Overseas Trust Bank Ltd. v. Lee See Ching John and Another

CACV000238/1997

CACV 238/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 238 OF 1997

(ON APPEAL FROM HCMP NO. 820/1992)

AND IN THE MATTER OF an issue ordered to be tried

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Coram : Hon. Mortimer, V.P., Godfrey & Rogers, JJ.A.

Date of Hearing : 11 & 12 May 1999

Date of Judgment : 14 May 1999

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. On 22 August 1997 Pang, J resolved a dispute between the administrators of the estate of Mentor Lee deceased ("the father") and John Lee ("the son") in favour of the administrators. The son, and the administrators, each claimed to be entitled to the beneficial interest in the moneys at the date of the father's death standing to the credit of three fixed deposit accounts with Overseas Trust Bank Limited. These accounts were accounts in the name of the son. The son claimed to be beneficially entitled to the money but the administrators claimed that it was the father, not the son, who had been beneficially entitled to the money and that, accordingly, the beneficial interest in the money had, on the father's death, vested in them as the father's personal representatives. The son, dissatisfied with the judge's resolution of this dispute in the administrators' favour, now appeals.

Background

2. The background is succinctly and sufficiently set out by the judge in his judgment (referring to the father as "Mr. Lee") as follows :-

"Mr Lee came to Hong Kong in 1949 with his two households and had since been engaged in various types of business. All the evidence suggests that Mr Lee was a very methodical person and he maintained a detailed handwritten record of his bank deposits. He also had the habit of making regular entries into his diary and the contents suggest that he had little reservation in expressing his views on the people and on the events around him.

For many years the deceased operated Mentor Lee & Company which was in the business of importing and exporting nylon and polyester yarn. He had been extremely careful with monetary matters. Over the years Mr Lee accumulated his wealth gradually and by the time of his death in August 1991, he had a substantial amount of cash in fixed deposit accounts with various banks in Hong Kong.

Some of the accounts were in his own name, some in the names of his family members or trusted friends or employees. In respect of the accounts in other persons' names, he would ask the person to sign blank account opening forms and mandates, and he would operate the accounts without reference to the named account holder. All the account documents were sent to him; all the money deposited into the accounts came from him and he would, from time to time, withdraw money from those accounts for his own purpose.

The subject matter of the present action are the three fixed deposit accounts with the Overseas Trust Bank Limited in the name of the Defendant John Lee See Ching. They are :

Account A
Account No. :	3160051367
Date Opened :	29.11.89
Currency :	US Dollars
Opening Balance :	$625,000
Balance as on 18.8.91 :	$889,769.16
Account B
Account No. :	31600053397
Date Opened :	21.02.90
Currency :	US Dollars
Opening Balance :	$104,532.88
Balance as on 18.8.91 :	$288,486.80
Account C
Account No. :	9160262732
Date Opened :	22.01.90
Currency :	Canadian Dollars
Opening Balance :	$345,000
Balance as on 18.8.91 :	$352,957.76"

The issue

3. The questions in issue need careful identification. There is no doubt that the moneys standing to the credit of these accounts at the date of the father's death were derived from the father. As I see it, the questions are whether the father (1) had intended, or, alternatively, (2) is to be taken as having intended, that these moneys should belong to the son beneficially, notwithstanding the father's reservation of the right to manage the money and indeed to use it for his own purposes if he wished so to do.

4. As to (1), the answer can be provided only by evidence of the father's intention. If it can be shown by relevant and admissible evidence that the father did, or (as the case may be) did not, intend that the money should belong to the son beneficially, the answer to (1) would conclude the matter.

5. If, however, such relevant and admissible evidence is not there, or is too equivocal, to provide a satisfactory answer to (1), then (2) must be considered. As to (2), the case for the son is assisted by the "presumption" that, when a father causes property to be placed in the name of his son, he is to be taken as having intended that the son should take the property beneficially, not as nominee for the father (when the person in whose name the property is placed is a stranger, the "presumption" is the other way). This "presumption" (known as "the presumption of advancement") is, like all presumptions, a device "whereby the courts are entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence about it ..... It describes the readiness of the courts to draw inferences from common human experience ..... In reality it is no more than a slightly grandiose term for the ordinary process of judicial reasoning about facts" : see Phipson on Evidence, 14th edition (1990) at p.83. It follows that if there is evidence, even if only slight evidence, militating against the operation of the "presumption", the court is at liberty to treat the "presumption" as displaced. So in the absence of evidence as to the alleged donor's intention, the issue in every case is whether the "presumption" does or does not operate so as to provide an answer to the second question.

What evidence is relevant and admissible on these issues?

6. It has been clear since at least 1818 (see Murless v. Franklin, 1 Swanston's Reports 18) that, in cases like this, the only admissible evidence as to the intention of the father must apply to the time of the initial transaction. As Lord Eldon rules in the case cited : "subsequent acts will not enable him to convert an advancement for his sons into a beneficial purchase for himself". The case also establishes the important rule that it is impossible to qualify the effect of the transaction in question by transactions relative to other property. The leading case of Shephard v. Cartwright [1955] AC 431, which is to the same effect, makes it clear further that evidence of the acts and declarations of the parties before or at or immediately after the time of the transaction, constituting part of that transaction, is admissible for or against the party doing the act or making the declaration; but that evidence of subsequent acts or declarations is admissible only against the party doing or making them.

The proceedings below

7. The trial of the issue between the administrators and the son here took no less than 13 days. The judge received much evidence about the character of the father and about the entries made by the father both in his diaries, and in the records he kept in his own handwriting of bank deposits, in his own name and in the names of others, which he controlled. None of this material, however, provided any evidence as what was the father's intention, at the time of making the deposits he had made here in favour of the son, as to whether or not he had made such deposits, or any of them, by way of gift. All that material was, therefore, irrelevant and inadmissible in evidence.

8. The only relevant and admissible oral evidence before the judge as to the father's intention in relation to these deposits was the son's evidence that the father had told him, at the time of making the deposits, that he (the father) had made the deposits by way of gift to the son; but the judge rejected this self-serving evidence (as he was entitled to do) and I say no more about it.

9. The only relevant and admissible documentary evidence before the judge was a letter of 8 May 1991 drafted by the father and transcribed by an aunt. This letter contains some remarks critical of two other sons, after which it proceeds (according to the English translation) as follows :-

"Therefore some of my deposits in the bank were deposited under your name. I have enclosed herewith just two copies of them. Should circumstances require, [the judge read this as : 'When it becomes necessary'] I intend to give them to your little aunt and Miss Shing Man Kuen (presently the manager of my firm) who will pass them on to you in time for your disposal."

10. The son says this letter supports his case. The administrators say it supports theirs. For my part, I consider it equivocal, although if I were compelled to come to a conclusion on the point, I would incline to a conclusion favourable to the son, based on my view that the intention of the father expressed in relation to the copies relating to the deposits is more consistent with an intention to make a gift of the moneys to the son than with an intention that the balance at the date of his death was to fall into and form part of his estate.

The judgment below

11. The judge reserved consideration of the case for almost a year. He rightly rejected as irrelevant all the evidence placed before him as to other dealings by the father not part of the transactions in dispute. But he was much influenced by the diaries kept by the father (whom he described as "a meticulous and methodical person"). He found that when the father made monetary gifts to members of his family he would (said the judge) "without exception record the amount of the gift and the reasons for making [it]. Any acknowledgment from the recipient would also be faithfully recorded." The diaries did not in fact record the deposits in dispute at all, let alone whether they had been made by way of gift, and there was no record of any acknowledgment by the son of the deposits made in his name, facts the judge clearly regarded as most significant. But there was no evidence at all to support the judge's finding that in his diaries the father recorded "without exception" all gifts made by the father. There was, no doubt, evidence that this was the father's usual practice; but that fact is not admissible evidence probative of the administrators' case that the deposits in issue here (unrecorded in the diaries anyway) were not made so as to give the son that beneficial interest in the money which it might otherwise have been presumed the father intended to give him. The judge expressed his reason for his decision against the son as follows :-

"It is inconceivable that, considering the deceased's attitude towards money, he would have made such substantial dispositions without making any reference to them in his diary. This lack of reference, coupled with the absence of any form of acknowledgement from the Defendant, lead me to conclude that the deceased had never intended the money in the three accounts as gifts to the Defendant, at the time when the accounts were opened or at any thereafter."

12. This negative finding as to the father's intention (incorrectly described by the judge as a "positive finding") is based on inadmissible evidence and irrelevant considerations and cannot be supported. There was no admissible evidence before the judge on the basis of which he, or we, could find that these moneys, placed by the father on the name of his son, belonged not to the son but to the father.

Conclusion

13. It is perhaps an odd sort of "gift" with which we are concerned here, a gift of moneys controlled and managed by the donor and (in lawyers' language), liable to be revoked pro tanto by drawings made from the accounts by the donor for his own benefit during his lifetime. But these odd characteristics do not as a matter of law preclude the transaction being regarded as one in which the donee takes an immediate beneficial interest in the money.

14. In the words of Megarry, J. in In re Figgis, deceased [1969] 1 Ch. 123, at p.149 :-

"It may be that the correct analysis is that there is an immediate gift of a fluctuating and defeasible asset consisting of the chose in action for the time being constituting the balance in the bank account."

15. Megarry, J. thought the subject "worthy of academic disputation" (loc. cit.) But I would adopt this analysis; hold that it applies to the transactions in dispute here; and allow the son's appeal.

Costs

16. This was hostile litigation and (subject to hearing counsel) I would propose an order that the costs of the son both here and below be taxed (if not agreed) as between party and party and paid by the administrators. I would not make any order in respect of the administrators' costs. If they have already obtained an order of the court authorising them to prosecute these proceedings at the expense of the father's estate (what is known as a "Beddoe" order; see In re Beddoe [1893] 1 Ch. 547) they will be able to retain their costs (including the costs of the son which they will have to pay) out of the father's estate accordingly. If they have not already obtained such an order, it will be for consideration (though not in the present proceedings) whether they will be allowed to take their costs out of the father's estate or whether they will have to bear such costs themselves without recourse to the father's estate.

Rogers, J.A. :

17. I agree. I only wish to add a few words of my own because we are differing from the judgment below.

18. The issues have been set out in Godfrey, J.A.'s judgment. In this case, the primary question is whether there was evidence to show that when the deceased opened bank accounts in the name of the Defendant in the issue, he did not intend that what has been referred to as the "fluctuating and defeasible asset consisting of the chose in action for the time being constituting the balance in the bank account" should be a gift.

19. The Judge below held that the presumption that there was a gift was rebutted in the first place because there was no reference to the opening of the bank accounts or of the gifts in the deceased's diaries. In the second place, he coupled that with the lack of evidence of any form of acknowledgement of the gifts by the Defendant.

20. These are of course negative matters. To rely upon a negative matter or the absence of evidence in relation to an opposite contention when it is sought to prove, even on a low standard of proof, a positive fact is, in my view, tenuous. Having relied upon these two factors to draw the conclusion that the deceased never intended the money in the three accounts as gifts, the Judge referred to this as a positive finding of the intention of the deceased. In a sense, it was a positive finding. But it was based on the absence of evidence to the contrary. On analysis, in my view, it therefore came dangerously close to changing the onus of proof, light, as I have said, it may be.

21. In this case, however, the reliance upon the absence in the diaries of mention of facts as a proof that particular acts never happened or that the deceased did not have a particular intention, seems to me, to be flawed. In reference to the diaries, the Judge said :-

"On a number of occasions he (the deceased) would express his affection for his family members by making monetary gifts. When this was done he would, without exception, record the amount of the gift and the reasons for making them. Any acknowledgement from the recipient would also be faithfully recorded."

22. It can be said without risk of contradiction that the diaries record a number of very trivial and minor gifts as well as a number of substantial gifts. However, it cannot be assumed even on that basis that necessarily all gifts would have been recorded. Mr. Ma, S.C., appearing on behalf of the Plaintiff in the issue, put before us, as part of his submissions, a schedule of the gifts entitled "Extracts from deceased's diaries on gift". This schedule, far from demonstrating that all gifts were recorded, shows that either the deceased was highly erratic in the gifts which he gave, for example, for some years the New Year lai sees are recorded but in others, there is no reference to the lai sees, or else simply the proposition that a gift cannot have been given because reference to it does not appear in the diary is clearly wrong. For my part, I would only say that in the absence of any other indication or evidence, the approach that a gift could not have been given because reference to it has not been made must be wrong.

23. As to the absence of acknowledgement, the same considerations must apply. Furthermore, as Mr. Tang, S.C. appearing on behalf of the Defendant submitted, in the peculiar circumstances of this case, there may well have been good reason why the Defendant should not have acknowledged a gift from the deceased. Sheer embarrassment and difficulty in phraseology alone could be expected to have made it better for the Defendant to have left the matter unacknowledged.

24. I note also that the Judge did not say in relation to the diaries that it was more likely than not that the deceased would have recorded gifts or acknowledgements. That in itself would have been a different finding from that which he made. Even if the Judge had made such a finding, it would not, in my view, have been sufficient evidence that the balances in the accounts were not intended as gifts.

25. The records kept by the deceased of bank accounts and bank balances which are in the form of detailed schedules cannot, in my view, assist either. They are clearly detailed schedules. They appear to be in respect of accounts over which the deceased had control. As was pointed out by Mr. Tang, it would appear that in one instance at least the deceased recorded an account some of the moneys in which did not on any footing belong to the deceased. Minor though that matter may have been in comparison to the rest of the document, it demonstrates that it cannot be said that because the deceased recorded a bank deposit in the schedules, it necessarily meant that it was not intended as a gift.

26. The final matter is the letter of the 8th May 1991. Like Godfrey, J.A., I would not regard this letter as constituting part of the relevant evidence in this case. It would be admissible if it were a declaration against the interest on the part of the deceased. It would not be admissible, however, to show that the balances in the bank accounts were not intended as gifts because the letter is not contemporaneous with the opening of the bank accounts. The rule which is grounded in logic as well as law that subsequent declarations are inadmissible because there cannot be a change of heart and in effect a retraction of what in law was a gift, would exclude the letter from being taken in favour of the Plaintiff in this case.

27. I incline to the view, in any event, that paragraph 3 of the letter does indicate that the deceased regarded the balances in the bank accounts, whichever bank accounts were in fact being referred to in that letter, as gifts intended for the Defendant. It seems to me that this part of the letter was written with a clear reference to the deceased's own death and had the bank accounts themselves been positively identified rather than inferentially, I consider that the argument that they could be relied upon by the Defendant might have had a much greater chance of success.

28. In the circumstances, it is unnecessary to give further consideration to Mr. Tang's argument that the question should be asked "Why were the bank accounts put in the Defendant's name?" The question is to a certain extent implicit in the consideration of whether the presumption of advancement is applicable. Certainly, if the question were asked here, no relevant answer springs to mind nor has any been given other than gifts were intended. It was suggested that it might have been to show trust to the Defendant. But given the Defendant's geographical location and the fact that the accounts were operated by the deceased, that is too tenuous. It seems that if that question were asked, the only answer on the present admissible evidence could be that the balances in the accounts were intended as gifts, in other words that the presumption of advancement would apply.

Mortimer V-P:

29. I also would allow this appeal and would add a few words of my own.

The issue

30. I adopt with respect Godfrey JA's identification of the issues and the effect of the presumption of advancement. As this presumption is displaced only by relevant and admissible evidence, even if that is only slight, the issue for this Court is whether there was relevant and admissible evidence upon which it was open to the judge to conclude that the father never intended the money in the three accounts as gifts to the son.

Background

31. Admissible evidence to prove the father's intention in relation to these accounts is limited to his acts or declarations at the time of the gifts, or so near them as to be part of the transactions, and to later acts or declarations against his interests and the interests of his estate, see Shephard v Cartwright [1955] AC 431 at 445.

32. It is not in dispute that the relevant accounts were in the son's name, but the father operated them as if they were his own until his death.

33. The son's evidence was rejected below. Mr Tang SC, for the son, has demonstrated that some of the judge's reasons for not accepting the son were erroneous. For example, the judge wrongly thought that the initial correspondence from the son to the bank about these accounts after father's death was inconsistent with his evidence. This was not so. However, this point leads nowhere because at most, if the judge's decision on credibility is demonstrated to be flawed, we could have ordered a re-trial but that is not asked for.

The evidence

34. The evidence which the judge took into account was partly oral or partly documentary. As to the documentary evidence he had before him letters from the father to the son dated 31 December 1976 and 8 May 1991; the father's diaries; and what was described as "account schedules". These were meticulous ledger records of all the deposit accounts controlled and used by father in his own hand. Of these documents, the "account schedules" and the letter of 31 December 1997 were inadmissible beyond argument.

The letter of 8 May 1991

35. First, this leaves the letter of 8 May 1991. As it was not contemporaneous with the gifts, at most this was admissible as a declaration against interest. It either tends to rebut the presumption therefore, or it is of no effect whatsoever.

36. To get a flavour of the relevant part of this letter I read the last two paragraphs.

"When will be your next vacation? Can you come see us in Hong Kong again? I am now in the eighties and can feel that my strength is deteriorating. I am afraid that I do not have much time left in this word to see you. Amongst the four sons of your mother, you are the only one who has always maintained your filial piety. As to the other three persons, one has fled to a far away place. [I interpose that he had died.] The remaining two have both caused me to lose a tremendous amount of money on some pretext or other; they never come to my place to visit me at other times they have even said to outsiders 'why hasn't this old codger died yet?!" So extremely unfaithful. Therefore, some of my deposits in the bank were deposited under your name. I have enclosed herewith just two copies of them. Should circumstances require, I intend to give them to your little aunt and Miss Ching Man Yuen (presently the manager of my firm) who will pass them on to you in time for your disposal.

Since the defection of Sam Mo, the business of my firm has been running more and more smoothly, the sales volume has also increased substantially and profits have further increased. This is a path to fortune, are you two interested in coming back to join us?"

The judge dealt with that letter as follows:

"Even if one is confined to this narrower meaning [the judge meant confirming the gifts]I cannot say that the contents of the letter support the Defendant's contention. From the various letters written by the deceased and from the entries in the diaries over the years, the deceased impressed me as a person who was able to express himself clearly with words. If it was his intention that the moneys were a gift, he would have no difficulty in reducing his thoughts into writing."

He then referred to part of the letter and said:

"I cannot say that I am persuaded by the argument that this letter is an admission by the deceased of his having made a gift to the Defendant."

He noted that there was no mention of the word death. Of course the judge was right to say that there was no mention of the word "death" but the father was certainly had his demise in mind.

37. I am content to hold that the judge was in a better position to conclude that the letter was too unclear to be admissible as a declaration against interest and therefore was inadmissible. But I leave it with the comment that it would not be impossible to hold that in contemplation of his demise the father was informing the son that the balance in these accounts were gifts to him.

The diaries

38. The judge was left then with the diaries. There is a question whether the diaries are admissible. But at most they were admissible in the way the judge considered them as a negative declaration against interest because of the absence of any note in them about the accounts or any gift of them. This, the judge coupled with an assessment of the father's character and habits from other evidence such as the "account schedules".

Was it open to the judge to find as he did?

39. There was no reference in the diaries to the disputed accounts. The question, therefore, is whether it was open to the judge on this negative finding to infer a positive intention. The foundation for the judge's findings upon the father's character and habits enabled him, so the judge thought, to make this kind of assessment. The account schedules, though inadmissible to show intention, speak volumes of the father's meticulous approach to his ledger transactions and his accounts. They border on the obsessive and he must have devoted much time to them. But however meticulous he was, an examination of the diaries does not bear out the judge's findings upon which his final conclusion was based. His conclusion was:

"It is inconceivable that, considering the deceased's attitude towards money, he would have made such substantial dispositions without making any reference to them in his diary. This lack of reference, coupled with the absence of any form of acknowledgement from the Defendant, lead me to conclude that the deceased had never intended the money in the three accounts as gifts to the Defendant, at the time when the accounts were opened or at any time thereafter."

Earlier, as the basis for his conclusion, the judge said about the father:

"I think it is also fair for me to say that his approval or otherwise of his children is sometimes translated into monetary terms. On a number of occasions he would express his affection for his family members by making monetary gifts. When this was done he would, without exception, record the amount of the gift and the reasons for making them." (my emphasis)

But it was not demonstrated on the evidence that without exception he would record gifts and the reasons for them. Some were recorded but an examination of the diaries showed he did not record everything of this nature without exception. Even if a proper foundation had been laid, it would be almost impossible for the judge to have inferred from the absence of reference a positive finding on the father's intention. But as it is, I am driven to say that there was no basis in evidence upon which it was open to the judge to find as he did.

The nature of the gift

40. I turn finally to the nature of the gift. The gift by the father - in Megarry J's words in In re Figgis [1969] 1 Ch 123 at 149 - was "an immediate gift of a fluctuating and defeasible asset consisting of the chose in action for the time being constituting the balance in the bank account", is a strange legal animal indeed. However, even though it is a gift of something which may turn out to be nothing, it is recognised by the law, in spite of the difficulty in providing any wholly sound, legal analysis.

Conclusion

41. I would conclude, therefore, by holding that there was no evidence upon which it was open to the judge to reach his conclusion that the presumption of advancement was rebutted. The presumption must apply. The moneys in the accounts were gifts to the son of the kind analysed by Megarry J.

42. In those circumstances I would also allow the appeal. That is the order of the Court.

Representation:

Mr. Geoffrey Ma, S.C. & Mr. Godfrey Lam (M/s Wilkinson & Grist) for Plaintiff in the issue (Respondent)

Mr. Robert Tang, S.C. & Mr. Horace Wong (M/s Hobson & Ma) for Defendant in the issue (Appellant)