YEUNG YUK YIN v. CHIU TAT SI AND ANOTHER

HCA 4556/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

ACTION NO. 4556 OF 2003

D E C I S I O N

1.  This is an appeal against an order of Master Au Yeung.  Master Au Yeung ordered on 21 November 2005 that all proceedings herein, including the plaintiff’s summons of 22 May 2005, be stayed until 21 days after the due and proper production by the plaintiff to the defendant of the probate of the will of Au Kin-sun, deceased, dated 17 October 2004.

Background

2.  The plaintiff was the wife of the deceased and is the executrix named in the said will.  The deceased was a 30% partner of a business called Yau Hing, Marine Store & Old Metal Dealer.  The remaining 70% interest was owned by the 1st defendant as to 60%, and by the 2nd defendant, as to 10%.  The 1st defendant is the father of the 2nd defendant.

3.  Before his death, the deceased had on 29 July 2003, through solicitors, served a notice of intention to dissolve the partnership.  The 1st and 2nd defendants, through their solicitors, acknowledged the notice of dissolution on 29 July 2003.  The deceased passed away on 24 October 2003.  The plaintiff, in the capacity of the executrix of the deceased, started this action on 16 December 2003.

4.  She claimed an account of the partnership by the defendants, an order that copies of all relevant books, accounts and lists of assets belonging to the partnership be produced, an order that all the assets be vested in a court-appointed receiver and a declaration that the partnership has been dissolved.

5.  In the defence filed on 12 March 2004, the defendants put the plaintiff to strict proof of her entitlement to bring this action.  They also denied a charge of mismanagement of the assets.  Apart from those two points, the defence did not contain any averment that would impinge on the plaintiff’s entitlement to the relief claimed. 

6.  On 22 May 2005 the plaintiff issued a summons under Order 43 of the Rules of the High Court against the defendants for account to be taken, which account should detail all the assets and liabilities, dealings and transactions of the partnership with third parties, and all partnership dealings and transactions between the deceased and the defendants as co-partners, all starting from 2001.

7.  Two days before the first hearing of this summons, the defendants issued a summons for stay of the action, including the above summons.  On 8 April 2005, Master Ho ordered, among other things, that the defendants’ summons of stay should be heard first. 

8.  The defendants’ ground for stay is that the relief claimed in the plaintiff’s summons is determinative of her claim in the action and she is not entitled to such relief without producing the grant of probate of the deceased’s will.

9.  On 25 November 2005, Master Au Yeung heard arguments from both sides and allowed the defendants’ summons to stay.  The plaintiff appealed. 

The Appeal

10.  The plaintiff makes two points on appeal.  The first point is that the plaintiff as an executrix, even without grant of probate of the deceased’s will, is entitled under section 53 of the Probate and Administration Ordinance to sue the defendants in respect of the relief claimed in the action.  The second point is that even if the plaintiff, before obtaining grant of probate, is only entitled to start and continue an action up to the time when she needs to prove title, the action has not reached that stage and her summons for account is only an interlocutory step which she can pursue without producing the grant of probate. 

First point

11.  There is no dispute that under the common law, the executor before obtaining grant of probate is only entitled to start and maintain an action until such time when he needs to prove title.  Paragraph 8-07 of Williams, Mortimer and Sunnucks: Executors, Administrators and Probate (18th edn.) says this:

“Executor may commence action before probate

Though an executor cannot maintain actions before probate, except upon its actual possession, yet he may commence the action before probate, and may continue the same as far as that step where the production of the probate becomes necessary, and it will be sufficient if he obtains the probate in time for that exigency.  …

In order to protect the defendant in such cases, the court, on being shown that the plaintiff who claims as executor has not obtained probate, will stay proceedings until probate has been taken out and a reasonable time has elapsed after it has been submitted to the inspection of the defendant.

The same principles apply to all proceedings whether in the Chancery Division, or elsewhere, including bankruptcy petitions and winding-up petitions.”

12.  Paragraphs 25.10 and 25.12 of The Law of Succession by Mellows (5th edn.) talks about the same thing:

“25.10 The executor derives his authority from the will, and the probate merely confirms his rights.  Generally, however, the executor can prove his right only by taking a grant of probate.  The result is that he can do any act without a grant except:

(a) sue to judgment where it is necessary to show his title as executor; and

(b) in practice, make title. 

Thus, it has been held that an executor without a grant may levy distress for unpaid rent, pay and release debts, receive payments, sell chattels, and pay legacies.  On the other hand, before he has taken out a grant he may be sued by a creditor of the testator.

25.12   The first of the two situations in which the executor needs a grant is to sue to judgment.  Any executor before grant can begin any action, and he can continue any action commenced by the deceased, provided it does not lapse on death.  He must obtain probate before judgment, if the action depends on his title as executor, but probate is not needed in any other case.  If, therefore, it is necessary only to show possession and not title, as in the case of an action for trespass, the action can be completed without a grant.”

13.  The Law of Succession by Parry & Clark 11th edition at paragraph 18-30 spells out the same principle.  In fact, the same principle can be found in most textbooks on the law of succession.  The reason for this is because production of probate is the only way that the executor is allowed to prove his title (see Chetty v Chetty [1916] 1 AC 603 at 608 and Chao Yue Wah v Mo & Company (Hong Kong) Ltd & Ors HCA2326/2001 (unreported) at paragraphs 19 and 34.  The only exception to this rule are cases in which the executor has obtained possession of the property and sues on the basis of such possession.  There is no dispute as to this common law principle.

14.  Mr Shum, counsel for the plaintiff, however, says that the common law principle has been modified by section 53 of the Probate and Administration Ordinance, Cap.10, and the executor in Hong Kong can sue to judgment without production of grant of probate.  The section reads:

“53.     Subject to the provisions of any other Ordinance, a personal representative has the same power to sue in respect of all causes of action vested in and surviving the deceased.”

15.  Section 2 of the Ordinance defines “personal representative” to include the executor. 

16.  Mr Shum further submits that the English cases were decided under section 18(4) of the Trustee Act 1925 and the common law, but section 53 of the Probate and Administration Ordinance is broader than them.  He also relies on sections 19 and 40 of the Interpretation and General Causes Ordinance, Cap.1, which reads:

“19.   An Ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Ordinance according to its true intent, meaning and spirit.

40(1)   Where any Ordinance confers upon any person power to do or enforce the doing of any act or thing, all such powers shall be deemed to be also conferred as are reasonably necessary to enable the person to do or enforce the doing of the act or thing.

17.  I have carefully considered the submissions and do not think that the wording of section 53 is clear enough to amend the common law rule so as to allow the executor to sue to judgment before obtaining a grant of probate.  Section 53 merely allows the executor to sue in respect of all causes of action vested in and surviving the deceased.  It does not say that the executor can sue to judgment without production of grant.

18.  I also refer to Statutory Interpretation, 4th edition by Bennion.  Sections 313 and 315 say:

“313.   The court seeks to avoid a construction of an enactment that produces an unworkable or impracticable result, since this is unlikely to have been intended by Parliament.  Sometimes, however, there are overriding reasons for applying such a construction, for example where it appears that Parliament really intended it or the literal meaning is too strong.

315.     The court seeks to avoid a construction that creates an anomaly or otherwise produces an irrational or illogical result.  Sometimes however there are overriding reasons for applying such a construction, for example where Parliament really intended it or the literal meaning is too strong.”

19.  I agree with Mr Pao, counsel for the defendants, that the wording in section 53 is not clear enough to modify the common law rule, and I reiterate that the production of grant is the only way that the executor can prove title.  I, therefore, do not accept Mr Shum’s first point. 

Second point

20.  Regarding the second point, Mr Shum says that the summons under Order 43 for account is only an interlocutory application and the plaintiff can proceed with it without production of grant.  Again I do not agree with this submission because the relief sought in the summons is a final account which will satisfy one of the claims in the statement of claim in a final manner.  I do not think the plaintiff is entitled to this relief without producing the grant.

21.  Mr Shum has also raised the point that without settled accounts to be delivered by the defendants, the plaintiff would have difficulty in obtaining an estate duty clearance.  However, the Estate Duty Commissioner has already indicated that provisional estate duty clearance can be obtained and I do not think any inconvenience that may be encountered with the Estate Duty Office can compel me to make an order contrary to the common law rule. 

22.  I now come to the progress of the action.  The action has only reached the stage of close of pleadings.  There are still many steps that have to be taken before the action can be set down for trial.  I take the view that it should not be stayed at this early stage.  After I have raised this point with the parties, Mr Pao for the defendants conceded on it when he opened his submissions.  On this basis, I would allow the appeal to the extent that the stay imposed on the action be removed.  However, as I disagree with Mr Shum on his two points on appeal, I would therefore dismiss the appeal in relation to the plaintiff’s summons for account.

(Submissions on costs)

Costs

23.  Both parties have failed in their duty to explain to the Master the two distinct aspects of the defendants’ summons to stay.  They were in pari delicto in this.  This resulted in part of the Master’s order being overturned on appeal.  However, the defendants’ summons to stay ultimately achieved partial success. 

24.  Regarding the conduct of the appeal, the first day was lost because the question of whether it is possible to get estate duty clearance without the account from the defendants had not been covered by the defendants with evidence and/or submissions.  That produced a wastage of one day.  For the second day it was all spent on the points on which the appellant has failed.  No time was spent on the part of the appeal that was allowed.

25.  Bearing in mind these considerations, I would change the Master’s order of costs to an order that the plaintiff do pay the defendants one-third of the costs of the defendants’ summons up to the conclusion of the hearing before the Master, and there be no order as to costs for the appeal.  These orders appear to me to achieve justice and fairness on a totality basis too.

Mr Edward Shum and Miss Joan Auyang, instructed by Messrs Shea & Co., for the Plaintiff

Mr Jin Pao, instructed by Messrs Or, Ng & Chan, for the Defendants