Gilman & Co Ltd v. Shishir Kothari t/a Ko Jewels Trading Co

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO. 48 OF 1971

(ON APPEAL FROM O.J. ACTION 1915 OF 1970)

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Coram: Briggs, Huggins and Leonard, JJ.

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JUDGMENT

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Briggs, J.:

1.  This is an appeal from the decision of a Judge sitting without a jury.

2.  The Respondent is a jeweller. The Appellants agreed to insure the Respondent with London underwriters under an Insurance Cover Note dated July 20, 1970, against loss by theft of any of the Respondent’s stock of jewellery up to the value of $200,000.

3.  The case for the Respondent is that on August 15, 1970, he was robbed of jewellery worth over $300,000. The Appellants refused to pay out under the Cover Note. So the Respondent brought an action against them for $200,000. The Appellants did not deny that the Cover Note was valid. In their defence they put the Respondent to strict proof of his claim and alleged that the jewellery which was the subject matter of the Respondent’s claim was not in the Respondent’s premises at the time of the alleged theft.

4.  After a trial, which lasted for six days, the trial judge found in favour of the Respondent and awarded him the sum claimed, $200,000.

5.  The Appellants appeal against this decision. Originally eight separate grounds of appeal were filed. This was increased to ten at the hearing.

6.  The ninth ground of appeal was that “the learned judge failed to consider what constituted a fraudulent claim thereby wrongfully concluding that he was unable to find any evidence of fraud.”

7.  The Appellants did not plead fraud in their Statement of Defence. However the learned trial judge had this to say in his judgment:–

“it is their defence that the diamonds and jewellery particularised .... were not in the Plaintiff’s premises at the time of the alleged robbery or, alternatively, that if they were so there, they were not stolen. Whilst the statement of defence does not employ the word ‘fraud’ and certainly does not particularise fraud, the whole tenor of the defence is an innuendo that the Plaintiff’s claim is spurious and the robbery a bogus one. I will say at once that I am unable to find any evidence of fraud.”

8.  If a party is basing his case on fraud it must be pleaded and particularised. A famous dictum of Thesiger, L.J., in Davy v. Garrett^([1]) runs thus:

“In the Common Law Courts no rule was more clearly settled than that fraud must be distinctly alleged and as distinctly proved, and that it was not allowable to leave fraud to be inferred from the facts.”

9.  At the hearing the Appellants were not alleging that the robbery did not occur. They were not putting forward a positive case of fraud. They could not be heard to do so. Their case was that the Respondent had not proved his claim and that the Respondent told lies when giving his evidence. That is, that the Respondent committed perjury. Now, perjury is fraud. To give false evidence in support of a claim under an Insurance Policy is and must be fraud. And I do not see how the Appellants can rely upon such a ground of appeal when fraud was neither pleaded nor particularised in the Lower Court. An application could have been made to amend the defence as soon as the Appellants became aware of the facts on which they would rely to support a charge of perjury. The court will allow an amendment to include an allegation of fraud at an early stage in the trial. The time for such an amendment in this case was when the Respondent left the witness box. It was at that time that the Appellants were in possession of the facts on which a charge of perjury could have been made. That course was not adopted. It is too late to seek to prove the charge of perjury and to allege fraud at this stage.

10.  The case for the Appellant still is that the Respondent has failed to prove his case. Part of this case is that the Respondent and his witnesses are unworthy of belief. A very large portion of the cross-examination of the Respondent and his witnesses was for the purposes of discrediting the Respondent and his witnesses.

11.  In Regina Fur Company v. Bossom^([2]), which was a case with rather similar facts to those of this appeal, Lord Evershed, M.R., said this:

“I think that a defendant – whether he is an underwriter or any other kind of defendant – is entitled to say, by way of defence, ‘I require this case to be strictly proved, and admit nothing’. Where such is the defence, the onus remains throughout upon the plaintiffs to establish the case they are alleging. Where such is the form of the pleading, it is not only not obligatory upon the defendants but it is not even permissible for them to proceed to put forward some affirmative case which they have not pleaded or alleged; and it is not, therefore, right that they should, by cross-examination of the plaintiffs or otherwise, suggest such an affirmative case. The defendants are acting correctly if they follow the course adopted in this case – that is, so to challenge, at each point, and by proper evidence, where it is admissible, and by cross-examination, the case which the plaintiffs seek to make good.

The result, where such is the form of the defence and of the issues raised, is no doubt such that the Judges will watch carefully that defendants, first, do not attempt, by evidence or cross-examination, to establish some affirmative case of which no proper notice has been given by way of pleading to the other side; and second, do not attempt to lead evidence solely directed to the credit of witnesses.

So much, Mr. Marshall naturally and very properly admitted; and he also conceded that, in practice, no doubt sometimes the line is often a little narrow between evidence which is properly directed to challenging the evidence of the plaintiff upon some relevant issue, and evidence which may, upon analysis, turn out to be no more than direct evidence to credit.”

The last paragraph of the above quotation from the judgment of Lord Evershed is particularly applicable to the present case. This is abundantly clear from the transcript of the evidence. I think that it was unnecessary though not wrong of the trial judge to come to a positive finding of “no fraud”. But the passage from his judgment which I have quoted above clearly shows that he was alive to the distinction between evidence which challenges the Plaintiff’s evidence on a relevant issue and evidence going as to credit.

12.  In the circumstances the Appellants cannot be heard to argue ground 9 of their grounds of appeal. 

13.  I will now turn to ground 2 of the grounds of appeal. This concerns certain books of the Respondent. They were referred to as his Bank book and his Cash book. Also exhibited were his Bank statements. A very large part of the cross-examination of the Respondent in the court below was directed to a comparison of items in the Cash and Bank books with items in the Bank statements. It is those answers given by the Respondent which, according to the Appellants, indicate that the Respondent committed perjury.

14.  There were a large number of documents in this case. And bundles of agreed documents were prepared for the trial. Included in these were the books I have referred to above.

15.  Although they come from the custody of the Respondent – they are his books – they were not relied upon directly as part of his case. At the trial they were put in as exhibits by counsel for the Appellants not by the Respondent. However it is right to state that they had been seen by the accountant called by the Respondent as one of his witnesses. These books were very much part of the case for the Appellants and numerous questions were put to the Respondent as to the meaning of various entries. At the hearing of the appeal the Respondent’s answers to such questions were referred to in detail.

16.  The Respondent said at the trial on more than one occasion that the Cash and Bank books had been made up every few days, and not all at one time, or at the end of each month as was suggested by counsel for the Appellants. The trial judge found as a positive fact that the business of the Respondent was a genuine business. But it was not for this reason that this line of cross-examination was pursued, as the learned judge seems to have thought. The purpose of the line of cross-examination was to discredit the Respondent and in addition, to show that he was a man of very little financial substance. The accounts showed that a number of cheques had been dishonoured albeit at a period of some months previous to the robbery. And that this was at a time when the Respondent according to his own evidence had a large sum of cash in his safe.

17.  It was urged that no business man would allow his account to be in such a state that his cheques would be dishonoured, when he had plenty of money in his safe. And that no business man of the standing of the Respondent would lock as much capital up in stock as the Respondent claimed to have done.

18.  Counsel for the Respondent made it quite clear that he did not rely upon these books and the Bank statements to prove his case. His case was based upon the Purchase and Sales Book of the Respondent and upon the invoices which supported the various entries therein. It was pointed out that when giving his answers as to the various items in the Cash and Bank books, the Respondent had before him no documents other than the books themselves, and that the entries referred to various transactions which occurred many months before the trial. Counsel said that this evidence did not go to the root of the case. It was no more than a collateral issue between the parties. He did not consider that it would have been proper or practical to seek for an adjournment, and to try to support every entry in the accounts by other evidence such as paying-in slips, cheque stubs and the like.

19.  I have seen these books and they may be described as incoherent. The theory of counsel as to the correct times at which the Bank book and the Cash book was made up is both ingenuous and attractive. But I agree with counsel for the Respondent. These books were not part of his case, not relied upon by him. Even if they were made up all at once or in one day the matter would not advance the Appellant’s case. The matter is collateral. What is of importance of course is, that if the Appellants are right in their contention, the Respondent is shown to be not telling the truth. I will deal with that matter separately.

20.  The rest of the grounds of appeal can be dealt with together. They are all to the effect that the findings of the judge were against the weight of the evidence.

21.  The trial judge came to positive findings of fact. He believed the version of the account of the robbery given by the Respondent. And he acquitted him of fraud. He believed that his business was being properly conducted that he had the sums of money which he said he had, and that his claim was genuine in substance and in amount. He specifically found that the Respondent made up his books every two or three days.

22.  Central to the case for the Respondent is the evidence of Mr. Kothari, the Respondent himself. The most important witness was the Respondent himself. His evidence takes up ninety seven ages of the transcript seventy nine of which are devoted to his cross-examination. This was of a most searching nature: and covered the whole background of the Respondent as well as his business dealings, the state of his Cash and Bank books being particularly referred to. The trial judge accepted the evidence of Mr. Kothari as being the truth. This finding was clearly based in part at least on the demeanour of the Respondent and his witness, Mr. Li.

23.  At the hearing of the appeal, counsel for the Appellant invited the court to reject the evidence of the Respondent. Apart from the evidence as to the method of bookkeeping adopted by Mr. Kothari counsel for the Appellants drew the attention of the court to other aspects of his evidence. The suggestion was that the trial judge should have had doubts as to the existence of a robbery because the story of the robbery as given by the Respondent is inconsistent with other evidence. The unusual nature of the wounds; a discrepancy in the evidence as to the condition of the cords used to tie up the Respondent; the fact that Mr. Li, an employee of the Respondent, happened to return to the flat at the right time; the fact that his cook boy was in the immediate vicinity of the flat when Mr. Li arrived and so on, should have been sufficient for the trial judge to have had doubts as to the genuineness of the evidence of the Respondent.

24.  The trouble with this line of argument is that the trial judge dealt specifically with all these matters. Thus for example, he dealt specifically with the evidence as to the presence of the cook boy, the question of the knots on the cord, the evidence of Mr. Li and the evidence of the caretaker. And I can find no fault with the manner in which such evidence was assessed. He went further however and made a positive finding of fact that there was no fraud. The trial judge saw and heard the Respondent give evidence and he had ample opportunity to assess the value of his evidence. It is quite obvious from his judgment that the demeanour of the witness was a very important reason for his findings.

25.  It is trite law that an Appeal Court will only upset a finding of fact made by a judge based upon his opinion of the demeanour of a witness in exceptional cases. In a proper case the court will not hesitate to act. [See Yuill v. Yuill^([3])].

26.  The principles on which an appellate court will act were laid down in Watt v. Thomas^([4]). The headnote in that case reads as follows:

“When a question of fact has been tried by a judge without a jury and it is not suggested that he has misdirected himself in law, an appellate court in reviewing the record of the evidence should attach the greatest weight to his opinion, because he saw and heard the witnesses, and should not disturb his judgment unless it is plainly unsound. The appellate court is, however, free to reverse his conclusions if the grounds given by him therefor are unsatisfactory by reason of material inconsistencies or inaccuracies or if it appears unmistakably from the evidence that in reaching them he has not taken proper advantage of having seen and heard the witnesses or has failed to appreciate the weight and bearing of circumstances admitted or proved.”

28.  In his judgment Lord Thankerton notes with approval a well known passage from the judgment of Lord Shaw in Clarke v. Edinburgh & District Tramways Co., Ltd.^([5]). This reads as follows:

“In my opinion, the duty of an appellate court in those circumstances is for each judge of it to put to himself, as I now do in this case, the question, Am I – who sit here without those advantages, sometimes broad and sometimes subtle, which are the privilege of the judge who heard and tried the case – in a position, not having those privileges, to come to a clear conclusion that the judge who had them was plainly wrong? If I cannot be satisfied in my own mind that the judge with those privileges was plainly wrong, then it appears to me to be my duty to defer to his judgment.”

29.  Counsel for the Respondent referred the court among other cases to the case of Gross v. Lewis Hillman Ltd.^([6]). Part of the head-note in that case reads as follows:–

“... That an appellate court could not hold someone guilty of fraud when the judge who saw and heard him acquitted him of it unless the appellate court was convinced that the judge was wrong, albeit that it had doubts about the judge’s finding and since it was not so convinced, the defendants were not guilty of fraudulent misrepresentation.”

30.  Applying those principles to the facts of the present case I do not think that the judgment of the trial judge should be disturbed.

31.  Applying the test suggested by Lord Shaw – sitting here as I am without the advantages of having seen and heard the Respondent give evidence, I am not satisfied that the trial judge was “plainly wrong” when he accepted that evidence. Whatever doubts I may entertain as to that finding are not sufficient to warrant its being disturbed.

32.  I would dismiss this appeal with costs.

A. Zimmern(Deacons) for Appellant.

R. Mills-Owens(J.S. & Master) for Respondent. 

([1]) [1877] 7 Ch. D. at 489

([2]) [1958] 2 Lloyd’s List Law Reports 425 at 428

([3]) [1945] 1 A.E.R. 183

([4]) [1947] A.C. 484.

([5]) [1919] S.C. (H.L.) 35, 37

([6]) [1969] 3 W.L.R. 787 at 789