Lkyi v. Gjs, As the Personal Representative of Ko , The Deceased
Read the full judgment text of FCMP 46/2020 on BabelCite. This FCMP judgment was delivered on 2 August 2024.
1. This is an application for reasonable financial provision to be paid out of the net estate of O, deceased (“ the Estate ”). The Applicant claimed as a dependent of O under section 3(1)(ix) of the Inheritance (Provisions for Family and Dependents) Ordinance (Cap. 481) (“ IPFDO ”).
Cited by 1 case · Cites 10 cases
|
FCMP 46 / 2020 [2024] HKFC 145 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION FAMILY COURT MISCELLANEOUS PROCEEDINGS NO. 46 OF 2020 ________________________ BETWEEN
________________________
________________________ JUDGMENT (Financial provision claimed by ________________________ A. The Application 1.This is an application for reasonable financial provision to be paid out of the net estate of O, deceased (“the Estate”). The Applicant claimed as a dependent of O under section 3(1)(ix) of the Inheritance (Provisions for Family and Dependents) Ordinance (Cap. 481) (“IPFDO”). B. Brief Background 2.O was a businessman. He founded and operated two companies, L Travel which runs a plane ticketing and hotel booking service, and L Insurance, a licenced insurance broker company. O was the sole shareholder of L Insurance and the majority shareholder (99%) of L Travel. L Insurance and L Travel are referred collectively below as “the Companies”. 3.The Applicant was a reservation officer employed by an airline company, earning a monthly salary of $13,000. 4.The Applicant and O met in 2003 through their respective works in the travel industry. They began a romantic relationship in mid-2008. 5.In around September 2009, the Applicant was pregnant and started to cohabit with O in a property in Stubbs Road (“Stubbs Road Property”). Stubbs Road Property was held in the name of WHL, a company solely owned by O. They have been living together for about 10 years but they had not married. The Applicant produced photos taken at her request in 2009 in studio wearing wedding gowns. 6.Their daughter (“Daughter”) is now 14 years old. 7.The Applicant’s case is that she has been a full time housewife since she has cohabited with O. She held the title of Office Manager in L Insurance and received a monthly salary of $18,000 although she did not have day to day duties and responsibilities. In addition, O gave her $35,000 cash every month for her own personal use and $25,000 for other household expenses. O would also occasionally gave her money to take care of ad-hoc expenses.[1] 8.In October 2018, O unexpectedly passed away intestate at the age of 71 years. The Daughter is the sole known beneficiary of the Estate. 9.The Applicant filed this claim on 13 May 2020 against the Estate. 10.By an Order dated 27 September 2022 (“Interim Maintenance Order”), a monthly interim maintenance of $90,000 was granted to the Applicant to be paid out of the Estate and will be taken into account after the final distribution. C. The Respondent 11.Although O has passed away in 2018, no step has been taken to apply for letters of administration of the Estate. It appears that the reason for the long period of delay is to allow the Applicant to get her own maintenance first so that she will not be in conflict with the Estate when she seeks to apply to be an administratrix. The Applicant said it is likely that she will make such application once her conflict of interest arising out of the present claim is resolved[2]. The effect that this delay may have caused to the administration of the Estate is unknown but this is not a matter within the jurisdiction of this court. 12.As there is yet to have a personal representative of the Estate, on 22 April 2022, upon the application by the Applicant and with consent of GJS, Deputy Judge W.Y. Ho (as she then was) appointed GJS[3] to represent the Estate solely for the purpose of these proceedings. 13.GJS is O’s nephew and the eldest male descendant of O’s extended family. He is not a beneficiary of the Estate. He has never had any business dealings with O. He made himself available for the appointment because he felt that, as the eldest male descendant, he had a moral duty to take care of the Daughter (his youngest cousin) and the Estate and to see that the Applicant is fairly taken care of. He said he is not hostile to the Applicant or any party. He is conscious of his duty to the Estate and shall act in the best interest of the Estate and its beneficiary.[4] D. Applicable statutory provisions and legal principles 14.Section 3 of IPFDO provides that:-
15.Section 3(3) defines the meaning of “being maintained, either wholly or substantially, by the deceased” as follows:
16.When considering whether an applicant’s care and support are full valuable consideration for maintenance, the English Court of Appeal held in Bishop v Plumley[5] that care and support given by an applicant to the deceased in the years prior to his death was not to be considered in isolation from the mutuality of their relationship. The benefits which flowed between them living together as man and wife had to be viewed in a common sense way without valuing too finely the normal exchanges of support or benefit within such domestic relationship. 17.A distinction on the standard of “reasonable financial provisions” applies to a surviving spouse and to other categories of applicants was drawn in section 3(2).
18.By amendments to the English Inheritance (Provision for Family and Dependants) Act 1975, the entitlement to provisions on the surviving spouse standard was expanded to civil partners and cohabitees. This amendment was not adopted in Hong Kong. 19.Although the Applicant is a de facto wife of O and was so treated by O’s relatives and friends, she does not fall within the category of “surviving spouse”. Her application was rightly made on the ground as a dependent under section 3(1)(ix). Hence, the reasonable financial provision that may be awarded to her is for her maintenance only. 20.The form of orders that the court is empowered to make out of the deceased’s net estate are set out in section 4(1) which include periodical payment, lump sum payment, order for transfer or settlement or acquisition of property for the benefit of the applicant. 21.It is well settled that an applicant has the burden to prove a two-stage test:
22.The first stage test is a question of fact or evaluative judgment that the court shall determine objectively, but not based on the subjective view of the applicant: In re Coventry, deceased; LZX v WYL (Provision: family and dependents); Tam Mei Kam v HSBC International Trustee Ltd[12]; Ilott v Mitson (No 2). 23.Although the reasonableness of the deceased’s decision can be a factor for consideration under section 5(1)(g), the question remains whether reasonable financial provision had not been made to the applicant, but not whether the deceased has acted unreasonably in the disposition of his estate by will or by resorting to the intestacy regime: Ilott v Mitson (No 2) §17. 24.The second stage test is a question of discretion, which must be exercised after having regard to the factors listed in section 5 (“Section 5 Factors”). These factors govern whether the court should exercise its power to make reasonable financial provision for an applicant, and in what manner such power should be exercised: In re Coventry, deceased at 486 - 487, Tam Mei Kam v HSBC International Trustee Ltd, §32, §38. 25.Section 5 contains general matters that apply to all applicants and specific matters that apply only to some categories of applicants. 26.Section 5(1) are general matters that the court shall have regard to when considering applications of all eligible applicants under IPFDO:
27.Section 5(8) provides that for the purpose of section 5, the court shall take into account:
28.In addition to the general matters, sections 5(5) and 5(6) set out specific matters that the court shall have regard to when considering an application by a person falls within section 3(1)(ix). These matters are:
29.Section 5(7) provides that in evaluating the matters set out in section 5, the court shall take into account “the facts as known to the court as at the date of the hearing”. 30.The following principles and guidance on what is or what is not “maintenance” have been elucidated and applied in many English and Hong Kong authorities, notably In re Coventry, deceased, In re Dennis, deceased[13], Re Duranceau[14], LZX v WYL (Provision: family and dependents), Tam Mei Kam v HSBC International Trustee Ltd:
31.It is worth repeating the following oft-cited passages.
32.In re Christie, deceased, “maintenance” was held to refer to “no more and no less than the applicant’s way of life and well-being, his health, financial security and allied matters such as the well-being, health and financial security of his immediate family for whom he is responsible.”[18] This wide definition of maintenance was disapproved in In re Coventry, deceased as one “come dangerously near to equating it simply with ‘wellbeing’ or ‘benefit’”[19]. 33.It was held in Re Duranceau, a Canadian authority, that maintenance was what was “sufficient to enable the dependant to live neither luxuriously nor miserably, but decently and comfortably according to his or her station in life.”[20] 34.The Applicant cited §12 of Bahouse v. Negus[21] and submitted that:
35.I find the following decision of Mr Justice Munby in §§22 to 25 of Bahouse v. Negus elucidated the point with more clarity:
36.The Respondent referred this court to the following cases:
37.In my view, the nature and quality of life that an applicant had accustomed to live with the deceased prior to his demise is part of the facts and circumstances that the court shall have regard to when considering a claim under IPFDO. It is acknowledged that some people enjoyed more comfortable life than the other. Care should be given when the court has regard to the previous lifestyle of the applicant. This is not to be construed subjectively. The decision of Mr Price QC in In re Christie, deceased that maintenance refers to the applicant’s way of life and well-being is still regarded as an anomaly and has not been followed. The court had disallowed “unmerited extravagance” although it may be the applicant’s way of life when living with the deceased. In Tam Mei Kam v HSBC International Trustee Ltd, the Court of Appeal reminded that the court’s statutory power to make reasonable financial provision “is an evaluative judgment based on objective considerations, not the subjective view of the applicant”. [27] This applies to the consideration of the nature and quality of life previously enjoyed by the applicant, which is to be viewed objectively when assessing maintenance. 38.I proceed to consider this application with the above principles in mind. E. The Parties’ Open Offers E1. The Applicant 39.The Applicant claimed a maintenance of $120,000 per month (excluding provision for accommodation) for the remainder of her life capitalized at $64,146,566 according to the SJE’s Duxbury calculations. She further seeks an additional sum equivalent to 10% of the current value of Stubbs Road Property (i.e. $6.62 million) to reflect the costs of accommodation. To provide security for her continued residence in Stubbs Road Property which she considered as her de facto matrimonial home, she proposes a transfer of 50% of Stubbs Road Property, with the remaining balance of $37,666,566 ($64,146,566 – (66,200,000 x 40%)) to be paid by cash or equivalent value of the listed shares. 40.The Applicant made the open offer that the Estate shall pay and/or transfer to her the following assets in full and final settlement of her dependency claim of about $70.8 million[28] in the following manner:
E2. The Respondent 41.The Respondent considered the expenses claimed by the Applicant are extravagant. Moreover, the Applicant has double claimed the general household and other expenses which have been paying by the Companies. 42.The Respondent submitted that no order is needed to be made for the Applicant’s maintenance, alternatively a capitalised lump sum reflecting a monthly maintenance of $25,000 or lower should be sufficient. 43.The Respondent did not oppose an order for lump sum payment of capitalised maintenance, but he criticised the use of Duxbury calculation. He suggested alternative methods of either (a) bespoke calculation based on Duxbury or (b) Chan/Ogden Tables, or (c) Multiplier-Multiplicand method.[29] 44.The Respondent accepted that the Applicant’s accommodation needs shall be provided for. The Respondent initially proposed to give the Applicant a life interest in Stubbs Road Property. At closing, the Respondent addressed the complaint on rigidity imposed by a life interest and revised his open offer[30] to a transfer of Stubbs Road Property to the Applicant on trust for herself and the Daughter as joint tenants to meet the Applicant’s housing needs. F. Witnesses 45.The court heard the evidence of 3 factual witnesses and 1 expert witness, namely:
46.The well established test for assessing witnesses’ credibility has been summarised in Hui Cheung Fai v Daiwa Development Limited[31] at §§76-82. Contemporaneous documents and documents which came into existence before the problem in question arose are generally of great importance in assessing credibility. The reliability of a witness will also be assessed by the inherent probabilities and consistencies of his evidence. 47.I approach the witnesses’ testimony on matters involving the deceased with more caution for the obvious reason that the deceased cannot give evidence. I look for documentary evidence and circumstantial evidence to test the reliability of witnesses’ testimony. Evidence supported by contemporaneous documents carries more weight. Mere oral assertions will be approached with circumspection. G. Locus Standi – section 3(1)(ix) 48.O died domiciled in Hong Kong, and was survived by the Applicant. It is common ground that the Applicant, who is presently 45 years old, was the de facto wife of O for about 9 years, and has been financially maintained by O during the period of their cohabitation. 49.The parties are in consensus, and I agree, that the deceased was making a substantial financial contribution towards the Applicant’s reasonable needs immediately before his death otherwise than for full valuable consideration. The Applicant has the locus standi under section 3(1)(ix) to apply for an order under section 4 for her reasonable financial provision. H. The first stage test - whether viewed objectively, reasonable financial provision for the Applicant had not been made 50.O made no will. He passed away intestate leaving no surviving wife but an issue, the Daughter. Under section 4(5) of the Intestate’s Estates Ordinance, O’s residuary estate shall be held on the statutory trusts for the Daughter. The Daughter is the sole known beneficiary of the Estate. It is common ground that no financial provision has been made to the Applicant out of the Estate. I. The second stage test - whether, if so, what order shall be made for the financial provision in favour of the Applicant I1. Overview 51.This is the parties’ real battle ground. 52.The court’s exercise of discretion at this stage must be guided by the Section 5 Factors. 53.I first set out those parts of the Section 5 Factors that are inapplicable, irrelevant or not in dispute:
54.Next, I consider the remaining Section 5 Factors in the following sequence:
I2. Size and nature of the net Estate – section 5(1)(e) 55.The total size of the Estate is substantial. According to the updated agreed table of assets and liabilities of the Estate signed by the parties (“Joint Table”)[33], the Estate has a net value of about $166.3 million, comprises:
56.The above figure does not include:
57.Mr Yuen gave the following evidence about the Companies. 58.The Companies experienced serious administrative and logistical difficulties brought by O’s death:
59.To avoid causing a standstill or abrupt closure of the Companies that may affect their clients and employees, the Applicant and Mr Yuen continued the Companies’ operation in the following manner:
60.As at September 2020, L Travel has a bank balance of $5,330,131 and L Insurance $10,351,070. As shown in the respective management accounts as at 31 March 2023, L Insurance has net assets of over $8 million and L Travel $2.6 million. 61.There are the following possible issues or claims relating to the Estate:
I3. Financial resources and financial needs of the Applicant – section 5(1)(a) I3a. The expenses claimed by the Applicant 62.The Applicant claimed the following monthly expenses round up to $120,000, with breakdown as follows:
63.The Applicant contended that the claimed expenses are commensurate with the standard of living enjoyed by her and O as well as the financial maintenance provided by O during their relationship. 64.She described the standard of living enjoyed by her during O’s lifetime is luxurious and one of comfort. To reflect her “station in life”, she referred to O’s association with a group of 11 persons in the upper echelon of Hong Kong society with whom she said O had frequent gatherings, and they readily lent money to the Applicant shortly after O’s death. 65.These 11 persons and O formed a “Fraternity Club Ltd”, a company limited by guarantee for organising social gatherings. With respect, it appears to me that O’s wealth and background are not quite the same as these friends or some of them. I remind myself not to too readily associate the Applicant’s lifestyle and “station in life” with these friends when assessing her needs. 66.The Applicant has also referred to her status as a de facto wife and suggested that her entitlement should be comparable to the entitlement that a de jure wife may have. 67.Hong Kong has not adopted the English amendment which placed civil partners and cohabitees into the category of “surviving spouse”. There remains a clear statutory distinction on the standard of reasonable provision applies to a surviving spouse and other categories of applicants. It is wrong to associate the de facto wife status of the Applicant (as a dependant under IPFDO) with the entitlement of a de jure surviving wife in the assessment of reasonable maintenance. The Applicant might have lived with O as husband and wife, and are treated by O’s relatives and friends as O’s wife. These are indicative of the closeness of their relationship. It remains the fact that they chose not to register their marriage formally. An attempt to draw a comparison with a de jure wife’s entitlement is liable to create confusion. I3b. Disputed expenses - 3 cars’ expenses 68.The Applicant claimed $19,751.74 as expenses for maintaining 3 cars: a Porsche Macan, a Nissan Figaro and a BMW. At the trial, the Applicant withdrew her claims for maintenance of the Porsche Macan. 69.The Porsche Macan was used by O. It is already beyond repair and will be scrapped. It is no longer necessary to spend maintenance expenses for this car including monthly repairing charges, autotoll expenses and gasoline expenses. 70.The Nissan Figaro is a hobby car kept by O since 1991. It is owned by the Companies. The Applicant wanted to keep this car as it holds sentimental value for her. She intended to use it just to keep it in good running condition and will pass it to the Daughter. Among the expenses claimed for the Nissan Figaro is $4,500[35] being the monthly rental for a car parking space near the Companies’ office building, which were being paid by L Insurance. 71.I find that no expenses shall be allowed for maintaining the Nissan Figaro for the following reasons:
72.The BMW is the car used by the Applicant. It was purchased by L Insurance 4 years ago. I allow a reasonable sum for maintaining this car but not the hire purchase payments for the following reasons:
73.By reason of the above, $4,000 (instead of $19,751.74) is a reasonable sum for the Applicant’s car expenses. 74.For completeness, her claims for an additional monthly sum of $1,500 for transportation expenses is allowed. I3c. Disputed expenses – Household Food and Meal out of Home 75.The Applicant claimed $10,939 (50% of $21,879.98) for household food. 76.This amount is much higher than the household food expenses ($6,500 being 50% of $13,000) stated in her 1st Form E filed in May 2020. In her 2nd Form E filed in July 2022, she increased the expenses to $22,299.33. 77.To justify the claim, she testified at trial that they used to have wagyu beef, king salmon or coral grouper when dine with the Daughter at home. They used to have sugarless yogurt purchased from City Super for breakfast. The Daughter developed the habit of consuming dry scallop which is costly. 78.The Applicant claimed $14,522.03 for meals out of home. She said that she would have fine dining or buffet at hotel with the Daughter during the weekend. 79.I find the amounts claimed for household food is excessive. I am not satisfied that the Applicant had spent a similar amount for household food during O’s lifetime. The expenses set out in the 1st Form E (which was closer to the time before O’s demise) is more reflective of the expenses incurred during O’s lifetime. This is also a reasonable amount for household food expenses. Moreover, this claim is for the Applicant’s maintenance only. The Daughter’s expenses and her habit of consuming dry scallops is irrelevant. 80.The Applicant produced receipt of $4,522.03 for meal out of home. No documentary support was adduced to support the remaining $10,000 claim. She explained that her friends paid the bill first and she reimbursed her share by cash, therefore she did not have receipts. This explanation does not sit well with the Applicant’s evidence that she usually dines out with the Daughter and did not have much entertainment after the death of O. 81.Generously assessed, I allow $6,500 (instead of $10,939) for the Applicant’s share for household food and $9,000 (instead of $14,522.03) for her expenses for meal out of home. I3d. Disputed expenses - Clothing and Personal Grooming 82.The Applicant claimed a monthly sum of $21,503[36] for clothing and shoes, and a monthly sum of $22,287.5 for personal grooming, including haircut, cosmetics and body treatment. 83.The Applicant produced receipts of $3,006 in December 2021 and May 2022 (claiming a monthly average of about $1,503) for clothing/shoes. She did not produce any supporting document for the balance of $20,000. She explained at trial that she used to purchase brand name products and bags from a buyer who does not operate under the name of any company. The buyer only accepted cash for payment and did not issue receipt. 84.In support her claims for personal grooming, she produced a receipt for a body treatment package of $37,800 valid for 18 months. She said this package is mainly for her weekly massage. She said she has purchased other packages for facial treatment of around $1,000 to $1,200 per visit, and she used to visit hair salon every month for haircut and hair treatment. No documentary evidence was produced. 85.The Applicant stated in her 1st Affidavit and her 1st Form E, both filed on 13 May 2020, that her monthly expenses for personal grooming (including haircut and cosmetics) before[37] and after[38] O’s death was $5,000. In her 2nd Form E filed in July 2022, she increased the personal grooming expenses to $22,287.5. 86.Having considered the evidence and generously assessed, I allow $15,000 (instead of $21,503) for clothing/shoes and $5,000 (instead of $22,287.50) for personal grooming. I3e. Disputed expenses - Holiday 87.The Applicant claimed a monthly sum of $15,000 (yearly $180,000) for holiday expenses. She said they used to fly on business class and stay at top hotels. During the lifetime of O, they had vacation and travel around 5 to 8 times a year to places like Korea, Japan, Thailand, Taiwan, China and France (see Part 5.3 of her 1st and 2nd Form Es). 88.At cross examination, the Applicant admitted that while O was alive, they had gone to trips in South East Asia or China, and had only travelled once to Paris to attend a celebration hosted by one of the friends in the fraternity club. She also admitted that as the Daughter was young, they could not travel frequently nor travel long haul. They had only travelled to South East Asia. She said that she travelled to Tokyo with the Daughter for 7 days in 2023 and spent $40,000 each person. She plans to travel to Australia with the Daughter in the future. 89.I find the Applicant’s evidence at cross examination more credible and reject her assertion that she had 5 to 8 travels every year during O’s lifetime. Holiday expenses is a discretionary spending. Generously assessed, I allow a monthly sum of $10,000 (instead of $15,000). I3f. Other expenses 90.I do not find the claims for entertainment/presents expenses of $4,128.05 and medical/dental expenses of $8,642.13 unreasonable in the context of this case. 91.The Applicant said O would give her gifts or red packet money of about $30,000 on special occasions such as birthday. These gifts and red packet money are, in my view, discretionary spending but not “maintenance”. 92.For completeness, the Applicant has referred to a sum of $25,000 for contribution to parents in her 1st Affidavit. She has rightly not claimed this item. I3g. Disputed expenses - Expenses paid or reimbursed by the Companies 93.After examination of the documents exhibited to the affidavits filed for the Applicant, the Respondent found out that many of the expenses claimed (including but without limitation to utilities expenses, management fee, domestic helper expenses and medical insurance premium) were paid by L Insurance without reimbursement by the Applicant. 94.The Respondent submitted that maintenance for these expenses paid by the Companies shall not be allowed. The Applicant, who was regarded by Mr Yuen and the Companies’ employees as the “proprietress” (老闆娘), maintained a substantial degree of influence over the Companies and their funds. She had the ability and control to effect two increases of her own salary to $38,000 after the death of O. The business of the Companies is profitable. L Insurance is earning about $1.7 million each year even in the adjusted operation model, thus is financially capable to pay the household expenses for the Applicant and the Daughter. 95.The Respondent criticised the Applicant for double claiming these expenses without stating in her affidavits that these expenses were paid by the Companies. 96.To salvage, the Applicant confirmed under oath at re-examination to the effect that if the court allows her application by making an order of the lump sum payment for her maintenance, these items of expenses would no longer be paid by the Companies. 97.The Respondent submitted that it is artificial and unrealistic to rely on the Applicant’s statement at re-examination because:
98.It must be wrong for the Applicant to claim expenses which were actually paid by another. The Applicant said this was the practice before O’s death. This is not a reason for her to gain by “double claiming”. 99.I shall also take heed of the evidence that the operations of the Companies have been winding down since O’s death. I was told that L Travel has ceased operation because it is expensive to maintain the licence. It is likely that L Insurance may not survive in the long run to service payment of these household expenses. 100.The Daughter is a minor. Pursuant to section 25 of the Probate and Administration Ordinance, 2 or more administrators shall be appointed as the personal representatives of the Estate. If the Applicant seeks to be one of the administratrix, she has the duty not to place herself in conflict with the interest of the Estate. The co-administrator has an independent duty to act in the best interest of the Estate but not the Applicant. The co-administrator, who will have notice of this judgment, may be liable for breach of his duty as a personal representative of Estate if he allows double recovery by the Applicant. 101.In the circumstances, I am prepared to accept the Applicant’s sworn confirmation at the re-examination, and award these expenses as part of her maintenance on the basis of an undertaking from the Applicant to the court and the Estate to ensure no double recovery. I3h. The Applicant’s Financial Resources 102.The Applicant disclosed in her Form E a net asset of $556,208.28:
103.She is receiving a monthly salary of $38,000 from the Companies, annual dividend of about $3,200 from her HSBC stock and a monthly interim maintenance of $90,000 since the Interim Maintenance Order. She is residing in Stubbs Road Property with the Daughter. The Applicant used to receive a monthly salary of $18,000 during O’s life time, and she has increased it to $38,000. 104.As stated in section I3g above, the Applicant shall not continue to receive maintenance in the form of salary or otherwise from any of the Companies if an order of lump sum maintenance is made. In the context of her background, it is fair to assume that over the years, the income she can really earn will be limited. I3i. Reasonable amount of maintenance before accommodation needs 105.Having considered all the relevant factors, I find that $75,000 is a reasonable provision for the Applicant’s monthly maintenance. 106.To test this figure, I cross check with the maintenance received by the Applicant during O’s life time. 107.The Applicant said[40] O gave her $18,000 as salary from L Insurance, $35,000 cash for her personal use, and $25,000 to handle other household expenses per month. The household expenses of $25,000 was for the benefit of at least 3 people (not counting domestic helpers). Therefore, the monthly maintenance paid to the Applicant during O’s lifetime was about $61,333[41]. 108.An award of $75,000 as maintenance matches the sum paid during O’s lifetime ($61,333) with a balance of about $13,600 for the other items of expenses that O had separately settled during his lifetime. I3j. Accommodation needs 109.Maintenance includes the provision for accommodation needs. The cases showed that the housing needs was often provided for by a life interest to reside in a property. Lord Hughes has said in a recent English Supreme Court decision Ilott v Mitson (No.2) that:
110.A life interest provides for the accommodation needs without conferring capital, but this is not the only option. The court is empowered to award a sum or transfer interests in a property to meet this needs. 111.The Respondent initially proposed to give the Applicant a life interest to reside in Stubbs Road Property. 112.The Applicant objected to this proposal. She raised that a life interest creates undue rigidity which binds not only the Applicant, but also the Daughter. With the imposition of life interest, equity in the property is locked out for the reminder of the Applicant’s life. The Daughter may not be able to sell it should circumstances change. This rigidity may also create conflict or complication in the mother and daughter relationship. To provide security for her continued residence in the de facto Matrimonial Home, she claimed 50% interest of Stubbs Road Property, with 10% being value for the accommodation needs ($6.62 million), and the remaining 40% being in lieu of the equivalent value of the lump sum payment. 113.The Respondent acknowledged the issue of rigidity and revised his proposal to a transfer of 50% of Stubbs Road Property to the Applicant and the Daughter as joint tenants, but not tenants in common. 114.In my view, the Applicant’s proposal is a better option for the following reasons:
115.The Applicant, relying on the following evidence of Mr Yuen[42] and the case M v X[43], further contended that O promised and/or had the intention to give the Applicant an interest in Stubbs Road Property:
116.The above evidence of Mr Yuen suggested that O had intended to plan for assets restructuring with a view to passing the same to the Daughter and the Applicant after his death. This remains to be an initial plan in general terms without details such as how and in what proportion O “intended” to pass them to the Applicant and the Daughter. Mr Yuen’s proposal only covers the restructuring, but not the transfer. There is also no evidence on the views that O had on the proposal. 117.I am not satisfied that O had made a promise to give his properties to the Applicant. The fact of this case is distinguishable from M v X where an express promise by the deceased to the applicant was found. I4. Financial resources and financial needs of the Daughter – section 5(1)(c) 118.After having regard to the financial resources and financial needs of the Applicant, I move on to consider the situation of the Daughter. 119.The Daughter is the sole known beneficiary of the Estate. She was maintained by O prior to his death. The application for a grant of letters of administration of the Estate has not been made. Since O’s demise, the Daughter has been taken care of by the Applicant. She is residing in Stubbs Road Property together with the Applicant. 120.The Daughter is studying in a local school. The Applicant said she intended to transfer the Daughter to an international secondary school which would increase the school expenses by around $25,000 per month. 121.According to the Applicant, the Daughter has the following monthly expenses:
122.Assuming the Daughter’s monthly needs is round up to $100,000 on the basis that she continues to reside in Stubbs Road Property, and it takes about 12 years to complete her secondary school, undergraduate and master’s degree, the Daughter would need a maintenance of about $14.4 million for the next 12 years. 123.In view of the size of the Estate and the assessed amount of the Applicant’s maintenance, there should be sufficient funds in the Estate to provide for the Daughter’s financial needs. I5. Other matters – section 5(1)(g) 124.The Respondent drew the court’s attention to the 30 years age gap between the Applicant and O and the 10 years duration of their relationship. The Respondent submitted that these matters have a crucial implication for the purpose of capitalisation because no one can predict whether the Applicant will start another relationship in the future, nor whether there will be a change of relationship between the Applicant and the Daughter when the Daughter attains majority. 125.Firstly, on the inability to predict the future, since the court is tasked to assess the Applicant’s reasonable maintenance for the future, an application under IPFDO inevitably involves estimation and assumptions. 126.Secondly, I do not consider the age gap and the duration of relationship between the Applicant and O require an adjustment of the maintenance award. The evidence showed that the Applicant and O had a stable relationship for about 10 years (which is not a short period). They had a daughter. The Applicant was in good terms with O and the Daughter. The Applicant has made efforts to take care of the Daughter and to handle O’s business for the transition despite the difficulties caused by his death. J. Duxbury calculation or other methods of calculation J1. Overview 127.The parties agreed to achieve a result of clean break, but they differed on the method to calculate a capitalised sum of maintenance. 128.The Applicant advocated the use of Duxbury calculation. The Respondent opposed and pointed out the unfairness that Duxbury calculation may create. The Respondent proposed to use (a) bespoke calculation based on Duxbury or (b) Chan/Ogden Tables; or (c) Multiplier-Multiplicand Method. J2. Duxbury calculation 129.A Duxbury calculation is an iterative calculation used to estimate the monetary amount a person requires to support themselves for the reminder of their life or a fixed time period computed with a number of assumptions and variables. 130.Although the courts have from time to time pointed out the weakness and limitation of Duxbury calculation, it has been commonly accepted by family courts in Hong Kong and England for calculating capitalised lump sums. J2a. The SJE’s Duxbury Calculation 131.It is apt to explain the Duxbury calculation method by setting out the methodology adopted in the Duxbury Report:
132.The SJE estimated the 4 parameters as follows:
J2b. The Respondent’s criticism 133.The Respondent raised the unfairness that may be induced by the distorting effect of a Duxbury calculation. 134.He cited F v F (Duxbury Calculation)[51], a 1996 English case, where Holman J pointed out the “Duxbury Paradox”:
135.He also cited F v F[52], a 2003 Hong Kong case where Hartmann J (as he then was) commented on the limited usefulness of the method as follows:
136.The Respondent argued that the maintenance should not cover the Applicant’s entire actuarial lifespan for the following reasons:
J3. Bespoke calculations 137.The Respondent submitted that bespoke calculation gives a more flexible approach to suit the circumstances of the case. He cited ND v GD[53] where the judge has expressed the view of generating bespoke calculation by using a Capitalise programme (a software developed for the UK market):
138.The Respondent also referred to the following observations of Thorpe LJ in Wells v Wells[54] after noting how Duxbury is a programme making general assumptions:
139.In this case, the Respondent was not asking the court to use the Capitalise programme referred in ND v GD. He asked the court to adopt the Duxbury formula but apply a fixed period up to the Applicant’s retirement age, instead of for the remaining years of the estimated life expectancy.[55] The Respondent did not take issue on the assumptions of inflation rate and the rate of return in the Duxbury Report, his criticism is on the assumed period of lifespan[56]. J4. Chan/Ogden Tables and Multiplier-Multiplicand Method 140.The Respondent further submitted that while bespoke calculations can and should generate a result that achieve fairness, the court is at liberty to use other methods, such as Chan/Ogden Tables or the Multiplier-Multiplicand method which had also been used in matrimonial cases.[57] 141.The Respondent referred to Fournier v Fournier[58], a 1998 decision where the English Court of Appeal acknowledged “the quantification of a periodical payments claim by the Duxbury formula is a reasonably scientific quantification which is generally appropriate in ancillary relief litigation”. The parties conceded that it would be inappropriate to turn to the Duxbury calculation in view of the ages of the parties. A multiplier was applied to reach a capitalised lump sum maintenance. 142.In Tattersall v Tattersall[59], the English Court of Appeal held that the use of Ogden Tables in matrimonial cases is not an error of law. Moylan LJ has held:
143.In F v F (the English case), Holman J pointed out a basic difference between damages in tort cases and maintenance in matrimonial cases, which is that damages granted to a person injured by tort is to put him in the same position so far as possible as if the tort had not happened, the same premises does not apply to typical matrimonial cases:
J5. The method adopted 144.The court is not bound to use a specific method for calculating capitalised maintenance. 145.There are plenty of authorities approving or expressing preferences to Duxbury calculations in matrimonial cases, for example, Holman J in the English F v F acknowledged that Duxbury approach has “deeply engrained in matrimonial practice”, Moylan LJ expressed in Tattersall v Tattersall that the court should use Duxbury calculation rather than Ogden tables. In Hong Kong, Duxbury calculation was used in claims under IPFDO, for example In re the estate of Liu Wing On (deceased)[60]. 146.I do not rule out the use of methods other than Duxbury in appropriate cases. 147.Bespoke calculation appears to have the benefit of flexibility to cater for special features in individual cases. An important condition for bespoke calculation is the correct identification of specific parameters and the figures to be adopted in these specific parameters. It is not prudent for the court to just pick a figure without supporting evidence. Often, expert evidence on these areas would assist the court. 148.The Chan/Ogden Tables emerged to deal with the limitation of Multiplier-Multiplicand method commonly used in personal injuries cases. The basis for awarding damages in tort cases and maintenance in matrimonial cases is different. Expert evidence on the underlying basis and differences of these methods will be of assistance to the court. 149.In this case, the Respondent suggested the bespoke calculation by using the Duxbury formula but replacing the parameter of life expectancy with a retirement age. The Respondent also invited the court to consider using the Chan/Ogden Tables and Multiplier-Multiplicand method. 150.To satisfy the court that any of these alternative methods should be used, the Respondent is expected to at least:
151.The Respondent has not done any of the above. The court does not have the assistance of expert evidence to assess whether using the methods proposed by him is better than the Duxbury calculation in this case. As such, it is not prudent for me to adopt the proposed alternative methods. 152.Having regard to the above and the evidence before me, I adopt the Duxbury calculations, based on which, the capitalised lump sum for a monthly maintenance of $75,000 from the Notional Trial Date is $40,092,000. K. Disposition 153.By reasons set out in Section I3g above, the capitalised lump sum maintenance of $40,092,000 is subject to the Applicant’s undertaking in terms set out below to ensure no double recovery as she had confirmed at the sworn testimony during re-examination. 154.I therefore order that upon the Applicant’s undertaking to the court and the Estate that she shall be responsible for settling by her own funds all the expenses for her maintenance, including all the items allowed herein and she shall not seek or allow the Companies and/or the Estate to pay such expenses or any part thereof without full reimbursement by her promptly:
155.There be a costs order nisi that the costs of the Applicant and the Respondent, including all costs reserved, be paid out of the Estate on a common fund basis, with certificate for one counsel. The amount is to be taxed if not agreed. 156.I thank all counsel for their helpful assistance to the court.
Mr. Robert Pang SC and Mr. Eric Leung instructed by Alvin Cheng & Rosaline Choy for the Applicant Mr. Anthony P. W. Cheung instructed by Benjamin Au & Billy Chan for the Respondent [1] Applicant’s 1st Affidavit dated 12 May 2020 §§10-11. [2] Applicant’s 2nd Affidavit dated 11 May 2021 §13. [3] but not the other person who had shown interest to act. [4] Respondent’s Affirmation dated 25 January 2022 §19. [5] [1991] 1 All ER 236, per Butler-Sloss LJ. [6] Section 3(2)(a). [7] Section 5(2). [8] Section 3(2)(b). [9] [1980] 1 Ch 461. [10] [2012] 5 HKLRD 29. [11] [2018] AC 545; [2017] UKSC 17. [12] CACV 181/2016, 10 February 2017. [13] [1981] 2 All ER 140 at 145-146. [14] 1952 3 DLR 714 at 720. [15] [1996] 2 FLR 716. [16] [1980] 1 Ch 461 at 485C-D, quoted also in Tam Mei Kam v HSBC International Trustee Ltd at §44. [17] [1981] 2 All ER 140 at 145-146. [18] [1979] Ch 168 at 174F. [19] [1980] 1 Ch 461 at 471E. [20] 1952 3 DLR 714 at 720. [21] [2008] EWCA Civ 1002 §12. [22] Applicant’s opening submissions §30. [23] [1979] 1 WLR 1353. [24] [2009] 1 FLR 1240. [25] [2009] 1 FLR 1240§41. [26] [2011] EWHC 945 (Ch). [27] CACV 181/2016, 10 February 2017§31. [28] $64,146,566 (the capitalised sum) + $6,620,000 (10% value of Stubbs Road Property) = $70,766,566. [29] Respondent’s opening submissions §§62, 70. [30] R’s closing submissions §47. [31] HCA 1734/2009, 8 April 2014. [32] K is the first letter of O’s surname. [33] There is a clerical error on the value of some shares written in the Joint Table. The figures set out in this paragraph are the agreed correct figures. [34] Respondent’s 2nd Affirmation §27. [35] Applicant’s 7th Affidavit p.5. [36] In the Applicant’s 1st Form E, she claimed a sum of $25,000 for clothing/shoes. [37] Applicant’s 1st Affidavit §18. [38] Applicant’s 1st Affidavit §27. [39] Including jewellery of $785,000, handbag and shoes of $715,000, watches of $270,000 and Redwood table and cabinet of $45,000. [40] Applicant’s 1st Affidavit at §§10-13. [41] $18,000 + $35,000 + $8,333. [42] Affirmation Mr Yuen §§17-23. [43] FCMP 100/2012, 14 January 2014. [44] The car expenses for the Porche Macan and BMW are excluded. [45] Duxbury Report §2.8. [46] The amounts of expenditures for computation are $25,000, $38,000, $50,000, $61,000, $75,000, $90,000, $100,000, $110,000 and $120,000. [47] Duxbury Report §2.11. [48] [2013] 2 HKLRD 1. [49] The investment products used by the SJE are not the same as the products relied on by Mr Justice Bharwaney, but the SJE was of the opinion that the returns calculated would be very similar: Duxbury Report §2.22. [50] Duxbury Report §§2.12 – 2.23. [51] [1996] 1 FLR 833 at 846. [52] [2003] 1 HKLRD 836 at §197. [53] [2021] EWFC 53. [54] [1997] WLR 652. [55] Respondent’s opening submissions §66. [56] Respondent’s opening submissions §63. [57] Respondent’s opening submissions §67. [58] [1998] 2 FLR 990. [59] [2019] 1 FLR 470. [60] HCMP 1359/2008, 26 August 2011 (CFI), and CACV 183/2011, 25 July 2012 (CA). [61] $40,092,000 - $26,480,000 (being 40% value of Stubbs Road Property). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under FCMP 46/2020