LEUNG WING HONG v. LEUNG YIU CHO, THE ADMINISTRATOR OF THE ESTATE OF LEUNG KAM WAH, THE DECEASED

HCMP 1473/2014

[2018] HKCFI 1486

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1473 OF 2014

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D E C I S I O N

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Introduction

1.  This Court handed down a judgment in this action on 11 August 2018 (“Judgment”) setting out the detailed background of this matter and in the present decision, this Court will follow the abbreviations in the Judgment, unless otherwise indicated.

2.  As set out in the Judgment, this Court ordered D to produce a true and perfect inventory and account (“Inventory”) of the Estate within 3 months.  As for the removal order and other consequential orders sought by P in the originating summons, these were adjourned sine die on 11 August 2018 with liberty to restore in the event of D’s failure to produce the Inventory as ordered (“Order”).  Pursuant to the Order, this Court also ordered D to pay personally the costs of and occasioned by P’s application.

3.  The deadline imposed in the Order was 11 November 2016, but notwithstanding the Order, D had failed to provide the Inventory ordered.  P applied to restore the originating summons and has further issued a summons under Order 45 rule 8 of RHC seeking, amongst others, an order that the Inventory be prepared by a nominated person (“Order 45 Summons”). 

4.  The day prior to the hearing on 10 January 2018, D indicated that he agreed to be removed as administrator of the Estate and for an independent and professional administrator to be appointed in his stead. The only matters outstanding are:

(i)  The appointment of a new administrator;

(ii)  The fees and expenses for the preparation and production of the Inventory;   

(iii)  Costs of the originating summons and the Order 45 Summons.

Appointment of the administrator

5.  The Court has invited P and D to each put forward names of two persons to be administrators, together with their CVs, for the Court’s consideration.  Each has put forward one solicitor and one accountant.

6.  The first candidate proposed by P is a solicitor Mr Ip, and the second candidate is a certified public accountant Mr Poon.  D’s first candidate is a solicitor Mr Cheng and the second candidate is a certified public accountant Mr Ng.

7.  The Estate is a small one and had consisted of 3 landed properties (one of which had been sold and the two remaining properties being the Carparking Space and the Tai Nan Street Flat), cash at bank, and shares in Hong Kong publicly listed companies.  I have said at the time of the Judgment (based on valuations in 2015), the Estate was said to be around HK$6.8m gross and P’s share was said to be around HK$450,000.[1] 

8.  P has indicated a value of the Estate to be around HK$7.5m to Mr Ip in March 2017.

9.  Under section 60 (2)(b) of the Probate and Administration Ordinance, Cap 10 (“Ordinance”), the fees of the administrator shall not exceed 1% of the balance of the gross value of all property of whatsoever nature administered.

10.  On P’s side :

(i)  Mr Ip has given details of his scope of work and his charging rate of HK$4,000 per hour together with his associate’s fees of HK$2,500 per hour and legal executive’s fees of HK$1,500 per hour; Mr Ip further indicated in a letter from his firm dated 29 March 2017 that he is prepared to a cap of his fees to 1% of the total value of the Estate as at the date of the grant being amended on the conditions as set out in that letter; Mr Ip has indicated in a further letter from his firm dated 29 January 2018 that he is prepared to adhere to the earlier quotations;

(ii)  Mr Poon has not indicated any cap, nor scope of work and simply provided his charging rate of HK$3,000 per hour exclusive of all disbursements such as his solicitors and counsel fees.

11.  On D’s side:

(i)  Mr Cheng has given a charging rate of HK$3,860 per hour with no cap, and no details of scope of work;   

(ii)  Mr Ng has given a charging rate of HK$2,800 per hour, and again with no cap and his “service” does not appear to include administration work, and further his quotation is based on service to “assist to the case for the administrator of the Estate…”

12.  First of all, the appointment of an administrator is a personal appointment.  In the case of the two proposed accountants, it would appear that Mr Poon is likely to be requiring assistance from lawyers in the administration and he has not given details of the scope of the administration work he is personally going to undertake.  As for Mr Ng, he appears to be under the impression that he is to assist the administrator, rather than he himself being the administrator.  He has also not provided any details of the scope of administration work he is personally going to undertake.

13.  In the present case, as the Estate is small, the preparation of the Inventory should be a relatively straightforward matter. A forensic accountant is not required at this stage and may not be required at all.  Neither solicitor candidate has this stage indicated any need to instruct an accountant separately.  With a view to reduce costs, I am of the view that one of the solicitors proposed should be appointed, rather than one of the accountants.

14.  As for the two solicitors, both are experienced solicitors.  D’s Counsel Ms Lee submitted that Mr Cheng has experience in landed property whereas Mr Ip does not.  It would appear from Mr Cheng’s CV that in the past few years, Mr Cheng was twice appointed by the Court as administrator for estates involving two groups of family members with conflicting interest, in one case as an independent administrator and in the other case, as a joint administrator.

15.  By comparison, Mr Ip listed his work in probate and estate administration in the past 12 months, which included being appointed as an independent professional administrator in one case for an estate of net assets value around HK$50m and in another case to replace the administrators of an estate of net asset value on unadministered estate of around HK$15m.  His experience also included acting for the Official Administrator in one case.   

16.  I agree with P’s Counsel, Mr Co, that it is the experience in dealing with administration of estate and related matters which is most important and relevant in the present case when there are two camps of different beneficiaries. 

17.  Having considered their CVs, I have come to the view that Mr Ip appears to have more experience in estate administration work than Mr Cheng. 

18.  Mr Co has also pointed out that Mr Ip has given the rates of his firm’s associates and legal executives which Mr Cheng has not.  I agree that some minor work can be done by associates and legal executives charging much lower hourly rates.   

19.  After considering their respective charging rates, I agree with Mr Co that the difference in fees between Mr Ip and Mr Cheng does not appear to be significant.  Further, Mr Ip has provided a cap to his fees.

20.  Having considered all the information and their respective charging rates, I am of the view that Mr Alfred Ip should be appointed as the administrator of the Estate in place of D, subject to Mr Ip signing a written consent to act and to agree to the cap of his fees as stated in the letters dated 29 March 2017 and 29 January 2018 from Messrs Oldham, Li & Nie and the cap stated in section 60 of the Probate and Administration Ordinance, Cap 10, whichever is the lower. 

Fees and expenses for the true and perfect inventory and accounts

21.  Under paragraph 1 of the Order 45 Summons, P seeks an order that the Inventory be prepared and produced by the new administrator, and that the fees and expenses incurred in such preparation and production be paid by D personally.

22.  Under section 56 of the Ordinance, the personal representative of a deceased person shall produce a true and perfect inventory and account when lawfully required to do so.  Mr Co argues that no court order has been made to allow D to receive remuneration from the Estate and if D had complied with the Order, the costs of the preparation of the Inventory would have been zero, except to the extent of any disbursements.  Mr Co therefore argued that due to D’s failure, now the new administrator will need to comply with the Order and to prepare the Inventory, and therefore costs is inflated by the remuneration to the new administrator, which should be borne by D.

23.  However, the applicable principles are well established.  It is the duty of an executor to keep clear and accurate accounts, and to be always ready to render such accounts when called upon to do so, eg when ordered by the Court under section 56 of the Ordinance[2] .  Thus, whether there is an order by the Court or not, keeping clear and accurate accounts is part of the duties of an executor, or an administrator and any expenses for keeping such accounts should be part of the costs of administration. 

24.  In the circumstances, I am of the view that the fees and expenses for the preparation of the Inventory by the new administrator should be borne by the Estate.

Costs of the restored originating summons

25.  On 11 August 2016, pursuant to the Judgment, this Court has made an order nisi for D to personally pay the costs of and occasioned by P’s application and for D to bear his own costs.  There was no application to vary the order nisi which has been made final.

26.  Thereafter, the Inventory was not provided by D.  On 28 June 2017, P’s solicitors wrote to D’s solicitors reminding D to provide Inventory, failing which P would restore the application for removal.  There appeared to be no response.

27.  On 26 October 2017, P’s solicitors wrote again indicating that P was intending to take out a summons for an order for D to personally bear any costs relating to the preparation and production of the Inventory to be heard together with the restored application for the removal order.  P’s solicitors had sought D’s agreement to the directions they were proposing to seek from this Court by a letter dated 2 January 2018 prior to the direction hearing on 10 January 2018. Again, there did not appear to be any response from D.

28.  On 10 January 2018, Ms Lee appeared for D and 5 Interveners, and it was only in Ms Lee’s submissions of 9 January 2018, D indicated that he agreed to be removed as administrator of the Estate and his stance was supported by 4 of the Interveners.  They then indicated objection to P’s proposed administrator Mr Ip and asked the matter to be adjourned sine die with liberty to restore or alternatively for such period as the Court deems just.

29.  Pausing here for the moment, by then, there has been a further delay of some 17 months since the Judgement.  This Court was only prepared to adjourn the matter to 22 February 2018 for the parties to propose names of administrators.

30.  D could have agreed to the removal order much earlier or sought his own removal much earlier, and there would not have been any need to have a hearing fixed for the restoration of the originating summon.  If it is only a matter of whom to appoint as replacement, D could have applied for directions instead of simply doing nothing.  Having considered D’s conduct above, I see no reason why he should not bear P’s costs of the restoration of the originating summons personally and D to pay for his own costs.

31.  P has sought an order that his costs be paid on indemnity basis by D.

32.  Ms Lee has argued that D’s conduct had not been oppressive nor with any base or ulterior motive, nor did it constitute conduct which was part of an oppressive game plan. 

33.  However, D had opposed the applications in the originating summons all along, and this Court said in the Judgment that D was to be given a final chance to produce the Inventory within 3 months.  D ignored the final chance given to him, and had failed to comply with the Order without any reasonable explanation.  The Order was made on 11 August 2016, and now almost two years down the road, there is still no proper inventory and account, nor distribution of the Estate.  Having considered D’s conduct, I am of the view that D should pay P’s costs of the restoration of the originating summons, to be taxed if not agreed, on an indemnity basis. 

Costs of the Order 45 Summons

34.  D opposed the Order 45 Summons mainly on two grounds, namely (i) that there was no need to issue the summons; (ii) Order 45 rule 8 is not meant to be punitive and D should not be ordered to pay the costs because his failure to do so did not inflate the costs.

35.  Under Order 45 rule 8 of the Rules of the High Court, if a mandatory order is not complied with, then, without prejudice to its powers to punish the disobedient party for contempt, the Court may direct that the act required to be done may, so far as practicable, be done by some other person appointed by the Court, at the cost of the disobedient party, and upon the act being done the expenses incurred may be ascertained in such manner as the Court may direct and execution may issue against the disobedient party for the amount so ascertained and for costs.

36.  As set out earlier, the preparation of the Inventory is part of the duties of an administrator, and the new administrator will have to prepare the Inventory.  As I have said the fees and expenses of the preparation of Inventory should be part of the administration costs of the Estate.  I am not convinced that it was necessary for P to take out the Order 45 Summons as in my view the orders and directions he sought in the Order 45 Summons could be part of the consequential reliefs under the restored originating summons.  In any event, P has failed to obtain an order for D to pay personally for the fees and expenses for the preparation and production of the Inventory.

37.  Having considered the above, I am of the view that the costs of the Order 45 Summons should follow the event, and that P should pay D’s costs of and incidental to this summons, to be taxed if not agreed.

[1]  See para 130, at B:55

[2]  See paras 16- 18 of Re Estate of Lee Da Kor [2010] 1 HKLRD 415