LAM MO CHU SUSIE v. LAM SIK YING VICTOR, ADMINISTRATOR OF THE ESTATE OF LAM TIM ALIAS STAN LAM TIM, DECEASED

HCA 1974/2015
[2018] HKCFI 97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1974 OF 2015

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D E C I S I O N

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1.  This is the 1^st Defendant’s application for a stay of execution of the judgment herein dated 4 September 2017 (“the Judgment”) until the disposal of his appeal therefrom under his Notice of Appeal dated 9 October 2017.

2.  The 1^st Defendant was the administrator of the Estate of Lam Tim (林添) alias Stan Lam Tim, deceased (“the Deceased”). By the Judgment, the court terminated the appointment of the 1^st Defendant as administrator of the Estate, appointed Mr Ng Kin Yuen as new administrator of the Estate, and ordered the 1^st Defendant to account to the new administrator his dealings with the Estate and any assets therein.

3.  The background facts of this case were set out in a written judgment given after trial in HCA 1605/2004 and HCA 894/2011 (“the Actions”) dated 3 October 2016, and will not be repeated here.

4.  The reasons for removing the 1^st Defendant as administrator of the Estate were set out in a written decision (“the Decisions”) herein handed down on 4 September 2017. In particular, the court was of the view that:-

(1) The 1^st Defendant committed a very serious breach of fiduciary duty in his undervalue sale of No 6 Sharp Street East, Hong Kong (“the Property”), the principal asset of the Estate, to Advance Property Holding Limited (“APHL”), a company apparently owned or controlled by the 2^nd Defendant (see paragraph 15 of the Decision).

(2) The administration of the Estate of the Deceased, including –

(a) sale of the Property and distribution of the proceeds of sale thereof to the beneficiaries;

(b) enforcement of the account against APHL for recovery of the rents and other income (if any) received by APHL from the Property as from 8 February 2007, less certain deductions, pursuant to the consent judgment dated 15 May 2015 made in the Actions; and

(c) vetting of the 1^st Defendant’s claim for reimbursement of expenses allegedly incurred by him on behalf of the Estate,

ought to be carried out and completed as soon as practicable having regard to the fact that the Deceased passed away more than 34 years ago and administration was first granted to the 1^st Defendant and his mother more than 18 years ago.  However, if the 1^st Defendant should continue as administrator of the Estate, the likelihood was that the disputes amongst the beneficiaries would continue and there would be no end in sight (see paragraphs 16 and 17 of the Decision).

5.  The principles governing an application for a stay of execution of a judgment pending appeal are well established.

(1) The applicant is required to demonstrate a “good reason” for a stay of execution.

(2) Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay.  It is the minimum requirement before a court would even begin to consider granting a stay.

(3) If the court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.

(4) On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.

(5) In most cases, where the court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.

(6) Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.   

(7) In considering an application for a stay pending appeal, it would be impractical and even undesirable for the court to go deeply into the merits or strengths of the appeal, although the court must still form a preliminary view of these aspects.

For the above principles, see the judgment of Ma J (as he then was) in Stay Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.

6.  In the 1^st Defendant’s Notice of Appeal, three grounds of appeal are raised.

7.  The first ground contends that the court erred in entering final judgment against the 1^st Defendant and/or concluding that there was no triable issue in the case.  No further reason or detail is given in support of this ground.

8.  The second ground contends that the court erred in law in failing to find that it was procedurally wrong for the Plaintiff to apply for summary judgment, or apply to remove the 1^st Defendant as administrator of the Estate. Again, no further reason or detail is given in support of this ground.

9.  It is plain that neither the first, nor the second, ground of appeal is arguable or has any reasonable prospect of success.

10.  The third ground contends that the court ought to have found that there are triable issues in the case:-

(1) Sub-paragraph (a) states that “[o]n the ground that the Administrator having sold the Property at undervalue, there are findings made in HCA 1605 of 2004 and HCA 894 of 2011 already.”  This paragraph is unintelligible and cannot possibly give rise to any arguable ground of appeal.

(2) Sub-paragraph (b) contends that the 1^st Defendant’s delay in rendering an account was caused by the 3^rd Defendant, that the 1^st Defendant has, allegedly “already accounted for the receipts and outgoings”, that “he had already accounted for the Estate’s income as from 1983 to 2003”, and that “the accounts had been filed [with] the court and served [on] the parties in 2012”. It should be noted, however, that the Court’s decision to remove the 1^st Defendant as administrator of the Estate was not based on his failure to render a proper account.  The question of whether the 1^st Defendant has rendered a proper account is, I understand, in dispute, and is a matter which may well have to be decided by the court in future.

(3) Sub-paragraph (c) contends that the 1^st Defendant has “paid all estate expenses” and “advanced money to pay off the Estate debts”.  As mentioned in the Decision, I consider that the expenses allegedly incurred by the 1^st Defendant on behalf of the Estate ought to be properly vetted, and the vetting ought to be carried out by an independent administrator (see paragraph 17(2) of the Decision).

(4) Lastly, sub-paragraph (d) relates to the Plaintiff’s complaint of conflict of interest, and the 1^st Defendant contends that he “is entitled to assert that his own mother was a wife of the Deceased as a matter of fact”.  Again, it should be noted that the decision to remove the 1^st Defendant as administrator of the Estate was not based on any perceived conflict of interest on his part arising from the status of his mother.

11.  In all, I am not satisfied that the 1^st Defendant has shown any arguable ground of appeal.

12.  At the hearing on 18 January 2018, the 1^st Defendant also relied upon various matters in support of his application for a stay pending appeal, including the following:-

(1) the tenant of the Property moved out at the end of October 2017 upon the expiry of the tenancy with a few months of rent being in arrears, and the 1^st Defendant said that it would be difficult for the new administrator to recover the outstanding rent because he was not a party to the tenancy agreement;

(2) due to the old age of the Property, it would be difficult for the new administrator to renew the fire and liability insurance policies for the Property which expired in November 2017, or purchase new policies for the Property; and

(3) the 1^st Defendant had received various enquiries from estate agents for leasing or purchasing the Property and he should be permitted to handle the lease or sale of the Property.

13.  The above matters seem to me to fall within the ordinary scope of duties of an administrator.  I see no reason why Mr Ng would not be able to deal with them appropriately after obtaining a grant from the court.

14.  The 1^st Defendant also said that the appointment of Mr Ng was only “prospective”, and had not taken effect pending the outcome of his appeal against the Judgment.  I should point out that generally speaking a judgment is effective as soon as it is given.  The existence of an appeal does not operate as an automatic stay of the judgment.

15.  I do not consider that the 1^st Defendant’s appeal will be rendered nugatory if the Judgment is not stayed pending his appeal.  Neither am I able to see any other good reason to stay the Judgment pending the 1^st Defendant’s appeal.

16.  For the foregoing reasons, the 1^st Defendant’s Summons dated 3 November 2017 is dismissed with costs to the Plaintiff, to be taxed if not agreed.

HCA 1974/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1974 OF 2015

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____________

__________________

D E C I S I O N

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APPLICATIONS

1.  By a summons issued under Order 14 of the Rules of the High Court (Cap 4A) and Section 40 of the Probate and Administration Ordinance (Cap 10) dated 26 January 2017 (“the Judgment Summons”), the plaintiff seeks:-

(1) summary judgment against the 1^st defendant for, inter alia, the following relief:-

(a) the termination of the 1^st defendant’s appointment as administrator of the estate (“the Estate”) of Lam Tim (林添) alias Stan Lam Tim (“the Deceased”) pursuant to the Letters of Administration, Grant No HCAG000498/1999, dated 24 March 1999;

(b) the appointment of Mr Herbert Tsoi of Herbert Tsoi & Partners as new administrator of the Estate; and

(c) the 1^st defendant do render an account to the new administrator in respect of his dealings with the Estate and any assets therein;

(2) alternatively, Mr Herbert Tsoi be appointed to act as administrator pendete lite of the Estate pursuant to section 40 of the Probate and Administration Ordinance, Cap 10, until the determination of this action.

2.  The Judgment Summons first came before this court on 31 March 2017 for a 30-minute hearing.  In view of the fact that the court was in the middle of hearing another trial on that date, the plaintiff’s former counsel (Mr Nelson Miu) was given the option of proceeding with the application limited to his submissions only or having the plaintiff’s summons adjourned to another date to be fixed for full arguments.  Mr Miu chose the former course.  Mr Miu further informed the court that the plaintiff would abandon her alternative application for the appointment of an administrator pendete lite.  Accordingly, the court heard Mr Miu’s submissions only on 31 March 2017.  The plaintiff’s part-heard summons came before the court again on 24 August 2017.

3.  Prior to the resumed hearing, the plaintiff issued a summons on 8 August 2017 (“the Amendment Summons”) seeking to amend the Judgment Summons to apply for the following relief (instead of the relief mentioned in paragraph 1(1)(b) and (2) above):-

(1) the plaintiff be appointed to act as administrator of the Estate;

(2) alternatively, the plaintiff and Mr Ng Kin Yuen of Messrs Liu, Chan and Lam be appointed to act jointly as administrators pendete lite of the Estate until the determination of this action.

4.  For reasons which I shall briefly explained below, Mr Richard Yip (for the plaintiff) informed the court at the hearing on 24 August 2017 that the plaintiff would not pursue the Amendment Summons, but would seek the appointment of Mr Ng King Yuen, instead of Mr Herbert Tsoi, as the new administrator.

5.  On 21 August 2017, the 1^st defendant issued a summons seeking leave to file and serve his 2^nd affirmation dated 18 August 2017.

BACKGROUND FACTS

6.  The parties to this action have been litigating against each other for a long time.  The background facts were set out in a judgment given by this court after trial on 3 October 2016 (“the Judgment”) in HCA 1605/2004 and HCA 894/2011 (“the Actions”), and will not be repeated here.  A brief outline of the parties’ disputes arising from the 1^st defendant’s sale of No 6 Sharp Street East, Hong Kong (“the Property”), an asset belonging to the Estate, to Advance Property Holding Limited (“APHL”), a company apparently owned or controlled by the 2^nd defendant, was given in an earlier decision of this court dated 18 July 2016 dismissing a previous application by the plaintiff for the appointment of an administrator pendete lite.

7.  In her statement of claim filed herein on 28 August 2015, the plaintiff raised the following complaints against the 1^st defendant in support of her claim for the removal of the 1^st defendant as administrator of the Estate, namely:-

(1) his sale of the Property at an undervalue;

(2) his failure to render accounts;

(3) his claim of unjustified expenses against the Estate;

(4) his conflict of interest; and

(5) his residence outside the jurisdiction.

8.  At the hearing on 31 March 2017, Mr Miu informed the court that, for the purpose of the Order 14 application, the primary ground of the plaintiff’s application was the 1^st defendant’s breach of fiduciary duties in relation to the sale of the Property.  Mr Miu submitted that ground alone was sufficient to justify the court removing the 1^st defendant as administrator of the Estate, and that the plaintiff would not rely on the allegations in respect of (i) his failure to render accounts, or (ii) his residence outside the jurisdiction in support of her application.  Mr Richard Yip, who appeared for the plaintiff at the hearing on 24 August 2017, confirmed that the plaintiff would abide by the above concessions made by Mr Miu, and also that the plaintiff would not proceed with the alternative application for the appointment of an administrator pendete lite.

9.  In the Judgment, the court found that the 1^st defendant clearly acted in breach of fiduciary duties owed to the Estate in relation to the sale of the Property to APHL in the following aspects:-

(1) he failed to properly advertise the Property for sale;

(2) he failed to obtain any updated valuation of the Property from a professional valuer prior to entering into agreements for the sale of the Property to the 2^nd defendant or APHL;

(3) he insisted on including a 7-year non alienation condition in the sale of the Property, which would likely depress the value that he could obtain from selling the Property, whether to an outsider or to a beneficiary of the Estate;

(4) he sold the Property to the 2^nd defendant/APHL on terms which were unduly favourable to the purchaser;

(5) he sold the Property on advantageous terms to APHL because he was motivated by (i) a desire to favour Madam Wong’s branch of the Lam family (of which he is also a member), and (ii) his wish to recover the outstanding indebtedness which he considered the Estate to be owing to him;

(6) he sold the Property to APH at an undervalue; and

(7) other instances of breach of fiduciary duties in relation to the sale of the Property.

See paragraphs 133 to 140 of the Judgment.

10.  At paragraph 152 of the Judgment, the court stated the following conclusion:-

“In all, I find that Victor acted in breach of the fiduciary duties that he owed to the Estate in relation to the sale of the Property to APH. In view of the consent judgments against APH, it is not necessary for me to find whether APH knowingly assisted Victor in his breach of fiduciary duties. Had it been necessary to do so, I would have no difficulty in finding ‘knowledge’ and ‘assistance’ on the part of APH.”

11.  I have been given to understand that there is no appeal against the Judgment.

DISCUSSION

12.  The principles for summary judgment are well established, and I do not propose to set them out here.

13.  Section 33(3) of the Probate and Administration Ordinance (Cap 10), which empowers the court to remove an administrator, states as follows:-

“The court may, if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require, suspend or remove an executor or administrator (other than the Official Administrator) and provide for the succession of another person in place of such executor or administrator and for the vesting in that other person of any property belonging to the estate.”

14.  In Chow Chak Kiu v Chow Man Chi and Others, HCMP 797/2016 (17 January 2017), at paragraphs 52 to 56, I set out the applicable principles for removal of an administrator under that section.  In particular:-

(1) When deciding whether to remove an administrator, the proper question to ask is whether the removal is necessary for the due and proper administration of the estate and whether it is in the interests of the beneficiaries for the administrator to be removed.

(2) It is not necessary to establish specific wrongdoing, misconduct or fault on the part of an administrator before he can be removed, although obviously wrongdoing, misconduct or fault would be relevant considerations (see Re Estate of Kwan Chung [2013] 6 HKC 29, at paragraph 15 per Poon J (as he then was); Cheng Tang Kam Yung v Tang Kam Cheung, HCMP 147/2008 (26 August 2013), at paragraph 62 per DHCJ Leung; Leung Wing Hong v Leung Yiu Cho, HCMP 1473/2014 (11 August 2016), at paragraph 64 per B Chu J).

(3) When deciding whether to exercise its power under Section 33(3) to remove an administrator, the court should also have regard to the size of the estate, the nature of the assets to be administered, and the background, education, training and experience of the remaining personal representatives (if any) (see Cheng Tang Kam Yung, at paragraph 22; Leung Wing Hong, at paragraph 134).

15.  In the present case, in view of the court’s aforesaid findings in the Judgment, in particular those referred to in paragraph 9(4), (5) and (6) above, and bearing in mind that the Property represented the single most important asset of the Estate, the 1^st defendant’s breach of fiduciary duties is, in my view, very serious.

16.  Currently, the Property is still held by the Estate.  It is a very valuable asset. According to the 1^st defendant, he received a written offer, accompanied by a valuation report prepared by S H Ng & Co valuing the Property at HK$200 million, dated 20 February 2017 for the purchase of the Property at the price of HK$250 million.  The 1^st defendant has pointed to various matters to cast doubt on this offer.  However, irrespective of the offer, having regard to the current rental payable by the tenant of the Property (at HK$215,000 per month), it cannot seriously be doubted that the open market value of the Property would be very substantial.  It is also clear that the Property ought to be sold, and the proceeds of sale thereof distributed to the beneficiaries, as soon as practicable bearing in mind that the Deceased passed away more than 34 years ago, and administration was first granted to the 1^st defendant (and his mother) more than 18 years ago.  It is, however, apparent from recent correspondence amongst the beneficiaries that they are still at loggerheads with each other, and have not been able to agree on matters such as renewal of tenancy or sale of the Property.  If the 1^st defendant should remain as administrator of the Estate, the likelihood is that the disputes amongst the beneficiaries will simply continue with no end in sight.

17.  Further, there are on-going matters to be handled by the administrator on behalf of the Estate in relating to the Property, including (i) enforcement of the account against APHL for recovery of the rents and other income (if any) received by APHL from the Property as from 8 February 2007, less certain deductions, pursuant to the consent judgment dated 15 May 2015 made in the Actions, and (ii) the 1^st defendant’s claim for reimbursement of expenses allegedly incurred by him on behalf of the Estate which are disputed by the plaintiff.

(1) In relation to the account, I am given to understand that there are currently disputes with APHL as regards the scope or extent of the permissible deductions.  The parties are, however, unable to agree on who should take action to enforce the account against APHL.  The plaintiff considers that the 1^st defendant, being the administrator of the Estate, ought to take action, whereas the 1^st defendant considers that the plaintiff, being the successful claimant in HCA 894/2011, has the carriage of the proceedings and ought to apply to the court for directions in that action to enforce the account against APHL.

(2) In relation to the 1^st defendant’s claim for reimbursement of expenses, it seems to me to be clear that the alleged expenses have to be properly vetted, and the vetting ought to be carried out by an independent administrator.  Any unresolved disputes will eventually have to be determined by the court.

18.  In all circumstances, I consider it to be clear that the removal of the 1^st defendant as administrator of the Estate is necessary for the due and proper administration of the Estate, and in the interests of the beneficiaries of the Estate, and that an independent administrator ought to be appointed to wind up the affairs of the Estate as soon as practicable.

19.  On behalf of the 1^st defendant, Ms Alice Mok SC has raised a number of points to resist the plaintiff’s application for removal of her client as administrator of the Estate.

20.  First, Ms Mok argues that there is no risk of dissipation of assets belonging to the Estate, and no risk of loss or damage to the Estate should the 1^st defendant be permitted to continue to act as administrator of the Estate.  I accept that there does not appear to be any immediate risk of (i) dissipation of assets, or (ii) loss or damage to the Estate, should the 1^st defendant’s appointment as administrator of the Estate be permitted to continue.  However, although the existence of a risk of dissipation, or loss or damage, would be a good reason to remove an administrator, the absence of such risk does not mean that the administrator would necessarily be permitted to continue to act as such.  In other words, the existence of a risk of dissipation, or loss or damage, is not a condition precedent for the removal of an administrator.

21.  Second, Ms Mok submits, by reference to paragraphs 9 to 15 of the plaintiff’s 2^nd affirmation, that “it would appear that she is relying solely on the ground of D1’s failure to take immediate action against APHL to give proper account in respect of the undervalue sale to support her Order 14 Summons”.  However, my reading of paragraph 15 of the plaintiff’s 2^nd affirmation is that she also relies on the 1^st defendant’s breach of fiduciary duties in relation to the sale of the Property to APHL, referred to in paragraph 8 thereof, as one of the matters in support of her Order 14 application.  Further, as earlier mentioned, Mr Miu made it clear at the hearing on 31 March 2017 that was the primary ground of the application. 

22.  Third, Ms Mok argues that the plaintiff has not, in her affirmation filed in support of the Order 14 application, verified the facts and basis for the various breaches as pleaded in paragraphs 8 to 47 of the Statement of Claim, nor has she affirmed to the fact that it is her belief that there is no defence to the said breaches, as required by Order 14 rule 2(1) of the Rules of the High Court.

23.  In her affirmation filed on 26 January 2017 in support of the Order 14 application, the plaintiff referred to the Judgment which established the 1^st defendant’s breach of fiduciary duties in relation to the sale of the Property to APHL (paragraph 8), and stated that she believed that the 1^st defendant had no defence to the action (paragraph 15).  It seems to me that there has been sufficient compliance with the formal requirements for a summary judgment application under Order 14 rule 2(1) of the Rules of the High Court.  In any event, if the plaintiff has failed to comply with the formal requirements under the rule, such failure would be an irregularity only.  Since I do not consider the 1^st defendant to have suffered any prejudice of substance as a result of such failure, I would have no hesitation in waiving the non-compliance under Order 2 rule 1 the Rules of the High Court and/or granting the plaintiff leave to file a further affirmation to address the formal deficiency.

24.  Fourth, Ms Mok reminds the court that it must be very “cautious and sparing” in the exercise of its powers to remove an administrator, and that “not every mistake, neglect of duty or inaccuracy of conduct will cause a removal of the representative”.  I accept these to be relevant and applicable principles. However, in view of the matters mentioned in paragraph 15 to 17 above, I consider the removal of the 1^st defendant as administrator of the Estate to be clearly justified.

25.  Lastly, the 1^st defendant says that he has incurred substantial expenses on behalf of the Estate in the course of his administration and he wishes to claim what is due to him by the Estate (by way of set off against rentals received by him on behalf of the Estate).  I am by no means satisfied that all the amounts claimed by the 1^st defendant can properly be justified.  I do not, however, have to determine this matter, because it can, and should, be dealt with in the course of the account which the 1^st defendant shall render in relation to his administration of the Estate.

26.  In all, I am of the clear view that the 1^st defendant has no arguable defence to the plaintiff’s claim for his removal as administrator of the Estate.  Taking into account the 1^st defendant’s serious breach of fiduciary duties owed to the Estate (in respect of which there can be dispute in view of the fact that he has not appealed against the Judgment) and the circumstances referred to in paragraphs 16 and 17 above, I believe the removal of the 1^st defendant is clearly necessary for the due and proper administration of the Estate, and in the interests of the beneficiaries of the Estate.  No useful purpose would be served by granting the 1^st defendant leave to defend, which would merely delay the completion of the administration of the Estate, which I consider to be long overdue.

CHOICE OF ADMINISTRATOR

27.  Originally, the plaintiff put forward Mr Herbert Tsoi as the new administrator of the Estate.  Mr Tsoi is a well-known probate practitioner who would be qualified to act as the administrator of the Estate.  By the Amendment Summons, the plaintiff put herself forward instead, apparently because she is concerned about the potential costs of Mr Tsoi’s appointment.  At the hearing on 24 August 2017, I pointed out to Mr Yip that I had certain reservations about appointing the plaintiff as the new administrator.  I do not propose to go into the details of my reservations in view of the plaintiff’s decision to withdraw the Amendment Summons.  As earlier mentioned, the plaintiff now puts forward Mr Ng Kin Yuen of Messrs Liu, Chan and Lam as the proposed new administrator.  Mr Ng has confirmed that he is prepared to act, and has agreed to cap his fees to 1% of the gross value of all the properties which form the Estate to be administered by him, exclusive of disbursements actually incurred.  Ms Mok accepts that Mr Ng is an experienced probate practitioner, and has not suggested that he is not suitable to be appointed in the present case.  Notwithstanding the potential costs of a professional administrator, I consider that the new administrator ought to be an independent third party unrelated to the Lam family.  Mr Ng seems to me to be an appropriate candidate.

DISPOSITION

28.  I grant leave to the plaintiff to withdraw the Amendment Summons.  The plaintiff shall pay the 1^st defendant’s costs of and occasioned by the Amendment Summons, to be taxed if not agreed with certificate for one counsel.

29.  I grant leave to the 1^st defendant to file and serve his 2^nd affirmation under his summons dated 21 August 2017.

30.  I make an order in terms of paragraphs 1, 2, 3, 4, 6 and 7 of the Judgment Summons, save that (i) Mr Ng Kin Yuen instead of Mr Herbert Tsoi shall be appointed as new administrator of the Estate, and (ii) Mr Ng’s fees shall be subject to Section 60 of the Probate and Administration Ordinance. 

31.  I make an order nisi that (i) the costs of the 1^st defendant’s summons dated 21 August 2017 shall be treated as forming part of the costs of the Judgment Summons, and (ii) 70% of the plaintiff’s costs of and occasioned by the Judgment Summons shall be paid by the 1^st defendant, to be taxed if not agreed with certificate for counsel.  The reduction is on account of the plaintiff’s abandonment of the application for the appointment of administrator pendent lite.  The plaintiff’s own costs during the period when she was legally aided shall be taxed in accordance with legal aid regulations.

32.  Lastly, I give the parties liberty to apply for further directions, if necessary.

HCA 1974/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1974 OF 2015

____________

____________

__________________

D E C I S I O N

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APPLICATION

1.  This is the plaintiff’s application for, inter alia, an order that:-

(1)   the appointment of the 1^st defendant as administrator of the estate (“the Estate”) of Lam Tim (林添) alias Stan Lam Tim (“the Deceased”) pursuant to Letters of Administration dated 24 March 1999 (Grant No HCAG 000498/1999) (“the Grant”) be suspended until the determination of this action; and

(2)   Mr Herbert Tsoi of Herbert Tsoi & Partners be appointed to act as administrator pendete lite of the Estate pursuant to section 40 of the Probate and Administration Ordinance, Cap 10, until the determination of this action.

BACKGROUND FACTS

2.  The disputes between the parties to this action have a long history and are of some considerable complexity.  They have generated a number of court actions with the present being, I understand, the latest one.  For the purpose of disposing of the plaintiff’s present application, the following brief summary of facts should suffice.

3.  The plaintiff, the 1^st, 2^nd and 3^rd defendants are siblings and are beneficiaries of the Estate of the Deceased, who died intestate in Hong Kong on 6 January 1983.

4.  Other beneficiaries of the Estate include: (i) Lam Mo Chun, a daughter of the Deceased, who passed away in or about January 2003, and (ii) Madam Wong Kwan Ying (“Madam Wong”), who described herself as the concubine of the Deceased in an affirmation dated 18 January 1999 and filed in support of the application by her and the 1^st defendant for the Grant.  Madam Wong passed away on 7 June 1999.  In addition, there is a person by the name of Lam Mo Ling Mary, in respect of whom there is a dispute as to whether she qualifies as a beneficiary of the Estate.

5.  One of the major assets of the Estate is a property known as No 6 Sharp Street East, Hong Kong (“the Property”).  By a sale and purchase agreement dated 11 June 2004 and an assignment dated 8 February 2007, the Property was purportedly sold by the 1^st defendant, as the sole surviving administrator of the Estate, to a company known as Advance Property Holding Limited (“APHL”) for the consideration of HK$10,810,000.

6.  APHL was, and is, apparently owned or controlled by the 2^nd defendant. It is, however, the case of the plaintiff and the 3^rd defendant that APHL was in fact the nominee of the 1^st defendant, and the purported sale of the Property by him (in his capacity as administrator of the Estate) to APHL was an improper transaction.  By HCA 1605 of 2004 and HCA 894 of 2011, the 3^rd defendant and the plaintiff respectively took action against the 1^st defendant and APHL to challenge the purported sale of the Property.

7.  The two actions were consolidated, and the trial of the consolidated action took place in April and May 2015 and May 2016, with a long gap in between because the original dates allotted for the trial of the consolidated action proved to be insufficient.  In the middle of the trial, APHL consented to judgment being entered against it.  The consent judgment dated 15 May 2015 (“the Consent Judgment”) provided, amongst other things, that:-

(1)   the sale of the Property to APHL be set aside;

(2)   an account be taken of the rents and other income (if any) received by APHL from the Property from 8 February 2007 less (a) the government rent and rates, property tax, and other expenses and outgoings (if any) discharged by APHL in respect of the Property, and (b) the purchase monies paid by APHL for the Property; and

(3)   APHL do pay to the Estate any sum found to be due upon the taking of such account.

8.  The action against the 1^st defendant continued.  At the conclusion of the trial, judgment was reserved and is current pending.

9.  By reason of the Consent Judgment, APHL is liable to account to the Estate for the rental income derived from the Property that it has received since 8 February 2007.  It is not in dispute that the Property has, since April 2003, been let to a tenant called Onluck Corporation Ltd (“Onluck”) pursuant to a number of tenancy agreements.  According to the plaintiff, APHL is liable to pay to the Estate a sum of approximately HK$13.5 million in respect of the rents that it received from Onluck during the period from 8 February 2007 to April 2015.  The plaintiff complains, however, that the 1^st defendant has done nothing to recover the same from APHL.

10.  In passing, I should mention that the rental income from May 2015 to March 2016, in the total sum of HK$2.8 million, has been paid by the 1^st defendant into court on 22 March 2016.  In so far as the rents paid by Onluck since April 2016 (at the rate of HK$215,000 per month) are concerned, they have been received by the 1^st defendant.  In the course of the hearing this morning, Mr Nelson Miu (for the plaintiff) made it clear that his client takes no issue with the 1^st defendant’s receipt of the rents from Onluck since April 2016.

GROUNDS OF APPLICATION

11.  Two grounds have been advanced by Mr Miu in support of the present application.

12.  First, Mr Miu says that the 1^st defendant, as administrator of the Estate, is under a duty to enforce the Consent Judgment against APHL, in particular the taking of the account of the rents and other income which APHL has derived from the Property since 8 February 2007 and payment of the amount due upon the taking of such account.  The 1^st defendant has, however, failed to take any positive action since the date of the Consent Judgment, and his excuse for his failure to take action is wholly insufficient or unsustainable.

13.  Second, Mr Miu refers to an earlier action commenced by the 1^st defendant against the 3^rd defendant (HCA 4713/2001) in which the 1^st defendant seeks an account in respect of assets belonging to the Estate which it is alleged had been received or handled by the 3^rd defendant prior to the 1^st defendant’s appointment as administrator of the Estate.  Mr Miu argues that an independent administrator should be appointed for the Estate to review the merits of the application and decide whether it would be in the interest of the Estate to proceed with that action.

Discussion

14.  It is well established that the court has a discretion to appoint an administrator pendete lite when it is necessary or expedient to do so.  In Hung Jin Mui v Tang Chui Yuk Angela, HCAP 4/1997 (11 February 1998),  Le Pichon J (as she then was) stated as follows:-

“The leading textbooks on the subject have little to say. Some refer to necessity, others to expediency. In my judgment, whether one uses the term ‘necessity’ or ‘expediency’, I do not think that the court would make an order without regard to or wholly divorced from the actual circumstances of the case, namely the assets comprised in the estate and whether they warrant the appointment of an administrator pendente lite. It is apparent from a proper reading of the passage quoted from Bellew v. Bellew that an appointment is not an automatic consequence of a bona fide suit pending, regardless of the condition or nature of the estate; rather such an appointment would be made by reference to and if warranted by the particular facts. It follows that the nature of the assets comprised in this estate is of critical importance.”

15.  In Cheung Ting Kau Vincent v Koo Siu Ying and Another, HECA 25/2013 (18 February 2016), Deputy High Court Judge Kee Yee, after quoting from the above judgment of Le Pichon J, stated in paragraph 85 of his judgment as follows:-

“After considering the assets as disclosed in the evidence, Le Pichon J identified two usual concerns with the principles laid down by Lord Greene in Re Bevan [1948] 1 All ER 271 in mind. First, the court should see whether there is a likelihood of dissipation or jeopardy of assets (which was not a consideration in that case given the undertaking by the defendant) and secondly whether there is a need to collect the ‘fruit of theestate’.”

16.  Whilst not exhaustive, it is clear that two of the factors that the court would usually have regard to in this type of applications are: (i) likelihood of dissipation or jeopardy of assets, and (ii) whether there is a need to collect the ‘fruit of the estate’.

17.  I now turn to the circumstance of the present case.  In respect of the first ground relied upon by the plaintiff, I accept that the 1^st defendant has failed to give any good or sufficient explanation for his failure to take action to enforce the Consent Judgment against APHL.  According to the 1^st defendant, he has been “spending a good amount of time to request for and with a view to check the account(s) of APHL, its tax returns and expenses claimed as those are my duties as an Administrator” (see paragraph 12 of the 1^st defendant’s affirmation filed on 20 April 2016).  The 1^st defendant further states, in paragraph 13 of his affirmation, that:-

“As to the account(s) of APHL in the past years, I was told by the 2^nd defendant that its account(s) were submitted to the accountant for auditing. The accountant is now looking into the account(s) of APHL. This step is under process and it takes some time to finish after enquiries made. In turn, the accountant has to explain to me the accounts of APHL. After the accounts are prepared, the audited account(s) of APHL would be submitted to Inland Revenue Department for taxation purpose. If Inland Revenue Department has approved the account(s) provided by APHL, the 2^nd defendant can provide one copy to the parties and the court for reference, if it required, as I was told.”

18.  In my view, it is no part of the duty of the 1^st defendant, as administrator of the Estate, to examine or investigate the internal accounts or tax returns of APHL, or enquire into whether APHL has prepared proper audited accounts and tax returns.  The 1^st defendant’s duty is to see that APHL renders a proper account in accordance with the Consent Judgment and pays to the Estate the amount found to be due upon the taking of such account. If APHL wishes to claim any deductible expenses or outgoings in the taking of the account, it is for APHL to substantive such expenses or outgoings.  The 1^st defendant should, I believe, have taken prompt action to compel APHL to give the account as required by the Consent Judgment, but has failed to do so for no good reason.

19.  This having been said, there is no evidence to show that the failure of the 1^st defendant to take prompt steps to enforce the Consent Judgment against APHL has caused the Estate any loss or damage.  In particular, the financial situation of APHL is not known.  It has not been shown that APHL is now unable to pay any amount due to the Estate upon the taking of account, but would have been able to do so if it had been called upon to give the account earlier.  In any event, as submitted by Mr Kenneth Chan (for the 1^st defendant), the 1^st defendant’s share in the Estate would be sufficient to cover any damage or loss which may be shown to have been caused to the Estate as a result of the 1^st defendant’s failure to take prompt action to enforce the Consent Judgment against APHL.  In this regard, there is evidence before the court of an offer for the purchase of the Property for HK$220 million made on 6 January 2016.  That offer was communicated by 3^rd defendant’s solicitors (Hastings & Co) to the solicitors of the plaintiff and the 1^st defendant respectively, but was rejected by both.  Since the Property is, I understand, currently free from any mortgage or incumbrance, it seems clear that the 1^st defendant’s share, as a beneficiary of the Estate, of the proceeds of sale of the Property alone would be sufficient to make good the maximum loss that may result from his failure to recover on behalf of the Estate the rental income which APHL is liable to account to the Estate.

20.  In my view, instead of incurring the additional costs of appointing a professional person as administrator pendete lite of the Estate, it should be sufficient for the court to direct the 1^st defendant to use his best endeavour to take immediate action to require APHL to give the account pursuant to paragraph (3) of the Consent Judgment.  The court would also make it clear that any failure on the 1^st defendant’s part to comply with this direction may result in his removal as administrator of the Estate and adverse costs order being made against him personally.

21.  In respect of the second ground relied upon by the plaintiff, as pointed out by Mr Miu in his submissions, the 1^st defendant has not applied for any Beddoe order for the costs which have already been incurred, or which may be incurred in future, by him in his action against the 3^rd defendant in HCA 4713/2001.  Accordingly, the 1^st defendant is not entitled to recoup such costs, or any costs which he may be adjudged liable to pay to the 3^rd defendant in that action, from the assets of the Estate without a further order of the court.  Any application that may be made by the 1^st defendant to be reimbursed those costs out of the assets of the Estate will be carefully examined by the court.  There is therefore no risk of the Estate’s assets being improperly depleted by the 1^st defendant’s action against the 3^rd defendant. 

DISPOSITION

22.  For the foregoing reasons, I am not satisfied that it is either necessary or expedient for the court to appoint an administrator pendete lite of the Estate at this stage.  I should make it clear, however, that the position may be re-visited should (i) the 1^st defendant fail to use his best endeavour to take immediate action to require APHL to give the account pursuant to paragraph (3) of the Consent Judgment, or (ii) after the court has given judgment in the consolidated action.

23.  I shall now hear the parties on the question of costs.