LEE GOO LYNETTE SIU YIN AND OTHERS v. CHEUNG WAI MING DAISY in her capacity as executor of the estate of LI SING KUI AND OTHERS

HCMP 1836/2017

[2019] HKCFI 1086

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1836 OF 2017

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J U D G M E N T

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Introduction

1.  The plaintiffs (collectively “Ps”) are beneficiaries of the estate of Li Sing Kui (“Deceased”) who died some 63 years ago but up until the present, his estate has not yet been finally distributed and/or wound up.  Ps issued the originating summons herein in August 2017 under Order 85 of the Rules of the High Court and seeking, amongst other things, (i) an order to remove the executrix of the Deceased’s estate (“Estate”), namely the 1^st defendant, and for an independent professional administrator to be appointed in her place; (ii) an order for the sale of the family property on 15 Robinson Road (“Family Property”); (iii) an order for the executrix to give a full inventory and account of the Estate.

2.  At the heart of the dispute is the Family Property where the Deceased and his family members had resided, some of whom are still residing therein.  The Family Property was built in 1936 and the market value was assessed by  Access Partner Consultancy & Appraisals (“Access Partner”) in a report dated 20 April 2018[1] to be at HK$440,000,000 as at 15 November 2017 (“Valuation Report”).  In paragraph 2 of the originating summons, Ps have sought an order for the sale of the Family Property subject to the terms stated therein (“Order for Sale”).

3.  The removal application was opposed by the executrix and all the other defendants.  The application for the Order for Sale was opposed by the 2^nd and 3^rd defendants, who have alleged that there was a family arrangement among the 5 sons of the Deceased that so long as one of them should be living and residing in the Family Property, the Family Property would not be sold (“Family Arrangement”), and that the executrix is estopped from selling the Family Property during the 2^nd defendant’s lifetime while he remains residing therein (“Promissory Estoppel”).  As for the executrix, her position is said to be neutral.

4.  In relation to the inventory and account of the Estate, the position of the executrix was that proper estate accounts (“Estate Accounts”) had already been provided.

5.  Mr Anson Wong SC and Mr Justin Lam appeared for Ps at the hearing, Mr Douglas Lam SC and Ms Jacqueline Law appeared for the 1^st and 4^th to 7^th defendants.  Mr Andrew Liao SC, Mr Kenneth CK Chow, Ms Grace Tam and Mr William Tse appeared for the 2^nd and 3^rd defendants.

Ps’ application for Order for Sale

6.  At a directions hearing on 27 March 2018, which was attended by Counsel Mr Justin Lam for Ps, Ms Jacqueline Law for 1^st and 4^th to 7^th defendants, and Ms Grace Tam for the 2^nd and 3^rd defendants, Ms Tam had initially sought a direction to have the originating summons to continue as if begun by writ, but both Mr Lam and Ms Law felt it was unnecessary.  Ms Tam pointed out that there was a substantial issue on dispute on facts in relation to the Order for Sale sought in paragraph 2 of the originating summons, due to the allegation of the Family Arrangement/Promissory Estoppel. 

7.  However, the claims by the 2^nd and 3^rd defendants should not affect orders sought by Ps in the other paragraphs of the originating summons.  This Court had made a preliminary observation that the claims by the 2^nd and 3^rd defendants should be by way of a separate action against the Estate.  This Court further indicated that as it would only be the executor who could sell the Family Property, the removal application would have to be dealt with first before the application for the Order for Sale. 

8.  Although Ms Tam was invited by this Court at the hearing on 27 March 2018 to propose directions in relation to Ps’ application for the Order for Sale, she decided not to press on with the issue.

9.  Subsequently, directions, which were unopposed, were then given for the originating summons, and, amongst other things, the substantive hearing was directed to be on affidavit evidence only and to be held in chambers not open to public pursuant to Schedule 2 of practice direction 25.1. 

10.  On the 2^nd day of the substantive hearing, Leading Counsel for all parties agreed to only make submissions on the procedural issues in relation to Ps’ application for the Order for Sale in light of the Family Arrangement/Promissory Estoppel raised by the 2^nd and 3^rd defendants. 

11.  Mr Wong had submitted that under RHC Order 85 rules 2(3)(c) and rule 6, the court has jurisdiction to make an order to direct an executor, administrator or trustee to do or abstain from doing a particular act in his capacity as executor, administrator or trustee and Mr Wong had referred the Court to Ip Cheung- Kwok v Sin Hau Bank Trustee Ltd [1990] 1 HKLR 497, and Chan Yu Hong v Chan Kam Hong, unrep, HCMP 888/2013, 19 July 2017.

12.  Order 85 rule 2 states as follows:

“(1) An action may be brought for the determination of any question or for any relief which could be determined or granted, as the case may be, in an administration action and a claim need not be made in the action for the administration or execution under the direction of the Court of the estate or trust in connection with which the question arises or the relief is sought.

(2) Without prejudice to the generality of paragraph (1), an action may be brought for the determination of any of the following questions—

(a) any question arising in the administration of the estate of a deceased person or in the execution of a trust;

(b) any question as to the composition of any class of persons having a claim against the estate of a deceased person or a beneficial interest in the estate of such a person or in any property subject to a trust;

(c) any question as to the rights or interests of a person claiming to be a creditor of the estate of a deceased person or to be entitled under a will or on the intestacy of a deceased person or to be beneficially entitled under a trust.

(3) Without prejudice to the generality of paragraph (1), an action may be brought for any of the following reliefs—

(a) an order requiring an executor, administrator or trustee to furnish and, if necessary, verify accounts;

(b) an order requiring the payment into court of money held by a person in his capacity as executor, administrator or trustee;

(c) an order directing a person to do or abstain from doing a particular act in his capacity as executor, administrator or trustee;

(d) an order approving any sale, purchase, compromise or other transaction by a person in his capacity as executor, administrator or trustee;

(e) an order directing any act to be done in the administration of the estate of a deceased person or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed, as the case may be, under the direction of the Court.”

13.  Order 85 rule 6 then states as follows:

“Where in an administration action an order is made for the sale of any property vested in executors, administrators or trustees, those executors, administrators or trustees, as the case may be, shall have the conduct of the sale unless the Court otherwise directs.”

14.  I accept Mr Wong’s submissions that this Court has power to direct the executor/administrator/trustee to sell a property belonging to a deceased’s estate under Order 85 rule 2 and further the Court has power to direct how the sale is to be effected.  For example, if the property is subject to encumbrances, the court may give directions as to whether the property is to be sold free of encumbrances or subject to the existing encumbrances.  If there are occupiers in the property, then the court may have to give directions as to whether the property is to be sold with or without vacant possession.

15.  In the present proceedings, what Ps are seeking in relation to the Order for Sale is that the Family Property be sold subject to 5 terms, one of which is that the “independent administrator obtains vacant possession”.  In short, Ps are seeking that the Family Property be sold with vacant possession.

16.  There are in fact other “material encumbrances” to the title of the Family Property referred to in the Valuation Report[2] and as seen in the search record in the Land Registry.

17.  Whether eventually this Court is to direct the present executrix or the independent professional administrator to sell, if such an order for sale is directed to be with vacant possession, the executrix/administrator can only proceed to sell after she/he has obtained vacant possession of the entire Family Property.  If any occupier refuses to deliver up vacant possession, this would mean that the executrix/administrator may have to issue proceedings on behalf of the Estate against the occupier/s of the Family Property to seek vacant possession before any sale can take place.  As indicated in the directions hearing, it would in fact be open to the 2^nd and 3^rd defendants to issue a separate action restraining the Estate to sell on the basis of the alleged Family Arrangement/Promissory Estoppel.

18.  Alternatively, as the Court had also pointed out at the substantive hearing, the sale could also be subject to present occupation, but this would obviously affect the sale price.  

19.  In any event, as indicated by this Court at the hearing, a decision will have to be made first on whether the present executrix should be removed before the Court hears Ps’ application for the Order for Sale.  As seen later in this judgment, and for the reasons stated in this judgment, it is this Court’s decision that an independent professional executor should be appointed for the Estate in place of the current executrix.  In light of this Court’s decision on the removal application, Ps’ application for the Order for Sale will be adjourned sine die with liberty to restore after the appointment of the new administrator.

The Deceased’s family

20.  The Deceased died in Hong Kong on 28 August 1955 at the age of 76.  He was said to be a top businessman and a philanthropist in Hong Kong during the early 1920s to 1930s.  The Deceased founded the Hong Nin Savings Bank in 1921 and amongst other things, he was also a shareholder of the Bank of Canton.  He was also said to be one of the financiers to the Chinese Revolution led by Dr Sun Yat-sen.  

21.  After his first wife died, the Deceased had a “Tin Fong” wife or a second wife Li Leung Shi (“Madam Leung”), and a number of concubines including Li Cheung Shi (“Madam Cheung”) and Li Chau Shi (“Madam Chau”). 

22.  After the death of the Deceased, Madam Leung continued to reside in the Family Property until her death in 1972.  Madam Cheung moved to Canada sometime after the Deceased’s death, to live with her children and grand-children until her death in 1989.  Madam Chau continued to reside in the Family Property until her death on 25 September 2002. 

23.  The Deceased left 5 sons and 15 daughters at the time of his death.  Madam Cheung was the mother of Deceased’s eldest son, Francis.  Madam Leung was the mother of the Deceased’s 2^nd son James. Madam Chau was the mother of the Deceased’s 3 other sons.

24.  The Deceased’s 5 sons, in order of their respective ages, were:

(i)  Li Pak Iu (“Francis”), who died on 20 June 1992 aged 81

(ii)  Li Pak Tat (“James”), who died in October 1987 aged 62

(iii)  Li Pak Leung (“Bernard”), who died on 6 December 2014 aged 83

(iv)  Li Pak Wing (also known as Li Sze) (“Pak Wing”), who died in 2016 aged 83

(v)  Li Pak Huen (“Pak Huen”), the 3^rd defendant in these proceedings

25.  Pak Huen is now the only surviving son of the Deceased.  He was born in November 1938 and is now 80 years old.  He has been residing in the Family Property since he was born and he has remained residing there.

26.  James married the 1^st plaintiff herein (“Lynette”) in 1954.  After marriage, they were residing in the Family Property and after James died, Lynette has continued to reside in the Family Property but since early 2001 she has been dividing her time between Hong Kong and the United States and she now spends most of her time with her family in Los Angeles.  Lynette is now 89 years old.  She is the executrix of James’ estate and according to a table set out by her[3], she and her two children are beneficiaries of the Estate through James’ will, each entitled to 1/18 share of the Deceased’s residuary estate (“Residuary Estate”).  Lynette is a plaintiff herein in her personal capacity, as a beneficiary of the Residuary Estate.

27.  Francis married Madam Wan Yee Miu.  They had two children, namely Michael Lee (“Michael”) and Colleen Lee (“Colleen”), who are respectively the 2^nd and 3^rd plaintiff herein. Madam Wan died in 2002.     Michael and Colleen are both said to be beneficiaries of the Residuary Estate through Francis’ will and through Madam Wan’s will.  Michael also is the executor of Francis’ estate through chain of representation of being executor of Madam Wan’s will, although in the present proceedings, Michael is a plaintiff in his personal capacity as a beneficiary of the Residuary Estate.

28.  Bernard married the 1^st defendant herein (“Daisy”) in 1962.  They had 4 children who are the 4^th, 5^th 6^th and 7^th defendants herein, and I shall refer to them respectively as D4, D5, D6 and D7, and they are each entitled to 1/30 share of the Residuary Estate through Bernard’s will.  Daisy is being named as a defendant in her capacity as executrix of the Estate, and not in her capacity as beneficiary of the Residuary Estate.

29.  Pak Wing was said to be very close to Pak Huen and Pak Huen was the sole beneficiary to Pak Wing’s estate.  Pak Huen is entitled to 1/6 share in the Residuary Estate through Pak Wing’s will and 1/6 share directly through the Deceased’s will, totalling 1/3 of the Residuary Estate.

The Deceased’s will and chain of representation

30.  The Deceased executed a will on 15 December 1954 (“Will”). 

31.  The Will contained, amongst other things, the following terms:

(1)  By Clause 1, Francis, Bernard, Madam Chau were appointed as executors and trustees of the Will;

(2)  By Clause 3, the Deceased gave pecuniary legacies to six of his daughters and three of his sons;

(3)  By Clause 4, the Deceased provided lifetime annuities for his wife, Madam Leung and two concubines, Madam Cheung and Madam Chau;

(4)  By Clause 5(1), the Deceased provided for the trustees of the Estate (“Trustees”) to deal with his Residuary Estate as follows:

“(i)  To sell call in and convert the same into money with power in their absolute discretion to postpone such sale calling in and conversion and after payment thereout of my debts funeral and testamentary expenses, legacies and annuities to invest the residue of such moneys in manner hereinafter authorised and to stand possessed of such investments and of all parts of my estate for the time being unsold [ Residuary Estate] during the joint lives of [Madam Leung, Madam Cheung and Madam Chau] and the life of the survivor of them upon the following trusts…”

(ii)  To keep and maintain a family house at No 15 Robinson Road Victoria Hong Kong for the habitation of Madam Leung, Madam Cheung and Madam Chau during their respective lives (Clause 5(1)(a));

(iii)  For the support, maintenance and education of each of the Deceased’s unmarried daughters until the age of 28 or until marriage, whichever is the earlier (Clause 5(1)(b));

(iv)  For the support, maintenance and education of each of the Deceased’s unmarried sons until the age of 28, and if the Trustees think advisable, to continue to pay for the educational expenses of any of the said sons until the age of 30 (Clause 5(1)(c)).

(v)  By Clause 5(2), the Residuary Estate is divided into six equal shares to be held on trust by the Trustees absolutely, one share for each of the Deceased’s five sons absolutely and one share is appropriated for “Ching Sheung” (蒸嘗) for the purpose of ancestral worship (“Ancestral Worship”) subject to a proviso therein.

32.  Probate of the Will was granted to Madam Chau and Francis on 19 June 1956 with power reserved to Bernard.  Double probate was later granted to all the three executors appointed in the Will on 22 May 1957.

33.  After Francis’ death in 1992, Madam Chau and Bernard became the surviving executors.  After Madam Chau’s death in 2002, Bernard became the sole surviving executor.

34.  After Bernard’s death, Daisy, being the sole executrix appointed in Bernard’s will, was granted probate of Bernard’s estate on 16 November 2016 (“Probate”).  It was not disputed that Daisy became the executrix of the Estate when she obtained the grant of the Probate, by virtue of a ‘chain or representation’ under section 34 of the Probate and Administration Ordinance, Cap 10 (“PAO”).  

General legal principles on removal of an executor or administrator

35.  In respect of the removal of an executor or administrator, Section 33(3) of the Probate and Administration Ordinance (“PAO”) 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.”

36.  As summarised by Chow J in Lam Mo Chu Susie v Lam Sik Ying Victor (unrep, HCA 1974/2015, 4 September 2017) at paragraph 14:

(1)  When deciding whether to remove an administrator, the proper question to ask is whether the removal is necessary for the due and proper administration of the estate and whether it is in the interests of the beneficiaries for the administrator to be removed.

(2)  It is not necessary to establish specific wrongdoing, misconduct or fault on the part of an administrator before he can be removed, although obviously wrongdoing, misconduct or fault would be relevant considerations (emphasis added).

(3)  When deciding whether to exercise its power to remove an administrator, the court should also have regard to the size of the estate, the nature of the assets to be administered, and the background, education, training and experience of the remaining personal representatives (if any).

37.  There was no dispute to the above general principles.

Grounds for Ps’ application for removal of Dairy as executrix of the Estate

38.  The grounds set out in Ps’ skeleton submissions were as follows:

(i)  Daisy had been delaying and refusing to sell the Family Property, in clear conflict of interest by continuing to reside at the Family Property rent free and personally benefitting from the failure to sell the Family Property;

(ii)  There had been inordinate and inexplicable delay in the distribution of liquid assets of the Estate, including cash and listed securities;

(iii)  There were numerous unexplained accounting irregularities in the unverified and unverifiable accounting reports.

39.  At the hearing, Mr Wong had summarised Ps’ complaints to be under the following heads: -

(i)  Unjustifiable delay

(ii)  Failure to provide proper accounts of the Estate;

(iii)  Accounting irregularities;

(iv)  Conflict of interest;

(v)  Daisy’s qualifications/suitability to act as an executor

40.  I will first consider Ps’ complaints in (ii) and (iii) above in relation to the Estate Accounts, namely the inadequacy of the accounts and alleged accounting irregularities.

Inadequacy of the Estate Accounts and accounting irregularities

The law

41.  In respect of the executor’s duty to provide inventory and account of the assets of a deceased, section 56 of the PAO 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.”

42.  It is also stated in Re Estate of Lee Da Kor [2010] 1 HKLRD 415, at paragraph 17, that 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.

43.  Further, as explained in Chow Chak Kiu v Chow Man Chit (unrep, HCMP 797/2016, 17 January 2017), generally speaking, to render a proper account of the estate of a deceased person, the personal representative is required to: (i) show the opening balance (including capital assets) and closing balance; (ii) give details of movement of assets, incomes and expenditure of the estate; (iii) give details of the whereabouts of all properties (including cash) of the estate which the personal representative is duty bound to administer; and (iv) support the accounts with documentary evidence[4].

The format of the pre 2014 Estate Accounts

44.  Lynette had produced in her 1^st affirmation a copy of the Financial Statements of the Estate for the year ended 31 December 1994 prepared by a firm of professional accountants called Ho & Au Yeung which she had referred to as the last available Estate Accounts.

45.  It would later transpire that there had been Financial Statements of the Estate prepared by a firm of professional accountants called Ho & Chung CPA Limited between 2007 and 2011, and thereafter there were Financial Statements prepared by a firm of professional accountants called Qual-Mark CPA Limited (“Qual-Mark”).  The Financial Statements of the Estate for the year ended 31 December 2012 were only prepared by Qual-Mark a year later, on 31 December 2013, and the 2013 Financial Statements were prepared by Qual-Mark on 4 April 2014.

46.  The pre 2014 Estate Accounts were all prepared in the form of “Financial Statements” or “Balance Sheets”.

47.  Then there was a gap of some 3 years between 2014 -2016 when there appeared to be no Estate Accounts in any form prepared during those years.  Daisy herself had said in her 1^st affirmation that she had been advised that the format of those so called Estate Accounts by way of financial statements was not in line with the usual format of an estate account[5]. She had also said it would be in the interests of the Estate and the beneficiaries as a whole if she were to retain a better resourced and more capable firm of CPAs experienced in the preparation of estate accounts to replace Qual-Mark and she later engaged BDO Financial Services Limited (“BDO”) to prepare the Estate Accounts[6].

48.  Thus, even on Daisy’s own case, those Estate Accounts prior to 2014 were not in the proper format and were not proper estate accounts.

The BDO Estate Accounts

49.  BDO was engaged to prepare the Estate Accounts covering 4 periods, namely (i) the year of 2014, (ii) the year of 2015, (iii) for the period from 1 January 2016 to 15 November 2016 (the date of Probate), and (iv) from 16 November 2016 to 15 November 2017.

50.  The “Assets Schedule” of the 2017 Estate Accounts revealed   total gross assets of at least a sum of almost HK$518m and total net assets of at least about HK$517m.  In particular, there were 3 main categories of assets of the Estate, as follows[7]:

(i)  Property, Plant and Equipment – (a) the Family Property of HK$440m and (b) “Furniture” of HK$56,640;

(ii)  Investment Securities – (a) Shares in listed companies of a total of about HK$24m and (b) Shares in private companies of a total of at least HK$92,777;

(iii)  Cash and Bank Balances – (a) Cash at Hang Seng Bank of about HK$10m and (b) Cash at Bank of East Asia of about HK$44.5m;

51.  Ps’ complaints in relation to the BDO Estate Accounts were essentially as follows[8]:

(1)  The Estate Accounts were wholly inadequate:

(2)  There were clear accounting irregularities:

Inadequacy of the BDO Estate Accounts

52.  The inadequacies alleged consist of :

(1)  Each of the Estate Accounts prepared by BDO contained a fundamental caveat/disclaimer by BDO, that the veracity of the accounts were wholly dependent upon what Daisy was willing to provide to BDO;

(2)  There was failure to provide any documentary evidence in support of the statements in the Estate Accounts;

(3)  There was no breakdown any of the cash outflow items, or of the item of “Furniture”, and there was an unexplained item of “rental income” which appeared in the 2008 Estate Accounts.

53.  Regarding the complaint in (1), insofar as I can see, the authorities do not go so far as to say that there is a duty imposed on an executor/administrator that he/she has to instruct or engage an independent firm of accountants to prepare the estate accounts on an “assurance” basis, or that the estate accounts have to be audited. The duty to render an inventory and account is imposed on the executor/administrator personally.  In the case where an executor/administrator is personally capable of preparing the estate accounts there may not be any reason why a professional accountant has to be engaged, so long as the personal representative is able to set out the information set out in Chow Chak Kiu. In cases involving substantial assets, a personal representative is likely to employ a professional accountant to assist him/her to discharge his/her duty, but it does not mean that the estate accounts will necessarily have to be audited or to be prepared on an “assurance” basis.  I thus do not find Ps’ complaint in this regard justified.

54.  In fact, Daisy’s engagement letter of BDO had set out BDO’s responsibilities was to obtain and review the primary documents, including the relevant bank and securities accounts, statements etc. and the evidence showed that BDO did review the bank statements of the Estate and had raised an issue in relation to the whereabouts of some dividends.

55.  In (2) above, Ps complained that they had not been provided with copies of the primary supporting documents for the statements in the BDO Estate Accounts.

56.  Mr Lam pointed out that after the draft and finalised BDO Estate Accounts were circulated to Ps by Daisy in February 2018 and late April 2018, Ps had never requested Daisy to provide the primary supporting documentary evidence to “verify” the truth and accuracy of the Estate Accounts, nor did Lynette in her 4^th affidavit filed in June 2018 complain of the BDO Estate Accounts being inadequate because of lack of supporting documents.

57.  On the 1^st day of the hearing, the Court pointed out to Mr Wong that it was not clear what supporting documents Ps were seeking and over what period, since there was no mention of this in Lynette’s 4^th affidavit.  Ps were then invited to provide a list of supporting documents which they wished to seek.  In the afternoon of the 1^st day, Mr Wong produced a list to Mr Lam (“List of Documents”)[9].  Mr Lam indicated then and there that there was no objection from Daisy in relation to inspection all those documents and if necessary, copies of the documents in the List of Documents would be provided.  The matter was then left for the parties’ respective solicitors to resolve.

58.  Notwithstanding the above, when the hearing resumed about one month later, it would appear that the matter had still not been resolved and inspection of those requested documents had still not been provided by Daisy.  Daisy’s position appeared to be that her Leading Counsel’s non-objection to inspection was on the premises upon her continuation to be the executrix of the Estate, and further subject to the discretion and order of the court.  Daisy thus indicated that she was only prepared to consider Ps’ request for inspection of the documents upon confirmation that Ps would no long pursue the removal application[10].

59.  Pending this Court’s decision on the removal application, Daisy remains the executrix of the Estate, and is under a continuing duty to provide a proper inventory and account.  There was never any suggestion from Mr Lam on the 1^st day that inspection of the requested documents was on the condition that Ps would withdraw or would not pursue their application for removal order or that the inspection would have to be subject to formal order of the Court.  I therefore find Daisy’s subsequent attitude somewhat surprising.  Anyway, in light of Daisy’s attitude, the matter was still not resolved on the 2^nd day of the hearing.  However, it was not Daisy’s position that Ps were not entitled to those document or any of them, or that she was not obliged to provide them.

60.  Thus, Daisy had failed to provide proper Estate Accounts in that she had failed to provide the supporting documents in the List of Documents after indicating through counsel that she had no objection thereto.

61.  As for the breakdown of any cash outflow items, or the item of “Furniture”, or any suspicious item of “rental income”, these matters were not raised in Lynette’s 4^th affidavit.  The photographs/video of the Family Property showed there were various items of Chinese hard wood furniture and it was not clear what was the basis for the valuation of HK$56,640.  Ps have now asked for an inventory of the furniture in the List of Documents.  In any event, if Lynette wished to challenge any items in the Estate Accounts, she should raise them properly, and then, if there is no satisfactory response, it would be open for Lynette to consider whether to make a proper application for the same. 

Accounting irregularities

62.  The accounting irregularities complained of by Ps were as follows:

(i)  There was a missing account at the Bank of East Asia no 514-10-409787-1 in the 2017 Accounts even though this account appeared in the bank statements in Daisy’s 1^st Affirmation and was also included in BDO’s draft accounts for 2017;

(ii)  There were missing and dividend deposits, as noted by BDO, and that such dividends were in fact paid into Bernard’s personal account;

(iii)  there were significant sums of money in the bank accounts of the Estate which were not generating any income;

(iv)  Daisy was continuing to use bank account numbers 262-159239-001 and 262-159239 as the Estate’s accounts, despite being told by Hang Seng Bank that they could not be re-designated to the name of Daisy and operated normally.

(v)  There were unexplained missing bank statements set out in Note 4(ii) to the 2017 BDO Estate Accounts.

63.  Daisy had explained that after the grant of Probate, she had approached Bank of East Asia (BEA) and also Hang Seng Bank (HSB) to open bank accounts for the Estate in her capacity as the executrix of the Estate.

64.  Daisy had explained that the “Missing Account” was opened at the request of BEA as a “suspense account” to receive dividend income and pending the opening of the Estate’s bank account, and that the whole amount deposited into the said account would be transferred into the Estate’s bank account with BEA when opened.  As pointed out by Mr Lam, which I accept, there was no sufficient evidence at this stage of any mingling of Daisy’ assets with those belonging to the Estate.  Further, BDO in an email dated 21 November 2018 had confirmed what was said by Daisy after reviewing the bank statements covering the period from 19 May 2017 to 18 January 2018.  Although, Mr Wong said that the email from BDO raised more questions than answers, I accept Daisy’s and BDO’s explanation of the Missing Account.  

65.  As for the alleged missing share dividends, such had been credited into the personal accounts of Bernard instead of the Estate bank account.  This was prior to Daisy obtaining Probate, and Daisy had taken steps through her solicitors and Qual-Mark to rectify the issue. Although there was a delay of a few months in 2017 after Probate was granted, I accept that such delay was not inordinate, and there was no sufficient evidence that the Estate had suffered any loss in terms of these missing dividends.

66.  As to the registration of Estate’s listed shareholdings into Daisy’s personal name instead of as executrix of the Estate, Daisy had explained that this was the practice of Computershare, the Share Registrar of some of the listed companies and she had produced the correspondence between her solicitors with Computershare in October and November 2018 in support of her explanation.  There was no suggestion that the registration in the personal name of Daisy was done with any intention of misappropriation or disposal of the shares to the detriment of the beneficiaries, nor was there any such evidence, in particular when Daisy had already accounted for those shares from the very first day.

67.  As for whether the cash in the bank accounts could have generated income, Daisy had pointed out Ps had been making repeated demands for interim distributions and Daisy had at that time agreed to consider this and thus it would not be appropriate for her to proactively invest the funds in alternative investments in the meantime.  This is in any event not an accounting issue.

68.  As for the missing bank statements for the Estate’s BEA account #219-40-00731-8 (formerly under Bernard’s name as executor) for the period from 1 March 2017 – 15 November 2017, Daisy said she had confirmed with BDO that the entire balance in that account was transferred to the Estate’s BEA account #514-10-309788-9, leaving nil balance in the former account as of 15 November 2017.  There was no sufficient of any impropriety.  Daisy’s solicitors had written to BEA after the 1^st day of the hearing on 27 December 2018 to seek copies of the missing bank statements[11]. No statements had yet been received by Daisy at the 2^nd day of the hearing[12].

Conclusion on Ps’ complaints in relation to the Estate Accounts

69.  As said, at the 2^nd hearing, Daisy had still failed to arrange for inspection of all those documents in the List of Documents, and as such, proper Estate Accounts with supporting documents had not yet been rendered at the end of the 2^nd hearing.  Insofar as accounting irregularities were concerned, having considered Daisy’s explanations and also the explanations from BDO, as this stage, I find there was no sufficient evidence of any irregularities.

Unjustifiable delay

70.  The delay complained by Ps was in two aspects, namely (i) delay in rendering proper Estate Accounts, and (ii) delay in administration and distribution of property, cash and securities of the Estate.

71.  Ps also complained that Daisy did not even inform them as to when Probate was eventually granted.

Delay in rendering proper Estate Accounts

72.  According to Lynette, she travelled to Hong Kong in April 2014 to meet with Bernard and Daisy before Bernard passed away.  She had explained to Bernard her desire to better understand the structure of the Estate as she needed to address her personal affairs for estate planning and for US tax purposes and she had specifically requested for a copy of the updated Estate Accounts from Bernard but her request was ignored. Lynette said she then contacted solicitors (“Withers”).  After Bernard’s death, Withers had tried to contact Daisy between December 2014 and April 2015 to find out whether Bernard had left a will and in March 2015, Lynette’s son-in-law had on behalf of Lynette met with Daisy to explain to Daisy the need for financial disclosure in relation to the Estate and had suggested to Daisy that she should consult her own solicitors. 

73.  Daisy admitted meeting with Lynette in April 2014 and said Bernard duly noted Lynette’s request for information in April 2014 and claimed that it was not true that Bernard “ignored” the request[13].  However, Daisy did not mention what steps Bernard took to meet Lynette’s request.  Although Daisy admitted meeting with Lynette’s son-in-law in March 2015, she said she recalled she told him that she had not been appointed as the executor of the Estate and that as soon as she had been, she would carry out her duties and would keep all the beneficiaries informed of the progress.  She denied Lynette’s allegations that she failed to grasp the concept of the gravitas of her obligations as an executor.

74.  Anyway, it was quite clear that at the time, Daisy did not divulge any information on the Estate to Lynette.  It would also appear that Daisy did contact solicitors in February 2015, or at least the name of a firm of solicitors was provided to Lynette’s solicitors.  In February 2015, Withers wrote twice to a firm called YC Lee, Pang, Kwok & Ho (“YC Lee”) to enquire whether they had instructions to act for Bernard’s estate as executor of the Estate.  YC Lee had replied that they had no instructions to act for Bernard’s estate and no instructions to reply to Lynette’s solicitors’ letters.  Having said this, it would appear that subsequently YC Lee did receive instructions to act for Daisy.

75.  It was after receipt of those replies from YC Lee and when Lynette failed to receive a substantive response from Daisy in relation to the assets of the Estate that Lynette then instructed her solicitors to file a caveat in respect of Bernard’s estate[14].

76.  According to Daisy, Bernard did not mention to her during his lifetime much about the affairs relating to the administration of the Estate, nor about his own financial affairs and that when he passed away unexpectedly, it took her a long time to ascertain the position regarding assets of Bernard’s estate and of the assets of the Estate, and that after the funeral, she then sought legal advice on the validity of Bernard’s will from her present solicitors Raymond Tong & Co (“RT”).

77.  Thus, even on Daisy’s evidence, she would seem to have contacted two law firms, RT and YC Lee in early 2015 although according to Daisy, it was only in around May 2015 that she instructed YC Lee to begin applying for probate of Bernard’s estate.  YC Lee eventually wrote to Withers on 11 May 2015 over Wither’s will enquiry and confirming that they were acting for Daisy.  

78.  On 29 May 2015, Withers had written to YC Lee informing them they filed a caveat as Lynette had not received any substantive response from Daisy in relation to the assets and administration of the Estate and (i) seeking confirmation that if Daisy were to apply for a grant , she would step into Bernard’s shoes and become an executor of the Estate; (ii) asking whether any recent Estate Accounts were available; (iii) whether Daisy would agree that the Family Property was an asset of the Estate[15].  In that letter, Withers stated that Lynette’s objective was to obtain “regular and consistent financial accounting and disclosure on the administration” of the Estate[16].

79.  YC Lee only replied on 13 July 2015[17], and stated that Lynette could not receive a substantive response from Daisy in relation to the administration of the Estate when Daisy had not even applied for the grant of probate of Bernard’s estate and that the caveat was premature and without reasonable ground, and further demanded Lynette to withdraw the caveat or otherwise they had standing instruction to take all necessary legal action.  In the letter, it was also stated that Daisy would attend to the administration of the Estate in accordance with the law. 

80.  Withers wrote again on 16 July 2015 seeking information they required regarding the Estate.  It was only on 7 September 2015, YC Lee replied stating that Daisy would deal with the Estate in due course according to the law and the relevant parties would be informed of the assets of the Estate.

81.  According to Lynette, Withers had tried to contact YC Lee on 12 separate occasions with no information forthcoming in relation to the administration and assets of the Estate during 2015 and finally Lynette received a call from Daisy herself in December 2015 during which Lynette alleged Daisy to be aggressive and that Lynette found the call “deeply upsetting”.

82.  Lynette then decided to put the matter on hold to allow Daisy time to grief and to see whether a resolution could be reached amongst family members and on 11 December 2015 Withers wrote to indicate Lynette was willing to withdraw the caveat, and recording Daisy’s confirmation that she would provide information in relation to the Estate upon obtaining grant. 

83.  Pausing here, although Lynette’s filing of the caveat had probably upset Daisy, on the other hand, I do not find Daisy’s attitude and YC Lee’s letters were helpful either in that it did not really address Lynette’s concerns.   Although it was not Daisy’s duty to provide information on the Estate to the beneficiaries of the Estate prior to her obtaining the Probate, in my view, it would have been more helpful if she had indicated to Lynette that she would forward whatever information she had and/or would come across when going through Bernard’s papers, particularly when she had met Lynette as early as April 2014 and knew that Lynette was anxious to obtain updated Estate Accounts. 

84.  After the caveat was withdrawn, in January 2016, instead of instructing YC Lee to proceed, Daisy decided to instruct RT instead to take over the probate application.  Daisy explained her delay in applying for the grant by saying that the handing over of papers from YC Lee to RT took time and also enquiries with various third parties in relation to Bernard’s assets took time.  Eventually, it was not until 21 June 2016, some 6 months after the withdrawal of the caveat, that Daisy finally commenced the probate application process for Bernard’s estate.  

85.  All along, Daisy had in her possession a copy of Bernard’s will and she could have instructed solicitors to conduct enquiries over Bernard’s assets earlier and in 2015 as the caveat should not have affected such enquiries.  There was no reason why her application for probate could not have started sooner or in any event, as soon as Ps caveat was lifted.

86.  Daisy was granted the Probate on 16 November 2016.  Notwithstanding Daisy’s confirmation through YC Lee that she would provide information of the Estate to Ps upon grant of Probate, she did not even inform Ps of the grant.  In fact, according to Ps, they only found out almost 6 months later when conducting a search at the Probate Registry in April 2017.  It appears that it was only on in July 2017 that RT formally informed Withers that Daisy had obtained the Probate and would be acting as executrix of the Estate[18].  No Estate Accounts or any information on the assets of the Estate were provided to Lynette until August 2017.

87.  Lynette had affirmed her 1^st affirmation on 16 August 2017 in the United States and at that time she had not yet received the 2013 Financial Statements prepared by Qual-Mark which Daisy only sent to Withers through RT on 15 August 2017 (Hong Kong time).  In any event, as Ps took the view that those the Financial Statements did not constitute proper Estate Accounts, the originating summons was issued on 29 August 2017.

88.  As can be seen in Daisy’s 1^st affirmation, she met with Qual-Mark on 28 January 2016[19].  There was no explanation as to why the 2013 Financial Statements could not have been sent over to Lynette earlier, say in February 2016.  Daisy had only said that after the grant of the Probate, she decided she should first deal with Bernard’s estate and that the administration of Bernard’s estate was not as simple and that it had taken time and was only more or less completed in or around March 2017.

89.  I do not see that to be an adequate explanation as why Daisy could not simply instruct RT to send the 2013 Financial Statements to Lynette/Withers in 2016, particularly when Daisy herself had said that notwithstanding that she wished to complete administration of her husband’s estate first, she was always cognisant of the Estate, even before the Probate was granted[20].

90.  Further, as mentioned earlier, Daisy herself accepted that she had been advised that the format of the the 2013 Financial Statements by Qual-Mark was not of the usual format.  She should be aware of the format of the 2013 Financial Statements when she met with Qual-Mark in January 2016, or shortly thereafter and yet notwithstanding obtaining the Probate on 16 November 2016, and it was not until almost a year later, at end of October 2017 that she formally instructed BDO to prepare the Estate Accounts.  As said earlier, the supporting documents in the BDO Estate Accounts had not yet been provided by the 2^nd day of the hearing.  I understand that after the hearing, there was inspection arranged on 27 and 28 February 2019, but in any event, having considered the above, I am satisfied that there was unjustified delay on the part of Daisy to provide Ps with proper Estate Accounts.

Delay in administration and distribution

91.  Mr Lam submitted that within a relatively short time, Daisy had actively and diligently acted, with the assistance and advice of professional legal and financial advisors to:

(1)  collect in assets;

(2)  appoint new professional accountants;

(3)  consider the advantage and disadvantages of realising the assets for cash;

(4)  maintain a constructive dialogue with the beneficiaries even after the present proceedings had been commenced;

(5)  made an interim distribution in the total sum of HK$25m to the 5 sons and/or their estate.

92.  As seen in Daisy’s own chronology, items (2) and (5) in fact only took place after Ps had issued the present proceedings.

93.  As seen in Daisy’s chronology, in the period of some 9½ months, between 16 November 2016 (date of grant of Probate) and 29 August 2017 (the issue of the present proceedings by Ps), what Daisy had done in relation to the administration of the Estate was only (i) to instruct her solicitors to conduct land searches; (ii) to arrange to open new bank accounts in her name for the Estate; (iii) to arrange issue of new share certificates of the listed companies and private companies in her name; (iv) to arrange for sale of the Estate’s shares in the Hong Kong Sanatorium Hospital under a general offer by the hospital (which was between May and June 2017).

94.  Thus, most of the administration work during those 9½ months was only in relation to collecting in the assets of the Estate.  According to Daisy’s own chronology, after obtaining the Probate, she instructed RT to conduct land searches on the properties of the Estate at end of November 2016 and thereafter, Daisy approached the banks and share registrars for the listed companies in relation to opening of new bank accounts for the Estate and registering the shares in her names.  However, the Probate was only presented for registration at the Land Registry against the Family Property a year after grant, on 13 November 2017 after the present proceedings had been issued.  Daisy claimed that this was because she believed that the original Probate must be lodged with the Land Registry and would be retained by the Land Registry for 6 to 8 weeks and therefore she decided to deal with collecting in the other assets and opening of Estate bank accounts first.  Eventually, the original Probate was only returned to RT by the Land Registry on 19 April 2018.  The reason why it took such a long time was because after the registration on 21 March 1962 of the probate of the Estate granted on 22 May 1957 to the 3 executors, Daisy’s predecessor had not registered the death certificates of the other two deceased executors.  This should however be apparent to Daisy and/or her solicitors when the land search was conducted in November 2016. 

95.  Anyway, prior to the issue of these proceedings, no information was sent to Ps although Daisy was fully aware of her agreement to provide information upon grant of Probate.  As said earlier, the 2013 Financial Statements prepared by Qual-Mark were only sent on 15 August 2017. Ps were not even informed of the sale of the Estate’s shares in the Hong Kong Sanatorium Hospital.

96.  As further said earlier, it was not until after the issue of these proceedings, in October 2017 that Daisy decided to instruct BDO to prepare Estate Accounts.

97.  As seen in 2017 Estate Accounts, the total balance of the bank accounts of the Estate with BEA was approximately HK$44.6m, and that on 6 November 2018, she had instructed her solicitors to write to the beneficiaries to give an update on the progress of the administration of the Estate and that she would be making an interim distribution of HK$5m to each of the beneficiaries entitled to share in the Estate, and that on 5 December 2018, the dividend cheques for interim distribution were sent out .     

98.  However, in a letter dated 15 December 2017, which was almost over a year earlier, she had already indicated through RT to Withers that she was prepared to consider an interim distribution if such distribution was in the best interest of all the beneficiaries of the Estate and that such distribution would not jeopardize the ongoing funding requirements of the Estate.  By then, Daisy had already sold Deceased’s share in the Hong Kong Sanatorium Hospital for almost $23.4m (net) on 14 August 2016.  Yet, it was not until almost a year later, on 5 December 2018 which was about 14 days before the 1^st day of the hearing, that the cheques for the interim dividends totalling HK$25m were eventually delivered to each of beneficiaries concerned.  According to Daisy, the interim distribution was in fact of HK$30m, with a sum of HK$5m said to be the share for the Ancestral Worship. 

99.  On the issue of the interim distributions, according to Pak Huen, there had been 5 interim distributions between 7 November 1975 and 2002, and that he had received a total of HK$50.7m, the last one being a sum of HK$46m arising out of the sale of a piece of land in Lam Dei in New Territories prior to the death of Madam Chau[21].  It was not clear whether there was any interim distribution for the Ancestral Worship and if so, the whereabouts of the monies.  The Trustees appointed by the Deceased under the Will would appear to have two roles or capacities, one as trustees of the Estate and the other one as trustees of 1/6 shares of the Residuary Estate, bequeathed by the Deceased for Ancestral Worships.  It was not clear whether there was a separate trustee bank account opened for Ancestral Worship.

100.  There seemed to be no further distributions since 2002, and Daisy only made an interim distribution some two years after the grant of Probate even though there seemed to be sufficient liquid assets, consisting of cash and shares in listed companies in the Estate.

101.  As for the shareholding in listed companies, the shares were transferred into Daisy’s name or held in a securities account at HSB opened by Daisy for such purpose by at about end of 2017.  Daisy had said these shares had generated a stream of dividend income every year which had been used in part for the costs of the administration and maintenance of the Family Property.  In Daisy’s 2^nd affirmation of 30 April 2018, she had said as the hearing of these proceedings would take place in December 2018, she would try to formulate a long term proposal on how to deal with those securities and would duly inform the Court and beneficiaries accordingly[22].  There was no explanation from Daisy as to why she had to wait till the hearing to formulate a proposal.  Then in her 3^rd Affirmation of 7 December 2018 filed 12 days before the hearing, Daisy said she considered that it was not the best timing to realise the shares and that a viable option would be to distribute the shares in specie in the requisite proportions.  Daisy had also said that she realised that as some of the beneficiaries do not reside in Hong Kong, it may not be convenient for them to receive the physical shares certificates and that she had instructed her solicitors to write to each beneficiary on 3 December 2018 offering them the option. 

102.  As for the shareholding of private limited companies, on 3 December 2018, Daisy instructed her solicitors to write to the various beneficiaries as to whether he or she was interested to purchase these shares or any part of them and if so, what price he or she was prepared to offer.

103.  To summarise, it was only in early December 2018, two years after the Probate was granted and with the hearing before this Court approaching, that the interim dividends cheques were sent out by Daisy and letters were then sent to the beneficiaries regarding the shares in publicly listed companies and private companies.  There was no reason as to why all these could not have been done earlier. 

104.  The main dispute in this matter is really over the Family Property.  As seen in a “chart” produced by Pak Huen in his 1^st affirmation, the Family Property has 4 levels, namely the Ground Floor, the 1^st Floor, the 2^nd Floor and the 3^rd Floor, with two wings on each floor, namely the East Wing and the West Wing. 

105.  According to Pak Huen, no one has the exclusive right to use or occupy the Ground Floor, but there are cubicles for storage. At the moment, Lynette is using 2 of those cubicles, Pak Huen is also using 2 cubicles, Michael is using 1, and Daisy is using 1.  There are 3 floors, each with two apartments, one on the east and one on the west.

106.  On the 1^st Floor, the Deceased used to occupy the East Wing while Madam Cheung and her children used to occupy the West Wing.  Later, Bernard and his family occupied those 2 Wings, and after his death, Daisy has continued to occupy those 2 Wings on the 1^st Floor, and at present with 2 of her 4 children[23].

107.  As for 2^nd Floor, Pak Huen and his son are now occupying the East Wing, while Michael and his family are now living in West Wing.

108.  As for 3^rd Floor, according to Pak Huen, Lynette and her children occupy the East Wing and the West Wing was occupied by Pak Wing and after his death in March 2016, it has been vacant.

109.  Michael had filed an affirmation in support of the originating summons and Lynette’s case for the Family Property to be sold with vacant possession and he had said that the Family Property poses health and safety concerns and there may be fire hazards as the building does not have a sprinkler system.  Further, even though there had been waterproofing works carried out by Daisy in early 2017, those repairs were not extensive enough.

110.  As for Daisy’s 4 children named as defendants, they had each filed an affirmation in support of their mother to continue to act as the executrix of the Estate but neither of them had expressed any views on the Order for Sale sought by Ps.

111.  In her 1^st Affirmation, Daisy had said that Lynette’s allegation that Daisy had wished to take advantage of her residence in the Property by delaying the sale of the Family Property and the final distribution of the Estate, was “wholly unfounded, untrue and unfair”. Daisy had declared that:

“I fully recognise that it is my duty, as executrix, amongst other things, to realise the [Family Property] and to distribute the proceeds amongst the named beneficiaries in the manner provided in the [Will]. On the other hand, I believe it is also my duty to secure the best terms and conditions for the disposal of the [Family Property] which should be in the best interest of all the beneficiaries[24].”

112.  What Daisy further said in her 1^st affirmation was that from her recent discussions with Pak Huen, he had indicated to her that he wanted to continue to live in the Family Property, but Daisy then said :

“Nevertheless, I still believe that it is my duty and in the best interest of the beneficiaries of the Estate for the [Family Property] to be sold[25].”

113.  There was no mention by Daisy in her 1^st affirmation of any “Family Arrangement” as alleged by Pak Huen.  It would further appear from Daisy’s evidence that even Pak Huen himself did not assert to Daisy at that time that he had any entitlement to continue to live in the Family Property by reason of any Family Arrangement/Promissory Estoppel.  According to Daisy, all Pak Huen did was to express to Daisy that he wanted to continue to live there, and notwithstanding Pak Huen’s wish, Daisy’s then stance was that it was her duty and that it was in the best interest of the beneficiaries to sell the Family Property.

114.  In her 1^st affirmation, Daisy had also said that she was in the process of engaging a reputable firm of professional surveyors on the market value of the Family Property as a house, as well as its potential value if sold to a property developer for redevelopment purposes[26].

115.  It would appear that in her 2^nd affirmation, Daisy seemed to have a change of heart.  As for the valuation mentioned by her in her 1^st Affirmation, she said after obtaining a quotation from CBRE of HK$280,000, due to Pak Huen’s case of the alleged “Family Arrangement”, it was uncertain when the Family Property could be sold with vacant possession, and which mode of sale should be in the best interest of all the beneficiaries and that the sale might have to be deferred until the courts could make a final ruling on this issue in the present proceedings, or if Pak Huen could come to a settlement with Ps[27].  She further pointed out that there could be an appeal from the Court’s decision no matter which side would be successful.  In such circumstances, Daisy said it would be premature to retain a firm such as CBRE to provide a valuation.

116.  Daisy then instructed her solicitors to approach Access Partner to prepare a report at a fee of HK$20,000.  Although a draft of the Valuation Report was prepared by Access Partner in November 2017, Daisy then said it could not be finalized until the registration of the Probate at the Land Registry was complete and thus although the valuation date was at 15 November 2017, the Valuation Report was subsequently issued on 20 April 2018 by Access Partner.

117.  The Valuation Report was stated in the revised engagement letter dated 21 December 2017 to be for accounting reference purpose only[28] and the valuation was based on the redevelopment basis and on the basis that vacant possession of the property would be immediately available upon completion of a sale.  Access Partner did not carry out detailed on-site measurements to verify the site and floor areas of the property and the valuer had assumed that the areas shown on the documents handed to them were correct.  According to the Valuation Report, the valuer had inspected the exterior and where possible the interior of certain property, but no structural survey had been made in respect of the property.  It was not clear which part of the interior was inspected.

118.  Anyway, as seen above, for a year after grant of Probate and before Pak Huen had raised the issue of the Family Arrangement/Promissory Estoppel, Daisy had done little or nothing to bring about a sale of the Family Property and/or otherwise to wind up the Estate.  In fact, she did not even try to deal with those “material encumbrances” mentioned in the Valuation Report.  Although this was not a matter raised by Ps, since it was mentioned by Access Partner, there was no reason as to why Daisy could not have tried to deal with those first.  In fact, Ps’ complaint was that Daisy would only act when a problem was raised by them.

119.  Daisy is clearly fully aware of her duty as an executrix to achieve a final distribution and to wind up the Estate bearing in mind in particular that the Deceased died 63 years ago and there had already been a long lapse of time and all the original executors had already died with the last one, namely Bernard, died over 4 years ago.  However, notwithstanding that Daisy is fully aware of her duty, so far the evidence shows, apart from collecting in all the assets, she had not taken any pro-active step to try and achieve a final distribution and/or otherwise to wind up the Estate prior to the issue of the present proceedings and it took her over two years after grant of Probate to make an interim distribution and to write to the beneficiaries regarding the disposition of shares in listed companies and private companies.

120.  Thus, even though Daisy cannot be blamed for any delay prior to her being granted Probate, it is my view that there has been continuing unjustified delay on her part towards administration and distribution.

Conflict of interest  

121.  There are two aspects of Ps’ complaints in this respect:

(i)  Daisy herself residing in the Family Property with her family members rent free;

(ii)  Daisy has a duty to investigate into conduct of previous executors of the Estate.

122.  So far as (ii) was concerned, this matter was really raised at the hearing.  This issue arose when Ps learnt that some dividends received from shares of the Estate in 2015 and 2016 had been credited into Bernard’s personal bank account after Bernard’s death.  Daisy said this was done without her knowledge and Daisy had arranged for those dividends to be transferred to the Estate’s bank accounts.  Ps had complained that Daisy did not do anything earlier to find out the whereabouts of those dividends even though a “red flag” was raised in the BDO Estate Accounts by end of April 2018 and there was no proper explanation as to how it happened.  It would appear that Daisy only found out on 4 December 2018 after asking Qual-Make to help trace the amounts.

123.  Mr Wong also raised a further issue in that the past dividends could have been automatically or systematically credited into Bernard’s personal account, and that this matter should have alerted Daisy and Daisy should have carried out an investigation into the past history of the deposits of the dividends cheques.

124.  Daisy had said that before she was granted the Probate, all dividends were credited either by autopay or be cheques into the Estate’s bank accounts maintained by Bernard.  At this stage, there was no sufficient evidence of any misconduct or any intermingling of assets between Bernard (or his co-executors) and the Estate, and those dividend cheques deposited into Bernard’s personal account after Bernard’s death had been accounted for.  The records of payment of dividends were in the List of Documents sought by Ps.  At this moment, there is no sufficient evidence that there is a need for investigation into past conduct of Bernard or his co-executors.   

125.  More seriously in my view, as said earlier, it is Ps’ allegation that  Daisy is taking advantage of the fact that Bernard has died and she is now in control of the Estate in order to delay indefinitely the final distribution of the Estate as she (and her children) are residing in the Property free of rent[29].

126.  Mr Lam argued that in fact everybody is still occupying the Family Property or part thereof “rent-free”, which had been the status quo since the 1950s.  Mr Lam pointed out that Madam Chau, who had a life interest in the Family Property and was residing therein, only passed away in 2002, and that since then until the present proceedings, no one had raised any complaint, and in fact, even Ps themselves are still occupying one part of the Family Property.

127.  As earlier mentioned, at the moment, according to Pak Huen[30], and as mentioned earlier, Daisy is residing and occupying two wings, namely both East and West Wing on 1^st Floor with two of her children and further uses one of the cubicles on the Ground Floor for storage.  Thus, Daisy and her family would seem to be occupying more space than the others.

128.  Further, it was not Pak Huen’s case that under the Family Arrangement, the 5 brothers had the right during their respective lifetime to reside in the Family Property free of rent and all utilities and maintenance expenses.  It would also appear from the 2017 BDO Estate Accounts that rates, electricity, telephone and fax, water, cleaning, repairs and insurance charges of about HK$1m a year were all paid by the Estate[31].  All Pak Huen alleged about the Family Arrangement was that there was “an overall understanding and de facto arrangement” that for as long as one of them shall still be living and residing at the Family Property, the Family Property would not be sold, irrespective of whether or not the Deceased’s wife or concubines were still alive and living there[32].

129.  Even though Daisy had claimed that she intended to sell the Family Property, prior to Pak Huen raising the issue of the Family Arrangement/ Promissory Estoppel on 23 November 2017, there had been no positive steps taken by Daisy in relation to seeking or securing vacant possession of the Family Property from the beneficiaries including herself and/or placing the Family Property on the market for sale or placing any part/apartment in the Family Property for rent.  Further, after Pak Huen had raised the issue, Daisy did not herself issue any administration action under Order 85 of RHC, nor sought any orders or directions in the present proceedings, whether for sale subject to vacant possession or sale without vacant possession, or for any part of the Family Property to be rented out.  Nor had she issued a separate action against Pak Huen to seek vacant possession. 

130.  Mr Wong submitted that there had been a change of stance on the part of Daisy.  Mr Lam said this was only in the sense that because there was going to be the substantive hearing before this Court that Daisy decided to take no steps.  Mr Lam then indicated to the Court that if the Court were to allow Daisy to continue to administer the Estate, then Daisy would be prepared to give an undertaking to proceed with a sale but insofar as vacant possession was concerned, if no agreement could be reached, then Daisy might have to take out an application to evict Pak Huen, and further insofar as Daisy was concerned it was not that she was saying that she had to continue living there.  Mr Lam then pointed out that Ps were also living there, but that if everyone would be willing to leave, then so be it.

131.  Mr Lam had also pointed out that although Michael had indicated his wish for the Family Property to be sold, he did not see fit to immediately move out of the Family Property, and that “none of the beneficiaries” saw an urgent or immediate need to change the status quo which had been in place for decades without complaint.

132.  It was thus clear from Mr Lam’s submission as that Daisy herself and her children did not see an urgent or immediate need to move out.  There was no evidence that Daisy herself had tried to secure an agreement, at least as between her (and her 4 children) and Ps, in relation to moving out or vacating the Family Property for the purpose of a sale.

133.  The problem is that Daisy’s stance in relation to the sale has been inconsistent.  First, she said it was her duty and that in the best interest of the beneficiaries to sell the Family Property but took no positive action to procure a sale.  Then when she received Pak Huen’s affirmation, she decided to adopt a neutral position in respect of the Family Arrangement and to do nothing regarding a sale.   There was no evidence that she had sought any legal advice on behalf of the Estate as to the prospects of success on the claim by Pak Huen or what actions she should take on behalf of the Estate in relation to Pak Huen’s claim.  In Mr Lam’s skeleton submissions, Daisy’s position was that if she were to remain as the executrix, she would abide by the orders and directions made by the Court.  However, she herself had not sought any orders or directions in relation to a sale nor had she supported or expressed any views on those 5 terms proposed by Ps for the sale.  Then, at the end of the 1^st day of the hearing, Mr Lam told the Court that he had instructions that Daisy was prepared to give an undertaking to proceed with a sale if she were to be allowed to continue as executrix of the Estate.  The undertaking was vague and there was nothing firm in writing placed before the Court as to what exactly Daisy was undertaking to do to achieve a sale, or the mode of sale proposed by her.

134.  After the 1^st day, on 11 January 2019, Pak Huen’s solicitors wrote to RT to seek clarification on Daisy’s undertaking. There was no reply from RT.   

Conclusion on conflict of interest

135.  Notwithstanding Daisy’s own statements and her last minute undertaking through Mr Lam, her inconsistent stance and the lack of positive and/or concrete actions on her part as an executrix in relation to a sale plus her attitude that there is no urgent or immediate need to change the present status quo would result in delay in winding up the Estate and such a delay would in effect mean that she and her children can continue to reside in the Family Property free of rent and with utilities and various expenses paid by the Estate.  Having considered all the circumstances of this case, I have come to the view there is a serious conflict of interest between Daisy as executrix and the Estate in relation to the matter of a sale of the Family Property.

Other matters

Views of the beneficiaries

136.  Other than Daisy herself and her children, Pak Huen had also opposed the removal of Daisy as executrix.

137.  Pak Huen holds 1/3 share in total in the Residuary Estate (as a direct beneficiary under the Will and further as sole beneficiary under Pak Wing’s will). Daisy and her children hold 1/6 share in total. On the other hand, Ps plus Lynette’s two children together hold 1/3 share of the Residuary Estate and the remaining 1/6 share is for Ancestral Worship.

138.  Pak Huen’s opposition can be summarised as follows:

(i)  Daisy had done a good job and was responsible for carrying out the Ancestral Worship ceremonies;

(ii)  It was not Deceased’s wish to have an outsider to be an executor;

(iii)  High costs of an independent administrator and possible conflict of interest

139.  As for (i) above, Pak Huen had said in his 1^st affirmation that Daisy  had been doing a good job including “maintaining the household of the Family Property as well as expenses incurred for repairing the Family Property” and that she had been responsible for carrying out all the family’s ancestral worship ceremonies as Daisy, being a faithful believer in Buddhism, would regularly replenish the ancestral hall (this was said to be in an exclusive room on the ground floor of the Family Property)[33]. However, as pointed out by Ps and as seen in the video, the room appeared to have a Buddha statue on the altar table for worshipping, rather than ancestral tablets, but in any event, it was not really disputed that ancestral worship would take place there.

140.  Anyway, under clause 5 (2)(f), the remaining 1/6 share for Ancestral Worship is subject to a proviso that the Deceased’s Trustees may in their uncontrolled discretion pay or apply the said share or any part thereof to or for the benefit maintenance and support of some one or more to the exclusion of the others or other of the Deceased’s sons.  There is at present no information from Daisy as to how this share is to be applied, and further, as said earlier, no information as to how past interim dividends attributable to this share had been applied[34].

141.  As for (ii), according to Pak Huen, Daisy is the only person, other than himself, who is deeply familiar with the family traditions and culture and who would be able to form a balanced judgment without losing sight of the intrinsic values that underline the Deceased’s last wishes[35]. Pak Huen had also said he did not believe that the Deceased would have wanted any outside individual to take charge of the Estate and that a newly appointed independent administrator would not be able to duly satisfy the Deceased’s wishes as contained in the Will[36].  Pak Huen then raised the issue of a real risk that an independent administrator would have at least a commercial desire, if not vested interest, to cater for the wishes of prominent developers who would be potential purchases of the Family Property.

142.  Mr Lam had submitted that Daisy became the sole executrix of the Estate by transmission of executorship in the unbroken chain of representation and that as seen in Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (21^st Ed) what underlines this rule is that the power of an executor is founded upon the special confidence and actual appointment of the deceased; and such executor is therefore allowed to transmit that power to another, in whom he has “equal confidence”[37].

143.  Although this would be a relevant factor for the Court to take into consideration, this is only one of the factors or circumstances the court will have regard and each case depends on its own facts and circumstances.  Ultimately, the Court has to decide whether due and proper administration of the Estate and the interest of the persons beneficially entitled thereto require the replacement of Daisy by an outsider.

144.  As Ps’ proposed mode of sale is by private tender with a reserve price set by an independent surveyor, I see no cause for concern or suspicion that there will be a conflict of interest between an independent administrator and the Estate, in catering for wishes of prominent developers as alleged by Pak Huen.

145.  In relation to costs of administration in (iii), Pak Huen had expressed concern over the high costs involved if an independent administrator were appointed and said this would lead to a “serious wastage against the Estate[38]”. Daisy said she shared Pak Huen’s concerns.

146.  However, even on Daisy’s own evidence, she had to rely a great deal on professionals for assistance in administration of the Estate.  Most of the work involved in bringing in or collecting the assets of the Estate was done through her solicitors and she had to rely on professional accountants to prepare the Estate Accounts.  In any event, it would appear at this stage, that by far the major part of the costs in the administration of the Estate would be in conducting litigation in relation to the Family Property, in particular between the Estate and Pak Huen over the issues of the Family Arrangement/Promissory Estoppel.  Even for the present administration proceedings, when Daisy had claimed to be neutral, she had instructed both Senior and Junior Counsel to appear for her.  I further note that Pak Huen has instructed one Senior Counsel and three Junior Counsel to appear for him in his capacity as executor of Pak Wing and in his personal capacity.  Whether Daisy remains the executrix or be replaced by an independent professional, there is likely to be substantial litigation costs incurred by the Estate in opposing Pak Huen’s claims unless all the beneficiaries are able to reach a settlement in relation to a sale and the terms of the sale.  All in all, Pak Huen’s opposition to the Order for Sale has put him in conflict with Ps and his support for Daisy as executrix has to be seen in the light of possible self-interest in particular when Daisy had taken a neutral stance towards his allegations and no positive step had been taken by Daisy against him.

147.  Apart from Pak Huen and Daisy, there had been no particular concerns raised by D4-D7 over costs of administration if an independent administrator were to be appointed.

148.  In fact, so far as D4-D7 were concerned, their respective affirmations were almost identical and they did not state any particular reasons or grounds to support their views as to why they were in favour of Daisy to continue to act as the executrix of the Estate.

Daisy’s qualifications

149.  Mr Wong submitted that Daisy is in her 70s, being born in 1945 and she has not received much education.  She married Bernard in 1962, when she was 17 and she has been a housewife with no professional career.  Mr Lam pointed out that the first time Mr Wong raised this issue was on the 1^st day of the hearing and that this was an “ambush”.

150.  However, all this was Daisy’s own evidence and she herself had in fact admitted that Bernard did not mention to her too much about his financial affairs.

151.  In the case of Re Estate of Chan Kan Ying, Deceased HCMP 888 of 2013, unreported, 19 July 2017, this Court had referred to what was held in Yu Hong Ping v Kenneth Yuen [2009] 6 HKC 347, namely the court in exercising its discretion under s 33(3) of the PAO, shall be satisfied with the statutory criteria, and should have regard to the size of the estate, the nature of the assets that needed to be administered, the background and the education, training and experience of the remaining and substituted personal representatives and the interest of the beneficiaries, especially if there is minority interest involved.

152.  Even though there is no minority interest in the present case, I am of the view that I am entitled to take into account Daisy’s age, her education background and lack of experience in administering the Estate which consists of substantial assets and involves contested litigation which may be protracted.  As Mr Wong has submitted, the Estate a “highly complicated” one.

Conclusion

153.  Having considered all the above and the circumstances of this case, I am satisfied that due and proper administration of the Estate and the interests of the persons beneficially entitled thereto require the removal of Daisy as executrix and that another independent professional administrator be appointed in her place and that the assets of the Estate be vested in the new administrator.

Order

154.  At this stage, no names have been put forward by Ps who have sought an order that that such independent professional administrator be agreed by the parties within 28 days.  I am prepared to allow the parties 28 days from the date of this judgment to try and agree to a professional administrator to be appointed, failing which they are each to provide to the Court two names of their respective proposed administrator/s, together with the proposed administrator’s charging rate, CV and experience in administration of estates and contested litigation between the estate and a beneficiary.  The Court will decide on paper as to whom to appoint.

155.  As for the application for the Order for Sale, this is to be adjourned sine die with liberty to restore for a direction hearing (estimated length of hearing of one hour) after the professional administrator has been appointed by this Court.

156.  In relation to the Estate Accounts, I am of the view since there is going to be a new administrator appointed, any request for outstanding documents, accounts and inquiries can be sought from the new administrator.  The applications in paragraphs 3, 5 and 6 of the originating summons in relation to the Estate Accounts, as well as such other accounts and inquiries should be adjourned sine die with liberty to restore. 

157.  As for costs, the parties are to lodge their respective written submissions within 21 days.  There be leave for them to lodge written reply submissions within 21 days thereafter.  The matter of costs will be dealt with on paper, unless otherwise directed by the Court.

158.  Ps are to submit a draft order for approval.

159.  Finally, I would like to thank all Counsel for their assistance to the Court.