EDWIN KWOK WING YUN v. LEE SHUK YEE

HCMP 3904/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3904 OF 2001

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D E C I S I O N

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Introduction

1. The plaintiff is a practising solicitor in Hong Kong and the trustee in bankruptcy of the estate of one Mr Lee Sin Chung, the bankrupt ("Lee"), after having been so appointed by a meeting of general creditors held at the Official Receiver's Office on 28 December 1999. The defendant became the administratrix of the estate of a Mr Lee Kwong Yuen, deceased ("the deceased") pursuant to Letters of Administration granted to her on 28 July 1998.

2. On 20 July 2001, the plaintiff commenced this action claiming the following relief:-

(a) an account of the administration of the deceased's estate to be rendered by the defendant;

(b) distribution of the deceased's estate;

(c) further or other account, inquiries, directions or relief;

(d) costs of the action.

3. At the hearing on 2 May 2002, the plaintiff was represented by leading and junior counsel who clarified that the plaintiff is at this stage only asking for an order in terms of (a) above (together with costs). Counsel proposed that the other relief be adjourned sine die with liberty to restore. The defendant opposes both matters.

Background Facts

4. The defendant and Lee were the children of the deceased. The deceased passed away on 22 February 1990. His wife predeceased him in September 1986. At the time of the deceased's death, he has 11 children who were entitled to share equally in his estate, including the defendant and Lee.

5. After the deceased's death, there was protracted litigation between the defendant and 5 of her siblings (including Lee) concerning who should administer the deceased's estate. Probate Action No. 9 of 1993 was commenced in 1993 and ended in about the beginning of 1997 when the Privy Council refused special leave to appeal. The 5 siblings were in effect the losing party. They all became bankrupts subsequently.

6. The plaintiff represented the 5 siblings in the probate action. Lee owed the plaintiff outstanding legal fees and the plaintiff was one of the creditors in Lee's bankruptcy. After Lee has been made bankrupt in April 1999, the Official Receiver was appointed the trustee of his estate. Later, a solicitor surnamed Chu was appointed by the general committee of creditors to be trustee in bankruptcy. Chu, however, was unable to provide security to the Official Receiver's satisfaction. At a general meeting of creditors held in December 1999, the plaintiff was appointed the trustee in bankruptcy.

Issues Raised Regarding the Claim for An Account

7. The defendant opposes this action essentially on the grounds that:-

(a) she has already rendered an account by way of a letter dated 23 March 2001 (exhibit "WA-12" to the affirmation of Mr. William Au of solicitor dated 20 December 2001);

(b) the plaintiff has not come to court with clean hands and therefore is not entitled to an order for an account because this is an equitable relief;

(c) the plaintiff is not a fit and suitable person to be Lee's trustee in bankruptcy.

8. In relation to point (a) above, the letter the defendant refers to was sent by Messrs William Au & Co. to the plaintiff in reply to the plaintiff's letter dated 7 March 2001. This letter basically sets out events relating to some of the assets of the deceased's estate since his death (22 February 1990). It refers to the alleged wrongful retention of rental income by persons including Lee from real properties which are part of the estate until May 1999 (when those properties were sold). It also alleged that Lee together with others received a deposit from the purchaser of the properties before Letters of Administration were granted to the defendant. The 23 March 2001 letter also claimed that Lee owes to the estate the taxed legal costs of the probate action.

Nature of The Claim for An Account

9. The plaintiff argues that para.1 of this action (the rendering of an account) was based on s. 56, Probate and Administration Ordinance, Cap. 10 which reads:-

"The personal representative of a deceased person shall, when lawfully required so to do, exhibit, by affidavit filed in the court, a true and perfect inventory and account of the movable and immovable property of the deceased, and the court shall have power as heretofore to require personal representatives to bring in inventories.

[cf. 1925 c. 23 s. 25 U.K.]"

10. The plaintiff says that 2 points should be noted. First, the personal representative's duty under s. 56, Cap. 10 is statutory in nature, and not one in equity. Secondly, s. 56, Cap 10 refers to his duty to exhibit 2 matters in her affidavit: an inventory and an account.

11. In relation to the first point, namely, the nature of the personal representative's duty, the plaintiff asks the court to note s. 56 is different from s. 25, Administration of Estates Act 1925. In England, the personal representatives of a deceased are under a duty, when required by the court, to render an account of the administration of the estate to the court: 17 Halsbury's Laws of England 1117, text to n. 2. The legislative history of the relevant provisions has been set out in Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (2000), para. 6-13 as follows:-

"A representative is under a duty, when required to do so by the court, to exhibit on oath in the court a full inventory of the estate and when so required render an account of the administration of the estate to the court. Formerly the exhibition of a true and perfect inventory and account of the estate was automatically required by statute, but the change introduced by the Administration of Estates Act 1971 apparently recognized the modern practice not to require an inventory or account unless an application had been made to the court for the purpose by some party interested".

12. The plaintiff submits that the Hong Kong provision reflects the pre-1971 position in England. Thus, a representative may be compelled to exhibit an inventory on the application of any person having an interest, or even the appearance of an interest: Williams, Mortimer & Sunnucks, para. 6-14, text to n. 84. The fact that the interest or debt upon which the claim for an inventory or account is made has been disputed or challenged is irrelevant: Williams, Mortimer & Sunnucks, para. 6-14. This, the plaintiff argues, is the true meaning of the phrase:-

"... when lawfully required so to do ... "

in s. 56, Cap. 10. The plaintiff further argues that Lee, being one of the 11 children of the deceased, is prima facie entitled to a share of the estate. For this reason, Lee (and therefore the plaintiff) can lawfully require the defendant to render an account. In Williams, Mortimer & Sunnucks, para. 61-25, it was observed that:-

"In an action for an account as distinct from an action for breach of trust, a plaintiff beneficiary who does not allege wilful default is entitled to an order for an account as of right",

citing in support Re Wells [1962] 1 WLR 874.

13. As regards the second complaint (not coming to court with clean hands), the defendant alleges that Lee has been guilty of misappropriating assets belonging to the deceased's estate the value of which exceeded Lee's possible entitlement to his share in the estate. Further, since the plaintiff only represents Lee, the plaintiff's claim is tainted with Lee's not having come to court with clean hands. The plaintiff denies the defendant's claim that Lee has misappropriated assets belonging to the deceased's estate.

14. The first accusation made by the defendant is that Lee and his sister, Lee Suk Ping, have failed to account to the estate for rents which they collected after the deceased's death from property owned by the deceased. The plaintiff points out that the defendant has apparently not taken any action to recover those rents, and only made a similar allegation in the probate action. Further, the plaintiff submits that the rents said to have been collected wrongfully were payable to a Special Effect Trading Investment Co. Ltd. ("Special Effect"), and not the estate. Both Lee and his sister were directors of Special Effect and together held 25% of the shares therein. The deceased held the controlling shareholding in Special Effect but, as a shareholder, he would have no interest in the assets of Special Effect. The defendant could also have, for example, commenced an action on Special Effect's behalf to recover the rents and/or wind up Special Effect to distribute its assets to the shareholders but none of these have been done.

15. The defendant asserts, secondly, that Lee has failed to account $200,000 payable for the sale of a piece of land in the New Territories. This property again belonged to Special Effect. The plaintiff argues similarly that even if this were true, Lee does not owe the money to the deceased's estate.

16. The defendant's third accusation is that Lee Suk Ping has failed to account for $2,464,005 she received from a Year Trend Ltd. This was the deposit which Year Trend Ltd. paid as deposit for the purchase of the deceased's properties in the New Territories. The plaintiff contends that if Lee Suk Ping had done so, there is nothing to implicate Lee for this.

17. The defendant further alleges that Lee has failed to pay the taxed costs of the probate action. The plaintiff argues that those costs were awarded before the grant of Letters of Administration and are thus irrelevant to Lee's claim for an account of the deceased's estate. Further, the costs were either the defendant's own costs (which therefore are unrelated to the deceased's estate) or the estate's (which still cannot be relied upon by the defendant to absolve her personal duty to render an account).

18. The defendant has effectively not put forward any argument in reply to the plaintiff's case that the claim for an account is statutory in nature but merely contends that this is an equitable relief. I agree with the plaintiff's argument. Whether Lee (and hence the plaintiff) has come to court with clean hands is therefore immaterial. There is accordingly no need to determine the accusations of the defendant set out above. Further, the defendant's accusations are all genuinely disputed by the plaintiff. I therefore find that the plaintiff can lawfully require the defendant to render an account despite the defendant's said allegations.

The Defendant's Duty as Administratrix

19. As stated above, the plaintiff differentiates between defendant's duties to provide an inventory and to render an account. In relation to the duty to render an account, the plaintiff argues that a letter sent (or even an affirmation made) by a solicitor based on information and belief does not satisfy the statutory requirements imposed on a personal representative by s. 56, Cap.10. There must be "a true and perfect ... account" (a phrase used in Williams, Mortimer & Sunnucks, para. 6-13, text to n. 79) of the movable and immovable property of the deceased being provided by the personal representative (in this action, the defendant) by affidavit made by her personally. Further, in order to provide a "true and perfect ... account", the defendant must provide details of the whereabouts of all properties (including cash) which she is bound to administer. It is common ground that about $27 million has come into the defendant's hands in the course of the administration of the deceased's estate since about May 1999. The plaintiff submits that despite numerous requests, no proper accounts have been provided by the defendant. The plaintiff further asks the court to note he has been unable to locate the defendant in Hong Kong.

20. Again, the defendant has not advanced arguments in relation to the above save those relating to the alleged misconduct of Lee and letter dated 23 March 2001. I agree with the plaintiff and disagree with the defendant regarding this point. The defendant's affirmation made by her before the grant of Letters of Administration puts it beyond doubt her duty to render an account. The defendant deposed that:-

"I will well and truly administer and faithfully dispose of, all such property and estate, rights and credits as the abovenamed deceased ... was entitled to within Hong Kong, and I will pay whatever debts the deceased did owe ... and I will exhibit a true and perfect inventory of all and singular the said estate and effects and render a just and true account thereof whenever required by law so to do".

The Other Relief Sought in This Action

21. Counsel for the defendant opposed the plaintiff's application to adjourn the other parts of this action pending a proper account from the defendant. I agree with the plaintiff that the further progress of this action depends at least partly on the account to be rendered by the defendant. For this reason, I will adjourn the other relief sine die with liberty to restore.

Other Matters

22. The defendant also argues that since disputes involving facts have been raised, this action should continue as if begun by writ. I agree with the plaintiff that the disputes raised are irrelevant to the defendant's duty to render an account. It was observed that a claim for an account can be made by way of an originating summons: see, for example, Atkin's Encylopaedia of Court Forms (1998) 2nd Ed., Vol. 2, para. 24, esp. p. 37; Williams, Mortimer & Sunnucks, para. 60-03.

23. The defendant also contends that this action ought to be heard in court rather than in chambers. In this connection, I adopt what has been said in 5(2) Halsbury's Laws of Hong Kong 90.1055, n. 4:-

"Originating summonses should only be heard in chambers where matters of private concern only are being considered, such as the execution of trusts or the administration of estates ... ".

24. I enquired with counsel whether time should be afforded to the defendant for rendering an account if an order is made requiring an account to be rendered. Counsel for the plaintiff indicated that the plaintiff is prepared to give 14 days to the defendant for doing so. Counsel for the defendant declined to give any indication as to time and took the view that the matter could only be considered after the court has given its decision on the matter.

25. The defendant argues that the plaintiff is not fit and suitable to be Lee's trustee in bankruptcy. This argument is based essentially on the plaintiff's close relationship with Lee: he previously represented the siblings in the probate action, he acted for Special Effect in the sale of the property in the New Territories in 1995 and he was a co-director (with Lee and Lee Suk Ping) of Lee Special Investment Co. Ltd.

26. I accept the plaintiff's arguments that he has been considered by the Official Receiver and the body of general creditors to be a suitable person to act as the trustee in bankruptcy. He was validly appointed as such at a meeting in December 1999. The power to appoint a trustee was vested in the creditors by ss. 80 and 81, Bankruptcy Ordinance, Cap. 6. If any creditor was dissatisfied with the plaintiff's appointment, recourse to court can be had under s. 83, Cap. 6 but no such action has been instituted.

Conclusion

27. By reason of the matters aforesaid, I will make the orders proposed by plaintiff's counsel at the hearing on 2 May 2002. The defendant will be given 14 days from today to render the account.

Costs

28. At present, it seems the facts of this action fall within the court's observations in In re Skinner [1904] 1 Ch 289:-

"Then comes the question as to the costs of taking this account. I think that the view expressed ... in Hewett v. Foster ... as explained ... in Easton v. Landor ..., was a correct statement of the law applicable at the date of the case before him. Under the old practice, inasmuch as every one interested in the estate had a right to have the accounts taken in Court, the order for an account in an administration action went as a matter of course, and the costs of taking it came as a general rule out of the estate. But that is no longer the case now. ... The result is that I have to decide which of the two parties shall bear the costs of taking and vouching the accounts. I have come to the conclusion in the circumstances that I ought to make these two defendants pay them" (p. 293, per Farwell J).

The circumstances the learned judge referred to were:-

"I am always very unwilling to make trustees pay costs; but, on the other hand, beneficiaries have a right to expect the performance of their duty by executors ... In my opinion the conduct of these two defendants amounts to a gross neglect to account ... " (p. 292).

There will be a costs order nisi that the costs of the taking of an account, including the costs of para.1 of the Originating Summons herein, any reserved costs and costs of the hearings up to and including 2 May 2002, be paid by the defendant to the plaintiff to be taxed if not agreed. I also certify the hearing on 2 May 2002 suitable for attendance by 2 counsel.