LEE CHARLES v. LEE YAN CHUN AND OTHERS

HCMP 1709/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1709 OF 2007

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JUDGMENT

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1. This is the plaintiff’s application by the amended summons dated 23 July 2008 for an order that the plaintiff do have leave to amend the originating summons (“the OS”) in the terms of the draft annexed to the amended summons and for consequential directions.

2. The amendments sought are to add additional defendants and to seek relief against the additional defendants as well as the existing defendants.

3. The background facts are that these proceedings concern the estate of Lee Ka Dor (“the deceased”) who died on 18 May 2004 leaving a will dated 18 December 2001 (“the Will”).  The defendants were appointed executors and trustees under the Will.  Probate of the Will was granted in Hong Kong on 4 January 2007.

4. It will be convenient to refer to the defendants and the proposed defendants as follows:

Lee Yan Chun (‘D1”);

Li Yeung Tak Lugee (“D2”);

Lee Annie Yeung Ning (“D3”);

Wong Yu Ching (“D4”);

Lee Yeung Chuen (“D5”);

Lee Yeung Kong (“D6”);

Lee Yau Fun Cindy (“D7”);

Li Yeung Hing (“D8”);

Lee Dianna Yeung Chu (“D9”).

5. D1, D2, D5, D6, D7 and D8 are the natural children of the deceased and Ng Ming Fun who has also passed away.

6. D3 is the natural child of the deceased and D4.

7. The plaintiff and D9 are the natural children of the deceased and Madam Fan.

8. Under the Will the deceased made distributions of shares in a private company to the beneficiaries as provided in the Will.  The plaintiff was to be given 15,000 shares in the company.  The deceased’s residuary estate was to be divided into 9 equal shares and distributed to the plaintiff, Ng Ming Fun, D1, D4, D5, D6, D7, D8 and D9.

9. About one month prior to the deceased’s death the deceased transferred the shares which were to be given to the plaintiff under the Will to D4 as a gift.  The plaintiff’s case is that as a result of this the plaintiff and the other 8 beneficiaries of the residuary estate entered into a Deed dated 8 June 2004 (“the Deed”) thereby varying the dispositions made under the Will.

10. Two other deeds were also entered into but they are not relevant to the matters before me.

11. The Deed was made between the plaintiff, Ng Ming Fun, D1, D4, D5, D6, D7, D8 and D9, all the 9 beneficiaries of the residuary estate of the deceased.  As set out in the Deed at the date of his death the deceased had accounts in Canadian currency in the Royal Bank of Canada in Vancouver, British Columbia, Canada (“the Canadian accounts”) which formed part of the residuary estate.  By the Deed the parties agreed, inter alia, as follows:

“ 1. Each of the Beneficiaries hereby conveys and assigns unto the [plaintiff] all of his or her respective share, benefit, estate and interest in that portion of the residuary estate of the Deceased which consists of the Deceased’s Accounts in Canada and hereby covenants to hold all the monies in the Deceased’s Accounts in Canada unto the [plaintiff] absolutely;”

…………………………………………

5. Each of the Beneficiaries hereby covenants each other and with the [plaintiff] that he or she would procure the Executors of the Will of the Deceased to:

(a) Confirm this Deed as soon as practicable upon obtaining a grant of the Will of the Deceased in Hong Kong;

(b) release all monies in the Deceased’s Account in Canada to the [plaintiff] as soon as practicable after obtaining a grant of the Will of the Deceased in the Province of British Columbia and upon retaining sufficient monies from the Deceased’s Accounts in Canada for payment of taxes, fees, assessments and duties as aforesaid but in any event, not later than 6 months after obtaining a grant of the Will in Canada.”

12. D1, D2 and D3 as the executors and trustees of the Will are in the course of the administration of the estate.

13. It is trite that a residuary legatee has no interest in a defined part of the estate until the residue is ascertained.  His right, which is transmissible, is to have the estate properly administered and applied for his benefit when the administration is complete.  Such a right is a chose in action.  (para 78-04 Williams, Mortimer & Sunnucks on Executors, Administrators and Probate 19^th Edn.).

14. The plaintiff’s case is that the Deed constitutes an agreement by the plaintiff and the other 8 beneficiaries of the residuary estate to alter the dispositions under the Will which, once communicated to the executors, is binding on them (Crowden and another v Aldridge and others [1993] 1 WLR 433). 

15. In Crowden the memorandum signed by each of the residuary legatees showed on its face an intention to create a document having immediate legal effect directing the executors to vary their obligations in the administration and distribution of the estate.  Deputy Judge Sumption QC said at 438-439:

“ At the time when the memoranda were signed, none of the signatories had any beneficial interest in the estate.  But they did have a right, enforceable in a Court of Equity, to compel the executors to do their duty.

It is not in doubt that a will, or more properly the obligations of executors in administering an estate assigned to it, may be varied by a direction given by all the relevant legatees.  It is conceded that the deed would have had this effect if all the residuary legatees had executed it in this case.  The exact juridical analysis of the transaction is obscure, but in my judgment it operates in the same way as a unanimous direction to trustees by all the relevant beneficiaries under a trust.  Such a direction can in law create an interest in a third party enforceable directly by him against the trustees: In re Chrimes; Locovich v. Chrimes [1917] 1 Ch. 30, 36-37, and In re Wale decd.; Wale v. Harris [1956] 1 W.L.R. 1346, 1350-1351.

This is sometimes described as an assignment of the interest of the directing beneficiaries to the third party, but it is in fact simply an alteration of the trusts on which the property is held.”

16. The plaintiff’s position as submitted by Ms Tong, for the plaintiff, is that the residuary beneficiaries’ rights to the monies in the Canadian accounts should be transferred to the plaintiff upon completion of the administration pursuant to the Deed.

17. It seems to me that on the authority of Crowden the plaintiff’s contentions are plainly arguable.

18. The evidence shows that the solicitors for D1, D2 and D3 have written to the beneficiaries asking them, inter alia, to inform them whether they executed the Deed, whether they agreed to be bound by the terms of the Deed and whether they would procure D1, D2 and D3 to do the acts as set out in Clause 5 of the Deed.  Only D4 and D9, who is the natural sister of the plaintiff, have confirmed that they had executed the Deed and agreed to be bound by it.  No confirmation from the other beneficiaries has been received.  Not even from D1 who was a party to the Deed in her personal capacity as a beneficiary of the residuary estate.

19. By paragraph 14 of the affirmation of D2 and D3 filed on 28 January 2008, which affirmation was also made on behalf of D1, they state that when enquiry was made of D1 as to the Deed, she told D2 and D3 that she did execute the Deed but that she did not know the contents thereof in detail.  She has, however, not provided the confirmation sought by the solicitors.

20. The plaintiff, therefore, applies to join D4 to D9 in these proceedings and to amend the OS to sue D1 as executor as well as in her personal capacity as beneficiary, and D2 as executor of the deceased and also as the personal representative of Ng Ming Fun, deceased.  The amendments sought include prayers 2, 3, 4 and 5 in the prayer for relief.

21. By prayer 2 the plaintiff seeks a declaration that the Deed is valid, binding and enforceable.

22. By prayer 3 the plaintiff seeks an order pursuant to the Deed, in particular Clause 5 thereof, that the other 8 beneficiaries of the residuary estate who executed the Deed do:

(1) procure D1, D2 and D3 as the executors and trustees of the estate of the deceased to confirm the contents of the Deed;

(2) instruct, direct, authorize and procure D1, D2 and D3 to release to the plaintiff all monies in the Canadian accounts;

(3) co-operate with and to do all things necessary to assist and enable D1, D2 and D3 to release the monies in the Canadian accounts to the plaintiff.

23. By prayer 4 the plaintiff seeks an order that D1, D2 and D3 as the executors and trustees of the estate of the deceased do act in accordance with the instructions and directions of the beneficiaries of the residuary estate to be made pursuant to prayer 3 and in particular, to release the monies in the Canadian accounts to the plaintiff.

24. By prayer 5, further and/or alternatively, the plaintiff seeks an order that D1, D2 and D3 be removed as executors and trustees of the estate of the deceased and that the plaintiff be appointed in his place.

25. D1, D2 and D3 oppose the application.  Mr. Lin, for D1, D2 and D3, submitted that the executors were not parties to the Deed.  Their position is that any dispute on the Deed should be resolved in separate proceedings between the plaintiff and the parties to the Deed and should not be an issue affecting in any way their duties as the executors in the course of the administration of the estate.

26. Mr Lin also submitted that the position of the executors on the validity of the Deed has remained neutral but if all the beneficiaries confirm to them that they all agree to be bound by the Deed, then there is no reason why they should not give effect to their wishes.

27. Although Mr Lin stated that the position of the executors on the validity of the Deed has remained neutral, I would observe that despite being asked to confirm the Deed and agree to be bound thereby, D1 in her personal capacity has not done so.  Neither has D2 as the personal representative of Ng Ming Fun, deceased.

28. It is relevant to consider the provisions of Order 15; rules 1, 4 and 6 RHC.

29. By O.15; r.1(1)(b) a plaintiff may in one action claim relief against the same defendant in respect of more than one cause of action if the defendant is alleged to be liable in the capacity of executor in respect of one or more of the causes of action and in his personal capacity but with reference to the same estate in respect of all the others.  So far as D1 is concerned, it is clear that the plaintiff may in the same action claim relief against her as executor and also in her personal capacity with reference to the same estate namely, the estate of the deceased.  The same can be said of D2 who is also the personal representative of Ng Ming Fun, deceased.

30. By O.15; r.4(1) two or more persons may be joined together in one action as defendants with leave of the court or where if separate actions were brought against each of them some common question of law or fact would arise in all the actions.

31. As is set out in 15/4/1 of the Hong Kong Civil Procedure 2008, the rule should be construed in a liberal sense.

32. By O.15; r.6(2)(b) the court may order any of the following persons to be added as a party, namely:

(i)   any person whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

33. Mr Lin submitted that ‘the cause or matter’ referred to in r.6(i) and (ii) meant the action as it stands between the existing parties and that it was not necessary nor was it just and convenient to join the additional defendants in these proceedings.  He submitted that the plaintiff should bring separate proceedings against the additional defendants as the executors did not wish to be involved in the dispute concerning the Deed.

34. I accept that ‘the cause or matter’ in O.15; r.6(i) and (ii) meant the action as it stands between the existing parties.  However, I am unable to accept Mr Lin’s submission that it is not necessary and that it is not just and convenient to join the additional defendants.

35. As submitted by Ms Tong, correctly in my view, if a separate action were to be brought against the additional defendants D1, D2 and D3 would be necessary parties.  O.85; r.2(2)(a) provides that an action may be brought for the determination of any question arising in the administration of the estate of a deceased person.  The validity of the Deed and whether it amounts to a variation of the provisions of the Will as regards distribution of the monies in the Canadian accounts being part of the residuary estate is a question which arises in the administration of the estate of the deceased.  Hence an action may be brought under O.85; r.2(2)(a).  All the executors of the estate must be parties to that action (O.85; r.3(1)).  D1, D2 and D3 would be necessary parties to that action.

36. O.15; r.13A relied on by Mr Lin provides no assistance to D1, D2 and D3.  Mr Lin submitted that the executors could simply be given notice of the action and need not be parties but would be bound by any judgment given in the action as if a party thereto under r.13A(4).  However, by O.85; r.3(1), D1, D2 and D3 as the executors of the estate must be parties to that action.

37. Looking at the OS and the affirmation of the plaintiff in support filed on 10 September 2007 the same day as the issuance of the OS, it is plain that the Deed and the provisions thereof are relied on by the plaintiff in the existing OS. 

38. The Deed is specifically mentioned in paragraph 1.4 of the prayer for relief.  The OS seeks a true and accurate account of the inventory of the estate including detailed information on the steps taken by D1, D2 and D3 in respect of the monies in the Canadian accounts and details of the steps taken or to be taken or work done or to be done by them in relation to the administration and eventual distribution of the monies in the Canadian accounts in the light of the provisions of the Deed (paragraph 1.4 of the prayer for relief).

39. The affirmation of the plaintiff in support of the OS clearly shows that the plaintiff has all along been relying on the provisions of the Deed when demands were made on the solicitors for D1, D2 and D3 to act in accordance with the provisions of the Deed and to release the monies in the Canadian accounts to him.

40. I would also observe that by prayer 5 of the prayer for relief in the proposed amended OS the plaintiff seeks an order that D1, D2 and D3 be removed as executors and trustees of the deceased’s estate.  One of the grounds relied on for this relief is the complaint of the plaintiff that D1, D2 and D3 have failed to act in accordance with the plaintiff’s entitlement under the Deed which has been communicated to them and which, on the plaintiff’s case, amounts to a valid alteration of the disposition of the monies in the Canadian accounts under the Will and is binding on D1, D2 and D3.

41. It seems to me that one of the matters raised in the OS as it stands between the existing parties is the validity and enforceability of the Deed and its effect on the executors D1, D2 and D3.  The plaintiff’s case is that the disposition under the Will as regards part of the residuary estate relating to the monies in the Canadian accounts has been varied and this is a matter which must affect the administration of the estate and the distribution of the monies in the Canadian accounts.

42. It seems to me that it is just and convenient to determine the validity of the Deed and its effect in one action rather than in two separate actions.

43. I am not persuaded that by the addition of the additional defendants there will be a delay in the administration and distribution of the estate.  Until the issue of whether the Deed is valid and enforceable and if so, whether it amounts to a variation of the disposition of part of the residuary estate under the Will is determined there can be no final distribution of the estate.

44. I am also not persuaded that there will be an increase in costs by the joinder of the additional defendants.  Mr Lin made the point that D1 may have to have separate representation for the claim made against her in her personal capacity.  D2 may also have to have separate representation for the claim made against her as the personal representative of Ng Ming Fun, deceased.   Even if a separate action were to be brought against the additional defendants, it seems to me that there will be the same problem of separate representation for D2 and D3.  Hence additional costs may have to be incurred even if there is no joinder.

45. In my view it is a complete waste of time, resources and costs to require the plaintiff to bring a separate action against the additional defendants where D1, D2 and D3 will in any event have to be parties in that action.  Proper and effective case management strongly militates against such a course.

46. In my judgment it is just and convenient to join the additional defendants in these proceedings as sought by the plaintiff.  I also grant leave to the plaintiff to amend the OS.

47. I make an order in terms of paragraph (1) of the amended summons dated 23 July 2008 granting leave to the plaintiff to amend the OS in the terms of the draft annexed to the amended summons save that in paragraph 5 of the prayer for relief in the draft the word “Defendants” should be D1, D2 and D3.

48. I also give leave to the plaintiff to serve the amended OS on D5 and D6 out of the jurisdiction.  The time for acknowledgment of service by D5 and D6 should be 28 days after service of the amended OS.

49. There is to be liberty to apply for further directions.

50. I also make an order nisi that D1, D2 and D3 do pay the plaintiff the costs of the application in any event.