STEPHEN GREGORY CHANG AND ANOTHER v. CHANG WING DEE

HCMP 944/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 944 OF 2013

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D E C I S I O N

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The background

1. This is the hearing of the 1^st Plaintiff’s application for an order that the Defendant’s interrogatories to the 1^st Plaintiff dated 6 August 2013 be withdrawn.  The application was made pursuant to Order 26, rule 3(2) of the Rules of the High Court.

2. The 1^st and 2^nd Plaintiffs are respectively the only natural son and daughter of the Defendant’s brother (“John”).  John has three siblings: the Defendant, Esther and Yvonne.  Yvonne had predeceased their mother (“Mother”).  Their Mother died on 8 September 1999, about seven months after the death of their father (“Father”).

3. Following their Mother’s death, disputes arose between the Defendant and Esther on the one part and John on the other in relation to the administration of the Mother’s and the Father’s estates.  The Defendant and Esther commenced proceedings in P3/2001, P4/2001 and HCA48/2001 against John and his wife.

4. Eventually, on 6 March 2009, after eight years’ litigation, the parties reached an agreement through mediation (the “Mediation Agreement”) to settle their disputes.  On 6 January 2010, the Mediation Agreement was approved by Lam J, as he then was, when ordering a stay of all further proceedings in HCA 48/2001.

5. On 25 June 2010, upon the application of the Defendant and Esther, John gave an undertaking before Lam J, as he then was, to provide them with certified accounts relating to all Canadian assets belonging to the Mother’s estate within 21 days.  But that undertaking was never honoured. 

6. During his lifetime, the Father jointly with the Mother had owned eight condominiums in Toronto (the “Toronto Properties”), including one at 801-188 Spadian Avenue (“Unit 801”), and one condominium in Vancouver (the “Vancouver Property”).  John was given a power of attorney in respect of those properties.  Those properties were passed to the Mother by survivorship.  Soon after the Father’s death, John caused the legal title to all the Toronto Properties to be transferred to his own name.  In a declaration of trust dated 4 March 1999, he acknowledged that the Mother was the beneficial owner of the Toronto Properties and that he was a bare trustee in respect of the properties.

7. Under the terms of the Mediation Agreement, John will be allotted three of the eight Toronto Properties, including Unit 801; while the Defendant and Esther will be allotted the remaining five units.  In breach of the Mediation Agreement, John did not transfer those five units to the Defendant and Esther.  In breach of his undertaking given to the court, he also failed to provide them with certified accounts relating to all Canadian assets belonging to the Mother’s estate, including the rental income from the Toronto Properties and Vancouver Property.  Since 2009, Unit 801 has been occupied by the 1^st Plaintiff.  While the 1^st Plaintiff and John claimed that rent had been paid by the 1^st Plaintiff for his use of Unit 801, they provided no documentary proof.  No rental receipts had since been reported by John to Canadian Revenue Agency.

8. In accordance with the terms of the Mediation Agreement, the Defendant was appointed the administrator of the Mother’s estate pursuant to Letters of Administration granted in Hong Kong dated 3 January 2011.  He also applied in Vancouver for letters of administration in respect of the Mother’s estate in Canada, but that application is still pending.

9. The Mother made a number of bequests of jewellery and cash under her will.  Two of the bequests are a gift of C$500,000 to 華楓 (Wah Fung) and a gift of C$300,000 to 華瑩 (Wah Ying).  The 1^st and 2^nd Plaintiffs claim they are respectively the two legatees referred to in these bequests.

10. Despite requests over the past three years, John failed to provide the certified accounts relating to all Canadian assets to the Defendant.  On the other hand, the Defendant resisted paying the pecuniary legacy to the Plaintiffs, ostensibly because of uncertainty over their identity as the legatees under the Mother’s will and whether the 1^st Plaintiff owes mesne profit to the estate in respect of his occupation of Unit 801.

11. On 3 May 2013, the Plaintiffs took out an originating summons against the Defendant as the administrator of the Mother’s estate seeking, inter alia, a declaration that they are the beneficiaries entitled to be paid the pecuniary legacies under the Mother’s will and to be paid forthwith out of the Mother’s personal chattels and/or the residuary estate.

12. On 6 August 2013, the Defendant requested the 1^st Plaintiff to answer interrogatories relating to his occupation of Unit 801, including the tenancy agreement, the amount of rent paid, the period in respect of which it was paid and to whom it was paid, etc.  On 29 August 2013, the Plaintiffs took out the present summons applying to have the interrogatories withdrawn.

The legal principles applicable to interrogatories

13. The legal principles applicable to interrogatories are well settled. Interrogatories must be relevant.  They must relate to a matter in question between the parties: Lee Nui Foon v Ocean Park Corp (No 2)[1]. They must serve a clear litigious purpose by saving costs or promoting the fair and efficient conduct of the action at hand, not some other action.  They must be necessary and the test is a stringent one.  The interrogatories must not be unreasonable, vexatious or oppressive: Oppenheim & Co v Sheffield[2].  They must not be effectively asking for documents of discovery and must not be raised in an attempt to fish for material to patch up an insufficiently particularised case[3].

The issues in this case and the purpose of the interrogatories

14. The Plaintiffs claim to be two of the pecuniary legatees named in the Mother’s will.  The Defendant’s stance is that he is uncertain as to their identities and is concerned about the risk that he may be sued by the beneficiaries if he wrongfully paid the Plaintiffs from the Mother’s estate.  He therefore adopts a neutral position and put the Plaintiffs to strict proof.  Specifically in respect of the 1^st Plaintiff, the Defendant is of the view that if his identity is confirmed, his pecuniary legacy should be reduced by the amount of mesne profit he owes the Mother’s estate for his occupation of Unit 801.  He relies on the principle stated in Halsbury’s Laws of Hong Kong[4] that where a legatee of a general legacy or share of residue is a debtor to the estate, he is not entitled to receive his legacy without bringing his debt into account.  Hence, he raised the interrogatories for the purpose of ascertaining the amount of reduction.

15. The issues in this case are:

(1)    the identity of the 1^st and 2^nd Plaintiff, ie whether they are the legatees, Wah Fung and Wah Ying, referred to in the Mother’s will;

(2)   whether the principle of law as stated in Halsbury’s is applicable to the present case; and

(3)   whether the 1^st Plaintiff is a debtor of the Mother’s estate and the amount of the debt, if any.

The interrogatories are directed at the third issue.

The principle of law as stated in Halsbury’s

16. Mr Chan, counsel for the 1^stPlaintiff, argues that the interrogatories ought to be withdrawn because the Defendant has no power to deduct any debt, even if owed to the estate, from the pecuniary legacy.  He relies on two grounds.  In effect, Mr Chan is seeking a determination of the second issue.

17. First, Mr Chan argues that as the Defendant has no power of administration over the Canadian assets, including Unit 801, whatever arrangements in place between John and the 1^st Plaintiff in respect of Unit 801 are irrelevant to the 1^st Plaintiff’s entitlement to the pecuniary legacy in these proceedings in Hong Kong.  Accordingly, the Defendant has no right to demand any account as to the use of Unit 801 for the purpose of setting-off any amount based on such account against the pecuniary legacy to the 1^st Plaintiff.

18. The Defendant admits that he has no power to demand payment of rent from the 1^st Plaintiff for his occupation of Unit 801.  He argues that he is only seeking to invoke the principle stated in Halsbury’s to ensure fairness to the residuary beneficiaries.  He is not seeking an account for the purpose of a set-off in the ordinary commercial context of setting-off what is due to the other against what that other owed him. 

19. Second, Mr Chan argues that, in any event, if John has allowed the 1^st Plaintiff to occupy Unit 801 unlawfully or in a manner contrary to his duties as a trustee, then the Defendant’s claim is against John only and not the 1^st Plaintiff.  Basically, Mr Chan is saying that the estate, as beneficiary of the trust, has no right to sue.  In reply, the Defendant argues that an action for breach of trust against the trustee is not the only remedy available to the estate.  The estate may also have a claim against the wrongdoer, ie the 1^st Plaintiff, for rent or mesne profit in respect of his unlawful occupation of Unit 801. 

20. On the face, the two grounds of objections advanced by Mr Chan are very valid grounds.  However, Mr Chan has not addressed the legal principle raised by the Defendant.  If as a matter of law, the executor or administrator is entitled to deduct from a legatee’s pecuniary legacy the debt he owed to the estate, whether the executor or administrator has power of administration over assets out of the jurisdiction in respect of which the debt arose is immaterial.  Likewise, whether the executor or administrator has the power to sue the legatee is beside the point.  The question is whether the legatee is indebted to the estate.  This is particularly so where, as in the present case, the legatee has invoked the jurisdiction of this court by submitting to its jurisdiction and seeks to be paid out of assets in the jurisdiction.  As this legal issue has not even been argued, I accept for the purpose of this application that the Defendant, as the administrator of the Mother’s estate, has the right to deduct from the pecuniary legacy to the 1^st Plaintiff his debt owed to the estate.

Relevance

21. There is no dispute that John is the legal owner of Unit 801 which admittedly is held by him as trustee for the Mother and now for her estate.  He allowed his son, the 1^st Plaintiff, into possession of the property.  They both claim that rent has been paid and received, but refuse to produce any documentary proof.  The 1^st Plaintiff said that the Defendant’s request for account is only a matter between John and the Defendant.  According to Canadian Revenue Agency, no rental receipts had been reported in respect of Unit 801 since 2009.  In the circumstances, their assertion begs belief.  The Defendant thus entertains reasonable suspicion that no or no sufficient payment representing genuine rent or mesne profit has been paid or that the 1^st Plaintiff has been in unlawful occupation of Unit 801.  If indeed the 1^st Plaintiff has not paid rent or sufficient mesne profit, he owes debt to the estate.  The dispute has spilled over from one between the estate and the trustee of one of its properties to one among the estate, the trustee of its property and the occupier of the property who is also a pecuniary legatee of the estate.  At the heart of their dispute is whether rent or sufficient rent representing genuine rent has been paid by the 1^st Plaintiff for his occupation of Unit 801.  The interrogatories were raised to address these issues in dispute and are clearly relevant.  Some of the information sought has been disclosed in the affirmations of the 1^st Plaintiff and John, but, in my view, not in sufficient details.  The Defendant is not seeking discovery of documents.  I do not see why John or the 1^st Plaintiff should hide away from providing the full information.

Necessity, propriety and reasonableness

22. In the second affirmation of Miss Hui, the 1^st Plaintiff’s solicitor, she referred to the Defendant’s complaint of John’s failure to honour his undertaking to provide certified accounts relating to the Mother’s estate in Canada.  She asserted that instead of taking appropriate steps in HCA 48/2001, the Defendant is administering the interrogatories in an attempt to illicit information from the 1^st Plaintiff for improper collateral purposes, and in particular the purpose of furthering the Defendant’s dispute with John. 

23. I am unable to agree with that contention.  The information sought in respect of Unit 801 is but one very small fraction of the information which the Defendant has been seeking from John.  The interrogatories as I have found are directed solely at Unit 801, which is relevant to a genuine triable issue in dispute in these proceedings. Miss Hui’s allegation of improper collateral purpose is ill-founded.

24. Mr Chan argues that the Defendant has raised no properly framed and particularised allegation against the 1^st Plaintiff in respect of Unit 801 so as to make the arrangements between John and the 1^st Plaintiff a genuine triable issue in these proceedings.  He therefore submits that the interrogatories are no more than an attempt to fish for a legal case that the Defendant has himself failed to properly raise.

25. Though the Defendant is not legally represented, he has referred to the 1^st Plaintiff’s occupation of Unit 801 and his refusal to provide documentary evidence in support of his payment of rent for his occupation and has sufficiently raised a legal issue by referring to the principle in Halsbury’s.  In my view, he has adequately particularised his case and is not fishing for a case which he has failed to properly raise.

26. Next, Mr Chan argues that even if the interrogatories are relevant, the factual position can be ascertained by way of cross-examination at trial and the Defendant has failed to demonstrate how it is truly necessary for reasons of either cost or fairness for the matter to be dealt with by interrogatories.

27. While the information sought could be given in cross-examination, one rhetorically ask, why were they not given in the 1^st Plaintiff’s affirmations?  What has the 1^st Plaintiff to hide by deferring that to cross-examination?  Surprise tactic is not a game to be played in this court.  What costs would be saved by not answering them now?  What prejudice or unfairness would the 1^st Plaintiff suffer by answering, if eventually, as his counsel submits, he has to answer them in cross-examination? The truth is exclusively known to the 1^st Plaintiff and John.  The estate would be disadvantaged if not informed of these facts before trial.  If the legacy is paid without deducting the debt which is truly owed to the estate, the other beneficiaries of the estate will suffer loss and the Defendant as administrator may be liable in negligence.  The chance of recovery against the 1^st Plaintiff will be remote or at least costly and time consuming as action will have to be taken out of the jurisdiction.  This is a case where, on balance, more unfairness and prejudice would be suffered by the Defendant if the interrogatories are not answered than if they are.

28. Lastly, Mr Chan attacks on the Defendant’s professed neutrality as to the Plaintiff’s entitlements under the will because of his insinuations regarding Unit 801, his active pursuit of information in this regard and his insistence on strict proof.  Given John’s failure to honour his undertaking to the court and in the light of the peculiar family background in this case which will have to be explored in greater depth at trial, I dismiss these allegations and say no more.

Conclusion

29. In conclusion, I reject the 1^st Plaintiff’s argument that the interrogatories are irrelevant, unnecessary, improper and unreasonable.  I dismiss his application to withdraw the interrogatories with costs to the Defendant.