CHAN GORDON v. LEE WAI HING AND OTHERS

HCMP1596/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1596 OF 2008

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JUDGMENT

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1.  This is a contest between the administrator of a deceased father and the daughter over a residential property (“the property”) and monies in a bank account (“the savings”).

UNDISPUTED FACTS

2.  The plaintiff, a solicitor, is the administrator (“the administrator”) of the estate of the late Mr. Lee Kar-kwong (“the father”) and that of his lawful brother the late Mr. Lee Kwok-kwong (“the uncle”).  The lawful widow of the father is Madam Liu (“the wife”), a PRC resident. 

3.  The 1^st defendant (“the daughter”) is the only daughter born of the father and one Madam Tam.

4.  The 2^nd defendant (“the 5th uncle”) is the half-brother of the father and the uncle.  The claim against him has been discontinued but he remained as a witness for the daughter.

5.  The property was acquired in the joint names of the father and the uncle as tenants-in-common in equal shares in 1964.

6.  Since 1974, the father and Madam Tam had been residing at the property. The Plaintiff was born in that year.  In 1994, Madam Tam passed away.

7.  On 21 February 1999, the uncle died intestate.  The father, being his natural and lawful brother, was the only person entitled to his estate.

8.  In May 2004, the father married the wife in Mainland China.

9.  On 23 December 2004, letters of administration of the estate of the uncle was granted to the father.

10.  On 11 January 2005, the father died at the age of 73, without administering the estate of the uncle.  The father’s estate comprised the property and the savings of some HK$115,602.63 in his bank account.  The only beneficiaries are Madam Liu and/or the daughter.

11.  On 25 January 2008, the plaintiff, having applied as attorney of the wife, became the administrator of the father’s estate.  On 30 June 2008, the plaintiff obtained letters of administration de bonis non for the uncle’s estate.

THE DAUGHTER’S CASE

12.  The daughter claimed that she had expended money or otherwise acted to her detriment in the belief that she would become the absolute owner of the property.  The father and the uncle had encouraged or acquiesced in the same and it would be unconscionable for the administrator to recover possession from her.  She based her claim on: (A) proprietary estoppel, (B) common intention constructive trust and irrevocable licence protected by constructive trust, (C) the doctrine of unconscionability set out in Pennington v. Waine [2002] 1 WLR 2075 and (D) donatio mortis causa.   She also alleges that the father’s savings were held on: (E) resulting trust for her.

13.  The property was purchased by the great-grandmother of the daughter for the descendants of the Lee family.  It was in the joint names of the father and the uncle because the uncle was deaf and dumb since birth and the father promised to take care of him. 

14.  The daughter has been residing at the property since birth.  She ceased studying in 1992 and started working in 1993. Since 1996, she has been working as a waitress with different restaurants.  In that year, the father, then aged 65, retired.  The daughter claimed that on several occasions in about 1996, the father represented to her that she could reside in the property for the rest of her life for free provided that she maintained the family.  In reliance on those representations, the daughter substantially increased her monthly maintenance for the support of the father and the uncle until their respective death and incurred costs on repair of the building to which the property formed part.  The pattern over the years was as follows:

Year	Income per month	Maintenance to father
1996	$9,000	$2,000 pm + $100 per day for food
1997	$10,000	$3,000 pm + $100 per day for food
1999	$10,000	$4,000 pm + $50 per day for food as the uncle died
2001	$9,000	$5,000 pm
2003	$9,000	$5,500 pm
2004-5	$9,500	$6,000 pm

15.  Whilst the uncle was alive, the father shared the maintenance with him. In addition, the daughter paid about $1,000 for the outgoings and miscellaneous expenses like dog food, shampoo.  Those monthly maintenance took up 2/3 (about $6,000 to $7,000) of her income.  She would also hand over any tips received to the father. 

16.  Throughout the years, the 5^th uncle had repeatedly reminded the father (at gatherings of the extended family) during Chinese New Year, Ching Ming and Chung Yeung Festivals that he should transfer the property to the daughter.  The father, the uncle and 5^th uncle repeated their intention that the property would belong to the daughter. 

17.  In about 1999 when the uncle died, the father told the daughter again that at the end of the day, the property would belong to her and promised to transfer the property to her. 

18.  On one occasion between 1994 and 2000, the father told the ex-boyfriend of the daughter (“the ex-boyfriend”) that he should take good care of the daughter and that the property would be given to her. 

19.  The father got married in May 2004.  The daughter learnt about it one evening when she saw the father looking sadly at the marriage certificate.  He told her that he might be cheated and that he wanted to transfer the property to her as soon as possible.  He said he regarded the natural relationship with the daughter as the most important and promised to leave everything to her.   

20.  In about June 2004, the father delivered the title deeds to Messrs. Pang & Associates with a view to effecting a transfer to the daughter. 

21.  The daughter later learnt from the father that one Mr Yiu, solicitor of Messrs. Pang & Associates, advised him that transfer of the property to her by way of gift might create difficulties in terms of raising loans on the security of the property in future; and that it would be better to effect the transfer by means of a purported sale and purchase (“the legal advice”). Therefore the father told Mr Yiu that the price should be $500,000 but he would not really charge the daughter.  The father also learnt that the property was not held by him and the uncle as joint tenants but as tenants-in-common. Therefore, through Messrs. Pang & Associates, the father applied for and was granted the letters of administration for the uncle’s estate. 

22.  Sadly, within 3 weeks of such grant, the father suffered from suspected colon problem on 11 January 2005 and was sent to hospital.  Before the operation, the father allegedly passed the property to the daughter and told her that she and the puppy could live there.  He told her to consult Mr Yiu. The father died on the same day.

THE ADMINISTRATOR’S CASE

23.  The administrator effectively put the daughter to strict proof and denied each head of the daughter’s claim.  In particular, he relied on the fact that any alleged intention of the father and the uncle to transfer the property to the daughter for free was rebutted and negated by the clear instructions of the father to Messrs. Pang & Associates to prepare a conveyance for the sale of the property to the daughter at a consideration of HK$500,000. 

ASSESSMENT OF CREDIBILITY OF WITNESSES

24.  I have reminded myself that though the situation of the daughter attracted sympathy, the act of the administrator in seeking to enforce the strict legal rights was perfectly proper.  The Court must be cautious in exercising its equitable jurisdiction.  In the end, it must decide the case on the evidence and in accordance with the law. 

25.  The daughter’s version was based on oral promises.  She has not produced contemporaneous documents of payments to the father and the source of those payments despite its forming the core of her case: Chan Chui Mee v. Mak Chi Choi [2009] 1 HKLRD 343, at para 53.  The father’s bank passbook, most likely kept inside the property, was not produced in support of her case.  The administrator, understandably with a view to saving costs and thinking that it was no longer necessary to provide 3 years’ bank record for estate duty purpose, had not sought the transaction history from the bank.  Since the burden of proof was on the daughter, her credibility was of crucial importance

26.  The daughter’s job pattern and income were simple and consistent.  Her employment was continuous.  The family structure and lifestyle was simple but close.  There was no suggestion that the father and the uncle had independent financial means.  The daughter’s narrative was borne out by the circumstantial evidence which will be further analyzed below.  Having seen and heard the daughter, I find her to be an honest and credible witness and I accept her evidence.

27.  The honesty of all the other witnesses – the ex-boyfriend (DW2), the 5th uncle (DW3) and the administrator (PW1) – was not seriously challenged.  I accept their evidence.

A. PROPRIETARY ESTOPPEL

28.  The essential elements of proprietary estoppel are well known.   The owner of land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the owner’s property [“representation”].  In reliance upon this belief, the claimant acts to his detriment to the knowledge of the owner [“reliance”].  The owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive [“detriment”].  See the Law of Real Property, 7th ed, Megarry & Wade at pp. 698-699 and Thorner v. Major [2009] 1 WLR 776, per Lord Scott of Foscote.

Representation

29.  The representation was said to have been made orally in around 1996, 1999 and 2004.  The whole course of conduct should be looked at.  In 1996, there was good reason for the retired father to make the representation to induce the daughter to financially support him and the uncle, both of whom did not appear to have any pension or security of income.  In 1999, it was not surprising that he had repeated his promise, if anything, to ensure that the status quo would be maintained even after the death of the uncle.  In 2004, the alleged feeling of being cheated gave a reason for the father to reinforce his intention of passing the property to the daughter and put it into action by instructing Messrs Pang & Associates to prepare the transfer documents.

30.  In testing the validity of the daughter’s case, Mr Leung, counsel for the administrator, put forward the following arguments:

(i) The wishes of the great-grandmother was for the property to be left to male descendants of the family.

(ii) The extent of the representation was limited to letting the daughter reside in the property without paying rent but not acquiring the beneficial ownership thereof.

(iii) What the 5th uncle said to the effect that the property would belong to the daughter was of no legal effect since the he had no interest in the property.

(iv) There was no evidence of the uncle’s intention to give the property to the daughter.

(v) Nothing was done to transfer the ownership between 1996 and late 2004.

(vi) The intention of the father was to convey the property to the daughter for valuable consideration and not by way of gift.

(vii) The father’s intention to convey the property to the daughter was dependent on the marriage between the daughter and the ex-boyfriend.

(i) The wishes of the great-grandmother

31.  I do not consider the wishes of the great-grandmother to be of any relevance.  It is the estate of the father that is in issue.  Moreover, the 5th uncle’s repeated reminders to the father to effect the transfer to the daughter refuted any assertion that the father intended to leave the property to a male descendant of the Lee family in accordance with the wishes of the great-grandmother.

(ii) The limited extent of the representation

32.  One is dealing with lay persons who did not know about the niceties of the law and strict legal terminology.  When interpreting the representation of the father, one should consider the circumstances known to him, the daughter and the uncle.  In 1996, the father had no next-of-kin apart from the uncle whom he believed to be a joint tenant and the daughter.  When he repeated his intention in 1999, he must have been labouring under the belief that he had become the full owner by virtue of the right of survivorship under the joint tenancy.  When he told the daughter she could live there rent free for the rest of her life, there could have been no other meaning but that she could occupy and eventually inherit the property upon his death.    Two weeks after his marriage to the wife, he purported to convey the property to the daughter alone.  His intention remained the same even when he was in hospital. The irresistible inference was that he intended the daughter to take the full beneficial ownership of the property to the exclusion of others and I so find.

(iii) What the 5th uncle said to the effect that the property would belong to the daughter was of no effect

33.  I agree with Mr Leung.  The 5th uncle was not a joint owner of the property and had no right thereunder to pass on to the daughter.  However, his evidence corroborated the daughter’s in showing that the intention of the father was formed and well-known not only to the daughter but also to the 2 uncles years ago. 

(iv) No evidence of the uncle’s intention to give the property to the daughter

34.  The evidence from the 5th uncle, which I accept, was that the uncle loved the daughter.  The 3 brothers talked about transfer of the property to the daughter during family gatherings.  It is not difficult to infer that the uncle, having received the benefit of maintenance, would be happy to leave the property to the daughter when he himself had no offspring.  In any case, this issue is water under the bridge because the uncle had pre-deceased the father.

35.  Whether viewed in 1996 or 1999, the irresistible inference is that the father was disposing of whatever interest he had in the property: Thorner v. Major [2009] 1 WLR 776 (on proprietary estoppel). It would be illogical, in my view, to suggest that the father only intended to dispose of 50% of his property leaving the rest under intestacy.

(iv) Nothing done to transfer the ownership between 1996 and 2004

36.  This is undeniable.  I do, however, accept that there was no hurry to do that as the daughter considered the father to be healthy even in 1999 when the father was aged about 68. 

37.  I also accept the daughter’s evidence that she had wanted to pay for the legal costs of the transfer, which she could not then afford.  She had no savings. She could only pay for the costs of the letters of administration for the uncle by 2 instalments.  Given the low income for the support of 3 persons, I am satisfied that it was not financially viable for the transfer to be effected in between 1996 and 2004.

(v) Intention only to convey for consideration than by gift

38.  The administrator relied on a letter from Messrs Pang & Associates stating that the father had indicated initially that he and the uncle would sell the property to the daughter at the price of $500,000 (the then market value). 

39.  In rebuttal, the daughter relied on the legal advice, which was hearsay.  Hearsay evidence is admissible; it is a question of what weight should be placed on it.  In deciding the weight to be attached, I have considered that it was common knowledge in conveyancing that a gift may be set aside as a transaction at undervalue if the assignor were to become bankrupt within 5 years before the presentation of a bankruptcy petition: sections 49 and 51(1)(a) of the Bankruptcy Ordinance, Cap 6.  Even the administrator admitted this.  It was thus likely that a responsible solicitor would have given the legal advice.  However, the administrator had never put the daughter’s case about the legal advice to Messrs Pang & Associates for comment.  We therefore have only the unchallenged version of the daughter.

40.  The circumstantial evidence supported the daughter’s version.  There was no reason why the father suddenly wanted to have $500,000 when all along he had been maintained by the daughter.  The father had no other property in Hong Kong.  If he were to sell the property to the daughter, where did he expect to live?  There was no indication e.g. that he would move to live with the wife in the Mainland.  The father knew the daughter’s income.  If she were still to maintain him and the uncle, how could she afford taking out a mortgage for $500,000?  Which bank would lend that sum to the daughter on the security of the property aged 40 years and at her income?

41.  Considering all these factors, I have no hesitation in placing the fullest weight on the hearsay evidence.  I find that the father had received the legal advice and acted accordingly, but he never intended to receive the $500,000 from the daughter.

(vi) Conveyance to the daughter was dependent on the marriage between the daughter and the ex-boyfriend

42.  The ex-boyfriend’s evidence was that about 2 months after the death of the uncle, the father told him that he should look after the daughter and that the property would be left to her.  That remark was in the briefest terms. There was no mention of marriage.  It was at best a casual remark and could not carry any weight.  In any case, it was never communicated to the daughter.  I also doubt if any parent would impose such a condition when making a gift to his own child.  This challenge had no merit.

43.  On the issue of representation, I find that the father had made the representation in 1996, 1999 and 2004 as alleged by the daughter and had the intention to confer beneficial ownership of the property on her.

Reliance

44.  This issue was not really contested.  I find that the daughter did rely on the father’s representation. Such reliance was reasonable, given the financial circumstances of all parties concerned and their relationship.  

Detriment

45.  The daughter suffered detriment in the sense of maintaining the father for 9 years and the uncle for 3 years and hence had less money to spend on herself.  There had been only one occasion of renovation of the building and the daughter paid for it in the sum of $5,000.  She also spent repair costs for falling concrete, water seepage from ceiling and electricity shortage in May 2008 although no amount was stated in evidence.  All of such payments were referable to her interest in the property.

46.  Mr Leung submitted that any detriment suffered had been offset by counterveiling benefits in terms of free accommodation for 37 years.  I do not think the first 22 years of free accommodation should be treated as a “counterveiling benefit” for resisting her claim.  In those years, she was either in her minority and/or still at school.  The father had a duty to maintain and house her.  He could not have reasonably expected contribution or maintenance from the daughter in those years.

47.  Mr Leung purported to compare the value of the maintenance over the years with the rent the daughter had been spared from paying.  With respect, there was no evidence on the rental level (whether of the property or a room therein) and value of the property.  I decline to do such a comparison for lack of sufficient basis.

48.  Mr Leung also submitted that payments for household expenses and outgoings for the enjoyment of the claimant did not amount to detriment on its own: Sledmore v. Dalby (1996) 72 P&CR 196.  I accept this principle. However, the daughter’s case was distinguishable on the facts.  She worked 10 hours a day.  She had her meals at the restaurants where she worked.  The maintenance was for the exclusive use of the father and the uncle.  The occasional meals taken by the ex-boyfriend and even his overnight stays at the property could not be a counterveiling benefit that should reduce the daughter’s interest in the property.  In the circumstances of this case, the financial contribution by the daughter was constant and substantial.  It was for the survival of both owners of the property.  She also effectively helped her father honour his promise to the great-grandmother to look after the uncle.  The payment of maintenance constituted “detriment”.

49.  Renovation done largely for the enjoyment of the claimant does not amount to detriment on its own: Lam Ping Hing v. Yeung Leung Wai DCCJ 2673 of 2008.   Renovation expenses on the property have to be looked at against the value of the property.  In Jong Lan Kiauw v. Jong Yang Hwa & anor, DCMP 2540 of 2008, compared to the property worth $5,000,000, the renovation expenses of $275,500 and any other expenses incurred by the daughter and the son-in-law were held to have been sufficiently offset and outweighed by the benefits which they and their family had received by their rent-free occupation of the property for 21 years and cash payments from the mother.

50.  The costs for renovation was admittedly small compared to the value of the property.  They would not in themselves constitute detriment.

51.  The cost of the letters of administration in respect of the uncle’s estate, however, was on a different footing.  The father had savings of over $100,000 by the time of his death in 2005.  It was thus probable that he maintained some savings in 2004.  Why did he not pay the cost but let the daughter pay by instalments?  She only paid half ($4,150) before the solicitor ceased to act.  In my view, not only did the cost paid constitute detriment but it was clearly an indication that both father and daughter treated the property as the daughter’s, for which she had to bear all costs arising thereunder.

The Equitable Relief

52.  All the requisite elements to a claim in proprietary estoppel were met. The Court should determine the proper relief to be granted to the daughter. The court’s function in determining the extent of the equity created by the proprietary estoppel is especially important, as its effect is permanent: Sledmore v. Dalby (1996) 72 P&CR 196.  In that case, Roch LJ said,

“The task for a court in determining the extent of an equity created by proprietary estoppel is set out in the 29^th edition of Snell’s Equity:

The extent of the equity is to have made good, so far as may fairly be done between the parties, the expectations of A which O has encouraged. A’s expectation or belief is the maximum extent of the equity, so that if, for example, A’s expectation is that he could stay in a house for the rest of his life, this will not be given effect to in such a way as to confer on him the rights of a tenant for life under the Settled Land Act 1925, for that, with its concomitant right of sale, would give him a greater interest than he was entitled to expect. Accordingly A may have to be content with something less than his expectations, e.g. some form of lease at a rent. In other cases a full life interest operating under the Settled Land Act 1925 may be given. Further, the position of O has to be considered. Thus the courts are reluctant to compel two persons to live together when they have fallen out, and even after O has died, the due administration of his estate and the rights of those taking under it are factors to be considered.

I would respectfully adopt that passage as an accurate statement of the decided cases and the law.

53.  It is thus always necessary to ask what is the assumption made by the party asserting the estoppel for which the party affected is to be treated as responsible.  There is a need for proportionality, which means that the end result must be a just one having regard to the assumption made by the party asserting the estoppel and the detriment which he has experienced.  See Sledmore v. Dalby, per Hobhouse LJ.

54.  In Sledmore v. Dalby, the court was of the opinion that the respondent’s expectation would have been that he would remain in the house as long as his wife was alive and he was living with her and, probably whilst their daughters were still living with their parents, or following his wife’s death, with him.  The respondent had lived rent free in the house for over 18 years.  At the time of the trial, it was clear that he had accommodation elsewhere.  He had employment and therefore was capable of paying for his accommodation.   One of the daughters had married and moved out and the other was able to maintain herself.  On the other hand, the appellant was vulnerable and liable to lose her present accommodation and had a pressing need for this house which was her property.  The court made an order for possession in favour of the appellant on the basis that the minimum equity to do justice to the respondent on the facts of the case was an equity which has then expired.

55.  The “assumption” of the father and daughter was clear.  The daughter was not only to reside there for life but also to take the full beneficial interest.  She needs the property and there was no evidence that anyone else including the wife had more pressing need than her.  It would be unconscionable that the father, having enjoyed the years of maintenance, should be allowed to go back on his promise through the administrator.  The equities in this case are clearly in favour of giving the full beneficial interest in the property to the daughter.

B. COMMON INTENTION CONSTRUCTIVE TRUST AND LICENSE PROTECTED BY CONSTRUCTIVE TRUST

56.  The determination of beneficial ownership under a common intention constructive trust involves a two-stage test.  First, the key was to establish the parties’ true common intention that the claimant should have a beneficial interest.  Second, it was necessary to ascertain the extent of the parties’ respective interests in the property, by adopting a holistic approach to quantification, surveying the whole course of dealing and conduct which threw light on what shares the parties must have intended.  The court could not impose its own view of what it considered fair.  Chan Chui Mee v. Mak Chi Choi, [2009] 1 HKLRD 343. 

57.  The present alleged constructive trust involved a post-acquisition common intention.  This would imply a change in the ownership of the property and there has to be an express or implied post-acquisition agreement that the property held in the name of the father was intended to be shared beneficially by him and the daughter.   Otherwise compelling evidence was required.   See Chan Chui Mee v. Mak Chi Choi, above, HKCB Finance Ltd v. Yuen Yi Wan Sandy & another, CACV 355 of 2005.  

58.  In Chan Chui Mee v. Mak Chi Choi, Lam J explained the difference between common intention constructive trust and proprietary estoppel:

“33. It is also significant to note that at para.37 in Stack v. Dowden Lord Walkerexpressed the view that common intention constructive trusts cannot be completely assimilated with proprietary estoppel.

Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the ‘true’ owner. The claim is a ‘mere equity’. It is to be satisfied by the minimum award necessary to do justice … which may sometimes lead to no more than a monetary award. A ‘common intention” constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.

…

34. In Ip Man Shan Henry v. Ching Hing Construction Co Ltd at paras.70-74, I referred to the conceptual distinction between pre-acquisition common intention and post-acquisition common intention. At para.74, I said:

If the common understanding was arrived at prior to the acquisition of the property, the beneficial ownership had not yet been crystallized and one may infer a common intention more readily. On the other hand, if the common understanding were only formed after the acquisition of the property, this would imply a change in the beneficial ownership of the property. The evidence must support an inference that there was a fresh agreement as to beneficial ownership before the court can give effect to the common understanding. In other words in that situation, there must be some evidence to infer that the original beneficial owner has agreed to give up some of his interest in the property in favour of the other party.

35. I do not think Stack v. Dowden and Abbott v. Abbott bring about any changes in this regard. In James v. Thomas [2007] 3 FCR 696, a Court of Appeal decision after Stack v. Dowden, Chadwick LJ said at p.705:

More pertinently, if the circumstances so demand, a constructive trust can arise some years after the property has been acquired by, and registered in the sole name of, one party who (at the time of the acquisition) was, beyond dispute, the sole beneficial owner: Gissing v. Gissing [1971] AC 886 at p.901, Bernard v. Josephs [1982] Ch 391 at p.404. But, as those cases show, in the absence of an express post-acquisition agreement, a court will be slow to infer from conduct alone that parties intended to vary existing beneficial interests established at the time of acquisition.”

The common intention

59.  Given my analyses under proprietary estoppel, the evidence was compelling in showing that the father did intend to benefit the daughter although he did not state her share of beneficial ownership.  In my view, there was no doubt that their true common intention was to create a joint tenancy in favour of the daughter.  It was an express post-acquisition agreement.  A constructive trust was accordingly established.

60.  A licence protected by constructive trust arises by operation of law when the court is of the opinion that it is in the interests of justice or for the prevention of unjust enrichment that such a trust should be found: Burn and Cartwright, Cheshire and Burn’s Modern Law of Real Property, (17th ed), at p. 839.

61.  I have no doubt that the representation of the father would have given rise to at least a licence to the daughter to reside in the property for life and for free.  It is not revocable until the interest with which it was granted has come to an end.  It can bind a successor in title of the licensor if he is bound by the interest to which the licence is coupled.  Land Law in Hong Kong, (3rd ed), SH Goo, at pp. 492 and 512.

62.  However, given my finding that the common intention was for the creation of a joint tenancy, it would be inequitable to given relief to the daughter simply to the extent of a licence.  Upon her father’s death, she has become the sole beneficial owner under this constructive trust.  Her rights overlapped those under the proprietary estoppels.

C. THE DOCTRINE OF UNCONSCIONABILITY IN PENNINGTON v. WAINE

63.  Given my analyses under proprietary estoppel and constructive trust, this head of claim has no significance.  I will only deal with it briefly in deference to counsel.  In Pennington v. Waine [2002] 1 WLR 2075, it was held that, although further acts may remain to be done by the donor to vest the legal interest in the donee, the gift may nonetheless be effective in equity if it would be unconscionable for the donor to resile from his intention that the transaction should be complete.  Arden LJ explained (at para 64 of the judgment) that,

“There can be no comprehensive list of factors which makes it unconscionable for the donor to change his or her mind: it must depend on the court’s evaluation of all the relevant considerations.”

64.  In Pennington v. Waine, the transferor had executed a share transfer form but did not deliver it to the donee or the company for registration.  She did inform the donee about the gift.  The donee acted on the assumption that the gift was complete and had been expressly told by the donor’s agent that he need take no further action.  The court found that the donor did intend to make a gift.  The court regarded it as an equitable assignment without the necessity for a delivery of the form or share certificate and the gift was held to be complete in equity.  In the present case, however, the preparation of the formal conveyance had not even started. It was not in truth a gift by the father but the intention was for the daughter to pay maintenance in exchange for the property.

65.  Pennington v. Wainehas been criticized.  The decision may perhaps be treated as turning on its particular facts (the agent of the donor having become the agent to the donee to use the documents to register the transfer) and not establishing any new principle preventing the donor from resiling from a gift or trust before he has done all that he needs to complete it.  Lewin on Trusts, 18^th ed (2008), para.3-57.

66.  I refrain from basing my decision on the principles of Pennington v. Waine.

D. DONATIO MORTIS CAUSA

The law

67.  In the Official Administrator v. The Luk Hoi Tong Co. Ltd. & another [2005] 3 HKC 615, Cheung J set out the 3 essential requirements of donatio mortis causa:

“Cases of donationes mortis causa sometimes provide an exception to the rule that equity will not perfect an imperfect gift. A donatio mortis causa must comply with the following essential requirements:

(i) The donor must have made the gift in contemplation though not necessarily in expectation of death.

(ii) He must have delivered the subject matter of the gift to the done 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.

(iii) 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. A condition to this effect need not be expressed and will normally be implied from the fact that the gift was made when the donor was ill.”

68.  The burden is on the claimant to prove on a balance of probabilities that there existed such a gift: Cai Guo Xiang v. Mok Hang Won Elsa [2001] HKCU 260.

Circumstances of making the gift

69.  The circumstances giving rise to the gift was as follows.

70.  On 11 January 2005, the father suffered from abdominal pain.  After medical inspection, it was suspected that something was wrong with the colon and a report was pending.  The situation worsened in the afternoon.  The doctor advised that an operation might be necessary.  The father said to the daughter words to the following effect:

“Due to unforeseen reason, the procedures for the transfer of the property could not be completed till now. You should contact Mr Yiu, the solicitor. I have promised your mother that I would look after you for life. Despite the fact that I am now going to die and cannot look after you, you will have a place to live without making payment until your death. All you have to do is to work to support yourself. I therefore can leave without regret. Though you, Ah Hing, were not born in a wealthy family, your condition is worse off than some but better off than many. That is because a lot of people have to spend over half of their income in order to have a place to live. However, you do not have to worry about rent. You can reside here with the puppy at ease.”

71.  The gift in question was only the property, not the savings.  The question is whether or not it was a licence to occupy for life or to own the property. 

72.  In making the gift, the father was only concerned with the daughter. There was no mention at all by the father of the need to provide for the wife to whom he was married for only 8 months and she had not provided evidence otherwise.  The father knew the income of the daughter and would have known that she could not afford to buy or rent another property on her own.  The father made an express reference to the transfer procedure which was then ongoing.  He intended that transfer to go ahead, as revealed from his asking the daughter to contact Mr Yiu.

73.  It is true that there might be another beneficiary to the estate of the uncle – the 2^nd defendant.  However, the father clearly was not aware of this.  His affirmation in support of the application for letters of administration of the uncle’s estate did not mention that the uncle had other brothers.  In any case, by the time of the trial, the administrator had conceded that the only possible beneficiaries to the property were the daughter and the wife.

74.  I find that there was compelling evidence to show the father’s intention to make a gift of the property to the daughter instead of just allowing her to live there for life.

Made in contemplation of death

75.  “In contemplation of death” does not mean the possibility of death at some time or other, but death within the near future, which may be called death for some reason believed to be impending: Re Craven’s Estate [1937] 1 Ch 423, at 426, per Farwell J. 

76.  If death was certain, so that the possibility of the donor’s recovery was removed, there was no scope for a donatio mortis causa; the purported gift must be treated as an attempted lifetime gift or fail as a testamentary disposition: Cai Guo Xiang v. Mok Hang Won Elsa [2001] HKCU 260, following Lord Advocate v. M’Court [1952] All ER 184.

77.  An operation carried with it both the possibility of death and of recovery.  Death could not be said to have been certain.  I find that the father made the gift in contemplation of death.  He eventually died from that impending illness.

Delivery of subject-matter to the daughter

78.  There must be handing over of the gift to the donee: Sen v. Headley [1991] 2 All ER 636.  Where actual hand over did not and could not take place or the thing was intagible, there should be some parting with dominion over the “indicia of title”.  In Birch v. Treasury Solicitor [1951] Ch 298， the Court of Appeal said,

“… The question then is, where actual transfer did not or cannot take place, what will ‘amount to [an indicia of title]”? As a matter of principle the indicia of title, as distinct from mere evidence of title, the document or thing the possession or production of which entitles the possessor to the money or property purported to be given, should satisfy Lord Hardwicke’s condition.”

79.  The following had been held to be acts of delivery of the gift: putting the donee in possession of the only key to a box containing the title deeds: Sen v. Headley [1991] Ch 425; giving the donee the bank passbook / deposit receipt: Birch v. Treasury Solicitor [1951] Ch 298; permitting the son to drive the car without giving him the car registration document when the father said, “You can keep the keys, I won’t be driving it anymore.”: Woodard v. Woodard [1992] RTR 35. 

80.  In the present case, there was no handing over of the keys (the daughter already had one set) or title deeds of the property to the daughter. 

81.  Mr Yeung, counsel for the daughter has referred to various authorities in the USA which stated that where the intent to bestow was obvious and clear and there was no evidence of fraud or undue influence, and the circumstances showed that the donor has done all that in his opinion was necessary to do to accomplish his purpose, the rule which required delivery of the subject of the gift was not to be enforced arbitrarily: MacKenzie v. Steeves 98 Wash. 17, 167 P.50 (1917); McCarton v. Watson, 39 Wash. App. 358, 693 P.2d 192 (1984).

82.  This US approach creates much uncertainty and ignores the rationale behind the requirement for parting with dominion over the subject-matter:

“I have considered what was the reason for imposing as a condition of a valid donatio that the donor must part with dominion over the subject-matter thereof and the answer seems to me to be that the subject-matter of the donatio must be some definite property, and, to ensure that, the donor must put it out of his power between the date of the donation and the date of the death to alter the subject-matter of the gift and substitute other chattels or property for it. Otherwise, so long as the subject-matter of the gift remained in the dominion of the donor, the donor might at any time between the donatio and the gift deal with it as he or she pleased.” In Re Craven’s Estate [1937] 1 Ch 423, at 427, per Farwell J

83.  I do not consider it appropriate to adopt the US approach.  Even if it were adopted, I am of the view that it did not assist the daughter in the present case.  Indisputably, right from the date of the gift, the daughter had never taken possession of the title deeds and they had eventually fallen into the hands of the administrator since February 2006.  Even if she had gone to Mr Yiu, she could hardly have obtained the title deeds without a letter of authorization from the father.  All in all, even if the father had intended to part with dominion over the property, he had not done all that was necessary to accomplish his purpose.

Gift to be absolute and complete only on donor’s death so as to be revocable before then

84.  As Cheung J said in the Luk Hoi Tong case, this will usually be implied.  However, if the death was certain, so that the possibility of the donor’s recovery was removed, there was no scope for a donatio mortis causa; the purported gift must either be treated as an attempted lifetime gift or fail as a testamentary disposition: Cai Guo Xiang v. Mok Hang Won Elsa [2001] HKCU 260, at para.83.

85.  Whilst waiting for an operation, it was perfectly reasonable for the 73 year old father to make this gift to cater for his death.  The daughter had dutifully maintained him for years without pressing for a transfer of the property.  There was nothing to make me doubt that the situation would revert to the previous state if the father had recovered from the illness.  In my view, this criterion of the gift being conditional upon death was undoubtedly met in this case.

Conclusion on the claim under donatio mortis causa

86.  For lack of delivery, the gift under donatio mortis causa was incomplete and this cause of action fails.

E. RESULTING TRUST OF THE SAVINGS

87.  The administrator resisted this claim on the ground that the alleged trust of money could not be ascertained with reasonable diligence and should be void for uncertainty or otherwise. 

88.  The subject matter, being the savings in the bank account of the father, was not uncertain.  What was uncertain was when the trust came into being.  The daughter’s evidence that after deducting the expenses, any left over from the monthly maintenance would be saved up for her future use was put under a paragraph in her witness statement about what the father told her a month before his death.  If the trust was formed then, the daughter would at best be entitled to one month’s savings, of which she failed to prove the quantum.

89.  The more pertinent question nevertheless is whether the daughter had the positive intention to retain beneficial interest in the money or parted out-and-out with it.

90.  The monthly payments were, as described by the daughter, “maintenance”. They served also as “detriment” for the daughter’s acquisition of beneficial interest in the property.  Her case on proprietary estoppel was that the maintenance was for the exclusive use of the father and the uncle.  She could not have retained or hoped to retain beneficial interest in the money given away. 

91.  On any view, the claim for the savings under resulting trust must fail.

OTHER MATTERS

92.  The wife complained that she had been denied access to the property and that the daughter had refused to deliver up of assets or personal chattels of the father despite demands made through her solicitors.  Given the conflict in interest between the wife and the daughter, it was not surprising that tension existed between them to preclude any cooperation.  The administrator and the daughter may, after considering this judgment, apply for further directions from this Court if necessary.

CONCLUSION

93.  The daughter acquires full beneficial interest in the property under the principles of proprietary estoppel and constructive trust.  I do not base my decision on Pennington v Waine.  For lack of delivery of the property, the cause of action under donatio mortis causa fails.  Her claim for the savings under resulting trust fails for lack of evidence on when the trust was formed and an intention to retain beneficial interest in the money.

94.  I declare as follows:

(1) That the property did not form part of the estate of the father.

(2) That the property belonged to the daughter as a result of proprietary estoppel and constructive trust.

(3) That the father had not made a valid donatio mortis causa of the property in favour of the daughter.

(4) That the savings of the father formed part of his estate and were not held on resulting trust for the daughter.

95.  I further order that:

(1) Subject to sub-paragraph (3) below, there be distribution of the estate of the father and the estate of the uncle by the plaintiff for the purpose of administration.

(2) The administrator do execute a conveyance of the property to the daughter.

(3) That cash and/or money in the bank account(s) of the father shall not be distributed pending resolution of the issue of costs of this action.

COSTS

96.  In principle, costs should follow the event and be to the daughter, to be paid out of the estate.  There should also be legal aid taxation of her own costs.

97.   The administrator has maintained a rather neutral stance in this action.  The cross-examination of Mr Leung was fair and was directed towards ascertaining the truth rather than engaging in hostile litigation.  Costs of the administrator should, in principle, be paid out of the estate on trustee basis if not agreed: Re Estate of Lau Wai Chau, HCMP1024 of 2004.

98.  I have mentioned at the pre-trial review that this case cried out for mediation.  Before making any formal order for costs, I want each party to file and serve one set of written submission on costs of not more than 2 pages within 14 days of the handing down of these reasons.  The party seeking costs should also file and serve a costs statement for summary assessment.  A hearing on costs shall be held on 23 March 2011 at 10 am with 30 minutes reserved.  These directions do not, of course, preclude the parties from agreeing between themselves the appropriate order for costs.

99.  I thank Mr Leung and Mr Yeung for their very thorough legal arguments and assistance given to the Court.