HONGKONG BANK TRUSTEE LTD v. LEE SEE CHING, JOHN

1992, No.MP820

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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Background

1. These proceedings commenced on 19 March 1992 by way of an interpleader summons taken out by the Overseas Trust Bank Limited (OTB). The Plaintiff in the issue, the Hongkong Bank Trustee Limited, is the administrator of the estate of the late Mr Mentor Lee who died on 18 August 1991.

2. The deceased was a native of Shanghai and in about 1931 he married Madam Moi Song Eng. They had 4 sons and 4 daughters. Mr Lee also had a concubine Madam Scylla Koo Suet Lai and they had 4 sons. The Defendant in the issue John Lee See Ching is one of the sons of Madam Koo and he was at all material times resident in the United States.

3. Mr Lee came to Hong Kong in 1949 with his two households and had since been engaged in various types of business. All the evidence suggests that Mr Lee was a very methodical person and he maintained a detailed handwritten record of his bank deposits. He also had the habit of making regular entries into his diary and the contents suggest that he had little reservation in expressing his views on the people and on the events around him.

4. For many years the deceased operated Mentor Lee & Company which was in the business of importing and exporting nylon and polyester yarn. He had been extremely careful with monetary matters. Over the years Mr Lee accumulated his wealth gradually and by the time of his death in August 1991, he had a substantial amount of cash in fixed deposit accounts with various banks in Hong Kong.

5. Some of the accounts were in his own name, some in the names of his family members or trusted friends or employees. In respect of the accounts in other persons' names, he would ask the person to sign blank account opening forms and mandates, and he would operate the accounts without reference to the named account holder. All the account documents were sent to him; all the money deposited into the accounts came from him and he would, from time to time, withdraw money from those accounts for his own purpose.

6. The subject matter of the present action are the three fixed deposit accounts with the Overseas Trust Bank Limited in the name of the Defendant John Lee See Ching. They are :

Account A

Account No.	:	3160051367
Date Opened	:	29.11.89
Currency	:	US Dollars
Opening Balance	:	$625,000
Balance as on 18.8.91	:	$889,769.16

Account B

Account No.	:	31600053397
Date Opened	:	21.02.90
Currency	:	US dollars
Opening Balance	:	$104,532.88
Balance as on 18.8.91	:	$288.486.80

Account C

Account No.	:	9160262732
Date Opened	:	22.01.90
Currency	:	Canadian Dollars
Opening Balance	:	$345,000
Balance as on 18.8.91	:	$352,957.76

The Issues

7. There is only one issue in this dispute and it is this : whether the money in the three accounts were gifts from the deceased to John Lee. In the event that they were not gifts, the money in the accounts will form part of the estate of the deceased.

8. It is the Plaintiff's case that in the light of the evidence, the money in the accounts was not, and could not have been intended as a gift inter vivos. Alternatively, if the presumption of gift in law arises, the surrounding circumstances are such that the presumption is rebutted.

9. The Defendant contends that the deposits in the accounts were gifts from the deceased and they took effect as soon as the money was paid into the respective accounts bearing the Defendant's name.

The law

10. The presumption of advancement applies to all cases in which the person providing the money is under an obligation to support or make provision for the recipient. The present father and son relationship between the deceased and the Defendant is one such relationship recognized by law as giving rise to the presumption. This presumption is rebuttable. The law in this area is succinctly stated by the learned editors of Snell on Equity, 20^th edition at page 180 :

" Both the presumption of resulting trust and the resumption of advancement can be rebutted by evidence of the actual intention of the purchaser .... The clearest evidence is an express declaration of trust on the face of the conveyance of the legal estate, but even where this is absent the court puts itself in the position of a jury, and considers all the circumstances of the case, so as to arrive at the purchaser's real intention; it is only where there is no evidence to contradict it that the presumption of a resulting trust, or of advancement, as the case may be, will prevail."

11. As to the type of evidence which is capable of rebutting the presumption, the following passage appearing further down at page 180 of the same work was approved by Viscount Simonds in Shephard v. Cartwright [1955] A.C. 431 at p.445 :

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

12. The presumption, as I see it, is nothing more than a tool to find the person's intention at the time of the transaction. The court's function is to examine the evidence to see if the deceased intended a gift or otherwise. It is only when the court could not find any assistance from the surrounding circumstances that it is to fall back on the presumption. If the totality of the evidence at the time of the transaction, or that which is sufficiently proximate in time or nature to be considered as part of the transaction, is such that the court cannot decide what the true intention was, it falls back on the presumption of advancement. Another category of evidence capable of shedding light on the issue or in appropriate cases, of rebutting the presumption, would be the evidence from the alleged beneficiary himself. In cases where a beneficiary is alleged to have been aware of the gift, his acts, omissions or admissions at any time in respect of the alleged gift must be highly relevant.

Evidence of other accounts

13. It has been repeatedly urged upon this court by the plaintiff the fact that the deceased had a habit depositing his money into the accounts of his other children and trusted friends is strong evidence that he could not have intended the money in the present accounts as gifts to the Defendant. In light of the authorities cited to me, I am persuaded by the defence that the conduct of the deceased in relation to the other accounts is not part of the transaction and they are therefore not relevant to the issues before this court.

The deceased's character

14. There is undisputed evidence that the deceased was a meticulous and methodical person. Throughout the years he kept a diary and copies of which were made available to the court. He also maintained regular correspondence with his children who were resident overseas and such letters were also placed before the court. Nearly every incident in his daily life, big or small, would form the subject matter of his regular entries in his diary. He would, in his entries, frequently express his unreserved views of those around him.

15. The evidence suggests that Mr Li was a man who treasured the traditional Chinese virtues with very strong emphasis on filial piety. When he considered his children or employees to be not up to his expected standards, he was never mean in using strong words of criticism against them in his diary entries. I think it is also fair for me to say that his approval or otherwise of his children is sometimes translated into monetary terms. On a number of occasions he would express his affection for his family members by making monetary gifts. When this was done he would, without exception, record the amount of the gift and the reasons for making them. Any acknowledgement from the recipient would also be faithfully recorded.

16. In matters concerning money I think it is common ground that he had a reputation, at least among his children, of being very careful with it. From the records available to the court, it was apparent that he was critical in his calculations of interest on bank deposits down to the last dollar. He would hardly part with a single cent without good reason. Over the years, when his children borrowed money from him, he would insist that interest had to be paid on the outstanding balance punctually. When they had failed to do so, he would regard such as unfilial gestures. He had strong principles on anything to do with money and one can hardly say that he was a generous man.

17. The deceased had firmly entrenched views about each child and this is again reflected in his diaries. His favourite children were the Defendant and Leslie. He considered them as filial sons and he had repeatedly complimented them in his diary.

18. In 1990 when the deceased reached his 80^th year, the Defendant made a birthday gift of US$999.99 to his father. The amount signified longevity. The deceased was extremely pleased with this gesture and in recognition of John's piety, he made a return gift of US$100,000. The gift and his appreciation of John's filial piety was repeatedly mentioned in the records kept by the deceased. I note also that there was an entry on 28^th October 1990 in the diary stating that the Defendant, over the telephone, had thanked him for his gift. It is against this background of the Defendant being the favourite son that learned leading counsel for the Defendant submitted that the money in the three accounts must have been gifts intended for the filial son.

19. One of the points made was that since the deceased was very careful with his money, he would not have set up the substantial bank deposits in the name of the Defendant without good reason. Again relying on Shephard v. Cartwright (supra) at p.456 per Lord Reid :

" I cannot imagine any reason why he should put the shares in his children's names unless he intended at least that if he died before making any alteration the shares should belong to them and not to his estate."

The one good reason in this case, it follows, must be that the moneys in the accounts were meant as a gift to the Defendant.

20. Forceful as it may seem, the validity of this argument must be examined with reference to the Defendant's conduct at the time of the alleged gift and his testimony in court.

The Defendant's testimony

21. The Defendant's evidence was that he was expressly informed by his father on the day when Account A was opened with OTB in his name that the money deposited therein was a gift to him.

22. The Defendant gave an account of the circumstances under which Account A with OTB was opened. He said in November 1990 he returned to Hong Kong to visit his father. In the evening of the day which they visited his mother's grave the deceased had a long discussion with the Defendant in his study. It was an intimate discussion between the aged father and his favourite son over which a wide range of nostalgic topics were covered. The Defendant remembered that the deceased told him he was a trustworthy son and he and his late mother had helped him to create his wealth. Towards the end of the discussion he arranged for the Defendant to meet him the next day.

23. On the following morning they proceeded on foot to the OTB branch at Gloucester Road where the first account (Account A) in the Defendant's name was opened. He was asked by the deceased to sign a number of mandates and specimen signature cards. Three days later the Defendant returned to the United States.

24. Pausing here, one would have expected two things to happen. On the son's part, when he was alleged to have been informed by his father in no uncertain terms that he had made a substantial gift to him, it would only be natural for the son to thank the father for his generosity in the first available opportunity upon his return to the United States. It must have been plain to the Defendant that as a filial son he was expected to offer words of thanks. There is, however, no written record of anything of this nature.

25. On the father's part, it would have been consistent with his character that he should make an entry in his diary about his feelings towards the Defendant and, if the money was indeed intended as a gift, the reasons for his making it. The deceased was very devoted to the late Madam Koo and paying respect with the Defendant at her grave is something which would not have escaped his attention in the diary. However the entries in the diary for that period only showed the Defendant returned to Hong Kong on 24 November and left for the United States on 2 December. There was not a single reference in his diary, whether before or on the particular day or after the event, of paying respect to the late Madam Koo at her grave. There was no record of the discussions in the study and of the deceased making a gift by opening the account in the Defendant's name.

26. The Defendant went on to testify that in the ensuing months the deceased told him over the telephone on separate occasions that he had opened more accounts in his name and the money in those accounts were, as in the case of the first account, gifts to him. They formed the basis of the Defendant's claim on Accounts B and C. The deceased, however, never told him about the particulars of the account and the sums deposited therein. The Defendant's evidence was that he never asked for the particulars and he left it to the deceased to manage the accounts. The reason he gave was that the Defendant had complete trust in the deceased on money matters.

27. Again there was a significant absence of any reference by the father in his diary of the subsequent gifts nor was there any written record from the Defendant thanking the deceased for his generosity. Bearing in mind the past conduct of both persons, I find their silence in these matters to be utterly surprising if not totally inconceivable. The only logical conclusion which I can draw from the evidence, and particularly on the lack of written records, is that the Defendant was not telling the truth when he said the deceased told him that the money was a gift to him.

The two letters

28. The Defendant also relies on two letters dated 31 December 1976 and 8 May 1991 from the deceased as evidence of the deceased's intention of making a gift. The former letter was written by the deceased and the latter was drafted by the father and transcribed by Aunt Betty.

29. Paragraph 10 of the first letter referred to an account in the name of the Defendant's mother, Madam Koo. Had the deceased intended the account of Madam Koo to be a gift, it would have been treated as part of Madam Koo's estate upon her death. But the fact was that the deceased treated the money as his own money and dealt with it in his own way. It shows quite clearly that the money was not intended for Madam Koo's use. This being the case, I do not think this letter supports the defence case in any material way.

30. On the letter of 8 May 1991, the point made by the defence is that this letter is positive evidence that the money in the accounts were intended as gifts for the Defendant. It was also argued that the letter could be construed as to confer an immediate gift, to confirm a previous gift or to confer a gift upon the deceased's death.

31. In the letter the deceased praised the Defendant for his filial piety while at the same time criticizing the other sons. In paragraph 3, it was mentioned that the deceased had some money deposited with the bank in the name of the Defendant and when it becomes necessary, he would give the documents to Aunt Betty and the manager of the company, a Miss Shing Man Kuen, for the Defendant to handle. But the defence case was put forward on the basis that the money in the accounts were immediate gifts and they were complete as soon as the money was deposited into the accounts. The Defendant also gave evidence to this effect. In the light of the defence case this letter could only be construed along the lines of having the effect of confirming the gifts which had been made previously.

32. Even if one is confined to this narrower meaning I cannot say that the contents of the letter support the Defendant's contention. From the various letters written by the deceased and from the entries in the diaries over the years, the deceased impressed me as a person who was able to express himself clearly with words. If it was his intention that the moneys were a gift, he would have no difficulty in reducing his thoughts into writing. But the words used were :

"when it becomes necessary"

They are suggestive of a particular future event happening. The phrase used was conditional rather than confirmatory. I cannot say that I am persuaded by the argument that this letter is an admission by the deceased of his having made a gift to the Defendant. If it was intended that those monies were gifts to the Defendant upon the deceased's death, there was never any mention of the word "death". The fact remains, and this is not in dispute, that the deceased drafted the letter himself and Aunt Betty, who gave evidence as PW3, was asked to transcribe it into the present form. It was, according to her, an accurate transcription of the original. As the precise nature of the future event is not apparent on the face of the letter, this letter is therefore of little assistance to the court.

The conduct of the Defendant in respect of the accounts

33. This is not a case where the Defendant was ignorant of the gift. On the contrary the Defendant claimed that he was at all material times aware of the gifts to him although he was not given the particulars of the accounts in his name or the amount of money deposited therein. In the light of his conduct as evidenced by the letters he wrote after the deceased's death I have further doubts about his credibility. Mr Lee died in August 1991. In the Defendant's letter to his half-brother Leslie dated 28 September, there was no assertion that the money in the accounts bearing his name were gifts from the deceased. In that letter he seemed to have accepted that the accounts, although in his name, were a part of the estate of the deceased. It was not until 20 December 1991 that he claimed the money were gifts for the first time. His conduct over those several months is again inconsistent with his oral testimony.

34. I cannot say that the Defendant had impressed me as having told the court the truth. I have serious doubts about his evidence and particularly in the area where he alleged that the deceased had told him that the money in the various accounts were gifts to him. I find that the alleged conversations between the deceased and the Defendant had never taken place.

The presumption of gift

35. It was argued on behalf of the Defendant that even if the court is to reject the Defendant's evidence, the position remains that there is no evidence of any acts or declarations by the deceased before the setting up of Account A which goes to rebut the presumption of advancement. I think this line of argument is necessarily flawed. The question that should be asked is not whether the presumption is rebutted but whether the state of the evidence is so wanting in respect of the intention of the deceased that the court has to fall back onto the presumption of advancement. It is inconceivable that, considering the deceased's attitude towards money, he would have made such substantial dispositions without making any reference to them in his diary. This lack of reference, coupled with the absence of any form of acknowledgement from the Defendant, lead me to conclude that the deceased had never intended the money in the three accounts as gifts to the Defendant, at the time when the accounts were opened or at any time thereafter.

36. Having made a positive finding on the intention of the deceased, I do not think this is a case where the court has to fall back onto the presumption of advancement. I find that the money in the three fixed deposit accounts with the OTB is part of the estate of the deceased.

37. For the reasons given, I give judgment for the Plaintiff in the issue with costs and certificate for two counsel.