Yung Siu Chee Margaret and Others v. Choy Ching Wa Fionne and Others

HCMP 1682/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1682 OF 2016

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DECISION (3)

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INTRODUCTION

1.By their originating summons dated 30 June 2016, the plaintiffs, being three of the executrices of the estate of YUNG YAU (翁祐), deceased (“the Deceased”), applied for (inter alia) directions as to interim distribution of the residuary estate to the beneficiaries of the estate.  The issue for determination is the proper amount of interim distribution that should be made.

BASIC FACTS

2.The Deceased passed away on 2 May 2004, leaving behind him a substantial estate in Hong Kong.  On 11 January 2006, probate of the last will of the deceased dated 6 November 2001 (“the Will”) was granted to the plaintiffs and the 1^st defendant (“the Executrices”), being the 4 executrices and trustees named in that will.

3.Under the Will, the residuary estate of the Deceased is divided into 17.2 shares to be distributed to 13 named beneficiaries, including the 1^st to 3^rd plaintiffs, the 2^nd to 5^th defendants, and 6 other beneficiaries, who together are entitled to 31.98%, 18.6% and 49.42% respectively of the residuary estate of the estate.  Those 6 other beneficiaries have been informed of these proceedings, but have chosen not to be joined as parties to the same.

4.In or about July 2016, an interim distribution of the residuary estate of about HK$258 million was made to the beneficiaries.

5.As at 1 November 2016, the estate of the Deceased had cash of about RMB 9.7 million, HK$138 million and US$42,700 (totalling about HK$149 million), and some other assets which it is not necessary to set out in this decision.  On the other hand, the Executrices on behalf of estate of the Deceased have been engaged in substantial litigations with Billy Yung, a son of the Deceased and the father of the 2^nd to 5^th defendants, in the PRC, and it is anticipated that there will be further litigations between the Executrices and Billy Yung/related parties in Hong Kong and the PRC.

6.The 1^st to 3^rd plaintiffs, with the support of the 1^st defendant, propose that a further interim distribution of about HK$24 million should be made, leaving a reserve of about HK$125 million for litigation costs and potential liabilities of the estate.  The amount of further interim distribution now proposed by the 1^st to 3^rd plaintiffs has been substantially reduced from the figure of about HK$80 million previously proposed by them in June2016.

7.On the other hand, the 2^nd to 5^th defendants propose that the Executrices should make a further interim distribution of about HK$125 million, leaving a reserve of about HK$24.45 million.

DISCUSSION

8.The dispute between the parties focuses primarily on the reasonableness of the plaintiffs’ estimated litigation costs and potential liabilities in the total sum of HK$125 million.  The breakdown of that figure is set out in a table appearing at paragraph 53 of the 5^th affirmation of Mr Wong Tak Shing, the plaintiffs’ solicitor.  It comprises 14 items, as follows:-

	Description	Amount (HK$)	Remarks
1	Final estate account by independent CPA	3,000,000
2	Court proceedings, if any, in HK: Loan to NY	5,000,000	On $9m loan
3	Court proceeding, if any, in HK: Venes Enterprises Ltd	5,000,000	On $100m assets
4	Court proceedings in PRC: Yau Li Company	10,000,000	On ¥358m assets
5	Court proceedings, if any, in HK: Billy Yung	20,000,000	On ¥358m tracing
6	Court proceedings in HK: on estate administration directions	10,000,000	HCMP 1682/2016
7	Estate administration legal services at $1,500,000 for say 5 yrs	7,500,000
8	Reserve for miscellaneous expenses & disbursements	5,000,000
9	Court proceedings in PRC against Billy Yung	500,000	2017 PRC case
10	Court proceedings in HK: removal of 4 Executrices by 4 beneficiaries	10,000,000	HCMP1586/2017
11	Contingency admin(s) remuneration at $400,000/yr say 5 yrs	2,000,000	2 CPA adms
12	Contingency admin expenses by Big 4 CPA $2mil/yr say 5 yrs	10,000,000	CPA firm
13	Litigation in PRC 2017 with Billy Yung: debt due by the Deceased	35,760,096.01	¥30,538,083 @1,171
14	Litigation in PRC 2017 with Billy Yung: costs and expenses	1,000,000	2017 PRC case

9.On behalf of the 2^nd to 5^th defendants, Mr To submits that the plaintiffs’ estimated costs and potential liabilities are arbitrary.  He further complains that the plaintiffs have completely failed to provide any information or basis to substantiate the estimated costs and potential liabilities, or provide any proper breakdown or supporting materials (eg, budgets, quotations or advices) for the same.  Mr To says that it is unacceptable for the plaintiffs to simply plug figures out of the air and claim that they represent estimated costs or potential liabilities of the estate of the Deceased.  I consider that there is considerable force in Mr To’s criticisms.

10.I have the following observations on the estimated costs and potential liabilities put forward on behalf of the plaintiffs:-

(1) Items 2 to 5 relate to proceedings which have not yet been commenced. The plaintiffs have failed to provide basic information relating to the proposed actions, such as the viability of the proposed claims, the steps which may have to be taken, further breakdown of the costs involved for major stages of the proposed actions (with supporting materials), or the timeframe of the proposed actions.  The estimated costs of HK$5,000,000, HK$5,000,000, HK$10,000,000 and HK$20,000,000 are no more than figures asserted by Mr Wong without any or any proper or reasonable basis.

(2) Item 6 relates to the present action, and the estimated costs are said to be HK$10,000,000.  However, Mr Leung informed the court that up to the date of the hearing on 11 October 2017, the legal costs incurred by the plaintiffs were less than HK$1 million.  Even if one assumes that the costs of the 1^st defendant and the 2^nd to 5^th defendants shall be paid out of the estate, it is difficult to see how the figure of HK$10,000,000 could be a reasonable or proper estimate of the total costs which may be incurred in this action.

(3) Items 7 relates to “estate administration legal services” for 5 years (in the total sum of HK$7,500,000), which seems to overlap with other items of legal costs set out in the table.

(4) Item 8 relates to “reserve for miscellaneous expenses & disbursement” (in the sum of HK$5,000,000) without any further breakdown. Again, it is just a figure asserted by Mr Wong without any or any proper or reasonable basis.

(5) Items 10 relates to the recent action commenced by the 2^nd to 5^th defendants in HCMP 1568/2017 for the removal of the Executrices.  The grounds relied upon by the 2^nd to 5^th defendants are the same or substantially the same as those raised by them in the counterclaim in this action.  Much of the evidence on both sides have already been prepared and can be re-deployed in those proceedings.  The estimated costs of HK$10,000,000 seem to me to be obviously excessive on any reasonable basis.

(6) Items 11 and 12 relate to the costs of the accountants who may be appointed as new administrators in the event that the 2^nd and 5^th defendants should succeed in removing the Executrices in the new action.  No basis is given or information provided on how the estimated sums of HK$2,000,000 and HK$10,000,000 are arrived at.

(7) Item 13 relates to certain proceedings in the PRC commenced in 2017.  Mr Leung told the court it related to an alleged debt of RMB30,538,083 owed by the Deceased to Billy Yung.  No further information in respect of the alleged debt has been given.

11.I bear in mind that: (i) Mr Wong is an experienced probate lawyer and he has no apparent reason to exaggerate the litigation costs and potential liabilities of the estate of the Deceased, (ii) once monies are paid out to the beneficiaries, the Executrices may face difficulties in recovering any excess payments from them, and (iii) an executor or administrator has a duty to administer an estate cautiously, and he has to ensure that there will be sufficient fund in the estate to make distribution to all the beneficiaries for their just shares taking into account the potential size of the estate after the determination of any breach of fiduciary duty or intermeddling claim (for this proposition, see paragraph 52 of the decision of Lok J in Li Kin Yan and Another v Li Lim Cho Dorothy, HCMP 3425/2015, 17 February 2017).

12.These having been said, the court can only exercise its discretion regarding interim distribution based on proper information and materials normally put before it by those who have been appointed to administer the estate and who ought to be in a good position to provide such information and materials.  In the present case, I consider the plaintiffs have wholly failed to make any real attempt to justify the estimated costs or potential liabilities of the estate of the Deceased.  The plaintiffs’ estimated total figure of around HK$125 million, as well as the individual estimated sums, are, in my view, unreliable.  Distribution of the estate of the Deceased is long overdue, being in mind that the Deceased passed away more than 13 years ago and probate was granted to the Executrices more than 11 years ago.  Doing the best that I can on the information and materials before me and taking a broad view of the situation, I consider that a reserve of HK$50 million should be ample to provide for the potential costs and liabilities of the estate in respect of the items referred by Mr Wong.  Taking into account also Mr Leung’s submission that the cash in the RMB account may not be readily realizable, I consider that an interim distribution of HK$88 million ought to be made to the beneficiaries of the estate of the Deceased.

DISPOSITION

13.For the foregoing reasons, I direct the Executrices to make a further interim distribution of HK$88 million to the beneficiaries of the estate of the Deceased.

14.I reserve the question of costs, which shall be dealt with at the hearing of the rest of the claim and counterclaim in this action.

Mr Richard Leung and Mr Ronald Pang, instructed by Wong, Shum & Co, for the 1^st to 3^rd plaintiffs

Mr Isaac Yung, instructed by KCL & Partners, for the 1^st defendant

Mr Ken To, instructed by Wilkinson & Grist, for the 2^nd to 5^th defendants