Role and Importance of Administrator and Executor
An executor or an administrator is a person responsible for administration of a Deceased’s person’s Estate. This person is called an executor if he is named in a deceased person’s Will. Where no executor is named or if a person dies without making a Will, the person taking up administration by way of his priority pursuant to the intestacy law is called an Administrator. The role of an executor/administrator is very important, and involves:
- Taking the necessary steps to identify, protect, secure, and recover all assets of a deceased person’s Estate;
- Taking the necessary steps to identify, review, and settle the proved and outstanding debts and liabilities of the deceased person;
- Keeping a just and true account of the administration of the Estate of the deceased person, including but not limited to the keeping of books and records and preparing receipts and payment accounts for the Estate;
- Making the application for the grant of representation required for the administration of the Estate of the deceased;
- Dealing with claims from creditors, beneficiaries, or third parties in relation to the Estate and, where necessary, taking out legal proceedings to recover or protect assets belonging to the estate; and
- Distributing the assets of the Estate of the deceased person pursuant to the deceased person’s Will and/or the relevant intestacy laws.
Clearly, executors/administrators are crucial to the handling of the affairs of a deceased person and beneficiaries rely on them to administer the Estate efficiently and fairly. Not only that, but depending on the size and complexity of a deceased person’s estate, the duties of an executor/administrator can be extremely daunting.
What happens, then, when the Executor or Administrator is unfit for the job? The relevant matters in such a scenario would be, firstly, whether it is appropriate to remove or pass over the executor/administrator, and secondly, who to appoint in his/her place.
Thankfully, section 36 of the Probate and Administration Ordinance, Cap. 10 (the “Ordinance”) provides a mechanism for the Court to exercise its discretion to appoint a qualified person to be the administrator of a deceased’s estate in the following situations:-
- Where the deceased died wholly intestate;
- Where the deceased left behind a Will but did not appoint an Executor who is willing or legally competent to take probate;
- Where the Executor is resident out of Hong Kong at the time of death of the deceased person; or
- Where it appears to the court that it is either necessary or convenient to appoint a person to be the Administrator of the Estate of the deceased person other than the person who is otherwise entitled to a grant of administration of the Estate.
Amongst these grounds, ground (4) is most commonly relied on for the person who would (if this Ordinance had not been passed) by law have been entitled to the administration of a deceased’s Estate to be “passed over” for a more qualified person to be appointed administrator. This gives the Court wide discretion to determine whether, taking into account the facts of the case, it would be necessary or convenient to make an order to pass over the current executor/administrator in favor of another one (“Pass-over Order”).
The case of Re Estate of Loo Che Chin  HKEC 377 illustrates factors the court will take into consideration when determining whether it is “necessary or convenient” to make a Pass-over Order. In Loo Che Chin, the Deceased left behind a Will dividing his estate into 6 equal shares to be distributed to his 5 children and son-in-law. He also named his wife (who predeceased him) and one of his children as executors of his Will. Following the death of the wife, relationship between the beneficiaries began to break down and they eventually fell in two opposing camps with one side applying to pass over the surviving named executor. In making the pass-over order, the court considered the following matters:
- If the person to be passed over is a named Executor under the Will, the Deceased’s understanding of the named executor’s characters, attitudes and relationship (of which the Court lacks) will be considered;
- whether hostility between the beneficiary(ies) and the executor is mutual or merely induced by the beneficiary(ies) as a pretext to pass over the Executor;
- whether the hostility impedes on the executor’s ability to administer the estate fairly or efficiently;
- whether the administration of the estate is a simple matter or not; and
- whether the person to be passed over has caused delay in administration of the estate.
While the above are all relevant factors to take into consideration in a passover application, the Court was minded to emphasize that the exercise of discretion under section 36 of the Ordinance is highly fact-sensitive and will therefore depend heavily on the circumstances and contextual background in each case. Factors that a court will take into consideration is therefore non-exhaustive. Some other examples of matters that courts in other cases have considered when exercising their discretion include misappropriation of estate assets and failure to provide a just and true account or inventory of the estate.
Who to appoint?
Where it becomes necessary to make the Pass-over Order, the Court will usually appoint an independent professional to be administrator in the interest of fairness and efficacy. Parties to the Pass-over application may make nominations of their own volition or as requested by the Court, who will usually either be a professional Certified Public Accountant (“CPA”) or a solicitor experienced in such matters. The Court will then exercise its discretion to appoint the person most appropriate to administer the estate.
So now we come down to the million-dollar question – who should you nominate to be the Administrator? As with all things, there are pros and cons to each option.
CPAs are, of course, going to be more number-savvy and will be able to navigate complex financial statements to identify missing funds and/or fiscal shenanigans. For particularly complex estates that involve businesses, it may be preferable to nominate a CPA, who will most likely be better equipped to prepare accounts and for auditing purposes.
Solicitors, on the other hand, are more geared towards dealing with matters with a contentious element to it. A solicitor’s experience in handling disputes is also helpful for encouraging party settlement, and, where the former, is not possible, they will be in a better position to seek Court direction in the event of an impasse. Whether a CPA or a solicitor should be nominated is, therefore, largely going to depend on the nature of the Estate in question.
The Court has, on several occasions, explored the situations where a CPA would be best suited for the administration of an estate, and in which circumstances a solicitor would be more appropriate instead.
In the case of Re Lai Suet Ching  HKCFI 2323, the Court elucidated the principles which the Court will take into consideration when making such an appointment. As previously discussed, the Court exercises its discretion under s.36 of the Ordinance in a factually sensitive manner, and the Court at paragraph 26 of the decision provided that the discretion “is to be exercised in the best interests of the estate, including to effect an expeditious and economical administration according to law”. The proposed fees of each nominee will of course be relevant in every instance with regard to the economical administration of the estate – to this end, the fees of the administrator should never significantly deplete the assets of the estate. Furthermore, whether a CPA or a solicitor will be appointed involves a balancing exercise – whether the legal aspect of administration is trickier to deal with than the numerical aspect.
Notwithstanding that the estate in question involved assets worth over HK$22.3 million, the Court in Lai Suet Ching decided that a solicitor would be more suitable to act as administrator instead of a CPA because the estate involved a lot of issues which requires a solicitor’s legal expertise. In particular, the administrator to be appointed would have to:
- understand the family arrangement having agreed by the parties;
- identify the estate of the deceased mother which was in dispute;
- identify the un-administered estate of the deceased father which was part of the mother’s estate; and
- deal with an ongoing litigation.
Ren Micky v Fung Kung Kuen and Others  HKCFI 2385 was another case where the Court had to decide between solicitors and CPAs for the administration of an estate. Ultimately, the Court exercised its discretion to appoint a solicitor over a CPA by reason that:
- the estate in question was relatively simple and straightforward to administer; and
- the contentious nature of the case and the ongoing litigation amongst the parties made it such that a solicitor administrator was more appropriate.
As the Court put it at paragraph 27 and 34 of the decision, “Although a CPA may have more experience in preparing accounts and in audit generally… [n]o doubt, an administrator who is a solicitor may have more experience of attending in person at a hearing before the Court”.
On the other hand, a CPA’s proficiency in analyzing, deciphering, and presenting numerical information is effective in the administration of estates involving multiple businesses and/or cashflow.
The Estate in the case of Chan Yu Hong v Chan Kam Hong and Others  HKCFI 1275 involved, among other things, a metal wares manufacturing business run by the deceased by sole proprietorship. Shortly before and after the death of the Deceased, to facilitate transition of the deceased’s business, some beneficiaries set up various entities, firstly a partnership, then a new sole proprietorship, and afterward a limited company. There was no formal transfer of the business from deceased’s sole proprietorship to the new businesses. But it was raised that the deceased’s wife had transferred substantial portion of the deceased’s estate to the new businesses and/or other entities. Accordingly, when the other beneficiaries applied to remove the surviving administrator, the Court made an order for a CPA to be administrator, citing, in particular, the original administrator’s inability to render complete accounts of the Estate. The Court also requires an administrator to render accurate valuation of the deceased’s business taking into account its goodwill, inventory, and receivables/payables. To this end, the skillset of a CPA will no doubt be invaluable.
At the end of the day, an administrator owes a duty to the estate and to all the beneficiaries entitled to the same. It is therefore important to find one with the correct skillset to best suit your needs. While it is always possible to nominate a CPA and a solicitor to act jointly in the administration of an Estate, it is always important to be mindful of the fees that will be incurred in such case. Most of the times, it is better to appoint one based on whether the Estate requires more legal know-how or fiscal fact-finding. Notwithstanding that an Estate might involve elements of both, it is always possible for a professional administrator to engage a solicitor or a CPA in certain matters only in order to best deal with the situation at hand in a cost-efficient manner. Below is a summary of the (non-exhaustive) benefits that each can bring to the table:
· Use of forensic accounting to trace and identify missing/misappropriated assets
· Calculate value of missing/misappropriated assets
· Keep accurate accounts and records for complex estate, in particular those involving businesses
· Navigate companies’ financial statements, understand auditing obligations
· Deal with ongoing or potential litigation
· Deal with estates which involve legal agreements (e.g. settlement agreements, family arrangements, etc.)
· Handle legal complexities in estate administrations, such as application for grants involving complications and identifying estate assets
· Handle trust assets
· Take out and represent the estate in court proceedings where appropriate
· Experience in dealing with and selling landed properties
Re Estate of Loo Che Chin  HKEC 377案說明了法院在決定是否「需要或方便」發出替代令時的考慮因素。在Loo Che Chin案中，死者留下遺囑指示把遺產分成六份，分配予其五名子女和一名女婿。他亦指定了其妻子（先於他去世）和其中一名子女作為遺囑執行人。在其妻子去世後，受益人之間的關係開始破裂，最終陷入了兩個對立的陣營，其中一方申請替代指定的遺囑執行人。在作出替代令時，法院考慮了以下事項：
在Re Lai Suet Ching  HKCFI 2323案中，法院闡明了在作出此類委任時將考慮的原則。如前所述，法院很大程度上視乎事實，並根據《條例》第36條行使酌情權。法院在判決的第26段指出，酌情權「應以遺產的最佳利益為重，包括依法落實快捷而合乎經濟原則的管理」。被提名人的建議收費，當然與遺產管理是否合乎經濟原則有關。因此，遺產管理人的收費不應嚴重消耗遺產。此外，委任註冊會計師或律師擔任遺產管理人亦需權衡利弊——在遺產管理上，究竟法律方面或數字方面更難處理？
儘管Lai Suet Ching案涉及價值超過2,230萬港元的遺產，法院裁定由律師擔任遺產管理人比註冊會計師更合適，因為該筆遺產牽涉很多問題，並需要律師的法律專業知識。因此，被委任的遺產管理人必須：
Ren Micky v Fung Kung Kuen and Others  HKCFI 2385一案中，法院也必須決定委任律師或註冊會計師來管理遺產。最終，法院行使酌情權委任了律師而非註冊會計師，原因是：
Chan Yu Hong v Chan Kam Hong and Others  HKCFI 1275一案的遺產涉及死者獨資經營的業務。案件其中一名受益人希望繼續經營該業務。為達成該目標，相關人士需以合夥企業，或新的獨資企業，或成立有限公司的方式進行。死者的獨資企業則無法轉移至新的業務公司。當其他受益人申請替代尚存的遺囑執行人時，法院下令委任一名註冊會計師擔任遺產管理人，理由是原有的遺囑執行人無法提供遺產的完整賬目及相關準確的文件。法院亦指出遺產管理人的責任為考慮其業務的商譽、庫存和應收／應付賬目後，對死者的業務進行準確估值。在這方面，註冊會計師的技能無疑是非常寶貴。