LAW SIU YIN ADA v. LO HUNG KWAN

CACV 1034/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1034 OF 2000

(ON APPEAL FROM HCAP NO. 11 OF 1999)

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J U D G M E N T

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Hon Le Pichon JA (giving the judgment of the court):

1. This is an appeal by the plaintiff from an order made by Deputy Judge Muttrie on 30 December 2000 dismissing an appeal by the plaintiff from an order made by Master Ho on 12 September 2000 striking out the plaintiff's amended statement of claim pursuant to O. 18 r. 19 and/or the inherent jurisdiction of the court on the ground that it is frivolous or vexatious, or otherwise an abuse of the process of the court and dismissing the action with costs against the plaintiff.

2. The plaintiff is some 80 years of age. Upon the plaintiff's application by letter dated 1 February 2001, Woo JA granted leave to the plaintiff to be represented in court by her son Herbert Lo ("Mr Lo"), provided that she was present in court throughout the proceedings.

Background facts

3. Lo Yau Yung died intestate in China in 1936. He was survived by his widow Lo Yu Shi ("the deceased") who died intestate in China in 1946. They had one son, Lo Chung Man, the father of the plaintiff and the defendant. The father was married to Cheung Shui Bing but had a concubine, Wong Luk Mui, the mother of the plaintiff Law Siu Yin, Ada, who was born in 1921, and the defendant, her younger brother, Lo Hung Kwan, who was born in 1922.

4. The Lo family had a jewellery business in Canton but they also had a company in Hong Kong called Wang Yuen Limited. When the deceased died, her estate in Hong Kong consisted of 20 shares in that company. The defendant applied for Letters of Administration and in the petition for Letters of Administration dated 18 July 1947, the defendant affirmed that he was the "only natural and lawful grandson and the only next of kin ... surviving" the deceased.

5. Letters of Administration No. 915 of 1947 were granted to the defendant on 9 October 1947. The sole asset of the estate in Hong Kong consisted of the 20 shares in the company which was sold in 1971. The net proceeds after deducting administration expenses were paid to the defendant as the sole beneficiary.

6. The plaintiff came to Hong Kong from Canton in about 1938 accompanied by her fiance Law Po Sang. The plaintiff and her fiance had eight children but, according to the plaintiff, they never married. Mr Law died in Australia in 1989. Before he died, Mr Law apparently told the plaintiff certain things which caused her to suspect that there had been some irregularity relating to the dealings with the deceased's estate. After Mr Law's death, the plaintiff fell ill and did not recover sufficiently until mid-1993. She was in Hong Kong in early July 1993 and visited the defendant. During that meeting the topic of the deceased's estate came up. From what was allegedly said at that meeting, the plaintiff came to realise that she was entitled to a share in the estate.

7. Upon her return to Australia, the plaintiff began making claims for a share in the deceased's estate which had comprised not only assets in Hong Kong but also in China. The defendant made some payments to her in 1993.

8. In 1995, the plaintiff made further claims through Messrs James Chong & Co. of Perth, Western Australia. On 23 August 1995, the plaintiff's solicitors wrote to the defendant asserting that the plaintiff was owed sums of money to which "she was entitled through intestate succession from her parents and her grandparents." The amount claimed was in excess of $215 million.

9. Protracted negotiations then ensued between the parties' solicitors and eventually the plaintiff's claim was settled through a Deed of Settlement dated 7 February 1996 ("the Deed"). Pursuant to the settlement, the defendant paid the plaintiff an amount in Australian dollars equal to HK$8 million.

The Action

10. By writ dated 28 October 1999, the plaintiff instituted the present action for rescission of the Deed on the ground of misrepresentation or alternatively on the ground of common mistake, revocation of the grant of the Letters of Administration to the defendant, an account of the assets of the whole of the estate of the deceased that had come into the hands of the defendant and an account of what is due to the plaintiff under the provisions of the Civil Code of the Republic of China, and other relief. The issues raised in the action are:

(a) whether the defendant had wrongfully obtained the letters of administration by falsely representing that he was the only surviving next of kin of the deceased (the administration issue);

(b) whether irrespective of who was entitled to administer the estate, the plaintiff was entitled to a one half share of the estate of the deceased (the succession issue);

(c) whether the plaintiff's claim is barred by the Deed.

11. On the succession issue, the plaintiff's case is that the deceased died domiciled in China and that the applicable law of succession is the law of the Republic of China prevailing in 1946 under which she became entitled to half of the estate. The defence on that issue is that the deceased was domiciled in Hong Kong at the date of her death, that such domicile was acquired as a dependant of her husband who had himself acquired a domicile of choice in Hong Kong. The applicable law of succession was thus Chinese law and custom under which the defendant was the sole beneficiary if, as pleaded in the defence, the plaintiff was already married to Mr Law at the time of the deceased's death. Certainly, by then, several children had been born to the plaintiff and Mr Law. If, on the other hand, the plaintiff was not married to Mr Law, her entitlement under Chinese law and custom would have been limited to maintenance and dowry only.

Chronology of negotiations

12. As noted above, on 23 August 1995, the plaintiff claimed $215 million as her share of the deceased's estate. This invited an offer from the defendant on 17 October 1995 of a payment of $20,000 per month for five years, aggregating $1.2 million. This was rejected on 17 November by the plaintiff who had meanwhile reduced her claim considerably: from $215 million to $30 million.

13. On 23 November 1995, the parties reached an oral agreement for settlement at $5 million. A draft deed was then prepared by the defendant's solicitors and sent to the plaintiff on 8 December 1995. The plaintiff took issue with certain of the provisions of the draft and insisted on adding the phrase "according to Chinese Law and Custom" to several of the provisions.

14. The position as at 16 December 1995 was summarised by the defendant's solicitors in the following terms:

"The stumbling block now standing in the way of this settlement seems to be your client's insistence to resolve this matter only on Chinese Laws and Customs whilst our client seeks to have your client waiving all claims, if any."

On 20 December, the plaintiff's solicitors sent by way of facsimile their letter dated 14 December to the defendant's solicitors to the following effect:

"Our client will agree to settle all her claims in their entirety, and accordingly delete the references to 'Chinese Law and Custom' upon payment to her of the sum of $HK100,000,000."

However, by 4 January 1996, the plaintiff had second thoughts: for a settlement on a full and final basis, the plaintiff wanted $30 million.

15. This drew a counter-offer on 9 January of $7 million from the defendant. Further bargaining ensued with the plaintiff counter-offering $10 million on 9 January. On 12 January, the defendant increased his offer to $8 million. To this counter-offer, the plaintiff's solicitors responded as follows:

"Our client has instructed us that she will make a final concession and settle the matter for the sum of HK$8,000,000.00, subject to the following conditions:

1. ...

2. ... However, in order to settle this, our client is prepared to acknowledge that, as of the date of the settlement of this matter, she has no further rights in respect of the deceased estate.

..."

16. The draft deed was then finalised and executed by the parties and payment made by the defendant in accordance with the terms of the Deed.

The Deed of Settlement

17. The Deed was made between the plaintiff and the defendant. After reciting that Lo Yu Shi, Lo Yau Yung, Lo Chung Man and Cheung Shui Bing individually and collectively referred to as "the deceased" died in China and that Letters of Administration in respect of the estate of Lo Yu Shi in Hong Kong namely 20 shares in Wang Yuen Limited ("the said Estate") had been granted to the defendant on 9 October 1947, the Deed went on to recite and provide as follows:

"(7) By various letters, the [plaintiff] has alleged that she is entitled to share in and the [defendant] is liable to account to her for the following properties of the Deceased ('the Properties'):-

(a) shares in Wang Yuen Limited, the subject matter of the said Estate:

(b) the property namely No.6, Yuk Kwai Tau Hong (玉桂頭巷) in Canton, Kwong Tung, the Republic of China;

(c) the said proceeds in Yu Tung Wo (余同和醬院), a soya sauce manufacturer, in Canton, Kwong Tung, the Republic of China; and

(d) the sale proceeds in the property in Sha Kei Road (沙基路), Canton, Kwong Tung, the Republic of China.

(8) The [defendant] has denied that he is liable to account to the [plaintiff] for the Properties as alleged or at all.

(9) The Parties have agreed to enter into this Deed on the terms and conditions hereinafter appearing."

NOW THIS DEED WITNESSETH AS FOLLOWS:-

"In pursuance to the said agreement and for the consideration hereinafter appearing the Parties hereby covenant and agree with each other as follows:-

1. The [defendant] agrees to pay the [plaintiff] the following sums on or before the respective dates hereinafter specified:-

...

2. The [plaintiff] hereby covenants, warrants and undertakes that, in respect of the Properties and the Deceased's other properties (including but not limited to investments of any kind), if any, whether real or personal or wherever situated:-

(a) she has no claim, right or demand in whatever nature against the [defendant], his personal representatives and the members of the [defendant's] family;

(b) she waives all her claim, right or demand, if any, against the [defendant], his personal representatives and the members of the [defendant's] family;

(c) she, her personal representatives or persons claiming under or through her shall not make any claim or demand against the [defendant], his personal representatives or the members of the [defendant's] family.

3. The [plaintiff] declares that in entering into this Deed of Settlement and making the covenants, warranties and undertakings in Clause 2 aforesaid, she has taken proper legal advice. The [plaintiff] further accepts that the [defendant] is entitled to the said Letters of Administration.

...

5. Each of the Parties hereby acknowledges that they have taken separate and independent legal advice on the matters referred to in this Deed and that this Deed has been entered into of their own volition with full knowledge of the facts and consequences thereto and that they believe this Deed to be reasonable under the circumstances.

6. This Deed constitutes the entire agreement between the Parties with respect to this subject matter. Neither party has relied on any representation or warranty made by the other party which is not contained in this Deed.

..."

18. As pleaded, the plaintiff's case is that her claims are not barred because the Deed ought to be rescinded on the grounds of misrepresentation and/or mutual mistake. In the submissions made before us, the plaintiff sought to rely on additional grounds which she said had been overlooked by the Deputy Judge.

Misrepresentation

19. It is the plaintiff's case that during the negotiations culminating in the execution of the Deed, the defendant's solicitors had misrepresented to her lawyers that "intestate succession to the [deceased's] estate" was governed by Chinese law and custom when the correct law was in fact the law of the Republic of China in 1946 under which the plaintiff became entitled to a half share.

20. The representations complained of are pleaded in paragraph 23 of the Amended Statement of Claim and are contained in three letters sent by Woo Kwan Lee & Lo, the defendant's then solicitors to the plaintiff's solicitors.

21. As noted above, the plaintiff retained solicitors to represent her in August 1995 claiming a half share in the estate of the deceased. Protracted negotiations through solicitors' letters then ensued. It is therefore relevant to put the statements complained of in context.

22. Having on 23 August 1995 advanced the plaintiff's claim to a share in the estate of the deceased which share the plaintiff valued at $215 million, on 9 October 1995, the plaintiff's solicitors reiterated the plaintiff's entitlement to share in the intestacy of the deceased. This elicited the response dated 17 October 1995:

"Letters of Administration were granted to our client according to Chinese laws and customs. Our client was also the only person entitled to the benefit of the estate of Lo Yu Shi."

It is clear from the terms of this response that what the defendant's solicitors were attempting to do was to set out the defendant's stance on both the administration and succession issues since they were unable to agree with the plaintiff that she was entitled to a half share in the estate.

23. The plaintiff's solicitors responded to the letter of 17 October on 2 November by denying that Chinese law and custom applied to the administration of the estate of the deceased. They then went on to say that even if (which was denied) the system of Chinese law and custom were to apply to govern the rights of their client to inherit property, their client would still be entitled to share in the estate by way of maintenance and dowry and authorities were cited to substantiate that assertion. This in turn invited a response on 9 November as follows:

"under customary law a Chinese married woman was not entitled to maintenance and dowry ...

...

In the circumstances of the case, our client is the only person entitled to share in the estate of the deceased."

It is to be noted that it was the defendant's belief and understanding all along that the plaintiff was married to Mr Law at the date of the deceased's death. In fact, the plaintiff's marital status was only raised for the first time in the plaintiff's solicitors' letter dated 11 December, sent shortly after receiving the first draft of the Deed in which it was recited that the plaintiff was married before the date of the deceased's death.

24. Finally on 17 November 1995, the defendant's solicitors wrote to state that:

"Our client's entitlement to the deceased's estate was under Chinese customary law."

25. The plaintiff's case is that the representations contained in the letters dated 17 October, 9 and 17 November were made to induce her to believe that intestate succession to the estate of the deceased was governed by Chinese law and custom by virtue of which her entitlement was limited to only one of an unmarried woman's claim for maintenance and dowry and/or to forbear in claiming a share in the estate to the full extent of her legal entitlement.

26. But the statements about which the plaintiff complains did no more than set out and/or clarify the defendant's position at law as he perceived it. From the outset, the plaintiff had asserted an entitlement to a half share of the deceased's estate. Whilst no mention was made in the letters from the plaintiff's solicitors that the plaintiff's claim was premised on the deceased having died intestate and domiciled in China, as Mr Lo accepted in the course of his submissions, that was the basis the plaintiff's solicitors adopted in calculating the value of her claim in their letter of 23 August 1995. It is also clear that prior to the execution of the Deed, the plaintiff was in possession of all the facts upon which she now relies in support of the contention that the deceased died intestate and domiciled in China and she had the benefit of independent legal advice throughout these negotiations. In those circumstances, it is difficult to see how the plaintiff can discharge the burden of proof on her to show that the statements caused her to enter into the Deed and that the representations were material.

27. Moreover, after a draft deed was presented to the plaintiff's solicitors, by letter of 9 December 1995, they told the defendant's solicitors that the plaintiff requested that the phrase "according to Chinese Law and Customs" be added to the end of the draft clauses for waiving the plaintiff's claims. The defendant's solicitors refused, and the plaintiff raised the formerly orally agreed amount for settlement of $5 million to $100 million. The attempt to limit the claims that she was agreeable to waive to those according to Chinese law and custom failed. Eventually the compromise was agreed at $8 million without Chinese law and custom being mentioned in the Deed: the plaintiff's claims against the estate and the defendant, whether based on that law and custom, were waived. This demonstrates clearly that the plaintiff and her legal advisers appreciated that the compromise as recorded in the Deed was not only based on Chinese law and custom on which the defendant relied. Her agreement to settle all of her claims could not have been based on the alleged misrepresentation of the defendant.

28. Those matters aside, the question of misrepresentation cannot arise unless and until the representor's statement is shown to be wrong. The issue is whether the deceased died domiciled in China or in Hong Kong. That issue remains unresolved since it was no part of the striking out application for any such determination to be made: that would have been a matter for trial had the action not been struck out. The Deputy Judge made no finding as to where the deceased died domiciled. At the top of page 11 of his judgment, the Deputy Judge was merely saying that the plaintiff would be entitled to share in the estate if the deceased did indeed die domiciled in the Republic of China. He was not there making any finding of fact but simply stating that on that supposition, certain consequences would follow. Then at page 14 of his judgment, after referring to the facts upon which the plaintiff relies to establish the deceased's domicile at the date of her death, he went on to say that the mistake, if there was one, could not have been mutual because the plaintiff knew all along the facts which would negate it. The plaintiff appears to have misread the judgment and treated those observations of the Deputy Judge as equivalent to a holding that the deceased did die domiciled in China.

29. Clauses 3, 5 and 6 of the Deed stated in clear and unambiguous terms that each of the parties had taken separate and independent legal advice before entering into the Deed, that they were doing so of their own volition with full knowledge of the facts and consequences, believing the Deed to be reasonable under the circumstances and that neither party had relied on any representation or warranty made by the other party not contained in the Deed. In the face of those provisions, it is not open to the plaintiff to say that she had been induced into entering the Deed by reason of any representation. The Deputy Judge's conclusion was plainly correct.

30. The Misrepresentation Ordinance

31. The Deputy Judge went on to consider (at pages 14 to 15) the question of the applicability of section 4 of the Misrepresentation Ordinance, Cap. 284 to clause 6. Section 4 is in the following terms:

"If a contract contains a term which would exclude or restrict -

(a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or

(b) any remedy available to another party to the contract by reason of such a misrepresentation,

that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 3(1) of the Control of Exemption Clauses Ordinance (Cap 71); and it is for the person claiming that the term satisfies that requirement to show that it does."

Section 3(1) of the Control of Exemption Clauses Ordinance, Cap. 71 provides:

"(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Ordinance and section 4 of the Misrepresentation Ordinance (Cap 284) is satisfied only if the court or arbitrator determines that the term was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made."

32. The test required was one of "reasonableness". In applying the test, the Deputy Judge took into consideration the fact that:

"The plaintiff knew the facts which might have produced the legal result that she was entitled to a half share in the estate, and she had legal advice throughout the negotiations which led to the execution of the deed."

In those circumstances, he concluded that it could not be said that it was not fair and reasonable to include clause 6. We agree.

Mistake

33. The plaintiff also relies on mutual mistake as a ground for setting aside the agreement. The Deputy Judge applied the principles enunciated by Denning LJ in Solle v. Butcher, [1949] 2 All ER 1107, 1118-1119. A contract will be rescinded if the mistake of one party has been induced by a material misrepresentation of the other or if the parties were under a common misapprehension either as to facts or as to their relative and respective rights provided that the misapprehension was fundamental and the party seeking to set it aside was not himself at fault.

34. For the reasons stated above, it is not open to the plaintiff to contend that she was induced by a material misrepresentation by the defendant.

35. But what was the mistake that is alleged to have been mutual? The plaintiff's claim from the outset, when her solicitors wrote the letter of 23 August 1995, was to a half share of the estate which in turn was premised on the deceased having died domiciled in China. In support of that view, the plaintiff relied on facts which are set out in her fourth affirmation and which facts had been in her possession all along. So far as the defendant was concerned, he did not share that view. He maintained that the estate devolved in accordance with Chinese law and custom which would be the case if the deceased died domiciled in Hong Kong. On the facts, there was never any mutual mistake. Each of the parties, being independently and separately advised, compromised the dispute by entering into the Deed. There is no question of there having been any mutual mistake as would warrant the rescission of the Deed.

Other grounds

36. The plaintiff submitted that the Deputy Judge failed to take into account or overlooked three additional grounds. These were referred to in the plaintiff's extensive written submissions running to some 39 pages. Although we have endeavoured to distil these grounds from the written submissions, we confess that we have not found the task easy since the submissions were not readily comprehensible. Doing the best we can, we will attempt to articulate the additional grounds relied on by the plaintiff.

37. Public policy

38. As we understand it, the plaintiff's submission is that the Deed ought to be set aside as being contrary to public policy. The factors relied on by the plaintiff appeared to be the following: the petition for the grant of Letters of Administration (the truth of which was affirmed by the defendant) contained a falsity in that it stated that the defendant was "the only next of kin" surviving the deceased and that although the defendant had executed the administration bond, he had failed to distribute to the plaintiff her entitlement under the deceased's intestacy.

39. Reference was made to a passage in an old edition of Halsbury's Laws of England which can be found in the current edition at Volume 9(1) Halsbury's Laws of England, 4th Edition para 842:

"Any agreement which tends to be injurious to the public or against the public good is invalidated on the grounds of public policy."

The types of agreements which are invalidated on the ground of public policy include, for example, interference with the legislative process or elections, agreements to conceal offences, agreements involving maintenance or champerty, etc. But the factors relied on by the plaintiff do not constitute grounds that would attract the application of the principles set out above. What the Deed did was to effectuate an agreement to settle the dispute over the estate of the deceased. Such agreements do not offend public policy. It would appear that the plaintiff has not understood the principle of law involved in the submission made.

40. The administration bond

41. The submission ran something along these lines: under the terms of the administration bond which the defendant executed, he undertook to deliver and pay to such person or persons as shall be entitled thereto all the rest and residue of the personal estate of the deceased. According to the plaintiff, she is entitled to one half of the deceased's estate so that the defendant's obligation under the administration bond was to make that distribution to her and as the Deed provided for distribution that was different from that due under the administration bond, the Deed ought to be set aside.

42. The absurdity of the submission hardly needs further elaboration. An administration bond in no bar to beneficiaries who are sui juris settling a dispute relating to the distribution of a deceased's estate.

43. Inducement or economic duress

44. The relevant events are as follows:

(1) By letter dated 20 November 1995, the plaintiff rejected the defendant's offer of settlement at $1.2 million and, instead, sought a settlement at $30 million.

(2) On 23 November 1995, the defendant's solicitors wrote stating that the defendant was extremely upset that the plaintiff should see fit to exploit on his goodwill and that her oppressive attitude was inconsistent with her expressed desire to resolve her differences with her brother. They made a counter-offer of $2 million to the plaintiff.

(3) As a result of that letter, in the evening of 23 November 1995, the plaintiff rang the defendant and in the course of that conversation, the parties agreed to a $5 million settlement and the signing of an appropriate deed to reflect the settlement.

45. The plaintiff now complains that she was 'coerced' into agreeing to this settlement because the defendant allegedly told the plaintiff that if the plaintiff ever took legal proceedings against him, the defendant would deny the brother-sister relationship. The plaintiff's contention is that she would have difficulty in proving the relationship in the face of such a denial since the plaintiff does not have a birth certificate.

46. But subsequent events militate against any suggestion of coercion. The defendant's solicitors prepared the draft of the Deed of Settlement. After it had been perused by the plaintiff's solicitors, they insisted on adding the phrase "according to Chinese Law and Custom" to clauses 4a, 4b, 4c and 5. The defendant did not accede to this request since the whole purpose of the settlement was to achieve a final settlement and not one simply settling the plaintiff's claim under Chinese law and custom. There followed further "horse trading" between the parties as is apparent from the chronology of negotiations and, eventually, they culminated in the execution of the Deed.

47. By no stretch of the imagination can it be said that the alleged threat of the defendant to deny the brother-sister relationship between him and the plaintiff had the effect of "coercing" the plaintiff into entering into the Deed. The suggestion that the plaintiff would somehow not be able to prove that she was the defendant's sister if the defendant were to deny the relationship is absurd: whether or not the plaintiff has a birth certificate, the relationship has been accepted and acknowledged by the defendant through his solicitors in countless letters generated since the plaintiff's solicitors first made their claim in August 1995.

48. To sum up, none of the additional grounds that we have endeavoured to articulate has any merit and the Deputy Judge cannot be criticised for not attempting to grapple with those submissions which we have found to be somewhat elusive.

Conclusion

49. This appeal should never have been brought. It is entirely devoid of merit, grounded on misconceptions of the law and legal principles.

50. Accordingly, the appeal is dismissed and there is to be an order nisi that costs be to the defendant.