Wlk By Myw Her Next Friend v. Cciw and Others

FCMP 176/2019

[2023] HKFC 58

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 176 OF 2019

------------------------

____________

------------------------

------------------------------

DECISION

( Litigation Funding )

------------------------------

INTRODUCTION

1.In these proceedings, the Applicant seeks reasonable financial provision to be made out of the estate (“the Estate”) of her late husband (“the Deceased”) pursuant to section 4 of the Inheritance (Provision for Family and Dependants) Ordinance, Cap 481 (“the Ordinance”).

2.The Deceased passed away on 8 August 2018, leaving his last Will dated 3 December 2013 (“the Will”).

3.The 1^st to 10^th Respondents are the children of the Deceased and the Applicant.

4.There is no dispute that the Applicant is the lawful wife of the Deceased within the meaning of section 3(1)(i) of the Ordinance.

5.Under the Will, the Estate is to be divided among the 1^st to 10^th Respondents with no provision being made to the Applicant.

6.The 6^th and 10^th Respondents were appointed by the Will as the executrixes of the Estate and are therefore named as the 11^th and 12^th Respondents respectively in their capacity as the executrixes.

7.The Applicant commenced these proceedings by way of an originating summons filed on 9 September 2019 (“Originating Summons”) through her next friend, MYW (“Madam Ma”). Madam Ma is a granddaughter of the Applicant.

8.According to the Open Offer dated 28 October 2022, the Applicant seeks 50% of the net Estate of the Deceased in these proceedings.

9.Following an unsuccessful Financial Dispute Resolution hearing on 21 September 2022, the trial of the Originating Summons is scheduled to be heard before Her Honour Judge T Kwan on 28 to 31 August and 1 September 2023.

10.By a summons dated 24 October 2022 (“the Summons”), the Applicant applies for litigation funding from the Estate as follows:

“The 11^th Respondent and the 12^th Respondent, as the Executrices of [the Estate of the Deceased] pursuant to the Will of [the Deceased], do pay to the Applicant’s solicitors from the Estate, as litigating funding for the Applicant, a sum of:

(1) HK$26,000 per month to be backdated to the date of the Originating Summons filed herein on 9 September 2019; and

(2) From 1 November 2022 onwards, HK$125,000 per month, until the final determination of the Originating Summons …”

11.The application for litigation funding is opposed by the 1^st, 2^nd and 7^th Respondents – who are beneficiaries under the Will.

12.By letters dated 5 January 2023 (which were handed to the Court by the 6^th Respondent on 9 January 2023), the 3^rd, 4^th, 5^th, 8^th, 9^th and 10^th Respondents wrote to the Court respectively stating that they were taking a neutral stance in these proceedings and, on such basis, seeking to be excused from attending the hearing on 9 January 2023.

13.While it is not expressly stated in her letter to the Court, I take that the 10^th Respondent was also indicating a neutral stance to the Summons in her capacity as the 12^th Respondent.

14.The 6^th Respondent (who is also the 11^th Respondent in her capacity as an executrix of the Estate), acting in person, was present at the hearing. She did not file any evidence in response to the Summons. Nor did she file any written submissions.

15.Upon enquiry by the Court, the 6^th Respondent indicated that she was taking a neutral stance to the Summons in her capacity as an executrix but she objected to the Summons in her capacity as a beneficiary under the Will on the ground that the Estate should be used to support the living expenses of the Applicant rather than legal fees.

16.I should record that subsequent to the hearing, the Court received a letter dated 11 January 2023 from the 6^th/ 11^th Respondent(s) to clarify that she is actually supportive of the Summons.

17.As a result, all other parties were given an opportunity to comment on the contents of that letter from the 6^th/ 11^th Respondent(s) on or before 20 January 2023. No comments or further submissions were received by the Court.

BACKGROUND

18.This is not the first time the Applicant has made an application for interim financial provision under section 7 of the Ordinance.

19.Previously, the Applicant applied for, inter alia, interim financial provision for her living expenses by a summons dated 15 May 2020 (as amended on 9 October 2020).

20.By a decision dated 4 February 2022 (“the Decision”), Deputy District Judge R Chow ordered interim financial provision at the rate of $12,095 per month to be paid out of the Estate to cover the living expenses of the Applicant.

21.The learned Judge also held in the Decision:

“80. The Wife’s Summons amended on 13 October 2020 seeks only interim provision in the sum of HK$12,095 per month and an order for the Wife to remain at the property. Legal costs provision is not sought in the Amended Summons.

81. The Wife only asks for the legal costs provision by the Next Friends’ affirmations. I am not satisfied that this is the proper way to claim the legal costs. This item is not allowed in this application.” (emphasis added)

22.The factual background of this case was set out in detail in §§8 to 39 of the Decision.

23.I shall highlight the salient facts relevant for the purpose of the present application in the following paragraphs.

24.The Applicant and the Deceased went through a Chinese customary marriage in 1953 in Mainland China.

25.The 1^st to 10^th Respondents were born to the Applicant and the Deceased between 1956 and 1971.

26.There is no dispute that the Deceased was the sole bread winner of the family until their children respectively reached the age of majority and became financially independent.

27.The Applicant and the Deceased registered their marriage in Hong Kong in 1984.

28.On 8 August 2018, the Deceased passed away in Hong Kong at the age of 87.

29.The Applicant was born on 8 January 1935. She is now 88 of age. She was diagnosed with dementia in 2014.

30.According to a medical report by Dr Gabriel Hung dated 30 May 2019, the Applicant was assessed to be suffering from severe cognitive deficits consistent with Dementia of Alzheimer’s type and was therefore a mentally disordered person within the meaning of the Mental Health Ordinance, Cap 136.

31.It is also stated in the medical report that the Applicant showed “no appreciation of her husband’s death” and “no appreciation of her assets and her financial needs”.

32.As noted above, the Will does not make any financial provision in favour of the Applicant.

33.Probate was granted on 13 March 2019 to the 11^th and 12^th Respondents as executrixes named in the Will.

34.According to the Schedule of Assets and Liabilities as at the date of his death, the net Estate of the Deceased comprised: (1) a landed property located at Yue On Court, No 3 Yue On Court Road, Hong Kong (“the Property”); (2) cash in bank accounts then totalling: $1,860,213.47; and (3) stocks in various publicly-listed companies[1].

35.The Property was purchased under the Home Ownership Scheme and is presently estimated to have a net value of about $4,977,126 after deducting the premium payable to the Housing Authority.

36.According to the Affirmation of the 11^th Respondent filed on 27 October 2022, the bank balance in the account of the Deceased’s Estate as of 15 October 2022 is $1,745,190.28, including the sale proceeds of the stocks and shares held in the name of the Deceased, which were sold by the Executrixes some time ago.

37.As such, the Estate has a current value of about $6.7 million.

38.It is the Applicant’s case that the 3^rd and 6^th Respondents accompanied the Deceased to attend a solicitors’ firm to make the Will in December 2013 and the Deceased expressly stated to the lawyer that he did not include the Applicant as a beneficiary under the Will because he expected the 1^st to 10^th Respondents to utilize the Estate to look after the Applicant financially after his death.

39.The Applicant commenced the present proceedings because the 1^st, 2^nd and 7^th Respondent refused to follow such intention of the Deceased and insisted that the Estate be distributed according to the Will.

40.The case of the 1^st, 2^nd and 7^th Respondents is that the marriage between the Deceased and the Applicant broke down in the 1970s. In about 1972, the Deceased broke the law and was sentenced to prison for 2.5 years. During the time when the Deceased was in prison, the Applicant squandered the family assets and was discovered to have an extramarital affair.

41.The Deceased was very upset after being released from prison. After that, the Deceased and the Applicant lived separate lives. The Deceased and the Applicant registered their marriage in 1984 purely to enable their under-aged children to apply for residency in the USA.

42.According to the 1^st, 2^nd and 7^th Respondents, it was a conscious decision of the Deceased not to make any provision to the Applicant under the Will because he had already sufficiently provided for her in the past.

APPICABLE LEGAL PRINCIPLES

43.Section 7(1) of the Ordinance provides that:

“Where on an application for an order under section 4 it appears to the court—

(a) that the applicant is in immediate need of financial assistance, but it is not yet possible to determine what order (if any) should be made under that section; and

(b) that property forming part of the net estate of the deceased is or can be made available to meet the need of the applicant,

the court may order that, subject to such conditions or restrictions, if any, as the court may impose and to any further order of the court, there shall be paid to the applicant out of the net estate of the deceased such sum or sums and (if more than one) at such intervals as the court thinks reasonable; and the court may order that, subject to this Ordinance, such payments are to be made until such date as the court may specify, not being later than the date on which the court either makes an order under section 4 or decides not to exercise its powers under that section.” (emphasis added)

44.The leading authority on section 7 of the Ordinance is ACLS v HSB(T)L [2013] 2 HKLRD 444 (CA), in which Lam JA (as he then was) said at p 450, §§22–23:

“22. In our judgment, the proper construction of s.7 must have regard to the statutory scheme of the Ordinance as a whole.

23. The primary objective of the Ordinance can be found in s.3. In short, it is to provide an avenue for persons who are the dependants of a deceased person to seek reasonable financial provision from the estate of the deceased where the will of the deceased or the law as to intestacy (or a combination of both) does not make sure provision. However, for any other person who claimed to be a dependant, he or she can only apply if he or she had been maintained, either wholly or substantially, by the deceased immediately before the death. That means that the deceased had been making a substantial contribution towards the reasonable needs of that person, see s.3(3).”

45.His Lordship went on to set out the relevant legal principles at pp 455–456, §§36–42:

“36. In Barnsley v Ward (unreported) English Court of Appeal 8 Jan 1980, Templeman LJ held that an applicant for interim maintenance had to overcome three hurdles:

First, she must show that she is in immediate need; secondly, that there is property forming part of the estate which is or can be made available to meet that need and, thirdly, she must satisfy the court that it is right in the circumstances to exercise the court’s discretion and make an order in the manner sought.

37. It is to be noted that unless the court imposes a condition for repayment when making an order for interim maintenance (and the court does have the power to impose such order, see Tyler’s Family Provision 3^rd Edn at p.374), the applicant needs not repay any interim maintenance paid to him or her even though at the end of the day the court is not minded to order any relief after trial. Given that an applicant has to show immediate need for financial assistance, in many cases it might not be practical to impose such condition. Alternatively, even if such condition is imposed, that applicant might not have the means to repay.

38. With the above analysis of the statutory scheme in mind, we can now turn to the requirement in s 7(1)(a) on “immediate need of financial assistance”. Though in some parts of the judgment the judge referred to immediate financial need, the actual wording in the statute is “immediate need of financial assistance”. This is not a mere semantic point. If the financial needs of an applicant can be met by his own financial resources or had been met from other sources, he would not be regarded as having an immediate need for financial assistance.

39. It follows from the above analysis of the statutory scheme that interim maintenance should only be granted (at a stage where the actual entitlement of a claimant has yet to be established) in a very clear case where the immediate need of financial assistance is shown. Since there is no obligation on the part of a claimant to repay (subject to conditions to such effect being imposed and the resources of the claimant to meet such conditions), there is a real risk that the beneficiaries to the estate may suffer a detriment if at the end of the day the court held at the trial that such claimant was not entitled to any relief. As mentioned, there are many factors at play in an application under the Ordinance, an important one being fairness amongst all the beneficiaries to the estate. Thus, the court cannot look at the matter merely from the angle of the reasonable need of a claimant and the resources available in the estate. In this respect, the position under the Ordinance is very different from a case for interim maintenance in the matrimonial context, especially when the claimant is not a spouse or former spouse of the deceased.

40. Turning to the disagreement between the parties, viz whether “immediate” means “current” or “current and urgent”, our first observation is that something urgent must be something stemming from some current need. If one goes to the dictionary meanings of the word “immediate” in the New Oxford Dictionary cited by Mr Lam, we do not think it is right to narrow down the meaning of the word by choosing between “current” or “urgent”. In the context of s 7(1), it should be noted that it is a requirement applicable to every scenario. In other words, it is a requirement which applies as much to a surviving widow as an applicant having no blood or adopted relationship with the deceased. In our view, “immediate need” means something which calls for immediate attention. We do think it is desirable to put any further gloss on this expression.

41. Urgency can be a facet of an immediate need but it cannot be said that a case must be urgent before it requires immediate attention. It all depends on the circumstances. There is an element of flexibility built into the concept of “immediate need” which makes it an appropriate test to be adopted under s7(1)(a) which is universally applicable. In some cases, the urgency of the need is relevant for determining whether there is an immediate need for financial assistance. In other cases, it is not so much a matter of urgency as opposed to a matter of the seriousness of the consequences of not dealing with the need that calls for immediate attention.

42. On the other hand, we cannot accept the submission of Mr Lam that the requirement under s7(1)(a) is satisfied by the Plaintiff showing a current liability to repay a substantial debt. First, as mentioned, the immediate need is the need for financial assistance. Thus, if the current financial need of an applicant has been met by other sources (albeit by way of a debt from another relative), there is no immediate need for financial assistance. Second, depending on one’s usage of the expression, something can be current but not requiring immediate attention.” (emphasis added)

46.Ms Christine Yu, counsel for the 1^st, 2^nd and 7^th Respondents, helpfully drew my attention to Yip Wing Ching v Yip Shung Kin & Anor [2020] 1 HKC 180. In that case, the applicant applied for the transfer of half of the net estate of his deceased wife under the Ordinance. Likewise, prior to the determination of the application, he applied for interim maintenance and legal fees from the deceased’s estate under section 7 of the Ordinance.

47.After referring to the above legal principles from ACLS v HSB(T)L, supra, DHCJ William Wong SC (as he then was) said at pp 186–187, §§25–27:

“25. Further, it is established law that:

(1) “Immediate need” means something calling for immediate attention. Urgency and the seriousness of the consequences of not dealing with the need are relevant considerations. On the other hand, “immediate need” should not be equated with “current need”. (See ACLS v HSB(T)L (supra) at §§40 – 41, 44)

(2) The test for “immediate need of financial assistance” is a fairly strict test and is stricter than the test employed by the court to determine whether reasonable provision should be made for the applicant’s maintenance. (Tyler’s Family Provision, 3^rd ed, at page 372)

(3) The applicant has to proffer to the Court and the other side convincing evidence that there is immediate financial need. (See Smith v Smith [2011] EWHC 2133 (Ch) at §30 per Mann J)

26. I am of the view that the assets of the estate should be the last resort of a dependant’s immediate financial needs. An applicant carries the burden to prove that his or her immediate need for financial assistance cannot be met by his own financial resources or had not been met from other sources. The Court has to take into consideration the interest of other beneficiaries of the estate.

27. The merit of an applicant’s case under section 4 of the Ordinance is also a material consideration for the Court. If an applicant can demonstrate that he or she is bound to get some relief at the end of the proceedings, I can see that the Court will be more inclined to allow interim maintenance to be granted. On the other hand, if it can be shown that the applicant’s case is bound to fail under section 4 of the Ordinance, then there will be no point in making any interim maintenance. I agree that the Court should in its discretion make an interim order only if the applicant has a strong prima facie case for provision. (Tyler’s Family Provision, 3^rd ed, at page 373)” (emphasis added)

48.It can be seen from the above authorities that the test under section 7 of the Ordinance is a stringent one – the applicant carries the burden to establish by convincing evidence a very clear case that there is an immediate need of financial assistance.

IMMEDIATE NEED OF FINANCIAL ASSISTANCE

49.Ms Lareina Chan, who appeared with Mr Fergus Chan, submitted on behalf of the Applicant that there has always been “an immediate and pressing need” for litigation funding.

50.It is the evidence of Madam Ma in §11 of her 5^th Affirmation filed on 24 October 2022 that:

“It can be seen that the total of Part 1 and Part 2, ie. the legal costs which were already incurred as at the date of the Form H, amounted to HK$936,000 (ie. HK$750,000 + HK$186.000). Thus far, I was having to borrow money in order to pay for the legal costs on behalf of [the Applicant], as her next friend. All along, it was hoped that these proceedings could be settled, and so far as possible, I looked for short-term measures in order to “get by”, little by little, month by month, particularly as it also costs money in order to take out a litigation funding. However, it cannot be disputed that all along, there was certainly a need – an immediate and pressing need – on behalf of [the Applicant], for litigation funding. With the sums that are necessary in order for this matter to go towards Trial, and for the Trial itself, such short-term, “little by little” measures are wholly unfeasible, and the legal costs will, post-FDR hearing, escalate exponentially. I cannot continue to borrow money for legal costs, particularly at the figures that will be required moving forward.” (emphasis added)

51.It is also Madam Ma’s evidence that it will require a further sum of $1,025,000 to take the case up to and including trial. On such basis, the Applicant seeks a monthly sum of $125,000 (for 8 months)[2]. She also seeks a monthly sum of $26,000 (for 36 months)[3] to be backdated to the date of the originating summons to cover the legal costs previously incurred.

52.At the hearing, when queried by the Court, Ms Chan confirmed (on instructions) that the legal costs incurred in the sum of $936,000 were actually paid.

53.The evidence filed on behalf of the Applicant, however, is completely silent on when, how and from whom Madam Ma managed to borrow the said sum of $936,000, not to mention any reason why Madam Ma is no longer able to borrow from the same or other source(s). No supporting document (e.g. bank statements, loan agreements or text messages between the lender(s) and Madam Ma) has been produced.

54.There is also no evidence that the lender(s) was going to press for or demand repayment of the sum of $936,000.

55.As rightly pointed out by Ms Yu, even after the Applicant’s case on immediate need of financial assistance was specifically challenged in the 1^st Respondent’s 4^th Affirmation filed on 28 November 2022, Madam Ma’s 6^th Affirmation filed on 12 December 2022 (which is her evidence in reply) conspicuously does not contain any further particulars/ documents to make good the Applicant’s case.

56.More specifically, the 1^st Respondent contended in §3 of his 4^th Affirmation that “the Applicant did not and does not have any immediate need of financial assistance for litigation funding because [Madam Ma] and the other 7 Respondents (i.e. the 3^rd to 6^th, 8^th to 10^th Respondents) have been paying for the Applicant’s legal costs; and together they should have fully settled all costs incurred up to now”.

57.The 1^st Respondent also referred to a WhatsApp message sent by the 5^th Respondent to a group of family members including the 1^st, 2^nd and 7^th Respondents on 14 July 2019 (Exhibit CCIW-2).

58.In that WhatsApp message, the 5^th Respondent said: “… 因為到目前為止，你哋三個都沒有任何行動，所以，我哋七個有咗以下嘅決定：… 不過，你哋三個要負責埋我哋呢邊律師費嘅所有支出，到目前為止，大概HK$200,000，因為喺你哋三個話要用律師對話，所以我哋先要請律師” (emphasis added).

59.The above WhatsApp message appears to suggest that at least part of the legal costs incurred on behalf of the Applicant came from the 3^rd to 6^th and 8^th to 10^th Respondents.

60.At the hearing, Ms Yu further drew my attention to §22 of the Applicant’s Answers filed on 11 January 2022[4], which reads:-

“Answer to Q22

The Applicant’s monthly expenses have been paid out of the 3^rd to 6^th Respondents’ and 8^th to 10^th Respondents’ entitlements to the funds in the Deceased’s estate. Given that these payments were made to satisfy the Applicant’s immediate, urgent and/or pressing expenses and needs for the time being, it remains to be seen whether those Respondents will subsequently seek reimbursement of these expenses out of any award to be made in the Applicant’s favour.” (emphasis added)

61.When questioned by the court why such financial assistance from the 3^rd to 6^th and 8^th to 10^th Respondents in favour of the Applicant was not addressed in the Applicant’s Form E, no satisfactory answer was supplied on behalf of the Applicant save that Ms Chan said to the Court (again on instructions) that such financial assistance was only for living expenses (but not for legal fees).

62.However, no explanation was given as to why the 3^rd to 6^th and 8^th to 10^th Respondents could not finance at least part of the litigation funding sought.

63.The above matters raised on behalf of the 1^st, 2^nd and 7^th Respondents were not specifically addressed or contested by Madam Ma in her evidence in reply, save for a very general statement that “[i]t cannot simply be assumed that I could or should continue to find ways to borrow money in order to pay for [the Applicant’s] legal fees, including for a full Trial”[5].

64.As correctly submitted by Ms Yu, none of the 3^rd to 6^th and 8^th to 10^th Respondents has come forward to give evidence when they must be in the best position to respond to the above matters.

65.In this regard, what Mann J said in Smith v Smith & Ors [2012] 2 FLR 230 at 235, §30 is apposite:-

“[30] She claimed to have one bank account with Barclays. She has not produced any statements from which a limited investigation of her financial means would no doubt be possible. How far it would take one, one does not know, but she did not produce them. True it is she was not challenged to produce them, but it seems to me it behoves an applicant in an application under s 5 to proffer to the court and to the other side convincing evidence of the case that there is immediate financial need. Mere statements of fact are not necessarily going to be sufficient and on the facts of this case they are certainly not sufficient.”

66.In my view, the same can be said about the evidence (or the lack of it) proffered by the Applicant in support of her application under section 7 of the Ordinance.

67.Ms Yu also took an additional point that no attempt was made by the Applicant to apply for legal aid. This is of course one of the conditions under what is commonly known as the Currey test for litigation funding in divorce cases.

68.Both parties accepted that there is no direct authority that the Currey test is applicable to section 7 applications under the Ordinance in Hong Kong.

69.I do not find it necessary for me to resolve whether the Currey test is applicable or not for the present purposes.

70.It suffices for me to say that, as noted in §§19–21 above, Madam Ma first referred to the question of legal costs in these proceedings in §14 of her 3^rd Affirmation filed on 15 May 2020.

71.The fact remains that since then no attempt has been made on behalf of the Applicant to apply for legal aid, especially as it is the Applicant’s own evidence that this is not a “big money” case.

72.This reinforces Ms Yu’s point that there was (and is) no immediate need of financial assistance, bearing in mind DHCJ William Wong’s dictum that the assets of the estate should be the last resort of a dependant’s immediate financial needs (see Yip Wing Ching, supra, p 187, §26).

73.For all the reasons stated above, I have no hesitation in finding that the Applicant has failed to satisfy the stringent test that there is a very clear case of immediate need for financial assistance.

OTHER CONSIDERATIONS

74.At the hearing, Ms Chan emphasized that the Applicant has a strong prima facie case under the Originating Summons. It is correct that since the Applicant is a surviving spouse of the Deceased, she is not required to show that she had been wholly or substantially maintained by the Deceased.

75.That said, the 1^st, 2^nd and 7^th Respondent are running a case that there was a very long period of separation between the Applicant and the Deceased, which (if proved) may impact on the award to be received by the Applicant.

76.These are, however, not matters that I can form a judgment at the stage and can only be resolved at trial.

77.In any event, the merits of the Applicant’s case under section 4 of the Ordinance does not (and cannot) assist the Applicant’s application here, given that she is unable to demonstrate a very clear case of immediate need for financial assistance.

78.In §§28–29 of her skeleton submissions, the Applicant also referred to other factors under section 5 of the Ordinance. For the same reason, I do not consider any such factor to be able to advance the Applicant’s case.

79.In this regard, I should mention that the Applicant is seeking close to $2 million in legal fees by the Summons when the size of the Estate is about $6.7 million (see §37 above). As pointed out by Ms Yu, even taking her case to the highest, the Applicant is unlikely to be awarded more than half of the value of the Estate.

80.Even if I am wrong on the aforesaid analysis and there is an immediate need for financial assistance (which I do not accept), it is clear to me that the amount sought by the Applicant is disproportionate and excessive.

81.For the avoidance of doubt, I have duly considered all other submissions ably advanced by Chan. None of those points is able to assist the Applicant.

DISPOSITION

82.For the above reasons, I dismiss the Summons.

83.The Applicant is unsuccessful in her application. I make an order nisi that the Applicant shall pay the costs of and occasioned by the Summons to the 1^st, 2^nd and 7^th Respondents (including all costs reserved), on a party to party basis, with certificate for counsel, to be taxed if not agreed. Such order nisi shall become absolute if no application to vary the same is made within 14 days from the date of this decision.

84.Lastly, it remains for me to thank Ms Chan and Mr Chan for the Applicant and Ms Yu for the 1^st, 2^nd and 7^th Respondents for their able assistance.

Ms Lareina J Chan and Mr Fergus Chan instructed by Hugill & Ip, Solicitors, for the Applicant

Ms Christine Yu instructed by Rowdget W. Young & Co., Solicitors, for the 1^st, 2^nd and 7^th Respondents

The 6^th/ 11^th Respondent appearing in person

The 3^rd, 4^th, 5^th, 8^th, 9^th & 10^th/ 12^th Respondents acting in person (attendance excused)