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

HCMP 1682/2016 and
HCMP 1568/2017
(Heard Together)
[2019] HKCFI 1767

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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AND

HCMP 1568/2017

MISCELLANEOUS PROCEEDINGS NO 1568 OF 2017

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(Heard Together)

Before: Deputy High Court Judge K Wong in Court

Dates of Hearing: 4 – 6 June and 5 July 2019

Date of Judgment: 23 July 2019

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JUDGMENT

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A. INTRODUCTION

1.Dr Yung Yau (“the Deceased”) was a successful businessman.  He died on 2 May 2004.  These proceedings concern disputes over the administration of his estate, between the executrices and some beneficiaries.  

2.On 11 January 2006, upon proof of the Deceased’s last will dated6 November 2001 (“the Will”), Probate (Grant No HCAG 011741/2005) of his estate was granted to Ms Yung Siu Chee Margaret (“Margaret Yung”), Ms Yung Siu Fong Grace (“Grace Yung”), Ms Yang Yung Sui King Winnie (“Winnie Yung”) and Ms Choy Ching Wa Fionne (“Fionne Choy”) as executrices (collectively “the 4 Executrices”).

3.According to the Will, the Deceased’s residuary estate is divided into 17.2 shares among the following beneficiaries:

(1)	Mrs Yung Ho Wun Ching (“Madam Yung”):	2.5 shares
(2)	Grace Yung:	2 shares
(3)	Winnie Yung:	1.5 shares
(4)	Mr Yung Kwok Choi Simon (“Simon Yung”):	2 shares
(5)	Margaret Yung:	2 shares
(6)	Dillon Yung Kwok Yuen Trust:	1 share
(7)	Yung Yau Charitable Trust:	1 share
(8)	Mr Yung Pok Man (“Yung Pok Man”):	1 share
(9)	Mr Yung Cheuk Man (“Yung Cheuk Man”):	1 share
(10)	Mr Ivan Caesar Yung (“Ivan Yung”):	1 share
(11)	Mr Isaac Cosmo Yung (“Isaac Yung”):	1 share
(12)	Ms Andrea Stephenie Yung (“Andrea Yung”):	0.6 share
(13)	Ms Claudia Natalie Yung (“Claudia Yung”):	0.6 share

4.Madam Yung was the Deceased’s wife.  On 6 May 2016, Deputy High Court Judge Kent Yee, having been satisfied that Madam Yung was mentally incapable, appointed a committee of her estate (“Madam Yung’s Estate’s Committee”).

5.Grace Yung, Winnie Yung and Margaret Yung were the Deceased’s daughters.  Simon Yung and Mr Dillon Yung Kwok Yuen were the Deceased’s sons.  Yung Pok Man and Yung Cheuk Man are Simon Yung’s sons and hence the Deceased’s grandsons.  Ivan Yung, Isaac Yung, Andrea Yung and Claudia Yung were also the grandchildren of the Deceased, as the children of Mr Yung Kwok Kee Billy (“Billy Yung”).  Billy Yung was the Deceased’s son but he is not one of the beneficiaries of the Deceased’s estate.

6.Fionne Choy had been working as the Deceased’s secretary and personal assistant for about 14 years up to his death in 2004.

7.It was stated in the first report on the administration of the Deceased’s estate issued by Wong Shum & Co, solicitors for and on behalf of the 4 Executrices dated 12 September 2014 that thus far the gross amountof cash of the Deceased’s residuary estate (in different currencies) collected by and in the hands of the 4 Executrices approximately HK$390.91 million. 

8.The first interim cash distribution totalling HK$258 million was made to the beneficiaries (other than Madam Yung) in December 2014 and to Madam Yung’s Estate’s Committee after its appointment in July 2016. 

9.On 30 June 2016, Margaret Yung, Grace Yung and Winnie Yung, in their capacity as executrices, issued an originating summons under HCMP 1682/2016 against Fionne Choy, seeking the Court’s directions on (a) payment of remuneration to Fionne Choy and (b) further interim distribution of the Deceased’s residuary estate to the beneficiaries.  Subsequently, Claudia Yung, Andrea Yung, Isaac Yung and Ivan Yung (“the 4 Beneficiaries”) joined the proceedings.  In their Amended Points of Counterclaim filed on 5 July 2017, they sought a number of orders against the 4 Executrices.

10.On 7 July 2017, the 4 Beneficiaries issued another originating summons under HCMP 1568/2017. They seek an order that the 4 Executrices be removed as the executrices of the Deceased’s estate pursuant to section 33(3) of the Probate and Administration Ordinance (“the PAO”) and that a fit and proper person be appointed to act in their place as administrator of the Deceased’s estate.

11.On 11 October 2017, Chow J ordered that other than the issue of further interim distribution, the aforesaid originating summonses in the two proceedings be heard together.

12.On 20 October 2017, the learned judge directed the 4 Executrices to make a further interim distribution under HCMP 1682/2016 of HK$88 million to the beneficiaries.

13.On 17 April 2018, the learned judge ordered, inter alia, that Fionne Choy should attend the substantive hearing for cross examination on the issue of the NY Loan (as defined below).

14.Fionne Choy and the other three executrices are separately represented in these proceedings.

B.   ISSUES TO BE DETERMINED AT THIS HEARING

15.The parties agree that the following six issues are required to be determined by the Court:

(1)   Whether Fionne Choy should be paid HK$50,000 per year for the book-keeping and accounting services that she rendered to the Deceased’s estate.

(2)   Whether the 4 Executrices should reimburse the Deceased’s estate for costs and expenses of certain legal proceedings instituted in the Mainland and withdrawn (“the PRC Proceedings”).

(3)   Whether Fionne should indemnify the Deceased’s estate against all loss caused by her failure to recover the loan of HK$9,323,698 advanced by the Deceased to Mr Yang Wei Hsiang Nicholas (“Mr Yang”), whom is the husband of Winnie Yung (“the NY Loan”).

(4)   Whether the Deceased’s estate should be directed (a) to examine the financial statements of Venes Technology Limited, which name was subsequently changed to Venes Enterprises Limited (“VTL”), (b) to make enquiries of the purpose and effect of the change of the name, (c) to request distribution of VTL’s retained earnings to the Deceased’s estate as its shareholder, and (d) to investigate into any potential fraudulent activities which may have been carried out by its management.

(5)   Whether a professional accountancy firm should be engaged by the Deceased’s estate for the preparation of its accounts.

(6)   Whether the 4 Executrices should be removed.

C.   THE FIRST ISSUE: Whether Fionne Choy should be paid HK$50,000 per year for the book-keeping and accounting services that she rendered to the Deceased’s estate

16.Clause 5 of the Will provided as follows:

“ If the said CHOY CHING WA FIONNE (蔡清華) shall take up the office of an executrix and trustee of this my Will and together with the other executrices and trustees of this my Will administer my estate I GIVE to her a sum of Hong Kong Dollar One Million Five Hundred Thousand (HKD1,500,000.00) free of estate duty absolutely.”

17.The meaning of the clause is clear: If Fionne Choy should (a) take up the executorship and (b) administer the Deceased’s estate together with the other executrices, she would get HK$1.5 million.  In other words, a remuneration of HK$1.5 million would be given to Fionne Choy on condition that she (a) took up the responsibilities of an executrix and (b) administered the Deceased’s estate as an executrix together with other executrices.

18.The 4 Beneficiaries suggested that there was another sum of HK$3 million paid to Fionne Choy from one of the trusts set up by the Deceased.  However, there was no evidence on the detail of this payment. The Court could not draw any inference from or make any finding on it.

19.It is not disputed that before the application to the Court for directions was made, with the other three executrices’ consent, Fionne Choyhad received HK$50,000 per year from 2004 for 11 years up to 2014.  Thesepayments were made to her under the description “accounting fees” in the accounts of the Deceased’s estate as one of the items of expenses, totalling HK$550,000. 

20.On 7 October 2016, after commencement of HCMP 1682/2016, Fionne Choy refunded the said sum of HK$550,000 to the Deceased’s estate pending the Court’s direction. 

21.Mr Richard Leung, with Mr Ronald Pang, Counsel for Margaret Yung, Grace Yung and Winnie Yung submits that the scope of the payment of HK$50,000 per year to Fionne Choy covers not only the book-keeping and accounting services but also her works in the estate administration such as attending court hearings in the PRC Proceedings and liaising with the legal representatives of the Deceased’s estate in the Mainland, as well as attending the day-to-day management of the estate.

22.This submission does not match the fact.  In a number of her e-mails to Margaret Yung, Grace Yung and Winnie Yung attaching payment requests, Fionne Choy stated that the amount of HK$50,000 per year was “the accounting fees”.

23.Regarding the applicable legal principles, it is clear that a personal representative must act gratuitously.  He/she is not entitled to any remuneration and must not make a profit from his office.  There are two exceptions to this principle.  The first is where the will itself directs remuneration, like the Will of the Deceased which provides for payment of HK$1.5 million.  The second is where the Court allows the payment.

24.To allow remuneration to an executor, the Court has inherent jurisdiction as well as power under section 60 of the PAO. 

Discretion under inherent jurisdiction

25.Firstly, on inherent jurisdiction.  It is said in Halsbury’s Laws of Hong Kong (2^nd ed), Vol 51, [425.439] that the inherent jurisdiction is exercised sparingly and only in exceptional circumstances.  However, it does not go on to explain why it is exercised sparingly and what those exceptional circumstances which justify an exercise of inherent jurisdiction to allow remuneration to be given to an executor or trustee are.

26.In Re Duke of Norfolk’s Settlement Trusts[1981] 3 All ER 220 at 230j – 231a, Fox LJ of the English Court of Appeal held as follows:

“ I conclude that the court has an inherent jurisdiction to authorise the payment of remuneration of trustees and that that jurisdiction extends to increasing the remuneration authorised by the trust instrument. In exercising that jurisdiction the court has to balance two influences which are to some extent in conflict. The first is that the office of trustee is, as such gratuitous; the court will accordingly be careful to protect the interests of the beneficiaries against claims by the trustees. The second is that it is of great importance to the beneficiaries that the trust should be well administered. If therefore the court concludes, having regard to the nature of the trust, to the experience and skill of a particular trustee and to the amounts which he seeks to charge when compared with what other trustees might require to be paid for their services and to all the other circumstances of the case, that it would be in the interests of the beneficiaries to increase the remuneration, then the court may properly do so.”

27.In conducting the balancing exercise referred to by Fox LJ, the Court should pay particular caution.  This is because of the existence of a parallel or similar power in section 60 of the PAO.  It is trite that when there is such power provided for in a statute, in exercising its inherent jurisdiction, the Court should be cautious, particularly not to undermine the will of the legislature and not to cut across the statutory scheme, see the English Court of Appeal’s judgment in In Re L (Vulnerable Adults with Capacity: Court’s Jurisdiction) (No 2) [2012] EWCA Civ 253 at [62] per McFarlane LJ, approving Westminster City Council v C [2007] EWHC 3096 (Fam) at [119] per Roderic Wood J, and also the United Kingdom Supreme Court’s judgment in In re B (A Child) (Reunite International Child AbductionCentre and others intervening) [2016] AC 606 at [85] per Lord Sumption JSC.

28.As section 60 of the PAO has set out the basis for allowing remuneration to an executor, the Court’s inherent jurisdiction to do the same should be exercised sparingly and cautiously.

29.The Will has expressly fixed the amount of remuneration to Fionne Choy for her work as an executrix.  She is not a qualified accountant.  Her book-keeping and accounting works cannot be said to be professional.  She was the Deceased’s secretary and personal assistant. Because of her day-to-day contact with the Deceased she had acquired vast knowledge of the Deceased’s affairs.  This knowledge gives her advantage in collecting and managing assets for the estate, and might have been the reason why the Deceased named her as an executrix.

30.In fixing the amount of her remuneration in the Will, it would be likely that the Deceased had already borne in mind the said two factors: firstly that she was very familiar with his affairs, and secondly that she was not a professional accountant or professional administratrix.

31.Fionne Choy and the other three executrices submitted that much effort had been spent by Fionne Choy in preparing the accounts of the Deceased’s estate, and that HK$50,000 per year is not a substantial amount. These might well be so.  However, in my view, whilst they are factors which may be taken into account, they are not the decisive factors in the balancing exercise in Re Duke of Norfolk’s Settlement Trusts,with the caution as explained above.

32.As such, in balancing with caution the aforesaid two influences,namely that the Court should be careful to protect the estate against claims byexecutors and that the estate should be well administered, taking into account all the circumstances of the case including Fionne Choy’s experience, skill and role (that she is not a professional accountant albeit she might well have spent considerable time and effort in preparing the accounts, and that her intimate knowledge of the Deceased’s affairs might well have already been considered by the Deceased when making the provision for her remunerationin the Will), in my judgment, there is no sufficient justification for the Court to allow her remuneration on top of what has already been provided for in the Will.

33.Therefore, I would not exercise the Court’s inherent jurisdiction in allowing the additional remuneration proposed by Margaret Yung, Grace Yung and Winnie Yung.

Section 60 of the PAO

34.Secondly, I turn to Section 60 of the PAO.  It reads as follows:

“ Allowance of remuneration to executor, administrator or attorney

(1) Subject to subsection (2), the court may allow to any executor ‌…such remuneration out of the estate of the deceased person as the court thinks fit.

(2) (a) No allowance shall be made to any executor or administrator or attorney who neglects to pass his accounts at such time, or to dispose of any moneys, goods,chattels, or securities with which he is chargeable in such manner as may be required by probate rules and orders.

(b)  No such remuneration shall exceed five per cent on the first one thousand dollars, two and a half per cent on the next four thousand dollars and one per cent on the balance of the gross value of all property of whatsoever nature administered.”

35.There is no dispute that the provisos in subsection (2) of section 60 do not constitute obstacle in the present case to granting additional remuneration as proposed to Fionne Choy. The only dispute is whether the Court has the jurisdiction under subsection (1) of section 60 andif so the approach that it should adopt in exercising the discretion to allow the proposed remuneration in addition to that already provided for in the Will.

36.Mr Edward Chan SC, leading Mr Ken To, Counsel for the 4 Beneficiaries submitted that when the Will has already set out the amount that an executrix would get for her work, the Court does not have jurisdiction to allow additional remuneration under section 60 of the PAO.

37.So far there appears to be no judgment in Hong Kong illustrating the interpretation and application of section 60 in the context of proposed increase of the executor’s remuneration fixed in the will.  There is no corresponding English statutory provision similar to section 60.  Mr Chan referred me to two comparable sections.

38.The first is section 59 of the Probates Ordinance, 1897 (Ordinance No 2 of 1897) of the Laws of Hong Kong. This ordinance is now repealed.  In In re Perry (deceased), Perry and Ezra v Perry and the Anglo-Jewish Association (1931–32) 25 HKLR 1, the plaintiffs sought remuneration in addition to what was provided for in the will, for the “signal service” rendered to the estate “by raising a loan for its benefit and rescuing it from probable insolvency”.  They relied on the said section 59.  Acting Chief Justice Wood rejected the plaintiffs’ argument.  His Lordship explained the genesis and the object of this section:

“ That section [section 59] is as follows:—‘It shall be lawful for the court to allow any executor … such remuneration out of the estate of the deceased person as may be just and reasonable for his pains and trouble therein.’ No parallel statutory power exists in England. This power was introduced into the ordinances of this Colony in 1860 (see Ordinance No. 8 of 1860, section 28). The object of the section would seem to be to allow the court to remunerate an executor out of an estate in cases where the testator who had selected him had omitted to give directions for his remuneration. In my opinion, in general, the court will confine the operation of this section to such circumstances. Where the testator has by his will assigned a definite remuneration to the services of his executor, and the executor has undertaken the office with notice of the contents of the will, this would seem to constitute something in the nature of an agreement between the executor and the deceased person by which the court will hold the executor to be bound. For this reason, in the present case, I do not consider myself empowered to entertain any proposition for an order to be made under this section in favour of these executors.”

39.The second comparable section is section 26 of the Administration and Probate Act 1890 of Victoria, Australia.  It reads:

“ It shall be lawful for the Court … to allow out of the assets of any deceased person to his executor administrator or trustee for the time being, in passing his accounts, such commission or percentage not exceeding five pounds per centum for his pains and trouble as shall be just and reasonable. …”

40.In considering the application of section 26, Cussen J of the Supreme Court of Victoria in Winter Irving v Winter [1907] VLR 546 said this at 564:

“ The principle itself, which is vouched by the great weight of authority, is, I think, based on the view that the Court is always bound when administering a will to have close regard to the testator’s intention. If then, he has in clear and distinct terms measured the amount of the remuneration to be received by his executors, and they accept his view by proving and acting under the will, the Court ought to enforce his intention. Sec. 26 is wide in the terms by which it confers jurisdiction to grant commission wherever the Court thinks it just and reasonable to give it, but the practice I have mentioned was well known to the Legislature as universal, and as having prevailed in the English and Victorian Courts for a great while, and it is not to be assumed that it intended to set aside that practice by the general, but, as to this practice, unpointed words which it has used in sec. 26 for another well-known and sufficient purpose …. Further, the practice has prevailed, and been acted on for nearly a quarter of a century in Victoria, since the Administration Act 1872 was passed, and the Legislature has never sought to alter it, thus indicating that the practice has been in accordance with its intentions. I therefore think that the right to commission is not independent of the clear wishes of the testator.”

41.Acting Chief Justice Wood held in In re Perry that there was no power under section 59 of the Probates Ordinance, 1897 (Ordinance No 2of 1897) (now repealed) for the court to grant additional remuneration.  Cussen J of the Supreme Court of Victoria in Winter Irving did not go so far.  While the learned judge acknowledged section 26 of the Administration and Probate Act 1890 of Victoria was wide in the terms and conferred jurisdiction to grant commission wherever the court thought it just and reasonable to give it, he held that it should not depart from a practice which was well known to the legislature as universal, namely that the court should respect the testator’s intention and as such the right to additional remuneration should not be independent of the clear wishes of the testator as set out in the will.  There was no submission from the parties that the practice referred to in Winter Irving is in place in this jurisdiction.

42.The approach adopted in Winter Irving was nonetheless controversial in Victoria.  Mr Isaac Yung, Counsel for Fionne Choy referred me to a more recent judgment of the Supreme Court of Victoria by Kellam J in Ian Fielding Tweedie & ors v The Attorney-General for the State of Victoria [2003] VSC 433.  It concerns section 65 of the Administration and Probate Act 1958 of Victoria, which provides:

“ It shall be lawful for the Court to allow out of the assets of any deceased person to his executor, administrator or trustee for the time being such commission or percentage not exceeding Five per centum for his pains and trouble as is just and reasonable.”

43.Section 65 was in terms very similar to the said section 26, as acknowledged by Kellam J.  So the question turned on whether the approach adopted in Winter Irving should be followed, namely ordinarily the court would not grant commission or additional remuneration to an executor or trustee where the testator has by his will already provided for remuneration to his executor or trustee for their efforts.  In other words, whether the exercise of the court’s discretion under the said section 65 should or should not be independent of the express wishes of the testator as stated in the will.

44.After reviewing authorities in Australia on the proposition that the court’s discretion given by the legislature cannot be fettered by judicial decisions, as well as Re Duke of Norfolk’s Settlement Trusts as discussed above (see paragraphs 37 – 43 in Ian Fielding Tweedie), Kellam J decided that the correct approach is the one expounded by the New Zealand Court of Appeal in In re Allan McLean, deceased (1911) 31 NZLR 139 at 141. The learned judge said at paragraphs 44 to 45 in Ian Fielding Tweedie:

“ 44. In New Zealand, a similar view has been adopted in a series of decisions since 1884. In the case of In re Allan McLean, deceased the Chief Justice of New Zealand, Stout CJ, said in the course of delivering the judgment of the Court of Appeal:

The proper rule to be applied is, we think, that where the testator has left to his executors a legacy which he might reasonably consider a fair allowance for their services in administering his estate, having regard to the trouble and responsibility he expected to be imposed on them when discharging this duty, that legacy ought to be treated as being prima facie adequate remuneration for their services. If in such a case the executors desire to obtain further remuneration, the onus lies on them of showing clearly that the remuneration allowed is inadequate, or that there are special circumstances in connection with the administration which probably were not in the contemplation of the testator when he fixed the amount of the legacy bequeathed to his executors, and which justify an additional allowance.

45.   In my respectful opinion that statement accords with sound common sense and carries with it more flexibility than the somewhat more rigid approach of the Victorian Full Court only five years earlier in Winter Irving v Winter.”

45.I respectfully agree with Stout CJ in In re Allan McLean, deceased and Kellam J in Ian Fielding Tweedie. 

46.On the question of jurisdiction, section 60 of the PAO enables the Court to allow an executor such remuneration “as the court thinks fit”.  In my view, the clear wording of section 60 gives a wide and unfettered discretion to the Court.  The provisos in subsection (2) of section 60 do not place any restriction on the Court’s ability to allow remuneration in addition to the amount provided for in the will.  The legislature could have done so had it intended to place such restriction.

47.Therefore, the Court may allow such remuneration to an executrix as is fair, just and reasonable in all the circumstances of the case, in addition to the amount or rate of remuneration provided for in the Will.

48.Following In re Allan McLean, deceased and Ian Fielding Tweedie, the proper approach is to first treat the amount of remuneration stated in the will as being prima facie adequate for the services provided by the executor named by the testator.  If the executor asks for additional remuneration, the onus lies on him/her to show clearly that the remunerationprovided for in the will is inadequate, or that there are special circumstancesin connection with the administration of the estate which probably were not in the testator’s contemplation when the testator fixed the amount or rate of remuneration in the will and which justify an additional allowance. 

49.In my view, the preceding approach pays due regard to the paramount considerations mentioned above: that the wish of the testator as expressed in the will should be respected, hence substantial weight should be attached by the Court, that the Court should be careful to protect the interests of the beneficiaries against claims by the executors, and that the estate should be well administered.  Whilst given these paramount considerations the onus for allowing additional remuneration may not be easily discharged,the Court’s discretion under section 60 of the PAO will not be fettered.

50.For the above reasons, it is my decision that the approach in In re Allan McLean, deceased and Ian Fielding Tweedie is correct and should be followed, instead of the approach in Winter Irving. 

51.Applying the said approach that I find correct, in the Will the Deceased had fixed Fionne Choy’s remuneration for her appointment and administration of his estate as an executrix.  The onus is on Fionne Choy and the other three executrices who support the additional allowance to show clearly that either the remuneration of HK$1,500,000 fixed in the Will is not adequate, or that there arespecial circumstances in connection with the administration which probably were not in the contemplation of the Deceased when he fixed the amount of the remuneration in the Will, and which justify an additional allowance.

52.In my judgment, they have failed to discharge the onus.

53.Mr Yung for Fionne Choy and Mr Richard Leung (leading Mr Ronald Pang), Counsel for the other three executrices raised a number of matters which in their submissions are reasons which justify Fionne Choy to receive additional remuneration, such as (a) significant effort spent by her in preparing the estate’s accounts, (b) her in-depth knowledge of the Deceased’s business dealings and assets, her unique position as not being a residuary beneficiary, (c) support by the other three executrices, (d) extensive travelling to the Mainland for meetings and hearings in various Mainland legal proceedings for recovery of the major asset of the estate, (e) the modesty of the proposed additional remuneration of HK$50,000 (which is much lower than those proposed by the proposed replacement professional administrators), (f) the protraction of the administration of the estate and the multiple legal proceedings in various jurisdictions in respect of the estate, (g) the sudden death of the Deceased which led to the collection of the estate’s assets difficult.

54.Further, during his oral closing submission, I specifically asked Mr Yung how the onus could be discharged, or in what way the fixed remuneration in the will was shown to be inadequate, or what special circumstances there existed to justify the additional remuneration.  He referred me to paragraph 43 of his written opening submission, which mentioned some of the administration works done by the 4 Executrices, such as paying estate duty, preparing and maintain estate accounts, recovering money from various banks, recovering loans due to the Deceased, paying debts and funeral expenses, making interim distributions to the beneficiaries, conducting legal proceedings in the Mainland, hiring a consultant to investigate matters of Youli Company, enquiring companies including VTL in which the Deceased held shares and responding to the 4 Beneficiaries’ inquiries.

55.In my view, none of the above justified additional remuneration.

56.As noted in paragraphs 19 and 22 above, the evidence shows the proposed additional remuneration was for accounting works.  However, as can be seen from the preceding paragraphs, Fionne Choy and the other three executrices now attempted to expand the scope for the additional remuneration to almost all works done by Fionne Choy as executrix.  This is not right.  Fionne Choy did these works in discharge of her duties as executrix. Difficulties were said to be encountered, and more efforts and works were required as a result.  But there is no evidence to support how these works, whether counted individually or together, show clearly that Fionne Choy’s remuneration fixed in the Will was not adequate, or how these works constitute special circumstances which were not in the Deceased’s contemplation when he fixed the remuneration in the Will and which justify additional allowance.  The works described to the Court by Mr Yung and Mr Leung are what an executor or trustee would normally do in a usual case of administration.  No evidence was produced detailing the time that Fionne Choy had incurred in these works, so as to explain how extraordinary these works were, or how these works were beyond the contemplation of the Deceased when he fixed the remuneration in the Will.  

57.Therefore, in summary, if the proposed additional remuneration of HK$50,000 per year is for all the works done by Fionne Choy as an executrix, I do not consider Fionne Choy and the other three executrices have discharged the onus.  The matters mentioned by Mr Yung and Mr Leung are either the advantage of having Fionne Choy as an executrix or what an administration of an estate would normally involve.  No evidence has been adduced on how out of the ordinary that Fionne Choy has personally spent her time or incurred her effort for the administration of the estate.  Based on the general nature of those matters submitted I do not consider that the fixed remuneration in the Will was inadequate or that special circumstances beyond the contemplation of the Deceased when he fixed the remuneration in the Will exist.  

58.For the above reasons, I would not exercise the Court’s discretion to allow Fionne Choy’s additional remuneration under section 60 of the PAO.

59.In conclusion, I disallow the additional remuneration to Fionne Choy proposed by her and the other three executrices.

D.   THE SECOND ISSUE: Whether the 4 Executrices should reimburse the Deceased’s estate for costs and expenses of the PRC Proceedings

60.The PRC Proceedings involved the legal proceedings in the Mainland under the following references:

(1)   (2010) 順法民一外初字第00011號之一;

(2)   (2010) 順法民一外初字第00011號之二;

(3)   (2010) 佛中法立民四終字第8號;

(4)   (2010) 佛中法立民四終字第213號; and

(5)   (2010) 順法民一外初字第00011號之三.

61.These proceedings were commenced by the 4 Executrices starting from 2010.  In 2013, the Executrices applied for and obtained the permission to withdraw the entire PRC Proceedings.

62.In broad terms, the PRC Proceedings were commenced against Billy Yung and a Mainland company called “佛山市順德區有利投資服務有限公司” (“Youli Company”) for registration of the 4 Executrices as holders of the shares owned by the Deceased in Youli Company.  There is no dispute that the Deceased owns 80% of the shares in Youli Company whereas Billy Yung owns the remaining 20%.

63.The 4 Beneficiaries asked that the costs of the PRC Proceedings should not be borne by the Deceased’s estate.

64.There is no dispute on the following facts relevant to this issue:

(1)   Before they commenced the PRC Proceedings in 2010, the 4 Executrices had sought legal advice in Hong Kong and in the Mainland.  However, they did not produce to this Court any written legal advice.  Only some bills of costs from law firms in Hong Kong were produced, but they did not serve to enable this Court to know what legal advice the 4 Executrices had received.

(2)   The 4 Executrices did not apply for a Beddoe order from the Court for sanctioning of and cost protection in the commencement and conduct of the PRC Proceedings.

(3)   Before the 4 Executrices applied for the permission to withdraw the PRC Proceedings in 2013, they had obtained two written legal advices from two PRC law firms, namely one from 廣東凡立律師事務所珠海分所 dated 1 November 2011 and the other from 北京市中倫 (廣州) 律師事務所 dated 15 July 2013.  The 4 Executrices produced to the Court these two written legal advices.

(4)   In both written legal advices, the 4 Executrices were advised to apply for withdrawal of the PRC Proceedings.  Both law firms took the same view, that Billy Yung should not have been added as a defendant in the PRC Proceedings.  However, in the two advices, the factual accounts of why Billy Yung was sued in the first place was different: one advice explaining that Billy Yung was added as a defendant on spot at the court registry upon insistence of the clerk in front of the “reception window”; and the other saying that Billy Yung was sued upon the advice of a judge on spot when the claim form was about to be lodged.

(5)   The 4 Executrices did not follow the first written legal advice in 2011 and continued with the PRC Proceedings.  They however followed the second written legal advice in 2013 and applied for the permission to withdraw.

(6)   The permission to withdraw the entire PRC Proceedings was granted on 27 September 2013.

65.The parties are not in agreement on the correct legal test.  Mr Leung for the three executrices contended that the 4 Executrices should be held personally liable for costs and expenses incurred in the PRC Proceedings taken out by them for the estate only if those proceedings were speculative.  I do not agree. 

66.Whilst commencing a speculative litigation for the estate without the Court’s advance sanction will certainly carry a very high risk of being held personally liable for the costs so incurred, such risk on the executor is not limited to commencing “speculative” proceedings.

67.The line is not drawn on “speculative” but whether the litigation costs are “reasonably incurred”.

68.The principle is explained in Snell’s Equity (33^rd ed), at paragraph 7-033:

“ Beddoe orders. Recovery of a trustee’s costs of litigation incurred in relation to the trust provide an important example of the requirement that expenses be reasonably incurred to be recoverable. Because the trustee’s costs of litigation will only be recoverable if they have been reasonably incurred, the trustee risks having to pay those costs personally if the litigation is unsuccessful from his or her perspective (in which case an order for costs may include the successful party’s costs as well). In case of doubt, the trustee may seek the court’s guidance on whether to prosecute or defend the litigation. When litigation appears to be prima facie proper and in the interests of the trust, the court will grant trustees leave to sue or defend. Such an order is known as a Beddoe order. The effect of the order is that, however the litigation results, the trustee is protected against action by the beneficiaries and is entitled to be reimbursed his or her costs out of the trust estate.

‘So long as the trustees make full disclosure of the strengths and weaknesses of their case, if the trustees act as authorised by the court, their entitlement to an indemnity and lien is secure.’ [Alsop Wilkinson v Neary [1996] 1 W.L.R. 1220 at 1224]

If trustees omit the precaution of obtaining leave, they are still entitled to be reimbursed their costs if the action was properly brought or defended for the benefit of the trust estate, even though the trustees were incidentally defending their own character against a charge of personal fraud in respect of something connected with their administration of the trust estate.  But if the litigation is speculative and, in the ultimate result, unsuccessful, atrustee will usually not be allowed on costs, even though he acted in good faith and on the advice of counsel.”

(emphasis underlined)

69.In the present case, no Beddoe order had been obtained before the 4 Executrices commenced the PRC Proceedings.  In deciding whether the litigation costs were reasonably incurred, the Court should put itself in the position which the Court would have been had an application for a Beddoe order been made.  The approach was explained in the Chancery Division by Deputy High Court Judge Alan Boyle QC in Singh v Bhasin [2000] WTLR 275 at 280H:

“ If the trustee omits to apply for a Re Beddoe order, he defends the action at his own risk as to costs, and may find at the conclusion of the proceedings that the court adjudges that his conduct was unreasonable.  If the court considers that it would have authorised the defence of the proceedings at the expense of the trust fund had such an application been made, it may in the exercise of its discretion permit the costs to be taken out of the trust fund.  But if the court considers that it would not have given authority todefend the proceedings, it will not generally allow the costs out of the estate.  In the latter case, the fact that the trustee was advised by counsel that he had a good defence may not be sufficient to persuade the court not to visit the costs on the trustee personally.”   (emphasis underlined)

70.To enable the Court to assess whether the costs of the unsuccessful litigation were reasonably incurred, in other words whether the litigation (albeit unsuccessful) was in the least prima facie proper and in the interests of the estate, the executor must make full disclosure of the strengths and weaknesses of his/her case, as explained in Snell’s Equity referred to above.

71.It is regrettable that whilst certain bills of costs of law firms evidenced payments for certain pre-litigation written legal advices were produced, none of the advices was shown to this Court.  The legal and factual basis for the 4 Executrices to commence the PRC Proceedings was not explained.  No disclosure of the strengths and weaknesses of the 4 Executrices’ case was made.  Hence the Court can in no way assess the reasonableness of the 4 Executrices commencing the PRC Proceedings.

72.Although two post-commencement written advices were produced, they did not explain the legal and factual basis for commencing the proceedings.  To the contrary they both confirmed that it was mistaken to have sued Billy Yung as a defendant in those proceedings in the first place.  They both advised withdrawing the PRC Proceedings and instituting fresh legal action against Youli Company only.  Importantly, there is no explanation from the 4 Executrices of the factual inconsistencies between two written advices on why and how Billy Yung was sued as a defendant.

73.As can be shown from the above, the 4 Executrices did not produce any or any sufficient evidence to demonstrate to this Court that there was reasonable basis for them to commence the PRC Proceedings in the manner as they did.  It is particularly fatal for them not to produce to this Court the pre-litigation written legal advices they had apparently sought.  As they have made no disclosure of the strengths and weaknesses of their case, on the material before this Court, this Court would not have authorized the PRC Proceedings to be commenced had they applied to the Court for a Beddoe order.  I cannot see how in this circumstance the costs of such an unauthorised and unsuccessful litigation brought by the 4 Executrices could be reasonably or properly thrown on the Deceased’s estate.

74.Fionne Choy and the other three executrices submitted that they have achieved some success in the following fresh proceedings in the Mainland which were instituted for the same purpose, and that it was Billy Yung and the 4 Beneficiaries who have been actively opposing those proceedings and obstructing their efforts throughout the years. Whilst this might well be true, this, in my view, is really not relevant to the determination of the reasonableness of the commencement of the PRC Proceedings in the first place.  This can in no way absolve the duty of the 4 Executrices to satisfy the requirement of reasonableness as explained above.

75.Lastly, I accept Mr Chan’s submission that section 60 of the Trustee Ordinance does not relieve the 4 Executrices from being held personally liable for the costs of the PRC Proceedings because the 4 Executrices did not give any explanation why none of the pre-action legal advices was produced to this Court, and no cogent reason was given why Billy Yung was sued in the first place, which led to the withdrawal of the entire PRC Proceedings, with such costs completely wasted.

76.For the above reasons, I have no doubt that the costs and expenses incurred in the PRC Proceedings should not be allowed to be borne by the Deceased’s estate.  They must be borne by the 4 Executrices personally.

E. THE THIRD ISSUE: Whether Fionne Choy should indemnify the Deceased’s estate against all loss caused by her failure to recover the NY Loan

77.The 4 Beneficiaries’ case is that by a Chinese authorisation letter (委託書) dated 28 September 1998 (“CAL”), the Deceased advanced the NY Loan to Mr Nicholas Yang, whom is the husband of Winnie Yung.  The 4 Beneficiaries alleged that Fionne Choy was aware of the NY Loan when she took up the role as an executrix in May 2004, but she had failed to take any step to recover the NY Loan before the probable expiration of the limitation period six years after the advancement of the NY Loan on 28 September 1998, ie 27 September 2004.  Therefore, the 4 Beneficiaries asked the Court to order Fionne Choy to personally indemnify the loss of the Deceased’s estate because of her wilful neglect in recovering the NY Loan. 

78.The content of the CAL was short and scant.  It was said to be addressed to the Deceased from Mr Yang, and signed by Mr Yang.  In the CAL, Mr Yang authorized the Deceased to pay on his behalf a sum of HK$9,323,698 to SMC Microtronic Co Ltd, and asked the Deceased to transfer the sum to the bank account of that company on or before 30 September 1998.  The last sentence of the CAL mentioned that this sum of money would be used for Mr Yang’s repayment of the shareholder’s loan and relating interest thereon owed by Mr Yang to that company.  There was nothing more in the CAL.  It did not mention whether the said sum of money represented a loan from the Deceased to Mr Yang.  There was no mention in the CAL of whether and if so when the said sum of money would become repayable; and whether interest was payable on the said sum of money and if so at what rate.

79.Notwithstanding the above observations, there is no dispute between the parties that CAL evinced the NY Loan. 

80.Fionne Choy stated in her affirmation affirmed on 24 October 2016 that:

(1)   In or about 1998, she prepared a debt repayment table in respect of the NY Loan (“DRT”) by the Deceased to Mr Yang. 

(2)   The amount of the NY Loan recorded in the DRT was the same amount stated in the CAL.

(3)   There was no entry in the DRT of the debt interest commencement date and the debt interest rate.

(4)   There was also no record in the DRT of any repayment of the NY Loan or any interest thereon.

81.Fionne Choy further stated in her affirmation that up to about 2000, from time to time she reminded the Deceased about the NY Loan.  Under cross-examination by Mr Chan for the 4 Beneficiaries, she said she had reminded the Deceased for some five to six times.

82.Importantly, Fionne Choy further stated in paragraphs 18 and 19 of her affirmation that:

“ 18.  In about 2000/2001, the Deceased told me (a) that there was no need to remind him about [the NY Loan] from [Mr Yang], and (b) that [Mr Yang] had made a lot of money for him. Since then the Deceased had never told me that [Mr Yang] was still owing him any money.

19.  From 1998 to the date of death of the Deceased in 2004, the Deceased had never told me to ask [Mr Yang] for repayment of [the NY Loan].”

83.When questioned during cross-examination, Fionne Choy explained how she had handled the NY Loan before the Deceased died in May 2004, ie when she was still the secretary and personal assistant of the Deceased:

(1)  The original DRT and a copy of the CAL would have been inserted into a file together with debt recollection tables of other unrelated debts.  This file would have been placed in the Deceased’s office.

(2)  When the file was full, she would have moved the debt repayment tables of those debts which had not been fully paid to a new file.  The debt repayment tables of those fully paid debts would remain in the file, and would be labelled as an “old” file. 

(3)  She reminded the Deceased of the NY Loan several times.

(4)  After the Deceased informed her that she no longer needed to remind him of the NY Loan, since there was no need for her to follow up with the NY Loan according to the Deceased’s instruction, she had treated the NY Loan as a fully paid loan. Therefore, when it became necessary to create a new file for those debt recollection tables of those debts which had not been fully paid, she did not move the DRT into a new file.

(5)  She disposed of her copy of the DRT, but the original DRT should have been kept with the Deceased in his safety box where the original documents of his business transactions including loans were kept.

(6)  As the Deceased’s secretary and personal assistant, she had a lot of duties in addition to following up loans and preparation of debt recollection tables, such as collation of documents received by the Deceased, translation of documents, checking and signing of cheques as she was one of the authorized signatories of the Deceased’s companies, assisting the Deceased in preparation of the annual reports, announcements,circulars of the Deceased’s companies, assisting in simple disclosure compliance matters, following up on the extended agenda of annual general meeting of the companies each year,and sometimes preparing minutes of meetings which she attended with the Deceased etc.

(7)  Therefore, after the said instruction given by the Deceased that there was no need for her to remind the Deceased about the NY Loan, the NY Loan did not occur to her again and it had been long out of her mind.

84.I find the evidence of Fionne Choy credible, for the following reasons:

(1)   At the hearing, she answered questions responsively and straightforwardly.

(2)   She did not shy away from questions.  She readily acknowledged matters asked of which she had no knowledge.

(3)   Her answers were consistent with her affirmations, see eg the matters referred to in paragraphs 80 – 83 above.

(4)   During cross-examination she has expressed difficulty in dealing with the emotional aspects of this litigation.  I accept Mr Leung’s submission that this is understandable because this litigation concerns not only the Deceased whom she had served for a long time but also serious allegations of personal wrongdoings directly against her.

(5)   There is no objective reason or evidence explaining why she should hide the existence of the NY Loan from the beneficiaries of the Deceased’s estate, or not disclose the NY Loan in the Schedule of Property declared during the probate application, if she was really aware of it.  She could have no personal gain from hiding it.  The 4 Beneficiaries made some suggestion that the proposed remuneration of HK$50,000 per year might have been offered to her as quid pro quo.  This is a very serious allegation.  It is not supported by any evidence and cannot take off the ground.

85.Since I have accepted Fionne Choy’s evidence, even assumingthat she had indeed taken up the role as an executrix as early as in May 2004,at that time the NY Loan had been, as I have found, long out of her mind.  Hence it would be reasonable for her not having taken any step at that time in relation to the NY Loan.

86.This explanation was plausible because firstly, as explained above, she wasinstructed by the Deceased not to remind him about the NY Loan, after, andnotwithstanding, she had reminded him of it a number of times; and secondly,after giving such instruction to Fionne Choy, the Deceased indeed did not ever raise this matter again with her until he passed away in 2004, and, as far as the evidence showed, he did not ever take any step, or instruct Fionne Choy or anyone else in his companies, to chase up repayment of the NY Loan.  

87.In paragraph 16 of Claudia Yung’s affirmation filed on 4 October 2016, it was alleged that Billy Yung told Natalie Yung that shortly after the Will was read in May 2004, Fionne Choy passed the CAL to Billy Yung and Billy Yung subsequently passed it to Winnie Yung, Mr Yang’s wife.  On this basis, the 4 Beneficiaries asked the Court to draw the inference that Fionne Choy had all along been aware of the NY Loan but took no step to recover the same. 

88.This is an entirely hearsay evidence. The Court did not have the benefit of hearing any direct evidence from BillyYung. When weighing it against the evidence of Fionne Choy, which as explained above the Court has found credible, the Court prefers Fionne Choy’s account of the event to the 4 Beneficiaries’ allegation.

89.Fionne Choy was put during cross-examination that she had passed the CAL to Billy Yung.  She denied.  This is consistent with her position all along as explained above.  It was again put to her that she had given the CAL to Billy Yung because Mr Yang was Winnie Yung’s husband.  She denied and stated that she definitely did not pass the CAL to Billy Yung.  During re-examination, she explained this answer and told the Court that since the Deceased told her that it was not necessary to remind him of the NY Loan, and she did not have the original or keep a copy of the CAL, she had not seen the CAL until it was exhibited in Claudia Yung’s said affirmation filed on 4 October 2016.  This explanation is consistent with her recollection of the event described in paragraphs 80 – 83 above.  I accept Mr Yung’s submission for Fionne Choy that it would be unreasonable for her to somehow suddenly revive the memory of the NY Loan, and not so until the 4 Beneficiaries raised this issue and produced the CAL in October 2016.  I reiterate the finding that the NY Loan had long been out of her mind in May 2004.

90.As I have found that it was reasonable that the NY Loan had escaped from the memory of Fionne Choy for a long time since about 2000/2001 when the Deceased told her that there was no need to remind him about the NY Loan, not until October 2016 when the 4 Beneficiaries first raised this issue.,she could not be reasonably expected to have taken any step in seeking to recover the NY Loan.  Therefore, in my judgment, she has committed no negligence.

91.The above conclusion should have left the 4 Beneficiaries’ other arguments, for instances that Fionne Choy should have searched exhaustively (which seems to me quite impossibly given the very large volume of documents there) the company’s attic storage space for the CAL and the DRT, that the Deceased’s mention to Fionne Choy that Mr Yang had earned a lot of money for him was factually incorrect, that there was no mention that the face-to-face meeting between Mr Yang, Winnie Yung and Messrs Wong Shum & Co on 7 October 2016 was in relation to the NY Loan, unnecessary to be dealt with in detail. Suffice to say is that firstly, given the said state of mind of Fionne Choy at the material time as found by this Court above, it would be unreasonable to have expected Fionne Choy to have searched through the great number of boxes in the attic; secondly on the basis that Fionne Choy’s evidence is accepted by this Court and as such the Deceased did make the mention to her that Mr Yang had earned a lot of money for him, it would be futile for the Court now to make a finding on what the Deceased said was a fair comment or not, be it a subjective or objective comment from the Deceased; and thirdly absent further evidence on what was actually discussed in the meeting on 7 October 2016, it would be futile for the Court to draw negative inference against Fionne Choy basing on the existence of such a meeting alone.

92.For the above reasons, in my judgment, the 4 Beneficiaries’ complaint on this issue is not made out.

F. THE FOURTH ISSUE: Whether the Deceased’s estate should be directed (a) to examine the financial statements of VTL,

(b) to make enquiries of the purpose and effect of the change of the name,

(c) to request distribution of VTL’s retained earnings to the Deceased’s estate as its shareholder, and

(d) to investigate into any potential fraudulent activities which may have been carried out by its management

93.The Deceased’s estate owns 10% of the shares in VTL.  This company has around HK$56 million of retained earnings.  Simon Yung is the majority of VTL.  On 27 May 2016, VTL changed its name to Venes Enterprises Limited.  On 3 June 2016, Venes Lighting Limited, a company controlled by Simon Yung, changed its name to Venes Technology Limited and adopted the same Chinese name as the original VTL, ie 蜆科技有限公司.  There is no evidence explaining why these changes of names were made.

94.By a letter dated 21 June 2016, the 4 Beneficiaries urged the 4 Executrices to recover the Deceased’s estate’s assets from VTL and investigate into any potential fraudulent activities of VTL that might affect the interest of the estate.  The 4 Beneficiaries complained that whilst the aforesaid change of names was effected in October 2016, the 4 Executrices have taken few steps to exercise the estate’s right as a shareholder of VTL. The complaint can be summarised by referring to paragraph 14 of Claudia Yung’s 2^ndaffirmation filed on 18 April 2017:

“ It is completely unexplained as to why the Executrices have pursued the Youli matter with such pace, whereas they seriously procrastinated in their pursuit of the estate’s interest in Venes Technology Limited.”

95.Fionne Choy’s position is she is willing to be bound by any directions of the Court.  The other three executrices indicated that the 4 Executrices have been able to partake in the business affairs of VTL.  There is no indication from them that they are not willing to make enquiries into the affairs of VTL to ensure the interest of the estate in VTL is protected and to realize its interest in it as a shareholder.  It appears that the only reservation expressed by the other three executrices is whether the vigourous steps proposed by the 4 Beneficiaries are worthwhile.

96.As a minority shareholder having 10% of the shares of VTL, the estate’s shares are worth about HK$5 million.  This is much less than the value of the estate’s interest of 80% of the shares in Youli Company, the total value of which is estimated to be around RMB 250 million.  VTL is a company incorporated in Hong Kong and unlike Youli Company, a Mainland company, the 4 Executrices can exercise the right for and on behalf of the Deceased’s estate as a shareholder with relative ease.  It is obvious under Hong Kong laws that a shareholder does not have the powers of a director, such as to participate in the management of the company and to look into its business and financial affairs from time to time.  However, it can make enquires into the affairs of the company in accordance with the Companies Ordnance and the common law to protect its interests.

97.On the current evidence, the Court cannot make a finding that the 4 Executrices have been too slow to the extent of negligent or falling short of the standard of a reasonable businessman taking care of his own business in making enquiries and protecting the interest of the Deceased’s estate in VTL as a shareholder.  The 4 Beneficiaries alleged that the 4 Executrices have been slow to take steps to realize the estate’s interests in the company. However, they did not state exactly what steps the 4 Executrices should have taken, what actually should and could have been achieved reasonably and at what time.  In a essence, their complaint is general and not concrete.  The Court should not find fault with the 4 Executrices on such general and unspecific ground.

98.On the constructive way ahead, in light of this Court’s decision on the sixth issue below, that professional administrators shall be appointed, this Court takes the view that the matter should be expressly left for consideration by the appointed professional administrators and for further investigation as they may consider necessary and in the best interest of the estate and all its beneficiaries.  The professional administrators are of course at liberty to seek legal advice and then make a judgment on what appropriate steps should be taken.  Naturally they are also at liberty to apply for directions from the Court as they consider necessary.

G. THE FIFTH ISSUE: Whether a professional accountancy firm should be engaged by the Deceased’s estate for the preparation of its accounts

99.There is no longer any dispute between the parties that a professional accountancy firm should be engaged for preparation of the accounts of the Deceased’s estate.

100.The 4 Beneficiaries complained that the previous accounts prepared by Fionne Choy was delayed and contained a lot of inadequacies.  The complaint, in my view, is not unreasonable, as the 4 Executrices could not really provide plausible explanations on why the accounts were always produced so late, eg the first one of which was produced in December 2010, more than five years after the Deceased passed away in 2004 and more than four years after the grant of the probate to the 4 Executrices in 2006.  Likewise, there was no explanation offered on why occurrences of errors were so commonplace.  There was no answer provided to the mistakes or inadequacies identified by the 4 Beneficiaries. Further, each account has been revised with corrections by Fionne Choy for a number of times.  It might be said Fionne Choy is not a professional accountant.  But to prevent the parties from the entanglement of endless disputes this is exactly why appointment of a professional accountant is so desirable.

101.As to the choice of the professional accountant, Mr Chan asked that if the two directors of KPMG Advisory (Hong Kong) Limited are to be appointed as the professional administrators of the Deceased’s estate as the 4 Beneficiaries proposed, the professional accountancy firm of KPMG may also be appointed as the accountants for preparation of the accounts of the estate.  Mr Yung for Fionne Choy and Mr Leung for the other three executrices did not oppose.  I see no reason why the Court should not make this direction accordingly.

H. THE SIXTH ISSUE: Whether the 4 Executrices should be removed

102.The jurisdiction and basis for removing an executor are set out in section 33(3) of the PAO, which reads:

“ The court may, if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require, suspend or remove an executor or administrator (other than the Official Administrator) and provide for the succession of another person in place of such executor or administrator and for the vesting in that other person of any property belonging to that estate.”

103.As Mr Chan rightly pointed out in his skeleton submissions, the Court’s discretion under section 33(3) of the PAO is a wide one, and it is not necessarily premised on any finding of misconduct on the part of the personal representative, see eg Chan Sau Heung v Kwan Siu Fai HCMP 2620/2012 (unreported, 17 April 2013), at paragraph 15 per Poon J (as Poon JA then was).

104.The main considerations are “the due and proper administration of the estate” and “the interests of the persons beneficially entitled thereto”.  

105.Whilst obviously the Court should consider all the circumstances of the case, in the context of the present case, the breakdown in relationship between the 4 Executrices and the 4 Beneficiaries are glaring, and as a result the due administration has been seriously affected.

106.The breakdown in relationship and animosity between the 4 Executrices and the 4 Beneficiaries can be demonstrated by the following events:

(1)   The 4 Beneficiaries has actively participated in opposing thosefresh proceedings brought by the 4 Executrices in the Mainland subsequent to the withdrawal of the initial PRC Proceedings for recovery of the estate’s very substantial interest in Youli Company, and in appealing against some judgments held in favour of the 4 Executrices.

(2)   The three executrices, in Mr Leung’s skeleton submissions on their behalf, complained that the 4 Beneficiaries have only taken issue with the administration of the estate by the 4 Executrices on matters related to Billy Yung, the 4 Beneficiaries’ father.  In contrast, the 4 Beneficiaries, in Mr Chan’s closing submission on their behalf, complained that the 4 Executrices are obsessed with accusing Billy Yung in these proceedings and this obsession underlines how the 4 Executrices view his children as beneficiaries in an evidently hostile way.

(3)   I would not go so far to say, and hence disagree with Mr Chan in his closing submission, that Fionne Choy transferred her hatred to people who are related to Billy Yung.  Nonetheless, as explained in paragraph 84(4) above, Fionne Choy during cross-examination has indeed shown strong emotions arising from this litigation.  Whilst this is understandable given the serious attacks of personal wrongdoings against her, I observe that due administration of the estate, which requires sound judgment of her as an executrix, has likely been impeded.  This observation is supported by her answer to Mr Chan during cross-examination that if the Court said she did not act well, she would quit and she did not care.  She further added the remark that it would be fine to fire all the executrices.

107.The following two extracts from Williams, Mortimer and Sunnucks: Executors, Administrators and Probate (21^sted), paragraph 57-20illustrate the need to replace the executrices in these circumstances for the due and proper administration of the estate and in the interests of the beneficiaries:

“ … if the administration has come to a standstill because relations between the personal representatives have broken down, or relations between the representatives and the beneficiaries have broken down, the court will ordinarily remove the personal representatives, and appoint new ones to enable the administration to be completed …. If, for whatever reason … it has become impossible or difficult for the administration to be completed by an existing personal representative, then an order for his removal will usually be made …”

“ Where there is a conflict between representative and beneficiary,the court might think it proper to remove a representative if it appears clear that the continuance of the representative would be detrimental to the administration of the estate, even if for no other reason than that human infirmity would prevent those beneficially interested, or whose who act for them, from working in harmony with the representative.  Friction or hostility between representative and beneficiary is not of itself a reason for removal, but where the hostility is grounded on the mode in which the estateis being administered, it should not be disregarded.  A breakdown in relations between the executor and beneficiary is another factor for the court to take into account if it is obstructing the administration of the estate, or even sometimes if it is capable of doing so …”

108.It is common ground that looking forward, there are primarily three tasks which remain to be administered for the Deceased’s estate, namely those concerning Youli Company, VTL and the NY Loan.  The matters in relation to Youli Company, as explained above, involve litigation with the 4 Beneficiaries and Billy Yung.  The matters in relation to VTL, also as explained above, involve dealing with Simon Yung.  The matters in relation to the NY Loan, involve dealing with Mr Yang, husband of Winnie Yung.  This means all involve members of the Deceased’s family.

109.To avoid the already deep friction or hostility which will in my view very likely cause a standstill or reach stalemate or even incompletion of the administration of the Deceased’s estate, I have no doubt to hold that having considered all the circumstances of this case, for due administration of the estate, in the best interest of all the beneficiaries, professional administrators, independent of any member of the Deceased’s family, should be appointed in place of the 4 Executrices.

110.The said conclusion having been reached, it is not necessary for the Court to make findings on other grounds advanced by Mr Chan for removing the 4 Executrices, or to decide on their validity, save for the avoidance of further disputes, no wrongdoings have been found on any of the 4 Executrices which led to their replacement by professional administrators. 

111.As to candidates, the 4 Beneficiaries proposed the appointment of Wing Sze Tiffany Wong and Patrick Cowley, directors of KPMG Advisory (Hong Kong) Limited as the administrators of the Deceased’s estate.  The 4 Executrices did not raise objection to this choice during the course of the proceedings.  However, at the last day of the hearing, they submitted they wished to make further submission on an alternative choice. Nonetheless, they did not mention who their alternative choice was and did not explain why the said directors from KPMG should not be appointed.  Mr Leung vaguely said it was because of disruption that would be caused to the administration of the estate because of the time that the professional administrators need to look into the case.  I did not understand his submission because every replacement professional administrator would need time to get into the case.  Therefore, I would refuse the request which will delay the appointment and the further progress of the administration.

112.I shall appoint Wing Sze Tiffany Wong and Patrick Cowley accordingly as the administrators of the Deceased’s estate.

I.   DISPOSITION

113.I direct Counsel for the parties to submit for my approval an agreed form of the order that I should make in light of the above findings on each of the issues.

114.As to costs, I shall make the following order nisi according to the result of each issue at this hearing:

(1)   Costs of the First Issue be paid by the 4 Executrices personally, jointly and severally to the 4 Beneficiaries, to be taxed if not agreed; and the Deceased’s estate do indemnify the 4 Beneficiaries’ costs if not recovered as a result of taxation.

(2)   Costs of the Second Issue be paid by the 4 Executrices personally, jointly and severally to the 4 Beneficiaries, to be taxed if not agreed; and the Deceased’s estate do indemnify the 4 Beneficiaries’ costs if not recovered as a result of taxation.

(3)   Costs of the Third Issue be paid by the 4 Beneficiaries personally to Fionne Choy and the other three executrices, to be taxed if not agreed; and the Deceased’s estate do indemnify Fionne Choy’s costs and the other three executrices’ costs if not recovered as a result of taxation.

(4)   The Deceased’s estate do indemnify the 4 Beneficiaries’ costs and the 4 Executrices’ costs of the Fourth Issue, such costs to be taxed if not agreed by the 4 Executrices and all the beneficiaries of the Deceased’s estate.

(5)   The Deceased’s estate do indemnify the 4 Beneficiaries’ costs and the 4 Executrices’ costs of the Fifth Issue, such costs to be taxed if not agreed by the 4 Executrices and all the beneficiaries of the Deceased’s estate.

(6)   Costs of the Sixth Issue be paid by the 4 Executrices personally, jointly and severally to the 4 Beneficiaries, to be taxed if not agreed; and the Deceased’s estate do indemnify the 4 Beneficiaries’ costs if not recovered as a result of taxation.

115.It remains for me to thank counsel for the parties for their very helpful assistance.

Mr Richard Leung and Mr Ronald Pang, instructed by Wong, Shum & Co, for the 1^st to 3^rd plaintiffs (in HCMP 1682/2016) and the 1^st to 3^rd defendants (in HCMP 1568/2017)

Mr Isaac Yung, instructed by KCL & Partners, for the 1^st defendant (in HCMP 1682/2016) and the 4^th defendant (in HCMP 1568/2017)

Mr Edward Chan SC and Mr Ken To, instructed by Wilkinson & Grist, for the 2^nd to 5^th defendants (in HCMP 1682/2016) and the 1^st to 4^th plaintiffs (in HCMP 1568/2017)