KENNETH HOI WAH SIT v. LAU YAU SANG & LEUNG SAU YING t/a ME & GEORGE FASHION IMPORT SHOP AND ANOTHER

HCA 31/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 31 OF 2006

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J U D G M E N T

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1. The only defence relied on by the defendants is that they were in occupation pursuant to a licence from Wai Yip and that when Frank Wong granted the licence to Wai Yip, he was acting in his capacity as administrator of estate; accordingly the licence was binding on the estate. 

2. In assessing whether the defendants have a real or bona fide defence for the purpose of granting leave to defend, I accept the following propositions of law:

(1) The title of "administrator" stems from the grant of Letters of Administration and, before the grant, he has no title or status to bind the estate;

(2) The act of an executor de son tort is good against a lawful administrator only if the act was lawful, one that the lawful administrator was bound to perform in the due course of administration of the estate and was, in the opinion of the lawful administrator, for the benefit of the estate;

(3) A solitary act of wrong-doing will not bind the administrator.

3. Mr Yip, counsel for the defendants, submitted that on the authorities of Thomsonv. Harding and Chan Pak Man v. Chan Pang Fee an executor de son tort was able to bind the estate by reason of his purporting to act and fairly be understood to act with the authority as the personal representative.  In that respect, he submitted, it was not necessary to show that his act was for the benefit of the estate.  Without disrespect, this view of the two cases flies against authorities prohibiting a person from intermeddling with the estate.  A simple illustration will show that the submission cannot be accepted.  Assuming Mr Frank Wong acted as an intended administrator and rented out the estate's property at well below the market rent, an act clearly against the benefit of the estate, did that mean he or the tenant could pray in aid the purported status of Frank Wong to escape liability towards the estate?  The answer is an obvious "No".  In my view, Thomsonv. Harding does not fall beyond the propositions of law that I accept.  On the facts of that case, the executor de son tort did purport to act as an administrator but the act he did was for the benefit of the estate in that he used the intestate's money to repay his creditor.

4. With the above principles in mind, I now analyse the facts of this case.  First and foremost, there is no evidence as to how the licences granted by Wai Yip to the two defendants arose respectively.  Nevertheless, the most favourable inference will be drawn, namely, that after Wai Yip was granted a licence by Frank Wong, he sub-licensed to D1 and then D2, by way of oral agreements.

The Claim Against D1

5. The occupation of D1 can be divided into two periods: 

(i)    5 October 2000 to 30 April 2002.  (30 April 2002 was chosen because the licence granted under "the Licence Agreement" was to commence on 1 May 2002); and

(ii)    1 May 2002 to 28 February 2003.

6. The question is:  when did the licence first arise?  There is simply no evidence on it.  Faced with a demand letter, the 1st defendant has never informed the plaintiff that they had a licence from Wai Yip.  Furthermore, unlike the affirmation filed by D2, D1 has never asserted that it has paid Wai Yip any licence fees. 

7. Mr Yip invited me to draw an inference from preamble (A) of the Licence Agreement that before the Licence Agreement came into existence, there was already a licence in place.  The answer to that submission is that, firstly, at best, it shows a licence between Mr Frank Wong and Wai Yip.  It says nothing about the licence between Wai Yip and the 1st defendant.  Secondly, it does not show when the licence between Mr Frank Wong and Wai Yip and then between Wai Yip and the 1st defendant commenced. 

8. I borrow the words of Deputy Judge Reyes (as he then was) in  Sumikin Bussan International (HK) Ltd, HCA 3814/2001, at para. 39: 

"A defendant cannot be sparing of the particulars of his defence and then claim, as a result of his own parsimony in detail, that there is an obscurity which must await trial for illumination." 

In my view, there is clearly no defence to the claim with regard to the first period of occupation. 

9. For the second period of occupation, I have assumed that a licence had been granted by Wai Yip to the 1st defendant.  Its validity stood and fell with the that of the "Licence Agreement".  Applying the propositions of law as set out in paragraph 2 above, the questions I have to ask myself are:

(i) Did Mr Frank Wong act as an intended administrator?

(ii) Was the act of granting a licence to Wai Yip lawful?

(iii) Was that act one that an administrator was bound to do in the course of administration?

(iv) Was that act for the benefit of the estate?

10. Although Mr Justice A Cheung ordered that Mr Frank Wong be appointed as a personal representative, no Letters of Administration had ever been taken out by him.  Mr Frank Wong had never, in law, been an administrator.  Neither had he purported to act as an intended administrator in executing the Licence Agreement.  Preamble (A) was drafted in a convoluted way.  Who was the intended administrator?  Who was his lawful attorney?  If Mr Frank Wong was only an “agent of the lawful attorney of the intended administrator”, did that mean he was neither the intended administrator nor the lawful attorney?

11. This Licence Agreement was entered into just four days after Mr Justice A Cheung's judgment.  Pursuant to that judgment, there was nothing to prevent Mr Frank Wong or his lawful attorney to act as an intended administrator if that was his or their real intention.  However, they chose to leave things in a limbo so that the reader of the Licence Agreement was left to guess the capacity of Mr Frank Wong. 

12. Mr Yip suggested that leave to defend should be given so that the makers of the Licence Agreement can be cross-examined on the meaning of that preamble.  I respectfully differ from this view.  The 1st defendant has never even purported to say that they relied on this Licence Agreement or any representation as to Mr Frank Wong's capacity as intended administrator.  Furthermore, by way of analogy to a conveyancing claim, if one assignment in a series of title documents is not well drafted and contained a similar problem, there is no point calling the makers of that assignment to give evidence.  The answer to question (i) is "No". 

13. Given that Mr Frank Wong was not an administrator and had not purported to act as such, his act of granting the licence to Wai Yip was not lawful.  It was but a solitary act on the part of Mr Wong.  The answer to question (ii) is "No".

13A. Even if I am wrong, the grant of the licence to Wai Yip was not (unlike e.g. repayment of a debt to a creditor) an act that an administrator was bound to do in the course of administration.  The answer to question (iii) is “No”.¹

14. The plaintiffs have shown that the licence fees to be paid by Wai Yip to Frank Wong appeared to be much below the market rate and, hence, not for the benefit of the estate.  Whether something was for the benefit of the estate must be seen, in my view, earliest from the time when the plaintiff became the administrator because prior to that date, he could not do anything even though he was not satisfied with the terms of the Licence Agreement.  The facts show that soon after the plaintiff was appointed administrator, he had properly obtained valuation reports and promptly notified the two defendants that he would not ratify the licence.  There was no apparent reason on the face of the Licence Agreement why such a long period of licence with a right of renewal was granted at the rates stated in that agreement.  The defendants had not challenged the plaintiff of non-ratification.  In my view, the act of Mr Frank Wong in entering into the Licence Agreement was not for the benefit of the estate and the plaintiff has rightly declined to ratify it.  The answer to question (iv) is "No". 

15. In an Order 14 situation, it is for a defendant to raise triable issues but the 1st defendant has simply failed to discharge that burden. 

The Claim Against D2

16. My analysis with regard to D1's occupation in the second period applies with full force to the 2nd defendant.  Again, I see no triable issues raised by D2. 

Conclusion

17. The licence granted by Mr Frank Wong was clearly not binding on the estate.  Accordingly, any sub-licence purportedly granted thereunder was equally not binding.  The 1st and 2nd defendants were trespassers.  There is clearly no defence to the plaintiff's claim. 

18. There shall be judgment to the plaintiff against both defendants and:

(i)    As against D1, also for damages to be assessed for the period from 5 October 2000 to 28 February 2003, both dates inclusive;

(ii)    Against D2, also for damages to be assessed for the period from 1 March 2003 to 28 September 2006, both dates inclusive. 

19. There will also be leave to the plaintiff to withdraw his claim for vacant possession and damages for trespass for the period after 28 September 2006 as the plaintiff has already disposed of the property by way of assignment after that date. 

(Submissions on Costs)

20. Costs of and incidental to these proceedings be to the plaintiff to be taxed on a party-and-party basis if not agreed.  There will be certificate for counsel.

¹ In the course of approving the transcribed judgment, I discovered that in delivering the extempore judgment, I have omitted to read out para 13A which was in my own note of Decision.  This was clearly an oversight as in para 9, I have listed 4 questions to be answered.  The answer to question (iii) was left out.