CHAN KOON NAM v. NG MAN SUM

CACV 281/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 281 OF 2011

(ON APPEAL FROM HCA NO. 1494 OF 2007)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Kwan JA:

1.  This is the defendant’s appeal from the judgment of Suffiad J on 25 November 2011 given after a three-day trial. The judge found in favour of the plaintiff that 50 shares of Karpex Holdings Limited (“Karpex”) were held by the defendant on trust for the plaintiff upon an oral express trust and for which the defendant agreed and undertook to transfer back to the plaintiff on request. He ordered the defendant to transfer the shares back to the plaintiff forthwith. On 17 January 2012, the defendant was ordered to pay costs to the plaintiff on an indemnity basis, in view of his conduct in litigation, which the judge found to be unreasonable.

2.  Six weeks before the hearing of this appeal, the defendant issued a summons seeking leave to adduce further evidence on appeal in four box files.  Three weeks before the hearing, he issued a summons to amend his defence.  These applications were heard at the same time as the appeal.

3.  The main contention before this court was whether the defendant has shown special grounds and satisfied the three conditions in Ladd v Marshall [1954] 1 WLR 1489 at 1491, for discretion to be exercised in his favour to admit further evidence on appeal.

4.  At the conclusion of the hearing, we dismissed the defendant’s applications and his appeal.  These are the reasons for our judgment.

The background

5.  I will first relate the relevant background matters.

6.  In 1994, the plaintiff entered into an agreement for the purchase of factory premises on the 4^th floor and flat roof of Hanway Factory Building in Tuen Mun (“the Property”).  The purchase price of $2 million was to be paid by instalments over three years.  When the time came for the completion of the sale and purchase, the plaintiff nominated Karpex to take up the assignment of the Property.  Karpex was incorporated in December 1996 with two issued shares of $1 each and was acquired by the plaintiff in January 1997 for the purpose of holding the Property.  The plaintiff and his mother each took up one share and were appointed directors.  The plaintiff’s mother held her share on trust for the plaintiff.  At all times, Karpex did not carry on any business other than to hold the Property.

7.  In 1998, the plaintiff was a director of three other limited companies – Joyful Lane Development Limited, Joyful World International Limited and American Dry Cleaner & Laundry Co Ltd.  All three were involved in disputes with employees and were ordered to be wound up as a result of petitions presented in 1999.  In October 2003, the Official Receiver gave notice to the plaintiff of his intention to apply for an order to disqualify the plaintiff from acting as a director and a disqualification order was subsequently made.

8.  The plaintiff envisaged there might be adverse legal consequences to him in the event those other three companies were wound up.  He therefore changed the shareholding of Karpex to protect his interest in the Property.

9.  In March 2001, the plaintiff transferred his one share to his brother-in-law Chen Wei Ming.  He also arranged for Karpex to allot 69 shares to Chen Wei Ming.  At his direction, his mother transferred her one share to the plaintiff’s daughter Chan Ka Man.  He arranged for another 29 shares to be allotted to his daughter.  Chen Wei Ming and Chan Ka Man did not pay for their shares, but held the 100 issued shares on trust for the plaintiff.  They were appointed directors in place of the plaintiff and his mother.

10.  In September 2001, at the plaintiff’s direction, Chen Wei Ming transferred 20 of his shares and Chan Ka Man transferred her 30 shares to the defendant, who was a good friend of the plaintiff and his former business partner.  As on the previous occasions when the shares of Karpex were transferred, instruments of transfer and bought and sold notes were signed.  There was no dispute that the defendant did not pay for the shares, which formed the subject matter of these proceedings.  It is the plaintiff’s case that the shares were transferred to the defendant to hold on trust for the plaintiff and the defendant agreed to return them to the plaintiff on request.  The defendant denied this and asserted that the sale and transfer of the 50 shares to him was a “genuine and bona fide commercial transaction”[1].

11.  On the same occasion, Chen Wei Ming transferred his remaining 50 shares to the plaintiff.  So the plaintiff and the defendant became equal shareholders of Karpex.  They were appointed directors in place of Chen Wei Ming and Chan Ka Man.

12.  There were two further transfers of the 50 shares held by the plaintiff.  In July 2002, these shares were transferred by the plaintiff to his sister Chan Fung Siu, who is married to Chen Wei Ming.  She became a director in place of the plaintiff and held her shares on trust for him.  In May 2005, at the plaintiff’s direction, Chan Fung Siu transferred all the shares she held to the plaintiff’s wife Wu Zhongfang and the latter was appointed a director in place of Chan Fung Siu.  The plaintiff’s wife held her shares on trust for him.

13.  On all the occasions when the plaintiff caused the shares of Karpex to be held on trust for him by his relatives, no declaration of trust was executed and the person who became a shareholder was invariably appointed a director, until he or she ceased to hold the shares.  The plaintiff asserted this was the same with the defendant when he caused 50 shares to be transferred to the latter.  He gave reasons why the shares were transferred successively to various relatives, which were accepted by the judge[2].

14.  Tindex Limited (“Tindex”) was incorporated in December 1998.  The defendant was a 5% shareholder of Tindex in the beginning and eventually became its major shareholder in 2004 or 2005 holding 95.6% of its issued shares.  One of the businesses operated by Tindex was Go Sing Washing Company (“Go Sing”).  The two directors of Tindex in the beginning were the defendant and Chan Chi Him.  Chan Chi Him gave evidence for the plaintiff, he served as a director of Tindex until 2003.

15.  In 1998, Go Sing took over the business of Made Laundry Services Company (“Made Laundry”), with the tenancy of Made Laundry in the Property, where Made Laundry operated its business under the plaintiff’s management.  When the tenancy of Made Laundry expired in 2000, Go Sing became a tenant of Karpex in its place.  Go Sing has continued to occupy the Property as tenant.

16.  In March 2007, the defendant purporting to act on behalf of Karpex caused it to enter into a tenancy agreement with Go Sing to let the Property to Go Sing for ten years.  In May 2007, the plaintiff requested the defendant to transfer the 50 shares back to him.  When the defendant refused, the writ was issued in July 2007.

The judgment below

17.  The judge noted whilst it was pleaded in the defence that the sale and transfer of the 50 shares to the defendant was a “genuine and bona fide commercial transaction”, it was not pleaded in that document what constituted the consideration[3].  In the subsequent witness statement of the defendant, it was stated that in mid 2000, the plaintiff was concerned that Go Sing would go out of business and tried to persuade the defendant to continue renting the Property.  The defendant requested to join in Karpex as a shareholder so that Go Sing would have a more secured tenure in respect of the Property and the defendant would have power in deciding on the rent to be paid.  The plaintiff agreed with the defendant if he could continue to run the business of Go Sing at the Property, he promised to transfer 50% of the shares in Karpex to the defendant on a later day.  The plaintiff also said he would consider selling the remaining 50% shares to Tindex a few years later.

18.  Notwithstanding the above allegation, the defence was not amended to plead the consideration alleged in the defendant’s witness statement.  This matter was raised at the pre-trial review and again at the trial.  Former counsel for the defendant told the judge they faced “insurmountable difficulty” in amending the defence to plead consideration without giving any further explanation what that difficulty was since counsel was unable to disclose privileged matters to the court[4].  So the trial proceeded on the basis there was no pleading of consideration to support the defendant’s case of a “genuine and bona fide commercial transaction” and defence counsel submitted that the plaintiff’s claim should be dismissed in that the plaintiff and his witnesses had failed to prove a case of oral express trust as alleged[5].

19.  The judge accepted the evidence of the plaintiff and his two witnesses, Chan Chi Him and Chan Ka Man[6].  He wholly rejected the evidence given by the defendant where his evidence differed from the evidence given by the plaintiff and his witnesses[7].  He discussed and analysed four aspects of the evidence that brought him to this conclusion.

20.  Firstly, the defendant mentioned for the first time in cross-examination that in May 2003, the monthly rent paid by Tindex was by two cheques of $15,000 each, one was given to the plaintiff and the other to him[8].  This was not put to the plaintiff or Chan Chi Him during their cross-examination despite it was mentioned in two witness statements of Chan Chi Him[9], the 2^nd affirmation of the plaintiff [10] and the witness statement of the plaintiff[11] that the amount of rent was different and was all paid to the plaintiff by two cheques split differently.  According to the plaintiff and Chan Chi Him, the rent was $36,000 a month at first, then it was reduced to $28,000 until May 2003 and thereafter it was $24,000.  Rent in the sum of $28,000 was paid to the plaintiff in two cheques of $18,000 and $10,000 and rent in the sum of $24,000 was paid to him in two cheques of $15,000 and $9,000.  The judge viewed this evidence of the defendant with a great deal of suspicion as being something conjured up by him in cross-examination in an attempt to explain away his case he had a 50% entitlement to the Karpex shares[12].

21.  Secondly, the judge also viewed with suspicion the defendant’s evidence that the plaintiff had never asked him for the return of the shares in 2007[13], as this had been wholly contradicted and shown to be an utter lie by what was stated in para 19 of the defendant’s affirmation sworn on 9 November 2009[14].

22.  Thirdly, the judge was sceptical of the defendant’s evidence he had agreed with the plaintiff in 2001 that the price of the remaining shares in Karpex which the plaintiff would sell to Tindex would be half of $1 million[15].  This came out for the first time in cross-examination[16] and was not put to the plaintiff in cross-examination.

23.  Fourthly, and this was the main reason for disbelieving the defendant, there was no valid explanation why the plaintiff, a shrewd person who had saved up $2 million to purchase the Property as an investment from which he had hoped to generate rental income to support his own living, would for no apparent reasons give outright to the defendant half of the issued shares of Karpex (which would amount to some $1 million) on the flimsy pretext to ensure that Tindex or Go Sing would continue to rent the Property.  The fallacy of the defendant’s case was shown by the plaintiff’s evidence in re-examination[17] when he was asked what he would do if Tindex were not going to rent the Property.  The plaintiff answered he could rent it to another tenant, or sell the Property, or start his own business using the Property, but would not consider giving 50% of the issued shares of Karpex to the defendant.  So there were a number of possibilities open to the plaintiff and none of them would result in having to lose out on half of his savings which he had invested into the Property[18].

24.  The judge held that the absence of any pleading of consideration for the sale or transfer of the shares to the defendant was fatal to his pleaded case of the transaction being a “genuine commercial transaction”.  And on the facts as given in evidence and the findings of fact made by the judge, the defendant’s case, in so far as it relies on there being a “genuine commercial transaction”, failed completely[19].

The application to amend the defence

25.  The defendant’s application to this court to amend the defence to plead consideration in line with his case in his witness statement and contrary to the consideration pleaded in his further and better particulars was a non-starter.  Having been given ample opportunity to seek leave to amend after the pre-trial review and even at the trial, and having made the decision not to amend due to some “insurmountable obstacle”, it was far too late to ask this court to exercise discretion to allow an amendment of the defence and we dismissed this application accordingly.

26.  I turn to the application to adduce further evidence, which, as I said, was the main contention in this appeal.

The application to adduce further evidence

27.  The defendant sought leave to adduce these four items of further evidence:

(1)  copies of cheques of Go Sing operated by Tindex as paid to the plaintiff, being either cheques drawn in his favour or cash cheques cashed in by the plaintiff from 23 May 2003 to 16 January 2007 (Exh NMS-1 to the defendant’s affirmation filed on 9 January 2013);

(2)  copies of cheques of Go Sing operated by Tindex being cash cheques cashed in by Chong Ching Wah (“Ms Chong”), the accountant of Go Sing, from 15 August 2003 to 23 January 2007 (Exh NMS-2);

(3)  extracts of bank statements of Go Sing operated by Tindex from 2003 to 2007 showing the payments of the cheques in (1) and (2) (Exh NMS-3); and

(4)  extracts of the ledgers of Go Sing operated by Tindex from 2003 to 2007 as prepared by Ms Chong showing the payments of the cheques in (1) and (2) (Exh NMS-4).

28.  In support of this application, the defendant made two affirmations and Ms Chong made an affirmation confirming what the defendant deposed to.  He also relied on an affirmation made in reply by a staff of an accountant firm that was retained as the auditor of Tindex.

29.  In essence, the defendant said the further evidence would go to show that during 2003 to 2007, Go Sing had paid $30,000 a month as rental of the Property and this amount was split equally between the plaintiff and the defendant.  The cheques in Exh NMS-1 were paid to the plaintiff as his half share of the rent being $15,000, and the cheques in Exh NMS-2, which were cashed in by Ms Chong on behalf of the defendant, were paid to the defendant as his half share of the rent.  As for the cheques of $9,000 a month which the plaintiff received during this period (and which the plaintiff asserted was part of the rent, the amount of rent being $24,000 split into two cheques of $15,000 and $9,000), the defendant said this was not part of the rent but was commission paid to the plaintiff, as borne out by the ledgers.  Thus, the above further evidence would support the defendant’s case that he owned 50% of the shares in Karpex absolutely and through his shareholding a 50% interest in the Property.

30.  The relevant principles for admission of further evidence on appeal under Order 59 rule 10(2) of the Rules of the High Court are as stated in Ladd v Marshall, supra at 1491:

“To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.”

31.  The burden is on the defendant to show that each of the three conditions is satisfied.

The first condition – reasonable diligence

32.  Mr C Y Li, SC, who appeared for the defendant on appeal[20] but not below, accepted that all the further evidence could have been obtained at trial with reasonable diligence.  He submitted there was “special ground” which was “tantamount to the defendant not being able to use the fresh evidence at the trial despite reasonable diligence”.  He also argued that the “special ground” here was “akin to an irregularity in the trial”, in that the defendant’s former solicitor and counsel had failed to advise him to adduce the further evidence.

33.  The defendant alleged in his supporting affirmation there was breach of duty of his former solicitor and counsel in failing to give him proper advice for the conduct of the action below.  He said he was educated up to primary 3 in the Mainland, does not read English, had no experience in litigation and relied entirely on his former solicitor and counsel in the conduct of his defence.  He alleged he had told his former solicitor that he had received half of the rent paid by Go Sing as a result of his 50% shareholding in Karpex; that Ms Chong could confirm this; that his former solicitor had asked him to bring Ms Chong to his office for a statement to be taken but later changed his mind and said this was not necessary.  He claimed he had never been advised by his former lawyers of the need to locate any documents to prove that the plaintiff did not receive all of the rent or that he had received half of the rent, and he only met counsel once before trial.  He said he only looked for the relevant documents and made enquiry with Ms Chong and the bank after he changed solicitors and counsel for the appeal, and was advised to do so.

34.  The plaintiff had, in October 2009, sought specific discovery of documents from the defendant being the bank statements of Go Sing from 2001 to 2007 showing the payment of rent to the plaintiff, copies of the cheques issued by Tindex or Go Sing for the payment of rent of the Property during this period, and the audited or unaudited financial statements Karpex from 1997 to 2007.  The purpose of the documents sought was to establish that rent was paid to the plaintiff as the sole beneficial owner of all the shares in Karpex.  This application was opposed by the defendant and it was later withdrawn when it was raised by a master that the summons had not been served on the relevant bank[21] or Tindex[22].

35.  In the defendant’s affirmation of 9 November 2009 opposing that application for specific discovery, he deposed that it could not be concluded from the cheques paid by Go Sing or Tindex to the plaintiff every month that they related to the rent as alleged, the production of the cheques could not by itself represent that the plaintiff was the ultimate beneficial owner of Karpex, and the production of the documents sought would not in any event assist the plaintiff’s case[23].  In his affirmation filed on 9 January 2013 in support of this application, he claimed[24] he did not understand the contents of his previous affirmation as his former solicitor’s explanation of it was brief.  He said he was “startled” by the contents of his previous affirmation when it was explained by his present solicitors, as those parts of it I referred to earlier were “incorrect”.

36.  The defendant said in considering whether he had failed to exercise reasonable diligence in obtaining the further evidence, the court should have regard to two matters.  Firstly, he had been “misguided” by his former lawyers and did not realise the need of obtaining the documents.  Secondly, if he could not rely on the further evidence, his chance of success on appeal would be “greatly diminished if not slim.”  He alleged this would mean the plaintiff would be allowed to keep the fruit of the judgment which had been obtained “based on deception”[25].

37.  Mr Hingorani, who appeared for the plaintiff in this appeal[26], took us through the relevant parts of the transcript[27] in which the defendant was cross-examined as to why he made no mention in his witness statement that the rent was split into two cheques of equal amount and paid to him and the plaintiff.  Mr Hingorani made the point that contrary to the defendant’s allegation in his affirmation in January 2013[28], he did not give the explanation that he had told his former solicitor about this and that he acted according to the advice of his former lawyers.  It is pertinent to note in particular these exchanges with the judge when the defendant sought to put the blame on his lawyers[29]:

“Court: Well, the question is not what Chan Chi-him knows. Why didn’t you respond to that [in your witness statement]?

A. I am not familiar with law, so I allowed my lawyer to handle it for me.

Court: Well, you were able to answer counsel’s question without any input or interference by your lawyers, and you were able to tell us five minutes ago that the cheques were split into two parts. Why wasn’t that put in your witness statement, particularly if you knew what was said by Chan Chi-him in his witness statement?

A. Because I’ve never been in this situation before and I didn’t know whether I should respond or not.

Court: This doesn’t need a lot of experience for that, and you knew enough to say the plaintiff says that you’re a trustee but your defence is that you’re not a trustee. If someone says something which you dispute or which you take a different view as to the facts, one would expect that you would respond to it by putting forward your side of -- your version of what actually was the case.

A. Of course, I would, if we were face to face, but I could not do it because we were not face to face.

Court: Well, you’ve done so in your witness statement, disputing the plaintiff’s claim that you hold the shares as a trustee for him. Why is it in this respect, when it comes to the rental payment, you did not respond in the way that you just did in the witness-box?

A. I don’t know.”

38.  In the light of these exchanges, it is not surprising that the judge viewed the defendant’s evidence in this respect with a great deal of suspicion as being something conjured up by him in cross-examination.  As we do not have the benefit of the judge in testing the new assertions of the defendant regarding the alleged failures of his legal advisors, which are not wholly consistent with his evidence at the trial as mentioned above, I do not think we can accept his latest account without reservation.  As to his allegation that he failed to disclose the relevant documents regarding the payment of the rent because he was not advised by his lawyer to do so, I am inclined to view this with some scepticism.  Like the judge, I do not think it would require a lot of experience for a litigant in the defendant’s position to know the documents relevant to support his case and which he should provide to his lawyers.

39.  Contrary to his present claim he did not understand the “brief” explanation given by his lawyer of his affirmation made to oppose the plaintiff’s application for specific discovery, and was now “startled” by its contents, he gave evidence at the trial that this affirmation was read and explained to him[30].  From that affirmation prepared on his behalf, he would have known the plaintiff’s reasons for seeking discovery of the documents relating to the payment of rent.  If that were the case, he would not have failed to appreciate the relevance of the same or substantially similar documents, which he now sought to adduce on appeal.

40.  We do not have the response of the former solicitor and counsel to the defendant’s allegations of professional negligence.  The defendant’s present solicitors wrote to his former solicitors on 3 January 2013 setting out his allegations and requesting an explanation.  The former solicitors had only made a short reply on 8 January stating that they would confirm that the defendant had told his former solicitor “there was certain evidence to prove the rental arrangement” and would let the new solicitors “have further details upon the receipt of the reply from the Counsel”.

41.  To sum up, I am sceptical about the defendant’s allegation that he had told the former solicitor the rent was split equally between him and the plaintiff, as this was not an explanation he gave at the trial despite he was pressed about it several times by the plaintiff’s counsel and by the judge.  I am inclined to think the defendant ought to know the relevant documents in support of his case, as this is plain common sense, and he would have appreciated it from his affirmation made to oppose the plaintiff’s specific discovery.

42.  On the evidence placed before this court, I cannot agree with the defendant’s assertion that the entire blame for the failure to disclose the further evidence must rest on his former legal advisors.  It seems to me he was too ready to shift the responsibility to his lawyers.  At the very least, part of the blame must rest with him.  Applying an objective standard, it cannot be said he had exercised “reasonable diligence” regarding the production of relevant documents to support his case.

43.  On this state of affairs, I am not satisfied that the defendant has made out any “special ground” which was “tantamount to the defendant not being able to use the fresh evidence at the trial despite reasonable diligence”, as contended by Mr Li. Nor do I think the failure to adduce relevant documents was “akin to an irregularity in the trial” as he has submitted.  The case of Chan Chiu Yin v Chan Ki Kau, CACV 468/2001, 28 May 2003, cited by Mr Li as example of an irregularity in the trial was very different.  There, the trial judge in the Lands Tribunal had not given the tenant an opportunity to present his case and call evidence.  And the appeal court was satisfied that the tenant had used reasonable diligence in his attempt to adduce the fresh evidence.

44.  No authority was cited by Mr Li in support of his contention that notwithstanding the further evidence sought to be adduced on appeal could have been obtained at trial with reasonable diligence, the failure to do so relying on the advice of the legal advisors could constitute a special ground for such evidence to be admitted on appeal.  There is in fact an authority to the contrary, in a decision of this court (Ma CJHC, Stock JA and Stone J) in Dr Kwong Kwok Hay v Medical Council of Hong Kong (No 2) [2007] 4 HKC 446 cited by Mr Hingorani.  It was an appeal in judicial review proceedings and it was held that the first condition of Ladd v Marshall was not satisfied, as the fresh evidence sought to be used on appeal was available at trial but was withheld as the result of a decision taken upon counsel’s advice.  Ma CJHC (as the Chief Justice then was) followed the principle that whilst the Ladd v Marshall principles do apply in public law, some flexibility has been allowed where the interests of justice so require and there is discretion to depart from those principles in exceptional circumstances.  He then emphasized the following points:

“11. … First, the circumstances must be wholly exceptional before this wider discretion to depart from the Ladd v Marshall principles is exercised. Secondly, in most if not all cases, a strong public interest will need to be demonstrated. This probably explains why it is only in the sphere of public law (where the public interest is often engaged) where the wider discretion has been exercised. It is difficult to conceive in a private law case how the wider discretion will ever be exercised if the Ladd v Marshall test is not satisfied. Thirdly, the burden is obviously on the party seeking the exercise of discretion to show cogently that exceptional circumstances exist. A mere general reference to the public interest will not suffice: the court is entitled to be provided with details of this.

12. In the present case, the first requirement of Ladd v Marshall is not satisfied. I do not regard it as sufficient that the respondent had apparently followed the advice of its legal advisors in not providing the evidence before Reyes J that is now sought to be used in the appeal.”

45.  Ma CJHC went on to set out the exceptional circumstances in that case for admission of fresh evidence notwithstanding the Ladd v Marshall test was not satisfied and returned to the points emphasized earlier in these words:

“14. It must be stressed that the admission of further evidence on appeal in the present case, should be regarded as wholly exceptional. I would add that but for the public interest identified above, the application [for admission of fresh evidence] would simply have been dismissed.”

46.  Stock JA in para 16 specifically endorsed Ma CJHC’s emphasis on the unusual circumstances that had compelled the court’s decision to admit the fresh evidence.  He said that “to take our determination as some widening of the limited discretion in public law cases to permit fresh evidence on appeal would be perverse.” Stone J agreed with the judgments of Ma CJHC and Stock JA.

47.  Mr Li sought to distinguish the above case on the ground that there was no incompetence of the lawyers in that case whereas in the present case the defendant’s former solicitor had failed to advise him to produce the further evidence which was apparently relevant.  I would express no view on the alleged incompetence of the former solicitor, as we do not have his response to the allegations of incompetence.  Assuming there was incompetence of the former solicitor (on which I express no view), and the defendant was not to be blamed at all for the failure to produce relevant documents (which I find to the contrary), I fail to see why the incompetence of lawyers should be a factor distinguishing the present case from Dr Kwong Kwok Hay v Medical Council.  Where it is sought to attribute the reason for failure to produce relevant evidence to the act or omission of the lawyer, it would not make the slightest difference whether the lawyer involved was incompetent or not.

48.  On the authority of Dr Kwong Kwok Hay v Medical Council, there are no exceptional circumstances in the present case to justify the exercise of the wider discretion to admit the further evidence when the first condition of Ladd v Marshall is not satisfied.  The Ladd v Marshall principles must be strictly applied, as “a litigant [who] has obtained judgment in a Court of justice … is by law entitled not to be deprived of that judgment without very solid grounds” (Brown v Dean [1910] AC 373 at 374), and the discretion to admit fresh evidence on appeal has always been exercised in the light of the maxim interest reipublicae ut sit finis litium[31] (Brown v Dean at374; Ladd v Marshall at 1492; Skone v Skone [1971] 1 WLR 812 at 815D).  There would be no end to litigation if litigants who had not adduced evidence at trial were allowed to do so on appeal on the ground that their legal advisors had not given them correct legal advice at the time.

49.  On this ground alone, that the first condition of Ladd v Marshall is not met, the application to adduce further evidence must be dismissed.  I will deal with the other conditions succinctly, as it is not strictly necessary to discuss them in view of my conclusion on the first condition.

The second condition – important influence on the result

50.  The test here is that the fresh evidence must be of such weight if believed, would probably have an important influence on the result.  It need not have a decisive influence on the outcome.

51.  I am inclined to agree with Mr Li that the second condition is satisfied here.  The issue on the payment of rent was one of the four aspects of evidence analysed by the judge, who regarded the defendant’s evidence in this respect with a great deal of suspicion as being something conjured up by him for the first time in cross-examination.  If the further documents were admitted, and if they were to be regarded as having the effect as contended by the defendant, they would go to rebut the suggestion that he had conjured up his evidence and might cast doubt on the plaintiff’s evidence regarding the payment of rent and that the cheques of $9,000 were not for commission.

The third conclusion – apparently credible

52.  I have more difficulty if the further evidence here, or more accurately whether all of the further evidence, is apparently credible.

53.  As pointed out by Mr Hingorani, the cheques in Exh NMS-2, which the defendant alleged were paid to him, were cash cheques cashed in by Ms Chong.  Further, of these cheques, there are numerous examples of two cheques with identical writing, bearing the same date, amount and cheque number, but one is a bank copy marked “paid” and the other bore an annotation which read “4/F rent” and “Ng”.  The defendant was asked to produce the original of the cheques with annotation but claimed he does not have them.  The annotation must have been made on a copy of the cheque before the original cheque was cashed in at the bank.  So the copy cheque with the handwritten annotation would be the “original” of this kind of cheque with annotation.  Mr Hingorani queried why the defendant had discarded the “original” of the annotated cheque and made a further copy of it, unless it was to conceal something.

54.  As for the ledgers, Mr Li accepted that five of the entries bore the mark of tippex and were over-written, purportedly showing $15,000 cash payment to the defendant.  There are also some entries on the ledgers inconsistent with the defendant’s present contentions in that four entries showed a payment of $20,000 to the defendant (instead of $15,000); one entry described the payment of $15,000 to the plaintiff as commission (instead of just $9,000).  There were also 12 instances where payments were made to the plaintiff for a particular month but there was no entry of payment to the defendant.  Mr Hingorani submitted these entries would go to undermine the defendant’s present contentions.

55.  Further, the plaintiff had in 2009 produced a copy of a computer generated accounting journal dated 17 November 2001 of Go Sing, showing a single rental payment of $36,000, which was consistent with his case.  Mr Hingorani queried why the defendant is relying on handwritten records since Go Sing was keeping computerised records as early as 2001.

56.  It is unnecessary to come to a definite view here if all of the further evidence is apparently credible.  But insofar as Mr Li relied on the further evidence as supporting “a strong prima facie case of wilful deception” practised by the plaintiff over the court in alleging that he had received all the rent to persuade us to exercise our discretion more readily to admit the further evidence (Skone v Skone, supra at 817D to E; Kwan Chi On v Kwan Tit On Daniel [1996] 1 HKC 137 at 143B to 144C), I do not think a strong prima facie case of wilful deception of the court is made out, having regard to the unsatisfactory nature of some of the further evidence as mentioned above.

57.  For all the above reasons, the defendant’s application to admit further evidence on appeal was dismissed.

This appeal

58.  The defendant sought to set aside the judgment and costs order of Suffiad J and asked for a re-trial of the action.

59.  This is an appeal against the findings of fact of the judge.  Shorn of the further evidence, there was very little Mr Li could say about the grounds of appeal.

60.  He asked this court to form an independent opinion on the proper inference to be drawn, but this was a case of primary findings of fact made by the trial judge, not findings based on inference.  It was a question of assessment of the relative credibility of witnesses on each side.  The judge had found in favour of the plaintiff and his witnesses they were credible and had given truthful evidence, and had disbelieved the defendant where his evidence differed from theirs.  For this court to disturb primary findings of fact, Mr Li would need to establish that even though this court does not enjoy the advantages of the trial judge in receiving evidence at first hand, we could nevertheless be satisfied the trial judge was plainly wrong in his conclusion on the facts.  He came nowhere near to establishing any such error.

61.  Mr Li criticised the judge insofar as the judge had relied on the demeanour of the plaintiff in finding the plaintiff to be an honest and truthful witness[32].  But it is clear from the judgment that the judge had arrived at that view by a proper consideration and analysis of the plaintiff’s evidence[33], and had not placed undue reliance on the demeanour of the witness.

62.  There was no irreconcilable conflict between the judge’s observation that the plaintiff was “a very simple businessman and who was not sophisticated sufficiently to know about matters such as trust deeds”[34], and his subsequent remark that the plaintiff was a “shrewd person who had quite obviously saved up the $2 million used by him to purchase the Property as an investment”[35].

63.  Mr Li sought to attack the plaintiff’s credibility by asking questions such as why the plaintiff had 50 shares transferred to his own name in September 2001 when the risk which caused him to put the shares into the names of others still existed; why he had not asked for a declaration of trust from the defendant when the documents of transfer were executed in the accountant’s office; why he made the defendant a director of Karpex if the defendant was just holding the shares for him; and why the books and records of Karpex, including the title deeds of the Property, and the company seal were handed over to the defendant for safe keeping.  The judge had considered these matters which were raised in cross-examination of the plaintiff.  He was entitled to accept the plaintiff’s explanation[36].  The weight to be given to the plaintiff’s evidence is a matter for the trial judge.

64.  There is nothing in the other criticisms of Mr Li regarding the judge’s acceptance of the plaintiff’s evidence, or in the judge’s rejection of the defendant’s evidence.

65.  There is no basis to set aside the judgment or the costs order.  We therefore dismissed the appeal with costs.

Hon Fok JA:

66.  I agree with the Reasons for Judgment of Kwan JA.

Hon Poon J:

67.  I agree with the Reasons for Judgment of Kwan JA.

[1] As pleaded in the Defence, para 6(f)

[2] The Judgment on 25 November 2011, paras 7, 8, 10 and 62

[3] In the further and better of the defence provided by the letter of the defendant’s solicitors dated 1 September 2007, it was stated that the consideration for the sale and transfer of the 50 shares to the defendant was “One dollar for each share”. It was not argued at the trial that this consideration, which was nominal, was the consideration for a genuine commercial transaction. A different consideration was alleged in the witness statement of the defendant dated 10 April 2010.

[4] The Judgment, para 30; Transcript, page 24 lines K to M

[5] The Judgment, paras 33 and 35

[6] The Judgment, paras 62 to 69

[7] The Judgment, para 79

[8] Transcript, page 62 line I to page 63 line D

[9] 1^st statement, paras 12 to 14; 2^nd statement

[10] Para 7

[11] Para 26

[12] The Judgment, paras 71 and 72

[13] Transcript, page 72 line Q

[14] Transcript, page 72 line R to page 73 line L

[15] The Judgment, paras 74 and 75

[16] Transcript, page 77 line G to page 78 line F

[17] Transcript, page 35 lines G to M

[18] The Judgment, paras 76 to 78

[19] The Judgment, paras 81 and 82

[20] With Ms Angela Gwilt

[21] Transcript, page 60 lines Q to U

[22] Plaintiff’s affirmation filed on 23 January 2013, para 11

[23] Paras 28, 30, 34 to 36 and 40

[24] Para 18

[25] Para 22

[26] With Mr Lawrence Cheung, who was the plaintiff’s counsel at the trial

[27] Transcript, page 62 line Q to page 65 line D

[28] Para 8

[29] Transcript, page 64 lines H to S

[30] Transcript, page 68 lines O to R

[31] In the interest of society as a whole, litigation must come to an end.

[32] The Judgment, para 63

[33] The Judgment, paras 64 to 66

[34] The Judgment, para 64

[35] The Judgment, para 76

[36] The Judgment, paras 40, 42 and 43