YE XIUXIA v. YE JINXIANG AND ANOTHER

HCMP 754/2019

[2021] HKCFI 3927

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 754 OF 2019

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D E C I S I O N

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1.  By the Judgment of this court dated 2 July 2021 (the “Judgment”), it was ordered, inter alia, that:

“(1)   The 1^st defendant do within 28 days provide the plaintiff with a true and perfect inventory and account of the Estate (the “Account”) as verified on Affirmation, including but not limited to the following matters: -

(a)  the funeral expenses of Madam Kan Hak Ming (the “Deceased”);

(b)  the legal costs incurred by the 1^st defendant in HCAP 25/2012; and

(c)  the withdrawal of funds out of the net proceeds of sale of the Shop, if any, being unconditionally stake-held by Messrs Raymond Cheung and Chan, the solicitors of the 1^st and 2^nd defendants;

(2)  The 1^st defendant do within 14 days thereafter allow the plaintiff and/or his legal representatives to inspect all supporting documents in relation to the Account and allow the plaintiff to take copies thereof;

(3)  The 1^st defendant shall be removed as the administrator of the Estate of the Deceased;

(4)  Mr Lee Sui Hong Jerome (“Mr Lee”) be appointed as the new administrator of the Estate of the Deceased and his fees shall be calculated at the rate of HK$4,000 per hour and his employee Assistant Accountant at the rate of HK$1,020 per hour subject to a cap of 1% of the net assets of the Estate of the Deceased (subject to any further order of the court) to be paid out of the Estate of the Deceased;

(5)  Within 3 days from the date hereof, the 1^st defendant do transfer the following funds to Mr Lee as new administrator to hold on trust for and on behalf of the Estate of the Deceased:

(a)  the net proceeds of sale of the Shop being unconditionally stake-held by Messrs Raymond Cheung and Chan, the solicitors of the 1^st and 2^nd defendants, in the sum of HK$16,201,185.00; and

(b)  the balance of all net assets of the Estate of the Deceased other than (a) above, if any, including items 2 to 31 of the Schedule annexed to the Originating Summons filed on 24 May 2019, held on trust by the 1^st defendant as the administrator for the Estate of the Deceased.”

2.  There are 3 applications before the court, the 1^st defendant’s summons dated 7 July 2021 for a variation of the Order (the “Variation Application”); the 1^st defendant’s summons dated 16 July 2021 for a Stay of Execution of the Order (the “Stay Application”); and the plaintiff’s summons dated 10 November 2021 for a variation of the sum held by the new administrator to take account of a distribution of HK$3 million out of the Estate agreed since the date of the Judgment (the “Plaintiff’s Application”).

3.  As regard the Stay Application, the 1^st defendant says that he is unable to come to Hong Kong to carry out the tasks required of him under the Order because the PRC government has imposed a ban on the issuance of return permits to Chinese residents to visit Hong Kong (see paragraph 8 of the 1^st defendant’s Skeleton Submissions).

4.  I do not regard this as a good reason for ordering a stay of execution of the Judgment.

5.  There is no appeal against the Judgment.  The Stay Application is said to be made pursuant to Order 45, rule 11 of the Rules of the High Court, Cap 4A and the Inherent Jurisdiction of the Court.

6.  Clearly, the matters now relied on by the 1^st defendant was already in existence before the date of the Judgment.  Indeed, in another Skeleton Submissions of the 1^st defendant dated 9 September 2020 in support of an earlier interlocutory application, the 1^st defendant has stated his position that:

“However, unfortunately, due to the prevalence of Covid-19 virus in China since January 2020, D1 could not get travel permission out of China since January 2020. The validity of the travel document (自由行來往香港通行證) that D1 relied on to travel to Hong Kong was even subsequently nation-wide stayed by the Chinese Government due to the Covid-19 pandemic in both Hong Kong and China up to present until further notice.”

7.  It is clearly not a matter arising since the date of the Judgment.

8.  In applying for relief under Order 45, rule 11 of the Rules of the High Court for a stay of execution, the application can only be made on the ground of matters which had occurred since the date of a judgment or order.  If the grounds existed prior to the judgment or order, a stay would be refused (see Daiwa Bank Limited v Shum Shek Chiu and Anor [2005] 1 HKC 243 at 249B-C).

9.  The 1^st defendant further relies on the Dicta of Ma CJHC (as he then was) in Credit Lyonnais v SK Global Hong Kong Limited [2003] 4 HKC 104 at paragraphs 2 and 3 that:

“...the court retains an inherent jurisdiction, in suitable cases, to make orders staying execution quite apart from those situations expressly permitted under the Rules of the High Court (namely, RHC O 45, r 11, O 47, r 1 and O 59, r13). By the term ‘suitable cases’ are meant those situations in which the inherent jurisdiction of the court is required to be exercised so as to avoid injustice, prevent abuse, preserve the dignity of the court or to facilitate the administration of justice…”

10.  However, Ma CJHC made clear that he accepted the point made by Rogers VP that the inherent jurisdiction must not expressly conflict with rules of court.  And in my view, to allow the 1^st defendant’s Stay Application to rely on matters which occurred before the Judgment would be such a case.

11.  Further and in any event, during the course of submission by Mr Yau on behalf of the 1^st defendant, I have gone through the list of matters which has to be done by the 1^st defendant in compliance with the Order, to see which of those genuinely required the personal attendance of the 1^st defendant in Hong Kong.

12.  The preparation of an account of the Estate can be done through solicitors in Hong Kong and would not require personal attendance of the 1^st defendant. Indeed, as noted in paragraph 3 of the Judgment, Mr Benjamin Chain, counsel for the defendants at the trial, indicated no objection to an order being made in terms of paragraphs 1 and 2 of the Order.

13.  Paragraphs 3 and 4 of the Order require no participation of the 1^st defendant.

14.  As to paragraph 5(a), the sum of HK$16 million odd is now stake-held by the solicitors of the 1^st and 2^nd defendants.  Mr Yau accepts that that sum can be paid out to the new administrator pursuant to the Order without participation of the 1^st defendant.

15.  As to paragraph 5(b), the items mentioned therein are now kept in a safe deposit box maintained with the Bank of East Asia.  No attempt has been made to the Bank of East Asia to retrieve these items based on written instructions given by the 1^st defendant through his solicitors.

16.  In short, I am not satisfied that the 1^st defendant has made all genuine attempts to comply with the Order, before coming to the Court to seek a stay of execution without an appeal against the Order.

17.  As to the 1^st defendant’s Variation Application, it is for, inter alia, an order that the sum of HK$16 million odd should be stake-held by the plaintiff’s solicitors, instead of the new administrator, Mr Lee.

18.  In this regard, the defendants claim that the arrangement of Mr Lee as the new administrator had not been gone so far in the mind of their handling solicitors at the material time but only after Judgment.

19.  In fact, as pointed out by the plaintiff, one of the main issues at trial was the appointment of a new administrator with consequential directions.  However, the defendants have never raised any issue at all whether Mr Lee’s professional insurance as a certified public accountant covered work as a trustee.  On the other hand, the defendants have at trial counter-proposed Mr Sam Fu as the new administrator.

20.  Since the commencement of these proceedings, the defendants have been legally represented and Mr Benjamin Chain, appeared on their behalf for the hearing.  I agree that it is impossible that the appointment/arrangement of Mr Lee as the new administrator had not gone through the minds of the defendants’ experienced legal team.  In any event, there is no appeal against the Order and there is no basis to have that question revisited again at this stage.

21.  For the reasons set out above, the Stay Application and the Variation Application are dismissed.

22.  As to the Plaintiff’s Application, parties agree that paragraph 1 thereof is not necessary if I dismiss the Stay Application.  Also, parties agree that an order should be made in terms of paragraph 2 of the Plaintiff’s Application with the figure changed to HK$13,074,645 to reflect certain property tax paid on behalf of the Estate.

23.  Accordingly, I order as follows:

(1)            The 1^st defendant’s Summonses dated respectively 7 July 2021 and 16 July 2021 be dismissed.

(2)            Order in terms of paragraph 2 of the plaintiff’s Summons dated 10 November 2021, save that the figure should be changed to HK$13,074,645.

(Discussion re costs)

24.  I see no reason why costs should not follow the event.  In the Judgment, I have made an order nisi that the defendants do pay costs personally, and there has not been any application to vary that order.

25.  For the same reason, I think the 1^st defendant should bear the costs of the Stay Application and the Variation Application.  Further, I think that the 1^st defendant should pay costs on an indemnity basis.  It is appropriate to do so because the 1^st defendant’s applications are completely lacking in merits.

26.  I order that the 1^st defendant do personally pay the plaintiff his costs of and occasioned by the Stay Application and the Variation Application, including all costs reserved, on an indemnity basis to be taxed, if not agreed.

27.  The defendants do personally bear their own costs of and incidental to the Stay Application and the Variation Application, and such costs are not to be borne by the Estate of the Deceased.

28.  I make no order as to the costs of the Plaintiff’s Application.  The outcome of that application was reached by agreement of the parties at the hearing.

HCMP 754/2019

[2021] HKCFI 1912

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 754 OF 2019

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J U D G M E N T

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A.    INTRODUCTION

1.  This is the substantive hearing of the Originating Summons filed on 24 May 2019 by the plaintiff, who is one of the three beneficiaries of the Estate of the late Madam Kan Hak Ming (the “Deceased”).

2.  At the hearing before this court, the plaintiff confirmed that the orders sought were as follows:

(1)  The 1^st defendant do within 28 days provide the plaintiff with a true and perfect inventory and account of the Estate (the “Account”) as verified on affirmation, including but not limited to the following matters:

(a)  the funeral expenses of the Deceased;

(b)  the legal costs incurred by the 1^st defendant in HCAP 25/2012; and

(c)  the withdrawal of funds out of the net proceeds of sale of the Shop, if any, being unconditionally stake-held by Messrs Raymond Cheung and Chan, the solicitors of the 1^st and 2^nd defendants.

(2)  The 1^st defendant do within 14 days thereafter allow the plaintiff and/or his legal representatives to inspect all supporting documents in relation to the Account and allow the plaintiff to take copies thereof.

(3)  The 1^st defendant shall be removed as the administrator of the Estate of the Deceased.

(4)  Mr Lee Sui Hong Jerome (“Mr Lee”) be appointed as the new administrator of the Estate of the Deceased and his fees shall be calculated at the rate of HK$4,000 per hour and his employee Assistant Accountant at the rate of HK$1,020 per hour subject to a cap of 1% of the net assets of the Estate of the Deceased (subject to any further order of the court) to be paid out of the Estate of the Deceased.

(5)  Within 3 days from the date of the Order, the 1^st defendant do transfer the following funds to Mr Lee as new administrator to hold on trust for and on behalf of the Estate of the Deceased:

(a)  the net proceeds of sale of the Shop being unconditionally stake-held by Messrs Raymond Cheung and Chan, the solicitors of the 1^st and 2^nd defendants, in the sum of HK$16,201,185.00; and

(b)  the balance of all net assets of the Estate of the Deceased other than (a) above, if any, including items 2 to 31 of the Schedule annexed to the Originating Summons filed on 24 May 2019, held on trust by the 1^st defendant as the administrator for the Estate of the Deceased.

(6)  Liberty to apply.

(7)  The 1^st and 2^nd defendants do personally pay the plaintiff the costs of and occasioned by these proceedings, including all costs reserved, on an indemnity basis to be taxed, if not agreed.

(8)  The 1^st and 2^nd defendants do personally bear their own costs of and incidental to these proceedings and such costs not to be borne by the Estate of the Deceased.

3.  Mr Benjamin Chain, counsel for the defendants, indicated no objection to an order being made in terms of paragraph 2(1) and (2) above, but objected to the removal of the 1^st defendant as the administrator of the Estate of the Deceased.

B.    BACKGROUND

4.  In gist, the Deceased had been a concubine or a tsip in a union of concubinage with Yip Ching Bong (the “Father”) and died intestate on 24 April 2005, leaving no other children or issue, apart from the plaintiff, the 1^st defendant and the 2^nd defendant’s husband^[1], who were children of the Father and his lawful wife.

5.  On 9 October 2012, the 1^st defendant, in his own personal capacity, commenced proceedings entitled HCAP 25/2012 against Kan Ping Kwong, the natural and lawful brother of the Deceased, for a court order to declare that:

(1)  the 1^st defendant is a lawful son/issue of the Deceased and one of the persons entitled to the Estate; and

(2)  the letters of administration of the Estate be granted to him.

6.  By the judgment dated 20 October 2016 (the “Judgment”), this court declared, inter alia, that the 1^st defendant was entitled to:

(1)  the grant of the letters of administration with order of entitlement as provided for in the Intestates’ Estate Ordinance, Cap 73 (“IEO”); and

(2)  succeed the Estate in accordance with section 4 of the IEO.

7.  Pursuant to the Judgment, letters of administration of the Estate (“LoA”) was granted to the 1^st defendant as sole administrator on 17 August 2018.  It is common ground that the plaintiff, the 1^st defendant and the 2^nd defendant are the only three beneficiaries of the Estate, and each is entitled to a one-third share of the Estate.

8.  The Schedule of Property of the Deceased (the “LoA Schedule”) dated 15 February 2013 showed an estimated net value of the Estate in the total sum of more than HK$20 million at the time of the death of the Deceased, including various bank deposits, shares, and 3 landed properties, ie, Chee On Property^[2], Chu Kee Property and the Shop[3]. The estimated values of the 3 landed properties have since substantially increased as set out below:

	Estimated Values in the LoA Schedule dated 15 February 2013	Estimated Market Values as at 13 March 2019 per the plaintiff’s Surveyor’s Reports
Chee On Property	HK$2,260,000	HK$8,650,000
Chu Kee Property	HK$1,120,000	HK$5,100,000
The Shop	HK$6,500,000	HK$17,000,000
Total	HK$9,880,000	HK$30,750,000

9.  The 2^nd defendant was joined as a party of this action as she did not indicate her consent to the plaintiff’s claim or not.  The 2^nd defendant, on her own behalf and duly authorized by the 1^st defendant, filed 2 affirmations dated 17 June 2019 and 20 June 2019 whilst the 1^st defendant has filed 2 affirmations dated 10 July 2019 and 16 September 2019, all stating both the defendants’ stance to oppose the plaintiff’s present claim.

C.    RELEVANT LEGAL PRINCIPLES

10.  The applicable legal principles in respect of the rendering of accounts by and removal of executors have been summarised by this court in Chu Kin Wing & Anor v Chu Kin Sang James[2018] HKCFI 1597 at §§10 to 17 as follows:

“10.  Section 33(3) of the Probate and Administration Ordinance, Cap 10 (the “Ordinance”) provides that:

‘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.’

11.  Section 56 of the Ordinance provides that:

‘The personal representative of a deceased person shall, when lawfully required so to do, exhibit, by affidavit filed in the court, a true and perfect inventory and account of the movable and immovable property of the deceased, and the court shall have power as heretofore to require personal representatives to bring in inventories.’

12.  In Re Estate of Lee Da Kor [2010] 1 HKLRD 415, the plaintiff brought proceedings for an account and the removal of the executors and trustees of the estate of the plaintiff’s father (“Mr Lee”) of which the plaintiff was one of the beneficiaries.  Mr Lee passed away on 18 May 2004.  Pursuant to the deceased’s last will, the defendants were appointed as executors and trustees.  Probate was granted on 4 January 2007. It was the plaintiff’s case that after Mr Lee’s death, he had repeatedly made inquiries with the executors and pressed for full and accurate account of the estate with inventory but to no avail.  The plaintiff therefore commenced the proceedings on 10 September 2007.

13.  In giving Judgment for the plaintiff, Jeremy Poon J (as he then was) summarized the applicable principles relating to the duty to keep accounts as follows (at paragraphs 17 and 18):

(1)  It is the duty of an executor to keep clear and accurate accounts, and to be always ready to render such accounts when called upon to do so.  In order to provide a true and perfect account, the executor must provide details of the whereabouts of all properties (including cash) which he is bound to administer.

(2)  Further, under section 56 of the Ordinance, personal representatives are, when so ordered by the court, to exhibit on oath in the court a full inventory of the estate and render an account of the administration of the estate to the court.  Correspondingly, the court may under O 85, r 2(3) order executors to furnish and verify accounts.

14.  On the evidence of that case, even though the executors had already provided the plaintiff with all the bank statements, ledgers and receipts, the executors had failed to explain the discrepancies in relation to the significant drop in the deceased’s assets and discrepancies in the relevant bank accounts.  As the executors ought to have given explanation together with the supporting documents and they had failed to do so, they had not discharged their duty to render a proper account.

15.  His Lordship ordered the executors be removed for two principal reasons (at paragraph 37):

(1)  They had failed to render a full and proper account despite repeated requests from the plaintiff.  The documents that they had provided were insufficient.  It seemed to be that they had more or less adopted the attitude: ‘Here are the documents.  You sort it out yourself.’  That is plainly wrong;

(2)  They had been unjustifiably dilatory in distributing the monies to the plaintiff.  At the latest, they should have distributed the monies to the plaintiff within a reasonable time after January 2007; and

(3)  They were also ordered to be personally liable for the costs of the plaintiff’s claim.

16.  In Re Chan Kan Ying, HCMP 888/2013 (Judgment dated 19/07/2017), B Chu J held, inter alia, that there has been substantial delay on the part of the defendant in administering the estate and such delay is unjustifiable and that the account provided by the defendant is not complete and the 1^st defendant be removed as administrator of the estate.

17.  Her Ladyship further stated at paragraphs 81 and 82 that it is the duty of administrators to keep clean, clear and accurate account and to be always ready to render such account when called upon to do so, and to discharge the duty to account properly, there must be production of the relevant supporting documents and receipts, as well as proper breakdown of items.  Further, it is essential for the account to show at least the opening capital assets, details of the movements of capital assets, the present capital assets, details of income earned, and details of expenditure.”  (Emphasis added)

D.    THE PLAINTIFF’S COMPLAINTS

11.  It is not disputed that prior to the commencement of the present proceedings, the plaintiff received a distribution in the sum of HK$500,000 in cash (the “1^st Distribution”).  Assuming that the 1^st defendant had distributed HK$500,000 to each of the plaintiff, the 1^st defendant and the 2^nd defendant, a total of HK$1,500,000 have been distributed out of the Estate.

12.  Despite repeated demands by the plaintiff through her solicitors to obtain a statement of account of the Estate and a proposal and time table for distribution of the Estate from 1 February 2019, the 1^st defendant has been persistently evasive and has given unreasonable excuses as delaying tactics in dealing with the plaintiff’s demand:

(1)  On 14 February 2019, the 1^st defendant alleged that share and property market values at that time were low due to Sino-US trade disputes and he anticipated to sell when market values would rise in 2 years’ time, which the plaintiff submits was unrealistic and speculative as no valuation report had been produced to support his bare allegation;

(2)  On 20 February 2019, the 1^st defendant alleged that he would provide final statement of account upon his completion of the administration in 2 years’ time and distribute the Estate to the plaintiff upon her acceptance of the purported final statement of account.  The 1^st defendant further alleged that he would provide to the plaintiff an interim statement of account in 4 months’ time upon her payment to the 1^st defendant’s solicitors an administration fee in the sum of HK$60,000;

(3)  On 21 February 2019, the 1^st defendant alleged that the Estate had limited cash flow, as it should be liable to pay the 1^st defendant’s own legal costs of approximately HK$8,637,000 including Taxed Allocator No 4 dated 13 October 2017 for HK$6,045,747 (the “1^st defendant’s Taxed Costs”) in HCAP 25/2012.  The 1^st defendant further alleged that the Chu Kee Property was in dilapidated condition, the Shop was unable to be leased out due to abundant vacant shops in the vicinity and the Chee On Property was for the use of all beneficiaries;

(4)  On 4 March 2019, the 1^st defendant wrongfully alleged that the plaintiff has obstructed his administration of the Estate and he would deduct HK$26,000 from her share of the Estate.  However, the attached solicitors’ bill produced by the 1^st defendant was for HCAG 000544/2017 (at an hourly rate of $6,000) which is completely unrelated to this action;

(5)  On 15 March 2019, the 1^st defendant wrongfully alleged that the plaintiff has obstructed his administration of the Estate and he would deduct HK$48,500 plus interest from her share of the Estate.  Again the attached solicitors’ bill produced by the 1^st defendant was for HCAG 000544/2017 (at an hourly rate of $6,000) which is completely unrelated to this action.  The 1^st defendant further alleged that he would provide a complete statement of account and distribute the Estate in 1 to 2 years’ time when the property market value would become satisfactory.  The 1^st defendant informed the plaintiff that the Chu Kee Property had been sold at HK$5,920,000;

(6)  On 12 April 2019, the 1^st defendant stated that he would not provide any statement of account until he completed his administration.  The 1^st defendant further alleged that the Estate had already paid approximately HK$5 million to the 1^st defendant’s solicitors for his own legal costs in HCAP 25/2012.  The 1^st defendant wrongfully alleged that the plaintiff has obstructed his administration of the Estate and he would deduct HK$121,000 plus interest from her share of the Estate.  Once again, the attached solicitors’ bill produced by the 1^st defendant was for HCAG 000544/2017 (at an hourly rate of $6,000) which is completely unrelated to this action;

(7)  On 14 May 2019, the 1^st defendant alleged that he would provide statement of account when all income and expenses have been completely dealt with, and then distribute the Estate.  The 1^st defendant wrongfully alleged that the plaintiff has obstructed his administration of the Estate and he would deduct HK$152,500 plus interest from her share of the Estate.  Once again, the attached solicitors’ bill produced by the 1^st defendant was for HCAG 000544/2017 (at an hourly rate of $6,000) which is completely unrelated to this action.  The 1^st defendant also informed the plaintiff that the Shop had been sold at HK$16,600,000;

(8)  On 17 May 2019, the 1^st defendant alleged that he would provide statement of account in 1 to 2 years’ time upon the sale of all properties and then distribute the Estate.  The 1^st defendant wrongfully alleged that the plaintiff has obstructed his administration of the Estate and he would deduct HK$164,500 plus interest from her share of the Estate.  Once again, the attached solicitors’ bill produced by the 1^st defendant was for HCAG 000544/2017 (at an hourly rate of $6,000) which is completely unrelated to this action;

(9)  On 20 May 2019, the 1^st defendant unreasonably demanded the plaintiff to sign an authorization letter and direction that the plaintiff would not ask the 1^st defendant’s solicitors to bear any legal responsibility for the sale of the Shop (which had been sold on 13 May 2019) and the plaintiff would compensate the 1^st defendant’s solicitors for any loss.

13.  According to the plaintiff, the net cash of the Estate accumulated as at 10 July 2019 was more than HK$10 million, even when the 1^st defendant’s Taxed Cost is deducted.

14.  The plaintiff submits that the 1^st defendant’s evasive and hostile attitude is amply demonstrated by his conduct in dealing with the plaintiff’s reasonable demands for the statement of account of the Estate. The plaintiff therefore submits that it is clearly appropriate for this court to order the defendant to provide full and proper accounts and inventory of the Estate as required by the law.  This will enable the plaintiff to ascertain and monitor the progress of administration, distribution of the Estate and preservation of the Estate for the best interests of the Estate and all beneficiaries.

15.  Thus the plaintiff commenced these proceedings.

16.  Significantly, the “Schedule of Expenses” put forward by the 1^st defendant, which purports to show the position as at 18 November 2020, is grossly inadequate and is not to be considered as an accurate or a true and perfect inventory and account of the Estate:

(1)  there is no opening balance of the assets of the Estate;

(2)  there are no details of movement of assets, income and expenditure of the Estate;

(3)  only a figure of HK$42,069,658.85 is stated as the total asset of the Estate with no breakdown whatsoever;

(4)  there is no documentary evidence to support the expenses for property tax, Chu Kee Property (note that the amount was increased by HK$2,653 with no explanation from HK$492,197.60 as at 16 September 2019 to HK$494,850.60 as at 18 November 2020, given the fact that the Chu Kee Property had been sold in March 2019; however the amount was stated as HK$579,380.60 in a list attached to the defendants’ solicitors letter dated 14 May 2019), Chee On Property, the Shop, reimbursement for funeral expenses, legal fee for safety deposit box inspection and the legal fee bills;

(5)  the net balance of the Estate in the sum of HK$14,823,619.69 as at 18 November 2020 was HK$1,377,565.31 less than the net sale proceeds of the Shop in the sum of HK$16,201,185 stake-held by the defendants’ solicitors as per the 1^st defendant’s undertaking.  It seems that the 1^st defendant must have breached his undertaking by withdrawing funds out of the said stakeholder money.

E.   DISCUSSION

17.  I agree that the plaintiff’s complaints as set out in paragraph 16(1), (2) and (3) above are fully justified, and this becomes apparent if one compares the contents of the Schedule of Expenses against the legal requirements in providing a true and perfect inventory and account of the Estate summarised in paragraph 10 above.

18.  Further, the plaintiff has highlighted three areas in particular to justify the orders sought by her.

E1.   Funeral Expenses of the Deceased

19.  Referring to paragraph 16(4) above, the plaintiff points out that the amount of reimbursement for funeral expenses was increased (without the 1^st defendant giving any reason) by HK$220,000 from HK$758,400 as at 16 September 2019 to HK$978,400 as at 18 November 2020, despite the fact that the Deceased had passed away on 24 April 2005.

E2.   Withdrawal of funds out of the net sale proceeds of the Shop

20.  By a letter dated 12 September 2019, the defendants’ solicitors informed the plaintiff’s solicitors that the net sale proceeds of the sale of the Shop was HK$16,201,185.  Under the order of this court dated 29 July 2019, the 1^st defendant undertook that the defendants’ solicitors would unconditionally stake-hold the net sale proceeds of the Shop on behalf of the Estate until the final determination of these proceedings.

21.  Yet, in the Schedule of Expenses, the “Total net balance of Estate” after payment of expenses was stated to be HK$14,823,619.69.  This would imply that, in breach of the undertaking, the 1^st defendant has withdrawn funds out of the said stakeholder money.

22.  At the hearing, the 1^st defendant has belatedly given an explanation, but such an explanation was not given under oath and came too late.

E3.   Deductions made by the 1^st defendant of his legal costs incurred in HCAP 25/2012

23.  The plaintiff submits that the 1^st defendant had commenced the HCAP 25/2012 action in his own personal capacity against Kan Ping Kwong prior to the grant of the LoA.

24.  It was explicitly ordered by this court in the Judgment that the costs of those proceedings were to be paid by the defendant therein to the plaintiff therein, ie to be paid by Kan Ping Kwong to the 1^st defendant. There was no order allowing the 1^st defendant’s costs to be paid out of the Estate and there was no application by the 1^st defendant to vary or appeal from such costs order.  The 1^st defendant is thus not entitled to book the legal costs as expenses in the Estate account.

25.  In response, the 1^st defendant’s position is that his costs in HCAP 25/2012 are “testamentary/administrative” expenses, and do not form part of the residuary estate available for distribution among the beneficiaries.

26.  The 1^st defendant refers to Re Clemow [1900] 2 Ch 182, which held that “testamentary expenses” include both the costs and expenses of obtaining the letters of administration and another set of costs (incurred by a third party) to obtain a grant of the letters of administration.

27.  However, significantly, Mr Chain on behalf of the defendants accepts that unlike executors, an administrator may need an order from the court before claiming reimbursement.  A “person entitled under an intestacy … is also entitled to an order for his costs out of the estate, so far as an unsuccessful party who is ordered to pay his costs fails to pay them”: Halsbury’s Laws of England, 5^th ed, Vol 103, §909.

28.  In the circumstances, the plaintiff in my view has made the valid point that the 1^st defendant’s entitlement is to apply for reimbursement of his legal costs not recovered from Kan Ping Kwong in HCAP 25/2012.  The 1^st defendant in his application will have to satisfy the court with all legal requirements supported by proper and adequate evidence (which is not in issue in the present proceedings).  The plaintiff’s stance is clear, and in my view correct, that it must still be the 1^st defendant’s own liability for his legal costs in HCAP 25/2012 unless and until an order is granted by the court, which has not occurred in the present case.

29.  For the reasons submitted by the plaintiff, I am satisfied that the 1^st defendant has failed to render a full and proper account of the Estate despite repeated requests from the plaintiff, and the 1^st defendant has been unjustifiably dilatory in rendering the account and in distributing the monies to the plaintiff.

30.  In the circumstances, I agree that the 1^st defendant should be removed as the administrator of the Estate as he has failed to render a full and proper account to the plaintiff, when he had been repeatedly demanded by the plaintiff to do so but provided various excuses and incomplete accounts/statements without documentary evidence as mentioned in paragraph 16 above.  What the 1^st defendant has so far provided to the plaintiff is grossly inadequate and fails to fulfil the requirements of a full and proper account.

31.  Further, I agree that the 1^st defendant should be removed as the administrator as the 1^st defendant has failed to administer the Estate properly, paying his own legal costs in HCAP 25/2012 from the accounts of the Estate without an order of the court. 

32.  In light of the 1^st defendant’s unfair treatment towards the plaintiff as one of the three beneficiaries, the plaintiff has justifiably lost her confidence and trust on the 1^st defendant and the 1^st defendant should not continue to be the administrator of the Estate.

33.  As the size of the Estate remains substantial (over HK$16 million on account of the net sale proceeds of the Shop alone on the 1^st defendant’s own case), I agree that Mr Lee as a neutral professional accountant ought to be appointed as the administrator to scrutinize all the income and expenses of the Estate claimed by the 1^st defendant including, in particular, the propriety and reasonableness of the legal costs incurred in HCAP 25/2012. 

F.    DISPOSITION

34.  For the reasons stated above, I make an order in terms of the order sought by the plaintiff as set out in paragraph 2(1) to (6) above.

35.  Further, I see no reason why the 1^st defendant should not bear all the costs of these proceedings personally.  Accordingly, regarding costs, I make an order in terms of the order sought by the plaintiff as set out in paragraph 2(7) and (8) above.

36.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

37.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.

HCMP 754/2019

[2021] HKCFI 115

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 754 OF 2019

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________________________

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D E C I S I O N

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1.  This is an application by the 1st and 2nd defendants for retrospective leave to file the 3rd affirmation of the 1st defendant made on 8 December 2020 on the ground, inter alia, that the same is required to reply to the new allegations made in the 3rd affirmation of the plaintiff.

2.  I should immediately point out that the 1st defendant has already filed and served his 2nd affirmation on 18 September 2019 (retrospective leave for which was given on 17 September 2020) in which it was expressly stated that the same was filed in reply to the plaintiff’s 3rd affirmation.  In fact, in the 2nd affirmation of the 1st defendant, there was a paragraph-by-paragraph response to the matters deposed to in the plaintiff’s 3rd affirmation.  In the circumstances, there is simply no basis for the defendants to put in yet another round of affidavit evidence in response to the plaintiff’s 3rd affirmation.

3.  Further, there is no satisfactory explanation for the delay in taking out the application only in December 2020, resulting in the hearing only taking place today, which is barely one month before the substantive hearing of the originating summons.  In particular, there is no explanation from the 1st defendant as to why the 1st defendant could not have applied earlier for special permission from the “Chinese authority”, to come to Hong Kong for the purpose of making the affirmation.

4.  For the foregoing reasons, and as a case management decision, I would dismiss paragraph 1 of the defendants’ summons dated 10 December 2020, and I rule expressly that the defendants shall not be entitled to rely on the 3rd affirmation of the 1st defendant made on 8 December 2020 at the hearing of the originating summons. 

5.  I would, however, grant leave to the defendants to file and serve an affidavit/affirmation by their solicitors limited to the sole purpose of exhibiting what the 1st defendant says is the Final Account of the Deceased’s Estate (namely, exhibit “YE3-3” to the 3rd affirmation of the 1st defendant), and the defendants’ solicitors should do so within 3 days from the date hereof.

6.  I further direct that the plaintiff do have leave to file and serve affidavit evidence in reply within 7 days thereafter. 

7.  There be no further affidavit evidence to be filed without leave of the court.

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

(Ruling on Costs)

9.  This is a case where the costs of the application should be borne by the defendants and on an indemnity basis.

10.  From my ruling, it is clear that the application is completely without merits. Worse still, it was taken out at the eleventh hour before the substantive hearing, listed only for three-minutes, giving the court no choice but to hear the application substantively today.

11.  Further, it is yet another application for retrospective leave for the filing of affidavit evidence, when the defendants ought to have applied for leave before the filing of the affirmation in question. 

12.  These are procedural manoeuvres that amount to abuse of process of the court, which should be visited by an adverse costs order made on the indemnity basis.

13.  Mr Yau submitted that the costs should be apportioned because the defendants obtained leave to file an affirmation limited to the exhibiting of the Final Account.  I do not agree.  The plaintiff is clearly the successful party today and the defendants had never offered to limit the additional evidence to only the Final Account at the hearing of the originating summons.

14.  For the above reasons, I order that:

1)  the defendants do personally pay forthwith to the plaintiff his costs of and occasioned by the summons on the indemnity basis, to be summarily assessed; and

2)  the defendants do personally bear their own costs of the summons and such costs are not to be borne by the Estate.

Mr Warren Louis Tang, instructed by Chan & Chan, for the plaintiff

Mr Yau Chap-yin, of Raymond Cheung & Chan, for both defendants