YAT TUNG INVESTMENT CO LTD AND ANOTHER v. DAO HENG BANK LTD

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO. 23 OF 1971

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BETWEEN
YAT TUNG INVESTMENT CO. LTD. 1st Appellant
(1st Plaintiff)
MEE AH CONSTRUCTION CO. LTD. 2nd Appellant
(2nd Plaintiff)
and
DAO HANG BANK LIMITED Respondent
(Defendant)

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Coram: Blair-Kerr, S.P.J. and Huggins, J.

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JUDGMENT

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Huggins, J.:

1. The first contention on behalf of the Appellants is “that the learned judge ought to have held on the evidence before him thatin reality the 1st Appellant did not pay the purchase price or any part thereof but acted as the Respondent’s trustee in the purchaseof the said property”. The substance of the argument is that the judge made two findings of fact which, it is said, led to theinevitable conclusion that the 1st Appellants were trustees. One finding was that on 9th January, 1969 Mr. Lai wrote on behalf ofthe 1st Appellants to the Bank indicating a desire to purchase three flats in the property from the Bank. That suggestion was, ofcourse, inconsistent with the 1st Appellants’ being the absolute owners of the property, but it is common ground that they werenot the absolute owners: the Bank were the owners by reason of the assignment to them by the 1st Appellants by way of legal mortgage.The proposal was not inconsistent with that position and the letter certainly does not point to the 1st Appellants’ having purchasedthe property as trustees. The second finding relied upon was that the voucher, Exh. HH3, was not satisfactorily explained. That was an internal document of the Bank supporting a debit in favour of Mr. Au for the purposeof paying a deposit on the property. The learned judge did not say what sort of further explanation he would expect. I would agreethat a debit in favour of their own officer was in the circumstances something which the officer might justifiably be called uponto explain to the Bank, but the document shows clearly a transfer of funds to Mr. Au in his personal capacity for a particular purpose.It was signed by two persons purporting to be officers of the Bank, although they were never identified. There is nothing whateverin it to indicate that the eventual recipient of the money was to be a trustee of the property purchased. The general contentionthat the judge should have analysed the evidence more fully does not come within the scope of this ground of appeal, but nothingpointed out to us persuades me that such an analysis would have led to a different conclusion.

2. Next it is said that the judge failed to decide whether the letter of 9th January 1969 was written by Mr. Lai. In fact he expresslysaid that Mr. Lai did write it and went on to say that “coming as it did from the registered owner of the property [the requestthat the 1st Appellants be allowed to purchase three floors] can only be regarded as extraordinary”. This passage may, indeed,have been unduly favourable to the Appellants because at least in one sense it is not entirely accurate to say that the letter camefrom the “registered owner”: as I have already mentioned, the property had been mortgaged to the Bank by assignment and, themortgage having been registered, the Bank were the registered owners of the property, while the 1st Appellants had nothing more thanan equity of redemption.

3. It is complained that the judge did not give sufficient consideration to the evidence concerning the reference in the letter dated24th July, 1968 from the Hong Kong Electric Company to the Bank’s being “part owner” of the property. He set out the letterin full, although he did not indicate what conclusion he drew from it. For my part I think the letter could have been of no assistanceto him: the phrase used was as consistent (or, perhaps, inconsistent) with the case for the Respondents as with that for the Appellants.

4. Much emphasis was placed on the fact that the Bank, over a period of several months, rendered to the 1st Appellants inaccurate debitnotes in respect of interest on the money advanced to the 1st Appellants by the Bank under the new building mortgage. The error wasthat the sum claimed each month was $1,034 instead of $10,340. This was apparently noticed at the end of the year and a correctivedebit note submitted before the 1st Appellants first made their allegation of trusteeship. I cannot agree that such an error supportsthe contention that the transaction at the auction was a sham.

5. The final complaint appears to be that the learned judge said “there is no evidence that the Bank was made aware of the amountof the outstanding construction costs which it is alleged it was undertaking to pay”. I think it is clear that the judge was drawinga distinction between the Bank and Mr. Au, who, although an officer of the Bank, claims to have been acting in his personal capacity.There was no evidence that the construction costs were discussed with anyone other than Mr. Au: indeed, Mr. Lai agreed that he didnot discuss that matter with Mr. Tang, the Managing Director of the Bank, despite the fact that he claimed to have had confirmationfrom Mr. Tang that the 1st Appellants were to purchase as trustees for the Bank.

6. As Blair-Kerr, J. has said, the case really turned upon the evidence of Mr. Lai and he was disbelieved. I see no reason to thinkthat the learned judge came to a wrong conclusion and I agree that the appeal must be dismissed.