LEE CHAIO SHING v. THE LUK HOI TONG CO LTD AND ANOTHER

CACV 376/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 376 OF 2003

(ON APPEAL FROM HCA NO. 1348 OF 2000)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1. I agree with the judgment of Le Pichon JA.

Hon Le Pichon JA:

2. This was an appeal from the order of Yam J dated 19 November 2003 allowing the plaintiff's appeal from the decision of Mr Registrar C Chan who had granted a stay of HCA 1348 of 2000 ("the high court action") pending the outcome of HCAP 4 of 2000 ("the probate action"). At the hearing, the appeal was dismissed and costs were ordered against the 2nd defendant on an indemnity basis. Written reasons were to be handed down later. This we now do.

Background

3. The deceased died in 1940. At the date of his death, he was the registered holder of 85 ordinary shares and 2 promoter class B shares (collectively "the shares") in the 1st defendant ("the company"). His wife Chan Yeuk Lan predeceased him in 1930. He was survived by his tin fong wife Chow Fung Yin ("Madam Chow") who died in 1960.

4. Lee Wing Hang was an adopted son of the deceased. However, he was not a blood relative and disappeared some time during the war and has not been heard of since.

5. The deceased's elder brother Lee Do Kwok had two sons who survived the deceased. The elder son, Lee Yat Sun who died in 1982, was the 2nd defendant's husband. The younger son is the plaintiff who claims to have been adopted by the deceased in 1928.

6. In December 1985, the 2nd defendant applied for the registration of an alleged transfer of the shares to her by the deceased. The registration was effected based on an instrument of transfer and bought and sold notes relating to the 85 ordinary shares which were apparently purchased for $425. The dividends declared for those shares for that year alone apparently amounted to over $9,000. The documents were allegedly executed by the deceased in 1985 and witnessed by his wife Chan Yeuk Lan through the affixing of their personal chops to the documents. But, as noted above, the deceased and his wife had died in 1940 and 1930 respectively. Notwithstanding that and the further fact that the documents relied on related solely to the 85 ordinary shares and had nothing to do with the promoter shares, the company registered the shares in the name of the 2nd defendant.

7. According to the plaintiff, he discovered that the shares had been transferred from the deceased's name into the name of the 2nd defendant in 1997. On 26 June 1998, he obtained a grant of letters of administration to the deceased's estate. He then sought the re-instatement of the shares into the deceased's name. Upon the company's refusal to do so, the plaintiff commenced the high court action against the company on 3 February 2000 for restoration of the deceased's name to the register of members, for payment of dividends and other consequential relief.

8. The plaintiff applied for summary judgment but that application was refused on 3 August 2000. The company obtained leave to defend but it would appear that since 12 January 1999, the company has stopped payment of all dividends and bonuses in respect of the shares and has had such sums set aside in a separate fund pending the resolution of the dispute between the plaintiff and his sister-in-law, the 2nd defendant.

9. The plaintiff obtained leave to amend the writ to join the 2nd defendant as a party to the high court action on 3 October 2001 and to issue a Concurrent Re-Amended Writ against the 2nd defendant and to serve it out of the jurisdiction on 17 March 2003.

10. Meanwhile, Harvey Lee, the youngest son of the 2nd defendant issued the writ in the probate action against the plaintiff on 1 March 2000 for revocation of the grant of letters of administration to the estate of the deceased and for a grant of the same to Harvey Lee. The statement of claim in the probate action was filed on 9 May 2000. An amendment was made in May 2003 to include in the relief sought a declaration to the effect that the plaintiff is not the adopted son of the deceased. It is to be noted that both the plaintiff and Harvey Lee are male collateral descendants of the deceased, the plaintiff being a nephew and Harvey Lee a great-nephew.

11. On 5 May 2003, the 2nd defendant took out a summons to stay the high court action pending the determination of the probate action. The Registrar granted a stay on 9 October 2003 but, on appeal, Yam J set aside the order staying the high court action. The judge saw no good reason why the two actions should not proceed together. Prima facie, the transfer of the shares out of the estate of the deceased was highly suspect given that the 2nd defendant's title to the ordinary shares is dependent upon a transfer executed by a dead person and witnessed by another dead person. In relation to the promoter shares, the transfer was not based upon any documentation at all. As the judge saw it, the issue was one concerning the protection of the deceased's estate. Had there not been a grant, potential beneficiaries could have come forward to advance the case for the estate. The judge further noted that the plaintiff and the 2nd defendant who are brother-in-law and sister-in-law are well into their 80's and the 2nd defendant was said to be in poor health. In those circumstances, he considered that there would be a denial of justice if there were to be any further delay in resolving the real matter in dispute between the parties which is whether the shares belong to the estate or to the 2nd defendant and that is the issue which arises in the high court action.

The appeal

12. The decision of the judge that is the subject of challenge on appeal was one of case management, involving an exercise of his discretion. Leaving aside the difficulties that lie in such challenges, Mr Hui, who appeared for the 2nd defendant, was unable to articulate, in any comprehensible manner, where the judge had gone wrong. Insofar as I was able to understand them, the following were the propositions advanced:

(1) if the grant to the plaintiff were eventually revoked (as a result of the probate action), the high court action would be rendered a nullity

13. When asked for authority for this proposition, Mr Hui cited the Privy Council decision in Chan Kit San v Ho Fung Hang [1902] AC 257 but that case is of no assistance. It concerned the limitation period applicable in a suit by an administrator of a deceased partner for a partnership account. It was held that the period ran from the grant of letters of administration and not from the grant of probate of a forged will which on revocation was void ab initio. That decision has no bearing on the effect of a revocation of a grant of letters of administration because the title of an executor is derived not from the probate but from the will. Mr Hui then sought to rely on Clay v Oxford (1866) LR 2 Exch 54 which concerned an action commenced in the name of someone who had died before the date of the writ. An application to substitute the names of his executrix and executors as plaintiffs failed because the proceedings had been a nullity. Again that decision has nothing to do with the proposition sought to be advanced.

14. In the present case, the plaintiff is the administrator of the deceased's estate. It is axiomatic that unless and until the grant of letters of administration to the plaintiff is revoked, he enjoys all the powers of a personal representative. See Hewson v Shelley [1914] 2 Ch 13; Tristram & Coote's Probate Practice 29th Ed at 1.27. The plaintiff therefore has every authority, by virtue of the grant to him, to commence the high court action. Even if his grant were to be revoked at some point in the future, it would not have the effect of rendering the high court action a nullity. Where an action is brought by an administrator and, while it is pending, the grant is revoked and administration committed to another, the court may order that the proceeding be continued by the new personal representative as if the same had been originally commenced by him. See Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 18th Ed at paras. 27-39 and section 44 of the Probate and Administration Ordinance, Cap. 10. Mr Hui's first proposition that the proceedings would be rendered an nullity is incompatible with section 10 and cannot be correct.

(2) the locus standi of the plaintiff to sue, if successfully challenged by the 2nd defendant, will dispose of the high court action

15. In my view, counsel for the 2nd defendant has completely misunderstood the nature of the high court action and what is in issue there. The issue quite simply is whether the shares form part of the estate of the deceased. The fact that the plaintiff claims to be the adopted son of the deceased and therefore beneficially entitled to the shares is not the issue to be decided in the high court action. How the estate of the deceased devolves is a separate question, to be determined only after the initial question of whether the shares form part of the deceased's estate has been determined. It follows that the revocation of the grant to the plaintiff does not dispose of the high court action. As stated above, the court has power to order that the action be continued by the new representative. See also Ord. 15 r. 17 of the Rules of the High Court.

16. In the course of his submissions, Mr Hui alluded to the need for a preliminary issue to be tried as to the plaintiff's locus standi. For my part, that would be nothing more than a further attempt at satellite litigation, designed to defer the date when the real issue falls to be determined. Such litigation tactics should not, in my view, be countenanced.

(3) the judge was wrong in attaching weight to the advanced ages of the plaintiff and the 2nd defendant as one of the determining factors in considering the stay

17. What the judge had to say on that issue was eminently sensible. I agree that it would be denial of justice if the resolution of the dispute between the parties is to be further delayed. It would be most unfortunate if the real issue is not resolved when both parties are still able to give evidence.

18. I would add that whilst, at the end of the day, it is a matter for the judge who will be hearing the probate action and the high court action, there is much to be said for both actions to be heard at the same time given that the plaintiff and the 2nd defendant will be the central witnesses in each of the actions.

Costs

19. This appeal was little short of an abuse of process. Not only did it not have any merit, there was not even a semblance of merit. None of the propositions sought to be advanced was based on authority or a proper understanding of the cases cited in support. None of the grounds was remotely arguable. The whole exercise was a complete waste of judicial time and resources. One is driven to the conclusion that the sole reason for this unmeritorious appeal was to further delay matters. Such conduct should be discouraged and to mark the court's strong disapproval, indemnity costs were awarded.