ANNABELL KIN YEE LEE AND OTHERS v. LEE WING KIM (MAY LEE)

HCA9522/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9522 OF 1997

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REASONS FOR DECISION

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1. This is the plaintiffs' application for leave to adduce expert evidence on the administration of estates and trusts. Two summonses were issued by the plaintiffs. In the first summons filed on 23 June 2001, the plaintiffs seek, under paragraph 2(b)(ii)-(iv), (c) and (d), leave to adduce expert evidence on the administration of estates and trusts together with directions relating thereto. By another summons issued on 23 August 2001, the plaintiffs apply to restore the earlier summons and for leave to adduce expert evidence at the trial, the substance of which is set out in the draft report annexed to the summons. The application was opposed. After hearing submissions, I dismissed the application. My reasons appear below.

The background

2. This action arose out of the administration of the estate of Madam Ng Chan Wah ("the Deceased"), who died on 15 May 1991, leaving her last will dated 22 November 1989 ("the Will"). The 3rd plaintiff and the defendants are the children of the Deceased and the 1st and 2nd plaintiffs are two of the children of the 3rd plaintiff. The defendants are the executors and trustees under the Will. The plaintiff are among the beneficiaries under the Will.

3. Apart from the Will, the Deceased had also made a document dated 22 November 1989, which is referred to by the plaintiffs as a codicil and by the defendants as a secret trust document ("the Secret Trust document"). The Secret Trust document purports to vary some of the provisions of the Will, the validity of which is challenged by the plaintiffs.

4. In January 1992, the 3rd plaintiff entered a caveat in respect of the Deceased's estate. This resulted in caveat proceedings no.358 of 1995 in which the 3rd plaintiff objected to the 1st defendant acting as an executrix of the Will. The caveat proceedings remain unresolved and had been ordered to be heard immediately after the trial of this action. As a result of the unresolved caveat proceedings, no grant of probate has been issued.

5. By this action, the plaintiffs seek to revoke the appointment of the defendants as executors and trustees and have them replaced by a firm of professional trustees. The plaintiffs also seek accounting and other consequential relief.

6. The plaintiffs' case is that the defendants are unfit and improper persons to continue with the administration of the estate. Principally, the plaintiffs say that the defendants have been in breach of trust and are also guilty of wilful default. Various matters are relied upon by the plaintiffs and they have been summarized in the 3rd plaintiff's witness statement as follows :

(1) that the defendants have given away assets in the estate;

(2) that the defendants have wrongfully failed to deal with or have dealt improperly with overseas assets;

(3) that the defendants have failed to take adequate steps to minimise estate duty;

(4) that the defendants have wrongfully failed to maximise the benefit to the estate of 157 Argyle Street;

(5) the defendants wrongfully refused to disclose the Secret Trust document, thereby causing significant costs to be unnecessarily incurred;

(6) that, until recently, the defendants failed to take adequate steps to determine the validity of the bequests in clauses 8 and 11 of the Will;

(7) that the defendants have failed to give proper accounts;

(8) overall, that the defendants have failed properly to administer the estate of the Deceased or of the father's assets appointed by her under the Will; and

(9) that the 1st defendant's conduct in relation to the bequests in clauses 8 and 11 of the Will has been such as to cause a justifiable loss of confidence in her as an executrix and trustee.

7. The defendants deny the allegations of breach of trust and wilful default. As to the specific complaints of the plaintiffs, the defendants' case can be summarized as follows :

(1) Most of the jewellery and chattels of the Deceased were given away by her during her life time. After her death, jewellery were given to the Deceased's daughters in accordance with the Deceased's written instruction dated 12 September 1979. In any event, clause 22 of the Will confers upon the executors an absolute discretion to appoint the residuary estate to the beneficiaries named in the Will.

(2) In respect of the bank accounts in USA, the defendants had obtained legal advice and were advised that it is not necessary to obtain probate. Money had been remitted to Hong Kong in accordance with the Deceased's wishes. The money paid to the Deceased's former housekeeper did not come from the estate. As for the properties in Guangzhou, the defendants had given authorization to the 3rd plaintiff to deal with them.

(3) On matters of estate duty, the defendants had sought and acted on professional advice. The defendants had also conducted negotiations with the commissioner of estate duty, as a result of which, agreement had been reached with the commissioner.

(4) In relation to Argyle Street property, given the old and derelict condition, it would be unrealistic to let it out. Also, the property is subject to an equitable charge held by the Commissioner for Estate Duty as security. It would also expose the estate to risk if the property were to be sold before the grant of probate.

(5) The Secret Trust document had already been disclosed. The claim for costs is denied.

(6) The defendants had commenced HCMP 457 of 1999 in January 1999 to determine the validity of the Secret Trust document.

(7) Professional accountants had been employed and estate accounts can be prepared if and when necessary.

(8) The payment of funds and dividends into MWLS was neither wrongful nor a breach of interest in that MWLS has always been the de facto banker in the family.

(9) The allegations of misconduct against the 1st defendant are denied

8. The issue for the determination of the Court are whether the defendants have been in breach of trust and/or guilty of wilful delay as to render them unfit and improper to remain as executors and trustees. This in turn defends on the court's findings on the complaints raised by the plaintiffs. These are mixed questions of facts and law.

The application

9. As early as January 1999, leave to adduce expert evidence was granted by Yam J with direction that the expert reports be exchanged by 30 June 1999. The areas and scope of expert evidence was, however, not specified. The exchange of reports did not take place. At the direction hearing on 25 April 2001, the defendants raised an issue regarding the scope of the expert evidence that the plaintiffs intended to adduce at trial, whereupon the plaintiffs undertook to supply details of the proposed experts to the defendants within 14 days. Also on that basis, the time for exchange of expert reports was extended to 20 July 2001. The plaintiffs did not provide the details and the date for exchange of reports again lapsed.

10. Then on 23 June 2001, the plaintiffs issued a summons for the variation of Yam J's order and the order of 25 April 2001. The present application was included under paragraph 2(b)(ii) of the summons. The application was opposed and it was adjourned further evidence to be filed to indicate the contents of the expert evidence sought to be introduced. Then on 23 August 2001, the second summons was issued with the draft expert report attached.

11. Both the plaintiffs' summonses were issued pursuant to Order 38, rule 37 Rules of High Court and the inherent jurisdiction of the court. Order 38, rule 37 concerns directions on the disclosure of expert evidence. Given that the defendants oppose the introduction of expert evidence on administration of estates and trust, the present application of the plaintiffs is in actual fact an application for leave to adduce expert evidence pursuant to Order 38, rule 36(1) Rules of High Court. The expert evidence in issue is that as set out in the draft report annexed to the 23 August 2001 summons.

12. In the 7th affidavit of Mr Hughes filed in support of the application, it is suggested that further modifications and additional annexures will be made to the draft report. Although it is not uncommon for expert report to be subject to some editing after leave is granted and before it is served and filed, it is not expected that the report will undergo substantial revisions or important changes. This is all the more so where leave is granted after a contested application. Indeed Mr Carolan accepts that, if leave were to be granted, the report to be filed and served should be substantially the same as the draft attached to the summons. Accordingly, in considering the present application, I shall proceed on the basis that the draft report provides the substance and sets the boundaries of the evidence sought to be given by the expert.

The relevant principles

13. It used to be the rule that the court had no power, at interlocutory stage, to rule on the admissibility of expert evidence since it was a matter solely for the trial judge : Sullivan v. West Yorkshire Passenger Transport Executive [1985] 2 All ER 134. In Woodford and Ackroyd v. Burgess [2000] CP Report 79, the English Court of Appeal decided that High Court judges do have power under the inherent jurisdiction of the Court to rule on the admissibility of expert evidence at pre-trial review hearings, but doubted whether masters enjoy the same power and whether such power can be exercised at interlocutory hearings other than pre-trial reviews.

14. In Ko Chi Keung v. Lee Ping Yan Andrew [2001] 2 HKC 63, Chung J declined to follow the English approach in Woodford and held that the distinctions in jurisdiction between judge in chambers and master, on the one hand, and between pre-trial reviews and other occasions, on the other hand, were invalid. It was observed that the matter is ultimately one of the court's discretion. I respectfully agree. Neither Mr Carolan nor Mr Fung SC seeks to challenge the decision of the learned judge. I am also in agreement with Chung J's holding that (at p.670) :

"...When it is clear and obvious that the expert evidence is relevant (or irrelevant), the discretion should normally be exercised in not deferring the determination on admissibility until trial so as to save time and costs and to promote certainty in litigation. On the other hand, if the relevance (or irrelevance) of the expert evidence is not clear and obvious, the discretion should usually be exercised to defer that issue for it to be raised at trial."

15. Indeed modern judicial approach has moved away from leaving all matters to be resolved by the trial judge at the trial to an emphasis on effective pre-trial case management. The court is prepared at an interlocutory stage to exercise its discretion to exclude evidence, including expert evidence, which it perceives to be plainly irrelevant : see for instance the judgment of Rogers JA in Ying Ho Company Limited & Ors v. The Secretary of Justice (unreported) CACV365/1999. The advantages of such an approach in reducing the costs and the length of trial are obvious and need no elaboration.

16. As to the relevant test for determining whether expert evidence is to be received, Evans-Lombe J in Barings plc (in liquidation) & Anor v. Coopers and Lybrand & Ors LEXIS Transcript 9 February 2001 at para.44 observed that this involves a two stage test, the first stage being whether the evidence is admissible as "expert evidence" for the purpose of section 58 of the Evidence Ordinance, Cap.8, and the second stage is whether the evidence is relevant, in the sense of being helpful, to any decision that the court has to arrive at. It is pointed out (at para.45) that :

"... 'expert evidence' is admissible under [section 8 of the Evidence Ordinance] in any case where the Court accepts that there exists a recognised expertise governed by recognised standards and rules of conduct capable of influencing the Court's decision on any of the issues which it has to decide and the witness to be called satisfies the Court that he has a sufficient familiarity with and knowledge of the expertise in question to render his opinion potentially of value in resolving any of those issues. Evidence meeting this test can still be excluded by the Court if the Court takes the view that calling it will not be helpful to the Court in resolving any issue in the case justly. Such evidence will not be helpful where the issue to be decided is one of law or is otherwise one on which the Court is able to come to a fully informed decision without hearing such evidence."

17. With these principles in mind, I now turn to look at the expert evidence proposed to be adduced for the trial herein.

The proposed expert evidence

18. The purpose of adducing expert evidence on the administration of estates and trusts, as stated in the opening part of the proposed expert report, is to assist in the determination of whether the defendants are fit and proper persons to continue as executors or whether they should be replaced. After setting out the allegations of the plaintiffs, the expert stated that the present case was unusual because of the "[d]efendants' determinations to remain as Executors at all costs", which made the introduction of a neutral party a critical issue, particularly, to the 3rd plaintiff. It was then said that the fact that the defendants are permanently resident outside Hong Kong has compounded the difficulties in dealing efficiently and expeditiously with the administration of the estate.

19. The report then gave what the expert said was, a "comparison with what fit and proper executors would or would not do". It started with the statement that one of the key responsibilities of an executor is to prepare a detailed inventory of all the assets and liabilities of the estate, which was usually agreed with the principal family beneficiaries. It was then said that within a year of death, the executor should have realised the assets and settled the liabilities and presented an estate account containing these information. In any case, an account should be provided after one year if any person interested in the estate so required. It is also normal practice to produce internally interim estate accounts. It was said that no estate account had been produced in this case, when the defendants could have appointed professionals to handle this.

20. The report continued to state that the usual practice is to obtain valuations of properties before distributing them. The expert then reviewed the provisions of clause 22 of the Will and concluded that the defendants, in distributing the assets of the estate, had not complied with clause 22. The report then moved on to state that with regard to foreign assets, the defendants should engage professionals to carry out valuations, inspections and obtaining the grant of probate. The expert remarked that "[t]here is no logical reason why the [defendants] could not have instructed Chinese lawyers themselves or through their own Hong Kong lawyers to handle the Estate's properties in China". He then referred to the 3rd plaintiff's complaint in respect of 11½ Milestone, Castle Peak and commented that there were "clear breaches by the [defendants] of their responsibility to preserve the assets as far as possible", and that "at the very least, they were in breach of their duty in not informing the 3rd plaintiff about the reversion ....".

21. On the issues of estate duty and valuation of shares, the report stated that an executor should ensure that estate duty is cleared before making distribution. The expert observed that there was a delay in this case in the finalization of estate duty assessment that resulted in interest of over $4 million being imposed. It was said that fit and proper executor would not incur delay leading to substantial interest being imposed or exposing the estate to unnecessary liability. On the question of valuation of shares, the report stated that independent opinion on valuation should be sought while negotiations with the Estate Duty Office were being conducted. The expert questioned the need of granting a charge over the Argyle Street property. He commented that the defendants, when acting by their former solicitors, were not attentive and were guilty of delays, and had also failed to deal with particular assets of the estate. He also criticized the defendants' present solicitors' effort in negotiating with the Estate Duty Office.

22. In respect of the Argyle Street property, the report stated that where a property is to be sold, it is the executor's responsibility to obtain an independent valuation and to agree the terms of sale with the beneficiaries interested in the proceeds. The expert observed that the 3rd plaintiff had "taken his own initiatives" to obtain valuations and procure favourable offers. A description of these offers were given. The expert recognized that the equitable charge over the Argyle Street property and the fact that grant of probate is pending do pose difficulties, but he considered that they could be overcome. The expert also accepted that the defendants had power to postpone sale, but said that the property should at least be "on the market within one year of the Deceased's death". The expert also said that the defendants should have undertaken a valuation and marketed the property for sale. According to the expert, he "would not have expected any reasonable executors to have acted in the way they did over the handling of this property" and that "it was wholly unnecessary to encumber the family home in this way".

23. The report then carried on to identify the advantages of an independent trust company and discuss the costs of independent trust company. In the final part of the report, the expert set out his opinion under four paragraphs. He was of the view that there is exhibited a great personal battle and personal animosity and deepening of mistrust. He said that the defendants' opposition to the appointment of a neutral party to administer the estate "is indicative of the defendants' unwillingness or inability to set aside their personal differences against the third plaintiff in particular". His view was that without third party intervention, the differences could not be resolved and the plaintiffs' suggestion "is the most practical and indeed usual course of action".

24. I had set out in some details the substance of the proposed expert report in order to demonstrate why, in my view, the proposed expert evidence should not be admitted. One only needs to read the proposed report to form that view.

25. Mr Fung, SC in his submissions doubts the existence of a body of expertise with recognized standards in relation to the administration of estates and trusts. I share that reservation. A reading of the proposed expert report in no way alleviates this concern. No doubt the expert had made statements as to the duties of an executor to prepare inventory, accounts and valuations of properties, to realise assets and to settle debts and liabilities as well as to act expeditiously. The report, however, made no reference to any established practice or standard of conduct as laid down by a particular profession or sanctioned by common usage. The duties identified in the report are readily recognized by the law and well within the knowledge of the court. They are not the subject matter of any specialized knowledge as to call for expert testimony.

26. Secondly, the statements made in the proposed report are general propositions on the duties of executors. They do not address the particular and individualized circumstances of the present case. For instance, when the report said that a key duty of an executor is to prepare an inventory of the assets, which is usually done by agreement with the principal beneficiaries, it did not state what would be the acceptable or recognized standard or practice where, as in this case, some of the beneficiaries challenge the properties to be included in the estate. Take another example, in stating that valuations and grant of probate should be obtained for overseas properties, the report did not indicate what commonly accepted practice or standard would require an executor to do when he has been advised that a grant of probate is not necessary. The proposed expert evidence is, in my view, not helpful and irrelevant to the issues that the court has to decide.

27. Thirdly, the proposed report strikes one as a piece of written advocacy. It is more an attempt to rehearse the plaintiffs' arguments on the merits of the case than a piece of independent expert testimony. Although section 58 of the Evidence Ordinance permits an expert to give opinion on the ultimate issue, the section does not sanction an expert to give opinion on the legal or general merits of the case. In the proposed report, the expert not only commented adversely on the conduct of the defendants, but also concluded that the defendants had acted in breach of clause 22 of the Will. In paragraph 48 of the proposed report, the expert went so far as stating that the defendants are unwilling and unable to set aside their personal differences against the 3rd plaintiff. Quite how such remarks are apt for an expert witness is beyond my comprehension. The last section of the proposed report under the heading "Opinion" is a piece of legal submissions that has no place in an expert report. It is plainly an attempt to further the plaintiffs' cause by recommending to the court the plaintiffs' proposal to appoint an independent trust company. The court can derive no assistance from expert testimony that sets out to advocate the interest of a party to the action.

28. Mr Carolan emphasises strongly that the present application is only what he calls a "standard application for directions" and that I should not be concerned with weighing the evidence or ruling on the admissibility of the expert report. It is pointed out that even with the directions for expert evidence, the defendants may still challenge the expert evidence at the trial. For my part, I do not agree that I am dealing with a standard application for directions on expert evidence. To say the least, the application is strenuously opposed and the court is called upon to adjudicate on whether this is a case fit for expert evidence of the kind proposed by the plaintiffs. In the course of considering the application, if it becomes obvious that the proposed expert evidence is not genuinely expert evidence and/or is irrelevant, then the court ought to exercise its discretion to refuse the admission of such evidence. It is only where the court cannot form a clear view on the relevance of the proposed evidence or where it considers that the proposed evidence is clearly relevant that it should grant leave for the proposed evidence to be adduced. I also do not accept that, after leave is granted on a contested application for adducing expert evidence, the opposing party may still challenge the admissibility of the expert evidence contained in the expert report that had been considered by the court in the leave application.

29. In the present case, I have for the reasons stated come to the view that the proposed expert evidence is clearly and obviously not genuinely expert evidence and is irrelevant to the issues before the court. The proposed expert evidence should not be received and the leave sought ought to be refused.

Costs

30. Mr Carolan does not dispute that costs should follow event. He however argues that certificate for two counsel should be refused and that the costs of the defendants' hearing bundles should be disallowed. I shall deal with his arguments in the reverse order. The defendants had prepared three hearing bundles, none of the documents in which had been referred to either in the written or oral submissions. The stated reason for the bundles is that they are to assist the court in case the court needs to refer to them. That is hardly justifiable in a party-and-party taxation. The costs for the preparation of the three bundles is to be excluded. As to certificate for two counsel, I accept Mr Mok's submissions that the application does involve submissions on recent development of the law on the court's jurisdiction to exclude expert evidence. I also take into account that the present application will impact on the conduct of the trial and that it is appropriate for counsel conducting the trial to argue the application. I will therefore certify it fit for two counsel.

Conclusion

31. For the reasons stated above, paragraphs 2(b)(ii)-(iv), (c) and (d) of the plaintiffs' summons filed on 23 June 2001, and the plaintiffs' summons filed on 23 August 2001 are dismissed. The costs of the first summons, including 20 minutes of the hearing on 3 July 2001, and the costs of the 2nd summons, but excluding the costs of the defendants hearing bundles, be to the defendants against the plaintiffs in any event, to be taxed if not agreed. There is a certificate for two counsel.