NANYANG COMMERCIAL BANK, LTD v. LO TAK CHUEN, the administrator of the estate of LOO CHAO YEU or spelt as LO CHO YU AND OTHERS

HCMP 2766/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2766 OF 2015

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REASONS FOR JUDGMENT

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INTRODUCTION

1.  This is the application by the 2^nd respondent (“R2”) and 3^rd respondent (“R3”) [1] for payment out of court regarding the funds which have paid in by the applicant (“the Bank”) pursuant to Order 92, rule 2 of the Rules of the High Court (“RHC”), Cap 4A and section 62 of the Trustee Ordinance, Cap 29.[2]  The funds, which are the subject matters of this application, consist of 6 fixed deposits in the total amount of CAD1,652,897.35 and NZD3,714,179.34 held originally in an account with the Bank in the name of R2.  The bank account was opened by the late C Y Loo from whom all the deposits came.  C Y Loo was the father of R3.  It is the case of R2 and R3 that the funds in R2’s bank account were held on expressed trust declared by C Y Loo inter vivos with R2 as the trustee and R3 as the beneficiary.  

2.  As regards the stance of the other parties, the Bank has confirmed that they take no position regarding the application and do not wish to be heard at the hearing.  The 1^st respondent (“R1”) had passed away and the administrators of his estate (who originally expressed some potential interests in the funds) have through their solicitors indicated that R1’s estate would take no further action in the matter and would abide by the order of this court, subject to the agreement by R2 and R3 that there be no order as to costs.  That has already been agreed to by R2 and R3.  Thus, the application of R2 and R3 is now uncontested.

FACTS

3.  Based on the undisputed evidence before this court, very briefly stated the facts are as follows.

4.  R2 was the sister of the late Chan Iok Fong (“I F Chan”) (a Macao resident), the mother of R3.  I F Chan was married to C Y Loo (a Hong Kong resident) in late 1970s in Macao.  In April 1983, however, she died in a fire accident in Macao about three months after she had given birth to R3 in January 1983.  After the tragic death of I F Chan, R2 took up the responsibility of looking after R3 in Macao and became her guardian.  C Y Loo would come to Macao to visit R3 every one month or two and he would from time to time pay R3’s maternal grandmother for R3’s maintenance.  It was only after the death of I F Chan, however, that R2 was told by C Y Loo that he had a family in Hong Kong with children without a marriage. 

5.  In about 1987 or 1988, C Y Loo talked to R2 about his intention to open a bank account to keep money for the maintenance and benefit of R3.  He told R2 that he had been suffering from a heart disease and he was concerned to see that, in case he died, R3 would be taken care of by R2 and the maternal grandmother with money in that account.  In 1989, R2 made a name chop and handed it over to C Y Loo for the purpose of opening a bank account in Hong Kong.  In December that year, C Y Loo opened the aforesaid bank account in R2’s name with the Bank and subsequently made deposits which were the subject matters of the present application.  C Y Loo told R2 that that she could access the funds at any time, before or after his death, for the upbringing of R3.  He said that the funds could be released to R3 when she attained the age of 18.  He said that he kept R2’s name chop in his office and she could go to get it there at any time.  He also said that in any event R2 would have no difficulties accessing the funds if she contacted a Ms Liu who was a staff member of the Jordan branch of the Bank.  It is pertinent to note at this juncture that although C Y Loo had the custody of R2’s name chop, he never made any withdrawals from her bank account. 

6.  When R2 last met C Y Loo, she was told that he was going to undergo a heart operation in Hong Kong.  Since then, she heard nothing from him and she subsequently learned that he had passed away in late November 1992.  In about 1993, R2 was paid a visit in Macao by R1 whom she met for the first time.  R1 was a son of C Y Loo in Hong Kong.  During the visit, R1 did not mention anything to her about her bank account with the Bank or the funds therein.  Neither did R2 talk with him about R3’s share in C Y Loo’s estate. 

7.  In 1996 when R2 approached the Jordan branch of the Bank intending to deal with the funds in her Bank Account, she was told that Ms Liu was no longer working there and that she was asked to seek the assistance of lawyers in Hong Kong.  R2 then discussed with R1 about the funds in her bank account but the discussion had not resulted in any resolution. 

8.  In 2004, R1 became the sole administrator of C Y Loo’s estate.  Although R1 knew that the funds in R2’s account were all deposited by his late father, when he applied for estate duty clearance he did not include them in the Statement in lieu of Affidavit as assets of his father’s estate or as assets disposed of by his father within three years of the death.  In April 2008, R1 died intestate and his administratorship of C Y Loo’s estate ceased.

9.  Both R2 and R3 are still living in Macao.  R3 is now aged 34 and is working. 

CONSIDERATION

Trust

10.  I have regard to the legal principles stated in Article 7 of Law Relating to Trusts and Trustees, by Underhill and Hayton.[3] 

11.  In view of the undisputed facts and given the stance of the parties, I have no doubt whatsoever that the funds which are the subject matter of this application were gifts made by C Y Loo inter vivos in favour of his daughter R3.  C Y Loo had shown a clear intention to create an expressed trust over the funds (which had been set aside from his other assets) with R2 as the trustee and R3 as the beneficiary during the period of time when R3 was minor and after that to R3 absolutely.  I find as a fact that C Y Loo kept R2’s name chop simply for the sake of convenience and that did not signify any different intention or change of mind.  This is the based on the fact that C Y Loo had told R2 that she could at any time asked for the return of her name chop and that the funds had stayed in R2’s bank account without any attempt of withdrawal. I find as a fact that C Y Loo had effectively transferred the funds to R2 as trustee for the benefit of R3.  Even if I was wrong about this, it is also my finding that C Y Loo had done everything necessary for him to do to enable the funds to be transferred to R2 for her to hold them for the benefit of R3 and that there had never been any change of mind on his part.

Estate duty implications

12.  I note that at the time C Y Loo passed away, there was still estate duty in Hong Kong.[4] Moreover, the deposits into R2’s bank account held with the Bank were all made within three years of his death.[5]  The funds in the bank account, however, had never been reported to the Commissioner of Inland Revenue and no estate duty had been paid in respect of them.  Therefore, given by my factual findings above, there are potential estate duty implications on the part of R2 and R3 respectively as trustee and beneficiary of the funds.  However, I need to emphasise that I make no determinations of any liabilities of estate duty in this judgment.  That would be a matter between R2 and R3 on the one hand and the Inland Revenue Department on the other hand.  The IRD is not a party to the present proceedings and it has not been presented or heard. 

13.  Mr Ng (and with him, Ms Ho), counsel for R2 and R3, says that in case this court is agreeable to make the order for payment out, R3 would undertake to:

(a)   provide to the Commissioner of Inland Revenue an account within one month of the order setting for the particulars of the funds deposited by C Y Loo to R2’s bank account; and

(b)   pay the Commissioner any estate duty, interest and penalties (if any) on those deposits.

Mr Ng also says that his instructing solicitors would undertake to inform the Commissioner of this matter within 14 days after the sealing of the order.

14.  In view of the aforesaid undertakings, I agree with Mr Ng’s submission that the potential liabilities for estate duty, being personal liabilities of R2 and R3, should not be an impediment of the granting of an order for payment out of court.  

ORDERS

15.  In all the circumstances, I rule in favour of R2 and R3 and, upon the undertakings given by R3 and her solicitors respectively as stated in paragraph 13 above, order that:

(i) the sum of CAD1,652,940.51 and NZD3,726,350.63 paid into court by Messrs Anthony Chiang & Partners, solicitors for the Bank, in compliance with the Order of Master Hui dated 14 January 2016, together with the interest accrued thereon, be paid out to R3; and

(ii) (as agreed by the parties) there be no order as to costs.