Sun Legend Investments Ltd v. Ho Yuk Wah David and Others

FACV No. 14 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 14 OF 2010 (CIVIL)

(ON APPEAL FROM CACV NO. 242 OF 2009)

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HCA 1212/2002

Between:

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AND

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AND

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AND

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(Consolidated by the Order of Master Woolley dated 31 October 2003)

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Date of Hearing : 12 May 2011

Date of Judgment : 31 May 2011

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J U D G M E N T

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Mr Justice Bokhary PJ :

1.I agree with Mr Justice Litton NPJ’s judgment.

Mr Justice Chan PJ :

2.I agree with Mr Justice Litton NPJ’s judgment.

Mr Justice Ribeiro PJ :

3.I agree with Mr Justice Litton NPJ’s judgment.

Mr Justice Litton NPJ :

Introduction

4.This case concerns fees for services rendered by a firm of solicitors to a group of developers between mid-December 1994 and mid-November 2001.  The claims were first set out in two bills of costs rendered by the firm to their clients dated 29 November 2001.  They went back many years, to the time when the firm was first established, and related to two building projects in Mainland China.  One was in Dongguan (“the Dongguan project”), the other in Beijing (“the Beijing project”).  The two bills of costs were later amended.  They form nevertheless the focus of the solicitors’ claims in the case.  Nothing turns on the later amendments.  They set out the services rendered and the disbursements made by the firm, for a period spanning nearly seven years.  In each case there was a deduction for “monies received from purchasers/mortgagors” (that is to say, fees collected from purchasers and mortgagors in relation to the units handled by the solicitors).  In relation to the Dongguan project the net amount claimed was $4,220,706.  In relation to the Beijing project it was $6,316,013.

5.The solicitors say that the sums claimed constituted the shortfall of fees owed, computed on a time-spent basis.  The developers say that nothing was owed because all fees and disbursements on the two projects were for the account of the purchasers.

6.At the heart of the case at trial was this issue: What were the terms of the retainers and in particular the arrangement regarding the payment of solicitors’ costs and disbursements in relation to those two developments?

7.The burden was, of course, on the solicitors to establish the terms of their retainers.

Background Facts

8.The story goes back to the 1980s; to the time when the Mainland authorities first relaxed the rules concerning the private development and ownership of landed property, making such commercial developments possible.

9.Mr David Ho (the principal of the firm David Y W Ho & Co) was then a partner in the large international law firm Baker & McKenzie.  He became close friends with Mr Peter Cheng, son of the chairman of the New World group of companies and a director in that group.  Mr Ho was part of the China property and conveyancing team in Baker & McKenzie.  The New World group of companies was then showing a strong interest in branching out into real estate development in the Mainland. 

10.The sale and purchase of real estate in Mainland China was, at that time, an entirely new field for solicitors in Hong Kong.  It involved rules and regulations, practices and procedures quite different from those with which solicitors were familiar in Hong Kong.

11.One of the first local firms to be involved in such work in the Mainland was Messrs. Yung Yu & Yuen.

12.Mr Ho was anxious to secure work for Baker & McKenzie from Mr Cheng and the New World group, particularly for the highly lucrative work of conveyancing in relation to large scale developments in Hong Kong.  At that time the Law Society rules required solicitors to charge scale fees in relation to each piece of work, such as the drawing up and execution of agreements, legal charges, assignments, deeds of mutual covenant, etc.  For a high-rise development involving the duplication of such documents hundreds of times, the fees collected from the purchasers could amount to tens of millions of dollars for a single development. 

13.Thus it was that Mr Ho sent to Mr Peter Cheng (and his brother Mr Stewart Cheng) a letter dated 4 October 1991 which became the focus of the case at trial and in the Court of Appeal.  This is one of the curiosities of this case.  In terms, when read as a whole, the letter seems aimed principally at cultivating the relationship with the New World group.  It outlined in general terms a “fee-offsetting arrangement” (FOA) whereby the benefit of the huge fees earned from conveyancing in Hong Kong might be shared with the New World group without offending the Law Society rules.  Eventually, the New World group, with joint venture partners, embarked on a very large residential development in Dongguan, in the Mainland.  The units were for sale to purchasers in Hong Kong.  Baker & McKenzie were retained as solicitors for that project, in February 1992. 

14.About 1½ years later, Baker & McKenzie, again through Mr Cheng and Mr Ho, were instructed to act for the developers in the Beijing project.  This was a large multi-purpose complex in Beijing, comprising a shopping arcade, underground carparking, two office towers, a hotel and service apartments.  The service apartments and units in the office blocks were for sale in Mainland China and overseas. 

15.The two projects were still on foot when the legal proceedings began in 2002.

16.In December 1994 Mr David Ho set up his own firm David Y W Ho & Co (“the firm”) and almost the entire China property team at Baker & McKenzie left and joined the new firm.  It is common ground between the parties that the retainers for the two Mainland projects were transferred to Mr David Ho’s firm upon the same terms. Thereafter the firm continued to render legal services with regard to the two projects until the end of October 2001 when the retainers were terminated.

17.As mentioned earlier, the two bills of costs sued upon in this case were issued at the end of November 2001.  This followed a meeting between Mr Ho and Mr Cheng which took place in a restaurant in Lan Kwai Fong on 23 October 2001.  At trial, there was a dispute as to the circumstances of that meeting.

18.Mr Ho’s evidence was to this effect: He asked for the meeting to discuss the outstanding fees in relation to the two projects.  At the restaurant he allegedly told Mr Peter Cheng that there were substantial time costs which had not been offset by fees received from purchasers.  He asked if some of the outstanding time costs could be paid to ease the firm’s cash flow.  Mr Ho said that Peter Cheng agreed to consider this, but that it was a difficult time for both him and the New World Group due to the recession.  Mr Ho said in evidence it was clear throughout the meeting that Peter Cheng recognized the obligation to pay those costs.

19.Mr Peter Cheng’s evidence was that he had heard at that time that Mr Ho was in trouble and wanted to remove the two projects from Mr Ho’s firm.  So he told Mr Ho that the two projects had been completed and that there would not be many more transactions in the future.  He told Mr Ho that the retainers should be terminated.  Mr Cheng’s evidence was that Mr Ho told him there were no outstanding financial matters in relation to the two projects.

The proceedings

20.The proceedings were commenced by the developers in 2002 seeking payment by the firm of the purchase monies held by the firm in its trust account in respect of the two projects. These were never denied by the firm.  But the firm claimed the right to offset those sums by the outstanding legal costs by way of defence, and counterclaimed for the balance.  There were in fact two sets of proceedings, one relating to the Dongguan project, the other to the Beijing project.  They were consolidated, and heard by Saunders J in June and July 2009.  It was common ground throughout the case that the terms of the Dongguan retainer were later agreed as the terms of the Beijing project retainer; these were then simply taken over by the firm.  Hence, a determination of the terms of the Dongguan project retainer resolved the entire case.  By his judgment of 18 September 2009 the judge, having found that the developers had lost the right to tax the bill, awarded $4,979,111.28 for the Dongguan action to the firm and ordered that the bill for the Beijing action be taxed and paid upon taxation.

21.On appeal to the Court of Appeal (Rogers VP, Le Pichon and Kwan JJA) the developers’ appeal was allowed, Saunder J’s judgment was set aside and judgment was entered in favour of the developers in respect of their claims.  Hence this appeal by the firm (or, perhaps more accurately, by the remaining partner of the firm).

The Pleadings

22.The case for the firm as pleaded went through several amendments.  As originally pleaded it was this:

“5. In the early 1990s Peter Cheng on behalf of the New World Development Co. Ltd and the New World Group discussed with [Mr Ho]…about retaining [Baker & McKenzie] as solicitors in relation to the several projects in Mainland China of real estate development …

6. As a result of the aforesaid discussions, it was agreed that [Baker & McKenzie] would be paid for their services rendered on time spent basis at the usual rate charged by [Baker & McKenzie] provided that any costs paid by the purchasers of units in the respective projects would be applied to set off such fees payable to [Baker & McKenzie].”

23.The final version of the firm’s pleaded case is as follows:

“4. In the early 1990s, Peter Cheng on behalf of New World Development Co. Ltd and the New World Group discussed with [Mr Ho], then a partner and on behalf of Baker & McKenzie about retaining [Baker & McKenzie] as solicitors in relation to the several projects in Mainland China of real estate development…..

5. As a result of the aforesaid discussions, it was agreed that [Baker & McKenzie] would charge New World Development Co. Ltd and the New World Group for the professional work rendered or to be rendered in connection with the projects on a time-spent basis, but New World Development Co. Ltd and the New World Group would procure the purchasers for the development projects to pay the legal fees and disbursements of New World Development Co. Ltd and/or the New World Group as the case may be for the sale of units in the projects.  [Baker & McKenzie] would then seek first to recover its time costs from the fees paid in this way by the purchasers of units in the projects, and so not seek payment from New World Development Co. Ltd and/or the New World Group for its time costs so long as the amounts received from purchasers were sufficient to cover [Baker & McKenzie’s] actual time costs for the sales and pre-sales incurred ….. [Baker & McKenzie] may agree to carry over the surplus or some of it.  However, if the previous firm was unable to recover in full from the purchasers its actual time costs, New World Development Co. Ltd and the New World Group would have to pay [Baker & McKenzie] such outstanding amounts in respect of the services rendered at [their] usual hourly rates.”

24.It was then pleaded that the parties orally agreed that the terms agreed with Baker & McKenzie would apply in respect of the firm’s retainer, when the firm took over the projects in December 1994.

25.In defence to the firm’s claim, the developers pleaded:

(a)   They would not be charged or be liable for any fees or disbursements in connection with the sale of units in the project.

(b)   The fees and disbursements arising from the sale and purchase of units in the project would be paid by the purchasers.

26.It was common ground that, whatever the precise arrangement regarding fees and disbursements arising out of the handling of the projects might have been, such arrangement was orally concluded by discussion between Mr Peter Cheng and Mr David Ho.

The Difficulty in the Firm’s Pleaded Case

27.As can be seen from the firm’s pleading in para. 23 above, the arrangement (orally made) included, so the firm averred, this provision: That Baker & McKenzie may agree to carry over the surplus [fee] or some of it.  This was some kind of fee-offsetting arrangement which, in some circumstances, might benefit the client.  What then precisely was the arrangement, which the firm had to prove to the satisfaction of the trial judge, before it could recover the amounts on the two bills of costs?  And how had this been orally conveyed to the client back in the early 1990s so that the client understood clearly the terms of the retainer?

28.As far as Mr Peter Cheng was concerned his position was simple.  By the time the Dongguan project came up for discussion with Mr Ho, a Mr Henry Yuen had been appointed the project manager for Dongguan.  His brother, Mr Philip Yuen, was a partner in the firm Yung Yu & Yuen.  That firm had experience in handling real estate development in Mainland China.  That firm was willing to handle the Dongguan project on the basis that they would do the work and would look only to the purchasers and not the developers for their costs.  Full stop.  If Baker & McKenzie were willing to handle that project on the same basis, he would consider it right for the New World group to retain Baker & McKenzie to do the job.

29.So we have this stark situation: On the developers’ pleaded case, the arrangement, orally concluded, was plain.  On the firm’s case, as finally pleaded after various amendments, it was obscure.

30.It can be seen from Saunder J’s judgment that the learned judge was casting around for some “evidence in documentary form to establish the basis upon which fees were to be paid in respect of work undertaken in relation to the retainer in respect of the Dongguan project…”(§67).  He found it in the letter of 4 October 1991, referred to in para. 13 above.

31.Under the heading “The Central Issue” he stated the firm’s case in this way (§71):

“71. The case for the Firm is that it had been agreed between Peter Cheng of behalf of NWD and its subsidiaries, and David Ho, initially on behalf of Baker & McKenzie, and subsequently in his own capacity with the Firm, that the Firm’s time in relation to instructions received on either project would be charged on a time basis, with the cost of the time being met pursuant to the FOA, as set out in paragraph 22 above.”

32.  In §22 he reproduced in full the letter of 4 October 1991.  In §24 he said there had been no written response to the letter but it was common ground that shortly thereafter in February 1992 Mr Cheng instructed Baker & McKenzie to set up a complex of holding companies, shareholder agreements etc. in relation to the Dongguan project.  In §25 he added:

“Other than the letter of 4 October 1991, there is no documentary evidence to establish the precise terms of the retainer held by Baker & McKenzie in respect of the Dongguan project.”

He reverted to the letter again in §129 where he said:

“129. ….. The only document that could be pointed to by either party that might establish the basis for an agreement was the Baker & McKenzie letter of 4 October 1991. But there was no written reply to that letter. The position of David Ho and the Firm was that that letter set out the terms of the agreement. The position of the developers was that that offer had never been accepted.”

33.  This was, perhaps, in the judge’s mind, where the question of credibility came in: whether Mr Peter Cheng had, despite his denial, orally accepted Mr David Ho’s position; for the question of credibility occupied a very large part of Saunders J’s judgment.

34.  In his conclusion (§273), under the heading “Summary of Findings”, Saunders J said:

“I have concluded as follows:

(i) that the fee offsetting arrangement as set out in the Baker & McKenzie letter of 4 October 1991 was the agreed basis upon which both Baker & McKenzie and the Firm would be remunerated with respect to legal work undertaken on the Dongguan Project and the Beijing Project.”

35.It is therefore not surprising that the Court of Appeal focused the main part of its judgment (on which all three judges agreed) on the letter of 4 October 1991.  They concluded unanimously that the trial judge had misconstrued that letter.  This error of law vitiated his entire judgment: Hence the developers’ appeal was allowed.

The letter of 4 October 1991

36.The events leading up to the letter of 4 October 1991 are these: David Ho, as the judge found, was anxious to secure work from the New World group.  On 27 September 1991 a letter, drafted by Baker & McKenzie’s conveyancing and construction group, was sent over David Ho’s signature to a Mr Michael Fong of New World Hotels International Ltd soliciting conveyancing work for Baker & McKenzie, in relation to large-scale property development in Hong Kong. The proposal put to Mr Fong was a fee-offsetting arrangement, whereby a portion of the conveyancing fees collected from the purchasers of units might be absorbed by fees owed by the group on non-conveyancing work done on their behalf.  The letter gave the example of a development involving 600 units with estimated fees earned on conveyancing documents for those 600 units totalling $21,048,000.  Assuming an agreed apportionment of 40-60 (and this would have to be agreed on a case-by-case basis) this meant that $8,419,200 ($21,048,000 x 40%) by way of “surplus fees” would be available to absorb fees owed by the New World group for non-conveyancing work.  The letter ended by expressing the firm’s enthusiasm “at the prospect of further developing [their] relationship with the New World Group” and their belief that there was an “excellent match” between the group’s legal needs and the services they could provide.

37.This was followed by a meeting on 1 October 1991 between Mr Ho, Peter Cheng and his brother Stewart Cheng.  Then, three days later came the crucial letter.  This was, in effect, an elaboration of the earlier letter; it ended in practically the same terms: enthusiasm at the prospect of further business and belief in the “excellent match” between the group’s needs and the firm’s services.

38.The letter was split into three sections A, B and C.

39.Section A was headed “Basis of Conveyancing Fee-Offsetting Arrangements”.  It explained how, under current arrangements, the scale fees which the Law Society required solicitors to charge for each piece of conveyancing work earned these huge profits: far in excess of the fees that would be earned if calculated on the conventional time basis.  And because the Law Society prohibited any reduction of the scale fees or the giving of rebates, some solicitors now operated a system whereby “a portion of the surplus of scale fees over notional time costs” was allocated to the client “in the form of free advice on other areas of law such as tax planning, construction, finance, litigation or China”.

The letter went on to say that because Baker & McKenzie was a large international firm the “surplus” could be absorbed by providing service not only in Hong Kong but overseas. The letter enclosed a directory showing 50 Baker & McKenzie offices in 10 countries throughout the world.

40.  Section B was headed “Conveyancing Fee-Offsetting Arrangements Proposal”.  It put forward certain initial suggestions and asked for comments.  The suggestions were basically these:

(1) There would be an agreed split on a case-by-case basis.  Within the firm’s agreed portion (the example given in Section C of the letter was 60%) the firm would perform “the full range of conveyancing work normally included in the scale fee”.  The balance would be available to absorb fees for “other non-conveyancing work”.

(2) Given the lead times involved in New World’s substantial property transactions, there might have to be a limit set on the amount of non-conveyancing fees which could be carried forward against an “anticipated surplus, pending the accumulation of an actual surplus.”

(3) As regards non-conveyancing work, the letter says:

“I suggest that non-conveyancing work carried out pursuant to this arrangement is dealt with as follows:

(a) Fees will be incurred in respect of that work at the normal rate applicable at the time it is carried out;

(b) We will endeavour to pre-estimate the level of fees on individual assignments wherever possible, though you will appreciate that such estimates are often difficult and are to be used as guidelines only;

(c) We will regularly inform you of fees incurred against current matters at whatever intervals are convenient to you;

(d) We will bill you in the normal way in respect of any fees incurred in excess of the limit referred to above;

(e) We will ask you to pay disbursements of non conveyancing matters (Counsel’s fees, etc.) as and when they are incurred.

4. Assuming the proposals are acceptable to you I suggest we implement them as soon as possible.  We do not as yet have instructions on any property matters likely to yield a scale fee excess though you mentioned that you had a number of projects in mind.”

41.Section C of the letter was headed “Significant Savings for the New World Group”.  It provided an illustration of how the fee offsetting arrangement might work in practice. It assumed a property development involving 300 units earning total scale fees of $10,524,000.  Assuming the agreed split at 40-60, $4,209,600 ($10,524,000 x 40%) would be available as “surplus fees” to be used by the New World group for “other non-conveyancing legal work”.

Points Arising from the Letter of 4 October 1991

42.The odd thing about this case at trial is that this letter never appeared in the pleadings of either party.  The judge’s understanding of the case for the firm seems to be this: Legal services were always to be paid on a time basis; but the developer’s obligation for those fees might be discharged by the fees and charges paid by the purchasers, under the FOA along the lines of the 4 October 1991 letter; this was an arrangement allegedly concluded between Mr Cheng and Mr Ho orally in about 1991-2, before Baker & McKenzie were retained for the Dongguan project. 

43.But Mr Peter Cheng’s evidence was that he had only a vague recollection of the letter and had never agreed to it.

44.It is not easy to follow the trial judge’s line of reasoning.  The expression “fee offsetting arrangement” is not self-explanatory and, as the letter of 4 October 1991 itself stated in Section A, there were different models of such arrangements used by Hong Kong solicitors.

45.The proposal for a FOA in that letter was simply put forward as an initial suggestion for Mr Cheng’s comment.  It was never in terms an offer capable of maturing into a binding agreement.

46.Even within the fee offsetting arrangement as proposed in the letter, there might be a different “split” from case to case.  If there were no “split” it meant that the solicitors would take 100% of the fees and charges paid by the purchasers. There would then be no “surplus” to be off-set against fees earned on non-conveyancing work done.  There was no suggestion that in the event of a shortfall, the New World group would be charged on a time basis.  That event was simply not imaginable in the context of Hong Kong conveyancing at that time.  As the letter said in Section A:

“Even in the case of the conveyance and mortgage of a single property, the total amount of scale fees payable generally exceeds the fee which would be payable if calculated on the conventional basis by a considerable margin.”

47.  One thing is clear. The entire arrangement as proposed in the letter was predicated upon the supposition that, in Hong Kong, under the scale-fees regime, there would in every case be a huge “surplus”.  The larger the development, the greater the surplus.  The letter simply did not envisage the possibility that, having collected all the scale fees from the purchasers, there could be a notional “shortfall”, were those fees to be measured against what might have been earned had the work done been computed on a time basis.  This was, as Saunders J said in the first paragraph of his judgment, “in the halcyon days when solicitors were able to charge for conveyancing work in accordance with the Law Society of Hong Kong’s scale fees”.

48.How this might be adapted to conveyancing in Mainland China was never explained.  Whilst the various stages of conveyancing in Hong Kong, all attracting Law Society scale fees to be paid by the purchasers, were well understood by solicitors and perhaps by the developers in Hong Kong, this had no application in the Mainland.  There was no suggestion that similar conveyancing practices prevailed in the Mainland.

49.On any view, the letter could not possibly have been the “agreed basis” upon which Baker & McKenzie would be remunerated for their legal work in the Dongguan project. Insofar as the trial judge had found this was so, he was plainly in error.  The Court of Appeal was right to overturn the judgment on that ground. 

50.The position, quite simply, is that apart from Mr Ho’s bare assertion, there was no evidence that the firm was to be paid on a time basis.  The weight of evidence was heavily against that proposition: The parties never catered for a shortfall in the costs, which were all envisaged to be paid by the purchasers, giving the firm as they thought a very healthy profit.  What then is left of the case?

The Alternative case for the Firm

51.As presented to this Court by Mr Denis Chang SC, the solicitor’s case rests thus:  Assuming that the letter of 4 October 1991 was as the judge found the agreed basis of the retainer, under clause 3(a) of that letter, the solicitors could then charge for non-conveyancing work fees “at the normal rate applicable at the time” the work was carried out; whilst accepting that the Court of Appeal had found that the Dongguan bill related wholly to conveyancing work, this was not so in relation to the Beijing bill; the trial judge’s order should be restored at least to the extent that the Beijing bill of costs should be submitted for taxation in respect of the non-conveyancing work and the developers be ordered to pay the sums thus taxed. 

52.Given the fog surrounding the proceedings at trial, it is not clear whether this was one of the ways in which the case was presented at first instance.  It is certainly not the way the solicitors’ case was pleaded.

53.Leaving the pleadings point aside, there are a number of insuperable difficulties:

(1) Clause 3(a) was not intended to stand in isolation.  It was part of a proposal for a fee-offsetting arrangement in the context of Hong Kong conveyancing practice.

(2) Regarding professional services in relation to the sale of property in the Mainland, what precisely does “conveyancing” and “non-conveyancing” work mean?  Para. 5 of the firm’s pleadings (see para. 23 above) refers to fees for “professional work rendered or to be rendered in connection with the projects” which the New World group would procure the purchasers to pay.  In the Hong Kong conveyancing context, this would be clear enough: it meant all those Law Society scale fees which the purchasers would be required to pay.  But how could this be transposed to the Mainland where Law Society scale fees did not exist?  Take the Dongguan bill of 29 November 2001. The first item in that bill was:

“perusing and considering government approval documents in relation to the project”.

Was this conveyancing work?

(3)   Clause 3(b) envisaged the pre-estimate of fees for “individual assignments” and clause 3(c) said that the developers would be informed of such fees incurred at regular intervals.  For seven years the firm rendered no bills to the developers for the two projects. And yet, on their case, there was an accumulating shortfall, based upon their time-costs: The fees received from the purchasers, so they now assert, failed to match the costs computed on a time-spent basis by an ever-increasing margin, amounting at the end of the day to many millions of dollars.  As Rogers VP noted (§13), during this period the New World group were in fact invoiced sums exceeding $11 million for work done: The failure to bill that group for the “shortfall”, if the firm’s case were right, is inexplicable.  Rogers VP in the same paragraph drew attention to two bills rendered and paid in 1998 and 1999 in relation to the cancellation of pre-sale contracts for the Beijing project. This further negated Mr Denis Chang’s case.

(4)   In relation to the Beijing project there was a letter of appointment dated 28 April 1995 from one of the joint-venture partners addressed to the firm which listed the work entrusted to the firm.  This included things like examining “relevant documents such as advertising texts, promotional booklet, instructions to purchasers and so on…”: All to be charged to the purchasers.  How was the firm to implement an FOA based upon a distinction between “conveyancing” and “non-conveyancing” work?

(5)   If the Beijing bill was left to the Registrar for taxation, how was he to distinguish between “conveyancing” and “non-conveyancing work”?

Credibility

54.  What is said above is sufficient to dispose of this appeal.  As can be seen, little turned on the question of credibility affecting the two main individuals in the case, Mr Peter Cheng and Mr David Ho.  But the odd thing is that at trial much of the evidence put before the court concerned just that; particularly Mr Ho’s credibility as a witness.  At §72 the judge said:

“At the end of the day, the issue is simply one of credibility”.

On that basis, he allowed a “concerted attack” to be mounted on Mr Ho’s character and evidence to be adduced for this purpose. Of particular note is the following:

(1) A wholly unrelated action HCA 14674 of 1999 in which Mr Ho was the defendant, against whom judgment had been entered.  In the course of her judgment in that case the Recorder Ms Gladys Li SC said that certain letters in evidence in that case demonstrated “the deviousness of the defendant’s character”.

(2) In another totally unrelated case HCA 1747 of 2000 where Mr Ho was sued as a guarantor and summary judgment proceedings had been launched against him, senior counsel acting for Mr Ho had put up a defence which Deputy Judge Whaley had categorized as “practically moonshine”.

(3) Mr Ho had fled the jurisdiction and resided in Beijing to avoid his Hong Kong creditors in wholly unrelated suits.

55.  Saunders J considered each of these matters and concluded that they did not affect Mr Ho’s credibility in the case before him.

56.  In the Court of Appeal Rogers VP (with whom Le Pichon JA agreed) said this (§48):

“Had the judge below given proper consideration to the [matter] to which his attention had been draw he would inevitably have come to the following conclusions and warned himself:

A. That Mr Ho was a devious character;

B. That Mr Ho was given to raising defences which were practically moonshine and

C. That Mr Ho was prepared to go to the length of disgracing himself and his profession to avoid his legitimate creditors.”

Mr Ho was according to Rogers VP (§47) “not only a coward but disreputable”.

Kwan JA did not associate herself with these remarks.

57.  With respect, I cannot agree with the Vice-President’s approach.  A civil case is a trial of the issues as put before the court.  It is not a trial of the character of the parties.  This is a matter beyond the scope of analysis in a court of law.

58.Courts have always been wary of cross-examination of witnesses as to credit.  Generally speaking evidence of facts and circumstances to show the disposition of a party is inadmissible: see Sankey LJ in Hobbs v. Tinling [1929] 2 KB1 at 50. Far less is it permissible to have the labels “devious character” “coward” etc. created in unrelated proceedings attached to the parties before the court.

59.Whether the trial judge was right or wrong to have allowed evidence bearing upon the three matters referred to in Rogers VP’s judgment (para. 56 above) to be put before him is beside the point.  Having entertained such evidence, the judge was perfectly entitled to reject them as of no relevance.  He could not be faulted in that regard.

60.But nothing turns on this at the end of the day.

Conclusion

61.I would dismiss this appeal and make an order nisi that the firm should pay the costs of the appeal, the order nisi to be made absolute within 21 days of the date of this judgment unless the parties should before the expiration of 21 days lodge written submissions for a different order.

The Rt Hon Lord Millett NPJ :

62.I agree with Mr Justice Litton NPJ’s judgment.

Mr Justice Bokhary PJ:

63.The Court unanimously dismisses the appeal with the order nisi as to costs referred to in the concluding paragraph of Mr Justice Litton NPJ’s judgment.

Mr Denis Chang SC & Mr Patrick Szeto instructed by Messrs Wilkinson & Grist, for the appellants

Mr Jason Pow SC instructed by Messrs Li, Wong, Lam & W. I. Cheung, for the respondent