CHUNG WING ON v. CHUNG WING PIU

HCMP 2562/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2562 OF 2005

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J U D G M E N T

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Introduction

1.  This is an originating summons seeking a declaration that (a) a notice of severance of joint tenancy dated 3 May 1999 (“the said notice of severance”) is null and void and (b) upon the death of a Mr Chung Chiu on 18 September 2001, his benefit and interest in the real properties of the late Madam Chau, Lau Choi (also known as Chau, Lau Toi) (“the deceased”) passed to the plaintiff as the sole surviving joint-tenant.  Chung Chiu’s said benefit and interest will be referred to in more detail below.

2.  This application is opposed by the defendant on two grounds.  One, the joint-tenancy was severed before the death of Chung Chiu.  Two, an implied assent was given by Chung Chiu (as a co-executor) for such severance.

Background Facts

3.  The real properties the subject-matter of this application are (1) a unit in a building called Chung Hing Mansion in Pan Hoi Street, Hong Kong and (2) a unit in a building in Argyle Street, Kowloon (collectively “the suit properties”).

4.  The deceased passed away on 18 January 1999.  Her husband was Chung Chiu.  The couple has two sons, who respectively are the defendant (the older son) and the plaintiff (the younger son).  Both sons used to live in the mainland.  The plaintiff came to Hong Kong in 1987 to join his parents.  The defendant emigrated directly from the mainland to Australia in the 1960’s and Chung Chiu emigrated from Hong Kong to join him in 1999.

5.  The deceased’s will dated 5 May 1990 appointed Chung Chiu and the plaintiff as the executors.  Further, her will made a specific gift of all her benefit and interest in the suit properties to them as joint-tenants absolutely.

6.  Chung Chiu passed away in Australia on 18 September 2001.  He left a will (executed in February 1999) appointing the defendant as the executor and trustee of his estate.

7.  Probate of the estate of the deceased has not been granted by the time of Chung Chiu’s death but was granted to the plaintiff only afterwards (on 24 December 2004).

8.  It turned out Chung Chiu has, prior to his death, signed the said notice of severance in respect of the suit properties (in May 1999).

Issue 1 :  Was Severance Before Distribution Possible?

9.  Which of the parties herein should be entitled to Chung Chiu’s benefit and interest in the suit properties on his death depends on the validity of the said notice of severance.  There is no dispute Chung Chiu’s said benefit and interest will vest in the plaintiff by virtue of the doctrine of survivorship in relation to joint tenancies if the said notice of severance is invalid. The plaintiff naturally so contends whereas the defendant contends otherwise. 

10.  The plaintiff’s case regarding this issue is as follows.  Up to the time of death of Chung Chiu, the suit properties were vested in him and the plaintiff in their capacity as the co-executors named in the deceased’s will: Williams, Mortimer and Sunnucks: Executors, Administrators and Probate (2000) 18^th Ed.:-

“Where an executor is appointed by a will, he derives title from the will, and the property of the deceased vests in him from the moment of the testator’s death … ” (para. 8-02).

In such capacity, they only held the suit properties “in auter droit” (that is, in another’s right or on behalf of another): Williams, Mortimer and Sunnucks:-

“The interests vesting in the personal representative do not vest in him beneficially.  Although he is no necessarily a trustee he is said to hold ‘in auter droit’ so that his interest is different from the absolute and ordinary interest which everyone has in his own property” (para. 42-10). 

The proprietary interest in the suit properties can only be passed by way of an assent: s. 66(3), Probate and Administration Ordinance (Cap. 10):-

“An assent to the vesting of a legal estate shall be in writing, signed by the personal representative, and shall name the person in whose favour it is given, and shall operate to vest in that person the legal estate to which it relates” (emphasis supplied).

It is said in Williams, Mortimer and Sunnucks:-

“An assent is an acknowledgment by a personal representative that an asset is no longer required for the payment of the debts, funeral expenses or general pecuniary legacies” (para. 78-01).

11.  The plaintiff argues that, because no assent or conveyance has been executed in Chung Chiu’s favour, the legal estate of the suit properties was not vested in him personally when the said notice of severance was purportedly executed.  The plaintiff also contends the same as regards the beneficial interest in the suit properties.  Reliance is placed on various authorities including Commissioner of Stamp Duties (Queensland) v. Livingston [1965] AC 695:-

“When Mrs. Coulson died she had the interest of a residuary legatee in the testator’s unadministered estate.  The nature of that interest has been conclusively defined by decisions of long-established authority … [Subject] to the working of these rules [relating to the devolution of freehold land and its liability for the deceased’s debts] whatever property came to the executor virtute officii came to him in full ownership, without distinction between legal and equitable interests.  The whole property was his. He held it for the purpose of carrying out the functions and duties of administration …

… therefore, he was in a fiduciary position with regard to the assets … and for certain purposes and in some respects he was treated by the court as a trustee …

It may not be possible to state exhaustively what those trusts are … Essentially, they are trusts to preserve the assets … and to apply them in a due course of administration for the benefit of … legatees of various sorts … What equity did not do was to recognise or create for residuary legatees a beneficial interest in the assets in the executor’s hands during the course of the administration” (emphasis supplied) (p. 707);

“When the whole right of property is in a person, as it is in an executor, there is no need to distinguish between the legal and equitable interest in that property … What matters is that the court will control the executor in the use of his rights over assets that come to him in that capacity, but it will do it by the enforcement of remedies which do not involve the admission or recognition of equitable rights of property in those assets … ” (emphasis supplied) (p. 712).

12.  On the other hand, the defendant says that a specific legatee or devisee (that is, a legatee or devisee of a specific property) is vested with an equitable interest in the property immediately upon the testator’s death.  Williams v. Holland [1965] 1 WLR 739 is relied upon for this proposition.  The relevant facts of that case were that the plaintiff, as the executor, served notice to quit on the defendants, who were specific devisees in occupation of the devised properties.  The English court of appeal said:-

“A more difficult question arises with regard to the mesne profits. … The defendants were not in possession as trespassers: they were in there as persons who, subject to the claims of administration, could properly say that, under a trust for sale, they were entitled in equity to a one-fourth part of the proceeds of sale and the rents and profits until sale” (emphasis supplied) (p. 744).

13.  That equitable interest is only subject to the claim of the executor for the purpose of administering the estate.  An assent signed by the executor is only a piece of evidence that the executor the property is no longer required by him for payment of the estate’s liabilities (debts and expenses and the like): Kemp v. Inland Revenue Commissioner [1905] 1 KB 581, 585-7.  The defendant also relies on Snell’s Equity (2005) 31^st Ed.:-

“Not until there has been an assent can it be said with certainty whether or not a particular assets will be needed for the payment of debts or other liabilities … Accordingly, the general rule is that no beneficiary can assert that he has any legal or equitable interest in any of the assets which are still unadministered … ” (emphasis supplied) (para. 31-02);

“… But it does not apply to a specific bequest or devise.  In this case the property is vested in law in the personal representatives … but subject to this, in equity the property is in the legatee as soon as the testator dies” (emphasis supplied) (para. 31-03).

14.  In reply, the plaintiff says that those decisions (as well as others relied on by the defendant), and the statements in Snell’s Equity, do not survive the decision in the Livingston case.  Further, the plaintiff submits that the state of the law has correctly been stated by the High Court of Australia in Official Receiver in Bankruptcy v. Schultz (1990) 170 CLR 306 (where the Official Receiver claimed the devised properties formed part of the bankrupt’s estate):-

“… the fact that the administration of the deceased estate was incomplete when Mrs. Schultz [the bankrupt and beneficiary under the will] was discharged from her bankruptcy means that the Official Receiver must point to some interest in property which vested in Mrs. Schultz prior to her discharge from bankruptcy.

… Not only does the legal ownership in the property not vest in the named beneficiary at the time of death of the testator, nor does the equitable ownership.  That emerges from the Privy Council’s decision in [the Livingston case].  The reason for this is that, prior to administration of the deceased estate, there is no specific property capable of constituting the subject property of any trust in favour of the beneficiary. …  Although Livingston was concerned with a residuary estate, the observations it contains apply with equal force in the case of a specific bequest or devise.  The parties here are agreed on that point”.

15.  The accurate summary of the law, according to the plaintiff, has been stated in Williams on Wills (2002) 8^th Ed.:-

“It has been suggested that a specific legatee or specific devisee has an equitable interest in the property from the date of the testator’s death. … However, at best, the specific legatee or devisee has a defeasible interest, since the asset might be required for the purposes of administration.  It is suggested that the better view is that until a personal representative assents to a specific gift, the specific legatee or devisee … has … only a chose in action to have the deceased’s estate properly administered” (emphasis supplied) (para. 1.12).

Similar observations can also be found in Theobald on Wills (2001) 16^th Ed., para. 13-07.

16.  Further to the above, a point arising from the affidavit evidence also needs to be dealt with.  The defendant filed an affidavit deposed to by his handling solicitor (one day before the hearing).  The affidavit says:-

“I was instructed by the Defendant that all the debts and liabilities of the Deceased were paid by Chung Chiu … ” (para. 4);

“I therefore verily believe that at the time of service of [the said notice of severance], it was not necessary to resort to [the suit properties] … to pay off all the debts and liabilities of the Deceased.  Further, it may be safely assumed that all debts and liabilities would have been fully paid prior to service of [the said notice of severance]” (para. 6).

The plaintiff, while raising no objection to the affidavit being filed out of time, disagrees with the affidavit and asserts:-

(1)     the plaintiff has been the sole acting executor handling the probate application;

(2)     the plaintiff has been paying all the outgoings of the suit properties since the deceased passed away;

(3)     the plaintiff has also paid for the funeral expenses of the deceased.

In these circumstances, the plaintiff submits that the deponent would not know whether there were any claims against the estate when Chung Chiu signed the said notice of severance, which was within 4 months of the deceased’s death (in January 1999).  The defendant’s said affidavit should not be given any weight.

Issue 2 :  Implied Assent

17.  The defendant also contends that Chung Chiu was both the executor and beneficiary of the suit properties.  In such case, an implied assent should be inferred where he dealt with the suit properties qua beneficiary: Williams, Mortimer and Sunnucks, para. 78-06:-

“Where a legacy is bequeathed to the executor, his assent to his own legacy may … be either express or implied.  He may not only, in positive terms, announce his election to take it as a bequest, but such election may also be implied from his language or his conduct … ”.

It is said that the said notice of severance amounted to such election.

18.  The plaintiff disagrees and contends that the common law doctrine of implied assent must be subject to ss. 54 and 70, Cap. 10.  The relevant part of s. 54(1) provides:-

“No conveyance of immovable property of a deceased person dying after the commencement of this Ordinance shall be made without the concurrence of all the personal representatives of the deceased … ”(emphasis supplied).

The material parts of s. 70(2) stipulate:-

“Any person who, as against the personal representative, claims … a transfer or conveyance [of immovable property], or an assent to the vesting thereof, or to be registered as proprietor thereof, may apply to the court for directions with reference thereto, and the court may make such vesting or other order as may be deemed proper … ” (emphasis supplied).

Hence, so the plaintiff argues, there must be either the concurrence of both Chung Chiu and the plaintiff, or the making of a vesting order, before Chung Chiu could validly convey the legal and equitable title in the suit properties from the executors to himself.  The plaintiff further argues that the same principle applies to an assent: 27 Halsbury’s Laws of Hong Kong (2004 Reissue) 425.833, text to n. 9.

19.  The plaintiff also relies on s. 5(1)(a), Conveyancing and Property Ordinance (Cap. 219):-

“… no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law”.

20.  In response to the plaintiff’s above arguments, the defendant says that, because the beneficial interest in the suit property remains with Chung Chiu throughout, there has not been any “creation” or “disposal” of equitable interest; accordingly, s. 5(1)(a), Cap. 219 was never engaged.

21.  The validity of the last-mentioned point is dependent on the conclusion to be reached in relation to whether a specific legatee or devisee has an equitable interest in the property upon the death of the testator (see the related paragraphs under “Issue 1: Was Severance Before Distribution Possible?”).

Conclusion

22.  The parties have very helpfully presented their respective case in a clear manner.  As a result, there is no need for me to elaborate or re-state them.

23.  All that I need to say, therefore, is that for the reasons advanced by the plaintiff (summarised above), I agree with all of the plaintiff’s arguments in relation to both issues and disagree with those of the defendant.

24.  No further argument has been advanced as regards the relief sought herein.  In all the circumstances, I consider it appropriate to grant the relief sought by the originating summons.  An order will accordingly be made in terms thereof.

Costs Order

25.  The parties agree that the costs of this application should follow the event.  There will accordingly be a costs order that the costs of this application (including any reserved costs) be paid by the defendant to the plaintiff to be taxed if not agreed.