GLOBAL FAIR INDUSTRIAL LTD AND OTHERS v. MENNO LEENDERT VOS

FAMV No. 7 of 2015

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 7 OF 2015 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 281 OF 2009)

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REASONS FOR DETERMINATION
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Mr Justice Fok PJ :

1.  At the conclusion of the hearing, we dismissed this application for leave to appeal and indicated that we would provide our reasons for doing so in due course.  These are those reasons.

Background

2.  The application for leave to appeal arises out of an action tried before To J[1]. After a 25-day trial, the Judge found the 2^nd defendant, Yung Ka Po (“Yung”), liable for breach of fiduciary duty owed to Goldmark Agents Limited and World Champ Limited (“the Companies”) and six other defendants, including the applicants, liable for dishonest assistance in the breach of duty and knowing receipt of the Companies’ properties.  The applicants were respectively the 1^st, 3^rd and 6^th defendants below.

3.  The facts out of which the action arose were complex but the following is a brief summary of the salient background.

4.  The breach of fiduciary duty alleged against Yung was in his dishonestly disposing of two properties[2] owned by the Companies at an undervalue.  These properties had been advertised in July 1993, on Yung’s instructions, for sale by public tender but, as the Judge found, Yung’s decision was made in bad faith and the auction was a sham, the tender period being “unconscionably short”.[3]  There was no appeal from any of these findings.

5.  The 6^th defendant, Dr Cheung Wai Yin (“Cheung”), on behalf of the 1^st defendant, Global Fair Industrial Limited (“Global Fair”), purported to place the sole bid for the two properties at a price of HK$2.05m for Unit 1A and HK$2.2m for Unit 1D.  The Judge found these bids were at a “gross undervalue”, since their open market value was HK$3.4m each.[4] In addition, the Judge found that she used various means to seek to conceal her identity on the tender form.[5] 

6.  The purchase monies for the two properties were paid as to HK$2.2m from Yung and his wife[6] and as to HK$2.05m from Cheung.[7]  At trial, Cheung alleged that the former payment was a loan which she later repaid but this was rejected by the Judge[8].

7.  After the properties were acquired by Global Fair in July 1993, the 3^rd defendant, Start Win Limited (“Start Win”), was incorporated in October 1993.  Cheung was a shareholder and, with her sister, was one of the two directors.  In November 1993, Global Fair sold Unit 1A to Start Win for HK$4m.  Start Win charged Unit 1A to Dao Heng Bank to secure an instalment loan of HK$2m, which was paid into Global Fair’s account with First Pacific Bank.  As for Unit 1D, Global Fair mortgaged this in November 1993 to HSBC as security for overdraft facilities to be granted to New Champion Trading Limited (“New Champion”)[9], a company controlled by Yung.

8.  The case for the plaintiff at trial was that Yung was liable for breach of fiduciary duty to the Companies in dishonestly disposing of the two properties at an undervalue and that the applicants were liable for knowing receipt and dishonest assistance.  He summarised the claims against the applicants as follows:

“As against Cheung, the Plaintiff’s case is that Cheung acquired the Units through Global Fair with the knowledge that the Units were being disposed of by Yung at an undervalue and in breach of Yung’s fiduciary duty to the Companies or turned a blind eye to such breach. Cheung and Global Fair dishonestly assisted Yung by concealing his interest in the Units and were knowing recipients of trust properties which had been disposed of by Yung in breach of his fiduciary duty to the Companies. Upon Global Fair assigning Unit 1A to Start Win, Start Win was knowing recipient of trust property which had been disposed of by Yung in breach of fiduciary duty to Goldmark and/or World Champ. Start Win also dishonestly assisted Yung in the disposition and acquisition of the Units by assisting him in continuing to conceal his interest in Unit 1A. Global Fair and Start Win therefore held the Units respectively as constructive trustees for the Companies and were liable to account to the Companies.”[10]

9.  The applicants’ case was that they were bona fide purchasers of the two properties for value without notice of Yung’s breach of fiduciary duty.  As summarised by the Judge, Cheung’s case was:

“…that she and Global Fair were bona fide purchasers for value without notice of Yung’s breach of fiduciary duty, if any. She saw the advertisement for the auction of the Units on 12 July 1993 by coincidence. She recalled that the Units were the offices of Goldmark. She enquired from Yung about the Units and told Yung that she wanted to purchase them as an investment and to keep her investment in the Units secret from her husband. Yung then advised her to use corporate vehicles for holding the Units. She bid for the Units. Out of convenience, Yung paid the deposit for her. She was the only bidder. The Units were sold to her at arm’s length. The purchase price she paid reflected the forced sale value of the Units. The Units were purchased by her using her own funds and funds borrowed from her friends including $1.35 million from Yung and Mrs Yung.”[11]

10.  The applicants’ appeal to the Court of Appeal against the judgment entered against them was dismissed.[12]

The basis of the application for leave

11.  Leave to appeal is sought by the applicants on the “or otherwise” limb of section 22(1)(b) of the Court’s Ordinance.[13] As is now well-settled, the grant of leave to appeal on that ground is exceptional.[14]

12.  Having considered the written submissions in support of the application and the oral submissions advanced by counsel for the applicants[15] at the hearing, it is quite apparent that the present case is not one which reaches the high threshold for the grant of leave on the “or otherwise” basis.

13.  The applicants essentially advanced two lines of attack against the correctness of the judgments below.  First, it was said that the Judge’s main finding against the applicants was based on a major departure from the plaintiff’s pleaded case.  Secondly, the Judge’s findings of fact were challenged for various reasons.

The pleading point

14.  The applicants’ argument, which was advanced in the Court of Appeal and rejected by that court[16], was that the Judge was wrong to make findings on an unpleaded case that the properties were acquired by Cheung and Yung respectively or acquired by them jointly.  It was contended that the only pleaded case was that the applicants were the nominees of Yung, such that he and he alone was the sole beneficial owner of the properties.

15.  There was no substance to this complaint.  It is apparent from a reading of the pleadings that the contention that the applicants were the nominees of Yung was not the only pleaded case against the applicants.  Reading the Re-Re-Re-Amended Statement of Claim as a whole, it is clear that the plaintiff’s case against the applicants was advanced on the further or alternative bases that the applicants dishonestly assisted in Yung’s dishonest design and had dishonestly received the plaintiff’s property with knowledge it had been disposed of by Yung in dishonest breach of trust or fiduciary duty.  The Court of Appeal dealt comprehensively with this ground of appeal and their conclusion, that there was no inconsistency between the Judge’s findings and the pleaded case[17], is patently correct.

16.  Accordingly, there is no scope for an appeal on the basis of the principles as to the purpose of pleadings[18], which principles were common ground.  Ribeiro PJ’s comments in Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 at §§30 and 31, on which the applicants relied, do not apply to the facts of the present case.  In any event, the applicants did address the case they contend to have been unpleaded, namely that they dishonestly assisted Yung or knowingly received property belonging to the Companies, so there was no question of any unfairness in the trial process.  Moreover, the applicants’ case that they were bona fide purchasers for value without notice would have been the same whatever the basis of the plaintiff’s claims, so no prejudice could have arisen from the alleged departure from the plaintiff’s pleadings.

The challenge to the Judge’s findings

17.  The Judge’s findings of fact were challenged on appeal to the Court of Appeal, which upheld those findings[19]. The applicants are therefore faced with concurrent findings of fact against them.  As has been repeatedly stated, this Court will not review concurrent facts save in special circumstances, namely where there is some miscarriage of justice or violation of some principle of law or procedure[20].

18.  The applicants essentially repeat in this application the submissions made to the Court of Appeal challenging the Judge’s findings of fact.  No special circumstances that would warrant this Court embarking on a review of these concurrent findings have been demonstrated.

Conclusion and costs

19.  For the foregoing reasons, we dismissed the application for leave to appeal with costs to the respondent.

20.  We acceded to the respondent’s application that its costs be taxed on an indemnity basis.  The points sought to be resurrected in this Court were fully dealt with by the Court of Appeal and none of the grounds advanced came close to satisfying the test for the exceptional grant of leave on the “or otherwise” basis.