Yu Man Fung Alice v. Chiau Sing Chi Stephen

CACV 14 & 15/2021
(Heard together)

[2021] HKCA 1456

CACV 14/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 14 OF 2021

(ON APPEAL FROM HCA NO 1584 OF 2012)

________________________

________________________

AND

CACV 15/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 15 OF 2021

(ON APPEAL FROM HCA NO 1243 OF 2017)

________________________

(Heard together)

Before: Hon Kwan VP, Barma JA and Au JA in Court

Date of Hearing: 7 September 2021

Date of Judgment: 7 September 2021

Date of Reasons for Judgment: 8 October 2021

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R E A S O N S   F O R   J U D G M E N T

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

Introduction

1.On 23 December 2020, Coleman J handed down a judgment of 140 pages (“the Judgment”) dismissing two actions brought by Yu Man Fung Alice (“the plaintiff” or “Ms Yu”) against Chiau Sing Chi Stephen (“the defendant” or “Mr Chiau”) for damages of some $80 million and other reliefs arising out of an oral agreement (“Oral Agreement”) allegedly made between them at around Christmas 2002, in which Mr Chiau agreed to pay Ms Yu 10% share of net profits made on all successful investments recommended by her to him. The Judgment was given after a ten-day trial in November and December 2020.  Ms Yu appealed against the Judgment.  At the conclusion of the hearing before us, we dismissed her appeal in each action with costs to Mr Chiau, with a certificate for two counsel.  These are the reasons of the court for dismissing the appeals.

2.Ms Yu’s main claim (in HCA 1584/2012) is for 10% of the profits in respect of the property known as 12 Pollock’s Path, The Peak, Hong Kong (“House 12”).  Her other claims (in HCA 1243/2017)^[1] are for 10% of the profits in respect of three houses of a development in Tai Po known as The Beverley Hills (“BH Properties”) and an investment in a private equity fund known as the Peregrine Greater China Capital Appreciation Fund LP (“Fund”).

3.The judge held that the claims in respect of House 12 failed for any number or any combination of these reasons^[2]:

(1)  The Oral Agreement as alleged by Ms Yu was not made.  The discussion between them at around Christmas 2002 about profit sharing was in relation to a verbal promise of Mr Chiau to make gifts to Ms Yu of 10% of his property investments^[3].

(2)  There was no binding agreement as there was no intention to create legal relations.  The parties were in a steady romantic relationship at the time, there was lack of ordinary commercial sense in the terms and vagueness of the language used.  On an objective basis, these and other matters considered by the judge pointed to a loose arrangement between boyfriend and girlfriend as befitting a gift or series of gifts and not any kind of binding commercial arrangement^[4].

(3)  Mr Chiau had intended to retain House 12 for his self-use from the moment he acquired the property (“Skyhigh Property”) on which House 12 and three other houses (Houses 10, 16 and 18) were subsequently built.  The evidence in this respect is “overwhelming”.  House 12 was therefore not an “investment” which would fall within the terms of the Oral Agreement, even if the Oral Agreement were made and even if it were a binding agreement.  Hence, on Ms Yu’s own case, her claim to any share of profit on House 12 is “bound to fail”^[5].

(4)  In any event, Ms Yu’s case depended upon the implication of the “Notional Sale Term”^[6], which was rejected as being “artificial, and convoluted” and does not meet the necessary test for being implied^[7].

(5)  Even under the Notional Sale Term, as the evidence showed that it was always the intention of Mr Chiau to live in his “dream house” to be built on the Skyhigh Property from the time he successfully bid for the property in 2004, the value of the Skyhigh Property was the same as the auction price and there could have been “no profit”.  And even that ignores the cost of development, and the rather tortuous analysis that that might involve^[8].

(6)  Ms Yu also failed to prove any of the pleaded dates on which Mr Chiau became liable to pay her a share of the “profits”.  Those dates are dependent upon the implication of the Notional Sale Term, which was rejected^[9].

(7)  For Ms Yu to be entitled to a profit share, she had to be the person who brought about the acquisition of the property, as a matter of construction of the terms of the Oral Agreement or by implying such a term into the Oral Agreement.  On the evidence, she was not the person who really brought about the acquisition of the Skyhigh Property.  Whatever her involvement, it did not really have any causal impact on Mr Chiau’s decision to acquire the property for redevelopment^[10].

4.The claim in relation to the BH Properties and the Fund also failed because they were dependent on the existence of the Oral Agreement and that it was a legally binding agreement^[11].  Further, for the BH Properties, it could not be said that Ms Yu was the person who really brought about the investments in these properties^[12]. As for the Fund, the fundamental and fatal problem for the claim is that the investment is in a fund which is not complete in that there is no liquidation or realisation.  So there is no sensible date on which any obligation to pay any profit can be said to have accrued and none was pleaded, and Mr Chiau could not have breached any obligation to share profits with Ms Yu^[13].

5.Two identical notices of appeal were filed in respect of each action.  They were drafted by Mr Barrie Barlow, SC and Mr Chan Pat Lun, who did not appear for Ms Yu at the trial.  The grounds of appeal are longer than the skeleton argument of counsel, which kept to the limit of 15 pages.  They read like an extended version of the skeleton argument, as the latter made repeated references to the grounds for details of the arguments.  The grounds of appeal in the notice of appeal do not follow the guidance in Practice Direction 4.1^[14].

These appeals

6.These appeals sought to challenge the judge’s findings summarised above, which are in essence findings of fact or of mixed law and fact.  These observations made by the United States Supreme Court and the Canadian Supreme Court and adopted by the United Kingdom Supreme Court in McGraddie v McGraddie [2014] UKSC 12 at §§3 and 4 are particularly pertinent:

“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)

7.In this case, Coleman J has sat through a ten-day trial.  He is the primary judge in the assessment of the evidence and making relevant findings of fact.  His comprehensive judgment demonstrated his total familiarity with the issues and the evidence.  The insight he gained from the experience of how the case was contested would be far deeper than the members of this court, as none of us have ‘lived’ with the case and our perception on reading the papers may be shaped or narrowed by the focused challenges on appeal to particular parts of the evidence.  The appellate process is not designed to give a litigant a platform to advance again with greater or different emphasis the submissions on the evidence and factual aspects which did not find favour with the primary judge, in the hope that three judges in the Court of Appeal might be persuaded to reach a different view.  This huge cost in diversion of judicial resources is not likely to contribute significantly to the accuracy of fact determination.

8.In exercising their appeal as of right to challenge findings of fact of the primary judge, litigants should bear in mind that the trial before the judge would be “the main event” and not a “tryout on the road”.  As stated by Lam VP (as he then was) in To Pui Kui v Ng Kwok Piu & Ors, CACV 281/2012, 21 August 2014 at §§12 to 16, and in China Gold Finance Ltd v CIL Holdings Ltd, CACV 11/2015, 27 November 2015 at §24, institutionally it is not appropriate for the Court of Appeal to take over the role of the trial judge as the primary assessor of the evidence.

The background in brief

9.A brief narrative of the background matters will suffice.  For a full and comprehensive summary, we refer to the Judgment at §§4 to 7, 64 to 156.

10.From 1997/1998 to about March 2010, Ms Yu and Mr Chiau were in a romantic relationship.  He is a household name, being a well-known film actor, producer and director.  She comes from a well-off family, and had pursued a career in financial services.  They remained on relatively good terms until around mid-2011.

11.In early 2002, Ms Yu left her job in the investment companies in which her brother was a partner and began to provide assistance to Mr Chiau in his personal investments on a full time basis.  The parties formalised this aspect of their relationship in a consultancy agreement dated 1 April 2002 referred to in the Judgment as the “Loncham Agreement”, made between Loncham Ltd (“Loncham”; a company owned by Ms Yu and her mother) and The Star Overseas Ltd (“Star Overseas”; the main film production company of Mr Chiau, the sole shareholder and director of which is his sister May Chow (“May”)). By that agreement, through Loncham Ms Yu was engaged as a financial consultant to provide consultancy services to Mr Chiau at $20,000 a month.  There was an ‘entire agreement’ clause in the Loncham Agreement.

12.The Loncham Agreement was amended on seven occasions to provide for changes in the remuneration payable to Loncham^[15]. Significantly, no amendments were ever made to the Loncham Agreement to record the terms of the Oral Agreement by which Ms Yu was to be paid 10% of the net profits made on all successful investments recommended by her to Mr Chiau^[16].

13.From May 2007 to 2011, Ms Yu was paid various sums reflecting approximately 10% of the profits made by Mr Chiau on certain property investments and investments in shares.  The eight payments were in the total sum of $19.5 million odd^[17]. The largest payment was for $14,942,001 made on 3 December 2009, relating to House 16 and House 18 of the redevelopment of the Skyhigh Property^[18]. There is no dispute that all these payments made were first requested by Ms Yu, and it is common ground that the relevant discussion was in 2002 (whether of a legally binding agreement or the promise of a gift) and the first occasion that payment was requested and made was in 2007.  Except for Payment 1, they were made by May personally from her personal bank account and paid to Ms Yu’s personal account, they were not declared by Ms Yu or Loncham as taxable income, and not used as tax deduction by the company that held the relevant property.  At the trial and on appeal, heavy reliance was placed by Ms Yu on these payments as evidence of subsequent conduct of the parties pointing to the existence of the Oral Agreement and the intention to enter into legal relations.

14.In early 2004, Mr Chiau made a successful bid for the Skyhigh Property at $320 million.  In her evidence, Ms Yu accepted that this property, as with other successful investments in properties, were not “introduced” by her to Mr Chiau but by various estate agents.  Her case for remuneration was based on the extensive enquiries, research and analysis subsequently conducted by her which led to her “recommendations”.

15.Mr Chiau formed a joint venture with Raymond Hu (“Mr Hu”) of Ryoden Property Development Co Ltd (“Ryoden”) on a 50-50 basis to redevelop the Skyhigh Property into four independent houses.  It was agreed that the partners would each retain a house for self-use and the other two houses would be sold.  Mr Chiau chose House 12 and Mr Hu chose House 10.  Ryoden acted as the project manager for the development.  Most of the project manager’s dealings with Mr Chiau went through Ms Yu and she had particular involvement to oversee the decoration of House 12^[19]. The development process continued to around 2008 or 2009.

16.As for the BH Properties, they were three houses purchased by Mr Chiau via corporate entities held by May when the houses were under construction, through the introduction of a property agent in a “star investors” programme which offered discounts to him on account of his celebrity status.  They were sold by him at a profit following completion of the development, in June 2011, May 2012 and March 2013.

17.The remaining subject of the claims was in relation to the Fund, which was subscribed for in April 2008 on Ms Yu’s recommendation through a trust vehicle of Mr Chiau of which Treasure Offshore Holdings Ltd (“TOHL”) was the trustee. From time to time, the Fund made capital calls from its subscribers to make contribution and also made distributions to them.  Up to June 2020, TOHL made total contributions to the Fund of US$1,541,122 and has received substantial distributions totalling US$8,297,004.  The Fund has not yet been liquidated.  Ms Yu accepted at the trial that Mr Chiau has not yet breached the Oral Agreement as regards the Fund and did not seek immediate monetary relief but a declaration as to her entitlement to profit sharing upon the liquidation of the Fund or Mr Chiau’s realisation of the investment in the Fund.

18.In April 2011, at Ms Yu’s request, she was permitted by Mr Chiau to move temporarily into House 12.  She stayed there until September 2011.  Mr Hu changed his mind about keeping House 10 for self-use and sold it in June 2011 for $800 million.  In April or May 2011, Ms Yu made a demand for payment of 10% commission to her in respect of House 12, based on a notional sale price of $800 million.  By July 2011, Ms Yu and Mr Chiau had in effect adopted the stances maintained by them since that time.  Mr Chiau moved into House 12 towards the end of 2011 with members of his family and has since kept it as his residence.

19.On 27 February 2012, Mr Chiau paid Ms Yu $10 million under cover of a note that the cheque was in “appreciation for [her] friendship and support over the years”.  She responded that the $10 million was an advance payment of the 10% net profit sharing on House 12.

20.The writ in HCA 1584/2012 was issued on 3 September 2012. 

The claim based on House 12

21.This claim accounted for most of the damages for $80 million. Ms Yu’s case on the Oral Agreement went through many different versions. The version of the re-amended statement of claim (“RASOC”) relied on at the trial was the sixth iteration^[20]. The relevant paragraphs read as follows:

“3. Shortly before or after Christmas 2002, during a telephone conversation between the Plaintiff and the Defendant, the Defendant agreed to pay the plaintiff a ten percent (10%) share of net profits (“the Agreed Profit Share”) made on all successful investments recommended to the Defendant by the Plaintiff (“the Agreement”). Immediately thereafter, the Agreement was confirmed in an exchange of SMS messages between the Plaintiff and the Defendant, in which the Plaintiff sent the Defendant and SMS setting out the terms of the Agreement and requesting the Defendant to confirm his agreement, and the Defendant responded confirming his agreement. The Plaintiff can no longer access these SMS messages.

4. On a true construction of the Agreement (alternatively as a matter of necessary implication therein):

(a) the Agreed Profit Share was to be paid by the Defendant on the occurrence of one or other of the following events:

(i) where the Defendant (or any corporate vehicle through which the investment was held) sold an investment recommended by the Plaintiff, upon the sale of that investment; or

(ii) where the Defendant decided not to sell an investment recommended by the Plaintiff, instead deciding to retain for his own use (or to cause it to be retained by any corporate vehicle through which it was held), upon the making of that decision by the Defendant OR, in the alternative, upon the taking by the Defendant of any step consistent only with a decision to retain rather than to sell the investment.

(b) In the case of a sale in accordance with paragraph 4(a)(i) above, the Agreed Profit Share was to be calculated by reference to the profit made on the sale. In the case of a decision to retain the investment in accordance with paragraph 4(a)(ii) above, the Agreed Profit Share was to be calculated by reference to a notional sale (i.e. on the assumption that the Defendant had chosen to sell the investment in question to a third party rather than retaining it for his own use) at the time when the profit share became payable.

(ba) Where the Defendant had paid the Plaintiff the Agreed Profit Share pursuant to paragraph 4(a)(ii) above and subsequently sold the investment, the Defendant was to pay the Plaintiff the Profit made on the sale after deducting the Agreed Profit Share that the Plaintiff had already received in respect of that investment.

(c) The reference to “net profits” was a reference to profits after tax. Where no tax was in fact paid (for instance because the Defendant chose to retain an investment rather than selling it), there was no need to allow for tax in calculating the Agreed Profit Share payable.”

“6.  Further or alternatively, it was an implied term of the Agreement that the Defendant was not entitled to avoid paying the Agreed Profit Share by declining to sell any investment recommended to him by the Plaintiff.”

22.Thus, on the case as pleaded in RASOC, Ms Yu would be entitled to a 10% profit share only upon one of two situations: (a) where Mr Chiau sold an investment recommended by Ms Yu, upon the sale of that investment – the calculation being made by reference to the profit on the sale (“Actual Sale Term”); or (b) where Mr Chiau decided not to sell an investment recommended by Ms Yu but instead to retain it for his own use, upon the making of that decision or upon taking any step consistent only with a decision to retain rather than sell – the calculation being made by reference to a notional sale to a third party (“Notional Sale Term”)^[21].

23.In the notice of appeal at §10(5), it was sought to advance on behalf of Ms Yu that the Oral Agreement could be construed in this manner:

“It should be noted that the Oral Agreement was capable of being construed (and significantly, the post-Discussion conduct of both parties demonstrated that this was their mutual intention e.g. paragraph 7(8) and (11) above) as entitling the Plaintiff to her 10% profit-share upon demand and irrespective of whether or not the Defendant’s net profit had been liquidated or realised by sale.” (Emphasis supplied)

24.Paragraphs 7(8) and (11) of the notice of appeal read as follows:

“(8) Consistently with the parties’ understanding of and intentions within the Oral Agreement, the 10% Payment No. 4, was in respect of an unsold investment which the parties recognised as having been successful without being the subject of any Defendant’s sale transaction.”

“(11) The 10% Payment No. 7 (the largest and relating to the purchase of No. 12 Pollock Path^[22]) was formally recorded by the Family Office’s Accounts Department as being made on the instructions of the Defendant and representing ‘10% commission paid to [the Plaintiff]’ upon the Defendant’s ‘Half share of profit … from Y.E. 2002 to Y.E. 2009’^[23] – which the Defendant signed to confirm his approval and the Plaintiff signed to confirm her receipt.”

25.Mr Bernard Man, SC, who appeared for Mr Chiau on appeal and below^[24], submitted that the contention in §10(5) of the notice of appeal is a departure from the version run at trial and such “fundamental recast” of the plaintiff’s case plainly offends the “state of evidence bar” in Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 at §§37 to 39 and must be wholly impermissible. This new case is also wholly unpleaded.  We agree with him.

26.The contention in §10(5) of the notice of appeal is that Ms Yu’s entitlement to payment under the Oral Agreement was not limited to one of the two situations as pleaded in RASOC being the Actual Sale Term and the Notional Sale Term, but might arise “upon demand and irrespective of whether or not the Defendant’s net profit had been liquidated or realised by sale” as demonstrated by the “post-Discussion conduct” in §§7(8) and (11) of the notice of appeal. According to §7(8), payment of 10% profit was made in respect of an “unsold investment which the parties recognised as having been successful without being the subject of any Defendant’s sale transaction.”  This alleged term is clearly outside the ambit of the Actual Sale Term and the Notional Sale Term.  As for §7(11), it does not appear to us to support the contention in §10(5) that entitlement to payment might arise upon demand irrespective of whether profit had been liquidated or realised.  This might be due to the misconception that the document for Payment 7 referred to in §7(11) was in relation to House 12 when that was not the case.

27.Mr Barlow contended that the construction of the Oral Agreement advanced in §10(5) was pleaded in RASOC.  He pointed to §7 of RASOC which read:

“Alternatively to paragraphs 3-6 above, an agreement on the same terms (i.e. those pleaded at paragraph 3, 4 and 6 above) was made by conduct, by reason of the parties’ course of dealing pleaded at paragraphs 8 to 11 below. Except where the context requires otherwise, references to ‘the Agreement’ should be taken to include, in this alternative, this agreement made by conduct.”

28.We do not think this paragraph would assist him. The alternative case pleaded was “an agreement on the same terms (ie those pleaded at paragraph 3, 4 and 6 above)” was made by conduct.  It was not an alternative case of an agreement made by conduct on terms different from or in addition to the terms pleaded in §§3, 4 and 6 of RASOC.  Besides, it was pointed out in the Judgment at §234 that the alternative case pleaded in §7 of RASOC (that an agreement in the same terms as the Oral Agreement was made by conduct) was “not really pursued at trial (even if not formally abandoned)”, that this alternative case was “always at best a very difficult case to make out, and focus was understandably on the Oral Agreement”.  The alternative case was therefore formally rejected by the judge.

29.The seventh attempt to reformulate the case of Ms Yu on the Oral Agreement in the notice of appeal must be rejected.  Her claim in respect of House 12 could only rest on the Notional Sale Term, as it must be accepted there has not been an actual sale to date.

30.On this basis alone, the appeal in respect of her claim regarding House 12 must fail, for the reasons given by the judge as summarised at the outset of this judgment.  There is no appeal against the judge’s finding of fact that it was always Mr Chiau’s intention to retain House 12 for his own use from the time he acquired the Skyhigh Property. Even if the Oral Agreement were made and even if it were legally binding, House 12 was not an “investment” within the Oral Agreement for which Ms Yu was entitled to be paid a 10% profit.  And there could have been no profit under the Notional Sale Term, in light of the finding that Mr Chiau had decided to live in the house to be built from the time he successfully bid for the Skyhigh Property.

31.Mr Barlow advanced other grounds to challenge the dismissal of the claim based on House 12.  These other grounds are in common with the claim based on the BH Properties and the Fund and will be considered below.  But insofar as the claim in respect of House 12 is concerned, this must fail on the basis as mentioned above, regardless of all his other contentions.

The claim based on the BH Properties and the Fund

32.The grounds of appeal advanced to challenge the crucial findings – that there was no Oral Agreement as alleged and the conversation said to give rise to the Oral Agreement was not intended to be legally binding – are prolix and discursive.  Much time and costs must have been incurred in the preparation of the grounds and for the opposing side to digest the same.  It is not helpful to make lengthy submissions in the notice of appeal.  We do not propose to deal with each of the contentions made except the salient ones.  We will group the arguments under the topics mentioned below for ease of analysis.  

(1) General criticisms regarding the assessment of evidence

33.The principles for the appeal court to disturb the findings of fact of the trial judge are well settled.  Palpable errors, whether of law or of fact, must be identified, and they must be sufficiently material to undermine the conclusions of the trial judge.  In the absence of material errors, an appeal court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified.  What matters is whether the decision is one that no reasonable judge could have reached.  That the judges in the appeal court may have reached a different conclusion is not a ground for intervention.

34.The principles for appellate intervention apply also to inferences of fact drawn from primary facts (unless the finding is based purely on inferences or otherwise has nothing to do with the witnesses’ demeanour or the trial judge’s having received the evidence at first hand), and findings of mixed fact and law, or an issue on which the judge had to come to a judgmental conclusion after taking a number of factors into account.  The correct approach in reviewing such a conclusion is to treat the judge’s decision with utmost respect, and refrain from interference unless satisfied that it proceeded upon some erroneous principle or was plainly wrong.  It is similar to an appeal against an exercise of discretion^[25].

35.Mr Barlow complained that the judge had failed “adequately or comprehensively” to identify the “relevant factual context”, being the matters set out in §5 of the grounds of appeal.  It was then asserted in §6 that within that context, “there was nothing inherently unlikely” that the Oral Agreement was made.  Complaint was made in §7 that the judge erred in not undertaking “adequate or comprehensive analysis” of the “post-Discussion conduct” of the parties, and in brushing aside the plaintiff’s submissions including the contention that whilst the parties maintained a “romantic unmarried relationship”, Mr Chiau “consistently exhibited a parsimonious nature” and “exploitative tendencies” towards Ms Yu.  §8 complained that the judge failed to place “any reliance upon” or “recognise the significance of” various matters alluded to in the Judgment (being the evidence of Mr Hu, the evidence of May and Brenda regarding the accounting records of Mr Chiau’s personal investments, Mr Chiau’s inability to recall events, his “post-Discussion conduct” and his failure to call an estate agent Dicky Tsoi to give evidence).  §9 asserted that by reason of the aforesaid complaints, the dispute should be resolved in Ms Yu’s favour and the judge was wrong not to conclude that the factual context and subject of the discussion which gave rise to the Oral Agreement was of a “commercial character”.  §10 contended that the meaning of the words used in the discussion being “recommended” and “successful investments” is unambiguous and the form of words used in the discussion and their commercial purpose was clear.

36.The above submissions are not valid in law.  The “relevant factual context” in §5 is a selective presentation of the findings in the Judgment, they were shown in the light of the plaintiff’s interpretation of the events and without regard to other findings and matters considered by the judge.  The complaints in §§5, 7 and 8 are in substance complaints that the judge failed to give as much weight as the plaintiff contended was appropriate, as the judge was clearly aware of those matters and had mentioned them specifically in the Judgment.  How evidence should be assessed and considered against other evidence and what is the appropriate weight to be given are matters entirely for the trial judge.  In the absence of identifiable errors that are sufficiently material to undermine the judge’s conclusions, there is just no basis for the appeal court to intervene.  No palpable error of the judge has been identified (we will deal with the alleged errors of law in the subsequent paragraphs).  The contentions in §§6, 9 and 10 must be rejected.

37.Save for evidence relating to subsequent conduct, we do not propose to dwell on details regarding other matters for which it was said that the judge failed to analyse adequately or comprehensively.  They have been addressed in the written submissions of Mr Man, with which we agree.

(2) Subsequent conduct

38.The judge has clearly recognised that for the purpose of determining the parties’ intention at the material time of the Oral Agreement in 2002, evidence of their subsequent conduct is admissible.  He noted “the fact that the transaction was performed on both sides may point to an intention to enter into legal relations, and the same might apply to partly executed transactions”^[26]. Significantly, he also mentioned that evidence of subsequent conduct and that the transaction was performed “is but one factor in the consideration of the question, the answer to which will, of course, very much depend on all the other circumstances (including, for example, whether there was a commercial context).”^[27]

39.The judge has cited RTS Ltd v Molkerei Alois Müller GmbH & Co KG [2010] 1 WLR 753 at §54 in which Lord Clarke of Stone-cum-Ebony JSC, who was giving the judgment of the Supreme Court, referred to what was said to be a conflict between the approach of Steyn LJ in G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 at 27^[28] and that of Robert Goff J in British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 at 510 to 511, and expressed disagreement there was any conflict.  Lord Clarke went on to say as follows:

“Each case depends upon its own facts. We do not understand Steyn LJ to be saying that it follows from the fact that the work was performed that the parties must have entered into a contract. On the other hand, it is plainly a very relevant factor pointing in that direction. Whether the court will hold that a binding contract was made depends upon all the circumstances of the case, of which that is but one. The decision in the British Steel case was simply one on the other side of the line. …”

40.On appeal, Mr Barlow submitted that the judge appeared to have ignored the principles concerning contract formation and performance stated in the Percy Trentham case at 27^[29] and applied in Euro Search (Hong Kong) Ltd v Snow Lake Capital (HK) Ltd at §§33 to 36. For good measure, he invoked the equitable doctrine of part performance with quotations from Kingswood Estate Co v Anderson [1963] 2 QB 169 at 181 to 182; Steadman v Steadman [1976] AC 536 at 540G, 541E to 542A, 558E to G, 570E to H; World Food Fair Ltd & Anr v Hong Kong Island Development Ltd [2005] 1 HKLRD 665 at §§7, 14, 107 to 110^[30]; and Ng Yuk Pui Kelly v Ng Lai Ling Winnie (Executrix) & Ors [2021] HKCA 724 at §§33 to 40. Reliance was also placed on cases involving collateral oral warranties in J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 at 1081F to H, 1083D to H and 1085E; and Bank of China (Hong Kong) Ltd v Fung Chin Kan (2002) 5 HKCFAR 515 at §§55, 69 to 71.

41.It is clear that the judge has not made any error of law.  He was rightly guided by the approach of Lord Clarke in RTS Ltd.  The fact that some performance had subsequently occurred was a relevant pointer to an intention to enter into legal relations, and was a factor to be taken into account with other relevant considerations, such as the setting and purpose of the oral discussion^[31], the nature and tone of the conversation^[32], the lack of commercial sense in the terms discussed^[33], the vagueness of the language used^[34], the contrast with the formal written agreement in the Loncham Agreement and the various written amendments to it^[35]. The judge was entitled to give such weight as he thought fit in evaluating the importance of the factor of subsequent conduct against the other relevant factors and in coming to a judgmental conclusion after his evaluation of all relevant factors.  That being the case, the principles for appellate restraint apply and the appeal court should not interfere with his conclusion in the absence of any material error which would warrant intervention as in the situation of an appeal against an exercise of discretion.

42.The judge also noted that the Percy Trentham case and the British Steel case were “factually very different from the current case”.  Mr Barlow’s quotations from cases of statements which were made in totally different contexts, do not assist the plaintiff’s case at all.  The present situation is far removed from the circumstances in which the equitable doctrine of part performance may be invoked to enable proof of a parol agreement to be given where it would be fraudulent to rely on the statutory requirement for a sufficient memorandum in writing for a contract for the disposition of land.  Nor do we think the situation where parol evidence may be admissible to establish a collateral warranty or contract external to the main contract in writing is in any way comparable.  

43.The judge considered in detail the matters relating to subsequent conduct including Payments 1 to 8 to Ms Yu from May 2007 to 2011^[36]. After a thorough analysis of the evidence and the submissions, he came to the view that the payments “point strongly, on an objective basis, to the making and receipt of personal payments, consistent with the provision of gifts, rather than payment of consultancy fees calculated as a profit share due under and arising from a legally binding consultancy contract”^[37].  Mr Barlow argued to the contrary and set out various matters in §7 of the grounds of appeal to support his contention that the “post-Discussion conduct” should lead to a contrary conclusion.  We agree with Mr Man that this challenge is quite hopeless.

44.All of the matters set out in §7 of the grounds have been mentioned in the Judgment and most of them were the subject of submissions made to the judge on behalf of Ms Yu.  Repeating submissions rejected by the judge and giving the plaintiff’s own take on the evidence is not the proper way to challenge the factual findings of the judge, who was clearly entitled to form the views he did as to the relevance, significance and weight of the evidence.  The judge had given cogent reasons for the views he reached.  He had explained why the documents relating to the payments are consistent with Mr Chiau’s case.  He was entitled to accept the evidence of Brenda and Mr Chiau about the documents, including the reason why “income and expenditure statements” were generated by Brenda^[38] and her adoption in those documents of Ms Yu’s descriptions such as “consultancy fee”, “profit-sharing” and “commission”^[39]. Contrary to Mr Barlow’s contention that the 10% profit share in the eight payments was precisely assessed, the judge found that calculations as to the 10% were “loose” and the explanation for Payment 4 and then Payment 6 makes “little commercial sense”^[40]. We do not propose to repeat each of the reasons given in those paragraphs of the Judgment as mentioned in the footnotes to the foregoing paragraph which would answer each of the contentions raised in §7 of the grounds.  We find no palpable error in the assessment of the evidence relating to subsequent conduct.

45.There is no proper basis to challenge the judge’s inference from primary facts that Ms Yu was willing to assist Mr Chiau in his personal investments because of her romantic relationship with him and that she was happy to accept the level of remuneration provided for in the Loncham Agreement (and its subsequent variations) because of that relationship. The judge also took into account that Ms Yu had sufficient private means not to have to worry greatly over her income generated by employment^[41]. The judge has put it neatly in this way: “As was perfectly natural, she wanted to help and, as was also perfectly natural, he was happy for her to do so.”^[42]

(3) Burden of proof

46.It was contended in §§13 and 14 of the grounds of appeal that the judge had impermissibly reversed the onus of proof and erroneously required the plaintiff to disprove the defendant’s plea that he had no intention to create any contractual or legal obligation vis-à-vis the plaintiff.  In support of the proposition that the onus is on the party who asserts that no legal effect was intended and the onus is a heavy one, Edwards and Skyways Ltd [1964] 1 WLR 349 at 355 and New World Development Co Ltd & Ors v Sun Hung Kai Securities Ltd & Anr (2006) 9 HKCFAR 403 at §14 were cited. Both cases concerned agreements of a commercial character.

47.In §15 of the grounds, it was contended that the judge erroneously failed to conclude that the discussions giving rise to the Oral Agreement involved “commitments of a commercial character” and an objective observer would have concluded that the Oral Agreement, like the Loncham Agreement, was of a commercial character.

48.The above contentions are clearly without merit.

49.The judge had summarised the relevant legal principles correctly^[43]. The presumptions mentioned in the cases are presumptions of fact, not of law, and are rebuttable.  The presumptions of fact in the family context (Jones v Padavatton; Ho Lai King v Kwok Fung Ying & Anr) and the commercial context (Edwards and Skyways Ltd; New World Development Co Ltd & Ors v Sun Hung Kai Securities Ltd & Anr) merely shift the evidential burden.  So in the family context, the onus lies on the party who contends there was intention to create legal relations to establish such an intention.  Conversely, in the commercial context, the onus lies on the party who contends there was no intention to create legal relations to establish the absence of such intention.  The legal burden of establishing there was a binding agreement in that the parties had an intention to be bound does not shift, it remains on the plaintiff who asserted that the Oral Agreement was a legally binding agreement.  Before the judge, it was rightly accepted by Ms Yu’s counsel that “if Ms Yu is to succeed in her claim, she bears the burden of proving the existence of the Oral Agreement and that it was intended to be legally binding”^[44].

50.We agree with the judge that it is not profitable to consider the strength of any presumption of fact, nor will considering who bears the onus of proof be “generally determinative, or even very helpful”.  See also the judgment of the High Court of Australia in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at §26, doubting the utility of using the language of presumption in this context.  The question of intention to create legal relations is simply a question of fact, to be inferred from the terms of the agreement and the surrounding facts and circumstances.  A good illustration is the case cited by Mr Man of an agreement in an allegedly commercial context in Hadley & Ors v Kemp & Anr [1999] EMLR 589 at 623 to 624.  It was held that despite the important business elements in the mutual relations of the members of a pop group, who were at the time a close-knit group of friends, the decision of a member to share his publishing income was not made with the intention to create legal relations.  What would satisfy the court in a particular case must depend on all the circumstances.

51.Regarding the context of the relationship of the parties, the judge accepted the submission made on behalf of Ms Yu that their relationship covered a spectrum of matters, at one end might be the romantic relationship and at the other the commercial relationship and how they dealt with each other on any particular aspect might depend on the point of the spectrum on which that aspect fell.  Hence, the judge did not treat the romantic or commercial sides of the relationship as ‘black or white’.  Rather, he treated them as being different and fluid aspects of their relationship, where the ‘balance’ between them may have fluctuated^[45]. The judge did not apply any presumption of fact but considered the totality of the evidence in arriving at the conclusion that there was no intention to create legal relations^[46].

(4) Other alleged errors

52.In §17 of the grounds of appeal, it was contended that the judge took into account five matters which the law deems irrelevant being: (1) whether the Oral Agreement was void for uncertainty when no such plea had been made in the defence; (2) the unpleaded trade customs of estate agents when the plaintiff was not an estate agent; (3) the adequacy of the consideration supporting the Oral Agreement, which should not be a concern of the court; (4) inapplicable case law concerning married couples and/or blood relations; and (5) whether the plaintiff had paid tax on the profit share of 10%.

53.None of the contentions are of merit.

54.As to (1), the judge did not find that the Oral Agreement was void for uncertainty.  He took into account the vagueness of the language used in the discussion and important terms that were missing as relevant factors in determining whether an agreement was made and whether there was an intention to be bound.  There is nothing wrong with his approach.

55.In respect of (2), the discussion relating to the situation under which estate agents are remunerated for bringing about a transaction, is relevant to the contention of “effective cause”, namely, what is meant by an investment “recommended” by Ms Yu to Mr Chiau under the terms of the Oral Agreement for which she was to receive a 10% share of the profit.

56.As for (3), the judge did not find that the consideration for the Oral Agreement was insufficient or inadequate.  He took into account the lack of commercial sense of the alleged agreement as suggesting that there was no intention to create legal relations and whether it was objectively likely that the parties had made a commercial arrangement.  We see nothing wrong with this.

57.The case law on married couples and blood relations in (4) are relevant to romantic relations by analogy.

58.As to (5), the judge took the view that the tax treatment of the eight payments by the payer and payee and the non-payment of tax is relevant as these matters indicate strongly, on an objective basis, that nobody involved in these arrangements considered them to be truly commercial or in any way binding^[47]. We agree with the judge.  We fail to see how Ms Yu could rightly think she did not need to pay tax because she considered that she was making profits by herself from investing in stocks and properties, when obviously she was not.  And we do not think the statement of Megaw J in Edwards and Skyways Ltd at 357 provides any support for Mr Barlow’s arguments.  The statement cannot be regarded as a legal proposition that tax liability would be an irrelevant factor in considering whether there was a legally enforceable right to payment. It must be read in the context of that case. 

59.In §20(2) of the grounds of appeal, the plaintiff sought to rely on Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334 at §§83 to 87 in support of the contention that the judge was wrong not to hold the defendant to the consequences of the accounting records regarding Payments 1 to 8 including some documents which bore the defendant’s signature.  The reliance is misplaced.  The authority referred to applies to signing legally effective documents, which is not the case here.  The documents signed by Mr Chiau at most relate to his subjective understanding (Blue v Ashley at §64).  The judge had thoroughly considered the documents and was entitled to give them such weight as he thought fit^[48].

60.The other contentions in §20 of the grounds of appeal are plainly insufficient for this court to interfere with the crucial findings that there was no Oral Agreement as alleged and no intention to enter into legal relations.  We agree with Mr Man’s submissions in answer to these contentions and will not repeat them here. 

(5) Effective cause

61.The contention in §§21 to 24 of the grounds of appeal is that the judge was wrong in law in upholding the defendant’s plea that the Oral Agreement would require Ms Yu’s “recommendations” to be an “effective cause” for her to be entitled to payment.  Complaint was made that the judge failed to explain whether he was upholding that plea as a matter of construction of the Oral Agreement or by inferring an implied term to the agreement.

62.There is no substance to these contentions.  The “effective cause” requirement may arise by way of construction of the terms of the agreement, or by way of implying such a term into the agreement.  The judge rejected Ms Yu’s contention that her entitlement to the profit share does not depend on her recommendation being an effective cause of Mr Chiau’s acquisition of the subject asset, as such a contention would give no natural meaning to the need for a “recommendation”, stripping away any logical or causal connection between the contractual effort required for a contractual reward and that reward^[49]. We think that must be right.  The result of the reasoning would be the same, whether it is by way of the construction of terms or the implication of terms.  Ms Yu did not challenge the findings of fact that her “recommendations” did not bring about the investments in the Skyhigh Property and the BH Properties^[50].

63.For all the above reasons, the contentions in the grounds of appeal are of no merit.  We therefore dismissed the appeals brought by Ms Yu with costs.

Mr Barrie Barlow SC and Mr Chan Pat Lun, instructed by Lee Law Firm, for the Plaintiff (Appellant)

Mr Bernard Man SC and Mr Keith Lam, instructed by Anthony Siu & Co, for the Defendant (Respondent)