OFFICIAL AMINISTRATOR, the Personal Representative of the Estate of LUNG NGA LAI EILLY v. KONG MEI SIN AND OTHERS

[English Translation – 英譯本]
CACV135/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 135 OF 2012

(ON APPEAL FROM HCMP 1793 OF 2009)

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J U D G M E N T

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Hon Yuen JA (giving the judgment of the Court)

1.  This appeal arises from HCMP 1793/2009. Madam Kong Mei Sin, the 1^st defendant, lodged an appeal against the judgment of Deputy High Court Judge Lisa Wong SC in respect of arrangements made by Madam Lung Nga Lai Eilly （龍雅麗女士）(hereinafter “the Deceased”) during her lifetime regarding some of herproperty (including real properties).

Background

2.  On 31^st December 2006, the Deceased was found unconscious at home and was certified dead athospital the same day.  She passed away at the age of 65.   The Official Administrator is her personal representative.

3.  The Deceased neither had a will nor any next-of-kin.  Therefore her estate became bona vacantia and went to the Hong Kong Government.  In this appeal, the Government was represented by the Secretary for Justice; the other defendants were not involved.

4.  Madam Kong had been a good friend and neighbour of the Deceased for more than 20 years.  After the death of the Deceased, Madam Kong saidto the personal representative that the Deceased had said something to her and done something three days before her death which showed that she gave certain properties (hereinafter “the Properties”) to Madam Kong as gifts.

5.  The Properties can be divided into 4 items: (1) the Deceased’s former residence (hereinafter “Unit 6B”); (2) cash in the amount of $40,000 odd found inside Unit 6B; (3) adeposit in the amount of about $128,000 in the Citibank; (4) a deposit inthe amount of $1,000,000 odd in the Bank of East Asia.

6.  Accordinglythe personal representative of the estate commenced HCMP 1793/2009 asking the court to decide whether the Properties belonged to the Deceased’s estate and therefore went to the Hong Kong Government, or had been given by the Deceased to Madam Kong as an inter vivos gift on the legal principles of donatio mortis causa and therefore did not belong to the Deceased’s estate.

The legal principles of donatio mortis causa

7.  In paragraphs 26 – 29 of her judgment, the trial judge has correctly set out the legal principles of donatio mortis causa as follows:

“26. The law will not perfect an imperfect gift. This principle is well-established; see Milroy v Lord (1862) 45 ER 1185, 1189. This authority was cited by A. Cheung J in Official Administrator v Luk Hoi Tong Company Limited [2005] 3 HKC 615, para 102.

27. However, donatio mortis causa is one of the exceptions to this principle. The reason is that a donatio mortis causa is a singular form of gift, being a gift which is neither inter vivos nor testamentary. It is an act inter vivos by which the donee is to have the absolute title to the gift not at once but if the donor dies. If the donor dies the title becomes absolute not under but as against the personal representative of the donor. In order to make the gift valid it must be made so as to take complete effect on the donor’s death; see Re Beaumont [1902] 1 Ch 889, 892.

28. In addition, donatio mortis causa was held to be a trust raised by operation of law. Upon the death of the donor, his personal representative will hold, as trustee, the legal title to the gift for the donee; see Duffield v Elwes (1827) 1 Bli (NS) 497, 543.

29. There are 3 requirements of a donatio mortis causa:

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

(2) The donor must have delivered to the donee the subject-matter (in the case of a chose in possession) or the indicia of title (in the case of a chose in action) of the gift, or transferred to him the means of getting at that subject-matteror indicia of title, e.g. delivering a key, like car keys, or a key to a box containing the indicia of title, intending to part with dominion over the gift;

(3) The gift must be such as to be absolute and complete only on the donor’s death so that it is 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 seriously ill.

(See para. 105 of Luk Hoi Tong, where A. Cheung J cited the legal principles elucidated on p. 276 of Hayton and Marshall, Commentary and Cases on the Law of Trust and Equitable Remedies (11^th Ed.))

The Judgment of the Trial Judge

8.  After a 3-day trial, the trial judge handed down her judgmenton 20^th July 2011.   Having considered the evidence as a whole, she found that the Deceased during her lifetime hadindeed said something to Madam Kong and had givenher keys to the rooms in Unit 6B (Madam Kong already had the door key to Unit 6B before that) and keys to the drawers, outdateddocuments of Citibank, the seal of the Deceased, and the key to the Bank of East Asia safe deposit box, inside which there were the title deeds of Unit 6B and the passbook of the Bank of East Asia savings account.

9.  In respect of the aforesaid item (4) of the Properties, that is, thedeposit of the amount of $1,000,000 odd in the Bank of East Asia, the trial judge, having considered the evidence as a whole, found that based on what the Deceased had said to Madam Kong and the fact that she was given the key to the Bank of East Asia safe deposit box inside which the passbook of the Bank of East Asia savings account was kept, the Deceased had given the deposit in the Bank of East Asia to Madam Kong as a gift under the legal principles of donatio mortis causa.

10.  In respect of the aforesaid item (3) of the Properties, that is, thedeposit inthe amount of about $128,000 in Citibank, the trial judge was of the view that the Deceased did not give Madam Kong the passbook of that account or other indicia of title.  Therefore, she found that Madam Kong could not get the deposit in Citibank.

11.  In respect of the aforesaid items (1) and (2) of the Properties, that is, Unit 6B and cash of $40,000 odd found inside the unit, the trial judge found that the Deceased haddelivered to Madam Kong the key to the Bank of East Asia safe deposit box in which the title deeds of Unit 6B were kept.  The trial judge also knew very well that the principles of donatio mortis causa were applicable to landed property (Sen v Headley [1991] Ch 425).

12.  However, as the evidence of Madam Kong showed that the Deceased’s intention was to stay in Unit 6B until she passed away and the Deceased had never indicated that she would give up Unit 6B before she died, the trial judge was of the view that this showed that the Deceased did not part with dominion over Unit 6B. Therefore, one of the requirements of donatio mortis causa was not satisfied (paragraph 46).

Appeal

13.  On 15^th June 2012, we granted leave forMadam Kong’s appeal out of time against the judgment of the trial judge.  The Secretary for Justice neither lodged a respondent’s notice nor a cross-appeal in respect of the judgment of the trial judge.

14.  In respect of the aforesaid item (3) of the Properties, that is, thedeposit inthe amount of about $128,000 in Citibank, Madam Kong has failed to put forward any grounds of appeal in her Notice of Appeal.  Therefore, we dismissed her appeal in respect of this item.

15.  In respect of the aforesaid item (1) of the Properties, that is, Unit 6B, in our judgment, the Deceased’s intention to stay in Unit 6B until she passed away was not incompatible with the principles of donatio mortis causa, under which Madam Kong, the donee, in any event, must wait until the death of the deceased, the donor, before her absolute title to the property will become effective.  Therefore, the Deceased’s intention to stay in Unit 6B until she passed away was not incompatible with the principles of donatio mortis causa. What is most important is that the key to the safe deposit box inside which the title deeds of Unit 6B were kept was given to Madam Kong.  Consequentlythe Deceased could not further transfer the unit to others, and therefore she had parted with dominion over the property.

16.  The above analysis is consistent with a recent English High Court case.  In Vallee v Birchwood (2013) 16 ITELR 305, CV, the adopted daughter of the deceased, returned to England from overseas to visit him.  The deceased told her that he did not expect to live much longer and might not be alive when she came back again and that he wanted her to have his house on his death.  He also gave her the door key and the title deeds to the house.  After a comprehensive examination ofthe legal principles ondonatio mortis causa, Deputy Judge Jonathan Gaunt QC found that the deceased’s continued enjoyment of the house for 4 months (until he died) did not mean that the legal principles of donatio mortis causa must be inapplicable.  He found that (paragraph 37),

“A gift by way of donatio does not become effective until the death of the donor, so the property remains both in law and in equity the property of the donor. There seems to be no reason why acts of continued enjoyment of his own property should be regarded as incompatible with his intention to make a gift effective on his death.”

17.  Based on the reasonsset out above, we are of the view that, with respect, the trial judge’s analysis in paragraph 46 of her judgment was in error.  Having taken the context of her judgment, including her findings on facts, into consideration, in our judgment, had there not been the aforesaid error, the trial judge would have found that item (1) of the Properties fell withindonatio mortis causa.  Therefore we allowed the appeal of Madam Kong in respect of this item of the Properties.

Formality of Property Transfer

18.  As far as the formality of property transfer is concerned, in Vallee v Birchwood, the judge, after analyzingthe general legal nature of donatio mortis causa, had this to say (paragraph 12),

“A donatio mortis causa is a present gift which remains conditional until the donor dies. It can be revoked in the meantime. Until the death, the gift is inchoate. It gives rise to a constructive trust, which gets round the formal requirements for the transfer of land and the creation of trusts of land. If the donor effectively transfers title to the donee, the gift will become unconditional on the donor’s death; if, however, it is revoked in the meantime, the donee holds on trust for the donor. If title has not been effectively transferred, the donor’s personal representatives will hold the property on trust for the donee and can be compelled to transfer it to him”.

19.  In view of the aforesaid analysis, in our judgment, the personal representative has beenholding the property of Unit 6B on trust for Madam Kong on the death of the Deceased.  If necessary, we can make a vesting order requiring the personal representative to sign a vesting assignment in favour ofMadam Kong.  The personal representative is to haveliberty to apply.

20.  Regarding item (2) of the Properties, which is the cash of $40,000 odd found inside Unit 6B, there is no evidence to show that the Deceased had explicitly parted with her dominion over this sum of cash as she could use it at any time before her death (Sen v Headley p 431).  Nor did Madam Kong raise this issue in the grounds of appeal.  Therefore, we uphold the original decision on item (2) of the Properties.

Madam Kong’s new claims

21.  After we had granted her leave toappeal out of time, Madam Kong put forward some new claims in December 2012saying that the Deceased while alive had also given her properties inside the Hang Seng Bank safe deposit box, which contained a passbook of a Hang Seng Bank savings account, a passbook of a Wing Lung Bank savings account, 26 gold ingots and 2 rings.

22.  Madam Kong made an application to us asking us in this appeal to find also that these properties were also given to her by the Deceased as donatio mortis causa. However, the Court of First Instance did not make any findings of facts on these claims made by Madam Kong regarding these properties.  Therefore, we cannot deal with these new claims in the appeal, and accordingly, the summons she filed on 3 July 2013 was dismissed.

Costs

23.  Finally, we have heard submissions from the parties on costs.  We will not interfere with the order made by the trial judge on the costs of thetrial.  As far as the costs of the appeal is concerned, although Madam Kong’s appeal on Unit 6B is allowed, her appeal on the cash found inside Unit 6B and the deposit atCitibank, and her application before us for dealing with her new claims are dismissed.  In our judgment, the fair approach is that there beno order as to the costs of the Secretary of Justice and Madam Kong.  Regarding the expenses of the personal representative (including costs), in our view, theyshould be deducted from the estate, and, if there areinsufficient funds and it is necessary to do so, they may be deductedfrom the proceeds of the sale of Unit 6B.  This is because this case is distinguishablefrom Kelly v O’Connor [1917] IR 312 in the sense that Madam Kong needed the intervention of the personal representative before she could obtain the full title of Unit 6B.  The parties have liberty to apply for directions in this regard.

Translated by the Judgment Translation Unit of the Judiciary and vetted by P. Y. Lo, Barrister-at-law