Regent Fund Investment Ltd. v. Ng Shuk Kwan and Another

HCMP002301/1996

1996, No.MP 2301

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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Coram: Deputy Judge Pang in Court

Date of hearing: 28 November 1996

Date of handing down judgment: 12 March 1997

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J U D G M E N T

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1. This is a vendor and purchaser summons. The Plaintiff is the purchaser and the Defendants are the vendors of the property known as Shop B on the Ground floor of Nos.68-70A Hollywood Road. The

Sales and Purchase Agreement was dated 21 June 1996. The property is presently registered in the name of the Defendants as joint tenants and they became registered owners of the premises on 8 August 1990 by way of a Deed of Gift executed by the 1st named Defendant in favour of herself and the 2nd named Defendant.

2. The objection to title was raised by the Plaintiff's solicitors in their letter dated 22 June 1996 which reads :-

"Assignment Mem. No.4451276 (copy enclosed)

We note from the above Assignment that Ng Shuk Kwan assigned the property by way of gift to herself and Sze Hung Ling Judy as joint tenants. As the said Ng Shuk Kwan (being one of the Vendor in the present transaction) is still surviving, the property in question is therefore subject to a charge pursuant to the provisions of the Estate Duty Ordinance, Cap.111 and thus the title of the said property is defective (please refer to the authority of Lee Siu Man v. Chu Chi Wing & others in HCMP 91 of 1992).

Furthermore, we further note that the said Ng Suk Kwan is still retaining certain interest and benefit of and in the property in question, your attention is also drawn to Section 6(1)(c) of the Estate Duty Ordinance where the '3 years' period stated therein has not started to run yet."

3. The Plaintiff contends that the Defendants' title in the property is defective since there is always unity between joint tenants it can never be said that bona fide possession and enjoyment of the gifted property has been assumed by the donee to the entire exclusion of the donor.

4. In reply the Defendants' solicitors were of the view that the property will only be subject to a charge under the Ordinance if the 1st Defendant dies before the transaction is completed. They had therefore shown good title to the premises and the requisition had been sufficiently answered.

5. The parties are now before the court at the instance of the purchaser for a declaration that good title had not been shown by the vendor and that the deposit of $310,000 be returned to the Plaintiff.

6. The Plaintiff relied on the case of LEE Siu-man v. CHU Chi-wing [1992] HKC 266 where Godfrey, J., as he then was, held that the vendors who acquired the property in question under a deed of gift executed within three years of the time of the sale of the property and at which time the donor was still alive would have given rise to a "latent" charge for estate duty by virtue of s.6(1)(c) of the Estate Duty Ordinance, Cap.111. In the present case counsel argues that despite the Deed of Gift which was executed some 6 years ago, Madam Ng Shuk Kwan has never divested herself of her interest in the property in law and in fact because herself being one of the donees, the donees of the gift were not holding the property "to the entire exclusion of the donor". The three year period envisaged under the section has not started to run.

7. The Defendants' case, in summary, is that they have shown good title to the property and the requisition has been sufficiently answered.

8. The facts of this case are not dissimilar with Shum Lap Chun & anr. v. Au Mee Ling & others MP No.2845 of 1996 (unreported) a case which came before me. The grounds of objection raised by the Plaintiff in this case are the same. In Shum's case I took the view that upon completion of the sale of the property the premises no longer belong to the defendants and it cannot constitute "property passing upon her death" within the meaning of s.5 of the Estate Duty Ordinance. If the Plaintiff's objection to the title is sound, then both the premises and the sales proceeds of the premises will form part of the estate of Madam Ng. This result is startling indeed. I think the better view must be that only the sales proceeds could be the subject of estate duty calculation and how the estate duty will be assessed and in what proportion could not affect Plaintiff's rights in the property in any way.

9. The Plaintiff also argued that under s.6(1)(d) the property will be chargeable with estate duty under this section and the whole of the property is dutiable regardless of how much time has elapsed since the disposition. The section provides that estate duty is chargeable on :-

"... property which the deceased had been absolutely entitled, and which he has caused to be transferred to or vested in himself and any other person jointly, whether by disposition or otherwise ... so that the beneficial interest therein or in some part thereof passes or accrues by survivorship on his death to such other person."

10. In my view this section only applies to a situation where firstly the property was originally under the sole name of the deceased; and secondly at the time of the death of the deceased the property is in the joint ownership of the deceased and others and the beneficial interest of the property passes to another person by reason of the doctrine of survivorship. In the present case, however, once the flat is sold it will no longer be in the joint ownership of the Defendants and there can be no interest in the flat which is capable of being passed to the 2nd Defendant by survivorship. The Plaintiff's objection must therefore necessarily be misconceived.

11. For the reasons given I find that the requisitions raised by the Plaintiff in its letter dated 22 June 1996 had been sufficiently answered and the Plaintiff's Originating Summons is dismissed with costs.

Representation:

Mr Edward Shum, inst'd by M/s Leonard K.L. Heung & Co., for the Plaintiff

Mr Peter Ng, inst'd by M/s C.M. Li, Chow, Pang & Chan, for the Defendants