CHOI HOI SHUEN, ATHENA v. CHOI KIM LUI

HCMP 1997/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1997 OF 2014

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J U D G M E N T

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1.  This is an application by the plaintiff for relief under section 56 of the Probate and Administration Ordinance, Cap 10 (“the PAO”) and O 85 r 2 of the Rules of the High Court. Section 56 provides:

“56. Duty of personal representative as to inventory

 The personal representative of a deceased person shall, when lawfully required so to do, exhibit, by affidavit filed in the court, a true and perfect inventory and account of the movable and immovable property of the deceased, and the court shall have power as heretofore to require personal representatives to bring in inventories.”

For O 85 r 2, Mr Edward Chan, SC and Mr Johnny Ma, counsel for the plaintiff referred in their written submissions to r 2(2)(a) and r 2(3)(a) and (c) as follows:

“(2) Without prejudice to the generality of paragraph (1), an action may be brought for the determination of any of the following questions—

(a) any question arising in the administration of the estate of a deceased person or in the execution of a trust;

...

(3) Without prejudice to the generality of paragraph (1), an action may be brought for any of the following reliefs—

(a) an order requiring an executor, administrator or trustee to furnish and, if necessary, verify accounts;

..

(c) an order directing a person to do or abstain from doing a particular act in his capacity as executor, administrator or trustee;”

Background

2.  Choi Kim Kwong, deceased made his last will on 5 September 2012 and passed away on 13 September 2012.  The plaintiff was his only lawful and natural daughter and is the sole beneficiary of his estate. 

3.  The defendant was the deceased’s elder brother and is the executor of his estate.  Probate of the will was granted to the defendant on 17 December 2013.

4.  The deceased and the defendant used to run a group of companies called the Transward Group.  The group had engaged in the business of walla-walla, barge and mid-stream business for many years.  The group owned office premises and a fleet of vessels.  The vessels were sold between 2008 and 2013 and the office sold in January 2014.  The deceased and the defendant were the shareholders of the group.

The plaintiff’s enquiry on the transfers of shares on 6 September 2012

5.  The plaintiff subsequently learnt that a significant number of shares of deceased in four companies within the Transward Group had been transferred to the defendant on 6 September 2012.  The transfer documents showed that they were transferred for nominal values only.

6.  The plaintiff on about 24 February 2014 instructed solicitors to act for her.  Her solicitors by a letter of the same date asked the defendant’s solicitors for a copy of the grant with a schedule of property annexed to it and the audited and management accounts of the various companies in the Transward Group.  They also asked for a meeting with the defendant as the executor and his solicitors to discuss various matters mentioned in the letter.  One of the matters they wanted to know about and discuss in the proposed meeting was about the said transfers of shares.  The letter stated that the plaintiff would like to learn about in the meeting:

“g. Reasons, information and documents for transfer of shares from the Deceased to the Executor Mr. Choi Kim Lui on 6 September 2012 in Transward Limited, New Moonraker Motorboat Company Limited, Famous Launch Chartering Limited and Go Extend Limited.”

7.  The defendant’s solicitors answered many of the queries and provided a copy of the grant with a schedule of assets and liabilities of the estate annexed, copies of the audited accounts and management accounts of the companies in the Transward Group, and some bank statements of the companies. 

Appendix VI

8.  The defendant’s solicitors by a letter dated 4 March 2014 addressed to the query about the transfers of shares above-mentioned (B2 118-121). They enclosed in the letter copies of the transfer documents, some appendices of transfers of funds between the deceased and the defendant and some lists of debtors and creditors of the estate.  Among the appendices was an appendix IV (B8 2207). The Financial Manager of the Transward Group, Ms Yung Suk Wa said in an affirmation filed on 9 February 2015 that she had prepared this appendix on 4 March 2014.

9.  This appendix stated the estimated value of the shares transferred at HK$5,808,175 as at 28 February 2014 (not the date of transfer of 6 September 2012).  The amount paid by the defendant to the deceased for the shares was at HK$973,332 leaving a balance of HK$4,834,843.63 payable by the defendant. The HK$4,834,843.63 was then used to set off against an indebtedness of HK$26,610,865.11 owed by the deceased to the defendant.  After the set off, there was a net sum of HK$21,776,021.48 owed by the deceased to the defendant. 

10.  The transfers were discussed between the plaintiff and the defendant in the presence of their solicitors in a meeting on 5 March. But there is a dispute as to what explanation the defendant had given to the plaintiff.

11.  The defendant at the demands of the plaintiff also vested unto the plaintiff on 14 March 2014 the deceased’s shares in the companies and the properties in the estate.  The defendant also appointed for the plaintiff an equal number of directors for the companies in the Transward Group on the same day.  The defendant also gave access to the plaintiff’s accountants, Union Alpha to the accounts of the companies.

The 26 May letter of enquiry and the defendant’s replies

12.  On 26 May 2014, the plaintiff’s solicitors issued a letter seeking from the defendant the records, inventory and accounts of the estate from the date of death of the deceased (“the 26 May letter”) (B2 34-37).  The plaintiff also made a number of queries including the value of the shares held in the deceased’s name at the date of death, monies owed to or by the deceased, whether such sums had been ascertained and any defence available for monies allegedly owed by the estate, whether there was any other cause of action or claim that the estate could pursue, whether the deceased had shares in private companies held by others on trust for him, and the documents and records about the disposal of a property in around October 2011 by a company of which the deceased and the defendant’s wife were equal shareholders to the defendant and his wife.  The letter also enquired whether the transfers of shares by the deceased to the defendant on 6 September 2012 were for full value and consideration and on the HK$21 million odd allegedly owed by the deceased to the defendant as stated in appendix IV (but did not appear in the schedule of assets and liabilities annexed to the grant of probate).

13.  The defendant then engaged another firm of solicitors to represent him personally.  The defendant’s solicitors replied to the 26 May letter by a letter of 7 July 2014 (B2 39).

14.  Regarding the transfers of shares on 6 September 2012 and the debt of HK$21,776,021.48 as recorded in appendix IV, the reply was as follows:

“10. We are instructed that the said HKD21 million owed by the Deceased to our client has been settled by the Deceased prior to his death. Hence they do not form part of the assets and/or liabilities of the Deceased at the date of his death. As such, we do not see any basis for your client to request ours to provide any ‘full particulars’ of the same, together with all relevant documentations. The fact is that our client has not made any claim for the repayment of the said HKD21 million or any part thereof from the Estate during the administration thereof. In this regard, your client is asked to confirm her position as to whether the Deceased did and still owes our client HKD21 million or any part thereof as at the date of his death.

11. As to the transfer of shares made on or about 6 September 2012, our client is certain that the said transfer was valid. Should your client consider otherwise, please provide details and particulars of the allegations with evidence in support of your client’s allegation for our client’s consideration.”

15.  The explanation in para 10 about the HK$21 million odd alleged debt is baffling.  The defendant had advised the plaintiff on 4 March 2014 by supplying her with appendix IV that this debt was then outstanding. But this debt did not appear in the schedule of assets and liabilities annexed to the grant.  The schedule had been verified by the defendant on affirmation when he applied for the grant.  It was thus natural for the plaintiff to have made the query in the 26 May letter.  However, the defendant’s reply on 7 July did not explain this discrepancy.  The reply merely said that the debt had been settled prior to the deceased’s death.  There was no explanation on how or by what means or consideration from the deceased that it was settled.  There was also no explanation of why the debt was still recorded in appendix IV which was supplied on 4 March 2014 if it had been settled prior to the deceased’s death on 13 September 2012.  This explanation given on 7 July created more problems than it sought to answer.  The defendant’s retort at the bottom of para 10 in asking the plaintiff to confirm whether the debt was subsisting was also unhelpful but petty.

16.  Para 11 was also not an answer to the plaintiff’s query on the transfers of shares.

The commencement of these proceedings

17.  The plaintiff then issued the originating summons on 12 August 2014 and asked for the following relief against the defendant:

“1. The Defendant, being the Executor of the Estate of the Deceased, do:-

(a) exhibit upon oath/affirmation in the Honourable Court a true and perfect inventory and account of the whole of the Estate as from the date of death and up to date; and

(b) fully and properly answer by way of oath/affirmation all queries raised in the letter from Messrs Wilkinson & Grist dated 26 May 2014; and

(c) give a full and proper account by way of oath/affirmation of what the Executor has done in terms of collecting in and preserving the Estate as well as enquiries, investigations and/or advice in respect of ascertaining and/or identifying the properties and assets of the Estate and claims or potential claims and causes of action or potential causes of action available or potentially available to the Estate;

(d) give a full and proper account by way of oath/affirmation of all the Executor’s dealings, payments and/or distributions;

2. such further and/or other remedy, relief, orders, directions, accounts and/or enquiries as the Honourable Court may consider appropriate;”

18.  The originating summons is supported by an affirmation of the same date made by Ms Ma Lai Yuk, a solicitor of the plaintiff’s solicitors. Ms Ma said in her affirmation that the defendant had failed or refused to properly address and answer the 26 May letter and that the 7 July reply by the defendant’s solicitors was sorely inadequate.

19.  The defendant filed his 1st affirmation in opposition on 15 October 2014.  The plaintiff filed her affirmation in reply on 14 November 2014.  The defendant then filed his 2nd affirmation and two affirmations by Madam Yung Suk Wa and the personal assistant of the deceased Madam Kwan Siu Ping, Apple all dated 9 February 2015.  The plaintiff also filed her 2nd affirmation in reply on 16 March 2015.

The issues

20.  Mr Li, leading counsel for the defendant opposed the originating summons on a number of grounds.  He submitted in his written submissions that the enquiries in the 26 May letter had all been answered.  For new matters raised by the plaintiff in these proceedings, they would have been answered by the defendant if the plaintiff should have raised them prior to the proceedings.  Hence, the new matters cannot justify the bringing of the proceedings.  Mr Li also submitted that the plaintiff as a beneficiary is not entitled to have a review of every judgment and reasoning process gone through by the defendant.  He also submitted that the plaintiff had confused her rights as a shareholder/director of the companies in the Transward Group and her rights as the sole beneficiary of the deceased’s estate. He further submitted that these proceedings are a fishing exercise for evidence for the plaintiff’s intended claims against the defendant and that the plaintiff’s real complaint is her disagreement to the size of the estate as the defendant has accounted for because she thought that the deceased had owned a larger share of or the entire Transward Group.  Finally, he submitted that the defendant had already provided an executor’s account on 15 July 2014 (B4 743) and updates on 25 August (B4 781) and 9 October 2014 (B4 837).

21.  When Mr Edward Chan, SC opened the case for the plaintiff, he accepted that of the many queries raised in the 26 May letter and in these proceedings, only two issues are of significance and of which the defendant had failed to properly account for in his account rendered pursuant to section 56 of the PAO. 

22.  The first matter is on the transfers of shares on 6 September 2012 which was related to the alleged debt of HK$21 million odd as stated in appendix IV but not in the schedule of assets and liabilities annexed to the grant. 

23.  The second matter is the withdrawal by the deceased of HK$2.5 million by cheques drawn on five companies in the Transward Group on 5 September 2012, the date the deceased made his last will.  The withdrawals were debited to the deceased’s current accounts with the companies as “cash advance”.  The cheques were drawn in favour of the defendant.  The matter was raised by the plaintiff in her 1st affirmation in these proceedings filed on 14 November 2014.  These sums are tabulated in para 82 of the plaintiff’s 1^st affirmation as follows:

“	Date	Company	Voucher	Debit Amount
	5.9.12	TL	JVB2010009	$250,000
	5.9.12	NML	JVB2060008	$1,500,000
	5.9.12	GEL	JVB2090001	$150,000
	5.9.12	RMBL	JVB2090001	$300,000
	5.9.12	Hantec	JVB2060001	$300,000	”

The defendant’s replies on the issues

24.  Regarding the first matter, the defendant had by the 4 March letter of his solicitors enclosed for the plaintiff appendix IV (B8 2207), which was prepared by the Financial Manager, Madam Yung on 4 March 2014 to explain the payment for the transfers.  Appendix VI showed that the transfers were in consideration of HK$5,808,175.63 as at 28 February 2014 of which HK$973,332 was paid by the defendant and HK$4,834,843.63 was set off against debts owed by the deceased to the defendant.  The appendix showed that the deceased still owed the defendant HK$21,776,021.48 as at 4 March 2014. 

25.  The defendant’s 7 July letter in reply to the plaintiff’s query in the 26 May letter merely said that the transfers were valid.  He further challenged the plaintiff to produce evidence if she should consider otherwise.

26.  However, he said in para 66 of his 1st affirmation filed on 15 October 2014 as follows:

“…

(b) The reason for the Transfer of Shares between the Deceased and I was to reflect the 50/50 position between us within the Group before the death of the Deceased.

(c) In consideration of the Transfer of Shares to me, I orally agreed with the Deceased to waive the Debt owed by the Deceased to me (in the total amount of HK$26,610,865.11), which I knew was far more and hence sufficient to cover the value of the Shares transferred to me.

(d) This is why I had only paid the nominal value of the Shares (at HK$1 per shares), i.e. HK$973,332 (‘Nominal Value of the Shares’) for the Transfer of Shares, as reflected in the adjustments made to the Deceased’s director’s account and my director’s account within the said 4 companies (see Bundle of Debts Documents (CKL-20, Tab A, pp.12, 47; CKL-20, Tab B, pp.52, 69; CKL-20, Tab C, p.72; CKL-20, Tab F, p.94)).

(e) Although the shares were transferred to me prior to the death of the Deceased and therefore did not form part of the Estate, in order to explain the position to the Plaintiff the relevant documents in relation to the Transfer of Shares have also been provided to the Plaintiff on 4 March 2014 (CKL-5, pp.38-41). …”

27.  On the basis of these further revelations by the defendant, appendix IV is inaccurate to the extent where it stated that the estate of the deceased owed the defendant the sum of HK$21,776,021.48 as at 4 March 2014 as this indebtedness (as part of the total debt at HK$26,610,865.11) had already been waived on 6 September 2012 by the defendant (with the balance of the total debt at HK$4,834,843.63 set off against part of the share value).

28.  The defendant made more revelations about the transfers in his 2nd affirmation filed on 9 February 2015.  He said in paras 90 and 96 to 98 as follows:

“90. … In fact, the discussion between the Deceased and me regarding the Shares Transfers started to take place on 29 August 2012 and continued for 1 or 2 days following 29 August 2012. I recount as to what had happened during the discussion:-

(a) The following concerns were identified by the Deceased and me:-

(i) The then shareholding in the Group did not reflect the equal interest of the Deceased and I in the Group, which had always been the understanding. Further, the Deceased did not want the Plaintiff and the Plaintiff’s Mother to interfere with the business of the Group, which was in the process of closing down.

…

(b) As a result, the following were agreed:-

(i) The Deceased would transfer the Shares to me to reflect the 50/50 position between us within the Group. At that time, I had orally asked Sylvia Yung to calculate the market value of the Shares based on the expected sale of the assets of the companies. According to Sylvia Yung, she duly did so by looking into the accounts of the 4 companies and came to a calculation that the estimated total value of the Shares was of about HK$5 million.

(ii) The Deceased took the view that the Shares should be transferred to me without payment. I then counter-proposed to him that I could make the payment by setting off the said estimated total value of the Shares from the Deceased’s Debts. As I had confirmed with Sylvia Yung, the accumulated debts owed by the Deceased to me over the years as could be gathered from the company ledgers amounting to over HK$20 million. I told the Deceased that I had no intention to ask him to repay the Deceased’s Debt and hence I could make use part of the debt to set off the price of the Shares. The Deceased agreed and I duly told Sylvia Yung about the arrangement.

…

96. I turn to the value of Shares. As said above, according to the accounts as studied by Sylvia Yung, the value of the Shares was about HK$5 million. However, as the ‘payment’ for them was meant to be done by setting off the debt owed by the Deceased to me, at the suggestion of Sylvia Yung, it sufficed to state the par value of the Shares on the transfer documents. However, that would not create any stamp duty problem as the relevant Instruments of Transfer and the Bought and Sold Notes were submitted to the Stamp Duty Office together with the management accounts. …

97. … As said, when I discussed with the Deceased about the transfer of the Shares, the Deceased had been told that the market value of the Shares was about HK$5 million, a figure which I obtained from Sylvia Yung and that the Deceased had no quarrel with setting off the price of the Shares from the Deceased’s Debt.

98. The Plaintiff also queried in paragraph 38 of the Plaintiff’s Affirmation as to why the value of the Shares was estimated on the basis of the ‘Net Assets as at 28/2/2014’.  She seemed to suggest that the proper date should be 6 September 2012, the date of the transfer documents.  As I have confirmed with Sylvia Yung that she picked the date of 28 February 2014 to illustrate the value of the Shares as the date chosen would give a more accurate reflection of the ‘market value’ of the Shares.  According to Sylvia Yung, that was so as by 28 February 2014 most of the assets of the Group had been sold.  The net asset figures prior to the Shares Transfers (say in early September 2012) would be a book value only, and would be lower than the figure as at 28 February 2014. …”

29.  Regarding the second matter of the withdrawal by the deceased of HK$2.5 million from five companies on 5 September 2012 and paid the same to the defendant, the defendant said in paras 90 and 120 to 122 of his 2nd affirmation as follows;

“90. …

(a) The following concerns were identified by the Deceased and me:-

…

(ii) The Deceased also expressed his worry over the financial well-being of the less well-off members of the family and considered that something should be done to help them.

(b) As a result, the following were agreed:-

…

(iii) A family fund with contribution from both the Deceased and me would be set up. The idea was to mete out distribution from the fund to family members in need. It was agreed that the Deceased and I would each contribute HK$2.5 million towards the fund. I call this fund ‘Family Fund’.

(iv) The intended beneficiaries of the Family Fund would be the siblings of the Deceased and me as well as their children. The Deceased entrusted me with complete discretion to administer the Family Fund.

...

120. … This HK$2.5 million was the Deceased’s contribution to Family Fund as mentioned above. The sum was paid out to me so that I could proceed to establish Family Fund as agreed. It can be noted from the documents produced in Exhibit ‘CHSA-6’ that the Deceased had signed the cheques for the payment of the HK$2.5 million. I also contributed HK$2,500,000 of my own money to the Family Fund.

121. Regarding the establishment of Family Fund, I further elaborate as follows:-

(a) On 3 September 2012, I opened an independent bank account in Bank of East Asia for the Family Fund (‘Family Fund Account’). … The sum of HK$5,000,000 was then deposited into the Family Fund Account. …

(b) I have since invested the sum into Unit Trust so that the monthly dividend of the Unit Trust can be distributed to the less well-off family members who are in need.

…

(e) Since September 2012, I have used the Family Fund by transferring monthly distributions to Kim Hung, Choi Kim Wah and Tsoi Kit Yee, Kitty, daughter of Kim Hung. There is now produced and shown to me marked Exhibit ‘CKL-58’ a summary table of the transactions … from 4 September 2012 to 1 December 2014.

122. With reference to the matters aforesaid, for the avoidance of doubt, I must confirm that I have never obtained any benefit from the sum of HK$2.5 million given to me by the Deceased and have no intention to do so.  I abide by the arrangement and agreement made between the Deceased and me that the Family Fund would only be used for the benefit of and to cater for the needs of other family members.”

Legal principles

30.  The plaintiff referred to Re Estate of Lee Da Kor [2010] 1 HKLRD 415 at paras 16-18 for the principles governing the executor’s duty to account:

“Duty to account

16. The applicable principles are well established.

17. It is the duty of an executor of keep clear and accurate accounts, and to be always ready to render such accounts when called upon to do so: see Halsbury’s Laws of Hong Kong (2008 Reissue) Vol.27, para.425.897. In order to provide a true and perfect account, the executor must provide details of the whereabouts of all properties (including cash) which he is bound to administer: see Kwok Wing Yun v Lee Shuk Yee (unrep., HCMP 3904/2001 [2008] HKEC 846), per Chung J at para. 19.

18. Further, under s.56 of the Ordinance, personal representatives are, when so ordered by the court, to exhibit on oath in the court a full inventory of the estate and render an account of the administration of the estate to the court. Correspondingly, the court may under O.85 r.2(3) order executors to furnish and verify accounts.”

31.  The plaintiff also relied on the principles pronounced by Reyes J in In the Estate of Cheung Hung Hai, deceased, HCMP 3956/2002 (29 January 2004) and I highlight two of which as follows:

“…

2. First, an executor stands towards a residuary legatee as a fiduciary to a beneficiary. The residuary legatee has an interest in ensuring that the executor administers an estate properly.

…

8. Seventh, where it appears, perhaps from the number and type of objections made by a beneficiary to an account rendered or perhaps from the rival contentions of beneficiary and fiduciary on some issue or issues, that there is:-

(1) a serious question or dispute between beneficiary and fiduciary as to what constitutes the assets of an estate or as to the proper administration of the estate; and,

(2) such dispute cannot be resolved by the provision of a verified account by the personal representatives,

the Court may in it discretion order that there be an inquiry into the question.  The Court can order an inquiry in other situations.  The specific example which I have just mentioned is one which is pertinent to my deliberation here.”

The plaintiff’s submissions

32.  Mr Chan submitted that the circumstances surrounding the transfers of shares were suspicious and called for conscientious investigation as to their validity.  Mr Chan referred to the making of the last will by the deceased on 5 September 2012.  The deceased was medically examined beforehand to ensure that he had the mental capacity to make the will.  Mr Chan thus queried why the transfers were not executed at the same time but on the next day.  The plaintiff also said in her affirmation that she and her mother were with the deceased for most of the time on the next day, but they were not aware that the deceased had signed the transfers. The plaintiff further alleged that the deceased had instead told his wife that he had signed some annual returns of companies at the request of his personal assistant, Ms Apple Kwan.  The plaintiff doubted if the deceased was able to read or understand the documents which he might have been asked to sign on that day.

33.  Given the significant assets held by the companies, the plaintiff doubted the sufficiency of the consideration at the nominal value of the shares as stated in the stamped transfer documents.  If the transfers were at an undervalue, that would have benefitted the defendant.

34.  The plaintiff also doubted the defendant’s explanation that the transfers were to achieve a 50:50 position for the deceased and the defendant. The reason being that the defendant had on 7 September 2009 transferred 2,499 shares in one of the involved companies to the deceased.  That had the effect of widening the disparity of holding between the two.

35.  Mr Chan also referred to the unsatisfactory way in which the defendant had explained the transfers since February 2014 including the defendant’s use of appendix IV and the further information in the defendant’s two affirmations.  The waiver by the defendant of all the debts owed by the deceased in consideration of the transfer was only mentioned for the first time in the defendant’s 1st affirmation.  Mr Chan thus submitted that it is still unclear what the fair value of the shares was as at 6 September 2012.

36.  Regarding the HK$2.5 million, it was treated by the defendant as part of the HK$15.9 million owed by the deceased to various companies in the Transward Group.

37.  Mr Chan referred to the queries in the 26 May letter. One of which asked the defendant what he had done in ascertaining whether the HK$15.9 million debts were true and correct.  The defendant replied to this in para 9 of the 7 July letter saying that all assets and liabilities of the deceased had been set out in the schedule of assets and liabilities annexed to the grant and he was not aware of any other asset or liability of the deceased.  After the plaintiff had raised the HK$2.5 million query in her 1st affirmation, the defendant then explained it in his 2nd affirmation by disclosing the setting up of the “Family Fund”.

38.  Mr Chan further submitted that the transfers of shares and the withdrawal of the HK$2.5 million took place when the deceased was hospitalized and in circumstances that the plaintiff had no knowledge of at the time.  It is also no longer possible for the deceased to rebut the defendant’s explanations. Hence, the court should be cautious in accepting the defendant’s evidence (see Yung Shu Wu v Vivienne Sung Wu (2011) 14 HKCFAR 39 at 73 and Thomas v The Times Book Co Ltd [1966] 2 All ER 241 at 244).  He asked the court to order an enquiry on the transfers of shares, the enforceability of the debt of about HK$26 million allegedly owed by the deceased to the defendant and the deceased’s agreement to contribute HK$2.5 million to the “Family Fund”.

The defendant’s submissions and analyses thereon

39.  There is no dispute on the applicable legal principles. Mr Li for the defendant however emphasised that it is a matter of discretion of the court on whether to order the rendering of account and inventory by the executor.

40.  Regarding the transfers of shares, Mr Li referred to the 26 May letter and said that the plaintiff’s then query was:

“What has the Executor done in terms of considering these purported transactions and their validity? Were they done for full value and consideration? What was the true and proper value of the various shares transferred at the time.”

41.  He criticized the plaintiff for not spelling out in the letter her specific objections but only revealed them in her 1st affirmation as follows:

“(1) the previous valuation date of the Shares adopted by D (28 February 2014) was wrong and that 6 September 2012 ought to be used instead (P(1^st) (B1 96 at para.38); and

(2) there were ‘apparent discrepancies in the explanations so far given by [D]’ as to how the Shares were paid for (P(1^st) (B1 97 at para.39).”

Mr Li further submitted that if the plaintiff was eager to seek an explanation on her perceived discrepancies, he expected her to have identified the perceived discrepancies in the 26 May letter.

42.  I disagree with this submission.  If the defendant should have properly explained everything or before the commencement of proceedings, which he could have done so, there would have been no room for the plaintiff’s specific objections.  His case would also be on firmer ground.  Given that his explanations only came in dribs and drabs and were discrepant, it was only natural that the plaintiff would have pursued him for a proper explanation and raised her objections as perceived by her from time to time and to seek vigorously for an order for enquiry.

43.  Regarding the HK$2.5 million which was debited against the deceased’s accounts and paid to the defendant on 5 September 2012, Mr Li criticized the plaintiff for not mentioning this in the 26 May letter.

44.  However, given the time and circumstances of the payment and the lack of any contemporaneous document evidencing its purpose, if the defendant were not also the recipient of the payment and were unaware of its purpose, he as the executor would have carried out an enquiry on why the payment was made and whether there was any cause of action for recovery.  He would then report in his account to the beneficiary the result of the enquiry and whether the estate should take action for recovery.  The fact that he is both the executor and the recipient of the payment does not moderate his duty to the beneficiary to any extent.

45.  The fact that the defendant is the executor and also the recipient of the payments also puts him in a situation of conflict of interest. He should therefore be more vigilant in discharging his duty to the beneficiary and to do so in as full and transparent a manner as possible.  Mr Li has tried to excuse the defendant’s default by putting the blame on the plaintiff’s failure to raise the query earlier.  But I repeat that the time and circumstances of the payment and the absence of any contemporaneous document evidencing the purpose would have obliged the executor to enquire and report.  He should not have waited for the enquiry from the beneficiary.

46.  The defendant also complained that the application was taken out too soon as only eight months had lapsed since the grant.  He in fact complained that the plaintiff had been oppressive to him by demanding him to vest unto the plaintiff the properties in the estate, the shares in the companies and to appoint her a director of the companies all at short notice.  But he had no problem in meeting all these demands.  He also gave no explanation on why he should not have accomplished these tasks before the demands were made.  If he should have been more proactive, less legal costs would have been incurred and the relationship between the parties could have been less acrimonious.

47.  Regarding the timing of these proceedings, though they were instituted only eight months after the grant, the defendant had no difficulty in dealing with them.  He was able to file two lengthy affirmations by himself (41 pages and 62 pages respectively) and two affirmations by the staff of the companies to oppose these proceedings.  I do not think the defendant has been prejudiced by the timing of these proceedings.

Decision

48.  In the light of the unsatisfactory way that the defendant had explained the transfers of shares and the alleged indebtedness of the HK$21 million odd and of his omission to deal with the payment to him of HK$2.5 million, I am of the view that the plaintiff is justified to seek a true and perfect inventory and account of the whole estate as from the date of the deceased.  However, I am also of the view that the defendant has now provided substantial documents, information and explanation on the assets and liabilities of the deceased’s estate.  The plaintiff’s accountants have also had access to and studied the accounts of the companies in the Transward Group for months.  I do not think it would take the matter any further if I should order a true and perfect account now.  That would instead incur a substantial expenditure on the estate.

49.  I would therefore accept the suggestion of Mr Chan made at the end of the hearing that I should instead order the defendant to provide the plaintiff with an up-date of the simple up-dated account that he had rendered on 9 October 2014 (C4 837-841).  He should include therein all the assets and liabilities including those that had gone missing like the items of properties kept in the deceased’s office.  He should verify this up-dated account by affirmation and to affirm that all documents relevant to the items therein had been provided to the plaintiff already. I so order.

50.  Regarding the claim for an order of enquiry on the transfers of shares, the alleged debt of HK$21 million odd and the payment of HK$2.5 million, I again do not think an order of enquiry will take the matter any further as the defendant has made his position on these matters very clearly and there does not appear to be more relevant documents that can be revealed by an enquiry.  Any order of enquiry may instead delay the litigation that the plaintiff may wish to institute on these issues.  I would therefore decline the plaintiff’s claim for such order.

Costs

51.  On the question of costs, I think the plaintiff is justified in seeking an order of enquiry though I have declined her claim in the exercise of my discretion.  Nevertheless, I think the plaintiff in conducting these proceedings has cast too wide a net and drag in a host of matters that the defendant had already dealt with by way of supply of documents and explanations prior to the proceedings.  Furthermore, the plaintiff’s accountants had also spent months in the office of the Transward Group going through the accounts of the companies.

52.  If the plaintiff should have focused just on the transfers of shares, the alleged debt of HK$21 million odd and the payment of HK$2.5 million, I would have ordered the defendant to personally pay the plaintiff the costs of these proceedings.

53.  Now that the scope of the proceedings was extended unnecessarily and a lot more expenses had been incurred unnecessarily by both sides, it would be unfair to require the defendant to personally bear his own costs and the costs of the plaintiff.

54.  The three matters above-mentioned in fact constitute a relatively small portion of the whole proceedings.

55.  In the premises, I consider it fair to make a costs order nisi that there be no order as to costs as between the plaintiff and the defendant and that the defendant be allowed to recoup from the deceased’s estate only 50% of his own costs on a trustee basis.  I so order.