WONG TAT LUN EDDIE AND OTHERS v. WONG CHI HO JIMMY (AS THE SOLE EXECUTOR OF THE ESTATE OF WONG CHUNG MING, DECEASED) AND OTHERS

HCMP 2391/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2391 OF 2013

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J U D G M E N T

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Introduction

1.  This is an application by the plaintiffs (collectively “Ps”) for an order that, among other things, the executor of the estate of Wong Chung Ming (“Deceased”) be removed.

Background

2.  The Deceased operated the business of manufacturing and distributing food products under the brand name “同珍” set up by his father.  Between 1960 and 1995, the Deceased also incorporated various companies for redevelopment of properties. The business and these various companies are collectively called the Tung Chun Group of Companies (“TC Group”).    

3.  For the purpose of the present hearing, the TC Group include the following 12 companies in the  TC Group :

(i) 8 companies to which the Deceased was said to have owed various sum at the date of his death[1] (“8 TC Companies”); and

(ii) 4 companies alleged by Ps to have owed the Deceased various sums in 2001 (“4 TC Companies”).

4.  Also included in the TC Group is a company called Wong Chung Ming Development Fund Company Limited (“Fund Co”) incorporated in 1995.  Fund Co is the holding company of various subsidiaries whose main businesses are the holding and developing of various real properties (“Subsidiaries”).

5.  The Deceased had a daughter out of his 1^st marriage, namely the 2^nd plaintiff herein Oi Lun, also known as Helen, who is now 76 years old (“P2”).

6.  Deceased’s 2^nd wife was Madam Chan Lai Chun, (“Madam Chan”), and out of their marriage they had a son, namely the 1^st plaintiff Eddie (“P1”), who is now 75 years and who has been living in the USA since 1982.

7.  The 3^rd plaintiff David (“P3”) is Eddie’s son, or the eldest grandson of the Deceased. 

8.  Madam Chan passed away on 6 March 2009.

9.  The Deceased also had a relationship with Madam Cheung Siu Fung, the 2^nd defendant herein (“D2”) who is now 85 years old, and  they had two children, a son Jimmy who is the 1^st defendant (“D1”) herein and a daughter Monica who is the 4^th defendant (“D4”).

10.  Both D1 and D4 are medical doctors.  D1 had his own medical practice which he gave up to help run the family business which he has been doing since 2002.  D4 is now working as the Assistant Director of Health (Special Health Services) at the Department of Health. 

11.  Deceased passed away on 10 December 2010.  His last will was made on 13 December 2000 (“Will”)[2].  D1 was appointed the sole executor and trustee of the Will, with D4 to fill in his office should D1 predecease the Deceased or be incapable of acting or unwilling to act.

12.  Among the beneficiaries was a Mr Chan Lau Kong (“Chan Lau Kong”), a long-time employee employed by companies in the TC Group.  Chan Lau Kong passed away on 21 February 2013 and his personal representative(s) has been named as the 3^rd defendant in this action (“D3”).

13.  The distribution of the Deceased’s estate under the Will is summarized as follows:

(a) Specific legacies:

(i) HK$2,500,000 to Madam Chan;

(ii) HK$2,500,000 to D2;

(iii) HK$1,000,000 to D3.

(b) Annual annuity:

(i) HK$720,000 (subject to adjustments in accordance with the Government Consumer Price Index) to Madam Chan;

(ii) HK$720,000 (subject to adjustments in accordance with the Government Consumer Price Index) to D2.

(c) Residuary estate:

(i) 2,200/3000^th shares for D1;

(ii) 500/3000^th shares for P1;

(iii) 150/3,000^th shares for P3;

(iv) 50/3,000^th shares for P2; and

(v) 100/3,000^th shares for D4.

14.  Since Madam Chan died before the Deceased, the bequests made in her favour lapsed.

15.  The Will was subsequently proved and probate granted to D1 on 16 September 2011 (“Probate”) with a copy of the Schedule of Assets and Liabilities dated 21 July 2011 (“Original Schedule”)[3].  There was later an additional schedule dated 15 September 2011 (“Additional Schedule”) and Probate was re-issued on 20 December 2011[4] (The Original Schedule and the Additional Schedule are collectively referred to “Schedules”). 

16.  The estate of the Deceased (“Estate”) was sizeable, consisting of:

(i) Cash  exceeding HK$78m;

(ii) Substantial holdings in listed and unlisted companies;

(iii) 19 landed properties, with no outstanding amount of charges;

(iv) Various chooses in action including 9 items of debts due to the Deceased

17.  There were also no less than 11 items of liabilities set out in the Original Schedule (“11 Items of Liabilities”). Although there appeared to be a net negative balance as regards the loans to and from the companies related to the Deceased of about HK$53.3m, even if accurate, this would not detract from the fact that the Estate was of considerable value.

18.  Some two months after the date of the making of the Will, on 26 February 2001, Fund Co’s shareholdings were changed to mirror substantially how the residuary estate under the Will was to be held.

19.  After the re-issue of Probate, there were various queries raised by Ps in relation to the assets and liabilities of the Estate, which I will go into later in this judgment.  This eventually led to a breakdown of communications between Ps and D1.

20.  Ps took out the originating summons in these proceedings on 16 September 2013 under Order 85 of the Rules of High Court Cap 4 (“RHC”) and section 33 of the Probate and Administration Ordinance Cap 10 (“Ordinance”) against the defendants (collectively “Ds”), seeking, among other things, the following orders:

(i) That D1 be removed as the executor of the Estate;

(ii) That either D4 be ordered as replacement executor or in the alternative Ps may within 14 days and in writing submit their nominations of professional accountants for appointment as the executor of the Estate;

(“Removal Application”)

21.  Further, due to disputes in relation to Fund Co, Ps issued proceedings on 21 October 2013 under the then section 168A of the Companies Ordinance Cap 32 against D1, D4 and Fund Co to seek a buyout order of their shares in Fund Co (“HCCW 298/2013”).  A copy of the Points of Claim was filed by Ps on 24 October 2013[5] (“Points of Claim”). D1 filed its Points of Defence on 17 June 2014 (“Points of Defence”)[6].

22.  Ps’ Removal Application was initially based on alleged delay and deficiencies on the part of D1 as the executor.  While Ps had made a number of complaints, eventually the main focus was on the amounts alleged to be owed by at least 3 of the 4 TC Companies to the Deceased / Estate of some HK$335m (“Loans”) which D1 had allegedly failed to ascertain. The Loans were recorded as “Amounts Due to Directors” in the audited financial statements.  The 4 TC Companies and the alleged respective amounts of the Loans in 2001 were originally said by Ps to be :

(i)	Colworth Company Limited (“Colworth”)	HK$281,204,324
(ii)	Tung Chun Company Limited (“TC Company”)	HK41,178,648
(iii)	Tung Chun Construction Company Limited (“TC Construction”)	HK3,340,633
(iv)	Tung Chun Manufacturing Company Limited (“TC Manufacturing”)	HK$10,019,963
	Totalling	HK$335,743,568

23.  The Removal Application was fixed for hearing on 16 April 2014 (“1^st Hearing”) and had to be adjourned part-heard to 10 July 2014 (“2^nd Hearing”).  Ps were represented by Mr Paul Lam SC leading Mr Jonathan Wong.  D1 was represented by Mr Ambrose Ho SC leading Mr Leon Ho.  D2, D3, and D4 were absent throughout those two hearings.

24.  Prior to the 2^nd Hearing, Ps issued a summons for leave to file further affidavit evidence from a solicitor Mr Robert Ip (“Ip”) out of time (“Leave Application”).  Ip was a former legal advisor of the Deceased and the TC Group.  This was opposed by D1.  Mr CY Li SC appeared for D1 for the Leave Application.  The other Ds were absent. After hearing the parties’ respective submissions, I granted leave on 23 June 2014.  The reasons for granting the Leave Application are set out hereinbelow.

Reasons for Decision for the Leave Application

25.  As mentioned earlier, one of the main focus of complaints by Ps was in relation to D1’s alleged failure to ascertain the Loans.

26.  The queries of the Loans was first raised by Ps in a letter 27 March 2012 from their solicitors CK Mok & Co (“CK Mok”) to D1’s solicitors Sit, Fung, Kwong & Shum (“SFKS”) under the heading “Chose in action” (“27.03.12 Letter”), noting that the account (sic) in 2001 of the 4 TC Companies mentioned above had recorded the Loans being due to the Deceased, and as the Loans were not disclosed in the Schedules, requesting D1 to provide documentary evidence showing the whereabouts of the Loans due to the Estate[7].

27.  SFKS replied on 24 April 2012 and their response was to seek copies of the accounting 2001 documents of those four companies referred to above.   Further, they stated that TC Manufacturing could not be found in the Hong Kong Companies Registry, whilst the other 3 companies, according to their audited account, they did not owe the Deceased any amount as at the date of his death (“24.04.12 Letter”)[8].

28.  It later turned out that Ps probably mistook Tung Chun Food Manufacturing Company Limited (“TC Food”) to be TC Manufacturing, but TC Food was only incorporated in 2003, and there could not have been accounts in 2001.  Anyway, for the Removal Application, Ps were really concentrating on the Loans owed to the Deceased by 3 of the 4 TC Companies, namely Colworth, TC Company and TC Construction.  

29.  In P3’s 1^st affirmation filed in support of the Removal Application, he had set out D1’s deficiencies as executor, and produced copies of correspondence between solicitors.  He had referred to the 27.03.12 Letter from CK Mok in relation to the query in respect of the Loans from the 4 TC Companies, and had said that by 23 August 2013, D1 was still reluctant to provide any information in relation to, among other things, Colworth[9].

30.  D1 filed his 1^st affirmation on 6 March 2014 to oppose the Removal Application.  He had produced in his 1^st affirmation, a letter written by SFKS on 29 May 2012 to Ip, saying that D1 would like to verify the position of the various sums due to and/from the Deceased and/or the Estate at the date of death and requesting Ip to provide certain information and/or relevant documents in this connection (“29.05.12 Letter”)[10].  This letter was sent after D1 had apparently called up and spoken to Ip a couple of times.

31.  Ip had replied on 5 June 2012 stating that he had not been involved as legal advisor of the Deceased and the TC Group since about October 2008 (“05.06.12 Letter”)[11].  Ip said according to his recollection, instructions were received from the Deceased to consider tax planning for the residual properties still under his name after the corporate restructuring in about 1997, and that there were discussions on, inter alia, the transfer of the remaining shares held by the Deceased and the directors’ loan provided by the Deceased to the TC Group. 

32.  According to Ip, he had subsequently prepared a written recommendation, and that in about September 2005, instructions were confirmed by the Deceased to Ip to proceed with the transfer of shares of the TC Group in favour of D1, and pursuant to this, further financial statements of the TC Group had been provided to Ip for calculation of the stamp duty for the transfer of shares, and that, those financial statements should be kept at the Accounts Department of the TC Group.  Ip had also suggested that D1 could obtain copies from the auditors, namely with Billy Ho & Associates CPA Limited (“BHA”) (up to 2008) and, Deloitte Touche Tohmatsu (“Deloitte’s”) (until 2003).  Ip had further said that if D1 wanted him to retrieve the old files, he was prepared to do so subject to payment of related costs. 

33.  There appeared to have been no follow up with Ip by D1/SFKS after the 05.06.12 Letter, the reason said to be that whatever information Ip had would be 9 years before the death of the Deceased.

34.  Although D1 did not follow up with Ip, he said he had instructed SFKS to approach the auditors for past records in relation to Colworth, TC Company and TC Construction.   He had produced letters SFKS wrote to Deloitte’s and  BHA respectively in August 2012 seeking those underlying supporting documents in relation to the Loans and having received no proper replied, reminder letters were sent in April 2013[12]. 

35.  Suffice to say, by the time of the 1^st Hearing, there had been no substantive replies or information provided by Deloitte’s or BHA. 

36.  The largest amount of the Loans due to the Deceased was from Colworth.  In reply to what was said by D1 in his 1^st affirmation, P3 had pointed out that Fund Co was and is at all material times 99% of shareholder of Colworth, and that D1 had already become the majority shareholder of Fund Co by early 2001, and that it was surprising that D1 had to seek information/explanation from Deloitte’s or BHA.

37.  Eventually, the day before the 1^st Hearing, D1 issued a summons for leave to adduce additional evidence by way of his 2^nd affirmation to deal with the issue.  For the first time, D1 clarified and asserted that the Loans were due to him by the 4 TC Companies and not to the Deceased, and he then made disclosure of the audited financial statements for Colworth, TC Company and TC Food for the years 2010 and 2011 and for TC Construction, only 2008.

38.  During the 1^st Hearing, this court had commented that had there been more provision of information from D1’s side, this might have helped in alleviating Ps’ concerns, and this court had further encouraged the parties to communicate during the adjournment.   

39.  According to Ps, after the 1^st Hearing, they had attempted to request for further information from D1 in relation to the 4 TC Companies from 2001, but to no avail.

40.  This then led to CK Mok writing to Ip direct on 5 May 2014 (“05.05.14 Letter”), and Ip replied on 14 May 2014 (“14.05.14 Letter”)[13]. Ip’s 14.05.14 Letter revealed that there had been numerous discussions between the Deceased, D1 and Ip on estate planning of the residual assets held under the name of the Deceased which included various director’s loans provided by the Deceased to the TC Group, including TC Company, Colworth and TC Construction, and that the incorporation of a new company to take over those loans was discussed.  According to Ip, it was not until about August 2005 that the Deceased  confirmed his instructions to Ip’s firm to prepare the necessary papers for, inter alia, transfer of his director’s loans to D1 instead of a newly formed company, but later in about September 2005, the Deceased refused to sign the documents for transfer of title to the director’s loans in favour of D1 and indicated that he would reconsider the arrangements in the light of the imminent abolition of estate duty by the Government of Hong Kong.

41.  Further according to Ip, in about December 2006, he attended the Deceased’s residence with the documents to follow up on the transfer of the director’s loans to D1, but after a short discussion, the Deceased again refused to sign those documents indicating that he would like to keep the residual properties including the said director’s loan under his name.  

42.  From what Ip had said, he last saw the Deceased in a family gathering in about March 2008, and that he had heard nothing further from the Deceased thereafter.  Ip had further said he was not aware of the execution of any documents by the Deceased for transfer of title of the director’s loans to D1 or any one else.

43.  After receipt of the 14.05.14 Letter from Ip, CK Mok wrote to SFKS asking them to reconsider their position on providing the financial statements of the 4 TC Companies for earlier years.

44.  Ps’ Leave Application was simply for them to file an affirmation from Ip to formally produce and to confirm the contents of the 05.05.14 Letter and the 14.05.14 Letter.

45.  Ps’ ground for the Leave Application was that the two Letters would be relevant to the issues in deciding whether this court should grant leave to remove D1 as the executor of the Estate.  Ps had no objection to D1 being given leave to file evidence in response.

46.  D1’s objections were based on the following grounds:

(i) Ps’ Leave Application was a prime example of “Case Splitting”;

(ii) Ip’s affirmation would be of low probative value and had negligible effect in advancing Ps’ position;

(iii) Ps’ substantial delay in issuing the Leave Summons, in that it was issued only after the 1^st Hearing, and further D1 only had a very tight time frame to deal with Ip’s affirmation.

47.  Mr Li SC had referred this court to Jacobs v Tarleton (1848) 11 QB 421, where Lord Denman CJ had held that where in a trial there was a single issue and the onus of proof was upon the plaintiff, he was not entitled to rely, in the first instance, upon a prima face case upon that issue, and afterwards, when that prima facie case was called in question by the defendant, to call other evidence to confirm his prima facie case[14]. Mr Li also referred to an Ontario Court of Appeal decision Allcock Laight & Westwood v Patten [1967] 1 OR 18 which followed and accepted the same principle. 

48.  The principles of the general rule against case splitting was not disputed by Mr Lam SC.

49.  As stated by Shroeder JA in Allcock, it is well settled that where there is a single issue only to be tried, the party beginning must exhaust his evidence in the first instance and may not split his case by first relying on prima facie proof, and when this has been shaken by his adversary, adducing confirmatory evidence[15].

50.  As Mr Li himself had said that the principles in both Jacobs and also Allcock were stated in the context of trials.  It was his submission that the rule against case splitting was also applicable in the present hearing, and the Ps could have contacted Ip over a month before the 1^st Hearing.

51.  I am of the view that the circumstances of the present case were different from Jacobs or Allcock.  The single issue here in the Removal Application before this court is whether D1 should be removed as executor of the Estate.  There were several complaints from P, and one of these was in relation to whether the status of the Loans should have been investigated by D1, and whether they would form part of the Estate or should have been disclosed in the Schedules; and if so, and whether D1 would be in a conflict position to carry out such investigation.

52.  Ip’s 05.06.12 Letter was only produced in D1’s 1^st affirmation for the first time, and this letter in fact appeared to confirm Ps allegation that on 31 March 2001 there were indeed directors loans provided by the Deceased to some companies, and although there appeared to have been discussions between Ip with the Deceased and D1 on the transfer of directors loans from the Deceased to D1, it was not quite clear whether the transfers took place. 

53.  It was, however, not until D1’s 2^nd affirmation that his position was made clear that the Loans had indeed been transferred to him and some audited financial statements of the 4 TC Companies were disclosed.  It was however not clear as to when the transfer took place.

54.  Mr Li also referred to a number of cases post CJR in relation to the filing of new evidence.   

55.  The general approach and principles had been summarise by Bharwaney J in Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 709.  This was an appeal against the Master’s decision to dismiss the plaintiff’s application to file additional witness statements where the case had been or was ready to be set down for trial.   Bharwaney J dismissed the appeal and held that whilst the primary aim was to secure a just resolution of the dispute, taking into account the right of a party to rely on admissible, relevant and probative factual evidence, other circumstances – including the potential disruption to the trial, the prejudice to other parties, and the applicant’s explanation for the late application – had to be weighed against the underlying objectives of CJR to ensure the cost-effectiveness of the proceedings, expedition and reasonable proportionality; having regard to the amount of money involved, the importance of the case, the complexity of the issues, and each party’s financial position; to ensure procedural economy and fairness between the parties[16].  Bharwaney J had also said very strong grounds would be required to move a court to accede to such applications if doing so would result in trial dates being vacated[17].

56.  Mr Lam did not dispute the principles in relation to late application for filing evidence cited by Mr Li.  

57.  As accepted by Mr Li, whether the court will grant leave for the filing of new evidence is in the discretion of the court after careful weighing in each case the relevance and probative value of the late evidence against the potential disruption of the proceedings, prejudice to other parties and the objectives of CJR.  

58.  DHCJ Ng had also summarized the approach in Liu Chen and Chan Poon Wing & Anor, HCPI 779/2006, unreported, 07.10.09, that whilst each case must be determined in the context of its own factual and legal matrix, the considerations of the court would largely be largely three-fold[18], namely:

(i) The merits of the proposed application – whether the application if granted will assist the court in securing “the just resolution of dispute in accordance with the substantive rights of the parties” ( Order 1A rule 2(2) of RHC);

(ii) The presence or absence of any real prejudice to the other party;

(iii) Any conscious flouting of the rules of court, practice directions and/or case management directions/timetables, or any over-reaching or deliberate manoeuvring on the part of the applicant.

59.  In the present case, it was D1 who was late in the first place in providing clarification and confirmation of the Loans having been transferred to him.

60.  During the 1^st Hearing, D1’s Senior Counsel Mr Ho had drawn this court’s attention to the 05.06.12 Letter from Ip and that there had been tax planning being considered by the Deceased which involved discussions of transfers of directors’ loans from the Deceased to the TC Group in 2005.  The inference from that letter was that the Loans in question could have been transferred to D1 as a result of tax planning. 

61.  At the time of the 1^st Hearing, from the then available information, there was clearly a gap period between 2001 when the Loans were said to be due to the Deceased, and the respective dates of the audited financial statements of the 4 Companies which showed that in 2008/2009 the Loans were due to D1.  

62.  In light of the late clarification by D1 as to his position in relation to the transfers of the Loans, and the late provision of the audited financial statements by D1 of the 4 TC Companies, and further in light of D1’s failure to follow up on Ip’s offer to retrieve the old files in his 05.06.12 Letter, it was not unreasonable that after the 1^st Hearing, Ps then tried to seek from D1 further clarification of certain matters and also audited financial statements of the 4 TC Companies for earlier years since 2001.  Failing proper responses from D1, it was not, in my view, unreasonable for Ps to directly approach Ip for further information thereafter for further information.

63.  Ip’s 14.05.14 Letter revealed that as late as in December 2006 the transfers of the Loans from the Deceased to D1 might not yet have taken place, although I accept that it could be possible that such transfers could have taken place without Ip’s knowledge.  Mr Li had criticized that the information from Ip was from his recollection and that Ps were carrying out a “fishing exercise”.   However, as Ip had said in the 14.05.14 Letter, what was stated therein was not merely according to his recollection, but also from the records of the firm Messrs Robert CC Ip & Co.  Also, it would seem from the 14.05.14 Letter that according to Ip, D1 was kept informed of some of the matters stated therein. 

64.  Having considered D1’s 1^st and 2^nd affirmations and the information produced by D1 at the 1^st Hearing about the Loans, I am of the view that Ip’s 14.05.14 Letter would be relevant to P’s case.  Ps had demonstrated there were merits for the Leave Application.  There was no conscious flouting of any procedural rules on the part of Ps.

65.  SFKS had had a copy of the 14.05.14 Letter since 26 May 2014.  The 2^nd Hearing was not to take place until 10 July 2014.   D1 should have had sufficient time to seek advice on the 14.05.14 Letter from his legal team.  There was sufficient time for D1 to file any affirmation in answer to Ip’s affirmation, and there was no evidence that any adjournment of the 2^nd Hearing would be required.  In my view, there was no real prejudice to D1 in allowing the Leave Application.

66.  For all the above reasons, I gave leave to Ps to file Ip’s affirmation before close of business on 23 June 2014, and leave to D1 to file an affirmation in response on or before close of business on 7 July 2014.  I ordered costs be in the cause with certificate to Counsel.

Legal principles on removing of an executor  

67.  Section 33(3) of the Ordinance provides that:

“The court may, if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled to 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.”

68.  Mr Lam SC had referred this court to Chan Sau Heung v Kwan Siu Fai, HCMP 2620/2012 (17/4/2013) where the legislative background and history of this statutory provision in England and in Hong Kong had been set out by Poon J[19].

69.  In England, the power or removal of a personal representative without revocation of the grant is found in section 50 of the Administration of Justice Act 1985.  As observed by Poon J in Chan Sau Heung:

“It is not necessary to establish wrongdoing or fault by the personal representative in order to obtain his removal under section 50 of the 1985 Act. The court may order a removal if, for example, the breakdown of relations between the personal representatives (such as clash of personalities, or the lack of confidence in the personal representative by the beneficiaries) leads to the administration coming to a standstill, or makes it difficult or impossible for the administration to be completed by an existing personal representative...”[20]

70.  Mr Lam also referred to Re Steel Augus v Emmott [2010] EWHC 154 (Ch) where the English Court reaffirmed that the court’s power to remove and replace a personal representative was in no way limited to cases of misconduct[21], and the Court stressed that the main guide must be “the welfare of the beneficiaries”[22].

71.  It has also been said by Deputy Judge Leung  in Cheng Tang Kam Yung v Tang Kam Cheung and Another, HCMP 147/2008 (26/8/2013), that the terms of section 33 (3) are wide and the establishment of specific guilt or misconduct in administering the estate is not a pre-requisite of the discretion in that section[23].

72.  Mr Lam had further referred to various other cases in Hong Kong and submitted that in the exercise of its discretion, the court 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 interests of the beneficiaries[24].

73.  As pointed out by Lam J, as he then was in Re Estate of Lau Yik Yam [2010] 3HKLRD 700, a case which was referred to by Poon J in Chan Sau Heung and also Deputy Judge Leung in Cheng Tang Kam Yung, section 50 of the 1985 Act, on the face of its wording appeared to be wider than that under our section 33(3).  In the English provision the court is given a general unfettered discretion whilst section 33(3) requires the court to be satisfied that due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require before the power of removal can be exercised[25]. (emphasis added)

74.  Mr Ho SC on the other hand referred to authorities from various other jurisdictions and submitted two general principles:

(i) The court will respect the testator’s choice to appoint his executor, and will not remove an executor save on special grounds;

(ii) In less serious situations, the court will either refuse the application to remove executors, or adopt other measure as it sees fit.

75.  In particular, Mr Ho SC had referred to the following which was said by Jeune P in  In the Goods of Loveday [1900] P 154:

“After all, the real object which the Court must always keep in view is the due and proper administration of the estate and the interests of the parties beneficially entitled thereto … If the Court has in certain circumstances made a grant in the belief and hope that the person appointed will properly and fully administer the estate, and if it turns out that the person so appointed will not or cannot administer, I do not see why the Court should not revoke an inoperative grant and make a fresh grant.”[26]

76.  As pointed out by Mr Ho, the passage cited above in Loveday contained exactly the same words that appear in our section 33(3).  In Loveday, the administratix could not be found and thus could not administer the estate.

77.  Mr Ho had also referred to  Tsaknis As Executor and Trustee of the Estate of Geoffrey Douglas Roland Liburne (Dec) v Lilburne [2010] WASC 152, where Em Heenan J of the Supreme Court of Western Australia  held that :

“The testator’s choice of a designated person to be executor or co-executor implies that the deceased reposed trust in that person and considered him or her to have been suitable and capable of performing the duties required ... Especially in relation to family affairs where it might be suggested that there is, or might be, a conflict of interest between the executor named and the due administration of the estate, it is necessary to bear in mind that the deceased can be expected to have known of relationships and circumstances existing during his lifetime which might create or lead to any expectation of any such conflict of interest and, to have made the choice of appointee in the light of that knowledge. However, this approach cannot be taken in relation to conduct or circumstances which have arisen since the death of the testator or about matters which the testator could not have been expected to have had knowledge”[27]

78.  In Tsaknis, a grant of probate of the will was made to one of the two executors appointed under the will with leave reserved to the other executor to apply for probate.  The other executor then applied for, among other things, a grant of double probate.  This was opposed by the executor granted probate who also sought leave to revoke the leave reserved for the other executor to apply for probate.  In the end, Em Heenan J ordered a trial of an issue to determine whether the other executor’s application for a double grant should be passed over.

79.  I accept that the passage quoted above was made in the context of passing over an applicant for a grant who was an executor named by the deceased.

80.  However, as said by Newey J in Kershaw v Micklethwaite & Ors [2010] EWHC 506 (Ch), a testator’s choice of executors is capable of being of relevance, if no other basis then because the testator may be expected to have had knowledge of the characters, attitudes and relationships involved which a court will lack[28].

81.  Mr Lam submitted that no Hong Kong authority on the relevance of this factor in the present context and that in Kershaw, there was evidence that Mrs Kershaw had devoted considerable thought to who her executors should be and there was no such evidence in the present case.

82.  Although there was no such evidence in the present case as in Kershaw, in my view, a testator’s choice of a designated person to be executor or co-executor must, on the face of it and unless there was evidence to the contrary, imply that the deceased at least reposed trust in that person and considered him or her to have been suitable and capable of performing the duties required.

83.  Having heard submissions from both sides, to summarise, the court has a wide discretion under section 33 (3) of the Ordinance, but will need to be satisfied that the removal or suspension is required for (i) due and proper administration of the estate and for (ii) the interests of the persons beneficially entitled to the estate, or interests of the beneficiaries.  To be so satisfied, the court has to consider all the circumstances of the case and each case will depend on its own facts. Matters the court may have regard include size of the estate, nature of the assets, background, education, training and experience of the remaining and substituted personal representative.

84.  The testator’s choice of executors may be a relevant consideration.  Friction or hostility between the executor and the beneficiaries, although per se may not be a good reason for the removal, such hostility if grounded in the manner in which the estate is being administered or not being administered is a matter that ought not to be disregarded[29].  The reasons where an executor has been removed include, but not limited to :

(a) Absolute inactivity for years[30];

(b) Inexplicable diminution of assets and/or excessive administration expenses[31];

(c) Serious conflict of interest[32]

85.  It has also been said that the court must always be very cautious and sparing in the exercise of the power to remove an executor or administrator, and that there has been reluctance to make such an order in the case of an incumbent executor or administrator who wishes to carry on, without allowing that incumbent an opportunity to repair or remedy any defects and progress promptly with due administration[33]. Further, the fact that administration of the estate could have been done better is not of itself sufficient ground for the court to remove an executor[34].

86.  With the above principles in mind, I turn to the Removal Application.

Ps’ Grounds for the Removal Application

87.  Ps’ main grounds for the Removal Application initially were[35]:-

(a) D1 had been delaying in administering and distributing the Estate and failed to administer it properly, fairly and impartially; and

(b) D1 had failed to keep a proper and accurate account of the Estate and had failed to render such account when called upon to do so.

88.  At the 2^nd Hearing, Ps’ grounds had included the existence of friction and hostility between D1 and Ps, and conflict of interest.

Matters leading up to the Removal Application

89.  After the filing of the Additional Schedule and re-issue of Probate, SFKS wrote to CK Mok on 20 January 2012 (“20.12.11 Letter”)[36], indicating that the next stage of the administration would involve :

(i) Valuation of  19 landed properties in the Original Schedule;

(ii) Verification of the current values of the listed securities in the 2 Schedules;

(iii) Original Probate be presented to the banks for registration in order to process the closure of accounts in the 2 Schedules;

(iv) Original Probate to be produced to the share registrars of the listed shares for registration in the 2 Schedules;

(v) Original Probate to be registered at the land Registry against each of the landed properties;

(vi) If deemed necessary, a meeting would be called to discuss further details in due course.

90.  After receipt of the above letter, CK Mok had sent a number of letters raising various queries, in particular in relation to the 11 Items of Liabilities, seeking further information and documentary proof thereof, and also seeking a distribution of the monies in the Deceased’s bank accounts.

91.  In response to CK Mok’s letters, SFKS replied on 14 March 2012 dealing with Ps’ queries (“14.03.12 Letter”)[37], in particular providing information in relation to the 11 Items of Liabilities.  It was stated in this letter that the valuation of the properties had not yet been carried out, as D1 was going to choose and determine which property valuation firm to be engaged (“Property Valuation”).

92.  SFKS had explained in the 14.03.12 Letter that any distribution could only be effected after due payment of debts of the Deceased.  They then pointed out that there was a landed property in the United States in the name of the Deceased which was subject to certain litigation and/or claim by third parties including some public authorities, and this might have a negative impact on the Estate, and further investigations into this were being carried out.  

93.  No details in relation to the litigation had been provided in the 14.03.12 Letter at that time.  It later transpired that the property which was subject to the litigation consisted or 5 plots of land (“Rialto Property”).  The Rialto Property with other adjoining sites had been used to store, test and manufacture fireworks, etc, and the area’s groundwater was alleged to be contaminated as a result.  There seemed to be two sets of claims, one by a company called Goodrich Corporation (“Goodrich”), namely CV-6630-PSG-SS filed on 11 September 2009, and the one by US Government and Environmental Protection Agency (“EPA”), namely CV-01864-PSG-SS filed on 4 February 2010.  The Deceased and TC Company were named as defendants in both sets of claims, among some 10 other defendants (“collectively “US Litigations”).  The two claims were later consolidated[38].

94.  Anyway, the tone of the 14.03.12 Letter was not an unfriendly one, and SFKS had asked Ps whether they had any further comments on the 11 Items of Liabilities, and further SFKS had ended their letter by saying D1 would welcome any questions and and/or proposals form Ps without having to wait for a formal family meeting.

95.  This was followed by the 27.03.12 Letter from CK Mok referred to earlier, which raised more queries and in particular, the queries on the Loans.   On the issue of Property Valuation, in this letter, CK Mok had also commented that it was in early January 2012 that D1 had expressed the need of having a valuation report of the 19 landed properties and that Ps found it very surprising that D1 had not yet by end of March even decided on which surveyor to prepare the valuation.  Out of the 11 Items of Liabilities, 8 were due by the Deceased to the 8 TC Companies, and CK Mok had in the letter also asked for inspection of the relevant accounts of the 8 TC Companies since 2002.  The letter ended by CK Mok again demanding a distribution of the cash in the bank accounts, and stating that unless there was a reply within next 7 days, they had standing instructions to seek court’s direction as to the administration of the Estate. 

96.  This then sparked off a 8 page letter from SFKS on 24 April 2012 (“24.04.12 Letter”)[39] first of all pointing out that due to the number of issues raised in the 27.03.12 Letter, it would require “very substantial time” to collect and assemble information/materials in response.  On Ps’ complaint about the delay in the Property Valuation, D1 had explained that he had to consider the costs/benefits in the exercise and the correct timing for that, as whether the properties would need to be sold in the course of administration of the Estate, and if they were to be sold, then there would not be any need for professional valuation, indicating that it was premature to instruct professional valuers to incur substantial costs for valuation at that time.

97.  This was met with a reply from CK Mok on 18 May 2012[40]  (“18.05.12 Letter”), in which Ps then set out the background and alleged that the Deceased had set up Fund Co to effect distribution of the family assets amongst selected family members by allotment of shares, and that following a series of allotment of shares, D1 had ended up with 75% of the Fund Co, whereas P1 got 16.6% and the rest distributed among P2, P3 and D4. 

98.  It was further alleged in the 18.05.12 Letter that D1 was appointed to be the executor of the Will, and director and permanent Chairman of the Fund Co because the Deceased had thought D1 would be fair, open and reasonable and would look after the interest of his brothers, sisters and nephew.  Ps then set out their complaints on how Fund Co had been run since 2002.

99.  What Ps had also alleged in the 18.05.12 Letter was the following:

(i) D1 took over control of the TC Group in mid 2002 following the deterioration of health of the Deceased;

(ii) After 2009, P1 and P3 had difficulty to visit the Deceased without D1’s permission and supervision, and it was not until 2009 when the Deceased fell into coma and was in intensive care room that P1 and P3 could visit the Deceased freely without D1’s control;

(iii) Following the death of the Deceased, D1 had continued to show total disregard of the interest of his family members and made all kinds of excuses to exclude their participation in but not limited to refusal to convene family meeting to account for the affairs of the administration of the Estate and also the burial matter.

100.  The 18.05.02 Letter ended by Ps accusing D1 of deliberate delay, frequent change of mind, concealment of assets and exaggeration of liabilities.  The 18.05.02 Letter seemed to be a turning point, as the tone of that letter had become aggressive.  The letter was met with no response for 2 months and CK Mok wrote again on 26 July 2012 demanding the accounts for the 4 TC Companies from the year 2002 up till the present, and threatened legal action.  Again, there was no response from D1/SFKS.

101.  Thereafter, on 22 January 2013, CK Mok separately sent a number of letters to D1 and Fund Co and various Subsidiaries seeking certain audited financial statements[41], but there was again no reply to these letters.

102.  Eventually, on 5 February 2013, SFKS forwarded a personal letter dated 1 February 2013 from D1 addressed to P1[42] (“1^st Progress Report”) in which, D1 reported on the progress of administration and announcing that he would be arranging a preliminary provisional uniform distribution of HK$200,000 to the 7 named beneficiaries under the Will, including Ps and D1 and other defendants.  In this 1^st Progress Letter, D1 reported that:

(i) Transfer of monies in the Deceased’s bank accounts with HSBC and BOC had been made to the Executors’ bank accounts;

(ii) Shares in listed companies, with exceptions of a few, had been transferred to the Executor;

(iii) Registration of the Probate in the Land Office was being processed.

103.  At the same time, D1 also reported in the 1^st Progress Report that the various items of assets/liabilities of the Estate had not yet been finalized due to queries raised by certain beneficiaries and that this would take some to time to resolve before there could be final distribution of the Estate.

104.  CK Mok responded on 11 March 2013, pointing out that the 1^st Progress Report did not deal with many of the issues raised by Ps in their previous letters, but there was again no response to this letter.

105.  Eventually, CK Mok sent a pre-action letter on 30 July 2013 when D1 was given the last opportunity to respond to the matters raised by Ps in relation to the administration of the Estate. 

106.  SFKS finally responded on 23 August 2013 to provide more information as to what had been done for the administration of the Estate[43] (“23.08.13 Letter”).  It would appear from the enclosures to that letter, that D1/SFKS had sent 12 letters of request sent to Tricor Services Limited and 25 letters of request, all dated 24 December 2012, to request for registration of D1 as executor of most of the listed shares, and the shares in a total of 34 companies had been duly registered.  Further, it was stated in the 23.08.13 Letter that some of the share certificates had not yet been found, and D1 had instructed SFKS to declare loss and to obtain new share certificates.  From the copies of the land searches of the properties, the Probate was duly registered at the Land Registry on 22 April 2013.

107.  SFKS further set out in the 23.08.14 Letter D1’s response to the following 3 matters, which were briefly:-

(i) Property Valuation – D1’s attitude maintained the same as set out in the  24.04.12 Letter that this was pre-mature;

(ii) US Litigations – The US Litigations involved substantial claims by EPA preliminarily estimated to be in terms of tens of millions of USD and US lawyers had been instructed to study the situation. 

(iii) The Loans – D1 said the request for audited accounts for Colworth, TC Company and TC Construction since 2002 was oppressive, and would deal with the request separately.

108.  In D1’s 1^st affirmation in opposition, he had exhibited an undated “Interim Report” on the administration of the Estate (“1^st Interim Report”)[44].  Ps had, however, complained that the Interim Report was not complete, and had contained inaccuracies, which D1 had later admitted and explained. 

109.  To summarise, Ps’ specific complaints included the following areas:

(i) D1’s unsatisfactory way of handling the US Litigation;

(ii) D1’s failure to conduct the Property Valuation;

(iii) D1’s failure to ascertain the Loans and conflict of interest;

(iv) Existence of friction and hostility.

Unsatisfactory way of handling the US Litigations

110.  I will begin with this complaint first.

111.  In late 2012 and early 2013, the EPA had reached settlement agreements with some of the defendants[45], but legal actions against the Deceased and TC Company were still pending.

112.  D1 had claimed that the US Litigations might have a negative impact on the Deceased’s estate and had produced voluminous documents.  What D1 had said were as follows:

(i) Chan Lau Kong did not provide information to SFKS as requested by D1 up to his death in February 2013.

(ii) D1 had to instruct a firm of US lawyers Fox Rothschild (“Fox”) through SFKS to investigate into the US Litigations in early 2013. As a result of the searches and investigations by Fox, some 650 pages of documents had been generated in about June 2013.

(iii) Since then, there were exchanges of views, discussions and instructions going back and forth between him, SFKS and Fox, but according to D1, such exchanges between SFKS and Fox, and D1’s instructions to the lawyers were privileged and confidential.

(iv) A lien had been registered against the Rialto Property[46].

(v) D1 had instructed Fox to negotiate a settlement with EPA[47].

(vi) There was at that time a pending application by Goodrich to substitute the Deceased by D1 as defendant in the US Litigations.

(vii) There seemed to have been an offer from the tenant of the Rialto Property[48] to buy the Rialto Property to avoid the property being forfeited and then sold by auction by the relevant parties[49] .

113.  D1 had produced voluminous documents in relation to the US Litigation in his 1^st affirmation. Pausing here for a moment, I must say what D1 could have done was simply to prepare a summary or report on the US Litigations, in particular the then status, with all those documents available for inspection by Ps, if necessary. I find it extremely unhelpful, not to say waste of paper, to include almost 1,000 pages in the paginated bundles when it seemed only those documents referred to by Mr Lam were really relevant[50].

114.  The Rialto Property did not appear in the Schedules. It is an asset of the Deceased outside Hong Kong.  As pointed out by Mr Lam, the Probate granted by the Hong Kong Court would not give D1 any authority to collect foreign assets.  D1 would have to apply for an ancillary grant or a separate grant in US.  As a fiduciary, he would be under a duty to apply for a foreign grant where the interests of the Estate so require[51].

115.  It was not clear from D1’s 1^st affirmation whether D1 had taken all proper and necessary steps under the relevant US law to collect the Rialto Property and to safeguard the interests of the Estate.

116.  Further, Mr Lam had submitted that it was misconceived for D1 to conceal the communications between himself and the Hong Kong as well as US lawyers in relation to the US litigations and the related negotiations.

117.  D1 owes fiduciary duties to the other beneficiaries, and must be obliged to give a full and frank account of all relevant facts to them.  I am of the view that confidentiality should not be a reason for D1 not providing an account of all relevant matters to the beneficiaries of the Estate, and if necessary, confidentiality of any disclosure could have been preserved by the beneficiaries giving necessary and appropriate undertakings. 

118.  Up until D1’s 2^nd affirmation, there was no information as to the potential liability in monetary terms, such as if the Rialto Property were to be sold compulsorily to satisfy the lien, whether there would be any surplus, or shortfall, and also, whether there would be any legal basis under the US law for the potential judgment creditor to require the Estate to satisfy any outstanding sum by reference to the Deceased’s assets in Hong Kong.

119.  All such information could have been answered by D1 instructing Fox to provide an opinion, which would have been helpful in answering Ps’ queries and allaying their concerns.  It was only in D1’s 2^nd affirmation that he exhibited an email dated 10 April 2014 from one Thomas Chan, a partner/arbitrator of Fox to D1[52] (“Advice Email”), and marked confidential with access limited to the court, Ps and their legal advisors.  The Advice Email provided some answers to the above queries of Ps.

120.  From what I could gather, D1’s case seemed to be that although he had attended a meeting with the Deceased some time in 2008, and was given a power of attorney to deal with the US Litigations, the person who had been handling the “US matters” was Chan Lau Kong who had all the information, and that there seemed to be another piece of land in the US.  Notwithstanding being requested by D1, Chan Lau Kong did not provide much information about the US Litigations to SFKS and he then passed away.  SFKS had to conduct their own searches in 2012 to find out more information about the US Litigations.  Eventually, Fox was instructed in early 2013, and Fox conducted the preliminary searches on 10 June 2013, which revealed that the claims against the Estate might be substantial[53].

121.  D1 had said that if he were to be removed and replaced by a professional accountant to be appointed by this court, the new executor would not be able to deal with the matter effectively, which would entail extra time and substantial costs in any event.

122.  Although D1 had been relying on SFKS and Fox for information and advice, ultimately, it was the Deceased and TC Company which were the named defendants, and instructions to the lawyers would have to come from the executor and TC Company.

123.  Even if D1 did not have much information about the US matters in 2012 or early 2003, I am of the view that by now, D1 would have become more involved in the US Litigations and the related negotiations.

124.  D1 had in his latest 3^rd affirmation provided further updates on the US Litigation confirming that the US Court had made an order on 15 April 2014 substituting D1 as defendant in place of the Deceased, upon Goodrich’s application.  Goodrich had been described as an aggressive litigant. Further, Goodrich was at that time filing an application for default judgment in the sum of some US$11m and a declarative judgment against the Estate for all future response costs incurred by Goodrich.  

125.  D1 had also said in his 3^rd affirmation that a hearing for Goodrich’s application was scheduled for 28 July 2014, about 2 ½ weeks after the 2^nd Hearing.  Negotiations had already started with the US Department of Justice and EPA since early 2014 and there had been a without prejudice telephone conference for settlement negotiations with them which took place on 21 June 2014 and that further negotiations had been planned.  However, according to D1, EPA had also filed an amended Complaint, and that D1 had to file a response by 18 September 2014.

126.  According to the Advice Email from Fox, full litigation cost is costly and difficult to estimate.  It seems that for an EPA settlement, the total costs would be about US$55,000, and for the Goodrich litigation, it would be at least UD$1m.

127.  D1 accepted that an amount could be set aside for the US Litigations so that the administration and distribution of the rest of the Estate would not be affected.   However, having regard to the state of the US Litigations, I am of the view that at this stage, a change of the executor is likely to cause further delay to the US Litigations and/or achieving a settlement with the EPA.  There will also be extra costs.

Failure to conduct the Property Valuation

128.  The 19 landed properties in Hong Kong formed a substantial part of the Estate.  Ps said they had no idea about their value.  It was therefore Ps’ case that D1 should either sell the properties and distribute the sale proceeds to the beneficiaries; or distribute the properties in specie to the beneficiaries by exercising his power of appropriation (subject to the need to settle the Deceased’s debts and liabilities), and that in order to administer this part of the Estate, Property Valuation must be done. 

129.  As earlier mentioned, D1 had given an explanation in the 24.04.12 Letter that there was no point to carry out any valuation until and unless the properties would be sold or when they would be distributed in specie; and a pre-mature valuation would be a waste of money.   D1 had maintained this position until his 3^rd affirmation, filed in response to Ip’s affirmation, after the Leave Application had been granted.

130.  It was D1 himself who indicated back in the 21.01.12 Letter  that the next stage of the administration would involve the Property Valuation, and from the exchange of letters, it  was not clear as to when, in D1’s view, would be the right time to sell the properties or, alternatively, distribute them in specie to the beneficiaries. 

131.  I accept what Ps said, D1 clearly changed his mind about carrying out the Property Valuation, and if D1 were to take the view that this would not be the right time to do so, he should provide the reasons to the beneficiaries and to state when, in his view, would be the right time.    Up until D1’s 2^nd affirmation, Property Valuation had not been carried out by D1 and there was no indication from D1 when he would do so.

132.  D1 had said in his 2^nd affirmation in light of the update from his US lawyers in relation to the US Litigations, he was in a better position to provide concrete figures and roadmap for further distributions, and he had finally exhibited a copy of the specific plan and time line for distribution (“Distribution Plan”)[54], but claimed that this had to be a confidential exhibit with access limited to the court, Ps and their legal advisors.

133.  The Distribution Plan reflected “estimates” of Net Value of the Estate as at 15 April 2014, and a summary of values of the landed properties was attached.  The market values were stated to be at 19 March 2014. 

134.  It was stated in the Distribution Plan that all the landed properties held by the Estate would be made available for sale.

135.  It was further stated in the Distribution Plan that there would be 3 phases for distribution, the 1^st one to be completed in a month, the 2^nd one to be completed in 6 months including the sale of the landed properties, and the 3^rd phase to be completed 6 months after settlement of the US Litigation.

136.  Now that D1 had produced the Distribution Plan and all the landed properties would be sold, D1 had taken steps to deal with this complaint.

Failure to ascertain Loans and Conflict of Interest

137.  By the 2^nd Hearing, this complaint had become Ps’ main focus.  D1 had eventually in his 3^rd affirmation produced the audited financial statements for Colworth, TC Company and TC Construction since 2005.

138.  Further, in light of Ip’s assertions that the Deceased had at some stage refused to sign those draft documents prepared by Ip, D1 had in his 3^rd affirmation explained that the Deceased had instructed the late Billy Ho of Billy Ho and Company (“BHC”), a long time friend of the Deceased, to effect the transfer of the Loans to D1.  D1 then said he had instructed SFKS to write to BHC on 30 June 2014 for further information[55], but apparently BHC would need 3 weeks to provide “initial response” as they had resigned as auditors of the companies some years ago[56].

139.  It would appear that the letter initially sent by SFKS to BHA was sent to the wrong firm, and that the correct firm which was the auditor for the 4 TC Companies should be BHC.  As BHC’s name clearly appeared on the audited financial statements, I do not understand why SFKS were instructed to write to BHA.

140.  Anyway, D1 had explained in his 3^rd affirmation that the transfer of the Loans was part of the greater plan for the Deceased to transfer his business to D1, and as part of this estate planning, D1 had to shoulder the Deceased’s liabilities.  Thus, in 2006, D1 had agreed to replace the Deceased to be the sole guarantor of HK$52m, for a revolving loan banking facility  made by HSBC to Colworth in the early 1990s, and that D1 executed the guarantee on 8 September 2006[57].

141.  D1’s duties as an executor would include the duty to collect the Deceased’s assets.  It was not until D1’s 2^nd affirmation that he clarified that those Loans owed by the 4 TC Companies were in fact owed to him instead of the Deceased.  Further it was only after his unsuccessful opposition to the Leave Application that D1 filed his 3^rd affirmation producing the audited financial statements for earlier years, and gave a clearer explanation in relation to the transfer of the Loans to him by the Deceased.

142.  At the time of the 2^nd Hearing, BHC had not yet provided the further information in relation to the transfers.  It was not known whether BHC would be able to produce any further information.  Ps, however, did not wish to wait for the reply.

143.  It was thus not known clear whether there had been any transfer documents signed by the Deceased and D1 relating to the Loans, and whether there had been any board resolutions approving the transfers.

144.  The 2005, 2010 and 2011 financial statements for Colworth, TC Company and TC Construction were audited by Deloitte’s and the 2006-2008 financial statements were audited by BHC.  I note there was no qualified opinion provided in relation to the Loans by either firm of auditors.

145.  On comparing the 2006 financial statements with the 2005 ones, one can see the following:

(i) Colworth –

The transfer of the Loan appeared to have taken place during the financial year ended 31 March 2006, and the 2006 financial statements were stated to be approved on 21 June2007, and appeared to bear the signatures of the Deceased and D1.

(ii) TC Company–

The same observation as above

(iii) TC Construction

The transfer appeared to have taken place during the financial year ended 31 March 2006; 2006 financial statements were stated to be approved on 23 January 2007 and appeared to bear the signatures of the Deceased and D1.

146.  Although it seemed that Ps had raised queries on the signatures of the Deceased, it would not be possible for this court to make any factual finding on such allegations.  For the present application, I shall take the above financial statements as having been signed by the Deceased.  In any event, the transfers of the Loans appeared to have taken place sometime between 1 April 2005 and 31 March 2006.

147.  Mr Lam submitted the real issues for this court to decide now are:

(a) From the point of view of the beneficiaries of the Estate as a whole, whether the executor should carry out further inquiries or investigations into the matter as part and parcel of his duty to ascertain the assets of the Deceased;

(b) If so, whether D1 would still be the appropriate personal representative.

148.  After D1’s explanations, Ps had raised further queries about the Loans, including the following:

(a) why D1 had only revealed his case on this issue and disclosed the audited financial statements in a sporadic and piecemeal manner;

(b) All along, D1 had given an impression that he was not sure about what had happened to the Loans; and hence, he had to make inquiries with various persons.  This did not seem to be consistent with his latest case.

(c) D1 seemed to be claiming that the transfer of the Loans was for dual purposes: as part of the estate planning of the Deceased, and for him to succeed in the Deceased’s business.  As to the first purpose, estate duty was abolished by the Revenue (Abolition of Estate Duty) Ordinance 2005, which was enacted on 10 November 2005 and came into for on 11 February 2006 and thus it was difficult to see why transfer of the Loans was necessary for estate planning.  And if it was for estate planning, why were all the Loans transferred to D1, but not to any of the other beneficiaries under the Will.  Further, D1 had not explained how the transfer of the Loans was related to or necessary for his succession to his father’s business.

(d) D1 referred to a personal guarantee of HK$52M given by him in 2006.  This was a new allegation, and the maximum potential liability under his guarantee was much smaller than the amount of Loans transferred to him.

149.  D1 had said that he believed that the transfers would be effected by the requisite legal documents. Mr Lam submitted that at that time, the Deceased was assisted by professionals (including lawyers and accountants), who presumably would know the relevant legal requirements and procedures to effect a valid transfer of the Loans, and it was not clear as to what was the basis to support the legal validity of the transfers.

150.  I accept that the audited financial statements would not be the documents effecting the transfer. They were however prima facie evidence indicating that there had been a transfer, although it was not clear how the transfers had been effected, or whether they were transferred as gifts to D1 or there had been considerations.   

151.  I agree with Mr Lam’s submissions that in order to discharge his duties properly, D1 should carry out further enquiries.  I am of the view that D1 should follow up the inquiry with BHC (in particular, to see whether they still have any relevant documents or records such as Loan transfer documents and/or board resolutions) and also to make inquires with Deloitte’s, since Deloitte’s was re-appointed after BHC resigned during the financial year ended 31 March 2010, any documents previously in the possession of BHC might have been passed on to Deloitte’s.  D1 should also make enquiries from staff members of the companies which might have knowledge about the matter.

152.  However, on Ps’ own case, P1 and P3 had difficulty to visit the Deceased only after 2009 until the Deceased fell into a coma and admitted into intensive care.  D1 had said that the Deceased had spent 338 days in the St Teresa Hospital before he passed away, and 335 out of the 338 days he was in intensive care.  As the Deceased passed away on 10 December 2010, this would mean that D1 had been hospitalized in intensive care since about early January 2010.  There was thus no evidence even on Ps’ own case that they had any difficulty to visit the Deceased in 2005/2006.

153.  Ps had said there was deterioration in the Deceased’s health in 2002.  Although the Deceased was about 95 years old in 2005/2006, there was no sufficient evidence at this stage that the Deceased had at that time, or in 2007, become senile or  in any way mentally incapacitated . There was nothing in Ip’s evidence which would indicate that the Deceased was not well in 2005 or 2006.  Ip last saw the Deceased in a family gathering in about March 2008, and there was again no mention by Ip that the Deceased was not well by then.

154.  Ip’s evidence in fact showed that it was indeed the Deceased’s wish and instructions to transfer the Loans to D1 at that time, albeit eventually the Deceased did not sign those documents prepared by Ip. The Deceased’s refusal to sign those draft documents prepared by Ip could be due to many reasons, and the Deceased could have signed the transfer documents of the Loans prepared by others, eg Billy Ho, without telling Ip.  In any event, there was no evidence that the transfer of the Loans, even on Ps’ case, or in Ip’s affirmation, was intended by the Deceased to be to any other beneficiaries apart from D1.

155.  In the Shih Chia Cheong case, the plaintiff and the defendant were 2 administrators of the estate and the plaintiff sought an order that both of them be removed and be substituted by 2 independent professionals.  There were complaints that the defendant had bypassed the plaintiff in dealing with the assets and income without providing a proper account, and also the defendant had misappropriated assets belonging to the estate.  Further, there was a change of stance on the part of the defendant that she should be the sole beneficiary owner of certain assets, instead of the estate, and this would be in serious conflict with the estate under which the defendant’s minor child was a beneficiary.  DHCJ Lok in the end made the removal order.  

156.  In the above, it appeared that the defendant’s sudden change of stance that had put her in serious conflict of interest with the estate.

157.  The Loans were never listed as part of the assets of the Deceased in the Schedules by D1 and D1 had maintained that the Loans were not due to the Deceased at the date of his death.  I accept that D1’s non-forthcoming attitude, his dilatory and piecemeal way in producing the audited financial statements, and also his late clarification/disclosure that the Loans had been transferred to him by the Deceased may have brought suspicion on himself.  However, eventually, he did produce the audited financial statements to show that the Loans had been transferred in about 2005/2006, which was some 4 or 5 years before the Deceased’s death.  Those statements were audited with no qualifications and further approved and signed by the Deceased.

158.  D1 had also shown his willingness to make further enquiries from BHC and he was awaiting BHC’s reply. There was no sufficient evidence that D1 would not be willing to make any further enquiries as raised by Ps.  There was no sufficient evidence at this stage that the transfers were not validly carried out.  There had not been any allegation of bad faith on the part of D1 by Ps.  There was no sufficient evidence at this stage that this issue would warrant or would lead to any application to the court.

159.  Having considered the above, I am not satisfied that there will be any serious conflict of interest for D1 to make any further enquiries or investigations as raised by Ps.

Friction and hostility

160.  As I have said earlier, friction and hostility may not per se be a good reason for the removal of the executor.  In the present case, initially the parties were still able to communicate through their respective solicitors.  The breakdown of the relationship seemed to have started with P’s threat of legal action in their 14.03.12 Letter and aggravated by the accusations in Ps’ 18.05.12 Letter.  D1 then decided to ignore further correspondence from Ps.  I also accept that the parties are by now embroiled in HCCW 298/2013 in relation to a buy-out order and in relation to Fund Co.

161.  There is clearly distrust, suspicion and disagreement between the parties.  Notwithstanding this, there was no sufficient evidence that any friction or hostility between D1 and Ps was to such an extent that had resulted in inaction on the part of D1, or that the Estate not having been administered by D1.

Other Considerations

162.  An earlier complaint of Ps was that there had only been one small distribution of HK$200,000 at the time when the Removal Application was issued.  I accept that both P1 and P2 are elderly and it is more desirable that their shares in the Estate should be distributed to them as soon as practicable.  In this respect, D1 had already taken steps to remedy the situation, and had produced the Distribution Plan.

163.  Ps had also complained about D1 not having provided accounts, but it seemed that there was some confusion on their part since what were repeatedly being sought by them were the audited accounts/financial statements of the 4 TC Companies, and not the executor’s account.

164.  The duties of an executor include :

(a) to ascertain the assets and liabilities of the estate (considered to be of paramount importance in Doshi[58]);

(b) to render an account when called upon to do so (the account must be “clear and accurate” and “true and perfect”[59];

(c) to administer the estate with due diligence[60].

165.  Even though Ps had not applied under section 56 of the Ordinance to request D1 for a true and perfect inventory and account of the Estate, D1 should do so without further delay.  D1 had said that he intended to instruct professionals to audit the accounts of the Estate, and that in the meantime, he had been assisted by a firm of accountants to handle the administrative matters.  These steps should be proceeded with as soon as possible.

Conclusion

166.  The executor year expired on 10 December 2011, namely one year after the death of the Deceased[61].  However, the Probate was only granted in September 2011 and re-issued in December 2011.  There was the burial of the Deceased which had to be arranged by D1 and only took place at about end of May 2012, and during the first 4 or 5 months of 2012, D1 was also dealing with the numerous queries from Ps.  

167.  In the Chan Sau Heung case, the estate principally comprised of one property, and there was a very attractive offer from a potential purchase which was turned down by the personal representative without giving any explanation, and further the administrator had done nothing to administer the estate at all for one year when the proceedings were issued.  The personal representative had not even acknowledged service or turn up at the hearing.  His conduct was considered by Poon J to be detrimental to the due and proper administration of the estate and the interests of the beneficiaries and he was removed, and the grant of the letter of administration was also revoked.

168.  In the Cheng Tang Kam Yung case, the defendants (administrators) took over 5 years to obtain letters of administration.  By the time of the hearing before DHCJ Leung, another 9 years had passed and the administration had not been completed.  The estate was substantial and involved 23 lots of land in the New Territories and right to compensation for resumption of land. The plaintiff had made her first request for an account of the estate in 2006, but eventually accounts were only provided after the commencement of the proceedings before DHCJ Leung. The defendant/s were removed due to the delay of 9 years and their failure to keep and provide full and accurate accounts when required to do so.

169.  In Re Estate of Lee Da Kor, the executors were removed firstly they had failed to render a full and proper account of the estate despite the plaintiff’s repeated request; and secondly the executors had been unjustifiably dilatory in distributing the monies to the plaintiff.

170.  As I have mentioned earlier, each case has to be looked at according to its own facts. A period of 28 months was said to have elapsed from the Deceased’s death until when the originating summons was issued.  This was, however, not a case where nothing had been done in relation to administration during those 28 months.  In those 28 months, D1 had arranged the Deceased’s burial, collected in all the cash in bank accounts, the shares in listed companies, and also the 19 landed properties, and had also made a small distribution.  He had also instructed US lawyers in early 2013 to deal with the US Litigations.  Although it seemed that he still had not applied for grant in USA, I understand that the matter had been raised with Fox when he asked for an estimate of costs.

171.  Although it could be said that D1 could have done it better or with greater diligence, in view of the size of the Estate and the US Litigations, in my view, the delay had not been serious.  D1 had also taken steps to remedy the situation.

172.  D1 had not caused any loss or otherwise dissipation of assets of the Estate.

173.  D1 was the Deceased’s choice of not only the successor in the Fund Co and the TC Group, but also his executor.  D1 clearly wishes to carry on and has taken remedial steps after being accused of delay, and failing to render the executor accounts.  As mentioned earlier, he had also come up with the Distribution Plan and it was his plan that all he landed properties held by the Estate to be made available for sale in the next 6 months.

174.  I have also said there was no sufficient evidence of any serious conflict of interest at this stage. 

175.  Ps originally had asked for an order that D1 be substituted by D4 but she has not appeared in these proceedings at all.  She also has her own full time job.  Ps had also proposed a professional accountant be the replacement administrator.  As I have said, any change of executor at this stage is likely to further delay the progress of the US Litigations and/or settlement discussions, giving rise to possibly another application for substitution of the defendant.

176.  Having weighed up all the pro and con factors and all the circumstances of this case and in light of the remedial steps being taken by D1, I am not satisfied that due and proper administration of the Estate and the interests of the beneficiaries require D1 to be removed at present time. 

177.  In the circumstances, I will dismiss Ps’ application.  As for costs, I direct that the parties to submit their submissions on costs within 21 days, and to file their replies within 21 days thereafter.  The matter will be dealt with on paper, unless otherwise directed by the court.

[1] Listed under Section B “Liabilities in the Schedule of Assets and Liabilities, with the exception of

  Glasgow Capital Limited, B1:92

[2] B1:77-84,

[3] B1:85-94

[4] B1:97-99

[5] B2:264-282

[6] SB1:2876-2894

[7] B2:480, at pg 482, under Section G

[8] B2:484, at pg 490, under Section G

[9] See para 26, B1:32, and para 37, B1:36

[10] B5:1599

[11] B5:1600

[12] B5:1587-1596

[13] SB1:2671-2674

[14] At pg 423-424

[15] At last para, pg 21

[16] At Holding (2)

[17] At Holding(3)

[18] At para 55, pg 18

[19] At paras 9-21

[20] At para 15, pg 7-8

[21] At para 108

[22] At para 107

[23] At para 62

[24] Yu Hong Ping v Kenneth Yuen [2009] 6 HKC 347 at 349 G-H, §12; Shih Chia Cheong v Li Liu Zhu, HCMP 1891/2011 (5/11/2012), §11 at pg 5; Cheng Tang Kam Yung v Tang Kam Cheung and another, HCMP 147/2008 (26/8/2013), §22 at pg 7

[25] At para 7, pg 702

[26] At pg 156

[27] At para 61

[28] At para 14

[29] At para G, pg 273, Damayanti Kantila Doshi v Jigarlal Kantilal Doshi [1998] 4 MLJ 268

[30] per A Cheung J, as he then was, at para 10, Re Lam Choi Hing [2007] 1 HKLRD 23; see also para 2, Re Estate of Kwan Chung [2013] 6 HKC 29; and see also Damayanti Kantilal Doshi & Ors v Jigarlal Kantilal Doshi & Ors [1998] 4 MLJ 268

[31] See Re Estate of Lee Da Kor [2010] 1 HKLRD 415; and also Cheng Tang Kam Yung v Tang Kam Cheung & Another HCMP 147/2008, unreported judgment 26.08.13

[32] See Shih Chia Cheong, administrator of the Estate of Shih Chia Ying deceased v Li Liu Zhu HCMP 1891/2011, unreported judgment 05.11.12; see also Flood v Flood [1999] 2 IR 234

[33] Per Em Heen J in The Estate of Erminia Agnes Rogers v Rogers [2009] WASC 258, at para 32; see also Hanson Jay Wang Kit v Ernest Jay Wang Ko & Others HCMP 3473/1984, unreported judgment 30.05.85

[34] Kershaw v Mickelthwaite & Ors [2010] EWHC 506 (Ch)

[35] See para 19, P3’s 1^st affirmation, B1:30; see also para 3.1 of P’s Skeleton Submissions

[36] B1:117

[37] B2:425

[38] B6:2097

[39] B1:145

[40] B1:169

[41] B1:178-186

[42] B1:188

[43] B1:198

[44] B5:1641

[45] B2:252-261

[46] B7:2305

[47] B1:66

[48] Pyro Spetaculars Inc

[49] B7:2499

[50] Namely exhibits JW-14, JW-16, JW-18-19

[51] Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (8^th edn, 2013), §§49-28 to 49-34 at pgs 801-804; Johnston, The Conflict of Laws in Hong Kong (2^nd edn, 2012), §8.033 at   p 510. 

[52] JW-23

[53] See paras 44-45

[54] Exhibit JW-24, D1’s 2^nd affirmation

[55] SB1:2895-2896

[56] SB1:2897

[57] See paras 19-20, and JW-29, SB1:2661-2662

[58] See Doshi, at pg 278 B

[59] See Re Estate of Lee Da Kor, pgs 419-420, para 17

[60] Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, pgs 781-782

[61] See s 71 of the Ordinance