Chow Lily v. Chow Wai Wai Violet and Others
Read the full judgment text of CAMP 202/2021 on BabelCite. This Court of Appeal judgment was delivered on 8 February 2023.
2. As for the facts material to the present judgment, they are listed chronologically below:
Cited by 2 cases · Cites 7 cases
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CAMP 202/2021 [2023] HKCA 167 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL MISCELLANEOUS PROCEEDINGS NO 202 OF 2021 (ON AN INTENDED APPEAL FROM HCAP NO 22 OF 2019) ________________
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____________________ JUDGMENT ____________________ Hon Yuen JA (giving the Judgment of the Court): Background 1.1. This is the “rolled-up” hearing of the plaintiff’s application for leave to appeal the decision of DHCJ Leung given on 30 July 2020 dismissing her application for the appointment of administrators pendente lite (“the APL Decision”) in the probate action concerning the estate of Chow Yei Ching (“the Deceased”). 1.2. The background of the case has been set out in the Judgment of this court given on 16 May 2022 in which we concluded that the stand taken by the plaintiff (“Lily”) in her pleadings did not amount to a renunciation of executorship (“Judgment on the Renunciation Issue”)1. 2.As for the facts material to the present judgment, they are listed chronologically below:
2015 Will 3.In the 2015 Will, all the Deceased’s shares in Chevalier (“the Chevalier Shares”) were gifted to Violet. The residuary estate was divided into 100 parts or shares, with 30 parts or shares to the Mother, 20 to Violet, and 10 each to the other siblings except for Oscar, who was not given anything. Probate Action 4.In the Probate Action, Lily seeks a declaration that the 2015 Will is invalid as it had been executed by the Deceased without knowledge or approval of its contents, or testamentary capacity, or animus testandi. Application for appointment of APL - evidence 5.In support of her summons24 for the appointment of APL filed two months after the Probate Action, Lily deposed in her 3rd aff to the following, among other things:
6.1. Violet opposed the application. Violet deposed in her 1st aff (§7):
6.2. However, she did not object to Lily’s assertion that she (Violet) did not have the resources to acquire those shares. 6.3. More importantly, she did not:
6.4. She said however that she was prepared to undertake that she “will transfer” the Winful Shares into a trust to be shared equally and beneficially amongst the Siblings (§8). 6.5. Pausing there, we note that the beneficial interests under this proposed transfer would differ substantially from the situation that would result if the shares belong to the estate, as:
6.6. Violet also said alternatively, that she was willing to undertake not to dispose of the Hidden Shares pending the resolution of the Probate Action or other order of the court (§9). 7.1. As for Vi Vi, she deposed in her 2nd aff (§4) that:
7.2. However, there was no disclosure of the source of her information or belief. 8.1. In reply, Lily filed her 6th aff in which she pointed out that Violet has failed to provide any particulars of the source of funds for the acquisition of the Hidden Shares (§14). 8.2. In addition, Lily drew attention for the first time to the PIP, alleging that she was “recently provided” with the Restruct Plan, in which the “Current Structure” showed (§15):
8.3. Lily said that:
9.1. Vi Vi filed a 6th aff in which she deposed (§§7 - 8):
9.2. However, she did not explain the means by which the Siblings had acquired the assets (eg by gift), and she did not say what were their respective interests therein. Nor did she say what was the arrangement under which the Deceased and the Mother held one of the companies in the PIP. 9.3. Vi Vi also said:
9.4. Regarding the Deceased’s mental capacity, Vi Vi did not deny Lily’s assertion that he had become mentally incapacitated after his stroke in January 2016, and explained that the Mother and Siblings “did not proceed” to make an application for appointment of a committee under the MHO in order to avoid or minimize speculation and publicity (§36). 10.1. Violet filed her 3rd aff in which she simply confirmed Vi Vi’s 6th aff and said (§8):
10.2. We note that even though Violet controlled Owton which held the Winful Shares, she did not explain the means by which she acquired them, nor did she say what interests (if any) the Siblings had in Owton or other companies in the PIP, or what were the interests (if any) the Deceased and the Mother had in the company within the PIP of which they were the shareholders. Nor was there any evidence that before the Deceased was incapacitated, the assets in the PIP were administered or managed by PCH, or were controlled by anyone other than the Deceased. 11.In Lily’s 7th aff, made a day before the hearing before the judge, she said:
12.1. The above was the state of the evidence regarding the PIP at the hearing before the judge. 12.2. Significantly however, the judge recorded in the APL Decision that (§81):
12.3. This appears to be the first time that Violet and Vi Vi, who had both categorically denied that the PIP belongs to the Deceased’s estate31, have acknowledged that the assets were funded by the Deceased. 12.4. What the judge recorded in §81 was not contained in any of the defendants’ affirmations. There was no evidence from Violet or Vi Vi as to when the Deceased had divested himself (wholly or partly) of the beneficial interests in the assets, and if so, to whom (and if more than one, in what proportions), and how. The judge’s APL Decision 13.Section 40 Probate and Administration Ordinance Cap. 10 (“PAO”) provides:
14.1. In §§29 - 31 of the APL Decision, the judge set out the principles governing the exercise of the discretion to appoint an APL, as follows:
14.2. Pausing here, it is common ground that the judge had correctly set out the relevant principles above. But Lily contends that the judge had departed from those principles by, among other things, failing to appreciate the risk of dissipation, and the need to manage, collect and secure the Deceased’s estate pending the Probate Action. 15.1. In the APL Decision, the judge held in respect of the Hidden Shares that Lily had not substantiated by concrete evidence the alleged risk of dissipation32, and that the following undertakings (“the Undertakings”) were sufficient to maintain the status quo:
15.2. We note that:
16.1. As for the PIP, the judge discussed this issue in §§80 - 87 of the APL Decision. After setting out both parties’ submissions, he held:
16.2. Having said that, however, the judge held:
17.The judge also declined to accept Lily’s query about dividends from the Deceased’s Chevalier shares, some of which were applied to acquire Talent Luck Ltd (“TLL”), a company in the Chevalier Group which held the property in which the Deceased and the Mother resided. 18.Eventually, upon the undertakings given, the judge dismissed the APL application. Application for leave to appeal 19.On 13 August 2020, Lily applied for leave to appeal, which application was dismissed by the judge on 14 May 2021, for reasons set out in his decision of that date. 20.On 28 May 2021, Lily renewed her application for leave to appeal in this court. 21.After this court’s Judgment on the Renunciation Issue, the parties were given leave to file further evidence. Both Lily and Violet filed affirmations on 30 May 2022. 22.In Lily’s affirmation, she alleged (among other things):
23.In Violet’s affirmation, she alleged (among other things):
Discussion Ground (2) 24.We shall deal first with the ground40 that APL should be appointed due to “hostility between executrices” i.e. between Lily of the one part and Violet and Vi Vi of the other. It is not disputed that animosity and distrust between executors may be a ground for appointment of APL41. 25.The defendants have objected to this ground on the basis that this is a new ground which was not before the judge either at the hearing of the summons for appointment of APL or in the summons for leave to appeal. 26.1. It is clear that on the facts of this case, this is not a valid objection. This ground could not have been raised before the judge at the hearing of the summons for appointment of APL (30 October 2019), as it was not until 27 April 2021 that Lina renounced executorship and Lily was substituted as executrix in the third degree. 26.2. This event also occurred well after submissions were filed (on 29 December 2020, 5 January 2021 and 6 January 2021) for leave to appeal, and less than three weeks before the judge gave his decision refusing leave (14 May 2021). There is no evidence of any hostility during those three weeks. 27.1. However, we reject this ground because in §20B of her Re-Re Amd SOC (verified and filed on 29 June 2021), Lily has stated that she does “not intend to accept the office of executrixship of the 2015 Purported Will pending judgment of the Court in this action”. Although this court has found that such a statement did not amount to a renunciation at law, and whatever reservations she may seek to make, the fact remains that she has verified that she would not act in that office or capacity of executrix pending judgment in the Probate Action. Accordingly, any representation to third parties after the date of the Re-Re Amd SOC that she is acting in the capacity as executrix would not be correct. 27.2. In any event, although we have of course not heard third parties (eg the banks) on the point, the general law is that executors do not have to act together, except in dealings with immoveable property42. No doubt, in view of the concerns expressed by Lily regarding the possibility of limitation defences, the defendants should be alert to their duty to act with due diligence and without delay in taking all necessary actions for the purpose of collection of the estate. Other grounds 28.In the other grounds, Lily contends essentially that the judge has failed to appreciate the risk of dissipation, and the need for APL to manage, collect and secure the Deceased’s estate. Mr Edward Chan SC appearing for Lily43, criticized the defendants for categorically denying any interest of the Deceased in the PIP and only admitting that he was in fact the source of the funds at the hearing before the judge44, and when there was no evidence how the Deceased had divested himself of his interests in the assets. 29.1. In our view, that criticism is well-made. It is the duty of executors to collect and get in the estate of the deceased and administer it according to law. The first step involves an examination of the deceased’s financial affairs so as to ascertain what his estate comprises. It is incumbent on executors to approach this exercise having regard to all the available evidence. 29.2. If an asset acquired with funds belonging to the deceased has been transferred to another person or entity without consideration, the executors should consider the circumstances of the transfer to see if the deceased had validly and fully divested himself of his interest therein. 30.1. The defendants have simply deposed that the assets in the PIP did not belong to the Deceased. If the Deceased had transferred any or all of the assets by way of gift, one would have expected such a statement from the defendants at the forefront of their evidence. However, they simply denied that the Deceased had any interest in the assets, without evidence as to when he had divested himself (wholly or partly) of the beneficial interests therein, and to whom (and if more than one, in what proportions), and how, and his intention(s) at the time of transfer. 30.2. Insofar as there may be reliance on the presumption of advancement (which has not been argued), that is no more than that, a presumption to be considered against evidence45 showing that the Deceased had during his lifetime transferred various funds to one or other of his children by way of loan. 30.3. The fact that, against the backdrop set out above, the defendants have readily denied the Deceased’s interest in the PIP (in which they have both asserted personal interests) is a matter which a court should take into account when considering whether there is a need to appoint APL to (among other things) collect the estate. With respect to the judge, he had failed to take into account the significance of the defendants’ eventual admission that the assets had been acquired with funds of the Deceased and that there was no evidence that consideration had been given for disposition, when he held that “Lily ... should establish the basis for contending that the pool is held on trust for the benefit of the Deceased ...”46 , but she “did not adduce evidence of the creation of such trust (apart from the admitted fact of funding)”47. 31.1. We now come to the defendants’ reliance on the conduct of the Siblings (including Lily) regarding the PIP to justify their (the defendants’) denial of the Deceased’s interest therein. This was emphasized by the judge. 31.2. In §§82 - 83, he referred to instances before the Deceased’s death when one or other of the Siblings and the Mother have received, or suggested the use of, funds from the pool. However, with respect to the judge, these instances were after the Deceased had suffered a serious stroke, and even on the defendants’ evidence, the family considered making an application for appointment of a committee under the MHO to take charge of his affairs, although they eventually did not do so due to a wish to avoid publicity and speculation. 31.3. In §84, the judge referred to instances after the Deceased’s death. 31.4. Then in §87, the judge found that if the PIP forms part of the Deceased’s estate,
32.1. With respect, that is approaching the issue from the wrong premise. Instead of seeing if the defendants had evidence to exclude the PIP from the Deceased’s estate even though he had funded it, the judge seems to have held that because the Siblings had utilized the funds after the Deceased’s incapacity and death, it followed that they could legitimately do so, and therefore the funds could not have belonged to the Deceased. 32.2. The reference to the family consulting two legal firms (§87) is not understood. There was no evidence that the family was advised that they could “help themselves” to the PIP. The advice referred to in the evidence was on making an application for the appointment of a committee, evidence which shows that the Deceased was mentally incapable. Indeed, in §92, the judge expressed his “concern ... that the properties and affairs of the Deceased after he has suffered the stroke in January 2016 until his death have been managed without the appointment of a committee under the MHO”. 32.3. Further, that Lily did not take a contrary stand from the other siblings at first, and as the judge found, could not distance herself from the use of funds from the PIP, do not create some sort of estoppel (although the judge was certainly entitled to criticize her litigation conduct in advancing the PIP issue at only the eleventh hour before the hearing). 32.4. The fact that the Siblings (including Lily) have treated the PIP as their own after the Deceased’s incapacity and death is only one factor to be taken into account when investigating whether the PIP or part thereof is part of the Deceased’s estate, a duty of the executors. Whatever the Siblings subjectively assumed or believed (however innocently), the issue whether the Deceased has beneficial interests in the PIP is a matter of title, to which property and trust law must be applied. 32.5. In any event, Lily is only one beneficiary among many. Insofar as the Chevalier shares held through Owton (a PIP company) are concerned, the difference between a scenario where the PIP belongs to the Siblings and a scenario where they belong to the estate has been set out in §6.5 above48. Insofar as other assets in the PIP are concerned, it should also be noted that under the 2015 Will, the Mother would get 30/100 parts of the residuary estate, and Oscar would not get any part or share. As executrices, the defendants have a duty to the estate, the beneficiaries of which may not be confined to the Siblings and may include minors, depending on the judgment in the Probate Action. 33.1. We have noted above our concern regarding the defendants’ readiness to deny any interest of the Deceased in the PIP, apparently in the absence of investigation into the Deceased’s intentions when arranging for assets he funded to be held by the 15 companies. If the matter had ended there, we would have been inclined to overturn the judge’s exercise of discretion for the reasons set out in the preceding paragraphs, as APL would be expected to investigate the Deceased’s affairs with a more open mind, and take steps to collect and protect the estate. 33.2. Nevertheless, the matter did not end there. As mentioned above, relevant considerations governing the court’s exercise of the discretion to appoint APL include the likelihood of dissipation, an aspect of protection of the estate. 33.3. In this regard, undertakings were obtained from Violet regarding the Hidden Shares49. We are satisfied that the terms of the undertakings are adequate to protect them against risk of dissipation pending the Probate Action. This is especially since at the hearing before us, we were informed that witness statements in the Probate Action have been filed, a Case Management Conference will be held in April this year, and the trial is likely to take place within the next year. 33.4. However, no undertaking was offered regarding the rest of the PIP (i.e. other than the Winful Shares held by Owton, a PIP company). The judge did not extract an undertaking even when he assumed that the Deceased had some beneficial interest in the PIP50. The reasoning was that “absent dissipation”, any interest of the Deceased in the PIP would fall into the residuary estate. 33.5. If that was the sole reasoning, the judge would also have dismissed the summons vis-a-vis the Hidden Shares without the need for the undertakings. The fact that he did not require an undertaking for the rest of the PIP may have been due to Lily’s membership of the Inv Comm, which enabled her to be aware of intentions regarding the assets’ movements. 34.However, Lily was no longer a member by the time the matter came before us. After we expressed our concern regarding the PIP at the hearing, Mr Benjamin Yu SC appearing for the defendants51 took instructions and offered an undertaking which was then reduced to writing in a letter dated 20 January 2023 from Minter Ellison (“ME”) as solicitors for Oscar, in the following terms (“Oscar’s PCH undertaking”):
35.1. Subsequent to the court’s receipt of the ME letter, the court received a letter dated 26 January 2023 from LFP enclosing (1) their letter to Oscar dated 20 January 2023; (2) a Hong Kong company search and (3) a Hong Kong BR search. LFP alleged that the name “Polaris Capital Holdings Ltd” was “never mentioned” in the evidence filed in the proceedings before this court or in the CFI. 35.2. LFP’s allegation is clearly wrong. “Polaris Capital Holdings Ltd”, expressly stated to be incorporated in the BVI, was one of the contracting parties in Administration and Consultancy Agreement52 and the Management Agreement53, both of which documents had been exhibited and referred to. 35.3. After this was pointed out by PCW in their letter to the Court dated 27 January 2023 (copied to LFP), LFP did not even write to the court to correct or withdraw their allegation which was at best, careless and at worst, misleading. Either way, such conduct is unsatisfactory. 36.Coming back to Oscar’s PCH undertaking, with prior information given of disposals and with Lily’s membership on the Inv Comm, we are satisfied that it would be adequate to protect the estate from risk of dissipation of the PIP in the run-up to the Probate Action. 37.1. Finally, in Mr Chan’s submissions, he referred to the transaction whereby, after the Deceased’s stroke, dividends from his Chevalier shares were applied for the Mother to acquire TLL from the Group. 37.2. Lily alleged that she did not know about the whereabouts of the dividends. The judge held that contemporaneous emails tended to suggest the contrary. It has not been argued before us that there was no evidence which entitled the judge to arrive at that finding. 37.3. In any event, there is no suggestion that there is a risk of dissipation of the shares of TLL, or the residential property, its underlying asset. Order 38.1. For reasons set out above, we would give leave to appeal but upon Oscar’s PCH undertaking above, dismiss the appeal. 38.2. As far as costs are concerned, the appeal has failed on the new ground and the other grounds regarding the Hidden Shares and TLL. As far as the PIP is concerned, we are mindful that a new undertaking has been provided. Accordingly, we would make a costs order nisi that the appellant is to pay the respondents 50% of their costs of the appeal including costs for the application for leave, with certificate for two counsel.
Mr Edward Chan SC and Mr Abel Lam, instructed by Lily Fenn & Partners, for the plaintiff Mr Benjamin Yu SC, Ms Teresa Wu and Ms Jacqueline Law, instructed by P C Woo & Co, for the 1st & 2nd defendants 2 C/997. 3 B1/618 (Violet’s name did not appear). 4 S2/1143. 5 Vi Vi’s 6th aff §35. 6 Lily’s 6th aff §38. 7 Lily’s 6th aff §15. 8 Vi Vi’s 6th aff §10. 9 B2/902. 10 B2/904. 11 B2/933. 12 B1/503. 13 B2/866. 16 S3/1253+. 17 S3/1461. 18 S3/1241. 19 S3/1484. 20 S3/1504. 21 S3/1243. 22 S2/1139-1141. 23 S3/1301. 24 At that time, Lily had support from Wai Lee, but Wai Lee withdrew her support as a result of the APL Decision: email from Wai Lee to Oscar on 17 May 2021: S3/1456-7. 25 §2(12). 26 (Other than the Chevalier Shares held in her capacity as executrix). 27 The last day of the 80th year following the Deceased’s death. 28 Intestates Estates Ordinance Cap. 73, s.4(3). 29 At an unknown date, Lily ceased to be a member of the Inv Comm. 30 That “the defendants have withheld from mention the Deceased’s investment held by some 15 corporate vehicles holding different assets”: APL Decision, §80. 31 See §9.1 and §10.1 above. 32 APL Decision, §51. 33 The sealed order was not included in the bundles before us, but we have read it in the Court File. 34 Instances set out in §§82 - 83, APL Decision. 35 Instances set out in §84, APL Decision. 36 S3/1529 -1538. 37 §2(35). 38 §§2(37) - (38). 39 §2(40). 40 NOA §2. 41 Re Steel, dec’d [2010] EWHC 154 (Ch), §§106 - 118. 42 Section 54 PAO. 43 With Mr Abel Lam. 44 CFI Leave to Appeal Decision §24. 45 eg. The Deceased’s note showing a loan to Lily of $4 million: §2(4); and Oscar’s email referring to a loan from the Deceased to Wai Lee of $22.75 million: §2(10). 46 CFI Leave to Appeal Decision, §26. 47 CFI Leave to Appeal Decision, §27. 48 (Depending on whether the 2009 Will or the 2015 Will is held to be the Deceased’s final will, or whether he died intestate). 49 §15.1 above. 50 CFI Leave to Appeal Decision, §29. 51 With Ms Teresa Wu and Ms Jacqueline Law. 52 §2(8). 53 §2(9). |
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