HO SUEN CHANG v. HO HIN CHEUNG in his capacity as the sole executor of HO HARK KUN, deceased

HCMP 1669 & 1670/2015

[2021] HKCFI 1133

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1669 OF 2015

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AND

MISCELLANEOUS PROCEEDINGS NO 1670 OF 2015

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D E C I S I O N (N O. 2)

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The Application

1.  The Plaintiff and Defendant are brothers.  These consolidated proceedings involve administration of the estate of their Father.  The estate consists of a number of properties.  This is an application for an order that the proceeds of sale of one property (abbreviated as “NT Property” in the pleadings) be paid into Court pending trial.

2.  The Father passed away on 9.12.2012 at the age of 91. Under his will dated 10.1.1998, the parties are the only 2 beneficiaries entitled in equal shares.  Probate for Father’s estate was granted on 29.7.2013 to the Defendant as Executor.

3.  In 2015, the Plaintiff commenced 2 actions:

(1)  HCMP 1669/2015 dated 9.7.2015 against the Executor, in which the Plaintiff sought orders, amongst others, to require the Executor to render an account of the estate and to distribute the assets of the estate; and

(2)  HCMP 1670/2015 dated 9.7.2015 against the Defendant in his personal capacity in which the Plaintiff sought an order for sale of Po Wah Property registered in their names as tenants in common.

4.  These two actions were subsequently consolidated, with directions for the filing of pleadings. 

5.  As disclosed in the pleadings, there is no dispute that Father had, during his lifetime, purchased various properties with his own funds including:

(1)  NT Property registered in Father’ name;

(2)  TNS Property registered in the Plaintiff’s name since 1986 and was sold by the Plaintiff in 2014 at the price of HK$17 million (“TNS Proceeds”);

(3)  Po Wah Property; and

(4)  Meizhou Property.

6.  In the consolidated action, the Executor pleads that TNS Property and Po Wah Property form part of the estate, despite the state of registration of title.  He counterclaims for the TNS Proceeds and TNS Rents which had been collected by the Plaintiff for 6 months prior to the death of Father.  The total amounted to no less than $17.65 million.

7.  The ownership of Po Wah Property is in dispute.  The value of Meizhou Property is low, only about RMB200,000.

8.  The Plaintiff has registered the originating summons in HCMP 1669/2015 against the NT Property (“NT Property lis pendens”).

9.  The estimated market value of the NT Property has fluctuated from $24.4 million in June 2020 to $15 million in December 2020 (with the NT Property lis pendens).  The latest offer that the Defendant has received, in December 2020, is $22 million.

10.  All of the offers that the Defendant has received were conditional on the NT Property lis pendens being vacated prior to purchase.  However, the Plaintiff has categorically refused to vacate the NT Property lis pendens until the time of completion of sale. 

11.  By the present summons, the Defendant seeks an order that the proceeds of sale of the NT Property be paid into Court.  This is not opposed by the Plaintiff.  The only question is one of costs.

Analyses

12.  The Court has jurisdiction to determine any question arising in the administration of the estate, including the manner and timing of the distribution of assets: Order 85, rule 2 of the Rules of the High Court. 

13.  In exercising its jurisdiction to give directions, the Court decides what ought to be done in the best interests of the estate and not in determining the rights of the adversarial parties: Hong Kong Civil Procedure 2020, Vol 1, §85/2/1.

14.  The Court would only order payment into court if it appears that assets in the hands of the administrator are at risk and only if the assets cannot be adequately safeguarded in any other way because of additional expense and inconvenience it caused. See Williams, Mortimer and Sunnucks, 21^st ed, §58-08. 

15.  This summons is, in my view, a strange one. 

16.  Firstly, it is taken out by the Executor who does not allege any risk of the proceeds being put into his hands. The application was probably to fend off continuous demands from the Plaintiff to distribute assets before this action is disposed of.

17.  Secondly, the summons seeks payment-in, rather than a determination of the mechanism and price of sale or an order to vacate the lis pendens. The summons covers only the NT Property, and not Po Wah Property which faces a similar problem of having a lis pendens registered against it.  Accordingly, the making of an order for payment-in has little utility and would not substantially advance the administration of the estate.

18.  This Court had, in an attempt to assist the parties in moving forward, suggested a mechanism for sale of the properties with the lis pendens removed and having the title deeds placed in the hands of the Defendant’s solicitors with undertakings to be given by those solicitors and the Defendant.  (See letter dated 23 March 2021.) Unfortunately, no agreement could be reached between the parties even at this hearing and the Plaintiff had refused to consent to an offer for sale of the NT Property at $22 million. 

19.  Accordingly, the Court will only decide the question of costs within the parameters of the summons. 

20.  The consent of the parties is important.  That aside, an order for payment-in of proceeds of sale is appropriate for the following reasons:

(1)  The Executor seeks to recover $17.65 million from the Plaintiff (which would eventually be split between the Plaintiff and the Defendant).  However, the Plaintiff’s half share of the proceeds of sale of the NT Property will only be $12.2 million (taking the highest valuation for present purposes) and RMB100,000 (in respect of the Meizhou Property).  In the event the Executor succeeds in the claim, there is a risk that the Plaintiff’s share in the estate may not be sufficient to cover the damages and legal costs.

(2)  The Plaintiff has created many obstacles in the administration of the estate.  He had harassed Mother after the death of Father, driving her out of the NT Property whilst he and his family occupied a floor of the NT Property.  It took the Executor some time to get vacant possession of the NT Property.

(3)  The Plaintiff created other obstacles by refusing to vacate the lis pendens to facilitate the sale of the NT Property, thereby putting his own interests above that of the estate.

(4)  The Plaintiff refused to disclose his residential address in the latest affirmation and only provided a post-box address.

21.  If the Executor were to distribute the proceeds of the NT Property immediately after sale, there is a risk that the Plaintiff’s share will be put beyond the reach of the Executor, making it difficult to enforce the judgment against the Plaintiff. 

22.  The Executor has offered to pay in the full amount of the proceeds of sale of the NT Property, which would include his half share.  This would provide protection on costs should the Plaintiff succeed in fending off the Executor’s counterclaim.

23.  The Plaintiff claims to have given his consent to the payment-in a month after the summons was filed and has invited the Plaintiff to give alternative proposal for sale of the NT Property.

24.  I have read the Calderbank letters.  The so-called consent of the Plaintiff carried with it many conditions, eg as to the time for sale of the New Territories NT Property, the sale price, the amount of legal fees.  The sale was not workable in the light of the Plaintiff’s refusal to vacate the lis pendens before sale.  One offer to purchase the NT Property at $20 million in November 2020 lapsed as a result. 

25.  It was in the written submission to this summons that the Plaintiff finally gave his unconditional consent to payment-in.  However, even in the written submission, the Plaintiff queried why the lis pendens could not be vacated at completion but must be done at present.

26.  I find that the Plaintiff’s consent was not unconditional.  The general rule that costs should follow the event applies and should be to the Defendant. 

27.  However, costs of the summons should not cover those in response to this Court’s letter dated 23 March 2021.  That part of the costs, including 1 hour of the hearing time, went outside the summons and was aimed at facilitating the sale of the disputed properties expeditiously.  Those costs should be costs in the cause of the action.

28.  The Defendant’s own costs of the summons on trustee basis should be borne out of the estate.

29.  I thank Ms Liu and Ms Lo for their assistance.

30.  Once again, this Court urges the parties to exercise common sense in selling the disputed properties.  It will be of use if a party were to ask his own valuer how much the property price with and without a lis pendens registered against it.  The party who imposes terms of sale without himself being able to come up with an actual buyer offering over $22 million (the latest offer received by the Defendant) may have to face the consequence of having to bear the risk of a falling market and the resultant loss.