HO LAI KING v. KWOK FUNG YING AND ANOTHER

CACV 108/2019

[2020] HKCA 763

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 108 OF 2019

(ON APPEAL FROM HCA NO 305 OF 2014)

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DECISION ON COSTS

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Hon G Lam J (giving the decision of the Court):

1.  In our judgment handed down on 31 July 2020 allowing the appeal and entering judgment for the defendants on the counterclaim,[1] we directed the parties to make written submissions on the question of the costs below. This is our decision on that question based on the submissions received. The same defined terms as used in our judgment are adopted below.

2.  By his decision on costs dated 4 November 2019,[2] the judge affirmed the costs order nisi in his judgment and gave the plaintiff the costs of the action as well as the counterclaim.  Obviously, this result cannot stand given the outcome of the appeal.

3.  The defendants contend in the written submissions of Mr Pun SC and Mr Yip that the plaintiff should only be entitled to the costs of her claims for the two declarations on which she succeeded and that, subject to this, the defendants should have the costs of the entire proceedings, including costs reserved. Instead of making cross-orders, they contend that it would be fair overall to order the plaintiff to pay 80% of the defendants’ costs below on a party and party basis, to be taxed if not agreed.

4.  The position of the plaintiff, as submitted by Mr Cheung, is that the plaintiff should have 80% of the costs, and the defendants 20%.  It appears that the rationale is as follows: the plaintiff gets 50% of the costs of the entire proceedings, representing the costs of the action; as to the other 50%, accounted for by the counterclaim, the plaintiff gets three-fifths (30%) and the defendants two-fifths (20%), for the reason that the defendants have failed in many of the challenges mounted in their counterclaim and only succeeded on the Oral Agreement issue. The plaintiff also contends that as an alternative, this court may remit the question of costs to the trial judge.

5.  The action was brought in February 2014.  After an amendment in January 2016 to remove a claim for nuisance (the costs of and occasioned by the amendments were awarded to the defendants in any event), the plaintiff claimed only declarations in the action, which have been divided and referred to in the judge’s judgment as follows:

(1)  Declaration 1: that the plaintiff is the sole beneficiary of the Property and the estate of the late Kwok Chun in respect of his Hong Kong assets;

(2)  Declaration 2: that the defendants are not entitled to the Property and the estate of the late Kwok Chun in respect of his Hong Kong assets;

(3)  Declaration 3: that the 1^st defendant is not entitled to any share or any part of the compensation money obtained by the plaintiff from the Mainland authorities; and

(4)  Declaration 4: that the 2^nd defendant is not entitled to the alleged authorisation from the plaintiff and HK$50,000 for expenses incurred for the negotiations on compensation.

6.  In the Amended Defence and Counterclaim, the defendants’ case was as follows:

(1)  They admitted the plaintiff obtained a grant of probate of Kwok Chun’s will, but put the plaintiff to proof that the will reflected the testamentary intentions of Kwok Chun.[3]

(2)  Kwok Chun’s will did not apply to his estate in the Mainland.  Under the succession laws of the Mainland, the 1^st defendant was entitled to a one-third interest in the Property.[4]

(3)  In response to the plaintiff’s reliance on the Declaration of Relinquishment, the defendants aver that the plaintiff represented to them that under PRC inheritance law, the Property should jointly vest in the plaintiff, Kwok Siu Po and the 1^st defendant even though the plaintiff was the sole beneficiary under the will, and that it was for convenience in the context of the resumption that the Property was to be held in the sole name of the plaintiff.  In reliance on such representations, the 1^st defendant signed the Declaration of Relinquishment.[5]

(4)  The defendants aver they entered into the Oral Agreement with the plaintiff which they did a series of acts to perform.[6]  The 2^nd defendant incurred expenses in the sum of HK$102,400 in carrying out the Oral Agreement.[7]

(5)  The plaintiff breached the Oral Agreement in that without the knowledge of the defendants, she accepted the sum of RMB3 million as compensation which was substantially below the amount of RMB5,407,452 that the Mainland authorities would be willing to offer pursuant to regulations promulgated in around December 2012.[8]  The 1^st defendant suffered loss and damage as a result.

(6)  By way of relief, the defendants counterclaimed for an order that the plaintiff account for the resumption compensation and damages to be assessed.

7.  In light of the result of the appeal, in terms of the outcome of the action, the plaintiff succeeded in obtaining Declarations 1 and 2, but failed to obtain Declarations 3 and 4.  The defendants succeeded in obtaining judgment for a sum of RMB1.5 million, but the 2^nd defendant did not obtain any award for reimbursement of his expenses.

8.  Focusing on the counterclaim first, it is clear in our view that the defendants have prevailed.  It is true that the 2^nd defendant did not in the end obtain an order for reimbursement in the relatively small sum of HK$102,400.  However, first, the defendants had actually succeeded in proving the acts they carried out in performance of the Oral Agreement.[9] Those acts were relevant, inter alia, to the issues of whether the Oral Agreement was binding and whether the defendants had performed it, issues on which they succeeded.  It has not been shown that much separate and additional costs had been incurred below in relation to the quantum of expenses associated with those acts.  Secondly, the claim for reimbursement did not fail for lack of merits.  In the absence of a finding below on the amount incurred, the 2^nd defendant agreed in the appeal hearing to waive his claim only to avoid the case having to be remitted to the judge for such a finding to be made.  Thirdly, since any reimbursement had to be set off against the amount of compensation before it was divided in accordance with the Oral Agreement, the net amount given up by the defendants was only HK$51,200 which paled into insignificance when compared to the judgment they obtained.

9.  Mr Cheung points to the fact that the defendants’ case was that the proper amount of resumption compensation should be RMB5,407,452 under the applicable regulations in the Mainland and that by accepting RMB3 million the plaintiff had caused loss to the 1^st defendant.  However, there was no expert evidence adduced and the defendants simply included around 30 pages of PRC rules and regulations in the trial bundles for the purposes of that allegation.  The judge had little difficulty in rejecting that part of the counterclaim.[10] It does not seem to us to be an allegation that had caused a significant increase in the length or cost of the proceedings, such as to justify an order depriving the defendants of part of their costs of the counterclaim in accordance with the principles flowing from the case of In re Elgindata Ltd (No 2) [1992] 1 WLR 1207.

10.  It follows in our view that, based on the general starting point in RHC Order 62 rule 3(2) that costs should follow the event, the defendants should in principle be entitled to the costs of the counterclaim.

11.  As to the plaintiff’s action, the plaintiff succeeded in obtaining Declarations 1 and 2, but failed on Declarations 3 and 4. 

12.  The claim for Declarations 3 and 4 was the obverse of the defendants’ counterclaim.  It might be said, technically, in relation to Declaration 4, that the 2^nd defendant had failed to prove his entitlement to HK$50,000 or any other sum because there was no finding on the amount spent.  Nevertheless, given that the Oral Agreement was established, the plaintiff could not obtain a declaration that the 2^nd defendant had received no authorisation from her.  The plaintiff has clearly failed on the substantive issues underlying these two declarations and the counterclaim. 

13.  In these circumstances, we accept the defendants’ submission the proceedings below may be broadly divided into two parts:

(1)  the defendants’ counterclaim and that part of the action which relates to Declarations 3 and 4 and which is the obverse of the counterclaim; and

(2)  the claims for Declarations 1 and 2 in the action. 

14.  Effectively, the defendants have succeeded on the first part whereas the plaintiff has succeeded on the second part.  It seems to us in principle appropriate that costs should follow the event in respect of these parts respectively, but that instead of cross-orders with separate assessments of the costs attributable to each part, there should be a single overall order of costs in favour of one party subject to a percentage reduction.

15.  Having reviewed the pleadings, witness statements, the documents available and the judgment below, in our view the issues relating to the Oral Agreement, including whether there was in fact an agreement, whether it was a legally binding agreement, and whether it had been performed by the parties, plainly represented the principal part of the litigation below. 

16.  On behalf of the defendants, Mr Pun SC and Mr Yip submit that there was no factual dispute in respect of the plaintiff’s entitlement to Kwok Chun’s estate and that the only dispute at trial was whether there was a genuine need for these declarations and whether as a matter of discretion of the court, the declarations should be made.  It seems to us that in this regard, the following matters are of note:

(1)  While this might be the defendants’ position when it came to the trial, it should not be overlooked that on the pleadings, they had put the plaintiff to proof that Kwok Chun’s will reflected his testamentary intentions.  It was further their pleaded case that the will did not apply to his assets in the Mainland and that, under PRC succession laws, the 1^st defendant was entitled to a one-third interest in the Property. 

(2)  Pursuant to expert evidence directions applied for by the defendants, a joint experts’ opinion dated 11 May 2017 was obtained which stated that the will had legal effect in Mainland and could be enforced there.[11]

(3)  In light of the joint experts’ opinion, the defendants appear to have backtracked somewhat on their position.  By their solicitors’ open letter dated 26 October 2017, the defendants indicated that the 1^st defendant’s claim was not founded on her entitlement to Kwok Chun’s estate in Hong Kong or the Property, and that they did not challenge the grant of probate.  However, the defendants did not clearly abandon any specified parts of their Amended Defence and Counterclaim or further amend their pleaded case; nor did they retract the paragraphs in the 1^st defendant’s witness statement made in March 2015 that suggested the will did not accurately reflect Kwok Chun’s testamentary intentions.

(4)  It was only at the commencement of the trial that the defendants, through counsel, indicated there was no relevant factual issue in relation to the plaintiff’s claims for Declarations 1 and 2.

17.  On the other hand we also reject Mr Cheung’s submission that the defendants’ primary aim was to challenge the plaintiff’s entitlement to the estate.  It may be noted that according to the list of assets filed by the plaintiff for probate purposes, there were only assets of HK$10,000 in cash and HK$4.93 in bank deposits in the estate.

18.  The defendants submit that the costs order herein should cover the costs reserved in Master Lai’s order dated 9 November 2016 in relation to the defendants’ application for leave to adduce expert evidence on Mainland law.  Mr Cheung does not make any contrary submissions.  Given that the costs incurred in relation to the plaintiff’s opposition to that application had already been separately awarded by the Master to the defendants, the reserved costs would appear to be insubstantial.  To avoid the need for further steps in the proceedings below in relation to such limited costs, we agree that these costs should be covered by our order herein.

19.  We note that Mr Cheung has in his written submissions relied on the abandoned claim for nuisance, alleging that the defendants had resorted to improper and oppressive acts to harass the plaintiff.  We reject these submissions.  The pleaded allegations had been deleted as long ago as in January 2016.  No finding has ever been made by any court on the allegations in question.  The costs of and occasioned by the plaintiff’s amendments had already been dealt with at the time.  There is no factual or legal basis for the plaintiff now to revisit that aspect of the case.  Mr Cheung has also referred to certain allegations in correspondence by the defendants about a family trust but they have never formed part of the defendants’ case in the action or counterclaim and are not, in our view, relevant for present purposes.

20.  We should also mention that both sides have referred to unsuccessful attempts before the trial to compromise their disputes. None of them however can be regarded as an offer that the other side has failed to beat by reference to the ultimate outcome as determined by the courts.  We do not think that these offers provide any useful basis for determining the question of costs.

21.  In all the circumstances, the dispute over the Oral Agreement seems to us plainly to be the major part of the litigation in terms of the time and costs spent.  Taking a broad-brush approach, we consider it fair to require the plaintiff to pay the defendants 50% of the costs of the proceedings below (including the costs reserved by Master Lai by order dated 9 November 2016), to be taxed if not agreed.  This is therefore the order we make.

22.  The costs of the submissions on costs are to be paid by the plaintiff to the defendants.

Written Submissions by Mr Y L Cheung, instructed by Wong Yuen Chi & Co, for the Plaintiff (Respondent)

Written Submissions by Mr Hectar Pun SC and Mr Bowie W S Yip, instructed by Yu Sun Yau Mak & Lawyers, for the 1^st and 2^nd Defendants (Appellants)

CACV 108/2019

[2020] HKCA 657

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 108 OF 2019

(ON APPEAL FROM HCA NO 305 OF 2014)

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J U D G M E N T

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The Court:

Introduction

1.  The plaintiff and her late husband, Kwok Chun, have two children, namely, the 1^st defendant and Kwok Siu Po. The 2^nd defendant is the 1^st defendant’s husband. Kwok Chun died on 2 February 2012, leaving a will in which the plaintiff was the sole executrix and beneficiary.  Kwok Chun owned a landed property in the Mainland, situated in No 52 Dongjiao Renxiufang, Liwan, Guangzhou, Guangdong Province (廣東省廣州市荔灣區東漖仁秀坊52號) (“Property”), which was subject to resumption by the local authorities there in around 2012. 

2.  The defendants contended, by their counterclaim in the action below, that they had an oral agreement with the plaintiff in July 2012 that in return for their help in securing higher compensation for the resumption of the Property, the compensation would be divided equally between the 1^st defendant and Kwok Siu Po.  The Judge,[1] after trial, accepted that there was such an oral agreement, but held that the defendants had failed to prove that the parties had the requisite intention thereby to create legal relations, and dismissed the counterclaim on that ground.[2]  From this decision the defendants now appeal.

The facts and events

3.  Kwok Chun, a resident of Guangzhou, came to Hong Kong in 1949.  He married the plaintiff in the Mainland in 1959.  Their two children, Kwok Siu Po and the 1^st defendant, were born in Guangzhou in 1965 and 1969 respectively.  The Property was built in the 1970s and acquired by Kwok Chun as a home for his parents, himself (when he was in Guangzhou) and the plaintiff, and their two children. 

4.  In 1980, the plaintiff and her two children moved to Hong Kong and became residents here.  In 1990, Kwok Siu Po got married and started living apart from his parents.  In 2000, the 1^st defendant married the 2^nd defendant and also began living away from her parents.

5.  Kwok Chun died on 2 February 2012, leaving a will dated 26 February 2010 which named the plaintiff as the sole executrix and beneficiary of his estate.  Probate of the will was granted on 13 August 2012.

6.  In around 2012, the Property was in the process of being resumed by the local authorities in Guangzhou, with the amount of compensation yet to be determined.

7.  In June 2012, as the Judge found, the plaintiff approached the 1^st defendant for assistance in negotiating for higher compensation for the Property.  The 1^st defendant was reluctant to help, for the reason that, as she put it in her witness statement, she considered that the task was not easy and would require considerable expenditure of money and time, but since the plaintiff had all along favoured Kwok Siu Po, the fruits of their effort might all go to him in the end.[3]

8.  On 7 July 2012, as the Judge found, the plaintiff called the 1^st defendant again asking for assistance on the matter of resumption compensation.  The 2^nd defendant was next to the 1^st defendant during that telephone conversation.  The 1^st defendant told the plaintiff she was busy with her work and suggested that the 2^nd defendant could be appointed to assist in the matter.  The Judge accepted the 2^nd defendant’s description of that conversation which was confirmed by the 1^st defendant and read as follows:[4]

「 何女士要求太太協助處理第51號房屋的拆遷賠償事宜。當時太太已向何女士表示工作繁忙，不能花太多的時間處理有關工作，因此建議委托其女婿即本人出面處理。何女士當時回覆『唔理你揾邊個幫手，攞咗之後都係分比你地二兄妹，我夠食夠住，要嚟都無用，我一心都係爭埋比你地二兄妹』。在對話中，何女士承諾把第51號房屋拆遷的賠償平均分給太太及郭肇波 …… 何女士和太太在電話中亦談到處理這事的細節，雙方達成清楚共識，何女士委任本人及太太兩人為何女士的代表，授權本人及太太共同或分別處理第51號房屋的拆遷賠償事宜，範圍包括但不限於向內地各部門協商以爭取更高賠償金額。在電話中，本人及太太特別和何女士約定好，無論最後爭取到的賠償金額如何，一定要有郭肇波、本人和太太三人的一致同意才可以接受。最後，何女士在電話中清楚表示，第51號房屋的拆遷賠償，扣除在爭取更高金額所花費用及其他開支後，將全數由太太和郭肇波兩人平分 ……」

9.  On 18 July 2012, at a morning tea gathering in Guangzhou, the plaintiff, the 1^st defendant and Kwok Siu Po met with, among others, a former schoolmate of Kwok Siu Po called Hu Zuowai, a former teacher of Kwok Siu Po called Zhou Jielan, and a friend of his called Liu Fengping (“Liu”).  During that gathering, Liu explained the devolution of a person’s property upon death under Mainland succession law and practice. The explanation given by Liu at that time was that the 1^st defendant was entitled to a 1/6 interest in the Property under Mainland succession law. This was in fact, but unbeknown to the parties then, incorrect, because according to Mainland law, given that Kwok Chun’s will was valid under Hong Kong law, it was effective and enforceable in relation to the Property.

10.  On the same day, during an afternoon tea gathering in Guangzhou, the plaintiff, the 1^st defendant, Kwok Siu Po and Hu Zuowai had a discussion about the interest in the Property and the notarial procedures.

11.  In or around August 2012, during a family gathering in Hong Kong, the plaintiff, the 1^st defendant and Kwok Siu Po discussed the administration of the Property.

12.  On 18 February 2013, the plaintiff, the 1^st defendant and Kwok Siu Po attended the office of a China Appointed Attesting Officer in Hong Kong.  There, the plaintiff signed a document called Declaration of Inheritance, stating that Kwok Chun had died leaving the Property and that she was willing to inherit such interest in the Property as provided by law.  At the same time, both the 1^st defendant and Kwok Siu Po signed a document called Declaration of Relinquishment of Inheritance of Estate (“Declaration of Relinquishment”), stating that they voluntarily relinquished inheriting any part or share of the Property.

13.  In April 2013, the plaintiff collected the original Declarations from the 1^st defendant and went to the China Notary Office in the Mainland for a formal application for change of ownership of the Property with the assistance of Kwok Kin Pong, the plaintiff’s nephew.

14.  On 7 May 2013, pursuant to the plaintiff’s application, the relevant notary public office issued a notarial certificate stating that as matrimonial property acquired during their marriage, the Property, despite being registered in Kwok Chun’s sole name, had belonged to Kwok Chun and the plaintiff in equal shares according to law, and that in accordance with the Succession Law of the People’s Republic of China and Kwok Chun’s will, the plaintiff succeeded to Kwok Chun’s interest in the Property and was therefore the sole beneficial owner of the Property.  The formal Certificate of Change of Ownership of the Property, stating that the plaintiff was the sole beneficiary of the Property, was issued subsequently on 29 July 2013.

15.  The amount of compensation for the resumption of the Property originally offered by the relevant authorities in the Mainland was RMB540,745.20.

16.  It appears that by May 2013, the parties’ relationship had broken down.  On 13 May 2013, the 1^st defendant through her then solicitors issued a letter to the plaintiff in relation to the Property and the estate of Kwok Chun, stating that the 1^st defendant would not accept the amount of compensation being proposed by the Mainland authorities and that the plaintiff was acting as a trustee for the 1^st defendant. The letter also claimed that the plaintiff had promised the 1^st defendant on 21 April 2013 not to sign any documents relating to such compensation without the written consent of the 1^st defendant.  The 1^st defendant stated that she would claim damages if the plaintiff breached her promise.

17.  After negotiations with the Mainland authorities, the total amount of compensation was increased to RMB3 million in June 2013.  On 18 June 2013, the plaintiff signed a compensation agreement with the authorities based on that amount.

18.  On 24 June 2013, RMB2.98 million was transferred by the Mainland authorities to the plaintiff’s bank account by way of compensation for resumption and on 13 September 2013, the remaining RMB20,000 was paid to the plaintiff, totalling RMB3 million. 

19.  On 15 July 2013, the 2^nd defendant commenced proceedings in Hong Kong in the Small Claims Tribunal against the plaintiff for HK$50,000 on account of the expenses incurred for the negotiations with Mainland officials in relation to the compensation for the resumption of the Property.

20.  There was correspondence between the parties in August 2013.  In particular, in her solicitors’ letter dated 15 August 2013, the plaintiff alleged that the defendants had harassed her and baselessly claimed an entitlement to Kwok Chun’s estate, and demanded that the defendants refrain from causing further nuisance to her.  By their letter dated 22 August 2013, the defendants denied the plaintiff’s allegations of harassment and asserted that prior to his death, Kwok Chun had told both the 1^st defendant and Kwok Siu Po that his estate should be distributed to them in equal shares, and also asserted that the plaintiff had sought their help to deal with the matter of resumption compensation for the Property with the promise that half of the compensation would be paid to them.

21.  On 21 February 2014, the plaintiff commenced the action below (HCA 305/2014) against the two defendants.  On the same date, the plaintiff applied in the Small Claims Tribunal for the claim brought by the 2^nd defendant against her to be transferred to the Court of First Instance, which application was subsequently granted.

The parties’ cases below

22.  By her statement of claim which was amended in March 2016, the plaintiff claimed against the 1^st and 2^nd defendants, inter alia, declarations that the plaintiff is the sole beneficiary of the estate of Kwok Chun in respect of his Hong Kong assets and the Property and that the defendants had no entitlement thereto.  She also sought a declaration that the 1^st defendant was not entitled to any part of the compensation paid by the Mainland authorities and that the 2^nd defendant was not entitled to the HK$50,000 claimed as expenses incurred by him in the negotiations for compensation relating to the Property.

23.  The defendants filed a defence and counterclaim in May 2014 (amended in May 2016), claiming that the plaintiff and the defendants had on or about 7 July 2012 entered into an oral agreement with the following terms (“Oral Agreement”):

“ (1) the 1^st and 2^nd Defendant[s] be appointed as the Plaintiff’s representatives jointly and severally to deal with or otherwise manage the Property;

(2) the Defendants’ appointment shall include but not limited to negotiate for higher compensation amount of the Property or other form of compensation with the PRC Government officials;

(3) the amount of compensation of the Property (‘Compensation’) shall be determined by the Defendants and [Kwok Siu Po]. Their decision on the Compensation must be unanimous; and

(4) the Compensation will be equally shared by the 1^st Defendant and [Kwok Siu Po] subject to deduction of tax levied by PRC Government, expenditures incurred by 2^nd Defendant in the course of negotiating the Compensation.”

24.  The defendants claimed that they carried out a series of acts to perform the Oral Agreement, as particularised in their pleading, and that the 2^nd defendant also incurred the sum of HK$102,400.  As summarised by the Judge,[5] the particulars included the defendants’ acts of negotiating with Mainland officials, seeking help from a member of the Legislative Council of Hong Kong, seeking help from the Hong Kong Economic and Trade Office in Guangdong, reporting to the police in the Mainland regarding damage to the Property, lodging complaints against certain Mainland officials, bringing the matters to the media’s attention in the Mainland, liaison with other affected people in the Liwan District, and reporting the progress to the plaintiff.

25.  The defendants claimed that, in breach of the Oral Agreement, the plaintiff received the sum of RMB3 million which was substantially below the amount of compensation the Mainland authorities would be willing to offer, which the defendants claimed to be no less than RMB5,407,452.  They counterclaimed against the plaintiff for an account of the compensation received or damages to be assessed.

26.  In her reply, the plaintiff denied the Oral Agreement, and stated that she had not given any written authorisation to the defendants to deal with the compensation issue, which would be a requirement in the Mainland, and had never confirmed their status as authorised persons to deal with the compensation issue on her behalf. 

27.  As to the defendants’ plea that they did a series of acts in performance of the Oral Agreement, the plaintiff pleaded a denial and averred that if those acts had in fact been done, they were unilateral acts done without the consent or knowledge of the plaintiff.  The plaintiff stated that she would not have permitted the 2^nd defendant to do those things.  Further, the plaintiff averred that after the death of Kwok Chun, the plaintiff and her nephew, Kwok Kin Pong, had worked together over the compensation issue in respect of the Property.

The judgment below

28.  There was little dispute at trial that the plaintiff was the sole beneficiary in relation to the Property and the Hong Kong assets in Kwok Chun’s estate and that the defendants were not entitled thereto.  Rejecting the defendants’ submission that declarations to that effect were unnecessary, the Judge granted the declarations.[6]  There is no appeal by the defendants against these declarations.

29.  The plaintiff’s claim for the other declarations is effectively the obverse of the defendants’ counterclaim.  On the issue whether the Oral Agreement existed, the Judge noted that the plaintiff herself said that she had forgotten a lot of things, and did not find the plaintiff’s evidence reliable.  He preferred the 1^st defendant’s evidence on the existence of the telephone conversation with the plaintiff on 7 July 2012 and its content, and the existence of the Oral Agreement, and accordingly held that the Oral Agreement did exist as a matter of fact.[7]

30.  The Judge also found that the defendants had pursuant to the Oral Agreement undertaken the series of acts as particularised and that those acts were referable to the plaintiff’s promises in the Oral Agreement,[8] thus accepting the defendants’ (in particular, the 2^nd defendant’s) evidence on that aspect.  In contrast, the Judge did not find Kwok Siu Po’s and the Kwok Kin Pong’s evidence on the role they played in the negotiations with the Mainland authorities to be reliable.[9]

31.  As mentioned above, however, the Judge held that the defendants had failed to prove that the Oral Agreement was intended by the parties to be legally binding.  His reasoning may be summarised as follows. The Judge first set out the applicable law on this question and referred to passages from, inter alia, Balfour v Balfour [1919] 2 KB 571 and Jones v Padavatton [1969] 1 WLR 328 that stated the principles and relevant considerations.  In light of the close family relationship between the plaintiff and the defendants (being mother, daughter and son‑in‑law), the Judge considered that a strong presumption of fact arose that the Oral Agreement was not intended to be legally binding.

32.  The Judge noted that the plaintiff was an elderly lady with very little education while the 1^st defendant had had university education and experience of handling financial matters. They had a fairly good relationship at the time and the 1^st defendant cared for the plaintiff.  The plaintiff’s relationship with the 1^st defendant’s daughters were also good.  The Judge stated:[10]

“ Faced with a crying, aged, poorly educated and newly widowed mother seeking assistance in dealing with outsiders on compensation payable for resumption of a property owned by her recently deceased father, and objectively viewed, D1 was most unlikely to have any intention to take her mother to a court of law in respect of any dispute that might subsequently arise from an agreement reached in such circumstances. That is particularly so given their fairly good relationship at that time, and that P’s relationship with her two granddaughters (Ds’ daughters) was good. All these would also have borne upon D2’s intention.”

33.  The Judge considered that if the 1^st defendant had intended the Oral Agreement to be legally binding, one would expect her to have confirmed with Kwok Siu Po his agreement to what she had agreed with the plaintiff.  The Judge said it was “most surprising”, and inconsistent with the 1^st defendant treating the Oral Agreement as legally binding, that she could not give any detail of such confirmation.[11]

34.  The Judge took into account the fact that the terms of the Oral Agreement did not expressly state that it was intended to be legally binding, that the Oral Agreement was not reduced into writing and that the defendants did not request the plaintiff to make a will to record her promise.[12]

35.  The Judge also considered that a number of terms of the Oral Agreement were vague and that this lack of certainty supports the inference that the parties did not have the intention to be legally bound.[13]

36.  As regards the subsequent conduct of the parties, such as the 1^st defendant’s execution of the Declaration of Relinquishment and the series of acts of the 1^st and, especially, 2^nd defendants, the Judge took the view that the conduct, considered together with the other matters, was not sufficient to support the inference that the parties intended to be legally bound by the Oral Agreement.  Instead, the subsequent acts of the defendants were explicable by and referable to the promises between them and the plaintiff, which were honoured out of trust and natural love and affection.[14]

37.  In conclusion, the Judge said that the defendants had failed to prove that the parties had the requisite intention to be legally bound and that the Oral Agreement was “one of those family arrangements which depend on the good faith of the promises which are made and are not intended to be rigid, binding agreements”.  He added that his conclusion would have been the same without applying the presumption.[15]  In the result, he dismissed the counterclaim without making the remaining, corresponding declarations in the plaintiff’s favour.

38.  As to the defendants’ performance and the plaintiff’s breach of the Oral Agreement, the Judge stated they should not be considered in a vacuum and did not find it appropriate to deal with them beyond what he had stated in the Judgment (particularly, paragraph 77(e), where he found that the defendants had undertaken the pleaded acts pursuant to the Oral Agreement).[16]

The defendants’ appeal

39.  On this appeal, the defendants accept that the Judge’s conclusion that the parties had no intention to be legally bound is a finding of fact.  They submit however that it is a finding based on evaluation of facts rather than a finding of primary fact.  It involves an assessment of a number of different factors which have to be weighed against one another.  The approach of the appellate court to an appeal against such a finding is similar to that against an exercise of discretion.  As such, the appellate court should not interfere unless the court below has misdirected itself on the law, taken into account a factor which it ought not to have taken into account, failed to take into account a factor which it ought to have taken into account, or reached a conclusion which, in light of the primary facts, it could not properly have reached: ZJW v SY [2017] HKFLR 612, §§33‑34; Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 WLR 577, §16; Todd v Adams [2002] CLC 1050, §§60‑61.  Mr Y L Cheung who appears for the plaintiff does not dissent from this approach.

40.  The defendants contend that the Judge’s conclusion that there was no intention to create legal relations should be set aside on three main grounds: (i) the Judge failed to take into account relevant matters; (ii) the Judge erred in law in concluding that the terms of the Oral Agreement lacked certainty; and (iii) the Judge failed to address certain relevant evidence in relation to the plaintiff’s subsequent conduct.  These grounds will be dealt with in turn below.

Intention to create legal relations

41.  There is no dispute in this appeal that an agreement that would otherwise be a contract may not be binding if it was made without any intention of creating legal relations.  This is sometimes found to be the case for agreements between family members.  In the context of agreements between spouses, Atkin LJ said in Balfour v Balfour [1919] 2 KB 571, 578‑579:

“ … one of the most usual forms of agreement which does not constitute a contract appears to me to be the arrangements which are made between husband and wife. It is quite common, and it is the natural and inevitable result of the relationship of husband and wife, that the two spouses should make arrangements between themselves — agreements such as are in dispute in this action — agreements for allowances, by which the husband agrees that he will pay to his wife a certain sum of money, per week, or per month, or per year, to cover either her own expenses or the necessary expenses of the household and of the children of the marriage, and in which the wife promises either expressly or impliedly to apply the allowance for the purpose for which it is given. To my mind those agreements, or many of them, do not result in contracts at all, and they do not result in contracts even though there may be what as between other parties would constitute consideration for the agreement. … Nevertheless they are not contracts, and they are not contracts because the parties did not intend that they should be attended by legal consequences. … They are not sued upon, not because the parties are reluctant to enforce their legal rights when the agreement is broken, but because the parties, in the inception of the arrangement, never intended that they should be sued upon. Agreements such as these are outside the realm of contracts altogether. …”

42.  The same approach has been applied to dealings between other relations, such as parent and child.  In Jones v Padavatton [1969] 1 WLR 328, Salmon LJ said that:

“ as a rule when arrangements are made between close relations, for example, between husband and wife, parent and child or uncle and nephew in relation to an allowance, there is a presumption against an intention of creating any legal relationship. This is not a presumption of law, but of fact. It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations, but intend to rely solely on family ties of mutual trust and affection.”

43.  It is not in dispute that the question is to be resolved by considering what was communicated between the parties in all the circumstances and deciding whether, as understood by a reasonable person, the true inference is that they intended to create legal relations: Jones v Padavatton, at p 332G; RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753, §45.  Evidence of subsequent conduct is admissible for the purpose of determining the parties’ intention at the material time: Blue v Ashley [2017] EWHC 1928 (Comm), §64; Jones v Padavatton, p 336H.  It has been said that evidence of the subjective understanding of the parties is also admissible in so far as it tends to show whether, objectively, the agreement was intended to be legally binding: Blue v Ashley, §64.

44.  As to the “presumption” referred to in Jones v Padavatton, Mr Cheung, relying on Butterworths Common Law Series, The Law of Contract (1999) at para 2.168, submitted that the presumption is a strong one.  The Judge also expressed a similar view at §59 of the judgment.

45.  But as Salmon LJ said in Jones v Padavatton, it is but a rebuttable presumption of fact.  Like many such presumptions found in the law, it is based on generalised notions of human behaviour viewed in the prevailing social mores and conditions, and provides no substitute for an examination of the circumstances of the individual case.  The subject matter of agreements between close relations may vary infinitely, as do the situations of individual families.

46.  As Baroness Hale pointed out in Granatino v Radmacher (formerly Granatino) [2011] 1 AC 534 at §142, an agreement between spouses to share the ownership or tenancy of the matrimonial home, bank accounts, savings or other assets may be treated quite differently from agreements for housekeeping or personal allowances.  Ultimately, the question of intention is a question of fact that must be determined on the basis of the facts of each case.

47.  In our judgment, it is not very profitable to proceed on the basis that the presumption is a strong one as if this is a legal presumption.  Since it is only a presumption of fact, the strength or usefulness of such presumption must depend very much on the facts and circumstances of each case.

48.  The better view is that in respect of agreements between family members, the presumption means that (as opposed to agreements between commercial parties) the onus is reversed: it lies on the party who contends there was an intention to create legal relations to establish such intention.  What will satisfy the court in a particular case must depend on the circumstances, including (without being exhaustive) the relationship between the parties, whether they are in amity or estranged, the subject matter of the agreement, the language used in the agreement, the manner in which the agreement has been made.  The Judge also alluded to some relevant factors at §60 of the judgment.  For oral agreements on maintenance support or other daily domestic arrangements, it may be that convincing evidence is required to discharge that burden: see Gould v Gould [1970] 1 QB 275 at p 281C (contra the case of a written agreement on transfer of ownership of a matrimonial home upon separation in Merritt v Merritt [1970] 1 WLR 1211).

49.  Mr Cheung also relied upon §39 of the judgment of Yeung J (as he then was) in Sun Er Jo v Lo Ching [1995-2000] HKCLRT 14.  We do not think the judge was stating a general proposition of law in that paragraph.  In any event, with great respect, insofar as that paragraph is read as suggesting as a matter of law that there had to be some prior declaration or statement that an agreement between family member may give rise to legal obligation before it could be legally enforceable, that is plainly wrong as a matter of law.

The First Ground

50.  The first matter, the defendants submit, that the Judge failed to take into account is the relationship between the 1^st defendant and Kwok Siu Po.  The 1^st defendant’s evidence, which the Judge appears to have accepted, was that her relationship with her brother had not been good since fairly early on and that she considered him self‑centred and indifferent to the interests of the family.  The 1^st defendant also felt that the plaintiff was biased in favour of her brother over her, especially after their father’s death.  The Judge also accepted that when the plaintiff first approached the 1^st defendant in June 2012 for help in relation to the Property, the 1^st defendant was reluctant to assist because the plaintiff was biased towards Kwok Siu Po and appeared only to want him to receive all the compensation, which would mean that the considerable expenditure of money and effort required for seeking higher compensation would only enure to Kwok Siu Po’s benefit.[17]

51.  One has to be careful in this regard in distinguishing what was subjectively felt or considered by the defendants from the objective facts.  The defendants’ subjective thinking is not relevant unless it is probative that the agreement was objectively intended to be legally binding.  In cases such as Blue v Ashley, supra, it is the subjective understanding the parties derived from the oral communication that the court looked at as being potentially relevant to ascertaining the nature and content of the oral exchange.  Here, the sentiments and internal reasoning of the defendants are not states of mind generated by the agreement and are not relevant for present purposes.

52.  Nevertheless, with respect, we agree with the submission of Mr Hectar Pun SC and Ms Stephanie Lam, neither of whom appeared below, that the 1^st defendant’s relationship with her brother and the plaintiff’s favouritism towards the son are matters that objectively support an inference of intention to create legal relations.  The defendants were being asked to undertake a task that would involve considerable effort and expense in relation to a property situated in the Mainland and held in Kwok Chun’s name.  They had already declined the plaintiff’s request in June 2012.  In the second conversation in July 2012, the plaintiff assured them that the compensation obtained would not be for her own benefit but would be divided between the 1^st defendant and her brother.

53.  All this was considered by the Judge as “primarily something between D1 and the Son”.[18] The more important point, in the Judge’s view, was that the 1^st defendant’s relationship with the plaintiff remained fairly good.  We respectfully disagree.  Although the agreement was made between the plaintiff and the defendants, part of the benefit derived was to go to Kwok Siu Po.  The plaintiff herself, according to what she told the defendants, did not need or want the money.  The agreement included the term that the amount of compensation had to be unanimously agreed between the defendants and Kwok Siu Po.  There was clearly a possibility or even likelihood in reality, and ground for real concern on the part of the defendants, that without the agreement, any effort they made to seek an increase in compensation would simply benefit Kwok Siu Po — a prospect that would be anathema to the 1^st defendant. 

54.  After referring to the relationship between the plaintiff and the 1^st defendant, the Judge observed that the 1^st defendant would be “most unlikely to have any intention to take her mother to a court of law”.[19] Even accepting this as a fact, however, if proper regard is paid to the dimension of Kwok Siu Po and the 1^st defendant’s relationship with him, one simply cannot confidently dismiss any intention on the part of the defendants to enforce the Oral Agreement in a court of law, for example, by asserting an equitable interest in the compensation proceeds if they were all paid over to Kwok Siu Po, or by suing him for wrongful interference with a contract, or even by making a claim against the plaintiff’s estate after her death.

55.  As to the point mentioned by the Judge that the 1^st defendant could not give any detail of securing Kwok Siu Po’s agreement to the terms of the Oral Agreement (see paragraph 33 above), it should be noted that the Oral Agreement did not seek to impose any obligations (as opposed to conferring benefits) on Kwok Siu Po.  Further, whilst the 1^st defendant was unable to pinpoint any time prior to 18 July 2012 when Kwok Siu Po was informed, her evidence and that of the 2^nd defendant was that in the many family gatherings between 18 July and early August 2012 attended by the plaintiff, Kwok Siu Po and his family, and the defendants and their family, the Oral Agreement was confirmed by the plaintiff.  As discussed in relation to the third ground of appeal below, the Judge did not make any finding on this evidence.  In these circumstances, we do not think it right to take this point as being inconsistent with the 1^st defendant intending the Oral Agreement to be legal binding.

56.  It is important to bear in mind that one is not concerned here with matters such as living allowances or domestic financial contributions, but entitlement to a capital asset of substantial value viewed in the context of the parties’ apparent means.  Kwok Chun had recently passed away and steps were being taken in Hong Kong for obtaining probate of his will, which bequeathed everything to the plaintiff.  In the circumstances of the case a reasonable observer would in our view take account of the 1^st defendant’s relationship with her brother as a matter tending to show an intention to create a binding arrangement.  Sibling rivalry for family assets is, unfortunately, something with which these courts are all too familiar.

57.  The second matter that the defendants submit the Judge failed to take into consideration is the different relation between the plaintiff and the 2^nd defendant (mother‑in‑law and son‑in‑law), and that, as was common ground, their relationship was “distant” and they “lacked any common language”.  It does seem to us that the Judge has primarily if not exclusively focused on the relationship between the plaintiff and the 1^st defendant. He considered that the 1^st defendant was most unlikely to have any intention to sue her mother in case of any dispute arising from the agreement.  He said this “would also have borne upon D2’s intention”.[20]  It is important however to note that (i) the Oral Agreement which the Judge found to exist was an agreement between the plaintiff and both defendants; (ii) it was envisaged by the parties that the 2^nd defendant, who was known to the plaintiff to be more familiar with relevant procedures on the Mainland, was the one who would be carrying out the requisite tasks and incurring expenditure with a view to increasing the compensation; (iii) under the Oral Agreement the consent of the 2^nd defendant was also required before any compensation was to be accepted.  In these circumstances, it seems to us that the relationship between the plaintiff and the 2^nd defendant is a relevant matter to take into consideration, albeit not in isolation from the relationship between the plaintiff and the 1^st defendant.

58.  Thirdly, the defendants submit that the Judge failed to take into account the fact that the plaintiff would not easily part with money.  We do not find this fact a significant indicator one way or the other in relation to the intention to create a binding contract.  It may be noted that this undisputed character trait of the plaintiff was prayed in aid at trial by both parties, with the plaintiff submitting that it made it less probable for her to have intended any legal relations, and the defendants submitting that the plaintiff’s promise in the Oral Agreement must therefore have been intended seriously.

The Second Ground

59.  The second contention of the defendants concerns the Judge’s reasoning that the lack of certainty in relation to a number of terms of the Oral Agreement supports the inference that the parties did not have the intention to be legally bound.  In paragraph 74 of the Judgment, the Judge said:

“ The certainty (or lack of it) of the terms of the Oral Agreement is relevant when considering whether the parties had the intention to be legally bound. In this regard, I agree with Mr Cheung that a number of the terms lack certainty in the following regards:

(a) in respect of the 1^st Pleaded Term, no written authorization had ever been executed by P in favour of either D1 or D2;

(b) in respect of the 2^nd Pleaded Term:

(i) the meaning of “to negotiate for higher compensation” is vague. “Higher” than what, and “higher” by how much? Even if one takes the amount of the compensation originally offered as the starting point, does it mean that so long as the final compensation would become higher by just one dollar, D1 would be legally entitled under the Oral Agreement to half of the compensation?

(ii) no time frame for the completion of the compensation negotiation had been set out;

(iii) the consequence of D1 and D2 failing to “to negotiate for higher compensation” (whatever that meant) was not set out. If the Oral Agreement were meant to be legally binding, would it also mean that Ds could have been legally liable to P if they had failed to “negotiate for higher compensation”? I do not believe that had been the intention;

(c) in respect [of] the 3^rd Pleaded Term, the consequence of the Son refusing to be a party to the Oral Agreement, or the consequence of the parties ultimately failing to reach any “unanimous” decision on the compensation was not spelt out. No mechanism had been agreed to resolve any impasse.”

60.  The 1^st Pleaded Term was that the defendants be appointed as the plaintiff’s representatives jointly and severally to deal with or otherwise manage the Property.  In the context of the facts, this does not seem to us to be an overly uncertain term.  The fact that there was no written authorisation executed by the plaintiff does not relate to the certainty of this term, but to the efficacy of the authorisation.  In fact, despite the absence of written authorisation, the 2^nd defendants had managed to undertake many tasks in performing the agreement, as found by the Judge.  There was also evidence, albeit not addressed by the Judge (see the third ground of appeal below), that the plaintiff introduced the 2^nd defendant to others as her authorised agent and equipped the 2^nd defendant with keys and documents for him to manage the affairs of the Property.

61.  As to the amount of “higher compensation”, there is force in the defendants’ submission before us that the 2^nd Pleaded Term must be read together with the 3^rd Pleaded Term that the compensation had to be agreed by the defendants and Kwok Siu Po.  The defendants were informed by the plaintiff in the 2012 conversations of the compensation in the proposed amount of RMB540,745.20.  Properly understood, “higher compensation” means compensation in a sum higher than that amount, to be agreed by the defendants and Kwok Siu Po.  There was no such uncertainty as to suggest an absence of intention to create legal relations.

62.  It is true that there was no express timeframe set out in the agreement for completing the negotiations for higher compensation, but a term can be readily implied that the parties would perform it within a reasonable time.

63.  Likewise, the absence of an express term on the consequence of any failure to secure higher compensation or to reach a unanimous decision on the acceptable compensation does not necessarily suggest that there was no intention to create legal relations, especially when the Judge did not find the Oral Agreement to be so uncertain in its provisions or so lacking in essential terms as to be unenforceable for that reason.  It is to be borne in mind that it was after all an oral agreement between non‑legally trained people reached over a telephone conversation.

64.  For these reasons we consider that the Judge erred when he derived support from the perceived lack of certainty in the aspects discussed above for his conclusion that the parties did not have any intention to be legally bound.

The Third Ground

65.  The defendants submit, as their third contention, that the Judge failed to address certain points of evidence in relation to the plaintiff’s subsequent conduct.  The defendants gave evidence that at the tea gathering on 18 July 2012 (referred to in paragraph 9 above), the plaintiff had reaffirmed that the compensation obtained for resumption of the Property would be divided equally between the 1^st defendant and Kwok Siu Po.  Secondly, they also testified that in the numerous family meetings among the plaintiff, the defendants and Kwok Siu Po held between July and August 2012, the plaintiff had time and again expressly confirmed the terms of the Oral Agreement.  Further, there was evidence from the defendants that during a visit to the Property on 28 August 2012, the plaintiff introduced the 2^nd defendant as her fully authorised agent to a Mainland official, introduced the 2^nd defendant to the tenant of the Property and gave the keys, tenancy agreement and utility bills of the Property to the 2^nd defendant so that he could manage it.  Fourthly, the defendants gave evidence that on 21 April 2013, when the Declaration of Relinquishment was passed to her, the plaintiff agreed that she would not accept any compensation for resumption of the Property without the consent of the defendants.

66.  These instances of subsequent conduct on the part of the plaintiff, if established, were referable to the Oral Agreement and could at least arguably support the defendants’ case that there was the requisite intention to create legal relations.  As noted in the Judgment at paragraph 60(e) from Jones v Padavatton at p 336H, sometimes “it is the subsequent history which gives the best guide to the parties’ intention at the material time”.  These are therefore matters that should have been inquired into, with relevant findings made by the court.  The fact that the Judge did not do so is a ground for setting aside his conclusion against the defendants: Yap Sui Kong v Yip Fong Tim [2018] 4 HKLRD 791, §§65‑79.

Disposition of the appeal

67.  It follows from the above that the grounds of appeal are made out and that the Judge’s conclusion that the defendants had failed to establish that in making the Oral Agreement the parties had the requisite intention to be legally bound must be set aside.

68.  On behalf of the plaintiff, Mr Cheung submits that if the appeal is allowed the counterclaim must be remitted to the Court of First Instance, but he does so only because the issues of whether the defendants had performed the agreement and whether the plaintiff had breached it remain (he submits) for determination by the trial court.

69.  The subsequent conduct referred to in the third ground of appeal is based on the oral evidence of the defendants.  It would not be right for us to seek to make the relevant findings; nor are all the materials relevant to that question (such as the full transcript of the defendants’ oral evidence) placed before us in this appeal.  Had the defendants required findings to be made in relation to those matters, it would have been necessary to remit the case to the court below. 

70.  The defendants do not, however, insist upon those matters being found.  In our view, leaving aside the subsequent conduct which has not yet been established as referred to in the third ground of appeal, there are unchallenged primary facts on the basis of which the necessary finding may be made by this court.

71.  In particular we highlight the following matters:

(1)     The Oral Agreement concerns the disposition, and division as between the 1^st defendant and Kwok Siu Po, of the resumption proceeds of the Property which was a major family asset owned by Kwok Chun. 

(2)     Kwok Chun had died, and procedures for succession to his estate were being handled by the 1^st defendant for the plaintiff in Hong Kong.  The plaintiff was the executor of Kwok Chun’s will and estate.

(3)     The subject matter of the Oral Agreement — the resumption of the Property — was something that inherently involved legal procedures in the Mainland.  The agreement also concerned the authorisation of the defendants by the plaintiff to deal with third parties in relation to the Property, including Mainland authorities connected with the resumption of the Property.

(4)     The plaintiff had earlier in June 2012 asked the defendants for assistance before but they declined.  She called the defendants again specifically with regard to the matter of resumption of compensation.  While the agreement was reached orally over the telephone, the conversation could not properly be described as a casual chat, nor did the Judge find it to be such.  Mr Cheung focussed on one sentence in that conversation[21] and submitted it was what an unskeptical mother would have said within a free and casual discussion about future arrangements in relation to her estate, but it was never the plaintiffs’ case that the relevant promise was made in the context of a discussion about the plaintiff’s estate.  Further, the conversation encompassed much more than that one sentence, though the actual words used are not known.  The defendants’ evidence, which the Judge accepted, was that the details were discussed (“談到處理這事的細節”), a clear agreement was reached (“雙方達成清楚共識”), and the plaintiff’s promise was specifically sought (“本人及太太特別和何女士約定好”).  In particular, there was an agreement as to how the resumption proceeds would be divided as between the 1^st defendant and Kwok Siu Po.

(5)     The 1^st defendant and Kwok Siu Po did not have a close relationship.  The 1^st defendant had a fairly good relationship with the plaintiff but the 2^nd defendant had distant relationship with the plaintiff that lacked any “common language”. Without a binding agreement, there was a risk that all the efforts expended by the defendants would simply enure to the benefit of Kwok Siu Po.

(6)     In February 2013, the 1^st defendant arranged for the Declaration of Relinquishment to be prepared by China Appointed Attesting Officers, and signed it, and in April 2013 handed it over to the plaintiff, thereby relinquishing any interest she might have had in inheriting the Property from Kwok Chun, in order to facilitate the resolution of the question of compensation.  The 1^st defendant did so even though, as the Judge accepted,[22] the parties had been advised by Liu in July 2012 and would have believed that she had a legal entitlement to one‑sixth of the Property.

(7)     Pursuant to the Oral Agreement, the 2^nd defendant undertook a host of activities and ran a tenacious campaign in the Mainland at considerable expense of time and money, which was even published in the press in Hong Kong. 

72.  The fact that the agreement had been substantially performed is a relevant factor pointing to an intention to create legal relations: Chitty on Contracts (33^rd ed), §2‑171; Purton (t/a Richwood Interiors) v Kilker Projects Ltd [2015] EWHC 2624 (TCC) at §§5-7.  For the reasons set out above, we find that the parties had the requisite intention to create legal relations when they entered into the Oral Agreement.

73.  We reject the plaintiff’s submission that the case should be remitted to the court below for the issues of performance and breach.  As regards performance, the Judge found that the pleaded acts had in fact been undertaken by the defendants and that those acts were “readily explicable by” and “referable to” the Oral Agreement.[23]  This is sufficient under the Oral Agreement for the defendants to be entitled to one‑half of the compensation monies net of expenses.  There was no pleaded issue raised below that the defendants’ acts did not materially cause or contribute to the increase in the compensation eventually received.

74.  As for the issue of the plaintiff’s breach, there was a plea by the defendants below that the plaintiff acted in breach of contract by accepting the amount of RMB3 million as compensation in full and that the amount of compensation that could have been demanded and obtained was RMB5,407,452, being ten times of the amount initially offered.  In the light of the Judge’s rejection of that plea because of the lack of evidence on the amount of compensation that should properly have been payable,[24] it is difficult to see what point there remains for determination in this regard.  At the hearing, Mr Pun confirmed that the defendant would be content to claim their entitlement under the Oral Agreement based on the compensation received in the amount of RMB3 million.

75.  It is true that the Oral Agreement required the agreement of both the defendants and Kwok Siu Po to the amount of compensation accepted, and that the defendants had not provided their consent to accept RMB3 million. That was, however, a requirement in their favour and we see no reason why it could not be waived by them, so that they are simply entitled under the fourth term of the Oral Agreement to receive a half share of the compensation net of tax and expenses.

76.  There was at trial a claim by the 2^nd defendant for reimbursement of expenditure in the amount of HK$102,400 which he incurred in performing the Oral Agreement.  Although the Judge accepted that the acts said to have been done by him had in fact been done, there was no finding on the amount of expenses incurred.  Mr Pun, however, informed the court during the hearing that the 2^nd defendant was also prepared to waive this claim.

77.  On this basis, it seems to us that the defendants are plainly entitled to be paid by the plaintiff half of the compensation she has received, without any deduction.  There should therefore be judgment in their favour for the sum of RMB1,500,000.

78.  We make an order nisi that the costs of the appeal be to the defendants with a certificate for two counsel.

79.  As regards costs below, we direct that the defendants lodge and serve written submissions within 14 days hereof, followed by the plaintiff within 14 days thereafter, and a reply by the defendants within 7 days thereafter.