OSMAN MOHAMMED ARAB AND ANOTHER v. NG SHUI CHING, IRENE AND ANOTHER

CACV 5/2018

[2021] HKCA 220

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 5 OF 2018

(ON APPEAL FROM HCA 311/2014)

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JUDGMENT

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

A. Introduction

1.  This Court handed down our judgment on 9 October 2020 ([2020] HKCA 818) (the “CA Judgment”) dismissing the Plaintiff’s appeal against the judgment of Au-Yeung J (the “Judge”) in HCA 311/2014 on 5 December 2017 (the “CFI Judgment”).

2.  By a notice of motion filed on 6 November 2020 (the “Notice of Motion”), the Plaintiff applies for leave to appeal against the CA Judgment to the Court of Final Appeal.  The Plaintiff relies on both the “great general or public importance” limb and the “or otherwise” limb.  The application is opposed by the Defendants.

3.  The relevant criteria for granting leave to appeal to the Court of Final Appeal are set out in section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap 484):

“ An appeal shall lie to the Court [of Final Appeal] at the discretion of the Court of Appeal or the Court [of Final Appeal], from any judgment of the Court of Appeal in any civil cause or matter, whether final or interlocutory, if, in the opinion of the Court of Appeal or the Court [of Final Appeal], as the case may be, the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court [of Final Appeal] for decision.”

4.  Having considered the written submissions, we take the view that the Plaintiff’s application can be properly disposed of without an oral hearing.  We now hand down our judgment. 

B. The Notice of Motion

5.  In the Notice of Motion, the Plaintiff has raised the following questions which he contends to be of great general or public importance:

(a)   Question 1:

“ What are the relevant factors governing the enforceability of a purported loan repayment agreement made between married couples living in harmony; alternatively, whether any or all of the following factors relating to such loan repayment agreement indicate an intention not to create legal relations; alternatively whether any or all of the following factors relating to such loan repayment agreement renders the same contrary to public policy or caught by sections 49 and 50 of the Bankruptcy Ordinance (Cap 6) (“BO”) or section 60 of the Conveyancing and Property Ordinance (Cap 219) (“CPO”).

(a) The inconsistency and uncertainty in the express wording of the purported loan repayment agreement.

(b) An express intention of the married couple to repay by way of transfer or set off of property from the debtor spouse to the creditor spouse only to take effect when the debtor spouse is unable to pay his/her debts.

(c) The set off of property ignores or fails to take account or is inconsistent with other substantial contemporaneous fund flow from the debtor spouse to the creditor spouse by way of gift (or whether an artificial selection by ignoring other substantial contemporaneous fund flow for the purpose of repayment or set off is permissible as different subject matters on the authority of Granatino v Radmacher [2011] 1 AC 534 as found by the Court of Appeal in para.51(c) of its judgment).

(d)    The delay in the completion of such transfer or set off until such time when the debtor spouse is unable to pay his/her debts.”

(b)   Question 2:

“ Whether an owner who makes a pledge of property and retains to himself an equity of redemption can at the same time make a declaration of trust of the same property whereby the beneficial interest thereof immediately passes to the beneficiary”;

(c)   Question 3:

“ Whether the said sections of the BO and the CPO are engaged when a bankrupt enters into an agreement, whilst solvent, to dispose of his beneficial interest by way of declaration of trust but at the same time retains an equity of redemption until such time when he becomes insolvent and unable to redeem his interest”;

(d)   Question 4:

“ Whether an agreement as aforesaid between married couples living in harmony is a fraudulent scheme to prefer the spouse over general creditors, whether such agreement is caught by the said sections in the BO or the CPO or contrary to public policy”.

6.  The Plaintiff contended that further or alternatively, the intended appeal otherwise ought to be submitted to the Court of Final Appeal.  However, it is common ground that such limb of the application should be reserved for the Appeal Committee.  We shall say no more about that.

C. Question 1

7.  As regards the approach for determining if there was intention to create legal relation in agreement made in domestic setting, the applicable legal principles have been set out in Ho Lai King v Kwok Fung Ying [2020] HKCA 657 which we applied in the present appeal in the CA Judgment at [51].  There was no disagreement by the Plaintiff to those principles.  It is ultimately an assessment of the intention of the parties which is a question of fact.  

8.  In substance, we are of the view that the Plaintiff’s complaint is not one of law and principle.  Rather, the Plaintiff essentially seeks to challenge the concurrent findings of facts by the Judge and this Court that there was an intention between the Bankrupt and the 1^st Defendant to create legal relations and that the 2009 Agreement was legally enforceable[1], and the conclusion based on the facts that the 2009 Agreement was not contrary to public policy or caught by the relevant provisions of the BO or the CPO[2].

9.  In this respect, it is well-established that concurrent findings of fact will not be reviewed unless there had been some miscarriage of justice or some other violation of some principle of law or procedure to warrant such interference (Chinachem Charitable Foundation v Chan Chun Chuen (2011) 14 HKCFAR 798 at [37]).  In Suen Shu Tai v Tam Fung Tai (No 2) (2015) 18 HKCFAR 491 at [3], Ma CJ emphasized:

“ It is no part of the function of the Court of Final Appeal’s function to debate ‘yet again the factual findings made at first instance and previously reviewed by the Court of Appeal’ in the hope on the part of an appellant of finally obtaining favourable findings.”

10.  The four factors listed as (a) to (d) under Question 1 had been duly considered by us.  For the reasons given in the CA Judgment, we did not accept that any of those factors could overturn the Judge’s findings (see in particular [32], [34], [35], [37], [44], [47], [51] and [55] of the CA Judgment). 

11.  Question 1 is essentially a challenge against concurrent findings of fact.  Those findings were made in the very special factual context of this case.  It does not raise any question of great general or public importance in the law of bankruptcy in Hong Kong.

12.  For the above reasons, we decline to give leave to appeal to the Court of Final Appeal for Question 1.

D. Question 2

13.  Question 2 is directed at the following underlined passages in [37] and [46] of the CA Judgment:

“ 37. Likewise the reference to pledge is not necessarily inconsistent with the immediate transfer of beneficial ownership of the Shares. The Statement of Debt itself referred to the execute of declaration of trust ‘for such period prior to the actual transfer of the shares in Gain Whole’. Hence, it is plain that the parties intended to give immediate protection to the 1^st Defendant by way of trust pending the completion of formality for the transfer of shares.”

…

46.  In any event, even assuming that it is open to the Plaintiff to contend at this stage (notwithstanding the failure to do so at the court below and such a claim had not been put to the witnesses in cross-examination and no submission along such line had been pursued in the Plaintiff’s closing submission at the trial) that the Declaration of Trust was only intended to confer a security interest upon the 1^st Defendant, and even assuming that the Bankrupt intended to reserve a right to redeem in the future (which is not the only possible finding in light of the evidence to the contrary highlighted above), it does not follow that the beneficial interest did not pass upon the execution of the Declaration of Trust.  At the highest, such argument only implies that the beneficial interest held by the 2^nd Defendant had been subject to an equity of redemption.  As there was no suggestion that the Bankrupt had attempted to redeem prior to the Transfer in 2012, the new point would not impinge upon the Judge’s holding that the Transfer was not unfair preference and there was no intention to defraud creditors.”

14.  It is clear from [46] of the CA Judgment (quoted above) that this Court did not find that the Bankrupt retained to himself an equity of redemption.  Instead, this Court stated that this “is not the only possible finding in light of the evidence to the contrary highlighted [in the CA Judgment above]”.  Nor did this Court make any finding that the Bankrupt had made any “pledge”.

15.  Neither did the Judge make any such finding as the former counsel of the Plaintiff did not run such a case at the trial (see the CA Judgment at [38]).  As noted at [38] to [46] of the CA Judgment, the Plaintiff’s argument by reference to “pledge” in the 2^nd Statement of Debt that the whole arrangement was ineffective for transferring the beneficial interest over the Shares to the 1^st Defendant in 2009 was neither pleaded nor run by the former counsel for the Plaintiff at the trial.  The only pleaded case of the Plaintiff was the absence of effective Loans to support the Transfer, and the trial proceeded on the basis of such pleaded case. 

16.  At the trial, the case put by the Plaintiff was that “[the Declaration of Trust] was a sham because there was no debt of $4.4 million at all” (see Transcript at p. 278O-P[3]).  This is a different point from the argument that the arrangement was ineffective for transferring the beneficial interest over the Shares to the 1^st Defendant because of the real nature of the transaction was a “pledge”.

17.  As the “pledge” point was neither pleaded nor run at the trial, we did not allow the Plaintiff to run the “pledge” point on appeal as this would offend the Flywin principles.  In particular, we explained at [41] of the CA Judgment that:

“ This [is] not an arid pleading point because it is common ground that in 2009 the Bankrupt was solvent. Hence, if such a plea had been advanced, the parties would have to explore at the trial whether the business and overall finance of the Bankrupt was in such a precarious state to require a scheme to be put in place way back to 2009 and the reason for the 1^st Defendant to accept such strange arrangement when the Loan had been outstanding and she had demanded for the transfer of the Property in the 2 emails on 1 June 2009 and 5 October 2009.”

18.  The business and overall finance of the Bankrupt and the reason for the 1^st Defendant to accept such arrangement formed part of the factual circumstances at the time when the 2009 Agreement was made, and this is within the scope of inquiry which the Court is entitled to, and should, undertake: Arnold v Britton [2015] AC 1619 at [15]. 

19.  It should be noted that the 2009 Agreement as pleaded and as found by the Judge was an oral agreement, and the documents including inter alia the 2^nd Statement of Debt were contemporaneous evidence supporting the 2009 Agreement.  The 2^nd Statement of Debt was not the agreement itself.  Thus, the inquiry is not to the subjective intention of Bankrupt and the 1^st Defendant as the Plaintiff seeks to suggest.  Rather, the inquiry referred to at [41] would shed light on the true nature of the 2009 Agreement which was made orally.  The submissions and authorities[4] cited by the Plaintiff suggesting the irrelevance of evidence of a party’s subjective intention as to the meaning of document are beside the point.

20.  Accordingly, we refuse to grant leave to appeal to the Court of Final Appeal for Question 2.

E. Question 3

21.  The premise of Question 3 is that the Bankrupt retained an equity of redemption until such time when he became insolvent and unable to redeem his interest.

22.  As explained above, there is no factual or evidential basis for such a premise.  Therefore, Question 3 simply does not arise.  We decline to grant leave to appeal to the Court of Final Appeal with respect to Question 3.

F. Question 4

23.  Question 4 is premised upon the Plaintiff successfully mounting a challenge based on Question 1 and Question 2.  For the reasons stated above, we refuse to grant leave to appeal to the Court of Final Appeal with respect to those questions.

24.  Further and in any event, we are of the view that Question 4 is also a challenge against the concurrent factual findings and conclusion that the relevant criteria of the BO and the CPO were not established (the CFI Judgment at [120]-[128]; CA Judgment at [56]).

25.  As such, Question 4 does not raise any question of great general or public importance.  We decline to give leave to appeal to the Court of Final Appeal for Question 4.

G. Disposition

26.  For the above reasons, we refuse to grant leave to the Plaintiff to appeal to the Court of Final Appeal and dismiss the Notice of Motion of 6 November 2020 accordingly.  There is no reason why costs of the application should not follow the event.  We order the Plaintiff to pay the costs of the Defendants in the Notice of Motion.

27.  The Defendants ask for costs of this application on an indemnity basis, as the Plaintiff’s real complaint was not one of law or principle but of the decision on the facts and that the application is so obviously hopeless that it should not have been made at all.  The Defendants refer to Sun Crown Trading Limited v Holyrood Limited FAMV 27/2014 (unreported, 15 October 2014) where costs on an indemnity basis were awarded based on such considerations.

28.  Having regard to the questions proposed in the Notice of Motion and the arguments advanced by the Plaintiff, despite the lack of merits, we consider that it is more appropriate that costs be taxed on a party and party basis.