LI CHEONG v. LEE KWAI TAI also known as LI KWAI TAI

CAMP 65/2018

CACV 346/2018

[2018] HKCA 491

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 65 OF 2018 and

CIVIL APPEAL NO 346 OF 2018

(ON AN INTENDED APPEAL and APPEAL FROM PROBATE ACTION NO 32 OF 2012)

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R E A S O N S  F O R  J U D G M E N T

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Hon Lam VP:

1.  I respectfully agree with the reasons for judgment of Yuen JA. In light of the unsatisfactory conduct of the case on behalf of DL, I should articulate on the duty of a respondent (and those acting for a respondent) in an application for leave when the Court has given directions for a rolled-up hearing.

2.  Those directions are usually given after the Court has considered the written submissions (including submissions from the respondent) and formed the view that in the interests of justice, procedural economy, and efficient and proportionate use of judicial resources, it is appropriate to dispose of the matter by a rolled-up hearing.  The Court works on the basis that the parties have at least outlined on the papers all the arguments which they wish to deploy.

3.  Thus, if there are grounds which a respondent intends to rely upon to support the judgment other than those canvassed by the judge below, those grounds should also be stated in the opposition to leave submissions, instead of leaving it to be raised afterwards. There is no reason why those grounds should not be canvassed to resist the grant of leave, and the failure to do so (leading to more costs being incurred to resolve the matter) would be met by costs sanction (c.f. Asgain Co Ltd v Cheng Ka Yan (No 2) [2018] 2 HKLRD 641 at [44]).

4.  This is all the more so when the respondent intends to bring a cross-appeal in a context where leave is required.  The time limit for an application for leave to cross-appeal applies in the same way as an application for leave to appeal.  Though it may be understandable for a winning party to adopt a wait and see approach initially, as soon as an application for leave is taken out by a losing party, the winning party should proceed to seek leave to cross-appeal expeditiously (and if necessary, seeking an extension of time to bring such application).  It is wholly wrong for a respondent to wait for the outcome of the other party’s leave application before initiating his own application for leave to cross-appeal.  Such delay is not excusable and it will militate against the respondent’s chance of getting leave for the cross-appeal as a party guilty of inexcusable delay has to show real prospects of success (a higher threshold than the usual reasonable prospect of success, see Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd [2001] 1 HKC 125) before leave would be granted.

5.  A direction for a rolled-up hearing means that if the Court grants leave at the hearing, it would proceed immediately to hear the appeal proper.  Hence, those acting for the respondent should ensure that they are in a position to deploy all the respondent’s arguments at the hearing.  The proper preparation for the hearing must entail the preparation for a cross-appeal if that is the intended course, including ensuring that the requisite application for leave is before the Court.

6.  If a respondent intends to raise new arguments (viz those not yet canvassed in the submissions already lodged in opposition to the leave application) which could materially affect the preparation for the hearing and estimate of time, he and his legal advisers owe the duty to inform the Court and the other parties as soon as practicable.  This is a facet of the duty under Order 1A Rule 3 to assist the Court in furtherance of the underlying objectives.

7.  I regret to say that in the present instance, those acting for DL had failed to observe such duty. There was ample time between the giving of the direction for a rolled-up hearing on 4 July 2018 and 24 July 2018 (when the further submissions were lodged by Mr Lam) to alert the Court and those acting for LKT of the new points and the intended cross-appeal.  Yet not a word was said by those acting for DL during that period.  With respect, I cannot accept the explanation of Mr Lam (counsel for DL) that it would have been premature for DL to allude to the intended cross-appeal at an earlier stage.  For the reasons I gave above, such an approach goes completely against the underlying objectives in Order 1A introduced by the Civil Justice Reform and the efficient processing of a leave application.

8.  As I said, a direction for rolled-up hearing is a case-management measure adopted by the Court to further the underlying objectives in Order 1A.  But the attainment of the objectives demands co-operation and a mindset aligned with those objectives on the part of the litigants and those acting for them.  It is hoped that those in the legal profession should strive to attune to such mindset (as they have a duty to do so under Order 1A Rule 3) if they have yet to do so.   

Hon Yuen JA:

9.  On 8 June 2016, DHCJ Yee gave judgment in a probate action (HCAP32/2012) declaring that Madam Lee (Li) Kwai Tai (“LKT”) was the only surviving issue of Sang Lee also known as Li Tin Sang (“the Deceased”) and granting letters of administration of the Deceased’s estate to LKT.

10.  On 10 April 2017 however, Madam Lee Soo Tan Doreen (“DL”) applied to intervene in HCAP32/2012 in order to set aside the judgment.  LKT opposed DL’s application, but on 5 March 2018, the learned deputy judge granted DL’s application (“the Decision”). 

11.  On 19 March 2018, LKT applied for leave to appeal the Decision, but her application was refused by the judge on 4 May 2018.  On 17 May 2018, LKT applied to this court for leave. 

12.  After considering written submissions provided by LKT and DL, on 4 July 2018 directions were given by a single judge of this court that there be an oral hearing of the application for leave to appeal, and (if leave is given) for the appeal proper to be heard immediately thereafter, with an estimated length of hearing of 1 hour.  No objection was raised to this approach by DL’s legal representatives.  

13.  However on 24 July 2018, two days before the hearing before this court, Mr Simon Lam counsel for DL indicated in his skeleton submissions that if leave to appeal is granted to LKT (and consequently the appeal proper would be heard immediately thereafter), she (DL) “intends to file a Respondent’s Notice … by way of cross-appeal”.  However DL did not file an application for leave to cross-appeal, as required by the rules of court (see Ng Hong Ki v Leung Fong Kiu [2012]  1 HKLRD 435, §§24-26).  

14.1.   At the hearing, we granted LKT leave to appeal, and heard her appeal immediately thereafter.  DL opposed LKT’s appeal but on instructions Mr Lam did not apply for leave to cross-appeal, confirming that he has abandoned those parts of his skeleton which dealt with his intended cross-appeal. 

14.2.   At the conclusion of the hearing, on LKT undertaking by counsel to file the notice of appeal as per the draft in her application for leave to appeal, we allowed her appeal and set aside the judge’s order made on 5 March 2018.  We also ordered that DL pay LKT’s costs of her application for leave to appeal (to the judge and to this court) and the costs of the appeal, to be taxed if not agreed.  My reasons appear below.

15.  To understandthese Reasons for Judgment, it is necessary to set out some of the background.

Background

16.  On 22 February 1985, the Deceased died intestate in the UK aged 74. 

The 2012 Action

17.1.   On 12 December 2012, the Deceased’s nephew Li Cheong (“LC”) issued HCAP32/2012 (“the 2012 Action”) against LKT.  LC alleged in the Statement of Claim that:

(1)  the Deceased died leaving no wife, no issue and no surviving parents¹;

(2)  he (LC) and his siblings were the only persons entitled to share in the Deceased’s estate on intestacy²; but

(3)  LKT claimed to be the only issue of the Deceased³.

17.2.   LC sought declarations that:

(a)  the Deceased died intestate;

(b)  the Deceased died leaving no issue; and

(c)  he (LC) was entitled to the grant of Letters of Administration of the Deceased’s estate.

18.1.   On 14 January 2013, LKT filed a Defence and Counterclaim alleging that:

(1)  the Deceased is her natural father and she is the surviving natural daughter of the Deceased⁴; and

(2)  she alone is the person entitled to the entirety of the Deceased’s estate by reason of her being the only surviving issue of the Deceased⁵.

18.2.   LKT counterclaimed (amongst other things) for:

(a)  a declaration that she is the only surviving issue of the Deceased; and

(b)  a grant to her of Letters of Administration of the Deceased’s estate.

19.1.   On 22 September 2015, the 2012 Action came on for trial before DHCJ Yee.  LC’s case was that LKT was not the Deceased’s natural daughter.  Although LKT did not have a birth certificate, her case was that she was born in 1932 to the Deceased who was a seaman, she was brought up in Hong Kong by the Deceased’s mother, and that the Deceased had throughout his life kept in touch with her.  In her witness statement, she exhibited (amongst other things) a letter from the Deceased sent to her from the UK in 1977 referring to her as his daughter, and referring to his intention to transfer his property in Hong Kong to her.  

19.2.   The judge adjourned the hearing so that DNA samples could be obtained from the parties for a DNA report to be done. 

DL’s Caveat

20.1.   Two days later, on 24 September 2015, DL filed a Caveat in respect of the Deceased’s estate.  The Caveat was filed by Kelvin Cheung & Co, solicitors (“KCC”).

20.2.   The following day, KCC sent a letter to the respective solicitors of LC and LKT informing them of the Caveat. Significantly the caption of the letter specifically included the number of the 2012 Action, and the letter referred to “the above probate proceedings”.

21.  It is therefore clear that in September 2015, DL’s solicitors were already aware of the 2012 Action. Nevertheless, she did not seek to join as a party to the action.

22.  In November 2015, LC’s solicitors came off the record in the 2012 Action.

23.  On 7 December 2015, LKT’s solicitors filed a Warning to Caveator directed at DL.  On 18 December 2015, DL filed a Caveator’s Appearance to Warning.  On the same day, her solicitor Mr Cheung Ka Wai⁶ made an affirmation:

(1)  stating that DL is a Singaporean resident, not currently residing in Hong Kong, and “will file an affirmation of her own as and when appropriate”⁷;

(2)  exhibiting photocopies of (a) a Singapore birth certificate showing DL’s birth in 1946, the name of the father being stated as “Li Sang”, and (b) a registration document of “Lee Sang” issued by the Consulate General of the Republic of China in Singapore in 1948, in which he is stated to be the father of a daughter DL and a son (Lee Tung Ngoh)⁸;

(3)  stating that “in the circumstances, the Caveator [DL] claims that she is the sole beneficiary of the estate of the deceased”.

Notice of 2012 Action  

24.1.   A month later, on 12 January 2016 LKT’s solicitors served a notice of the 2012 action on KCC.  However this was followed by a letter dated 14 January 2016 in which LKT’s solicitors informed KCC that they (LKT’s solicitors) will first obtain leave from the court to file and serve it, and would let KCC know in due course.  The following provisions regarding a notice of action are material.

24.2.   Order 15 rule 13A Rules of the High Court, which applies to “any action relating to the estate of a deceased person”⁹ which the 2012 Action clearly was, provides (where material):

“(1) At any stage in an action to which this rule applies, the Court may, on the application of any party or of its own motion, direct that notice of the action be served on any person who is not a party thereto but who will or may be affected by any judgment given thereunder.

(2) An application under this rule may be made ex parte and shall be supported by an affidavit stating the grounds of the application;

(3) ...

(4) A person may, within 14 days of service on him of a notice under this rule, acknowledge service of the writ ... and shall thereupon become a party to the action, but in default of such acknowledgment ... he shall be bound by any judgment given in the action as if he was a party thereto”. (Emphasis added).

24.3.   On 1 February 2016 LKT’s solicitors wrote to the court informing it of DL’s Caveat, and on 22 February 2016, the judge gave leave to LKT to file and serve a notice of the 2012 action on DL.  

24.4.   On 18 March 2016, a notice of action (“the Notice of 2012 Action”) was filed.  Three days later, on 21 March 2016 an employee of LKT’s solicitors served it (together with a set of all the pleadings) by hand on KCC¹⁰. A receipt chop was affixed on a copy which was retained by LKT’s solicitors.

25.1.   It would be crystal clear to anyone reading the Notice of 2012 Action and the pleadings that LC was claiming that the Deceased had left no issue, and that LKT was claiming that she was the only issue of the Deceased.  Both cases were directly contradictory to DL’s allegation that she was the sole surviving issue of the Deceased.  So whether LC won or LKT won the 2012 Action, that would be adverse to DL’s interests.

25.2.   However, no acknowledgment of service was filed on behalf of DL.  I shall discuss later the reasons given by her solicitors KCC for this inaction¹¹.

The 2016 Action

26.1.   Two months later, on 26 May 2016, DL issued HCAP10/2016 (“the 2016 Action”).  The defendants were LC and LKT.  Significantly, the Statement of Claim specifically pleaded:

“5.   In respect of the estate of the Deceased, there is a pending probate action HCAP32/2012 (“the 2012 Action”), in which:- 

5.1.   ...

5.2.   ...

5.3.   [LC] claims, inter alia, in the 2012 Action that the Deceased died leaving no wife, no issue and no surviving parents ...

5.4.   [LKT] claims, inter alia, in the 2012 Action that she is the surviving natural daughter of the Deceased, and counterclaims for grant of Letters of Administration of the Deceased’s estate”.  (Emphasis added).

26.2.   DL goes on to plead that LKT “is not a natural daughter of the Deceased and is not related to him by blood”; further or alternatively, that LKT “is not a lawful daughter of the Deceased”, and consequently that LKT is not a beneficiary of the Deceased’s estate and not entitled to the grant of Letters of Administration to his estate.

26.3.   DL sought (amongst other things) a declaration that she “is the only surviving issue of the Deceased”.

27.  Pausing there, it is noted that the Statement of Claim was not verified by a statement of truth from DL, and is thus liable to be struck out under O.41A r.6 RHC.  

Trial and Judgment in the 2012 Action

28.  Meanwhile, the DNA report ordered in the 2012 Action was filed on 29 December 2015. The conclusion was that LKT was “very likely” a biological cousin of LC and his brothers¹².

29.1.   The resumed hearing of the 2012 Action was fixed for 8 June 2016.  On 1 June 2016 LKT’s solicitors wrote to the court, stating that Notice of the 2012 Action had been served on DL’s solicitors KCC¹³.

29.2.   On 7 June 2016, LKT’s solicitors wrote to the court again, informing it of DL’s 2016 Action and enclosing correspondence relevant to that action only.

30.1.   At the resumed hearing on 8 June 2016, LC did not appear¹⁴. The judge dismissed LC’s claim and proceeded to hear LKT’s counterclaim. 

30.2.   Mr Kevin Poon, counsel for LKT, informed the judge of the 2016 Action and the contents of DL’s claim therein, but when the judge suggested that a declaration in the 2012 Action would only be binding between the parties (ie LC and LKT), Mr Poon agreed¹⁵.  That was incorrect as a matter of law.  Notice of the 2012 Action had been served on DL, no acknowledgment of service had been filed, and consequently, under O.15 r.13A(4) the judgment would be binding on DL as if she was a party. 

30.3.    After considering the witness statements (since LKT was in poor physical condition), the judge gave judgment in terms of the counterclaim, i.e. that LKT was the only issue of the Deceased (“the Judgment”).  It was sealed on 11 July 2016.

Events after Judgment in the 2012 Action

31.  On 20 October 2016, solicitors for LKT and DL appeared before the master in an interlocutory matter in the 2016 Action.  Solicitors for LKT informed the master about the Judgment in the 2012 Action¹⁶.  This evoked no actionfrom DL.

- LKT’s application to strike out the 2016 Action

32.1.   On 1 November 2016, LKT applied to the court to strike out the 2016 Action based on the binding effect of the Judgment in the 2012 Action on DL. 

32.2.   It was only then that DL’s solicitors wrote to LKT’s solicitors asking for a supporting affirmation and for the Judgment in the 2012 Action.

32.3.   On 17 November 2016, LKT’s solicitor filed an affirmation, in which it was stated that Notice of the 2012 Action had been served on KCC. 

33.  By now DL’s solicitors KCC were clearly made aware of the Judgment and the Notice of the 2012 Action¹⁷ but again significantly, this evoked no action from DL.

- LC’s application to appeal the Judgment in the 2012 Action out of time

34.1.   Instead, what happened was that on 16 November 2016, LC (who had taken no part in the 2012 Action after the DNA test) issued an application to appeal the Judgment in the 2012 Action out of time.

34.2.   On 11 April 2017, this court¹⁸ dismissed LC’s application, rejecting his contention that he was not aware of the resumed hearing on 8 June 2016.

DL’s application to join the 2012 Action as party etc

35.1.   It was not until one day before that Court of Appeal hearing, ie on 10 April 2017, that DL issued an application for (a) an extension of time to acknowledge service in the 2012 Action; and (b) an extension of time to apply to set aside the Judgment under O.35 r.2(1) RHC. This rule provides:

“(1) Any judgment ... obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.

(2) An application under this rule must be made within 7 days after the trial”.

35.2.   DL’s solicitor Mr Cheung made two affirmations in support of the application, to the effect that he was not personally aware of the Notice of the 2012 Action (even though it was served on his firm) until he had sight of the affirmation of LKT’s solicitor in support of the strike-out application in the 2016 Action. 

36.  However DL did not make an application to intervene for 5 months thereafter.  Mr Cheung says the parties had “without prejudice” correspondence in November and December.  I do not think that is a good reason for inaction, but even if those 2 months are ignored, no explanation at all was proffered for DL’s inaction in the 3 months (January - March 2017) thereafter.  

37.  Further Mr Cheung’s affirmations contained inconsistent statements.  In his earlier affirmation, Mr Cheung referred to the history of his firm’s conduct on behalf of DL of matters pertaining to the Deceased’s estate, and stated that unless the Notice had not come to his firm’s attention, there was no plausible reason why DL would not have joined as a party to the 2012 Action¹⁹.  In other words, if the Notice had been delivered to his firm, it would have accepted it and advised DL to intervene. In his later affirmation, he said that even if the Notice of the 2012 Action was served at his firm’s address, his firm had no authorization to receive service on DL’s behalf²⁰. In other words, his firm would not even have accepted the Notice at all.  This inconsistency appears to be an ill-conceived attempt to avoid the consequences of service of the Notice of Action. 

38.  DL’s application was heard on 7 February 2018, and gave rise to the Decision under appeal.

The judge’s Decision 

39.1.   For reasons set out in detail in the Decision, the judge acceded to DL’s application but ordered that she pay LKT’s costs of and occasioned by DL’s application on an indemnity basis.

39.2.   It is noteworthy that the judge accepted that the Notice of the 2012 Action was validly and properly served on KCC on 21 March 2016²¹. DL did not challenge the process server’s evidence which could have been done by applying for cross-examination.  The judge also rejected the allegation (set out above) that KCC was not authorized to accept service thereof²².

39.3.   The judge also accepted that, since DL had not filed an acknowledgment of service, LKT’s solicitors had no obligation to serve any further documents on DL, including the notice of the resumed hearing on 8 June 2016²³, or to remind him of the Notice at the hearing²⁴.  The judge also rejected DL’s allegation that LKT had deliberately misled the court²⁵. 

39.4.   It is also noteworthy that the judge held correctly that as a matter of law, the Judgment in the 2012 Action became binding on DL²⁶.

39.5.   The judge referred to DL’s failure to take any steps to intervene despite her knowledge of the 2012 Action even before the Notice of the 2012 Action²⁷ and to her delay in making the application, finding that the excuses made by her solicitor were not reasonable and describing the delay as “inordinate and inexcusable”²⁸.

39.6.   Importantly, the judge also accepted that LKT would be prejudiced if DL were allowed to reopen all the issues in the proceedings, especially given her advanced age and medical condition²⁹. 

40.  However, despite the above findings, the judge acceded to DL’s application saying:

“However, the overriding concern of this court is that this court expressly indicated that the relevant declaration in the CFI Judgment [in the 2012 Action] was not intended to be binding on [DL] and that the documentary evidence presently placed before this court shows that [DL’s] allegation in the [2016] Action that she is the natural daughter of the Deceased is indeed bona fide. Mr Poon cannot argue otherwise. This court is unwilling to disallow a bona fide claim to be pursued and instead insist that [DL] should be bound by the relevant declaration by reason of her default in filing her acknowledgment of service in the absence of her knowledge of the Notice in the first place”.

Discussion

41.  With respect to the judge, in my view his exercise of discretion in DL’s favour was in error in the following respects.

42.  First, the judge’s intention when he made the declaration in the 2012 Action was an irrelevant consideration. The issue of who is bound by a judgment is a matter of law, not of an individual judge’s intention, and as the judge noted, as a matter of law, the Judgment in the 2012 Action was indeed binding on DL.  In any event, even if LKT’s counsel had specifically informed the judge at the hearing that Notice of the 2012 Action had been served on DL through her solicitors and no acknowledgment of service had been filed, that should have made no difference to the way in which the judge dealt with the trial.  DL was legally represented and it was not the function of the judge to be her legal adviser.

43.  Second, the judge was in error when he said DL’s default lay in failing to file the acknowledgement of service. With respect, that was not her only failure.  The judge did not take into account the incorrect approach she had adopted throughout³⁰ in asserting her claim, as discussed below. 

44.  As the judge had taken into account an irrelevant consideration and had failed to take relevant considerations into account, the exercise of his discretion must be set aside.  Accordingly we gave leave to LKT to appeal the Decision. 

45.  It is for this court to exercise the discretion afresh.

46.  It is clear that DL’s application to extend time to file an acknowledgment of service so as to join the 2012 Action and to apply to set aside the Judgment therein must be rejected. 

47.  It is well-established that a judgment in a probate action is by nature in rem.  It is thus incumbent on all those who have rival claims (say, as issue of a deceased person) to advance their claims simultaneously, so that the probate court could adjudicate on them in a judgment which would bind all rival claimants once and for all, with the legal consequence that probate of a will or letters of administration of the deceased person’s estate could be granted by the court properly.  The rationale of the procedure of giving notice of action under O.15 r.13A RHC is precisely to inform those who may not otherwise know that a probate action is in progress.  Thus, even if no notice of action had been served on him, a rival claimant who stands by with knowledge that a probate action is being adjudicated may well find that if he institutes a separate action in respect of the same estate later, that may be struck out as an abuse of the process.

48.  When DL became aware of LC’s and LKT’s pleadings in the 2012 Action³¹, she would have realized that neither side was fighting her case for her.  Whichever way the judgment went, she would lose out.  That being so, it was incumbent on her to apply immediately to join the 2012 Action as a party even if no Notice of the 2012 Action had been served on her. She failed to do that, and failed to acknowledge service when the Notice of the 2012 Action was served on her, and failed to apply to intervene in the 5 months after becoming aware of the Judgment.

49.  It was argued on DL’s behalf that despite the above, the court should nevertheless exercise its discretion in her favour as she had “incontrovertible” official documents proving that she is a natural daughter of the Deceased.  However, it would appear that the exhibited documents are not originals.  More importantly, if DL is the Deceased’s daughter, there is no evidence explaining why, in the 30 years after the Deceased’s death, she has not applied for letters of administration to his estate.  And more importantly, there is no verification of DL’s claim.   DL did not make an affirmation when she filed a caveat in September 2015, she did not sign a statement of truth to verify the Statement of Claim in the 2016 Action, and she has not made any affirmation in the 2017 application to join the 2012 Action as intervener.  Her counsel said she resides in Singapore, but with ease of air travel and the availability of courier services, residence overseas cannot provide an excuse for her failure to verify her claim personally in the nearly 3 years since she first asserted it.  In any event, however bona fide a person’s claim may be, it does her no good unless she asserts it promptly and in accordance with correct legal procedure.    

50.  These failures, together with the prejudice found by the judge to be suffered by LKT, led to the conclusion that the summons of 10 April 2017 should be dismissed with costs.

Order

51.  For the reasons set out above, leave was given to appeal and the appeal was allowed, the order of DHCJ Yee of 5 March 2018 was set aside, and the summons of 10 April 2017 was dismissed.  We also ordered that DL pay LKT’s costs of the application for leave to appeal (to the judge and to this court) and the costs of the appeal, to be taxed if not agreed.