Inheritance Claims for Financial Provision of Dependants

Inheritance (Provision for Family and Dependants) Ordinance, Cap. 481 (“the Ordinance”) allows dependant to make an application for the Court to order “reasonable financial provision” from the estate of the deceased where his/her Will has made none or insufficient provision for the dependant (sections 3 and 4 of the Ordinance), or if he or she is not entitled to share the estate under intestacy rules and the deceased did not make a Will.

WHO MAY APPLY

s3 of the Ordinance provides that the following persons may apply for financial provision from the deceased’s estate:

  • the wife or husband of the deceased;
  • a tsip (where 妾 means “concubine” in Chinese) or male partner of the deceased by a union of concubinage;
  • 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.
  • The above categories represent family members who would otherwise be entitled to share the estate under intestacy rules, hence a claim arises when they are deliberately excluded from inheritance by the Deceased’s Will.

The following categories of persons must have been maintained before the death of the deceased, either wholly or substantially:

  • a former wife or husband of the deceased – though it is to note that such order ceases to have effect should he/she remarry;
  • a parent of the deceased;
  • an adult child of the deceased;
  • 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 – i.e. a step-child;
  • a brother or sister of the half-blood or the whole blood of the deceased; and
  • any person who was maintained before the death of the deceased, either wholly or substantially.

Only an adult child of the deceased is entitled to share under intestacy rules, so he or she must be excluded by the Deceased’s Will, yet they have to show that they were financial dependants before they are entitled to relief under this Ordinance.

At the same time, any person who was maintained, wholly or substantially, by the deceased before the death of the deceased can make a claim, irrespective of the relationship that the claimant may have with the Deceased. However, for this category of claimant, it would be necessary to explain his or her relationship with the Deceased, leading to the financial support made by the Deceased.

WHAT IS "REASONABLE PROVISION"?

There are two standards for deciding whether there is reasonable financial provision for an applicant, provided by section 3(2) of the Ordinance:

  1. where an application is made by the surviving spouse of the deceased (or a tsip or male partner by union of concubinage), the question is whether it would be reasonable in all circumstances for them to receive such financial provision, regardless of whether the spouse needs such provision for his/her maintenance;
  2. in all other cases, the Court considers whether the financial provision would be reasonable in all circumstances of the case for the applicant to receive maintenance.

In other words, in order to assist the Court in considering a claim, it is almost inevitable for a narrative affirmation to be filed on behalf of an applicant detailing the relationship between the applicant and the deceased in order to assist the Court to consider all the circumstances of the case together with documentary evidence to show that he or she has been receiving financial support. It could be painful and embarrassing for the applicant to reveal the personal relationship in lengthy affirmation which will be disclosed to other parties to the proceedings, especially when such relationship is often not accepted by the other family members during the deceased’s lifetime which often becomes the opposite parties to such claim.

FACTORS CONSIDERED BY THE COURT

Section 5 of the Ordinance provides guidance to the factors considered by the Court in determining whether reasonable financial provision has been made for the claimant, which generally include:

  1. the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future;
  2. 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;
  3. 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;
  4. any obligations and responsibilities which the deceased had towards any applicant for an order under section 4 or towards any beneficiary of the estate of the deceased;
  5. the size and nature of the net estate of the deceased;
  6. any physical or mental disability of any applicant for an order under section 4 or any beneficiary of the estate of the deceased;
  7. 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.

It is important to note that pursuant to section 6 of the Ordinance, the general time limit for making such claim is six months from the Grant issued. Applicants may apply to the Court for interim payments out of the net estate of the deceased if there is an immediate need of financial applicant; and property which forms part of the net estate of the deceased is or can be made available to meet the need of the applicant.

The importance of applying within the stipulated six months was highlighted in HCC v LPL, the sole Administratrix of Estate of KKW, Deceased (2019). The applicant had cohabitated with the Deceased for 18 years prior to his death and intended to apply for financial relief pursuant to s.3(1)(b)(ix) of the Ordinance for a sum of HK$3 million. The applicant admits that she was “at least 205 days late” in taking out the originating summons and sought the Court’s permission to take out the application. The respondent, the wife of the deceased, opposed the application.

Referring to the guidelines provided in LZX v WYL (provision: family and dependants) (2012) for out-of-time applications, the Courts are held to have unfettered discretion, and “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 … 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” (emphasis added). Additionally, the judgement of LZX suggested that another relevant consideration is “whether a refusal to extend the time would leave the claimant without redress against anybody.”

The applicant’s case for delay was that “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 [as she] did not want to cause hassle to [the respondent] as there was a mutual understanding that she could stay in the Property,” and that she had applied and was refused legal aid. However, the judge found that even if the applicant’s intention was to cause no hassle to the respondent, “it would be absurd” for the applicant to have applied for legal aid so late when Hammer – a holding company who was the registered owner of the Property (the Deceased being a director and shareholder of the company) – commenced proceedings in the Court of First Instance for an order of possession of the Property, seeing the applicant as a trespasser – 8 months prior.

The Court was “not satisfied [that the applicant] could provide good reasons to justify for her delay in taking out the original summons” which was furthered by her conduct in the case brought by Hammer, and the respondent’s attempts at negotiations with the applicant. Additionally, she was held to be “unable to discharge her burden to establish an arguable case for her claim of financial provision under this Ordinance.” The summons was dismissed.

The importance of the above case is that any person who has been receiving financial support should seek legal advice as soon as the provider passed away, irrespective whether there is any other family member who continued such financial support on behalf of the deceased. A caveat is often filed so that he or she would receive notice of anyone who intends to apply for grant, and he or she is aware of the deadline for such claim to be lodged.

CAN ADULT CHILDREN SUCCEED IN A REASONABLE FINANCIAL PROVISION CLAIM?

Looking at cases from the past, the issue of adult children claiming reasonable financial provision – whether it be pursuant to ss. 3 & 4 of the Ordinance or under the U.K.’s Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) – has been controversial. The success of the claims are highly dependent on the facts of the case, particularly if the adult child claimant has been estranged from their deceased parent.

REASONABLE FINANCIAL PROVISION CLAIMS BY ADULT CHILDREN IN HONG KONG

Claims for reasonable financial provision brought by adult children against the estate of their deceased parents are typically not entertained by the Hong Kong Courts. The following cases illustrate the difficulty adult children may have in bringing such claims, even if their parent had maintained them before their death:

1. Kwan Chi Pun v Lai Hoi Yee [2016] 4 HKLRD 689

The mother (“the Deceased”) died in October 2011; pursuant to her Will dated 25 April 1989, her younger brother (“Kwan”), the plaintiff, was appointed executor of her Estate and the only beneficiary. The trial combined two actions: the first action, Kwan sought to “recover the possession of a landed property [(“the Property”)], which formed part of the Estate and has been transferred to him” from the Deceased’s daughter (“Hoi Yee”); the second action, relevant to the current discussion, where Hoi Yee sought to have the Property transferred to her under s.4 of the Inheritance (Provision for Family and Dependants) Ordinance, Cap. 481, or alternatively sought a lump sum payment of HK$1 million for the purchase of a property.

The Property was purchased in 1987 with the Deceased and her then-husband, Hoi Yee’s father (“Lai”), as joint tenants; the Deceased signed another Sale and Purchase Agreement for the Property in June 1988 as sole purchaser. In 1989, the Deceased and Lai divorced; Hoi Yee was aged 5 and the Deceased had been granted sole custody. Since then, the Deceased and Hoi Yee resided at the property, and raised her daughter there. Hoi Yee left Hong Kong in 2002 to study in Canada and would return to Hong Kong every Christmas to stay with her mother.

While the Court accepted that Hoi Yee was entitled to make a s.4 claim under the Ordinance (pursuant to s.3(1)(b)(vi)), the Court examined her circumstances: while she was a dependent adult child of the Deceased, Hoi Yee at the time of the trial was 32 years old, and began working only 4 years prior, though a comment was made that “[h]er working life so far cannot be described as successful.” At the time of the trial, she was employed as a tester “under a 1-year contract by a contractor working for the Immigration Department. She earns HK$13,000 per month net of MPF contribution. She is single and has no boyfriend.” An expert witness also produced a medical report which stated Hoi Yee was suffering from adjustment disorder with mixed anxiety and depressed mood due to the death of her mother and mainly due to her dispute with her uncle Kwan. However, the report stated that “the prognosis is not negative” and with “current medical treatment at the frequency of once in 4 to 6 weeks, and such treatment is likely to be required until about 6 months after the conclusion of these litigations.” She claimed that “to prepare for her return from Canada, her mother had discussed with her about selling the Property and applying the proceeds to purchase a bigger property in their joint name.”

Regarding Hoi Yee’s employment, the judge commented that she “has not fully made use of her earning capacity. She has a degree from Canada and clearly has an advantage to be exploited.” The judge also cast doubt onto the relationship between Hoi Yee and her mother due to evidence before the Court – namely Hoi Yee’s behaviour and actions once she learned of her mother’s death, and evidence from Kwan that stated the “mother and daughter relationship was not close. His sister [the Deceased] felt burdened by Hoi Yee’s delay in completing her studies.” The judge also commented that “I see no reason for [Hoi Yee] to believe that her mother would agree to live with her for as long as she liked.”

Ultimately, Hoi Yee’s s.4 claim was rejected. The judge held that “Hoi Yee’s dependency on her mother must be coming to an end at the time of the Mother’s death. There can be no question that the Mother had provided Hoi Yee with the best education which she could afford at considerable cost to her personal expenditure. With her foreign education, Hoi Yee was given a good start to her own independent life.” In addition, the Deceased had purchased a life insurance policy for the benefit for Hoi Yee, which paid out in 2012 a sum of HK$1.3 million odd, and the judge considered that “the benefit must be viewed as a provision for Hoi Yee’s maintenance in the event of the Mother’s death.” While there was nothing provided for Hoi Yee in the Deceased’s Will, the judge stated: “I do not agree that failure to make any provision in her favour was unreasonable.” Kwan also agreed to make an improved offer to Hoi Yee by allowing her to stay at the Property for no cost for several more months and agreed to pay her 15% of the net proceeds of Shares when sold.

2. Tang Tim Chue v Tang Ka Hung Robert & Anor [2018] HKCU 2818

Tang Tim Chue (“TTC”) made an application under the Inheritance (Provision for Family and Dependants) Ordinance, Cap. 481 for financial provision from the estate of his father (“the Deceased”). The respondents were the executors named in the Deceased’s Will, who are TTC’s half-siblings. The Deceased’s Will left everything to a woman (“Madam Yip”) he cohabitated with following his divorce with TTC’s mother, and the 4 children the Deceased had with Madam Yip. TTC sought monthly maintenance of HK$112,491 from his father’s estate for the support of his wife and 2 sons, and the maintenance of the ancestral home. It was also based on an agreement referred to as the “light the lantern agreement” at one of the Deceased’s birthday parties, where he promised (in front of the grandmother, TTC’s mother, and TTC) that at his death, the Deceased would divide his personal estates into 4 equal shares and 2 of them would be given to TTC. The application at first instance was dismissed (June 2012), as TTC “failed to satisfy section 3(1)(vi) of the Ordinance to show that immediately before the death of the father he had been wholly or substantially maintained by his father, in the form of free accommodation or rent collected from his father’s lands [as alleged by TTC]. He is not qualified to make an application under the Ordinance.” With regards to the light the lantern agreement, though the judge agreed that the Deceased had failed his moral obligation, he held that “the father’s breach of his promise under the light the lantern agreement simply did not come into play.”

TTC issued a summons seeking to adduce fresh evidence and appealed to the Court of Appeal (“CA”) for the same claim, seeking to overturn the first instance judge’s finding of facts that he had failed to prove he was wholly or substantially maintained by the Deceased immediately before his death.

The Court dismissed the appeal, holding that TTC had failed once again to prove his maintenance by the Deceased. TTC’s arguments were as follows:

1. The ancestral home in which TTC lived (with the Deceased) was provided by the Deceased.

The CA found that the first instance judge was “entitled on the evidence to say “Accordingly, even if TTC had been provided with accommodation at the ancestral home, it was not shown to be provided “by the deceased” within the meaning of section 3(1)(vi)” (emphasis added)”. The CA also held that further evidence showed that immediately before the Deceased’s death that TTC had not lived at the ancestral home.

2. TTC alleged that the Deceased authorized him to collect and keep rents from land owned by the Deceased to maintain his family as proved by the improvement in relationship between him and his father.

The CA held that TTC failed to adduce further evidence, and merely repeated his case from the first instance court. The CA found that hostile litigation instigated by TTC against the deceased for a minor claim, TTC’s involvement as the “driving force” behind his mother’s institution of divorce proceedings, and the Deceased’s codicil in 2004 (a year before his death) which directed his ex-wife, TTC, and his daughter by his ex-wife be excluded from attending his memorial/funeral/burial services and exclude their name from his Obituary.

U.K. CASE LAW

In 2017, the U.K. Supreme Court handed down the judgement for Ilott v Mitson, which was highly anticipated as it was the first application for reasonable financial provision to reach the Supreme Court. Below, we look at the decision of the Court in Ilott v Mitson and several applications for reasonable financial provision by adult children that followed.

1. Limiting awards to “maintenance”: Ilott v Mitson [2017] UKSC 17

Mrs. Ilott was the only child of Mrs. Jackson; she left home secretly in 1978 to live with a boyfriend of whom Mrs. Jackson did not approve, causing a lifelong estrangement. Mrs. Jackson died aged 70 in 2004. In a Will and recorded Letter of Wishes dated 1984, Mrs. Jackson stated that “she [Mrs. Ilott]… wished to have nothing to do with me. Therefore, she receives nothing from me at my death.” Her last Will, made in 2002, conveyed the same sentiment and bequeathed her estate (worth approximately GB£486,000) to three animal charities. Following Mrs. Jackson’s death, Mrs. Ilott applied for “reasonable financial provision” under the 1975 Act.

At first instance, the judge found that Mrs. Jackson’s will “did not make reasonable provision for Mrs. Ilott” and awarded her a lump sum of GB£50,000. The decision was appealed by Mrs. Ilott on the basis that the sum would not be enough; she sought to be awarded “capital provision amounting to half or more of the estate.” The Court of Appeal held that the District Judge erred in his decision and proceeded to award Mrs. Ilott GB£143,000 to purchase the house she lived in, as well as a further GB£20,000. Mrs. Ilott appealed to the Supreme Court.

The Supreme Court held that the nature of the relationship between Mrs. Ilott and her deceased mother in this case was “of considerable importance” as the 26 years of estrangement was the reason for Mrs. Jackson’s testamentary wishes, and also reflected that Mrs. Ilott was “not only a non-dependent adult child but had made her life entirely separately from her mother, and lacked any expectation of benefit from her estate.”

The Supreme Court emphasised that the concept of maintenance “cannot extend to any or every thing which it would be desirable for the claimant to have. It must import provision to meet the everyday expenses of living” at the current standard of living of the claimant. By reference to a 1981 judgement (In re Dennis, deceased), the maintenance, by definition is “the provision of income rather than capital”. The importance of testamentary freedom was also reinforced by the Supreme Court. The Court of Appeal took the view that charities chosen by Mrs. Jackson did not have any “competing need” in contrast to Mrs. Ilott; this was considered “erroneous” by the Supreme Court, as even though “she had had no particular connection [to the charities] during her lifetime … [it] represented her freely made and considered choice of beneficiaries” as the wishes of the testator are a relevant factor to be considered in a 1975 Act claim.

The Supreme Court reinstated the original lump sum award of GB£50,000.

2. 10% of the estate to be passed to children?: Wellesly v Wellesly & Ors [2019] EWHC 11

Similarly, in this case a claim for reasonable financial provision was brought by an estranged daughter, Tara Wellesley (“Tara”) against her father, the 7th Earl Cowley’s estate, worth GB£1.3 million. The late Earl bequeathed Tara GB£20,000, and the rest of his estate was left in a Trust for his fourth wife. The daughter had been estranged from her father for over 30 years, and attempted to argue that the estrangement was caused by her step-mother; the judge held that the estrangement had in fact, been caused by her lifestyle of heavy drinking and drug use.

The Court dismissed Tara’s claim, holding that she was living within her means and had no financial maintenance from her late father during her adult life. She was awarded only the GB£20,000 she had been left by the Earl. Tara also attempted to claim that where inheritance was available, that it was a breach of the Human Rights Act to require her to live on state benefits. This was rejected by the Court. She additionally attempted to argue that case law (citing Ilott v Mitson) established a precedent that 10% of the estate was to be passed to the children. Again, the Court dismissed the argument as each case is highly dependent on their circumstances.

3. Not estranged, but a “hopeless” case: Shapton v Seviour [2020] 3 WLUK 537

Colin Seviour (“Colin”) died in August 2016, leaving his entire estate (worth approximately GB£268,000) to his wife, Maria Seviour (“Maria”). It was understood that Colin and Maria planned to leave their estate equally to their four children from previous marriages (two children each), on second death. Following Colin’s death, Maria made a new Will, leaving out Colin’s two children, Carly Shapton (“Carly”) and her brother, due to Maria and Carly falling out. This resulted in Carly’s claim for reasonable financial provision under the 1975 Act, claiming that it was “unreasonable” to not inherit anything from her father’s estate given that they had an “incredibly close relationship.” She sought enough capital for a new house that had separate rooms for her two children, and an office for her husband.

The judges assessed the financial position of both parties. At the time of the hearing, Carly and her husband lived a comfortable lifestyle; both of them worked in the hospitality industry. Though the couple had no savings and had accrued credit card debts of GB£20,000, their house was valued at GB£240,000. On the other hand, Maria had been diagnosed with Motor Neuron Disease shortly after Colin’s death, which forced her to give up work and rely on state benefits, and lived in the modified home she previously shared with Colin. She was wheelchair bound at the time of the trial. Maria also had savings and bonds of approximately GB£57,000.

The judge dismissed Carly’s application, holding that it was “absolutely hopeless”. The judge commented that the modest size of the estate meant that “some 80% [of it] is tied up in Maria’s house, where she has lived for many years and wishes to remain for as long as possible. … [Additionally,] Maria suffers from a debilitating illness … She will need every penny to live out her remaining years in dignity and comfort.” By contrast, the judge found that Carly’s application “was motivated by the view that she was entitled as of right to one quarter of her father’s estate.” He also commented that Carly and her husband are “relatively well off, despite their GB£20,000 credit card debts” which he commented were “self-inflicted”. The couple’s “high combined income, which is more than adequate to meet their day-to-day needs.” The judge also enforced Colin and Maria’s testamentary freedom. The change to Maria’s will was “her prerogative.”

In addition to her failed claim, Carly was ordered to pay GB£12,500 in legal costs, which are relatively low, as Maria’s lawyer had acted on a pro-bono basis.

4. A successful estrangement case? Re H (Deceased) [2020] EWHC 1134 (Fam)

The father concerned died in 2016 (“the Deceased”), leaving behind an estate valued at GB£554,000 solely to the mother. The mother had sometime moved into a care facility after her husband’s death. The Deceased’s daughter (“C”) brought a claim for financial provision for a two-bedroom flat (approximated between GB£380,000 – 500,000), funding for continued psychological therapy, capital to replace her car, and “an income fund to meet the shortfall in her living expenses” for herself and her two minor children, as they lived on state benefits due to her long-term psychiatric illness which caused her to be unable to work. Her claim, together with inheritance tax (which has been abolished in Hong Kong in 2006) would have exceeded the value of the estate.

Applying the two-stage approach from Ilott, the judge asked two questions:

  1. Did the will make reasonable financial provision for C;
  2. If not, what reasonable financial provision ought now to be made for C?

Despite the fact that C, at the time of her father’s death, had been estranged from her parents for the last 10-20 years (the dates were disputed by the reporting psychiatrist and C), and the Deceased had not provided financial assistance to C for a number of years prior to his death, the judge awarded her approximately a quarter of the Deceased’s estate (GB£139,918). The judge held that she was in no doubt “in a position of real need” but also considered her estrangement and the fact that “the priority must be to ensure that C’s mother, the beneficiary under the will, has sufficient funds properly to be maintained for the rest of her days.”

The case also considered whether a Conditional Fee Agreement (“CFA”) – where fees are paid dependent on success of the case – could form part of an award under the 1975 Act. The judge followed a decision handed down some 9 days prior to the hearing (Bullock v Denton) and considered that a balance was to be struck between the C’s needs to fund the litigation and fairness to the estate. He awarded approximately half of the CFA she claimed, as her primary needs would not be met if she was required to meet the liability herself.

The reason behind the difference between the above UK cases and Hong Kong cases is that it is not a requirement for adult child to claim against the estate to show that he or she was financially maintained by the Deceased immediately prior to the death of the deceased under Inheritance (Provision for Family and Dependants) Act 1975, notwithstanding that the drafting of the Ordinance was predominately based on that similar legislation in the UK. Hong Kong has since the enactment of the legislation specifically drawn this distinction with the UK counterpart when it comes to adult child making a claim against the estate. In other words, it is within the prerogative of any person to disinherit his or her own child through making a Will in Hong Kong irrespective of whether such arrangement would create any financial hardship to that child and whether that child could end up relying on the social benefit as financial support due to such financial arrangement. While Hong Kong is not considered a “welfare state”, it remains controversial whether anyone should receive social benefits if his or her basic financial needs could potentially be covered by the wealth of his or her own parent.

FINAL CONSIDERATIONS

There are many ways a person can look to challenge the inheritance they may be due to receive and in recent years claims under the Inheritance (Provision for Family and Dependants) Ordinance, Cap. 481 have dramatically increased. In a growingly affluent society as Hong Kong changes to the traditional family structure and an increase in wealth – in particular when this is connected to the value of real estate – are believed to be part of the cause. Such claims can be quite significant and in often cases a dependant might receive as much as an individual would receive upon death of the spouse, while other family members might not receive as much inheritance as they initially expected.

Inheritance disputes of this nature, when seeking payment from the estate, can sometimes be resolved quickly through a flexible attitude and well-managed negotiation between the claiming parties and the beneficiaries. When this is not feasible, then litigation proceedings might become essential. Courts in Hong Kong generally have a discretion as to what they consider an appropriate and reasonable financial provision. 

To sum up, this is a technical and complex practice area and there are many factors to consider when evaluating if an individual may have a meritorious claim.  As such claim will be adjudicated by the Family Court, which has an overall discretionary jurisdiction, and each case is very fact sensitive, legal advice should be sought from experienced practitioners when deciding the appropriate relief to be sought and quantification of the claim. 

Partner, Hugill & Ip Solicitors

A qualified solicitor in Hong Kong since 2000, Alfred’s specialty is dispute resolution, an area in which he is ranked by Chambers & Partners Asia Pacific as a ‘Leading Individual’. Until recently he was partner in the Dispute Resolutions team and head of Private Client at a leading Hong Kong law firm. Alfred is skilled in helping individuals and their families manage personal and wealth-related matters, including trust and probate (both contentious and non-contentious), family office, and mental capacity issues. He is vastly experienced in all areas of probate and can help clients with estate planning, ranging from the proper drafting of a will to constructing complicated trusts, airtight from any potential perils.