Case Detail

HCCA 2740/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO. 2740 OF 2007

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	IN THE ESTATE of CHAN HUNG MOU （陳鴻茂）, late of Flat C1, 13^thFloor, Greenville Gardens, Shiu Fai Terrace, Stubbs Road, Hong Kong, Merchant, deceased
	and
	IN THE MATTER of Rule 44 of the Non-Contentious Probate Rules (Cap. 10A) and Section 36 of the Probate and Administration Ordinance (Cap. 10)

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Before: Hon Lam J in Chambers

Date of Hearing: 3 February 2009

Date of Judgment: 12 February 2009

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J U D G M E N T

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1. The Deceased died intestate on 18 September 2005. His surviving widow [“the Widow”] applied for grant but a daughter born out of wedlock [“the Daughter”] contended that in her stead a professional accountant should be appointed.

2. In a decision handed down on 11 November 2008, Master J Wong ruled that Letters of Administration in respect of the estate of the Deceased is to be granted to the Widow, if entitled to.

3. The Daughter now appeals against that decision.

4. Although reference was made to Order 58 in the Notice of Appeal, since this is a non-contentious probate matter the appeal should be considered under Rule 62 of the Non-Contentious Probate Rules, see Order 1 Rule 2(2) of the Rules of the High Court.

5. Counsel did not research on whether the approach of the court in dealing with an appeal from a master under Rule 62 should be different from that in ordinary civil proceedings under Order 58. Halsbury’s Laws of England 4^th Edn Reissue (2000) Vol 17(2) para.101 said the following as regards appeals in non-contentious probate business,

“Where a discretionary jurisdiction is given to the court, the judge is in no way fettered by the previous exercise of the district judge’s or registrar’s discretion. The judge is entitled to exercise his discretion as though the matter came before him for the first time.”

This is confirmed by a Practice Note at [1949] WN 475.

6. In other words, the approach is similar to an appeal under Order 58.

7. The Master set out the relevant legal principles at paragraph 9 of his judgment. Counsel does not seek to challenge the same. Section 36 of the Probate and Administration Ordinance gives the court a wide discretion in the appointment of an administrator having regard to the interest of the estate as a whole. Rule 21 of the Non-contentious Probate Rules gives priority to the Widow. But that priority can be displaced if the Daughter can persuade this court that the interest of the estate requires the Widow to be passed over.

8. Although the Daughter relies on a number of matters, Mr Thomson told this court that the Daughter is not saying that the Widow deliberately concealed assets of the estate or took steps to reduce the size of the estate to the detriment of the beneficiaries. Counsel based his submissions on a case of neglect of duties on the part of the Widow when she prepared the schedule of properties for estate duty purposes.

9. The Widow had omitted reference to the share held by the Deceased in Ting Chong Transportation Company Limited in the first schedule of property filed with the Estate Duty Office. It was only after the solicitors for the Daughter raised query in that respect that the share was included by way of an amendment. The value of the share was stated to be $2,503,797.63 and dividends accrued were $3,559,773.28. They represented a very significant part of the assets of the estate since apart from these assets, the estate only has a value of $1,461,407.87 plus 1/3 share in the matrimonial home valued at $6,000,000.

10. The Widow explained she had previously thought that the share in Ting Chong was included in an exercise of transferring the major assets of the Deceased to a Panamanian Company between 1988 and 1993. Upon query raised by the solicitors for the Daughter, the Widow realized that her belief was mistaken and she made the amendment accordingly.

11. Mr Thomson submitted that it would be naive to accept that explanation. The Master obviously disagreed. For my part, I see nothing inherently implausible in the Widow’s explanation. In my experience, it is not uncommon that personal representative found it necessary to amend the schedule of properties due to omissions. It can of course be said that the Widow should have done better. A company search would reveal that the share had not been transferred. But I do not regard such failure as so serious that the Widow should be passed over in the appointment of administratrix.

12. Mr Thomson also suggested that the dividends accrued might not be accurately reflected in the schedule of properties. But it is sheer speculation. Given that the figure had been accepted by the Estate Duty Office, it can be taken that there had been some verifications by those in that office.

13. The same can be said with regard to Mr Thomson’s skepticism in respect of the liability to the Widow concerning medical expenses incurred for the treatment of the Deceased.

14. Mr Thomson urged this court to bear in mind the previous conflicts between the Widow (and her own children) and the Daughter in the exercise of discretion. I take the relationship between the parties into account. But as correctly said by the Master, hostility between family members per se should not be a reason for passing over a person who has priority in appointment unless it can be demonstrated it is likely that by reason of such hostility the person would administer the estate in a manner not in accordance with the law.

15. A further caveat is that one must focus on the issue at hand. As observed by Litton V-P (as he then was) in Lefkowitz v The Bank of New York [1996] 3 HKC 591 at p.599D, the issue is essentially an administrative matter. Further, at p.594D, it was emphasized that the court is not called upon to determine the parties’ rights and liabilities and no resolution of disputes of fact is called for. Thus, the evidence on past hostilities should be circumscribed.

16. In the present case, the Widow had included the Daughter as one of the children of the Deceased in her affirmation in support of her application for grant. Though she had mistakenly stated that she was the sole beneficiary (a mistake she had duly corrected), it was probably a slip on the part of those preparing the affirmation.

17. Having considered all the evidence before me on past conflicts (and it is not necessary to set them out in details in this judgment) I do not think the Daughter had made out a case that such conflicts should lead this court to infer that the Widow would administer the estate in a manner not in accordance with the law to the prejudice of the Daughter.

18. It is also said that there is a conflict of interest because of (a) the Widow’s claim for reimbursement of medical expenses paid by her for the treatment of the Deceased; and (b) the potential challenge to the gift of the bearer share in the Panamanian company to her son.

19. On (a), as mentioned, the Estate Duty Office had checked the medical expenses. In this connection, one would expect checking not only in terms of the receipts for such expenses but also that they were paid by the person named as the creditor, viz. the Widow. In any event, the Administratrix is obliged to account for the same in the account of the estate. If the Daughter as a beneficiary found anything amiss in this regard, she can come to court to seek relief by way of administration proceedings if she deems fit.

20. On (b), the Daughter has not produced any evidence to show that a challenge to the gift to Philip has any real basis. Until she is able to do so, this matter should be left out of the equation.

21. Lastly, Mr Thomson submitted that a professional accountant may be able to trace some assets of the Deceased which have not been revealed so far. With respect, that is a very far-fetched suggestion. Given that the Daughter is not suggesting that the Widow has deliberately concealed assets, and there is no evidence whatsoever to identify or suggest that the Deceased might have other assets that had to be traced, it is equally possible (if not more probable) that an accountant cannot trace more assets.

22. If a professional accountant were to be appointed, he would have to be remunerated. And it is not disputed by the Daughter that the accountant who has given a quote of his fees might have to charge for more than what has been quoted. Given the size of the estate, it should not be unnecessarily burdened with substantial professional expenses without a good justification.

23. In this connection, I also take note of the wishes of the other beneficiaries. Out of the eight children (four born out of wedlock), the Daughter appears to be the only person opposing the grant to the Widow.

24. According to the evidence, the net estate is not that big, particularly when the deduction for the medical expenses is taken into account. I do not see any reason to suggest that the Widow is not capable of administering the same properly.

25. Taking all the matters into account, I am of the view that the Master came to the right decision. The appeal is therefore dismissed. Parties agreed that costs should follow event. I order that the Daughter shall pay the costs of the Widow in this appeal, such costs to be taxed if not agreed.

(M H Lam)
Judge of the Court of First Instance
High Court

Mr James Thomson, instructed by Messrs Mallesons Stephen Jaques, for the Caveator

Mr Erik Shum, instructed by Messrs King & Company, for the Person Warning

HCCA 2740/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO. HCCA 2740 OF 2007

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	IN THE ESTATE of CHAN HUNG MOU (陳鴻茂) late of Flat C1, 13^th Floor, Greenville Gardens, Shiu Fai Terrace, Stubbs Road, Hong Kong, Merchant, deceased
	and
	IN THE MATTER of Rule 44 of the Non-Contentious Probate Rules (Cap. 10A) and Section 36 of the Probate and Administration Ordinance (Cap. 10)

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Coram: Before Master J. Wong in Chambers

Date of Hearing: 24 October 2008

Date of Decision: 11 November 2008

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D E C I S I O N

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Introduction

1. A natural daughter disputes that the surviving widow shall not administer the estate of her deceased husband. Instead, a professional administrator is to be appointed by this Court. The widow argues otherwise.

Background

2. Mr. Chan Hung Mou (“the Deceased”) died intestate in Hong Kong on 18 September 2005. His surviving spouse, Madam Chan Lee Hong Kok (“the Widow”) applied under HCAG 7525/2006 for the grant in respect of the estate (“the Estate”) of the Deceased.

3. The application could not be processed because Ms. Kitty Kay Chan (“the Daughter”) lodged various Caveats against it. The parties’ legal representation corresponded extensively for quite some time from 2006 to 2008, but unfortunately, they still have to resolve their dispute through the Court.

The Widow’s case

4. Briefly, the Widow married to the Deceased in 1946 in Shanghai and had the same registered in Hong Kong on 8 October 1966. Out of the wedlock, 4 children were born and Philip was the eldest son.

5. The Widow accepted that the Deceased had 2 other ladies with him. One Madam Huang gave birth to 3 children for the Deceased and one Madam Wong, the Daughter and Caveator herein.

6. Hence, under the Intestates Estates Ordinance (Cap. 73) (“IEO”), the Widow will take the statutory sum of $500,000 together with half of the remaining Estate, and the said 4 lawful and natural children as well as the said 4 natural children are to take an equal share in the other half remaining Estate.

7. The Widow agrees that she will well and truly administer the estate. She also says that she ranks the top priority under rule 21 of the Non-Contentious Probate Rules (“NCPR”) (Cap. 10A). All the beneficiaries of the Estate, except the Daughter, agree to her application. She is in good health and has explained sufficiently for the enquiries made by the Daughter. She has corrected her mistakes made. The suspicion and allegation of the Daughter are unfounded and it is not necessary to appoint a professional administrator in the circumstances.

The Daughter’s case

8. On the other hand, the Daughter argues that a professional administrator should be appointed.

“3. ……

(1) The estate is complicated, involving the Deceased’s business interests in Hong Kong and elsewhere and held through the vehicles of Panamanian registered companies. Mr. Borrelli has agreed his fees would be capped at HK$80,000 (see “ANS-1” E-5/120);

(2) Given that correspondence from Kitty’s solicitors has led to the disclosure of further assets, it is likely that a professional administrator will uncover further assets of the estate;

(3) Madam Lee, who has applied to be the sole administratrix of the estate, has demonstrated a marked reluctance to provide relevant information regarding the Deceased’s assets;

(4) A professional administrator is independent and not subject to family pressures to conceal assets;

(5) There have been glaring omissions in the Schedule of Property filed by Madam Lee to obtain Estate Duty Clearance;

(6) Madam Lee is old and unsuitable to be appointed sole administratrix of the estate;

(7) Madam Lee has a conflict of interest in administering the estate for the benefit of all the beneficiaries, including, Kitty. This is all the more marked as she is the largest ‘creditor’ of the estate;

(8) There is a history of resentment between Madam Lee and her family towards Kitty and her mother that makes Madam Lee wholly unsuitable and unfit to be appointed as administratrix.”

(skeleton submission of Mr. Thomson)

Discussion

9. Both Counsel, Mr. Shum for the Widow and Mr. Thomson for the Daughter, do not have much argument over the applicable law to their dispute. Section 36 Probate and Administration Ordinance (“PAO”) (Cap. 10) allows the Court to appoint an administrator as he thinks fit as necessary or convenient in the circumstances. It gives him a broad discretion to be exercised in the best interests of the estate (Lefkowitz v The Bank of New York & Ors [1996] 3 HKC 591). Besides, since the Widow ranks the first person entitling to the grant under rule 21 NCPR, the burden lies on the Daughter to persuade that the grant should not be issued to the Widow, but the professional administrator.

10. I now move to examine each of the reasons put forward by Mr. Thomson.

(1)    Is the Estate complicated? Has the professional administrator agreed to cap his fee?
(a)       There is undisputed or undisputable evidence before me that between 1988 and 1993 the Deceased transferred various of his shareholdings of companies to a Panamanian company called Shun On for, inter alia, tax purposes. Once the transfer was completed, they became “off-shore” and were no longer assets “within” the jurisdiction. As such, they could not possibly form part of the Estate in Hong Kong. As now appeared in the Estate Duty (“EO”) papers before this Court showing the Estate, it comprises a matrimonial home, shares, bank accounts and a motor vehicle. I do not agree that they are complex.
(b)       I further do not agree that the professional administrator has agreed to cap his fee. It is so because, as pointed out by Mr. Shum, the professional administrator did qualify the capped fee with the followings:
“17.        The above estimate has been prepared on the basis of the information provided and our experience with assignments of this nature. Should our work substantially increase (beyond that described in this proposal) we will discuss further billing arrangements with you.”
(2)    Is it likely that the professional administrator will uncover further assets of the Estate?
In response to the Daughter’s enquiries, the Widow investigated into the Estate and subsequently amended the ED papers to include interest of the Deceased in one Ting Chong Transportation Limited for about $6 m. The Widow explained that it was all along her belief that all the substantial shareholdings of the Deceased had transferred to Shun On. She made a mistake and upon checking by her solicitor, the same was then rectified. To this explanation, I am afraid that the Daughter has not been able to adduce any or sufficient evidence to persuade me not to accept it. Further, the shareholdings in Shun On and the subsequent gift to Philip, having been completed for years, with respect, I am not too optimistic about the purported “uncover” by the professional administrator. In the alternative, even if there might be something wrong with the said gift, it has to be disputed elsewhere as Shun On is not within the jurisdiction of Hong Kong Court.
(3)   Has the Widow demonstrated a marked reluctance to provide information regarding the Estate?
Mr. Thompson has spent quite some efforts leading me go through the correspondence between the parties’ representatives at all material times, I take the view and find on balance that the Widow has reasonably answered all enquiries put to her, including probably something she is not legally obliged to do so.
(4)   Will the Widow conceal the Estate?
The ED papers are regarded as prima facie evidence of the Estate. The Widow has offered her explanation and case on oath. The burden lies squarely on the Daughter if she wants to show that the Widow should not administer the same. I am afraid that she has not been able to satisfy me that the Widow has intentionally concealed or will conceal the Estate. From a practical point of view, I should also bear in mind that all the beneficiaries, other than the Daughter, support the Widow’s application and the Daughter represents only about 6% interest in the Estate.
(5)   Have there been glaring omissions by the Widow in the ED papers?

       It is not denied that the ED papers have been amended. On balance, I accept the Widow’s explanation.
(6)   Is the Widow old so that she is unsuitable to administer the Estate?
It is also not denied that the Widow is a senior citizen at age of 80. However, seniority per se, short of evidence of poor or bad health, can never be a factor affecting the right of administration at all.
(7)   Does the Widow have a conflict of interest?
The Daughter complains that the Widow has a claim of $7 m medical expenses paid for the Deceased. Being the largest creditor of the Estate, she should therefore not administer the same. I disagree. To start with, only close family members are entitled to an estate of a deceased under IEO. Paying medical expenses for a close family member who eventually dies is not uncommon. Hence, having a reimbursement claim of medical expenses for a deceased family members, without more, should never be sufficient to deprive one’s right of administration. Although the Widow has not explained why she omitted such a large amount when she applied at the beginning for the ED papers, I take it that the Estate Duty Office did subsequently check the supporting documents, and allow the Widow to include such debt as incurred for the Deceased. Last, but not least, for whatever reasons, the Daughter decided not to inspect those receipts when the Widow had offered such opportunity to her.
(8)    Is the Widow unsuitable and unfit because there is a history of resentment between her and the Daughter/her mother Madam Wong?
In my view, personal hospitality between different members of a family or different camps of families should never be a factor to deprive one’s entitlement to administration. In administration of estate for an estate, this Court will only look to factors affecting the administration, but not otherwise. Hence, disputes like, whether one has been a good wife, a good daughter, so and so forth is not relevant at all in a section 36 PAO application.

Conclusion

11. In conclusion, it appears that the complaints of the Daughter do not even get off the ground, let alone the exercise of the discretion of the Court. In the alternative, even if discretion needs to be exercised, I see no reason why the Widow should be passed over. I therefore will order the followings.

(a)       The Re-Amended Summons of the Daughter as attached to her Summons filed on 22 October 2008 is dismissed.
(b)       The Caveat filed herein on 16 November 2007 shall cease to have any effect.
(c)       Letters of administration in respect of the Deceased is to be granted to the Widow, if entitled to.
(d)       There is an order nisi that the Daughter shall bear costs of the Widow in the application and proceedings, including all costs reserved and certificate of counsel for hearing on 24 October 2008, to be taxed if not agreed.

(Jack Wong)
Master of the High Court

Mr. J. Thomson instructed by Messrs. Mallesons Stephen Jaques for the Caveator.

Mr. E. Shum instructed by Messrs. Kong & Company for the Person Warning.

RE CHAN HUNG MOU

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