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China Sex, Mistresses, And Improper Payments, And What They Mean For Your China Business Litigation.

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Fascinating post up over at CNReviews, entitled, “Husband and wife sue mistress for 330,000 yuan in “lover’s fees.” The gist of the case is that a married couple sued the husband’s former mistress to require her to return 330,000 RMB the husband had given her during the course of the affair. The court ruled in favor of the married couple.
I will leave the moral lessons for others to analyze, but I love this case for all it can teach about how China’s courts (and arbitrators) tend to make their decisions. And though I am relying entirely on CN Reviews for the case analysis, that is fine because the point I will be making is only that Chinese courts rely far more on equity than do Western courts.
Chinese courts tend to give large account to what is “fair,” not just to what the law says. This means that if a Chinese company is late on a contract because its own supplier was late in delivering it a necessary component part, the Chinese court may very well excuse the delay. This means that if the price of a necessary component part jumps precipitously, a Chinese court might very well excuse the Chinese supplier for substituting in a cheaper part. Many times, Westerners ascribe Chinese court rulings to corruption, when they very well might have been due to equity.
If you have a dispute that may be heading to a Chinese court or to arbitration before a Chinese arbitration, think long and hard about the equities involved, not just the law.
UPDATE: This post has spurred a rather funny follow-up post by Dan Hull over at the What About Clients? Blog.

  • http://cnreviews.com Mollie Kirk

    I’m really glad you picked up on this story, Dan. It caught my attention precisely for the bizarre (by my own American sense of justice, at least) legal saga that unfolded. Thanks for the great insight and for helping to put this case in context.

  • http://www.medivisas.com/ uk visa

    Many lay people feel that equity should be considered more highly in proceedings here in the UK.
    Interesting post – thank you.

  • http://www.foarp.blogspot.com FOARP

    @UKVisa – Umm . . presuming that’s not just a spam post, I totally disagree. Let’s give it a run-down with some examples:
    1) Money which Robert Maxwell embezzled and then gave to his mistress to spend on herself was recovered through constructive trust.
    2) Family law principles now allow family home owners to miss repayment so long as they can pay off the mortgage over a reasonable period, and it was recently found that this could be the entire remaining length of the mortgage.
    3) Mortgage repossession can be blocked by those with an over-riding interest in the property (e.g., material contribution to purchase price).
    4) Withholding of injunction for copyright infringement where freedom of speech affected.
    5) Constructive trust of property for benefit of owner where owner duped into transferring it for little/no payment to charlatan who then sells it.
    6) Broad interpretation of undue influence and duress in formation of contract.
    7) Statutory third party contract rights where contract intended to benefit from contract.
    8) Despite elimination of equitable jurisdiction in common mistake (which I entirely agree with) courts still unwilling to adopt standard of mistake only as to existence of subject matter being grounds for rescission. May still grant rescission where only mistake as to quality of subject matter.
    9) Promises to perform what are already contractual duties can be valid consideration.
    etc. etc. etc. If anything, English law is drowning in excessive discretion being given to judges, especially in property law through the influence of family ‘law’.

  • Chris

    It’s an interesting case, but surely this would be better read as a “family values” issue rather than an “equity” issue.
    It seems very reasonable to rule that the husband should ask his wife’s opinion before giving away so much money, but why should the mistress need to prove a legitimate reason to ask for money from the husband? If the husband gave away what was not his to give, then surely the wife’s first recourse should be to recover the money from him.
    The judge ruled that the case was about “improper acquisition” – the use of an active verb describing the mistress’s alleged actions could be seen as a bias against her. Did the mistress ‘acquire’ the money, or did she ‘receive’ it? Why didn’t the judge rule that the case was about “improper distribution”? This would put the responsibility on the husband’s actions.
    Instead the judge ruled that the husband’s actions were “null and void.” Perhaps I should try this next time I buy something I don’t like – “Sorry, but I paid without my partner’s authorisation. My actions must be considered null and void. So here is the item, and give me back all our money, thank you.”
    As the case is ruling that the main actor – the husband – has no responsibilities, then I’m not sure how this can be considered equitable. The husband and the mistress acted together, yet only one of them suffers for it.
    The major lessons to learn here are for mistresses in China:
    (1) Make sure that all money given to you by your lover can not be recovered by a court.
    (2) Make the split from your lover as amicable as possible, so that he has less reason to want to sue you later.
    (3) If you aren’t already a mistress, but thinking about it, just don’t. It’ll be nice for the ride, but the landing will be very very rough.

  • outcast

    Maybe this will make would be mistresses think twice before entering into an affair.

  • http://docs.law.gwu.edu/facweb/dclarke/ Don Clarke

    Hi, Dan – I don’t disagree with the general point about the relative importance of perceived equity in Chinese law, but I’m not sure this case is really the poster child for it. The wife’s case was far from meritless from a strictly law-on-the-books standpoint. Here’s my analysis: http://lawprofessors.typepad.com/china_law_prof_blog/2009/06/husband-and-wife-successfully-sue-former-mistress-for-return-of-300000-yuan-in-gifts.html

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