ACLS v. HSB(T)L

CACV 136/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 136 OF 2012

(ON APPEAL FROM FCMP NO. 270 OF 2010)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Lam JA (giving Reasons for Judgment of the Court):

1.  The Plaintiff applied for interim maintenance from the estate of her grandfather under the Inheritance (Provision for Family and Dependants) Ordinance Cap 481 [“the Ordinance”]. Her grandfather passed away in July 2009. There are probate actions in respect of the estate of her grandfather in High Court Probate Actions Nos. 7 and 9 of 2010. Those actions have not been concluded. A corporate administrator pendente lite was appointed. It takes a neutral stance with regard to the Plaintiff’s application.

2.  For the purpose of this appeal, it is not necessary to set out the disputes in the probate actions.  The litigations stemming from such disputes have been the subject matters of a number of judgments including at least two judgments of this court in Choy Po Chun v Au Wing Lun [2012] 2 HKLRD 148 and Au Cheuk Wei Wilson v Hang Seng Bank (Trustee) Ltd  CACV 213 of 2011, 7 January 2013.  The background of the disputes has been adequately set out in those judgments.  There is substantial wealth in the estate of the grandfather.  It is estimated that as in April 2010 the stocks in the estate were over $520 million and in addition it held 22 landed properties.

3.  The Plaintiff sought interim maintenance on the basis that she had been a person who immediately before the death of the deceased was being maintained by him.  Her case was that the grandfather had been supporting her in her education, both in Hong Kong and overseas.  In the summer of 2009, the Plaintiff enrolled herself in a degree course offered by a university in England.  At that time she expected that the grandfather, as in the past, would support her overseas living and education expenses. However, after the death of the grandfather, she encountered difficulties in obtaining such support and therefore the present application was made.

4.  Her application was dismissed by the judge in March 2012.  In the judgment of 2 March 2012, the judge was sympathetic to the Plaintiff’s claim.  Subject to one point, the judge made it clear that he was of the view that the Plaintiff was likely to succeed[1].  The point which the judge considered to be fatal to the Plaintiff’s claim was this: since she had already completed her undergraduate study and was about to complete her postgraduate study, all her education expenses had been paid, albeit, according to the evidence, by loans from the Plaintiff’s brother. Given that there is no evidence that the brother would take legal action or other action to recover such loans, the judge was not satisfied that the Plaintiff was in “immediate need of financial assistance” and therefore this is not a case coming within the scope of s7(1) of the Ordinance.

5.  The Plaintiff appealed against that judgment and contended the judge erred in his construction of s7(1).  Mr Kenneth Lam, counsel for the Plaintiff, contended that the word “immediate” in s7(1) should mean “current” and/or “existing at the present time” as opposed to “urgent” as held by the judge at para 60 of the judgment.

6.  The Administrator pendente lite continued to maintain a neutral stance in the appeal and its attendance was excused.  The interveners (who resisted the application at the court below) resisted the appeal.

7.  On behalf of the 2^nd to 4^th Interveners, Mr Kevin Li submitted that the judge did not confine himself to a consideration of the urgency of the Plaintiff’s need.  He also submitted that urgency is a relevant consideration and the judge was correct in taking that into account.  He contended that the Plaintiff’s appeal is effectively a dressed up complaint against the court’s exercise of discretion with which this court should not interfere as it was not obviously wrong.  Counsel said the Plaintiff was well-provided for by her parents and adequately financed in her overseas education by the loans from her brother.  Counsel also drew this court’s attention to a recent case[2] where another judge of the District Court refused to grant interim maintenance under the Ordinance on the ground that the probate disputes had not been resolved.  There is however, no respondent’s notice raising this point.

8.  On behalf of the 1^st Intervener, Ms Belinda Ma supported the following arguments which, she said, were advanced by the 2^nd  to 4^th Interveners,

(a) The judge should take a literal approach in construing the word “immediate” which means both “urgent” and “current”;

(b) Even if “immediate” should mean “current”, the Plaintiff does not have current financial need.

9.  She also submitted that current liabilities should be distinguished from current financial needs.  In her submissions, past debts should not be regarded as “immediate financial need” in the absence of any indication that creditors are seriously pressing for repayment.

10.  In his skeleton in reply, Mr Lam said he did not dispute that urgency is a relevant consideration in determining how the discretion of the court should be exercised in an interim maintenance application under s7 of the Ordinance.  However, he contended that the judge did not reject the Plaintiff’s application as a matter of discretion.  Rather, according to Mr Lam, the judge rejected the application on the basis that the Plaintiff could not satisfy the statutory criterion of being “in immediate need of financial assistance”.  Thus, if the construction on that criterion adopted by the judge was wrong, it was an error of law which had precluded the judge from having exercised his discretion altogether.

11.  As regards whether the needs of the Plaintiff were current, Mr Lam referred to the unchallenged evidence that the Plaintiff was a student with no income or assets and her brother had borrowed money from others in order to lend the money to her.  There was no evidence of the Plaintiff being provided for by her parents or that she had other sources of finance. Counsel said the Plaintiff had an indebtedness of at least $885,000 and she should be required to rely on loans or the continuing generosity of others.

12.  Mr Lam objected to the jurisdiction point (viz probate disputes not having been resolved) being taken at this stage.

13.  On 1 February 2013, after hearing submissions from the parties, we dismissed the appeal with an order that the Plaintiff shall pay the costs of the Interveners, such costs to be taxed if not agreed.  Here are our reasons for our judgment.

The basis for the dismissal of the Plaintiff’s application

14.  The first issue is: what was the judge’s basis for the dismissal of the Plaintiff’s application.  Did he dismiss it on the ground that the Plaintiff did not satisfy the criterion of “immediate need” in s7 or did he dismiss it as a matter of his exercise of discretion having regard to the overall circumstances, including the urgency of the Plaintiff’s need?

15.  In our judgment, it is plain from a reading of the reasons set out in the judgment of 2 March 2012[3] that the judge refused to grant the Plaintiff interim maintenance because she was not in immediate need of financial assistance.  

16.  We do not think the judge had in mind the exercise of his discretion when he held that the Plaintiff did not satisfy the statutory criterion.  This is quite apparent from the fact that after reaching his conclusion in this respect, he went on to discuss what he would have done if the Plaintiff had met such criterion. In that context, he had regard to the considerations set out under section 5 of the Ordinance on a broad-brush basis.  Having regards to all the circumstances, he said subject to his decision on the statutory criterion of immediate need, the Plaintiff did have a good chance of success.

17.  The judge did not explicitly give consideration as to how “immediate need” should be construed. The judge started his discussion on this criterion by reciting s 7(1) at para 56 and stating at para 57 that the burden of proof as to “immediate financial needs” was on the Plaintiff. After referring to the factual background at paras 58 and 59, he said at para 60,

“Bearing this background in mind, the question that has to be asked is this: If the Plaintiff is only asking for the reimbursement of her expenses incurred and paid for during the past 3 years, is the court satisfied that she is now really in urgent financial needs so that an interim maintenance order has to be made at this stage?”

18.  He then to proceed to answer that question in the negative and held at para 63 that the Plaintiff was not in such a precarious financial position that warranted an interim maintenance order to be made.

19.  Therefore, the judge dismissed the Plaintiff’s application on the basis that she failed to establish “immediate need of financial assistance” instead of refusing relief as a matter of discretion. Was he correct as a matter of law?  

Construction of “immediate need” in section 7 of the Ordinance

20.  Mr Lam took us to the dictionary meanings of the word “immediate” and he said the word is capable of encompassing the meanings of “current” as well as “urgent”.  He relied on the English authority of M v M [2011] 1 FLR 1773 and contended that in the context of the Ordinance, the word should mean “current” rather than “urgent”.

21.  The Interveners argued that M v M [2011] 1 FLR 1773 was decided in a different context and therefore distinguishable. Ms Ma submitted that the literal meaning of the word “immediate” is “current and urgent”.  She also contended that such a construction would fit well into the statutory scheme as the objective of s 7 is to provide a remedy to persons who cannot wait for a determination of the substantive claim under the Ordinance.  In other words, it is a stop-gap measure to deal with the need of a claimant for financial assistance during the lapse of time between the lodging of a substantive claim and the trial and determination of the same.

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 s3.  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 such provision.  The surviving spouse and a tsip are deemed to be dependants.  However, for 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).

24.  Therefore, ex hypothesi, apart from the case of a surviving spouse or a tsip, before a case for relief can be made out under the Ordinance, an applicant must have been substantially provided for by the deceased in respect of his or her reasonable needs immediately before the deceased passed away.  Even in the context of an interim application under s7, this requirement must be satisfied.

25.  For such a person, the cessation of provision upon the death of the deceased could bring about hardship to his or her livelihood unless there are other sources of provision for him.

26.  There can be many reasons why a claim for substantive relief cannot be determined within a short period of time.  In this respect, though the Ordinance has some affinity with the regimes under the matrimonial and divorce jurisdiction, the issues that can be raised and the parties having interests in the outcome can be more diverse. As set out in s3, the relief under the Ordinance is to give reasonable provision to dependants who do not have such provision under the will of the deceased or the law as to intestacy (or a combination of both). If the court grants relief, such provision is to be made out of the estate and the other beneficiaries’ entitlement in respect of the estate would be diminished accordingly. This follows from the effect of an order under s21(1),

“(1) Where an order is made under section 4 then for all purposes, including the purposes of the enactments relating to estate duty (if applicable), the will or the law relating to intestacy, or both the will and the law relating to intestacy, as the case may be, shall have effect and be deemed to have had effect as from the deceased's death subject to the provisions of the order.”

27.  Further, unlike the situation in a divorce or matrimonial context, the applicant could be a person who has no matrimonial, blood or adopted relationship with the deceased.  Under s 3(1)(ix), any person can apply so long as it can be shown that he or she had been either wholly or substantially maintained by the deceased immediately before the latter passed away.

28.  Therefore, the statutory scheme strives to balance the interests of all the parties.  This is first highlighted by s4(4), which reads,

“(4) An order under this section may contain such consequential and supplemental provisions as the court thinks necessary or expedient for the purpose of giving effect to the order or for the purpose of securing that the order operates fairly as between one beneficiary of the estate of the deceased and another and may, in particular, but without prejudice to the generality of this subsection-

(a) order any person who holds any property which forms part of the net estate of the deceased to make such payment or transfer such property as may be specified in the order;

(b) vary the disposition of the deceased's estate effected by the will or the law relating to intestacy, or by both the will and the law relating to intestacy, in such manner as the court thinks fair and reasonable having regard to the provisions of the order and all the circumstances of the case;

(c)    confer on the trustees of any property which is the subject of an order under this section such powers as appear to the court to be necessary or expedient.”

(Our emphasis)

29.  Section 5 sets out the matters that the court must have regard in exercising the powers under the Ordinance. The general list of matters under s5(1) again borne out this theme of fairness between different beneficiaries,

“(1) Where an application is made for an order under section 4, the court shall, in determining whether the disposition of the deceased's estate effected by his will or the law relating to intestacy, or the combination of his will and that law, is such as to make reasonable financial provision for the applicant and, if the court considers that reasonable financial provision has not been made, in determining whether and in what manner it shall exercise its powers under that section, have regard to the following matters-

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

(b) the financial resources and financial needs which any other applicant for an order under section 4 has or is likely to have in the foreseeable future;

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

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

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

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

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

30.  Bearing in mind the different scenarios that could have led to an application under the Ordinance and giving recognition to the relevance of different factors in different scenarios, s 5(2) to (6) set out different sets of additional relevant matters for different scenarios. In respect of an applicant falling within s 3(1)(ix) (which is the case of the Applicant), s 5(5) and (6) are applicable.  Under s 5(5), the court is directed to have regard to,

“the extent to which and the basis upon which the deceased assumed responsibility for the maintenance of the applicant, and to the length of time for which the deceased discharged that responsibility.”

In England, it has been held that for this category of applicants, assumption of responsibility by the deceased is a pre-requisite for a claim though there could be different views on whether it is a matter of jurisdictional consideration or a matter of discretionary bar, see Ross on Inheritance Act Claims, 3^rd Edn (2011) paras 4-102 to 4-103.

31.  Under s5(6), the court is directed to have regard to,

“the closeness of the relationship between the applicant and the deceased immediately before the death of the deceased.”

32.  These considerations are equally relevant for an application for interim maintenance under s7 though the intensity to which the court can examine them depends on the urgency of the case, see s 7(3).

33.  Thus, an application under the Ordinance, particularly in the context of an application other than one brought by a surviving spouse or tsip, requires a more diverse investigation than a usual application for maintenance in the matrimonial context.  This has to be borne in mind in any attempt to apply principles laid down in the matrimonial context to an application under the Ordinance. 

34.  Section 7 provides,

“(1) Where on an application for an order under section 4 it appears to the court -

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

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.

(2) Subsections (2), (3) and (4) of section 4 shall apply in relation to an order under this section as they apply in relation to an order under that section.

(3) In determining what order, if any, should be made under this section the court shall, so far as the urgency of the case admits, have regard to the same matters as those to which the court is required to have regard under section 5.

(4)   An order made under section 4 may provide that any sum paid to the applicant by virtue of this section shall be treated to such an extent and in such manner as may be provided by that order as having been paid on account of any payment provided for by that order.”

35.  The power to make interim order for family provision cases was added to the English statute book in 1966 as a result of the unsatisfactory situation revealed in Re Ferrar’s Application [1966] P 126. That was a case where the Court of Appeal held that a former wife could not get an interim order to direct the executor to continue with the payment of the mortgage of the house (owned by the deceased husband) where she and her children were living in.  The building society had obtained an order for possession in respect of the house.  The reasoning of the majority in the Court of Appeal was that pending trial, the former wife had not yet shown any entitlement to provision: as Davies LJ observed at p.140D, at the time of the interim application whether she was entitled to anything out of the estate was in the melting pot.

36.  In Barnsley v Ward (unreported) English Court of Appeal 8 Jan 1980[4],  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.

43.  Mr Lam relied on M v M [2011] 1 FLR 1773 to support his contention.  That was not a case on inheritance claim. Rather it was a case on interim maintenance based on a foreign divorce.  The relevant statute was Part III of the Matrimonial and Family Proceedings Act 1984.  Section 14(1) of that Act also adopted “immediate need of financial assistance” as the criterion for the exercise of discretion to order interim maintenance.  In contrast, there was no similar requirement for interim maintenance for a UK divorce.  The question posed before the court was whether a higher hurdle was imposed by s 14(1) as compared with that laid down for a UK divorce.  Eleanor King J held that in that context the word “immediate” should be construed to mean “current” as opposed to “urgent”.

44.  As we have already explained, we accept that it would not be right to construe “immediate” to mean “urgent”, which we regard as the ratio of that decision.  For the reasons we have given, in the context of s7(1)(a), we think it may be too simplistic to equate “immediate” with “current”. Of course, s7(1)(a) (or its English equivalent) was not at issue before Eleanor King J.

45.  Mr Lam also relied on parts of the judgment in M v M, supra. to support his submission that the financial assistance received by thePlaintiff from her brother cannot defeat her claim for interim maintenance. 

46.  On the other hand, Ms Ma referred to Smith v Smith [2012] 2 FLR 230 for the proposition that in the context of a claim for interim maintenance under the Ordinance, the need to repay an old outstanding loan from friends cannot be an immediate need for financial assistance.

47.  Each case must depend on its own facts and we do not consider these cases as establishing any proposition of law in this respect. As such, we do not find it necessary to discuss these authorities at length. What is more important is whether the judge had come to the right decision in the present case.

Did the judge come to the right decision?

48.  Though the judge did pose the question by reference to “urgent financial needs” at para 60 of the judgment, it is quite obvious that he did so with the facts of this case in mind.  He recited the financial needs of the Plaintiff at para 58 and the fact that she had already paid the overseas educational and living expenses. He also had regard to the fact that such payment was funded by loans from her brother.

49.  The crux of his decision can be found at para 62,

“There is simply no evidence to suggest that she would not be able to complete her studies without an interim maintenance order. It is true that the Plaintiff may now be in debt to her brother, but there is equally no evidence to suggest that the brother is now taking action to recover the same from her, by way of legal action or otherwise.”

50.  On the facts of the present case, we are of the view that the judge was entitled to come to the conclusion that the Plaintiff was not in immediate need of financial assistance.  Considering it against the facts of the case and on a fair reading of his judgment as a whole, we do not regard the judge’s reference to “urgent financial needs” at para 60 constitutes an error of law which vitiated his decision.  As we have said, urgency of the matter can, in some cases, be a relevant factor in considering whether “immediate need” is established. This is just one of those cases.

51.  We would also say that had we been minded to exercise our discretion afresh, we would have come to same decision.

52.  For these reasons, the appeal of the Plaintiff failed.

53.  In the absence of any Respondent’s Notice on the point, we are not minded to express any view on whether interim maintenance should be granted when probate disputes have not been resolved.