LILY CHEUNG v. THE OFFICIAL SOLICITOR AND ANOTHER

HCMP635/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 635 OF 2006

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DECISION

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Introduction

1. By order dated 7 April 2008, the master struck out the plaintiff’s claims as against the Official Solicitor (“OS”), the 1^st defendant herein, and refused the plaintiff’s application for limited stay of the proceedings.  The plaintiff now appeals. 

2. Separately, the plaintiff applies by summons dated 4 August 2008 for, inter alia, an order appointing her as the representative of Madam Luk Kim Ying’s estate for the purpose of this action under Order 15, rule 15, Rules of the High Court, Cap. 4 and for leave to re-amend her title in the amended originating summons consequentially by adding to her description the words “and as appointed to represent the estate of [Madam Luk], the deceased” (“the Application”).

3. The Application concerns a Mr Cheung Wai Kwok (“Mr Cheung”) as well.  He claims to be the lawful husband of Madam Luk and is the defendant in the probate action HCAP3/2008, which the plaintiff commenced in March 2008.  Although Mr Cheung is not a party to this action, the plaintiff served the summons on him presumably because he is also interested in the Application.

4. By consent, both the appeal and the Application were heard together.

5. The main question that arose out of these matters is whether a purported beneficiary of an un-administered estate of a deceased person can bring an action in his own personal capacity in relation to assets which, he asserts, belong to for the estate beneficially.

Background facts

6. To put the question in context, I first summarise the background facts.

7. Madam Luk, then 86, suffered from a stroke on 3 July 2001 and had since become a mentally incapacitated person.  She was then living with the 2^nd defendant, who claimed to be Madam Luk’s adopted daughter.  By order dated 23 October 2001, the 2^nd defendant was appointed Madam Luk’s guardian under Part IVB of the Mental Health Ordinance, Cap. 136 (“MHO”).

8. Madam Luk and the 2^nd defendant were registered owners of two properties.  By two notices of severance and two deeds of gift all dated 2 January 2003, Madam Luk’s interest in the said properties were purportedly gifted to the 2^nd defendant’s brother.  The 2^nd defendant alleged that she first became aware of the transactions on 11 June 2003.  She then reported the matter to the Director of Social Welfare two days later.

9. The Director of Social Welfare was alarmed.  Legal action against the 2^nd defendant’s brother was contemplated but she refused to act as Madam Luk’s next friend.  She was replaced when the Director was by order dated 28 January 2004 appointed Madam Luk’s guardian.  The Director then commenced HCA2498/2004 on 2 November 2004 against the 2^nd defendant’s brother to set aside the alleged gifts on the ground of, inter alia, lack of mental capacity.

10. By order dated 5 November 2004, the OS was appointed the committee of the estate of Madam Luk under Part II of the MHO.  The OS as committee had since taken over the conduct of HCA2498/2004.

11. The plaintiff also claimed to be the adopted daughter of Madam Luk.  In July 2005, her solicitors wrote to the 2^nd defendant.  They disputed the 2^nd defendant’s status as Madam Luk’s adopted daughter.  They further alleged that Madam Luk alone provided the purchase monies for the two properties referred to above; and that accordingly she held the properties on trust for Madam Luk.

12. By letter dated 8 August 2005, the plaintiff’s solicitors wrote to the OS raising her concerns about, among other things, the alleged ownership of the 2^nd defendant in the two properties.  A series of correspondence ensued.  In short, the plaintiff asked the OS to look into the complaints and take steps to protect Madam Luk’s estate, including applying to the court for direction/determination, which was declined by the OS.

13. Madam Luk died on 15 March 2006, whereupon the OS’s appointment as committee was automatically discharged by reason of section 27(4) of the MHO.  Since then, the OS had taken no further step in HCA2498/2004.

14. On 29 March 2006, the plaintiff commenced the present action, claiming against both the OS and the 2^nd defendant :

(1) for declarations as to three properties (including the two referred to above) which she claimed belonged solely to Madam Luk’s estate (“Para. 1”);

(2) that she be appointed administratrix of Madam Luk’s estate without the power to distribute the residue of the estate pursuant to section 40 of the Probate and Administration Ordinance, Cap. 10 (“PAO”), with specific directions including the one that authorises her to take over the conduct of HCA2498/2004 (“Para. 2”); and

(3) an order for inquiry as to whether Madam Luk’s estate suffered damage and the amount the OS and the 2^nd defendant ought to compensate the estate (“Para. 3”).   

15. The plaintiff’s case against the OS is that the OS had failed to carry out investigation into her complaints made in August 2005 that the 2^nd defendant did not have any beneficial interest in the properties and to take the necessary steps of protection, thereby causing damage to Madam Luk’s estate.

16. On 9 May 2007, Mr Cheung applied for the letters of administration of Madam Luk’s estate on the basis that he was her lawful husband.  The plaintiff took out a similar application on 3 December 2007.  The applications had since been left in abeyance.

17. Then on 11 March 2008, the plaintiff commenced HCAP3/2008 against Mr Cheung, seeking for orders that his application for the letters of administration be dismissed and that the letters be granted to her.  Mr Cheung has already filed his defence and counterclaim and pleadings have now been closed.  Whether Mr Cheung was Madam Luk’s lawful husband and whether the plaintiff was her adopted daughter are hotly in dispute.

The master’s decision

18. In September 2007, the OS applied to strike out the plaintiff’s claims as against the OS.  The master heard the application at two hearings in February and March 2008.  In the judgment handed down on 7 April 2008, the master ruled that in the absence of any grant in her favour, the plaintiff did not have any capacity as an administrator to seek redress for Madam Luk’s estate.  He further ruled that in the absence of a representation order in respect of the estate, the present action commenced by the plaintiff in her own personal capacity as a purported beneficiary of the estate was irregular and was liable to be struck out.  The master also refused the plaintiff’s alternative application to stay Paras. 1 and 3 pending the determination of Para. 2.

Was the plaintiff entitled to bring this action?

19. As noted, the first and foremost question is whether the plaintiff was entitled to bring the present action against the OS.

20. As the amended originating summons now stands, the plaintiff is suing in her own capacity as a purported beneficiary of Madam Luk’s estate.

21. Para. 2 is personal to the plaintiff.  Subject to the point of misjoinder raised by Mr Wong for the OS, to which I will return in a moment, Para. 2 does not give rise to any procedural problem that warrants a striking out.

22. The problem lies with Paras. 1 and 3.  No doubt an action can be commenced on behalf of Madam Luk’s estate to seek redress as per Paras. 1 and 3.  However, in the absence of a grant, a purported beneficiary such as the plaintiff simply does not have the locus to sue on behalf of the estate.  For it is trite that a party cannot purport to sue on behalf of an intestate estate unless and until that person is granted the letters of administration : Ingall v. Moran [1944] 1 KB 160.  Any action commenced by such a party purportedly on behalf of the estate must be struck out.

23. Here, as noted, the plaintiff sued in her own personal capacity as a purported beneficiary of Madam Luk’s unadministered estate.  What she was entitled to in respect of her rights in the estate is a chose in action, capable of being invoked for any purpose connected with the proper administration of the estate : Commissioner of Stamp Duties (Queensland) v. Livingston [1965] AC 694 (PC), per Viscount Radcliffe at p. 717C-D, applied in Ip Cheung Kwok v. Sin Hua Bank Trustee Ltd [1990] 1 HKLR 497.

24. In my view, it is reasonably arguable that the plaintiff’s complaints underlying Paras. 1 and 3 are something connected with the proper administration of Madam Luk’s estate.  The extent of the 2^nd defendant’s beneficial ownership in the properties concerned and arguably the failure of duty on the part of the OS qua committee, if any, in protecting the estate are matters that need to be determined for the purposes of properly administrating Madam Luk’s estate.  That gives the plaintiff locus to pursue Paras. 1 and 3.

25. Mr Wong relied on Ip Cheung Kwok and argued that the plaintiff is only entitled to seek declaratory relief in her own personal capacity as a purported beneficiary of Madam Luk’s estate.  Since Paras. 1 and 3 are not declaratory relief, the plaintiff does not have any locus to pursue them.

26. In my view, the Court of Appeal in Ip Cheung Kwok applied the general principle the Privy Council propounded in Livingston to the facts then before the court.  I do not think Ip Cheung Kwok had limited the general principle in the way as contended by Mr Wong.  In fact, one of the remedies claimed by the plaintiff in Ip Cheung Kwok was account, which is not a declaratory relief.

Procedural irregularity

27. Although the plaintiff has locus to pursue Paras. 1 and 3, that is not the end of the matter.

28. In an action commenced by a purported beneficiary to obtain the protection of the court to ensure the due administration of the estate, it is necessary to join the personal representative of the estate or to a suitable party to represent the estate.  In the absence of joinder, the action is irregular, though not a nullity, and is liable to be struck out : Ip Cheung Kwok, followed and applied in周順鏞及徐玉蓉, CACV34/2005, unreported, 3 March 2006, paras. 34-36.

29. So until and unless the court allows the Application, Madam Luk’s estate is not properly represented in this action.  The proceedings are irregular and liable to be struck out.

The Application

30. This brings me to the Application, which is in my view clearly brought by the plaintiff to rescue her appeal by bringing herself within Ip Cheung Kwok.

31. Order 15, rule 15(1) of the Rules of the High Court provides :

“Where in any proceedings it appears to the Court that a deceased person was interested in the matter in question in the proceedings and that he has no personal representative, the Court may, on the application of any party to the proceedings…by order appoint a person to represent that estate for the purposes of the proceedings…”

32. Mr Butt, for the 2^nd defendant, took a jurisdictional point.  He submitted that on a proper construction, Order 15, rule 15 only applies to on-going proceedings to which the deceased person, when living, was made a party, had died.  He cited Silver v. Stein (1852) 1 Drew 295 in support.

33. I only need to deal with this submission briefly.  In my view, the construction that Mr Butt sought to put on Order 15, rule 15 is too narrow.  And as rightly pointed out by Mr Chang, SC, for the plaintiff the courts nowadays adopt a more flexible practice.  Indeed, in Ip Cheung Kwok, the representation order was made at the trial well after the death of the deceased.  I reject this jurisdictional challenge.

34. Mr Wong further submitted that under Ip Cheung Kwok, a representation order could be made only if the relief sought is declaratory relief.  So no representation order can be made insofar as Para. 3, a claim for damages, is concerned.  This really harks back to Mr Wong’s earlier submission that a purported beneficiary is only entitled to pursue declaratory relief in his personal capacity, which I have already rejected.  If the plaintiff is entitled to bring the present action on her own behalf, I can see no objection in principle to cure the procedural irregularity by making a representation order.

35. I next consider if I should exercise my discretion to make a representation order under Order 15, rule 15.

36. The plaintiff based the Application on the need for timely protection of the assets belonging to Madam Luk’s estate.  Mr Butt submitted that protection had already been achieved in light of various undertakings given by the 2^nd defendant including not to spend the rental income generated by the two properties.  And there is no suggestion of any dissipation of assets despite the undertakings.  I disagree.  As the matters now stand, the present action, insofar as Paras. 1 and 3 are concerned, is improperly constituted as against not only the OS but also the 2^nd defendant.  If the procedural irregularity is not remedied, the action is liable to be struck out.  In the circumstances, the 2^nd defendant’s undertakings, which are all interim in nature, are simply not enough.

37. The plaintiff also rested the Application on her concern that if no representation order is granted and the present action is struck out, she may need to start a fresh action against the OS later after the determination of HCAP3/2008 in her favour.  By that time, time bar may have already arisen.  Mr Wong submitted that in light of the progress of HCAP3/2008, time bar is unlikely to arise.  Given the uncertainties surrounding litigation, one cannot tell when HCAP3/2008 will be disposed of.  I am prepared to err on the safe side and accept the plaintiff’s concern to be legitimate.

38. Finally, I come to the question if the plaintiff should be appointed.  On this, Mr Wong adopted a neutral position.  So did Mr Hung for Mr Cheung.

39. Mr Butt submitted that it is not appropriate to appoint the plaintiff because her status as Madam Luk’s adopted daughter is in doubt and the 2^nd defendant’s case on beneficial ownership of the two properties is strong.  On the materials before me, I simply cannot decide on affidavit alone the merits of the parties’ case.  More importantly, it seems that the plaintiff is the only person among all the potential beneficiaries of Madam Luk’s estate to be really concerned with the beneficial ownership of the properties in question and the damage, if any, caused by the alleged breach of duty on the part of the OS as Madam Luk’s committee.  She is plainly an appropriate person to be appointed as the representative of Madam Luk’s estate.

40. For the above reasons, I will allow the Application.

The Appeal

41. I now come to the Appeal.

42. The procedural irregularity affecting Paras. 1 and 3 is now cured by the appointment of the plaintiff to represent Madam Luk’s estate.  What remains is the misjoinder point taken by Mr Wong.  He submitted that there was a misjoinder for Paras. 1 and 2.  So they are liable to be struck out against the OS in any event.  On Para. 1, it is, in my view, necessary to join the OS so that any finding on the beneficial ownership of the properties concerned, which may impact on the plaintiff’s case that the OS had failed in his duties as Madam Luk’s committee, will bind the OS.  On Para. 2, I accept that it is not proper to join the OS.  That should be struck out against the OS.

43. On the evidence then before the master, Paras. 1 and 3 were affected by the procedural irregularity that no party was appointed to represent Madam Luk.  On Para. 2, the OS should not have been joined.  So the master was entirely justified in striking out the plaintiff’s claim against the OS and refusing the plaintiff’s application for the limited stay.  But the plaintiff has now put her house in order, she should be allowed to continue with her claim against the OS on Paras. 1 and 3.

44. For these reasons, I will allow the appeal to the extent that the plaintiff’s claim against the OS on Paras. 1 and 3 be allowed to continue.  Para. 2 remains struck out against the OS.

Stay

45. At the hearing, the idea of staying the present proceedings pending the determination of HCAP3/2008 or further order was mooted.  Basically counsel all agreed that that is the best case-management option to take.  I so order.

Costs

46. On costs, the parties have indicated that they would like to be heard.  I therefore direct that they should file and exchange submissions on costs within 14 days from the handing down of this decision.  I will then dispose of the question of costs on paper.