LAM CHING SHEUNG v. THE PERSONAL REPRESENTATIVE OF THE ESTATE OF TAM SHUI, DECEASED AND OTHERS

HCA 2234/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2234 OF 2008

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BETWEEN

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J U D G M E N T

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INTRODUCTION

1.  This is an action for recovery of the outstanding balance of a loan and interest (collectively, the “Loan”) under an oral agreement made in mid 1999 (“the First Oral Agreement”) and another oral agreement made on 25 July 2006 (“the Second Oral Agreement”).  The plaintiff was the lender under the First Oral Agreement; the borrowers were Tam Shui, who is now deceased (the “Deceased”) and her husband, the 2^nd defendant.  The 1^st defendant is the personal representative of the estate of the Deceased, which is represented by her younger son, Chan Yung Heng Henry (“Henry”).  Under the Second Oral Agreement, the 2^nd defendant and the 3^rd defendant who is the elder son of the Deceased, undertook to repay the Loan subsequent to the default of the 1^st and 2^nd defendants.  The 1^st and 2^nd defendants are being sued for their breach of the First Oral Agreement.  The 2^nd and 3^rd defendants are being sued for their breach of undertaking under the Second Oral Agreement.

Background

2.  The following background facts are based on incontrovertible evidence, evidence which was not in dispute and my finding of facts based on evidence which was not seriously disputed.  More serious disputes of facts are dealt with separately.

3.  The plaintiff was a business associate and a very close and trusted friend of the Deceased and the 2^nd defendant.  They invested in village houses in the New Territories.  They conducted their investments through corporate vehicles.  At one stage, the plaintiff was very successful.  However, her business collapsed and she was adjudged bankrupt on or about 22 May 2001.

4.  In September 1995, the Deceased sought financial assistance from the plaintiff as she was breaking up her business partnership with their common business associate, Ching Lin Fu whom the plaintiff did not have a good regard.   The plaintiff agreed to make available three properties to the Deceased for the purpose of obtaining loans from a finance company for lending to the Deceased.  The Deceased agreed to pay the interest charged by the finance company and to repay the principal when building permits in the Deceased’s building project in Sha Lan Village were issued.  At the time, the Deceased was the majority shareholder of Wai Hang Cheong Limited which was the developer of the Sha Lan Village project in Tai Po comprising of 33 village houses.

5.  Then through the arrangement of the Deceased and the 2^nd defendant, the plaintiff mortgaged one property in Tsim Uk Village (“Property A”) registered in her name to Lo Brothers Investment Company Limited (“Lo Brothers”) for a loan of $700,000 at a monthly interest rate of 1.3%.  At the direction of the Deceased, the plaintiff paid a sum of $734,800 to Buildfont Company Limited (“Buildfont”), a company controlled by the Deceased, the 2^nd defendant and their two sons, ie the 3^rd defendant and Henry.  The payment was effected by the plaintiff’s personal cheque dated 22 September 1995, the receipt of which was acknowledged by Buildfont.  That sum together with the legal costs of  the mortgage of $15,200 agreed to be paid by the Deceased represented  the loan of $750,000 by the plaintiff to the Deceased (“Loan A”). Subsequently, the plaintiff redeemed Property A and sold it on 21 October 1997.  That loan and interest were repaid in full in June 1999 by cheques issued by Buildfont and signed by the 3^rd defendant.  The plaintiff’s case is that that loan was made by her to the Deceased.  The defendants’ dispute is that the loan was made by the plaintiff to Buildfont, which was subsequently wound up on 20 April 2009.  That loan is only relevant as to the factual matrix in this case.

6.  Similarly, the plaintiff caused Well Force International Limited (“Well Force”), which was beneficially owned by the plaintiff,  to mortgage two properties in Lung Mei Village registered under its  name (“Properties B”) to Lo Brothers to raise two loans of $800,000 at   a monthly interest rate of $1.3%.  Well Force, not the plaintiff, was the borrower of the two loans from Lo Brothers.  The two loans were  drawn down on 28 September 1995 by the plaintiff upon execution of   the mortgages.  At the direction of the plaintiff, Lo Brothers paid the  sum of $1,600,000 to Buildfont.  This payment represented a loan from    the plaintiff to the Deceased (“Loan B”). Then the Deceased told the plaintiff that she had executed a promissory note in the amount of $2,350,000 representing the total principal of Loan A and Loan B before Kwok Yuk Leung (“Kwok”) of Messrs Ng, Tam, Ko & Chan (“NTKC”).  Apart from being a solicitor of NTKC familiar to the Deceased, at the time Kwok was a shareholder of South China Property Limited (“South China”), a company related to the Deceased and the 2^nd defendant.     Some days later, Kwok gave the promissory note to the plaintiff.  Under the promissory note, the Deceased promised to repay the said sum of $2,350,000 on 28 September 1996.  The Deceased was unable to pay either of the loans and the promissory note was not presented.    The plaintiff’s case is that Loan B was made by her to the Deceased.  It was partially repaid and the outstanding principal and interest were transformed into the Loan to the Deceased and the 2^nd defendant. The defendants’ dispute is that Loan B was made by Well Force to Buildfont and they denied liability under the Loan.

7.  In January 1998, the plaintiff lent the Deceased another loan of $750,000 (“Loan C)”). This loan was funded by a mortgage over a number of the plaintiff’s properties to Guangdong Finance Company Limited (“Guangdong Finance”) at a monthly interest rate of 1.5%.  At the direction of the Deceased, the loan advanced from Guangdong Finance was deposited into the bank account of Buildfont.  That loan and interest were subsequently fully repaid by Buildfont.

8.  By January 1998, the total principal of the above three loans lent to the Deceased was $3,100,000.  In May 1998, an amount of $100,000 was deposited into the plaintiff’s bank account.  The deposit advice was faxed to the plaintiff from South China.  In around April and March 1999, Buildfont repaid a total of $1,400,000 to the plaintiff by cheques of Buildfont signed by the 3^rd defendant.  Those repayments discharged Loan A and Loan C, leaving the loan principal of $1,600,000 in respect of Loan B outstanding.

The plaintiff’s case against the 1^st and 2^nd defendants – the First Oral Agreement

9.  In 1999, the Plaintiff came to know that the Deceased was suffering from cancer.  The Deceased told the plaintiff that she had   only one to two years to live.  The plaintiff became concerned about repayment of Loan B and asked the 2^nd defendant to take over the loan.  A number of meetings and telephone conversations ensued at least since July 1999.  As the Deceased was very sick, the discussions were mostly conducted between the plaintiff and the 2^nd defendant. The discussions revolved around repayment of the plaintiff’s loan from Lo Brothers and redemption of Properties B, transferring the plaintiff’s loan from Lo Brothers to the 2^nd defendant and continuation of Loan B.      Those alternatives were set out in a note from the plaintiff to the Deceased and the 2^nd defendant dated 14 July 1999.    Eventually, the plaintiff, the Deceased and the 2^nd defendant reached the First Oral Agreement to treat the outstanding loan principal of $1,600,000 owing by the Deceased to the plaintiff under Loan B as a loan from the plaintiff to the Deceased and the 2^nd defendant jointly, ie the Loan.  The plaintiff would forgo her right of action against the Deceased in respect Loan B. Under the terms of the First Oral Agreement, the plaintiff would charge the Deceased and the 2^nd defendant interest on the Loan at the monthly rate of 1.3% which was the same interest charged by Lo Brothers on the plaintiff’s loan of $1,600,000 which she used to lend to the Deceased under Loan B; the Deceased and 2^nd defendant would pay the interest directly to Lo Brothers to settle the interest due from the plaintiff to Lo Brothers; and they would repay the loan principal to the plaintiff in full when the building permits for the Deceased’s building project in Sha Lan Village were issued.

10.  Towards the end of 1999, the 2^nd defendant lent the plaintiff $600,000.  The plaintiff was unable to repay.  The 2^nd defendant agreed to set off that loan against the Loan.  Thus the outstanding principal of the Loan was reduced to $1,000,000.  The outstanding principal was further reduced to $975,000 by a payment of $25,000 on 23 August 2006.

The plaintiff’s case against the 2^nd and 3^rd defendants – the Second Oral Agreement

11.  The plaintiff was adjudged bankrupt on or about 22 May 2001.  Towards the end of 2001, she learned that the Deceased had passed away on 26 June 2000.  She had a meeting with the 2^nd defendant at his building site in Sheung Shui on 4 September 2001.  She told him of her bankruptcy and discussed about the payment of interest to Lo Brothers under her loan.  The 2^nd defendant understood the importance of paying interest to Lo Brothers because defaults would entitle Lo Brothers to take mortgagee action against Properties B.  He assured the plaintiff that he would continue to pay interest to Lo Brothers. By that time, payment of interest had stopped for almost two years.

12.  Towards the end of 2005, the plaintiff learned that Properties B had been sold by Lo Brothers and that Well Force had been struck off from the company register of the Companies Registry.  She made enquiry from the 2^nd Defendant, who replied that he did not know anything about the matter and had to ask the 3^rd defendant. Then sometime later, he told the plaintiff that the 3^rd defendant had honoured their obligation to pay interest in respect of her loan to Lo Brothers but Lo Brothers was wound up.  The plaintiff did not believe that Lo Brothers had been wound up, though the company could not be found at the address she knew.    Eventually, after much effort, she got in touch with the solicitors acting for Lo Brothers. She was informed that because no interest had been paid since 27 December 1999, Lo Brothers sold Properties B at an auction for a very low price and the buyer now   offered to sell Properties B for $1,500,000.  Using that price as the value of Properties B, she suggested to settle her liabilities to Lo Brothers under her loan by compensating their loss of $100,000 by way of loan principal before negotiating repayment of the outstanding interest.

13.  Then the plaintiff chased the 2^nd Defendant for repayment   of the outstanding principal of the Loan of $1,000,000 and interest.  The 2^nd defendant said that the 3^rd defendant was responsible as he was     the beneficiary of the estate of the Deceased.    The plaintiff made    many attempts to contact the 3^rd defendant, but in vain.  Eventually, on 25 July 2006, she had a meeting with the 2^nd and 3^rd defendants at their office in South China to discuss repayment of the Loan.      The 2^nd and 3^rd defendants undertook to repay the Loan on behalf of the Deceased and the 2^nd defendant (“the Second Oral Agreement”).  The 3^rd defendant also agreed to pay the plaintiff $100,000 before mid August 2006 for paying Lo Brothers so that she may discuss with Lo Brothers about settlement of the outstanding interest.  Upon that agreement, the plaintiff withheld taking legal action against the 2^nd defendant. At that time, no application for probate in respect of the Deceased’s estate had been filed.   However, the 3^rd defendant did not honour his promise to pay the said sum of $100,000 by mid August 2006.  Then upon the plaintiff’s repeated demands, he issued a cheque in the amount of $25,000 on 23 August 2006 in repayment of part of the outstanding loan principal.  The outstanding loan principal was therefore reduced to $975,000.

14.  In September 2006, the plaintiff learned that Wai Hang Cheong had sold the Sha Lan Village project to a third party which suggested that the 2^nd defendant had no intention to develop the project.  She repeatedly demanded the 2^nd and 3^rd defendants to repay the Loan and to apply for probate of the estate of the Deceased so that she could take legal action against the estate of the Deceased.     They ignored her demands.  The plaintiff commenced the present proceedings on 7 November 2008.

The defence

15.  In their defence, which consisted of a total of 28 pages, the defendants raised all possible defences under the sky.  In summary, they deny they were parties to the various loans leading to the Loan; they deny they were parties to the First Oral Agreement and Second Oral Agreement; they dispute that the plaintiff was a party to the various loans and the Loan; and they pleaded lack of consideration and that the plaintiff’s action was statute barred.

The issues

16.  The disputes in this case are all factual, being whether the Loan, the First Oral Agreement and the Second Oral Agreement existed; who were the parties to those agreements; whether those agreements were supported by consideration and whether the plaintiff’s causes of action were statute barred.  The legal principles involved are trite principles of the law of contract and application of sections 23 to 26 of the Limitation Ordinance.  My finding of credibility of the witnesses is crucial.

Credibility of witnesses

17.  This is a peculiar case.  Substantial sums were advanced on the strength of oral agreements.  The plaintiff’s claims were also based on two oral agreements.  On the face, her cause of action based on Loan B or the Loan has long been statute barred. The essential facts asserted by the plaintiff were all denied by the defendants.  The plaintiff, Henry, the 2^nd and 3^rd defendants all gave evidence.  The defendants disputed the existence of the Loan, First Oral Agreement and the Second Oral Agreement.  They also disputed that the plaintiff and the Deceased were parties to the underlying loans, particularly Loan B.

18.  Mr Yip, counsel for the 2^nd and 3^rd defendants, severely criticised the plaintiff’s credibility because she departed from her pleading by saying in evidence that the various loans were lent to the Deceased and the 2^nd defendant. The basis of her assertion was that the 2^nd defendant also participated in the various discussions about the loans and that the Deceased and the 2^nd defendant used the pronouns “we” and “us” in relation to the borrowing.  Her departure from the pleading may be caused by a misunderstanding between her and her solicitors, which had no impact on her credibility. In any event, the plaintiff had nothing to gain from the departure.  Mr Yip also criticised the plaintiff for giving different accounts as to what happened during the discussion.  The plaintiff’s explanation was that there were in fact many discussions, both during meetings and over the telephone, which accounted for the different versions.  I accept her explanation.

19.  My only criticism of the plaintiff is that her evidence about her discussion with Lo Brothers on settlement of the outstanding loan principal after the sale of Properties B was thin and vague.  However, that was not the focal point in this litigation and, more importantly, there was no dispute that as a result of that discussion she demanded the defendants to first pay her $100,000 to pay Lo Brothers.  I consider the criticism has no serious impact on her credibility. 

20.  On the whole, the plaintiff impressed me as a simple‑minded, easy going and very accommodating person.  She respected her friendship with the Deceased highly.  Putting aside the issue of corporate personality, there is no doubt that she suffered the loss of two properties at the hands of one or more of the defendants.  Yet, out of respect for her friendship with the Deceased, she approached them with a most courteous and accommodating manner.  Even after discovering the lies of the 2^nd defendant about having paid interest to Lo Brothers, a fact which I have no doubt at all, she wrote to him in a sincere and apologetic manner seeking an amicable settlement.  She impressed me as a straight forward witness.  She has an answer to every question asked.  Her answers under cross‑examination were prompt and spontaneous. Her case about the Second Oral Agreement was supported by contemporaneous letters written by her to the defendants and replies from the 3^rd defendant. I find her an honest and credible witness.  I accept her evidence.

21.  Henry gave evidence on behalf of the estate of the Deceased.  He was brought into this dispute at a very late stage.  He had no knowledge about the matters in dispute.  His evidence was unhelpful.  He was probably asked to represent the estate because of his lack of knowledge of the matters in dispute.  I give no weight to his evidence.

22.  The 3^rd defendant assisted the Deceased in the management of Buildfont and was in control of the company after the Deceased’s death.  Buildfont was wound up or struck off from the company register of Companies Registry and its business was taken over by South China.  He said very boldly under cross‑examination and in answer to the bench that he was willing to repay the plaintiff provided he was able to ascertain the accounts from his end.  But his evidence was that for all these years since the issue of the writ, he had done nothing whatever to verify the accounts from Buildfont.  He issued a number of cheques on behalf of Buildfont to repay the loans and interest.  Yet, he claimed to have no knowledge about the loans.  He said that he just signed cheques as and when they were presented to him just on the trust of his staff.  He did not search for documents in support of his case that the loans, particularly Loan B, were contracted by Buildfont.  His bold statement of his intention to pay was just an empty assertion to boost his honesty.

23.  More fatally, in his application to set aside a default judgment obtained by the plaintiff against the defendants, he affirmed on oath that the Deceased never borrowed any money from the plaintiff; that Loan B was a loan made to Polyline Development Limited (“Polyline”), not Buildfont; that Loan B was secured by the promissory note dated 28 September 1995; and that the promissory note had been fully repaid with the original returned to the Deceased.  Some of those assertions were obviously untrue.  Some were contrary to his witness statement and the pleadings.  He admitted under cross‑examination that he adopted an account which he knew was untrue.  His explanation was that he was desperate.  He impressed me as an extremely insincere witness who was ready to do anything to relieve the co‑defendants and himself from liability by putting all liabilities on Buildfont, now that the company had been wound up or struck off.  He had no qualm telling lies under oath.  I do not believe his evidence.

24.  The 2^nd defendant tried to impress me that he had nothing whatever to do with the business of his wife, the Deceased.  But the incontrovertible evidence was that he accompanied the Deceased when the various loans were negotiated.  He explained his presence by saying that he only served as the Deceased’s driver.  It is incredible that he played no part in the management of Buildfont, especially at a time when the 3^rd defendant and Henry were studying abroad.  It is incredible that he had no knowledge of the loans and particularly Loan B, which was the precursor to the Loan.  It is incredible that he did not know Buildfont had ceased paying interest to Lo Brothers since 27 December 1999.  Yet, when approached by the plaintiff in 2001, he misrepresented to her that  the interest had been and would continue to be paid.     He must have known that by failing to pay interest, Properties B would be sold by Lo Brothers as a matter of course.  Again, when approached by the plaintiff after Properties B had been sold, he still put up a façade as if he knew nothing about the sale at all and then misrepresented to her that the 3^rd defendant had paid interest but Lo Brothers was wound up.     Later, pretending to be helpful and assuring, he gave the plaintiff a written note to request the 3^rd defendant to pay her $100,000 even if he had to resort to borrowing. And so he sent the plaintiff chasing after his son when the inference to be drawn from the circumstances was that neither of them had any intention to pay.

25.  He adopted the 3^rd defendant’s affirmation in his application to set aside the default judgment.  Under cross‑examination, he admitted that he did not bother to read the content of that affirmation and entrusted the matter with the 3^rd defendant.  His evidence contained nothing but bald assertions and was inherently incredible. I find him an evasive and irresponsible witness.  He impressed me as an untruthful witness who was trying all that he could to evade liability for the Loan and to have it buried with the Deceased.  I do not accept his evidence.

THE FIRST ORAL AGREEMENT

26.  Simply put, the plaintiff’s case is that by an oral agreement, the Deceased and the 2^nd defendant agreed to jointly take over the Deceased’s obligation under Loan B and to pay interest due to the plaintiff directly to Lo Brothers to settle the plaintiff’s interest owed to Lo Brothers.  The alleged First Oral Agreement was not evidenced in writing.  There were few express terms.  The defendants disputed there was such an oral agreement and, if there was, they disputed the plaintiff was a party and denied they were a party or parties to that agreement.  The entirety of the plaintiff’s case was based on the First Oral Agreement.  Its existence or otherwise is basically the case of one person’s words against another’s.  It is common ground that the 3^rd defendant and Henry did not participate in the negotiation of the First Oral Agreement. According to the plaintiff, only the 2^nd defendant, the Deceased and herself were present during the negotiation.  But the 2^nd defendant denied there was such negotiation.  The truth is the secret of the dead and dishonest.

27.  I start with the history of borrowing between the parties and the precursor loan.  The plaintiff, the Deceased and the 2^nd defendant conducted their business using corporate vehicles.  They were the natural persons behind those corporate vehicles.  Whether a loan was contracted by the persons who actually conducted the negotiation or by them on behalf of the corporate vehicles which they represented was a matter of intention.  This intention can be ascertained from the conduct of those persons, the corporate vehicles and the surrounding circumstances.  Insofar as the surrounding circumstances are concerned, the parties’ relationship is of utmost importance.  The evidence of the parties must be understood in the light of their relationship.  There was a history of borrowing between the plaintiff or her corporate vehicle and the Deceased or her corporate vehicle.  The borrowing was conducted in an extremely casual and informal manner.  The loans were of substantial amounts.  There was no loan document signed by the parties to the loans, not even a receipt for the loans.  The only document evidencing two of the loans was the promissory note given voluntarily by the Deceased.  All the loans were unsecured.  On the other hand, the lender did not have ready cash to lend to the borrower.  What happened was that the lender provided security to Lo Brothers to raise a loan to the lender, which was then lent to the borrower.  As between the lender and borrower, the loan was not only unsecured but more importantly, interest free in the sense that the interest was to indemnify the lender of the cost of financing the loans to lend to the borrower.  The lender obtained no benefit but risk from the loans.  The Deceased was a family friend and business associate of the plaintiff.  On the other hand, Buildfont and Well Force were unrelated to each other and had no business connection with each other.  Well Force derived no benefit whatever from the loans but risked enforcement of its Properties B.  It is obvious that those loans were granted on the basis of good faith and personal trust between the plaintiff and the Deceased.  Under such circumstances, the irresistible inference is that the loans were made between the natural persons who negotiated the loans and not the corporate vehicles which they represent.

28.  Under Loan A, the plaintiff provided her own property as security to Lo Brothers and having had the loan paid into her account, she topped it up with her own funds to make up the amount of Loan A and paid it over to Buildfont using her own personal cheque.  The cheque was acknowledged by an accountant of Buildfont.  The interest and principal were paid to the plaintiff by cheques issued by Buildfont.  While there was no dispute that the plaintiff was the lender, the 3^rd defendant relied on the fact that the loan was paid to Buildfont and partly repaid by Buildfont as evidence that Buildfont was the borrower and not the Deceased.  Some of the cheques in repayment of the principal and interest were indeed signed by the 3^rd defendant at a time when he was a director of Buildfont.  If he ran such a defence, he should have obtained company documents from Buildfont, such as ledgers and payment vouchers, to support his  case that it was a loan to Buildfont.  He did not.  Though Buildfont was wound up or otherwise struck off from the company register by        the Companies Registry, there was no explanation why he could not   have obtained the supporting documents.  Adverse inference may be drawn against his credibility on this issue.  In fact, his answers under cross‑examination were evasive and incredible.

29.  The Deceased issued a contemporaneous promissory note in which she wrote:

“ In consideration of the sum of HK$2,350,000.00 now paid by LAM CHING SHEUNG (林徵嫦) to me …, I, TAM SHUI (譚瑞) … DO HEREBY PROMISE to repay the said LAM CHING SHEUNG (林徵嫦) the said the said sum … on 28^th day of September 1996.”

The sum mentioned in the promissory note was the total of Loan A and Loan B.  This promissory note is significant.  It was attested before a solicitor and presumably prepared by the solicitor.  It must be intended by the maker to have legal effect and is the best evidence of the intention of the maker of the promissory note, ie the Deceased.  In the promissory note, the Deceased acknowledged that she received the sum of $2,350,000 from the plaintiff which represented the total of Loan A and Loan B, and she promised to repay on 28 September 1996.  This promissory note is clear evidence that Loan A and Loan B were advanced by the plaintiff to the Deceased.

30.  It is open to a borrower to request or direct the lender to pay the loan to a third party.  The amount thus paid over, nevertheless, remained as a loan to the borrower.  It is equally open to a borrower to cause a third party to repay a loan and interest on his behalf.  The amount thus repaid represented a repayment by the borrower.  In the light of the relationship between the plaintiff and the Deceased and the promissory note, the irresistible inference is that the Deceased was the borrower of Loan A.  This loan was repaid and is not an issue in this litigation.  It is mentioned as part of the factual matrix under which the Loan was made.

31.  Loan C was made under similar circumstances in January 1988. The plaintiff also used her own properties as security to obtain a loan from Guangdong Finance and, pursuant to the Deceased’s request, directed Guangdong Finance to deposit the loan into Buildfont’s bank account.  The principal and interest were paid by Buildfont.  Again, the defendants similarly argued that the parties to Loan C were the plaintiff and Buildfont.  For similar reasons as above, I dismiss such argument.  This loan was repaid, but is mentioned as part of the factual matrix.

32.  In respect of Loan B which, according to the plaintiff’s case, was the precursor of the Loan, the plaintiff used Properties B registered in the name of Well Force to obtain two loans totalling $1,600,000 and directed Lo Brothers to pay the money over to Buildfont.  The defendants mounted a similar argument that it was a loan between Well Force and Buildfont.  Again, I dismiss such argument because the circumstances, in particular the relationship between the plaintiff and the Deceased and the promissory note, were such that the overwhelming inference is that this loan was one made between the persons negotiating the loan in their personal capacity and not on behalf of the corporate vehicle which they represented.  That Well Force was the borrower of the loan from Lo Brothers had little bearing to the question who were the lender and borrower of Loan B.  In addition, I also draw adverse inference against the 3^rd defendant for his failure to produce company documents in support of his assertion that the loan was one between Well Force and Buildfont.  Accordingly, I find that the plaintiff and the Deceased were parties to Loan A, Loan B and Loan C.

33.  I have found the plaintiff honest and credible.  But the defendants have demonstrated their lack of good faith in the conduct of these proceedings by the ridiculous position they took as regards the identities of the parties to the three loans.  They were not credible witnesses, particularly the 2^nd defendant who, being the father of the 3^rd defendant and Henry and who was involved in the loans right from the beginning, must have taken a leading role in this litigation.

34.  There was no dispute that the 2^nd defendant knew that the plaintiff caused the two loans borrowed by Well Force from Lo Brothers to finance Loan  B which the plaintiff lent to the Deceased. He knew all the loans lent to the Deceased were interest free from the plaintiff, though  the Deceased or Buildfont had to indemnify the plaintiff of the interest she had to pay to Lo Brothers.  He knew Lo Brothers would take mortgagee action and sell Properties B in the event of defaults in repayment of interest.  Besides the Deceased, he was the other person in control of Buildfont at the material times.  He must know Buildfont paid interest in respect of the Loan due to the plaintiff directly to Lo  Brothers to settle the plaintiff’s obligation owed to Lo Brothers.   There was no dispute that since 27 December 1999 Buildfont stopped paying interest to Lo Brothers.  Regardless whether he was a party to the Loan, given the generosity of the plaintiff, the financial assistance she gave to the Deceased and his relationship with her, he ought to have informed her if Buildfont was not going to pay or had stopped paying interest to Lo Brothers.  Not only that he did not, he assured the plaintiff in September 2001 that interest had been and would continue to be paid to Lo Brothers.  Even when confronted by the plaintiff in 2005, he still insisted that the 3^rd defendant had paid all interest and misrepresented to her that Lo Brothers had been wound up.   Given the very close relationship between the plaintiff and the Deceased, there was no reason why he did not inform the plaintiff of the Deceased’s death, if not immediately at least soon after.  I hold a very dim view of his commercial morality and credibility.  His conduct suggests to me that he was trying to bury the Loan with the Deceased.  I do not find him credible.

35.  On the factual circumstances, the plaintiff was informed by the Deceased of the condition of her disease.  It was only natural and credible that she took steps to safeguard her Loan B to the Deceased which was unsecured and undocumented and her Properties B were at risk.  Though the 2^nd defendant had his own bore drilling business, the Deceased’s business was conducted jointly with the 2^nd defendant.  The 2^nd defendant accompanied the Deceased when negotiating the three  loans.  It was natural that the plaintiff looked to the 2^nd defendant to fulfil the Deceased’s repayment obligation, if the Deceased could not.  It is credible that she discussed repayment of Loan B with the Deceased and the 2^nd defendant and secured an agreement to provide for the contingency of the Deceased’s death before the work permits for the Sha Lan Village project would be issued when repayment of Loan B would be due.  Had there been no agreement, the plaintiff must have commenced legal action during the Deceased’s lifetime to recover the Loan so as to obtain a judgment which could be enforced over the Deceased’s then available  and substantial assets or a judgment binding on the Deceased’s estate if    she died.

36.  The 2^nd defendant’s subsequent conduct was also consistent with his being a party to the First Oral Agreement.  There was no dispute that he lent the plaintiff $600,000 to enable her to redeem Properties B.  The redemption did not materialise because the plaintiff was cheated    of her money and she could not even repay the 2^nd defendant.  Then the       2^nd defendant agreed to set off that loan against the Loan.  Hence, the parties thereafter conducted their affairs on the basis that the outstanding principal was reduced to $1,000,000.  Had the 2^nd defendant not assumed liability for the Loan under the First Oral Agreement, he would not have agreed to the set off. The 2^nd defendant denied knowledge of the payment of this loan of $600,000 to the plaintiff.  However, the 3^rd defendant admitted that he recall being asked by the Deceased to issue a cheque in that amount to the plaintiff.  The 2^nd defendant was obviously not telling the truth.

37.  Having considered the totality of the evidence, I accept the plaintiff’s evidence and reject the 2^nd Defendant’s. I find that the plaintiff, the Deceased and the 2^nd defendant entered into the First Oral Agreement in the terms as alleged by the plaintiff.  Effectively, under the First Oral Agreement, the Deceased and the 2^nd defendant jointly assumed the Loan which was used to discharge Loan B; and the 2^nd defendant assumed liability jointly with the Deceased to repay the plaintiff the loan principal when the work permits for the Sha Lan Village project were issued and in the intervening period to pay Lo Brothers the interest which the plaintiff was liable under her loans, or more precisely Well Force’s loans, from Lo Brothers which were used to fund Loan B lent to the Deceased.

THE SECOND ORAL AGREEMENT

38.  The plaintiff case in respect of the Second Oral Agreement was that she discovered the Deceased’s and 2^nd defendant’s breach of the First Oral Agreement and upon her withholding legal action against the 2^nd defendant, the 2^nd and 3^rd defendant undertook on 25 July 2006 to  repay the Loan.  At that time, she could not sue the estate of the Deceased as probate had yet to be obtained.  As an interim arrangement, the 3^rd defendant agreed to firstly repay the plaintiff the loan principal of $100,000 by mid August 2006 with the terms of full repayment to be discussed.  The defendants denied.  The Second Oral Agreement was not evidenced in writing.  But, there were a number of letters from the parties which point to the existence of this agreement.  The authenticity and truthfulness of the contents of those letters were not disputed by the defendants.

39.  Towards the end of 2005, the 2^nd defendant was trying to divert the plaintiff by misrepresenting to her that the 3^rd defendant had paid the interest but that Lo Brothers had been wound up.  On 15 June 2006, the plaintiff wrote to the 2^nd defendant requesting a repayment of the Loan.  It can be inferred from that letter that the plaintiff’s case as to how she discover the 2^nd defendant’s breach of the First Oral Agreement is credible.  Then the parties had the meeting on 25 July 2006.

40.  On 5 September 2006, the plaintiff wrote to the 2^nd and 3^rd defendants and Henry, referring to the meeting on 25 July 2006 in which no substantial repayment proposal was received.  She wrote:

“ 就羅氏於1995 年的貸款一事，與你們磋商已有多月，但一直未收到你們任何的確實還款建議。即使是在2006 年7 月 25 日下午在貴司大埔的寫字樓的商談也得不到確實還款建議。”

This passage supported the plaintiff’s evidence that there had been continuous negotiations between the parties and a meeting at the defendants’ South China office in Tai Po on 25 July 2006 was held.  Mr Yip argued that this letter evidenced the contrary that no agreement to repay the outstanding loan principal and interest was reached.  The plaintiff explained that by the above quoted passage she meant there was no agreement on any definite timetable for repayment of the whole amount of the Loan but during the discussion on 25 July 2006 the 2^nd and 3^rd defendants admitted liability for and undertook to repay the Loan.  That sentence is consistent with the plaintiff’s case that the 2^nd and 3^rd defendants agreed to repay the loan principal and interest with an initial repayment of $100,000 to be made before mid August so that the plaintiff could liaise with Lo Brothers for settlement of her outstanding interest with Lo Brothers.  If there was no agreement by the 2^nd and 3^rd defendant to repay the Loan, there was no point for the 3^rd defendant to agree to pay $100,000 being the loss suffered by Lo Brothers upon sale of Properties B.  There was nothing to suggest that the agreement to pay this sum of $100,000 was a gratuitous act of generosity on the part of the defendants.  Understood in the proper context of the evidence, the above passage does not negate the conclusion of the Second Oral Agreement, though it does not evidence its existence.

41.  In the third paragraph, the plaintiff referred to the defendants’ agreement made prior to the Deceased’s death to repay interest to Lo Brothers.  She wrote:

“ 陳太未過身前，你們按我們間的協定還款給羅氏，根據羅氏給我的資料，你們已於2000 年 1 月起沒有還款，……”

This sentence corroborated the plaintiff’s evidence that there was the First Oral Agreement under which the 2^nd defendant agreed to make payment of interest to Lo Brothers.

42.  To this letter, the 3^rd defendant did not dispute but responded by his letter dated 14 September 2006 as follows:

“ 就上次我們磋商過償還羅氏十 萬元利息之事，我本承諾八 月中旬清付，由於我們還未能收回工程欠款數 十 萬 元，以致此事拖再拖，我們實感非常抱歉！”

By this paragraph, the 3^rd defendant admitted his undertaking to pay the plaintiff $100,000 by mid August.  Not only that, he went on to apologise for the delay in repayment due to cash flow problem of his company and renewed his assurance to repay by disposing of some of the company’s building sites or seeking loans from finance companies by using those building sites.  If he only had in mind the payment of a small sum of $100,000 which had nothing to do with the Loan, he would not have found it necessary to mention about disposing of some, not just one, of company’s building sites or seeking loans by mortgaging those sites.  Impliedly, he was talking about repayment of the Loan, the principal and interest at 1.3% per month which accrued over the past six odd years.  Therefore, the agreement to pay this sum of $100,000 must be premised on an admission of liability to pay the loan principal and interest.  This letter lent further support to the plaintiff’s evidence that agreement was reached between the plaintiff and, at least, the 3^rd defendant on the terms of the Second Oral Agreement.  This letter was originally relied on by the defendants as evidence that the Loan was one between Well Force and Buildfont because the 3^rd defendant apologised for the fact that his company’s cash flow had caused the plaintiff’s company inconvenience.  Such argument is bound to fail as Well Force had been struck off by the date of this letter.  Thus this letter reinforced the plaintiff’s evidence that the Loan was a personal loan to the Deceased and 2^nd defendant.

43.  The plaintiff followed up with a letter dated 19 September 2006, in which she offered three proposals to the 2^nd and 3^rd defendants and Henry.  She asserted that the total amount owing was $1,662,500 which should be reduced by $25,000 to take into account a sum of that amount paid by the 3^rd defendant on 23 August 2006.  Mr Yip argued  that the amount owing referred to in this letter was not about the Loan because the outstanding principal of the Loan was only $1,000,000    plus an unknown amount of interest.  His argument was based on his misunderstanding of the evidence.  In that letter the plaintiff was seeking compensation for loss of her Properties B.  She explained that the amount owing, ie the compensation, was arrived at by multiplying her cost of acquiring Properties B, which was $2,660,000, with a factor of 10/16, representing the ratio which the defendants’ outstanding loan had to bear against her loan from Lo Brothers.  Her offer was more than reasonable.  However, she is not now seeking compensation for the loss of Property B.

44.  In fact, the 3^rd defendant never took the view that the plaintiff’s letter was referring to another loan. In his two subsequent letters issued between 27 September 2006 and the mid Autumn Festival, the 3^rd defendant only asked for time to pay and never queried the amount owing, let alone to suggest it was relating to another loan.  Mr Yip’s argument was just a misconceived point taken by counsel.

45.  Those letters were supportive of the plaintiff’s case and inconsistent with the denial of the 2^nd and 3^rd defendants.  The 2^nd and 3^rd defendants impressed me as unreliable witnesses.  They were evasive.  Their evidence was inconsistent with contemporaneous documents.  I reject their evidence and accept the plaintiff’s evidence that the 2^nd and 3^rd defendants entered into the Second Oral Agreement on 25 July 2006 in the terms as asserted by the plaintiff, ie they undertook to repay the loan capital and to pay interest under the Loan, if the estate of the Deceased and the 2^nd defendant failed to.

THE DEFENCE

Non parties

46.  The defendants put up as a defence that Well Force, and not the plaintiff, was the lender of Loan B; and another defence that they were not parties to the various loans, the First Oral Agreement and Second Oral Agreement.  For reasons as given when analysing the plaintiff’s case, I am satisfied that the plaintiff and Deceased were parties to Loan A, Loan B and Loan C; that Loan B was the precursor to the Loan which  was the subject matter of the First Oral Agreement; that the plaintiff, Deceased and 2^nd defendant were parties to the First Oral Agreement; and that the plaintiff, 2^nd and 3^rd defendants were parties to the Second Oral Agreement.

Lack of consideration

47.  The defendants pleaded lack of consideration to support the First Oral Agreement as well as the Second Oral Agreement.  In respect of the First Oral Agreemnt, the plaintiff’s evidence, which I accept, was that one of the terms of the First Oral Agreement was that she would forgo her right of action against the Deceased under Loan B. Effectively, under that arrangement, the Deceased’s liability under Loan B was discharged  in exchange for the First Oral Agreement.  Clearly, that provided valuable consideration for the First Oral Agreement.

48.  In respect of the Second Oral Agreement, the plaintiff’s evidence, which I accept, was that the 2^nd and 3^rd defendants entered into the Second Oral Agreement because she withheld taking legal action against the 2^nd defendant.  At that time, she could not take action against the estate as probate had not been obtained in respect of the Deceased’s estate.  Mr Wong, counsel for the plaintiff, submitted that forbearance to sue was good consideration: Clears v Hunter (1887) 19 QBD 341 and that the plaintiff was entitled to rely on an implied promise to forbear: Thornton Springer v NEM Insurance Co Ltd [2000] 2 All ER 489 at 516.  These propositions are supported by well established authorities.

49.  It was not the plaintiff’s case that she commenced her negotiation with the 2^nd and 3^rd defendants under the threat of legal proceedings.  It was the plaintiff’s evidence that though she did not actually threaten taking legal action, she did forbear enforcing the First Oral Agreement in the hope of a more amicable settlement with the 2^nd and 3^rd defendant.  Given the 2^nd defendant’s deliberate default in honouring his obligation under the First Oral Agreement, his misrepresentation and his deliberate concealment of the default (see below), it must be in the contemplation of the plaintiff, the 2^nd and 3^rd defendants that legal proceedings would follow if no settlement was reached.  Indeed, when the 3^rd defendant reneged from the Second Oral Agreement, the plaintiff wrote a number of times in no uncertain terms threatening that she would commence legal proceedings, which she eventually did.  I accept the plaintiff’s evidence that she did forbear taking legal action and that the circumstances were such that her implied promise to forebear was known to the 2^nd and 3^rd defendants.  Accordingly, I find that this forbearance provided consideration for the Second Oral Agreement.

Limitation – the First Oral Agreement

50.  The 1^st defendant pleaded limitation under section 4 of the Limitation Ordinance.  Mr Bok, counsel for the 1^st defendant submitted that there was a lapse of time of more than six years between the date of issue of the writ in this action on 7 November 2008 and the following events:

(a)   the date of the 1^st defendant’s death on 26 June 2000;

(b)   the date of repayment of the promissory note on 28 September 1996;

(c)    the date of making of Loan C;

(d)   the date of making of Loan B;

(e)    Buildfont’s default in repayment of interest to Lo Brothers since 27 December 1999; and

(f)    the plaintiff’s knowledge of the death of the Deceased  in 2001.

51.  With respect to the 1^st defendant’s legal team, this defence was wholly misconceived and based on a misunderstanding of the law and the plaintiff’s case.  Section 4 of the Limitation Ordinance provided that no actions founded on simple contract or on tort shall be brought after the expiration of six years from the date on which the cause of action accrued.  Time started to run from the date when cause of action accrued.  Counsel was obviously wrong in the law in arguing that the plaintiff’s claims under Loan C and Loan B were statute barred since 20 September 2001 and   28 September 2001 respectively, six years after the making of the respective loans.  More fatal is that counsel failed to appreciate that the plaintiff was not suing on Loan B, Loan C or the promissory note, but on the First Oral Agreement and Second Oral Agreement.  He also failed to appreciate that the plaintiff’s case was that in respect of the First Oral Agreement time did not start to run until November 2005 by reason of the 2^nd defendant’s deliberate concealment.  Furthermore, Mr Bok seemed to be making another novel point that an action in contract was extinguished six years after death.  Thus, what is left of the 1^st defendant’s defence was whether the claim under the First Oral Agreement was statute barred by reason of the plaintiff’s failure to prove deliberate concealment and whether the plaintiff’s cause of action did not survive the Deceased’s death.

52.  The 2^nd defendant also pleaded limitation in answer to the plaintiff’s claim under the First Oral Agreement.  Mr Yip argued that the question of time bar was not relevant because on the evidence the 2^nd defendant was not a party to Loan B; the2^nd and 3^rd defendant never agreed to repay Loan B; the 2^nd defendant did not represent to the plaintiff that he would pay interest to Lo Brothers; and there was no agreement on the part of the 2^nd and 3^rd defendants to make repayment to Lo Brothers.  With respect, these arguments were badly misconceived.  This part of the plaintiff’s claim was not based on Loan B, but on the First Oral Agreement.  Also, his argument was based on the defendants’ evidence, which I have rejected.  In the alternative, Mr Yip argued that all causes of action accrued under Loan B and the First Oral Agreement by 27 December 1999 and were statute barred on 27 December 2005.  The cause of action under Loan B had in fact been extinguished by the First Oral Agreement.  The plaintiff was suing on the First Oral Agreement and her case was that time did not start to run until November 2005 by reason of the 2^nd defendant’s deliberate concealment.     The limitation issue raised by Mr Yip was held in common by Mr Bok; except that Mr Yip did not argue whether the action did not survive the Deceased’s death.

53.  I now turn to the first question, ie whether the plaintiff’s cause of action was statute barred on 27 January 2005.  The cause of action under the First Oral Agreement accrued on 27 December 1999 and the action would have been barred on 27 December 2005.  Relying on section 26(1) of the Limitation Ordinance, Mr Wong argued that by  reason of deliberate concealment by the 2^nd defendant time did not start to run until November 2005 and the action was therefore not statute barred.

54.  Mr Yip argued that Lo Brothers would not have failed to remind the plaintiff and Well Force to make payment and the plaintiff ought to have known about the non‑payment by the Deceased and 2^nd defendant. The plaintiff’s evidence was that she was never informed by Lo Brothers of the default.  There was no dispute that all along Buildfont paid interest on behalf of the plaintiff directly to Lo Brothers.  The evidence of the plaintiff, which I accept, was that she only learned about the Deceased death in mid 2001 after which she discussed with the 2^nd defendant about the Loan.  At the time, she was adjudged bankrupt.  According to the plaintiff, she impressed upon the 2^nd defendant the importance of his continuing to pay interest to Lo Brothers and the 2^nd defendant assured her that he would.  But contrary to that assurance, the 2^nd defendant had in fact stopped paying interest a year ago since    27 December 1999.  If she had been informed of the default by Lo Brothers, she would have approached the 2^nd defendant in a different manner and made different requests.  But, it was not the 2^nd defendant’s evidence that the plaintiff sought his assistance because Well Force was in default of payment of interest or that he had alerted the plaintiff that payment of interest had stopped.  His evidence was a general denial and that the plaintiff asked him to settle some of the debt owed by the Deceased.  But according to the plaintiff, the 2^nd defendant initially responded by saying that the 3^rd defendant had paid interest but Lo Brothers was wound up and later told her that he left those matters to the 3^rd defendant. The 3^rd defendant’s evidence was that he left those matters to his staff and did not know why payment to Lo Brothers stopped.  I think the plaintiff’s account more credible.  I accept her evidence that she was never informed by Lo Brothers of the default in payment of interest. 

55.  It is convenient for the 2^nd and 3^rd defendant to push the blame to the other and ultimately to their staff, but it remained the obligation of the Deceased and the 2^nd defendant to pay interest to Lo Brothers. Upon the Deceased’s death, it was solely the 2^nd defendant’s responsibility to pay interest.  There was non‑payment for more than five years before Lo Brothers sold Properties B.  Even if non‑payment of interest were unintentional at the beginning, the inference to be drawn from such a long period of continuing default is that it was deliberate.  Furthermore, the 2^nd defendant was reminded of the importance to pay interest by the plaintiff in 2001.  Since then, the default in payment of interest could not have been unintentional but deliberate.

56.  Mr Yip argued that a prudent person or a prudent director of Well Force would have made enquiries with Lo Brothers to ascertain whether interest had been paid and had she done so she would have been informed of the default. Hence, he argued that the plaintiff was not entitled to rely on concealment.  I accept the plaintiff’s evidence that acting on the 2^nd defendant’s assurance she made no enquiry from Lo Brothers about the repayment of interest. In view of her relationship with the Deceased and the 2^nd defendant, it was reasonable for her to act on the 2^nd defendant’s assurance.  The plaintiff waited for the issue of work permits for the Sha Lan Village project when repayment of the Loan would be due.  In view of the assurance given by the 2^nd defendant who was a trusted friend, I have no difficulties to find that the deliberate non‑payment was a continuing breach under circumstances in which it  was unlikely to be discovered by the plaintiff for some time and as such amounted to deliberate concealment of the facts involved in that breach of duty within the meaning of section 26(3).      Furthermore, when the plaintiff confronted the 2^nd defendant in November 2005, he still misrepresented to her that the 3^rd defendant had paid interest.  That is clear evidence that the 2^nd defendant deliberately concealed his breach of the First Oral Agreement.  Thus, time did not start to run until November 2005 when the plaintiff first came to know of the breach.  Her action against the 1^st and 2^nd defendant was not statute barred.

57.  I now turn to Mr Bok’s argument that the action did not survive the Deceased’s death.  The plaintiff relied on section 20 of the Law Amendment and Reform (Consolidation) Ordinance (“LARCO”), which provided that all causes of action shall survive for or against the estate.  However, Mr Bok argued that section 20 is only applicable to causes of action in tort as that section is contained under Part IV of LARCO which is headed “Tort” and the heading of section 20 is “effect  of death on certain causes”.  I reject Mr Bok’s approach in interpretation as it is impermissible to take into account the headings in construing a statute.  Basically, a statute has to be construed by reading it as a whole.

58.  On the other hand, Mr Wong submitted that the section is similar to section 1 of the English Law Reform (Miscellaneous Provisions) Act 1934, the purpose of which was to reverse the Latin maxim, action personalis moritur cum persona, ie that a personal action dies with the person.  Thus, he construed the intention of the legislature was that all causes of action, whether in tort, contract or otherwise, survive the death of the plaintiff or the defendant except those for defamation etc as stipulated in the proviso.  Mr Bok submitted that section 1 of the English Law Reform (Miscellaneous Provisions) Act 1934 had no application in Hong Kong because article 8 of the Basic Law of Hong Kong only permitted the common law, rules of equity, ordinances, subordinate legislation and customary law to be maintained but not the above English statute.  With respect to Mr Bok, Mr Wong was not seeking to apply an English statute in Hong Kong, but to borrow the interpretation of that English statute to a similar statute in Hong Kong which was enacted as part of the laws of Hong Kong and in force in Hong Kong well before the change of sovereignty in 1997.  I can see no valid objection to such an approach in statutory interpretation.

59.  Having considered counsel’s argument, I agree with Mr Wong’s interpretation.  The purpose of LARCO as stated in its preamble is:

“To consolidate Ordinances relating to interests in land, assignments, contract, tort, breach of promise and foreign corporations; and to amend the law relating to the defence of tender before action.”

A number of ordinances were consolidated.  LARCO does not purport to change the common law. In the absence of clear or express intention, it has no effect in changing the common law.

60.  The authorities suggest that under common law death does not in general operate to terminate a contract and extinguish all rights and liabilities under a contract.  The effect of death varies according to the nature of the particular contract.  An agency contract or a contract for personal services, such as contract to perform at a concert, for example, is automatically terminated by death.  Usually, rights and liabilities which accrued before death survive and are enforceable by or against the estate.  Depending on the circumstances, some contracts even survive death of the contracting party.  In Bradbury v Morgan (1862) 1 H and C 249, a guarantor had written to the plaintiffs requesting them to give credit to a third party and guaranteeing payment up to a certain amount.  The guarantor then died.  The plaintiffs, in ignorance of that fact, continued to give credit to the third party.     In an action on the guarantee against the executors of the guarantor, Channell B said:

“In the case of a contract death does not in general operate as revocation, but only in exceptional cases, and this is not within them.”

Pollock, CB was equally emphatic.  He said:

“This is a contract, and the question is whether it is put an end to by death of the guarantor. There is no direct authority to that effect; and I think that all reason and authority, such as there is, are against that proposition.”

61.  This is a very ancient authority which suggested that rights and obligations under a contract survive death of the parties to the contract.   A fortiori, pre‑existing rights and obligations which have accrued must survive death, which as Channell B pointed out was the general rule.

62.  Section 20(1) and (4) of LARCO provide:

“(1) Subject to the provisions of this section, on the death of any person after 26 October 1951, all causes of action subsisting against or vested in him shall survive against, or, as the case may be, for the benefit of, his estate:

Provided that this subsection shall not apply to causes of action for defamation or seduction or for inducing one spouse to leave or remain apart from the other or to claims for damages on the ground of adultery.

(4) Where damage has been suffered by reason of any act or omission in respect of which a cause of action would have subsisted against any person if that person had not died before or at the same time as the damage was suffered, there shall be deemed, for the purposes of this section and sections 21 and 22, to have been subsisting against him before his death such cause of action in respect of that act or omission as would have subsisted if he had died after the damage was suffered.”

Bearing in mind the purpose of the Ordinance, by no reading of section 20(1) can it be construed that the legislative intention was to bring about anything other than a consolidation of the existing law.  In the light of the existing common law principle, the sub‑section cannot be construed as conferring a previously non‑existing right or liability to the estate of a person to sue or to be sued in tort or to abolish a previously existing right or liability to the estate to sue or to be sued in contract after death.     Rather, it is obvious that the section acknowledged the common law principle that a cause of action survives death and the section only abolished previously existing right to sue in respect of certain causes of action in tort, ie those stipulated in the proviso.  This explains why this section found its way into Part IV under the heading of “Tort” and was given a section heading of “effect of death on certain causes”.  “Certain causes” refer to the causes of action stipulated in the proviso.  I can find no basis to support Mr Bok’s interpretation that the section gives the right to sue the estate in tort and that all rights and obligations under contract are extinguished  upon death.

63.  Lastly, Mr Bok argued that the plaintiff has not tackled the limitation issue, namely that more than six years had lapsed between the date of death of the Deceased in June 2000 and the date of issue of the writ in November 2008.  As a cause of action survives death except those under the proviso to section 20(1), I utterly fail to see the relevance of the Deceased’s date of death in a limitation issue.  Upon the Deceased’s death, it is open to the plaintiff to sue her estate.  Death has no impact on the issue of limitation.  The issues in the present case are the date when the cause of action accrued and whether time stopped running because of deliberate concealment.  As explained above, by reason of deliberate concealment, time did not start to run against the plaintiff until November 2005 and the action was not statute barred.

64.  Accordingly, I find that the plaintiff’s claims under the First Oral Agreement against the 1^st and 2^nd defendants were not statute barred.  The 1^st and 2^nd defendants are jointly liable to the plaintiff for the outstanding principal of $975,000 and interest.

Limitation – the Second Oral Agreement

65.  In respect of the Second Oral Agreement, which was made on 25 July 2006, time has not yet expired.  The 2^nd and 3^rd defendants are jointly liable to the plaintiff for the outstanding principal of $975,000 and interest.

Interest

66.  The plaintiff claims interest on the outstanding loan principal at the monthly rate of 1.3% until payment or damages.  The intention of the parties was that the Loan was basically interest free from the plaintiff in that any interest charged by the plaintiff was to indemnify her of her interest payable to Lo Brothers in financing the Loan.  Had the defendants honoured their agreement, that would have been the case and the mortgage of Properties B would have been redeemed in due course. With the defendants breach of the First Oral Agreement, Properties B  were sold by Lo Brothers and the interest which the plaintiff had to pay to    Lo Brothers was reduced or even extinguished as a result of Well Force having been struck off from the register of the Companies Registry.  The question then arose as to whether the plaintiff could continue to charge interest which was not what was in the contemplation of the parties when they entered into the First Oral Agreement.  In my opinion, if it was a term of the agreement that she could charge interest, she should have the benefit of the interest even though the circumstances have changed.  This is particularly so because the change in circumstances was brought about by the defendants’ breach of the First Oral Agreement and the plaintiff suffered the loss of her Properties B as a result.  Furthermore, the defendants should not be allowed to benefit from their own breach. 

67.  The interest on the outstanding loan principal of $1,000,000 from 27 December 1999 to 23 August 2006 at the rate of 1.3% per  month is $1,038,741.93 (ie $1,000,000 x 0.013 x [79 + (5+23)/31]).  The interest on the reduced loan principal of $975,000 from 24 August 2006      until the date of the writ on 7 November 2008 is $335,778.45          (ie $975,000 x 0.013 x [26 + (8/31 + 7/30)]).  The interest calculated up to 7 November 2008 is $1,374,520.38.  

CONCLUSION

68.  The plaintiff is entitled to be awarded the amount of $2,349,520.38, being the sum total of the outstanding loan principal of $975,000 and interest calculated up to the date of the writ of $1,374,520.38. 

69.  The defendants’ conduct leading to the plaintiff’s claim and in this litigation is appalling.  Despite the plaintiff’s help in financing the Deceased’s business by using her own properties as security to raise loans to lend to the Deceased interest free, the 2^nd and 3^rd defendants deliberately defaulted in payment of interest to Lo Brothers with the knowledge that their default would result in the plaintiff’s loss of her properties used    to raise the loan for the Deceased.  Not only that, the 2^nd defendant knowingly misrepresented to her that the interest had been paid to Lo Brothers and assured her that it would continue to be paid.  When the plaintiff sought to recover the Loan, instead of honestly admitting liability and repay, the three defendants rather incurred costs to instruct two legal teams to put up spurious defences, thereby causing the plaintiff to incur additional costs.  To show the court’s disapproval of such outrageous conduct, the defendants should be ordered to pay interest at judgment rate from the date of the writ and the plaintiff’s costs on solicitor and own client basis.

70.  Accordingly, I enter judgment for the plaintiff against the   1^st, 2^nd and 3^rd defendants jointly and severally in the amount of $2,349,520.38, with interest on the sum of $975,000 at judgment rate from the date of the writ on 7 November 2008 until full payment.  I also make a costs order nisi that the 1^st, 2^nd and 3^rd defendants shall pay the plaintiff’s costs on solicitor and own client basis, to be taxed if not agreed, while the plaintiff’s own costs shall be taxed in accordance with Legal Aid Regulations.