A and B, As the Administrators and Trustees of the Estate of the Deceased v. C and Others

HCMP 1260/2020

[2020] HKCFI 2628

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1260 OF 2020

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Before: Hon B Chu J in Chambers (Not Open to Public)

Date of Hearing: 25 September 2020

Date of Decision: 25 September 2020

Date of Reasons for Decision: 12 October 2020

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R E A S O N S   F O R   D E C I S I O N

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Introduction

1.The originating summons herein is taken out by the plaintiffs, of K, being the administrators and trustees (“Administrators”) of the estate of the Deceased (“Estate”). Essentially, the Administrators seek a vesting order (“Vesting Order”) and Beddoe orders (“Beddoe Orders”) under Order 85 rule 2 of the Rules of the High Court (RHC) and section 33(3) of the Probate and Administration Ordinance, Cap 10.

2.The 8 defendants (save D7) are residuary beneficiaries of the Estate, whereas D5 to D8 are the 4 former executrices (“Former Executrices”).

3.D1-D4 (“Opposing Beneficiaries”) do not agree to the reliefs sought by the Administrators and Counsel Mr Ken To appeared for them at the hearing before this Court. 

4.The 4 Former Executrices are made defendants to the originating summons since the orders/directions sought by the Administrators concern them, and D5-D7’s solicitor Mr Tak Wong appeared for them at the hearing.  However, no written submissions nor oral submissions were made on their behalf in relation to the Vesting Order and the Beddoe Orders sought by the Administrators, save on the question of costs.  As for D8, she is now acting in person and was absent at the hearing.

5.Other residuary beneficiaries have indicated to the Administrators that they either adopt a neutral stance or have no objection to the directions/orders sought in the originating summons and they do not wish to be named as parties, and they have thus not been joined.

6.Counsel Mr José Maurellet SC appeared with Mr Jason Yu and Ms Sharon Yuen for the Administrators at the hearing.

7.After hearing submissions from Counsel, this Court granted those orders sought by the Administrators and the reasons are set out herein.

Background

8.The Deceased left surviving him his widow Madam YH, 3 daughters W, X and Z and 3 sons SY, DY, and BY. The Deceased left a will dated 6 November 2001 (“Will”).  According to the Will, the Deceased’s residuary estate (“Residuary Estate”) is divided into 17.2 shares among 13 residuary beneficiaries, including the 8 defendants herein (save D7).  BY is not a beneficiary of the Estate, but his 4 children are and they are the 4 Opposing Beneficiaries.

9.The Former Executrices are the 3 daughters and D7 (the former secretary and personal assistant to the Deceased) and they were granted probate of the Will on 11 January 2006 (“Grant”).

10.On 23 July 2019, DHCJ K Wong handed down a judgment[1] (“Removal Judgment”), and as seen in the Removal Judgment, the  Former Executrices were removed pursuant to section 33 of the Probate and Administration Ordinance, Cap 10 and the Administrators were appointed in their place (“Removal Order”).  I will follow the definitions and abbreviation in the Removal Judgment save otherwise indicated in this decision. 

11.The Removal Order was in fact made upon the application of the Opposing Beneficiaries.  At the time of the Removal Order, no vesting order was sought from the Court to vest the assets of the Estate in the newly appointed Administrators.

12.The Vesting Order presently sought is for an order that all the assets and monies of the Estate, including but not limited to the 80% shares in a PRC[2] company called YL (“YL Shares”), which are currently registered in the name of the Former Executrices, to be vested in the Administrators.

13.As seen in the Removal Judgment, there was no dispute that the Deceased owned the YL Shares whereas BY owned the remaining 20% of the shares in the YL[3].

14.As further seen in the Removal Judgment, the Former Executrices had commenced 5 sets of proceedings in PRC starting from 2010 against BY and YL for registration of the Former Executrices as holders of the YL Shares (“2010 PRC Proceedings”).  They were later advised to withdraw the 2010 PRC Proceedings as it was a mistake to have sued BY and that they should institute a fresh legal action against YL only.  The Former Executrices’ permission to withdraw those 2010 PRC Proceedings was subsequently granted on 27 September 2013. 

15.One of the issues which had to be determined by the Deputy Judge was whether the Former Executrices should reimburse the Estate for costs and expenses of those 2010 PRC Proceedings there being no Beddoe orders obtained prior to the commencement of those proceedings.   It was ultimately held by the Deputy Judge that those costs and expenses must be borne by the Former Executrices personally.

16.The breakdown in relationship and animosity between the  Former Executrices and the Opposing Beneficiaries was noted by the Deputy Judge at that time and that, amongst other things, subsequent to the withdrawal of the 2010 PRC Proceedings, the Opposing Beneficiaries had actively participated in opposing the fresh action brought by the Former Executrices for recovery of the Estate’s very substantial interest in the YL and in appealing against the decisions held in favour of the Former Executrices.  As further noted by the Deputy Judge, it was common ground between the Former Executrices and the Opposing Beneficiaries that one of the primary tasks to be administered for the Estate concerns YL and the matters in relation to YL which will involve litigation with the Opposing Beneficiaries and BY[4].

17.As said above, after the withdrawal of the 2010 PRC Proceedings, the Former Executrices issued a fresh legal action against YL in 2013.  On 22 January 2014, the Foshan Intermediate People’s Court declared that the Former Executrices were entitled to hold the YL Shares then registered in the name of the Deceased, and that YL was to register the transfer of the YL Shares to the Former Executrices (“2014 Decision”)[5].  However, thereafter, the Opposing Beneficiaries then filed third-party revocation actions in 2015 against the Former Executrices to overturn the 2014 Decision, contending that the Opposing Beneficiaries were entitled to be registered as holders of their respective shares in YL (“Revocation Actions”).  The Revocation Actions were first dismissed by the Foshan Intermediate People’s Court on 28 August 2015 (“2015 Decisions”)[6]. The Opposing Beneficiaries then appealed, but their appeal was dismissed by the Guangdong Higher People’s Court on 8 May 2017(“2017 Decision”)[7].

18.In light of the 2017 Decision, and upon the application of the Former Executrices for enforcement on 27 September 2017, the Foshan Intermediate People’s Court ordered the compulsory registration of the YL Shares in the name of the Former Executrices (“Registration Decision”).

19.The Opposing Beneficiaries persisted with their challenge and filed applications for a retrial (再審) with the PRC Supreme People’s Court (“SPC”) under (2017) SPC Application Nos 5065, 1389, 1390 and 1391 (“Retrial Applications”).  As this Court understands, the application for 再審 is different from an application for發回重審 (in the latter case, if the application/appeal is successful, the matter will be remitted to the first or second instance court for a trial de novo). 

20.On 22 December 2017 and 17 May 2018, the SPC allowed the Retrial Applications pursuant to Article 200 (6) of the PRC Civil Procedure Law, that there was a mistake in the applicable law in the original decisions[8] and ordered a retrial (再審) by the SPC (“Retrial”).  On 11 June 2020, summonses were issued by the SPC for the Retrial to be scheduled for 22 October 2020.  Later, by a SPC announcement published on 9 July 2020, the Retrial under  (2020) SPC Retrial No 111-114 (“SPC Proceedings”) is now fixed at 9 am on 12 November 2020 at the First Circuit Court of the SPC in Shenzhen[9].

21.According to the company registration record, as at 31 July 2018, the YL Shares were registered in the respective names of the Former Executrices, each holding 20% of the YL Shares.  The remaining 20% of the shares of YL were registered in the name of BY.  The Deceased remained the registered legal representative and the registered capital of the company was RMB 18m.  The record showed that the business licence of YL was revoked on 3 May 2012 due to the failure of filing annual capital examination reports.

22.In light of the imminent Retrial, the Administrators urgently sought this Court’s directions as to their participation in the SPC Proceedings and the Beddoe Orders.

The Vesting Order

The Administrators’ position

23.The Administrators sought the Vesting Order under section 33(3) of the Probate and Administration Ordinance, Cap 10. Section 33 provides as follows:

“(1) Where it appears to the court that a probate or administration either ought not to have been granted or contains an error, the court may call in the probate or administration and if satisfied that it would be revoked at the instance of a party interested, may revoke it.

(2) A probate or administration may be revoked under subsection (1) without being called in if it cannot be called in.

(3) 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 the estate.”

24.A vesting order is usually made at the time of the removal and/or the appointment of the new executor/s or administrator/s and are in effect consequential orders upon such removal and/or appointment orders.  In fact, the court would ordinarily grant vesting orders in relation to the properties of the estate following the substitution of the personal representative[10].

25.There was no dispute by the Opposing Beneficiaries for this Court to make the Vesting Order as sought by the Administrators, save in relation to the YL Shares, which are foreign assets. 

26.Mr Maurellet had referred this Court to Chellaram v Chellaram [1985] Ch 409, and submitted that while the Court may not grant an in rem vesting order in respect of foreign assets, the Court can make in personam orders requiring former trustees or personal representatives to vest foreign assets in the new trustees or personal representatives[11].  Thus, as the Former Executrices came into possession of the YL Shares qua executrices under the Grant under Hong Kong law, the Administrators are entitled forthwith to an order in personam to vest the YL Shares in the Administrators.

The Opposing Beneficiaries’ position

27.As stated initially in Mr To’s skeleton submissions, the Opposing Beneficiaries did not take issue that this Court can make an order in personam in relation to the vesting of the YL Shares but the issue was whether the Court should do so, and that the Court should not at this stage, in light of the pending Retrial[12]. However, in his supplemental skeleton submissions, Mr To then submitted that the vesting of the YL Shares cannot be ordered at this stage because a vesting order in personam cannot be made during administration of an estate.

Whether the Court can make a vesting order in personam at this stage in relation to the YL Shares

28.Mr To’s argument was that a vesting order in personam cannot be made during administration of an estate, as it can only be made against a trustee but not a personal representative and that a personal representative will only turn into a trustee (or hold a piece of asset as a trustee) after the administration of the estate[13], and that the case of Chellaram is not applicable to the present case.

29.As explained by Scott J, as he then was, at A-E, at pg 428 in Chellarem:

“...The jurisdiction of the court to administer trusts to which the jurisdiction to remove trustees and appoint new ones is ancillary, is an in personam jurisdiction. In the exercise of it, the court will inquire what personal obligations are binding upon the trustees and will enforce those obligations. If the obligations are owed in respect of trust assets abroad, the enforcement will be, and can only be, by in personam orders made against the trustees. The trustees can be ordered to pay, to sell, to buy, to invest, whatever may be necessary to give effect to the rights of the beneficiaries, which are binding on them. If the court is satisfied that in order to give effect to or to protect the rights of the beneficiaries, trustees ought to be replaced by other, I can see no reason in principle why the court should not make in personam orders against the trustee requiring them to resign and to vest the trust assets in the new trustees. This is so, in my judgment, whether or not the trust assets are situated in England, and whether or not the proper law of the trusts in questions is English law. It requires only that the individual trustee should be subject to the jurisdiction of the English courts…”

30.First, the Former Executrices were appointed both the executrices and trustees of the Estate under the Will, and the Administrators, being ordered to replace the Former Executrices, have taken over not only as personal representatives but also as trustees of the Estate.

31.Second, as stated in paragraph 22.9 of Mellows: The Law of Succession, 5^th Edition, in the case of pure personalty, a personal representative will cease to hold as such and will thereafter hold as trustee: (i) if the personal representative executes an assent in his favour as trustee; or (ii) upon the completion of the administration, whichever occurs first.  In my view, by obtaining of the registration of the YL Shares in their names, the Former Executrices have taken possession of those shares and are in effect holding them as trustees for the Estate. 

32.Third, as stated in paragraph 26-023 of Volume 2 of Dicey, Morris & Collins on The Conflict of Laws, 15^th Edition, whether a personal representative is entitled to recover foreign assets is a matter for the law of the country in which they are situate.  The author went on to state that there are certain dicta to the effect that an English grant, at any rate when the deceased was domiciled in England, “extends” to all the movables wherever situate but these dicta, as submitted by the author, will be found on analysis to be concerned with one or other of two rather different propositions.  The first is that an English personal representative who actually obtains possession of foreign assets is accountable for them in England as if they had formed a part of the English estate.  The second is that if the deceased died domiciled in England, the English personal representative has in most countries a “generally recognised claim” to a local grant[14].  Thus it seems that there are authorities to support that the Former Executrices having obtained possession of the YL Shares are accountable for those shares in Hong Kong as if they had formed a part of the Hong Kong estate.  

33.In any event, I see no reason why a court cannot make in personam orders against the executrices after removing them and to vest assets held by them qua executrices in the new personal representatives appointed.

34.Having regard to all above, I have come to the view that this Court has the power and can make an in personam vesting order against the Former Executrices in respect of foreign assets including the YL Shares.

Whether the Court should make a vesting order in personam at this stage in relation to the YL Shares

35.Mr To submitted on behalf of the Opposing Beneficiaries that the Court should not make a vesting order in respect of the YL Shares, because in about one month’s time from now, the SPC will rule on the applicable law on the vesting of the YL Shares.  It was submitted that if the applicable law were held to be the PRC Law, then the YL Shares should be vested in the residuary beneficiaries directly and that any vesting order made by the Hong Kong Court in relation to the YL Shares would pre-empt the SPC in resolving the vesting issue, rendering potentially inconsistent judgments.  It was submitted that the proper way would be to allow SPC to first determine the issue before any vesting order made in relation to the YL Shares by the Hong Kong Court.

36.Mr To submitted that the general approach of the Hong Kong Court in dealing with non-Hong Kong assets of an estate, it that the Court will pay regard to the law of the lex situs.  He referred to paragraph 8.021 under (iv) of The Conflict of Laws in Hong Kong (3^rd Ed) by Johnston in relation to the administration of an estate, that where property has its situs outside Hong Kong at the time of death, a Hong Kong court will recognize the title of the personal representative entitled under the lex situs, at least if it has been reduced into possession.  Footnote 48 of paragraph 8.021 (iv) refers to Rule 144 of Dicey, Morris and Collins on The Conflict of Laws (15^th Ed) (Vol 2) in relation to “Foreign Personal Representatives” and their authority in England.

37.However, there is no concept of appointment of executors by a deceased in a will and/or otherwise appointment of a personal representative in the case of intestacy by the court under the PRC Law.  In any event, the YL Shares were registered in the names of the Former Executrices pursuant to the Registration Decision of the Foshan Intermediate People’s Court, and as said earlier, the Former Executrices have taken possession of the YL Shares, in that they hold 20% each in the total shareholding of YL, and in my view, they are accountable to the Estate for those shares.

38.According to the 2017 Decision, the Opposing Beneficiaries are seeking that 2.79%, 2.79%, 4.65% and 4.65% of the YL Shares should be registered directly under the respective names of D1, D3, D2 and D4.

39.The Deceased died domiciled in Hong Kong.  The Will is in respect of all the Deceased’s assets whatsoever and wheresoever over which the Deceased stood possessed or entitled to as at the date of his death.  As mentioned earlier, under the Will, there are 13 residuary beneficiaries (including the 4 Opposing Beneficiaries) and they are only entitled to their specified shares of the Residuary Estate in accordance with paragraph 8 of the Will and according to the Hong Kong law, they are not entitled to have the YL Shares registered directly under their respective names.  Those percentages, namely 2.79%, 2.79%, 4.65% and 4.65% of the YL Shares are only calculated by the Opposing Beneficiaries approximately by reference to their respective entitlement to the Residuary Estate.  It is thus not clear even if the Registration Decision were held by the SPC to be of no effect, whether this would necessarily result in those percentages of the YL Shares sought by the respective Opposing Beneficiaries being registered directly under his/her name.

40.Anyway, any vesting order made by this Court in relation to the YL Shares will be subject to the Administrators being able to recover them under the PRC Law.  At this stage, I do not find that there is sufficient evidence that the making of any vesting order by this Court in relation to the YL Shares will pre-empt the SPC in resolving the vesting issue, or that it will render potential inconsistent judgments. 

Conclusion on the Vesting Order

41.The Former Executrices have not raised any objection to a vesting order in personam being made as sought by the Administrators against them in respect of the YL Shares.

42.The other residuary beneficiaries who have not been joined as defendants have not expressed any objection to a vesting order in personam being made against the Former Executives in respect of those shares.

43.Having considered all the above, I granted the Vesting Order as sought by the Administrators. 

The Beddoe Orders 

44.There are essentially two sets of Beddoe Orders sought by the Administrators, one set in relation to seeking an indemnity for costs out of the Estate and directions in relation to the Joinder Applications as set out below:

(1)  whether the Administrators should apply to the SPC to (i) replace the Former Executives as defendants in the SPC Proceedings; and to (ii) as an alternative position, to join in the SPC Proceedings as a third party without independent claim rights (both the replacement application and the joinder application are collectively referred to herein as “Joinder Applications”);

(2)  in the event that the Joinder Applications fail, whether the Administrators should procure the Former Executrices to participate in the SPC Proceedings to resist the reliefs sought by the Opposing Beneficiaries and to contend that the Former Executives should remain as registered shareholders of the YL Shares.

45.The other set of Beddoe Orders sought are in relation to directions and an indemnity for costs for intended claims in PRC to be commenced by the Administrators against BY and one Ms Liang (“Ms Liang”) in relation to (i) suspected unauthorised transactions relating to YL and/or alleged unauthorised withdrawals from YL of RMB 70,490,000 by BY and Ms Liang and (ii) alleged wrongful dissipation by BY and Ms Liang of the sale proceeds of around RMB 358,000,000 arising out of the sale of shares in the Midea Group held by YL (“Intended PRC Claims”).  By the time of the hearing, the Administrators agreed that there was no longer any urgency in relation to the application for the Beddoe Orders for the Intended PRC Claims and directions were given by this Court for the further conduct of this application.

The Beddoe Orders in relation to the Joinder Applications

46.It was submitted on behalf of the Opposing Beneficiaries that :

a.  there is no real urgency;

b.  the Joinder Applications have no significance in the Intended PRC Claims;

c.  They are not reasonably arguable under the PRC Law;

d.  The exercise of discretion is not supported by the PRC Law;

e.  Former Executrices had acted contrary to the PRC legal advice obtained in relation to the same subject matter

Any urgency

47.It was submitted by Mr To that there was no urgency in seeking the Beddoe Orders in relation to the Joinder Applications and that any perceived ‘urgency’ was caused by the Administrators themselves.  Mr To pointed out that the Retrial was decided by the SPC on 22 December 2017 and on 17 May 2018.

48.However, the Retrial Applications were already completed by the time the Administrators were appointed on 23 July 2019.

49.In the supporting affirmation of Ms Lui, one of the Administrators, she had explained that there was no undue delay on the part of the Administrators and that they had acted with reasonable promptitude, given the amount of documentation (about 180 box files), the complexity and length of the administration by Former Executrices and the amount of multi-jurisdictional litigation in Hong Kong and in PRC.

50.It was in December 2019 that the Administrators retained their present solicitors as their legal advisors and in early January 2020, they applied for the amendment of the Grant to reflect their appointment which was only granted on 18 March 2020 due to the “General Adjournment Period” by reason of the Covid-19 pandemic. Further, Ms Lui explained that the Administrators were duty-bound to carry out their own investigations into matters relating to YL and the related PRC proceedings, to consider the Beddoe application which the Former Executrices had previously taken out under HCMP 419/2019, and to obtain relevant legal advice on these and other matters from both Hong Kong and PRC lawyers, and that all the steps took more time than usual because of the Covid-19 pandemic.

51.On the other hand, it was pointed out on behalf of the Opposing Beneficiaries that between November 2019 to January 2020, the Administrators had already (a) perused documents, (b) considered the SPC Proceedings with other PRC actions, (c) discussed with the Former Executives and beneficiaries and (d) considered proposed steps to be taken in the SPC Proceedings and that at the latest, the Administrators could have taken out their applications for the Beddoe Orders in January/February 2020. 

52.The Retrial was only allocated case numbers in 2020, as seen in the summons issued by the SPC on 11 June 2020 and in the SPC announcement on 9 July 2020, ie the SPC Proceedings in which the Administrators are now seeking the Joinder Applications.  There seemed to be a gap of almost two years from the time of SPC allowing the Retrial Applications and the actual fixing of a date of the Retrial and pending the announcement of the Retrial, there would seem to be no proceedings in which the Joinder Applications could be made.  In any event, having considered the evidence and the explanations from the Administrators, I am of the view that there was no sufficient evidence that there was any undue delay on the part of the Administrators to make their present application.

No significance in the Intended PRC Claims

53.The Administrators have received advice by their PRC legal advisors and believe that the registered shareholders of the YL Shares have a reasonably arguable case against BY and Ms Liang for compensation arising from their alleged misconduct in relation to YL (ie the Intended PRC Claims).

54.Mr To argued that the Opposing Beneficiaries only represent a total of 18.60% of the interest in the residuary estate whereas the opposing camp has a total of 55.23%, and that the beneficiaries holding the remaining 26.1% of interest mostly take a neutral position and thus even if the YL Shares are vested in all the beneficiaries, they can authorise the Administrators to take all necessary actions in relation to YL, including the Intended PRC Claims, on their behalf, and YL will still be controlled by the Administrators.

55.Ms Lui has said in her supporting affirmation that as it is the registered shareholders of YL who have the standing to bring the Intended PRC Claims, this reinforces the importance for the Administrators to take steps to recover the YL Shares, upon which they can then take over the conduct of the Intended PRC Claims from the Former Executrices.

56.As I have queried during the hearing, it is not in fact clear as to  what the SPC’s decision will be, and even if the applicable law in the lower courts’ decisions is held by the SPC to be wrong, whether this will mean  that that the registration of the YL Shares in the names of the Former Executrices will be cancelled or the Former Executrices will be removed as registered shareholders of the YL Shares, and if this is indeed going to be the case, whether the YL Shares will then be automatically registered in the names of the Opposing Beneficiaries and all the other residuary beneficiaries (who are not in fact parties in the SPC Proceedings save the Former Executrices), or only those percentages sought by the Opposing Beneficiaries will be registered in their respective names and if so under what basis; or whether the YL Shares will simply revert to the Deceased’s name.  There were no clear answers to this Court’s queries.

57.In any event, in light of the SPC decision being unknown and uncertain at this stage, I have come to the view that it is important for the Administrators to at least try and make the Joinder Applications and to try to secure the YL Shares for the purpose of eventually launching the Intended PRC Claims on behalf of the Estate.

Proposed steps not reasonably arguable under the PRC Law

58.As set out earlier, the Joinder Applications consist of (i) a replacement application or (ii) failing which, an application to join as third party.  The Administrators will be making the Joinder Applications under Article 249 of the PRC Interpretation of the Civil Procedure Law.

59.Mr To submitted that Article 249 is not applicable as it deals with disputed transfer of civil right by providing locus standi to the transferee to participate in the proceedings whether by substituting or by acting as a third party, and that the dispute in the SPC Proceedings is one concerning the Former Executrices, not the Administrators, and that Article 249 is not engaged.

60.The Opposing Beneficiaries have produced two legal  opinions by their PRC legal counsel the Guang Dong Teamwin Law Firm[15]. In the 1^st legal opinion, the legal counsel Mr Hung highlighted the distinction  between 再審and發回重審, and opined that the Joinder Applications have no legal basis in the Retrial as the Joinder Applications can only be carried out in the course of a trial at the 1^st and 2^nd instance courts, ie if there is an order for 發回重審, namely the matter be remitted for a trial de novo in the lower courts[16].  Then upon being referred to Article 249, the Opposing Beneficiaries obtained a supplemental legal opinion from  in which Mr Hung opined that Article 249 is inapplicable as there has been no transfer of civil rights in a litigation, which is the situation contemplated by Article 249[17].

61.Article 249 provides that during a litigation, there is a transfer of the disputed civil rights and obligations (爭議的民事權利義務轉移的), any enforceable decision of the People’s Court will be binding on the transferee, and that the People’s Court can allow an application by the transferee to join as a third party without independent claim rights.  If the transferee makes an application to replace a party in the litigation, the People’s Court can decide whether to allow such an application depending on the actual circumstances of the case, and if such an application is not allowed, the Peoples’ Court can subsequently add the transferee as a third party without independent claim rights. 

62.On my reading, the words “爭議的”, or “disputed” in Article 249 appear to describe or qualify the civil rights and obligations or民事權利義務, and not the transfer as s submitted by Mr To in paragraph 27 (b) of his skeleton submissions.  In any event, what Mr To submitted did not seem to be part of Mr Hung’s opinion.  All Mr Hung opined was that there was no transfer.  The parties in the litigation, namely the SPC Proceedings, are the Opposing Beneficiaries on one side and the Former Executrices on the other and the dispute is whether the Former Executrices are entitled to have the YL Shares registered in their respective names qua executrices.  As the Former Executrices have been removed, and in light of the Vesting Order made earlier, in my view, the Former Executrices have to transfer the YL Shares in their possession and/or their entitlement to the YL Shares qua executrices to the Administrators and it is reasonably arguable that the Administrators are the transferees of the YL Shares and/or of their entitlement.

Discretion not supported by PRC Law

63.Mr To put forward 4 points in submitting that the PRC Law does not support this Court’s exercise of discretion to grant the Beddoe Orders sought.  This Court’s views on the 4 points are, first, although the Former Executrices are named personally as parties to the SPC Proceedings and the YL Shares have been vested under their personal names, the YL Shares have clearly come into the possession of the Former Executrices qua their capacity of executrices/personal representatives of the Estate and further as said earlier, this Court granted the Vesting Order as sought; second, although the Retrial was granted on the ground that there was mistake in the applicable law of the decisions of the lower court,  as mentioned earlier, how that mistake is going to be rectified by the SPC or what order the SPC is going to make is unknown at this stage; third, even though the Former Executrices’ right to file a “Respondent’s Notice” had already expired on 9 August 2020, this may or may not affect the Administrators’ right to lodge the Joinder Applications or their right to file a “Respondent’s Notice” if their replacement application is allowed; fourth, I do not find that the Administrators, by having argued that the Former Executrices may not have the necessary locus in the SPC Proceedings after their removal and then putting forward as a fallback position the Former Executrices should be procured to participate in the SPC Proceedings, are adopting contradictory and unreliable legal positions.  As they have indicated, they put forward the second position only as a fallback position.

Former Executrices acted contrary to PRC legal advice

64.The Opposing Beneficiaries’ position is that the Administrators may procure the Former Executrices to continue to engage in the SPC Proceedings on the basis that no Beddoe Order would be granted, without prejudice to the Former Executrices’ right to show cause to the Estate/Court to have their costs incurred reimbursed after the decision of the SPC Proceedings.

65.It was submitted on behalf of the Opposing Beneficiaries that the above safeguard is important to protect the interest of the Estate and in this respect, Mr To referred to paragraphs 60-76 of the Removal Decision and submitted that the Opposing Beneficiaries had acted contrary to PRC legal advice[18].

66.The Deputy Judge gave detailed reasons as to why he did not allow the Former Executrices’ costs in relation to the 2010 PRC Proceedings to be paid out of the Estate and that they had to bear the costs incurred personally.  What was clear was that the Former Executrices did not apply for a Beddoe order for sanctioning of and cost protection for the commencement and the conduct of the 2010 PRC Proceedings and this was primarily the reason why they had to bear those costs personally. 

67.The Deputy Judge had referred to two post-commencement written legal advices produced by the Former Executrices, one dated 1 November 2011 and the other dated 15 July 2013 and had said that the legal advices did not explain the legal and factual basis for commencing the 2010 PRC Proceedings.  The Deputy Judge had also referred to there being different factual accounts in those two written legal advices of why BY was sued in the first place and that there were no explanations from the Former Executrices for those factual inconsistencies.  Although the Former Executrices did not immediately follow the first of those written legal advices to withdraw the proceedings, they did apply to withdraw after the second written legal advice. There was no particular comment in the Removal Judgment as to why they did not apply to withdraw after receipt of the first legal advice.  I do not see any finding in the Removal Judgment, nor was there sufficient evidence that the Former Executrices had acted contrary to PRC legal advice without reason.

68.In any event, as said, the primary reason why the Deputy Judge deprived them of costs to be paid out of the Estate was that the Former Executrices did not produce any or any sufficient evidence to demonstrate to the Court that there was reasonable basis for them to commence those  2010 PRC Proceedings in the manner they did[19]. 

69.In fact, it was exactly for the reason to safeguard their position on costs that the Former Executrices are now insisting that they be indemnified for their costs in the fallback situation that they have to continue to participate in the SPC Proceedings on behalf of the Estate in the event that the Administrators fail to obtain an order to replace them in the SPC Proceedings, since such participation would only be to secure the  YL Shares in their names and to transfer the same to the Administrators to hold for the benefit of the Estate .

The merits of the Joinder Applications and the SPC Proceedings

70.The merits of the Joinder Applications and the defence in the SPC Proceedings have been set out in the Confidential Submissions.  Having considered them, I am of the view that there are merits in the Joinder Applications and in defending the SPC Proceedings and at least they are reasonably arguable.  I accept that it is also in the interests of the Estate that the Administrators participate in the SPC Proceedings and if they fail in their application to replace the Former Executrices, they should procure the Former Executrices to continue to participate in the SPC Proceedings, in order to secure the YL Shares for the benefit of the Estate.

71.From the estimates of the costs provided to this Court for the Joinder Applications and the SPC Proceedings, in my view, the amounts are reasonable and as said by the Administrators, the amounts are negligible compared to the size of the Estate, and that Estate has enough funds to cover all the costs which may be incurred.  The Administrators have no personal stake in the Joinder Applications and the SPC Proceedings.

72.As said earlier, the Former Executrices’ participation, if required, is merely to secure the YL Shares to be transferred to the Administrators and they are only agreeable to assist the Administrators to continue participating in the SPC Proceedings if they can be protected by the indemnity they requested on costs.  I am satisfied that this Court has power to, and should, indemnify the Former Executrices for costs to be incurred in the SPC Proceedings in the event that the Administrators’ replacement application fails. 

73.Finally, I am also satisfied that this Court has power to grant the Beddoe Orders sought even though they ultimately relate to assets situated outside the jurisdictions.

Conclusion

74.For all the reasons set out above, I granted the Vesting Order and the Beddoe Orders and costs to the Administrators, essentially as set out in paragraphs 1-3 and 5 of the draft order submitted by the Administrators at the hearing.  

75.As said earlier, in relation to the Beddoe Orders and directions sought in paragraph 2(3) of the originating summons for the Intended PRC Claim, this was adjourned for argument and proposed directions for further conduct of the matter were mostly agreed and an order was made in terms thereof.  

76.As for costs of the defendants, Mr Tak Wong made submissions on behalf of 3 of the Former Executrices in their capacity as beneficiaries.  In the end, same with those costs of the Opposing Beneficiaries, the costs of the beneficiaries who have been made defendants in these proceedings were ordered to be paid out of the Estate on party and party basis. 

HCMP 419/2019 

77.The Opposing Beneficiaries had on 23 September 2020 issued a summons for directions in HCMP 419/2019 (the Beddoe proceedings issued by the Former Executrices referred to earlier) for that matter ie HCMP 419/2019 to be heard together with the present proceedings.  The summons was fixed at the same hearing before this Court.  That summons was subsequently adjourned sine die with liberty to restore and costs were reserved.

Mr José Maurellet SC, Mr Jason Yu and Ms Sharon Yuen, instructed by Howse Williams, for the plaintiffs

Mr Ken To, instructed by Wilkinson & Grist, for the 1^st to 4^th defendants

Mr Tak Wong of Wong Shum & Co, for the 5^th to 7^th defendants

The 8^th defendant was not represented and did not appear