CHAN FUK TAI AND OTHERS v. CHAN WAI MING

HCMP 3474/2016

[2018] HKCFI 2810

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3474 OF 2016

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DECISION

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Introduction

1.  This is the decision on the directions to be given for the further conduct of the originating summons commenced in December 2016.

2.  The plaintiffs are the beneficiaries of the estate of the late Chan To (“the dec’d” and “the said estate” respectively) whereas the defendant is the administrator of the said estate.

3.  The main relief sought here is:

(a)   the defendant to provide a just and true account (on oath) of the said estate;

(b)   distribution of the said estate to the plaintiffs (and other beneficiaries).

Background

4.  The dec’d passed away intestate in Hong Kong in July 2005, at the age of 69.  He was a bachelor with no issue, but has 3 siblings.  The beneficiaries of the said estate (including the plaintiffs and the defendant) are the children of his siblings.

5.  Letters of Administration (“L/A”) were granted to the defendant in October 2014.  According to the schedule of property attached to the L/A, the value of the said estate amounted to about $5.2 million (about $4.7 million of which was comprised of real properties).

6.  According to the plaintiffs, the real properties were sold in late 2014, early 2015 and late 2016.  The total proceeds were said to amount to about $15 million.

This application

7.  The plaintiffs complain that they have not been informed of the progress of the administration of the said estate; there has been no distribution of the assets of the said estate either.

8.  In an affirmation filed on 14 November 2018, the defendant summarized the state of the said estate (“the deft’s said affirmation”).  The main items are as follows:

(1)   about $33,000 (HCAG 5631/2010), $147,000 (HCAG 12960/2011) and $325,000 (HCAG 10434/2014) were incurred to engage lawyers to obtain the L/A;

(2)   about $1.6 million was incurred in a legal action against a person claiming to the dec’d’s adopted son (and others) (HCAP 15/2011);

(3)   about $15.15 million sale proceeds were obtained from the sale of properties belonging to the said estate;

(4)   $150,000 was received from the person who claimed to be the dec’d’s adopted son (and another) as settlement sum of another legal action (HCA 214/2012).  The legal fees incurred was about $150,000;

(5)   various expenses (such as legal fees, estate agent commission) were incurred in relation to the sale of the properties;

(6)   rental income from a car parking space of about $78,000;

(7)   other expenses totaling about $1.46 million.

The above summary was contained in the body of the deft’s said affirmation, as well as in what appears to be accounting documents exhibited thereto as “CWM-16” (and parts of “CWM-17” and “CWM-18”) (and verified therein) (“the verified accounts”).

9.  The total expenses and remuneration set out in the verified accounts come to about $4.2 million, according to the plaintiffs (para 3, plaintiffs’ skeleton argument dated 16 November 2018).

10.  By reason of the filing of the said affirmation, at the hearing on 20 November 2018 (“the Nov hearing”), the plaintiffs no longer sought the relief set out in para 3(a) above.  However, they dispute the defendant’s entitlement to make the following deductions in the verified accounts:

(a)   $1,466,509 being the alleged expenses incurred for paying respect to the dec’d at the Ching Ming and Chung Yeung Festivals;

(b)   about $100,000 being the alleged loss of income of the defendant;

(c)   about $110,000 being alleged transportation expenses incurred for the sale of some of the properties of the said estate;

(d)   loss of value of the defendant’s sale of a property for funding litigation on behalf of the said estate (this probably was HCAP 15/2011);

(e)   various reimbursements sought by the defendant.

Sub-paragraphs (a) to (e) will be called “the disputed items” below for convenience.

11.  At the end of the Nov hearing, an order was made (among other things) to the following effect:

(1)   there be an inquiry to determine whether the expenses allegedly incurred by the defendant (that is, the disputed items) should be included in the verified accounts (whether wholly or partly);

(2)   the hearing of this originating summons be adjourned sine die pending the determination of the said inquiry or further order.

12.  In relation to para 11(1) above, the parties were asked to attempt to agree on the items to be included in the said inquiry within 14 days, any disagreement is to be determined by the court. Judging from the contents of the series of the parties’ correspondence from 23 November 2018 (should be 30 November 2018) to 11 December 2018, the parties have not been able to reach agreement.

13.  Helpful guidance for the further conduct of an inquiry into the verified accounts can be found in:

(a)   the footnotes to RHC Ord 43 (Cap 4A) set out in Hong Kong Civil Procedure 2019, Vol 1 (esp para 43/3/1);

(b)   the comments in Wong Poh Geak and Others v Chin Lan Hong and Others, HCMP 3956/2002 (29 January 2004) (esp para 16 thereof).

14.  For convenience, the relevant parts of Hong Kong Civil Procedure 2019 are quoted below:

“… In a simple case the vouchers may be ordered to be exhibited to the affidavit: otherwise it is generally ordered that each party permit inspection of all relevant documents in their possession or power relating to the account, to enable the opposing parties in effect to carry out an audit, and so that any necessary verification of the account can be dealt with out of court.

The opposing parties will then file a notice of objections, or an affidavit setting out their contentions with regard to the account, so that it can be seen what issues require determination by the court. It may also assist the court to have the parties’ respective contentions summarised in the form of a Scott Schedule.

On an inquiry the evidence is generally given on affidavit, with cross-examination if necessary, though pleadings are sometimes directed in complicated cases. The proceedings are technically in open court (O.38, r.1)” (emphasis supplied).

15.  The deft’s said affirmation and the verified accounts appear to be an attempt at the first step mentioned in Hong Kong Civil Procedure 2019.  Unfortunately, for reasons not immediately apparent, the verified accounts were scattered in various parts of the deft’s said affirmation and the exhibits referred to in para 8 above (rather than in tabular form; see also Ord 43 r 2(2); Chitty & Jacob’s Queen’s Bench Forms (1986) 21^st ed, Ch 98, esp Forms 1601, 1602). This departure from the common practice, to say the least, does not promote efficiency for the purpose of an account “vouching” exercise (Ord 43 r 3(1)).

16.  Such being case (and the plaintiffs having indicated the principal areas of objection (para 10(a) to (e) above)), the following directions are appropriate at this stage:

(a)   the defendant do within 14 days file and serve a supplemental affirmation for the sole purpose of exhibiting thereto (and verifying therein) a full account of the assets and liabilities of the said estate (including all of the sums which the defendant claims entitlement to be paid out of the said estate) (by way of a schedule the same as, or similar to, a Scott Schedule (see also para 15 above));

(b)   the defendant do within 14 days thereafter permit inspection of all relevant documents in his possession or power relating to his claims for payment out of the said estate (“the deft’s claims”);

(c)   the plaintiffs do within 21 days after completion of the said inspection of documents file and serve an affirmation setting out their contentions relating to the deft’s claims, and attaching thereto a notice of objections (by way of a schedule the same as, or similar to, a Scott Schedule) (“the objection affirmation”) (see also Queen’s Bench Forms, esp Form 1604);

(d)   the direction hearing for the further conduct of the said inquiry (directed at the Nov hearing) be heard not earlier than 14 days after the filing of the objection affirmation.

Other matters

17.  In the defendant’s letter dated 23 November 2018 (should be 30 November 2018) (and effectively repeated in the letter dated 11 December 2018), the defendant seeks the inquiry to include an investigation into the existence (or otherwise) of a conspiracy between the dec’d’s alleged adopted son (para 8(2) and (4) and 10(d) above) and any or all of the plaintiffs (and for related relief).

18.  The defendant has not explained (and therefore it is not known) how such an issue can be raised within:

(1)   the context of this originating summons;

(2)   the context of the said inquiry (directed at the Nov hearing to be held).

Further, and equally importantly, there is no evidential basis in support of such a proposal.

19.  During the Nov hearing, the defendant has also mentioned the following matters:

(a)   incomplete/verbal will of the dec’d;

(b)   estoppel on the plaintiffs’ part.

No conclusion was reached in relation thereto at the Nov hearing.  These matters are no longer raised in the parties’ said correspondence.  I proceed on the basis these are no longer pursued (at least for the purpose of this originating summons).

20.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision and its easier comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs order nisi

21.  There is no apparent reason not to order the costs related to this dispute to follow the outcome of the said inquiry.  A costs order nisi to such effect is made accordingly.