RE LAI SUET CHING

HCCA 1364/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO. 1364 of 2015

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D E C I S I O N

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Application

1.  This is a caveat action, involving disputes among siblings as to who should administer the estate of their mother, including the un-administered estate of their father, as well.

Background

2.  Mr. Lung Tin Kwei (龍天桂) (“the father”) died intestate on 25 September 1990.

3.  About 5 years later, on 7 December 1995, letters of administration of the father was granted to his wife, Madam Lai Suet Chin (黎雪清) (“the mother”). From the relevant estate duty papers, the estate of the father then valued at about 5.2 million, consisting of primarily about 700,000 shares in C.H.K. Consultants Limited (“CHK”), 5 landed properties and shares in 3 restaurant businesses.  

4.  The estate of the father was to be shared by the mother as well as 7 of their children. Briefly, the mother took the statutory sum as per section 4 Intestates’ Estates Ordinance (Cap. 73) at the material time and half of the remaining sum. The 7 children then further shared equally the other half. 

5.  The 7 children are:

(1) Man Wing (萬榮)

(2) Man Fung (萬豐)

(3) Ping Ying(冰瑩)

(4) Man Kuen (萬權)

(5) Man Kwong (萬光)

(6) Man Leung (萬良), and

(7) Kam Ying(錦瑩).

6.  It appeared that the mother and the children had agreed with a family arrangement[1], including that the estate of the husband would be treated as family assets to be managed by the wife.

7.  Things went on for almost 20 years.

8.  Then, on 30 July 2014, Man Wing commenced a probate action (HCAP 22/2014) against the mother. He sought, inter alia, a declaration of his interest in the father’s estate and accounts. Such proceedings were later stayed on 18 November 2014, by consent, pending appointment of a legal representative for the mother.

9.  Indeed, the mother passed away on 2 November 2014. She died intestate at the age of 81.  Her estate, including the “un-administered” estate of the husband, is to be shared equally by the said 7 children.

10.  On 4 November 2014, Man Kwong and Kam Ying filed a caveat[2] under HCCA 4787/2014. It later lapsed.

11.  On 17 February 2015, Ping Ying, Man Kuen, Man Kwong and Kam Ying filed a joint application for grant under HCAG 2398/2015 for the letters of administration of the mother’s estate. From the affidavit evidence prepared by them, the estate of the mother consisted of cash of about $960,000 at banks, some shares in 2 companies (including 100,000 shares in CHK), 8 landed properties (2 being held in trust by the siblings, “255 property” by Man Kwong and “253 property” by Man Leung) as well as her interest in the estate of the father.

12.  HCAG 2398/2015 could not be processed because Man Fung and Man Leung (hereinafter called “caveators”) filed the present caveat proceedings after about 1 month on 19 March 2015.

13.  Ping Ying, Man Kuen, Man Kwong and Kam Ying (hereinafter called “the persons warning”) warned the caveators who entered their appearance.

14.  On 28 April 2015, the caveators issued the present summons. He asked for the dismissal of HCAG 2398/2015 and the appointment by the court of an independent and professional administrator regarding the estate of the mother.

15.  In the supporting affirmation, Man Leung said that the mother had not fully administered the estate of the father and as such, a grant de bonis non would be needed. He also said that Man Wing was adjudged bankrupt in around 2010 and he started HCAP 22/2014 against the mother for accounts and so forth. In the estate of the father, the shares in CHK and all landed properties had not been administered. On the other hand, it was said that, the mother’s estate should include “Tai Fung Lau[3]” notwithstanding that it was held under joint tenancy with Ping Ying.   Over the years, the mother wished to make a will. She prepared a note[4] of wishes. He did not follow up because he was worried that the family would be torn up. Soon after the death of the mother, it was evident that there would be disputes among the siblings, including incomes and ownership of the landed properties. In light of the circumstances, he proposed accountants to be appointed as the independent administrator at a cap fee of $80,000.

16.  On 19 May 2015, Kam Ying filed her affirmation in opposition. She agreed that Man Wing was an un-discharged bankrupt. She said that Man Fung had a long history of conflict with the mother. Both Man Wing and Man Fung borrowed $900,000 from the mother on condition their shares in the family assets were to be subject to the full control of the mother.  Exclusive power of control over the property of Man Fung at Wong Uk Tsuen was given to the mother. The arrangement was documented[5]. As to Man Leung, it was said that the position was even more obvious (or worse), including that he was in fact holding the legal title of 253 property for the mother only. He denied the trust and therefore had a conflict of interest with the estate of the mother. Kam Ying also produced a record[6] of rental income from the landed properties for the father’s estate from 1990 to 2015. It was said that they were used to pay the household expenses of the family and the mother also used hers to cover the shortfall. She further denied all unfounded   allegations made by Man Leung. The persons warning should obtain the grant. The proposed accountants did not seem to possess the experience and expertise. Its quotation of $80,000 was unrealistic.

17.  On 4 June 2015, Kam Ying filed her 2^nd affirmation to further oppose the caveators’ case. She explained the current status of the father’s estate. The landed properties were valued at about $10.3 million[7]. The income from the restaurant businesses amounted to about $13.6 million[8]. CHK was dormant and insolvent. She also spent some time explain what the family arrangement was about. Further, over the years, the mother did arrange each of the siblings to have a village house registered in their own names. The 253 property and 255 property were however trust properties held for the mother. She reiterated that there was no need for an independent administrator. However, if it was so decided by the court, she would propose an experienced solicitor who agreed to charge at $3,800 per hour with a cap fee of 1% of the value of the estate.

18.  Man Lung replied by his 2^nd affirmation. He repeated that there were conflicts among the siblings and as such, professional input was required. The disputes lied in accounting rather than legal in nature. He further explained the accountants (if appointed) would engage a solicitor to apply for the grants. The solicitor would charge $60,000, i.e. $30,000 each for the application for grants of the father and mother respectively. Hence, it totally cost a sum of $140,000 ($80,000 + $30,000 + $30,000), exclusive of disbursements. The suggestion of the persons warning was said to be too expensive.  

19.  On 23 July 2015, Kam Ying filed her 3^rd further affirmation. She spent some time dealing with the alleged conflicts raised by Man Leung. She commented and disagreed with the proposals suggested by him. She reiterated her denial over the allegations against her. She produced an account[9] of the estate of the father which showed a net value of about $22.3 million as at 31 March 2014. She also confirmed that the persons warning no longer wished to cross-examine Man Leung on his affirmations.

20.  Finally, Man Lung filed his 3^rd affirmation. He explained that he should not be misunderstood. He doubted if the applicants would properly administer the estate of the mother. He reiterated that the court should adopt the suggestion of the caveators.

21.  Parties appeared before me on 11 December 2015 for the substantive argument. Mr. Kerby Lau of counsel acted for the caveators and Mr. Douglas Lam SC represented the persons warning. Upon hearing from them, I reserved my decision to be handed down.

22.  Here is my decision.

Parties’ cases

23.  The caveators proposed 3 options.

(a) Two accountants with a cap fee of $80,000.

(b) Two accountants (cap fee of $80,000) and a solicitor as co-administrators to apply for grants of the father and the mother ($30,000 x 2).

(c) A solicitor on his own (cap fee  at 0.5 % of the estate)

24.  By counsel’s skeleton and confirmation at the hearing, the persons warning no longer asked the court to appoint them (or any one of them) to be administrators. They agreed that an independent administrator was to be appointed. However, they suggested that their nominee was to be preferred to. Their proposed solicitor agreed to lower his cap his fee from 1 % to 0.65 % of the value of the estate. By submissions of his counsel, it was said that the solicitor was further willing to lower his cap to 0.5 %.

25.  With the parties’ positions at the hearing before me, it largely reduced the extent of arguments. The dispute as to whether the persons warning (or any of them) should be “passed over” is no longer at issue. Hence, the usual arguments of bad character, neglect of duties, intermeddling with estate, incompatible interest, and so forth could be skipped. At the end of the day, it is a choice of the proposal(s) of independent administrator(s) to be preferred to by this court.    

Applicable principles

26.  Both counsel expressed their views over a number of authorities cited before the court. Although it appeared that they had disputes, I do not find that there is any in substance. Ultimately, it is an exercise of the discretion of the court in the particular circumstances of each and every case. It suffices to bear in mind that the discretion under section 36[10] Probate and Administration Ordinance (Cap.10) is to be exercised in the best interests of the estate, including to effect an expeditious and economical administration according to law[11].

Discussions

27.  The followings features are particularly relevant in the present case.

(a) The size of the estate is substantial with an estimated amount of not less than $26 million.

(b) The distribution is not difficult. It is to be divided into seven equal parts.

(c) The administration nonetheless requires some effort.

(d) The administrator has to identify the un-administered estate of the father which is part of the estate of the mother. Among others, the administrator has to understand the family arrangement having agreed by parties and the administration and distribution by the mother (with the assistance of her child(ren)) over the years. In this respect, some accounts[12] have been disclosed by the persons warning. However, the caveators do not (entirely) agree with them.

(e) The administrator has also to identify the estate of the mother.

(i) The persons warning said that the 235 property was held by Man Leung on trust for the mother. He denied.

(ii) The persons warning also said that the mother had lent loans to the caveators. They also denied.

(iii) The caveators complained that Tai Fung Lau should form part of the estate of the mother. Ping Ying apparently disagreed. 

(f) The administrator has to deal with HCAP 22/2014 which was commenced by Man Wing against the mother. It is of course noted that he is still an un-discharged bankrupt. 

28.  With these in mind, the choice of accountants can be easily disposed of. The administration touches on lots of issues which solicitors with legal knowledge are to be preferred to. I further agree with Mr. Lam SC that the cap fee of $80,000 is quite unrealistic. 

29.  Should the accountants then work together with solicitor(s) as co-administrators? I take the view that the difficult part in the present administration lies in the legal aspects and calculations can be delegated to bookkeeper(s) or accounts clerk(s). One of course does not forget the effort to be spent in inter-parties discussions and communications between two professions would definitely increase time and costs. I therefore consider that the disadvantages of such approach outweigh its advantages in the present case. Further, the proposed cap fees are still unrealistic.  

30.  Finally, it left with the choice between the 2 solicitors.

31.  The difference between the 2 proposed solicitors is fine. There is no allegation on the integrity of both candidates. They are both professionals with experience in dealing with probate matters, including contentious ones. It is also not aware that they have taken sides of any of the siblings and/or they have any conflict of interest with any of parties hereto.

32.  However, of course, one is proposed by the caveators and another, by the persons warning. Hence, in terms of the numbers of siblings or beneficiaries, it is 2 to 4. So, the latter represents a majority share in the estate of the mother.

33.  Both learned counsel did spend some time on this issue. Upon thought, I take the followings views.

(a) In those cases wherein the parties (enjoying same priority, usually siblings) are fighting for being appointed as administrator(s), it is the general practice to prefer the one with the largest interest or who is supported by the majority of interest.

(b) Mr. Lau referred me to the case of re Palmer Marine Surveys Ltd. [1986] 1 WLR 537. He said that the choice of the one whose conduct was under suspicion should not be preferred. He of course pointed his finger to Ping Ying. Mr. Lam SC disagreed and tried to distinguish the case from the present case. In my view, it remains nothing more than a factor to be considered. There are allegations against Ping Ying. There are also allegations against the caveators. However, they could not be resolved by affidavit evidence and are to be investigated by the independent administrator.

34.  I finally look at the fees proposed. Both of them excludes disbursements and costs regarding contentious matters.

35.  The candidate proposed by the caveators asks for:

(a) Solicitor at $4,000 per hour;

(b) Associates at $2,500 per hour;

(c) Legal executive at $1,500 per hour; and

(d) Cap fee of 0.5 % of the value of the estate of the mother.  

36.  On the other hand, the one suggested by the persons warning seeks:

(a) Solicitor at $3,800 (after discounted from $4,500) per hour;

(b) Assistant solicitor at $1,800 per hour;

(c) Legal executive at $1,000 per hour; and

(d) Cap fee of 0.5 % (having lowered from 1 % to 0.65%, then further to 0.5 %) of the value of the estate of the mother.

37.  Upon consideration, I prefer the one offered by the former. He is more accurate at his estimate. His suggestion remains the same throughout. On the other hand, although the one chosen by the persons warning appears to be negotiable (he discounted his hourly rate from $4,500 to $3,800 as well as lowered his cap fee from the original offer 1 % to 0.65 %, then further to 0.5 %), it is not always true that this court will only pick the one with the lowest fee. There are other factors to be taken into account. In his proposal, I am a bit concerned about the fact that he is expressly reserving the right for adjustment. As in his letter of 11 December 2015, it was said,

“…The capped fee of … remains unchanged…In the event that we have to seek approval from the Court or the beneficiaries for adjustment...”

It should be noted that “cap fee” means “cap fee” and “adjustment” should not happen (except in perhaps exceptional circumstances) otherwise, the capping will serve no meaningful purpose at all.  

38.  With the above in mind, the one suggested by the persons warning is preferred to.

Orders and costs

39.  To conclude, I will make the followings orders.

(a) The caveat herein shall cease to have any effect.

(b) The application filed by the persons warning under HCAG 2398/2015 is to be withdrawn.

(c) Subject to the filing of all requisite papers and compliance of the requirement by the Registrar, grant of representation of the estate of Madam Lai Suet Chin (黎雪清), Mr. Alfred Ip of Messrs. Oldham, Li & Nie is to be appointed as administrator under section 36 Probate and Administration Ordinance (Cap.36).

(d) Costs of Mr. Alfred Ip in the said administration will be levied as per his letter of 23 and 24 June 2015.

(e) Liberty to apply for further directions, if necessary.

40.  Although I do not have the benefit from the parties on the question of costs, there appears to be no reason why costs should not follow the event. 

(f) There will be an order nisi (to be made absolute after 14 days) that costs of the caveators including costs reserved and certificate for counsel for hearing on 11 December 2015, be borne by the persons warning to be summarily assessed by this court.

(g) Subject to (f), for the purpose of the summary assessment of costs, the caveators do lodge and serve their costs statements within 3 days from the order absolute. The persons warning do also lodge and serve their reply not later than 3 days thereafter.

41.  It remains for me to express my gratitude for the assistance rendered by both learned counsel to the court.

[1] Exact details are to be ascertained.

[2] By rule 44 (4) of the Non-Contentious Probate Rules (Cap.10A), a caveat remains in force for 6 months from its filing of the court. It lapses if nothing further happens.

[3] It is a building with 6 levels at Nos.13 – 15 Tai Hang Street, Yuen Long. The building consists of 18 residential units and 2 shops on the ground floor.

[4] Note in Chinese signed by the mother dated 18 October 2011 as per LML - 8. 

[5] Chinese memorandum dated 1.12.1992 at LKY-2, signed by both Man Wing and Man Fung. 

[6] LKY-10 shows a total income of about 2 million was received for about 15 years. 

[7] As per the valuations in LKY-14.

[8] As per the calculations in LKY-15.

[9] LYK-26

[10] Although only rule 25 (2) Non-Contentious Probate Rules (Cap. 10A) was referred to in the summons and section 36 Probate and Administration Ordinance (Cap.10) was not expressly mentioned therein, both parties apparently also relied on the latter in persuading the court to adopt their suggestion(s). 

[11] Re Estate of Loo Che Chin [2013] 2 HKLRD 739, Jeremy Poon J. (as he then was)

[12] LKY-10, LKY-14, LKY-15, LKY-16 and LKY-26.