CHAN WAI SUN AND ANOTHER v. LAW SHIU KAI ANDREW

FACV No. 24 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

 FINAL APPEAL NO. 24 OF 2005 (CIVIL)

(ON APPEAL FROM CACV NO. 18 OF 2004)

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J U D G M E N T

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Mr Justice Bokhary PJ:

1.  At the conclusion of the hearing, we dismissed the appeal (doing so with costs, which were not resisted). We now hand down our reasons for dismissing the appeal. They are given by Mr Justice Chan PJ for the Court.

Mr Justice Chan PJ:

2.  The respondent, Mr Chan Wai Sun (“Mr Chan”) was the 1^st plaintiff in this action and the appellant, Mr Law Shiu Kai Andrew (“Mr Law”) was the defendant. Mr Chan claimed against Mr Law for the repayment of two loans in the respective sums of $1,976,525 and $692,972 together with interest. The trial judge (Gall J) gave judgment for Mr Chan. The Court of Appeal (Yuen JA and Chung J, Cheung JA dissenting) dismissed Mr Law’s appeal. He now appeals as of right to this Court.

Relationship between Mr Chan and Mr Law

3.  Mr Chan was the Chairman of the Dynasty Group of companies which was engaged in the business of share investments and hotel operation in the Asia Pacific region. Mr Law was a solicitor by profession. They came to know each other in 1996 when one of the companies in Mr Chan’s group had a joint venture business with the company in which Mr Law was then working as a corporate counsel. He left that employment in January 1999. Shortly after that, the two companies were engaged in litigation which was subsequently settled with Mr Chan’s company being paid compensation.

4.  The two men became good friends and Mr Chan and his companies became Mr Law’s clients in his legal practice. In August 2000, Mr Law started to be employed by one of Mr Chan’s companies, TravelMart Inc. However, he resigned and left at the end of August 2001. He instituted proceedings in the Labour Tribunal against TravelMart Inc., Mr Chan and two other companies for arrears of wages and other benefits. After a trial in the High Court (to which the employment claim was transferred), he obtained judgment against TravelMart Inc. for arrears of wages, damages for wrongful dismissal and balance of annual leave, but his other claims against the other respondents in that case were rejected.

The alleged loans

5.  The loans in question were not made or evidenced in writing. The parties’ respective cases depended largely on oral evidence. The trial judge made certain findings of fact based on such evidence. They were upheld by the majority of the Court of Appeal. In this appeal, Sir John Swaine SC, leading Mr J J E Swaine for Mr Law, seeks to overturn the concurrent findings of the courts below, submitting that there are good grounds for doing so. We shall set out the relevant evidence and the findings which are being challenged.

6.  Mr Chan’s case is that in April 1999, that is, a little more than one year before Mr Law started to be employed by TravelMart Inc., he told Mr Chan that he was unemployed and needed some money. He asked Mr Chan for a loan of US$255,000 (which they worked out to be HK$1,976,525) and Mr Chan agreed. They also agreed that the loan would be repaid after one year and carried interest at the same rate as Mr Chan was charged by his own bank.

7.  Mr Chan lent the money to Mr Law using his personal investment company (i.e. the 2^nd plaintiff) by means of four cheques drawn on this company’s bank account, three of which were in the sum of HK$500,000 each and the fourth of which was in the sum of HK$476,525. According to Mr Chan, Mr Law requested that the cheques be drawn payable to a company called General Profits Asia Ltd (“GPA”). This was confirmed by a Ms Tong Po Fong (“Ms Tong”) who was at that time a director and senior vice president of one of Mr Chan’s companies and his long time personal assistant. She also testified to the effect that it was Mr Law who told her to draw the cheques in this way over the telephone. The stubs for these cheques indicated that the date of the cheques was 23 April 1999, the payee was GPA and the amounts were those mentioned above. There were also in her handwriting the words “Andrew Law” on each stub. She admitted that they were put there by her not at the time the cheques were drawn, but some months after they were issued in order to remind herself for whom the cheques were drawn. According to Mr Chan, Mr Law came and collected the cheques personally. This was the first loan.

8.  A year later, Mr Law had not repaid the first loan. Instead he asked Mr Chan for an extension of one year to make repayment. He also requested Mr Chan to give him a further loan of US$89,000 which worked out to be HK$692,972. This was to be on the same terms as the first loan. Mr Chan acceded to this request. On 28 April 2000, Ms Tong, as instructed by Mr Chan, drew another cheque in the amount requested, again on the 2^nd plaintiff’s bank account and also payable to GPA.  This time, Mr Chan took the cheque to Mr Law’s office and gave it to him. This was the second loan.

9.  Both Mr Chan and Ms Tong said that apart from these cheques, neither Mr Chan nor his group of companies had any dealing with GPA and had never engaged it to do any work at all. The cheques were paid to GPA only upon Mr Law’s requests.

10.  The loans were never repaid. Mr Chan commenced the present action. Initially, his personal investment company which was wholly owned by him was named the 2^nd plaintiff. Its claim was later dismissed for failure to comply with an order for security for costs made against it on the ground that it was a BVI company. Issue was taken before the Court of Appeal (but not before the trial judge) that Mr Chan could not sue alone for the recovery of a joint loan. This was rightly rejected by the Court of Appeal for the reason that the two loans were personal loans made by Mr Chan using the 2^nd plaintiff as a payment vehicle. There is no appeal on this issue.

11.  Mr Law’s case was that he never borrowed or received any money from Mr Chan; that he had nothing to do with GPA, the recipient of the 5 cheques; and that the whole case was fabricated by Mr Chan to baulk his, i.e. Mr Law’s employment claim in the Labour Tribunal and to bring pressure on him. It was suggested at the trial (although this was not pleaded in the Defence) that the cheques in question represented payment for services rendered to Mr Chan’s companies in 1998 by a Miss Leung Pui Ling Mandy (“Miss Leung”) who was the sole shareholder and director of GPA (a British Virgin Island company) until 1 December 2002. But this was no more than a suggestion, there being no evidence to support it.

Credibility of the witnesses

12.  So the case boils down to this. Five cheques which matched the loans in question were drawn on two occasions (in April 1999 and April 2000) on Mr Chan’s personal investment company’s bank account and paid into the bank account of GPA. There is no dispute as to that. However, there was no apparent connection between GPA and Mr Law. Mr Chan sought to bridge the gap by his oral evidence and that of Ms Tong to the effect that they were loans made to Mr Law and that the money was paid into GPA’s bank account at his request. If their evidence was accepted, Mr Chan had established his case and judgment for him would necessarily follow. It was strictly not necessary, in order to succeed, for Mr Chan to prove positively that Mr Law was involved in GPA and if so, to what extent. Mr Law denied any knowledge of or connection with this company and Mr Chan sought to show that he was not being frank in his denial. That of course went only to Mr Law’s credibility, there being no real attempt by him to set up any positive case on this matter.

13.  As the trial judge rightly pointed out, the crucial issue in this case was whether Mr Chan and Ms Tong were telling the truth or Mr Law was telling the truth. Their credibility was to be assessed in the light of all the evidence at the trial. Two matters were raised by the parties during cross examination and were specifically dealt with by the trial judge. The first related to Mr Chan’s credibility and the other related to Mr Law’s credibility.

The taped conversation

14.  Mr Law tried to demonstrate to the trial judge that Mr Chan was telling lies about the loans by cross-examining Mr Chan on a conversation which they allegedly had on 24 August 2001 before he, Mr Law, left his employment with TravelMart Inc. That conversation was secretly taped by Mr Law on a recorder. Admittedly, what was produced in court was not a complete record of the conversation as there were interruptions when the recorder was switched off. Mr Chan did not deny the conversation but said that the record had been edited and that there were other things which he had said but were not on the tape.

15.  Among the things discussed in the recorded conversation were 75,000 shares previously issued to Mr Law which were not paid for and the question of arrears of wages owed to Mr Law by TravelMart Inc. from April to August 2001. It was put to Mr Chan that he had made no mention of the loans in question during the taped conversation even when Mr Law complained that he had not been paid his wages and that this indicated that there were in fact no such loans. In a previous witness statement given in connection with Mr Law’s employment claim, Mr Chan explained that these loans were not mentioned because he had an agreement with Mr Law in June 2001 to the effect that Mr Law’s salaries would be withheld pending repayment of the loans (“the June agreement”). Mr Chan further explained in court that in fact only the salaries for July and August 2001 were withheld since the salaries for April, May and June were to be held against the payment for the 75,000 shares. Mr Chan’s explanation was apparently accepted by the trial judge. The judge also said that the taped conversation did not affect his assessment on credibility. The manner in which the judge dealt with the taped conversation and Mr Chan’s explanation and the judge’s conclusion in relation thereto form the basis of Mr Law’s challenge in this appeal.

Mr Law’s knowledge of or connection with GPA

16.  In relation to Mr Law’s credibility, he was crossed examined on his initial denial of any knowledge of and connection with GPA and his subsequent admission (after Mr Chan’s solicitors had discovered more about this company from documents obtained from HSBC pursuant to a court order) that he in fact knew the sole shareholder and director of this company, Miss Leung, having worked together with her in another company before and having introduced her to Mr Chan for conducting research in 1998 and for a summer job in August 2000. The trial judge noted that when Miss Leung was doing casual work for Mr Chan in August 2000, Mr Law was also employed by TravelMart Inc., that she was paid on an hourly basis and that her wages were first paid by Mr Law who would later get a re-imbursement from the company.

17.  Miss Leung was not called to give evidence. Instead, a letter was “produced” before the judge purporting to support Mr Law’s evidence on this aspect of the case. It was a letter dated 6 October 2003, one day before the trial, sent to Mr Chan’s solicitors from Messrs Ma Tang & Co, acting for GPA. This letter was apparently written at the request of Mr Law who approached a Mr Ho Wai Chi, who became a director of GPA after it had changed hands in December 2002. It referred to Mr Chan’s previous application to the court for discovery from HSBC of documents relating to GPA of which they had no prior knowledge. It also alleged that at Mr Chan’s request, GPA had provided services to one of his companies in 1998 in the form of financial analysis done for the group in connection with the litigation in which the company where Mr Law was previously employed was involved. The letter pointed out that the litigation was subsequently settled with Mr Chan’s company being paid compensation out of which GPA was paid two fees the amounts of which were the same as the loans in question. The letter said that GPA wanted to “put the record straight” and “take grave objection” towards Mr Chan’s application to the court for discovery.

18.  This rather odd letter which was not formally adduced in evidence before the court was relied on by Mr Law and considered by the trial judge. This letter raises suspicion on Law’s denial rather than assists his credibility. First, the services alleged to have been rendered by GPA to Mr Chan’s group of companies was said to have happened 4 or 5 years earlier in 1998. Secondly, at that time, GPA was not yet incorporated. In fact, it was incorporated on 7 April 1999, only 16 days before the date of the 4 cheques representing the first alleged loan. Although the suggestion was that it was Miss Leung who had provided the services but made use of her company GPA to obtain payment for the services after it was incorporated, this was not supported by any evidence. Thirdly, there was apparently no reason for raising this matter out of the blue in such a “letter of objection”. Fourthly, whoever gave instructions to write this letter, he or she was not called to give evidence on what object it was aimed at achieving. Not surprisingly, the judge expressed concern over this letter, noting that it was obviously written by GPA’s solicitors acting on instructions, but was not supported by any invoices, receipts, correspondence or material. The trial judge was entitled to give no weight on this letter.  It had all the hallmarks of a thinly veiled manufactured attempt to support Mr Law’s case.

Gall J’s assessment and findings

19.  The trial judge carefully assessed all the evidence. He said he was impressed by Mr Chan and Ms Tong who gave their evidence in a straightforward manner. He reminded himself of the fact that because of their previous working relationship, they might feel some loyalty towards each other but he noted that at the time of the trial, Ms Tong no longer worked for Mr Chan’s group of companies. He said that there was no discernable reason for Ms Tong to fabricate evidence on behalf of Mr Chan. As to the recorded conversation, he expressed distaste for the secrecy of the recording, but said that it had not affected his assessment on credibility.

20.  On the other hand, the trial judge considered that Mr Law was not straightforward and was evasive concerning Miss Leung. While the judge appreciated that Mr Law might have difficulty in rebutting an allegation of events which he Mr Law said never took place, he was not satisfied that Mr Law was fully frank in all that had happened; nor did he accept the denial of the loans.

21.  In conclusion, the trial judge accepted the direct evidence of Mr Chan and Ms Tong that the cheques were drawn in favour of GPA but the money was intended to be paid to Mr Law; he also accepted Ms Tong’s evidence that Mr Law gave her the name of GPA and nominated that company for the purpose of receiving the money and that it was a loan to Mr Law.

The judgments in the Court of Appeal

22.  In the Court of Appeal, Mr Law challenged these findings on grounds of appeal which were similar to those argued in this appeal. They were accepted by Cheung JA but rejected by the majority.

23.  In his dissenting judgment, Cheung JA took the view that the trial judge’s finding that there were two loans was flawed in that it was “contrary to some very important evidence adduced in this case”. The important evidence on which the learned Justice of Appeal relied was first, Mr Chan’s complete silence about the loans during the taped conversation and second, his explanation both in his witness statement filed in connection with the employment claim and in his oral testimony in court. It was said that if the loans had existed, it was most surprising that Mr Chan did not even mention them during the taped conversation, since these loans would have more than wiped out the arrears of wages which Mr Chan had admitted were due and owing to Mr Law. Mr Chan’s explanation was also criticized as “totally incredible” for the same reason: had there been any agreement to withhold the payment of wages pending repayment of the alleged loans, there was no reason why Mr Chan had not mentioned it in that conversation. Cheung JA concluded that the trial judge had failed to analyse this important part of the evidence; and that one was left with the clear impression that Mr Chan was lying about the existence of the loans. He would allow Mr Law’s appeal and order a re-trial.

24.  On the other hand, Yuen JA, with whom Chung J expressed agreement, carefully examined Mr Chan’s witness statement and his evidence in court and considered that there was no inherent contradiction between what Mr Chan said in the statement about the deferment of two months for the repayment of the loans and what the alleged agreement to withhold payment of Mr Law’s arrears of wages, and the lack of any mention about the loans during the taped conversation. She also noted that Mr Chan was not cross-examined on why he did not mention the June agreement during the conversation and this was not made a point in counsel’s final submission before the trial judge. Having considered the taped conversation in its context and Mr Chan’s explanation under cross-examination, Yuen JA took the view that the trial judge was entitled to accept such explanation. Reminding herself of the approach to findings of fact by an appellate court, she was not satisfied that the trial judge’s conclusion on the facts was plainly wrong.

25.  As the matter now stands, there are concurrent findings that (1) the loans in question existed as alleged by Mr Chan and Ms Tong and (2) there was an acceptable explanation for Mr Chan not mentioning the loans and the June agreement during the taped conversation. These findings were made by the trial judge and the majority of the Court of Appeal respectively after a detailed and careful examination of all the evidence.

The Court’s approach to concurrent findings of fact

26.  Faced with these concurrent findings, needless to say, Sir John’s task is a difficult one. This is because the practice of the Court of Final Appeal in the exercise of its final appellate jurisdiction is that it would not disturb concurrent findings of fact save in exceptional and rare circumstances where there is a miscarriage of justice or violation of some principle of law or procedure. See Bokhary PJ in Sky Heart Ltd v Lee Hysan Co Ltd (1997-98) 1 HKCFAR 318, 333 to 338.

27.  Sir John does not challenge the above proposition of the law. However, he submits that this Court, as the Court in Kwan Siu Man v Yaacov Ozer (1997-98) 1 HKCFAR 343, would not be inhibited by concurrent findings of fact if it is clear that the judge’s findings were self-contradictory and there were facts pointing to the opposite conclusion. It is submitted that in the present case, the Court should intervene since the trial judge’s conclusions were wrong because he had failed to reconcile the inconsistencies and contradictions arising from Mr Chan’s evidence and his admissions made during the taped conversation, and the majority of the Court of Appeal had misunderstood the evidence relating to the taped conversation and Mr Chan’s explanation.  Although counsel describes these errors as “errors which are so fundamental as to amount to errors of law”, so that this case falls within the exception to the practice regarding concurrent findings of fact, he is in fact inviting the Court to review these findings and the evidence in order to demonstrate that the conclusions reached by the lower courts were unsupportable. He is asking the Court to come to the opposite conclusions and to allow the appeal and enter judgment for Mr Law or alternatively order a re-trial.

28.  Where an appellant seeks to challenge the concurrent findings of fact made by the lower courts, the Court is often if not invariably asked to conduct a detailed review of the findings in question, particularly the evidence on which the lower courts relied to make those concurrent findings. But the Court will not do so unless there are special circumstances. If it were otherwise, the practice will become superfluous: the Court would be doing what it should not do save in exceptional and rare cases. Hence, where an appellant asks this Court to review concurrent findings of fact, it is incumbent on him to point at once to the special circumstances put forward to warrant such a review. The Court will examine these circumstances and will not embark upon a review of the findings in question unless the circumstances are of the exceptional nature required. Only if they are, will the Court embark upon the review and see, at the end of it, whether it will disturb the concurrent findings. If they are not, the Court will decline to conduct such an exercise. As Lord Hoffmann NPJ put it in Aktieselskabet Dansk Skibsfinansiering v Brothers & Others (2000) 3 HKCFAR 70, at 84, the practice of the Privy Council (which is adopted by this Court) is that “the Board will not review concurrent findings of fact merely on the ground that the courts below did not accord appropriate weight to the evidence but that ‘the question whether there is evidence on which the courts could arrive at their finding’ is a question of law”.

No special circumstance

29.  With respect, notwithstanding Sir John’s forceful submissions, we are not satisfied that it has been shown that there are special circumstances which call for a review of the concurrent findings of fact and the evidence relied on by the lower courts to make those findings.

30.  In the present case, the crucial issue is one of the credibility of the witnesses. The only matter put forward as constituting a special circumstance which may call for a review of the concurrent findings of fact and forming the main basis for the contention that the concurrent findings are unsupportable is the taped conversation. It is submitted by counsel that the conversation contains what he describes as the “undoubted admission” made by Mr Chan that there were no loans made to Mr Law and that the trial judge had failed to reconcile the inconsistencies between this “admission” and Mr Chan’s evidence.

31.  This submission clearly goes beyond what Cheung JA was prepared to hold. The main basis for Cheung JA entertaining a doubt in Mr Chan’s evidence was his concern over what Mr Chan had failed to mention during the conversation. Counsel says that he now relies not only on what Mr Chan had not said but also on what he had said at that conversation. It is submitted that in acknowledging that Mr Law was owed arrears of wages and in promising Mr Law that he would be paid, Mr Chan was in effect admitting that there were no loans due and owing by Mr Law.

32.  We note that this point was not made in the courts below. Apart from this objection, the submission is clearly unsustainable. First, this is not borne out by the transcript of the taped conversation. Nor can it be said to be the effect of the conversation. Secondly, one simply cannot interpret Mr Chan’s acknowledgment that Mr Law was owed his wages and the promise to pay them later as an admission that no loans had been made to Mr Law. This is reading too much into what Mr Chan had said and making up too much from what he had not said. It would be wrong to attribute to him what he had not said.

33.  Another reason why counsel’s submissions based on the taped conversation must fail is that the conversation did not prove anything positive against Mr Chan; it was only relevant to his credibility. Moreover, the record was admittedly incomplete and disjointed. Although there was no finding that the tape had been edited, it is obvious that one must exercise some degree of care in seeking to rely on what was recorded, let alone what was not. The use, if any, which can be made of the failure to mention any particular matter during the conversation naturally depends very much on the nature, purpose and focus of the conversation and the explanation for the failure to do so.  In our view, counsel has not begun to show that the taped conversation was of such value or significance in this case as to merit a review of the concurrent findings of fact by this Court. The present case is clearly distinguishable from Kwan Siu Man v Yaacov Ozer where the Court was satisfied that there was no evidence upon which the lower courts could make the relevant findings of fact. This is not the case here.

34.  The comprehensive submissions made on behalf of Mr Law amount to no more than supporting and elaborating on the reasons given in Cheung JA’s dissenting judgment and contending that the learned Justice of Appeal was right and the trial judge and the majority of the Court of Appeal were wrong.  But as this Court held in Sky Heart, the practice against interfering with concurrent findings of fact would not be obviated by the dissent of a member of the appellate court or by a difference in the reasons in upholding the finding of fact. (See Bokhary PJ at 334.)

Conclusion

35.  For the reasons set out above, there is no special circumstance which calls for a review of the concurrent findings of fact in the present case and we are not persuaded that this is an exceptional case in which we should disturb those findings. The appeal must be dismissed with costs.