TIN KWONG INTERNATIONAL ENTERPRISE CO LTD AND OTHERS v. SAN TUNG AND ANOTHER

CACV 164/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 164 OF 2005

(ON APPEAL FROM  HCA 7165 OF 2000)

______________________

______________________

_________________________

REASONS FOR JUDGMENT

_________________________

Hon Woo VP:

Introduction

1. The 1^st and 2^nd defendants appealed against the judgment given on 27 April 2005 by Deputy High Court Judge Poon in favour of the plaintiffs in the following manner:

(1)	as against the 1st defendant:
	(a)	HK$1,039,659.89; and
	(b)	HK$1,700,150.00.
(2)	as against both the 1st and 2nd defendants:
	(a)	HK$2,369,251.46; and
	(b)	HK$1,451,726.66.

2. At the conclusion of the hearing before us on 11 January 2006, we dismissed the appeal with costs.  We also disallowed the defendants’ solicitors’ costs for the preparation of the core bundles.  My reasons appear below.

The facts

3. The three plaintiffs are all limited companies incorporated in Hong Kong.  Mr Sun Tian Gang (“Mr Sun”) was at all material times a 50% shareholder of the 1^st plaintiff and a majority shareholder of the 2^nd and 3^rd plaintiffs.  He was also a director and the general manager of each of the plaintiffs.

4. At all materials times, the 1^st defendant was a director and the assistant general manager of each of the plaintiffs and the 2^nd defendant was his wife.

5. At the trial before the judge, the parties accepted that between 27 October 1999 and 14 February 2000, the 1^st defendant received a total of HK$63,338,216.00, comprising 14 sums of money (“the sums”) deposited into his personal bank account with Po Sang Bank.  The sums were subsequently disposed of in various ways.

The judge’s relevant finding

6. At the trial before the judge, Mr Sun gave evidence on behalf of the plaintiffs.  On the other hand, the 1^st defendant was absent from the trial throughout and the 2^nd defendant chose not to give evidence.  The 1^st defendant’s affirmation filed on 28 September 2000 in the Mareva injunction proceedings was by consent admitted in evidence without cross-examination.

7. As noted by the judge in his judgment, the central issue raised by the defendants was as to the beneficial ownership of the sums.  The judge found that the sums belonged to the plaintiffs and that the defendants were liable for the four amounts referred to above.

The grounds of appeal

8. Even though five grounds of appeal were raised in the notice of appeal on behalf of the defendants, little was put in argument on the fourth and fifth grounds, which respectively relate to the sum of HK$1,700,150.00 and to the sums of HK$2,369,251.46 and HK$1,451,726.66.  It is therefore unnecessary for me to deal with the correctness of the judgment against the defendants on these three amounts individually.

9. All of the first three grounds challenge the judge’s finding that the sums belonged to the three corporate plaintiffs as being against the weight of the evidence.  In the skeleton submission of Mr Jason Wong, counsel for the defendants before us, our attention was drawn to various aspects of the evidence that allegedly lacked certainty regarding the source of the sums, which were relied on in support of the challenge.  Indeed, the query on the source of the sums was the main basis advanced by Mr Wong to challenge the judge’s finding.

10. Mr Wong said that Mr Sun was the controlling director of at least five companies including the plaintiffs and was involved in a number of companies established in the Mainland, and that Mr Sun’s evidence did not clearly point to the source of the sums as received by the 1^st defendant.  Mr Wong relied on authorities dealing with the corporate personality of a company as distinct from the personality of its shareholders and the reluctance of the courts to lift the corporate veil to support his argument that the judge’s finding of the beneficial ownership of the sums was wrong.

11. In my view, Mr Wong was not only confronted with an uphill task against the judge’s findings of fact but had also raised points that are of no consequence.

The law on appeal on facts

12. The law regarding appeals against decisions of questions of fact is well settled.  The principles can be found in para 59/1/48 of Hong Kong Civil Procedure, 2006, Vol 1 and a large number of English and Hong Kong cases, including The Julia (1860) 14 Moo. PC 210 at 235 per Lord Kingsdown, SS Hontestroom v SS Sangaporack [1927] AC 37 at 47 per Lord Sumner, and Benmax v Austin Motor Co Ltd [1995] AC 370 at 375 per Lord Reid; Lobo v Kripalani [1998] 2 HKLRD 325 at 327J per Godfrey JA, Carrian Holdings Limited (In liquidation) v Crestflame Estates Limited & Ors (CACV 205/1993, 30 Aug 1994, unreported) at pp 16-17 per Power VP, Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657, at 663D, per Godfrey JA, Shiek Shin Jiu v Mak Shiu Kei, Johnny and Anr (CACV 174/1997, 13 April 1999, unreported) at p 4K-P per Godfrey JA, and Chung Fai Engineering Co v Maxwell Engineering Co Ltd (CACV 981/2000, 15 June 2001, unreported) at para 32 per Mayo VP.

13. The principles and the rationale were reiterated in Ting Kwok Keung v Tam Dick Yuen & Ors (2002) 5 HKCFAR 337, where Bokhary PJ said at p 349J:

“	41.	‘On an appeal against a judgment of a judge sitting alone’ – Lord Sankey LC said in Powell v Streatham Manor Nursing Home [1935] AC 243 at p.249 – ‘the Court of Appeal will not set aside the judgment unless the appellant satisfies the Court that the judge was wrong and that his decision ought to have been the other way’.  I would reinforce that by respectfully adopting what Lord Hoffmann said in Biogen Inc v Medeva Plc [1997] RPC 1 at p.45 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360 at p.1372D-F:
		The need for appellate caution in reversing the trial judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy.  It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence.  His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance … of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation.
	42.	Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact.  And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state.  Such advantages can be, as Lord Shaw of Dunfermline put it in Clark v Edinburgh Tramways [1919] SC (HL) 35 at p.36, ‘sometimes broad and sometimes subtle’.  The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.  The Court of Appeal should intervene if so satisfied.  But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness.”

14. The principles laid down in the above authorities can be summarised as follows:

(a)	If the Court of Appeal is to reverse the trial judge’s decision on the facts, it “must not merely entertain doubt whether the decision below is right, but be convinced it is wrong”.
(b)	The Court of Appeal will certainly not disturb the judge’s findings of primary fact where they are based on the credibility of the witnesses or the preference of the evidence of one witness for that of another because he enjoyed the advantages of receiving the evidence in a living state at first-hand.
(c)	In order to disturb a finding of primary fact, the Court of Appeal has to be satisfied that the judge’s conclusion is plainly wrong in the sense that either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence that the judge overlooked.  It is not enough to show there is little evidence to support the judge’s finding, or that it was “contrary to the weight of the evidence”.  The weight of the evidence is a matter for the trial judge.  It does not matter how many witnesses say one thing, and how few say the contrary.  The judge is perfectly entitled to prefer the evidence of the few to that of the many.

15. To put the matter shortly, the defendants have failed to overcome the stringent test that is required to be satisfied for us to interfere with the judge’s findings of fact.

Two significant facts

16. Regarding the correctness of the judgment against the defendants, it is only necessary to note two significant facts that were before the judge.  First, in his affirmation filed on 28 September 2000, which was by consent admitted in evidence before the judge, the 1^st defendant stated:

“I do accept however that these funds [ie the sums] should beneficially belong to Mr Sun Tang Gang as it was he who could foretell me as to when the money would be received by me and where the money should go.  This sums of money came to HK$63,338,216.00.”

17. The second fact was that Mr Sun maintained in evidence that the sums were transferred to Hong Kong for the account of the plaintiffs and not for Mr Sun’s personal purpose, that the 1^st defendant was instructed to effect the transfer into the accounts of the plaintiffs but the sums ended in his personal account, and that Mr Sun was not the beneficiary of the sums.

18. While, as the judge noted in his judgment, “Mr Sun’s evidence in certain aspects is not entirely satisfactory”, and that comment appeared to relate to the source of the sums, it was not for the 1^st defendant or the 2^nd defendant, both of whom had not testified before the judge, to deny Mr Sun’s claim that the sums belonged to the plaintiffs.  The reason is simple.  Insofar as the 1^st defendant (and the 2^nd defendant who, as the judge found, had knowingly assisted in the 1^st defendant’s breach of his fiduciary duties) accepted that he had the duty towards Mr Sun regarding the disposal of the sums, and Mr Sun had on oath disclaimed his beneficial ownership of the sums in favour of the plaintiffs, the judge’s finding of the plaintiffs’ beneficial ownership of the sums was a foregone conclusion.  Whatever the source of the sums, it was accepted by the 1^st defendant that he had received them pursuant to the arrangements made and instructions given by Mr Sun.  On his own admission, the 1^st defendant was duty-bound to carry out Mr Sun’s instructions.  The instructions were for the 1^st defendant to hold the sums on behalf of the plaintiffs.  Such instructions were not and could not be denied.

19. In view of the above, it is unnecessary to deal with each and every argument about the weight of the evidence that related to the source of the sums.  These grounds of appeal are plainly devoid of any merit.

Conclusion

20. For the above reasons, the appeal must be dismissed with costs.

Costs of the core bundles

21. Three appeal bundles had been lodged with the court, comprising an affirmations bundle of 232 pages, and two other bundles totalling 839 pages.  Prior to the hearing, my clerk reminded the defendants’ solicitors to submit a core bundle in accordance with Practice Direction 4.1.  As a result, two core bundles were lodged on 6 January 2006, consisting of a total of 649 pages, including a large quantity of material irrelevant to the issues to be decided on the appeal.  They were not prepared in accordance with the Practice Direction and had the effect of burdening the court instead of assisting it.  It was for this reason that we disallowed the solicitors’ costs for their preparation.

Hon Cheung JA:

22. I agree.

Hon Yuen JA:

23. I agree.