HCA 31/2006
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 31 OF 2006
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BETWEEN
KENNETH HOI WAH SIT (薛海華)
Plaintiff
and
LAU YAU SANG (劉佑生) and
1st Defendant
FAITHFUL KING LIMITED
2nd Defendant
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Before: Deputy High Court Judge Gill in Chambers
Date of Hearing: 28 March 2007
Date of Judgment: 13 April 2007
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J U D G M E N T
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1. The plaintiff, Mr Sit, is a solicitor and the court appointed administrator of the estate of Wong Yee Man who died in 1970. The primary asset in the estate, which Mr Sit has recently sold, was a small commercial building in Tung Choi Street, Kowloon, that the deceased had bought in 1937.
2. For a period prior to the sale as well as afterwards, in fact to date, the shop premises comprising most of the building were occupied first by the 1st defendant and then the 2nd defendant. Although they are separate legal entities they have had common ownership. Each in turn has been the proprietor of a retail business carried out from the shop premises.
3. Following the grant of Letters of Administration in his favour Mr Sit tried without success to recover vacant possession for the purpose of selling the property at the best price for the beneficiaries. When that did not happen he brought this action to recover possession from the 2nd defendant and for damages for trespass by both defendants.
4. The pleaded defence is that for the period October 2000 to February 2003 the 1st defendant occupied the premises as licensee of Wai Yip Land Development Limited (Wai Yip) and thereafter and ever since the 2nd defendant has been doing so, paying the agreed half yearly licence fee of $180,000.
5. By summons of May 2006 Mr Sit applied for summary judgment for vacant possession, damages and mesne profits pending delivery of vacant possession (subsequently, with the property sold and the sale completed, he abandoned his claim for vacant possession).
6. The challenge to judgment was advanced in affidavits made by Lau Yau Sang, a director of the 2nd defendant and as well one of the proprietors of the 1st defendant. In April 2002 a judge at first instance ordered that administration of the estate of the late Wong Yee Man be granted to Frank Wong, a son of the deceased. Frank Wong with apparent authority so to do (but before grant of administration) gave a licence to Wai Yip to use and occupy the property in the name of his deceased father for a period of five years from May 2002 with a renewal for a further five years thus to April 2012. The licence fee was fixed at $30,000 per month for the first term and $36,000 per month for the second.
7. How Wai Yip came to be involved I shall return to. Suffice to say that Lau Yau Sang deposed that Wai Yip had the right and power to license the premises to the 2nd defendant and it did so, for which the 2nd defendant was all along paying a licence fee which acquainted with $30,000 per month.
8. But when the matter came before a Master as it did in October 2006, she held that there was no arguable defence to Mr Sit’s claim for damages from both defendants, and she entered judgment with damages to be assessed.
9. The Master’s reasoning can be shortly stated.
10. Before Frank Wong was formally granted Letters of Administration, the order appointing him administrator was overturned on appeal. The court noted that there were two warring factions of the late Y M Wong’s family, and that the administrator should be a disinterested professional rather than a member of the family. Thus it was that by consent Mr Sit came to be appointed.
11. The licence Frank Wong entered into with Wai Yip was the act of an executor de son tort which was not binding on the estate unless ratified by the administrator. And Mr Sit was entitled to decline to do so having decided there would be no benefit to the estate if he were to ratify.
12. This is an appeal by rehearing against the Master’s interlocutory judgment.
The Issues
13. By the time the matter came before me the defence was given the opportunity to file additional evidence and the plaintiff to respond. But the issues before me are no different from those before the Master.
14. Is the act of the executor de son tort , Frank Wong, made in anticipation of a grant of Letters of Administration in his favour, namely the granting of a licence to Wai Yip to occupy, good against the lawful administrator and thus the estate?
15. Is there an arguable defence that Mr Sit as the lawful administrator is bound to ratify the licence, rendering thus sub-licences to the 1st , and then 2nd defendants, lawful?
16. Before considering the evidence originally and then subsequently advanced I recite the legal principles.
The Law
17. First, a quotation from Williams Mortimer and Sunnicks on Executors, Administrators and Probate, 2000 , at para. 8.16:
“2 — ACTION WITHOUT TITLE TO A GRANT
Executor de son tort — Intermeddling
A person not lawfully appointed executor or administrator and without title to a grant may by reason of his own intrusion upon the affairs of the deceased be treated for some purposes as having assumed the executorship: such an intermeddler is called a tort executor or an executor de son tort (i.e. of his own wrong). The same term is used whether the deceased died testate or intestate, for the law knows no such appellation as ‘administrator de son tort ’. Such a person is a constructive trustee for those entitled to the assets and may also be liable to criminal sanctions.”
18. It is well established law that the act of an executor de son tort is good against the lawful administrator only where it is lawful, and an act that the lawful administrator was bound to perform in the course of his administration; see, for example, Buckley v Barber (1851) 6 Exch. 164, at p.183, per Parke B.
19. It has been laid down in an ancient case, namely Coulters Case (1598) 5 co. that “all lawful acts which an executor de son tort doth are good”.
20. But this has come to be qualified: in Thomson v Harding (1853) 2 E & B 630, Lord Campbell CJ said:
“We are by no means of opinion that, as against a person who becomes the rightful representative of a person deceased, every payment from the assets of the deceased shall be valid, if made by a person who has so intermeddled with the property as to render himself liable to be sued as executor de son tort . ... But, where the executor de son tort is really acting as executor, and the party with whom he deals has fair reason for supposing that he has authority to act as such, his acts shall bind the rightful executor, and shall alter the property.”
21. A solitary act of wrongdoing will not bind the lawful administrator; see Mountford v Gibson (1804) 4 East 441.
22. In a much more recent case in Hong Kong, Chan Pak Man v Chan Pang Fee & Anor [1981] HKLR 483, Sir Alan Huggins V-P made reference to the doctrine of relation back at p.502:
“The Second Issue: Relation Back
In view of the conclusion we have reached on the first issue it is not strictly necessary to decide this further issue, but in case the matter should go further I shall express my view upon it. Many cases were cited to us and it is necessary to review some of them.
Inasmuch as he initially contracted as ‘the proposed administrator’ and agreed to complete only after letters of administration had been granted, it seems to me that the husband did not in the first instance purport to bind the estate. If that be right, it would only be by virtue of the purported ratification after letters of administration had been granted that the estate could be bound. However, I will now assume that the words used were such as did indicate an intention to contract as an administrator. On that basis the question arises whether the husband could effectively contract before obtaining a grant of representation.
The fundamental distinction between an executor and an administrator is that the title of the one stems from the will and the title of the other stems from the grant of letters of administration. It follows that an administrator has in theory no right to sue in respect of loss or damage to the estate occurring between the date of the death and the date of the grant. That was so manifestly inconvenient that the courts developed the doctrine of relation back. Originally the doctrine appears to have been concerned with damage resulting from tortious acts … However, the doctrine was extended to some cases where a person intermeddled with the estate, purporting to deal with property belonging to the estate, and subsequently took out representation. Those cases must be distinguished from cases where executors de ses torts , although they never became lawful personal representatives, were nevertheless able to bind the estate by reason of their purporting to act, and fairly being understood to act, with authority as personal representatives.”
Sir Alan then went on to quote the excerpt from the judgment of Lord Campbell in Thomson v Harding I have already reproduced. Later in his judgment Sir Alan stated, at page 506, there are two necessary features for the doctrine of relation back to apply:
“I think the case [Morgan v Thomas 155 ER 1362] shows two things to be requisite for the operation of the doctrine of relation back: (1) that the person whose conduct is relied upon as binding the estate should have been acting in the assumed character of an administrator, and he does that if the act is done by him when professedly intending to take out letters of administration so that he is an executor de son tort ; and (2) that the act done should be for the benefit of the estate. Whether an act is in fact for the benefit of the estate would seem to depend upon the opinion of the lawful administrator: if he ratifies it (as by suing upon the contract) the estate would be bound, but if he rejects the act by suing on behalf of the estate in conversion it would not seem to be open to the defendant to contend that the contract was for the benefit of the estate.”
23. Le Pichon JA followed this premise in Chin Lan Hong & Ors v Cheung Poh Choo & Ors [2005] 3 HKLRD 811 at p.825.
24. With these principles in mind I now turn to the evidence.
Evidence
25. The affidavit that emerged with leave following the Master’s determination came from one Choy Wai Bor. He was at a material time a director of Wai Yip, the licensee of the licence given by Frank Wong. However his role as director is clouded by the fact that from June 2002 to October 2006 he was not a director; this because during that four years he was an undischarged bankrupt.
26. He deposed that some ten years after the death of Wong Yee Man no steps had been taken in the administration of his estate. Then it was, in 1980, he negotiated with the widow, one Madam Shee Hom Wong, to purchase the property. The upshot was an agreement for sale and purchase dated November 1980. Madam Wong executed as intended administratrix, with completion dependant on her appointment. The consideration was $1.5 million. Mr Choy was given power of attorney to make application on Madam Wong’s behalf for Letters of Administration, for she was elderly and a permanent resident in the US. Quite how far this progressed is not clear; in any event 12 years later she died. By then it was 1992, and there had been no grant and thus no completion.
27. Mr Choy deposed however that Madam Wong had verbally given him wide powers to deal with the property and this, he said, included the right to lease out and grant licences. She also, he said, gave him the right to redevelop the property.
28. And this is what he did. In 1990 the Building Authority gave notice that it was in a dangerous state of disrepair. He caused Wai Yip as his nominee to demolish and reconstruct a single storied building on site. This was funded by Wai Yip.
29. Then following the death of Madam Wong, her son Frank Wong came on the scene. He was his mother’s appointed executor and, like his mother, gave Mr Choy power of attorney to apply on his behalf for administration of his father’s estate as well. And as well, by letter of June 1997, referring to himself therein as the intended administrator of the estate of his late father Wong Yee Man, he gave to Mr Choy authority “to deal with all matters in relation to the leasing out of the whole or any part of the deceased’s property situate at Ground Floor, No.64 Tung Choi Street Kowloon … in such manner and on such terms as you deem fit without being liable for losses and/or damages”.
30. But then there was another development. One Madam Chung Lam Heung brought an action claiming entitlement to the grant of administration in the deceased’s estate ahead of Frank Wong. Her claim was as a wife of the deceased.
31. In the proceedings it came to emerge that the deceased did in fact have two wives and two families. Following trial the judge ordered the appointment of Frank Wong to be the administrator. This was in April 2002. But before the grant was made that order was overturned on appeal; the Court of Appeal decided the appointment should be to an independent. This was in April 2003. And so it was that the plaintiff, Mr Sit, was appointed in February 2004, and the Letters of Administration were granted to him in July 2005.
32. In the meantime, and in purported recognition of the authority of the then intended administrator Frank Wong, Mr Choy had caused Wai Yip to sub-licence the redeveloped premises to various parties for various periods of time. In October 2000 this was the 1st defendant as to about 83% of the total space at $50,000 per month, reduced to $40,000 per month from January 2002.
33. Following the order made at first instance to appoint Frank Wong in April 2002, he confirmed orally what Wai Yip had so far done being the demolition and reconstruction and granting of licences, and entered into the written licence in favour of Wai Yip.
34. In March 2003 the sub-licence to the 1st defendant was terminated, and replaced with that to the 2nd defendant. In mid-2003 Wai Yip built a cockloft on to the premises and most of that was incorporated into the licence. The licence fee was paid half yearly at $180,000.
35. It was shortly after this sub-licence was entered into that the pending appointment of Frank Wong as administrator was overturned on appeal. By now it was April 2003.
36. Mr Choy deposed that both sub-licensees paid the licence fees without default up to the date of completion of sale of the property by the plaintiff.
37. Following his appointment as administrator Mr Sit set about the task of determining the various interests claimed in the deceased’s property. Having been told by Mr Choy that Wai Yip had redeveloped the same he called for accounts and was given some, which purported to be an accounting of the redevelopment and income earned over the years, including to date that paid by the 1st and 2nd defendants. But he professed to being concerned about the status and authority of Mr Choy (this was during the period when he was an undischarged bankrupt) and he sought confirmation or ratification from Wai Yip’s Board of Directors. He was not favoured with a response.
38. What was of concern was the ongoing presence of the 2nd defendant, in occupancy, with prospectively the right to be there until 2012. Further, as established by valuers, the rent that was payable was far below a market rental; further still, as far as he was aware no money had been received by or for the estate. This was clearly detrimental to his being able to get the best price on a sale of the property which of course was necessary to achieve a distribution to the beneficiaries, bearing in mind there are two camps.
39. With all this in mind Mr Sit chose not to affirm the licence that Frank Wong had entered into. It was not for the benefit of the estate; indeed it was detrimental to the estate. And so he entered into a memorandum of non-ratification and that was registered in March 2006.
40. To establish the worth of the property with vacant possession and subject to licence Mr Sit ordered valuations. Prudential SIL came up with a figure of $14,250,000 with vacant possession. DTZ Debenham valued the property at $14 million, reducing that down to $12,500,000 if subject to the licence.
41. These figures reinforced the appropriateness of a sale not hindered by the existence of a licence.
42. It is pertinent to note that in pursuing the steps he had taken Mr Sit sought and obtained approval of the beneficiaries (including Frank Wong) and that included the non-ratification of the licence and the issue of these proceedings against the 1st and 2nd defendants as trespassers.
43. What happened next was a proposition put forward to Mr Sit by solicitors representing Frank Wong and other named beneficiaries. That was that he sell the property to a nominee of Wai Yip, called Faith International Limited (Faith International) for the sum of $12 million subject to the existing occupancy. The rationale was not explained. But it was made clear by those making the proposal that those beneficiaries not being parties to it would be paid out as if a sale of $13.9 million had been achieved.
44. Given that this figure represented a sale at or about market value (there being no commission due) Mr Sit agreed to the proposal. The agreement entered into included an assignment by Faith International to Mr Sit of the right to maintain his action for damages for trespass against the defendants. Of course, the claim for vacant possession was no longer pursued.
45. It is pertinent to note that Mr Choy was a signatory to the agreement. In it was a clause that Faith International was aware that the premises were occupied by trespassers.
Discussion
46. The history has been a convoluted one, I suppose largely because it has taken so long for administration of the Wong Yee Man estate to be granted; 35 years from the date of his death.
47. But the issue remains straightforward; was Mr Sit duty bound to ratify the licence, the existence of which is vital to give the defendants rights to occupy the premises?
48. I think the answer is obvious; it is ‘No’.
49. It is pertinent to note that the parties to it, namely Frank Wong and Mr Choy (for Wai Yip) could not and did not support ratification. Frank Wong’s solicitors wrote to that effect, giving approval for the writ to issue. And Mr Choy, in his capacity as a signatory for Faith International in the agreement for sale and purchase branded the occupiers as trespassers.
50. The defendants will be entitled to be aggrieved to be so designated, if in fact they did over the years of occupancy meet the terms of the licences they claim to have existed. But the chain of title to the registered proprietor cannot be made out; and the test is not the extent to which they have been hard done by but rather as to whether the estate would benefit or not by ratification of the licence to their licensor; I have already said ‘No’ to that.
Conclusion
51. There is no arguable defence; there are no triable issues. The additional evidence adduced does not change things.
52. The appeal is dismissed. Costs are nisi . They are to the plaintiff.
(D M B Gill)
Mr L Ng, instructed by Messrs Chui & Lau, for the Plaintiff
Mr S Yip, instructed by Messrs P T Yeung & Tang, for the 1st and
2nd Defendants