Ting Fu Keung, By His Next Friend, Hui Kang Sun v. Tse Nei Lan, (As the Administrator and One of the Beneficiaries of the Estate of the Deceased)

HCMP 1664/2017

[2019] HKCFI 856

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1664 OF 2017

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D E C I S I O N
(On Costs)

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Introduction

1.The plaintiff, P, is a child born in 2008 out of the Deceased’s relationship with Madam Zhang Yuanwang (“Madam Zhang”). The Deceased and Madam Zhang were never married.  Madam Zhang is now married to Mr Hui Kang Sun (“Mr Hui”), and Mr Hui is P’s next friend in these proceedings.

2.The Deceased died on 2 April 2016 intestate and domiciled in Hong Kong, leaving his widow, the defendant D and 6 children.  Out of the 6 children, 4 were born out of the Deceased’s marriage with D.  The 5^th child is a daughter born out his relationship with another lady.  P, a son, is Deceased’s 6^th and youngest child, who is now about 11 years old. 

3.D applied for and obtained letters of administration of the Deceased’s estate (“Estate”) on 14 December 2016 (“Letters of Administration”).  D is the sole administratrix of the Estate.

4.On 12 June 2017, P commenced legal proceedings through his mother Madam Zhang as next friend, against D as administratrix of the Estate, claiming financial provision under the Inheritance (Provision for Family and Dependants) Ordinance, Cap 481. 

5.On 25 July 2017, P issued the originating summons herein through Mr Hui, seeking the following orders:

(i)   the grant of the Letters of Administration be revoked, as it contains an error, in that D had failed to disclose the interest of P being a beneficiary of the Estate and a minor;

(ii)   a fresh grant of letters of administration be granted to D and Madam Zhang jointly, or D and Mr Hui jointly;

(iii)   alternatively, Madam Zhang or Mr Hui be added as co-administrators pursuant to section 25(2) of the Probate and Administration Ordinance, Cap 10 (“PAO”).

6.The trial of these proceedings was fixed for 2 days commencing 12 February 2019.  Counsel Mr Nelson Miu appeared for the P at the hearing, and Ms Candy SH Chan appeared for D.

7.At the outset of the trial, Mr Miu, having considered Ms Chan’s skeleton submissions, indicated to the Court that P was willing to revise his stance, and would not seek a revocation of the grant, but only sought Madam Zhang to be appointed to act as an additional administrator of the Estate under section 25 (2) of the PAO.  This was opposed by D who proposed instead that an independent accountant be appointed to act as additional administrator.

8.Section 25(1) and (2) of the PAO state as follows as follows:

“(1) Probate or administration shall not be granted to more than four persons in respect of the same property, and administration shall, if there is a minority or if a life interest arises under the will or intestacy, be granted either to a trust corporation, with or without an individual, or to not less than two individuals:

Provided that the court in granting administration may act on such prima facie evidence, furnished by the applicant or any other person, as to whether or not there is a minority or life interest, in accordance with probate rules and orders.

(2)   If there is only one personal representative not being a trust corporation then, during the minority of a beneficiary or the subsistence of a life interest and until the estate is fully administered, the court may, on the application of any person interested or of the guardian, committee or receiver of any such person, appoint one or more personal representatives in addition to the original personal representative in accordance with probate rules and orders.”

9.Upon indication by Mr Miu, time was then given to the parties to discuss, but they were not able to reach agreement and the trial commenced in the afternoon of the 1^st day.  Both Madam Zhang and D gave oral evidence and were cross examined.

10.As can be seen from the parties’ affirmations, the major disputes between the parties are in fact over the value of the Estate, or over the Deceased’s business called Sun Luen Beancurd Factory (“Sun Luen”) and other landed properties in the Mainland.  It is D’s case that Sun Luen was making a loss and the Estate was insolvent at the date of Deceased’s death, due to large amount of liabilities.  This is strongly disputed by Madam Zhang.

11.Madam Zhang studied accounting after graduating from high school in Mainland, and she had worked as an accounts clerk in a hotel, although she said she ceased working about 10 years ago.  As mentioned earlier, Madam Zhang has also issued proceedings in the Family Court under Cap 481, for financial provision for P, and Madam Zhang indicated during her oral evidence in the trial that she will be seeking orders for transfer of Deceased’s properties in Mainland for the benefit of P.  I understand that the Cap 481 proceedings have been adjourned/stayed pending the present proceedings.

12.As said, D’s case is that the Estate is insolvent.  D denied that she had ever met P nor knew of Madam Zhang’s existence, and that although the Deceased had brought along P to have tea with D, as the Deceased had often brought along kids, she never enquired about the identity of these kids.  D was adamant that she could not co-operate with Madam Zhang or with Mr Hui.

13.It was clear from Madam Zhang’s evidence that although she said she would use her best endeavours to co-administer the Estate with D and to co-operate with D, as Madam Zhang would be challenging the value of the Estate and/or the alleged liabilities of the Estate, there was and is a potential conflict of interest between Madam Zhang and D/Estate.  The evidence also showed that there would be incompatibility between Madam Zhang and D since both had shown inflexibility in their approach in these proceedings.  It was obvious to the Court that it would be unlikely that Madam Zhang and D would be able to co-operate.  Mr Hui did not give any evidence, and there was no evidence that he and D would be able to co-operate in administering the Estate.  In fact, in the course of Madam Zhang’s evidence, she had indicated that she would not object to a professional person to be appointed as a co-administrator with D.

14.Eventually, on the 2^nd day of the hearing, the parties themselves decided to come to an agreement for an independent accountant to be appointed as an additional administrator with D, upon D’s undertaking to pay the remuneration and expenses of the additional administrator.  The parties were however not able to agree on who should be appointed. 

15.This Court made an order by consent for an accountant to be appointed as additional administrator with D and directed the parties to each submit names of two accountants, with their respective CV (including experiences in administering estates) and charging rate, for the Court to select.  The Court also directed, amongst other things, that the co-administrators to jointly prepare a true inventory and account of the Estate within 4 months from the date of appointment of the additional administrator, and D to be personally liable for the remuneration and expenses of the accountant, subject to a right to claim indemnity of the same from the Estate.

16.This Court subsequently selected Mr Benny Kwok, an accountant proposed by P/Madam Zhang to be appointed as co-administrator, hearing considered his experience in such matters.

17.As for costs, the parties were directed to lodge written submissions.

Parties’ respective submissions on costs

18.P sought costs of the whole proceedings but Mr Miu submitted that should the Court consider that the trial could have been shortened if P had taken another course, then the Court could consider ordering no order as to costs as the afternoon of the 1^st and the 2^nd day.

19.Ms Chan on the other hand submitted that P should be ordered to pay to D all the costs including reserved costs of these proceedings, as one of the matters of contention during negotiation was over the provision of an inventory and account of the Estate.  Ms Chan submitted that P did not take out proper proceedings to seek accounts of the Estate, and that P had been substantially, if not wholly unsuccessful in his prayers for relief.

Discussion

20.There was no dispute on general legal principles on costs.  Costs are in the unfettered discretion of the Court.

21.Mr Miu referred the Court to Re Chan Choi Yim HCCA 2083/2001, unreported judgment, 22 May 2002 on section 25(2) of the Ordinance. As noted by the then Deputy High Court Judge A Cheung as paragraph 12:

“In considering how I should exercise my discretion in the matter, in my judgment, the foremost consideration I must bear in mind is the interest of the grand-daughter whose minority is the reason for considering the appointment of an additional administratrix in the first place. In my judgment, there is a potential conflict or incompatibility between the interests of the grand-daughter and the widow relating to the transfer of money and the two real properties in the Mainland. I would like to emphasize the word 'potential' as the suspicions pointed out by me above may or may not materialise into anything. But if an additional administratrix is required to be appointed at all, her main function will be to protect the interest of the grand-daughter in relation to the proper administration of the estate and the division of the property.”

22.Thus, the main function of an additional administrator is to protect the interest of P in the present case, in relation to the proper administration of the Estate and the division of the Deceased’s assets.

23.It was on 7 April 2017 that P acting through Madam Zhang had first written to D’s then solicitors claiming beneficial interest in the Estate as a natural son of the Deceased.

24.Later, P obtained legal aid and the letter before action was sent by P’s solicitors to D on 25 May 2017 pointing out that under section 25(1) of PAO, as there is minority interest in the Estate, the letters of administration should be granted to not less than two individuals.  It was proposed by P at that time that Mr Hui be the co-administrator.

25.D’s then solicitors replied on 31 May 2017, seeking documentary evidence proving that P is the natural son of the Deceased and/or P had been wholly and substantially maintained by the Deceased.

26.P’s solicitors provided a copy of P’s birth certificate and photographs of the Deceased and P in their reply of 1 June 2017.

27.D’s then solicitors pointed out in their letter of 9 June 2017, amongst other things, that a mere birth certificate showing the name of the Deceased as P’s father was not sufficient and that cogent evidence such as results of scientific tests would be required.  They proposed Madam Zhang to arrange for P to undergo scientific tests and D agreed to pay for the costs incurred to be paid out of the Estate.

28.D had admitted in her affirmation that she knew the Deceased was having affairs with various women in the Mainland.  During her oral evidence, D did not deny that the Deceased had brought P to have tea with D but claimed that she had not bothered to find out the identity of P because the Deceased was always bringing along some kids to the restaurant to have tea with her.

29.Notwithstanding Mr Miu’s submission that D must have “Nelsonian Knowledge”, if not actual knowledge, of P’s existence, even if D had been told by the Deceased that he was P’s father, I am of the view that a mere birth certificate would not be conclusive evidence that the Deceased was indeed and in fact P’s natural father and that as an administratrix of the Estate, that D had sought further evidence by way of scientific tests, or a DNA report, could not said to be unreasonable.

30.There was no further correspondence between the parties after the letter of 9 June 2017 from D’s solicitors.  P then commenced the present proceedings on 25 July 2017. 

31.D filed her first affirmation on 9 November 2017, and she made it clear therein that she accepted P’s birth certificate as satisfactory proof of P’s relationship with the Deceased and that she no longer disputed a co-administrator should be appointed, but D objected to Mr Hui or Madam Zhang to be appointed.  D was at that time proposing to appoint her daughter, Ms Ting Fung Yi, Helen.

32.It was not until almost the eleventh hour, on 31 January 2019, 4 days before the CNY holidays and 4 full working days before the trial, that D’s present solicitors wrote to P’s solicitors and D proposed an independent accountant to be appointed as an additional administrator.  P then counter-proposed on 1 February 2019 that the independent accountant should be appointed to act as sole administrator and further requested that D should provide her proposed accountant for P’s consideration on an urgent basis.

33.Mr Miu submitted that the offer made on 31 January 2019 by D was not one that could be accepted, as no details had been offered of the accountant, and there was also no indication as to what work the accountant was to perform qua co-administrator, or how his remuneration was to be secured.  He submitted that P could not start to consider the offer on 31 January 2019.

34.Although the 31 January 2019 letter lacked the information said by Mr Miu, there was no reason why P could not accept in principle D’s proposal for an independent accountant to be appointed subject to identity and costs issues be agreed.  The independent accountant could be appointed by the Court, if no agreement could be reached, as it turned out to be the case.  As to what work the accountant was to perform qua co-administrator, an experienced accountant should know the duties of an administrator and again directions from the Court could be sought, if not agreed.

35.It was most unfortunate that the parties did not try to be more flexible.  Further, on the 1^st day of the trial, although this Court was told that the parties were negotiating, they ended up spending the whole morning of the 1^st day negotiating with no agreement reached.  It was only on the 2^nd day that the parties then submitted to the Court two different versions of the draft consent order.  D’s version did not contain what is now paragraph (3) of the final order, concerning the rendering of inventory and account of the Estate as at date of the Deceased’s death.

36.Mr Miu submitted that D only reluctantly agreed to this paragraph.  However, in the originating summons, P did not seek an inventory and an account against D under section 56 of the PAO.

37.Having said this, although P had not made a proper application for rendering of inventory and accounts in the originating summons, it is the duty of an administrator, when lawfully required to do so, to provide an inventory and account.  There was no reason why D should insist on P issuing another summons for the same, which would only result in further costs being incurred.  Whether the Estate is insolvent or not, D is still under a duty to provide an inventory and an account to the beneficiaries when lawfully required to do so.

38.Having said this, I accept that as D’s position is that the Estate is insolvent, there was an issue as to who should initially bear the costs of the independent co-administrator.  D’s offer to pay such costs is in my view a reasonable step to try and resolve the matter. 

39.On the whole, I am unable to say D’s conduct in these proceedings has been unreasonable to the extent that she should be personally liable for P’s costs.

40.P’s insistence of having Mr Hui or Madam Zhang appointed as a co-administrator was unrealistic.  On the other hand, P had to come to the Court in order to have an independent co-administrator to be appointed and she had succeeded in the end.  There was no reason why she should be ordered to be D’s costs. 

Conclusion

41.Having considered all the above and all the circumstances of this case, I am of the view that both P’s and D’s costs of these proceedings up until the trial, including the morning of the 1^st day of the trial (which would include both Counsel’s Briefs) should be paid by the Estate (including all costs reserved), and thereafter there should be no order as to costs as between P and D (including submissions on costs).  P’s own costs be taxed under Legal Aid Regulations, with certificate for counsel.

Mr Nelson Miu, instructed by Tsui & Co, for the plaintiff

Ms Candy SH Chan, instructed by M M Wong & Co, for the defendant