LUI WING SHEK ADRIAN v. LEE YUK PING JANET, e administratrix of the estate of the Deceased

HCMP 999/2019

[2020] HKCFI 1054

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 999 OF 2019

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JUDGMENT
(on the Originating Summons)
AND REASONS FOR DECISION
(on the defendant’s summons filed on 7 May 2020)

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A. INTRODUCTION

1.  Before this court is the Originating Summons issued by the plaintiff dated 10 July 2019 (“OS”).  The OS concerns a dispute between a mother and her son (the defendant and the plaintiff respectively). The Deceased was the plaintiff’s father (the defendant’s husband).  The dispute arises out of the defendant’s refusal to distribute, or decision to “deduct”, a sum of HK$1,824,120 out of the Deceased’s intestate estate (the “Estate”) on the ground that the plaintiff allegedly owed the defendant a personal debt represented by a personal loan of an equivalent sum (the “Alleged Loan”).

2.  Also before the court was a summons filed by the defendant on 7 May 2020 (the “Summons”).  Under the Summons, the defendant applied for an order, inter alia, that: –

(1)     The OS proceedings be continued as if the cause had been begun by writ and the existing affirmations filed by the parties do stand as pleadings (“Conversion Relief”).

(2)     These proceedings be heard together with DCCJ 42/2020 (“Heard Together Relief”).

(3)     The hearing of the OS fixed on 15 May 2020 at 10:00 be vacated and adjourned to a date to be fixed in consultation with counsel’s diaries (“Vacation of Trial Relief”).

B.     FACTUAL BACKGROUND

4.  The present administration proceedings are concerned with the Estate of the deceased father, who died intestate in Hong Kong on 5 January 2017, leaving the defendant as widow and 2 adult sons surviving.  The defendant is and was the sole administratrix of the Estate.

5.  In the OS, the plaintiff has identified the question for determination by the court as follows: –

“Whether the plaintiff [amended at the hearing to read “defendant”] could lawfully deduct, pursuant to sections 61 and 62 Probate and Administration Ordinance, Cap 10 or otherwise, money in the sum of AUD$324,000 or HKD$1,824,120 (“the Sum”) from the plaintiff’s share of the estate or residuary estate of the Deceased on the ground that the plaintiff allegedly owed the defendant a personal debt of the same sum?”

6.  The plaintiff has never shied away from the fact that the Sum has been advanced to him by the defendant in 2016.  He, however, alleges that the Sum was intended to be and was a gift in his favour.

7.  The defendant, on the other hand, denies that the Sum was a gift.  It is the defendant’s case that the Sum was a loan borrowed by the plaintiff from her for buying an apartment in Australia upon the agreement that he would repay the money to her when he would become more financially capable in the future.

8.  It is not disputed that the administration of the Estate of the Deceased has been completed in that all debts and expenses have been discharged and the residuary estate is ascertained.  There was no notice received from any potential creditors of their claim against the Estate.  The defendant has engaged professional accountant to prepare accounts of the Estate.  Insofar as the plaintiff is concerned, he has no objection to the accounts and that his share of the Deceased’s Estate ready for distribution was in the sum of HK$3,292,356.93.

9.  Indeed, it is common ground that, except for the Sum in dispute, the defendant has distributed to the plaintiff his entitlement in the Estate of the Deceased through interim distribution in July 2018, further distribution in or about March 2019 based on the accounts prepared by professional accountant and the last distribution after the sale of a property co-owned by the Deceased and his younger brother in April 2019.

C.     REASONS FOR DISMISSAL OF THE SUMMONS

10.  At the hearing, the Summons was dismissed. Further, I ordered that the costs of the Summons be paid by the defendant personally to the plaintiff, such costs are to be taxed on the party-and-party basis if not agreed.

11.  Reasons for my decision on the Summons were reserved, which I now give below.

C.1   Plaintiff’s position on theSummons

12.  The plaintiff submitted that the Summons should be dismissed, inter alia, for the following reasons: –

(1)     This court has no jurisdiction to grant the Heard Together Relief. 

(2)     The defendant has failed to justify her inexcusable delay in taking out the Summons.

(3)     In any event, the outcome of the OS proceedings does not depend on the validity of the defendant’s claim for the repayment of the Alleged Loan.

C.2   No jurisdiction to grant the Heard Together Relief

13.  I agree that, on its proper construction, this court’s discretion under Order 4, rule 9(1) of the Rules of the High Court (“RHC”) to grant the Heard Together Relief is triggered only when “two or more causes or matters are pending” in the Court of First Instance (“CFI”).

(1)     In order to apply for the Heard Together Relief, the defendant should have first made an application to the District Court (“DC”) for transfer of DCCJ 42/2020 to the CFI.  See:

(a)     Wu Yi Development Co Ltd v Big Island Construction (HK) Ltd, DCCJ 5174/2005 (unrep, Decision dated 8/12/06) §§1, 8, 16, 20 and 23; and

(b)     Big Island Construction (HK) Ltd v Wu Yi Development Co Ltd, HCA 714/2007 (unrep, Decision dated 10/04/10) §§35 and 43(1).

(2)     The above is supported by the commentary in Hong Kong Civil Procedure 2020, Vol 1, p.77 Practice Note 4/9/7:

“A separate summons should be issued in each action proposed to be consolidated, or one summons may be issued provided it fully sets out the title of each such action. The principle is that the actions to be consolidated or tried together should be before the court at the same time. …” (Emphasis supplied)

(3)     If a matter is transferred from the DC to the CFI, a new action number would be assigned.  To allow actions pending separately in the DC and the CFI to be ordered by the CFI to be “heard together” without a proper order for transfer by the DC would be unworkable. 

14.  If the Heard Together Relief is refused, there is no basis to grant the Conversion Relief either ― particularly at this late stage.  I agree the Summons should be dismissed on this jurisdictional ground alone.

C.3    Inexcusable delay

15.  The applicable principles on delay are well-established. 

(1)     The trial of the OS is a milestone date and not to be altered without exceptional reason. 

(2)     A late interlocutory application is not a proper reason for vacating a milestone date.

(3)     Late interlocutory applications may be dismissed on the basis of delay alone.  “The application [for consolidation] should be made as soon as possible―by summons”[1].  See also Pannam Ltd v Gheorghe Nicolaescu, HCMP 339/2015 (unrep, 30/09/16) at §§14 and 21-22, where G Lam J refused an application for consolidation because “it was far too late and far too close to the trial” of the first action and acceding to the consolidation would inevitably lead to vacation of the trial.

16.  As submitted by the plaintiff, the history of these proceedings show that the defendant has been guilty of egregious unjustified delay in taking the appropriate steps to make the claim for repayment of the Alleged Loan.

(1)     The defendant raised the Alleged Loan as early as in her then solicitors’ letter dated 6 September 2018 (i.e. 20 months before the Summons).

(2)     On 5 September 2019 (i.e. 8 months before the Summons), the defendant asked for the plaintiff’s consent to the Conversion Relief.

(3)     On 11 September 2019, the plaintiff’s solicitors made clear that they had no instructions to act for the plaintiff in respect of the Alleged Loan. 

(4)     The defendant was therefore expected to make the appropriate application at the latest in September 2019 if she desired to make a counterclaim in HCMP 999/2019 and/or seek the Conversion Relief.

(5)     Yet, the defendant chose to commence DCCJ 42/2020 nearly 4 months later on 3 January 2020.

(6)     Despite the General Adjourned Period, the defendant completely fails to explain why she did nothing to seek the relief in the Summons during the reopening of the High Court Registry from 9 March 2020 to 20 March 2020.

(7)     The defendant only applied for the Conversion Relief some 8 months after September 2019 on 7 May 2020 which was only 8 days before trial of the OS. 

C.4    Outcome of the OS does not depend on the validity of the defendant’s claim on the Alleged Loan

17.  The position of the plaintiff has been set out at paragraph 9 of his affirmation made on 25 June 2019, namely, that even if the Alleged Loan did exist, the defendant could not lawfully deduct any sums representing the Alleged Loan from his lawful entitlement to the Deceased’s Estate under the relevant law.

18.  At the hearing, the plaintiff confirmed that he was not seeking a determination of the defendant’s claim against the plaintiff on the Alleged Loan.  Rather, the plaintiff’s argument would be that the outcome of the OS proceedings did not depend on the result of the defendant’s claim in DCCJ 42/2020.

C.5    Conclusion on the Summons

19.  For the above reasons, I dismissed the Summons with costs and proceeded to hear the OS.

D.     JUDGEMENT ON THE ORIGINATING SUMMONS

20.  The defendant relies on Taylor v Taylor (1875) LR 20 Eq 155 and Re Jones; Christmas v Jones [1897] 2 Ch 190 as authorities for the proposition that where there is a claim in administration proceedings by a next of kin for a sum due in respect of a share of the intestate’s estate, the administrator may set off a debt due to himself personally from the next of kin.

21.  The plaintiff’s position is that the two cases mentioned above should not be followed in Hong Kong.

22.  In this regard, it is important to note the ratio in the two cases.

23.  In Taylor v Taylor, Supra, Sir G. Jessel, MR, said this at page 160: –

“The Plaintiff claims against the Defendant, who is the administrator of the father of the Plaintiff and Defendant, a sum of money on account of his, the Plaintiff’s, share of the residue of the father’s estate. The Defendant says: ‘I have lent you larger sums of money, exceeding the amount due to you in respect of the residue, which sums have been lent or advanced to you out of my own monies, and are wholly unpaid. You have come into equity for a personal equitable debt due from me to you. I ask to set off a personal legal debt due from you to me.’ It seems to me to be clear, on every principle of equity, on every principle of common sense and common justice, and on every principle derived by analogy from the Statute of Set-off, or otherwise, that the Defendant, if he proves the facts, is entitled to the set-off claimed, and I intend to allow it. …” (Emphasis supplied)

24.  Clearly, the set-off was allowed on the basis that there was a “personal equitable debt” due from the administrator to the next of kin regarding his share of the residue of the father’s estate.

25.  Similarly, in Re Jones; Christmas v Jones, Supra, the analysis of Kekewich J can be found at page 203: –

“…The administrator is not a trustee for them in the strict sense, but he has a duty towards them, namely, to pay the debts, cleared the estate and hand over to the next of kin each his aliquot share of the estate. In other words, he [i.e. the administrator] is in the position of bailiff for them [i.e. next-of-kin] of their shares in the estate, and, when once ascertained, their claim against him is a legal claim, and he holds for the next of kin the amount of the claim. Therefore, if one of the next of kin owes the administrator money, and that next-of-kin sues him for the money he owes as administrator, the administrator can set off the debt owing to himself against the money coming to the next-of-kin, and can hold that money for the debt owing to him. …” (Emphasis supplied)

26.  Again, such set-off was allowed on the basis that the administrator was in the position of “bailiff” and the next of kin’s claim against the administrator was a legal claim.

27.  This should be contrasted with the position in Hong Kong.

28.  In Hong Kong the defendant is more than a “bailiff” for the plaintiff of his share in the Deceased’s Estate.  Rather, the defendant was the “trustee” for the plaintiff in respect of the Deceased’s residuary estate under section 9 of the Intestates’ Estates Ordinance, Cap 73, which provides as follows: –

“Subject to his rights and powers for the purposes of administration, the personal representative of any person dying intestate shall be a trustee for the persons beneficially entitled under this Ordinance in respect of the residuary estate of the deceased unless it appears from the will, if any, of the deceased that he is to take the residuary estate beneficially.” (Emphasis supplied)

29.  Under section 2 of the Intestates’ Estates Ordinance, “residuary estate” has been defined as meaning “every beneficial interest in an estate as to which a person dies intestate, after payment of all such funeral and administration expenses, debts and other liabilities as are properly payable thereout, which … he could, if of full age and capacity, have disposed of by his will”.  See also section 4(1) of the Intestates’ Estates Ordinance, which provides that the residuary estate of an intestate shall be distributed in the manner or “be held on the trusts” mentioned in that section.

30.  As the defendant has now accepted that “the residuary estate is ascertained”, the defendant is the trustee for the plaintiff who is beneficially entitled in respect of HK$1,824,120, i.e. the Sum withheld by the defendant. 

31.  As a matter of general principle, “a beneficiary’s claim to recover a trust fund would not be impeached by the trustee’s personal cross-claim against the beneficiary so as to permit an equitable set-off”[2].

32.  The above general principle is consistent with the settled law that an executor cannot set off a beneficiary’s indebtedness to the executor in his personal capacity against the beneficiary’s claim in specie for his share in the trust fund[3].

33.  Based on the above, I am of the view that in Hong Kong, where the defendant is a trustee for the plaintiff in respect of his share of the Deceased’s residuary estate, the defendant is not entitled to claim a set-off in respect of the plaintiff’s alleged indebtedness to the defendant.

D.1    Conclusion on the OS

34.  For the reasons stated above, I hold that the question posed by the plaintiff set out at paragraph 5 above should be answered in the negative.

35.  Further, I order that the defendant do forthwith distribute to the plaintiff money in the sum of HK$1,824,120 held by the defendant in her capacity as the administratrix of the Estate of the Deceased.

36.  As to costs, I order that the defendant do personally pay to the plaintiff the costs of these proceedings, such costs are to be taxed on a party-and-party basis if not agreed.

37.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

38.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.