Bermuda Trust (Hong Kong) Ltd. v. The Shum Yee Hing Tong Co., Ltd.
Read the full judgment text of HCA 15976/1998 on BabelCite. This High Court CFI judgment was delivered on 5 January 2000.
1. The Plaintiff is the executor of the estate of the late Shum Lee Po Lun ("the Deceased") who died in 1993. The Defendant is a company in which the Deceased had 36% of the shares.
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HCA015976/1998 HCA 15976/98 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTON NO. 15976 OF 1998 ----------
---------- Coram: Hon Yuen J in Chambers Date of Hearing: 29 December 1999 Date of Decision: 5 January 2000 ------------------------ D E C I S I O N ------------------------ 1. The Plaintiff is the executor of the estate of the late Shum Lee Po Lun ("the Deceased") who died in 1993. The Defendant is a company in which the Deceased had 36% of the shares. 2. This is an appeal from the decision of a master who gave summary judgment in favour of the Executor for payment of a dividend declared by the Company in 1995, together with interest at judgment rate commencing the day following the declaration of dividend. 3. The Company has failed or refused to pay the dividend to the Executor. The Company is controlled by the Deceased's son Mr C. Y. Shum ("Mr Shum") and its contention is that he, not the Executor, is entitled to the dividend. The Company 4. The Company's shares were owned as to 56% by Mr Shum, 36% by the Deceased and as to 4% each by Mr Shum's 2 sons. Mr Shum and his 2 sons are the only directors of the Company. The Will 5. In 1990, the Deceased made a Will, clause 5 of which provided :-
6. The Will provided that the Residuary Estate be given to some 28 persons (including Mr Shum and his sons) in various proportions. Clause 5 7. The effect of that clause is (as accepted by Mr Edward Chan SC, counsel for the Company) that the gift was a conditional one, the condition being that Mr Shum should "bear and pay" the estate duty relevant to the shares. 8. It is common ground that Mr Shum has to date not paid such estate duty. It follows therefore that under the terms of the Will, the gift still remains only conditional. Probate 9. The Deceased died in December 1993. Standard Chartered Bank Hong Kong Trustee Limited, now known as Bermuda Trust (Hong Kong) Ltd, had been named as executor in the Will and it proceeded to apply for grant of probate. Probate was granted on 28 May 1998. Declaration of dividend 10. Meanwhile, in 1995, the Company declared a dividend of $40,000 per share. Payment has been made to some of the shareholders, but there is an amount of $7.2m referable to the Deceased's shares which has been retained by the Company. Company's refusal to pay dividend to the Executor 11. In July 1998, the Executor asked the Company to pay the dividend. 12. The Company has refused or failed to pay the dividend to the Executor on the basis that Mr Shum is entitled to the dividend. The "representation" 13. It relies on a "representation" said to have been made by Miss Anna Choi, then a trust officer of the Executor, to Mr Shum that "my mother [the Deceased] had bequeathed the said 180 shares to me [Mr Shum] and I should be responsible for payment of the estate duty on them. Anna further indicated that it would indeed be more convenient for me to take care of the payment of the estate duty on the said 180 shares as SYHT [the Company] could have done the valuations on them more easily. Anna expressly told me that the said 180 shares were mine" ("the representation"). 14. The Company alleges that first, this representation constitutes an assent by the Executor in favour of Mr Shum. 15. Secondly, the Company claims that this representation gave rise to an equitable estoppel. The Company's case is that since Mr Shum and his sons were also directors of the Company, they (in their capacity as directors of the Company) acted upon such representation by causing the Company to declare the dividend and to pay for valuations of the Company's assets. There are affirmations by Mr Shum and his 2 sons to the effect that if the trust officer had not made the representation, they would not have declared the dividend or caused the valuations to be done. The Company claims that the Executor is thereby estopped from asserting a claim for the dividend, which it says was declared in reliance on the representation. 16. The representation is denied by Miss Choi in her Affirmations, but in my judgment, even if it is assumed for present purposes that such a representation was made, it provides no defence for the Company. 17. At the heart of the matter is the fact, accepted by Mr Chan SC, that Mr Shum, who is a barrister, was aware of the terms of the Will, and thus that the gift was conditional upon payment of estate duty. Order 14 Principles 18. Whilst it is well-established that a defendant in a summary judgment application should only be deprived of his right to defend if his defence is unbelievable or frivolous, the burden is on him to show that there is a triable issue, or that for some other reason the matter should go to trial. In the present case, the Company has failed to show any real dispute as to fact or law such that the matter should go to trial. The "Assent " argument 19. It is clear on analysis that the "assent" argument must fail. The nature of a gift to a legatee is circumscribed by the testator by the terms of the will. In the present case, the gift was only a conditional one and the condition has not yet been fulfilled. 20. A "representation" made by an executor (such as that alleged) cannot change the terms of the Will so as to turn a conditional gift into an unconditional gift. 21. An assent by an executor is no more than the act by which a legatee's inchoate right under a will is converted :- from just a right that the executor administers the estate properly, to a right to the actual gift under the will. But it remains the gift under the will that the executor gives assent to, and no more, in the absence of special circumstances. 22. Mr Chan SC submitted that assent could be given "by mistake" and that it is not retractable. However, since it is not disputed that Mr Shum (and through him, the Company) was aware of the terms of the Will, he cannot take advantage of any such mistake. The example of a purchase from a personal representative is not apposite, because Mr Shum was not a third party purchaser of the legal estate. In principle, I see no reason why a person who has knowledge of the terms of the will should be allowed to take advantage of an "assent by mistake" so as to claim or retain beneficial title. Mr Chan SC has not referred to any law or authority that suggests otherwise. 23. Hence, since Mr Shum is not beneficially entitled to the shares yet (as he has not paid the estate duty on them), it follows that the submission based on "entitlement" in Article 23 must fail. 24. As a matter of completeness, I should note that it was not the Company's submission that Mr Shum was legally entitled to the dividend even if he was not beneficially entitled to it. The Company's case proceeded upon the basis that there had been an "assent" for transmission of the shares. It cannot rely on transfer, because no instrument of transfer has ever been executed by the Executor. 25. In the circumstances, I see no defence available to the Company on the basis that there has been an "assent" given by the Executor in favour of Mr Shum. The estoppel argument 26. Similarly, the estoppel argument fails by reason of the Company's admitted knowledge (through its directors) of the terms of the Will. Since the Company knew that in the absence of payment of estate duty by Mr Shum, the shares would not be his, it is difficult to see how the representation could have given rise to the reliance required for an estoppel. This has not been explained in the Company's evidence. 27. Further there is no evidence that the Company has suffered any detriment. As for the valuations, they had been ordered by the Company to provide materials for the assessment of estate duty on the shares. Since it remains Mr Shum's contention that he intends to pay the estate duty on the shares, Mr Shum would still take the benefit of the valuations, and indeed it appears that he has done so, as he has come to an agreement with the Estate Duty Office on the value of the shares. Interest 28. Finally there is the issue of interest. Mr Chan SC submitted that even though s.48 High Court Ordinance cap. 4 gives the Court a discretion to order interest at such rate and for such period as the Court deems fit in the exercise of its discretion, it should take into account the fact that Article 102 of the Company's articles provided that no dividend shall bear interest against the Company. 29. I accept that this is an important factor that the Court should take into account. However, it could not have been the intention of the members and the Company, when they entered into the articles of association, that this Article should be abused by the Company as a charter to retain a dividend which it had already declared for the benefit of its members. It may be for this reason that the master ordered judgment rate, and in the exercise of my discretion, I would agree with that rate. 30. Having said that, I cannot agree with the master when he ordered interest to commence the day following the declaration of dividend. The Executor did not obtain probate until May 1998 and it did not write to the Company for release of the dividend until 14 July 1998. In my view, the Company could not be expected to release the dividend to the Executor before the grant of Probate, and on request by the Executor after probate, the Company should be afforded some time, say 7 days after request, to release the dividend to it. 31. I would accordingly allow the appeal from the master only to the extent that interest at judgment rate commence to be payable from 21 July 1998. In other respects, the appeal is dismissed. I would make an order nisi that the costs of the appeal be to the Plaintiff.
Representation: Mr Edward Chan, SC and Mr C.Y. Li, instructed by Messrs Au Yeung, Cheng, Ho & Tin, for the Defendant Mr John Budge, of Messrs Wilkinson & Grist, for the Plaintiff |
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