CHEUNG TING KAU, VINCENT v. KOO SIU YING AND ANOTHER

HCAP 4/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO. 4 OF 2011

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DECISION

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1. This court handed down a composite decision on 18 February 2016 (“the Decision”) whereby both Mr Cheung’s application for a grant of administration ad colligenda bona (made in another set of proceedings HCEA 25/2013) and the application of Madam Koo and Madam Ling (“K & L”) for the appointment of administrators pendent lite (“APL”) were dismissed.

2. K & L now apply leave to appeal against my dismissal of their APL application by their summons dated 3 March 2016, which was amended with leave given at the hearing. The Amended Schedule to their amended summons contains an amended draft notice of appeal comprising 16 grounds.

3. Before I deal with the substantive application, I shall first remind myself of the undisputed principles applicable.

4. To obtain leave to appeal from an interlocutory order, K & L have to show that either their appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard: section 14AA(4) of the High Court Ordinance, Cap. 4.

5. Reasonable prospect of success involves the notion that the prospects of success must be “reasonable” and therefore more than “fanciful” without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at §17 per Le Pichon JA.

6. Section 40 of the Probate and Administrative Ordinance, Cap. 10 (“the PAO”) endows this court with a discretion to appoint an APL who would be subject to the immediate control of the court and act under its direction. In Hung Jin Mui v Tang Chui Yuk Angela and Anor., unreported, HCAP 4/1997, 11.2.1998, Le Pichon J (as she then was) explained that this discretion is to be exercised out of necessity or expediency with reference to the actual circumstances of the case bearing in mind the assets comprised in the estate.

7. K & L are now seeking to appeal against the exercise of discretion by this court under the said provision. Whilst Mr Ho SC, together with Mr Chan, for K & L accepts the well-established principle that an appellate court will not lightly interfere with the exercise of discretion, it is apposite to refer to the two recent authorities helpfully cited to me by Mr Man SC with Mr Lam appearing for Mr Cheung. 

8. First, in Re China Medical Technologies Inc., unreported, HCMP576/2016, when considering whether leave to appeal should be granted in respect of an order made under section 221 of the Companies Ordinance, Barma JA had this to say,  

“It is well established that the exercise of the powers under section 221 is a matter for the court’s discretion. As such, the liquidators face a substantial hurdle in seeking to overcome the judge’s exercise of his discretion. It is not enough to suggest that the judge assigned inappropriate weight to one (or several factors) in the balancing exercise that led him to exercise his discretion as he did. It is trite that questions of the weight to be given to particular factors in that process are for the judge hearing the application to determine, and an appellate court will not interfere simply because it might take a different view from the judge as to the weight to be assigned to any given factor. Absent a relevant error of law, or a demonstrated misunderstanding of the evidence, or it being shown that the judge failed to have regard to relevant factors or took into account irrelevant matters, the court will only intervene in the exercise of discretion if it is satisfied that the judge’s decision was plainly wrong

9. Further, even though the conclusions in the Decision were made without cross-examination on evidence, still an appellate court should only interfere where it is clear that an error of principle has been made or that the result falls outside the range of potentially ‘right’ answers: AmTrust Europe v Trust Risk Group [2016] 1 All ER (Comm) 325 per Beatson LJ at §33. The exercise carried out by the judge is an evaluative one, sometimes with a ‘predictive’ element, and with more than one possible answer where the documentary evidence contains a sharp clash of evidence about the facts.

10. Beatson LJ went on to discuss the role of an appellate court, which appears to have elements of a ‘rationing of appellate resources’ rationale. Such elements are likely to be relevant where the first instance decision is interlocutory and not conclusive as to the merits, which are to be determined at a later substantive hearing.

Discussion about this application

11. I shall adopt the same abbreviations used in the Decision here. I shall also refer to the background facts set out in the Decision and shall not repeat any of them here.

12. Mr Man makes an apt categorisation of all the grounds set out in the amended draft notice of appeal. Absent any challenge to its correctness, it would be helpful for me to set it out as follow.

13. Grounds 1 and 11 to 13 relate to the allegations of K & L that Mr Cheung lacks neutrality in his dealings against K & L. Ground 2 relate to the inadequacy of the Undertaking. Ground 3, 4 and 7 cast doubt on the overall approach adopted by this court in dismissing the various complaints of K & L about Mr Cheung. Grounds 5 and 6 relate to the alleged failure of this court to take into account the way Mr Cheung handled the ACB Application. Grounds 8 to 10 relate to the allegedly void or voidable transfer of the Wisdoman shares by the Deceased in his lifetime to Peter Lam and Grounds 14 to 15 relate to the alleged delay of Mr Cheung in his prosecution of the present action.

14. Ground 16 is only a general allegation that this court has wrongfully exercised the discretion by erring in law and principle, by failing to take into account of relevant considerations and by taking into account of irrelevant considerations in my decision.

15. In both his written and oral submissions, Mr Ho does not really go through each and every grounds of the intended appeal. I do not propose to deal with all such grounds myself and I shall only focus on those fully developed by Mr Ho in this application.

16. Whilst being well aware of the threshold of this application, Mr Ho essentially repeats the same submissions including his sharp criticisms of Mr Cheung’s conduct of the probate action and his management of the Estate thus far with the same admirable eloquence and skill as he did on the last occasion. I believe I have dealt with his arguments and the authorities he cited sufficiently in the Decision and in any event, it is not appropriate for me to give any additional reasons here.

17. Mr Man notes that as shown in the Decision, I have referred to a number of relevant authorities and taken into account the applicable principles. I have considered all the grounds advanced by K & L but I am unable to accept that it is either necessary or expedient that an appointment of an administrator pendent lite is warranted in the particular circumstances of this matter. Hence I refused to exercise my discretion under section 40 of the PAO. Mr Man submits that the appellate court can hardly find my exercise of the discretion to be plainly wrong on the established principles.

18. Mr Ho however highlights that it is the case that the Court of Appeal has adequate grounds to interfere by reason of a wrong approach adopted by this court. He submits that the intended appeal involves an important principle of law, i.e. the duty of neutrality of Mr Cheung in his administration of the Estate. Mr Ho submits that this court did not turn its mind to and did not decide on the question as to whether this court can still be confident that leaving the management of the Estate to Mr Cheung with his avowedly partisan position would not occasion any prejudice or loss to K & L so that no appointment of an administrator pendent lite is warranted.

19. Mr Ho submits that this court’s erroneous approach taken was a result of the failure of this court to appreciate and distinguish the two different and conflicting roles of Mr Cheung. On the one hand, Mr Cheung is the executor under the 2004 Will seeking to propound the same in the probate action. On the other hand, He has the de facto control and management of the Estate pending the outcome of the probate action. 

20. To underscore to this court the duty of neutrality of an executor and trustee under the 2004 Will, he refers again to the dictum of Lam J (as he then was) in HSBC International Trustee Limited v Tam Mei Kam, unreported, HCMP 716/2004, 11.10. 2004 citing the principles expounded by Lightman J in Alsop Wilkinson v Neary [1996] 1 WLR 1220 and a passage in Lewin on Trusts, 17^th Edn., §21-96. Such dictum can be found in the Decision.

21. Mr Ho further refers to this court two authorities for the first time to illustrate the importance of an administrator pendent lite to act impartially in preserving the estate and not to favour one class of potential beneficiaries over another.

22. In Re Rondahl (2005) 226 ALR 475, Mrs Henderson, the surviving spouse of a testatrix, Mr Rondahl, was named as the sole executor and effectively the sole beneficiary under a will made in 1993. The beneficiaries of the earlier wills together with the executors appointed thereunder started an action to revoke the 1993 will on the ground that Mr Rondahl did not have the testamentary capacity to make the 1993 will. In the course of the action, Mrs Henderson applied successfully for an appointment of Mr Hart as per her proposal as an administrator pendent lite to hold certain shares of Mr Rondahl pending the determination of the action. Mrs Henderson wanted to sell those shares whilst the opposing camp wanted to retain them for the sake of the family business. By an order, Mr Hart could not deal with such shares without the court’s approval.

23. When considering the duty of such an administrator pendent lite appointed, Anderson J said this,

“It is also clear that the person appointed as administrator should be totally dissociated from the litigation and is not to be seen to act in the role of an agent for any party: see Tomkinson v Hersey (1983) 34 SASR 181 (§121).

What is clear is that the administrator must at all times act in an impartial manner and not favour any of the potential beneficiaries when there is a dispute as to their entitlement. The important point is that the disputing parties are only potential beneficiaries, and, until their dispute is finalised there is no ability to predict how many of them and in what proportions they will have a capacity to exercise voting rights in relation to the shares (§124).”

24. It should be noted that in Re Rondahl, there was no dispute as to the suitability of Mr Hart to act as an administrator pendent lite and he was independent of the parties to the action. The necessity or expediency of his appointment, which is the bone of contention here, was not in issue there at all.

25. Next, Mr Ho refers to Tomkinson v Hersey for the proposition that it is in generally undesirable that a person actively concerned in litigation concerning a disputed will should be appointed as administrator pendent lite. The dispute there again was not whether an administrator pendent lite should be appointed. It was about who should be appointed.

26. There, Cox J considered the suitability of Mr Tomkinson to act as an administrator pendent lite pending an action commenced by him. In the action, Mr Tomkinson sought to prove in solemn form of a will whereby a testatrix appointed him to be one of her executors and bequeathed to him substantial benefits. This was an important factor which Cox J took into account when he refused to find Mr Tomkinson to be a proper person to be appointed as administrator pendent lite.

27. I cannot accept that whenever an executor not being one of the beneficiaries in an estate seeks to propound a will in an action and wishes to take an active role therein, he has to step down and be replaced by an independent administrator pendent lite appointed by the court merely by reason of any challenge to the validity of the contested will.

28. Here, Mr Cheung is not a beneficiary under the 2004 Will. It is not suggested that he has any financial interest in conflict with those of K & L in the Estate. I cannot accept that his mere participation of the probate action should suffice to disentitle him to manage the Estate in accordance with the 2004 Will.

29. Returning to the two different and conflicting roles of Mr Cheung, I should point out that it is the submission of Mr Ho that Mr Cheung owes a duty of neutrality in each of the two roles he plays and he discharges neither of them. He submits that the breach of duty of neutrality in the former role must reflect badly on his fitness and appropriateness for the purpose of the management of the Estate pending the determination of the probate action. The breach does not merely give rise to a question of costs as contended by Mr Man and apparently accepted by this court.

30. Mr Man never shies away from the fact that Mr Cheung does not take a neutral stance in the probate action. Mr Cheung should and could, in his submission, not do so. To Mr Cheung, K & L are mere strangers to the 2004 Will and he is not obliged to take care of their alleged potential interest in the Estate. He submits that the issue of the duty of neutrality only arose in the context of whether a pre-emptive costs order should be granted in HSBC International Trustee Limited.

31. I note that Mr Ho now accepts that a partisan role taken by an executor and trustee in a dispute among beneficiaries alone does not necessarily justify his replacement by an administrator pendent lite without any ado. It follows that K & L must adduce further evidence to show that Mr Cheung should invariably be adversely affected by his partisan approach in the probate action in his management of the Estate and hence he has to be replaced so as to protect the Estate.

32. In the Decision, this court finds that in the particular circumstances of this matter, the decision of Mr Cheung not to abide by his usual duty to remain neutral in the probate action and instead to defend the integrity of the 2004 Will and his own professionalism with full vigour cannot be held against his suitability to continue his administration of the Estate.

33. On the other hand, Mr Ho is unable to persuade me on the evidence that Mr Cheung has ever acted in breach of his duty of neutrality in managing the Estate with or without being affected by his partisan stance taken in the probate action. There is no allegation that he has shown favourism towards any particular potential beneficiaries in a dispute as to their entitlement. I have already explained that Mr Cheung does not have a duty to treat all the debtors of the Estate equally.  In the absence of any valid complaint of his lack of neutrality in his administration of the Estate endangering or causing loss to the Estate or any potential beneficiaries, I fail to see why Mr Cheung has to be replaced by an administrator pendent lite.

34. Therefore, I am not convinced that I erred in law in that I misunderstood the different duties of neutrality owed by Mr Cheung and hence adopted a wrong approach to my exercise of the discretion under section 40 of the PAO. I am not persuaded that this main ground of appeal has any reasonable prospect of success.

35. Now I continue to deal with some other minor points raised by Mr Ho. With respect of the adequacy of the Undertaking, I did not say and do not think that it is a complete answer to the purported concern of K & L. However, I am entitled to accept the offer of the Undertaking given by Mr Cheung, which to a certain extent can allay the purported concern.

36. I agree that dissipation of assets can be achieved by inaction too. Mr Man submits in appropriates cases with cogent evidence K & L can apply in the probate action for a mandatory injunction to compel Mr Cheung to act in his administration of the Estate to avoid dissipation. The same applies when a particular part of the Estate calls for management. I agree with him.

37. K & L are dissatisfied with my refusal to find the existence of an intended collusive sale of the Properties in the ACB Application. They now complain that this court has refused to allow cross-examination of Mr Cheung and as a result they were deprived of the chance to establish his dishonesty.

38. I find no merit in this compliant. The application for a cross-examination of Mr Cheung was made in HCEA 25/2013 and not in this probate action. I did not find cross-examination necessary to dispose of the ACB Application and there is no appeal against this decision. Nor did they ever apply to cross-examine Mr Cheung for the purpose of the APL Application.

39. In regard to the Wisdoman shares, it is submitted that this court erred in its dealing with the issue of limitation relating to a possible claim against Peter Lam and Madam U for the recovery of those shares.  

40. The limitation issue arose when K & L complained that Mr Cheung had failed to consider whether any claim relating to the Wisdoman shares might be time-barred: see §29 of the Skeleton Submissions of K & L filed for the APL Application. This court did not accept the validity of this complaint because the lack of mental capacity was only raised by K & L very late in the probate action. When it was raised, such a claim should already be time-barred and Mr Cheung should not be blamed for letting the claim be time-barred. Whether such a claim may nevertheless survive the limitation issue is quite another matter.

41. Mr Ho points out that K & L might not have the locus to set aside the transfer of the Wisdoman shares and so this court is wrong to say that there is no reason why they did not take steps to do so when such a claim could be made without any limitation issues.

42. I made the observation in response to the submission that K & L had taken out an application for specific discovery to find out more about the circumstances of the Wisdoman shares with a view to a challenge to the validity of the transfer. The application was said to be heard on 24 November 2015 before another judge. With or without the locus to sue in their personal capacities to challenge the validity of the transfer, I took the view that they should have acted before any limitation issue might arise and it is not open to them now to blame Mr Cheung.

43. Lastly, as rightly pointed out by Mr Man, there is no complaint about my finding of their inexcusable delay in the APL Application, which seriously tilted my discretion against the grant of their application.

44. As noted above, there are other points in the amended draft notice of appeal. I believe the Decision can sufficiently dispose of all of them and I do not find any of them to be meritorious.

Conclusion

45. For the reasons given, I am not satisfied that I have exercised my discretion in an erroneous manner and that there is a reasonable chance that the Court of Appeal would disturb the same. K & L have failed to meet the threshold and their application must be refused. I dismiss their amended summons accordingly.

46. There is no reason why costs should not follow the event. I make an order nisi that K & L should pay Mr Cheung his costs of and occasioned by this application, to be taxed if not agreed with certificate for two counsel. 

47. Last but not least, I thank all counsel involved for their assistance in this matter.