HCC v. LPL, the sole Administratrix of Estate of KKW, Deceased

FCMP 201 / 2017

[2019] HKFC 46

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS

NUMBER 201 OF 2017

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__________________________

JUDGMENT
(For leave to issue claim by a dependent for financial provision under
section 3(1)(ix) of Cap 481)

__________________________

Introduction

1.  The applicant (“Madam H”) commenced this application by an originating summons filed on 3 October 2017 for leave to apply for relief pursuant to sections 3 to 7 of the Inheritance (Provision for Family and Dependents) Ordinance, Cap. 481 (“the Ordinance”) out of time.    

The applicant’s case

2.  In March 1972, Mr KKW (“the Deceased”) was married to the respondent (“Madam L”) in Hong Kong.  In 1997, Madam H started to cohabite with the Deceased and had become his mistress. In 2013, the Deceased was diagnosed with gastric cancer. In September 2015, the Deceased passed away intestate. The Deceased and Madam H have no children. On 12September 2016, the letter of administration was granted, the Court appointed Madam L as the sole administratrix of the Deceased’s estate.

3.  Madam H intends to apply for financial relief pursuant to section 3(ix) of the Ordinance against the Deceased’s estate for reasonable financial provision. Section 3 of the Ordinance reads,

“3. Application for financial provision from deceased’s estate

(1) Where after the commencement of this Ordinance a person dies—

(a) domiciled in Hong Kong; or

(b) having been ordinarily resident in Hong Kong at any time in the 3 years immediately preceding his death, and is survived by any of the following persons—

(i) the wife or husband of the deceased;

(ii) a former wife or former husband of the deceased who has not remarried and was being maintained, either wholly or substantially, by the deceased immediately before his death;

(iii) a tsip or male partner of the deceased by a union of concubinage;

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

(v) an infant child of the deceased, or a child of the deceased who is, by reason of some mental or physical disability, incapable of maintaining himself;

(vi) an adult child of the deceased who immediately before the death of the deceased was being maintained, either wholly or substantially, by the deceased;

(vii) any person (not being a child of the deceased) who, in the case of any marriage to which the deceased was at any time a party, was treated by the deceased as a child of the family in relation to that marriage and was being maintained, either wholly or substantially, by the deceased immediately before his death;

(viii) a brother or sister of the half blood or the whole blood 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,

that person may apply to the court for an order under section 4 on the ground that 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 not such as to make reasonable financial provision for the applicant.

(2) In this Ordinance, “

reasonable financial provision” (合理經濟給養)—

(a) in the case of any application made—

(i) by virtue of subsection (1)(i) by the husband or wife of the deceased (except where the marriage with the deceased was the subject of a decree of judicial separation and at the date of death the decree was in force and the separation was continuing); or

(ii) by virtue of subsection (1)(iii) by a tsip or male partner of the deceased by a union of concubinage,
means such financial provision as it would be reasonable in all the circumstances of the case for such a person to receive, whether or not that provision is required for his or her maintenance;

(b) in the case of any other application made by virtue of subsection (1), means such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance.

(3) For the purposes of subsection (1)(ii), (iv), (v), (vi), (vii), (viii) and (ix), a person shall be treated as being maintained by the deceased, either wholly or substantially, as the case may be, if the deceased, otherwise than for full valuable consideration, was making a substantial contribution in money or money’s worth towards the reasonable needs of that person.

[cf. 1975 c. 63 s. 1 U.K.]

4.  Section 6 of the Ordinance expressly stated a 6 – month time limit to take out such application.

“6. Time-limit for applications

An application for an order under section 4 shall not, except with the permission of the court, be made after the end of the period of 6 months from the date on which representation with respect to the estate of the deceased is first taken out.

[cf. 1975 c. 63 s. 4 U.K.]”

5.  Madam H has not made out this application within the time limit as stipulated. Madam H admits she was at least 205 days late when she took out this originating summons. Madam H is now seeking permission from Court to take out the said application.  Madam L opposed.

6.  Since Madam H and the Deceased’s cohabitated, they have lived in both Hong Kong and Guangzhou, PRC. In or about 2008, both of them returned to Hong Kong and had resided in a flat in Lilac Court (“the Property”). Hanmer International Holding Limited (“Hanmer”) was the registered owner of the Property. The Deceased was a director and shareholder of Hanmer.  The Deceased conveyed his share in Hanmer to his godson prior to his demise. Nonetheless, after the Deceased has passed away, Hanmer saw Madam H as a trespasser, it commenced proceedings in the Court of First Instance (“HCA 2210 of 2016”) against Madam H for an order of possession of the Property. Madam H contested on the basis that she was a beneficial owner. On 30 March 2017, The Court of First Instance granted unconditional leave to Madam H to defend in the said action. Madam H did not file a defence as directed. On 13 July 2017, Hanmer obtained interlocutory judgment for possession of the Property.

7.  As at the date of this hearing, I am given to understand Hanmer has recovered possession of the Property on 30 July 2017 and the Property was sold afterwards.

Relevant legal principles

The correct approach

8.  In LPC v. CYC, the Administrator of the Estate of EHC, the Deceased, (FCMP 61 of 2012, 16 September 2014, unreported), Deputy District Judge Grace Chan (as she then was) illustrated the approach of deciding financial provision for “any person” under section 3(ix) of the Ordinance.   

“8. Under section 3(1)(ix) of the Ordinance, a person may apply for reasonable financial provision out of the estate of the deceased if he/she is a person,

“who immediately before the death of the deceased was being maintained, either wholly or substantially, by the deceased” (underlined added)

9. By the word “immediately”, the court should look at “something more substantial and enduring” and a settled basis or general arrangement between the applicant and the deceased as regards maintenance during the latter’s life time, but not the actual, or perhaps fluctuating, variation of it which exists immediately before the latter’s death: Jelly v Iliffe [1981] 2 All ER29 at 34j-35a; 38e-f.

10. For the purpose of an application under section 3(1)(ix), section 3(3) provides that a person shall be treated as being maintained wholly or substantially by the deceased,

“if the deceased, otherwise than for full valuable consideration, was making a substantial contribution in money or monies’ worth towards the reasonable needs of that person.” (underlined added)

11. As regards “full valuable consideration”, the court has to balance what an applicant was contributing against what the deceased was contributing. If the applicant was contributing more than the deceased or if the contributions were equal, then there is no dependency, either because the deceased depended on the applicant or because there was mutual dependency, and any dependency claim must fail: Jelly v Iliffe (supra).

12. Section 4 of the Ordinance gives a list of orders which the court may make, such as periodical payments, lump sum or property transfer orders.

13. Section 5 (1) of the Ordinance sets out 7 matters to which the court is to have regard in exercising the power in section 4. These 7 factors apply to all groups of persons listed in section 3(1) of the Ordinance:

“5. Matters to which court is to have regard in exercising powers under section 4

(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 any 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.”

Application out of time

9.  In LZX v WYL (provision: family and dependants) [2012] 5 HKLRD 29, PFCJ Bebe Chu (as she then was) summarized the guidelines on this point in paragraphs 30 – 32:

“30 .I have been referred two cases by Mr. Lui, Counsel for Lan and the Father, where the English court had to consider whether leave should be granted. In the first case of In re Salmon, decd. [1], Sir Robert Megarry V.-C. listed out some guidelines:

“First, the discretion is unfettered. No restrictions or requirements of any kind are laid done in the Act. The discretion is thus plainly one that is to be exercised judicially, and in accordance with what is just and proper. Second, I think that the onus lies on the plaintiff to establish sufficient grounds for taking the case out of the general rule and depriving those who are protected by it of its benefits. Further, the time limit is a substantive provision laid down in the Act itself, and is not a mere procedural time limit imposed by rules of court which will be treated with the indulgence appropriate to procedural rules. The burden on the applicant is thus, I think, no triviality: the applicant must take out a substantial case for it being just and proper for the court to exercise its statutory discretion to extend the time……..In my view, a third point is that it must be material to consider how promptly and in what circumstances the applicant has sought the permission of the court after the time limit has expired. … ...The whole of the circumstances must be looked at, and not least the reasons for the delay, and also the promptitude with which, by letter before action or otherwise, the claimant gave warning to the defendants of the proposed application….….This leads to a fourth point. ..….I think that is obviously material whether or not negotiations have been commenced with the time limit; for if they have, and time has run out while they are proceeding, this is likely to encourage the court to extend the time……Fifth, I think that it is also relevant to consider whether or not the estate has been distributed before a claim under the Act has been made or notified. …….Sixth, I think that it is relevant to consider whether a refusal to extend the time would leave the claimant without redress against anybody.. ” [2] The Vice Chancellor also made it clear that the six considerations he stated were not exhaustive.

31. The second case Re Dennis (Deceased)[3] followed shortly after the above case. In this case, Browne-Wilkinson J. referred to the above guidelines laid down by the Vice Chancellor, but pointed out that an earlier decision of the Court of Appeal in Re Stone (deceased) [4] was not drawn to the attention of the Vice Chancellor in Re Salmon (deceased). In Re Stone (deceased), the Court of Appeal allowed an appeal by a widow and enabled her to bring her application out of time. Lord Denning MR had said in the course of giving judgment that if the widow “has an arguable case or, as we say in the Ord. 14 cases, if there is a triable issue, then permission ought to be given’. Browne-Wilkinson J was thus of the view that in addition to the 6 guidelines laid down by the Vice Chancellor in In re Salmon, decd., the applicant would also need to demonstrate that he had an arguable case, a case fit to go to trial, and that in approaching that matter, the court’s approach would be rather the same as when considering whether a defendant ought to have leave to defend in proceedings for summary judgment.

32. It is clear that the Court has the unfettered discretion to grant the permission, and the discretion is to be in accordance with what is just and proper.  The burden of proof is on W to establish there are sufficient grounds to grant the permission and the burden is not trivial.”

The issues

10.  Mr Lau, counsel for Madam L, submitted Madam H has not put forward an arguable case. The explanation of Madam H of the reasons of delay was unsatisfactory. The Property has been sold already, she has no redress against Madam L.     

11.  The issues in this application for leave would be whether (i)  Madam H can substantiate an arguable case; (ii) whether her explanations for delay are satisfactory; and (iii) whether she has any redress against 3^rd party.

Analysis

12.  Madam H was a mistress of the Deceased, she falls within the category of section 3(1)(ix) of the Ordinance, the “any person” category. In this category, the test or measurement of financial relief is different from those of wife, tsip or male partner (see section 3(2)(a)(i) & 3(2)(a)(ii)).  In cases of wife and tsip, the financial relief shall be reasonable in all circumstance whether or not that provision is required for his or her maintenance. In cases of Madam H, within the “any person” category, of maintenance would be reasonable in all the circumstances of the case for an applicant to receive for her maintenance (see section 3(2)(b)). The Court has to consider whether an applicant in the “any person” category whether the deceased has maintained the applicant, wholly or substantially, for full valuable consideration (see section 3(3)). In other words, whether maintenance shall be provided is premised on the reasonableness of all circumstances and also the financial resources and needs of the applicant.

13.  In applying the above tests, the Court should scrutinize both financial resources of Madam H and to weigh against her needs or future needs. If Madam H’s assets could meet her future needs, no award is necessary. (See LPC v. CYC, the Administrator of the Estate of EHC, the Deceased, supra)

14.  Having consider the tests LZX v WYL (provision: family and dependants) for late applications, I see fit to consider whether Madam H has an arguable case first as it formed a vital part in leave applications, the Court’s discretion is unfettered and should be exercised judicially and in accordance with what is just and proper. The burden is with Madam H to establish sufficient grounds for taking the case out of general rule and depriving those who are protected by it of its benefits.

Arguable case

15.  Madam H did not plead the extent of financial relief she has sought in her originating summons. Mr Hor, counsel for Madam H indicated, Madam H intended to ask for a share of the Deceased’s estate in sum of HK$3 million in this hearing.

16.  Mr Hor continued, Madam H’s evidence should satisfy the Court that she has an arguable case which is equivalent to the standard of an arguable case in Order 14 application, i.e. whether triable issues existed. He named the following: 

(i)  Madam H and the Deceased had a close relationship;

(ii)  They spent time to go out together;

(iii)  Madam H was responsible to clean the house and to do housework.

(iv)  Madam H took care of the Deceased at time when he was very ill.

(v)  Their relationship was good in the eyes of respective families where both of them were being introduced to member of their respective families.

17.  Mr Hor further submitted Madam H was in need of financial maintenance, she is an unemployed lady in her 60s without other income. Madam H has two daughters (from her previous marriage) but they are married without contributing to her daily expenses.

18.  Financially, the Deceased represented to Madam H that she could treat the Property as her own property. The Deceased paid for all household expenses; maintained Madam Hon by allowing her to use his Hang Seng Bank ATM card to access one of his bank account. The Deceased also provided maintenance to Madam H in the range of HK$10,000 to HK$20,000 per month prior to his demise.

19.  Mr Lau submitted the above does not satisfy she has an arguable case. Madam failed to provide any information, not limiting to Form E, about her financial resources and needs she may have.

20.  The law provided the basis to Madam H to seek an order for financial provisions, as a dependent categorized in section 3(1)(ix) of the Ordinance. The Court has a duty to scrutinize (i) whether Madam H was being maintained by the Deceased wholly or substantially, immediately before his death; (ii) for full value consideration; and (iii) her reasonable needs. That is to say, if Madam H does not have needs, the Court does not need to consider or to grant an order under this Ordinance.

21.  “Full value consideration” is defined in paragraph 11 of LPC v. CYC, the Administrator of the Estate of EHC, the Deceased, the learned judge gave a succinct definition of “for full value of consideration” as follows:   

“10. As regards “full value consideration”, the court has to balance what an applicant was contributing against what the deceased was contributing. If the applicant was contributing more than the deceased or if the contribution were equal, then there is no dependency, either because the deceased depended on the applicant or because there was mutual dependency, and any dependency claim must fail: Jelly v Lliffe (supra)”[5]

22.  In applications taken out pursuant to the Ordinance, it is no different from an ancillary claim where financial needs or position of both sides should be canvassed. Especially in this category of application, the burden is on Madam H to persuade the Court an order of financial provisions should be made in favour of her.

23.  Regrettably, apart from whimsical allegations that Madam H was maintained by the Deceased as mentioned, I failed to see Madam H could substantiate that she has an arguable case with the following reasons.

24.  Firstly, Madam H claimed herself to be unemployed. This statement is neither here nor there because an unemployed person may have assets or other income source. Madam H did not file her Form E or have provided her means or financial status in her affirmation. Yet in Madam H’s affirmation filed on 20 January 2017 for the purpose of defending Hanmer’s claim in HCA 2210 of 2016, she shed some light about her background. Madam H deposed she was running a small garment business in or about 1997 when she and the Deceased had met[6].  Madam H and the Deceased jointly invested in real estate and small business. They agreed to share profit equally. Madam H allowed the Deceased to manage their investment[7]. Madam H and the Deceased invested in a property in Guangzhou when they started to cohabitate. They also invested in some small garment and pearl trading business. Those investments included Madam Ho’s contribution in cash. The properties and investments were all under the name of the Deceased. They had enjoyed profits in one of their real estate around RMB150,000[8]. Madam H has experience in investing 4 landed properties during the time of cohabitation.

25.  To qualify an arguable case, Madam H has to state how she was being maintained by the Deceased for full value consideration. Suffice to say, from what has been deposed in the said affirmation, Madam H was a businesswoman. She has funds to run her own business and to invest in real estate. For more than once, both Madam H and the Deceased invested in real estate with profit. The Deceased hold on trust both Madam H’s investment and business.  From the evidence here, it may likely be a case of mutual dependency in absence of concrete evidence otherwise.

26.  In Kwan Chi Pun, v. Lai Hoi Yee [2016] 4 HKLRD 689, an adult child made an application pursuant to section 3(vi) of the Ordinance.  The same provision, section 3(3) applies. Anthony Chan J in Kwan Chi Pun cited at paragraph 84 the following remarks of Bulter-Sloss LJ (in Espinosa v. Bourke [1999] 1 FLR 747, at 752A)

“The financial position of an applicant may determine the application. However rich the deceased, if the applicant has sufficient financial resources and no financial needs, it would not be necessary for the court to look further.”

27.  It is unknown to the Court of Madam H’s asset. The Deceased gave Madam H a gift in sum of HK$476,000. Madam H’s second daughter received 3 cheques in sum of HK$69,000 each totalling HK$207,000 as her university tuition fees and living expenses. It might be too far fetch to say the said sum could satisfy Madam H’s future needs, nevertheless, it could have formed part of her assets and should be considered.

Delay

28.  In LZX v. v WYL (provision: family and dependants), the length of delay was 7 months. I accept the length of delay in Madam H’s case, being 205 days, would not be substantial if justified with good reasons.

29.  Madam H did not sit idly after the Deceased has passed away. She went to the Probate Registry in two separate occasions for enquiry around 1 – 2 months after the demise of the Deceased. She was told no probate application has been filed but she was not entitled to be the administrator of the estate of the Deceased. The letter of administration was finally granted on 12 September 2016.

30.  Pursuant to section 6 of the Ordinance, the time for Madam H apply for leave expired on 12 September 2016, i.e. 11 March 2017, 6 – month from the date of the letter of administration. I see Madam H has knowledge of the letter of administration. Such knowledge would come on 14 February 2017, when she was being served with the affirmation by Hanmer in HCA 2210 of 2016 which is sometime within the 6-month time limit. Madam H had only filed her originating summons on 3 October 2017, the length of delay was agreed to be 205 days.

31.  The next question is, whether Madam H has good reasons to have commenced her claim under the Ordinance out of time. It largely depends on her conduct.

32.  Madam H stated in paragraph 26 of her supporting affirmation of this application she did not consider that it was necessary to apply for financial provisions if she could (i) stay in the Property and (ii) to be maintained by receiving rental payments of the carpark space therein. Madam H did not want to cause hassle to Madam L as there was a mutual understanding that she could stay in the Property. Madam H only finds it necessary to apply for financial provisions when the Court of First Instance had granted interlocutory judgment of HCA 2210 of 2016 on 13 July 2017 against her.

33.  Madam H applied for legal aid on 25 April 2017 and she was then refused legal aid on 15 June 2017.

34.  Be it the intention of Madam H of causing no hassle to Madam L, it would be absurd when HCA 2210 of 2016 was commenced against her on 26 August 2016. Madam H would have to face an imminent risk of being evicted from the Property by Hanmer as early as August 2016. She did not apply for legal aid in the first instance but only 8 months from the commencement of HCA 2210 of 2016.

On-going negotiations

35.  I understand Madam H had engaged in negotiations with Madam L on two separate occasions, including phone calls and private meeting regarding the distribution of the Deceased’s estate. The negotiation continued up to 18 September 2017 (where the 6 – month limit has lapsed already) when Madam H instructed her solicitors, Messrs Huen & Partners to issue a letter to Madam L but with no reply. It speaks for itself when Madam H’s claim or request for financial provision were all unanswered. Although there are conversations and private meetings, Madam L did not respond with counter offer. The only inference would be that Madam L did not agree to any financial provisions at all. I do not see Madam H can advance evidence in light of the contents of the negotiations that she was in anyway encouraged by Madam L not to issue the proceedings under the Ordinance.

36.  In the meantime, Madam H did nothing to protect her rights. Mr Hor submitted Madam H was ignorant and had little resources to seek legal advice and when she did, she was not advised of her rights under the Ordnance. She went to Messrs Huen & Partners for the purpose of seeking legal advice on defending HCA 2210 of 2016. Messrs Huen & Partners were not, on the face of it, instructed to provide overarching, all-encompassing and general legal advice on all possible relief Madam H might have at that material time. It is not surprising that Madam H has not been advised of her rights under the Ordinance.

37.  I am unable to accept this is a valid explanation. Madam H was legally represented since the commencement of the originating summons. Madam H was represented by the same firm of solicitors in both HCA 2210 of 2016 and this originating summons. I take it that Madam He should have properly advised on both matters.

Whether estate has been distributed

38.  Madam H did not explain in her affirmation the reason she has opted for not defending HCA 2210 of 2016 where she had claimed to be a beneficial owner of the Property. The Court of First Instance has granted unconditional leave to defend to Madam H when it saw fit with issues to be tried in that action. Madam H could have counterclaimed against Hanmer in HCA 2210 of 2016. In absence of a defence, she seemed to have given up redress against Hanmer.

Conclusion

39.  I am not satisfied Madam H could provide good reasons to justify for her delay in taking out the originating summons. Madam H was unable to discharge her burden to establish an arguable case for her claim of financial provision under this Ordinance. For her conduct after the demise of the Deceased, particularly on her choice to give up redress against Hanmer of the Property and on her inaction upon hopeless negotiation with Madam L, I am not satisfied she could have persuaded me to exercise my discretion, which I consider not just and proper, to grant time extension for Madam H, to give permission for making an application pursuant to the Ordinance after a period of 6 months from the grant of letter of administration.

40.  I have heard submissions on costs at the hearing, both Mr Hor and Mr Lau agreed costs should follow event, with certificate for counsel.

41.  I therefore give the following orders:

(i)  The originating summons filed on 3 October 2017 be dismissed.

(ii)  Costs of the originating summons filed on 3 October 2017 including all hearings be paid by the Madam H (the applicant) to Madam L (the respondent), to be taxed if not agreed, with certificate for counsel.