Recovering assets from an estate without challenging a will

In Leung Chung Ching Edwin and Wong Fung San Hanny v The Estate of Leung On Mei Amy, deceased, the Court of First Instance held that the parents of the deceased, who died intestate, were the beneficial owners of a property which they had bought in the deceased's name. The property was, therefore, held on trust for the Plaintiffs and did not form part of the deceased's estate. The Court also confirmed the principles in relation to the presumption of advancement and the presumption of resulting trust. This decision demonstrates that challenging a will is not the only method of receiving assets from an estate.

Facts

Amy Leung On Mei (the "Deceased") died without leaving a Will. She was survived by her husband and their daughter, and by her parents, the Plaintiffs. The Plaintiffs purchased a property in the Deceased's name, (the "Property"), and brought an application against her estate for a declaration that the Property was beneficially owned jointly by them and a consequential order for the transfer of the Property back to them. The Deceased's husband contended that the Property was a gift from the Plaintiffs and the Property should form part of the intestate estate.

Legal principles

It was emphasised that this type of claim should be scrutinised with considerable care in light of the fact that the deceased person cannot give evidence against the claim. The Judge helpfully summarised the legal principles in relation to the presumptions of advancement and resulting trust. Where a property is purchased in the name of one person but with funds of another, the Court must ascertain the true intention of the parties as to which one holds the beneficial interest in the property. If there is sufficient evidence to establish the transferor’s actual intention, the Court will uphold the intention as shown. But where the intention is not expressed, the Court must ascertain the intention of the parties objectively and resort to the presumptions of advancement and resulting trust.

Where there is no close relationship between the transferor and the transferee, the presumption of resulting trust applies, whereby it is considered that the transferor did not intend to part with the beneficial interest in the property and the transferee would hold legal title under a resulting trust for the transferor. The presumption of advancement, on the other hand, applies where there is a close relationship between the transferor and the transferee, such as a father and child. The implication is that the transferor intended to give the beneficial interest in the property to the transferee and accordingly, the transaction will take effect as if it were a gift. The presumption does not, however, apply between a mother and her child. The Judge commented that he saw no reason why this distinction between a mother and a father should be maintained.

Decision

After a careful analysis of the facts and the witness evidence, it was held that the property was not gifted to the deceased and that it was the Plaintiffs' intention that they were to retain the beneficial interest in the Property. The Court found that, as the Plaintiffs kept possession of the title deeds to the Property, the Deceased was thereby prevented from exercising any right as an owner to dispose of or deal with the Property without first consulting the Plaintiffs. This evidenced the Plaintiffs' beneficial ownership of and control over the Property. Therefore, the Deceased held the Property on trust for the joint benefit of the Plaintiffs and the Judge ordered for it to be transferred to them.

Costs

In respect of costs, the Judge ordered that each party bear their own costs (despite the fact that the Plaintiffs had clearly been successful).  This was on the basis that the Deceased's estate had to resolve the issue of the ownership of the Property by way of a determination of the Court in any event. Interestingly, the Judge also had consideration for the fact that the Deceased's child was one of two beneficiaries of the estate and he did not wish to put the financial burden of the Plaintiffs’ costs on the estate. 

Take-away points

This case represents an interesting example of how assets can be recovered from an estate. The Judge's comment on the distinction between a mother and a father in relation to the presumption of advancement is also significant, especially in light of the obiter statements recently made by the Court of Appeal in Suen Shu Tai v Tam Fung Tai [2014] HKEC 1125 that Hong Kong should apply the presumption of advancement in same way regardless of whether the transfer was made by a father or mother. It remains to be seen whether in future the Courts will formally change the operation of this presumption.

If you wish to discuss, please contact Gareth Thomas or Richard Norridge of our Private Wealth and Trusts team.