AU GARY CHUNG LOK, one of the Executors of the estate of the Deceased v. LEUNG KUEN KAY, one of the Executors of the estate of the Deceased AND ANOTHER

HCMP 1413/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1413 OF 2015

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D E C I S I O N

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APPLICATION

1.  I have before me an application by the plaintiff, an executor of Lai Kwong Wing (黎光榮), deceased (“the Deceased”), to remove the 1^st defendant as co-executor of the Deceased.

BASIC FACTS

2.  The Deceased passed away in Hong Kong on 30 July 2010.

3.  On 29 June 2012, probate of the last will (“the Will”) of the Deceased dated 5 June 2010 was granted to the plaintiff and the 1^st defendant, being the executors and trustees named in the Will.

4.  As can be seen from the Schedule of Assets and Liabilities of the Deceased attached to the grant, the assets of the Deceased included:-

(1)   cash and publicly listed securities;

(2)   shares in 3 private companies incorporated in Hong Kong, namely –

(a)   1,752,000 shares in Katal Knitting Factory Limited (“KKF”);

(b)   1 share in Katal (International”) Knitting Factory Limited (“KIKF”); and

(c)   2 shares in Worldhand Development Limited (“Worldhand”).

(3)   a half interest in a property known as Unit D, 52^nd Floor, Tower 8, Bellagio, 33 Castle Peak Road, Sham Tseng, Tsuen Wan, New Territories (“the Bellagio Property”);

(4)   Car Parking Space No R5076 on Level 5 of The Podium in Phase 3 & 4 Bellagio, 33 Castle Peak Road, Sham Tseng, Tsuen Wan, New Territories (“the Car Parking Space”);

(5)   a debt of HK$7,351,806.61 owing by KIKF; and

(6)   a debt of HK$11,111,273.62 owing by Worldhand.

5.  A total of 10 beneficiaries are named in the Will, including:-

(1)   Madam Fung Chi, the Deceased’s mother, who passed away on 24 October 2014;

(2)   the 2^nd defendant, the Deceased’s son;

(3)   Alyssa Lai (a minor), the Deceased’s granddaughter and the 2^nd defendant’s brother’s daughter;

(4)   6 brothers or sisters of the Deceased; and

(5)   a nephew of the Deceased.

6.  The plaintiff is the husband of the Deceased’s sister, but is not a beneficiary under the Will.

7.  By the Will, the Deceased made provisions for certain pecuniary legacies to the beneficiaries.  In particular, the following provisions in the Will are of note:-

(1)   by Clause 4(a)(1), the sum of HK$5,000,000 is to be given to Alyssa Lai in the following manner –

(a)   HK$15,000 as monthly payment to be given after the death of the Deceased on the 1^st day of each and every calendar month; and

(b)   upon her attainment of university level, a sum of HK$200,000 to be given to her absolutely and the aforesaid monthly payment be increased to HK$20,000 to be paid on the 1^st day of each and every following calendar month.

(2)   by Clause 4(a)(2), the sum of HK$5,000,000 is to be given to the 2^nd defendant in the following manner –

(a)   HK$500,000 to be given to him absolutely after the death of the Deceased; and

(b)   after giving the said HK$500,000, a sum of HK$15,000 to be given on a monthly basis on the 1^st day of each and every following calendar month.

(3)   by Clause 4(a)(3), the sum of HK$5,000,000 is to be given to Lai Kwong Ming (the Deceased’s brother) in the following manner –

(a)   HK$1,000,000 to be given to him absolutely after the death of the Deceased; and

(b)   after giving the said HK$1,000,000, a sum of HK$15,000 to be given on a monthly basis on the 1^st day of each and every following calendar month.

As pointed out by Ms Queenie Ng (counsel for the 2^nd defendant), the above monthly payments would last more than 20 years before the exhaustion of the pecuniary legacies.

8.  By Clause 5 of the Will, the Deceased gave his residuary estate to his executors and trustees to be held on trust for the 10 beneficiaries as tenants in common in equal shares absolutely.

9.  After the grant, the executors opened new bank accounts and paid or deposited some of the cash and securities previously held in bank accounts in the name of the Deceased into the new bank accounts.  Other than that, the bulk of the Deceased’s estate remains un-administered.  According to the plaintiff, no distribution of the Deceased’s estate has been made to the beneficiaries, his intention being to make distribution after all assets of the Deceased’s estate have been collected and realised.

10.  By a letter dated 27 February 2015, the 1^st defendant informed the plaintiff that he wished to resign as executor of the Deceased with immediate effect.  Thereafter, he failed or refused to participate in the administration of the estate of the Deceased.

11.  By the originating summons herein issued by the plaintiff on 9 June 2015, the plaintiff seeks an order that the 1^st defendant be removed as executor of the Deceased.  The plaintiff’s application is consented to by all the beneficiaries of the Estate (in the case of Alyssa Lai by her father on her behalf and in the case of Madam Fung Chi by her personal representative) save and except the 2^nd defendant. This is my decision on the plaintiff’s application.

THE 2^ND DEFENDANT’S OBJECTIONS

12.  The 2^nd defendant does not strictly object to the removal of the 1^st defendant as executor of the Deceased.  However, he says that the 1^st defendant should not be removed at this stage, leaving the plaintiff as sole executor of the Deceased.  The 2^nd defendant’s position is that the status quo should be maintained pending the hearing of his own originating summons in HCMP 303/2016.  In the current form of the amended originating summons, the 2^nd defendant seeks an order for his appointment as one of the joint executors or joint administrators of the estate of the Deceased.  There is no application to remove the plaintiff as executor of the Deceased.  Indeed, the 2^nd defendant on two previous occasions, once before Master Chow on 14 January 2016 and once before this court on 8 July 2016, confirmed that he did not intend to ask the court to remove the plaintiff as executor of the Deceased.  However, at the hearing on 14 July 2016, Ms Ng handed up to the court a draft re-amended originating summons, in which the 2^nd defendant seeks, inter alia, an order for the removal of both the plaintiff and 1^st defendant as executors of the Deceased.  Ms Ng further informed the court that the 2^nd defendant would formally make an application to amend the amended originating summons once the statutory stay of 42 days of the proceedings in HCMP 303/2016, resulting from a legal aid application made by one of the parties to those proceedings, expires.

13.  As set out in the skeleton submissions of Ms Ng dated 12 July 2016 and as amplified in her oral submissions, the 2^nd defendant submits that the plaintiff’s application to remove the 1^st defendant as executor of the Deceased should not be acceded to at this stage for the following reasons:

(1)   the plaintiff has failed to comply with paragraph 46 of Practice Direction 20.2 - Probate and administration of estate proceedings (other than applications under the Non-Contentious Probate Rules (Cap.10A));

(2)   the plaintiff has failed to provide full information and documents relating to HCMP 347/2015 despite repeated requests;

(3)   two administrators are preferred where minority interest exists; and

(4)   unsatisfactory administration of the estate of the Deceased by the plaintiff, and unsuitability of the plaintiff to act as sole executor of the Deceased given his age (over 70) and the time frame for payment of the pecuniary legacies.

14.  There is, in my view, validity in the 1^st complaint.  It is common ground that Practice Direction 20.2 is applicable to the plaintiff’s present application.  Paragraph 46 thereof provides that the supporting affidavit for the application should set out the grounds of the application and the following information so far as it is known to the applicant:-

(1)   brief details of the property comprised in the estate, with an approximate estimate of its value, and any income that is received from it. If the personal representative has partially administered the estate, an account should be exhibited giving brief details of the size, value and nature of the assets administered;

(2)   brief details of the liabilities of the estate;

(3)   the names and addresses of the persons who are in possession of the documents relating to the estate if they are not in the possession of the plaintiff; and

(4)   the names of the beneficiaries and their respective interests in the estate, confirming whether there exist minority interest or interests of persons under disability.

15.  As set out in the table under paragraph 20 of Ms Ng’s skeleton submissions, the plaintiff has failed to provide, in his supporting affirmations, information relating to (inter alia) the estimated values of the Bellagio Property (half interest) or the Car Parking Space, or the credit balances in some new bank accounts opened by the plaintiff and the 1^st defendant as executors of the Deceased. Also, he has not given any breakdown or the estimated values of some publicly listed securities comprised in the estate of the Deceased.  There are other less significant matters which the plaintiff has also failed to provide relevant information as required by paragraph 46 of Practice Direction 20.2.  I accept, however, that the plaintiff may not be in a position to give the estimated values of the Deceased’s shareholdings in the 3 private companies, namely, KKF, KIKF and Worldhand.

16.  In relation to the 2^nd complaint, HCMP 347/2015 is an action commenced by Mr Tang (a long time business partner of the Deceased who is also a shareholder in, and director of, KKF, KIKF and Worldhand) against, inter alia, KIKF and the plaintiff and 1^st defendant as executors of the Deceased.  By the originating summons in HCMP 347/2015 dated 10 February 2015, Mr Tang seeks to challenge various board or shareholders resolutions providing for the restructuring of the board of directors of KIKF (including an alleged “resignation” of Mr Tang as director of KIKF) and changing of the bank mandate in respect of KIKF’s accounts at Fubon Bank (Hong Kong) Limited.  In paragraph 17 of the plaintiff’s first affirmation filed herein on 9 June 2015, it is said that HCMP 347/2015 concerned a dispute amongst the surviving shareholders of KIKF.  However, the plaintiff has refused to disclose any further information relating to that action despite repeated requests by the 2^nd defendant.  In paragraph 18 of his 2^nd affirmation herein filed on 1 February 2016, the plaintiff states merely as follows:

“The proceedings in HCMP 347/2015 had been concluded and did not cause any damages or make a gain to the Deceased’s estate. I confirm that the costs thereof have been fully settled without resort to the Deceased’s estate.”

17.  At the hearing of this application on 14 July 2016, the court asked Ms Queenie S F Lau of Messrs Liu, Chan & Lam, who appeared for the plaintiff, how the proceedings in HCMP 347/2015 were concluded.  Ms Lau declined to provide any further information about those proceedings on the ground of irrelevance.

18.  As earlier mentioned, the Deceased’s estate has an interest in KIKF.  I am told that KIKF has a total of 3 issued shares, of which 1 share is registered in the name of the Deceased.  There is little information regarding the assets or liabilities of KIKF save that, as mentioned above, KIKF was apparently indebted to the Deceased in the sum of HK$7,351,806.61 as at the date of his death.  The plaintiff has also said, in paragraph 13 of his second affirmation, that KIKF is presently “not in operation”.  In my view, on the basis of the presently available materials, it cannot be said that the outcome of HCMP 347/2015 is clearly or necessarily irrelevant to the administration of the estate of the Deceased.  I should also add that the stance adopted by Ms Lau on behalf of the plaintiff, in refusing to provide the court with further information relating to the proceedings in HCMP 347/2015, is most unsatisfactory and unhelpful.  In all, I consider that the 2^nd complaint is justified.

19.  I do not accept the 3^rd complaint, because the requirement of at least two administrators under section 25 of the Probate and Administration Ordinance, Cap.10, where there is minority interest arising under a will or intestacy only applies to a grant of administration, but not probate.

20.  Lastly, in relation to the 4^th complaint, I consider that the plaintiff and 1^st defendant have delayed in administering, realising or distributing the estate of the Deceased, having regard to the fact that almost 6 years have elapsed since the death of the Deceased and more than 4 years have elapsed since the date of the grant.  While there might not have been sufficient cash in the estate of the Deceased for the plaintiff and 1^st defendant to make full distribution of the pecuniary legacies under the Will, there seems to me to be no good reason why partial distribution could not have been made. In this regard, I cannot see any justification for the stance taken by the plaintiff that distribution would only be made after all assets of the Deceased’s estate have been collected and realised.  On the other hand, I do not consider the advanced age of plaintiff to be a good reason for not making the order sought by the plaintiff.  As a matter of law, if the plaintiff should pass away prior to completion of administration of the estate of the Deceased, his executor will become the executor of the Deceased under section 34(1) of the Probate and Administration Ordinance.  Further and in any event, the court always has the power to appoint another person as administrator of the estate of the Deceased under section 33(3) of the Probate and Administration Ordinance if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require.

21.  On the facts of the present case, it seems to me plain that the 1^st defendant ought to be removed as executor of the Deceased, having regard to his unwillingness to continue to act as such executor and his failure or refusal to participate in the administration of the Deceased’s estate since the submission of his resignation letter to the plaintiff dated 27 February 2015.  The only question is whether the removal of the 1^st defendant ought to be postponed until the hearing of the 2^nd defendant’s originating summons in HCMP 303/2016.

22.  The plaintiff is currently a lawfully appointed executor of the Deceased.  He is under an obligation to properly administer the estate of the Deceased with such powers as may be conferred on him as a matter of law.  The fact that the plaintiff has failed to fully comply with Practice Direction 20.2 (as found above) is relevant to, but not decisive of, the court’s exercise of discretion whether to make an order to remove the 1^st defendant.  The other matters complained of by the 2^nd defendant may be relevant to his proposed application to remove the plaintiff as executor of the Deceased, but do not directly impinge on the plaintiff’s application to remove the 1^st defendant.  In any event, it is a fact that, as of now, there is no existing application for the removal of the plaintiff.  Although the 2^nd defendant has indicated an intention to further amend the amended originating summons in HCMP 303/2016 to seek an order for the removal of the plaintiff, it remains to be seen whether the proposed amendments would be allowed by the court.  As I have not heard full arguments on the question of removal of the plaintiff, it would not be appropriate for me to express any firm view on the merits of such application.  Lastly, I have taken into account the fact that none of the complaints that have been raised by the 2^nd defendant against the plaintiff indicate that there is any immediate danger or jeopardy to the assets comprised in the estate of the Deceased.

23.  In all, I do not consider there to be any sufficiently good reason to postpone the removal of the 1^st defendant as executor of the Deceased.

DISPOSITION

24.  I make an order in terms of paragraph 1 of the plaintiff’s originating summons dated 9 June 2015.

25.  On the question of costs, I make an order nisi that there be no order as to costs of this application, in view of the plaintiff’s failure to fully comply with Practice Direction 20.2 even after he has been given an opportunity to file and serve a supplemental affirmation to satisfy the requirements of sub-paragraphs 46(1) and 46(2) thereof by the order of Master Chow dated 14 January 2016.