Kung Kwok Wai David, The Executor of the Last Will of Kung Wong Sau Hin, Deceased v. The Commissioner of Estate Duty

HCED 1/2011

[2019] HKCFI 788

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ESTATE DUTY APPEAL NO 1 OF 2011

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Before: Hon Chow J in Chambers (Open to Public)

Date of Hearing: 21 March 2019

Date of Decision: 21 March 2019

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D E C I S I O N

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1.By his summons dated 14 November 2018, the Commissioner applies to strike out (i) paragraphs 16 to 23 and exhibit DK-64 of the 8^th Affidavit of David Kung (“Kung 8”), and (ii) paragraphs 36 to 42 and exhibits LF-38 to LF-42 of the 9^th Affirmation of Lily Fenn (“Fenn 9”), both filed on 24 October 2018.

2.Kung 8 and Fenn 9 were filed pursuant to the court’s order dated 27 September 2018 (“the September Order”), which provides, relevantly for the present purpose, as follows:

“3 Leave be granted to the Plaintiff to file affidavit in opposition to the 4^th Affirmation of Ip Mei Ching within 28 days hereof;

5 No further affidavits are to be filed without leave of the Court”.

3.Also relevant for the present purpose is the court’s order dated 5 October 2018 (“the October Order”), paragraphs 15 and 16 of which provide as follows:

“15 The Plaintiff and Ms Lily Fenn shall attend the trial for cross-examination, failing which and subject to any further directions as may be made by the Trial Judge their affidavits filed herein shall not be admitted into evidence; and

16 Liberty be granted to the Plaintiff to apply within 14 days to vary this Order”.

4.Paragraphs 16 to 23 of Kung 8, under the heading “Variation of Order Dated 5-10-2018”, are plainly not in response to anything contained in the 4^th Affirmation of Ip Mei Ching (“Ip 4”). Instead, they purport to be in support of the Plaintiff’s application “to vary Paragraph 15 of [the October Order], if necessary” (see paragraph 1 of Kung 8).  Paragraphs 16 to 23 of Kung 8 deal with matters such as the Plaintiff’s age and his health conditions, as well as Ms Lily Fenn’s interest in engaging in hazardous sports since 1995, which it is said may preclude them from attending the trial for cross-examination in the event of ill-health, mental incapacity or death.  At paragraph 23 of Kung 8, the Plaintiff states that “we would reserve the right to apply to [the] court for the variation of Paragraph 15 of [the October Order]”.

5.The Plaintiff has not made any application to vary the October Order within the period of 14 days of that order (as provided for in paragraph 16 thereof), or at any time.  In Lily Fenn & Partners’ letter dated 2 November 2018 to the Department of Justice, the Plaintiff’s solicitors stated that “we see no need to pursue a variation of the Order at this stage”.  This is why, in paragraph 23 of Kung 8, it is said that the right to apply to the court to vary the October Order is reserved.

6.In my view, paragraphs 16 to 23 of Kung 8 and exhibit DK-64 thereto ought to be struck out, because:

(1)  The matters stated in those paragraphs are irrelevant to any issues to be determined by the court at the trial, for the simple reason that there is currently no application to vary the October Order.  It is only when an application, now out of time, to vary the October Order is made that the matters stated in those paragraphs may become relevant to the court’s determination of the application.  I do not consider that it is permissible for a party to file evidence in support of a potential application which may never be made.  Otherwise, the affidavits filed by the parties could contain all sorts of irrelevant materials.  In this regard, I agree with Ms Yvonne Cheng, SC’s submission that the court has a discretion to strike out irrelevant matters in an affidavit even if they are not scandalous, notwithstanding older authorities such as Re Y & Another (Infants) [1946-1972] HKC 378 which suggest otherwise: see Chan Woon Fui v Chan Wing Suen, HCCW 350/2004 (11 July 2005), at paragraph 4(3) per Barma J (as he then was).  I should add that this is not disputed by Mr Edward Chan, SC for the Plaintiff.

(2)  Under the September Order, the Plaintiff only has leave to file evidence in reply to Ip 4, and no further affidavits are to be filed without leave of the court.  As earlier mentioned, paragraphs 16 to 23 of Kung 8 are not in reply to anything contained in Ip 4, and the Plaintiff has not applied for leave to file further evidence either.  Even if an application is now made by the Plaintiff to file additional evidence in respect of the matters set out in paragraphs 16 to 23 of Kung 8 and exhibit DK-64 thereto, such application would be refused for the reason mentioned above (namely, the absence of any application to vary the October Order).

7.Different considerations apply in relation to paragraphs 36 to 42 of Fenn 9.  Those paragraphs relate to legal proceedings brought by the Deceased against 22 defendants represented by different law firms to recover what has been referred to as the “Tin Ha Road Property” which form part of a larger piece of land referred to as the “Said Land”, the valuation of which is an issue to be determined at this trial of this action.  According to Mr Chan, the purpose of adducing such evidence is to show “the substantial legal costs and counsel fees which were incurred in HCMP 1614/1990 and all the relevant appeals, and therefore the sale proceeds of some of the properties belonging to the deceased were in fact for the legal fees and costs for HCMP 1614/1990”.  These matters are said to be relevant to the existence of the “Alleged Debts” (another issue to be determined at the trial of this action), and to counter the allegation or suggestion raised in Ip 4 (as explained or amplified in the Commissioner’s previous skeleton submissions dated 21 September 2018 in support of the application for leave to file Ip 4) that because the Deceased had sold various properties the proceeds of sale thereof could well have been used by her to repay the Alleged Debts.

8.I take note of the fact that Ms Lily Fenn has not mentioned the amount of the legal costs incurred by the Deceased in HCMP 1614/1990 and related appeals, and there is no direct evidence that the sale proceeds of the properties were in fact used to pay those legal costs.  However, Ms Lily Fenn has stated that, owing to the lapse of time, she is unable to produce the relevant bills.  It may be that the evidence now proposed to be relied upon by the Plaintiff to show that the sale proceeds were used to fund the litigations is not strong.  This having been said, the allegation that the sale proceeds of the properties might have been used to reply the Alleged Debts (if they existed) is not without difficulty either.  In relation to Ms Cheng’s concern that the evidence may be used by the Plaintiff at the trial for the purpose of valuation, Mr Chan has said that the evidence is not relevant for such purpose.  In any event, having regard to the stated position of the Plaintiff that the evidence objected to by the Commissioner is put forward in relation to the issue of costs incurred by the Deceased, and that the leave granted by the court to the Plaintiff was to file evidence in reply to Ip 4 only, I would record that, subject to any further directions which may be given by the trial judge, the evidence under consideration may only be used in relation to the issue of costs only.

9.Overall, I do not consider paragraphs 36 to 42 of Fenn 9 and exhibits LF-38 to LF-42 thereto to be irrelevant, or outside the scope of the leave granted to the Plaintiff to file evidence in reply to Ip 4.

10.For the above reasons, I make an order in terms of paragraph 1, but not paragraph 2, of the Commissioner’s summons dated 14 November 2018.  For the sake of completeness, I should mention that, because the 9^th Affidavit of David Kung made on 4 January 2019 is filed for the purpose of resisting the present application only, its contents should not be treated as evidence at the trial of this action, although the Plaintiff may of course apply for leave to refer to it should an application be made to vary the October Order in future.

11.I shall now hear the parties on the issue of costs.

[The court heard further submissions from the parties.]

12.The Defendant’s costs of this application, including costs reserved, shall be in the cause.

Mr Edward Chan, SC, and Mr Nicholas Oh, instructed by Lily Fenn & Partners, for the Plaintiff

Ms Yvonne Cheng, SC, instructed by Department of Justice, for the Defendant