RE MAK WOON SHUI

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J U D G M E N T

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Sir Derek Cons, V.P.:

1. Whenever a person dies in Hong Kong then, by s. 5 of the Estate Duty Ordinance, Cap. 111, duty is payable upon the "principal value ... of all property passing on the death of such person". By s. 6(1)(a):

6.    (1) Property passing on the death of the deceased shall be deemed to include the property following -

(a)    property of which the deceased was at the time of his death competent to dispose;"

Section 6(4) excludes property "held by the deceased as trustee for another person".

2. Section 14 makes recovery of the duty the responsibility of the Commissioner who, by subs. (12) shall, perhaps after correspondence and negotiation with the accounting party, notify that party of the amount of duty ascertained. If that party is aggrieved on the ground, inter alia, of "property being considered to be property in respect of which estate duty is payable and for which he is considered accountable" s. 22 gives him a right of appeal to the High Court where "his accountability or the amount of duty payable shall be determined".

3. On 12th January 1987 Mak^-Woon Shui died at the age of 76. I mean no disrespect in referring to her hereafter simply as "the wife". Registered then in her name were two properties, i.e. 134 Fuk Wing Street, Kowloon, and 20 Tung Shan Terrace, Hong Kong, and locally listed shares to the value of approximately HK$1.15 million. There was a credit balance of HK$4,500 in her current account with the Hang Seng Bank, almost nothing in a deposit account and less than HK$1,000 in a joint account with her husband "Au Ming" ("the husband"). But in three fixed deposit accounts, held also jointly with the husband, there was a total of nearly US$190,000. Rejecting a suggestion that the properties, shares and bank accounts were all held by the wife simply as trustee for the husband, the Commissioner, on 31st January 1991, assessed the estate at just under HK$13.5 million, including therein as a gift made within three years prior to the death, and therefore liable to duty, a sum of HK$650,000 which the husband, utilising an authority given seven days earlier by the wife, had withdrawn from her current account on the very day of her death. The duty claimed by the Commissioner was HK$2,420,820 together with interest accrued of HK$737,122. The husband, aggrieved by this decision, appealed to the High Court.

4. The appeal was argued before Mayo, J., on 18th and 19th September. Evidence was by way of affidavit only, the parties agreeing that no deponent should be called for cross-examination.

5. The substance of the husband's case was that he came from a wealthy family in Guangzhou and on the death of his father in 1930 inherited several properties in Canton and a dispensary then located in Shanghai Street, Kowloon. This would appear to have been a branch of a similar business in Canton. The husband had married his wife in the preceding year. By 1943 he had six daughters but only one son. In a second of two almost identical affirmations he observed:

"    17. Being an old fashioned Chinese man of wealth, I wished to take a concubine just for the purpose of having more sons."

Earlier he had referred to the difficulties in his way:

"    13. While my deceased wife was a young girl, she and her mother were deserted by her father who took a concubine. My wife and her mother were poor at that time and had to survive on their own. For this reason, my wife's attitude towards concubinage was one of extreme dislike and she had taken every precaution to ensure that I would not have the opportunity to take a concubine."

But later we find:

"    18. Both my elder brothers Au Wai Ki ( ) and Au Chi Ki ( ) had concubines and many sons. That intention to have a concubine somehow became known to my wife. After many heated arguments, I agreed to transfer all my assets and cash to her name with the intention that whenever I want to dispose of the property or tuse cash, she would have knowledge.

19.    However, at the time when I passed my assets to her, I did not have the' intention to give my properties to her as a gift or advancement. The intention was that she will keep all the properties of whatever description in her name in trust for me. My wife was made aware of this intention and she agreed to it. The arguments, the agreement and my intention were known to those of my children who enquired from time to time.

20.    I was in control of the profits derived from the properties and management of my business.

21.    I could use the profit whenever and whatever I want to.

.....

25.    The trust abovementioned was manifested by the fact that since then all my assets and properties were registered in the name of my wife and all properties subsequently acquired by me with my money were registered under her name. Further all income derived from such properties and business were deposited with bank accounts opened only nominally in her name. All expenditure and outgoings in relation to my family and all educational expenses of my children who all studied abroad were paid out of those bank accounts.

26. After World War II, I realised all my assets and properties in China and settled in Hong Kong. The following immovable properties in Hong Kong were purchased with my money but registered under the name of my wife, namely:-

(a) No. 20, Tung Shan Terrace; and (b) No. 134, Fuk Wing Street.

The premises known as No. 20, Tung Shan Terrace, Ground Floor, Stubbs Road, Hong Kong since its purchase have been the residence of myself, my wife, and, whilst they were living with us, our issue. As such it comprised the matrimonial home of myself and my wife.

....

29.    Since 1936/37 (i.e. when my only living issue were my 1st, 2nd and 3rd daughters) I had not had any other properties or any bank accounts under my sole personal name and I used to keep only enough cash with me to, meet my personal daily expenses. At the time of death of my wife, I had only small amount of cash."

6. Whether the judge should have even considered this evidence is open to question. In Shephard v. Cartwright [1955] AC 431 at 445 Viscount Simonds said:

"    My Lords, I do not distinguish between the purchase of shares and the acquisition of shares upon allotment, and I think that the law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of a child or one to whom the purchaser then stood in loco parentis, there is no such resulting trust but a presumption of advancement. Equally it is clear that the presumption may be rebutted but should not, as Lord Eldon said, give way to slight circumstances: Finch v. Finch.

    It must then be asked by what evidence can the presumption be rebutted, and it would, I think, be very unfortunate if any doubt were cast (as I think it has been by certain passages in the judgments under review) upon the well-settled law on this subject. It is, I think, correctly stated in substantially the same terms in every textbook that I have consulted and supported by authority extending over a long period of time. I will take, as an example, a passage from Snell's Equity, 24th ed., p. 153, which is as follows:

' The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration ... But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.'

    I do not think it necessary to review the numerous cases of high authority upon which this statement is founded. It is possible to find in some earlier judgments reference to 'subsequent' events without the qualifications contained in the textbook statement: it may even be possible to wonder in some cases how in the narration of facts certain events were admitted to consideration. But the burden of authority in favour of the broad proposition as stated in the passage I have cited is overwhelming and should not be disturbed."

7. In reliance upon Fowkes v. Pascoe [1875] 10 LR Ch App 343 Mr. Pang, who appears with Mr. Bernacchi, Q.C. for the husband as they did below, sought to draw a distinction between acts and declarations on the one hand and evidence, written as well as oral, on the other. I have to note that this appeal proceeded on the expressed assumption that there was in that instance no presumption of advancement, and that its existence had been drawn to the attention of their Lordships in Shephard v. Cartwright. But I need go no further for Miss Hartstein, who appears for the Commissioner as she did below, took no objection then and does not do so now.

8. The judge did not believe the husband's story. After reviewing the evidence he concluded:

"    I have reluctantly come to a conclusion that I agree with the view of the Commissioner that it is impossible to attach credence to the [husband's] affirmations and I am not prepared to believe statements which he makes unless they are corroborated by some other means.

    In my view there is no credible evidence that the assets which have been referred to were acquired with moneys provided by the [husband].

    Even if I am wrong in this there is no credible evidence available to rebut the presumption that the assets were gifts made by the [husband] to his wife."

9. In the circumstances this Court is in as good a position as the judge below to come to a conclusion on the evidence. To this end we have been taken in detail through the affirmations of the husband and that of Allen Ng Ka Wing, an assessor of the Inland Revenue Department posted to the Estate Duty Office. From the latter it is clear that the husband's affirmation that since 1936/7 he had no property or bank accounts in his sole personal name and that at the time of his wife's death he had nothing more than "small amount of cash" is simply not true. In November 1984 he had opened a US$ savings account with Citibank. At the time of the wife's death there was little in that account, but in a US$ Guam deposit account, opened in December 1986, he had nearly US$100,000. In a joint savings account with his son, opened a month before that, was a further US$100,000. He had a still further US$750,000 in his.own name which, for reasons not apparent, he transferred on the date of his wife's death into a joint account with his son. On the same day he exchanged the HK$650,000 which he drew from his wife's current account into American Dollars and placed them on fixed deposit. Despite his advanced age and what I would'accept as a natural concern for a sick wife, I find it difficult to believe, as he suggests in his affirmation in-reply,.;that he really does not remember what he then did. He has also made no attempt to explain his personal portfolio of shares, worth at that time, as the judge below found, some HK$300,000.

10. Apart from these matters, which would indicate that any trust as described by the husband was not in fact adhered to, I find the suggestion itself somewhat implausible. It seems to me most unlikely that an apparently determined woman, fearful of being deserted in the same way as her mother, would willingly accept an arrangement which, if properly explained to her, she must have appreciated would give her and her daughters no security whatsoever.

11. I accept that the presumption of advancement to a wife no longer carries the weight that it once did. In Falconer v. Falconer [1970] 1 WLR 1333 Lord Denning commented at p. 1336:

"It has no place, or, at any rate, very little place, in our law today: see Pettitt v. Pettitt [1970] A.C. 777, per Lord Reid at p. 793, per Lord Hodson at p. 811 and per Lord Diplock at p. 824. We have decided these cases now for some years without much regard to a presumption of advancement, and I think we should continue so to do."

By "these cases" he was referring to disputes as to the ownership of the matrimonial home.

12. But counsel for the husband go further. Relying on the words of their Lordships in Pettitt v. Pettitt, as noted by Lord Denning above, they suggest that with the passing of the Married Women's Property Acts in the later 19th century the underlying need for the presumption was removed, so that the presumption immediately died a natural death, although the English judges failed to appreciate that fact until recently.

13. I am unable to accept that analysis. Although the Acts may have been an early reflection of a changing attitude to the position of women in society, it was not those Acts as such but the radical changes in social conditions following the Second World War which influenced their Lordships. Those changes had not reached Hong Kong by the thirties or forties, or even, in my view, the fifties. Having regard to the level of society in which the affirmations of the husband lead me to think he and his wife would have found themselves at the time in question I would count the presumption of advancement to be a matter of considerable importance not easily to be displaced.

14. To succeed on the main aspect of this appeal, therefore, the husband has two hurdles to clear, the deeming provisions of s. 6 of the Ordinance and the presumption of advancement. In my judgment he falls at both.

15. Finally, on the question of costs, it is submitted that the judge's order giving the Commissioner the whole of his costs should be varied to some extent to reflect the fact that on the day immediately prior to the hearing below the Commissioner and the husband came to a compromise as to the value of the two properties in question and the proportion to be taken as the matrimonial home (and thus exempt from tax) which more nearly related to the position taken initially by the husband (and which he came prepared to support with expert evidence) than that taken by the Commissioner. This point had been taken before the judge below. In the absence of an agreed note by counsel of the reasons then given by the judge I turn to the note fortunately taken by the judge's own clerk:

"I regret that I am unable to accept the validity of the submission which have been made relating to costs. I do not regard the "issues" which were compromised to be separate and distinct to justify me in departing from the usual order which is made in this type of litigation. In reality the issues all formed part of a whole and what was agreed was part of the case as a whole. I therefore do not propose varying the order which I made previously."

Costs are a matter within the discretion of the judge. It does not appear to me from the reasons given that he erred in any way in principle nor am I persuaded that he was plainly wrong.

16. For these reasons I would dismiss the appeal.

Kempster, J.A.:

17. I agree and have nothing to add.

Litton, J.A.:

18. In the Court below the husband made, in effect, two points:

(1) that the purchase money for the assets listed in the estate duty affidavit (and set out in pages 4 to 6 of the judgment of Mayo J.) had been provided by him, not by his wife, and

(2) that, in relation to these assets held in his wife's name, assuming that a presumption of advancement arose in favour of his wife, the evidence surrounding the transactions displaced that presumption.

19. Although these submissions were made in relation to all the assets, that is to say (a) the two landed properties No. 134 Fuk Wing Street and No. 20 Tung Shan Terrace, (b) the locally listed shares (c) the various bank accounts, no attempt was made in the affirmations filed on behalf of the appellant to explain the circumstances surrounding the acquisition of the shares or the opening of the bank accounts. The argument focused therefore almost exclusively upon the acquisition, in the wife's name, of the two landed properties. As to this, the appellant's case was that the wife, when she was a young girl, was poor. From this, the court was invited in effect to infer that many years later, when the properties came to be acquired, the appellant had provided all the money, nothing having come from the wife. However, no evidence of any kind was adduced as to her family background and circumstances, beyond a statement to the effect that when she was a young girl she and her mother had been deserted by her father and he had taken a concubine. The court was left totally in the dark as to what her father did in his lifetime and whether he had, for instance, left any properties to his descendants upon his death.

20. The evidence before the court was to the effect that the couple had married in 1929. The first of the two properties in question, namely 134 Fuk Wing Street, was not acquired until some 15 years later, in August 1944. The appellant asserted that when that property was purchased he had provided all the money for the purpose. However, as to the sources of that money, it became obvious from the Commissioner's evidence that at least one of those had been inaccurately stated : that is, the proceeds of sale of a property in Nathan Road. When this was checked by the Commissioner of Estate Duty it was found that the Nathan Road property was not sold until long after the Fuk Wing Street property was purchased. No satisfactory explanation was given by the appellant for this, beyond a general statement that he was, at the time when he made his affirmation, a very old man and these transactions had occurred a long time ago.

21. The appellant's primary assertion was this : since 1936/37 everything he owned had been transferred into his wife's name, to the extent that thereafter he did not have any property or bank accounts in his sole personal name, so that when his wife died on 12 January 1987 he had only a small amount of cash : the only exception to this was the business of Shang Chee Hong, a dispensary, inherited from his father which he kept in his own name in memory of his father. This assertion was first made in a letter to the Commissioner of Estate Duty dated 31 July 1987 by the appellant's solicitors, and repeated in the affirmations filed in the proceedings in the court below. The appellant then proceeded to make this point : with all the properties and bank accounts held in his wife's name, if the intention all along had been to confer gifts rather than create trusts of the assets, his wife would have owned all, and he would have owned nothing. Hence, the appellant asserts that the intention at the time when the assets were acquired and put in the wife's name was that she would hold them upon trust for him; alternatively for him and his wife jointly.

22. The appellant was, in my view, entitled to depose to the "surrounding facts and circumstances" attending the acquisition of the assets in the wife's name : Fowkes v. Pascoe (1875] 10 LR Ch App 343 at 349. But, as in all instances where a party to proceedings is in possession of all the facts, and the respondent (here, the Estate Duty Commissioner) is a stranger to the transactions, the court would be inclined to take such self-interested assertions with a "pinch of salt", as the Judge plainly did in the court below.

23. Here, the appellant was found to have mis-stated the facts in a number of important respects. For instance, far from having no bank accounts in his "sole personal name", he had an account with the Citibank in Guam (opened in December 1986) with a credit balance of US$99,771.13; far from having only a small amount of cash, he had a US dollar certificate of deposit jointly with his son amounting to over US$787,000, and also other accounts. Moreover, on the same day as his wife's death, he had transferred out, from his wife's account, a sum of HK$650,523, using a written authorization given by his wife, and had placed it on deposit in US dollars with the Hang Seng Bank. It would be extremely unlikely that when he gave instructions to the solicitors shortly after his wife's death, to enable the solicitors to draft the letter of 31 July 1987 to the Commissioner, the appellant could have forgotten about the withdrawal of cash on 12 January 1987. Given these facts, Mayo J's categorization of the appellant's assertions as "clearly wrong and misleading" is not too harsh. I should add here in parenthesis that the Judge's reliance on a letter of 17 May 1985 to the Inland Revenue Department as a "declaration against interest" is perhaps unsound. What happened was that in correspondence with the Department concerning Property Tax the appellant had asserted that the properties belonged to his wife. As I view the matter, this is neutral : the wife being the legal (registered) owner of the properties was plainly liable for Property Tax, not the appellant. A claim of beneficial interest in the properties would have been inappropriate in the circumstances.

24. But, in my judgment, what I have stated above would alone have justified the Judge in concluding that the appellant was unreliable in his primary assertion : that he and he alone had provided the money for the purchase of the properties. The affirmations contained, in effect, a huge gap in the recitation of the "facts and circumstances" from the time when his wife was a young girl (and poor) to the time when the properties were purchased (and she was middle-aged) was a considerable span. The court had only the word of a self-serving and unreliable deponent (who was never cross-examined) to conclude that the wife remained poor all that time. It is not surprising that the Judge held, in these circumstances, that the burden of proof was not discharged.

25. The appellant, failing to establish that he had provided the money for the purchase of the properties in his wife's name, was therefore unable to rebut the statutory presumption in section 6(1) of the Estate Duty Ordinance, Cap. 111, which says:

"6(1) Property passing on the death of the deceased shall be deemed to include the property following -

(a)    Property of which the deceased was at the time of his death competent to dispose".

26. As to the presumption of advancement I agree with the observations of the Vice-President.

27. For the reasons above I too would dismiss the appeal, and concur in the result regarding the costs below.

Sir Derek Cons, V.P.:

28. In handing down these judgments we make an order nisi that the Commissioner of Estate Duty shall have his costs of the appeal.