FNG v. BCJ

HCMP 109/2020

[2022] HKCFI 654

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 109 OF 2020

_________________

_________________

BETWEEN

_________________

_______________

DECISION

_______________

Introduction

1.  The plaintiff and the defendant are daughters of FJM. The defendant was appointed as FJM’s attorney under an enduring power of attorney dated 14 May 2010. The document was registered with the High Court on 13 October 2017.

2.  In these proceedings, on 17 November 2020, by consent of the parties, Marlene Ng J ordered that the defendant do produce audited accounts of the estate of FJM since 13 October 2017 and on an ongoing bi-annual basis. Pursuant to the order, on 13 May 2021, a set of accounts covering the period from 13 October 2017 to 31 December 2020 was served on the plaintiff. I shall refer to this as “the first set of accounts”.

3.  Having reviewed the first set of accounts, the plaintiff was of the view that it contained records and entries which ought to be clarified by the defendant in order to ensure that the estate of FJM is being managed properly by the defendant and in FJM’s best interest.

4.  Before me this morning is a summons taken out by the plaintiff on 15 September 2021 requesting the defendant to produce further and better records and further and better accounts in relation to a number of entries in the first set of accounts.

5.  As a result of observations made by Marlene Ng J at the first call-over hearing on 5 October 2021, the plaintiff subsequently produced a revised draft order, narrowing down the scope of the application. The plaintiff sought an order that the defendant should produce records and documents in support of a number of expenditure items, which include, eg, renovation costs of a property referred to as “the xxxxxxxxxxx Manor Stables”, expenditure on a property in Chelsea, London, “Lifestyle Expenses”, “Legal and Professional Fees”, “Reimbursement of Expenses” and “Various Card Expenses”. The plaintiff also demanded the defendant to give an account of the use of the xxxxxxxxxxx Manor Stables and benefits or gifts given to the plaintiff and/or the defendant and others out of FJM’s estate.

6.  In the meantime, the defendant produced the audited accounts of FJM’s estate for the six-month period ended 30 June 2021 pursuant to Marlene Ng J’s earlier order and served them on the plaintiff on 10 November 2021. I shall refer to this as “the second set of accounts”.

7.  Shortly after that, the plaintiff’s solicitors wrote to the defendant’s solicitors on 25 November 2021, stating:

“We now have had the opportunity to peruse and scrutinize the latest set of Audited Accounts with our client and her Counsel [ie the second set of accounts]. Our client is glad to learn that this set of Audited Accounts is in a much better order than the previous sets [ie the first set of accounts], which were provided to us on 13 May 2021 and are the reasons why our client had to take out the Summons. Our client hopes that this will continue.”

8.  The plaintiff’s solicitors proposed to adjourn the summons sine die with costs reserved.

9.  Correspondence was then exchanged on the disposal of the summons. No consensus was reached. At a hearing before me on 12 January 2022, the plaintiff confirmed that she no longer wishes to pursue the substantive relief in the summons. The plaintiff’s primary position was that leave should be granted for the summons to be withdrawn without any order as to costs. The defendant disagreed. I therefore adjourned the summons to today where the issue of costs would be argued.

The issues

10.  Generally speaking, where an applicant wishes to withdraw her application, unless there is any good reason, she should bear the respondent’s costs incurred so far.

11.  Here, the plaintiff says that there is merit in her application. However, given that the second set of accounts is now in a better form than the first, with a view to saving time and costs and with a focus on how things should be done in the future rather than in the past, she is prepared not to insist on the application and focus on the future administration of the estate.

12.  In the circumstances, the plaintiff contends that there should be no order as to costs or, alternatively, that each party’s costs be paid out of the estate.

13.  Given the reason put forward by the plaintiff for the withdrawal, I consider that the material questions which I need to address today in order to rule on costs are these. Is there merit in the application? Was there sufficient justification for the plaintiff to take it out in the first place? If yes, the plaintiff’s position on costs should be upheld. If no, the defendant should have costs which she has been forced to incur on an unmeritorious or unjustified application that is now abandoned.

14.  The plaintiff’s application comes within section 11(1) of the Enduring Powers of Attorney Ordinance, Cap 501, which provides:

“11. Functions of court in relation to enduring power

(1) The court may on the application of an interested party—

(a) require the attorney under an enduring power to produce records and accounts and make an order for their auditing;”

15.  It is not in dispute that the plaintiff is “an interested party”. Both the plaintiff and the defendant are beneficiaries under the will of FJM. There are no other relevant relatives.

16.  It is clear to me that once the plaintiff is accepted to be an “interested party”, the court has jurisdiction to grant the orders sought by her. The question is whether it would exercise its discretion to do so if the substantive relief were pursued.

Legal principles

17.  In Re FSF (Enduring Power of Attorney) [2021] 1 HKLRD 1099, [2021] HKCA 160, the Court of Appeal set out authoritative guidance on how the discretion should be exercised.

18.  The purpose of the statutory power under section 11 is to facilitate the courts, if circumstances so warrant it, to take necessary steps to protect the interest of a principal who is either mentally incapacitated or otherwise vulnerable.

19.  It must however be borne in mind that the statutory regime is aimed at paying due respect to the autonomy of a principal in appointing an attorney to manage his properties. Such appointment is meant to continue to be effective despite the loss of mental capacity on the part of the principal at a time after making such appointment.

20.  Unlike the appointment of a committee under Part II of the Mental Health Ordinance, Cap 336, the appointment of an attorney by an enduring power is made by the donor, as opposed to by the court. The statutory regime is intended to provide autonomy to a donor in choosing an attorney to administer his properties even if he were to lose mental capacity in the future. Thus, the power of court to interfere with such appointment and the management of the properties by an attorney so appointed is more circumscribed than the court’s supervisory jurisdiction over a committee.

21.  The statutory powers under section 11(1) of the Ordinance can therefore be invoked by an interested party when he has reason to suspect that the attorney had abused the authority granted under an enduring power of attorney and the donor is for one reason or another unable to hold the attorney to account.

22.  The court must therefore exercise the discretion under that subsection in light of the circumstances of the case, always giving due respect for the autonomy of the donor and by reference to the interests of the donor and his wishes (insofar as such wishes can be ascertained).

23.  One important consideration that the court should bear in mind is that the exercise of the powers under section 11(1) is prima facie an interference with a previous decision by the donor as to the person to whom he entrusted an unfettered power to manage or administer his properties.

24.  The court adopts a broad brush approach in cases where there is objectively speaking reasonable cause for concern calling for intervention by the court.

25.  An order for production of records and accounts necessarily impinges upon the right of privacy of the donor. The court should be mindful of the interest of the donor in privacy.

26.  For the above principles, see paras 1, 3, 23, 28 to 31 of Re FSF.

27.  It can be seen that the interested party has a considerably high threshold to meet in an application under section 11(1).

Discussion

28.  In my view, the plaintiff has failed to surmount that threshold.

29.  The starting point of the analysis is that any exercise of the power under section 11(1) is prima facie an interference with the autonomy of FJM. She entrusted the defendant with unfettered power to manage and administer her properties. It is for the plaintiff to show by objective evidence why the court’s intervention is justified.

30.  Mr Jeremy SK Chan, counsel for the plaintiff, submits in writing that “on the face of [the first set of accounts], there were and are grounds for saying that at the very least ‘mistakes’ have been made, some of which need to be put right, and others need to be balanced and taken into account for the future”.

31.  However, in his written submissions (which is 7 pages long), there is no elaboration or explanation of what these “mistakes” are. In fact, I note that the submissions contain no cross-references to the hearing bundles at all. The complaint about the first set of accounts are made in a bland and generic manner.

32.  In the absence of any analysis on the alleged “mistakes” in the accounts, I fail to see how the plaintiff can demonstrate to the court that there is proper ground to interfere with how the defendant manages and administers the estate of FJM, which is what FJM has intended the defendant to do when she gave her the enduring power.

33.  The complaints made in the plaintiff’s supporting affirmations are also generic in nature. She asked for breakdowns of the various expenditure items and requested supporting documents. She also complained that the xxxxxxxxxxx Manor Stables was registered in the defendant’s name, rather than FJM’s.

34.  In this regard, one must bear in mind the distinction drawn by the Court of Appeal between the court’s power under the Mental Health Ordinance over the committee of a mentally incapacitated person and its power under section 11(1) of the Enduring Powers of Ordinance over the attorney.

35.  In the present case, the queries raised by the plaintiff may well be legitimate questions to ask of a committee of a mentally incapacitated person. But they are, in my view, not questions that the court can impose on the defendant. The descriptions of, eg, “Social Costs”, “Legal Expenses” and “Various Card Expenses” are no doubt generic in nature. However, on the face of it, the descriptions and their corresponding amounts are not such as to call for the court’s intervention.

36.  As for the xxxxxxxxxxx Manor Stables, it is made clear in the audited accounts that it forms part of the estate of FJM.

37.  As Mr Chan puts it in his written submissions, one of the plaintiff’s main concerns in this application is that FJM’s estate should be “properly managed with transparency”, as she and the defendant are both beneficiaries under FJM’s will but only the defendant is the attorney.

38.  In the course of his oral submissions, Mr Chan referred to a number of corresponding entries in the two sets of accounts. He pointed out that there are drastic drops in some of the expense items when the figures of the two periods are compared. The basis of the application, he submitted, was primarily the large expenditure figures which appeared in the first set of accounts. The plaintiff was not able to tell whether they were reasonable or not. The whole point of the application was to find out. As Mr Chan put it, the plaintiff wanted more visibility in the management of the estate.

39.  This submission emphasising the perceived need of transparency or visibility does not sit well with what the Court of Appeal said in Re FSF. The plaintiff may well want to play a supervisory role over the defendant’s management of the estate because of her financial interest in it after the passing of FJM. But her personal wish or interest is not a relevant consideration when the court exercises its power over the defendant as the attorney.

40.  First and foremost, under the statutory regime, the autonomy of FJM in choosing her attorney should be respected. Here, the plaintiff has failed to demonstrate any ground of intervention. The court will not intervene.

41.  Furthermore, the perceived need of transparency or visibility is also at odds with the need to respect FJM’s privacy, as highlighted in Re FSF.

42.  I would also add that the plaintiff’s stance in the summons appears to me to be incoherent. As pointed out by Mr Robert Whitehead, SC, appearing for the defendant with Ms Madeleine Booth, it is unclear why and how the second set of accounts would help clear the queries which the plaintiff allegedly had over the first set.

43.  First, the two sets of accounts cover different periods of time. Second, the second set did not provide any of the information sought by the plaintiff in her summons or her subsequent draft order. Thirdly, there is no change in the methodology of accounting between the two sets. Fourthly, a number of the items in the first set queried by the plaintiff are still listed in the second set.

44.  I agree with those observations. It seems illogical for the plaintiff to say effectively that her mind is somehow put to ease by the second set of accounts.

45.  Mr Whitehead criticised that the plaintiff is really using the second set of accounts as a smokescreen in order to get away from the costs consequence of raising an unmeritorious application.

46.  On the materials before me, it is clear to me that in light of the clear guidance set out by the Court of Appeal in Re FSF, the application has no merit. It is based on a mistaken perception that the plaintiff is entitled to play a supervisory role over the defendant’s management of the estate. She has no such role. She has also failed to make out any ground which justifies the court in intervening in the defendant’s management. Having reviewed the relevant entries now relied on by the plaintiff to say that the second set of accounts somehow has given her comfort that the defendant finally understands her duty as an attorney, I find the plaintiff’s explanation for not pursuing the application to be unconvincing. It seems quite plain to me that she is using the second set of accounts as an excuse to escape from the adverse costs consequence.

47.  The plaintiff shall now bear the costs incurred by the defendant in resisting the unmeritorious application which should not have been taken out in the first place.

Conclusion

48.  I dismiss the plaintiff’s summons. I order that the defendant should have costs of the summons, including costs of today’s hearing.

49.  Mr Chan accepted that in the situation where the court is of the view that the application is unmeritorious and the second set of accounts is really used as an excuse by the plaintiff to withdraw the summons, the court is quite entitled to order costs on a trustee basis.

50.  I have ruled that that is the case. I order that the costs should be summarily assessed on a trustee basis.

[Submissions on quantum]

51.  I grant certificate for two counsel.

52.  There is no objection by the plaintiff to the amounts claimed in the defendant’s statement of costs, including the hourly rate of the senior solicitor at $8,800 on a trustee basis.

53.  The plaintiff’s costs are assessed at the sum claimed, which is $328,838, payable within 28 days from today.