LAI YUEN WAH v. HOI KWONG PRINTING CO. LTD. AND OTHERS

HCA 2179/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2179 OF 2001

____________

____________

_______________

JUDGMENT

_______________

1. This is an appeal from a decision of the Master in which summary judgement has been given for the plaintiff on an O.14 application.

2. As is apparent from the title to these proceedings the plaintiff is the administratrix of the deceased's estate. The 2nd, 3rd, and 4th defendants are children of the deceased. The plaintiff, the deceased's widow, is his second wife, and accordingly the stepmother of the 2nd, 3rd , and 4th defendants. The 1st defendant is a company which occupied two sets of premises owned by the deceased. The 2nd 3rd and 4th defendants are the directors and shareholders of the 1st defendant. The writ is issued by the plaintiff to recover rent allegedly due by the defendants as tenants of the two sets of premises for a period following the death of the deceased.

3. The plaintiff takes a strict position in respect of the proceedings, not only requiring a formal application for leave to appeal out of time to be made, but also that a formal application be made for a stay of execution pending appeal. Further, I am informed by her counsel, that she is insisting, as administratrix of the estate, that the assets of the estate, or at least those assets not occupied by her or in her physical possession, be called in and converted to money prior to distribution to the beneficiaries. She is apparently insisting on this course despite the fact that there is more than ample in the estate to allow an appropriate division of the assets between the beneficiaries without the need for formal conversion into cash. This is a course that will only involve expenditure on legal fees and estate agents fees, and the realisation of the reduction of property values over recent years. If a sensible agreement were reached between the parties to divide the estate property values may, in time, be able to be restored to the consequent advantage of all parties.

4. The first application that I must deal with is the application for leave to extend time for appeal. The application is opposed by the plaintiff. The relevant factors to be considered in deciding whether to exercise the discretion to extend time are (a) the length of the delay, (b) the reasons for the delay, (c) the chances of the appeal being successful, and (d) the degree of prejudice to the defendant: Wong Kam Hong v Triangle Motors [1998] 2 HKLRD 330.

5. The length of the delay in this case is 4 months. It is right that in Tong Yi Sang v Fung Law & Ors [1993] 2 HKC 665 Kaplan J refused leave to appeal out of time, commenting that Practice Directions were intended to be complied with. However the modern approach to an application for leave to appeal out of time does not require a mechanistic approach to applications as the court has the widest measure of discretion in which the merits of a potential appeal and the prejudice to the other side are more relevant factors: see Finnegan v Parkside Health Authority [1998] 1 WLR 411 CA.

6. The length of the delay is not significant, especially when regard is had to the fact that the writ was issued in May 2001, and that it was not until April 2002 that the summary judgment was entered. Further, it is plain that throughout the period between the entry of judgment and the filing of the application for leave to appeal out of time, the solicitors for the defendants made it clear to the plaintiff's solicitors that the terms of the summary judgment were not accepted and endeavoured to reach some resolution of the matter without the need for an appeal. The defendants' solicitors ought to have formally filed the appeal document before the time expired, and at the same time continued discussion, but they did not. The circumstances are not such that in my view their default ought to be visited upon the defendants, who were quite unaware of the time error. The explanation put forward by the defendants is a reasonable explanation.

7. As will be seen, I am satisfied that this is a situation in which, not only for technical reasons, but also for substantive reasons, the appeal is one which ought to be allowed. The merits of the situation are entirely with the defendants.

8. There is no significant prejudice to the plaintiff. To allow the appeal simply restores the parties to their original positions and the plaintiff is still able to proceed with the claim subject only to a period of delay. Any such delay, should she be ultimately successful, can be adequately compensated by the award of interest on the amount due. This is not a situation where she would lose her right to pursue her action, in which circumstances there would be prejudice.

9. The defendants further seek leave to amend the notice of appeal. This application was necessary because the plaintiff relies extensively on correspondence from the defendants' former solicitors in which it is contended certain admissions were made. It is not at all clear that the defendants were made aware of the precise terms of the correspondence written on their behalf or that they intended to make the so-called admissions. In my view the proposed amendment will properly reflect the true state of affairs between the parties and that to deny the amendment would be to deny the defendants the opportunity to pursue a legitimate position. In the circumstances leave to amend the notice of appeal is granted.

10. For these reasons there will be an order extending time to appeal against the summary judgment of 19 April 2002 and an order granting leave to amend the notice of appeal.

11. The argument for the defendants is that summary judgment in this matter was wholly inappropriate on 4 grounds.

12. First, it is contended that there is uncertainty as to the exact amount due. Other than one specific claim for a sum of HK$900,000 being the repayment a loan, (which is no longer in dispute), the prayers for relief in the statement of claim do not specify the amount claimed but instead seek an inquiry and the taking of accounts. The summary judgment entered requires payment of a specific sum in excess of $2.3 million. It is not at all clear as to the basis upon which that sum has been calculated, but it apparently comes from calculations made based upon affidavits filed by the plaintiff.

13. If an application for summary judgment is to be made the statement of claim must be complete and good in itself: see Gold Ores Reduction Co v Pain [1892] 2 QB 14, Hong Kong Civil Procedure 2002 para 14/1/5. The affidavit of the plaintiff to support an application for summary judgment is an affidavit which must verify the facts in the statement of claim. It cannot supplement the statement of claim and make assertions of fact which are not pleaded in the statement of claim. In simple terms if summary judgment is to be entered the amount due must be able to be determined from facts pleaded in the statement of claim. That is not the case in this case. That that was recognised by the plaintiff may be seen from the plaintiff's own claim for an inquiry or an accounting.

14. In order to support the judgment it was necessary for Mr Lee to undertake a laborious exercise involving copious reference to further affidavits, and making and adjusting calculations, in order to reach the figure for which judgment has been entered. The exercise that he was required to undertake, by itself, demonstrated that there was a serious issue between the parties as to the correct amount due. Even then the amounts for which Mr Lee contended judgment should be entered were substantially different from those sums for which the master entered judgement.

15. On this ground alone the appeal can succeed, but Mr Chua for the defendants made it clear that he did not rely solely upon this pleading point.

16. Second, as well as entering judgment for the sum of $2.3 million the master made a further in order for an inquiry and an accounting. The order for payment of a specific sum is, in the context of this case, inherently and fundamentally inconsistent with an order for an inquiry and an accounting. The rule is that where there is a question as to what on the true state of the account is payable leave to defend must be granted: Lynde v Waithman [1895] 2 QB 180, Wallingford v Mutual Society [1880] 5 App Cas 685. In the circumstances of this case where the prayer for relief sought no specific sum but both an inquiry and an accounting, summary judgment ought not to have been entered.

17. Third, the statement of claim dealt with two different properties, each involving different defendants. In relation to the first, flat 5C, the allegations made against the 2nd and 3rd defendants were allegations claiming that they are accountable as trustees in relation to rental payments made in respect of this flat. No allegations at all are made against the 4th defendant in relation to this flat. The summary judgment makes no distinction in this respect and in relation to this flat there was no jurisdiction whatsoever to enter judgment against the 4th defendant. In relation to the second flat, flat 15A, the allegation is that the 4th defendant is accountable as a trustee in relation to rental payments made in respect of this flat, and no allegations at all are made against the 2nd or 3rd defendants in relation to this flat. Again, the summary judgment makes no distinction between parties, and in relation to this flat there was no jurisdiction whatsoever to enter judgment against the 1st and 2nd defendants. For any support at all to be given to the summary judgment it would have been necessary for the judgment to properly distinguish between the individual parties and to have specified the different sums due by them. That it failed to do so is a fundamental error.

18. Further, it is not open to the plaintiff to rely upon the provisions of s.32 Trustee Ordinance, Cap 39, to support the judgment against the defendants as trustees for no liability of trustees under that provision arises unless there has been "wilful default" on the part of the trustees. No wilful default has been pleaded or particularised in the statement of claim.

19. In making an order for one lump sum payable by all three individual defendants the master has entirely overlooked the plaintiff's own pleaded case which expressly distinguishes between flat 5c and the 2nd and 3rd defendants on the one hand and flat 15A and the 4th defendant on the other hand.

20. Fourth, it is contended that in so far as the summary judgment orders both an inquiry and an accounting and damages for breach of trust it is in error in that an inquiry and account is an alternative remedy to damages and the plaintiff is not entitled to both remedies: Tang Man Sit v Capacious Investments Ltd [1996] 1 AC 514 PC. The plaintiff cannot have both judgment for a specified sum and an order for an inquiry in relation to the same matters. In purporting to give judgment for both the summary judgment is fundamentally in error.

21. For these reasons I am satisfied that this is a clear case where summary judgment ought not to have been entered. The appeal is allowed. The question of costs on both the application for summary judgment and the appeal is one which is better determined in the light of the ultimate resolution of the matter. Accordingly the question of costs is reserved.

22. I have already referred to the strict approach to this matter being taken by the plaintiff. I am satisfied from the whole of the circumstances that there is a very real doubt as to whether or not, had he been alive, the deceased would have required payment of any rent at all in respect of properties occupied by members of his family during the recent period of economic downturn. The plaintiff is seriously in delay in her administration of the estate, the deceased having died eight years ago. The estate assets exceed $13 million of which the individual defendants' share is at least $4.8 million. To suggest in all those circumstances that the summary judgment obtained ought now to be executed by charging orders being enforced against properties is wholly artificial.

23. I am confident that the plaintiff's solicitors will have advised her as to a sensible course of action to be taken to resolve the administration of the estate by the sensible division of the available property between the various beneficiaries. If they have not done so now they ought to do so immediately. To fail to so advise would be a gross breach of their duty. The present course of conduct of the plaintiff in her administration of the estate is only succeeding in putting legal fees into the pockets of solicitors, to the disadvantage of the beneficiaries, including the plaintiff herself. In my view the plaintiff should expect little support from the courts should she continue with the attitude she presently apparently holds towards the administration of the estate.

24. It remains only for me to express my apologies to the parties for the delay in the delivery of this judgment which has been occasioned by a period of ill health on my part.