LO ELLIE OO YI v. CHAU YAN GE previously known as CHAUHIU WING previously known as ZOU XIAORONG

HCMP 833/2023

[2024] HKCFI 2702

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 833 OF 2023

_________________

________________________

________________________

________________________

J U D G M E N T

________________________

INTRODUCTION

1.  By Amended Originating Summons filed on 31 August 2023, the plaintiff asked for, among others, the following orders:

“3. An Order to pass over the Defendant (or whoever is entitled to the relevant grant as the case may be)  as the personal representative of the Estate in the interests of due and proper administration of the Estate and instead appoint two independent third-party professionals as administrators of the Estate as minority interest arises in the Estate or as directed by this Honourable Court;

4.  The grant of letters or administration (or whichever grant is appropriate in the circumstances)  be issued in favour of the person(s)  referred to in paragraph 3 hereinabove.”

BACKGROUND

2.  The relevant background of the present case is as follows.

3.  The Deceased was born in 1943 and was married to the mother of the plaintiff in 1991.  The plaintiff was born to the couple two years later.

4.  The Deceased and the plaintiff’s mother subsequently divorced in 2000.

5.  The Deceased and the defendant were introduced to each other in around 1998.  They then got married in September 2001, and the defendant gave born to their two sons in February 2002 and December 2006 respectively (“the Elder Son” and “the Younger Son” respectively).

6.  From 2003 onwards, the Deceased, the defendant and their two sons lived in the Deceased’s flat in Homantin (“the Homantin Flat”).  The plaintiff did not live there at that time as she was studying abroad. However, she would stay in the Homantin Flat while she was spending her school holiday in Hong Kong. 

7.  The plaintiff eventually moved back to Hong Kong for good in 2016.  She initially lived in the Homantin Flat, but moved out shortly thereafter and lived in a rented flat.

8.  In around October 2017, the defendant and the Younger Son moved into another flat which was purchased under the joint names of the Deceased and the defendant (“the Kau To Shan Property”)  (the Elder Son was studying abroad at the time).  However, the Deceased refused to move into the Kau To Shan Property and chose to continue to live in the Homantin Flat instead.

9.  The plaintiff then moved back to live in the Homantin Flat in around November 2017.

10.  In April 2018, the defendant commenced divorce proceedings against the Deceased (“the Divorce Proceedings”).  Decree nisi was granted on 22 August 2019.

11.  The trial of ancillary relief (“the AR Trial”)  was then fixed to commence on 8 November 2022.  Although the Deceased was all along represented by solicitors, he filed a Notice to Act in Person on 30 September 2022, very shortly before the Pre-Trial Review of the AR Trial.  In the end, he participated in the AR Trial on 8 November 2022 without legal representation.  At the AR Trial, he denied that he had signed a number of documents filed including his narrative affirmation, his Form Es and his 2^nd Answers to the defendant’s Questionnaires.  As a result, he was treated as having proffered no evidence on his case in the AR Trial.

12.  The Deceased passed away sometime after noon on 9 April 2023.  By the time of his demise, the Judgment of the AR Trial had not been handed down yet.

13.  When the Deceased took his last breath, the plaintiff was flying back from UK to Hong Kong.  She only arrived in the afternoon on that day.

14.  After the Deceased passed away, the defendant went to the Homantin Flat with the Younger Son and the Deceased’s domestic helper (“the Domestic Helper”)  and went through the Deceased’s belongings.  According to the defendant, she did that for two reasons:

(1)  She wanted to check whether the Deceased had made any will;

(2)  She wanted to remove all the Deceased’s valuables and personal belongings of commemorative value for safekeeping, as she was worried that the Domestic Helper would be at liberty to go through the Deceased’s personal belongings and no one would know if anything were to go missing. 

15.  According to the defendant, she had taken away the following items from the Homantin Flat on 9 April 2023:

(1)  $5,000 cash;

(2)  A watch;

(3)  A mobile phone;

(4)  The keys to the Office[1];

(5)  The Deceased’s wallet.

16.  The Domestic Helper also witnessed the defendant taking away some items belonging to the defendant, including some money (around $5,000 – $6,000), Rolex watches and a wallet.

17.  Later on the same day, the defendant went to the Deceased’s office (“the Office”)  with the Domestic Helper, she said she had sorted out the items and documents which were on the Deceased’s desk and in his drawers, and in the course of which she had taken away, among other things, the following for safekeeping: (i)  HK$25,540; (ii)  RMB5,000 (iii)  Euro 455 and (iv)  1 Malaysian Ringgit.

18.  On the following day (10 April 2023), the defendant went to the Office with the Domestic Helper again.  She had admittedly taken away the following items from the safe in the Office:

(1)  A brown paper envelope containing the title deeds of a property in Fo Tan;

(2)  A brown paper envelope containing the title deeds of the Homantin Flat and carpark;

(3)  Deed documents relating to the property at which the Office is situated;

(4)  Deed documents relating to a shop in Tuen Mun.

19.  The defendant explained that she had taken away the aforesaid documents so as to go through them later for the purpose of looking for the will of the Deceased.

20.  The Office was and is the registered office of Introfaith Limited and Triumph Link Consultants Limited (“Triumph Link”). Both Introfaith Limited and Triumph Link are company vehicles which hold some of the Deceased’s land properties in Hong Kong.  Their shareholders and directors at the time of the passing of the Deceased were as follows:

(1)  Introfaith Limited

Shareholders:  The Deceased – 99.99%

  The defendant – 0.01%

Directors:  The Deceased and the defendant

(2)  Triumph Link

Shareholders:  The Deceased – 50%

  Join Smart Limited – 50%

Directors:  The Deceased and Madam Ma Ching Shim

21.  There are altogether 9 properties[2] which are held by Introfaith Limited, Triumph Link and the Deceased (under his sole name).

22.  While the Deceased was still alive, the defendant had never managed the affairs of Introfaith Limited or Triumph Link (despite her appointment as a director of Introfaith Limited).  Such affairs were mainly managed by Ms Ip (accountant of Introfaith Limited)  and Mr Au Kai Leung.  Both of them were answerable to the Deceased alone.

23.  According to the defendant, she felt that there was a need for her to “step in” upon the demise of the Deceased, so as to “ensure the continued operation of Introfaith and Triumph Link”.  However, in order to reduce operating expenses, “Ms Ip was eventually let go by Introfaith with her last day of employment being 18 August 2023”[3]. 

24.  On 2 June 2023, the plaintiff made an ex parte application against the defendant for an interim injunction which restrained her from intermeddling in the estate of the Deceased (“the Estate”)  and for an urgent grant ad colligenda bona to professional administrators.  This Court acceded to the application and appointed Ms Wong Wing Sze Tiffany and Mr Ho Siu Hang Gilbert both of Alvarez & Marsal Asia Limited as the professional administrators (“the AM Administrators”). They were empowered to deal with any assets comprising and derived from the Estate insofar as it is necessary to preserve the Estate, including but not limited to the exercise of any power conferred by any shareholding, payment of any sum and execute and enter into any contract and/or deed.

25.  The interim injunction was subsequently discharged on 9 June 2023 upon the defendant’s undertaking not to intermeddle with, deal with or dispose of the assets forming or derived from the Estate.

26.  At the hearing, the plaintiff asked this Court to pass over the defendant and order that letters of administration of the Estate be issued to the AM Administrators. 

27.  On the other hand, the defendant argued that there is no reason why she should be passed over.  It was also said that it is not in the interest of the Estate to appoint the AM Administrators because of the disproportionate fees incurred and to be incurred.  Attention of this Court was also specially drawn to the fact that, at the end of the day, in effect it will be the defendant and her sons who are funding the majority of such costs because they altogether are entitled to 5/6 of the Estate.

LEGAL PRINCIPLES

28.  Section 36 of the Probate and Administration Ordinance (Cap.10, Laws of Hong Kong)  (“the Ordinance”)  provides that:

“[…] where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate, other than the person who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate, the court may, subject to section 25, appoint such person as the court thinks fit to be such administrator, on his giving such security, if any, as may be required under this Part or as the court may direct, and every such administration may be limited in such manner as the court thinks fit.”

29.  It is now well established[4] that:

(1)  The words “necessary or convenient” in section 36 of the Ordinance give the judge a broad discretion, to be exercised in the best interests of the estate;

(2)  What constitute the circumstances to engage the court’s discretion to pass over the executor under the “necessity or convenience” ground must depend on the particular facts of the case before the court.  It is a fact-sensitive question to be determined essentially on the actual circumstances of the case.  The court will approach the evidence objectively and with a good dose of common sense to see if on the facts of the case the “necessity or convenience” ground is made out;

(3)  The judge is not called upon to determine the parties’ rights and liabilities, nor is it necessary for him to resolve disputed issues of fact;

(4)  In the circumstances where the executor/administrator has priority in appointment, the burden rests on the applicant to show that there are special circumstances that make it necessary or convenient to pass him/her over;

(5)  Friction or hostility between an executor/administrator and a beneficiary alone, without more, is of itself not a good reason for removing the executor/administrator.  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;

(6)  The expeditious and economical administration of the estate is always one of the objects that the court keeps in mind.  Therefore, if by reason of the hostility, the executor/administrator is rendered unfit to perform his/her duties as executor/administrator, he/she may be removed.  Such inability to perform his/she duties as executor/administrator may be proved if it can be demonstrated that he/she 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 relation has caused or has the potential to cause difficulty in the administration of the estate;

(7)  The overriding consideration is the interest and welfare of the beneficiaries, and the question is what is necessary or required for the due and proper administration of the estate;

(8)  The Court may also have regard to the size of the estate, nature of the assets, background, education, training and experience of the remaining and substituted personal representative;

(9)  It is not every mistake or neglect of duty, or inaccuracy or misconduct, which will induce a court to remove a personal representative and, a fortiori, to pass over a potential one. The acts or omission must be: “such as to endanger the trust property or to shew a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity”; but on the other hand, it is not necessary to establish specific wrongdoing, misconduct or fault for the purpose of passing over/removal, but they are relevant considerations if established;

(10)  The Court must always be very cautious and sparing in the exercise of the power to remove an executor or administrator;

(11)  When deciding on the identity of the administrator, the Court would usually give preference to the candidate with the support of the majority of the beneficiaries.  This consideration usually arises in the context of a dispute between persons entitled to administration to the same degree under the Non-Contentious Probate Rules.  Hence, the starting point must be the general practice that the choice of the majority would be preferred by the Court.

DISCUSSION

30.  In the present case, there are 2 issues to be resolved:

(1)  Whether the defendant should be passed over;

(2)  If the defendant is passed over, who should be appointed as the administrator of the Estate.

Passing over the defendant

31.  Having considered all the circumstances of the present case, I am of the view that it is convenient and necessary to pass over the defendant.

32.  First, while it is indisputable that the defendant, as the surviving spouse of the Deceased, has first priority to the grant of letters of administration of the Deceased’s estate, a special feature herein is that the Deceased and the defendant were in the course of getting a divorce when the Deceased passed away on 9 April 2023. The Petition had been filed by the defendant on 13 April 2018 (based on one year’s separation with consent).  Decree nisi was granted on as early as 22 August 2019.  Order for custody, care and control of the 2 children of the family had also been made on 16 December 2019.  But for the fact that the Deceased and the defendant could not agree on the ancillary relief order to be made by the Court which rendered it necessary to have a full trial on the matter, a decree absolute would have been granted long time ago.  As mentioned, at the end of the day, the AR Trial took place on 8 November 2022, and the Judgment was not yet handed down by the time of the Deceased’s demise. It is only because of this that the defendant is still entitled to share in the Estate pursuant to the Intestates’ Estate Ordinance (Cap.73, Laws of Hong Kong), and that she still has first priority to the grant of letters of administration of the Estate.  In my view, this must be a relevant matter which the Court should take into account.

33.  I have not lost sight of the defendant’s evidence that despite the commencement of the Divorce Proceedings, she had taken care of the Deceased from time to time, especially when he had fractured his hip bone in early 2020 and during the Covid-19 period.  However, this does not change the fact that, but for the necessity of the AR Trial which did not take place until late 2022, the defendant would not even be in the picture as far as the appointment of administrator of the Estate is concerned.

34.  Second, I accept the plaintiff’s case that the defendant had improperly intermeddled with the assets of the Estate which renders her unfit and unsuitable to act as the administratrix of the Estate as she has admittedly taken away from the Homantin Flat and the Office (on the day of the Deceased’s demise and on the following day)  a number of items which belonged to the Deceased.

35.  The defendant explained that she went up to the Homantin Flat and the Office to go through the Deceased’s belongings for the purported reasons of checking whether the Deceased had made any will and to remove all the Deceased’s valuables and personal belongings of commemorative value for safekeeping.  However, these reasons are, to say the least, unconvincing:

(1)  The defendant’s counsel submitted that the defendant knew at the material time that the plaintiff was not in Hong Kong, and that since she did not know when the plaintiff would be coming back, she thought that no one would be in a position to watch over the Deceased’s personal effects in the Homantin Flat in the meantime.  If the defendant really cared about the necessity of safekeeping any valuables while there was no one in the Homantin Flat, all that she needed to do was to ask the Domestic Helper when the plaintiff would be back.  If she had done so, there is no reason why the Domestic Helper would not have told her that the plaintiff was on her way back to Hong Kong[5], and in which case the defendant would have realised that there was no need for her to “safe-keep” anything in the absence of the plaintiff.  However, surprisingly, the defendant did not check with the Domestic Helper at all;

(2)  The defendant had admittedly taken away $5,000 cash (in 10-dollar bills)  from the Homantin Flat.  In the circumstances where she did not say that she was in financial difficulty at all, there is no reason why she had to take such monies away.  In other words, such an action on the defendant’s part was totally unjustified;

(3)  The same logic applies to the HK$25,540, RMB5,000 and Euro 455 which the defendant took away from the Office.  In fact, even if she was really worried about Ms Ip and Mr Au having any intention to steal money from the Deceased’s room in the Office (there is no evidence that the defendant felt suspicious about them at all), she only had to ask them to surrender their keys to the Deceased’s room;

(4)  She also took a watch of “unknown brand” away. She did not explain in her evidence why she thought the watch was of commemorative value (in the same way as she explained why she took the Deceased’s wallet)  or of high value.  In other words, the taking away of such a watch was also unjustified;

(5)  While it was said that one of the main purposes of her going through the Deceased’s belongings was to see if the Deceased had left any will, it is evident that the defendant did not even mention in her evidence that two versions of unsigned wills were lying in the Deceased’s room in the Office.

36.  It was also submitted on behalf of the defendant that her subsequent payments made on behalf of the Deceased (see the following paragraph)  show that she was not a greedy person at all.  With respect, I do not think this argument assists her submission that there was therefore no intermeddling on her part.  If there had been any intermeddling act, such act had already been completed before the defendant’s subsequent action.  The defendant could not use her subsequent action to explain away what she did wrong.

37.  The defendant’s counsel further argued that since the defendant was aware of the existence of the CCTV camera installed at the Homantin Flat, the defendant could not have taken the Deceased’s personal belongings with the intention of pocketing them.  With respect, this argument must be futile given it was the defendant’s own evidence that the CCTV camera was not on her mind at all at the material time[6].

38.  Third, some of the defendant’s other actions taken since the passing of the Deceased were puzzling.  For example, while she stated that she had been generous enough to spend a lot of money on matters relating to the Deceased (such as $45,800 for the Deceased’s funeral rites and cremation ceremony, $648,000 for the Deceased’s columbarium niche and $229,139.80 in settlement of various other expenses), she terminated Ms Ip’s employment on 18 August 2023 for the purported reason of reducing operating expenses.  Bearing in mind that Ms Ip’s monthly salary was only in the sum of $14,175, and that there is no evidence that the defendant could not afford this amount, I have a big question mark on the defendant’s real intention, given the defendant admittedly has had no experience at all in the management of Introfaith Limited and Triumph Link.  To put it bluntly, such a move has no commercial sense at all.  Hence, such a decision at least shows that the defendant is not suitable to be appointed administratrix of the Estate.

39.  Fourth, I agree that the hostility between the plaintiff and the defendant is so serious that there is potential for such a bad relationship to cause difficulty in the administration of the Estate.  While the defendant suggested that such hostile feeling was not mutual, I note that actually the defendant admitted that she and the plaintiff had had arguments throughout the years and that they did not get along very well[7]. There were also admittedly 2 occasions when the plaintiff had called the Police. 

40.  In such circumstances, I am of the view that professional administrator should be appointed (see further below).

41.  For the sake of completeness, I should mention that the defendant has made an open offer to the plaintiff that they be appointed as joint administrators of the Estate.  With respect, in the light of the bad relationship between the parties, it is unrealistic to expect that they can cooperate.  It is therefore unsurprising that this proposal was not accepted by the plaintiff.

Who should be appointed

42.  Having come to the conclusion that the defendant should be passed over, the next question is who should be appointed as the administrator/administratrix of the Estate.

43.  By reason of my view that a neutral administrator is necessary for the administration of the Estate, the appointment of professional administrator is unavoidable in the circumstances of the present case. 

44.  The plaintiff proposed that the AM Administrators who had been issued an urgent grant ad colligenda bona on 2 June 2023 should be appointed.  This was objected to by the defendant on various grounds which will be dealt with below.

45.  Firstly, it was said that since the Estate’s composition is not complicated, particularly when the Deceased had prepared a sworn asset schedule (“the Asset Schedule”)  in the Divorce Proceedings, there is no need to appoint the AM Administrators.

46.  In my view, while the Asset Schedule will certainly be helpful for the administrator to understand the value of the Estate as a starting point, it should not be relied upon too heavily because:

(1)  It is evident that 3 bank accounts of the Deceased (with Bank of China, Hang Seng Bank and Dah Sing Bank)  have not been included in the Asset Schedule.  While the balances in those bank accounts are not of large amounts, this at least shows that the Asset Schedule is not exhaustive/conclusive;

(2)  At the AR Trial, the Deceased denied that the Form Es filed in the Divorce Proceedings were signed by him.  It is unclear why he had taken such a drastic stance.  However, that at least renders the defendant’s argument on the Asset Schedule weaker.

47.  As to the defendant’s allegation that the composition of the Estate is simple:

(1)  Insofar as it is said that the Estate can be dealt with by a layman without experience of running a company, this argument is no longer relevant in the light of my view expressed above.  In any event, I disagree with such an assertion.  In fact, the defendant’s counsel accepted that even if the defendant is appointed as the administratrix, she would have to instruct solicitors for assistance;

(2)  I am of the view that the defendant has totally underestimated the complicity of the work involved because she has not taken into account the fact that the many land properties held by the Deceased cannot be sold overnight.  Before they are sold, these properties have to be managed and maintained.  The rental to be received has to be properly recorded.  These are not easy tasks.

48.  Secondly, it was said that since the AM Administrators had incurred costs in a total amount of more than $2.2 million in the 6-month period between mid-July 2023 and January 2024, the defendant is extremely concerned about the size of the bill that may ultimately be charged to the Estate.

49.  Taking into account the size of the Estate and the properties involved, I do not think it can be said that the AM Administrators have charged inflated fees.

50.  In any event, this Court has been informed that the AM Administrators have agreed to lower their hourly rates and impose a fee cap so as to match the quotations obtained from the candidates proposed by the defendant.  The AM Administrators have also confirmed that they would apply the lowered hourly rates to cover their works since their appointment on 2 June 2023.  With these assurances, the defendant’s concern is gone (at least to a large extent).

51.  Insofar as it is suggested that the AM Administrators should be replaced by another professional administrator, one must bear in mind that much time has already been spent by the AM Administrators to understand the extent of the Estate.  If another professional administrator is appointed, the new administrator would have to spend time in studying all the materials again.  This amounts to duplication of costs which should be avoided.

52.  Thirdly, it was said that the defendant and her sons do not need the service of the AM Administrators, and therefore it is extremely unfair if the bulk (5/6)  of the bill of the AM Administrators would be borne by them.

53.  With respect, the “need” to engage professional administrator should be assessed by the Court rather than by the defendant (and/or her sons).  In the circumstances of the present case, there is no doubt that professional assistance should be obtained for the best interest of the Estate because that is required for the due and proper administration of the Estate.

54.  Fourthly, it was argued that the Younger Son’s minority interest in the Estate cannot justify the incurring of such high costs of the AM Administrators.

55.  As the Younger Son will turn 18 in around 2 weeks’ time (on 4 December 2024), there will no longer be any minority interest to be involved very soon.  This argument therefore falls away.

56.  The fact that there will no longer be any minority interest involved also means that only 1 professional administrator is required to be appointed.  That would also save some costs to be incurred.

57.  The remaining question is who should be appointed out of Ms Wong Wing Sze Tiffany and Mr Ho Siu Hang Gilbert. 

58.  As Mr Gilbert Ho has been appointed as a director of Introfaith Limited, I am of the view that he instead of Ms Wong should be appointed. 

THE ORDER

59.  By reasons of the above, I make the following orders:

(1)  An Order to pass over the defendant as the personal representative of the Estate and instead Mr Ho Siu Hang Gilbert be appointed as the administrator of the Estate;

(2)  The grant of letters of administration be issued to Mr Ho Siu Hang Gilbert not earlier than 4 December 2024.

COSTS

60.  I have considered parties’ written submissions on costs which were of course made before they have had sight of this Judgment. Neither have they been given a full chance to answer the submissions on costs made by the other side. 

61.  My tentative view is that costs of the action should follow the event.  I therefore order on a nisi basis that the defendant do bear the costs of the action (including the costs of the plaintiff’s ex parte application made on 2 June 2023 and of the defendant’s summons filed on 29 May 2024), to be taxed if not agreed.

62.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper)  within 14 days hereof.