This bulletin briefly summarises three recent court decisions. They concern three separate legal concepts which all may seem a little obscure, but each can be very significant. The first is the presumption of advancement. The general position at law is that transfers of property are not intended to be gifts; the presumption of advancement in the case of very close family members counteracts this. The second issue is survivorship. This principle kicks in where one of two (or more) people holding property jointly dies, and works so that there is no need to transfer ownership. The property is simply held for the surviving party or parties. The final issue is donatio mortis causa ("DMC"). DMC arises where a gift is made during someone's lifetime but is conditional on their death. Clearly, this is potentially significant because DMC can cut across what is in the donor's Will.
- YKYM v YMCT
Facts: The case concerned disputes over a property in London between a Wife and her Husband (the Husband's Mother also subsequently joined the proceedings). The Wife argued that the Property was bought as a wedding gift for the couple. The Mother argued that the Property was never intended to be a wedding gift and that she remained the beneficial owner of the Property. The court found that the Property was not bought as a wedding gift for the couple.
Law: Presumption of resulting trust
The law's starting point is that gratuitous transfers are not gifts. Rather, the recipient holds the property on resulting trust for the person who gave them the property.
Law: Presumption of advancement
However, where there is a special relationship (e.g. father and son) the law presumes that a transfer was in fact intended to be a gift (this is known as "the presumption of advancement"). Chan J suggested that the presumption of advancement might also operate between a mother and son, although it is doubtful whether the presumption extends to parent and child-in-law. However, the presumption of advancement is nothing more than an evidential tool whose weight varies with the circumstances of the case.
- State clearly at the time of the purchase whether the property is intended to be an outright gift.
- The court may look into surrounding circumstances when considering whether the presumption of resulting trust can be rebutted, e.g. the socio-economic conditions in Hong Kong, the relationship between the transferor and transferee.
- Nanyang Commercial Bank Ltd v Personal Representative of Vannee Nativivat
Facts: The case concerned disputes between a Mother and her son over the beneficial ownership of joint bank accounts. The Mother and son had five joint accounts with Nanyang Commercial Bank. Under clause 7.1(g) of the Account Conditions, the balance in the Accounts would belong to the survivor upon death of either one of them. In 2010, the Mother and son had a dispute over the ownership of the Accounts. The Mother claimed that the monies in the Accounts (the "Monies") belonged to her solely and that the son was named as a joint account holder solely for convenience. In 2011, the Mother passed away. The son claimed that he was entitled to operate the Accounts as the sole remaining beneficial owner.
Law: Mr Justice Anthony to considered who the beneficial owner of the Monies in the Accounts was. He approached this issue 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 clause 7.1(g) and the presumption of advancement.
- The survivorship clause
To J concluded that a survivorship clause is not conclusive evidence of the parties' intention as to ownership of the monies in a joint account. The beneficial entitlement of funds in a joint account is to be determined by the common intention of the account holders.
- Presumption of advancement
To J held that the presumption of advancement extended to the mother and child relationship because of the "socio-economic conditions in Hong Kong". In jurisdictions like Singapore, which shares similar socio-economic conditions with Hong Kong, the court recognises the presumption of advancement between a father and his adult son on the basis of the moral or equitable obligations of one party to support or make provision for another. On the same premise, such presumption was extended to the mother-child relationship in a recent case in Hong Kong.
- State clearly at the time of opening the bank account how the account is to be held.
- The survivorship clause in the contract for opening the bank account is not conclusive evidence that the parties intend the account to be a joint account.
- If such intention is absent, the court will presume the existence of a resulting trust, which itself is rebuttable by the presumption of advancement. That said, the presumptions 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".
- Re Estate of Chen Soo King
Facts: The case concerned the validity of a gift made in anticipation of death. The Applicant sought a declaration that certain assets of the Deceased had been given to the Applicant by way of DMC. The estate of the Deceased consisted of shares in Hong Kong public companies found in a drawer, a safe deposit box, monies in the Deceased's bank accounts, and other shares (the share certificates for which were collected by the Applicant after the death of the Deceased).
Law: The court ruled that the Applicant was entitled to the monies in the bank accounts and all the contents of the safe deposit box. However, the court ruled that the Applicant failed to prove that the rest of the items he claimed to own had been effectively delivered to him under the principle of DMC, and thus he was not entitled to them.
What is DMC?
DMC is a gift made immediately before death and in anticipation of death. There are three essential requirements:
- "The donor must have made the gift in contemplation though not necessarily in expectation of death";
- "He must have delivered the subject matter of the gift to the donee or transferred to him the means or part of the means of getting at that subject matter e.g. delivering a key, like car keys, or a key to a box containing essential indicia of title, intending to part with dominion over the property to which the key relates";
- "The circumstances must have been such as to establish that the gift was to be absolute and complete only on the donor's death so as to be revocable before then."
The share certificates were found in the Deceased's flat. The court found that the "delivery" required for the 2nd limb had not taken place, as the Deceased gave the Applicant a duplicate set of keys to her flat while she continued to keep her own set. This was not sufficient because the Deceased still effectively retained dominion over the shares.
- In order to effect DMC, the donor must part with dominion over the subject matter.
- Shares can be the subject matter of DMC. The delivery of share certificates can amount to a valid DMC of the shares.