Estates disputes in Hong Kong come in all shapes and sizes.  We have previously covered disputes over Wills.  The case of Cheng Tsang Kam Yung v Tang Kam Cheung concerned a dispute over who administers the estate.

The deceased passed away without a Will in 1998, but various disputes over who had the right to administer the estate meant that letters of administration were not granted to his widow and son until December 2004.  Almost 9 years later, the administration of the estate had not been completed.  The estate was estimated to be worth over HKD80m.

The deceased’s daughter brought an action seeking to have her mother and brother account for their dealings with the estate (although her mother had since passed away).  An account was ordered and provided in 2008.  Nothing further happened for three and a half years until the daughter took out a summons seeking to have her mother and brother removed as administrators and replaced by a professional accountant.

The daughter relied upon s.33(3) of the Probate and Administration Ordinance which gives the Court the power to suspend or remove an administrator if “the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require”.  The court should have regard to the size of the estate, the nature of the assets that needed to be administered, the background and the education, training and experience of the remaining and substituted personal representatives and the interests of the beneficiaries.

When justifying the amounts that had been paid out of the estate, the son relied on the fact that he took out personal loans to cover certain estate expenses (because the estate was illiquid).  The loans were given by friends who charged interest of over 40% per annum.  The judge commented that there was “much to be said about the personal loans” and described the interest rate as “extraordinarily high”.  He bore in mind that the some of the money borrowed was said to be for estate duty which itself only attracts annual interest of 7% per annum if unpaid. 

Money was also apparently borrowed to pay for his mother’s medical and care costs.  Although there is some debate over whether section 34 of the Trustee Ordinance permitted this, in any event “the section does not absolve the administrator from the duty to act in the interest of the estate for the benefit of all the beneficiaries and to do so impartially among the beneficiaries”.

The judge held that “the terms of s.33(3) [of the Probate and Administration Ordinance] are wide; and establishment of specific guilt or misconduct in administering the estate is not a pre-requisite to the exercise of the discretion.”  He went on to state that “the history of how the [son] has administered the estate for the last 9 years, even on his own case, and his failure to keep and provide full and accurate accounts of the details of the estate as and when required to do so cry out for intervention.”  Accordingly, the son and mother were formally removed and ordered to pay the costs of the application.

In many cases, this kind of application is just the start.  Once the new administrators come in they will want to satisfy themselves as to what has happened to the estate assets and may wish to consider whether steps should be taken to reclaim any funds which have been improperly paid out.

If you wish to discuss please contact Gareth Thomas or Richard Norridge.