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HCA 1742/2007
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 1742 OF 2007
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BETWEEN
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NANYANG COMMERCIAL BANK TRUSTEE LIMITED
(南洋商業銀行信託有限公司) |
1st Plaintiff |
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SHANGHAI CITY XUHUI DISTRICT NOTARY PUBLIC OFFICE
(上海巿徐匯區公證處) |
2nd Plaintiff |
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And |
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JOHN KU, TAM & HO (a firm) |
Defendant |
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_________________________ |
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Coram : Before Master K. Lo in Court
Date of Hearing : 30 July 2010
Date of Judgment : 8 October 2010
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J U D G M E N T
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1. This is an assessment of damages hearing pursuant to interlocutory judgment on liability having been entered against the Defendant on 6 October 2008 (no notice of intention of defend having been given).
Background of case
2. The facts of this case is largely not in dispute.
3. A man named Choy Ching Ming (“Choy”) died intestate in Hong Kong. He was single and never been married.
4. Under laws of intestacy in Hong Kong, persons entitled to his estate comprised of persons in Shanghai, PRC including a surviving brother CAI and surviving children of Choy’s brothers and sisters (collectively called “Choy family”). A former cohabitee Wong also claimed to be entitled, alleging to be his kit-fat wife.
5. Another former cohabitee Mok also claimed she was entitled to the estate under a will that Choy made, which was later not proved.
6. Due to efforts of third parties, including that of the 1st Plaintiff, the Choy family and Wong reached a compromise and they decided to jointly fight Mok for the estate, at the same time agreed to distribute estate of Choy amongst themselves.
7. On 10 June 1997, a Deed of Family Arrangement (“DFA”) was executed by CAI and other PRC beneficiaries of the Choy family of the one part, Ng of the second part and the 1st Plaintiff of the third part. By the DFA, it was agreed by all that the 1st Plaintiff, in its capacity as the lawful attorney of CAI, shall apply to the High Court of Hong Kong for a grant of Letters of Administration to the estate of the Deceased. In face of claim by Mok, the 1st Plaintiff was also given absolute power to conduct the proceedings in the interest of the PRC beneficiaries (including CAI) and Wong.
8. Later, legal aid was granted to a person Lam, the attorney ad litem of CAI (representing CAI himself and all Shanghai relatives) and the Defendant was the assigned solicitors in instituting an action against Mok in establishing that Choy died intestate and that the “Will” of Choy presented by Mok was not a valid one. It was later decided by the Court of First Instance in HCAP 13/1997 that Choy had made a gift in favour of Mok in his death bed (Donatio Mortis Causa – “DMC”) which involved nearly the whole of Choy’s estate. In the course of the appeal against this decision, a settlement was reached between the Choy family (including Wong) and Mok whereby Mok would take half of the whole estate (aggregate of DMC and net estate) and the rest would be shared between Choy family and Wong in manner as agreed in the DFA.
9. In the meantime, the Court in HCAP 13/1997 had ordered that an independent trust company i.e. Bermuda Trust Hong Kong Ltd (“Bermuda”) be appointed to act as the administrator for the estate.
10. Both the Defendant and another firm of solicitors Messrs. Josip Ma & Co. assisted Bermuda in applying for the Letters of Administration in respect of estate of Choy.
Analysis
11. It is the case of the Plaintiffs that the Defendant had in the course of doing so, made “unauthorized use of 33 Notarial Certificates prepared and issued by the 2nd Plaintiff but entrusted by the 1st Plaintiff with the Defendant on or about 18 April 1997 in connection with the application to the Probate Registry of the High Court for the grant of representation in respect of the estate of Choy Ching Ming, deceased”.
12. It is not in dispute that
(a) after the Affirmation by the Administrator i.e. Bermuda was lodged with the Probate Registry, requisitions were raised by the Probate Registry which requires the filing of death certificates in respect of deaths of relatives of Choy whose death had preceded that of Choy.
(b) these are the notarial certificates previously entrusted to the Defendant by the 1st Plaintiff for the purpose of applying for Letters of Administration in favour of the 1st Plaintiff on behalf of CAI in respect of the estate of Choy and are prepared and issued by the 2nd Plaintiff.
(c) that though express request was made by the Defendant for the production of these certificates to the Probate Registry, 1st Plaintiff had insisted on production these certificates to the Probate Registry only if there was payment of requisite fees to themselves and 2nd Plaintiff or there was undertaking for such payment.
(d) that these notarial certificates had previously been included in the list of documents in the action between Choy family (including Wong) and Mok, i.e. HCAP 13/1997.
(e) that the Probate Registry refused to dispense with production of these certificates, despite being informed by letter from the Defendant dated 13 August 2001 that Bermuda has been appointed by the Court as administrator.
Reply letter dated 16 August 2001 from the Probate Registry reads
“I refer to your letter of 13.8.2001.
While I appreciate that substantial charges may be incurred in obtaining the Notarial Death Certificates as required by Requisition No. 4 and despite of the appointment by the Court of the Trust Corporation as the Administrator of the estate of the deceased, I regret that the requirement to the such death certificates may not be dispensed with since such death certificates are necessary to prove that those persons having a prior right to the grant have been cleared off (as required under Rule 6 of NCPR, Cap. 10).
Please comply with Requisition No. 4 accordingly.”
(f) that on 17 August 2001, the Defendant caused certified copies of 4 of notarial certificates made from photocopies of the original notarial documents namely the certified true copy notarial certificates of death of the father and mother of Choy and births of Choy and his young brother sent to the Probate Registry.
Defendant also enclosed the Judgment of Mr. Justice Yam in HCAP 13/1997 dated 24 March 2001 with direction to deal with the appointment of administrator as well as order dated 13 June 2001 appointing Bermuda as the administrator.
(g) Subsequent thereto, on 23 August 2001, the Registrar directed that the filing of the original death certificates (as required under Requisition No. 4) be dispensed with and the Letters of Administration was granted to Bermuda.
(h) Subsequent thereto, the 1st Plaintiff and the 2nd Plaintiff were paid $905,957 and $4,529,785 respectively. These monies came from the Choy family and Wong.
13. Defendant in their opening submission stated that the only wrong that the Defendant did was one single act of filing “certified true copy of 4 of the Notarial Certificates” as opposed to “unauthorized use of 33 Notarial Certificates” as alleged by the Plaintiff in the endorsement of claim. This is admitted by Madam Shum, witness for the Plaintiffs in Court and also in paragraph 10(c) of the Statement of Damages filed 23 February 2009.
14. In fact, Madam Shum Lai Kwan (“Madam Shum”), the only witness for the Plaintiffs in her witness statement dated 1 February 2010 and adopted in Court as her evidence in chief pointed out that the Defendant had, without the knowledge, consent or authorization of the 1st Plaintiff, filed certified true copy of 4 of the Notarial Certificates based on the original Notarial Certificates entrusted to them by the Plaintiffs with the Probate Registry and obtained the Letters of Administration for Bermuda.
15. She further stated that Mr. Tam of the Defendant did so after unsuccessful attempts to seek consent from the 1st Plaintiff and was told that payment of the fee or undertaking for such payment needed be given before the Plaintiffs would allow the use of the notarial documents for the application.
16. It is against this background that this Court assess the damages.
17. 1st Plaintiff is claiming damages in the sum of $905,957, being half of 1% of $181,191,399.50, i.e. the gross value of the Estate, being the service fee which 1st Plaintiff alleged was entitled in obtaining the said Notarial Certificates.
18. 2nd Plaintiff is claiming damages in the sum of $4,529,785, being half of 5% of the said $181,191,399.50, being the fee that the 2nd Plaintiff allegedly was entitled for issuance of the notarial certificates. According to the 2nd Plaintiff, the rate of 5% is based on the prevailing fee scale promulgated by PRC authorities.
19. Plaintiffs relied on the Schedule of Property no. ED 4178/96 issued by the Estate Duty Office of the Inland Revenue Department for the amount of the estate. The same stated that the net principal net value of the Estate is $181,191,399.50. It covered also the DMC and accordingly the 1st Plaintiff and the 2nd Plaintiff said they were respectively entitled to $1,811,914 and $9,059,870, representing 1% and 5% of the value of the estate.
20. Madam Shum, the trust officer of the 1st Plaintiff said the Defendant, in particular Mr. Tam of the Defendant, had been providing legal services and advice to the 1st Plaintiff prior to the present case, in connection with the 1st Plaintiff’s work as professional trustee for estates of deceased persons.
21. Madam Shum said the notarial certificates were issued by the 2nd Plaintiff and that the 2nd Plaintiff was entitled to 5% of the gross value of the Estate for the issuance of these notarial certificates.
22. In support of the Plaintiffs’ use, Madam Shum produced a letter dated 21 June 2002 from 2nd Plaintiff stating that in this case, they were charging 5% of the net estate (which covers inheritance and DMC). This letter was accompanied by the written notification from Judiciary Department of PRC, memo no. 202 of 1991, which set out the approved notary charges for notary offices (memo no. 549 of 1991 issued by the Pricing Bureau of the Ministry of Finance, PRC dated 19 November 1991).
23. The relevant part of the same reads: -
“公証費收費標准表
項目 |
公証事項 |
收費標准 |
13 |
証明財產繼承、贈與 |
按受益人收入金額總數：
(1) 不滿1萬元的收1%，最低10元；
(2) 1萬元以上的收2%。 |
說明：
(1) 如當事人以繼承域外財產為目的而要求辦理親屬關係、出生、死亡公証書的，按“証明財產繼承”的標准收費。為繼承域外同一宗財產而同時辦理“財產繼承”、“親屬關係”、“出生”或“死亡”等多項証明時，只按“財產繼承”標准收一次費。
(2) 繼承、遺贈、贈與域外財產按所得標的額收費。疑難复什的証明，可酌情增收，最高不超過5%。”
24. Madam Shum also produced a letter from the Judiciary Bureau, Shanghai City, PRC dated 5 November 2002 which confirmed that for the period between December 1996 to March 1997, the scale of notary fee chargeable was as per the said memo no. 549 of 1991 issued by the Pricing Bureau of the Ministry of Finance.
25. These documents were all disclosed to the Defendant via the witness statement of Madam Shum dated 1 February 2010 It is noted that the witness statement of Tam was dated 11 March 2010 which was one month later. Tam did not in his statement challenge the authenticity of these documents. Defendant also failed to challenge the authenticity of these documents via other means prior to the assessment hearing.
26. As for the service fee charged by 1st Plaintiff in connection with the notarial documents, Madam Shum produced the pamphlet issued by the 1st Plaintiff which stated that they charged 1% of the value of the estate.
27. The same is unchallenged by the Defendant, save on the issue of whether the estate included the assets of the DMC.
28. Since the issuance of the Letters of Administration, the Plaintiffs were paid 50% of the sum entitled totalling $5,435,742 and they now claim the balance $5,435,742 as their loss.
29. Although interlocutory judgment on liability was given and no attempt was made by the Defendant to set aside the same, in Court. Mr. Tam of the Defendant averred that he did not owe any duty to 1st Plaintiff or 2nd Plaintiff in relation to the use of those documents and that the production of these documents to Probate Registry was done with full authority given earlier in course of litigation. I am afraid it is not open for him to argue along this line as the endorsement of claim clearly alleged “Defendant’s unauthorized use of the notarial certificates prepared and issued by the 2nd Plaintiff but entrusted by the 1st Plaintiff with the Defendant”.
30. Defendant also invited the Court to accept that they were compelled by order of the Mr. Justice Yam dated 13 June 2001 in production of such certified copy notarial certificates to Probate Registry because the same reads “Messrs. Josip Ma & Company and Messrs. John Ku, Tam & Ho do within 7 days from the date (thereof) provide and give to the Administrator all information so required for the purpose of applying the grant of Letters of Administration in respect of the estate of the deceased”.
31. It is clear that the notarial certificates were properties belonging to 2nd Plaintiff and entrusted to the Defendant by the 1st Plaintiff for a defined purpose. This Court could not accede to the submission that because of the Order, the Defendant was empowered to appropriate the property of 2nd Plaintiff without their consent. If that were so, why did the Defendant seek consent from the 1st Plaintiff in using the notarial certificates. In my view, the Defendant by making known to the Administrator that these documents were available for use on payment of the requisite fees satisfy the order.
32. As Madam Shum of the Plaintiff said in Court, the order does not say that these notarial certificates could be used for free.
33. Solicitors for the Defendant, Mr. Ku did submit also that the Plaintiffs sued the Defendant because Mok failed to pay the other 50% fees charged by 1st Plaintiff and 2nd Plaintiff and that the Plaintiffs should first sue Mok before proceeding against the Defendant.
34. It is not unusual for a plaintiff to have different causes of action originating from a series of events against different entities. He is entitled to proceed against a particular defendant at his choice.
35. It matters not therefore that the Plaintiffs could not proceed against Mok because there was no contractual relationship between them. In this case, the Plaintiffs claimed against the Defendant for misappropriation of the notarial certificates and judgment on liability had already been entered.
36. The Defendant also attempted to argue that as these notarial certificates had previously been included in the list of documents and produced in Court in HCAP 13/1997, the Court would have these documents anyway and that therefore production of the copy of these documents for a different purpose to Court would not have resulted in any damages or loss to the Plaintiff here.
37. Firstly, Bermuda was not a party to the said action and therefore it should not have copies of these notarial certificates.
38. Secondly, it is clear from letter dated 16 August 2001 from Probate Registry that in entertaining the application for Letters of Administration, the Probate Registry insisted on the production of these notarial certificates even when told by the Defendant in their earlier letter dated 13 August 2009 that Bermuda was appointed by the Court as administrator of the estate in HCAP 13/1997 and on being asked that production of these documents be dispensed with.
39. Thirdly, as submitted by counsel for the Plaintiff, it is established principle that discovery of documents by a party in civil action is protected by an implied undertaking that any other party should not use them for any collateral or ulterior purpose, otherwise the misuse of the documents would be restrained by injunction or punished as contempt (see White Book paragraph 24/14A/1 on p.549). The implied undertaking protects also copies of the disclosed documents which the other party usually obtains and keeps because otherwise the protection of the implied undertaking would be worthless. There is no evidence from the defence including Tam that the contents of the subject notarial certificates had been read to or by the court or referred to in open court such that Order 24 rule 14A applies to waive the undertaking. In the premises, Bermuda, being non-party to the probate action 13/1997 could not make use of the certificates.
40. Further, one must bear in mind that Defendant was acting for Bermuda in the latter’s application for the grant of Letters of Administration, not any party to the probate action. The application for grant of Letters of Administration is a separate application bearing a different application no. HCAG 005504/2001.
41. In Court the Defendant alleged that there was doubt as to what fee the 1st Plaintiff and the 2nd Plaintiff could have charged for the use of the notarial certificates in question and therefore what the damages, if any, suffered by them were.
42. One must not forget that the Defendant was in fact the same firm of solicitors originally acting for the parties to the DFA in preparation of the DFA where the amount of fees charged by the 2nd Plaintiff for the notarial certificates was clearly spelt out.
43. It was a term of the DFA that 1st Plaintiff, as administrator, shall pay out of the estate of Choy all necessary expenses as more particularly set out in the Schedule thereto.
44. Item 6 of the Schedule reads “Notarial fees at 5% on the gross estate value and all other expenses and disbursements in relation to the notarial certificates so applied.”
45. It has also been argued by the Defendant that the calculation of charges of the Plaintiffs should not have included that of the DMC.
46. However, the Letters of Administration issued by the Probate Registry does cover and does affect the whole estate, including the assets of DMC as one could see from the Schedule of Property annexed.
47. In fact, the order of Mr. Justice Yam dated 13 June 2001 reads:
“ (1) Bermuda Trust (Hong Kong) Limited be appointed to act as the Administrator for the estate and the assets of Donatio Mortis Causa of the deceased;
……
(3) The Administrator be directed that upon the obtaining the grant of the Letters of Administration in respect of the estate and/or the assets of Donatio Mortis Causa of the deceased, the Administrator do perfect or pass the titles of the assets/properties in the assets of the Donatio Mortis Causa to the Defendant and to administer the estate of the deceased under his intestacy;
(4) The costs of to-day and the application herein be borne by the estate and assets of the Donatio Mortis Causa to be taxed on pro rata basis as to the respective value of the aforesaid estate and the assets, if not agreed, on common fund basis.”
48. The Letters of Administration therefore concerns the administration of both the estate and the DMC.
49. There is therefore no doubt that as early as the time of DFA, Defendant knew 2nd Plaintiff charged 5% of the value of the estate as his fee.
50. Moreover, in letter from the Defendant to Messrs. Josip Ma & Co, Solicitors, the Defendant wrote “The prescribed notarial fees will be the sum equivalent to 4% of the entire value of assets (including the assets of the DMC gift) of the deceased.
51. Again, in their letter dated 13 August 2001 to the Probate Registry, the Defendant wrote “Concerning Requisition no. 4, we would like to inform that the subject Deceaseds all died in China and their death certificates with due authentication would only be issued upon giving of an undertaking to make payment of notarial charges equivalent to 4% of the overall estate amount including the DMC gift to which undertaking no beneficiary is in a position to make decision on this aspect.”
52. The Defendant therefore could not now argue that they did not know that the 2nd Plaintiff would charge on the value of the estate including the value of assets of DMC gift.
53. Shortly after the receipt of the copy notarial certificates from the Defendant, i.e. 6 days later on the 23 August 2001, Probate Registry dispensed with the filing of the original notarial death certificates and approved the application for Letters of Administration to Bermuda.
54. In Court, the Defendant queried whether the notarial death certificates were actually necessary for the grant of Letters of Administration in this case. They said that the Letters of Administration was said to be issued pursuant to the order of Mr. Justice Yam dated 13 June 2009 made under Order 76, rule 5 of the Rules of High Court, Cap. 4.
55. The answer is simple. The Probate Registry in their letter dated 16 August 2001 said
“While I appreciate that substantial charges may be incurred in obtaining the Notarial Death Certificates as required by Requisition No. 4 and despite of the appointment by the Court of the Trust Corporation as the Administrator of the estate of the deceased, I regret that the requirement to the such death certificates may not be dispensed with since such death certificates are necessary to prove that those persons having a prior right to the grant have been cleared off (as required under Rule 6 of NCPR, Cap. 10).”
56. In fact, as Mr. Tam of the Defendant put it in paragraph 19 of his witness statements dated 10 March 2010,
“19. Next came the formal procedures for getting a grant of Letters of Administration. Only with such a grant issued by the Court could the parties put their fingers on the assets.”
57. In addition, Mr. Tam has admitted in paragraph 26 of the same witness statement that for the Letters of Administration in respect of the estate (including the DMC) be issued, the Affirmation of the Administrator need to “clear off” all persons who would have priority in entitlement, the subject notarial death certificates (i.e. death certificates of relatives of deceased who have predeceased the deceased) were therefore necessary.
58. Mr. Justice Yam also affirmed the need for compliance under rule 6 of the Non-Contentious Probate Rules to clear those who have the prior right to the grant even if an administrator was appointed by the Court before any grant of Letters of Administration (see paragraph 16 of judgment dated 10 March 2006 in HCMP 2953/2002).
59. It has been argued that Letters of Administration was not necessary for the donee of DMC to have assets of the DMC vested in her because at time of death of the donor, the property covered by DMC goes to the donee and not to the personal representatives of the estate and that the donee of DMC, in case of difficulty in perfecting the title to the assets of DMC could have made an application for a vesting order under section 52 of the Trustee Ordinance Cap. 29.
60. Whilst it can be so said, the fact remains that in the present case, Letters of Administration were applied for and were issued which did cover the administration of the assets of DMC and further as a result, no application for vesting order was necessary.
61. I have no doubt that in this case, the production of the certified copies of the notarial death certificates was necessary to the grant application.
62. In fact, in letter dated 27 June 2001, Bermuda appointed the Defendant and Messrs. Josip Ma & Co. jointly as their Solicitors to apply for grant of Letters of Administration in respect of the estate and the assets of DMC. If the Letter of Administration also covered the DMC and that the use of the notarial certificates are necessary for issuance of such grant, this Court wondered why the calculation of service fee should not have included value of DMC.
63. One must not forget that in fact, when the Defendant and Messrs. Josip Ma & Co, Solicitors first presented their bill of costs to Bermuda, the administrator, the same was based on estate value of $18,191,399.50 i.e. total value of the estate (including DMC). It was only later when Bermuda objected that they agreed to charge less, based on value of estate (excluding value of DMC).
64. According to Madam Shum, the fees that the 1st Plaintiff and 2nd Plaintiff were entitled to charge for the use of 33 notarial certificates were the same as that relating to the use of just 4 notarial certificates.
65. One could also see from the Schedule to the DFA that the fees charged by 2nd Plaintiff was based on a percentage of value of the estate. Likewise, as stated in the scale of charges in the pamphlet published by 1st Plaintiff, the fees chargeable by 1st Plaintiff was again based on a percentage of the value of the estate. They were not dependent on the number of notarial certificates involved.
66. It was also submitted by the Mr. Erik Shum, Counsel for the Plaintiff, which I agree, that the value of the notarial certificates must be the same as that of the certified copy of these notarial certificates.
67. It is clear to this Court in the circumstances, that had the Defendant not misappropriated the said notarial certificates, whoever proceeded with the application for Letters of Administration as in this case would need to make the payment of 1% and 5% on the total value of the estate (including the value of assets of DMC) to 1st Plaintiff and 2nd Plaintiff respectively for the use of these notarial certificates to comply with NCPR rule 6 as advised by the Probate Registry.
68. It follows therefore that the damages suffered by the Plaintiffs as a result of the unauthorized use of the 4 notarial certificates by the Defendant is the unpaid 50% of the fees, which equals to $905,957 being loss and damages suffered by the 1st Plaintiff and $4,529,785 being loss and damages suffered by 2nd Plaintiff.
69. Accordingly, I order that the Defendant shall pay:
(a) the 1st Plaintiff: -
(i) the said sum of $905,957;
(ii) interests thereon from 17 August 2001 i.e. date of misappropriation to date of judgment at 4% per annum and from date of judgment till date of payment at judgment rate;
(b) the 2nd Plaintiff: -
(i) the said sum of $4,529,785;
(ii) interests thereon from 17 August 2001 i.e. date of misappropriation to date of judgment at 4% per annum and from date of judgment till date of payment at judgment rate;
(c) Costs of and incidental to the Assessment of Damages hearing to the Plaintiffs, the same to be taxed if not agreed.
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(K. Lo)
Master of the High Court |
Mr. Erik Shum instructed by Messrs. Liu, Chan & Lam for the Plaintiffs.
Mr. John Ku of Messrs. John Ku & Co. for the Defendant.
Defendant's appeal to Court of Appeal allowed. Please refer to CACV234/2010 dated 24 May 2011 |