FACV 1/2015

IN THE COURT OF FINAL APPEAL

HO LIN v MO SEE CHUN
Skeleton Argument of the Plaintiff/Appellant
Introduction
1. This appeal raises the issue whether or not Clause 20, the entire agreement
clause (Clause) in the Tenancy Agreement of 9th January 2013 (Tenancy
Agreement) of the property situated at Shop No 8888, Shanghai Street,
Mongkok, Kowloon, Hong Kong (Property), excluded the Appellants liability
for his pre-contractual innocent or negligent misrepresentation on the legality of
the toilet therein (Misrepresentation).
2. The procedural history is straightforward. The issue arises from an action
commenced by the Appellant in respect of the Respondents wrongful
determination of the Tenancy Agreement. The Respondent contends that the
Tenancy Agreement had been rescinded by the Misrepresentation. The Court of
Appeal (in CACV 100000/2014) found for the Respondent but granted leave to
appeal against the same issue to this Court.
3. In summary, the Appellant submits that the Clause excluded the Appellants
liability for the Misrepresentation for two reasons.
Ground of Appeal I: Construction of the Clause
4. On the true construction of the Clause, the Clause does cover innocent and
negligent misrepresentations.
5. In the court below, the Respondent relied on the English Court of appeals
decision in AXA Sun Life Services plc v Campbell Martin Ltd & Others 1 to argue that
the Clause was of no effect for excluding liability in misrepresentation.
6. The construction in AXA :
1 [2011] EWCA Civ 133

a. The entire agreement clause in question in AXA (AXA cl. 24) read:
this Agreement shall supersede any prior promises agreements,
representations, undertaking or implications whether made orally or in
writing between you and us
b. The English Court of Appeal found that that clause excluded breaches of
collateral warranties but not misrepresentations.
c. Rix L.J. construed representations used in AXA cl. 24 as meaning
representations which would otherwise be a collateral warranty (at [27])
but for the entire agreement clause. The word representations there
therefore did not refer to actionable misrepresentation.
7. First, AXA is plainly not binding on the Hong Kong CFI, and it is submitted that
it should not be taken as persuasive authority.
8. Rix L.J. had used outdated, artificial (now unnecessarily artificial) method of
construction. Such means of construction had been necessary before the
enactment

of

the

Misrepresentation

Act

1967

(Equivalent

to

the

Misrepresentation Ordinance in Hong Kong), but no longer so.

9. In construing the word representations in such a way, the English Court had
failed to give effect to the intention of the contracting parties.
10. It is at the very least arguable that AXAs decision on whether the entire
agreement clause covered misrepresentations was obiter only.
11. Further or alternatively, even if this court should find the reasoning of AXA
compelling despite the above submissions, AXA should still be distinguished
from our present factual matrix.
12. AXA cl. 24 is differently worded from the Clause here in dispute.
13. The contexts in which the Clause is situated is different from those in AXA cl. 24.
Ground of Appeal II: Reasonableness of the Clause

14. To exempt liability for misrepresentations, the Clause must also be reasonable
within the meaning of the Misrepresentation Ordinance (Cap. 284) (MO) and
the Control of Exemption Clause Ordinance (Cap. 71) (CECO). Pursuant to
Schedule 2 to the CECO, relevant factors in determining reasonableness include,
inter alia:
a. strength of the bargaining positions of the parties, taking into account the
availability of alternatives;
b. whether the customer, here the Respondent, received an inducement to
agree to the term or had an opportunity to contract with others without a
similar term as the impugned term; and
c. whether the customer knew or ought reasonably to have known of the
existence and extent of the term, having regard to, inter alia, customs of
the trade.
15. It is submitted that, the Clause is reasonable in all the circumstances known or
should have been known to the parties prior to the contract.
16. First, the starting point is that entire agreement clauses are vital to give business
efficacy. It is said that the purpose of an entire agreement clause is to preclude a
party to a written agreement from threshing through the undergrowth and
finding in the course of negotiations some (chance) remark or statement (often
long forgotten or difficult to recall or explain) on which to found a claim such as
the present to the existence of a collateral warranty. The entire agreement clause
obviates the occasion for any such search and the peril to the contracting parties
posed by the need which may arise in its absence to conduct such a search. 2
(Although the dictum concerns exclusion of liability for collateral contract or
warranties, the reasoning equally applies to prove the reasonableness of a term
excluding liability for misrepresentations: Po On Auto Accessory Co Ltd v Grand
Faith Holdings Ltd.3)
2 Cited in Po On Auto Accessory Co Ltd v Grand Faith Holdings Ltd (n 3 below).
3 [2010] HKEC 1295, [108]-[111], Master M. Ng.

17. Indeed, starting from the case of Cheng Kwok-fai v Mok Yiu-wah Peter & Anor 4 to
Advanced Pacific Investments Ltd v Zen Chung Hei Hayley, 5 the Hong Kong courts
have consistently considered entire agreement clauses in respect of real property
contracts excluding liability for non-fraudulent representations and collateral
warranties as reasonable. In fact, the point seems so trite and those clauses so
essential that many authorities give effect to those clauses without even pausing
to consider reasonableness.
18. Second, this Court must have regard to the circumstances surrounding real estate
dealings in Hong Kong known to both parties bearing on whether it was fair and
reasonable for a term like the Clause to be included in the Tenancy Agreement
put forward by the Appellant for the Respondents signature: Green Park Properties
Ltd v Dorku Ltd.6 Since, as mentioned, entire agreement clauses are commonplace

in contracts concerning real property, the Respondent knew or should have

known its presence and effect in the Tenancy Agreement.7
19. Third, the common law doctrine of caveat emptor applies equally to leasees:
absent fraud, they share the responsibility to exercise due diligence. Given the
alleged importance of the toilet, the Respondent was at full liberty to exercise due
diligence by:
a. examining the Tenancy Agreement and ask for a term as to the legality of
the toilet be incorporated therein;8
b. inspecting the Property himself or with relevant experts so as to assess the
legality of the toilet;
4 [1990] 2 HKLR 440, 446, Godrey J.
5 [2009] HKEC 1053, [90]-[93], Dep. Judge R. Pang.
6 (2001) 4 HKCFAR 448, [27], Litton NPJ.
7 n 5 above.
8 ibid.

c. seeking independent legal advice on the terms, because he had not any
business experience and the Tenancy Agreement was for business
purpose.
20. Separately and cumulatively, these point to the reasonableness of the Clause in
all the circumstances. In turn, it was the Respondents own negligence to have
ignored the Clause.
Relief
21. By way of relief, the Appellant prays for a judgment for the Appellant that the
Court of Appeals decision be (i) upheld insofar as the construction of the Clause
is concerned and (ii) varied to the effect that the Clause is reasonable within the
meaning of the MO and CECO. Costs be to the Appellant.
Respectfully submitted.
Dated this 3rd day of February 2015.
Miss Kathy Liu
Mr Icarus Chan
Counsel for the Appellant

List of Authorities Appellant/ Plaintiff

Cases
1.
2.
3.
4.
5.
6.
7.

Advanced Pacific Investments Ltd v Zen Chung Hei Hayley [2009] HKEC 1053
AXA Sun Life Services plc v Campbell Martin Ltd & Others [2011] EWCA Civ 133
Cheng Kwok-fai v Mok Yiu-wah Peter & Anor [1990] 2 HKLR 440
Green Park Properties Ltd v Dorku Ltd (2001) 4 HKCFAR 448
Advanced Pacific Investments Ltd v Zen Chung Hei Hayley [2009] HKEC 1053
Photo Production Ltd. Respondents v Securicor Transport Ltd [1980] A.C. 827
Po On Auto Accessory Co Ltd v Grand Faith Holdings Ltd. [2010] HKEC 1295

Journal Article

8. E. McKendrick, Publication Review: The Interpretation of Contracts by Kim

Lewison (2005) LQR 158