Lck v. Dlky Committee of the Estate of Wsy, Appointed By the Order of Deputy High Court Judge L. Chan Dated 13 August 2012 Under Hcmh Nos. 78 and 80 of 2011 and Others
Read the full judgment text of HCMH 7/2016 on BabelCite. This High Court CFI judgment was delivered on 9 February 2021.
1. This is the Plaintiff’s application by way of the Re-Amended Originating Summons under HCMH 7/2016 for, inter alia, the execution of a statutory will for WSY. There is also a related High Court action, HCA 398/2017 (the “HC Action”), for, inter alia, the setting aside of certain transactions made by WSY allegedly under mental incapacity (the “Impugned Transactions” [1] ).
Cited by 2 cases · Cites 5 cases
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HCMH 7/2016 [2022] HKCFI 496 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MENTAL HEALTH CASE NO. 7 OF 2016 ____________
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_____________ (By original Originating Summons and by Order To carry on proceedings dated the 23rd day of January 2017) _____________ HCA 398/2017 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 398 OF 2017 _____________
_____________ (Heard together)
_________________________________________________ REASONS FOR JUDGMENT AND DECISION ON COSTS _________________________________________________ 1.This is the Plaintiff’s application by way of the Re-Amended Originating Summons under HCMH 7/2016 for, inter alia, the execution of a statutory will for WSY. There is also a related High Court action, HCA 398/2017 (the “HC Action”), for, inter alia, the setting aside of certain transactions made by WSY allegedly under mental incapacity (the “Impugned Transactions”[1]). 2.In the end of the substantive hearing, I made an order for the making of a statutory will for WSY in the terms provided in the order dated 9 February 2021 (the “Order”). The Impugned Transactions were also set aside on the same day pursuant to the concessions made by the parties (the “Concessions”[2]). The statutory will was executed shortly thereafter on 10 February 2021. I now give my reasons for these decisions. I will also give my decision on costs of these proceedings. 3.For the avoidance of doubt, any reference to the Plaintiff and Defendant in this Judgment means the Plaintiff and Defendant in HCMH 7/2016 and not the HC Action. BACKGROUND (i) The parties 4.WSY is the widow of the late LH and his fourth wife. WSY is mentally incapacitated and DLKY, a professional accountant, was appointed as WSY’s committee (the “WSY Committee”) on 13 August 2012. 5.WSY has one son with LH, namely CK. CK is mentally incapacitated and the same DLKY was also appointed as the committee for his estate (the “CK Committee”) on 13 August 2012. 6.In these proceedings, CK is represented by the 2nd Defendant, MJW, as his litigation guardian (the “CK’s Guardian”). 7.In addition to CK, WSY has two other biological sons (with the late LAN as opposed to with LH), namely:
8.I will refer them as the “L Brothers”. 9.LH had other children from his other marriages, including:
10.For easy reference, I will refer these two branches of LH’s family as the “LH Family”. 11.LKF passed away on 14 August 2020 and was survived by her 4 children, namely: (i) the 9th Defendant CZY; (ii) the 10th Defendant CYC; (iii) the 11th Defendant CHZ; and (iv) the 12 Defendant CYC. 12.By a letter dated 5 January 2021, the solicitors acting for the 5th, 9th, 10th, 11th and 12 Defendants indicated that their clients do not wish to contest the proceedings, or attend or participate at the trial, and that they will abide by the judgment of the court. (ii) Events in 2003 13.WSY suffered three significant strokes in July 2001, December 2001 and March 2003 respectively. WSY’s third stroke in March 2003 in particular caused a significant impact on her cognitive function. 14.The parties agree that they shall not rely on facts and matters arising on or after 9 March 2003 for the purposes of determining WSY’s intention, and I have made an order to that effect on 7 May 2019. 15.In October 2003, LH passed away. Probate of his estate was not granted until nearly 5 years later on 30 July 2008, with LCK and LCC named as the joint executors of LH’s will. 16.In November 2003, LCT (one of WSY’s two biological sons) attempted to visit WSY, and disputes then arose between LCT and members of the LH Family. (iii) The Impugned Transactions 17.On 4 December 2003, WSY appears to have executed the following documents, all by marking a cross:
18.On 3 January 2004, WSY appears to have executed a general power of attorney in favour of LCK and LCC jointly (the “1st 2004 POA”), again by marking a cross. 19.On 21 and 28 April 2004, WSY appears to have executed a series of documents (all by marking a cross), purportedly to put in place a scheme of succession (the “Scheme”) comprising of the following:
20.WSY’s step-children did not know that WSY had two biological sons until they made an attempt to visit WSY when she was very ill. The logical inference is that these transactions were made by WSY’s step-children with a view to avoid any claim to WSY’s estate by the L Brothers. (iv) The HC Action and the Concessions 21.A few months after LCK commenced these HCMH proceedings, in February 2017, WSY (acting by the WSY Committee as her next friend) commenced the HC Action. 22.By the Amended Statement of Claim in the HC Action, WSY seeks to, inter alia, set aside the 2003 POAs, the 1st 2004 POA, the KH Transfers, the CH Transfers, the ET Transfer, the FC Transfer and the 2nd 2004 POA (collectively the Impugned Transactions), as well as the 2003 Will and the 2004 Will, on inter alia the ground that she lacked the requisite mental capacity in executing the relevant documents. 23.Over the course of 2017, various defendants of the HC Action, including LCK, LCC, CK’s Guardian, the Sisters and the sons of LCK and LCC, signed the Concessions, the general effect of which is to consent to an order being made in the HC Action to set aside the Impugned Transactions upon the execution of a statutory will for WSY. 24.By an order made by me dated 8 March 2019, the HC Action was stayed until further order. 25.I am given to understand that the value of WSY’s estate is roughly in the region of HK$800 million. WSY’s estate was previously valued at around HK$817 million when most of the parties submitted their statutory will proposals, and was valued at around HK$785 million at the time of the hearing. THE RELEVANT LEGAL PRINCIPLES 26.The legal principles applicable to the making of a statutory will and settlement of property for a mentally incapacitated person (“MIP”) can be summarised as follows. 27.S 10B(1)(e) of the Mental Health Ordinance, Cap 136 (the “MHO”) confers power on the court to make a statutory will. It provides:
28.S 10B(4)(b) of the MHO further provides that the court’s power to make a statutory will “shall not be exercisable unless the Court has reason to believe that the [MIP] is incapable of making a valid will for himself.” The threshold is met if there is evidence to support a reasonable belief that the patient lacks testamentary capacity.[3] 29.In considering whether to make a statutory will, the court shall have regard, as a paramount consideration, to the requirements of the MIP.[4] The court should give priority to the interest of the patient.[5] 30.Once the court has decided to make a statutory will, the court then proceeds to determine what the proper contents of the will should be. The court must seek to make the will which the actual patient, acting reasonably, would have made if notionally restored to full mental capacity, memory, and foresight and with sound legal advice available.[6] 31.S 10B(1)(d) of the MHO also confers power on the court to make orders for “the settlement of any property of the [MIP], or the gift of any property of that person to any other person”. 32.The principles applicable to the making of a statutory will also apply in the case of a lifetime settlement or gift[7], in particular:
THE ISSUES AND THE POSITIONS OF DIFFERENT PARTIES 33.It is common ground that, based on the available medical evidence, WSY is incapable of making a valid will for herself by reason of her mental incapacity. Further, all the parties support the making of a statutory will on her behalf. Indeed, the Concessions made by the parties in the HC Action would only take effect upon the making of such will. 34.I agree that it would be in the best interest of WSY for the court to do so. There is considerable uncertainty as to whether WSY had the mental capacity to make the Impugned Transactions and the 2003 and 2004 Wills at the relevant times, and there is a serious possibility that the family members would be engaged in prolonged litigations after her death to contest the validity of the Impugned Transactions and the two wills. This is not something that WSY would have loved to see. In order to avoid further disputes, WSY, if she were to regain her mental capacity or in her lucid interval, would certainly have made a will to remove any argument as to her testamentary arrangements. 35.The WSY Committee takes the position that CK should be catered for generously in the manner that a loving and devoted mother would cater for her disadvantaged son, for this is what WSY would have done if she were not mentally incapacitated. No party seeks to challenge this position. In fact, the evidence suggests that LH had looked into this matter prior to his death, and it is likely that WSY would have done the same if she had the necessary mental capacity to make a will. 36.At the trial, there is also no serious dispute that an amount in the region of HK$320 million (taking into account the value of properties jointly owned by WSY and CK) should be reserved as the provision for CK. 37.The WSY Committee also takes the position that WSY, if properly advised, would most likely make provision for CK through a trust structure for his benefit. On the other hand, the position of the CK’s Guardian is that, were WSY now to experience a lucid moment and make a will, she would make provision for CK in her will in the form of an outright gift. As there is already a committee set up for CK, the gifted money will be managed by the CK Committee in due course. The other family members either support the setting up of the trust or are indifferent as to the mechanism for the making of provision for CK. Under such circumstances, the choosing of the option of trust or gift would be the main issue in determining the question of provision for CK. If the court were to act on behalf of WSY to set up a new trust for CK (the “CK New Trust”) as suggested by WSY Committee, the court will also have to settle the terms for the deed of the New CK Trust (the “Trust Deed”). 38.If the gift option were to be chosen, the money will be transferred to the CK Committee for management. As a huge sum of money will be sitting in the name of CK, there will probably be further proceedings for the court to settle a statutory will for CK. 39.In the case of the trust option, there will still be a possibility for the CK Committee to apply to the court to make a statutory will for CK. However, the assets that are required to be dealt with in the statutory will are much less, given that the bulk of the provision has already been transferred to the New CK Trust. For the trust option, this court will also have to determine the beneficiaries of the trust after the death of CK. 40.After making provision for CK, the next question that the court has to determine is the testamentary arrangement for the distribution of the balance of WSY’s estate amongst the different family members. Not surprisingly, the L Brothers are fighting for a significant share of the WSY’s estate (they say 50%), whilst LCK and LCC argue that the L Brothers should only entitle to a token share of the estate. EVIDENCE AT THE HEARING 41.After hearing the evidence, there is no serious dispute about the background of WSY:
42.There is broad consensus among her family members that WSY is a traditional Chinese lady who believes in customary Chinese virtues:
43.WSY has been a loving and somewhat submissive wife who would listen to her husband on important matters. The unchallenged evidence is that LH was the patriarch of the family who had the final word on important matters. In particular, it is the unchallenged evidence of both LCK and LCC that WSY was always willing to sign on various legal documents as directed by LH. 44.I agree with Mr Fung, SC, counsel for WSY’s Committee, that, despite being a traditional Chinese lady who believes in customary Chinese virtues, when coming to making provisions for family members, WSY (like LH) would not leave out female members of the family, although they may not receive as much as the male members. In fact, LH also made provisions for his daughters in his will made in 1983, and there is no reason to suggest that WSY would not have done the same. 45.WSY was sensitive to matters concerning interpersonal relationships (“識做”), and would generally seek to keep everyone happy and avoid antagonizing anyone in the big family. This is illustrated by, for example, her preparing gifts for the four children of LKF for the celebration of Chinese New Year. WSY’s sensitivity also extended to less trivial matters. LCT freely admitted that WSY did not want him to contact LH or his family members apparently to avoid upsetting them. 46.WSY was well aware of her moral obligations towards her own children, including CK as well as the L Brothers:
47.It is clear that LH and WSY had a particularly close relationship:
48.Both LH and WSY loved CK and had been very concerned about his welfare:
49.Before 2004, there was a rather healthy relationship between WSY and the two other branches of the LH Family:
50.It is also clear that WSY cared for the L Brothers and had maintained contact with them. LCT’s evidence of WSY’s frequent calls and visits over the years is unchallenged. WSY’s care for the L Brothers as her natural sons is also evident from her financial provision for them as mentioned above. PROVISION FOR CK (i) Summary of WSY Committee’s proposal 51.The position of the WSY Committee is that CK should be catered for generously in the manner that a loving and devoted mother would cater for her disadvantaged son, as this is what WSY would have done if she were not mentally incapacitated. As mentioned above, such position is not challenged by any parties. 52.The WSY Committee takes the view that provision for CK should be made in the following manner:
53.Taking into account the two properties currently held in the joint names of WSY and CK, the total effective provision for CK in monetary terms under the proposal of the WSY Committee is at least HK$320 million. This sum is arrived at as follows:
(ii) Trust or gift? 54.The WSY Committee takes the position that WSY, properly advised, would most likely make provision for CK through a trust structure for his benefit rather than in the form of an outright gift. 55.Mr Fung has rightly pointed out that the trust concept is not something alien to WSY. The unchallenged evidence is that “the possibility of setting up a trust for the benefit of CK … was explored seriously in or about 2002 by both LH and [WSY]”, but this was unable to be pursued further “owing to the stroke suffered by [WSY] and the sudden death of LH in 2003”. As explained by LCK in cross-examination, the family had yet to formally instruct solicitors and professional trustees for the purpose of setting up a trust because they were asked to provide further information but did not know how to respond. 56.I agree with Mr Fung that there are two broad reasons as to why WSY would have wanted to set up a trust for CK. 57.First, a trust structure would better avoid potential disputes or litigation in the future:
58.Second, a trust structure would provide more certainty for WSY that her assets are dealt with in ways which she would have wanted:
59.In my judgment, WSY, if she were to receive proper legal advice, would certainly prefer to adopt the trust structure to cater for the future maintenance of CK. The two broad reasons put forward by Mr Fung would be material considerations for someone like WSY, who would certainly prefer to have more certainty as to how she would distribute her assets. Further, being a traditional Chinese family lady, she would choose an option which would avoid CK being put in the spotlight and less prone to litigations in the future. The trust structure would serve these purposes. 60.Mr Lynn, counsel for CK’s Guardian, relies on the dicta in certain English authorities such as Re HM[11]and Watt v ABC[12] about the advantages of an outright gift. Apart from the fact that the context of the two English authorities is entirely different to that in the present case, the statutory frameworks for the protection of MIPs in England and Hong Kong are also different. Significantly, in terms of supervision, there is no comparison between a committee appointed under the MHO in Hong Kong and a deputy appointed under the Mental Capacity Act 2005 (“MCA 2005”) in England. 61.The new Court of Protection established under the MCA 2005 in England has no equivalent in Hong Kong. More importantly, English deputies are supervised by the Office of Public Guardian, which is an executive agency of the Ministry of Justice and is funded by the Ministry of Justice from its parliamentary supply and by income derived from fees received from customers. One of the Public Guardian’s statutory functions is to supervise deputies appointed by the courts.[13] The Public Guardian is required to make an annual report to the Lord Chancellor about the discharge of their functions.[14] The Public Guardian can also direct a Court of Protection Visitor to visit, amongst others, a deputy appointed by the court or the patient for whom the deputy is appointed to make a report on any such matter as the Public Guardian sees fit.[15] Under such kind of regime, it is not difficult to see why from a protection point of view, having the MIP’s assets administered by a deputy (who is supervised by the Office of Public Guardian) may be preferable to having them administered by a trustee of a private trust.[16] 62.In Hong Kong, whilst committees appointed under the MHO derive their authority to do things from the court[17], there is no similar supervision regime in Hong Kong over committees. Invariably, upon its appointment by the court, a committee would be imposed an obligation to provide periodic reports to the court.[18] However, the court is not provided with the resources to proactively monitor the work of the committees. There may be delays in the submission of the reports to the court, which is a common problem facing the court in the supervision of the work of the committees. The court also lacks the resources and structural support to verify the contents of the reports, and it is not uncommon for improprieties to surface after a considerable lapse of time. In practice, the court would only intervene if specific matters are brought to its attention by the relevant committee. Furthermore, the committee is not obliged to report generally to any family members. In the present case, DLKY (the Committee for WSY and CK) is only authorised to respond upon specific enquiries from certain family members of WSY and CK. 63.I have repeatedly voiced out my frustration about the deficiencies of the existing system relating to the management of welfare matters for MIPs in Hong Kong in cases such as SPLP v Guardianship Board[19] and Re: CML[20] (both cases were reported in law reports). Unfortunately, all my plea fell on deaf ears, and it seems that Hong Kong, which is facing the critical problem of an aging population, will continue to lag behind other modern jurisdictions in terms of the management of welfare matters for MIPs. 64.In any event, each case depends on its own factual circumstances. It is neither appropriate nor necessary for the court to rely on the list of factors set out in §45 of Re HM[21] to decide whether provision for CK should take the form of a trust or a gift. As HH Judge Hazel Marshall QC in that case rightly observed at §30, “[it] cannot … be over-emphasised that any actual decision is completely fact sensitive to the individual case, and that the weight of superficially similar factors may be very different in different cases”. 65.Mr Lynn has put forward various reasons to support a gift for CK, but I agree with Mr Fung that these are not good reasons for such course to be taken. 66.First, CK’s Guardian suggests that WSY would be sceptical of protections afforded to beneficiaries under a trust structure as a result of the detriment suffered by CK as a discretionary beneficiary under the Old CK Trust. However, many of the problems with the Old CK Trust highlighted by CK’s Guardian arose not from its nature as a trust but from the particular way in which it was administered. The ways in which the present Old CK Trust was set up and has hitherto been administered provide no basis to say that a new trust structure should not now be set up to provide maintenance for CK. On proper advice, WSY would be informed (or reminded) of how a trust would operate upon the appointment of a fully independent trustee who would be cognisant of their duties and obligations towards CK. 67.Second, CK Guardian relies on an observation made in §49 of Re HM[22] that the patient “is not going to know, or be directly concerned in what happens to the residue of his or her assets after death”, and suggests that the consideration that a trust structure might avoid the consequences of future intestacy could only confer “indirect benefits”. 68.However, the “patient” in the above quotation was a reference to the beneficiary of the trust. The observation was made by the judge in the context of whether it was in the patient’s best interests for his assets to be put in a trust for his benefit. It was in this context that the judge said that patient as a beneficiary of a trust would not know or be directly concerned in what happened to the residue of his asset after death. Yet in the present case, the court has to consider from WSY’s perspective the mechanism by which she would provide for her son. WSY would have every reason to be directly concerned in avoiding further disputes within the LH Family that would very likely arise if she were to provide for CK by way of outright gift, particularly given the potential impact such disputes may have on CK. 69.Third, CK’s Guardian suggests that WSY would be advised to preserve flexibility in relation to CK’s inheritance rather than by tying it up in a trust structure. However, it is too simplistic to say that it would be in CK’s interest to preserve flexibility in relation to his inheritance rather than by tying it up in a trust structure. When all things are equal, there may be something to be said for the contention that WSY should choose an option which preserves flexibility. However, properly advised (including as to the advantages of setting up a trust in favour of CK as mentioned above), WSY, if she were to regain her mental capacity, would probably want an appropriately worded trust to be set up, rather than to preserve flexibility indefinitely. Indeed, flexibility would also mean more uncertainties for CK in the future. Given that CK does not have the capacity to make decisions for himself and he has to rely on others to do so, “flexibility” and “uncertainty” may not be desirable in his case. 70.Fourth, CK’s Guardian suggests that a trust structure would unnecessarily complicate matters in terms of administration and would increase costs. 71.Even assuming that there may be more costs associated with the setting up of the trust structure, I think that WSY would still prefer such option in view of the circumstances facing her and CK. If the gift option were to be chosen, CK Committee would be solely responsible for taking care of the assets and providing maintenance to CK. Though CK Committee would be subject to the supervision of the court, the court, as mentioned above, may not have the resources to actively monitor the work of the CK Committee. Given that CK has a life expectancy of 85 years (as he is now 50 years old), it would create an unnecessary burden on the court’s resources to have to give directions from time to time on how the WSY’s assets are to be dealt with if they are to be given outright to the CK’s Committee in the proposed statutory will. On the other hand, in the case of the trust option, there will be a division of labour between the trustee and the CK Committee: the trustee will administer the substantial assets reserved for the trust and the CK Committee can focus on maintaining the well-being of CK. Further, CK Committee would probably be the Protector under the new trust structure, and so there would be adequate supervision over the management of assets provided for CK and his maintenance. 72.Fifth, CK’s Guardian suggests that the trustee managing the proposed trust would face difficulties in gaining CK’s trust. This issue simply will not arise. As proposed by the WSY Committee, the CK Committee would continue to be responsible for the day-to-day management of CK’s affairs and the maintenance of his well-being, whereas the trustee of the New CK Trust would focus on the management of the substantial assets to be provided by WSY. As such, the trustee would hardly need to interact with CK (if at all). 73.Sixth, CK’s Guardian suggests that the trustee would have a duty to hold a balance between CK and the default beneficiaries, whereas the CK Committee would only have a duty to act in the best interests of CK alone. 74.I agree with Mr Fung that such suggestion ignores the set up and safeguards proposed by the WSY Committee for the New CK Trust. Under the proposed terms in the New CK Trust:
75.Seventh, CK’s Guardian relies on the English position and suggests that a trust structure would deprive the court of its “supervisory” powers. However, there are fundamental differences between deputies appointed by the English courts and committees appointed by the Hong Kong courts in terms of “supervision” as mentioned above. In any event, given that the CK Committee is envisaged to be appointed the Protector of the New CK Trust, the judge supervising the CK Committee would be informed if the CK Committee wishes to exercise its powers as Protector (e.g. to remove and appoint trustee, to appoint a successor protector, to inspect the books and records of the trust) and can intervene if any directions are sought by the CK Committee. 76.Eighth, CK’s Guardian suggests that there would be difficulties in replacing trustees or varying or terminating a trust structure. However, under the WSY Committee’s draft Trust Deed, the CK Committee as Protector would have the power to remove and appoint trustees as it sees fit. The difficulties of varying or terminating a trust are also more theoretical than real. There is currently nothing to suggest that the proposed trust for CK will not be properly administered and will need to be varied or terminated in the future. 77.Ninth, CK’s Guardian suggests that a trust structure would increase litigation risk. I disagree. The WSY Committee’s draft Trust Deed has included in terrorem provisions which would create a strong disincentive for anyone to raise any challenges in relation to the assets provided to CK. By contrast, the provision of very considerable assets to CK by way of outright gift will almost certainly lead to highly contentious litigations in relation to CK’s estate, whether in the proceedings for the making of a statutory will for CK or otherwise. 78.For these reasons, based on the particular circumstances facing WSY, the trust arrangement would have more advantages than those of the gift arrangement. Indeed, such option had been seriously considered by LH and WSY prior to LH’s death. Given the close relationship between LH and WSY and their common affection for CK, WSY, properly advised, would most likely choose the trust arrangement to cater for the future maintenance of CK if she were to regain her mental capacity to manage her assets and finances. I therefore accept the proposal of WSY Committee to set up a New CK Trust for CK, and to inject capital into such trust in the manner as suggested by WSY Committee. PROVISION FOR OTHERS IN THE STATUTORY WILL 79.With at least HK$320 million reserved as the provision for CK, the next issue that the court has to decide is how WSY would distribute the remainder of the assets comprising her estate (“the Remainder”) in her will if she were to regain her mental capacity. 80.I agree with Mr Fung that, given: (i) the dynamics of the LH Family in which LH was accepted as the patriarch; and (ii) WSY is a traditional Chinese lady with strong belief in Chinese customary values, it would be reasonable to infer that WSY would consider a very substantial portion of her wealth to have derived from her association with LH and his family. 81.The starting point is that before WSY came to Hong Kong in 1957, she and LAN (the father of the L Brothers)were “living in great difficulty”, with LAN earning “very little income” at the time. 82.As explained in the document drafted by LCK entitled “History of the [LH] Family”, the contents of which were not seriously challenged in cross-examination:
83.As can be seen from the table entitled “List of Known Assets of the Estate WSY as at 12 October 2020” circulated by the solicitors for WSY Committee, out of the HK$785.18 million worth of assets comprising in WSY’s estate, and assuming the Concessions take effect:
84.In other words, WSY’s assets deriving from the LH family companies alone add up to around 65.3%, or almost two-thirds, of her estate. The above has not taken into account other assets comprising WSY’s estate which can also be considered to be derived from LH and his family, including the HK$11.10 million attributable to the MK Mansion property (which was the original home residence of LH, WSY and CK) and the HK$49.55 million attributable to WSY’s entitlement to the estate of LH which has not been distributed. 85.The L Brothers accept that “about half” of WSY’s estate was inherited from LH’s will. Nonetheless, they assert that WSY has “earned” the other half of her wealth by assisting in LH’s estate agency business, particularly from 1960 to 1976, when WSY “must have assisted LH full time … before CK was born”. The only evidence consists of LCT’s suggestion in oral evidence that WSY was assisting in the estate agency business even before she began to suffer problems with her legs in the 1980s. However, it is unclear how LCT would know about this because LCT himself accepted that “[he has] little idea because [WSY] seldom mentioned [LH’s] family matters to [him]”. In any event, LCC said in evidence that WSY did not help in the estate agency business and that the substantial part of LH’s income came from being a developer of old buildings rather than from his estate agency business. (i) Provision for the L Brothers 86.Given the background and character of WSY and her relationship with the L Brothers as mentioned in §§41-50 above, WSY would probably make some provision in her will for the L Bothers. There is an abundance of evidence, not challenged by any parties (including those from the LH Family), that WSY regularly made rather substantial financial provisions to the L Brothers. LCT stated on affirmation that WSY regularly gave monetary gifts to the L Brothers, including the capital needed for each of them to purchase their own properties. Further, under cross-examination, LCT gives evidence that WSY made a gift of HK$350,000 to each of the L Brothers in 1995. Such evidence is not seriously challenged in cross-examination. In any event, it is eminently believable and entirely consistent with WSY’s character that she would look after and provide for her natural sons. 87.If WSY were to regain her mental capacity, she would try to make reasonably substantial provisions for the L Brothers, whilst being careful not to antagonise the LH Family or attract any accusations that she was giving “money of LH Family” to people outside the LH Family. Putting myself into the shoes of WSY, I decide to distribute about 10% of WSY’s estate to the L Brothers. As the total value of WSY’s estate is in the region of HK$800 million, the provision for the L Brothers would be about HK$80 million. WSY would not want the L Brothers to get involve with the LH’s Family in the valuation of her estate after her death, and further to minimise the possible contacts between the two families, I believe WSY would provide for a specified sum, as opposed to a percentage of the Remainder, for the L Brothers in her will. Hence, I include in the statutory will the provision of HK$40 million for each of the L Brothers making a total of HK$80 million. The WSY Committee agrees with such provision. 88.Further, if WSY were to regain capacity and upon receiving advice on the question of how complex it is for her estate to be distributed upon her death, she would consider it simpler to leave the L Brothers to make sufficient provision for their respective sons (i.e. WSY’s grandsons), as opposed to making their grandchildren as direct legatees in her will. There is no reason for WSY to think that this would not be done by the L Brothers. (ii) Provision for others in LH Family 89.Given: (i) WSY’s background and character; and (ii) a very substantial portion of her wealth to have derived from her association with LH and his family, it is almost inconceivable that she would make no provision for members of the LH Family (other than CK) in making her will if she were to regain capacity. In particular, it is reasonable to infer that WSY would provide more to his step-sons (namely LCK and LCC) and less to his step-daughters, similar to what LH did when he executed his last will. 90.For these reasons, after the making of the provisions for CK and the L Brothers, the balance of the Remainder would be divided into 3 equal shares, with 1 share to LCK, 1 share to LCC and the remaining share to be divided between the 3 Sisters. As LKF had passed away, her children would get her share instead. I believe this is what WSY would do in her will if she were to regain her mental capacity, and I therefore include such provisions in her statutory will. I also accept Mr Fung’s submissions that WSY would have considered it simpler to leave his step-sons and step-daughters to make sufficient provision for their respective children (i.e. WSY’s step-grandchildren) as it is in the case of the L Brothers. (iii) Any provision for charities? 91.In the hearing, I have considered the issue as to whether there should be any provision for charities in the statutory will. 92.Whilst there is some dispute over WSY’s religious belief, there is unchallenged affirmation evidence by a Buddhist monk that WSY formally converted as a Buddhist in 2006. However, in light of the doubts over WSY’s mental capacity after 2003, whether it was her own decision to convert is very much open to question. For the same reason, the donation of over HK$782,500 for the renovation costs of a temple made by LCC’s wife allegedly on behalf of WSY also cannot stand as evidence of WSY’s intention for or predisposition towards giving to charities. 93.On the contrary, LCK’s evidence that WSY had always had reservations when it came to matters of charity and donation is not challenged in cross-examination. Under such circumstances, there is insufficient evidence for me to conclude that WSY, if she were to regain her mental incapacity, would make any provision to charities in her will, whether by including them as direct beneficiaries of her will or by way of the remaindermen provisions in the Trust Deed of the New CK Trust. I therefore make no such provision in the statutory will and the Trust Deed. SPECIFIC TERMS OF THE TRUST DEED AND STATUTORY WILL (i) Terms of the Trust Deed 94.I basically approve the terms of the draft Trust Deed of the New CK Trust prepared by WSY Committee. The draft Trust Deed is professionally drafted and prepared with great care. I understand from Mr Fung that some of the trust experts of the solicitors’ firm acting for WSY Committee have been engaged to prepare the draft Trust Deed. With the proposed terms in the draft, I am satisfied that the welfare needs of CK have been well taken care of by the proposed New CK Trust. 95.The WSY Committee will execute the Trust Deed on WSY’s behalf. 96.As mentioned above:
97.There is also a clause requiring the trustee to give regular financial information to CK’s family in the form of a copy of their accounts relating to the trust every 12 months.[24] 98.There is no issue that professional trustee will have to be engaged to run the New CK Trust. The firm representing WSY Committee proposes three professional trustees: (i) HSBC Trustee (Hong Kong) Ltd. (“HSBC Trustee”); (ii) Zedra (Hong Kong) Ltd. (“Zedra”); and (iii) PraxisIFM Nerine (Hong Kong) Ltd. All of them are well qualified to be the trustee under the New CK Trust. Those instructing Mr Fung have a working relationship with PraxisIFM, and the fees charged by HSBC Trustee are slightly higher. However, since WSY is a person who received little formal education and does not have experience in trust matters, I believe that WSY, if she were to regain her mental capacity, would choose HSBC Trustee to be the trustee of the New CK Trust, mainly because “HSBC” is a household name and known to many people living in Hong Kong. The difference in the fees is not material given the size of the assets of the trust. 99.Another important issue I have to decide is the beneficiaries that are entitled to the properties of the New CK Trust upon the death of CK or CK’s issue if any. These beneficiaries are defined as “the Final Repository” and they are listed out in the Fourth Schedule of the Trust Deed. 100.Since the provision for CK is comprised of wealth derived from LH and his family business, I agree with the observation of the WSY Committee that the Final Repository should only include those who are closer to LH. I therefor include the members of the LH Family entitled to the distribution of the Remainder of WSY’s estate in the Fourth Schedule, and their entitlements are the same as the shares as stated in the statutory will. 101.For the other terms relating to the trustee in the Trust Deed, I am satisfied that they are usual and reasonable terms in such kind of trust document. Further, the draft Trust Deed has been sent to HSBC Trustee for comment before the final draft is approved by the court. That saves the trouble of the parties coming back to the court for further revisions of the Trust Deed. 102.Mr Lynn has raised some issues with the clauses in the draft Trust Deed relating to, inter alia, delegation of the power of trustee, release of the power of trustee, possible liability of trustee and power of the trustee to relocate the trust. I do not propose to discuss these matters in any details here, save that to say I am satisfied that the final draft, which have addressed some of the concerns of the court and CK’s Guardian, is one I believe would be settled by WSY if she were to regain her mental capacity and under proper legal advice. Indeed, the final draft is the product of serious debates in the court. I am sure that the final draft is a well-considered and yet practical trust deed that would cater for WSY’s special needs in this case. (ii) Terms of the statutory will 103.I basically approve the terms of the draft statutory will prepared by WSY Committee. The draft is based on the Standard Provisions (England and Wales) (2nd edition) published by the Society of Trust and Estate Practitioners in the United Kingdom. 104.As mentioned above, the evidence suggests that members of WSY’s family do not see eye-to-eye on many matters which have given rise to acrimonious disputes and litigations in the last 15 years or so, and so I agree with the WSY Committee that an independent professional should be appointed as the executor. 105.LCC and LKC have proposed for DLKY (i.e. the WSY Committee and the CK Committee) and GDN (i.e. another partner at the same accountants’ firm who has been assisting DLKY in executing his said two roles) to be the executors of the statutory will. There is no objection by any parties and I therefore appoint them as the executors. 106.In fact, such appointment would have the following advantages as rightly observed by Mr Fung:
107.Insofar as there is any concern about a perceived conflict of interest with his role as the CK Committee, any such conflict can be properly managed. If any serious disputes or litigation arise as to the administration of WSY’s assets after her passing, it would be possible, if needed, to appoint a litigation guardian to represent CK in place of the CK Committee (just like the appointment of CK Guardian in these proceedings). 108.Since I have provided for the transfer of a larger sum to be injected into the New CK Trust at the time of its set up, the sum to be transferred to the New CK Trust upon WSY’s death will be reduced to $235 million. The Remainder will be distributed to the different family members as mentioned above. COSTS 109.I have reserved the question of costs of these proceedings. I also have to determine the costs of the HC Action. (i) General observations on costs 110.The principles on costs of a statutory will application are well-established and were summarised by Poon J (as he then was) in Re LLC (No 2)[26]. I do not want to repeat the same here. 111.In general, I accept that all the parties were acting bona fide in the interest of WSY. In the case of the making of a statutory will, all these parties would have to get involved in the proceedings to make out their respectively cases in order to assist the court in making a statutory will which would truly reflect WSY’s intention if she were to regain her mental capacity. 112.In fact, it is because of the particular circumstances of WSY which very much necessitate the making of the statutory will. It is common ground that WSY has inherited the bulk of her wealth from LH and his family business. She has a disadvantaged son, but no provision or financial arrangement has been made to cater for his future maintenance. Adding further complication to the picture, WSY has two biological sons and yet she has not made any testamentary provision for them. Under such circumstances, the making of the statutory will and lifetime settlement as mentioned above would only be in the best interest of WSY. With the court doing so, adequate provision can be made to take care of the future welfare needs of CK, and it is also the best option in avoiding any disputes or litigations in the future. 113.There are two matters which may affect this general observation. 114.First, LCK and LCC originally in the present HCMH proceedings asked the court to make a statutory will on behalf of WSY to confirm the Impugned Transactions and the 2003 and 2004 Wills made by WSY in 2003 and 2004. The WSY Committee disagreed. Instead of lodging a counterclaim in the present HCMH proceedings, the court considered it more appropriate for the WSY Committee to issue separate writ proceedings to set aside the Impugned Transactions and the two wills, i.e. the HC Action. Mr Fung submits that, in the initial stage of the HCMH proceedings, LCK and LCC had unreasonably insisted the confirmation of the Impugned Transactions and the 2003 and 2004 Wills, and as a result the HCMH proceedings had been prolonged unnecessarily. Mr Fung therefore submits that LCK and LCC should not get full indemnity of their costs for the HCMH proceedings from WSY’s estate. They should also pay for the costs of WSY in respect of the HC Action. 115.Second, Mr Yin, counsel for LCK, submits that the L Brothers should not be allowed for their costs be paid out of WSY’s estate and they should even pay for the costs of the other parties in these proceedings. According to Mr Yin, the L Brothers have adopted an adversarial approach in these proceedings by embroiling themselves in unwarranted allegations in evidence and arguments in submissions. Further, the parties had actively engaged in negotiation and mediation with the L Brothers prior to the substantive hearing. Some initial offers were made. In a final bid to settle with the L Brothers, LCK made a Calderbank offer on 11 January 2021 to settle these proceedings by way of LCK and LCC jointly paying each of the L Brothers HK$60 million (the “Calderbank Offer”). The L Brothers refused to accept the Calderbank Offer or to sign a deed poll disclaiming their interest in WSY’s estate and CK’s estate. As the provision for the L Brothers determined by the court in the ultimate statutory will is much less, the L Brothers should bear their own costs of the HCMH proceedings. They should also pay at least part of the other parties’ costs as well. This should be the case particularly in view of the warning on costs given by this court in the earlier hearing on 19 May 2020. 116.I will deal with these arguments in turn. (ii) The stance of LCK and LCC on the confirmation of the Impugned Transactions and the 2003 and 2004 Wills 117.Mr Yin submits that the court should not be too harsh on costs against LCK (and indeed LCC) relating to his initial stance on the Impugned Transactions and the 2003 and 2004 Wills. 118.After the death of LH and the strokes suffered by WSY, LCK was eldest son in the family. By that time, no provision was made for CK, and so the Impugned Transactions and the 2003 and 2004 Wills cannot be said to be made for the sole benefits of LCK or LCC. Indeed, generous provision had been made for CK through these arrangements, though the provision ultimately decided by the court in the HCMH proceedings may be larger. 119.There is some force in these submissions. The situation in the family became complicated when WSY fell ill and the L Brothers suddenly appeared in the scene. It would be in the interest of WSY for provision to be made to CK as soon as possible, and for that, I cannot say that the Impugned Transactions and the 2003 and 2004 Wills were made only to satisfy the personal greed of the members of the LH Family. By applying to the court to make a statutory will to confirm the said transactions, I also cannot say that LCK (and indeed LCC) was doing it solely for his own personal interest. As I have repeated many times, the sudden appearance of the L Brothers had necessitated some of these measures to be taken. WSY herself was partly responsible for the development of these complications, and so I agree with Mr Yin that the court should not be too critical on LCK and LCC in their conduct of the HCMH proceedings. I therefore allow their full costs to be paid out of the WSY’s estate. 120.In my judgment, it would only be fair that all the parties of the HC Action shall bear their own costs of the action. In any event, the costs should be minimal as the parties should have focused on the statutory will proceedings rather than the setting-aside claim in the HC Action. In fact, the HC Action has not gone beyond the filing of the Statement of Claim. Though some of absent parties have indicated that they will abide by any order made by the court, I, as a matter of caution, would only make a nisi order in respect of the costs of the HC Action, just in case the absent parties would like to make any submissions on costs. (iii) The refusal of the L Brothers to accept the Calderbank Offer 121.As mentioned above, it would be fair for the L Brothers to take part in the HCMH proceedings. However, I take the view that they should not have taken any further part in the proceedings after the making of the Calderbank Offer. HK$60 million is a generous offer to each of them. They had already presented their case by way of documents to the court at the time of the making of the Calderbank Offer. What they should have done was to accept the offer and not to take any further part in the proceedings. There is no reason why they should not be asked to bear their own costs after the Calderbank Offer. 122.I have also considered the question as to whether I should order the L Brothers to pay the other parties part of their costs in respect of the substantive hearing. I decide not to do so for the following reasons:
123.For the costs of the L Brothers, I allow them to claim for their costs up to the first day of the trial. The Calderbank Offer was made only shortly before the substantive hearing on 11 January 2021. By that time, brief should have been delivered to counsel and the first day of costs cannot be avoided in any event. (iv) The final costs order 124.For the above reasons, I make the following order on costs in the present HCMH proceedings:
125.For the HC Action, I make an order nisi that there be no order as to costs of the action which shall be made absolute 21 days after the date of the handing down of this Decision on Costs.
Mr Michael Yin and Mr Jeff Chan, instructed by Herbert Tsoi & Partners, for the Plaintiff in HCMH 7/2016 and the 1st Defendant in HCA 398/2017 Mr Eugene Fung, SC and Mr Jason Lee, instructed by Herbert Smith Freehills, for the 1st Defendant in HCMH 7/2016 and the Plaintiff in HCA 398/2017 Mr Andrew Lynn, instructed by Hampton, Winter & Glynn, for the 2nd Defendant in HCMH 7/2016 and the 9th Defendant in HCA 398/2017 Ms Yvonne Fong and Ms Mandy Lau, instructed by Adrian Yeung & Cheng, for the 3rd and 6th Defendants in HCMH 7/2016 and the 2nd and 5th Defendant in HCA 398/2017 Mr Nelson Miu, instructed by Hobson & Ma, for the 7th and 8th Defendants in HCMH 7/2016 The 4th Defendant in HCMH 7/2016 and the 3rd Defendant in HCA 398/2017, in person, absent The 5th, 9th to 12th Defendants in HCMH 7/2016 and the 4th Defendant in HCA 398/2017, represented by S H Leung & Co, absent The 6th Defendant in HCA 398/2017, represented by Chui & Lau, absent The 7th and 8th Defendants in HCA 398/2017, represented by Herbert Tsoi & Partners, absent The 10th and 11th Defendants in HCA 398/2017, represented by Adrian Yeung & Cheng, absent [1] as further defined in §22 below [2] as further defined in §23 below [3] Re CYL [2007] 4 HKLRD 218 at §17 (Lam J, as he then was); Re LLC [2010] 3 HKLRD 16 at §4 (Poon J, as he then was) [4] s 10(A)(2)(a) of the MHO [5] Re CYL (above) at §§31-32 (Lam J, as he then was); Re LLC (above) at §5 (Poon J, as he then was) [6] Re D (J) [1982] Ch 237 at 243-244 (Megarry J); Re CYL (above) at §§34-36 (Lam J, as he then was); Re LLC (above) at §6 (Poon J, as he then was) [7] Re G (ET) and G (TJ) [2008] WTLR 599 at §§21-22 (Morgan J) [8] s 10A(2)(a) of the MHO [9] Re G (ET) and G (TJ) (above) at §19 [10] Clauses 3-5 of LH’s will [11] [2011] EWHC B30 (COP) [12] [2017] 4 WLR 24 [13] s 58(1)(c) of the MCA 2005 [14] s 60 of the MCA 2005 [15] s 58(1)(d) of the MCA 2005, see also Heywood & Massey: Court of Protection Practice §§2-020 to 2-027, 8-031E [16] see Re HM, supra, at §§75, 76, 81 [17] s 11(2) of the MHO [18] e.g. §12 of the appointment order of the WSY Committee [19] [2019] 3 HKLRD 670 [20] [2020] 3 HKLRD 481 [21] supra [22] supra [23] Clause 24 [24] Clause 23 [25] see Williams, Mortimer and Sunnucks: Executors, Administrators and Probate (21st ed, 2018), §§5-06 to 5-10 [26] [2010] 4 HKLRD 400 |
Cases cited in this judgment
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