CHAN SHUI HING, Executrix of the estate of LUKE SO NUI v. CHAN KIN KEUNG

HCA 2658/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2658 OF 2015

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D E C I S I O N

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Application

1.  Before the court is the defendant’s application, by summons issued on 18 October 2017, for (1) a stay of all further proceedings in this action pending the determination of HCAP 20/2017 (“Probate Action”); and (2) for vacation and adjournment of the trial of this action which has been set down for 4 days from 9 to 12 January 2018 (“Application”).

Matters giving rise to need for stay

Plaintiff’s claims and defendant’s grounds of defence in this action

2.  In this action, the plaintiff claims against the defendant for

(1)   an account, and return, of the proceeds of sale (“Proceeds”) of Ground Floor & Cockloft, 27 Shing On Street, Hong Kong (“Property”) of which Madam Luke So Nui, deceased (“Deceased”) was the sole owner and which was sold and assigned by the defendant in June and July 2010 at HK$15,900,000 as the Deceased’s attorney under a general power of attorney dated 20 June 2002 (“Power”); or

(2)   alternatively, damages equivalent to the current market value of the Property.

3.  The plaintiff so claims as the executrix and trustee of the Deceased’s estate (“Estate”) appointed under the Deceased’s will dated 30 March 1976 (“1976 Will”), probate of which was granted to the plaintiff on 5 June 2012 under Grant No.HCAG004513/2012 (“Grant”).

4.  Under the 1976 Will, the residuary Estate was bequeathed by the Deceased in equal shares to her 5 children namely, Chan Miu Hing (“Miu Hing”), Chan Wai Hing, the plaintiff, Chan Sau Hing Virginia and the defendant.

5.  It is the plaintiff’s case that:

(1)   The Proceeds form part of the Estate. 

(2)   The defendant, as donee under the Power, held the Proceeds on trust for the Deceased during her lifetime and for the Estate after her death on 17 May 2012.

(3)   Alternatively, the Power had been revoked by reason of the Deceased’s mental incapacity prior to the sale and assignment of the Property by the defendant so that the defendant did not have the Deceased’s authority to deal with the Property.

6.  In defence, the defendant contends that:

(1)   It was always intended by the Deceased and her husband (with whom she purchased the Property as joint tenants) to eventually give the Property to the defendant.

(2)   Such intention remained unchanged.

(3)   The Power was executed by the Deceased to enable the defendant to, inter alia, carry out and fulfil such intention on the Deceased’s behalf.

(4)   The sale of the Property and retention of the Proceeds by the defendant was expressly approved by the Deceased.  The Proceeds was a gift by the Deceased to the defendant.

(5)   The Deceased was not mentally incapacitated at the times of the sale and assignment of the Property by the defendant, using the Power.

Stage to which this action has reached

7.  As stated above, the trial of this action is due to take place from 9 to 12 January 2018.

8.  The matter first came before me on 10 October 2017 for a pre-trial review (“PTR”), at which directions for the preparation of the trial were given and issue was raised by me as to the need for medical expert evidence regarding the Deceased’s mental state in June and July 2010 when the sale of the Property was agreed and completed, which evidence has not been obtained.[1]

Reason for stay

9.  The reason why the defendant wishes to have the trial vacated and adjourned is that he has since found another will executed by the Deceased (“2010 Will”) in the presence of 2 solicitors from Ong & Chung namely, Mr Lawrence Ong Tong Sing (“Mr Ong”) and Mr Chan Siu Pan (“Mr Chan”), on 10 March 2010 under which:

(1)   all former wills of the Deceased (which would necessarily include the 1976 Will) were revoked;

(2)   the defendant was named the sole executor as well as sole beneficiary of the Estate (with the Property specifically identified); and

(3)   the plaintiff and the other 3 daughters of the Deceased were specifically excluded from sharing the Estate for the reason that they had already been well provided for by the Deceased prior to the making of the 2010 Will and the Deceased believed that they were financially capable of adequately supporting themselves.

10.  The defendant has, on 18 October 2017, commenced the Probate Action against his 4 sisters including the plaintiff for the court to revoke the Grant and pronounce the 2010 Will in solemn form.

How the 2010 Will was found?

11.  According to the defendant’s affirmation dated 18 October 2017 in support of the application:

(1)   He attended a conference with his solicitor and counsel on 6 October 2017 at which he was asked by counsel for confirm that he has disclosed all relevant documents in his possession custody and power whereupon it suddenly occurred to him that the Deceased had executed a document which might have been linked to the sale of the Property at about the time of the sale, though he could not at the time say what that document was and whether he still had it.  He was advised to locate the document.

(2)   Between 6 and 11 October 2017, the defendant could not find the document, whether at his home or workplace.

(3)   The defendant eventually found the 2010 Will in the evening on 11 October 2017 inside a brown manila envelope stuck between a stack of other documents (most of which relate to his business) inside one of the cabinets in his study at home.

(4)   Following the discovery, the defendant sent a copy of the 2010 Will to his solicitor on 12 October 2017, was advised by counsel in conference as to the ramifications of the 2010 Will on 13 October 2017 and through solicitors disclosed the 2010 Will to the plaintiff on 13 October 2017.

Defendant’s account of the execution of the 2010 Will

12.  Having found and read the 2010 Will, the defendant is now able to recall the following:

(1)   In early 2010, the Deceased orally informed him that she wished to make a will because she wanted to make sure that there would be no dispute between the defendant and his sisters regarding the gift of the Property to him and to bestow upon the defendant her remaining property as she had in her younger days given other landed properties to the defendant’s sisters.

(2)   He engaged Mr Ong’s firm for the Deceased for this purpose.

(3)   On 10 March 2010, Mr Ong and Mr Chan attended the Deceased at her home.  After exchanging introductory small talks for a few minutes in which the Deceased engaged in a normal manner and confirming with the Deceased that she had enlisted the defendant’s assistance in preparing a will, Mr Ong interpreted and explained verbatim the contents of the draft will that he had prepared in Cantonese.  Thereafter, Mr Ong enquired with the Deceased whether she fully understood the contents or had any amendments to make, to which the Deceased replied that the contents were in order.

(4)   The Deceased executed the 2010 Will by drawing a cross on it and stamping her personal name chop (which was retrieved by Miu Hing) next the cross.

(5)   Mr Ong and Mr Chan then signed on the 2010 Will as witnesses.

(6)   The Deceased gave Mr Ong instruction to give the 2010 Will to the defendant for safekeeping after sealing the same.

(7)   Apart from Mr Chan, also present throughout the process were the defendant, his elder sister Miu Hing (who is a witness for the plaintiff in this action) and the Deceased’s domestic helper.

12.  The defendant expects Mr Ong would be in a position to verify his above account and confirm the authenticity and due execution of the 2010 Will in the Probate Action.

Why the 2010 Will was not unearthed and disclosed earlier?

13.  After the Deceased’s death on 17 May 2011, upon his sisters’ urging, the defendant searched for the Deceased’s will but only found the 1976 Will which he duly handed over to his sisters.  At that time he did not recall that the Deceased had made the 2010 Will.  The defendant reasons that he would not have surrendered the 1976 Will to his sisters or deliberately withheld the 2010 Will had he harboured any sinister motive to claim the entirety of the Estate.

14.  As to why, despite having assisted the Deceased in arranging for the preparation of the 2010 Will by Mr Ong, witnessed the execution of the same by the Deceased and had possession of the 2010 Will all these years, the Defendant only unearthed the 2010 Will more than 6 years after the Deceased’s death, the defendant claims that:

(1)   He cannot recollect when exactly the sealed original 2010 Will was passed to him by Mr Ong but ventured to guess that it might have been around the time when he sold the Property a while later that same year.  He is not entirely certain about this because Mr Ong had passed to him quite a number of other documents during that time, including e.g. the title deeds of the Property and the conveyancing documents.

(2)   His attention was focused on the sale and assignment of the Property, which followed shortly after the making of the 2010 Will.

(3)   His home has been in a cluttered and disorganised state over all these years.

(4)   The existence of the 2010 Will genuinely slipped his mind despite his having been advised as to his obligations to make discovery of all relevant documents.

(5)   It was upon the actual discovery of the 2010 Will on 11 October 2017 that he became able to remember the events leading to its preparation and execution.

15.  The defendant also observes and places reliance on the fact that Miu Hing also appears to have forgotten about the 2010 Will, the execution of which she witnessed.

Plaintiff’s position

16.  The plaintiff opposes the Application as being not in the best interest of the Estate for the following reasons:

(1)   The Deceased had told her children during her lifetime that she intended to distribute the Estate to them in equal shares.

(2)   After the Deceased’s death, when he was asked to return the 1976 Will, the defendant intimated to the plaintiff that there was another will but did not elaborate.  In view of what the defendant said, an enquiry was made by the plaintiff in the usual way via the Law Society’s weekly circular dated 15 August 2011 but to no avail.  The plaintiff therefore applied for probate of the 1976 Will and obtained the Grant.  The defendant made no mention of the 2010 Will throughout the process.

(3)   There was until 13 October 2017 no mention of the 2010 Will in this action.

(4)   The plaintiff does not accept the defendant’s claim that he has forgotten about the existence of the 2010 Will.  Such claim does not sit well with the facts that he is the sole beneficiary under that will and he played a significant role in arranging for its preparation and execution.

(5)   The defendant’s account of the late discovery of the 2010 Will is contrived and unbelievable.

(6)   The plaintiff believes that the defendant had deliberately withheld disclosure of the 2010 Will because he knew that the Deceased had already lost testamentary capacity and that the 2010 Will would not be admitted to probate.

(7)   If the trial of this action proceeds as scheduled, the findings as regards the Deceased’s mental capacity to manage her affairs in June and July 2010 (i.e. when the Property was sold and assigned and just 3 to 4 months after the date of the 2010 Will) would have an impact on the parties to the Probate Action as to how they should approach the question of the validity of the 2010 Will.  If the plaintiff loses this action, she and her sisters would “not vigorously challenge the validity of the 2010 Will”.

17.  If the Application should be allowed, the plaintiff asks the court to order the defendant to:

(1)   pay the plaintiff all her costs since the first case management conference up to date on an indemnity basis and to be paid forthwith; and

(2)   disclose the whereabouts of the Proceeds or assets acquired therewith;

(3)   undertake not to in the meantime dispose of or encumber or otherwise diminish the value of the Proceeds or assets acquired with the same to the extent of HK$12,720,000 (being 80% of the Proceeds to which the plaintiff and the other 3 beneficiaries under the 1976 Will would be entitled).

Stay and adjournment

18.  Under s 16(3) of the High Court Ordinance (Cap 4) and Order 1B rule 1(2)(e) of the Rules of the High Court (Cap 4A), the court has general powers to stay the whole or part of any proceedings either generally or until a specified date or event.

19.  The Grant (in respect of the 1976 Will), if revoked, and the 2010 Will, if propounded, would deprive the plaintiff of locus standi to bring and continue with this action and would further vest the subject-matter of this action (i.e. Proceeds) in the defendant as the sole beneficiary of the Estate.

20.  That being the case, the Probate Action should as a matter of principle be heard and determined first.  The plaintiff’s suggestion that a finding on the Deceased’s mental capacity in managing her own affairs in June and July 2011 that is adverse to her in this action may impact upon her and her sisters’ stance towards the issue of the validity of the 2010 Will in the Probate Action is putting the cart before the horse.

21.  Further, from a case management point of view:

(1)   While the plaintiff has raised an issue as to the validity of the 2010 Will (if not its authenticity), this court should not and cannot pre-judge such issue, which is clearly a matter for the judge trying the Probate Action.

(2)   The determination of the Probate Action in favour of the defendant would however dispose of this action against the plaintiff.

(3)   The court should guard against any additional wastage of the parties’ time and costs and the court’s resources as a result of the further prosecution of this action in the event of a disposition of the Probate Action favourable to the defendant.

(4)   The only prejudice that the plaintiff would suffer in case she should prevail in the Probate Action is that of delay.  Such prejudice can be adequately compensated by appropriate orders for costs and conditions for stay.

22.  It follows that the trial of this action on 9 to 12 January 2018 should be adjourned and those trial dates vacated.  In this regard, the trial dates are milestone dates.  Under Order 25, rule 1B(3), the court should not grant an application by a party to vary a “milestone date” unless there are exceptional circumstances justifying the variation.  Practice Direction 5.2 on Case Management stresses in paragraph 42 that milestone dates are immovable save in the most exceptional circumstances.  However, the appearance of the 2010 Will having fundamental impacts upon both the plaintiff’s locus standi to bring and continue with this action and the devolution of the Proceeds and, therefore, the necessity to resolve the issue as to the validity of the 2010 Will first are, to my mind, exceptional circumstances.

Conditions for stay

23.  I am not persuaded that the defendant should be required to undertake not to dispose of, encumber or diminish the Proceeds to the extent of the plaintiff and her 3 sisters’ 80% entitlement thereto under the 1976 Will or to disclose the whereabouts of the Proceeds.  The imposition of such conditions would be tantamount granting a Mareva injunction or proprietary injunction (together with the usual ancillary disclosure order) in favour of the plaintiff against the defendant.  No application for either of such injunctions has been made in the course of this action.  I fail to see why such interlocutory injunctive relief is needed or appropriate simply because of the stay.  I certainly do not have before me any evidence or submissions as to how the established requirements for such interlocutory injunctive relief are satisfied.

24.  However, as said earlier, the prejudice suffered by the plaintiff as a result of the stay is that the Estate might be delayed in the recovery of the Proceeds should the Probate Action be dismissed and the plaintiff’s claim herein be allowed.  Such delay would not have occurred but for the late disclosure of the 2010 Will on the eve of the trial of this action.  The defendant’s explanation for the time that he has taken leaves a lot to be desired.  It is in the interest of justice that the delay should be minimised as much as possible by the expeditious and efficient prosecution of the Probate Action.  The defendant has, upon being prompted by the court, undertaken to do so.  I am not satisfied that it is enough.  To ensure that the defendant would honour such undertaking and not abuse the stay and adjournment, a condition should be imposed that he pays into court HK$1.5 million within 21 days.  Prejudice caused by delay could be most appropriately compensated for by an appropriate order for interest.  The sum of HK$1.5 million represents roughly interest on HK$12,720,000 (to which the plaintiff and her 3 sisters would be entitled out of the Proceeds should they succeed in both the Probate Action and herein) at judgment rate (8% per annum) for a period of 18 months.  The Probate Action would take at least 18 months to conclude.

Costs

23.  There is no question that the defendant should pay the costs of the Application (by which he seeks the court’s indulgence). 

24.  The defendant should also pay the plaintiff’s costs herein from and including the pre-trial review on 10 October 2017, which costs is wasted as a result of the adjournment of the trial.

25.  I strongly disapprove of the defendant’s attempt to shift the blame to the plaintiff by harping on the fact that Miu Hing (a witness for the plaintiff in this action) has apparently also forgotten about the 2010 Will.

26.  All the aforesaid costs should be paid on an indemnity basis. As indicated above, I find the defendant’s explanation for the delay in disclosing the 2010 Will less than satisfactory.  He can at the very least be criticised for taking what appears to be a very nonchalant approach to the questions of probate of the wills of the Deceased and his defence of this action until the eve of the trial.

Orders

27.  In summary, upon the defendant’s undertaking to prosecute the Probate Action expeditiously and on condition that the defendant pays into court HK$1.5 million with 21 days:

(1)   all further proceedings in this action be stayed pending the determination of the Probate Action;

(2)   the trial of this action on 9 to 12 January 2018 be vacated and adjourned;

(3)   liberty to the parties to restore;

(4)   the defendant should pay the plaintiff’s costs herein from and including the pre-trial review on 10 October 2017 as well as the costs of the Application on an indemnity basis with certificate for counsel for the hearing on 9 November 2017, to be taxed forthwith if not agreed.

27.  Mr Albert Yau, counsel for the plaintiff, has invited me to give further case management directions for the 2 matters such as that for the Probate Action and this action to be tried by the same judge.  I have given serious thoughts to the suggestion.  However, given that the writ of summons in the Probate Action has just been issued and those proceedings have not taken shape yet, I decline Mr Yau’s invitation.  The matter should perhaps be raised in case management conferences in the Probate Action.