KWOK WING YAN v. KWOK KAM WING (the sole surviving executor of the estate of SHEK YING, deceased)

HCMP 827/2021

[2023] HKCFI 2510

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 827 OF 2021

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JUDGMENT

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INTRODUCTION

1.  By originating summons dated 16 June 2021, the plaintiff seeks an order that the defendant be removed as the executor of the estate of the late Madam Shek Ying (“the deceased”) pursuant to section 33(3) of the Probate and Administration Ordinance, Cap 10, and that the plaintiff be appointed as administrator in his place.  The plaintiff also seeks an order that the defendant do render a true and perfect inventory and account of the assets of the estate with supporting documents pursuant to section 56.

THE BACKGROUND FACTS

2.  The deceased passed away in June 2017, aged 88.

3.  The plaintiff is a granddaughter of the deceased by adoption.  The defendant is the deceased’s son.

The family members

4.  The deceased was married to Mr Kwok Chak Man (“the grandfather”).  They had seven children.  Three of them died at a young age.  The other four children are:

(1)  Kwok Kam Hung (son);

(2)  The defendant (son);

(3)  Kwok Lai Chan (daughter); and

(4)  Kwok Lai Sim (daughter).

5.  According to the plaintiff’s case, Kam Hung and his wife adopted her as their daughter in 2000 in mainland China when she was two years old.  She moved to live in Hong Kong in 2002.  She is now in her mid-20s.  She works as an associate in an asset management firm.

6.  In 2014, Kam Hung and his wife divorced.  In November 2016, Kam Hung passed away.  Under his will, his residuary estate was left to his ex-wife and the plaintiff in equal shares.

7.  I should also introduce here the two sons of the defendant – Kwok Kar Wo and Kwok Kar Yu.  They feature in one of the complaints made by the plaintiff in this application.

The deceased’s will

8.  The deceased made a will dated 28 August 2002. Kam Hung and the defendant were appointed the co-executors of the estate.  As Kam Hung had died before the deceased, the defendant has become the sole executor. 

9.  Under the will, the deceased left the residuary estate to Kam Hung, the defendant, Lai Chan and Lai Sim in equal shares.  The plaintiff says that by operation of a substitution clause of the will, she has substituted Kam Hung and become entitled to 1/4^th of the residuary estate.

10.  In December 2018, the grant of probate was issued to the defendant.

The estate

11.  The estate primarily consists of a residential flat in Shau Kei Wan, Hong Kong (“the flat”).  The flat is about 350 sq ft in size with two bedrooms.  It was valued at $5,500,000 as of January 2020.  The valuation was subsequently updated to be $5,300,000 as of September 2021.

12.  The flat was purchased by the deceased in 1976. It was the family home for the deceased, the grandfather, Kam Hung, the defendant, Lai Chan and Lai Sim.  Kam Hung, the defendant and Lai Sim had subsequently moved out.  The deceased and the grandfather had lived there till they passed away. 

13.  According to the defendant, Lai Chan has been suffering from epilepsy since a young age and she has limited earning capacity.  She has always lived at the flat and took care of the parents as they got old.  She has been residing at the flat for over 40 years.  (She is now in her mid-60s.)

14.  Also according to the defendant, Lai Sim moved back to the flat in late 2017 after suffering from a stroke.  This was so that Lai Chan could take care of her.  Special facilities were installed in the flat to facilitate her rehabilitation.  Lai Sim still lives at the flat.  (She is now in her late 50s.)

15.  The flat is currently subject to a mortgage granted to Public Finance Ltd on 16 July 2009 (“the mortgage”).  A loan in the sum of $1,050,000 was then taken out by the deceased and Kar Wo as co-borrowers (“the loan”) and the mortgage was granted as security.  As of the date of death of the deceased, the outstanding sum under the loan was $561,515.  There is a present dispute as to whether the estate should bear part or all of the outstanding loan.

16.  The defendant registered the probate against the flat at the Lands Registry in February 2019.

THE PLAINTIFF’S COMPLAINTS

17.  In gist, the plaintiff contends that the administration of the estate has reached a stalemate in the past few years. The distribution of the estate is no end in sight.  Mr Ken To, counsel for the plaintiff, highlights the following conduct of the defendant:

(1)  He has resolutely refused to sell the flat.

(2)  He has permitted two beneficiaries, ie Lai Chan and Lai Sim, to reside at the flat rent free.  Mesne profit remains to be recovered by the estate.

(3)  He has insisted on booking the full liability of the loan against the estate when the loan is highly questionable.

18.  In this application, the plaintiff alleges that the defendant was in breach of his fiduciary duties.  There are five heads of complaints.

19.  First, the defendant placed obstacles in the path for the plaintiff to claim her entitlement to the estate by:

(1)  failing to notify her of her beneficial interest;

(2)  withholding crucial information from her, including the contents of the will of the deceased and the issue of the probate; and

(3)  refusing to recognise her legitimate adoption status despite the provision of proper proof.

20.  Second, the defendant failed to properly investigate into the loan which is highly questionable and failed to investigate into his two sons concerning the loan, putting himself in a position of conflict of interest.

21.  Third, the defendant provided preferential treatment to two of the four beneficiaries by permitting them to occupy the flat when he refused to allow the plaintiff to live there.  The defendant acted incompetently by misunderstanding that residuary beneficiaries have a right to occupy the flat.

22.  Fourth, the defendant provided a highly misleading estate account by deflating the assets and inflating the liabilities.  The account was made up as of February 2020 and provided to the defendant in May of the same year (“the first estate account”).  He did so to advance his self-interest as a beneficiary in an attempt to buy out the plaintiff’s ¼ share in the residuary estate.

23.  Fifth, the defendant refused to sell the flat, causing material delay to the administration of the estate.

24.  In the circumstances, the plaintiff says that the defendant should be removed as the executor.  She puts forward herself as a replacement administrator.  Given the modest size of the estate, it is not considered proper to appoint a third party professional administrator.

CORRESPONDENCE BETWEEN THE PARTIES

25.  In order to determine whether the plaintiff’s complaints are made out, it is necessary to examine the communication between her and the defendant in some detail.  There are relevantly four time periods:

(1)  From when the deceased passed away in June 2017 to December 2019;

(2)  From December 2019 to 18 May 2020;

(3)  After 18 May 2020 and up to before 25 February 2021; and

(4)  From 25 February 2021 to the commencement of the present proceedings in June 2021.

From when the deceased passed away in June 2017 to December 2019

26.  After the deceased passed away in June 2017 and up to December 2019, there was not much communication between the plaintiff and the defendant. 

27.  In fact, it is one of the plaintiff’s complaints that the defendant had failed to inform her that she is a beneficiary of the estate and failed to provide a copy of the will to her when he ought to have done so.  Fortunately, her father, Kam Hung, before he passed away, had told her that she would receive his share in the estate. 

28.  It will be recalled that the defendant obtained the grant of probate in December 2018.  However, the plaintiff says that he chose not to inform her of this.  It was only after she carried out a land search of the flat in February 2019 that she found out about the probate and the contents of the will.

29.  In her affidavits, the plaintiff recounted two occasions on which she communicated with the defendant and relied on them, among other things, to say that the defendant was withholding crucial information from her.  That said, I should note here that in his written submissions, Mr To does not appear to place much reliance on this piece of evidence to such effect.

30.  The first occasion was a telephone conversation in 2018.  In this conversation, the plaintiff asked about the deceased’s estate and also asked for a copy of the will.  She also asked the defendant if she could move into the flat.  The defendant replied that the two aunts, Lai Chan and Lai Sim, were living there and he would get back to the plaintiff on this. However, he never did after this conversation.

31.  The second occasion was when the plaintiff sent a WhatsApp message to the defendant in November 2019 asking him to meet to deal with some matters concerning Kam Hung’s stele.  But the defendant replied that he was busy and wanted to schedule to meet on a day when he was free.

32.  For this period, the defendant’s evidence is that he was himself hospitalised several times between October 2017 and May 2018.  It was only upon his recovery that he had the time to deal with the estate.

33.  He denies that he was trying to conceal the probate and the will from the plaintiff.

34.  He also recalls the two occasions of communication referred to by the plaintiff during this period. 

35.  In the telephone conversation in 2018, the plaintiff said that she would like to move into the flat as she was then working as a summer intern in Central.  But the defendant says that she did not ask about the will or the estate.  He explained to her that the flat was small and the two aunts were already living there.  He asked for her understanding. According to the defendant’s recollection, the plaintiff seemed to understand. He was under the impression that she accepted the arrangement out of respect to the two aunts.  In any event, the plaintiff must have realised that it would be unrealistic and awkward for her to move in to live with the two aunts, who were not close to her.

36.  As for the WhatsApp message in November 2019, the defendant says it was about Kam Hung’s stele.  The plaintiff never raised the topic of the estate.

37.  The next time when the two communicated with each other again was in December 2019.

From December 2019 to 18 May 2020

38.  The period of about five months from December 2019 to 18 May 2020 is marked by a chain of correspondence exchanged between the parties’ solicitors.  The plaintiff was then represented by Messrs Chan Ching Man & Co (“CCM”) and the defendant was and is still represented by Messrs Iu, Lai & Li (“ILL”).  There were about a dozen letters exchanged between the two firms.

39.  By letter dated 16 December 2019, the plaintiff claimed that she was the legally adopted daughter of Kam Hung.  The letter stated that copies of her mainland adoption documents, namely the adoption registration (收養登記証) and the adoption notarial certificate (收養公証書), were enclosed. The plaintiff demanded that the ¼ share in the flat be assented to her within seven days or, alternatively, the defendant do within the same deadline provide a timetable for administering the estate and to account for the estate, in particular in respect of the deceased’s safe deposit box.

40.  By letter dated 23 December 2019, the defendant asked for copies of documents, including “the alleged certificate of adoption”.

41.  Copies of the adoption documents were then sent by CCM under cover of a letter dated 27 December 2019.  In that letter, CCM extended the deadline to another seven days.

42.  On 3 January 2020, ILL wrote back saying that more time was required by the defendant to consider the matter due to the intervening holidays.

43.  A substantive reply dated 23 January 2020 was then sent by ILL.  The reply sought to address the issue of the adoption status of the plaintiff.  ILL referred to sections 15(2)(a) and 17 of the Adoption Ordinance, Cap 290, and expressed the view that for the plaintiff to be a beneficiary under the will, she must have been adopted by Kam Hung in accordance with mainland Chinese law.  It was further pointed out that the burden was on her to prove that her adoption was legally valid in 2000, although it was accepted that the adoption certificate was prima facie good evidence of the adoption.

44.  At the end of the reply, ILL asked to see the original of the adoption certificate and requested the plaintiff to confirm and prove if necessary that all other requirements for a valid legal adoption had been fulfilled.  They wrote:

“We note that there are various legal requirements for a valid adoption in PRC under the Adoption Law of the PRC. There is no particular provision in PRC law to say that a PRC notary certificate and/or adoption certificate is conclusive. On the notary certificate, it is just a piece of hearsay evidence. On the adoption certificate, we accept that it is prima facie good evidence of adoption. However, to verify the position, we would like to have inspection of the original of the Adoption Certificate. … In addition, as said above, there are other legal requirements. We also want your client to confirm and prove if necessary that all the other requirements for a valid legal adoption in PRC had been fulfilled.”

45.  By letter dated 11 February 2020, CCM invited ILL to inspect the originals of some of the adoption documents at their office.

46.  What followed was an important letter from ILL dated 24 February 2020. 

47.  First, it was said that due to COVID, instead of inspecting the originals, they would ask for certified copies of the adoption documents. 

48.  Second, more crucially, ILL stated that assuming that the plaintiff had proved the validity of her adoption under PRC law and that she was entitled to ¼ share of the estate, as the other three beneficiaries all wanted to keep the flat to be used as the residence of Lai Chan and Lai Sim, the plaintiff was invited to consider selling her ¼ share to the other beneficiaries.

49.  Also mentioned in the letter were the following:

(1)  ILL referred to the valuation which they had obtained.  The flat was valued at $5,500,000 as of January 2020 and the ¼ share was valued at $1,000,000, if with vacant possession and free from all legal encumbrances.

(2)  The flat was subject to the mortgage, with the outstanding sum of $561,515 as of the date of death of the deceased.

(3)  ILL said that the defendant was in the course of preparing an estate account.

50.  CCM replied by letter dated 5 March 2020. Certified copies of the adoption documents were enclosed.  Further, it was stated that the plaintiff was “willing to explore” the option of selling her ¼ share to the defendant, Lai Chan and Lai Sim.  CCM asked ILL to confirm that they had instructions to act for the two aunts.  They also said that the plaintiff would be prepared to obtain a valuation report of her own for the purpose of further negotiation.

51.  In this letter, the following matters were also raised:

(1)  An inventory list of the safe deposit box was requested.

(2)  It was known to the plaintiff that the loan was taken out entirely for Kar Wo to study in Taiwan and for his personal use and that he should bear half if not all of the mortgage repayments.  CCM asked a number of questions concerning the loan and the mortgage.

(3)  It was stated that the defendant, Lai Chan and Lai Sim “had excluded and/or refused [the plaintiff] … to reside in the Property” and that she was “forced out of the Property”.  The defendant was requested to take into account the ¼ share of the rental income for the flat starting from the date of death of the deceased of about $16,000 to $17,000 per month.

52.  ILL sent two letters of reply dated 16 March 2020 and 14 April 2020.  A copy of the valuation report was enclosed with the former.  Materially for present purposes, the reply was as follows:

(1)  The deceased had no safe deposit box.

(2)  ILL denied that the loan was taken out for the alleged purpose.  They wrote that the loan was deposited into the bank account of the deceased and “how she disposed of the same was entirely a matter for her”.  Kar Wo never studied in Taiwan.  He acted as a guarantor, rather than a borrower, for the loan which would not have been granted to the deceased due to her old age.

(3)  ILL denied that the plaintiff had been excluded from or forced out of the flat.  It was said that the two aunts used to live in the flat to take care of the deceased on a rent-free basis and that “the present arrangement is reasonable to preserve the status quo with a view to maintaining an amicable relationship between the beneficiaries”.

53.  By letter dated 8 May 2020, CCM reiterated that there was sufficient proof of the validity of the plaintiff’s adoption.  They also repeated the allegation that the plaintiff had been excluded from the flat. The defendant was demanded to allow the plaintiff as well as the two aunts to take possession of the flat before vesting pursuant to section 70 of the Probate and Administration Ordinance.  At the end of the letter, CCM demanded that the defendant should confirm the plaintiff as one of the beneficiaries and to distribute the estate pursuant to the will.

54.  The last letter sent during this time period is the letter dated 18 May 2020 from ILL.  This is a material letter in the defendant’s case.  Some of the previous assertions were repeated, including the burden of proof in relation to the adoption issue and that the plaintiff had not been excluded from the flat etc.  I should also highlight the following matters raised in the letter.

55.  First, ILL suggested that a third party valuer would have to be jointly appointed if parties could not agree on the valuation of the flat.  They would nominate Savills and if the plaintiff agreed, they would write to enquire on their charges.

56.  Second, ILL enclosed a copy of a draft estate account made up to February 2020.  This is the first estate account which I refer to in para 22 above.  According to this draft, the ¼ share in the estate was stated to be $580,000.  As regards the flat, it was valued at $4,000,000, the figure being put in square brackets in the account.  The description read as follows:

“

Flat B on 15th Floor, Tung Fai Building, No.159 Shau Kei Wan Main Street East, Hong Kong (the “Property”) (valuation by Dudley Surveyors @20 Jan 2020 if free from encumbrances and with vacant possession) but discounted subject to occupation by the Daughters

[4,000.000.00]                      ”

57.  Third, ILL stated that the copying charges of the supporting documents of the account were $151 and that the same would be forwarded to CCM upon payment.  Originals could also be inspected if the plaintiff so wished.

After 18 May 2020 and up to before 25 February 2021

58.  There was no reply from the plaintiff to ILL’s letter dated 18 May 2020.  

59.  There then followed a period of more than nine months, that is after 18 May 2020 and up to before 25 February 2021, when no correspondence was exchanged between the plaintiff and the defendant.

60.  In her affidavit, the plaintiff explained her silence as follows:

“After receipt of ILL’s letter to CCM dated 18.05.2020 …, I did not instruct CCM to further respond because the back-and-forth correspondence with Uncle through the lawyers was not really going anywhere and I had genuine difficulties in affording the legal costs.”

61.  The defendant, however, saw the plaintiff’s inaction differently.  In his affirmation, he said:

“Oddly, there was no response at all from P to ILL’s 18/5/2020 Letter. After being provided with the Draft Estate Account [ie the first estate account], P stopped responding for the next 9 months or so. The next time I heard from P was already on 5 February 2021 when ILL received a pre-action letter from P’s current solicitors [Hobson & Ma] …”

62.  The defendant further said that the distribution of the estate was not proceeded with because the other three beneficiaries were led by the plaintiff to believe that subject to the negotiation of an agreeable price, the plaintiff was willing to sell her ¼ share and that once the price was agreed, that would be the end of the matter.  In fact, the defendant said that he and the two aunts had been waiting for the plaintiff to give her comments on the first estate account.

From 25 February 2021 to the commencement of the proceedings in June 2021

63.  After the nine-month hiatus, the communication resumed with a letter dated 25 February 2021 from the plaintiff’s new solicitors, Messrs Hobson & Ma (“HM”).  By this time, the plaintiff had been granted legal aid. 

64.  The letter can properly be referred to as a pre-action letter.  HM set out the plaintiff’s complaints against the defendant in the administration of the estate.  They included the following:

(1)  More than three years had passed after the deceased passed away and yet the defendant had not made any distribution of the estate.

(2)  The defendant had made use of the adoption issue to refuse or challenge the plaintiff’s entitlement as a beneficiary.

(3)  The two aunts had been living in the flat without paying any rent, thereby causing loss to the estate.

(4)  The defendant had failed to discharge the mortgage.  It was the plaintiff’s instruction that the defendant had used the proceeds of the loan “in his personal business”.  The defendant was thus in a position of serious conflict as he was personally benefiting from the estate by failing to discharge the mortgage.

(5)  HM were also instructed that the defendant had “refused and/or failed to properly account for the administration of the Estate to [the plaintiff] despite her repeated requests”.

65.  Based on the above, HM concluded that the defendant had failed to discharge his duties as executor, had been in breach of his fiduciary duty, and had caused loss to the estate.  He was asked to resign and be replaced by the plaintiff.  If he was not prepared to do so, HM had instructions to commence proceedings to remove him.

66.  It must be noted that there was no mention of the first estate account at all in the pre-action letter. 

67.  More correspondence followed.  ILL denied the allegations made against the defendant.  It is unnecessary to set out the contents save to highlight the following:

(1)  In their reply letter dated 10 March 2021, ILL reminded HM that the first estate account had in fact been sent to CCM on 18 May 2020 but there was no reply from the plaintiff or CCM for the following nine months.

(2)  By letter dated 28 April 2021, HM requested copies of the supporting documents of the first estate account.

(3)  Copies were then provided by ILL under cover of their letter dated 12 May 2021.

THE PRESENT PROCEEDINGS

68.  In June 2021, the plaintiff commenced the present proceedings. 

69.  In the supporting affidavit, one of the main complaints made by the plaintiff was about the first estate account.  She described the account as “dubious” and the supporting documents “problematic” and the section on this issue ran to about six pages.

70.  In his opposing affirmation, the defendant’s position concerning the mortgage and the issue of whether Lai Chan and Lai Sim could continue to live in the flat without paying rent remained the same. 

71.  At the same time, he stressed in his affirmation that the first estate account had been made available to the plaintiff in “draft” form.  In fact, he had been waiting for comments and feedback from the plaintiff ever since the account was sent to her, through CCM, in May 2020. The account would directly affect the price payable for the acquisition by the other beneficiaries of the plaintiff’s ¼ share.  Yet, no observations were ever provided until the plaintiff filed her affidavit in June 2021, more than a year later. 

72.  In any event, he sought to address the points made by the plaintiff.  He submitted a revised estate account made up to September 2021 (“the revised estate account”).  The ¼ share in the estate as of that date was revised upwards to $1.06 million. 

73.  The change in the value was primarily due to two matters.  First, the flat was valued at $5,300,000, as opposed to $4,000,000.  Second, a number of expenditure items were taken out, which included, eg, the hospital and funeral expenses for the grandfather and a sum reserved for the disposition of the cremated ashes of the deceased and the grandfather.  Those sums, which amounted to over $750,000, were put in the first estate account as it was the deceased’s instructions that the expenses should be borne by her four children in equal shares in discharge of their duties of filial piety. 

74.  The defendant now accepts that they should not be included in the estate account and is therefore prepared to take them out. However, in his affirmation, he stressed that the plaintiff had never taken issue with the first estate account until she filed her affidavit in these proceedings.  Hence the defendant had had no chance to know her views on these matters.

75.  Also, in the opposing affirmation, the defendant confirmed that he, Lai Chan and Lai Sim would not dispute the validity of the plaintiff’s adoption in the mainland.

76.  I should add that shortly after the defendant filed his opposing affirmation, ILL wrote to HM by letter dated 6 October 2021 stating the following:

(1)  All the plaintiff’s queries and concerns raised in her affidavit had been fully addressed.

(2)  The defendant confirmed that he would be prepared to distribute the estate in accordance with his position as stated in the opposing affirmation.

(3)  If the plaintiff had further queries, parties should engage in a mediation session to iron out all the differences.

(4)  The plaintiff was invited to attend mediation before incurring further legal costs for preparing an affirmation in reply.

77.  Further, by letter dated 26 October 2021, the defendant, through HM, made an open offer to the plaintiff.  He offered, among other things, to distribute the estate in accordance with the revised estate account and to pay to the plaintiff her ¼ share in the net residuary estate in the form of a lump sum payment.  The open offer would lapse when the plaintiff filed her affidavit in reply.

78.  The offer was not taken up.  The plaintiff proceeded to file her reply affidavit.

79.  Furthermore, at the hearing before me, I invited the parties to try to settle the matter, as the disputes should not drag on disproportionately given the modest size of the estate. 

80.  The defendant, through his counsel Mr Jeremy Kwong, made an open offer in court.  The material terms were that the defendant would sell the flat by engaging estate agents within two weeks and the liability of the mortgage loan in the sum of $561,515 would be excluded from the estate account.

81.  The open offer was rejected by the plaintiff.

LEGAL PRINCIPLES

82.  It is well established that the court has a wide discretion under section 33(3) of the Ordinance to remove an executor or administrator.  But it has to be satisfied that the removal is in the interest of the due and proper administration of the estate and the interests of the persons beneficially entitled to it: Re Estate of Lau Yik Yam [2010] 3 HKLRD 700 at para 7. 

83.  The main guide must be the welfare of the beneficiaries: Re Steel, Angus v Emmott [2010] EWHC 154 (Ch) at para 107.

84.  The court has to consider all the circumstances of the case and each case will depend on its own facts.  The court may have regard to matters such as the size of the estate, the nature of the assets, the background, education, training and experience of the remaining and substituted personal representative.  The testator’s choice of executors may be a relevant consideration: see, eg, Wong Tat Lun Eddie v Wong Chi Ho Jimmy HCMP 2391/2013, 21 October 2014 at paras 83 to 84.

85.  In that case, Deputy High Court Judge B Chu (as she then was) said:

“It has also been said that the court must always be very cautious and sparing in the exercise of the power to remove an executor or administrator, and that there has been reluctance to make such an order in the case of an incumbent executor or administrator who wishes to carry on, without allowing that incumbent an opportunity to repair or remedy any defects and progress promptly with due administration. Further, the fact that administration of the estate could have been done better is not of itself sufficient ground for the court to remove an executor.” (footnote omitted)

86.  It is also well established that not every mistake, neglect of duty or inaccuracy of conduct will cause a removal of the executor.  As Lord Blackburn said in Letterstedt v Broers (1884) 9 App Cas 371 at 386 (cited in The Thomas and Agnel Carvel Foundation v Carvel [2007] EWHC 1314 (Ch); [2008] Ch 395 at para 44 and in Re Steel at para 107):

“the acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.”

DISCUSSION

87.  I shall deal with the five complaints one by one.

The first complaint

88.  The first complaint is that the defendant placed obstacles in the path for the plaintiff to claim her entitlement to the estate. Mr To submits that it starts off with the defendant withholding information concerning the estate from her and moved on to the denial of her entitlement.

89.  The first complaint can be quickly disposed of. In my view, there is no merit in this complaint. 

90.  The plaintiff relied on the two occasions of contact between her and the defendant during the period from June 2017 to December 2019 to show that the defendant was withholding information about the probate and the will from her.  Precisely what was said on those occasions, in particular in the telephone conversation in 2018, is open to argument and the different versions put forward by the parties cannot be definitively resolved here. 

91.  Mr Kwong submits that it may be said that there had been delay in the first year after the issue of the probate for the defendant to contact the plaintiff.  However, this by itself cannot be elevated into an allegation that the defendant had concealed the probate from the plaintiff.  I agree.  Delay and concealment are entirely different matters. The evidence before me shows that the defendant had made no progress in informing the plaintiff of the probate and the will.  But it does not go to show that he was actively concealing the information from her.  There is simply no sufficient evidence to that effect.

92.  Furthermore, the plaintiff’s submission that the defendant had denied the plaintiff’s entitlement is simply not borne out by the contemporaneous correspondence, especially those exchanged from December 2019 to May 2020.

93.  The defendant accepts that back in 2000, the family, including himself, learnt that Kam Hung had adopted a daughter in the mainland and that in around 2002, the plaintiff came to Hong Kong to live with Kam Hung.  However, he had no knowledge of the actual circumstances surrounding her adoption.  He never asked Kam Hung about it.

94.  Notwithstanding this background fact, Mr Kwong submits that by raising the queries with CCM and asking for proof in support of the validity of the adoption, the defendant had not acted unreasonably.  He contends that the defendant, as executor, owes a duty towards the beneficiaries to ascertain whether the plaintiff was indeed a residuary legatee of the estate. 

95.  In my view, in the correspondence, ILL had properly referred to the relevant legislation in Hong Kong and correctly analysed the burden of proof on the adoption issue.  After copies of the adoption documents were provided to ILL, they stated, by letter dated 23 January 2020, that the adoption certificate was “prima facie good evidence of adoption”.  Reasonably, they then followed up with the request for inspection of originals and, subsequently, certified copies. 

96.  By letter dated 24 February 2020, the defendant, through ILL, was inviting the plaintiff to consider selling her ¼ interest on the assumption that she was a beneficiary under the will.  Mr Kwong submits that this could only have been on the basis that none of the beneficiaries intended to take issue with the validity of the adoption.

97.  I agree with Mr Kwong’s submission.  It was reasonable for ILL to raise their queries concerning the adoption and ask for proof.  I see nothing wrong in their approach in this regard.  At the same time, it is plain from the subsequent correspondence that the issue of adoption had not presented any obstacle for parties to start negotiation about the buy-out.  In fact, the defendant attempted to agree with the plaintiff on the valuation of the flat.  See para 55 above. 

98.  Mr To submits that the defendant’s true intention was to block the plaintiff from claiming her legitimate entitlement to the estate, by creating difficulties for her.  I reject that submission.  It is not borne out by, and is in fact inconsistent with, the contemporaneous correspondence.  

The second complaint

99.  The second complaint is that the defendant failed to properly investigate into the loan which is highly questionable and failed to investigate his two sons concerning the loan, putting himself in a position of conflict of interest. 

100.  It is the plaintiff’s evidence that enquiries had been made with Public Finance Ltd.  It was revealed that the loan proceeds were not paid into the bank account of the deceased and/or Kar Wo and it was Kar Wo who made repayments of the loan, not the deceased.  I should note here that in the evidence there was no formal reply from Public Finance Ltd but just a few scribbled handwritten notes by an unknown writer.

101.  The defendant’s stance is that as stated in ILL’s letter dated 14 April 2020 (see para 52(2) above).  Furthermore, Mr Kwong submits that under the loan and mortgage documents, the deceased was under a joint and several liability to repay the loan.  Hence, even though there are two co-borrowers of the loan, the estate is liable for the entire outstanding amount.

102.  This is not the occasion for me to make factual findings on the circumstances in which the loan was taken out and the mortgage was granted.  The questions before me now are whether the defendant was in breach of his duty by failing to investigate into the loan, which Mr To describes as “highly questionable”, and whether he is in a conflict position to investigate as the matter concerns one or both of his sons.

103.  In my view, there is no sufficient evidential basis to properly characterise the loan as “highly questionable”. 

104.  The plaintiff has put forward three different versions about the loan.  First, in CCM’s letter dated 5 March 2020, it was said that “[i]t was known” to the plaintiff that the loan was taken out entirely for Kar Wo to study in Taiwan.  See para 51(2) above.  Second, in HM’s letter dated 25 February 2021, it was stated that it was the plaintiff’s instruction that the defendant had used the proceeds of the loan “in his personal business”.  See para 64(4) above.  Third, in her affidavit, the plaintiff said that it was her understanding that the money borrowed was used for the benefit of Kar Yu and to pay for his tuition fees in Taiwan.

105.  These are conflicting versions of facts.  Throughout the correspondence and in the evidence filed in these proceedings, the plaintiff has never sought to explain the basis of her understanding and her source of knowledge about the loan.  She has also not sought to explain why she has been giving three conflicting versions on this matter.  Hence, in my view, no weight can possibly be given to her alleged (and varied) understanding.

106.  Prima facie, there is nothing to suggest that the loan and the mortgage are “highly questionable”.  I note here that the loan was taken out eight years before the deceased died.

107.  That said, however, how the defendant has so far dealt with the loan is not without problem.  His stance is that the deceased had taken out the loan out of her own will and Kar Wo, though named as a co-borrower, acted as a guarantor for the loan which would not have been granted to the deceased due to her old age. 

108.  The defendant so far has not stated how he got hold of the above information.  One would expect that he is in a position to make enquiry (or further enquiry) directly with Kar Wo, his son, who must have some first-hand knowledge of the loan as he was a co-borrower.  The defendant ought to be able to give more specific information in this regard so that he can ascertain and verify the extent of the estate’s liability under the loan.

109.  In this regard, I do not accept Mr Kwong’s submission that the estate must necessarily bear the entire liability of the loan just because the deceased was under a joint and several liability to repay.  As a matter of analysis, the joint and several liability of the co-borrowers means that each of them is liable for the entire sum vis-à-vis the lender.  The lender is contractually entitled to call on either one of them to repay the whole loan.  However, as between the co-borrowers themselves, I would think that in the absence of any agreement between them, the prima facie position is that each should bear half of the liability under the loan.

110.  Separately, on the issue of conflict, Mr Kwong submits that the conflict of interest principle would not be engaged where the executor was put in the position of conflict by the testator: Sargeant v National Westminster Bank plc (1991) 61 P & CR 518 at 519; Edge v Pensions Ombudsman [1998] Ch 512 at 539D-541B. 

111.  Furthermore, Mr Kwong argues that where family members act as executors, the potential conflict of interest would not be such as to require their removal as executors, because the deceased can be expected to have known of relationships and circumstances existing during his lifetime which might create or lead to any expectation of any such conflict of interest and that there must often be a possibility of similar conflicts of interest where family members are executors, relying on Tsaknis as Executor and Trustee of the Estate of Geoffrey Douglas Roland Lilburne [2010] WASC 152 para 61; Kershaw v Micklethwaite [2010] EWHC 506 (Ch) at para 26.

112.  I agree with Mr Kwong’s submission.  In the present case, if any conflict does arise because the defendant may be required to investigate his two sons, this is a conflict which was imposed on him by the deceased and in this family context, such conflict does not by itself require the removal of the defendant as an executor.

113.  However, it remains to be the case that when it comes to verifying the extent of the estate’s liability under the loan, the defendant does not appear to have fully investigated the matter or, if he has done so, he has not been entirely forthcoming about the results of his investigation.  This is a factor which I should take into account in the present removal application.

The third complaint

114.  The third complaint is that the defendant provided preferential treatment to Lai Chan and Lai Sim by permitting them to occupy the flat rent free and by refusing to allow the plaintiff to live there.

115.  Mr To submits that as residuary beneficiaries of the estate, Lai Chan and Lai Sim do not have any interests in the flat which enable them to occupy it.  A beneficiary of a residuary estate has no interest in the assets of the estate until the completion of the administration and distribution.  What he has is an interest in ensuring the proper administration of the estate: Pacific Harbor Advisors Pte Ltd v Winson Federal Ltd HCMP 1285/2015, 21 August 2015, para 28.2.  I accept the submission. 

116.  It follows that the defendant was wrong when he said in his affirmation that Lai Chan and Lai Sim are entitled to continue to live in the flat rent free because they are beneficiaries of the will.  The defendant has made a mistake there.

117.  Mr Kwong’s reply to the complaint is that there is nothing unreasonable for the defendant to allow her two sisters to stay at the flat rent free without at the same time allowing the plaintiff to move in.

118.  First, it would be unrealistic to have the three of them live together at the flat because of its size and because of the relationship between the plaintiff and the two aunts.

119.  Second, the flat has all along been the home of the Kwok family.  Lai Chan has for most of her life been living there.  Lai Sim moved in in late 2017 after she suffered from a stroke.  To allow them to continue to stay is simply to preserve the status quo pending the administration of the estate.

120.  Third, Mr Kwong submits that the defendant’s duty under the will is to convert the flat to cash, ie to sell it, for distribution in four equal shares.  Where the intention was to sell the flat, the defendant had no duty to rent it out for the short period of time pending sale. 

121.  Here, as shown in the correspondence exchanged between December 2019 and May 2020, three of the beneficiaries were negotiating with the plaintiff to buy out her ¼ share.  If they reached an agreement, that would be the end of the matter and Lai Chan and Lai Sim would not have to move out. That was the original intention of the buy-out proposal.  In the circumstances, there would be no point in renting it out pending the negotiations.  In the meantime, to allow the two sisters to continue living at the flat rent free, Mr Kwong submits, was simply a matter of preserving the status quo.

122.  I agree with Mr Kwong that the defendant’s stance to allow Lai Chan and Lai Sim to stay at the flat rent free must be viewed in its proper context.  It has been their family home for a long time.  At that time, negotiations for buy-out were under way.  A valuation report was obtained.  The figures were put forward in the first estate account for consideration by the plaintiff.  There was then a period of silence on the latter’s part of more than nine months after ILL’s letter dated 18 May 2020. Regardless of the real reason why the plaintiff had remained silent, the defendant was reasonably led to believe that the buy-out might still proceed. In my view, it was therefore reasonable for him to wait and to keep the status quo in the meantime.

123.  This was then followed by the plaintiff’s pre-action letter and the commencement of these proceedings.  Subsequent to that, the defendant proposed mediation and settlement in October 2021.

124.  In the overall context, I do not find that the defendant had acted unreasonably in seeking to preserve the status quo pending the administration of the estate.  The third complaint is not made out.

The fourth complaint

125.  The fourth complaint is that the defendant provided a highly misleading account in the form of the first estate account in which the size of the assets was deflated and the expenses and liabilities were inflated.  He did so to advance his self-interest as a beneficiary to buy out the plaintiff’s share.

126.  It will be recalled that the defendant submitted the revised estate account in his opposing affirmation, having taken into account the concerns and queries of the plaintiff.

127.  Mr To submits that the revised set of account is basically a reflection of the defendant’s admission to the plaintiff’s case (save for the issue of the loan).  Significantly, the flat is now valued at $5,300,000, instead of $4,000,000.  Further, two items of expenditures amounting to over $750,000 are now removed.  This goes to support the plaintiff’s contention that the defendant had in the first estate account inflated the liabilities and deflated the assets in order to advance his self-interest in the proposed buy-out.

128.  The defendant of course accepts that he has a duty to render proper accounts to the beneficiaries.  And it cannot be denied that the first estate account contains mistakes or inaccuracies. 

(1)  The flat was stated to be worth “[4,000,000.00]” and the value was “discounted subject to occupation by the Daughters”.  On the face of it, that valuation was not understood. 

(2)  That said, however, the figure was apparently derived from the valuation report compiled by the defendant’s surveyor.  The report was expressly referred to in the account.  On page 4 of that report, the flat as a whole was valued at $5,500,000 and a ¼ share was valued at $1,000,000.

(3)  A copy of the report had previously been sent to the plaintiff. 

(4)  The valuation has now been updated to $5,300,000. 

(5)  As to the two items of expenditure, the defendant has given an explanation as to why they had been included in the first estate account in the first place.  See para 73 above.

129.  In this regard, it ought to be noted that the first estate account was expressly stated to be in “draft” form, with the items enumerated in a clear manner.  The plaintiff subsequently raised her queries and concerns over the items.  In the end, the defendant revised the account to its present form. 

130.  While there were mistakes and inaccuracies in the first estate account, I do not agree with Mr To’s submission that the account was done in such a way by the defendant so as to advance his self-interest.  It was in fact done in a transparent manner whereby the plaintiff was able to cross-check the figures against the supporting documents.  In my view, I do not consider that the existence of the mistakes and inaccuracies is such as to justify the removal of the defendant as executor.

The fifth complaint

131.  The fifth complaint is that the defendant refused to sell the flat, causing material delay to the administration of the estate.

132.  Mr To submits that in light of the way the defendant manipulated the assets and liabilities of the estate, the plaintiff was no longer interested in selling her ¼ share in the estate.

133.  However, if that had been her stance, it is difficult to understand why she could not have made it plain to the defendant. ILL sent the first estate account to CCM by letter dated 18 May 2020.  She explained her subsequent silence by saying that she thought the back-and-forth correspondence through lawyers was not really going anywhere and she had genuine difficulties in affording the legal costs.  This may well be her explanation. 

134.  However, from the perspective of the defendant, I do not think it was unreasonable for him to harbour under the impression that a buy-out was still possible and hence not to proceed with the sale of the flat in the meantime. 

135.  Separately, since the commencement of the present proceedings, the defendant has made two open offers in an attempt to complete the administration of the estate. 

136.  I consider that it is factually wrong to say that the defendant has been refusing to sell the flat.  I reject the plaintiff’s submission to that effect. 

Should the defendant be removed as executor?

137.  To sum up, the first complaint is not made out. In respect of the second complaint, on the basis of the materials before me, I do not agree that the loan can be said to be highly questionable.  However, I am of the view the that the defendant has not demonstrated that he has fully investigated the precise extent of the estate’s liability under the loan. Further action is required in this regard.  The third complaint is not made out.  As for the fourth complaint, there were mistakes and inaccuracies in the first estate account.  However, I do not find that the account was done in such a way to mislead or to advance the defendant’s self-interest.  The fifth complaint is not made out.

138.  On the whole, this is a case where the defendant has made mistakes in the discharge of his duty as executor but they were not made out of self-interest as alleged by the plaintiff.  Throughout his correspondence with the plaintiff and in the course of these proceedings, the defendant has shown a willingness to remedy his mistakes and a willingness to move on with the administration of the estate.  The revised estate account was prepared.  Two open offers were made.

139.  The estate is a simple one and its size is modest.  The remaining steps primarily consist of selling the flat and investigating the extent of the estate’s liability under the loan.

140.  Applying the legal principles set out above, the circumstances do not warrant the removal of the defendant as executor.  In the interest of a proper and efficient administration of the estate, the defendant should be allowed to stay on and complete the job. 

CONCLUSION

141.  For the above reasons, I dismiss the plaintiff’s application to remove the defendant as executor.  I would however direct that the defendant do make an affirmation exhibiting a true and perfect inventory and account of the assets of the estate within 28 days from the date of this judgment, after making proper investigation into the extent of the liability of the estate under the loan.

142.  I make a costs order nisi that the plaintiff do pay the costs of the originating summons, including any reserved costs, to the defendant and that the plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.