Yung Shu Wu v. Vivienne Sung Wu and Others

FACV No.17 of 2009

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO.17 OF 2009 (CIVIL)

(ON APPEAL FROM CACV NO. 258 OF 2008)

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FACV No.18 of 2009

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO.18 OF 2009 (CIVIL)

(ON APPEAL FROM CACV NO. 258 OF 2008)

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J U D G M E N T

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Mr Justice Bokhary PJ :

1.I agree with the judgment of Lord Walker of Gestingthorpe NPJ.

Mr Justice Chan PJ :

2.I agree with the judgment of Lord Walker of Gestingthorpe NPJ.

Mr Justice Ribeiro PJ :

3.I agree with the judgment of Lord Walker of Gestingthorpe NPJ.

Mr Justice Mortimer NPJ :

4.I agree with the judgment of Lord Walker of Gestingthorpe NPJ.

Lord Walker of Gestingthorpe NPJ :

5.This appeal is concerned with the estate of Kwang Shu Wu, otherwise Wu Kwang Shu (“the deceased”) who died in Hangzhou on 19 December 2002, domiciled in Hong Kong.  The proceedings were commenced by the deceased’s brother the plaintiff Yung Shu Wu (“Mr Y.S. Wu”) as his executor.  The proceedings were originally framed as an application for construction of the deceased’s will, but it became apparent that there were disputed issues as to what assets were comprised in the deceased’s estate at his death.  The proceedings were ordered to be continued as if commenced by writ, and were eventually tried by Deputy High Court Judge L. Chan as a witness action which occupied ten days of the court’s time.  The evidence touched on many aspects of the deceased’s family and financial affairs, and especially the events of the last year of his life, when he was known to be suffering from a fatal illness.

6.Many of the primary facts are no longer in dispute, but they need to be set out in some detail in order to understand the issues which are in dispute.  The summary that follows relies heavily on the early part of the deputy judge’s judgment.

The background facts

7.The deceased was born in Shanghai in 1937.  His father had a distinguished career in Chinese public life, culminating in being governor of Xinjiang province.  When the war began the family managed to get to Hong Kong and then eventually to the USA. The deceased completed his education in New York, studying engineering and embarking on a Ph.D. on aspects of aeronautical engineering.  He married his first wife, Belinda, in 1969 or 1970, shortly before he obtained his Ph.D. from New York University.  He and Belinda had one child, Geraldine Amber, born in 1974.  Geraldine is the second defendant in these proceedings but she took no part in the trial or the subsequent appeals.

8.Belinda died in 1981.  The deceased was then working as a senior employee of a company engaged in engineering consultancy.  He had a rented apartment at Waterside Plaza, New York, where his daughter was looked after by a housekeeper during his absences on business.  His work took him to mainland China and to Hong Kong and it was first in Shanghai, and then in Hong Kong, in 1983, that he met his second wife, Vivienne Sung Wu, otherwise Wu Sung Ping Vivienne, the first defendant.

9.Vivienne was born in Shanghai in 1952 and was educated there.  She came from a wealthy family. She came to Hong Kong on her own in 1979.  At first she had a managerial job but in 1981 she set up her own business in the fur trade.  In 1983 she was able to obtain a mortgage and buy a flat in Happy Valley.

10.The deceased and Vivienne were married in Hong Kong on 11 November 1983.  Soon after their marriage they travelled to New York and stayed at the Waterside Plaza apartment for two months.  But Vivienne and Geraldine (then aged nine) could not (as the deputy judge put it) get along with each other. 

11.Because of the antipathy between Vivienne and her stepdaughter, the deceased and Vivienne agreed to organize their lives so as to minimize (indeed, for about 18 years so as to eliminate) contact between them.  He and Vivienne made their home at the Happy Valley flat in Hong Kong.  Geraldine remained in the care of the housekeeper in New York, where the deceased would visit her during her school holidays.  The deceased’s employer arranged to second him to work in and from Hong Kong, and Vivienne continued to run her fur trading business.

12.The deceased and Vivienne had two children, both sons: Christopher Charles born on 10 August 1986 and Sean Edward born on 23 October 1988.  They are respectively the third and fourth defendants.  They were represented (jointly as between themselves, but separately from their mother) at trial.  They have not however taken part in the subsequent appeals.

13.The births of their sons were accompanied by some important changes in the couple’s way of life.  In 1987 they moved to a flat at Grand Garden, South Bay.  They bought it with a mortgage and it was held by them as joint tenants.  In the same year Vivienne started to wind down her business, and closed it down in 1990.  In 1988 or 1989 the deceased resigned from his employment and started his own consultancy business, working from an office at home.

14.The deputy judge found that Vivienne assisted the deceased in developing and expanding his consultancy business.  The deputy judge added (para.36),

“She also claimed to be talented in public relations and produced some photographs taken with the leaders of the Mainland Government.”

The cautious tone of this sentence reflects a difference between the parties as to whether it was the deceased’s own personality, background and connections, or Vivienne’s, that made a greater contribution to the success of the deceased’s business in mainland China.  It seems unnecessary to pursue that question.  It is clear that both of them were talented and energetic individuals with firm family roots on the mainland, and the precise quantification of their contributions (even if feasible) would not be particularly relevant, and certainly not determinative, in relation to the issues on this appeal.

15.The business was very successful.  The deceased diversified into consultancy on banking as well as engineering.  In 1997 he and Vivienne obtained a mortgage and bought a holiday home at Honolulu.  Vivienne made a down payment of US$80,000 and the deceased undertook payments under the mortgage.  This property was vested in them in a form of tenure, recognized by the law of Hawaii, which was equivalent to joint tenancy.  In 2000 Christopher, the elder son, went to boarding school in Boston, and at the same time Sean, the younger son, started his secondary schooling in Honolulu.

The deceased’s financial arrangements

16.At this point it is convenient to interrupt the chronological narrative in order to cover two particular topics: the financial arrangements made by the deceased and Vivienne, and the deceased’s earlier testamentary dispositions (his first will with two codicils and his second will, revoked by his third and last will). The deceased and Vivienne made use of quite a large number of corporate vehicles, some of which are irrelevant or peripheral to the issues to be decided on this appeal (the way in which the proceedings have evolved has not, it seems, led to all contentious issues between the parties being brought forward for judicial determination at the same time).  The four companies of most immediate relevance were as follows:

(1)     The fifth defendant Good Harvest Capital Ltd (“Good Harvest”) was a Liberian company acquired in 1984 by the deceased and Vivienne.  Each of them held one share and they were its only officers.

(2)     The sixth defendant Hacienda Pacific Ltd (“Hacienda”) was a BVI company acquired by the deceased in 1997. Until the end of 2001 it was the deceased’s own corporate vehicle.  He was its only shareholder and its only director.

(3)     The seventh defendant Vacha Ltd (“Vacha”) was a Liberian company acquired in 1986 by the deceased and Vivienne.  It was similar to Good Harvest in that each of them held one share and they were the only officers.

(4)     Cardinal Pacific Ltd (“Cardinal”) was a BVI company acquired by Vivienne in 1997.  It was Vivienne’s own corporate vehicle.  She was its only shareholder and its only officer.

Good Harvest, Hacienda and Vacha have not been represented at any stage in the proceedings.  Nor has the eighth defendant, The Bank of East Asia Ltd (“BEA”).

17.The deputy judge found in relation to Good Harvest and Vacha that the deceased and Vivienne acquired them (para.39):

“… for use as their nominees in the business. They also used these two companies to hold shares in their business ventures. Either of them could operate the bank accounts of the companies singly. Vivienne was responsible for operating the accounts on a day-to-day basis.”

The deputy judge did not make any finding as to why there were two companies, Good Harvest and Vacha, for apparently similar purposes. He did find that the deceased and Vivienne kept some of their personal savings and investments in Hacienda and Cardinal respectively.  He accepted Vivienne’s evidence that when the business was flourishing the deceased paid Vivienne a monthly household allowance of US$15,000 to US$20,000, but made no finding about which bank accounts were used for these payments.

18.Good Harvest had accounts with First Pacific Bank (“FPB”) and BEA.  Hacienda had accounts with FPB, BEA and Standard Chartered.  Vacha had accounts with BEA and Bank of China.  FPB was taken over by BEA in 2000 and in March 2002 the FPB accounts were transferred to BEA.  In many cases the same company had more than one account with a bank.  Most were denominated in US$, but some were denominated in HK$.  All these accounts were at branches in Hong Kong.

19.The Court of Appeal accepted (para.46 of the judgment of Rogers VP, with whom Le Pichon JA and Poon J agreed) the deputy judge’s finding that Good Harvest and Vacha were simply nominees, with no beneficial interest in the credit balances which the banks held in their names.  The finding was consistent with the fact that no books of account had been kept, or financial statements prepared, for the companies.  There are therefore concurrent findings of fact on this point which this Court would not normally disturb, unless they were shown to be based on an error of law.  The Court of Appeal did not expressly approve the deputy judge’s conclusion that Hacienda was also merely a nominee.  That was probably because the Court of Appeal was differing from the deputy judge in his final conclusion about Hacienda.  But on the preliminary question of whether Hacienda was merely a nominee there is no good reason for distinguishing between the three companies.

20.The deceased had other business interests and investments which were not fully explored in the evidence and on which the deputy judge made no definite findings.  But it is appropriate to mention two other companies.  A company named Sunny Score Investments Ltd (“Sunny Score”) paid US$5m to Hacienda in two tranches, one in October 2001 and the other in March 2002.  The deputy judge made no findings about the purpose of these transfers and referred to them only in passing (para.121) to record Vivienne’s counsel’s statement that Vivienne did not claim that the payments by Sunny Score should have been made to Vacha.  Since Vivienne had withdrawn most of this sum from Hacienda (mostly via Good Harvest) that disclaimer is unsurprising.

21.It is also appropriate to mention the deceased’s investment in First Sino Bank (“First Sino”), of which he was the president.  In 1995 he borrowed US$5m, interest-free and repayable within ten years, in order to invest in First Sino, which was based in Shanghai.  He held this investment very indirectly, through a chain of companies (Vacha, Athena Resources Ltd, and Lotus Worldwide Ltd) and it is not clear from the evidence whether his stake was 12.5 per cent (as the deputy judge stated) or some other fraction.  What is clear, and relevant, is that during the last year of his life the deceased successfully realized this investment at a profit, after paying off the loan, of about US$4m.  This took place under a written (manuscript) agreement dated 8 August 2002.  This profit was on or about 19 August 2002 paid into an account on which Vivienne was not a signatory, and this added to the acrimony which marred his last year.  But that is to run ahead of the chronology.

The deceased’s earlier testamentary dispositions

22.The validity of the deceased’s third and last will, dated 26 October 2002, has never been in issue, despite the fact that he was then gravely ill, and died within two months.  It is therefore a little surprising that so much time was devoted in the courts below to discussion of earlier testamentary dispositions which had undoubtedly been revoked.  But they are of some relevance as part of the shifting pattern of the family’s economic and emotional dynamics, and so they call for brief mention.

23.The deceased made his first will in New York on 9 November 1981, after his first wife’s death.  He left everything to Geraldine (with gifts over if she died under 23).  Mr Frey, a New York lawyer who had advised the deceased since 1977, testified that under the law of New York this will was not revoked by the deceased’s marriage to Vivienne, but that she became entitled to a minimum share of his estate regardless of what was in his will.

24.The deceased made his first codicil in New York on 29 May 1986.  He left Vivienne a life interest in one-third of his estate (the minimum provision required by New York law).  He expressly recorded that “for reasons known to me” he was making no provision for Vivienne’s future child (at the date of the codicil she would have been about six months pregnant).  These provisions suggest, and other evidence from Mr Frey tends to confirm, that the marriage was then in a fragile state.

25.The deceased made a second codicil in New York on 16 November 1989.  Its terms suggest that the marriage had become more stable.  He modified the first codicil so as to leave the South Bay flat to Vivienne (who was already a joint tenant of it) and the rest of his property in Hong Kong to Christopher and Sean (with gifts over if either or both died under 23).

26.The testator made his second will in Honolulu on 15 January 2002.  Its terms were brief and, on the face of it, surprising.  He revoked his first will and its codicils and appointed Vivienne as his personal representative.  He gave Vivienne his checking account with Citibank in New York.  All the rest of his estate, wherever situated, he gave to Geraldine.  This second will was prepared by Mr Thomas L. Mui, a Honolulu lawyer.

27.The terms of the will are at least partly explained by the fact that the deceased had recently learned that he was gravely ill.  There had been discussions between the deceased and Vivienne about the financial implications for the family of this unexpected and unwelcome news.  The precise content and conclusions of the discussions are a matter of controversy but it is clear that discussions did take place, and by the time of the second will some action had already been taken: large cash gifts to both Vivienne and Geraldine, the introduction of Vivienne as a signatory on the Hacienda accounts, and a transfer of US$1.5m from Hacienda to Good Harvest.

28.In short, the general strategy seems to have been to make arrangements under which as little as possible would remain in the deceased’s estate so as to pass under his will.  This tends to be confirmed by a letter dated 13 January 2002 sent to the deceased by Mr Mui with the will.  The second paragraph was as follows:

“In regards to your Last Will and Testament, you have informed me that all of your American assets, except for your checking account at Citibank is in joint name or with designated beneficiaries. Accordingly, I have made your Will a simple one as the other assets would be distributed outside of the will, that is it would automatically go to the beneficiaries without a direction from the will. In the case of the Citibank account, you have designated your wife Vivienne as the sole beneficiary.”

29.The deputy judge (paras 98 to 101) and the Court of Appeal (Rogers VP, paras 24 to 26) both discussed the significance of the second will and Mr Mui’s letter.  Although parts of paras 25 and 26 of the Vice-President’s judgment are a little difficult to follow, I respectfully prefer the Vice-President’s general reasoning and conclusion that the deceased was contemplating that the bulk of his estate, whether in New York, Hong Kong or elsewhere, would by the time of his death have been disposed of or arranged so that it did not pass under his will.  This documentary evidence does not suggest that all the necessary dispositions and arrangements had already been made (although some had been made, as already noted, in December 2001).  The deputy judge referred in his discussion to the “imminent risk of death”, and clearly everyone thought that there might not be much time.  But the doctors had given him six months, and in the event he lived for almost a year.  During that year further transactions took place, involving millions of US dollars.  The essential issues for the Court are as to the legal effect of what took place in relation to Good Harvest, Vacha and Hacienda in December 2001, and of the further transactions effected during 2002.   

30.Against that background, it is not particularly surprising that the second will named Vivienne as personal representative, even though the residuary estate was to go to Geraldine.  The residuary estate was expected to be small, and Vivienne knew very much more than Geraldine about the deceased’s financial affairs.

The last year of the deceased’s life

31.On 18 December 2001, in Hong Kong, the deceased had a blood test which indicated liver malfunction.  He was provisionally diagnosed as having cancer of the liver, and after further tests this diagnosis was confirmed by a specialist on 28 December.  The deceased and Vivienne then travelled to the Stanford Medical Centre in San Francisco on 29 December for a second opinion.  Naturally enough they discussed the financial implications of the deceased’s illness.  Vivienne’s evidence on this, in the words of her witness statement (para.38(3)), was as follows:

“We discussed how he should divide the assets under his name. We agreed that he should leave everything he had in New York to Geraldine (who was then in her late 20’s and living in New York and studying for a doctorate degree at the University of Columbia) and his estate outside New York to Christopher, Sean and myself through gifts to me.”

32.It is easy to accept that there were anxious discussions between husband and wife at this crisis in their lives.  But the simple geographical split described by Vivienne seems implausible, especially if (as Vivienne contends) this amounted to an immediate gift, and not simply a decision as to his testamentary dispositions. Although the deceased’s New York assets and his other assets may have been roughly equal in value 20 years before, that was no longer the case.  There was no evidence of any New York assets other than the rented apartment and its contents and the bank accounts mentioned in the second clause of his last will, whereas outside New York (in addition to the homes in Hong Kong and Honolulu) there were extensive investments and savings amounting to millions of US dollars.  Some of these resources (in particular First Sino) were not fully within Vivienne’s knowledge.  Others (such as Hong Kong bank accounts in the deceased’s sole name) could hardly have been intended to be given away at once.  Moreover Vivienne’s account seems to be contradicted by what the deceased actually did.  Before the diagnosis he had given Geraldine US$250,000 (on 27 October and 5 November 2001) and he proceeded to give her another US$250,000 by three transfers from Hacienda, two on 28 December and the third on 31 December 2001.  At the same time US$250,000 was transferred to Vivienne from Hacienda, and a further US$1.5m was transferred from Hacienda to Good Harvest. 

33.The evidence about the introduction of Vivienne as a signatory on the Hacienda accounts comes from three sources: Vivienne herself; Madam Chui (who worked for a secretarial service company in Hong Kong, with Madam Ng as her superior); and contemporaneous documents.  Vivienne’s evidence (in para.39 of her witness statement) was as follows:

“… on 27 December 2001, [the deceased] added me as a signatory to Hacienda’s accounts with [Standard Chartered] and FBP with authority to singly operate them … While Hacienda remained [the deceased’s] company, [the deceased] made a gift to me of the monies that were, or were to come, into Hacienda’s accounts with the wish that I could and would continue to ensure the welfare and education of Christopher and Sean after his death. My being added as a signatory with authority to singly operate Hacienda’s bank accounts was to allow me to obtain this and any other moneys herein as my own monies.”

This passage is a little ambiguous, but the last sentence tends to indicate that the intention was that Vivienne should be put in a position where she could make money in the account her own property by exercising her power of withdrawal.  The deputy judge’s treatment of this evidence (para.42) reflects the ambiguity but gives weight to Vivienne having the facility to withdraw money.

34.The deputy judge dealt with the evidence of Madam Chui at paras 55 to 57 and 112.  He noted that her oral evidence went beyond what was in her witness statement. Moreover it was (as evidence of the deceased’s intentions) double hearsay, being the witness’s account of what Madam Ng, a friend of Vivienne, said she had been told by Vivienne.  Even taken at face value, Madam Ng’s statement (as set out in para.56) suggests that it was by withdrawing money that Vivienne was to make it her own property.

35.The documentary evidence (two sole director’s resolutions of Hacienda passed on 27 December 2001, one relating to the FPB accounts and the other to the Standard Chartered accounts) adds nothing that bears on the question of intention (no resolution relating to BEA accounts seems to have been produced, but para.15 of the Reply admits that Vivienne became a signatory on all the accounts).  The resolutions were signed by the sole director of a company called Well Arts Enterprise Ltd, which held Hacienda’s single issued share in trust for the deceased.  The resolutions were signed by both the deceased and Vivienne, but only for the purpose of providing specimen signatures.  They were signed in haste at the medical centre, where the deceased was having further tests before seeing the specialist on 28 December.

36.On or about 27 December 2001 the deceased signed three blank sheets of paper just in case (as Vivienne put it in para.41 of her witness statement) he had omitted to do anything necessary to give effect to his intentions.  These sheets of paper were produced in evidence, but no one attempted to make use of them by turning them into complete documents.  Little or no reliance was placed on them in the proceedings in the lower courts.

37.Further investigations in San Francisco finally confirmed that the deceased had fourth-stage cancer of the liver.  The couple then made a short trip to Hawaii.  The deceased made his second will there on 15 January 2002 as already mentioned.  The next day they returned to San Francisco. Geraldine also was with her father at that time.  On 14 March 2002 the deceased had an operation to remove the right lobe of his liver, but the left lobe was found to be affected also.  The deceased’s brother Mr Y.S. Wu visited him in San Francisco on 21 March.  The doctors in San Francisco advised that there was no more to be done.  But the deceased did not give up all hope, and decided to go to Shanghai for further treatment.  He and Vivienne flew to Shanghai on 31 March, and Geraldine also travelled to Shanghai to be with him.

38.In Shanghai they stayed in a flat owned by Vivienne’s brother (she had a flat in the same building but it was in course of refurbishment).  The deceased was admitted to a Shanghai hospital, but he found it intolerable and insisted on coming back to the flat.  There he was looked after by Vivienne who (on her own evidence and that of relatives and others in Shanghai) devoted all her time and energy to caring for him.

39.The last nine months of the deceased’s life were regrettably contentious.  The principal witnesses who gave evidence about it were Vivienne, Christopher and Mr Y.S. Wu.  Vivienne was with the deceased in Shanghai continuously from the beginning of April until 28 August 2002 when she travelled to the USA to accompany Christopher and Sean back to school in Boston.  Christopher was in Shanghai from early July until 28 August, apart from a short visit that he made to Hong Kong towards the end of July.  Mr Y.S. Wu arrived in Shanghai on 29 August (and his evidence as to earlier events was, as the deputy judge noted, hearsay, being derived from long conversations that he had with the deceased).  Geraldine, who was conspicuously absent as a witness, was in Shanghai from the beginning of April until the end of July (when she travelled to New York to hand in her thesis).  She returned to Shanghai on 26 August.  It was clearly not by chance that the arrival of Geraldine and Mr Y.S. Wu coincided with the departure of Vivienne and her sons; each side of this unhappy family divide seems to have wished to see as little as possible of the other side.

40.It was put to Vivienne and Christopher in cross-examination that there were serious quarrels, and that the reasons were that Vivienne was harassing the deceased in an attempt to find out more about his finances, and that she was angry at the deceased for making further gifts (amounting to no more than US$30,000) to Geraldine.  Vivienne accepted that she raised the subject of the gifts to Geraldine, but vehemently denied seeking further information (appeal bundle B2, p.359):

“I think it’s very laughable, it’s impossible, because Good Harvest and Vacha were almost equivalent given to me. Before, on 28 December, they were given to me, because the shares and all the stuff were handled by me, and for the purpose of the future of the two kids. After 28 December, after Hacienda was given to me, all the finances were rested on my hands. So it was pointless for me to ask him for any information because all the information was in my hands.”

Christopher accepted that there were quarrels, or at least disagreements, but he ascribed them to Geraldine’s difficult behaviour, not to financial matters.

41.The deputy judge found Vivienne a difficult witness (para.84) and found it necessary to scrutinize her evidence carefully and look to see whether it was corroborated. He did not accept (para.117) her evidence that she had not verbally abused the deceased or that they did not quarrel on 21 July 2002 (Mr Y.S. Wu’s hearsay evidence was that on that day there was a violent quarrel lasting for hours; he referred to it as the deceased’s “day of infamy”).  The deputy judge found that Vivienne was trying to get financial information, and that it was probably the investment in First Sino that she was interested in.

42.What is not in dispute (either on the pleadings or on the evidence) is that at about the time of the quarrel on 21 July 2002 Vivienne made some large transfers of money from Good Harvest to Cardinal, and the deceased made some modest transfers (four transfers of US$7,500 each to Geraldine) which were returned when Vivienne objected to them.  The transfers that Vivienne made were from Good Harvest’s USD fixed deposit account with BEA to Cardinal’s account with BEA, as follows (to the nearest US$1,000):

	US$
15 July 2002	1.511m
17 July 2002	0.149m
24 July 2002	2.211m
	3.871m

Vivienne’s evidence was that the deceased knew about these transfers.  The deputy judge did not accept this evidence (para.120).  Had the deceased known about the transfers he would not, when he came to make his last will in October 2002, have stated that Good Harvest’s accounts amounted to an estimated US$4.1m.  In fact there was less than US$80,000 in Good Harvest’s accounts at the date of the will.

43.While Vivienne was taking her sons back to school in the USA, Mr Y.S. Wu and Geraldine arranged for the deceased to move to another location in Shanghai, which was never disclosed to Vivienne.  When she returned to Shanghai on 17 September 2002 she found her brother’s flat empty, and her attempts to locate the deceased were unsuccessful.  She told a friend of the deceased that she was thinking of asking for help from the United States consulate, and soon afterwards the deceased telephoned Vivienne’s brother to say that he was all right.  But he rang off without leaving any address or telephone number.

44.Soon after the deceased’s disappearance, and no doubt because of it, Christopher on 22 September 2002 sent his father an email in very offensive terms.  The deputy judge referred to this (paras 59 to 62) and (no doubt rightly) found powerful mitigating circumstances in Christopher’s age (just 16) and distress at the time.  The deputy judge discouraged counsel from cross-examining Christopher at length about the email.  But it does show that Christopher had financial matters well in mind, and that he wanted (for whatever reason) to obtain access to the apartment in New York.  Christopher admitted in cross-examination that later in 2002 (according to Mr Y.S. Wu, on 29 November 2002) he and his brother had gone to the deceased’s office at First Sino in Shanghai and removed papers from a drawer in the deceased’s secretary’s desk.  The deputy judge did not mention this episode in his judgment.

45.Two further significant transfers were made by Vivienne during the deceased’s lifetime.  On 2 August 2002 she transferred about US$0.305m from Vacha’s account at the Bank of China to her own account at the same bank.  On or about 15 October 2002 she transferred a total of about US$0.272m from Hacienda’s accounts with BEA to accounts of herself or Cardinal at the same bank.

46.The evidence as to the last three months of the deceased’s life comes largely from Mr Y.S. Wu, whom the deputy judge found (para.85) to be a reliable and unbiased witness.  Some of his evidence was hearsay but he had honestly recounted what he was told.  He arrived in Shanghai on 29 August 2002 and spent the next fortnight with the deceased at the flat of Vivienne’s brother. They had long and intimate discussions, “uninterrupted”, as Mr Y.S. Wu said in his supplemental witness statement, “by work or wives”.  Then on 13 September, shortly before Vivienne’s return, they moved with Geraldine to accommodation in Zhenning Road, Shanghai.  On 20 September Mr Y.S. Wu left to travel to England.  On 25 September the deceased telephoned his New York lawyer, Mr Frey, and said he had been “hijacked” by his wife.  The deceased also told Mr Frey (who gave evidence by video-link) that his son was trying to gain access to his New York apartment.  Mr Frey was instructed to prepare a letter to the Waterside Plaza management forbidding access by anyone other than himself or Geraldine.  

47.On 26 October Mr Y.S. Wu returned to Shanghai, having brought forward his arrangements because the deceased was to have a liver transplant operation.  The deceased’s last will was executed at the offices of First Sino on the evening of 26 October, with two bank officials as witnesses.  The transplant operation took place on 30 October.  Then on 29 November 2002 Vivienne and her sons went to the offices of First Sino (I have already referred to Christopher’s evidence on this).  Mr Y.S. Wu believed that they removed a copy of the deceased’s will, but not the original.

48.There is no evidence as to the draftsman of the will, except that it was not Mr Frey.  It appointed Mr Y.S. Wu as sole executor.  Its effective bequests were all in the second clause of the will and may be summarized as follows:

(a)     The deceased gave to Geraldine all his property in New York.  He referred to four particular bank accounts but not to the apartment at Waterside Plaza, presumably because it was rented.

(b)     He gave to Vivienne, Christopher and Sean in equal shares money in his own account at BEA, Hong Kong.  He gave to Christopher and Sean in equal shares money in his own account at Standard Chartered, Hong Kong.

(c)      He gave to his three children equally his interests in the apartments in Honolulu and Hong Kong (but it is common ground that these properties were held in joint tenancy and passed to Vivienne by survivorship).

(d)     Finally he made the gift which was originally to have been the only subject-matter of the proceedings:

“ I give, devise and bequeath unto my three children, GERALDINE AMBER WU, CHRISTOPHER CHARLES WU and SEAN EDWARD WU, in equal shares, the corporate accounts maintained by me at the Bank of East Asia in Hong Kong, including an account for Good Harvest Capital Limited, with an estimated worth of U.S. Dollars Four Million One Hundred Thousand (US$4,100,000) an account for Hacienda Pacific Limited, with an estimated worth of U.S. Dollars Five Hundred Thousand (US$500,000), and an account for Vacha Limited, with an estimated worth of U.S. Dollars Two Hundred and Seventy Thousand ($270,000).”

49.The deceased died in hospital at Hangzhou on 19 December 2002.  Vivienne and her sons were informed of his death and they attended his funeral, which was arranged by Mr Y.S. Wu and took place in New York on 9 January 2003.

The issues on the pleadings

50.The facts as found by the deputy judge disclose a complex and painful clash of human emotions and loyalties, on which different minds may be inclined to form different moral judgments.  But this Court is not a court of morals (except to the limited extent that the doctrine of “clean hands” may be relevant to the grant of discretionary equitable relief).  The legal issues raised are, by contrast, relatively straightforward.  But they are not entirely straightforward, since they call for analysis of three separate questions:

(1)     What initially was the beneficial ownership of the bank accounts in the names of Good Harvest and Vacha?

(2)     What change, if any, occurred in the beneficial ownership of these accounts in or around December 2001?

(3)     What was the effect of the introduction of Vivienne as a signatory on Hacienda’s accounts on 27 December 2001?

It is therefore appropriate to have in mind the parties’ pleaded cases on these questions.

51.Vivienne’s pleaded case was as follows (the relevant paragraphs of her Defence being repeated and incorporated into her Counterclaim):

(1)     Good Harvest and Vacha held money in the accounts as nominees in trust for the deceased and Vivienne in equal shares (Defence para.9).

(2)     (a)     Between 18 and 27 December 2001 the deceased “orally gifted to [Vivienne] all his assets outside New York”.  These assets included his half-share of the beneficial interest in the Good Harvest and Vacha accounts, on which Vivienne was a signatory with power to operate the accounts singly (Defence paras 14 to 17).

(b)     There was an alternative case, added by an amendment permitted on the first day of the trial, that the gifts to Vivienne “became complete at the latest when she obtained such moneys by withdrawals from the accounts” (Defence para.17A).

(c)     There was a further alternative claim, added by the same amendment, of a gift mortis causa (Defence para.17B).

(3)     (a)     The deceased’s beneficial interest in the Hacienda accounts was also included in the oral gift made between 18 and 27 December 2001, and was completed when she was added as a signatory to Hacienda’s accounts, with power to operate them singly, on 27 December 2001 (Defence paras 22 to 24).

(b)     There was an alternative case, added by the same amendment, that the gifts became complete when money was withdrawn from the accounts (Defence para.24A).

(c)     There was a further alternative claim, added by the same amendment, of a gift mortis causa (Defence para.24B).

52.The plaintiff’s pleaded case in reply was as follows:

(1)     Money deposited by the deceased in Good Harvest’s accounts remained his money (Reply para.5).  Money which he deposited in the accounts of Good Harvest and Vacha did not belong to those companies beneficially but was “owed to and/or held on trust for the deceased” (Reply para.8(1) and (2)).

(2)     The deceased did not make the alleged oral gifts to Vivienne.  He did not make any instrument of transfer in her favour “nor had he done everything (anything) within his power to transfer the legal and beneficial interests of the alleged gifts to Vivienne” (Reply para.13).  The Reply was not amended to deal specifically with the amendments in paras 17A, 17B, 24A and 24B of the Defence, but they must be taken to have been put in issue.

(3)     Vivienne was added as a signatory to the Hacienda accounts as a matter of convenience, and not with any intention of conferring a beneficial interest on her (Reply para.15).

53.It will be apparent that on the first question neither side was contending that Good Harvest and Vacha were beneficial owners of money in their respective accounts.  Vivienne was contending for a trust relationship.  The plaintiff was keeping his options open on the pleadings, contending for either a trust relationship or a debtor-creditor relationship.

The judgments in the courts below

54.The deputy judge’s findings on some of the controversial issues of fact have already been noted. His treatment of the issues as to beneficial ownership begins at para.90 of his judgment.  He observed that Vivienne was an equal shareholder with the deceased in Good Harvest and Vacha, but that that did not equate to ownership of half of the moneys in their bank accounts.  In his submissions at trial the plaintiff’s counsel seems (para.91) to have opted for the debtor-creditor analysis (what the deputy judge called “an accounting approach”) but the deputy judge rejected that in favour of the trust (or nominee) analysis (para.95).  He did state (para.101) that “the companies were the owners of their properties” (the context is not clear; he may have been recognizing that it was the companies with whom the various banks had a debtor-creditor relationship).  But later (para.111) the deputy judge repeated his conclusion that “the companies were merely nominees to hold the moneys”.

55.That was the deputy judge’s resolution of question (1).  It has to be said that the resolution of questions (2) and (3) was not so fully explained.  He seems, with respect, to have given too much weight to the history of the deceased’s testamentary dispositions and his own perception of the family dynamics.  By 2001 the deceased’s first will and its two codicils were fairly ancient history, and the testator was a much richer man with diversified interests. The second will signed in Honolulu in January 2002 was prepared in haste by a lawyer who seems to have been incompletely instructed about the deceased’s complicated financial affairs, in the expectation that the bulk of his assets would pass otherwise than under his will.

56.The deputy judge seems to have attached importance (para.103) to the evidence of various relatives and friends of Vivienne as to what the deceased said about his intentions and arrangements to provide for his second family after his death. Christopher’s evidence (para.58 of the judgment) was that his father told him in March 2002, and again in July or August 2002, that he had “already made financial arrangements” to take care of them.  The evidence of Professor Zhang Cun-Hui as to a conversation on 5 July 2002 (para.51) and that of Dr Rosenthal as to a conversation in August 2002 (para.52) was to the same effect – that arrangements had been made, and they would be all right.  None of that points to any comprehensive gift of Hong Kong assets having already been completed (although on any view some significant gifts had already been made).  Madam Zee’s evidence of a conversation with the deceased on 14 January 2002 was of a future disposition, which actually contradicts Vivienne’s case.  Only Vivienne’s sister in law, Chu Wai Fuk, spoke (para.49) of a gift of all the deceased’s assets in Hong Kong having been made already.

57.All in all this evidence cannot be regarded as providing much support for the notion that the deceased had already made an immediate, irrevocable, effective oral gift of all his assets in Hong Kong, rather than that he had put in place arrangements under which his second family would be well provided for after his death.

58.What the deputy judge should have done, with respect, was to ask himself what overt acts were needed, as a matter of law, in order for the deceased to make gifts of his beneficial interests in the bank accounts of Good Harvest, Vacha and Hacienda, and whether the evidence established, with the degree of probability appropriate to a claim against the estate of a deceased person, that the requisite acts had been done.  I shall return to this essential point after considering the judgment of Rogers VP in the Court of Appeal.

59.The crucial part of the Vice-President’s judgment is in paras 40 to 50.  He began this part of his judgment by addressing questions (2) and (3), coming to question (1) as a sort of parenthesis in para.46, in which he said that he would not disturb the deputy judge’s finding that the deceased and Vivienne were equally entitled to the balances on the Good Harvest and Vacha accounts.  He did not go on to consider (perhaps because he regarded the point as uncontroversial) what were the consequences, at law or in equity, of a withdrawal from any of these accounts by one or other of the authorized signatories. 

60.As to questions (2) and (3), the Vice-President pointed out (para.40) that there was no reliable evidence, and no finding, as to any words of gift spoken by the deceased.  He analysed (paras 40 to 42) the evidence of the deceased’s intentions and arrangements given by Chu Wai Fuk, Madam Zee, Professor Zhang Cun-Hui and Dr Rosenthal, and reached the same conclusions as I have put forward in paras 52 and 53 above.  He pointed out (paras 43 and 44) that the deputy judge had misunderstood the position as to approximate equality between the values of the deceased’s New York assets and his Hong Kong assets (there was approximate equality in the mid-1980s, but there definitely was not in 2001 and 2002).  

61.The Vice-President concluded (para.45) that the deputy judge’s decision that there had been a gift of the balances on the three companies’ accounts was insupportable.  The Court of Appeal allowed the plaintiff’s appeal, set aside the order of the Court of First Instance, and made declarations as to the beneficial ownership of Hacienda and the balances in Good Harvest’s and Vacha’s bank accounts (it is not clear why there was this difference in the wording of the two declarations).  The order then directed accounts to be taken before a Master of the Court of First Instance of moneys removed by Vivienne from the accounts of Good Harvest and Vacha (so far as in excess of her half share) and from the accounts of Hacienda (without limitation).  The order indicated that the account should commence from 27 December 2001.

Question (1)

62.The deputy judge and the Court of Appeal reached the same conclusion on question (1) as identified in para.46 above, that is that Good Harvest and Vacha were mere nominees of their bank accounts, and that the beneficial owners were the deceased and Vivienne in equal shares, either having power to operate the accounts on his or her signature (though in practice it was Vivienne who carried out most of the transactions).  Therefore the accounts had some resemblance to a joint bank account held by a married couple, with either having power to operate the account alone.  That is not to say that it was in all respects the same as an ordinary joint account: in particular, there would be no automatic survivorship on the death of the first to die of the account-holders.  Vivienne, no doubt advisedly, has never contended that she had a right of survivorship to the bank accounts (in contrast to the apartments in Hong Kong and Honolulu, which were in joint names and have passed to her by survivorship).

63.What Vivienne does contend, as an alternative case put forward in para.17A of her amended Defence, is that she became absolutely entitled to any money that she withdrew from Good Harvest or Vacha during the deceased’s lifetime, by a transfer either to her own account or to Cardinal’s account.  Her pleading does not in terms say “without any obligation to bring the withdrawal into account” but that is implicit in the pleading of a completed gift.  Her case is that the Court of Appeal was wrong to order an account in respect of transactions on the Good Harvest and Vacha accounts, either from 27 December 2001 or from any other date.  Neither the deputy judge nor the Court of Appeal made any direct reference to para.17A of the amended Defence, but it is a point which this Court must consider in order to dispose of the appeal.

64.There is a good deal of English and Australian authority about the effect of withdrawing money from a joint account, whether held by a married couple or by other members of a family.  It may be of assistance by way of analogy, even though there is not any exact parallel with the present situation of equal equitable interests in an account in the sole name of a nominee company.

65.In Jones v. Maynard [1951] Ch 572 Vaisey J (at 575) said that when a married couple have pooled their resources in a joint account,

“… the idea that years afterwards the contents of the pool can be dissected by taking an elaborate account as to how much was paid in by the husband or the wife, is quite inconsistent with the original fundamental idea of a joint purse or common pool.”

Vaisey J would also, I think, have rejected the idea that withdrawals should be subject to any elaborate account.  Jones v. Maynard was approved by the Court of Appeal in Rimmer v. Rimmer [1953] 1 QB 63.

66.The question of withdrawals was squarely addressed in Re Bishop [1965] Ch 450 (in that case the withdrawals were used for acquiring an investment in the name of one of the account-holders).  Stamp J reviewed the authorities and held that in the absence of circumstances indicating a more limited purpose, money withdrawn from a joint account by one account-holder became his or hers outright.  Stamp J stated the principle at 458-459:

“… in the absence of some circumstances or some evidence of intention that the joint account was to have a limited operation or was set up and kept up for some special purpose, each spouse has power to draw on the joint account not only for the benefit of the spouses but also for his or her own benefit.”

This followed the decision of Diplock J in Gage v. King [1961] 1 QB 188.  Re Bishop was approved (though distinguished on the facts) by the Court of Appeal in Heseltine v. Heseltine [1971] 1 WLR 342 and was approved by Lord Upjohn in the House of Lords in Pettitt v. Pettitt [1970] AC 777, 815.

67.The conclusion that withdrawals are not to be accounted for, any more than contributions, has obvious practical advantages.  The suggestion that a husband and wife should keep strict accounts over a married life which may span several decades is hardly consistent with the idea of marriage as a loving partnership.  But the conclusion can also be explained and supported as a matter of basic legal principle.  If one account-holder has the legal right to withdraw money, and does so, it is up to the other account-holder, if he or she objects, to establish some equitable right which trumps the legal ownership.

68.That was the view taken by the High Court of Australia in Russell v. Scott (1936) 55 CLR 440.  It was a case of a joint account held by an elderly lady and her nephew. Dixon J and Evatt J observed in their joint judgment, at 451:

“The presumption of resulting trust does no more than call for proof of an intention to confer beneficial ownership; and in the present case satisfactory proof is forthcoming that one purpose of the transaction was to confer upon the nephew the beneficial ownership of the sum standing at the credit of the account when the aunt died. As a legal right exists in him to this sum of money, what equity is there defeating her intention that he should enjoy the legal right beneficially? Both upon principle and upon English authority we answer, none.”

The decision extended both to the balance in the joint account at the aunt’s death and also (and perhaps more pertinently for present purposes) to a sum which the nephew had withdrawn and held in an account in his own name.

69.There are concurrent findings that Good Harvest and Vacha held these accounts as nominees for the deceased and Vivienne in equal shares and the evidence points strongly to it having been a pooling arrangement similar (except for survivorship) to the arrangements considered in Jones v. Maynard and Re Bishop. Good Harvest and Vacha were set up in the mid-1980s.  Hacienda and Cardinal came a good deal later, in 1997.  During the last years of the 1980s Vivienne ran down her fur trade business and made a significant (though unquantifiable) contribution to her husband’s consultancy business, which became very successful.  The deceased very largely left the management of the accounts to her.  It is unthinkable that the intention was, at any time during the 1980s or 1990s, that one day all their family transactions would have to be brought into a strict accounting process.

70.Was there a significant change in 2001, when it became known that the deceased was gravely ill and did not have long to live?  Both sides contended, in different ways, that there was.  Vivienne contended that the pooling arrangement was abruptly terminated by a transfer of complete beneficial ownership to her, effected by an oral gift.  The plaintiff’s counsel, Mr Miu, having pleaded that Vivienne had no beneficial interest at all and that she was a signatory on the Good Harvest and Vacha accounts only for convenience, deployed before this Court an unpleaded case for a “consensus” as to an equal division of assets between the deceased’s first and second families.  The deputy judge accepted Vivienne’s case as to an oral gift and did not consider what would be the position if he were wrong in that conclusion.  The Court of Appeal reversed him but did not explain what happened in or around December 2001 to make it appropriate to order an accounting process as from that time.  It seems very probable that something significant did come out of the anxious discussions which took place between the deceased and Vivienne at that time.  But that comes under the heads of what I have called questions (2) and (3).  The answer to question (1) is that down to December 2001 this married couple had a pooling arrangement, through the mechanism of bank accounts in the names of the two nominee companies, with no equitable obligation to have an accounting for either contributions or withdrawals.

Question (2)

71.This Court has to decide whether the Court of Appeal was right to reverse the deputy judge on his crucial finding that the deceased made on oral gift, on or shortly before 27 December 2001, of his beneficial interest in the Hong Kong bank accounts of Good Harvest and Vacha.  In approaching this question it is necessary to bear in mind two points of law which received little attention in the judgments below.

72.First, the law of Hong Kong differs from the law of England as regards the formalities required for a disposition of an equitable interest, and English authorities on the topic must be read with that difference in mind.  The English rule, originating in the Statute of Frauds 1677 and now embodied in s.53(1)(c) of the Law Property Act 1925, is that an inter vivos disposition of an equitable interest must be made by a written instrument signed by the disposer (or by an agent authorized in writing).  Section 6(1)(c) of the Law Amendment and Reform (Consolidation) Ordinance, Cap. 23 (“LARCO”) was to the same effect.  But s.6(1)(c) of LARCO was repealed in 1984 and has not been reenacted.  So a signed written instrument is no longer required, as a matter of law, for the disposition of an equitable interest.

73.Secondly, and in tension with the first point, Vivienne is making a claim against the estate of a deceased person who cannot give evidence against her claim.  The court has always approached such claims with some suspicion, especially (in the case of an alleged gift) where the only or principal witness in support of the claim is the donee.  Corroboration is not essential in every case.  But as Plowman J said in Thomas v. The Times Book Co. Ltd [1966] 2 All ER 241, 244 (the curious case about ownership of the manuscript of Dylan Thomas’ Under Milk Wood),

“Therefore, not only in this case is the onus of proof on the defendants [who were resisting a claim by the poet’s administratrix], but I am enjoined by authority to approach their story with suspicion having regard to the fact that the other actor in the story, the late Dylan Thomas, is dead and cannot therefore give his own version of what took place.”

This principle has been applied in Cheung Cho Kam Sindy v. Cheung Yuet Ying Rose (Deputy High Court Judge Muttrie, 13 July 2007).

74.This Court has to give effect to both these rules.  A written instrument signed by the deceased was not essential, as a matter of law, for a valid disposition of his equitable interest in the Good Harvest and Vacha accounts.  Nor is corroboration essential as a matter of law.  But here Vivienne was the sole witness to an alleged oral gift amounting (if she is right) to the entirety of the deceased’s assets in Hong Kong, worth millions of US dollars, at a time when the deceased’s liver cancer had not yet been confirmed (it was confirmed by the specialist on 28 December 2001 and its advanced state was disclosed later than that).  She was undertaking a very heavy burden of proof to satisfy the court that the deceased made what Sargant J in Re Westerton [1919] 2 Ch 104, 109 referred to as “a clear gift then and there … an out and out gift and not an expression of a mere desire to make a gift”.

75.The Court of Appeal held that the deputy judge had been wrong to conclude that Vivienne had discharged that heavy burden.  The Court of Appeal’s reasons were expressed fairly briefly, in paras 40 to 45 of the Vice-President’s judgment.  They were, in brief summary (i) the absence of clear and reliable evidence of words of gift; (ii) the corroborative evidence (of statements made by the deceased to relatives and friends of Vivienne) being much weaker, on close examination, than the deputy judge had supposed; and (iii) the probabilities arising from the parties’ situation (and in particular the inequality in 2001 of the New York and Hong Kong assets, on which the deputy judge had misunderstood Mr Frey’s evidence).

76.The first of these reasons must in the end be the most crucial, and Mr Ho SC (for Vivienne) attacked it, drawing attention to a passage in Vivienne’s witness statement (para.38(3)) quoted in para.27 above and another in para.40 of the witness statement (“KS simply told me that he gave his shares in the monies to me”).  But in my judgment the Court of Appeal was right to hold that Vivienne had not discharged the heavy burden of proof that was on her, and that the deputy judge was wrong to hold otherwise.  The Court of Appeal was rightly looking for evidence that was clear and reliable.  Vivienne’s pleaded case was of an oral gift by the deceased of “all his assets outside New York”.  This is in contrast to the wording in para.40 of the witness statement.  There was no clear evidence of where, when and what the deceased said in making the alleged gift.  Nor was Vivienne’s evidence obviously reliable.  The deputy judge himself, having seen and heard Vivienne in the witness box, regarded her as a witness whose testimony must be treated with caution, quite apart from the special burden assumed by a person claiming to be a donee under a gift made by a deceased person.

77.I would therefore uphold the Court of Appeal’s rejection of Vivienne’s claim that there was an oral gift, on or shortly before 27 December 2001, of the deceased’s beneficial interest in the Good Harvest and Vacha accounts.  That disposes of the main part of question (2).  But I would add (tentatively, since it is not for this Court to start making new findings on unpleaded points) that it is not in dispute that there were anxious discussions between the deceased and Vivienne at this time as financial planning for the future.  It seems quite likely that there was a change in the understanding between husband and wife (a domestic understanding, not enforceable as a matter of legal or equitable right) as to the purposes for which Vivienne would use her management powers over the Good Harvest and Vacha accounts (and the Hacienda accounts, which I shall come to later).  But if there was a change in their domestic understanding, it is in my view overwhelmingly likely that it was a widening, and not a narrowing, of those purposes: not just the payment of medical and living expenses and school fees conceded in para.15(3) of the Reply, but also the building up of substantial funds to provide for the rest of the boys’ expensive education, and to provide for Vivienne herself (who was then approaching 50) for the rest of her life.  That would be consistent with (i) the Honolulu lawyer’s letter (para.24 above); (ii) the evidence of what the deceased said to Vivienne’s relatives and friends (paras 51, 52 and 55 above); and (iii) the evidence as to the character of the deceased himself – a fair, thoughtful man who seems to have been inclined to keep his financial affairs private and out of the public arena.

78.Whether that is right or not, the plaintiff did not plead or prove that Vivienne’s freedom to operate the accounts was narrowed by anything said or done in December 2001.  As already noted, the plaintiff did not amend his pleadings so as to respond to para.17A of the amended Defence.  In particular, he did not plead or prove a “consensus” (for equal division of everything between the first and second families) such as Mr Miu sought to deploy before this Court.

79.The deputy judge found that the deceased did not know of the large withdrawals that Vivienne made from the accounts in July 2002.  Had he known of them he might have felt that his wife was in some way abusing her powers or betraying her trust, especially as she had seriously harassed him on 21 July, and had strongly objected to some relatively modest payments being made to Geraldine.  But if he had entertained those feelings it would in my view have been a domestic grievance rather than a matter of legal or equitable right.  Had he known (and been well enough) he might have taken steps to remove his wife as a signatory on the Hacienda accounts, or to make withdrawals himself from the accounts of all or any of the three companies.  But that is all hypothesis.  This Court can decide only the issues properly raised on the appeal.  In answer to question (2) I consider that the Court of Appeal was correct to reject the claim to an oral gift, but wrong to order an account on the basis that Vivienne’s withdrawals were improper and had to be accounted for.

80.I would add three footnotes.  First, Mr Ho SC sought to attach importance to the three blank sheets of paper, signed by the deceased, that were retained and put in evidence by Vivienne.  Mr Ho SC relied on them as in some way completing the alleged oral gift, if it was otherwise incomplete.  I do not think these blank sheets can assist Vivienne in that way, or in any other way.  They merely tend to show that the parties themselves entertained some doubt as to the efficacy of what they had done (particularly, perhaps, in relation to Hacienda).

81.Secondly, and following on from the first point, I do not consider that the authorities as to imperfect gifts have much relevance to this appeal.  They are concerned (as Brennan J put it in Corin v. Patton (1990) 169 CLR 540, 564) with cases

“… when the nature of the property is such that the passing of title to it depends on the registration of an instrument of transfer or on some other act of a third party.”

That does not apply to this case.

82.Third, the Court of Appeal (in para.47 of the Vice-President’s judgment) referred to the well-established principle that there cannot be a voluntary assignment of property which is not yet in existence, and applied this to the bank accounts. The judgment cited Snell’s Equity, 31^st (2005) edition, pp 43-44.  But the deceased’s equitable interests subsisted in a number of existing choses in action, that is Good Harvest’s and Vacha’s contractual rights against the relevant banks.  So there could have been what Megarry J, in Re Figgis [1969] 1 Ch 123, 149, referred to as “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”.  Re Figgis is cited with apparent approval in Snell’s Equity, 32^nd (2010) edition, para.25-021.

Question (3)

83.I can deal with this question more briefly since I have already covered much of the ground. Before 27 December 2001 Hacienda was entirely the deceased’s own corporate vehicle.  He was the only shareholder and (through Well Arts Enterprise Ltd) the only director.  It had accounts in Hong Kong with FPB, BEA and Standard Chartered. It had received US$2.5m from Sunny Score in October 2001.  The oral and documentary evidence as to the introduction of Vivienne as a signatory on Hacienda’s accounts is summarized in paras 29 to 31 above.

84.All the Court of Appeal’s reasons for rejecting Vivienne’s claim of an oral gift of the deceased’s interests in the Good Harvest and Vacha accounts apply to her claim of an oral gift of the deceased’s entire beneficial interest in the Hacienda accounts.  In my view they apply even more strongly.  The burden of establishing an outright, irrevocable gift is even heavier because of Madam Chui’s evidence of what happened on 27 December 2001, and of what she had been told by Madam Ng.

85.These ladies were not lawyers, but they were experienced in corporate secretarial services and they seem to have had a firm grasp of practicalities.  Madam Chui said in cross-examination (bundle B2 p.423) in answer to a question about signing a declaration of trust:

“Document-wise, it can be said that we signed a document and just like that, the company would be transferred to Mrs Wu. But the problem is, if the company was transferred like that at that moment, they would have to change the signatory at the bank and the formalities would be much more complicated because the bank would again check who was the shareholder of this company. We could not declare that nothing was transferred. As such, the entire procedure of changing the signatory would be delayed.”

Delay was unacceptable because the documents had to be prepared and delivered to the medical centre for the deceased to sign.  Those who prepared the papers seem to have had serious doubts about whether what the deputy judge called a “short cut” did lead to the destination (if it was the destination) of passing full beneficial ownership of the Hacienda accounts to Vivienne.

86.However, making Vivienne a signatory on the accounts was clearly intended to have some practical effect.  The Court of Appeal considered (para.49 of the Vice-President’s judgment) that it was only as a matter of convenience:

“It is quite understandable that somebody who can expect to be in hospital for a long time and, perhaps, in a state where he or she may not wish to be troubled by making bank transfers and the like, may wish [to] facilitate others to look after the day-to-day running of an account.”

That is the sort of arrangement that was inferred to have been intended in Marshal v. Crutwell (1875) LR 20 Eq. 328 (where the arrangement involved the transfer of the account into joint names, not merely the addition of a signatory on a company account).

87.This is a question of some difficulty, since the need for a suspicious approach to a claim against a deceased person’s estate applies here too.  But on the whole I consider that the evidence does point sufficiently clearly to the intention having been to put Vivienne in the same position, in relation to Hacienda, as she had been for years in relation to Good Harvest and Vacha.  The argument that the arrangement was made simply for convenience is not strong, since Good Harvest and Vacha had ample funds to meet even very high medical expenses.  It seems more probable that at the end of 2001 the deceased decided to repose in Vivienne the same trust (in a non-legal sense) in relation to all three companies, and if there was any change in the purposes contemplated by that trust they are likely to have become wider, not narrower, for the reasons mentioned in para.73 above.

88.For these reasons I would answer question (3) in similar terms to question (2).  The Court of Appeal was right to reject Vivienne’s claim that there was an oral gift of the deceased’s beneficial interest in the Hacienda accounts, but wrong to order an account to be taken on the basis that her withdrawals from the accounts were improper.

First Sino

89.In view of the other proceedings (HCA 1447/2008) which have been stayed, it is appropriate to state expressly that although the deceased’s sale of his indirect interest in First Sino was referred to in evidence and during the argument on this appeal, the beneficial ownership of that interest and the way in which the proceeds of sale were dealt with is not an issue in these proceedings.  The fact that Good Harvest and Vacha held Hong Kong bank accounts as nominees for the deceased and Vivienne may have no bearing on the beneficial ownership of other assets held, directly or indirectly, by these companies. This Court is deciding nothing on that issue, or on any possible issue as to whether it was an abuse of process for the issue of First Sino to be raised in separate proceedings, rather than in these proceedings, under the principle in Yat Tung Investment Co. Ltd v. Dao Heng Bank Ltd [1975] AC 581.

The order to be made

90.I would therefore allow Vivienne’s appeal and dismiss the plaintiff’s cross-appeal.  I would set aside paras 3, 4, 5, 6, 7 and 8 of the Court of Appeal’s order and make three declarations:

(1) that the assets of the deceased’s estate include the sums standing to the credit of Hacienda’s relevant bank accounts at the deceased’s death and one-half of the sums standing to the credit of Good Harvest’s and Vacha’s relevant bank accounts at the deceased’s death (particulars of these accounts are set out in the schedules to Vivienne’s Defence and Counterclaim);

(2) that Vivienne is not liable to account for her dealings with any of these accounts during the deceased’s lifetime; and

(3) that the sums mentioned at (1) above pass under the gift in the last sub-clause of clause 2 of the deceased’s will dated 26 October 2002.

Costs are considered below.

Costs

91.The costs order to be made by this Court may be contentious.  Vivienne has been partly but not wholly successful in her appeal.  In financial terms she has obtained most of what she was seeking, because the large withdrawals made during 2002, for which she is not obliged to account, left little in the three companies’ accounts at the deceased’s death.  On the other hand the bulk of the evidence and argument, at every stage of the proceedings, has been devoted to her ultimately fruitless attempt to establish an oral gift.  So a large part of her costs has been expended on issues on which she has failed.  I would make an order nisi that the plaintiff must pay to Vivienne half of her costs of this appeal and in the courts below, including her wasted costs of the unfinished account.  A broad-brush approach is called for because the time spent on different issues cannot be precisely computed.

92.However that is not the only contentious issue that may arise on costs.  The plaintiff commenced these proceedings in the fiduciary capacity of the deceased’s executor, for the benefit of his estate.  If he has acted properly he is entitled to be indemnified out of the estate against both his own costs and any adverse costs order (provided that its assets are sufficient, and subject to the terms of any Beddoe order – see Re Beddoe [1893] 1 Ch 547 – or any other funding arrangement that has not been disclosed to this Court).  The deputy judge held (in para.85 of his judgment) that the plaintiff had given his evidence in an unbiased way, and his appeal to the Court of Appeal was successful.  It would be harsh to say that he was acting unreasonably in appearing as a respondent to this further appeal in order to defend his success in the Court of Appeal.  But if his costs and the costs awarded against him are to come out of the estate, on which beneficiaries should they fall?

93.Normally the answer would be simple: first out of any part of the estate not disposed of by the will, and secondly out of the residuary estate.  It is a curious feature of the deceased’s last will that it contains no true residuary bequest.  It contains in its second clause four effective dispositions of assets of a particular description and two purported gifts of interests in property that passed by survivorship.  The effective gifts are (1) assets in New York to Geraldine; (2) personal account at BEA, Hong Kong, to Vivienne, Christopher and Sean in equal shares; (3) personal account at Standard Chartered, Hong Kong, to Christopher and Sean in equal shares; and (4) corporate accounts at BEA, Hong Kong, to Geraldine, Christopher and Sean in equal shares.

94.There may possibly be a partial intestacy as to some assets (for instance any works of art or other valuable chattels in Hong Kong, any bank account in Hawaii, or any personal bank account in Hong Kong with a bank other than BEA or Standard Chartered).  If so, those assets should be resorted to first for payment of costs.  If there are no such assets, or if (as seems almost certain) they are insufficient, the fairest course, in my view, would be to resort to the funds at (2), (3) and (4) above (all Hong Kong assets) rateably as between themselves, in priority to the New York assets at (1) above.  Geraldine has taken no part in these proceedings, and the New York assets are the one item over which there has been no dispute at any stage.  They should be the last part of the estate to be resorted to.  I would make an order nisi to that effect.

95.It is of course open to either or both of the parties to notify the Registrar within 21 days of their wish to challenge these orders nisi.  But I have thought it right to put forward a briefly reasoned indication of my provisional view in the hope of limiting further argument and costs.

Mr Justice Bokhary PJ :

96.The Court unanimously: (i) allows the appeal; (ii) dismisses the cross-appeal; (iii) sets aside paras 3, 4, 5, 6, 7 and 8 of the Court of Appeal’s order; (iv) makes the three declarations set out in para.90 of Lord Walker’s judgment and (v) makes the order nisi as to costs referred to in paras 91 to 95 of his judgment, such order nisi to become absolute within 21 days in the absence of notification to the Registrar of challenge thereto.

Mr Ambrose Ho, SC and Mr Victor Dawes (instructed by Messrs Stevenson, Wong & Co.) for the appellant in FACV 17/2009 and respondent in FACV 18/2009

Mr Nelson Miu (instructed by Messrs Lee Chan Cheng) for the respondent in FACV 17/2009 and appellant in FACV 18/2009