HO SUEN CHANG v. HO HIN CHEUNG

HCMP 876/2019

[2020] HKCFI 1620

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 876 OF 2019

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D E C I S I O N

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Introduction

1.  This is an application to strike out the originating summons on the ground of duplicity.

2.  The parties are the sons of the late Mr Ho Hark Kun (“the Father”).  The Defendant is the executor of the Father’s Estate.

3.  The Plaintiff took out 2 originating summonses in 2015 against the Defendant.  One was to compel the executor to provide accounts as executor and make distribution of the Estate; the other was against the Defendant personally to compel him to sell the property held by him and the Plaintiff as tenants-in-common.  The 2 originating summons were consolidated (“Consolidated OS”).

4.  As pleadings were filed in the Consolidated OS, more properties were alleged by each party to have formed part of the Father’s Estate.  By a counterclaim upon counterclaim, the Plaintiff sought removal of the Defendant as an executor due to the latter’s breach of duties; and account of rental and proceeds of sale of properties.

5.  The Defendant counterclaims for a declaration that 2 properties, (i) held in the name of the Plaintiff but sold for $17 million; and (ii) a property in the joint names of the parties, are held on trust for the Estate.  He seeks account of rent and/or proceeds of sale from the Plaintiff.

6.  The Consolidated OS have progressed to a stage ready for setting down for trial, subject to the service of supplemental witness statements.  Mediation has taken place in 2018/2019 but failed.

7.  The Plaintiff took out the present originating summons in 2019 (“New OS”) seeking removal of the Defendant as an executor and production of accounts in relation to the Estate.  It is the Plaintiff’s case that the issue of removal of executor should be decided first, leaving the Consolidated OS, which deals with properties of the Estate “intact”.

8.  The Defendant applies to strike out the New OS on the ground that the reliefs sought are duplicitous of those in the Consolidated OS.  Should strike-out be unsuccessful, the Court is not to consider the merits of the New OS (as the Defendant has not yet filed evidence in opposition), but convert the New OS into a writ action and have it consolidated with the Consolidated OS.

Factual background

9.  The Father passed away on 9 December 2012, survived by the Mother and 4 children (ie 2 sons being the Plaintiff and the Defendant, and 2 daughters).  The Plaintiff and the Defendant were made the only beneficiaries to the Father’s estate.  The Defendant is the sole executor.

10.  Probate was granted to the Defendant on 29 July 2013.  The assets then found belonging to the Estate were (i) cash at bank; and (ii) a property in the New Territories (“NT Property”).

11.  Two years later, on 19 August 2015, the Defendant filed an Additional Schedule of Assets and Liabilities, listing 2 additional assets of the Estate, namely: the TNS Property and Po Wah Property. He avers that these 2 properties, paid for by the Father, have been held on trust for the Father and hence form part of the Estate.  These 2 properties form the subject matter of the counterclaim.

12.  As the litigation progressed, the parties have brought more properties into issue.  A total of 7 properties in Hong Kong are alleged to have formed part of the Estate, including the Meizhou Property owned by the Father in the PRC.  Each party asks the other to account for proceeds of sale or rent.

13.  Since grant of probate in 2013, not a single asset has been sold and not a dollar has been distributed.  The Meizhou Property has not yet been collected in.  Instead, the Defendant has allegedly incurred $5 million legal costs concerning the Estate.

14.  The Defendant has given explanations for the delays and difficulties faced in administration of the Estate.  It is not necessary to set them out here.

Procedural history

15.  On 9 July 2015, the Plaintiff took out HCMP 1669/2015 (“1669 OS”) to compel the Defendant as executor to produce accounts and distribute assets.  The Plaintiff also took out HCMP 1670/2015 (“1670 OS”) to compel the Defendant, in his personal capacity, to sell the Po Wah Property under the Partition Ordinance. 

16.  The 2 OS were converted into the Consolidated OS by order of Master Ho dated 8 March 2016. 

The New OS

17.  It is the Plaintiff’s case that:

(1)     It was on being sued that the Defendant responded by counterclaiming that the TNS Property and Po Wah Property formed part of the Estate. 

(2)     The Defendant has never distributed the property, in particular the NT Property since December 2015 and Meizhou Property, which are indisputably assets of the Estate.

(3)     Notwithstanding there had been some negotiation for settlement, there should be no valid reason for delay.

(4)     The Defendant had purportedly produced a set of accounts but it was heavily redacted.  The Plaintiff applied for specific discovery of an unredacted version.  After a contested hearing, the Plaintiff’s application was granted on 2 February 2018.  The Defendant lodged an appeal but abandoned it 2 weeks before hearing.  The Defendant finally produced the unredacted accounts only after a lapse of 16 months from the date of the order.  However, those accounts contained suspicious items which cried out for further investigations.

(5)     The Defendant has put himself in a position of conflict of interest.  He claims to have properly used the rental income collected on behalf of the Father to pay off expenses, which is disputed.

(6)     The Defendant’s conduct seriously delayed progress of the Consolidated OS and the trial. 

(7)     For the purpose of the present application, the Court does not need to reach any definitive finding on the beneficial ownership of the properties or decide whether the Plaintiff had properly dealt with monies which the Defendant collected for the Estate over many years.

(8)     On the Defendant’s own evidence, a rough estimate of legal costs incurred so far for the Consolidated OS is a huge amount of no less than HK$5,000,000.

18.  The Plaintiff submits that it was obvious from the history and the documents filed and served in the Consolidated OS that the breakdown of relationship between the Plaintiff and the Defendant has caused or has a potential to cause difficulty in the administration of the Estate.

19.  The Plaintiff suggests that an independent professional administrator be appointed to represent the Estate as soon as possible instead of waiting for trial of the Consolidated OS. The administrator can decide what is in the best interest of the Estate, including the future conduct of the Consolidated OS, the disposal of undisputed assets and general administration of the Estate. 

20.  The Defendant seeks to strike out the New OS on the grounds that it duplicates the Consolidated OS, is scandalous, frivolous and vexatious and/or is an abuse of process.

Legal principles on striking out

21.  Striking-out is only used for plain and obvious cases where the pleadings are incurably bad.  There should be no trial on affidavit.  Disputed facts are to be taken in favour of the party whose pleading is under attack.

22.  Under Order 18, rule 19(1) of the Rules of the High Court, the Court has the power to strike-out an action if, amongst others, it may prejudice, embarrass or delay the fair trial of the action or it is otherwise an abuse of process of the court.

23.  It is an abuse of process of the court to bring two actions against the same defendant in respect of the same cause of action. The public interest is in avoiding any possibility of two courts reaching inconsistent decisions on the same issue.  The latter action is liable to be struck out.  See Choi Gain Gee v Kowloon Development Co Ltd, CACV 371/2005, 13 June 2006, at §§64-65, CA; Lam Pak Cheung v Lin Zhen Lue [2009] 1 HKLRD 35, at §38, Recorder Fok SC (as he then was).

24.  The court should not compound the error of duplicate proceedings by consolidating the two actions instead of restoring the previous action: Upper Like Investments Ltd v Sino-Rank International Limited, HCA 17637/1999, 19 November 2012, at §§29 and 31, Recorder A Ho, SC.

Legal principles on removal of executor

25.  Section 33(3) of the Probate and Administration Ordinance, Cap 10 provides that:

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

26.  The Court’s discretion under section 33(3) of Cap 10 is wide.  The exercise of its discretion is not necessarily premised on a finding of misconduct on the part of the personal representative.  It is an assessment of the court having regard to all the relevant circumstances of the case and involves an element of value judgment on the part of the first instance judge: Tsang Wing Kwai v Tsang Wing Fai (No.2) [2019] 1 HKLRD 1300, §§26-27, Lam VP.

27.  It is well-established that friction or hostility between an executor and a beneficiary alone, without more, is of itself not a good reason for removing the executor.  No corrupt or improper motive is to be imputed against the executor even if mutual hostility, without more, is established.  However, if the hostility is grounded on the mode of administration, then it is a factor that cannot be ignored because the expeditious and economical administration of the estate is always one of the objects that the Court keeps in mind.  Thus, if by reason of the hostility, the executor is rendered unfit to perform his duties as executor, he may be removed.  Such inability to perform his duties as executor may be proved if it can be demonstrated that he would, say, by reason of the hostility, (a) administer the estate in a manner not in accordance with the law; or (b) obstruct the due administration of the estate.  The Court may also pass over the executor if the breakdown of relations has caused or has the potential to cause difficulty in the administration of the estate.  See Re Loo Che Chin [2013] 2 HKLRD 739, §13, following Kershaw v Micklethwaite [2010] EWHC 506 (Ch), at §11.

28.  It is not necessary to establish wrongdoing or fault by the personal representative to obtain his removal.  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.  See Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 21^st ed, §57-20 at page 1113.

29.  A personal representative can be removed on the ground of conflict of interest.  In Thian Sum v Yung Shui Tong [2019] HKCFI 2867, §17, DHCJ William Wong SC, the administratrix made a claim against the estate.  Solely on the ground that she has put herself in a position of conflict, she was removed as an administratrix.

Duplicity

30.  The New OS is completely duplicitous of the Consolidated OS.

31.  Firstly, the parties are the same.

32.  Secondly, the subject matter in the New OS is the same as part of the Consolidated OS, ie failure to properly administer the Estate and delay in production of accounts.  It is the Plaintiff’s own case in the New OS that he may refer to the court documents filed by the parties in the Consolidated OS: paragraph 32 of the Plaintiff’s affirmation in support.

33.  Thirdly, all the reliefs claimed against the Defendant in the New OS duplicate those in the Consolidated OS:

(1)     Production of accounts of the Estate: same relief sought in the 1669 OS;

(2)     Inspection of supporting documents: same as the relief sought in the 1669 OS; and

(3)     Removal of the Defendant as executor of the Estate and appointing the Plaintiff and/or other person as executor instead: similar relief sought in the 1669 OS and same relief sought in the counterclaim to counterclaim in the Consolidated OS.

34.  Fourthly, the reason a set of proceedings has been on foot for too long is not a reason to hive off one issue and put it under a new action.  There are case management tools to press a case on for trial and both parties and their legal representatives have a duty to assist the court in ensuring that a case is dealt with as expeditiously as is reasonably practicable: Order 1A, rules 1(b) & 3. 

35.  The last case management conference for the Consolidated OS was held on 16 April 2018 and was adjourned for mediation. Upon failure of mediation, the Plaintiff has not applied to restore the case management conference but issued the New OS on 17 June 2019.  This was an abuse of process: Upper Like Investments above.

36.  A subsequent action for the same reliefs is an abuse of process.  Not being cost-effective, it is against the underlying objectives in Order 1A, rule 1 of the Rules of the High Court.  The New OS should be struck out.

37.  Instead of concentrating on preparation of the Consolidated OS for trial, the parties’ attention was diverted to this New OS. Twelve months have been wasted.

Plaintiff’s contentions

38.  Mr Lo, counsel for the Plaintiff, submits that:

(1)     The focus of the Consolidated OS is on whether the properties belong to the Estate, whereas that of the New OS is removal of the executor, leaving the issues about the properties in the Consolidated OS “intact”.

(2)     The New OS does not require the Court to evaluate the parties’ case on the properties or misconduct of the executor. The relationship has clearly broken down.  There is clear conflict of interest.  There are sufficient undisputed or indisputable facts that would justify the removal of the executor.

(3)     Even if there is any overlap of issues in the Consolidated OS and the New OS, there is not sufficient abuse to justify an order for striking out.   There is no presumption against the bringing of successive actions (even if the Estate Action and the current action are).  The plaintiff has the right to have serious matters litigated. The burden, rather, is on the defendant to identify any specific abuse: Cheung Ping Sum v Wong Chi Hang [2018] HKCFI 70, §26(e), DHCJ Keith Yeung SC (as he then was).

39.  I note that the first mention of removal of executor appeared in the counterclaim upon counterclaim.  The basis for that was the executor’s breach of duties in failing to give an account of the rental income and net proceeds of sale.  It was denied by the Defendant.  Hence, removal of the executor is a live issue in the Consolidated OS.

40.  Who caused the break down in relationship, whether administration was delayed, whether the Defendant is in a position of conflict of interest are also live issues in the Consolidated OS.  The Court cannot summarily dismiss the Defendant’s explanations for delay and remove him.

41.  Whilst the legal principles on removal of executor are not in dispute and Mr Lo has respectable arguments in favour of removal of the executor, those arguments should be advanced in the Consolidated OS.  Mr Lo is unable to point to a reason why some issues in the Consolidated OS should be carved out for disposal now; and not even as an Order 14 or Order 14A issue but under the New OS.  None of the authorities cited by him concern removal of an executor in the course of litigation.

42.  In fact, removal of the Defendant would not do much good to the progress of the Consolidated OS.  The Defendant will remain as a party in his personal capacity in the Consolidated OS.  The real battle is still between him and the Plaintiff as beneficiaries. 

43.  Ko Hon Yue v Chiu Pik Yu (2012) 15 HKCFAR 72 at §83(5)(a) and Cheung Ping Sum, §§21-25do not assist the Plaintiff.  Those cases were concerned with the issue of res judicata which does not arise here.

44.  In Ko Hon Yue, there was a prior action by the employee (P) in the Labour Tribunal for arrears of wages which was settled.  P brought another action against the employer (D) for wrongful termination of his employment contract.  D’s case was that the subsequent action was an abuse of process (in the Henderson v Henderson sense) in that issues in the subsequent action could and should have been raised in the previous proceedings. 

45.  Ko Hon Yue is distinguishable on the facts in that the subsequent action asked for different reliefs from the previous action.  In addition, CFA upheld CA’s decision that it was far too late for D to apply to strike-out P’s claim only at the trial stage.  This is not the situation here.  The Consolidated OS has not decided or settled any issue.  The New OS is duplicitous and the Defendant has applied at the earliest opportunity to have it struck out. 

46.  In Cheung Ping Sum, P sued D (administrator) for orders to retract the renunciation of administration of the deceased’s estate, to revoke the letters of authorization granted to D and to have a fresh one granted to P.  On the basis that she had raised an arguable case of bare license, P was granted an interim injunction for 3 months restraining D from interfering with her quiet enjoyment of the property that belonged to the estate.  The matter had been set down for trial.

47.  In the subsequent action, P sued D for harassment.  The harassment was said to have occurred within the period largely covered by the interlocutory injunction and thereafter.  D applied to have the second action struck out on the basis that the subsequent claim could and should have been raised in the earlier action, but he was unsuccessful.

48.  Cheung Ping Sum is distinguishable from the New OS on the facts.  The interim injunction was not the relief sought in the first action of Cheung Ping Sum.  Some of the events that formed the subject matter of the subsequent action had not even taken place at the time of the injunction.  D also failed to show abuse on P’s part (at §26).  To the contrary, the facts in the New OS were duplicitous of the Consolidated OS and P has shown that issuing the New OS was an abuse of process.

Conclusion

49.  In summary, it is plain and obvious that the New OS is duplicitous, is an abuse of process and has delayed the proper preparation of the Consolidated OS.  The New OS should be struck out.  It follows that the Conversion and Consolidation Summons should also be dismissed.

50.  On a nisi basis, costs on both summonses should follow the event and be to the Defendant.  Such costs are to be summarily assessed on the papers.  The Defendant shall lodge and serve his costs statement with 3 days of the handing down of this decision.  The Plaintiff shall lodge and serve his grounds of object with 3 days thereafter.

51.  I thank counsel for their assistance.