CHAN YU HONG v. CHAN KAM HONG AND OTHERS

HCMP 888/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 888 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 plaintiff to remove the 1^st defendant as the surviving administrator of the estate of their deceased father.

2.  The parties’ father Chan Kan Ying (“Deceased”) died intestate on 5 May 1998.  His widow Madam Lung Chee Mui (“Madam Lung”) later passed away on 28 March 2012, leaving a will dated 9 July 2010. 

3.  The Deceased and Madam Lung had 8 children, namely seven sons and one daughter.  The plaintiff (“P”) is the 7^th and the youngest of all the sons.  The 1^st defendant (“D1”) is the 3^rd son, the 2^nd defendant (“D2”) the eldest of the sons, and the 3^rd defendant (“D3”) the 2^nd son.

4.  The descending order of the 8 siblings are :

(i) D2 (Chan Charm Hong) – about 70 years old

(ii) D3 (Chan Wing Hong) – about 68 years old

(iii) D1 (Chan Kam Hong) – about 65 years old

(iv) Chan Wah Hong – about 62 years old

(v) Chan Hon Hong – about 61 years old

(vi) Chan Hung Hong – about 59 years old (“Hung Hong”)

(vii) P (Chan Yu Hong) – about 56 years old

(viii) Chan Shuk Ying Allison – about 53 years old (“Allison”)

5.  Letters of administration in respect of the Deceased’s estate (“Estate”) were granted on 9 November 2001 to Madam Lung and D1[1]. After Madam Lung’s death in March 2012, D1 became and remains the sole administrator of the Estate.

6.  The assets of the Estate still undisposed of under the administration mainly consist of two pieces of land in Yuen Long, New Territories (“Land”).

7.  P was appointed the executor and trustee of Madam Lung’s estate in her will, and P obtained probate of Madam Lung’s estate in July 2012[2].

8.  The originating summons herein was first issued by P on 25 April 2013, which was subsequently amended.  The orders presently sought by P include (1) D1 be removed as administrator of the Estate; (2), a certified public accountant or such other person be appointed as administrator in place of D1; (3) consequential orders.  In this regard, P has now proposed a chartered accountant Mr Andrew Hung to be the substitute administrator.

9.  Although the 5^th brother, Chan Hon Hong, appeared to have withdrawn his earlier consent and indicated that he wished to remain neutral, he seemed to have changed his mind again.  As seen in the affirmation of P’s solicitor filed in April 2015, P has now obtained the written consent of  4 of his siblings to his present application to remove D1 and to appoint Mr Andrew Hung in D1’s place as administrator of the Estate and to the terms and conditions set out by Mr Hung[3].  The other 3 siblings who have not given their consent are D1, D2 and D3 (collectively “Ds”).

10.  D1 opposes P’s application.  So far as D2 was concerned, although he had said as early as in his 1^st affirmation in June 2013 that he was neutral as to who should be the administrator of the Estate, he had filed 2 further affirmations, and had expressed concern over the expenses if an accountant were appointed, which would jeopardize the interest of the beneficiaries of the Estate.  Since 30 June 2016, D2 has acted in person.

11.  As for D3, he had filed 2 affirmations, and he opposed to an accountant being appointed as the administrator.  His main concern appeared to be also the costs in appointing an accountant.  D3 has since 25 July 2016 also acted in person.

12.  Counsel Ms Teresa Wu and Mr Kerby Lau appeared for P and Counsel Mr Ken To appeared for D1 at the hearing.  D3 appeared in person.  D2 was absent at the hearing.

Brief Background

13.  The Deceased was the sole proprietor of a metal wares manufacturing business Wing Tai Engineering Works and Foundry Company/榮泰機器鑄造廠 which he set up in the 1950s[4] (“Wing Tai”).  Although P disagreed with D1 that Madam Lung was co-managing or co-running the business with the Deceased or that she was jointly in charge of finance with the Deceased, there was no real dispute that Madam Lung was very hard working and had attended Wing Tai’s factory almost every working day of the week, in addition to being a wife and mother in a large traditional Chinese family.

14.  According to P, Madam Lung did not make any business decision while the Deceased was alive, and that it was his elder brothers that the Deceased had expected and had groomed to inherit the business, and that his elder brothers had all understudied their father in the business and all of them had worked in the business.  It was also P’s case that after the Deceased’s death, Madam Lung was content to allow her sons to take over the business which they had helped building.

15.  It would appear that shortly before the death of the Deceased, the family was already having a discussion as to how to smooth the transition of the business of Wing Tai upon the Deceased’s death.  This included (1) the setting up of a new sole proprietorship by Madam Lung with the same name as Wing Tai, (2) a new partnership with the same name as Wing Tai, and also (3) a limited company.

16.  According to D1, there was a family meeting on 3 May 1998, two days before the Deceased passed away (“Family Meeting”).  P however said that the date of the Family Meeting should be after the Deceased’s death.

17.  Apart from the date, it was not disputed that the Family Meeting was attended by all 8 siblings.  Madam Lung was absent.  There was a record of the Family Meeting and it was stated therein that the siblings had to obtain the final consent of Madam Lung prior to their signing the record to confirm their agreement.

18.  Among the matters discussed at the Family Meeting was the setting up of another company with the same name as Wing Tai, and with Madam Lung and all the 7 sons as shareholders, and that it was up to Madam Lung to decide the percentage of her shareholding and the remaining shareholding was to be held by the 7 sons in equal shares. 

19.  According to the business registration record of 19 May 1998, a new partnership with the same Chinese and English name as Wing Tai commenced on 6 May 1998, the day after the death of the Deceased, with Madam Lung and all her 7 sons being partners[5].  However, as also seen on a business registration certificate on 28 May 1998, a sole proprietorship  was at set up shortly thereafter, which commenced business around 28 May 1998 with the same Chinese and English name as Wing Tai[6] (“New Wing Tai”).  Madam Lung was said to be the sole proprietor of New Wing Tai.

20.  According to D1, as New Wing Tai was able to continue the business of Wing Tai, the partnership ceased to operate as from 1 June 1998[7].

21.  Shortly thereafter, a limited company was also incorporated on 5 June 1998 with Madam Lung holding 3,000 shares out of 10,000 shares and the 7 sons each holding 1,000 shares at the time of incorporation[8] (“Limited Company”).

22.  In about 1999, the eldest son (D3) and the 4^th son Chan Wah Hong left the Limited Company, and thereafter, Madam Lung held 37.5% of the shareholding of the Limited Company, and each of the other remaining sons held 12.5%.

23.  According to D1, instead of any formal transfer of business from the Wing Tai to the New Wing Tai, the New Wing Tai simply carried on the business of Wing Tai in the name of New Wing Tai.  It was D1’s case that Madam Lung had held onto her managerial and financial power in the business and that Madam Lung would transfer some of the proceeds from sale of products and/or profits of the business of New Wing Tai into her own account/s.

24.  Further, after the Deceased’s death, Madam Lung held very tight onto the Estate and its administration and that the siblings had generally agreed to her decisions for both the business and the family.

25.  D1’s case was also that after the Deceased’s death, all the siblings agreed that Madam Lung be appointed as the administrator of the Estate, and that it was further agreed that given Madam Lung’s old age, D1 would be appointed to assist her in handling documents in the course of administration, and that was why an “additional and assisting administrator” was agreed to be appointed by all[9].  D1 had further said that although on paper, he and Madam Lung were appointed the co-administrators of the Estate, it was in fact Madam Lung who decided how to administer and manage the Estate.

26.  P on the other hand said Madam Lung did not do any business  after Deceased’s death through New Wing Tai or in any other capacity with the Limited Company or other people, although she was paid a monthly director fee by the Limited Company, and that she had amassed the wealth she had left behind as she was a thrifty person[10].  It was also P’s case that Madam Lung had left the administration of the Estate to D1.

27.  In any event, it would appear that P’s complaints about the progress of administration were really raised after Madam Lung’s death.  As mentioned earlier, these proceedings started over 4 years ago but not long after the first round of affirmations filed by P, D1 and D2, there was a standstill in 2013, and the proceedings picked up again in March 2015 with the amendment of the originating summons but in May 2015, came to another standstill until finally July 2016, when P proceeded with his application.

28.  P had filed a total of 4 affirmations.  In his 1^st affirmation filed when issuing the originating summons in 2013, he was seeking an order that he or a certified public accountant Mr Kong Tak Wing Robert be appointed as the administrator in place of D1.  In his 3^rd affirmation filed in April 2015, as mentioned earlier, he was seeking the appointment of Mr Andrew Hung as the administrator in place of D1.  Hung Hong had filed an affirmation in support of P and, apart from P’s present lawyer, there were also a lawyer Mr Pang Wing Hong who had filed an affirmation on behalf of P. 

29.  D1 had filed a total of 3 affirmations to oppose P’s application.  As mentioned earlier, D2 had filed 3 affirmations and D2 filed 2 affirmations.

Legal principles

30.  Section 33(3) of the Probate and Administration Ordinance (Cap. 10) (“Ordinance”) provides :-

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

31.  As seen in Yu Hong Ping v Kenneth Yuen [2009] 6 HKC 347, in exercising its discretion under s 33(3), the court shall be satisfied with the statutory criteria, and 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 interest of the beneficiaries, especially if there is minority interest involved[11].

32.  Insofar as the exercise of discretion to remove a personal representative is concerned, Mr To had referred to what was said by this court in Wong Tat Lun Eddie v Wong Chi Ho Jimmy HCMP 2391/2013, unreported, 21.10.2014 : -

“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 on opportunity to repair or remedy any defects and progress promptly with due administration. 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[12].”

33.  It has also been stated in Williams, Mortimer and Sunnucks (20^th Ed) that :-

“The removal of a representative tends directly or indirectly to exonerate him from his responsibilities and may not therefore be a wise step to take, but if the administration is still far from completion it will usually be better to remove one of the representatives and have the administration carried on by the remaining representatives, or by a new independent one, than to attempt to compel an unsatisfactory representative to complete the administration.

...

If, for whatever reason, (such as clash of personalities, or the lack of confidence in the personal representative by the beneficiaries, even if unjustified) it has become impossible or difficult for the administration to be completed by an existing personal representative, then an order for his removal will usually be made.

...

Not every mistake, neglect of duty or inaccuracy of conduct will cause a removal of the representative.

...

The overriding consideration is whether the administration of the estate is being properly carried out or, putting it another way, the welfare of the beneficiaries[13].”

34.  There was no dispute over the general principles.

P’s Grounds for D1’s removal

35.  The grounds for removal were:

(i) Substantial and inexplicable delay on the part of D1 in disposing of the Land;

(ii) D1’s failure to provide full and accurate accounts to the beneficiaries;

(iii) Incidental loss of potential income to the Estate by leaving the Land unmanaged and idle for all these year;

(iv) Serious conflict of interest;

(v) General lack of necessary skills, training or competence on the part of D1 to properly deal with or to administer the Estate;

(vi) Breakdown of trust and confidence between the majority of the beneficiaries;

(vii) Respect of the intent of the majority of the beneficiaries for removal;

(viii) The Estate is of substantial size.

Substantial and inexplicable delay

36.  In P’s 1^st affirmation, P had said that he had over the years tried to persuade D1 to sell the Property but to no avail, and that D1 had done nothing in relation to it.  P is the administrator of Madam Lung’s estate and as Madam Lung was entitled to at least half of the Deceased’s net assets under the intestacy law, and because the Land has not been disposed of, P has not been able to make distribution of Madam Lung’s own estate in accordance with her will.

37.  P said he confronted D1 in about September 2012, and that D1 had denied failing or refusing to distribute/administer/account for the Estate saying no suitable buyer had been found for the Land.  Thereafter D1 agreed to authorize P to handle the matter, and with D1’s consent, P had engaged some estate agents with the view to putting the Land on the market.  P had said in his 1^st affirmation that he prepared an authorization letter for D1 to sign, which was duly signed by D1 and P on 26 September 2012[14]  (“Authorisation Letter”).

38.  P then arranged a meeting at a lawyer’s office with D1, but during the meeting, D1 reneged on his agreement and tore up the letter of instructions to the estate agent and left.  P then said as a result, the situation was back to square one and that D1 did nothing to administer the Land, and that on 4 October 2012, he had written a letter to D1 copied to his siblings setting out his complaints[15] (“04.10.12 Letter”).

39.  D2 had in his affirmation pointed out there was a discrepancy between what P had said in his 1^st affirmation and the 04.10.12 Letter, in so far as to what happened at the lawyer’s office.

40.  D1’s version in his 1^st affirmation filed in July 2013 was that he met P at the lawyer’s firm on 26 September 2012 to sign an agency agreement to engage an agent to sell the Property[16] (“agency agreement”).  D1 claimed that the agency agreement was “folded up” and that he was told that it was nothing more than a usual agency agreement.  Thereafter, he found that the agency agreement was a sole and exclusive agency appointment and the period of the sole agency was for an unlimited period of time.  According to D1, he later called the lawyer to revoke the agency agreement, and that he was told by the lawyer that there was no need for D1 to return to the law office, and that the lawyer would tear up the agreement which would be revoked.  D1 had further said he later also found out that the agent had no valid estate agent’s licence.

41.  The lawyer involved was Mr Pang Wing Hong.  Mr Pang had made an affirmation to support P’s case and confirmed that he was present with P and D1 at the meeting on 26 September 2012.  Mr Pang denied that the agency agreement was folded up when D1 was asked to sign it or at any time during the meeting.  Mr Pang confirmed that D1 had read over the contents of the agency agreement before signing it, and that thereafter, a copy was given to D1 before he and P left the law firm.  Mr Pang further denied that he had told D1 not to return, and in fact, he told D1 to return.  About 20 minutes later, D1 did return, and that Mr Pang said he then handed over the original agency agreement to D1 who tore it apart in his presence, and kept shreds of the destroyed agency agreement before he left the law office.

42.  No reason was suggested by D1 as to why the agreement needed to be folded up for him to sign, nor did it seem to make sense since on D1’s own evidence, he was given a copy after he had signed it, and there was nothing to stop him from revoking the agency agreement after signing.  It would thus appear that it was in fact D1 who changed his mind after signing the agency agreement.   

43.  There was in any event no denial by D1 that he did sign the Authorisation Letter to P which had included authorizing P to appoint an agent to sell the Land, but as P had pointed out in the 04.10.12 Letter by tearing up the instructions to the agent, P was not able to instruct the agent to sell the Land.

44.  The above incident on 26 September 2012 seemed to be a turning point.  After sending the 04.10.12 Letter, P instructed his solicitors to send a letter to D1 on 8 October 2012 (“08.10.12 Letter”) demanding D1 to provide accounts and details of all undisposed assets of the Estate[17].  On 25 October 2012, D1’s solicitors replied on 25 October 2012 (“25.10.12 Letter”)[18] stating that no suitable buyer was found and disclosing that there was a potential boundary dispute with Gain Glory Development Company Limited (“Gain Glory”). This was followed by another letter dated 7 November 2012 from P’s solicitors (“07.11.12 Letter”)[19].

45.  In the 07.11.12 Letter, P had sought (i) particulars of D1’s efforts or attempts to find a suitable buyer for the Land; (ii) when and how the boundary issue with Gain Glory was resolved; (iii) an account of the Estate.

46.  There was no reply from D1’s solicitors to the 07.11.12 Letter.

47.  What D1 had said in his 1^st affirmation was in gist :

(i) In relation to the provision of the accounts of the Estate, as Madam Lung had continued the Deceased’s business in the name of New Wing Tai as if it were Deceased’s company and she had transferred some of the proceeds and/or profits of New Wing Tai to her own accounts and further she was the person who had access to this information, this caused difficulty in D1 providing a full accounts of the Estate, and that once he obtained information from P he would compile the accounts for the Estate;

(ii) As for the Land, all along the title deeds were kept by Madam Lung and that in order to assist her to make decision since 2001 to 2002, D1 and D3 had relied on a property agent to keep abreast of the property market condition and potential selling price of the Land and that valuation reports of the Land had been obtained at various times between 1998 and 2012 and  the siblings were informed of the valuation of the Land and the progress of sale formally or informally through other siblings[20], and that the siblings who engaged most in the discussion were D1, D3, P, Hung Hong and Allison.

(iii) D1 explained that his solicitors had written a letter dated 2 July 2013 to Gain Glory to obtain a copy of the survey plan and said he would keep all the beneficiaries updated on the progress of this issue.

(iv) Any change of administrator would not only be costly but also cause undue delay.

(v) If the court should decide that D1 be removed, he proposed Mr David CW Chan, a certified public accountant, to be appointed as an administrator.

48.  D1 had produced in his 1^st affirmation no less than 4 valuation reports/valuations obtained ranging from 1998 to 2012.

49.  It was clear that the first two reports obtained in 1998 and 2000, respectively from Associated Surveyors & Auctioneers and AG Wilkinson & Associations, were for the purpose of estate duty assessment of the Estate.  In December 2000, the valuation agreed with the Rating and Valuation Department was HK$20m and that the entire credit balance then held by the Deceased as sole proprietor of Wing Tai was released to the Estate Duty Office for payment on account of estate duty and interest[21]. 

50.  8 years thereafter, there was a valuation report stated to be obtained by the Limited Company from Centaline Surveyors in October 2008.  D1 had referred to another valuation report obtained from AG Wilkinson but this was not obtained by D1 but by P in 2010 (“2010 Valuation Report”).  P said he obtained this report as D1 was simply not willing to perform his duties as administrator.

51.  Thereafter, the next valuation report obtained by D1 appeared to be only obtained by him on 29 October 2012 after the 08.10.12 Letter from P’s solicitors.

52.  D1’s case was that there was a decline in the property market in 2003 due to SARS, and that there was a general consensus among the siblings that they were not in a hurry to sell the Land and only when there was an attractive purchase price offered, then they would consult Madam Lung for her views on how to deal with the Land[22].

53.  As mentioned earlier, it was D1’s case that throughout the years, in particular from 2008 to 2012, the siblings were informed of the valuation of the Land and the progress of the sale formally or informally through other siblings, and that the siblings who engaged most in the discussion were D1, D3, P, Hung Hong, and Allison.  He had further said they often met up at Chinese restaurants to discuss the matter after the obtaining of valuation reports and that they had discussed the same over the phone or through SMS.

54.  In so far as I could see, the earliest documentary evidence of  any meeting between siblings was one which took place on 10 April 2010, as there was a SMS sent by Allison to her D3, D1, Hung Hong, and P[23]. In this SMS, she was advising her brothers that as the valuation report was not yet issued, they should not speak to any property agents.  The report she was referring to was the 2010 Valuation Report which valued the Land to be HK 40m.  Thereafter, D1 mentioned another meeting on about 8 May 2010 between him, P, D3 and Hung Hong to discuss the 2010 Valuation Report.

55.  It was accepted by D1 that the 2010 Valuation Report was obtained by P who together with Hung Hong and Allison were clearly at that time raising the matter of sale of the Land.  However, it was not clear what concrete steps were actually taken by D1 between May 2010 and September/October 2012 to effect a sale.  In any event, there was no sufficient evidence produced by D1 as to there being any concrete step taken by him to sell the Land between the Deceased’s death and April/May 2010, apart from obtaining valuation reports.

56.  I accept that D1 did mention in his 1^st affirmation that he had first engaged a property agent in 2001 to 2002, and that in past two years he had further engaged various property agents to sell the Land.  This would be in about 2011.  However, the agency agreements produced by him appeared to be signed only after November 2012.

57.  One of these agency agreements was signed with Kam Wai Estate Agency (“Kam Wai”) on 22 June 2013, but seemed to be from to 2002[24]. Anyway, according to D1, he was told by Kam Wai that in 2001/2002 when he first approached them that an agency agreement was not required to be signed and that he only approached Kam Wai recently when advised by his lawyers. There was no written confirmation from Kam Wai that the agency firm was first approached by D1 in 2002, and if so, why it had taken 10 years with nothing achieved.

58.  D3 had filed an affirmation to say that D1 had communicated with the siblings in relation to valuation, and that he and D1 had placed the Land on the market through various agents, but he did not specify when he did this.  D3 did also mention that in 2008, Madam Lung had distributed HK$500,000 to each of the 8 siblings.  It was not clear whether this was meant to be a distribution from the Estate or not since these payments did not appear to be shown in the Estate Accounts mentioned later in this judgment.

59.  The evidence indicated that in 2010, P was taking a more active role in trying to sell the Land in that he had arranged for the 2010 Valuation Report to be obtained and that subsequent thereto, there were various meetings between the siblings.  I accept however that the evidence was that it was only after Madam Lung’s death and/or obtaining grant of probate of Madam Lung’s estate in about September 2012 that P started to seriously press for the sale of the Land by requesting D1 to sign the Authorisation Letter.

60.  Further, the evidence indicated that it was only after the correspondence between P’s solicitors and D1’s solicitors that D1 had signed various agency agreements and contacted various agents.  As Ms Wu had said, this was a knee jerk reaction on part of D1.

61.  D1 said he had made multiple offers to various estate agencies between November 2012 to February/March 2013, and that there was a counter offer of HK$67m in late April 2013, but when the potential buyer was invited to approach D1’s lawyers, the potential buyer did not respond further. 

62.  It also appeared from D1’s evidence that as the valuation of the Land had gone up, the asking price had been revised upward. D1 had also provided two reasons as to why there was no sale:

(i) The siblings generally object to trading price for expediency; and

(ii) Generally most of the siblings, of which P was one, took the view that the commission given to a property agent should not be more than 1 % of the transaction price.

63.  I do not see there was sufficient evidence of the above and/or that P was being inflexible over the commission.  In any event, even on D1’s own evidence, there seemed to be a constant change on his part in the asking price.  He had said in his 1^st affirmation in March 2013, the Land was offered at HK$60 m and later reduced to HK$56m, and then he had also said in February/March 2013, the Land was offered through Kam Wai at HK$1,000 per sq ft and later reduced to HK$950 per sq ft in June 2013.  He further said in February/March 2013, the Land was offered to an agent called Village at HK$80m, later reduced to HK$70m, and then a counter offer of HK$67m was received in April 2013, which was referred to earlier, but this later did not materialise[25].

64.  I find D1’s evidence rather confusing.  In the same period from February/March to June 2013, it seemed that the asking prices were different through different agents.  Such attitude in my view would not be conducive to any sale of the Land.

65.  Anyway, as earlier mentioned, after the 1^st round of affirmations, these proceedings had come to a temporary standstill after August 2013 and resumed in April 2015 and then stood still again after May 2015 until July 2016.

66.  It was revealed from D1’s 2^nd affirmation filed in September 2016 that in 2013 to 2014, an Islamic organization had offered HK$56m, which was more in line with the then valuation but the discussion then ceased as the buyer found that the right of way over the Land was uncertain. D1 further said in mid 2015, another offer was received at HK$60m but he said it was P who took the unrealistic view that the offer was very much undervalued, and that there was another valuation of the Land by Centaline Surveyors, which turned out to be HK$56.3m as at 16 October 2015[26].

67.  However, P had said it was D1’s duty to obtain an updated valuation prior to considering the offer.

68.  D1 had also said in his 2^nd affirmation that another serious offer was received in around mid 2016 for HK$62m with agency fee at 2% and then there were further negotiations, but the intended purchaser did not in end proceed further.  P had criticized D1 for not agreeing to two terms requested by the intended purchaser, and unreasonably refused to carry on further negotiation.

69.  Thereafter, suddenly about two months before the hearing, the intended purchaser renewed its interest to purchase the Land at HK$62m and had paid an earnest money in the sum of HK$1m.  D1 then filed a 3^rd affirmation on 22 December 2016 to say that the Estate had concluded negotiation with the intended purchaser and was carrying out the preparatory work for the signing of the formal sale and purchase of the Land[27].

70.  P’s Counsel Ms Wu pointed out at the hearing that notwithstanding what D1 said, nothing binding had been entered into by then, and that the intended purchaser was the same one in April 2016, and that D1 only resumed negotiation with this intended purchaser after P had filed his 4^th affirmation in reply.  Ms Wu complained this seemed to be another knee jerk reaction on part of D1.

71.  Mr To on the other hand submitted that the Land is about 65,000 sq ft and there is a right of way and also the boundary dispute with Gain Glory.  However, there was no sufficient evidence that the boundary dispute with Gain Glory could not be resolved simply by instructing surveyors to carry out a boundary setting out exercise, and in any event, apart from raising this issue in his 1^st affirmation, there had not been any update, and did not appear to be an issue in relation to D1’s negotiations with the latest intended purchaser.

72.  Section 62 of the Ordinance sets out the duties of personal representation and section 62(1) provides that:

“(1) On the death of a person intestate as to any property, such property shall be held by his personal representatives— (a) as to the immovable property upon trust, subject to section 54, to sell the same; and (b) as to the movable property upon trust to call in, sell and convert into money such part thereof as may not consist of money, with power to postpone such sale and conversion for such a period as the personal representatives, without being liable to account, may think proper, and so that any reversionary interest be not sold until it falls into possession unless the personal representatives see special reason for sale.”

73.  As Mr To himself had submitted, it is stated in Williams, Mortimer and Sunnucks (20^th Ed) as follows :-

“It is the duty of a personal representative, after a grant has been made to him, to collect and get in the real and personal estate of the deceased and also to administer it according to law ...

  The duty to administer according to law carries with it a duty to preserve and protect that estate once it has been collected and got in[28].”

74.  It is the duty of Madam Lung and D1 to sell the Land and to collect and get in the assets in the Estate as soon as they were granted the Letters of Administration. 

75.  D1 seemed to shift the blame onto Madam Lung, in that it was his case that Madam Lung held very tight onto the business, and also the Estate and its administration, and that it was her decision not to sell the Land.

76.  Hung Hong, who had worked for the business for more than 40 years, had in his affirmation said that Madam Lung never intervened in the business after Deceased’s death, and that she seldom set foot in the factory and was content to leave the business to those sons who were interested in carrying on.  Hung Hong had also said in his affirmation that Madam Lung did not do anything about the administration of the Estate and left it all to D1[29].

77.  I find there was no sufficient evidence to support what D1 had said about Madam Lung’s involvement.  In particular, it can be seen from the following:

(i) The Family Meeting was not attended by Madam Lung, and although D1 had said that the arrangement was subject to Madam Lung’s final consent and approval, she did not take part in the discussion of those matters in relation to the Deceased’s business or the amount of salaries payable to the members of the family, in the event of the Deceased’s death.  It was further stated in the unsigned minutes of the Family Meeting that each cheque would need to be co- signed by 2 out of 3 signatories who were stated to be D1, D2 and Hung Hong. 

(ii) After the Deceased’s death, those valuation reports obtained for the purpose of estate duty assessment were addressed to D1 and referred to instructions being from D1.

(iii) When D1 and D3 were referring to their efforts in placing the Land on the market, there was no mention of Madam Lung being involved.

78.  In any event, Letters of Administration were granted to Madam Lung and D1 in November 2001, over 15 years ago, and even if one were to accept that there was some sort of consensus and that the siblings were not in a hurry to sell, by 2010, the siblings were clearly meeting to discuss the sale.  Further, since March 2012, D1 has been the sole administrator, and this was over 5 years ago.  Yet, no sale had been effected.

79.  Although it appeared that there were some steps taken by D1 to sell the Land, these steps or efforts were made only after P’s solicitors’ 08.10.12 Letter.  I agree with Ms Wu’s submissions that, D1’s efforts appeared to be “lack-lustre and half-hearted”.  It further appears that some of the negotiations fell through due to D1’s inflexible attitude.  In my view, there was no sufficient evidence that D1 had used his best endeavours to effect a sale.  Nor was there any evidence that D1 had considered or explored any other means in selling the Land rather than merely placing it with property agents, eg by way of public tender or by way of public auction.

80.  Having considered all the evidence, I have come to the view that there has been substantial delay on the part of D1 in selling the Land and in administering the Estate and such delay is unjustifiable.

Failure to render full and accurate accounts

81.  It is the duty of administrators to keep clean, clear and accurate account and to be always ready to render such account when called upon to do so, and it is no excuse that they are inexperienced in keeping account as in such cases it would be their duty to employ a competent accountant to keep them[30]. To discharge the duty to account properly, there must be production of the relevant supporting documents and receipts, as well as proper breakdown of items[31].

82.  Further, as stated in Re Leung Kam Wah, HCMP 1473/2014, 11 August 2016, unrep, an administrator must at all reasonable times be ready to render a clear and accurate statement of account to a beneficiary, so that the beneficiary is able to see his entitlement under the trust.  It is essential for any accounting system to show at least the opening capital assets, details of the movements of capital assets, the present capital assets, details of income earned, and details of expenditure[32].

83.  In the present case, D1 has been a co-administrator with Madam Lung since 9 November 2001.  D1, whether jointly with Madam Lung or not, clearly had/has a duty to furnish accounts of the Estate, under section 56 of the Ordinance, when lawfully required so to do, and to exhibit by affidavit filed in the court a true and perfect inventory and account of the movable and immovable property of the Deceased.

84.  No inventory or account had ever been prepared by D1 prior to the commencement of this action.  In the 07.11.12 Letter from P’s solicitors, P had sought an account and inquiry of the Estate be taken by D1 within 14 days.  There was no response to this letter.

85.  In D1’s affirmation, he had said Madam Lung had transferred a fair amount of the Estate to the New Wing Tai set up by her and to her accounts, and that Madam Lung was the one who had access to this information.  He then said once he received the relevant information from P, he would then compile the account of the Estate.

86.  In D1’s 2^nd affirmation, D1 said that the account of the Estate could not be prepared unless and until P, as executor of Madam Lung’s estate, provided the relevant financial information in relation to funds and assets transferred from the Estate to Madam Lung, or the New Wing Tai, or otherwise.  D1 further said it was not until 11 April 2015, that P in his 3^rd affirmation provided the current account balance between the Limited Company and New Wing Tai, and the current account balance between the Limited Company and Madam Lung personally.  However, D1 had never approached P for any information prior to P’s commencement of these proceedings.

87.  D1 eventually did provide an account in his 2^nd affirmation[33] (“Estate Accounts”) on 5 September 2016.

88.  P complained that the Estate Accounts were still partial and incomplete as follows :

(i) There was no explanation at all concerning the lack of rental income from the village house built on the Land, despite that P had flagged out the question of idleness in his 1^st affirmation[34];

(ii) The references to income from sale of various scrap copper/metal are unexplained and are without details;

(iii) The remarks provided to explain the figures under Section A did not really match with the said figures, in particular, the alleged sums in the bank account of the Deceased;

(iv) D1 failed to provide information about the updated current net assets of the Estate, eg, what other scrap metal or other property were yet to be sold;

(v) Regarding the purported sale of scrap copper as set out in Section D, in the supporting documents shown in Appendix 6[35].

89.  Although it was termed as a “partial account”, Mr To submitted that the Estate Account was the full account.  Further, he submitted that D1 had asked P to provide Madam Lung’s missing account information on 27 June 2013, and that it was only in P’s 3^rd affirmation that he provided information on the missing accounts, and there were still 4 types of outstanding accounts.

90.  D1 had said having been advised by lawyers at the commencement of these proceedings, he learnt that a better and more proper way to deal with the Deceased’s business was to close down Wing Tai and to set up a new one. 

91.  The Deceased’s business Wing Tai was a sole proprietorship.  Same as the Land, the administrators’ duty was to sell the business, together with its goodwill and assets, as soon as practicable after the death of the Deceased or when they were granted the Letters of Administration.  At the time of the Deceased’s death, according to the Schedule of Assets attached to the Letters of Administration, the business was valued to be HK$673,129.38[36]. It was not clear how this valuation was arrived at, but appeared to be based on the then bank account balances of Wing Tai and the valuations of the 4 vehicles owned by Wing Tai.  It did not seem that the valuation had taken into account of goodwill or the stock, the then receivables/payables. 

92.  The duty of the administrators, as mentioned earlier, was to collect and get in the real and personal estate of the Deceased. Same as the Land, in my view, the administrators should sell or otherwise liquidate Wing Tai.  However, according to D1, Madam Lung decided to take over Wing Tai and in this case, she or her estate may have to account for the benefits received.  In any event, as pointed out by Ms Wu, the Estate Accounts did not seem to be complete.

93.  I also accept that there was no explanation or account for the rental income, if any, from the village house built on the Land.  Anyway, it was clear that the Estate Accounts were only first rendered by D1 in September 2016, after the commencement of these proceedings, and there was failure on the part of D1 until then.

94.  However, in light of the order I am going to make, the accounts should be prepared afresh by a professional accountant.

Serious conflict of interest and loss caused to the Estate

95.  As submitted by Ms Wu, as a fiduciary and a trustee of the assets of the Estate, D1 owes fiduciary duties toward the Estate and the beneficiaries, including the duty to act in their best interests and to seek the best financial return and this includes seeking to generate income from the Land.

96.  There was no evidence that Madam Lung and D1 had put the Land to any useful purpose all these years and P complained that D1 could at least have leased out the 3-storey village house on the Land for rental yield. 

97.  Mr To complained that the issue of idleness was a new issue raised by P and that it had not been raised in any of the 7 affirmations filed by P’s camp, nor was it addressed by Ds, and that there was simply no substantial material before the court to deal with this issue.

98.  Ms Wu on the other hand pointed out that in P’s 1^st affirmation, P had said that the Land was “lying idle”[37], and D1 did not provide any information as to use of the Land in his 1^st affirmation.

99.  D1 is the administrator, and in my view, whether “idleness” has been properly raised, the duty on an administrator is an onerous one, and the duty was/is on D1 to seek the best financial return for the Estate pending administration and distribution.  If D1 was of the view that this issue was raised late, it was open to D1 to seek an adjournment of the hearing and to seek leave to file a further affirmation to deal with this issue, but he did not do so.  

100.  Mr To submitted that any potential devastavit claim would be a personal action against D1.  He further submitted that P had not adduced evidence in relation to any potential negligence on the part of D1 in these proceedings.

101.  Ms Wu on the other hand clarified that P was not saying at this stage that D1 should be held responsible for leaving the Land idle, but in view of the prima facie evidence, there should be investigation as to whether D1 should be held liable and if so, what would be the damages, if any.  

102.  The fact that the Estate has not been administered or the Land has not yet been sold for some 19 years after the Deceased’s death or 15 years after grant of Letters of Administration, with no income accounted for, in a way speaks for itself.  I am of the view that an investigation into the administration cannot be ruled out at this stage, and that if D1 continues to be the administrator, this would raise a serious conflict of interest.

Lack of competence, training and skills on the part of D1

103.  D1 is only a lay administrator with no professional experience in administering estates or managing or selling land. P pointed out that, by way of contrast with himself, D1 did not receive tertiary education.

104.  On the other hand, all the siblings had agreed to Madam Lung and D1 being appointed as administrators, knowing full well that neither of them had any professional experience in administering estates or being trustees nor had they received any tertiary education. 

105.  Even though P holds a Master Degree in Business Administration at Cardiff University in United Kingdom, there was no sufficient evidence that P himself has had any professional experience in administering and managing estates and/or being a trustee, save that he has been since 2012 been granted probate of Madam Lung’s estate.  In fact, in preparing the Schedule of Assets to obtain grant, it would seem that Madam Lung’s sole proprietorship in New Wing Tai, her shares in the Limited Company and also her interest in the unadministered Estate/the Land had all been omitted. Notwithstanding his higher education, P would in my view also be a lay administrator.

106.  I accept however, that whether P or D1, they will need to rely on professionals, such as accountants, lawyers, surveyors and/or property agents to administer the Estate and there will be professional costs involved. Anyway, it is now P’s proposal to appoint a professional accountant to administer the Estate, and not P himself.

Breakdown of mutual trust and confidence

107.  I accept that the evidence indicated there is now a breakdown of mutual trust and confidence between the majority of the surviving beneficiaries of the Estate and D1.

The views of the majority beneficiaries

108.  The majority, namely 5 out of the surviving beneficiaries, including P both in his capacity as surviving beneficiary of the Estate and as executor of Madam Lung’s estate which is entitled to 50% of the Estate, support D1’s removal and the appointment of a professional accountant.

Substantial size of the Estate

109.  As mentioned earlier, both D2 and D3 were concerned over the costs involved in instructing a professional accountant.  P has undertaken to pay for the costs on behalf of the Estate until sale of the Land.  I have considered all the beneficiaries’ views.  In my view, the sooner a professional accountant takes over, the sooner the Land can be sold and the Estate administered and wound up and this will be of benefit to all the beneficiaries.

110.  The latest proposed sale price of the Land was HK$62m.  I am satisfied that the Estate is not insubstantial. 

Conclusion

111.  Even if it was indeed Madam Lung’s wish or decision not to sell the Land, more than 5 years have elapsed since she passed away.  I have said the delay in this matter has been unjustifiable.  In fact, these proceedings have been progressing at a slow pace, and D1 had had more than sufficient time to remedy the situation, and yet he had not done so. 

112.  Having considered all the circumstances of this case, and having balanced the interests of all the beneficiaries and the size of the Estate compared to the costs of appointing a professional accountant, I have come to the conclusion that D1 ought to be removed as the administrator of the Estate, and an independent professional accountant should be appointed in his place.

113.  In D1’s 1^st affirmation, he has proposed a certified public accountant Mr David CW Chan to be appointed as an administrator, and that Mr Chan’s charging rate was HK$1,800 per hour, but there was no CV from Mr Chan and no further information have been received.

114.  P has now proposed Mr Andrew Hung to be appointed in D1’s place and 4 out of his 8 siblings have supported this.  The appointment of an administrator is a personal appointment.  Mr Hung’s charging rate is stated to be HK$4,500 per hour.  Section 60 of the Ordinance places a cap on the remuneration to an administrator, in that no such remuneration shall exceed 5% on the first HK$1,000, 2½ % on the next HK$4,000 and 1% on the balance of the gross value of all property of whatsoever nature administered.  It is not clear whether Mr Hung is prepared to be bound by the statutory cap.  Further, in order to assist this court in considering whether to require surety under section 46 of the Ordinance, Mr Hung should provide evidence of his professional insurance to cover the administration of estate. I also note that Mr Hung’s letter to P’s solicitors was dated 7 January 2015, namely some 2 ½ years ago.

115.  I therefore direct that P should submit within 21 days an updated letter of consent signed personally by Mr Hung, indicating that Mr Hung accepts the statutory cap of his remuneration, and also to provide evidence of his professional insurance.

Order

116.  In light of the above, the order is as follows :-

(i) D1 be removed as administrator of the Estate;

(ii) A certified public accountant or such person this court deems fit be appointed as the administrator of the Estate;

(iii) Upon the appointment of the substitute administrator, D1 do deliver up the assets of the Estate (including all the title deeds and documents in relation thereto) to the substitute administrator so appointed;

(iv) P to submit within 21 days an updated letter of consent signed personally by Mr Andrew Hung, indicating that Mr Hung accepts the statutory cap of his remuneration, and also to provide evidence of his professional insurance.

Costs 

117.  P is successful in his application for the removal and replacement of D1 as administrator and P should be entitled to costs. This is a costs order nisi, which shall be made final after 21 days.