Kwan Chi Pun in His Personal Capacity and The Executor of the Estate of Kwan Sui Lin, Deceased v. Lai Hoi Yee and Another

HCA 557/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 557 OF 2014

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HCMP 2078/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2078 OF 2015

(TRANSFERRED FROM FCMP 225 OF 2012)

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J U D G M E N T

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1.There are 2 actions before the court.  They are related and, pursuant to an order of Deputy High Court Judge Yee dated 14 December 2015, the trial of these actions was conducted at the same time. 

2.The subject matter of dispute in these actions is the estate of the late Madam Kwan Sui Lin (“Estate”).  She (“Mother”) was the elder sister of the plaintiff (“Kwan”) and the mother of the 1^st defendant (“Hoi Yee”).  Pursuant to the Will of the Mother dated 25 April 1989 (“Will”), Kwan was appointed the executor of the Estate and is the only beneficiary thereof. 

3.In HCA 557/2014 (formerly DCCJ 3796/2012), Kwan seeks to recover the possession of a landed property, which formed part of the Estate and has been transferred to him, from Hoi Yee.  In the Counterclaim of Hoi Yee and her father (Mother’s ex-husband and the 2^nd defendant (“Lai”)), they seek to argue that Kwan is merely a trustee of the Estate and that Hoi Yee is the sole beneficial owner of the assets in the Estate. 

4.HCMP 2078/2015 (formerly FCMP 225/2012) is an action under s.4 of the Inheritance (Provision for Family and Dependants) Ordinance, Cap 481 (“Ordinance”) by which Hoi Yee seeks to have the Property transferred to her (“S.4 Claim”). 

Background

5.The Mother was born on 4 July 1950.  Kwan is the youngest of 4 siblings (3 boys and 1 girl) in the family.  He was born on 13 June 1953. 

6.On 31 January 1981, the Mother was married to Lai.  She gave birth to Hoi Yee on 26 May 1984.  She is the only child of the couple. In 1984, Lai was a welfare worker and the Mother worked as an accounts clerk. They had a modest income. 

7.Sometime after the marriage but before Hoi Yee was born, Lai and the Mother, together with Kwan and his wife, moved into Flat C, 12/F, Dao Shing Building, 51 Heung Wo Street, Tsuen Wan, New Territories (“Tsuen Wan Flat”).  The Tsuen Wan Flat belonged to Lai’s mother-in-law (“Liu”), and it was let to the 2 couples at a very modest rent of about HK$1,200 per month.  Lai, who gave evidence, said that he and his wife paid a little more than the Kwans in respect of the contribution to the rent. 

8.It is alleged by Lai that on or about 1 May 1984, he and his wife used their money to purchase the Tsuen Wan Flat from Liu.  With their consent and to save money, the legal title of that property was not transferred to the couple, but remained with Liu.  The agreed sale price was HK$140,000, which would be paid off by monthly instalments of HK$1,200. 

9.In about May 1986, the Tsuen Wan Flat was sold for HK$280,000.  Lai said that, after deducting the costs and expenses, the profit of HK$146,000 (“Fund”) was deposited into a joint account belonging to him and his wife.

10.Later, the couple decided to purchase a Home Ownership Scheme property known as Flat B, 1/F, Block 8, Chevalier Garden, 2 Hang Shun Street, Shatin, New Territories, Hong Kong (“Property”).  They signed a Sale and Purchase Agreement for the Property on 16 January 1987 as joint tenants. The purchase price was HK$236,400.  According to Lai, the deposit payment of about HK$24,000 came from the Fund.

11.Before the completion of the acquisition of the Property, the couple’s relationship turned sour.  They had disputes over financial matters[1]. Lai alleged that his wife had transferred HK$46,000 and later the remainder of the money in their joint account to her personal account without his consent.

12.On 22 September 1987, Lai petitioned for the dissolution of his marriage on the ground of unreasonable behaviour of the Mother (“Petition”).  Various allegations of a serious nature were made in the Petition against the Mother, including the misappropriation of the funds in their joint account.  Lai also sought the custody of Hoi Yee.  Lai confirmed, as indicated in the handful of documents still available in respect of the divorce proceedings, that his Petition was contested and the Mother had filed a Cross Petition laying the blame on him for the breakdown of the marriage.

13.During the divorce proceedings, Lai acting through his solicitors, Messrs P C Woo & Co (“PCW”), proposed in a without prejudice letter dated 15 March 1988 (“Letter”) that, inter alia, all interest in the Property be surrendered by him and the Mother to the relevant authority. It was also proposed that all other financial matters be adjourned for argument.  Apparently, this letter was written in response to a letter from the Mother’s solicitors, Messrs Helen A Lo & Co (“HAL”), dated 5 March 1988 in which certain terms of settlement were proposed (that letter is not before the court).

14.In HAL’s without prejudice reply dated 23 March 1988 (“Reply”), it was stated that the terms set out in the Letter were agreeable in principle save for the disposal of the Property.  The following matters were then raised :

(1)  The Mother wished to proceed with the purchase of the Property so as to provide a proper home for Hoi Yee.  She would be responsible for all mortgage payments but Lai was to waive all his interest in the Property;

(2)  Lai was to pay a monthly maintenance of HK$800 for Hoi Yee; and

(3)  Lai’s financial claims were to be dismissed by consent.  He should also undertake “not to make any further claims against either [the Mother] or [Liu]”.

15.The Mother signed another Sale and Purchase Agreement for the Property on 30 June 1988 as the sole purchaser.  It appears from the land search record that the purchase was made with the benefit of a bank mortgage in the sum of HK$190,000.  That mortgage was discharged in 1998.

16.By an order of the court dated 23 January 1989, sole custody of Hoi Yee was granted to the Mother with access to Lai, and a decree nisi for the divorce was made.  In addition, (a) leave was granted to the Mother to withdraw her Answer and Cross Petition and (b) the parties’ applications for ancillary relief were dismissed with each giving an undertaking not to make any claims against the other for any financial relief thereafter. Thus, it appears that the parties had, before the order was made, reached a settlement largely in the terms contained in the solicitors’ letters referred to above.

17.On 12 August 1989, the court pronounced the marriage dissolved and made the divorce absolute.

18.Before the decree absolute order was granted, on 25 April 1989, the Mother made the Will appointing Kwan the sole executor of the Will and bequeathing to him the entirety of the Estate.  The Will was made with the assistance of HAL.  Hoi Yee was 4 years old at the time.

19.The Mother and Hoi Yee resided at the Property since about 1989.  In the ensuing years, Hoi Yee was raised by the Mother with the assistance of Liu until the latter passed away in 1996.  In terms of financial contribution, Lai only paid HK$1,000 per month as Hoi Yee’s maintenance.

20.Hoi Yee left Hong Kong for studies in Canada in 2002. In summer 2011, she completed her university education in Canada with a bachelor degree in computer science.  During the 9 years of overseas studies, Hoi Yee would return to Hong Kong during Christmas (with the exception of 2010) to stay with her mother. 

21.On 3 October 2011, shortly before the Mother was to travel to Canada to attend Hoi Yee’s graduation ceremony, she met with a sudden death as a result of heart attack.

22.The Estate consisted of the Property (with a net value of HK$2,000,000 as of January 2014); various shares in the total value of HK$2,115,610.70 as at 7 July 2016 (“Shares”); about HK$1,700,000 in cash at the time of the Mother’s death; and MPF benefits in the total sum of HK$202,255. The Property and the Shares are now in Kwan’s name.  There is HK$200,000 to HK$300,000 left of the cash.  The total current value of the Estate is about HK$4,600,000. 

23.When Hoi Yee returned to Hong Kong at the end of October 2011 she stayed with Kwan and his wife for a few weeks.  The uncle and niece were in friendly terms.  Hoi Yee felt that because her mother had passed away Kwan and his wife tried to take good care of her.  After staying with the Kwans, Hoi Yee has been living in the Property. 

24.According to Hoi Yee, Kwan told her that her mother had left him a will and appointed him as the executor.  Kwan also said that there was only 1 sentence in that document, pursuant to which everything was left to him.  Hoi Yee also said that during casual conversations with Kwan he told her that he would transfer the Property and most of the cash to her.  She said that the suggestion was made by her uncle of his own volition and out of the blue.

25.Kwan obtained the Grant of Probate in respect of the Estate on 27 April 2012. 

26.It appears that the relationship between Hoi Yee and Kwan took a turn for the worse after she instructed solicitors to try to obtain a copy of the Will sometime in the middle of 2012.  Her solicitors pressed Kwan’s solicitors for a copy of that document and brought the matter to the attention of the court.  On 30 July 2012, Kwan revoked the oral license granted to Hoi Yee to stay at the Property.  The latter’s refusal to give up possession of the Property then led to the action in HCA 557/2014 which was filed on 29 October 2012.  Hoi Yee’s proceedings, HCMP 2078/2015, were taken out 3 days before on 26 October 2012. 

27.During her life time, the Mother had purchased 4 insurance policies, 3 in favour of another brother for the education of his child and 1 for the benefit of Hoi Yee.  The one for Hoi Yee was purchased in 2007 (“Policy”).  There is no evidence on the particulars of the other policies.

28.On 10 February 2012, a sum of HK$1,309,876.67 was paid to Hoi Yee under the Policy.

29.The above factual background is largely uncontroversial, save for the matters concerning the alleged purchase of the Tsuen Wan Flat by Lai and the Mother. 

30.Both the defendants and Kwan gave evidence, and they were the only witnesses in this trial.

Issues

31.A multitude of legal arguments have been advanced by the defendants.  They are all based in equity, including different species of trust and proprietary estoppel.  They are not dissimilar in nature and are all based on the same factual case.  Ms Chong, who appeared for the defendants, said in opening (in answer to questions from the court) that her strongest argument is that based on common intention constructive trust.  If that argument fails, none of her other arguments will survive.  Ms Chong accepted that the burden of proof in this case is on the defendants.

32.The defendants’ factual case centres upon the allegation that Lai had an interest in the Fund and in the Property.  It is contended that the Reply constituted a “declaration” on the part of the Mother by which she clearly expressed an intention to purchase the Property for the benefit of Hoi Yee (I understand that to mean not only purchasing the Property as a residence for the Mother and her daughter but that the beneficial interest in the Property would be held for the daughter).  To enable the Mother to proceed with the purchase, Lai was to waive all his interests in the Property and to forfeit his financial claim against her.

33.Relying on the Mother’s declared intention or undertaking, Lai forwent his interest in the Property and allowed her to register the Property in her sole name.  In addition, Lai allowed the Mother to keep what was remaining in the Fund, namely, HK$122,000 (HK$146,000 minus the deposit paid for the Property (HK$24,000)) so that she could apply the money towards the purchase of the Property.  These settlement arrangements (“Alleged Arrangements”) were made pursuant to the common intention of the couple to purchase the Property for the benefit of Hoi Yee.

34.Unless the defendants can prove their factual case, it is unnecessary to consider their legal arguments.

35.In her closing submissions, Ms Chong has also laid emphasis on the defendants’ case that the Will was subject to a secret trust, namely, that the Mother had entrusted the Estate to Kwan who had promised to manage the same for the benefit of Hoi Yee until she reached adulthood in the event of that the Mother met with a sudden death (“Alleged Trust”).

Analysis

The Alleged Arrangements

36.The Alleged Arrangements are based primarily on the evidence of Lai.  Let me say at the outset that, for the reasons set out below, I find his evidence unreliable. 

37.There are limited contemporaneous documents which may assist in resolving the factual dispute here.  Further, the Alleged Arrangements were made nearly 30 years ago.  Expectedly (as Lai said in his evidence repeatedly), recollection going back so long ago is vague.  There are added complications in that (a) none of the witnesses can be regarded as impartial (Lai said that he cares much for Hoi Yee) and (b) there is no one alive to contradict Lai’s evidence. 

38.However, it is the duty of the court to scrutinise Lai’s evidence with care.  To do so, I take into consideration the prevailing circumstances when the Alleged Arrangements were made.

39.Before I consider the relevant circumstances at the time of the Alleged Arrangements, it should be pointed out that I do not believe that the Reply by itself constitutes sufficient support for the Alleged Arrangements.  Firstly, the Reply did not set out, let alone setting out clearly, an intention to purchase the Property for the benefit of Hoi Yee.  It is a quantum leap to suggest that providing a home for Hoi Yee can be so interpreted. 

40.Secondly, it must be remembered that in the Letter it was made clear that Lai was willing to forgo all his interest in the Property. According to him, only a deposit of about HK$24,000 had been paid, and it was clearly unviable for the joint purchase to proceed given the intended divorce. In these circumstances, I need to look for credible evidence that Lai had somehow reached an agreement with the Mother for a conditional surrender of his interest. 

41.Turning to the alleged purchase of the Tsuen Wan Flat, Lai explained that the purchase came about because Liu was unhappy about the very low rent which she got from the 2 families for occupying that property.  With the intervention of Liu’s sister, there was a family meeting during which Liu invited the 2 families to purchase the property.  Kwan declined to do so, and it was purchased by Lai and the Mother.

42.Lai was asked about the details concerning the alleged purchase.  He said that the purchase price of HK$140,000 was fixed by Liu.  It was to be paid by monthly instalments of HK$1,200.  Lai was unable to explain why Liu would have accepted such a monthly instalment when she was unhappy with the rental payment of that same sum in the first place.  If Lai’s evidence were to be accepted, Liu had effectively agreed to give them the property on a 10-year interest free loan. 

43.Lai’s evidence wavered repeatedly on essential detail like the question of mortgage.  When it was pointed out to him that the Petition (drafted by PCW) referred to mortgage payments which he allegedly made for the Tsuen Wan Flat, Lai said that the monthly payments consisted of principal and interest.  However, the interest rate was not discussed or agreed with Liu.  It was somehow taken care of by the Mother who gave him a formula concerning the monthly payments.  At one stage, Lai said that he did not even know what a mortgage was.  His evidence is self-evidently incredible. 

44.Lai’s evidence is also unsatisfactory when he was asked who the purchaser of the Tsuen Wan Flat was.  At first, his evidence was that they (I understand that to mean Liu, Lai and the Mother) discussed about the sale and it was clearly sold to him and his wife.  Later, he said that according to Liu the property was sold to the Mother.  However, although it was not discussed that he would also participate in the purchase, his understanding was that the property was sold to them because he and the Mother were husband and wife. 

45.Lai was unable to offer any proper explanation on why he did not ask Liu to sign a simple note to record the sale so as to protect his interest.  The same applies to the Alleged Arrangements.  They were not recorded anywhere.  It must be borne in mind that Lai was legally represented in the course of the divorce.

46.It seems to be common ground that after the Tsuen Wan Flat was sold Liu gave the Mother HK$160,000 (Kwan’s evidence is that it was a gift).  Lai said that the money was deposited into a joint account belonging to him and the Mother.  It was never explained by Lai why Liu would have given them more than they were entitled to, namely, HK$146,000 (see para 9 above). 

47.This HK$160,000 is an important matter.  Lai’s evidence is that the breakdown of his marriage was caused primarily by the arguments with the Mother over his entitlement to that sum of money.  This piece of evidence should be considered in light of (a) the suggestion in the Reply that Lai might have made a financial claim (or threatened to do so) against Liu (see para 14(3) above) and (b) Liu asked only the Mother to purchase the Tsuen Wan Flat.  In my view, the weight of the evidence suggests that, even if there was a purchase of the Tsuen Wan Flat from Liu, there was a dispute by the Mother and Liu on whether Lai had any entitlement in the purchase.  Lai probably felt that he was unfairly treated because of his contribution to the monthly payment of HK$1,200. 

48.On balance, I am not satisfied that the Tsuen Wan Flat was indeed sold to Lai and the Mother as alleged.  The quality of Lai’s evidence is quite poor and such evidence was unable to withstand the simplest of scrutiny under cross-examination.

49.There are a number of other unsatisfactory aspects of Lai’s evidence.  I need only refer to his change of stance concerning the alleged recipient(s) of his interest in the Property (it should not be overlooked that at the time his interest was limited to basically half of the deposit).  He wavered between having given such interest to the Mother and Hoi Yee and only to Hoi Yee.  Later on, he said that when the Property was purchased (at an introduction meeting for purchasers before the signing of Sale and Purchase Agreement), he knew that the Property would be given to Hoi Yee if the Mother passed away.  With respect to Lai, it is very difficult to understand his evidence.  Such difficulty reflects poorly on its credibility.     

50.For completeness, whilst it is reasonably clear that the couple eventually reached a settlement to end their matrimonial dispute, it is not at all clear, or established by the evidence, that there existed the Alleged Arrangements.  Whatever right or interest that was given up by Lai, it was given up in return for a bargain on the Mother’s part.  That is reasonably clear from the evidence.  Critically, what is not proved is that the Mother had agreed to purchase the Property for the benefit of Hoi Yee. 

The Alleged Trust

51.Moving onto the Alleged Trust.  It is based on 2 factual elements.  Firstly, Lai’s evidence that on 1 occasion around the end of 1989 when he went to pick up Hoi Yee, he asked the Mother what would happen if she suddenly passed away and was then told about the Alleged Trust.  Secondly, the suggested inference that the Mother would have imposed such a trust on Kwan when she made the Will given the age of Hoi Yee at the time.

52.I need to examine the circumstances of the Mother more closely before analysing this part of the case.  She made the Will shortly after having completed the purchase of the Property and obtaining the custody of Hoi Yee.  She was 38 years old, getting divorced, had a young girl and limited financial means.  On any account, it was not a desirable position to be in.  Further, it is common ground that the divorce was a bitter one.  Apart from the serious allegations made against her in the Petition, Lai’s evidence is that he simply decided one day to remove all his belongings and leave the Mother without forewarning her.  The woman must have been both heartbroken and angry.

53.Hoi Yee’s evidence is that her mother had a strong mind, and was careful with money.  She is not aware of any romantic relationship which her mother had had after the divorce.  Before the Mother passed away, she was working in the Mainland (earning about HK$20,000 per month) and returning to Hong Kong during the weekend.  Very often, she would choose to spend the weekend with Kwan and his wife rather than going back to her own place. 

54.Although the Mother fought her husband over the custody of Hoi Yee, it might well have been the case that she had mixed feelings about the matter.  On one hand, she probably felt obligated to look after Hoi Yee given her tender age.  On the other hand, it would be a financial burden on her, and might be unhelpful to the prospects of remarriage.  Further, she might well have harboured a sense of revenge against Lai in fighting the custody battle. 

55.In my view, it is of considerable importance that the Will was made with the assistance of HAL, which acted for the Mother in the matrimonial proceedings.  The Mother could easily have made a will which imposed a trust on Kwan pending the maturity of Hoi Yee.  She did not do so, and this militates strongly against the Alleged Trust. 

56.Moreover, Hoi Yee became an adult in 2005.  There was ample opportunity for the Mother to make another will, but she did not. Importantly, she took out the Policy for Hoi Yee’s benefit in 2007.  Hence, she was providing for Hoi Yee in the event of her death, and yet she made no fresh will.  The objective indicia are not in favour of the Alleged Trust.  

57.There is no dispute that the Mother had a very close relationship with her youngest brother.  Further, the evidence shows that the Mother had extended her assistance to other members of her family (see para 27 above).  Thus, it is hardly inconceivable that she had decided to leave the Estate to a member of her family.  However, it was submitted by Ms Chong that in 1989 Kwan was a young man in full employment, albeit with a small income, and there was no reason for the Mother to have left everything to him.

58.Firstly, this point does not, in my view, outweigh the objective indicia identified above.  Secondly, at the time when the Will was made the Mother had limited assets.  The Property was acquired with a mortgage.  Assuming that she was keeping the balance of the HK$160,000 (it appears that a sum of about HK$46,000, which probably came from the HK$160,000, had been paid for the Property at the time when it was acquired by the Mother in her own name), that was her main asset.  Thirdly, Kwan’s evidence is that he believes that his sister had given him everything because she did not want Lai to obtain any benefit from the Estate (he might do so if it was left to Hoi Yee).  There is a ring of truth to that suggestion because (a) the Mother was probably very angry with her ex-husband and (b) the cause of their marital breakdown was the fight over the HK$160,000. 

59.On the other hand, it is possible that Kwan had made some sort of promise to his sister that he would look after Hoi Yee if she died.  Kwan denied such a promise in his evidence.  He said that he never discussed with his sister what would happen to Hoi Yee if she died.  I do not believe Kwan’s evidence in this regard.  Given his relationship with the Mother, it would be surprising for them never to have discussed the care of Hoi Yee. 

60.It should also be mentioned that (a) Kwan’s evidence is that he would feel under a moral obligation to care for Hoi Yee if his sister died and (b) Ms Chong relies in support of the Alleged Trust on Kwan’s offer to transfer some assets to Hoi Yee (see para 24 above).  These evidence are consistent with a promise by Kwan to look after Hoi Yee if his sister died.  In respect of the latter, I am reluctant to read too much into the offer.  Kwan was a very sick man at the time (see below).  It could have been a generous gesture on his part when he had little need for the windfall. 

61.However, there is no evidence of the timing, the circumstances or the terms of any promise by Kwan to look after Hoi Yee, if such a promise was made.  More importantly, there is a quantum leap between such a promise and the Alleged Trust. 

62.As regards Lai’s evidence of the alleged conversation with the Mother at the end of 1989 (see para 51 above), I do not believe in the truth of such evidence.  Lai had a poor relationship with his ex-wife.  Death was generally a tabooed subject in Hong Kong society.  It is inherently unlikely that Lai would have broached such a subject out of the blue.  More likely than not, the evidence was concocted to prop up Hoi Yee’s case.  Moreover, Lai had never told Hoi Yee about the Alleged Trust before the Mother passed away.  After the Mother’s death, it took him more than 1 year to inform Hoi Yee about the Alleged Trust.  Lai’s explanation that it took him 1 year to calm down (after the shock of the Mother’s death) and recall the Alleged Trust is not credible.

63.From the Mother’s point of view, Lai was always there to take over the care of Hoi Yee if she died.  I see no credible evidence of the Alleged Trust or proper justification to draw an inference of the same. 

The S.4 Claim

Statutory provisions

64.Section 3(1) of the Ordinance provides that where a person dies :

“(a) domiciled in Hong Kong;

...

and is survived by any of the following persons-

...

(vi) an adult child of the deceased who immediately before the death of the deceased was being maintained, either wholly or substantially, by the deceased;

...

that person may apply to the court for an order under section 4 on the ground that the disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for the applicant.”

65.“Reasonable financial provision” is defined under s.3(2) of the Ordinance to mean (for the present purpose) :

“... such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance.”

66.Section 3(3) further provides that :

“... a person shall be treated as being maintained by the deceased, either wholly or substantially, as the case may be, if the deceased, otherwise than for full valuable consideration, was making a substantial contribution in money or money’s worth towards the reasonable needs of that person.”

67.Under s.4 of the Ordinance, the court may make the following orders to effect reasonable financial provision from the estate of the deceased for the benefit of the applicant, namely, periodical payments; lump sum payment; transfer of property; settlement of property; and acquisition of property out of the property comprised in the estate of the deceased.

68.Section 5(1) provides that “in determining whether and in what manner it shall exercise its powers order under [s.4]”, the court shall have regard to the following matters :

“(a) the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future;

...

(c) the financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future;

(d) any obligations and responsibilities which the deceased had towards any applicant for an order under section 4 or towards any beneficiary of the estate of the deceased;

(e) the size and nature of the net estate of the deceased;

(f) any physical or mental disability of any applicant for an order under section 4 or any beneficiary of the estate of the deceased;

(g) any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant.”

69.Section 5(4) provides that :

“Without prejudice to the generality of paragraph (g) of subsection (1), where an application for an order under section 4 is made by virtue of section 3(1)... (vi) ... the court shall, in addition to the matters specifically mentioned in paragraphs (a) to (f) of that subsection, have regard to the manner in which the applicant was being or in which he might expect to be educated or trained ...”

70.Section 5(7) provides that “the court shall take into account the facts as known to the court at the date of the hearing”.  Section 5(8) further provides that :

“In considering the financial resources of any person for the purposes of this section the court shall take into account his earning capacity and in considering the financial needs of any person for the purposes of this section the court shall take into account his financial obligations and responsibilities.”

Case law

71.Both counsel have helpfully referred the court to the English case law on the Inheritance (Provision for Family and Dependants) Act 1975.  The provisions of the Ordinance mirror those in that Act.

72.The leading authority regarding an adult child’s application is Coventry v Coventry [1980] 1 Ch 561 (CA).  In that case, the plaintiff was 47 years old and the only son of the deceased’s father.  The defendant was his mother who was granted the letters of administration of the deceased’s estate.  Under the laws of intestacy, the estate, consisted mainly of a house of modest value in which the plaintiff had been residing, would go to the mother.  Hence, the plaintiff would inherit nothing from his deceased father’s estate.

73.Giving the main judgment of the Court of Appeal, Goff LJ said :

“The defendant and the plaintiff are in modest circumstances, and the plaintiff is in some financial difficulties occasioned by the debts which he had incurred. ...” (p 483G-H)

“What is proper maintenance must in all cases depend upon all the facts and circumstances of the particular case being considered at the time, but I think it is clear on the one hand that one must not put too limited a meaning on it; it does not mean just enough to enable a person to get by; on the other hand, it does not mean anything which may be regarded as reasonably desirable for his general benefit or welfare.” (p 485C-D)

“My second observation is that at times the argument came near to saying that what the court had to consider was how the available assets should be fairly divided. That, of course, is not the position under the Act, and is not what the court has to decide.” (p 486F-G)

74.Golf LJ approved the approach of the court below (Oliver J) as follows :

“So these matters have to be considered at two stages - first in determining the reasonableness of such provision (if any) as has been made by the deceased for the applicant's maintenance and, secondly, in determining the extent to which the court should exercise its powers under the Act if, but only if, it is satisfied that reasonable provision for the applicant's maintenance has not been made.” (p 486F-H)

“... the plaintiff failed before the judge because he failed to get over the first hurdle.” (p 487A)

75.Golf LJ held at p 487A-B that the first stage question is one of fact, a value judgment or qualitative decision whilst the second question is one of discretion.  The Lord Justice also quoted with approval the following judgment of Oliver J :

“It cannot be enough to say ‘here is a son of the deceased; he is in necessitous circumstances; there is property of the deceased which could be made available to assist him but which is not available if the deceased's dispositions stand; therefore those dispositions do not make reasonable provision for the applicant.’ There must, as it seems to me, be established some sort of moral claim by the applicant to be maintained by the deceased or at the expense of his estate beyond the mere fact of a blood relationship, some reason why it can be said that, in the circumstances, it is unreasonable that no or no greater provision was in fact made.” (pp 487H to 488B)

“In my judgment the plaintiff's claim substantially rests on two limbs only, that is to say (a) that he is a son of the deceased with whom it might be thought that there would be a bond of natural affection and (b) that although he is in employment and capable of maintaining himself his circumstances leave him little or no margin for expenditure on anything other than necessities of life. I have every sympathy for any plaintiff who, on relatively slender earnings, has to meet a steadily rising cost of living, but, as I have said, I cannot regard the Act as one which entitles the court to interfere with a deceased person’s dispositions simply because a qualified applicant feels in need of financial assistance. I cannot in this case find any circumstances which satisfy me that it is an unreasonable result of the intestacy laws that no provision is made for the plaintiff's maintenance and in my judgment the application must fail.” (p 488B-E)

76.Lane LJ concurred with the main judgment and added :

“Since the plaintiff received nothing from the estate on his father's death intestate, in effect the first question becomes this: Was it reasonable in all the circumstances that the plaintiff should receive no provision from his father’s estate? ... The result was a meticulous and painstaking examination of all the relevant facts of the case, and a conclusion that in the circumstances the contentions on behalf of the plaintiff must fail; that it was reasonable for this plaintiff to receive nothing and for the mother, who is the widow defendant, to receive whatever was left after all this litigation had been paid for.” (p 492E-F)

77.Buckley LJ added the following observation :

“... where an applicant is an adult male in employment, and so capable of earning his own living, some special circumstance is required to make a failure on the part of the deceased to make some financial provision for the applicant unreasonable.” (p 495A-B)

78.Finally, Buckley LJ approved the following judgment of Oliver J :

“It seems to me, however, that in regarding the circumstances and in applying the guide lines set out in section 3, it always has to be borne in mind that the Act, so far as it relates to applicants other than spouses, is an Act whose purpose is limited to the provision of reasonable maintenance. It is not the purpose of the Act to provide legacies or rewards for meritorious conduct. Subject to the court’s powers under the Act and to fiscal demands, an Englishman still remains at liberty at his death to dispose of his own property in whatever way he pleases or, if he chooses to do so, to leave that disposition to be regulated by the laws of intestate succession. In order to enable the court to interfere with and reform those dispositions it must, in my judgement, be shown, not that the deceased acted unreasonably, but that, looked at objectively, his disposition or lack of disposition produces an unreasonable result in that it does not make any or any greater provision for the applicant - and that means, in the case of an applicant other than a spouse for that applicant’s maintenance.” (p 495D-F)

79.In Williams v Jones [1988] 2 FLR 475, the plaintiff, an adopted daughter of her deceased mother, claimed reasonable provision out of her estate against the defendant who was the executor and recipient of the whole estate. He was also the only natural son of the deceased.  The plaintiff was 43 years old at the time of hearing, impecunious, unemployed and divorced.  She claimed that her mother held her in continuing affection.  Her claim was rejected.

80.In the judgment, Judge Micklem said :

“... the approach ... made to an application by an independent, adult son ... must be the same approach as should be adopted with regard to a daughter; there is no difference between the two ... although she is unemployed and necessitous, that is not enough; she has to show something in the nature of an obligation. It has been called a ‘moral obligation’; some reason why it would be reasonable for the testatrix, her mother, to make provision for her, and she put forward no affirmative reason here.” (p 488E-G)

81.In Re Abram (Deceased) [1996] 2 FLR 379, the plaintiff was about 52 years old at the time of hearing, and the only son of his deceased mother. When the plaintiff was 17, he started to work for the family business at a minimal wage.  His mother’s intention was that he would take over the family business one day.  Later, the plaintiff left the business because he was unable to support his family with what he was paid.  The mother then revoked her will, which would have left substantially the whole of the estate to the plaintiff, and made a new one which disinherited the plaintiff and would leave the bulk of the estate to charities.  Later, the mother and son reconciled.  There was evidence suggesting that the mother intended to revoke the later will and thought that it was destroyed.  The plaintiff made an application under the Inheritance (Provision for Family and Dependants) Act 1975.  He was impecunious at the time of hearing.  Judge Roger Cooke held that the case for moral obligation or special circumstances was overwhelming, and that the failure to make provision for the plaintiff was unreasonable.

82.The learned Judge summarized the principles adumbrated in the authorities as follows :

“(1) The purpose of the legislation is to provide maintenance for those for whom the disposition of (in this case) the parent's estate fails to make reasonable provision. It is not to provide legacies.

(2) The test is not whether reasonable provision has been made but whether the failure to make provision was unreasonable. The tests are not the same, the true test is the more rigorous.

(3) It is firmly established this side of the House of Lords that for an adult child to establish that a testator was unreasonable he must do more than establish relationship and necessity. If those are the only two elements he establishes he must fail.

(4) The adult child must therefore establish something which (on a value judgment) shows that the testator was in all the circumstances unreasonable. ‘Special circumstances’ is to my mind the more appropriate and all-embracing test than some of the other expressions used, though this is not in any case an exercise in semantics. A moral obligation is the most obvious special circumstance and obviously the most common but (see Goff LJ in Coventry) it is not the only one. To my mind it would be most unwise to try to construe the authorities as establishing a code which plainly they do not. The central question which must be answered is that in para (2) above.

(5) ‘Special circumstances’ must be relevant to answering the question before the court. Circumstances whose effect is wholly spent are (obviously) not so relevant: see Jennings[2].” (p 390B-F)

83.In Espinosa v Bourke [1999] 1 FLR 747 (CA), an adult daughter gave up her part-time job and lived with her father who was then aged 79.  However, in the last year of the father’s life (aged 87) she spent most of her time in Spain with a man and left her father in the care of her son.  The father had promised his wife that he would leave her portfolio of shares to the daughter.  It later transpired that the father’s money, including the wife’s shares, was left to the grandson, explicitly excluding the daughter.  The daughter claimed for reasonable provision from the estate.  At first instance, her claim failed.  She appealed and succeeded.

84.Giving the main part of the majority judgment, Butler-Sloss LJ said that :

“The financial position of an applicant may determine the application. However rich the deceased, if the applicant has sufficient financial resources and no financial needs, it would not be necessary for the court to look further.” (p 752A)

“If the applicant is of working age, with a job or capable of obtaining a job which would be available, the factors in favour of his claim for financial provision may not be of much weight in the scales.” (p 755G-H)

“The appellant was, at the time of the death of the deceased, wholly dependent upon him. She had given up any prospect of work, however little it had been in the past, when she assumed full-time care of her father.” (p 756C)

“The judge found, as I have already set out, an obligation which the deceased had towards the appellant in that he had promised the mother to give the daughter her share of the paternal grandmother's portfolio of shares.” (p 756H)

“The conduct of the applicant ... together with the wishes of the testator not to provide further for her ... are factors to which the court may have regard ... In the present case, the appellant's life-style, her failure to adjust to the presence of her elderly father (and indeed of her teenage son) in the house and the neglect of the father for most of the last 7 months of his life, are relevant matters. That conduct might have been sufficient for the court not to interfere with the expressed wishes of the testator if the only obligation found to exist related to her care of him for the 7 years, bearing in mind that he supported her financially during that period. It cannot however, in my view, weigh so heavily in the scales, even placed beside the inter vivos payments, so as to discharge the weighty obligation arising from the promise. Doing the balancing exercise and weighing in the scales, on the one hand, the straitened financial circumstances of the appellant and lack of prospects, the obligations and responsibilities which the deceased had towards the appellant, the lack of competing needs shown by any other applicant or by the beneficiary and the substantial size of the estate, and on the other hand, the inter vivos payments, her conduct towards him, the wishes of the testator expressed in the will and all the surrounding circumstances, I am satisfied that the balance comes firmly in favour of the conclusion that the deceased failed to make reasonable financial provision for the appellant out of his estate.” (pp 757F-758A)

85.The above principles had been in Tang Tim Chue v Tang Ka Hung Robert, HCMP 2506/2009, unrep, 7 June 2012 (see paras 15-18, 119 and 121-123).

86.In a more recent authority, Ilott v Mitson [2012] 2 FLR 170 (CA), the English Court of Appeal said that :

“Necessitous circumstances will never actually be the sole factor from amongst the s 3(1) [s.5(1) of the Ordinance] list to feature in a case.

The size and nature of the estate (s 3(1)(e)) will always be material.

Consideration will always have to be given to the situation of any other beneficiary of the estate...

Section 3(1)(g), drafted as it is in very broad terms, may well draw in other factors depending on the facts of the individual case, amongst them potentially the views of the deceased ...” (para 91 at pp 195-196)

87.Finally, relying upon para 35 of Ilott v Mitson, Ms Chong submitted that an adult child applicant has no higher burden of proof than any other applicant under the Ordinance.  I agree.

Hoi Yee’s circumstances

88.There is no issue that Hoi Yee is entitled to make a claim under s.4 of the Ordinance.  She was a dependent adult child of the Mother.  She is now 32 years old.  She started working in December 2012.  Her working life so far cannot be described as successful.  She has had a number of different jobs, not all of them in the IT field.  She is now a tester employed under a 1 year contract by a contractor working for the Immigration Department.  She earns HK$13,000 per month net of MPF contribution.  She is single and has no boyfriend. 

89.Hoi Yee is earning enough to pay her living expenses, save for her housing.  Hence, she is seeking an order to have the Property transferred to her.  In the alternative, she asks for a lump sum payment of HK$ 1 million to allow her to make a down payment to purchase a property.  I have to say that, on the evidence, Hoi Yee has not fully made use of her earning capacity.  She has a degree from Canada and clearly has an advantage to be exploited. 

90.On the other hand, she has been suffering from a psychiatric condition which has been affecting her since 2012 when the dispute with her uncle arose.  There is before the court a medical report of a joint expert, Dr Lai.  According to Dr Lai, Hoi Yee is suffering from adjustment disorder with mixed anxiety and depressed mood.  Her symptoms are the result of the death of her mother and the subsequent stressors (mainly the dispute with her uncle).  However, the prognosis is not negative :

“vii. In general the prognosis of an adjustment disorder depends on the development of its stressors. In her case, if she can return to work, has less financial issue, has a place to live, and the stress related to the present litigation can be resolved after conclusion of the present litigation, her psychiatric symptoms are expected to improve. It is likely that she will have only minor residual psychiatric symptoms or residual effect of the current stressors and psychiatric condition after completion of further psychiatric treatment, conclusion of the present litigation and resolution of the stressors.

viii. She graduated from university in 2011. It is understandable that she requires a period of time to find her area of interest at work, develop her skills and progress in her career. The stressors and the psychiatric symptoms following the death of her mother have likely made it more difficult for her to adjust to her work environment. After conclusion of the present litigation and resolution of the stressors, it is hopeful that given time, say two to three years, she will be able to get back on track for the normal development of her work and career.

56.  Based on the information from the available medical documents, the current examination findings and the above discussion, she is currently suffering from mild psychiatric symptoms.”

91.According to Dr Lai, Hoi Yee is required to continue with the current medical treatment at the frequency of once in 4 to 6 weeks, and such treatment is likely to be required until about 6 months after the conclusion of these litigations. 

92.Hoi Yee said that to prepare for her return from Canada, her mother had discussed with her about selling the Property and applying the proceeds to purchase a bigger property in their joint name.  As the Property meant a lot to her, in the end, she and her mother resolved to redecorate the Property to fit their future purposes.  They intended to live together at the Property even after Hoi Yee got married, and her mother wanted to help her in looking after her children.

93.It is not easy to evaluate the above evidence.  Hoi Yee is clearly an interested party.  She agreed in cross-examination that her mother never promised to transfer any interest in the Property to her, and that she would have to become financial independent after graduation and to earn to buy her own place.  Indeed, she intended to maintain her mother financially had she remained alive. 

94.The evidence before the court casts some doubt on the relationship between Hoi Yee and her mother.  I am surprised by the fact that Hoi Yee did not see fit to return to Hong Kong at once upon learning of her mother’s death.  I do not believe that such behaviour can be satisfactorily explained by the fact that a post mortem had to be carried out.  Also, she took no part in the preparation for her mother’s funeral.  According to Kwan, the mother and daughter relationship was not close.  His sister felt burdened by Hoi Yee’s delay in completing her studies.  Due to the relationship between Kwan and his sister, what he said about the mother and daughter relationship deserves weight. 

95.With the totality of the above evidence in mind, I believe that, at the highest, Hoi Yee could reasonably have expected that her mother would agree to live with her in the early years of her working life.  I see no reason for her to believe that her mother would agree to live with her for as long as she liked. 

Kwan’s circumstances

96.Kwan is in poor health, having had a lung transplant at the end of last year.  As a consequence, he requires hospitalisation even with minor illnesses.  He is now 62 years old.  He began to suffer from poor health when he was in his 40s.  He had completed secondary school education and was working as a security officer earning about HK$9,400 per month when he retired in December 2012.  He relies heavily on his wife for daily care.  His wife works as a helper in an elderly home earning about HK$10,000 per month.  I have little doubt that the need to care for Kwan has an adverse impact upon the wife’s earnings. 

97.The Kwans have no children.  They live in public housing.  Although they were both gainfully employed until Kwan retired, their jobs and income were modest.  I have no doubt that they have little savings of their own to speak of.  The evidence is that there were occasions when Kwan had to ask his sister for financial assistance.  Kwan is therefore in financial need to enable him to have a reasonable retirement life.  Kwan said in evidence that he has no need for the Property and intends to sell it. 

98.Kwan also said that his sister had promised his mother that she would look after him for the rest of his life.  Kwan was not cross-examined about the details of that promise.  Liu passed away in 1996. Kwan was about 42 years old at the time.  More likely than not, the promise (if true) was made before the onset of Kwan’s poor health.  However, not without reluctance (such allegation is easy to make and very difficult, if possible, to rebut), I am prepared to accept this piece of evidence given that Kwan was the youngest of the family, had no children, had limited financial resources and was very close to his sister.  

Analysis

99.Applying the legal principles set out above, the first question here is whether the failure by the Mother to make any provision for Hoi Yee in the Will is unreasonable.  To answer that question, I need to examine all the relevant circumstances.

100.First and foremost, Hoi Yee’s dependency on her mother must be coming to an end at the time of the Mother’s death.  There can be no question that the Mother had provided Hoi Yee with the best education which she could afford at considerable cost to her personal expenditure.  With her foreign education, Hoi Yee was given a good start to her own independent life.

101.It should not be overlooked that the Mother had provided Hoi Yee with the benefit of the Policy in 2007 when she was about 23 years old.  Under the Policy, Hoi Yee had obtained a payment in excess of HK$1.3 million after the death of her mother.  In my view, that benefit must be viewed as a provision for Hoi Yee’s maintenance in the event of the Mother’s death.

102.I believe that the the burden of these litigations and Hoi Yee’s medical condition, which has a lot to do with the stress from these litigations, have hindered the realisation of her full employment potential.  That should change after the conclusion of these litigations. 

103.In respect of having a place to live, given that Hoi Yee had been provided with the benefit of the Policy, I am unable to see any reasonable cause for complaint.  She is free to use the money as she pleases.  Ms Chong said that Hoi Yee no longer has the entirety of the HK$1.3 million.  Whilst there is no evidence on what is left of that sum, I am not surprise by what was said because Hoi Yee is required to fund these litigations.  However, this cannot make the lack of provision for her in the Will unreasonable. 

104.I regret to say that whilst I understand (this is not to be construed as an agreement) Hoi Yee’s grievance that she has been left with nothing in the Will, I do not agree that the failure to make any provision in her favour was unreasonable.  The S.4 Claim therefore fails at the first hurdle.

105.On a more positive note, Kwan has made an open offer in favour of Hoi Yee in his opening submissions, which consists of 2 elements: (a) waiving the mesne profits claim against her for the occupation of the Property since the 10 August 2012 and allowing her to occupy the same until 9 August 2016; and (b) paying her 15% of the net proceeds of Shares when they are sold.

106.With the persuasion of the court, Kwan has agreed to improve the offer by (a) allowing Hoi Yee to reside at the Property at no cost until the end of October 2016; and (b) paying her HK$317,341, which is the equivalent of 15% of the value of the Shares as of 7 July 2016, within 2 months after the handing down of this judgment.  Further, Kwan is willing to give an undertaking to embody the offer. 

107.In light of the offer, even if I were wrong to have rejected the S.4 Claim, I would certainly not accede to any of the relief sought (see para 89 above).  With the improved offer, Hoi Yee will have enjoyed exclusive possession of the Property for over 4 years, and will receive another sum of money in excess of HK$300,000.  It would not be right to make any further provision in her favour. 

Conclusions

108.In the premises, I give judgment for Kwan in HCA 557/2014 and grant the following relief :

(1)  Hoi Yee do deliver up vacant possession of the Property on or before 1 November 2016, failing which she is liable to pay mesne profit of HK$6,000 per month (agreed by the parties) from 1 November 2016 up to the date of delivery of vacant possession;

(2)  Hoi Yee do deliver up and return all title deeds of the Property to Kwan within 7 days from the date of this judgment;

(3)  The Counterclaim of the defendants be dismissed;

(4)  I make an order nisi that the costs of this action, including the costs of the Counterclaim, be to Kwan to be taxed if not agreed.

109.As regards HCMP 2078/2015, I dismiss the action with a costs order nisi that the costs of those proceedings be to Kwan.

110.The above judgment and relief are made upon the undertaking of Kwan as follows :

(1)  He do unconditionally waive all claims for mesne profits or other relief against Hoi Yee for the occupation of the Property for the period between and including the 10 August 2012 to 31 October 2016;

(2)  He would pay Hoi Yee the sum of HK$317,341 within 2 months from the date of this judgment.

111.Last but not least, I am grateful to counsel for their assistance in these matters.

Mr Paul Wong, instructed by Hon & Co, for the plaintiff in HCA 557/2014 and the respondent in HCMP 2078/2015

Ms Sezen Chong, instructed by Fung & Fung, for the defendants in HCA 557/2014 and the applicant in HCMP 2078/2015