XCHRX SUN SEK HAW AND OTHERS v. AU SO KUM

HCA12062/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.12062 OF 1997

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D E C I S I O N

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1. This is an unusual action which comes here on a Master's appeal. I confess I came to this case very late and saw a large amount of bundles and authorities, I have two experienced Senior Counsel in front of me, and I confess I wondered what this was all about.

2. It is essentially a dispute over title which normally finds its way to a judge by virtue of a vendor and purchaser summons. However, the plaintiffs here, who are purchasers of some property in Tsuen Wan, decided to launch an action seeking a declaration that the vendor/defendant has not shown a good title to the property. It is the same matter in reality.

3. I am grateful to Counsel for having distilled the variety of legal points which were raised in some extensive skeleton arguments to a more simple approach, which, in my understanding of this law, makes it somewhat easier for me to come to a decision. I am unfamiliar, quite frankly, with a number of the points that Mr Leong raises with regard to administration of intestate estates.

4. What has happened here, quite shortly, is that the plaintiffs/purchasers of the property asked the defendant to provide, in the normal manner, the title deeds to show a good root of title to this property. The documents that were provided show that the owner had been a lady, who was called Madam Wong Lai Yen, who died on 27 October 1972. She died intestate and therefore Letters of Administration were taken out and the two administrators appointed by the Court were Li Kam, her husband, and Li Chung Ko, her son. The Letters of Administration are found in the documents before me.

5. What then happened was that on 6 September1974, an assignment took place between the two administrators assigning as administrators, and as it says in the recital : "the administrator and co-administrator of the estate of Wong Lai Yen," they assigned the property, which was the sole asset in the intestacy to the father. So the assignment goes from the two assignors to the father.

6. The assignment recites that the deceased, that is the wife, had died intestate and it also recites that the Letters of Administration were granted to the two assignors in these words : "and whereas the assignors as such administrator and co-administrator have agreed to assign the said premises to the assignee in manner hereinafter appearing." So there is no doubt at all on this document that the assignment that took place, unusual though it might appear at first blush, was an assignment with the consent of the son. I am told this was a family flat. The husband, of course, under the intestacy has 50% of the estate, so he owns 50% of the asset and 50% of the residue, and the assignment that took place, in my judgment as I look at it, is a recognition, clearly, by the son, that the father ought to be the owner of the property. That, although it is not for consideration, in my judgment, would appear on its face, to be a perfectly valid assignment.

7. The property was sold in 1987 and I must assume that solicitors were acting, in 1989 and in 1992, when the defendant's solicitors acted in the acquisition. So three sales had taken place, but there was no one questioning whether or not the documents of title were in any way invalid.

8. What had happened, however, in this particular sale, coming at a time towards the end of 1997, when the variety of cases which I have dealt with over the last two months demonstrate that purchasers seek ways to get out of their bargains. However, I must not decide the case on that basis, that would be wrong. I have to look purely at the law. But what happened was that the solicitors acting for the purchasers raised a point with regard to this assignment and they wrote a letter. On 26 September, the title deed and documents were sent with the Letters of Administration and a Schedule which is set out at p.169 of the defendant's bundle of correspondence.

9. On 27 September, the purchasers' solicitors say :-

"We note from Assignment Memorial No.116044 that Li(Lee) Kam alias Li(Lee) Moon Kam and Li Chung Ko, the Assignors therein, were mentioned as the administrators to the estate of the deceased Wong Lai Yen and assigned the Property to one of them i.e. Li (Lee) Kam without any consideration. According to Section 54(5) of the Probate and Administration Ordinance, any improper disposition of the property is voidable at the instance of any other personal interested in the property."

Pausing there for a moment, it is quite clear from the document itself that the apparent beneficiaries of the deceased were only those two and the son, as it recited, was consenting to the father getting the property. And the solicitors say :-

"On the face of the said Assignment, there are improprieties as the administrators assign the Property to one of them."

Again, I do not share that view, it may well be that an experienced solicitor may question the matter, I do not see how it becomes improper. Despite the fact, in a recent decision of Sir Richard Scott in England in June 1998, about self-dealing, which I will deal with at a moment.

10. This was, after all, a family matter - this was the mother leaving the sole asset, the family flat, and the son conveying the flat to his father. I confess, looking at it from that point of view, I cannot see anything improper about it. There are no strangers involved, it is purely a family arrangement, I would have thought.

11. However, what happened was that on the same day, the purchasers' solicitors go off to the Supreme Court, as it then was, and search the file relating to the grant of the Letters of Administration. In that file is found what is called an Administrators Oath or Affirmation, and that is set out also in the documents (at p.70 of defendant's bundle of correspondence), and this is the administrators affirming the factual position. So they have to set out the potential beneficiaries, and indeed apart from Mr Li Chung Ko, who was aged 23, there were another four children, ranging from the age of 20 to 13. The purchasers' solicitors then, armed with this information, take the point, and this is the point taken by Mr Leong, that the vendor's title is flawed, because, he says, the assignment which took place between the two administrators to the father was in breach of their duties as trustees because the beneficiaries, the other children, did not receive anything and in fact were prevented from achieving their rights under the intestacy which was indeed a share, albeit a very small share, of the asset. The only asset being, as I said, the property. Mr Leong therefore says that this is a breach of trust. The purchasers under the subsequent sales that occurred in 1987, 1989 and 1992 must have notice of the breach of trust. Sir John Swaine's client must have notice of the breach of trust and therefore cannot pass a good title. When I asked him how this could be cured apparently, there does not appear to be any answer. Apparently these unfortunate vendors have a defective title which cannot in any way be cured. Now that to my way of thinking, albeit I am inexperienced in this branch of the law which is somewhat strange in Hong Kong, would lead me to conclude that there must be some error in that submission.

12. Sir John Swaine has pointed out that the error is to be found in the distinction between potential actions by beneficiaries against other persons for breaches of trust and conveyancing matters. I am dealing not with an action by one of the beneficiary children, suing the father or the brother, I am dealing with a conveyancing matter. It is conceded that the administrators' affirmation is not a document of title, it is not registered against the title and the title deeds that were disclosed would only demonstrate, on a fair reading, in my judgment, that there were only two beneficiaries here - the father and the son. The father, as everyone would recognize, has a substantial interest in the land and all that the son is assigning is a small portion.

13. In my judgment, the phrase used by Sir John Swaine is appropriate when he talks about "documents behind the screen". No one would know. The conclusion I reach is that the purchasers in 1987 would not have had notice I do not see how they could have had notice. The administrators' affirmation would not have been disclosed in the normal course of events and they could not be fixed with notice of any potential breach of trust. I therefore conclude, on this aspect, that the documents of title demonstrate that there was a good title to these premises.

14. The self-dealing rule which is identified in the case of Kane v. Radley-Kane and others (The Times Law Reports 1 June 1998) is concerned with the position of the personal representative of an intestate estate who appropriates to himself in an unwarranted and unlawful manner. This is not what I am dealing with today.

15. Further, Mr Leong says, even if Sir John Swaine has a good title, nevertheless his solicitors made reasonable requisitions and the answers given were unsatisfactory. He cites the case of Active Keen Industries Ltd. v. Fok Chi-keong [1994] 1 HKLR396 (CA), that there was no satisfactory answer given. In my judgment, there was. The title deeds demonstrate that the assignment that took place was in no way flawed. It might appear to some solicitors to be a little unusual, but I would have thought any common sense approach would have demonstrated that this was a family arrangement, that was all it ever was.

16. Further, the position that I am dealing with now, insofar as this case is concerned, is a position in 1997, the dates I have to examine is that when the requisitions were made, and the answers given, which is towards the end of 1997.

17. Mr Leong says any solicitor now who has fortuitously got into his hand the administrators' affirmation which demonstrates that there were other beneficiaries, naturally would not have permitted his clients to have gone ahead with the acquisition because of a potential action.

18. That, in my judgment, fails to accord with the realities of the position. On any view, the youngest child, who according to the affirmations was 13 in 1974, by this time would have been something in mid-30's. There is no evidence - this being an O.14A - being put forward by the plaintiffs of any claim made by any of the children, or any threat of a claim. I know there is no evidence in this case in the sense that this is a decision on a point of law, but the sales which had taken place in 1987, 1989 and 1992 demonstrate, to my mind, that no one has ever sought to suggest that the children were coming in to make a claim. Further, on any view, any such claim, in the absence of fraud, would be statute-barred. Claims for real property would have to be made within 20 years, that time would have passed by 1994. However, it is not necessary to decide this case on a limitation point although I consider Sir John is correct in his approach to the law on this matter.

19. I have to ask myself, using a reasonable approach in conveyancing matters, whether the answer given was a satisfactory answer. In my judgment, it was. The defendant has shown good title. I would, therefore, with respect, disagree with the conclusion of Master Chu arrived at below. On the matter I am asked to deal with under O.14A on the pleadings as put before me, I do not make a declaration as the plaintiffs seek and I would dismiss their case. I do not know whether I have to make any other orders and I will listen to Counsel.