CHENG TANG KAM YUNG v. TANG KAM CHEUNG AND ANOTHER

CACV185/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 185 OF 2013

(ON APPEAL FROM HCMP NO. 147 OF 2008)

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REASONS FOR DECISION

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1.  By summons filed on 24 October 2013, the 1^st and 2^nd defendants apply for stay of execution of the judgment and order made by Deputy High Court Judge Leung (“the Judge”) on 26 August 2013 and 15 October 2013 respectively pending their appeal herein. By the judgment and order, the 1^st and 2^nd defendants were removed from their office as the administrators of the estate (“the Estate”) of Tang Chung Sau (“the Deceased”) and, in their place, Mr David Yen Ching Wai of Ernst & Young was appointed to be the administrator of the Estate.

2.  After hearing submissions, I dismissed the summons and ordered the 1^st and 2^nd defendants personally pay the plaintiff’s costs of the application, to be taxed if not agreed.  My reasons appear below.

HCMP147/2008

3.  The plaintiff is the sister of the 1^st defendant.  The deceased and Madam Cheung Yuk Ying (“Mother”) were their parents.  The Deceased died intestate on 15 July 1998.  The Estate is substantial.  According to the provisional schedule of properties filed with the Estate Duty Office in 2003, the Estate comprises mainly of: (1) cash and bank deposits in the amount of about HK$630,000; (2) 23 lots of land in the New Territories with an estimated value of about HK$80 million; (3) debts due to the Deceased in the sum of about HK$3,200,000; and (4) right to compensation from the government for resumption of land, the value of which was unspecified.

4.  On 1 December 2004, Letters of Administration was granted to the 1^st defendant and Mother, who was by then some 80 years old and in poor health.  The Judge had found that the Estate was effectively administered by the 1^st defendant.  As of today, the administration of the Estate has not been completed and no distribution has ever been made.

5.  In 2006, in reply to the plaintiff’s solicitors’ request for an account, the 1^st defendant confirmed that the Estate had received from the government compensation together with interest in the sum of about $8,700,000.

6.  In January 2008, the plaintiff commenced HCMP147/2008 against the 1^st defendant and Mother pursuant to Order 85 of The Rules of High Court, Cap.4A (“RHC”) for the production of account and an administration of Estate or alternatively an order for payment into court of money held by the defendants as administrators of the Estate.  Throughout the proceedings in the court below, both parties were legally represented.  

7.  Pursuant to an order for account made in November 2008, the defendants rendered an account which was later verified by affidavit.

8.  Mother died in October 2011. The 1^st defendant was given leave to represent the estate of Mother and in that representative capacity becomes the 2^nd defendant.

9.  On 21 November 2012, the plaintiff applied by summons for an order appointing her or a professional accountant to replace the 1^st and 2^nd defendants as the administrators of the Estate.  As an alternative, the plaintiff sought an order appointing her in the place of the 2^nd defendant to act jointly with the 1^st defendant to complete the administration of the Estate. 

10.  At a direction hearing before Au Yeung J on 6 March 2013, an undertaking was given by the 1^st defendant through his solicitors to the effect that he would not dispose of the landed properties and buildings in the Estate by way of sale, charges or otherwise without first giving to the plaintiff 14 days’ written notice of his intention to do so (“the Undertaking”).   

11.  Both the plaintiff and the 1^st defendant had filed affidavits in respect of the application.  The grounds for the plaintiff’s application are: (1) there had been inordinate delay in the administration and distribution of the Estate; (2) the administration was not carried out properly, fairly and impartially; and (3) the defendants had failed to keep proper and accurate account of the Estate.  The defendants opposed the application, contending that further accountant’s report was being prepared.

12.  By judgment handed down on 26 August 2013 (“the Judgment”), the Judge granted the plaintiff’s application.  The Judge was of the view that the manner in which the Estate was administered by the 1^st defendant in the past nine years, even on the 1^st defendant’s own case, together with the 1^st defendant’s failure to keep and furnish full and accurate account of the Estate, cried out for intervention.  The Judge further considered that it is more appropriate to appoint independent professional accountants to be the administrators.  This is because both the plaintiff and the 1^st defendant are directors in and indebted to a company (Happy Post Enterprises Ltd), whose shares are held by the Estate.

13.  The Judge therefore ordered the removal of the 1^st defendant (both in his personal capacity and as personal representative of Mother) as administrator of the Estate to take effect upon the appointment of independent, professional accountants as the administrators of the Estate.  The Judge gave the 1^st defendant 14 days within which to make proposals on the persons to be appointed as the new administrators.  The 1^st defendant, however, did not make any nomination.

14.  On 15 October 2013, the Judge appointed Mr David Yen of Ernst & Yeung as the new administrator of the Estate.  Mr Yen has since commenced working on the administration.  The 1^st defendant indicated at the hearing that Mr Yen had written to him to request for information.

Applications for stay of execution

15.  In the meantime, on 9 September 2013, the 1^st and 2^nd defendants, acting in person, commenced these proceedings to appeal against the Judgment. By summons filed on the same day, the 1^st and 2^nd defendants applied to the Judge to stay the Judgment pending his appeal.  Subsequently, by another summons filed on 17 September 2013, the 1^st and 2^nd defendants applied for an order that they may have interim capacity to act as the administrators of the Estate to conduct two civil litigations until the final disposal of their appeal.

16.  The Judge heard the summonses on 10 October 2013 and dismissed them with costs against the defendants.  The reasons for the decision were handed down on 15 October 2013.

Applicable legal principles

17.  The starting point in considering the defendants’ present application is Order 59 rule 13(1)(a) RHC which provides that a pending appeal does not operate as a stay.  The grant of a stay of execution pending appeal is a matter of the court’s discretion. 

18.  The relevant legal principles are well settled: Star Play Development Ltd v. Bess Fashion Management Co Ltd [2007] 5 HKC 84, at paras.6-10.  A stay will only be granted if there are good reasons to justify it.  A strong appeal will usually constitute a good reason for a stay.  By “strong appeal”, it means that something has grievously gone wrong with the process of law in the court below: per Litton JA (as he then was) in World Trade Centre Group Limited v. Resourceful River Limited, unreported, Civ App No 70 of 1993, 12 May 1993; and Wenden Engineering Service Company Limited v. Lee Shing Yue Construction Co Ltd, unreported, HCCT No 90 of 1999, 17 July 2002 at paras.6-8. Conversely, a mere arguable appeal is by itself insufficient.  The appellant will have to provide additional reasons to justify the stay.  If the appeal will be rendered nugatory without the stay, that would provide an additional good reason justifying a stay of execution.

19.  With these principles in mind, I turn to look at the reasons put forward by the defendants in support of their application.

The defendants’ reasons for stay of execution

20.  The defendants made two affirmations and further filed four other affirmations in support of their application.  The defendants had not lodged any submissions, notwithstanding the directions given by the Master on 30 October 2013. 

21.  The defendants put forward the following reasons as special circumstances justifying a stay of execution:

(1)   The Estate was mainly inherited from the Deceased’s ancestors. The plaintiff had never paid tribute to the ancestral tombs. The Deceased’s restaurant business was managed by the 1^st defendant and the plaintiff had never helped to run the business.

(2)   The plaintiff was not a filial daughter.  She did not pay visit to Mother or attended her funeral.

(3)   It is costly to have a professional accountant to administer the Estate.  There is no requirement that the account of the Estate has to be audited.  The plaintiff’s son is an accountant and it is questionable whether he is connected to Ernst & Young. 

(4)   The Undertaking was given without the 1^st defendant’s consent and he had not signed any written undertaking.

(5)   The 1^st defendant was not afforded an opportunity to defend himself or to call evidence in the proceedings below.

(6)   There is one other beneficiary to the Estate, Tang Ieng Kit, and he has no knowledge of the proceedings and the application taken out by the plaintiff.

22.  I shall deal with these points in turn.

Reasons for decision

23.  The source of the Estate, whether the plaintiff had helped out in the Deceased’s restaurant business and whether she had been a filial daughter, are all irrelevant considerations in the defendants’ application for stay of execution.

24.  Similarly, the manner in which the Undertaking came to be given to the court is irrelevant and cannot support a stay of execution.  It is essentially a matter between the defendants and their former solicitors.  Contrary to the 1^st defendant’s suggestion at the hearing, the Undertaking did not prevent the sale of the landed properties in the Estate; it merely required the 1^st defendant to give notice to the plaintiff of disposal of the landed properties.  There is also no merit in the 1^st defendant’s oral submission that the Undertaking had the effect of giving the plaintiff a head start in the proceedings while posing a psychological threat to him.    

25.  The Judge was fully aware of the defendants’ objection to their removal and the appointment of a professional accountant to administer the Estate.  The Judge had also considered the arguments advanced by the defendants including it would be costly to appoint an independent professional administrator.  In order to reduce the costs, the Judge had reduced the number of administrators from two to one.  He had also in the order of appointment imposed a cap on the administrator’s fees. 

26.  In addition, having regard to the size of the Estate, the appointment of an independent professional administrator is not unreasonable.  Given the 1^st defendant’s inability to come up with a full and accurate account of the Estate, it is apt to appoint a professional accountant whose expertise will be of use in investigating, tracing and establishing what have happened to the assets of the Estate.

27.  In his oral submission, the 1^st defendant informed me that in his nine years of administration, the Estate had received over $60 million from the sale of land.  After discharging approximately $12 million estate duty and defraying expenses of about $3 to 4 million, the rest of the money was however absorbed by repayment of loans incurred by him on behalf of the Estate and the payment of interest on those loans.  Admittedly, an excess of $40 million had been incurred in administering the Estate since 2004.  In these circumstances, it is not open to the 1^st defendant to complain that the costs of professional administrator are high and that he should be allowed to continue administering the Estate.

28.  The 1^st defendant further said that they are Hakka people and the customary practice is that administration of estate should be carried out by people within the family.  Accordingly, he argued, the appointment of an outsider or third party to administer the estate is both unheard of and contrary to customary practice.  Insofar as the 1^st defendant sought to advance an argument based on customary Chinese law, there is no such evidence before the Judge.  There is also no such evidence before this court.  The affirmation of 陳潤新, who used to be an indigenous villager representative, is hardly sufficient to prove the alleged Chinese or Hakka custom.  The 1^st defendant has also not established the basis for adducing new evidence on appeal: see the legal requirements in Ladd v. Marshall [1954] 1WLR 1489.

29.  The 1^st defendant also complained that at the hearing before the Judge, there was no opportunity for him to defend himself, to cross-examine witnesses and to call oral evidence.  He therefore said there ought to be a re-trial.  The proceedings in the court below were brought pursuant to Order 85 RHC.  Under Order 85 rule 4, the court may make any order or grant any relief notwithstanding that the action was begun by originating summons.  If the defendants desired to call oral evidence or cross-examine the plaintiff, it would be incumbent upon them to apply for directions.  The defendants were legally represented in the proceedings below.  No procedural objection had been taken.  There was also no application to the Judge to adduce oral evidence or to cross-examine witnesses.  The defendants have not demonstrated in what way the Judge erred procedurally in not turning the application into a writ action and/or in determining the application on affidavits.  Importantly, too, the Judge had concluded that even accepting the 1^st defendant’s case, the state of the administration cried out for intervention.

30.  Turning to the complaint that one of the beneficiaries has not been given notice of the plaintiff’s application, Order 85 rule 3(2) RHC provides that it is not necessary to make all persons who have beneficial interest in the estate parties to proceedings brought under Order 85.  Moreover, until he was removed, the 1^st defendant as the administrator of the Estate could and should have given notice of the application to Tang Ieng Kit if indeed he thought that Tang Ieng Kit should be informed.

31.  In short, none of the reasons advanced by the defendants provides proper grounds for staying the Judgment and the appointment of the new administrator.

32.  Apart from the matters discussed above, the defendants have in the notice of appeal also complained that: (1) the Judge was wrong to have found that the interest for the loans incurred by the 1^st defendant on behalf of the Estate was high; (2) the defendants’ former solicitors had not included everything in drafting the 1^st defendant’s 2^nd affirmation; and (3) the Judge had not taken into account that the defendants had used their best endeavours and had diligently and conscientiously discharged their duties in administering the Estate.

33.  As this is not the hearing of the appeal, I shall refrain from embarking upon detailed discussion and analysis of the grounds of appeal.  I need only form a preliminary view on the merit of appeal.  It is sufficient for the purpose of the present application to say that the defendants are primarily seeking to challenge the Judge’s findings on the fact and that unless the Judge is shown to be clearly wrong, the appellate court is slow to interfere with his findings.  Given that it is the defendants’ case that millions of dollars had been incurred on interest payment, it is difficult to say that the Judge was not entitled to comment that the interest rate was high.  Further, on the materials before the court and in the light of the analysis and reasons given by him, the Judge is, in my view, entitled to conclude that the defendants should be removed and a new professional administrator be appointed.  As to the complaint levied against their former legal representatives, there is a lack of particulars.  It has not been shown what prejudice had been occasioned to the defendants. 

34.  The merit of the defendants’ appeal is accordingly not a strong one and does not justify a stay of execution.

35.  For the above reasons, the defendants’ summons was dismissed.

Costs

36.  The 1^st defendant argued that as the application relates to the administration of the Estate, the costs should be borne by the Estate.  The plaintiff however asked that the costs be paid by the defendants personally.

37.  Generally speaking, costs should follow event.  The defendants, having failed in their application, should pay the costs of the plaintiff.  When the defendants took out the present application, they were no longer the administrators of the Estate and they had no entitlement to have their costs met by the Estate. Further, under Order 62 rule 6(2) RHC, where a personal representative (which includes an administrator) has acted unreasonably or has in substance acted for his own benefit rather than for the benefit of the estate, the court may order that the costs not be paid out of the estate.  There is no doubt that the defendants acted for their own benefit rather than that of the Estate in bringing the application for stay.  This provides a further reason why the costs should not be paid out of the Estate. 

38.  Accordingly, I ordered that the 1^st and 2^nd defendants personally pay the plaintiff the costs of the application, to be taxed if not agreed.