WONG KA WAI v. WONG KA YIN RITA (one of the Executors of the estate of WONG LUK KAN, deceased) AND ANOTHER

HCMP 1094/2021

[2024] HKCFI 3659

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1094 OF 2021

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D E C I S I O N

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1.  By a will dated 16 May 2002, the deceased appointed the 1^st and the 2^nd defendants as the executors of his estate. The deceased passed away on 22 December 2015 and probate was granted to the 1^st and 2^nd defendants as executors on 3 March 2016.

2.  By an originating summons dated 4 August 2021, the plaintiff has applied to remove the 1^st and the 2^nd defendant as the executors of the deceased’s estate and to have herself appointed instead. As an alternative to the removal application, the plaintiff seeks an order for the defendants to make an affirmation to exhibit an inventory and account of the estate’s assets. The application is opposed by the defendants.

3.  I have come to the view that the plaintiff’s application cannot succeed. Here are my reasons.

REMOVAL OF EXECUTORS

4.  The jurisdiction of the court to remove an executor is found in section 33(3) of the Probate and Administration Ordinance (Cap 10).

5.  When deciding whether to remove an executor, the court must form an assessment having regard to all the relevant circumstances of the case to consider if removal is necessary for the due and proper administration of the estate and the interests of the beneficiaries. Each case must be decided on its own facts and the assessment involves an element of value judgment on the part of the court, and this is what Lam VP said in the Tsang Wing Kwai v Tsang Wing Fai [2019] 1 HKLRD 1300 at [27].

(1) Alleged breach of duty and conflict of interest

6.  The plaintiff relies on four grounds to support her application. The first ground is that the defendants have allegedly breached their duties as executors by not collecting the debts owed by them to the estate and thereby acting in a conflict of interest. The plaintiff alleges that the 1^st defendant owes to the estate C$130,000, being the partial proceeds of sale of a house in Markham, Ontario, Canada (“the Canadian Property”), and the 2^nd defendant owes C$228,000 to the estate, also being part of the sale proceeds of the same property. The plaintiff alleges that the 2^nd defendant further owes to the estate a sum of C$25,000.

7.  The plaintiff relies on certain WhatsApp messages from the 1^st defendant and the 2^nd defendant made on 5 January 2016 to contend that the defendants separately admitted that they respectively owed the estate C$130,000 and C$228,000.

8.  On the other hand, the 1^st and 2^nd defendants deny the existence of the alleged debts. They say that the Canadian property was sold on 8 January 2004, and afterwards the deceased asked them to invest the sale proceeds in some Canadian stocks which ended in losses due to the financial crisis in 2005 to 2007. They then offered to return the unused proceeds of around C$20,000 to the deceased, but the deceased offered to gift that amount to the 1^st defendant.

9.  There is a dispute of fact on the affidavit evidence on the existence of the alleged debts. In the absence of any cross-examination, which I note the plaintiff has not applied for in these proceedings, the court is presently unable to resolve the factual disputes. I am certainly unable to find that the defendants’ evidence is only a recent fabrication as the plaintiff submits. In their proper context, I also do not read the relevant WhatsApp messages made amongst the siblings shortly after the deceased’s death as a clear admission of the alleged debts by D1 and D2. I cannot accept the plaintiff’s submission that I can reject the defendants’ evidence at this stage by simply relying on inherent probabilities and the WhatsApp messages.

10.  As to alleged debt of C$25,000, the 2^nd defendant has explained that all the beneficiaries knew about this loan in about 2005 and has repaid it to the estate by setting off HK$137,500 from the first distribution of cash from the estate. The plaintiff appears to dispute this in her last affirmation by saying that no bank records has been exhibited in these proceedings. Again, the court is currently unable to resolve this dispute.

11.  Accordingly, given that there is a dispute between the parties on whether the defendants are indebted to the estate, I do not believe that the plaintiff can show that the 1^st and the 2^nd defendants are in breach of their duties by not collecting the debts owed by them to the estate or are acting in a conflict of interest. The plaintiff therefore fails on this ground.

(2) Alleged failure to render full and proper accounts of the estate

12.  The plaintiff’s second ground of removal is that the defendants have failed to render a full and proper account of the estate to her.

13.  I note that there was extensive correspondence in 2020 between the plaintiff’s former solicitors and the defendants’ former solicitors in relation to the estate accounts prepared by the defendants. And the defendants have provided the plaintiff with the accounts of the estate with supporting documents at least on three occasions in May, June and September 2020. In particular, I note that the estate accounts were prepared by the defendants on the basis that the funds in a joint account held by the plaintiff and the deceased at DBS (“the DBS Account”) should form part of the estate.

14.  The plaintiff’s position is that the funds in the DBS Account should belong to her after the deceased passed away. The defendants, as the executors of the estate, take the view that the account was used for the purpose of collecting rent of a property of the deceased and the funds remaining in the account should therefore belong to the estate. Given the nature of these proceedings, it is not possible for me to resolve the dispute about the ownership of the funds in the DBS Account in these proceedings. And it is particularly undesirable for this court to express any view on this issue given that not all the beneficiaries of the estate are parties to this action.

15.  The plaintiff relies on a statement made on behalf of the defendants in August 2020 that the estate account did not reconcile with the distribution statement. But that statement was made by the defendants’ former solicitors in the context of the defendants lacking further details and statements in relation to the DBS Account, which was in the plaintiff’s possession. Given that there is a dispute between the parties over the ownership of the funds in the DBS Account, I do not believe that the defendants’ inability to finalise the estate accounts due to the lack of information concerning the DBS Account can be used by the plaintiff as a basis to complain about the failure to render full and proper accounts of the estate.

16.  And the plaintiff further relies on the fact that the defendants did not account for the debts they allegedly owed to the estate. But given that this is also a disputed issue, it cannot be used as a basis for the plaintiff to complain about the inadequacy of the estate’s accounts.

17.  For these reasons, I do not think there is merit in this ground relied upon by the plaintiff.

(3) Alleged failure to distribute funds of the estate

18.  The third ground the plaintiff relies on is that there is a failure by the defendants to distribute funds of the estate to the plaintiff. The plaintiff complains that she did not receive any distribution from the estate during the two earlier rounds of distribution.

19.  As reflected in the estate account prepared by the defendants in September 2020, the plaintiff was notionally distributed HK$800,000 in June 2016 and HK$400,000 in December 2017, and such distributions were to come from the funds in the DBS Account. This arrangement would appear to be reasonable if the funds in the DBS Account belong to the estate.

20.  The plaintiff’s third ground of removal is premised on the basis that the funds in the DBS Account belong to her so that the notional distributions made by the estate in 2016 and 2017 were invalid. As I said earlier, there is currently a dispute between the parties in relation to the ownership of the funds in the DBS Account, and it is not something I can resolve in these proceedings. In these circumstances, I cannot accept the plaintiff’s complaint that the defendants have failed to make any distribution of funds to her.

(4) Breakdown of relationship between executors and beneficiaries

21.  The plaintiff’s last ground of removal is that there is a breakdown of relationship between the plaintiff and the two executors and according to the plaintiff, which has brought the administration of the estate to a standstill.

22.  In this connection, the defendants contend that most of the steps to be taken in the administration of the estate have been completed. They say that parts of No. 91 Wellington Street have been assigned to the five children of the deceased and that all the valuable shares in the listed companies which the deceased held have been sold. The defendants also say that there have been two distributions of cash in the past and the remaining cash of the estate is relatively modest. It therefore appears that the only obstacles which prevent the completion of the administration of the estate are the disputes relating to the sale proceeds of the Canadian Property and the ownership of the funds in the DBS Account. And I note that this was something that Mr Poon confirmed in his oral submission during the hearing.

23.  Importantly, I note that it is the existence of these disputes between the parties which have led to the fact that the administration of the estate cannot be completed, and rather than because of the friction or hostility between the defendants as executors and the plaintiff as the beneficiary.

24.  Accordingly, I am unable to accept the plaintiff’s last ground of removal which is based on friction or hostility between the parties.

25.  For these reasons, I do not believe that the plaintiff has made out a case that the defendants should be removed as executors of the estate. I consider that removal is certainly not necessary for the due and proper administration of the estate and the interests of the beneficiaries. The parties must endeavour to find the appropriate means to resolve the remaining disputes between them in relation to the ownership of the funds in the DBS Account and the sale proceeds of the Canadian Property so that the administration of the estate can be brought to completion.

AFFIRMATION WITH INVENTORY AND ACCOUNT

26.  I now proceed to deal with the plaintiff’s alternative claim for the defendants to file an affidavit to exhibit a true and perfect inventory and account of the property of the estate. This application is made pursuant to section 56 of the Probate and Administration Ordinance (Cap 10).

27.  It seems to me that this claim suffers the same problem as the plaintiff’s complaint that the defendants have failed to render full and proper accounts of the estate. As I have said earlier, the reason why the defendants are unable to finalise the estate accounts is due to the fact that they believe the funds in the DBS Account belonged to the estate and that the plaintiff has withheld the relevant information about that bank account. In other words, the inability for the defendants to produce final estate accounts stems from the dispute between the parties regarding the ownership of the funds in the DBS Account. Until that dispute is resolved, I see little point for the defendants to produce another set of the estate accounts.

28.  I am therefore not minded to accede to the plaintiff’s alternative application either.

DISPOSITION

29.  For all of these reasons, I dismiss the plaintiff’s originating summons dated 4 August 2021.