XCHRX LEE TAK YAN AND ANOTHER v. CHEN PARK KUEN

HCA 9928/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9928 OF 1996

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D E C I S I O N

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SUBSTITUTED PLAINTIFF

1. By a summons dated 15 April 2000 the Applicant, relying on O.15 r.6, applied to be substituted as Plaintiff in place of the two existing Plaintiffs in this action.

2. The Applicant claims that 100 shares in the family company Prudential Enterprises Limited, currently in the name of his deceased sister, Lee Jin, were held by her on trust for her mother Madam Lee Ng Chan Wa, who is also the mother of the Applicant. Madam Lee died and the Applicant contends that the shares should form part of her estate.

3. There is no dispute about the will itself. However the present Plaintiffs, the executors named in the will of Madam Lee, are unwilling to pursue the claim, although they have no objection to being joined as defendants together with the present Defendant, who is the widower of Lee Jin.

PROCEDURAL HISTORY

4. This action was begun by the first Plaintiff, one of the executors, together with 4 other Plaintiffs including the Applicant. The Defendant challenged the proceedings on the grounds that they were improperly constituted unless both executors were parties.

5. After argument before Master C. B. Chan, leave was granted, on 28 January 1997 for the other executor to be added as Plaintiff and it was ordered that the 4 other Plaintiffs, including the Applicant, be struck out. The Master did not state why they were struck out. There was no appeal from that order.

6. The Applicant submits now that once both executors were plaintiffs it was no longer necessary for the other 4 plaintiffs, all of whom were beneficiaries, to remain as parties, while the Defendant submits that they were struck out because they had no locus, an argument which the Defendant pursued at this hearing.

7. The present application was taken out pursuant to a consent order made by Mr Justice Yam on 7 April 2000 after a "Beddoes" application, HCMP 1185/1999. The 1st Defendant in those proceedings, the present Applicant, was to apply to be substituted as plaintiff in this action, HCA 9928/1996, in place of the executors who agreed to consent to the application.

8. This application is made in conformity with that order, the executors, through their representatives, having agreed to be joined as defendants.

9. The court may exercise its discretion and of its own motion or on application by O.15 r.6(2)(b)(ii) order to be joined any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

10. Such application must, except with leave of the court, be supported by an affidavit showing the applicant's interest in the cause or matter or the question or issue to be determined between him and any party to the cause or matter. An affidavit of the Applicant's solicitor sets out the Applicant's interest both as a specific legatee of property under Madam Lee's will and as a potential/contingent beneficiary of the residual estate, pointing out that the shares in dispute would fall into the residuary estate and thus be available to pay estate costs or for potential distribution at the discretion of the executors.

11. The executors were not eager to pursue the claim. While recognizing their duty to get in the assets for the estate if there was a valid claim, they were concerned that the estate might have to pay the costs of unsuccessful litigation.

12. The executors having indicated that they did not wish to pursue the question of the ownership of the shares the question of whether or not the shares ought to form part of the residuary estate will remain undecided unless the Applicant pursues it.

13. The Defendant's main argument was that the Applicant had no locus which enabled him to be joined in the proposed action and that O.15 r.6, a procedural rule, could not bestow any new or substantive right enabling those not having locus to sue.

14. The Defendant relied on the principle that a residuary legatee, even if the sole person entitled to the residue, has no interest in any property of the estate until the residue has been ascertained (Refer: Eastbourne Mutual Building Society v. Hastings Corporation [1965] 1WLR 861 and Lall v. Lall [1965] 1 WLR 1249). Further the Defendant contended that the Applicant's reference to his position as a "potential beneficiary" of the residuary estate (Refer: Affidavit R. J. Bennett Para. 6) underlined his insufficient interest.

15. The Applicant's position was that he had a sufficient interest in the true ownership of the shares because they would form part of the residuary estate and because the size of that portion of the estate would make a difference to other aspects of provision made under the will. He accepted that the order of Mr Justice Yam did not determine whether or not he had a right to sue, but says that he has proved a proper interest, which does not have to be a proprietary interest, in the residue which justifies his being substituted as Plaintiff.

16. He relied on Commissioner of Stamp Duties (Queensland) v. Livingston [1964] 3WLR where consideration was given inter alia to the insufficient variety of terms in our legal system to express the many senses of the words "interest" and "property" and the consequential inconsistencies that must result.

17. The court in Livingston looked at a reference in McCaughey's case (Refer. 46 S. R. N.S.W.192) wherein the judge referred to the idea of beneficiaries in an unadministered, or partly unadministered, estate having no beneficial interest in the items which make up the estate as being repugnant to elementary and fundamental principles of equity. Livingston recognised that if the term "beneficial interest" referred to such beneficiaries having property rights the proposition was neither elementary nor fundamental.

18. However "if the meaning is only that such beneficiaries are not without legal remedy during the course of the administration to secure that the assets are properly dealt with and the rights that they hope will accrue to them in the future are safeguarded the proposition is no doubt correct. They can be said, therefore, to have an interest in the assets, or even a beneficial interest in the assets, so long as it is understood in what sense the word "interest" is used in such a context".

19. It is this latter sense that the Applicant asserts locus and on that basis I rule that he has sufficient interest in establishing the true ownership of the 100 shares. His right is to have the estate properly administered and applied for his benefit. It follows that he must also have sufficient interest to bring him within the requirements of O.15 r.6.

20. Although Miss Eu for the Defendant argued that the Applicant's substitution could not come within the meaning of "joinder" or "added" as used in that rule, that is too restrictive an interpretation of the section which specifically envisages substitution. In any event the Applicant will be an additional party as he becomes sole Plaintiff and the executors become Defendants.

21. Miss Eu submitted secondly, that the Applicant was estopped from applying again to be joined in this action because that matter had been decided by the Master, whose decision must have been based on considerations of locus. It is not known what weight, if any, such considerations had on the Master's ruling. Circumstances have altered since then, the major change being that the executors are not prepared to continue the action. The Applicant can thus proceed under O.15 r.14 which enables a beneficiary to bring or pursue proceedings in his own name where the trustees have refused to do so, as long as the trustees are added as additional defendants.

22. Finally, I am not persuaded by Miss Eu's arguments that long delay in bringing this application causes obvious prejudice to the Defendant. This application was taken out timeously as directed at the Beddoes application. It may have been desirable that the locus point be heard as a preliminary issue prior to trial but it is not unknown for such preliminary points to be argued at the start of the trial proper. As trial dates have been fixed it is desirable that this action proceed on those dates insofar as that is possible.

23. In all the circumstances I am satisfied that the Applicant has locus in respect of this action. I am also satisfied that he has shown an arguable case for his being substituted as Plaintiff in this action in terms of O.15 r.6 and I make an order in terms of Paragraphs 1, 2 and 3 of the Applicant's summons filed 15 April 2000.