Wan Kwok Leung v. Wan Kwok Ling Bonnie, The Sole Executrix of the Estate of Wan Nin Sing, The Deceased

HCMP 906/2022

[2023] HKCFI 3286

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 906 OF 2022

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DECISION

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INTRODUCTION

1.By an Originating Summons filed on 13 July 2022 (“the OS”), the plaintiff applied for, inter alia, the following relief :

(1)  The 1^st defendant do provide the plaintiff with a true and perfect inventory and account of the estate (“the Estate”) of the late Wan Nin Sing (“the Deceased”) (“the Estate Account”) and allow the plaintiff to inspect and take copies of the supporting documents thereof;

(2)  The 2^nd defendant do provide the plaintiff with a full and accurate account of the state and whereabouts of the properties and assets under the Wan Nin Sing Family Trust (尹年盛家族信託) (“the Family Trust”) and allow the plaintiff to inspect the accounts (“the Trust Accounts”) and/or documents (“the Trust Documents”) in relation to the affairs of the Family Trust.

BACKGROUND

2.The following factual and procedural background is largely adopted from the plaintiff’s skeleton submissions in respect of which the defendants do not dispute.[1]

3.The Deceased was a successful businessman who had been in the business of production and retailing of jewellery and gold items under the business name of Diamond King (金鑽皇). The said business was operated by Diamond King Jewellery Holding Limited (“Diamond King Limited”), of which the Deceased was the sole shareholder. It was and is at all material times an ongoing business.

4.Other than Diamond King Limited, the Deceased also held several properties either under his own name or through other corporate vehicles, including a shop located in Wing Lung Building, Kowloon which was held through Excellent International Industrial Limited (“Excellent International Limited”), a company wholly owned by the Deceased.

5.The plaintiff was one of the sons of the Deceased and had worked in Diamond King Limited since December 1997, whereas the 1^st defendant was a daughter of the Deceased and the elder sister of the plaintiff.

6.The Deceased made a will on 25 August 2017 (“the Will”), under which the Deceased appointed the 1^st defendant to be the sole executrix of the Estate.

7.The Will provided, inter alia, that apart from various gifts specifically mentioned in the Will, having paid all debts, funeral expenses and administration expenses, the remainder of the Estate shall be vested in the Family Trust (which was set up by the Deceased by a trust deed (“the Trust Deed”) dated 17 August 2017) of which the 2^nd defendant is the corporate trustee.

8.The plaintiff is one of the beneficiaries of the Family Trust.

9.The 1^st defendant is and was at all material times the sole shareholder and director of the 2^nd defendant.

10.The Deceased passed away on 1 June 2019.

11.The 1^st defendant obtained the Grant of Probate on 4 March 2021.

12.From 4 August 2021, the plaintiff has been requesting for various documents relating to the Family Trust, including:

(1)  The Trust Deed, supplemental deeds, trustee memorandum and letter of wishes, if any;

(2)  Statements of trust investments and documents relating to property held by the Family Trust;

(3)  Latest trust accounts, including details of distributions made to the beneficiaries of the Family Trust.

13.After the exchange of various correspondences, a copy of the Trust Deed was eventually provided by the defendants’ solicitors to the plaintiff’s solicitors on 30 December 2021. However, no further documents relating to the Family Trust were provided by then.

14.The plaintiff therefore made further requests through solicitors from February 2022 onwards.

15.The defendants’ solicitors then replied by letter dated 9 March 2022, in which it was stated that the defendants were in the course of preparing the requested documents which would be provided once they were available.

16.On 14 April 2022, the defendants’ solicitors further informed the plaintiff’s solicitors that the 1^st defendant had engaged a certified public accountant (“the CPA”) for the preparation of the Estate’s account, and it was estimated that such accounts would be done by 1 June 2022. The plaintiff was requested to withhold legal action in the meantime.

17.By letter dated 1 June 2022, the defendants’ solicitors informed the plaintiff that the CPA could only complete the preparation of the Estate’s Accounts on 30 June 2022. They therefore requested the plaintiff to withhold taking out any application in the meantime.

18.However, since the plaintiff did not receive further reply from the defendants’ solicitors, the plaintiff commenced this action on 22 July 2022.

19.On 9 September 2022, the defendants’ solicitors provided the plaintiff’s solicitors with the following documents and proposed that the plaintiff should discontinue these proceedings:

(1)  A copy of the Estate’s Account;

(2)  A copy of the Family Trust Account;

(3)  Copies of supporting documents in relation to the Estate’s Account and the Family Trust Account.

20.At the first call-over hearing of the OS, Master Hui, having been informed by the 1^st defendant’s affirmation in opposition (filed on 12 October 2022) about the defendants’ provision of accounts and documents (as referred to in the preceding paragraph), directed the plaintiff to prepare a list of complaints so as to narrow down the issues, and, if possible, dispose of the whole matter. The learned Master then adjourned the case for a 2^nd call-over hearing to be held on 20 April 2023.

21.The plaintiff prepared a list of complaints (“the List of Complaints”) accordingly on 1 February 2023.

22.At the 2^nd call-over hearing on 20 April 2023, the defendants’ counsel informed Master Hui that an accountant would be appointed to deal with the List of Complaints. Master Hui then adjourned the matter for substantive argument before a Judge.

23.On 31 October 2023, the defendants sent the plaintiff a document in reply (“the defendants’ Reply”) to the List of Complaints, in which further information and documents had been provided.

24.Despite the provisions of further information and documents, the plaintiff contended at the hearing today that the relief sought in the OS has still not been fully satisfied. It was submitted that 6 categories of documents/information should be further provided.

25.Although it was originally claimed that the defendants shall provide an Estate Account as well as a Trust Account, Ms Ng for the plaintiff has sensibly informed this Court that the plaintiff would not proceed with the claim for an Estate Account because the assets of the Estate have now been vested in the Family Trust.

26.I will deal with the aforesaid 6 categories of requests as well as the claim for Trust Account in turn below. However, before I do that, I will set out the applicable legal principles.

THE LEGAL PRINCIPLES

Trust Account

27.Order 85 rule 2(3)(a) of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“RHC”) provides that an action may be brought for an order requiring an executor, administrator or trustee to furnish and, if necessary, verify accounts.

28.Trustee’s duty to furnish information to the beneficiary has been explained by Potter J in Foreman v Kingstone [2004] 1 NZLR 841 at [97] as follows:

“Beneficiaries are entitled to receive information which will enable them to ensure the accountability of the trustees in terms of the trust deed. They are entitled to have the trust property properly managed and have the trustees account for their management. They are entitled to receive trust accounts […]. This goes well beyond the right to be ‘considered’ by the trustees which, in the defendants’ submission, is the extent of entitlement of a discretionary beneficiary.”

29.In Lewin on Trusts (20^th Edn), the learned author also had the following to say:

“Although a beneficiary does not have an absolute right to disclosure of information about the state of the trust, in the absence of circumstances showing why such information should not be disclosed, or should not be made to the beneficiary seeking disclosure having regard to the nature of his rights as such, and subject to safeguards for the protection of information of a confidential nature, the trustees should normally make disclosure in accordance with the following principles. A beneficiary ordinarily has the right to call upon the trustee for accurate information as to the state of the trust, and a trustee may be called upon to give information to a stranger with whom the beneficiary is proposing to deal. Hence, in a trust for sale and payment of debts, the party entitled subject to the trust may say to the trustee: what estates have you sold? what is the amount of the money raised? what debts have been paid? A trustee should give the beneficiaries proper information as to the investment of the trust estate. A beneficiary is normally entitled to inspect trustees’ vouchers for their expenditure. Likewise, it is not sufficient for the trustee merely to say ‘I have invested the trust money on a mortgage’, but he must normally produce the mortgage deeds, and where trust money is invested in gilts a beneficiary is entitled to authority from the trustee to enable him to apply to see if there are any charging or stop orders. Ordinarily a beneficiary may seek reasonable information and supporting documents about transactions concerning the trust property and property owned by companies owned by the trust entered into by or with the authority of the trustees. While the trustees must give accurate information, they need not answer never-ending lengthy and voluminous enquiries as to the state of the trust beyond what is reasonable having regard to the trustees’ time and resources available to respond to such inquiries.”[2]

“Trust accounts often give global figures for the amounts of discretionary capital distributions or income distributions without any breakdown or information as to the recipients or nature of those distributions. A beneficiary to whom trustees are accountable in respect of such distributions (for instance income beneficiaries in respect of income distributions and capital or income beneficiaries in respect of capital distributions) may demand, and should normally be given, a breakdown together with the identity of the beneficiaries to or for whose benefit the distributions were made under the relevant discretionary trust or power, so as to enable the beneficiary making the demand to be satisfied that the distributions have been fully accounted for and been made to or for the benefit of persons who are objects of the relevant discretion or power […]”[3]

30.In Henchley v Thompson [2017] EWHC 225 (Ch), the claimants sought an order directing the defendant therein to provide a full account in common form of his dealings with the assets of two trusts. It was held that the court had a discretion about whether to order a trustee to provide an account of his dealings with the trust assets. While beneficiaries had no absolute entitlement to an order for an account, the court would ordinarily exercise its discretion in favour of making such an order. It was further held at [62] that:

“I have earlier in this judgment made some observations about the nature of trusts and accounts. They are different to trading accounts for a business entity. In the case of the latter, the accounts, in accordance with accounting conventions, provide a balance sheet which gives a snap shot as to the asset position on a date and a trading report covering a period. Trust accounts, particularly where there are beneficiaries with interests which have not vested, must be able to show from period to period (the frequency of accounts is not fixed) how the trust assets have been dealt with, including what distributions and disposals have taken place. A beneficiary reading trust accounts must be in a position to assess whether the trust assets conform with the trust instrument, that the class of assets held is appropriate for the trust. The style of the accounts, and the level of detail provided will necessarily vary […]” (emphasis added)

THE PLAINTIFF’S CURRENT REQUESTS

31.Ms Ng and Mr Li have neatly summarised the current requests of documents/information in a table which I gratefully adopt as follows:

Category	Documents/Information to be ordered	Purpose
1	Bank statements of the 2nd defendant	To ascertain the income and expenditure of the Trust and for accurate information as to the state of the Family Trust so as to understand how the trust assets have been dealt with.
2	Audited Financial Statements of the 2nd defendant for years 2019 to 2023	Ditto
3	Particulars of all distributions made by the 2nd defendant to the beneficiaries pursuant to the Trust Deed and the supporting documents thereof	To understand the distribution to other beneficiaries which a beneficiary is entitled to know.
4	Bank statements of Diamond King Limited and Excellent International Limited from 1 June 2019 (date of Deceased’s death)	To ascertain the income and expenditure of the Family Trust and for accurate information as to the state of the Trust so as to understand how the trust assets have been dealt with.
5	Monthly income statements of Diamond King Limited and Excellent International Limited from 1 June 2019 (date of Deceased’s death)	Ditto
6	All the supporting documents which had been provided to certified public accountants for preparing the Financial Statements of Diamond King Limited, Excellent International Limited and the 2nd defendant	Ditto

DISCUSSION

Category 2

32.For reasons which will become apparent later, I will deal with the Category 2 documents first.

33.Under this category, the plaintiff asked for the audited financial statements of the 2^nd defendant for the years 2019 to 2023.

34.It may be recalled that, during the 1^st call-over hearing of the OS, Master Hui has directed the plaintiff to prepare the List of Complaints, so that the issues could be narrowed down. However, it is noted that the plaintiff has not included the Category 2 documents as one of the complaints in the said list.

35.The question is, in such circumstances, whether the plaintiff should be allowed to raise a new request at this stage.

36.This is a case management decision.

37.In my view, the plaintiff should be allowed to do so, since the 2^nd defendant is duty bound to provide such documents to the plaintiff. Neither did the defendants say that it would suffer from any prejudice if the plaintiff was permitted to include this new request at the hearing.

38.The only prejudice which might have been caused to the 2^nd defendant by such a late request is that if there was no such new request, the whole matter might have been resolved amicably without a court hearing. However, if necessary, this matter can be addressed by way of an appropriate costs order, which I shall deal with at the end of this Decision.

39.Coming back to the substantive merit of this request, Mr Hon accepted at the hearing that the 2^nd defendant’s audited financial statements may be provided within 28 days.

40.I will therefore order accordingly.

Category 1

41.The plaintiff asked for the 2^nd defendant’s production of its bank statements so as to ascertain the income and expenditure of the Family Trust and to understand how the trust assets have been dealt with.

42.Mr Hon for the defendants referred this Court to a Report of Factual Findings To the Sole Director of Wan’s Asset Management Limited (i.e. the 2^nd defendant) dated 30 October 2023 which was prepared by Zhonghui Anda CPA Limited (“the CPA Report”), and submitted that the CPA Report provided much information than that contained in the bank statements of the 2^nd defendant and that it has adequately served the purposes of the plaintiff.

43.With respect, I disagree.

44.As explained in the CPA Report, one of the tasks which the accountants engaged by the 2^nd defendant were to perform was to “obtain lists of cash and cash equivalent as of period ended date and verify the balances with supporting document(s) provided by [the 2^nd defendant]”. Indeed, in the Statement of Affair contained in the CPA Report, only the closing balances of the 2^nd defendant’s various bank accounts as at 31 March 2023 were set out. It is unknown as to whether, and if so, how much had been withdrawn from the 2^nd defendant’s bank accounts.

45.Having said that, Ms Ng accepted that if the plaintiff would be provided with its audited accounts, the plaintiff would not insist on the provision of bank statements.

46.I therefore make no order in respect of this category of documents.

Category 3

47.While the plaintiff asked for particulars of all distributions made by the 2^nd defendant to the beneficiaries pursuant to the Trust Deed and the supporting documents thereof, Mr Hon informed the Court at the hearing that the defendants would be willing to provide the plaintiff with a full list of distributions made so far by the 2^nd defendant, Diamond King Limited and Excellent International Limited (verified by an affirmation) within 28 days, and the list shall particularize, in respect of each distribution, the date, amount, recipient and purpose thereof.

48.I will therefore make an order accordingly.

Category 4

49.The plaintiff asked for bank statements of Diamond King Limited and Excellent International Limited from 1 June 2019 (date of Deceased’s death) onwards, for the purpose of ascertaining the income and expenditure of the Family Trust and to understand how the trust assets have been dealt with.

50.At the hearing, this Court raised the question as to whether the defendants should provide the audited financial statements of Diamond King Limited and Excellent International Limited instead, because such audited accounts should contain much information than bank statements.

51.As to this, Mr Hon told the Court that the defendants have no objection to provide such audited accounts, and further:

(1)  The audited financial statements of Diamond King Limited for the year ended 31 March 2021 had already been provided to the plaintiff;

(2)  The audited financial statements of Diamond King Limited for the years ended 31 March 2022 and 31 March 2023 may be provided to the plaintiff within 7 days;

(3)  The audited financial statements of Excellent International Limited for the year ended 31 March 2022 had already been provided to the plaintiff;

(4)  The audited financial statements of Diamond King Limited and Excellent International Limited covering the period from 1 June 2019 to 31 March 2023, insofar as they had not been provided to the plaintiff, may be provided in due course.

52.That being the case, I agree that that should serve the purpose of the plaintiff. I therefore make no further order on the Category 4 documents.

Category 5

53.The plaintiff asked for monthly income statements of Diamond King Limited and Excellent International Limited from 1 June 2019 (date of Deceased’s death) onwards, for the purpose of ascertaining the income and expenditure of the Family Trust and to understand how the trust assets have been dealt with.

54.In support of this category of documents, Ms Ng drew my attention to various matters and figures which were found in the documents such as management accounts. It was submitted that the plaintiff should have the right to know how the Family Trust had been operated, and since Diamond King Limited and Excellent International Limited are now held by the Family Trust, his right to know should extend to, for example, the operation of Diamond King Limited, which is an ongoing business.

55.In my view, even though the plaintiff is a beneficiary of the Family Trust, he does not have any absolute right to obtain information and documents as such. The Court should take into consideration all matters and strike a balance between his entitlement to know and also the necessary time and costs which have to be incurred for the purpose of compiling the information for him pursuant to his requests. In the particular circumstances of the present case, the Court should also bear the following matters in mind:

(1)  Although the plaintiff had only been able to obtain information and documents upon repeated requests and after some delay, it cannot be disputed that he has been provided with much information;

(2)  The plaintiff will be provided with further documents (such as audited accounts) pursuant to the order of this Court to be made herein;

(3)  It was the Deceased’s clear intention that, after the plaintiff had been paid $10 million pursuant to the Will, he shall not be employed by any of the companies held by the Family Trust.

56.It is therefore against the wish of the Deceased if the plaintiff would be allowed to monitor the operation of the companies (in particular, Diamond King Limited which is an ongoing business) as if he were still a director thereof.

57.I therefore refuse the plaintiff’s application for the Category 5 documents.

Category 6

58.Under this category, the plaintiff asks for all the supporting documents which had been provided to certified public accountants for the preparation of the Financial Statements of Diamond King Limited, Excellent International Limited and the 2^nd defendant.

59.In Re B v B (Matrimonial Proceedings: Discovery) [1978] Fam.181, Dunn J had the following to say at 192B – C:

“…In many, perhaps most, cases audited accounts of companies of which the husband is a shareholder will be sufficient, together with full disclosure of all the husband’s personal financial records. But there are cases when the court will go behind company accounts and order discovery of company books and documents, if it has the power within the law and within the Rules to do so. It is not usual, however, for the court to take this course unless there is evidence before it from accountants or other experts that the published accounts of the company cannot be relied upon.”

60.Ms Ng for the plaintiff fairly accepted that there is no basis for her client to allege that the audited accounts of those companies cannot be relied upon, not to mention that there is no expert evidence adduced on the matter.

61.I therefore reject this request.

The Trust Account

62.In the light of various concessions made by the defendants at the hearing, Ms Ng accepted that there may not be any immediate need for the Trust Account.

63.On the other hand, Mr Hon told the Court that, while he had no strong view on the matter, the application for a Trust Account might well be pre-mature, because the documents to be provided may be adequate to address the plaintiff’s concerns.

64.I therefore suggested to the parties that, in such circumstances, the plaintiff’s application for Trust Account may be adjourned sine die with liberty to restore, and that they shall write to the Court within 6 months so as to seek further directions on this application, if such an order is still needed by then.

65.This proposal was accepted by both sides, I will therefore order accordingly.

ORDER

66.By reasons of the aforesaid, I make an order that:

(1)  The 2^nd defendant shall provide the plaintiff with the following documents:

(a)  the 2^nd defendant’s audited financial statements for the years ended 31 March 2020, 31 March 2021, 31 March 2022 and 31 March 2023 respectively on or before 11 January 2024;

(b)  The audited financial statements of Diamond King Limited for the years ended 31 March 2020, 31 March 2022 and 31 March 2023 respectively on or before 21 December 2023;

(c)  The audited financial statements of Excellent International Limited for the years ended 31 March 2020, 31 March 2021 and 31 March 2023 respectively on or before 21 December 2023;

(d)  A full list of distributions made so far by the 2^nd defendant, Diamond King Limited and Excellent International Limited pursuant to the Trust Deed on or before 11 January 2024, and the list shall be verified by an affirmation. The list shall particularize, in respect of each distribution, the date, amount, recipient and purpose thereof.

(2)  The plaintiff’s application for Trust Account be adjourned sine die with liberty to restore;

(3)  The parties shall write to the Court jointly no later than 14 June 2024 so as to seek further directions on the application for Trust Account and/or on the disposal of this action, as the case may be.

COSTS

67.By consent, it is ordered that the costs of the parties of this hearing may be paid out of the Estate. The plaintiff’s costs of this hearing shall be taxed on common fund basis if not agreed.

68.For the avoidance of doubt, the costs of the action is reserved and will be dealt with upon the disposal of the plaintiff’s application for Trust Account.

Ms Queenie Ng and Mr Colman Li, instructed by Cheung & Co, for the plaintiff

Mr Kevin Hon, instructed by Ivan Tang & Co, for the defendants