NGAI CHUN NGOR IRENE AND OTHERS v. NGAI CHUN NAM

HCMP 1055/2022

[2025] HKCFI 391

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1055 OF 2022

____________________

________________________

________________________

________________________

D E C I S I O N

________________________

1.  This is the substantive hearing of the Defendant (“Nam”)’s summons filed on 15 October 2024 (“the Summons”)  for an order that the proceedings herein be stayed pending the determination of HCAP 9/2022. The application (“the Stay Application”)  is opposed by the Plaintiffs (“Irene”, “Kwan” and “Kenneth” respectively, and “Ps” collectively).

2.  In this application, Mr Chan Yik Hong Jonathan represents Nam, and Mr Andrew Hart represents Ps.

Background

3.  The late Mr Ngai Lam Shing (“the Father”)  and the late Madam Cheng Yiu Chun (“the Mother”)  had 5 children (“the 5 Children”), namely, Irene, Kwan, and Kenneth, Nam, and Mr Ngai Chun Ming Tommy (“Tommy”).  There is hostility between Irene, Kwan and Kenneth on the one hand and Nam on the other hand, and there are litigations between the two camps.  Tommy has not been named as a party and has not taken part in these litigations.

4.  A few decades ago, the Father and the Mother ran a Chiu Chow food business.  They used the income from the business to acquire a total of 10 landed properties.  The Father set up 4 private companies (“the 4 Companies”)  at different times for the purpose of holding the 10 landed properties and collecting rental incomes from the same.  The 4 Companies are (a)  Evermore Corporation Limited (“Evermore”); (b)  Vicky Company Limited (Vicky”); (c)  Gosin (Hong Kong)  Limited (“Gosin”); and (d)  Landfar Investment Company Limited (“Landfar”).  The Father gifted some shares of the 4 Companies (“the Shares”)  to the Mother, and those shares were held on trust by the 5 Children for the Mother[1]. All the 5 Children have signed Declaration of Trusts for that purpose.  The shares held by the 5 Children on trust for the Mother in each company represent about 50% of the entire issued share capital in the company.

5.  The Mother passed away intestate on 9 April 2010.  The Shares are the only significant assets in the Mother’s estate.

6.  In 2020, Irene, Kwan and Kenneth commenced HCA 161/2020.  On 21 February 2020, they obtained an injunction (“the Injunction”)  in that action.

7.  Letters of administration of the Mother’s estate were granted to Nam on 5 October 2020.

8.  The Father passed away on 21 January 2022.

9.  On 26 May 2022, after a contested hearing, Nam succeeded in obtaining an order from Linda Chan J to vary the Injunction by allowing the Shares to be registered under Nam’s name, in the capacity that Nam being the administrator of the Mother’s estate.  See [2022] HKCFI 1557, [2022] 2 HKLRD 1235 (“the 2022 Judgment”).  Subsequently, the registration was done.  The Shares are now registered under Nam’s name qua administrator of the Mother’s estate.

10.  In March 2022, Irene, Kwan and Kenneth commenced HCAP 9/2022.  At present, the defendant in HCAP 9/2022 is Nam’s son, Mr Ngai Wai Leung Samuel (“Samuel”).  In that action, the plaintiffs claimed that the will made by the Father on 31 December 2020 (“the 2020 Will”)  shall not be propounded and instead the will of the Father dated 24 June 2016 (“the 2016 Will”)  shall be propounded.  Irene, Kwan and Kenneth’s case in HCAP 9/2022 is that when the 2020 Will was made, the Father lacked a sound mind, memory and understanding as required for the making of a will.

(1)  Under the 2020 Will, Samuel was appointed as the sole executor of the Father’s estate, and all the assets in the Father’s estate are bequeathed to Samuel.

(2)  Under the 2016 Will, Samuel is appointed as the executor of the Father’s estate, HK$20 million are bequeathed to Irene on the condition that she shall transfer all her shares in the 4 Companies to the executor, and those shares shall form part of the residuary estate.  The residuary estate is bequeathed to the 4 sons in equal shares.

11.  In HCAP 9/2022, Irene, Kwan and Kenneth also lodged a challenge and said that no matter which will is propounded, Samuel should not be the executor of the Father’s estate, and some other appropriate person(s)  should be appointed as the executor of the Father’s estate.

12.  In August 2022, Irene, Kwan and Kenneth commenced these proceedings, seeking an order to remove Nam as the administrator of the Mother’s estate, and to appoint two or more of them, or such other appropriate person(s)  as the new administrators of the Mother’s estate.

13.  On 4 October 2024, the substantive hearing of the Originating Summons here (“the OS”)  was fixed on 12 to 13 March 2025.  It is common ground that if the Stay Application is allowed, the substantive hearing of the OS cannot proceed as scheduled.

Discussion

14.  Nam is seeking a temporary stay of proceedings for a case management purpose.  The correct approach in an application for a temporary stay of proceedings is to consider the balance of convenience and fairness as between the parties.  The Court should exercise its discretion in such a manner to ensure that its procedure are used in a logical, fair and cost-efficient manner.[2]

15.  Mr Chan for Nam submits that the stay sought by Nam in his summons should be granted for the following reasons:

(1)  The outcome in HCAP 9/2022 would affect the identities of the beneficiaries in the Mother’s estate.  In considering whether Nam should be removed from the office of the administrator of the Mother’s estate, the view of the majority beneficiaries is a relevant factor.  Before knowing the outcome in HCAP 9/2022, who is/are the majority beneficiaries would not be known.

(2)  The stay sought by Nam would cause no injustice to Ps.  The 4 Companies are holding companies with no active business.  All that is left in the administration of the Mother’s estate is the distribution of the assets in the Mother’s estate. While the outcome in HCAP 9/2022 is not yet known, there cannot be distribution of the assets in the Mother’s estate.  The stay proposed by Nam would not prejudice Ps in any way.

16.  Mr Hart for Ps submits that the stay sought by Nam should be refused, for the administration of the Mother’s estate and the mismanagement by Nam must be addressed immediately.  Mr Hart submits that the mismanagement of the Mother’s estate by Nam is evidenced by the following:

(1)  his refusal to provide full financial records or bank statements of the 4 Companies despite numerous written requests made by Ps for the same;

(2)  inconsistent and contradictory claims by Nam in respect of certain cheques or withdrawals;

(3)  the wrongful use of the Shares to secure majority control in Evermore, Gosin and Landfar, where all the other directors were removed except for Nam and his son, Samuel; and 

(4)  police investigation of Nam for the suspected theft of company funds.

17.  Mr Hart argues that these proceedings must continue without any case management stay to ensure the preservation of critical evidence relating to the mismanagement and retention of banking records.  Any further delay of these proceedings risks the loss of this documentation due to bank retention policies, which would otherwise substantiate claims against Nam, as well as further delaying the administration of the Mother’s estate, thus prejudicing the rights of those beneficiaries.

18.  Mr Hart also submits that if the stay sought by Nam is granted, Ps would request for the following:

(1)  the disclosure of all corporate bank records of the 4 Companies within the next 7 days;

(2)  a direction to Bank of China (Hong Kong)  (“the Bank”, in which the 4 Companies having their accounts)  to preserve the financial records beyond the standard retention period of 7 years appeared; and

(3)  a direction to the Bank to preserve all bank statements of the Father beyond the standard retention time period.

19.  In considering an application for an order to remove an executor or administrator, the view of the majority beneficiaries is a relevant factor.[3] After the death of the Mother and before the demise of the Father, since the Mother died intestate, the beneficiaries of the Mother’s estate at that time were the Father and the 5 Children.  About 50% of the assets in the Mother’s estate would go to the Father.  After the death of the Father, the direct beneficiaries of the Mother’s estate would be the Father’s estate and the 5 Children.  The ultimate beneficiaries of the Mother’s estate would be the beneficiaries of the Fathers’ estate and the 5 Children.  As submitted by Mr Chan:

(1)  If the 2020 Will is held to be the last will of the Father in HCAP 9/2022, Nam and Samuel together would be the ultimate majority beneficiaries of the Mother’s estate.

(2)  On the other hand, if the 2016 Will is propounded, Ps together would be the ultimate majority beneficiaries of the Mother’s estate.

20.  At the level of the immediate beneficiaries of the Mother’s estate, about 50% of the assets in the Mother’s estate would be distributed to the executor of the Father’s estate.  Irene, Kwan and Kenneth are making a claim in HCAP 9/2022 that Samuel should not be the executor of the Father’s estate, no matter which will is propounded.  Accordingly, the identity of the executor of the Father’s estate would only be known after the determination of HCAP 9/2022.  Before the outcome of that action is known, it cannot be known that the majority of the assets in the Mother’s estate would be distribution to whom.  

21.  The identities of the majority beneficiaries of the Mother’s estate can only be known after the determination of HCAP 9/2022.  Bearing in mind that the view of the majority beneficiaries should be taken into account in considering the application for an order removing Nam as administrator of the Mother’s estate in these proceedings, I agree with Mr Chan that the stay proposed by Nam is a sensible way to ensure that the Court’s procedure are used in a logical, fair and cost-efficient manner.

22.  After examining the evidence and considering the parties’ respective submissions, I am also of the view that the balance of convenience is in favour of granting the stay sought by Nam, and there is no unfairness to Ps if the stay is granted.

(1)  The matter set out in [21] above is a factor titling the balance in favour of granting the stay.

(2)  As to whether there can be distribution of the Mother’s estate before the determination of HCAP 9/2022, theoretically before the determination of HCAP 9/2022, there can still be partial distribution of the Mother’s estate, ie distributing about 50% of the assets in the Mother’s estate to the 5 Children.[4] However, as the matters now stand, there can be no distribution of the Mother’s estate in the near future, for Ps are now challenging the beneficial ownership of the Shares.  Ps are saying that the Shares are not the assets in the Mother’s estate but are the personal properties of the 5 Children.  If Ps’ contention is true, there would be no asset in the Mother’s estate which can be distributed to Ps.  Ps’ contention has to be resolved in another set of proceedings (which has not yet been commenced by Ps)  and not in these proceedings.  Before the resolution of that contention, there can be no distribution of the Mother’s estate.  In other words, by reason of Ps’ contention regarding the beneficial ownership of the Shares, the distribution of the Mother’s estate would be delayed for a considerable period of time in any event.  In my view, in the present circumstances, it cannot be said that the stay proposed by Nam would cause delay in the distribution of the Mother’s estate.  There would be no causal link between the stay and the delay.

(3)  As to the contention that Nam has used the Shares to secure majority control in Evermore, Gosin and Landfar: 

(a)  As recorded in [6] of the 2022 Judgment, the directors of the 4 Companies in February 2020 were as follows:

Evermore – Father, Nam, Kwan

Vicky – Father, Nam, Kwan, Kenneth

Gosin – Father, Nam, Irene, Kwan

Landfar – Father, Nam, Kwan

(b)  As a result of the Injunction, the directors of the 4 Companies should remain the same until the expiration of the term of that order.

(c)  Ps’ complaint is that Nam, by using the Shares, altered the composition of the boards in Evermore, Gosin and Landfar in the AGMs of these companies in February 2023. Ps say that after the alteration, only Nam and Samuel are the directors of these companies.

(d)  Nam denies that there has been any alternation of the boards of these companies in February 2023.  Nam says that there was no sufficient quorum in the AGMs of these companies in February 2023 and no business was transacted in these AGMs.

(e)  Nam’s stance is that there has not been any alteration of the boards of these 3 companies, and Ps remain as directors of these 3 companies as shown in [6] of the 2022 Judgment.

(4)  Given that Nam’s stance as stated in the above, Nam would not and could not deny Ps’ rights stemmed from their directorship in the 4 Companies.  Nam also would not and could not cause the 4 Companies to deny Ps such rights.  Ps may still exercise their rights as directors in all the 4 Companies, including the right to have access to the financial records of the companies. 

(5)  In view of the above, the stay would not cause any prejudice to Ps.  Notwithstanding the stay, being the directors of the 4 Companies, Ps would have the right to participate in the management of the 4 Companies, and they would be entitled to have access to the financial records of the 4 Companies.  If Ps’ entitlements as directors are denied, Ps may seek appropriate reliefs from the Companies Court.

23.  I am aware of the fact that the Stay Summons was taken out by Nam at a rather late stage in these proceedings, and if the stay sought by Nam is granted, the substantive hearing of the OS cannot proceed as scheduled. However, in my view, these factors would not outweigh the matters in favour of the stay as set out in the above.  Having taken all the circumstances into account, I would exercise my discretion in favour of granting the stay sought by Nam.

24.  With respect, I am not prepared to accede to Ps’ request as stated in [18] above.  As said in the above, as directors, Ps can request the 4 Companies to provide them the banking records of the companies.  If Ps are of the view that the 4 Companies are preventing them from having access to the companies’ documents, they should seek appropriate reliefs from the Companies Court.  As to the directions concerning the Bank, the Bank is not a party in these proceedings.  No notice has been given to the Bank that any order is being sought against the Bank in these proceedings.  In the circumstances, no order affecting the Bank should be made in this decision.

Disposition

25.  I allow the Stay Application and grant the stay sought by Nam in the Summons.  As said before, once the Stay Application is allowed, the substantive hearing of the OS cannot proceed as scheduled.  I therefore order that the substantive hearing of the OS on 12 and 13 March 2025 be vacated.

26.  Costs should follow the event.  There be a costs order nisi that costs of the Summons, including costs reserved, be paid by Ps to D forthwith, and those costs be summarily assessed on paper.  Unless there is an application for an order varying the aforesaid costs order nisi by a summons within 21 days, the costs order nisi shall become absolute without a further order.[5] There be leave to Nam to lodge and serve a Bill of Costs (limited to 2 pages)  within 7 days after the costs order nisi being made absolute, and leave to Ps to lodge and serve a List of Objections (limited to 2 pages)  within 7 days thereafter.

27.  I thank Mr Chan and Mr Hart for the assistance rendered to the Court.