Mustaq Ahmad (alias Mushtaq Ahmad s/o Mustafa) v Providentia Wealth Management Ltd and others

[1] HCF/OSP 2/2023 (“OSP 2”) is an application by one Mustaq Ahmad @ Mushtaq Ahmad s/o Mustafa (“the Applicant”), who is one of the beneficiaries of the estate of the deceased Mr Mustafa s/o Majid Khan (“the Estate”). The Applicant seeks the interim distribution of 1,986,170 shares in Mohamed Mustafa and Samsuddin Co Pte Ltd (“MMSCPL”) held by the Estate.

[2] I dismiss OSP 2 and set out below the reasons for my decision.

[3] The present dispute is the continuation of a long-running dispute between parties. Much of the background to their relationship is outlined in Ayaz Ahmed and others v Mustaq Ahmad (alias Mushtaq Ahmad s/o Mustafa) and others and other suits [2022] SGHC 161 (“Ayaz Ahmed v Mustaq Ahmad”) at [7]–[40]. The facts that are material to the present case are as follows.

[4] The Applicant is the son of Mr Mustafa s/o Majid Khan (“Mr Mustafa”) and his wife, Mdm Momina. Following Mdm Momina’s death sometime in 1956 or 1957, Mr Mustafa married Mdm Asia (the 7th Respondent). The 2nd to 6th Respondents are children of Mr Mustafa and Mdm Asia.

[5] The 2nd to 7th Respondents are all beneficiaries of the Estate alongside the Applicant.

[6] Mr Mustafa passed away intestate on 17 July 2001. At the time of his passing, he was a shareholder of MMSCPL. Among other assets owned by Mr Mustafa are shares in Mustafa Air Travel Pte Ltd (“MAT”) (Ayaz Ahmed v Mustaq Ahmad at [670]).

[7] On 16 August 2021, the Syariah Court issued an inheritance certificate for the Estate, which was to be divided into 80 shares and split between parties according to the following proportions:

(a) The Applicant: 14 out of 80 shares;

(b) Ayaz Ahmed (the 2nd Respondent): 14 out of 80 shares;

(c) Ishtiaq Ahmad (the 4th Respondent): 14 out of 80 shares;

(d) Maaz Ahmad (the 5th Respondent): 14 out of 80 shares;

(e) Asia (the 7th Respondent): 10 out of 80 shares;

(f) Khalida Bano (the 3rd Respondent): 7 out of 80 shares;

(g) Wasela Tasneem (the 6th Respondent): 7 out of 80 shares.

[8] The Applicant’s application for the grant of letters of administration in relation to the Estate was granted on 24 November 2003. He extracted the grant of letters of administration on 28 January 2004.

[9] On 8 December 2017, the 2nd to 7th Respondents commenced HC/S 1158/2017 (“Suit 1158”) against the Applicant and other parties. Suit 1158 was a minority oppression action alleging that the Applicant and his co-defendants in that suit had conducted the affairs of MMSCPL in a manner that was oppressive and unfairly prejudicial to the interests of the Estate as a minority shareholder of MMSCPL. At the same time, the 2nd to 7th Respondents also commenced HCF/S 9/2017 (“Suit 9”) against the Applicant. Suit 9 was a probate action alleging that the Applicant had breached his duties as administrator of the Estate.

(a) The letters of administration granted to the Applicant in relation to the Estate were to be revoked;

(b) The letters of administration in relation to the Estate were to be granted to a professional third-party administrator; and

(c) The Applicant shall give an account of his administration of the Estate on a wilful default basis.

[12] The Applicant appealed against my decisions in Suit 9 and Suit 1158. The appeal has since been heard by the Appellate Division of the High Court, which has reserved judgement.

[13] The Applicant argues that the administrator of an estate should make an interim distribution of an estate’s assets as soon as practicable and that this should be done in the present case because the assets of the Estate exceed its liabilities. The Applicant makes the following claims:

(a) There is no evidence and no basis for the Respondents’ assertions that the Applicant under-declared the value of the MMSCPL shares held by the Estate;

(b) There is no basis for the Respondents’ assertions that there will be difficulties with selling MAT’s shares in an open market;

(c) There is no reason to oppose interim distribution just because the number of MMSCPL shares is in dispute, or because there are alleged outstanding dividends.

(d) The Applicant’s account of the administration of the Estate has not been woefully inadequate.

[15] Third, the Applicant claims that his application for interim distribution of the MMSCPL shares does not contravene the orders in Suit 9 because according to him, nothing in those orders precludes a distribution of the MMSCPL shares held by the Estate, and the beneficiaries of the Estate will still collectively be registered shareholders of 25.4% of the shares in MMSCPL. The Applicant maintains that his application is not filed in bad faith or for an improper purpose, because he has a legitimate interest in wanting to hold a majority stake. He further alleges that it is the 2nd to 7th Respondents who are instead improperly putting pressure on him.

[16] The Applicant seeks distribution of the Estate’s shares in MMSCPL in the following proportions:

(a) The Applicant – 347,579 out of 1,986,170 shares;

(b) Ayaz Ahmed – 347,580 out of 1,986,170 shares;

(c) Ishtiaq Ahmad – 347,580 out of 1,986,170 shares;

(d) Maaz Ahmad Khan – 347,580 out of 1,986,170 shares;

(e) Asia – 248,271 out of 1,986,170 shares;

(f) Khalida Bano – 173, 790 out of 1,986,170 shares;

(g) Wasela Tasneem – 173,790 out of 1,986,170 shares.

[17] Providentia opposes the present application on the basis that distribution of the MMSCPL shares is premature at this juncture.

[18] First, distribution is premature because there is no certainty that the Estate’s assets post-distribution will exceed its liabilities. This lack of certainty arises from:

(a) additional estate duties that may be potentially payable; and

(b) uncertainty over the value and liquidity of the Estate’s shares in MAT, and possible additional legal expenses that may be incurred in recovering shares due to the estate.

[19] Second, distribution is premature because the Applicant has yet to provide a complete account of his administration of the Estate. The current shareholding of MMSCPL has not yet been resolved and is in the midst of change.

[20] Third, there are outstanding dividends from the MMSCPL shares which ought to be payable to the Estate. It will be beneficial to the Estate and all beneficiaries for the issue of these outstanding dividends to be settled before the MMSCPL shares are distributed.

[22] Fifth, there is no urgency to have the MMSCPL shares distributed at this juncture. Providentia points out that it was only granted the letters of administration for the Estate less than a year ago. Prior to Providentia’s appointment as the professional third-party administrator, the Applicant was the administrator of the Estate for 17 years between 2004 and 2021, during which time he clearly saw no need to distribute the MMSCPL shares to the beneficiaries of the Estate. The Applicant’s own conduct over the 17-year period of his term as administrator thus contradicts his present argument that he is being subject to grave prejudice as a result of non-distribution of the MMSCPL shares.

[23] Finally, Providentia objects to having been named as a party in OSP 2 in its personal capacity, rather than in the capacity of administrator of the Estate.

[24] The 2nd to 7th Respondents point out that the Applicant’s position in the present application is inconsistent with his position on appeal from my decision in Suit 1158. In his appeal, the Applicant has asserted that he is the sole and beneficial owner of all the MMSCPL shares held by the Estate.

[26] Further, the 2nd to 7th Respondents argue that the application should be dismissed in limine because the Applicant does not even argue – much less, demonstrate – that there has been an improper exercise of discretion by Providentia, which is the only basis for intervention in an administrator’s decision. In any event, the Applicant is wrong to claim that the assets of the Estate will exceed its liabilities post-distribution, because this is based on his own disputed account of the Estate’s assets.

[27] Finally, the 2nd to 7th Respondents argue that the present application has been filed in bad faith, for the collateral purpose of enabling the Applicant and his wife to obtain a majority shareholding in MMSCPL, and thereby to obstruct Providentia’s administration of the Estate. According to the 2nd to 7th Respondents, the filing of the application was timed so as to enable Mustaq to block the appointment of new auditors for MMSCPL and the holding of any Annual General Meeting or Extraordinary General Meeting.

[28] In considering OSP 2, it is pertinent first to have regard to the context in which this application has been made. As I alluded to earlier, the Applicant was the previous administrator of the Estate between 2004 and 2021. During this 17-year period, the Applicant did not effect interim distribution of any of the Estate’s shares in MMSCPL, or indeed, of any of the assets of the Estate. The Applicant has not put forward any evidence that he ever attempted to make such a distribution. In bringing OSP 2, the Applicant now argues that Providentia, having been granted the letters of administration in December 2022, is in breach of its duties as administrator for not making an interim distribution within less than a year.

[29] I turn to consider the application proper.

[30] A trustee’s power to make interim distributions (that is, before the administration of the estate is complete) stems from the law of assent. An assent is an acknowledgement by a trustee that an asset of the deceased is no longer required for the payment of debts of the estate, funeral expenses or general pecuniary legacies: Seah Teong Kiang v Seah Yong Chwan [2015] 5 SLR 792 at [25]. Assent may be given notwithstanding that there are debts or other liabilities still outstanding: GDR and another v GDL and others [2022] SGHC 30 (“GDR”) at [30]–[36].

[31] In GDR, Philip Jeyaretnam J was concerned with the question of whether the annual maintenance which a testator had provided for his daughters was to be drawn from gifts identified in the will or constituted separate and additional pecuniary legacies. The executrices in that case denied that they had assented to the payment of a sum of $115,000 claimed by the daughters. Inter alia, the executrices contended that there could be no assent in respect of any part of the residuary estate prior to ascertainment of the entire residue, apparently because they took the view that ascertainment required “first meeting all expenses or at least determining in advance every last dollar of potential expenses”. Jeyaretnam J rejected this contention, noting that an executor “may assent to part of a residuary gift without assenting to the whole”. As he explained:

[32] In GDR, Jeyaretnam J found that on the evidence before him, there had plainly been an assent by the executrices in respect of the sum claimed. As such, it was not necessary for him to consider whether the executrices had shown “good reason” for withholding assent.

(a) Whether there was deadlock between the estate trustees (deadlock being a “strong factor justifying a court to exercise its discretion as to what interim distribution was fair and appropriate in the circumstances”);

(b) Whether the estate trustees had acted with mala fides;

(c) Whether the estate trustees had failed to exercise their discretion to make an interim distribution;

(d) Whether the estate trustees had behaved unreasonably or breached their fiduciary duty of good faith and fairness to the beneficiaries; and

(e) Whether a beneficiary would suffer undue prejudice if an interim distribution was not made.

[35] In McGovern, deadlock among the estate trustees was not an issue. On the facts, the court found (at [41]) that the estate trustees were not guilty of mala fides and that they had not refused to exercise their discretion but rather, had exercised their discretion and decided not to make a further distribution until the court had reviewed their conduct and accounting. The court was further satisfied that the trustees’ decision not to make a further distribution until they had passed their accounts was reasonable in light of the allegations of negligence and potential legal action they were facing from the applicant beneficiary and the objections being raised to their accounts. The court also found that there was no evidence of any undue prejudice to the applicant beneficiary other than that he had chosen to purchase a house and had thereby taken on a mortgage loan.

[36] The factors articulated by the court in McGovern were applied by Hon Lok J in the Hong Kong case of Li Kin Yan and another v Li Lim Chi Dorothy, The Sole Administratrix of the Estate of Li Wan Lung, Deceased [2017] HKCU 403 (“Li Kin Yan”). In Li Kin Yan, the applicant beneficiaries sought interim distribution of HK$8m to each of the three beneficiaries, out of an available fund of around HK$40m belonging to the estate. The respondent administrator thought it inappropriate to make such an interim distribution as the estate had outstanding claims against the applicant beneficiaries involving substantial sums of money. Applying the factors set out in McGovern, Hon Lok J agreed with the respondent administrator that it was inappropriate to make an interim distribution. He noted (at [56]) that the outstanding claims which the estate had against the applicant beneficiaries were “serious claims”; and that if the estate succeeded in those claims, there was a real possibility that the applicants might have to pay back the respective sums of HK$11.1 million and US$12 million to the estate – which would mean that the size of the estate would amount to about HK$145 million (including the existing fund of HK$40 million). In the circumstances, it was prudent of the respondent administrator not to make interim distribution out of the existing fund of HK$40 million at that juncture. The applicant beneficiaries’ argument that the estate’s claims against them were “hotly in dispute” - and that they had evidence to support their position – was rejected as it was “common ground that the court should not conduct a microscopic examination of the merits of [those] claims” (at [59]).

[37] In the following case, the Applicant has not alleged mala fides on Providentia’s part; nor, in any event, has he produced any evidence of mala fides. Further, the Applicant is not alleging that Providentia has failed to exercise its discretion to make an interim distribution: rather, he disagrees with the decision taken by Providentia not to make an interim distribution at this stage.

[38] Having reviewed the evidence, I am satisfied that there are good reasons for Providentia to withhold assent (GDR at [46]), even assuming that the Estate has sufficient value and liquidity to meet its liabilities.

[44] For completeness, I also reject the Applicant’s argument that Providentia has – in exercising its discretion – taken into account irrelevant considerations.

[45] The Applicant has identified two areas in which Providentia has purportedly taken into account irrelevant considerations: first, in considering potential difficulties in selling MAT’s shares in an open market, and second, in considering that the Estate may be owed dividends arising from its shareholding in MMSCPL. I reject the Applicant’s arguments on both counts. The first consideration is in my view clearly relevant, given that MAT is a private company, and Providentia must be satisfied that sufficient liquid funds will be available from the sale of their shares to meet potential liabilities. Although the Applicant has put forward various suggestions as to why the MAT shares should not be difficult to sell, the potential difficulty of selling the MAT shares remains a relevant consideration for Providentia. I also agree with Providentia that the second consideration is relevant. Given that Providentia’s duty as an administrator is to “call in” all the assets of the Estate, it is reasonable for Providentia to settle the issue of the outstanding dividends instead of having each individual beneficiary raise a claim on their own behalf.

[47] Given the findings I set out above, I also do not find it necessary to come to any firm conclusion on the 2nd to 7th Respondents’ contention that OSP 2 was filed in bad faith and for a collateral purpose.

[48] OSP 2 is dismissed. Having dismissed OSP 2, it is also not necessary for me to consider whether the application was rightly brought against Providentia in its personal capacity instead of in its capacity as the administrator of the Estate.