LEE UEK FONG AND ANOTHER v. LEE YIU FAI, the administrator of the estate of Lee Chow Ping, deceased

HCMP 2904/2016

[2018] HKCFI 1157

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2904 OF 2016

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REASONS FOR DECISION

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INTRODUCTION

1.  As confirmed by Mr Yip (for the Plaintiffs) at the commencement of the hearing on 24 May 2018, the Plaintiffs would pursue against the Defendant for the following relief set out in the Originating Summons only:-

(1)  paragraph 1(a) and (d) thereof requiring the Defendant as administrator of the estate (“the Estate”) of Lee Chow Ping, deceased (“the Deceased”), to render (i) a true and perfect inventory and account of the Estate from the date of death of the Deceased to the present, and (ii) a full and proper account of his dealings, payments and distributions in relation to the Estate; and

(2)  paragraph 2 thereof requiring the Defendant to assent to the vesting of 50% of the property known as Flat B on 12/F and Car Parking Space No 58 on 5^th Car Port, Evelyn Towers, 38 Cloud View Road, Hong Kong (“the Property”) to the Plaintiffs and the Defendant as beneficiaries of the Estate.

2.  In the course of the hearing, the parties were able to agree on certain directions for the sale of the Property, which I shall set out at the end of these reasons for decision.  I made an order in terms of the agreed directions.

3.  At the conclusion of the hearing, I further made an order in terms of paragraph 1(a) and (d) of the Originating Summons with reasons to be given later, which I now do.

BASIC FACTS

4.  The Deceased and the late Lee Sang Chang had 4 children, namely, (i) Lee Uek Fong, (ii) Lee Yeu Kit, who passed away after the commencement of this action and is currently represented by the administrator of his estate, namely, Lee Yiu Hung Jackie, pursuant to the order of Master Lai dated 7 December 2017, (iii) Lee Yiu Hung Jackie (hereinafter collectively referred to as the “Plaintiffs”), and (iv) Lee Yiu Fai (the “Defendant”).

5.  The late Lee Sang Chang died intestate on 16 December 1994.  Letters of Administration of his estate were granted to the Deceased on 17 October 1997 under Grant No HCAG004512/97.

6.  The Deceased died intestate on 7 December 2012. Letters of Administration of the Estate were granted to the Defendant on 30 September 2014 under Grant No HCAG015904/2013 (“the 2014 Grant”).  It is common ground that the 4 children of the Deceased and the late Lee Sang Chang are the only beneficiaries of the Estate under the Intestates’ Estates Ordinance, Cap 73.

7.  As at the date of death of the Deceased, the Property was held (i) as to ½ by the Deceased, and (ii) as to 1/8 by each of the 4 children, as tenants in common.

8.  In the Schedule of Assets and Liabilities (“the Schedule”) annexed to the 2014 Grant, which was an exhibit to the Defendant’s affirmation dated 4 December 2013 made in support of his application for the 2014 Grant, it was stated, inter alia, that the Deceased had (i) no assets whatsoever save and except a 50% interest in the Property, and (ii) no liabilities to anyone, as at the date of her death.

9.  Notwithstanding the 2014 Grant, the Defendant did not distribute to the Plaintiffs their shares in or entitlements to the Estate.

10.  The Plaintiffs also complained that the Defendant failed to render proper accounts in respect of the administration of the Estate despite repeated demands.  In particular, the Plaintiffs said that the accounts or purported accounts produced by the Defendant on 21 April 2016 and 6 June 2016 were deficient in various aspects.

11.  On 28 October 2016, the Plaintiffs commenced the present action against the Defendant seeking, inter alia, the relief mentioned at the beginning of these reasons for decision.

12.  It is the Defendant’s case that he has since rendered a full and proper account of the Estate and his administration thereof by a letter dated 10 November 2017 (with supporting documents annexed thereto) (“the November 2017 Account”), the contents of which have been confirmed by the Defendant in his 3^rd affirmation filed herein on 16 November 2017.  This is disputed by the Plaintiffs.

THE DEFENDANT HAS FAILED TO RENDER FULL AND PROPER ACCOUNTS OF THE ESTATE AND HIS ADMINISTRATION OF THE ESTATE

13.  The duty of a personal representative to keep and render proper accounts of the estate of a deceased person and his administration thereof is well established.  In Re Estate of Lee Da Kor [2010] 1 HKLRD 415, Poon J (as he then was) stated as follows:-

[17] It is the duty of an executor to keep clear and accurate accounts, and to be always ready to render such accounts when called upon to do so: see Halsbury’s Laws of Hong Kong, 2008 Re-Issue, Vol.27, para.425.897. In order to provide a true and perfect account, the executor must provide details of the whereabouts of all properties (including cash) which he is bound to administer: see Edwin Kwok Wing Yun v Lee Shuk Yee, HCMP3904/2001, unreported, 7 June 2002, per Chung J at para.19.

[18] Further, under section 56 of PAO, personal representatives are, when so ordered by the court, to exhibit on oath in the court a full inventory of the estate and render an account of the administration of the estate to the court. Correspondingly, the court may under Order 85, rule 2(3) of the RHC order executors to furnish and verify accounts.

14.  Generally speaking, to render a proper account of the estate of a deceased person, the personal representative is required to:-

(1)  show the opening balance (including capital assets) and closing balance;

(2)  give details of movement of assets, incomes and expenditures of the estate;

(3)  give details of the whereabouts of all properties (including cash) of the estate which the personal representative is duty bound to administer; and

(4)  support the account with documentary evidence.

See Re Estate of Lee Da Kor, ante, at paragraphs 17 and 26; Charles Yu Chiu Kwan v Edna Yu Chan Shek Yin, HCMP 965/1980 (22 April 1982) per Rhind J (quoted by B Chu J in Leung Wing Hong v Leung Yiu Cho, HCMP 1473/2014 (11 August 2016), at paragraph 104).

15.  As confirmed by Ms Chan on behalf of the Defendant, the above principles are not disputed.

16.  On behalf of the Plaintiffs, Mr Yip complains about various discrepancies or inconsistencies between the November 2017 Account and the accounts previously produced by the Defendant in April and June 2016.  It is not necessary for me to deal with those discrepancies or inconsistencies because it is apparent, on an examination of the November 2017 Account alone, that it is seriously defective.  Without being exhaustive, the following are the major deficiencies in the November 2017 Account.

17.  First, it fails to set out the “opening balance” or the “closing balance” of the Estate.

18.  Second, it includes, as part of the income of the Estate, rentals derived from letting the Property, in the total sum of HK$1,140,000, during the period from May 2009 to November 2012 which was prior to the date of death of the Deceased.  Assuming that such rentals (or a portion thereof) were received by the Defendant for the benefit of the Deceased and they were not used or expended by or on behalf of the Deceased during her lifetime, they should form part of the assets of the Estate as at the date of death of the Deceased (which were not, however, disclosed in the Schedule), and should not be regarded as part of the Estate’s income.

19.  Third, the same comment applies to various alleged expenditures paid or incurred prior to the death of the Deceased, including (i) renovation costs of the Property in the amount of HK$150,000 as evidenced by a receipt dated 28 December 2010, (ii) rates and government rent for the period from 1 July 2011 to the date of death, (iii) management fees for the period from May 2009 to the date of death, (iv) building improvement costs (at least to the extent of HK$8,500 incurred in 2009), (v) property tax (for the period up to the date of death), (vi) the Deceased’s nursing home expenses and health care expenses while she was still alive, and (vii) mortgage repayments allegedly made by the Defendant in respect of a loan secured by a mortgage over the Property created in 2003 and discharged in 2011.  If the Defendant had made the relevant payments on behalf of the Deceased as alleged by him (which is not admitted by the Plaintiffs), the Deceased might be indebted to the Defendant in respect of those payments (or a portion thereof). Such debts should be regarded as liabilities of the Estate to the Defendant (which were not, however, disclosed in the Schedule), and should not be regarded as part of the Estate’s expenses.

20.  Fourth, there are two items both relating to property tax in the November 2017 Account, one for HK$226,433 (consisting of the sum of HK$56,217 representing outstanding property tax as at 28 July 2010 and a further sum of HK$170,216 representing property tax for the years 2010/2011 to 2015/2016), and the other for HK$350,000 (said to be “[r]epayment of outstanding tax of the Deceased (as of 2010) and incurred expenses”).  When asked by the court whether there was any overlap between these two items, Ms Chan was unable to satisfactorily explain these two items or point to any evidence to show that there was no overlap between them.

21.  Fifth, there are no proper supporting documents for many of the alleged expenditures.

22.  Sixth, the November 2017 Account fails to properly recognize the fact that the Estate is only entitled to 50% of the Property, and thus only 50% of the relevant income and expenditures should be attributed to the Estate.

23.  Seventh, even if one were to take the November 2017 Account at face value, there should still be a surplus of HK$1,244,415 after deducting the expenses from the rental income.  Assuming that 50% of the surplus belongs to the Estate, the amount of approximately HK$622,208 should have been kept by the Defendant on behalf the Estate.  The Defendant has failed to account for the whereabouts of the surplus in the November 2017 Account.  When asked by the court, Ms Chan accepted that the surplus had been taken or used by the Defendant.  Effectively, that was an admission that the Defendant had misappropriated, or misused, funds belonging to the Estate.

24.  For the above reasons, I consider it to be clear that the Defendant has failed to keep or render proper accounts of the Estate and his administration thereof.

DISPOSITION

25.  I make an order, by consent, that:-

(1)  there be a sale of the Property at a price to be mutually agreed between the Plaintiffs and the Defendant, failing which the Plaintiffs and the Defendant shall appoint their respective surveyors and the reserve price for the sale of the Property shall be the average of the valuations produced by the parties’ respective surveyors;

(2)  the proceeds from the sale of the Property, after deducting all proper expenses incurred in the sale of the Property, shall be distributed in the following manner –

(a)  5/8 of the net proceeds be paid into court pending further order of the court;

(b)  1/8 of the net proceeds be paid to Lee Yiu Hung Jackie;

(c)  1/8 of the net proceeds be paid to Lee Uek Fong; and

(d)  1/8 of the net proceeds be paid to Lee Yiu Fai.

26.  I further make an order in terms of paragraph 1(a) and (d) of the Originating Summons, which shall be complied with by the Defendant within 42 days of the date of the order herein.

27.  Lastly, the parties shall have general liberty to apply for further directions where necessary.