Contractual intention and agreements between family members

Facts

In Ho Lai King v Kwok Fung Ying ([2020] HKCA 657) the plaintiff (‘P’) owned property in Guangzhou. Ownership was resumed by the mainland authorities. P was an elderly woman. She asked her daughter (D1) and son-in-law (D2) to help her negotiate the compensation payment.

D1 and D2 agreed on the understandings that:

(1) P would not accept an offer from the authorities without their consent; and

(2) They would receive 50% of the compensation received.

Contrary to this agreement, P accepted an offer of RMB 3 million as compensation and denied that any payment was due to D1 and D2.

Question

The question was whether P and D1 / D2 intended to create contractual relations when they reached their agreement. P contended that there was no such intention. She relied on the rebuttable presumption against the existence of a contractual intention in the case of domestic agreements (Balfour v Balfour [1919] 2 KB 571).

Court of Appeal’s analysis

The Court of Appeal said that the presumption is a rebuttable presumption of fact and the court had to consider the facts of each case ([47]):

‘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 manner in which the agreement has been made’ ([48])

Strong evidence would be needed to prove a contractual intention for ‘oral agreements on maintenance support or other daily arrangements’ ([48]).

The Court of Appeal decided that there was a contractual intention in this case. The relevant factors were:

  • P favoured her son over D1 (D1 and D2 were reluctant to get involved because they suspected that the son would receive the entire payment;
  • While D1 might not have been willing to bring proceedings against P during P’s life she might bring proceedings against P’s estate or the son;
  • The agreement was about a major capital asset
  • P and D1 and D2’s actions after the agreement (D2 spent time and money in pursuing the negotiations) pointed to a contractual intention).

Michael Lower

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