Favor Easy Management Ltd & Anor v Wu & Anor

When deciding beneficial ownership, a trial judge must assess contemporaneous documents, recorded conversations and oral evidence in their factual and cultural context. Solicitors’ attendance notes may be reliable without being conclusive, particularly where they record changing transactional mechanics rather than the parties’ ultimate intentions. A judge may consider the whole evidential picture, including documents in the trial bundles not expressly referred to at trial. Individual phrases should not be construed in isolation or through assumptions derived from English property practice. Findings about the parties’ relationship, credibility and purpose may be central to ownership. Failure to cross-examine a witness more fully does not automatically require acceptance of that evidence where it was fairly assessed and outweighed by other evidence.

Mr Lee funded the purchase of a hotel acquired in the name of FEM Seychelles. A neighbouring property was later acquired in the name of FEM Virgin, using mortgage finance secured on the hotel. Mr Lee claimed beneficial ownership of both properties through resulting or constructive trusts and claimed ownership of the bearer share in FEM Seychelles.

Ms Wu contended that the hotel had been gifted to her and that the neighbouring property was her own acquisition. The High Court accepted her account, dismissed Mr Lee’s claims, declared her entitled to the bearer share and declared her the legal and beneficial owner of the properties. Mr Lee appealed, alleging errors in the treatment of solicitors’ documents, telephone transcripts, inherent probabilities, resulting trusts and evidence concerning the bearer share. The central issue was whether the judge’s factual conclusions or trial process disclosed any material error or unfairness.

The appeal was dismissed unanimously. Lord Justice McCombe gave the judgment, and Lord Justices Lloyd and Ward agreed.

1. The judge was entitled, and indeed required, to assess the parties’ true intentions from the evidence as a whole. The solicitors’ file was a reliable source of material, but its notes were summaries of discussions conducted in Cantonese and recorded changing mechanisms for the transactions. They did not compel the conclusion that Mr Lee owned FEM Seychelles or that it held the hotel as his bare trustee.
2. The judge was not confined to documents expressly referred to by the parties. He could consider the documents contained in the trial bundles to understand the complete evidential picture. The documents and the recorded conversations were not to be read in isolation or treated as decisive without regard to the surrounding relationship and circumstances.
3. The telephone conversations were confused, allusive and conducted in the parties’ own private vocabulary. The judge was entitled to weigh passages apparently favourable to each side against the other evidence. It was appropriate to give substantial weight to the true nature of the relationship, the parties’ credibility and the wider context, including the need to give English legal content to arrangements shaped by Chinese cultural expectations.
4. The judge’s findings that the hotel was intended as a gift and that the later transfer to FEM Virgin reflected the perceived advantages of that company were open to him. The provision of purchase money therefore did not, on the facts found, establish a resulting or constructive trust in Mr Lee’s favour. The conclusion concerning No. 64 followed from the conclusion concerning the hotel.
5. Although counsel for Ms Wu ought to have cross-examined Ms Gao more fully, the absence of such cross-examination did not require the judge to accept her evidence in full. The judge fairly assessed it, found it lacking in detail and preferred more cogent evidence from other sources. The approach was consistent with the issue raised by Browne v Dunn (1894) 6 R 67 and Markem Corporation v Zipher Limited [2005] EWCA Civ 267, and caused no procedural unfairness.
6. The absence of a deed of gift, the alleged failure to tell others about the gift and the absence of express reference to the parties’ alleged agreement in the recordings did not undermine the judge’s conclusions. No material error of law or serious irregularity was established. The appeal was dismissed.

• Court of Appeal (Civil Division): On 21 November 2012, the court dismissed Mr Lee’s appeal: [2012] EWCA Civ 1464.
• High Court of Justice, Chancery Division: By order dated 14 October 2011, Mr Justice Norris dismissed the claims, declared Ms Wu entitled to the bearer share in FEM Seychelles and declared her the legal and beneficial owner of the properties.