In Graham-York v York ([2015] EWCA Civ 72, CA (Eng)) the English Court of Appeal looked at the approach to be taken to the valuation of an interest under a common intention constructive trust where title was in the sole name of one of the parties and there was no evidence of a common intention as to how the beneficial ownership was to be divided between the parties. Here a couple had co-habited for over forty years and had two children (one of whom was brought up by them and another by a relative). The man had provided nearly all of the family’s financial resources from the various businesses that he ran.

At first instance, the court found that there was evidence of a common intention that his partner (Miss Graham-York) should have an interest in the family home given her financial contribution to the family income before and at the time of the purchase of the property. The court also found that there was no express agreement as to the share that Miss Graham-York should have and that a 25% interest in the property would be a fair reflection of her financial and non-financial contributions over the years.

Miss Graham-York appealed against this finding. She argued that where there was no evidence as to a common intention concerning the size of her share, the court should take fairness as the guide to what they must reasonably be taken to have intended. Her initial and ongoing financial contributions, the length of the co-habitation and her contribution to the bringing-up of her daughter were each, she argued, factors pointing towards equal beneficial ownership ([18]).

Tomlinson LJ gave the principal judgment. He pointed to the joint judgment of Lord Walker and Lady Hale in Jones v Kernott as ‘the most authoritative modern guidance as to the proper approach in cases of this sort’ ([20]). While the search was primarily for the parties’ actual shared intentions, there were two situations in which this was not the case. The first of these was the situation in which the presumed resulting trust operated. The second, relevant here, involved cases, ‘where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared.’ Here, ‘the court is driven to impute an intention to the parties which they may never have had.’ (Jones v Kernott, [31]).

Tomlinson LJ went on to comment on the scope of the enquiry as to fairness in these circumstances. The court must do what is fair having regard to the whole course of dealing in relation to the property (Jones v Kernott, [51]). The court ‘is not concerned with some form of redistributive justice’; so, here, the abuse that Miss Graham-York had suffered during her long relationship was not a relevant factor (Graham-York v York, [22]).

There is no presumption of equality of interests in sole name cases, even where the other party has made a substantial contribution. (Graham-York v York [25]).The first instance judge had identified the appropriate legal principles and applied them correctly. Miss Graham-York’s appeal was dismissed.

Michael Lower

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Edwards v Kumarasamy ([2015] EWCA Civ 20, CA (Eng)) is a decision of the English Court of Appeal. Although the context is the English Landlord and Tenant Act 1985, it raises a general question as to when landlords must have notice of a defect before they can be in breach of their repairing covenant.

K granted a lease of a flat to E. K owned the flat but no other part of the building. K also had the benefit of certain easements over common parts including the entrance hall to the flats. E tripped over an uneven paving stone in a paved area just outside the entrance hall and injured his knee. He relied on the repairing covenant implied by section 11 of the Landlord and Tenant Act 1985. The Court of Appeal (Lewison LJ giving the main judgment) held that the paved area was part of the exterior of the building (and so within section 11) and that the easements granted to K gave him a sufficient interest for him to be liable for defects in the paved area under the terms of the covenant implied by section 11.

The question was whether K’s liability was conditional on E giving notice of the defect to K. Ordinarily, landlords are in breach of a repairing covenant as soon as a defect occurs and whether or not they have notice of it ([9]). The rule in O’Brien v Robinson, however, is an exception to this. In British Telecommunications plc v Sun Life Assurance Society plc ([1996] Ch 69), Nourse LJ explained the rule thus:

‘ … where a defect occurs in the demised premises themselves, a landlord is in breach of his obligation to keep them in repair only when he has information about the existence of the defect such as would put a reasonable landlord on inquiry as to whether  works of repair to it are needed and he has failed to carry out the necessary works with reasonable expedition thereafter.’

Here the implied repairing covenant imposed on K an obligation to keep the paved area in repair but the paved area did not form part of the demise. The crucial distinction for the rule in O’Brien v Robinson is whether the defect occurs in the demised premises. Since this defect was outside the demised premises, K was liable even though he had no notice of the defect.

Michael Lower

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In Channel Green Ltd v Huge Grand Ltd ([2015] 1 HKLRD 655, CA) C agreed to buy commercial property from H. The agreement contained a clause (clause 30) to the effect that the purchaser ‘shall not raise any questions / inquiries or refuse to complete or delay completion of transaction on the ground that there are any unauthorised additions, alterations or illegal structures on the Property’. There were defects arising out of the physical condition of the property. Stalls occupied areas designated for car parking under the terms of the Government Lease. Parts of shop premises were built on areas that the Government Lease stipulated should not be built upon. Despite the terms of the agreement, C raised requisitions about these matters and later failed to complete. The question was whether clause 30 prevented  C from raising these requisitions and from asserting that H could not give good title.

C argued that the effect of the clause was only to prevent it from objecting to unauthorised or illegal structures to the extent that they amounted to a breach of the Buildings Ordinance but not to the same problems considered as breaches of the terms of the Government Lease or the Deed of Mutual Covenant. The argument failed:

‘In our view, illegal structure simply means any structure erected against the law. The relevant illegality can stem from a breach of the Buildings Ordinance, it can equally stem from a breach of the terms of  the Government lease or the terms of the DMC.’ ([27], Lam V-P)

Applying Jumbo King the plain words of the clause prevented C from raising requisitions or objecting to the title on the grounds of the defects relied on ([39]). The fact that C knew of the problems at the time of the contract was part of the factual matrix and this made it even clearer that the clause prevented C from objecting to the defects ([40]). While Lord Hoffmann had spoken of an ovepowering principle that a vendor could not knowingly impose on a purchaser a seriously defective title, this was to be balanced against freedom of contract ([42] – [43]).

C had paid a 15% deposit and this was forfeited. C argued that the fact that the deposit was larger than the customary 10% meant that the onus was on H to justify it being treated as a deposit. This proposition was accepted ([50]) but H had provided the necessary justification. H had agreed to a four and a half month gap between contract and completion:

‘whether a higher deposit is reasonable in the circumstances of a particular case is a matter of fact and degree. In the present case, the Judge was clearly entitled to take account of the fact that the longer the completion period, the longer the vendor is at risk from the vicissitudes of the market and there is objective justification for a 15% deposit.’ ([56]).

Michael Lower

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In Lo Kau Kun v Cheung Yuk Yun ([2015] HKEC 316, CFI) a married couple bought a flat as joint tenants. P claimed that the property was held on common intention constructive trust in equal shares. D claimed that she was the sole beneficial owner. Deputy Judge Sakhrani referred to the statements in Stack v Dowden ([68] in Stack) and Jones v Kernott ( [51] in Jones) to the effect that where the legal title is in joint names and there is a question as to beneficial ownership equity follows the law (so that a legal joint tenancy gives rise to equal shares) but that it may be possible to show a contrary intention (the burden of proof being on the party seeking to establish this). P had paid the down payment. P and D were jointly liable under the terms of the mortgage and each had contributed to the mortgage payments. Crucially, there was a finding that the parties had discussed their intentions concerning the ownership of the property ([63]). The couple had agreed that the property was to be a family asset (to be held equally as a family asset according to P) ([64]). This (not the record of financial contributions) was determinative. The property was held on common intention constructive trust in equal shares ([66]).

D also argued that she had extinguished P’s title by adverse possession. P had left the property in 1993 after a violent argument and never returned ([77]). This argument failed since D was entitled to be in possession as co-owner. There was no evidence of the ouster that would be necessary for this claim to succeed ([81]).

Michael Lower

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In Mitchell v Watkinson ([2014] EWCA Civ 1472, CA (Eng)) the English Court of Appeal had to look at the application of the English equivalent of section 12(2) of the Limitation Ordinance. Section 12(2) provides that:

‘A tenancy from year to year or other period, without a lease in writing, shall, for the purposes of this Ordinance, be deemed to be determined at the expiration of the first year or other period, and accordingly the right of action of the person entitled to the land subject to the tenancy shall be deemed to have accrued at the date of such determination:

Provided that, where any rent has subsequently been received in respect of the tenancy, the right of action shall be deemed to have accrued on the date of the last receipt of rent.’

In this case, a father, having given land to his son, purported to grant a written periodic tenancy of it to trustees who held the tenancy on trust for an unincorporated association (a cricket club). Shortly afterwards, on 2nd October 1947, the father’ solicitors wrote to one of the trustees telling him that the land had been conveyed to the son but inaccurately stating that this had happened after the date of the tenancy. The club’s last payment of rent was made on 8th October 1974. The club, relying on the equivalent of section 12(2), argued that time began to run on that date and that they had acquired title by adverse possession twelve years later.

This analysis relied on the proposition that the trustees did not hold under the terms of the original written agreement but under a later implied periodic tenancy. The club’s argument was that it did not hold the property under the terms of the written agreement with the father but by virtue of an implied periodic tenancy based on the payment and acceptance of rent to the son’s agents once it had been pointed out that he was the owner of the land. Thus, it was argued, the periodic tenancy was ‘without a lease in writing’ and section 12(2) applied. This succeeded.

The owner (the son’s widow) argued, among other things, that the original written lease created a tenancy by estoppel which was to be treated as having been assigned to the son. This argument failed. The correct view was that the tenancy by estoppel had been impliedly surrendered on the grant of the new implied tenancy by the son([37]).

The owner also contended that the result of the letter of 2nd October 1947 and the subsequent conduct was to give rise to an estoppel by convention so that the tenants were estopped from denying that they held under the terms of the written agreement granted by the father. This failed because the letter of 2nd October 1947 could not be the basis for a common assumption that the tenants held under the terms of the written agreement; the parties might equally plausibly have understood that a new implied tenancy came into being (and almost certainly gave no thought to the distinction) ([55]).

Michael Lower

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In Lok Tin Choi v Lai Kwai Lin ([2015] HKEC 389, CA) a mother held land in the New Territories on trust for her son. The land included two lots that had been resumed by the Government. The mother claimed to have an interest in the compensation money. This was on the basis of Chinese law and custom requiring her son to maintain his mother for her life and to provide dowries (if applicable) for the two unmarried daughters.

Cheung JA gave the principal judgment. Section 13 of the New Territories Ordinance allows the court to recognise and enforce any Chinese custom or customary right affecting land in the New Territories. The definition of ‘land’ in section 2 of the Ordinance does not cover compensation received on the resumption of land and so the court had no power to enforce any Chinese custom or customary right said to affect the compensation money. The cases that held that compensation received in respect of Tong land remained subject to the trust were not authority for the proposition that the compensation was equivalent to land. Cheung JA refrained from comment on the Chinese law and custom that had been invoked.

Michael Lower

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In United Bright Limited v Secretary for Justice ([2015] HKEC 438, CA) the Court of Appeal (Lam V-P delivering the judgment of the Court) had to deal with a dispute concerning the construction of a letter modifying restrictions contained in the Conditions of Sale. The Conditions of Sale (entered into in 1939) allowed only ‘European type houses’ to be built and contained a ‘DDH’ clause:

‘The design of the exterior elevations and the disposition and height of any building to be erected on the lot shall be subject to the special approval of the Director of Public Works and in no case may any building to be erected on the lot exceed 2 storeys.’

In 1957 the Government issued a Letter of Modification that allowed flats to be built instead of houses. This modification was said to be subject to conditions:

‘(a) Payment of an additional premium amounting to $33,550.00 for each Section within 14 days on demand.

(b) Buildings to comply with the following coverage limitations:

3 storeys over car port – 55% of lot area

4 ” ” ” ” – 45% ” ” ”

5 ” ” ” ” – 40% ” ” ”

(c) Car parking to be at the rate of not less than 1 car per flat.

(d) Buildings to be in accordance with the provisions of the Buildings Ordinance and plans to be submitted to the Building Authority for approval in the usual way.’

United Bright wanted to build a 37 storey block of flats with car parking beneath and associated facilities. It contended that the Letter of Modification permitted this development. The Government contended that the Letter of Modification only permitted a 5 storey development and that the DDH clause remained in full operation. Thus, the question concerned the proper construction of the Letter of Modification.

The Government succeeded:

1. Defining the relevant ‘context’ against which the relevant terms should be considered is central to contractual interpretation (Fully Profit (Asia) Limited v Secretary for Justice) ([8]). The relevant context included the Conditions of Sale that were modified ([9] – [12]). In terms of the letter itself, it was to be noted that it did not expressly release the lessee from the need to obtain approval under the DDH clause ([14]).

2. In Ying Ho Co Ltd v Secretary for Justice, the Court of Final Appeal had decided that the DDH clause in that case was an independent restriction from other more detailed restrictions in the Conditions of Sale. There was no reason to take a different view of the status of the DDH clause in the present case ([15] – [19]).

3. The fact that the Building Ordinance had been amended in 1955 (shortly before the Letter of Modification) allowing buildings of more than 5 storeys to be built and conferring powers to disapprove plans) was not part of the relevant context. The Government’s powers under the Building Ordinance and under the Conditions of Sale were separate from each other and had different objects even if administered by the same Department (Hang Wah Chong Investment Ltd v AG) ([20] – [24]).

The Court of Appeal reached its decision (in favour of the Government) based on the above considerations([27]).

The court went on, however, to look at the admissibility of correspondence around the time of the application.The lessee applied for the modification in 1956. There was, however, earlier correspondence between the lessee’s solicitors and the Government  referring to an earlier (1955) application for permission to build ‘not more than four flats on each of the six sites.’ The 1956 application was a renewal of the 1955 application. Should the correspondence be taken into account when interpreting the letter? The developer objected that the correspondence was a subjective statement of intent or merely reflected the state of the negotiations at a given moment in time ([31]). This objection failed. It was legitimate to look at the correspondence in order to clarify the subject matter of the application ([33]). The letter of modification referred to the application and so invited a reading together of the two documents. The correspondence cast light on what had been applied for (permission to erect flats and not houses) ([33] – [34]).

Evidence of the Government’s internal calculations of the premium was also admissible since the basis of the calculation was common knowledge among the relevant professional community at the time. The fact that the specific calculations were not shown to the lessee did not, therefore, mean that the calculation was inadmissible ([35] – [40]).

Finally, the correspondence was admissible even though it was being used to interpret a document registered at the Land Registry. The letter of modification regulated the rights and duties as between lessor and lessee and was not of its nature a public document ([41]). The English Court of Appeal has recently said that ‘context’ is of limited relevance when interpreting publicly registered documents (Cherry Tree Investments Ltd v Landmain Limited) but that was said in the context of a registration system with a state guarantee of title and Hong Kong’s system is materially different ([41(d)]). It is reasonable to expect Hong Kong purchasers to make enquiries of the Lands Department if they are in any doubt as to the effect of a letter of modification ([41(e)]).

Michael Lower

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In Zhang Xueshai v Lai Chin Wing ([2015] HKEC 295, CA) LCW had been appointed as the Committee of the estate of his mentally incapacitated brother (LMW) and was authorised to sell LMW’s flat. The flat had been acquired under the Home Ownership Scheme. The mortgage had been paid off. There had been two later agreements to sell the property to financial institutions (which may well have been connected with each other). These agreements had been cancelled. A charging order nisi and a charging order absolute had also been registered against the property but these had been discharged by LCW.

LCW agreed to sell the property to the plaintiff (ZX). The agreement required LCW to prove title in accordance with section 13 of the Conveyancing and Property Ordinance. LCW was unable to provide the originals of any of the title deeds and offered to provide a statutory declaration to address this problem. ZX was not satisfied with the statutory declaration and sought declarations that LCW had failed to answer his requisition and to prove and show a good title. ZX also sought the return of the deposits.

Cheung CJHC referred to the Court of Final Appeal decision in De Monsa Investments. Missing title deeds are only a problem if this gives rise to a real possibility of the successful assertion of an encumbrance against the property after completion (such as the risk of the creation of an equitable mortgage by deposit of title deeds ([30])). Where there is a problem, it may be possible to address it either by a statutory declaration or by the production of any other type of evidence that is sufficient to dispel the doubt that has arisen ([31]).

There was a real risk, on the facts of this case, that LMW might have tried to raise finance on the security of an equitable charge. All of the title deeds were missing. The cancelled ‘sales’ to financial institutions may well have been disguised loan arrangements. The charging orders also suggested that LMW needed to raise funds ([35] – [37]). LCW did not have the personal knowledge needed to give a statutory declaration that would deal with this risk ([38]).

LCW argued that there was no risk of the successful assertion of an encumbrance against the property since it had been acquired under the Home Ownership Scheme and any unauthorized dealing would be void (section 17B of the Housing Ordinance). The argument failed in this case because it had been raised too late; if LCW intended to rely on this legal provision he should have mentioned it. The argument also failed  because no evidence had been produced to show that there had been no approval.

Michael Lower

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In Li Kwok Ching v Secretary for Justice [2015] HKEC 552, CFI) the plaintiff was the Government lessee of land near Sheung Shui. He sought a declaration that the Government was barred from recovering possession of neigbouring unleased land by virtue of the doctrine of encroachment. The claim failed because the  plaintiff was unable to establish that he had been in possession for the sixty year period demanded by section 7(1) of the Limitation Ordinance. In case, he was wrong on this, however, Godfrey Lam J. went on to consider the Government’s contention that the handover started time running afresh against the Government.

The argument was that the Peking Convention made the British Government a lessee of the land in the New Territories. The effect of the handover was to bring that lease to an end and to give possession to the Government of the Hong Kong SAR (on behalf of the Chinese State). Thus, time started running again against the Government of the Hong Kong SAR in 1997. The plaintiff’s possession up to 1997, it was argued, could only possibly have affected the title of the British Government.

Godfrey Lam J. rejected the Government’s argument on the basis that the Peking convention did not grant a leasehold estate. The Peking Convention operated at an international level and did not create an estate in land that was justiciable in domestic courts ([75]). As far as this type of inchoate encroachment claim was concerned, the Government of the Hong Kong SAR simply stepped into the shoes of the British Government ([76]). Article 120 of the Basic Law made it clear that the Goverrnment’s rights to land were subject to leases in existence in 1997 and ‘all rights in relation to such leases”; the rights of one who, like the plaintiff, had encroached upon Government land were among such rights ([80]). The Government’s argument failed.

Michael Lower

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In Yip Wai Hong v Yip Kai Tong ([2015] HKEC 501, CFI) a father transferred a village house to each of his two sons.  The consideration referred to in the assignments was never paid. The father now contended that the sons each held their village house on resulting trust for him. The sons sought to rely on the presumption of advancement and Deputy Judge Burrell decided that they were entitled to do so. It did not matter that the defence made no specific reference to the presumption. It was enough to show that there had been a transfer from father to son for the presumption to arise ([34] – [38]). The father also argued that the presumption is now a ‘weak  concept’. This was rejected: Tribe v Tribe from the UK and Calverly v Green from Australia show that the presumption is still alive and well ([41] – [42]).

The father could not rebut the presumption. One reason for this was that in order to do so he would need to rely on evidence of an illegal scheme. The houses were among several built on land owned by the plaintiff under a scheme which involved indigenous villagers selling their ‘Ting’ rights to allow the houses to be built under the Small House Policy. The father alleged that the sons, like the other villagers, had simply sold their ‘Ting’ rights. The overall scheme was undoubtedly unlawful. The sons had to make statutory declarations that they ‘had no intention at present to make any private arrangement for any rights under the Small House Policy to be sold to other individual / developer’ and that they were each the sole owner of the relevant house ([44]). These would be untrue if the sons were not the sole legal and beneficial owners. Although the father was not the maker of the false declarations, his knowledge  that the scheme was unlawful was enough to prevent him from relying on the scheme to rebut the presumption. Further, his actions in making the allegedly false declarations possible by transferring ownership to the sons would be illegal ([54]).

Michael Lower

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In Yip Chiu Fu v Ip Chiu Fat ([2015] HKEC 201, CFI) a family comprising three fongs owned a house in Shek O (‘the first house’). The family funds, beneficially owned by the entire family, were then used to buy another house in the village (‘the second house’) and a common intention was to be inferred from the source of the funds that the second house was held on trust for the entire family. There was a family division in the second world war. The first house was allocated to the first fong; the ground floor of the second house was allocated to the second fong and the first floor of the second house was allocated to the third fong. Legal title to the first house was now with representatives of the first fong. Legal title to the second house had been kept exclusively within the third fong.

Louis Chan J found that this family division gave rise to a common intention constructive trust that gave each fong beneficial ownership of the physical accommodation allocated to it ([223]). The detriment was the giving up by each fong of its claim to the area allocated to the other fongs ([224]).

Legal title to the second house passed from one generation to the next of the third fong with full knowledge of the beneficial entitlements so that they were not bona fide purchasers without notice ([226]). When the second fong complained, they were told that one of their representatives would be added to the legal title. This never happened but this failure had to be viewed against the background of the assurance of the third fong’s representative that the second fong’s rights would always be respected.

The second fong’s representative now sought a declaration that the third fong’s representatives held the ground floor of the second house on trust for them and that they had an exclusive right to the use and possession of it. She also sought an order vesting title to the property in her (as personal representative of the original head of the second fong). She obtained the orders that she sought.

The third fong argued that the claim was time-barred because of the failure to insist on compliance with the promise to include a representative of the second fong on the title deeds. This failed because this was not wrongful ([236]). In any event, s. 20(1)(b) of the Limitation Ordinance applies to constructive trustees and there is no period of limitation to recover trust property from a trustee ([239]).

Even assuming the failure to honour the promise as to the title to the second house to be wrongful, mere standing by after the breach had been completed could not amount to acquiescence ([243])

Michael Lower

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In Curran v Collins ([2015] EWCA Civ 404, CA (Eng)) Mr. Collins and Ms Curran were in a relationship from the late 1970s until 2010. During that time, Mr. Collins had owned three properties (one after another) and title to these properties was in his sole name in each case. Ms. Curran claimed that she had had an interest under a common intention constructive trust in the second house to be bought and that this gave her an interest in the third house (since the proceeds of sale of the second house were used to part-fund the acquisition of the third house).

Ms. Curran had made no direct or indirect contribution to the purchase price from which an agreement could be inferred. It seemed that there was no express agreement upon which a common intention constructive trust could be founded.

Ms. Curran pointed, however, to what she referred to as the ‘excuse’ for not putting her name on the title to the second property. Mr Collins told her that this was because if he were to do this the mortgagees would insist on a second life insurance policy; having title in his name alone meant that they would spare themselves the expense of the second policy. Ms. Curran argued that this excuse was like those given in Eves v Eves and Grant v Edwards and was actually an acknowledgement of an understanding that she had a beneficial interest in the property.

The judge at first instance rejected this. In this case, the excuse was given to avoid difficulties or confrontation. Ms. Curran argued that the meaning of the words was to be understood objectively, not subjectively; the judge should have considered the meaning that a reasonable person would have given to the excuse. This argument failed. There was nothing to suggest that the judge had misinterpreted the relevant facts and circumstances. There was no basis for thinking that the judge’s interpretation was wrong ([41], Arden LJ).

Lewison LJ distinguished this case from Eves v Eves and Grant v Edwards. First, in each of those cases, the home was being acquired as a family home. There was a pre-existing family unit (the couple were living together and had children at the time of the excuse). Second, in each case, there was a positive assertion that but for (the excuse) the claimant’s name would have been put on the title deeds. Neither of these factors was present in this case ([70] – [74]).

Lewison LJ said:

‘[I]t cannot be right that the giving of a reason why someone is not on the title deeds inevitably leads to the inference that it must have been agreed that they would have an interest in the property. If one who is not versed in the difference between legal and equitable ownership asks to be on the deeds and is told ‘no’, the more usual inference would be that they have understood that they were not to become owners or part owners of the property.’ ([69]).

In any event, there was no detrimental reliance and this remains a requirement for the existence of a common intention constructive trust ([77] – [78], Lewison LJ).

In 1992, Mr Collins told Ms Curran that he had made a will leaving the property to her. This was not the basis for finding a common intention constructive trust since, among other reasons, it was not an assurance that she had a present interest in the property and there was no promise that he would not alter his will later. ([75] – ([76]) and there remained the lack of detrimental reliance.

Michael Lower

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In Tsoi Ping Hung v Cheung Chow Lan ([2015] HKEC 701, CA) the defendants owned land on which they had built a house. The plaintiffs owned land adjoining that of the defendants. It was covered in vegetation. In February 2000 the defendants cleared wild vegetation on the plaintiffs’ land, levelled and paved it. They sowed grass and built a small ‘golf course’ on it. The result was that the land was a metre higher than the rest of the plaintiffs’ neighbouring land. The defendants also built a shed on the land. The defendants used the land for golf practice and walking the dog. They cut the grass from time to time. In early 2001, the defendants built a fence along one boundary. The possession proceedings were issued on 3 August 2012 so the question was whether there had been factual possession and an intention to possess since August 2000. The plaintiffs contended that they were only present from 2001 when the fence was erected.

Overturning the first instance decision, the Court of Appeal found that the events that took place in 2000 were sufficient to allow the defendant’s adverse possession claim to succeed. Paving or cultivating land is a clear act of possession ([4.8] – [4.11]). In this case, even before the fence, the presence of a pre-existing ditch combined with the work of raising the ground level of the land meant that there was a 6 feet drop from the disputed land to the rest of the plaintiff’s land. This barrier was an effective way of staking an interest in the land ([4.13]).

On the intention to possess, it was true, as explained in Powell v McFarlane, that the defendants as trespassers needed to provide ‘clear and affirmative evidence that the trespasser … not only had the requisite intention to possess, but made such evidence clear to the world.’ If the use to which the land was put was equivocal, there needed to be compelling evidence of an intention to possess. The actions of 2000 were sufficient evidence of an intention to possess. The plaintiffs’ possession proceedings failed and their title was extinguished.

Michael Lower

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In Siu Kai Ming v Lau Sai Hing ([2015] HKEC 211, CFA) D owned a village house. D entered into two contracts with P (a developer). Under the terms of the first contract, P agreed to build a three-storey village house on land owned by D in consideration of the assignment of the second floor and roof of the house (the Property) to P. The second contract granted D an option to purchase the Property from P. P built the house but D did not assign the title to the Property to P. D validly exercised the option but then gave notice that he did not intend to honour the contract thereby created. P accepted this repudiation and now sought transfer of the Property to him. D argued that the exercise of the option brought P’s rights to the Property to an end and that P was only entitled to damages for breach of the contract arising from the exercise of the option.

P succeeded. The first contract gave P an equitable interest in the property. Neither the option nor its exercise brought this to an end; they simply gave rise to another contract. In respect of the first contract, P could elect for specific performance or damages and he had chosen specific performance. He was also entitled to damages for breach of the contract arising from the option but he had suffered no loss in this respect since the market price exceeded the option price.

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In Mo Ying v Brillex Development Ltd ([2015] HKEC 583, CA) H married W in Hangzhou. Shortly afterwards, H returned to Hong Kong and bought a flat in his sole name, using a combination of his own money and a mortgage taken out in his own name. A few months later, W joined him in Hong Kong and asked why her name was not on the title deeds. H told her that this was troublesome and would cause expense. W did not pursue the matter as she thought that the fact of the marriage entitled her to a share in the property. The marriage broke up and W argued that she had an interest under a common intention constructive trust.

On the facts of this case, the husband’s excuse could not be construed as an agreement that W was entitled to an interest. Unlike Grant v Edwards  and Eves v Eves, the words used were equivocal and W did not take them to mean that she was to have an interest in the property ([7.6]  and [7.7] per Cheung JA). There was a suggestion that H had told W that ‘What belongs to me belongs to you’. Had it been proved, this would have been decisive in W’s favour; it had not been proved ([7.2] per Cheung JA).

The whole course of conduct can be referred to when deciding whether or not a common intention constructive trust exists in a sole name case ([6.2] per Cheung JA).  The fact that the parties are married is an important feature of the whole course of conduct but, on its own, it does not give rise to an inference that a common intention constructive trust exists ([7.17] per Cheung JA and [11.4] per Yuen JA). There were no other features of the case that pointed to the existence of a common intention constructive trust. The evidence did not suggest that the parties had pooled their assets and liabilities ([7.19] per Cheung JA). Any payments that W had made towards household expenses were not referable to any common intention that she was to have an interest in the property ([7.20] per Cheung JA). Detrimental reliance remains a necessary element of the common intention constructive trust ([6.12] per Cheung JA).

H sold the property. W was informed of the sale once the provisional sale and purchase agreement had been signed but did nothing to protect her interest or to inform the purchaser of her rights. The sale was later completed. While the purchaser had constructive notice of any interest that W might have (because of her occupation and the purchaser’s failure to inspect) this did not mean that W could not be estopped from enforcing her rights against the purchaser. Her silence, once she knew of the contract, gave rise to an estoppel ([8.7]  and [8.12] per Cheung JA, [11.10] per Yuen JA and [20] per Kwan JA). Even if it were seen as being a proprietary estoppel, it could be relied upon as a defence. It is unhelpful to draw rigid distinctions between types of estoppel ([8.9] and [8.10] per Cheung JA).

This case provide an extremely important review by the Court of Appeal of the framework for the law of the common intention constructive  trust in Hong Kong. It draws on the English developments in Stack v Dowden, Abbott v Abbott and Jones v Kernott. Further, W had commenced divorce proceedings. The comparison between W’s family law rights and her rights as a matter of strict property law is a fascinating thread running through Cheung JA’s judgment. As a wife, W had rights under family law. Should the law of the common intention constructive trust also be especially responsive to the relationship? As explained above, the conclusion reached, ‘with regret’ ([7.23]) was that in the absence of any basis other than marriage for inferring an agreement, W had no claim as a matter of property law.

Michael Lower

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In Chen Tek Yee v Chan Moon Shing ([2015] HKEC 735, CFI) Ms Chen and Chan Senior (a co-habiting couple) lived with Ms Chen’s daughters. The couple were in a stable, unmarried co-habitation relationship for several decades. Chan Senior was older than Ms Chen and lived in an old people’s home for the last few years of his life. He died in 2009.

The couple had no children together but they lived together with Ms Chen’s children from the early 1970s onwards. In 1980 they bought a flat (‘the Property’) as joint tenants. Ms Chen provided most of the purchase price and she and her daughters covered the mortgage installments and other outgoings in respect of the property. Mr Chan made a minor contribution to the purchase price and was able to provide the opportunity to buy the Property at a favourable price. On several occasions, Chan Senior assured Ms Chen and the daughters that they would be able to live in the property for the rest of their lives (‘the Contractual Licence’). Unknown to Ms Chen, Chan Senior executed an assignment severing the joint tenancy and assigning to his son, Chan, his 50% share in the property. Chan sold his share at auction to Ng at a substantial discount to the market value. By then, Ms Chen had learned of the severance and she began proceedings against Chan seeking a declaration that she and her daughters were entitled to sole and exclusive occupation of the property to the exclusion of Chan for the rest of their lives. The auction particulars made it clear that the sale was subject to these proceedings. Ng had visited the property and spoken to Ms Chen. Ms Chen and the daughters now sought declarations that: Chan Senior, Chan and Ng (in turn) held Chan’s 50% share on trust for Ms Chen; the Property was subject to the Contractual Licence; and that Ms Chen and her daughters were entitled to sole and exclusive occupation of the Property to the exclusion of Chan, Ng or their successors in title.

The first issue concerned the question as to whether the rebuttable presumption of equal beneficial interests (this being a joint names case) had been rebutted. This required a survey of the whole course of conduct ([73]). There had clearly been great inequality in terms of financial contributions. This fact was not enough to rebut the presumption of equality. A review of the overall context was enough to confirm that the presumption of equality reflected the parties’ intentions ([80]). The ‘domestic / familial’ context was relevant. The parties were in a stable, unmarried relationship and the parties had lived together as a family unit for some time before the acquisition of the Property ([74]). The acquisition of the Property was a ‘joint / common enterprise’ between Ms Chen and Chan Senior ‘following their express discussions with the common goal of providing a family residence and permanent home for the Family’ ([75]).  The purchase of the Property ‘reflected a joint or shared commitment by both Ms Chen and [Chan Senior] notwithstanding their unequal financial contributions’ ([77]). Ms Chen and Chan Senior were jointly and severally liable on the mortgage of the Property ([79]). It was true that in other respects there was no pooling of their financial resources but, ‘that is not to say they never acted for the common good or kept their affairs in relation to the Property strictly or rigidly separate’. There were ‘strong indications of their joint economic commitment in respect of acquisition of the Property’ ([80]).

Chan Senior had entered into the Contractual Licence with Ms Chen and the daughters and they had acted on this to their detriment. They met all of the financial outgoings in respect of the Property acting in reliance on the Contractual Licence. Chan Senior’s conscience was affected and the Contractual Licence gave rise to a constructive trust ([86] and [87]). Chan’s conscience was also affected: the circumstances showed that he ‘had undertaken a new obligation to give effect to the relevant encumbrance being the Contractual Licence that gave rise to the imposition of a trust’ ([92]). Ng had agreed to take subject to the proceedings brought by Ms Chen. This would often not be enough to affect his conscience. In this case, however, he was not only clearly on notice of the rights of Ms Chen and the daughters, he had also bought the share in the Property at a substantial discount to the market value (presumably because of those rights). His conscience was also affected and the Contractual Licence was binding on him ([113]). Ms Chen and the daughters obtained the declaration that they sought that they were entitled to sole and exclusive occupation of the Property during their lifetimes ([115]).

Michael Lower

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In Kwan So Ling v Woo Kee Yiu Harry ([2015] HKEC 694, CFI) the plaintiff (a widow) claimed that her parents-in-law had promised to give her and her husband two flats that they owned in Hong Kong. The plaintiff followed her husband to Hong Kong from the mainland. The parents-in-law transferred the title to one of the flats to the plaintiff and her husband. The plaintiff and her husband were allowed to make full use of the other flat (‘the second flat’) for several decades. Sometimes they lived in the second flat and sometimes they rented it out. The plaintiff’s husband and father-in-law died. The mother-in-law, shortly before her own death, transferred the title to the second flat to one of the plaintiff’s nephews. The nephew claimed that the plaintiff was a mere licensee of the second flat and he revoked this licence. The plaintiff claimed that she was the sole beneficial owner of the flat under the terms of a common intention constructive trust. Alternatively, she sought relief on the basis of proprietary estoppel.

The plaintiff’s claims failed for the simple reason that Godfrey Lam J found that there was no common intention / assurance. Nevertheless, he commented on the assertion that a more compelling standard of proof was needed since this would be a post-acquisition constructive trust. He suggested that this idea had no application where the trust was based on an express promise ([24]).

Godfrey Lam J also considered whether there was detriment. The plaintiff and her husband spent several hundred dollars to create internal partitions within the second flat in the 1970s. While this could potentially be detriment, it was not in this case since the income and other benefits that the plaintiff and her husband derived from the second flat far outweighed the expenditure ([53]). The same consideration was also relevant at the level of calculating any relief (53)).

The fact that the plaintiff made significant changes to her life by moving to Hong Kong was potential detriment. There was no causal linkage between this and any possible assurance by the parents-in-law. She moved to Hong Kong because of her love for her husband (54)).

Michael Lower

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In Chan Sang v Chan Kwok ([2015] HKEC 822, CFI) title to shop premises was in the joint names of the plaintiff and the defendant (who were brothers). The legal title was held by them as tenants in common in equal shares. The plaintiff successfully claimed to be the sole beneficial owner. The court made a declaration to this effect and ordered the defendant to convey his half share to the plaintiff. The defendant’s name was on the title deeds because of an agreement between the parties and their father. The father made a loan to the plaintiff to allow him to purchase the shop and the defendant’s name was on the title deeds as a form of security. The agreement was that the defendant would give up his share once the loan had been fully repaid. The plaintiff had fully repaid the loan and had also made all the payments due to a bank under the mortgage that had been entered into at the time of acquisition. The defendant made no payments that were referable to the property. The plaintiff had established that he was sole beneficial owner under either a common intention constructive trust or a resulting trust ([76]).

The defendant, basing himself on Laskar v Laskar, argued that the common intention constructive trust had no application here and applied only in the ‘domestic consumer’ context.  Anderson Chow J. rejected this.  Laskar was, rather, authority for the proposition that the Stack v Dowden presumption of equality in joint name cases only applied to the ‘domestic consumer’ context.  In fact, the case goes to show that it is difficult to draw a dividing line between the domestic and consumer contexts.

Michael Lower

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In Chan  Hau  Ling v 劉西  ([2015] HKEC 1095, CFI) P had been in possession of a flat since 1999. Initially this was as a tenant but she remained in possession long after losing contact with the landlord who had gone abroad. She lived elsewhere from 2003 but remained legally in possession. By 2008, huge arrears of management fees had built up. D agreed to clear the arrears in return for possession for two years. Following  this agreement, P allowed D into possession. D remained in possession at the end of the two years and P brought possession proceedings. She succeeded.

If she was in possession in her own right, she clearly had the right to recover the property from a later possessor (Asher v Whitlock; Mabo v Queensland (No 2)). If she was in possession pursuant to a licence she also had a right to recover possession from a later possessor even if she was not in actual occupation (Manchester Airport plc v Dutton) ([35] – [38]).

D argued that even though there was no question of an adverse possession defence  (given the short time period involved) P had abandoned the property in 2008. On D’s version of events, she had simply wanted to divest herself of the burden of responsibility for the property and D had taken over possession on this basis. This argument failed both because the court rejected the factual basis and because the defence of abandonment was unsupported by authority ([45]).

D had clearly entered the property pursuant to an agreement. Whether as tenant or as licensee, D was estopped from denying Ps’ title and from resisting P’s claim for possession ([60]).

D was ordered to give up possession of the property to P and to pay mesne profits at the rate of the market rental for the property for the period after the end of the two year period.

Michael Lower

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In Sum Fan Hung v Chum Mei Diu ([2015] HKEC 1100, CFI) the plaintiff and the defendant were sisters. The plaintiff bought a flat in 1997. Title was in the defendant’s name but there was no dispute that the property was held on trust (presumably a common intention constructive trust) for the plaintiff. In 2000, the plaintiff found she could no longer meet the mortgage payments. She orally agreed with the defendant that the defendant was to become the sole legal and beneficial owner of the property. In return, the defendant would take on all liabilities relating to the property without any right of recourse to the plaintiff.  This agreement was not recorded in writing signed by the plaintiff. This was a problem since section 5(1)(a) of the Conveyancing and Property Ordinance requires assignments of equitable interests in land to be in writing and signed by the assignor or an authorized agent. This problem was circumvented by dealing with it as a proprietary estoppel case. The agreement provided the assurance and the plaintiff’s later payments (of mortgage payments and so on) provided the detrimental reliance. The court declared that the defendant became the sole legal and beneficial owner from the time of the agreement. Proprietary estoppel circumvented the failure to satisfy the formality requirements.

Michael Lower

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