XCHRX THE BANK OF NEW YORK v. ADRIENNE MARSH LEFKOWITZ

1991, No. P5

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H E A N D O T E

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Probate - administration 'pendent lite' - transfer of assets to U.S.A. - whether infringement of s. 42 and s. 40(2) of the Probate and Administration Ordinance.

1991, No. P5

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

PROBATE JURISDICTION

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IN THE ESTATE OF NICHOLAS V. MARSH DECEASED

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J U D G M E N T

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1. This is an application under s.36 of the Probate and Administration Ordinance or under the inherent jurisdiction of the Court to permit two administrators 'pendente lite' to transfer certain funds to the United States. Nicholas Marsh was a wealthy American citizen, domiciled in America, who made a will on 26th May 1983, a codicil was added on 2nd October 1986 and he died on 15th March 1988.

2. He bequeathed a life interest to his wife who subsequently died on 13th May 1990 and his three daughters had certain trusts created for them. The Defendant to this action is the second daughter who was a direct beneficiary of 30% of the estate. Mr. Marsh, as I have said, was domiciled in the United States and had assets there. He also had certain cash and stock in Hong Kong. It is not necessary for the purposes of this application to set out how all those assets were acquired, save to point out that the Defendant claims that money which went from the deceased to Mr. Li Ka Shing are held in trust for her. The Defendant had been appointed executrix in America, but as a result of a dispute there, she was removed from that position on 19th April 1990 and the Bank of New York were appointed permanent executor and trustee. By virtue of the dispute in the United States, an action P5 was commenced in Hong Kong by two attorneys from the bank who were appointed administrators 'pendente lite' by this Court on 12th May 1992. I should emphasize that the only 'lis' appears to be the American dispute. The validity of the will has not been and is not challenged. I am grateful to counsel's assistance in guiding me along a legal path where my feet seldom tread and if I have not fully appreciated some of the submissions made then the fault is mine.

3. A large number of affidavits had been filed which I have read, but from this mass of paper the issues in this application can be distilled. There is a substantial dispute between Adrienne Lefkowitz and the Bank of New York. She alleges that they have wasted the estate's assets in the administration in the United States, they are unfit to serve as a fiduciary, they are dishonest and hostile to her. These allegations are denied and she is said to be a trouble maker, highly litigious and bordering on the verge of becoming a vexatious litigant. In Hong Kong Action 4573 of 1993, the Defendant sues the administrators of the Bank of New York over money which went from her father to Mr. Li Ka Shing. This she says, approximately HK$12m, is held in trust for her. In MP1638 of 1992, the Defendant claims that the Bank of East Asia should be appointed administrators in place of those present and this action is for hearing in April 1994.

4. It is not surprising, therefore, that this current application has provoked much argument. The Defendant is suspicious of anything the Bank or the administrators seek to do and she is accused by them of trying to frustrate a sensible application. The American administration has had heavy expenses and the cash position does not appear to be liquid. The American administrators have paid out certain sums of money. In the affidavit of Mr. Gordon Oldham, senior partner of Messrs. Oldham Li & Nie, solicitors for the Bank of New York, there is set out at pages 110 and 111 certain matters in respect of monies which have either gone from the United States to Hong Kong or for which the American adminsitrators are liable. For example, at paragraph 5, he says "In respect of the US/New York Estate Tax, it has been reduced by some US$5.15m. In respect of New York/US Income Tax it has been reduced by a total of US$1.789m. Accordingly, the New York Estate has been diminished to the sum of US6.9m in consequence of estate taxes and income taxes in the United States and New York". Para 6 "Furthermore, in order to meet the estate's Hong Kong liabilities for estate duty at a time when the Hong Kong Estate was not in funds, the New York Estate provided the Hong Kong Estate with the sum of HK$16.59m on or about 6th August 1992 for the purposes of settling the balance of the estate duty then due upon the estate."

5. By this application, there is sought to be transferred by the administrators either all of the assets of the deceased as marshalled by the administrators in Hong Kong to the Plaintiff, alternatively to transfer a lesser part of such assets as the Court may think fit, and in the application, this sum so sought was left unspecified.

6. Mr. Ching, Q.C. does not pursue the first matter, but asks the Court to sanction the transfer of some US$4.7m. It is clear from Exhibit GDO2 that the capital account shows approximately US$12.3m in Hong Kong. The action brought by the Defendant, 4573 of 1993, is for approximately HK$12m together with interest and costs. This has been assessed as being worth some US$2.5m. The Defendant as I have said, is also a direct beneficiary of 30% of the estate. I can, therefore, at first blush, see no prejudice to her if US$4.7m is transferred to United States. Such a course, the Hong Kong Administration being of a subsidiary nature, appears to be both reasonable and just for both parties. Mr. Barma, however, submits that I have no jurisdiction to grant this application. First, he says, it infringes section 42 of the Ordinance :

"Where administration has been granted in respect of any estate of a deceased person, no person shall have power to bring any action, or otherwise to act as executor of the deceased person in respect of the estate comprised in or affected by the grant, until the grant has been recalled or revoked."

The transfer is to be made by the Plaintiffs as Guarantee of Letters, Testamentary and Trusteeship, issued by the New York courts. He submits that their position is analogous to that of an ordinary executor. He says that the purpose for which the transfer is to be made is in order to enable the Plaintiff to carry out its role in America as executor, and therefore he goes on to submit that the purpose of the transfer is to enable the Plaintiff to act as executor of the Hong Kong Estate, a course which is expressly prohibited by section 42. With great respect to the able submissions he has put forward, I disagree. The Hong Kong action has been carried out by the two New York Bank officers. Debts have been paid and the assets, save for some private company assets, have been got in.

7. From what I have read in all the affidavits, this administration is independent of the American one. I do not consider the transfer of some US$4.7m enables the Plaintiff to act as the executor of the Hong Kong Estate. The Hong Kong Court has appointed the two officers who have carried out their duties under the control of the Hong Kong Court. The New York Bank has not been administering the Hong Kong assets. They will, however, be utilizing them, but that, in my judgment, on the facts of this case, does not infringe section 42.

8. Secondly, Mr. Barma submits that the Plaintiff is making a distribution to beneficiaries which is prohibited by section 40(2) of the Ordinance :

Section 40

"(1) Where any legal proceedings touching the validity of the will of a deceased person, or for obtaining, recalling, or revoking any grant are pending the court may, subject to section 25, appoint an administrator of the estate of the deceased.

(2) An administrator so appointed shall have all the rights and powers of a general administrator, other than the right of distributing the residue of the estate."

9. This is in reality a similar submission to the earlier one albeit cloaked in different words to accommodate the provisions of section 40(2). On the evidence submitted, this does not amount to a distribution of assets. A number of authorities have been cited. Some of these were reviewed in Re Weiss [1962] P 136 where Scarman J., as he then was, says this at page 144:

"I think that ordinarily an attorney administrator would be justified in paying over the balance to his foreign principal when he has paid the English debts, other debts of which he has notice and the expenses of his administration. Distribution to the beneficiaries, though it may in special circumstances become the duty of the attorney-administrator, is better left in most cases to the principal administrator in the country of the domicile of the deceased."

See also In re Achillopoulos [1928] Ch. 433 and In re Manihold decd. [1962] Ch. 1.

10. I am satisfied that on these authorities were this administration complete, then sums of money may be transferred, but this administration is still 'pendente lite'. As I have said earlier, the 'lis' does not affect the validity of the will, but any transfer must not usurp the function of administration in Hong Kong. The reasons for this transfer, in my judgment, appear both reasonable and sensible, but the position of Miss Lefkowitz must not be prejudiced. It is not necessary for me to evaluate the many complaints that she makes against the bank. She has set them out with clarity in her affidavits but it is not appropriate for me to go into those in any great detail. Although she does appear to be litigious, she is entitled to have her position safeguarded. On the facts I have set out, sufficient sums are retained here to prevent any prejudice to her, both in her action in respect of the Li Ka Shing monies and any subsequent distribution to her as a direct beneficiary of the Hong Kong assets.

11. Mr. Barma's final point is that this application is premature as MP1638 is to be tried in April 1994. The bulk of the administration is complete. The Bank of East Asia may not wish to take up their appointment, but assuming that they do and assuming that the Court revokes the current appointment, the position of the Bank of East Asia with a sum transferred will not hinder nor adversely affect their duty. I have considered all the factors here and although the application is unusual, on the particular facts as disclosed in the affidavits, I exercise my discretion in permitting the transfer of US$4.7m to the American administrators.