KU CAMEY v. KU SCARLET, the executrix of the estate of CHEN ELSIE, deceased AND ANOTHER

HCA 1482/2022

[2024] HKCFI 3316

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1482 OF 2022

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BETWEEN

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D E C I S I O N

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INTRODUCTION

1.  There are before the court two summonses:

(1) The 1^st defendant’s summons dated 20 November 2023 seeking security from the plaintiff in the sum of HK$1,400,000 for costs up to the setting down of the trial; and

(2) The plaintiff’s summons for summary judgment dated 13 December 2023.

2.  This action concerns the administration of the estate of Madam Chen Elsie, the deceased. She passed away on 21 August 2021 at the age of 93. She was survived by her husband, Mr Hsu, and three daughters, namely the plaintiff, the 1^st defendant and the 2^nd defendant. Mr Hsu was their step-father. He passed away about one year after the death of the deceased. In this decision, I shall refer to the parties by their first names – Camey, Scarlet and Miranda, respectively.

3.  The deceased made a will dated 17 December 2009 disposing of her assets in Hong Kong. She made another will dated 18 April 2014 dealing with her assets in the mainland. The latter is, however, not presently relevant. Under the Hong Kong will, Scarlet was appointed as the sole executrix of the estate. The deceased made pecuniary gifts to a total of 13 beneficiaries. Among them were Camey, Scarlet and Miranda, with each being given US$200,000. Her residuary estate was to be given to the three daughters in equal shares.

4.  In July 2022, probate was granted to Scarlet.

5.  Camey commenced the present action in December of the same year, naming Scarlet as the only defendant. The primary relief sought is the removal of Scarlet as the executrix and the appointment of a replacement administrator. In December 2023, Camey applied to join Miranda as a defendant on the basis that she was a necessary party to the action. (By that time, all the pecuniary distributions had been made.) Leave was granted. At that time, Miranda expressed her intention to stay neutral in the action. However, as confirmed by Ms Chantel Lin (appearing with Mr Axis Yu for Scarlet and Miranda) at the hearing, Miranda now also opposes the summary judgment application.

6.  By the time that application was taken out, pleadings had been completed. The pleadings disclose two major factual disputes. First, Camey alleges that the deceased told her in 2017 that she had cash of about HK$20,000,000. This is denied by Scarlet. Second, Camey alleges that in about May 2021, the deceased was already suffering from dementia, and Scarlet was aware of that. This is also denied by Scarlet.

7.  These factual disputes are not capable of being resolved on affidavits. For the purpose of the summary judgment application, I shall assume the facts in favour of Scarlet. That is to say, I shall proceed on the factual assumption that the deceased did not tell Camey that she had HK$20,000,000 in 2017 and that the deceased was not suffering from dementia in May 2021. It is therefore unnecessary for me to recite the parties’ opposite cases on these two matters in this decision.

8.  Camey’s case for the removal of Scarlet is based on the latter’s conduct in relation to the administration of the estate. The material events took place from after the probate was granted in July 2022. Both Camey and Scarlet have adduced as evidence contemporaneous communications between them, including emails, WhatsApp messages, WeChat messages and letters. There is no dispute that such communications took place. Nor is there any dispute over how such communications should be interpreted. The issue before me is therefore not a factual one as to whether, for instance, an alleged incident indeed took place or not. Instead, I am to decide whether Scarlet’s conduct, as disclosed by the undisputed evidence, amounts to proper grounds for removal.

CAMEY’S CASE

9.  I first set out Camey’s case.

10.  In July 2017, when they were alone together, the deceased confided to Camey that she had HK$20,000,000 cash and she had accounts in three banks, namely Hang Seng Bank, DBS and UBS. While I do not need to resolve the dispute over this allegation, this is part of the background leading to the queries which Camey subsequently raised with Scarlet.

September 2021

11.  Shortly after the passing of the deceased, in September 2021, Camey asked Scarlet about this sum. The latter replied that the deceased never had HK$20,000,000.

August 2022

12.  After the grant of probate was issued, on about 7 August 2022, Camey asked for the asset inventory list attached to the probate. She wrote in WeChat:

“Now, I request to see the attachments from the court grant, eventhough it may not be the final one as you suggested. I still require you to send a copy of what you have currently.

In addition, from this point onwards, I expect you to share/disclose all the information, receipts and documents from ILL [ie Messrs Iu, Lai & Li, the law firm engaged by Scarlet for handling the probate] and the banks.”

13.  Scarlet sent over a copy of the schedule of assets and liabilities attached to the probate. Camey immediately noted that it did not include any account with Hang Seng Bank. The schedule included accounts with DBS and UBS only and the total balance of the bank accounts amounted to about HK$1,200,000.

14.  On 17 August 2022, Camey emailed Scarlet asking about the omission of the Hang Seng Bank account. On the following day, Scarlet emailed back with an abrupt reply:

“I am cutting communication”

15.  Separately, Camey received a mail from Scarlet at around the same time. The mail included two documents. First, a one-page document showing copies of two customer’s receipts issued by Hang Seng Bank. The receipts show that two sums totalling HK$10,500,084.06 were withdrawn from the deceased’s bank account on 28 May 2021. There is now no dispute that those sum was transferred to Scarlet’s own bank account at HSBC. I shall refer to these sums as “the sums withdrawn in May 2021” below. Second, a document showing some calculations regarding the estate. This has been referred to as “the 1^st Calculations” in this action. It has three sections: “Executrix Expenses”, “Total Cash Collection” and “Available for Distribution”. Notably, the sums withdrawn in May 2021 were shown under the “Total Cash Collection” section.

16.  It is Camey’s case that the 1^st Calculations are not proper accounts and that they are not accompanied by any supporting document (except copies of the two customer’s receipts).

17.  About a week later, on about 24 August 2022, Scarlet sent over an updated worksheet. This has been referred to as “the 2^nd Calculations”. The major change was an addition of a sum of just over HK$640,000 received from DBS. But, still, Scarlet did not send over any supporting document.

September 2022

18.  Camey then followed up the matter through her solicitors, Messrs Foo, Leung & Yeung (“FLY”). In their letter dated 21 September 2022, FLY referred to the alleged conversation in 2017 about the HK$20,000,000 cash and pointed out that Scarlet had refused to give an account of that or to give bank statements showing the absence of such amount. FLY then made the following demand for account and supporting documents:

“We are therefore instructed that unless you provide an account to the satisfaction of our client including giving the opening balance of each of the above bank accounts, the movement of funds since 2017 to the date of death of the Deceased with microfilm of all the bank statements for the same period and the present whereabouts of all the assets of the estate of the Deceased within 14 days from the date hereof, our client will consider to apply to Court for an Order for such an account and/or for removal of you as executrix.”

19.  By email dated 4 October 2022, Scarlet replied that the deceased did not have HK$20,000,000 when she opened the account at Hang Seng Bank and that Scarlet had “legal power and control over the account prior to her death”.

20.  The reason for Scarlet saying the latter can be gleaned from a letter dated 3 October 2022 from her which FLY only received on 2 November. Scarlet wrote that she had a full power of attorney over the deceased’s account with Hang Seng Bank. The account was closed several months before her death. The amounts in the account were transferred to Scarlet’s personal account. She wrote:

“… My estate lawyer informed me that the amount need not be included in the probate application and I can just distribute accordingly if I choose.

Remember, the HS bank account is not part of the estate… Camey is protesting out of distrust and jealousy. I can very well not offer to distribute this amount. …”

October 2022

21.  On 5 October 2022, Scarlet texted Camey saying that the distribution to her would be withheld until Camey agreed with her calculations. The text read:

“Since you are contesting probate, your final distribution will be withheld until you agree with the numbers on spreadsheet. We are one step close to receiving full amount from UBS.”

22.  In this action, one of the major complaints of Camey is that Scarlet imposed a condition for making the final distribution, the condition being that she should agree with Scarlet’s calculations before the distribution was made. Camey says that this is objectionable, particularly given that she had been demanding Scarlet to provide proper accounts and supporting documents regarding the estate, which Scarlet had failed to do. The above text sent on 5 October 2022 was the first occasion when Scarlet indicated that the distribution would be subject to such condition. As will be seen below, she repeated this condition a few times shortly afterwards.

23.  By letter dated 7 October 2022, FLY wrote to Scarlet noting that she had not complied with their demand made in the letter of 21 September 2022. FLY therefore gave her a final notice to comply.

24.  Scarlet replied to FLY by email reiterating that she had the power of attorney over the Hang Seng Bank account, which was closed prior to the deceased’s death and that account was not part of the estate.

25.  In a separate email to Camey entitled “Final accounting on hk assets”, Scarlet gave an update that the funds from UBS would be received soon. She added that Camey had to agree with the amounts in writing before she would release the money. She also explained about the sums withdrawn in May 2021. She wrote:

“UBS will release funds next week and ILL is preparing the final invoice. I will update the spreadsheet and inform you of your shares. However. You have to sign the worksheet, stating you are in full agreement of the amounts before I can release funds.

…

When I closed the [Hang Seng Bank] account, I moved the 10 mil to my account so I can continue to manage online during the pandemic. Unfortunately mom passed away few months after. This account is not part of probate and account was closed legally. The 10 mil in my account was reported to US homeland security as they consider this money mine, because I have full power of attorney.”

26.  FLY responded to Scarlet’s email by letter dated 10 October. They repeated that so far she had failed to provide the information requested. They also reiterated Camey’s allegation about the HK$20,000,000 cash. They asked for information regarding all the bank accounts held by the deceased. They concluded:

“You must let us know with documentary evidence that you have taken steps to collect and supply the information to us. Otherwise, our Client will have no alternative but to take legal action against you.”

27.  On the following day, 11 October 2022, Scarlet replied by email. Among other things, she said:

(1) The deceased did not have HK$20,000,000 for the last few years.

(2) As regards the Hang Seng Bank account, the deceased signed a power of attorney naming her over five or six years ago. She had been helping the deceased renew time deposits and had been managing the funds online from the US. The account was closed months before the passing of the deceased.

(3) The funds in the Hang Seng Bank account was therefore “not part of probate”. She wrote:

“If you need to request copies of HS bank statements, I will be willing to sign a letter authorizing you or your client to submit to the bank.”

(4) As regards the bank accounts at UBS and DBS, they were “part of probate”. These accounts were customarily used for mahjong games and other household expenses.

(5) All the Hong Kong bank statements were shredded annually and after the death of the deceased.

(6) She was now ready to make the final distribution and she repeated the condition:

“So I am ready to make final distribution if your client is willing to sign and accept the 2nd cheque (amount to be determined) as final payout.”

28.  On the following day, 12 October 2022, FLY sent to Scarlet bank authorisation letters for signature so that they could apply for bank statements for the period from January 2017 to the date of death of the deceased.

29.  Notwithstanding that she stated in her previous email that she was willing to sign an authorisation letter for Hang Seng Bank, she replied to FLY’s request saying that she would give the authorisation “if my solicitor deems appropriate”.

30.  That email was followed by two further emails from Scarlet on 13 October 2022.

31.  In the first email, Scarlet repeated the condition for distribution:

“In addition, further probate payments will be on hold until your client is willing to accept and agree to the final distribution from Elsie Chen Probate account, and ILL has been fully compensated for the probate services and responding to your inquiry.”

32.  In the second email, she stated that she had received the funds from UBS and once again she repeated the condition:

“I have received the final bank remittance from UBS in the amount of hkd $468k. There will be periodically If you agree with distribution and want to receive my cheque as final payment from Elsie hk asset, respond YES. If not, say NO.”

33.  Shortly afterwards, Scarlet sent over what has been referred to in this action as “the 3^rd Calculations”. It was dated 12 October 2022 and was an update of the 2^nd Calculations. Most notably, the sum received from UBS was added to the “Total Cash Collection” section. The residuary estate was stated to be just over HK$3,000,000, with Camey’s share estimated to be just over HK$1,000,000.

November 2022

34.  On 23 November 2022, Scarlet wrote an email stating the following, once again reiterating the same condition for final distribution:

“Distribution of residual cash assets will not be made until all sign the deed of completion, which will be drawn upon closing of lawsuit and payment of all ILL expenses.”

35.  Based on the above correspondence, Camey contends that Scarlet never intended to disclose any accounts or supporting documents to her and without even a single supporting document, the 1^st, 2^nd and 3^rd Calculations could not be verified at all. Worse still, Scarlet was only prepared to make the final distribution with a string attached, namely to accept the finality of her calculations.

The present action

36.  Dissatisfied, in December 2022, Camey commenced the present action seeking the removal of Scarlet as executrix.

37.  In her opposing affirmation filed in March 2024, Scarlet exhibited a “Revised Estate Account made up to 6 March 2024”, which was accompanied by supporting documents in respect of the entries. Separately, she exhibited a number of documents concerning the assets of the deceased. They included bank statements of the Hang Seng Bank account from May 2017 to May 2021. The last statement dated 29 May 2021 shows the sums withdrawn in May 2021. There were also letter replies from DBS and UBS, stating the respective balances of the deceased’s accounts as of August 2021, ie the month of her death.

38.  Camey contends that the documents disclosed in the opposing affirmation are still not sufficient. First, the documents show the balances of the DBS account and the UBS account as of the time of the deceased’s death only. Scarlet has disclosed no further document showing the movement of those funds from that time onwards. The bank statements of the DBS account and the UBS account after the date of death are missing. Second, the Hang Seng Bank statement dated 29 May 2021 shows that there was a sum of US$10,800 withdrawn from the account on 28 May. That sum was not accounted for in the Revised Estate Account.

Grounds for removal

39.  Based on the above, Mr Raymond Lau, counsel for Camey, makes two submissions.

40.  First, before this action, Scarlet failed to, and in fact refused to, provide a proper account together with supporting documents regarding the administration of the estate. The 1^st, 2^nd, and 3^rd Calculations were deficient in that they were not supported by documents, such as bank statements. Scarlet was therefore in breach of her duty under section 56 of the Probate and Administration Ordinance, Cap 10. Even after the present action was brought, the Revised Estate Account is still deficient and the documents put forward are inadequate.

41.  Second, Scarlet has failed to distribute one-third of the residuary estate to Camey and she unreasonably imposed the condition that the distribution would be put on hold unless Camey agreed to Scarlet’s calculations.

42.  For these reasons, Camey seeks the removal of Scarlet as the executrix pursuant to section 33(3) of the Ordinance on the basis that the removal is necessary for the due and proper administration of the estate and is in the interests of the beneficiaries. Camey has put forward two candidates for the role of the administrator. Both candidates are solicitors with experiences in probate works. She also seeks other related reliefs.

43.  I should record here that as confirmed by Mr Lau at the hearing, Camey no longer seeks the relief stated in para 6 of the summary judgment summons. He also confirmed that the action would be entirely disposed of, if summary judgment is granted.

SCARLET’S CASE

44.  The correspondence between Scarlet and Camey, which is material to the summary judgment application, has been set out in detail above. In this section, I shall focus on Scarlet’s reply or position on the complaints made by Camey.

The complaint about the Hang Seng Bank account

45.  Scarlet says that the deceased never had HK$20,000,000 as alleged by Camey. She says that she opened the account at Hang Seng Bank for the deceased in 2017 with about HK$10,000,000. The deceased gave her a power of attorney over the account. She helped the deceased manage the funds in the account online. She closed the account in May 2021 and moved the balance of about HK$10,000,000 to her own bank account. The deceased passed away a few months later.

46.  Scarlet emphasises that while the closing balance of the Hang Seng bank account was not listed in the schedule of assets and liabilities when she applied for probate, she never hid this sum from the other siblings. She included the sum in the 1^st Calculations which was sent to Camey in August 2022, together with copies of the two customer’s receipts showing the transfers. If she had intended to hide the money from Camey or Miranda, she would not have disclosed it in the first place. She is prepared to revise the schedule if necessary.

47.  Furthermore, the money from Hang Seng Bank was in fact used to pay the pecuniary beneficiaries in accordance with the will, and Camey was one of them receiving US$200,000. According to the 1^st, 2^nd and 3^rd Calculations and the Revised Estate Account, the total amount paid to the pecuniary beneficiaries was over HK$8,200,000.

The complaint about Scarlet’s failure to provide accounts and supporting documents before the action

48.  As regards the complaint that she failed to provide accounts and supporting documents to Camey before the present action, Scarlet gives a number of explanations.

49.  In her affirmation, she said:

“… no enquiry has been made with the Hang Seng Bank, DBS or UBS in order to expedite the process of the application for the Grant of Probate. Hence when providing the Calculations, no supporting documents were provided to verify the content of the schedule of assets and liabilities annexed to the Grant or verify the figures as stated in the Calculations. …”

50.  She also said that the UBS account was not actively used or operated whereas the DBS account was primarily used by the deceased to pay credit card expenses and to deposit cheques received for winning mahjong games. She went on to say:

“With the aforesaid reasons borne in mind, I do not see any valid reason for incurring further expenses out of the Estate on obtaining the microfilm of the DBS and UBS accounts.”

The complaint about the condition for the final distribution

51.  As regards the complaint about Scarlet imposing a condition for the final distribution, she explained in her affirmation that she foresaw that the matter would escalate to a lawsuit after receiving FLY’s letter dated 21 September 2022 and legal costs would be incurred and be paid out of the estate. Since the amount of such costs could not be ascertained, it was reasonable for her to ascertain the view of Camey before making the final distribution.

52.  Ms Lin submits that in any event Camey is not seeking relief for the distribution of the residuary estate in this summary judgment application. Hence the court does not need to determine the issue of distribution.

The complaint about the Revised Estate Account and the documents provided in Scarlet’s opposing affirmation

53.  As regards Camey’s complaint about the Revised Estate Account and the documents provided in Scarlet’s opposing affirmation (see para 38 above), Scarlet does not put forward any reply at all.

Proper administration of the estate

54.  Scarlet stresses that she has duly performed her role as the executrix. She collected the funds in the accounts in DBS and UBS and included them in the estate calculations. She also treated the closing balance of the Hang Seng Bank account as part of the estate, even though she did not include it in the schedule of assets and liabilities when applying for probate. No other beneficiaries, except Camey, asked her to render the estate account. Scarlet prepared three calculations, which she sent to Camey and Miranda.

55.  For these reasons, Scarlet contends that there is no proper ground for her removal.

56.  In any event, she says that the administration is at its tail end, the works were completed or nearly completed, and the value of the residuary estate is modest. There is therefore no need to appoint a replacement administrator.

SUMMARY JUDGMENT

57.  As remarked at the outset, in this summary judgment application, my task is to decide on the basis of the undisputed contemporaneous evidence, whether Scarlet’s conduct amounts to proper grounds for removal.

58.  The duty of an executor to keep and render account is well-established.

59.  It is his duty to keep clean, clear and accurate account and be always ready to render such account when called upon to do so. To discharge this duty properly, there must be production of the relevant supporting documents and receipts, and proper breakdown of items. This is so that a beneficiary is able to see his entitlement under the estate. It is essential for any accounting system to show at least the opening capital assets, details of the movements of capital assets, the present capital assets, details of income earned, and details of expenditure. See, eg, Re the estate of Chan Kan Ying HCMP 888/2013, 19 July 2017 at paras 81 to 82, per B Chu J.

60.  Here, from the outset, ie shortly after the grant of probate was issued, Camey had already expressly requested Scarlet to disclose all information and documents concerning the estate. See the WeChat message sent on 7 August 2022 (para 12 above).

61.  Yet, when producing the 1^st, 2^nd and 3^rd Calculations, Scarlet did not provide any supporting document at all. Before the present action was commenced, the only document which Camey received from Scarlet was the one-page photocopy of the two customer’s receipts issued by Hang Seng Bank with regard to the sums withdrawn in May 2021.

62.  Scarlet now explains that in order to expedite the probate application, she did not make enquiries with the bank. That explanation is irrelevant as what we are presently concerned is a complete lack of supporting documents provided by Scarlet after the grant of probate was issued. In the absence of any supporting document, Camey was not able to verify the items listed in the calculations and was not able to ascertain her entitlement in the estate.

63.  It is clear that Scarlet failed to fulfil her duty to render proper account to Camey. This is so notwithstanding the persistent demands made by Camey’s solicitors. See FLY’s letters dated 21 September, 7 and 10 October and 23 November 2022 (paras 18, 23, 26 and 34 above).

64.  After the summary judgment application was taken out, Scarlet produced the Revised Estate Account together with supporting documents. However, I agree with Mr Lau’s submission that the account is still deficient and there are still missing supporting documents. Scarlet has not been able to answer this point at all in the present application.

65.  To make the matter worse, in the absence of a proper account, Scarlet insisted that Camey agree to her calculations, otherwise her distribution would be put on hold. See the messages from Scarlet on 5, 7, 11, 13 October and 23 November 2022 (paras 21, 25, 27(6), 31, 32 and 34 above). This is clearly prejudicial to the interests of Camey as a residuary beneficiary.

66.  Scarlet now tries to explain it away by saying that she was mindful of the potential legal costs which might have to be borne by the estate by reason of Camey’s stance and hence she needed to know Camey’s view on the calculations before making the final distribution.

67.  However, in order for Camey to come to a view, she needed to be provided with proper information first. But Scarlet did not give her any document in the first place. By imposing the condition, Scarlet was effectively requiring Camey to give up her right to seek a proper account. In these circumstances, it is improper for Scarlet to impose the condition on the final distribution as she did. That is not proper administration of the estate.

68.  In her affirmation, Camey expressed her dissatisfaction:

“No one will know the exact size of the Estate without a proper account. However, D2 has been pressurizing me to accept the self-serving Calculations which I have no means to verify if they are correct.”

69.  In my view, Camey’s complaint is justified.

70.  I am satisfied that Camey has made out proper grounds for the removal of Scarlet as the executrix. Summary judgment should be granted.

71.  Scarlet emphasises that the administration is at its tail end and the works were completed or nearly completed. She contends that there is therefore no need to appoint an administrator. However, the latest account and documents produced by her are still not sufficient. It is still not possible for Camey to properly verify her entitlement in the estate. Neither Camey nor Miranda is suitable to take up the role of administrator. It is therefore appropriate to appoint an independent professional administrator.

SECURITY FOR COSTS

72.  Since summary judgment is granted, it is unnecessary to deal with the security for costs application. However, in case I am wrong above, I set out my conclusion on Scarlet’s application.

73.  I am not satisfied that Camey is ordinarily resident out of the jurisdiction under Order 23, rule 1(a) of the Rules of the High Court. For that reason, the security for costs application should be dismissed.

74.  There is sufficient evidence before me showing that Camey, now retired, is splitting her time between the US and Hong Kong. She says that after spending her entire working life in the US, she has decided to settle permanently in Hong Kong. She is in the course of relocating herself from the US to Hong Kong, pending the sale of her house in Texas. She has already put that up for sale. She has produced a number of Hong Kong documents in support of her assertion, eg, her Joy Yu card, her driving licence, a document from the Electoral Office showing her status as a registered voter. Most notably, she has produced travel records issued by the Immigration Department for the period from September 2022 to February 2024. The records show that she was in Hong Kong for more than half of that time. At the hearing, Ms Lin accepted that a person may have dual places of ordinary residence. On the materials before me, I conclude that Camey can be said to be ordinarily resident in Hong Kong.

CONCLUSION

75.  I enter judgment in terms of paras 1, 2, 4 and 5 of the summary judgment summons. For para 2, I approve the nomination of Ms Lai Chiu Fan Fanny, a solicitor, as the administrator, subject to compliance with the requirements of the Probate Registry. For para 4, the inventory and account should be provided within 21 days from the date of this decision. I also dismiss the security for costs application.

76.  I make an order nisi that Scarlet personally pay Camey’s costs in this action, the summary judgment application and the security for costs application, including reserved costs, such costs to be taxed if not agreed.