LEUNG TAI WAI DAVID v. KWAN SI SHING AND OTHERS

HCCA 4604/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO HCCA 4604 OF 2014

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D E C I S I O N

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Introduction

1. This is a usual dispute in probate matters that parties are arguing who should be administering the estate of a deceased person. Within such dispute, one of the parties asks for an order to appoint a court expert on the mental ability of the other.

2. In terms of summons, there are three before me.  

(a)  The Caveator asked in the 1^st summons, inter alia, for appointment of independent administrators by the Court.

(b) The Person Warning disagreed and issued the 2^nd summons to pray for an order that he should be appointed instead.

(c)  The Caveator further took out the 3^rd summons asking the Court to appoint an expert under Order 40 of the Rules of the High court (Cap.4A) to inquire assess and report the mental ability and fitness of the Person Warning.

Background

3. The Deceased died intestate on 17 January 2013 at the age of 74.  Her estate is to be shared by six persons.

(a)  Her surviving spouse, the Person Warning, Mr. Kwan Si Shing (hereinafter called the “Husband”).

(b)Two children borne by her to the Husband, the 1^st and 2^nd Interest Parties, Mr. Kwan Yee Pun and Ms. Kwan Wai Man (hereinafter called “Yee Pun” and “Wai Man”).

(c)  Three further children borne by her to one Mr. Leung, Ms. Leung Wing Shan, Mr. Leung Tai Wai David and Ms. Leung Nga Lun (hereinafter called as “Wing Shan”, “David” and “Nga Lun”). David is the Caveator herein.

4. About 6 months later, on 18 June 2013, the Husband filed HCAG 7770/2013 applying for the grant of the Deceased. He also deposed, inter alia, that the estate of the Deceased consisted of:

(a)  2 landed properties (one commercial and one residential together with a car parking space),

(b)50,000 shares in Lai Sun Development,

(c)  cash at banks for over HK$ 6 million, and

(d)liabilities owing to her children (medical and funeral expenses) totaling about $ 1 million.

5. It is not disputed that the Husband will take the statutory sum of $500,000 and half of the remaining estate. Then, the other half is to be shared equally by the 5 children.

6. The grant application of the Husband could not be processed because of the entering of various caveats, including 3 by Wing Shan and 2 by David. Their procedural disputes within those caveat proceedings came before Deputy High Court Judge Marlene Ng. In the end, the learned Judge ordered, inter alia,

(a)  Wing Shan to pay costs of and occasioned by her summons to the Husband, to be taxed if not agreed, and

(b)unless David enters a (further) caveat by 4:00 p.m. on 23 October 2014, he be restrained from entering further caveat in respect of the estate of the Deceased, with no order as to costs.

7. One day before the deadline, on 22 October 2014, David filed the present caveat.

8. On 4 December 2014, David issued the 1^st summons under section 36 Probate and Administration Ordinance (Cap. 10) (“PAO”). He asked, among others, for appointment of 2 independent certified public accountants (“CPAs”) because, in his views, all the beneficiaries were not appropriate administrators for the estate. Among other reason,  

(a)  Yee Pun and Wai Man intermeddled and/or misappropriated the estate. The Husband sided with them.

(b)The Husband refused to disclose information. David also doubted both the physical and mental competence of the Husband to be the administrator.

(c)  Yee Pun had been convicted for theft.

(d) Wing Shan, David and Nga Lun were intending to sue the estate of the Deceased to recover assets held on trust for their late father, Mr. Leung.

(e)  The 2 camps lost mutual trust and confidence with each other and could not work together as co-administrators.

9. The Husband opposed such application and said, inter alia, that:

(a)  He would be impartial and investigate into the allegations against Yee Pun and Wai Man. He did disclose all available information with him. 

(b)He was physically and mentally fit to be the administrator. He produced photos of him taken in recent social occasions. He further produced a medical report of Dr. Chan, a specialist in psychiatry, dated 8 January 2015, showing:

“ 1. I have examined the above-named on 5^th January 2015. His son and daughter were also interviewed at the same time.

2. Mr. Kwan had completed junior secondary education. His main job during youth and middle age was salesman in a pharmacy. He retired at age 60. Currently he was living with his son’s family.

3. He had no previous psychiatric history, and no brain disease such as dementia and stroke.

4. Currently he could go outdoor by self, and even take the bus. He enjoyed “morning tea” in the restaurant and then stayed in the stock unit of a bank to chat with friends there. Mood had been stable, and sleep satisfactory. He denied specific worry.

5. Mental examination (5/1/2015) found Mr. Kwan conscious and alert. He could walk without help. Hearing was satisfactory. Co-operation was good. His speech was coherent and relevant. His mood was neither anxious nor depressed. There was no hallucination or delusion. He was grossly orientated in time, place and person. He could tell his own name, age, birthday and address. Mini-mental state examination score was 22 out of 30.

6. Mr. Kwan was mentally fit to handle his financial affairs, including, in particular, administration of the estate left by his deceased wife. He is mentally capable of instructing his lawyer on this issue.” 

(c)  The conviction of Yee Pun happened 14 years ago and he was fined only.

(d) Wing Shan, David and Nga Lun never mentioned their intended claim but it was their choice. He would handle it in the interest of the estate.

(e)  The administration was a relatively simple and straight-forward one. The appointment of independent administrators was wholly misconceived because it would only incur unnecessary costs, given the size of the estate. The Deceased passed away for more than 2 years and the matter dragged on thereafter, notwithstanding parties had agreed his earlier application for grant in HCAG 7770/2013.

10. David replied and disagreed with the Husband, in particular that he was mentally fit to act as administrator. David relied on:

(a)  Medial record of Pacificares Medical Centre

“ (a) Patient Number of Kwan :	xxxxxxx
with Pacificares
(b) Commencement Date of :	2nd September 2008
Medical Consultation
(c) Last appointment Date :	20th May 2011
(d) Name of Doctor consulted:	Dr. Hui Che Fai, Adnrew
	(“Dr. Hui”)
(e) Name of Diagnosis :	Stroke and Dementia
(f) Score of “智記力測試”  :	less than 20 scores
	(out of 30 scores)”

(b)Notwithstanding that the Husband had refused to attend for an assessment, on 25 April 2015, Dr. Lam, a specialist in psychiatry, commented on the report of the said Dr. Chan:

“Conclusion

In contrast to the Medical Report [of Dr Chan dated 8 January 2015], in my opinion, Mr. Kwan is likely suffering from a certain degree of cognitive impairment as indicated by his MMSE score that he might be able to maintain his usual activities of daily living. However, his mental capacity to manage extra financial issues (e.g. to be the administrator of his wife’s estate) needs further psychiatric review and specific assessment…” 

11. On 16 June 2015, the Husband issued the 2^nd summons to ask the Court to appoint him as the administrator.  In the meantime, he also applied and obtained for leave to issue Notice of Action to the other four children of the Deceased, Yee Pun, Wai Man, Yee Pun, Wing Shan, and Nga Lun.

12. Yee Pun and Wai Man filed their acknowledgment of service, indicating that they intended to join in the proceedings. On the other hand, Wing Shan and Nga Lun did not take any step herein.

13. Later, Yee Pun and Wai Man joined in the proceedings as the 1^st and 2^nd Interested Parties respectively. They were also allowed to file and serve their affirmations. In short, they supported the case of the Husband and objected to that of David. Both of them also denied the allegations against them made by David. They also offered themselves as candidates for the choice of administrator(s) by the Court, if necessary. 

14. The Husband raised no objection to the appointment of Yee Pun and/or Wai Man as administrator(s) of the estate.

15. David made his final reply. He did not accept the explanation made by Yee Pun and Wai Man on the intermeddling and/or misappropriation of the estate. Both of them were not suitable to be appointed as administrator(s). As to the costs of the independent accountant(s), David offered to bear the professional fees for retaining them, save and except the reasonable costs if any to be incurred in the investigation of the assets of the estate. 

Rulings and Discussions

16. Parties appeared before me on 20 June 2016 for the substantive argument. Both David and the Husband were represented by Counsel, Mr. Kelvin Tang for the former and Mr. Matthew Tse, for the latter. Yee Pun and Wai Man appeared in person. Having heard from all of them, I reserved my decision to be handed down. Here it is.

Court expert?

17. To start with, I will deal with the 3^rd summons, i.e. David’s application for appointment of Court expert. If it would be successful, the other 2 summonses had to be adjourned, pending report from such expert.

18. Upon thought, I decline it.

19. The object of an appointment of Court expert can be found at paragraph 40/0/2 of HKCP 2016 at p. 850.

“The object of the Order is presumably to enable the parties to save costs and expenses in engaging separate experts in respect of technical or scientific question which can be resolved fully, quickly and comparatively cheaply by an independent expert appointed by the court, and also possibly to prevent the court being left without expert assistance in cases in which the experts of the parties may will giving entirely contradictory evidence on technical or scientific questions…”

20. However, in the present case, parties have already adduced their respective medical expert evidence (by way of exhibits in affidavit evidence).  They are contradictory. Further report, albeit Court appointed, will not save costs and expenses. It also delays the appointment of administrator and, therefore the administration of the estate. Last but not lease, the report of the Court expert does not necessarily resolve the dispute among the parties. No one has agreed that such report is to be “binding” and “conclusive”. More importantly, the mental capacity of the Husband is only one of the factors to be taken into account by the Court.

Ad colligenda bona (“ACB”) Grant?

21. David also asked for a preservation grant, commonly called “ACB grant” in the 1^st summons. In the course of the filing and serving of affirmation evidence, it appears that the Husband, Yee Pun and Wai Man prayed for the same relief as well.

22. At one call-over hearing in the present proceedings, solicitors acting for David indicated that he was not pursuing such relief. However, at the substantive hearing before me, it was not entirely clear if Mr. Tang was dropping the application. 

23. As such, to avoid any uncertainty, I hereby formally dismiss it.

24. Although no one disagrees that the estate should be administered without further delay, there has been no agreement on the identity of the appointee of such interim measure. Hence, the arguments of the parties remain the same in relation to both “interim” and “final” grant. Once the Court will have decided on their disputes, there is no reason why only an ACB grant should be issued, but not the one with full power to administer and distribute the estate.

Who should be the administrator(s)?

25. I now move the core of the disputes among the parties, namely who should be administering the estate?

26. In the present case, there is no dispute that, under rule 21 (1) (i) of the Non-Contentious Probate Rules (Cap. 10A), the Husband enjoys priority over all the five children of the Deceased. Thereafter, these children rank equally among themselves at paragraph (ii) of the said rule.

27. At the same time, it is also indisputable that section 36 PAO gives a broad discretion to the Court to appoint someone to be the administrator(s) he consider “necessary and convenient” in the interest of the estate.

28. Both counsel referred me to the authority of Re Estate of Loo Che Chin [2013] 2 HKLRD 739, Jeremy Poon J. (as he then was), I have no hesitation to adopt the followings from the learned Judge.

“ 9. When necessity or convenience is relied on as a ground for removal, I had this to say in Re Estate Hague Shaquil regarding the general approach:

…The words ‘necessary or convenient’… give the court a broad discretion, to be exercised in the best interest of the estates… Whether or not the court will exercise the discretion depends on the actual circumstances of the case. The circumstances are not limited to those in connection with the estate itself or its administration, but can extend to any other circumstances which the Court thinks are relevant, which lead the court to think that it is necessary or convenient to pass over the executor… the burden rests with the applicant to satisfy the court that such circumstances exits…”

10…   

  13. Now, it is well-established that friction or hostility between an executor and a beneficiary alone, without more, is of itself not a good reason for removing the executor.  No corrupt or improper motive is to be imputed to the executor even if mutual hostility, without more, is established… However, if the hostility is grounded on the mode of administration, then it is a factor that cannot be ignored… This is a relevant factor because the expeditious and economical administration of the estate is always one of the objects that the Court keeps in mind… Thus, if by reason of the hostility, the executor is rendered unfit to perform his duties as executor, he may be removed… Such inability to perform his duties as executor may be proved if it can be demonstrated that he would, say, by reason of the hostility, (a) administer the estate in a manner not in accordance with the law… or (b) obstruct the due administration of the estate… The Court may also pass over the executor if the breakdown of relations has caused or has the potential to cause difficulty in the administration of the estate…”

29. One of course does not forget that David has made clear that he together with Wing Shan and Ngan Lun intend to bring proceedings against the estate, and as such, they cannot act as the administrators because of conflict of interest. Equally, they also rule out the possibility of appointment of co-administrators (one from their camp and one from the other) on the ground of breakdown of mutual trust.

30. With the above in mind, the only options left to be picked by the Court will be:

(a)  The Husband,

(b)Yee Pun,

(c)  Wai Man, or

(d)The proposed CPAs

31. Upon consideration, I have decided to choose the independent professional, i.e. the CPAs in the circumstances.

32. As usual, parties have raised a lot of factual disputes. I do not propose to deal with them in their entirety. For those that I will skip them, they are either irrelevant or incapable of being resolved by way of affidavit evidence.

33. The mental capacity of the Husband has been hotly contested herein. It suffices to say that, before me, there is conflicting medical evidence. However, it is a bit glaring that the Husband has chosen not to respond to the production by David of the medical record of Pacificares Medical Centre as per paragraph 10 (a) above. Other than a complaint by Mr. Tse that the source of information was not provided, it leaves such piece of evidence un-contradicted. Did he consult Dr. Hui? Was he diagnosed stroke and dementia?

34. Anyway, as I said above, the mental capacity of the Husband is only one factor. For the present purpose, I take the view that he should still excuse himself even if he is both mentally and physically fit to be the administrator (putting the best of his case in this respect).

35. The administration of the estate will not be as simple and straight-forward as it looks. There is an intended action by David’s camp. There is a hot debate (or litigation at later stage) on other possible assets which should belong and go back to the estate. There is also alleged conduct on Wai Man and Yee Pun as to intermeddling and misappropriation of the estate, leading to possible recovery or legal proceedings.

36. Parties are divided into two camps, 3 persons on each side. On the one hand, there are the Husband, Yee Pun and Wai Man. It is so notwithstanding that the Husband has been legally represented and his 2 children chose to act in person. On the other, there are Wing Shan, David and Ngan Lun. It is also so despite the fact that the 2 ladies have chosen not to file any acknowledgment of service or affidavit evidence herein.

37. I agree that mere dealings in the estate might not be justified to deprive a person from his or her entitlement to grant. With the rider that it is entirely within the purview of the administrators to be appointed, there appears to be some force on the alleged case against Wai Man and Yee Pun. It is to be investigated. If they did nothing wrong, their name should be cleared. Alternatively, in case that they crossed the boundary, appropriate action will be taken.

38. I also agree that hostility itself is not a good reason for passing over one’s priority to take grant. However, the hostility on the camp of David over the other rests squarely on the mode of administration. The Husband agrees to investigate into the matter, including the allegations against Wai Man and Yee Pun. I hate to say so but I do have some doubt if he could do so. The story does not stop there. The administrator will further need to deal with the claim or legal action by David’s camp over the estate. Could the Husband objectively assess and deal with it? 

39. Hence, the only viable option, in the best interest of the estate, is an independent administrator. David proposed 2 CPAs. There are 2 affirmations of fitness to support them. Although there is no other candidate available, the qualification and fees of the accountants are within the usual and reasonable range. Some money will be spent but I hope that they are going to be well spent.

40. When we come to the fees, David offered to pay a portion of it, apparently hoping that it is more likely to be accepted by the Court. I decline to accept such offer. It might send a wrong message to the CPAs that David is in a different position. Not only that he is the nominator but also one responsible for (part of) the fees. The CPAs should conduct the administration and distribution in the best interest of estate. All the beneficiaries are to be treated equally.

Costs

41. I do not have the benefit of parties’ assistance on the question of costs but no doubt, costs remains a matter within the discretion of the Court to be exercised judicially.  Costs usually follow event unless there is good reason justifying departure.

42. In the present case, David has persuaded me to accept his proposal of independent administrator. However, he also fails in his application for ACB grant and summons on Court expert. I see fit to make no order as to costs in such situation.

Conclusion

43. To conclude, I make the followings orders.

(a)  HCAG 7770/2013 be withdrawn.

(b)  The Caveat filed on 22 October 2014 herein shall cease to have any effect.

(c)  In relation to the summons filed on 4 December 2014:

(i)  Pursuant to section 36 Probate and Administration Ordinance (Cap. 10), subject to the filing of all necessary papers required and the compliance with the requirement of the Registrar of the Probate Registry, grant of the estate of Madam Wong Kin Fong (黃健昉), deceased be issued to Mr. Johnson Kong Chi How and Mr. Chan Leung Lee, both of BDO limited, if entitled to. Fees of the grantees in the application and administration are to be paid out of the said estate at time costs, charging rates being, at the level of manager to director of the said BDO Limited, from $2,000 to $4,950 per hour. 

(ii)  The application for preservation grant is dismissed. 

(iii)  There is an order nisi of no order as to costs.

(d)  The summons filed on 16 June 2015 is dismissed with an order nisi of no order as to costs.

(e)  The summons filed on 29 September 2015 is dismissed with an order nisi of no order as to costs.