PACIFIC ELECTRIC WIRE & CABLE CO LTD v. TEXAN MANAGEMENT LTD AND OTHERS

cacv 90/2012, CACV 91/2012, CACV 93/2012, CACV 94/2012, CACV 95/2012 AND CACV 96/2012 in the high court of the hong kong special administrative region court of appeal civil appeal nos. 90, 91, 93, 94, 95 AND 96 of 2012 (on appeal from hccl NOS. 16, 17 AND 18 of 2009) HCCL 16/2009 in the high court of the hong kong special administrative region court of FIRST INSTANCE COMMERCIAL ACTION no. 16 of 2009 (TRANSFERRED FROM HIGH COURT ACTION NO. 2203 of 2004) BETWEEN PACIFIC ELECTRIC WIRE & CABLE COMPANY LIMITED Plaintiff and TEXAN MANAGEMENT LIMITED 1st Defendant CLIPPER INVESTMENT LIMITED (formerly known as PACIFIC CAPITAL (INVESTMENT) LIMITED) 2nd Defendant PACIFIC CAPITAL (ASIA) LIMITED 3rd Defendant ALL DRAGON INTERNATIONAL LIMITED 4th Defendant PCL HOLDINGS LIMITED (formerly known as PACIFIC CAPITAL (HOLDINGS) LIMITED 5th Defendant LAIDLAW PACIFIC FINANCIAL SERVICES (HOLDINGS) LIMITED (formerly known as PACIFIC CAPITAL FINANCIAL SERVICES (HOLDINGS) LIMITED) 6th Defendant SUPER WISH LIMITED 7th Defendant HU HUNG CHIU（胡洪九） 8th Defendant WONG KUN TO（黃勤道） 9th Defendant (discontinued) CHEUNG KWAN HUNG, ANTHONY（張鈞鴻） 10th Defendant (discontinued) MA KAM FOOK, ROBERT（馬金福） 11th Defendant CHENG SHU WING（鄭樹榮） 12th Defendant (discontinued) TUNG HSIU CHUN (仝秀君), the person entitled to manage and administer the estate of Tung Yu Jeh (仝玉潔) (deceased) (By Order to carry on) 13th Defendant SUN TAO TSUN（孫道存） 14th Defendant PANG HONG（龐鴻） 15th Defendant (discontinued) HCCL 17/2009 in the high court of the hong kong special administrative region court of FIRST INSTANCE COMMERCIAL ACTION no. 17 of 2009 (TRANSFERRED FROM HIGH COURT ACTION NO. 2746 of 2004) BETWEEN PACIFIC ELECTRIC WIRE & CABLE COMPANY LIMITED Plaintiff and GOLD GLOBAL LIMITED 1st Defendant PCL NOMINEES LIMITED 2nd Defendant GREATEAM LIMITED 3rd Defendant HU HUNG CHIU（胡洪九） 4th Defendant CHUNG CHE LING（鍾子陵） 5th Defendant YIP CHI HUNG（葉稚雄） 6th Defendant TAM PUI NA, RAFIA（譚佩娜） 7th Defendant (discontinued) HARMUTTY LIMITED 8th Defendant HCCL 18/2009 in the high court of the hong kong special administrative region court of FIRST INSTANCE COMMERCIAL ACTION no. 18 of 2009 (TRANSFERRED FROM HIGH COURT ACTION NO. 2763 of 2004) BETWEEN PACIFIC ELECTRIC WIRE & CABLE COMPANY LIMITED Plaintiff and HARMUTTY LIMITED 1st Defendant HADDOWE LIMITED 2nd Defendant CASPARSON PROPERTIES LIMITED 3rd Defendant HU HUNG CHIU（胡洪九） 4th Defendant YIP CHI HUNG（葉稚雄） 5th Defendant CHUNG CHE LING（鍾子陵） 6th Defendant TUNG HSIU CHUN (仝秀君), the person entitle to manage and administer the estate of Tung Yu Jeh (仝玉潔) (deceased) (By Order to carry on) 7th Defendant SUN TAO TSUN（孫道存） 8th Defendant TAM PUI NA, RAFIA（譚佩娜） 9th Defendant (discontinued) WONG KUN TO（黃勤道） 10th Defendant (discontinued) CHEUNG KWAN HUNG, ANTHONY（張鈞鴻） 11th Defendant (discontinued) AFTERVILLE LIMITED 12th Defendant NEE SOON LIMITED 13th Defendant SHOWGROUND LIMITED 14th Defendant BERRIDALE DEVELOPMENTS LIMITED 15th Defendant JUTECH INVESTMENTS LIMITED 16th Defendant ALL DRAGON INTERNATIONAL LIMITED 17th Defendant BLINCO ENTERPRISES LIMITED 18th Defendant PATAGONIA LIMITED 19th Defendant MA KAM FOOK, ROBERT（馬金福） 20th Defendant HU SUN MAR LI（胡孫瑪琍） 21st Defendant (discontinued) TOP SELECTION COMPANY LIMITED 22nd Defendant Heard together Before: Hon Lam VP, Kwan and Fok JJA in Court Dates of Hearing: 8 to 10 July 2013 Date of Judgment: 17 September 2013 J U D G M E N T Hon Lam VP: I have the benefit of reading the judgment of Kwan JA. I respectfully agree with it and have nothing to add. Hon Kwan JA: A. INTRODUCTION I shall adopt the expressions and abbreviations used by the court below for ease of reference. In view of the large number of entities and individuals involved, the abbreviations and expressions which shall be referred to with a brief description of each are set out in a table in Annex 1 of this judgment. On 12 April 2012, Reyes J gave judgment in favour of the plaintiff PEWC against a number of defendants in each of the three actions which were heard together over 18 days in February and March 2012. The three actions (HCCL 16/2009, 17/2009 and 18/2009) were brought by PEWC to recover assets which it claimed were acquired with its funds, namely, the PacMOS shares, the Shouson Hill Property and the South Horizons Properties. In gist, the judge rejected the defence advanced by a number of defendants, among them Hu and Top Selection, that there was a Takeover Arrangement by which Top Selection, the corporate entity holding the aforesaid assets through an extensive network of companies, was transferred beneficially to Willi, a Swiss banker. The six appeals before this court were brought by three of the defendants – Hu, Top Selection and Ma, represented by Mr Whitehead, SC, Mr Grossman, SC and Mr Edward Chan, SC respectively. PEWC appeared by Mr Neoh, SC. To give effect to his judgment that PEWC should recover the PacMOS shares, the Shouson Hill Property and the South Horizons Properties, the judge made a declaration that Top Selection holds all its shares in Blinco BVI and Patagonia on constructive trust for PEWC, various declarations that a number of entities down the line in the network held or hold their respective shares or underlying assets on constructive trust for PEWC, and declarations that Hu held and holds any beneficial interest he had or has in the PacMOS shares, the Shouson Hill Property and the South Horizons Properties on constructive trust for PEWC. He ordered Top Selection to transfer its shares in Blinco BVI and Patagonia to PEWC or its nominee and other entities down the line to transfer the relevant shares or assets to PEWC or its nominee. The relevant entities and Hu were ordered to account to PEWC for all monies received in connection with the assets of PEWC held by them. An inquiry was also ordered as to the directorships and shareholdings of a number of companies in the network from their dates of incorporation. Apart from proprietary remedies, PEWC sought personal remedies against a number of defendants, and one of them was Ma. PEWC’s case against him was two-fold – a case based on dishonest assistance in that Ma had dishonestly assisted Hu and others to acquire the PacMOS shares and conceal the same from PEWC, and a case based on knowing receipt in that Ma procured or suffered the borrowings of his nominated company, Town Sky, to be secured by mortgages of part of the South Horizons Properties. The judge only found for PEWC on its case of knowing receipt. He ordered Ma to account for all benefits including monies and preferential borrowing rates received by him or Town Sky through the use of any part of the South Horizons Properties as loan security. As PEWC was not wholly successful against Ma, the judge ordered Ma to bear 70% of PEWC’s costs against him. The judge ordered Hu and Top Selection to bear 70% of PEWC’s costs of the proceedings, to be taxed on an indemnity basis, such costs to include 70% of the costs that PEWC was ordered to pay Tung’s estate, Jack Sun and other defendants against whom PEWC failed to obtain personal remedies and 70% of PEWC’s costs of the proceedings against Ma. The rationale was that much time at the trial was spent on the question whether Hu, Tung and Jack Sun established the network of companies surreptitiously without PEWC’s knowledge and PEWC did not succeed on that issue, so PEWC should recover only 70% of its costs. As for awarding costs against Hu and Top Selection on an indemnity basis, this was because fraud was involved. Further, given the uncertainty as to precisely who was involved in Hu’s diversion of PCHL, it was reasonable for PEWC to have sued Tung, Jack Sun and Ma, the judge made a Bullock order that part of the costs of suing them should be recoverable from Hu and Top Selection. The judge ordered Hu and Top Selection to bear the costs of the Corporate Defendants of these proceedings, to be taxed on an indemnity basis. The rationale was that as the judge had ordered the Corporate Defendants to be transferred to PEWC or its nominee, it would be wrong to make those companies liable for PEWC’s and their own costs. And as Hu and Top Selection would have been behind the Corporate Defendants’ conduct of the litigation, the Corporate Defendants should be indemnified for their costs by Hu and Top Selection. B. THE APPLICATION TO ADDUCE FURTHER EVIDENCE Before we heard the appeals, we dismissed the application of Top Selection to adduce further evidence in its appeal with reasons to be handed down. These are the reasons for dismissal. Top Selection applied to adduce as further evidence what was known as “the Pauline Ching File”. This was disclosed as item 37 in the 7th Supplemental List of Documents of PEWC on 6 January 2012, more than three weeks before trial commenced on 1 February 2012. It consisted of 365 pages of drafts, internal notes and similar documents relating to the work of POIM in an apparently disorganised manner. Pauline Ching was an employee of POIM and Jennifer Tse took over her responsibilities when she joined in May 2000 as the treasurer and assistant financial controller of POIM. Some of the documents in the Pauline Ching File were included in the bundles placed before the judge at the trial. Ma’s trial counsel Mr Michael Yin included 114 pages of documents from the Pauline Ching File in a bundle he compiled for the purpose of cross-examination (“Michael Yin’s Bundle” later named as “the D(Ma) Bundle”), which was tendered to the judge at the outset of Day 3 of the trial. Two key factual witnesses of PEWC, Jennifer Tse and Andy Cheng, were cross-examined by the leading counsel for Top Selection at some length on the minutes of a meeting of POIM on 23 December 1998 in the D(Ma) Bundle. Mr Yin likewise cross-examined those witnesses on the POIM minutes and a draft of one of Wilson Lee’s reports included in the D(Ma) Bundle. Submissions were made in closing by Top Selection, Hu, Ma, PEWC and other parties on the POIM minutes and other documents in the Pauline Ching File. Mr Grossman’s complaint to this court was that the entire Pauline Ching File should have been placed before the judge, not just selected documents, in order that the significance and relevance of the whole file may be properly understood, the significance being that it documented the work in the POIM office over the 1998 to 1999 period. He relied on 173 pages of documents in the Pauline Ching File in particular and submitted how these documents would go to undermine PEWC’s case that it was only in 2003 it discovered the network of companies of PCHL established by Hu and others (an issue the judge found against PEWC, and of which there was no appeal by PEWC) when a “bombshell” was dropped on PEWC there were huge losses necessitating a massive write off of US$291 million in its accounts, to be dealt with as a prior year adjustment. Mr Grossman submitted these documents would support Top Selection’s further contention (on which the judge made no finding) that PEWC was well aware of CPE and its activities as a treasury centre and there were serious inaccuracies in PEWC’s “bombshell” story, and this in turn would have a serious impact on the credibility of PEWC’s witnesses including Jennifer Tse and Andy Cheng. As analysed in annex 1 to the skeleton argument of Mr Neoh, of the 173 pages of documents now relied on by Mr Grossman, only 70 pages had not been selected by the parties and were not included in the hearing bundles below. And of the 70 pages, 58 pages could not be regarded as new, as they are almost identical to documents in the reports of Wilson Lee which were disclosed in PEWC’s 1st List of Documents in April 2010. So only a very small number of documents were in issue in this application. For this court to exercise its discretion to admit the Pauline Ching File as evidence in this appeal, the three conditions in Ladd v Marshall [1954] 1 WLR 1489 at 1491 must be satisfied: firstly, the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible. Top Selection’s application failed at the first hurdle. Mr Grossman contended there were certain “irregularities” in procedure adopted during the trial, which led to Top Selection being unable to use the Pauline Ching File as evidence despite its reasonable diligence. He complained of late discovery of PEWC in filing three supplemental lists of documents disclosing over 12,200 pages of documents close to the trial. The documents in the Pauline Ching File were provided to Top Selection on 18 January 2012, and some of these documents are partly or wholly in Chinese. The Chinese New Year holidays commenced on 23 January 2012 and trial began on 1 February 2012, Wednesday. On the first day of trial, Mr Hollander, QC on behalf of Top Selection applied for an adjournment of the trial to 6 February, Monday to deal with the late disclosure of PEWC. This was rejected by the judge, who indicated he would be going straight to the cross-examination of the witnesses and expected the parties to adhere to a strict timetable, notwithstanding that counsel had brought to his attention documents in the late disclosure could well be relevant to the cross-examination of PEWC’s witnesses. The judge did not agree that additional time was required to consider the late disclosure and stated it could be dealt with as the trial progressed. Mr Grossman submitted that due to the time constraint, there was no proper opportunity for Top Selection’s legal team to fully or properly consider the impact or relevance of the Pauline Ching File and appropriate measures that should be taken as a result, and whilst certain extracts were taken from the Pauline Ching File and utilised at the trial, only a superficial exploration was undertaken. There was no appeal against the judge’s refusal of the application to adjourn the trial for a few days. In any event, it was a case management decision which the appeal court would not interfere with, as it has not been shown that the judge “has gone clearly wrong and made orders which will clearly involve an injustice or an inability for the trial court to carry out its task” (Lee Tak Yee v Chen Park Kuen [2001] 1 HKLRD 401 at 403E to H), or that the judge had “erred in principle or the order was irrational having regard to the issues that had to be resolved” (Kan Miu Wah Pauline v Aeroflot Russian International Airlines, CACV 142/2006, 6 September 2006, §11). In rejecting the application of Top Selection for an adjournment, the judge had mentioned two things. Firstly, he noted that Top Selection had engaged two junior counsel, who are both bilingual, to assist Mr Hollander and not everyone was required to be in court so it was possible for counsel to find time to go through the further documents disclosed by PEWC. Secondly, he suggested to all parties that for new documents coming in, if it was proposed to add them to the court bundles, they could be inserted in a temporary file each morning to be vetted and approved by him on a daily basis. As mentioned earlier, at the outset of Day 3, Mr Yin was able to tender to the judge the D(Ma) Bundle which he compiled from the Pauline Ching File, to facilitate his cross-examination of PEWC’s witnesses. This bundle was approved by the judge. Mr Hollander did not start his cross-examination of Jennifer Tse on Day 3 until after the D(Ma) Bundle was put in. Plainly, it has not been shown that with the exercise of reasonable diligence, Top Selection was unable to adduce at the trial the entire Pauline Ching File or such parts of it as its counsel thought fit should be deployed. In the course of the trial, 15 days of which were taken up by the evidence of witnesses, there was sufficient opportunity for Top Selection or any other defendant to apply to the judge to consider any further document in the Pauline Ching File that ought to be canvassed. There was no irregularity in the procedure adopted during the trial. The case of Chan Chiu Yin v Chan Ki Kau, CACV 468/2001, 28 May 2003 at §§33 and 34 relied on by Mr Grossman does not support the proposition he advanced. The appeal court in that case was satisfied that the appellant had used reasonable diligence in his attempt to adduce fresh evidence. Where further evidence sought to be adduced on appeal could have been adduced at trial with reasonable diligence, the failure to do so owing to any act or omission of the lawyer could not constitute a special ground for such evidence to be admitted on appeal, in the absence of wholly exceptional circumstances (Chan Koon Nam v Ng Man Sum, CACV 281/2011, 5 March 2013, §§43 to 48). There are no exceptional circumstances here for this court to exercise the wider discretion to depart from the principles in Ladd v Marshall. The application of Top Selection must be refused, with costs to PEWC. C. THE APPEALS OF HU AND TOP SELECTION C.1 An overview of the case I do not propose to summarise the background matters as found by the judge relating to PEWC, its overseas investments, the setting up of an intricate web of companies, the acquisition and funding of the assets it sought to recover in the three actions, and the history of these proceedings for which the writs were issued in 2004 . In order not to burden this judgment with too many details, for the purpose of these appeals, a very brief synopsis of the respective cases advanced by PEWC, Hu and Top Selection and the relevant findings made by the judge would suffice. PEWC, a publicly listed company in Taiwan until it was de-listed in 2004, diversified its business in the late 1980s and the early 1990s by making extensive investments overseas, including Mainland China. At that time, companies in Taiwan were not permitted to invest in the Mainland as a matter of strict Taiwanese law. Between 1988 and 1999, three directors of PEWC, Hu, Tung and Jack Sun, established and operated an intricate network of overseas subsidiaries and associated companies through which the overseas assets were acquired and managed. Some of these investments, financed by liabilities kept off the balance sheet, were not reported in the financial statements of PEWC as they were not investments authorised by the Taiwan Investment Commission. In April 2003, PEWC’s financial statement came before its board and showed a colossal loss of NT$23,216 million. This led to investigations by the Taiwan Securities and Futures Commission and the Taiwan Prosecution Authority, which resulted in the de-listing of PEWC and the prosecution and conviction of Hu, Jack Sun, Tom Tung and others. In these proceedings, PEWC claimed that Hu, Tung and Jack Sun had defrauded PEWC on a massive and audacious scale. It was alleged that the network of companies was set up in secret in that the establishment and operation of these companies were deliberately concealed from the board of PEWC and that those three directors had acted in breach of their fiduciary obligations in using PEWC’s funds, goodwill and credit to acquire assets by the secret network of companies. It was further alleged that in around 1999, Hu fraudulently transferred the three assets in issue – the PacMOS shares, the Shouson Hill Property and the South Horizons Properties – to himself beneficially by transferring control of the network to Bridle Path and thereafter to Top Selection. It was only in August 2008 that the existence of Bridle Path and Top Selection became known to PEWC. Hu and Top Selection did not dispute that PEWC previously held the ultimate beneficial interest in the network of companies but claimed that PEWC no longer does so. Their defence was that there was a Takeover Arrangement in 1996, made between Hu, Tung and Jack Sun on the one hand and Willi on the other hand, for the good of PEWC in order to dispose of PCHL which was in a dire financial situation. The Takeover Arrangement led to the beneficial interests in PCHL, Blinco BVI and Patagonia being initially transferred to Bridle Path and then to Top Selection. It was alleged that pursuant to the Takeover Arrangement, on 1 February 1999, Hu handed over the bearer share of Top Selection to Willi to hold beneficially, Willi having performed that which he had agreed to do in providing a bridging loan of $80 million to PEWC in 1995 and injecting US$14.5 million into PCHL in 1996. And in full and final settlement of Willi’s remaining obligation to PEWC under the Takeover Arrangement, namely, the payment of a sum representing PCHL’s surplus of assets over liabilities, Super Wish transferred its share in Myall to Blinco HK in June 1999, so PEWC became the ultimate beneficial owner of 100% of Pacific Plaza in Singapore. In reply, PEWC asserted that the Takeover Arrangement was a recent fabrication and concoction of Hu and Willi. As mentioned earlier, the judge did not find in PEWC’s favour that the network of companies was established and operated by Hu, Tung and Jack Sun surreptitiously without the authority of the board of PEWC. He found on the evidence PEWC’s board expressly authorised Tung, Jack Sun and Hu to handle PEWC’s overseas investments, that the three directors carried out that mandate by establishing PCHL and its network of associated and subsidiary companies, that there was no real attempt to keep that network and its connection with PEWC secret, and that it was an “open secret” in Taiwan, Hong Kong and the Mainland that PEWC was behind the PCHL group of companies. The judge did not accept the defence of the Takeover Arrangement, and found that there was “overwhelming” evidence that fraud was established. He held that there never was such an arrangement and it was just a belated fabrication between Hu and Willi to cover up Hu’s ownership and control through Top Selection of the companies and assets held through Blinco BVI and Patagonia. In arriving at the above conclusion, the judge had made these specific findings: (1) The explanations of the swissfirst papers proffered by Hu and Willi were unconvincing; the explanations not only contradicted what the faxes say on their face, the explanations also contradicted each other. The swissfirst papers lead inexorably to a conclusion that in 2004, Hu (not Willi) was the beneficial owner of the PacMOS shares. (2) It was not in dispute that PCHL received a payment of $25 million on 20 September 1995 and $55 million on 9 November 1995. However, there was an absence of documentation in relation to the provision of an $80 million bridging loan by Willi to PEWC and the available documents suggested that there was no $80 million injection by Willi. The documents supported the conclusion that at least $55 million of the $80 million allegedly provided by Willi ultimately came from PEWC and PEWC was the more probable source of the $25 million. The evidence of Hu and Willi in cross-examination on the fund flow of the $80 million was evasive and difficult to believe. (3) It was not in dispute that on 19 April 1996, a sum equivalent to US$14.5 million was paid into the bank account of Patagonia by a cashier order. But the judge was unable to conclude on the available evidence that Willi was the source of the US$14.5 million. The evidence of Willi in cross-examination in relation to the US$14.5 million was not credible. (4) As to the allegation that the transfer of Myall was part of the Takeover Arrangement in full and final settlement of PCHL’s indebtedness to PEWC, the judge found this suspect on the documentary evidence and the timing. (5) The circumstances surrounding the three letters between Hu and Willi in 1996 and 1999 said to evidence the Takeover Arrangement were suspicious. Hu’s annotation to the letter of 10 March 1996 (that he had discussed it with Tung and Jack Sun and they agreed and authorised him to sign) must be treated with scepticism. (6) There was also the late assertion by Hu of the Takeover Arrangement. He never mentioned it over the whole of his interrogation by the Taipei District Attorney in 2004. (7) The whole account of the Takeover Arrangement, considered in the context of how a substantial commercial transaction would normally be carried out, lacked the ring of truth. (8) The financial condition of the PCHL group in 1995 could not have justified a selling off of the group’s assets on the terms of the Takeover Arrangement. (9) Hu’s evidence was inconsistent and vague as to who precisely authorised the transfer of Blinco BVI and Patagonia to Top Selection. (10) Even after the Takeover Agreement was completed on 1 February 1999 as alleged, Hu continued as a director of companies within the PCHL group. Thus, he remained in charge of the very assets and companies which he alleged were bringing PCHL to the verge of bankruptcy and which he claimed had to be disposed of urgently and secretly. This was another pointer to the Takeover Arrangement being a fiction. (11) In 1999, Hu caused the entities which held the South Horizons Properties, Haddowe Limited and Casparson Limited, to charge the properties to secure facilities for a nominated company of Ma of $73.4 million, which were increased to $170 million in 2001. In 2003, Hu used the South Horizons Properties to secure facilities of $150 million for two companies within the MVI group. The use of the South Horizon Properties by Hu pointed to Hu (not Willi) being the beneficial owner of the South Horizons Properties. (12) It was unclear whether Tung and Jack Sun were aware of the Takeover Arrangement. It was likely that Tung and Jack Sun were kept in the dark about the disposition of PCHL. The judge was unable to find that Tom Tung had knowledge of the Takeover Arrangement from the note of a meeting of POIM dated 23 December 1998 or a letter to Moniker on PEWC letterhead dated 1 December 2000. There was nothing in the conduct of Tung, Jack Sun or Tom Tung that supported the validity of the Takeover Arrangement. The judge held that Willi was not a bona fide purchaser for value without notice but merely a nominee for Hu, and the court is entitled to pierce the corporate veil and treat Top Selection as Hu’s alter ego. C.2 An overview of the appeals of Hu and Top Selection In these appeals, Hu and Top Selection sought to impugn the judge’s conclusion there was no Takeover Arrangement and that Hu had in effect handed the assets of the PCHL network of companies to himself. Mr Whitehead and Mr Grossman submitted that this conclusion was reached by a process of inference, as the judge had recognised when he examined the circumstances “which according to PEWC give rise to an irresistible inference that the Takeover Arrangement is a concoction between Hu and Willi”. They contended their appeals are not against findings of primary facts and the appeal court is not in any way disadvantaged in forming its own opinion about inferences of fact that should properly be drawn. As Viscount Simonds had stated in Benmax v Austin Motor Co Ltd [1955] AC 370 at 374: “For I have found, on the one hand, universal reluctance to reject a finding of specific fact, particularly where the finding could be founded on the credibility or bearing of a witness, and, on the other hand, no less a willingness to form an independent opinion about the proper inference of fact, subject only to the weight which should, as a matter of course, be given to the opinion of the learned judge.” I have no quarrel with the submission that the conclusion of the judge there was no Takeover Agreement was an inference of fact. However, it was an inference arrived at by a process of reasoning from his findings of specific or primary facts, as I have summarised earlier. As stated in Metropolitan Borough of Battersea v The British Iron and Steel Research Association [1949] 1 KB 434 at 471, per Denning LJ: “On this point it is important to distinguish between primary facts and the conclusions from them. Primary facts are facts which are observed by witnesses and proved by oral testimony or facts proved by the production of a thing itself, such as original documents. Their determination is essentially a question of fact for the tribunal of fact, and the only question of law that can arise on them is whether there was any evidence to support the finding. The conclusions from primary facts are, however, inferences deduced by a process of reasoning from them.” I agree with Mr Neoh that despite the protestations Hu and Top Selection were only seeking to overturn the judge’s inference there was no Takeover Agreement, they in fact sought to challenge findings of primary facts made by the judge concerning the existence of the Takeover Arrangement, and such findings of specific or primary facts were based on the oral testimony and documentary evidence evaluated by the judge. We should be slow to interfere with the judge’s findings of primary facts, unless we are satisfied that the findings were plainly wrong. If we are not so satisfied, we should defer to the trial judge’s conclusion. It is pertinent to bear in mind that in this factually complex case, the judge had sat through the evidence for many days, studied a considerable volume of documents, heard extensive arguments, and that his judgment – given within a month of the conclusion of the trial – was based on all the materials before him, not just the evidence he mentioned in his judgment. As Lord Hoffmann had said in Biogen Inc v Medeva plc [1997] RPC 1 at 45, “specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence.” There is every need for appellate caution in reversing the judge’s evaluation of the facts and evidence in this situation. Mr Neoh has helpfully summarised the grounds of appeal advanced by Hu and Top Selection and they may be stated as follows: (1) The judge failed to properly consider or give proper weight to the “false and dishonest case” that PEWC had no knowledge of the overseas network of companies and investments in Hong Kong as alleged by PEWC. The judge should have found as a result that PEWC knew of and had authorised the disposal of its investments and should have refused to grant any equitable reliefs to PEWC. (2) The judge reversed the burden of proof requiring Hu and Top Selection to prove that the Takeover Arrangement was not fraudulent, and failed to adopt the proper standard of proof for fraud. (3) The judge erred in his assessment and conclusion on the following aspects of the evidence: (a) the swissfirst papers; (b) the fund flow of the alleged injections of Willi into PCHL in the sums of $80 million and US$14.5 million; (c) the transfer of the Myall shares; (d) PCHL’s financial position in 1995; and (e) PEWC’s purported failure to call Jack Sun, Tom Tung and David Sun to give evidence at trial. (4) The judge was wrong to take into account Hu’s exercise of his right of silence to the Taiwan authorities in respect of revealing the Takeover Arrangement. (5) The conclusions of fraud arrived at by the judge, namely that Hu handed the assets in the PCHL network to himself and that Willi was Hu’s nominee, were not pleaded by PEWC. Further, Hu was deprived of the chance of pleading an alternative case that even if he had advanced a false case that Willi was the beneficial owner of the assets, that would still not have entitled PEWC to recover the assets. (6) The judge was wrong in making findings against Willi where his evidence was not challenged, or where the point was not put to him in cross-examination. I will consider the grounds of appeal in the order set out above. C.3 Argument that PEWC had advanced a “false and dishonest case” C.3.1 The arguments of Hu and Top Selection It was submitted that PEWC had pursued a false and dishonest case concerning its alleged lack of knowledge about PCHL and the acquisition of properties by PCHL. As a result of the false and dishonest case advanced by PEWC, the judge should have inferred that PEWC knew of and authorised the acquisition of the properties, that it had authorised Hu’s involvement in the acquisition and management of the properties and Hu’s involvement in the running of PCHL and its subsidiaries, that PEWC as a matter of course engaged in off-balance sheet investments financed through CPE utilising the temporary account #1502, that PEWC was aware it was the beneficial owner of the properties at least up until the completion of the Takeover Arrangement, and that Hu acted as an honest and loyal employee of PEWC in the discharge of its affairs at least up until the genesis of the Takeover Arrangement. Having rejected PEWC’s case of no knowledge and no authorisation of the acquisition of its overseas assets, the judge should have given anxious consideration to whether he could then safely accept PEWC’s corresponding assertion of no knowledge and no authorisation of the disposal of the assets. Reliance was placed on the words of Sir John Dyson in the Supreme Court of UK in MA (Somalia) v Secretary of State for the Home Department [2011] 2 All ER 65, where he dealt with the impact of lies by a litigant on a central issue at §§[31] to [33]: “… where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong. It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie. But much depends on the bearing that the lie has on the case. … Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence. … where the appellant tells lies on a central issue in the case, the [tribunal] may conclude that they are of great significance. …It will be a matter for the [tribunal] to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellant’s lies.” Mr Whitehead contended the finding that PEWC knew of the acquisition of the overseas assets and had authorised Hu to deal with the assets was a central issue here, and should be pivotal to the proper consideration of the case. Thus, when the judge came to consider PEWC’s corresponding assertion it had no knowledge about the disposal of its assets, his earlier finding should have informed the approach to be taken, and he should not have ignored the fact that PEWC had advanced a false case deliberately regarding the lack of knowledge of the acquisition of those assets. Had the judge considered the matters properly in the round, he should have found it inherently improbable that PEWC, as a publicly listed company, did not realise until 2004 that its very substantial assets had been disposed of in 1999. He should have found it inherently improbable that Tung and Jack Sun, who had been responsible for acquiring such substantial assets, did not know about (for eight years, from 1996 to 2004) and therefore did not authorise the disposal of those assets. He should have found it inherently probable that to avoid the consequence of criminal prosecution for making overseas investments in breach of Taiwan law and which did not appear in its accounts, PEWC’s board would have agreed to the unorthodox steps taken by Hu to bring about the Takeover Arrangement to dispose of those assets. It was inherently probable that when PEWC’s board was challenged by the Taiwan authorities in 2003 to explain the prior year adjustment of US$291 million in its accounts to deal with massive losses, the board would be compelled to deny knowledge of the disposal of the assets, having chosen to deny knowledge of their acquisition. The judge should have found it inherently improbable that the three letters produced to evidence the Takeover Arrangement were forgeries, as these letters did not indicate there had been an agreement to dispose of the assets or its full terms and a forger would not have forged documents with limited prospect of success. And the judge had failed to consider properly or at all the minutes of a meeting of POIM on 23 December 1998 and a letter from PEWC to Moniker dated 1 December 2000. It was submitted that the judge had failed to take into account the false allegations made by PEWC against Hu in its pleadings, affidavits and submissions, in an attempt to discredit Hu in the eyes of the court. These allegations included the following: that PEWC had no knowledge of the existence of CPE until 2003; that upon discovering the existence of CPE in 2003, PEWC became aware for the first time of PCHL and of a massive fraud perpetrated by Hu involving unauthorised off-the-balance sheet investments including the properties sought to be recovered in these proceedings; that Hu had siphoned off PEWC’s funds via CPE by using the account #1502 to finance his secret network of companies and had orchestrated the liquidation of CPE to destroy the relevant paper trail; that the matters allegedly discovered in 2003 came as a bombshell to PEWC and it became aware for the first time that the properties had been disposed of fraudulently by Hu; and that the losses incurred by Hu’s fraud resulted in an enormous prior year adjustment which caused PEWC serious financial consequences. The judge should have found on the evidence that PEWC at all times knew of the existence of CPE, that PEWC was aware of and had used the account #1502 for its investments both on and off the balance sheet, that Hu had not siphoned off PEWC’s funds via CPE to finance a secret network of companies or orchestrated the liquidation of CPE to destroy the audit trail, and that the prior year adjustment was utilised by PEWC in an attempt to blame Hu for its massive losses. In essence, had the judge taken the above matters into account and made the findings he should have made, he would have concluded that these matters would impact adversely on the truthfulness of PEWC’s related assertion that it knew nothing about and had not authorised the disposal of the properties to Top Selection. These matters would have bolstered Hu’s assertion that PEWC had advanced a false case against him including the allegation that the disposal of the properties was unauthorised or fraudulent. C.3.2 Did the judge find a “false and dishonest case” It is pertinent to note that it was argued in Mr Whitehead’s closing submission before the judge that rejection of PEWC’s case on lack of knowledge of the acquisition of assets should have informed his approach when considering PEWC’s case on the lack of knowledge of the disposal of assets. This submission obviously did not find favour with the judge. In my view, the arguments advanced on behalf of Hu and Top Selection are flawed in a number of respects as discussed in the paragraphs to follow. In the first place, it is clear from the judgment the judge did not find that PEWC had advanced a false and dishonest case against the defendants. The judge’s findings were quite simply that PEWC had failed to establish that Tung, Jack Sun and Hu established a secret network of companies in Hong Kong which was deliberately concealed from the other directors on the board of PEWC; that the board had authorised those three directors to handle PEWC’s overseas investments and that they carried out that mandate by establishing PCHL and its network of associated and subsidiary companies. The fact that PEWC had failed to establish its case cannot be taken to mean that it had advanced a false case dishonestly. Mr Grossman would appear to have acknowledged there was no express finding of a false and dishonest case, as he had contended that the judge implicitly found that PEWC was dishonest. This could not have been the case, as the judge had expressly said in another context (when he set out his conclusions on the Takeover Arrangement) that a court does not lightly make findings of fraud and it can only make such findings where it is satisfied to a high degree of conviction that there has been wrongdoing. The contention of an implicit finding of dishonesty must be rejected. I go on to consider even if the judge had made no finding that PEWC had advanced a false and dishonest case, whether it is right for this court to make such a finding on the evidence. C.3.3 If there was basis to find a “false and dishonest case” Given the limited extent of the judge’s findings on PEWC’s knowledge of the acquisition of overseas investments via the network of the PCHL group of companies, Mr Whitehead was driven to argue that the judge should have made quite a large number of inferences as mentioned earlier to bolster his contention that PEWC had advanced a false and dishonest case such that this should have an impact on the findings on the Takeover Arrangement. I am unable to accept this argument. The judge was not required to make findings on each and every dispute in this factually complex case. He had declined to make findings for a variety of reasons. In some instances, he did not think it necessary for the resolution of the issues in the trial. In other situations, it was because of the incomplete documentary evidence or that the evidence was insufficient to satisfy him to the requisite degree to make a definite finding. Unless it has been shown that the judge was in error, and I do not think this has been done, this court should decline to draw inferences and make findings in situations where the judge had expressly declined to do so. Mr Neoh also reminded this court that an inference to be drawn on the basis of circumstantial evidence must be properly grounded in the primary facts found, and that the court must guard against indulging in conjecture under the guise of drawing an inference where the primary evidence does not logically and reasonably justify the particular inference in question (Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387 at §185; Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 at §§78 to 79). I am inclined to agree with Mr Neoh that the inferences the defendants asked us to draw are not properly grounded in these primary facts as found by the judge at §§208 to 211 of the judgment such that those inferences could be logically and reasonably justified: (1) Not everyone on PEWC’s board was aware precisely what Tung, Jack Sun and Hu were doing in Hong Kong in relation to PCHL, even though the board members might have readily learned about the existence and activities of the PCHL group prior to 1996, if they had bothered to inquire. (2) Having authorised those three directors to handle PEWC’s overseas affairs, the other directors more or less left them to carry out their work with little monitoring from the board. Overall corporate governance at PEWC appeared to have been lax, insofar as the overseas activities of the three directors were concerned. (3) Individual directors at PEWC were responsible for handling specific departments and each director appeared to have concentrated on his departmental territory with little more than a cursory knowledge about what was going on in other departments. (4) Andy Cheng, who was in charge of the purchasing department, may well have been unaware of the activities of Tung, Jack Sun and Hu in relation to PCHL. The judge did not find it necessary to make findings relating to CPE or PEWC’s allegation that the “round-robin” system used in the account #1502, which the judge described as “byzantine”, was a means of Hu to siphon off PEWC’s funds as part of a scheme to defraud PEWC. That does not mean PEWC must have advanced a false and dishonest case. It is pertinent to bear in mind there was a tremendous amount of account manipulation going on and great obscurity of fund flows, as borne out by the report of Frank Yuen, the forensic expert of PEWC. As the judge had noted in summary, such incomplete accounts as are available to the court often disclose “a dizzying maze of fund flows, debt assignments and set-offs among PEWC and companies within the PCHL network” and “even where an internal record exists, the record may not by itself necessarily reflect how the funds were used” . Against this background, whatever knowledge PEWC had of the acquisitions and activities of PCHL was but piecemeal, and is insufficient for the alleged inferences to be drawn. C.3.4 If there was basis to find PEWC had knowledge of the disposal of properties Even if there were a basis to find that PEWC had advanced a “false and dishonest case” regarding the acquisition of properties, it does not necessarily follow that the court should find against PEWC on the disposal of the properties, as the judge had rightly observed when he put this question to Mr Whitehead during his closing submission. Further, as the judge had said, even if the PCHL network was an “open secret”, that would not have entitled Hu or any other director to transfer the network’s assets to himself without specific approval from PEWC’s board. As to the knowledge of Tung and Jack Sun regarding the disposal of the PCHL group and the Takeover Arrangement, there is some evidence they were not aware of the disposal of the PCHL group by Hu. They were removed from PCHL’s board by shareholders’ resolution signed by Hu alone and they did not seem to have known of their removal and seemed to have inquired around June 2000 why their PCHL directors’ fees were not paid. Tom Tung came to Hong Kong in around 1998 to investigate what had happened to the companies and assets within the PCHL group, apparently on Tung’s instructions and that would suggest Hu had kept Tung in the dark (and likewise Jack Sun) about the actual disposition of PCHL. The judge concluded there was nothing in the conduct of Tung, Jack Sun or Tom Tung that supports the validity of the Takeover Arrangement and the most that could be said is that Tung and Jack Sun would have been aware that something had gone wrong because they ceased to receive emoluments from PCHL and it might have been for this reason that Tung sent Tom Tung to investigate through POIM. As for the inherent improbabilities or probabilities urged upon us for inferences to be drawn and findings to be made that PEWC must have known and therefore authorised the disposal of the properties, the mere fact that the judge had not mentioned them in the judgment does not mean he had not considered them. Not every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained, but only those issues the resolution of which are vital to his conclusion (English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409 at §19). In any event, the alleged inherent improbabilities or probabilities are contrary to the findings of the judge, who had noted that POIM was investigating the affairs of the PCHL group in around 2000 to 2003 and had doubted if PEWC could reasonably be expected to have discovered the fraud involved in Hu’s disposal of the PCHL group until sometime between 2000 and 2003. The judge had held that in any event, PEWC could not have learned about Top Selection until 2008 when that company’s involvement emerged as a result of inquiries ordered by Saunders J and PEWC employed investigators to look into matters. As for the argument that the three letters produced by the defendants to evidence the Takeover Arrangement would have been better crafted if they were indeed forgeries, there is no room to speculate how a fraudster would have acted properly to perpetrate his fraud. Nor is it for the court to speculate why Hu and Willi had acted in a fraudulent way as the court had found. The above arguments will not avail Hu and Top Selection. Above all, it must be borne in mind that the judge had undertaken a detailed analysis of the evidence and concluded that the Takeover Arrangement was but a belated fabrication of Hu and Willi to cover up Hu’s ownership and control through Top Selection of the companies and assets held through a network of entities. The appeal court must look at the course of the trial and the whole substance of the judgment, and ought not reverse a finding of fact merely on the result of its own comparison and criticisms of the witnesses and its own view of the probabilities of the case (Owners of SS Hontestroom v Owners of SS Sagaporack [1927] AC 37 at 47, per Lord Sumner). C.3.5 If it was correct to grant equitable reliefs Hu had made a similar argument at the trial that PEWC had advanced an unconscionable case. This was rejected by the judge. As I have rejected the contention that PEWC had advanced a “false and dishonest case”, the argument that the judge was incorrect to grant equitable reliefs must also fail. C.4.1 If the judge had reversed the burden of proof The defendants argued that the judge was in error in requiring them to explain and demonstrate these matters: the swissfirst papers; that the sums of $80 million and US$14.5 million did not come from PEWC and Willi was the source; that the transfer of Myall shares to PEWC as part of the Takeover Arrangement was not suspect; the reason why Hu did not mention the Takeover Arrangement to the Taiwan authorities in a criminal investigation; the transfer of Blinco BVI and Patagonia to Top Selection in 1999; why the Takeover Arrangement was entered into in the manner as alleged and how it was carried out; and “suspicious” circumstances surrounding the three letters produced to evidence the Takeover Arrangement. It was submitted the effect of the above was that instead of requiring PEWC to prove fraud with cogent evidence, the judge reversed the burden of proof and required the defendants to disprove that the Takeover Arrangement was a recent fabrication and concoction, when the burden on Hu and Willi should have been merely an evidential burden to establish that prima facie the Takeover Arrangement occurred. There is no merit in the above contentions, as submitted by Mr Neoh. The persuasive burden of proving the existence of the Takeover Arrangement clearly lay on Hu and Top Selection, as its existence formed an essential part of their defence and they relied on it to justify the retention of the properties as belonging to Willi (Phipson on Evidence, 17th ed, §6-06). I reject Mr Grossman’s contention that the defendants were not required to prove the existence of the Takeover Arrangement which they raised in their defence or that it was for PEWC to prove that Hu disposed of the assets of PEWC to Willi without the authority of PEWC. Nor do I think the words of Lord Brandon of Oakbrook in Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948 at 951A to E would provide any support for his contention, as the plaintiff’s claim and the fact situation in that case was very different from ours. In our case, Hu and Top Selection did not dispute that PEWC previously held the ultimate beneficial interest in the PCHL network of companies but that it no longer does so. They asserted that the network of companies have been fully owned and controlled by Willi since February 1999, by virtue of the Takeover Arrangement. Even if the PCHL network was an “open secret” and Hu, Tung and Jack Sun were authorised to acquire overseas investments for PEWC, that would not have entitled Hu or any other director to transfer the network’s assets to himself without specific approval from PEWC’s board. It is clearly for Hu and Top Selection to establish the existence of the Takeover Arrangement. Mr Grossman’s contention that there was no obligation on Hu and Top Selection to prove the Takeover Arrangement raised in their defence and PEWC’s claim to recover its assets would still fail is just not sustainable. Further, as Hu and Top Selection were the parties who produced the three letters and asserted their validity as evidencing the Takeover Arrangement, the onus was on them to prove that these letters were genuine. It was not for PEWC to prove the letters were forgeries (Club Deluxe Ltd v Club Metropolitan Ltd [1995] 2 HKLR 69 at 82 and 88). It was pleaded by Top Selection that Willi was a bona fide purchaser for value of the properties without notice. The burden of proof was on Top Selection to establish this defence (Chan Chun Chung v PBM (HK) Ltd (2004) 7 HKCFAR 178 at §14). In response to the defence of the Takeover Arrangement, PEWC raised the issue that this was a fabrication and the three letters were forgeries. PEWC bore the evidential burden of adducing evidence sufficiently cogent and probative to raise that issue with a view to defeating the defence (Nina Kung v Wong Din Shin, supra at §§180 and 242). The judge regarded PEWC had successfully discharged that evidential burden, as he had concluded at §§526 to 534 of the judgment there never was a Takeover Arrangement as alleged and this was a belated fabrication. He also held at §539 that Willi was not a bona fide purchaser for value of the properties without notice. The judge did not place any persuasive burden on Hu and Willi to prove that they were not fraudulent, as submitted on their behalf in this appeal. They were found by the judge, on the totality of the evidence, to have put forward a fraudulent case. In any event, where the burden of proof lies is of no significance in this case, since the judge had found the evidence was “overwhelming” and pointed to a clear conclusion there was no Takeover Arrangement. C.4.2 If the judge had failed to adopt the proper standard of proof Mr Grossman submitted that although the judge had acknowledged that the court must be satisfied to a high degree of conviction to make findings of fraud, he did not apply the high standard required properly. An example given was in the context of the source of funds provided to PCHL, which, on the defendants’ case, were provided pursuant to the Takeover Arrangement. Neither the defendants nor PEWC was able to prove conclusively who had provided the funds. The judge however drew an adverse conclusion on a balance of probabilities against the defendants by relying on approximate coincidences in timing and the amount of funds supposedly emanating from PEWC. I do not agree this was indicative of the judge not applying the proper standard of proof. The judge found on the evidence that Hu and Willi had not established their contention that Willi was the source of the cashier order for US$14.5 million. He found that the documents supported the conclusion that at least $55 million of Willi’s alleged $80 million ultimately came from PEWC and PEWC was the more probable source of the remaining $25 million. The finding of fraud was not based on the judge’s conclusions on the fund flow alone but was arrived at after considering a whole host of matters. Mr Grossman’s complaint that the judge’s conclusions on the fund flow was wrong in that he had failed to give weight to certain matters, or that he should not have taken into account other matters, will be considered in the next ground of appeal regarding the judge’s assessment of various matters of evidence. C.5.1 The swissfirst papers Hu and Top Selection advanced the argument that the judge erred in relying on his prior conclusion on the swissfirst papers in rejecting the evidence of Hu and Willi on the source of the US$14.5 million. It was contended that the judge should not have first determined that the swissfirst papers “inexorably” led to a conclusion that the Takeover Arrangement did not happen, and therefore Hu and Willi were untruthful witnesses, and then using this finding in his analysis of the funding arrangement. I do not think that is a fair way of reading the judgment. The evidence on the swissfirst papers was the first of the seven matters listed by the judge at §224 to be considered in resolving the issue which was the crux of the case, namely the validity of the Takeover Arrangement. There is nothing in the judgment to suggest that he had stopped considering all the other evidence after examining the swissfirst papers. The judge’s approach was to test the veracity of the Takeover Arrangement by considering each of the seven matters as listed. As the judge had stated at §528, the swissfirst papers are “especially revealing of an intention on the part of Willi and Hu urgently to conceal Hu’s beneficial ownership in the PacMOS shares. But there is more than just the swissfirst papers.” Similarly, the observation at §248 that the first of the seven faxes in the swissfirst papers was “compelling evidence that the Takeover Arrangement is a fiction” should not be taken out of context. This observation did not amount to a firm or final conclusion, as the judge then went on to consider the other six faxes in the swissfirst papers and the other six matters on his list of relevant circumstances before he drew his conclusion on the Takeover Arrangement at §§526 to 534. The judge arrived at the conclusion that Hu was the beneficial owner of the PacMOS shares, based on his analysis of the swissfirst papers. Mr Whitehead submitted that this conclusion was not pleaded by PEWC. I do not think this is a point of substance. The Takeover Arrangement was raised by Hu and Top Selection in defence to PEWC’s claim asserting that PEWC no longer holds the beneficial interest in the properties in question. In its reply PEWC denied the existence of the Takeover Arrangement, averred that it is inherently implausible, and denied any consideration was provided. It is not necessary for PEWC to plead that the Takeover Arrangement was contradicted by the swissfirst papers as this is a matter of evidence. Nor is it necessary for PEWC to plead the meaning of or the inferences to be drawn from the swissfirst papers, as Mr Whitehead had also contended. Mr Whitehead criticised the judge of subjecting the seven faxes in the swissfirst papers to an analysis worthy of a scholar of the Dead Sea Scrolls. The judge had scrutinised the faxes with care to ascertain the meaning of each of them, with reference to each other and in correlation to evidence that was not in dispute or was found by him to be reliable. This approach was discussed in argument and was accepted by Top Selection’s leading counsel to be correct. I see nothing to find fault with this approach. I do not think the judge’s interpretation of the faxes was unjustified or far-fetched or was not borne out on a fair reading of the documents, if that is what counsel sought to imply. The judge had considered the testimony of Hu and Willi on the swissfirst papers, which was contrary to the judge’s reading of the faxes. He found their explanations unconvincing and contradictory, for the reasons given in §§321 to 339, and rejected their evidence as he was entitled to do. The complaint that the judge had failed to place any or any sufficient weight on various matters is beside the point, as what weight should be attached to what items of evidence is a matter for the trial judge. In assessing the evidence of Hu and Willi on the swissfirst papers, the judge remarked at §322 that “Hu was seeking to raise funds from Willi, while Willi was seeking to raise funds from Hu. Both objectives could not be achieved simultaneously.” Mr Whitehead contended that this finding was not borne out by the evidence, as Hu was not seeking to raise funds from Willi but from the Mosel group, and Willi was not seeking to raise funds from Hu but was attempting to dispose of his PacMOS shares without triggering a general offer. In any event, the raising of funds for PacMOS through the issuance of a convertible bond and Willi’s attempt to sell his shares were matters that could be achieved simultaneously and were not contradictory of each other. It is incorrect to say that the judge’s finding was unsupported by the evidence. Hu’s evidence of his plan in the May faxes was accurately summarised by the judge at §§293 to 295, which was that Hu was trying to raise funds, possibly though not necessarily, from Willi. When Hu was later cross-examined about the fax of 16 July 2004, which referred to the convertible bond being “funded within our group”, Hu then said in principle he was not looking to Willi for money to buy the convertible bond and he could consider making use of the funds of the Mosel group to take part in the convertible bond issue. There was a shift in Hu’s evidence. I agree with Mr Neoh it is somewhat disingenuous for Hu to rely on his own inconsistent evidence to argue that the judge’s finding regarding him was not supported by the evidence. As for the evidence of Willi, this was accurately summarised by the judge at §§312 to 320. There is no question that the judge’s finding regarding Willi was not supported by the evidence. Hence, the substance of the evidence of Hu and Willi, as correctly found by the judge, was that Hu was looking to Willi to raise money and Willi was looking to Hu to do likewise. The judge’s remark that both objectives could not be achieved simultaneously cannot be faulted. The judge found at §328 that contrary to what Hu was saying, the correspondence does not appear on its face to have anything to do with fund raising. If “Hu’s group” were genuinely seeking to raise money to enable it to purchase the Mainland electronic plant, the judge queried how could the group raise money through itself subscribing for the convertible bond which was supposed to raise money for the group as the group would merely be borrowing its own monies by the convertible bond. Mr Whitehead submitted the above was not supported by the evidence in that Mr Neoh had accepted at the trial that the letter dated 14 July 2004 was connected to fund raising; that the letter dated 14 July 2004 referred to PacMOS investing in an electronic plant, not “Hu’s group”; and the evidence was that PacMOS, not “Hu’s group”, would purchase the Mainland electronic plant. There is nothing of substance in this submission. What Mr Neoh said about the letter dated 14 July 2004 when he cross-examined Hu on this letter is of relatively little importance. Mr Whitehead sought to draw a distinction between PacMOS and “Hu’s group” as mentioned by the judge. “Hu’s group” would appear to be the judge’s shorthand way of referring to MVI or the Mosel group, and MVI owned 31.5% of the equity in PacMOS through a subsidiary Vision 2000. Irrespective of whether technically PacMOS was within the Mosel group, what the judge was saying in §328 and the paragraphs that followed was simply casting doubt if the real object of what was canvassed in the July 2004 correspondence was indeed to raise funds for PacMOS to acquire an electronic plant, in the light of the elaborate discussion involving the issue of a convertible bond which would dilute the stake of Texan in PacMOS to below 30% and thereby not triggering a general offer under the Hong Kong Stock Exchange Listing Rules. On behalf of Top Selection, it was contended that the judge had misunderstood the faxes in the swissfirst papers in §325 in that the judge envisaged the PacMOS shares were to be transferred in a transaction involving two stages, first from Willi to Hu, and then from Hu into a fund, whereas the correspondence contemplated a single transaction by which the PacMOS shares were to be transferred from Texan’s ownership into a fund. The judge was entitled to reject this interpretation of Willi of the correspondence as contrary to the ordinary and natural meaning of the documents. C.5.2 The injections of $80 million and US$14.5 million I will not repeat the judge’s findings on the fund flow concerning Willi’s alleged injections of $80 million and US$14.5 million into PCHL, which I have summarised earlier under section C.1. The judge’s detailed analysis of the relevant documents and the testimony of Hu and Willi on the transfer of funds appeared at §§340 to 446 of the judgment. Mr Whitehead helpfully put together a separate bundle for us containing the extracts of all the documents referred to in this part of his submission. I do not propose to set out the details of the documentary evidence which he had taken us through except to say that I have considered those documents and his submission carefully. Before I go to the specific grounds of challenge of the judge’s findings of fact, it is pertinent to bear in mind three things. Firstly, as the judge had noted, any investigation into the fund flows in and out of the PCHL group has to contend with a major difficulty in that not all of the records of CPE or Trident Bank are now available. Since many records were destroyed or lost upon CPE’s dissolution, it is not possible to have a complete picture of the fund flows between PEWC or PEWC-related companies and PCHL. Documents obtained from Trident Bank as a result of an Anton Piller order against Ma were far from complete, the discovery made by Ma in these proceedings had been scanty, and as payments to and from companies within the PCHL group were frequently routed through Trident Bank, it is not always possible to have a complete picture as to what happened to monies after they were received by Trident Bank. Patagonia and the Corporate Defendants had only provided scant discovery. No document was disclosed by them to show how a sum of $111,422,824.71 (roughly equivalent to US$14.5 million) was characterised in their books or what happened to the monies received by PCHL from Patagonia in April 1996. The judge did not think it right that Hu and Willi should be allowed to take advantage of the paucity of documents disclosed by Patagonia and the Corporate Defendants, which one or other of them ultimately controls. Secondly, as the judge had remarked, a “byzantine” system was adopted for the remittance of funds by PEWC to overseas entities, through the use of “fixed deposit” entries with Trident Bank, which was merely a brief transit point in a complicated and possibly roundabout routing of particular funds. The judge concluded that “even when an internal record exists, the record may not by itself necessarily reflect how funds were used”. Thirdly, the judge’s findings on the fund flows were arrived at not just on the basis of the available documentary evidence, but also on his assessment of the oral testimony of Hu and Willi of how Willi came to provide the funds, which he summarised at §§178 to 191. The judge had merely placed an evidential burden on them to establish that the funds were provided by Willi. He found their evidence on the fund flow “highly unsatisfactory”, “evasive”, “difficult to believe”, “incredible”, for the reasons given at §§433 to 442. With the above matters in mind, I turn to consider the defendants’ arguments challenging the findings on the US$14.5 million, the $55 million tranche (roughly equivalent to US$7.2 million) of the $80 million, and the balance being the $25 million tranche. The defendants’ criticisms regarding the findings on the US$14.5 million injection may be summarised as follows: (1) The judge did not refer to the audited financial statements of CPE as at 31 December 1996, which showed that Patagonia was not among the subsidiaries to which CPE had advanced money. His rejection of CPE’s balance sheet as “a work in progress” in that “it does not look like a finished document” is misplaced. The judge would appear to have only considered the trial balance and extended trial balance of CPE, which also showed that no loans had been made to Patagonia. (2) The judge did not take into account the use of the cashier order would suggest that the source of funds came from a third party outside PEWC’s group and there were no other parties putting their hands up as the source of the funds apart from Willi. (3) The judge took the view it was “most of the time” but “not invariably” that indirect remittance by PEWC would have been booked through CPE, and that “it is still entirely possible that PEWC routed the funds in some other way or ways over some period of time or times”. This was speculation on his part and was contrary to the evidence of Frank Yuen, who stated in §300 of his report that CPE served as “a booking entity of the PEWC group to consolidate all intercompany indebtedness between PEWC, the fund raising companies and their fellow subsidiary companies.” I do not think the above criticisms are sufficient for this court to interfere with the judge’s finding on the US$14.5 million. Even if the judge had not considered the audited financial statements of CPE, it is unlikely that this evidence would affect the judge’s conclusion in the overall scheme of things, in view of the incomplete documents made available to the court and that it is not possible to construct a complete picture of the fund flows between PEWC or PEWC-related companies and PCHL from the available documents. The judge was entitled to take the view that not all the monies provided by PEWC would have been booked through CPE, notwithstanding the opinion in the report of Frank Yuen. It is pertinent to note that Frank Yuen made a “limiting condition” to his report at §465 stating that the accuracy of his report “is primarily dependent on the accuracy and completeness of the information provided by PEWC” and in §§315 to 318 he noted the incompleteness of the accounting records. The judge was also entitled to reject the suggestion, which was made to him by Top Selection’s leading counsel, to accept Willi’s version just because there was no suggestion of an alternative source of the funds. In respect of the $55 million tranche, the defendants attacked the judge’s findings in these ways: (1) The judge’s finding in §§368 to 372 and 393 that this sum was routed by PEWC to PCHL through Trident Bank was contrary to the forensic evidence of Frank Yuen, in that the latter’s report at §230 stated that “the fixed deposits of PEWC with Trident Bank were bogus and created for the sole purpose of temporarily off-setting the balances of Account #1502 and treating the outward remittances of PEWC as fixed deposits overseas in its financial statements”. (2) The finding in §§368 to 372 and 393 that this sum of US$7.2 million was probably routed by PEWC to Trident Bank through CPE was contrary to the evidence. Mr Neoh acknowledged at the trial there was a missing step in the fund flow from CPE to Trident Bank, there was no evidence showing CPE did remit the sum to Trident Bank as the judge had noted at §370, and the draft extended trial balance of CPE as at 31 December 1995 showed that there was no such payment by CPE to Trident Bank. (3) The judge was wrong to place no weight on the draft extended trial balance of CPE at §§386 and 388. The figures in the draft extended trial balance correspond to the balance sheet of CPE as at 31 December 1995, which the judge did not refer to. The balance sheet recorded that the only sum placed by CPE with Trident Bank for the period was US$2,310,000. The documentary evidence, being the audited financial statements of CPE for the year ended 31 December 1995, the audit working papers of D P Lau & Co and the Trident Bank Interest Income Schedule, established that the only sum placed by CPE with Trident Bank in 1995 was a deposit of US$2,310,000. (4) The judge in relying on the concordance of dates in §390 and the coincidence of interest periods and rates in §392 to support the inference that CPE transferred the US$7.2 million to PCHL on 8 November 1995, mistakenly mixed up CPE with Trident Bank, which was previously known as Central Pacific Bank, and this was corrected in a corrigendum. The coincidence point falls away after the correction, as both documents referred to in §392 were Trident Bank documents and CPE was not involved. (5) The judge found in §§399 to 400 that most likely the $80 million advanced by PEWC to PCHL was paid in early 1997 out of the proceeds from the sale by Blinco HK of the Conrad Hotel. This finding is contrary to the tenor of Frank Yuen’s report in that money apparently transferred to Trident Bank did not reflect real transactions and Wilson Lee’s report dated 28 January 1999, which was not referred to by the judge. The latter report stated that of the proceeds of US$127.18 million, US$100 million was used for the investment in Montford Ltd in 1997 in respect of the Pudong development, US$20 million was loaned to PUSA, and US$7.18 million was used by other subsidiaries. The judge was fully aware of the missing gap in the fund flow in that there was no direct documentary evidence showing the payment of US$7.2 million by CPE to Trident Bank on 8 November 1995. He considered the documents referred to in §§361 to 372, which showed a remarkable correspondence with the details of the tranche of US$7.2 million, and I do not think the error corrected in the corrigendum significantly altered the position. He was entitled to have regard to the totality of the evidence, including the testimony of Hu and Willi, which he rejected. He had considered the trial balance of CPE and was prepared to accept this constituted some evidence against PEWC’s submission that the US$7.2 million moved from CPE to Trident Bank. What weight should be attached to the accounting documents of CPE is a matter for the trial judge. For the reasons as given above, I do not think the audited financial statements of CPE (if they had not been considered by the judge) would have made a difference to the finding he made. As for the documents of Trident Bank considered by the judge at §§361 to 366 and 369, the judge was entitled to infer, on the totality of the evidence before him, there was a transfer of US$7.2 million from CPE via its Société Générale New York branch account to Trident Bank’s Bank of Hawaii Hong Kong branch account on 8 November 1995. I agree with Mr Neoh that the extract in the report of Frank Yuen should not be taken to mean that the fixed deposits with Trident Bank involved no real funds. This was explained by Mr Neoh to the judge in his closing submissions and the judge had agreed with him. What the expert meant was that real moneys had come out but were treated as deposits with Trident Bank when the moneys had not actually gone into Trident Bank. For the same reason, I reject the contention that the judge’s finding the money loaned by PEWC to PCHL was most likely paid out of the sale proceeds of the Conrad Hotel is contrary to Frank Yuen’s report. The bank documents referred to by the judge in §400 showed real movement of funds through different banks. The statement in Wilson Lee’s report, which was not referred to by the judge, was based on an “inference … drawn from the first draft of the audit report”. This could hardly be regarded as weighty evidence. The defendants’ challenge against the finding of the $25 million tranche would fall away if their challenge regarding the $55 million tranche is unsuccessful. The judge was entitled to infer in all likelihood the $25 million tranche was transferred in the same way as the other tranche. C.5.3 The transfer of Myall shares The judge regarded as suspect the allegation by Hu and Willi that the Myall shares were transferred as part of the consideration of the Takeover Arrangement. His reasons appeared in §§420 to 432. The judge noted at §427 that on the face of the documents, Blinco HK acquired Super Wish and its Myall shares from PEWC at a notional consideration. Mr Whitehead submitted the fact that no monies passed when Blinco HK acquired Super Wish should support the defendants’ case that the transfer of the Myall shares was part of the bigger transaction under the Takeover Arrangement. It was the defendants’ case that the Myall shares were transferred without consideration from Super Wish to Blinco HK to settle the remaining indebtedness owed by PCHL (owned by Willi) to Blinco HK. Mr Grossman submitted that in disbelieving Hu and Willi the Myall shares were transferred as a result of arm’s length bargaining between them, the judge had misunderstood the evidence as according to Willi, the value of the Myall shares was at least equivalent to $252.5 million and payment was made in consideration of PEWC writing off the debts owed to it by PCHL. Mr Whitehead further submitted the judge was wrong in §§428 to 430 in holding that the timing of the transfer of the Myall shares did not make sense. He repeated the evidence of Hu, which was not mentioned in the judgment. I agree with Mr Neoh the above submissions are of no merit. The judge’s conclusion was supported by sound reasoning, as was summarised by Mr Neoh: (1) As Myall was apparently acquired by Super Wish in 1997 using internal resources of PCHL, it would make no commercial sense for the Myall shares to be transferred to PEWC as part of the consideration of the Takeover Arrangement, as Willi would be paying for the purchase with something he was purchasing. (2) The documents recording the transaction were backdated. (3) The consideration was notional and at an amount fixed by some accounting entries subsequently made, which “is not the way commercial enterprises normally conduct bona fide business”. (4) The Takeover Arrangement was supposed to be completed in February 1999. Even if the timing of the transfer of the Myall shares was taken to be 28 June 1999, that did not match the alleged completion of the Takeover Arrangement. C.5.4 PCHL’s financial position in 1995 The judge found that the financial condition of the PCHL group in 1995 could not have justified a selling off of the group’s assets on the terms of the Takeover Arrangements. He discussed his reasons in §§475 to 482. In any event, the judge concluded at §483 whatever the financial condition of the PCHL group might have been, it would in no circumstances have justified Hu in causing the beneficial ownership of the underlying assets to be transferred to himself. Mr Whitehead contended that the judge’s finding in §477 that PEWC would continue supporting PCHL financially for the foreseeable future was against the weight of the evidence. He referred to the consolidated financial statements of PCHL for the year ended 31 December 1995 which showed substantial losses (they were mentioned by the judge at §475) and made the point that the Tom Tung schedule demonstrated that PEWC had ceased making any further payments to PCHL after 5 November 1995. There is nothing in this ground of appeal. The judge had carefully considered the evidence on this, which took up much time at the trial. I see no reason to disturb his findings. Even though no payments were made to PCHL after 5 November 1995 according to the Tom Tung schedule, that document also showed that between 1992 and 1998 PEWC made substantial remittances abroad of over US$2 billion, as the judge had pointed out at §477. The fact that the funds were not remitted directly to PCHL does not mean no funds remitted from PEWC reached PCHL. Besides, a loan was obtained by PCHL from Rabobank in 1996 on the basis of PEWC’s backing by way of a comfort letter signed by Hu on behalf of PEWC. Mr Grossman made the point that the judge failed to take into account that given the difficult property market at the time, there was enormous difficulty in selling a shopping mall, which was PCHL’s main asset, without a substantial discount. But as submitted by Mr Neoh, it is illogical to suggest that PEWC would be reluctant to suffer a discount in selling the South Horizons Properties but was willing in effect to give away the properties through the Takeover Arrangement. C.5.5 PEWC’s failure to call certain witnesses On behalf of Hu and Top Selection, it was submitted that the judge was wrong in refusing to draw adverse inferences against PEWC for failing to call Jack Sun, Tom Tung and David Sun to give evidence. Jack Sun, Tom Tung and David Sun were Taiwan residents. Instead, PEWC called Andy Cheng, who was a junior director at the material times. Tung died during the litigation but Jack Sun has remained on the board of PEWC and is its vice chairman. He was within the power of PEWC to produce as a witness, but was not equally available to Hu as Hu was not able to compel his attendance at trial by subpoena. And it could not be said that because of his position as vice chairman of PEWC, PEWC could not expect to obtain from him unbiased testimony. It was contended that if Jack Sun had no knowledge of and did not authorise the Takeover Arrangement, he would have no incentive not to tell the truth. The judge said in §§521 and 522 he should not draw adverse inferences against PEWC because of its failure to call Jack Sun, as Jack Sun was sued as a defendant and it would be odd for PEWC to call him to give evidence when it was likely that PEWC would have to call him a liar in the course of his testimony. Similarly, the judge said at §519 PEWC could not be expected to call Tom Tung when it may well have to accuse him of lying. Tom Tung, although not a defendant in these proceedings, was convicted in Taiwan of defrauding PEWC. David Sun is the president of PEWC since 2003 and had met with the staff of PCHL over the years. The judge did not mention why he should not be called. It was argued that although Tung and Jack Sun were joined as defendants in these proceedings, they were in truth nominal defendants against whom PEWC had taken no meaningful steps throughout the litigation. They were joined as defendants for tactical purposes so that PEWC could avail itself of the exception to imputed knowledge in Re Hampshire Land Co [1896] 2 Ch 743 and to enable PEWC to say they should not be called to testify as they were being sued. The defendants cited among other cases Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434 at §28 in which the Court of Appeal cited with approval O’Donnell v Reichard [1975] VR 916 at 929 and Cavendish Funding Ltd v Henry Spencer & Sons Ltd [1998] PNLR 122 at 128, which are to the effect that it is permissible for the court to draw adverse inferences where a person without explanation fails to call as a witness a person who might reasonably be expected to give direct evidence on the matters in question. The relevant principles are as set out by Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340: “(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.” And as Lord Sumption has stated in Prest v Petrodel Resources Ltd [2013] UKSC 34 at §44: “There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party’s failure to rebut it. For my part I would adopt, with a modification which I shall come to, the more balanced view expressed by Lord Lowry with the support of the rest of the committee in R v IRC, ex parte TC Coombs & Co [1991] 2 AC 283, 300: ‘In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified. Cf Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340.’ ” Wisniewski and other authorities were cited by the parties to the judge so he was aware of the relevant principles. The judge accepted it was reasonable for PEWC to have sued Tung and Jack Sun, given the uncertainty as to precisely who were complicit in Hu’s diversion of PCHL, and reflected this in his costs order in that Hu and Top Selection were ordered to bear 70% of the costs PEWC was to pay Tung’s estate and Jack Sun for failing to establish its claim against them. He must have rejected the contention that PEWC had sued Tung and Jack Sun for tactical purposes as alleged by the defendants. He also accepted Andy Cheng’s explanation why Jack Sun remained on the board of PEWC despite its suit against him and that Jack Sun had not taken part in the board meetings in which the litigation was discussed. Jack Sun was an accused in the criminal proceedings in Taiwan and was sentenced to four years’ imprisonment for forgery. The judge accepted at §522 the reason for not calling Jack Sun. There is no basis to interfere with the judge’s decision that an adverse inference should not be drawn against PEWC in this situation. As for Tom Tung, the judge recognised there was no procedure to serve a subpoena on him as he was residing in Taiwan. And the judge accepted at §519 PEWC had good reasons for not calling him. The judge was right not to draw any adverse inference for not calling Tom Tung. I cannot see on what basis an adverse inference could be drawn against PEWC that it must have known and authorised the disposal of its assets on account of its failure to call David Sun to testify. There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party’s failure to produce a particular witness. In the case of David Sun, the finding was that he had met with PCHL staff and would appear to be aware of the connection between PEWC and PCHL. But even if David Sun knew about the connection between PEWC and PCHL, it does not logically and reasonably follow that he also knew about the acquisition of the properties by PCHL or the disposal of the properties. C.6 Hu’s exercise of the right of silence This relates to the late assertion by Hu of the Takeover Arrangement considered by the judge at §§458 to 467. Hu never mentioned this over the whole of his interrogation by the Taipei District Attorney in 2004. Mr Whitehead contended the judge was wrong to take into account Hu’s exercise of the right of silence in finding that the Takeover Arrangement was a recent fabrication. During Mr Neoh’s cross-examination of Hu when Mr Whitehead objected to questioning which was directed to Hu’s right of silence, the judge had indicated he was sympathetic to Mr Whitehead’s point of view although he did not make a ruling on this. I agree with Mr Neoh this complaint is not sustainable. PEWC was entitled to draw attention to, and the judge was entitled to rely on, what Hu chose to say to the District Attorney, which was plainly inconsistent with the defence he later put forward based on the Takeover Arrangement. As Mr Neoh has put it succinctly, the right is a right of silence, not a right to say inconsistent things. This was not a case where an accused exercised his right of silence. Hu had waived his right of silence for the purpose of giving an exculpatory explanation to the authorities. The judge’s approach is proper and permissible at law (Lee Fuk Hing v HKSAR (2004) 7 HKCFAR 600 at §57; HKSAR v Yuen Kai Tak, CACC 269/2011, §§39 and 42). C.7 Pleading objections The judge made findings at §§533 and 534 that Willi and Top Selection were Hu’s nominees, that Hu to this day controls the properties PEWC sought to recover in these proceedings, and that Hu handed the assets of the PCHL network of companies to himself. Mr Whitehead submitted that the above findings relating to the fraud committed against PEWC had never been pleaded. PEWC had merely pleaded that Top Selection was controlled by Hu, there was no averment that Hu was the beneficial owner. So the conclusions of fraud which the judge arrived at were new and distinct from what PEWC had averred in the pleadings. An allegation of fraud must be distinctly pleaded and particularised. The judge was not entitled to find for PEWC on the basis of an unpleaded theory. Further, the unpleaded fraud theory deprived Hu of the opportunity of responding to it. Hu could have advanced an alternative though inconsistent case that if he was the beneficial owner, PEWC had nevertheless authorised the acquisition of the assets, known of their disposal to Top Selection, and accepted valuable consideration from a third party for the same, so PEWC was not entitled to recover the assets it had disposed of. As pointed out by Mr Neoh, the defence pleaded by Hu and Top Selection was that there was a Takeover Arrangement in February 1999 whereby the companies held by Top Selection were transferred by PEWC, together with the assets held by the companies underneath, including PCHL, to Willi for consideration. The judge found there was no Takeover Arrangement and that the evidence revealed an intention of Hu and Willi to conceal Hu’s ownership of and control through Top Selection of the assets held. There is no need to plead the logical and natural result which followed from the finding that there was no Takeover Arrangement. I do not agree that a new case of fraud was advanced as a result. There is no substance in the contention of the alternative case that might be advanced by Hu. This was not supported by the findings of the judge as he rejected the defendants’ contention that valuable consideration was provided by Willi. C.8 The lack of challenge to Willi’s evidence Mr Grossman contended that the judge was wrong to make findings against Willi where his evidence was not challenged or where the point had not been put to him in cross-examination. Reliance was placed on the rule in Browne v Dunn (1894) 6 R 67 HL that if it is intended to suggest that a witness is not speaking the truth, his attention must be directed to it by cross-examination so that he has a chance to explain. Complaint was made that none of the interpretations of the swissfirst papers, which found favour with the judge, was put to Willi. Willi was not asked to explain who Investor X represented in the diagrams attached to the first fax dated 25 May 2004. He was only asked whether the swissfirst papers indicated it was not he who owned the PacMOS shares. Similarly, Willi was not asked about the matters relating to the transfer of the Myall shares. The judge mentioned at §441 that Willi said he provided PCHL’s 1995 audited financial statement to his financial backers but the auditors did not sign off the financial statement until May 1996, about a month after the cashier order said to represent the US$14.5 million had been paid to Patagonia. The judge had overlooked that Willi was not challenged in cross-examination when he later clarified he was referring to the draft financial statement as opposed to the signed report. Willi was not asked about the continued involvement of Hu and Mrs Hu in the Corporate Defendants after the completion of the Takeover Arrangement, or the use of the South Horizons Properties as security by Hu and Ma. The judge disbelieved Willi’s claim he could not disclose the names or details of his financial backers because of Swiss banking laws, but it was never put to Willi that these laws would not apply when Willi entered into the Takeover Arrangement in a purely private capacity. The judge criticised Willi for giving no details of the haircut repayment at §440 but Willi was not asked for further details when he was cross-examined about this. I do not accept the above submissions on Willi’s behalf. The rule in Browne v Dunn, as noted in Phipson on Evidence (17th ed) at §12-12, is not an inflexible one. It is not broken even if a material matter is not put to a witness, if the witness can fairly and objectively be said to be on notice of it or where the point is so apparent (Flower & Hart v White Industries (Qld) Pty Ltd (1999) 163 ALR 744 at §§51 to 52; Fong Ka Yeung v Medical Council of Hong Kong, CACV 157/2007, §30(1)). It is pertinent to have regard to the full written opening of PEWC so Willi must be on notice of the allegations that would be made against him. Nor does the principle in Browne v Dunn inflexibly require every point which might be used against a witness to be put to him. In essence, the principle is breached if in all the circumstances an omission to cross-examine on a specific point is unfair to a witness (Kaifull Investments Ltd v Commissioner of Inland Revenue [2002] 1 HKLRD 858 at §31(4)). Here, the judge had indicated to the parties on the second day of the trial he was prepared to take a more relaxed view about the rule in Browne v Dunn, and that he would accord a “generous margin of deference to counsel” as to whether they have been fair in the light of what was done in the cross-examination even if a point has not been put. Regarding the swissfirst papers, the main points of PEWC’s contentions were put to him in cross-examination. It should be noted that by the time Willi gave evidence, Hu had been cross-examined at length. The failure to cross-examine will not amount to acceptance of the witness’s evidence where the abstention arises from a motive to save time by not putting the same matters to several witnesses (Phipson on Evidence, §12-35). I am unable to discern any unfairness here. The same applies to the matters relating to the transfer of the Myall shares. The judge was entitled to reject Willi’s evidence on other matters because he found his explanations and assertions incredible. It was not necessary for every point to be put to Willi in cross-examination. C.9 Conclusion and costs For the above reasons, I would dismiss the appeals of Hu and Top Selection. In the event their appeals are unsuccessful, Hu and Top Selection sought in their Notices of Appeal to vary the judge’s costs orders against them. Hu sought an order that PEWC do pay Hu’s costs of the action below insofar as the same concerned the unsuccessful case advanced by PEWC regarding its alleged lack of knowledge of the acquisition of the subject properties, on an indemnity basis, and that the Bullock orders should be set aside. Top Selection sought an order that it is to bear 70% of PEWC’s costs in the proceedings insofar as the costs are referable to the issues concerning Top Selection, alternatively, in respect of PEWC’s costs, Top Selection is to bear 70% of such proportion of costs as may be determined by this court to be a fair and just reflection of Top Selection’s involvement in the proceedings, and that such costs are to be taxed on an indemnity basis. Top Selection also sought to set aside the Bullock orders and the order that it should bear the costs of the Corporate Defendants jointly and severally with Hu. I note that costs orders similar to those in the Notices of Appeal were sought by these defendants when they applied unsuccessfully to the judge to vary the costs orders nisi. I do not see any basis to interfere with any of the costs orders made by the judge against Hu and Top Selection in the exercise of his discretion. I would make an order nisi that Hu and Top Selection should pay PEWC’s costs of the appeals brought by them, with a certificate for four counsel. D. THE APPEALS OF MA D.1 An overview of the appeals Ma was sued in two actions, HCCL 16/2009 and HCCL 18/2009. He has brought an appeal in respect of each. The claim against him in HCCL 16/2009 was based on dishonest assistance of Hu and others in acquiring the PacMOS shares and concealing them from PEWC. The judge found on the evidence adduced by PEWC (Ma did not testify in the proceedings) it is not clear to what extent (if at all) Ma assisted Hu and declined to draw adverse inferences against Ma in the absence of more concrete evidence of Ma’s involvement in Hu’s diversion of PCHL. No relief was granted to PEWC on this claim. The only order made by the judge against Ma in this action was to order him to pay 70% of PEWC’s costs of the proceedings against him in this action and in HCCL 18/2009. Ma brought an appeal against this order in CACV 90/2012. He sought to set aside the order and asked this court to make an order dismissing PEWC’s claim against him in HCCL 16/2009 with costs to him on an indemnity basis, on the ground that this action should be considered separately from HCCL 18/2009 in that the two actions had not been consolidated. Ma was the successful party in this action and should not be made to pay PEWC’s costs. Mr Neoh submitted that this appeal is an appeal on costs only. No leave to appeal has been obtained and this court has no jurisdiction to hear the appeal unless leave to appeal is granted out of time. The claim against Ma in HCCL 18/2009 was premised on knowing receipt in that he had procured or suffered the borrowings of Town Sky to be secured by a mortgage of part of the South Horizons Properties. The judge found Town Sky appeared to be an alter ego for Ma. He drew adverse inferences against Ma as he could have explained in court how it came to be that Town Sky was able to use the South Horizons Properties as security for Town Sky’s borrowings. The judge made these holdings in §§562 and 563: “562. Here Town Sky clearly obtained a benefit from the use of property which had been derived by Hu from PEWC. Ma presumably knew that neither he nor Hu would in the normal course of events be entitled to such a benefit. There is no satisfactory explanation of what Ma knew or did not know, only because Ma opted not to give evidence. 563. It would therefore be unconscionable in all the circumstances to allow Ma to retain the economic value of the benefit which he obtained. Accordingly, a duty should be imposed on Ma to account as a constructive trustee for such benefit as he might have received.” The judge ordered Ma to account for all benefits (including monies and preferential borrowing rates) received by him or Town Sky through the use of any part of the South Horizons Properties as loan security from 27 May 1999 onwards. He also ordered Ma to bear 70% of PEWC’s costs of the proceedings against him in HCCL 18/2009 and in HCCL 16/2009. Ma brought an appeal against the above order in CACV 91/2012 asserting that the judge should have dismissed the claim against him as the case pleaded against him was doomed to fail. The evidence adduced by PEWC did not raise a case for Ma to answer on an issue arising on the pleadings. Hence, it was not open to the judge to conclude that he had knowledge of PEWC’s beneficial interest in the South Horizons Properties and of Hu’s breach of fiduciary duty in causing the mortgage to be made without the authority of PEWC, by drawing adverse inferences against him arising from his election not to give evidence. In any event, the judge was wrong to have ordered an account against Ma when (a) the pleadings failed to properly identify the subject matter of the account; (b) there was no evidence to suggest to what extent Town Sky had benefited at the expense of PEWC; and (c) there was no plea or evidence to suggest that Town Sky and Ma could be treated as if they were one and the same. D.2 Ma’s appeal in CACV 90/2012 I propose to deal with this appeal succinctly, as the real fight of the parties is in the other appeal. Mr Chan submitted on behalf of Ma that this is not an appeal on costs alone as he also complained against the judge’s failure or refusal to dismiss the claim against Ma for dishonest assistance. Further, by proceeding with his appeal against the orders made against him in HCCL 18/2009, Ma would “necessarily” also be impugning that part of the order against him which relates to the costs in HCCL 16/2009. It would not make sense to require him to make a separate application for leave to appeal in respect of his appeal against liability for costs in HCCL 16/2009. Mr Chan urged this court to adopt a “sensible and purposive approach” in construing the procedural rules so that the Notice of Appeal would not be caught by the requirement to seek leave to appeal. Alternatively, if leave to appeal is required, he submitted this is an appropriate case to grant leave to appeal out of time. I am inclined to agree with Mr Neoh this is an appeal as to costs only. Leave to appeal is not required where it is part of a larger appeal involving grounds of substance, but those grounds must be genuine and not put in as a kind of smoke screen (Wheeler v Somerfield [1966] 2 QB 94 at 107). It seems to me that the complaint against the judge’s failure or refusal to formally dismiss the claim was put in as a platform for Ma to argue against the costs order. And this separate appeal against the costs order in HCCL 16/2009 does serve a purpose, even though Ma would be attacking the costs order made against him in both actions in his other appeal against the order in HCCL 18/2009. Because if he should fail in his appeal against the dismissal of the knowing receipt claim, and the costs order in respect of HCCL 18/2008 is upheld, he would still be seeking to overturn the costs order in respect of HCCL 16/2009 by bringing this separate appeal. So leave to appeal is required in this instance. The next question is whether leave to appeal should be given out of time. The most pertinent consideration is whether Ma has a real prospect of success in appealing the costs order. Mr Chan submitted it is a cardinal principle that costs should follow the event and in no circumstances should the winning party be ordered to pay the costs of the losing side. As Ma was the successful party in HCCL 16/2009, the judge had erred in law in ordering him to pay 70% of PEWC’s costs. These submissions were made to the judge when Ma applied to vary the costs order nisi. The judge had clearly taken this into account when he made the costs order absolute. He indicated to Ma’s counsel Ms Joyce Chan that he was minded to make a global costs order, notwithstanding Ma succeeded in one action and failed in the other. He agreed with the submission of Mr Neoh that the actions are so intertwined he did not think it possible to do the “filleting” of issues and award costs according to the success on the issues. He therefore approached costs on a global and broad-brush basis. He was not persuaded by Ms Chan to alter the 70% costs awarded to PEWC in the global order. The costs order in respect of HCCL 16/2009, though a departure from the usual order of awarding costs to the winning party, is entirely within the judge’s discretion to make, and he had given valid reasons for doing so. Unless the judge is shown to be plainly wrong, and I do not think he was, we should not interfere with his exercise of discretion, even though we might not have decided costs in the same way. It is unnecessary to consider the Respondent’s Notice of PEWC. I do not think Ma would have a real prospect of success in appealing the costs order. I would decline to grant leave to appeal out of time. As for the costs of this appeal, I would deal with this after I have considered the other appeal of Ma. As I have mentioned earlier, the other appeal is the real fight of the parties. For if Ma should succeed here, the global costs order made by the judge in the two actions must be set aside. D.3 Ma’s appeal in CACV 91/2012 D.3.1 The pleading of the claim in knowing receipt As much of the arguments would turn on how PEWC’s case against Ma was pleaded in HCCL 18/2009, I would set out the relevant extracts from the Re-Re-Re-Amended Statement of Claim: “39. During the period beginning January 1992 to the date of issue of this Writ, Hu, … Ma … were at various times directors … of PCHL. In the premises, by virtue of the dealings of PCHL with the Property [i.e. the Commercial Block in South Horizons] and the proceeds of sale of part of the Property and the legal ownerships of PCHL in all the issued shares of Ever Dragon, Harmutty, Haddowe, Casparson, Afterville and Rakeplus [i.e. companies used by PCHL to acquire the South Horizons Properties], Hu, … Ma … are imputed with knowledge that the Property and proceeds of sale of part thereof are held on resulting and/or constructive trust for the benefit of PEWC, and they are therefore liable to account to PEWC as constructive trustees for losses to proceeds of sale or rents or any income derived from the Property.” “50. Further, Ma, as a director of Town Sky Holdings Limited (now Trident (Asia) Investment Limited) and by virtue of the fact that he was a director … of PCHL, is thereby put on notice that the beneficial interest in the Property belonged to PEWC. By reason of the fact that Ma procured or suffered Town Sky Holdings Limited’s borrowings to be secured by the West Block or any part thereof without any consideration moving to PEWC nor with the consent or authority from PEWC, Ma is a constructive trustee of any borrowings secured by the West Block or any part thereof and by virtue thereof, under a fiduciary duty to account for all such borrowings to PEWC. By virtue of his fiduciary duty to PEWC, Ma is under a duty to provide PEWC all information and assistance as will enable PEWC to trace and recover such borrowings.” In the prayer for relief, PEWC claimed against Ma: “6. A Declaration that [Hu] and/or … [Ma] … or each or jointly of them be liable as constructive trustee in respect of any loss to the proceeds of sale, rentals or other income from the East Block and the West Block for [PEWC]” “10. (a) An Order that [Ma] do account to [PEWC] for all borrowings made on the security of the West Block; and (b) An Order that [Ma] do pay or cause the same to be paid to [PEWC] sums found due on such taking of account.” This is a claim in knowing receipt. There is no dispute with Mr Neoh’s formulation that for a claim in knowing receipt to succeed, a plaintiff would need to establish these requirements: (1) a disposal of the plaintiff’s assets in breach of trust or fiduciary duty; (2) the beneficial receipt by the defendant of the assets of the plaintiff or their traceable products; and (3) receipt by the defendant of the assets with knowledge that the assets are trust property or property subject to a fiduciary duty and have been transferred in breach of trust or fiduciary duty. (See El Ajou v Dollar Land Holdings Plc [1994] 2 All E R 685 at 700g) The dispute of the parties in this case rests on the requirements in (2) and (3). D.3.2 The drawing of adverse inferences I would not repeat the legal principles regarding the drawing of adverse inferences in the absence or silence of a witness, as the extracts from the relevant authorities have been set out in the earlier parts of this judgment. Mr Chan’s submission is that the law permits adverse inferences to be drawn against a party or witness only where he might be expected to have material evidence to give on a matter that is in issue between him and the opposite party (proposition (1) in Wisniewski v Central Manchester Health Authority). In other words, the witness can be expected to give evidence only when such evidence is relevant to an allegation made against him on the pleadings. Further, there must be some evidence adduced by the opposite party which raises a case to answer on an issue arising on the pleadings between him and the party against whom adverse inferences are sought to be drawn before the court is entitled to draw the desired inference (proposition (3) in Wisniewski v Central Manchester Health Authority). At the trial, the stance adopted by Ma was that the case against him as set out in PEWC’s pleadings did not call for an answer. On the 6th day of the trial, his counsel Mr Yin informed the judge that Ma would not be called to give evidence. On the 7th day of the trial, Mr Yin raised with the judge that certain parts of Mr Neoh’s opening submission went beyond his pleaded case, and he obtained an assurance from the judge he may safely rely on the pleadings. Mr Chan emphasised that Ma had no obligation to dispel suspicions cast upon him by the evidence before the court unless the evidence was relevant to the pleaded case against him. Ma was entitled not to take notice of any evidence adduced by PEWC which, though relevant to some causes of action against the other parties, did not relate to any of the allegations against him on the pleadings. Mr Chan argued that on a proper analysis of the pleadings, the allegations against Ma were bound to fail. Faced with a case which did not call for an answer, Ma’s decision to remain silent was readily understandable and the judge clearly fell into error insofar as he held against Ma on the basis “there is no satisfactory explanation of what Ma knew or did not know, only because Ma opted not to give evidence”. I have no quarrel with the general propositions as submitted above by Mr Chan. Whether Ma should have applied to the judge to strike out PEWC’s claim on the basis it was bound to fail as contended in this appeal is beside the point. I turn to consider if Ma could make good his contention that he did not have a case to answer on the pleadings. D.3.3 If Ma had knowledge of PEWC’s interest in the properties and their unauthorised use I will first consider the requirement of knowledge for knowing receipt. Ma’s knowledge of the requisite matters (i.e. PEWC’s beneficial interest in the South Horizons Properties and Hu’s unauthorised mortgage of the properties) was pleaded on the basis that he was put on notice of these matters as a director of Town Sky and a director of PCHL. The pleading that knowledge must have been acquired or should be imputed as a director of PCHL is a bad one and Mr Neoh did not seek to defend it. This is because Ma had ceased to be a director of PCHL from April 1992 when PCHL had not even entered into agreements for the purchase of the South Horizons Properties. And since the mortgage of the properties to secure Town Sky’s lending facilities did not take place until 1999, it is clear that the allegation of knowledge acquired by Ma as a director of PCHL must fail on the evidence. Mr Neoh pinned his case on Ma’s knowledge acquired or imputed as a director of Town Sky. I leave aside whether Town Sky should be considered an alter ego of Ma, as that is another matter, and has not been pleaded by PEWC. The question is whether there was a case to answer in respect of the pleaded allegation that Ma should have the requisite knowledge as a director of Town Sky. The most that could be said was that Town Sky would not have obtained the credit facilities without the security of the South Horizons Properties and Ma knew about this by virtue of his being a director of Town Sky. I am quite unable to see on what proper basis it could be said that Ma should be put on notice Hu’s mortgage of the properties was unauthorised by virtue of Ma being a director of Town Sky. I do not think Ma would have a case to answer in respect of the requirement of knowledge for knowing receipt. D.3.4 If there was beneficial receipt by Ma of the assets of PEWC or their traceable products The next requirement for knowing receipt is the beneficial receipt by Ma of assets of PEWC or their traceable products. Credit facilities were granted to Town Sky (again, I leave aside for the time being if Town Sky should be treated as Ma’s alter ego) by HSH Bank by a facilities letter dated 27 May 1999, secured by, among other assets, part of the South Horizons Properties, which would appear to be the principal security. Mr Neoh argued the requirement of receipt was satisfied in that Town Sky received the benefit or value of a contractual obligation secured on PEWC’s property, valuable benefit was conferred on Town Sky with a corresponding encumbrance on PEWC’s property and detraction from the value of such property. He relied on this passage in the judgment of Iacobucci J of the Supreme Court of Canada in Gold v Rosenberg [1997] 3 SCR 767 at §84: “Specifically, the Bank [i.e. one of the defendants] contended that the guarantee itself is not property and that, accordingly, in receiving the guarantee, the Bank did not acquire any property which could be the subject of a knowing receipt claim. I do not agree with this argument. … on the facts of this case, when the Bank obtained the guarantee from Primary, it also acquired, … a $1.2 million collateral mortgage on real estate belonging to Primary in support of the guarantee. As such, the Bank received both a contractual undertaking to assume the obligations of Trojan [i.e. a company owned by another defendant] in the event of its default, and security of a proprietary nature in support of that undertaking. The mortgage, as security for the guarantee, conferred on the Bank a proprietary interest in the trust property. The guarantee provided by Primary, supported by a collateral mortgage over property owned by Primary, in my view, constitutes property which can be made the subject of a knowing receipt claim. Even if one takes the position that the guarantee does not constitute trust property, the giving of the guarantee confers a valuable benefit on the Bank and correspondingly encumbers the estate and detracts from its value. The benefit conferred on the Bank and the resulting loss in value suffered by the estate are sufficient, in my view, to bring the guarantee within the knowing receipt category of liability.” Mr Neoh submitted that by parity of reasoning, Town Sky received valuable benefits in the form of credit facilities, which correspondingly encumbered the mortgaged property and detracted from their value. Hence, the benefit conferred on Town Sky and the resulting loss in value suffered by PEWC were sufficient for the judge to find that the requirement of receipt for knowing receipt had been satisfied. I do not agree with his submission. I do not think the statements of Iacobucci J would advance PEWC’s case, for, as submitted by Mr Chan, it is a false analogy to compare Town Sky’s receipt of the loan monies from HSH Bank with a mortgagee who takes a mortgage of property belonging to the claimant with notice of the latter’s interest. A mortgage takes effect as a conveyance of the legal title subject to the mortgagor’s right of redemption, so proof of the mortgage would show that the mortgagee has received property belonging to the mortgagor. The situation is very different in the case of a borrower who allows his borrowings to be secured by a mortgage wrongfully granted over the mortgagor’s property. In receiving the loan monies from the bank, it cannot be said that the borrower has received property belonging to the mortgagor. Mr Neoh resorted to the doctrine of equitable tracing. He submitted that PEWC would be able to trace its property into the credit facilities obtained by Town Sky by tracing through the mortgage (a chose in action) obtained by HSH Bank. He prayed in aid the statements of Lord Millett in Foskett v McKeown [2001] 1 AC 102 at 128C and 134B to C to submit that by the process of tracing, a bundle of rights may be traced into another chose of action and what one traces is not the physical asset itself but the value inherent in it. I do not think equitable tracing would assist PEWC. We are here concerned with a borrower who allowed its borrowings to be secured by a mortgage wrongfully granted over the mortgagor’s property. As submitted by Mr Chan, tracing is not available not just because the security was granted to the bank and the loan advanced to Town Sky came from monies belonging to the bank. It is because the essence of the transaction reached with the bank was not to convert the mortgaged property into loan monies but to confer rights on the bank in the event of Town Sky’s default in repayment. The property charged to the bank to secure the repayment of the indebtedness was not intended to be called upon until the event of default, and even so only if the bank should elect to enforce the mortgage. And even if the bank should choose to enforce its security, it would be wrong to regard the mortgaged property as having been converted into money in the hands of the borrower, for the effect of enforcing the security was not to extinguish the indebtedness of the borrower to the extent it has been discharged by the enforcement but merely to substitute the mortgagor for the bank as the creditor. The mortgagor in that situation would step into the shoes of the bank as the creditor, and this is conceptually different from a tracing claim. There was in any event no pleading and no evidence that the mortgaged property had been called upon to repay the loan to Town Sky. Mr Neoh sought to advance an alternative case that Town Sky had received the traceable products of PEWC’s assets on the basis that the loan to Town Sky was repaid with the rental income derived from the South Horizons Properties. He drew our attention to the fact this was what he asked the judge to infer in his opening and closing submissions. But this was not PEWC’s case pleaded against Ma. I agree with Mr Chan in the absence of any allegation on the pleadings that the loan to Town Sky was repaid with rental income from the South Horizons Properties, Ma could not be expected to deal with this and no adverse inference should be drawn against him in this respect by reason of his election not to give evidence. Mr Neoh referred us to provisions in the facilities letter of HSH Bank to Town Sky, the assignments of rentals/licence fees in favour of the bank and the mortgages, the effect of which was that rental proceeds would be paid into the Charged Rental Account and applied by the bank towards the payment of the secured indebtedness, which would include the indebtedness of Town Sky. Mr Neoh submitted it could be inferred from those provisions that the loan to Town Sky was repaid with the rental income derived from the South Horizons Properties. Even if it were open to consider this unpleaded alternative case of PEWC, I do not think the evidence was such that Ma would have a case to answer. For there was specific provision in the facility letter addressed to Haddowe Co Ltd, which was not repeated in the facility letters of the same date addressed to Town Sky or to PCL Enterprises Holdings Ltd, that the rental receipts assigned to the bank would be applied to repay the loans to Haddowe. This was cogent evidence that the assigned rentals would only be applied towards discharging the indebtedness of Haddowe. I do not think the requirement of receipt of assets of PEWC or their traceable products would be satisfied in this situation. D.3.5 If there was proper basis for ordering the account claimed by PEWC against Ma Lastly, I turn to consider if there was any proper basis to make Ma liable to account to PEWC for the receipt of Town Sky, assuming that the requirement of receipt was satisfied. As mentioned earlier, the judge found Town Sky appeared to be an alter ego for Ma. Mr Neoh also pointed to the oral closing submissions of Ma’s counsel, Mr Yin, at the trial, in which he said that “for present purposes, we can identify Ma with Town Sky”. It was not the pleaded case of PEWC that Town Sky was Ma’s alter ego. In the absence of pleading, I do not think Ma could be expected to deal with it in the evidence. As for the position taken by his counsel in the closing submissions, I do not think Mr Yin was accepting that Ma could be identified with Town Sky for all purposes. His concession was limited to the point under discussion, which was attributing the knowledge of Town Sky to Ma. It is unnecessary to consider the case of unjust enrichment canvassed by Mr Chan, as this was not a case pleaded against Ma. D.4 Conclusion and costs For the above reasons, I am of the view that Ma would not have a case to answer on the claim of knowing receipt as pleaded. The judge was wrong to draw adverse inferences against him in not giving evidence in respect of a knowing receipt claim that was bound to fail. The judgment against Ma in HCCL 18/2009 should be set aside, and it follows that the costs order against him in HCCL 16/2009 and HCCL 18/2009 should be set aside. I would allow the appeal in CACV 91/2012. Mr Neoh requested us to give him an opportunity to make submissions on the costs of the trial, in the event we are minded to set aside the costs order of the judge. I propose to invite the parties to make written submissions without another hearing, giving leave to PEWC to lodge its submissions within 7 days of the handing down of this judgment, and Ma and any other party or parties that may be affected by the costs order proposed by PEWC 7 days thereafter to reply. For the costs of Ma’s two appeals, I propose to make an order nisi on a global basis, awarding Ma 85% of his costs, to reflect the fact that he has been largely successful, with a certificate for three counsel. Hon Fok JA: I have had the benefit of reading the judgment of Kwan JA in draft. For the reasons so comprehensively addressed in that judgment, with which I agree, I too would (1) dismiss the appeals of Hu and Top Selection and make the order nisi as to costs set out in paragraph 131 above, and (2) decline to grant leave to appeal to Ma in CACV 90/2012 but allow Ma’s appeal in CACV 91/2012 and make the global order nisi as to costs of the two appeals set out in paragraph 183 above. Hon Lam VP : In respect of CACV 93, 94, 95 and 96/2012, we make an order as per paragraphs 128 and 131 above. In respect of CACV 90/2012, we make an order as per paragraphs 147 and 183 above. In respect of CACV 91/2012, we make an order as per paragraphs 181 to 183 above. (M H Lam) Vice-President (Susan Kwan) Justice of Appeal (Joseph Fok) Justice of Appeal Mr Anthony Neoh SC, Mr Eugene Fung SC, Ms Barbara Wong & Mr Jonathan Chang, instructed by Lo & Lo, for the Plaintiff in HCCL 16, 17 & 18/2009 (Respondent in all appeals) Mr Robert Whitehead SC, Mr Steven Kwan & Mr Vincent Chen, instructed by Haldanes, for the 8th Defendant in HCCL 16/2009 & 4th Defendant in HCCL 17 & 18/2009 (Appellant in CACV 94, 95 & 96/2012) Mr Edward Chan SC, Mr Michael Yin & Ms Joyce Chan, instructed by C.K. Mok & Co., for the 11th Defendant in HCCL 16/2009 & the 20th Defendant in HCCL 18/2009 (Appellant in CACV 90 & 91/2012) Mr Clive Grossman SC, Ms Chyvette Ip & Ms Rachel Lam, instructed by Gall, for the 22nd Defendant in HCCL 18/2009 (Appellant in CACV 93/2012) Annex 1 Expression Name in full Description All Dragon All Dragon International Ltd A company incorporated in the BVI, the shareholders of which are Blinco BVI and Patagonia; held 100% of Texan as a result of transfers in 1996 and 1997; one of the defendants in HCCL 16/09 and HCCL 18/09 Andy Cheng Cheng Chao-chun, Andy (鄭超群) A director and current executive vice president of PEWC; witness of PEWC Bleau Bleau Investments Pte A joint venture company of PEWC and L.E.T. Pacific Ltd, which held Pacific Plaza in Singapore Blinco BVI Blinco Enterprises Ltd A company incorporated in the BVI as a wholly owned subsidiary of PEWC; one of the defendants in HCCL 18/09 Blinco HK Blinco Enterprises Ltd (太平洋投資企業有限公司) A company incorporated in Hong Kong, a wholly owned subsidiary of PEWC, set up to hold PEWC’s investment at one time in the Conrad Hotel, Hong Kong Bridle Path Bridle Path Consultants Inc A company incorporated in the BVI, to which Blinco BVI and Patagonia were transferred in February 1995 Corporate Defendants Various defendants in the three actions being some of the corporate entities held underneath Blinco BVI and Patagonia, which formed the structure holding the assets sought to be recovered by PEWC in the three actions; a chart setting out the Corporate Defendants’ present organisation is found in Annex 3 to the judgment of Reyes J CPE Central Pacific Enterprises Ltd A company incorporated in Hong Kong, a subsidiary of PEWC and served as a central treasury for PCHL and its network of companies David Sun Sun Tao-hen, David (孫道亨) A director and current president of PEWC, younger brother of Jack Sun Frank Yuen Yuen Tsz Chun, Frank Forensic accounting expert engaged by PEWC in the proceedings HSH Bank Hamburgische Landesbank Girozentrale Lender of the HSH Loan in 1999 on the security of the West Block and car parking spaces in the South Horizons Properties Hu Hu Hung Chiu (胡洪九) Former chief financial officer, director and executive vice president of PEWC; one of the defendants in each of the three actions Jack Sun Sun Tao Tsun, Jack (孫道存) A director of PEWC, its former president and current vice chairman; one of the defendants in HCCL 16/09 and HCCL 18/09 Jennifer Tse Tse Wan Man, Jennifer (謝韻文) The treasurer and assistant financial controller of Blinco HK; took over from Pauline Ching as the treasurer and assistant financial controller at POIM in May 2000; witness of PEWC Ma Ma Kam Fook, Robert (馬金福) A director at various times of Trident Asia, Trident Bank and Town Sky; one of the defendants in HCCL 16/09 and HCCL 18/09 Moniker Moniker Investments Ltd A company incorporated in the BVI which held 100% of Bleau, which in turn held Pacific Plaza in Singapore; Moniker was held equally by Myall (which used to be a subsidiary of L.E.T. Pacific Ltd) and Meredith Ltd (a subsidiary of PEWC) MVI Mosel Vitelic Incorporation A company formed as a merger of Mosel Electronics Taiwan Inc (a Taiwan company) and Vitelic Corp (a US company), of which Hu was chairman and president; PEWC held about 18.8% interest in MVI Myall Myall Investments Ltd A company incorporated in the BVI, holder of 50% of Moniker, acquired by Super Wish in October 1997 PacMOS PacMOS Technologies Holdings Ltd A company incorporated in Bermuda, formerly known as PCL Enterprises Holdings Ltd, Win Win International Holdings Ltd; listed on the Hong Kong Stock Exchange PacMos shares The assets in issue in HCCL 16/09, being the shares in PacMOS held by Texan and the shares in PacMOS previously held by Super Wish Patagonia Patagonia Ltd A company incorporated in the BVI as a wholly owned subsidiary of PEWC; one of the defendants in HCCL 18/09 PCHL PCL Holdings Ltd A company incorporated in Hong Kong, formerly known as Pacific Capital (Holdings) Ltd, Pacific Capital Ltd, Time Full Ltd; one of the defendants in HCCL 16/09, the original holding company which acquired the assets in the litigation in the early to mid 1990s PEWC Pacific Electric Wire & Cable Co Ltd A company incorporated in Taiwan, the shares of which were listed on the Taiwan Stock Exchange until 2004; the plaintiff in each of the three actions POIM Pacific Overseas Investment Management Ltd A company incorporated in Hong Kong, wholly owned subsidiary of PEWC, set up in 1998 to manage its overseas investments PUSA Pacific USA Holdings Corp A company incorporated in the US and a subsidiary of PEWC Shouson Hill Property The assets in issue in HCCL 17/09 South Horizons Properties The assets in issue in HCCL 18/09, known as the Commercial Block in South Horizons, Aplichau, Hong Kong Super Wish Super Wish Ltd A company incorporated in the BVI, a wholly owned subsidiary of Texan; one of the defendants in HCCL 16/09 Swissfirst papers Seven faxes exchanged between Hu and Willi in 2004, copies of which are found in Annex 1 to the judgment of Reyes J; Swissfirst Structured Bonds AG was the then employer of Willi Takeover Arrangement The defence advanced by Hu, Top Selection and the Corporate Defendants that an agreement was made in 1996 by which Willi agreed to buy out PEWC’s interest in PCHL, Blinco BVI and Patagonia, which led to the beneficial interests in PCHL, Blinco BVI and Patagonia initially transferred to Bridle Path and then Top Selection, and the agreement was completed on 1 February 1999 when the shares of Blinco BVI and Patagonia were transferred by Bridle Path to Top Selection and Hu handed over the one bearer share of Top Selection to Willi to hold beneficially Texan Texan Management Ltd A company incorporated in the BVI for the purpose of acquisition of PacMOS shares, held 43% shares in PacMOS; one of the defendants in HCCL 16/09 Tom Tung Tung Ching-yun, Tom (仝清筠) Son of Tung, a former director, vice chairman and president of PEWC from June 2000 to December 2003 Top Selection Top Selection Co Ltd A company incorporated in the BVI, to which Bridle Path transferred Blinco BVI and Patagonia in February 1999, one of the defendants in HCCL 18/09 Town Sky Town Sky Holdings Ltd A company incorporated in Hong Kong, re-named Trident (Asia) Investment Ltd Trident Asia Trident Finance (Asia) Ltd A company incorporated in Hong Kong, formerly known as Penhall Ltd, Trident Finance (Asia) Ltd and Trident (Asia) Ltd Trident Bank Trident Bank Ltd A company incorporated in Vanuatu and wholly owned by Trident Asia, formerly known as Central Pacific Bank, Trident Bank, N M Bank; not a real bank in that it was not licensed to receive deposits from the public Tung Tung Yu Jeh (仝玉潔) A former director and chairman of PEWC, passed away in May 2008; one of the defendants in HCCL 16/09 and HCCL 18/09 Vision 2000 Vision 2000 Venture Ltd A company incorporated in Seychelles Islands, formerly known as MV Holdings Co Ltd, a wholly owned subsidiary of MVI; held 31.5% shares in PacMOS Willi Robin Miles Willi A Swiss banker; Top Selection’s one bearer share was cancelled in September 2010 and in lieu thereof a registered share was issued to him Wilson Lee Lee Yu Wai, Wilson Former deputy chief executive officer of POIM, author of two investigation reports dated 28 January 1999 and February 1999