CHAN KAM TSUEN WALTER v. CHAN CHUN HEI DAVID

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1998, No. 165
(Civil)

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J U D G M E N T

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Mortimer V-P:

1. This is a defendant's appeal against the order of Hartmann J.

2. The plaintiff and the defendant are brothers. The plaintiff lived at the material times in England and the defendant in Hong Kong. The plaintiff had two consolidated claims before the judge. The first was the return of US$100,000 lent to the defendant in April 1995 for one year at a specified rate of interest. The second was for a declaration that a car space purchased by the defendant in Elegance Tower in July 1993 and registered in the defendant's name was beneficially owned by the plaintiff. Those two claims were not denied by the defendant. Judgment was given. Against those orders there is no appeal.

3. This appeal is against the order of the judge dismissing the defendant's counterclaim and setoff for US$400,000.

4. The defendant originally alleged that this sum had been lent to the plaintiff and that he was holding the car space until it had been repaid. But by the time of trial he had amended his case. He then alleged that the US$400,000 was money had and received by the plaintiff. The parties agreed that in June 1990 that sum had been paid by the defendant into the plaintiff's bank account in Luxembourg out of their mother's account in Hong Kong.

The issues

5. The issues were whether that money was a gift to the plaintiff from his mother living here in Hong Kong shortly before her death on 26 September 1990 when she was ill; and whether the defendant was acting as their mother's agent in remitting the money.

6. The basis upon which the defendant claimed that the money was money had and received by the plaintiff was not clear on the pleadings and never became clear during the trial because the defendant did not give evidence, but it was suggested in argument that the money must either have been paid by mistake, or paid for a consideration which had wholly failed.

The background

7. The father of the parties died in 1957. Their mother was left with a substantial estate. In about 1989, however, the mother became ill with cancer. She died on 26 September 1990. In 1988 she had made a will leaving everything to the two sons, the plaintiff and the defendant. But on 6 September 1990 she made a new will, leaving her estate in trust for her brothers and for charitable causes, in other words, cutting out the plaintiff and the defendant. Since then the defendant has brought an action to set aside the will which has not been heard. The plaintiff refuses to join in in that action.

8. The focus of the evidence at trial concerned the movements of money between the account of the mother, the defendant here in Hong Kong, an account of the plaintiff in England, and so far as the US$400,000 is concerned, an account of the plaintiff in Luxembourg.

9. In April and May 1990 substantial transfers were made from the mother's account into the defendant's account. The details do not matter but they remained for the time being in the defendant's accounts. After that had happened, the plaintiff came to Hong Kong to see his ill mother. He returned to United Kingdom on 17 June 1990. But on the day of his departure - he said in evidence - his mother offered him DM300,000. He was somewhat surprised and declined it at the time, saying that he did not want to act like a vulture. He suggested to his mother that they would talk about it the next time he was in Hong Kong. Now, there was no evidence that the mother had that sum in Deutsche Marks on that day, 17 June 1990, but she had a similar sum in Deutsche Marks in April and May. In fact in April and May the mother had transferred to the defendant a similar sum in Deutsche Marks in two amounts.

10. During the plaintiff's visit to Hong Kong to see his mother in the summer of 1990, he was never told by either his mother or the defendant of the transfers which had been taken place in April and May from mother's account into that of the defendant. As to the DM300,000, it was suggested by the plaintiff that the mother might have been speaking of that sum on 17 June. Such a sum had been earlier transferred to the defendant's account and the suggestion was that at that time she still regarded herself as the owner of it.

11. There followed a strange incident. The mother had a favourite god-daughter who came to Hong Kong to visit her. The mother was very generous towards that god-daughter but the defendant thought that she was up to no good and was after mother's money or goods. The god-daughter had received money to pay for the visit.

12. On 29 June 1990 the defendant reported the god-daughter for theft. The consequence was that the god-daughter returned some small amounts of money and gold trinkets. The case was left there. The relevance of it is, perhaps, tenuous. But on the same day the defendant arranged for a substantial part of the funds which had been transferred to his accounts from his mother's accounts in April and May to be consolidated into one of his mother's accounts. Also, there was placed into the mother's account at the same time a sum of HK$300,000 which came from the defendant's account with the Hang Seng Bank. That was a sum he was holding in his account but it had also originally come from the mother. Also on the same day, 29 June 1990, two transfers were made out of the mother's account by the defendant, one being the sum in issue in the counterclaim, US$400,000 which was put in the plaintiff's account in Luxembourg held under a pseudonym. Secondly, the remainder was transferred into an account held by the defendant in Canada. The spilt was about 60% to the defendant and 40% to the plaintiff. Just before the transfer, there was a telephone call from the defendant, according to the plaintiff's evidence. As I have said, there is no evidence at trial from the defendant. That call was described by the judge as follows:

"It was the Plaintiff's unchallenged testimony that his brother appeared to be in a state of high anxiety. His brother told him, he said, that lots of people in Hong Kong were asking their mother for money, trying to get money out of her one way or the other. He told him of the sworn god daughter from France taking so much. According to Plaintiff, his brother told him that after 'a hard fight' he had managed to get together US$400,000 which he would remit to the Plaintiff. That sum, said the Defendant, would be the Plaintiff's share of his mother's estate and after he had accepted it, the rest of the estate would have nothing further to do with him. He; that is, the Defendant would deal with the balance of the estate. The Plaintiff said that he raised no objection to the suggestion at that time as he felt he had no choice in the matter. He therefore gave his brother the necessary details of his Luxembourg account. However, he said that he had reservations at being pressured in this way into accepting what could well be less than his fair entitlement under their mother's will and although he did not voice any objection he did not feel that he had to be bound by any such proposal."

But, according to the judge's finding - and as was said in evidence by the plaintiff - after the transfer he thought he was holding funds which remained his mother's, believing that both he and his brother were holding funds to prevent dissipation.

13. The defendant, however, never told the plaintiff of the sums that he had remitted to his own account in Canada.

14. In the meantime, the medical bills for mother were mounting. The defendant spoke to the plaintiff hoping that he would pay his share.

15. There was a further conversation in July about the money. It was an important conversation because it indicated the defendant's state of mind. The defendant telephoned the plaintiff and said he was with their mother. During the conversation the defendant asked the plaintiff to thank their mother for the gift of US$400,000. The phone was handed to mother. He did so. His evidence was that her response to his gratitude was cold as if the gift did not matter to her at all.

16. There was correspondence to which we have been referred by counsel. There was a letter, for example, dated 26 June 1990 from the mother in which the mother seemed to be claiming and regarding the substantial sums, which had been put in the defendant's account in April and May, still as her own. In respect of other sums she recognised that she had given some to the defendant.

17. From July onwards, however, relations between the mother and the defendant deteriorated. The mother thought that the defendant was refusing to pay for the best accommodation she could have in hospital in order to keep the money for himself. That may have been one of the matters - but it is not entirely clear what led to the change in her will and the defendant's later challenge of it.

The dispute on the facts

18. The defendant received the mother's money into his own account in April and May 1990. Were those gifts from the mother to the defendant? It is clear that the sum involved in the counterclaim - US$400,000 - came out of those sums. So the question was whether that money transferred to the plaintiff belonged to mother, or whether it was defendant's own money transferred for no apparent reason? If the latter, said the defendant, he was entitled to its return or return of the balance subject to a setoff.

The appellant's case

19. The judge approached the issue by first considering the burden of proof. He said that there was no dispute that the burden of proof in the consolidated actions was on the defendant.

20. Mr Philip Dykes SC, who appears for the defendant on this appeal, submits that the judge was in error in putting the burden on the defendant in these circumstances. But, the judge found on the whole of the evidence, taking into account the presumption of advancement, that the defendant was not the recipient of a gift from the mother of the money which included the US$400,000 at all. So the burden of proof does not assist here.

21. But that is not the end of Mr Dyke's case. His main point is simple. He says that the judge failed to give sufficient effect to the presumption of advancement and that once the transfer of the money had taken place in April and May into the defendant's account from the mother's, the presumption is that it was a gift. The money came into the control of the defendant and the matter was concluded, so that whatever was said or thought about the status of the money or the ownership of the money thereafter is of no moment.

22. Further, that although there was only evidence from the plaintiff as to the circumstances of the transfer and of the relationship between himself, the mother and the defendant, the judge was wrong to accept his evidence because there were indications that he had lied in the past about a number of matters. At the very least he had not been frank about the money that had been transferred to him and had never indicated in his letters that he thought that money had come from mother.

Conclusion

23. Mr Dykes advanced the argument in his usual succinct and persuasive manner, but when one looks at the judgment and the judge's reasons in deciding whether the presumption had been disproved by the circumstances and the evidence that he had heard, Mr Dykes' argument does not come near to demonstrate that the judge was not entitled to find as he did on the evidence that was before him. This was amply demonstrated by the judge's careful summary of the matters upon which he relied. It is worth repeating the basis of his finding. It related to the state of mind of the defendant which was important because the defendant had at all relevant times been managing the mother's money. The judge, dealing with this part of the evidence, said this:

"Second, there is evidence that over the years the mother had donated amounts of money to both sons, money which they had accepted as being their property and had used accordingly. In respect of the funds transferred to him in the months of April and May 1990, however, in my judgment, the actions of the Defendant do not indicate that he believed himself to be the donee of several gifts of money and therefore the outright owner of them. For example -

a. If he believed he was the outright owner of the moneys, why remit them with such speed (and in such an apparent panic) at the time when he feared his mother might dissipate her estate? That must be an indication that at the time he believed his mother had some claim on the moneys earlier transferred to him. Did he believe it was just a moral claim rather than a legal one? I do not know. The Defendant, as I have said, chose not to testify.

b. If he believed he was the outright owner of the funds, why consolidate them all in an account in his mother's name and remit the moneys from that account so that it appeared the moneys were being sent by the mother?

c. If he believed he was the outright owner of the moneys, why not tell that to the Plaintiff when he telephoned him on 29th June to say that he was remitting US$400,000? For example, why not say: 'these are my moneys but I am afraid our mother will want them back to give away and I want to remit the funds to you so that you can keep them safely for me?'

d. If he believed he was the outright owner of the moneys, why attempt to strike a bargain with his brother in terms of which his brother would accept the remittance in full and final settlement of any claims not against him but against the mother's estate? Was he not thereby acknowledging that these were his mother's moneys to which, on her death, his brother would have a valid claim?

e. If he believed he was the outright owner of the moneys, why request his brother to speak direct to the mother to thank her for her gift of the US$400,000? Surely, that can only be interpreted as an acceptance by him at that time that the moneys had been the property of the mother and that she was therefore the donor. During his submissions, defence counsel, Mr. Chan, spoke of the possibility of Defendant not wishing to hurt his mother's feelings, either that or of wishing to make his mother feel good. But that is supposition unsupported by the evidence.

f. If he believed he was the outright owner of the moneys, why, after the death of the mother, did not the Defendant within a reasonable time contact the Plaintiff and request the return of the moneys? Why wait for over five years until an acknowledged debt was due and payable?"

24. The judge speaks of it not being unusual in Hong Kong for family members to transfer funds between each other and he said:

"In all the circumstances, I am not satisfied that the Defendant has shown on the probabilities that the transfers amounted to donations to him. In fact, I go so far as to say that the available evidence indicates the contrary; namely, that they were transferred to him to be held in trust and the Defendant at the time knew full well that this was the case and that, if she wished, his mother would have the right in law to use those funds as she saw fit. On all the evidence, that, in fact, was why he moved the funds out of Hong Kong; it was in order to prevent his mother using her money as she saw fit."

Further he found that:

"As concerns the US$400,000 received by the Plaintiff, I am satisfied on the available evidence that, once the mother was aware of the remittance, she ratified that as a gift to the Plaintiff; put simply, that she accepted that the Plaintiff could now keep those funds as a gift made by her to him."

25. In his challenge to those findings Mr Dykes seeks to say that the judge ought to have given weight to a number of other matters but there is no indication whatsoever that the judge was in any way in error in accepting the evidence he did or upon reaching his finding. For my part, I would dismiss the appeal with costs to the plaintiff.

Godfrey JA:

26. I agree.

27. If the US$400,000 paid by David to Walter was David's money, not the mother's money, then, no doubt, Walter would have to account to David for it. The crucial question, however, as Mr. Dykes, S.C. for the appellant candidly accepted, was whether the initial transfer made by the mother to David of the funds of which the US$400,000 formed part was a transfer made by way of gift by the mother to David. Mr. Dykes says that this is to be inferred from the circumstances and (as he has to do) goes on to say that no other inference is possible.

28. But for the reasons given by my Lord, Mortimer, V-P, I am satisfied that the judge was quite entitled on the material before him to draw the inference that the transfer of funds made by the mother to David was not made by way of gift. That conclusion is fatal to the appellant's case and so I, too, would dismiss this appeal.

Rogers JA:

29. I agree. I have nothing to add.