YU MEEI JU AND ANOTHER v. DONG XI CHENG AND OTHERS

HCMP 1409/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1409 OF 2012

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D E C I S I O N

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Introduction

1. The administrators have been facing difficult questions during administration of the estate and as such, commenced the present proceedings to seek determinations from the Court.

2. There are 2 questions to be answered:

(a)  One of the beneficiaries of the estate of the deceased father is a minor.  Should this Court grant sanction to the natural mother to receive his share?

(b)  The estate includes shares in private companies.  Could the administrators distribute them in specie?

Background

3. On 28 September 2003, the Deceased died intestate in Hong Kong leaving 4 persons entitling to share in his estate:

(a)  the 1^st Plaintiff, his lawful wife (“the Wife”),

(b)  the 2^nd Plaintiff, his lawful and natural son (“the Son”) borne to him by the 1^st Plaintiff,

(c)  the 3^rd Defendant, his lawful and natural daughter (“the  Daughter”) borne to  him by the 1^st Plaintiff, and

(d)  the 1^st Defendant, his natural son (“the Minor”) borne to him by the 2^nd Defendant (“Madam Dong”).

4. At the date of the death, the Deceased left a net estate (“the Estate”) of about $10m, comprising a landed property, bank deposits, accounts receivables and various shares in private companies. As to the shares, they were and are:

Name of Company	No. of Shares	Estimated Value (HK$)
Priscilla Investment Ltd	650	1,547,000
Banrick Enterprises Ltd	1	28,619
Rutheron Trading Company Ltd	240,000	240,000
Kam Har Ltd	1	10
Ginza Development Company Ltd	15	291,990
Aaron Investment Ltd	550	5,500
Sylvia Investment Ltd	15,000	148,500
Freswick Ltd	200	36,400
		2,058,019 =======

5. On 27 January 2011, the Wife and the Son filed their application for grant regarding the Estate.

6. Before the grant was issued, Madam Dong (for herself and the Minor) commenced an action for financial provisions against the Wife (as intended administratrix of the Estate) in DCMP 2939/2010.  Later, parties came to a settlement.  Briefly, parties acknowledged their respective rights and agreed the grant to be issued to the Wife and the Son.  Further, Madam Dong and the Minor would receive ¥1m to withdraw the case and each party bore their own costs.  Last but not least, within 60 days from issuance of the grant to the Wife and the Son, they should use their best endeavor to distribute the Estate.

7. Payment of ¥1m was made.

8. On 8 July 2011, the Wife and the Son obtained the grant.  Thereafter, solicitors of the parties engaged in some correspondence but were unable to resolve the aforesaid two questions relating to the distribution of the Estate.  In the circumstances, the Wife and the Son commenced the present application seeking directions from this Court.

9. Parties appeared before me on 1 February 2013.  Mr. Patrick Siu of Counsel acted for the Wife and the Son.  The Daughter took a neutral stance and did not decide to be present.  Madam Dong and the Minor were represented by Adrian Leung of Counsel.  After hearing from them.  I reserved my decision to be handed down.  I now do so.

Ruling and Reasons

10. Regarding the first question put to the Court, I will sanction Madam Dong to give effectual receipt to the Wife and the Son on behalf of the Minor in relation to his share in the Estate. 

(a)  Both Counsel agreed that Madam Dong needed the sanction of this Court so that she could give effective receipt of the Minor’s share in the Estate.

“…Nor is the executor justified, without the sanction of the court or the will or the authority of statute…, in paying the legacy to the minor’s parents…”

  (Williams, Mortimer & Sunnicks:  Executors, Administrators and Probate (19^th Ed. 2008) at para. 75-02)

(b)  The Wife and the Son took a neutral position to the question.

(c)  The Minor was born in 1998 and now aged at about 15.

(d)  Madam Dong is the mother and appointed guardian of the Minor.  She has been taken care of him for more than 10 years since the death of the Deceased.

(e)  Madam Dong sued for herself and the Minor in DCMP 2939/2010 for maintenance.  She also received the said sum of ¥1m for them.  Under the settlement, it was anticipated that the Minor’s share was to be distributed to Madam Dong on his behalf.

(f)  At the date of the death of the Deceased, the share of the Minor’s Estate was about  . Although I do not have the benefit of the undated value of the same, I take it that it has risen as property prices have been on the upward trend over the years.

(g)  There is no evidence before me that Madam Dong has not been in good terms with the Minor.

11. As to the second question, upon consideration, I will direct the Wife and the Son to transfer certain shares in specie to Madam Dong for the Minor when they shall also try to sell some of the shares in open market.

(a)  Mr. Leung did not pursue the sale of the shares in the Estate as to:

  (i)   Ginza Development Co. Ltd.,

  (ii)   Aaron Investment Ltd.,

  (iii)   Sylvia Investment Ltd., and

  (iv)   Freswick Ltd.

  There is no reason why they are not to be distributed in specie.

(b)  Parties’ dispute before me concentrated in the following four companies wherein the shares were held by the Deceased and the Wife.  As summed up by Mr. Leung in paragraph 7 of his skeleton:

No.	Company name	No. of shares held by the Deceased/ lawful widow	% of shareholding held by the Deceased and the lawful widow	Nominal value per share (HK$)	Estimated value under the Letters of Administration (HK$)
1)	Priscilla Investment Ltd	Deceased (650/1000 shares) Lawful widow (350/1000 shares)	100%	10	1,547,000
2)	Banrick Enterprises Ltd	Deceased (1/2 shares) Lawful widow (1/2 shares)	100%	10	28,619
3)	Rutheron Trading Co Ltd	Deceased (240,000/300,000 shares) Lawful widow (60,000/300,000 shares)	100%	1	240,000
4)	Kam Har Ltd	Deceased (1/2 shares) Lawful widow (1/2 shares)	100%	10	10

(c)  Mr. Siu and Mr. Leung had quite a dispute over the applicable law. It was largely arisen from their reading of the case of Lloyds Bank plc v Duker & others [1987] 3 All ER 193; [1987] 1 WLR 1324.  It suffices however for me to decide that the authority does not (and indeed, none of the cases referred to by the parties) attempt to limit the discretion of the Court.  Each case depends on its own facts.  This Court (as well as the administrators) should try his best to do “justice”, having regard on the circumstances.  In the authority, the Court ordered the executor to sell the shares in open market and distribute the proceeds because it would otherwise achieve an unfair result:

“ since the majority shareholding which D had requested be transferred to him was worth markedly more per share than the minority holdings, whether taken singly or as a whole, so that D would receive more than 46/8oths of the estate if the 574 shares were transferred to him…”

(d)  The companies as in (b) above are holding some landed properties:

(i)  Priscilla Ltd:

  Shop A1 and cockloft on G/F, Silver Centre Building, Mui Woo Ferry Pier Road, Lantau Island;

  Remaining portion of Lot No.77, 82, 86, 88 and 99 in D.D.313, Lantau Island, Hong Kong;

  Lots Nos. 2-6, 8-22, 24-28, 33-35, 38, 40, 42, 44, 48, 51, 53-55, 57, 59-69, 72 in DD No. 316, Lantau Island, Hong Kong.

(ii)   Banrick Ltd:

  Factory A on 1^st Floor, Sze Hing Loong Industrial Building, No. 44 Lee Chung Street, Chaiwan, Hong Kong;

  Car Parking Space No. 7, Sze Hing Loong Industrial Building, No. 44 Lee Chung Street, Chaiwan, Hong Kong.

(iii)  Rutheron Co. Ltd:

  Flat A, 20^th Floor, The Babington, No.6D Babington Path, Hong Kong.

(iv)   Kam Har Ltd:

  Lots Nos. 1-9 in D.D. No. 333

  Lot No. 678 in D.D. No. 333 (1/2 shares)

(e)  The distribution of the shares in specie in the companies at (b) above according to section 4 (3) the Intestates’ Estate Ordinance (Cap.73) will entitle the Wife to become the majority shareholders thereof (without counting the shares inherited by the Son and the Daughter).  The Minor is therefore going to become the minority shareholders therein.

(f)  The important factor as in the case of Lloyds Bank also appears in the case of these 4 companies, i.e. the shares to be transferred to the widow are worth more (markedly) per share than any minority shareholdings, including those of the Minor.

(g)  I of course do not overlook the difficulties of the Mother and the Son mentioned by Mr. Siu, including that they are shares in private companies wherein articles did not allow invitation to public to subscribe them.  However, I am sure that a court order can help releasing the concern of the buyer.  As to valuation, with respect, I cannot agree that it is difficult.  After all, companies are required by legislation to prepare audited accounts every year.

(h)  As to whether the shares could or could not be sold in open market as directed, one can only see how the matter will develops in its due course.  It suffices for me to be satisfied at this stage that it is still a feasible and not impossible option.

Conclusion

12. To conclude, I will make the following orders /directions.

(a)  The 2^nd Defendant can give effectual receipts on behalf of the 1^st Defendant to the 1^st and 2^nd Plaintiffs as administrators of the Estate.

(b)  The 1^st and the 2^nd Plaintiffs do dispose the following shares in the Estate in specie.

  (i)   Ginza Development Co. Ltd.,

  (ii)   Aaron Investment Ltd.,

  (iii)   Sylvia Investment Ltd., and

  (iv)   Freswick Ltd.

(c)  The 1^st and the 2^nd Plaintiffs do dispose the following shares in the Estate in open market and distribute the proceeds according to law.

  (i)   Priscilla Investment Ltd.,

  (ii)   Banrick Enterprises Ltd.,

  (iii)   Rutheron Trading Co Ltd., and

  (iv)   Kam Har Ltd.

(d)   Parties are at liberty to apply for further directions, including those relating to the said sale of the shares in open market, their mode of sale and the setting of reserved prices.

Costs

13. Although parties had a short discussion on the question of costs at the end of the hearing before me, the 3^rd Defendant did not have such an opportunity.  I will therefore make an order nisi (which will become absolute within 14 days from the date hereof) that:

(e)   Costs of the proceedings for all parties, including certificates for counsel of the hearing on 1 February 2013 and all cost reserved, be borne by the Estate, to be summarily assessed by me.  For the purpose of the assessment, parties do lodge and serve their skeleton bills within 21 days.  They do also lodge and serve their reply within 7 days thereafter.

14. It remains for me to express my gratitude towards both Counsel for their helpful assistance rendered to this Court.