RE WONG KEE CHUNG

HCMP 772/2019

[2019] HKCFI 2029

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 772 OF 2019

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J U D G M E N T

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1.  By these proceedings, the applicant applies in his capacity as the grantee of the Letters of Administration de bonis non in respect of the estate of his late mother, Yiu Wei Ying, deceased. Upon the court’s refusal to entertain the application on paper only, the matter was listed for hearing.

Background

2.  The deceased passed away on 4 May 1984, leaving her last will dated 21 January 1981.  Amongst others, the deceased owned leasehold interest in a village type house consisting of 3 floors.  The relevant parts of the will reads:

“1. I APPOINT my son WONG CHUN FAI … Merchant and my daughter WONG LAI KAM…jointly to be the Executors and Trustees of this my Will.

2. I GIVE AND DEVISE my interest and benefit of and in the leasehold property known as No 62A Lung Tsai Tsuen Road Second Floor Cheung Chau New Territories Hong Kong erected on Lot No 1102 in Cheung Chau UNTO my daughter the said WONG LAI KAM … for her own use and benefit absolutely.

3. I GIVE AND DEVISE my interest and benefit of and in the leasehold property known as No 62A Lung Tsai Tsuen Road First Floor Cheung Chau New Territories Hong Kong erected on Lot No 1102 in Cheung Chau (hereinafter referred to as “the said property”) to my Trustees UPON TRUST as to both the capital and income for the upkeep maintenance and worship my ancestral of all tombs and graves and I declare that my Trustees may from time to time in their sole discretion apply the income out of the said property for the aforesaid purposes.

4. I GIVE DEVISE AND BEQUEATH the remaining of all my real and personal properties whatsoever and wheresoever to my three sons the said Wong Chun Fai, Wong Kee Chun Carter…and Wong Kee Chung…for their own use and benefit absolutely as Tenants-in-Common in equal shares but subject to and charged with the payments of my debts, funeral and testamentary expenses and estate duties.”

3.  Probate of the will of the deceased was granted to Wong Chun Fai (“Chun Fai”) and Wong Lai Kam (“Lai Kam”), the executors named in the will, on 23 September 1985 (Grant No 3195/1985).

4.  On 29 March 2006, Chun Fai passed away in Hong Kong.

5.  On 17 October 2014, Lai Kam passed away in the United States of America.

6.  The land search shows that after the vesting of the 2^nd Floor and the Ground Floor of the house pursuant to the will, they have since changed hands so that in 2015, Wong Kee Chung (“Kee Chung”) has become the registered and sole beneficial owner of them.

7.  In 2017, Kee Chung entered into agreements to sell not just the Ground Floor and the 2^nd Floor but somehow also the 1^st Floor of the house.  The sale and purchase of the 2^nd Floor and the Ground Floor has completed in January 2018, but not that of the 1^st Floor.

8.  On the basis that part of the estate of the deceased, namely, the 1^st Floor of the house remained un-administered, Kee Chung applied and was granted on 25 March 2019 Letters of Administration with the will annexed de bonis non in respect of the estate of the deceased (Grant No HCAG 002652/2019) (“the Letters”).

9.  In April 2019, the contracted purchaser of the 1^st Floor raised requisition as to title with reference to Kee Chung’s authority to sell the 1^st Floor, in view of clause 3 of the will cited above.

10.  This caused Kee Chung to take out these proceedings.  He applies for the following order/declaration:

(1)  that clause 3 of the will is void and invalid;

(2)  that he has the power and liberty to sell the 1^st Floor; and

(3)  that there be no order as to costs.

11.  The application was taken out ex parte.  When this came to the attention of Hon Wilson Chan J, his Lordship directed that it be listed for hearing.  Hence the present hearing before this court.

The interested parties

12.  Mr Cheung appearing for Kee Chung acknowledged that the consequence of an order striking down clause 3 of the will is that the 1^st Floor will fall into the estate distributable to the residuary legatees pursuant to clause 4 of the will.  In that case, Chun Fai, Kee Chun and Kee Chung will be entitled to such as tenants-in-common in equal shares.

13.  Chun Fai has apparently passed away intestate in Hong Kong without any application for grant of administration.  Kee Chung has obtained a written confirmation from the widow of Chun Fai dated 16 May 2019 to that effect.  The widow further confirmed that no grant of administration was obtained because Chun Fai had no assets in his estate in Hong Kong when he passed away.  She acknowledged that if the order sought by Kee Chung in these proceedings is granted, she might have to apply for grant of administration in respect of the assets of her husband’s estate, namely the 1/3 interest in the 1^st Floor of the house.

14.  Both Chun Fai’s widow and Kee Chun confirmed in writing that they do not object to the present application by Kee Chung.  They also confirmed in writing that they have been advised to seek independent legal advice for such purpose.

Ex parte hearing

15.  I am of the view that once these proceedings were listed for hearing the usual way, one would have expected the applicant to actually name the parties interested affected by the relief being sought as defendants or at least to serve these proceedings on those parties. Neither has been done.

16.  O85, r3(2) of the Rules of the High Court provides that notwithstanding O15, r4(2) and without prejudice to the power of the court under that Order, all the persons having a beneficial interest in or claim against the estate or having a beneficial interest under the trust, as the case may be, to which such an administration action relates need not be parties to the action.  However, the plaintiff may make such persons parties, having regard to the nature of the relief or remedy claimed in the action.

17.  Mr Cheung cited the case Re Kwan Ngok (executor of the estate of Fu Stanley Zai Sui, Deceased), HCMP 263/2017 (19 April 2017), which is also the authority cited in respect of the above rule in Hong Kong Civil Procedure 2019 (Vol 1) at §85/3/1.  In that case, the executor applied for sanction of the court to distribute the proceeds of sale of the deceased’s property when there was a potential but disputed claim against the deceased’s estate.  DHCJ Paul Lam SC made a considered decision to permit the executor to proceed ex parte[1].  The learned DHCJ also stated that whether notice of the proceedings should be given to potentially interested parties would depend on the circumstances of the case.  He was careful in making clear that he did mean to lay down a general rule[2].

18.  Considering the circumstances of the present case as mentioned above, I felt safe to allow Kee Chung to proceed, further upon Mr Cheung’s undertaking to serve these proceedings on Kee Chun and the widow of Chun Fai forthwith after the hearing.  To avoid doubt, this hearing remained ex parte.

Clause 3

19.  The effect of clause 3 of the will is that the executors shall hold the 1^st Floor of the house on trust for its capital and income to be applied for the upkeep and maintenance of the ancestral tombs and graves from the passing of the deceased in May 1984.  The basis of the present application is that the clause infringes the rules against perpetuities.

20.  Under the common law, a future estate or interest in any property must vest no later than 21 years after the determination of a life in being at the time of the creation of such estate or interest.  If there is any possibility that the interest may vest outside that period, the interest fails from the time of the purported creation of such estate or interest.  To illustrate, Mr Cheung referred to the summary of the rule in Re Ridley (1879) 11 Ch D 645 at 649, which was cited by Hon Chu J (as she then was) in Lee Tak Yee v Lee Tak Yan & Ors, HCA 766/2008 (10 March 2010) at §43:

“The law does not recognize dispositions which would practically make property inalienable forever … The Chancellors established this rule in favour of alienation, the property could not be tied up longer than for a life in being and 21 years after. This is called the rule against perpetuities.”

21.  The Perpetuities and Accumulations Ordinance, Cap 257 came into force in 1970 to modify the common law relating to the avoidance of future interests in property on grounds of remoteness and governing accumulations of income from property.  Trusts created after the commencement of the Ordinance are subject to what Mr Cheung described as a statutory wait-and-see rule.  The creation of future estate or interest is not invalidated until it becomes apparent that the future estate or interest must vest outside the perpetuity period.  However, a settlor may specify a perpetuity period not exceeding 80 years.

22.  The Ordinance was amended with effect from 2013 effectively abolishing the rule against perpetuities, and a trust may continue in existence for an unlimited period unless the terms of the trust provide to the contrary[3]. However, this applies only to instruments taking effect on or after the commencement of such amendment.  Insofar as the will in the present case is concerned, which was executed in 1981 and took effect in 1984 upon the deceased’s demise, Part 2 of the Ordinance does not apply whereas Part 3 does[4].

23.  Section 3(1) provides that Part 3 does not affect the operation of the rule of law rendering void for remoteness certain dispositions under which the property is limited to be applied for purposes other than the benefit of any person or class of persons in cases where the property may be so applied after the end of the perpetuity period.  Section 6 sets the limit on the perpetuity period to 80 years, if such period is specified in the instrument containing the disposition.

24.  In the present case, there was no specification of the duration of the effect of clause 3 in the will.  Nor was this a charitable trust.  It was submitted that the effect and operation of clause 3 should remain to be governed by the old perpetuity period.  As the interest in the 1^st Floor of the house has already failed to vest for over three decades, the clause is void.

25.  On the basis of what were presented before this court, I grant the declaration.

26.  Upon such declaration of the state of affair, the 1^st Floor as part of the estate of the deceased shall fall into the residuary legacy to be disposed of in accordance with clause 4 of the will.  As mentioned, Kee Chung, Kee Chun and Chun Fai shall be entitled to the same as tenants-in-common in equal shares.  In the case of Chun Fai, who has passed away, his share of interest falls into his estate.  Administration of the estate of Chun Fai, which might have been unnecessary before, will now have to be applied for.  As mentioned, his widow acknowledged that.

27.  Given the lapse of time, it does not appear that intended sale of the 1^st Floor is actuated by any other administration need, such as that to discharge any liability of the deceased or to pay any testamentary expenses.  Therefore, sale or not, or any sale, will be a matter for Kee Chung, as the administrator of such estate, after taking into account the views of the other residuary legatees.  Whilst the widow of Chun Fai has indicated no objection to the present application, it is the view of the administrator of the estate of Chun Fai, once appointed, towards the disposition of the property that counts.

28.  In the circumstances, I do not consider that it is proper to simply sanction Kee Chung now to sell the 1^st Floor in his capacity as the administrator de bonis non without qualification.  I prefer to leave it to Kee Chung and the other two residuary legatees to work out the necessary authority to sell.

29.  As requested, I make no order as to costs of this application.