RE OUNG CHIN LIANG FUNG

HCMP 2347/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2347 OF 2015

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D E C I S I O N

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1.  This is an application under section 36 of the Probate and Administration Ordinance, Cap 10, for a grant ad colligenda bona in respect of the estate of Oung Chin Lian-fung. It came to me as an urgent application last Friday when I was the Duty Judge.

2.  The application was made by ex parte originating summons on notice. 

3.  Since the respondents who had appeared opposed the application and asked for time to prepare their opposition, the matter was adjourned over the weekend to today.

4.  The deceased was a widow who had seven children, namely: Margaret, Anastasia, Lilian, James, Daniel, Paul and Andrew. Daniel died in 2006 and James died in March 2015.

5.  Daniel had a daughter called Alice; and James had two children, James Junior and Jean.

6.  The deceased died intestate in December 2013 at the age of 89 years.  There seems to be no dispute that she died domiciled in Hong Kong. 

7.  Lilian has, since 2011, become mentally incapacitated as a result of a series of strokes.  A committee of estate had been appointed for her since November 2014.  The applicant, the younger of her two sons, has recently, on 7 September 2015, been substituted as her committee of estate, and it is in that capacity that he makes the present application. 

8.  The applicant has tried to give notice of this application to the children of the deceased, and in the case of James and Daniel to their children.  Of them, Andrew and James Junior have appeared by solicitor on Friday and by counsel today to oppose the application.

9.  This application has come as an ex parte on notice application, and I think it should be dealt with on that limited basis. 

10.  I have before me an affirmation from James Junior which was served on the applicant yesterday, Sunday evening. 

11.  In the very limited time available for the respondents to file evidence, it is evident that they have not dealt with all the allegations made or the issues raised.  Nor have I heard at all from Margaret, Anastasia, Paul and the daughter of Daniel, who are not represented in court today or last Friday. 

12.  There have been, it transpires in the evidence, quite a number of different sets of proceedings or applications issued in the BVI and Hong Kong among the parties, and I know very little of any of them.  The picture now before the court is far from complete.  Indeed, it looks more like a partial snapshot of what appears to be a wide-ranging dispute between the two sons of Lilian on the one hand, and some of the other members of the Oung family on the other. 

13.  In these circumstances, I ought to proceed on an urgent ex parte basis only if it is necessary and justified to do so.

14.  The property in respect of which the grant is sought is the interests of the deceased in a BVI company called Five Star.  The deceased, Lilian, and a company called Basurto hold the shares in Five Star in the proportion of 32.4%, 16.21% and 51.36% respectively.

15.  Basurto, in turn, holds the shares on trust for the deceased and Lilian in the proportion of two to one.  The interests in Five Star, therefore, appear to be held between the deceased’s estate and Lilian in the proportion of two to one. 

16.  There is some suggestion by the applicant that the deceased held her interest in Five Star in turn as trustee for Lilian, although no evidence has been adduced to support that proposition.  For present purposes it appears that Ms Ismail SC, appearing for the applicant, has proceeded on the basis that the deceased’s estate prima facie holds 67% of the interest in Five Star.

17.  Five Star used to hold a substantial number of shares in Paladin, a listed company in Hong Kong, the core asset of which is its interests in a valuable property on the Peak, namely 8‑12 Peak Road.

18.  Since sometime in 2014, a company called Cityguard had been interposed between Five Star and Paladin, so that Five Star now holds 100% of the shares of Cityguard which, in turn, holds 46.46% of the issued shares of Paladin. 

19.  Cityguard has issued certain convertible notes to a company called Next Level, which appears to be a BVI company equally owned by Andrew, his son Tony, James Junior and Basurto.  Next Level has, apparently, converted some of the notes and acquired shares directly in Paladin as a result of conversion.

20.  The applicant has raised complaints about the circumstances in which a power of attorney was obtained from Lilian in favour of Margaret, and also the issue of shares by Five Star to Basurto, the introduction and interposition of Cityguard between Five Star and Paladin, and the issue of the convertible note to Next Level.  These, however, are matters that have been known to the applicant for some time.

21.  The matter that has been the immediate cause of this application, as I see it, is an agreement entered into by Paladin to sell the Peak property to a third party for HK$1,825 million.

22.  The agreement was entered into on 17 June 2015, announced to the public on 2 July 2015, and is subject to the approval of the shareholders of Paladin at a Special General Meeting to be held at 11 am on 15 September, that is, tomorrow.

23.  Ms Ismail says because of the undisputed interests of the deceased in Five Star and, therefore, indirectly in Paladin, administrators should be appointed so that the estate is represented in the vote tomorrow.  The applicant has nominated two professional accountants to be appointed as such.

24.  But the normal procedure for the appointment of administrators of an estate is provided for in the Probate and Administration Ordinance, with the prima facie entitlement to be appointed administrators set out in the legislation, including the Non‑Contentious Probate Rules. 

25.  What the applicant is asking this court to do by this application is to appoint his nominated persons now, passing over all the beneficiaries of the estate who would otherwise be entitled to a grant, and to do so without adequate notice being given to them and an opportunity for them to be heard.  In the circumstances of this case, given the disputes between the parties, this could only be done in very special circumstances and with special justification. 

26.  The applicant has not, in my view, been able to justify this approach. 

27.  Although there is some suggestion that the proposed sale of the Peak property was at an undervalue, the evidence put forward by the applicant in this regard was inadequate and does not address the fact that the sale of the Peak property had, on the evidence, only been decided upon by the board of directors of Paladin after an extensive marketing exercise in which CBRE, as professional agents, were instructed to market the properties to 504 professional and 179 Chinese corporations.

28.  Further, the proposed sale, together with the price of sale, was announced in early July 2015.  Ms Ismail sought to explain the delay by saying that the previous committee of estate of Lilian had failed to act.  But the applicant did not explain why he only applied in early September to be substituted as the committee of estate, or why having got an order appointing himself as committee last Monday, he did not bring the present application until Friday afternoon, leaving very little time for manoeuvre before the Special General Meeting.

29.  There is also, to my mind, no satisfactory explanation why this application is being made in Hong Kong when there have been two applications for a general grant of representation for the deceased’s estate in the BVI which were made by Mike Chen, the elder brother of the applicant, and by Andrew, respectively. 

30.  This is of some concern given that the textbooks referred to by counsel suggest that generally a grant should be applied for where the property is situated, and that in the absence of special circumstances the Hong Kong court would generally not make a grant in the absence of property in Hong Kong. 

31.  I do not say that the applicant will never be able to persuade the Hong Kong court to give a grant ad colligenda bona in respect of the shares, but in the way that the issue has arisen over the weekend, he has not been able to satisfy me that I should do so now.

32.  Nor was there any explanation how a grant in Hong Kong can assist the applicant in relation to the Special General Meeting given its imminence and given that, presumably, it would be necessary for the grantees to obtain an ancillary grant on the back of any Hong Kong grant before it could be recognised and given any effect with respect to BVI property.

33.  I am also concerned that giving the grant in the circumstances now might derail the sale of the property on the eve of the Special General Meeting when there could be, on the evidence, substantial damage to the listed company arising from banks’ actions.  Because of the timing, these concerns have not been addressed by the applicant, but I cannot turn a blind eye to them. 

34.  For these reasons I refuse this ex parte on notice application on the limited basis as I have outlined.

(Submissions on costs)

35.  I order that costs be paid by the applicant to the respondents who have appeared, to be taxed if not agreed.