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HCMP 2027/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO 2027 OF 2011
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IN THE MATTER of Order 17 of the Rules of the High Court, Cap.4A
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and
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IN THE MATTER of an application by Nanyang Commercial Bank, Limited for interpleader relief against the claims between the 1st and 2nd Defendants herein
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BETWEEN
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NANYANG COMMERCIAL BANK LIMITED |
Plaintiff |
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And |
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THE PERSONAL REPRESENTATIVE OF VANNEE NATIVIVAT, Deceased |
1st Defendant |
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VITOON NATIVIVAT |
2nd Defendant |
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| Before: |
Hon To J in Chambers |
| Dates of Hearing: |
19 December 2012 |
| Date of Decision: |
27 March 2013 |
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D E C I S I O N
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Introduction
1. This is the hearing of an appeal by the 2nd Defendant against the decision of Master J Wong given on 14 June 2012 granting the Plaintiff (the “Bank”) interpleader relief with costs against the 2nd Defendant; and a cross appeal by the 1st Defendant, the personal representative of the mother of the 2nd Defendant (the “Mother”), against the master’s costs order that there be no order as to costs as between the 1st and 2nd Defendants.
Background
2. The Mother, a Thai national, and her son, ie the 2nd Defendant, had five joint accounts (collectively, “the Accounts”) with the Bank. Under clause 7.1(g) of the Conditions of Service of the Accounts (the “Conditions”), upon the death of either one of them, the balance in the Accounts would belong to the survivor. In a letter dated 19 October 2010, the Mother informed the Bank that the 2nd Defendant had taken away the account book and requested all the Accounts be frozen as she was incapacitated. The 2nd Defendant also wrote to the Bank twice the next month claiming there was a misunderstanding with the Mother and asked the Bank to freeze the Accounts. Accordingly, the Bank suspended the operation of the Accounts.
3. On 31 December 2010, the Mother went to the Yaumatei branch of the Bank in person claiming that the monies in the Accounts (“the Monies”) belonged to her solely and that the 2nd Defendant was named as a joint holder solely for convenience purpose. She told the Bank’s staff that she wanted to withdraw the Monies. Her request was refused because the 2nd Defendant had also written to freeze the Accounts.
4. About 6 months later, Messrs W K To & Co (“WKT”) informed the Bank that the Mother had passed away in Thailand leaving a will. They claimed again that the Monies belonged to the Mother and should not be released to the 2nd Defendant by survivorship. On 23 August 2011, WKT confirmed that they had instructions to act for the executors of the will or the personal representatives of the deceased Mother.
5. On the same day, Messrs Alvan Liu & Partners (“ALP”) acting on the instruction of the 2nd Defendant wrote to the Bank claiming that upon the death of the Mother, the 2nd Defendant in his capacity as the sole remaining beneficial owner of the Accounts was entitled to operate the Accounts.
6. In light of the development, the Bank proposed an interpleader by consent so that the Monies could be paid into court pending final determination of the entitlement of the Monies as between the 1st and 2nd Defendants. WKT agreed but ALP did not. This led to the Bank taking out an originating summons seeking interpleader relief.
7. On 14 June 2012, Master J Wong granted the Bank’s application but refused to make a summary determination of the entitlement of the Monies as between the 1st and 2nd Defendants. He ordered, inter alia, that the Monies be paid into court pending final determination; that the 2nd Defendant to pay the Bank’s costs of the application; and that there be no order as to costs as between the 1st and 2nd Defendants. He gave the following direction for the further conduct of the application:
“As to how the entitlement of the Monies between the 1st and 2nd Defendant is to be resolved, they should agree with further directions and submit the same for the master’s approval within 21 days of the order, failing which, the matter should be resumed before the master for 1 hour.”
8. The Mother left two wills. Under her first will dated 24 July 2004, she appointed the 2nd Defendant as one of the executors of her will. By her second will dated 24 December 2010, she disinherited the 2nd Defendant and appointed his three siblings, ie the 1st Defendant, as executors. The 2nd Defendant challenged the validity of the second will on the grounds that it was a forgery and made while the Mother was not of totally sound mind. However, for the purpose of the present appeal, the 2nd Defendant is not pursuing the question whether the 1st Defendant has authority to represent the estate of the Mother.
Some legal principles applicable to interpleader proceeding
9. Interpleader proceeding is a proceeding by which a person, from whom two or more persons claim the same property or debt, but who does not himself claim the property or dispute the debt, wishes to protect himself from legal proceedings by calling upon the two claimants to interplead, that is to say, claim against one another, so that the title to the property or debt may be decided by the court: Order 17 rule 1 and Hong Kong Civil Procedure 2012 paragraph 17/0/2. The prerequisite to the right to interplead is that the intended interpleader: (a) has no interest in the property the subject matter of the dispute; (b) did not collude with any of those claiming the subject property; and (c) is willing to dispose of the property as the court might direct.
10. In DLA Piper v China Property [2010] 1 HKLRD 903, the Court of Appeal endorsed the following principles applicable to an interpleader proceeding as correct:
(1) where two or more persons claim the same thing or fund, the holder of the thing or fund does not claim any interest in the property, and not knowing to which of the claimants he ought to deliver the property, and he is sued or fears that he may be sued by some of them, he may apply for interpleader relief against the claimants;
(2) the relief is discretionary and it will not be granted unless there appears to be some real foundation that the applicant may be sued;
(3) the applicant does not in any manner collude with any claimant, or has not voluntarily put himself into the situation from which he calls on the court to extricate him;
(4) he is ready to bring into court, or to pay to dispose of the subject matter of the action in such manner as the court may direct;
(5) the test for a real foundation of being sued is whether a prima facie case exists (see Chan King Sheen v KC Tsang & Co [2002] 3 HKC 209 (CA) at 221I); and
(6) the test is whether each of the rival claimants has a prima facie case against the interpleading party, but not whether the adverse claimant has a claim against each other (see de La Rue v Henru, Peron & Stockwell Ltd [1936] KB 164 per Greene LJ at 170‑173, Tsun Fat Finance Co Ltd v Commissioner for Police [2002] 3 HKC 232 at 246).
The first four of these “principles” are prerequisites. The remaining two are the test and the standard of the test to be applied in ascertaining whether the interpleading party has a real foundation that he will be sued by the claimants.
11. On hearing the application, the court has wide discretion, including dismissing the application on grounds that the prerequisites in rule 1 or the formal requirements in rule 3 are not satisfied; making a summary determination of the claim; and giving direction as to the further conduct of the proceedings: rule 5 and Hong Kong Civil Procedure 2012 paragraphs 17/5/2 to 17/5/9. Summary determination is the course most commonly taken in straightforward cases, particularly where expedition is desirable. But if the subject matter is of considerable value and difficult questions of law may arise, summary determination is not appropriate, even if the parties so consent: Fredericks and Pelhams Timber Buidings v Wilkins, Read (Claimant) [1971] 1 WLR 1197; [1971] 3 All ER 545 (CA).
12. A summary determination, being summary in nature, is only appropriate for clear cases to which summary judgment under Order 14 is applicable. The legal principles applicable to summary judgment under that order are also applicable to a summary determination under Order 17. Summary determination is therefore appropriate for cases in which there is no material factual dispute and if there is a legal issue, then no more than a crisp legal question as well decided summarily as otherwise. The court must not embark on a mini trial on affidavits.
The 1st Defendant’s case
13. The Mother’s case is that the Monies belonged to her solely and came from rental income from a property in Wing Lok Street (the “Property”) which belonged to her until she was defrauded by the 2nd Defendant into transferring the Property to him by way of a purported deed of gift dated 26 April 2004. The Property is the suit property in another set of proceedings, namely HCA 1376/2011 commenced by the 1st Defendant against the 2nd Defendant. Upon learning that the 2nd Defendant intended to fly to Hong Kong to withdraw the Monies, the Mother caused a letter dated 19 October 2010 to be sent to the Bank instructing it to freeze the Accounts. That letter was received by the Bank on 29 October 2010. On 28 and 29 October 2010, the Mother also spoke with Agnes Ng of the Bank on the telephone expressing her clear intention to freeze the Accounts to prevent the 2nd Defendant from withdrawing the Monies. On 24 December 2010, the Mother made her second will disinheriting the 2nd Defendant from her estate. On 31 December 2010, just one week after making her second will, the Mother went to the Yaumatei branch of the Bank where she was received by the manager, Leung. She told Leung that the Monies in the Accounts belonged to her solely and the 2nd Defendant was only made a joint account holder for convenience. The Mother also brought civil and criminal actions against the 2nd Defendant in Thailand for deception and embezzlement.
The 2nd Defendant’s case
14. The 2nd Defendant’s case is that the Monies in the five Accounts came from him and the Mother. A sum of US$400,000 was kept in the Accounts for the purpose of making joint investment in Hong Kong but was kept rolling over as fixed deposit because both the Mother and the 2nd Defendant were busily engaged in their business in Thailand. Some of the Monies came from profits generated out of two accounting and auditing firms in Thailand established by the Mother and the 2nd Defendant together with others. A third source was money solely contributed by the 2nd Defendant, including the rental income from the Property gifted to him by the Mother. They drew money from those accounts for their use when they visited Hong Kong and for giving to the Mother’s relatives in China when they visited China. Their common intention was that the beneficial interest in the credit balance of the Monies in the Accounts should be held by them jointly and that upon the death of either of them the beneficial interest in the Monies shall pass onto the survivor. This common intention is reflected in clause 7.1(g) of the Conditions. The Conditions had been explained by the Bank staff to them in Punti when the first of those Accounts was opened and understood by the Mother. The Mother seldom operated the Accounts and he was free to withdraw monies from the Accounts as he wished.
15. In June 2010, the Mother was diagnosed as suffering from lung cancer. The siblings, including the 1st Defendant, took advantage of the Mother’s condition and exerted undue influence on her. They began to raise questions about the Mother’s properties and their distribution upon her death. His relationship with the siblings deteriorated, especially when they discovered the Accounts and the gift of the Property. They demanded him to give all the Monies and the Property to the Mother. In September 2010, he was told by the Mother that his siblings forced her to give them the Accounts’ savings book and deposit certificates and to withdraw all the Monies from the Accounts.
16. Then, the 2nd Defendant learned about the Mother’s letter to the Bank dated 19 October 2010. He disputed the authenticity of the Mother’s signatures on the letter as the Mother was in critical condition on 17 October 2010 and had an emergency CT scan of the brain which showed that she had a stroke. He queried if the Mother understood the letter which was written in English. The Mother was readmitted into the hospital on 14 April 2011 where she remained until she died on 9 June 2011. His attempts to call or visit the Mother were frustrated by his siblings who were familiar with the doctors who treated the Mother.
The issues
17. To apply for the interpleader relief, the first hurdle the Bank has to overcome is to show that the pre‑requisites under Order 17 rule 1 are satisfied. There can be no dispute that the first and fourth prerequisites under the rule are met. The Bank is in possession of the Monies in which it does not claim any beneficial interest, but which both the 1st and 2nd Defendants are making adverse claims and the Bank is ready to pay the Monies into court for the court’s determination.
18. There is nothing to suggest that the Bank has colluded with either of the Defendants or has voluntarily put itself into the situation from which it calls on the court to extricate him. The third prerequisite is also met.
19. The 1st Defendant has, through their solicitors, represented to the Bank that they are personal representatives of one of the Account holders who has deceased and asked for the Accounts to be suspended. They indicated that they might apply for an injunction against the Bank if their request was refused. There is a prima facie case that the Bank was in fear of being sued by the 1st Defendant. Based on the survivorship clause, the 2nd Defendant made an even stronger demand in threatening to take action against the Bank if it did not pay the Monies to him or resume the operation of the Accounts. This appeal speaks for itself. The determination of the 2nd Defendant to carry out its threat and the Bank’s fear that it would be sued by the 2nd Defendant cannot be doubted.
20. The outstanding issue is whether the Bank can show that each of the Defendants has a prima facie case against the Bank in respect of their claims. If none of the Defendants can show a prima facie claim, then the Bank should be free to dispose of the Monies in accordance with the terms of its agreement with the account holders. If only one of the Defendants can show a prima facie claim, then the Bank should act according to the instruction of that party given in accordance with the terms of its agreement with the account holders. In either case, it should not have taken out the interpleader summons and the interpleader summons taken out has to be dismissed, preferably with a summary determination. If both Defendants can show a prima facie claim, it is an appropriate case for interpleader proceeding.
21. Thus, the issues raised in this appeal are quite clear. They are:
(1) whether each of the 1st and 2nd Defendants has a prima facie claim against the Bank;
(2) if yes, whether the application is capable of summary determination, in that there is no material factual dispute and no other than a crisp legal question which could be summarily determined; and
(3) if yes, which of the Defendants is entitled to the Monies.
22. The central dispute under the first issue is who is the beneficial owner of the Monies in the joint Accounts. This is a matter of intention of the parties who contributed monies to the Accounts, ie the Mother and the 2nd Defendant. The 1st Defendant relied mainly on the Mother’s assertion of her intention made fifteen years after the opening of the Accounts and her subsequent conduct in demanding the Bank to pay the Monies to her and to suspend the Accounts. The 2nd Defendant relied on the intention of survivorship held in common with the Mother as reflected in clause 7.1(g) of the Conditions and the presumption of advancement. I shall first discuss the legal principles relating to survivorship clauses applicable to joint bank accounts and the presumption of advancement before dealing with the three issues.
Survivorship clause
23. Ownership of funds in a joint account is subject to the same principles as other personal property: The Law of Trusts, Thomas and Hudson 2nd ed §3.46 to 3.47. It is all a matter of intention of the joint account holders. However, ascertainment of that intention in a joint bank account is difficult because there are various possibilities leading to the opening of a joint account, none of which by themselves raises an irresistible or only reasonable inference of the intention of the joint account holders. A joint account may be opened for convenience of the party providing the funds so that another party has only rights of withdrawal for specified purposes and the funds in the account form part of the estate of the party who provided the funds. A joint account may also be intended to be a pool of the account holders’ joint resources, in which case the money in the account belongs to them jointly. This is very common for spouses especially where the account has been in operation for many years. The spouses usually contribute unequal amounts out of their own resources and deposit in the joint account for no specific purpose but each of them is free to withdraw money at will for common or personal purpose: National Provincial Bank Ltd v Bishop [1965] Ch 450. Ascertainment of this common intention is made all the more difficult by the terms and conditions of the account which provides a survivorship clause. Such clauses are usually included in the agreement or in the signature cards or bank mandate to protect the bank than to reflect the intention of the account holders. The clause may be concealed in small prints in some of the many account opening documents which the account holders have to sign when opening the account. Such a clause may cloud the true intention of the parties.
24. Another difficulty in ascertaining the intention of the joint account holders is that each account holder is free to draw money from the account for his own purpose including to pay himself. Each withdrawal represents a severance of the joint ownership in the funds withdrawn.
25. In Lily Cheung and Another v The Standard Chartered Bank Hong Kong Trustee Ltd and Ors HCA 5464/1987, Deputy High Court Judge Finlay QC, as he then was, warned of the importance not to be confused by survivorship clauses which govern the contractual relationship between the joint account holders and the bank with the true relationship between the joint account holders inter se as regards their interest in the account. Such clauses usually do not say anything definitive regarding the relationship between the joint account holders as to their respective rights in respect of the funds in the account. That relationship depends on what the law allows and what the joint account holders intend. He said in §§171-177:
“171. It is also important, to my mind, not to confuse the contractual relationship between the account‑keeper and the account‑holders with the relationship between the account‑holders inter se regarding the assets being kept by the account‑keeper. Where a sole account‑holder causes another to become a joint account‑holder so that the account‑keeper is contractually bound, and entitled, to regard that new account‑holder as a joint account‑holder front whom. The account‑keeper should take instructions as to the operation of the account, that creates the new contractual relationship between the account‑keeper and the joint account‑holders, replacing the old one between the account‑keeper and the sole account‑holder, but it does not say anything, definitively, regarding the relationship between the joint account‑holders as to their respective rights in respect of the assets in the account. That relationship depends on what the law allows and what joint account‑holders intend the relationship should be. Nor does the new contractual relationship between the account‑keeper and the account‑holders determine what, if anything, has, in law, been transferred by the old account‑holder to the new account‑holder.
172. That is why, in cases such as Marshal v Crutwell (1875) LR 20 Eq 328, a finding that the intention was that the joint account‑holder’s power to manage the account was ‘a mere arrangement for convenience’ Jed to a decision that the joint account‑holder had no beneficial rights to the assets in the account.
173. The intention may, of course, be other than the creation of ‘a mere arrangement of convenience’; whatever it is, it is the duty of the court to give effect to that intention, if that intention has been carried into effect in a manner allowed by law.
174. This is also why one finds the following statements in the authorities –
175. Niles v Lake [1947] 2 DLR 2.48 (Supreme Court of Canada): by Rand J, at page 261, speaking of bank mandates containing mutual assignments and a right of survivorship ‑
‘These [the provisions of a joint bank mandate] are all constituent elements of a conclusive relation to the bank; whatever the interest in the money of the depositors inter se, these are the terms interposed between them and the bank. They, therefore, do not set up a joint tenancy, a title characterized by an immediate beneficial interest of a moiety in each of the owners; and no one has suggested the category of ownership into which they fit.’
176. Lily Cheung v Standard Chartered Bank [1988] 1 HKLR 613, per Kempster JA, at page 618 ‑
‘The terms of the mandate from the deceased and the second defendant [the very bank mandate in the HSBC account with which I am concerned] go to the Bank’s authority and not to beneficial title.’
177. Gail Stevenson v The Chartered Bank [1977] HKLR 566, per Leonard J., at page 579 ‑
‘The account is expressed to be joint and that it is expressed to be in the names of the first appellant ‘and/or’ second appellant means to me no more than that it was the intention of the parties that either husband or wife could give a good discharge for any withdrawals on production of the pass‑book.’
26. The use of survivorship clause in joint account documents as evidence of common intention of the account holders has been undermined in recent decisions. In Madsen Estate v Saylor [2007] 1 SCR 838, a “companion” case, the Supreme Court of Canada held at §§25 and 27:
“25. Beyond the fact that both accounts were designated as carrying the right of survivorship, the banking documents do not contain any express reference to beneficial entitlement to the assets in the accounts. …
26. … (quoting the clauses)
27. Having regard to the lack of clarity in the documents on this critical point, I would accord them little weight insofar as the issue of beneficial entitlement to the assets in the accounts is concerned.”
27. In Re Northall (Deceased) [2010] EWHC 1448, the survivor’s claim to the balance in a joint account under a survivorship clause was rejected by the court. The court placed more significance on the source of the funds in the joint account and the presumption of resulting trust. In that case, a widow paid the proceeds of sale into a joint account in her and her son’s name. Richards J held that under the circumstances there was a presumption of resulting trust in favour of the account holder who provided the funds, ie the widow, and the survivorship clause was of no assistance against the background of other evidence.
28. In Cheung Cho Kam Sindy v Cheung Yuet Ying Rose HCA 885/2005, (unreported) 13 July 2007, Deputy High Court Judge Muttrie held that beneficial entitlement of funds in a joint account was to be determined by the common intention of the account holders and no assistance was to be drawn from the terms of the bank mandate which went to the bank’s authority only.
29. Thus, the general principle is that beneficial entitlement of funds in a joint account is to be determined by the common intention of the account holders. A survivorship clause, without more, is just a contractual arrangement between the bank and the joint account holders as to how to deal with the money in the joint account. It is not conclusive evidence of the parties’ intention as to ownership of the money in the joint account. The parties’ intention overrides the survivorship clause. In drawing inference of common intention, greater weight is to be given to the source of the funds in the joint account and the presumption of resulting trust in favour of the joint account holder who provided the funds than to the survivorship clause. At the highest, survivorship clauses indicate a prima facie intention only, which is by no means conclusive and can be easily displaced by the circumstances.
The presumption of advancement
30. Next, the 2nd Defendant relied on the mother and son relationship between the Mother and himself as giving rise to the presumption of advancement of the Monies in the Accounts to him upon survivorship. Mr Lin, counsel for the 2nd Defendant, quotes my judgment in Lee Tso Fong v Kwok Wai Sun [2008] 4 HKC 36 that the presumption of advancement applies in the case of the relationship between mother and son just as it does between father and son. He also quotes similar decisions from other jurisdictions, such as Dagle v Dagle Estate Ltd (1990) 70 DLR (4th) 201 from Prince Edward Island in Canada; Nelson v Nelson [1995] 4 LRC 453 from Australia; Re Estate of Chong Siew Kum [2005] SGHC 41 from Singapore and Sayre v Hughes (1886) LR 5 Eq 376 from the United Kingdom. Mr Lin argues that the burden rests on the 1st Defendant or the Bank to rebut this presumption.
31. Mr Man, counsel for the Plaintiff, doubted if the presumption of advancement applies between a mother and an adult or independent child. He submits that the presumption was held inapplicable in recent decisions in multiple jurisdiction. He quotes Pecore v Pecore [2007] 1 SCR 795 of the Supreme Court of Canada, per Rothstein J; Low Gim Siah v Low Geok Khim [2007] 1 SLR 795 of the Singapore Court of Appeal, per Chan Sek Keong CJ; and HSBC Private Trustee (Hong Kong) Ltd v Ho Yuen Ping Dorothy HCA 2717/2008 per Deputy High Court Judge Coleman SC.
32. I respectfully disagree. In the United Kingdom, the presumption was abolished by statute. In Lee Tso Fong v Kwok Wai Sun, I held that the presumption of advancement survived and extended to Mother and child relationship because of the socio‑economic conditions in Hong Kong. Round about the same time, the Court of Final Appeal in Cheung v Worldcup Investments Inc [2008] HKCFAR 78 held precisely for the same reason that the presumption of advancement, albeit between a man and a woman in a de facto matrimonial relationship, applicable in Hong Kong. Pecore v Pecore, which is a decision from a jurisdiction with greatly different socio‑economic conditions has no impact on the presumption in Hong Kong.
33. In Low Gim Siah v Low Geok Khim, far from saying that the presumption did not apply to the relationship between father and his adult son, Chief Justice Chan held that the presumption did apply as the presumption of advancement was premised on the moral or equitable obligation of one party to support or make provision for another rather than the existence of financial dependence. The socio-economic conditions in Singapore are very similar to those in Hong Kong. In holding that the presumption applied to the joint accounts held by the father and his adult son, he said at p 815:
“In our view, it is correct to say that the cases where the presumption of advancement was held to have lost its robustness or diminished in importance were cases concerning joint contributions by married couples in acquiring the matrimonial home or properties acquired using joint savings. They were not concerned with the traditional and well‑established categories of father‑and‑child and husband-and-wife relationships where one party is under a moral or equitable obligation to support the other party.”
That was precisely the same premise on which the presumption was extended to the mother‑child relationship in Lee Tso Fong v Kwok Wai Sun.
34. As for HSBC Private Trustee (Hong Kong) Ltd v Ho Yuen Ping Dorothy, Deputy High Court Judge Coleman SC did not actually decide on that issue but thought that it was difficult to argue on the presumption on the facts of that case. In other words, he did not actually hold that the presumption did not apply in Hong Kong, but rather that on the fact it was difficult to give it weight or that it was rebutted.
35. Mr Liang, counsel for the 1st Defendant, quotes a number of United Kingdom and local decisions and argues that the presumption of advancement has lost much of its force in these modern days. Insofar as the United Kingdom cases are concerned, they were cases decided under greatly different socio‑economic backgrounds and are irrelevant. As for the local decisions, they are decisions on its facts.
36. In Cheung Cho Kam Sindy v Cheung Yuet Ying Rose HCA 885/2005, (unreported) 13 July 2007, the daughter claimed ownership of funds paid by her mother into her joint account with her mother who has since deceased. Relying on the English authority of Watson v Smith [1998] 3 HKC 461, Deputy High Court Judge Muttrie rejected the daughter’s argument based on presumption of advancement. On appeal, in CACV 178/2008, the daughter argued that the learned judge should have started with and applied the presumption. The Court of Appeal seemingly proceeded on the basis that the presumption was applicable but then dismissed the daughter’s argument. This decision supports the proposition that the presumption is applicable in Hong Kong, but the weight to be attached and whether it is rebutted on the facts are different issues.
37. On the other hand, there is a developing judicial trend, at least in Canada, of reversing the presumption where an aging parent placed funds into the joint account of his adult child. In Pecore v Pecore [2007] 1 SCR 795, eight of the nine presiding judges of the Supreme Court of Canada held that nowadays it is common for ageing parents to transfer their assets into joint accounts with their children in order to have that child assist them in managing their financial affairs and hence there should be a rebuttable presumption that the adult child is holding the property in trust for the ageing parents to facilitate the free and efficient management of the parents’ affairs. They were also of the view that the rebuttable presumption of advancement with regard to gratuitous transfer from parents to child should be preserved but be limited in application to transfer by mothers and fathers to minor children. This is a decision based on its facts. Also, the different socio-economic conditions in Canada should not be overlooked.
38. It should also be remembered that the presumption of advancement may only be raised in the absence of evidence of the intention of the parties or where the evidence is even. In Cheung Cho Kam Sindy v Cheung Yuet Ying Rose CACV 178/2008, Rogers VP said at §7:
“ On this appeal Mr Yip has manfully tried to argue that the judge should have applied the presumption of advancement. He says that the judge should have started with that. But the fact of the matter is that the presumption of advancement is only a presumption which is applied when there are no facts upon which the court can operate which would determine one way or the other where the particular property was intended to be owned. Once the judge has made findings of fact, as has the judge in this case, there is no scope, in my view, for the presumption of advancement.”
Stone J was of a similar opinion. He said at §11:
“11. It seems to me, with respect, that the Appellant has given a wholly erroneous significance to the so‑called “presumption of advancement.” It is not a ‘starting point’, as Mr Yip strongly has maintained, which thus immediately reverses the burden of proof. As the Vice President has intimated, the presumption is relevant only when there is no evidence of actual intention, or when the evidence available as to actual intention is evenly balanced. This patently is not the case here. The learned judge considered all the evidence and made his firm findings of fact. In the circumstances I, too, fail to see how the presumption comes into play at all.”
39. In Lavelle v Lavelle [2004] EWCA Civ 223, the English Court of Appeal took a similar approach. Lord Phillips MR held at §14:
“Normally there will be evidence of the intention with which a transfer is made. Where there is not, the law applies presumptions. Where there is no close relationship between A and B, there will be a presumption that A does not intend to part with the beneficial interest in the property and B will take the legal title under a resultant trust for A. Where, however, there is a close relationship between A and B, such as father and child, a presumption of advancement will apply. The implication will be that A intended to give the beneficial interest in the property to B and the transaction will take effect accordingly.”
40. Thus, the ultimate determining factor of ownership in funds in a joint account is common intention of the joint account holders. In the absence of evidence of this common intention or where the evidence available as to actual intention is evenly balanced, one may turn to presumptions, whether of advancement or resulting trust. A presumption is nothing more than an evidential tool; its weight varies with the circumstances of the case. On the one hand, the presumption of resulting trust may be raised in favour of the person providing the funds in the joint account. On the other hand, the presumption of advancement applies to the relationship between a parent and his adult child. Whether the presumption is raised depends on all the circumstances. These include the age of the parents, any reason or the lack of it for making a gift, the age of the child, his means and extent of financial dependence on the parent, the closeness of the parent‑child relationship, the parent’s moral and equitable obligations to the child and others, etc. Where funds are placed into the joint account of an aging parent and an adult child, an inference may be drawn that the arrangement is one of administrative convenience for the child to manage the financial affairs of the parent rather than a gift by the parent to the adult child.
Whether each of the parties has a prima facie case against the Bank
41. In the light of the parties’ case, the legal principles discussed above and the neutral position of the Bank as regards the Monies, each of the 1st and 2nd Defendant has a prima facie claim against the Bank. Prior to this proceeding, the Bank had far less information than that which has been presented to the court as a result of the issue of the summons. For reasons as will become obvious in the further discussion below, when the 1st Defendant’s case is tested against the 2nd Defendant’s and vice versa, it is difficult for the Bank to decide, at least from the evidence then available before the it, which party has a better claim. It is clearly possible that the Bank will be liable if it made a wrong decision to release the Monies to either of the parties. It is also clear that it is at risk of being sued if it chose not to do anything. In McEvoy v Belfast Banking Co [1935] AC 24 (HL), the bank was held liable for having made the wrong choice. Lord Warrington of Clyffe gave the following counsel of wisdom to banks finding themselves caught in such situation:
“Most unfortunately, as I think, the officers of the respondent bank, by accepting and acting on the endorsement of the executors, chose, with, I cannot but infer a shrewd eye to the pecuniary interests of the bank, to decide the matter for themselves without taking any care to protect the interests of the infant appellant. The proper course in my opinion would have been either to institute proceedings making the executors and the infant by his guardian ad litem defendants, and asking for directions as to the disposal of the money, or to refuse to act except under the directions of the Court, leaving the executors or the infant to institute the necessary proceedings …” (emphasis added)
On the facts of the present case, it was only appropriate that the Bank took out the interpleader summons. This is the usual procedure as commended by Lord Warrington.
Whether the claims were capable of summary determination
42. Ownership of the Monies in the joint Account is to be decided according to the intention of the joint account holders. The intention of the Mother is hotly disputed by the parties. The 1st Defendant’s case is that the Monies came from the Mother, belonged to the Mother and was intended to remain that way in the Accounts and that the 2nd Defendant’s name was added to the Account for convenience. The 2nd Defendant’s case is that the Monies came from him and the Mother and the Mother intended to make a gift of the Monies to him upon his surviving her. The thrust of the 2nd Defendant’s claim is that he is entitled to the Monies under the survivorship clause and the presumption of advancement. As discussed above, a survivorship clause has little significance on the issue of intention. I have found that the presumption of advancement applies in Hong Kong as between a mother and her adult child, but the presumption is rebuttable. The 1st Defendant seeks to rebut that presumption by evidence of the Mother’s intention. The key issue in this case is the Mother’s intention and the evidence pointing to that intention.
43. There are, therefore, at least the following material factual disputes between the 1st and 2nd Defendants:
(1) the intention of the Mother as regards ownership of the Monies in the Accounts;
(2) the source of the Monies in the Accounts;
(3) the authenticity of the Mother’s signature on her letter dated 19 October 2010; and
(4) what was the mental condition of the Mother since 19 October 2010.
All these factual disputes go to the core issue of the intention of the Mother as regards ownership of the Monies in the Accounts.
44. As to the source of the Monies, the 1st Defendant’s case is that the Monies belong solely to the Mother, being the rental income from the Property. The 2nd Defendant’s case is that the Monies came from him and the Mother and their joint businesses in Thailand for the purpose of investment in Hong Kong, but he was the major contributor of the Monies. His contribution included the rental income from the Property. The parties’ evidence on this key issue is just oral evidence which is unsupported by any documentary evidence.
45. The 2nd Defendant is ready to concede that he and the Mother contributed equally and to base his claim solely on the survivorship clause and the Mother’s intended advancement aided by the presumption if necessary. Despite the concession, the dispute remains as it is the 1st Defendant’s case that all the Monies came from the Mother and that the joint Account was set up for administrative convenience. The source of the Monies remains a material dispute and cannot be avoided by the concession.
46. The 1st Defendant’s case in particular is based on what they were told by the Mother during her lifetime as to the source of the Monies in the Accounts and her intention and the Mother’s subsequent conduct in requesting the Bank to release the Monies to her as a reflection of that intention. There is no documentary or independent evidence to support the case of either of the parties. A finding of the source of the Monies will tend to support the credibility of one party and damage that of the other.
47. According to the 1st Defendant, the Accounts were opened for the Mother’s convenience. Prior to 2010, the Mother trusted the 2nd Defendant and put his name jointly to her Accounts and safe deposit boxes in Bangkok for the following reasons. First, the 2nd Defendant requested the Mother to put his name into her Accounts to lift up his own credit with the banks as his business was not successful at the time. Second, the joint Accounts were opened for the Mother’s convenience so that the 2nd Defendant could manage the Monies and obtain documents from the safe deposit boxes for the Mother. The Mother also had joint accounts with other siblings for that purpose. Third, the Mother was worried that the executors might have difficulties in ascertaining her assets and the Accounts would enable the 2nd Defendant, who was one of the executors of her first will, to know where the asserts were. Fourth, the Mother was worried that application for probate would be a long process and the Accounts would enable the 2nd Defendant to distribute her Monies and properties in the safe deposit boxes more quickly. These allegations are denied and disputed by the 2nd Defendant.
48. Mr Lin argues that apart from the disadvantages of hearsay evidence, the evidence of the Mother’s conduct breaches the rule in Shephard v Cartwright [1955] AC 431 at 445 that evidence of subsequent acts or declarations was admissible only against the party doing or making them. At the highest, the 1st Defendant’s evidence could only be admitted as evidence of what the Mother did as a result of her change of mind and not evidence of her intention fifteen years ago when the Accounts were opened. If Mr Lin is correct, the 1st Defendant’s evidence on this issue may be wholly excluded and the 1st Defendant is bound to fail.
49. In his well‑researched argument, Mr Man suggests that the modern approach of the court is to deviate from the strictness of the rule in Shephard v Cartwright so that evidence of the subsequent act of a person may also be admitted as evidence in support of his earlier intention and leaving the question of weight to be assessed by the tribunal of fact. In Ip Man Shan Henry v Ching Hing Construction Co Ltd, Deputy High Court Judge Lam, as he then was, carried out an in‑depth examination of the rule in Shephard v Cartwright. He concluded that declarations by a person after the transaction is admissible if they pertained to acts and declarations contemporaneous with the transaction in question.
50. The relaxation of the rule is also noted in the latest edition of Snell’s Equity 32nd ed at §25‑013, in which the learned editors wrote:
“It has been held that subsequent acts and declarations may only be admissible as evidence against the party who made them, and not in his favour. The preferable approach nowadays may be to treat the parties’ subsequent conduct as admissible even in their own favour, and to leave the court free to assess its probative weight. This approach would be consistent with the looser significance attached to the presumptions of resulting trust and of advancement in the modern authorities.”
51. In Eugene Fung, The Scope of the Rule in Shephard v Cartwright (2006) 122 LQR 651, cited with approval by Snell’s Equity, the learned author wrote in §§686‑687:
“In a case where a living purchaser wishes to support a case of resulting trust or rebut a case of presumption, as shown by authorities referred to earlier, it has long been held that the purchaser can give direct admissible evidence of his intention at the time of the purchase. A living purchaser’s evidence of his subsequent acts or declarations should likewise be admissible: having given evidence about his intention at the time of purchase, he should also be allowed to give admissible evidence of subsequent acts or declarations as a reflection of his continued intention. Where the purchaser is dead, there is no good reason to refuse the admission of his subsequent acts or declarations as evidence; his subsequent acts or declarations may be the only means by which the court can find out what his intentions were at the time of the purchase.”
52. I think the admissibility of evidence of the Mother’s conduct raises more than a crisp legal question which may not be capable of summary determination. The credibility of the 1st Defendant’s evidence of what they were told by the Mother fifteen years after she opened the Accounts is one which could not be resolved on affidavit evidence.
53. The same applies to the credibility of the 2nd Defendant’s case that the Mother gave him the balance in the Accounts upon her death is also one which could not be resolved on affidavit evidence. There are legal arguments as to whether such intention was capable of being revoked or was revoked by the Mother during her visit to the Bank on 31 December 2010, if not by her letter dated 19 October 2010. All these issues deserve further exploration.
54. The 2nd Defendant challenged the authenticity of the Mother’s signature on her letter dated 19 October 2010. No handwriting expert evidence has been produced. But this dispute could be resolved on the affidavits. According to the 1st Defendant, the letter was prepared by one of the siblings and signed by the Mother. The authenticity of the signature could not be disputed as the Mother actually went to the Bank to confirm the request made in the letter. There is no reason not to believe the evidence of the Bank in this respect. This letter tends to support the 1st Defendant’s case.
55. The 2nd Defendant queried the mental capacity of the Mother at the time of writing or signing of the letter. He also alleged that the Mother was subject to undue influence exerted on her by the 1st Defendant. His allegation was based on his evidence that the Mother was in critical condition just two days ago and had an emergency CT scan of the brain which showed that she had a stroke. In the absence of medical evidence, it seems the 2nd Defendant’s evidence is neutralised by the incontrovertible evidence from Leung who interviewed the Mother in the Bank on 31 December 2010 when the Mother repeated her assertions in the letter. It was Leung’s evidence that the Mother was accompanied by, presumably, the siblings. But, Leung did not mention any unusual behaviour on the part of the Mother. Presumably, if there was, he would have made a mention of it in his affirmation. The 2nd Defendant also referred to the letter in which the Mother said she was “incapacitated” as evidence of lack of mental capacity on the part of the Mother. I think what was meant by that word is arguable. I say no more. I think in the absence of medical evidence, this issue may be resolved on affidavit evidence, if the court has to. But such finding could not help to resolve the ultimate factual dispute about the source of the Monies and the Mother’s intention. Besides, there is the dispute as to the source of the Monies insofar as it came from the Property which is the subject matter of another High Court action, HCA 1376/2011. That litigation is still on-going.
56. In view of the many factual disputes and the legal questions raised, the claims of the Defendants are not capable of summary determination. There is therefore no need to consider the third issue. The remaining question is the question of costs.
Costs of the hearing before the master
57. Having found it justified for the Bank to issue the interpleader summons and that the claims are incapable of summary dismissal, the Bank is entitled to have the costs of the application. Unless a summary determination is made, the court does not know where the merits lie. Thus, usually, where the interpleader summons is not dismissed and no summary determination is made, it is appropriate for the plaintiff to have its costs against all the claimants. Here, the 1st Defendant consented to the application but the 2nd Defendant contested. But for that contest, all the other parties’ costs would have been saved. It is therefore appropriate for the master to order the 2nd Defendant solely to pay the Plaintiff’s costs.
58. For the same reason, as between the 1st and 2nd Defendants, the 2nd Defendant should pay the 1st Defendant’s costs of the interpleader application. The master’s costs order in this respect is wrong in principle and has to be set aside and substituted by one in favour of the 1st Defendant.
Conclusion
59. Accordingly, the 2nd Defendant’s appeal is dismissed with costs to the Plaintiff and the 1st Defendant with certificate for counsel.
60. The 1st Defendant’s cross-appeal is allowed with costs and certificate for counsel to be borne by the 2nd Defendant. The master’s order as to costs as between the 1st and 2nd Defendant be set aside and substituted by an order that the 1st Defendant’s costs of the interpleader application, including all costs reserved, with certificate for counsel be to the 1st Defendant and paid by the 2nd Defendant.
61. All costs are to be summarily assessed and paid forthwith. The Plaintiff and the 1st Defendant shall submit their bills of costs to my clerk or the master’s clerk as appropriate within 14 days from the date of this decision and the 2nd Defendant shall submit his list of objection within 14 days thereof.
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(Anthony To) |
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Judge of the Court of First Instance |
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High Court |
Mr Bernard Man, instructed by Tsang, Chan & Wong, for the Plaintiff
Mr Alfred Liang, instructed by W K To & Co, for the 1st Defendant
Mr Kenny Lin, instructed by Alvan Liu & Partners, for the 2nd Defendant
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