When Family Gifts Turn into Legal Battles: How the Presumption of Advancement and Executor Duties Played Out in Cong v Shen
Jul 16, 2025The Supreme Court of New South Wales' decision in Cong v Shen (No 3) [2021] NSWSC 947 addresses complex issues surrounding the administration of estates, the role of executors, and the application of equitable doctrines such as resulting trusts and the presumption of advancement. This case provides valuable insights into the legal principles governing intergenerational wealth transfers and the obligations of executors in estate management. Court of Australia+2
Background
The dispute in Cong v Shen centered around the estate of the late Mr. Cong, who had children from both a former and a current marriage. The primary contention involved the beneficial ownership of certain properties and assets that were part of Mr. Cong's estate. Ms. Shen, the widow, claimed full ownership of specific properties, asserting that they were gifted to her by Mr. Cong during his lifetime. Conversely, Mr. Cong's children from his previous marriage argued that these assets were part of the estate and should be distributed accordingly.Svenson BarristerseLitigation
Legal Issues
The case raised several critical legal questions:
-
Resulting Trusts: Whether the properties in question were held on resulting trust for the estate or were valid inter vivos gifts to Ms. Shen.eLitigation+2eLitigation+2NSW Supreme Court homepage+2
-
Presumption of Advancement: Whether the presumption of advancement applied in favor of Ms. Shen, thereby negating the existence of a resulting trust.NSW Supreme Court homepage+2High Court of Australia+2eLitigation+2
-
Executor's Authority: The extent of an executor's authority to deal with estate assets before obtaining a grant of probate.NSW Supreme Court homepage
Court's Analysis
-
Resulting Trusts and Presumption of Advancement
The court examined the principles of resulting trusts, which arise when property is transferred to someone who has not provided consideration, leading to a presumption that the transferee holds the property on trust for the transferor. However, this presumption can be rebutted by the presumption of advancement, which applies in certain relationships, such as between spouses, where transfers are presumed to be gifts.
In this case, the court found that the presumption of advancement applied to the transfers from Mr. Cong to Ms. Shen, given their marital relationship. This presumption indicated that the properties were intended as gifts, thereby rebutting the presumption of resulting trust. The court emphasized that the presumption of advancement is a rebuttable presumption and can be displaced by evidence demonstrating a contrary intention.Taylor & Francis Online+2High Court of Australia+2Taylor & Francis Online+2eLitigation+1eLitigation+1
-
Executor's Authority Before Grant of Probate
A significant aspect of the case involved the actions taken by the executor before obtaining a grant of probate. The court referred to the decision in Deigan v Fussell, where it was held that an executor's authority to deal with estate assets arises upon the grant of probate, not before. However, the court in Cong v Shen acknowledged the complexities in this area, noting that there is divergence in judicial reasoning regarding the timing and extent of an executor's authority.NSW Supreme Court homepage
The court concluded that, while the executor's authority is generally recognized upon the grant of probate, certain actions taken before the grant may be validated retrospectively, depending on the circumstances and the nature of the actions. This nuanced approach underscores the importance of executors exercising caution and seeking legal advice when dealing with estate assets prior to obtaining probate.
Implications
The decision in Cong v Shen has several implications for estate planning and administration:
-
Clarification of Legal Presumptions: The case reinforces the application of the presumption of advancement in spousal relationships, highlighting the need for clear evidence to rebut this presumption when disputing the nature of property transfers.
-
Executor's Responsibilities: Executors must be aware of the limitations of their authority before obtaining probate and should avoid taking actions that could be challenged or deemed invalid.
-
Estate Planning Considerations: Individuals should ensure that their intentions regarding property transfers are clearly documented to prevent disputes and litigation among beneficiaries.
Conclusion
Cong v Shen (No 3) serves as a pivotal case in understanding the interplay between resulting trusts, the presumption of advancement, and the duties of executors in estate administration. It underscores the necessity for meticulous estate planning and the careful execution of duties by executors to uphold the intentions of the deceased and ensure equitable distribution among beneficiaries.
Contact the Shire Legal team if you have any questions.
Stay informed
Sign up to receive regular updates regarding changes to the law, Court decisions and other happenings of interest.
