LI KA SING, the executor of the estate of KONG WING HONG, deceased v. KONG COLIN CHUNG PING AND OTHERS

HCMP 418/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 418 OF 2017

(ON AN INTENDED APPEAL FROM HCMP NO 1620/2016)

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JUDGMENT

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Hon Chow J (giving the Judgment of the Court):

INTRODUCTION

1.  By a summons dated 23 February 2017, the 1^st and 2^nd defendants seek leave to appeal against a case management order made by Deputy High Court Judge Kent Yee on 16 November 2016 (“the Order”), as well as a stay of execution of the Order pending the determination of their intended appeal to the Court of Appeal.

BACKGROUND FACTS

2.  The basic facts relevant for the purpose of the present leave application can be shortly stated as follows.

3.  Mr Kong Wing Hong, deceased (“the Deceased”) died on 9 June 2003, leaving a will dated 11 March 1996 (“the Will”) and a codicil dated 24 June 1997 (“the Codicil”). Probate of the Will and Codicil was granted by the court on 6 March 2006.

4.  The 1^st and 2^nd defendants, the 3^rd defendant, and the 4^th defendants were respectively the Deceased’s grandchildren, life-long partner and brother.  They are all beneficiaries under the Will and Codicil.

5.  The plaintiff is the current executor of the Will and Codicil appointed by the court on 13 November 2013.

6.  An issue has arisen as regards the true meaning and effect of Clause 3 of the Codicil, in particular the validity of two alienation restrictions in respect of a property called the “Windsor Park Property” comprised in the estate of the Deceased.  The 1^st and 2^nd defendants take the view that the two restrictions are invalid because they infringe the rule against perpetuities or inalienability, and have sent an opinion by counsel to the plaintiff in support of their view.  On the other hand, the plaintiff’s own counsel has expressed the view that the restrictions may be valid subject to certain qualification. 

7.  The Codicil also contains, by Clause 2, what may be described as a “no contest” clause to the effect that the 1^st, 2^nd and 3^rd defendants shall not dispute the Will and/or the Codicil or any aspect of the Will and/or the Codicil, and if any of them should do so, all gifts made to him or her under the Codicil shall lapse immediately and such gifts shall instead be given and distributed to the rest of the three of them who has not raised any dispute (and if more than one in equal shares absolutely).

8.  On 24 June 2016, the Plaintiff issued an originating summons (“the Originating Summons”) seeking the court’s determination of the validity of the two alienation restrictions in Clause 3 of the Codicil (see paragraph 1 of thereof).

9.  By paragraph 2 of the Originating Summons, the plaintiff also asks the court to determine whether, upon the true construction of the Codicil and “in the events which have happened”:-

(1) any of the 1^st, 2^nd and 3^rd defendants “had” disputed the Will and/or the Codicil and/or any aspect of the Will and/or the Codicil; and

(2) (if the question in (1) is answered in the affirmative) the gifts made to the 1^st, 2^nd and 3^rd defendants under the Codicil are to lapse immediately and such gifts instead be given and distributed to the rest of the three of them who has not raised any dispute and if more than one in equal shares absolutely.

10.  On 10 November 2016, the 1^st and 2^nd defendants issued a summons (“the Summons”) seeking:-

(1) an order to strike out paragraph 2 of the Originating Summons on the grounds that it discloses no reasonable cause of action, is scandalous, frivolous and vexatious, may prejudice, embarrass or delay the trial of the action, and is an abuse of the process of the court; and

(2) further or in the alternative, an order to dispose of paragraph 2 of the Originating Summons as a point of law under Order 14A, or as a preliminary issue under Order 33 rule 3, of the Rules of the High Court.

11.  The Originating Summons came before Deputy High Court Judge Kent Yee on 16 November 2016.  At that hearing, the 1^st and 2^nd defendants sought a direction from the Deputy Judge that the Summons be heard and determined first before the court dealt with the rest of the Originating Summons.  After hearing submissions from counsel for the plaintiff and for the 1^st and 2^nd defendants respectively, the Deputy Judge made an order that the Summons be heard together with the Originating Summons.

12.  On 28 November 2016, the 1^st and 2^nd defendants issued a summons seeking leave to appeal against the Order to the Court of Appeal.  That application was dismissed by the Deputy Judge on 15 February 2017, who gave a detailed written decision (“the Decision”) explaining why he refused to grant leave to appeal.

13.  The 1^st and 2^nd defendants then made a further application, by a summons dated 23 February 2017, to this court seeking (i) leave to appeal against the Order, and (ii) a stay of execution of the Order pending the determination of the intended appeal.

THE PLAINTIFF’S CASE IN RESPECT OF PARAGRAPH 2 OF THE ORIGINATING SUMMONS

14.  By paragraph 2 of the Originating Summons, the plaintiff asks the court to determine whether, in the events which “have” happened, any of the 1^st, 2^nd and 3^rd defendants “had” disputed the Will and/or the Codicil thereby triggering the operation of Clause 2 of the Codicil.  In other words, the plaintiff is, apparently, asking the court to make a determination of the applicability of Clause 2 of the Codicil based on events which had already occurred prior to the date of the Originating Summons.

15.  This does not appear, however, to reflect the true position of the plaintiff.

(1) In paragraph 22 of his first affirmation filed on 8 July 2016 in support of the Originating Summons, the plaintiff stated that he was not making any positive allegation that the 1^st and 2^nd defendants had disputed the Will and/or the Codicil.

(2) The same stance was repeated by the plaintiff’s solicitors on his behalf in a letter dated 2 November 2016 to the 1^st and 2^nd defendants’ solicitors.  It was further stated in that letter that the “events” mentioned in paragraph 2 of the Originating Summons referred to the 1^st and 2^nd defendants’ “intended challenge to Clause 3 of the Codicil, previously foreshadowed and to be made in these proceedings (if so advised)”; and that the purpose of paragraph 2 of the Originating Summons was simply to “clarify whether the intended challenge, to be made in these proceedings, will engage Clause 2 of the Codicil”.

(3) The plaintiff seemed to have adopted a different stance at the hearing before the Deputy Judge on 16 November 2016. When the Deputy Judge asked Mr To (who also appeared for the plaintiff at that hearing) what the words “in the events which have happened” in paragraph 2 of the Originating Summons meant and what they included, Mr To stated that “the events are quite obvious because it’s all recorded in correspondence”.  In response to the Deputy Judge’s further observation that “[s]o the event itself is not disputed, the happening or the occurrence of such an event”, Mr To said “[w]e believe it’s not, it’s very clear” (see page 4 line G to page 5 line M of the transcript of the hearing).  These notwithstanding, Mr To submitted to us at the hearing on 11 April 2017 that he in fact advanced, on behalf of the plaintiff, the same consistent stance before the Deputy Judge, namely, that the plaintiff was not making any positive allegation that the 1^st and 2^nd defendants had disputed the Will and/or the Codicil.  That was, however, not how it was understood by the Deputy Judge, as can be seen from paragraph 18 of the Decision.

16.  Mr Lynn on behalf of the 1^st and 2^nd defendants submitted that due to the inconsistent stances adopted by the plaintiff in respect of the paragraph 2 of the Originating Summons, it became essential from the 1^st and 2^nd defendants’ point of view for the court to dispose of that paragraph of the Originating Summons prior to the substantive determination of the rest of the Originating Summons.

17.  When pressed by this court to state unequivocally what the plaintiff’s true case in respect of paragraph 2 of the Originating Summons was, Mr To ultimately confirmed that the plaintiff was not making any positive allegation that the 1^st and 2^nd defendants had, prior to the issue of the Originating Summons, taken any steps which could be regarded as disputing the Will and/or the Codicil, and that the reference to the “events which have happened” in paragraph 2 of the Originating Summons was intended to be a reference to the 1^st and 2^nd defendants’ intended challenge to the validity of the alienation restrictions in Clause 3 of the Codicil.  Mr To further accepted that the 1^st and 2^nd defendants could not be regarded as disputing the Will and/or the Codicil if they confine themselves merely to making legal submissions to the court on why the two alienation restrictions are invalid as a matter of law.

18.  That being the plaintiff’s true position, it is clear that paragraph 2 of the Originating Summons as currently expressed is misleading.  It also seems to us to be clear that no real issue arises for the court’s determination in respect of paragraph 2 of the Originating Summons, and the matter can be dealt with by the judge easily at the substantive hearing of the Originating Summons.  It is, however, a different matter whether paragraph 2 of the Originating Summons ought to be disposed of prior to the substantive determination of the rest of the Originating Summons, a matter which we shall consider below when we come to deal with the 1^st and 2^nd defendants’ intended grounds of appeal against the Order.

19.  There are two other matters that we wish to mention here.

20.  First, Mr Lynn accepts that, in view of the plaintiff’s position in respect of paragraph 2 of the Originating Summons as now unequivocally clarified or confirmed by Mr To, he does not need to pursue the 1^st and 2^nd defendants’ application for leave to appeal against the Order.

21.  Second, we note that in the plaintiff’s 2^nd affirmation filed on 12 January 2017, he alleges that certain conduct on the part of the 1^st and 2^nd defendants since the taking out of the Originating Summons may engage the operation of Clause 2 of the Codicil.  Such conduct would plainly fall outside the scope of the current paragraph 2 of the Originating Summons.  Mr To has informed us that it is the plaintiff’s intention to amend the Originating Summons in order to bring such further conduct of the 1^st and 2^nd defendants within the scope of paragraph 2 of the Originating Summons.  Since there is no current application to amend by the plaintiff, it is neither necessary nor appropriate for us to express any view on whether the Originating Summons can be amended in order to seek the court’s determination of the applicability of Clause 2 of the Codicil to events occurring after the date of the Originating Summons.  Should any such application be made by the plaintiff, it will have to be dealt with in the usual manner.  Nothing in this judgment is to be read as precluding the 1^st and 2^nd defendants from raising any reasonable or proper objections to the proposed amendments, or taking such other steps as they may be advised to protect their own interests.

THE TWO INTENDED GROUDNS OF APPEAL HAVE NO REASONABLE PROSPECT OF SUCCESS

22.  The Order directing that the Summons and the Originating Summons be heard together is in the nature of a case management decision.  It is well established that in an appeal against case management decisions, the applicant faces a very high hurdle and has to show that the judge has gone clearly wrong, or made orders which clearly involve an injustice or an inability for the trial court to carry out its task, or has erred in principle, or his order is irrational (see The Hong Kong Civil Procedure 2017, paragraph 59/0/55).

23.  In the 1^st and 2^nd defendants’ draft Notice of Appeal, two intended grounds of appeal against the Order are raised.

24.  First, it is contended that the Deputy Judge wrongly exercised his discretion because in reaching his decision he failed to take any or any sufficient account of the line of authorities to the effect that strike out applications would be entertained at trial only “in the clearest circumstances”.  Reliance is placed by the 1^st and 2^nd defendants on the observations of Cheung JA in Tang Wai Cho v Tang Wai Leung [2011] 1 HKLRD 1, at paragraphs 8 to 11, and Ma CJ in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72, at paragraphs 84 to 87.

25.  It is important to appreciate, however, that the general rule that an application to strike out proceedings should be made and disposed of at the earliest possible opportunity is based on the consideration that if the proceedings are obviously without merits or unsustainable or should not be permitted to go to trial, the grounds in support of the application ought, in the normal course of events, to be apparent at the close of pleadings or at the latest after exchange of witness statements, and the proceedings ought to be put to an end at as early a stage as possible before the parties and the court’s resources are potentially wasted.  However, such consideration loses much force in the context of an application commenced by a trustee or executor by way of an originating summons under Order 85, rule 2 of the Rules of the High Court seeking the court’s determination of a point of law or construction of a trust deed or will.  Such applications ought generally to be disposed of expeditiously and should, in normal circumstances, be capable of resolution in one hearing on the basis of limited and self-contained evidence.  Holding a separate hearing to dispose of only a part of the originating summons, whether by way an application to strike out under Order 18 rule 19, or an application to determine a point of law under Order 14A or Order 33 rule 3, of the Rules of the High Court would more likely than not increase rather than save the parties and the court’s resources.

26.  In our view, it is well within the Deputy Judge’s case management powers to decide that, having regard to the scope and nature of the strike out application and the particular circumstances of this matter, the Originating Summons and the Summons ought to be heard together (see paragraphs 13 and 14 of the Decision).

27.  Second, it is contended that the Deputy Judge wrongly exercised his discretion because in reaching his decision he failed to take any or sufficient account of the special context of an in terrorem (or “no contest”) clause.  On behalf of the 1^st and 2^nd defendants, Mr Lynn argues that justice cannot be done unless the matter is heard in two stages, because the 1^st and 2^nd defendants need to know how the court is going to construe Clause 2 of the Codicil before any other elements of the Will and/or Codicil can be securely brought before the court for its consideration.  In support of this argument, Mr Lynn refers the court to the following passage in Lewin on Trusts (19^th Edn), at paragraph 5-012:-

“Cautious beneficiaries, who are concerned that a ‘no contest’ clause in the trust might conceivably be invoked against them if they commence any kind of trust proceedings, have in the past sought, as the first claim for relief, a declaration that the substantive relief secondly claimed does not come within the ‘no contest’ clause, and the substantive relief is claimed only if such a declaration is granted. We consider that this is an effective procedure and is, perhaps, more prudent than before, since it now appears that the application of the ‘no contest’ clause may turn upon whether probable cause can be demonstrated, but there is scope for doubt as to what probable cause amounts to… it would, in our view, be regrettable if the court were unwilling to consider the grant of declaratory relief in circumstances where a beneficiary was advised that he had a meritorious claim but was unwilling to embark on litigation, in view of the draconian consequences, unless he had the protection of an order of the court. There would appear to be no difficulty in the court’s determining the issue of probable cause at the outset, in much the same way, for instance, that the court determines the question of a serious issue to be tried in applications to serve trust proceedings out of the jurisdiction, though there might be circumstances in which a declaration would be qualified so as to protect the commencement of proceedings but not necessarily their continuation after a particular stage in the proceedings had been reached.”

28.  We do not consider that this two-stage approach has any application to the present case.  This is not a case where the 1^st and 2^nd defendants (as beneficiaries) have brought proceedings for any substantive relief.  Instead, this is a case where the plaintiff (as executor), himself being uncertain about the validity of the two alienation restrictions in Clause 3 of the Codicil, has brought proceedings to seek the court’s determination of that matter.  If, at the substantive hearing, the 1^st and 2^nd defendants merely make legal submissions to the court on why the two alienation restrictions are invalid as a matter of law, we are quite unable to see how such conduct can be regarded as disputing the Will and/or the Codicil.  As earlier mentioned, this is accepted by Mr To on behalf of the plaintiff.

29.  In any event, it is generally a matter for the 1^st and 2^nd defendants to decide, with the benefit of legal advice, on how best to present their case in the proceedings commenced by the plaintiff, and to take such steps as may be necessary to protect their own interests.  It is not the court’s function to give an advisory opinion to any party on how they ought to conduct legal proceedings, or make advance ruling on the legal effect or consequence of events which have not yet occurred and may never occur.  There may be situations where, as mentioned by the learned editors of Lewin on Trusts, it would be justifiable for a beneficiary to seek an advance declaration from the court that the substantive relief he is claiming does not come within a “no contest” clause.  However, the 1^st and 2^nd defendants have not, in fact, claimed any relief in the proceedings below.

30.  Overall, we are not satisfied that the interests of justice would require paragraph 2 of the Originating Summons to be disposed of prior to the substantive determination of the rest of the Originating Summons.  We are also not satisfied that the two intended grounds of appeal have any reasonable prospect of success.

DISPOSITION

31.  For the foregoing reasons, we dismiss the 1^st and 2^nd defendants’ summons dated 23 February 2017.

32.  In so far as costs are concerned, although we have come to the conclusion that the 1^st and 2^nd defendants should not be granted leave to appeal against the Order, we consider that the procedural tangle which we have seen in what should be a fairly simple and straight forward application is partly caused by the inapt drafting of paragraph 2 the plaintiff’s Originating Summons as well as the inconsistent stances that the plaintiff previously adopted in respect of that paragraph.  In all the circumstances, we consider that a fair order to make would be no order as to the costs of the present application, and we so order.