LPC v. CYC, THE ADMINISTRATOR OF THE ESTATE OF CHS, THE DECEASED

FCMP 61 /2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FAMILY COURT

MISCELLANEOUS PROCEEDINGS NUMBER 61 OF 2012

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JUDGMENT

(Claim by a dependant for financial provision

under section 3(1)(ix) of Cap 481)

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Introduction

1. Mr CHS (“Deceased”) passed away on 18 March 2008, intestate, at the age of 69. He married Madam S in 1963 by undergoing all necessary formalities of a Chinese customary marriage. They had 4 natural children. The Respondent (“Mr C”) is his eldest son and subsequently the administrator of his estate.

2. The Applicant (“Madam L”) claims that she had been living with the Deceased as de facto husband and wife since the 1970s until his death. Having failed to establish that she was the surviving widow of the Deceased in the contentious probate action heard by Lam J (as he then was) in HCAP 7 of 2008[1] (“Probate Action”), she has commenced this case in the Family Court for financial provision under the Inheritance (Provision for Family and Dependents) Ordinance, Cap. 481 (“Ordinance”). [2]

3. It is her case that she was in a close relationship with the Deceased and remained as a dependent wholly maintained by him from the 1970s until his death.  The Deceased paid for all her expenses in and out, and more particularly the following:

(1) rent-free accommodation of a factory unit in Hunghom (“Unit 409”);

(2) remuneration of $10,972 per month received by her from AEL, a company limited which majority shareholder at all material times was the Deceased (“Remuneration Cheques”);

(3) at least half month’s salaries of $5,590 payable by AEL to the Deceased but were given to her (“Maintenance Cheques”);

(4) petty cash in the sum of $300 almost everyday.

4. Taking into account her future accommodation need, future living expenses and her net assets, she makes an open proposal of $15 million to be paid out of the Deceased’s estate (agreed to be worth about $180 million) for her maintenance as a clean break arrangement.

5. In defence, Mr C relies heavily on a series of letters written by Madam L to the Deceased in 2006 (“2006 Letters”) and the findings of Lam J (as he then was) in the Probate Action. The 2006 Letters, he says, show that any alleged intimate relationship between the Deceased and Madam L would have long gone by 2006; what was left is merely a commercial or employment relationship. He points out that Unit 409 and the Remuneration Cheques were provided by AEL, a separate legal entity from the Deceased. He further avers that the alleged accommodation and financial provision were made for valuable consideration, without any assumption of responsibility to maintain Madam L on the part of the Deceased latest by 2006, or if not, by November 2007 when the Deceased retained the Maintenance Cheques to himself. Hence, he argues that Madam L is unable to discharge her burden of proving that she was a dependant within the meaning of section 3 (1)(ix) of the Ordinance.

6. On quantum, Mr C argues that her claimed expenses are excessive and that she has sufficient financial resources, including the 30% shares of the AEL (agreed to be worth $5.6 million), to cater for her future needs. He asks that her application should be dismissed.

7. Of no dispute in this trial is that the findings made by Lam J (as he then was) in his judgment handed down on 1 December 2010 in the Probate Action (“Probate Judgment”) are binding on both parties.

Applicable statue & legal principles

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.”

14. The parties have agreed that only factors (a) and (g) of section 5(1) are in issue in this trial.

15. Section 5(2) to (6) spells 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 Madam L), the court is directed to have regard to section 5(5) and (6).

16. Under section 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.” (underlined added)

17. Under section 5(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.” (underlined added)

18. Section 5(7) stipulates that the court has to take into account of the facts as known to the court at the date of the hearing of the application.

19. In very broad terms, Madam L bears the burden of proof and she has to get over 2 hurdles in order to succeed in her application:

(1) First of all, she must show that she was being maintained, either wholly or substantially, by the deceased immediately before his death.  This is a question of fact.

(2) Next, she has to persuade this court to exercise its discretion to award such financial provision that is reasonable in all the circumstances for her maintenance by considering the factors as set out in section 5 of the Ordinance.  This is a matter of discretion of the court.

20. Counsel for respective parties hold different views whether the requirement of “assumption of responsibility” (under section 5(5) of the Ordinance) should be a matter of jurisdictional consideration (ie to be considered under the 1^st hurdle of para [19]) or a matter of discretionary bar (ie to be considered under the 2^nd hurdle of para [19]).

21. Mr Gary Lam, counsel for Mr C, submits that “assumption of responsibility”, though put under section 5 of the Ordinance, had been held to be a pre-requisite for marking an award under section 3 (1) of the Ordinance: Re Beaumont Ch 444 at 457E-F;  Baynes v Hedger [2009] 2 FLR 76 at para 46-47.  On the other hand, Mr Tony Ko, counsel for Madam L, does not agree. He points out that the English authorities are persuasive only and should not be followed by this court.

22. With respect, I cannot find myself agreeable to Mr Ko’s proposition.  Despite the fact that after 1997, the English authorities are persuasive only, it is trite to say that the English family law cases are often cited and heavily relied on in the family court and higher courts in this jurisdiction. Further, as rightly observed by Mr Lam, the Ordinance bears nearly similarities with the Inheritance (Provision for Family and Dependants) Act 1975,[3]and hence it needs cogent reasons why the legal principles propounded in the English authorities should be departed from.

23. Upon considering the authorities cited by both counsel, I humbly beg to agree with Sir Robert Megarry VC in Re Beaumont and Stephenson LJ in Jelly v Iliffe (supra) that “assumption of responsibility” is a pre-requisite requirement in establishing a dependency applicant’s right to claim. I would quote what Stephenson LJ said in Jelly v Iliffe (supra) at 136 as follows:

“ I do not question [Sir Robert Megarry VC’s] opinion that the requirement of section 3(4) that the court

‘shall…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’

 implies or “assumes” (in other sense) that at the first stage, when the court is considering the applicant’s right to apply under section 1(1) (e), he must prove that the deceased did “assume responsibility” for his maintenance.”  (underlined added)

24. However, I do agree with Mr Ko’s submission that  assumption of responsibility can be inferred from the bare fact of maintenance subsisting at the time of the death of the deceased: M x X, FCMP 100/2012, date of judgment 14/1/2014; Jelly v Iliffe (supra).

Issues

25. A joint list of issues dated 19 September 2013 was duly signed by counsel for the respective parties.[4] Since then, the size of the estate is no long of dispute.

26. Upon hearing all the evidence and submission on law/facts by respective counsel, I would rephrase/re-arrange the cores issues in the following broad terms:

(1) The closeness of relationship between Madam L and the Deceased immediately before his death;

(2) Whether Madam L was being wholly or substantially maintained by the Deceased immediately before his death by way of the accommodation and financial provision set out in para [3] above, with the following subsidiary issues:

(a) whether the Deceased had assumed responsibility for the maintenance of Madam L in respect of the Maintenance Cheques; and if so, whether that maintenance subsisted at the time of his death;

(b) whether the Deceased (as opposed to AEL) had assumed responsibility for the maintenance of Madam L by providing rent-free Unit 409 and Remuneration Cheques;

(c) whether the Deceased was making a substantial contribution towards her reasonable needs otherwise than for full valuable consideration;

(3) If the answer to issue (2) is in the affirmative, whether this court should exercise the power, upon considering the financial resources/needs of (factor (a) of section 5 (1)) and/or contribution to the Deceased’s wealth (factor (g) of section 5(1)) made by Madam L,  to make financial provision out of the estate for her, and if so, to what extent it should exercise such power?

27. On the above issues, only Madam L herself and Mr C himself are only witnesses in this trial. It is fair to point out at this stage that Mr C admits that he does not have personal knowledge on the relationship of Madam L and the Deceased, or, the operation of AEL save and except those evidenced documentarily, eg from documents of AEL or personal papers/items left behind by the Deceased.

Issue (1): Closeness of relationship between Madam L and the Deceased

28. As a starting point, I should set out the undisputed or indisputable background facts in chronological order, which are either gleaned from documentary evidence of this trial (including an agreed chronology) [5] or admitted facts/finding of facts in the Probate Judgment.

Undisputed or indisputable facts

29. The Deceased was born in China in 1938 and came to Hong Kong in 1957. In 1963, he married with Madam S.  Four children, including Mr C, were born in this wedlock between 1966 and 1973. In 1968, he set up his own electronic factory at an acquired property. Since then, he worked hard to expand his business and give good provision for Madam S and their children. At death, he was able to accumulate substantial wealth worth of about $180 million.

30. Madam L was born in 1954 and is now 60 years old. She holds a master degree in accounting.

31. The Deceased became the shareholder of AEL in November 1974 (with 70% shares held by the Deceased and the remaining 30% held by Madam S). At that time, Madam L was already working at AEL as an accounting clerk. She has worked as such and received salaries from AEL until the death of the Deceased.

32. In 1976, Madam L was pregnant with the Deceased’s child but had an abortion in 1977 due to poor health. [6]

33. According to the findings in the Probate Judgment, Madam L and the Deceased went through some form of Chinese customary marriage formalities, though the ceremonies were found to have taken place after 7 October 1971 and very likely to take place in the late 1970s. Since the “marriage” was not recognized by the laws of Hong Kong, I have found that it was a “non-marriage”.[7]

34. From 1980 to 1983, Madam L went to study in England, financially supported by the Deceased. While she was there, the Deceased wrote to her numerous lover letters. [8] Upon return to Hong Kong in 1983, she resumed working at AEL as the accounting clerk.

35. In the mid-1980s, the Deceased started to shift the nature of business of AEL from manufacturing of radios to investing properties. In March 1986, AEL purchased 3 industrial units (still under construction at that time) in Hunghom, including Unit 409, at total price of $1,859,100. In December of the same year, by the arrangement of the Deceased, Madam S transferred her 30% shares in AEL to Madam L. In 1988, Madam L was made a director of AEL in replacement of Madam S. She remains as the director until after the death of the Deceased.

36. Since about 1988, Madam L moved into Unit 409 and has continued to stay there until at least the death of the Deceased, rent-free.[9] The other 2 industrial units were rented out.

37. On the other hand, in or about 1987, Madam L started to receive the Maintenance Cheques from the Deceased. There is dispute as to if, and if so, when, such Maintenance Cheques stopped. This dispute will be discussed in the later part of this judgment.

38. Since about 1993 or 1994, AEL had stopped its production of electronic radios. The only staff (excluding the Deceased) who remained on the payroll were Madam L and the siblings of the Deceased. By 2006, only Madam L remained on its payroll. Having at least 1 staff on its payroll was vital to AEL’s continued keeping of its factory licence.

39. On 27 June 2005, the Deceased added Madam L to be a signatory of one of AEL’s Hang Seng Bank accounts (without overdraft facility).

40. From mid-2006 until his death in March 2008, the Deceased came in and out of the hospital(s).  Upon discharge from the hospital(s), he always returned to Ho On Mansion, a residential property bought by the Deceased for use by Madam S and their children. 

41. While the Deceased was at Ho On Mansion, Madam L would bring documents to the Deceased to sign from time to time. The Deceased introduced her to his daughter as “the account staff in the company bringing documents for him to sign”. Madam L did not contradict him, whether in his presence or subsequently when she met and talked to this daughter.[10]

42. Between 9 June and 1 August 2006, Madam L wrote the 2006 Letters to the Deceased. More will be said on the 2006 Letters later in this judgment.

43. On 9 January 2008, the Deceased was admitted into the hospital again and remained there until he passed away.  Since 9 March 2008 the Deceased was transferred another ward, after which Madam L did not see him ever again.  On 18 March 2008, the Deceased passed away.

The 2006 Letters

44. In the trial, Madam L maintains that,[11]

“4. [She has] had decades of a close intimate spousal relationship with the Deceased since the 1970s until his death in March 2008. The nature of [their] relationship of husband and wife remained the same until his death.”

45. Mr C, however, alleges that as shown in the 2006 Letters, Madam L simply did not accept the reality that her relationship with the Deceased had got cold for more than 20 years (ie counting from the early 1980s) and wrongly thought that the Deceased still loved her. He insists that,[12]

“7. …[she was] simply an employee, a personal assistant and at most a business partner whom the Deceased found convenient to maintain given her knowledge about AEL.”

46. Looking at the evidence as a whole, I have no doubt to say that Madam L and the Deceased were in an intimate relationship since at least 1970s and their relationship had not gone cold from the early 1980s. The love letters written by the Deceased to Madam L from 1980 to 1982 are good evidence to rebut such allegation.

47. The question is how close their relationship was immediately before the death of the Deceased.

48. Mr Ko, on behalf of Madam L, is adamant in saying that this intimate relationship were still in place until the death of the Deceased. He asks me to take note that the 2006 Letters were written by Madam L at the heat of the moment to the Deceased in order to express her distress and to show the Deceased how he had hurt her feelings.  They cannot be taken to mean that the Deceased had disowned her.

49. In her oral evidence, Madam L explained that the 2006 Letters were written in a state of quarrelling with the Deceased because he had cheated her for several 10 years and that what was written therein was not a true reflection of the actual picture (“穿鑿附會” ；“係就話唔係，唔係就話唔係，空中樓閣” ). Although she did not elaborate on what the Deceased had cheated her, it must be obvious that she was referring to her allegation that the Deceased had concealed the fact that he had already had another family with Madam S.

50. It is not in dispute that the same set of 2006 Letters was considered by Lam J (as he then was) in the Probate Action. Although the issues then before His Lordship was when the Chinese customary marriage formalities between Madam L and the Deceased took place, I agree with Mr Lam that His Lordship’s observation on the 2006 Letters were mainly about the nature and particulars of the relationship between Madam L and the Deceased. 

51. Upon careful consideration of these letters, I humbly share the same observation of His Lordship in the Probate Judgment. [13]  In gist, His Lordship found that the Deceased returned to Madam S almost most of the nights at all material times. His Lordship was of the view that the 2006 Letters showed that Madam L was aware of the existence of Madam S and her children well before 2006, and that in these letters, she described how miserable she had been throughout the 20 odd years and that the Deceased did all sorts of things to make her leaving him. His Lordship did not agree that she made these up out of her imagination. Madam L’s explanation on the 2006 Letters in this trial clearly contradicts with the findings of His Lordship and thus cannot be accepted by this court.

52. Furthermore, despite her oral explanation in court, she gave a totally different reasoning for writing the 2006 Letters in her affirmation evidence. In her 5^th affirmation prepared in response to the agreed list of issues, she says that the 2006 Letters were written at a time when she was feeling very helpless and heartbroken because the Deceased refused to accept proper medical treatment even though he was very ill. [14] Nothing was mentioned about the quarrels with the Deceased. It is also difficult to appreciate her logic that by describing “how sad, heartbroken and helpless” she was, it would “sway the Deceased towards accepting medical treatment”.

53. In the circumstances, I do not find Madam L’s explanation on the circumstances leading to the 2006 Letters reliable and believable. Full weight should and will be given to the content of the 2006 Letters. I do not propose to repeat each of the 2006 Letters here. The salient points have been sufficiently set out in Mr Lam’s opening submission.[15] However, I do wish to pinpoint on a few more important ones in the following.

54. In the letter of 21 June 2006, Madam L said she was stupid enough not to question the Deceased when he left her every night even in incumbent weather, leaving her to face a lonely life (“爲什麽你每晚都離開我, 無論風雨幾大也好, 留下我一個人面對空虛的生活”). And reviewing the past few years, the Deceased’s attitude towards her was that of resentment and hatred (“我回頭想一想最近幾年， 你對我的態度就是怨和恨”).

55. In the letter of 3 July 2006, she said that she felt sorry for the way the Deceased treated her and that 10 odd years ago, the Deceased already hated her very much. Although they could have only limited time together, each time after the Deceased reluctantly had intimate acts with her, he would say to her mean words. There was no more intimate acts between them for 10 odd years (“回想十多年前，你已經很討厭我，雖然我們只有可以數得出的相處時間，每一次你很免[sic]強地和我親熱之後， 你總會給我…很刻薄的言語…十多年了，我們再沒有親熱過”).

56. In the letter of 7 July 2006, she described that 10 odd years ago, she already felt that the Deceased did not plan to live with her (“十多年前, 當我感覺到你根本沒有打算和我一起生活”).

57. In the letter of 1 August 2006, she wrote that in the past 2-3 years, the Deceased always mentioned that he did not have money. He hinted to her that she had to find another way to earn a living and that he would not live with her. The Deceased said that she might plan to apply for public assistance (“在過去的兩三中, 你時常提及你沒有錢的, 提示我另謀生計, 你是不會與我生活在一起的, 你說領取綜援是我可以計劃做的”).

58. My overall impression (and thus my finding) upon reading the 2006 Letters is this. No matter how intimate the relationship between Madam L and the Deceased was in the 1970s and 1980s, the Deceased had displayed an attitude of detachment from her at least from 1996. This can be proven by the 2006 Letters, in particularly the content of those cited above, which clearly show that there was no more intimacy between them since 10 odd years prior to 2006 (ie at least since 1996). Further, 2-3 years prior to 2006, the Deceased escalated his attitude of detachment from her by  showing her hatred to her and/or by expressly telling her to look for another means of living and to consider applying for public assistance.

59. In reaching the above findings, I have duly considered the meals payment tickets, hospitalization payment and consent form of Queen Mary Hospital. [16]  I have also taken into account that on 27 June 2005, the Deceased added Madam L to be a signatory of one of AEL’s Hang Seng Bank accounts (without overdraft facility), but noted that this was done 2 days before his admission into the hospital and that she was not added as a signatory of AEL’s other account with Dah Sing Bank (with overdraft facility). In my view, all these documents/evidence are non-conclusive. They do not help to advance Madam L’s case further, certainly not to the level of establishing an intimate spousal relationship between her and the Deceased until the latter’s death.

60. However, I would refrain from jumping into the abrupt conclusion that since the Deceased showed the aforesaid sign of detachment from Madam L, their relationship had become a pure employment/commercial one by 2006. The content of the Madam L’s winding-up petition in respect of AEL (HCCW 481/2012), which I have read and considered, does not change such view.  It is mainly because despite such negative attitude or strong words from the Deceased as shown in the 2006 Letters, Madam L continued to receive at least the Maintenance Cheques until the death of the Deceased (according to Madam L)  or October 2007 (according to Mr C). 

Issue (2) : Whether Madam L was maintained by the Deceased immediately before his death

61. As a recap, Madam L claims that she was maintained by the Deceased in the manner set out in para [3] above immediately before his death. On top of free accommodation, she alleges that the monthly financial maintenance was at least $25,000 per month.

62. I take note of Mr Lam’s submission that Madam L’s claim as a dependant of the Deceased is an opportunistic one, for she had denied during cross-examination in the Probate Action that she was a dependant of the Deceased.[17]  However, one has to bear in mind 2 points. First, that line of questioning in the cross-examining was made with respect to the specific issues to be determined in the Probate Action, ie whether Madam L, but not Madam S, was the surviving widow of the Deceased. Secondly, from the questions that were put to Madam L, the plaintiffs (including Mr C) seemed to suggest that Madam L was not the wife, but a dependant of the Deceased.[18]  In all fairness to Madam L, I am not inclined to place too much weight on this part of Mr Lam’s submission.

Assumption of responsibility

(i)  The Maintenance Cheques

63. Madam L claims that she received from the Deceased at least 1 Maintenance Cheque of $5,590 per month (being half month of the Deceased’s salaries from AEL) for her maintenance since 1987 until the death of the Deceased. However, due to cash flow problem of AEL, she might defer depositing the Maintenance Cheques from time to time. She explains the arrangement in para 15 of her 5^th affirmation:

“b. …for accounting purpose, [the Maintenance Cheques] had to be issued in [the Deceased’s] own name but were left as bearer cheques because he would give me those cheques to deposit into my personal bank account for use as living expenses...

...

  d.   …sometimes, [AEL’s] account would be short of cash. I would wait until [AEL’s] accounts had sufficient funds to pay the cheques before I cashed them. At times, these cheques would become stale and would require us to alter the dates on the cheques and countersign the amendment before they could be presented for payment…and after I was added as a signatory, the Deceased would continue to countersign as I left these matters to him. However, after the Deceased was admitted to hospital in 2008, I would sign cheques for [AEL] and countersign the amendments (when necessary) as I was authorized to do so…”

64. By way of background, salaries were paid by AEL to Madam L and the Deceased twice a month, with cheques amounting to half month’s salaies issued on the 7^th and 22^nd of each month.

65. It can hardly be argued the otherwise that at least 1 Maintenance Cheque per month was deposited into Madam L’s personal bank account from 1987 until at least the death of the Deceased. This is supported by the documentary evidence, such as copies of Maintenance Cheques and Madam L’s bank accounts records.  Mr Ko has, in his closing submission, worked out a table showing the number of Maintenance Cheques that were deposited into Madam L’s personal bank accounts during this period. It is, however, pertinent to note that the table was prepared by reference to the clearing days (but not issue days) of the Maintenance Cheques. According to the evidence of Madam L, the clearing day of a Maintenance Cheque could be months after its issue day.

66. In response, Mr C avers that there was no assumption of liability by the Deceased immediately before his death, because the Maintenance Cheques were either:

(1) Money held by Madam L on trust for the Deceased for any urgent need of cash by AEL; or

(2) Rewards for her responsibilities towards AEL and/or the Deceased as his personal assistant; or

(3) Maintenance for her but had stopped in the last few months of his life, ie by about November 2007.

67. I will dismiss the 1^st contention set out above right away. In my view, even if AEL was losing money all these years till 2007 and needed injection of funds to be sustained, it would fly in the face of common sense for the Deceased to inject funds into AEL in such a convoluted manner. Looking at it from the other side of the coin, if this contention of Mr C was true, it would be very telling why the Deceased chose in the first place not to keep his own salaries as funds to be injected into AEL himself, but to give his salaries to Madam L, so as to create an impression that the injection of such funds into AEL came directly from her.

68. In passing, I add that this convoluted arrangement of fund-injection alleged by Mr C would not make any logical sense if the relationship between Madam L and the Deceased was a pure commercial/employment one long by 2006.

69. Due to matters which will become obvious below, I will skip the analysis on the above 2^nd contention but go straight to the 3^rd contention of Mr C.  The dispute here centres on 17 Maintenance Cheques purportedly issued between March 2007 and March 2008.[19]  I shall adopt the same numbering to these cheques as appeared in the affirmations of both parties. However, it must be noted that the numbering of these cheques does not follow chronological sequence. They are:

(1)  Cheques 1 – 5: signed by the Deceased but the issue dates were later amended and countersigned by Madam L when the Deceased was in coma;  

(2)  Cheques 6 – 10: issued by Madam L as bearer cheques; 

(3)  Cheques 11 – 17: original cheques cancelled and replaced by cheques issued by Madam L after the Deceased had passed away.

70. Mr C has prepared a table (“Table”) showing the cheques nos, issue dates and clearing dates of these 17 Maintenance Cheques, alongside with Madam L’s Remuneration Cheques and their details, arranged in chronological order by issue dates (not clearing dates) extracted from AEL’s 2007 and 2008 salaries book and bank reconciliation statements.[20] I have compared the Table with the copies cheques, AEL’s salaries records and bank reconciliation statements myself.  It does not seem to me that the particulars contained in the Table are incorrect (subject to Madam L’s admission in respect of Cheque 6 to be discussed below).  As a matter of fact, Mr Ko does not expressly challenge the Table in his closing submission. In the premises, I will accept the Table and attach full weight to it.

71. In the trial, Madam L was cross examined on the Table and these 17 Maintenance Cheques, in particularly Cheques 6-7 and 13-17. When confronted with the suspicious feature of Cheque 6, namely its number (No. 328030) is after that of Cheque 7 (No. 328026), yet its issue date (3 January 2008) is before Cheque 7 (7 February 2008), she at last admitted that Cheque 6 was issued by her in February 2008.

72. On behalf of Mr C, Mr Lam submits that Cheque 6 was issued in February 2008 has a significant implication, because according to the Table,  Cheque 6 should be issued on 22 December 2007 to cover the salaries of the Deceased for the period of 1-15 December 2007. This purported date of Cheque 6 (22 December 2007) was chronologically arranged with original Cheques 13 – 17 issued between November 2007 and January 2008, all of which were subsequently replaced by Madam L herself.  Further, it can hardly be disputed that Cheques 14-17 were found in the Deceased’s belongings. The overall implication, Mr Lam says, is that the Deceased in his last few months of his life, ie from November 2007, deliberately withheld the Maintenance Cheques from Madam L and withdrew his assumption of responsibility towards her.

73. When being cross-examined on why Cheques 14-17 were kept by the Deceased, Madam L was very evasive. At first, she said that after the Deceased had signed these cheques, he asked that the cheques be left with him for checking. When confronted with what the Deceased needed to check, Madam L resorted to the easy excuse that the Deceased was ill, implying that she did not feel it right to ask or chase him for the cheques.  However, I am of the view that her evidence was contradictory and illogical.

74. First of all, the Deceased’s alleged request for vetting the cheques was never mentioned in her affirmation, in which she simply deposed that she “must have forgotten to retrieve the cheques” after she gave the unsigned cheques to the Deceased to sign. [21] Secondly, the aforesaid excuse did not sit well with her other evidence that the Deceased was still sober and mentally sound at that time. Thirdly, according to Madam L, it had been the practice for many years that each time after she had prepared the Remuneration and Maintenance Cheques, the Deceased would immediately sign and gave them back to her for her maintenance. It is illogical that the Deceased was, health-wise, strong enough to sign and return the Remuneration Cheques to her, but not the Maintenance Cheques at the same time.  Last but not the least, it has always been her case that she was the most loved and trusted person of the Deceased for many years until his death. It defies explanation why the Deceased, still sober and in a state of sound mind, would all of a sudden decide to vet various cheques prepared by her.

75. Mr Ko tries to argue in his closing submission that the fact that the Deceased had signed these cheques means that he did intend to give them to Madam L; otherwise, he would not have signed it. With respect, I do not find this submission convincing. I take the view that quite on the contrary, the fact that the Deceased signed these cheques but did not give them to Madam L must mean more probable than not that the Deceased did not want to give the Maintenance Cheques to her anymore.

76. The hospital consent form and meal tickets referred to by Mr Ko in his closing submission cannot persuade me the otherwise.

77. The totality of all evidence shows this. The Deceased had, at least since or about 1996, started to show sign of detachment from Madam L as evidenced by the 2006 Letters. By withholding the Maintenance Cheques as aforesaid, he had by conduct disclaimed any intention to maintain Madam L by way of the Maintenance Cheques from November 2007. In other word, he had stopped his assumption of responsibility in respect of the Maintenance Cheques from November 2007. The case law is clear that the court should confine to gaze at the basis or arrangement of maintenance subsisting at the moment before death, but excludes whatever previously subsisted but has ended: Re Beaumont [1980] Ch 444 at 452.

78. Therefore, I shall conclude that there was no assumption of responsibility by the Deceased in respect of the Maintenance Cheques for Madam L immediately before his death.

(ii)  Unit 409 and Remuneration Cheques

79. It is indisputable that for many years until the death of the Deceased, Madam L was provided with rent-free accommodation at Unit 409 and Remuneration Cheques in the name of by AEL, but not directly in the name of the Deceased.

80. The registered owner of Unit 409 is AEL. The unit itself is a factory workshop of about 2,000 sq ft. Half of it was used to store unsold electronic radios and/or unused raw materials of AEL. The other half has been used, according to Madam L, as the matrimonial home of her and the Deceased.

81. Mr Lam argues that such an indirect arrangement via AEL shows that the Deceased did not want to maintain Madam L in his own name and that he wanted to confine any “maintenance” to an employment context. He insists that the Deceased and AEL were 2 separate legal entities and there is no exceptional circumstances, such as fraud, in this case for the court to lift the corporate veil: Prest v Petrodel Resources Ltd & others [2013] 2 AC 415.

82. In Prest (supra), the wife issued a claim for ancillary relief against her husband, who was the sole owner of a number of complexly structured offshore companies. Moylan J at first instance held that the former matrimonial home of the parties in London was held by Petrodel Resources Ltd on trust of the husband. He also found that the family court had a specific power to pierce the corporate veil in respect of 7 other properties. The learned judge ordered that the husband had to transfer or cause to transfer to the wife 6 of the properties and an interest in the 7^th which were held in the name of 2 companies.

83. The case went on appeal. The Court of Appeal of England decided that there was no power in family court cases to permit the corporate veil to be pierced to allow the transfer of assets in one-man companies, for instance, where this was just and necessary to do so. The company law principles stated in Salomon v A Salomon and Co Ltd [1897] AC22 on separate legal personality of companies applied equally to family law.

84. This view of the Court of Appeal was confirmed by the Supreme Court of England. However, the Supreme Court held on the facts of this case that the properties were held by the companies for the husband on resulting trust and that the husband, as the beneficial owner of these properties, could be ordered to transfer the same to the wife. The Supreme Court’s view on the court’s power to pierce the corporate view is summarized, in broad terms, as follow:

(1) That such a power does exist and applies in situations where “a person [eg husband] is under an existing legal obligation or liability or subject to an existing restriction which he deliberately evades or whose enforcement he frustrates by interposing a company under his control”; that duty or obligation is independent of the company and owed by the husband to the wife before he creates the company by which he seeks to evade the liability;

(2) The power cannot be used in circumstances where the company simply conceals assets from the wife; there must be “relevant impropriety”. Moylan J at first instance had found that the true purpose of the properties being held within the companies was wealth’s protection and avoidance of tax. Therefore, the fact that the companies helped the husband to obfuscate his liabilities in the case against the wife simply came later in time and did not amount to evasion of the kind required by the narrow test;

(3) The power is only to be used as a last resort where no other remedies, eg resulting trust remedy, exist.

85. In response to Mr Lam’s submission, Mr Ko concedes that AEL is a separate legal entity from the Deceased. He has not sought to argue that the legal principles propounded by the English Supreme Court in Prest (super) are not applicable to our case. He merely submits that the corporate veil of AEL should be uplifted if this court accepts Madam L’s evidence that this arrangement was for tax-saving purpose. It is also her evidence that this arrangement was for providing better security to her.

86. It is pertinent to note that at the time when the Preliminary Agreement for Sale and Purchase of Unit 409 was signed, Madam L was named as the purchaser therein. However, at completion, she (as the confirmor) transferred Unit 409 to AEL. Given such background, I am unable to appreciate how it could have saved more tax for AEL and/or offered more security to Madam L to have Unit 409 put under its name, rather than remained under her own name. Logically, if Unit 409 was purchased in the name of Madam L, she could have it rented out to AEL and thus earned a steady rental income. On the other hand, the rental payment made by AEL to Madam L would be deductible in AEL’s accounts as its expenditure. In the premises, I do not find her allegation of tax-saving and/or more security being provided to her convincing at all.  

87. Secondly, this allegation of tax-saving in respect of Unit 409 only surfaced for the first time during trial. Even if accepted (which is not the case), I only need to say that an arrangement for a property being held within a company for avoidance of tax is not an “impropriety” which warrants an uplift of the corporate veil: Prest (supra).

88. Thirdly, rightly pointed out by Mr Lam, the purchase price of Unit 409 was recorded in the book of accounts of AEL (prepared by Madam L herself) to be provided by shareholders’ loans. This shows that AEL purchased Unit 409 with its own money and should be taken to be the beneficial owner of it.

89. I would add one further observation. According to Madam L’s own evidence in this trial, she contributed $151,000 to the downpayment of Unit 409 and injected funds into AEL from time to time. Putting her case to the highest, the funding of AEL did not source from the Deceased only; it also came from her. Therefore, the Deceased could not be taken as the sole beneficial owner or person in sole control of AEL. 

90. As to the provision of Remuneration Cheques, I repeat what I have said in para [87] and take the view that the same rationale should apply.

91. In conclusion, Madam L concedes that AEL is a separate legal entity from the Deceased. She has not made out her case that the corporate veil of AEL should be lifted so that the provision of Unit 409 and the Remuneration Cheques should have been regarded as maintenance provided by the Deceased himself for her. It follows that the Deceased did not assume responsibility to maintain her as alleged.

For full valuable consideration

92. For completeness and on the assumption that I was wrong on the above findings on non-assumption of responsibility on the part of the Deceased, I shall proceed to consider whether the Deceased was making a substantial contribution towards Madam L’s reasonable needs otherwise than for full valuable consideration.

93. The case law requires me to consider and balance the contribution of Madam L and the Deceased to each other in order to decide if there is any dependency of Madam L on the Deceased. The law is clear that if the contribution of Madam L is greater than that of the Deceased, or, if the contribution to each other was equal, there was no dependency: Jelley v Iliffe (supra) at 138C-E.

94. I shall start with the contribution of the Deceased.

95. There cannot be any dispute that the Deceased paid for Madam L’s study in the UK for 3 years. Her affirmation evidence that the Deceased was already providing accommodation to her in the 1970s – 1980s before she moved into Unit 409 is not whole-heartedly contested in this trial. [22] Her evidence on how much financial provisions were provided to her before the death of the Deceased is, however, challenged. On this aspect, I find that her evidence is full of inconsistencies, as appeared below, which made her evidence not worthwhile to believe:

(1) In her 5^th affirmation addressed directly to the agreed list of issues of this trial, she deposed that she received approximately $25,000 per month from the Deceased;

(2) In her updated Form E, it stated that she had made small adjustment in her remuneration since the death of the Deceased to bring it “in line with the actual amount” received by her for more than 20 years before his death. Yet, the adjustment she had made was to increase her remuneration to $18,000 per month only, but not $25,000 per month;

(3) While in the witness box, however, she changed to say, without convincing reason(s), that the total financial maintenance provided by the Deceased amounted to around $30,000 - $40,000 per month;

(4) She claimed that she was given petty cash of $300 per day ($9,000 per month), yet in the Probate Action, she alleged that the petty cash was $500 per week ($2,000 per month).[23] In any event, there was no documentary evidence to substantial her bare oral assertion on petty cash payment.

96. Upon considering all evidence, I would only accept that the Deceased at the most provided, apart from Unit 409, an amount which was equal to the combination of the Remuneration Cheque ($10,972) and Maintenance Cheque ($5,590) per month for Madam L. The total amount is rounded up to $17,000 for easy calculation.  

97. In respect of Unit 409, the living condition therein cannot possibly be good and satisfactory. This can be reflected in the 2006 Letters in which Madam L herself described Unit 409 as a store place for fire woods (“柴房”). It has also to be remembered that it is not a residential flat but an industrial workshop. According to Madam L, half of it (about 1000 sq ft) was occupied by her and the Deceased together as their matrimonial home. Hence, putting her case to the highest, she was provided only with ¼ of Unit 409 as her residence (ie about 500 sq ft). 

98. There is no direct evidence in this trial on the monetary value of the provision of ¼ of Unit 409 for Madam L. Doing the best I can, I think reference can be drawn from the monthly rental of Unit 416 within the same building which was purchased at the same time by AEL. It is because the floor plan attached to the Assignment of Unit 409 depicts that the 2 units are of similar, if not totally identical, size. [24] The consideration of the 2 units stated in the respective Preliminary Agreements of Sale and Purchaser is of the same amount. [25]  According to the tenancy agreement of Unit 416, the monthly rent was $22,000 between 1 February 2008 and 31 January 2011. I shall therefore take the robust view that the likely rental of Unit 409 was about $22,000 immediately before the death of the Deceased. Alternatively, the value of accommodation provided by the Deceased for Madam L immediately before his death was about $5,500 per month ($22,000 x 1/4).

99. I now turn to the contribution of Madam L.

100. Even before the Deceased purchased AEL in 1974, she was already working as its accounting clerk. When AEL was still manufacturing electronic radios, it hired hundreds of workers. In the mid-1980s, AEL started to shift into property investment. In/about 1988, she was made its director and company secretary. She held all these positions until the death of the Deceased  and was responsible for,[26]

“18. …day to day running of [AEL]…both and after [AEL] commenced property investment business…where the Deceased was too busy to deal with the going concern and management of [AEL], such would naturally be delegated to [her].

….

“24. …assisting the Deceased in the conduct of the business of [AEL] almost as a one-man band.”

101. According to Madam L, in order to keep the factory licence of AEL, to which the Deceased treasured dearly and could not bear to abandon the unsold products/unused raw materials even after AEL had stopped manufacturing electronic radios, he needed to keep Madam L, being the only one staff remaining in AEL since 2006, on the payroll. It would be an added-credit if the only remaining staff (ie Madam L) was somebody who knew the daily operation and management of AEL extremely well. In this sense, her service and assistance was handy and quite indispensible.

102. In the cross examination, she rejected the allegation that as the accounting clerk of AEL, she did not have much to do. She said that she was “absolutely underpaid” by working as the director, shareholder and company secretary of AEL as well as personal assistant of the Deceased.[27] When confronted with what she had pleaded in the AEL’s winding-up petition in HCCW 481/2012 that she had a quasi-partnership arrangement with the Deceased and thus their relationship was strictly a commercial one, she objected categorically and questioned rhetorically that if their relationship was merely a commercial one, why she would allow her to be in such an inferior position (“委屈”) while she could have been paid a lot more. 

103. For the purchase of the 3 industrial units including Unit 409 in the 1980s, Madam L claimed that she had contributed almost her entire life savings of about $151,000.[28]  In return, she was given 30% of AEL’s shares which, according to her oral evidence, was worth nothing (“唔值錢”) because AEL was in negative equity at that time.[29]  Then, over the years as a shareholder of AEL, she injected working capital into AEL from time to time from a few hundreds to over ten thousands. From a table worked out by Mr C from Madam L’s ledger in AEL’s accounts, she allegedly injected some $524,000 over the years of 2001 to 2006 into AEL.[30]  By simple calculation, the total contribution made by her over the years well exceeded 30% of the total consideration of the 3 industrial units (which formed the core business of AEL after it stopped its production line in the 1990s).

104. In addition, she attended to the personal affairs of the Deceased including his personal investment, including:

(1)Handling the tenancy matters of the properties owned personally by the Deceased, such as liaising with tenants/estate agents, settling expenses relating to these properties;

(2)Managing and monitoring his investment portfolio in foreign exchange, time deposits and saving accounts in Hang Seng Bank, Bank of China and Dah Sing Bank.

105. In an attempt to push Madam L’s case further, Mr Ko urges me to take into account her significant contribution to the Deceased’s wealth and the alleged fact that she had foregone her career elsewhere and helped the Deceased to manage his finance, taking only a minimal token. By way of an example, she invested, on behalf of the Deceased, in foreign exchange since 1993 and helped the Deceased to make an astonishing 103.9% profit over 3 years from about HKD$16 million to almost HKD$33 million.

106. With the greatest respect to Mr Ko, I am bound to say that the more the contribution Madam L had made to the Deceased’s wealth, the more it would tilt the balancing exercise to the tip of Madam L’s making equal, if not more substantial, contribution towards the Deceased, which would lead to the inevitable conclusion that there was no dependency by Madam L on the Deceased.

107. Due to the above analysis and upon considering all evidence in the balancing exercise, I have to conclude that the Deceased was not making a substantial contribution in money or money’s worth towards the reasonable needs of Madam L. I am inclined to say that they were mutually dependant to each other.

Issue (3): What award should be made if liability was established

108. Given my finding that Madam L has failed to show she was a dependant of the Deceased immediately before his death, there is no need for me to expand on this issue. But for completeness, I shall briefly consider what award this court would give had Madam L been able to prove her case.

109. Under section 3(2) of the Ordinance, a dependent applying under section 3(1)(ix) will be awarded such financial provision that is reasonable in all the circumstances “for her/his maintenance”, but is not entitled to “reasonable financial provision” provided to a wife/tsip or husband of a deceased, regardless of whether the provision is required for her/his maintenance.

110. In so far as quantum is concerned, the dispute can only rest on the financial resources and financial needs of Madam L.

111. I do not agree that contribution of a dependant to the wealth of the deceased is a relevant factor for consideration under section 5(1) (g) of the Ordinance. I accept Mr Lam’s analysis on this point in his closing submission.[31] The English authorities of Ulku Stephanides v Jeffrey Cohen, Christov Stephanides, 2002 WL 819995, date of judgment 5/3/2002 and In re Goodchild, deceased [1997] 1 WLR 1216, both cited by Mr Ko in his closing submission, can come to no avail to Madam L.  I would also repeat what I have said in para [105] and [106] in this judgment.

112. According to her updated Form E, Madam L’s total assets, including 30% shares of AEL, are worth slightly over $6.4 million. But she claims that she has total liability of about $3.7 million, comprising of:

(1)	Debts owed to her brother	$108,000
(2)	Debts owed to her sister	$48,000
(3)	Unpaid or estimated costs (plus interest) of the Probate Action (including its appeal), wind-up petition and this case	(about)$3,544,000

113. Apart from her bare oral assertion, there is nothing in writing to substantiate her allegation of debts owed to her siblings. Neither her brother nor her sister was called to in this trial to testify on such debts. The oral evidence of Madam L shows that such debts were alleged loans from her siblings to her for contribution to their mother. In my view, even if proved (which is not the case here), the contribution made to her mother, disguised under the facet of debts, cannot fall within the perimeter of her reasonable needs.

114. On the unpaid or estimated costs arising out of various pieces of litigation between Madam L and Mr C (and/or his family), I agree with Mr Lam that such legal costs liabilities are mainly as a result of her own pursuit of an unmeritorious claim in the Probate Action and other legal proceedings. As such, these costs liabilities should be something for herself. It would not be fair to the beneficiaries of the estate of the Deceased to shoulder off such costs.

115. I therefore reject her evidence on her alleged liabilities. I find that she has an available asset of about $6.4 million.

116. In respect of her financial needs, Madam L claims in her updated Form E that her monthly expenses (excluding rental) are $28,200. I am of the view that they are excessive, because:

(1) She could not possibly have gone for high-teas and cinemas on any weekends with the Deceased, given my findings on their relationship as evidenced from the 2006 Letters;

(2) I accept Mr Lam’s comments on the other items of expenses set out in para 48 of his closing submission;

(3) She herself conceded in the trial that the total expenses for food and meal out are $4,500 only;

(4) Her allegation of $6,200 being spent on clothing/shoes, personal grooming, entertainment and holidays does not accord with what I observed during this trial of how she dressed and styled herself (without disrespect to her) and what she said in the 2006 Letters about how miserable her life had been.

117. I have said that had I found that the Deceased had assumed responsibility in maintaining her, the total financial provision was $17,000 per month and accommodation provision was $5,500. I cannot see why I should not take a broad brush approach and adopt these figures as the basis of calculating her financial needs.

118. Mr Ko has proposed in his closing submission to adopt a multiplier formula of 20.89. There is no strong objection from Mr Lam on this. Accordingly, her future financial needs would roughly be this:

   $22,500 ($17,000 + $5,500) x 12 x 20.89 = $5,640,300

119. Mr Ko is also adamant in claiming the pre-trial financial needs from the date of the originating summons (March 2012) to the date of trial (July 2014). I am afraid there is a double-counting element in this submission. At the time when her originating summons was issued in March 2012, she was still receiving her remuneration.[32] In fact, she increased her remuneration to $18,000 per month since June 2008 (which is well over my finding on financial provision of $17,500 per month). Further, she has continued to occupy Unit 409 up to the trial. Therefore, her claim for any pre-trial award of maintenance must be rejected.

120. Her total assets are slightly over $6.4 million. Her future financial needs are only about $5.64 million. Her total assets are thus sufficient to cover her reasonable needs. No award is needed in the circumstances.

Conclusion

121. Due to the matters set out above, I will dismiss the claim of Madam L.

122. There is no reason why costs should not follow the event. I shall therefore make a costs order nisi that Madam L should bear the costs of Mr C of the whole proceedings (including any cost reserved), to be taxed if not agreed, with certificate for counsel. This costs order nisi will be made absolute if there is no application to vary the same within 14 days from today.

[1] See judgment dated 1 December 2010 by Lam J (as he then was) in HCAP 7 of 2008

[2] The Originating Summons was issued on 23 March 2012

[3] The UK Act equivalent to the Ordinance is the Inheritance (Provision for Family and Dependants) Act 1975. Sections 3 (1) (ix), 3(3), 5 (1) and 5 (5) of the Ordinance are equivalent to sections 1(1)(e), 1(3), 3(1) and 3 (4) of the UK Act respectively, save and except the following: section 3(1)(ix) of the Ordinance (“maintained either wholly or substantially” ) vs section 1(1)(e) of the 1975 Act (‘maintained either wholly or partly”) 

[4] [core/301]

[5] [core/297-300]

[6] Records of Precious Blood Hospital [3/449]

[7] My Decision dated 9 June 2014

[8] [3/733-873]

[9]On 21 December 2012, Madam L, as the minority shareholder of AEL, filed a winding-up petition with the High Court to wind-up AEL (HCCW 481/2012). Liquidators were appointed pursuant to a court order of 24 July 2013. The liquidators later commenced HCA 2274/2013 on 25 November 2013 against Madam L to evict her from Unit 409 and the action is pending final determination

[10] Para 91 of the Probate Judgment

[11] Madam L’s 5^th affirmation [2/348]

[12] Mr C’s 7^th affirmation [2/426]

[13] Paras 61-74 of the Probate Judgment

[14] Madam L’s 5^th affirmation [3/362/para 25b]

[15] P10-16 of Mr Lam’s opening submission

[16] Consent form dated 14 January 2008 [core/78-82]

[17] Mr C’s 1^st affirmation [2/387] and excerpt of transcript of the Probate Action [10/3190-3195]

[18] Transcript of Probate Action on p139V-140A [10/3194-3195]

[19] Copies of the 17 Maintenance Cheques obtained from AEL’s bank [11/3556 – 3572]

[20] Exh CYC-30 of Mr C’s 3^rd affidavit [11/3758]

[21] Madam L’s 5^th affirmation [2/356]

[22] Madam L’s 1^st affirmation [2/286-287]

[23] LPC-28 [4/1151]

[24] [3/587]

[25] Unit 401 ($615,300; Unit 409 ($621,900) ; Unit 416 ($621,900) [3/559-560]

[26] Madam L’s 2^nd affirmation [2/295]

[27] Madam L’s oral evidence in 1^st day of trial (PM session)

[28] Madam L’s 5^th affirmation [2/349]

[29] Madam L’s oral evidence in 1^st day of trial (PM session)

[30] CYC-58 [11/3860]

[31] See para 9 & 12 of Mr Lam’s Note of Reply to Mr Ko’s closing submission

[32] Madam L’s remuneration was cut down to zero in June 2012