ADRIENNE MARSH LEFKOWITZ (FEMME SOLE) v. THE BANK OF NEW YORK AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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Nature of Application

1. In this application, the Plaintiff seeks an order under s.36 of the Probate and Administration Ordinance ("the Ordinance") appointing Matheson Trust Company (Hong Kong) Limited ("Matheson") as the administrator of the estate of Mr Nicholas Marsh ("Mr Marsh") in place of the Defendants.

Background

2. The Plaintiff is the daughter of Mr Marsh and a beneficiary under his will. On 15th March 1998, Mr Marsh died domicile in New York. The Plaintiff was also named as the executrix of Mr Marsh's will and was granted preliminary letters testamentary in New York on 25th April 1988. Her appointment was revoked by the New York Surrogate Court on 19th April 1990. On 26th February 1992, the 1st Defendant ("BNY") obtained probate of the will of Mr Marsh and was granted letters testamentary and trusteeship.

3. The estate of Mr Marsh consists of assets in the United States and Hong Kong. In respect of his estate in Hong Kong, the Plaintiff on 8th October 1990 entered a caveat in the Probate Registry. On 12th April 1991, letters of administration ad colligenda bona was granted to Mr Gordon Oldham ("Mr Oldham") and Ms Dianne Brennan ("Ms Brennan"), as attorneys for BNY. The Plaintiff then applied to discharge the letters of administration ad colligenda bona. On 6th May 1991, Nazareth, J. (as he then was) refused the Plaintiff's application on BNY's undertaking to apply within 7 days for administration pendente lite. On 13th May 1991, BNY applied to be appointed administrators pendente lite. On 14th May 1991, Probate Action No. 5 of 1991 was instituted by BNY seeking probate of the will of Mr Marsh. On 15th May 1991, BNY sought the appointment of Mr Oldham and Ms Brennan as the administrators pendente lite. The application was opposed by the Plaintiff. On 12th May 1992, Godfrey, J. (as he then was) appointed Mr Oldham and Ms Brennan as administrator pendente lite and ordered the BNY's action for probate be heard as short cause list unless the Plaintiff within 28 days apply under s.36 of the Ordinance for appointment of alternative administrator and thereafter proceed with due diligence and expedition. On 15th September 1992, letters of administration pendente lite was issued to Mr Oldham and Ms Brennan.

4. The present proceedings were issued on 8th June 1992. There was an unsuccessful attempt by the Plaintiff to obtain leave to cross-examine in May 1994. In January 1995 the hearing of the Originating Summons was again aborted because of the Plaintiff's application to put in further evidence which was rejected by me. Shortly before the present hearing took place, the Plaintiff applied for an adjournment of the hearing. The application was rejected.

Basis of removal

5. The issue before me is whether the Defendants are fit to carry out properly the administration of the estate and to serve in the interest of all the beneficiaries. The evidence filed in this case is voluminous. Mr Michael Thomas, Q. C. Counsel for the Defendants said the Plaintiff has filed 2,437 pages of affidavits and exhibits. Mr Shaw, Counsel for the Plaintiff, informed the court that the grounds for removing the administrators are in the main set out in the two affidavits of the Plaintiff filed on 24th June 1992 and 6th April 1994 respectively. Mr Shaw submitted that BNY and its attorneys are unfit to be administrators for a number of reasons:

Grounds of opposition

6. The Plaintiff's application is opposed by the Defendants on the following grounds:

Jurisdiction of Hong Kong Court

7. The arguments of Mr Thomas can be summarised as follows:

8. Illustration of the principle in (iii) is found in the case of Miller v. James [1873] LR 3 P&D 4; Orr-Ewing v. Orr-Ewing [1882] 22 Ch D 456 and Re Yahuda, deceased [1956] P388.

9. Mr Thomas submitted that New York as the domiciliary court is the appropriate forum for the determination of issues affecting the foreign grant and proceedings in Hong Kong for the determination of such issues should be stayed on the ground of forum non convieniens (Spiliada [1987] AC 460).

10. There is certainly great force in this submission. Mr Thomas, however, has indicated that the Defendants would not rest their case on this ground alone and he would invite the court to make a determination of the other issues raised in this case. This is an approach I intend to adopt. Whilst I should give recognition to the appointment by the New York courts of BNY as executor of the will of Mr Marsh, I would prefer to deal with this case on the basis of the issues raised by the parties on the fitness of the Defendants to act as administrators.

Issues already litigated in New York

11. If the issue whether the representative appointed by the foreign court is a fit and proper person to act in that capacity, or is improvident, irresponsible or hostile to the beneficiaries has already been raised and decided by a foreign court of competent jurisdiction at the instance of the same party, they cannot now be re-litigated. In Dicey and Morris, p.466, it was stated that:

"A plaintiff who has brought proceedings abroad and lost may seek to bring a similar action in England; or in proceedings on a different cause of action an issue may be raised which has been decided abroad. In such cases a foreign judgment entitled to recognition may give rise to resjudicata, i.e. to a cause of action estoppel, which prevents a party to an action from asserting or denying, as against the other party, the existence of a cause of action, the non-existence or existence of which has been determined by the foreign court, or to an issue estoppel, which will prevent a matter of fact or law necessarily decided by a foreign court from being re-litigated in England."

See also Carl Zeiss Stiftung v. Rayner and Keeler Ltd. (No.2) [1967] 1 AC 853.

12. A review of the evidence certainly showed that many of the issues relied upon by the Plaintiff were litigated before. The issue that was litigated was the fitness of BNY to be the executor of the estates of Mr Marsh and Mrs Marsh, who died on 13th May 1990. Allegations that were relied upon include the improvidence of BNY in mismanaging and improperly selling the family company known as Joseph Markovits, Inc. ("JMI"), and the hostility of BNY and its attorney Mr Streng towards the Plaintiff (it was alleged in one instance Mr Streng had ransacked the office of the Plaintiff and discarded her documents thereby preventing her to conduct properly a hearing in New York). The following is a brief history of the litigation between the parties.

Mr Marsh's estate

1. In April 1988, the Plaintiff was granted preliminary letters of administration of Mr Marsh's estate.

2. In August and September 1988, she (1) commenced proceedings to compel Mrs Marsh and others to turn over estates and records in their possession; (2) initiated an action to remove Mrs Marsh as a director of JMI; and (3) sought and obtained an appointment of a guardian ad litem for Mrs Marsh. (p.368 of bundle)

3. On 20th December 1988, Mrs Marsh began proceedings to revoke the Plaintiff's preliminary letters. Thereafter there were many court appearances.

4. The Plaintiff alleged that on 12th February 1990, Mr Streng had removed documents from her possession.

5. On 19th March 1990, the Surrogate's Court (Lambert S) in New York revoked the Plaintiff's preliminary letters.

6. On 19th April 1990, the Surrogate's Court (Lambert S.) found that the Plaintiff was unfit to be the executrix and she was removed. BNY was appointed in her place. The Court stated that:

"In summary, it is clear from the entire record therein and from the respondent's own testimony and submissions by her or on her behalf that the preliminary executrix has failed to fulfill her duties and responsibilities as an estate fiduciary and mush be removed immediately . . . Moreover, her hostility, acts of improvidence and clear conflict of interest with the beneficiaries of the estate make her ineligible to serve as a permanent fiduciary ...."

(The judgment of the Surrogate's Court is at pp.296 to 304 of the bundle).

7. BNY applied to serve as the executor of Mr Marsh's estate. The Plaintiff by cross-motion of 16th August 1990 alleged unfitness of BNY to act because of conflict of interest and improvidence. In her affidavit in support of her application (p. 315 of the bundle) matters regarding BNY's conflict of interest, improvidence and fraud misconduct were alleged. Issues regarding JMI and the ransacking of the office by Mr Streng was referred to.

8. On 22nd August 1990, the Surrogate's Court (Lambert S.) rejected the Plaintiff's cross-motion and BNY was appointed as preliminary executor subject to further hearings into qualification eligibility.

9. In May 1991, the appellate court dismissed the Plaintiff's appeal against the decision of removing her as the executrix. She however, failed to perfect an appeal from the order dated 27th August 1990. The judgment at p.307 stated that:

"We have not reviewed respondent Lefkowitz's claim of misconduct by adverse counsel, as she has not perfected an appeal from the order dated August 27th 1990 denying her motion to disqualify such counsel."

10. BNY's appeal against the order for further hearing into qualification eligibility was successful. The appellate court on 30th January 1992 affirmed the decision that BNY be designated as permanent executor and trustee (pp.350 to 355).

11. The appellate court, also by a judgment of the same day namely 30th January 1992, affirmed the Surrogate's Court's (Lambert S.) decision which denied the Plaintiff's motion to disqualify the opposing attorneys. The issue of the ransacking of the paper by Mr Streng was referred to. The Plaintiff alleged misconduct because privileged documents were looked at. The court held that there was no such wrongful misconduct. The judgment stated that "We have considered the other issues raised and found them to be without merit" (pp.569 to 70 of the bundle).

12. On 26th February 1992, BNY obtained probate of the will of Mr Marsh and was granted letters testamentary and trusteeship (pp.356 to 358 of bundle). The Plaintiff did not appeal against that decision.

13. The Plaintiff had made further applications to the court for the renewal of her unsuccessful application to disqualify counsel and vacature of the order removing her. On 21st October 1992, the Surrogate's Court (Preminger S.) denied her application. It was said that:

"Ms Lefkowitz's motion practice, while not yet abusive is repetitive. Such practice places an unfair burden upon the estate, other counsel and the court. Accordingly the parties may hereunder request a preliminary decision from the court determining whether responsive papers are required in a particular instance. The issue of sanction is preserved and shall be determined as an instant to the pending accounting proceedings." (pp.1466 to 1469)

14. The appellate court on 31st March 1994, affirmed Preminger S.'s denial of the Plaintiff's motion to vacate, on grounds of fraud and new evidence, orders in March and April 1990 removing her as executrix as Mr Marsh's estate and appointing BNY as permanent executor and trustee (pp.2808 to 2810).

15. On 4th April 1992, the Plaintiff petitioned to remove BNY as executor of Mr Marsh's estate for improvidence, dishonesty and misconduct (p.2716). The BNY by a motion of February 9th 1993 sought summary judgment dismissing the petition. By order dated 15th July 1993, the Surrogate's Court (Preminger S.) ordered firstly, the application to remove the BNY as executor shall be held in abeyance pending the BNY's accounting to be filed upon the settlement of the accounting of the Plaintiff. Secondly, BNY's motion for summary judgment to dismiss the petition to revoke its letters was denied without prejudice for leave to renew.

Mrs Marsh's estate

1. BNY obtained preliminary letters of administration of Mrs Marsh's estate. On 29th July 1991, the Surrogate's Court (Emanuelli S.) refused summary judgment for the probate of the will of Mrs Marsh and the second codicil and dismissed the cross-motion for an order to revoke the preliminary letters of administration (pp.572 to 576).

2. On 6th September 1991, the Plaintiff petitioned to the Surrogate's Court for the removal of BNY as executor of Mrs Marsh's estate for improvidence, dishonesty and false representation (pp.387 to 402). The contents of the petition referred to BNY's failure to conduct a liquidation analysis prior to the sale of JMI, and alleged that an orderly liquidation might have raised as much as $5 million. The ransacking by Mr Streng was again referred to. BNY filed an answer to the petition. The Plaintiff also sought discovery of BNY's document (pp.578 to 586) and on 24th July 1990, BNY sought summary judgment to strike out the Plaintiff's petition and sought protection against discovery (pp.361 to 385).

3. On 15th August 1992, the Plaintiff made an affidavit in opposition to the BNY's motion for summary judgment and protective orders. The affidavit referred to the sale of JMI at undervalue; the ransacking of documents by Mr Streng; the improvidence and hostility; and exposure to penalties in Hong Kong through non-reporting.

4. On 21st December 1992, the Plaintiff's petition to remove BNY from her mother's estate was dismissed by the Surrogate's Court. Strong words were used the Surrogate Emanuelli:

Dispute of issues

13. In this application Mr Streng at paragraph 20 of his affidavit dated 22nd September 1992 summarised the issues raised by the Plaintiff in the New York actions:

14. He contended that many of the allegations described by the Plaintiff in support of her present application in Hong Kong had been addressed.

15. The Plaintiff disputed Mr Streng's contention. In paragraph 54 of her affidavit of 11th November 1992, she said the order of 30th January 1992 of the appellate court is irrelevant to the fitness in Hong Kong of the administrators of BNY (p.813). It is not clear why she said the decision was irrelevant because the entry and the ransacking of the files is one of the issues relied upon by Mr Shaw in this hearing. The Plaintiff further said that the appellate decision was concerned with the events that took place prior to August 1990 and not BNY's performance after 1990. She said that evidence gathered pursuant to depositions and subpoena from September 1990 to November 1990 was not, considered by the appellate court. It may well be that the appellate court in January 1992 did not consider those matters. However, it is clear from the summary of events, the Plaintiff had made further applications in respect of Mr Marsh's estate resulting in decisions made by the Surrogate's Court in October 1992 and affirmed by the appellate court on 31st March 1994 (p.2810). In respect of Mrs Marsh's estate, the decision of 21st December 1992 again referred to the repetition of allegations the Plaintiff had relied upon in Mr Marsh's estate. Many of the allegations are again repeated here and should not be re-litigated again.

16. I will now deal with the specific allegations relied upon by the Plaintiff in her application to remove the Defendants.

1. Conflict of interest and duty

(i) Position of Ms Brennan

17. Ms Brennan is a solicitor and has been employed as the in-house counsel of Hutchison Whampoa ("Hutchison") since August 1992. She began acting as the administrator pendente lite on 15th September 1992. Hutchison is a company under the control of Mr Li. Mr Marsh had substantial investments with Mr Li. The Plaintiff argued that Ms Brennan's interests and duties as an employee of Hutchison placed her in a position of conflict with her duty as administrator to make full enquiries with Mr Li to disclose all assets held by him on behalf of the estate. As attorney and nominee, Ms Brennan had to act umberrimai fide with BNY. She was obliged to disclose to BNY her employment with Hutchison. Prima facie, BNY knew or ought to have known that she was in a position of conflict. Further, in her affidavit of 4th May 1991, Ms Brennan referred to the assets held by Mr Li and said that there were many enquiries to be made. In that affidavit, Ms Brennan stated that as a result of enquiries by the administrators, they have received a letter from P.C. Woo & Co. dated 13th April 1991 written on behalf of Mr Li indicating that as at 31st December 1990, the sum of HK$61,968,246.45 was held on behalf of Mr Marsh's estate. She also said that there are obviously many further enquiries to be made in order to protect the assets of the estate and to collect or otherwise deal with them. In fact, insufficient enquiries were made and many questions relating to the accounts have not been pursued. This is to be contrasted with BNY's effort to issue letters rogatory on 12th August 1993 seeking to question Mr Li, but only in relation to the gift of $500,000 by Mr Li to the Plaintiff. Even then BNY have not proceeded with the execution of the letters.

(ii) Position of BNY and Peregrine

18. BNY had been seeking to expand its US securities business in Hong Kong and China. It has been actively promoting the use of American Depository Receipts ("ADR") as a means of listing in the US the shares of companies in Hong Kong and China. Peregrine Investment Holdings Limited ("Peregrine") is an aggressive merchant bank in Hong Kong with close connections with Mr Li who directly owns stakes through Cheung Kong and Hutchison Whampoa. The Chairman of Peregrine, Mr Tose, has close ties with Mr Li. Peregrine acted as advisor and underwriter to Cheung Kong and Hutchison on a number of occasions. In 1993, Peregrine launched an ADR programme of its own shares in the US using the services of BNY which acted as depository of the Peregrine shares.

19. BNY was fully aware of the possibility of conflict in 1988. McCarthy Fingar Donovan, Drazen and Smith ("McCarthy") was a firm of lawyers in New York who prepared the codicil of Mrs Marsh. McCarthy approached BNY in May 1988 enquiring whether it would accept the appointment of executor and trusteeship of the will of Mrs Marsh. According to a memorandum of McCarthy dated 10th May 1988, it was recorded that Mr O'Connor of BNY stated that "It might be difficult for the Bank if it had relations with Li Ka Shing to pursue assets." (see Exh. AML 14 to the 5th affidavit of the Plaintiff).

(iii) Wing Hang Bank

20. The Plaintiff further submitted that BNY owns a large interest in the Wing Hang Bank which "inevitably must do business with the Hong Kong and Shanghai Bank Corporation and its affiliates".

BNY has made no sufficient enquiries into assets held by Mr Li and in Quebeton

21. Central to the allegation of conflict of interest is the Plaintiff's complaint that the Defendants had not made full inquiries with Mr Li of the assets he held for the estate or had marshalled such assets. Mr Li was a friend or Mr Marsh. Mr Li held investments in Cheung Kong shares on behalf of Mr Marsh ("the Li Funds"). Mr Marsh also had interest in a company called Quebeton which is related to Mr Li ("the Quebeton shares"). The Plaintiff complained that the BNY had knowledge of Mr Marsh's assets with Mr Li and in Quebeton, however, those assets were not disclosed in the affidavit filed with the Estate Duty Office of Hong Kong on 10th December 1990. In the memo dated 10th May 1988, McCarthy stated that "the combined properties of Mr and Mrs Marsh were in the range of $75 million to $150 million (from the divorce proceedings)". In a memo dated 20th May 1988, McCarthy stated that:

"Mrs Marsh also talked about the relationship of her family to Li Ka Shing. She said that a good deal of her husband's assets were in the name of Li Ka Shing or companies controlled by Li Ka Shing. She said that she could not imagine Li Ka Shing divulging information as to this interest or returning any of the assets. She said that she he was inclined to send flowers to her husband. She said had no explanation as to why her husband would transfer assets to Li Ka Shing."

22. The Plaintiff submitted that no genuine attempt had been made by the administrators to verify the assets held by Mr Li on behalf for Mr Marsh. They readily accepted the figures disclosed by Mr Li on 30th April 1991 which over three years after the death of Mr Marsh. The only attempt by BNY to question Mr Li was in relation to one limited issue - that of a cheque from Mr Li made payable to the Plaintiff on 16th October 1984 in the sum of US$500,000. The administrators had made no attempt to question Mr Li on other issues relevant to the accounts disclosed by Mr Li such as -

The Law

In Letterstedt v. Broers [1884] 9 AC 371, the Privy Council stated that:

"It seems to their Lordships that the jurisdiction which a Court of Equity has no difficulty in exercising under the circumstances indicated by Story is merely ancillary to its principal duty, to see that the trusts are properly executed. This duty is constantly being performed by the substitution of new trustees in the place of original trustees for a variety of reasons in non-contentious cases. And therefore, though it should appear that the charges of misconduct were either not made out, or were greatly exaggerated, so that the trustee was justified in resisting them, and the Court might consider that in awarding costs, yet if satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate."

At p.389, it was further held that:

"It is quite true that friction or hostility between trustees and the immediate possessor of the trust estate is not of itself a reason for the removal of the trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is certainly not to be disregarded."

23. In Hunter v. Hunter [1938] NZLR 520 Myers, C.J. held that if satisfied that the continuance of the trustees would prevent the trust being properly executed, then the trustees may be removed. And at p.530, he stated that:

24. In Bartlett v. Barclays Bank Trust Co. Ltd. [1988] 1 Ch. 515, Brightman, J. at p.532 held that:

"... The bank, as trustee, was bound to act in relation to the shares and to the controlling position which they conferred, in the same manner as a prudent man of business. The prudent man of business will act in such manner as is necessary to safeguard his investment. He will do this in two ways. If facts come to his knowledge which tell him that the company's affairs are not being conducted as they should be, or which put him on inquiry, he will take appropriate action. Appropriate action will no doubt consist in the first instance of inquiry of and consultation with the directors, and in the last but most unlikely resort, the convening of a general meeting to replace one or more directors. What the prudent man of business will not do is to content himself with the receipt of such information on the affairs of the company as a shareholder ordinarily receives at annual general meetings. Since he has the power to do so, he will go further and see that he has sufficient information to enable him to make a responsible decision from time to time either to let matters proceed as they are proceedings, or to intervene if he is dissatisfied."

At p.534, Brightman, J. further held that:

"A higher duty of care is plainly due from someone like a trust corporation which carries on a specialised business of trust management."

Inquiry of money held by Mr Li

Evidence of inquiry of Li Funds

25. As the central issue is in respect of inquiry by the Defendants of the money held by Mr Li for the estate, I will deal with this first. In respect of the Li Funds and the Quebeton shares, Mr Oldham pursued these matters with Mr Li commencing from 14th January 1991. There were exchange of correspondence between Mr Li's solicitors Messrs P.C. Woo & Co. Cheung Kong and Mr Oldham. On 30th January 1992, P.C. Woo & Co. further furnished to Mr Oldham a summary of the funds held by Mr Li on behaif of Mr Marsh from 1st January 1969 to 15th March 1988, which was the date of the death of Mr Marsh, and from 16th March 1988 to 20th January 1992. Details of those funds were set out in the Statement of Accounts exhibited to the 5th affidavit of the Plaintiff. Both Mr Streng and Mr Ulshafer of BNY had meetings either with Mr Li or Mr Li's legal advisers.

26. The Plaintiff complained that from the correspondence the Defendants showed a ready acceptance of what was said by Mr Li. Based on the affidavit evidence before me, I just could not say that the Defendants had not pursued fully their enquiries with Mr Li on the property he held for Mr Marsh. It was accepted by Mr Shaw, Counsel for the Plaintiff, that there is no evidence that Mr Li has withheld any sums belonging to the estate. Notwithstanding this acceptance, Mr Shaw nonetheless pressed on with the Plaintiff's case that the administrators should make further enquiries with Mr Li. There is no evidence for suspecting that Mr Li has withheld money belonging to the estate or that the accounts provided by him are not correct.

27. The Plaintiff in her affidavit of 6th April 1994 stated that she believed that no genuine attempt has been made by the administrators to verify the assets held by Mr Li on behalf of her father. The accounts exhibited to her affidavit show that Account No. 1 was started in March 1973. At that time, Mr Marsh was still alive and it is obvious from the documents that he was taking an active interest in his monetary affairs and receiving accounts. This can be see in the correspondence between Mr Marsh and Mr Li's company in 1982 and 1984 (pp. 2519 to 2523). The enquiries that the Plaintiff suggested that the administrators should make of Mr Li, e.g. the reason for the sale of Cheung Kong shares in 1984 and the various transfer of money out of the account, were in respect of matters that took place during the lifetime of Mr Marsh. In the premises, I just do not see how it could be said that the administrators have failed in their duties in not making enquiries with Mr Li.

28. Mr Thomas also drew my attention to the fact that Mr Oldham's firm had negotiations with Mr Li's legal adviser and had obtained released from Mr Li $3 million which had been withheld to cover Mr Li's legal cost. He submitted that it could not be said that there was a reluctance to antagonise Mr Li. (See affidavit of Mr Healey dated 11th April 1994)

High Court Action No.A4573 of 1993

29. The Plaintiff had instituted High Court Action No.A4573 of 1993 against the Defendants seeking a declaration that they are the constructive trustees for her in the sum of HK$12,084,606.28 being money held in the No.2 Account and released by Mr Li to them. The Plaintiff's case is that Mr Li held the money in the No.2 Account on trust for her. I have observed, in my judgment given in January 1995, that the Plaintiff obviously had taken a considered decision of not suing Mr Li. This attitude is puzzling. If the money was held by Mr Li on trust for her, then Mr Li was in breach of trust by releasing the money to the Defendants. If there is evidence showing that the money in the No.2 Account belongs to the Plaintiff, then one would have thought that she should pursue Mr Li in the action as well. With respect to Mr Shaw, it really is not an answer to say that the Plaintiff should not be doing the jobs for the Defendants. Afterall, if her contention is correct, she would be the only beneficiary in respect of the $12 million.

Quebeton shares

30. In respect of the Quebeton shares, Mr Streng had by letter of 13th October 1989 (p.823) informed the Plaintiff of his enquiries made of the company and supplied annual returns and financial statements of Quebeton for the years 1985 to 1989 to the Plaintiff. At that time the Plaintiff was already a preliminary executor of the estate of her father, having been appointed on 25th April 1988, she was not suspended until 19th March 1990. One just do not know what enquiries she had made of Quebeton while she was the executor of the estate. In any event, there is no evidence that the valuation of the Quebeton shares was incorrect.

Value of the estate

31. It is said that in 1988, McCarthy estimated the estates of both parents in the context of divorce proceedings were worth $75 million to $150 million. This was only an estimate made in 1988. There is no evidence that the estates were actually worth that amount. In May 1988, in the conversation between Mrs Marsh and Mr Streng of McCarthy, Mrs Marsh also made reference to Mr Marsh deciding to give profits made in Hong Kong to the Government of Israel. There is, of course, no evidence one way or the other that such donations were made. However I do not consider that an estimate of the worth of the assets would demand the administrators to make further enquiries when there is no ground for suspecting that Mr Li had withheld money belonging to the estate.

Failure to include items in estate duty affidavit

32. Much has been made by the Plaintiff of the failure by BNY and Mr Streng to act earlier and the failure of Mr Oldham to include the Li Funds and the Quebeton shares in the first estate duty office affidavit. Mr Oldham in his affirmation dated 2nd October 1992 stated that the Defendants did not have knowledge of the Li Funds prior to a letter dated 30th April 1991 received from P.C. Woo, solicitor for Mr Li. It was also said that the Quebeton shares was discovered at the same time as the full extent of the Li's Fund came to light. In his 3rd affirmation dated 1st March 1993, Mr Oldham stated that he knew of the Quebeton shares in October 1989. Mr Oldham explained that the Quebeton shares was not disclosed in the estate duty affidavit because he was not clear about their value and there was little indication that the estate might expect to receive those assets. He maintained that neither he nor the 1st Defendant have any knowledge of any property held by Mr Li for Mr Marsh until after receiving the Plaintiff's letter dated 5th January 1991 in which the Plaintiff informed Mr Ulshafer of the 1st Defendant that "As advised last night that additional assets belonging to my father's estate exist in Hong Kong, this development came from a friend of my father's, Mr Li Ka Shing."

33. Mr Shaw referred to the transcript of the proceedings in New York (p.2079), in which counsel for one of the beneficiaries stated that "Extraordinarily, as of 1/17/89 there is a vault folder which indicates several letters written by the deceased to Mr Li Ka Shing, one dated 4/16/87, and one dated 5/15/87, making available $1 million to Adrienne Lefkowitz in each letter." It was submitted by the Plaintiff that if BNY or its attorney knew about the Li Funds prior to 1991, then a serious omission would have been made in the estate duty affidavit and this shows the pattern of the Defendants in dealing with the estate of Mr Marsh. Mr Oldham had explained the circumstances in which such omissions were made. In my view the earlier omission is not relevant to whether further assets should have been collected or pursued.

34. Mr Thomas stated that there is evidence regarding the enquiry made by the administrators but such evidence was not introduced in the light of my ruling in January 1995 when on the Plaintiff's application to adduce further evidence, I ruled that no further evidence could be admitted. However, I should base my decision on the evidence before me. As the matter now stands, I do not find that the Plaintiff has substantiated her case that the Defendants had failed to make proper inquires of the assets held by Mr Li or had failed to marshal the assets. What was required to be pursued by the administrators had been completed.

Ms Brennan

35. Ms Brennan was formerly employed by Mr Oldham. Mr Thomas informed the court that the Defendants had applied in Probate Action No.5 and in Probate Action No.4 (the proceedings relating to the estate of Mrs Marsh) to replace Ms Brennan by a bank official of BNY. However, Godfrey, J. refused the application. The basis of the application for the change was that Ms Brennan had ceased to be an employee of Mr Oldham and not that she would join Hutchison in the future. Hence, the fact that such an application was made to replace Ms Brennan and was refused would not have any effect on the present application by the Plaintiff to replace Ms Brennan on the ground on conflict of interest.

36. If Ms Brennan's employment with Hutchison would preclude her from discharging her duties as an administrator then, of course, she must be removed. Ultimately, the issue, as stated by Letterstedt, is whether her continued representation as an administrator would preclude the trust being properly executed. When the present proceedings were instituted on 8th June 1992, there was no complaint by the Plaintiff against either Mr Oldham or Ms Brennan. Although Mr Cohen in his affidavit of 9th April 1994 (p.2727) referred to the previous employment of Ms Brennan with his firm, there was no evidence of any conflict of interest in the performance of her duties as administratrix. In relation to her current employment with Hutchison, the complaint is that insufficient enquiries had been made of Mr Li regarding the assets he held on behalf of Mr Marsh and there is a prima facie conflict of interest that exist in respect of her position as administrator pendente lite. Apart from this contention, there is no evidence that there is a conflict of interest in her performance.

37. Ms Brennan joined Hutchison in August 1992 by which time 80% of the funds held by Mr Li on behalf of Mr Marsh was paid to BNY and the balance of the fund in the sum of HK$13,900,000 would be collected when the balance of the estate duty required by the Estate Duty Office was paid or guarantees for such sums were given. Regarding the Quebeton shares, the administrators received a sum of HK$3,404,436.34 on 18th September 1992 (see affidavit of Mr Oldham dated 2nd October 1992, p.751). Finding, as I do, that the Defendants had completed the task of inquiry and marshalling the assets held by Mr Li on behalf of the estate, I do not consider Ms Brennan's employment had precluded her from discharging her duties as an administrator.

Peregrine Holdings

38. This is part of the allegation that in failing to pursue the Li assets and Quebeton shares, BNY shows itself reluctant to antagonise Mr Li. There is no evidence pointing towards such a conclusion. In 1988, it was thought that there might be conflict of interest by BNY because Mrs Marsh had indicated that she feared that Mr Li would not divulge information to the administrators. As it turned out, Mr Li had disclosed to the administrators the funds he held on behalf of the estate.

39. The desperate attempts by the Plaintiff to build up a case of conflict can be seen by the very documents produced by her (p.2568) in which it was stated that 16 companies in Hong Kong established the ADR programme, including Bank of East Asia and Peregrine and BNY was working with 12 companies in Hong Kong on similar issues this year. Bank of East Asia was an administrator that the Plaintiff originally proposed to appoint in place of the Defendants. If any conflict exists, it would extend to Bank of East Asia as well. Furthermore, it should be noted that the ADR was developed in June 1993 which was long after Mr Li had paid over $55.8 million in September 1992.

Wing Hang

40. I really do not see how BNY's interest in Wing Hang Bank and its business dealing with Hong Kong and Shanghai Banking Corporation could put BNY in a position of conflict.

Improvidence/failure of duty in its conduct in gathering in and dealing with the assets of the estate JML

41. The primary asset of Mr Marsh's American estate was his 50% interest in JMI. JMI was valued in 1989 at more than US$13 million and there was an offer to purchase JMI. at US$9 million. Eventually, BNY sold JMI for US$2,100,000. The allegations regarding JMI were disputed by the Defendants in Mr Streng's affidavit dated 31st August 1992 filed in the Plaintiff's New York proceedings to revoke the preliminary letters testamentary granted to BNY (p.670).

42. It is not appropriate or possible for me to decide whether BNY is unfit to act as administrators on this ground. This is, afterall, an Originating Summons proceedings. Liu, J. (as he then was) had already refused the Plaintiff's application to cross-examine the deponents of the affidavit. With such a conflict of evidence, it is not possible for me to decide this issue. Furthermore, this issue has already been raised by the Plaintiff in the New York courts and it has been decided that it is not a ground for not granting BNY probate or for removing them as executors. The matter should not be re-litigated.

Pension funds

43. The Plaintiff also alleged that the Defendants had not included pension funds in the original estate duty affidavit. The position of the pension funds is dealt with by Mr Healey in his affidavit of 11th April 1994. The position appeared to be that two family companies operated pension schemes benefitting Mr Marsh. The schemes, however, was not continued. The premium held by the pension companies were liable to be refunded to the companies. The refund was not made at the time of Mr Marsh's death but was only refunded to the companies in November 1993. As a consequence of such refund, the shares in the two companies may be deemed to be more valuable than they may otherwise had been considered at the time of the death of Mr Marsh. Although the administrators were of the view that no further estate duty would be payable, they took advice as to whether they are obliged to disclose such matter to the Inland Revenue Department. Mr Thomas informed the court that this matter has since been resolved as well.

Hostility between the Plaintiff and Mr Frank Streng, the attorney of BNY

44. The Plaintiff submitted that there was a long history of litigation and bad blood existing between BNY and the Plaintiff. The hostility is mutual and vituperative. The Plaintiff claimed that hostility commenced with the ransacking of her office by Mr Streng. Mr Streng refused to hand over documents to her and had her removed as the administratrix of the estate of her father. Hostility has rendered resolution of problems relating to the estate, particularly ownership of Account No.2 held by Mr Li. This led to the institution of High Court Action No.4573 of 1993 by the Plaintiff for determination of its ownership. Hostility accounted for BNY or its attorneys having failed to ask question of Mr Li, e.g. in relation to Account No.2, which might advance the Plaintiff's interest but have instead sought to question Mr Li by legal process only in relation to his gift of US$500,000 to the Plaintiff.

45. The Plaintiff has referred in detail to instances of hostility by the Defendants against her:

Defendants' response

46. Mr Thomas submitted that the matters relied upon by the Plaintiff are at worse evidence of exasperation or discourtesy at best a difference in points of view but are not in any case evidence of a disabling spite or malice or indifference to the Plaintiff's legitimate interest.

47. The correspondence and the evidence of proceedings in the US revealed that there were heated exchange between the parties. However, Mr Thomas submitted that the Plaintiff is clearly a very difficult person to deal with as well. He referred to the comments of the Plaintiff's mother on her character (p.2556) and the comments of the new York courts which I have referred to earlier.

48. In my view, many of the issues on hostility had been litigated before and should not be reopened again. In relation to Mr Streng's refusal to negotiate, it must be considered in the context of Mr Streng's previous dealings with the Plaintiff. In the transcript Mr Streng said that "Ms Lefkowitz has been represented by multitudes of lawyers which involved the litigation of our firm, literally all over the world. She is totally uncomfortable to deal with." In respect of the proposal regarding the No.2 Account, the issue must be whether the funds in the No.2 Account belongs to the estate or the Plaintiff beneficially. The mere fact that the tax consequence of including the funds in the No.2 Account would be of no benefit to the estate and should not be the basis for excluding the funds from the estate. In respect of the properties held by the two sisters, they were apparently gifts by the mother to them under a gift document. In an opinion given on 25th January 1994, Mr Orborn said that the signatures appearing on the gift documents were executed by someone other than the individuals who executed the other documents supplied to him for his examination. This is a matter that should properly be dealt with by the US Court. In respect of the inclusion of the interest from the Li Funds income to the estate, the matter should in my view be dealt with by the New York court in the accounting proceedings. In respect of the pursuit of sanctions by BNY, a review of the decisions of the New York courts clearly showed why such steps were taken. Ultimately, the question is whether BNY has become hostile towards the Plaintiff in a way that renders them unfit to perform their duties as executors. There is no evidence in that regard. As such it is not a ground for removing the trustee.

Misrepresentation to the Hong Kong Court

49. In Probate Action No.5 for 1991, the BNY by summons dated 13th July 1993 applied for transfer of the assets marshalled by the administrators in Hong Kong to New York. The Plaintiff objected to the transfer. Sears, J. ordered the transfer and the decision was approved by the Court of Appeal. It was said that the administrators had made misrepresentations to the court. At para.24 of her 5th affidavit, she said the representation of Defendants' Counsel, Mr Charles Ching, (as he then was) was that the money was needed for payment of taxes in the US and that the US estate was illiquid. The Plaintiff said that the US estate is not illiquid and there had been no settlement with the Inland Revenue Services of US of the tax liabilities as of 2nd March 1994.

50. Mr Shaw stated that the money that was transferred to the US were in fact distributed to the two sisters of the Plaintiff and the Plaintiff was successful in setting aside the transfer. On this particular point, there is no evidence before me and I have ordered in January 1995 that no further affidavit is to be filed. Hence, there is no evidence as to what had happened to the money that was transferred to the US.

51. The application for transfer was supported by the affidavit of Mr Oldham. In para. 15, it was stated that BNY as executor in the deceased's state of domicile has certain obligations pursuant to its grant of letters testamentary and of trusteeship including, inter alia, the marshalling and protection of the estate assets, the payment of liabilities of the estate and the distribution to the beneficiaries. In order to permit and assist BNY, the executor in the deceased's state of domicile, to perform its function as executor, and order transferring the Hong Kong assets to its control is required to enable it to properly perform such functions as executor. The transcript referred to by the Plaintiff did not support what she said to be the representation by Mr Ching to the court. His submission is as follows:

52. At the earlier hearing before Sears, J., Mr Ching informed the court that:

53. I just do not see how on the evidence before me a case of misrepresentation can be made out. Indeed as the Court of Appeal [1995]! HKLR 11 observed, the liquidity of the estate was not a feature which weighed with Sears, J. who merely commented in passing: "The cash position does not appear to be liquid."

54. In respect of the Plaintiff's contention that the application for transfer of the money was an attempt by the administrators to circumvent the present proceedings, I could only say that the transfer had been approved by the Court of Appeal. In respect of the allegation that BNY had calculated their commissions based on assets which included the Hong Kong assets and this is another indication that the administrators and BNY viewed the Hong Kong assets as having been distributed to BNY in New York, this is a matter that can be raised at the accounting proceedings in the US. It is not evidence of BNY's unfitness to be executors.

Failure to provide the Plaintiff with documents and information

55. The Plaintiff claimed that hostility has resulted in BNY's failing or obstructing the Plaintiff in obtaining information and document which she, as beneficiary have the right to obtain.

56. In In re Fairbairn [1967] VLR 633, a beneficiary asked the trustees to produce the books accounts and record of a deceased. Gillard, J. held that,

"There does not appear to be any reason - none prove to me, anyhow - why the trustees should not produce such documents to any beneficiary, having an equitable interest in the property, for the purpose of inspecting the property to discover whether it had any and what value."

57. In In re Pennell, deceased [1945] VLR 302, one of the beneficiaries of the estate complained that the other administrators have refused her access to the books and accounts and other documents of the estate. O'Bryan, J. held that:

"I am also of opinion that her rights as a beneficiary alone entitled her prima facie to production and inspection of these books and documents, which belong to the trustees only on behalf of all the beneficiaries."

In that case, the deceased left his estate to his widow and five children and appointed as executors and trustees his widow, a daughter and a son, but only the son took an active part in the management and control of the estate with the assistance, at a later stage, of another son of the testator. The daughter complained that these sons had taken over the entire administration of the estate and had refused her access to the books of account and other documents of the estate. The estate consists principally of real estate and a manufacturing business which his executors and trustees were empowered to carry on, during the lifetime of the widow.

Documents sought by the Plaintiff

58. Mr Thomas submitted that an executor or administrator has no general obligation to provide a beneficiary with any document or information which may be requested. Fairbairn is a decision on documents belonging to the deceased and his estate and Pennell concerns executors carrying on a business under the estate trust. The proper procedure where documents are requested is to seek production by summons: Williams, Mortimer and Sunnucks at pp.854 to 855.

59. Although the allegations in the Plaintiff's affidavit are often unparticularised and correspondence exhibited is incomplete, the Plaintiff appears to rely upon three matters.

60. Firstly, it was said that the Defendants had failed to provide monthly reports in accordance with an agreement reached between the parties and embodied in the letter dated 3rd September 1991. The relevant part of this letter reads:

"In collecting the assets described above, and in relation to assets already collected (that is, salaries due Nicholas Marsh from Bay Novelty and Arcadia), the Bank will maintain and continue to maintain all such assets in separate estate accounts designated for Hong Kong assets and to use all such assets for limited purposes, to wit, the payment of Hong Kong estate duty and United States and New York state estate (inheritance) and income and fiduciary taxes, together with interest. The bank represents that, with respect to all such payments, a monthly report shall be filed with the Hong Kong courts, with service of such reports upon all counsel, and such reports will set forth the payment made and provide an explanation as to the payment. Other than payments described above, no payments out of the Hong Kong assets shall be made without prior court approval. The foregoing representation, however, does not apply to assets collected by the Bank in relation to United States assets."

61. The agreement was reached in respect of the Defendants' application for administration pendente lite. As a result of the agreement, the parties agreed for the adjournment of the application for administration pendente lite. The Plaintiff submitted that the agreement was a temporary measure pending the appointment of the administrators. The administrators were eventually appointed by Godfrey, J. on 12th May 1992. The Defendants' argument is certainly supported by paragraph 6 of the letter of 3rd September 1991 which provided that:

"The above is, of course, without prejudice to your positions as to letters previously issued to the bank in Hong Kong and your opposition to the bank's application for letters pendente lite, and without prejudice to either side applying to the court for further or different directions. and with any rescheduled hearings to be scheduled at the earliest available date per the court's calendar."

In any event, there was a report given on 31st December 1991 (p.626 of Vo1.2). As explained by Mr Oldham in his affidavit dated 2nd October 1992, no further report was furnished because no other assets of Mr Marsh were collected by the administrators until August 1992. The affidavit further disclosed the matters relating to the collection of the Li Funds.

62. Secondly, it was alleged that BNY had failed to provide financial record of Mr Marsh. In her affidavit of 11th November 1992, the Plaintiff said that Mr Streng had harassed her administration as preliminary executrix and had refused to turn over her father's records to her. This is a matter that obviously had no effect on the proceedings in the New York courts which removed her as executrix of her father's will.

63. Thirdly, the Plaintiff complained that numerous requests were made by her solicitors to Mr Oldham's firm for information which were not complied with (para.67 of her affidavit of 14th April 1993). Some of the correspondence were referred to in pp.2307 to 2320 of the bundle. However, this bundle is incomplete as they have not include the response from Mr Oldham dated 10th December 1992 and 30th March 1993. This is a matter that the Plaintiff could have seek redress by way of discovery proceedings. However, as the matter now stands, it cannot be resolved due to the lack of information as to the nature and materiality of the documents sought and the reasons given for the non-production.

Relevant provisions

64. In order to succeed under s.36 the Plaintiff must show. that it is necessary or convenient to appoint someone else to be the administrator of the estate or Mr Marsh. It should be pointed out that the Defendants' case is that although the application was granted under s.36, this section is not applicable because the only situation where the court can make an appointment under s.36 in 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 a person who. if this Ordinance has not been passed would, by law, have been entitled to a grant of administration of such estate." (emphasis added). The Defendant argued that there is no person who is by law entitled to the grant. They further submitted that the revocation proceedings should be made under s.33(3) which is as follows:

"The Court may, if satisfied that the due and proper administration of the estate and the interest of the persons beneficially entitled thereto so require, suspend or remove and executor or administrator (other than the official administrator) and provide for the succession of another person in place of such executor or administrator for the vesting in that other person of any property belonging to the estate."

Alternative the application should be made under r.29 of the Non-Contentious Probate Rules.

Plaintiff has not proved her case

65. Whether the application is based on s.36 or s.33, I find that the Plaintiff has not proved her case in removing the Defendants. The New York appellate court in its decision of January 30th, 1992 referred to the Plaintiff's "conclusory allegations of improvidence and misconduct". This is a view I would adopt as well of the Plaintiff's present application. The appellate court also ruled that none of the purported conflict of interest raise any questions about BNY's eligibility since these issues can be resolved in an accounting. I think this approach must be correct. It is important to complete the administration of the estate and if indeed there is any substance of the Plaintiff's complaint which has not already been dealt with, it could be dealt with after the completion of the administration in the accounting proceedings.

66. Furthermore. there are compelling reasons why the proposed administrator Matheson could not be appointed. BNY is the executor of the will of Mr Marsh, Mr Oldham and Ms Brennan are its attorneys. Matheson would have no such relationship and I consider it to be unwise to juxtaposed a new corporate trustee into the picture. The administration in Hong Kong is virtually complete. All debts had been paid and all assets had been collected in as shown in the affidavit of Mr Healey on 11th April 1994. The only outstanding. complication is the action begun by the Plaintiff in High Court Action No.4573 of 1993. If Matheson is appointed, they would charge substantial administration fees and have virtually nothing to do beyond paying funds to BNY as executors and completing the accounts which Mr Oldham and Ms Brennan have prepared and kept.

67. There are also other beneficiaries in the estate of Mr Marsh and there is no evidence that the other beneficiaries wish to see the removal of the Defendants as the administrators in respect of the Hong Kong estate.

Conclusion

68. I shall accordingly order that the Plaintiff's application be dismissed with costs nisi to the Defendants. The costs is to be borne by the Plaintiff and not out of the estate.