CHENG NGAR MAN, ANGELA, MELWANI v. VISHAL PRAKASH MELWANI

HCA 1817/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1817 OF 2012

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J U D G M E N T

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1. The late Mr Vishal Prakash Melwani died sadly at the young age of 64 in November 2009 leaving a widow and their two young children, now aged 18 years and almost 16 years, and an older son by his first marriage, which ended in divorce. This last child, the defendant in this unhappy dispute, is now 37 years of age and by profession a practising solicitor. This last fact is not without significance in the context of this action.

2. The plaintiff was married to the deceased in 1993.  Three years later he made a will (13 April 1996).  It is in short form and may or may not have been copied from a specimen.  It does not appear to have the imprimatur of a practising solicitor but that does not matter.  Its provisions are clear enough.

3. He appointed the defendant as his executor, with his wife as the alternate in case the defendant pre-deceased him.  He bequeathed all his estate to four persons in the following order and percentages:

(i)  His mother – 20%

(ii)  His wife – 20%

(iii)  His eldest son (the defendant and executor) – 40%

(iv)  His younger son (then not quite one year old) – 20%

4. There was a provision for alternative beneficiaries in the event of none of those named beneficiaries surviving him.  Amongst the named beneficiaries was a provision for survivorship. 

5. His last child Roshni, was born twenty months later in December 1997. 

6. This was obviously a very happy second marriage and he was clearly an adoring husband as evidenced by e-mails and poetry written by him to his wife. 

THE 1998 DISCRETIONARY TRUST

7. Known as the “Prakmel Trust” (a combination of the first syllable of two of his names) it was established in Bermuda, and held funds on a discretionary trust for the benefit of his wife, their two children and his first son, the defendant.  The Trustee was the TD Trust (Bermuda) Limited.  The timing of the establishment of this trust is important.  Only four days earlier his mother had declared two trusts in his favour, in respect of a Tata bond, and of seven bank accounts.  These assets were included by him in the “Prakmel” Trust. 

8. Accompanying the Trust was a “Letter of Wishes” to the Trustee indicating how, in the event of his death, he preferred the fund to be distributed.  It was as follows:

(i)  50% of the fund was to go to his wife who would hold 15% on trust for each of their two children until each attained the age of 21 years. Effectively she would then have 20% for herself.  The provision for the children assumes greater significance in the light of later events.  The 20% for his wife echoed the provision in the 1996 will. 

(ii)  50% of the fund was to go to his eldest son, the defendant. 

9. The defendant does not dispute that the trust established himself and his father’s wife, equally entitled beneficiaries, subject of course to the provisions concerning the interests of the other two children. 

10. The next event is of crucial importance.  The family returned from Canada in 2002 where they had lived for about four years.

THE 2002 DEED OF APPOINTMENT

11. On the 29 August 2002 this deed was made between the Trustee and the wife and eldest son, whereby the trust fund was divided between the two beneficiaries absolutely and the Trust was terminated.  In other words the beneficiaries of the Trust received the funds directly and fully.  

12. The funds were then transferred to an account with the Bank of Bermuda Limited in the joint names of the plaintiff (wife) and defendant (elder son).  They were then transferred to joint accounts in their names at two banks in the Channel Islands – Kleinwort Benson and Rothschild & Sons. 

13. Again the defendant does not dispute that these funds were those of the original Trust Fund on its dissolution and therefore owned in equal proportions by the wife and himself.  Both of them gave mandates to the deceased for him to operate both accounts.  It is not contended on behalf of the defendant that by giving that mandate to her husband she was making a gift to him of her money.  It would not of course be sensible to do so.  It would fly in the face of everything he had done since at least 1996.  He therefore, as I find, operated that account as a trustee of the funds for both the plaintiff and the defendant. 

THE STATE BANK OF INDIA TIME DEPOSIT ACCOUNT

14. In 2003 this account was opened and made available to persons of Indian nationality or non-resident persons of Indian origin.  It offered a higher return than the existing accounts in which the monies of his wife and eldest son were held.  Unfortunately the account could not be opened in the wife’s name as one of the beneficiaries of such an account because she did not meet the nationality qualification. 

15. It is at this stage the defendant starts to raise an argument about the plaintiff as a beneficiary of the funds in the previously held joint account.  The funds were then transferred to the time deposit account with the State Bank, which was held in the joint names of the deceased and the defendant.  The argument by the defendant runs like this – her husband had always managed the accounts and now with her acquiescence he was taking back the funds into his own possession and was dealing with them as he liked. 

16. The defendant cannot point to any specific document from the plaintiff which expressly or impliedly amounts to consent on her part.  Instead he asserts that she did nothing to assert her claim to be the joint owner or beneficiary of these accounts. 

17. This I have to say is a facile argument on his part.  She was a trusting, loving and much loved wife who was accustomed to her husband making shrewd practical decisions for the financial benefit of herself and her children and he had without question acted consistently in accordance with his concern for her well-being and that of their two children.  In my view nothing the defendant alleges and no document in existence remotely challenges that state of affairs.  Furthermore although conversations he alleges in an affirmation took place between himself and his father, these have not been tested in cross-examination – and despite the fact that I do not need to evaluate them for the purposes of this exercise – I find them irrelevant and, where any content could be regarded as relevant, not credible. 

THE STANDARD CHARTERED BANK, SINGAPORE ACCOUNT

18. I deal with this only because Mr Fawls on behalf of the defendant stresses the significance of this as being clear evidence that the deceased had resumed control of the original funds and regarded himself and his son as the sole beneficiaries of the funds to the exclusion of his wife and children by her. 

19. On the 8 January 2005 both the deceased and the defendant signed the mandate for signatories to this account.  They declared themselves as the beneficial owners of the assets deposited in the account.  The funds deposited were those, wholly or in part, which had featured in the State Bank of India time deposit account. 

20. On the same day both of them signed “Certificate(s) of Foreign Status of Beneficial Owner for United States Tax Withholding” declaring themselves to be “the beneficial owner … of all the income to which this form relates.”

21. The defendant’s argument is that this clearly indicates that the deceased regarded his wife’s interest in the monies as at an end otherwise he would have identified her as a beneficiary of the funds in the account.  He stresses the fact that the certification which he signed “under penalties of perjury” is conclusive.  It is not.  Even if he intended thereby to deprive his wife of her beneficial interest – and I have firmly formed the view that he did not do so – he cannot take away an interest created by the legal documentation he himself brought into being – his gift to her.  Nor is there anything in existence which supports the contention that the wife gave back the monies to the deceased against which there is, in any event, a presumption.  Nothing exists to rebut or displace that presumption.  Furthermore I do not need to consider the implications vis-a-vis the deceased and the US Tax authorities.  They are irrelevant to this issue.

THE 2008 WILL

22. This will differs from the 1996 one it revokes in a number of respects.  The wife is replaced as the principal alternate executor by the deceased’s cousin who is also a witness to the deceased’s signature.  The wife does not feature at all in that capacity. 

23. The defendant is appointed as joint guardian with his wife of the two children during their minority.  I am not sure that he can make such an appointment unilaterally but that does not matter. 

24. Clause 6(a) is the operative one dealing with the joint accounts in his name and that of another – in this case his eldest son, the defendant.  He bequeaths the assets therein to the surviving joint-holder(s).  Before I consider in more detail this bequest, and the form of it, it is necessary to consider the disposition of the residue of his estate. 

25. He identifies five beneficiaries in the following order – the defendant, his younger son (Roshan), his daughter, his wife and then his mother.  Each is to receive 20%.  This is at variance with the precedence in the 1996 Will.  That remains an oddity.  But it is a peripheral matter which with other aspects, raises some concern about the drafting of the Will.  One curious feature in that regard is the defendant’s statement to the effect that he provided the deceased with some pages of notes from his PCLL course at the University, and suggested to his father that he obtain independent legal advice.  I am not going to explore that “alleyway” of credibility and explanation since it is not germane to the principal issue. 

26. What is noteworthy however is that by the terms of the Will, as it stands, the wife receives only one fifth of the residual estate of her husband, as do her two children by him.  On the face of it their beneficial interests have diminished substantially since 1986. 

27. There is nothing in the Will to explain why the wife is deprived (on the face of it) of her 50 percent interest in the assets of the joint accounts in the names of the deceased and the defendant.  The sub-clause does not itemise the accounts concerned and its terminology provides for a situation whereby there is in fact more than one surviving joint account holder.  The clause is badly drafted and smacks of an ill-considered situation or result. 

28. It is inconceivable that a husband who regarded his wife so highly, and up to the last was sending fondest expressions of his love and devotion to her and his concern for his young children, should suddenly and knowingly seek to deprive her and them of the gift he had initially made to her some ten years earlier, confirmed in the distribution of the trust fund, thus leaving her worse off than the provision made for her in his 1996 Will, and flying in the face of all that he had done to provide for her consistently over the years. 

29. Mr Fawls for the defendant tried to persuade me that such was the power of cultural tradition and the nature of Indian family life, that it was quite normal and understandable for the deceased to take back and treat as his own assets that he had earlier inherited and/or acquired and leave his eldest son to act according to conscience, and trust placed in him by his father, and provide for the widow and the other children on a discretionary basis.  That argument I find quite untenable.  It is utterly inconsistent with the past behaviour of a loving husband.  This could not possibly be a case of such a husband adopting for the first time a perverse approach – labelled “traditionally cultural” or some other such illogical term – whereby he was suddenly declaring, “It is all mine and now I am going to ignore the gifts I had made to you over the years, and leave you and our children dependent upon my eldest son for your and their support.”  The very fact that he had made the “Prakmel Trust” in 1998 overrides the rationale of this argument. 

30. It is somewhat surprising that the defendant, a practising solicitor who most probably had some knowledge of the contents of the Will – at least as far as his duty as executor and position as beneficiary – with a code of ethics to abide by and some professional expertise – would have failed to remind his father that the provision in the Will in his favour, effectively stripped the widow and children of their existing benefits.  The silence speaks volumes.  Unless of course he thought or realised, as a professional lawyer that the clause 6(a) on the face of it, did not take their interest away because, as a matter of law, it could not do so. 

31. The defendant cannot identify any unequivocal act or document which positively asserts by the wife that she had made a gift to her husband of the monies he had given to her.  Instead he falls back on some correspondence from her to himself.  I find it unattractive as well as unconvincing that lawyers should seek to construe some general statements about the contents of the estate and/or Will and the intentions of the testator by a non-lawyer widow who may also have been somewhat confused by the overall situation and not fully cognisant of how her situation may have been affected by the Will, so as to take advantage in favour of the defendant of what she wrote.  There ought to have been some semblance of equity.  That tactic was unworthy.  As far as her solicitors were concerned, the letters they wrote cannot bear the inferences the Defence seeks to draw and were in any event written before they were aware of all the documentation. 

CONCLUSION

Resultant Trust

32. When the assets of which the wife held 50 percent were passed to a joint account operated by her husband and the defendant there was a resultant trust of which both were trustees.  There is nothing to rebut that trust and nothing which could reasonably be construed as a surrender to the husband, of what he had given her so long ago, nor to the defendant who had his own half of the funds.  There was no gift by her.

33. Mr Kenny Lin for the plaintiff referred to a number of cases in his skeleton argument supplemented by oral answer to the defendant’s case advanced by Mr Fawls, who also supplemented a skeleton argument.  These are time-honoured decisions applying long-standing principles. 

34. There is nothing in the defendant’s case which detracts from those. 

35. When I invited Mr Fawls to address me first I had of course read the skeleton arguments from both parties.  I had also read the pleadings and embarked upon a consideration of the 29 page Defence in order to sift from it precisely what was the dispute.  It is a well-padded pleading, not settled by Mr Fawls, which is at best a strategic exercise in obfuscation. I accordingly invited Mr Fawls to explain by reference to the documented history how, what seemed to me to be an act of patent injustice and deprivation, came about, assuming that the proper construction of the Will did in fact provide for the whole of the assets in the joint accounts held by the deceased and the defendant, to vest in the defendant as survivor to the exclusion of the plaintiff and her two children. 

36. Since the fundamental facts and documents were agreed I was able to see at the outset that the defendant’s case was based on inference, construction of certain acts by the deceased, a form of Indian family culture which notionally I should graft onto the Will, and a self-serving series of alleged conversations to which only the defendant was now privy. Thrown into the melting-pot were the letters from the plaintiff and her solicitors on which I have already commented.  No purpose will be served by my setting them out “in extenso".  None of them affects the position. 

37. Mr Fawls reminded me that this action was not one brought under the Inheritance (Provision for Family and Dependants) Ordinance Cap 481 nor by way of an application to set the Will aside on the grounds of undue influence.  I am well aware of that.  This action is much simpler and more straightforward than that.  It is for breach of trust by the deceased and/or the defendant.  I find that there has been such a breach.  My finding is not based on fraud or dishonesty.  Those would be unnecessary, complicating features.

38. The provision in the Will may have been the result of careless drafting.  Alternatively the deceased may have believed that his wife was one of the joint signatories to the accounts in which her and his eldest son’s assets were held and that the clause was adequate protection for her interests.  In that case he was simply mistaken or it may have been an oversight based on a lapse of memory, forgetting that when money was transferred to the Time Deposit she had ceased to be a co-signatory.  These two are essentially the same.  I am satisfied that he did not intend to try and give away her interest to the defendant.  That would be wholly inconsistent with all that he had arranged over many years.  I am also convinced that in all the circumstances if anyone had said to him that by virtue of clause 6(a) “you are seeking to deprive your wife and children by her, of all that you provided for her, gave to her, in effect ten years ago,”  he would have been horror struck.

39. But these are matters of human consideration.  The fact remains that in effect clause 6(a) operates as a breach of trust, an unwitting one, certainly by the deceased, whatever the cause.  Matters of fraud or dishonesty are not relevant. 

40. Mr Fawls’ final argument is that this is not a case in which the provisions of Order 14 rule I should apply because the allegations in the Statement of Claim are based on fraud and/or dishonesty.  He cited a number of authorities which do not call for detailed consideration.  I have taken stock of them.  The Statement of Claim does not put forward an action based on fraud or dishonesty. 

41. This case is based on a straightforward breach of trust and I find that the defendant has no answer to it.  Accordingly there will be judgment for the plaintiff in the terms prayed for at the end of the Statement of Claim together with interest at the appropriate rate for the appropriate period. 

42. The defendant will also pay the plaintiff’s costs of this action to be taxed if not agreed.