WU YIM KUEN, EXECUTRIX OF THE ESTATE OF WU MUK FUNG AND THE ESTATE OF CHAN YU SUM v. WU YIM KWONG, KINDWIND AND OTHERS

HCMP 202/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 202 OF 2013

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REASONS FOR DECISION

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I. INTRODUCTION

1. The plaintiff is the daughter of Wu Muk Fung (“Father”) and Chan Yu Sum (“Mother”). On 10 April 2006, the Father and the Mother (collectively, the “Parents”) each made a will which provided that their respective estate was to be distributed amongst their five sons being the 1^st to 5^th defendants in this action (“D1, D2, D3, D4 and D5” or collectively, the “defendants”). In December 2008 and December 2010, the Father and the Mother respectively passed away.  Pursuant to the aforesaid wills and the relevant grants of probate, the plaintiff is the sole executrix of the estates of the Father and the Mother (collectively, “Estates”).

2. On 29 January 2013, the plaintiff in her capacity as the sole executrix of the Estates commenced the present proceedings by originating summons under Order 85 of the Rules of the High Court for inter alia:

(a)  an order approving and/or authorising the sale of various undistributed real properties belonging to the Estates (see the Properties defined in paragraph 2 of the Schedule hereto) by the plaintiff in her capacity as sole executrix of the Estates, and the distribution of the net proceeds of sale to the defendants in equal shares;

(b)  various prohibitory and mandatory injunctive reliefs against D1 and D2 in respect of income derived from those undistributed real properties belonging to the Estates (see the Properties defined in paragraph 2 of the Schedule hereto), including such income deposited in a bank account (“1^st BOC Account”) with the Bank of China (Hong Kong) Limited (“Bank”).

3. On the same day, the plaintiff issued an inter partes application against D1 and D2 for interlocutory injunctions in respect of the injunctive reliefs sought in paragraph 2(b) above (“Application”).  On the following day, the plaintiff filed her 1^st affirmation in support of the originating summons and her 2^nd affirmation in support of the Application.

4. The Application was returnable before me on 8 February 2013 (“Hearing”). D1 and D2 did not appear at the Hearing or file any affirmation in opposition or any acknowledgment of service.  By two letters both dated 8  February 2013 and purportedly signed by D1 and D2 respectively, they purported to authorise Madam Kan Mei Ha (transliteration) (簡美霞) (the wife of D1, “Madam Kan”) to appear and represent them at the Hearing.  No reasons were given for their non-attendance in such letters.

5. According to the affirmations of service filed on behalf of the plaintiff, I am satisfied that D1 and D2 had been served with the originating summons, the Application and the plaintiff’s 1^st and 2^nd affirmations.  There is no doubt that D1 and D2 were aware of the Application and the Hearing.  On 5 February 2013, they purportedly wrote to the court stating inter alia that (a) in the past few days they had reached a compromise with the plaintiff and other family members, (b) the plaintiff had indicated to them she would vacate the Hearing, and (c) they would not attend the Hearing (“5/2/13 Letter”).

6. Madam Kan turned up at the Hearing.  She informed the court that D1 and D2 had tried their best to resolve the matter with the plaintiff and other members of the family, and that they did not want to become embroiled in confrontation with the plaintiff, so they would not appear at the Hearing.  I was not satisfied that this amounted to good or sufficient reason for their absence at the Hearing, or for Madam Kan to represent them or to act as their McKenzie friend in their absence.  In the circumstances, at the hearing I refused to grant leave for Madam Kan to represent D1 and D2, and they were therefore absent.

7. At the Hearing, I was informed by Mr Suen, counsel for the plaintiff, that on 7 February 2013 the plaintiff had filed her 3^rd affirmation in response to various allegations raised by D1 and D2 in the 5/2/13 Letter.  However, given the shortness of time, such affirmation had not been served on D1 and D2. Mr Suen confirmed that the plaintiff would not rely on such affirmation for the purpose of the Application.

8. After hearing submissions from Mr Suen at the Hearing, I granted the orders set out in the Schedule hereto.  These are the reasons for decision which I have reserved.  For easy reference, I shall adopt the abbreviations used in the Schedule hereto.

II  BACKGROUND FACTS

9. The background facts as gleaned from the plaintiff’s 1^st and 2^nd affirmations are set out in paragraphs 10 to 16 below.

10. The Father accumulated substantial wealth (including various real properties in and around Sai Kung) during his lifetime.  Since she was 15 years old, the plaintiff assisted the Father in managing his business and investments.

11. The Parents purchased the real properties either in their own names, jointly with others or via corporate vehicles.  Sometimes, the Father would ask D1 and D2 to purchase real properties in their names, but the purchase monies would come from and the rental income would go to the Father.  Those real properties belonged to the Father, and the children held them in trust for the Father and dealt with them at the Father’s direction.  The Father used the rental income from his real properties to pay for property-related as well as family expenses.  He also had other investments and businesses in Hong Kong, United States and Mainland China.

12. For the Parents’ real properties held via corporate vehicles, the rental income and property-related expenses would be recorded in the company accounts. For the Parents’ real properties held in the name of the Father, the Mother and/or other family members, the income and expenditure would be recorded in the Father’s personal account, and an accounting staff was employed to administer the Father’s investments and accounts under his supervision and with the plaintiff’s assistance.  A system was put in place for requesting/approving the payment of expenses.  When the system was computerised in 2003, the Father’s personal account was replaced by the “Shing Fung Management” account, but the operation of such account remained essentially the same as before.  The Father’s personal account could no longer be used when he passed away in 2008, so with the consent of the five beneficiaries under his will D1 and D2 opened the 1^st BOC Account with the Bank to receive rental income and pay outgoing expenses in respect of the real properties under the name of the Father, the Mother and/or other family members that belonged to the Parents or their Estates.  Hence, the monies in the 1^st BOC Account belonged to the Estates.

13. Under the bank mandate for the 1^st BOC Account, any two of D1, D2 and D4 could withdraw monies or issue cheques.  But the accounting staff under the plaintiff’s supervision handled all requests (including vetting and approval thereof) and arrangements for payment from the 1^st BOC Account as well as the relevant bookkeeping in much the same manner as before (save that D1, D2 and/or D4 rather than the Father signed the cheques).

14. At the time when the Father passed away, he had six real properties in Hong Kong and shares in various companies under his name.  One such real property was sold to cover the debts of his estate.  His company shareholdings were either distributed pursuant to the agreement amongst the five beneficiaries or adjusted to ensure that they held equal ownership of the shares in the relevant companies.  Eight other real properties that belonged to the Father’s estate were held in the names of other family members for which they all executed declarations of trust.

15. The five beneficiaries/defendants agreed to convey the real properties belonging to the Father’s estate to Wu’s Shing Fung Holdings Limited (“Company”) since each of them were directors and held 2,000 shares in the Company.  Two properties in the Father’s name were conveyed to the Company with the assent of the five beneficiaries leaving three real properties in the Father’s name still undistributed.  Four properties belonging to the Father’s estate but held in the names of other family members were conveyed to the Company, so the remaining four real properties belonging to the Father’s estate but held in the name of other family members were still undistributed.  Together with the two real properties in the Mother’s name under her estate, there were altogether nine real properties belonging to the Estates (being the Properties as defined in paragraph 2 of the Schedule hereto) that had not been conveyed to the Company.  The rental income from the Properties being the undistributed properties of the Estates amounted to HK$302,445.00 per month.

16. The plaintiff could not convey the Properties to the Company because D1 and D2 indicated they did not want to sign any more documents, and she was not informed of any agreement amongst the five beneficiaries as to how to deal with the undistributed estates.  So on 8 August 2012, D3, D4 and D5 asked her to continue to administer the undistributed estates pending agreement by the five beneficiaries.  The plaintiff notified the five beneficiaries of her intention to have a CPA firm, Kenneth Tong & Company (“KTC”), supervise the Shing Fung Management account.  She received no objection and proceeded accordingly.  Under such arrangements, save for recurrent expenditure (eg the payment of  utilities etc), KTC would approve requests for payment of expenses before passing them to the five beneficiaries for confirmation, and then the accounting staff would make the payments.

III.  EVENTS LEADING UP TO THE APPLICATION

17. Again, the facts and matters referred to in paragraphs 18 to 26 below were gleaned from the plaintiff’s 1^st and 2^nd affirmations.

18. In December 2012, whilst the plaintiff was visiting the United States, she was informed by the accounting staff that D1 and D2 intermeddled with the 1^st BOC Account and changed its mandate by removing D4 as a co-signatory.  D1 and D2 also changed the mandate of the bank accounts of the Father’s investment companies by removing D3, D4 and/or D5 as signatories without their consent.

19. By changing the mandate of the 1^st BOC Account without the consent of the plaintiff and all five beneficiaries, D1 and D2 would be able to operate the 1^st BOC Account and draw monies on their own.  They had also taken away the bank statements of the 1^st BOC Account and only returned copies thereof two weeks later, so the plaintiff could not monitor the operation of the 1^st BOC Account, and the accounting staff could not properly prepare their monthly reports.

20. Having considered the bank statement for December 2012 that was received in mid-January 2013, the plaintiff discovered that D1 and D2 had applied for new chequebooks and issued cheques in respect of the 1^st BOC Account without her consent.  D1 and D2 refused to sign and return cheques submitted to them for signature by the accounting staff in accordance with the previous practice.  Sometimes they would cross out the cheques submitted to them by the accounting staff, and bypass the plaintiff, KTC and the accounting staff by issuing cheques from their new chequebooks.  The accounting staff did not know whether or not entries should be made in respect of such cheques, and the plaintiff was concerned that she might not know whether there were sufficient monies in the 1^st BOC Account for cheques issued for the payment of outgoing expenses.  If there were insufficient monies, it might invite demands and litigation from creditors thereby jeopardising the interests of the beneficiaries of the Estates.

21. Further, on 1 December 2012, the accounting staff passed a cheque in the sum of HK$250,000.00 to D1 for his signature for payment of PRC taxes, but such cheque was not returned to the accounting staff.  It later transpired that the D1 and D2 had cashed the cheque, but the plaintiff could not confirm whether the PRC taxes had been settled until she received a statement from the relevant PRC company which suggested that cash from the cheque might have been converted to RMB for payment of the PRC taxes.  But still the accounting staff could not make formal accounting entries without actual confirmation by D1 and D2.

22. Still further, the plaintiff noted that D1 and D2 jointly signed two cheques on 5 December 2012 and 10 January 2013 respectively to withdraw a total sum of HK$97,500.00 from the 1^st BOC Account without her approval.  D2 later provided a “聯絡單” signed by him which stated that such sum was for payment of interest due to his sister-in-law for her loan to one of the Father’s investment companies in the sum of HK$1,150,000.00.  But such investment company had not approved any such loan or interest payment, which should in any event be settled by such company and not from monies in the 1^st BOC Account which belonged to the Estates.

23. Consequently, the plaintiff opened an account with the Bank being the 2^nd BOC Account referred to in paragraph 3 of the Schedule hereto, and requested all tenants of the real properties under the name of the Father and as particularised in paragraphs 2(a)-(c) and (h)-(i) of the Schedule hereto to pay their rent and other charges (if any) into the 2^nd BOC Account.  But the rent and other charges (if any) in respect of the remaining real properties of the undistributed estates as particularised in paragraphs 2(d)-(g) of the Schedule hereto continued to be deposited into the 1^st BOC Account.

24. In view of the above developments, the plaintiff claimed she could not effectively administer the Estates and she believed the defendants would not be able to come to any compromise.  So she applied for the interlocutory reliefs sought under the Application.

25. In the 5/2/13 Letter, D1 and D2 purportedly alleged that the Application failed to give the whole background, including D4’s withdrawal of HK$190,000.00 in cash from the 1^st BOC Account and their difficulty in working with KTC in relation to the operation of such account which caused delay in paying suppliers and outstanding debts.  D1 and D2 explained this was why they removed D4 as a co-signatory of the 1^st BOC Account and arranged for payment of the outstanding sums.

26. Such assertions by D1 and D2 were not verified on affidavit.  On 6 February 2013, the plaintiff’s solicitors replied to D1 and D2 stating that although D1 had approached the plaintiff to indicate that he would change the bank mandate of the 1^st BOC Account, the plaintiff never agreed not to proceed with the Application and/or to vacate the Hearing.

IV.  LEGAL PRINCIPLES

27. The principles governing the grant of interlocutory injunctions are trite.  The burden is on the plaintiff to show there is a serious question to be tried, that damages are an inadequate remedy, and that the balance of convenience is in favour of granting the injunction (see Hong Kong Civil Procedure 2013 Vol.1 paras.28/1/10-14 at pp.640-641).

28. Mr Suen accepted that to grant a mandatory injunction (albeit interlocutory) the court must feel there is a strong prima facie case and a high degree of assurance that at trial it would appear that the injunction was rightly granted (see Hong Kong Civil Procedure 2013 Vol.1 para.28/1/29 at pp.645).  In those circumstances, the court should endeavour to avoid injustice.

V.  DISCUSSION

29. Here, the plaintiff sought interim relief against D1 and D2 to restrain them from interfering with the rental income of the undistributed real properties of the Estates including the monies in the 1^st BOC Account, and to require them to take steps to enable the plaintiff as the sole executrix of the Estates regain control of the 1^st BOC Account (eg by changing the mandate, delivering up bank statements and chequebooks, producing documents in relation to unaccounted for payment, and repaying monies withdrawn without her approval) and the rental income of the undistributed real properties of the Estates (eg by procuring the tenants to pay such rental income into the 2^nd BOC Account).

30. Having read the plaintiff’s 1^st and 2^nd affirmations, I am satisfied there is a serious question to be tried or (in the absence of affirmation evidence in opposition) even a strong prima facie case that the monies in the 1^st BOC Account, the Properties and the rental income from the Properties belong to the Estates.  The fact that D4 used to be a co-signatory (as admitted in the 5/2/13 Letter) suggests that the 1^st BOC Account was/is not the personal bank account of D1 and D2.  There is also evidence before me of the long-standing practice of the operation of the 1^st BOC Account with deposit of the rental income from the undistributed properties of the Estates into and the payment of property-related expenses out of such bank account, and of the administration of such bank account by the accounting staff and/or KTC under the plaintiff’s supervision.  These matters suggest that the rental income from the Properties and the monies in the 1^st BOC Account belong to the Estates, and hence the acts by D1 and D2 referred to in paragraphs 18-22 above which were allegedly done without the approval by the plaintiff as the sole executrix of the Estates raise a serious question to be tried or even a strong prima facie case that D1 and D2 had intermeddled in estate funds, especially when certain withdrawals were without the plaintiff’s consent and/or used for payment(s) unrelated to the Estates.

31. I accept that damages would be an inadequate remedy because the plaintiff as the sole executrix of the Estates was/is duty bound to properly administer the Estates and keep proper inventory and account of the property of the Estates under section 56 of the Probate and Administration Ordinance Cap 10.  Her inability to control the monies in the 1^st BOC Account or to keep a proper paper trail of the movement of funds in and out of such bank account may expose her to liability to the beneficiaries and may jeopardise the interests of the beneficiaries.

32. As for the balance of convenience, I do not see how the interlocutory reliefs set out in the Schedule hereto can be objectionable, especially when the court has added essential caveats to the reliefs sought in the Application, eg that a clear deadline be specified for compliance with the interlocutory injunctions, that such interlocutory injunctions will expire upon judgment in this action or until further order, and that the monies and documents to be returned by D1 and D2 will be preserved by the plaintiff pending the trial.

33. Further, the plaintiff as the sole executrix of the Estates is charged to collect the funds of the Estates and to properly administer the Estates.  Even from the 5/2/13 Letter, there is no suggestion that the plaintiff has not properly discharged her duty.  As regards the alleged default by D4 and the problems D1 and D2 encountered with KTC, they do not appear to justify interference with the estate funds.  On the contrary, there was evidence of a long standing practice as to how to deal with the income and expenses of the undistributed real properties of the Estates.  The interlocutory reliefs set out in the Schedule hereto seek to maintain this status quo.  Without such interlocutory injunctions, there would be a risk that D1 and D2 might be able to operate the 1^st BOC Account and use the monies therein as well as the future rental income from the Properties in paragraphs 2(d)-(g) of the Schedule hereto at their own will or for purposes extraneous to the Estates.

34. The plaintiff through Mr Suen gave the usual undertaking as to damages.  I note that the three Properties at paragraphs 2(a)-(c) of the Schedule hereto were unencumbered and free from mortgage.  According to the plaintiff, they generated a total monthly income of HK$166,615.00 for the Father’s estate and were worth about HK$30 million.  Hence, the undertaking as to damages was supported by valuable assets of the Estates.  In the circumstances, at the Hearing I granted the orders set out in the Schedule hereto.

Schedule

1.   D1 and D2, whether by themselves jointly or severally or by their servant and/or agent, be restrained until Judgment in this action or until further Order from using, withdrawing or in any way dealing with any money in the 1^st BOC Account without the prior written approval of the plaintiff;

2.   D1 and D2, whether by themselves jointly or severally or by their servant and/or agent, be restrained until Judgment in this action or until further Order from receiving, collecting, using or otherwise disposing of the income in relation to the following properties (“Properties”):

(a)  ALL THAT piece or parcel of ground registered in the Land registry as SECTION A OF LOT NO.9 in DEMARCATION DISTRICT NO.212;

(b)  ALL THAT piece or parcel of ground registered in the Land registry as SECTION B OF LOT NO.8 in DEMARCATION DISTRICT NO.212;

(c)  ALL THAT piece or parcel of ground registered in the Land registry as SECTION B OF LOT NO.9 in DEMARCATION DISTRICT NO.212;

(d)  ALL THAT one equal undivided 3^rd part or share of and in ALL THAT  piece or parcel of ground registered in the Land Registry as LOT NO.1994 IN DEMARCATION DISTRICT NO.244 And of and in the messages erections and buildings thereon now known as LOT NO.1994 IN DEMARCATION DISTRICT NO.244, Sai Kung, New Territories (“the Building”) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT FIRST FLOOR of the Building;

(e)  ALL THAT  one equal undivided 3^rd part or share of and in ALL THAT  piece or parcel of ground registered in the Land Registry as LOT NO.1994 IN DEMARCATION DISTRICT NO.244 And of and in the messages erections and buildings thereon now known as LOT NO.1994 IN DEMARCATION DISTRICT NO.244, Sai Kung, New Territories (“the Building”) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT SECOND FLOOR and THE ROOF of the Building;

(f)  ALL THAT piece and parcel of ground registered in the Land Registry as LOT NO.503 IN DEMARCATION DISTRICT NO.210;

(g)  ALLTHAT piece or parcel of ground registered in the Land Registry as THE REMAINING PORTION OF LOT NO.337 in DEMARCATION DISTRICT 247;

(h)  ALL THAT building or structure erected on ALL THAT  piece or parcel of ground registered in the Land Registry as THE REMAINING PORTION OF LOT NO.792 in DEMARCATION DISTRICT NO.215;

(i)  ALL THAT building or structure registered on ALL THAT piece or parcel of ground registered in the Land Registry as SECTION A OF LOT NO.792 in  DEMARCATION DISTRICT NO.215.

3.   A mandatory injunction be granted that D1 and D2 shall, within 14 days from the date of the service of the Order herein, procure the tenants of the Properties referred to in paragraphs 2d, 2e, 2f and 2g above to pay all future rental and other charges (if any) payable to the landlord of the said Properties referred to in paragraphs 2d, 2e, 2f and 2g above to the account of the plaintiff as executrix of the estates of Wu Muk Fung and Chan Yu Sum with the Bank (a/c no.: 012-xxx-000-xxxxx) (“2^nd BOC Account”) until Judgment in this action or until further Order;

4.   A mandatory injunction be granted that D1 and D2, shall within 14 days from the date of the service of the Order herein, procure a change of the bank mandate of the 1^st BOC Account by adding the plaintiff as a co-signatory of the 1^st BOC Account such that any withdrawal of funds from or issuance of cheques of the 1^st BOC Account be effective only upon the joint signatures of (a) the plaintiff together with (b) either of D1 or D2 until Judgment in this action or until further Order;

5.   A mandatory injunction be granted that D1 and D2 shall, within 14 days from the date of the service of the Order herein, refund the sum of HK$97,500.00 to the 1^st BOC Account whereupon the plaintiff shall not reduce the bank balance of the 1^st BOC Account to a sum less than HK$98,000.00 until Judgment in this action or until further Order;

6.   A mandatory injunction be granted that D1 and D2, whether jointly or severally, shall, within 14 days from the date of service of the Order herein, deliver up to the Plaintiff as executrix of the estates of Wu Muk Fung and Chan Yu Sum all the bank statements up to the date of the Order herein and all chequebooks in respect of the 1^st BOC Account (insofar as they are in the possession of D1 and/or D2) whereupon the plaintiff shall safekeep and preserve the same until Judgment in this action or until further Order;

7.   A mandatory injunction be granted that D1 and D2 shall, within 14 days from the date of the service of the Order herein, procure the Bank to send all bank statements and chequebooks in respect of the 1^st BOC Account after the date of the Order herein to the plaintiff as executrix of the estates of Wu Muk Fung and Chan Yu Sum whereupon the plaintiff shall safekeep and preserve the same until Judgment in this action or until further Order;

8.   Costs of the Application be costs in the cause.