In Re Estate of Chen Soon King  HKEC 210 the Hong Kong Court of First Instance ruled on whether certain assets, including shares in several listed companies, had been given to the applicant by way of donatio mortis causa (“DMC”). The court reiterated that the three requirements that had to be met to show that a deathbed donation had been validly made had to be applied strictly to safeguard against the fabrication of deathbed donations. The court found that these requirements were not met in relation to some assets as the deceased had not sufficiently parted with control over those assets. On the other hand, the court clarified that DMC could apply to shares provided that the requirements were met.
The assets sought by the applicant
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 gifted to him by way of DMC. The estate of the deceased consisted of shares in Hong Kong public companies (the share certificates for which were found in a drawer at the deceased’s home), a safe deposit box (which included among other items jewellery, currency and share certificates), monies in the deceased’s bank accounts, and further shares (the share certificates for which were sent to and collected by the applicant from the deceased’s home after the death of the deceased).
The three requirements of 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, eg 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 court’s finding
The court ruled that the applicant was entitled to the monies in the bank accounts and all the contents of the safe deposit box as the deceased had handed over the savings passbooks and the (sole) key to the deposit box, therewith ceding control to the applicant. The court confirmed that shares could be subject to DMC and that a valid “deathbed donation” could be affected by the delivery of share certificates, which are prima facie evidence of title to the shares. This meant that the shares in the deposit box had been validly gifted to the applicant. However, the court ruled that the applicant failed to prove that the shares contained in the drawer and those sent to the deceased after the deceased’s death had been delivered to him under the principle of DMC, and thus he was not entitled to either of those shares. Although the applicant’s evidence was that the deceased had mentioned on a number of occasions that he was to have all of her assets on her death, the deceased had not sufficiently ceded control to the applicant in relation to these shares in order for a DMC to be effective. 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.
- The requirements of DMC will be strictly enforced.
- Where a person wants to ensure that assets are validly transferred to a beneficiary on that person’s death (s)he will either need to cede all control prior to death or make a will.