Kwok Kin Kwok v Yao Juan (British Virgin Islands)

An appellate court must not interfere with a trial judge’s findings of primary fact, including factual evaluations and inferences, unless they are plainly wrong. The restraint is especially strong where findings depend on witness credibility. An appeal court re-exercising a discretion may consider relevant developments after trial. A respondent may apply to adduce fresh evidence, subject to the interests of justice and the Ladd v Marshall conditions. Once unfair prejudice is established, relief is wide and may include winding-up as a remedy of last resort where lesser remedies cannot cure the prejudice.

The appellant and respondent each owned 50% of Crown Treasure Group Ltd, a BVI company used to hold interests in a hotel project in China. After a 24-day trial, the Judge found that their oral agreement required equal funding and required the respondent to notify and consult the appellant about major decisions and transactions. He found repeated breaches causing unfair prejudice and appointed a liquidator under section 159(1)(a) of the Insolvency Act 2003.

The Court of Appeal reversed most of those findings, upheld one instance of unfair prejudice, and substituted a prospective notification, consultation and consent order. The appeal concerned appellate interference with factual findings, the admission of fresh evidence, and whether winding-up was within the reasonable range of remedies.

1. Appeal allowed. The Board held that the Court of Appeal was not entitled to reverse the Judge’s findings about the terms of the undocumented oral agreement. Findings of primary fact, including evaluations and inferences drawn from the evidence, should not be disturbed unless plainly wrong. That requires no supporting evidence, a misunderstanding of the evidence, or a conclusion that no reasonable judge could have reached. Greater restraint applies where credibility is involved, because the trial judge has seen and heard the witnesses and is immersed in the evidence.
2. The duty to notify and consult on major decisions and transactions was a finding of primary fact based on the conflicting evidence, credibility, surrounding circumstances and commercial sense. It was not an almost unrestricted or stand-alone general duty. The Judge was also entitled to find that equal funding obligations extended to shareholder loans used as working capital. The Court of Appeal’s contrary assessment of workability did not establish that those findings were plainly wrong.
3. The Board rejected the Court of Appeal’s view that a respondent was barred from applying to adduce fresh evidence. The Ladd v Marshall conditions and the interests of justice govern such applications. Where an appellate court sets aside a discretionary decision and is to exercise its own discretion afresh, it should consider relevant developments up to the time of its decision, subject to relevance, weight and any need for further fact-finding. This guidance was unnecessary to the result because the appeal succeeded on the first issue.
4. Once unfair prejudice is established under section 184I of the BVI Business Companies Act 2004, the court has a wide discretion as to relief. It is not confined to the relief sought in the petition and must consider the practical reality and all relevant circumstances. Winding-up remains a remedy of last resort, but was appropriate here because the prejudice was serious and repeated, trust and confidence had broken down, and a prospective notification and consultation order would be difficult to police and would not cure the damage. The order under section 159(1)(a) of the Insolvency Act 2003 was within the reasonable range of remedies.
5. The Board advised His Majesty to allow the appeal and reinstate the Judge’s order for the appointment of a liquidator over Crown Treasure.

• Privy Council: Appeal allowed; the Judge’s findings and order for the appointment of a liquidator over Crown Treasure were reinstated.
• Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands): On 14 March 2019, the appeal was allowed in part. Most findings of unfair prejudice were reversed, and a prospective notification, consultation and consent order was substituted.
• Trial court: On 13 March 2018, the Judge found breaches of the parties’ oral agreement causing unfair prejudice and appointed a liquidator over Crown Treasure under section 159(1)(a) of the Insolvency Act 2003.