Analysis
T died intestate. D1, one of the administrators of T’s estate, purchased a property using estate funds to cover around 40% of the purchase price, without informing P, one of the beneficiaries of the estate. Soon after completion of the purchase, D1 repaid the money to the estate, with interest at a rate that he selected, labelling the transaction as a loan. Later, when the property’s value had increased, P became aware of D1’s actions and brought proceedings to recover the profit made by him.
Held
D1 was a fiduciary who had made a profit by the application of his principal’s money for his own benefit; the case did not concern a fiduciary taking advantage of the fiduciary relationship or putting himself in a position where his interest and duty conflicted. As such, when P discovered the true position, he had the right to elect whether to reject or affirm the transaction. He elected to affirm it. D1 had no right to label the transaction as a loan, nor to insist that his repayment of the money discharged his liability; that right belonged to the beneficiaries. The repayment was to be treated as an attempt to buy out the estate’s interest in the property, which was rejected by P.
Per Lord Millett NPJ, at paras [20] and [21]: “When [P] received the accounts and discovered the disbursement, he had the right to elect whether to reject or affirm it. Had he elected to reject it, he would have asked for the disbursement to be disallowed and would have disclaimed any interest in the Property by treating it as bought with D1’s own money. This would have produced a deficit in the estate account which D1 would have been obliged to make good had he not already done so… As the Property had substantially increased in value, however, [P] has naturally elected to affirm the transaction, ie to treat it as an authorised investment of the estate’s money in or towards the purchase of the Property for the benefit of the estate. This has prevented there from being any deficit in the estate account, for the amount of the debit (the disbursement) is matched by the credit (the value of the Property which it was used to acquire).”
JUDGMENT Chief Justice Ma: [1] I agree with the judgment of Lord Millett NPJ. Mr Justice Ribeiro PJ: [2] I agree with the judgment of Lord Millett NPJ. Mr Justice Fok PJ: [3] I agree with the judgment of Lord Millett NPJ. Mr Justice Chan NPH: [4] I agree with the judgment of Lord Millett …Continue reading "Tang v Tang & ors [2018] WTLR 1019"