Re Chan Hung Mou

HCCA 2740/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CAVEAT NO. HCCA 2740 OF 2007

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Coram: Before Master J. Wong in Chambers

Date of Hearing: 24 October 2008

Date of Decision: 11 November 2008

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D E C I S I O N

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Introduction

1.A natural daughter disputes that the surviving widow shall not administer the estate of her deceased husband.  Instead, a professional administrator is to be appointed by this Court.  The widow argues otherwise.

Background

2.Mr. Chan Hung Mou (“the Deceased”) died intestate in Hong Kong on 18 September 2005.  His surviving spouse, Madam Chan Lee Hong Kok (“the Widow”) applied under HCAG 7525/2006 for the grant in respect of the estate (“the Estate”) of the Deceased.

3.The application could not be processed because Ms. Kitty Kay Chan (“the Daughter”) lodged various Caveats against it.  The parties’ legal representation corresponded extensively for quite some time from 2006 to 2008, but unfortunately, they still have to resolve their dispute through the Court.

The Widow’s case

4.Briefly, the Widow married to the Deceased in 1946 in Shanghai and had the same registered in Hong Kong on 8 October 1966.  Out of the wedlock, 4 children were born and Philip was the eldest son.

5.The Widow accepted that the Deceased had 2 other ladies with him.  One Madam Huang gave birth to 3 children for the Deceased and one Madam Wong, the Daughter and Caveator herein.

6.Hence, under the Intestates Estates Ordinance (Cap. 73) (“IEO”), the Widow will take the statutory sum of $500,000 together with half of the remaining Estate, and the said 4 lawful and natural children as well as the said 4 natural children are to take an equal share in the other half remaining Estate.

7.The Widow agrees that she will well and truly administer the estate.  She also says that she ranks the top priority under rule 21 of the Non-Contentious Probate Rules (“NCPR”) (Cap. 10A).  All the beneficiaries of the Estate, except the Daughter, agree to her application.  She is in good health and has explained sufficiently for the enquiries made by the Daughter.  She has corrected her mistakes made.  The suspicion and allegation of the Daughter are unfounded and it is not necessary to appoint a professional administrator in the circumstances.

The Daughter’s case

8.On the other hand, the Daughter argues that a professional administrator should be appointed.

“3.       ……

(1)       The estate is complicated, involving the Deceased’s business interests in Hong Kong and elsewhere and held through the vehicles of Panamanian registered companies.  Mr. Borrelli has agreed his fees would be capped at HK$80,000 (see “ANS-1” E-5/120);

(2)       Given that correspondence from Kitty’s solicitors has led to the disclosure of further assets, it is likely that a professional administrator will uncover further assets of the estate;

(3)       Madam Lee, who has applied to be the sole administratrix of the estate, has demonstrated a marked reluctance to provide relevant information regarding the Deceased’s assets;

(4)       A professional administrator is independent and not subject to family pressures to conceal assets;

(5)       There have been glaring omissions in the Schedule of Property filed by Madam Lee to obtain Estate Duty Clearance;

(6)       Madam Lee is old and unsuitable to be appointed sole administratrix of the estate;

(7)       Madam Lee has a conflict of interest in administering the estate for the benefit of all the beneficiaries, including, Kitty.  This is all the more marked as she is the largest ‘creditor’ of the estate;

(8)       There is a history of resentment between Madam Lee and her family towards Kitty and her mother that makes Madam Lee wholly unsuitable and unfit to be appointed as administratrix.”

(skeleton submission of Mr. Thomson)

Discussion

9.Both Counsel, Mr. Shum for the Widow and Mr. Thomson for the Daughter, do not have much argument over the applicable law to their dispute.  Section 36 Probate and Administration Ordinance (“PAO”) (Cap. 10) allows the Court to appoint an administrator as he thinks fit as necessary or convenient in the circumstances.  It gives him a broad discretion to be exercised in the best interests of the estate (Lefkowitz v The Bank of New York & Ors [1996] 3 HKC 591).  Besides, since the Widow ranks the first person entitling to the grant under rule 21 NCPR, the burden lies on the Daughter to persuade that the grant should not be issued to the Widow, but the professional administrator.

10.I now move to examine each of the reasons put forward by Mr. Thomson.

(1)    Is the Estate complicated?  Has the professional administrator agreed to cap his fee?

(a)       There is undisputed or undisputable evidence before me that between 1988 and 1993 the Deceased transferred various of his shareholdings of companies to a Panamanian company called Shun On for, inter alia, tax purposes.  Once the transfer was completed, they became “off-shore” and were no longer assets “within” the jurisdiction.  As such, they could not possibly form part of the Estate in Hong Kong.  As now appeared in the Estate Duty (“EO”) papers before this Court showing the Estate, it comprises a matrimonial home, shares, bank accounts and a motor vehicle.  I do not agree that they are complex.

(b)       I further do not agree that the professional administrator has agreed to cap his fee.  It is so because, as pointed out by Mr. Shum, the professional administrator did qualify the capped fee with the followings:

“17.        The above estimate has been prepared on the basis of the information provided and our experience with assignments of this nature.  Should our work substantially increase (beyond that described in this proposal) we will discuss further billing arrangements with you.”

(2)    Is it likely that the professional administrator will uncover further assets of the Estate?

In response to the Daughter’s enquiries, the Widow investigated into the Estate and subsequently amended the ED papers to include interest of the Deceased in one Ting Chong Transportation Limited for about $6 m.  The Widow explained that it was all along her belief that all the substantial shareholdings of the Deceased had transferred to Shun On.  She made a mistake and upon checking by her solicitor, the same was then rectified.  To this explanation, I am afraid that the Daughter has not been able to adduce any or sufficient evidence to persuade me not to accept it.  Further, the shareholdings in Shun On and the subsequent gift to Philip, having been completed for years, with respect, I am not too optimistic about the purported “uncover” by the professional administrator.  In the alternative, even if there might be something wrong with the said gift, it has to be disputed elsewhere as Shun On is not within the jurisdiction of Hong Kong Court.

(3)   Has the Widow demonstrated a marked reluctance to provide information regarding the Estate?

Mr. Thompson has spent quite some efforts leading me go through the correspondence between the parties’ representatives at all material times, I take the view and find on balance that the Widow has reasonably answered all enquiries put to her, including probably something she is not legally obliged to do so.

(4)   Will the Widow conceal the Estate?

The ED papers are regarded as prima facie evidence of the Estate.  The Widow has offered her explanation and case on oath.  The burden lies squarely on the Daughter if she wants to show that the Widow should not administer the same.  I am afraid that she has not been able to satisfy me that the Widow has intentionally concealed or will conceal the Estate.  From a practical point of view, I should also bear in mind that all the beneficiaries, other than the Daughter, support the Widow’s application and the Daughter represents only about 6% interest in the Estate.

(5)   Have there been glaring omissions by the Widow in the ED papers?

It is not denied that the ED papers have been amended.  On balance, I accept the Widow’s explanation.

(6)   Is the Widow old so that she is unsuitable to administer the Estate?

It is also not denied that the Widow is a senior citizen at age of 80.  However, seniority per se, short of evidence of poor or bad health, can never be a factor affecting the right of administration at all.

(7)   Does the Widow have a conflict of interest?

The Daughter complains that the Widow has a claim of $7 m medical expenses paid for the Deceased.  Being the largest creditor of the Estate, she should therefore not administer the same.  I disagree.  To start with, only close family members are entitled to an estate of a deceased under IEO.  Paying medical expenses for a close family member who eventually dies is not uncommon.  Hence, having a reimbursement claim of medical expenses for a deceased family members, without more, should never be sufficient to deprive one’s right of administration.  Although the Widow has not explained why she omitted such a large amount when she applied at the beginning for the ED papers, I take it that the Estate Duty Office did subsequently check the supporting documents, and allow the Widow to include such debt as incurred for the Deceased.  Last, but not least, for whatever reasons, the Daughter decided not to inspect those receipts when the Widow had offered such opportunity to her.

(8)    Is the Widow unsuitable and unfit because there is a history of resentment between her and the Daughter/her mother Madam Wong?

In my view, personal hospitality between different members of a family or different camps of families should never be a factor to deprive one’s entitlement to administration.  In administration of estate for an estate, this Court will only look to factors affecting the administration, but not otherwise.  Hence, disputes like, whether one has been a good wife, a good daughter, so and so forth is not relevant at all in a section 36 PAO application.

Conclusion

11.In conclusion, it appears that the complaints of the Daughter do not even get off the ground, let alone the exercise of the discretion of the Court.  In the alternative, even if discretion needs to be exercised, I see no reason why the Widow should be passed over.  I therefore will order the followings.

(a)       The Re-Amended Summons of the Daughter as attached to her Summons filed on 22 October 2008 is dismissed.

(b)       The Caveat filed herein on 16 November 2007 shall cease to have any effect.

(c)       Letters of administration in respect of the Deceased is to be granted to the Widow, if entitled to.

(d)       There is an order nisi that the Daughter shall bear costs of the Widow in the application and proceedings, including all costs reserved and certificate of counsel for hearing on 24 October 2008, to be taxed if not agreed.

Mr. J. Thomson instructed by Messrs. Mallesons Stephen Jaques for the Caveator.

Mr. E. Shum instructed by Messrs. Kong & Company for the Person Warning.