HO TUNG MING OSCAR v. HO FOOK SHING

HCMP 31/2019

[2021] HKCFI 1046

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 31 OF 2019

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J U D G M E N T

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A. INTRODUCTION

1.  This is the hearing of the plaintiff’s Originating Summons dated 9 January 2019 (the“Originating Summons”), as well as the defendant’s Summons dated 24 January 2020 (the“Defendant’s Summons”) seeking directions on valuation of a property which belong to the estate of the Deceased (the “Estate”).

2.  By way of background, the plaintiff and the defendant are siblings.  Their late father, Mr Ho Kin, died intestate on 4 June 2012 at the age of 83 (the“Deceased”).  By the time of passing of the Deceased, he was survived by the following members of the family:

Name	Relation	Age
Wong Ah Sze	The Deceased’s lawful widow and relict	Deceased at 87
Ho Tim Sing	The Deceased’s lawful and natural son	71
Ho Lam Shing	The Deceased’s lawful and natural son	69
Ho Kam Shing	The Deceased’s lawful and natural son	66
The defendant	The Deceased’s lawful and natural son	65
Ho Tai Choi	The Deceased’s lawful and natural daughter	63
Ho Yun Yee	The Deceased’s lawful and natural daughter	56
Ho Chun Shing	The Deceased’s lawful and natural son	54
Ho Chun Ling	The Deceased’s lawful and natural daughter	52
Ho Mei Fung	The Deceased’s lawful and natural daughter	50
The plaintiff	The Deceased’s lawful and natural son	48
Ho Mei Ling	The Deceased’s lawful and natural daughter	44

3.  By the Letters of Administration under Grant No HCAG010543/2012 dated 28 November 2012 (the “Letters of Administration”), the defendant was appointed as the administrator of the Deceased’s estate, which according to the plaintiff, was not known to the plaintiff and other siblings, ie the beneficiaries.

4.  The Schedule of Assets and Liabilities annexed to the Letters of Administration (the“Schedule of Assets and Liabilities”) shows that the Estate included only one landed property described as “All those 6/10 of and in All that 1/14 of and in Apleichau Inland Lot No 76 (1^st Floor, No 4A Ping Lan Street, Hong Kong)” (the“Apleichau Property”), with no other assets including company shares and liabilities.

5.  By a letter from the plaintiff’s solicitors to the defendant dated 9 October 2018, the plaintiff demanded the defendant to, inter alia:

(1)  Amend the Schedule of Assets and Liabilities to include the share in a company known as Wing Wai Transportation Co Ltd (“Wing Wai”) so as to reflect all assets belonging to the Estate;

(2)  Provide a list of assets and liabilities and income and expenditure together with bank statements relevant to the Estate for inspection; and

(3)  Provide bank statements and accounts in relation to the rental proceeds of the Apleichau Property.

6.  Given there was no constructive reply from the defendant, the plaintiff took out an application, by way of the Originating Summons, to seek an order from the court, inter alia, that:

(1)  The defendant be removed as the administrator of the Deceased’s estate under the Letters of Administration;

(2)  The plaintiff be appointed as the administrator to complete the administration of the Estate in place of the defendant;

(3)  The defendant be ordered to amend the Schedule of Assets and Liabilities to reveal a true and perfect account of the Deceased’s assets and liabilities;

(4)  The defendant be ordered to render to the plaintiff a true and perfect inventory and account of the assets and the defendant’s dealings of the assets upon grant of the Letters of Administration up to the date of the order to be made with all supporting documents by way of an affirmation within 28 days from the date of the order; and

(5)  The costs of the proceedings be paid by the defendant to the plaintiff, such costs are to be borne by the defendant personally and not to be borne by the estate of the Deceased.

7.  On 24 January 2020, the defendant filed the Defendant’s Summons to seek directions for inter alia, the appointment of a joint property valuation expert for the valuation of the value and rental value of the Apleichau Property.

B.      APPLICABLE LEGAL PRINCIPLES

B1.    On duty of administrators

8.  It is trite that an administrator of an estate has a duty to account to the beneficiaries of the estate.  The account to be kept must be clear and accurate, and the administrator should always be ready to render such account when called upon to do so. 

9.  To render proper account of the estate of a deceased person, the personal representative is required to:

(1)  Show the opening balance, including capital assets, and the closing balance;

(2)  Give details of movement of assets, income and expenditure of the estate;

(3)  Give details of the whereabouts of all properties (including cash) of the estate which the personal representative is duty bound to administer; and

(4)  Support the accounts with documentary evidence.

(Chow Chak Kiu v Chow Man Chit, HCMP 797/2016 (Decision dated 17/01/2017))

10.  In Charles Yu Chiu Kwan v Edna Yu Chan Shek Yin, HCMP 965/1980 (Judgment dated 22/04/1982), Rhind J commented in relation to the account provided by an executrix:

“The so-called ‘cash account’, together with the purported explanations in the defendant’s solicitors’ letter of the 24 July 1980 comprised the only accounts which the defendant has ever supplied to the plaintiff. To my mind, those accounts come nowhere near to complying with the duty required of an executrix to supply a proper account to a beneficiary. What the defendant supplied to the defendant [sic] was little better than a sizable, yet woefully incomplete, quantity of undigested material. An executrix is a species of trustee. Like any other trustee an executrix must at all reasonable times be ready to render a clear and accurate statement of accounts to a beneficiary, so that the beneficiary is able to see his entitlement under the trust.” (Emphasis supplied)

B2.    On removal of administrators

11.  Section 33(3) of the Probate and Administration Ordinance, Cap 10 provides that the court may, if satisfied that the due and proper administration of the estate and interests of the persons beneficially entitled thereto so require, suspend or remove an executor or administrator and provide for the succession of another person in his place, and for the vesting in that other person any property belonging to the estate.

12.  In deciding whether to remove an administrator, “the proper question to ask is whether the removal is necessary for the due and proper administration of the estate, and whether it is in the interests of the beneficiaries for the administrator to be removed.  That does not mean it is necessary to establish specific wrongdoing, misconduct or fault, though obviously such conduct would be a relevant consideration.  A failure to render a full and proper account when called upon to do so, which can be seen as a breach of a fundamental and important duty of an administrator, may in appropriate circumstances be good reason to justify the removal of an administrator.”  (Emphasis supplied) (See: Shum Oi Lun Helen v Wong Yuk Ching, HCMP 1189/2018 (Judgment dated 29/11/2019) at §38 per Coleman J).

13.  In Re Estate of Lee Da Kor [2010] 1 HKLRD 415 at §§37 and 39, Jeremy Poon J (as the CJHC then was) held that the executors should be removed as they (a) had failed to render a full and proper account despite repeated requests from the beneficiaries; and (b) had been unjustifiably dilatory in distributing monies belonging to the estates to the beneficiaries.  The executors were further held personally liable for the costs of such hostile litigations. 

C.      THE PLAINTIFF’S CASE FOR REMOVAL OF DEFENDANT AS ADMINISTRATOR

C1.    The defendant’s failure to render true and accurate information in the Schedule of Assets and Liabilities

14.  Subsequent to the plaintiff knowing in 2016 that the defendant had obtained the Letters of Administration in November 2012, it is the plaintiff’s position that the defendant had failed to disclose in the Schedule of Assets and Liabilities true and accurate information of the Deceased’s assets, in particular, the Deceased’s 1 out of 4 shares in Wing Wai.

15.  Wing Wai was incorporated on 18 January 1994 and has been carrying on the family business of transporting steel materials.  At the time of the Deceased’s death, the Deceased was holding 1 out of 4 shares, ie a 25% interest in Wing Wai.

16.  However, in the Schedule of Assets and Liabilities, the defendant had only disclosed the Apleichau Property and failed to include any of the Deceased’s other assets, in particular, the Deceased’s share in Wing Wai and any liabilities.  It is admitted by the defendant in the affidavit evidence filed in these proceedings that he “omitted” to include the Deceased’s share in Wing Wai as he was of the view that the Deceased’s share did not have any commercial value and Wing Wai was heavily indebted in 2017.

17.  However, it should be noted that the defendant’s claim that the Deceased’s share in Wing Wai had no commercial value was based on the Financial Statements of Wing Wai for the year ended 31 March 2017, in particular the Balance Sheet, which showed that Wing Wai had a net liability of some HK$1,848,411.  But from Note 10 to the Financial Statements, it can be seen that the leasehold land owned by Wing Wai (which comprised the landed property situated at Unit C on 4^th Floor with Flat Roofs adjacent thereto, Evernew Commercial Centre, No 33 Pine Street, Kowloon (the “Pine Street Property”)) was carried in the accounts of Wing Wai at cost, and the net book value of the Pine Street Property was stated only to be HK$310,764 taking into account accumulated depreciation.

18.  According to the Land Search Record, the Pine Street Property has been held by Wing Wai since 6 April 1994 and was purchased at a consideration of HK$2,180,000.  The plaintiff in his affidavit evidence estimated that the Pine Street Property currently is in fact worth some HK$5,000,000.  In the circumstances, I reject the defendant’s explanation for not including the Deceased’s share in Wing Wai in the Schedule of Assets and Liabilities as totally disingenuous.

19.  Further, as submitted by the plaintiff, the defendant as the administrator owes a fundamental duty to the beneficiaries to render true and accurate information of the Deceased’s assets and liabilities.  Whether Wing Wai was heavily indebted or not at the time of the Deceased’s passing provides no justification for the defendant to knowingly omit such item.  I agree that despite the defendant agreeing to amend the Schedule of Assets and Liabilities at this stage, the defendant’s omission to include the Deceased’s share in Wing Wai in the first place has already constituted a fundamental breach of the defendant’s duty as an administrator and the defendant ought to be removed by the court for the due and proper administration of the Deceased’s estate.

C2.    The defendant’s failure in due and proper administration of the Deceased’s estate

20.  The assets of the Deceased that are required to be and should be administered by the defendant (known to the plaintiff) are (1) the Apleichau Property; and (2) The Deceased’s share in Wing Wai. 

21.  In relation to the Apleichau Property, it is the plaintiff’s case that the defendant has failed to distribute the Apleichau Property and the rental income of the Apleichau Property despite having obtained the Letters of Administration for 7 years, and to render a full and proper account of the rental proceeds of the Apleichau Property. 

22.  Notwithstanding the plaintiff’s requests, in particular, by way of a letter from the plaintiff’s solicitors prior to the commencement of these proceedings in October 2019 demanding from the defendant for, inter alia,  a list of assets and liabilities and income and expenditure relevant to the Estate for inspection and the bank statements and accounts in relation to the rental proceeds of the Apleichau Property, the defendant has failed to render a full and proper account of the Deceased’s estate despite having ample time and opportunities to do so.  In fact, the defendant has failed to provide any documents, including but not limited to bank statements and rental receipts for the plaintiff’s inspection.  From the evidence filed by the defendant, it is also obvious that the defendant had never carried out or attempted to carry out any proper valuation of the market value of the Apleichau Property as well as the market rental value of the Apleichau Property at any stage up to now. 

23.  Further, there is no evidence to suggest that the defendant has ever carried out or attempted to carry out proper valuation of the Deceased’s share in Wing Wai at any stage up to now.  The defendant has also failed to provide any documents in relation to the accounts of Wing Wai, including giving details of opening balance, closing balance, movement of assets, income and expenditure, as at the date of the Deceased’s passing or when the Letters of Administration was obtained up to now apart from the Financial Statements of Wing Wai for the year ended 31 March 2017. 

24.  As submitted by the plaintiff, I agree that the defendant has completely failed in rendering a full and proper account of the Estate when being called upon to do so, which constituted a breach of the fundamental and important duty of an administrator and is justified to be removed as such by the court.

C3.    Dilution of the Deceased’s shareholding in Wing Wai

25.  It is discovered by the plaintiff that in or around July 2018 the defendant has diluted the Deceased’s shareholding by increasing Wing Wai’s issued share capital by HK$999,996 with all of the 999,996 new shares of Wing Wai being allotted to Ho Chun Shing, the defendant and Ho Chun Ling equally. 

26.  The defendant admitted the dilution of Wing Wai shares but alleged that the increase in capital was for financing/loan purposes. However, it can be noted from the Land Search Record of the Pine Street Property that Wing Wai had taken out a mortgage in favour of the DBS Bank (Hong Kong) Limited on 31 May 2016.  Although it is unknown whether the purpose of such mortgage loan was for the benefit of Wing Wai or otherwise, this completely contradicts the defendant’s case that share capital has to be increased or shares has to be diluted for financing/loan purposes as it is apparent that Wing Wai could and did mortgage the Pine Street Property to raise funds.  More importantly, by diluting the Deceased’s shareholding in Wing Wai, the defendant’s entitlement to Wing Wai’s assets has been drastically increased. 

27.  As such, the defendant, as the administrator of the Deceased’s estate, had clearly not acted in the interest of the Estate for the benefit of all the beneficiaries and not done so impartially among the beneficiaries.  This constitute further reason why it is necessary for the defendant to be removed as the administrator, for the due and proper administration of the Deceased’s estate.

D.      THE PLAINTIFF TO REPLACE THE DEFENDANT AS ADMINISTRATOR

28.  I agree with the plaintiff’s submission that he is the most suitable person to be the substitute administrator as he is the youngest son of the Deceased without health issues and is willing to contribute his time and energy to deal with the matter for the benefit of the family.  I can discern no conflict between the plaintiff’s interests and the interests of the Deceased’s estate.   He is also supported by 3 of his siblings, who are also beneficiaries of the Deceased’s estate.

E.      COSTS OF THE ORIGINATING SUMMONS

29.  In relation to costs, the plaintiff submits that costs should be borne by the defendant personally instead of being paid out from the Deceased’s estate as the Originating Summons was necessitated by the defendant’s failure to respond to reasonable requests over pre-action correspondences, as well as his defaults in discharging his duty as the administrator.

F.       CONCLUSION AND DISPOSITION

30.  For the reasons set out above, I consider that the defendant should be removed as the administrator of the Deceased’s estate and the plaintiff should be appointed in his place.

31.  The defendant does not oppose to an order being made in terms of paragraphs 3 and 4 of the Originating Summons.

32.  Accordingly, I order as follows:

(1)  The defendant be removed as the administrator in the Letters of Administration issued to the defendant on 28 November 2012;

(2)  The plaintiff be appointed as the administrator to complete the administration of the estate of the Deceased in place of the defendant;

(3)  The defendant do amend the Schedule of Assets and Liabilities annexed to the Letters of Administration to reveal a true and perfect account of the Deceased’s Assets and Liabilities;

(4)  The defendant do render to the plaintiff a true and perfect inventory and account of the Assets and the defendant’s dealings of the Assets upon grant of the Letters of Administration up to the date of this order with all supporting documents by way of an affirmation within 28 days from the date of this order;

(5)  The costs of these proceedings be paid by the defendant to the plaintiff, such costs are to be borne by the defendant personally and not to be borne by the estate of the Deceased;

(6)  There be liberty to apply; and

(7)  The Defendant’s Summons be dismissed.