LEUNG YUET MING, Executrix of the Estate of LEUNG WING CHUEN (Deceased) v. LEUNG YEUK HUNG

HCMP 1880/2017

[2018] HKCFI 1911

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1880 OF 2017

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REASONS FOR DECISION
AND DECISION ON COSTS

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1.  At the end of hearing the various summonses in these proceedings before me, I ordered that these proceedings should continue as if begun by writ, and gave directions for the further conduct of the writ action. As indicated, I would explain my decision in writing, which I now do. I would also give my ruling on the costs of the various summonses, which the parties also argued during the hearing.

The dispute and procedural background

2.  These proceedings were brought on 24 August 2017.  They concern a residential property in Ap Lei Chau, Hong Kong (“the Property”) registered in the sole name of the defendant (“YH”) since 2015.  The property has since been YH’s residence, while the rest of the family reside in Canada.  The plaintiff (“YM”) is her younger sister.

3.  YH and YM were both named as the executrices of the will of their late father, Leung Wing Chuen, deceased (“the Father”).  In May 2017, YM alone obtained probate.  As the executrix of the estate of the Father, YM now claims against YH for a declaration that the Property is held by YH upon resulting trust for the Father absolutely, and an order that the title of the Property shall be vested in her as the executrix of the Father’s estate free from encumbrance.

4.  The basis of the claim is that the Father provided the entire purchase money for the Property in the sum of HK$7,880,000, and YH acknowledged that in writing on 19 January 2015 (the so-called “1^stMemorandum”).  The 1^stMemorandum also says that the property belonged to the Father, and after his passing, the family, and YH is only the nominal owner.

5.  YH disputes the claim.  She gave her explanation of the circumstances giving rise to 1^st Memorandum and her signing of the same in 2015, despite the inaccuracy of its terms.  As far as she knows, only the Father and she knew about the existence of the memorandum, and the other siblings probably came to learn about its existence after the passing of the Father.  Her case is that the Father actually provided HK$6,380,000 for the purchase of the Property, while the remaining HK$1,500,000 was financed by a mortgage over the property and repaid by her.  It is said to be the agreement or understanding of the parents and her that she could reside at the Property for life.  YH has the supportive declaration in Canada of the mother (adduced by way of affidavit) in respect of the intention of the parents at the material time to assist YH in acquiring a permanent residence in Hong Kong.

6.  In her affidavit in reply, YM denied YH’s case and questioned the genuineness of the mother’s supportive evidence, suggesting that the evidence was obtained under the influence of YH and one of their brothers as well as overshadowed by the disagreement between YM and the mother over the tax issue concerning the Father’s estate in Canada.  Substantial factual allegations touching upon various events, conversations and matters were set out.  Evidence of alleged audio-recording of such conversations was also adduced.

7.  YH acknowledged that the Property would be beneficially owned by the family, though this was never clear at the time it was acquired in 2015.  The Father’s will did specify the percentage division of the estate among the family members, but it was dated 2011 before the acquisition of the Property.

8.  On the basis that YH was allegedly not entitled to mortgage the Property pursuant to the 1^st Memorandum, YM also raised her entitlement to recover from YH the amount of such mortgage loan effectively as secret profits from making use of trust property.

9.  YM also raised her entitlement to recover missing assets of theFather’s estate from YH and the mother.  They included a HK$500,000 loan extended by the Father to YH, evidenced by another memorandum dated 19 January 2015 signed by YH (the so-called “2^ndMemorandum”), which should have been repaid to the Father.  As to this, YH alleges that she has repaid HK$350,000 by instalments to the Father and, after his passing, the mother.  YM alleges that any such money so paid to the mother should have formed part of the Father’s estate, and therefore YH and/or the mother would be obliged to account and repay to the same to the Father’s estate.

10.  YM specifically indicated that the claim may be amended to include these other claims mentioned above, if so advised legally.

11.  It was in the above circumstances when the notice of appointment for the hearing of the originating summons was filed.  In response, YH took out her summons on 12 March 2018 for an order to turn these proceedings into a writ action (“12/3/2018 Summons”) pursuant to Order 28, rule 8(1) of the Rules of the High Court (“RHC”).

12.  The originating summons and YH’s 12/3/2018 Summons were before the court on 15 March 2018.  After hearing the parties, the learned Deputy Judge adjourned the originating summons for substantive hearing and gave directions for the filing of further affidavit evidence for such purpose.  He also adjourned YH’s 12/3/2018 Summons to be heard at the same time.  The hearing should be fixed to last for 1 day in consultation with counsel’s diary.  For the purpose of the substantive hearing of the originating summons, the learned Deputy Judge also directed YM to attend the hearing for cross examination on her affidavits.

13.  Pausing here, concern arises.

14.  First, it is not immediately apparent how the originating summons taken out by one side should be heard substantively, with cross examination on affidavits, at the same time of determining the other side’s summons for direction that the substantive determination of the dispute ought not to take this mode.

15.  Second, even for the substantive hearing of the originating summons, it is not immediately apparent why only YM should be cross examined on her affidavits whereas YH or the mother would somehow be immune.  However, I note that the skeleton submission on behalf of YM for the hearing on 15 March 2018 projected this case as a simple one with no need for cross examination of deponents.  Mr Tang appearing on behalf of YM explained to me that he did expressly reserve the right of his client to seek to do so subsequently upon perusal of the further affidavit evidence to be filed pursuant to the court’s leave given during that hearing.  I should perhaps also mention that this concerns the mother no more, because she passed away earlier this month.

16.  Indeed, after YM, YH and the mother have filed further affidavit evidence as directed, YM took out the summons on 29 June 2018 (“29/6/2018 Summons”) for direction that YH should also attend the substantive hearing of the originating summons for cross examination on all her affidavits.  YM also sought direction to extend the substantive hearing from 1 to 2 days.

17.  This was followed by YH’s further summons on 17 July 2018 (“17/7/2018 Summons”), effectively seeking to bring forward the determination of her 12/3/2018 Summons together with YM’s 29/6/2018 Summons.

18.  YM then took out another summons on 20 July 2018 (“20/7/2018”), this time seeking leave to file further affidavit evidence and documents in support of her case for the substantive hearing of the originating summons.

Discussion

19.  It was somehow suggested in the written submissions on behalf of YM that the learned Deputy Judge effectively ruled against YH’s 12/3/2018 Summons when he ordered for the substantive hearing of the originating summons with direction for cross examination of deponent on affidavits.  But this was not what the order says.  YH’s 12/3/2018 Summons was adjourned and remained to be determined.  As mentioned, this was why the concern mentioned above arises.

20.  I can only guess that the intention behind the order made on 15 March 2018 was to require the parties to be all suited up anyway so that if the court rules against YH’s 12/3/2018 Summons, the parties would proceed to the substantive hearing of the originating summons immediately on the same day.  Yet this does not lessen the concern.  This becomes evident in view of the development entailed by the order on 15 March 2018 mentioned above directing that the originating summons will be substantively heard.  This is to say the least undesirable.

21.  Pursuant to Order 28, rule 4(3), the court is supposed to consider at as early a stage of the proceedings as practicable whether there is or may be a dispute as to fact and whether the just, expeditious and economical disposal of the proceedings can best be secured by hearing the summons on oral evidence or affidavit evidence with or without cross examination of the deponents.  If appropriate, Order 28, rule 8(1) should be invoked.

22.  Order 28, rule 8(1) provides that where it appears to the court at any stage of the proceedings that the proceedings should for any reason becontinued as if the cause or matter had been begun by writ, it may give such order.  This is a flexible rule providing for wide discretion.  However, the usual consideration is whether there is factual dispute.  This is trite.  What was insisted upon on behalf of YM was that there was no genuine or substantial factual dispute that would require adjudication in these proceedings.  It was argued that YH has failed to raise factual dispute of such character.

23.  I disagree.  The objective view of the matter is that there exists substantial factual dispute between the two sides.  This should be obvious by the time of the notice of appointment to hear the originating summons.  If not, it must be obvious as the case developed by the time when YM took out her 29/6/2018 Summons.  The major factual dispute goes to whether YH is entitled to beneficial interest in the Property with reference to her alleged financial contribution towards its acquisition as well as a life interest in the form of the right to reside there pursuant to the agreement with the parents, as opposed to the Father’s will that predated the acquisition of the Property and the 1^st Memorandum.  This has bearing on the entitlement of YM’s claim against YH for the declaration that the Property belonged to the Father, and now his estate, “absolutely”, as well as the vesting order “free from encumbrance”.  There are other factual disputes in respect of the alleged entitlement of YM to further claim against YH, albeit yet to be formulated by way of amendment to the originating summons.  The fact is that the evidence in respect of such other entitlements of YH are all in for the purpose of the substantive hearing.  By her latest 20/7/2018 Summons, YM sought to adduce further affidavit and substantial documentary evidence.  Even YM, apparently according to counsel advice, now accepted that the factual dispute could not be resolved on affidavits without cross examination of the deponents.  As it has been reiterated on behalf of YH, what was contemplated would in no way differ from a trial.

24.  However, it was argued on behalf of YM that what the learned Deputy Judge ordered on 15 March 2018 was in line with the approach of the court in Ip Kam Wah & Anor v Fair City Group Ltd [2005] 4 HKLRD 168 (HCMP 2491/2004, 6 January 2005).  I do not see how.

25.  Ip Kam Wah involved a vendor and purchaser summons arising from a property deal.  At the substantive hearing of the originating proceedings, the defendant contended that the procedure was not appropriate as there were substantial disputes on facts which could not be resolved on affidavit evidence.  The defendant asked the court to apply Order 28, rule 8(1) or alternatively to order the deponents of the affidavits to attend the court for cross examination under Order 28, rule 4(3).  To address the defendant’s such contention, DHCJ To (as To J then was) considered that it would be necessary to consider whether the assertions in affidavits were believable [1], and only when the court was satisfied that the factual disputes could not be resolved on affidavit evidence that oral evidence or trial should be considered [2]. His Lordship proceeded to consider the affidavit evidence, and considered that the defendant’s evidence was practically moonshine and incapable of belief so that there was no genuine and substantial dispute on facts [3]. His Lordship then proceeded with the substantive hearing of the originating summons.

26.  First, this was not what the learned Deputy Judge did in the present case on 15 March 2018.  YH’s 12/3/2018 Summons for turning these proceedings into a writ action was adjourned undetermined, whilst direction was made at the same time for the substantive hearing of the originating summons with cross examination of deponent on affidavits.  As mentioned, I could only speculate what the intention behind such an order might be.

27.  Second, as to whether genuine and substantial disputes on facts exist so that the same could not be resolved without trial, each case must be decided on its own facts.  As I have to decide now, I find there exists factual dispute of such nature in the present case.  As mentioned, even the legal representatives for YM effectively accepted that, and therefore sought leave to cross examine YH on all her affidavits.  The circumstances of the present case are far removed from those of Ip Kam Wah, which accounted for To J’s ruling.

28.  In my view, much arguments and the series of applications before me as well as the incidental costs could have been avoided.  But the proper resolution of the dispute between the parties in the present case could only be secured by turning these proceedings into a writ action.  I therefore still made the following order in respect of YH’s 12/3/2018 Summons at the end of the hearing:

(1)   The proceedings herein shall continue as if the same has been commenced by way of writ pursuant to Order 28, rule 8(1) of the RHC;

(2)   YM do file and serve a statement of claim within 28 days;

(3)   YH do file and serve a defence (and counterclaim, if any) within 28 days thereafter;

(4)   YM do file and serve a reply (and defence to counterclaim, if any) within 28 days thereafter;

(5)   There will be discovery of documents within 21 days upon the close of pleadings, and inspection of documents within 7 days thereafter;

(6)   The parties do exchange witness statements within 28 days thereafter.

(7)   Upon compliance with the above, case management summons shall be taken out for further directions in accordance with the RHC and Practice Direction.

(8)   Costs of the originating summons be in the cause of the action.

29.  The above timetable for discovery and exchange of witness statements was set to avoid delay.  It could be so set, as the formal discovery of the documents so far exhibited to the parties’ affidavit should be straight forward.  So would the preparation of the witnesses’ evidence with reference to the affidavits be, though now in accordance with Order 38, RHC.  Of course, how the parties now formulate their case by pleading becomes a variable.

30.  In respect of YM’s 29/6/2018 Summons, YH’s 17/7/2018 Summons and YM’s 20/7/2018 Summons, the relief sought by these summonses were rendered unnecessary by the above order.  I therefore made no order as to that in respect of each of these summonses at the end of the hearing.  What remains is the issue of costs of these summonses.

Costs

31.  Upon my invitation, the parties made their respective submissions in respect of the costs of the summonses mentioned above.  Reference was made to the parties’ correspondence, which I have also considered.

32.  The circumstances were such that YH had sound basis for inviting YM to consent to turning these proceedings into writ action by the time of the notice of appointment to hear the originating summons.  Due to YM’s stance, YH took out her 12/3/2018 Summons.  Whilst YM insisted on her stance and turned down subsequent similar requests of YH in line with her 12/3/2018 Summons, she took out the 29/6/2018 Summons for leave to cross examine YH on all her affidavits, which, as I explained above, only reinforced the objective difficulty of resolving the factual disputes on affidavits.  Yet YM’s stance was maintained until now.

33.  I disagree with YM and ordered these proceedings to be turned into writ action.  It is only fair to order that YH should have her costs of and occasioned by her 12/3/2018 Summons.

34.  For the same reason, it is fair to order that YH should have her costs of and occasioned by YM’s 29/6/2018 Summons, even though no order was made in respect of the substantial relief sought.

35.  Whilst the purpose of YH’s 17/7/2018 Summons, ie, bringing forward the hearing of YH’s 12/3/2018 Summons in view of YM’s 29/6/2018 Summons, cannot be criticized, the court in any event would have had the power to invoke Order 28, rule 8(1) for such purpose.  I therefore make no order as to the costs of YH’s 17/7/2018 Summons.

36.  The necessity for YM’s 20/7/2018 Summons should also be considered against the background discussed above.  Such application, in the normal course of events, would have been one for leave of the court as required under §2 of the order of the court dated 15 March 2018.  It was argued on behalf YH that this was similar to asking the court’s indulgence in the absence of explanation for the failure to adduce the new documentary evidence earlier since the grant of probate in May 2017.  However, the fact was that the application was rendered unnecessary.  The costs occasioned by such an application to YH would not be rendered futile, as the same documents would presumably be covered by discovery in the writ action.  I therefore also make no order as to costs of this summons.

37.  All costs mentioned above shall be taxed, if not agreed.

Remark

38.  During the hearing, I urged the parties to seriously consider mediating out of the dispute.  I repeat that.