Tinsley

Milligan [1993]

WLR

126 House

of

Lords

The Claimant and Defendant were lovers. Together they purchased a property from which they jointly ran a business by letting out the rooms in the house. It was agreed that the house was to be registered in the name of the Claimant alone. This was so that the Defendant would be able to fraudulently claim social security benefits which would go into their joint bank account. The relationship broke down and the Claimant sought possession of the house asserting full ownership. The Defendant sought a declaration that the property was held on trust for both of them in equal shares. The Court of Appeal applied the public conscience test and held that it would be an affront to the public conscience to allow the Claimant to keep the whole interest in the house. The Claimant appealed to the Lords. Held: The House of Lords rejected the public conscience test as it was inconsistent with previous authorities and gave too much discretion to the court. They applied the reliance principle; the Defendant did not have to plead the illegality to succeed, it was sufficient that she had contributed to the purchase price and there was a common understanding that they would own the house equally. Lord Brown Wilkinson:

"the consequences of being a party to an illegal transaction cannot depend...on such an imponderable factor as the extent to which the public conscience would be affronted by recognising rights created by illegal transactions." Lord Goff:

"There is no trace of any such principle forming part of the decisions in any of the cases in question. It follows that in my opinion, on the authorities, it was not open to the majority of the Court of Appeal to dismiss the appellant's claim on the basis of the public conscience test invoked by Nicholls LJ"

Tribe v Tribe Facts The plaintiff was concerned that he may have become liable for dilapidations on business leases, the landlords of the premises concerned having served schedules of dilapidations requiring him to carry out substantial repairs. Accordingly, he transferred his shares in a family company to the defendant, who was one of his sons and the director of the company, as a means of safeguarding his assets. The illegal purpose of the transfer was to deceive the plaintiff's creditors by creating an appearance that he no longer owned any shares in the company. In the event no repairs were carried out, because of negotiations between the plaintiff and the landlords of the properties. The plaintiff then wished to restore the position to that existing prior to the claims for repairs being made, but the defendant refused to retransfer the shares. Decision The Court of Appeal allowed the plaintiff to advance evidence to rebut the presumption of advancement, where the fraud had not actually been carried out. Note The decision does not apply where the fraud has been carried out, and dicta in Tinsley v Milligan [1994] 1 AC 340 suggest that evidence of the fraud cannot there be used to rebut the presumption. Note however that Tinsley v Milligan actually concerned a case where there was no presumption of advancement, but the fraud had been carried out. In other circumstances (apart from where a fraud has been perpetrated), where the presumption applies it can, of course, be rebutted, for example if a wife is allowed to draw cheques on a joint banking account for the convenience of the husband, perhaps because the husband is ill, as in Marshal v Crutwell (1875) LR 20 Eq 328. Clearly in such a case there is no intention to make a gift to the wife, unlike for example Re Figgis [1969] 1 Ch 123, where an otherwise similar arrangement on a joint account was not merely for convenience. The presumption was rebutted in Tribe v Tribe, and McGrath v Wallis. It also appears that bank guarantees, for example where a husband guarantees his wife's overdraft, do not attract the operation of the presumption, but that ordinary rules of contract apply: Anson v Anson [1953] 1 QB 636.

Are constructive trusts institutional or remedial? Denning MR sought to develop what he called a constructive trust of a new model in Eves v Eves. The existence of a fiduciary relationship wasnt required to find such a trust: instead one would be imposed whenever justice and good conscience require itit is an equitable remedy by which the court can enable an aggrieved party to obtain restitution Denning in Hussey v Palmer. The main areas in which the new model constructive trust has been used are in disputes over the home & the enforceability of contractual licences as in Binions v Evans.

2 objections to the new model constructive trust: 1) To look at a constructive trust as a remedy & not as a substantive institution is wrong because, even though constructive trusts have always been remedies in one sense, they have also been substantive trusts because the property is trust property and therefore if the trustee becomes bankrupt the beneficiaries take priority over the trustees creditors. 2) The idea of imposing a constructive trust whenever justice requires leads to uncertainty. Mahon J observed in the case of Carly v Farrelly. No stable system of jurisprudence can permit a litigants claim to justice to be consigned to the formless void of individual moral opinion.

The new model const. trust was firmly reject by CA in Halifax Building Society v Thomas and Re Polly Peck international plc(no.2). However, it may abe been given a new lease of life by the speech of Lord in Thorner v Major. This debate is fundamentally about whether a const. trust should be tied to equitable principles, albeit functioning as a remedy in one sense as in Boardman v Phipps or if it should simply be a general remedy, taking its place alongside damages and injunctions.

The evolution of the presumption of advancement in Hong Kong

The presumption of advancement has been criticised around the common law world as anachronistic and discriminatory; however, in Hong Kong, it is being developed as a useful judicial tool to determine the intent behind transfers of property.
Posted by LexisNexis

A presumption is a conclusion or inference as to a fact in issue drawn from other facts accepted as true. The presumption of advancement is an inference based upon societys expectations as to the intention behind a transfer of property between those in a close family relationship. As such, the presumption of advancement has been criticised around the common law world as anachronistic and discriminatory. In some jurisdictions it has been restricted. In the United Kingdom, it has been abolished. However, in Hong Kong it is being developed to feel the pulse of the society in line with its traditional purpose, as a useful judicial tool of last resort to determine the intent behind transfers of property where there is little or no credible evidence: see Lee Tso Fong v Kwok Wai Sun [2008] 4 HKC 36 at 43 per To DJ. The presumption of resulting trust and the presumption of advancement The presumption of resulting trust arises when there has been a voluntary transfer of property or voluntary contribution to the purchase of property, and where it is unclear as to the intention of the transferor or contributor: Lam Ping Wong v Ho Chi Ha [1987] 3 HKC 544. In these circumstances, equity will presume that the transferor/contributor intended to retain his/her beneficial interest in the property. Therefore, the legal owner holds the property on resulting trust for the transferor or on resulting trust for himself/herself and the contributor in proportion to the contributions made to the purchase price. The presumption of resulting trust applies to real and personal property: Commissioner of Estate Duty v Tse Hong Hung [1991] 1 HKC 46. The presumption of resulting trust is rebuttable by evidence that a gift or loan was intended, or by the presumption of advancement:Lo Leung Shi v Lo Lim Yeuk [1912] 7 HKLR 6. Although the presumption of advancement originally prevented the presumption of resulting trust from arising, it is now categorised as a sub-rule of the general presumption of resulting trust. If the parties are within a recognised category of family relationship, equity will presume that the transfer or contribution was a gift intended to advance the recipient in life because of the natural consideration of blood and affection: Grey v Grey (1677) 2 Swans 594 at 598 per Lord Nottingham. The categories of family relationships recognised as giving rise to the presumption of advancement have traditionally been limited to a father to his child, an adult male to those to whom he is in loco parentis, a husband to his wife, and a fianc to his fiance. The presumption of advancement is itself rebuttable by evidence that a gift was not intended: Chan Lan v Shing Kei[2008] HKCU 1479. The court first seeks evidence of the intent of the transferor or contributor at the time of transfer. Thus, the rule in Shephard v Cartwright [1955] AC 431 provides that acts or declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence, either for or against the party who did the act or made the declaration; but subsequent acts and declarations are only admissible in evidence against the party who made them. However, the rule does not exclude testimony before the court as the court may weigh the credibility of such testimony: Ip Man Shan, Henry v Ching Hing Construction Company Ltd (No 2) [2003] 1 HKC 56 at 317. If there is no reliable evidence, perhaps because one or all of the parties to the transaction have died, the evidence is tainted with illegality or the witnesses are all plainly self-serving and unreliable, then the longstops of the presumptions can come into play. In such cases, gratuitous transfers or contributions involving close family members may result in a battle of competing presumptions: Cheung Lily v

Commissioner of Estate Duty [1987] 3 HKC 307. The burden of proof in this battle follows the general principle that he/she who asserts must prove. Thus, the legal burden is upon the party seeking to show that beneficial ownership differs from legal ownership. However, the plaintiff need only bring evidence of a voluntary transfer or contribution to establish the presumption of resulting trust. The legal owner then faces an evidential burden to rebut the presumption. This may be done by adducing evidence that consideration was paid, that a gift was intended, that there was another purpose to the transfer or that the transferee is within the recognised categories of advancement. If the presumption of resulting trust is rebutted by the presumption of advancement then the legal burden is on the plaintiff to displace the latter with an evidential burden to adduce evidence to support this, for example, evidence that the transfer was a loan or trust: Lee Tso Fong v Kwok Wai Sun [2008] 4 HKC 36. Common law restrictions Traditionally, the presumption of advancement did not apply to transfers between a mother and child as the presumption derived from a time when a married woman had little or no right to own property independently, and, as Jessel MR stated in Bennet v Bennet (1879) 10 Ch D 474, there is no moral legal obligation ... no obligation according to the rules of equity ... to provide for her child. Similarly, the presumption did not apply as between a wife and husband because the wife was under no obligation to support her husband (Re Young, Trye v Sullivan (1885) 28 Ch D 705), or between a child and parent because fathers are bound to provide for their children, but children do not provide for their fathers (Grey v Grey (1677) 2 Swans 594). The possibility of a presumption of advancement between cohabitees was dismissed by Lord Eldon in Rider v Kidder (1805) 10 Ves 360 because as the couple was standing in no relation to each other, then no question of advancement could arise. More recently, in Windeler v Whitehall [1989] FCT 268 at 269 Millett J (as he then was) stated: "English law recognises neither the term nor the obligation to which [cohabitation] gives effect. In [England], a husband has a legal obligation to support his wife even if they were living apart. A man has no legal obligation to support his mistress even if they are living together. Problems with the presumptions The usefulness of the presumption of resulting trust has declined in the UK in recent years. In Lohia v Lohia[2001] WTLR 101 the court held that s 60(3) of the Law of Property Act 1925 (UK) abolished the presumption of resulting trust for voluntary conveyances of property. The usefulness of the presumption of resulting trust has also waned in the familial context while the doctrine of the common intention constructive trust has grown after the decision of the House of Lords in Stack v Dowden [2007] 2 AC 432. However, the presumption of resulting trust remains in Hong Kong. There is no s 60 of the Law of Property Act equivalent in the Conveyancing and Property Ordinance (Cap 219). Thus, a voluntary conveyance of land with no declaration as to whose use it was made will give rise to a presumption of resulting trust. Stack v Dowden is also of limited effect as s 9 of the Ordinance provides that when property is conveyed into joint names with no express declaration as to the nature of the tenancy then it is presumed that they hold it as tenants in common. There has been a debate on the usefulness of the presumption of advancement for the last 40 years culminating in the UK abolishing all categories of the presumption: s 199 of the Equality Act 2010 (UK). Canada has removed the presumption as between husband and wife, and parent to an adult child (Pecore v Pecore [2007] 1 SCR 795) and New Zealand has abolished the presumption for spouses (s 4

of the Property (Relationships) Act 1976). Criticism has focused on the presumption being anachronistic and discriminatory. Such criticism is hard to rebut as the traditional presumption of advancement is undoubtedly a product of a bygone age, traced to Lord Nottinghams decision in Grey v Grey which itself is based upon an earlier common law principle. The traditional categories of advancement are discriminatory as they all concern transfers from, or contribution by, men. However, if the presumption is developed in line with social norms then it is not anachronistic and discrimination may be ameliorated or removed. In Lee Tso Fong, To DJ stated (at 42): "I must not forget that the law is a living thing. It evolves with time and with changes in socio-economic conditions. Unlike the presumption of resulting trust, where the law imputes a common intention between the parties when there was none, presumption of advancement is a rule of evidence. It infers an intention which, according to human nature or human behaviour, must have been what was in the contemplation of the parties at the time of the relevant transaction. Human nature or human behaviour is a reflection of the social norm which changes with time and with socio-economic conditions. ... Where the changes are so substantial, a stage may be reached when the basis on which the inference of common intention is to be drawn no longer exists or a new stage has been set for inference of some different intentions to be drawn as a matter human nature or human behaviour under the prevailing socio-economic conditions. When this occurs, the law has changed. In Hong Kong the presumption of advancement has thus been developed in line with social norms to remain a useful evidential tool. Advancement in Hong Kong In considering the traditional family categories of advancement, the courts of Hong Kong have confirmed that they are relevant because they reflect the presumptions of society. Thus, in Tam Chiu Kam and Tam Lap Shun, Administrators of the estate of Shum Tak Hing, deceased v Chui Yan Tai [1997] HKCU 28 Wooley DJ noted that although the father to child presumption is an old element particular to the English common law, it sits well with traditional Chinese family obligations. Similarly, the presumption of advancement between a man and those to whom he is in loco parentis is of particular relevance in Hong Kong because of the support of extended family. Thus, in Wong San Mui v Ha Pa Yang [1996] HKCU 215 because the grandfather had been the sole supporter of the extended family he was in loco parentis to his grandson; therefore, a purchase in the names of the grandfather and grandson was subject to the presumption. In Re Silkease Investments Ltd (Sze Ka Shuen v Silkease Investments Ltd) [2007] HKCU 2100, Kwan J held that the presumption applied to the stepson because the stepfather, even though he had been addressed as uncle, had been in loco parentis. Furthermore, although it was also held in Wong San Mui, following Bennet v Bennet, that a grandmother could not be in loco parentis as the presumption did not apply to mothers, more recent developments, discussed below, seem to support the presumption applying to a woman in loco parentis. In Hong Kong, discrimination against men has been noted with the presumption from husband to wife being much weakened: Cheung Lily v Commissioner of Estate Duty [1987] 3 HKC 307. This should also apply to the presumption between engaged couples. Use of the spousal presumption has also decreased because of the wide powers of the court to reorder property rights on divorce under the Matrimonial Proceedings and Property Ordinance (Cap 192). However, the presumption was applied in Lion Will Investment Ltd v Triple Will Ltd [1992] 2 HKC 430, and more recently evidence was accepted to rebut a

gift between husband and wife in Ko Sha Lam v Kei Fong [2007] HKCU 1041. Of course, if the spousal presumption were reciprocal then it would not be discriminatory. The English authorities have clearly identified the presumption applying to engaged couples: Moate v Moate[1948] 2 All ER 486. In Mossop v Mossop [1988] 2 All ER 202, s 2 of the Law Reform (Miscellaneous Provisions) Act 1970 (UK) (similar to s 24 (1) of the Law Amendment and Reform (Consolidation) Ordinance (Cap 23)) was interpreted as confirming that the presumption of advancement operates between fianc and fiance. However, Halsburys Laws of Hong Kong cites, at [400.111], Au Keong v Chung Lau Hoi [1991] HKCU 36 as authority that the presumption does not apply to this category of relationship. This seems dubious authority as there was no need for Nazareth J to consider the presumption. There was clear evidence of the intention of the 62 year old plaintiff to make a gift of the purchase price of a flat to the 29 year old prostitute he had agreed to marry. Nazareth J (at 17) mentioned in passing the presumption of resulting trust not applying when a transferee is a wife or child of the transferor. As Nazareth J did not indicate those to whom the transferor was inloco parentis, it seems unlikely that this was intended to be a definitive list of accepted categories and the interpretation in Mossop would apply in Hong Kong. Developments in Hong Kong In response to social expectations, Hong Kong courts have also recognised a presumption of advancement in additional categories of relationship: a mother to her child; and a man to his concubine or his de facto wife. Mother to her child In Hong Kong, the extension of the presumption to transfers between a mother and her child has been a gradual development in the law. Judges have preferred to consider the presumption of resulting trust rebutted with the slightest evidence rather than rely on the presumption of advancement: Tam Chiu Kam and Tam Lap Shun, Administrators of the Estate of Shum Tak Hing, deceased v Chui Yan Tai [1997] HKCU 28. In Watson v Smith [1998] 3 HKC 461, the Court of Appeal considered the mother and child presumption. Godfrey JA, relying on Bennet v Bennet, stated: ... since there is no equitable obligation on a mother to advance a daughter, there is no presumption of advancement when a mother makes a purchase of property in the name of her child .... This was followed in Cheung Cho Kam Sindy v Cheung Yuet Ying Rose [2007] HKCU 1184. However, in Lee Tso Fong v Kwok Wai Sun [2008] 4 HKC 36, To DJ stressed the changes in attitudes to equality worldwide, referring to Mrs Margaret Thatcher becoming Prime Minister of Great Britain and the possibility of a woman president of the United States. To DJ also noted the development of the law in other common law jurisdictions, in particular the Supreme Court of Prince Edward Island, Canada, in Dagle v Dagle Estate (1990) 70 DLR (4th) 201, and the Court of Appeal of New South Wales in Brown v Brown (1993) 31 NSWLR 582. Both decisions doubted the modern relevance of Bennet v Bennet and approved extending the presumption to mother and child. To DJ thus chose not to follow Watson v Smith, clarifying that the Court of Appeal had not had the benefit of these authorities to consider. Thus, Bennet v

Bennet was out of date and a mother to child presumption of advancement should apply. The decision was followed in Ha Yuet Chi v Yeung Yiu Keung [2010] HKCU 2428. More recently, in HSBC Private Trustee (Hong Kong) Ltd v Ho Yuen Ping Dorothy [2011] HKEC 814, Coleman DJ commented (at [50]-[51]): "There is usually said to be no presumption of advancement between mother and daughter (though I wonder whether in an appropriate case that principle might fall to be tested against modern views as to equality and non-discrimination) ... the defendant sought to rely on a presumption of advancement arising because the Deceased stood in loco parentis to her. I reject those assertions on the evidence ... As a result, there is no need for me to delve further into the law relating to presumptions of advancement (though I might point out that I would see at least extreme difficulty in any independent woman in her mid-50s asserting such a presumption as being even capable of arising as a matter of law). Coleman DJ did not consider Lee Tso Fong as the claim that the defendants deceased aunt was in loco parentis and was merely part of the shifting sands of the defence and quickly dismissed. The more important and ultimately decisive issue was whether the defendant had exercised undue influence over her aunt to induce transfers of HK$58 million. A man to his concubine or his de facto wife The political and social history of Hong Kong has caused some confusion regarding relationships that can give rise to the presumption. The Chinese customary status of a concubine is defined in s 14 of the Legitimacy Ordinance (Cap 184) as a union of concubinage, entered by a male partner and a female partner before 7 October 1971, under which the union of the female partner has, during the lifetime of the male partner, been accepted by his wife as his concubine and recognised as such by the family generally. In Li Hung Chan v Wong Woon Heung (alias Wong Yuen) (1950) 34 HKLR 213 (at 226) Williams ACJ commented: ... any presumption in favour of a wife or child would apply in the present circumstances to the defendant as concubine, for the plaintiff has admitted his moral obligation to support her. However, as the status or rights of concubine cannot be lawfully acquired after 7 October 1971 (s 5 of the Marriage Reform Ordinance (Cap 178)), the possibility of this relationship being contended in future litigation to give rise to the presumption of advancement is fast diminishing. As it has not been unknown for a man married on the mainland under Chinese custom to come to Hong Kong alone and subsequently marry again according to the law of Hong Kong, it has been necessary for the courts to consider the presumption with respect to de facto or secondary wives. Although the term de facto wife has been criticised as obfuscatory it was used and accepted as giving rise to the presumption of advancement in the Court of Final Appeal in Cheung Pui Yuen v Worldcup Investments Inc [2008] HKCU 1669. Madame Chin had not established she was either a wife or a concubine, and, therefore, within one of the recognised categories giving rise to the presumption of advancement. However, Litton NPJ doubted the importance in determining intent of the legal pigeonhole into which a party is put as the reality was that she was the testators only wife. Accepting the categorisation of Le Pichon JA in the Court of Appeal of the relationship as a de facto matrimonial relationship, Litton NPJ continued (at [9]): Assuming this to be an accurate categorisation, it does not conclude the matter. The true question is whether such a relationship makes it more probable than not that a gift was intended.... Lord Scott of Foscote NPJ concluded (at [44]) that Madam Chin, although described as a concubine in the pleadings, was a secondary wife and that: I can see every reason why the evidential presumption of

advancement should apply; and I can see no merit whatever in the contention that a resulting trust ... should be presumed. The courts application seems in line with s 2 of the Inheritance (Provision for Dependants) Ordinance (Cap 481), which provides that a husband or wife in relation to a dead person includes a person who in good faith entered into a void marriage with the deceased. The presumption of advancement may therefore be applied to husbands and legally recognised wives, concubines, and de factos or secondary wives. However, the presumption will not apply to those who merely cohabit (Lion Will Investment Ltd v Triple Will Ltd [1992] 2 HKC 430), the important factor being that the nature of the relationship is akin to that expected of a legal marriage and treated by the parties as such. As Muttrie DHCJ stated, in Lim Por Yen v Highfit Development Ltd [2003] HKCU 1382, with regard to a loan between parties where their marital status was disputed (at [14]): There is no magic in a marriage, in whatever tradition it may have been contracted. There are men who, having vowed in a Church of England marriage ceremony With all my worldly goods I thee endow, or its modern equivalent will not give their wives a cent. There are men who will give their mistresses a fortune and never expect it back. No doubt the same applies in all cultures and religions. Restrictions in Hong Kong Familial relationships which have not given rise to the presumption of advancement include: parent to their childs fianc or fiance (Chan Lan v Shing Kei [2008] HKCU 619); transfers to a child-in-law: Lee Tso Fong v Kwok Wai Sun [2008] 4 HKC 36; and transfers between siblings: Yue Shiu Ngam v Zen She Lin [1999] 1 HKC 823. Of course if the transferor has made themselves in loco parentis to the transferees then the presumption may apply: Lee Tso Fong v Kwok Wai Sun [2008] 4 HKC 36. Another criticism of the presumption considered in Hong Kong is that the parent-child presumption should not apply to adult offspring. Thus, in Yau Kwong-Chiu v Yau Kwong-Ha [2001] HKCU 147 (CA) it was noted that that the presumption was less likely if the child is a financially independent adult, as it is common for aged parents to put funds into a joint account with the child for administrative convenience. In Canada, this has been the justification for the presumption only applying to infant children: Pecore v Pecore [2007] 1 SCR 795. Interestingly, in Grey v Grey (at 600-1), Lord Nottingham noted that a married son who had already received a marriage settlement and so appears to be fully advanced and emancipated would not be the donee of further purchases by his father in his name: Ho Tak Ming v Chiu Ka Tsin [2003] HKCU 1397 per Lam J at [66]. Conclusion The criticism of the presumption of advancement has focused on it being anachronistic and discriminatory. It may seem ridiculous that the presumption of resulting trust and the presumption of advancement, derived from English mediaeval and Restoration common law solutions to problems in determining property interests, are in use today in Hong Kong. However, in Hong Kong the presumption is being developed to accommodate modern socio-economic realities. The presumption is recognised as a tool of last resort and may be rebutted by slight evidence that a gift was not intended. As there are very few restrictions on the admissibility of evidence in these cases, the presumptions are only raised when there is nowhere else to turn for evidence of the intent of the transferor.

The presumption of resulting trust was a development of equity in recognition of commercial transactions because equity is suspicious of gifts and tries to seek bargains: Pecore v Pecore (2007) SCC 17 at 24. It was presumed that a businessman would always intend to have his property returned or retain an interest in it. Similarly, equity prefers the tenancy in common for commercial transactions as a vindication of initial property rights rather than joint tenancy and the gamble of the tontine. Equity adopted the presumption of advancement to avoid the presumption of resulting trust in recognition of the special nature of familial relationships as opposed to commercial arrangements. In Hong Kong, it is quite common for a registered company to be used as a vehicle for the purchase of family property and for shares in that company to be held by family members even if they have made no contribution to the purchase. In such circumstances, determining beneficial interests relying on the normal commercial principles of equity may be inappropriate, as transactions between family members are not always subject to the same commercial considerations as transactions between strangers. Changing socio-economic circumstances in Hong Kong make appropriate use of the presumptions of resulting trust and advancement as useful as they have always been. For example, a hot property market makes it more common that adult children will require parental help in purchasing property. Without credible evidence of the intention of the parent at the time of transfer, perhaps because of the death of the parent or the breakdown of their relationship with the child, the presumption of advancement would reflect the natural consideration of blood and affection to advance children. If the circumstances are such that the child already has property or the parent is aged and merely required help administering their property then the court may take this into account to rebut the presumption. Although the presumption of advancement is clearly discriminatory in its application as between husband and wife, the recognition that the presumption applies as between a mother and her children removes discrimination against fathers. To eliminate discrimination, a reciprocal presumption that transfers from a wife to her husband as a gift could be developed if there is no clear evidence of intent. Alternatively, the presumption could be abolished as between a husband and wife but retained for transfers to dependent children. Hopefully, the judges of Hong Kong will continue to develop this useful evidential tool in line with socio-economic changes and the evolution of Hong Kongs common law.