LILY DOROTHY CHAN (personal representative of the estate of CHAN Michael Yiu-Hee) AND ANOTHER v. CHAN ORLANDO YIU-KUI (sole surviving executor of the estate of Madam Chan Lam Yat Wah, deceased)

HCMP 1043/2018

[2020] HKCFI 388

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1043 OF 2018

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J U D G M E N T

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Introduction

1.  The plaintiffs are beneficiaries of the Estate, and they are applying for an order that the defendant, the sole surviving executor of the Estate be removed and an order that a professional accountant be appointed as the executor of the Estate.

Background

2.  Madam Chan Lam Yat Wah (“Madam Chan”) died in Hong Kong on 11 January 2002.  She had 7 children, who were, in order of age:

(i) Anita Chan Kit Mui

(ii) Belinda Chan Kit Hing

(iii) Peter Chan Yiu Sing (now deceased)

(iv) Michael Chan Yiu-Hai (or Hee) (now deceased)

(v) Cecilia Chan Kit-Lai

(vi) Orlando Yiu-Kui Chan, the defendant herein

(vii) Rosalind Chan Chuk-Man, the 2^nd plaintiff herein

3.  For easy reference, I shall refer to the above by their respective first name.

4.  Madam Chan’s husband predeceased her.  She made her last will on 7 April 1982 (“Will”).  In the Will, she declared she had disowned her eldest son Peter for reasons stated therein[1].  She appointed her two other sons Michael and Orlando to be the executors of the Will, and apart from Peter, her 6 other children were named as beneficiaries in equal shares of her residuary estate (collectively “Beneficiaries”).

5.  Madam Chan died in Hong Kong on 11 January 2002. On 12 June 2003, Michael and Orlando obtained probate of the Will as joint executors (“Grant”)[2]. According to the schedule of property attached to the Grant (“Schedule of Property”)[3], the net principal value of estate was   approximately HKD1,311,418 and the assets of the Estate in Hong Kong consisted of :

(i) Cash about HKD 53,000;

(ii) Contents in two Safe Deposit Boxes with Citibank together with Key Deposit HKD 1,258,365.

6.  The major assets of the Estate were in fact outside Hong Kong and comprised of, amongst other things :

i. Madam Chan’s beneficial interest in 474,500 Class A Units of a unit trust called “Terra Unit Trust”; and

ii. Madam Chan’s 100% interest, being the holder of the only one issued share of a company called Terra International Holding Inc (“Terra International”).

7.  Terra International was, until about July 2017, the trustee of the Terra Unit Trust.  Terra Unit Trust was set up by Madam Chan on 1 September 1981 under the laws of Nauru with 474,500 Class A Units and 255,500 Class B Units, totalling 730,000 Units.  The 474,500 Class A Units were held for Madam Chan since 22 October 1981, and of the 255,500 Class B Units, since 1 December 1981, 73,000 Units were held respectively for Michael, Anita and Orlando and 36,500 Units were held for Michael’s son, Geoffrey Chan (“Geoffrey”).  I understand that the main difference between Class A Units and Class B Units is in relation to the voting rights of the holder, and that for all intents and purposes, Madam Chan in effect held 65% of the beneficial interest of the Terra Unit Trust or its assets through her Class A Units.

8.  Terra International was first incorporated under the laws of Nauru on 1 July 1981 and later migrated to and continued as a company with the same name under the laws of the British Virgin Islands on 25 March 2003 (which was about 14 months after Madam Chan’s death). 

9.  It would appear from the Management Accounts of Terra International that prior to Madam Chan’s death, it, or Terra Unit Trust had held at least two landed properties in Hong Kong, one at MacDonnell Road (which was been rented out since 1 August 1992 to September 1997, the rent of which was received by Madam Chan) and one at Kotewall Road (which was sold on 18 October 1997 for HKD18m and partial sale proceeds were received by Madam Chan)[4].

10.  Terra International, as trustee of the Terra Unit Trust, was, until about July 2017, the sole shareholder of a Canadian company called Canterra International Holdings Ltd (“Canterra”) which was incorporated in British Columbia on 1 April 1987[5].  On 16 April 1987, Madam Chan, Michael, and his wife Lily, the 1^st plaintiff herein (“Lily”) were appointed directors of the company[6]. On the same date, Madam Chan was also appointed the President, and Michael the Secretary.  Subsequently, Geoffrey was appointed a director on 1 October 1993.

11.  As at date of Madam Chan’s death, it would appear that the major asset held by Terra International was Canterra, which appeared to be incorporated for the purpose of purchasing a property in Canada. 

12.  Shortly after its incorporation, Canterra purchased a building in Canada (“Bellevue Tower”) on 30 April 1987.  The purchase price was said to be CAD 10m[7].

13.  Apart from Bellevue Tower, it appeared that Canterra had at one time also held a 12.5% in a “joint venture” engaged in another property development (“Joint Venture”), but the Joint Venture was eventually dissolved on 1 October 1997[8], prior to Madam Chan’s death.

14.  It was Orlando’s case that after Madam Chan’s death in January 2002 until Michael’s death in May 2010, Michael and members of his immediate family served as directors of Canterra and controlled the management of Canterra.

15.  It would appear that on or about 30 June 2005, Anita had signed 2 letters of disclaimer, one in respect of disclaiming her interest in the Estate and one in respect of disclaiming her interest in Terra International (collectively “Disclaimers”).

16.  After the Grant, Orlando and Michael had disputes over the administration of the Estate.  In particular, Orlando complained that the administration of the Estate was performed almost solely by Michael, and that Michael had often made decisions about the Estate on his own with the assistance of Lily and Geoffrey and without the consent of Orlando.

17.  In October 2008, Orlando commenced HCMP 2126/2008 in Hong Kong against Michael alleging, amongst other things, that Michael had breached his fiduciary duties as executor and seeking to remove Michael as the co-executor of the Estate (“2126/08 Action”). Rosalind had in her 2^nd affidavit filed herein complained that Orlando had not proceeded with the said proceedings diligently and that his inaction showed that he had not properly discharged his duty as executor[9].

18.  In any event, about 20 months after Orlando commenced the 2126/08 Action, on 6 May 2010, Michael died in West Vancouver in British Columbia.  Letters of administration of Michael’s estate were subsequently granted to Lily.

19.  Bellevue Tower was sold by Canterra on 7 June 2010, which was about a month after Michael’s death, at a sale price of CAD 36.5m.  There was a copy of the “Vendor’s statement of adjustments” signed by Geoffrey on behalf of Canterra on closing of the sale[10] and a copy of the “Source and Application of Funds Statement”, which indicated that the total funds held pending further instructions from Canterra upon completion/closing of sale was a sum of CAD 33,646,143.29[11], or about CAD 34m.  It did not appear that Orlando had disputed this, and further he had said that upon sale, the net sale proceeds of Bellevue Tower were kept by Canterra[12].

20.  After Michael’s death, Orlando became the sole executor of the Estate.  Orlando had given two versions as to when he took over the administration of the Estate, one was 2013 and later, he was it was in 2011.  I will come back to this issue later in this judgment.

21.  Orlando has been a director of Terra International since around 2001 and after 29 February 2012, Orlando has been the sole director of Terra International up to the present date.  According to the Register of Directors of Canterra[13], Orlando became one of three directors of Canterra on 16 July 2011, and the other two were Geoffrey and a Calvin Leung (the former accountant of Canterra).  On 2 August 2011, Calvin Leung was replaced by Victor Yang, a solicitor practising in Hong Kong.  Geoffrey ceased being a director on 24 October 2012, leaving only Orlando and Victor Yang.  Victor Yang ceased to be a director on 8 October 2014, when Orlando became the sole director of Canterra.

22.  It was Orlando’s case that as Michael took the view that (i) Anita had signed the Disclaimers and (ii) Rosalind was deemed to have abandoned her entitlement under the Will due to her having withdrawn a significant amount of funds from Madam Chan’s bank accounts and having misappropriated Madam Chan’s jewellery, Michael then decided to transfer 118,625 Class A Units of the Estate’s holding of the 474,500 Class A Units in the Terra Unit Trust to each of the 4 remaining Beneficiaries, namely Michael himself, Belinda, Cecilia and Orlando, leaving Rosalind out.  This was objected to by Rosalind.

23.  From the Share Register of the Terra Unit Trust, it would appear that the transfers of 118,625 Class A Units respectively to Michael, Belinda and Cecilia were effected on either 12 June 2008 or 12 August 2008[14]. However, according to Orlando, no transfer to him was in the end effected by Michael, as Orlando did not agree to the arrangement, and that he considered those transfers by Michael invalid.  Orlando was of the view that Rosalind remained one of the entitled beneficiaries.

24.  After Michael’s death, there were various legal actions commenced in Hong Kong, BVI and in British Columbia including the following:

In Hong Kong

(i) HCMP 2642/2011 issued on 22 December 2011, by Orlando against the Beneficiaries seeking an order for him to be at liberty to commence legal proceedings over the validity of Disclaimers.  These proceedings came before this Court on 11 April 2013, but were stayed and adjourned sine die, and were subsequently overtaken by HCMP 1004/2013 mentioned below.  Costs were reserved.

(ii) DCCJ 142/2013 issued on 14 January 2013, by Rosalind to recover Madam Chan’s hospital fees and funeral expenses  incurred by her and the action was later settled by Orlando[15].

(iii) HCMP 1004/2013 issued on 8 May 2013, by Orlando seeking a determination on, amongst other things, the validity of the Disclaimers.  All the other Beneficiaries were made defendants in the action. This action was eventually settled by way of a consent order made by Chow J on 9 October 2017[16] with the Disclaimers declared valid, and a lump sum of CAD 1m to be paid to Anita from the Estate within 7 days upon distribution of the Estate.  Thus, save for the sum of CAD 1m, Anita is no longer be entitled to any remaining assets of the Estate, leaving only 5 out of 6 Beneficiaries.

(iv) HCMP 240/2017 issued on 1 February 2017, by Lily and Rosalind (collectively “Ps”), seeking a true and perfect up-to-date inventory and account of the Estate and its assets (“240/17 Action”)[17].  As seen later, this led to an order made by DHCJ To on 21 September 2017.

(v) The present proceedings issued on 9 July 2018 by Ps to remove Orlando as executor of the Estate.

In BVI

(i) HC (COM) 2010/78, issued by Orlando in 2010 as personal representative of the Estate against Terra International for a declaration that Orlando was entitled to be registered as holder of the share in Terra International registered in name of Madam Chan.  This was allowed by the BVI Court and on 5 July 2011, Orlando was duly registered[18].  It would appear that Lily had applied to intervene but such intervention application was dismissed.

(ii) HC (COM) 2011/0068 issued by Lily, Cecilia, Belinda and Geoffrey against Terra International and Orlando, seeking, amongst other things, an order appointing Cecilia as a co-trustee of the trusts of the Will together with Lily and an order vesting the assets held on the said trusts jointly in Terra International and Orlando, which action was dismissed by the BVI court.

In British Columbia

(i) Court File No VLC-S-S-S114501 issued on 5 July 2011 in the Supreme Court of British Columbia, by Lily in her personal capacity and in her capacity as executor of the estate of Michael, and Geoffrey, seeking, amongst other things, an order permitting Canterra to pay into court funds in its possession obtained from the sale of the Bellevue Towers and injunctions from payment or transfer of the funds and from removing Geoffrey as a director of Canterra or appointing any other directors of Canterra.  The applications were dismissed (“S114501 Action”).

(ii) Court File No VLC-S-S-128564 issued on 4 December 2012 by Canterra against Geoffrey, Lily (in her personal capacity and as executor of the estate of Michael), and Jennifer Chan, the daughter of Michael and Lily, seeking, amongst other things, a declaration that Canterra held a charge or lien on all assets owned by the defendants to the extent of the benefits accrued to the defendants and each of them as a result of their wrongful conduct (“S128564 Action”)[19]. The alleged wrongful conduct was in relation to various matters, including but not limited to (i) directors’ and management fees paid by Canterra to the defendants as former directors; (ii) legal fees paid by Canterra for the benefit of others; (iii) over contributions by Canterra in relation to the Joint Venture.  The parties later reached a settlement over this action on 21 May 2014 pursuant to which Geoffrey and Lily have executed a promissory note to pay Canterra jointly and severally a sum of CAD 775,000, but the promissory note shall be assigned by Canterra to Terra International before distribution of any monies payable to Lily and Geoffrey by the Terra Unit Trust[20].

25.  Anyway, according to Rosalind, most of the foreign litigations had been dismissed and/or settled by the time the 240/17 Action was issued by Ps.

26.  After Orlando he took over administration of the Estate, he appointed new professional accountants to prepare the various accounts.  However, it would appear that it was only in about October 2015 that Orlando first produced to Ps the Management Accounts of the Estate and of Terra International, and Financial Statements of Canterra, for the year ended 30 April 2014 but he did not answer further queries raised thereon by Lily and/or Rosalind.  This led to Ps commencing the 240/17 Action.

27.  In Orlando’s 1^st opposing affirmation filed on 6 April 2017 in the 240/17 Action (“240/17 1^st Affirmation”), he had produced two further sets of the Management Accounts of (i) the Estate and (ii) Terra International, and the Financial Statements of (iii) Canterra respectively for the years ended 30 April 2015 and 30 April 2016. 

28.  As at 30 April 2016 :-

(i) According to the Management Accounts of the Estate, its “Net Assets” were stated to be HKD 19,570,957.94[21];

(ii) According to the Management Accounts of Terra International, its “Net Assets” were HKD 48,335,552.40[22];

(iii) According to the Financial Statements of Canterra, the “Shareholders’ Equity” as at 30 April 2016 was CAD 25,610,818[23], and at CAD 1= HKD6.18 as at 30 April 2016[24], this would be HKD 158,274,855.

29.  However, apart from producing the abovementioned Management Accounts and/or Financial Statements, Orlando failed to provide any supporting documents including up-to-date financial records such as bank account statements.  About one week before the substantive hearing of the 240/17 Action before the DHCJ To, Orlando then produced hundreds of pages of financial documents.

30.  Notwithstanding Orlando’s production of further financial documents, on 21 September 2017, DHCJ To ordered Orlando to provide amongst other things a true and perfect up-to-date inventory and account together with supporting documents of (i) all movable and immovable properties of the Estate and (ii) Canterra[25] (“21.09.17 Order”).  DHCJ To further ordered Orlando to pay costs personally on indemnity basis and that his own costs were not allowed to be recovered from the Estate. 

31.  To comply with the 21.09.17 Order, Orlando filed a 2^nd affirmation in the 240/17 Action on 12 October 2017 (“240/17 2^nd Affirmation”) providing, amongst other things, further accounts and supporting documents:

(i) Management Accounts of the Estate for the period ended 31 July 2017;

(ii) Management Accounts of Terra International for the period ended 31 July 2017;

(iii) Financial Statements of Canterra for the 3 month period ended 31 July 2017;

(iv) Supporting documents in respect of “Amount due to an executor” of the accounts of the Estate;

(v) Supporting documents in respect of “Amount due from director” of the accounts of Terra International

32.  Lily then engaged a professional accountant firm, BDO Financial Services Limited (“BDO”) to review the documents provided by Orlando.  Lily and Rosalind alleged that those Management Accounts and/or Financial Statements produced by Orlando were far from perfect, and further showed serious misconduct of Orlando in misappropriating funds of the Estate and/or converting funds for his own use and benefit.

33.  On 15 January 2018, Lily requested for further information and documents in relation to those Management Accounts and Financial Statements disclosed by Orlando.  Further requisitions were raised culminating in a letter dated 3 April 2018 from Lily’s solicitors to Orlando’s solicitors.  Apart from a holding reply on 19 April 2018, there was no further substantive reply from Orlando.

34.  This led to the issue of the originating summons herein on 9 July 2018 by Ps seeking, amongst other things, an order that Orlando be removed as the sole executor of the Estate and that a professional accountant from BDO be appointed in place of Orlando, together with consequential vesting orders and costs.

35.  On 2 October 2019, about 3 weeks prior to the hearing before this Court, Orlando’s solicitors suddenly sent over by letter 1,000 pages of documents to Ps’ solicitors including management accounts, ledgers and various supporting documents in respect of the “inventory and account” of the Estate and Terra International[26] and then on 15 October 2019, about a week prior to the hearing, Orlando’s solicitors sent over by another letter some 400 pages of documents including management accounts and various supporting documents in respect of the inventory and account of Canterra[27] (altogether some 1,400 pages of documents placed in 6 box files Bundle D (“Bundle D Documents”).

36.  Ps complained that they had not had a chance to analyse the Bundle D Documents which were produced so late.  There was no summons before the Court for leave to Orlando to file a further affirmation exhibiting those documents, although Ps had no objection to the Court considering those documents de bene esse.

37.  It was submitted on behalf of Orlando at the hearing before this court that he resisted Ps’ present application “not because he covets the position as executor and wants to hang on to his office” and that he is in Court “primarily because of the serious charges of misconduct against him which call for an answer”, and that Orlando is also mindful of his duty as executor to assist the Court by drawing attention to the applicable legal principles and submitting on how they should be applied to the facts of the present case, and that submissions were made on that basis.

38.  Counsel Mr Erik Shum appeared for Ps and Mr Michael Yin appeared for Orlando at this hearing.

Grounds for removal

39.  Ps’ originating summons herein was issued under section 33 (3) of the Probate and Administration Ordinance, Cap 10 (“Ordinance”), which states as follows:

“The court may, if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require, suspend or remove an executor or administrator (other than the Official Administrator) and provide for the succession of another person in place of such executor or administrator and for the vesting in that other person of any property belonging to the estate.”

40.  Ps’ grounds for removing Orlando as the Executor of the Estate are :

(1) Failure to comply with the 21.09.17 Order;

(2) Misappropriation and conversion of the Estate for own use;

(3) Dilatory in administering and distributing the Estate;

(4) Loss of mutual trust and confidence

Ground (1) – Failure to comply with the 21.09.17 Order

The scope of the 21.09.17 Order

41.  Section 56 of the Probate and Administration Ordinance, Cap 10 (“Ordinance”), provides that:

“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.”

42.  The 21.09.17 Order states, amongst other things :

(1) [Orlando] do exhibit by affidavit together with supporting documents a true and perfect up-to-date inventory and account, including but not limited to the present value and latest financial records, of all movable and immovable properties of the Estate up to the end of July 2017;

(2) [Orlando] do exhibit by affidavit together with supporting documents a true and perfect up-to-date inventory and account, including but not limited to the outstanding balance and latest financial records, of [Canterra] up to the end of July 2017;

(3) [Orlando] do exhibit by affidavit together with supporting documents a breakdown of the estimated costs … incurred and/or to be incurred by Orlando in all legal proceedings in respect of the Estate, Terra Unit Trust, Terra International and Canterra up to the end of July 2017.

43.  Thus, under paragraphs 1 and 2 of the 21.09.17 Order, Orlando was to produce “supporting documents including but not limited to the present value and latest financial records” up to the end of July 2017 of (i) all movable and immovable properties of the Estate and (ii) of Canterra.

44.  It was argued on behalf of Orlando by Mr Yin that he had already complied with the 21.09.17 Order by producing the Management Accounts of the Estate and Terra International and the Financial Statements of Canterra with supporting documents within 21 days as ordered and the fact that Ps had since raised further requisitions in relation thereto and sought further supporting documents, as a result of which Orlando had supplied further documents under protest, was not a ground for inferring that the documents initially disclosed were insufficient to comply with the terms of the 21.09.17 Order.

45.  Mr Yin further submitted that:

(i) For paragraph 1 of the 21.09.17 Order, the “supporting documents” of the properties of the Estate do not extend to all the books and records of the subsidiary companies, and that internal company documents, and internal books and accounts of Terra International and Canterra are outside the scope of the order;

(ii) For paragraph 2, the “supporting documents” do not include board resolutions or members’ resolutions.

46.  As said by Chow J in Chow Chak Kiu v Chow Man Chi HCMP 797/2016, unrep, 17.01.2017[28], as follows:

“40. 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 expenditure 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 support the account with documentary evidence.

See Re Estate of Lee Da Kor [2010] 1 HKLRD 415, at paragraphs 17 and 26 per Jeremy Poon J (as he then was); 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).

41. Moreover, it is not acceptable for the personal representative merely to give to the beneficiary a bundle of documents relating to the estate and leave it to the beneficiary to sort out the documents himself (Re Estate of Lee Da Kor,at paragraph 37).”

47.  In the present case, Orlando had instructed professional accountants to prepare the inventory and account of the movable and immovable properties of the Estate to be prepared in the form of Management Accounts.  As the Estate consists of only immovable properties including the 100% interest in Terra International, and through Terra International, 65% of the beneficial interests in Canterra, Orlando had also produced the Management Accounts of Terra International and the Financial Statements of Canterra and there was no evidence that Orlando, in his capacity as a sole director of either Terra International or Canterra had objected to the production on behalf of either of the companies.  In any event, under paragraph 2 of the 21.09.17 Order, Orlando has been ordered separately to exhibit an inventory and account of Canterra with supporting documents.

48.  The “supporting documents” in the 21.09.17 Order included but were not limited to the latest financial records. As seen earlier in the quoted passage from Chow J in Chow Chak Kiu,the inventory and account has to be supported by documentary evidence.

49.  This Court has also said in Re Estate of Chan Kan Ying, deceased, HCMP 888/2013, unrep, 19.07.17, to discharge the duty to account properly, there must be production of the relevant supporting documents and receipts, as well as proper breakdown of items, referring to paragraphs 16 and 17 of Wu Wing Ching and Anor v Ding Yu Fang HCMP 2471/2012, unrep, 16.07.14 and paragraph 10 of Clare Hollingworth v Thomas Edward Juson, HCA 249/2006 unrep.

50.  As further seen in the judgment of Carlye Chu J, as she then was, in the above Hollingworth v Thomas case, that the practice and proper format for account and verifying affidavit, can be found in Atkin’s Encyclopaedia of Court Forms in Civil Proceedings, second edition (1992 issue), vol 1[29]. As pointed out therein by Chu J, as she then was, the practice set out in Atkin’s Forms was the same as that described in Hong Kong Civil Procedure 2006 edition vol 1 para 43/3/1.     

51.  As stated in the “Editorial Introduction” of Order 43 in the Hong Kong Civil Procedure 2020, edition vol 1, accounts are a specialised form of inquiry most commonly ordered in administration actions, partnership actions, and actions for specific performance.  Paragraph 43/3/1 applies when the Court orders an account to be taken or inquiry to be made under Order 43 rule 3.  Even though in the present case, there is no claim or application under Order 43, what is stated in paragraph 43/3/1 may also be helpful to what an executor is expected to produce when ordered to produce a “true and perfect inventory and account”.  As seen therein, in a simple case, the vouchers may be ordered to be exhibited to the affidavit; otherwise it is generally ordered that each party permit inspection of all relevant documents in their possession or power relating to the account, to enable the opposing parties in effect to carry out an audit, and so that any necessary verification of the account can be dealt with out of court.

52.  Those Management Accounts of the Estate and of Terra International, and the Financial Statements of Canterra were not audited. The Management Accounts of the Estate and Terra International were stated to have been prepared from accounting records and information supplied to the accountants Alphalink Accounting Services Limited (“Alphalink”) appointed by Orlando after he took over the administration of the Estate.  As for the Financial Statements of Canterra, as stated in those Financial Statements, the review conducted was not an audit and the review was prepared by the Canadian accountants Dale Matheson Carr-Hilton Labonte LLP from inquiry, analytical procedures and discussion related to the information supplied to Dale Matheson by Canterra[30].

53.  Insofar as Canterra was concerned, it was clear that no supporting documents at all were produced in Orlando’s 2^nd affirmation filed on 12 October 2017 in the 240/17 Action, and he had said he would file and serve them upon receipt.  There was no reason why Orlando was not able to send any supporting documents in relation to the Financial Statements of Canterra within the ordered deadline or shortly thereafter.  It would thus appear that Orlando had failed to comply with paragraph 2 of the 21.09.17 Order.

54.  Orlando became the sole executor of the Estate upon Michael’s death in May 2010.  As said earlier, Orlando had given two versions as to when he took over the administration of the Estate.  In a letter dated 9 July 2018 from his present solicitors, he claimed that he only took over the management of the Estate in 2013[31].  However, in Orlando’s affirmation filed herein on 12 November 2018, he said he took over control of the Estate in or around late 2011[32].

55.  In 2010, Orlando had already issued proceedings in BVI for himself to be registered as the holder of the one share registered in the name of Madam Chan in Terra International and at about end of February 2012, he became sole director of Terra International, and further he became one of the two directors of Canterra in July 2011.  By end of December 2011, Orlando had also issued the HCMP 2642/2011 in Hong Kong.  In my view, Orlando had already taken over the management and the administration of the Estate in 2011. In any event, on his own case, latest by 2013, Orlando should have in his possession, custody and power all relevant financial documents and records of the Estate, Terra International, and Canterra.  

56.  In the 240/17 2^nd Affirmation, apart from the Management Accounts and /or Financial Statements, the “supporting documents” exhibited by Orlando were (i) those said to be in respect of the item “Amount due to an executor” in the Management Accounts of the Estate which consisted of some 388 pages of invoices for professional services, and (ii) those said to be in respect of the item of “Amount due from director” in the Management Accounts of Terra International which consisted of some 223 pages.    

57.  Thus, in so far as paragraph (1) of the 21.09.17 Order, apart from (i) in the above paragraph, there were no other up-to-date financial records such as bank statements of the Estate.  As for paragraph (2), as mentioned earlier, there were no supporting documents exhibited.

58.  As mentioned earlier, after receipt of the Estate Accounts in the 240/17 2^nd Affirmation, and review by BDO, Orlando’s solicitors wrote to Orlando’s solicitors on 15 January 2018 requesting for further information and documents[33]. The information sought by Ps in their solicitors’ letter of 15 January 2018 were, briefly, in relation to:

For the Management Accounts of the Estate

(i) Seeking clarification of the items of “professional fees”, “loans” advanced to the Estate, “amount due from third parties”, “amount due to Terra” and why there were two different sets of accounts showing a difference in loan interest charged to the Estate;

The Management Accounts of Terra International

(ii) Seeking clarification of the identities of the directors who received “Directors’ fees” of HKD 1,917,500 from May 2013 –July 2017 and copies of resolutions passed in approving the directors’ fees, and seeking clarification of “Professional fees”, “Loans to Terra”, “Investment in subsidiary”, “Cash at bank”, “Amount due from third parties” and “Amount due from director”;

The Management Accounts of Canterra

(iii) Seeking clarification on “Loss on disposal of investments”, “Professional fees”, “Bonuses”, “Directors’ fees” “Investment management fees”, and “Travel expenses”, “Salaries and wages”, “Changes in non-cash working capital”, “Marketable securities” and “Due from related parties”.

59.  Orlando’s solicitors replied to say that Ps’ requests were outside the scope of the 21.09.17 Order.

60.  However, in my view, as those Management Accounts and/or Financial Statements were unaudited, and Orlando had not exhibited any supporting documents in support of the various items in those accounts, the information and documents sought by Ps were not outside the scope of the 21.09.17 Order.  Further, if Orlando took that they were outside the scope, then upon receipt of the requests from Ps, he could have made application to DHCJ To for clarification as to the scope of the order, but no such step was taken by him, and instead, he chose to produce the documents, albeit said to be under protest.

Orlando’s responses

61.  On 7 February 2018, Orlando did send replies to Ps on a without prejudice basis in relation to the Management Accounts of the Estate and of Terra International, but in relation to the queries in relation to the Management Accounts of Canterra, Orlando’s solicitors said he was “considering the relevant documents” and would reply in due course[34].

62.  It transpired from Orlando’s replies that the “lender” of the loans advanced to the Estate was Orlando himself and interest was charged on the advances which according to Orlando, were made by him on behalf of the Estate for payment of fees and expenses relating to the administration of the Estate.  The interest rate was initially 8% pa which was later adjusted to 8.5% pa, and this resulted in the difference in the interest rates in two sets of accounts.

63.  As for the “director’s fees” in the Management Accounts of Terra International, these were confirmed by Orlando to have been paid to him and he produced written member’s resolutions approving the payment, with Orlando signing the resolutions as sole member of the company (presumably in his capacity as executor of the Estate).

64.  The clarifications/queries sought by Ps in relation to the Management Accounts of Canterra were only responded to by Orlando’s solicitors on 12 April 2018[35]. Again, the “Directors’ Fees” were confirmed to have been paid to Orlando, and approved by board resolutions signed by Orlando as sole director of Canterra.  The “travel expenses” were for Orlando’s trips from Hong Kong to Vancouver to deal with Canterra’s business.  The salary was paid to Orlando’s son Otto Chan (“Otto”) who is resident of Canada and who was appointed as the Executive Vice President of Canterra on 14 June 2017 with a monthly salary of approximately CAD 8,000 per month.

65.  Essentially, the item “Due from related parties” in the Financial Statements of Canterra showed an advance to a director or an amount due from director in the sum of CAD2,885,964 for the 2016 fiscal period of Canterra[36], and this was confirmed to be a loan from Canterra to Orlando himself.  It was said by Orlando’s solicitors that Orlando had used his personal resources to finance the significant professional fees incurred by the Estate and the Terra Unit Trust, and “to fill the hole caused by the hardship to Orlando, it was reasonable for Canterra to lend funds to Orlando for his personal uses”[37].  By 31 July 2017, the total loan (non-interest bearing with no set repayment terms) or the amount due from director had grown to CAD 3,584,954[38] and by 31 March 2018 and grown to CAD4,649,698[39].  It would appear that Orlando borrowed this sum from Canterra interest free and on the other hand, he had made various loans to the Estate, charging the Estate 8 – 8.5% pa interest.

66.  In the meantime, on 3 April 2018, Ps’ solicitors had sent another letter enclosing the comments of BDO on Orlando’s solicitors’ letter of 7 February 2018 on Orlando’s responses to those queries in relation to the Management Accounts of the Estate and of Terra International[40].  Although Orlando’s solicitors had sent a reply requesting Ps to withhold further action for 2 weeks, after 2 months, Orlando still had not provided any response.

67.  To summarise, the following is a table showing chronologically in so far as this court could gather, how the Management Accounts of the Estate and Terra International, and the Financial Statements of Canterra, and supporting documents had been produced by Orlando:

Date	Event/Requests/Order	Production
11.08.2014	In light of the settlement of the S128564 Action, Rosalind’s solicitors wrote to enquire what outstanding matter were preventing distribution  of the Estate
27.10.15	At a mediation conference said to be attended by Orlando and some of the Beneficiaries	Management Accounts of the Estate and of Terra International for the year ended 30 April 2014, and Financial Statements of Canterra for the years ended 30 April 2013, 2014 and 2015 were provided by Orlando[41]
29.10.15		Orlando’s solicitors sent a memorandum dated 04.01.13 to Lily’s and Rosalind’s respective solicitors relating to the tax planning of the distribution of the assets of Canterra (“Original Plan”) and other documents[42]
03.11.15	Rosalind’s solicitors wrote raising queries in relation to (i) tax issues (ii) loans from Orlando to the Estate and Terra Unit Trust totalling about CAD 2m
04.11.15	Rosalind’s solicitors wrote raising queries on the Management Accounts and/or Financial Statement etc[43]
Between 4.11.15-18.11.15	Lily’s solicitors and Rosalind’s solicitors wrote to raise further queries
27.11.15	Rosalind’s solicitors wrote to complain there was no response[44]
01.02.17	Ps commenced 240/17 Action
06.04.17		Orlando produced in his 240/17 1st Affirmation Management Accounts for the Estate and for Terra International, and Financial Statements for Canterra for the years ended 30 April 2015 and 30 April 2016, with no supporting documents
14.09.17		Orlando produced hundreds of pages of supporting financial documents
21.09.17	21.09.17 Order made
12.10.17		In his 240/17 2nd affirmation , Orlando provided Management Accounts (with some supporting documents) of the Estate, Terra International, and Financial Statements of Canterra (without supporting documents)
19.10.17	Rosalind raised numerous queries
15.01.18	Lily raised numerous queries
07.02.18		Orlando produced further information and documents in relation to the Estate and Terra International
03.04.18	Lily raised further queries
12.04.18		Orlando provided some answers and supporting documents in relation to the Management Accounts of Canterra
On about 12 .06.18		Orlando changed solicitors
09.07.18	Present proceedings issued by Ps
09.07.18		By letter , Orlando’s present solicitors  sent some answers to Ps queries and  some documents to Ps in relation to the Management Accounts of the Estate and Terra International
02.10.19		Orlando’s solicitors sent over by letter some 1,000 pages of documents including those of Canterra (Bundle D Documents)
15.10.19		Orlando’s solicitors  sent over by letter some 400 pages of documents including those of Canterra (Bundle D Documents)

68.  To summarise, prior to 9 July 2018, the main outstanding queries included:

Re the Management Accounts of the Estate

(i) There had not been a summary of services provided by Orlando for all the “Professional Fees”, even though a summary of fee notes and amounts had been provided;

(ii) No loan documents/contracts setting out the loan amounts and interest rates for the “Loans advanced to the Estate”, and no loan documents showing the adjustment of loan interest rate from 8% to 8.5% pa.

(iii) As for the “Amount due from third parties”, no confirmation as to whether the amount due from Anita was considered settled and for amounts due from Rosalind and another person, no confirmation as to whether these amounts were still considered owing;

Re the Management Accounts of Terra International

(i) There were outstanding unanswered queries in relation to the “Investment in subsidiary”;

(ii) There were outstanding unanswered queries in relation to the “Decrease in cash at bank”;

(iii) For “Amount due from unknown third parties”, no response as to what Orlando intended to do to recover such amounts;

(iv) Orlando had not answered as to why Terra International was making payments on behalf of the directors for professional services incurred.

Re the Financial Statements of Canterra

(i) The table of comments /queries from BDO sent by Ps’ solicitors to Orlando’s solicitors on 3 April 2018 did not contain any comments on the Financial Statements of Canterra, as those comments from BDO were confined to Orlando’s answers in his solicitors’ letter of 7 February 2018 and not to Orlando’s solicitors’ letter dated 12 April 2018 in which Orlando provided certain answers to Ps’ queries in relation to Canterra.

(ii) Suffice to say at this stage, although there were no comments/queries raised by letter on Orlando’s answers in the letter dated 12 April 2018, Orlando’s answers in that letter have now raised complaints from Ps in relation to his conflict of interest.

69.  In my view, simply producing the unaudited Management Accounts of the Estate and of Terra International and Financial Statements of Canterra[45], without any proper clarification/explanation from Orlando as to the various items set out therein and/or without producing or making available for inspection supporting documents thereof would not discharge an executor’s duty to provide a “true and perfect inventory and account” to the Beneficiaries.  As submitted by Mr Shum, those documents produced by Orlando in his solicitors’ letter of 9 July 2018[46] clearly existed before July 2018, and there was no reason why Orlando did not disclose them prior to July 2018.  In my view, Orlando had failed to render a true and perfect account of the Estate prior to 9 July 2018.

70.  Further, simply sending over by letter a total of some 1,400 pages of documents at almost the eleventh hour was completely unhelpful.  As said earlier, if Orlando were of the view that the documents sought were not within the scope of the 21.09.17 Order, he could have made an application to DHCJ To for clarification.  As for those Bundle D Documents, what would clearly have been more appropriate was to inform Ps that the documents were available for inspection, rather than producing some 5 box files containing 1,400 pages of documents, the contents of which Mr Yin did not even refer to at the hearing.

71.  Having considered all the above, I have come to the view that Orlando had failed to comply in full the 21.09.17 Order within the time limit ordered.

Ground (2) – Misappropriation and Conversion of the Estate to own use

72.  According to Mr Shum’s submissions during the trial, Ps’ complaints fell mainly into 3 categories:

(i) Orlando borrowing from Terra International of about HKD1.2m and from Canterra of about CAD 3.58, interest free with no set repayment terms;

(ii) Orlando making various loans to the Estate charging interests at 8 – 8.5% pa;

(iii) Charging director’s fees and bonuses without authorisation.

73.  As for category (iii) above, it was Orlando’s case that in fact it had always been the arrangement known and agreed to by the Beneficiaries that, the directors of Canterra and/or Terra International, that Michael Geoffrey, and/or Lily were entitled to remuneration and which they had been charging.  However, Rosalind had denied that she had any knowledge, nor had she ever agreed to such arrangement.  Her case was after Madam Chan’s death, the assets of Terra International and Canterra (except the Class B Units in Terra Unit Trust) beneficially belong to the Beneficiaries, and that it should not be up to Orlando and/or Michael to cause payments to be made to themselves and/or anyone as they pleased.

74.  Mr Shum had referred to the following passage from paragraph 52-43 of Williams, Mortimer and Sunnucks: Executors, Administrators and Probate 21^st Ed:

“If a representative is the registered holder of the deceased’s shares in a company and the control that those shares give him enable him to obtain a remunerated post (such as that of director or managing director) in that company, then although the remuneration he receives from the company is for work done in his post for the company, he is prima facie liable to account for it because he obtained it by virtue of the estate’s shareholding[47].”

75.  Mr Shum also referred to In re Madadam. Dallow v Codd, [1946] Ch 73 where it was held that although the remuneration was for services as directors of the company, the opportunity to obtain that remuneration was gained as a result of a discretion vested in the trustees, and that the trustees were liable to account to the trust estate for the sums received by them as remuneration for those services.

76.  On the other hand, Mr Yin had referred the Court to In re Keeler’s Settlement Trusts [1981] 156 which concerned a settlement with a professional charging clause enabling a professional trustee to charge, but there was no power authorising the retention of remuneration received by a trustee appointed as a director of a company in which the trustee had an interest.  It was held, amongst other things, that the court’s inherent jurisdiction, to allow a trustee accountable to the trust fund to retain fees and remuneration received for exceptional effort or skill in the performance of his duties, would extend to the fees and remuneration of a trustee for collateral duties as a director of a company if the effort and skill required of him was over and above that ordinarily required of a director representing the interests of a substantial shareholder.  Mr Yin argued that even though there had not yet been an application taken out by Orlando for the court to allow him to retain directors’ fees and remuneration paid to him by Terra International and/or Canterra, it could not be readily assumed that he would have to account such fees and remuneration.

77.  It would however appear that Orlando was adopting a rather inconsistent attitude, since no doubt it was with his consent as director, that Canterra commenced the S128564 Action in Canada to recover payments made by Canterra to Lily (as executor of Michael’s estate), Lily (in her personal capacity), Geoffrey, and Jennifer, including payments of directors’ fees.

78.  However, I accept Mr Yin’s submission that it is not for this Court to make any finding at this stage as to whether there had been any misappropriation and/or conversion of the Estate to Orlando’s own use, or whether there had been any wrongdoing or misconduct on the part of Orlando in relation to 3 categories of complaints set out above.  Suffice to say, I find Ps justified in seeking further follow up clarification/information in relation to the Management Accounts of the Estate, Terra International, and the Financial Statements of Canterra and that they have raised sufficient concerns that at least, there may be a conflict of interest on the part of Orlando in respect of the 3 categories.

Ground (3) – Dilatory in administering the Estate and distribution

79.  Orlando denied that there was any gross delay on his part in administering the Estate and distribution of assets to the Beneficiaries.  He explained the delay was due to:

(i) Michael’s administration without his consent and knowledge;

(ii) The various litigations mentioned earlier;

(iii) Tax issue

Michael’s administration

80.  In relation to (i) above, as Orlando was co-administrator with Michael since the Grant on 12 June 2003, he cannot simply shift all the blame to Michael relation to the administration of the Estate and the fact was that it was only more than 5 years after the Grant, on 29 October 2008, that he issued proceedings to remove Michael.  There was no explanation as to why it took him 5 years to take any step.  In any event, on his own case, latest by 2013, he had taken over the management and administration of the Estate.  Yet, interim distributions were only made in about April 2019, some 9 months after the present proceedings were issued.

Various litigations

81.  As for (ii) above, the various litigations said to have hampered Orlando in his administration were the litigations referred to earlier.  As said by Rosalind, all the foreign litigations had been either dismissed and/or settled.  The S128564 Action was settled on 21 May 2014. 

82.  Regarding the Hong Kong litigations, HCMP 2642/2011 was stayed in April 2013 and Rosalind complained that it was Orlando who had failed to deal with the costs issue therein.  As for HCMP 1004/2013, this was eventually settled in October 2017 and Orlando’s costs and save for Anita, the other Beneficiaries’ costs were to be paid out of the Estate, to be taxed if not agreed.  Rosalind complained that by the time she filed her 2^nd affidavit herein in January 2019, Orlando still had not presented his bill of costs.  These two actions concerned the Disclaimers and Anita’s share of the assets of the Estate.  There was no reason as to why this should prevent Orlando making at least some partial distribution of the assets to the other Beneficiaries in the meantime.

83.  Anyway, in my view, the various litigations were not good reasons for delay.

Tax issue

84.  In relation to (iii), according to Orlando, all voluntary disclosures to the Canada Revenue Agency and all liabilities of Madam Chan and the Terra Unit Trust for Canadian income tax plus arrear interests were paid by about 3 January 2013[48]. The only outstanding tax matter was in relation to the Canadian tax on the Estate, or on the distributions of the assets of Canterra.

85.  As seen earlier in the table, there was the Original Plan on the tax issues dated 4 January 2013 and provided by Orlando to the Beneficiaries in October 2015.  The Original Plan was prepared by Borden Ladner Gervais LLP (“BLG”), a firm of Canadian lawyers.  In November 2017, further details or a “Tax Planning Proposal” was proposed by BLG for the implementation of the Original Plan and for the distribution of the assets of Canterra (“Tax Plan”)[49]. There was a meeting on 13 November 2017 of some of the Beneficiaries and/or their respective solicitors with Orlando and/or his solicitors, and also Mr Peter Wong of BLG.  

86.  In essence, the Beneficiaries were advised at the time that   with no tax planning and Canterra simply wound up and to pay its assets of approximately CAD 26m to the Terra Unit Trust in the form of a dividend,  there would be CAD 3.9m (@15%), or more, Canadian tax payable (which according to Orlando could be up to about CAD 6.5m), depending on whether the relevant tax authorities would agree that the dividends distributed would benefit from the favourable application of the tax treaty between Canada and Hong Kong. 

87.  The Tax Plan proposed by BLG involved the migration of the Terra Unit Trust from Canterra to a new Canadian company, and subject to the general anti-avoidance rule, there could be no Canadian withholding tax on the removal of approximately CAD 26m from Canterra.  Under the Tax Plan, no tax would be payable but 20% of the fund would have to be held in escrow pending for 6 years in case the authority were to successfully challenge the Tax Plan and tax were to be then payable[50]. The Tax Plan would take 3 – 6 months to complete if agreed by all parties, and would involve CAD 90,000 to CAD 120,000 in legal fees.  

88.  Rosalind did not agree to the Tax Plan as she took the view that the proposal was an unlawful attempt at tax evasion. Further, Cecilia and/or the other Beneficiaries, save Orlando, were not in support of it.  Rosalind took the view that Orlando could simply pay the tax levied by the Canadian Authorities at 15%, ie of about CAD 3.9m.  Orlando took the view that simply paying the tax without adopting the Tax Plan was unacceptable, as it could mean forfeiting CAD 2,535,000 to CAD 4,225,000 of the Estate[51].

89.  However, it would appear that notwithstanding the objection of Rosalind and the lack of support from the other Beneficiaries, Orlando had decided to implement the Tax Plan without further informing the Beneficiaries.  It would in fact appear that prior to Orlando sending over to Lily and Rosalind the Tax Plan in November 2017, a Canadian company Kai Yuen Holding Ltd was incorporated on 12 July 2017 and on 8 March 2018, Orlando’s son Otto became its director[52] (“Kai Yuen”).  It would appear that Kai Yuen became the trustee of the Terra Unit Trust in place of Terra International, and Terra Unit Trust was migrated to Canada on about 1 April 2018.  Originally, the Beneficiaries were advised by Mr Peter Wong of BLG that if the Tax Plan were to be implemented, distributions could be expected in February 2018.  However, it would appear there was a delay, and there were no distributions in February 2018.  Further, although steps were taken to implement the Tax Plan, the objective of the Tax Plan was unintentionally thwarted by changes made on 13 December 2018 to Canadian income tax legislation[53].  It was not clear what reasons there were for the delay.

90.  Anyway, on 14 March 2019, there was a revised tax plan  (“Revised Plan”)[54] sent to Lily and Geoffrey by BLG, which consisted of 5 steps, stating that it should be implemented before 19 March 2019.  In effect, the plan was for the termination and wind-up of the Terra Unit Trust and the Estate.  It was the observations and conclusions of BLG that under the Revised Plan, (i) the Terra Unit Trust and the Estate can be “wrapped-up” quicker; (ii) the non-resident Beneficiaries (other than Orlando) would enjoy an effective Canadian withholding tax rate of only 15%[55]. 

91.  On 24 April 2019, Lily received from BLG a cheque in the amount of CAD 2,210,383, and the amount was said to be net of CAD 516,667 withheld as payment for Lily’s portion of the debt owing by Lily and Geoffrey to Canterra in the amount of CAD 775,000.  It was also said that there would be a 2^nd payment to Lily in the amount of CAD 2,076,998.75 forthcoming[56]. A similar letter was sent to Geoffrey on the same date together with a cheque in the amount of CAD 1,105,182 of his portion of the distribution, said to be net of CAD 258,333 withheld as payment for Geoffrey’s portion of the debt of CAD 775,000[57].

92.  Rosalind received a letter dated 14 June 2019 from Orlando that another cheque of HK$12,047,157.84 (or CAD 2,076,998.75), being capital distribution of the Estate was ready for collection at Alphalink. It would appear that Belinda and Cecilia have also each received a cheque for the same amount.

93.  Rosalind’s solicitors wrote on 20 June 2019 to complain that prior to 14 June 2019, Rosalind was not informed of the intended distribution, and further put on record that her receipt thereof was without prejudice to her rights against Orlando for his breach of duty as executor of the Estate and the present proceedings.  Rosalind’s solicitors also demanded Orlando to provide a statement setting out the various distributions to each of the Beneficiaries[58].

94.  BLG replied to Rosalind on 18 July 2019 to set out the various calculations as to how Rosalind’s share was arrived at (“BLG’s Letter”)[59].

95.  Lily’s solicitors had also put on record on 3 September 2019  Lily’s position on the Revised Plan, namely (i) Orlando should comply with his obligations under the 21.09.17 Order and to provide all information sought by Ps, without which Lily was not able to assess/comment on the Revised Plan; (ii) as the assets of the Estate had been reduced substantially in the region of more than CAD 9 m in less than 7 years without reasonable justifications, it was improper for Orlando to proceed with termination and winding up of the Estate when the full inventory and account had yet to be delivered[60]. As set out in Geoffrey’s 2^nd affirmation filed herein, he and Lily had not cashed the respective cheques delivered by BLG to them.

96.  In short, interim distributions were made to the Beneficiaries first time only in April 2019 after Orlando took over the administration of the Estate.  Even though Orlando decided to proceed with the Tax Plan in 2017, he did not make any interim distributions by February 2018, as originally indicated/advised by Mr Peter Wong of BLG if the Tax Plan were to be proceeded with.

97.  Further, in making the interim distributions to the Beneficiaries, Orlando has made certain deductions, including:

(i) Canadian withholding tax allocable to each Beneficiary;

(ii) the Estate’s obligation of payment of CAD 1m to Anita, of CAD 200,000 for each of the Beneficiaries;

(iii) the Estate’s estimated CAD 5m debt owing to Orlando, of CAD 1m for each of the Beneficiaries;

(iv) A sum withheld for future expenses of CAD 200,000 each.

98.  Of the above, the deduction in (iii) above is subject to serious dispute.

Whether delay justifiable

99.  In any event, the interim distributions were made only about 9 months after the commencement of the present proceedings, and at least 6 years after Orlando’s own case as to when he took over administration.  The S128564 Action was settled in May 2014. Even if the issue on the Disclaimers, or Anita’s entitlement to any distribution was not settled until October 2017, as said earlier, there was no reason why there could not be interim distributions to the other Beneficiaries by early 2018, pending the determination of the validity of the Disclaimers.

100.  Having considered the circumstances, notwithstanding the tax issues, in my view, there had been unjustifiable delay on the part of Orlando in the administration and distribution of the Estate. 

Ground (4) – Loss of mutual trust and confidence

101.  It is Ps’ case that they, Cecilia and Belinda have lost trust and confidence in Orlando in protecting the interests of all the Beneficiaries.  Cecilia and Belinda have written to support removing Orlando as the executor.

102.  Mr Shum had referred to the following passages from Williams, Mortimer and Sunnucks: Executors, Administrators and Probate 21^st Ed:

“…Where there is a conflict between representative and beneficiary, the court might think it proper to remove a representative if it appears clear that the continuance of the representative would be detrimental to the administration of the estate, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the representative. Friction or hostility between representative and beneficiary is not of itself a reason for the removal, but where the hostility is grounded on the mode in which the estate is being administered, it should not be disregarded. A breakdown in relations between the executor and beneficiary is another factor for the court to take into account if it is obstructing the administration of the estate, or even sometimes if it is capable of doing so. The fact that the testator has chosen the executors in question is capable of being relevant, for no other reasons that he may be expected to have had knowledge of the characters, attitudes and relationships involved, although if circumstances have changed radically since the appointment, that would be a countervailing consideration[61].”

103.  I accept that in the present case, the evidence indicates that there is a breakdown in relationship and trust and there is a continuing conflict between Orlando and the other Beneficiaries in that there are serious disputes over the Estate’s alleged debt of at least CAD 5m to Orlando, director’s fees paid to Orlando and salaries paid to Otto.

Other considerations

104.  Mr Yin submitted that in view of the very substantial interim distributions which had already taken place in March 2019 and the expectation that the administration of the Estate could be completed within 6 months, and bearing in mind the very substantial costs likely to be incurred in the form of professional fees if an accountant were to be appointed to take the place of Orlando, it would not be in the interest of the Estate as a whole to replace Orlando at this stage. 

105.  The fact is by the time of the hearing in October 2019, there was no completion of the administration in sight and there are serious disputes over the issues mentioned earlier.  Mr Yin argued that Ps would not be left without a remedy in relation to their allegations of misconduct as they could issue separate proceedings.  However, as pointed out by Mr Shum, if Ps were to commence separate proceedings, they would be suing using their own resources.

Exercise of discretion

106.  As said earlier, in relation to the 3 categories of misconduct alleged by Ps under Ground (2), Ps have raised sufficient concerns that there may be a conflict of interest on the part of Orlando in respect of the matters complained of.  Although appointing independent accountants to act in place of Orlando would be quite expensive, there is substantial work to be done in relation to the investigation of alleged misconduct of Orlando. 

107.  Having considered all the circumstances of this case, even though by now there have been further disclosures and there have been substantial interim distributions made to the Beneficiaries, I am satisfied that the due and proper administration of the Estate and the interests of the Beneficiaries require that Orlando be removed and should be replaced by a professional accountant.

Conclusion

108.  In light of the above, I am prepared to make an order that Orlando be removed as sole executor of the Estate which is only to take effect upon appointment of a professional accountant as executor of the Estate.  Any necessary and consequential vesting orders will be made upon such appointment.

Choice of candidate

109.  I accept Mr Yin’s submission that the candidate (from BDO) named in the originating summons is not a suitable person given his previous involvement in the matter as expert/advisors for Ps.

110.  Ps have at last minute come up with 2 alternative candidates, but Orlando said he should be given time to decide whether to oppose their appointment. 

111.  I am prepared to allow 21 days for Orlando to file an affidavit in response to the Affidavit of Fitness filed by Ms Hung of Ps’ solicitors on 16 October 2019, and leave for Ps to file any affidavit in reply within 14 days thereafter.  The matter is to be dealt with on paper unless otherwise directed.  Parties to lodge their written submissions (limited to 5 pages each) within 14 days after Ps’ reply affidavit, if any, and any written reply submissions (limited to 3 pages each) within 7 days thereafter. 

Costs

112.  In light of what was said earlier, I am of the view that Ps have succeeded with their application for removal.  I am of the view that Orlando should be ordered personally to pay Ps’ costs of this application, on a party and party basis, and that Ps’ common fund costs be paid by the Estate.  Orlando is not allowed to recover his costs from the Estate.