CHINA GOLD FINANCE LTD v. CIL HOLDINGS LTD AND OTHERS

CACV 11/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 11 OF 2015

(ON APPEAL FROM HCA NO. 2900 of 2001)

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JUDGMENT
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Hon Lam VP (giving the Judgment of the Court):

1. The Plaintiff advanced a loan of HK$40 million [“the Loan”] to the 1^st Defendant in 1999 and the 2^nd and 3^rd Defendants acted as guarantors. In June 2001, the Plaintiff issued the writ in this action for the recovery of this loan. The Defendants raised a number of defences. It took a long time before the action was tried before Deputy High Court Judge B Chu (as B Chu J then was) [“the Judge”] in mid-2014. By the time of trial, the 2^nd Defendant and a witness called Duan (who, as we shall see, featured prominently in the relevant transactions) had passed away[1]. The trial lasted for 10 days. By the time when the Judge gave judgment, the remaining Defendants relied only on two lines of defence:

(a) The Plaintiff no longer had title to sue for the recovery of the Loan and it had assigned the same to Hainan Guotai Real Estate Development Company  Limited [“HGRED”] a PRC company in September 2005; and

(b) There had been partial repayments of the Loan, $30,956,774.94 on 29 Feb 2000 and $3,386,808 on 5 April 2000 as evidenced by a Debit Note of 12 June 2001. 

2. To set matters in context, in 2005 when the Plaintiff entered into an agreement with HGRED (the making of the agreement was not disputed though its true nature and purport and effect are the central issues in the case), the listing of the 1^st Defendant’s shares had been suspended since May 2001[2] with a winding up petition issued against it which culminated in a scheme of arrangement sanctioned by the court in April 2003.  The Plaintiff took no step to pursue this action for 3 years and it was not able to identify any assets of the 1^st Defendant[3].

3. In the judgment handed down by the learned Judge on 19 December 2014, she rejected the partial repayment defence.  However, she accepted the Defendants’ case on assignment.  She therefore dismissed the Plaintiff’s claim. 

4. The Plaintiff appealed against the judgment. The Defendants cross-appealed against the rejection of the partial repayment defence.  However, Mr Lam SC made it clear that his clients would only pursue that cross-appeal if the Plaintiff succeeded in its appeal.

5. Mr W Wong SC (together with Mr D Wong and Mr M Lok), appearing for the Plaintiff, submitted that the Judge had erred in finding as a matter of fact that the Loan had been assigned to HGRED.  There was no dispute that the Plaintiff had executed a written agreement on 15 September 2005 [“the Agreement”].  However, Mr Wong submitted that the Judge should have accepted the Plaintiff’s case that the Agreement was a sham in that it was only intended by the parties to be an instrument to facilitate Duan to recover money from the 1^st Defendant on behalf of the Plaintiff.  Counsel also contended that the Judge should not have found the Loan as the subject matter of the Agreement in view of the discrepancy between the Loan amount ($40 million) and the figure stated on the Agreement (RMB 46.5 million).  Further, Mr Wong submitted the Judge should have found that the Agreement had been cancelled, as evidenced by a fax dated 28 November 2005 [“the Fax”]. 

6. In the further alternative, Mr Wong submitted that even if the Agreement was valid and subsisting, the Judge should have found that it was not an assignment of the entire Loan but only partially in respect of the stated amount of RMB 46.5 million, or the principal amount without assigning the interest flowing therefrom.

7. By way of another alternative, Mr Wong submitted that the assignment was not effective because the original documents regarding the Loan were not given to the HGRED, there was no handing over of proof of the debt pursuant to Clause 6 of the Agreement.  Still further, Mr Wong submitted the Judge should have accepted the expert evidence of the Plaintiff’s expert that as a matter of PRC law the documents handed over could not constitute proof of the debt, and as such there was no effective assignment pursuant to Clauses 6 and 7 of the Agreement.

8. Further still, Mr Wong also advanced these submissions in his written materials to contend the assignment was not effective:

(a) Clause 13.2 of the Loan Agreement prohibited the Loan from being assigned; and

(b) The Judge erred in placing the burden of disproving the payment of the RMB 1 by HGRED as consideration under the Agreement on the Plaintiff. 

9. In short, Mr Wong sought to re-argue before us each and every point taken below.  The Judge dealt with all these points in her meticulous judgment of 117 pages (consisting of 400 paragraphs).  Most of the submissions of Mr Wong are mere repetitions of what he had advanced before the Judge by way of closing submissions in the trial.  There were extensive cross-references in Mr Wong’s skeleton submission before us to the written closing submissions (which is a document consisting of 176 pages). 

10. We agree with the submissions of Mr Lam (appearing together with Mr M Wong for the Defendants) that the Plaintiff’s appeal is essentially an attempt to overturn the findings of fact of the Judge by re-running arguments which had been considered but rejected by her.  We hasten to say that it is a misuse, if not an abuse, of the appellate process.  We shall explain why.

The proper scope of an appeal against findings of fact and the proper drafting of notice of appeal

11. It is well settled that in respect of findings of fact, this court can only intervene when we are satisfied that the findings by the primary judge is plainly wrong: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 is often cited and applied in this court.

12. Regrettably, there are still cases coming before us in which counsel (including experienced and senior counsel) apparently failed to have regard to the proper role of the Court of Appeal in an appeal of this nature.  Thus, from time to time, we can find judgments from this court reiterating the fundamental principles in this respect: Chinachem Charitable Foundation Ltd v Chan Chun Chuen CACV 101 of 2010, 14 February 2011 para 26; Welltus Ltd v Fornton Knitting Co Ltd [2013] 5 HKC 106; Bank of China (Hong Kong) Ltd v Tsang Sheung Bun [2013] 5 HKLRD 62; Pang Ketian Sally v Tam Yuk Hung Annie CACV 147 of 2013, 25 April 2014; To Pui Kui v Ng Kwok Piu CACV 281 of 2012, 21 August 2014; Ageas Insurance Co Ltd v Lam Hau Wah Inneo CACV 65 of 2014, 9 January 2015 are some recent examples.

13. Mr Lam also referred us to the recent judgment of the United Kingdom Supreme Court on the same topic: Carlyle v Royal Bank of Scotland [2015] UKSC 13 in which references were made to McGraddie v McGraddie [2014] UKSC 12; Henderson v Foxworth Investments Ltd [2014] 1 WLR 2600 and the judgment of the Privy Council in Beacon Insurance Co Ltd v Maharaj Bookstore Ltd [2014] UKPC 21.

14. These authorities explained the limits of an appellate court in reversing the findings of fact of the primary judge.  We used the expression “primary judge” because it emphasizes the primary role of the first instance judge in the assessment of evidence and making of relevant findings of fact.  In our judicial system, the appellate process is not designed to give a litigant (or his counsel) a platform for regurgitating his closing submissions on the evidence and factual aspects of the case again with the hope that the appellate judges may come to a different view to that of the primary judge.  It is thus, as we said above, a misuse of the appellate process to place before this court submissions which, in substance, are (or should be) submissions advanced by way of closing submissions at the trial after the judge has heard all the evidence.

15. In an appeal, the court of appeal should focus on the question whether the primary judge has fallen in palpable errors which could give rise to grounds for intervention by the appellate court.  As explained in the cases, it is not germane that judges in this court may reach a different conclusion from that of the judge.  There are many areas, particularly those in relation to findings of fact, where judges can reasonably reach different conclusions from each other.  That would not be a ground for intervention. 

16. Thus, in an appeal, it is not helpful if counsel and litigant (acted in person) only repeat submissions already advanced and considered by the primary judge at the trial.  The starting point should be the judgment of the primary judge and the identification of palpable errors (which must be errors of such nature which warrants intervention from this court) in the judgment.  The mere assertion that the finding of the judge is against the weight of the evidence or that the judge should have reached another conclusion because of points advanced in the closing submissions below are not errors coming within that category. 

17. We respectfully agree with the judgment of the Privy Council in Beacon Insurance Co Ltd v Maharaj Bookstore Ltd, supra, where Lord Hodge explained at paragraph 12 the phrase “plainly wrong” in the context of an appeal against a finding of fact:

“ This phrase does not address the degree of certainty of the appellate judges that they would have reached a different conclusion on the facts … Rather it directs the appellate court to consider whether it was permissible for the judge at first instance to make the findings of fact which he did in the face of the evidence as a whole. That is a judgment that the appellate court has to make in the knowledge that it has only the printed record of the evidence. The court is required to identify a mistake in the judge’s evaluation of the evidence that is sufficiently material to undermine his conclusions.”

18. Similar statement was made by Lord Reed in Henderson v Foxworth Investments Ltd, supra at paragraph 62.

19. The kinds of mistake which could engage an appellate court’s power of intervention were recently explained by Lord Neuberger in In re B (A Child) [2013] 1 WLR 1911, at paragraph 53:

“ …where a trial judge has reached a conclusion on the primary facts, it is only in a rare case, such as where that conclusion was one (i) which there was no evidence to support, (ii) which was based on a misunderstanding of the evidence, or (iii) which no reasonable judge could have reached, that an appellate tribunal will interfere with it.”

20. In addition to the traditional explanation for such a limitation on appellate intervention by reference to the trial judge’s advantage in assessment of witnesses after hearing their evidence, Lord Neuberger also provided further explanations in light of modern litigation ethos:

“ This can also be justified on grounds of policy (party should put forward their best case on the facts at trial and not regard the potential to appeal as a second chance), cost (appeals can be expensive), delay (appeals on fact often take a long time to get on), and practicality (in many cases, it is very hard to ascertain the facts with confidence, so a second, different, opinion is no more likely to be right than the first).”

21. To the same effect, Lord Hodge said in Carlyle v Royal Bank of Scotland, supra, paragraph 22:

“ The rationale of the legal requirement of appellate restraint on issues of fact is not just the advantages which the first instance judge has in assessing the credibility of witnesses. It is the first instance judge who is assigned the task of determining the fact, not the appeal court. The re-opening of all questions of fact for redetermination on appeal would expose parties to great cost and divert judicial resources for what would often be negligible benefit in terms of factual accuracy. It is likely that the judge who has heard the evidence over an extended period will have a greater familiarity with the evidence and a deeper insight in reaching conclusions of fact than an appeal court whose perception may be narrowed or even distorted by the focused challenge to particular parts of the evidence …”

22. With the recognition of the rationale for appellate restraint in this light, there is also a greater appreciation of the need to exercise restraint in respect of findings of secondary facts based on inference drawn from findings of primary fact, see Beacon Insurance Co Ltd v Maharaj Bookstore Ltd, supra, paragraph 17; Pang Ketian Sally v Tam Yuk Hung Annie, supra, paragraphs 26 to 32; Ageas Insurance Co Ltd v Lam Hau Wah Inneo, supra, paragraphs 29 to 30. 

23. See also the well know statement of Lord Hoffmann in Piglowska v Piglowski [1999] 1 WLR 1360 at 1372 on the findings of fact by a judge as inherently incomplete statement of the impression upon him or her and the judgment of Bokhary PJ in Ting Kwok Keung v Tam Dick Yuen, supra.

24. In To Pui Kui v Ng Kwok Piu, supra, after referring to McGraddie v McGraddie, supra, this court also explained at paragraphs 12 to 16 why institutionally it is not appropriate for our Court of Appeal to take over the role of the trial judge as the primary assessor of the evidence.  

25. A notice of appeal should set out the grounds of appeal by identifying errors are of a nature which truly entitled the court of appeal to intervene with a finding of fact.  We regret to say that in many cases we have seen numerous paragraphs which are in substance closing submissions made at the trial and references to evidence.  We are firmly of the view that statements of such nature have no place in a proper notice of appeal. 

26. The Notice of Appeal in the present appeal was settled by senior counsel.  It is 48-page long with a 10-page schedule.  We do not know how much costs were incurred in the preparation of this document (including the costs of explaining it to the clients) and how much costs were incurred by Mr Lam’s team in digesting the same.  In any event, with respect, we do not find the document helpful in the proper resolution of the appeal. 

27. We implore counsel (or whoever drafts a notice of appeal) to exercise discipline, proper care and professional judgment in the preparation of a notice of appeal.  It should be a concise document setting out clearly and succinctly why the Court of Appeal should intervene with the judgment of the judge.  In relation to findings of fact, the grounds of appeal must pinpoint the palpable errors of the primary judge.  It is an abuse to canvass submissions at length in a notice of appeal.  Such a practice proliferates unhelpful arguments and escalates the costs of the process.  It also causes wastage in judicial resources which should be more fruitfully utilised for other purposes.

28. Lawyers and litigants are required by Order 1A Rule 3 of The Rules of the High Court to assist the court in the furtherance of the underlying objectives in Order 1A Rule 1.  A notice of appeal which is prolix and unfocused containing statements in the nature of submissions or evidence goes against each and every objective set out in Rule 1.  It is the duty of the court to discourage such practice.  And it is the duty of the litigants and the professional duty of their lawyers to refrain from engaging in such practice. 

29. In future, litigants and practitioners can expect this court to exercise tighter case management in this and other aspects of the appellate process.  In cases of serious abuse, the appellant will be met with an unless order requiring a prolix, unfocused notice of appeal to be amended by a certain deadline, failing which the appeal will be struck out. 

30. For reasons set out above, we must consider the appeal in the present instance by asking in respect of each finding of fact challenged by the Plaintiff whether there is any palpable error in the Judge’s assessment of evidence.  If there is none, this court should not embark on the role of the re-assessment of evidence in the way Mr Wong’s skeleton submissions invite us to do.  In that regard, Mr Wong’s oral submissions before us is more pertinent.  But before we do so, we should address the submission of Mr Wong that the Judge adopted a wrong general approach in her assessment of evidence.

The Judge’s approach in the assessment of evidence

31. After setting out the background and issues between the parties, the Judge considered the factual witnesses and their demeanour at paragraphs 65 to 74 of the judgment.  At paragraph 67, the Judge said:

“ I have to say at the outset that I do not find any of the witnesses entirely reliable and they all had their own interests to guard. The court had not really told of the full picture, in particular to those events in PRC or the business relationships between the Kwok Siblings[4] and those various entities and persons in PRC. Having said this, the main witnesses in relation to the Assignment Defence were Ms Kwok and Li Jie. Having observed their demeanour in court, I have preferred Li Jie’s evidence in many areas to that of Ms Kwok’s, as I have found him more spontaneous and firm when giving evidence, whereas I have found Ms Kwok to be guarded, evasive and vague and she often said she had no knowledge when asked about some of the events in PRC. I will consider their respective evidence in detail later when dealing with the factual issues.”

32. Mr Wong submitted that the Judge had erred in her approach to the evidence because she committed the same mistake as identified by Ribeiro PJ in Tradepower (Holdings) Ltd v Tradepower (Hong Kong) Ltd [2010] 1 HKLRD 674 at paragraph 24. 

33. In that case, the trial judge accepted some witnesses as credible witnesses and said he would accept their evidence unless any particular aspect of their evidence is shown to be wrong by undisputed contemporaneous documents or other incontrovertible evidence.  Ribeiro PJ said this was an unsatisfactory approach.  His Lordship continued:

“ Inconsistencies between the testimony of a witness and other items of evidence have to be evaluated as part of the overall process of assessing credibility. It is not satisfactory first to form the view that the witness is generally credible and then to carve out exceptions in areas where inconsistencies with other evidence are found. Such an approach casts doubt on the initial assessment of credibility.”

34. With respect, if one reads paragraph 67 in light of the whole judgment, one can readily see that the Judge did not commit the error as the other judge did in Tradepower.  The Judge did weigh the relevant evidence on each issue separately and carefully and she did not come to her conclusion simply based on demeanour of the witnesses.  The Judge specifically stated at paragraph 67 that she would consider the evidence of the witnesses in detail later.  By the time she wrote the judgment, the Judge must have assessed the evidence thoroughly and she must have formed the views set out in the whole judgment.  At that paragraph, she only gave an introductory overview and the actual weighing process was set out by her in the later parts of the judgment.  It is wrong to read paragraph 67 as the Judge closing her mind to other matters which were addressed later in the judgment. 

35. There is no merit in this challenge. 

The purpose of the Agreement: a sham or a real assignment

36. The Plaintiff’s case was that the Agreement was a sham whilst the Defendants’ case was that it was a true assignment of the Loan. 

37. The Judge analysed the relevant sub-issues at paragraphs 140 to 275 of the judgment.  She made the following findings of fact:

(a) The Kwok Siblings (of the Plaintiff) prepared the 5 Initial Documents to show to Duan and Li Jie (of HGRED) at a meeting on a date after 12 April 2005 (paragraphs 173 and 174 of the judgment);

(b) At that meeting, the Plaintiff sought assistance from Duan and Li Jie in resolving the dispute relating to Charity Plaza as testified by Li Jie and the role they played was not limited to (as testified by Ms Kwok) dissuading Li Zhengli from misusing the 1^st Welchem power of attorney (paragraphs 219 to 221 read together with paragraph 47);

(c) The assignment of the Loan was part of the reward for such services of Duan and Li Jie, in addition to the $2 million stated in a consultancy agreement of 8 Oct 2005.  Such a reward was suggested by the Kwok Siblings when Duan and Li Jie asked for RMB 8 million for their services when the Plaintiff initially offered HK$ 2 million.  The Plaintiff’s case that the Agreement was merely prepared to facilitate Duan and Li Jie’s recovery of money for the Plaintiff was rejected (paragraph 241). 

38. There are sub-sub-issues within these sub-issues and the Judge considered them at length in her judgment.

39. Mr Wong could not suggest that the Judge’s findings in these respects were not supported by any evidence.  It is beyond dispute that there was evidence supporting these findings in the form of the testimony from Li Jie and the documents that the Judge alluded to.  However, Mr Wong submitted that the Judge did not weigh the relevant evidence properly.  We shall now examine his submissions. 

40. First, he submitted that the Judge gave excessive weight to the 5 Initial Documents and gave little or no weight to some glaring omissions and errors on these documents.  As submitted by Mr Lam, this was just a re-run of the closing submissions of the Plaintiff before the Judge, which she duly considered and dealt with at paragraphs 140 to 175 of the judgment.  The weighing of evidence is a matter for the Judge and we cannot discern any misunderstanding of the evidence on the part of the Judge.  Nor do we regard the Judge’s finding as perverse.  With respect, this ground of appeal is misconceived.

41. Second, Mr Wong submitted that the finding of the Judge “failed to take into account or accord sufficient weight to” the fact that (i) the purported assistance was outside the pleaded case of the defendants; (ii) there is no documentary evidence to support it; (iii) it was contradicted by the Agreement and the Consultancy Agreement of 8 Oct 2005 and (iv) the same does not accord with inherent probability.

42. Mr Wong in his reply skeleton said he was not taking a pleading point but it was a point going to credibility.  As we said, credibility is a matter for the Judge and there is no reason for us to believe she had not taken this into account.

43. On inherent probability, Mr Wong simply referred us to paragraphs 260 to 290 of the closing submissions placed before the Judge.  We have read those paragraphs.  With respect, whilst they are submissions pertinent to weighing the evidence (and we again do not have reason to believe the Judge had not considered them in her weighing of the evidence), they do not provide a reasonable basis for suggesting that the Judge’s acceptance of the evidence of Li Jie was perverse.  They cannot amount to grounds for this court to interfere with the Judge’s findings of fact. 

44. On the so-called contradictions and lack of documentary evidence, they are again matters for the Judge in weighing the evidence.  The fact that the Agreement did not refer to the services by Duan and Li Jie in relation to the settlement of the Charity Plaza Dispute and the Consultancy Agreement did not provide for the assignment of the Loan as additional consideration were part of the documentary evidence to which the Judge had given due regard. She had considered the documents in light of the oral evidence of the witnesses (see paragraphs 237 to 241 of the judgment).  It was open to her to accept the testimony of Li Jie and to find that these documents did not contain the complete arrangement agreed between Ms Kwok and them.

45. Mr Wong submitted thirdly that the Judge failed to consider the documents produced by Li Jie properly.  He contrasted the Judge’s analysis of the evidence of Ms Kwok with that of Li Jie by referring us to paragraphs 200, 201, 211, 212 (on the evidence of Ms Kwok) and paragraphs 205-207 and 217 (on the evidence of Li Jie).  Mr Wong then made a submission based on his perceived illogicality of the evidence of Li Jie that the document referred as Attachment 8 (a draft of the Welchem Resolution of 31 May 2005) was sent to Li Jie and Duan for review (審閱) after the execution of the document.

46. The thrust of this submission is on the implication of the expression“審閱”used by Li Jie in his witness statement.  That was not the focus of paragraphs 199 to 205 of the judgment where the Judge was dealing with the contention of the Plaintiff that these documents were not authentic and were manufactured by Li Jie.  She explained why she did not believe Ms Kwok in that respect.  We do not find any merit in Mr Wong’s submission that the Judge had wrongly placed the burden on Ms Kwok in those paragraphs.  She was only dealing with Ms Kwok’s assertion that these documents were forged and she had not seen them before she read Li Jie’s statement. 

47. As regards the submission now advanced by Mr Wong on illogicality, it is not clear to us whether the point was taken below. In the closing submissions before the Judge, Mr Wong dealt with Attachment 8 at paragraphs 221 to 227 and there was no reference to any illogicality flowing from the expression“審閱”.  Nor did Mr Wong bring our attention to the transcript to show that he had cross-examined Li Jie on this so-called illogicality.  There could well be explanations since the paragraph in the witness statement of Li Jie dealt with several documents together. 

48. An appeal is not the proper occasion for canvassing new points which might have been relevant but have not been raised below.  This court cannot be expected to re-assess the weight to be attached to the evidence of a witness when the point had not been properly canvassed below. As explained above, it is a misuse of the appellate process to attempt to do so.

49. Mr Wong’s fourth point relates to the discrepancy in the amount of the Loan.  The principal amount was $40 million, converted to RMB according to the official exchange rate as RMB 47.1 million. However, in the Agreement, the amount was stated to be RMB 46.5 million.  The Plaintiff’s case was that the amount in the Agreement was set by reference to a Hainan judgment debt obtained by the 1^st Defendant.  Ms Kwok’s evidence was that the Agreement was executed as a sham to facilitate Duan to recover money from the Defendants.  On the other hand, Li Jie’s evidence was that the Agreement was a genuine assignment of the Loan as part of the reward for their services in respect of the resolution of the Charity Plaza dispute.  The Judge assessed the evidence at paragraphs 222 to 241 and 277 to 287 of the judgment and she found in favour of the version testified by Li Jie. 

50. On the amount stated in the Agreement, Li Jie gave evidence that the calculations were done by a financial staff of HGRED who might have used the then “black market” exchange rate to convert $40 million into RMB 46.5 million.  This explanation was accepted by the Judge at paragraph 287 of the judgment. 

51. Mr Wong submitted that the following undisputed facts were “entirely consistent” with Ms Kwok’s version and it was wrong for the Judge to reject her evidence because the stated amount was at variance with the Hainan judgment debt (in the sum of RMB 44.992 million) as the latter was not known to Ms Kwok and the Agreement was drafted by Li Jie.  The undisputed facts were: (a) the 1^st Defendant did recover the Hainan judgment debt by 30 June 2005; (b) the choice of a seemingly arbitrary figure of RMB 46.5 million; (c) the figure in the Agreement was stated in RMB instead of HK$; (d) the choice of HGRED, a Hainanese company as intermediary for recovering the Loan; (e) a series of errors (stated at paragraphs 325 to 338 of the Plaintiff’s closing submissions before the Judge) found in the Agreement showing that it was prepared “at a rush” without paying much attention to its content.

52. With respect, it is yet another attempt by Mr Wong to invite this Court to perform the role of the primary judge in assessing the evidence again based on submissions which had been considered by the Judge.  Some of the so-called undisputed facts are self-serving.  In any event, even assuming that they were consistent with the evidence of Ms Kwok, it does not mean that the Judge’s rejection of her evidence was perverse.  The Judge had to assess Ms Kwok’s evidence against that of Li Jie. 

53. The Judge said at paragraph 282 in respect of the evidence of Ms Kwok:

“ Anyway, there was clearly a discrepancy between RMB 44.992m and RMB 46.5m. Ms Kwok was unable to explain the discrepancy when cross-examined. Even if she said she had no information on the amount of the Hainan Judgment Debt, there was no reason why she could not have found out such information before signing.”

54. Thus, the Judge did not overlook the fact that Ms Kwok said she had no knowledge of the amount of the Hainan judgment debt at that time. 

55. In the end, what Mr Wong’s submission boils down to is this: the version of Li Jie on black market rate was much more outlandish than the evidence of Ms Kwok on Hainan judgment debt and it was therefore wrong for the Judge to prefer Li Jie’s evidence to that of Ms Kwok.  In that connection, Mr Wong referred us to the relevant transcript of Li Jie’s evidence.

56. There is no evidence from the Plaintiff to show that Li Jie’s claim of black market rate was impossible.  Having considered the submissions of Mr Wong in this respect, we are not persuaded that the Judge’s finding can be said to be perverse. 

57. We conclude that this court has no proper basis to disturb the findings of the Judge that the Agreement was intended by the parties to be an assignment of the Loan as a reward for the services rendered by Duan and Li Jie in resolving the Charity Plaza dispute.

Cancellation

58. The Plaintiff contended that the Agreement had been cancelled.  The Judge discussed this contention and the relevant evidence at paragraphs 292 to 321 of the judgment.  She found that the Plaintiff had not discharged the burden of showing that the Agreement was cancelled on 17 September 2005. 

59. The Plaintiff relied on the evidence of Ms Kwok to establish the cancellation. In this respect, her evidence had to be considered in conjunction with her evidence on the purpose of the Agreement.  Her evidence was that though she had signed the Agreement on behalf of the Plaintiff, she did not get the ratification of the same from the board and therefore Duan agreed with her to cancel the same on 17 September 2015. 

60. The Judge assessed this part of the evidence at paragraphs 255 to 275.  Ms Kwok’s evidence on lack of authority and cancellation tied in with her evidence on the purpose of the Agreement.  The Judge rejected her evidence on lack of authority and as we have seen above, we have no reason to interfere with the Judge’s rejection of her evidence on the purpose of the Agreement.

61. The Plaintiff did not appeal against the Judge’s conclusion on the authority of Ms Kwok in signing the Agreement.

62. Since the Judge concluded that the purpose of the Agreement was to assign the Loan as part of the reward for services provided by Duan and Li Jie, the case of Ms Kwok that they simply agreed to cancel the Agreement without anything in return is inherently unlikely (see paragraphs 302 and 303 of the judgment).  We disagree with Mr Wong’s submission that the Judge’s reasoning there is illogical.  It is quite clear that the Judge was referring to Ms Kwok’s case on lack of authority when she used the expression “if indeed what Ms Kwok said was true” at paragraph 302, and not referring to her case on the purpose of the Agreement. 

63. Mr Wong however challenged the finding of the Judge on cancellation by submitting that the Judge did not have proper regard to the Fax.  The Judge explained at paragraphs 304 to 320 of the judgment why the Fax could not show that the Agreement had been cancelled. 

64. The Fax was not addressed to Li Jie.  Instead it was addressed to Chen Sanlin and Duan.  It was produced by the Plaintiff at a very late stage.  By then, Duan was seriously ill and Li Jie had not asked Duan about it.  It was perfectly open to the Judge to accept that explanation.  Though the Judge did not find there was sufficient evidence to find the Fax to be unauthentic, the Judge observed it could have been sent to Chen Sanlin (who had no interest in the assignment and with whom Li Jie had no contact) instead of Duan.  Further, the Judge did not find the Fax as sufficient evidence that there was any agreed cancellation of the Agreement (see paragraph 320 of the judgment).  In that paragraph, the Judge referred to evidence pointing to the contrary conclusion in the PRC Judgment. 

65. On 8 December 2005, HGRED further assigned the Loan to another party, a company the Judge called Guangdong Zhongling.  The PRC Judgment suggested that that further assignment had been acted upon.  That would not be possible if the Agreement had been cancelled on 17 September 2005.

66. Though the Fax referred to a promise to return an agreement, there was no clear identification of the relevant agreement.  We do not accept Mr Wong’s submission that it must have been referring to the Agreement.  Li Jie accepted that there was an agreed cancellation of another agreement, viz the Share Transfer Agreement (in respect of the shares in CRED Huadong), see paragraphs 293 and 294 of the judgment. 

67. It is against such background one should read the Judge’s discussion at paragraphs 309 to 320.  Viewed in that light, we do not accept Mr Wong’s submission that the Judge had overlooked some aspects of the evidence is a valid one. 

68. The submission based on the inability to produce the original of the Agreement had been duly accounted for (see paragraph 318 of the judgment).  The Judge also satisfactorily dealt with the question of notice of assignment at paragraphs 323 to 327 of the judgment.

69. On the whole, there is no merit in Mr Wong’s challenge to the Judge’s finding on cancellation.  

Partial assignment or assignment of the entire loan

70. Mr Wong submitted that even if the Agreement was not cancelled and operated as an assignment of the Loan, it was only an assignment of either RMB 46.5 million or the principal of the Loan, leaving the Plaintiff with the title to the balance (viz the interest or any sum over and above RMB 46.5 million).

71. The Judge discussed the relevant arguments at paragraphs 276 to 287 of the judgment.  It is a question of construction of Clause 1 of the Agreement.  Notwithstanding the discrepancy in the stated amount of the Loan, the Judge found that the common intention was to assign the Loan and, as discussed above, we do not have any basis to interfere with that finding.

72. As the Judge rightly observed, there was no indication in Clause 1 that only part of the Loan was to be assigned.  We have no hesitation in rejecting Mr Wong’s submission that only the principal was assigned.  There is no ground for advancing such a construction for Clause 1. The same applies to the alternative contention that only RMB 46.5 million of the Loan was assigned.  The description of the subject matter of the assignment in that clause must be construed as a whole and it was the loan due from the 1^st Defendant to the Plaintiff, viz the Loan.  There is absolutely nothing in the factual matrix as found by the Judge to support Mr Wong’s construction of Clause 1.  On the facts as found by the Judge as to the genesis of the Agreement, as testified by Li Jie, the whole of the Loan (including interest) was to be assigned.  The documents handed over by the Plaintiff to Duan and Li Jie were in respect of principal as well as interest.  Li Jie explained in his evidence that in the mainland, they described a chose in respect of a debt (“追討基礎”) by reference to the principal sum which formed the basis of the claim and interest would be calculated by reference to it.  That was the right over the debt (“債權”) that was assigned.  It was open to the Judge to accept such evidence.

Effectiveness of the assignment

73. Mr Wong advanced three arguments under this head:

(a) as a matter of Hong Kong law, the Loan is not assignable in view of Clause 13.2 of the loan agreement;

(b) the Judge reversed the burden of proof as to the payment of the RMB 1 nominal consideration under the Agreement; and

(c) there had not been any production of the proof documents (“債權憑証”) pursuant to Clause 6 of the Agreement and the Judge erred in accepting the evidence of the Defendants’ expert on PRC law in that respect in holding that the 9 documents handed over by the Plaintiff to Duan and Li Jie were sufficient proof documents.

74. On the assignability of the Loan, the Judge considered the same at paragraphs 343 to 363.  After discussing the relevant authorities cited by Mr Wong, the Judge adverted to the wordings of the clause in question.  Clause 13 reads:

“ 13. ASSIGNMENT

13.1. Benefit of Agreement: This Agreement shall be binding upon and ensure to the benefit of each party thereto and its successors and permitted assignees and transferees.

13.2. Assignments and Transfers by the Borrower: the Borrower shall not be entitled to assign or transfer all or any of their respective rights, benefits or obligations hereunder.  The Lender shall be entitled to assign or transfer all or any of their respective rights, benefits or obligations hereunder, by giving a written notice to the Borrower.”

75. It is quite plain from the wordings of the clause itself that the lender, viz the Plaintiff, could assign the Loan.  The Judge then considered the submissions of Mr Wong based on Hendry v Chartsearch Ltd [1998] CLC 1382.  The Judge had regard to the different wordings between the clause in that case and Clause 13.2.  The argument in the present context boils down to whether notice of assignment had to be given by the Plaintiff before the assignment.  Having given due regard to the submissions of counsel, the Judge concluded at paragraphs 361 to 363 that Clause 13.2 should be construed in a manner consistent with section 9 of the Law Amendment and Reform (Consolidation) Ordinance Cap 23.  She held that the Loan was assignable and the assignment would be effective as long as notice was given to the 1^st Defendant irrespective of by whom and when. 

76. On appeal, Mr Wong submitted that the Judge was wrong in that regard.  He did not elaborate on his argument (whether in his written skeleton or oral submissions) and simply referred us to his closing submissions before the Judge (see paragraph 31 of his skeleton submission in this appeal and footnote 89).

77. We do not think Hendry v Chartsearch Ltd, supra, sheds any light on Clause 13.2.  That was a case where assignment was not permissible without the prior written consent of a company.  Clause 13.2 did not provide as such.  The Judge construed Clause 13.2 in light of the general law on assignment.  That is part of the legal background which formed the relevant factual matrix to the loan agreement.  She also explained at paragraph 362 why Mr Wong’s construction of Clause 13.2 would be absurd.  We respectfully agree with her. 

78. The challenge regarding the payment of RMB 1 is that the Judge erred in paragraph 291 of the judgment in that the burden was on the Plaintiff to show that RMB1 had not been paid.  Mr Lam properly accepted that the Judge was wrong in that respect.  However, he submitted that it was immaterial because even if RMB 1 had not been paid, it would only entitle the Plaintiff to elect to terminate the Agreement, and the Plaintiff had not elected to do so.

79. We agree there is no evidence of the Plaintiff rescinding the Agreement before its performance in terms of the assignment (which, as discussed below, took place when the proof documents were handed over to Duan and Li Jie).  Once the assignment had been effected, and HGRED acted upon it to further assign the Loan to Guangdong Zhongling, and the 1^st Defendant acted upon it by entering into settlement agreements with Guangdong Zhongling, the Plaintiff could not nullify the assignment.  There is perhaps a more direct answer.  According to the findings by the Judge, the payment of RMB 1 was only a nominal consideration.  The real consideration was the settlement of the claims of Duan and Li Jie for reward in respect of their services in the Charity Plaza dispute.  Thus, even if there was non-payment of RMB 1, it was a matter of no moment.

80. Regarding the expert evidence on PRC law, the Judge analysed the same at paragraphs 371 to 391 of the judgment.  She concluded that the 9 documents handed over by the Kwok’s Siblings to Duan and Li Jie satisfied the requirement in Clause 6.

81. Before us, Mr Wong advanced sub-arguments under this part of his submissions.  First, he said the Judge erred in holding that these documents, read together, could satisfy Clause 6.  He gave two reasons for his contention: (a) the Judge had wrongly applied the common law approach or dictionary meaning and failed to have regard to the expert evidence that the proof documents (“債權憑証”) should prove the formation and creation of the loan.  He contended that the 9 documents did not satisfy this criteria because they did not evidence the advancement of the loan; and (b) the documents were not originals.

82. Mr Wong also submitted that the Judge did not make the relevant findings on PRC law.  Instead, counsel said, the Judge applied common law principles or dictionary meaning in the construction of Clause 6.  With respect, we do not agree.  It was common ground between the experts (as set out in their Joint Report paragraph 12) that PRC law does not stipulate any definition for proof documents.  Further, at paragraph 20 of that Joint Report, the expert for the Defendant referred to Section 79 of the Contract Law (“合同法”) on assignment of contractual rights and the absence of mandatory rule in the Contract Law on the mode of assignment in terms of the handing over of proof document.  There is no challenge to that view in the opinion of the expert for the Plaintiff.  Accordingly, the Judge made a finding to that effect at paragraph 373 of the judgment.

83. In other words, as a matter of PRC law, there is no legal requirement on what kind of documents had to be transferred before the assignment could be effected.  There is no statutory rule on proof documents and it is not a term of art in PRC law.

84. It follows that the requirement in Clause 6 is a simple matter of construction.  Though there were disagreements between the experts on whether the 9 documents could effectively prove the Loan, none of their views can be elevated to the status of a provision in the PRC law on the requirement as to proof documents in light of their consensus as mentioned earlier. 

85. In proffering their opinions on the effectiveness of the 9 documents as evidence to prove the Loan, the experts had gone beyond giving evidence on the requirement under the PRC law on what kind of documents must be handed over before an assignment could be effected.  The answer to that question is clear: as found by the Judge, there is no such legal requirement as a matter of PRC law. 

86. Likewise, Mr Wong’s references to the transcripts of cross-examination in terms of what documents were necessary to prove the existence of the Loan are not germane to the question on PRC law as to the requirement on effective assignment.  Such evidence is simply irrelevant and the Judge was correct in not dealing with it at length.

87. In the absence of a requirement for the handing over of proof document under PRC law for an effective assignment of a debt or a contractual right, the matter becomes a question of construction as to the meaning of Clause 6.  There was no suggestion before the Judge that there was any special rule for construction of contract under PRC law other than Section 125 of the Contract Law.  The Judge adverted to that section at paragraphs 377 and 378 of the judgment.  There is no reason for us to believe that she did not have regard to that in her construction of Clause 6 in terms of the requirement as to proof documents. 

88. As the Judge observed, Clause 6 did not require the proof to be conclusive.  As a matter of common sense, there could not be conclusive proof.  It is not an uncommon occurrence that authenticity of documents is disputed in litigation.  Thus, even if the documents provided were to include original bank transfer documents, there could still be dispute on “the formation and creation of the loan”.  It is always a matter of degree as to the weight that one could attach to one set of documents. 

89. We do not accept Mr Wong’s submission that the evidence of the experts proved that there is a requirement under PRC law that for the purpose of an effective assignment, the proof documents (“債權憑証”) should prove the formation and creation of the loan.  It is a different question from whether the PRC court, or any court for that matter, would regard the 9 documents per se as sufficient proof of the Loan.  That would depend on the disputes raised in the particular piece of litigation and the other evidence before the court.  But that is not the germane question in terms of construction of Clause 6.  Yet, it appears the Plaintiff’s expert had focused on the latter question.

90. We do not see any ground for us to say that the Judge’s construction of Clause 6 in paragraphs 372 to 375 of the judgment was wrong.  Mr Wong’s ground (a) is without merit.

91. The same analysis applies to Mr Wong’s submission that the documents must be originals before they could constitute proof documents for the purpose of Clause 6.  Mr Wong’s attempt to derive mileage out of his line of cross-examination of the expert witness along the line of business efficacy as a rule of PRC law is wholly misconceived.  It was yet another conflation on his part of the two very different questions as stated in paragraph 89 above. 

92. The Judge dealt with the question of whether originals were required under paragraphs 377 to 388 of the judgment.  She accepted the evidence of the Defendants’ expert that originals were not required under Clause 6.  The opinion of that expert was set out in the Joint Report at paragraphs 19 to 23.  In particular, at paragraph 23 he explained why in accordance with the approach of Section 125 of the Contract Law, Clause 6 should not be construed as requiring originals to be handed over.

93. There is no plea in the Re-re-re-amended Reply of any implied term to the effect that original documents should be supplied. There is also no evidence in the Joint Report on the application or operation of the concepts of “true contractual intent” (真實意圖) or “business efficacy” (有效商業運作) under the PRC law on construction of contract.  Yet, in Mr Wong’s cross-examination of the Defendants’ expert, he introduced the idea of implied term and through what he put forward as “the true contractual intent” introduced the concept of business efficacy.  These were common law concepts in the construction of contract.  The Judge had duly considered it and come to a finding adverse to the Plaintiff.  It does not lie in Mr Wong’s mouth to complain in this appeal about the Judge’s adverting to these concepts in her judgment.  It is also impermissible for Mr Wong to contend in this appeal that there was under PRC law a different concept of business efficacy from that under Hong Kong law when this was not even referred to in the Plaintiff’s expert evidence. 

94. Mr Wong failed to persuade us that the Judge was wrong in accepting the evidence of the Defendants’ expert.  His ground (b) also failed.

95. Mr Wong further challenged the finding by the Judge that the documents were handed over to Duan and Li Jie by the Kwok Siblings.  In the relevant section of his written submissions, Mr Wong cross-referenced to paragraphs 381 to 387 of his closing submissions before the Judge.  Those submissions had been considered by the Judge.  She assessed the relevant evidence at paragraphs 242 to 253 of the judgment.  Suffice for us to say that Mr Wong failed to persuade us that the Judge had misunderstood the evidence or otherwise come to a finding which is plainly wrong.  She was entitled to accept the evidence of Li Jie in this regard, as in other aspects of the case.

96. Thus, we reject Mr Wong’s submissions in the challenge to the effectiveness of the assignment.

Disposition

97. For the above reasons, we dismiss the appeal by the Plaintiff.  This being the case, it is not necessary to consider the cross-appeal as Mr Lam will only pursue the same in the event that the Plaintiff succeeds on the appeal.

98. We also make a costs order nisi that the Plaintiff shall pay the Defendants’ costs of the appeal, with certificate for 2 counsel.  We are also minded to consider imposing costs on a higher basis than the usual party-to-party basis due to the wholly inappropriate manner in which the appeal had been conducted in light of what we said in relation to the proper role of the court of appeal and the proper function of an appellate process.  Accordingly, we direct parties to file written submissions as follows:

(a) The Plaintiff shall lodge and serve submissions (not more than 5 pages) on why costs should not be taxed on a higher basis within 14 days after handing down of this judgment; and

(b) The Defendants shall lodge and serve submissions (not more than 5 pages) in reply within 14 days thereafter.