YIP WING CHING v. YIP SHUNG KIN AND ANOTHER

HCMP 818/2018

[2019] HKCFI 2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 818 OF 2018

(TRANSFERRED FROM FCMP 29 OF 2018)

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DECISION

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Application

1.  In these proceedings, Yip Wing Ching (the “Applicant”) seeks an order for the transfer of half of the net estate of Madam Lau Mei Wah (the “Deceased”) under section 4 of the Inheritance (Provision for Family and Dependants) Ordinance, Cap 481 (the “Ordinance”).  There is no dispute that the Applicant has the relevant locus to institute these proceedings in his status as the husband of the Deceased.

2.  By a summons dated 30 July 2018 (the “Summons”), the Applicant applies for interim maintenance and legal fees provision from theestate of the Deceased (the “Estate”) pursuant to section 7 of the Ordinance in the following terms:

“ There shall be paid to the Applicant out of the estate of Lau Mei Wah (Deceased) the sum of HK$1 million as legal fees incurred and/or payable plus a monthly sum of legal fees of $100,000 thereafter until further ordered [sic]; and a monthly maintenance sum of $107,827.60 from today hereof or such sum or sums at such interval as the court thinks reasonable.”

3.  The application is opposed by the executors of the Estate (the “Executors”).

Background

4.  The Applicant married the Deceased in 1979. Together they have two sons who are the Executors. They represent the Estate in these proceedings.

5.  In the 1990s, the Applicant and the Deceased established a travel services business.  The business subsequently developed into a group of companies (the “Group”) with Yip’s International Holdings Limited (“YI Holdings”) as the holding company.

6.  The family also incorporated Yip’s Enterprises Management Limited (“YE Management”), a property holding company holding various landed properties in Hong Kong.

7.  Prior to March 2014, the Applicant, the Deceased and the two sons respectively held 55%, 25%, 10% and 10% shareholding in YI Holdings and YE Management, and were directors of the two companies.

8.  In around 1995, the Deceased discovered the Applicant had an affair with a lady.

9.  In around March 2012, the Deceased discovered that the Applicant had yet another affair with a mistress in the Mainland, one Madam Xu Qiao Hong (“Madam Xu”).  The Applicant and Madam Xu have a daughter born in June 2013.

10.  It is the Executors’ case that in or about April 2012, in order toseek the Deceased’s forgiveness, the Applicant made the following promises to her:

(1)   He would retire from the Group business so as to spend more quality time with the Deceased.

(2)   He would gift and transfer 55% shares he held in YI Holdings and YE Management to the Deceased unconditionally to show his sincerity in seeking to reconcile with her.

(3)   In October 2012, the Deceased decided to give the Applicant a chance to reconcile and indicated to the Applicant that she accepted his promises.

(4)   Accordingly, in or about November 2012, the Applicant executed a number of documents to effect the transfer of the shares and gave the documents to the Deceased for her retention,thereby perfecting the gift of the shares to her absolutely and unconditionally.

(5)   However, contrary to his earlier promises to the Deceased, from 2013, the Applicant began to travel to the Mainland to meet Madam Xu again frequently.

(6)   Further, the Deceased discovered that the Applicant committedvarious acts of serious misconduct against the Group, includingmisappropriating funds of the Group, setting up a new business venture (Elegance Global Investment Limited) in competition with the Group and converting the vehicle registration documents (“VRDs”) belonging to the Group for his own use.

(7)   In such circumstances, the Deceased completed the transfer documents in March or April 2014.

11.  The Applicant was subsequently removed from the boards of YI Holdings, YE Management and the subsidiaries of the Group.

12.  The family disputes have resulted in a number of legal actions.  In HCA 1061/2014, Nam Kee Travel Company Limited (“Nam Kee”), a subsidiary of YI Holdings sued the Applicant for misappropriation of funds in the total amount of HK$30 million.  A freezing injunction was granted against the Applicant on 14 August 2014.

13.  Subsequently, Nam Kee obtained three disclosure orders in aid of its tracing claim in respect of the whereabouts of the HK$25 million (out of the misappropriated HK$30 million) paid into Mr Yip’s account with Public Bank (“PB Account”).

14.  It later transpired from the discovered documents that the Applicant withdrew HK$1.7 million from the PB Account the day before thegranting of the freezing injunction, after he received notice of the application.  

15.  HCA 1389/2014 relates to the claims against the Applicant for the return of the VRDs.  This action is currently dormant following the return of the VRDs by the Applicant.

16.  In HCA 1563/2014, the Deceased sought a declaration that she is the legal and beneficial owner of the 55% shares of YI Holdings and YE Management.  The Applicant counterclaims for a declaration that he is still the legal and beneficial owner of the said shares on the ground that he was induced by the Deceased’s fraudulent misrepresentation and/or under mistake to transfer the said shares to her.  The Applicant also relies on a declaration of trust dated 20 September 2012 to say that the Deceased at all material times held the said shares on trust for him.  It is the Deceased’s case that the declaration of trust was a forged document.

17.  On 17 February 2015, the Applicant petitioned for divorce against the Deceased in FCMC 2121/2015 on the ground that she had behaved in such a way that he could not reasonably be expected to live with her.  The petition was subsequently withdrawn.

18.  On 13 May 2016, the Applicant presented yet another petition for divorce against the Deceased in FCMC 5768/2016, this time on the ground of a two-year separation.

19.  Unfortunately, the Deceased died on 15 August 2016, before any order was made in the divorce suit.  Under her will dated 8 July 2014 (the “Will”), the Deceased appointed her two sons as the executors and bequeathed all her assets to them.

20.  The Applicant attempted to dispute the validity of the Will, alleging inter alia that it was executed under the undue influence of the Executors. As such, the Executors commenced HCAP 30/2016 to propound the Will in solemn form.  By a Decision dated 9 July 2017, Deputy High Court Judge Kent Yee granted summary judgment in favour of the Executors.

21.  On 5 February 2018, the Applicant commenced these proceedings against the Executors, seeking an order that the Estate do transfer half of its net assets to him.  The Executors’ case is that:

(1)   The 55% shares of YI Holdings and YE Management gifted by the Applicant to the Deceased in 2012 should be regarded as property falling outside the ambit of marital acquest to be divided between them upon divorce, or alternatively as propertyattributable only to the Deceased because it was so intended by the Applicant and the Deceased.

(2)   In exercising its powers under section 4 of the Ordinance, the Court should have regard to the serious wrongs committed by the Applicant against the Deceased and the Group as pleaded in HCA 1061/2014, HCA 1389/2014 and HCA 1563/2014.

Applicable legal principles

22.  Section 7(1) of the Ordinance provides that:

“ Where on an application for an order under section 4 it appears to the court—

(a) that the applicant is in immediate need of financial assistance,but it is not yet possible to determine what order (if any) should be made under that section; and

(b) that property forming part of the net estate of the deceased is or can be made available to meet the need of the applicant,

the court may order that, subject to such conditions or restrictions, if any, as the court may impose and to any further order of the court, there shall be paid to the applicant out of the net estate of the deceased such sum or sums and (if more than one) at such intervals as the court thinks reasonable; and the court may order that, subject to this Ordinance, such payments are to be made untilsuch date as the court may specify, not being later than the date on which the court either makes an order under section 4 or decides not to exercise its powers under that section.”

23.  In ACLS v HSB(T)L[2013] 2 HKLRD 444, Lam JA (as he then was) at §§22 – 23 said:

“ 22. In our judgment, the proper construction of s.7 must have regard to the statutory scheme of the Ordinance as a whole.

23.   The primary objective of the Ordinance can be found in s.3.  In short, it is to provide an avenue for persons who are the dependants of a deceased person to seek reasonable financial provision from the estate of the deceased where the will of the deceased or the law as to intestacy (or a combination of both) does not make such provision.  The surviving spouse and a tsipare deemed to be dependants.  However, for any other person whoclaimed to be a dependant, he or she can only apply if he or she had been maintained, either wholly or substantially, by the deceased immediately before the death.  That means that the deceased had been making a substantial contribution towards the reasonable needs of that person, see s.3(3).”

24.  The learned Judge then set out the relevant applicable legal principles at §§36 – 39 as follows:

“ 36. In Barnsley v Ward (unrep., Eng CA, 8 January 1980), Templeman LJ held that an applicant for interim maintenance had to overcome three hurdles:

First, she must show that she is in immediate need; secondly, that there is property forming part of the estate which is or can be made available to meet that need and, thirdly, she must satisfy the court that it is right in the circumstances to exercise the court’s discretion and make an order in the manner sought.

37. It is to be noted that unless the Court imposes a condition for repayment when making an order for interim maintenance (and the Court does have the power to impose such order, see Tyler’s Family Provision (3rd ed.) at p.374, the applicant need not repay any interim maintenance paid to him or her even though at the end of the day the Court is not minded to order any relief after trial. Given that an applicant has to show immediate need for financial assistance, in many cases it might not be practical to impose such condition. Alternatively, even if such condition is imposed, that applicant might not have the means to repay.

38. With the above analysis of the statutory scheme in mind, we can now turn to the requirement in s 7(1)(a) on ‘immediate need of financial assistance’. Though in some parts of the judgment the Judge referred to immediate financial need, the actual wording in the statute is ‘immediate need of financial assistance’. This is not a mere semantic point. If the financial needs of an applicant can be met by his own financial resources or had been met from other sources, he would not be regarded as having an immediate need for financial assistance.

39. It follows from the above analysis of the statutory scheme that interim maintenance should only be granted (at a stage where the actual entitlement of a claimant has yet to be established) in a very clear case where the immediate need of financial assistance is shown. Since there is no obligation on the part of a claimant to repay (subject to conditions to such effect being imposed and the resources of the claimant to meet such conditions), there is a real risk that the beneficiaries of the estate may suffer a detriment if at the end of the day the Court held at the trial that such claimant was not entitled to any relief. As mentioned, there are many factors at play in an application under the Ordinance, an important one being fairness amongst all the beneficiaries of the estate. Thus, the Court cannot look at the matter merely from the angle of the reasonable need of a claimant and the resources available in the estate. In this respect, the position under the Ordinance is very different from a case for interim maintenance in the matrimonial context, especially when the claimant is not a spouse or former spouse of the deceased.” (emphasis added)

25.  Further, it is established law that:

(1)   “Immediate need” means something calling for immediate attention.  Urgency and the seriousness of the consequences of not dealing with the need are relevant considerations.  On the other hand, “immediate need” should not be equated with “current need”.  (See ACLS v HSB(T)L (supra) at §§40 – 41, 44)

(2)   The test for “immediate need of financial assistance” is a fairly strict test and is stricter than the test employed by the court to determine whether reasonable provision should be made for the applicant’s maintenance.  (Tyler’s Family Provision, 3^rded, at page 372)

(3)   The applicant has to proffer to the Court and the other side convincing evidence that there is immediate financial need.  (See Smith v Smith [2011] EWHC 2133 (Ch) at §30 per Mann J)

26.  I am of the view that the assets of the estate should be the last resort of a dependant’s immediate financial needs.  An applicant carries the burden to prove that his or her immediate need for financial assistance cannot be met by his own financial resources or had not been met from other sources.  The Court has to take into consideration the interest of other beneficiaries of the estate.

27.  The merit of an applicant’s case under section 4 of the Ordinance is also a material consideration for the Court.  If an applicant can demonstrate that he or she is bound to get some relief at the end of the proceedings, I can see that the Court will be more inclined to allow interim maintenance to be granted.  On the other hand, if it can be shown that the applicant’s case is bound to fail under section 4 of the Ordinance, then there will be no point in making any interim maintenance.  I agree that the Court should in its discretion make an interim order only if the applicant has a strong prima facie case for provision.  (Tyler’s Family Provision, 3^rd ed, at page 373)

Immediate need of financial assistance

28.  Mr Wong for the Applicant submitted passionately that the Applicant has no employment, no income and has a continuing burden to provide for his common law wife, Madam Xu and their five-year-old daughter. He also needs funding for a heart operation which is scheduled to take place on 13 September 2019.

29.  However, when queried by the Court as to how the Applicant supported himself, Madam Xu and their five-year-old daughter from 30 July 2018 (the date the Summons was issued) to 8 August 2019 (the date of the present hearing), Mr Wong informed the Court that the Applicant’s siblings helpfully support their living continuously by way of loans and/or other advances.  This is not covered in the two affirmations filed by the Applicant in support of his present application.  I should also mention that there is no evidence before this Court that his siblings’ financial support is going to be stopped in the immediate or near future.

30.  Mr Wong for the Applicant submitted that the Applicant does not want to rely on his siblings continuously and there is no certainty that his siblings’ financial support will continue forever.  Whilst I can well understand the Applicant’s wish not to rely on his siblings continuously, it does appear to this Court that the Applicant and his dependants’ financial needs have been met by his siblings’ generosity and there is no evidence that such financial assistance will ceased if this Court dismisses the present application.

31.  Mr Chan SC for the Respondents submitted that this fact alone is fatal to the application.  I agree.  The evidence clearly shows that the Applicant’s financial needs had been met from other sources and can also be met by other sources.  In the circumstances, he would not be regarded as having an immediate need for financial assistance.  I am of the view that on this ground alone, the present application should be dismissed.

32.  Secondly, Mr Chan SC also submitted that the Applicant did not even in any of his affirmations deposed that unless he gets an order fromthis Court under section 7 of the Ordinance, he would not be able to meet hisexpenses.  This shows that there is no urgent necessity for financial assistance.  I am of the view that there is considerable force in Mr Chan SC’s submission given that the Applicant and his dependants have all along been supported by his siblings financially.

33.  Thirdly, this Court also takes into consideration the following facts:

(1)   The Applicant is a 50% owner of a residential property in HongKong.  Although it is correct that there is a present need for theApplicant to live in his flat in Tuen Mun and that his attempt to sell his half share in the said property has not been successful, there is no evidence before this Court that the Applicant could not have raised a mortgage or a loan by using his half share of the property as a security.

(2)   The Applicant’s common law wife has a real property in the Mainland.  Again, there is no evidence as to current market value of the said property and whether it could be sold or mortgaged in order to raise finance to support the Applicant andhis dependants. Mr Chan SC for the Respondents also correctly submitted that there is no evidence as to the financial position of Madam Xu, the Applicant’s common law wife.

34.  Fourthly, Mr Chan SC for the Respondents also submitted that the Applicant has conspicuously failed to:

(1)   give particulars of his savings and loans from relatives, their extent, whether or when they fall due, the possibility of further loans from the same or other sources; and

(2)   give evidence on whether he has any assets outside the jurisdiction, such as in the Mainland.

35.  Fifthly, Mr Chan SC for the Respondents further submitted that no particulars or documentary evidence were provided to support the Applicant’s claimed expenses and some of them are exaggerated and cannot be regarded as immediate needs.

36.  Sixthly, Mr Chan SC submitted that the Court has no jurisdiction under section 4 of the Ordinance to make an order covering the needs and expenses of Madam Xu, the Applicant’s common law wife. I agree with Mr Chan SC’s submissions that:

(1)   As the Applicant’s “common law wife” is in essence just a girlfriend.  Even assuming she is entirely dependent upon and maintained by the Applicant (and not by some other), this cannot be regarded as a financial need of the Applicant for the stringent purposes of section 4 of the Ordinance;

(2)   This aligns with the recognised position under Hong Kong law in the connected contexts of matrimonial and intestacy, where the law declines to accord any particular legal status or otherwise equate a mistress or girlfriend’s position with that of a lawful married spouse. (See Suen Toi Lee v Yau Yee Ping (2001) 4 HKCFAR 474 at §77(5) per Lord Millett NPJ;Wong Lai Wan Avril v Prudential Assurance Co Ltd [2010] 5 HKLRD 39 at §64 per HH Judge Wong Hing Chun.

37.  For all the reasons stated above, I am of the view that the Applicant has not satisfied the stringent test that of a very clear case where an immediate need for financial assistance is shown. 

Merits of the Applicant’s case under section 4 of the Ordinance    

38.  Mr Wong for the Applicant submitted that this Court should take into account all the circumstances of this case.  In particular, he invited this Court to consider the factor that the Applicant is bound to have some financial relief under section 4 of the Ordinance.  His point is that even if the Applicant were to lose in the HCA 1563/2014 and the Applicant’s claims on the 55% shares in YI Holdings and YE Management were all to be dismissed, he would still be entitled to some financial relief under the present proceedings in his capacity as the husband of the Deceased.

39.  Mr Wong referred this Court to the case of LZX v WYL (provision: family and dependants) [2012] 5 HKLRD 29 where HH Judge Bebe Chu PFCJ (as she then was) at §§201, 203 and 206 said:

“ 201. As W was H’s legal spouse, H would have an obligation and responsibility to maintain her.

…

203. I now come to consider the last paragraph of the s.5 Factors,the ‘divorce standard’. When considering the ‘divorce standard’,one would need to consider the factors laid down in s. 7 of the Matrimonial Proceedings and Property Ordinance (MPPO), the ‘s.7 Exercise’, and also the principles set out in the case of LKW v DD (2010) 13 HKCFAR 537.

…

206. Ribeiro PJ has set out in LKW v DD the principles as to how the s.7 Exercise should be approached, namely:

(i) To arrive at a distribution of assets which is fair as between the parties;

(ii) The concept of fairness requires the refutation of any gender or role discrimination;

(iii) With a view to eliminating insidious discrimination and promoting fairness, judges should check their tentative views on distribution against a ‘yardstick of equal division’,which should be departed from only for good, articulated reasons;

(iv) To reject minute retrospective investigations.”

40.  I agree with Mr Wong that if this Court comes to the view that the Applicant is bound to obtain some form of financial relief in these proceedings, then that is a factor this Court should take into consideration in deciding whether to award an interim maintenance. However, I am of the view that Mr Chan SC is right that this Court is not in a position at this hearing to decide whether the Applicant is bound to obtain some sort of financial relief.  Mr Chan SC referred this Court to paragraphs 27 and 28 of the Respondents’ Defence in these proceedings which state:

“ 27. By reason of the aforesaid, paragraphs 14 and 15 are denied. The Respondent further avers that the Court should have regard to the serious wrongs committed by the Applicant against the Deceased and/or the Group’s interest as pleaded in HCA 1061 of 2014, HCA 1389 of 2014 and HCA 1563 of 2014 in determining whether and in what manner it shall exercise its powers under section 4 of the Inheritance (Provision for the Family and Dependants) Ordinance, Cap.481.

28.  It is denied that the Applicant is entitled to any of the relief claimed or any relief.”   

41.  Mr Chan SC submitted that the Applicant has not taken out any application to strike out the above paragraphs and whether the Applicant is entitled to any relief he seeks in his Statement of Claim in these proceedings is yet to be determined.  Although Mr Wong for the Applicant submitted strongly that the Applicant, qua husband must be entitled to some form of financial relief under the divorce standard and he might well be right at the end of the day, I am of the view that this Court is not in a position to form a judgment on whether there are any countervailing factors which might negate the Applicant’s entitlement qua husband.  Those are matters for trial.

42.  Further, Mr Chan SC submitted that if the Applicant succeeds in his claim on the 55% shares in YI Holdings and YE Management, he would be wealthier than the Estate which only holds 25% shares.  In that case, the Applicant could not have any resort to the Ordinance and would not need any reasonable financial provision from the Estate.  Mr Wong submitted thatdespite the fact that the Applicant would have 30% more shares in the event that he succeeds in HCA 1563/2014, the aggregate value of the Applicant’s net assets might still be lower than the aggregate value of the Estate’s net assets. This Court is not in a position to, and should not make any speculation as towhether the Applicant would be wealthier if he succeeds in HCA 1563/2014.  

43.  I am of the view that the Applicant’s said claims have yet to bedetermined and it is too early at this stage to determine whether the Applicant will succeed.  As such, this Court cannot agree that Applicant is bound to obtain some sort of financial relief after a full trial in these proceedings.  It could well be that the Applicant has more assets than the Estate and hence his claims under the present proceedings would be dismissed.

44.  Mr Chan SC additionally submitted that the Applicant cannot have the cake and ate it.  The Applicant cannot on the one hand maintain thathe has a good case in relation to his claims to the 55% shares in YI Holdings and YE Management, and on the other hand argue that he is entitled to relief under section 4 of the Ordinance.  It was submitted that it is unclear as to how it could be said that the Applicant has a good chance of success in the present proceedings which reverses the basis of his primary case in HCA 1563/2014.

45.  I am not convinced that the above submission is correct because the Applicant can also legitimately submit that it is the Executors’case that the Applicant’s claim in the HCA 1563/2014 is weak and thus the Applicant has a better case in the present proceedings given the size of the net estate in this case.  Ultimately, I am of the view that the key issue is that the Applicant has not demonstrated to this Court that he has a sufficiently good arguable case in view of the full background and the context of the parties’ disputes.

Exercise of discretion

46.  Mr Wong for the Applicant submitted that the Applicant has no assets but the Executors are in control of all the assets of the Estate and the family companies.  Given the size of the net assets of the Estate and the relatively small amount the Applicant is applying, the Court should exercise its discretion to award the interim maintenance.

47.  On behalf of the Applicant, Mr Wong also submitted that the Applicant is willing to undertake to repay the entire amount of the interim payment should the Court subsequently dismisses the Applicant’s claims in these proceedings.

48.  I have duly considered the above submissions but am of the view that the Court should adopt a principled approach.  Whilst the Court must consider whether it is right in all the circumstances to exercise its unfettered discretion and make an order in the manner sought, the Court must also be satisfied that the Applicant has demonstrated that he is in immediate need of financial assistance in the sense that his financial needs cannot be met by his own financial resources or had not been met from other sources.

49.  The application of such a stringent test sits well with my view that the assets of the Estate should be the real last resort of an applicant’s immediate need of financial assistance and the same cannot be made availableto an applicant if it is clear to the Court that the applicant’s immediatefinancial needs have been and/or can be met by other sources.  This is so because the Court has a duty to consider the interest of other beneficiaries of the Estate.

Disposition

50.  For all the reasons stated above, I make the following orders:

(1)   The Summons dated 30 July 2019 is dismissed;

(2)   The Applicant is to pay the costs of and occasioned by the Summons to the Respondents, on a party to party basis, with a certificate for two counsel, to be taxed if not agreed.

51.  Finally, it remains for this Court to thank Mr Wong and Mr Ng for the Applicant and Mr Chan SC and Mr Man for the Respondents for their helpful assistance.