CHEN YU LING YU, also known as CHEN YU LUN YOK, deceased AND ANOTHER v. CHEN WA TEK, by his guardian ad litem CHEN Tsen Nam

HCMP 2073/2022

[2024] HKCFI 3593

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2073 OF 2022

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Reasons for Decision

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1.  By an Originating Summons taken out on 8 December 2022, the 2^nd Plaintiff (“CTS”)[1] as the intended administrator of the estate of the late Madam Chen Yu Ling Yu (respectively “Madam Chen” and “the Estate”) seeks the main reliefs, among others, of

(1)  A declaration declaring as null and void the Assignment dated 31 October 1966 (registered by Memorial No 557663) executed by the developer as vendor, Madam Chen as confirmor and the Defendant (“CWT”) as purchaser assigning the property known as Flat D on 18^th Floor and Parking Space No.60 on Ground Floor, Skyscraper, 132-142 Tin Hau Temple Road, Hong Kong to CWT (respectively “the 1966 Assignment” and “the Property”);

(2)  A declaration that CWT at all material times has been holding the Property on trust for the Estate or the beneficiaries thereof; and

(3)  An order for an account of all profits made from the Property.

2.  On 16 August 2024, CWT took out a summons applying to convert these proceedings into an action as if begun by writ (“CWT’s Summons”), which was opposed by CTS.

3.  On the call-over hearing of CWT’s Summons on 25 September 2024, among others, I directed that the scheduled substantive hearing of this OS on 8 December 2024 would no longer be such substantive hearing, but be the substantive hearing of CWT’s Summons and a directions hearing.

4.  At this hearing, CWT also sought a direction that there be a trial of a preliminary issue, namely, whether Chandra Elbert, the 2^nd Plaintiff, was in fact CTS, and this Court queried whether there was sufficient evidence to raise such a challenge on identity to warrant such a direction.  Mr Cheung, counsel for CWT, having sought instructions confirmed that CWT on this occasion would not pursue that direction, but reserved CWT’s right to raise this issue later, if so advised.

5.  Mr Lau, counsel for CTS contended strenuously on behalf of CTS that the Court should summarily dispose of part of the OS by making an order in terms of §1 of the OS declaring the 1966 Assignment null and void, leaving the question of the beneficial ownership and other reliefs to be adjudicated according to the directions this Court would make.

6.  At the conclusion of the hearing, I (a) refused to so summarily dispose of part of the OS, (b) ordered that these proceedings be converted into an action as if begun by writ with such directions for further conduct in terms of CWT’s Summons, and (c) ordered the costs of CWT’s Summons, including the costs of the hearing on 25 September 2024, which I reserved, be costs in the cause of the action, with reasons for this costs order given at the hearing.

7.  These are my reasons for the refusal and acceding to CWT’s Summons.

Background and an overview of the parties’ respective case

8.  CWT and CTS are brothers.  They come from a large Indonesian Chinese family which apparently emigrated from Shanghai to Indonesia in 1940s or 1950s.  CTS is the youngest and the 8^th child, and CWT the eldest son and the 2^nd child of the late Chen King Fok (“Chen Senior”) and Madam Chen.  Chen Senior since 1921 ran a family business trading in Chinese antiques, while Madam Chen, according to CTS, was a housewife with no business interest or activities[2].  Chen Senior and Madam Chen passed away in Indonesia respectively on 5 May 1958 and 9 May 1966.

9.  The broad overview according to CWT is that as the eldest son, he helped took care of the family and its business, while at the same time he became very successful in running his own businesses.  According to Chen Tsen Nan (“CTN”), the son and guardian ad litem of CWT, CWT has been running extremely successful commodities trading businesses in Indonesia since early 1960s, and later in 1970s established and ran a group of companies under P. T. Diamond Food Indonesia TBK, which was listed at the Jakarta Stock Exchange in 2020.

10.  CWT is by now 101 years old.  He has been suffering from severe dementia and other ailments and has been bedridden. CTS is 84 years old.

11.  According to CTS, there was a long-term dispute over Chen Senior’s estate and then the Estate between the remaining 7 siblings on one side and CWT on the other lasting from 1980s to around 2016.

12.  CTS said that after the said dispute, he “was reminded of the Property which belonged to the Deceased and/or her estate”[3] and upon obtaining legal advice “discovered his mistaken belief concerning the validity of the Power of Attorney (and the Purported Assignment)”[4].

13.  CTS’ case, in gist, is that

(1)  Madam Chen intended to acquire a property in Hong Kong in the early 1960s.

(2)  On 22 March 1963, Madam Chen by her agent/attorney one K.H. Koo entered into a sale and purchase agreement for the purchase of the Property at HK$138,000.

(3)  The balance of the price at HK$110,000, after deducting the deposits paid earlier, was paid on 29 May 1964.  With reason unknown to CTS, the assignment for the Property however was not executed.  CTS surmised that it was an oversight by the solicitors Messrs Lo & Lo, or that it was because Madam Chen had to travel to Shanghai.

(4)  In or around mid-October 1965, Madan Chen was in poor health.  She decided to appoint CTS as her lawful attorney to complete the purchase of the Property.  Messrs Lo & Lo prepared in Hong Kong a Power of Attorney, which was executed by Madam Chen in Jakarta.  CWT was also present at the signing of the Power of Attorney.  CWT kept the original notarized copy of the Power of Attorney after it was executed.

(5)  On 9 May 1966, Madam Chen passed away.

(6)  In late October 1966, CWT visited Hong Kong and asked CTS to meet him at the office of Messrs Lo & Lo.  CWT said words to the effect that the law of succession in Hong Kong was complicated, that he would manage the Property for and on behalf of the Estate, and asked CTS to execute the 1966 Assignment transferring the Property to him.  Trusting CWT as the eldest son, CTS executed the 1966 Assignment pursuant to the Power of Attorney.

(7)  It was only in 2016 that CTS “was reminded” about the Property.  He was advised by lawyers in 2017 that Madam Chen’s death in May 1966 in law terminated or revoked the Power of Attorney.  The 1966 Assignment therefore was null and void as it was signed by him as attorney under the Power of Attorney after Madam Chen had passed away.

14.  CTS then said that as the purchase money was solely paid by Madam Chen, the Property beneficially belonged to the Estate.  However, he did not say in his affirmations, whether as a matter of personal knowledge or hearsay, as to how Madam Chen paid the said HK$138,000 or whether it was paid by her own money.  All he said was that he discovered in 2016 the said receipt for HK$110,000.  He did not proffer any documentary evidence other than the said receipt and the conveyancing documents.

15.  It seems to me of significance is the common ground that since the Property was assigned to CWT by the 1966 Assignment, the Property has all along been rented out to earn rental income all of which since then until now has been received by CWT.  In the materials before me, there is no suggestion whatsoever that there has been any protest by CTS or any beneficiaries of the Estate or any demand by any of them for CWT to account for or pay over the rental incomes.  These bear significance as the gravamen of CTS’ case is that CWT had so represented and promised him in 1966 as aforementioned when the 1966 Assignment was executed.

16.  CWT’s case, in gist, is that:

(1)  Madam Chen was illiterate and had been suffering from tuberculosis for many years.

(2)  Madam Chen did not have much cash or wealth in late 1950’s and early 1960s.  The bulk of Senior Chen’s assets were controlled by his favourite 3^rd wife Madam Cao, and Madam Chen had had no property registered under her name in Indonesia or Hong Kong.

(3)  It was CWT, and not Madam Chen, who intended to acquire property in Hong Kong for investment purposes.  CWT at the time purchased Flat 18C Skyscraper, the Property and Flat 4D Woodland Height.  The money for the purchase of the Property was provided by CWT.  It was because of foreign exchange control implemented by the Indonesian government that the Property was acquired using the name of Madam Chen as she held a PRC passport. 

(4)  K. H. Koo, who signed the sale and purchase agreement of the Property as the attorney of Madam Chen, was the business associate of CWT.

(5)  CWT proffered (a) the Instruction for Sale dated 15 January 1962 in respect of the Property which was signed by CWT as the purchaser and not signed by Madam Chen, and (b) 2 original receipts both dated 1 February 1962 both for the amount of HK$27,000 (being deposits for Flat 18C and the Property in the sum of HK$28,000 net initial deposit of HK$1,000).

(6)  CWT also relied heavily on what was stated on the 1966 Assignment itself, namely, that (a) Madam Chen was only a confirmor, (b) Madam Chen had agreed with CWT to sell the Property to CWT at the same price, and (c) the price of HK$138,000 was paid by CWT to the developer at the request of Madam Chen.

(7)  CWT denied having said the words CTS alleged he had said in the office of Messrs Lo & Lo.

17.  At the hearing, Mr Cheung on behalf of CWT confirmed that CWT would be relying on the equitable defence of laches against the Estate’s assertion and enforcement of an equitable interest in the Property, even if any, as there was evidently unexplained inaction of the Estate or the beneficiaries for over half a century, which caused prejudice or injustice to CWT.

Refusing to dispose of part of the OS summarily by granting an order in terms of paragraph 1 thereof

18.  As mentioned, Mr Lau argued strenuously for such partial summary disposal.

19.  As I understand it, he focused on the contention that it is indisputable that CTS’s execution of the 1966 Assignment on behalf of Madam Chen was without authority as the Power of Attorney had by then been revoked as a matter of law.

20.  That may be so, but I do not accept that there is no triable issue concerning the relief sought or that it is appropriate in the circumstances to grant that declaration summarily on this occasion.

21.  Firstly, on whether there is a triable issue regarding the granting of that declaration.  A declaration is a discretionary relief.  If CWT ultimately prevails on his case, it would be, in my view, arguable that Madam Chen was only his bare trustee in signing the sale and purchase agreement as the purchaser, that CWT directed her to sign the 1966 Assignment as confirmor formally assigning the Property to him, which Madam Chen as trustee sought to comply by having CTS armed with the Power of Attorney to execute the 1966 Assignment, which execution by CTS unfortunately failed as she died before the execution.  In such circumstances, novel and unusual it might seem, but I think there is a prospect that CWT might be able to persuade the court not to exercise its discretion in granting the declaration declaring the 166 Assignment null and void, but instead to declare that, the defect in the confirmor’s signature notwithstanding, the 1966 Assignment be effective in conveying the legal title of the Property to CWT as the true beneficial purchaser and owner.

22.  Secondly and in my judgment, it is clearly inappropriate to grant that relief first and summarily on this occasion, leaving all other disputes and consequential matters to be sorted out or litigated later, for the following reasons.

(1)  Declaring the 1966 Assignment null and void without resolving the beneficial ownership of the Property means that in the meantime the rights and responsibilities regarding all matters relating to the Property are dangling in the air.  Practical matters such as the liability to pay management fees, liability to maintain and repair, and many others that one can think of are left without any resort or attachment as to who has the right and bears the liability.

(2)  CTS could not point to any matter of urgency such as to warrant such a summary disposal in this manner.

(3)  Clearly, the bulk of the parties’ dispute is over the beneficial entitlement to the Property.  I do not see how such a summary disposal in this manner would save costs or time or otherwise achieve the primary aim or the underlying objectives; on the contrary and as said, it seems to me it would create practical problems and potential arguments over them.

(4)  In my judgment, it is clearly much more appropriate to consider the question of relief regarding the 1966 Assignment after all the contentious issues, particularly the beneficial interest and the equitable defence of laches, have been adjudicated and resolved.

23.  For these reasons, I refused to grant the order summarily as asked for by CTS.

Converting these proceedings into a writ action

24.  With respect to Mr Lau, I was not at all persuaded by his various submissions that there is no real dispute of fact between the parties.  As I outlined above, there are disputes between the parties, from the broader circumstances such as whether Madam Chen at the time had the means to purchase the Property, whether there was the alleged foreign currency control and, if there was, its relation with the purchase of the Property in the name of Madam Chen, to the more specific factual matters of whether K. H. Koo acted on behalf of Madam Chen or CWT, whose money it was that paid the HK$1,000 initial deposit, the HK$27,000 deposit and the balance of HK$110,000, why was it that CWT signed the Instruction of Sale in 1962 and not Madam Chen, and also importantly whether what CTS alleged happened on 31 October 1966 was true, and so on.   I also do not accept his submission that the only material dispute of fact is that which concerns what happened on 31 October 1966 when CTS and CWT met in the office of Messrs Lo & Lo for the execution of the 1966 Assignment.

25.  The main thrust of Mr Lau’s argument that there was no real dispute of fact was that CWT was unable to proffer any documentary evidence or any affirmation from other witnesses; and therefore CWT’s case consisted of mere assertions.  Firstly, I find CWT’s present evidence and case relatively detailed and coherent.  Secondly, though both parties are not proffering much probative documentary evidence to begin with, the Instruction of Sale signed by CWT as purchaser, rather than by Madam Chen, is one of few and is prima facie supportive of CWT’s case.  Thirdly and weightily, Mr Lau’s such criticism, in my view, must be measured against the fact that CTS and other beneficiaries did not make any claim or dispute for half a century during which time (a) documentary evidence such as banking documents might have been sought or retained, other otherwise probative documents might very well have been discarded or lost, (b) CWT was healthy and would have been able to depose to facts or locate documents, and (c) other witnesses might very well be still alive and well and be located.   Absent such claim or dispute, CWT cannot be faulted for not having sought or retained such documentary evidence or for being unable to find a witness with personal knowledge.  In such circumstances, I do not recognize such criticism as valid.

26.  Evidently, and is common ground, the defence of laches and the case against its applicability both need to be pleaded with particularity.  Therefore, pleadings or some sort of points of claim or response would have to be directed to be filed by the parties.

27.  Mr Lau submitted that the more appropriate direction would be to continue these proceedings as miscellaneous proceedings but giving directions for the deponents to attend and be cross-examined, such that thereby time and costs could be saved.  Having considered it, I did not think it has a clear advantage over converting the matter into a writ action, whether in terms of saving time and costs, but it would be disadvantageous in terms of facilitating the just resolution of the parties’ disputes.

28.  Firstly, relating to the defence of laches :

(1)  As mentioned, it requires some form of pleading;

(2)  Unless the parties’ cases thereto are properly formulated thereby, the ambit of discovery is not defined;

(3)  Bearing in mind that there has been inaction by the Estate or the beneficiaries for half a century and given that CTS was already referring in his affirmation to the alleged disputes over the estates since 1980s to 2016, among others, as an explanation as to how he was only then “reminded” about the Property, I cannot readily dismiss the prospect that many events and/or disputes might be said to be relevant, such that potentially discovery of some magnitude might be involved; and

(4)  In all likelihood, after discovery is given, a fair opportunity might need to be afforded to the parties for them to file yet further evidence in support or in resistance of that defence.

Therefore, I am not persuaded that much time would be saved by not converting these proceedings into a writ action.

29.  Secondly, the machinery of discovery provided in a writ action would better ensure that all relevant documents have been discovered, and procedures like interrogatories would also facilitate fair resolution of factual disputes.  In my view, they are necessary machinery to be made available in a dispute of beneficial ownership of the present nature.

30.  Mr Lau urged on me the consideration that the 2 direct witnesses, CTS and CWT, are very aged, so that the earlier the time the substantive hearing takes place, the higher the chance they may be able to give evidence.  As I have mentioned briefly above concerning the present condition of CWT, it seems there is no likelihood that he would be able to be a witness, whether these proceedings continue as they are now or are being converted into a writ action.

31.  In any event, considering the matters in the round, I am of the clear view that converting these proceedings to a writ action would better facilitate the just resolution of the parties’ disputes according to their substantive rights.

32.  For these reasons, I acceded to CWT’s Summons and so ordered as said.

33.  Lastly, I thank both Mr Lau and Mr Cheung for their assistance.