|
HCA 2085/2017
[2023] HKCFI 1097
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 2085 OF 2017
____________
|
BETWEEN
|
| |
LAU WAI KWONG |
Plaintiff |
| |
and |
|
| |
LAU CHEUNG KAM LING MARGARET née |
Defendant |
| |
CHEUNG, KAM LING MARGARET |
|
____________
| Before: |
Hon Cheng J in Court |
| Date of Trial: |
7 - 10 and 16 March 2023 |
| Date of Judgment: |
5 May 2023 |
_______________
J U D G M E N T
_______________
A. INTRODUCTION
1. On 19th August 2011, the Defendant (“Ms Cheung”) presented a petition for divorce from the Plaintiff (“Mr Lau”) in FCMC 11425/2011. A decree nisi was granted on 25th October 2011.
2. On 18th February 2014, by the parties’ consent, Deputy District Judge I Wong (“the Judge”) made an order (“the Consent Order”), settling the parties’ claims in the ancillary relief proceedings in FCMC 11425/2011.
3. Mr Lau now claims, in these proceedings, for rectification of the agreement between the parties as set out in the Consent Order, on the grounds of common mistake or unilateral mistake.
4. The part of the Consent Order in issue relates to the former matrimonial home of the parties (“the Matrimonial Home”).
5. Ms Cheung counterclaims against Mr Lau for damages for the delay in transferring to her his shares in the company holding the Matrimonial Home, so that she was unable to rent out the Matrimonial Home for the period between 31st March 2015 and 28th November 2017.
B. THE BACKGROUND
6. Unless otherwise indicated, the following is not in dispute, and I find such undisputed matters as facts.
7. On 29th January 2014 and 18th February 2014, Mr Lau and Ms Cheung participated in two financial dispute resolution hearings before the Judge (“the 1st FDR Hearing” and “2nd FDR Hearing” respectively) regarding the distribution of the parties’ matrimonial assets and potential settlement in the ancillary relief proceedings.
8. The key assets which were the subject of the parties’ negotiations were:
8.1 a warehouse, an important asset in Mr Lau’s and Ms Cheung’s successful logistics business (“the Warehouse”), which at the time was held by Eastern Investment Holding Limited (“EIH”), a company owned by Mr Lau and Ms Cheung in equal shares;
8.2 the Matrimonial Home, which at the time was held by Eastern Logistics Investment Co Limited (“ELI”), a company owned by Mr Lau and Ms Cheung in equal shares;
8.3 a property in Tung Chung, which was registered in the name of Ms Cheung (“the Tung Chung Property”);
8.4 a group of ten companies including EIH, involved in the logistics business, and which were owned by Mr Lau and Ms Cheung in equal shares (“the Companies”). Another company in the group was Oriental Logistics Company Limited (“OLL”).
The 1st FDR Hearing
9. What happened at the financial dispute resolution hearings was summarised in the Judge’s judgment dated 26th February 2016 regarding Mr Lau’s application to amend the Consent Order pursuant to RHC O.20 r.11 (“the Slip Rule Judgment”) at [49] to [50].[1] In relation to the 1st FDR Hearing:
9.1 Mr Lau’s initial stance was that because of his stellar contribution to the family, he should have more than a 50% share of the family assets, whereas Ms Cheung insisted on an equal division. Later on, the parties were apparently agreeable to a 50:50 split, with an indication from counsel then appearing for Ms Cheung that this was her bottom line. The case was stood down for negotiations;
9.2 when the parties returned to the court at the end of the day, Ms Yip SC outlined the parties’ agreement, which was in principle a 50:50 split. The Warehouse was to be sold, with the proceeds to be divided between the parties. The Matrimonial Home was to be sold with an asking price of $55m, with the proceeds to be divided between the parties. The Tung Chung Property was to be acquired by Ms Cheung by paying 50% of its value to Mr Lau. Mr Lau was to buy out Ms Cheung’s shares in the Companies. Personal assets were to be split on a 50:50 basis. There was still room for negotiation with regard to the expenses of Mr Lau and Ms Cheung’s son (“the Son”) but the Judge was told that this would not be a deterrent to settlement;
9.3 as the parties were making progress towards settlement, the Judge adjourned the hearing to 18th February 2014.
Events during the adjournment
10. On 11th February 2014, Messrs Ernest Li & Co (“ELC”), solicitors for Ms Cheung, sent a draft consent summons to Messrs Lam & Lai (“LL”), solicitors for Mr Lau, under cover of a letter marked “Without Prejudice to Respective Parties’ Rights & Subject to contract” (“the ELC 11.02.2014 Letter”). The letter stated that:
“[Ms Cheung had previously agreed to put up the Matrimonial Home for sale at the [1st FDR]. However, after further consideration, [Ms Cheung] prefers keeping the Matrimonial Home to avoid unnecessary inconvenience might be caused by relocation and to preserve the Matrimonial Home for the son’s future use. Therefore, [Ms Cheung] proposes that she shall acquire [Mr Lau’s] interest in the Matrimonial Home in the manner proposed in the enclosed draft consent summons…”.
11. The enclosed draft “minutes of consent order” (“the ELC Draft”) provided for the dismissal of the parties’ respective claims upon the giving of various undertakings. Undertakings J and K were as follows.
“The Matrimonial Home
J. AND UPON the Petitioner and the Respondent agreeing and acknowledging that:-
(i) The current market value of [the Matrimonial Home] is HK$45.9 million;
(ii) The Matrimonial Home is subject to an existing mortgage created in favour of Hang Seng Bank with outstanding mortgage repayment of HK$15 million approximately;
(iii) The Matrimonial Home is jointly owned by the Petitioner and the Respondent via [ELI]. The Petitioner and the Respondent currently each holds 50% [of] the issued shares of ELI;
(iv) ELI currently owes to OLL a loan of the amount of around HK$15 million (“ELI Loan”) [to be confirmed by company accountant];
(v) The net value of the Matrimonial Home (the “Net Value of the Matrimonial Home”) shall mean the sale price of the Matrimonial Home after deducting the following expenses:
(a) the outstanding amount payable upon redemption in respect of the mortgage in favour of Hang Seng Bank as mentioned in Paragraph J(ii) above; and
(b) repayment of loan advanced by ELI to OLL as mentioned in Paragraph J(iii) above; and
(c) other reasonable expenses in relation to the transfer of shares of ELI (including legal costs, tax and stamp duty, if any);
K. AND UPON the Petitioner and the Respondent agreeing that:-
(i) The Petitioner shall acquire all the Respondent’s interest of and in ELI (represented by his 50% shares in ELI) by paying to the Respondent one half (1/2) of the Net Value of the Matrimonial Home (as defined above) upon the satisfaction of the following conditions precedent:
(a) the completion of sale of the Warehouse;
(b) due diligence report and latest audited accounts of ELI are to the satisfaction of the Petitioner;
(c) The Petitioner and the Respondent each repays 50% of the ELI Loan to OLL, such that the ELI Loan is fully released;
(d) The Respondent pays to the Petitioner an amount equivalent to one half (1/2) of the outstanding redemption amount in respect of the mortgage secured thereon in favour of Hang Seng Bank mentioned in Paragraph J(ii) above;
(e) Any other assets and liabilities of ELI as shown on ELI’s latest audited accounts shall be shared or borne by the Petitioner and the Respondent equally;
(f) The Respondent shall use his best endeavours to procure the proper and complete transfer of his 50% shares in ELI to the Petitioner, including but not limited to signing all necessary documents (e.g. bought and sold notes, instruments of transfer, board resolution) to effect the transfer.”
12. The unchallenged evidence of Ms Cheung is that she is the one who came up with the mechanism by which she was to acquire Mr Lau’s shares in ELI, including how the ELI Loan and the Hang Seng Bank mortgage was to be repaid. From her point of view, Mr Lau had a responsibility to preserve a home for use of Ms Cheung and the Son who was still studying at the time.
13. The ELC Draft was provided to Ms Yip SC who provided her comments to LL in her email of 17th February 2014. Amongst other things, she suggested amending undertaking K so that whilst the acquisition of Mr Lau’s interest in ELI was to be made upon completion of the sale of the Warehouse, there was no need to satisfy any other conditions precedent. In manuscript annotation beside the deleted conditions precedent (c), (d) and (e), she wrote “No need to repeat, already mentioned under J(a) to (b) above, Besides, there’s no personal liabilities. At any rate, upon completion, the liabilities under J(a) to (b) will / must be discharged.”
14. In addition, Mr Raymond Kwan, the accounting manager for Mr Lau’s companies, pointed out to Mr Lau that either Ms Cheung should pay to Mr Lau 50% of the market value rather than the “Net Value” of the Matrimonial Home; or, if he was to be paid the “Net Value”, then there would not be any need for him to also pay 50% of the loans, or else this would result in “double counting” of his contribution to the loans and liabilities in respect of the Matrimonial Home, such that it would not be a genuine 50:50 division. Mr Lau passed on this observation to Mr Elden Lai so that the ELC Draft could be amended.[2]
15. Later in the day on 17th February 2014, LL sent a letter to ELC (“the LL 17.02.2014 Letter”), with a revised draft “minutes of consent order” (“the LL Draft”). The letter, which was marked “Without Prejudice to Respective Parties’ Right & Subject to contract”, stated that:
“As regard the matrimonial home, [Mr Lau] has put forward 3 different proposals as to how to deal with the same for [Ms Cheung’s] consideration. They are set out under section K of the said draft.
We stress that nothing herein shall be binding upon our client unless and until a written document is signed by all related parties and the terms of which are subsequently approved by Court.”
16. In the LL Draft, LL had marked up changes to undertakings J and K as follows.[3]
“The Matrimonial Home
J. AND UPON the Petitioner and the Respondent agreeing and acknowledging that:-
(i) The current market value of [the Matrimonial Home] is HK$45.9 50 million;
(ii) The Matrimonial Home is subject to an existing mortgage created in favour of Hang Seng Bank with outstanding mortgage repayment of HK$15,003,503.82 as at 31st January 2014 million approximately;
(iii) The Matrimonial Home is jointly owned by the Petitioner and the Respondent via [ELI]. The Petitioner and the Respondent currently each holds 50% [of] the issued shares of ELI;
(iv) ELI currently owes to OLL a loan of the amount of around HK$15,160,064.72 as at 31st January 2014 million (“ELI Loan”) [to be confirmed by company accountant];
(v) The net value of the Matrimonial Home (the “Net Value of the Matrimonial Home”) shall mean the sale price of the Matrimonial Home after deducting the following payments or expenses:
(a) the outstanding amount payable upon redemption in respect of the mortgage in favour of Hang Seng Bank as mentioned in Paragraph J(ii) above; and
(b) repayment of loan advanced by ELI to OLL as mentioned in Paragraph J(iii) above; and
(c) other reasonable expenses in relation to the transfer of shares of ELI (including legal costs, tax and stamp duty, if any); and
(c)(d) all other liabilities of ELI as shown on the latest audited accounts of ELI, if any
K. AND UPON the Petitioner and the Respondent agreeing and undertaking to the Court and to each other that:-
( ) The Petitioner shall acquire all the Respondent’s interest of and in ELI (represented by his 50% shares in ELI) by paying to the Respondent one half (1/2) of the Net Value of the Matrimonial Home (as defined above) upon the satisfaction of the following conditions precedent:
(b) the completion of sale of the Warehouse;
(c) due diligence report and latest audited accounts of ELI are to the satisfaction of the Petitioner;
(d) The Petitioner and the Respondent each repays 50% of the ELI Loan to OLL, such that the ELI Loan is fully released;
(e) The Respondent pays to the Petitioner an amount equivalent to one half (1/2) of the outstanding redemption amount in respect of the mortgage secured thereon in favour of Hang Seng Bank mentioned in Paragraph J(ii) above;
(f) Any other assets and liabilities of ELI as shown on ELI’s latest audited accounts shall be shared or borne by the Petitioner and the Respondent equally;
(ii) The Respondent shall use his best endeavours to procure the proper and complete transfer of his 50% shares in ELI to the Petitioner, including but not limited to signing all necessary documents (e.g. bought and sold notes, instruments of transfer, board resolution) to effect the transfer.
(g) (iii) Provided that if after the transfer by the Respondent of the his 50% shares in ELI to the Petitioner aforesaid the Matrimonial Home is subsequently sold to a third party for re-development purpose at a price exceeding HK$50 million, the amount of sale proceeds in excess of HK$50 million shall, after deduction of all reasonable expenses in relation to such sale (including property agent’s commissions, auctioneer’s fees, legal costs, tax and stamp duty, if any) be divided equally between the Petitioner and the Respondent.
OR
[(i) Each of the parties shall execute a declaration of trust, instrument of transfer and bought and sold note in respect of their respective shareholdings in ELI and in favour of [the Son] until he attains the age of [ ], upon which the parties shall procure the transfer of their respective shareholdings in ELI to [the Son.]”
OR
[(i) The Matrimonial Home shall be placed on the market to be sold at the best price reasonably obtainable subject to the following:
(a) the initial asking price is HK$50 million;
(b) for any purchase offer reaching the price not less than HK$45 million, the parties agree to accept such offer; and
(c) vacant possession of the Matrimonial Home to be delivered on or before [ ].
[(ii) In the event that there is no purchase offer reaching the price at or above HK$50 million within 6 months from the date of the order to be granted herein, and failing agreement to accept any purchase offer which is lower than HK$45 million, the parties agree to put the Matrimonial Home up for auction with reservation price of HK$45 million.
(iii) The net proceeds of sale deriving from the sale of the Matrimonial Home (or of the shares of ELI, if the prospective purchaser chooses to purchase the shares of ELI) shall be divided equally between the parties.]”
The 2nd FDR Hearing
17. On 18th February 2014, the parties and their legal teams met in the morning in the court building to continue their negotiations, in advance of the 2nd FDR Hearing which was fixed for 2:30pm. Each camp occupied a separate room. Negotiations were conducted between Ms Yip SC and/or Mr Elden Lai on behalf of Mr Lau, and Ms Annie Lai and/or Mr Ernest Li[4] on behalf of Ms Cheung, although Ms Lai left at about lunch time. Mr Lau and Ms Cheung did not themselves take part in the negotiating process. The parties did not start the hearing at the scheduled time of 2:30pm. They asked for further time from the court, and it was not until after 5:00pm that the hearing before the Judge commenced.
18. What happened at the 2nd FDR Hearing is summarised in the Slip Rule Judgment at [50]. The parties submitted to the court a revised version of the minutes of consent order, which bore various amendments in the form of handwritten additions, deletions, reinstatements, and some points awaiting verification. The Judge noted that he was not told whether or not there was any guiding principle or overall agreement that the family assets and liabilities were to be shared equally, and what had happened in the negotiations between the parties during the adjournment and on the day of the 2nd FDR Hearing. He noted that the final product (the minutes of the consent order) was quite different from what was said to have been agreed on 29th January 2014, the notable differences being that Ms Cheung was to acquire the Matrimonial Home, and that each party was to keep their other properties.
19. The minutes which were submitted to the court were signed by Ms Cheung and her solicitor Mr Ernest Li, and Mr Lau and his solicitor Mr Elden Lai. At the trial, a colour print out of the photographed pages of the original set of minutes filed with the court was produced (“the Signed Minutes”). The Signed Minutes were endorsed by the Judge on the same day.
20. In undertakings J and K of the Signed Minutes:
20.1 in paragraph J(i), the market value of the Matrimonial Home had been amended in red ink from $50 million to $49 million;
20.2 in paragraph J(iv), one of the digits in the figure for the ELI Loan had been amended in red ink from “0” to “2”;
20.3 the first paragraph of undertaking K which had appeared to be un-lettered in the LL Draft had been re-lettered as paragraph “(i)” in red ink. Each of the words “satisfaction of the following conditions precedent” in this paragraph, which had been struck out in the LL Draft, had been reinstated by a tick in red ink on top of each of the words;
20.4 the lettering for the first condition precedent in paragraph K(i) (“the completion of sale of the Warehouse”) which had been lettered as “(a)” in the ELC draft, and which had been lettered as “(b)” in the LL Draft[5] and crossed out in that draft, was reinstated by the writing of “(a)” in red ink in front of the condition precedent;
20.5 the conditions precedent in paragraph K(i) which were lettered as sub-paragraphs “(c)”, “(d)” and “(e)” in the LL Draft and which had been struck out in that draft had been reinstated by means of a tick in red ink on the left of each sub-paragraph, and the sub-paragraphs had been re-lettered as sub-paragraphs “(b)”, “(c)”, and “(d)” in red ink (“the Reinstated Conditions Precedent”);
20.6 in paragraph K(iii), which provided for the sharing of proceeds between Mr Lau and Ms Cheung in the event of sale, even after transfer of the shares in ELI to Ms Cheung, the sale price was amended from $50 million to $49 million in red ink, and a qualification of “within 3 years from the date of this order” was added in red ink (“the Clawback Provision”);
20.7 the words “undertake not to defeat H’s claim for profit by selling the Property to her nominee” had been added in black ink to the left of the Clawback Provision, and then subsequently struck out in red ink;
20.8 the words “The Petitioner further undertakes that she will or will not cause the Matrimonial Home to be sold or held by her nominee so as to defeat the Respondent’s 50% share of the sale proceeds referred to hereof” had been added to the end of the Clawback Provision in red ink;
20.9 the alternative proposals in the LL Draft that Mr Lau and Ms Cheung execute a declaration of trust in relation to their shares in ELI in favour of the Son until he reached a certain age (whereupon the shares would be transferred to him), and that the Matrimonial Home be sold and the proceeds divided equally between the parties, were struck out in red ink.
21. In other words, the effect of the amendments in red pen to undertakings J and K were that:
21.1 the market value of the Matrimonial Home was agreed to be $49 million under paragraph J(i);
21.2 there was a reinstatement of the requirement in paragraph K(i) that Ms Cheung’s acquisition of Mr Lau’s interest in ELI was to take place upon the satisfaction of the conditions precedent that Ms Cheung and Mr Lau each repaid 50% of the ELI Loan (of about $15m), Mr Lau paid to Ms Cheung half of the outstanding amount under the Hang Seng Bank mortgage (of about $15m), and that any other assets and liabilities of ELI as shown on ELI’s accounts were to be shared by Mr Lau and Ms Cheung equally.
21.3 the Clawback Provision proposed in the LL Draft was accepted but its operation was limited in time to three years from the date of the order, and a provision was added to prevent defeat of its operation by sale to a nominee;
21.4 the alternative proposals in the LL Draft as to how the Matrimonial Home was to be dealt with (essentially, holding on trust for the Son and eventual transfer, and sale on the open market as originally proposed after the 1st FDR Hearing), were deleted.
The formal drawing up of the Consent Order
22. On 28th February 2014, ELC sent to LL an edited, typed-up version of the Signed Minutes for approval. The covering letter put on record Ms Cheung’s understanding that her agreement to the Clawback Provision was to be operative only if the Matrimonial Home was sold for redevelopment.
23. On 12th March 2014, ELC sent a chaser letter to LL, seeking approval of the typed-up version of the Signed Minutes.
24. On 13th March 2014, LL sent to ELC a marked up copy of the typed-up version earlier provided by ELC (on 28th February 2014). There were amendments proposed to undertaking I. The letter also noted that there appeared to be some discrepancies between the Signed Minutes and ELC’s typed-up version in relation to particulars of certain of the Companies. One of these was that ELI had been omitted from the list of companies in respect of which Ms Cheung was to transfer her shares to Mr Lau. The letter ended “Save as to the aforesaid, we confirm that the draft minutes of consent order are in order.”
25. On 14th March 2014, ELC replied to LL, explaining that the deletion of ELI from the list of companies was to give sense to the order, as under undertakings J and K, Ms Cheung was to acquire Mr Lau’s shares in ELI. Inclusion of ELI in the list of companies in respect of which Ms Cheung was to transfer her shares to Mr Lau would conflict with this agreement. ELC indicated agreement with LL’s proposed amendments (to undertaking I) and requested a final confirmation of the order prior to submission to the court.
26. On 27th March 2014, ELC sent a chaser to LL asking for its confirmation of the version of the order sent on 14th March 2014.
27. LL replied on the same day: “We confirm that the contents of the Minutes of Consent Order are in order.”
28. On 31st March 2014, ELC submitted the revised minutes of consent order to the court for approval, drawing the court’s attention to the changes made and indicating that Mr Lau’s solicitors had approved them.
29. On 4th April 2014, the court asked the parties to file a consent letter regarding the amendments.
30. On 15th April 2014, a joint letter signed by ELC and LL confirming the parties’ agreement to the amendments to the minutes of consent order was sent to the court. The letter enclosed the final version of the minutes of consent order.
31. The Consent Order, which is the subject of Mr Lau’s claim, was sealed on 30th April 2014.
Events after the sealing of the Consent Order
32. The sale of the Warehouse as provided for under paragraphs H and I of the Consent Order was completed on 31st March 2015.
33. Prior to this, on 26th March 2015, LL wrote to ELC, noting that the Matrimonial Home, Tung Chung Property and the Companies were to be dealt with either on completion of sale of the Warehouse or upon the receipt by the parties of the sale proceeds thereof. LL proposed setting off the various amounts due by the parties to each other, with Mr Lau paying the balance due to Ms Cheung upon completion of sale of the Warehouse. The letter stated that the amount payable by Ms Cheung to Mr Lau for acquiring his interest in the Matrimonial Home was $17,493,214.83 (which was calculated as half of the market value of $49m in paragraph J(i) of the Consent Order after deduction of the $14-m odd bank loan as at 1st April 2015). The letter further noted that the ELI Loan would have to be repaid by Mr Lau and Ms Cheung equally, so that each would have to issue a cheque of $7,653,515.86 to OLL to settle the loan.
34. On 30th March 2015, ELC wrote to LL, taking “great exception” to the calculations in LL’s letter, in particular the amount which Mr Lau considered should be paid for the acquisition of his interests in the Matrimonial Home, as these departed from the agreed calculations under the Consent Order.
35. On 2nd April 2015, LL wrote to ELC, noting the disagreement regarding the calculations of the payment amount relating to the Matrimonial Home, and stating that they were taking instructions from Mr Lau in this regard.
36. On 10th April 2015, ELC wrote to LL, setting out the calculations for payment regarding the Matrimonial Home, with Ms Cheung paying Mr Lau $9,418,115.73 (half of the market value of $49m after deduction of the Hang Seng Bank loan and the ELI Loan), and Mr Lau paying Ms Cheung $7,501,751.91, being half of the Hang Seng Bank loan.
37. On 15th April 2015, LL wrote to ELC, demanding that Ms Cheung transferred her shares in the Companies to Mr Lau and paid him the amount due for the Tung Chung Property.
38. On 17th April 2015, ELC wrote to LL, pointing out that LL had yet to revert regarding the calculations for the Matrimonial Home.
39. On 20th April 2015, there was a meeting between Mr Lau, Mr Raymond Kwan (the accounting manager of Mr Lau’s companies), Ms Yip, and Mr Elden Lai. Mr Raymond Kwan sent a summary of what was discussed at the meeting to Mr Lau by an email of 28th April 2015. The email noted that “Anita & Elden found it curious that certain paragraphs were crossed out but have ticks at the same time but without initials.”
40. On 23rd April 2015, LL wrote to ELC, stating that the spirit behind the Consent Order was to achieve an equal split of the family assets between the parties, and that the parts of the Consent Order dealing with the Matrimonial Home were “inherently problematic, if not absurd, and do not at all reflect the true intentions of the parties”, as Mr Lau had to assume all the liabilities of the Matrimonial Home but that Ms Cheung did not have to so contribute. The letter went on:
“…The problem is caused by a “double counting” of the OLL loan and the Hang Seng Bank Loan in the calculation…
Upon close scrutiny of the wordings and construction of the consent order, and having looked at the signed version of the consent order on which several handwritten amendments are scribbled, it is very likely that there is an obvious mutual omission / mistake by both parties. Quite simply, if the term “Net Value” appearing in Part K(i) is replaced by the term “market value” (i.e. HK$49million), and the rest of the provisions remain unchanged, then it will yield the intended result contemplated by the parties, that is a 50:50 distribution of the Matrimonial Home. …”
41. It was then said that Ms Cheung should pay Mr Lau $9,839,698.97 for his interest in ELI which in turn held the Matrimonial Home.
42. On 30th April 2015, LL wrote again to ELC, enclosing proposed amendments to undertakings J and K, “so as to bring it in line with the common intention of the parties to achieve an equal split of the family asset”. It was suggested that:
42.1 the value of $49m in paragraph J(i) be defined as the “Market Value” (of the Matrimonial Home);
42.2 paragraph J(v) (containing the definition of “Net Value of the Matrimonial Home”) be deleted; and
42.3 the words “Net Value” in paragraph K(i) be replaced by “Market Value”
43. The effect of the amendments proposed in LL’s letter of 30th April 2015 would have been to require Ms Cheung to pay half of the $49m fixed as the Market Value of the Matrimonial Home in paragraph J(i), upon Ms Cheung and Mr Lau each repaying half of the ELI Loan and Mr Lau paying half of the outstanding Hang Seng Bank loan to Ms Cheung.
44. On 6th May 2015, ELC wrote to LL, declining to amend the Consent Order, as the terms correctly reflected Ms Cheung’s intentions, she having reviewed them before agreeing to them.
45. On 2nd June 2015, LL wrote to ELC, saying that the transcript of the 1st FDR and 2nd FDR Hearings showed that it was Ms Cheung’s intention to achieve an equal division of the family assets, and inviting Ms Cheung to make a joint application to the court.
46. On 5th June 2015, ELC wrote to LL, asking for the basis for making an application to clarify or vary the Consent Order.
47. On 15th July 2015, LL wrote to ELC, pointing out that there were various typographical errors in the Consent Order which arose from accidental slips. It was said that paragraph K(i) similarly suffered from an “accidental slip” and that the reference to “Net Value of the Matrimonial Home (as defined above)” in paragraph K(i) should be replaced by “the current market value of the property as mentioned in Paragraph J(i)”. Amendments to paragraph J(i) and J(v) were no longer proposed. Again, there was no suggestion that the Reinstated Conditions Precedent be deleted.
The Slip Rule Application
48. On 3rd August 2015, Mr Lau applied for amendment of paragraphs J(v)(b), K(i), O and Q of the Consent Order pursuant to RDC O.20 r.11. The application to amend paragraph K(i) was as indicated in LL’s letter of 15th July 2015, namely, to replace the words “Net Value of the Matrimonial Home (as defined above)” by “the current market value of the property as mentioned in Paragraph J(i)” (“the Slip Rule Application”).
49. The application was determined by the Judge. He allowed the proposed amendments to paragraphs J(v)(b), O and Q, which were “clearly typos” and not in dispute.[6] He refused the proposed amendment to paragraph K(i), rejecting the argument that the manifest intention of the parties, as contended for by Mr Lau, was clearly shown on the face of the Consent Order.[7] The Judge left open the possibility that Mr Lau might pursue other avenues of redress.[8]
50. By a judgment dated 4th May 2017, the Court of Appeal dismissed Mr Lau’s appeal. Lam VP was of the view that not all the requisite evidence had been placed before the court, and the parties’ disputes could not be summarily resolved in an application under the slip rule or the inherent jurisdiction of the court to amend its orders; the appropriate course was to have the issues properly canvassed in a fresh action. Cheung JA (with whom Kwan JA agreed) was of the view that Mr Lau had not made out a case of accidental omission or that the court’s intention as recorded in the Consent Order had not been properly manifested.
Transfer of shares in ELI
51. On 28th November 2017, Mr Lau transferred his shares in ELI to Ms Cheung.
Rental value of the Matrimonial Home
52. The parties agree that for the purposes of the counterclaim, the rental for the Matrimonial Home should be taken to be $55,000 per month.
C. THE PARTIES’ CASES
C1. Mr Lau’s case
53. It is Mr Lau’s case[9] that at all material times up to and including the signing of the Signed Minutes, it was the common intention of the parties that they would divide their interests and liabilities in the Matrimonial Home equally, on a 50:50 ratio. Specifically, Ms Cheung would acquire Mr Lau’s interest in the Matrimonial Home by paying half of the Net Value of the Matrimonial Home (as defined in undertaking J), which was approximately $9,418,115.73. However, the Reinstated Conditions Precedent were wrongly included in the Signed Minutes.
54. It is Mr Lau’s alternative case[10] that at the time of signing of the Signed Minutes:
54.1 Mr Lau erroneously believed that the Reinstated Conditions Precedent had been omitted from the document;
54.2 Ms Cheung knew that they had been included due to Mr Lau’s mistake;
54.3 Ms Cheung deliberately omitted to draw the mistake to Mr Lau’s attention;
54.4 the mistake was calculated to benefit Ms Cheung; and
54.5 in the circumstances, it would be inequitable to allow Ms Cheung to enforce the Reinstated Conditions Precedent.
55. The essence of Mr Lau’s case is that under the terms of the Consent Order, he has to make a net payment to Ms Cheung of $5.7m (approximately), rather than receiving $9.4m (approximately), and yet also have to transfer his interests in the Matrimonial Home to Ms Cheung. He says that this results from the duplication of his obligation to repay the ELI Loan and the Hang Seng Bank loan.
56. Mr Lau therefore seeks rectification of the Consent Order by deletion of the words “the satisfaction of the following conditions precedent” in paragraph K(i) and the Reinstated Conditions Precedent.[11]
C2. Ms Cheung’s case
57. As regards the claim of common mistake, it is Ms Cheung’s case that:
57.1 there was no “clear, communicated and continuing” common intention to divide the Matrimonial Home on a 50:50 basis;[12]
57.2 there was no drafting error in the Signed Minutes. The conditions precedent had been put forward by Ms Cheung at her specific instructions; they were the subject of negotiations; they were in the form of the Reinstated Conditions Precedent in the Signed Minutes which the parties signed and which were not the subject of complaint despite various reviews after the 2nd FDR Hearing.[13]
58. As regards the claim of unilateral mistake, it is Ms Cheung’s case that there is no basis for the allegation that she deliberately took advantage of Mr Lau’s mistake.[14]
59. Ms Cheung counterclaims for loss of rental income arising from Mr Lau’s failure to use his best endeavours, as required by paragraph K(ii) of the Consent Order, to procure the transfer of his shares in ELI to Ms Cheung, the transfer not being completed until 28th November 2017.[15]
D. THE ISSUES
60. The parties agreed that the following issues arise for determination.
Mr Lau’s claim
60.1 Whether there was any common mistake in entering into paragraph K(i) of the Consent Order.
60.2 Alternatively, whether there was any unilateral mistake in entering into paragraph K(i) of the Consent Order.
60.3 Whether Mr Lau is entitled to rectification of the Consent Order by deletion of the words “the satisfaction of the following conditions precedent” in paragraph K(i) and the Reinstated Conditions Precedent.
Ms Cheung’s counterclaim
60.4 Whether there was any breach by Mr Lau of his duty under undertaking K of the Consent Order, including whether Mr Lau’s duty under undertaking K of the Consent Order to use his best endeavours to procure the proper and complete transfer of his 50% shares in ELI was triggered only:
60.4.1 upon or at the same time as Ms Cheung’s performance of her payment obligations under paragraph K(i) for her acquisition of the 50% shares in ELI; and
60.4.2 in the event of a material dispute over the proper construction of paragraphs K(i) and (ii) of the Consent Order or the parties’ rights and obligations thereunder, after the resolution of such disputes.
60.5 Whether Ms Cheung is entitled to any damages, and if so, the quantum of such damages.
E. THE RELEVANT LEGAL PRINCIPLES
61. There is no dispute as to the applicable principles.[16]
E1. Common or mutual mistake
62. In the case of common or mutual mistake, the mistake is about whether a written document correctly reflects what the parties had, on an objective assessment, agreed it should contain. If parties have agreed to execute a document in certain terms and by mistake it contains different terms, the court can order specific performance of the prior agreement by rectifying the document. See Kowloon Development Finance Ltd v Pendex Industries Ltd (2013) 16 HKCFAR 336 at [19] (Lord Hoffmann NPJ).
63. The party seeking rectification must show that:
63.1 the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;
63.2 there was an outward expression of accord;
63.3 the intention continued at the time of the execution of the instrument sought to be rectified;
63.4 by mistake, the instrument did not reflect that common intention.
See Kowloon Development Finance Ltd at [31], approving the analysis of the Court of Appeal in that case. Lam J (as he then was), giving the judgment of the Court of Appeal in [2012] 5 HKLRD 11 at [25], cited Peter Gibson LJ’s summary of the requirements in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 at 74 (Peter Gibson LJ).
64. In ascertaining the common intention, the approach is an objective one. The question is what a reasonable observer would have understood the parties to mean. See Kowloon Development at [19]. See also Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [60] (Lord Hoffmann):
“…the authorities suggest that in both cases [of a binding antecedent agreement and a common continuing intention without a binding antecedent agreement] the question is what an objective observer would have thought the intentions of the parties to be. Perhaps the clearest statement is by Denning LJ in Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450, 461:
“Rectification is concerned with contracts and documents, not with intentions. In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, you do not look into the inner minds of the parties – into their intentions – any more than you do in the formation of any other contract. You look at their outward acts, that is, at what they said or wrote to one another in coming to their agreement, and then compare it with the document which they have signed. If you can predicate with certainty what their contract was, and that it is, by a common mistake, wrongly expressed in the document, then you rectify the document; but nothing less will suffice.” ”
65. In claims for rectification for contracts for common or mutual mistake, it is necessary for the court to be confident that the formal document does not reflect what was previously agreed. In commercial contracts, at least, one does not construe preceding heads of agreement as if they were a contract and simply compare them with the final document. If there is room for ambiguity in the heads of agreement or if they might have been varied in the course of subsequent negotiations, a claim for rectification must fail. See Kowloon Development Finance Ltd at [24].
E2. Unilateral mistake
66. Unilateral mistake is concerned with the subjective states of mind of the parties. If a contract contains a provision which one party knows that the other party thinks is not there, or that the other party is mistaken about its meaning, the court may, as a matter of discretion, either refuse to allow him to enforce the contract as it would ordinarily be construed, or go further and rectify the written contract to give effect to what the mistaken party thought had been agreed. See Kowloon Development Finance Ltd at [20].
67. The party seeking rectification must show that:
67.1 he (Party A) erroneously believed that the document to be rectified contained a particular term or provision, or did not contain a particular term or provision which, mistakenly, it did contain;
67.2 the other party (Party B) was aware of the omission or inclusion, and that it was due to a mistake on the part of Party A;
67.3 Party B omitted to draw the mistake to the notice of Party A;
67.4 the mistake must be one calculated to benefit Party B.
68. If these requirements are satisfied, the court may regard it as inequitable to allow Party B to resist rectification to give effect to Party A’s intention on the ground that the mistake was not, at the time of execution of the document, a mutual mistake. See Thomas Bates and Son Ltd v Wyndham’s (Lingerie) Limited [1991] 1 WLR 505 at 516A-C (Buckley LJ).
69. The conduct of the defendant must be such as to make it inequitable for him to object to the rectification of the document. Sharp practice is not necessary. The question is the equity of the position. The conduct must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake. See Thomas Bates and Son Ltd at 515H.
70. The graver the character of the conduct involved, the heavier the burden of proof will be. See Thomas Bates and Son Ltd at 515H; Citilite Properties Ltd v Innovative Development Co Ltd [1998] 2 HKLRD 705 at 710I.
71. As to knowledge, the various mental states which may be involved were analysed by Peter Gibson J in Baden v Société Générale pour Favouriser le Développement du Commerce et de l’Industrie en France SA (Note) [1993] 1 WLR 509:
71.1 actual knowledge;
71.2 wilfully shutting one’s eyes to the obvious; or
71.3 wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make;
71.4 knowledge of circumstances which would indicate the facts to an honest and reasonable man; and
71.5 knowledge of circumstances which would put an honest and reasonable man on inquiry.
72. The knowledge on the part of the defendant which is required in order to satisfy the conditions for rectification for unilateral mistake is that in the first three categories: Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259 at 280D to 281E (Stuart-Smith LJ), 292F-G (Evans LJ).
73. In cases that fall within the second and third categories, dishonesty is a requirement of establishing that the defendant had sufficient knowledge: Global Display Solutions Ltd v NCR Financial Solutions Group Ltd [2021] EWHC 1119 at [454] to [455] (Jacobs J).
E3. The distinction between common / mutual mistake and unilateral mistake
74. It is important to bear in mind that the distinction between the two types of mistake. As Lord Hoffmann NPJ said in Kowloon Development at [19], “they are actually the expression of quite different principles”. He went on to explain:
“[19] … rectification for common mistake involves carrying into effect what the parties appear to have actually agreed that the document should say. And in deciding what the parties have agreed, the common law adopts its usual objective stance, looking at what a reasonable observer would have understood the parties to mean and not concerning itself with their uncommunicated states of mind…
[20] Rectification for unilateral mistake, on the other hand, is very much concerned with the subjective states of mind of the parties…
[23] …The function of the court [in cases of common mistake] is to make the document accord with what the parties objectively agreed. It is not necessary for this purpose to show that in resisting rectification the other party is acting in bad faith. He may have been entirely in good faith in thinking that the written document reflects what was agreed, but that makes no difference. Importing notions of good faith into rectification for mutual mistake does not recognise that the important difference between mutual and unilateral mistake lies in what the mistake must be about. In mutual mistake, the mistake is about whether the document correctly reflects the terms previously agreed. In unilateral mistake, it is about the mistaken belief of one of the parties, known to the other, about what the contract said or meant.”
75. Rectification for mutual mistake is on the ground of an objective common continuing intention, whereas rectification for unilateral mistake is on the ground that the defendant was aware or ought to have been aware that the claimant enetered the formal contract under a mistake. The defendant’s culpability being is irrelevant in a claim for rectification for mutual mistake, but essential in a claim for rectification for unilateral mistake. See Daventry DC v Daventry Housing Ltd [2012] WLR 1333 at 91 (Etherton LJ, who dissented in the result).
F. COMMON / MUTUAL MISTAKE
F1. The agreement in principle reached at the end of the 1st FDR Hearing
76. In cross-examination, Mr Ernest Li (the solicitor acting for Ms Cheung in the FDR Hearings) accepted that at the end of the 1st FDR Hearing, the hearing was adjourned on the basis that the parties had agreed to a 50:50 division of the four key assets in principle, on a non-binding basis. Ms Cheung accepted that there was agreement on how the four key assets were to be dealt with. Both accepted that for the Matrimonial Home, the agreement in principle was for it to be sold on the market, and the net proceeds divided equally between the parties.
77. Ms Anita Yip SC accepted that the negotiations on the occasions of the 1st and 2nd FDR Hearings were conducted under a clear appreciation on her part that the parties’ various negotiations, expressions of aspiration, indications of preparedness to accept proposals and so on were all made freely, without prejudice to their respective rights, and were subject to contract, with both parties being free to change their positions. Mr Elden Lai (the solicitor acting for Mr Lau) agreed that all the negotiations were conducted on a “without prejudice” basis, with the parties not being bound by any exchange of ideas, and being free to change their minds on any aspect of the negotiations.
78. At the trial, Mr Victor Dawes SC (leading Ms Sheena Wong), counsel for Mr Lau, placed emphasis on the fact that the parties had reached agreement, albeit that it might be of an “in principle” nature only. Mr Jason Pow SC (leading Mr Au Lut Chi and Ms Hannah Tang), counsel for Ms Cheung, placed emphasis on the fact that any agreement between the parties was not of a binding nature. Whilst there was a difference of emphasis, in my view there was no difference of substance. I find that at the end of the 1st FDR Hearing, the parties had reached an agreement in principle, on a non-binding basis, that the Matrimonial Home would be sold, and the proceeds divided between Mr Lau and Ms Cheung equally.
F2. ELC’s 11.02.2014 Letter and the ELC Draft
79. A common intention, even if non-binding, is capable of founding a claim for rectification for common mistake. However, in the present case, it is clear that objectively, any common intention formed at the end of the 1st FDR Hearing did not continue up to the time of execution of the Signed Minutes. ELC’s 11.02.2014 Letter made it clear that Ms Cheung had changed her mind as how she wanted the Matrimonial Home to be dealt with.
79.1 The letter set out the fact that Ms Cheung had “previously” agreed to put up the Matrimonial Home for sale – a prelude to the message in the letter that this was no longer her position.
79.2 The letter went on to say that “However…[Ms Cheung] prefers keeping the Matrimonial Home…” and that “[Ms Cheung] proposes that she shall acquire [Mr Lau’s] interest in the Matrimonial Home in the manner proposed” – a clear indication that Ms Cheung was making a new and different proposal as regards the treatment of the Matrimonial Home, namely, an outright acquisition of Mr Lau’s interests on the terms particularised in the ELC Draft.
79.3 The letter was marked “Without Prejudice to Respective Parties’ Rights & Subject to contract”, and emphasised in the concluding sentence that nothing was to be binding until a written document was signed by the parties and approved by the court – which showed that this was part of the parties’ continuing negotiations.
80. In my judgment, an objective, reasonable observer would have understood this letter to be a change of stance on the part of Ms Cheung from her previously agreed position of sale, and a new offer to acquire Mr Lau’s interest in the Matrimonial Home “in the manner proposed in the enclosed draft summons”.
81. Mr Dawes submitted that:
81.1 if the non-binding agreement regarding the division of assets on a 50:50 basis were to be departed from, a reasonable observer would expect at the very least clear and express language, in writing, to reflect it. Neither party could have intended a result whereby Ms Cheung would receive a windfall whereas Mr Lau would suffer a loss;[17]
81.2 an objective observer would have understood the ELC Draft as proposing an alternative comparable mechanism for effecting a 50:50 division of the Matrimonial Home, and not as seeking to renegotiate or reopen the previous agreement for equal division of their interests in the Matrimonial Home;[18]
81.3 the language and structure of the ELC Draft indicated that undertakings J and K were intended to effect an equal division of the parties’ interests in the Matrimonial Home;[19]
81.4 the purpose of paragraph K(i)(a) was to ensure that sales proceeds would be available to enable Ms Cheung to acquire Mr Lau’s interest in the Matrimonial Home, which would not have been needed under the Consent Order given that the amounts due between the parties could have been netted off, with Mr Lau making a net payment to Ms Cheung.[20]
82. In my view, notwithstanding that Mr Lau and Ms Cheung had previously agreed to sell the Matrimonial Home and split the proceeds, an objective, reasonable observer would nevertheless consider that the ELC 11.02.2014 Letter, together with the ELC Draft, sought to re-open the previous agreement, and not simply to provide for the mechanics of implementing the previous agreement.
82.1 The previous agreement regarding the Matrimonial Home was a non-binding, in-principle agreement, from which the parties knew they could depart.
82.2 The ELC 11.02.2014 Letter signaled a radical departure from the agreement: Ms Cheung proposed that there should not be a sale on the market at all, but instead, an outright acquisition by her.
82.3 It would have been apparent from the ELC Draft that overall, the amount to be received by Mr Lau for his shares in ELI would not have been sufficient to cover the payment to be made for discharge of the loans associated with the Matrimonial Home.
82.4 It is true that the covering letter itself did not go on to spell out, in so many words, the precise mechanism or the economic implications of the acquisition, but it did say that it was to be “in the manner proposed in the enclosed draft consent summons” (ie. the ELC Draft). The ELC Draft set out the terms clearly. There remained a week before the 2nd FDR Hearing was to take place, so there was time to scrutinise the proposal. Mr Lau was legally represented. An objective, reasonable observer would expect that the letter and its enclosure would be read in its entirety in order for the nature of the proposal to be fully understood.
82.5 In fact, Mr Lau and his advisers did consider the terms carefully and appreciated their effect, in particular as pointed out by Mr Raymond Kwan to Mr Lau and passed on by Mr Lau to Mr Elden Lai.[21] Whilst the point of view to consider is the objective observer’s and not Mr Lau’s subjective understanding, that subjective understanding serves to reinforce that the criticism that the ELC 11.02.2014 Letter failed, on an objective reading, to indicate that Ms Cheung sought to depart from an intention of equal sharing, is misplaced.
83. I do not agree that the language and structure of the ELC Draft indicated that undertakings J and K were intended to effect an equal division of the parties’ interests in the Matrimonial Home.
83.1 Whilst there is some similarity between undertakings H and I on the one hand and undertakings J and K on the other[22] (for example, paragraph H(iii) refers to the holding company of the Warehouse owing a loan to OLL, and paragraph J(iv) refers to the holding company of the Matrimonial Home owing a loan to OLL), there are also differences (for example, paragraph I(i) provides that the net proceeds of sale from the sale of the Warehouse were to be divided equally between the parties, whereas paragraph K(i) provides that Ms Cheung was to acquire Mr Lau’s interest in ELI by paying one half of the Net Value as defined). It is simply not possible to derive from the similarities an intention that undertakings J and K were intended to effect an equal division of the parties’ interests in the Matrimonial Home.
83.2 The fact that it would have been less convoluted for the Consent Order to provide for the transfer of Mr Lau’s ELI shares to Ms Cheung and for him to make a net payment to her does not inexorably lead to the conclusion that the drafting of undertaking K is “inexplicable”.[23] Of course, clumsy drafting may be an indication that something has gone wrong with the drafting and that the words do not mean what they on their face appear to mean. However, the context of the negotiations between the parties was an attempt between two divorcing parties to settle their financial affairs, which involved amongst other things a division of assets and reckoning of liabilities. Furthermore, it was not a commercial transaction. It is not inherently improbable that rather than providing for a net payment, the parties’ responsibilities for discharging each of the loans associated with the Matrimonial Home were separately listed out, and the price to be paid by Ms Cheung for the acquisition of Mr Lau’s shares in ELI to also be separately stipulated. If it had been the case that the net payment to be made, after calculating each of these items, were in Mr Lau’s favour, would he nevertheless be complaining that the items were addressed separately in undertaking K? Mr Lau’s complaint appears to be directed to the overall financial effect of the clauses when taken together, rather than the drafting of the individual provisions.
83.3 Nor do I consider that support for an intention of equal sharing can be derived from clause K(i)(a), which provided that Ms Cheung’s acquisition of Mr Lau’s shares in ELI was to take place upon completion of the Warehouse (so that Ms Cheung would have sufficient funds to pay Mr Lau). Whilst it may be the case that if all the items had been netted off against each other, either within undertakings K and J or the entirety of the Consent Order, Ms Cheung may not have had to make any net payment, clause K(i)(a) in itself provided for Ms Cheung to make a payment to Mr Lau, and the evidence is that she would not have been in a position to do this in the absence of a sale of the Warehouse. In this regard, I note from LL’s letter of 26th March 2015 that even if Mr Lau’s calculations (on the basis of the Consent Order being construed in his desired manner) were to be adopted, an overall net payment would still have been made by Mr Lau to Ms Cheung under the Consent Order. On that premise, clause K(i)(a) would still have been redundant.
84. I therefore consider that by 11th February 2014, there was no longer any common intention to sell the Matrimonial Home and divide the proceeds equally between the parties.
F3. LL’s 17.02.2014 Letter and the LL Draft
85. The response to ELC’s 11.02.2014 Letter was LL’s 17.02.2014 Letter. In my judgment, an objective, reasonable observer would have understood this to be continuing the process of negotiation regarding the treatment of the Matrimonial Home, and acknowledging that there was no common intention regarding the property at that stage.
85.1 The letter did not seek to hold Ms Cheung to the previously agreed “in principle” position regarding the Matrimonial Home or complain that she was reneging from it.
85.2 On the contrary, the letter stated that Mr Lau had three different proposals as to how to deal with the Matrimonial Home “for [Ms Cheung’s] consideration” – indicating that Mr Lau himself was re-opening the previous position, and prepared to conduct further negotiations.
85.3 The LL Draft contained three proposals, different in nature, and separated by “OR” – indicating that any of these were acceptable to Mr Lau, and that the treatment of the Matrimonial Home was open for discussion.
85.4 Similarly to ELC’s 11.02.2014 Letter, LL’s letter was marked Without Prejudice to Respective Parties’ Right & Subject to contract”, and emphasised that nothing was to be binding until a written document was signed by the parties and approved by the court.
86. The three proposals in the LL Draft were as follows.
86.1 The first counter-proposal in the LL Draft was to delete all of the conditions precedent in paragraph K(i), thus indicating Mr Lau’s willingness to sell his interest in the Matrimonial Home to Ms Cheung, but on different terms to those proposed by Ms Cheung.
86.2 The second was for both parties to execute a declaration of trust, instrument of transfer and bought and sold note in respect of their respective shareholdings in ELI in favour of the Son until he reached a particular age, at which point the parties would transfer their shareholdings to the Son. In other words, neither party would retain their interest in the Matrimonial Home.
86.3 The third was for the Matrimonial Home to be sold on the market on certain terms, and for there to be an equal division of the proceeds between the parties. This was essentially the original method of dealing with the Matrimonial Home which had been agreed in principle after the 1st FDR Hearing.
87. I do not agree that these proposals show that treatment of the Matrimonial Home continued to be governed by the non-binding agreement reached at the end of the 1st FDR Hearing that the Matrimonial Home would be sold, and the proceeds divided between Mr Lau and Ms Cheung equally. Two of the proposals did not involve such a sale.
88. Even if one were to ignore the element of sale involved in the agreement, and describe the agreement reached at the end of the 1st FDR Hearing as an agreement between Mr Lau and Ms Cheung to divide the Matrimonial Home on a 50:50 basis, I do not agree that objectively, the proposal for the parties to execute a declaration of trust in favour of the Son and eventually transfer their ELI shares to him constituted such a proposal to divide the property or its proceeds between them; rather, it was a proposal to transfer the property to a third party in the future, for nil consideration, with the parties continuing to (indirectly) jointly hold an interest in the property in the meantime rather than achieving a “clean break”. Of course, it could be said that under this proposal, neither Mr Lau nor Ms Cheung would benefit more than the other. But this focusses on only one aspect of the of the proposal and ignores other aspects which are inconsistent with the agreement reached at the end of the 1st FDR Hearing.
89. In any event, even if I am wrong about this, and even if it could be said that Mr Lau’s three proposals all simply sought to implement the agreement reached at the end of the 1st FDR Hearing, there was nevertheless, objectively, no consensus between the parties by this stage, as I explain in the next section.
F4. No continuing common intention by the 2nd FDR Hearing
90. In my view, by the time of the 2nd FDR Hearing (18th February 2014, a day after the LL 17.02.2014 Letter) an objective, reasonable observer would have understood that there was no longer any agreed consensus between the parties as to how the Matrimonial Home was to be dealt with. Instead, there were three proposals on the table for the parties to consider. There was Ms Cheung’s proposal of acquiring Mr Lau’s interest on certain terms, to which Mr Lau had counter-proposed amendments. There was also Mr Lau’s proposal of holding the interests on trust for the Son, with a view to eventually transferring the entire interest to him upon his reaching a certain age. Finally, the original proposal had not been abandoned altogether, and remained as the third option proposed by Mr Lau for the parties to consider.
91. In fact, the lack of consensus is effectively acknowledged in the closing submissions for Mr Lau. In the section on unilateral mistake, it is said that:
“49. Under the 1st of three proposals under Para K, D must have noticed P’s deliberate crossing out of the [conditions precedent], and thus P did not accept a proposal which would result in him giving up his share in the Matrimonial Home for no consideration and payment out of HK$5.7 million to D’s benefit.
…
51. In short, by the time that P’s representatives circulated the [LL Draft] to D’s legal team on the eve of the 2nd FDR, there could be no doubt that P did not agree to the inclusion of the conditions precedent or any departure from the 50:50 Consensus. …
52. In light of the context and circumstances set out above, when the parties reconvened at the 2nd FDR, D and her legal team clearly knew that agreement had not been reached with P concerning Para K(i) of the Consent Order – and in fact, that the parties’ positions were a world apart at that point (the difference amounting to around HK$15 million in numerical terms).”
(Emphasis added.)
92. Of course, these submissions were made in the context of the issue of unilateral mistake, and were therefore directed at the parties’ subjective intentions rather than what an objective, reasonable observer might think. However, there is no reason why an objective, reasonable observer would not take the same view: the lack of consensus, and the parties’ respective positions, are plain from the correspondence. Indeed, in the course of closing submissions, Mr Dawes acknowledged that going into the day of the 2nd FDR Hearing, the parties were “obviously” miles apart, and objectively were not in agreement in relation to the treatment of the Matrimonial Home.
93. It is not Mr Lau’s case that there was any new common intention regarding the Matrimonial Home reached on the day of the 2nd FDR Hearing. The consensus he relies on is the one reached at the end of the 1st FDR Hearing, but this was clearly overtaken by the parties’ further negotiation prior to the 2nd FDR Hearing.
94. It is Mr Lau’s case that there was no discussion on the day of the 2nd FDR Hearing regarding the Reinstated Conditions Precedent, so that the in-principle agreement reached at the end of the 1st FDR Hearing continued to govern. I do not agree.
94.1 As explained in paragraph 104 below, I consider that Mr Lau fails to establish that there were no discussions on the day of the 2nd FDR Hearing regarding the Reinstated Conditions Precedent.
94.2 In any event, even if there had not been any discussion of the Reinstated Conditions Precedent on the day of the 2nd FDR Hearing, by that time there was no longer any continuing common intention regarding the treatment of the Matrimonial Home.
F5. No continuing common intention up to the time of the execution of the Signed Minutes and making of the Consent Order
95. In these circumstances, Mr Lau cannot show that there was a common intention between the parties that “they would divide their interests in the Matrimonial Home equally on a 50:50 ratio”[24] which continued up to the time when the parties executed the Signed Minutes. It simply cannot be said that the Signed Minutes (or Consent Order) fails to reflect the agreed common intention when there was no objective common intention at the time of the Signed Minutes (or Consent Order).
G. UNILATERAL MISTAKE
G1. Mistake on Mr Lau’s side
96. The evidence given on behalf of Mr Lau is that he and his legal team erroneously believed that there had not been any reinstatement of the Reinstated Conditions Precedent in the Signed Minutes.
96.1 Ms Yip’s evidence was that by the time of the signing of the Signed Minutes, the parties were under some time pressure to resume the hearing, as it was already around 5pm. She did not see that the reinstatement (ticks and re-lettering of the paragraphs) had been made prior to the signing of the Signed Minutes. She did not review the draft one last time before the final signing. She had asked Mr Elden Lai to go through it with Mr Lau.
96.2 Mr Elden Lai says that he explained the draft to Mr Lau, and they read through the document together, but he also overlooked spotting the reinstatement of the Reinstated Conditions Precedent.
96.3 Mr Lau could not really remember what Mr Elden Lai told him in the course of going through the draft, given that the event happened so long ago.
97. However, Mr Pow submitted that Mr Lau’s claim of a mistake was not credible, given that his case as to what the mistake was about has shifted over time. The letter from LL of 23rd April 2015 did not mention any discovery that the Reinstated Conditions Precedent had been wrongly reinstated, and instead complained about the financial implications of the Consent Order. The letter from LL of 30th April 2015 proposed amendments to undertakings J and K by changing “Net Value” to “Market Value”; there was no suggestion of deleting the Reinstated Conditions Precedent. There was correspondence between the solicitors in formally drawing up the Consent Order, during which the Reinstated Conditions Precedent ought to have been discovered. The Slip Rule Application sought to make similar amendments without deleting the Reinstated Conditions Precedent, on the basis that there was a mutual mistake of the parties. The Statement of Claim still continued to describe the mistake as one of a “mutual oversight”.
98. Notwithstanding these challenges, I accept that Mr Lau and his legal team erroneously believed that there had not been any reinstatement of the Reinstated Conditions Precedent in the Signed Minutes on the day of the 2nd FDR Hearing.
98.1 Whilst LL’s letters of 23rd April and 30th April 2015 to ELC did not refer to the Reinstated Conditions Precedent and focused more on the financial implications of the Consent Order, prior to that, on 20th April 2015, Mr Lau had met with his legal team to discuss the Consent Order. The notes of the meeting specifically recorded that Ms Yip and Mr Lai had found the Reinstated Conditions Precedent “curious”. Thus whilst LL’s letters may not have raised the reinstatement with ELC in correspondence, it does not seem to me that Mr Lau’s case about the Reinstated Conditions Precedent was merely an “afterthought” as submitted by Mr Pow.
98.2 Mr Elden Lai explained that it had never crossed his mind that there may have been mistakes in the Signed Minutes, so when he received the typed-up draft Consent Order in ELC’s letter of 28th February 2014, he asked his clerical staff to proofread the document. There was thereafter correspondence between the parties relating to various parts of the draft Consent Order, including paragraph K(iii) (the Clawback Provision), before the Consent Order was finally sealed on 30th April 2014. Mr Elden Lai did review the parts which were touched upon in the correspondence, but not the entire order once again. This seems to me to be entirely credible.
98.3 Ms Yip explained that the Slip Rule Application was put on the basis of a mutual mistake as the focus at the time was on how to put right the situation, rather than to go into the details of how the mistake arose. Amending the Consent Order so that Ms Cheung would acquire it on the basis of its market value (instead of the “Net Value”) or deletion of the Reinstated Conditions Precedent would have achieved the same outcome, in eliminating the element of “double counting” of Mr Lau paying twice for the loans. I consider this to be entirely credible – the aim at that stage would have been to try to amend the Consent Order so that it operated in the way which Mr Lau’s side considered to be correct, rather than to seek to assign blame for the mistake, which would not have assisted in this aim.
98.4 The Statement of Claim was not settled by Ms Yip, so I do not consider that this has any bearing on the credibility of her evidence.
98.5 I further bear in mind that Ms Yip and Mr Elden Lai have voluntarily come to court to frankly say that there was an oversight on their part, despite the fact that this may have an impact on their professional reputations. They gave their evidence in a straightforward manner, doing their best to recall what happened some nine years ago. I reject the suggestion that their evidence as to the mistake made on their part is doubtful. It was put to Ms Yip that she had a personal interest in the matter and was not giving evidence impartially, but I accept her evidence that she has come to court to give evidence because she considered that it was the right thing to do, without regard to her own position. Indeed, even as at the meeting on 20th April 2015, Ms Yip had already advised Mr Lau of the possibility that he might need to consult a different solicitor if it was really the case that she had overlooked any point, so it is not the case that she sought to shirk from any responsibility in the matter.
G2. Ms Cheung’s side not aware of any mistake on Mr Lau’s side
99. However, I do not accept the submission that Ms Cheung and her team (1) knew that Mr Lau had not agreed to the Reinstated Conditions Precedent, and (2) must have known that the Reinstated Conditions Precedent were slipped in or reinserted as a result of Mr Lau’s mistake and oversight, at the point in time of execution of the Signed Minutes.[25]
100. It is not in dispute that Mr Lau bears the burden of proving this allegation, and that there needs to be “convincing proof”, albeit not one beyond reasonable doubt: Citilite Properties Ltd v Innovative Development Co Ltd [1998] 2 HKLRD 705 at 710H-J. The graver the character of the conduct being alleged, the heavier the burden of proof will be: Thomas Bates and Son Ltd at 515H.
101. In oral closing submissions, Mr Dawes clarified that it was not being said that Ms Cheung herself was aware of any mistake on the part of Mr Lau. Ms Cheung’s unchallenged evidence was that she was not herself involved in the negotiations on the day of the 2nd FDR Hearing, so that whatever she learned would have been relayed by her lawyers. She said that her instructions were for the conditions precedent to be reinstated. She was told at some point that this had been done, and she saw herself that this was the case at the time of signing. It was not put to her that she was aware of any mistake on Mr Lau’s side.
102. Mr Dawes also clarified that it was not being said that Mr Ernest Li was aware of any mistake on the part of Mr Lau. Mr Ernest Li’s unchallenged evidence was that he was not involved in negotiating the Reinstated Conditions Precedent. Ms Lai left at around lunchtime on the day of the 2nd FDR Hearing, and Mr Ernest Li says that he asked her whether the Reinstated Conditions Precedent were agreeable to Mr Lau’s side. He says that Ms Lai told him to look at her working draft, and he saw that she had placed ticks against the Reinstated Conditions Precedent. Based on this, he assumed that the issue had been discussed with Mr Lau’s side and that he was agreeable to the reinstatement.
103. Mr Dawes further clarified that the reference to the knowledge of Ms Cheung and her legal team was a reference to the knowledge of Ms Lai, with such knowledge being imputed to Ms Cheung and Mr Ernest Li. The submission was that the evidence was that there had not been any discussions regarding the Reinstated Conditions Precedent on the day of the 2nd FDR Hearing, so that Ms Lai must have known that Mr Lau’s side had not agreed to the reinstatement and that its inclusion must have been due to a mistake on Mr Lau’s side.
104. However, first of all, I find that Mr Lau fails to establish, as a positive fact, that there were no discussions regarding the Reinstated Conditions Precedent on the day of the 2nd FDR Hearing.
104.1 In cross examination, Ms Yip (who carried out most of the negotiations on the day of the 2nd FDR Hearing) said that she could not recall whether there was any discussion with Ms Lai and Mr Ernest Li regarding the Reinstated Conditions Precedent – whether Ms Cheung’s side conveyed their disagreement with the deletion of the conditions precedent, whether she or Mr Elden Lai conveyed the message that Mr Lau’s stance was that the conditions precedent were unacceptable, whether there was any discussion of the rationale for deletion, and whether there was any discussion regarding the ELI Loan or the Hang Seng Bank mortgage. This is not surprising, given the long lapse of time since events in question.
104.2 Mr Elden Lai’s evidence was to the same effect – he could not recall whether, in his discussions with Mr Ernest Li, there were discussions regarding the deletion of the conditions precedent.
105. At this juncture, I should refer to a related piece of evidence. A copy of the LL Draft, marked with what Mr Elden Lai described as appearing to be three different sets of handwriting, was found in ELC’s files (by Ms Cheung’s current solicitors) (“the Other Draft”). One set of the handwriting (in black ink) was identified by Mr Lai as being Ms Yip’s handwriting. There were ticks (in blue ink) against the deleted conditions precedent, although there is no direct evidence as to who made the ticks. Mr Elden Lai said that it was possible that a copy of the LL Draft (not necessarily this particular one) was passed to and fro between the parties, with various amendments marked up, in the course of negotiations on the day of the 2nd FDR Hearing. Mr Ernest Li said that the Other Draft was the one given to him by Ms Lai before she left. Mr Pow in his closing submissions carried out an exercise to show that many of the amendments marked up in the Other Draft ended up in the Signed Minutes, suggesting that this was an “intermediate” draft which represented the position which the parties reached at some time during their negotiations. However, there is no direct evidence as to who placed the ticks against the deleted conditions precedent, and when and for what purpose this was done, so this document carries little evidential value as to whether there were discussions between the two sides on the day of the 2nd FDR Hearing regarding the Reinstated Conditions Precedent.
106. Second, even if Ms Lai did not take part in discussions regarding the Reinstated Conditions Precedent with Ms Yip and Mr Elden Lai, it does not follow that Ms Lai must have known that Mr Lau’s side had not agreed to the reinstatement and that its inclusion must have been due to a mistake on Mr Lau’s side.
106.1 There is no clear evidence as to when or how the Reinstated Conditions Precedent came to be reinstated by means of the ticks and re-lettering.[26] Ms Yip gave evidence that most of the markings in red pen in the document that was eventually signed (as the Signed Minutes) were made by her in the course of preparing a tidied-up version for the court, but she thought that the re-lettering and the ticks next to re-lettering were unlikely to be her handwriting, as they were neat, whereas she scribbled. She said that in the course of her reviews of the drafts as they were passed to and fro between the two sides, she could not remember seeing attempts to reinstate the deleted conditions precedent. However, she also said that she did not review the draft one last time before it was signed.
106.2 It is not Mr Lau’s case that the reinstatements were carried out by Ms Lai or before Ms Lai left court on the day of the 2nd FDR Hearing. As Mr Dawes submitted, the circumstances in which the reinstatement was carried out are unclear.[27]
106.3 The evidence is that drafts were passed back and forth between the parties; presumably the parties would not have been in a position to start preparation of the final tidied-up version for presentation to the court until agreement on various aspects had been finalised.
106.4 All of this leaves open the possibility that the reinstatement – that is, that which appeared on the Signed Minutes – was carried out after Ms Lai left. After all, Ms Lai left around lunch time, and the parties had not reached an agreement yet at this time; there were further negotiations carrying on throughout the afternoon, with the parties were pressed for time to complete their discussions before they eventually went back before the Judge shortly after 5pm with the Signed Minutes.
106.5 It is of course also possible for parties to negotiate without oral discussions. Drafts and messages were passed back and forth between the two legal teams, sometimes orally, and sometimes in writing. Mr Elden Lai’s evidence was that the written proposals or responses were sometimes supplemented by simple oral messages, but sometimes not.[28] If the reinstatement had been made by Mr Lau’s team, and Ms Lai saw it, she could have understood it as a concession rather than a mistake; if it had been Ms Lai who made the reinstatement and no objection was taken to it, Ms Lai could equally have understood it as a concession rather than a mistake.
106.6 In such circumstances, I cannot conclude that Ms Lai must have known that Mr Lau’s side had not agreed to the reinstatement of the Reinstated Conditions Precedent in the Signed Minutes, and that their inclusion must have been due to a mistake on Mr Lau’s side. This is a conclusion which applies as regards any of the three mental states which would be required to establish the complaint of unilateral mistake: I cannot say that Ms Lai had actual knowledge, or that she wilfully shut her eyes to the obvious, or that she wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make.[29] The absence of evidence as to when, how or by whom the reinstatement came to be made, together with the gap in time between Ms Lai’s last dealings with the matter and the time when the Signed Minutes came to be signed, rule out such a conclusion. The fact that not everything was discussed orally in the first place further reinforces this.
106.7 Indeed, I cannot even conclude that Ms Lai was aware that the Signed Minutes contained the Reinstated Conditions Precedent in the first place, since she left around lunch time. There is no evidence that the Signed Minutes had been prepared by the time that Ms Lai left, or that they were shown to her, or that she had a hand in preparing them. This point is significant because the relevant point of time for establishing knowledge on the part of Ms Cheung’s side is the point of execution of the Signed Minutes.[30]
107. Mr Dawes submitted[31] that I should draw adverse inferences, by reason of the fact that Ms Lai was not called to give evidence at trial, that (1) Ms Lai actually knew that the Reinstated Conditions Precedent were included in the Signed Minutes due to Mr Lau’s mistake, (2) Ms Lai wilfully shut her eyes to the obvious, and/or (3) wilfully and recklessly failed to make such enquiries which an honest and reasonable man would make.
108. Before an adverse inference can be drawn, there must have been some evidence, however weak, adduced on the matter in question before the court is entitled to draw the desired inference; there must be a case to answer on that issue. See Pacific Electric Wire & Cable Company Ltd v Texan Management Ltd, unreported, CACV 90-91, 93-96/2012, 17th September 2013 at [106] (citing Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340) (Kwan VP).
109. As to what a “case to answer” means, in Prest v Petrodel Resources Ltd [2013] 2 AC 415 at [44], Lord Sumption said:
“There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities before a court can draw useful inferences from a party’s failure to rebut it.”
110. I do not consider that there is any case to answer on the issue of whether Ms Lai knew that the inclusion of the Reinstated Conditions Precedent in the Signed Minutes was due to Mr Lau’s mistake. As analysed above, I do not see that there is a reasonable basis for the hypothesis that Ms Lai knew[32] that (a) the Reinstated Conditions Precedent were in the Signed Minutes and (b) they were there because of Mr Lau’s mistake. I therefore do not agree that any adverse inference can be drawn.
111. For completeness, I should also record my view that I accept Mr Pow’s submission that in any event, given the way in which the evidence developed, it cannot be said that Ms Lai was a witness who might be expected to have had material evidence to give.
111.1 Even in the second round of witness statements, both sides had thought that Ms Lai was not present on the day of the 2nd FDR Hearing.[33] Ms Yip had said that Mr Ernest Li acted as Ms Cheung’s legal representative, and she and Mr Elden Lai negotiated with him.
111.2 It is true that by the time the 3rd witness statement of Li Shiu Ki, Ernest of 10th November 2020, Mr Li recalled that Ms Lai was present on the day of the 2nd FDR Hearing and left around lunch time. Mr Ernest Li also produced the Other Draft said that he assumed that it was presumably Ms Lai’s.
111.3 In response, in the 2nd witness statement of Lai Chi Chiu, Alfie Elden, Mr Elden Lai says that he recalled that Ms Lai’s presence in the morning. He also identified the handwriting in red ink on the Signed Minutes as appearing to be that of Ms Yip.
111.4 It was not until Ms Yip gave evidence at trial that it emerged that the re-lettering in red ink of the Reinstated Conditions Precedent and the ticks next to them were not likely to be hers.
G3. Third and fourth requirements for establishing a case of unilateral mistake
112. It is therefore not necessary for me to go further to consider the third and fourth requirements for establishing a case of unilateral mistake.[34] It is also not meaningful to do so, as the requirements presuppose that the defendant was aware of the wrongly omitted or included term, and that it was due to a mistake on the part of the claimant.
113. For example, in relation to the third requirement, it is not meaningful to say that anybody on Ms Cheung’s side omitted to draw the mistake to the notice of Mr Lau’s side when nobody on Ms Cheung’s side had the requisite knowledge, at the relevant time, to be in a position to do so. Furthermore, for Ms Lai, she was not even physically present at the time of the execution of the Signed Minutes.
G4. Unilateral mistake not established
114. I therefore find that the claim of unilateral mistake fails.
H. THE COUNTERCLAIM
115. The sale of the Warehouse was completed on 31st March 2015. However, Mr Lau did not transfer his shares in ELI to Ms Cheung until 28th November 2017. Ms Cheung has therefore counterclaimed for Mr Lau’s failure to use his best endeavours, as required by paragraph K(ii) of the Consent Order, to transfer his shares to Ms Cheung. It is said that she suffered loss and damage in not being able to rent out the Matrimonial Home between 31st March 2015 and 28th November 2017. Ms Cheung refers to a letter from LL of 7th January 2017 which said that Mr Lau was not willing to sign a written resolution of ELI to let out the Matrimonial Home.
116. Mr Lau put forward a number of defences.
116.1 There was an implied term that Mr Lau’s duty to use his best endeavours to transfer his shares in ELI would be triggered only (1) at the same time as Ms Cheung’s performance of her obligation to pay for the shares; and (2) after the resolution of any material dispute as to the proper construction of paragraphs K(i) or K(ii) of the Consent Order or the parties’ obligations thereunder in respect of Ms Cheung’s acquisition of Mr Lau’s shares in ELI and Mr Lau’s transfer of the shares to Ms Cheung.[35]
116.2 Ms Cheung failed to prove her alleged loss.
116.3 The alleged loss was too remote, rental of the Matrimonial Home never having been contemplated at the time of the parties’ agreement.
116.4 Ms Cheung failed to mitigate her loss, as she had another property which she could have let out.
117. It seems to me that as a matter of plain language, Mr Lau’s obligation to use his best endeavours to procure the transfer of his shares in ELI under paragraph K(ii) of the Consent Order goes hand in hand with Ms Cheung’s obligation in the preceding paragraph K(i) to acquire the shares by paying half of the Net Value of the Matrimonial Home, which payment was in turn to be carried out on satisfaction of the Reinstated Conditions Precedent in paragraph K(i). There is no need for an implied term in this regard. I do not read the Consent Order as suggesting a freestanding obligation on the part of Mr Lau to transfer his shares in ELI regardless of whether Ms Cheung fulfilled or was able to fulfil her obligations.
118. Given the interrelated nature of the obligations, I would accept that there is an implied term that Mr Lau’s (and indeed Ms Cheung’s) obligations to perform their obligations in paragraphs K(i) and K(ii) of the Consent Order are put on hold pending the resolution of the dispute between the parties as to the proper construction of the clauses and whether paragraph K(i) contains the Reinstated Conditions Precedent. It should go without saying that Mr Lau’s obligation is not a freestanding obligation, to be performed in circumstances where the nature of Ms Cheung’s corresponding obligations, and indeed Mr Lau’s obligations under the Reinstated Conditions Precedent if any, are unclear.
119. Accordingly, I agree that Ms Cheung fails to establish that there was a breach on the part of Mr Lau in not transferring the ELI shares to her at an earlier time.
120. In any event, it does not seem to me that the loss complained of is that of Ms Cheung. The Matrimonial Home is owned by ELI, so that the proper plaintiff to complain of loss is ELI, not Ms Cheung. The basis, if any, of Ms Cheung’s entitlement to complain of such loss has not been pleaded.
121. If I am wrong about all of the above, then Ms Cheung would have suffered a loss in the amount of $55,000 per month for the period from 1st July 2015 to 28th November 2017. Ms Cheung’s evidence in her witness statement was that she wanted to rent out the property since 31st March 2015, but she also said in cross examination that she did not move out of the Matrimonial Home until June 2015, and in her supplemental witness statement, she said that she only moved out in about the last week of June 2015. In the same statement, Ms Cheung says that she placed the Matrimonial Home on the market for rent in about July 2015; this was not challenged in cross-examination.[36] Insofar as there were unauthorised building works in the Matrimonial Home which would have prevented the renting, Ms Cheung’s evidence is that this would only have lasted a month from December 2016 to January 2017, and the other units in the building continued to be occupied during this time, showing that vacation of the property was not necessary.
122. As to the defence of remoteness, Mr Pow objected that it was not pleaded. I agree that it is not open to Mr Lau in the circumstances. Likewise with the defence of failure to mitigate.
I. DISPOSITION
123. I dismiss both Mr Lau’s claim and Ms Cheung’s counterclaim.
124. I further make a costs order nisi that Mr Lau is to pay to Ms Cheung the costs of and occasioned by the action, save that Ms Cheung is to pay to Mr Lau the costs of and occasioned by the counterclaim, to be taxed if not agreed; with certificate for two counsel in both instances.
| |
(Yvonne Cheng)
Judge of the Court of First Instance
High Court
|
Mr Victor Dawes SC leading Ms Sheena Wong, instructed by Fan Wong & Tso, for the Plaintiff
Mr Jason Pow SC leading Mr Au Lut Chi and Ms Hannah Tang, instructed by Alvin Cheng & Rosaline Choy, for the Defendant
[1] Acknowledged by Ms Anita Yip SC, leading counsel then acting for Mr Lau, and a witness for Mr Lau in the present proceedings, to be a fair summary of events.
[2] Mr Lau’s first witness statement paragraphs 22, 23.
[3] It will be noted that some of the formatting in the LL Draft (such as the paragraph lettering) differed from that in the ELC Draft; this is of no consequence.
[4] To avoid confusion, the full names of Mr Elden Lai and Mr Ernest Li will be used in this judgment.
[5] By reason of formatting.
[6] Slip Rule Judgment at [18].
[7] Slip Rule Judgment at [51].
[8] Slip Rule Judgment at [63].
[9] Opening Submissions paragraph 55.
[10] Opening Submissions paragraph 56.
[11] Opening Submissions paragraph 57.
[12] Opening Submissions paragraph 33.
[13] Opening Submissions paragraph 34.
[14] Opening Submissions paragraph 37.
[15] Opening Submissions paragraph 41.
[16] Apart from the cases referred to in this section, the parties cited a number of other cases relating to mistake, as “illustrations”. I do not propose to deal with these here as counsel confirmed that they did not disclose any further principles being relied upon, and that each case is of course fact-specific.
[17] Closing paragraphs 21, 26.
[18] Closing paragraph 30.
[19] Closing paragraphs 31 to 34.
[20] Closing paragraphs 35 to 36.
[21] Mr Lau’s first witness statement paragraphs 22, 23.
[22] Closing paragraph 32.
[23] Closing paragraph 34.
[24] Statement of Claim paragraph 24.1.
[25] Closing for Mr Lau paragraph 55, as clarified by Mr Dawes in oral closing submissions.
[26] Mr Dawes clarified in oral closing submissions that he did not seek to suggest that the reinstatement was carried out after Mr Lau’s side signed the Signed Minutes.
[27] Closing paragraph 56.
[28] Witness statement of Lai Chi Chiu, Alfie Elden, paragraph 18.
[29] In this regard, I would also note that it has not been suggested that Ms Lai was dishonest, as is required for establishing the second and third types of Baden knowledge.
[30] As submitted by Mr Dawes in oral closing submissions.
[31] Closing paragraph 62.
[32] In any of the three relevant Baden meanings of “knowledge”.
[33] Witness statement of Yip Hau Ki Anita paragraph 35; 2nd witness statement of Li Shiu Ki, Ernest.
[34] That the defendant omitted to draw the mistake to the notice of the claimant, and that the mistake must be one calculated to benefit the defendant.
[35] Amended Defence and Counterclaim paragraph 13A.1.
[36] Answering Mr Lau’s suggestion that there was no evidence that the Matrimonial Home had been placed on the market for lease (Supplemental Witness Statement of Lau Wai Kwong, paragraph 24).
|