HAU, LINDA AND ANOTHER v. HAU FUK WAH AND ANOTHER

HCA2235/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2235 OF 2008

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BETWEEN

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J U D G M E N T

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1.  By summons filed on 5 June 2009, the plaintiffs apply to strike out the Defence and alternatively for summary judgment, judgment by admission and an order for account against the defendants.

The parties

2.  The plaintiffs are the natural daughters of Hau Sik Wah (侯錫華), deceased (“the Deceased”) and Pang Lai Kuen, deceased. The Deceased and Madam Pang were lawfully married in Denmark. The Deceased died on 14 October 1994, domiciled in Denmark. Letters of administration of the Deceased’s estate were granted to the plaintiffs on 22 March 2006.

3.  The plaintiffs bring this action in two capacities. The first is in their capacity as the administrators of the estate of the Deceased. The second is in their capacity as the only beneficiaries of the estate of the Deceased.

4.  The defendants are respectively the brother and sister of the Deceased. They are sued in their capacity as the administrators of the estate of Hau Pang Sheung Kam, deceased (“the Trustee”). The Trustee was the mother of the Deceased and the defendants. She died on 20 February 1995. Letters of administration of the Trustee’s estate were granted to the defendants on 4 January 2002.

The Properties

5.  The properties in issue in this action are those set out in Part B of the 3^rd Schedule to the Statement of Claim (“the Properties”). They comprise:

(1)  Lots No. in D.D.91:

      2027, 2028B, 2133, 2138, 2140, 2168B, 2339, 2367B, 2377, 2392, 3170, 3179, 3183, 3211B,

      3251, 3265B and 2384

(2)  Ping Kong Lots No. in D.D.91:

      23, 52, 53B, 55 and 56

(3)  Lots No. in D.D.91:

      2068, 2114,2154, 2257, 2259, 2267 and 2319

6.  By a Succession of Property dated 5 May 1959 and registered in the Land Registry under Memorial No. N139439, various plots of agricultural land in D.D.91 (including the Properties), which were previously registered in the name of Hau Ying Leung, deceased became succeeded by Hau Chun Yin, Hau Hong Wah, the Deceased and the 1^st defendant. Hau Chun Yin was the elder son of Hau Ying Leung while Hau Hong Wah, the Deceased and the 1^st defendant were his grandsons. The interest of Hau Hong Wah, the Deceased and the 1^st defendant was held on trust by the Trustee under section 18 of the New Territories Ordinance on the ground that they were minors. The land lots covered by the Succession of Property were set out in the 2^nd Schedule to the Statement of Claim.

7.  By a Division of Property dated 5 November 1959 and registered in the Land Registry under Memorial No. N140234, the land lots covered by the Succession of Property were divided in the manner set out in the 3^rd Schedule to the Statement of Claim between: (a) Hau Chun Yin; and (b) Hau Hong Wah, the Deceased and the 1^st defendant as tenants-in-common, with the Trustee as their trustee. In consequence of this, each of Hau Hong Wah, the Deceased and the 1^st defendant had one-third share in the part of the Properties as set out in paragraph 5(1) and (2) above and one-sixth share in the part of the Properties set out in paragraph 5(3) above.

8.  Hau Hong Wah died on 6 April 1989. His interest in the Properties was succeeded by Hau Chi Chiu and Hau Wai Kei under section 17 of the New Territories Ordinance.

9.  Notwithstanding Hau Hong Wah, the Deceased and the 1^st defendant had attained majority, the Trustee did not during her life time vest the Properties in them or in the case of Hau Hong Wah, his successors and in the case of the Deceased, his estate in accordance with their share of interest therein. Consequently, upon her death, the respective interest of Hau Hau Wah, the Deceased and the 1^st defendant continued to be held by the Trustee’s estate on trust. Further, upon the grant of administration of the Trustee’s estate to the 1^st and 2^nd defendants, the Properties became to be held by the 1^st and 2^nd defendants on trust for the successors of Hau Hong Wah, the estate of the Deceased and the 1^st defendant himself.

10.  By a vesting assignment dated 28 June 2003 and registered in the Land Registry under Memorial No. N549060, the 1^st and 2^nd defendants vested the legal title of one-third share in the part of the Properties set out in paragraph 5(1) and (2) above and one-sixth share of the part of the Properties in paragraph 5(3) above in the 1^st defendant in his capacity as a beneficiary.

11.  By another vesting assignment and registered in the Land Registry under Memorial No. N549061, the 1^st and 2^nd defendants vested the legal title of one-third share in the part of the Properties set out in paragraph 5(1) and (2) above and one-sixth share of the part of the Properties in paragraph 5(3) above in Hau Chi Chiu and Hau Wai Kei as tenants-in-common in equal shares in their capacity as beneficiaries.

12.  By letter dated 4 August 2008, the plaintiffs’ solicitors herein requested the defendants to vest the legal title of the Deceased’s share in the Properties in the plaintiffs, to which the defendants did not accede.

Government resumption of land

13.  Meanwhile in 2002, part of the Properties was resumed by the government. On 12 March 2002, the defendants made a statutory declaration proving loss of title deeds of the lots of land in question so as to comply with the standard requirement of the government and the preconditions for payment of compensation.

14.  By two government notices dated 1 August 2006 and 17 August 2006, part of the Properties, being Lots No. 2027, 2028B(P) and 2267(P) in D.D.91 (”the Resumed Land”), was resumed by the government under the Land Resumption Ordinance.

15.  On 15 September 2006, the plaintiffs accepted the offer of compensation in respect of the interest of the Deceased’s estate in the Resumed Land. The plaintiffs were required by the Lands Department to produce, inter alia, the title deeds or a statutory declaration made by the administrators of the Trustee’s estate proving loss of the title deeds, together with a vesting assignment from the administrators of the Trustee’s estate to them as administrators of the Deceased’s estate.

16.  Despite request made in another letter dated 4 August 2006 by the plaintiffs’ solicitors, the defendants did not provide to the plaintiffs the title deeds or a statutory declaration to prove loss of the title deeds, or execute an Agreement as to Compensation and Indemnity, which was required by the Lands Office. The plaintiffs have not been able to obtain the compensation money from the government.

The plaintiffs’ claim

17.  On 7 November 2008, the plaintiffs commenced this action. In essence, the plaintiffs claim that the defendants have failed to discharge their duties as administrators and/or trustees by failing: (1) to vest in the plaintiffs the share of interest that the Deceased’s estate has in the Properties; (2) to take steps to enable the plaintiffs to receive the compensation money for the resumption of the interest of the Deceased’s estate in the Resumed Land; and (3) to properly administer the estate of the Trustee.

18.  Primarily, the plaintiffs seek: (1) a mandatory injunction compelling the defendants to execute a vesting assignment in their favour; (2) an order for account by the defendants of their dealings with the Properties; (3) an enquiry in respect of the defendants’ dealings in the Properties; (4) an order requiring the defendants to either produce the title deeds of the Resumed Land or to make a statutory declaration proving loss of the title deeds and to enter into an Agreement as to Compensation and Indemnity and execute other legal documents in connection with the resumption of the Resumed Land; and (5) alternatively, the removal of the defendants as the administrators and trustees of the Trustee’s estate.

The Defence

19.  The defendants have no dispute with the material facts pleaded in the Statement of Claim and as set out above. The Defence only raises the following matters:

(1)  Apart from the plaintiffs, the Deceased had one other natural daughter named Susan Hau. She was born in Denmark and her mother is a Danish woman.  Hence, the plaintiffs are not the only beneficiaries of the Deceased’s estate.

(2)  When the plaintiffs applied to the Hong Kong High Court for grant of administration, they had failed to disclose the fact that there is a third beneficiary to the estate of the Deceased, namely, Susan Hau.

(3)  The plaintiffs had hitherto not requested for an account of the properties held on trust by the defendants. The defendants are agreeable to providing an account of all their dealings of the trust properties.

The defendants’ arguments on the summons

20.  The plaintiff’s summons contains four applications. The primary application is to strike out the Defence under Order 18, rule 19 of Rules of the High Court on the ground that no reasonable defence to the claim has been disclosed and/or that the defence is scandalous, frivolous and vexatious or otherwise an abuse of the court process. The second and alternative application is for summary judgment on the claim. The third application is for judgment by admission under Order 27, rule 1 on the ground that the defendants have conceded that they are under a duty to render an account of the trust property. The fourth is an application under Order 43, rule 1 for an account and enquiry of the defendants’ dealings with the trust properties.

21.  In opposing the striking out and summary judgment applications, the defendants contend that the Defence has raised a reasonable defence and that there are triable issues. Specifically, the defendants raise the following arguments:

(1)  One of the plots of land, Lot No.2384, which was handled by the village chief, had been sold many years ago.  Accordingly, this lot has never been vested in the Trustee and does not form part of the Trustee’s estate.  The defendants say that this is supported by the fact that the lot is not included in the Schedule of Properties annexed to the Letters of Administration in respect of the Trustee’s estate or in the Schedule of Properties annexed to the Letters of Administration in respect of the Deceased’s estate.

(2)  By reason of the fact that the plaintiffs, in applying for grant of administration, asserted in the affirmation leading the grant that they are the only beneficiaries of the Deceased’s estate and failed to disclose that Susan Hau is also a beneficiary of the Deceased’s estate, the Letters of Administration granted to them is liable to be revoked under section 33 of the Probate and Administration Ordinance, Cap.10.

(3)  In the premises, the court should enquire at trial as to whether the plaintiffs had deliberately misled the court in obtaining the granting of administration.  The court should also enquire into whether the plaintiffs come under any conflict of interest so that they are not fit to continue the administration of the estate.

22.  The defendants concede that they are trustees in respect of the Deceased’s share in the Properties. They are prepared to vest the trust property in the plaintiffs but say that it is reasonable for the plaintiffs to give an undertaking as to indemnity by reason of Susan Hau’s interest in the Deceased’s estate and also the plaintiffs’ conflicting interest as the administrators and beneficiaries of the Deceased’s estate.

23.  As to the rendering of an account, the defendants maintain their position in the Defence that they will provide it to the plaintiffs. The defendants have in fact engaged accountant and Mr Ho, who appears for them, indicates that the report would be available within 28 days.

Any reasonable cause of defence or triable issues?

(A) Lot No. 2384

24.  The suggestion that Lot No. 2384 has never been vested in the Trustee and is not part of the trust property was only raised in the affirmation opposing the plaintiffs’ summons. It is not pleaded in the Defence.

25.  That aside, it is only an assertion made by the 1^st defendant. It would also appear from the affirmation that he does not have first hand information about it. The chief of village who is said to have dealt with the lot is not even identified. No particulars were given as to when the lot was said to have been sold. On the other hand, both the Succession of Property and the Division of Property had included Lot No. 2384. On the basis of the Division of Property, Lot No. 2384 was assigned to Hau Hong Wah, the Deceased and the 1^st defendant and held on trust for them by the Trustee. The suggestion that the Division of Property made a mistake about this lot is only a bare allegation.

26.  In my view, the assertion that Lot No. 2384 is not part of the land held by the Trustee on trust for the estate of the Deceased cannot stand in light of the Division of Property and in the absence of cogent proof that there is an error in it. In so far as the lot is now no longer held by the Trustee’s estate, this only goes to the question of relief to be granted by the Court. It will mean that the Court cannot compel the defendants to vest one-third share of this lot in the estate of the Deceased. It cannot afford the defendants with a defence, let along an arguable defence to the plaintiffs’ claim. As Mr Chong for the plaintiffs points out, given that the grant to the defendants is a general grant (as opposed to a limited grant), all properties comprising the estate (irrespective of whether they had been included in the Schedule of Properties annexed to the Letters of Administration) fall within their ambit of power and duty. Thus, even though Lot No. 2384 is not included in the Schedule of Properties, the defendants as administrators of the Trustee’s estate are still under a duty to account for it.

(B) Revocation of the grant to the plaintiffs

27.  I turn next to the defence that the grant of administration to the plaintiffs is liable to be reovoked on the ground of material misleading statement in the affirmation leading to the grant. It is common ground between the parties that the Deceased had fathered Susan Hau. The plaintiffs assert that there was no marriage between the Deceased and Susan Hau’s mother. The defendants had produced a letter written by the Deceased to the Trustee in 1969 in which he said he had set up a family and Susan Hau was born on 1 November 1968. The plaintiffs had previously disclosed to the defendants two expert opinions on Danish law. The opinions expressed in the reports were made in the context of the estate of the plaintiffs’ mother, Hau Pang Lai Kuen. They are to the effect that the plaintiffs are the only heir of the Deceased and Hau Pang Lai Kuen. They are however silent as to Susan Hau or her relationship and position vis-à-vis the Deceased and his estate under the Danish law. On the evidence before the Court, the questions of whether, as a matter of fact, Susan Hau is the legitimate child of the Deceased, and whether, as a matter of Danish law, she has any interest or right in the Deceased’s estate remain inconclusive.

28.  However, these questions are irrelevant to the plaintiffs’ claim against the defendant in their capacity as administrators of the Deceased’s estate. Mr Ho who appears for the defendants accepts, and the same can be said of the defendants, that the Trustee’s estate, and in turn the defendants as its administrators, are all under a duty to vest the Deceased’s share in the Properties in the estate of the Deceased. The plaintiffs had obtained Letters of Administration in respect of the Deceased’s estate. In their capacity as administrators, the plaintiffs are therefore entitled to call upon the defendants to vest the Deceased’s share of the Properties in them. The assertion in the defendants’ affirmations and the letters to the plaintiff’s solicitors that the vesting assignment has to be in favour of the beneficiaries of the Deceased’s estate, namely, the plaintiffs and Susan Hau, is misplaced. In the same vein, it is inappropriate for the plaintiffs to have brought this action on their own behalf and in their capacity as beneficiaries of the Deceased’s estate. I shall have more to say about this in the latter part of this Judgment when dealing with the question of costs.

29.  The defendants argue that the grant to the plaintiffs is liable to be revoked. It is plain that this is not a matter for this Court. And the defendants have no right to seek a revocation of the grant. Mr Ho does not seek to argue against these trite points of principle. What he nevertheless urges the Court to do is to investigate further into the matter, to see whether the grant should be revoked and whether the plaintiffs are fit to administer the Deceased’s estate as their duties as administrators may conflict with their interest as beneficiaries, having regard to their intention to exclude Susan Hau from the distribution of the Deceased’s estate. I am unable to accept this submission. There is no room for the court to embark on the kind of investigation or enquiry that the defendants hope for because it is clearly irrelevant to the cause in this action.

30.  As to the request for indemnity made by the defendants as a condition for executing the vesting assignment in favour of the plaintiffs, this is to cater for any claim that Susan Hau may bring against the defendants. Again, this stems from the misconception that the Deceased’s interest in the Properties has to be vested in the beneficiaries of the Deceased’s estate. Any beneficial interest that Susan Hau may have in the Deceased’s estate will not be affected by having the trust property vested in the Deceased’s estate and in turn the plaintiffs as administrators of the estate.

31.  In summary, the contentions that the plaintiffs have not made proper and full disclosure when applying for the Letters of Administration and/or that the grant is liable to be revoked do not amount to reasonable cause of defence to the plaintiffs’ claim.

32.  It follows from the above analysis that the Defence filed by the defendants is liable to be struck out for disclosing no reasonable cause of defence and the plaintiffs are entitled to judgment on their claim, save that the vesting assignment that the defendants are ordered to execute shall not extend to Lot No. 2384. And I so order.

33.  That being the case, it is not necessary for me to make any order on the application for summary judgment. Had it been necessary to deal with the application, I would have entered summary judgment for the plaintiffs. Similarly, I do not have to make order on the applications for judgment by admission and for an order of account and enquiry. In any event, the defendants do not oppose to an order for account and enquiry.

Costs

34.  On the question of costs, Mr Ho submits that as both the plaintiffs and the defendants are acting on behalf of the respective estates, the costs should be borne by the estates in question. I do not agree. The fact that the plaintiffs and the defendants are administrators of the respective estates is only relevant to their own costs, so that they may have the costs they incur (to the extent this is not compensated by the other side) being reimbursed out of the estate they represent. The fact is, however, irrelevant to the costs position between the parties. For inter partes costs upon the conclusion of an action, the normal rule is for costs to follow event. The plaintiffs, having succeeded in their claim against the defendants, are entitled to have their costs against the defendants.

35.  The question is whether there is any ground for departing from the normal rule. By a without prejudice letter dated 15 January 2009 to the plaintiffs’ solicitors, the defendants had offered to give the bulk of the relief claimed by the plaintiffs on the basis of no order as to costs. The offer to execute a vesting assignment, however, was subject to the condition of an undertaking of indemnity to be given by the plaintiffs. As stated above, the undertaking of indemnity is unnecessary and in entering judgment for the plaintiffs, I have not imposed such an undertaking. The letter and the offer contained in it therefore do not enable the defendants to avoid the costs consequences.

36.  The plaintiffs seek costs on an indemnity basis. It is said that the Defence amounts to an abuse of process and is an ill attempt to stall the plaintiffs’ rights such that the defendants should be visited with an indemnity costs order. I have for reasons indicated above concluded that the defendants have not raised any reasonable cause of defence or triable issue. In particular, I have held that the defendants are misconceived insofar as they think that the vesting assignment has to be in favour of the beneficiaries of the Deceased’s estate. Indeed, it seems it is this misconception that underlines the defendants’ stance and defence in this action. I am, however, not persuaded that there are special circumstances in this case that justify the making of an indemnity costs order against the defendants. In this regard, I note that the plaintiffs have pleaded in the Statement of Claim that the claim is brought not only in their capacity as administrators of the Deceased’s estate, but also in their capacity as beneficiaries of the Deceased’s estate. As indicated above, the latter capacity is irrelevant. Further, the judgment is granted to the plaintiffs in their capacity as administrators only.

Conclusion and orders

37.  For the reasons indicated above, I make the following orders:

(1)  The Defence of the 1^st and 2^nd defendants is struck out.

(2)  Judgment is entered for the plaintiffs as provided in (3) to (9) below.

(3)  The 1^st and 2^nd defendants and each of them do execute a vesting assignment or deed and such other legal documents whereby the legal title of the one-third share of the land set out in paragraphs 5(1) and (2) above (save and except Lot No. 2384 in D.D. 91) and of the one-sixth share of the land set out in paragraph 5(3) above, and beneficially owned by the Deceased may be vested in the plaintiffs as administrators of the estate of the Deceased.

(4)  In default of compliance with (3) above within 14 days from the date of this Judgment or such extended period as may be agreed between the parties, the Registrar of the High Court is authorized to execute such vesting assignment or deed and other legal documents for the purpose of vesting the legal title of the Deceased’s interest in the Properties (save and except Lot No. 2384 in D.D. 91) in the plaintiffs as administrators of the estate of the Deceased.

(5)  The 1^st and 2^nd defendants do within 14 days from the date of this Judgment or such extended period as may be agreed between the parties, produce to the plaintiffs’ solicitors –

(a)  the original title deeds showing or evidencing the Deceased’s interest in the Properties; or

(b)  a statutory declaration duly affirmed and declared by the 1^st and 2^nd defendants that the title deeds showing or evidencing the Deceased’s interest in the Properties have been lost.

(6)  The 1^st and 2^nd defendants do within 14 days from the receipt of a written demand by the plaintiffs’ solicitors or within such extended period as may be agreed between the parties, execute and produce to the plaintiffs’ solicitors a standard term “Agreement as to Compensation and Indemnity” in respect of the government resumption of the Deceased’s interest in the Properties.

(7)  In default of compliance with (6) above, the Registrar of the High Court is authorized to execute a standard term “Agreement as to Compensation and Indemnity” in respect of the government resumption of the Deceased’s interest in the Properties.

(8)  The 1^st and 2^nd defendants do jointly and severally, within 28 days from the date of this Judgment or such extended period as may be agreed between the parties, provide to the plaintiff a true and proper account of each and every dealing with any of the land lots set out in paragraph 5 above (together with supporting documents); the said account shall be prepared in accordance with the accepted accounting practice in Hong Kong and be verified on oath by the 1^st and 2^nd defendants.

(9)  The plaintiffs do have liberty to apply for the purposes of (4) and (7) above and generally.

(10)  The plaintiff’s application for enquiries of the account to be provided by the 1^st and 2^nd defendants be adjourned sine dine with liberty to restore provided it shall not be restored before the lapse of the 28 days period or such agreed extended period as provided in (8) above; and the plaintiff do have liberty to apply for directions on the conduct of the enquiry.

(11)  The costs of the action, including the costs of the plaintiffs’ summons, be paid by the defendants to the plaintiffs to be taxed if not agreed on party-and-party basis.  The plaintiffs’ own costs to be paid out of the Deceased’s estate.