Wear Me Apparel Llc v. Lam Na

CACV 32/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 32 OF 2012

(ON APPEAL FROM HCA NO. 149 OF 2009)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Kwan JA:

1.This is the defendant’s appeal against the judgment of Sakrhani J on 17 January 2012 in a five-day trial in December 2011. The plaintiff, Wear Me Apparel LLC, sued the defendant Ms Lam Na, also known as Lin Na, for US$800,000, being the outstanding balance of a loan of US$1 million advanced to her. The judge gave judgment for the plaintiff with interest at 1% above the best lending rate of HSBC from 30 October 2008 until judgment and thereafter at the judgment rate until payment. Costs were awarded to the plaintiff.

2.There was no dispute that the total sum of US$1 million was remitted on the plaintiff’s behalf into the bank account of Chiavenna Holdings Ltd (“Chiavenna”), a related company of Regent Alliance Ltd (“Regent Alliance”).  (The relationship between the defendant and these companies is set out at the later parts of this Reasons for Judgment.)  Nor was there dispute that the plaintiff had been repaid US$200,000.  The contention at trial was whether the US$1 million was a loan made by the plaintiff to the defendant personally or whether the amount was paid as deposits to Regent Alliance for the purchase of garments of the plaintiff from Regent Alliance.

3.Only one witness was called for each party at the trial.  Arthur Rabin (“Mr Rabin”), the chief executive officer of the plaintiff, gave evidence on its behalf.  The defendant testified in her own defence.  The judge accepted the evidence of Mr Rabin and rejected the defendant’s evidence.  He found that she was an evasive, dishonest, untruthful and unreliable witness and was badly discredited in cross-examination[1].  He made a primary finding of fact based on his assessment of the credibility of the witnesses that the payments of US$1 million into Chiavenna’s bank account in April and May 2008 were made as loans to the defendant and not as deposits paid by the plaintiff to Regent Alliance for the purchase of garments.

4.The defendant sought to overturn this primary finding of fact on appeal.

5.At the conclusion of the hearing, we dismissed the appeal and these are the reasons for our judgment.

The background and findings in the judgment

6.The plaintiff is a company incorporated in the USA and at all material times was and is a leading designer, marketer and seller of apparel for children and young men in the USA.  It entered into a trading relationship with Regent Alliance in about 2006 and engaged Regent Alliance to source garments manufactured in Mainland China to be shipped to the USA.  The purchase orders placed by the plaintiff were with Regent Alliance, a company incorporated in Hong Kong, with a registered office in Wing On Plaza, Mody Road, Tsimshatsui East, Kowloon at the material time (“the Wing On Plaza premises”).  It was also common ground that all the invoices issued to the plaintiff in respect of the purchase orders placed with Regent Alliance were issued by Chiavenna, which received payments for the goods.  Chiavenna was incorporated in the BVI.

7.Mr Rabin gave evidence he was told by the defendant and her husband Moe Samuel Cohen (“Mr Cohen”) that they were the bosses of Regent Alliance.  The contrary case of the defendant was that she was merely an employee of Regent Alliance and had no interest in Chiavenna, although she could and did operate Chiavenna’s bank account.

8.The defendant was neither a shareholder nor a director of Regent Alliance at any time.  According to the annual return of Regent Alliance in 2006, Mr Cohen was its sole shareholder and director.  In 2008, the sole shareholder and director was Madam Yuan Shu Zhen.

9.Apart from Regent Alliance, three other Hong Kong companies had their registered office at the Wing On Plaza premises – Malan Garment Ltd (“Malan”), Limax Ltd (“Limax”) and Linna Textiles Manufacturing Ltd (“Linna Textiles”).  The corporate documents of these companies disclosed the following information.  Mr Cohen and Lin Chaoying were the shareholders of Malan in 2007, and Mr Cohen and Madam Yuan Shu Zhen were its directors.  In 2007, the vast majority of the shares in Limax were held by Perine International Inc (“Perine”), a BVI company; the other shareholders were Lin Chaoying and Madam Lin Yumei.  Its directors were the defendant and Mr Cohen.  As for Linna Textiles, in 2009, 90% of the shares were held by the defendant and 10% by Mr Cohen and they were the directors.

10.Limax was the registered owner of the Wing On Plaza premises and the defendant signed the agreement for sale and purchase, the assignment and mortgage documents for Limax.  Linna Textiles was mentioned in its webpage as a subsidiary of Regent Alliance.  The four Hong Kong companies as well as Chiavenna all operated from the Wing On Plaza premises.  The defendant admitted she was an authorised signatory to the bank accounts of Regent Alliance, Chiavenna, Malan, Limax and Perine.

11.Madam Yuan Shu Zhen is the defendant’s mother.  Lin Chaoying is the younger brother of the defendant and Madam Lin Yumei her younger sister.  The defendant was asked in the interrogatories served in February 2010 to specify her relationship with Mr Cohen, Madam Yuan Shu Zhen, Lin Chaoying and Madam Lin Yumei.  She only answered that Mr Cohen is her husband and did not specify her relationship with the other three.  Her relationship with the others was only ascertained in her oral evidence.

12.The defendant said in evidence all the companies were owned by her mother and she was merely an employee of Regent Alliance involved mainly in production with no involvement in matters relating to money.  The judge rejected her evidence as evasive, misleading and untrue[2].  He found that the companies which operated from the Wing On Plaza premises were family companies used by the defendant and her family for different purposes[3].  He found that what Mr Rabin was told by the defendant and Mr Cohen as to the defendant being the boss who would make decisions for Regent Alliance was in fact the true situation[4], and that Mr Rabin had been assured by the defendant’s assurances and representations that she was the owner in full control of her corporate vehicles including Regent Alliance and Chiavenna[5].

13.There is no appeal against any of the above findings of primary fact.

14.It was common ground that in 2007, seven payments totalling US$2.7 million were paid by the plaintiff or on its behalf into the bank account of Chiavenna.  Just as in the case of the 2008 payments which were the subject of the action, the plaintiff asserted these were loans to the defendant and the defendant alleged they were payments of deposits to Regent Alliance.  There was no dispute that the total sum of US$2.7 million was paid back to the plaintiff by Regent Alliance remitting monies to the plaintiff or by setting off against the amount due on the invoices issued by Chiavenna.  The judge rejected the defendant’s evidence and found that the 2007 payments were loans to the defendant, not deposits paid to Regent Alliance[6].

15.This finding of primary fact is challenged on appeal.

16.In respect of the four payments totalling US$1 million, the judge found that the defendant had asked Mr Rabin for a loan in a telephone conversation in April 2008, that she went to see him in his office to discuss the matter further as he had requested, and that Mr Rabin agreed to lend her the money[7].

17.This crucial finding of primary fact is challenged on appeal.

This appeal

18.In the Notice of Appeal filed on 13 February 2012, which was signed by the defendant’s solicitors, seven grounds of appeal were advanced.  All seven grounds were deleted and replaced by ten grounds in the amended Notice of Appeal filed on 28 March 2012, which was settled by Mr Frederick Chan, who did not appear at the trial.  The amended Notice of Appeal sought, in the alternative to dismissal of the plaintiff’s claim, a re-trial before another judge.  In the ten grounds of appeal, various findings of fact were attacked on the basis that the judge had failed to give sufficient weight to various aspects of the evidence and the inherent probabilities.  Complaint was also made that the judge had erred in drawing adverse inference against the defendant for not calling her husband to testify.

19.In the written submission served by the defendant in this appeal, settled by Mr Grossman, SC (who also did not conduct the trial) and Mr Chan, there was yet another change of tack.  Of the ten grounds of appeal in the amended Notice of Appeal, only grounds 6, 7 and 8 were mentioned in the submission.  A major contention raised in the submission was that the judge, in resolving the issue of credibility of the two witnesses, failed to give any or any adequate reason why he preferred the evidence of Mr Rabin and rejected the evidence of the defendant.  This was not a ground raised in the amended Notice of Appeal.

20.At the hearing of the appeal, we gave leave to the defendant to further amend the Notice of Appeal to argue this ground.

21.The grounds of appeal raised by the defendant may be broadly stated as follows:

(1) the judge failed to address the “many glaring inconsistencies” in Mr Rabin’s evidence;

(2) he did not give any or any adequate reason for preferring the evidence of Mr Rabin to that of the defendant;

(3) he failed to give sufficient weight to relevant matters;

(4) he relied on irrelevant matters in rejecting the defendant’s evidence;

(5) a number of his findings were not supported by evidence; and

(6) he wrongly drew an adverse inference against the defendant for not calling her husband.

22.The grounds of appeal will be considered in the order set out above.

If there were glaring inconsistencies in Mr Rabin’s evidence which the judge had failed to address

23.It was submitted on behalf of the defendant that Mr Rabin’s evidence contained “many glaring inconsistencies”.  Counsel went through the whole of his evidence in cross-examination consisting of over 100 pages and contended there were inconsistencies here and there.  I have gone through the transcript of the whole of Mr Rabin’s evidence meticulously, reading considerably more than just the parts referred to by counsel, to satisfy myself that the parts singled out by counsel would not be taken out of context.  I bear in mind that I must not be too ready to find “glaring inconsistency” just because the witness had appeared to express himself in a different way or was rather loose in his language.  I also cautioned myself that “evidence may read well in print but may be rightly discounted by the trial judge or, on the other hand, he may rightly attach importance to evidence which reads badly in print” (Benmax v Austin Motor Co Ltd [1955] AC 370 at 375).  As an appeal court, I must be cautious in finding “glaring inconsistency” solely by reading the evidence in the transcript, not having enjoyed the advantage of the trial judge who had seen and heard the witness.

24.Of the inconsistencies in Mr Rabin’s evidence alleged in paragraph 8 of the written submission of counsel, I am satisfied the only inconsistency and the only inconsistency that really mattered was his testimony that the defendant asked him on the telephone for a loan and he asked her to a meeting in his Hong Kong office to discuss further[8].  This was different from the plaintiff’s case as pleaded[9] and the two witness statements of Mr Rabin[10] in which it was stated that the request of the loan was made by the defendant to Mr Rabin over the telephone and there was no mention of a meeting between them for this purpose.

25.Mr Rabin was cross-examined about this discrepancy in his case.  He reiterated and maintained there was a request of the defendant by telephone for a loan and he had made the defendant to come and see him before he eventually agreed to loan her the money[11].  As to why this meeting was not mentioned in the pleading or his witness statement, his response was: “I can’t answer – I can’t answer.  I’m not going to try answer something which I did not answer.”[12]  He denied the reason he could not answer was because he was making up a story in the witness box[13].

26.Mr Grossman pointed out there was no re-examination of Mr Rabin why the details in relation to the meeting were not disclosed in the pleadings and Mr Rabin’s witness statements.  I decline to read anything into this.  That the plaintiff’s counsel did not see fit to re-examine on this could be due to a variety of reasons.  It is not possible to conclude this must be treated as an acceptance that there could be no satisfactory explanation.

27.Mr Kenny Lin, who appeared for the plaintiff here and below, drew our attention to Mr Rabin’s supplemental witness statement in which he responded to the defendant’s allegation that there was a meeting at the plaintiff’s office in April 2008 and he said he could not recall exactly if there was such a meeting[14].  Mr Rabin had also said in evidence: “I have a good memory but to go back to April 2008, I can’t recollect everything that was said.”[15]

28.The judge was alive to this inconsistency in Mr Rabin’s evidence and had taken into account the meeting was not mentioned in the witness statement.  He specifically raised with Mr Lin in the closing submissions about Mr Rabin’s omission to mention the meeting until in his oral evidence, to which Mr Lin replied this should not affect the overall credibility of the plaintiff’s case[16].  Having noted this inconsistency, the judge accepted Mr Rabin’s evidence in this respect[17].  It does not appear to me there is any proper basis to interfere with the judge’s finding.  And there is nothing of substance in the contention that there were many glaring or extremely material inconsistencies which were not addressed in the judgment.

If the judge had given adequate reasons for preferring Mr Rabin’s evidence

29.This was a major plank in the defendant’s arguments in this appeal.

30.The submission was made that the judge went to great lengths to provide reasons to justify the rejection of the defendant’s evidence but the judgment was silent on why Mr Rabin’s evidence should have been preferred.  Counsel referred to these paragraphs in the beginning of the judgment under the heading of “The witnesses” which read:

“12. I have no hesitation in accepting Rabin as a witness of truth. I find that he was an honest, credible and reliable witness.

13. I also have no hesitation in finding that Lin Na was an evasive, dishonest, untruthful and unreliable witness. She was badly discredited in cross-examination.

14. Where the evidence of Rabin and Lin Na are at variance, I have no hesitation in preferring the evidence of Rabin, whose evidence I accept, to that of Lin Na, whose evidence I reject.”

31.It was contended that in the subsequent paragraphs of the judgment, the judge did not refer to extremely material inconsistencies in Mr Rabin’s oral evidence (I have already rejected the submission in this respect), he merely recited Mr Rabin’s evidence and this was followed by the ‘formulaic phrase’ of “I believe him and accept his evidence” without providing adequate and cogent reasons and basis for doing so.  Counsel cited the relevant paragraphs in the judgment in which this phrase or similar wording was found[18].  It was submitted that the judge had erred in determining the respective credibility of Mr Rabin and the defendant in such a manner.

32.To bolster this submission, reference was made to a number of authorities.  Particular reliance was placed on the observations of Ipp JA (Mason P and Tobias JA agreeing) in Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187 under the heading of “Giving adequate reasons for demeanour findings” at paras 27 to 30:

“27. It is not appropriate for a trial judge merely to set out the evidence adduced by one side, then the evidence adduced by another, and then assert that having seen and heard the witnesses he or she prefers or believes the evidence of the one and not the other. If that were to be the law, many cases could be resolved at the end of the evidence simply by the judge saying: “I believe Mr X but not Mr Y and judgment follows accordingly”. That is not the way in which our legal system operates. I hasten to add that this is not what the trial judge did in this case. Her Honour gave detailed reasons as to why she preferred Mr Arsic's testimony.

28. Often important issues of credibility involve sub-issues. Often, objective facts, or facts that are probable, are capable of having significant bearing on the sub-issues. In cases of this kind, it is incumbent upon trial judges to resolve the sub-issues and to explain, by reference to the relevant facts, the conclusions to which they have come. This having been done, they should then turn to the ultimate facts in issue and explain how their decisions on the sub-issues have assisted them in forming a conclusion on the ultimate issue. It is only when adequate reasons of this kind are given that an unsuccessful party will be able to understand why the judge has believed his or her successful opponent.

29. In the influential case of SS Hontestroom v SS Sagaporack (1927) AC 37 Lord Sumner said (at 50) that one of the material questions in determining whether the credibility finding in that case was erroneous was: “Is there any glaring improbability about the story accepted, sufficient in itself to constitute ‘a governing fact, which in relation to others has created a wrong impression,’ or any specific misunderstanding or disregard of a material fact … that has had the same effect?” It is in this context that the following remarks of Hayne J in Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816 at 1835, [130] are particularly relevant:

“Rather, because the primary judge was bound to state the reasons for arriving at the decision reached, the reasons actually stated are to be understood as recording the steps that were in fact taken in arriving at that result. Understanding the reasons given at first instance in that way, and the error identified in this case is revealed as an error in the process of fact-finding. In particular, it is revealed as a failure to examine all of the material relevant to the particular issue.”

30. A failure by a judge, when making a demeanour finding, to deal with an improbability constituting a “governing fact” in the SS Hontestroom sense may constitute “an error in the process of fact-finding” as explained by Hayne J.”

33.It would suffice to quote from one other authority on the duty to give reasons in the context of a demeanour finding.  This is the decision of the English Court of Appeal in Hazim Jawad v Mehdi Rahim [2000] EWCA Civ 313.  Sir Christopher Slade (with whom Aldous LJ agreed) had this to say:

“25. In summary, therefore this Court is ordinarily very slow to interfere with the findings of fact made by a trial judge in a case where those findings have depended primarily on his assessment of the credibility of the parties' witnesses. In such a case, the onus on a party seeking to persuade this Court to set aside the judgment of the Court below is a heavy one. Nevertheless, the “demeanour” of witnesses (to repeat an often used phrase) may be misleading if viewed on its own. It remains incumbent on the trial judge to test the credibility of witnesses against the more important factors which may throw light on such credibility and have been drawn to his attention in the course of argument. Correspondingly, in my judgment, the trial judge is under an obligation to give reasons for his decision sufficient to show that he has carried out this exercise and has grasped the nettle presented by any particular difficulties which may arise in accepting the version of the relevant events presented by one side or the other.

26. In the recent case of Flannery & Another v The Halifax Estate Agencies Limited [2000] 1 WLR 377 the Court of Appeal held on the facts that, since the Judge in the court below had heard reasoned analysis and accepted the defendant's expert evidence, he was under a duty to supply reasons in the form of a coherent rebuttal of the plaintiff's expert evidence, and that his failure to do so justified setting aside his judgment and remitting the case for re-trial. Henry LJ delivering the judgment of the Court, made the following general comments on the duty to give reasons (at pages 381 to 382).

“(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in Ex parte Dave[19]) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.

(2) The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself.

(3) The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases.

(4) This is not to suggest that there is one rule for cases concerning the witnesses truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise). The rule is the same: the judge must explain why he has reached his decision. The question is always, what is required of the judge to do so; and that will differ from case to case. Transparency should be the watchword.”

34.Lastly, it is pertinent to bear in mind what will amount to adequate reasons for decision will depend on the context in which the decision maker is operating and the circumstances of the case in question (Oriental Daily Publisher Ltd v Commissioner for Television and Entertainment Licensing Authority (1997-98) 1 HKCFAR 279 at 290J to 291A).

35.With the above authorities in mind, I turn to review the judgment to see if the complaint of failure to give adequate reasons in preferring Mr Rabin’s evidence to that of the defendant is made out.

36.The relevant parts of the judgment are from para 15 to para 100, which appeared under the heading of “The evidence and findings”.  The judge considered the evidence in chronological sequence.  It would be convenient to divide up the paragraphs according to the issues dealt with and consider them in groups.

37.Paras 15 to 49 are concerned with resolving the issue in dispute whether the defendant was merely an employee of Regent Alliance or was actually the boss who would make decisions for Regent Alliance.  The judge summarized the documentary and oral evidence.  He rejected the defendant’s evidence by and large.  It cannot be said that no or no adequate reasons were given for preferring Mr Rabin’s evidence to that of the defendant or that the judge had merely recited the evidence without analysis.  The reasons are apparent on a proper reading of the relevant paragraphs:

(1) The defendant’s evidence that her main duties were as the production manager of Regent Alliance was contrary to her witness statement where she said she was employed by Regent Alliance as the manager responsible for the sales and marketing aspect[20].

(2) In her answer to the interrogatories, she concealed her relationship with her brother, sister and mother, who were registered as shareholders and directors in various family companies which operated from the same office[21].

(3) She tried to bolster her case that she was just an employee of Regent Alliance by producing MPF records of Regent Alliance, the earliest of which was dated after the order for specific discovery was made in February 2010, requiring her to disclose her contract of employment, salary records and MPF records.  Apart from the MPF records, no other documents were disclosed to show that salaries were paid to her.  She claimed that Regent Alliance had ceased operation but was unable to explain why it would pay still salaries to her as mentioned in the MPF records right up to August 2011.[22]

(4) Similarly, the letter signed by her mother as president of Regent Alliance dated 22 June 2009 stating that the defendant was an employee and not a shareholder was prepared after a defence was filed in this action and was an attempt to bolster her case[23].

(5) She was evasive when she was asked if Linna Textiles was named after her[24]. She denied Linna Textiles was a subsidiary of Regent Alliance but was unable to explain why it was so mentioned in the website[25].

(6) She was evasive as to her role in the various companies[26].

(7) She admitted she was a director of Limax and an authorized signatory to the bank accounts of Regent Alliance, Chiavenna, Limax, Malan and Perine.  She accepted she signed the sale and purchase agreement, the assignment and mortgage documents on behalf of Limax regarding the purchase of the Wing On Plaza premises[27].

(8) The email address used by all the companies was her email address[28].

38.These detailed and cogent reasons clearly supported the judge’s finding that what Mr Rabin was told by the defendant and her husband as to the defendant being the boss who would make decisions for Regent Alliance was in fact the true situation.  As I have noted earlier, there is no appeal from this finding.  The judge had looked at the objective facts in the corporate documents.  And it was entirely appropriate for him to examine the defendant’s evidence closely because of the nature of the issue in dispute, as the defendant should be in the best position to explain what was the true situation regarding her role and interest in the various companies.  Mr Rabin could only give evidence as to what he was told by the defendant and her husband regarding who was in control of the companies.

39.The next issue considered by the judge related to the plaintiff’s allegation that the goods delivered to Wal-Mart in 2007 were defective.  This was considered in paras 50 to 55.  Having set out the relevant evidence adduced by the parties, the judge accepted Mr Rabin’s evidence that the defendant had assured him she would exercise control over her companies to ensure that the goods delivered would meet quality and safety standards of the plaintiff and its buyers but the goods delivered were defective.

40.I do not agree the judge had rejected the defendant’s evidence here without giving reasons or adequate reasons.  The reasons are apparent from the judgment.  Her evidence was that the goods delivered to Wal-Mart were not defective[29]. The judge was entirely justified to reject this evidence having regard to the objective facts – that Wal-Mart returned 1,800,000 pieces of the goods and refused to pay for the same; that a complaint letter dated 5 October 2007 was sent by Wal-Mart to the plaintiff’s subsidiary, Kids Headquarters; and that there were negotiations between the plaintiff and Regent Alliance and their legal representatives to try and resolve the problem[30]. Having rejected the defendant’s evidence on the question of defects, the judge went on to hold that Mr Rabin’s evidence as to what happened as a result should be preferred.  No further elaboration would be necessary.

41.To resolve the central issue whether the payments were loans to the defendant or deposits to Regent Alliance for the purchase of goods, it is clearly relevant to consider the defendant’s pleaded case which was an established course of dealings[31]. The judge did this in paras 56 to 61.  There, he analysed the defendant’s evidence, her affirmation and the documents disclosed.  And it is entirely proper for him to concentrate on the evidence adduced by the defendant because of the nature of this issue.  Having considered this evidence, he rejected it, and the reasons could be gleaned clearly from the judgment.  The defendant’s evidence in cross-examination that deposits had been paid by the plaintiff to Regent Alliance in 2006 clearly contradicted her 1^st affirmation given in answer to the interrogatories that other than the deposits paid in 2007 and 2008, no other deposits were paid.  She failed to give satisfactory explanation for this discrepancy[32].  Further, no contemporaneous documents were disclosed showing that deposits were paid in 2006[33].

42.The factual dispute whether the 2007 payments were paid as loans to the defendant or deposits to Regent Alliance was considered in paras 62 to 73.  The judge resolved this dispute by testing the veracity of the defendant’s contentions: that she had difficulty in communicating with Mr Rabin in English, nearly 90% of the telephone calls were between Mr Rabin and her husband, and her husband translated for her when speaking to Mr Rabin; and that the requests for the deposits in 2007 were made by Mr Cohen not by her.  He rejected her evidence and the reasons appeared in the judgment:

(1) It was never put or suggested to Mr Rabin in cross-examination that it was Mr Cohen who had most of the discussions with him, or that the defendant could only understand simple English[34].

(2) The defendant’s evidence that the requests for deposits in 2007 were made by Mr Cohen not by her was contradicted by her 1^st affirmation in which she said the requests for deposits were made by her on behalf of Regent Alliance to Mr Rabin and other staff of the plaintiff over the telephone about the time the deposits were paid.  She was unable to satisfactorily explain why she had failed to mention her husband’s involvement in the matter[35].

(3) It was inconceivable she did not call her husband to give evidence on the above matters if she were telling the truth[36].

(4) She was unable to refer to any purchase order in respect of which a deposit was paid in 2007[37].

43.Having rejected the defendant’s evidence, the judge went on to consider Mr Rabin’s evidence which was that as the defendant was doing business through various companies which might not have assets, he would only approve loans to her personally and not to her companies so that the plaintiff could go after her in the event of default.  The judge then said he preferred and accepted his evidence[38]. Although the judge did not say anything further why Mr Rabin’s evidence was in the end preferred, I am inclined to think his thought process showing the steps by which he arrived at this view was made sufficiently transparent, as I have demonstrated above.

44.I turn to the main factual dispute which concerned the 2008 payments.  It should be noted from the discussion above that in working through the dispute in a chronological fashion, the judge had by then resolved a number of sub-issues which were important steps in the process of fact-finding and helped him to form a conclusion on the ultimate issue.  I do not agree with Mr Grossman that the judge’s findings on these matters are surplus and should have no bearing on the crucial issue.

45.The judge approached the main factual dispute in this manner in paras 74 to 100 of the judgment.

46.He first summarized the evidence of Mr Rabin.  The judge accepted his explanation of the reason for the loans – that the payment terms agreed with the defendant for the purchase of goods were mainly on LDP terms (landed duty paid, so the plaintiff would make payment only upon delivery of the goods to its warehouse in California) and the defendant was shipping a lot of goods to the plaintiff at the time.  The judge further accepted Mr Rabin’s evidence he trusted the defendant to repay, it being common ground that the sum of US$2.7 million was repaid to the plaintiff in 2007[39].

47.The judge noted that Mr Rabin did not mention the meeting in April 2008 in his witness statement and raised it only in his evidence in cross-examination.  Notwithstanding this, he accepted Mr Rabin’s evidence regarding the meeting in April 2008[40].

48.He turned to consider the defendant’s pleaded case as to what happened in April 2008 and examined it against her evidence in cross-examination.  He gave a number of reasons why her evidence should be rejected:

(1) The defendant said initially in cross-examination that at the meeting in April 2008, only the precise total sum of the garments to be manufactured was mentioned (US$13,608,566.11) but not the details including colour, style, size and fabric of the garments and that the first purchase order was issued after the meeting.  Later she contradicted her witness statement and her earlier evidence in cross-examination and said the sum of US$13,608,566.11 was a figure she worked out with the purchase orders placed at the meeting[41].  She also contradicted what she had said earlier that no purchase orders were placed at the meeting[42].

(2) She changed her evidence in alleging that at the meeting Mr Rabin had already given her all the information about the purchase orders, including the styles, quantities and all the information in the purchase orders[43].

(3) She said in cross-examination for the first time that at the April 2008 meeting, Mr Rabin had given her certain sheets of paper with the information including styles, quantities and amounts.  Those sheets of paper were never disclosed, nor was it suggested to Mr Rabin he had produced such papers at the meeting.  The judge found she had made a false assertion here[44].

(4) She said in cross-examination her husband was present at that meeting and he translated to her what was discussed with Mr Rabin.  This was contrary to what her counsel had put to Mr Rabin – that Mr Cohen was not present at the meeting in April 2008[45].

(5) She said in cross-examination the dates for refund of deposits were specified by Mr Rabin at the meeting.  In her Amended Defence, it was pleaded that Regent Alliance would refund various amounts to the plaintiff by various dates conditional upon the plaintiff settling Regent Alliance’s invoices in full.  When she was asked if she had made notes of the dates of refund at the meeting, she shifted the responsibility to her husband by saying that it was her husband who did the negotiations and not her.  The judge found that Mr Cohen was not present at the meeting in April 2008, noting that there was no satisfactory explanation for not calling her husband, who was in court throughout the trial[46].

(6) There was no documentary evidence to support the allegation that the payments were made as deposits for the purchase of goods.  Further, the defendant was unable to relate any of the amounts paid by the plaintiff to any purchase order placed by the plaintiff[47].

(7) Her case that the payments in 2008 were not loans was contradicted by her email to Mr Rabin dated 8 September 2008[48].

(8) The repayment of US$200,000 to the plaintiff, which was common ground, was contrary to her pleaded case that Regent Alliance would only refund deposits conditional upon the plaintiff settling Regent Alliance’s invoices in full and that the plaintiff had refused to pay Regent Alliance the sum of US$7,003,790.34 being the balance of the purchase price[49].

(9) There were emails from Mr Rabin pressing for repayment in 2008.  There was no reply from the defendant and no assertion by her or Regent Alliance that the plaintiff owed Regent Alliance in excess of US$7 million[50].

49.I do not think it is justified to criticise the judge for not giving adequate reasons in resolving the factual dispute in favour of the plaintiff that the payments in 2008 were loans to the defendant.  The judge had considered Mr Rabin’s evidence in juxtaposition with the defendant’s evidence.  And, as I have mentioned earlier, the judge had by then resolved a number of sub-issues in favour of the plaintiff, having been satisfied with the credibility of Mr Rabin’s evidence on those issues.  He could not be faulted in disbelieving the defendant on the ultimate issue as he had provided a thorough analysis of how and why he arrived at that view.

50.Having gone through the exercise of reviewing the judgment in detail, I am not persuaded that the judge had merely recited the evidence on both sides without providing adequate and cogent reasons for accepting the evidence of Mr Rabin in preference to that of the defendant.  As was stated in the cases quoted earlier, the extent of the duty to give reasons on the assessment of credibility depends on the subject matter and nature of the dispute.  We are here concerned with a relatively straightforward factual dispute.  The judge had said sufficiently to show that he had firmly grasped the nettle in resolving the different versions given by Mr Rabin and the defendant.  Their credibility was to be assessed in the light of all the evidence at the trial.  The defendant could have been under no difficulty in understanding why the version of events given by Mr Rabin was accepted by the court whereas her version was rejected.  And the reasons given by the judge could not be faulted.  Nor has any error been identified by the defendant’s counsel in respect of the reasons given by the judge, particularly of the reasons relating to the unsatisfactory nature of the defendant’s evidence.  There is no merit in the ground of appeal that the judge had not given adequate reasons for preferring Mr Rabin’s evidence.

If the judge had failed to give sufficient weight to relevant matters

51.Complaint was made that the judge had failed to give sufficient weight to these matters:

(1) the amount of US$2.7 million repaid to the plaintiff in 2007 was not repaid by the defendant herself but by Chiavenna;

(2) the amount of US$200,000 repaid to the plaintiff in 2008 was not repaid by the defendant herself but by a combination of remittance by Regent Alliance (of US$102,230.30) and deduction of shipping costs for garments shipped between March and September 2008 (of US$97,769.70); and

(3) the inherent improbability that a commercial loan for business purpose would be made to a director without documentary proof and support.

52.What weight should be given to a particular piece of evidence is a matter for the trial judge.  The judge had mentioned the first two matters specifically in the judgment[51] and did not think it important to attach significance to the fact that the repayments were made with the monies of Chiavenna and Regent Alliance.  This is a view he was entitled to take on the evidence, in view of his findings that the defendant was the boss who would make decisions for Regent Alliance[52], that Mr Rabin was assured by the defendant she was the owner in full control of her companies including Regent Alliance and Chiavenna[53], and that Mr Rabin had no objection when the defendant suggested setting off the loans made to her personally against monies due from the plaintiff to Regent Alliance or Chiavenna[54].

53.Although the judge did not mention specifically it would be inherently improbable for loans to be made to the defendant for business purpose without documentary proof and support, it is unlikely that the lack of documentary proof would have escaped his attention.  Nor do I think he could be criticised for not attaching great significance to the absence of documentary support in the context of this case, bearing in mind it was common ground that payments of substantial sums were made by the plaintiff in 2007 and 2008 and both sides were unable to come up with documentary support for the different purposes asserted by each as to why the payments were made.  In the end, the judge decided to attach greater significance that the defendant was unable to come up with documentary evidence to support her contention that the payments were made as deposits for the purchase of goods and that she was unable to identify the purchase orders in respect of which the four payments were made as deposits in 2008 as alleged[55].  The judge was entitled to take this view on the evidence.

54.There is no substance in the ground of appeal that the judge had failed to give sufficient weight to relevant matters.

If the judge had relied on irrelevant matters in rejecting the defendant’s evidence

55.It was submitted on the defendant’s behalf that in rejecting the defendant’s evidence, the judge had relied on these irrelevant or peripheral matters which merely touched on the general credibility of the defendant:

(1) whether the defendant was an employee or the boss of Regent Alliance;

(2) who made the business decisions in Regent Alliance;

(3) what was the structure of the defendant’s family companies including Regent Alliance and Chiavenna;

(4) what was the English proficiency of the defendant;

(5) whether the goods delivered by Regent Alliance in 2007 to the plaintiff were defective;

(6) whether the defendant had received sheets of paper giving the details of the purchase orders from Mr Rabin at the April 2008 meeting; and

(7) the MPF payments to the defendant by Regent Alliance.

56.It was contended that the adverse findings against the defendant on the above matters were irrelevant and they “unduly clouded” his assessment of the defendant’s credibility and those irrelevant findings could not have assisted him in determining the central issue which was whether the 2008 payments were made as personal loans to the defendant.

57.This argument that the judge had taken irrelevant matters into account is the converse of the earlier argument that he had failed to give sufficient weight to relevant matters.  I would reject this argument as well for the following reasons.

58.The issues in (1), (2), (3) and (7) are clearly relevant sub-issues that have significant bearing on the resolution of the ultimate issue.  Whether the defendant was the boss of Regent Alliance and in control of her companies or was just an employee were clearly relevant to the central issue if the plaintiff should make substantial loans to her personally.

59.The issue in (5) of defective goods formed part of the background matters that led to the payments in issue in 2008.  The judge was right to resolve the factual dispute on this and give it such weight as he considered appropriate.

60.The issues in (4) and (6) may be dealt with together.  They have a direct bearing on the defendant’s version of what happened at the April 2008 meeting, which was supportive of her case that the payments in 2008 were made as deposits for the purchase of goods.  The judge rightly took these issues into consideration in determining the ultimate issue.

If any of the findings were not supported by evidence

61.It was contended that a number of findings of the judge were not supported by evidence and one example was given in the written and oral submissions.  This related to the finding that the defendant’s case that the payments in 2008 were deposits to Regent Alliance and not loans to her was contradicted by her email sent to Mr Rabin on 8 September 2008[56].  It was argued that in the email, the words “we’re” and “we” were used, so the email was equivocal as these words were more likely to have referred to Regent Alliance not the defendant herself.  Further, the defendant said in cross-examination that her email account was used by other staff of Regent Alliance and counsel cited the email of 9 September 2008 sent by Regent Alliance’s accountant Carry Hui to Peter Cheng of the plaintiff’s Hong Kong office as an example in which her email account was used by a staff.

62.There is nothing in these points.  The significance about the email of 8 September 2008 was that it was specifically stated “as per yr. instructions, we’re returning $200,000 of the loan”.  It ended with the words “Regards, Linna”.  In contrast, the 9 September 2008 email ended with the words “Regards, Carry”.  As noted by the judge, the defendant was evasive and was unable to say who would have used her name in sending out the 8 September email.  He took the view it was inconceivable that this email with her name inserted as the sender from her email address would have been sent without her knowledge.  His finding that this email contradicted the defendant’s case that deposits were paid to Regent Alliance is unassailable.

If the judge was wrong in drawing adverse inference against the defendant for not calling her husband

63.It was argued that the judge was wrong to draw adverse inference against the defendant for not calling her husband to testify for these reasons.  The plaintiff did not plead there was a meeting in April 2008 and Mr Rabin only agreed to the fact there was this meeting when he was cross-examined.  Mr Rabin said in cross-examination his staff Peter Cheng also came into the meeting and Mr Cohen was present throughout.  The defendant had explained in cross-examination it did not occur to her that her husband’s presence at this meeting would be something relevant to the claim made by the plaintiff against her[57].  The plaintiff had also failed to call Peter Cheng to give evidence about the meeting and did not explain why no witness statement was taken from him.  And the judge did not explain why the defendant’s explanation for not calling her husband to testify was not satisfactory.

64.There is no substance in any of the points taken above.

65.It is immaterial whether the plaintiff had pleaded there was a meeting in April 2008 or Mr Rabin had mentioned this meeting in his witness statements.  What are important are the allegations by the defendant that since 2006 she had relied on her husband to translate for her during negotiations with Mr Rabin, that the requests for deposits in 2007 were made by Mr Cohen not by her, and that Mr Cohen translated for her what was discussed with Mr Rabin at the meeting in April 2008.  The defendant must know her own case and what role she alleged was played by her husband in all the dealings with Mr Rabin.  The judge was right in taking the view there was no satisfactory explanation for not calling her husband to give evidence, noting that he was in court throughout the trial.  No further elaboration was necessary in this respect.

66.I fail to see the relevance of the plaintiff not calling Peter Cheng to give evidence.  Mr Rabin’s evidence at trial was that he did not remember if Mr Cohen was present at the April meeting, nor could he recollect if the meeting was just between him and the defendant or whether Peter Cheng might have walked in[58].  There was no reason why the plaintiff should have called Peter Cheng to testify.  Besides, the judge was told at the beginning of the trial that Peter Cheng was no longer in the plaintiff’s employment and they could not locate him[59].

Conclusion and costs

67.There is no merit in any of the grounds of appeal.  The challenge to overturn the primary findings of fact of the judge must fail.

68.We have therefore dismissed this appeal with costs to the plaintiff, to be taxed if not agreed.

69.We further order that the amount of HK$320,000 paid into court as security for costs on appeal is to remain in court and that this sum with the accrued interest or such amount as is sufficient is to be released to the plaintiff upon the taxation or agreement of the costs of this appeal.

Hon Chung J:

70.I agree with the Reasons for Judgment of Kwan JA.

Hon McWalters J:

71.I agree with the Reasons for Judgment of Kwan JA.

Mr Clive Grossman SC & Mr Frederick HF Chan, instructed by Wong, Fung & Co., for the Appellant / Defendant

Mr Kenny CP Lin, instructed by Vivien Chan & Co., for the Respondent / Plaintiff