KARUPAYEE AMMAL (as the administratrix and one of the beneficiaries of the estate of KARUPAYA SELVARAJ, Deceased) v. MOORTHY SELVARAJ

HCMP 1341/2019

[2020] HKCFI 289

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1341 OF 2019

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BETWEEN

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DECISION

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1.  This action concerns the estate (the “Estate”) of Mr Karupaya Selvaraj (the “Deceased” or “Father”). Madam Karupayee Ammal (the “Plaintiff”) was the Deceased’s wife and the administratrix of the Estate. Her application, made herein pursuant to Order 113 and in her latter capacity, is against Mr Moorthy Selvaraj (her third son, the “Defendant”) for an order for possession of the property known as Unit No 03, 10^th Floor, Eastern Centre, No 1065 King’s Road, Hong Kong (the “Property”). The issue is whether the Court should at this stage order possession summarily (as the Plaintiff is seeking), or whether triable issues have been raised so that the application should be dismissed, stayed, or otherwise dealt with (as the Defendant is urging this Court to do).

The Originating Summons and the affirmations

2.  The Originating Summons was taken out on 27 August 2019.  The Plaintiff seeks:

“ …an Order that she do recover possession of the Property on the ground that she is entitled to possession and that the person(s) in occupation is (are) in occupation without license or consent.”

No mesne profit or licence fee is being sought.

3.  When first filed, the Originating Summons was supported only by an affirmation of Mr Patrick Ciaran Rattigan (“Rattigan’s Aff”).  Mr Rattigan is a partner of Messrs Haldanes, solicitors acting for the Plaintiff.

4.  The Defendant filed his affirmation in reply on 23 December 2019 (“D’s Aff”).  Amongst other things, he took issue with Mr Rattigan (but not the Plaintiff) filing evidence in support of the Originating Summons.

5.  On 6 January 2020, the Plaintiff filed her affidavit in reply (“P’s Aff”).  She adopts everything Mr Rattigan has said in Rattigan’s Aff. She has also provided some further evidence herself. 

The facts

6.  I extract the following facts primarily from D’s Aff and P’s Aff.

7.  As said, the Deceased and the Plaintiff were husband and wife.

8.  The Deceased passed away on 22 February 2003.  He passed away intestate.

9.  The Deceased and the Plaintiff have 4 sons (collectively the “4 Sons”). In descending order of seniority, they are: (1) Selvam Selvaraj (“Selvam”), (2) Mohan Selvaraj (“Mohan”), (3) Moorthy Selvaraj (ie the Defendant) and (4) Shivkumar Selvaraj (“Shiva”).

10.  Selvam’s wife was Madam Fan Rong Li (“Fan”). 

11.  The Deceased founded GMT Industrial Limited (“GMT”) in 1979.  It had become the main family business.  It was in the business of design, manufacture and sale of electronic products.  The family business had prospered.  Great family wealth had been amassed over the years.

12.  The Deceased has been described by the Plaintiff as the patriarch of the family.  He was in charge of all family business and the family wealth. 

13.  The Deceased has been the registered owner of the Property since 15 February 1999.

14.  The Estate in fact has interest in 2 other units in the same building which the Property is in.  One is Unit No 6 & Storeroom on 10/F (“Unit 1006”). The other is Unit No 5 of 10/F (“Unit 1005”).  Unit 1006 was purchased in 1989 and registered in the joint names of the Deceased, the Plaintiff, Selvam, Mohan and the Defendant.  Unit 1005 was purchased in 2002 with Selvam as the sole owner.

15.  In November 2005, before the grant of any letters of administration of the Estate, the Plaintiff and the 4 sons entered into a Deed of Family Arrangement (the “2005 DFA”).  It was recorded that the parties had agreed, inter alia and under Clause 3 thereof, that:

(a) Unit 1006 would go to the Plaintiff and Selvam;

(b) Unit 1005 “and small warehouse adjoining property at 1003 to be given to” the Defendant;

(c) the Property would go to Mohan and Shiva.

16.  On 13 November 2006, Letters of Administration of the Estate were granted to Selvam.  The Property is on the schedule of the properties disclosed on the death of the Deceased and forms part of the Estate.

17.  On 19 May 2008, Selvam passed away, also intestate.  Fan subsequently became the administratrix of his estate.  At the time when Selvam passed away, most of the Estate remained unadministered.

18.  On 12 October 2009, the Plaintiff was granted Letters of Administration de bonis non of the Estate.  The Property remains on the schedule of the properties disclosed on the death of the Deceased.

19.  The Property is currently occupied by the Defendant and being used as the office of two companies called G-Toys Manufacturing Limited (“G-Toys”) and Global Gain Enterprise Limited (“Global Gain”).  He has in fact been in possession of the Property for some time.  There is a history to that occupation.  According to D’s Aff:

“ 44. The Deceased completed the purchase of the Property in 1999 using GMT’s funds and named himself as the sole-owner of the Property. As the Deceased was the leader in the family, the founder of GMT and the person in charge of GMT, no one took any issue about it. The Deceased agreed to use the Property since its acquisition as the office of G-Toys. The Property has therefore been so used up to now (and since 2002 also as the office of Global Gain). Since I became in charge of G-Toys in 2000, I have had the exclusive possession of the Property up to present. No one from the Selvaraj family has ever taken any issue about this arrangement, not even the Plaintiff after the Deceased had passed away until out of the blues, she commenced the present proceedings to seek recovery of possession of the Property.

…

106. The Deceased had assured me on numerous occasions that I could use the Property as my office, without ever imposing any time limitation. The Deceased further assured me that before I am to own one of the family office properties, I can use the Property as my office infinitely. I have therefore occupied and used the Property for more than 19 years. Neither the Deceased, when he was alive, nor any other family members, after the Deceased had passed away, ever asked me to vacate the Property until the Plaintiff’s recent demands.

107. The Property has initially an old rundown warehouse.  Relying on the Deceased’s assurances as mentioned above, I undertook maintenance work and spent substantial amount of money on redecoration and improvements of the Property in the expectation of being allowed to stay there for as long as I wish.  Due to long lapse of time, despite my attempts, I can no longer find any documents showing my expenditure on the redecoration and improvements on the Property.”

20.  The administration of the Estate, initially by Selvam and after his death by the Plaintiff, has not been smooth.  It has still not been completed. A number of legal actions have ensued.  One of them is HCA 413/2016 (“HCA 413”). It was initiated by the Defendant on 17 February 2016.  The defendants are the Plaintiff, Fan, Mohan, and Shiva.  The Defendant claims thereby, inter alia, an Order for (1) the removal of the Plaintiff as the administratrix of the Estate; (2) his own appointment as the administrator of the Estate in her place; (3) assignment by Fan (as administratrix of Selvam’s estate) of Unit 1005 to him pursuant to Clause 3 of the 2005 DFA; and (4) assignment of Unit 1003A ^[1] by the Plaintiff to him pursuant also to Clause 3 of the 2005 DFA.  That action is on-going.

21.  Subsequently, HCA 413 was stayed for one year so that the parties could attempt mediation.  In November 2017, the Plaintiff, the 3 surviving sons and GMT ^[2] entered into a Deed of Settlement (the “2017 Deed of Settlement”).  It is dated 17 November 2017.  At §(E) of its Recital, it is recorded that:

“ Various disputes have arisen between the Parties regarding the administration of Father’s estate and the distribution of assets thereunder. The Parties are now desirous of settling their disputes and achieving the fair distribution of assets amongst the beneficiaries of the late [Father].”

22.  The following clauses of the 2017 Deed of Settlement are relevant:

“ 2. SETTLEMENT OF CLAIMS OVER GMT AND REAL ESTATE

2.1. The net balance of funds remaining in GMT’s bank account…is approximately USD19 million. The Parties agree that this sum shall be distributed in the following manner:

- Shiva: USD13 million

- Mohan: USD5 million

- [the Defendant]: USD1.1 million

2.2. [The Property] shall be transferred to [the Defendant].

…

2.7. The Parties acknowledge that the payments and transfers of real estate referred to in this Clause 2 cannot be made out of the assets of GMT until such time that a settlement is reached with Fan.

…

4. WAIVER OF CLAIMS AND CESSATION OF LEGAL PROCEEDINGS

4.1.   The Parties agree that upon the execution of this Deed, each of the Parties agree to waive any and all claims they have or may have against the other, or Father’s estate in relation to the conduct of Father, Mohan, or [the Defendant] as shareholders or directors of GMT are waived, and/or any other claim whatsoever arising out of or in connection with the running of the family business or distribution of funds from Father’s estate.”

23.  On 28 July 2019, Haldanes on behalf of the Plaintiff wrote to Messrs Cheung & Choy (“C&C”), solicitors for the Defendant.  The Plaintiff through Haldanes demanded the Defendant to move out of the Property within 7 days.  In that letter, Haldanes said that:

“ Pending the transfer of the Property to your client pursuant to Clause 2.2 of the Deed of Settlement dated 17^th November 2017, our client is of the view that it is beneficial to the Estate as a whole to rent out the Property of the Estate in order to maximise its commercial value. The rental income will received form part of the assets to be distributed.”

24.  On 1 August 2019, C&C replied.  The Defendant refused to move out of the Property.  Various allegations were made in respect of the administration of the Estate and the performance of the 2017 Deed of Settlement. It was then said on behalf of the Defendant that:

“ Therefore, GMT, Mohan and Shiva, both as directors of GMT, and your client, who agreed to nominate Shiva to the Board of GMT, have committed repudiatory breach of the [2017 Deed of Settlement] or evinced an intention no longer to be bound by the [2017 Deed of Settlement]. Our client is therefore entitled to accept the repudiatory breach of the [2017 Deed of Settlement].”

25.  As can be seen from the above, whilst it was said on the Defendant’s behalf in that letter of 1 August 2019 that he was “entitled ” to accept the alleged repudiatory breach of the 2017 Deed of Settlement, the Defendant did not say in that letter that he actually accepted it.  He did so on 8 August 2019 when he filed his Amended Reply in HCA 413, wherein he said in §5.7 that:

“ By reason of the following matters, [the Plaintiff], [Mohan] and [Shiva] and GMT have committed a repudiatory breach of the [2017] Deed of Settlement or evinced an intention no longer to be bound by the [2017] Deed of Settlement and the Plaintiff is entitled to and hereby accepts their repudiatory breach.”

Applicable test for an application under Order 113

26.  The jurisdiction conferred by Order 113 should be exercised only in clear cases.  But if the case is a clear one, it cannot matter that the defendant has contested it.  The test is whether the issue between the parties, be it one of fact or law, is one which the defendant is entitled to have sent to a trial — see Vipac Engineers & Scientists Ltd v Mark Karpovich and Another [1990] 1 HKLR 725, per Godfrey J at 726I to 727C.

27.  When considering an application under Order 113, the applicable approach is not to be significantly different from the approach under Order 14 — see Direk Mahadumrongkul v Lau Chun Keung & Others, CACV 133/1998 (unrep, 16 Oct 1998, per Nazareth VP at pp 7, having cited Vipac with approval).

28.  In Re Safe Rich Industries Limited, CACV 81/1994 (unrep, 3 November 2994), Bokhary JA observed at §13 that the test at the summary stage is as simple as whether the defendant’s assertions are believable.  No mini-trial on affidavit evidence should be attempted.

29.  Mr Chan refers me to Mutual Luck Investment Ltd v Chiu Yim Man [1999] 3 HKC 399, wherein Keith J referred to an earlier decision of his Lordship and observed that:

“ …As was said in Kung Wong Sau Hin v. Sze To Chun Keung (HCMP 1614/90), the Ord. 113 procedure will not

‘ usually be an appropriate vehicle for the recovery of land which has been occupied by many families for very many years.  Such cases will invariably raise issues of both fact and law which cannot properly be investigated without proper pleadings and following a trial at which the rules of evidence are adhered to.’ ”

I do not read the learned Judge as meaning to lay down any invariable rule that any particular type of claims is not appropriate for the Order 113 procedure.  The facts of each application will have to be looked at and considered separately.  But the learned Judge is obviously correct in observing that where cases raise issues of both fact and law which cannot properly be investigated without proper pleadings and following a trial, the Order 113 procedure will be inappropriate.  

30.  As in an Order 14 application, the onus to show that there is a triable issue is on the Defendant.

The Plaintiff’s case

31.  The Plaintiff’s case as framed by Ms Leung, Counsel for her, is straightforward.  The Property is registered in the name of the Deceased.  It forms part of the Estate.  It is not disputed that the Plaintiff is the administratrix of the Estate.  The Property has come to be held by her upon trust to sell the same — s 62(1)(a) of the Probate and Administration Ordinance Cap 10.  Although the parties have by virtue of the 2017 Deed of Settlement agreed that the Property shall be transferred to the Defendant, that transfer has not been effected and has been contractually agreed not to be effected until a settlement has been reached with Fan.  Further, whilst the Defendant has commenced HCA 413 for her removal, and despite that, she remains the administratrix of the Estate until actually removed.  The Plaintiff is hence prima facie entitled to possession of the Property, and the onus is on the Defendant to justify otherwise.

The Defendant’s case

32.  On behalf of the Defendant, Mr Chan, counsel appearing for him, submits that the Defendant has 2 lines of arguable and bona fide defences on the bases of:

(a) contractual defence of waiver; and

(b) estoppel.

Contractual defence of waiver

33.  Mr Chan relies on Clause 4.1 of the 2017 Deed of Settlement. I have set out its terms above.

34.  I have considered the terms of Clause 4.1 carefully.  Its exact effect is a matter for interpretation.  Whilst not necessarily the only interpretation, it is at least reasonably arguable that the terms of Clause 4.1 may be read and interpreted in a way as broken up as follows (without adding or deleting any words), that:

“ The Parties agree that upon the execution of this Deed, each of the Parties agree to waive

any and all claims

they have or may have against

the other, or

Father’s estate in relation to the conduct of Father, Mohan, or [the Defendant] as shareholders or directors of GMT are waived,

and/or any other claim whatsoever arising out of or in connection with

the running of the family business or

distribution of funds from Father’s estate.”

35.  So viewed, the waiver is wide.  It is reasonably arguable that the present application is caught by Clause 4.1 and has been waived.

36.  In her written submissions ^[3], and in addressing the effect of Clause 4.1 of the 2017 Deed of Settlement, Ms Leung submits that:

“ In the present proceedings, the Plaintiff does not claim mesne profits or licence fee from the Defendant for his occupation of the Property. The Plaintiff only wants to recover possession of the Property pending distribution of the same in accordance with the [2017 Deed of Settlement]. The Plaintiff has abided by the [2017 Deed of Settlement] and would continue to do so.”

37.  If the present action is covered by Clause 4.1, I do not see why the fact that no mesne profit or licence fee has been claimed would make any difference.

38.  Ms Leung’s real complaint is that in HCA 413, the Defendant has taken the position that the Plaintiff, Mohan and Shiva have committed a repudiatory breach of the 2017 Deed of Settlement which the Defendant has accepted.  She submits therefore that “it is simply not open for the Defendant to claim that the Plaintiff is estopped from pursuing the present proceedings based on the [2017 Deed of Settlement] which he does not respect himself ”.

39.  To start with, the issue here is not simply a question of estoppel.  It is a question of whether the present action is caught by the scope of Clause 4.1 of the 2017 Deed of Settlement so that the right to pursue the same has been contractually waived.

40.  Further, despite the Defendant’s stance in HCA 413, it appears reasonably arguable for him to take an alternative position in the present case to the following effects, that should the Court rule against him in respect of his primary stance on repudiation (eg the acts of Plaintiff, Mohan and Shiva did not constitute any repudiatory breach of the 2017 Deed of Settlement, so that the Defendant was not entitled to accept any repudiatory breach, so that the 2017 Deed of Settlement remains on foot and binding), the 2017 Deed of Settlement would remain binding, in which case the present action is caught by Clause 4.1 and has been contractually waived.  The Defendant may not need to rely on any inconsistent facts to run the alternative position.  And as Mr Chan has pointed out, even the pleading of inconsistent facts can be permitted under Order 18 rule 12A.  In my view, Mr Chan’s submission ^[4] that “[i]nsofar as the [2017 Deed of Settlement] is still valid or enforceable, which is [the Plaintiff’s] case, [the Defendant] is entitled to retain the Property on the strength of the terms of the [2017 Deed of Settlement]” is at least reasonably arguable.

Estoppel

41.  Mr Chan refers me to the following evidence:

(a) the fact that the Defendant has been in possession of the Property without objection for some 19 years;

(b) the terms of the 2017 Deed of Settlement (and in particular Clause 4.1 thereof);

(c) the Defendant’s evidence, and in particular, §§44 and 104 to 107 thereof. I have reproduced §§44, 106 and 107 above.  §§104 and 105 are in the following terms:

“ 104. As mentioned above, under Clause 4.1 of the [2017 Deed of Settlement], the Plaintiff has agreed to waive any and all claims she may have against me as shareholders or directors of GMT, and/or any other claim whatsoever arising out of or in connection with the running of the family business or distribution of funds from the Estate. Relying on the [2017 Deed of Settlement], I have already surrendered my share to the Deceased’s cash in bank in India to Shiva.

105.  The Plaintiff is therefore estopped from making any claim against me concerning the Estate…”

(d) §18 of P’s Aff, wherein she says that:

“ …I accept that before the Deceased passed away, he has allowed G-Toys and Global Gain to occupy the Property as their offices for free. After I took over as administratrix of the Estate, I tried to honour the same arrangement. I had hoped that my sons would continue to run the family business in the same way as it was before. I understand that such arrangement is akin to a bare licence given to G-Toys and/or Global Gain and it is recoverable at will. The licence to occupy the Property was never given to the Defendant personally.” (Emphasis added)

42.  Mr Chan submits ^[5] that even if the contractual defence of waiver is not open to the Defendant, the terms of the 2017 Deed of Settlement, and the Plaintiff’s other words and conduct, communicated by the Plaintiff to the Defendant, on which the Defendant has acted upon to his detriment, give rise to a promissory estoppel that precludes the Plaintiff from claiming possession of the Property.  He alternatively relies on estoppel by misrepresentation.  On the basis of the redecoration and improvement on the Property which the Defendant says he has done to the Property, Mr Chan further argues that a proprietary estoppel has arisen.

43.  There is no need in this judgment to go into the intricate differences between the various types of estoppels raised.  As has been commented upon, classifications of estoppels sometimes can be of more interest to academic lawyers than anyone else — see Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 at 1022.  However, at the risk of over-simplification, and as Mr Chan has submitted, there are 3 elements shared by all the relevant classes of estoppels raised: (1) representation or assurance made to the claimant; (2) reliance on it by the claimant, and (3) detriment suffered by the claimant or alteration of position in consequence of the reliance — see Fung Oi Ha v Fung Pui On, HCA 17/2012 (unrep, 6 June 2016, per Lisa Wong J at §107) and Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, per Ribeiro PJ at §55).

44.  The main complaint made by Ms Leung is the lack of particulars on the elements of representations and detriments.  She refers me to Luo Xing Juan, wherein Ribeiro PJ observed at §55 that the promise in the context of a plea of promissory estoppel has to be “a clear and unequivocal ” one.  She highlights also the facts that the Defendant has failed to provide any particular as to what “share to the Deceased’s cash in bank in India” the Defendant says he has surrendered to Shiva ^[6], or any document in support of his claim that he has carried out redecoration or improvements to the Property.  Relying on Kung Wong Sau Hin & Anor v Sze To Chun Keung & Ors [1996] 2 HKC 616, Ms Leung submits that the Defendant’s alleged defences based on estoppels are nothing but his bald assertions.

45.  I have considered the evidence.  The starting point must be the fact that the Defendant has been permitted to be in possession of the Property for a long period of time.  He was permitted to do so while the Deceased was alive.  That state of affairs continued after the death of the Deceased and after the Plaintiff became the administratrix in 2009.  Even after the signing of the 2017 Deed of Settlement, he remained permitted to occupy the Property for some 20 months before demand was made in July 2019 for its vacation.  There is dispute as to whether it was G-Toys or Global Gain (as opposed to the Defendant) who was permitted to occupy the Property.  But the Defendant in fact appears to have been in possession of the Property.  The circumstances in which he was permitted to take and remain in possession of the Property, which are relevant to the proposed defences based on estoppels, can only be decided after a trial.

46.  The Defendant says that the Deceased had given him various assurances on his occupation of the Property.  The Plaintiff herself says that “before the Deceased passed away, he has allowed G-Toys and Global Gain to occupy the Property as their offices for free.  After I took over as administratrix of the Estate, I tried to honour the same arrangement.  I had hoped that my sons would continue to run the family business in the same way as it was before”.  The Defendant says that he has acted in reliance of the waiver in Clause 4.1 of the 2017 Deed of Settlement.  He has further undertaken other acts in his detriments.  Particulars may be scanty at this stage.  But considered against the family disputes between the parties, and the prolonged period during which the Defendant was apparently permitted to occupy the Property, the Defendant’s allegations and evidence are not unbelievable. They are not simply bald assertions of his. 

47.  Having considered all the evidence before me, I do not find it appropriate to dispose of the matters summarily.  There are at least issues of facts which cannot be properly investigated without proper pleadings and without a trial. 

What next?

48.  Mr Chan submits that if I am not prepared to grant the Plaintiff an order for possession summarily, I should dismiss the Originating Summons.  He submits that the Plaintiff’s issuance of the Originating Summons is an abuse of process because the real movie in her doing so is to shore up her defence in HCA 413 and to deprive the Defendant of the use of the Property.  This Court should therefore dismiss the Originating Summons so as not to condone the abuse.

49.  I do not accept that any abuse of process has been proved.  In D’s Aff, he says at §8 that “I suspect that these proceedings are initiated against me to retaliate my recent success in HCMP 971/2019 in obtaining an Order from High Court to compel GMT…for disclosure of the company’s bank account…”.  That was one basis upon which allegations of abuse against the Plaintiff was made.  The Defendant’s suspicion is however clearly unfounded. The present Originating Summons was taken out on 27 August 2019.  The Defendant did not obtain the Order concerned in HCMP 971/2019 from Coleman J until early September.

50.  In my view, the most appropriate way ahead is for me to order that this application be continued as if started by writ, and I so order.

51.  I also make the following consequential directions, that:

(i) the Plaintiff shall file and serve her Statement of Claim within 21 days from the date hereof;

(ii) the Defendant shall if he chooses to defend the action file and serve his Defence (and Counterclaim is any) within 21 days of receipt of the Statement of Claim;

(iii) the Plaintiff shall file and serve her Reply (and Defence to Counterclaim if any) if any within 14 days upon receipt; and

(iv) the Rules of the High Court will then be followed.

Upon close of pleadings and with issues having hopefully been defined, consideration may then be given as to whether the matter should be consolidated with HCA 413.

Disposition 

52.  For the reasons set out above, I refuse to grant the Order of possession sought summarily.  I order that this application be continued as if started by writ.  I also give the directions on the filing and service of pleadings as set out above. 

Costs

53.  I make a costs order nisi that the Defendant shall have the costs of this application, to be assessed summarily and be borne by the Estate.  I direct that the Plaintiff shall file her submissions on costs within 21 days from the date hereof, submissions by the Defendant in response within 14 days upon receipt, and submissions in reply by the Plaintiff within 7 days upon receipt.

54.  I add one further matter.  I respectfully echo the observations and remarks made by Mimmie Chan J in Weili Su v Shengkang Fei [2019] 2 HKLRD 1214 (at §§79-81) in respect of the undesirable practice of legal advisers in contested litigations swearing affirmations for their clients on factual matters which the lawyers have no direct knowledge of but are based solely on instructions.  In this case, given the fact that the Plaintiff has in P’s Aff adopted the contents of Rattigan’s Aff, I have decided to take the matter no further.  But that does not mean that I condone that practice.