Adrienne Marsh Lefkowitz v. The Bank of New York and Others
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CACV000013/1996
-Headnote- Section 36 Probate and Administration Ordinance, Cap 10 - Discretion vested in Registrar or High Court judge to appoint as administrator "such person as the court thinks fit" - Testator died domiciled in New York - Whether the executor appointed by the New York court to administer the U.S. estate should be passed over and a local trust corporation appointed. Held (Court of Appeal): The words in s36 "necessary or convenient" gave the judge a broad discretion; the judge was not called upon to determine the parties' rights and liabilities nor was it necessary to resolve disputed facts. His decision was unimpeachable. Observations by the Court on curtailing the material (over 2,900 pages) put before the judge.
----------------- Coram: Hon Litton V-P, Mortimer and Liu, JJ.A. in Court Date of hearing: 16-18 July 1996 Date of judgment: 19 July 1996 ----------------- JUDGMENT ----------------- Litton V-P: Introduction 1. This is an appeal against a judgment of Cheung J given on 20 December 1995 after hearings in court lasting five days, based solely on affidavit evidence. That evidence consisted of over 2,900 pages of material, of which over 2,400 came from the plaintiff. 2. The matter concerned the administration of the Hong Kong estate of an American citizen who died domiciled in New York. It involved the exercise of the judge's discretion. The issue before the judge was essentially very simple: Should the administrator appointed by the court in New York be passed over and a local trust corporation be appointed? The jurisdiction to decide this question is conferred by Section 36 of the Probate and Administration Ordinance, Cap 10 which, where relevant, reads:
3. The words "necessary or convenient" in s36 gave the judge a broad discretion, to be exercised in the best interests of the estate. The judge was not called upon to determine the parties' rights and liabilities, nor was it necessary for him to resolve disputed issues of fact: that is, why an application to cross-examine the deponents to the affidavits, made before the hearing, was quite rightly disallowed. 4. The originating summons, as eventually amended, reads:
5. This originating summons was first issued on 8 June 1992 and sought then to appoint the Bank of East Asia as administrator; remarkably, it did not come on for hearing until 3 1/2 years later: and then it went before a judge when, by r51(a) of the Non-Contentious Probate Rules (which the summons itself invoked), it could have been heard by a Registrar. And, as I have said earlier, the hearing before the judge took 5 full days, resulting in a judgment 36 pages long. Such is the luxury of litigation. 6. The judge declined relief. Hence the appeal to this court. Proceedings in New York 7. Mr Nicholas v. Marsh, an American citizen, died domiciled in New York on 15 March 1988. By his will he left his estate to various members of his family including his daughter Mrs Adrienne Lefkowitz who was nominated as an executor and trustee in the will. By the codicil to Mr Marsh's will, if Mrs Lefkowitz (the plaintiff in the present proceedings) should fail to qualify or cease to act as executor then the Bank of New York should be appointed. 8. In April 1988 the plaintiff was granted preliminary letters of administration by the New York court but on 19 April 1990, following legal proceedings and a lengthy hearing, the Surrogate's Court of the State of New York removed her as preliminary administrator. In ordering her removal the court said:
The Bank of New York was appointed in her place. Thereafter the plaintiff (i) appealed against her own removal and (ii) commenced proceedings against the Bank of New York seeking their removal on various grounds. There followed lengthy proceedings, the outcome of which was that the plaintiff failed. 9. On 26 February 1992 the Bank of New York obtained probate of the will and grant of letters of administration testamentary and trusteeship by the New York court. Background to the s36 application 10. The deceased, during his life time, had extensive business interests in Hong Kong and had, for many years, substantial funds and assets held by a well-known Hong Kong businessman Mr Li Ka-shing. 11. As at the date of his death, his Hong Kong assets were, broadly speaking, as follows:
12. The plaintiff did not seek probate of the deceased's will in Hong Kong but on 8 October 1990 entered a caveat in the Probate Registry. 13. On 14 May 1991 the Bank of New York commenced Probate Action No. 5 of 1991 seeking grant of probate and on the following day took out a summons seeking an order under s40(1) of the Probate and Administration Ordinance that, pending the resolution of Probate Action Act No. 5/91, Mr Gordon Oldham and Ms Dianne Brennan, solicitors, as attorneys of the Bank, be appointed administrators pending suit. This application was opposed and, remarkably, was not heard until the following year. When it eventually came on for hearing before Godfrey J on 12 May 1992 there was before the judge not only the original application lodged by the bank for the appointment of administrators pending suit but also an application by the plaintiff for leave to lodge a Defence in the Probate Action. In para 14 of the draft Defence the plaintiff objected to Probate being granted to the Bank of New York and averred that a "neutral trust corporation" should be granted letters of administration under s36 of the Ordinance either solely or jointly with her, and to the exclusion of the Bank of New York. She then gave a whole series of reasons why the Bank of New York was allegedly unfit to administer the estate in Hong Kong. 14. Godfrey J quite rightly refused leave to lodge the Defence since nothing in it constituted grounds for opposing the pronouncement of the will in solemn form. He then made orders as follows:
15. Obviously, for the s36 application to be meaningful, it had to be prosecuted with expedition. The reason is obvious: if the application should succeed and a "neutral trust corporation" were appointed, then inevitably Mr Oldham and Ms Brennan, the Bank of New York's attorneys, would be displaced as administrators; but, until displaced, they had duties to perform. Surprisingly, the plaintiff took steps in those proceedings - whether intended or not is irrelevant - which had the effect of substantially delaying the hearing of the application and, in the process, the paper mountain grew and grew. And much costs were incurred, in relation to which, on one occasion, the plaintiff was ordered to pay on an indemnity basis. So it was that the s36 application was not heard until November 1995. 16. In the meantime the administrators proceeded to gather the assets and to wind up the estate. There is before the court an affidavit dated 10 October 1995, lodged shortly before the hearing in the court below, in which Mr Oldham deposed to the fact that, by that time, the administration was almost complete; the family companies had been put into voluntary liquidation and distributions had been made in the course of those liquidations; Mr Li and the companies he controlled had accounted for the moneys held in trust; all relevant taxes had been paid. The hearing before Cheung J 17. So by the time Cheung J came to hear the application, the scene was entirely different from that envisaged in Godfrey J's order of 12 May 1992. Cheung J in his judgment (p3) said this:
18. Presumably, that was how the matter was put to the judge by counsel. This was a curious way of framing the issue. By the time the judge was asked to deal with it - in November last year, 7 1/2 years after Mr Marsh's death - the issue of the two administrators' fitness was largely academic. Fit or not, they had in fact got on with administration in the intervening years. Under s40(2) they had all the powers of general administrators except the power to distribute the residue of the estate, which they had exercised. 19. At the conclusion of his judgment (p35R) the judge said this:
20. The High Court Action No. 4573 of 1993 referred to in the above passage is an action in which the plaintiff claims that a sum of HK$12,084,606 received by the Bank of New York from Mr Li, on behalf of the estate, belongs in fact to her beneficially. This Action has been set down for trial in November this year. So, if she succeeds, there is nothing left to administer. And if she fails, it is difficult to see how it would be in the interests of the estate generally to have that sum transferred over to Matheson - who would, presumably, hand it back to the Bank of New York again eventually as the executor of the US estate, after deducting their own fees charges and expenses. 21. It would seem that, for the reasons given in the passage as quoted above, and those alone, the judge would have been justified in dismissing the plaintiff's application to have Matheson appointed. But the judge in fact gave detailed and pains-taking consideration to the criticisms levelled at the Bank of New York and the administrators, and he totally rejected them all. Many of the criticisms as regards the Bank of New York had been litigated and re-litigated in New York: not only in relation to Mr Marsh's estate, but also in respect of Mrs Marsh's estate was well, Mrs Marsh having died about 2 years after her husband. 22. In relation to the plaintiff's petition to remove the Bank of New York from her mother's estate, the Surrogate's Court of the State of New York said:
"Hostility" 23. It was said in the court below, and repeated here, that the bank had displayed hostility towards the plaintiff. Reliance was placed on various passages in the testimony or Mr Ulshafer, a senior Bank official, where Mr Ulshafer made some intemperate remarks. Reliance was also placed on a letter written by Mr Oldham where he said that the plaintiff should "either put up or shut up". 24. The judge concluded as follows:
25. It is difficult to see how this conclusion can be faulted. 26. The other attack on the administrators in the court below, and repeated here, is this: It is possible that Mr Li has not in fact fully accounted for the moneys held in trust; and because of his powerful position in the community the bank and the administrators might have deferred to Mr Li and neglected their duties to the estate. This criticism is particularly aimed at Ms Brennan who is an employed solicitor in a company controlled by Mr Li, and at the bank itself. 27. The judge wholly rejected these criticisms, describing them as "desperate attempts to build up a case of conflict". He said there were no grounds for suspecting that Mr Li has withheld moneys belonging to the estate. Nothing said in this court has, in the least, shaken the validity of that conclusion. 28. Other minor criticism have been made of the judgment which need not be repeated. Conclusion 29. Plainly, as a matter of common-sense and of good practice, where a person dies domiciled abroad, leaving an estate in Hong Kong, the Hong Kong court should in general follow the foreign grant; it will not, in exercising its discretion to grant letters of administration, pass over the foreign executor unless there are very good reasons to do so. This principle is reflected in Rule 29 of the Non-Contentious Probate Rules which says:
30. After examining every conceivable objection over a period of five days, the judge concluded that there were no good reasons why the Bank of New York should be displaced as the general administrator of the estate in favour of Matheson. His conclusion is, in my judgment, unimpeachable. My only reservation about the judgment is to wonder whether so much time and effort should have been expended on what, ultimately, was an essentially administrative matter, and whether the evidence - over 2,900 pages of material - should not have been substantially curtailed. As an exercise of discretion, Cheung J's conclusion cannot be faulted. 31. I would dismiss this appeal and, subject to anything further that might be said by counsel, order that the costs of the appeal be paid personally by the plaintiff - that is to say, not out of the estate. I would also welcome submissions as to the appropriate scale of costs. Mortimer JA: 32. I agree that this appeal should be dismissed for the reasons given by the Vice-President with which I entirely agree. To this I cannot usefully add anything and I would also agree with the order that he proposes. Liu J.A.: 33. In 1988 Mr Nicholas Victor Marsh died domiciled in New York. The deceased made a Will in 1983 and a Codicil in 1986. His residuary estate was left to his three daughters and two grand-daughters. The plaintiff is a daughter of the deceased and she is entitled to 30% of the residuary estate, her daughter 10%. In the Will, the plaintiff was a named executrix, failing her, the Bank of New York ("BNY"). In 1988, the plaintiff was granted Preliminary Letters of Administration in New York but she was removed two years later and replaced by BNY. Probate of the deceased's Will was finally granted to BNY in 1992. There had been many motions and appeals in America with respect to the plaintiff's removal and the substitution of BNY. The plaintiff's latest challenge to her removal and the appointment of BNY as executor failed in March 1994. 34. The deceased also left assets in Hong Kong. In October 1990, the plaintiff entered a caveat in our Probate Registry. In May 1991, BNY commenced Probate Action No. 5 of 1991 with the plaintiff as the defendant therein. Immediately, BNY applied for the appointment of the 2nd and the 3rd defendants as administrators pendente lite. The plaintiff resisted that application. On 12 May 1992, Godfrey J.A., as he now is, appointed the 2nd and the 3rd defendants as administrators pendente lite for the Hong Kong assets of the deceased. For nearly four years, in their capacity of administrators pending suit the 2nd and the 3rd defendants had been marshalling the deceased's Hong Kong assets. By the same order made in the Probate Action, Godfrey, J. ordered the action to be tried as a short cause, estimated time 1/2 hour. It was further ordered that the trial of the Probate Action in the Short Cause List, together with the given directions, was not to "take effect until 28 days from the date (thereof) and thereafter shall not take effect if the (plaintiff in these proceedings) shall then have made a duly constituted application to (the) court pursuant to s.36 of the Probate and Administration Ordinance and N.C.P.R. Rule 51(a) to appoint some persons to be the administrators of the estate of (the) deceased other than (BNY)". The Judge also ordered the trial of the Probate Action as a short cause to be revived immediately upon the dismissal of the s.36 application. 35. Pursuant to the order of Godfrey J., as he then was, the plaintiff caused to be commenced these proceedings by Originating Summons for what is known as a "section grant" in favour of her nominee, Matheson Trust Company (Hong Kong) Limited ("Matheson"). BNY was a named alternate executor in the Will of the deceased and had been installed as such by the New York court. By instituting proceedings under s.36 of the Probate and Administration Ordinance pursuant to the Probate order, the plaintiff seemed to have acknowledged BNY, a named and appointed alternate executor, as being primarily entitled to a Hong Kong grant. That is precisely what the Probate order envisaged, that is to say, the plaintiff to apply for "some persons ... other than (BNY)" to be appointed. What is also worthy of note is that the plaintiff opted for a s.36 application by originating summons which would entail a hearing on affidavits. The plaintiff applied for cross-examination of the deponents of the material affidavits filed in these proceedings but her application was refused. No appeal was lodged against that refusal. With full awareness of her position, the plaintiff caused these proceedings to be proceeded with on affidavits. There were common facts from which inferences might be drawn. The disputed evidence, controverted on affidavits or otherwise, could not be resolved. Cheung, J. was nevertheless invited to determine whether the plaintiff had established her alleged grievances in support of her application for Matheson to be given a "section grant" "other than (BNY or its attorneys)". The Judge refused to appoint Matheson and ordered costs to be paid by the plaintiff. From this order of Cheung, J. the plaintiff appeals. 36. The real nub of the plaintiff's case rests on whether "it appears to the court to be necessary or convenient to appoint (Matheson) to be the administrator of the estate of the deceased person ........... other than (BNY) who, if this Ordinance had not been passed, would by law have been entitled to a grant of administration of such estate". But for s.36, BNY who is the named alternate executor and granted Probate of the Will of the deceased in New York, should not be passed over in the Hong Kong grant. The plaintiff prays for BNY to be passed over in her Originating Summons. From first to last, this is a case of passing over a foreign executor in a Hong Kong grant, not one of removing a locally appointed personal representative. 37. That BNY is primarily entitled to a Hong Kong grant is well settled in practice. As a matter of practice ever since 1952, it is for the ancillary forum to follow a domiciliary grant. In the Goods of Gustav Kaufman, Deceased [1952] P 325 at p.331, Lord Merriman P. stated the Probate practice as follows:
38. S.36 of our Probate and Administration Ordinance is taken from s.73 of the Court of Probate Act 1857. Despite the practice as re-stated by Lord Merriman, P., the court retains a very wide statutory discretion. See Statutes of England, Vol. 8, p.291. Section 73 of the Court of Probate Act 1857 enabled the court to exercise such a wide discretion in, inter alia, special circumstances. The statutory discretion under the 1857 Act is now exercised under s.116 of the Supreme Court Act 1981. Like our s.36, section 116 of the Supreme Court Act 1981 has also omitted the words "special circumstances", but the wording of s.116, Supreme Court Act 1981 has the same effect. See pp.343 & 344, Williams, Mortimer & Sunnucks on Executors, Administrators and Probate. And in order to pass over a foreign executor in a local grant, special circumstances would still have to be shown. See page 345, ibid. See also generally Halsbury's Laws of England, 4th Ed. Vol. 17, p.543, para.1041 and Dicey & Morris, the Conflict of Laws, 12th Ed., Rule 124 at p. 1005. The practice to follow a domiciliary grant is reflected locally in the N.C.P.R. Rule 51(a) and Rule 29(a), (b) and (c). 39. Were there special circumstances for the Judge to invoke his wide statutory discretion to pass over BNY in favour of the plaintiff's nominee, Matheson? The special circumstances which would justify a departure from the settled rule for the ancillary grant to follow the primary domiciliary grant are many. Mr Thomas, leading counsel for the defendants, gave an example of a named foreign executor who is a minor. See In the Goods of Her Royal Highness the Duchess of d'Orleans, (1859)1 Sw. & Tr. 253. In the Goods of Gustav Kaufman, deceased, supra at p.331 provides another example of an exceptional case. In Duncan v. Lawson, 41 Ch.D.394 at p.397, on account of the natural immobility of leaseholds the uniform rule was not followed. Other examples are given in the English and Empire Digest (1925) Vol. 23 pp. 164-170 and Williams, Mortimer & Sunnucks on Executors, Administrators and Probate, p.345. The list is evidently not exhaustive. 40. The other beneficiaries under the Will of the deceased had not been joined but under O.44, r.3 RSC they were ordered to be served and therefore had notice of these proceedings. In an affidavit of Mr Streng filed on 28 June 1991 in the Probate Action, it was disclosed that except perhaps for the daughter of the plaintiff, the other beneficiaries would lend their support to BNY. Here these beneficiaries have not voiced any objection to the eligibility of BNY and its attorneys. As a matter of fact, the plaintiff's last and fifth affidavit which raised fresh allegations was filed at a very late stage of the proceedings. The defendants joined issue with her belated allegations but because of such late filing and other reasons, the defendants did not cause to be filed further affidavits in reply. 41. The hearing of the Originating Summons before Cheung J. was therefore to be strictly on affidavit evidence and no finding of facts could be made where evidence was disputed. The plaintiff raised many complaints, including those on the accounts. They are categorised by the Judge in his judgment, but it would be quite unnecessary to consider them in any detail. The disagreed facts could not be resolved on the affidavits. Apart from those rejected by the New York court, the plaintiff had not caused her fresh "accounts" complaints to be transmitted to New York; nor had she sought disclosure or explanation from BNY in any of the American proceedings. Was it open to the Judge to hold that she had failed to prove her case under s.36 for not honouring our Probate practice? In addition to taking what he possibly could from the disputed affidavit evidence, the Judge gave weight to the almost completed administration in Hong Kong except for the plaintiff's 1993 action here for breaches of trust against the attorneys of BNY. In her 1993 trust action for recovering funds, the plaintiff has by amendments in 1996 added Account No.1A to Account No.2, both of which are said to have been held by Mr Li Ka Shing as her trustee. The Judge also had regard to the fact that the plaintiff would be free to query these accounts and matters incidental thereto in her 1993 trust action. This court is informed that there has been discussion culminating in some understanding with Matheson who, if appointed Hong Kong administrator, would charge up to 3% for commission and would shortly bring the 1993 trust action to an end. Therefore, in the plaintiff's 1993 trust action the attorneys of BNY, the 2nd and the 3rd defendants, would probably be better defenders of the interests of the estate. On the conclusion of Probate Action No.5 of 1991, the 2nd and the 3rd defendants as appointed Hong Kong administrators pending suit must produce their account for examination. An administrator pending suit has the duty to marshall assets as that of a general executor. He cannot, of course, distribute. See s.40 Probate and Administration Ordinance. If these defendants were appointed Hong Kong administrators of the assets of the deceased in Hong Kong, they could be further questioned qua administrators on the presentation of accounts after completing administration. As against the background and circumstances which enabled the Judge to refuse to disapply the settled Probate practice, the disputed affidavit evidence lost much of its significance. 42. We are led through one or two pages of Mr Ulshafer's cross-examination in the plaintiff's New York accounting proceedings upon her removal as preliminary executrix. Mr Ulshafer's outburst and uncivil remarks made elsewhere were hardly good illustrations of alleged corporate hostility. The Judge was not satisfied that instances of offensive behaviour had disabled BNY from performing its duties as New York executor or its attorneys from offering themselves to be appointed Hong Kong administrators. The position of the 3rd defendant with Hutchison Whampoa and BNY's association with Peregrine were also taken into account by the Judge who did not place the alleged conflict of interest and hostility into separate water-tight compartments. Afterall, the test derived from removal cases is whether local appointment of the attorneys of BNY, a foreign executor, would serve the welfare of the beneficiaries and of the estate. See Letterstedt v. Broers & Anr. [1884]9 AC 371. In New Zealand, it is recommended that the court should satisfy itself:
43. The Judge made such findings as he was able to make on affidavit evidence alone. He was unimpressed by the submission of misrepresentation having been made to our courts, and in any case an interim distribution (wherever made and albeit said to be irregular) would benefit all. The Judge rejected the accusation of refusal to furnish trust documents. He concluded that the plaintiff had failed in her application for passing over BNY. Faced with the procedural constraints of a hearing by originating summons on affidavits, the last of which was merely challenged at the hearing, whatever the general feel the Judge had of the application cannot be readily faulted. On the view he took of the impact of such affidavit evidence on the welfare of the beneficiaries and of the estate, the Judge exercised his wide discretion and preferred to observe the settled Probate practice of following the domiciliary grant. In that scenario, unsurprisingly the Judge was time and again unable to make any factual finding. Clearly it was unproductive for the Judge to dwell upon the disputed allegations which he could not be expected to resolve on affidavits, and the Judge seemed to have been driven to focus on discretion rather than "special circumstances". There is no warrant for this court to analyse each ground of appeal painstakingly. It is not claimed that the Judge could not draw inferences from primary common facts or that his crucial findings of facts were wholly unsupported by evidence. The Judge was inaccurate in some particulars. In the light of the known circumstances, what other sensible view could he have formed? 44. The plaintiff's core complaint is that on the findings the Judge found himself able to make, he should have come to a conclusion favourable to the plaintiff. In his skeleton argument, Mr Shaw, counsel for the plaintiff, concedes that "none (of the alleged independent errors) was fatal on its own". The Judge was decidedly influenced by the near completion of the administration, the many years in which administration had been left in the interim charge of the 2nd and 3rd defendants, the possible extra3% charges for the sparse effort required to complete administration, the complication of having two different representations, the dilution of alleged hostility and conflict of interest by the professionalism in BNY's attorneys, the acquiescence of the other beneficiaries, the plaintiff's removal, the further opportunities of investigation in her 1993 trust action and at the time of the passing of accounts by BNY, the administrators pending suit as well as the Hong Kong administrators to be appointed, and the grey areas in which evidence was contested or lacking. In the difficult built-in conditions of an originating summons hearing, the Judge allowed himself to be guided by his overall view as to whether or not the welfare of the beneficiaries and of the estate would be compromised. Also, the plaintiff's claim in her 1993 trust action is personal but as a beneficiary sharing the residual estate she could not complain of prejudice in Accounts Nos 1A & 2. The Judge had a very wide discretion, and the exercise of discretion in his deliberation as to whether or not to depart from the settled practice has not been shown to be wrong. 45. Taking a global view of all the material placed before him, the Judge was able to conclude that the allegations were not substantial enough to displace the settled practice. I can find no justification for questioning his view, less for interfering with what was largely an exercise of his discretion in proceedings hardly conducive to fact-finding. 46. There are only two remaining issues on which I wish to comment. The first is forum non conveniens. Whilst the Hong Kong court must recognise the fact that fitness of BNY to be granted American Probate in New York where the corpus of the estate is situated should best be left to the American court, once an application is made here under s.36 of our Probate and Administration Ordinance a determination must be attempted and discretion exercised. In New York, analogous jurisdiction aside, a section grant under our s.36 cannot be or be more conveniently sought or made. Finally, s.33 of the Probate and Administration Ordinance concerns revocation of a grant and removal of an appointed administrator. No Hong Kong administrator had been appointed, and that was how a s.36 application came about. It sought an appointment of some person as the Hong Kong administrator other than BNY who substituted the plaintiff in New York in its capacity of named alternate executor in the Will of the deceased. S.33 could not have been envisaged by Godfrey, J. in the order he made and it was not included in the plaintiff's Originating Summons. Moreover, for the relief sought under s.33, the plaintiff's allegations which had been either sought to be explained or challenged must be adjudicated in an action, not by way of an originating summons on affidavit evidence. See Halsbury's Laws of England, 17, p. 1057 Underhill's Law relating to Trust and Trustees, 15th Ed. page 742 and Williams, Mortimer and Sunnucks on Executors, Administrators and Probate at page 822 et seq. 47. As to the costs awarded, if it could be legitimately canvassed, the order made was a mark of judicial disapproval which cannot be said to be plainly insupportable. 48. I would also dismiss this appeal.
Representation: Photocopying of this Headnote is not allowed Mr Jonathan L.M. Shaw (M/S Boase Cohen & Collins) for the Plaintiff/Appellant Mr Michael Thomas QC leading Mr Ian Payne (M/S Oldham, Li & Nie) for the 1st-3rd Defendants/1st-3rd Respondents Photocopying of this Headnote is not allowed |