Ho Sing Yin v. Chan Yiu Ling

HCA 90/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 90 OF 2010

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BETWEEN

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Before: Deputy High Court Judge Saunders in Court

Date of Hearing: 11, 12 & 13 June 2012

Date of Judgment: 13 July 2012

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J U D G M E N T

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INTRODUCTION

1.In these proceedings the plaintiff, Madam Ho, makes a claim for financial provision from the estate of the deceased under the provisions of the Inheritance (Provision for Family and Dependants) Ordinance, Cap 481.

2.Madam Ho is the stepmother of the deceased.  Mr Chong advances her claim arguing that Madam Ho falls within the descriptions of those entitled to claim, alternatively, under the provisions of s 3(1)(iv) or (ix) of the Ordinance, which are in the following terms:

“(iv) a parent of the deceased who immediately before the death of the deceased was being maintained, either wholly or substantially, by the deceased;

(ix) any person (not being a person included in the foregoing paragraphs of this subsection) who immediately before the death of the deceased was being maintained, either wholly or substantially, by the deceased”

3.It is not necessary to determine the difficult question as to whether Madam Ho, as a step-parent of the deceased, falls within the expression “parent” as that expression is used in s 3(1)(iv).  That is because the real issue in this case is whether or not, immediately before the death of the deceased, Madam Ho was being maintained, either wholly or substantially by the deceased.

4.The defendant, Madam Chan Yui Ling, (Madam Chan) the administratrix of the deceased’s estate is, for reasons which I will explain, now the sole beneficiary of the deceased’s estate.  The primary submission made by Mr Leung for Madam Chan is that Madam Ho was not being wholly or substantially maintained by the deceased, immediately before his death, and that accordingly the claim fails at the first hurdle. 

5.Mr Leung submitted that if the Court finds that Madam Ho was being maintained, either wholly or substantially, by the deceased, the court must consider just what Madam Ho’s needs are, and says that such financial needs ought to be shared amongst her sons and daughters, not just by the estate.

THE STRUCTURE OF THE FAMILY

6.The structure of the family involved in this litigation is somewhat complex, and is best illustrated by the family tree, helpfully supplied by the solicitors for Madam Chan, and annexed hereto as Annex A.  The family tree may be summarised in this way. 

7.The deceased, who was born on 17 July 1950, was the natural son of Mr Tsang Kei Hung (Mr Tsang Snr) and Madam Leung Lai Fong (Madam Leung).  During the course of the marriage they had three children, the second of whom was the deceased. 

8.In 1953, Mr Tsang Snr took Madam Ho as his concubine under Chinese customary law. In 1958, Mr Tsang Snr and Madam Leung divorced, and the deceased was thereafter brought up by Mr Tsang Snr and Madam Ho.  Madam Leung remarried a Mr Chan, by whom she had three children, one being the defendant, Madam Chan.

9.At the mid-autumn festival in 1958, Mr Tsang Snr and Madam Ho went through a ceremony equivalent to a traditional Chinese marriage.  They thereafter lived together as man and wife, and had six children. 

10.It is not in dispute that the deceased was brought up by Mr Tsang Snr and Madam Ho, effectively as their own child.  In the same way, his elder brother, (who is already deceased) and younger sister, Tsang Yau Man (Yau Man), were also brought up by Mr Tsang Snr and Madam Ho, but all three maintained contact with their natural mother.

THE DEATH OF THE DECEASED

11.The deceased attended the Faculty of Medicine at the University of Hong Kong, beginning in 1971, and graduating in 1980.  The deceased married in September 1996, but tragically, his wife died from liver cancer in March 1999.  The deceased himself died in December 2001, as a result of a heart attack.  There were no children of the marriage.

12.The deceased died intestate, and under the provisions of the intestacy rules, his whole estate passed to his natural mother, Madam Leung[1].  In 2009, Madam Leung died from colon cancer.  Probate of her will was granted to her daughter by her second marriage, Madam Chan, who was the sole beneficiary of her estate.

13.In 2004, Madam Leung had commenced a probate action against Madam Ho, claiming letters of administration and succession to the estate of the deceased.  Madam Ho counterclaimed seeking that relief for herself.  The administration of the deceased’s estate was granted to Madam Leung by the High Court.  Madam Ho appealed the decision to the Court of Appeal.  The appeal was dismissed and Madam Ho appealed that decision to the Court of Final Appeal, which appeal was also dismissed.

14.Under the intestacy rules, Madam Leung succeeded to the deceased’s entire estate. Upon her death in 2009, her estate, including the deceased’s estate, past according to her will to Madam Chan.

15.The end result of all of this was that the deceased’s entire estate went to his half-sister, Madam Chan, the defendant.

ENTITLEMENT TO APPLY FOR FINANCIAL PROVISION

16.The essential criteria that is required to be established by Madam Ho is that she was, immediately before the death of the deceased, being maintained, either wholly or substantially by the deceased.  There is nothing particularly special about the expressions “maintained”, “immediately” or “wholly or substantially”, the determination of those factors being simply matters of fact.  The concept of being “maintained” involves the provision of funds to ensure that a person’s way of life, his needs, well-being, and health, are met by someone other than that person.

17.If Madam Ho can establish herself as a person entitled to apply to the court for an order under the provisions of the Ordinance, she must then establish that any disposition of the deceased’s estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is not such as to make reasonable financial provision for her.  As the effect of the intestacy was that no financial provision was made for her, if she is a person entitled to apply, then it would be clear that no reasonable financial provision had been made for her.  Only then is it necessary for the court to consider the extent to which provision might be made by the court.

THE MAINTENANCE OF MADAM HO

18.There is no doubt that at the time of the mid-autumn festival in 1958, the deceased’s father, Mr Tsang Snr, and Madam Ho went through a ceremony that, in traditional Chinese terms, constituted a statement to the world that they intended to live together as man and wife.  Thereafter Madam Ho became in all respects a parent to the deceased.  Having reviewed the evidence before me, I am satisfied that A Cheung J was quite right when he found in earlier litigation between Madam Ho and Madam Leung[2]:

“As I remarked at the outset of this judgment, this is a very unfortunate case. I am convinced, having considered the evidence, that Madam Ho played a most significant part in raising up the deceased. She and the deceased had developed an excellent relationship and she treated him as her own and no different from her own natural children. Their relationship was no different from that between a natural mother and son - except that the deceased did have a natural mother, with whom he maintained regular contacts particularly after he had grown up. I have no doubt that Madam Ho was a loving and exemplary stepmother.” (sic)

19.But it is not the strength of the relationship between a stepmother and her stepson that determines an entitlement to claim under the Ordinance.  What must be established, on the facts, is that immediately before the death of the deceased, the claimant was being maintained, wholly or substantially, by the deceased.

20.The evidence is that from 1958 until 1971, Madam Ho and Mr Tsang Snr supported themselves through a wooden carton box business operated by Mr Tsang Snr.  In 1971, the deceased was admitted into the Faculty of Medicine at the University of Hong Kong, where, until graduation in 1980, he was supported by government subsidy and borrowings made by Madam Ho and Mr Tsang Snr.

21.In 1973, Madam Ho and Mr Tsang Snr commenced business hawking jade.  With the assistance of borrowing from a good friend, they initially sold jade on the pavement of Canton Road.  In 1976, the business expanded, by buying raw jade pieces which were given to craftsman for processing, with the manufactured items thereafter being more profitable when sold.  The business developed and extended to overseas clients.  By 1983, they had moved from hawking jade on the pavement to a licensed store in the jade market at Yau Ma Tei.

22.In 1985, the deceased opened his first medical clinic in a clinic operated by the To Kwa Wan Kaifong Welfare Association, and was able to negotiate an arrangement whereby he did not need to pay rent.  That arrangement was as a result of the assistance of a personal friend of his father and stepmother. Their jade business was successful, and in 1987, Madam Ho was able to give $500,000 to the deceased as her share of a contribution for a joint investment in a shop in Tak Man Street, Whampoa Estate, Hung Hom, in which the deceased established a second medical clinic.

23.During 1988, Madam Ho sold jade pieces and on six occasions, gave $150,000 to the deceased, totalling $900,000, as her share of a contribution for a joint investment in a residential property at Whampoa Garden, Hung Hom.  In the same year, a company called Maryo Development Ltd was established by the deceased for investment in real estate.  The evidence is that all the money earned from the shop in Tak Man Street and the residential property at Whampoa Garden, and other property, later purchased, were put into this company.

24.The deceased and his half-sister, (the eldest daughter of his father and stepmother, Madam Ho), Tsang Yau May (Yau May), were the shareholders and directors of this company.  The deceased held 99.8% of the share capital and Yau May held 0.2%.  Madam Ho says that the deceased told her that all the money earned by Maryo could be used for the retirement of her husband (Mr Tsang Snr, the deceased’s father) and herself, or as Madam Ho’s property for supporting her living expenses, or as an emergency fund.

25.Between 1988 and 1993, Madam Ho gave the deceased a further $1.3 million as her share of a contribution to a joint investment in a shop in Man Tai Street Whampoa Estate. 

26.In 1996, Madam Ho and her husband began semi-retirement.  The only business they then did was selling existing stock goods to established clients.  In the same year, Madam Ho gave the deceased $500,000 as her share of a contribution for a joint investment in a residential property at Parc Regal, Hung Hom.  This property was eventually to become the matrimonial home of the deceased and his wife after their marriage in September 1996.

27.Between 1997 and 1999, Madam Ho gave the deceased a further $700,000 as her share of a contribution for the joint investment in real estate, including a shop in Ha Heung Rd, To Kwa Wan.

28.In total, between 1987 and 1999, Madam Ho and her husband had given $3.9 million to the deceased.  Madam Ho said that her husband made a record every time the money was given, but the record was not produced.  That said, I have no reason to doubt Madam Ho’s evidence that the sum of $3.9 million was given to the deceased for investment on behalf of Madam Ho, in real estate, through Maryo.

29.Sadly, in March 1999, after less than three years marriage, the deceased’s wife died from liver cancer.  The deceased’s father died from a heart attack in April 2000.  The deceased himself died, intestate and without issue, on 12 December 2001.

PAYMENTS BY THE DECEASED TO MADAM HO

30.Madam Ho’s evidence was that the deceased regularly gave her money.  The evidence was he made payments to her and his father after their semi-retirement, and that since her husband had passed away in April 2000, the deceased gave her between $8,000 and $10,000 a month as a living and daily expenses.  In addition he would give her additional sums at Chinese new year, and sums for special trips to China. 

31.Madam Ho’s evidence of the deceased giving her money was corroborated by a nurse who had formerly been employed in the deceased’s medical practice, Ms Yu Mo Ling. Ms Yu’s evidence was that she had seen the deceased pay cash in sums of several thousand Hong Kong dollars, to even several ten thousand Hong Kong dollars, either from his desk drawer, the cash register, or at lunch meetings. 

32.Ms Yu’s evidence was that these payments were made between three and six times a year.  Nothing was put to her in cross-examination that would have led me to disbelieve her.

33.I am satisfied, that from time to time, from about 1999, when the deceased’s father and Madam Ho entered a state of semi-retirement, the deceased made regular payments to them both, and then to Madam Ho following the death of her husband. 

34.No proper record was kept of these payments.  It is accordingly difficult, on the evidence, to estimate just how much was paid to Madam Ho by the deceased, but it seems likely that the payments were in the order of $150,000 to $200,000 per year.

ACTIVITY IN MARYO

35.At the time of the deceased’s death, both the deceased and Yau May were directors of Maryo.  At that time, according to its accounts, the company owned two properties, both of which were let. 

36.Although the profit and loss account for Maryo showed that the company operated at a loss, it is necessary to note that in the year ended 30 June 2000, the expenses included depreciation, of $704,999, and directors remuneration, of $102,000. Depreciation is of course not a cash expense.  Thus, although not being liable for companies tax, the company was not operating at a cash loss, but producing an amount of surplus cash in the order of $800,000 per year.

37.Following the death of the deceased, and apparently ignoring the fact that Madam Leung had succeeded to the deceased’s ownership of 99.8% of the shares in Maryo, Yau May took steps to appoint another of the deceased’s half-siblings, her youngest brother, Tsang Kwong Kan, as a director of Maryo.  It appears that, in 2002 and 2003, with the two directors still ignoring Madam Leung’s interest in Maryo, the company proceeded to sell the two properties it owned.  Then, instead of property, the company held the sale proceeds of the properties, according to the accounts, in the form of “cash at bank” and “fixed deposit” totalling $13.78 million. 

38.Under the provisions of the intestacy, Madam Leung was entitled to succeed to the 99.8% shares in Maryo.  Despite numerous requests Yau May and Kwong Kan refused to give any information at all to either Madam Leung or Madam Chan, who, after the death of Madam Leung had become entitled, under her will, to succeed to the deceased’s estate.  Even after letters of administration in the estate of the deceased were granted to Madam Chan, no information was supplied.

39.In November 2011, Madam Chan applied by way of originating summons to the companies judge, and on 6 January 2012, an order was made that she be registered as a member of the company in her capacity as the Administratrix/successor-in-tile to the shares in the company previously registered in the name of the deceased.

40.The accounts for Maryo shows that by mid-2003, the company held cash in the bank and on fixed deposit totalling $13.78 million.  Part of the assets of the company, as disclosed by the balance sheet in the accounts of Maryo, was a debt of $6,725,700 owed by Maryo to the deceased.  That is not at all surprising. That sum probably reflects the cash contributions made by the deceased, both from his own funds, and those of Madam Ho, to enable Maryo to acquire the properties it owned.  Double entry bookkeeping requires appropriate entries on each side of the ledger.  If a property is acquired by a company, it will be shown in the balance sheet as an asset.  Usually on the other side of the balance sheet will be any mortgage liability and any cash contribution made by the shareholders for the purchase, usually shown as an advance by a shareholder or director or as shareholders funds.

41.As a result of a specific discovery application made against non-parties, (Yau May and Kwong Kan), in May 2012, it has been disclosed that the company’s cash position has reduced from $13.78 million to a mere $15,500.  In particular, in July 2011, a withdrawal of $9 million was made. 

42.These were circumstances that plainly cried out for explanation.

43.No explanation was forthcoming.  Instead, Yau May made a brief witness statement on 5 June 2012, simply asserting that “wrongful and malicious accusations have been made against her” and that “the funds had not been dissipated”.  There was no proper explanation for the depletion of the funds from the company’s account.  For the first time a suggestion was made that cheques were drawn for the purchase of jade products for business.  There was no explanation of just what “business” was referred to by this assertion.  The cheques were not produced, so there was no evidence at all indicating in whose favour the cheques had been drawn.  There was nothing to substantiate the assertion that jade had been purchased.  Maryo had never been in the business of dealing in jade. There had been no discussions at all with the majority shareholder in Maryo (Madam Chan) as to any investment in jade.  The witness statement raised more questions than it answered.

44.Also, for the first time, it was asserted that the debt of $6.7 million owed by Maryo to the deceased was in fact owed to Yau May.  Quite how this situation could have arisen was not in any way explained.  While the existence of such a debt to the majority shareholder was readily understandable on the factual scenario before the court, there was nothing in the evidence to explain why such a sum should be owed to Yau May.  No attempt at all was made to explain why very substantial withdrawals had been made from a company that was not owned by Yau May, but as a matter of law, owned, as to the majority interest, first by the deceased, then upon his death, Madam Leung, and upon her death, Madam Chan.

45.Although this witness statement was filed, and both Yau May and Kwong Kan had made other witness statements, neither Yau May nor Kwong Kan were called to give evidence.  That was despite assertions from Mr Chong that at least Yau May would be called to give evidence.  There is accordingly no proper explanation before me as to what has happened to the sum of $13.78 million held by Maryo in 2003, and plainly representing the proceeds of the disposal of the investment properties held by the company at the time of the death of the deceased.  At the very least, whoever owned the 99.8% of the shares in Maryo is, on the face of it, entitled to 99.8% of that sum.

46.What is clear is that the investments by the deceased and Madam Ho in Maryo were successful and produced a steady income stream.

47.In the absence of evidence to the contrary the only inference that can be drawn is that Yau May and Kwong Kan have appropriated the cash fund of $13 million from Maryo, either for their own benefit, or for the benefit of their mother, Madam Ho.

WAS MADAM HO MAINTAINED BY THE DECEASED

48.I am satisfied on the evidence before me that the deceased made regular payments to Madam Ho from which payments she supported herself in her lifestyle.  On the balance of probabilities I have reached the conclusion that the funds for those regular payments came primarily from the income of Maryo.  Just as the deceased had said to Madam Ho, Maryo’s earnings were being used for the retirement of his parents or as her property for supporting their living expenses or as an emergency fund.

49.Mr Leung submits that the evidence is that the deceased himself did not consider that he was making payments.  He says so, because in the tax returns filed by the deceased for the years ended 31 March 2001 and 31 March 2002, no claim was made by the deceased for a dependent parent allowance.  The deceased was a person who was conscious of the advantage of tax deductions.  According to Madam Ho, at his suggestion one of the properties purchased, to which she had contributed funds, was purchased in his name in order that tax deductions from his business might be made.  I accept that the inference that he was not personally making payments to support Madam Ho is open from his failure to make a claim for a dependant parent allowance in his tax returns. 

50.In the whole of the circumstances disclosed by the evidence in this case, I find that it cannot be said that it was the deceased who was maintaining Madam Ho. It is right that the funds for her maintenance were coming from a company owned by the deceased, but the reality of the situation was that the payments to Madam Ho constituted a return on the investment she had made in the company, albeit there was no separate record in the company’s accounts of that investment.

51.It may well be that, by way of a resulting trust, or some other form of action, Madam Ho may have a right to recover from Maryo, or the deceased’s estate, the sums advanced to the deceased for investment in real estate.  But the proceedings before me are based only upon the provisions of the Ordinance.  The qualifying criteria to make a claim under the Ordinance not having been met, there is simply no jurisdiction by which I can make any award in favour of Madam Ho.  I should note that if there were such resulting trust or other proceedings, a complete and proper explanation of the activities in the bank accounts of Maryo and the estate of the deceased would have to be supplied by Yau May and Kwong Kan before any order could be made.

CONCLUSION

52.This finding is sufficient to dispose of the proceedings.  Madam Ho fails in limine, being unable to establish that immediately prior to the death of deceased she was being wholly or substantially maintained by the deceased.  She was in fact being wholly or substantially maintained by the return on the investment she had made with the deceased in his company, Maryo.  There is no evidence that the deceased was having to have recourse to his own assets or income to maintain Madam Ho.

53.Madam Ho’s claim for provision from the estate of the deceased is dismissed.  She must pay Madam Chan’s costs of the proceedings to be taxed at a party and party basis.

THE APPROPRIATE VENUE FOR THE PROCEEDINGS

54.The provisions of s 25 of the Ordinance requires that proceedings under the Ordinance shall be commenced in the District Court.  These proceedings were commenced in the High Court.  I have no doubt at all, that were these proceedings commenced in the District Court this would have been a case which would have properly been transferred for trial in the High Court.

55.The proceedings were properly commenced in this Court, and accordingly, costs must be assessed on the High Court scale.

THE ASSESSMENT OF THE EVIDENCE:

56.As well as Madam Ho, her daughter, the full sister of the deceased, Yau Man was called to give evidence.  At the end of the day it has not been necessary for me to rely upon the evidence of Yau Man in any way, because her evidence was primarily directed to the strength of the relationship between Madam Ho and the deceased.  That issue, as has been seen, is an irrelevant issue in these proceedings.

57.Mr Leung drew my attention to the fact that the witness statement of Yau Man was a 58 paragraph statement, with 37 paragraphs which were identical to the witness statement of another of Madam Ho’s daughters, Yau May, a half-sister of the deceased.  She, as I have explained, was not called to give evidence, despite having filed a witness statement.

58.This is not the first time that I have seen witness statements from two witnesses in which the majority of the paragraphs are precisely identical.  I accept Mr Leung’s submission that where witness statements are presented to the court which are substantially identical, it will often be unlikely that the court will be able to place any weight at all on either witness.

59.It is right that Yau Man said that she did not have any discussion with Yau May before making her witness statement, and denied having read Yau May’s witness statement before signing her own witness statement.  If that was the case the only inference that can be drawn from the fact that 64% of her witness statement was precisely identical to another witnesses statement is that the solicitors who have prepared her witness statement have slavishly copied that of another witness.  It is simply unbelievable that two witnesses, even sisters, could have used precisely the same words and punctuation in telling their story.

60.Too often solicitors forget that the purpose of a witness statement is for the witness to “tell their story” to the court.  The pre-prepared, pre-filed, witness statement is a substitute for the evidence in chief of a witness.  The only proper way in which such a witness statement can be taken is for a solicitor to sit with the witness and question the witness, in the same way as evidence would have been elicited in the past in chief.  From the answers to the questions the narrative, or “the story”, is built up in the form of a witness statement. 

61.The fact that our system now requires full disclosure of a party’s case, in part by the exchange of witness statements prior to the trial, is not a license to solicitors to tailor or engineer witness statements in order that they may corroborate each other.  If they do so, it will be transparent, as it is in this case, and it is likely that the court will reject the evidence of the witnesses.

62.Mr Chong sought to justify the identical paragraphs by saying that:

“It is common in the legal profession that witness statements are prepared by solicitors upon the instructions given by the witnesses. The presentation of one’s evidence in a witness statement such as the choice of words, phrases, expressions and formatting preferences is usually a matter of style determined by solicitors who know much better than the witnesses as to the relevance and weight of different events and matters.”

63.With respect to Mr. Chong, that is no answer.  It is right that solicitors know better than witnesses the relevance and the weight of different events and matters.  That knowledge will define the questions that are asked of the witness in the course of the preparation of the witness statement.  I accept that a solicitor may determine the formatting of a witness statement.

64.But it is not for a solicitor to “choose” the words, phrases, or expressions in a witness statement.  Those are all matters for the witness.  Where witness statements are identical it is difficult if not impossible to believe that the witnesses have independently provided, what Mr Chong correctly described as, the “raw materials” for the preparation of the witness statement. 

65.The preparation of the witness statement for a trial is a matter which is not to be undertaken lightly, or handed down to the most junior solicitor.  It is an important and delicate task, requiring a proper understanding of the case, particularly the jurisdictional basis upon which any application might be made or relief might be sought.  It is a task which must be undertaken by solicitors responsibly, ensuring that words are not put in a witnesses mouth, and that the witness should express himself in his own words, words which he will understand when he is cross-examined on that statement. 

66.A proper understanding of the jurisdictional basis upon which relief is sought or opposed enables the solicitor to ensure that the witness statement deals only with relevant matters.  In this case it was plain that those on both sides preparing the witness statements had no proper understanding of the basis upon which relief might be given or opposed under the Ordinance.  That resulted in many pages of assertions and accusations as to family occasions and events in the past, all designed to emphasise the closeness of the relationship of one party to the deceased and to denigrate the relationship of the opposition.

67.All of that was simply irrelevant, when proper regard was had to the real issue, that of whether or not the claimant was being wholly or substantially maintained by the deceased immediately prior to his death.

Mr K M Chong and Mr Aiden Tam, instructed by Damien Shea & Co, for the plaintiff

Mr Paul H M Leung, instructed by K S Wong & Co, for the defendant

Please refer to CACV173/2012 for the relevant appeal(s) to the Court of Appeal.