XIE WEN YUAN (谢文辕) a minor by HE JUN (何君) his next friend and mother v. ZENG MEI YU (曾美玉), the Administrator of the estate of XIE HUIZHANG (謝會章), deceased

HCMP 659/2019

[2021] HKCFI 2226

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 659 OF 2019

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DECISION

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1.  There is before this court a Summons filed on 26 February 2021 by the Plaintiff (“Summons”) in which his next friend and mother seeks an interlocutory injunction to preserve the Plaintiff’s entitlements in the estate of his late father, Xie Huizhang (“Deceased”).

2.  The underlying action (“Action”) is an Amended Originating Summons filed on 28 July 2020 (the Originating Summons was filed on 3 May 2019) which concerns the estate of the Deceased (“Estate”).  The Defendant is the widow of the Deceased and the Administrator of the Estate.

3.  By the Amended Originating Summons, the Plaintiff (“Wen Yuan”), now aged 16, acting through his mother (“He”) as his next friend, claims, inter alia :

(1)  a declaration that Wen Yuan, being the son of the Deceased, is a beneficiary to the [Estate];

(2)  an order that the Defendant do hold Wen Yuan’s entitlement to the residual Estate on statutory trust; and

(3)  an order that in the event that the properties in the Estate are realised, to pay Wen Yuan’s share into court until he attains majority.

4.  The Summons seeks to preserve the Plaintiff’s interest in the main assets of the Estate[1], namely, 3 landed properties in Hong Kong (“Properties”) such that an appropriate portion of the proceeds of sale (not less than 1/6) reflecting the Plaintiff’s interest in the Estate will be kept in the bank account of the Estate, or be stakeheld by the Defendant’s solicitors, or be paid into court pending the final determination of the Action.

5.  Two of the Properties had in fact been sold. The Defendant’s (“Zeng”) position, as stated in para 28 of her 4^th Affirmation filed in opposition of the Summons, is that she would continue to discharge her duties as the Administrator of the Estate.  In view of the Action, she would retain half of the proceeds arising from the sale of the Properties after deducting the debts and half of the expenses of the Estate. 

Issue

6.  In light of Zeng’s position, the disagreement of the parties is a narrow one: whether the retained proceeds should be secured by, eg, payment into court pending the determination of the Action.

7.  Regrettably, despite the narrow issue, the evidence filed for this application is unnecessarily extensive, and much of the submissions made by counsel on both sides did not address the real issue. 

Background

8.  The following background facts are not in dispute.  Zeng and the Deceased were married on 29 November 1983 in the Mainland. They remained married until the Deceased’s demise in the Mainland on 4 November 2015.  They had two children, namely, a daughter (“Becky”) born on 2 November 1984 and a son born on 12 May 1996.  Zeng became the Administrator of the Estate on 19 July 2018 and remains so to date.

9.  According to the Letters of Administration[2], in addition to the Properties, the Estate is made up of cash and company shares.  However, the evidence showed that the Deceased also had shares and landed properties in the Mainland.  The court was informed by Mr Chan, who appeared for Zeng, that under the Mainland legal system the Deceased’s Mainland properties could simply be distributed amongst the beneficiaries where consensus between them had been reached or the distribution would have to be litigated in the event of dissent.  Regrettably, there is no proper account of the Deceased’s Mainland properties or their present status provided to the court by Zeng.

10.  Wen Yuan was born on 14 September 2004 in the Mainland.  It is Wen Yuan’s case that he is the illegitimate child of the Deceased and He.  Zeng does not accept Wen Yuan’s case that the Deceased was his father notwithstanding the adjudication of the Mainland courts on the issue.  However, there is no dispute between the parties that should Wen Yuan establish his relationship with the Deceased, he is entitled to one-sixth (1/6) of the Estate pursuant to s 4 of the Intestates’ Estates Ordinance, Cap 73.  Both Wen Yuan and his mother reside in the Mainland.

11.  With Zeng’s refusal to accept the forensic evidence obtained pursuant to the directions of the Mainland court concerning Wen Yuan’s relationship with the Deceased[3], the parties had subsequently agreed to engage in DNA testing with the participation of Becky and Wen Yuan to resolve this dispute.  However, it was said that Becky was residing in Canada and it was impracticable for her to travel to Hong Kong during the COVID-19 pandemic to have the DNA test.  On that basis, on 30 September 2020, the hearing of the Amended Originating Summons was adjourned by the court sine die with liberty to restore, and the parties were ordered to report on progress within 6 months.  No progress had been made on the DNA test.

12.  One of the Properties (situated at Banyan Garden) was sold on 26 February 2019 for HK$8,350,000.  According to the Zeng’s evidence, in April 2019, she had distributed HK$4,675,000 out of the net proceeds of sale.  After the issuance of the Originating Summons by He, HK$1,650,000 from the distribution was returned to the Estate. 

13.  Shortly after the Originating Summons was taken out, on 8 May 2019, He attempted to register a sealed copy of the Originating Summons against the unsold Properties to prevent their disposal without her notice.  On 18 November 2020, Zeng successfully applied for an order to remove the registrations with costs.

14.  Unbeknown to He, Zeng had in fact disposed of another Property (a car park at Banyan Garden) on 16 February 2021.  There is no dispute that the disposal was not disclosed to He or the court when the Summons came before the court on 19 March 2021.  On that occasion, He’s application for an interim interim injunction was declined by the court after argument.

15.  I shall need to deal with 2 preliminary matters before addressing the true issue. 

Admissibility of the Affirmations made by He’s solicitor

16.  It must now be well-established that, subject to narrow exceptions, it is no part of a solicitor’s duties to give evidence for his client (see Hong Kong Civil Procedure 2021, vol 1, [41/5/4] and Weili Su v Shengkang [2019] HKCFI 1257 at §§79-81 per Mimmie Chan J).

17.  Regrettably, the evidence relied upon by He in support of the Summons in the form of two Affirmations were both made by her solicitor, Mr Poon.  Zeng took exception to such evidence.  In those Affirmations, one can find the standard declaration that the contents of the Affirmation were within Mr Poon’s personal knowledge or gleaned from the documents in hand, and that those contents were true to the best of his knowledge information and belief. 

18.  As pointed out by Mr Chan, Mr Poon was only instructed to act for He in November 2020.  Much of the contents of the Affirmations were controversial, and it is not at all clear why such matters would be within Mr Poon’s personal knowledge or could be gleaned from the documents.  Indeed, it is apparent that Mr Poon felt no constraint about making extensive submissions in the Affirmations. 

19.  There was no explanation why the evidence did not come from He, who had in fact made two Affirmations in support of the Amended Originating Summons.  As regards the explanation made at the hearing by Mr Tsui, who appeared for He, that He was unable to come to Hong Kong due to travel restrictions imposed under the pandemic.  With respect, that was a lame excuse.  For Mainland based deponents, it was common for their affirmations to be prepared by their Hong Kong advisors and finalised in the Mainland with the appropriate notarisation.  In case of urgency, the unnotarised document could be exhibited in an affirmation of the solicitor with an undertaking to have the duly notarised affirmation filed as soon as practicable.

20.  However, He is a Mainlander and it was highly unlikely for her to know about the procedural requirements of the Hong Kong court[4]. Bearing in mind the interest of a minor, and subject to the issue of costs, it is not in the interest of justice to exclude the Affirmations of Mr Poon in their entirety. 

21.  In coming to this decision, I take into account the existence of the evidence filed by He in support of the Amended Originating Summons as well as Zeng’s evidence in opposition; the exhibits to Mr Poon’s Affirmations (especially the judgments of the Mainland court) which supported some of the evidence in the Affirmations; and the evidence filed by Zeng part of which was consistent with He’s case.  Any evidence in the Affirmations which was not supported by the foregoing would be ignored. 

Proper basis for the relief sought

22.  It is evident from their skeleton arguments that both Mr Tsui and Mr Chan were trying to gain a tactical advantage by, in the case of the former, fitting this case into a relief which required a lessor burden to establish, and in the latter, fitting the other side’s case into one involving a heavier burden. 

23.  Mr Tsui’s primary argument was that Wen Yuan had a proprietary claim in respect of his interest in the Estate.  By asserting such a claim, there was no need for proof of risk of dissipation of assets by Zeng (see Zhang v Asa Bullion Ltd [2019] HKCFI 179 at §11, per Recorder Eugene Fung SC).

24.  However, it is reasonably well-established that a beneficiary has no proprietary interest in any specific asset of an estate during the course of its administration (see Commissioner of Stamp Duties v Livingston [1965] AC 694 at 707F to 708C and Ip Cheung-kwok v Sin Hua Bank Trustee Ltd [1990] HKLR 497 at 509E-G, per Clough JA). I agree with Mr Chan that none of the cases cited by Mr Tsui contradicted this position.  In the premises, the proprietary claim is not a viable one.

25.  Mr Chan characterised the relief sought in the Summons as a Mareva injunction.  I do not agree.  Such an injunction normally applies to the assets of the defendant.  Here, the assets belong to the Estate to which Wen Yuan would have an entitlement subject, primarily, to the proof of parentage (there are two other arguments advanced by Zeng, namely, (i) her “suspicion” that Wen Yuan had been adopted by someone which would disentitle him to any share in the Estate and (ii) Wen Yuan had received gifts from the Deceased which would have to be taken into account in determining his share in the Estate).

26.  In my view the proper basis for the relief sought in the Summons is a preservation order pursuant to O 29, r 2. 

Preservation order

27.  The applicable principles for the grant of a preservation order can be found in HKCP 2021, vol 1, [29/8/7] :

“The applicable principles for the grant of a preservation order are: (i) There is property which is bonafide the subject matter of the cause or matter. (ii) Something ought to be done for the security of the property. Part of this inquiry will involve showing that damages may not be an adequate remedy. (iii) Unlike an application for a Mareva injunction, no risk of dissipation needs to be demonstrated. Further, even if there has been delay in making an application which may lead to refusal of a freezing injunction, a proprietary injunction may nonetheless be granted. (iv) An enquiry into the relative merits of rival claims is not necessary. (v) In respect of the merits of the claim, the party seeking the preservation order only needs to show that there is a serious issue to be tried on the merits on the normal American Cyanamid principles. …”

28.  In view of the position of Zeng, the issue here is whether Wen Yuan’s interest in the Estate should be secured (principle (ii) above).  For completeness, there can be no doubt about that (i) and (v) are satisfied in this case.  I shall cover the issue of delay in analysing the application of (ii) below. 

Whether Wen Yuan’s interest should be secured

29.  In my view, He’s contention that Zeng is hostile to her son’s claim to the Estate is unsurprising.  Life experience informs that a widow who was cheated by her unfaithful husband would not normally enjoy a convivial relationship with her husband’s mistress or their children. 

30.  Zeng had been engaged in various litigations in the Mainland involving He and Wen Yuan.  It can be seen from the judgments of the Mainland courts that they were highly contentious litigations in which no quarter was given by Zeng, and she appealed every decision against her.

31.  By a judgment of the 中华人民共和国广东省肇庆巿中级人民法院, (2017) 粤12民撤1号 dated 28 March 2019 (the case was accepted by the court on 28 November 2017), it was held that Wen Yuan was the son of the Deceased and entitled to a share in the Estate.  Zeng’s contrary contentions were rejected.  The court observed that whilst refusing to accept the forensic evidence before the court Zeng and her children had refused to participate in a fresh test to determine Wen Yuan’s parentage. 

32.  In light of that judgment, I fail to see any good reason why Zeng did not voluntarily disclose the disposal of the Banyan Garden property and car park to He and set aside Wen Yuan’s share of the proceeds.  In particular, Zeng’s failure to disclose the disposal of the car park to the court at the hearing on 19 March 2021 when the issue of protection over Wen Yuan’s interest in the Estate was argued does not reflect favourable on her. 

33.  Given the refusal by Zeng and her children to participate in a fresh test at the invitation of the Mainland court, and the documentary evidence dated 10 May 2020 by which Becky was authorised by her mother to represent her (until 31 December 2021), inter alia, to attend shareholders’ meetings in the Mainland, there is clearly fragility in Zeng’s contention that it was difficult for Becky to come to Hong Kong to have the DNA test. 

34.  There is no restriction for people coming to Hong Kong from the Mainland, subject to quarantine requirement.  Even if Becky is residing in Canada, according to Zeng’s evidence, the Canadian Government had only encouraged its citizens not to travel outside of Canada.  On any objective view, the pandemic is well-controlled in Hong Kong.  It is difficult to see that an “encourage” by the Canadian Government was a serious inhibition to Becky if she wanted to come to Hong Kong.  Any delay in resolving the parentage of Wen Yuan would only be to his prejudice.

35.  As indicated above, the Deceased’s assets in the Mainland and their present status had not been properly disclosed to the court.  Such lack of transparency on Zeng’s part instills no confidence that she is going to treat Wen Yuan fairly.

36.  Further, there was evidence that Zeng had disposed of 10 landed properties in the Mainland which were registered in her.  They were acquired during her marriage to the Deceased.  According to a Mainland judgment obtained by Zeng, 中华人民共和国湖南省高级人民法院民事判决书, (2018) 湘民终348号 properties acquired during marriage should belong jointly to the married couple.  It was the basis on which Zeng succeeded in recovering from He large sums of money transferred to her by the Deceased during his lifetime.  Applying the same principle, the 10 properties were, at least prima facie, jointly owned by Zeng and the Estate.  There is no evidence from Zeng as to when the properties were disposed of and the whereabouts of the proceeds of sale.

37.  Finally, Zeng had emigrated to Canada with her children in 1998.  She had subsequently managed to obtain a Canadian citizenship.  Despite Zeng’s evidence that she had permanently relocated to Hong Kong in 2015 due to health reasons, it is not inconceivable for Zeng to go back to Canada and, if she is so minded, take away with her the liquidated assets of the Estate. 

38.  Properly evaluated, the above circumstances do indicate a real risk to Wen Yuan’s interest in the Estate.

39.  I am unable to agree with Mr Chan’s submission that He had been sitting on her hands for almost 2 years since the issuance of the Originating Summons.  The fact of the matter was that He had, probably laboured under misguided advice, tried to register the Originating Summons against the remaining Properties to prevent their disposal without her knowledge.  The Summons was issued 3 months after the vacation of the registrations.

40.  For completeness, firstly, I see little in the evidence before the court which supported Zeng’s suspicion of Wen Yuan’s adoption. 

41.  Secondly, in respect of the alleged gifts to Wen Yuan by the Deceased, I agree with Mr Tsui that most if not all of such gifts were considered in the judgment of 中华人民共和国湖南省高级人民法院民事判决书, (2018) 湘民终348号 and rejected.

Conclusions

42.  For these reasons, I am of the view (and I order) that Wen Yuan’s interest in the Estate should be secured with a payment into court by Zeng of 1/6 of the net proceeds of sale of the 2 disposed Properties.  Such payment is to be made within 14 days from today.  At the time of payment, Zeng is to serve on He’s solicitors a brief account for each of the disposed Properties, setting out the deductions made from the gross proceeds of sale. 

43.  I have intentionally ignored any deduction for the expenses of the Estate or gifts received by Wen Yuan from the Deceased. The latter has been dealt with above.  There is no proper evidence of the former before the court.  In any case, it is unlikely that the proceeds to be paid into court would fully reflect Wen Yuan’s entitlements under the Estate by reason of the other assets belonging to the Estate, including the Mainland assets. 

44.  Further, I order that Zeng is to inform He’s solicitors within 3 working days of any sale of the remaining Property.  I give liberty to apply.  Such liberty must not be treated as an open door for unnecessary satellite litigations.

45.  The costs of and occasioned by the Summons be paid by Zeng, save that, to reflect the non-compliance of the rule and the wastage of time, costs and resources (including those of the court) in dealing with Mr Poon’s Affirmations, one half of the costs of Mr Poon’s Affirmations are to be borne by He’s solicitors.  All costs are to be taxed if not agreed.