In Nicholas Stewart Wood and David John Standish (as the joint trustees in bankruptcy of Karl Eric Watkin) v Kate Rebecca Watkin [2019] EWHC 1311 (Ch), trustees in bankruptcy sought to establish that a bankrupt (the Bankrupt) was the sole beneficial owner of three properties (the Properties), ostensibly purchased by him for his adult daughter. The High Court refused the application and held that the Bankrupt was not the sole beneficial owner of the Properties.

In considering the application, the Judge considered issues regarding the presumption of advancement. This article will focus on two main aspects: firstly, the scope and strength of the presumption of advancement, particularly to adult children financially independent of their parents, and secondly, whether liability under a mortgage used to fund part of the purchase price might be treated as a contribution giving rise to a resulting trust. It will further discuss the alternative claims brought under the Insolvency Act 1986 (IA) and the comments made by the judge regarding the written evidence advanced by the applicants.


The Bankrupt was a successful entrepreneur involved in a number of start-ups and listings on the UK stock market. The Bankrupt’s adult daughter described her upbringing to be extremely privileged.  She continued to receive a monthly allowance of £320, paid from the joint account of her parents (the Joint Account), until she started paid employment in 2007. The Bankrupt’s children were also able to invest in a number of companies in which he was involved. Any bequests, inter vivos gifts from family members and gains realised from such share sales were paid into the Joint Account.

The Properties were purchased in 2003, 2006 and 2007 and registered in the sole name of the Bankrupt’s adult daughter. The Properties were purchased using funds from the Joint Account, a mortgage advance and funds from a third party. There was no evidence that the Bankrupt was in financial difficulty at the time of any of the purchases.

The bankruptcy order was made in December 2012. The joint trustees in bankruptcy applied for declarations and other relief in respect of the Properties, claiming that the Bankrupt was the sole beneficial owner of such properties at all material times based on resulting trust principles. Alternatively, they claimed that that the transactions defrauded creditors pursuant to section 423 IA, or that the transactions were at an undervalue pursuant to section 339 IA. Issues concerning the strength and scope of the parent/child presumption of advancement arose.


In refusing the application, the Judge identified the current law in relation to the presumption of advancement and assessed whether liability under a mortgage used to fund part of the purchase price might be treated as a contribution giving rise to a resulting trust.

Scope and strength of presumption of advancement

The Judge first noted that the presumption of resulting trust is an important one, but that it could be displaced by a presumption of advancement whereby the intention of a gift is presumed if a father purchases a property in the name of child. However, this presumption may be further rebutted by contrary intention of the parties.

Three important observations as to the scope and strength of the presumption of advancement were made:

Firstly, the presumption is not limited to minor children, as suggested in Pecore v Pecore, 2007 SCC 17. The judge held that Pecore was merely obiter as the presumption in that case was not a necessary consideration due to the evidenced intention of the parties. Even if the decision was not obiter, it did not represent English law. Instead, the judge preferred the comments of Lord Neuberger in Laskar v Laskar [2008] EWCA Civ 347 to the effect that the presumption of advancement between parent and child may exist in relation to a child who is not a minor.

Secondly, the presumption is not only relevant to financially dependent children or situations where the evidence establishes that the parent is under an obligation to provide for the child, as suggested in Musson v Bonner [2010] WTLR 1369 and Purvis v Purvis [2018] EWHC 1458. Although financial dependence is a factor relevant to the strength of the presumption, the historic rationale for the presumption was based on parental affection as well as parental obligation. Whilst the presumption may be weaker and more readily rebuttable in cases of financially independent adult children, this does not mean it does not exist.

Thirdly, the judge rejected the submission that the strength of the presumption was ‘very weak’ in the modern age, holding that Shephard v Cartwright [1953] 1 W.L.R. 460 remained good law notwithstanding the obiter comments made in Lavelle v Lavelle [2004] EWCA Civ 223. The judge distinguished the factual matrix of matrimonial property in Lavelle from the present case, noting that the husband/wife and parent/child contexts will often differ in material respects. Courts should be slow to extrapolate the treatment of the presumption of advancement in the matrimonial context to the context of property transactions involving the parent-child relationship.

Rebuttal of presumption of advancement

The applicants failed to rebut the presumption of advancement that arose in favour of the adult daughter in respect of the properties purchased in 2003 and 2006. Little weight could be given to the evidence relied on by the applicants and the intention as inferred from the circumstances showed that the adult daughter was intended to be the sole beneficial owner of those properties.

The Properties were funded by three main sources: the Joint Account, a mortgage advance and (for the property purchased in 2006), a third party. The judge held that the payments made from the Joint Account were attributed to the Bankrupt and his wife on a 50-50 basis. Accordingly, the Bankrupt’s contributions from that account towards the purchase of the Properties were 10%, 5% and 13% respectively.

A presumption of advancement in favour of the adult daughter arose in relation to the properties acquired in 2003 and 2006 because she was still financially dependent on her parents at the time of acquisition. The purchases of the two properties in question were completed at timings and locations convenient to her and were consistent with the pattern of parental support she had received throughout her life. There was no plausible suggestion as to why the Bankrupt would have advanced the funds other than for the purpose of granting a gift to his daughter, given that it was inherently unlikely that he, a sophisticated wealthy businessman, would have wanted her, a graduate on starter salary, to be his trustee at that time. In fact, the judge observed that a trust “made no sense”, whereas beneficial ownership by the adult daughter did.

For the property acquired in 2007, the evidence clearly showed that the Bankrupt and his wife had not intended to retain any beneficial interest in the property. However, the Judge noted that a presumption of advancement would nevertheless apply if this conclusion was incorrect.

Whether liability under a mortgage is capable of giving rise to resulting trust

The judge held that the Bankrupt’s involvement in the mortgage loan should not be treated as a contribution to the purchase price of the property.

In principle, undertaking liability under a mortgage used to fund part of the purchase price of a property may be treated as a contribution giving rise to a resulting trust. However, the fact that one remains potentially liable to the mortgagee is insufficient to give rise to a beneficial interest in their favour (Carlton v Goodman [2002] EWCA Civ 545). Further, the mere guarantee of a mortgage is insufficient to give rise to a contribution to the purchase price that gives rise to a resulting trust.

On the facts, the evidence showed that the Bankrupt was only a party to the mortgage loan on one property and had merely assisted his adult daughter’s purchase of the property. Further, the mutual understanding between the Bankrupt and his adult daughter was that she was responsible for payment of mortgage instalments and that the Bankrupt was only acting as guarantor of the mortgage. The evidence showed that the daughter fulfilled her payment obligations by receiving rental income of the Properties into her own bank account, paying tax and financing the property outgoings. Even if a resulting trust was found, the presumption of advancement applies.

Insolvency Act claims

The judge rejected the alternative claim of the joint trustees in bankruptcy for breaches of section 423 and section 339 IA on the ground that there was no evidence that the Bankrupt contributed to the properties for the purpose of putting assets beyond the reach of creditors or otherwise prejudicing them, and that no undervalue was established.

It was further noted that it was inherently implausible that an individual with an annual income of the Bankrupt, amounting to £1.6 million, would conceal sums which were not even a small fraction of that income.

Written evidence

The applicants were criticised for having pursued a ‘confused and poorly evidenced primary case for little purpose’. The long-standing practice is that office holders bringing an application by application notice and witness statements must take proper steps to ensure that all non-privileged documents in their possession that were relevant to the issues raised by the application were exhibited to their supporting statements. If this practice is not honoured, there may be a need to give directions for pleadings and formal disclosure.


Cases in relation to the presumption of advancement are often difficult and involve lengthy litigation as the unique factual circumstances of each case must be considered. Woods v Watkins affirms the approach of the court paying close attention to the context of the case, such as whether an alleged intention or action makes sense in light of the parties’ respective positions and circumstances. This includes the parent’s financial circumstances and relationship with their children.

Further, whilst the presumption of advancement may be rebutted by contrary evidence, the judgment affirms that the presumption is not obsolete in modern times and is not restricted to minor children. A financially independent child is entitled to rely on the presumption, though it is more readily rebuttable and the threshold of proof required is inevitably higher. Ultimately, the intention of the parties as identified from the circumstances of the case is the paramount consideration.

Finally, documentary evidence, objectively provable facts and other forms of primary evidence are preferred over memories. It is important for firms and clients to rely on objective evidence as much as possible.

Joanna Caen
Joanna Caen
+852 2101 4167
Richard Norridge
Richard Norridge
+44 20 7466 2686
William Cheung
William Cheung
Senior Associate
+852 2101 4183