Read the full judgment text of CACV 14/2021 and CACV 15/2021 on BabelCite. This Court of Appeal judgment was delivered on 7 September 2021 before Kwan VP, Barma JA and Au JA.
Civil law – contract – oral agreement – intention to create legal relations – formation of contract – appellate review of findings of fact – Loncham consultancy agreement – subsequent conduct – burden of proof – effective cause – implication of terms – notional sale – state of evidence bar on appeal – Court of Appeal – The plaintiff, Ms Yu, and the defendant, Mr Chiau (a famous film actor, producer and director), were in a long romantic relationship from 1997/1998 to March 2010, during which Ms Yu assisted Mr Chiau with his personal investments; this assistance was partly formalised in the Loncham Agreement (1 April 2002) between Loncham Ltd and The Star Overseas Ltd, which was amended seven times but never to record any profit-sharing term. The plaintiff alleged that around Christmas 2002, in a telephone call and SMS exchange, the defendant orally agreed to pay her 10% of net profits on all successful investments she recommended to him. Between May 2007 and 2011 she received eight payments totalling over HK$19.5 million, calculated approximately at 10% of profits on certain property and share investments; these were paid largely by Mr Chiau's sister May from her personal account and were not declared as taxable income. The main claim in HCA 1584/2012 was for 10% of profits on House 12 (12 Pollock's Path, The Peak), a house on the Skyhigh Property Mr Chiau acquired in 2004 and redeveloped, intending from the outset to retain for self-use. A second claim in HCA 1243/2017 concerned three houses of The Beverley Hills development in Tai Po and a private equity investment in the Peregrine Greater China Capital Appreciation Fund LP. After a ten-day trial, Coleman J dismissed both actions on the bases that the Oral Agreement as alleged was not made, that there was no intention to create legal relations (the discussion being a promise of gifts in a romantic relationship), that House 12 was not an 'investment' within any such agreement, that the Notional Sale Term should not be implied, and that the 'effective cause' requirement was not satisfied in respect of the Skyhigh Property and the BH Properties. On appeal, the plaintiff sought to raise for the first time a new construction that the 10% was payable upon demand irrespective of whether profit was realised, but the Court of Appeal held this to be a fundamental recast of her case, unpleaded and offending the state of evidence bar in Flywin Co Ltd v Strong & Associates Ltd. The Court of Appeal applied the principles in McGraddie v McGraddie and Anderson v City of Bessemer that the trial is the 'main event' and findings of fact and mixed fact and law will not be disturbed absent material error. The judge correctly applied the rebuttable presumptions of fact and the legal burden on the party asserting a binding agreement (Edwards and Skyways Ltd; New World Development; Ermogenous). The trial judge was entitled to weigh the subsequent conduct of the eight payments against the romantic context, the contrast with the formal Loncham Agreement, the vagueness of the language, the lack of commercial sense and the tax treatment of the payments, and to conclude the payments were consistent with personal gifts rather than a binding consultancy commission. The 'effective cause' requirement was correctly part of the agreement and Ms Yu's recommendations did not bring about the investments in the Skyhigh Property or the BH Properties. The court also held that the plaintiff had no sensible date for any breach in respect of the un-liquidated Fund. The Court of Appeal dismissed both appeals with costs to the defendant, with a certificate for two counsel.
Legal issues: Whether the new construction of the Oral Agreement (entitlement to 10% upon demand irrespective of liquidation) could be raised on appeal · Whether the Oral Agreement was made and intended to create legal relations · Whether the Notional Sale Term should be implied into the Oral Agreement · Whether the trial judge impermissibly reversed the burden of proof on intention to create legal relations · Whether the trial judge took into account legally irrelevant matters · Whether the 'effective cause' requirement was correctly imposed for entitlement to profit share
Outcome: Appeals dismissed in both CACV 14/2021 and CACV 15/2021; the trial judge's dismissal of the plaintiff's claims for some HK$80 million and other reliefs stands.
Cited by 34 cases · Cites 6 cases