TAM MEI KAM v. HSBC INTERNATIONAL TRUSTEE LTD AND OTHERS

CACV 89/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 89 OF 2015

(ON APPEAL FROM HCMP NO. 2981 of 2004)

__________________________

__________________________

__________________________

______________

JUDGMENT
______________

Hon Cheung JA:

1.  I agree with the judgment of Yuen JA.

Hon Yuen JA:

2.  This is an appeal by Madam Tam Mei Kam from a decision of L Chan J given on 1 April 2015.  Before I consider the issues that have arisen in this appeal, it is necessary to set out briefly the factual background and the scheme of the relevant legislation.

Background

3.1.  Madam Tam is the mother of the late Mui Yim Fong, of whose estate (“the MYF Estate”) HSBC International Trustee Ltd is the executor.

3.2.  Madam Tam is a bankrupt, and Wong Teck Meng and Chan Pui Sze are the trustees of her estate in bankruptcy (“the TMK Estate in Bankruptcy”).

Originating summons under IPFDO

4.  On 6 October 2004, Madam Tam (who was then legally represented) issued an Originating Summons entitled

“ IN THE MATTER of an application under sections 4 and 7 of the Inheritance (Provision for Family and Dependants) Ordinance Cap. 481 (‘the Ordinance’)”

(Emphasis added).

The IPFDO (“the Ordinance”)

5.1.  Under the Ordinance, the court is empowered to make orders for financial provision for a deceased person’s family members (or other dependants) from the deceased’s estate if “the disposition of the deceased’s estate effected by his will ... is not such as to make reasonable financial provision for the applicant”: see s.3(1).

(A) Procedure

5.2.  Applications under the Ordinance are begun by Originating Summons (“OS”) and the procedure set out in Order 28 of the Rules of the High Court should be followed. 

5.3.  This procedure requires evidence to be adduced by way of the usual three rounds of affidavits, subject to the powers of the court to make suitable directions in case of disputes of fact.

5.4.  Indeed on 4 January 2005 A. Cheung J (now Cheung CJHC) gave directions for the filing of affidavit evidence, and adjourned the hearing of the OS (“the substantive hearing”) sine die with liberty to restore.  On 22 December 2005 he gave further directions for the filing of evidence.  (By this time, a probate action had commenced in 2004 as Madam Tam challenged the validity of the will).  

5.5.  Coming back to procedure, the substantive hearing should be held in open court: see O.28 r.3A RHC.

(B) Substantive hearing

(B1) Section 3 requirement

6.1.  At the substantive hearing, the applicant must first satisfy the court that the disposition under the will did not make reasonable provision for him: see s.3(1). 

6.2.  If he is not able to do so, the OS should be dismissed.

(B2) Section 4 (final) order

7.1.  If the applicant is able to satisfy the court that the disposition under the will did not make reasonable provision for him, the court may then make one or more of the following orders:

(1) periodical payments: see ss.4(1)(a);

(2) payment of a lump sum: ss.4(1)(b);

(3) a property transfer order: ss.4(1)(c);

(4) a property settlement order: ss.4(1)(d); and

(5) transfer or settlement to the applicant of a property to be acquired: ss.4(1)(e).

7.2.  A s.4 order is a final, “once and for all” order.  Normally the proceedings under the OS would then be concluded.  The only exception is if the court decides to make an order at the substantive hearing for periodical payments under ss.4(1)(a), in which case s.8 enables the court to vary, discharge or suspend the order subsequently.

8.  It is important to note that none of the parties before us has suggested that, prior to the Decision from which this is an appeal, there has been a substantive hearing at which a finding has been made under s.3 that the deceased’s will did not make reasonable provision for Madam Tam.

(C) Section 7 (interim) order

9.1.  I have mentioned that the OS also included s.7 in its title. 

9.2.  This section deals with the period of time between the commencement and the conclusion of the OS. 

9.3.  During that period, when:

“ it is not yet possible to determine what order (if any) should be made under [s.4]” (emphasis added),

an applicant may apply for an “interim order” for financial assistance: see s.7(1).

9.4.  The interim nature of a s.7 order is clear from the legislation, which states that no payments under a s.7 order may be made “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”: see s.7(1).

10.1.  This court (Cheung, Fok and Lam JJA) extensively discussed s.7 in the case of ACLS v HSB(T)L [2013] 5 HKC 92.  It held that the court may make a s.7 order if the applicant overcomes three hurdles (paragraph 36):

(1) the applicant must show he is in immediate need of financial assistance;

(2) the net estate of the deceased can meet that need; and

(3) the applicant must satisfy the court that it is right in the circumstances to exercise the court’s discretion to make an order in the manner sought.

10.2.  The court further said (paragraph 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 Ed at p374), 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”.

10.3.  Given those considerations, it is clear that the OS should be proceeded with as efficiently and expeditiously as possible.  It is clearly not the intention of the legislation that the substantive hearing can be left in abeyance, with s.7 interim orders providing an applicant with payments over a lengthy period of time.

11.  It does not appear from the Decision under appeal that the attention of the judge was drawn to ACLS and the discussion there about the different purposes that s.4 and s.7 was respectively intended to serve.     

This case

12.1.  In the present case, the OS was issued as long as 11 years ago.  Even if one deducted the period of the probate action and the appeals from that judgment, that action was finally determined by the Court of Final Appeal in May 2011, some 4 years ago: see Tam Mei Kam v HSBC International Trustee Ltd (2011) 14 HKCFAR 512.

12.2.  However it would appear that no steps were taken by Madam Tam to fix a date for the substantive hearing.  Instead Madam Tam just made applications for interim orders from time to time.

12.3.  It should be noted that during the pendency of the probate action, a number of orders made by A. Cheung J specifically stated that payments under those interim orders may be deducted in the future.  Of course, as noted in ACLS, although a court has power to impose conditions on payments under interim orders, in many cases it might not be practical, and “even if such condition is imposed, that applicant might not have the means to repay”.  Indeed, as events transpired, Madam Tam was declared bankrupt.   

13.  Having discussed the relevant factual background and the scheme of the Ordinance, I now turn to the present appeal.  

Madam Tam’s summonses

14.  On 23 March 2015, Madam Tam issued three summonses, two under the Ordinance and one under the Bankruptcy Ordinance Cap.6 (“BO”). 

Summonses under the Ordinance

15.1.  It is important to note that the applications under the Ordinance were made by summons and sought a hearing “in Chambers”, as opposed to a hearing in open court which would have been necessary if Madam Tam intended to make an application for a final order which could only be made at the substantive hearing.

15.2.  Moreover, contrary to good practice, the summonses were not endorsed with references in the margins to the provisions under which the applications were made: see Hong Kong Civil Procedure 2015, vol. 1, paragraph 32/6/7. 

16.  One summons was for:

(1) “special maintenance” in the sum of $301,000 to “save [Madam Tam] from being evicted by her Landlord”

(2) “special maintenance” in the sum of $170,500 for funeral expenses for Madam Tam’s deceased son.

17.  The other summons was for:

(1) a “one-off lump sum of HK$35,195,322 being maintenance for 15 years ...”

(2) a “one-off lump sum of HK$20,488,771 being hospital and medical expenses for 15 years ...”

(3) alternatively, a “one-off lump sum of HK$1,981,320 being maintenance for 13 months (until discharge from bankruptcy) ...”.

18.1.  Each summons was supported by an affirmation of Madam Tam.  In the affirmation in support of the lump sums, she said she was applying for “Lump Sum Payment of my maintenance during my entire lifetime with life expectancy properly assessed and evaluated by medical experts having been continuously taking care of me” (paragraph 2).

18.2.  She then said (paragraph 3):

“ The application for lump sum payment is well founded in law. I am advised and verily believe that in accordance with ss.4(1)(b); 8(1) and 8(2)(b) of Cap. 481 my present application is justified”. (Emphasis added).

18.3.  Pausing there, it would be noted that:

- the reference to s.4(1)(b) does not sit well with an application by summons, nor did the summons contain any indication that it was for the substantive hearing; and

- the reference to s.8 is misconceived in any event as that section is predicated upon a s.4 periodical payment order having already been made (referred to as “the original order” in s.8).

18.4.  As such, the “lump sum summons” was confusing.  It appears from the submissions of the executor (which was not represented by counsel before the judge) that it did not know what to make of the summons either.  See paragraphs 3-4:

“ Madam Tam has brought an application seeking orders under s.4 .... That application remains pending”,

cf paragraph 15:

“ the [lump sum] application seeks to replace the interim maintenance orders with lump sum orders, on the basis that Madam Tam’s life expectancy is 15 to 16 years ... It would appear that this application is for final relief under s.4 ...”.

18.5.  Perhaps because of the confusion over the nature of the “lump sum summons”, the executor did not file any evidence at all.  That would be surprising if the executor had thought that was the substantive hearing concluding the OS.  I will return to this later.

Summons under the BO

19.1.  Pausing here I would simply record that the other summons was for an order under the BO for variation of Income Payments Order made by the court in its bankruptcy jurisdiction on 21 February 2014. 

19.2.  Under that order, certain monthly payments are made by the executor of the MYF Estate directly to the trustees of the TMK estate in bankruptcy.

19.3.  Madam Tam sought an order that if she succeeds in getting a lump sum, the payment from the MYF Estate should be made to her personally first, and then she would make income payments to her trustees in bankruptcy.

The Judge’s Decision

20.  In respect of Madam Tam’s summonses under the Ordinance, the judge

(1) granted her application for special maintenance of $170,500 for funeral expenses for her deceased son; but

(2) dismissed her application for special maintenance of $301,000 for arrears of rent;

(3) dismissed her application for a lump sum of about $35m for 15 years’ maintenance;

(4) dismissed her application for a lump sum of about $20m for 15 years’ medical and hospital expenses; and

(5) dismissed her application for a lump sum of about $1.9m for 13 months’ maintenance until her expected discharge from bankruptcy.

21.  As for the summons under the BO, as it was predicated upon Madam Tam’s summons for a lump sum being successful, the judge dismissed this application as well.

Appeal

22.1.  Madam Tam has obviously not appealed the order for funeral expenses.  There is no cross-appeal.  Accordingly I say no more about it.

22.2.  Madam Tam has also not appealed the dismissal of the BO summons. 

22.3.  The appeals are against the orders

(1) dismissing the summons for “special maintenance” for her to pay arrears of rent; and

(2) dismissing the summons for “lump sum(s)”.

Discussion

“Arrears of rent Summons”

23.1.  As for the summons for “special maintenance” to enable Madam Tam to pay arrears of rent, it is clear that this was correctly understood by the judge to be an application for an interim order under s.7. 

23.2.  This can be seen from his reference to the fact that “she had already applied for maintenance for the same purpose on a previous occasion earlier this year”: see paragraph 9 of the Decision.  That previous application was decided by the judge on 15 January 2015. 

23.3.  Madam Tam appealed that decision and her appeal (CACV21/2015) was heard by this court (Yuen, Kwan and Chu JJA) on 14 April 2015.  Kwan JA, giving the judgment of the court in dismissing the appeal, remarked at paragraphs 3-4 that there was as yet no disposition of Madam Tam’s application under s.4 (in other words there has been no substantive hearing yet), and that in the meantime Madam Tam had made a number of applications for interim orders, of which that was one.

23.4.  In considering Madam Tam’s summons dated 25 March 2015, again for payment for arrears of rent, the judge noted that the only new fact she advanced was that her landlord had now issued a writ of possession.  The judge held that was not a change of circumstances.  It was a development that was only to be expected from her failure to pay rent. 

23.5.  There is nothing in Madam Tam’s grounds of appeal, or written or oral submissions, indicating why she says the judge was in error.  In my view the judge’s decision cannot be faulted and Madam Tam’s appeal against the order dismissing her summons of 25 March 2015 for “special maintenance” under this head should be dismissed. 

“Lump Sum Summons”

24.1.  The judge’s treatment of Madam Tam’s “lump sum summons” is more difficult to understand, probably because of the confused nature of Madam Tam’s summons which I have discussed at paras.18.3-18.4 above.

24.2.  With respect to the learned judge, it is not clear from the Decision if he treated the application as one for a final order under s.4, or for an interim order under s.7.  

- Was the “lump sum summons” treated as an application for a final order under s.4?

25.1.  If the judge had thought it was an application for a final order under s.4, he would have needed to have regard to the following steps or issues:

(1) as it would be a substantive hearing, the hearing should have been held in open court in compliance with O.28 r.3 RHC (with consideration given in advance as to which parties should be served and be duly represented at the substantive hearing);

(2) at the substantive hearing, a finding would have to be made whether the deceased had immediately prior to her death been maintaining Madam Tam;

(3) if the answer to issue (2) above is “Yes”, a finding would have to be made on the primary issue whether the disposition of the deceased’s estate effected by the will was such as to make reasonable financial provision for Madam Tam: see s.3(1);

(4) if the answer to issue (3) above is “Yes”, the OS would have to be dismissed (in which event, payment under previous interim orders would cease, and the judge would have to consider the wording of previous interim orders to see if an order for repayment should be made);

(5) if the answer to issue (3) above is “No”, the evidence as to each of the matters to which the court must have regard under s.5 would have to be considered (in this regard, it should be noted that the evidence filed pursuant to A Cheung J’s directions is now 10 years old, and consideration should have been given in advance as to the need for updated evidence);

(6) after consideration of the evidence in (5) above, a decision would then be made as to which order(s) to make under s.4;

(7) such an order would then dispose finally of the OS, subject only to the power under s.8 to vary if a s.4(1)(a) order for periodical payments is made.

25.2.  It would appear from the Decision that some at least of those steps or issues were not considered.   At a substantive hearing, issue (3) is of primary importance.  However apart from Madam Tam’s cursory affirmation regarding her physical condition, there was no other evidence before the judge.  The will was not adduced in evidence and its provisions considered.  The judge could not, in the absence of the will and other relevant evidence, decide whether or not it had provided reasonably in a financial way for Madam Tam.  The Decision contains no finding on this essential issue one way or the other.  The judge’s reference to s.3(2)(b) at paragraph 19 of the Decision is not about this issue.  I do not think it would be reasonable to assume that the judge made a finding on this important issue and yet did not express it. 

25.3.  Further if the judge had considered it to be the substantive hearing for a final s.4 order, the judge would have had to make an order to dispose of the OS: whether it be to dismiss it altogether, or to make any one or more of the orders under s.4.  Neither was done.

25.4.  Accordingly, even though Madam Tam’s written submission before the judge specifically referred to s.4(1)(b), I do not think the judge treated the hearing of the “lump sum summons” as the substantive hearing of the OS. 

- Was the “lump sum summons” treated as an application for an interim order under s.7?

26.1.  However it seems the judge did not treat the “lump sum summons” as an application for an interim order under s.7 either. 

26.2.  He referred to s.4(1)(a) in paragraph 16 of his Decision and said he considered it was “relevant”.  With great respect, it seems to me that if the judge was dealing with an application for an interim order under s.7, s.4(1)(a) does not arise at all.  The only relevant issues would be the following (as per ACLS):

(1) whether the applicant is in immediate need of financial assistance;

(2) whether the net estate of the deceased can meet that need; and

(3) whether the court thinks it is right in the circumstances to exercise the court’s discretion to make the interim order.

26.3.  Further it would be noted that nowhere in the Decision did the judge refer to s.7 at all, whereas sections 3, 4, 5 and 8 were set out extensively.

26.4.  Moreover, at paragraph 24, he said “even if there is admissible evidence that Madam Tam may live long, there is still the question of whether a reasonable financial provision for her should be by way of the existing periodical payments or by the lump sum sought by her”.  The language of “reasonable financial provision” for a “long life” seems to refer to a final order, not an interim order when there is “immediate need” for financial assistance.   

Order

27.1.  In the circumstances, it is not clear whether the judge’s order in respect of the “lump sum summons” was made with s.4 or s.7 in mind. 

27.2.  Insofar as the judge had s.4 in mind, unless and until there is a finding that Madam Tam has satisfied s.3, no consideration of what orders to give under s.4 can be made, and any exercise of discretion would be premature. 

27.3.  Insofar as the judge had s.7 in mind, it does not appear from the Decision that he had considered the three requirements discussed in ACLS, and as such the exercise of discretion was not informed by the relevant principles.

27.4.  Accordingly the only order that this court can make is to set aside the order, and to this extent the appeal should be allowed. 

Directions

28.1.  As stated earlier, it is not within the contemplation of the legislation that the substantive hearing of the OS can be left in abeyance, with s.7 interim orders providing an applicant with payments over a lengthy period of time.  Directions should be given for the OS to be put back on track. 

28.2.  Although at the hearing of the appeal, this court had initially given directions for the filing of evidence for the substantive hearing, those directions were withdrawn at the hearing after reflection.  I take the view that the matter should be remitted to L Chan J for directions, with a view to fixing a substantive hearing of the OS without further delay.

Costs

29.  We have heard arguments on costs.  As Madam Tam has failed in her appeal from the order regarding “special maintenance” and has succeeded in her appeal from the order regarding “lump sum(s)”, I would propose that there be no order as to costs. 

Hon Kwan JA:

30.  I agree with the judgment of Yuen JA.