Tan Cheng Gay & Others vs Tan Choo Suan and SJ (FACV no 3 of 2015)

The dispute relates to the construction of the will of Mr. Tan Kiam Teon (Deceased) who died domiciled in Hong Kong in December 2008. This case has attracted media attention not only because of its substance but also because it was the first case heard by the Court of Final Appeal (CFA) after its relocation to the former Legislative Council building.

Background

The dispute arose between the Deceased’s elder daughter (the first Respondent), who was the named executor under the last will of the Deceased (the Will), and his younger daughter and three sons (together the Appellants).

The Will was a joint will written in Chinese by the Deceased and his wife which expressly governed “在我們名下 (不論在世界任何地方)的財産 (all the properties under [our] names (wheresoever situate worldwide))” (clause 2). Besides this clause which was the crux of the dispute, clause 5 of the Will stipulated that the income derived from the estate should be provided to the surviving spouse for life, and subject to that the residue should be donated to various charities in Hong Kong, Xiamen and Singapore (clauses 7-9). Clause 11 of the Will declared that since the children were adequately cared for during their lifetime, the parents did not intend to provide any part of the residuary estate to them.

The estate of the Deceased included valuable shares in a Singapore listed company EnGro Corporation Limited, part of which were held through a Hong Kong company (HKco) and another part under a Singapore company (Singco). The relevant shares in HKco and Singco were registered under the daughters’ name, who both acknowledged that they held such shares on trust for the Deceased. The estate also included various artwork and antique, as well as a share in a BVI company holding a bank account. The HKco shares were the subject matter of the proceedings in Hong Kong while the Singco shares were subject to other proceedings in Singapore.

The first Respondent and the Appellants argued over the proper construction of the words “在我名下的財産 (properties under my name)” which would affect the entitlement to the HKco shares as follows:

  1. If a narrow construction was to be adopted, only properties owned by and held under the name of the Deceased (in some “registered or officially recorded” sense) would be governed by the Will. This means that any property registered in the name of others (even though held by them on trust for the Deceased) would not be governed by under the Will. As such the HKco shares would not pass under the Will but would only devolve under the intestacy rules, with the results that the Appellants would benefit;
  2. If however a wide construction was to be taken, properties “belonging to the deceased (屬於)” or beneficially owned by him, irrespective of whether those properties are held under his name, would still pass under the Will. Under this approach, the HKco shares would pass under the Will and benefit the various charities specified in the Will. This was the position taken by the Respondent, as well as by the judges at the Court of First Instance and the Court of Appeal. The judges were all of the view that the intention of the Deceased was “crystal clear”.

The matter may have been made complicated by certain events which could have led the Appellants to expect inheritance of the HKco shares. These include (i) several wills made prior to the Will with seemingly contrary intentions; (ii) acknowledgement by the daughters in a letter to the Deceased that part of the HKco shares held by them were actually held on trust for the benefit of their mother and siblings; and (iii) a letter (the Letter) written by the Deceased and his wife to the children just six months after the execution of the Will, stating that they would pass all their estate to charities except for the HKco shares which would be given to the children provided they sign a Deed of Family Arrangement to avoid future disputes. However, the arrangement was never finalized because the sons sought to persuade the parents to give them the Singco shares as well.

The Decision

On November 5, 2015, the CFA unanimously ruled that the words“名下的財産 (properties under my name)”shall be given their natural, plain and ordinary meaning and agreed that the Will shall govern all assets belonging to the Deceased, whether or not they are held under his name. Hence, according to the provisions of the Will, the HKco shares should pass to the various charities.

As per Justice Ribeiro, if the narrow construction was otherwise adopted, there would be “implausible” practical consequence. Assets which would pass under the Will would just include the share in the BVI company registered under the Deceased’s name, and may not even include his artwork or antique. He queried why the Deceased would still have bothered to make a will in such circumstances, and acknowledged that it was a “golden rule” of construction that a testator is presumed not to intend to die partially intestate if he has gone through the solemn form of making a will. Justice Ribeiro also relied on the lifetime gift of income to the spouse stipulated by the Will, which would be meaningless if a narrow construction were to be adopted.

The judgement also dealt with the questions of whether extrinsic evidence should be admitted to assist the construction  of the Will pursuant to s.23 B of the Wills Ordinance. Under that section, such evidence may only be admitted to aid the interpretation of a will when there is ambiguity on its face, or ambiguity in light of the surrounding circumstances.

Justice Ribeiro agreed with the lower courts that no such ambiguity arose. He further opined that that even if such evidence were to be considered, the results would have been the same. Although in the Letter, the Deceased expressed an intention to gift the HKco shares to the children, this lifetime gift has failed to materialize due to the sons’ reluctance to sign the Deed of Family Arrangement, hence the shares remained in the Deceased’s estate to be dealt with by his Will.

It is thought provoking to note Justice Tang’s criticism against the lawyer responsible for drafting the Will. He said he “was troubled” by the fact that a bilingual solicitor trained in the common law who should have understood the difference between legal and beneficial ownership, had still seen it fit to use the words “名下 (under my name)” to describe the properties. He thus thought it necessary to examine the extrinsic evidence, but still came to the same conclusion that none of it assisted the Appellants. He also relied on the amount of the charitable gift stated in the Will as the key in helping with the construction. The Deceased must have thought his residuary estate to be quite substantial and a narrow construction of the Will would have defeated his intention.

Observations

This case reminds solicitors to be alerted to the applicable legal principles when employing a language other than English in which they may conduct most of their practice. While there is a division of legal and beneficial ownership under English law, the Chinese legal system does not recognize such a division. Therefore, when drafting wills in Chinese language, use of precise wordings to ensure conveyance of the correct legal intent is important. In this case, where the intent is found to be disposal of all assets in which the testator had legal and beneficial ownership, instead of saying “名下 (under my name) use of “屬於我的財産 (all properties belonging to me)” may be appropriateMore elaborate language could also be used to avoid potential arguments, like “我擁有實益權的所有資産, 不論我持有法定權益與否 (all properties beneficially owned by me, whether or not I hold the legal title thereof).”

To avoid any confusion on the type of assets which would pass as residuary estate under a will, when giving or taking instructions for the preparation of the will, the testator and the advisor should both have a clear understanding of assets or type of assets which are intended to form part of the residuary estate of the testator. Preferably, a list of such assets could be put on file for record but the testator must clearly understand that he is free to dispose of the assets during his life time despite such a record is being kept.

Where a testator intends to make lifetimegift to others but subject to trusts, instead of passing the assets absolutely to the transferee and relying on the transferee to sign a “letter of intent”, like what the Deceased and his daughters did, it would be advisable for the transfer to be accompanied by a trust deed and/or a declaration of the trust on the assets transferred. The relevant documentation should also be stamped to provide admissible evidence of the trust arrangement, so as to avoid any future arguments as to whether the assets have been gifted absolutely to the transferee, or they still remained beneficially owned by the testator, or the beneficial interest has been passed to some other parties as beneficiaries of the trust arrangement.