Hong Kong Court refused to make a grant of administration ad colligenda bona for lack of special circumstances and special justification

In Re Oung Chi Lian Fang (HCMP2347/2015), the Hong Kong High Court refused an ex parte application for a grant of administration ad colligenda bona under s.36 of the Probate and Administration Ordinance.

Introduction

Ad colligenda bona grants are temporary limited grants for administration of deceased estates.  They are made in emergencies, when there is a need to immediately deal with assets. The Latin phrase ad colligenda bona means “to collect the goods”. The Court may grant letters of administration ad colligenda bona to any person to deal with specified property in an estate when that property might be endangered by delay in administration. For example, if part of the estate consists of perishable goods, the Court may grant administration ad colligenda bona to any suitable person to allow him or her to sell or otherwise deal with those goods for the benefit of the estate. A grant ad colligenda bona is a limited grant and ceases on the issue of a full grant of representation to the persons entitled to deal with the whole estate.

Facts

Oung Chi Lian Fang (the "deceased") died intestate in December 2013. She was a widow with seven children (Margaret, Anastasia, Lilian, James, Daniel, Paul and Andrew). The deceased’s son, James, had also died leaving two surviving children, James Junior and Jean.

The application for the grant ad colligenda bona was made by one of Lilian's children on her behalf because Lilian had become mentally incapacitated.

The application related to the interests of the deceased in a BVI company called Five Star. Five Star held a substantial number of shares in Paladin, a listed Hong Kong company, which in turn owned a valuable property on the Peak (Peak Property).

Andrew and James Junior, who opposed the application, were the shareholders of another BVI company called Next Level, which also held shares in Paladin.

Application

The applicant brought the on notice but ex parte originating application on 11 September 2015 because Paladin had entered into an agreement to sell the Peak Property on 17 June 2015, subject to its shareholders' approval at a Special General Meeting (SGM) called for 15 September 2015.

The applicant argued the deceased was holding her interests in Five Star as trustee for Lilian. He claimed that administrators for the estate of the deceased (for which the applicant nominated two accountants) should be appointed before the SGM so that the estate of the deceased could be represented in the vote at SGM.

Andrew and James Junior served affirmations opposing the application on 13 September 2015, a Sunday. The Court heard the case on 14 September 2015, and gave its decision the same day.

Decision

The judge reminded himself that the respondents to the application had very limited time to file their affirmations. The judge also admitted that he had a very limited knowledge of the facts surrounding the other disputes between the parties, which had resulted in several other BVI and Hong Kong Court proceedings.

The judge noted that what the applicant was asking the Court to do by this application was to appoint the applicant's nominated persons now, passing over all the beneficiaries of the estate who would otherwise be entitled to a grant, without giving them adequate notice or an opportunity to be heard. Given the disputes between the parties, the judge concluded that he could only do so in very special circumstances and with special justification.

After considering the facts before him, the judge concluded that neither such special justification nor special circumstances existed. The Court thus dismissed the ex parte application on the following grounds:

1. Though the applicant suggested the sale of the Peak Property was at an undervalue, the sale was handled by professional agent.
2. The applicant failed to justify his delay in making the application for the grant, as well as why the application was made in Hong Kong while two others had been made in BVI by the brother of the applicant and another child of the deceased.
3. Generally, a grant should be applied for where the property is situated. Without special circumstances, the Hong Kong Court would generally not make a grant in the absence of property in Hong Kong. Here the grant related to shares in a BVI company (Five Star) and there were no such special circumstances in the case. 
4. A grant in Hong Kong would also not assist the applicant at the SGM given its imminence. It would be necessary for grantees to obtain an ancillary grant in addition to any HK grant before it could be recognized and have effect with respect to any BVI property. This would include the shares in Five Star.
5. A grant under the circumstances could disrupt the sale of the Peak Property, potentially causing substantial damage to the listed company arising from banks' actions.

Comments

Ad colligenda bona grants of administration can be useful in situations that call for urgent administration where the facts or details necessary to allow a full grant cannot be immediately ascertained.

The Hong Kong High Court treats applications for ad colligenda bona grants with caution. Especially when the grant is disputed, ad colligenda bona grants will only be made in special circumstances and with special justification.

The Court will not accept the applicant’s arguments for urgency if the application itself is delayed. The Court will also assess the balance of convenience in granting or not granting letters of administration ad colligenda bona.

If you wish to discuss, please contact Richard Norridge, Partner, or your usual Herbert Smith Freehills contact.