ANNABELL KIN YEE LEE AND OTHERS v. LEE WING KIM (MAY LEE) AND ANOTHER

HCAP5/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO.5 OF 2003

(FORMERLY ACTION NO.9522 OF 1997)

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D E C I S I O N

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1. This action arises out of the administration of the estate of Madam Ng Chan Wah ("the Deceased"), who died on 15 May 1991. By her last will dated 22 November 1989 ("the Will"), the Deceased appointed the defendants as executors and trustees. The plaintiffs and the defendants are among the beneficiaries under the Will. No grant of probate has yet been issued.

2. By this action, the plaintiffs seek accounting and other consequential relief in addition to orders revoking the appointment of the defendants as executors and appointing a firm of professional trustees in their place. In particular, the plaintiffs claim against the defendants for an account of the estate of the Deceased on the footing of wilful default.

3. Various matters were pleaded and relied upon by the plaintiffs in support of their case that the defendants have acted in breach of trust and are guilty of wilful conduct. They had been summarised in paragraph 6 of my Decision herein handed down on 6 December 2001. I do not repeat them here.

The application

4. By their summons filed on 3 December 2002, the plaintiffs apply for specific discovery under Order 24, rule 7 of Rules of the High Court. The documents requested for as set out in the Schedule to the Summons are :

"(1) Unadjusted estate accounts of Lee Ng Chan Wah for the period from 15 May 1991 to 15 May 1999;

(2) Estate accounts of Lee Ng Chan Wah for the periods from (a) 15 May 1999 to 15 May 2000 and (b) from 15 May 2000 to 15 May 2001, including any draft estate accounts prepared by the Defendants' accountants in respect of these periods;

(3) Estate accounts of Lee Ng Chan Wah or draft accounts prepared by the Defendants' accountants in respect of the periods from (a) 15 May 2001 to 15 May 2002 and (b) from 15 May 2002 to the present time;

(4) Supporting accounting records of the estate of Lee Ng Chan Wah, including all journals and vouchers relied upon by the Defendants' accountants in the preparation of estate accounts and draft accounts, unadjusted and adjusted, in respect of the periods: (a) from 15 May 1991 to 15 May 1999; (b) from 15 May 1999 to 15 May 2000; (c) from 15 May 2000 to 15 May 2001; (d) from 15 May 2001 to 15 May 2002; and (e) from 15 May 2002 to date;

(5) Documents containing information, representations, either verbal or written, or instructions made or sent to Mr Robinson for the purpose of preparing the report dated 30 March 2001 (see paragraph 1.2 of page 1 of Mr Robinson's report) and/or on which Mr Robinson relied when preparing estate accounts in respect of the foregoing periods; and

(6) Documents containing any further information, representations, either verbal or written, or instructions, produced since the date of Mr Robinson's report dated 30 March 2001, that might lead or have led Mr Robinson to amend the estate accounts for the period from 15 May 1991 to 15 May 1999 (see paragraph 1.3 of page 1 of Mr Robinson's report)."

5. At the hearing, the plaintiffs no longer pursue item 1 and the first part of item 2. The documents pursued are therefore the draft estate accounts of the Deceased for the periods from 15 May 1999 to 15 May 2001 and items (3) to (6) of the Schedule (collectively referred to as "the Documents").

6. The defendants oppose the application principally on the basis that the plaintiffs have failed to show the relevance of the Documents. The defendants also argue that the existence of some of the Documents has not been shown and that the scope of some of the Documents requested for is too wide, oppressive and not necessary for the fair disposal of the issues herein.

The applicable principles

7. It was indicated in the plaintiffs' correspondence and also in the written submissions of Mr Coleman that the plaintiffs, being beneficiaries under the Will, are entitled to the Documents on the principles of In re Londonderry's Settlement [1965] Ch 918. Mr Coleman in his oral submissions, however, clarifies that the present application is only made under Order 24, rule 7.

8. The relevant principles underlying an Order 24, rule 7 application are set out by Mustill LJ in Berkeley Administration Inc. & Others v. McCelland & Others [1990] FSR 381 at 382-3. The relevant part of the judgment reads :

" (1) There is no jurisdiction to make an order under R.S.C., Order 24, rule 7, for the production of documents unless (a) there is sufficient evidence that the documents exist which the other party has not disclosed; (b) the document or documents relate to matters in issue in the action; (c) there is sufficient evidence that the document is in the possession, custody or power of the other party.

(2) When it is established that those three prerequisites for jurisdiction do exist, the court has a discretion whether or not to order disclosure.

(3) The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.

(4) It has been suggested that the court should approach the appeal on the basis that this is a matter of discretion, and that the appellate court should not ordinarily interfere with that discretion in the absence of misdirection or some other factor which, according to familiar principles, would justify it in taking such a course. This is right as regards the exercise of that discretion which arises once the conditions for the existence of jurisdiction have been satisfied. But on the question whether they have been satisfied and whether the order is in the appropriate form, we are not concerned with discretion at all, and they are reviewable without inhibition by the appellate court.

(5) It is not an answer to an assertion that documents falling within a particular category are disclosable that no such documents are in the other party's possession or power, although if this information has already been conveyed on oath in the course of the proceedings this would furnish a reason why, in the exercise of the court's discretion, it might well not make an empty order."

9. Order 27, rule 7(3) further requires the supporting affidavit to make out a prima facie case on the relevance of the documents sought : see also Hong Kong Civil Procedure 2002, Vol.1, para.24/7/1 at p.418.

10. With these principles in mind, I turn now to deal with the objections raised by the defendants.

Relevance

11. A useful reference point in deciding whether the documents sought are relevant to the issues in the action is the affidavit filed in support of the application. It would appear from the Ninth Affidavit of Alun Wyu Hughes filed on 3 December 2002 in support of the application that the Documents relate to paragraph 13(1) of the Re-Re-Re-Re Amended Statement of Claim and paragraph 15 of the Re-Re-Re-Re Amended Defence, which had been set out in full in the affidavit. Paragraph 13(1) of the Re-Re-Re-Re Amended Statement of Claim states :

"The latest estate accounts prepared by the Defendants in respect of Deceased's estate were dated 12 January 1995; despite repeated requests made on 8, 26, 29 and 30 June 1996, 2, 19, 22, 26 and 28 July 1997 by the Plaintiffs, no later accounts have been prepared and/or supplied to them."

Paragraph 15 of the Re-Re-Re-Re Amended Defence reads :

"Save it is admitted that the estate accounts were prepared as set out in Paragraph 13(1) of the Re-Re-Re-Re Amended Statement of Claim, the Defendants aver that they have engaged professional accountants to deal with the accounts of the Estate and if and when necessary, such estate accounts can be prepared and supplied to the Plaintiffs."

12. The issues that arise out of these paragraphs in the pleadings are simply whether the defendants have engaged professionals to deal with the accounts of the estate and whether estate accounts were prepared and/or supplied to the plaintiffs. There is no issue on the pleadings as to the accuracy and/or the veracity of the estate accounts already prepared or are to be prepared and supplied to the plaintiffs. It is therefore difficult to see how the Documents are relevant to the particular issues in those parts of the pleadings identified in the supporting affidavit or to the issues in the action as a whole.

13. Mr Coleman however points out that the defendants have on their volition disclosed the estate accounts for 1991-1999 and have also through their solicitors accepted that the estate accounts could have been disclosed earlier in the List of Documents filed on 21 December 2001. That in my view does not advance the plaintiffs' application. Plainly, the estate accounts are relevant to the issues whether professionals had been retained by the defendants to deal with the accounts of the estate and whether estate accounts had been prepared and/or supplied after 1995. As such the estate accounts must be disclosable. But it does not follow that the information, materials or documents based upon which the estate accounts were prepared are relevant and/or disclosable. The disclosure of the estate accounts and the acceptance that they could be disclosed by list of documents do not mean or imply that the accuracy of the contents of the estate accounts is in issue. Neither do they give rise to an entitlement to discover the documents upon which the accounts were based.

14. Mr Coleman submits that the core issue in the plaintiffs' claim is the poor conduct of the defendants as executors, and that the plaintiffs have alleged improper use of the assets of the estate of the Deceased by the defendants. It is therefore argued that the complaint can only be decided by reference to the estate accounts and by testing the basis of the accounts.

15. It is no doubt correct that the plaintiffs' claim is partly founded on their complaint that the defendants have acted in breach of trust, have disposed of assets in the estate to persons not entitled to them and have used assets in the estate for their own benefit. The complaint, however, is not a blanket allegation but has been particularized on the pleading by reference to very specific matters and assets : see paragraphs 7 to 13 of and the Schedule to the Re-Re-Re-Re Amended Statement of Claim. Accordingly, to be relevant, the Documents must relate to one or more of the specific allegations and/or assets particularized in the pleadings.

16. It is not sufficient for the plaintiffs to say that because there is on the pleading allegation of improper conduct against the defendants as executors, they are entitled to test the basis of the estate accounts generally or to check the accuracy of the items presented in the estate accounts, irrespective of whether they are in issue. It is not the purpose of discovery to give the plaintiffs an opportunity to hunt around the documents in the hope that they will reveal some improprieties on the defendants' part or will provide information for them to pursue more enquiries.

17. In paragraph 8 of the supporting affidavit, it is also said that the Documents are necessary for the purpose of enabling the plaintiffs to prepare for the trial of the action. The plaintiffs have also exhibited several letters from their accountant, Mr Martin Hall of Messrs Lee & Allen, and placed great reliance on them in justifying and explaining why the Documents are needed.

18. It is however of significance to note the reasons given by Mr Hall for requiring the documents, namely, to enable him to perform a review of the transactions underlying the estate account : letter dated 28 November 2002, and to comment on the completeness and accuracy of the estate accounts : letter dated 16 January 2003. Clearly, Mr Hall is performing the task of auditing the estate accounts. As such it is understandable why he would wish to have sight of the underlying information and documents. That however does not mean that the plaintiffs are entitled to compel discovery of the Documents when the accuracy or completeness of the estate accounts is not an issue in this action. The point is best illustrated by Mr Hall's request to have the receipts for the estate duty payment when there is no dispute that the estate duty had been paid. In my view, the reliance placed on Mr Hall's letters is misplaced.

19. Among the several matters of concern raised in Mr Hall's letters is a sum of HK$11 million. The matter arises in this way. In the Schedule to the Re-Re-Re-Re Amended Statement of Claim, which is relied upon in support of the averments of breach of trust and wilful default, the plaintiffs aver in paragraph (1) that :

"By letter dated 28th January 1999 to the Defendants' solicitors, the Plaintiffs' solicitors requested the Second Defendant to provide a full account of the sum of HK$38,068,902, being cash and shares of the Deceased received by him prior to the Deceased's death. The Second Defendant has previously admitted that approximately HK3.8 million of the said sum was used by him to purchase shares on the Deceased's behalf prior to her death and alleged that 'expenses' (including a gift to himself of over HK$6.5 million) account for approximately a further HK$10 million. However, he has given neither any proper particulars of such expenses, nor any proper account of either the said shares or the remaining sum of approximately HK$25 million. Notwithstanding the above Defendants' solicitors have not replied substantively [or at all] to the said request for an account."

20. In meeting this averment, the defendants in paragraph 7A(1) of the Re-Re-Re-Re Amended Defence deny that they had not supplied the plaintiffs with the particulars requested for, and further set out the materials in which the particulars are contained. The defendants then go on to aver that :

"In the course of administration of the estate, the 2nd Defendant had made various payments on behalf of the Estate, including estate duty and interest in the sum of HK$17,957,276.30 from his own resources. Further, he had repaid to the estate in 1996/1997 the sum of HK$11,000,000.00. Thus, there is due from the estate to the 2nd Defendant the sum of over HK$6,000,000.00."

21. In the estate account for the year ending 15 May 1997 prepared by Mr Robinson, it is stated under Note (6) that "HK$11 million was paid by T.Y. Lee to M.W. Lee & Sons, which had been credited (in the accounts of M.W. Lee & Sons) to the current account of Lee Ng Chan Wah representing repayments by T.Y. Lee to the Estate". Then in the estate account for the year ending 15 May 2000, a sum of $11,371,450 is recorded to be due from the estate of Lee Man Wah. Mr Robinson states in the explanatory note to this item that "[a] total of HK$11 million was transferred out of (sic) the current account of Lee Ng Chan Wah in M.W. Lee & Sons on 1 and 5 November 1999. I was informed by the client that this amount was transferred into a fixed deposit held by the Estate of Lee Man Wah."

22. Initially in his letter dated 16 January 2003, Mr Hall requested to have third party documents showing the receipt by the estate of Lee Ng Chan Wah of the amount in the year ending 15 May 1997. Then in his letter dated 22 January 2003, Mr Hall commented that the explanatory note in the estate account for the year ending 15 May 2000 was inconsistent with a letter from the defendants' solicitors dated 30 May 2002 to the plaintiffs' solicitors, which states that :

"After dismissal of the MWLS winding up Petition in October 1999, T.Y. Lee arranged for the sum of HK$11 million originally paid by him into the Company and credited to the accounts of the Estate of Ng Chan Wa to be paid out and held in accounts opened by the Executors for the Estate of Ng Chan Wa."

Mr Hall suggests that the defendants' solicitors should be requested to explain the inconsistency and also the reason for paying the funds due to the Deceased's estate to the estate of Lee Man Wah. In his latest letter of 11 February 2003, Mr Hall's concern is that the accounting treatment of the sum as stated by Mr Robinson in the estate account for the year ending 15 May 2000 is not supported by documents and asks to see the supporting documents.

23. Against such background, Mr Coleman submits that this amount of HK$11 million is a relevant issue in the action that has been specifically pleaded and that the inconsistency calls for investigation necessitating discovery of the documents relating thereto.

24. I am unable to agree with this submission. Firstly, although the defendants have pleaded the amount, it is in the context of meeting the plaintiffs' averment that no particulars of the expenses incurred by the 2nd defendant and of the cash and shares of the Deceased received by the 2nd defendant had been provided to the plaintiffs. Secondly, the defendants' averment that the 2nd defendant had repaid the sum to the estate of the Deceased in 1996/1997 is not controverted on pleading and is not in issue. As appeared from his letter dated 22 November 2002, Mr Hall accepts that the 2nd defendant had made payments totalling HK$11 million into MWLS's account in the year ending 31 March 1997, and that the estate accounts have correctly reflected the payment made by the 2nd defendant to MWLS on behalf of the estate of the Deceased. Thirdly, it is plain from the Time Deposit Confirmation Slips exhibited as CSH-13 to the Tenth Affidavit of Choi Shiu Hung that two sums totalling HK$11 million were deposited into an account held by the defendants as the executors of Lee Man Wah. They confirm what Mr Robinson was told, namely, the amount was transferred into a fixed deposit held by the estate of Lee Man Wah. Fourthly, it is explained in the Tenth Affidavit of Choi Shiu Hung that the $11 million was held by the estate of Lee Man Wah on behalf of the Deceased. This will prima facie dispel any apparent inconsistency identified by Mr Hall, so that if there is any concern, it will be the reason for the amount to be held by the estate of Lee Man Wah for the estate of the Deceased. But this is not the point pleaded in paragraph 7A of the Re-Re-Re-Re Amended Defence. Neither is it an issue in this action. The disclosure of the supporting documents is not necessary.

25. In short, I do not consider the plaintiffs have made out a prima facie case that the Documents are relevant to one or more matters in issue in this action. That would have been sufficient to dispose of the application, but for completeness sake, I will also deal briefly with the other objections of the defendants.

Other objections

26. With regard to item 3 of the Documents, namely, estate accounts or draft accounts for the year ending 15 May 2002 and for the subsequent period, I agree with Mr Fung SC's submissions that there is no evidence that these documents exist. All that Mr Hall says in the letter dated 11 February 2003 is that "it seems reasonable to assume that the Estate Accounts for the year ended 15 May 2002 might now have been prepared." But given that the estate accounts for the year ending 15 May 2001 was only ready on 17 January 2003, the assumption does not appear to be substantiated. As for the estate accounts or draft accounts covering the period after 15 May 2002, even Mr Hall says that he would not necessarily expect them to have been prepared, though he says there is no harm in requesting them. There is simply no support that these documents exist.

27. As regards items 4, 5 and 6 of the Documents, the additional objection is that they are too wide and oppressive. In this regard, Mr Hall has in his letters dated 16 January and 11 February 2003 endeavoured to narrow down the scope of item 4, and Mr Coleman is contended with an order along those lines. The issue of relevance aside, I agree that the letters of Mr Hall has helped to identify with greater precision the documents intended to be covered by item 4. The problems with items 5 and 6, however, remain. They encompass an unduly wide scope of documents and further lack precision, making it both oppressive and difficult to comply in full. Where discovery is sought in relation to a class of documents, it is important that the class should not be defined or described too widely and should only be confined to relevant documents : Hong Kong Civil Procedure 2002, Vol.1, para.24/7/1 at p.419. Items 5 and 6 clearly fall foul of this requirement. The reference to item 6 as an "open request" in Mr Hall's letter of 11 February 2003 highlights the objection.

Conclusion

28. For the reasons aforesaid, I conclude that the plaintiffs have not made out a case for invoking the court's jurisdiction under Order 24, rule 7, Rules of the High Court. The plaintiffs' application therefore fails. Accordingly, I dismiss the plaintiffs' summons. There will also be an order nisi that the plaintiffs pay the defendants the costs of the application in any event, to be taxed if not agreed, together with a certificate for two counsel.