Chen Cheryl Deanna v. Chen Pak Yin Stella

CACV 24/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 24 OF 2015

(ON APPEAL FROM HCAP NO. 16 OF 2008)

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J U D G M E N T
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Hon Cheung JA:

1.I agree with the judgment of Kwan JA and the orders she proposes to make.

Hon Kwan JA:

2.This is the defendant’s appeal against the dismissal of her summons made under Order 76 rule 11 of the Rules of the High Court and section 36 of the Probate and Administration Ordinance, Cap 10 by Deputy High Court Judge B Chu (as she then was).  The appeal was brought with leave granted by the judge.

3.The summons was issued in February 2014 in a probate action (HCAP 16/2008) brought against the defendant by the plaintiff, who is her sister, to challenge the validity of the will of their father (“the deceased”) dated 24 January 2005 (“the 2005 will”).  The defendant was appointed the sole executrix and trustee of the deceased’s estate under the 2005 will.

4.By her summons, the defendant sought an order that (1) the probate action be discontinued or dismissed; (2) an independent certified public accountant Mr Li Ka Sing be appointed administrator of the estate of the deceased; and (3) grant of letters of administration of the estate of the deceased with the will annexed be made to Mr Li.

5.On 18 November 2014, the judge dismissed the summons.  She did so for two main reasons.  Firstly, she was of the view that the court has no jurisdiction under section 36 to grant the reliefs sought in the summons.  Secondly, she considered that granting the reliefs sought in the summons is in effect giving summary judgment to the defendant and this is inappropriate as testamentary capacity is a hotly disputed issue in the probate action.

The background and reasons for the summons

6.The deceased passed away in March 2005.  He had three daughters and one son (the defendant, the plaintiff, Margaret and Edward).  By the 2005 will, he bequeathed his residuary estate to his four children in equal shares and appointed his eldest daughter, the defendant, as the executrix.

7.On the same day he made the 2005 will, the deceased executed an enduring power of attorney nominating and appointing the defendant his attorney.

8.The plaintiff alleged that the deceased was not of sound mind, memory or understanding when he executed the 2005 will and the enduring power of attorney.

9.In October 2008, the plaintiff issued the writ in the probate action, asking the court to pronounce against the validity of the 2005 will for want of testamentary capacity and to grant her letters of administration of the estate of the deceased.

10.In January 2011, the plaintiff and her son Andrew brought an action in the High Court against the defendant (HCA 59/2011), seeking, among other things, a declaration that the enduring power of attorney was invalid and the acts performed by the defendant relying on it were invalid.  In particular, it was alleged that unknown to the plaintiff and Andrew, the defendant had effected a change of the beneficiaries of an insurance policy taken out by the deceased in August 2004.  The beneficiaries used to be the plaintiff, Andrew and Edward in equal shares.  Relying on the power of attorney, the defendant changed the beneficiaries to the four children of the deceased in equal shares.

11.On September 2011, an order was made by Registrar Lung that the probate action is to be tried with the High Court action before the same judge in the order to be determined by the trial judge, and that the evidence of one action shall be admissible in the other action.

12.Both actions dragged on for a number of years due to various applications and disputes between the parties.

13.In 2014, the probate action was ready to go to trial but HCA 59/2011 was not.  The plaintiff, who by then was and has since been acting in person, sought leave to make extensive amendments to the amended statement of claim in the probate action.  This was refused by the judge in the same judgment on 18 November 2014.  Her application for leave to appeal against that part of the judgment was refused by the Court of Appeal on 24 April 2015 (HCMP 256/2015).  The plaintiff has also applied to further amend her statement of claim in HCA 59/2011.  The hearing date of this application before the judge is in March 2016.

14.According to the estimates given, the trial of the probate action would be in the region of 10 days, and the trial of HCA 59/2011 (on the state of the existing pleadings) would be 8 to 8.5 days.

15.As a result of the advice from her new legal advisers, the defendant issued the summons in February 2014, in an attempt to bring the probate action to an end without proceeding to trial.  She accepted the advice that since the distribution of the estate is the same regardless of whether the 2005 will is valid or not, it would be a wholly unjustified waste of time and costs to fight over the issue of the validity of the will.  The only difference is who may apply for a grant to administer the estate.  If the 2005 will is upheld, the defendant would have the first priority to apply for a grant as the sole executrix.  If the will is declared invalid, the plaintiff would have the same priority as any of her siblings, including the defendant, to apply for a grant of letters of administration.  The defendant decided not to insist on taking a grant as the executrix and by her summons proposed that an independent professional be appointed as administrator and for her to be passed over.

16.As submitted to the judge by Mr Miu, who appeared for the defendant throughout, the deceased’s estate was estimated to be around $9 million, it would be an out-of-proportion exercise for the probate action to proceed to trial.  Even if the defendant should succeed in the probate action and the 2005 will were to be upheld, it could still be in the interests of the estate, in view of the hostility between the plaintiff and the defendant, for an independent professional to be appointed as an administrator, with the will annexed.  And if she should fail in the probate action and the 2005 will were to be declared invalid, it would not follow that the court would appoint the plaintiff as the administratrix.

If there is jurisdiction to grant the reliefs sought

17.The defendant invoked Order 76 rule 11 and section 36 of Cap 10 in her summons.  The judge had only considered section 36 but not Order 76 rule 11 in dismissing the summons for want of jurisdiction.

18.Order 76 rule 11(1) provides that Order 21 shall not apply in relation to a probate action. Rule 11(2) provides as follows:

“At any stage of the proceedings in a probate action the Court may, on the application of the plaintiff or of any party to the action who has acknowledged service of the writ therein, order the action to be discontinued or dismissed on such terms as to costs or otherwise as it thinks just, and may further order that a grant of probate of the will, or letters of administration of the estate, of the deceased person, as the case may be, which is the subject of the action, be made to the person entitled thereto.”

19.Section 36 reads as follows:

“Where a person dies wholly intestate as to his estate or leaving a will affecting estate but without having appointed an executor thereof willing and competent to take probate, or where the executor is, at the time of the death of such person, resident out of Hong Kong, or where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate, other than the person who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate, the court may, subject to s 25, appoint such person as the court thinks fit to be such administrator, on his giving such security, if any, as may be required under this Part or as the court may direct, and every such administration may be limited in such manner as the court thinks fit.”

20.In my judgment, the combined provisions of Order 76 rule 11 and section 36 of Cap 10 clearly empower the court to grant the reliefs sought in the defendant’s summons.

21.Order 76 rule 11(2) gives power to the court to order the probate action to be discontinued or dismissed at any stage of the proceedings.  Mr Miu relied on the words “order the action to be discontinued or dismissed on such terms as to costs or otherwise as it thinks just” as sufficiently wide to empower the court to grant the reliefs sought, including the grant of letters of administration to an independent person.  For my part, I have considerable reservation whether those words, read with Order 76 rule 11(2) as a whole, could be so construed as to confer power on the court to grant administration of the estate to a third party.  But there is no need to resolve this, as there is power to appoint “such person as the court thinks fit to be such administrator” under section 36, provided that the defendant can bring herself within the scope of that provision.

22.The judge referred to Re Ho Wai Man [2006] 4 HKLRD 421, in which A Cheung J (as he then was) considered section 36 and held in §18 that it applies to four different, although to some extent overlapping, situations:

“(1) “where a person dies wholly intestate as to his estate”;

(2) “where a person dies … leaving a will affecting estate but without having appointed an executor thereof willing and competent to take probate”;

(3) “where the executor is, at the time of the death of such person [i.e. a person who has died leaving a will affecting estate], resident out of Hong Kong”; or

(4) “where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate, other than the person who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate”.”

23.In any one of the four situations, the court may appoint such person as it thinks fit to be the administrator.  The passing over of the person with a prior right concerns directly the last situation in (4), and, by implication, passing over would also occur in situation (3) (Re Ho Wai Man at §§19 and 20).

24.In this instance, the defendant relied on situation (4).  The judge took the view in §86 of her judgment that without conceding to intestacy and without conceding that the defendant is not willing and not competent to take probate, the defendant may not be able to rely on situation (4) for herself to be passed over.

25.It seems to me the judge’s approach is too formalistic in insisting on concessions that should be made by the defendant before being satisfied that she could be passed over, instead of looking at the effect of the defendant’s words in her supporting affirmation and her conduct in seeking the appointment of an independent administrator.  As A Cheung J has said in Re Ho Wai Man at §38, the four situations identified in section 36 do not cover the situation “where the deceased person leaves a will appointing an executor/applicant who is willing and competent to take probate and who is resident within the jurisdiction”.  Here, the defendant has shown quite clearly, by her supporting affirmation (at §§5 to 9) and by her conduct in asking for an independent administrator to be appointed, that she is not willing to take probate and has asked for herself to be passed over.  Before this court, Mr Miu further clarified the defendant’s position that she is content to ask the court to grant administration to an independent third party without the will annexed, on the basis of intestacy.

26.The above is sufficient to bring the defendant within the scope of situation (4) in section 36.  There is jurisdiction to grant the reliefs sought in the defendant’s summons.

If the discretion to grant the reliefs should be exercised

27.This brings me to the second main reason of the judge in refusing relief, namely, that it would be inappropriate to grant what would in effect be summary judgment to the defendant when testamentary capacity is hotly disputed in this action.

28.I agree with Mr Miu that the disputed issue of testamentary capacity can and should be disregarded because the resolution of this issue would not affect the underlying issues of distribution and administration.  The distribution of the residuary estate would be the same, whether or not the 2005 will is upheld.  The issue of administration is no longer a live issue, given that the defendant has indicated her willingness to be passed over in favour of an independent professional.  There is no longer any triable underlying issue relating to distribution or administration in this probate action.  If dismissal or discontinuance of this action is in effect a summary judgment, there is no obstacle to taking this course as this would be an appropriate case for summary judgment.

29.The judge also mentioned in §88 of her judgment it would not be appropriate to grant letters of administration to the independent professional with the will annexed, as such a grant is conclusive as to the terms of the will the validity of which is in dispute.  The defendant’s summons sought a grant of letters of administration with the will annexed be made to Mr Li.  When Mr Miu sought leave to appeal from the judge, he proposed an alternative order of a grant to Mr Li without the will annexed.  Mr Miu has confirmed to this court that he is seeking this alternative order on the basis of intestacy and this should be expressly provided in the order to be made if the appeal is to be allowed.

30.I think the difficulty mentioned by the judge is a matter of substance touching on the validity of the will, but it can be overcome by the alternative order subsequently proposed by Mr Miu.  I am not persuaded by Mr Miu that a grant with the will annexed should be made for expediency in the interest of saving expenses or that it would have made no practical difference to require the administrator to identify the beneficiaries, as there are only the four children entitled to the estate.

31.The defendant’s summons and supporting papers were not served on the other two beneficiaries, Margaret and Edward, although we were given to understand by the defendant that she has spoken to both and both have indicated their agreement with the orders she sought.  At the hearing of the appeal, we directed the defendant’s solicitors to serve within 21 days the appeal bundle and the submissions on both sides on Margaret and Edward, and these beneficiaries would have 21 days from the date of service to provide their response in writing whether they would agree with the proposal of making a grant of letters of administration to Mr Li without the will annexed, on the basis of intestacy.  The defendant made an affirmation on 10 March 2016 deposing to these steps taken by her and her solicitors pursuant to the directions of this court on 19 February.  After the hearing the plaintiff also made an affirmation on 22 February 2016, which she filed without leave, deposing to matters completely irrelevant to the single point for which we directed the defendant’s solicitors to contact the other two beneficiaries.  We decline to consider this affirmation of the plaintiff.

32.On 23 February 2016, the defendant’s solicitors served on Margaret the documents as directed by this court and a proposed draft order to the effect that the grant of letters of administration is on the basis of intestacy.  Margaret confirmed by letter dated 27 February she supports the draft order proposed by the defendant.

33.Edward is a discharged bankrupt.  In the defendant’s telephone discussion with him on 20 February 2016, she relayed to him the proposal to obtain a grant of letters of administration for an independent professional to administer the estate and on the basis of intestacy.  He informed her he did not wish to be bothered or get involved in this case as any money he may receive from the deceased’s estate would have to be given to his trustees in bankruptcy.  He said he would not sign anything.

34.The defendant has not been able to serve the documents on Edward because he refused to give her a postal address or a valid email address.  She was only able to send by WhatsApp to his mobile phone on 29 February 2016 a draft letter of no objection and the proposed order.

35.I am satisfied Edward has sufficient knowledge of the proposal and has chosen not to take a stance.

36.There are no circumstances that would militate against the exercise of the discretion in granting the reliefs sought in the defendant’s summons.

37.It cannot seriously be disputed that the trial of the probate action on the issue of testamentary capacity is wholly unnecessary and would serve no useful purpose.  The mental capacity of the deceased in signing the enduring power of attorney will be litigated in HCA 59/2011.  The plaintiff will be at liberty to adduce such evidence as she sees fit on that issue in the other proceeding.  Her interest and position in the other action will not be affected in any way by the dismissal and discontinuance of the probate action.  The mere fact that an order was made by Registrar Lung in 2011 that the probate action should be tried with HCA 59/2011 does not mean that must be a trial of the probate action come what may, regardless of subsequent circumstances not envisaged by the Registrar when he made his order some years ago.

38.Given the hostility between the plaintiff and the defendant, which would affect the administration of the estate, it would clearly be appropriate for an independent professional to be appointed as the administrator, instead of any one from the opposing camps, as was done in Re Estate of Loo Che Chin [2013] 2 HKLRD 739.  There is no merit in the plaintiff’s contention that she would be prejudiced in that she would be deprived of the opportunity of being appointed the administratrix in the event the 2005 will is declared invalid after a full trial of the probate action.

39.I do not think any of the other grounds of opposition raised by the plaintiff are of substance.

40.The plaintiff mentioned that the probate action should proceed to trial as much costs have been incurred in obtaining evidence from medical experts on the mental capacity of the deceased and she is desirous of recovering the costs she had incurred.  As already mentioned, the mental capacity of the deceased will be litigated in HCA 59/2011.  The plaintiff may still seek to recover the costs she has incurred in obtaining evidence on this issue if she should succeed in establishing her case.  Besides, it is plainly against some of the underlying objectives in Order 1A rule 1 (“to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings”, “to ensure that the resources of the Court are distributed fairly”) to allow further substantial costs to be incurred in fighting the probate action to the bitter end, just to enable the plaintiff to recover some of her costs that had been incurred and which she may still seek to recover in another ongoing action.

41.The plaintiff also raised the question of the expenses in engaging the service of an independent professional to administer the estate.  I have considered the rates of charge in the draft order submitted by Mr Miu, which I think are reasonable.  The proposed remuneration to the administrator and his staff would be capped in that the total remuneration should not exceed the scale costs laid down in section 60(2)(b) of Cap 10.  Against these expenses must be balanced the substantial costs that would be incurred if the probate action is to proceed to a trial of ten days or more and the risk that the estate, estimated to be around $9 million (or much less according to the plaintiff), may be ordered to bear all or part of the costs.

42.It would clearly be in the interest of the estate that there should be no further delay in the administration.  There has already been much delay since the probate action was brought in 2008.  If it should proceed to trial, a trial is not likely to take place for quite some time since it is ordered to be tried with HCA 59/2011 which is a long way from being ready for trial.

43.As for the complaints made by the plaintiff against the defendant regarding various aspects of the administration of the estate by the defendant, there is all the more reason why an independent professional should be appointed to administer the estate.  The plaintiff can take up her complaints with the independent professional to be appointed as the administrator.  Her complaints do not provide any reason why the defendant should not be granted the reliefs sought, which are clearly in the interest of the beneficiaries of the estate.

44.The plaintiff contended that the probate action should proceed to trial in the interest of her pursuit of justice, having raised a serious dispute on the validity of the 2005 will.  It is one of the underlying objectives in Order 1A rule 1 to “ensure fairness between the parties”, but there are other underlying objectives as well.  Other than “to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings”, “to ensure that the resources of the Court are distributed fairly”, which have already been mentioned, there are these objectives: “to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court”, “to ensure that a case is dealt with as expeditiously as is reasonably practicable”.  Taking into account all the relevant circumstances, the court will not allow litigation to be pursued needlessly and without regard to the more pertinent underlying objectives in Order 1A.

Orders

45.For the above reasons, I would allow the defendant’s appeal against that part of the order of the judge on 18 November 2014 dismissing her summons of 27 February 2014.

46.Mr Miu has helpfully prepared a draft order for our consideration. I would make an order in terms of paragraphs (1) to (9) save that I would delete the words “(with the Will of the Deceased dated 25 January 2005 annexed)” in paragraph (5) and substitute them with these words “(on the basis of intestacy)”, as I am not prepared to grant letters of administration to Mr Li with the will annexed.

47.As for the costs orders proposed in paragraphs (10), (11) and (12) of the draft order, I am in broad agreement with them save and except the costs incurred in respect of the issue of the mental capacity of the deceased. As that issue is to be litigated in HCA 59/2011, it seems to me it would be fairer to make no order as to costs in respect of that issue in the probate action, leaving both parties to seek whatever order they see fit in respect of the costs pertaining to that issue in HCA 59/2011.

48.I would make an order nisi in terms of paragraphs (11) and (12) of the draft order, and paragraph (10) would be changed to read: “Costs of this action including all costs reserved, except for the costs relating to the issue of the mental capacity of the Deceased, be paid out of the Estate on a party and party basis.  There be no order as to the costs relating to the issue of the mental capacity of the Deceased in this action.”

The Plaintiff (Respondent) appeared in person

Mr Nelson L Miu, instructed by Li, Chow & Company, for the Defendant (Appellant)