HCA 1974/2015
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
HIGH COURT ACTION NO 1974 OF 2015
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BETWEEN
LAM MO CHU SUSIE
Plaintiff
and
LAM SIK YING VICTOR, Administrator of
1st Defendant
LAM MO LIN
2nd Defendant
LAM SIK SHI TONY
3rd Defendant
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Before: Hon Chow J in Chambers (open to public)
Date of Hearing: 18 July 2016
Date of Decision: 18 July 2016
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D E C I S I O N
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APPLICATION
1. This is the plaintiff’s application for, inter alia , an order that:-
(1) the appointment of the 1st defendant as administrator of the estate (“the Estate”) of Lam Tim (林添) alias Stan Lam Tim (“the Deceased”) pursuant to Letters of Administration dated 24 March 1999 (Grant No HCAG 000498/1999) (“the Grant”) be suspended until the determination of this action; and
(2) Mr Herbert Tsoi of Herbert Tsoi & Partners be appointed to act as administrator pendete lite of the Estate pursuant to section 40 of the Probate and Administration Ordinance , Cap 10, until the determination of this action.
BACKGROUND FACTS
2. The disputes between the parties to this action have a long history and are of some considerable complexity. They have generated a number of court actions with the present being, I understand, the latest one. For the purpose of disposing of the plaintiff’s present application, the following brief summary of facts should suffice.
3. The plaintiff, the 1st , 2nd and 3rd defendants are siblings and are beneficiaries of the Estate of the Deceased, who died intestate in Hong Kong on 6 January 1983.
4. Other beneficiaries of the Estate include: (i) Lam Mo Chun, a daughter of the Deceased, who passed away in or about January 2003, and (ii) Madam Wong Kwan Ying (“Madam Wong”), who described herself as the concubine of the Deceased in an affirmation dated 18 January 1999 and filed in support of the application by her and the 1st defendant for the Grant. Madam Wong passed away on 7 June 1999. In addition, there is a person by the name of Lam Mo Ling Mary, in respect of whom there is a dispute as to whether she qualifies as a beneficiary of the Estate.
5. One of the major assets of the Estate is a property known as No 6 Sharp Street East, Hong Kong (“the Property”). By a sale and purchase agreement dated 11 June 2004 and an assignment dated 8 February 2007, the Property was purportedly sold by the 1st defendant, as the sole surviving administrator of the Estate, to a company known as Advance Property Holding Limited (“APHL”) for the consideration of HK$10,810,000.
6. APHL was, and is, apparently owned or controlled by the 2nd defendant. It is, however, the case of the plaintiff and the 3rd defendant that APHL was in fact the nominee of the 1st defendant, and the purported sale of the Property by him (in his capacity as administrator of the Estate) to APHL was an improper transaction. By HCA 1605 of 2004 and HCA 894 of 2011, the 3rd defendant and the plaintiff respectively took action against the 1st defendant and APHL to challenge the purported sale of the Property.
7. The two actions were consolidated, and the trial of the consolidated action took place in April and May 2015 and May 2016, with a long gap in between because the original dates allotted for the trial of the consolidated action proved to be insufficient. In the middle of the trial, APHL consented to judgment being entered against it. The consent judgment dated 15 May 2015 (“the Consent Judgment”) provided, amongst other things, that:-
(1) the sale of the Property to APHL be set aside;
(2) an account be taken of the rents and other income (if any) received by APHL from the Property from 8 February 2007 less (a) the government rent and rates, property tax, and other expenses and outgoings (if any) discharged by APHL in respect of the Property, and (b) the purchase monies paid by APHL for the Property; and
(3) APHL do pay to the Estate any sum found to be due upon the taking of such account.
8. The action against the 1st defendant continued. At the conclusion of the trial, judgment was reserved and is current pending.
9. By reason of the Consent Judgment, APHL is liable to account to the Estate for the rental income derived from the Property that it has received since 8 February 2007. It is not in dispute that the Property has, since April 2003, been let to a tenant called Onluck Corporation Ltd (“Onluck”) pursuant to a number of tenancy agreements. According to the plaintiff, APHL is liable to pay to the Estate a sum of approximately HK$13.5 million in respect of the rents that it received from Onluck during the period from 8 February 2007 to April 2015. The plaintiff complains, however, that the 1st defendant has done nothing to recover the same from APHL.
10. In passing, I should mention that the rental income from May 2015 to March 2016, in the total sum of HK$2.8 million, has been paid by the 1st defendant into court on 22 March 2016. In so far as the rents paid by Onluck since April 2016 (at the rate of HK$215,000 per month) are concerned, they have been received by the 1st defendant. In the course of the hearing this morning, Mr Nelson Miu (for the plaintiff) made it clear that his client takes no issue with the 1st defendant’s receipt of the rents from Onluck since April 2016.
GROUNDS OF APPLICATION
11. Two grounds have been advanced by Mr Miu in support of the present application.
12. First, Mr Miu says that the 1st defendant, as administrator of the Estate, is under a duty to enforce the Consent Judgment against APHL, in particular the taking of the account of the rents and other income which APHL has derived from the Property since 8 February 2007 and payment of the amount due upon the taking of such account. The 1st defendant has, however, failed to take any positive action since the date of the Consent Judgment, and his excuse for his failure to take action is wholly insufficient or unsustainable.
13. Second, Mr Miu refers to an earlier action commenced by the 1st defendant against the 3rd defendant (HCA 4713/2001) in which the 1st defendant seeks an account in respect of assets belonging to the Estate which it is alleged had been received or handled by the 3rd defendant prior to the 1st defendant’s appointment as administrator of the Estate. Mr Miu argues that an independent administrator should be appointed for the Estate to review the merits of the application and decide whether it would be in the interest of the Estate to proceed with that action.
Discussion
14. It is well established that the court has a discretion to appoint an administrator pendete lite when it is necessary or expedient to do so. In Hung Jin Mui v Tang Chui Yuk Angela , HCAP 4/1997 (11 February 1998), Le Pichon J (as she then was) stated as follows:-
“The leading textbooks on the subject have little to say. Some refer to necessity, others to expediency. In my judgment, whether one uses the term ‘necessity’ or ‘expediency’, I do not think that the court would make an order without regard to or wholly divorced from the actual circumstances of the case, namely the assets comprised in the estate and whether they warrant the appointment of an administrator pendente lite . It is apparent from a proper reading of the passage quoted from Bellew v. Bellew
15. In Cheung Ting Kau Vincent v Koo Siu Ying and Another , HECA 25/2013 (18 February 2016), Deputy High Court Judge Kee Yee, after quoting from the above judgment of Le Pichon J, stated in paragraph 85 of his judgment as follows:-
“After considering the assets as disclosed in the evidence, Le Pichon J identified two usual concerns with the principles laid down by Lord Greene in Re Bevan [1948] 1 All ER 271 in mind. First, the court should see whether there is a likelihood of dissipation or jeopardy of assets (which was not a consideration in that case given the undertaking by the defendant) and secondly whether there is a need to collect the ‘fruit of theestate’.”
16. Whilst not exhaustive, it is clear that two of the factors that the court would usually have regard to in this type of applications are: (i) likelihood of dissipation or jeopardy of assets, and (ii) whether there is a need to collect the ‘fruit of the estate’.
17. I now turn to the circumstance of the present case. In respect of the first ground relied upon by the plaintiff, I accept that the 1st defendant has failed to give any good or sufficient explanation for his failure to take action to enforce the Consent Judgment against APHL. According to the 1st defendant, he has been “spending a good amount of time to request for and with a view to check the account(s) of APHL, its tax returns and expenses claimed as those are my duties as an Administrator” (see paragraph 12 of the 1st defendant’s affirmation filed on 20 April 2016). The 1st defendant further states, in paragraph 13 of his affirmation, that:-
“As to the account(s) of APHL in the past years, I was told by the 2nd defendant that its account(s) were submitted to the accountant for auditing. The accountant is now looking into the account(s) of APHL. This step is under process and it takes some time to finish after enquiries made. In turn, the accountant has to explain to me the accounts of APHL. After the accounts are prepared, the audited account(s) of APHL would be submitted to Inland Revenue Department for taxation purpose. If Inland Revenue Department has approved the account(s) provided by APHL, the 2nd defendant can provide one copy to the parties and the court for reference, if it required, as I was told.”
18. In my view, it is no part of the duty of the 1st defendant, as administrator of the Estate, to examine or investigate the internal accounts or tax returns of APHL, or enquire into whether APHL has prepared proper audited accounts and tax returns. The 1st defendant’s duty is to see that APHL renders a proper account in accordance with the Consent Judgment and pays to the Estate the amount found to be due upon the taking of such account. If APHL wishes to claim any deductible expenses or outgoings in the taking of the account, it is for APHL to substantive such expenses or outgoings. The 1st defendant should, I believe, have taken prompt action to compel APHL to give the account as required by the Consent Judgment, but has failed to do so for no good reason.
19. This having been said, there is no evidence to show that the failure of the 1st defendant to take prompt steps to enforce the Consent Judgment against APHL has caused the Estate any loss or damage. In particular, the financial situation of APHL is not known. It has not been shown that APHL is now unable to pay any amount due to the Estate upon the taking of account, but would have been able to do so if it had been called upon to give the account earlier. In any event, as submitted by Mr Kenneth Chan (for the 1st defendant), the 1st defendant’s share in the Estate would be sufficient to cover any damage or loss which may be shown to have been caused to the Estate as a result of the 1st defendant’s failure to take prompt action to enforce the Consent Judgment against APHL. In this regard, there is evidence before the court of an offer for the purchase of the Property for HK$220 million made on 6 January 2016. That offer was communicated by 3rd defendant’s solicitors (Hastings & Co) to the solicitors of the plaintiff and the 1st defendant respectively, but was rejected by both. Since the Property is, I understand, currently free from any mortgage or incumbrance, it seems clear that the 1st defendant’s share, as a beneficiary of the Estate, of the proceeds of sale of the Property alone would be sufficient to make good the maximum loss that may result from his failure to recover on behalf of the Estate the rental income which APHL is liable to account to the Estate.
20. In my view, instead of incurring the additional costs of appointing a professional person as administrator pendete lite of the Estate, it should be sufficient for the court to direct the 1st defendant to use his best endeavour to take immediate action to require APHL to give the account pursuant to paragraph (3) of the Consent Judgment. The court would also make it clear that any failure on the 1st defendant’s part to comply with this direction may result in his removal as administrator of the Estate and adverse costs order being made against him personally.
21. In respect of the second ground relied upon by the plaintiff, as pointed out by Mr Miu in his submissions, the 1st defendant has not applied for any Beddoe order for the costs which have already been incurred, or which may be incurred in future, by him in his action against the 3rd defendant in HCA 4713/2001. Accordingly, the 1st defendant is not entitled to recoup such costs, or any costs which he may be adjudged liable to pay to the 3rd defendant in that action, from the assets of the Estate without a further order of the court. Any application that may be made by the 1st defendant to be reimbursed those costs out of the assets of the Estate will be carefully examined by the court. There is therefore no risk of the Estate’s assets being improperly depleted by the 1st defendant’s action against the 3rd defendant.
DISPOSITION
22. For the foregoing reasons, I am not satisfied that it is either necessary or expedient for the court to appoint an administrator pendete lite of the Estate at this stage. I should make it clear, however, that the position may be re-visited should (i) the 1st defendant fail to use his best endeavour to take immediate action to require APHL to give the account pursuant to paragraph (3) of the Consent Judgment, or (ii) after the court has given judgment in the consolidated action.
23. I shall now hear the parties on the question of costs.
(Anderson Chow)
Mr Nelson Miu, instructed by Hobson & Ma, assigned by Director of Legal Aid, for the plaintiff
Mr Kenneth CL Chan and Ms Annie Lai, instructed by Fan Wong & Tso, for the 1st defendant
The 2nd defendant acting in person and absent
The 3rd defendant acting in person and present