RE MAK WOON SHUI

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ESTATE DUTY APPEAL NO. 1 OF 1991

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JUDGMENT

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1. This is an appeal against the decision of the Estate Duty Commissioner.  The Commissioner assessed various assets for duty which the appellant claims were held by the deceased, his wife, on trust for him.

2. At the commencement of the hearing I was informed that the parties had agreed the valuation of the two properties referred to and that 1/3 of the value of the Tung Shan Terrace property was to be considered as the matrimonial home.

3. Prior to the hearing before me the appellant issued an originating summons in MP625 of 1988 in which he sought to obtain a Declaration from the court that the properties in question were beneficially owned by him. The parties to this application were the appellant and his issue. A Consent Order was made in the form sought by the appellant. Clearly this order in no way binds the Commissioner. It does however indicate that the persons entitled in intestacy to his wife's estate do acknowledge the position to be as stated by the appellant.

4. The relevant facts are set out in some detail in three affirmations affirmed by the appellant. The Commissioner has also sworn an affidavit dealing with the facts as known to him but clearly the scope of the knowledge of the Commissioner is inevitably limited. Both parties however agreed that the present appeal should proceed upon the affidavits and that there should be no cross-examination thereon.

5. Very shortly the facts are that the appellant came from a wealthy Chinese family originating from China. The appellant is now aged 86. The appellant married the deceased in 1929. According to him his wife was in poor financial circumstances when they got married. The reason for this was that her father had taken a concubine and deserted her and her mother.

6. For this reason his wife had had a great repugnance for concubinage and had been fearful that a similar fate might overtake her.

7. It became evident in the years following their marriage that the children being born to them were mainly girls and that there was a possibility that the appellant might seek to take a concubine so as to ensure that he had male descendents. His wife had became very distressed and had insisted upon all his property being registered in her name.

8. For the sake of peace and quiet he had acquiesced in his wife's wishes and had agreed to all property being put in her name. He said that it had never been his intention to gift any of the property to his wife.

9. The appellant had inherited property from his father who died in 1930.  Amongst the property left to him was a business trading under the name Sheung Chee Dispensary. There was a branch office of this business in Hong Kong which originally traded at 448 Shanghai Street, Kowloon but which subsequently moved to 509 Nathan Road, Kowloon.

10. With the advent of the Pacific War the appellant and his family moved from Canton to Hong Kong.

11. It is generally the appellant's case that the assets which are the subject of the present proceedings were purchased with moneys supplied by him.

12. The assets are as follows:

13. Mr. Bernacchi who was representing the appellant submitted that there was clearly sufficient evidence to show that the purchase moneys for the said assets had been provided by the appellant.

14. He went on to argue that in the circumstances of the case, as I have outlined, there was clearly sufficient evidence to rebut any presumption there might be that the appellant had gifted the property to his wife. He also contended that the weight of this evidence did not have to be particularly heavy as the modern trend was to attach less and less weight to presumptions that gifts were intended when husbands made gifts to their wives. He placed particular reliance upon Pettit v Pettit 1970 AC 777 and Falconer v Falconer 1970 1WLR 1333. These were of course matrimonial cases. However, Mr. Bernacchi submitted that the principles relating to the advancement of moneys were applicable to other situations.

15. I do not think that there was a great deal of difference in the submissions which were made to me in the law by Mr. Bernacchi and those made by Miss Hartstein for the Commissioner. Suffice it to say that both accepted that there was still a presumption of a gift but that more recent cases had indicated that this presumption could now more readily be rebutted than had hitherto been the case.

16. The main difference between the parties was the amount of weight which I should attach to the appellant's affirmation evidence which was designed to rebut the said presumption.

17. Miss Hartstein submitted that the appellant's affirmation was highly unsatisfactory in a number of respects and that there was no acceptable evidence to establish either that the purchase moneys for the various assets had been provided by the appellant or that the presumption of gifts had been rebutted. The burden of establishing both these matters lay upon the appellant.

18. I must say at once that I can see considerable force in Miss Hartstein's submissions. Even taking cognizance of the fact that the appellant is now an old man and referring to events which occurred many years ago I am of the view that his evidence is highly unsatisfactory and incomplete. Indeed I regret that it is necessary for me to go further and state that in a number of instances the evidence is clearly wrong and misleading.

19. One of the matters I consider to be of importance is the appellant's evidence concerning his own financial situation.

20. In paragraph 30 of his 1st affirmation he gives an explanation concerning a transfer of moneys which was made at the time of his wife's death and concludes the paragraph in these terms:

"This was my money which I kept in my deceased wife's name but never intending to make a gift of it to my wife. Indeed, if I had done so, with all the other properties and bank accounts nominally in my wife's name, my wife would have owned all and I would have owned nothing which would of course be a ridiculous situation."

21. The Commissioner made his own inquiries concerning the appellant's financial situation. Paragraph 9 of his affidavit reads:

"I have conducted enquiries with four major banks in Hong Kong. The results of such investigation indicated that the appellant did have assets in his sole name or in joint names with his son. The details are as follows:

 

22. It is evident from the correspondence which is exhibited that the largest amount deposited referred to in item (e) was on the day his wife died transferred from an account in his sole name to the joint names of himself and his son.

23. The Commissioner goes on to refer to shares which he managed to locate which are registered in the appellant's name. The value of these shares at the date of his wife's death was in excess of $300,000.

24. It will of course be appreciated that the scope of the inquiries made by the Commissioner would inevitably have been limited and it may well be the case that there are other assets which have not been found.

25. In my view the explanations which have been given by the appellant for the apparent discrepancies between the evidence available and the statements contained in his affirmations are far from convincing in any sort of way.

26. The main point of all this is to demonstrate that the appellant has given much less than a full and frank explanation concerning the background circumstances of his and his wife's financial situation.

27. I will now consider the more important elements of the appellant's evidence.

28. As I have stated earlier the main reason given by the appellant for putting property in his wife's name was her fear that the appellant might take a concubine. This was apparently the reason why he agreed to put property in her name.

29. It would appear that the appellant has not been consistent in acceding to his wife's wishes. It is evident from the certificates of ownership of 2 of the properties situate in China that they were registered in his name and not in his wife's name. No plausible explanation is forthcoming to show why it was that some properties were in his name and others in his wife's. It will of course be appreciated that the other property which the Commissioner was able to locate was in his sole name and equally no explanation has been given why this property was also not in his wife's name.

30. In paragraph 5 of the Commissioner's affidavit he refers to correspondence which was exchanged between the Inland Revenue Department and the appellant in 1985. Inadvertently the Inland Revenue addressed the Property Tax Return Forms to the appellant rather than to his wife. The appellant wrote to the Department on the 17th May 1985 stating that the properties belonged to his wife. No reference was made to his having any beneficial interest in the property. I find myself in agreement with Miss Hartstein's submission that this letter could amount to a Declaration contrary to the interest of the maker - namely the appellant. Again no satisfactory explanation is given for this.

31. Further difficulties are encountered in considering the appellant's evidence in any detail.

32. The appellant made a statement to the effect the Fuk Wing Street property was bought with money coming from 3 sources:

33. So far as any of these items are amenable to being checked it was shown by the Commissioner that the Nathan Road property was not sold until some years after the Fuk Wing Street property was purchased. No satisfactory explanation is given by the appellant for this.

34. In attempting to rebut any presumption of there having been a gift Mr. Bernacchi places heavy reliance upon the evidence available to the effect that the appellant always kept the title deeds of the 2 properties referred to. His authority for this was Warren v Gurney 1944 2 AER 472.

35. Even here the evidence is unsatisfactory. In his first affirmation the appellant claims that the deeds were kept in a secret place in the matrimonial home at Tung Shan Terrace. In his 3rd affirmation he states that the deeds were kept in his Safe Deposit Box at the Hang Seng Bank. It is obvious that the deeds could not have been in both places at the same time. In my mind this casts considerable doubt upon where the deeds were kept and whether they were in his sole custody and control.

36. It is not only on matters of detail that difficulties are encountered in accepting the appellant's evidence at its face value. I accept the evidence of the Commissioner that it is impossible to discern patterns from the material which is available which bear out the appellant's testimony concerning the overall situation relating to assets belonging to himself and his wife.

37. I have reluctantly come to a conclusion that I agree with the view of the Commissioner that it is impossible to attach credence to the appellant's affirmations and I am not prepared to believe statements which he makes unless they are corroborated by some other means.

38. In my view there is no credible evidence that the assets which have been referred to were acquired with moneys provided by the appellant.

39. Even if I am wrong in this there is no credible evidence available to rebut the presumption that the assets were gifts made by the appellant to his wife.

40. I will now consider the submissions made by Mr. Bernacchi relating to assets which were jointly owned.

41. In general it would appear to have been the case that rents receivable from the properties were accumulated and in due course deposited in joint accounts. Mr Bernacchi submitted that duty was not payable on these accounts by virtue of the concession made by the Commissioner in 1979 which is reproduced in Vol. 9.3 of the Hong Kong Law Journal of that year.

42. For the sake of convenience I will reproduce an extract from the Journal.

    "Section 6(1)(d) of the Estate Duty Ordinance

    The practice of the Department will be as follows;

 

    Section 6(l) (d) provides that

43. Miss Hartstein contended that this concession was not applicable to the present case. The reason for this was that it was evident from the bank records available that no moneys had been withdrawn from any of these accounts by the appellant in the 3-year period preceeding the deceased's death hence there had been no enjoyment of the property. This would appear to be the case and as I understand the position duty is payable on both of the joint interests in the accounts. In this connection I would add that I also accept the validity of Miss Hartstein's submission that as there is no presumption of an advancement in respect of moneys paid by a wife to a husband it would appear that the appellant may encounter difficulty in maintaining an interest in the joint property having regard to the Commissioner's and my reluctance to accept the affirmation evidence of the appellant.

44. Be that as it may I am satisfied that the appellant's appeal in respect of the joint accounts must also be rejected.

45. I have now dealt with what I consider to be the material matters which were raised in this appeal. With the exception of the agreement between the parties which I have referred to at the beginning of this judgment this appeal is dismissed in its entirety.

46. I make an order nisi that the Commissioner is to have his costs.