TIN YING WA v. TIN YUNG SIN, the Executor of the estate of CHEUNG FUNG YAN, Deceased AND ANOTHER

HCMP 1832/2022

[2024] HKCFI 469

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1832 OF 2022

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JUDGMENT

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INTRODUCTION

1.  By Originating Summons filed on 8 November 2022, the plaintiff asked for, among others, the following orders:

“1. An Order that the 1^st Defendant do within 14 days deliver to the Plaintiff a true and perfect inventory and account of the estate of CHEUNG FUNG YAN (張鳳茵) (‘Estate’);

2. An Order that the 1^st Defendant be passed over as Executor of the Estate and replaced by Ms Tiffany Wong, managing director of Alvarez & Marsal, as the Administrator of the Estate (‘Substitute Administrator’) pursuant to section 36 of the Probate and Administration Ordinance (Cap.10);

3. An Order that the 1^st Defendant do deliver up to the Substitute Administrator all assets and monies in his hands representing the assets and monies of the Estate;

4. A Vesting Order in favour of the Substitute Administrator;

5. Subject to the filing of the requisite papers, a grant of Letters of Administration with the Will annexed to the Estate be made in favour of the Substitute Administrator.”

2.  It is now common ground that an independent professional administrator should be appointed in place of the 1^st defendant. The remaining issue is the identity of such an administrator, which is the main issue to be resolved in this Decision.

BACKGROUND

3.  In the light of the latest development of this case, I only need to set out the background briefly as follows.

4.  The Deceased was born in 1928 and was married to the father of the parties who had passed away in 1983.

5.  The Deceased passed away on 2 March 2022, and was survived by her 3 children: the plaintiff (the eldest sister), the 1^st defendant (the second child) and the 2^nd defendant (the youngest brother).

6.  The Deceased made her last Will on 20 January 1999, by which she appointed the 1^st defendant as the executor of her estate (“the Estate”). The 3 siblings were named as beneficiaries of the Estate in equal shares.

7.  According to the parties’ estimation, the size of the Estate is of no less than $50 million.

8.  After the passing of the Deceased, the 3 siblings (and some of their respective family members) had had a number of meetings (“the Family Meetings”) in which they discussed the handling and distribution of the Estate.

9.  In the Family Meetings, the plaintiff had raised a number of queries on the state of the Estate. The 3 siblings subsequently signed a handwritten agreement dated 20 March 2022 (“the Handwritten Agreement”) which appears to have recorded their agreement on the distribution of the Estate.

10.  Despite the Handwritten Agreement (which the plaintiff now suggests that it is unenforceable and/or liable to be set aside), the plaintiff commenced these proceedings on 8 November 2022, on the bases that:

(1)  The 1^st defendant had dissipated at least $3.2 million owned by the Deceased, and it is therefore in the interest of the Estate to identify, investigate and secure assets belonging to the Estate by an independent administrator;

(2)  The 1^st defendant’s refusal to account for the whereabouts of the HSBC share dividends which had been distributed to the Deceased;

(3)  The plaintiff was not sure whether some payments allegedly made by the Deceased to the 2^nd defendant’s wife and his son were made with the full knowledge and approval of the Deceased;

(4)  The plaintiff had lost trust and confidence in the 1^st defendant by reasons of various complaints made by her in her supporting affirmation including those matters referred to above;

(5)  She was deeply concerned that the defendants’ hostility and bias towards her would result in an unfair and partial administration of the Estate.

11.  In the plaintiff’s supporting affirmation, she proposed to appoint Ms Tiffany Wong of Alvarez & Marsal Asia Limited (“Ms Wong”) to be the administratrix of the Estate.

12.  The defendants initially opposed the plaintiff’s application as they denied the serious allegations made against them. They had offered their version of the events in their respective affirmations (both filed on 28 February 2023). They also suggested that, in the event the Court agrees that an independent administrator should be appointed, Mr Derek Lai (“Mr Lai”) and Mr Adrian Chan of Deloitte should be chosen.

13.  By letter dated 29 January 2024, the defendants’ solicitors reiterated the defendants’ proposal that Mr Lai and his team be appointed as the independent administrator. Their updated fees had been set out for the plaintiff’s consideration (see further below). It was also said that the defendants “are content to limit the argument at the upcoming hearing to the identity of the independent administrator that should be appointed by the Court”.

14.  On 30 January 2024, the plaintiff’s solicitors replied. They asked for clarification as to Mr Lai’s quotation. They also informed that Ms Wong has agreed to lower her hourly rate. They proposed that:

“1. Ms Tiffany Wong of A&M be appointed as the independent administratrix of the Estate.

2. In any event, the parties’ costs be borne by the Estate irrespective of the eventual choice of independent administrator.

3. In any event, the upcoming hearing be confined to the argument on the identity of the independent administrator.”

15.  Unfortunately, despite further correspondence exchanged between the parties, they could not agree on the identity of the independent administrator. As a result, this hearing had to be proceeded with.

LEGAL PRINCIPLES

16.  Section 36 of the Probate and Administration Ordinance (Cap.10, Laws of Hong Kong) provides that:

“[…] where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate, other than the person who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate, the court may, subject to section 25, appoint such person as the court thinks fit to be such administrator, on his giving such security, if any, as may be required under this Part or as the court may direct, and every such administration may be limited in such manner as the court thinks fit.”

17.  In Lefkowitz v The Bank of New York & Others [1996] 3 HKC 591, Litton VP (as he then was) explained that:

“The words ‘necessary or convenient’ in s 36 gave the judge a broad discretion, to be exercised in the best interests of the estate. The judge was not called upon to determine the parties’ rights and liabilities, nor was it necessary for him to resolve disputed issues of fact: that is why an application to cross-examine the deponents to the affidavits, made before the hearing, was quite rightly disallowed.” (at 594D – E)

18.  When deciding on the identity of the administrator, the Court would usually give preference to the candidate with the support of the majority of the beneficiaries. This consideration usually arises in the context of a dispute between persons entitled to administration to the same degree under the Non-Contentious Probate Rules. Hence, the starting point must be the general practice that the choice of the majority would be preferred by the Court: Ho Chiu King Pansy Catilina v Ho Angela & Another [2022] 4 HKC 321, at [31], [37] and [49].

DISCUSSION

19.  In the present case, there are only 3 beneficiaries, namely, the plaintiff and the defendants.

20.  Both defendants are in favour of the appointment of Mr Lai and Mr Chan as joint and several Administrators. In other words, they are supported by the majority of the beneficiaries.

21.  However, the plaintiff argued that Mr Lai and Mr Chan should not be appointed.

22.  Firstly, it was said that if Ms Wong is appointed, the administration of the Estate can be done at a lower cost.

23.  On my part, even though I agree that the cost to be incurred is a relevant matter to be taken into account, I am of the view that it should not be a determinative factor unless all other factors are more or less equal. This is not the situation here, because, as explained, the majority of the beneficiaries favoured the appointment of Mr Lai and Mr Chan rather than Ms Wong.

24.  Both the plaintiff and the defendants have provided the Court with the fee quotations of their respective candidates. The candidates have also revised their quotations time and again for the sake of clarification and/or to deal with concerns raised by the other side. For example, Deloitte has now confirmed that they will put forward Mr Lai as the sole Administrator rather than suggesting that two joint and several Administrators are to be appointed. They have also clarified the cap fees to be charged and also the circumstances under which the cap fee is not applicable.

25.  I set out the relevant parts of the quotations in the comparison table below:

	Ms Wong (P)	Mr Lai (Ds)
Hourly rates	Administratrix: $5,200 Senior Director: $4,700   Manager: $2,200     Associate: $1,700	Partner/Principal: $5,300 Director: $4,800 Associate Director: $4,000 Manager: $2,300 Senior Associate: $2,100 Associate: $1,800
Fee Cap	1% of the Estate’s value (covering contentious work only)	1% of the Estate’s value (covering contentious work only)

26.  Mr Lam for the plaintiff submitted that Deloitte should not be appointed because they are proposing to charge a minimum fee of $450,000. My reading of Deloitte’s quotation is that they are only suggesting that the fees to be chargeable shall be capped at 1% of the value of the Estate or $450,000, whichever is higher. This was also confirmed by Mr Tai upon his further clarification with Deloitte. There is thus nothing in this point.[1]

27.  The plaintiff submitted that Ms Wong should be appointed as the sole administratrix because the hourly rates of her team are lower.

28.  I am not persuaded that the appointment of the plaintiff’s candidate would necessarily mean that cost can be saved. One must bear in mind the followings:

(1)  As the Deloitte’s quotation has frankly put it, it is not possible to estimate with certainty the total amount of fees at this stage. The assessment should therefore be made upon this caveat;

(2)  Both candidates are willing to cap their fees at 1% of the total value of the Estate. This, in a way, has protected the Estate from being charged an unreasonable amount of fees at the end of the day;

(3)  It is common ground that despite the appointment of a particular person as the Administrator/rix, the selected candidate will be assisted by a team of personnel. This has the following implications:

(a)  The Court should not only focus on the hourly rates but also the overall cost structure;

(b)  Since Mr Lai’s team structure has more ranks with different levels of fees, there is every possibility that cost can be saved. For example, in relation to work which need not be done by the Administrator/rix but could not be done by a Manager, Ms Wong could delegate such work to a Senior Director who will charge $4,700 per hour, whereas Mr Lai might consider delegating to an Associate Director who would only charge $4,000/hour. This possibility means that there might well be savings of cost.

29.  The conclusion is that it is uncertain as to which independent Administrator/rix will charge less at the end of the day. I therefore do not think the Court should place much weight on this factor.

30.  Secondly, counsel for the plaintiff argued that since the defendants’ conducts were suspicious which warrant investigation, their proposal of candidate should not be accepted, because the administrator/rix should not only be independent but also seen to be independent. They cited Re Lowestoft Traffic Services Co. Ltd. (1986) 2 BCC 98,945 and In re Palmer Marine Surveys Ltd. [1986] 1 WLR 573 in support.

31.  First of all, since it is not the function of this Court to resolve any disputed issues of fact herein, I do not think the Court should, despite the plaintiff’s various complaints, assume that the defendants’ conducts are suspicious, even though they will certainly be asked to answer the administrator/rix’s enquiry on the assets of the Deceased.

32.  In any event, insofar as it is suggested or even hinted that Mr Lai and his team will not discharge their duties as administrator independently and impartially, this suggestion should be dismissed outright as totally groundless.

33.  Moreover, it must be borne in mind that, even if Deloitte, which was proposed by the defendants, is selected, they will be formally engaged by all the beneficiaries (including the plaintiff). In other words, Deloitte (and Mr Lai) shall be accountable to the plaintiff as well. It is therefore totally unmeritorious for the plaintiff to suggest that Mr Lai would somehow favour the defendants in his investigation of matters relating to the Estate.

34.  Mr Lam argued that the perception of the public is important, and the Court should not give an impression that the suspected parties’ choice of candidate would be accepted. I do not accept that the appointment of Mr Lai would give the public any impression that there is any impropriety in the process of appointment of Administrator, particularly when there is admittedly no challenge on the professionalism of Mr Lai and his team.

35.  Further, the insolvency cases cited by the plaintiff are not applicable to the present case at all because:

(1)  In Re Lowestoft, there was prima facie evidence of fraudulent trading, and the circumstances of the liquidator’s appointment (the director had outvoted the creditors who voted for another candidate as liquidator because he was holding a large number of proxies in hand) caused disquiet to the petitioning and supporting creditors. It was in such circumstances that it was held that public interest required that the liquidator should not only be independent but be seen to be so.

(2)  Similarly, in Re Palmer, there was evidence suggesting that assets of the company had been transferred to an associated company for inadequate value. The company went into voluntary liquidation. The voluntary liquidator was in effect appointed by the sole director of the company. At the creditors’ meeting, a creditor proposed that a different liquidator be appointed. However, he was outvoted by the sole director who held a large number of proxies. It was in the above circumstances that the Court held that in a case in which there was evidence of such transfer, the independent trade creditors should ordinarily be entitled to have the company’s affairs investigated by a liquidator who is not merely independent but who can be seen to be independent.

(3)  It can thus be seen that the circumstances surrounding the appointment of the liquidator in the above authorities had understandably led to concerns by the creditors. The present case is totally different, because the administrator/rix is going to be selected by this Court.

36.  At the hearing, Mr Lam referred this Court to certain transactions as shown by the bank statements produced by the defendants and submitted that they raised question mark on the handling of financial matters of the Deceased which warrant investigation. These complaints have never been made in the plaintiff’s affirmations. It is most unfair on the part of counsel to make such points while he was on his feet when the defendants simply do not have any chance to reply by admissible evidence. In any event, I do not accept that the Court should ignore the defendants’ choice of Administrator simply because the plaintiff has picked up entries in the bank statements which she said worth further investigation. I am of the view that the professional Administrator, who is independent and impartial, is expected to discharge his duties properly no matter whether he was nominated by the plaintiff or the defendants.

37.  For reasons of the aforesaid, I am of the view that Mr Derek Lai should be appointed as the Administrator of the Estate.

THE ORDER

38.  Before the hearing, parties have agreed on the terms of the order to be made, subject to the Court’s decision on the identity of the administrator/rix. In the light of the decision above, I make the following orders:

(1)  The 1^st defendant do deliver to the plaintiff a full inventory and account of the Estate on or before 12 March 2024;

(2)  The 1^st defendant be replaced by Mr Derek Lai as the Administrator (“the Independent Administrator”) of the Estate pursuant to section 36 of the Probate and Administration Ordinance (Cap.10);

(3)  Upon delivering the full inventory and account pursuant to paragraph (1) above, the 1^st defendant do deliver up to the Independent Administrator all assets and monies in his hands representing the assets and monies of or belonging to the Estate within 14 days thereafter;

(4)  There be a Vesting Order in favour of the Independent Administrator;

(5)  Subject to the filing of requisite papers, a Grant of Letters of Administration with the Will annexed to the Estate be made in favour of the Independent Administrator.

COSTS

39.  Parties agreed that the costs of the parties arising out of or incidental to these proceedings be paid out of the Estate, to be taxed if not agreed.

40.  However, Mr Tai for the defendants argued that the defendants should be entitled to their costs of the hearing today. With respect, I disagree. Although the defendants have succeeded in persuading this Court to accept their nomination of Administrator, it should be noted that they have procured Deloitte to revise their quotation during the course of the hearing so as to deal with the plaintiff’s concerns and this Court’s enquiry. In the circumstances, I think it is not right to order the plaintiff to bear the costs of the hearing today despite the Court’s final ruling on the identity of the independent Administrator.

41.  For the avoidance of doubt, it is further recorded that neither party asked this Court to grant certificate for two counsel.