Hoh Han Keyet v. Artimax Investment Ltd and Others

CACV 161/20 16

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 161 OF 2016

(ON APPEAL FROM HCA NO 1163 OF 2013)

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the reasons for judgment of the court):

1.This appeal was brought by Hon Kiang Ngan (“Frank”) and Sharikat Ying Mui Sdn Bhd (“SYM”) to challenge the finding of fact of Deputy High Court Judge Eugene Fung, SC in the judgment handed down on 30 June 2016 after a three-day trial in May 2016. Frank is the 2^nd defendant in the original action and SYM is the 3^rd defendant in the original action and the plaintiff in the counterclaim. We dismissed their appeal at the conclusion of the hearing with costs and these are the reasons of the court.

The trial and the judgment

2.In a nutshell, the core issue for determination at the trial was whether the shares in Artimax Investment Limited (“Artimax”, a private company incorporated in Hong Kong, the 2^nd defendant in the counterclaim) are held by the registered shareholders on trust for SYM.  The registered shareholders of Artimax are Frank and two of his brothers, Robert Hoh Kiang Chan (“Robert”), since deceased, and Hoh Kiang Po (“George”; the 3^rd defendant in the counterclaim).  SYM is a private company incorporated in Malaysia in 1968, the original subscribers of which were the parents of the brothers.  At the material times, SYM owned shares in a number of pawnshop companies incorporated and operating in Malaysia.

3.The plaintiff, Hoh Han Keyet (“Han”, the son of Robert), brought this action for an order that his name be entered in Artimax’s register of members as the holder of Robert’s share, on the basis that he is the legal and beneficial owner.

4.The appellants asserted that the registered shareholders of Artimax held their shares on trust for SYM.  SYM counterclaimed for a declaration that Robert’s share and another share registered in the name of George are held on trust for it[1]. Their case is that the shares in Artimax were held by the three registered shareholders on an express trust, alternatively a common intention constructive trust, for SYM[2]. The burden rests on the appellants to prove the alleged trust.

5.Their pleaded case is that the alleged trust was anticipated and discussed at a family meeting on 19 September 1999, shortly before the incorporation of Artimax in October 1999, and it was twice confirmed at the family meetings of 9 January 2000 and 9 July 2000, wherein Robert, George and Frank agreed each held his share on trust for SYM.  Their leading counsel, Mr Douglas Lam, SC, who appeared with Mr Justin Ho at the trial and on appeal, advanced two cases as to when the alleged trust came into existence: at the family meeting on 9 July 2000; alternatively, when each shareholder was allotted his share, on 27 January 2000 for Robert and George and on 28 January 2000 for Frank[3].

6.At the trial, the appellants placed heavy reliance on the minutes of the three family meetings, which were all prepared by Robert – the September 1999 Minutes, the January 2000 Minutes and the July 2000 Minutes, the authenticity of which is not in dispute.  It was recorded in each of the minutes that the shares in Artimax were to be held or were held by the shareholders in trust for SYM.

7.For the reasons fully explained in section D3a and b of the judgment, the judge came to the view at §53 that he is unable to take the three sets of minutes as having fully and accurately recorded what happened at the particular meeting in order to determine whether there was any discussion at the three meetings amongst Robert, George and Frank in relation to the holding of the Artimax shares on trust for SYM.  The judge considered he would need to examine other available evidence in addition to the three sets of minutes.

8.The judge then considered the evidence of George and Frank.  For the reasons he gave in section D3c, he decided at §59 to accept the evidence of George that there was no discussion at any of the three meetings the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM.

9.Other evidence was also considered in section D3d, being 15 sets of the annual reports/financial statements of SYM from 1999 to 2013 (in which there was no mention of Artimax as a subsidiary or associated company of SYM, or of any beneficial interest of SYM in Artimax), and the minutes of another family meeting on 9 April 2004 (which recorded that the “Artimax (SYM) account should eventually be wound up.  Artimax by then will have nothing to do with SYM.”).  The judge took the view that these evidence would suggest that the shares in Artimax are not subject to any trust for SYM.

10.He reached the finding in §66 there was no discussion at any of the three family meetings in 1999 and 2000 that the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM.  As a result of this finding, the judge rejected the appellants’ primary case of express trust (that it was created at the July 2000 meeting) at §69 and the alternative case (that it was created on 27 and 28 January 2000) at §72.

11.In Mr Lam’s closing submissions at the trial, he conceded that a common intention constructive trust would not arise if the court should find there was no discussion concerning a trust arrangement amongst Robert, George and Frank at the family meetings in 1999 and 2000.  Hence, the alternative case of common intention constructive trust also failed in view of the judge’s finding there was no discussion at any of the three family meetings that the shares of the new company (or Artimax) would be held on trust by the shareholders for SYM.

This appeal

12.This appeal sought to challenge the critical finding of primary fact mentioned above.  The main complaint is that the judge was wrong not to find on the three sets of minutes that there was discussion at the family meetings in 1999 and 2000 the shares of Artimax would be held on trust by the shareholders for SYM.  The appellants emphasised that “very substantial weight” should be attached to these contemporaneous documents and the judge’s reasoning in concluding that the minutes did not fully and accurately record what happened at the particular meeting was “untenable”, “wholly unconvincing” and “inconsistent with the weight to be accorded to the contemporaneous minutes”.  It was contended that the appeal court is as well placed as the trial judge to decide whether the minutes should be accepted in preference to other evidence.  Further, even if the judge were correct to prefer the oral evidence of George over the minutes and find no discussions had taken place, this could not negate the existence of an express trust in respect of Robert’s share, given that Robert had drafted the minutes and this recorded an intention to create a trust on his part.

13.The arguments advanced on behalf of the appellants are contrary to the proper scope of an appeal against a finding of fact, as has been discussed by the court of appeal in recent years, most notably in China Gold Finance Ltd v CIL Holdings Ltd & Ors, CACV 11/2015, 27 November 2015 at §§11 to 25, in which reference was made to pertinent authorities in the UK Supreme Court, the Privy Council, and other local authorities at the appellate level.  It would appear that the appellants have not heeded the correct approach established in all these authorities.

14.The following passages in the judgment of Lord Reed in McGraddie v McGraddie [2013] 1 WLR 2477 (with whom all the other members of the Supreme Court agreed), in which he quoted with approval at §§3 and 4 the statements from a case of the US Supreme Court and a case of the Canadian Supreme Court are worthy of note:

“The rationale for deference to the original finder of fact is not limited to the superiority of the trial judge’s position to make determinations of credibility. The trial judge’s major role is the determination of fact, and with experience in fulfilling that role comes expertise. Duplication of the trial judge’s efforts in the court of appeals would very likely contribute only negligibly to the accuracy of fact determination at a huge cost in diversion of judicial resources. In addition, the parties to a case on appeal have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one; requiring them to persuade three more judges at the appellate level is requiring too much. As the court has stated in a different context, the trial on the merits should be ‘the “main event” … rather than a “tryout on the road” … For these reasons, review of factual findings under the clearly erroneous standard — with its deference to the trier of fact — is the rule, not the exception. (Anderson v City of Bessemer (1985) 470 US 564, 574–575)

The trial judge has sat through the entire case and his ultimate judgment reflects this total familiarity with the evidence. The insight gained by the trial judge who has lived with the case for several days, weeks or even months may be far deeper than that of the Court of Appeal whose view of the case is much more limited and narrow, often being shaped and distorted by the various orders or rulings being challenged. (Housen v Nikolaisen [2002] 2 SCR 235, §14)”.

15.Similar statements were made by Lord Hodge in Carlye v Royal Bank of Scotland [2015] UKSC 13 at §22 (with whom all the other members of the Supreme Court agreed), as quoted in China Gold at §21.

16.Mr Lam’s submission that the appeal court is as well placed as the trial judge to decide whether the minutes should be accepted in preference to other evidence misses the point.  As repeatedly emphasised in the authorities, it is the trial judge who has the primary role in assessing the evidence and making relevant findings of fact, not the court of appeal.  The trial before the primary judge should be “the main event”, not a “tryout on the road”.  The appellate process is not designed to give an appellant a second chance of repeating his arguments before three judges, in the hope that they might be persuaded to accept the account of facts he advanced unsuccessfully before the primary judge.  Quite apart from the fact that the appeal court is unlikely to gain as much insight to the facts from seeing how the evidence unfolded, or be as familiar with the evidence as the primary judge, who has lived with the trial from beginning to end, its perception may be narrowed or distorted by selective readings of the transcript when its focus is on the challenge of a particular finding.  There is every reason for the appeal court to exercise restraint in this situation.

17.Mr Lam has sought to do in this appeal what the authorities have disapproved of.  The main points in his submission to this court are quite simply a recycle or regurgitation of his detailed closing submission at the trial, down to the footnote references to relevant parts of the transcript, which are largely, if not entirely, the same in both submissions.  As stated in China Gold at §14, it is a misuse of the appellate process to place before the appeal court submissions which, in substance, are submissions advanced by way of closing at the trial.  His primary submissions have already been considered by the judge and rejected for the reasons given in the judgment.  It is well established that the appeal court does not interfere with primary findings of fact unless it is satisfied that the trial judge was plainly wrong, and the appeal court should defer to the trial judge’s conclusion even if in some doubt as to its correctness.

18.The starting point of an appeal, as emphasised in China Gold at §§15 and 16, should be the judgment of the primary judge and the identification of palpable errors, which must be errors that are sufficiently material to undermine the judge’s conclusion for the appeal court to intervene.  The mere repetition of arguments which in substance have been advanced before the judge and the assertion that the judge should have reached some other conclusion are not errors within that category.

19.There is no inflexible rule of law that contemporaneous documents must be accorded “very substantial weight” in assessing credibility.  It depends on the nature of the documents and the circumstances in which they came into being.  The judge was well aware that “with all things being equal”, contemporaneous documents are more reliable than a witness’s recollection of something which happened over 16 years ago[4]. However, for the reasons he gave in sections D3a and b, he was unable to take the three minutes on their face value and just prefer the minutes to the evidence of George.  He has considered and analysed the three sets of minutes in some detail, before he came to the view that they do not accurately reflect what happened at the family meetings.

20.Mr Lam sought to argue on appeal there were only “minor discrepancies” in the three sets of minutes and there is no reason to doubt the accuracy of the record in those minutes.  He had made similar submissions at the closing of the trial.

21.With regard to the September 1999 minutes, the judge drew a distinction between obvious typographical errors (which on their own did not cause him to doubt the accuracy of the minutes) and another error which recorded a discussion that did not take place (which the judge did not accept as minor)[5]. The latter error was the reference to a sister Maureen as an intended shareholder of the new company.  Mr Lam sought to persuade this court that this should not be treated as an error but merely a subsequent change of intention by reference to the witness statement of George.  But the evidence before the judge was not one way.  In reaching the view that this was an error, the judge took into account the evidence of Frank, who agreed it was an error and stated he did not believe Maureen was ever intended to be a shareholder of Artimax[6].  We cannot say he must be wrong in accepting Frank’s evidence in this regard.  Nor can we say his rejection of Mr Lam’s submission that this error was “minor in nature” was plainly wrong.

22.For the January 2000 minutes, the judge went through a similar exercise and came to the view that “on Frank’s case”, “there would be doubts about the precision of the language used” and he “cannot take the document entirely at face value to determine whether it fully records what happened at the time”[7]. Mr Lam submitted to us when the relevant part of Frank’s evidence as quoted by the judge was read in context, the judge should have taken the view that Frank was not stating there was any error in the minutes.  He also made the point that George never complained of any error in this regard.

23.We are unable to accept these submissions.  The judge had considered Frank’s evidence in his witness statement as quoted in the judgment along with Frank’s evidence under cross-examination.  He is fully entitled to take the view that according to Frank’s evidence, the references to repayment and reduction of loans in the January 2000 minutes are not accurate and hence there would be doubts about the precision of the language used.  Again, it cannot be shown that he was plainly wrong in this respect.

24.Turning to the July 2000 minutes, the judge pointed out the matters which suggest that the minutes do not appear to fully record what happened at the time[8]. Mr Lam submitted the reasoning of the judge is “wholly unconvincing”.  We are not persuaded that is the case.  He also submitted it “makes no sense” for Robert to repeat the error about the shares of Artimax being held on trust a third time, if George had indeed told him twice this was an error.  The judge had considered this submission made to him and concluded that he was unable to say it is inherently unlikely for Robert, as experienced as he was as a lawyer, to make mistakes in the three meeting minutes[9]. There is no basis for the appeal court to interfere.

25.We are not satisfied there is any palpable error for the judge to conclude that the three sets of minutes cannot be taken as having fully and accurately recorded what happened in those family meetings and that he should consider other available evidence in addition to those minutes[10].  There is no proper basis to warrant interference with that approach.

26.As pointed out by Mr Jeffrey Tam, who appeared for Han, George and the personal representative of the estate of Robert on appeal and below, the judge had (rightly, in our view) evaluated the minutes as an overall process, by taking into account the production and background of the minutes, the surrounding circumstances of the family meetings, the nature and operation of SYM and other private companies set up by family members, how the family members had been dealing with these companies, the demeanour of the witnesses, the inherent probabilities, and other contemporaneous documents.

27.Mr Lam’s complaint boils down to the question of weight that should be accorded to the minutes in reaching the critical finding there was no discussion at any of the family meetings in 1999 and 2000 that the shares of Artimax would be held on trust for SYM.  He contended the judge should have given the minutes very substantial weight, whereas the judge treated the minutes as having little weight in the overall evaluation.  What appropriate weight should be attached to a particular piece of evidence is clearly a matter for the trial judge.

28.The judge went through the evidence of George and Frank in some detail in section D3c.  He came to the view the evidence of George should be accepted, having seen and heard him give evidence.  Mr Lam sought to argue that George’s evidence was self-serving and should not be accepted for a variety of reasons that he had already advanced before the judge in similar detail.  We do not propose to repeat them.  As we have stated, this is not how a challenge to a finding of fact should be made.  He has failed to show any palpable error in that part of the judgment.

29.Similarly, we could discern no palpable error in the judge’s analysis of other evidence in section D3d.  We do not agree with Mr Lam the judge was wrong in his observation in §62(2) that it “has not been satisfactorily demonstrated that SYM has any legal or beneficial interest in the gold money”.  Mr Lam contended that the evidence of George in cross-examination showed that the “gold money” was paid directly into the “Artimax D account” and George had also accepted that the Artimax D account belonged to SYM[11].  Mr Tam referred us to other parts of the evidence of George in cross-examination[12], part of which Mr Lam also drew our attention to in his oral submission.  George had said repeatedly in this earlier part of his evidence that the “gold money” did not belong to SYM or their mother, but was “family money”, and “distributed to certain members of the family”.  Reading the evidence of George fairly and as a whole, we do not think the judge was wrong to think that it “has not been satisfactorily demonstrated that SYM has any legal or beneficial interest in the gold money”.

30.We also disagree with Mr Lam that the judge was “plainly in error” regarding his analysis of the April 2004 minutes.  He had made the submission before the judge that the last two sentences in the part quoted by the judge, when read in context and as a whole, merely reflected a discussion as to the “future function of Artimax”.  The judge rejected this in §65.  We agree with the judge’s reading of the minutes.

31.There are some minor points made by Mr Lam, such as the fact that SYM had paid for all of Artimax’s costs of incorporation and maintenance costs out of its own funds, which we have considered de bene esse.  We do not think this would help to advance the appellants’ case.  Besides, this was raised in Mr Lam’s closing submission before the judge, albeit in the context of detrimental reliance for the purpose of establishing a common intention constructive trust[13].  The fact that the judge did not mention it in the judgment does not mean he had not considered it.

32.Mr Lam also submitted that the judge was wrong to hold in §73 that the appellants’ alternative case of express trust (that the trust was created on 27 and 28 January 2000) would fail as a matter of law as it is impossible for a settlor to create a presently existing trust of future property.  He cited authorities for the proposition that a trust over future property can arise if it is part of an agreement and supported by consideration.  He then argued that consideration was provided in this instance.  It is not necessary to deal with his argument whether consideration was provided, as the judge has already ruled on the facts that there was no discussion at the September 1999 meeting and the January 2000 meeting that the shares would be held on trust for SYM[14].

33.The submission that the judge should nevertheless have held that there was an express trust over Robert’s own share even if he is correct to find no discussions about the trust had taken place in the family meetings had been made before the judge[15].  The judge did not deal with it in his judgment.  We reject it as having no merit.  It is contrary to the case of the appellants that the shares in Artimax were held by all three registered shareholders on trust for SYM.  It was not canvassed in evidence that Robert might have held a different intention from the other two shareholders.  Last but not least, the judge had found there was no discussion about the trust in the three family meetings as regards the share of any registered shareholder of Artimax. Further, the evidence of George (which the judge appeared to have accepted) was that Robert had agreed with him that the statements that the shares were held on trust were mistaken.

34.Mr Lam accepted that the alternative case of common intention constructive trust would stand or fall with the case on express trust, having conceded in his closing submission before the judge that constructive trust would not arise if the court finds there was no discussion concerning a trust arrangement in the family meetings in 1999 and 2000.  It is unnecessary for us to address the alternative case of constructive trust.

35.For all the above reasons, we have dismissed this appeal with costs to the respondents.

Mr Douglas Lam SC and Mr Justin Ho, instructed by Lipman Karas, for the 2^nd & 3^rd Defendants (by Original Action) and the Plaintiff (by Counterclaim) / Appellants

Mr Jeffrey Tam, instructed by Ribeiro Hui, for the Plaintiff (by Original Action) and the 1^st, 3^rd & 4^th Defendants (by Counterclaim) / Respondents