THE WITNESSES SAY THE OTHER SIDE IS LYING: WHAT DOES THE JUDGE DO? A GORGEOUS BEAUTY CONSIDERED!

We have looked before at issues of witness credibility, particularly in relation to the drafting of witness statements. This was an issue considered by Arnold J in Gorgeous Beauty Ltd -v- Liu (and others) [2014] EWHC 2952 (Ch). It provides an example of the way the trial judge approaches a case where there are allegations that the witnesses of both sides are lying.

THE ISSUE BEFORE THE COURT

Put bluntly virtually all the witnesses on each side alleged the other side were lying. The judge addressed this issue head on.

“General comments on the factual evidence

  1. In this case both sides accuse the other of dishonesty. Accordingly, as counsel for the Defendants submitted, it is necessary to adopt the approach to finding the facts articulated by Robert Goff LJ in a well-known passage in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:

“Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the independent facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.”

  1. In this case, I have been particularly cautious in relying upon the demeanour of the witnesses, for three reasons. First, all of them except Irene, Mana, Michael and William Liu gave evidence through an interpreter. It was clear that, despite the skill of the interpreter, this led to difficulties in understanding. For example, as the interpreter explained, Mandarin does not have tenses and thus there was sometimes difficulty between distinguishing between what a witness knew at a particular time and what the witness knew now. Irene, Mana, Michael and William Liu all gave evidence in English, but their English was not perfect and they all resorted to assistance from the interpreter at times. Again, it was clear that there were difficulties in comprehension. Secondly, a number of witnesses gave evidence by videolink from Taiwan. Thirdly, there are significant cultural differences between this country and Taiwan.
  2. For the same reasons, I accept the submission made by counsel for Gorgeous Beauty that it is necessary when analysing the evidence of the witnesses to be cautious about relying on the phraseology of particular answers as being indicative of an untruthful witness, and rather to consider the general thrust of that witness’ evidence. I also bear in mind the point made by counsel for the Defendants that the fact that a witness had lied about one matter does not necessarily mean that he or she has lied about another.
  3. In attempting to determine where the truth lies, I have faced five further difficulties. The first is that, as will appear, I consider that both sides’ cases have implausible features.
  4. The second is that the documentary evidence is incomplete and unsatisfactory. It is not possible for me to attribute blame for this state of affairs. The Defendants accused Gorgeous Beauty of deliberately withholding disclosure, but I am not satisfied that this charge has been made out. Gorgeous Beauty certainly gave late disclosure of certain documents, including some just before and some during the trial, but since it did disclose documents which can be regarded as damaging to its case, it does not appear that it suppressed such documents. Moreover, the late disclosure can be at least partly explained by the fact that certain issues were only clearly raised at trial. No doubt for the same reason, the Defendants also gave late disclosure during the trial. Above all, by the end of the trial, it was common ground that, because YSC was a family business and because it was run in a way which might appear unusual to English eyes, some things were not simply documented in the way that an English court would expect.
  5. The third difficulty is that, although the key factual issue lies within a narrow compass, both sides raised a considerable number of other issues as supporting their respective cases or as casting doubt on the opposing party’s case or as undermining the credibility of one or more of the opposing party’s witnesses. As I have already indicated, some of these issues were only clearly raised at trial. As a result, both the witness and documentary evidence on such issues is not as complete as it might have been. Indeed, at least one issue has been raised which it was more or less common ground between counsel in closing submissions that the court was not in a position to resolve.
  6. The fourth difficulty is that, with one solitary exception, each side accused all the other side’s witnesses of lying. The exception is Eric Wu of GenPro, whom counsel for the Defendants accepted was an honest witness, albeit one he characterised as defensive and the accuracy of whose recollection he challenged.
  7. The fifth difficulty is that most of the witnesses have a personal interest in the outcome. The most independent witness was Eric Wu. The next most independent was Ming-Zhen Xu, but as discussed below he accepted that he was a friend of Lien-Sheng Liu and Ching-I Yang. The next most independent was Shu-Ying Yang, given that she is no longer a shareholder in YSC, but she was a shareholder at all the relevant dates, including when she signed her witness statement.
  8. As a result, the one conclusion about which I am certain is that I cannot be certain what the truth is. Rather, I can only decide where I consider that the balance of probabilities lies having regard to the evidence before the court.”

THE RESOLUTION OF THE FACTUAL ISSUES

Fortunately we are only concerned with the issues relating to witness evidence. The judge set out the competing contentions and concluded in favour of the claimant.

  1. Both counsel relied upon a series of matters as demonstrating that their case was more plausible that the opposing side’s case. I will take these in turn, beginning with the ones relied on by counsel for Gorgeous Beauty.
  2. First, he relied on the fact that the Longtan Property had been acquired using the Gorgeous Beauty structure, which had been set up for the purpose of acquiring the Yanjiang Property, and in particular the fact that the structure includes the five Seychelles companies which were owned in the same proportions as YSC. I agree that this supports Gorgeous Beauty’s case, but against this one has to take into account the evidence with regard to the insertion of Gold Wealth into the structure and the creation and execution of the Declaration of Trust.
  3. Secondly, he pointed to the absence of any written record crossing the line between the Lien-Sheng Branch and the Lien-Fa Branch that the purchase of the Longtan Property was in fact for the benefit of William Liu. Given the informality with which YSC was run, and the absence of documentation which one would expect to see, I do not regard this as a strong point; but I do agree that there is a degree of inconsistency between the Defendants’ evidence that this transaction did not need to be recorded in writing because of the trust that existed between the family members and their evidence that other, smaller transactions did need to be recorded in some way (notably, the alleged NTD 6,467,945 loan to Lien-Sheng Liu in connection with purchase of the Taoyuan Property, as to which see paragraph 95 above).
  4. Thirdly, he pointed to the absence of any written record of any description of any loan to William Liu, despite the fact that ultimately YSC allegedly loaned him over US$ 8 million (assuming Trillion belonged to YSC’s shareholders). In particular, he pointed out that Irene Liu had accepted that no record was ever made of the differing sums William Liu owed YSC. I agree that this is implausible, but not overwhelming so. I also agree that there is a degree of inconsistency between this and the Defendants’ evidence that Lien-Sheng Liu requested that Chao-Yu Liu and Michael Liu be made directors of Golden Up in order to protect the loan.
  5. Fourthly, he submitted that the Defendants’ evidence with regard to the intended financing of the purchase of the Longtan Property was incredible. I have considered this aspect of this case at paragraphs 180-199 above. As stated there, I consider that the evidence with regard to the financing of the purchase of the Longtan Property is more supportive of Gorgeous Beauty’s case than of the Defendants’ case, but it is not all one way.
  6. Fifthly, he submitted that the size of the transaction (purchase price US$ 8.6 million) compared to (a) YSC’s shareholder dividends in 2007, (b) the net value of YSC and its affiliates in 2009 (about US$ 39.7 million) and (c) the loans/misuse of monies by the Lien-Sheng Branch alleged by the Defendants (totalling about US$ 400,000) made the Defendants’ case implausible, particularly given that Michael Liu (who is five years older than William Liu) had received no such favourable treatment. I agree that this is a pointer against the Defendants’ case.
  7. Sixthly, he pointed out that William Liu had accepted that he had not spoken to a single member of the Lien-Sheng Branch about the transaction, even to thank them, at any point. He submitted that it was incredible that, if the transaction was an investment for William Liu to mark his reaching maturity, as the Defendants contend, nothing should have been said about this. I agree that this does seem unlikely.
  8. Seventhly, he pointed to the absence of any proper evidence as to the tax benefit to William Liu of using the Gorgeous Beauty structure and to the conflict between the evidence of Eric Wu and Irene Liu with regard to the advice he provided. I have considered this aspect of the case in paragraphs 132-140 above, and concluded that I prefer Eric Wu’s evidence to Irene Liu’s. This conclusion undermines an important aspect of the Defendants’ case.
  9. Eighthly, he submitted that Irene Liu’s evidence with regard to the correction of the letter of authorisation was implausible. I have considered this aspect of the case in paragraphs 148-149 above. As stated there, I find Irene Liu’s evidence on this question plausible.
  10. Ninthly, he pointed to the evidence with regard to the creation and execution of the Declaration of Trust. I have considered this aspect of the case in paragraphs 155-172 above. For the reasons stated there, I consider that Gorgeous Beauty’s case is both more probable and more consistent with the documentary evidence than the Defendants’ case.
  11. Tenthly, he submitted that the Defendants’ evidence with regard to the changing of the date of execution of the contract for the Longtan Property from 4 to 6 August 2010 was incredible. I have considered this aspect of the case in paragraph 109 above, and concluded that it casts some doubt on the Defendants’ case.
  12. Eleventhly, he relied on the evidence with regard to Trillion. I have considered this aspect of the case in paragraphs 52-65 above. I have concluded on the balance of probabilities that Trillion was a YSC affiliate as Gorgeous Beauty contends. Although this does not directly contradict any aspect of the Defendants’ case with regard to the acquisition of the Longtan Property, it does undermine Lien-Fa Liu’s and Irene Liu’s credibility.
  13. Twelfthly, he relied on the evidence with regard to the adjacent farmland. I have considered this aspect of the case in paragraphs 112-126 above. I have concluded that the balance of the evidence points towards this land having been acquired for YSC’s shareholders. Again this does not directly contradict any aspect of the Defendants’ case with regard to the acquisition of the Longtan Property, but it does undermine Lien-Fa Liu’s credibility.
  14. Finally, he relied on the Transfer and the discovery of the Transfer. I have considered these matters in paragraphs 250-256 and 267-268 above. I consider that they do provide some support for Gorgeous Beauty’s case.
  15. Turning to the matters relied on by counsel for the Defendants, first he pointed out that it was clear from the evidence that the Declaration of Trust was an authentic document which had been signed by Mei-Chuan Liao whose address had been written by Yan-Fan Xue. I agree that this is a point in favour of the Defendants, but it does not detract from the conclusion expressed in paragraph 288 above.
  16. Secondly, he pointed out that, contrary to Gorgeous Beauty’s case that most of the shareholders in YSC had visited the Longtan Property before it was purchased, it had turned out that only Lien-Sheng Liu, Lien-Fa Liu and William Liu had done so. I considered this in paragraph 106 above. As stated there, I agree that this casts some doubt on Gorgeous Beauty’s case, but I do not regard it as a strong point in the Defendants’ favour.
  17. Thirdly, he relied on the evidence with regard to YSC’s alleged purpose in acquiring the Longtan Property. I considered this aspect of the case in paragraphs 103-104 and 200-202 above. Overall, I consider that the evidence is more supportive of Gorgeous Beauty’s case than it is of the Defendants’ case. In particular, as I have explained, I accept Ming-Zhen Xu’s evidence as to the circumstances in which he brought the property to the attention of Lien-Sheng Liu.
  18. Fourthly, he submitted that it was improbable that Irene Liu would have carried out the alleged fraud because of the risk that it would be discovered given that she worked in a small open-plan office close to Mei-Chuan Liao and Yan-Fan Xue, that she used GenPro to set up Gold Wealth, that she received communications from GenPro via the shared fax machine in YSC’s Finance Department and that Mei-Chuan Liao and Yan-Fan Xue were (at least in the case of Mei-Chuan Liao) loyal to Ching-I Yang. I agree that these factors mean that the fraud would have been a somewhat high-risk one and that this is a pointer against Gorgeous Beauty’s case, but I do not consider it a strong one.
  19. Fifthly, he pointed to the unsatisfactory nature of Gorgeous Beauty’s evidence with regard to the discovery of the Declaration of Trust. I have considered this aspect of the case in paragraphs 214-221 above. As stated there, I agree that it casts some doubt on the credibility of Gorgeous Beauty’s case, but I am not persuaded that it has as much significance as counsel for the Defendants contended.
  20. Sixthly, he relied on Lien-Fa Liu’s and Irene Liu’s previous good character. I have considered this above.
  21. Seventhly, he relied upon the submissions as to motive I have considered above.
  22. Finally, he submitted that many of Gorgeous Beauty’s witness had given untruthful evidence. To this end, he provided me with a detailed analysis of their evidence. I have addressed the points which I regard as most significant above, and I have considered all of them. While I accept that a number of the witnesses gave some evidence that was untruthful, or at least unreliable, I am not persuaded that the untruthfulness was as extensive as counsel submitted. Furthermore, I have also been critical of some of the evidence given by Lien-Fa Liu and Irene Liu. In any event, for the reasons I have explained, I do not consider that it would be safe to determine this case purely by reference to the credibility of the witnesses.
  23. Taking everything into consideration, the conclusion I have come to is that the preponderance of the evidence supports Gorgeous Beauty’s case on each of the sub-issues which make up the key factual issue. I therefore conclude that the Longtan Property was purchased for the benefit of YSC’s shareholders, not for the benefit of William Liu, and that the Declaration of Trust was made without the consent of the majority of the shareholders in Gorgeous Beauty.”

OTHER POSTS ABOUT WITNESS EVIDENCE AND CREDIBILITY

1. Litigators must know about credibility.

2. Witness Statements and Witness Evidence: More about Credibility.

3. Which Witness will be believed?Is it all a lottery?

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