DARACH E. HAUGHEY AND ANOTHER v. LAM MUI AND OTHERS

HCMP 1593/2014

[2024] HKCFI 2222

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1593 OF 2014

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D E C I S I O N

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A.  INTRODUCTION

1.  On 28 March 2024, I gave a decision (“the Decision”) on 4 issues concerning costs of the Administrators and the amount that they should repay the Estate. I held that D2 was effectively the true winner. However, as the issues arose in the course of administration, I ordered, on a nisi basis, costs of $400,000 be paid by the Estate to the Administrators.

2.  Before me are 2 applications:

(1)  A summons dated 10 April 2024 taken out by D2 to vary the costs order nisi (“Variation Summons”) such that costs of D2 be borne by the Administrators;

(2)  A summons dated 11 April 2024 taken out by the Administrators for leave to appeal against the Decision on Issue 1, ie whether DTT’s costs should be regarded as part of the costs of the Administrators under Yam J's Order (“Leave Summons”).

3.  The abbreviations used in the Decision shall be adopted in this decision. This decision affects only the Administrators and D2.

B.  VARIATION OF COSTS ORDER NISI

4.  D2 seeks an order that the costs of her summons dated 9 February 2023 seeking rulings on the 4 issues (“2023 Summons”) be paid by the Administrators to her, to be summarily assessed by the Court; and that the Administrators be disentitled to be paid any of their legal costs and disbursements of and incidental to the 2023 Summons. Similarly, D2 seeks costs for the Variation Summons and an order that the Administrators be disentitled to be paid costs out of the Estate.

5.  The grounds put forth by D2 are that:

(1)  D2 was the true winner and the Administrators’ stance was not truly neutral (“True WinnerGround”);

(2)  D2 has made Calderbank offers which, if accepted, would have avoided the hearing of the Summons and the intended appeal (“Calderbank offerGround”).

6.  The only ground in opposition put forth by the Administrators is that the 4 Issues concern matters arising in the course of administration, which concerned the proper construction of Yam J's Order, the 2 Master So’s Orders and the Statutory Cap. Unless the Administrators have acted unreasonably, they should be entitled to their costs out of the Estate. I shall deal with the ground of opposition first as the Administrators have not disputed the 2 grounds put forth by D2.

B1.  Administrators’ ground in opposition

7.  Mr To, counsel for the Administrators, submits that the 2023 Summons was taken out in the context of an originating summons commenced under Order 85, rule 2, RHC and D2 must have intended this summons to be part of the administration action and the Administrators have dealt with the 2023 Summons on this basis.

8.  The normal rule is that, absent unreasonable or improper conduct, the costs of the trustee and of the beneficiaries should be paid out of the trust fund. See Order 62, rule 6(2); Chiu Pak Wo v Chiu Yim Kam[2019] HKCFI 2517, DHCJ William Wong SC, §§5-12.

9.  It was held in Re Buckton [1907] 2 Ch 406, that guidance sought for construction of documents or administration is necessary for the administration of the estate and costs of all parties are necessarily incurred for the benefit of the estate as a whole and the costs of the parties should be paid out of the estate:

“In a large proportion of the summonses adjourned into Court for argument the applicants are trustees of a will or settlement who ask the Court to construe the instrument of trust for their guidance, and in order to ascertain the interests of the beneficiaries, or else ask to have some question determined which have arisen in the administration of the trusts. In cases of this character I regard the costs of all parties as necessarily incurred for the benefit of the estate, and direct them to be taxed as between solicitor and client and paid out of the estate…

There is a second class of cases differing in form, but not in substance, from the first. In these cases it is admitted on all hands, or it is apparent from the proceedings, that although the application is made, not by trustees (who are respondents), but by some of the beneficiaries, yet it is made by reason of some difficulty of construction, or administration, which would have justified an application by the trustees, and it is not made by them only because, for some reason or other, a different course has been deemed more convenient. To cases of this class I extend the operation of the same rule as is observed in cases of the first class. The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate regarded as a whole.” pp.414-415 (underline added)

10.  Whether the application was taken out by a beneficiary (like D2 in the present case) or the administrator/trustee does not affect the above general principle on costs.

11.  It may seem at first blush that the 4 Issues concern construction of Court orders and the terms of appointment of the Administrators arising in the course of administration. However, when one looks at the substance, the administration in fact has ended. As pointed out by Mr Sousa, the net outcome of the Decision was to decide how much fees the Administrators could keep, or further receive, or how much they should repay to the Estate. They were issues on which the Administrators had a direct personal interest against the Estate and not issues arising in the course of administration. The Administrators did not remain neutral but have opposed D2’s demand for repayment on every front, but failed. I rule against the Administrators on this ground of opposition.

B2.  D2 was true winner and Administrators were not truly neutral

12.  There is no dispute over the finding that D2 was the true owner of the 2023 Summons (§60 of the Decision). The error of this Court, in thinking that the 2023 Summons was an application by the Administrators for guidance concerning administration of the Estate, would not affect the conclusion on any of the Issues but only the question of costs.

13.  Costs should follow the event of the 2023 Summons and be granted to D2.

B3.  Calderbank offers from D2

14.  CLW made 2 offers for full and final settlement of the costs of the Action and the administration of the Estate by letters dated 29 April and 1 August 2022, respectively, well before the 2023 Summons was taken out on 9 February 2023. There is no suggestion that even if the authorities cited above applied in favour of the Administrators’ costs, the Estate was not entitled to make a Calderbank offer.

15.  Had the Administrators accepted D2’s 2^nd offer,

(1)  The Administrators could have kept 90% of their bills (about HK$2.1 million) and all disbursements in all 4 of their bills, instead of just HK$443,365.46 pursuant to the Decision. SFKS’ offer meant that the Plaintiffs could retain all costs previously received, ie HK$2.23 million and receive a further HK$80,000.

(2)  Would not need to face the risk of losing the Statutory Cap challenge and hence have to repay D2, which is now the outcome of the Decision;

(3)  Would save a taxation and the risk of their fees being taxed down, thereby losing costs due to the Calderbank offer, have to repay D2 the taxed down amount and repay some of the fees/costs received;

(4)  Would have saved the costs and time of the Court on the Leave Summons and (if leave is granted) on an appeal.

16.  D2’s Calderbank offer has made clear that it was independent of SFKS’ costs, such that the Administrators could have accepted the Calderbank offer and have SFKS’ costs dealt with separately.

17.  Under the Decision, the Administrators had to repay about HK$1.87m (see corrigenda) but get costs order nisi of $400,000, hence having to pay a net amount of HK$1.47m to the Estate.

18.  Should the Administrators win on the appeal, they could, at best, keep HK$1.72m (see corrigenda), have to repay HK$149,276 and get, say, the apportioned costs of HK$200,000 for Issue 1 but would have to pay costs to D2 for the rest of the Issues.

19.  Mr To has not suggested that the Administrators have beaten any of the 2 Calderbank offers. Hence the Administrators should bear costs on indemnity basis. This applies even if my ruling in Section B1 is wrong.

20.  The Calderbank offers were in line with D2’s consistent approach in trying to get the administration to a close and save time and costs, since she has become sole beneficiary of the estate after the Judgment on 8 June 2017 and more so after CLW came on board. This was evidenced by her efforts to get involved in costs between the Administrators and D4-D6 and the various costs orders that formed the subject matter of the Decision.

21.  As Mr Sousa rightly points out, §63(1) and 64 of the Decision ordered that the Administrators’ costs of the 2023 Summons (HK$220,750) were not recoverable in view of the Court’s ruling on Issue 1. Accordingly, those costs need not be varied but it is prudent to spell that out in the final costs order.

22.  I therefore vary the costs order for the 2023 Summons and order that:

(1)  The Administrators do pay costs of the 2023 Summons to D2 forthwith, summarily assessed on indemnity basis at $450,000;

(2)  The Administrators shall be disentitled from being paid any of their legal costs and disbursements of and incidental to the 2023 Summons from out of the Estate;

(3)  The costs of and incidental to the Variation Summons be paid by the Administrators forthwith to D2, to be summarily assessed on indemnity basis;

(4)  The Administrators shall be disentitled from being paid any of their legal costs and disbursements of and incidental to the Variation Summons from out of the Estate.

C.  LEAVE SUMMONS

23.  Leave to appeal is granted only on points of law. The court must be satisfied that the appeal has a reasonable prospect of success or there are some other reasons in the interests of justice why the appeal should be heard before granting leave. Reasonable prospect of success involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’: SMSE v KL [2009] 4 HKLRD 125 at §17.

24.  In his written submission, Mr To advances 3 grounds:

(1)  Administration of estate was professional services provided by DTT as CPA (“Ground 1”);

(2)  There should be liberal construction of Yam J's Order (“Ground 2”);

(3)  The Statutory Cap only applied to fiduciaries, ie the Administrators but not DTT (“Ground 3”).

25.  These are points of law, but do they have reasonable prospect of success?

26.  The effects of the Decision on Issue 1 are that the Administrators were personally entitled to remuneration, subject to the Statutory Cap (§17 of the Decision). The Administrators could engage others to assist them in the administration of the Estate. Those people could be “independent legal and other professional advisers” and/or DTT as CPA for the fulfilment of the Administrators’ duties (§19). The expenses of these professional advisers and CPA are disbursements not subject to the Statutory Cap (§20). With regard to clerical services, even if provided by DTT or to fulfill the duties of the Administrators, the Estate is not obliged to pay for those expenses beyond the Statutory Cap (§20).

27.  With regard to Ground 1, the general propositions that services provided by CPAs was not limited to traditional book-keeping and financial reporting services but extended to the administration of estates could not advance the Administrators’ case. It was on the facts, on their own bills, that the Administrators failed to show that DTT’s costs fell within the principles summarized in paragraph 26 above.

28.  The bills issued by DTT, with self-serving remarks that the fees were for “professional services”, did not distinguish between time costs of the Administrators and DTT’s staff. The Administrators never billed for DTT’s costs as disbursements like those for DTT France (§21 of the Decision).

29.  The reply submission of Mr To concedes that §6 of the Yam J's Order expressly treated “the costs of DTT” as a form of “disbursements”. However, it is not necessarily the case that once DTT had incurred costs, that must be disbursements. As pointed out by Mr Sousa, under §6 of Yam J's Order, it was contemplated that the Administrators had staff and the Administrators were entitled to be indemnified by the Estate by reference to the time properly given “by the Administrators and their staff” in attending to matters arising in the administration. That was what the Administrators purportedly did by their letters dated 21 February 2016 and 21 September 2009, which referred to time spent by or remuneration of “the Administrators and their staff”, not DTT as a separate provider of service.

30.  Ground 1 has no reasonable prospect of success.

31.  Ground 2 complains that this Court should have given a liberal interpretation to Yam J's Order. Mr To submits that §§4(1), (2), (3) and (6) of Yam J's Order authorized the Administrators to engage both professional and non-professional service providers to assist them in the fulfillment of their duties. Expenses incurred were treated as disbursements.

32.  With respect, I fail to see how this would advance the Administrators’ case. Their case under Issue 1 was that they were authorized to engage DTT as a professional adviser to assist in the administration of the Estate (§18 of the Decision). Again the problem with the Administrators’ case is that they could not, on the facts, on their own bills, bring DTT’s costs within the terms of Yam J's Order. Ground 2 has no reasonable prospect of success.

33.  Ground 3 is that the Statutory Cap only applied to fiduciaries such as an executor, administrator or attorney but not DTT/its staff. I agree with Mr To. In fact, no one ever disputed this and §20 of the Decision is in line with this.

34.  Mr To submits that Issue 1 did not ask for any contractual arrangement between DTT and the Estate that the DTT costs would be subject to the Statutory Cap to be determined. I agree. This was a non-issue that the Decision never attempted to address. To the contrary, §§17 and 20 of the Decision expressly stated that the Administrators’ remuneration, but not disbursements, was subject to the Statutory Cap. The Court was never told that there was a contractual arrangement between DTT and the Estate, beyond the ONC Letter, at the substantive hearing of Issue 1.

35.  Paragraphs 11 (b) and (c) of the reply submission of Mr To states as follows:

“(b) The ONC Letter is a composite document written from the perspective of DTT rather than from that of the Administrators. For commercial convenience, DTT puts forth the relevant charging rates for its personnel, irrespective of whether they would be engaged by the Estate directly as administrators, or through DTT indirectly as its personnel; and

(c) Similarly, DTT issued composite bills by putting together all the fees to be payable by the Estate to DTT. It is not surprising that the ‘disbursements’ in the bills do not include the DTT Costs as the bills were issued by DTT, not by the Administrators. The DTT Costs were therefore organized and presented from the perspective of DTT. As such although the provision of services by DTT would not be a ‘disbursements’ for the purpose of DTT, it would be a disbursement for the purpose of the Estate.”

36.  These points were neither advanced at the substantive hearing on Issue 1 nor in the first set of written submission in support of the Leave Summons. In any case, the problem in the Administrators’ case did not lie with the ONC Letter but the Administrators’ own failure to distinguish their personal roles as administrators and DTT’s role as their staff or as their independent advisers in the bills.

37.  Having considered the draft grounds of appeal and the submissions, I am not satisfied that the grounds of appeal have reasonable prospect of success. I therefore decline to give leave to appeal.

38.  Just to complete the picture, even if the Administrators can obtain leave to appeal, they still have not demonstrated how the financial outcome of the appeal would have beaten the Calderbank offers. Accordingly, I would require the Administrators to bear costs of the Leave Summons anyway, on indemnity basis.

D.  CONCLUSION ON BOTH SUMMONSES

39.  I vary the costs order nisi and make an order along the lines of paragraph 23 above in relation to the Variation Summons. I dismiss the leave application and make an order along the lines of paragraph 22 in relation to the Leave Summons. I dismiss the Leave Summons with costs to D2 on indemnity basis.

40.  Summary assessment for both Summonses shall be carried out on paper after CLW has answered the Court’s requisitions on their costs statements raised on the same day as the handing down of this decision.

41.  I thank Mr To and Mr Sousa for their assistance.

Mr Ken To, instructed by Sit, Fung, Kwong & Shum, for the Plaintiffs

Mr Richard Alvaro Sousa of Messrs Chan, Lau & Wai, for the 2^nd Defendant

HCMP 1593/2014

[2024] HKCFI 924

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1593 OF 2014

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D E C I S I O N

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A.  INTRODUCTION

1.  Before this Court is a summons dated 9 February 2023 taken out by the 2^nd Defendant (“D2”) for directions on the following matters:

(1)  Whether the fees of the staff of Deloitte Touche Tohmatsu (“DTT” and “DTT’s Costs”) should be regarded as part of the costs of the Plaintiffs, Administrators of the estate of Chiu Keung, deceased (“the Estate”), under the Order of Yam J on 27 October 2003 in HCA 6123/1995 (“Yam J’s Order”) (“Issue 1”);

(2)  Whether the net proceeds of the sale of a property situated at No. 4 Derby Road, Kowloon Tong, Hong Kong (“Property”) should be adopted in calculating the gross value of the Estate for the purpose of section 60 of the Probate and Administration Ordinance (Cap. 10) (“PAO”) (“Issue 2”);

(3)  In relation to the costs of the appeal under CACV 157/2017 (“the Appeal”) and the stay application under HCMP 1593/2014 (“Stay Application’), whether there are any over-recovered costs by the Administrators and its legal representatives, Messrs. Sit, Fung, Kwong & Shum (“SFKS”) that should be reimbursed to the Estate, namely, the difference between the amount the Administrators and SFKS had been paid from out of the Estate and the amount found due by the Estate to them in Master Rita So’s Consent Orders dated 27 January 2022 (“Master So’s Orders”) (“Issue 3”); and

(4)  As to the costs of the new evidence application under CACV 157/2017 (“New Evidence Application”), whether the Estate should be reimbursed for costs already paid from the Estate as D4-D6 had been ordered to bear the Administrators’ costs (“Issue 4”).

2.  The professional Administrators seek the Court’s guidance under Order 85, rule 2 of the Rules of the High Court. They adopt a neutral approach whilst making submission to assist the Court.

B.  FACTUAL BACKGROUND

3.  The Administrators were appointed pursuant to Yam J’s Order and were granted the Letters of Administration on 6 January 2006. By now, D2 has become the sole beneficiary of the Estate. On 8 June 2017, this Court gave judgment on distribution of the Estate. D4-D6 lodged an appeal.

4.  By an order dated 9 October 2018 (“New Evidence Order”), the Court of Appeal dismissed D4 to D6’s application to adduce new evidence and ordered them to pay the costs of the Administrators and D2.

5.  By an order dated 17 July 2020 (“Appeal Order”), the Court of Appeal ordered that the costs of the Administrators and D2 be borne by D4 to D6, and that the Administrators’ own costs be paid out of the Estate on trustee basis.

6.  By an order dated 17 August 2020 (“Stay Application Order”), this Court allowed D4 to D6 to withdraw their application for stay of execution and ordered the costs of the Administrators and D2 to be borne by D4 to D6, with the Administrators’ own costs to be paid out of the Estate on trustee basis.

7.  Taxation proceedings were commenced. The Administrators were able to agree on a global settlement of costs, as recorded in Master So’s Orders both dated 27 January 2022:

(1)  The Administrators have leave to accept D4 to D6’s sanctioned payments of HK$250,000 and HK$75,000 in full and final settlement of the Administrators’ costs in the Appeal and the Stay Application respectively (i.e. HK$325,000 in total) (§§1 of Master So’s Orders);

(2)  D4-D6 do pay HK$20,000 to the Administrators in full and final settlement of each of the whole of the two Administrators’ Bill of Costs filed on 4 August 2021 (i.e. in relation to the Appeal Order and the Stay Application Order) as between the Administrators and D4-D6 (i.e. HK$40,000 in total) (§§4 of Master So’s Orders); and

(3)  The Administrators’ own costs of HK$14,632 and HK$28,388 for the Appeal and the Stay Application respectively be paid out of the Estate (i.e. HK$43,020 in total) (§§5 of Master So’s Orders).

8.  There is no dispute that the sums totalling HK$365,000 in sub-paragraphs (1) and (2) covered all 3 Orders. This sum has been returned to the Estate.

9.  The Estate had already paid for the Administrators’ costs under the Appeal Order and Stay Order. D2 claims that the Administrators should repay what they recovered from D4-D6 to the Estate. As for the New Evidence Order, D2 claims that costs should be borne by D4-D6 and the Estate is not liable to indemnify the Administrators as the Order does not say that the Administrators’ own costs be paid out of the Estate. The Administrators seek the Court’s guidance on the 4 Issues.

C.  LEGAL PRINCIPLES

10.  Section 60 of PAO provides for a “Statutory Cap” on an administrator’s remuneration:

“60. Allowance of remuneration to executor, administrator or attorney

(1) Subject to subsection (2), the court may allow to any executor or administrator … such remuneration out of the estate of the deceased person as the court thinks fit.

(2) (a) …

      (b) No such remuneration shall exceed five per cent on the first $1,000, two and a half per cent on the next $4,000 and one per cent on the balance of the gross value of all property of whatsoever nature administered.”

11.  Order 62 rule 6(2) of the Rules of High Court (Cap. 4A) (“RHC”) provides for an administrator’s legal costs as follows:

“Where a person is or has been a party to any proceedings in the capacity of trustee, personal representative or mortgagee, he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee or personal representative or the mortgaged property, as the case may be; and the Court may otherwise order only on the ground that the trustee, personal representative or mortgagee has acted unreasonably or, in the case of a trustee or personal representative, has in substance acted for his own benefit rather than for the benefit of the fund.”

D.  ISSUE 1 – WHETHER DTT’s COSTS SHOULD BE REGARDED AS PART OF THE ADMINISTRATORS’ COSTS

12.  To decide this issue, the starting point must be Yam J’s Order.

13.  As held by Chow J (as he then was) in Cosimo Borrelli v Allen Tak Yuen Chan (unrep., HCMP 2174/2014, 12 November 2015) at §11, the correct approach when construing a court order is as follows:

“… the starting point is the natural and ordinary meaning of the words in light of the syntax, context and background in which those words are used. What additional principles and factors come into play as part of the court’s exercise of interpretation will depend on the nature of the writing to be interpreted and will be highly dependent on the facts of the specific case.”

14.  The relevant parts of Yam J’s Order are as follows:

“4. that the Administrators be authorized:

…

(4) to retain independent legal and other professional advisers both inside and outside Hong Kong to assist them in the fulfillment of their duties;

(5) to retain the services of DTT, Certified Public Accountants, including overseas offices, for like purpose;

…

(7) to make such payments as are necessary to preserve and get in the property comprised in the Estate and to pay their reasonable remuneration at rates as per their letter to Messrs. Or, Ng & Chan (“ONC”) dated 16^th October 2003 [“ONC Letter”] and disbursements, costs, charges and expenses (including legal fees) incurred in administering the Estate;

…

6. that the Administrators be indemnified out of the assets to which their appointments extend in respect of their proper and reasonable remuneration (at rates as per their letter to ONC dated 16^th October 2003) and disbursements, including the costs of DTT and any legal advisers retained by the Administrators subject to the provisions of the Ordinance and the Rules of the High Court (Cap. 4) by reference to the time properly given by the Administrators and their staff in attending to matters arising in the administration which if not agreed, should be subject to taxation and/or assessment by the Court;

…” (underline added)

15.  The ONC Letter provides as follows

“Thank you for inviting us to provide a fee quotation to act as the Administrators of the Estate. We are pleased to advise that Mr Darach E Haughey and the undersigned [ie Mr Lau] would be willing to act as the Joint and Several Administrators of the Estate in place of the existing Administrators, if so appointed by the Court (“the proposed engagement”).

… our fees in relation to the proposed engagement will be based upon the time spent by the individuals to be assigned to the proposed engagement to complete the work, together with reimbursement of actual disbursements incurred (including legal fees). Individual hourly rates vary according to the degree of responsibility involved and the level of experience and skill required.

Kindly be advised that the following personnel of our firm will be assigned to the proposed engagement:

1.  As mentioned above, Mr Darach E Haughey and [Mr Lau] will act as the Joint and Several Administrators of the Estate, if so appointed. The new Administrators will be in charge of the engagement and assume a supervisory role in this regard; and

2.  Ms Jacinte See will be responsible for controlling the engagement on a day to day basis and she is expected to be assisted by a Senior Staff and a Trainee. A RSG Manager from the [PRC] … will assist Ms See in handling the PRC issues.” (underline added)

Points 1 and 2 are about division of responsibilities, all under “the proposed engagement” of the 2 named Administrators.

16.  What followed ONC’s Letter was a list of discounted hourly rates “for the proposed engagement”, ie for the Administrators appointed. As they were partners at the material time, they were entitled to charge the partner/principal’s rate. There were also manager or senior staff rates.

17.  There is no dispute that the Administrators’ appointment was personal. There are only 2 Administrators, whose remuneration is governed by the Statutory Cap.

18.  The Administrators’ case is they were authorized to engage DTT “as a professional adviser” to assist in the administration of the Estate. Fees were therefore incurred by the staff of DTT for that propose. The DTT Costs, being time costs of the DTT staff, are not subject to the Statutory Cap. However, D2 contends that DTT’s Costs is part of the Administrators own remuneration and not “disbursement” under Yam J’s Order.

19.  On a proper interpretation of Yam J's Order, the Administrators can engage other people to assist them:

(1)  §4(4) authorizes the Administrators to retain “independent legal and other professional advisers”; and

(2)  §4(5) authorizes the Administrators to retain DTT as certified public accountant; the phrase “for like purpose” should mean “in the fulfillment of [Administrators’] duties.

20.  What §§4(4) and 4(5) contemplate is the need for professional services (eg legal, accounting or others) and not, eg clerical service. There is no limit to the number of professionals engaged and their expenses would be “disbursements” recoverable from the Estate pursuant to §6 of Yam J’s Order. These disbursements would not be subject to the Statutory Cap. However, if, eg clerical service is obtained, even if it is provided by DTT or to fulfill the duties of the Administrators, the Estate is not obliged to pay for the expenses beyond the Statutory Cap.

21.  Mr To accepts that the original bills issued by DTT did not provide any separate breakdown as to time costs of the Administrators and DTT’s staff. I also note that none of the billed items purport to be for professional services and hence cannot be regarded as disbursements under §6 of Yam J’s Order either. This is in contrast to the services of DTT France’s staff provided overseas, which were separately billed and hence formed disbursements. (See B34, 38.)

22.  Mr To, however, submits that throughout the administration of the Estate, a total of 8 staff members of DTT have assisted in the administration (albeit at different stages). If they are all regarded as administrators of the Estate, it would breach the ceiling of having more than 4 persons to be issued the Letters of Administration: section 25(1) of PAO. Moreover, the context as to why DTT was engaged is important to the question of interpretation of ONC’s Letter. The Administrators were appointed in their personal capacity without staff. The administration of this Estate had taken 16 years with numerous litigation. How could the Administrators have committed to a “package” limited to the Statutory Cap?

23.  With respect, I am unable to agree. No one has ever suggested that there were/are other administrators. The Administrators were personal appointments and they had no staff. Even if their staff was used, their remuneration fell under the Administrators’ umbrella and is subject to the Statutory Cap. The staff, in truth, belongs to DTT. Whether DTT’s staff could charge the Estate was a matter of construction of ONC’s Letter and I have given my ruling in §§ 20 and 21 above.

24.  One cannot use subsequent events of litigation as aids to interpretation. If the Administrators have made a bad deal under the ONC Letter, that is not a justification for remuneration beyond the Statutory Cap.

25.  The Statutory Cap does not distinguish between contentious and non-contentious work of the Administrators. It exists to protect the Estate, to give reasonable remuneration to Administrators which will not over burden the Estate and to encourage expeditious administration so that an administrator cannot benefit from his own dilatoriness.

26.  If the Administrators had wanted to charge for DTT staff costs separately or charge for contentious work beyond the Statutory Cap, they could have those included in the terms of the appointment, as was done in Chen Cheryl Deanna, HCAP 16/2008. In that case, PwCHK gave a written proposal (§8). After another potential administrator was proposed, the Court directed that a letter be sent to the proposed administrators inviting them to send a letter of consent to act indicating acceptance of the remuneration as administrators, subject to the Statutory Cap (§12). PwCHK wrote back to the Court stating that “it would not be commercially viable” for them to accept the remuneration to include the time-cost of their employees but were prepared to consent to act on the basis that their remuneration applies only to the services or work performed by the administrators personally on a time-cost basis at a specified hourly rate but subject to the statutory cap (§15). After some negotiations, the Court eventually ordered that: (i) the aggregate remuneration of the administrators shall not exceed the statutory cap; and (ii) the time costs of the employees of PwCHK be considered an expense or disbursements of the administrators; and (iii) the administrators’ remuneration and fees of PwCHK are subject to the statutory cap (§26). The terms of appointment there were distinguishable from the present case.

27.  In the light of the above, the answer to Issue 1 is Yes. DTT’s Costs should be regarded as part of the Administrators’ costs.

28.  The Estate has paid 3 bills of the Administrators totalling $2,234, 851.04, whereas the Statutory Cap is $443,265.46. The 4^th bill has not yet been paid. Upon this ruling on Issue 1, anything that the Administrator had received above the Statutory Cap has to be returned to the Estate.

E.  ISSUE 2 – GROSS VALUE OF THE PROPERTY

29.  There is no more dispute that the gross value of the Property for the purpose of section 60(2)(b) of PAO is HK$44,326,546.27.

F.  ISSUE 3 – WERE THERE ANY OVER-RECOVERED COSTS IN RESPECT OF THE APPEAL AND THE STAY APLICATION WHICH SHOULD BE REIMBURSED TO THE ESTATE?

30.  By the Appeal Order and the Stay Application Order, D4-D6 were ordered to pay the Administrators and D2’s costs of the Appeal, to be taxed if not agreed, and the Administrators’ own costs be paid out of the Estate on a trustee basis.

31.  The Estate had paid the Administrators for their costs in respect of the Appeal and Stay Application. Subsequently, the Administrators, D4-D6 and D2 (all legally represented) reached agreements on costs, as reflected in Master So’s Orders. There is no dispute that the total settlement sum of HK$365,000 (ie HK$250,000 + HK$75,000 + HK$40,000) covered all 3 costs Orders subject to what is discussed in Section G below.

32.  The question boils down to whether the Administrators are required to repay the Estate for the difference (if any) between the amount paid by the Estate for the Administrators’ costs, and the amount found due by the Estate to them for the same purpose in Master So’s Orders. The Administrators say no, because SFKS’ costs have not been included in the settlement; the amount agreed under Master Rita So’s Orders only covered the Administrators’ remuneration. D2 objects.

33.  Order 62 rule 6(2) of RHC (set out in §11 above) provides that a personal representative is entitled to costs out of the Estate “insofar as any costs are not recovered from or paid by any other person”.

34.  §6 of Yam J’s Order also provides that “the Administrators be indemnified out of the assets… including the costs of… any legal advisors retained…”

35.  Despite the right to be indemnified, the personal representatives may submit their costs for assessment, and they would only be “entitled to their costs as so assessed and nothing more”: Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (22^nd ed) at §59-15.

36.  I have taken into account the following matters:

37.  Firstly, a taxation is to tax “costs” under an order. “Costs” include fees, charges, disbursements, expenses and remuneration: Order 62, rule 1(1) RHC definition. The Administrators had submitted bills for party and party taxation, the propose of which was to recover as much costs as possible from D4-D6. D4-D6 had filed list of objections. The Administrators/SFKS could not expect one taxation to deal with only part of the costs and another to tax SFKS’s costs under the same Orders. Their (and SFKS’) misunderstanding of the effect of taxation and settlement could not become the liability of the Estate.

38.  Secondly, it is a question of construction, in the light of circumstances known to the parties and Master So, as to whether the relevant sums in Master So’s Orders were intended by the parties to be agreed costs such that the Administrators are only entitled to the costs provided therein and nothing more.

39.  In determining the intention behind these Orders, the Court is entitled to consider the pre-compromise negotiations to see if they contain any implied terms: see Wong Hung Kar Kee Mimi v Severn Villa Ltd [2014] 1 HKLRD 1088 at §§46-49, per Au-Yeung J.

40.  I see no ambiguity in the intention behind Master So's Orders:

(1)  §§1-4 governed the party-and-party costs between D4-D6 and the Administrators. §§5 governed the Administrators’ “own costs” payable out of the Estate insofar as they could not be recovered from D4-D6. There was no inconsistency or duplication between §§1 and 5.

(2)  The discontinuance of the taxation and the term “in full and final settlement” made it clear that none of the 3 parties should come back for taxation under any of the 3 Orders. If the Administrators/SFKS had left out SFKS’ own costs and Master So was not alerted, the Administrators/SFKS have to bear the consequence.

(3)  None of the parties rely on §§9 of Master So's Orders, which must be regarded as irrelevant for present purposes.

41.  Thirdly, it is a wrong approach to ascertain the intention behind Master So's Orders from the correspondence in this case because, as conceded by Mr To, the correspondence was not placed before Master So.

42.  Fourthly, assuming the correspondence is relevant to the interpretation exercise, Master So's Orders were entirely consistent with the sentiments expressed in the following correspondence:

(1)  By a letter dated 28 October 2021 from SFKS to CLW, SFKS stated that “in view of the aforesaid offer from [Messrs. Cheng, Yeung, “CY”] and your position (as we understand it) that any of the Administrators’ costs not recovered from D4 to D6 would be payable out of the Estate, our client’s settlement proposal… has been superseded” (underline added).

(2)  By a letter dated 25 November 2021 from SFKS to CLW (not cited by Mr To), SFKS stated that “[as] we have made it clear in our previous letters, our clients are entitled to payment out of the Estate for their own costs incurred (including our costs and disbursements)”. (underline added)

(3)  By a letter dated 16 December 2021 from SFKS to CLW, SFKS stated that “[our] clients’ acceptance of the offers of 4^th to 6^th Defendants is without prejudice to our clients’ claim for reimbursements of the balance of the Administrators’ fees and our legal costs from the Estate” (emphasis added).

(4)  CLW never made any objections in this regard until they suggested, by a letter dated 28 December 2021, that the Administrators should first enter into agreement with D4-D6, leaving further settlement to be dealt with subsequently.

(5)  In view of CLW’s suggestion, by a letter dated 31 December 2021 to the Court, copied to D2 and D4-D6, SFKS stated that “(3) … the Administrators will consider to revise the terms of the draft Consent Summonses to conclude a settlement with [CY] first… (4) The Administrator will continue to negotiate with CLW to try to agree on the amount payable out of the Estate for settlement of the balance of costs payable to us and the Administrators. In the event that such amounts cannot be agreed with CLW, the Administrators may have to proceed with taxation thereof”. (underline added)

(6)  In a reply letter from SFKS to CLW dated 4 January 2022, SFKS stated that “[the Administrators] are agreeable to such approach and adopted the same in our report letter to Court dated 31 December 2021”.

43.  The Administrators have thus made it clear a number of times in the above correspondence that, for the costs which are not recovered from D4-D6, they considered that they would be indemnified by the Estate.

44.  By a letter dated 7 January 2022, CLW proposed to SFKS:

“[with] the above in mind, D2 proposes … that [the Administrators’] costs pursuant to [the Stay Application Order] and [the Appeal Order] can be fully and finally settled once and for all.

In this regard, we enclose herewith a copy of your draft consent summons wherein we have added our amendments, namely, the addition of two paragraphs. We will not, and have no intention to, comment on the other provisions which relate to the settlement as between [the Administrators] and D4-D6.” (underline added)

It was plain by then that D2 wanted a full and final settlement of the costs between the Administrators and the Estate and have the amount quantified.

45.  One added paragraph was accepted by the Administrators and reflected in §§5 of 2 consent summonses such that: the Plaintiffs’ costs ordered to be paid out of the Estate of Chiu Keung,” pursuant to the Stay Application Order, and Appeal Order shall be the sum of HK$28,388.00 and HK$7,244.00, respectively, in full and final settlement of such costs, inclusive of interest.

46.  The other added paragraph proposing that the Administrators shall not be entitled to be indemnified from out of the Estate in respect of any other or further costs of and incidental to this application and the taxation proceedings was not accepted by the Administrators. It ended up in the form of §§9 in Master So’s Order.

47.  Master So did not rubber stamp those terms but made amendments, including specifying in §§5 of the 2 consent summonses “the Plaintiff’s own costs”. Upon sealing of her Orders, the tripartite settlement was complete. Mr To concedes that, in the light of the correspondence, §§5 could only mean that the amounts to be paid out of the Estate to cover the Administrators’ own costs were assessed by agreement.

48.  Fifthly, it is thus wholly surprising that at this hearing, Mr To produces a one-page submission referring to Administrators’ “remuneration” (“Remuneration Statement”) to support his argument that the settlement did not cover SFKS’ costs.

49.  Mr To explains that the breakdown for Administrators’ remuneration was reflected in §§4 and 5 of Master So's Orders. The sums added together exactly matched the remuneration claimed by the Administrators in the 3 bills.

50.  Again, the Remuneration Statement was not before Master So. Obviously, the Administrators thought that their “own costs” meant their “remuneration”. However, even if they could seek remuneration in a party and party taxation, they should also claim for solicitors’ costs incurred by them, or else they would have been in breach of their duties to protect the Estate.

51.  To all objective intent and purposes, the Administrators’ party-and-party and own costs have been fully billed for taxation purpose, settled by 3 parties and endorsed by Master So. The Administrators are estopped from claiming for further costs of SFKS.

52.  In respect of Issue 3, the Administrators have to repay over-recovered costs to the Estate, i.e. HK$132,955.34 (being HK$540,975.34 paid by the Estate for the Appeal and Stay Application, less HK$365,000 settlement sum, less the own costs of HK$43,020 quantified by Master So).

G.  ISSUE 4 – SHOULD THE ESTATE BE REIMBURSED FOR COSTS OF THE NEW EVIDENCE APPLICATION ALREADY PAID FROM OUT OF THE ESTATE?

53.  In respect of the New Evidence Order, the party and party obligation between the Administrators and D4 to D6 has been met by the HK$365,000 settlement sum paid under §§1 of Master So’s Orders.

54.  The Estate had already paid the Administrators for costs (HK$16,321) in respect of the New Evidence Application. The New Evidence Order was silent as to whether the Plaintiff’s own costs should be paid out of the Estate.

55.  D2’s position is that the costs of that Application should be borne by D4-D6, not the Estate. The costs previously paid by the Estate in respect of the New Evidence Application must be repaid by the Administrators to the Estate.

56.  I am unable to agree as a matter of principle for the following reasons:

(1)  The New Evidence Order only governed party-and-party costs.

(2)  §§4(4) and 6 of Yam J's Order did not require the Administrators to obtain a court order before they could be indemnified by the Estate. Having something similar to §§5 of Master So's Orders only enables taxation on trustee basis to be done together with party-and-party costs.

(3)  I agree with Mr To that to deprive an administrator of his costs is a high hurdle and D2 has not justified the same.

57.  However, according to the Remuneration Statement, the Administrators have claimed for HK$7,388 remuneration against D4-D6. That part of the costs has been covered by the HK$365,000 settlement sum. Accordingly, the Estate is only liable to indemnify the Administrators for the balance of HK$8,933 (ie HK$16,321 – HK$7,388).

58.  The answer to Issue 4 is “Yes”. The Administrators need to pay back HK$7,388 for the New Evidence Application to the Estate.

H.  CONCLUSION AND Costs

59.  In view of the above, my answers to the questions posed by the Summons are as follows:

(1)  Issue 1: Yes, DTT’s Costs should be regarded as part of the Administrators’ costs. To the extent that the Administrators have received remuneration beyond the Statutory Cap, the excess has to be repaid to the Estate.

(2)  Issue 2: The gross value of the Property for the purpose of section 60(2)(b) of PAO is HK$44,326,546.27.

(3)  Issue 3: Yes, the Administrators shall be required to reimburse the Estate for the difference (HK$132,955.34) between the amount the Administrators were paid by the Estate for their own costs, and the amounts quantified as their own costs in Master So’s Orders. Insofar as SFKS’s costs are concerned, they are no longer recoverable.

(4)  Issue 4: Yes, the Estate should be reimbursed for the amount of HK$7,388 already paid from out of the Estate for the New Evidence Application and covered by the settlement sum.

60.  D2 is effectively the true winner.

61.  On the authority of Buckton v Buckton [1907] 2 Ch 406,414, Kekewich J, costs of the Administrators should still be borne by the Estate, as it is an application by the Administrators for guidance concerning administration of the Estate.

62.  The amount involved in this Summons is about HK$1.94 million, being:

(a).  HK$1,791,585.58 (ie HK$ 2,234,851.04 less HK$443,265.46) under Issue 1;

(b).  HK$132,955.34 under Issue 3; and

(c).  HK$16,321 under Issue 4.

63.  And yet the costs claimed for this Summons are enormous:

(1)  The Administrators’ “own costs”[1] in the amount of HK$220,750 (11.38% of the amount involved); and

(2)  Legal costs in the amount of HK$604,150 for SFKS and Mr To (31.14%).

64.  Item (1) is not recoverable in view of my ruling on Issue 1.

65.  Item (2), whether viewed alone or together with Item (1) is wholly unreasonable in view of the Issues and amount involved. (This comment does not apply to Mr To.) Whilst acknowledging the efforts of SFKS in negotiating a tripartite settlement on costs, the level of costs spent on those negotiations and this Summons is totally disproportionate. Authorizing the incurring of such costs was simply not in the best interests of the Estate, but was more for the benefit of the Administrators and SFKS.

66.  This is not the first time this Court gives adverse comments on the manner of administration resulting in costs sanction against the Administrator and SFKS: [2021] HKCFI 1843, 25 June 2021, §§12, 27-39, 41-42; [2021] HKCFI 441, 22 February 2021, §§23-25, 29-30, 34(6).

67.  On the other hand, equally shocking is the level of costs incurred by D2 in this Summons, being HK$600,085. SFKS’s grounds of opposition to D2’s statement of costs suggest allowing a total of not more than HK$223,757.33, representing a deduction of HK$376,327.67.

68.  In my view, a similar scale of deduction should be applied to SFKS’ costs, especially since Issue 3 arose out of their / the Administrators’ own misconception in taxation.

69.  Taking a broad brush approach, I allow a sum of HK$400,000 for costs (in its true and ordinary sense under Order 62, rule (1)) of the Administrators to be paid by the Estate. I make an order nisi accordingly.

70.  I thank Mr To and Mr Sousa for their assistance.

Mr Ken To, instructed by Sit, Fung, Kwong & Shum, for the Plaintiffs

Mr Richard Alvaro Sousa of Messrs Chan, Lau & Wai, for the 2^nd Defendant

HCMP 1593/2014

[2021] HKCFI 1843

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1593 OF 2014

____________

____________

_______________________________________________

REASONS FOR DECISION AND RULING ON COSTS

_______________________________________________

1.  This is an application by Chiu Hiu Hung (administratrix of D2, the sole beneficiary) to compel the Administrators to comply with a court order and distribute the Estate to her.

Background to the court order

2.  On 8 June 2017, this Court handed down judgment and made an Order, insofar as relevant to the present Summons, that:

(1) The cash (about $39 million) then in the hands of the Administrators should be distributed to D2 solely (§1);

(2) If any other beneficiary still wanted the Administrators to pursue investigation of properties in South Vietnam, North Vietnam, and/or administration of properties in Mainland China, he/she shall inform the Administrators within 2 months, failing which the investigation on Vietnam properties shall cease and/or the beneficiary would be regarded as giving up his rights and claims to the Mainland China properties (§§2-3);

(3) There be an order nisi that the Administrators shall have their costs out of the Estate before distribution (§5);

(4) There be an order nisi that the Defendants’ costs on common fund basis should be borne out of the Estate (§6);

(5) There be an order that Chiu Hiu Hung's costs should be indemnified by the Estate (§7); and

(6) D2 had to pay back $1,470,600 to the Estate (§8); and if an amount of $3 million had been paid from the Estate to D2, it should also form part of the Estate.

3.  The Order made reference to funds of “about HK$39 million” in the hands of the Administrators at the time of the Order. In fact, the correct amount was $36,310,263.03.

Steps taken by the Administrators after the Order

4.  No beneficiary had invoked §§2-3 of the Order.  D1 had passed away and no costs were claimed.  Save for an amount of $22,730 paid to D2 on 5 September 2018 for costs for the time when she acted in person, the Administrators had not complied with those parts of the Order dealing with costs before D2 issued the Summons.

5.  On 12 July 2017, D4-D6 lodged an appeal to the Court of Appeal against the Order in paragraph 2(1) above (“the Appeal”).  There was no stay of execution in the meantime. The Appeal (CACV 157/2017) was heard on 9 October 2018.  The Administrators incurred costs.

6.  Chan, Lau & Wai (“CLW”) came on record for Chiu Hiu Hung in July 2018.  After numerous requests, the Administrators made an interim distribution to Chiu Hiu Hung of $26,310,583.19 on 2 August 2018, withholding $10 million.  That was already 14 months after the Order.

7.  CLW took out the present Summons on 30 June 2020 (amended without objection from the Administrators on the day of this hearing).  The Amended Summons seeks to compel the Administrators (i) to distribute $6 million to Chiu Hiu Hung out of the funds in their hands; (ii) settle the Defendants’ costs under the Order; (iii) distribute the cash in the Estate to Chiu Hiu Hung; and (iv) to personally bear costs of the Amended Summons on indemnity basis.

8.  On 17 July 2000, the Court of Appeal handed down judgment, dismissing the appeal, save to reduce the amount which D2 had to pay back to the Estate by $3 million.

9.  After the Court of Appeal’s Judgment, the Administrators:

(i) Distributed another $6 million to Chiu Hiu Hung on 24 August 2020;

(ii) Paid $105,935 to D3 for costs under the Order on 2 September 2020; and

(iii)    Paid $275,000 to D4-D6 for costs under the Order on May 2021.

10.  Although all the party-and-party costs under the Order had been dealt with, the costs of the Appeal, the stay application and what was known as the new evidence application, have not been settled by the time of this hearing.

11.  Meanwhile, the Courts have also made orders disallowing the costs of the Administrators and their solicitors (“SFKS”) out of the Estate or otherwise required them to personally bear costs, ie the order of Master Phoebe Man dated 23 April 2021 (concerning taxation) and this Court’s order dated 22 February 2021 (concerning relief against sanction).  It was not clear if the Administrators and SFKS needed to or had repaid the Estate accordingly.

12.  After the affirmations in relation to the Amended Summons were filed, this Court wrote to the parties, asking the Administrators to produce a Checklist of the outstanding steps to be taken before final distribution:

“(1) The deceased had died for 65 years. Administration of the estate is pathetically slow having regard to the fact that the Trustees were appointed in 2003. Even after my Judgment dated 8 June 2017 and the Court of Appeal’s decision, one still cannot see the end of the road to the administration.

(2) It is of little use for the Trustees to only explain why, in the past 3 odd years, they have not distributed the estate to D2 and eg how many letters have been written to whom. What concerns the Court is that the way the estate has been administered since the Judgment dated 8 June 2017 appears to lack direction, proper management and common sense.

(3) Some of the questions that spring to mind are: what are the outstanding steps to be taken before distribution? What is the time needed to complete each of these steps? What are the estimated costs of each party or the Trustees or the Trustee’s legal representatives? What is the estimated date for completing administration of this estate? I expect a positive proposal from the Trustees.

(4) The Court proactively manages a case and expects the Trustees and their solicitors to do the same.  Dilatoriness will end up with a direction by the judge to the taxing master to cut down the costs of the Trustees, the relevant party or their legal representatives.”

13.  The Administrators produced the Checklist.  By this hearing, the Administrators had about $2,237,522.36 in their hands.  Subject to the following payments, this amount can be released to Chiu Hiu Hung:

(1) Fees of the Administrators and costs of SFKS, if any, that have not been paid under the Order;

(2) Fees of the Administrators and costs of SFKS in respect of the costs of the Appeal on trustee basis which could not be recovered from D4‑D6; and

(3) Repayment of fees of the Administrators and costs of SFKS, if any, to the Estate pursuant to paragraph 11 above.

Issues

14.  By this hearing, the outstanding issues were therefore: the way forward that could lead to final distribution of the Estate to Chiu Hiu Hung and costs of the Amended Summons.  After hearing the parties and based on the Checklist, I gave the directions in the Annex to this Decision. Here are my reasons.

Directions in the Annex

15.  The overall scheme depicted in the Annex is to enable the administration of the estate to be completed by September 2021. 

16.  §1 in the Annex was to ensure that the Administrators/SFKS do pay back fees/costs to the Estate pursuant to the Court orders in paragraph 10 above.

17.  §§2 and 3 in the Annex was to enable Chiu Hiu Hung to obtain the cash as soon as possible; but CLW should stakehold $500,000 to cater for fees/costs that need to be paid to the Administrators and SFKS.  This direction would give incentive to the Administrators to work out the amounts due to them and SFKS in order to get paid and complete administration as soon as possible.

18.  The $500,000 to be stakeheld, together with the $325,000 sanctioned payment made by D4-D6 shall provide sufficient security for the Administrator’s outstanding costs and remuneration.

19.  §4 was to have the party-and-party costs of the Appeal dealt with as soon as possible.

20.  §§5 and 6 were included at the reasonable request of Chiu Hiu Hung who wished to know the breakdown of the Administrators’ remuneration and SFKS’s fees before deciding whether to agree the quantum.

21.  §§7-10 were to ensure that outstanding fees and remuneration that needed to be paid would be computed and that the final accounts would be delivered in a timely manner.

22.  §§11-12 laid down some caveats as some issues have been raised in the submissions that have not been covered by the Amended Summons. If those issues are not resolved, the interested party could come back to Court under the liberty to apply provision.

Costs of the Amended Summons

23.  One needs to consider the rationale behind the Summons and the Administrators’ explanations for the delay in implementing the Order.

24.  Under Order 45, rule 6(2) of the Rules of the High Court (“RHC”):

“Where … an order requiring a person to do an act does not specify a time within which the act is to be done, the Court shall have power subsequently to make an order requiring the act to be done within such specific time after service of that order, or such other time, as may be specified therein.”

25.  The purpose of this rule is to enable the court to give the respondent one last chance to comply with its order before the applicant may invoke contempt proceedings.  The burden is on the applicant to prove that an order had been made requiring the respondent to perform an act within a specified time and the respondent failed to do so.  Once that is proved, the burden then shifts to the respondent to show why he should not be required to comply with the order to perform the act, upon being given a second chance. The obligation to perform the act required has been determined and made an order of the court.  Thus, in considering whether to exercise the discretion under this rule, there is no need for the court to revisit the appropriateness or otherwise of its previous order.  The question is simply whether in all the circumstances the respondent should be excused from performing the act under its previous order.  As the court’s orders are made to be complied with, such circumstances must be very rare indeed.  A possible example would be impossibility of performance as a result of a change of circumstances”.  See Ip Pui Lam Arthur v Alan Chung Wah Tang and ors [2015] 2 HKLRD 603, a case about enforcement under O.45, r.6(1), §19, To J; Dr Q v The Health Committee of the Medical Council of Hong Kong [2014] 2 HKLRD 57, §§31, 35-37, Au‑Yeung J (re an application for committal for contempt).

26.  Orders of the court must be complied with strictly in accordance with their terms.  It is not sufficient, by way of answer to an allegation that a court order has not been complied with, for the person concerned to say that he “did his best”.  The only exception to that proposition is where the court order itself only orders the person concerned to ‘do his best’.  But if a court order requires a certain state of affairs to be achieved, the only way in which the order can be complied with is by achieving that state of affairs.  See Dr Q, at §32(4).

27.  The Order laid down a timetable for the Administrators to carry out investigation of assets and pay the costs of the Defendants with a view to completing the administration within a short time.  It was totally unacceptable that the simple steps on settlement of costs could not be dealt with for 3 years before the Summons was taken out.

28.  The Administrators’ defence for the delay can be summarised as follows:

(1) They were concerned that after distribution to D2 and yet D4-D6’s Appeal was successful, there might be an issue of recoverability from D2 and there might be some unknown future events (“recoverability defence”);

(2) They seemed to suggest that they had to wait for the outcome of the Appeal and yet the Court of Appeal took a long time to hand down judgment (“Appeal defence”);

(3) They had complied with the Order by paying out about 95% of the cash in hand to D2 and there was no flagrant flouting of the Order (“substantial compliance defence”); and

(4) The Appointment Order provided that the Administrators shall be paid their costs out of the estate before distribution (“Administrators’ costs defence”).

29.  The recoverability defence is unsustainable. SFKS had had discussions with D2 (then acting in person) as regards interim distribution. The concerns of the Administrators related to (i) the recovery of assets from D2 in the event the appeal was to reverse the Order; and (ii) the possibility of costs arising as a result of some unknown future events occurring.  Concern (i) was a legitimate one.  However, there was nothing to show that the Administrators had taken reasonable steps to ascertain the proper amount that should be set aside for D4-D6 to cater for success of the Appeal and costs necessary until CLW came on board.  In respect of concern (ii), the deceased had died for over 65 years.  Any unknown future events could hardly have been substantial as to justify keeping $36 million undistributed until 2018.

30.  The Appeal defence is unsustainable because:

(i) The payment of costs to the Defendants under the Order was not dependent on the outcome of the appeal;

(ii) D4-D6 had not appealed against the costs order;

(iii)    D4-D6 only applied for stay of execution on 11 May 2018, about a year after the Order, and no stay had ever been granted; and

(iv)    D3 and Chiu Hiu Hung had not appealed at all.

31.  The Administrators had not paid the costs to Chiu Hiu Hung (then acting in person) until 5 September 2018.  It was late but was still tolerable. However, there was simply no reasonable excuse for paying the other Defendants only in 2020 and even 2021.

32.  The substantial compliance defence is not sustainable.  The Administrators should have complied with the Order instead of just a substantial part of it: Dr Q.  Even if money should have been set aside for the Appeal (or even to the Court of Final Appeal), there was nothing to show that the Administrators had properly estimated the proper amount to retain.

33.  The Administrators did nothing to pay costs to the Defendants except to write a few letters to them asking for bills.  The Administrators neither laid down a timetable for the Defendants to come up with bills of costs nor applied under Order 62, rule 22 of the RHC to compel the Defendants to commence taxation.

34.  Chiu Hiu Hung was the sole beneficiary who had a say over the quantum of costs to be paid to the Defendants.  And yet CLW was only notified that D1 had no claim to costs on 25 February 2020.

35.  After being notified of the costs claimed by D3 and D4-D6, CLW participated in discussions which led to settlement of those costs under the Order.  From the time CLW was notified to such settlement, it was 4 months (in the case of D3’s costs) and 9 months (in the case of D4-D6’s).  Hence CLW only took months to do what could not achieve in 3 years.

36.  The Administrators’ costs defence is unsustainable.  It was not the Appointment Order but the Order which stated that the Administrators’ costs should be paid out of the Estate before distribution. 

37.  Even if the Administrators’ costs should be paid out first before distribution to Chiu Hiu Hung:

(1) It was not even clear if the Administrators and SFKS had got paid under the Order.

(2) Over 10 months had elapsed since the Court of Appeal’s Judgment and the costs to be paid by D4-D6 in respect of the Appeal have not been settled.

(3) The Administrators had no road map for complying with the Order and completing administration until this Court asked them to prepare the Checklist.

38.  Where the order has not specified a time for performance, the steps must be taken within reasonable time. In view of the way the Order was made and the fact that the deceased had died for 65 years at the time of the Order, Chiu Hiu Hung was all the more entitled to expect the Administrators to promptly comply with the Order.  And yet the evidence disclosed that CLW had to make repeated requests to push the Administrators into taking steps forward.  Chiu Hiu Hung had rightly taken out the Summons.

39.  The Court should mark its disapproval of the Administrators’ delay as in Dr Q.  The defences were unsustainable.  The analyses in this section confirmed this Court’s view that the Administrators’ administration “lacked direction, proper management and common sense”.

40.  Further, prior to the Summons, CLW had written to the Administrators to request for release of $6 million to Chiu Hiu Hung. Calderbank letters were issued shortly after the issue of the Summons.  Whilst not objecting to release of $6 million, the Administrators had counter-offered that CLW should withdraw the Summons and the Administrators should get costs out of the Estate (for their own default).

41.  The Court bears in mind the principle in Order 62, rule 6(2) of the RHC that where a person has been a party to any proceedings in the capacity of personal representative, he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the personal representative, and the Court may otherwise order only on the ground that the personal representative has acted unreasonably or, in the case of a personal representative, has in substance acted for his own benefit rather than for the benefit of the fund.

42.  In my view, whilst this was not a situation of the Administrators acting for their personal benefit (save for the legitimate remuneration and costs) or acting partially or had committed misconduct, the Amended Summons was wholly necessitated by their unreasonable delay in implementing the Order and administration of the Estate.  The Administrators should not be remunerated by Estate for their own delay and they should personally bear the costs of Chiu Hiu Hung for the Amended Summons on indemnity basis.

43.  I summarily assess Chiu Hiu Hung’s costs of the Amended Summons at $650,000.

Conclusion

44.  For the reasons given, I gave the directions in the Annex.  I gave leave to amend the Summons at the hearing.

45.  I also order that costs of the Amended Summons be personally borne by the Administrators on indemnity basis, summarily assessed at $650,000.  The Administrators shall not be entitled to recover their remuneration and costs out of the Estate in respect of the Amended Summons.  This Order is, of course, without prejudice to the charging of remuneration and costs of the Administrators and SFKS in complying with the directions in the Annex.

Annex

1. The Administrators and SFKS shall verify if they have received money out of the Estate in respect of the relief from sanction summons dated 21 December 2020 and in respect of the taxation proceedings referred to in paragraph 1 of Master Phoebe Man’s Order dated 23 April 2021.  If they have received such costs, those costs shall be paid back to the Estate forthwith.

2. Within 7 days from today, the Administrators shall pay to CLW the money held by the Administrators for the Estate.

3. CLW shall stakehold $500,000 in an interest bearing account for the fees of the Administrators and costs of SFKS, which shall not be paid out without a court order.  The balance of the sum received from the Administrators shall be released by CLW to D2 forthwith.

Costs to be paid by D4-D6 to the Plaintiff in respect of the Order dated 17 July 2020 in CACV 157/2017

4. “Costs of the appeal” in this order shall mean costs of:

(a) The appeal itself;

(b) The stay application dated 11 May 2018; and

(c) The fresh evidence application dated 8 October 2018.

5. Within 28 days, the Administrators shall negotiate with D4-D6 with a view to agreeing the costs of the appeal, failing which the Administrators shall file a notice of commencement of taxation upon expiry of those 28 days.

Bills of costs of the Administrators and SFKS

6. Within 28 days, the Administrators shall provide to D2 (and where appropriate, to D4-D6) the breakdown of their fees for (i) the costs of the appeal; (ii) the costs of the underlying action in HCMP 1593 of 2014 which led up to the Judgment dated 8 June 2017; and (iii) the costs claimed arising from the Order of Yam J dated 27 October 2003.  Identify those fees if they have been included in the second and third bills of the Administrators.

7. Within 28 days, SFKS shall provide to D2 (and where appropriate, to D4-D6) the breakdown of their costs and disbursements for (i) the costs of the appeal; (ii) the costs of the underlying action in HCMP 1593 of 2014; and (iii) the costs claimed arising from the Order of Yam J dated 27 October 2003.  Identify those costs and disbursements if they have been included in any bill of SFKS.

8. Within 28 days, the Administrators shall provide to D2 their final bills for all steps up to and including completion of administration.

9. Within 28 days, SFKS shall provide to D2 their final bills for all steps up to and including completion of administration.

10. Any fees/costs not included in paragraph 8 or 9 shall not be recoverable from the Estate.

Final accounts

11. Final accounts shall be delivered by the Administrators within 28 days upon completion of all the above steps or by 30 September 2021, whichever is the earlier.

Savings

12. The above directions are made:

(1) On the basis that there is no need for party and party taxation between the Plaintiffs and D4-D6; and

(2) Without prejudice to D2’s challenge to the Administrators’ accounts, fees and costs incurred in respect of the Estate, and any argument that the statutory cap under Section 60 of the Probate and Administration Ordinance (Cap 10) shall apply to the fees and costs in this Estate.

13. There be liberty to apply.

HCMP 1593/2014

[2021] HKCFI 441

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1593 OF 2014

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D E C I S I O N

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A. INTRODUCTION

1.  On 8 June 2017, this Court gave judgment ordering, amongst others, that the cash of about HK$39 million in the hands of the Administrators should be distributed to D2 (“Hiu Hung”) solely (“the Judgment”).  There were also orders on costs and directions on distribution of the estate.  D4-6 appealed to the Court of Appeal but the appeal was dismissed in 2018.  Over 3 years since the Judgment, the Plaintiffs (“Trustees”) have not distributed the money to Hiu Hung.

2.  On 30 June 2020, Hiu Hung issued a summons for distribution of monies out of the estate subject to payment of costs to the beneficiaries and the Trustees pursuant to the Judgment (“1^st Summons”).  She later issued a summons for amendment to the 1^st Summons on 21 August 2020 (“2^nd Summons”).  These shall collectively be called (“the 2 Summonses”).

3.  The parties filed a consent summons on directions for disposal of the 2 Summonses.  On 31 August 2020, this Court directed the Trustees to file and serve an affirmation in opposition within 28 days, with the rest of the directions adjourned until the Court has read the Trustees’ affirmation.

4.  After 2 time extensions to the Trustees (twice over 5 months), Master Kot directed that unless the Trustees do file and serve an affirmation in opposition to the 2 Summonses by 4:00 pm on 7 December 2020 (“unless order”), the Trustees would be barred from adducing affidavit evidence.

5.  On 7 December, Sit, Fung, Kwong & Shum (“SFKS”), solicitors acting for the Trustees, filed 2 affidavits, namely the 4^th and 5^th affidavits of Darach E Haughey (“DEH-4^th” and “DEH-5^th” respectively).  Only DEH-5^th, which was filed at around 4:40 pm and served on D2’s solicitors at 5:07 pm, was in breach of the unless order.

6.  Before me is a summons by the Trustees for relief against sanction in respect of DEH-5^th (“Relief Summons”), supported by DEH-6^th.

7.  The Trustees did little to go through the checklist in Order 2, rule 5 of the Rules of the High Court in DEH-6^th or in SFKS’s submission but rely on the following grounds to seek relief:

(1)  The breach of the unless order was not intentional.  (ground 1)

(2)  The delay would not have significantly prejudiced the interests of D2.  (ground 2)

(3)  The Trustees were required to file and serve 2 affidavits in opposition to 2 sets of summonses taken out by Hiu Hung and it involved a significant workload.  The Trustees had to revise and finalize the draft DEH-5^th in the afternoon of 7 December 2020, which led to delay in execution, filing and service of that affidavit.  (ground 3)

(4)  The Trustees had to locate documents dated over 10 years ago and it took longer time than originally expected.  The relevant staff had resigned.  (ground 4)

8.  D2 did not take a contentious stance but has drawn to the Court’s attention the procedural defaults of the Trustees in this application and their lack of explanation.

B.  LEGAL PRINCIPLES

9.  Under Order 2, rule 4,

“Where a party has failed to comply with a … court order, any sanction for failure to comply imposed by … the court order has effect unless the party in default applies to the Court for and obtains relief from sanction within 14 days of the failure.”

10.  Under Order 2, rule 5(2), an application for relief from sanction must be supported by evidence.  Under Order 32, rule 1, “… every application in chambers not made ex parte must be made by summons, and where, under the provisions of these rules, such summons must be supported by affidavit, such affidavit shall be filed at the same time as the summons.”

11.  The relevant circumstances for the Court’s consideration are set out in Order 2, rule 5(1).

12.  Non-compliance with the rules shall be treated as an irregularity, which the Court has the discretion to cure on terms of costs or otherwise as it thinks fit: Order 2, rule 1.

13.  Once a court order is disobeyed, the imposition of a sanction is almost always inevitable if court orders are to continue to enjoy the respect which they ought to have: Global Torch Ltd v Apex Global Management Ltd (No.2) [2014] 1 WLR 4495, §23, Lord Neuberger.

14.  It is difficult to have much sympathy with a litigant who has failed to comply with an unless order when the original order was in standard terms, when the litigant has been given every opportunity to comply with it but has failed to come up with a convincing explanation as to why he has not done so: Global Torch, at §24.

15.  Refusal of relief from sanction is not limited to intentional and contumelious defaults.  Depending on the circumstances, failure to comply through negligence, incompetence or sheer indolence may be such as to lead the court to conclude there is an existence and degree of fault which warrants a refusal of an extension of time, so as to decline relief.  Any other conclusion would be to ignore the positive duty placed on parties to assist the court to further the underlying objectives of Order 1A, rule 3 and on the court to do so by actively managing cases Order 1A rule 4(1). See Top One International (China) Property Group Co Ltd v Top One Property Group Ltd [2011] 1 HKLRD 606, §41, Fok J (as he then was).

C.  APPLICATION OF THE LEGAL PRINCIPLES

C1.  Procedural default of the Trustees in seeking relief

16.  It was only on 21 December 2020 that the Trustees took out the Relief Summons, after reminders from Chan, Lau & Wai (“CLW”), solicitors for Hiu Hung.  Although it was within 14 days of the non-compliance, it was not accompanied by any evidence.  The supporting affidavit (DEH‑6^th) was only filed and served 7 days later.

17.  The Trustees asserted that CLW had misled them into believing that CLW would consent to the grant of relief.  The Trustees thus focused on preparation of the consent summons only to find that CLW had changed their stance when the draft consent summons was delivered to CLW. 

18.  In the correspondence, CLW appeared to suggest that the Trustees must take out a summons and file an affidavit to get relief instead of filing a consent summons.  In my view, as for all interlocutory applications, there is nothing to prevent an opponent from waiving the default by entering into a consent summons with the party in default.  Such waiver carries weight.  Of course, it is always up to the Court to raise requisitions as to the reasons for breach of the unless order and decline to grant relief despite consent of all the relevant parties.

19.  Even so, in the present case, although CLW stated that they might give consent, one could understand why had not, because the Trustees never explained their delay in the correspondence.  Even the explanations now in DEH-6^th are hardly acceptable. (See under section C2 below.)  The draft consent summons only spared the estate from having to bear costs but did not deal with the costs of D2.  The Trustees had not even joined with CLW in writing to court for further directions regarding the rest of the directions referred to in paragraph 3 above.

20.  Further, DEH-6^th was in simple terms.  Even if CLW had changed their stance, there was still time for SFKS to file and serve DEH-6^th with the Relief Summons.  It should not have taken them another 7 days.

21.  Accordingly, there was procedural default on the part of the Trustees/SFKS in taking out the Relief Summons.

C2.  Merits of the application for relief

22.  With regard to ground (1) in paragraph 7 above, I accept that the failure to comply was unintentional because the Trustees managed to file and serve another affidavit, DEH-4^th, on time.

23.  With regard to ground (2), I do not accept that there was no prejudice to Hiu Hung.  As stated in my directions letter dated 20 January 2021, the administration of this estate has taken woefully long (about 18 years, from 2003 when the present Trustees were first appointed).  The Relief Summons stood in the way of disposal of the 2 Summonses and put Hiu Hung in a position of uncertainty as to whether or not relief would be granted and whether she should go about preparing an affirmation in reply. 

24.  In DEH-6^th, the Trustees pointed out that no milestone date has been fixed.  That was a lame excuse.  It was precisely because the Court had wanted to first read the Trustees’ affidavit in opposition before deciding the appropriate timeframe for Hiu Hung’s affirmation in reply and the hearing. The delay of the Trustees had delayed the whole process.

25.  Further, distribution of estate does not carry interest.  Hiu Hung has waited for over 3 years from the Judgment for distribution.  The longer the wait, the more she will suffer from loss of use of the money.

26.  With regard to ground (3), it is not a valid explanation.  It is the responsibility of every legal representative to make proper estimates of time to enable the Court to set a realistic timetable for preparation of affidavits and bind the party toit.  The Trustees had been given 3 extensions and over 5 months to prepare DEH-5^th.  There was no reason for them to leave “finalization” to the last day of filing.

27.  With regard to ground (4), the Trustees were talking about the breakdown of their fees and an 03 Letter which set out the bases of their fees.  As pointed out by CLW, CLW had been asking for a copy of the 03 letter by letters dated 11 July 2019 and 25 May 2020, well before the 2 Summonses.  The 03 Letter was an important document and should have been kept at a convenient place and should not have required any great length of time to locate. Further, at least a Kevin Ho, who has been working for the Trustees since at least September 2009, is still working for the Trustees.

28.  In my view, save for ground (1), the Trustees have not provided valid explanations for the delay.

29.  Additionally, the Trustees and SFKS were evasive as to who were responsible for the delay.  DEH-6^th claimed that the “related logistics” were such as to have caused delay in filing and service.  However, what the related logistics were and who was responsible have not made clear.

30.  It was after the hearing, upon further requisitions by the Court, that SFKS informed the Court by letter that they and the Trustees each agreed to bear the costs of Hiu Hung personally and equally.

31.  Despite the unsatisfactory explanations from the Trustees, the Court has to consider the circumstances in the round.  The 2 Summonses ask for distribution of the estate to Hiu Hung in accordance with the Judgment.  The Judgment contemplated costs of other beneficiaries and the Trustees to be borne out of the estate.  If the Court were to accede to Hiu Hung’s request without considering DEH-5^th, it may affect the rights of other beneficiaries.  

32.  Hiu Hung has not taken a contentious stance and that is a weighty factor.  In the interests of the administration of justice under Order 2, rule 5(1)(a), I exercise my discretion to grant relief against sanction.  The filing and service already done shall stand.

33.  Consequent upon this order, Hiu Hung shall have 28 days to file and serve her affirmation in reply, if so advised.  The 2 Summonses shall be fixed for hearing with 3 hours reserved.

D.  ORDERS

34.  I order as follows:

(1)  There be relief from the sanction imposed by Master Kot’s Order dated 16 November 2020 such that the time for the Plaintiffs to file and serve the affidavit evidence in opposition to the 2 Summonses shall be extended to 4:40 pm and 5:07 pm, respectively, on 7 December 2020.  The filing and service of DEH-5^th shall stand.

(2)  There be leave to D2 to file and serve an affirmation in reply in respect of the 2 Summonses within 28 days from the handing down of this decision.

(3)  No further evidence shall be filed without leave of the Court.

(4)  The 2 Summonses shall be set down for hearing with 3 hours reserved.

(5)  The Trustees personally and SFKS personally do each bear 50% of the costs of D2 on the Relief Summons on indemnity basis, summarily assessed at $96,425.

(6)  Neither the Trustees nor SFKS shall recover costs from the estate in respect of the Relief Summons.

35.  I thank Mr Sousa and Mr Lee for their assistance.

Mr Trevor Lee, of Sit, Fung, Kwong & Shum, for the Plaintiffs

Mr Richard A Sousa, of Chan, Lau & Wai, for the 2^nd Defendant

HCMP 1593/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1593 OF 2014

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J U D G M E N T

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INTRODUCTION

1.  The plaintiffs are Administrators of the Estate of Chiu Keung (“the Deceased”) appointed by the court.  They seek directions on distribution of the Estate pursuant to Order 85 of the Rules of the High Court.

2.  The Deceased died 62 years ago on 17 April 1955, leaving behind an enormous estate (“the Estate”).  He was survived by 17 family members, ie the wife, 3 concubines, 5 sons and 8 daughters.  The names of the family members and their status as parties are set out in Table 1 annexed to this judgment.  I shall refer to each fong (房) by the respective names of the concubines.

3.  The Administrators propose (“the Proposal”) to distribute the HK$39 million in their hands in the following manner:

(a) The cash formerly distributed to the 3^rd son (D2) be regarded as interim distribution and be added back to the pool of assets of the Estate;

(b) The Administrators’ costs and expenses be deducted from the Estate.

(c) The net Estate be divided into 17 shares with 2 shares for each of the 3^rd to 6^th sons, 1 share for the 2^nd son and 1 share for each of the 1^st to 8^th daughters in accordance with the Will.

(d) The 2 shares of a missing beneficiary (the 4^th son) be distributed pro rata to the other beneficiaries;

4.  All the beneficiaries who wished to be heard have been joined as defendants. Some have just filed affirmations or made representation.

5.  D1, D4, D5 and D6 (the Lam Mui fong)are represented.  So is the 5^th son (D3).  They have no objection to the Proposal.

6.  The 3^rd son (D2)’s Estate is represented by his daughter (“Hiu Hung”).  She opposes the Proposal.  She claims that the 3^rd son (D2) should be entitled to the whole Estate now remaining because there had been prior distribution of the Estate to other beneficiaries to the exclusion of the 3^rd son (D2) whilst he was residing in Mainland China.  She also claims that married daughters are not entitled to share in the proceeds of sale of real properties.  

7.  The Administrators have given notice under section 29 of the Trustee Ordinance, Cap 29 on 15 November 2013 to all persons who might wish to claim against the Estate.  Despite that, the Administrators have not heard from the 4^th son at all.

8.  The 8^th daughter appeared in person and appeared not to oppose the Proposal.

9.  For convenience, when I refer to “the defendants” below, I shall exclude Hiu Hung.

LEGAL PRINCIPLES

10.  The court has discretion under Order 85 of the Rules of the High Court to give directions on the administration of the estate of a deceased person. The court will have regard to the best interests of the estate instead of the rights of adversarial parties: Marley v Mutual Security Merchant Bank [1991] 3 All ER 198, at 201g-j:

“… In exercising its jurisdiction to give directions on a trustee’s application the court is essentially engaged solely in determining what ought to be done in the best interests of the trust Estate and not in determining the rights of adversarial parties… Where beneficiaries oppose a proposal of a trustee with a host of objections of more or less weight, the court is, of course, inevitably concerned to see whether these objections are or are not well founded, but that must not be permitted to obscure the real questions at issue which are what directions ought to be given in the interests of the beneficiaries and whether the court has before it all the material appropriate to enable it to give those directions.”

BACKGROUND

11.  The Deceased was a businessman in his lifetime.  He operated drug stores in Cholon and Hanoi.  He held properties in North and South Vietnam, Canton, Hong Kong and Paris before his death. 

12.  The Deceased made his last will on 28 August 1953 (“the Will”). At that time, he had a wife, 3 concubines, 4 sons and 8 daughters. 

13.  On 6 November 1954, the last son (the 6^th son) was born.

14.  Five months later, on 17 April 1955, the Deceased died in Hong Kong, survived by a wife, 3 concubines, 5 sons and 8 daughters.  The 1^st son had pre-deceased him in the war.

15.  The Estate of the Deceased included a property at House No. 4, Derby Road, Hong Kong (“the Derby Property”).

16.  On 9 October 1956, a Deed of Partition (Amicable) (“the 1956 Deed”) was executed in Saigon, Vietnam, among the following persons:

(a) The 2nd son acting for himself and on behalf of the Lee Ng (the wife and his mother) pursuant to a power of attorney dated 8 August 1956;

(b) Chan Mui acting for herself and purportedly on behalf of the 3^rd son (D2);

(c) The 5^th son (D3);

(d) Leung Yuet Chun acting for herself and as guardian and legal trustee of her 5 children, the 4^th son, the 1^st, 5^th, 7^th and 8^th daughters;

(e) Lam Mui acting for herself and as guardian and legal trustee of her children, ie the 2^nd, 3^rd, 4^th, 6^th daughters and 6^th son.

17.  Under the 1956 Deed, amongst others:

(a) The parties agreed to a partition of the Deceased’s properties, both real and personal in Hong Kong, South Vietnam and France, but not Canton, Caoyue in China and Hanoi in North Vietnam.

(b) The wife (not entitled to real estate under the Will) was “assigned” sole ownership of the Derby Property (clause 2);

(c) The 2^nd son (an unfavoured son who should only receive 1share out of the real properties) received 1 million piastres from the Estate (clause 3); receipt and discharge were acknowledged in the 1956 Deed.

(d) The other 15 beneficiaries were jointly assigned all other real and personal property of the Estate that were situated in Hong Kong, South Vietnam and France, including but not limited to:

(i) Cash and ready money, bank balances in Hong Kong;

(ii) The real properties situated in South Vietnam that are the subjects of the title deeds No. 219 of Cholon Pha-Lam;

(iii) The business interest in Societe Hop Tao whose head office was in Cholon No.63 and 65 Boulevard Tong Doc Phuong.

(iv) Bank balances in banks in Saigon and Cholon;

(v) Rice plantations in Nga Bay;

(vi) Motor vehicles;

(vii) The property in Paris (“the Paris Apartment”);

(viii) The accounts deposited with the banks in Paris.

The beneficiaries would be free to maintain joint possession the properties or divide the same amongst themselves.

(e) The wife, the son and the 15 beneficiaries accepted the terms in full and final satisfaction of their respective rights against the Estate. The 15 beneficiaries renounced all claims against the wife and the 2^nd son in respect of the Estate, and vice versa.

18.  Six months later, on 4 April 1957, a Chinese Agreement (“the 1957 Agreement”) was executed in Saigon, Vietnam, among the same persons.  It was agreed, amongst others, that:

(a) The drugstore business of “Dai Guang Duoc Phong” at 27 Boulevard Tong Doc Phuong, Cholon, South Vietnam, should be incorporated with shares allotted to the parties to the 1957 Agreement in the shares provided for in the Will (clause 1);

(b) Leung Yuet Chun fong and Lam Mui fong would receive the Deceased’s 340 shares of and in the business of “Societe Hop Tac” at 63-65 Boulevard Tong Doc Phuong; the 2 fongs were at liberty to distribute them in accordance with the shares stated in the Will; Chan Mui’s fong gave up rights in relation to this asset (clause 2);

(c) Other than the 27 Boulevard Tong Doc Phuong (whilst the drug store was in operation), all other remaining assets of the Deceased (whether real or personal in South Vietnam, Hong Kong and France) should be distributed in rem or sold and the proceeds distributed to the parties to the 1957 Agreement (clause 5);

(d) The wife and 2^nd son gave up all rights against the Estate and acknowledged having received the Derby Property and 1 million piastres respectively.

(e) The shares of the Dai Guang Duoc Phong were divided into 19 shares worth 3,800,000 piastres; each concubine, daughter and 2^nd son would have one share; each other son would have 2 shares.

The 1957 Agreement was signed by the 3 concubines and the 5^th son (D3).

19.  The 1956 Deed and 1957 Agreement (collectively “the 2 Documents”) were formal documents signed by the 2^nd son, 5^th son (D3) and the 3 concubines.  Adults who were not present had given powers of attorney (eg the wife and the 1^st daughter).  However, the 3^rd son (D2) was not a party to the Documents and he had not given a power of attorney, although he had attained majority (born in 1930).  He was then residing in Mainland China, under the Communist government.  His mother Chan Mui purported to have stated that she was confident that she could represent him and would be able to obtain his consent.  He claimed not having been given prior notice or opportunity to attend the meeting before the 2 Documents were executed and had received nothing from the Estate.

20.  On 7 September 1966, letters of administration with the Will annexed was granted to the wife and the 4^th son as administrators.

21.  About 16 years after the grant, a dispute arose between the co-administrators.  The 4^th son sought an order against the wife for an account of incomes and profits of the Estate, in particular as regards the Derby Property; and a declaration that the 1956 Deed was null and void.

22.  On 27 March 1985, in HCMP 1845/1982, Rhind J declared the 1956 Deed null and void and ordered that the Derby Property be sold once the Wife ceased to live therein or died.  The proceeds of sale were to be distributed in accordance with the terms of the Will.  Until sale of the Derby Property, the tenancies and incomes should be administered by an international trustee company.  The wife died in the following year. 

23.  In 1995, the 4^th son as sole surviving administrator commenced HCA 6123/1995 against the 3^rd son (D2) alleging wrongful interference with the Estate (including collection of rent), and seeking orders for delivery up of the Deceased’s properties in Canton, government bonds, share certificates, rents books, chops and accounting records. 

24.  The 3^rd son (D2) denied the claim.  He counterclaimed for an order for removal of the 4^th son as administrator, an account and inquiry of assets of the Estate that have come into the hands of the 4^th son, delivery up of assets and an order for administration of the Estate.

25.  On 24 September 2001, in HCA 6123/1995, Chu J (as she then was) again ordered that the Derby Property be sold.  Without prejudice to the 3rd son (D2)’s dispute as to entitlement of the beneficiaries under the Will, Chu J ordered that the proceeds be divided into 17 shares as set out in the Will.

26.  On 16 May 2003 (18 years after Rhind J’s order), the Derby Property was finally sold for HK$45 million.

27.  On Hiu Hung’s application, there had been 2 orders for interim payment to the 3^rd son (D2) a total of HK$4,470,600 (“the Sum”) out of the proceeds of sale.

28.  On 27 October 2003, HCA 6123/1995 was tried. By then, the 4^th son had absconded. Yam J appointed the Administrators to replace the 4^th son.  The letters of administration issued in 1966 were revoked.  The 4^th son was ordered to give an account of the Estate on oath.  Yam J also ordered that Hiu Hung’s costs be paid out of the Estate on indemnity basis.

29.  The 4^th son had never given any account.  The Administrators had to obtain documents in relation to the Estate from his solicitors.

30.  On 6 January 2006, new letters of administration with the Will annexed were granted to the Administrators.

IDENTIFIED ASSETS OF THE ESTATE

31.  There are cash of about HK$39 million, the Paris Apartment, and properties in Mainland China (“the PRC properties”), North Vietnam and South Vietnam.  Hiu Hung alleges that there are other properties that may form part of the Estate. There might be a bank account in Paris but the Administrators have no information as to the particulars of the bank account. The 5^th son (D3) has denied existence of this bank account.

32.  On 30 June 2014, the Administrators made the present application seeking the reliefs set out in paragraph 3 above.

ISSUES

33.  The issues in this case are summarized as follows:

A． On scope of the Estate:

A1. Whether the Sum should be put back to the pool of the Estate;

A2. Whether the Paris Apartment formed part of the Estate;

A3. How the properties in Vietnam are to be dealt with;

A4. How the properties in Mainland China are to be dealt with;

A5. Whether other properties should be treated as part of the Estate;

B． Whether married daughters are entitled to a share in the real properties;

C. Whether there had been prior distribution of the Estate to the exclusion of the 3^rd son (D2);

D. How the assets in the hands of the Administrators should be distributed.

A.  Scope of the Estate

A1.  Whether the Sum should be put back to the pool of the Estate

34.  By orders dated 25 September 2003 and 19 January 2009 respectively, Yam J ordered, in HCA 6123/1995, that there be payment to the 3^rd son (D2) the sum of HK$3,000,000 and HK$1,470,600 respectively out of the sale proceeds of the Derby Property.  The Administrators also had to pay Hiu Hung HK$100,000 as costs in respect of the 2^nd payment.  See letter of Sit, Fung, Kwong & Shum dated 20 January 2009. 

35.  There is dispute over the purpose of the Sum.  The Administrators say that it was interim distribution of the Estate to the 3^rd son (D2).  Hiu Hung says that it was for her costs in HCA 6123/1995.

36.  The Administrators had produced court orders but not the reasons for decision or transcript of proceedings. From the evidence before me, it appears that Yam J’s orders were made pursuant to a summons in HCA 6123/1995 taken out by Hiu Hung for interim payment of the 3^rd son (D2)’s share of the Estate after the Derby Property was sold.  At that time, she claimed that the 3^rd son (D2) was entitled to 2/21 shares in the business and 2/17 over the real properties. 

37.  On the other hand, there was a letter from JSM (then acting for Hiu Hung) dated 23 February 2006 and 20 December 2006 chasing for interim payment of costs in HCA 6123/1995 under §14 of the order dated 27 October 2003 for “about HK$3.2 million” and another HK$150,000 whilst Hiu Hung engaged BC Chow & Co (later taken over by Or, Ng & Chan).

38.  The Administrators’ Report stated as follows:

“Payments under Orders of Yam, J dated 27 October 2003 and 19 January 2009:

- Settlement of bill of costs to Ms Chiu Hiu Hung 2,850,000

- Payment re counterclaim of Ms Chiu 1,570,600

-   ... ”

39.  Taking such evidence together, I find that HK$1,470,600 was interim distribution to the 3^rd son (D2) which should be put back to the pool of the Estate.  The rest of the payments were all for Hiu Hung’s costs.  It seems that HK$3,000,000 had not been paid to the 3^rd son (D2); but if it had been, it should form part of the Estate.

A2.  Whether the Paris Apartment formed part of the Estate

40.  There was no dispute that the Deceased had purchased the Paris Apartment in the joint names of himself and a person in 1953.

41.  The 5^th son (D3) claimed that he was the other joint owner.  However, the name of that joint owner was not spelt in the same way as that of the 5^th son (D3)’s.  Moreover, the ownership record (obtained by Deloitte France) showed that the joint owner was born on 10 September 1934 and was aged 19 by the time of the acquisition of the Paris Apartment. However, the 5^th son (D3) asserted that he was born on 10 October 1939 and was aged 14 at the time of the acquisition.  The 5^th son (D3) could not explain the discrepancies and why he could, as a minor, be a joint owner of a property.  Hiu Hung disputed that he was the joint owner.

42.  The Administrators were advised that the ground floor and cellar of the Paris Apartment were bought on terms that the title passed to the 5^th son (D3) upon the death of the Deceased in 1955 under French law. 

43.  The 5^th son (D3) claimed that the Deceased had told him on more than one occasion after the purchase that the Paris Apartment belonged to him, the 5^th son (D3).  The 5^th son (D3) and siblings studying in France had lived there.  Hiu Hung disputed these.

44.  The 1^st daughter admitted receiving rent for the Paris Apartment but it was on behalf of the 5^th son (D3) (see Cheng, Yeung & Co’s letter dated 6 June 2012).  However, the 5^th son (D3) disputed ever receiving rental income. 

45.  The 5^th son (D3) said that Chan Mui told him that the 1^st daughter, had “taken” the Paris Apartment and told him not to run into dispute with her. He claimed to have engaged an agent in France to investigate the current status of the Paris Apartment and was told that he had been dispossessed for being “missing” for 30 years.  He had no knowledge as to the present legal status of the Paris Apartment. 

46.  According to the Administrators’ land search in 2011, the Paris Apartment was no longer under the name of the 5^th son (D3) or the 1^st daughter.  The Administrators had no idea how the Paris Apartment ended up with the present owner. 

47.  The Administrators raised the issue as to whether or not it is just to exclude the 5^th son (D3) from further distribution of the Estate or to make the necessary adjustments to the shares he is entitled to under the Will. The court is also invited to draw adverse inference against the 5^th son (D3) for failing to adduce evidence in the preceding paragraph.

48.  The Paris Apartment was referred to in the 1956 Deed but not the Will.  Hiu Hung submits that if the Paris Apartment had belonged to the 5^th son (D3), that property would not have been included in the 1956 Deed. 

49.  There is dispute of facts.  Neither the Administrators nor the 5^th son (D3) have produced French legal opinions to assist the court.

50.  There was no direct evidence as to the true intention of the Deceased at the time of the acquisition of the Paris Apartment. However, from the Will, it could be seen that the Deceased was a person who encouraged his children to go for higher education; a child who would take up higher education after the age of 20 could get monthly allowance double that of the minors.

51.  The Deceased considered that the 5^th son (D3) would have attained majority in 1955, so the year of 1934 could well be the year of birth of the 5^th son (D3).  The Deceased owned various properties. The Paris Apartment appeared to be the only one in joint names with a child. Since the 5^th son (D3) was studying in Paris at the time of the purchase, it may be that the Deceased really wanted to make a gift (upon his death) of the Paris Apartment to the 5^th son (D3); and I so find.

52.  In any case, it is impossible now to place a value on the Paris Apartment or any rental collected thereunder.  Hiu Hung agreed that at this stage there was not much to be gained from further investigating the Paris Apartment.

53.  Taking all circumstances into account, I am not satisfied that the Paris Apartment should be regarded as part of the Estate or that further investigation is in the best interests of the Estate.  I will come back to exclusion of the 5^th son (D3)’s interests under Section C below.

A3.  How properties in Vietnam are to be dealt with

54.  According to the 1956 Deed and 1957 Agreement, there should be 7 properties in Vietnam.  Based on property searches carried out by the Administrators, it would appear that in relation to 3 of the properties, there would be difficulties for claims to be made if the purported owner was a foreigner. It would also be difficult to make a claim to the 4^th property if the owner was a foreigner and the claim had not been filed before 1996.  The 5^th property could not be located.  The 6^th property was managed by Cinema Company but the operation had stopped since October 2003. No information could be obtained in relation to the 7^th property.

55.  The Administrators have been advised by a Vietnamese lawyer that in order to assess whether recovery of the properties was possible, documents evidencing ownership of the Deceased, such as title deeds, would be required. However, as the whereabouts of the 4^th son was unknown, no information or title deeds could be obtained from him. The Administrators’ attempt to obtain further information from other beneficiaries of the Estate met with no success.

56.  There is no legal opinion in support of §§54-55.

57.  According to the 5^th son (D3) and 8^th daughter, the properties in Vietnam had not been distributed to the beneficiaries but were confiscated by the governments.  That was why the properties are still registered in the name of the Deceased.

58.  In my view, there should be a difference in treatment between the properties in South Vietnam and North Vietnam.  The former should be governed by the 2 Documents and the latter by the Will.  Anyway, after lapse of 62 years, I consider that if any beneficiary still wants the Administrators to pursue investigation, he or she should inform the Administrators within 2 calendar months of the handing down of this judgment, provide further information regarding any or all of the Vietnamese properties and fund the investigation (or seek funding directions from the court).  In the absence of such steps of the beneficiaries, the Administrators shall cease investigation of the properties in North Vietnam and South Vietnam, unless otherwise directed.

A4.  How the PRC properties should be dealt with

59.  The 5 PRC properties had been demolished or redeveloped by third parties.  PRC lawyers have, on behalf of the Estate, successfully taken possession of several domestic units and a shop in exchange for one of the 5 landed properties.  The remaining 4 of the 5 landed properties are, after redevelopment, now being controlled and managed by the Chinese government. The PRC lawyers would only be able to advise on the merits on claims by the beneficiaries in those 4 properties and/or related compensation after further transaction history information could be obtained. That was the position in 2012.

60.  According to the Administrators, they were unable to have the apartments and shops registered in their names because PRC did not recognize the legal status of administrators appointed by the Hong Kong court.  The PRC lawyers advised that all the beneficiaries of an Estate should join together to carry out administration of and succession to an Estate in PRC.  They should make a collective application to the PRC government.  At present, it is beyond the powers of the Administrators to administer the properties in Mainland China. Again, there is no legal opinion in support.

61.  The properties in Mainland China are not covered by the 2 Documents. I direct thatany beneficiary who is still interested in pursuing the administration of these properties should inform the Administrator within 2 calendar months of the handing down of this judgment. Any beneficiary who fails to do so should be regarded as giving up his rights and claims to those properties.  The Administrators shall assist the beneficiaries who are interested to make a collective application to the PRC government to get back the properties in Mainland China as soon as possible.

A5.   Other properties to be taken into account

62.  In the course of her submission, Hiu Hung suggests that a property in Hillwood Road and Happy Valley (presumably those bought by Lam Mui and Chan Mui in Blue Pool Road) should form part of the Estate.  She asserts that the administrators have failed to carry out sufficient investigation into assets falling within the Estate.

63.  I am unable to accept these new assertions by Hiu Hung.  The address of the Hillwood Road property was not even identified in any of her affirmations. Even on her own case, the Blue Pool Road properties were purchased after the death of the Deceased and could well be part of the previous distribution to the relevant fong.  These properties should not form part of the Estate. Subject to what I had said about the PRC properties, the North Vietnam and South Vietnam properties, there is nothing to warrant further enquiry by the court.

B.  Whether married daughters are entitled to a share in the real properties

64.  The material parts of the Will are as follows:

“When all my sons and daughters have come of age and want to divide the Estate, only the real Estate under my name shall be allotted (to them) according to the ratio of two shares for each son and one share for each daughter and for Sin Man. (Fifteen shares in all.)

My properties may be divided, but the shops doing business shall never be divided. My wives and sons and daughters shall not open and establish two “Chiu Tai Kwong” drugstores in the same city, so as not to ruin (their) own business. Warning may be taken from the previous examples of Leung Choi Shun and Leung Kwok Ying. [I] hope my sons and daughters will do good.

‘Chiu Tai Kwong’ drugstore(s) shall permanently remain a company organization and shall not be divided. The allocation of shares shall be made in the same (proportion) as the allotment of the division of properties. (The shares) shall not be transferable to outsiders.

As soon as (any one of) my daughters is married, the share(s) belonging to her name shall be transferred to, and regarded as (part of), the Common Share…….

If after the will is made I should have some more children, (they) should also be entitled to two shares (of the Estate) in the case of males and to one share in the case of females.  All (their) other rights shall be the same as those enjoyed by their brothers and sisters.” 

(all italics added)

65.  I agree with the Administrators that the Deceased plainly intended that his real Estate be divided after his children had come of age and by allotting to his sons (except the 2^nd son) 2 shares each, and his daughters and the 2^nd son one share each.  He was survived by 5 sons and 8 daughters, hence there should be 17 shares altogether.

66.  Hiu Hung contends that once the daughters became married, their shares should be regarded as the common share.  I am unable to agree. Reading the Chinese version in context, the phrase “share(s) belonging to her name” clearly referred to the shares (股) in the business entity operating the drugstores, not the shares (分) in the real Estate. 

67.  I find that married daughters are entitled to a share in the real properties under the Will.

C.  Whether there had been prior distribution of the Estate to the exclusion of the 3^rd son (D2)

68.  Hiu Hung contends that since there had been prior distribution to the exclusion of her father, the remaining Estate in hands of the Administrators should be paid out to her father’s Estate solely. The defendants denied receipt of any part of the estate directly or indirectly.  They (except the 5^th son (D3)) denied knowledge of the 2 Documents.

69.  This is a factual dispute.  Resolution of it depended on the validity of the 2 Documents and what happened after their execution.

70.  The 2 Documents were signed by adults. It is not clear what the age of majority was in Vietnam.  For Hong Kong, it would have been 21 then.  If the 5^th son (D3) was born in 1939, he was aged 17 at the time the 1956 Deed was executed. The Will stated that by 1 January 1955, Sin Kuen (5^th son (D3)) would attain majority and that must have been the Deceased’s intention.  The 5^th son (D3) could vaguely remember being asked by his mother Chan Mui to sign a document in French.  She told him that it was in relation to his brother (the 2^nd son). The 5^th son (D3) signed without reading through the contents. He disclaimed the Chinese characters 趙善權 as his signature but he did not say who signed on his behalf.  In all probabilities, the 2 Documents were validly signed by the 5^th son (D3).

71.  There was prior allocation of specific assets to the wife and the 2^nd son for which they acknowledged receipt in the 2 Documents. 

72.  The 2^nd son received 1 million piastres (and Chiu So told the court at the hearing on 28 April 2016 before To J that it was after the death of the Deceased).  The Administrators could no longer ascertain the value of this amount.  However, a glimpse of the enormity of this amount could be made in the 2 Documents themselves:

(a) The Will provided that each of the wives, sons and daughters shall be paid 1,000 piastres per month in cash for board, lodgings, clothing, school fees and miscellaneous expenses.  One million piastres could support one person for over 83 years.

(b) The Will stated that, “if the yearly business profits exceeded 100,000 piastres, 30% should be donated to the Estate or charity organizations”;

(c) The 1957 Agreement stated that the shares that the Deceased had in the drugstore were worth 3,800,000 piastres.  The 1 million piastres was about 26% of the value of those shares.

73.  Parties to the 2 Documents accepted the assets allocated to them, in return giving up the others.  The arrangements were in full and final settlement of rights and claims to the Estate in Hong Kong, France and South Vietnam.

74.  The parties to the 1956 Deed treated it seriously enough as to have it signed by the Vice President of the Court of First Instance of Saigon.

75.  The 1956 Deed had stood for about 30 years before it was nullified.  The nullity only extended to the wife’s interest in the Derby Property.  All other appropriations under the 1956 Deed were not disturbed.  The 2^nd son did not return the 1 million piastres.  Restitution is not possible now since it is not possible to convert into current value.  The 2^nd son is not claiming anything now.  The 1957 Agreement was never declared void.  None of the defendants or those who have filed affirmations disputed their mother’s authority to represent them in 1956/57.

76.  Given such circumstances, the burden is on the defendants to show that the 2 Documents were of no effect and explain why they had not received distribution as alleged.

77.  The defendants’ evidence can be summarized as follows:

(a) According to the 3^rd and 5^th daughters, before the Deceased’s death, there were lots of houses and shops in Vietnam in the name of Chan Mui.  The Deceased had always told the 5^th daughter that those were temporarily under the name of Chan Mui and were not given to her entirely.  Chan Mui gave full power to the nephew of the Deceased (Chiu Ming) to handle.

(b) According to the 3^rd daughter Chiu Shuet Nung, after the death of the Deceased, the 2^nd son went to Vietnam and threatened the 3 wives (probably referring to the 3 concubines) to distribute the estate. Under security concerns, Chiu Ming (then executor) caused the 2 Documents to be signed.  The 2^nd son took 1 million piastres and Derby Property and left Vietnam.  Thereafter, each fong maintained the status quo, lived their own lives and did not really divide up the assets under the name of the Deceased.  The fact that Deloitte found that properties in Vietnam remained in the name of the Deceased was strong proof that there had been no distribution.

(c) According to the 3^rd daughter, if there had been distribution, then the Chan Mui fong already had over 50 shops and residential properties, the 5^th son had the Paris Apartment, Leung Yuet Chun fong and Lam Mui fong only had a cinema. According to the 8^th daughter, Chan Mui had taken all the assets. 

(d) Lam Mui recalled that Chiu Sin Ming (son of the Deceased’s brother) told her that the 2^nd son had forced Leung Yuet Chun to open the safe at the business premises and took an unknown amount of cash away. 

(e) The properties in Vietnam and Canton had remained in the name of the Deceased, indicating that there was no prior distribution. 

(f) According to the 5^th daughter, the drugstores in North Vietnam and South Vietnam had been confiscated.

(g) The defendants (and those siblings who had filed affirmations) struggled on their own without support from the Chiu family.

(h) According to the 8^th daughter, the Deceased had bought a property for the 3^rd son (D2) at Ferry Street.

(i) According to the 8^th daughter,“自南越解放後，南越的產業已被政府沒收，而解放後的工人當家作主，要求以年資計算補償，每一年補償三個月，工人工作年資由40年至60年不等，無奈我母親衹好用私人金錢作補償給他（她）們，致使我們陷入困境，一無所有。”

78.  When assessing such evidence, I had regard to the reality  that the widows had to raise their young families.  The children continued to receive education; some of them had lived in different countries (eg the 5^th son (D3)).  Where did the 3 fongs obtain financial support if not from the income of the businesses and other assets not distributed to the wife and the 2^nd son?

79.  The 5^th son (D3) and 3^rd daughter’s evidence in fact contradicted the defendants’ version.  The 5^th son (D3) confirmed that following the death of the Deceased, his livelihood was supported by monthly allowance derived from the profit of the family drugstore, pursuant to the terms of the Will. The 3^rd daughter confirmed that it was Chan Mui who supported the 1^st daughter who was studying in Paris, after the death of the Deceased. Such support would probably be appropriation, at least under the 1957 Agreement.

80.  Some of the workers must have been hired after the death of the Deceased to be able to accrue 40-60 years of service.   The business must have run on.

81.  The defendants have not been specific about the dates of confiscation of properties by the North and South Vietnamese governments but the irresistible inference was that the confiscation had come after the execution of the 2 Documents.  Otherwise, the family members would not have bothered to agree upon the terms therein.  

82.  On the other hand, Hiu Hung has put forth some evidence as to distribution:

(a) On a number of locations when the 1^st daughter visited the 3^rd son (D2) in Canton, the 1^st daughter had expressly acknowledged to him that the Deceased’s wives and other children including herself had entered into the 1956 Deed without his knowledge and had further divided up the Estate.

(b) The 1^st daughter had also admitted to the 3^rd son (D2) whilst the latter had moved to Hong Kong that the Estate had been divided amongst the Deceased’s wives and other children to the exclusion of the 3^rd son (D2); and that the 5^th son (D3)had received his share.

(c) Lam Mui and her daughter Chiu Hing Sheung also acknowledged to the 3^rd son (D2) and Hiu Hung that the Estate had been divided up among the Deceased’s wives and other children and that Lam Mui fong had already received their respective shares.

(d) JSM pointed out to the Administrators by a letter dated 20 December 2006 that the 4^th son had “admitted, in the course of [the HCA 6123/1995] proceedings, that certain division of the properties of the Estate, including properties in Vietnam, were effected.” At that time HCA 6123/1995 was still extant.  The Administrators could have verified JSM’s assertion and yet had not denied that there was such admission from the 4^th son.

(e) The 5^th son (D3) who had never worked (according to Hiu Hung’s father) was financially able to rent accommodation for the 3^rd son (D2)’s family when the 3^rd son (D2) first came to Hong Kong. 

(f) Chan Mui acquired No.38 Blue Pool Road (as admitted by the 5^th son (D3) and verified by land search) in 1957 in cash. That was soon after execution of the 2 Documents.

(g) Lam Mui did not work but she purchased No.40 Blue Pool Road (next to Chan Mui’s property) also in 1957 in cash.  It was more than just a coincidence with the preceding sub-paragraph.  It was later assigned to the 4^th daughter. These are verified by land search.

(h) In respect of the Lam Mui fong, the 3^rd daughter had leisurely life: residing in Vietnam in 1956-57; in Taiwan in 1957-59; 1960-1975 in Hong Kong and had been to Vietnam many times in the interim.  The 4^th daughter set up a beauty company with the support of her mother; then took up the property in Blue Pool Road.  Chiu Sin Ka studied in Canada, and returned to Hong Kong every summer to visit his family members.  I place little weight on this for lack of documentary proof, except in relation to the Blue Pool Road property.

(i) When the 5^th son (D3) went to Vietnam in 1973-74, he resided at No. 27, Boulevard Tong Doc Phuong, Cholon, Vietnam, indicating that the property had not been nationalized or confiscated then.

(j) The 5^th son (D3) had not worked, lived in Hong Kong, Paris, Taiwan, Japan (on 5^th son (D3)’s own evidence) and went to Switzerland and US.  His mother sold No. 38 Blue Pool Road on 22 January 1970 and a property was purchased by the 5^th son (D3) at Victoria Park Mansion in Causeway Bay 2 days later. However, I place little weight on such evidence as there is no independent proof of the source of money except in relation to the date of sale of the Blue Pool Road property.

83.  Hiu Hung claims that her father had never received his share.  The 3^rd daughter however asserted that his mother Chan Mui had purchased a property in the name of Ho Shuet in Kowloon Man Ying Building for the benefit of the 3^rd son (D2).  She claimed that Ho Shuet had returned the property to the 3^rd son (D2).  Hiu Hung denied, explaining that the unit in Man Ying Building was where her father resided when he first came to Hong Kong.  It never belonged to the 3^rd son (D2) and he never received rent.  The 3^rd daughter has not produced independent proof to contradict Hiu Hung and I do not accept the 3^rd daughter’s version.

84.  In my view, even if I were to ignore the evidence from Hiu Hung (except the land search results), the evidence of the defendants could hardly rebut the fact of prior distribution.  The fact that just the 5^th son or just Chan Mui had appropriated assets of the Estate or each fong just appropriated some of the assets could not affect the validity of the 2 Documents or rebut the fact that there had been prior distribution.  The position was consistent with their own intention stated in the 1956 Deed, ie that the beneficiaries would be free to maintain joint possession or divide among themselves.  See §17(d) above.

85.  The subsequent misfortune of confiscation could not have invalidated the 2 Documents and what was already distributed thereunder.   Rhind J’s order only applied to the distribution to the wife and in any case not the 1957 Agreement.

86.  The issue can be disposed of summarily without a trial. I find that there had been prior distribution under the 2 Documents to the exclusion of the 3^rd son (D2).

D.  How the assets in the hands of the Administrators should be distributed

87.  Given my findings in Section C, the various fongs (including the 5^th son (D3)) have given up their rights and claims against the Estate insofar as assets in Hong Kong, France and South Vietnam were concerned.  The only beneficiary remaining who can claim the funds in the hands of the Administrators would be the 3^rd son (D2). 

88.  The assets in North Vietnam and Mainland China were not covered by the 2 Documents and they should be allocated in accordance with the Will.

89.  The money in the Administrators’ hands comprised

(i) largely of real property, being proceeds of sale of the Derby Property, including the HK$1,470,600 that Hiu Hung had to put back to the pool of the Estate; and

(ii) a small portion of residual personal property (about HK$400,000), being proceeds of sale of shares and bank balances from Mainland China and Hong Kong; it is not covered by the Will but by the 2 Documents.

90.  Both items shall be distributed to the 3^rd son (D2) solely.

91.  For completeness sake, if I am wrong and paragraphs 3(c) and (d) should be adopted, I have taken into account the following.  The 4^th son is missing.  He has not reimbursed the Estate for Hiu Hung’s costs under Yam J’s order dated 27 October 2003.  Further, he had not kept proper accounts and records whilst he was an administrator.  There had been possible misappropriation of rental income from the Derby Property to the tune of HK$13 million, which the 4^th son used for his own purpose.  The supporting documents did not support the entire amount claimed by the 4^th son for legal and professional fees and entertainment expenses.

92.  Therefore, I direct that anything that the 4^th son can receive from the Estate (including properties in PRC, North Vietnam and South Vietnam) shall be applied in the following order of priority:

(a) Towards payment of costs in HCA 6123/1995;

(b) Towards payment of costs in the present proceedings; and

(c) Any residue shall be distributed to the other 16 beneficiaries equally.

Conclusion

93.  The amount of $1,470,600 but not the Paris Apartment should be put back into the pool of the Estate.  I make an order that the cash (about HK$39 million) now in the hands of the Administrators should be distributed to the 3rd son (D2) solely (§90 above).

94.  In respect of the properties in North Vietnam, South Vietnam and Mainland China, I give directions in accordance with §§58 and 61 above.

95.  I find that under the Will, married daughters are entitled to a share in the real properties.

96.  The Administrators shall have their costs out of the Estate before distribution.  The defendants have conducted themselves properly in putting forth facts for the court’s consideration.  Their costs on common fund basis should be borne out of the Estate.  Hiu Hung’s costs should be indemnified by the Estate as her pursuit of the claim was proper and assistance to the court useful.   All costs should first be paid out of item (ii) in §89 and then item (i).  The 4^th son shall indemnify the Estate on costs as his abscondment without proper accounts has made administration of the Estate more difficult than it should be.  I make an order nisi in accordance with this paragraph.

97.  There shall be liberty to apply.  Any further directions sought as regards the PRC properties, the North Vietnam and South Vietnam properties must be fixed for hearing no later than 31 December 2017.

OTHER MATTERS

98.  The preparation of this case was deficient due to the lack of legal opinions on the status of foreign properties.

99.  Where there are many beneficiaries, those representing the Administrators should have prepared a dramatis personae setting out their names and relationships and in this case, the Vietnamese names as well (for easy reference to the 2 Documents). With so many affirmations filed, the lawyers should have summarized the competing versions, if anything, to assist the court in deciding whether to summarily dispose of the dispute or give directions, and to facilitate judgment writing.

100.  On preparation of hearing bundles, an index of documents that only stated the exhibit numbers without description of documents is useless.  It does not facilitate the finding of exhibits or verification of facts.

101.  Bundles A to C should each start from page one.  Pagination like page 101-83, etc is clumsy.  Care must be taken to ensure that the bundles are well copied. Blur copies (especially handwritten ones) should be replaced or typed up. There are missing pages of important documents in the bundles and the court has to write to ask for them.

Table 1: Names of family members and their status as parties