a declaration that the flat was being held by the Defendant for the Plaintiff on a resulting trust. The action was heard Deputy Judge Woolley. By a judgment handed down on 18 April 2000, he dismissed the Plaintiff's claim.

2. The Plaintiff wished to appeal to the Court of Appeal. The judgment was sealed on 5 May, which happened to be the date on which the amendment to Ord. 59 r. 4(1)(c) took effect, whereby the time for serving a notice of appeal to the Court of Appeal was reduced from six weeks to 28 days. The Plaintiff's solicitors served the notice of appeal on the Defendant on 29 May, i.e. within the new time limit. The Defendant is now applying for the notice of appeal to be struck out "for failure to set down the appeal as required by Ord. 59 r. 5".

The requirements of the Rules

3. The Defendant's application as originally formulated betrays a misunderstanding of what Ord. 59 r. 5 requires an appellant to do once the notice of appeal has been served on the other party. Ord. 59 r. 5 identifies three separate steps. First, Ord. 59 r. 5(1) provides that where, as in the present case, the notice of appeal has been served after the order appealed from has been sealed, the appellant is required, within 7 days of service of the notice of appeal, to lodge with the Registrar two copies of the notice of appeal duly endorsed and a copy of the order appealed from. Secondly, Ord. 59 r. 5(2) provides that, once these documents have been lodged with the Registrar, it is the Registrar who must (a) file the notice of appeal and (b) cause the appeal to be set down. Thirdly, Ord. 59 r. 5(4) provides that, within 4 days of the Registrar causing the appeal to be set down, the appellant must give notice to that effect to all the parties on whom the notice of appeal was served. There is no prescribed form for such a notice. Indeed, the Rules do not require the notice to be in writing. Accordingly, the notice that the Registrar has set down the appeal may be given orally.

4. It will be noted from this summary of the steps to be taken that an appellant cannot be criticised for failing to set down an appeal. It is the Registrar's responsibility to cause an appeal to be set down. What an appellant can be criticised for is either not lodging the relevant documents with the Registrar within the relevant time as required by Ord. 59 r. 5(1), or not notifying the other parties within the relevant time that the appeal has been set down as required by Ord. 59 r. 5(4).

The Plaintiff's compliance with the Rules

5. In these circumstances, the Defendant no longer contends that the Plaintiff failed to set down the appeal. Nor does the Defendant contend that the Plaintiff failed to comply with the requirements of Ord. 59 r. 5(1). In that connection, the Defendant does not dispute that on 30 May the Plaintiff lodged with the Registrar the documents required to be lodged. The only point now taken by the Defendant is that the Plaintiff failed to comply with the requirements of Ord. 59 r. 5(4), in that the Plaintiff failed within 4 days after the appeal had been set down to give notice to the Defendant to that effect.

6. It is not disputed that late on 31 May, the Defendant's solicitors sent a fax to the Plaintiff's solicitors asking if the notice of appeal which had been served on the Defendant's solicitors on 29 May had been filed in court, and if so when. It is common ground that on the following day, David Wan, who was the solicitor with the Defendant's solicitors handling the case, telephoned the Plaintiff's solicitors to get the answer to the query raised in his fax. It is also common ground that he spoke to Emily Ho, who was the solicitor with the Plaintiff's solicitors who was handling the case. It is here that it initially looked as if there might be an unfortunate difference of recollection. Ms Ho claims that she told Mr Wan that the documents had been lodged with the Registry on 30 May, that a number had been assigned to the appeal then, and that the appeal had accordingly been set down. Her version of events is supported by a file note which she prepared at the time. For his part, Mr Wan claims that he merely asked her whether the notice of appeal had been filed, not whether the appeal had been set down, and that Ms Ho had not told him that it had been set down.

7. If their evidence had revealed a genuine difference of recollection between them on a material issue, that difference of recollection could not really have been resolved without Ms Ho and Mr Wan being cross-examined on the contents of their affirmations or affidavits. We do not believe that that is necessary. That is because we do not think that there is a difference of recollection between them on a material issue. What Mr Wan did not say in his affirmation is whether Ms Ho answered his query whether the notice of appeal had been filed. Since the notice of appeal had been lodged two days earlier, and since Ms Ho knew that, it would have been extraordinary if Ms Ho had not confirmed that the notice of appeal had been filed. Thus, even if there had been no conversation as to whether the appeal had been set down, Mr Wan's failure to state in his affirmation what Ms Ho's answer to his query had been is, in our view, tantamount to an admission that she had told him that the notice of appeal had been filed.

8. What, then, is the effect in law of Ms Ho having told Mr Wan that? The answer, in our opinion, is this. In Chan Cheryl v. Ngai Po Lun Paul [1991] 1 HKC 148, the Court of Appeal had to decide when an appeal can be said to have been set down. It referred to the practice in the Registry which was then (and still is) that when the documents required by Ord. 59 r. 5(1) to be lodged are lodged, the appeal is entered in the Register of Appeals, and an appeal number is given. The Court held that it was that entry in the Register which constituted the setting down of the appeal. In the present case, as we have said, Mr Wan has to be treated as having been told that the appropriate documents had been lodged with the Registry on 30 May. Since the consequence of the lodging of those documents would have been the entry of the appeal in the Register, and since that would have constituted the setting down of the appeal, the notice to Mr Wan that the appropriate documents had been lodged with the Registry was tantamount to notice to him that the appeal had been set down on that date. It follows that the Plaintiff did not fail to comply with the requirements of Ord. 59 r. 5(4).

9. Both in his skeleton argument and in the course of his submissions, Mr Kenneth Chan for the Defendant referred to the fact that the Plaintiff's solicitors made no attempt to fix a date for the hearing of the appeal. That may be so, but neither the Rules nor the Practice Direction Relating to Civil Appeals to the Court of Appeal lay down a time limit for the Plaintiff to do that. Perhaps they should. The fact is that they do not. But in any event, it was open to the Defendant to apply for a date for the hearing of the appeal to be fixed if the Defendant wanted to.

Conclusion

10. For these reasons, the Defendant's application to strike out the Plaintiff's notice of appeal must be dismissed.

 

 

 

Representation:

Ms Linda Chan, instructed by Messrs Pang, Wan & Choi, for the Plaintiff

Mr Kenneth Chan, instructed by Messrs Peter Mo & Co., for the Defendant