There have been a number of recent cases in which family members have argued that funds provided by or held jointly with parents or parents-in-law were provided to them as a gift rather than being held on trust for the parent or parent-in-law.  These are often difficult cases resulting in lengthy litigation, as the court needs to consider the unique factual circumstances of each case.  In two recent Hong Kong cases the Court has had further opportunity to make findings on the scope and application of the presumption of advancement.

The case of Nanyang Commercial Bank Ltd v Personal Representative of Vannee Nativivat [2013] HKEC 450 concerned a dispute between the deceased mother’s personal representative and her son over the beneficial ownership of joint bank accounts. The mother and son had five joint accounts with Nanyang Commercial Bank. The account conditions that were signed by the mother and son on account opening provided that the balance in the accounts would belong to the survivor upon the death of either one of them.  Such a clause is known as a “survivorship clause” and is commonly included in joint account opening documentation. Shortly before her death, the mother and son had a dispute over the ownership of the accounts. The mother claimed that the monies in the accounts belonged to her and that the son was named as a joint account holder solely for convenience.  After the mother’s death the son claimed that he was entitled to operate the accounts as the sole remaining beneficial owner. 

The Court approached the issue as to the beneficial ownership of the funds in the accounts by considering the intention of the mother and the son. The mother’s personal representative relied primarily on the mother’s assertion of her intention made fifteen years after the opening of the accounts and her subsequent conduct. The son relied on the intention of survivorship as reflected in the account opening documentation and the presumption of advancement.

The survivorship clause

The Court concluded in line with existing case law that a survivorship clause is not conclusive evidence of the parties’ intention as to ownership of the monies in a joint account. The Court pointed out that survivorship clauses are often included in the “small print” of account opening documentation to aid the bank and often “cloud” the true intention of the parties.  What needs to be determined is the common intention of the parties as to how the funds should be dealt with in their relationship inter se rather than in the relationship with the bank.  In determining the account holder’s true intention the Court held that greater weight should be given to the source of the funds and the presumption of resulting trust in favour of the joint account holder who has paid the funds into the account than to the survivorship clause.

Presumption of advancement

Although abolished or in decline in other common law jurisdictions (eg, England and Canada), the Hong Kong courts have consistently held that there is still a presumption that funds that are provided in a relationship where one party is under a moral or equitable obligation to support the other party, are provided as a gift and are not simply held on trust for the donor.  This presumption is known as the “presumption of advancement”. The Court in Nanyang confirmed that the presumption of advancement not only applied between a father and his (adult) child, but extended to the mother and (adult) child relationship in light of the “socio-economic conditions in Hong Kong”.  The Court pointed out that similar socio-economic conditions exist in Singapore, which meant that courts in Singapore took a similar approach.

In another recent case (YKYM v YMCT [2013] HKEC 487),  the Court had to decide whether a matrimonial home that the mother had provided to a couple was a (joint) gift to the daughter-in-law or was being held on resulting trust for the mother.  In that case, the presumption of resulting trust prevailed (ie, there was no gift and the beneficial ownership remained with the mother).  In light of the findings in that case it remains doubtful whether courts will extend the presumption of advancement to the parent and child-in-law relationship.

Key points

  • It is important to state clearly at the time of opening a joint bank account on how the funds in the account are to be held as between the joint account holders, and when providing other assets or funds to close relatives for their use whether or not they are meant as a gift.
  • The survivorship clause in the contract for the opening of a joint bank account is not conclusive evidence that the funds in the account are to belong to the surviving account holder upon the death of the joint account holder.
  • If a clear common intention is absent, the court will presume the existence of a resulting trust in favour of the account holder who has provided the funds and the donor of any other assets or funds.  This presumption is  rebuttable by the presumption of advancement.
  • The presumption of advancement applies as between mothers and adult children, but is less likely to apply to children-in-law.
  • Both the presumptions of resulting trust and advancement are only evidential tools and the court will also look into other circumstances, including “the age of the parents, any reason or the lack of it for making a gift, the age of the child, his means and extent of financial dependence on the parent, the closeness of the parent child relationship, the parent’s moral and equitable obligations to the child and others, etc”.