Shanti Ramesh Ramchandani v. The Commissioner of Estate Duty
Read the full judgment text of HCMP 586/1979 on BabelCite. This High Court CFI judgment.
1. By the present summons before me, the parties seek a ruling on the following question:
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HCMP000586/1979
Coram: Rhind, J. Date of Judgment: 5th January, 1981. ----------------- JUDGMENT ----------------- 1. By the present summons before me, the parties seek a ruling on the following question: "Whether on the true construction of Policy No. 2346667 issued by the Manufacturers Life Insurance Company on the life of Rajan Bhagwandas on 21st December, 1973 and in the events which have happened Estate Duty under the Estate Duty Ordinance (Cap. 111) is payable in respect of the said policy upon the death of the said Rajan Bhagwandas?" 2. A further question about the actual amount of duty payable if my answer to that first question turns out to be "Yes", no longer calls for determination, as there is no dispute between the parties as to amount in that eventuality. 3. There is no dispute on the facts. 4. Rajan Bhagwandas was a resident of Hong Kong who was born here on 7th February. 1954 and died here on 29th October, 1974. Hereafter he will be described as, "the deceased". 5. On 28th November, 1973, in Hong Kong, the deceased signed a printed application form (incorporated in Exh.P1) for life insurance with The Manufacturers Life Insurance Company (hereafter called "the Company). This was done in the presence of a Mr. Motwani, a life underwriter, whose signature. I presume it is, appears on the form above the description. "Signature of agent". 6. This application form, which the deceased signed, had printed at its head, "Application for Insurance to the Manufacturers Life Insurance Company Head Office: Toronto Canada. A Mutual Company Incorporated In Canada With Limited Liability". In the left hand margin of the form is printed the word, "Agency" together with an arrow pointing to the words "Hong Kong", which can be seen to have been put on with a chop. 7. At the time the deceased signed the application form, and ever since, the Company has maintained a branch office in Hong Kong. 8. In the appropriate box on the application form, the face amount of the proposed policy was shown as "Can. $100,000". meaning one hundred thousand Canadian dollars. 9. On the occasion of signing this application form, the deceased handed Mr. Motwani a Canadian dollar draft for the sum of Can. $1,391.50, being the first year's premium, in favour of the Company. 10. In exchange for his draft, the deceased got what was described as a "Conditional Receipt", dated 28th November, 1973, issued by the Company's Hong Kong branch. That receipt bore the words:
11. Conditions included on that receipt which might have some relevance are one about the insurance coming into effect on a particular date if "the proposed life insured was, in the opinion of the Company's authorized officers at its Head Office insurable according to the Company's rules ......" and another one: "The amount of any insurance on the proposed life insured under this conditional receipt will not exceed Hong Kong $500,000, Canadian $100,000, United States $100,000 or £ sterling 55,000, as the case may be .........". 12. Before leaving the application form signed by the deceased, two further details can be mentioned. One is that it contained a declaration in the following terms:-
Secondly, in the space provided for an applicant to state his name, there appear the words in brackets "(Name in Chinese characters if applicable)" and those same words appear in the space where the applicant is to sign at the end of the form. 13. The Company's Head Office in Canada in due course issued the deceased with Policy No. 2346667 on 21st December, 1973. That policy, which is the subject matter of the present action, was forwarded to the deceased in Hong Kong through the Company's Hong Kong branch manager, and it remained here till the deceased's death. 14. Attention can now be turned to the contents of that policy. 15. Basically, the policy was on the whole of the deceased's life, with the benefits under the policy accruing to a designated beneficiary on the deceased's death. In practical terms, this meant that the deceased himself did not stand to receive anything under the policy, but the beneficiary he designated under the policy became entitled to the proceeds of the policy, viz one hundred thousand Canadian dollars plus profits on the deceased's dying. 16. Some features and provisions of the policy call for mention. 17. Nowhere on the policy itself is any reference made to Hong Kong, except to the extent that the policy incorporates the application forms leading up to the grant of the policy, and on those application forms there are some references to Hong Kong. 18. On the front of the policy the name, "The Manufacturers Life Insurance Company" appears with the words put on by chop underneath: "A mutual company incorporated in Canada in 1887 with limited liability." On the back of the policy, the Company's name again appears, this time showing the address, "200, Bloor Street East, Toronto, Canada M4W 1E4" under it. 19. Note can be taken of the following provisions in the policy:
20. On the back of the policy is what is described as an "Important Notice" in the following terms:
21. The beneficiary designated by the deceased under the policy was his sister's son, Ranjiv Ramesh Ramchandani (hereafter referred to as "the beneficiary") who was born in Singapore in 1970 and is a resident there. During the beneficiary's minority, the deceased appointed the Plaintiff, who is both the deceased's sister, and the beneficiary's mother, to receive any payments due under the policy in trust for the beneficiary. She too is a resident of Singapore. 22. Before the time came round for the deceased to make the second annual, payment of premium under the policy, he had died. 23. The areas of dispute between the parties is extremely narrow. 24. They both agree that the only head of the Estate Duty Ordinance, Cap.111, under which duty could be leviable on the policy monies is s.6(1)(f) which provides:
25. While acknowledging that s.6(1)(f) describes the type of beneficial interest which has accrued to the beneficiary under the policy on the deceased's death, the Plaintiff disputes there can be any liability for duty in the face of s.10(1)(b) of the Estate Duty Ordinance which provides:-
26. This case, in effect, boils down to the narrow issue of whether the proceeds arising under the policy can be said to be property situated within Hong Kong, the Defendant asserting that they are, while the Plaintiff maintains the contrary. 27. Trying to pin-point the location (or, as it is normally called in this branch of the law, "the situs") of the proceeds of an insurance policy issued by an international company with branches in more than one country can only be regarded as a somewhat artificial exercise, the out-come of which can hinge upon whether the insurance policy under which the monies fell due was a specialty or merely a simple contract. Specialty 28. If the policy were a specialty then the proceeds payable under it would have to be treated as situated where the policy happened to be at the time of the deceased's death, i.e., Hong Kong. Gurney v Rawlins(1); Stamps Comr v Hope(2); Toronto General Trusts Corporation v R.(3); Royal Trust Co., v A-G for Alberta(4). 29. Counsel for the Defendant raised the possibility that the policy might be a specialty, but did not press the point, indicating that he was content to have the case decided on the basis that the policy was no more than a simple contract. As the point has been raised, albeit less than whole-heartedly. I must therefore rule on it. 30. In favour of the view that the policy is a deed is the fact that on its face, it bears the Company's impressed seal with the signature of the Company's President alongside. Moreover, in the part of the General Provisions of the policy entitled "Beneficiary designation" there is a reference to "covenants", a word normally associated with deeds. I will set out the "Beneficiary designation".
Apart from that, nowhere else in the policy is there any reference to "covenants". 31. Pointing away from the policy being a specialty is the absence of the word "deed" any where, and the absence of the formula "signed, sealed and delivered" which one normally finds in a deed. 32. Merely because a document bears a seal does not necessarily mean it is a deed. See Clement v Gunhouse(5); The Solvency Mutual Guarantee Company v Froane(6); Electricity Meter Manufacturing Coy. Ltd., v Manufacturers Products Proprietary Ltd.,(7). A seal may be impressed merely for identification or authentication rather than for the purpose of constituting a document as a deed. 33. Whether the affixing of a seal will have rendered a document a deed will depend on the intention with which it was done. In the case before me there is no direct evidence of the intention which attended the impressing of the seal on the policy, and there is insufficient evidence for me to infer that it was done with the intention of executing it as a deed. I do not even know whether any formalities required by the Company's articles for executing a deed have been complied with. 34. In the circumstances I am not prepared to conclude that the policy is a specialty. 35. Hence, I must treat the policy as giving rise to an obligation in simple contract only. Simple Contract 36. A chose in action such as the debt arising in simple contract under the insurance policy in the present case has its situs where the debtor, i.e. the Company, resides. Both parties are agreed on that basic proposition of law. The problem is determining where an international company like the Company in the present case resides. Which of its residences should be treated as relevant for determining the situs of the insurance proceeds - should it be Hong Kong, Canada or somewhere else? It will only be if the answer is "Hong Kong" that the Defendant will succeed. 37. There is no dispute as to what is the correct test for resolving this dispute; the only problem is determining how the test applies to the facts of the present case. 38. That test is to be found in the words of Pearson, J. in F. & K. Jabbour v. Custodian of Israeli Absentee Property (8)at 146:
39. That passage sums up the effect of the leading case in this field, New York Life Insurance Company v Public Trustee(9). 40. As the Defendant would have it, the primary place of payment of these insurance monies is Hong Kong, because, in Crown Counsel's submission, there is no provision in the insurance policy about where the monies are required to be paid, and, according to the ordinary course of business, so he maintains, the monies would be paid in Hong Kong. 41. If, on a proper interpretation of the contract embodied in the insurance policy, it is possible to determine where the monies are primarily payable, that will dispose of the case. In such circumstances, the very terms of the contract would serve to "localize" the debt" There is then no longer any scope for going on to consider where payment would be made according to the ordinary course of business. As Warrington L.J. put it in New York Life Insurance Co., v Public Trustee at 117
Merely from the terms of the contract in the case before me, the court is able to arrive at a conclusion as to the situs of the monies when they became payable under the policy. Determinative of this question is the endorsement on the policy: "Currency. All amounts payable either to or by the Company will be payable by bankers' demands drafts on Toronto, Canada for Canadian Dollars." 42. The signifiance of the inclusion of such words in the context of where a debt is primarily payable is made clear by the cases of Pick v Manufacturers Life Insurance Company(10) and Rossano v Manufacturers' Life Insurance Company(11). 43. Those cases show that where, as here, a debt is to be discharged by means of a banker's draft, the primary place of payment is the place where the draft is required to be honoured, which in the present case is explicitly stated by the policy to be Toronto, Canada. Thus, in my opinion Toronto, Canada was the situs of the policy monies arising on the death of the deceased. 44. It is, perhaps, worth noting that, in the Pick case, the judge saw fit to mention that the debtor company with which he was there concerned had not undertaken by the contract on which it was being sued to maintain any branches other than its head office throughout the duration of the contract. Exactly the same appplies in the case of the contract before me now. 45. This contract, it will be remembered, was on the whole life of a man aged only 20 in 1973, when it was made. How far the contracting parties contemplated it might stretch into the future can be gauged from a term which makes provision for varying the premium from the year 2018 onwards. 46. I would be surprised in those circumstances if the parties to the policy would ever have intended that the primary place of payment should be Hong Kong, bearing in mind the constitutional uncertainties which surround the Colony from 1997 onwards. 47. For the Defendant it has been contended that what was said in the Pick and Rossano cases was obiter because those cases fell to be decided on the issue of the proper law of a contract, rather than the situs of a chose in action. Perhaps the observations on situs were not strictly necessary to the decision in Pick, and may be the same could be said of Rossano, albeit to a lesser extent, but, nonetheless, the opinions of the judges on situs in both of those cases were obviously carefully considered, and whether obiter or not, their opinions commend themselves to me as correct. 48. Counsel for the Defendant urged me to decide this case by confining myself to the principles enunciated by the Court of Appeal in New York Life Insurance Company v Public Trustee while ignoring the decisions in Pick and Rossano which never went further than first instance. Were there any conflict among any of those decisions I might have been inclined to follow such a course, but, as I understand them, there is no disharmony discernible. 49. Both Pick and Rossaro are illustrations of the principle laid down by New York Life Insurance Company v Public Trustee that one looks to the terms of the contract first of all to see whether the contract itself lays down where the debt is primarily payable. 50. Defence counsel complained in effect that neither Pick nor Rossano paid sufficient attention to the question of where the debt would have been paid in the ordinary course of business. The short answer to that is that there was no need to, for in both of those cases, the debt had been localised by the very terms of the contract, so the topic of where payment might have been made according to the ordinary course of business never came into play. 51. It cannot be disputed that many of the circumstances leading up to the issuing of the policy, and even subsequent to that, do have a Hong Kong connection. Hong Kong clearly features in such workaday matters as, for example, where the application form for the policy was filled in, where the Canadian dollar draft for the first premium was handed over, and where the policy was ultimately delivered to the deceased. More likely than not, I suppose, the deceased would have delivered Canadian drafts for subsequent premiums to someone in the Company's branch office here in Hong Kong, had he lived. Moreover, it is interesting to note that after the deceased died it was not to the Head Office in Canada but to the branch office in Hong Kong that those interested in receiving payment of the proceeds found it natural to make their initial application; I think it is on account of concentrating on such homely details rather than looking to the terms of the policy that the Crown has misled itself into believing that the situs of the debt was Hong Kong. 52. Lest it might be thought that Counsel for the Plaintiff was content to steer by a single light, I feel I should add out of deference to him that he advanced a whole array of arguments in addition to the main one dealt with in this judgment. However, I have not found it necessary to refer to his other arguments, as he succeeds in any event on the ground I have stated. 53. In view of the foregoing, my formal answer to the first question in the summons, as set out at the beginning of this judgment, is "No".
Representation: G. Horton (Hastings & Co.,) for Plaintiff B. Barlow, Crown Counsel, for Defendant (1) (1836) 2 M & W 87 (2) [1891] A.C. 476 (3) [1919] A.C. 679 (4) [1930] A.C. 144 (5) 5 Esp. 82 (6) 1861 Exch. 193 (7) 1930 N.S.W. S.R. 422 (8) [1954] 1 W.L.R. 139 (9) [1924] 2 Ch. 101 (10) [1958] 2 Lloyd's Rep. 93 (11) [1963] 2 Q.B. 352 |