POON FOW HING v. POON KWAI PING CORINNA

CACV 124/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 124 OF 2015

(ON APPEAL FROM HCA NO 1636 of 2014)

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(By original action)

AND BETWEEN

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.  This is an appeal by the Defendant against the decision of Chung J on 28 April 2015 striking out paragraphs 3 to 53 of the Re-Amended Defence. However, the judge did not strike out the Counterclaim, which was partly based on matters pleaded in the Re-Amended Defence, including the paragraphs struck out. Nor did the judge strike out the Defence entirely because there was no attack before the judge as to the alternative defence case based on proprietary estoppel. In other words, both the claim for possession and the Counterclaim for relief relating to administration of estates of the father and the mother have to be tried.

2.  There had been an attempt on the part of the Plaintiff and the 2^nd Defendant by Counterclaim to appeal against the refusal to strike out the Counterclaim.  That attempt had failed because at the hearing for leave to appeal (HCMP 3293 of 2015 heard before Lam VP and Chow J on 21 January 2016), their counsel accepted the lack of merits in that regard and withdrew the application for leave.  The appeal brought by them without leave in CACV 121 of 2015 was also dismissed.

3.  The Defendant is a sister of the Plaintiff.  The claim by the Plaintiff is a claim for possession of the property known as Flat 4C Tivoli Court, Duke Street [“the Property”] which is registered under the Plaintiff’s name.  The Plaintiff said he is the owner of the Property and he provided it to his mother and his siblings as their residence since its acquisition in 1977.  The Defendant came back from Canada in 1978 and she had since been living there with the Plaintiff’s permission.  Over the years, the mother passed away (in 2004) and the other siblings had moved out.  By a letter of 30 May 2012 from the Plaintiff’s solicitors, the licence given to the Defendant was determined.  But the Defendant refused to move out.  Hence, the writ was issued on 17 July 2012 to recover possession and damages.

4.  The defence case is more complicated.  The Defendant said that the Plaintiff did not have beneficial ownership of the Property. It was in fact purchased by funds from the estate of the father who passed away in 1971 intestate.  The Defendant is therefore a beneficiary to the estate (there are altogether 9 siblings in the family).  Though the mother and the Plaintiff obtained letters of administration in respect of the estate of the father in 1973, the Defendant said the estate had not been properly administered and the Plaintiff had not rendered any account in respect of the estate.  The Defendant said the father had operated a business as a dealer of dyeing materials called Woo Sang.  The Plaintiff started to work in that business in 1968 at the age of 23.  After the death of the father, the Plaintiff continued to run the business and later ran it through a limited company. Over the years the Plaintiff had purchased properties with the monies derived from the business (which the Defendant contended to be part of the estate of the father) without accounting to the other siblings and the mother.

5.  The Property was purchased in 1977 (using monies from the estate of the father) as a residence for the mother together with some siblings after it was found out that the Plaintiff had purchased another unit in Tivoli Court (Flat 8B) as residence of his own family (he had married the 2^nd Defendant by Counterclaim in 1972 and lived apart from the mother and other siblings).  The Defendant’s pleaded case at paras 52 and 53 of the Re-amended Defence was that the Property was held in the Plaintiff’s name on trust for the Mother, and after her death, for her estate.

6.  The above allegations (in addition to some other allegations regarding the affairs of the estate of the father which we need not go into details in this judgment) were pleaded in paras 3 to 53 of the Re-amended Defence.  Those are the paragraphs struck out by the judge.

7.  The Defendant further averred that since 1982 (after another sibling moved out upon marriage) she had been managing the affairs of the Property solely and paying for the outgoings and repairs and other expenses of the same under the belief that she had a right of continuous occupation.  She also said the Plaintiff had assured the other siblings on 2 occasions that the Defendant could continue to occupy the Property during her lifetime.  Acting in reliance on such assurance, the Defendant continued to manage the affairs relating to the Property and paid for its expenses.  On that basis, she advanced a case of proprietary estoppel by way of defence to the Plaintiff’s claim for possession.

8.  In her counterclaim, the Defendant sought relief concerning the administration of the father’s estate, including declaratory relief as well as account and distribution of assets.

9.  As the counterclaim is not the subject matter of this appeal, we shall not go into the details of it.  We should however point out that at para 60 the Defendant explicitly referred to the allegations in the Re-amended Defence as part of the Counterclaim.

10.  The judge ordered paras 3 to 53 to be struck out on the basis that they did not disclose any reasonable cause of defence to the claim for possession.  Even assuming in her favour that the Property was not beneficially owned by the Plaintiff, the Defendant herself was only a beneficiary to the estate of the father and a beneficiary to the estate of the mother.  Her interest lies in the proper administration of the estate and she does not have any interest in any specific property belonging to the estate. As such she could only enforce the duty of an administrator or administrator de son tort against the Plaintiff.  As between the Plaintiff and the Defendant, the judge held that the Plaintiff had a better title and was therefore entitled to possession.

11.  With respect, we are of the view that the nature of the Plaintiff’s ownership of the Property is a crucial issue in the context of the Counterclaim as well as the Re-amended Defence and the matters pleaded in paras 3 to 53 are relevant to that issue.  If the Plaintiff is not an absolute owner but only holding the legal title on trust for either the estate of the father or the estate of the mother, he is not at liberty to manage the Property according to his own wishes.  In the first place, the Plaintiff may not be appointed as the administrator of the estate of the mother (in view of the apparent conflict of interest between his claim of beneficial ownership over the Property and the case of at least one beneficiary that the Property was held by him on trust for the mother’s estate).  In respect of the estate of the father, again there is potential conflict of interest (similar to the conflict regarding the mother’s estate if there is potential argument for the Property being held on trust for the father’s estate).  Thus, there may be scope for argument as to whether the Plaintiff should remain as the sole surviving administrator regarding that estate.  Further, it is at least arguable that the duty imposed upon an administrator or administrator de son tort requires him to consider the interest of the beneficiaries.  In light of the family agreement pleaded at para 50 of the Re-amended Defence, the arrangement as to the actual use and occupation of the Property since its acquisition with the assurance from the Plaintiff as pleaded at 55 and 56, it is, in our view, at least arguable that the Plaintiff should not get an order for possession against the Defendant pending the full administration of the estates.  Whilst it is correct that as beneficiary to the estates, the Defendant could not claim to have any direct beneficial interest over the Property, it does not follow that the Plaintiff as administrator has the absolute right to obtain possession against her.  A beneficiary to an estate can come to court to challenge the decision of a personal representative in the administration of the estate (including the decision to commence legal proceedings to recover possession of a property) and seek directions from court in an administration action under Order 85. 

12.  In this connection, the judge had misapplied the concept of relativity of title.  The authority cited by the judge, Megarry & Wade, the Law of Real Property (2012) 8^th Edn paragraph 4-008, did not address the situation where a plaintiff’s title is that of an administrator and the administration decision is subject to challenge in court.

13.  Though there are references in the paragraphs which were struck out that are related to other properties (alleged by the Defendant to be part of the estate of the father) which are more relevant to the Counterclaim than the Defence against the claim of possession of the Property, the court could refer to such matters in an administration action in which the decision to sue for possession is challenged as part of the overall picture as to the administration of estate. 

14.  In any event, as those allegations are relevant to the Counterclaim, it might be a matter of little moment that they were pleaded in the Re-amended Defence with a cross-reference to them in the Counterclaim when for other reasons (as stated above) that the defence could not be struck out. 

15.  For these reasons, we allowed the appeal and set aside the order of the judge in striking out paras 3 to 53 of the Re-amended Defence.

16.  We regret that the trial of the action has been delayed for at least 3 years by virtue of this unfruitful interlocutory skirmish.  The action was commenced in 2014 and the resolution of the disputes is nowhere in sight.  The progress of this interlocutory appeal has been far from satisfactory (the Notice of Appeal was issued on 26 May 2015 and solicitor for the Defendant, who came on record in January 2016, did not apply to fix a date for hearing until December 2016).  From a post-CJR case management point of view, it is difficult to see the benefit of this interlocutory application to strike out in terms of the overall resolution of the disputes between the parties.  At the same time, we can see rooms for improvement in the way in which the Defence had been pleaded (with re-amendments).  Further, it seems that the parties did not take proper account of Order 85 which is applicable to an administration action and in substance the counterclaim is an administration action.  The other beneficiaries to the estates should be involved in the administration action.

17.  Counsel may need to review the pleadings again in light of what we said.  There might be a long road ahead before the case can come on for trial.  Substantial costs might still have to be incurred in light of the long history of events which need to be examined at the trial.  As the parties are members of the same family and the dispute relates to administration of the estates of the parents, and in view of the observations we made, this is a case that cries out for mediation.  We were told that parties have not attempted mediation.  We direct them to consider mediation and their lawyers should advise them on the same.  

18.  As regards the costs of the appeal, we see no reason why it should not follow the event.  We ordered the Plaintiff to pay the costs of the Defendant in the striking out application here and below, to be taxed if not agreed.