TO KIT SHEUNG, the sole administrator of the estate of TO SHAK also known as TO SHEK WAN and also known as SHICK DOO, deceased AND ANOTHER v. CHAN SHOOK FUNG NANCY AND ANOTHER

HCA 2340/2019

[2021] HKCFI 1156

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2340 OF 2019

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J U D G M E N T

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A.      INTRODUCTION

1.  By Summons dated 12 May 2020 (the “Summons”), the 1^st and 2^nd plaintiffs seek to strike out certain parts of the defendants’ Defence as set out in the Schedule to the Summons, under Order 18, rule 19(1)(a) of the Rules of the High Court on the ground that the same do not constitute a defence at law.

2.  Amongst the grounds for striking out pleadings under Order 18, rule 19(1), the plaintiffs are relying only on (a): “it discloses no reasonable cause of action or defence”.

3.  In Practice Note 18/19/3 of the Hong Kong Civil Procedure 2021, at page 518, it is stated under “(4) Evidence” that: “O18, 19(2) excludes evidence…on an application under O18, r 19(1)(a).  The court is obliged to look at the indorsement on the writ or the pleading without extrinsic evidence and decide whether on the assumption that the facts as pleaded are true the indorsement or pleading discloses a cause of action or defence in law”.

4.  In Practice Note 18/19/4 of the Hong Kong Civil Procedure 2021, at page 519, it is stated that:

“Exercise of powers under this rule

(1)  Striking out only in plain and obvious cases – It is only in plain and obvious cases that the court should exercise its summary powers to strike out the indorsement on any writ or any pleading under this rule.  There should be no trial upon affidavit.  Disputed facts were to be taken in favour of the party sought to be struck out.  Nor should the court decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.”

5.  The question for determination is: where the disputed facts are to be taken in the defendants’ favour, are those paragraphs in the Defence being challenged obviously unsustainable or unarguably bad?  If there is something that is “arguable”, the paragraphs being attacked by the plaintiffs ought not be struck out.

B.      FACTUAL BASIS OF THE PLAINTIFFS’ CLAIM AND THE RELIEF SOUGHT

6.  As has been set out in the plaintiffs’ Chronology of Material Events, the following material facts have been established in the parties’ pleadings:

(1)  To Shak (the “Deceased”), a person wholly of Chinese race, died intestate leaving (i) Hong Kong Property and (ii) New Territories Properties;

(2)  Letters of Administration in respect of the Deceased’s estate were granted to the 1^st plaintiff on 3 August 1987;

(3)  the 1^st plaintiff, a resident of Belgium, both by Power of Attorney and upon request, conferred power to the 2^nd plaintiff’s Sister (Chan To Yuk Lin) to administer the estate of the Deceased;

(4)  in the course of administration of the estate of the Deceased, the 2^nd plaintiff’s Sister (i) disposed of the Hong Kong Property; (ii) disposed of substantial part of the New Territories Properties; (iii) let out part of the New Territories Properties and (iv) received compensation money from resumption of part of the New Territories Properties; and

(5)  up to the date of her death, no account has been given by the 2^nd plaintiff’s Sister to the 2^nd plaintiff.

7.  On the factual basis of their claim as aforesaid, the 1^st plaintiff, in his capacity as the sole administrator of the estate of the Deceased, and the 2^nd plaintiff, in his capacity as:

(1)  one of the 2 beneficiaries of the Hong Kong Property; and

(2)  the sole beneficiary of the New Territories Properties,

seek as against the defendants, in their capacity as the only executrices of the estate of the 2^nd plaintiff’s Sister, for (i) an order for account of the 2^nd plaintiff’s Sister’s dealings with the estate of the Deceased; (ii) declaratory relief that the 2^nd plaintiff is the sole person entitled to succeed the New Territories Properties; and (iii) registration of the lis pendens of the defendants with the Land Registry against the New Territories Properties be vacated.

C.      CAUSES OF DEFENCE OF THE DEFENDANTS

8.  In their Defence, the defendants pleaded that:

(1)  there had been a “Family Arrangement” between 1984-1987 reached as a result of an oral agreement between the 2^nd plaintiff and the 2^nd plaintiff’s Sister so that they would have an equal share to the proceeds of disposal of the landed properties of the Deceased’s estate.  Pursuant to the Family Arrangement, 3 joint accounts were opened (§§5 to 7 of Defence);

(2)  in respect of the 3 joint accounts, there was a “pooling arrangement” so that neither party would be obliged to account to the other in relation to any money contributed to or withdrew therefrom and the withdrawals by the 2^nd plaintiff’s Sister were pursuant to this part of the Family Arrangement (§9 of Defence), hence, the money paid into the 3 joint accounts was not trust property, nor was the 2^nd plaintiff’s Sister liable to account therefor;

(3)  despite the 2^nd plaintiff’s sole entitlement to succeed the New Territories Properties, under the Family Arrangement, the 2^nd plaintiff’s Sister would be entitled to equal division of the proceeds of sale, and the proceeds of sale and rental income derived from the New Territories Properties were deposited into the 3 joint accounts (§§11 and 13 of Defence);

(4)  the 2^nd plaintiff’s Sister did not act as the 1^st plaintiff’s agent for administration of the Deceased’s estate in general.  She had only signed the assignments for the 3 landed properties under the 1^st plaintiff’s 3 Powers of Attorney (§§7(c), 14, 15(b), 16(c), 19, 22, 29(b), 31, 46(b) and 62(b) of Defence).  The 2^nd plaintiff’s Sister is not a fiduciary in relation to the administration of the Deceased ’s estate (§§24 and 31 of Defence); and

(5)  the defendants further rely on the time bar under sections 20(2), 4(1)(a), and 4(2) and (7) of the Limitation Ordinance, Cap 347, and such equitable defences as laches, acquiescence and waiver (§§55 to 60 of Defence).

D1.    PLAINTIFFS’ GROUND (A) - ORAL AGREEMENT/INFORMAL FAMILY ARRANGEMENT BETWEEN 2^ND PLAINTIFF AND SISTER NOT SUSTAINABLE IN LAW (§§5-7, 9, 11,13, 23, 32(B)-(C), 34, 46(A) OF DEFENCE)

PLAINTIFFS’ SUBMISSIONS

9.  The plaintiffs submit that the defendants’ defence being the alleged “Family Arrangement” was allegedly created under an oral agreement made between the 2^nd plaintiff and the 2^nd plaintiff’s Sister in 1984 to 1987.

10.  Even if this court were to accept the existence of an oral agreement creating the Family Arrangement for equal division of the estate of the Deceased, the plaintiffs submit that both the oral agreement and the Family Arrangement would be void and unenforceable.

11.  First, the oral agreement would constitute disposal of, inter alia, the 2^nd plaintiff’s interest in the New Territories Properties which would be void unless the same be evidenced in writing and signed by him, being the person to be charged (see: section 3, Conveyancing and Property Ordinance, Cap 219).

12.  For such purpose, “proceeds of sale” of interest in land constitute land and, in the premises, it would still be caught by the statutory requirement (see: section 2, New Territories Ordinance, Cap 97; Tang Che Tai & Ors v Tang On Kwai & Ors [2007] 5 HKC 277, at §32).

13.  Secondly, the effect of the oral agreement would only benefit the 2^nd plaintiff’s Sister and, hence, there was no consideration in support so as would enable it to be enforceable unless by a deed (contract under seal) (see: section 4, Conveyancing and Property Ordinance, Cap 219).

DISCUSSION

14.  Ground (a) is misconceived because the Family Arrangement was concerned about money (proceeds of disposal of landed properties in the Deceased’s estate), not land (§§5(a) and 11(c) of Defence). 

15.  For a family arrangement, where land is not concerned, writing is not necessary (see: Halsbury’s Laws of England, Vol 91, 2019, p 566, §794). 

16.  The Family Arrangement was on “equal division of the proceeds of disposal of the landed properties” in the Deceased’s estate. It did not concern land.  The defendants are not seeking to enforce an oral agreement between the siblings in relation to landed properties.  Hence, section 3(1) of the Conveyancing and Property Ordinance has no application.

17.  Further, the plaintiffs’ reliance on section 2 of the New Territories Ordinance for the definition of “land” is misplaced.

18.  The relevant definition of “land” that should apply in the context of section 3 of the Conveyancing and Property Ordinance should be that contained in section 2 of the same Ordinance, ie:

“‘Land’ includes -

(a) land covered by water;

(b) any estate, right, interest or easement in or over any land;

(bb) the whole or part of an undivided share in land and any estate, right, interest or easement in or over the whole or part of an undivided share in land; and

(c) things attached to land or permanently fastened to anything attached to land;”

19.  Further, even if one considers the definition of “Land” under the New Territories Ordinance, Deputy High Court Judge To in Tang Che Tai v Tang On Kwai, Supra, stated in §33 that “… I am quite unable to find it as the legislature’s intention to apply Part II of the NTO to any other form of property converted from land in the New Territories.  Reading the NTO as a whole, I could by no canon of construction interpret the word ‘land’ to include compensation or proceeds of sale of land”.

20.  Accordingly, I reject the plaintiffs’ submissions based on section 3 of the Conveyancing and Property Ordinance.

21.  Regarding the plaintiffs’ complaint of lack of consideration, it is pleaded in paragraph 5(d) of the Defence that the 2^nd plaintiff’s Sister provided consideration for the Family Arrangement in that she would assist the plaintiffs living in Belgium to obtain the grant of Letters of Administration of the Deceased’s estate, and that she would act as the plaintiffs’ attorney without remuneration in signing assignments on the plaintiffs’ behalf for disposing landed properties of the Deceased’s estate.  I cannot say at this stage that such averments are plainly unsustainable or unarguably bad.

D2.    PLAINTIFFS’ GROUND (B) – 2^ND PLAINTIFF’S SISTER WAS A TRUSTEE OF THE PROCEEDS OF SALE/RESUMPTION MONEY/RENTAL INCOME OF THE LANDED PROPERTIES (§§17(A), 18, 24, 46, 62(B) OF DEFENCE)

PLAINTIFFS’ SUBMISSIONS

22.  The plaintiffs submit that a person dealing with the estate would become an executor de son tort who would, in the eyes of equity, become a trustee and fiduciary.  

23.  A person who assumes the role of dealing with the property of another (whether in which he also has an interest) would assume the role as a fiduciary and, in such case, he would also be treated, in the eyes of the law, a trustee and fiduciary.  And in either case, he would be obliged to give an account of all his dealings with the estate of the properties of another and this duty is imposed as a matter of law.

DISCUSSION

24.  First of all, as submitted by the defendants, the 1^st plaintiff was appointed Administrator of the Deceased’s estate in 1987.  Arguably, an agent for a named executor (or administrator) could never be liable as executor de son tort, since her acts would be taken to be that of her principal and cannot be characterised as unlawful (see: Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 21^st ed, §5-46, p 78 text to n 222 citing Sykes v Sykes (1870) LR 5 CP 113).

25.  Further, it is the defendants’ case that the money paid into the 3 joint accounts was not trust property, nor was the 2^nd plaintiff’s Sister liable to account therefor: see paragraph 8(2) above.

26.  As submitted by the defendants, whether the Sister’s acting as agent for the 1^st plaintiff is limited in scope (ie for signing assignments on behalf of the 1^st plaintiff only, and not in general administration of the Deceased’s estate on behalf of the 1^st plaintiff) is a matter of fact to be determined at trial.  The issue involves whether the Sister only did mechanical acts on behalf of the 1^st plaintiff (for example, in signing assignments), or was involved in the decision making process for disposing of the landed properties.  For the purpose of the present strike out application, the defendants’ version of fact that the scope of agency was limited should be taken to be true.  In that case, the Sister cannot be assumed to be a fiduciary in relation to the administration of the Deceased’s estate, or a trustee de son tort at this stage.

27.  In my view, the defendants’ defence is not obviously unsustainable or unarguably bad.  Accordingly, the plaintiffs’ application to strike out the same on Ground (b) must fail.

D3.    PLAINTIFFS’ GROUND (C) – NO STATUTORY LIMITATION BECAUSE THE PLAINTIFFS CLAIM FOR AN ACCOUNT AND BECAUSE OF THE STATUTORY EXCEPTIONS UNDER S20(1), LIMITATION ORDINANCE (§§55-57 OF DEFENCE)

PLAINTIFFS’ SUBMISSIONS

28.  When a beneficiary claims to be entitled under a trust, his claim would not be barred by limitation, as the duty of a fiduciary and trustee continue until the same be discharged.  It is especially so when the proceeds of sale were pocketed by the trustee (see: section 20(1), Limitation Ordinance).

DISCUSSION

29.  The proceeds of disposal or rental income were deposited into the 3 joint accounts in the names of the 2^nd plaintiff and the 2^nd plaintiff’s Sister.  Such money was not held in the 2^nd plaintiff’s Sister’s own accounts under her sole name.  In any event, the defendants’ primary case is that there is no true trust because the money in the 3 joint accounts was not trust property held by the 2^nd plaintiff’s Sister exclusively for the benefit of the 2^nd plaintiff.  The 2^nd plaintiff’s Sister had the right to withdraw money as her own from such joint accounts.  The 2^nd plaintiff also retained possession and control of the 3 joint accounts throughout.  There arguably being no trust, the plaintiffs can in that case only rely on contractual claims based on agency or employment (namely, as pleaded under paragraph 11(a) of the Statement of Claim).  Hence, the 6-year time bar under section 4(1)(a) of the Limitation Ordinance would be applicable.

E.      CONCLUSION AND DISPOSITION

30.  For the reasons set out above, I agree that the plaintiffs have failed to establish that the paragraphs in the Defence sought to be struck out disclose no reasonable cause of defence.  They cannot be said to be obviously unsustainable or unarguably bad.

31.  Accordingly, the plaintiffs’ Summons is dismissed.

32.  I see no reason why costs should not follow the event.  I order that the costs of the Summons be paid by the plaintiffs to the defendants, such costs are to be taxed if not agreed and paid forthwith.

33.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

34.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.