FAIRBAIRN CATELY LOW & KONG (a firm) v. WILLIAM KWOK also known as KWOK YEE LILIAN WONG KWOK

1988, No. A208

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-----------------

-----------------

JUDGMENT

----------------

1. This is an appeal from a decision of Maser Jones given on the 23rd November 1988 when he refused the plaintiff's application for declarations that two properties in the name of the 2nd defendant were held as nominee and trustee for the 1st defendant. The plaintiff is a well known firm of solicitors practising in Hong Kong. The 1st defendant was a partner in the 1st defendant was a partner in the plaintiff firm from 1972 until the 31st January 1985 when he ceased to be a partner, but remained as a consultant until he resigned on the 15th December 1986. The 2nd defendant is the wife of the 1st defendant.

2. The summons before Master Jones was issued under 0.13, r.6(1) of the Rules of the Supreme Court which deals with the procedure to be adopted when a defendant fails to give notice of intention to defend in respect of claims not referred to in 0.13, rules 1 to 4, being claims for a liquidated demand, unliquidated damages, detention of goods and possession of land. 0.13, r.6(1) which inter alia relates to a claim for a declaration provides : -

"6.    (1) Where a writ is indorsed with a claim of a description not mentioned in rules 1 to 4, then, if any defendant fails to give notice of intention to defend, the plaintiff may, after the prescribed time and, if that defendant has not acknowledged service, upon filing an affidavit proving due service of the writ on him and, where the statement of claim was not indorsed on or served with the writ, upon serving a statement of claim on him, proceed with the action as if that defendant had given notice of intention to defend. "

The jurisdiction of a master is derived from 0.32, r.11(1) of the Rules of the Supreme Court which reads, without the exceptions which are not relevant, as follows:

"11.     (1) The Registrar and any master shall have power to transact all such business and exercise all such authority and jurisdiction as under any Ordinance or by these rules may be transacted and exercised by a judge in chambers......."

It is therefore clear that as a declaration can only be granted in the manner provided by 0.13(6) which is in open court, a master has no jurisdiction to hear such an application in chambers. However, the lack of jurisdiction on the part of the master in this case could only affect the issue of costs, for the hearing before me was treated as a re-hearing de novo.

3. The evidence in support of the application is set out in an affidavit of Mr Fairbairn who is the senior partner in the plaintiff.

4. He states that during 1985 and 1986, the 1st defendant claimed that he was in financial difficulties with the result that certain monies were advanced to him by the plaintiff, part of which was subsequently repaid from the sale of his shares in the firm.  In respect of the balance due, the plaintiff obtained judgment against the 1st defendant on the 31st March 1987 for the sum of $430,567.89.

5. In 1983, a holiday home at Fairview Park, New Territories was purchased in the name of the 2nd defendant.

6. The property was sold in November 1985 but two other properties in Fairview Park were purchased in April and June 1986 in the name of the 2nd defendant. The purchase price for the first property was $750,000 of which $600,000 was raised by way of a mortgage which was guaranteed by the 1st defendant. However, there was no evidence to show who had provided the balance of the purchase price. The mortgage repayments of $7,360 per month were to be repaid by direct debit from the 2nd defendant's bank account. In respect of the second property which was mortgaged for $380,000, the 1st defendant paid a deposit of almost $89,000. The 1st defendant also guaranteed payment of the mortgage. The monthly mortgage repayments for the second property amounted to $4,763. This property was let at a rent of $5,000 per month. The 1st defendant paid the rates for both properties and the service charges for the second property.

7. The two properties have since been sold by the mortgagee and after discharge of the monies due under the mortgages, there is a surplus remaining for disposal upon which the plaintiff seeks an order for the balance to be released to the extent of the judgment debt outstanding and costs.

8. Mr Fairbairn believes that the property in 1983 was purchased with the 1st defendant's money for he claims that the 2nd defendant never worked after her marriage and that so far as he is aware she has no private assets or income. Apart from his belief that the 2nd defendant did not have money of her own to purchase any property, Mr Fairbairn contended that the 1st defendant could not have purchased them as a gift as he was in financial difficulties. Further, he averred that the 2nd defendant did not regard the properties to be beneficially owned by her for at a meeting on the 21st January 1987,in the presence of Mr Catley, a partner in the plantiff's firm, the 1st defendant produced a letter from the 2nd defendant in which she stated that she only had a sum of $13,000 in her Hong Kong Bank account and enclosed some signed blank cheques so that the 1st defendant could use that money. In that letter, the 2nd defendant expressed her grief at the 1st defendant's situation in Hong Kong and also referred to having borrowed money in the United States. However, as the letter did not mention the two properties, Mr Fairbairn expressed the opinion that she did not regard them to be beneficially owned by her or did not realise that they were held in her own name.

9. As the properties had been purchased in the name of the 2nd defendant, there is a presumption of advancement by the 1st defendant as her husband. In order to rebut the presumption the onus is upon the plaintiff to show that the purchases were not intended by the 1st defendant to be a gift with the result that the 2nd defendant held the properties as the nominee or trustee for her husband.

10. Mr Pirie, counsel for the plaintiff, contended that the purchase monies were not provided by the 2nd defendant and the presumption of advancement had been rebutted because the 1st defendant was in financial difficulties so that he could not have intended to make any gifts to the 2nd defendant. However, the evidence adduced by Mr Fairbairn amounts to no more than speculation. His evidence that the 2nd defendant had no private assets or income amounts to a bare assertion based upon no foundation in fact. Apart from the deposit paid by the 1st defendant in respect of the second property, there was no evidence to show that the deposit for the first property or the mortgage repayments were or were not made out of monies provided by the 2nd defendant. The 2nd defendant's failure to mention the two properties in her letter to the 1st defendant does not justify the adverse inference that I was invited to draw. In respect of the first property, the plaintiff has failed to establish that the 2nd defendant did not provide the purchase money or the mortgage repayments from her own resources.

11. By virtue of the 1st defendant's financial difficulties, it is suggested that the properties were placed in the name of the 2nd defendant with the object of defeating his creditors. However, whether the 1st defendant's motive was honest or improper does not assist the plaintiff for such evidence is inadmissible to rebut the presumption of advancement, see Gascoigne v. Gascoigne (1918)1 K.B. 223. There was no evidence to support the plaintiff's contention that the presumption of advancement had been rebutted. Accordingly, the master came to the right decision despite his lack of jurisdiction. The plaintiff's application for the declarations sought therefore fails.