RE LAU HOI TO

HCCA 3230/2020

[2022] HKCFI 1703

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO HCCA 3230 OF 2020

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JUDGMENT

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Introduction

1.  This is an appeal by the caveator Choy Heung May (“Madam Choy”) against the decision of Master D To (“Master”) on 30 November 2021 to (i) strike out her caveat entered against the estate of the Deceased (“Estate”) and her appearance to warning and (ii) grant letters of administration in respect of the Estate to the person warning.

Brief background

2.  The Deceased died intestate on 15 June 2020 in Guangzhou City in Guangdong Province. He was domiciled in Hong Kong and was survived by:

(1)  his lawful widow Madam Lam Wai Man (“Madam Lam”), now aged about 66

(2)  his lawful and natural son Lau Tak Sang, Samuel, now aged about 50 (“Mr Lau”), who is the person warning in the present application

(3)  his lawful and natural son Lau Tak Kwong Gary, now aged about 48

(4)  his lawful and natural son Lau Tak Ko Henry, now aged about 48

(5)  his lawful and natural daughter Lau Siu Na Mirana, now aged about 45

3.  As a result of discussion among the above beneficiaries of the Estate, it was agreed that the eldest son Mr Lau would be the one to apply for grant of the letters of administration (“LA”) of the Estate and Madam Lam renounced her right and title to the LA by a renunciation dated 9 November 2020.

4.  When Mr Lau proceeded to apply for the LA on 10 November 2020, he was informed that a caveat against the Estate (“Caveat”) was entered by Madam Choy on 17 June 2020, 2 days after the Deceased’s death. Madam Choy was said to be a long time mistress of the Deceased for more than 25 years until his death in 2020.

5.  A warning against the Caveat was filed by Mr Lau on 16 December 2020 (“Warning”) to which Madam Choy entered an appearance to warning on 28 December 2020 (“Appearance”).

6.  As stated in the Warning, Madam Choy was warned that within 8 days after service of the Warning on her, she was to either (i) enter an appearance setting forth what interest she has in the Estate contrary to that of the party issuing the Warning, or (ii) if she has no contrary interest but wish to show cause against the sealing of a grant, to issue and serve a summons for directions.

7.  By the Appearance entered by her, Madam Choy claims she has contrary interest. She claims to be a creditor of the Estate and that she had advanced a number of loans to the Deceased during his lifetime totalling RMB 7,600,000 at the date of the Deceased’s death (“Outstanding Loan”), and therefore the Estate owes her the amount of the Outstanding Loan. Further, in the Appearance, Madam Choy proceeded to set out various correspondence between her solicitors and Mr Lau (and his two brothers and/or their solicitors), and that despite her repeated demands and requests, Mr Lau failed and/or refused to furnish her with the information, papers and documents requested by her in relation to the intended administration of the Estate. It is Madam Choy’s allegation that Mr Lau’s conduct may be detrimental to her interest.

8.  On 20 July 2021, Mr Lau issued a summons under the inherent jurisdiction of the court, later amended on 24 August 2021 to include jurisdiction under Rule 44 of the Non-Contentious Probate Rules, Cap 10A (“NCPR”) (“Amended Summons”), to strike out the Caveat and the Appearance on the grounds that (i) the Caveat and/or entering of the Caveat and/or the continuance of the Caveat is an abuse of the process of the court; and/or (ii) Madam Choy has not shown any contrary interest as required under the Rule 44 and Mr Lau seeks an order that the LA in respect of the Estate be granted to him if he is so entitled.

9.  On 4 January 2021, Madam Choy commenced HCA 1/2021 to claim the Outstanding Loan from the “Personal Representative “of the Estate (“HC Action”). By a consent summons between Madam Choy and Mr Lau, Mr Lau was appointed to represent the Estate in that action. This Court was informed that the pleadings had not yet been closed and there appeared to have been no progress since Mr Lau’s appointment.

Madam Choy’s grounds of appeal

10.  Madam Choy presently relies on 3 major grounds[1]:

(1)  Ground (1) - She was entitled to make an application under section 36 of the Probate and Administration Ordinance, Cap 10 (“PAO”) to challenge the grant and for that purpose she had rightfully entered the Caveat;

(2)  Ground (2) - She had no means to enquire as to whether the Deceased had left her a will or to ensure that the Estate would pay off the Outstanding Loan from her to the Deceased other than entering the Caveat;

(3)  Ground (3) - There had been material non-disclosure in that Mr Lau failed to disclose her existence, namely a creditor of the Deceased, when applying for the grant of the LA and that such non-disclosure was material.

Discussion

11.  It is argued on behalf of Madam Choy that creditors have the standing to make an application for passing over under section 36 of the PAO.

12.  First of all, rule 21 of NCPR provides as follows:

“21. Order of priority for grant in case of intestacy

(1) Where a person dies wholly intestate, the persons having a beneficial interest in the estate shall be entitled to a grant to administration in the following order of priority, namely—

(i) the surviving spouse or the surviving partner or partners to a union of concubinage entered into before 7 October 1971;

(ii) the children of the deceased including any children born of a union of concubinage entered into before 7 October 1971, or the issue of any such child who has died during the lifetime of the deceased;

(iii) the father or mother of the deceased;

(iv) brothers and sisters of the deceased or the issue of any deceased brother or sister of the deceased who has died during the lifetime of the deceased.

(2) If no person in any of the classes mentioned in subparagraphs (ii) and (iii) of the last foregoing paragraph has survived the deceased, then, the following persons hereinafter described shall, if they have a beneficial interest in the estate, be entitled to a grant in the following order of priority, namely—

(i) grandparents;

(ii) uncles and aunts of the deceased, or the issue of any deceased uncle or aunt of the deceased who has died during the lifetime of the deceased.

All of the persons referred to in classes (i) and (ii) of this paragraph shall be entitled to a grant notwithstanding that the relationship referred to shall have been established by or resulted from a union of concubinage.

(3) In default of any person having a beneficial interest in the estate, the Official Administrator.

(4) If all persons entitled to a grant under the foregoing provisions of this rule have been cleared off, a grant may be made to a creditor of the deceased or to any person who, notwithstanding that he has no immediate beneficial interest in the estate, may have a beneficial interest in the event of an accretion thereto, or is, by virtue of section 3 of the Inheritance (Provision for Family and Dependants) Ordinance (Cap. 481), entitled to apply to the court for an order under section 4 of that Ordinance.

(5) Subject to rule 25(3), the personal representative of a person in any of the classes mentioned in paragraphs (1) and (2) of this rule or the personal representative of a creditor shall have the same right to a grant as the person whom he represents:

Provided that the persons mentioned in paragraph (1) and in paragraph (2) of this rule shall be preferred to the personal representative of a spouse who had died without taking a beneficial interest in the whole estate of the deceased as ascertained at the time of the application for the grant.

(6) The provisions of the Adoption Ordinance (Cap. 290) shall apply in determining the entitlement to a grant as they apply to the devolution of property on intestacy.”

13.  Thus, a grant may be made to a creditor if all persons entitled to a grant under Rule 21 (1) – (3) as set out above have been cleared off. However, this is not the situation in the present case.

14.  Ms Tse on behalf of Madam Choy then relied on section 36 of the PAO and argued that creditors have the standing to make an application for passing over under section 36 of the PAO.

15.  Section 36 provides as follows:

“36. Appointment of administrator of intestate’s estate

Where a person dies wholly intestate as to his estate or leaving a will affecting estate but without having appointed an executor thereof willing and competent to take probate, or where the executor is, at the time of the death of such person, resident out of Hong Kong, or where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate, other than the person who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate, the court may, subject to section 25, appoint such person as the court thinks fit to be such administrator, on his giving such security, if any, as may be required under this Part or as the court may direct, and every such administration may be limited in such manner as the court thinks fit.”

16.  Ms Tse referred the Court to Re Haque Shaquil HCCA 129/2011, [2012] 1 HKLRD 689. In this case, Poon J, as he then was, held that as section 36 of PAO does not define the qualified persons who may make the application, the court has to look at the particular circumstances of the case to see if the applicant is qualified and the same is true for the consideration if the applicant is a proper person in the sense that he has a legitimate interest in the relief sought[2].

17.  In Re Haque Shaquil, the deceased left a will appointing his equal shareholder Mr Lee in a company co-founded by them to be the sole executor and sole beneficiary of the deceased’s estate. The caveator claimed to be a creditor of the estate, and as pointed out by Poon J, if the caveator’s claims were sustained, then Mr Lee must pay him before making any distribution to himself as beneficiary. Poon J held that the caveator had a legitimate interest to see that Mr Lee was passed over as executor, and that the caveator was plainly a qualified and proper person to make the present application. Poon J found that Mr Lee’s conduct in the companies winding up action commenced by the caveator showed quite clearly that Mr Lee was amenable to and would in fact resort to unscrupulous means to further what he perceived to be his advantage, justified or not, and that he was thoroughly an unfit person to act as the executor for the estate. Poon J further found that Mr Lee was guilty of misusing the Estate’s funds and that Mr Lee had placed his personal own interest over and above the estate’s and was not qualified to act as executor, and that he had put himself in a clear conflict with the estate. There had also been overwhelming prima facie evidence on the estate’s insolvency. Poon J concluded that it was a just and obvious case to pass over Mr Lee as executor and ordered the Official Administrator to be appointed.

18.  What is clear from Re Haque Shaquil is that whether a caveator has locus or is qualified to make an application in that he/she has a legitimate interest in the relief sought under section 36 will depend on the circumstances of each case.

19.  In Re Haque Shaquil, the caveator had made an application under section 36 of the PAO about a month after he entered the appearance to Mr Lee’s warning and on the same day, Mr Lee applied to discharge the caveat. The decision of Poon J was essentially over whether Mr Lee should be passed over in the application under section 36.

20.  The present case is completely different. Up until now, there has been no application made by Madam Choy under section 36 of PAO, notwithstanding that by now, some 19 months have elapsed after she first entered the Appearance. As submitted by Mr Tsui, on behalf of Mr Lau, there is nothing to prevent Madam Choy to make an application under section 36. This Court is presently not dealing with any section 36 application. I do not see how Re Haque Shaquil assists Madam Choy.

21.  In paragraph 21 of Fok Po Nam and HSBC Trustee (Hong Kong) Limited, HCCA 3844/2017, [2018] HKCFI 1, Chow J, as he then was, has explained Rule 44 of the NCPR as follows:

“21. From the above provisions, it is can be seen that:-

(1) The effect of entering a caveat is that no grant relating to the estate of the deceased can be sealed without notice to the caveator.

(2) The provisions in sub-rules (5) and (6) ensure that no grant would be sealed by the Registrar where there is an effective caveat in force in relation to the estate of that deceased.

(3) By issuing a warning, the person warning can compel the caveator to state whether he has any contrary interest “in the estate of the deceased” (sub-rule (7)).

(4) The caveator, if he has a contrary interest, is then required to enter an appearance by filing an appropriate specified form. Pausing here, it may be noted that the specified form, namely, Form No.C1.4, requires him to set out “the interest of the caveator, stating the date of the Will, if any, under which such interest arises”.

(5) On the other hand, if the caveator has no contrary interest but wishes to show cause against the sealing of a grant to the person warning, he is required to issue and serve a summons for directions returnable before the Registrar.”

22.  Then in paragraph 22, Chow J, went on to explain, citing Tristam and Coote’s Probate Practice at paragraph 23.05 as follows:

“The following are some of the purposes for which a caveat may be entered:

(a) to give time to the caveator (objector) to make enquiries and to obtain such information as may enable him to determine whether or not there are grounds for opposing the grant;

(b) to give any person interested in the estate an opportunity of bringing any question arising in respect of the grant before the court on summons; and

(c) as a step preliminary to a probate claim, or to the issuing of a citation (notification).”

23.  Chow J further went on to say as follows:

“23. Although the purposes mentioned in the above passage are not exhaustive, it is nevertheless instructive to note they relate to matters such as whether a grant of representation of the estate of the deceased should be made, to whom the grant should be made, and possibly the terms of the grant. Generally, these are matters which a person having some interest in the estate of the deceased may legitimately be concerned with, but not someone who has no interest in the estate.

24. It is clear from Rule 44(7) that the legislature envisages that both the person warning and the caveator having a contrary interest would have some interest “in the estate of the deceased”. As earlier mentioned, if the caveator has, or asserts, an interest contrary to that of the person warning, he is required, under sub-rule (9), to enter an appearance in the Probate Registry by filing Form No.C1.4 (being the relevant specified form), and that form requires him to set out his interest. Examples of persons who may enter an appearance as having a contrary interest include an executor, legatee or devisee, the personal representative of a legatee or devisee, any other person claiming an interest under a will or codicil, a person claiming to be entitled to share in, or interested in, the estate of the deceased on his intestacy or partial intestacy, or the personal representative of any such person (see Tristram and Coote’s Probate Practice, at paragraphs 23.64 and 23.65).

25. In my view, the same interest requirement must also be applicable to a caveator who does not have, or assert, any contrary interest to the person warning. An example would be where both are entitled to a grant in the same degree (see Parry & Kerridge, The Law of Succession, 12^th Ed, at paragraph 19-02(ii)). At the time of the entry of a caveat, the caveator would not necessarily know whether there will be any person warning. Neither would the caveator necessarily know, at that time, that he has, or does not have, any interest contrary to that of the person warning.

26. It cannot, I believe, have been the intention of the legislature that a person who does not have, or assert, any interest in the estate of the deceased should be entitled to be given prior notice of the sealing of a grant in respect of the estate of the deceased, or be entitled to issue a summons for directions so that his demands can be considered or entertained prior to the sealing of the grant, thereby enabling or permitting any busybody to interfere in the process of applying for and obtaining a grant of representation by the proper personal representative of the deceased.

27. Support for the view that a person must have some interest in the estate of the deceased to justify the entering of a caveat can be found in the standard textbooks on probate law and practice. In Tristram and Coote’s Probate Practice, at paragraph 23.11, it is stated that “[a] caveat (objection) can be entered by any person having or asserting an interest in the estate of the deceased, either by the party himself or his probate practitioner”.

28. In Christopher Sherrin, Probate Practice in Hong Kong, 3^rd Ed, at paragraph 5.053, it is stated that “[t]he applicant will have to show an interest in the estate sufficient to justify the caveat.”

24.  As mentioned earlier, Madam Choy has simply relied on Re Haque Shaquil to support her case that she has an interest in the Estate contrary to that of Mr Lau and as I have said that case does not assist her.

25.  As seen in paragraph 24 of the Fok Po Nam case, examples of persons who may enter an appearance as having a contrary interest include an executor, legatee or devisee, the personal representative of a legatee or devisee, any other person claiming an interest under a will or codicil, a person claiming to be entitled to share in, or interested in, the estate of the deceased on his intestacy or partial intestacy, or the personal representative of any such person. Having a claim against the estate does not necessarily mean that the person has an interest in the estate. Further, for an applicant to have the locus to make an application under section 36, as seen in paragraph 22 of Re Haque Shaquil, what the applicant needs to show is that he/she has an interest in the relief sought under section 36.

26.  Mr Tsui has also referred the Court to Re Estate of John Tung Chi Ying, HCAP 2594/1987 and Re Estate of Diana Wong Pui Tak, HCCA 1160/2013, (unrep). 14.11.13.

27.  Having considered both counsel’s submissions, I am not satisfied that Madam Choy has a contrary interest or any interest in the Estate as alleged by her.

28.  As stated in paragraph 23.6 in Tristram and Coote’s Probate Practice, 37^th Ed, the steps taken after the entry of a caveat, the warning or notice to appear issued against the caveator by the party whose application for a grant has been stopped, and the appearance to the warning by the caveator will disclose the names and address of the parties and their respective interests in the estate of the deceased. With this information it is open to either of them, if their interests conflict, to commence a probate claim against the other for the purpose of establishing their own claim.

29.  Under Rule 44(12)(b), any caveat of which an appearance to a warning has been entered shall remain in force until the commencement of a probate action but this is subject to the Registrar’s direction otherwise. In the present case, after obtaining the information, there was no probate action taken out by Madam Choy, or as mentioned earlier, any section 36 application. Apart from issuing the HC Action, some 18 months ago, there was no other application issued by her. There is no dispute that the Master or this Court has inherent jurisdiction to strike out the Caveat. To allow the Caveat to remain on the Court file will obstruct Mr Lau in applying for the LA and is in my view an abuse of process.

30.  As for the alleged material non-disclosure, Madam Choy’s allegation was that on or around 27 October 2020, Madam Choy sent a letter before action though her solicitors to the Deceased’s 3 sons to inform them of the Outstanding Loan and enquired amongst other things as to whether the Deceased had left a will and she also sought information relating to the administration of the Estate. It is Madam Choy’s case that upon receipt of her solicitors’ letter that Mr Lau then proceeded to apply for the LA of the Estate, and in doing so, he failed to disclose the Outstanding Loan in the schedule of assets and liabilities filed by him and that there were material non-disclosure on his part.

31.  Ms Tse has relied on the case of Re Estate of Kwok Mei Lung, HCMP 302/2018, [2020] HKCFI 343. In that case, one of the reasons for the revocation of the letters of administration was the failure to disclose material facts, namely, the existence of the will and the sister’s attempt to inform the defendant of the will. At present, the Outstanding Loan is only a claim by Madam Choy and it is subject to dispute and has not been proved or established. There is no authority to support Ms Tse’s submission that all potential claims must be included. As I have indicated during the hearing, any administrator would have the duty to investigate any potential claim by an alleged creditor. Madam Choy is not a secured creditor. I do not agree with Ms Tse that Mr Lau’s failure to include this claim in the schedule of assets was material to the extent that it can be inferred from such failure that it was rightful and necessary for Madam Choy to have entered the Caveat to protect her claim.

32.  It is further Madam Choy’s case that Mr Lau and his siblings have incurred further liabilities by the Estate by their advancing sums to a company used by of the Deceased for his real estate business. However, the liabilities would be those of the company and not of the Estate, and in any event, it was Mr Lau’s evidence that such advances were to support the liquidity of the company. Even if Madam Choy for some reasons considered this to be dissipating assets of the Estate, as mentioned by this Court during the hearing, there would be other steps she could consider taking to protect her claim under the HC Action.

Conclusion

33.  An appeal from a master’s decision is by way of an actual rehearing. Having considered the submissions, I have come to the same conclusion as the Master, namely that the Caveat and the Appearance should be struck out. I thus dismiss Madam Choy’s appeal with costs and the order made by the Master on 30 November 2021 to stand.

34.  Mr Lau is to submit his statement of costs within 7 days, and Madam Choy her list of objections within 7 days thereafter. Costs are to be summarily assessed and payable by Madam Choy within 7 days of summary assessment.