KAN YUK SUM v. KAN YUK SHING

HCMP 1150/2021

[2022] HKCFI 1532

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1150 OF 2021

_______________________

______________________

______________________

______________________________________

DECISION

(ON PLAINTIFF’S COSTS)

______________________________________

Introduction

1.  The originating summons herein was taken out by P against his brother D under Order 85 of the Rules of the High Court (“OS”), to determine a question arising out of the estate of their deceased mother (“Mother”).

2.  D was appointed as the sole executor of Mother’s estate under her will (“Will”) and P and D are the only beneficiaries under the Will. Mother died on 8 February 2011, and probate was granted to D on 30 August 2011.

3.  As pointed out by this Court, it was not clear from the title of these proceedings as to whether D was named as a defendant herein in his personal capacity or in his capacity of being the executor of Mother’s estate. Although P’s Counsel Mr Leon Ho said D was named in both capacities, D’s Counsel Mr Ronald Pang said his submissions were based on his understanding that D was being named in his capacity as the executor only. This would accord with this Court’s understanding as gleaned from the affirmations filed by P.

4.  At the commencement of this hearing, this Court gave some preliminary observations and views, and encouraged the parties to discuss the matter. Eventually, the parties arrived at an agreement in relation to the sale of the subject property of the Estate (as defined later) and the only disputed issue was whether P’s costs should be paid by the Estate, and if so whether they should be paid on trustee basis.

Brief background

5.  The Will is a simple one , which provided amongst other things, (i) all the deceased’s real and personal estate were devised and bequeathed to the trustee (D) upon trust to sell call in and convert the same into money, with power to postpone the sale calling in and conversion (“Clause 3”); and (ii) to hold the net proceeds of the said sale and conversion and ready money (“Estate”) upon trust to pay thereout all the deceased’s debts and funeral and testamentary expenses and that the residue be divided in 3 equal shares, with 1 share to D and 2 shares to P absolutely (“Clause 4”).

6.  According to the schedule of assets and liabilities lodged by D at the time of his application for the grant, the Estate consisted of only one landed property, namely a shop space on Shanghai Street (“Property”).

7.  Briefly, the Property had been used and occupied by a business which was started by the parties’ father as sole proprietor in the 1940s, which after their father’s death, became a partnership and until November 2008, Mother, P and D were the sole named partners of the business, and thereafter, P and D became the two named partners of the business.

8.  P immigrated to Canada in or around 1991.

9.  The parties’ relationship later deteriorated and P commenced proceedings in July 2020 against D to seek the books and accounts of the partnership.

10.  Insofar as the Property is concerned, it is now vacant, and has been so since about 2021.

The OS

11.  In the OS, P sought directions as to whether D, as executor, is to assent the Property to the parties as beneficiaries of the Estate (“Assent Question”); and in the event of a negative direction on the Assent Question, for an order for sale (“Order for Sale”).

12.  At the hearing, as mentioned earlier, upon the Court giving preliminary observations and views, the parties arrived at a settlement in relation to the Order for Sale. The parties had also agreed to D’s costs in his capacity as executor of the Estate be paid by the Estate on trustee basis.

Discussion

13.  P has sought his costs of the OS be also paid by the Estate, on trustee basis. D suggests that there should be no order as to costs, and in any event should not be on trustee basis.

14.  A chronology of relevant correspondence between the parties and their respective solicitors has been set out in D’s skeleton submissions.

15.  From a letter dated 2 August 2019 from P’s former solicitors to D’s solicitors, it can be seen that according to P, over the past 8 years (ie since 2011), he had repeatedly requested D to have P’s interest in the Estate vested. In response to this issue, in his solicitors’ letter dated 23 August 2019, D had denied that P had made such repeated request for vesting his interest, but D was willing to execute the relevant assent for the vesting of P’s interest in the Property (ie the only asset of the Estate).

16.  In a letter of 11 September 2019, P acknowledged that D’s offer to execute an assent, but he did not indicate whether the same was acceptable and P had made other demands in that letter.

17.  On 4 June 2021, P’s new solicitors (ie his present solicitors) wrote and asked D to send the draft assignment or the draft assent for their approval, and further indicated that once the daft was approved by P, then D should send the assignment/assent duly executed by D first before P’s solicitors sending the same to P in Canada for his signature in the presence of a notary public in Canada, and that P’s solicitors would arrange for the document to be duly stamped and registered at the Land Registry.

18.  On 18 June 2021, a draft of the assent (“Assent”) was duly sent by D’s solicitors.

19.  Thereafter, on 23 June 2021, P’s solicitors suddenly raised the issue that in light of Clauses 3 and 4, that there is no express power for D to execute the Assent and that to avoid any unnecessary challenges on title of the Property, they deemed it necessary for a deed of family arrangement to be entered into between the parties. D’s solicitors replied that a deed of family arrangement was superfluous.

20.  By a letter of 15 July 2021, P’s solicitors insisted that D lacked the power to execute the Assent in relation to the Property and sought an indemnity as a condition of executing the Assent. In this respect, P’s solicitors relied on Re FSF (Enduring Power of Attorney) [2020] 1 HKLRD 786. The matter then came to a stalemate.

21.  In P’s Skeleton Submissions at the hearing before this Court, Mr Ho also referred to section 66 (1) of the Probate and Administration Ordinance, Cap 10 (“PAO”) to support his argument that D has no power to execute the Assent in relation to the Property.

22.  In reply, Mr Pang submitted that it was uncertain how section 66 (1) would assist P, in particular when under section 68(1) of PAO provides that:

“The personal representative may appropriate any part of the movable or immovable property including things in action of the deceased in the action condition or state of investment thereof at the time of appropriate in or towards satisfaction of any legacy bequeathed by the deceased, or of any other interest or share in his property, whether settled or not, as to the personal representative may seem just and reasonable, according to the respective rights of the persons interested in the property of the deceased”.

(emphasis added)

23.  As set out in section 68(2)(ii) of the POA, the above power is subject to consent of the respective beneficiary”.

24.  As I have indicated at the hearing, upon reading of sections 66 and 68 of PAO, on my preliminary views, D did have the power to execute the Assent, in that D may appropriate any part of the Estate including the Property subject to P’s consent and that the various conditions imposed by P for the execution of the Assent were not necessary.

25.  Having said this, as further indicated, in light of the relationship between the parties, the execution of the Assent would not assist P, since upon being vested with 2/3 interest in the Property, he might have difficulty in realizing his 2/3 interest. If D were not agreeable to sell the Property, P would have to issue an application under the Partition Ordinance for partition of the Property and/or for an order for sale. Yet, not until the issue of the OS, P did not make any proposal in relation to a sale and instead kept imposing conditions on the execution of the Assent. I find P’s attitude not helpful and he should not be awarded any costs for those letters prior to the issue of the OS.

26.  Having said this, D had not make any proposals for sale of the Property either, nor did he take the initiative to issue any administration action under Order 85. Further, even in D’s Skeleton Submissions, D was seeking a dismissal for the Order for Sale arguing that this was an attempt to circumvent the executor’s absolute discretion over the Property by dressing the application in the form of an academic question.

27.  D, being the executor, is under a duty to administer the Estate expeditiously, and now some 11 years after probate of the Will being granted to him, the Estate still has not been wound up. As observed by this Court, unless there are good reasons for such delay, dilatory action on the part of executor may place him at risk of being removed as the executor.

Conclusion and order

28.  Having said all the above, I accept that if not for the issue of the OS, the parties would not have appeared before the Court at the hearing which had given them an opportunity to arrive at an overall agreement in relation to the sale of the Property. Their agreement had saved considerable costs and the Court’s time.

29.  Costs are in the discretion of the Court, and after considering all the circumstances of this matter, I am of the view that P should be entitled to their costs as from the date of issue of the OS on 12 August 2021 onwards.

30.  As for the basis for the costs, I refer to Re Buckton [1907] 2 Ch 406 in which Lord Scott had said as follows:

“56. The case on costs, as explained by Mr Thomas, is based on the principle that where proceedings have been properly instituted for the benefit of a trust fund, or a deceased’s estate, the court may, in an appropriate case, make an order for the costs of the proceedings to be borne by the fund or estate, as the case may be. The principle was explained by Kekewich J in In re Buckton [1907] 2 Ch 406 at 414/415. He referred, first, to cases in which trustees ask the court to determine some question which has arisen in the administration of the trust. In such cases, said Kekewich J, the general rule would be that the costs of all necessary parties would be taxed as between solicitor and client and paid out of the estate. He then referred to a second class of case in which the question for determination by the court is raised not by the trustees but by some of the beneficiaries. In such a case, if the question raised would have justified an application by the trustees but for some reason or other the application has been made by beneficiaries, the same costs consequences, he said, should follow:

The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate as a whole.”

31.  In the present application the question for determination by this Court would have justified an application by D.

32.  I therefore order P’s costs to be paid by the Estate on solicitor and client basis.

33.  I order the parties’ respective costs to be summarily assessed and be paid out of the net sale proceeds upon the sale of the Property. Each party is to lodge his statement of costs within 14 days, and their respective list of objections to the other’s costs within 14 days thereafter.