HSBC Trustee (Singapore) Limited v Carolyn Fong Wai Lyn & 4 Ors

• Judge: Quentin Loh J
• Judgment Date: 04 March 2016
• Neutral Citation: [2016] SGHC 31
• Citation: [2016] SGHC 31
• Court: High Court (Singapore)
• Published date: 10 March 2016
• Docket Number: Originating Summons No 904 of 2013
• Plaintiff Counsel: Sarjit Singh Gill, SC, Stephanie Wee and Vincent Lim (Shook Lin & Bok LLP)
• Defendant Counsel: Kee Lay Lian and Rachel Chow (Rajah & Tann LLP),Jason Chan, Clement Tan and Seow Wan Jun (Allen & Gledhill LLP)
• Subject Matter: Probate and Administration,administration of assets
• Hearing Date: 25 July 2014,06 March 2015,24 April 2015,09 September 2014,26 November 2015,14 August 2015

Quentin Loh J: Introduction

Originating Summons No 904 of 2013 was an application brought by the plaintiff, the professional executor and trustee of the late Peter Fong’s estate (“the Estate”). For ease of reference, where necessary, I will refer to the plaintiff as the “executor of the Estate”. The plaintiff sought three prayers for relief: first, that it be discharged as executor of the Estate (“Prayer 1”) secondly, that the fees, costs and expenses incurred by it from the date of its appointment as executor on 2 March 2012 up to the date of the order be paid out of the assets of the Estate (“Prayer 2”); and thirdly, that it be authorised to take up further mortgages on two properties held by the Estate for the purpose of discharging the Estate’s outstanding liabilities (“Prayer 3”). The two properties referred to in Prayer 3 are No 37 Pepys Road #02-01 Northcrest, The Peak, Singapore and No 37 Pepys Road #03-03 Northcrest, The Peak, Singapore. I shall refer to these two properties as the “Peak 1 Property” and the “Peak 2 Property” respectively, and as “the Properties” collectively.

At the hearings before me on 25 July 2014 and 9 September 2014, I urged the parties to consider mediation as an option. The parties attempted to do so but, unfortunately, the mediation did not bear any fruit. The parties made their submissions before me on 14 August 2015. After hearing the parties’ arguments, I delivered an oral judgment on 26 November 2015. I dismissed Prayer 1 but granted the plaintiff liberty to apply as and when it is able to nominate a viable replacement. I granted Prayer 2 with the qualification that the fees, costs and expenses to be paid out by the Estate must be shown to have been reasonably incurred. As for Prayer 3, I granted an order in terms. The fourth and fifth defendants have since filed an appeal against my judgment and I therefore set out my detailed grounds of decision.

When I delivered the oral judgment on 26 November 2015, I also directed the parties to tender written submissions on the issue of costs. Having perused these submissions, I will set out my decision as to costs in the present grounds of decision as well.

Background facts The parties

The plaintiff is HSBC Trustee (Singapore) Limited, a professional trustee which was appointed to manage the Estate by an Order of Court dated 2 March 2012 (“the Plaintiff”).¹ Prior to its appointment, the Estate was managed by four individuals who were specifically identified to serve as executors in Peter Fong’s will (“the Former Executors”).² The Order of Court which directed that the Plaintiff be appointed in place of the Former Executors was made pursuant to an application by the first to third defendants on 5 September 2011 (ie, OS 764/2011/V) to have the Former Executors discharged.

The first to third defendants are Peter Fong’s daughters by his third wife. Collectively, they form one faction. They will be referred to as “the Fong Sisters”.

The fourth and fifth defendants are Alice Lee Pei-Ru (ie, Peter Fong’s 4th wife) and Fong Wei Heng (ie, Peter Fong’s son) respectively. Together, they form another faction.

The will

Pursuant to the will of Peter Fong, dated 24 January 2007, the Peak 1 and Peak 2 Properties were to be divided amongst the defendants in the following manner: The Peak 1 Property was devised and bequeathed to the fifth defendant, So long as he continues to hold the property, the fourth defendant shall be entitled to reside in it as a life tenant for as long as she lives or desires, provided that she does not remarry and provided that she does not permit her siblings to reside in the property (see cl 15.1 of the will). The Peak 2 Property was devised and bequeathed to the Fong Sisters in equal shares as tenants-in-common absolutely (see cl 16.2 of the will).

Subsequently, a codicil dated 21 March 2008 was executed by Peter Fong, wherein he revoked cl 16.2 of the will and instead devised and bequeathed the Peak 2 Property in five equal shares which are as follows:³ one share to the fourth defendant; one share to each of the Fong Sisters; and one share to be divided equally between Peter Fong’s five sisters. The validity of the codicil is being challenged by the Fong Sisters in S 883/2012 although more will be said of this later.

Events leading up to the application

Since taking over as executor of the Estate, the Plaintiff has had to manage numerous legal proceedings involving the Estate. This led to a significant reduction of the Estate’s available assets. A summary of the pending suits against the Estate is as follows:⁴ OS 687/2015 - an action brought by the fourth defendant for the Peak 2 Property to be sold and for her share of the sale proceeds to be paid to her. S 883/2012 – a challenge brought by the Fong Sisters to the validity of the codicil against the Estate. S 426/2012 – an action brought by the fourth defendant against the Estate in respect of an alleged loan to Peter Fong during his lifetime. S 1015/2012 – a claim by the receivers and managers of Airtrust (Singapore) Pte Ltd (“Airtrust”) against several individuals for breach of director’s duties and conspiring against Airtrust wherein the Estate has been brought in as a third party. S 550/2013 – an action brought by the fifth Defendant for the Peak 1 Property to be vested in him in advance of him turning 25 years of age.

As a result of having to defend the various suits, the Estate no longer had sufficient liquid assets to meet its outstanding and future expenses. The Plaintiff claimed that it had not been paid for its services since 2013⁵ and this was one of the premises on which the present application was brought.

The parties’ case The Plaintiff’s case

Apart from the fact that the Plaintiff had not been paid for a significant period of time, it raised two other reasons why it should be discharged as executor of the Estate. First, it argued that the Fong Sisters would be in a better position to defend the various claims against the Estate as they had more intimate knowledge of Peter Fong’s matters as well as a direct interest in the outcome of the claims as residuary beneficiaries of the Estate.⁶ Secondly, it argued that having the Fong Sisters serve as executor would ultimately save costs for the Estate.⁷

As for Prayers 2 and 3, the Plaintiff contended that the expenses it had incurred on behalf of the Estate were reasonable and justified, and it should also be allowed to take up further mortgages on the Peak 1 and 2 Properties so that the liabilities of the Estate may be discharged.

The Fong Sisters’ case

The Fong Sisters proposed that Prayers 2 and 3 be determined before Prayer 1 as my determination on those matters might have a material bearing on Prayer 1. In that regard, the Fong Sisters took no objections to both Prayers 2 and 3, except to say that the costs of the Estate had to be shown to have been incurred reasonably.⁸

Given the above position, the Fong Sisters submitted that the Plaintiff should not be discharged as executor since there would now be funds to meet the fees owed to it and other future expenses.⁹ Alternatively, if the Plaintiff was to be discharged, the Fong Sisters did not object to being appointed as the replacement executors.¹⁰

The fourth and fifth defendants’ case

With respect to Prayer 1, the fourth and fifth defendants did not object to the executor being discharged as executor. However, they disagreed to the Fong Sisters being appointed as replacement. According to them, it was untrue that the Fong Sisters had the requisite knowledge of Peter Fong’s matters.¹¹ More materially, the fourth and fifth defendants averred that the Fong Sisters would not be able to act independently and impartially vis-à-vis the various suits against the Estate. This was because the Fong Sisters were adversely positioned against the Estate with respect to several of the pending lawsuits and, as beneficiaries of the Estate, they would also have separate duties and interests which would directly conflict with their duty as executors of the Estate.¹²

As for Prayer 2, while the fourth and fifth defendants initially took the position that I should determine whether the entirety of the Estate’s expenses were reasonable in the proceedings before me, they subsequently altered their position and agreed for those costs to be taxed instead at a separate hearing.¹³

The fourth and fifth defendants submitted that Prayer 3 should be rejected and that, instead, the sensible and practical solution would be for the Peak 2 Property to be sold to meet the estate’s expenses. According to them, a mortgage of the Peak 1 and 2 Properties would not resolve the issues of funds in the Estate but would only result in the incurring of greater costs in the servicing of the mortgage.¹⁴ Additionally, granting a mortgage on both Properties would cause injustice to the fifth defendant because, pursuant to cl 16.1 of the will, he would have to maintain and service any mortgage taken out on the Peak 1 Property.¹⁵ In contrast, the will and subsequent codicil did not require the beneficiaries of the Peak 2 Property to be personally liable for all expenses pertaining to that property.¹⁶ Further, a sale of the Peak 2 Property would not cause any injustice because there were nine beneficiaries to the property and it would therefore be improbable, if not impossible, that the beneficiaries would exercise their right to live in the property.¹⁷

My decision

I accepted the Fong Sisters’ submission that a determination on Prayers 2 and 3 may have a material bearing on Prayer 3. I will first provide my detailed grounds for Prayers 2 and 3.

Prayer 2 – expenses to be paid out of the Estate

I noted that with respect to Prayer 2, there was no disagreement among the parties that the Plaintiff should be allowed to claim its reasonable fees, costs and expenses from the Estate. The only disagreement...