RE LOO CHE CHIN

HCCA 3131 of 2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO 3131 OF 2011

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  The Deceased made his last will dated 2 August 2005 (“the Will”), dividing his estate into 6 equal shares to be distributed to his 5 children, Damian, Arnold, Josephine, Janet and Clive and his son‑in‑law, KS Chu, Josephine’s husband.  The Deceased also appointed his wife (“the Mother”) and Clive to be the executors of the Will.  The Deceased died in Hong Kong on 24 July 2010, at the age of 95.  The Mother predeceased him in Hong Kong on 30 June 2010, leaving Clive to be the only executor under the Will.

2.  The Deceased’s estate consists of an apartment and a car parking space in Happy Valley, significant shareholdings in 4 blue chip listed companies and some bank deposits.  It probably exceeds HK$1.2 billion, even after discharging debts are of about HK$100 million.  It is a very sizable estate indeed.  Each of the 6 beneficiaries is looking to receiving about HK$200 million. 

3.  On 29 September 2010, Clive applied for the grant of probate of the Deceased’s estate.  However, as early as 19 August 2010, Janet had already entered a caveat at the Probate Registry.  On 21 December 2010, Clive’s solicitors invited Janet to withdraw the caveat.  She did not. Instead, she took out a summons dated 22 December 2011 under section 36 of the Probate and Administration Ordinance (“the Ordinance”),[1] seeking an order that guarantee be provided by Clive for the grant of probate with sureties’ guarantee of not less than HK$1.2 billion.  On 14 June 2011, Janet amended the summons with leave.  She primarily sought an order that Clive be passed over as executor and that two named certified public accountants be appointed the joint and several administrators of the Deceased’s estate.  The initial relief of surety guarantee then became an alternative remedy.

4.  The 6 beneficiaries fall into two warring camps.  Josephine and her husband support Janet’s application.  Clive is joined by Damian and Arnold.

5.  The matter first came before me on 13 November 2012.  Janet dropped her claim for sureties’ guarantee.  After discussion, the hearing was adjourned to enable the parties to attempt mediation. Unfortunately, mediation failed.  The matter was then fully argued at the resumed hearing on 31 January 2013.

B.  GROUNDS FOR REMOVAL

6.  Section 36 of the Ordinance provides :

“Where a person dies wholly intestate as to his estate or leaving a will affecting estate but without having appointed an executor thereof willing and competent to take probate, or where the executor is, at the time of the death of such person, resident out of Hong Kong, or where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate, other than the person who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate, the court may, subject to s 25, appoint such person as the court thinks fit to be such administrator, on his giving such security, if any, as may be required under this Part or as the court may direct, and every such administration may be limited in such manner as the court thinks fit.”

7.  As explained in Re Ho Wai Man,[2]section 36 applies to four different but overlapping situations :

“(1) where a person dies wholly intestate as to his estate;

(2) where a person dies … leaving a will affecting estate but without having appointed an executor thereof willing and competent to take probate;

(3) where the executor is, at the time of the death of such person, resident out of Hong Kong; or

 (4) where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the deceased’s estate or of any part of such estate, other than the person who, if the Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate.”

8.  Janet mainly relies on situation (4) (necessity or convenience).  She also relies on situation (3) (residence outside Hong Kong). Hitherto, there is no decided case in Hong Kong on the requirement of residence.  However, for reasons which will become apparent in a moment, it is not necessary for me to express a definite view on the requirement on this occasion.

C.  NECESSITY OR CONVENIENCE

C1.  General approach

9.  When necessity or convenience is relied on as a ground for removal, I had this to say in Re Estate of Haque Shaquil regarding the general approach :[3]

“10. The words ‘necessary or convenient’ in situation (4) give the court a broad discretion, to be exercised in the best interests of the estate: Lefkowitz v Bank of New York [1996] 3 HKC 591, per Litton V-P at p 594D. Whether or not the court will exercise the discretion depends on the actual circumstances of the case. The circumstances are not limited to those in connection with the estate itself or its administration, but can extend to any other circumstances which the court thinks are relevant, which lead the court to think that it is necessary or convenient to pass over the executor : see Re Clore (Deceased) [1982] Fam 113, per Ewbank J at p 117H. The burden rests with the applicant to satisfy the court that such circumstances exist : Chang Man v Ma Shou Yung [2002] 2 HKC 213, pp 218I - 219A (para 19) per Carlye Chu J (as she then was).”

10.  As said, what constitutes the circumstances to engage the court’s discretion to pass over the executor under the “necessity or convenience” ground must depend on the particular facts of the case before the court.  In short, it is a fact-sensitive question to be determined essentially on the actual circumstances of the case.  The court will approach the evidence objectively and with a good dose of common sense to see if on the facts of the case the “necessity or convenience” ground is made out.

11.  Further, as an executor has priority in appointment, the burden rests squarely on the applicant to show that there are special circumstances that make it necessary or convenient to pass him over : Chang Man v Man Shou Yung.[4]

C2.  Hostility and breakdown of relationship

12.  Here, Janet’s primary case is based on hostility and a complete breakdown of relationship and loss of mutual trust between the siblings, which is best summarized in her third affirmation :

“35. Since our parents passed away, there have sadly been numerous allegations and cross-allegations among siblings who have become alienated from each other. Speaking for myself, if Clive be granted probate of our father’s will, I have no confidence that he would respect my legitimate wish and interest as a beneficiary, having regard to the difficulty that I have already experienced in obtaining from Clive information about, and in communicating with him regarding, the administration of our father’s estate and his persistent hostile attitude towards me. The level of mistrust is not conducive to efficient administration. In worst case, further dispute may arise and further resort to the courts may become necessary.”

13.  Now, it is well established that friction or hostility between an executor and a beneficiary alone, without more, is of itself not a good reason for removing the executor.  No corrupt or improper motive is to be imputed against the executor even if mutual hostility, without more, is established : Earl of Portsmouth v Fellows.[5]  However, if the hostility is grounded on the mode of administration, then it is a factor that cannot be ignored : Letterstedt v Broers,[6] Hunter v Hunter,[7] Kershaw v Micklethwaite & Ors.[8]  This is a relevant factor because the expeditious and economical administration of the estate is always one of the objects that the court keeps in mind : Chang Man v Man Shou Yung.[9]  Thus, if by reason of the hostility, the executor is rendered unfit to perform his duties as executor, he may be removed : Lefkowitz v The Bank of New York & Ors.[10]  Such inability to perform his duties as executor may be proved if it can be demonstrated that he would, say, by reason of the hostility, (a) administer the estate in a manner not in accordance with the law : In the Estate of Chan Hung Mou;[11] or (b) obstruct the due administration of the estate : Kershaw.[12]  The court may also pass over the executor if the breakdown of relation has caused or has the potential to cause difficulty in the administration of the estate : Kershaw.[13]

14.  In considering if Janet has made good her case, I bear in mind the following factors.

15.  First, the Deceased chose Clive as executor.  Although his choice is not conclusive, it is cogently relevant to the question of passing over “because the testator may be expected to have had knowledge of the characters, attitudes and relationships involved which a court will lack” : Kershaw.[14]

16.  Ms Wong submitted that the Deceased did not appoint Clive as the sole executor.  Clive became the sole executor purely because the Mother predeceased the Deceased.  I do not think how Clive’s sole executorship arose really matters.  The Deceased must have been fully aware that after his wife’s death, Clive would become the sole executor of his estate.  Yet he did not take any step to appoint an additional executor. Inferentially, he must has been content to leave his estate to be administered by Clive as the sole executor.  This factor must remain in the balancing scale when the court considers if Clive should be passed over.

17.  The second factor is whether the hostility is mutual, as Janet contends, or one-sided or induced by Janet as a pretext for passing him over, as Clive argues.  If Clive is correct, it militates strongly against removing him : Froster v Davies;[15] Hunter v Hunter.[16]

18.  As expected, the evidence filed by the parties on hostility is dramatically opposed.  Ms Wong, SC, for Janet and Mr Liang, for Clive, have rightly asked me not to resolve the factual disputes on affidavit.   What I will do is to evaluate the evidence objectively as it stands.  Without going into detail , I think the board picture is this.

19.  The seed of dissension between the parties was first sown soon after the Mother died.  The administration of her estate had, to put the matter neutrally, given rise to problems that strained the relationship between the siblings.  Their relationship has further deteriorated since the death of the Deceased.  Now Janet has concerns over whether Clive resides in Australia and not in Hong Kong, his financial position, his ability to administer the estate, the potential conflict of interest that may arise from the sum of HK$15,030,000.00 given to Clive by the Deceased on or about 19 January 2010, which she thinks Clive should account for.  Janet’s allegations are all strongly denied by Clive.

20.  Since February 2011, Janet had made several attempts to contact Clive about the administration of the estate with no response forthcoming from Clive.  To borrow Ms Wong’s description, Clive had erected a wall of silence.  That is most unfortunate.  That partly prompted Janet to commence the present proceedings, which Clive viewed as her attempt to take over administration.  Clive’s view is of course wholly misconceived when Janet is seeking an appointment of an independent accountant to be the executor.

21.  Clive complained that the hostility was induced by Janet to support her present application.  He referred to an email that Janet wrote to him on 7 December 2008 in which she said, “I know you are the [executor] of father will, good luck, and have fun when you time comes.”  But what she said must be understood in context.  Janet was referring to the difficulties in the administration of the Mother’s estate before uttering those words. Plainly, she was just teasing Clive.  The fact that Clive could now regard that email, written in December 2008, as a possible precursor of Janet’s present action only demonstrates how deep his mistrust in Janet is.  Clive also said he harboured no grudges or hostility against Janet.  I think it is a self-serving statement, not borne out by his conduct viewed objectively.

22.  In my view, the evidence clearly shows that there is a complete breakdown of relationship and mutual distrust between Clive on one hand and Janet and her supporters on the other.

23.  The third factor I take into account is whether the hostility is grounded on the mode of administration of the Deceased’s estate. As said, because of the mutual hostility, there was no effective communication between Clive as executor and Janet and her supporters as beneficiaries.  This certainly would render the effective administration of the estate most difficult.  Mr Liang argued that Clive was not obliged to answer any query raised by Janet when administration of the estate had not even begun.  I disagree.  Clive’s attitude, fuelled by hostility, is simply not conducive to the expeditious administration of the estate at all.

24.  The fourth factor is whether the administration of the estate is a simple matter, as Clive contends.  If it is, it may weigh against removal : Kershaw.[17]  Whether or not the administration is simple is hard to tell at this stage.  The size of the estate may suggest that it is not as straightforward as Clive has contended.  More importantly, if the parties continue to embroil themselves in hostility, which is most likely though unfortunate, there is every possibility that a simple administration exercise would turn into a recipe of drawn-out and expensive litigation.

25.  The fifth factor is Clive’s concern about the costs to be charged by the professional accountant in administering the estate.  The charges quoted by the accountants nominated by Janet and Clive range from HK$600,000.00 to HK$2 million.  I think they are insignificant when compared to the size of the estate (HK$1.2 billion).

26.  Finally, I take into account the fact that nearly 3 years have lapsed since the death of the Deceased and no step has been taken to administer his estate.  It is not in the parties’ interest to drag on.  Appointing an independent accountant to administer the estate without ado best serves their interest.

27.  Having evaluated all the circumstances, I am satisfied that it is necessary and convenient to pass Clive over as executor. Janet has no particular preference as to who should be appointed in Clive’s stead.  Clive objected to KPMG nominated by Janet.  To alleviate any concern that Clive may have, I will appoint the two accountants of Ernst Young nominated by him.

28.  In light of my decision above, it is not necessary for me to deal with the other ground of passing over based on non-residence.  I will just leave it as it is.

29.  I further direct the parties to file and exchange their submissions on costs within the next 14 days.  I will then dispose of it on paper.

D.      GUIDANCE ON PRACTICE

30.  To conclude, I take this opportunity to mention two points as guidance for the preparation of contested applications brought under section 36.

31.  First, whether to exercise the discretion to pass over an executor under section 36 of the Ordinance is essentially a fact-sensitive exercise.  However, as the Probate Judge, I have discerned a recent trend of over-citation of cases in contested applications, such as the present one, on how the discretion should be exercised.[18]  Typically, counsel for the parties would cite numerous cases on section 36 or similar provisions in other jurisdictions, draw analogy from the facts, which might not be truly comparable when properly understood in context, and elicit from the judgments passages which they considered to be in favour of their contention.  Over-burdening the court with cases used in this way is simply not helpful at all.  It is the principles derived from the cases that inform the approach to section 36.  Judicial utterances made in different factual context in a particular case do not.  And as rightly observed by Ms Wong, while cases are of guiding value, they should not be treated as straitjackets into which one has to fit.  From now on, I hope legal advisors would exercise proper restraint in citing cases.

32.  Second, it is not uncommon, in particular in hotly contested applications based on the “necessity or convenience” ground, for the parties to file dramatically opposed evidence.  But as observed by Liu JA in Lefkowitz v The Bank of New York & Ors :[19]

“The words ‘necessary or convenient’ in s 36 gave the judge a broad discretion, to be exercised in the bests interests of the estate. The judge was not called upon to determine the parties’ rights and liabilities, nor was it necessary for him to resolve disputed issues of fact: that is why an application to cross-examine the deponents to the affidavits, made before the hearing, was quite rightly disallowed.”

33.  Occasionally, the parties allow their hostility to spill over into the evidence, which is emotionally charged, bordering on mud-slinging for pure prejudice.  That is wholly unwarranted.  Emotional language only blurs the parties’ focus.  Trivial or irrelevant matters only confuse the real issues.  In this regard, I agree with what Lam J (as he then was) said in In the Estate of Chan Hung Mou :[20]

“15. A further caveat is that one must focus on the issue at hand. As observed by Litton VP (as he then was) in [Lefkowitz] at p 599D, the issue is essentially an administrative matter. Further, at p 594D, it was emphasized that the court is not called upon to determine the parties’ rights and liabilities and no resolution of disputes of fact is called for. Thus, the evidence on past hostilities should be circumscribed.”

34.  I hope in the future, the parties and their legal advisors would firmly bear in mind these judicial comments and what I have just said in preparing the evidence.