TSAO CHI CHING v. TSAO LUNG MAY

HCCA 2054/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO. 2054 OF 2012

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BETWEEN

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J U D G M E N T

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A. BACKGROUND

1.  The deceased, a widower, died on 18 April 2011, wholly intestate, leaving seven lawful and natural sons and daughters, who are equally entitled to share in the whole of his estate and administration in the same degree under rule 21(1)(ii) of the Non-Contentious Probate Rules (“NCPR”), Cap 10A, Laws of Hong Kong.

2.  The fifth son (“Ching”) and the second daughter (“May”) of the deceased filed applications for grant respectively on 13 and 14 December 2011 in respect of the deceased’s estate.

3.  Since both Ching and May are entitled to a grant of administration of the deceased’s estate in the same degree, Ching issued a summons pursuant to rule 25(2), NCPR, to dispose of the dispute between him and May, asking for a grant of administration of the estate of the deceased be issued to him, and the dismissal of May’s application for grant.  As required by rule 25(4), NCPR, Ching has also entered a caveat.

B.  OBJECTIONS TO MAY’S APPLICATION FOR GRANT

4.  Ching’s objections are three: (i) May is a person with bad character, (ii) Ching has more support from his siblings than May, (iii) May is personally objectionable to other persons entitled to share in the estate.

5.  For convenience, I will refer to the first objection as the “bad character” objection; the second as the “majority of interest” objection and the last as the “personally objectionable” objection.

B.1  Bad character

6.  Ching avers that May is not a suitable person to be granted letters of administration as May had intermeddled in their late mother’s estate and that she would likely be doing the same in respect of the deceased’s estate.

7.  Although no grant of administration was obtained in respect of the late mother’s estate, May had in fact, with the consent of all the siblings, taken the responsibility of distributing the assets of the estate of the late mother.  Ching however alleged that Mei had improperly withdrawn substantial amount of money belonging to the late mother’s estate without properly accounting for it.

8.  Ching therefore alleged that May is a person with bad character. Further, Ching also averred in his 3^rd Affirmation that May had allegedly indicated that she would handle the deceased’s estate in the similar manner as she had done in the late mother’s estate, that is, by distributing the assets in accordance with her own view of “fairness” rather than in accordance with the law.

9.  In addition to the allegation of improper management of the late mother’s estate and the alleged intention of May in intermeddling of the deceased’s estate, Ching has also made a number of allegations against May in connection with an application for guardianship for the deceased before his death.  At the hearing, Mr Wong (quite sensibly in my view) has not placed any reliance on this part of evidence.

10.  Mr Wong also cited the English cases of Re Wright (1898) 79 LT 473 and Re Frost [1905] P140 in support of his submission that a court could decline a grant to a person with bad character.

B.2  Majority of Interest

11.  Where there is dispute between applicants with equal entitlement to grant, the practice (Mr Wong submits) is to prefer an applicant supported by the majority of interest[1].

12.  In this case, it is not disputed that Ching’s application is supported by the two youngest sisters.  However the stance of the three remaining siblings (the deceased’s eldest and the third sons as well as the fourth daughter, Kam) was unclear and Mr Wong accepted that their position could be regarded as neutral.

13.  Thus, Mr Wong submitted, Ching – with the support of two of the siblings and the other three being neutral – is a person with the majority of interest, and should be preferred over May who has got no support from any of the siblings.

B.3  Personally objectionable

14.  The evidence concerning this objection mainly came from the two supporting youngest sisters.  In their affidavits in support of Ching’s application, the two youngest sisters alleged that May had failed to properly look after the deceased before his death and further averred that she did not enjoy good relationship with the siblings.  They have also referred to the various incidents relating to the guardianship application in respect of the deceased and said that May is not a person the siblings can trust.

15.  Mr Wong further cited a Hong Kong case of Yee Kwok Chun v Yu Kwok Leung Albert, unrep, HCCA 4070 of 2012, Master Wong, 29 February 2012, and submitted that a court had power to pass over an executor where a person is personally objectionable to other persons entitled to share in the estate.

C.  MAY’S STANCE

16.  In her affirmation, May denied the allegations, and averred that she enjoyed excellent relationship with the two brothers who have chosen to remain neutral.  May said that Ching, on the other hand, is not a suitable administrator as he has already immigrated to Australia and established his family there.  She further avers that Ching does not enjoy good health after an operation to his eyes.

17.  May contends that she is more suited to administer the estate as the siblings had previously entrusted her with the task of handling their late mother’s estate, which was completed without objection from them.  Further, as the child who had principally taken care of the deceased while he was living, she is much better placed than any siblings to administer the deceased’s estate. Nonetheless she is willing to act together with Ching should the court refuse to let her administer the estate alone.

18.  Miss Siu, counsel for May, submitted that Ching cannot be said to have the majority of support when he only has the support of two of the siblings out of a total number of seven.  In any event, Miss Siu contended (citing Tristrim and Coote’s Probate Practice (30 ed) 578-579) that the “majority of interest” principle is not obligatory upon the court, and it is only “a good general rule … introduced by practice”.

19.  As to the complaint of mishandling of their late mother’s estate, Miss Siu pointed out that all the siblings had in fact got their respective shares without any complaint of unfair distribution in the past 12 years until Ching raised it in this application.

D.  DISCUSSION OF OBJECTIONS

D.1  Bad character

20.  An administrator is duty-bound to administer an estate faithfully.  Thus an applicant for grant is required to affirm such duty in the Oath filed together with the application for grant that he or she will “well and truly administer and faithfully” dispose of a deceased’s estate, and “exhibit a true and perfect inventory of all and singular the estate and effects and render a just and true account thereof whenever required by law so to”[2].

21.  A person of bad character will certainly not be suited to be entrusted with such responsibility.

22.  However, when an objection basing on a person’s bad character is made, one must be careful in ensuring that the particulars of bad character should be relevant to the person’s suitability to administer. In other words, there must be a nexus between the person’s bad character and the suitability. Trivial and personal matters are rarely relevant.  Thus, as in this case, evidence about May’s personal life (for example, she is a divorcee and her relationship with the daughter has been bad[3]) or the alleged treatment of the deceased prior to the latter’s death (including the Guardianship application that Mr Wong has conceded as being irrelevant) bear little relevance to the consideration of suitability.

23.  When persons with the same entitlement are competing for a grant of administration, it is not uncommon for these parties to use any available opportunity avail to them (such as an opportunity found in this application) as a platform to ventilate their bitterness.  It is for this reason that a party’s solicitors, who are required to be detached and objective, have the responsibility of ensuring only relevant evidence that is helpful to a court in appointing a suitable person to administer an estate should be filed.  Unfortunately, quite a number of irrelevant imputations of May’s character have been made in this case.

24.  Further, cases of Frost and Wright Mr Wong cited are also, in my view, of little assistance.  These cases are mainly concerned with a court’s jurisdiction to issue a grant to a person by passing over a person with a higher priority.  However, this application is not about passing over a person enjoying the higher priority to grant, but persons of equal entitlement to grant.

25.  The facts are, anyhow, entirely different to the facts of this case. The case of Frost is about passing over a widow who had committed adultery while the case of Wright is about a disappeared executor who was wanted on a warrant in connection with a charge of embezzling trust funds.  Frost was decided more than 100 years ago, moral standard has changed substantially, and it is therefore doubtful whether adultery alone would be a sufficient reason to pass over a person otherwise entitled to grant.  As for Wright, it is about a person charged with a very serious criminal matter.

26.  Coming back to the facts of this case, it appears that the siblings in the past were content to entrust the care of the deceased to May as some of the siblings were living overseas while some were unable to take up such responsibility for various reasons.  Ching’s dissatisfaction with May’s treatment of the deceased bears no relevance to May’s fitness to act as an administratrix. I am therefore not inclined to take such evidence into account.

27.  Neither do I find the allegation of the improper distribution of the late mother’s estate by May can be accepted as evidence of bad character. As pointed out by Miss Siu, quite correctly in my view, the fact that the distributions of the late mother’s estate had been made for over 10 years without any complaint or steps taken against May by the brothers and sisters until this application is not consistent with the recent allegation made.

28.  Concerning the distributions of the late mother’s estate, I also notice that the evidence is completely silent as to whether the deceased - who, as the surviving spouse, should have been legally entitled to the largest share of the late mother’s assets -  has indeed been given his due entitlement before his death.  If the deceased had not be given his due share of the late mother’s estate, Ching, in my view, cannot complain as any improper distributions of the late mother’s estate might have been made with his connivance. 

29.  In the circumstances, the suggestion of May being unable to administer the deceased’s estate arising from her bad track record in the handling of the late mother’s estate appears to be without foundation. Even if May, as Ching averred, had indeed indicated that she would  distribute the deceased’s assets in the same way as she had done in respect with the late mother’s estate, I do not think it would assist Ching in this objection as what May has allegedly indicated she would do in the administration  is only a surmise.

30.  In the circumstances, I do not find this objection valid.

D.2  Majority of interest

31.  The seven children of the deceased are equally entitled to a grant of administration.  Two out of the seven children filed evidence to support Ching’s evidence while three of them had maintained a neutral stance.

32.  Of the three children who have maintained a neutral stance are the two other sons and one daughter, Kam.  The neutral stance of the two other sons is not based on their non-involvement but through the concession by Ching’s counsel.   According to Ching, the deceased’s eldest son has supposedly provided written to support Ching’s application.  Mr Wong only conceded that his stance being neutral after May has filed evidence casting doubt on the reliability of the written document[4]. So far as the other son is concerned, he had, according to Ching’s evidence, allegedly remarked on May’s unsuitability[5]. Mr Wong only agreed to regard this son’s stance as being neutral at the hearing for lack of documentary evidence.

33.  So much for the position of the two “neutral” brothers.  As for the other sibling, Kam, the situation is quite different to the other two neutral brothers. Kam does not appear o have been involved at all in this application. Her stance was clearly neutral (at least up to the filing of her affirmation on 18 January 2013 in the circumstances outlined in paras 34 and 35 below).

34.  The factual matrix thus was this: two sisters have openly sided with Ching, whilst the other two brothers were deemed to be neutral by concessions. Kam by that stage seemed to me to be genuinely neutral in a sense that she, unlike the other two brothers, appeared to have kept out of the dispute. I was therefore anxious to explore the possibility of whether she would be a suitable neutral person to be appointed either to act alone or jointly with another sibling should I have doubt on the suitability of Ching and May. Thus, with the consent of the parties, I directed (subject to Kam’s agreement) to file an affirmation to confirm (i) if she agreed to act as a sole administratrix, and if not, whether she was willing (ii) to act jointly either with Ching or May.

35.  Pursuant to my direction, Kam filed an affirmation on 18 January 2013.  In it, Kam answered “No” to both questions I have asked her to confirm.  She further stated in the said affirmation that she supported Ching’s application for grant.

36.  The additional support Ching has got from Kam means that Ching has now clearly obtained the majority support of the siblings.

37.  Whilst this factor alone may not be decisive in a court’s consideration, it will be another factor, by practice, to be favourably weighed in favour of Ching as he has clearly enjoyed the majority support.

D.3  Personally objectionable

38.  This objection, though being relied on as a separate head of objection, is in fact inter-connected with the “majority of interest” objection.  It is said that since May is personally objectionable to the majority of her siblings as a result of the allegations made by Ching (supported by his two younger sisters), May is not suitable to be appointed to act as an administratrix.

39.  As for the case of Yee Kwok Chun Mr Wong cited in support of the application, I think the case is of little assistance as the exercise of the Master’s discretion is entirely based on the facts of that particular case.

D.4  Conclusion of the objections raised

40.  From the discussions above, I do not think Ching is able to show that May is a person of bad character rendering her unfit to act.  However, the evidence tends to confirm that Ching has the majority of the support of the siblings.  May’s lack of support from any of her siblings also tends to further suggest that some of the siblings may find May objectionable to act as an administratrix.

41.  Thus, the only valid objection seems to be the majority of interest objection. However, as it is only by practice that a court would accept this ground as a valid objection but is not bound to follow it when deciding a person’s fitness (see paras 11 and 18 above), I will, for the sake of prudence and completeness, go further by further considering other relevant circumstances before coming to a concluded view on May’s suitability,.

E.  OTHER CONSIDERATIONS

E.1  Size and characteristics of an estate

42.  When disputes arise between persons with equal entitlement to a grant of administration, the court has an inherent power to refuse a grant to one and commit it to others[6] by taking into account of all the circumstances of a case, including but not limiting to matters discussed in this case, i.e. bad character, majority of interest and personal objectionability.  Other matters such as the size and characteristics of an estate, and the potential conflict (be a financial or otherwise) of a person entitled to a grant of administration or a ground known as incompatible interest of an applicant[7] are also relevant. In this case, as will be apparent from the discussions below, the characteristics of the estate such as its value and the issue of conflict of interest are inter-related matters relevant to my exercise of discretion.

43.  In considering the characteristics and value of the deceased’s estate in this case, I think it is best is to glen from the Schedule of Assets and Liabilities May filed with her application for grant. This Schedule is prima facie a true and account of the estate as May is required (as mentioned in para 20 above) to exhibit a true and perfect inventory of a deceased’s assets and liabilities.

44.  According to the Schedule, May affirmed that the deceased’s estate mainly consists of movable assets comprising of cash in banks and some stocks and shares with a value of no more than $5 million.  Apart from the movable assets, there is also an immovable asset, a modest property in To Kwa Wan. As for liabilities, it is stated that the estate owed a sum of $5 million to May.

45.  Based on the information having been disclosed in the Schedule, it would appear that the only asset available for distribution to the siblings will be the equity in To Kwa Wan property after the liability of $5 million is discharged.

46.  Accordingly, the reported liability of $5 million undoubtedly makes up a substantial bulk of the value of the deceased’s estate. It therefore becomes highly relevant to consider if there will be a conflict of interest should May be issued a grant of administration.

E.2  Incompatible interest of the applicant

47.  Given the value of the estate as discussed above, I do not think the sum of $5 million supposedly owed by the estate to May is a small sum. I am further told that May has not disclosed this liability to her siblings.  It is highly doubtful therefore that this liability will be accepted without the rigorous scrutiny by the siblings, or perhaps more appropriately, by an administrator.

48.  In the circumstances, is May’s interest as the major creditor of the estate incompatible with the interest of the estate, making her less suitable to act?

49.  I tend to think so.

50.  It is because this purported debt will inevitably create an inherent conflict of interest (be it perceived or actual) if she were entrusted with the administration, one of which task will involve a payment of $5 million to herself.  However, given the rather large amount of the purported liability, May will likely be required to provide proof of this item of liability by the administrator. If she became the administratrix, it will be questionable whether the verification of the liability can be done in a fair and transparent manner.

51.  For this reason, I think it is entirely unsuitable to appoint her to act as an administratrix due to this apparent conflict.

F.  CONCLUSION

F.1  Is May suitable to act?

52.  For the reasons above, I find that May is not suitable to be appointed as an administratrix as she does not enjoy the support of any of her siblings, and more importantly, her financial interest conflicts with her duty of administratrix if she were appointed.

53.  Neither do I however think she should be allowed to act jointly with Ching as she has suggested in her fallback position.  Given the bad blood between them, disagreements would be inevitable if I were to allow joint administration.  When the joint administrators are not able to cooperate in an administration, administration will be impeded.  Hence, I think it is undesirable to accede to her alternative proposal in allowing her to act together with Ching.

54.  Thus, I further reject May’s alternative proposal of appointing her and Ching to be the joint administrators.

F.2  Is Ching suitable?

55.  After having decided against appointing May, I think I am only left with an option of giving favourable consideration to Ching.  In some appropriate circumstances, a court may appoint an independent third party to act when it cannot find a suitable person with entitlement to act.  However, in this case, the parties are clearly against appointing a third party neutral to act due to costs concern. My consideration of Ching’s suitability will be restricted by the express wishes of the parties.

56.  Before endorsing Ching as a preferred candidate, I should perhaps briefly discuss about his suitability, hoping it would help Ching (should he be appointed) become more alive to some fundamental duty of an administrator.

57.  May has given two reasons against the appointment of Ching to act as an administrator, namely, Ching’s bad health and his lack of a permanent home in Hong Kong as a result of his immigration to Australia.

58.  I have considered the evidence regarding Ching’s ill health, but am unable to find any medical evidence suggesting that Ching is physically unfit to perform the duty of an administrator.  The fact that he has the support of three of the siblings shows that Ching is likely to be physically fit to take up the task of administration.

59.  What however concerns me is that Ching – due to his lack of a permanent home in Hong Kong – may have also put himself in a position of conflict if his present occupation of the To Kwa Wan property, the property belonging to the estate, is rent-free and without his siblings’ consent.

60.  The To Kwa Wan property which Ching is currently living while he is in Hong Kong does not belong to him but to the estate. As he has indicated that he will remain in Hong Kong until the completion of the administration of the estate, there is a likelihood that he would remain there until the property is sold. Given the mistrust among some of the siblings, this may lead to further disputes.

61.  Thus my endorsement of Ching is not free from anxieties. I am however, as discussed above, left with no alternative after my effort to find another more suitable sibling is not successful when Kam – the sibling who hitherto has retained clear neutrality – has declined to be involved whatsoever with the administration. I of course cannot Kam compel to act.

62.  All in all, after having carefully weighed up the objections relating to both parties, I find on balance my discretion should be exercised in favour of choosing Ching to act.

63.  I however wish to sound a word of caution regarding my appointment of Ching. In the light of my observations above, Ching should be particularly vigilant when discharging his administrator’s duties so as not to place himself in a position of any actual or potential conflicts.

G.  ORDER

G.1 Appointment

64.  I grant orders in terms of paragraphs 2 and 3 of Ching’s summons, that is:

(1)  Upon filing of the requisite papers in his application for grant in HCAG 15551/11 and satisfactory answering of all requisitions of the Registrar, Ching (the Applicant) be granted letters of administration of the estate of the deceased.

(2)  May’s application for grant in HCAG15682/2011 is dismissed.

(3)  For the avoidance of doubt, the caveat Ching has entered shall cease to have effect.

G.2  Costs

65.  As for costs, I wish to give my provisional view that I will be inclined, for the reasons given below, to depart from the usual costs order of ordering May to pay for Ching’s costs though strictly speaking Ching can be regarded as a winner of this application:

(i)  Some of the evidence filed in support of the application is irrelevant,

(ii) The appointment of Ching is made after I have weighed up the evidence concerning the suitability of two quarreling siblings, both of whom I have expressed some reservations regarding their suability to act.

In the circumstances, I think it is fair that Ching’s costs should be paid out from the estate but not be borne by May.

(4)  A costs order nisi that Ching’s costs of the application including costs reserved, together with certificate for counsel, be paid out from the estate, to be taxed if not agreed.