CHOY PO CHUN AND ANOTHER v. AU WING LUN

HCAP 7/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO. 7 OF 2010

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D E C I S I O N

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BACKGROUND

1.  There are two wills in respect of the estate of the Deceased – one was purportedly executed in 2002, and another in 2008.  The Plaintiffs are two of the executors appointed in the 2002 will, and the Defendant, one of the executors in the 2008 will.

2.  The Plaintiffs have brought the present probate claim to propound the 2002 will, and at the same time a caveat has been entered against the sealing of a grant in respect of the Deceased’s estate.  The Defendant has also brought a separate probate claim to propound the 2008 will.

3.  The Plaintiffs issued the present summons under Order 76 r.14 of the Rules of High Court and S.40 of the Probate and Administration Ordinance Cap.10 (“PAO”) for the appointment of an administrator pendent lite (“administrator PL”) or administrator pending determination of the probate claims.

4.  Both parties agree that an administrator PL should be appointed.  The only issue between them is who should be appointed.

PROPOSED ADMINISTRATOR PL

5.  In the summons, the Plaintiffs ask the Court to appoint Hang Seng (Trustee) Limited (“HS Trustee”) or other suitable person(s) to be the administrator PL.

6.  Apart from HS Trustee, the Plaintiffs have further proposed accountants from three accountant firms.  They are Miss Chan Wai Hing and Mr. Morrison of Messers. Mazars, Mr. Yuen of UHY Vocation HK CPA Limited, Mr. Eric Ng of Messrs. C.Y. Ng & Co, all of whom are certified public accountants.

7.  The Defendant, however, objects to all the candidates the Plaintiffs proposed. 

8.  In relation to HS Trustee, it is contended that there would be a conflict of interest because its connected company, Hang Seng Bank has allegedly been involved with the disputes of the Deceased’s estate by “unlawfully clearing void cheques and paid into said bank accounts maintained with it by my father (i.e. the Deceased) prior to his death”[1] (words in bracket inserted).  Further, the Defendant submitted that since his mother (the Deceased’s surviving widow) has been the said bank’s long-standing customer, it has allegedly taken side with his mother by refusing to provide information relating to the Deceased’s accounts. The Defendant therefore has doubt on HS Trustee’s neutrality should it be appointed to handle the Deceased’s estate.

9.  In respect to the other proposed administrators PL, the Defendant’s only objection is that they are accountants of relatively smaller firms and are not suitable to deal with such a substantial estate such as the Deceased’s. He submitted that accountants from the city’s top firm should be chosen instead.

10.  The Defendant counter-proposes Mr. Peter Wong and Mr. Alan Tang of Grant Thornton to be appointed.

11.  The Plaintiffs however object to the appointment of the Defendant’s proposed administrators PL because they said that the proposed administrators PL have not provided (as their own proposed candidates have) a cap on the costs of the interim administration.

DISCUSSION

12.  The court will only appoint an administrator PL if it is satisfied that such appointment is expedient in the circumstances.  When rival candidates are proposed, the court will choose.  Often an accountant unconnected with the probate claim may be more suitable.[2]

13.  With these principles in mind, I would consider the choices that have been put forward by the parties.

14.  The size of the Deceased’s estate – which comprises a large numbers of blue-chip stocks (with a value of about HK$500 million, yielding an annual dividends of about $23 million) and over 20 landed properties (about $200 million), most of which are rented out with a monthly rental income of about $500,000) – can be described as substantial. Since the death of the Deceased in July 2009, a number of rent-related actions in relation to the Deceased’s properties have been commenced and are still active in the District Court as a result of the disputes over the Defendant’s  entitlement to collect rent payments from the tenants.

15.  The pending probate actions mean that the Plaintiffs and the Defendant, being respective executors appointed by the two disputed wills, would not cooperate in the administration of the Deceased’s assets. The ongoing disputes would adversely harm the interests of the beneficiaries, and such harm is already evident by the litigations in the District Court.

16.  The facts of this case, in my view, undoubtedly justify the necessity and expediency for the appointment of an administrator to deal with the Deceased’s estate, especially in respect of rental matters.

17.  Concerning the proposed candidates, I note that apart from HS Trustee, all the candidates – be they from a bigger firm (such as Grant Thornton) or a smaller one (such as CY Ng & Co)- are accountants with little experience (at least from the papers that are placed before me) in estate administration.  Their experiences and areas of practice seem to be mainly in corporate restructure and insolvency.

18.  HS Trustee is the only corporation candidate specializing in trust matters.   Although the Plaintiffs have not provided its qualifications and experiences, HS Trustee enjoys a good reputation in Hong Kong, and is known to have experiences in trust matters and estate administration.  In view of the substantial size of the estate, I think HS Trustee should be in a much better financial position to give security (if required) than any of the proposed accountants.  Further, if HS Trustee is a trust corporation, there is a slim chance that security would be required. Hence, a further factor in its favour.

19.  In preferring HS Trustee to other candidates, I have taken into account the allegations by the Defendant about its alleged lack of neutrality.  However, I find that the basis of attack is unfounded.  The activities Heng Sang Bank has allegedly engaged are unconnected with estate administration. Even if they were, I do not think such alleged activities by Heng Sang Bank would have any effect on the neutrality of the HS Trustee.

20.  Further, an administrator PL when appointed is in the same position as a general administrator, both of whom owe to the beneficiaries a number of fiduciary duties such as a duty to act in good faith and for the interests of the beneficiaries.

21.  Furthermore, as the chance of HS Trustee being required to provide security is low, it should be able to obtain a grant more speedily than the other proposed candidates -whom would likely be required to provide security.

22.  In the circumstances, I am inclined to think, on balance, HS Trustee will be a more suitable candidate.

PROCEDURAL REQUIREMENTS

23.  In England, when an application is made for the appointment of an administrator PL, the applicant – apart from filing an affidavit in support by setting out the name of a proposed administrator, his qualifications, and the value of the estate to be administered – is also required to furnish with the court the following documents:

(i)        An affidavit of fitness of the proposed administrator by some disinterested person, and

(ii)       The consent to act[3].

24.  We do not yet have the corresponding rules in Hong Kong.  I am of the view that these documents are essential before an appointment should be made.  I also think that the said English practice should  be applied to our practice here by the operation of S. 72(2), PAO[4]. Thus, in an application for an appointment for an administrator PL, an applicant will be required to furnish to the court documents in paragraph 23 above.

25.  In view of its specialized practice and the reputation HS Trustee enjoys, I am inclined to waive the requirement of filing of an affidavit of fitness in this case.

SCOPE OF POWERS

26.  Both parties agree that the administrator PL should have the powers of a general administrator.  I however observe that in the Plaintiffs’ affidavit in support (at paragraph 32 of the Affidavit of Choy Po Chun), it is deposed that the administrator PL is only “for collecting and receiving the rents of all landed properties of the Deceased”.

27.   In the circumstances, I am slightly uncomfortable to entrust the administrator PL with general power, but inclined to think that its power should be limited to the collection and receiving of rents.

28.  Since my view runs contrary to the shared views of both parties, I would receive further submissions before deciding on the scope of its power.

ORDER AND DIRECTIONS

(A)  ORDER

29.  Before the HS Trustee is to be appointed to act as the administrator PL, I require the Plaintiffs to file and serve the following documents within 7 days of the handing down of this judgment:

(i) A confirmation that whether HS Trustee is a trust corporation. If yes, a certificate under S.78 Trustee Ordinance (Cap.29) is to be furnished, and

(ii) The consent to act[5].

(B)  DIRECTIONS

30.  Before deciding on whether general or limited power is to be given to the administrator PL, I direct parties to make further submissions.  I have originally fixed a hearing to be held on the same day of the handing down of the judgment (6 May 2010) for consequential directions (if necessary).  As the Plaintiffs are now required to furnish further documents, I do not think it is practicable to hold the hearing on that day.  Such hearing should be held after the required documents are filed.  Hence, I vacant the hearing on 6 May, and direct the parties to fix a hearing (with 1 hour reserved) on the earliest possible date, but not before the lapse of 7 days.

31.  In the directions hearing, I would also deal with ancillary matters relating to the filing of accounts by and remuneration of the administrator PL as well as the costs of this application.

32.  Parties are to lodge and serve written submissions in respect of the matters above at least 3 days before the adjourned directions hearing.

[1] Affirmation of Au Wing Lun filed on 29 April 2010, para. 24.

[2]    See Williams, Mortimer & Sunnuck, “ Executors, Administrators and Probate” (19^th ed.), 24-51 and 24-52.

[3]    See Williams, Mortimer & Sunnuck (supra) at para.24-54. and D’Costa, Winegarten & T. Synak, “Tristram and Coote's Probate Practice” (30^th ed.)  para. 38.01 at p.858.

[4]    S.72 (2), PAO, “ In all such business in respect of which no provision is made by probate rules and orders, the practice and procedure for the time being in force in the Probate Registry in England should be deemed to be in force in the court and the Registry.

[5]     See Williams, Mortimer & Sunnuck (supra) at para.24-54. and D’Costa, Winegarten & T. Synak, “Tristram and Coote's Probate Practice” (30^th ed.)  para. 38.01 at p.858.