LEUNG KAM YIN JOYCE v. LI OI LUN

HCMP 4859/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4859 of 2001

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J U D G M E N T

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Introduction:

1. In these proceedings the plaintiff, Leung Kam Yin, Joyce, the widow of the deceased, (the wife), seeks provision from the estate of her late husband, Lee Sai Wai, pursuant to the provisions of the Inheritance (Provision for Family and Dependants) Ordinance Cap 481 (IPFDO).

2. The deceased (the husband) died in Hong Kong on 23 April 2000, leaving a will dated 30 March 1999. He was domiciled in Hong Kong and had been ordinarily resident in Hong Kong for more than 3 years. The estate, as returned for duty purposes, comprises a residential property, owned solely by the husband, at Unit 801, 8th floor, Block E, 13-15 Hong Shing Street, Kornhill, Hong Kong (the home). The home is debt free and is valued now at $2,900,000. In addition there are cash and securities in the estate valued at $2,150,300 (a rounded figure). The total value of the dutiable estate, as proved to the Inland Revenue Department, was some $5 million. No duty was payable. After taking into account funeral expenses, legal costs on the administration of the estate, and a reduction in property values, the net estate is now worth some $4,385,000. This comprises the property and remaining cash and securities of $1,485,000.

3. The husband's will, made 13 months before his death, left his entire estate to his two brothers and sister equally. He made no provision whatsoever for the wife and gave no reasons, either in the will or in any separate document, as to why he should make no provision for her. The evidence was that prior to the execution of the will he was advised as to the terms of the IPFDO, but elected to make the will in the terms signed and not to explain his actions. Ms. Li asserts that after executing the will he gave it to her saying that he had left his whole estate to her and the two brothers "because the Estate belonged to the family".

The family circumstances:

4. The plaintiff wife is the deceased's widow. They were married in 1990, when the wife was aged 28 and the husband aged 40. It was a first marriage for both. There are no children of the marriage. They had been married for 9 years at the date if the husband's death. The husband was aged 50 at his death from lung cancer.

5. They were married in Canada on 2 December 1990, after which the husband returned to Hong Kong while the wife remained in Canada with her parents while she achieved appropriate status for immigration to Canada as a permanent resident. In the way of many Hong Kongers, in the lead up to 1997, once that status was achieved, she returned to Hong Kong. I do not find anything unusual in the fact that her husband did not remain with her in Canada. That too was a common occurrence prior to June 1997. She having achieved Canadian residence, should a departure from Hong Kong be required, he could rely upon her status to gain entry to Canada.

6. The defendant Li Oi Lun (Ms. Li) is the deceased's sister. He has two brothers, Lee Sai Ping, (Sai Ping) and Lee Sai Lun (Sai Lun). Both of the deceased's parents pre-deceased him.

7. Ms. Li is aged 42. She is single and is the manager of a company from which she earns $21,000 a month. Her personal expenses are $10,900 a month. She has savings of some $130,000, and owns a flat at Tseung Kwan O, purchased by her in 1989 for $246,800. The mortgage has been repaid in full and the property is debt free. There was no current valuation for this property and when asked as to its present value Ms. Li insisted that it was worth only the original purchase price, a proposition I simply reject as unbelievable. This property is empty and has never been occupied. Ms. Li was unable to offer any satisfactory explanation as to why she left it empty. She has lived with the husband ever since the home was purchased.

8. No affirmations were filed by either of the brothers, and although both were present throughout he trial neither gave evidence. Instead they elected to put their information to the court by way of hearsay assertions on their behalf by Ms. Li. No objection was taken to this course, but the result is that I have no evidence from them on important matters and they were not cross-examined in any way.

9. Ms. Li says Sai Ping is now aged 45 and is a teacher at the Institute of Physics, Academia Sinica, Taiwan, where he earns the equivalent of $24,800 a month. Ms. Li says he has expenditure of $28,000 a month. He is married with an 11 year old son. He owns his own home and makes monthly mortgage payments.

10. As to Sai Lun she says that he is divorced, with no children. He is now aged 43. He used to work in Seattle USA as a network manager. The only evidence as to his income was three wage statements, two from the Peace Corps and one from Washington University, all of which were quite unhelpful as they do not specify the periods to which they relate. There was virtually no evidence as to his expenditure or family circumstances when he lived in Seattle, other than that when there he rented for US$595, and is now divorced. In 1998 he began work as a volunteer in Western Africa, where he worked until August 2000, earning only US$180 a month. He is now living in Hong Kong where he resides in the husband's home with Ms. Li. He is presently unemployed and is said to be looking for a job, and living on savings. He was described as a "network manager" a description about as helpful as "company director". Nothing was said as to his qualifications or the nature of the work he had done in the past, or what steps he was taking to obtain work in Hong Kong.

The issues to be determined:

11. The emphasis in most family inheritance actions is on the primary issues of whether reasonable financial provision has been made for the applicant in the will, and the consequent entitlement of the applicant to further provision from the estate. In this case however, there are three issues that need to be addressed before consideration of these traditional issues can begin.

12. First, Ms. Li says that the home was not owned by the husband alone, but by him on trust for the four members of the immediate family. Thus, it is argued, the amount to be regarded as part of the estate is not the full value of the home of $2,900,000 but the husband's one quarter share, a sum of $725,000.

13. Second, it is argued that the cash and securities did not belong to the husband at all, but that he held them on trust for his brothers and sister, they having contributed the whole of the funds. Consequently, it is argued, the estate is not one of $5 million, but one of only $725,000.

14. Third, it is argued that the wife has concealed her real worth and has substantial undisclosed assets, which should be taken into account when determining the extent of the provision to be made for her.

15. Mr Surman sensibly accepted that, as to the first two of these issues, the burden of proof, on the balance of probabilities, lay on Ms. Li. The burden of proof as to her own position lies on the wife.

The home:

16. The case for Ms. Li was that in July 1980 an aunt, Madam Li Wai King died leaving a sum of $40,000 to each of the four family members. It was said by Ms. Li that she and her three brothers then agreed that they would pool these sums, and that when they had enough money a home would be purchased as a base for the whole family. Their mother, still alive at that time, would live in the home with them. The evidence shows that on 11 July 1980 three sums of $40,000 were deposited into the husband's HKSB savings account passbook. On the same day a sum of $40,000 was deposited in Ms. Li's bank account. At that time the husband had a total sum (including the deposits on that day) of $297,300 in his account. He also had US$4,800 in a foreign currency account, on the exchange rate at the time about HK$25,000. Thus, funds in excess of $362,000 were available to the family in July 1980.

17. The home was purchased in July 1986 for $436,475, in the husband's sole name. Cash of $336,475 came from his bank accounts and the balance of $100,000 by way of mortgage. Ms. Li's bank account shows withdrawals at the same time. She says that the funds from her account were used for expenses and decoration of the home. There were no documents to substantiate that assertion. After the home was purchased the husband, Ms. Li and their mother moved into it and lived in it together. Although it seems that the two brothers were both then resident in Seattle, either in education or in work, I have no doubt that both returned from time to time to the home for visits. The mortgage was paid off in November 1990, a month prior to the marriage of the husband and wife. The evidence was that the mortgage payments were made by the husband.

18. In February 1986, shortly before the home purchase was completed, the mother wrote an important letter to Sai Ping. In it she had this to say:

"Let us talk about the purchase of our new property. Elder brother has gone to a solicitor firm to complete the second part of the purchase procedure this morning. He has given a cheque in the sum of three hundred thousand odd to the solicitor firm as part of the purchase price. The purchase procedure is temporarily completed. Maybe last part of the procedure will be to hand over the property. By that time, we will have our perfect home. I am so happy that you would all have a place to live after coming back."

19. Hong Kong is a particular society in which its history, tradition and culture play an important part. Many of its citizens do not need to look back too far to remember living in vast squatter areas. Certainly in 1980 many families lived in extremely difficult circumstances. The work done by the Hong Kong Government in housing people through public housing schemes and the promotion of private housing development is world renowned. The consequence of the rapid growth of Hong Kong through the 60's to the 90's has been that a great premium is placed upon the acquisition of a home. To own one's own home, in a proper development, has long been the goal of many in Hong Kong. Coupled with this background is the traditional Chinese view of the importance of immediate family. Parents take care of, and educate children, and in return the children take care of parents when they reach old age. This often involves parents and children living together for many years in a way that is not so common in Western society. These are all factors which are reflected in the letter written to Sai Ping. They are factors which tend to support the assertion that the home was purchased for all the members of the family, although in the husband's name alone.

20. Against this is the fact that, other than one transfer of funds by Ms. Li, there is no evidence at all of any further deposits from other family members in the husband's bank accounts prior to the purchase of the home. On 22 January 1985 Ms. Li transferred $30,000 to the husband's savings account, which sum he appears to have placed in a time deposit with other funds, and presumably used these funds for the purchase of the home 18 months later. Any evidence of funds being transferred from the two brothers in USA all relates to a period after the purchase of the home.

21. At the time of the $40,000 deposits, the family had sufficient funds, over $360,000, including the husband's savings, his US$ deposit and Ms. Li's $40,000, which, at the time, would have been more than enough to acquire a proper home. No explanation was offered as to why they should wait a further 6 years before making the purchase. Thus, while there is evidence that of the purchase price, a sum of $80,000 came from the brothers, and $70,000 from the sister was put to expenses and decoration, plainly the greater part of the purchase price was provided by the husband from his resources alone.

22. Further there is no evidence as to the source of funds for the repayment of the mortgage other than that payments were made by the husband from his bank accounts. There is evidence from Ms. Li that she paid public utility charges, management fees, government rent and rates, and made occasional repair payments and purchased occasional electrical appliances. But, apparently deliberately, she does not say that she has paid anything towards the mortgage payments. While the brothers have apparently made payments to the husband's accounts from time to time by remittance from overseas, there is no evidence or suggestion that these were for the purpose of making mortgage payments.

23. Consequently, not only has the husband paid the greatest part of the purchase price, he alone has cleared the mortgage on the property. If the sum spent by Ms. Li on expenses and decoration is added to the purchase price the cost of the home was about $506,000. Ms. Li and her brothers have contributed $150,000 between them. The balance of the cash for the purchase came from the husband who has also repaid the mortgage. Thus the husband has contributed 70% of the total cost and the remaining members of the family 30%.

24. In Constructive Trusts 3 ed. A.J. Oakley the learned author says this of constructive trusts:

"It has been established since the 18th century that where property has been purchased in the name of another it will be presumed to result to whoever provided the purchase moneys, including if appropriate the person into whose name the property has been put in, in proportion to their respective contributions."

25. Having regard to all of the circumstances I find, on the balance of probabilities, that the evidence establishes that the family did intend that the home would be a home for all of them, to which all had contributed and in which all would be entitled to live. I find that it was their intention that the husband should hold the property on trust for himself and the members of the family. But it is clear that by far the greater portion of the funds came from the husband. There is no evidence of any agreement between the family members as to the proportions in which they would share in the property and accordingly their interests must be determined in proportion to their respective contributions.

26. I have already set out the proportions in which the home was acquired. It is necessary to take into account also the running costs over the years as well and although the husband has paid the mortgage the evidence is that Ms. Li has paid rates and the like. She has had the advantage of being able to live in the property, an advantage not enjoyed by her brothers who lived overseas. Looking at the matter broadly I find that the respective contributions are such that the home should be held between the husband and his siblings as to two thirds share for the husband and the remaining one third share equally between the sister and two brothers. That I find adequately reflects the contributions made by each over the years.

The bank accounts and securities:

27. As I have said there was no evidence of any contributions by family members to the husband's bank account prior to the purchase of the property. It was argued for Ms. Li that the evidence as to the husband's earnings was such that he could not possibly have saved as much as was reflected in his bank accounts. I do not accept that submission.

28. First it is clear that prior to the deposits from the legacies the husband had been able to accumulate a very substantial sum, which could not be justified by the evidence of his earnings alone. The source from which these funds came is not adequately explained, but the only inference open is that they are from the husband's resources. The evidence as to the brother's contributions is simply not sufficient to raise the inference that all of the funds in the accounts came from family members.

29. Second, it is clear that the table prepared by Ms. Li, set out in her second affidavit, as to the husband's earnings, was demonstrated in cross-examination to be substantially deficient and does not reflect the full extent of his earnings. As I have said, the source of his income is unexplained, but the only possible explanation for the accumulation of the funds is that they were provided by the husband from some undisclosed source.

30. Third, while I accept that payments have been made to the husband's bank account, apparently by his two brothers, the evidence as to the payments made do not establish that they are responsible for all of the accumulated funds. Some at least of these payments were simply for the support of their elderly mother, and the inference is open that to an extent they were repaying to those members of the family remaining in Hong Kong the cost of what must have been an expensive North American education. Significantly there was no evidence from either of the brothers as to the purpose for the payments that they made. On Ms. Li's assertions as to Sai Ping's income and expenditure he operates at a monthly loss. There is no explanation from Sai Ping as to the purpose of payments he did make, nor as to how he was able to make any payments, if, as is asserted on his behalf, he operates his lifestyle at a deficit.

31. As to Sai Lun, there is no evidence at all as to his income or expenditure prior to 1998. He plainly could not have made any contributions while working as a Peace Corps volunteer in Africa on a monthly income of only US$180.00 (HK$1,404) a month. There is no evidence from Sai Lun, or even from Ms. Li on his behalf, as to his payments, or his income and expenditure. Neither Sai Lun nor Sai Ping themselves say that there was some overall family savings plan administered by the husband.

32. Finally there was no evidence from Ms. Li herself of the payment by her of any sums to the husband, other than for the acquisition of the property that I have set out above. In particular there was no assertion made of any payments to the husband by her for some form of family savings. She deals with payments by her brothers to the husband in paragraph 12 of her second affidavit. In that it is said that part of the payments were "for purpose continuance of savings and investing for Lee's family" (sic). But she specifically avoids saying that she too contributed in this way.

33. In one respect only can an assertion of a trust from savings be made. Following the death of the mother the net sum comprising her estate, about $120,000, was paid into the husband's account. That was a sum in which all four members of the family were entitled to share equally. The evidence was that it was their intention to use the fund for redecoration of the home. I accept that that sum, held in the husband's accounts at the date of his death may be separated from his own funds, and was held by him for himself and his three siblings, as to $30,000 each.

The extent of the estate:

34. I accordingly conclude that the net estate, from which provision may be made, amounts to $3,415,000, comprising the husband's two thirds share of the home, at $1,930,000, and the net available cash of $1,485,000, less the sum of $90,000, being the sibling's share in the mother's estate.

The extent of the wife's assets:

35. The evidence from the wife as to her own assets was entirely unsatisfactory. She had to be recalled to produce bank account details that she said she "had found" during the course of the trial. Her explanation as to why, despite repeated requests, these had not been found earlier was unsatisfactory at best. When finally disclosed the accounts were not complete and raised as many questions as they answered. Her explanation as to her family circumstances in Canada was evasive and revealed little. I am obliged in the circumstances to proceed on the assumption that the wife has capital assets either in Hong Kong or in Canada which she has not disclosed. I am quite unable to say to what extent these assets are, but that some other assets exist is a factor that must be taken into account.

36. The wife had not disclosed the fact that she had rented a flat and was spending most of her time there. Having regard to the way in which she was treated in the home, a matter I will deal with in more detail later, I am not at all surprised at that decision and the fact that she concealed it. While the decision to rent and to conceal the fact is understandable it ought to have been disclosed, however, I do not hold the concealment against her in assessing the evidence.

The relevant factors for consideration:

37. Mr. Surman for Ms. Li acknowledges that, there being no provision whatsoever in the will for the wife, the provision is not reasonable. The relevant factors to be considered under the Ordinance are first, the testator's wishes, and second, the s. 5 IPFDO factors.

The testator's wishes:

38. It is right that in Re Inns, deceased, Inns v Walker [1947] 1 Ch 576 at 581 the court said that a testator "should continue to have freedom of testamentary disposition". But that statement must be read in the context of a case in which a substantial settlement was made on the applicant wife. Similarly in Re Krubert [1997] Ch 97, where Inns was cited with approval substantial provision was made for the applicant wife. Neither of these cases provide any support for the proposition that where there is a plain failure of a testator to make any provision whatsoever for a wife primary regard should be had to his wishes. The provisions of the legislation must be given effect to remedy the testators failure to provide for those whom the legislation considers ought to have provision.

The relevant s. 5 IPFDO factors;

s. 5(1)(a) The financial resources and needs of the applicant;

39. The wife is now aged 40 and is presently not in good health. Looking at the medical evidence broadly I am of the view that much of her health problems presently arise as a result of the circumstances in which she has been required to live both before and since her husband's death. Once the litigation is over and she can put her association with the husband's family behind her, I am confident that her health will improve. But that said her earning capacity is plainly limited.

40. Although Ms. Li asserts that the wife is welcome to live in the home I have no doubt at all that simply not so. The whole way in which the litigation has been conducted, and the criticisms and assertions made against the wife by Ms. Li, make it abundantly clear that the wife has been made to feel most unwelcome in the home following her husband's death. The family plainly take the view that she is an intruder and the result has been that she has been forced to find other accommodation. It is for these reasons that I find her decision to rent and to conceal that fact to be understandable. I reject completely the submission that the wife is welcome to continue to reside in the home.

41. She needs accommodation and income. A capital sum will enable her either to invest the sum and apply the income to rent or to purchase and work part time to support herself. Her own resources are unexplained but I am satisfied that she has some capital resources and cannot be treated as an applicant with nothing at all.

s. 5(1)(c) The financial resources and needs of the beneficiaries:

42. Ms Li has a good job, a debt free property and only herself to support. She has substantial savings and if she chooses can let her Tseung Kwan O property to further increase her income and savings.

43. Sai Ping has a secure job and seems able to support his family adequately on his income. He owns his own home and seems able to meet his obligations as although it was said that he operates at a deficit, he was still bale to make remittances to Hong Kong. There is no evidence as to any special needs that might otherwise arise form his own family circumstances.

44. Sai Lun's situation has not been adequately explained to me. He is single and apparently has no obligations to anyone else. He is educated and there is no satisfactory explanation as to why he is not working. There was no proper description of his qualifications or work experience. The assertion that he did not go back to Seattle because the prospect of getting work was affected by "the recent catastrophic earthquake in Seattle" was not explained at all. I am aware, from my own knowledge, that there was a powerful earthquake in Seattle in February 2001, but the evidence simply did not establish that the earthquake had had any long term effect on employment prospects for persons with Sai Lun's qualifications. The evidence does not establish any particular need on his part.

s. 5(1)(e) The size and nature of the estate:

45. The state comprises a total sum of $3,415,000 of which, 43% is in cash or readily realisable securities. The balance is comprised in a debt free property which may easily be mortgaged to provide further cash if required.

s. 5(1)(f)) The wife's disability:

46. I have found that the wife, while able to work on a limited basis only at the present time, is likely to recover her health to a large extent following the conclusion of the litigation and will be able to extend her working hours. However she will remain under some limited disability and will have difficulty as a result in finding suitable work, especially in the present economic climate. There is no suggestion that the three beneficiaries are not in good health nor able to work.

s.5(2)(a) Age and duration of marriage:

47. The wife is aged 40, and has no children to whom she can look for support in the future. The marriage was of a little more than 9 years, not long but not a short marriage. For the reasons I have given, I disregard the fact that the first few years of the marriage were spent apart.

s.5(2)(b) The wife's contribution to the welfare of the family:

48. Up until the death of the husband's mother it is more likely than not that the mother undertook the majority of household chores. After her death those chores would have been shared between the wife, the husband and Ms. Li. As there were no children of the marriage the wife's role in caring for the family was significantly reduced.

s. 5(2) The divorce standard:

49. By s.5(2) the court is enjoined to "have regard" to the provision the wife might reasonably have expected to receive had the marriage not terminated by death but had been terminated by decree of divorce. The is has been called "the divorce standard". It must be remembered that the two pieces of legislation, IPFDO and the Matrimonial Proceedings and Property Ordinance (MPPO) are not necessarily directed at achieving the same result, and the overall criterion is what is reasonable: see In Re Besterman [1984] 1 Ch 458 at 478. In the first the court must deal with the competing moral obligations the testator has to those who have a claim on his estate. In the second the court must deal only with the competing claims of a husband and wife.

50. On divorce the wife's claim would not fall to be dealt with strictly in terms of the decision in White v White [2000] 3 WLR 1571 as explained by the Court of Appeal in Cowan v Cowan [2001] 1 All ER (D) 173. It is clear that property owned by a spouse before marriage falls into a quite different category from property acquired by joint efforts during a marriage. It is also clear that a very important factor in an award of equality is a long marriage.

51. Having regard to all of the factors relevant on divorce I would expect that the wife in this case, if there were to be a clean break, would receive a capital award that may be as much as 40% of the available sum. This is especially so where the wife is of an age, as this wife is, where the prospect of remarriage is slight.

s. 5(3) The deceased's contribution to the needs of the wife;

52. The wife was, by reason of her health problems virtually entirely dependant upon the husband prior to his death. I am satisfied that those health problems were, in part, as a result of the living circumstances in which the wife was required to live in a home with the husband's sister who was not entirely welcoming of her.

s. 5(6) The closeness of the relationship between the husband and wife:

53. The case for the wife was that she and her husband had a good relationship right up until his death. The case for Ms. Li was that the relationship had deteriorated. The evidence established that the husband was a devout Buddhist who preferred to spend his spare time in the weekends reading Buddhist texts. The was a 12 year age difference between the husband and wife at the time of their marriage. The medical evidence showed that the state of the relationship was a matter of concern to the wife and it may well have been a factor in her illness. But it also established that the husband attended the psychiatrist with her, a plainly supportive action.

54. I perceive the situation to be one where parties with differing ages and interests had married and were having difficulty in reconciling those differences within the bounds of their marriage. But they were both aware of those differences and were taking steps together, in a supportive way, to resolve them. To an outsider from the relationship, such as Ms. Li it may have appeared that the relationship was in difficulty. But the parties to the relationship were aware of their differences and taking steps to resolve them together. I am satisfied that the nature of the relationship was sufficiently close that the differences between the husband and the wife should not detract from the award to be made.

The award:

55. In making the award I have had regard to all of these factors. Of significance is that the wife has demonstrated a real need whereas the beneficiaries have not demonstrated such a need. This is an appropriate case for a lump sum award. It would be quite impracticable to require some form of sharing of the home. The primary moral obligation of a testator must be to his wife before brothers and sisters, especially where there is no demonstrated need on the part of brothers and sisters. This is not a case where it is appropriate that the wife should receive the home. I have found that it was intended that the home should be a family home, albeit in unequal shares.

56. As to the divorce standard I have indicated a figure that I consider might have been appropriate in divorce. In this case, where there has been demonstrated no special obligation by the testator to beneficiaries other than a wife, the wife must be the primary beneficiary of the testators bounty. As the court does not have to consider the competing claim of the husband as it would under the MPPO, it may be significantly more liberal in making an award IPFDO. That must be especially so where a widow has no children to whom she can look for future support.

57. Weighing all of these matters I have come to the conclusion that the wife should receive a lump sum of $1,750,000. There will be an order nisi that the wife shall have her costs paid by Ms. Li personally, not in her capacity as executrix of the estate, for it is in her personal capacity as a beneficiary that the claim has been resisted. Her brothers took no steps and so are not parties to the proceedings but as the defence was plainly mounted on their behalf as well they ought to share equally in the costs with their sister. The costs are to be taxed on a party and party basis.

58. I appreciate that the award exceeds the available cash. However, the home, remaining an asset owned now by the three surviving family members, is debt free only a small mortgage, well within the capabilities of Ms. Li and Sai Lun, will be required to meet the balance and costs.