DORIS YUE LING CHI v. YU or YUE KIN SHIU AND OTHERS

1991 No. A5643

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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I. The Facts Alleged by the Plaintiff

1. The plaintiff is the second eldest daughter of the late Mr Yu Chi Yuen ("the deceased") who died intestate on 28th July 1979. He was survived by his widow, who became his administratrix under letters of administration dated 31st December 1981, three daughters including the plaintiff, and three sons (D1, D2 and D3). Under the law of intestacy, the widow was entitled to half the Estate, and the children one twelfth each.

2. The deceased owned shares in four private companies, namely, Yee Tak Investment Co Ltd ("Yee Tak"), Dor Po Investment Co Ltd ("Dor Po") Merry Court Enterprise Ltd ("Merry Court") and Shing Lee Enterprise Ltd.

3. On 24th and 25th July 1979 purported transfer of shares owned by the deceased in those four companies were made as follows:-

4. On both 24th and 25th July 1979, the deceased was a patient under intensive care in the cardiac unit at the Hong Kong Saratorium Hospital, dying.

5. Those purported transfers to at least the 2nd and 3rd defendants were made without the authority, knowledge or consent of the deceased whose signature stamp and chop were applied to the transfer documents, (Agreed Bundle 69 to 73), without his knowledge or authority.

6. Two days after the deceased's death, the Defendants paid the stamp duty on the share transfer documents which were then duly stamped.

7. The prices shown above were included in the Provisional Schedule of the deceased's property submitted by the deceased's widow to the Commissioner of Estate Duty on her application for letters of administration as debts due to the deceased in the case of both D2 and D3.

8. The total D2 was shown as owing to the Estate was $1,218,000, ($1,112,500+$93,800). That was Item 12 on the Provisional Schedule (See Agreed Bundle, orange marker, pages 10 and 15).

9. D3 was shown as owing the Estate $819,830($600,000+ $120,000+99,830) as the price for his shares. That was shown as Item 11 on the Provisional Schedule. (Agreed Bundle, Orange marker pages 10 and 15)

10. In respect of the 100 shares in Yee Tak D1 bought for $400,000, there is no explicit reference to them in the Provisional Schedule, but one can see from page 9 of the Agreed Bundle, Orange Marker that $400,000 was taken into account in striking a balance between what D1 allegedly owed his late father and what his father allegedly owed him. The result of striking that balance was that the deceased, at the date of death, allegedly owed D1 $4,482,817.06. The plaintiff does not accept that their late father owed D1 anything.

11. The prices D2 and D3 said they paid their late father for the private company shares were not accepted by the Commissioner of Estate Duty as their market value at the date of death. Instead of the $1,218,800 D2 said was the price, the Commissioner assessed the value as $2,503,082, and in respect of D3 $4,124,780 was substituted for $819,830. (See Agreed Bundle, Orange Marker, p.15 for the Final Schedule)

12. The plaintiff contends the value of those shares was greater than the Commissioner's assessment.

13. No upward adjustment was made by the Commissioner to the $400,000 D1 owed the Estate for his 100 Yee Tak shares.

14. On or about 21st August 1979 D1 gave the plaintiff a document, (the "Report") (Agreed Bundle, Yellow divider, pages 83A and 84), purporting to show the state of accounts between the deceased and D1 in relation to the buying and selling of publicly-quoted shares as at the close of business on 27th July 1979. The deceased died at approximately 3 am on 28th July.

15. The plaintiff also got hold of various ledger extracts (Agreed Bundle, yellow divider, pages 75,76 and 115), providing further information about the state of accounts between D1 and their late father in relation to publicly-quoted stocks. When and how she got those documents is not clear on the material before me. More likely than not she got them from D1 at or about the same time as he gave her the Report.

16. Another possibility is he gave her those ledger extracts when he allegedly wrote to her on or about 16th October 1979 (Agreed Bundle, yellow divider, pages 88 to 91).

17. In that letter, allegedly written by D1, he explained how, immediately after their father's death, he had gained possession of publicly- quoted stocks and shares being held by banks for the deceased. The banks had been holding those stocks and shares as security for loans made to the deceased. D1 paid off any overdraft owed by the deceased, and took the stocks and shares. His object in doing that, so he explained in the letter, was to prevent the deceased's assets being frozen once the banks knew their customer had died. By paying off the overdraft and taking the shares, so D1 explained, there would be no need to continue paying interest to the banks, and D1 thought the action he had taken would strengthen the family's hand in dealing with the Government on probate matters.

18. The letter mentioned, too, that he had changed the name on some of the deceased's stocks to that of either D2 or D3. Probably there D1 meant the stocks in the four private companies to which I have already made reference.

19. Presumably to counter any anxiety the plaintiff might harbour on account of the way D1 was manipulating their late father's assets, D1 assured her, "But in future I will get the same as you all," and "in future when we distribute the Estate 'true' accounting will be settled" (Agreed Bundle, Yellow divider, p.89).

20. Despite D1's reassuring words, the plaintiff does not accept that there has been true accounting in relation to the deceased's estate.

21. What were presumably meant to be final estate accounts, showing the position upto 30th September 1986, were prepared by a firm of Chartered Accountants on 23rd March 1987 (Agreed Bundle pages 23 to 54).

22. By comparing the information in the Report and the ledgers I have already referred to with the final estate accounts, the plaintiff contends that D1 has failed to account to the estate for publicly-quoted shares falling into two categories.

23. Firstly, there are the shares released by banks to D1 at about the time of their father's death on paying off any overdrafts.

24. Those shares are as follows (See Agreed Bundle, yellow divider, page 112, column 7)

No. of Shares	Company
35,033.	Hang Seng Bank Ltd.
54,000.	Hong Kong Electric (Holdings) Ltd.
28,600.	Hong Kong Telephone Ltd.
70,414.	Hutchison Whampoa Ltd. ordinary shares
203,000.	Swire Pacific "B"
163,500.	Grand Marine
192,014.	Hutchison Whampoa Ltd. 7 1/2 preference shares

25. The total value of those shares as at the time of the deceased's death was $6,072,555.29. (See Defence Submission on Evidence, page 5)

Then, secondly, comes a category of publicly-quoted shares owned by the deceased upto the date of his death, and then taken over by D1 to off-set money allegedly owed D1 by the deceased. The plaintiff disputes the deceased's owing D1 anything at the date of death. Those shares, which at the date of death were worth $2,749,884.6, are as follows (See Agreed Bundle, yellow divider, page 112, column 5).

No. of Shares	Company
62	Hang Seng Bank Ltd.
6,000	China Light & Power Company Ltd.
6,300	Hong Kong Electric (Holdings) Ltd.
57,000	The Great Eagle Co. Ltd.
2,600	Hutchison Whampoa Ltd. ordinary shares
108,000	Miramar Hotel & Investment Co. Ltd.
1,500	Grand Marine
625	Hong Kong Land Co. Ltd. registered warrants HK$10 each 1986

26. The Plaintiff lacks confidence in her mother as administratrix. She alleges her mother colluded with her sons to deprive the plaintiff of her rightful share of the estate.

II. The Facts According to the Defendants

27. Through two affirmations from D3, the defendants dispute any failure to account.

28. In relation to the private company share transfers to himself and D2, D3 says that he and D2 have accounted to the Estate for them at their market value at the date of death, as assessed by the Commissioner for Estate Duty, meaning, presumably, in the sum of $2,503,082 in the case of D2, and $4,124,780 in D3's case. From the final Estate accounts accompanying D3's first affirmation, together with the other documentary material before the court, it is as yet not possible to say whether what D3 says about himself and D2 is correct.

29. Certainly, the Estate Duty Schedule in its final form as exhibited to D3's first affirmation (Agreed Bundle, yellow divider page 15) shows D2 owing the Estate $2,503,082 and D3 owing $4,124,780, but so far there is nothing to link those amounts with the final Estate accounts.

30. Insofar as D1 is concerned, D3 explains that everything is accounted for in the running account kept between D1 and their father.

31. The Plaintiff's five brothers and sisters and their mother, the administratrix, approved the Estate Accounts, made up to 30th September 1986 at a meeting held on 21st April 1987. Their approval was signified by signing those accounts (See Agreed Bundle, yellow divider, p.28).

32. Although the plaintiff was invited to attend that meeting, she did not, her explanation for her absence being she was back in the United States at the time.

33. In relation to the plaintiff's prayers that the defendants should account, Mr Anthony Neoh, Q.C., on their behalf, has foreshadowed a defence that the administratrix, in signing the Estate Accounts, in fact exercised the power with which a personal representative is endowed under s.16 (f) of the Trustee Ordinance, Cap.29 of compromising or settling any claims the Estate might have had against them. Unless made in good faith and with informed consent by the administratrix, a purported compromise would not, however, by itself bring about the situation of the defendants having accounted to the Estate.

The Proceedings

34. In the present action which the plaintiff brings against only her brothers, the prayer to the Statement of Claim asks that they should be ordered to account to the administratrix with respect to the various share dealings of which she has complained. In that prayer she does not seek administration of the Estate, nor does she seek an accounting by the defendants directly to her regarding the shares.

35. It is only in her alternative prayers that she asks the court that they should be ordered to account to her directly for her entitlement as one of the next of kin, or for an order for the administration of those assets (not the whole estate) or for the appointment of a receiver.

36. The plaintiff also has an action on foot, commenced on 9th May 1986, against her mother, as administratrix, for willful default in administering the Estate. There the plaintiff does seek general administration of the Estate. That action is 1986 No. A2708.

37. From Further and Better Particulars supplied by the plaintiff in that earlier action, common questions of fact arise in it and the present action, since both relate to the share dealings by her brothers, either shortly before or after their father's death. (See Agreed Bundle, blue divider, pages 9 to 15)

38. That earlier action has gone to sleep, but is ready to be re- awakened if need be, so I was informed.

Summons to Strike Out

39. Before me now is the Summons by the three defendants in the later action to strike out the plaintiff's Statement of Claim on the grounds it discloses no reasonable cause of action, and/or is frivolous or vexatious, and/or is an abuse of process in that

(a) the proceedings are not properly constituted, and

(b) they should not be maintained in the face of the earlier action against the administratrix

40. Besides the issues in the Summons of (a) whether the proceedings were properly constituted and (b) whether there should be a stay of the present action in the face of the earlier action, Mr Bunting, for the plaintiff, allowed the defendants to argue a further point, namely, that the allegations put forward on behalf of the plaintiff that the defendants were liable as executors de son tort in relation to their dealings with the shares in the private companies immediately prior to their father's death disclosed no reasonable cause of action.

41. I will deal with that last issue first.

I. Could the Defendants be made liable to Account to the Plaintiff as Executors De Son

Tort in relation to their conduct before the deceased's death

42. I think counsel for the defendants must be right in arguing that no kind of executorship can arise prior to the death of the person whose death is in issue.

43. The allegedly wrongful conduct of the defendants in relation to the private companies' shares would have given a right of action on which their father might have sued in his lifetime, and that right of action would have been transmitted to the administratrix as one of the assets of the Estate: s.20 of the Law Reform (Miscellaneous Provisions) Ordinance, Cap.23.

44. It is almost unthinkable that the plaintiff could proceed directly against the defendants in respect of such assets since she would simply lack title. Almost certainly, the administratrix or someone representing the Estate under O.15 r.15 would have to be joined in.

45. There was a slight shifting of ground on behalf of the plaintiff when it was argued that the conduct of the defendants after their father's death in relation to the shares in the private companies made them executors de son tort. Continuing generally to hold those shares after their father's death, and their taking the particular step of having the share-transfer documents stamped on 30th July 1979 was conduct sufficient to make them executors de son tort, so it was alleged on behalf of the plaintiff.

46. On that point the plaintiff relies on s.58 of the Probate and Administration Ordinance, which I now set out.

58. Liability of a person fraudulently obtaining or retaining estate of deceased

If any person, to the defrauding of creditors or without full valuable consideration, obtains, receives or holds any movable or immovable property of a deceased person or effects the release of any debt or liability due to the estate of the deceased, he shall be charged as executor in his own wrong to the extent of the property received or coming into his hands, or the debt or liability released, after deducting

(a) any debt for valuable consideration and without fraud due to him from the deceased person at the time of his death; and

(b) any payment made by him which might properly be made by a personal representative.

47. The plaintiff relies on the words, "retaining", and "holds".

48. On the view I take the defendants' wrongful conduct was completed before their father's death, and I do not think they come within the ambit of s.58.

49. Mr Bunting submitted that "holds" must mean something different from "obtains", his contention being that "obtains" covered interference with the deceased's assets after death, and "hold" must refer to property wrongfully taken before death.

50. As the section deals with executorship - "executor in his own wrong" - it all relates to post-death conduct in relation to the Estate's, assets in my view.

51. I do not see how the plaintiff gets any help from the defendants' taking the step of having the private company share-transfer documents stamped on 30th July 1979. That was a transaction between the defendants and the revenue authorities. I do not regard that as a wrongful act against the Estate.

52. In the context of reasonable cause of action, I fail to see how D1 is supposed to have done anything wrong in relation to the private company shares, bearing in mind the way paragraph 5 of the Statement of Claim is pleaded. Paragraph 5 states:

"The said purported transfers to the 2nd and 3rd defendants (at least) were made without the authority, knowledge or consent of the Deceased, his chop and signature stamp being applied without his knowledge or authority .........."

53. That implies that what D1 did was with the authority, knowledge or consent of the Deceased. That does not disclose a cause of action. As against D1 I order that the part of Statement of Claim in relation to the private company share should be struck out. At the same time, I give liberty to the plaintiff to put in an amended Statement of Claim within one month against D1 in relation to the private company shares, since I have a strong suspicion that the problem with the Statement of Claim against D1 stems from poor drafting technique rather than lack of a substantive case against him if properly pleaded.

54. In my judgment, the Statement of Claim as pleaded fails to make out a cause of action against any of the defendants in relation to the private company shares if it is to be on the basis of their being executors de son tort .

55. However in relation to both D2 and D3 the facts pleaded do disclose a reasonable cause of action against them on the basis that in his lifetime their father could have sued them for their alleged fraudulent acquisition of the private company shares and that cause of action will have survived his death to vest in the administratix of his Estate. See Williams on Executors etc., 17th edition, Chapter 46, Devolution of Claims, p.515, Heading I "What Claims Devolve On or Accrue to the Executor or Administrator".

II. Whether the Proceedings Properly Constituted

56. It will only be in quite exceptional circumstances that a residuary legatee will be permitted by the court to bring an action on behalf of an estate without the personal representative or at least someone appointed by the court to represent the Estate being joined in as a party. This is not one of those exceptional instances.

57. Two cases in particular are relied on by the plaintiff to show that the court will allow actions to be brought against those intermeddling in an Estate without joining in any personal representative. Those two cases are Coote v. Whittington (1873) LR 16 Eq.534 and Re Lovett (1876) 3 Ch D 198. They are both decisions of Vice-Chancellor Malins, and are out of step with what his contemporaries (Lord Romilly, MR in Cary v. Hills (1872) LR 15 Eq.79 and Sir G. Jessel MR in Rowsell v. Morris (1873 LR 17 Eq. 20) were saying and what his predecessors had said: See Beardmore v. Gregory (1865) 2 H&M 490; Penny v. Watts (1846) 2 Phil CC 149; and Eddowes v. Deane (1718)

58. Both Cootes v. Whittington and Re Lovett deal with a very different situation from the one existing in the present case. Both of them were actions by creditors against those intermeddling with assets of estates where no personal representatives had been appointed. In both instances the estates were solvent, and what Malines V.C. did in allowing creditors to recover from executors de son tort, without requiring probate or letters of administration to be taken out first, in what were very straightforward circumstances, made good sense, even if it did not make good law.

59. In the case before me, there is a personal representative and the factual situation is somewhat complex, involving as it does allegations of fraud. This is the type of situation where, if there were no personal representative, the court would direct that one would have to be appointed or that someone should be appointed under O.15 r.15 before the action could be permitted to proceed further.

60. The plaintiff should no more be permitted to bring this claim in her personal capacity without joining in the personal representative than was the plaintiff in Ip Cheong-kwok v. Sin Hua Bank Trustees Ltd [1990] 1 HKLR 497.

61. Mutatis Mutandis, the following passage from the Ip Cheong-kwok case at page 511 highlights some of the difficulties which may ensue where an action is not properly constituted by joining in the personal representative to represent the interests of the Estate :-

"Any order made in the absence of the settlor's personal representative or a party representing the settlor's estate would not bind his personal representative when duly constituted. There would therefore be multiplicity of proceedings. If the order were adverse to the estate it could be embarrassing to the personal representative. Moreover the personal representative might take a different view of the estate's claim to the property and wish to compromise it with the trustees and the other interested parties."

62. Clearly, there are cases where a residuary legatee can proceed directly, without joining in the personal representative, against someone wrongfully holding assets belonging to an estate. That such situations can arise is acknowledged in the following passage from Commissioner of Stamp Duties v. Livingstone [1965] A.C.694.

"Nor can the solution of the difficulty be advanced by referring to those cases in Equity Courts in which a creditor or a pecuniary or residuary legatee has been allowed to follow and recover assets which have been improperly abstracted from an estate. The basis of such proceedings is that they are taken on behalf of the estate and, if they are successful, they can only result in the lost property being restored to the estate for use in the due course of administration. Thus, while they assert the beneficiary's right of remedy, they assert the estate's right of property, not the property right of creditor or legatee; indeed, the usual situation in which such an action has to be launched is that in which the executor himself, the proper guardian of the estate, is in default, and thus his rights have to be put in motion by some other person on behalf of the estate."

63. In Re Diplock [1948] 1 Ch 465 sub nom. Ministry of Health v. Simpson and others [1951] AC 694 are to similar effect.

64. Up until now there is nothing to prove that the administratrix is in default. There is only the plaintiff's assertion in her pleadings to that effect. One of the reasons the administratrix should be joined in is so that the court can hear her side of the story.

65. Re Diplock and Minister of Health v. Simpson made it clear that beneficiaries must first of all exhaust their remedies against the personal representatives before proceeding directly against persons wrongly holding estate assets. That is a salutary principle in my view and should be applied in the present case.

66. On the view I take the plaintiff's action is not properly constituted on account of her failure to join the administratrix.

67. In similar fashion to what happened in the Ip Cheung kwok case, the proceedings are irregular, but not a nullity (Ingall v. Moran [1944] KB 160.)

68. Rather than strike out the Statement of Claim at this stage, I will stay the proceeding to give the plaintiff an opportunity to put her house in order. There is a summons to consolidate pending which the court can hear in due course, assuming the matter is not dealt with by consent meanwhile.

O.85 rr.2 and 3

69. The point has been made on the plaintiff's behalf that her action is not one for general administration of the Estate. I accept that, the consequence being that her action falls outside the scope of O.85 r.1.

70. Nonetheless, in my view, her action falls within O.85 r.2, generally, and particularly within (3)(e).

71. If I am correct on that, the administratrix must be joined in the action.

Significance of the Existence of 1986 No. A2704

72. The mere existence of that earlier action does not by itself afford a basis for staying the later action. For all practical purposes, though, the later action cannot go ahead without the administratrix being joined in.

Conclusion

73. For the reasons stated above I stay Action A5643/91 with liberty to the plaintiff to apply to have that action properly constituted. I also strike out as much of the Statement of Claim in that action as relates to the allegation against D1 with respect to the private company shares but with liberty to the plaintiff to put in a properly pleaded Statement of Claim with respect to that within one month. I do not stay A2704/86.

74. I make a 14 day order nisi for costs against the plaintiff, this being a judgment delivered pursuant to O.42 r.5A. I also grant a Certificate for two counsel.