NG KWAN YING v. CAI GUO XIANG AND OTHERS

HCA65/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 65 OF 2004

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J U D G M E N T

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A. INTRODUCTION

A.1 The parties

1. On 28 August 1996, Mr Choy Ching Ming (“Mr Choy”) died.  He left a considerable estate, the net principal value of which was assessed by the Estate to be HK$181,191,399.50 as at 6 August 2001.

2. Mr Choy was survived by his next-of-kin :

(1)	the 1st defendant, his brother;
(2)	the 2nd defendant, his niece;
(3)	Madam Zhang Wen Jing (“Madam Zhang”), his niece,
(4)	the 4th defendant, his niece;
(5)	the 5th defendant, his nephew;
(6)	the 6th defendant, his niece; and
(7)	the 7th defendant, his nephew.

They are referred to as the Statutory Beneficiaries collectively below.

3. Madam Zhang died on 27 April 1998.  The letters of administration of her estate were granted to Nanyang Commercial Bank Trustee Limited (“the Bank”) on 24 January 2003.  The Bank in its capacity as the administrator of Madam Zhang’s estate is sued in this action as the 3^rd defendant.

4. The 8^th defendant is the administrator of Mr Choy’s estate appointed by the court on 13 June 2001.

5. It is the plaintiff’s case that she lived with Mr Choy as husband and wife between October 1962 and May 1974.

A.2 The Deed

6. The plaintiff, the Statutory Beneficiaries and the Bank entered into a deed of family arrangement dated 10 June 1997 (“the Deed”).  Under the Deed :

(1)	The Bank, in its capacity as the lawful attorney of the 1st defendant, shall apply to the High Court for the grant of letters of administration to Mr Choy’s estate.  (Clause 2)
(2)	Upon realization or conversion into cash of all the realty and personalty of Mr Choy’s estate by the 3rd defendant and after deduction to all necessary expenses, the net residuary estate shall be divided and distributed to the Statutory Beneficiaries and the plaintiff thus :
	(a)	the 1st defendant, 20% thereof;
	(b)	the 2nd defendant, 20% thereof;
	(c)	Ms Zhang and the 4th to 7th defendants, jointly 20% thereof in their respective equal shares; and
	(d)	the plaintiff, the 40% thereof.
	(Clause 9)
(3)	The Statutory Beneficiaries and the plaintiff shall not make any claim to any part of Mr Choy’s estate other than in accordance with the terms and conditions of the Deed.  (Clause 10)

A.3 HCAP13/1997

7. At the time when the Deed was made, the parties thereto were fully aware of the allegation by one Ms Elsa Mok Hang Won (“Ms Mok”) that she was the widow and lawful kit-fat wife of Mr Choy and that Mr Choy had purportedly executed his last will on 24 May 1996, naming her as the sole beneficiary of his estate.  See Clauses 16 to 21 of the Deed.

8. On 19 November 1997, the 1^st defendant by his lawful attorney Lam Fong commenced HCAP13/1997 on behalf of all the Statutory Beneficiaries and the plaintiff against Ms Mok, claiming inter alia for a declaration that Mr Choy died intestate and that he should be entitled to a grant of letters of administration of Mr Choy’s estate.  The plaintiff was not a party to that action.

9. In a Judgment handed down on 26 March 2001, Yam J found that Ms Mok had failed to establish that Mr Choy had executed a valid will but she had proved that Mr Choy had effected a valid gift of donatio mortis causa of everything inside his safety box in Po Seng Bank to her (“the Alleged Gift”).  As it turned out, the value of the Alleged Gift constituted nearly all of Mr Choy’s wealth.

10. By order dated 13 June 2001, Yam J appointed the 8^th defendant as the administrator of Mr Choy’s estate.  The letters of administration of Mr Choy’s estate was then granted to the 8^th defendant on 3 September 2001.

A.4 Appeal and the Consent Order

11. Both the 1^st defendant and Ms Mok appealed against Yam J’s judgment.

12. By a consent order dated 28 May 2002 (“the Consent Order”), they disposed of the appeal by settlement.  They agreed to jointly instruct the 8^th defendant to distribute the net estate of Mr Choy in the following manners :

(1)	to pay HK$15 million to one Rosa Chan Yam in full and final settlement of all her claims against Mr Choy’s estate; and
(2)	to realize the other assets in the estate of Mr Choy and, after deduction of estate duty, administration and testamentary expenses, proved just debts and liabilities of his estate (i.e. proved to the satisfaction of the Estate Duty Office), to distribute the same equally between the plaintiff and the defendant.

A.5 Distributions

13. To effect the distributions, the 1^st, 2^nd and 4^th defendants executed powers of attorney in favour of the Bank dated 21 January 2002.  The 5^th to 7^th defendants executed theirs on 26 June 2002.  Pursuant to those powers of attorney, the Bank was empowered to collect the entitlements of the Statutory Beneficiaries by way of receiving distributions under the Consent Order by the 8^th defendant.

14. In the course of administration of Mr Choy’s estate, the 8^th defendant had in July 2002 made four interim distributions of entitlements of the Statutory Beneficiaries (pursuant to an estate account calculated up to and including 30 June 2002) to the Bank in its capacity as their lawful attorney.  In August 2002, the 3^rd defendant paid out those interim distributions in accordance with the provisions of the Deed.

15. According to the Statements of Accounts prepared by the Bank (“the Accounts”), as at 23 August 2002, the total value of Mr Choy’s estate was HK$61,514,155.81[1] and was distributed thus : 40%, that is, HK$26,205,662.32, to the plaintiff and 60%, that is, HK$39,308,493.49, to the Statutory Beneficiaries.  After deducting the necessary expenses, the net distributions were HK$14,665,180.50 to the plaintiff and HK$20,502,048.16 to the Statutory Beneficiaries.  The plaintiff, 1^st, 2^nd, 4^th to 7^th defendants and Mr Qi Min Liang (“Mr M.L. Qi”), Madam Zhang’s husband, apparently representing the estate of Madam Zhang all signed on the Statements of Account to acknowledge the figures and express their agreement to accept the distributions.

16. The actual sum that the plaintiff had received from the Bank through distribution was HK$11,512,589.65 : see the receipt dated 5 September 2002.  The plaintiff had also received a sum of HK$143,593.83 as disbursements.  In acknowledging the contributions made by various parties in HCAP13/1997, the Statutory Beneficiaries[2] agreed in writing that 10% of their 60% entitlement (HK$3,930,849.35) and of the plaintiff’s 40% entitlement (HK$2,620,566.23) be paid to the plaintiff.  Thus the plaintiff also received a total sum of HK$6,551,415.58 from the Bank on 5 September 2002.  According to a note written by the plaintiff dated 5 September 2003, the plaintiff had given the said sum of HK$6,551,415.58 to her daughter, Ms Jennifer Wong (“Ms Wong”) for handling.

17. By a Deed of Release and Indemnity dated 28 August 2002 (“DRI”), the plaintiff, the 1^st, 2^nd, 4^th to 7^th defendants, inter alia, jointly released and discharged the Bank from all claims and demands in relation to the distributions.  Recital 13 expressly recorded that [the Statutory Beneficiaries] and [the plaintiff] have carefully examined and approved [the Accounts] to be true and accurate in all respect.

A.6 Threats

18. By letter dated 1 August 2003, the 1^st, 2^nd and 5^th defendants asked the 8^th defendant to remit the balance of Mr Choy’s estate to the Statutory Beneficiaries directly, instead of remitting to the Bank as their attorney.

19. By letter dated 19 August 2003, the plaintiff’s former solicitors, Messrs Liu Chan & Lam (“LCL”) enquired with the 8^th defendant’s solicitors, Messrs Denton Wilde Sapte (“DWS”) if whether the 8^th defendant would deduct a sum equivalent to 40% of the net residuary estate and send the same to the plaintiff before making any payment to the Statutory Beneficiaries.  By another letter dated 3 September 2003, LCL asked DWS if the 8^th defendant would refrain from distributing the residuary estate to the Statutory Beneficiaries pending their confirmation to abide by the Deed.

20. The 8^th defendant replied by letter dated 8 September 2003 that unless they received instructions from the Statutory Beneficiaries instructing them to pay 40% of their entitlements to the plaintiff, they could not make any distribution to the plaintiff.  By another letter dated 17 November 2003, the 8^th defendant informed LCL that it had received instructions from the 1^st defendant to withhold any distribution of Mr Choy’s estate to the Bank.

21. LCL then wrote on 4 December 2003 to the 1^st, 2^nd, 4^th to 8^th defendants and Mr M.L. Qi seeking their written authorization to the 8^th defendant to remit her entitlements in Mr Choy’s estate to her directly.  They did not respond to that letter.

22. By a letter dated 9 January 2004, the 2^nd defendant purported to revoke the promise of allowing the plaintiff to have 40% of Mr Choy’s estate and instructed the 8^th defendant to remit the 2^nd defendant’s entitlements in Mr Choy’s estate equally to two bank accounts in Shanghai.

B. THE PRESENT ACTION

B.1 The plaintiff’s claim

23. Not surprisingly, the plaintiff then commenced the present action on 13 January 2004.  She essentially sought the due performance of the Deed, claiming an injunction and order for specific performance against the 1^st to 7^th defendants and an injunction against the 8^th defendant.

B2. Defence and counterclaim

24. Briefly, the defence of the 1^st and 2^nd defendants is that the Bank had acted improperly and in breach of its fiduciary duties towards the Statutory Beneficiaries in making the distributions.  The 2^nd defendant averred that on a correct interpretation of the Deed and the Consent Order, the plaintiff was only entitled to share in Mr Choy’s estate and not in any of the share in the Alleged Gift the benefit of which was given only to the Statutory Beneficiaries.  The plaintiff had been overpaid.  The 2^nd defendant counterclaimed against the plaintiff for an account of overpayment and an order for payment of the overpayment.

25. The defence 4^th to 7^th defendant is similar.  They alleged that the value of Mr Choy’s estate as at 10 June 2002 was only HK$3,796,563.96.  The plaintiff was accordingly only entitled to 40% thereof, namely, HK$1,518,225.20.  The plaintiff had received more than her entitlements.  They counterclaimed for the return of the alleged overpayment.

26. Both the 3^rd and 8^th defendants adopted a neutral position and agreed to abide by the court’s order.

B.3 Interlocutory applications

27. At the pre-trial review dated 6 July 2007, the 5^th defendant and a Mr Qi Luen Hua, a beneficiary of Madam Zhang’s estate, took out various interlocutory applications.  I directed them to be dealt with at the first day of the trial.  Having heard the parties, I dismissed all the applications with costs.

B.4 The trial

28. I now return to the trial proper.

29. The plaintiff is currently residing in the USA.  She is aged 81 and according to Ms Wong, is not in good health.  Ms Wong gave evidence on her behalf.  She had filed a witness statement dated 8 January 2005 and gave oral evidence.

30. The 1^st defendant did not appear.  The 2^nd defendant did.  She purported to represent the 1^st defendant upon his oral authorization as well.  The 1^st and 2^nd defendants have they filed a joint witness statement dated 29 November 2005.  But the 2^nd defendant elected not to give oral evidence.

31. The 5^th defendant appeared in person.  He had filed two witness statements dated 4 April 2006 and 14 June 2007.  He also gave oral evidence.

32. The 4^th, 6^th and 7^th defendants were absent.  They are residing in Shanghai and have authorized in writing the 5^th defendant to represent them.  By virtue of the unless orders dated 13 February 2006 and 22 September 2006, they are debarred from adducing any evidence at the trial.

C. DISCUSSION

C.1 The main issue

33. The main and only issue before the court is : what is the plaintiff’s entitlement to Mr Choy’s estate?  This depends on a proper construction of the Deed.  The more pertinent provisions of the Deed are summarized below.

34. The parties acknowledged that Mr Choy died intestate and that the Statutory Beneficiaries are the only persons entitled to share in his estate according to the provisions of the Intestate Estates Ordinance, Cap.73 (“IEO”) (Clause 1 of the Preamble).

35. The Statutory Beneficiaries and the plaintiff were desirous of avoiding any dispute and litigation on the issue of whether or not the plaintiff was the lawful kit-fat wife of Mr Choy and/or she was lawfully entitled to share in Mr Choy’s estate.  They Statutory Beneficiaries and the plaintiff thus agreed to distributing part of the residuary estate of Mr Choy in the manner as provided to the plaintiff in full and final settlement of any and all of her claims against Mr Choy’s estate (Clause 7 of the Preamble).

36. Notwithstanding the provisions of the IEO, the Statutory Beneficiaries and the plaintiff agreed that Mr Choy’s estate shall, after deduction of all necessary expenses as set out in the Schedule, be divided in the manner as provided (Clause 10 of the Preamble).

37. Further, the provisions of the Deed shall prevail over the provisions of IEO in case of variance or inconsistency (Clause 1).

38. The manner of distribution is set out in Clause 9.  To recap, upon realization or conversion into cash of all the realty and personalty of Mr Choy’s estate by the 3^rd defendant and after deduction to all necessary expenses, the net residuary estate shall be divided and distributed to the Statutory Beneficiaries and the plaintiff thus :

(a)	the 1st defendant, 20% thereof;
(b)	the 2nd defendant, 20% thereof;
(c)	Ms Zhang and the 4th to 7th defendants, jointly 20% thereof in their respective equal shares; and
(d)	the plaintiff, the 40% thereof.
(Emphasis supplied)

39. Clause 10 then provided that the Statutory Beneficiaries and the plaintiff shall not make any claim to any part of Mr Choy’s estate other than in accordance with the terms and conditions contained therein.

40. The parties were aware of the claim by Madam Mok (see Clauses 16 to 21).  In particular, they agreed that if Madam Mok succeeded in her claim on the purported will, then the Deed shall fail and become lapse and have no binding effect (Clause 17).  And they authorized the Bank to commence probate actions against Madam Mok (Clause 21).

41. The intention of the parties as gathered from the above Clauses is clear.  Among themselves, they accepted that Mr Choy died intestate.  In such circumstances, only the Statutory Beneficiaries are entitled to share in his estate under the IEO.  But the plaintiff claimed that she as his lawful kit-fat wife was also entitled to share in his estate.  The parties wished to avoid litigation and therefore agreed that irrespective of the provisions in the IEO and hence the entitlements of the Statutory Beneficiaries thereunder, Mr Choy’s estate was to be distributed in accordance with Clause 9.  Upon such analysis of the parties’ intention, the meaning of the phrase “net residuary estate” in Clause 9 is plain.  It simply means the cash equivalent of Mr Choy’s entire estate that the Statutory Beneficiaries are entitled to after all the property comprised in his estate has been realized or converted into cash and after all necessary expenses have been deducted.

42. The 1^st, 2^nd, 4^th to 7^th defendants contended that the net residuary estate of Mr Choy does not include the Alleged Gift.  As I understand their case, they principally relied on the judgment of Yam J in HCAP13/1997.  Such reliance is however misplaced for the simple reason that Yam J’s judgment had been overtaken by the Consent Order.  By virtue of the Consent Order, the net estate of Mr Choy was to be distributed in the manner as set out in paragraph 12 above.  The net effect of the Consent Order is that irrespective of Yam J’s judgment, the Alleged Gift now formed part of Mr Choy’s estate for the purpose of implementing the distributions pursuant to the Consent Order.

43. Plainly, what the 1^st defendant obtained under the Consent Order then constituted the net residuary estate of Mr Choy within the meaning of the Deed, which is to be distributed among the Statutory Beneficiaries and the plaintiff in accordance with Clause 9.

44. The contention advanced by the 1^st, 2^nd, 4^th to 7^th defendants is inherently inconsistent and self-contradictory.  On the one hand, they said by virtue of Yam J’s judgment, the plaintiff is not entitled to claim any share in the Alleged Gift because it did not form part of Mr Choy’s net residuary estate.  On the other hand, they as the Statutory Beneficiaries are so entitled.  But they are so entitled only if the Alleged Gift formed part of the Mr Choy’s estate.

45. For these reasons, the contention of the 1^st, 2^nd, 4^th to 7^th defendant must be rejected.  In my view, it is an afterthought fabricated by them to make out a wholly disingenuous and untenable case by relying on Yam J’s judgment, which reliance is wholly misplaced, to wrongfully deprive the plaintiff of her lawful entitlements to Mr Choy’s estate under the Deed and to unjustifiably enrich themselves at her expense.  Their conduct is deplorable.  Their defence must fail and there is no basis whatsoever to support their counterclaim.

C.2 Other evidence

46. This is sufficient to dispose of the issue.  However, for completeness, I will briefly deal with the evidence as follows.

47. Ms Wong gave evidence on the background circumstances leading to the present action, the reason why it was the 1^st defendant who commenced HCAP13/2007, and her understanding why the plaintiff’s contention on the effect of Clause 9 of the Deed is correct.  She has not been shaken under cross-examination.  I find her a truthful witness.  I accept her evidence entirely.

48. On the other hand, I find the 5^th defendant a poor and unreliable witness.  His evidence on various aspects, such as the alleged wrongdoing of the Bank, is irrelevant.  More importantly, he remained adamant that his contention on the effect of the Deed is correct.  In my view, this only shows that he was willing and did twist the obvious to suit his need.  I reject his evidence.

49. It is the case of the 4^th to 7^th defendants’ case that the net residuary estate was HK$8,769,307 as at 28 August 1996 and HK$3,795,563.96 as at 10 June 2002.  It is not clear how they obtained those figures.  The figure of HK$8,769,307 appeared in one of the Accounts prepared by the Bank.  But it only represented part of the Mr Choy’s estate stated to be HK$181,224,227.25.  As to the figure of HK$3,795,563.96, the 5^th defendant obtained it from the Schedule of Property attached to the letters of administration of Madam Zhang’s estate.  In the Schedule of Property, it was stated that Madam Zhang’s 1/15 interest in Mr Choy’s estate was HK$244,830.51.  He multiplied this figure by 15 and came at HK$3,795,563.96 and claimed that it is the total value of Mr Choy’s estate.  The 5^th defendant’s approach is flawed.  It is apparent from the Schedule of Property that the figure of HK$244,830.51 was stated for estate duty purpose only.  The Commissioner of Estate Duty did not accept it to be correct in representing the value of Madam Zhang’s estate : see the letters from the Commissioner dated 23 September 2002 and 15 October 2002.  Finally, the value asserted by the 4^th to 7^th defendants, be it HK$8,769,307 or HK$3,795,565.96, does not sit well with the other evidence, which I accept, showing that the total net value of Mr Choy’s estate is in the region of HK$181 million.

50. As to the documentary evidence, I am of the view that the Accounts, the DRI and the evidence showing the distributions received by the Statutory Beneficiaries all went to support the plaintiff’s case.  The 5^th defendant tried to undermine them in his oral testimony by raising various allegations.  I need not dwell on them.  Suffice it to say that I have carefully his allegations but find no substance in them at all.  I reject them all.

51. Finally, on the evidence before me, is it beyond dispute that the 1^st and 2^nd defendants, the beneficiaries of Madam Zhang’s estate, and the 4^th to 7^th defendants have all threatened to refuse the plaintiff’s entitlements in Mr Choy’s estate in accordance with the Deed.  And the 8^th defendant, as the administrator of Mr Choy’s estate, must act in accordance with the instructions of the Statutory Beneficiaries.  In the circumstances, an order for injunctions and specific performance as prayed for is warranted.

D. CONCLUSION

52. I will enter judgment for the plaintiff :

(1)	As against the 1st to 7th defendants :
	(a)	an injunction to restrain each of them form instructing or causing the 8th defendant to pay, remit, or distribute the balance of Mr Choy’s estate to themselves, otherwise then in the proportion of 60% of such sum to which they would collectively be entitled to as Statutory Beneficiaries; and
	(b)	specific performance of the agreement to share the balance of Mr Choy’s estate with the plaintiff in the proportion of 60/40.
(2)	As against the 8th defendant, an injunction to restrain it from paying, remitting or distributing the balance of Mr Choy’s estate to the 1st to 7th defendants otherwise than in the proportion of 60% of such sum to which they would collectively be entitled to as Statutory Beneficiaries.

53. The counterclaim is dismissed.

54. Finally, I see no reason why costs should not follow the event.  I order that the plaintiff shall have the costs of the action against the defendants to be taxed if not agreed.