Gorgeous Beauty Ltd v Liu & Ors

A claimant alleging fraud must prove it on the balance of probabilities, supported by cogent evidence. The court should test witness evidence against independent documents, motives and the overall probabilities, while treating demeanour with caution where interpretation, videolink evidence and cultural differences may affect comprehension.

For a trust with no express choice of law, the court may infer a choice from the trust instrument and circumstances. If no choice is established, the applicable law is that with which the trust is most closely connected. The Seychelles law considered in this case did not recognise non-statutory trusts, so a trust failing the requirements of the Seychelles International Trusts Act 1994 would be invalid under Seychelles law.

Gorgeous Beauty, a Seychelles international business company, claimed that a declaration of trust concerning its 99 per cent interest in Gold Wealth LLP was invalid. It sought rectification of the Companies Register under section 1096 of the Companies Act 2006.

The dispute arose from the acquisition of industrial land in Taiwan. Gorgeous Beauty contended that the land was acquired for the benefit of the shareholders of Yuan Sheng Aluminium Manufacturing Corporation. Irene and William Liu contended that it was acquired for William’s sole benefit and financed partly by loans from the company. The central issue was whether the declaration of trust for William was authorised and genuine in its intended effect.

1. Disposition. Judgment was given for Gorgeous Beauty. The court ordered the relief sought, including rectification of the Companies Register.
2. The claimant bore the burden of proving its essentially fraudulent case. The applicable standard remained the balance of probabilities, but cogent evidence was required. In assessing credibility, the court applied the approach in The Ocean Frost [1985] 1 Lloyd's Rep 1, testing testimony against documents, motives and the overall probabilities. Demeanour was treated cautiously because much evidence was interpreted, some witnesses gave evidence by videolink, and cultural and linguistic differences affected comprehension.
3. On the balance of probabilities, the Longtan Property had been acquired for the benefit of YSC’s shareholders. The declaration of trust had been made without the consent of the majority shareholders in Gorgeous Beauty. The court’s conclusion rested on the cumulative evidence, including the corporate structure, financing arrangements, the absence of any proper record of a substantial loan to William, the evidence concerning the declaration of trust, and the related property transactions.
4. The governing law of the trust was English law. The instrument and surrounding circumstances demonstrated an implied choice under article 6 of the Convention. Alternatively, the trust was most closely connected with English law under article 7, having regard particularly to its administration, the situs of the trust asset, the trustee’s incorporation and the trust’s objects.
5. Had the factual issue been resolved for the defendants, the court would have found for them on the principal alternative arguments under Seychelles law. However, that factual conclusion was decisive. The court also concluded that the law of Seychelles did not recognise non-statutory trusts. It followed the most recent Seychelles Court of Appeal authority, Zalazina v Zoobert Ltd, despite an apparent inconsistency with Chow v State Assurance Co Ltd.
6. Under section 1096 of the Companies Act 2006, as applied to LLPs by regulation 67 of the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009, the court had jurisdiction to expunge the forms relating to the transfer from the Register.