CYBERLAND (CHINA) LTD v. ZHANG WEI BING AND ANOTHER

CACV 266/2015

[2018] HKCA 207

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 266 OF 2015

(ON APPEAL FROM HCCL NO. 3 OF 2014)

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JUDGMENT

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Hon Chu JA (giving the judgment of the Court):

1.  On 19 December 2017, we handed down our judgment dismissing the plaintiff’s appeal against Chow J’s judgment dismissing its claim against the 1^st defendant.

2.  We also ordered that the sum of HK$ 51,230,137 paid into court by the 2^nd defendant on 8 May 2013 pending the disposal of the appeal be paid out to the 1^st defendant with interest accrued (“Payment Out Order”).  At the request of the plaintiff made through counsel at the hearing of the appeal, we granted an interim stay of 14 days of the Payment Out Order.  The period of stay was subsequently extended to 28 days.

3.  In the meantime, the plaintiff filed a Notice of Motion on 3 January 2018 to apply for leave to appeal to the Court of Final Appeal against our judgment.  

4.  Prior to that, the plaintiff had on 29 December 2017 filed a summons seeking to stay the Payment Out Order until after the final determination of the plaintiff’s intended appeal to the Court of Final Appeal.  By another summons filed on 22 January 2018, the plaintiff applies to amend the 29 December 2017 summons to seek, in the alternative, a stay of the Payment Out Order until after the determination by the Court of Final Appeal of the plaintiff’s application for leave for the intended appeal or until further order, in the event this Court refuses leave to appeal to the Court of Final Appeal, and on the condition that the plaintiff shall take out the necessary application to the Court of Final Appeal within the time prescribed by section 24(4) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484.

5.  The 1^st defendant opposes both the leave and stay applications.

6.  The Notice of Motion sets out two proposed questions as follows:

“(1) Whether the Court of Appeal erred in law in failing to address and/or rule on the following question:

  “How the default rules in relation to resulting trust as referred to in §28 of the said Judgment operates where it is common ground as indicated in §4 of the said Judgment that the stated consideration in the instrument transferring the legal title in the subject 3^rd CB is not genuine and both the plaintiff’s case and the 1^st defendant’s case on the consideration for the transfer were rejected by the Court with no other consideration being stated or advanced by the 1^st defendant.” 

(2) Whether the Court of Appeal erred in law in failing to regard the plaintiff’s case on the basis of resulting trust as conducted throughout the trial and as accepted by the Trial Judge as a separate course of action independent from its case on the basis of the Bond Borrowing Agreement resulting in

a. Its erroneous conclusion in §41 of the said Judgment that the plaintiff’s agreement “is not supported by the pleading” and in §43 of the said Judgment that the trust claimed by the plaintiff “arose not by reason of the non-payment of the $50 million stated consideration, but by reason of the Bond Borrowing Agreement and/or the breach of it”.

b. Misapplication of the burden of proof in §44 of the said Judgment when it took the view that “Insofar as Cyberland contends that by reason of the Bond Borrowing Agreement and/or Zhang’s breach of it, the beneficial interest of the 3^rd CB does not reside in Zhang, the burden of proof is on Cyberland to make good its claim”.

c. Its failure to properly apply the presumption of resulting trust directed by Tribe v. Tribe in §40 and §41 of the said Judgment.

d. Its erroneous conclusion in §43 [sic] of the said Judgment that “When the Judge rejected Cyberland’s case on the Bond Borrowing Agreement, the very basis of Cyberland’s trust claim falls away, and the claim is simply not made out”.

e. Its erroneous and inconsistent stance in §43 and §46 of the said Judgment when it refused to take into account the lack of benefit to Cyberland on the basis that it was a reason given by the Trial Judge in rejecting the 1^st defendant’s case on the Bond Payment Agreement and yet adverted to Ying Zi’s failure to rectify the contents of the Disclosure of Interests and the 2011 and 2012 Annual Reports when the same were reasons given by the Trial Judge in rejecting the Bond Borrowing Agreement.

f. Its misapplication of the burden in equity as opposed to the burden for money had and received in common law as referred to in §39 of the said Judgment.

g. Serious miscarriage of justice by virtue of the matters aforesaid.”

7.  The plaintiff contends that Question (1) raises a point of great general or public importance in relation to the operation of the default rules under the doctrine of resulting trust.  It is also said that there is as yet no Court of Final Appeal decision that addresses the issue as to “how a gratuitous transfer to give rise to a presumption of resulting trust is proven and constituted in a case when it is common ground that the stated consideration in the instrument for the transfer is not genuine and both the plaintiff’s case and the defendant’s case on the consideration for the transfer were rejected by the Court”.  It is further said that the decision of the Court of Final Appeal in Big Island Construction (HK) Ltd v. Wu Yi Development Co Ltd (2015) 18 HKCFAR 364 is not relevant, and the correct approach is as stated by Millet LJ (as he then was) in Tribe v. Tribe [1996] Ch 107 at 122, and that the principle in Tinsley v. Milligan [1993] 3 All ER 65 should have been applied.

8.  In our view, Question (1) as formulated is clearly fact specific and needs to be understood on the facts and issues of this case.  Importantly, too, our decision and reasons for dismissing the appeal have to be read in the context of the factual matrix and arguments advanced by the parties both before Chow J and on appeal. We have not decided as a rule that once it is common ground that the consideration stated in the instrument of transfer has not been, and is not intended to be, paid, and when both parties’ case on the circumstances leading to the transfer are rejected, no resulting trust will or can arise.  We do not accept that Question (1) is a question of law of great general or public importance.

9.  We further take the view that Question (1) is not reasonably arguable.  We have in our judgment considered the arguments advanced by the plaintiff in this application[1]. We are, however of the view that the reliance on Tribe v. Tribe, supra is misplaced because the circumstances of the present case are different from those in Tribe v. Tribe, supra, where there was no dispute that the transfer was made for no consideration, and the passage in Millet LJ’s judgment (at p.122F-H) relied upon by the plaintiff does not establish a rule that whenever the consideration stated in the instrument of transfer was not paid, a resulting trust will arise unless the transferee can rebut the presumption[2].  Similarly, the fact of gratuitous transfer of property was established in Tinsley v. Milligan, supra, with the respondent having proved that she had contributed to the purchase price.  In the present case, the 1^st defendant does not accept that the transfer is gratuitous, and the plaintiff’s pleaded case of gratuitous transfer (i.e. the Bond Borrowing Agreement and/or the breach of it) was rejected by the Judge and was not made out.  Further, as we have pointed out, the plaintiff’s attempt to argue that its case on resulting trust is separate and independent from its case based on the Bond Borrowing Agreement is not supported by the pleading.[3]

10.  As for Question (2), the plaintiff seeks leave under the “or otherwise” limb.  While we have reservations whether this ground is properly engaged, we note that the plaintiff accepts in its submission that it is for the Court of Final Appeal to decide whether leave should be granted on this ground. 

11.  For the above reasons, we refuse the plaintiff’s application for leave to appeal to the Court of Final Appeal.

12.  As we refuse leave to appeal, there is no basis to stay the Payment Out Order pending the determination of the appeal to the Court of Final Appeal. 

13.  The plaintiff has indicated its intention to seek leave to appeal from the Court of Final Appeal and on this basis seeks a further stay of the Payment Out Order pending the outcome of its intended application.  The plaintiff also offers, as a condition for the further stay, to pay a further sum of HK$3 million into court to cover interest on the sum standing in court for the period between January 2018 and January 2019. 

14.  It is the plaintiff’s contention that the intended appeal to the Court of Final Appeal will be rendered nugatory if the amount standing in court were to be paid out to the 1^st defendant, who is not a permanent resident in Hong Kong and does not appear to own any property in Hong Kong.  The 1^st defendant on the other hand contends that there is no arguable ground of appeal and there is no concrete evidence that the absence of a stay would render the intended appeal nugatory.  It is said that the 1^st defendant has substantial connections to Hong Kong, including directorships in listed companies from which he derives substantial income.  It is also pointed out that the 1^st defendant has been deprived of the fruits of his success in the litigation for over five years since the litigation began.

15.  Counsel are in agreement that the applicable principles for the exercise of discretion are those stated by Ma J (as the Chief Justice then was) in Star Play Development Ltd v. Bess Fashion Management Co Ltd [2007] 5 HKC 84.  It is not necessary to recite them here.

16.  In the light of our reasons for refusing leave to appeal, we are not satisfied that the proposed application to the Court of Final Appeal for leave to appeal or the intended appeal to the Court of Final Appeal enjoys reasonable prospects of success.  We therefore refuse the application for stay pending the application to the Court of Final Appeal for leave to appeal, and dismiss both the summons dated 29 December 2017 and the summons dated 22 January 2018.

17.  Applying the usual rule of costs follow event, we also make an order that the plaintiff pays the 1^st defendant the costs of the Notice of Motion and of the two summonses together with a certificate for two counsel.