LI YAT CHEUNG v. LEE YAT SUN, the executor of the estate of LEE KA CHUAN, the Deceased

HCMP 25/2019

[2021] HKCFI 178

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 25 OF 2019

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J U D G M E N T

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A.    INTRODUCTION

1.  This is the determination of the plaintiff’s application made by way of an originating summons dated 8 January 2019 (“OS”) for, inter alia, (1) an order that the defendant, as executor of the Estate, do furnish a true and perfect inventory and account of the Estate; and (2) an order that the defendant be removed as executor of the Estate and replaced with the plaintiff.

2.  By the order of Deputy High Court Judge Leung dated 4 July 2019, the following directions were given:

(1)  The case be adjourned for substantive argument including in particular whether the oral agreement alleged by the defendant, assuming that it existed as a matter of fact, affords the defendant an arguable defence to the plaintiff’s claim on a date to be fixed with 3 hours reserved;

(2)  Depending on the answer of the aforesaid question, the court shall give appropriate order for the disposal of this action or alternatively directions for the further conduct of this action including the mode of trial; and

(3)  Costs be in the cause.

B.    BACKGROUND

3.  The relevant background underpinning the parties’ disputes is largely undisputed and can be summarised as follows:

(1)  The plaintiff and the defendant are brothers and sons of the Deceased with the defendant being the younger brother.

(2)  In or about 1985, the parties’ parents purchased Section C and Section RP of Lot 959 in DD 118 (the “Land”) and they moved into the same around the 1990’s.

(3)  A house was constructed on the Land wherein the parties’ parents lived in one section and the plaintiff and his family lived in the other.

(4)  The plaintiff and his family moved out of the Land sometime in the mid-90’s and the defendant and his family moved onto the Land sometime in 2012.  It is the plaintiff’s case that he consented to the same on the condition that the defendant and his family would move out when the plaintiff’s children got married.

(5)  Their mother, ie Madam Tsang Ying Tai passed away some time in 2006.

(6)  Shortly thereafter, the Deceased moved into an elderly home in early-2007 and the plaintiff took care of all expenses arising therefrom.

(7)  A few years later, the Deceased prepared a last will dated 19 July 2012, which was prepared by Messrs Paul W Tse (the “Will”).

(8)  The Deceased passed away on 26 January 2014 and unbeknownst to the plaintiff, the defendant obtained the grant of probate (the “Grant”) in respect of the Estate on 9 April 2015.

(9)  There has been no distribution of the Estate whatsoever, whether according to the Will or otherwise, despite the fact that the Deceased passed away in 2014 and the Grant was obtained in 2015.

(10)  As a result, by way of letter dated 18 October 2018, the plaintiff, through his previous solicitors, Messrs Ford, Kwan & Co, demanded the defendant to distribute the Deceased’s estate, including the Land.

(11)  In reply, the defendant on 30 October 2018through his then solicitors, Messrs K T Lo & Co, refused on the basis that in about 2012 the parties had entered into an oral agreement for the plaintiff to transfer his interest in the Land to the defendant at the consideration of HK$350,000, and that the plaintiff has “illegally” refused to perform the same.

(12)  In response, Messrs Ford, Kwan & Co, by way of a letter dated 6 November 2018 (the “6/11 Letter”), denied such allegations and demanded the defendant to distribute the assets of the Deceased after paying debts owed to the plaintiff including medical expenses/hospital fees in the sum of HK$204,388.  However, no response was forthcoming from the defendant.

(13)  As a last ditch effort, the plaintiff, by way of letter dated 19 December 2018,demanded the defendant to furnish estate accounts and to provide a proposal as to the distribution of the Deceased’s estate.  Again, the defendant did not respond to the same.

4.  The defendant’s case is that as a result of the oral agreement, the plaintiff is not entitled to seek accounts and inventory in respect of the Estate.

5.  Further, it is the defendant’s case that the sum of HK$350,000 paid to the plaintiff is related to the oral agreement by which the plaintiff allegedly agreed, sometime in 2012, to assign and/or give up his interest in the Land.

6.  In this regard, the defendant asserts that in 2012, there was the following common understanding: -

(1)  The defendant would first pay a sum of HK$100,000 to the plaintiff as a first instalment (and this was done in or about April 2012); and

(2)  Upon entering into the relevant written agreement/assignment, the defendant would pay the remaining sum of HK$250,000 as a second instalment.  This sum was in fact paid in January 2015 although no written agreement was signed.

7.  The plaintiff’s case on this issue is that the sum of HK$350,000 was payment as license fee/rental for the use of his portion of the Land.

C.    RELEVANT LEGAL PRINCIPLES

8.  The applicable legal principles in respect of the rendering of accounts by and removal of executors have been summarised by this court in Chu Kin Wing & Anor v Chu King Sang James [2018] HKCFI 1597 at §§10 to 17 as follows:

“10.  Section 33(3) of the Probate and Administration Ordinance, Cap 10 (the “Ordinance”) provides that: –

“The court may, if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require, suspend or remove an executor or administrator (other than the Official Administrator) and provide for the succession of another person in place of such executor or administrator and for the vesting in that other person of any property belonging to the estate.”

11.  Section 56 of the Ordinance provides that: –

“The personal representative of a deceased person shall, when lawfully required so to do, exhibit, by affidavit filed in the court, a true and perfect inventory and account of the movable and immovable property of the deceased, and the court shall have power as heretofore to require personal representatives to bring in inventories.”

12.  In Re Estate of Lee Da Kor [2010] 1 HKLRD 415, the plaintiff brought proceedings for an account and the removal of the executors and trustees of the estate of the plaintiff’s father (“Mr Lee”) of which the plaintiff was one of the beneficiaries.  Mr Lee passed away on 18 May 2004.  Pursuant to the deceased’s last will, the defendants were appointed as executors and trustees.  Probate was granted on 4 January 2007.  It was the plaintiff’s case that after Mr Lee’s death, he had repeatedly made inquiries with the executors and pressed for full and accurate account of the estate with inventory but to no avail.  The plaintiff therefore commenced the proceedings on 10 September 2007.

13.  In giving Judgment for the plaintiff, Jeremy Poon J (as he then was) summarized the applicable principles relating to the duty to keep accounts as follows (at paragraphs 17 and 18): –

(1)  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.  In order to provide a true and perfect account, the executor must provide details of the whereabouts of all properties (including cash) which he is bound to administer.

(2)  Further, under section 56 of the Ordinance, personal representatives are, when so ordered by the court, to exhibit on oath in the court a full inventory of the estate and render an account of the administration of the estate to the court.  Correspondingly, the court may under O 85, r 2(3) order executors to furnish and verify accounts.

14.  On the evidence of that case, even though the executors had already provided the plaintiff with all the bank statements, ledgers and receipts, the executors had failed to explain the discrepancies in relation to the significant drop in the deceased’s assets and discrepancies in the relevant bank accounts.  As the executors ought to have given explanation together with the supporting documents and they had failed to do so, they had not discharged their duty to render a proper account.

15.  His Lordship ordered the executors be removed for two principal reasons (at paragraph 37): -

(1)  They had failed to render a full and proper account despite repeated requests from the plaintiff.  The documents that they had provided were insufficient.  It seemed to be that they had more or less adopted the attitude: “Here are the documents.  You sort it out yourself.”  That is plainly wrong;

(2)  They had been unjustifiably dilatory in distributing the monies to the plaintiff.  At the latest, they should have distributed the monies to the plaintiff within a reasonable time after January 2007; and

(3)  They were also ordered to be personally liable for the costs of the plaintiff’s claim.

16.  In Re Chan Kan Ying, HCMP 888/2013 (Judgment dated 19/07/2017), B Chu J held, inter alia, that there has been substantial delay on the part of the defendant in administering the estate and such delay is unjustifiable and that the account provided by the defendant is not complete and the 1^st defendant be removed as administrator of the estate.

17.  Her Ladyship further stated at paragraphs 81 and 82 that it is the duty of administrators to keep clean, clear and accurate account and to be always ready to render such account when called upon to do so, and to discharge the duty to account properly, there must be production of the relevant supporting documents and receipts, as well as proper breakdown of items.  Further, it is essential for the account to show at least the opening capital assets, details of the movements of capital assets, the present capital assets, details of income earned, and details of expenditure.”  (Emphasis added)

9.  Persons who have interest in the estate may be entitled to estate accounts.  As to the nature of this interest, a mere appearance of interest will suffice.  Even a probable or contingent interest is sufficient.  In fact, even a creditor whose debt is contested is entitled to seek the rendering of accounts, see: Williams, Mortimer & Sunnucks on Executors, Administrators & Probate (21^st ed) at §42-22.

10.  It is also trite that every beneficiary is entitled to see the trust accounts, notwithstanding that his or her interest is not in possession (see: Armitage v Nurse & Ors [1998] Ch 241 at 261G; Royal National Lifeboat Institution and others v John Hedley [2016] EWHC 1948 (Ch) at §§10-14) .

D.    DISCUSSION

11.  The defendant’s case is predicated upon an allegation that there was indeed an oral agreement between the plaintiff and the defendant for the plaintiff to transfer his interest in the Land to the defendant. 

12.  However, as correctly submitted by the plaintiff, even taking the defendant’s case to the highest, it does not absolve the defendant of his obligation to provide estate accounts and inventory.

13.  While there is no dispute that the plaintiff is one of the beneficiaries of the Deceased’s estate, it seems that the defendant’s case is that the existence of the oral agreement disentitles the plaintiff from asking or seeking accounts regarding the estate.  I agree with the plaintiff that this argument does not give rise to any defence to the plaintiff’s claim herein for the following reasons.

14.  First, the plaintiff is not asserting any proprietary right over the Land or against the defendant personally.  The plaintiff is merely exerting his right against the defendant as the executor of the Estate in the capacity of a residuary beneficiary of the Estate.  It is indeed not disputed by the defendant that the plaintiff and the defendant are the residuary devisees under the Will (see: paragraph 13 of the defendant’s Skeleton Submissions).

15.  It is trite that the only right a residuary beneficiary has vis-à-vis an estate is a composite right to have the estate properly administered and to receive his entitlement of the residuary. A beneficiary does not actually have any actual interest in the assets of the estate (see: Williams, Mortimer & Sunnucks on Executors, Administrators & Probate (21^st ed) at §35-05).

16.  As part of such right, the plaintiff is entitled to seek accounts relating to the Estate to ensure that the Estate is properly administered and take appropriate action if necessary. 

17.  While the oral agreement may eventually disentitle the plaintiff from ownership of the Land, this does not avail the defendant of his obligation, as executor, to render accounts when requested.

18.  More importantly, while the plaintiff believes that the Estate is mainly comprised of the Land, until proper accounts and inventory is rendered, it will be impossible for the plaintiff to properly ascertain the extent of the Estate and to determine whether indeed the Deceased only had the Land.

19.  Therefore, I agree the defendant’s defence of an oral agreement in respect of the Land is irrelevant to the plaintiff’s claim herein. 

20.  In fact, if the defendant wishes to do so, he may institute separate proceedings to seek redress from the plaintiff regarding the oral agreement if the same actually exists.  However, in the context of these proceedings, the allegation of an oral agreement has no bearing to the plaintiff’s claim under the OS.

21.  Further, even on the assumption that the oral agreement somehow extinguishes the plaintiff’s right for accounts as a beneficiary of the Estate, the plaintiff can still assert his right for accounts on the basis that there are certain monies owed to the plaintiff by the Estate (see: the 6/11 Letter and paragraph 9 above).

22.  As a result, not only is the plaintiff a beneficiary of the Estate, but he is also a creditor which also entitles him to seek accounts thereof even when his claim is in doubt.

23.  Thus, the plaintiff is entitled to accounts in any event and the defendant should be ordered to render the same.

24.  In the premises, as submitted by the plaintiff, it is not necessary to go further to discuss the plaintiff’s argument that the alleged oral agreement is in any event invalid or void as a matter of law.

25.  Further, in light of the fact that the defendant has failed to provide accounts despite repeated reminders and opportunities, he should be removed as the executor of the Estate, as the defendant had clearly failed to discharge his duties as the executor of the Estate (see: the principles set out at paragraph 8 above).

E.    CONCLUSION AND DISPOSITION

26.  For the reasons stated above, I am of the view that the defendant should be removed as the executor of the Estate of the Deceased.

27.  According, I grant the following relief as sought by the plaintiff:

(1)  An order that the defendant be removed as the executor of the Estate and the plaintiff be appointed as executor in place of the defendant pursuant to section 33(3) of the Probate & Administration Ordinance, Cap 10; and

(2)  An order that the defendant do render to the plaintiff a true and perfect inventory and account of the Estate, and the defendant shall produce the same by way of an affidavit/affirmation within 28 days from the date of this order.

28.  Further, I order that the costs of these proceedings including all costs reserved be borne by the defendant personally.

29.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

30.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.