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Michael Lower

In Warnborough Ltd v Garmite Ltd ([2003] Civ 1544, CA (Eng)) W sold property to G but the entire purchase price was left oustanding. G granted W a legal charge to secure the outstanding balance of the purchase price. G also granted W an option to re-purchase the property for the same price as that paid by G less the amount of the purchase price unpaid by G at the relevant time. The option could only be exercised if certain conditions were met. One of these conditions was that a specified amount of the purchase price was still outstanding. The effect of the exercise of the option would be to restore the parties to their original positions. W exercised the option and then sought specific performance of the contract. G argued that the option was a clog on the equity of redemption and so void (Samuel v Jarrah).

Jonathan Parker LJ reviewed the authorities. The court had to look at the substance of the transaction. If the true nature of the transaction was that it was a mortgage then the option was void ([73]). Here, it was more likely that the substance of the transaction was a contract for sale and purchase and not a mortgage ([76]). The option would then be perfectly valid:

‘Although it would clearly not be appropriate to attempt to lay down any absolute rule, it does seem to me that where the option to purchase which is sought to be challenged as a “clog” is granted against the background of a sale of the property by the grantee of the option, as owner of the property, to the grantor for a price which is to be left outstanding on mortgage, there must be a very strong likelihood that, on an examination of all the circumstances, the court will conclude, as it did in Davies v Chamberlain, that the substance of the transaction is one of sale and purchase and not one of mortgage.’ ([76])

Michael Lower

In Liden v Burton ([2016] EWCA Civ 275) B and L co-habited in B’s home for twelve years until they broke up in 2013. B’s home was mortgaged and he was concerned that he would not be able to keep up with the mortgage payments. He asked L to contribute and she made monthly payments to him of GBP 500. She asked him to explain how this was made up and he agreed that GBP 200 of this was ‘towards the house.’ The sum of  these payments ‘towards the house’ came to GBP 28,500.  L made the payments because of her reliance on the relationship (that he would look after her forever) and because of the later assurance that the payment was ‘towards the house’ which she reasonably understood to mean that she was to have an interest in the house. At first instance, the judge found that the elements of proprietary estoppel were present. B held the house on trust under the terms of which the first GBP 32,500  (GBP 28,000 plus interest) of the equity was held on trust for L. The English Court of Appeal (Hamblen LJ giving the main  judgment) upheld the first instance decision.

The assurances about the the long-term nature of the relationship and that the house would be their joint home were confirmed by the assurance that the payments were ‘towards the house’ ([28] – [30]). There was clear reliance and the GBP 200 payments were detriment. ‘The combination of reliance and detriment leads to and justifies the conclusion of unconscionability’ ([32]). The judge had a discretion as to how to satisfy the equity and it could not be said that the trust securing the repayment of the contributions with interest was more than the minimum required to do justice.

Michael Lower

In Jovian Corporate Communications Ltd v Link Wide International Investment Ltd ([2016] HKEC 808, CA) the dispute arose out of a contract for the sale of an office unit. The building had been jointly developed by four developers. One of the developers was a charity and it needed the consent of the Governor of Hong Kong for any dealing with its land, including any partition. The developers had entered into a series of agreements at the time of the development in the 1980s. One of these bore the title ‘Deed of Mutual Covenant and Partition’ (‘DMC & P’). The purchaser of the office unit raised a requisition asking for evidence that the Governor had consented to this partition. The seller argued that this requisition was misconceived. Completion did not take place and the seller sought a declaration that it was entitled to forfeit the deposit and to damages. It was successful at first instance and on appeal.

In the Court of Appeal, the principal question was whether the title was good or not even in the absence of some specific written approval directed at the charity’s involvement. The question had to be approached ‘from the standpoint of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain. (Mexon Holdings Ltd v Silver Bay International Ltd, per Litton PJ). The title is good unless there is the risk of the successful assertion of an encumbrance against the purchaser. When assessing the level of risk, regard must be had to the circumstances of the case (De Monsa Investments Ltd v Whole Win Management Ltd, Litton NPJ).

Here the Government was well aware of the transaction. The MTR Corporation was a party to some of the agreements and the Governor’s approval was endorsed on them. The DMC & P had the approval of the Registrar General (Lands Office) as required by the agreement with the MTR Corporation. In these circumstances, it was fanciful to suggest that the DMC & P had not been approved by the Government ([17] per Lam V-P). There was no prospect that the Government could successfully assert that it had not approved the DMC & P ([18]). The written approval of the Governor on an assignment to the MTR agreement which was one of the core agreements relating to the development provided any approval which might be necessary ([19] – [20]). Even if it could challenge this, neither the Government nor any other interested party had any reason to do so ([21]).

In any event, ‘partition’ in the DMC & P bore its technical legal meaning as an arrangement that brought an end to co-ownership. The DMC & P (despite its title) did not do this.

Michael Lower

In Fordtime Industrial Ltd v Yip Shing Lam ([2016] HKEC 812, LT) the tenant of a cockloft unlawfully held over at the end of the tenancy. After a dispute lasting several years, it wrote to its former landlord on 2 December 2014 notifying the landlord that it could re-take possession. The tenant had, however, built a wall that blocked off access to the cockloft. The landlord was finally able to demolish the wall on 7 March 2015. Had possession been given to the landlord on 2 December 2014 or 7 March 2015? Since the wall erected by the former tenant prevented the landlord from enjoying possession, possession was given on 7 March 2015 when the wall was demolished.

The tenant had removed the floor slab from the cockloft to adapt it to its purposes. The market value of the cockloft was much higher if it was let with a floor slab in place. Should mesne profits be calculated on the basis of the value with the slab or without it? The Tribunal held that the restitutionary basis should be adopted in this case: the aim was to prevent the tenant from being unjustly enriched. Actual losses suffered by the landlord would only come into the calculation if they were higher than the value of the benefit received by the tenant. This was not the case here. Mesne profits were to be calculated by reference to the use contemplated by the parties (without the floor slab).

Michael Lower

In Flat 4 on 3/F of Block A, Tin Yau Court, No 1 Tin Shing Road, Tin Shui Wai, Yuen Long, New Territories ([2016] HKEC 751, CFI) title to the property had been in the joint names of a husband and wife. An order had been made to the effect that when a decree absolute had been made in the matrimonial proceedings, the husband would transfer his interest in the property to his former wife but it seems that this transfer did not take place. Over three years after the order, the husband entered into a personal, unsecured loan agreement. The lender sought to register the agreement against the property at the Land Registry. It was not registered but appeared as a deed pending registration. The wife asked the lender to withdraw the registration but it refused to do so. The wife applied for, and  was granted, a declaration that the loan agreement did not create an interest in land and so was not registrable. The court has an inherent jurisdiction to vacate the registration or purported registration of any instrument in the Land Registry which does not affect land ([16]). The question of costs was left for later but Anderson Chow J. referred to authorities where, on similar facts, costs had been awarded to the property owner on an indemnity basis; the courts are concerned to prevent the abuse of the land registration process ([9] – [10]).

Michael Lower

In Burns v Burns ([1984] Ch. 317, CA (Eng)) the couple were unmarried (though the woman had changed her  family name to be the same as her partner’s). They lived together for two years and had a child before buying the house that was to be the family home. Title was in the man’s sole name and he made all of the contributions to the purchase price and mortgage installments). Although the female partner contributed to household expenses (rates, phone bills, domestic fixtures and fittings and redecoration) these payments could not be said to have been necessary to allow the man to meet the mortgage payments. The couple lived in the home for seventeen years before separating. The female partner claimed to be entitled to a beneficial interest in the property under a common intention constructive trust.

The claim failed. There was no evidence of an express intention that she was to have an interest in the property. Nor had she made any payments that could give her an interest under a  resulting trust. It was not possible to infer the existence of a common intention constructive trust from the payments that she had made since they were not referable to the acquisition of the property (Fox LJ ). It would have been different if there had either been direct contributions to the purchase price or if her contributions to the household finances had been necessary to allow the man to make the mortgage payments.

The fact that the woman carried out domestic duties and looked after the children could not be taken into account: ‘the mere fact that the parties live together and do the ordinary domestic tasks is, in my view, no indication at all that they thereby intended to alter the existing property rights of either of them’ (Fox LJ at 331). May LJ made the same point:

‘when the house is taken in the man’s name alone, if the woman makes no “real” or “substantial” financial contribution towards either the purchase price, deposit or mortgage instalments by means of which the family home was acquired, then she is not entitled to any share in the beneficial interest in that home even though over a very substantial number of years she may have worked just as hard as the man in maintaining the family in the sense of keeping the house, giving birth to and looking after and helping to bring up the children of the union’ (at 345).

Michael Lower

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In Ip Man Shan v Ching Hing Construction Co Ltd ([2005] HKEC 188, CA) ICP paid for land but he channeled the payment through his company (Ching Hing). Ching Hing then paid the construction costs for the large family residence constructed on the land. Title to the land went into the name of ICP’s son, Ip Man Shan. At first instance, Johnson Lam J (as he then was) decided that there was sufficient evidence to establish that Ip Man Shan was a mere nominee, holding the title on common intention constructive trust for ICP and Ching Hing. This approach could perhaps have been arrived at by applying the presumed resulting trust approach since ICP supplied the purchase price and Ching Hing financed and carried out the construction work. Nevertheless, Johnson Lam J. made it clear that he had looked at other additional evidence to support his conclusion as to the common intention constructive trust. He rejected a narrow approach to Lord Bridge’s statement in Rosset that only contributions to the purchase price or mortgage installments could be relied upon to infer the existence of a common intention constructive trust. He said that an intention to create a trust could also be inferred from other equally ‘concrete and compelling conduct’  (see here for an account of Johnson Lam J’s judgment). Ip Man Shan died. His son continued the proceedings and appealed against the first instance decision.

The Court of Appeal (Le Pichon JA giving the judgment with which the other members of the Court of Appeal agreed) upheld the first instance decision and the reasoning on which it was based. The judgment does not include an analysis of the law, so it seems that there was an implicit acceptance of Johnson Lam J’s approach. The judgment, rather, identifies the aspect of the whole course of conduct (at the time of acquisition and subsequently) that pointed to the intention being to create a trust (rather than make a gift to Ip Man Shan). This included evidence of discussions between the parents (who were also the founders of Ching Hing). The property was acquired subject to a condition as to the construction work that was to be carried our before the Crown Lease would be granted and Ip Man Shan (then recently graduated) was in no position to finance these works ([24]). Ip Man Shan’s parents and six siblings all had shares in Ching Hing so that it was not in a position to make a gift of the construction costs to Ip Man Shan ([25]). Ip Man Shan had no input into the design of the building and it was used as a residence for the whole family for many years ([26]). Ip Man Shan gave his mother a very wide-ranging power of attorney concerning the property and this was further proof that he accepted that he was a mere nominee. Exercising her power, the mother granted a lease of the property to Ching Hing for the full term of the Crown Lease less one day. This was a recognition of Ching Hing’s interest in the property. The Court of Appeal also considered the fact that the property was not shown as an asset in the company’s accounts; it was satisfied that this could be explained on the basis that this was thought to be the proper accounting treatment given that the legal title was vested in Ip Man Shan. So an analysis of the other ‘concrete and compelling conduct’ (in addition to financial contributions) confirmed that there was a trust in favour of ICP and Ching Hing.

Michael Lower

In Davies v Davies ([2016] EWCA Civ 643, CA (Eng)) a couple owned a farm. E, the second of three daughters, lived with the parents for much of the time up to the time of her final falling out with them. E worked for her parents for little money, although her pay increased over time. Around 1985 her parents assured E that the farmhouse would be hers one day. She later fell out with them and moved out.  E was later reconciled with her parents but left the farm a second time after another falling out. E’s father induced her to return by promising that she could live rent free in the farmhouse. During part of the time that she lived away from the farm she worked as a technician for a company that provided livestock reproduction services. She enjoyed this work and was good at it. After a third dispute with her father, he brought proceedings to evict her from the farmhouse. She relied on proprietary estoppel to claim some interest in the farmhouse and / or the business. The Court of Appeal had already considered the threshold question as to whether or not E had established a right to some form of relief and decided that she had (see here ). These proceedings were concerned with the question as to the form that the relief should take.

The parents made an offer to their daughter which was calculated by reference to the detriment that she had suffered in reliance on the assurances made to her. The daughter sought a much larger sum that would reflect the expectations induced by the assurances. Lewison LJ gave the only full judgment. He set out some core propositions about the law of proprietary estoppel ([38]). He referred to the controversy as to whether expectations or detriment should govern the relief ([39]) and the proportionality test in Jennings v Rice and to the idea that in ‘bargain’ type proprietary estoppel  cases the claimant’s expectations represent a starting point([40]). But where to go from there if the expectation is only a starting point? Lewison LJ accepted the following proposition suggested by counsel as a useful working hypothesis:

‘there might be a sliding scale by which the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation.’ ([41]).

The assurances that had been given envisaged that the daughter would work long-term in the family farming business but she left the business (twice temporarily and then permanently). This was not like the decades-long arrangements in Gillet v Holt or Thorner v Major ([48]). While E had some expectation of inheriting the business, it was relatively vague and so a modest award would suffice ([64]). Modest sums were also in order in respect of the ‘non-financial detrimental reliance’ involved in giving up her work as a technician and moving from her home to the farmhouse ([65] and to reflect the delay in receiving payments relating to past expectations (such as her unmet expectation that she would be a partner in the farming business) ([68]). So a modest uplift from the payment offered by the parents was in order but this would fall far short of a payment that would reflect E’s expectations in full.

Michael Lower

In Goldfame Consultants Ltd v Tse Sai Ming ([2016] HKEC 1113, CFI) TCS agreed to sell land to Goldfame. The contract provided for the payment of deposits and then for the payment of the balance of the purchase price to be made on 14 August 2006. The contract provided that the assignment of the land would take place within 7 days of receipt of a letter from the Buildings Department approving the proposed site formation plan or at such other time as the purchaser might specify. The balance of the purchase price was duly paid on 14 August 2006 but the approval had not been received and the assignment did not take place. Instead, TCS executed Declarations of Trust under which he held the land on trust for Goldfame. TCS also nominated Goldfame as attorney to act for him in relation to the land. Neither the contract nor any of the other documents were registered with the Land Registry.

TCS died intestate in 2010 and TSM was granted letters of administration of his estate. TSM sold the land to H. Goldfame brought an action against TSM for breach of contract seeking damages or the return of the price paid to TCS. It also sought a declaration that TSM held the land on trust for Goldfame. It sought to have the sale to H set aside under section 60 of the Conveyancing and Property Ordinance.

There was no answer to the breach of contract claim and TSM was ordered to repay the purchase price with interest. It was accepted on all sides that the sale contract and the declarations of trust were void as against H since they had not been registered and there was no reason to doubt his good faith. Section 3(2) of the Land Registration Ordinance took effect.

Goldfame was forced to rely on section 60 of the Conveyancing and Property Ordinance. In Tradepower (Holdings) Ltd (in liquidation) v Tradepower (Hong Kong) Ltd, Ribeiro PJ  said that ‘where the disposition was made for valuable consideration, or where the disponor is not insolvent or where the disposition does not deplete the fund potentially available to creditors, an actual intent to defraud creditors must be shown as an inference properly to be drawn on the available evidence before s. 60 is engaged.’ (at [88]). The sale to H was not at an undervalue, nor was there any intention to defraud creditors ([94]). The claim against H failed.

In commenting on the expert evidence as to the market value of the property at the time of the sale to H, Recorder Coleman SC expressed his preference for valuation methods based on direct comparables where available. The subject matter of the transaction (undeveloped rural land where there was no guarantee that the approvals needed for development would be obtained) was somewhat out of the ordinary and so indices looking at the property market as a whole were unhelpful. Valuations based on the residual method involved too many assumptions to be as useful as direct comparables.

Michael Lower

In Siu Wei v Ng Ying Ying ([2016] HKEC 1162, CFI) S and P entered into a provisional sale and purchase agreement for the sale and purchase of property. S later decided that she wanted to keep the property and refused to complete. S admitted that she was in breach of contract. P now sought specific performance.

1. Was P ready, willing and able to perform his obligations under the contract?
2. S argued that specific performance would inflict great hardship on her and so should be refused.
3. P sought damages in addition to specific performance. How should these be calculated?

1 Ready, willing and able?

This must be the case both at the date of the writ and at the date of the decree. Anthony To J. commented that P needed to show:

‘on a balance of probability that he was and is ready, willing and able to perform his obligations at the material times as those obligations fall due in the sense that he is not presently incapacitated from future performance and is not indisposed to do what the contract requires when the time comes. It is all a matter of evidence, a matter of credibility for the court.’ ([33])

P satisfied this test.

2 Relevance of hardship

Specific performance will not be granted if to do so would inflict great hardship on the defendant (S here). Hardship involves a balancing of the position of both parties:

‘A defendant has to show hardship in the sense of relative prejudice. He has to show that he would suffer greater prejudice if an order of specific performance is made against him than that likely to be suffered by the injured party if the order is refused.’ ([38])

This test favoured P; he really wanted to live in the flat while it was merely a commodity for S. He would be put to additional transaction costs (including a higher level of stamp duty) if he had to buy another property([44] – [46]).

Conduct was also relevant and S had not conducted her defence in good faith ([44]).

3 Calculation of damages

‘In the case of delay in conveyance of property, the normal compensation is the value of the user of the property, which will generally be taken as its rental value, for the period from the contractual time for completion to the date of actual completion’ ([48])

P was entitled to the rental value of the property for this period but reduced by the amount of mortgage interest that he would have had to pay, had completion gone ahead, but had been ‘saved’ from by the refusal of S to complete on time ([52]).

Michael Lower

In White v White ([2001] 1 AC 596, HL) a couple divorced after thirty years of marriage. The appeal concerned the ancillary financial relief proceedings. This was a case where the couple’s joint assets were more than sufficient to meet the needs of them both. The House of Lords had to consider how the discretion conferred on the courts by the Matrimonial Causes Act 1973 (‘the Act’) should be exercised in cases such as this. Mrs. White sought an order giving her an equal share in all of the assets. Lord Nicholls gave the main judgment. He pointed out that this was a case where there was an ‘equality of contribution’ by Mr. and Mrs White over the course of their marriage. This was an important feature of the case (at 602).

Section 25 of the Act requires the court to have regard to all the circumstances of the case when exercising its discretion; the welfare of children is of first importance. Section 25(2) contains a list of factors to which the court is to have regard. Section 25(2)(f) requires the court to have regard to, ‘the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after or caring for the family’. Lord Nicholls made the point that the need for the outcome to be fair meant that there was no place for discrimination:

‘But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering paragraph (f), relating to the parties’ contributions … If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the home-maker and the child-carer ‘ (at 605)

A judge may be minded to order an unequal division of the couple’s assets :

‘Before reaching a firm conclusion and making an order along these lines, a judge would always be well advised to check his tentative views against the yardstick of equality of division. As a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination.’ (605)

There is no presumption of equality (only a ‘yardstick’) but:

‘Today there is greater awareness of the value of non-financial contributions to the welfare of the family. There is greater awareness of the extent to which one spouse’s business success, achieved by much sustained hard work over many years, may have been made possible or enhanced by the family contribution of the other spouse, a contribution which also required much sustained hard work over many years. There is increased recognition that, by being at home and having and looking after children, a wife may lose for ever the opportunity to acquire and develop her own money-earning qualifications and skills.’ (605 – 6)

Judicial approaches that would give the wife enough to meet her needs but would allocate any surplus over needs to the husband mean that ‘discrimination would be creeping in by the back door.’ (608) Needs are only one factor and the court needs also to have regard to factors such as the available resources and the parties’ contributions (609).

‘In my view, in a case where resources exceed needs, the correct approach is as follows. The judge has regard to all the facts of the case and to the overall requirements of fairness. When doing so, the judge is entitled to have in mind the wish of a claimant wife that her award should not be confined to living accommodation and a vanishing fund of capital earmarked for living expenses which would leave nothing for her to pass on. The judge will give to that factor whatever weight, be it much or little or none at all, he considers appropriate in the circumstances of the particular case.’ (610)

The Court of Appeal had awarded Mrs. White two-fifths of the couple’s net wealth (almost doubling the amount awarded at first instance) and the House of Lords upheld this award.

Michael Lower

In Fung Oi Ha v Fung Pui On ([2016] HKEC 1272, CFI) the title to a family home was in the father’s name. In 2005, the father assigned the home into the names of himself and his son as joint tenants. In 2011, the father and son assigned the home into the son’s sole name. The son gave no consideration for either of these assignments. One of the daughters brought proceedings seeking a declaration that she had a beneficial interest under a common intention constructive trust. There was no express agreement that she was to have an interest. The daughter relied on the fact that, since taking up employment, she had over many years given a large proportion of her salary to her mother and this money had been used to discharge the outgoings and expenses of the property. She had also  looked after the father since his first stroke in 2003. The daughter’s claim failed.

Recorder Lisa K Y Wong SC considered whether the common intention could be inferred. She commented on the difference in approach between Lord Bridge in Rosset (only contributions to purchase price or mortgage installments will do) and Fox LJ in Burns v Burns (any payments  referable to the acquisition of the house will do, including contributions to household expenses that allow the other party to meet the mortgage payments) (at [78]). In fact, the judge took a broader view: a holistic review of the whole course of dealing applying the factors identified by Baroness Hale in paragraph 69 of Stack v Dowden should be undertaken ([90] – [94]). This did not help the plaintiff, in this case:

‘Given the multifactorial nature of the question of intention, just as there are cases where the proof of financial contributions by one who is not the legal owner or in excess of one’s share of legal ownership may readily justify the inference of an intention to share beneficial ownership, there would conceivably be instances where the establishment of financial contributions does not support the inference of a common intention to share beneficial ownership. I am inclined to think that this present case is just such an instance.’ ([100]).

Context is relevant: this was not a claim by a spouse to a share in the matrimonial home ([101]):

‘The relationship with which I am concerned is that between parents and children in what appears to be a conventional Chinese family practising traditional family values … I daresay, in a lot of these cases, the parents (and probably the children too) would be taken aback if they be told that, even in the absence of an express agreement or understanding, the children’s contributions could be used to support the inference of an intention to share the beneficial interest of the parents’ property (which may be the parents’ only shelter in old age) if such contributions should happen to be applied toward the mortgage payments of the property.’ ([102]).

The plaintiff failed and was ordered to give up possession of the property to her brother.

Michael Lower

In LKW v DD ((2010) 13 HKCFAR 537) the Court of Final Appeal had to deal with the issue of the division of assets between a divorcing couple where the available assets exceeded the parties’ needs. Ribeiro PJ gave the only full judgment.

The principles that govern the making of an ancillary relief order are those contained in section 7 of the Matrimonial Proceedings and Property Ordinance. Given the close structural similarities between it and section 25 of England’s Matrimonial Causes Act 1973 it is unsurprising that Hong Kong’s courts have had regard to the English authorities on section 25 ([11]). Had the applicable principles in Hong Kong changed given the House of Lords decisions in White v White and Miller v Miller and McFarlane v McFarlane? C V C represented the law in Hong Kong before White v White. Wives in ‘big money’ cases got enough to meet their reasonable requirements and any surplus over joint needs went to the husband unless the wife could show that she had ‘earned’ a share in the surplus. The C v C approach was not good law since it gave excessive weight to ‘needs’ / ‘reasonable requirements’ which is only one of the section 7 criteria.

The overarching requirement is to achieve a fair solution:

‘what is fair treatment upon the dissolution of a marriage involves concepts which ‘change from one generation to the next’ and the values underlying C v C do not reflect elementary notions of fairness as between husband and wife in present day Hong Kong. To confine a non-working wife’s award to the sum needed to meet her “reasonable requirements” and to permit the husband to keep the remaining assets is patently unfair and discriminatory’ ([28]).

It was argued that to follow White v White would be to apply western values to Hong Kong’s Chinese population ([37]). Ribeiro PJ rejected this. White v White‘s insistence on fairness was equally relevant in Hong Kong ([40).

Ribeiro PJ emphasised that the guidance that he would give later in his judgment was only that. He was providing guidelines to assist judges in the exercise of their section 7 discretion case-by-case. The guidelines represent an attempt to balance flexibility and legal certainty ([47] – [53]). They only apply where there is a surplus of assets over needs ([54] – [55]).

Ribeiro PJ identified five steps to be followed:

1. Identify the parties’ assets ([71] – [73]);
2. Assess the parties’ financial needs ([74] – [79]);
3. Apply the sharing principle if assets exceed needs ([80] – [82]);
4. Consider whether there are good reasons for departing from equal division (equal sharing should not be applied mechanistically) ([83] – [86]);
5. Decide the outcome ([131] – [132]).

He also identified four principles to be gathered from White v White which judges should bear in mind in applying section 7:

1. The objective of fairness ([56]);
2. Rejection of discrimination ([57]);
3. Apply the yardstick of equal division ([58] – [61]);
4. Avoid ‘minute retrospective investigations’ (a lengthy and pointless trawl through the details of the parties’ conduct over the course of the marriage) ([62] – [69]).

The judgment contains useful guidance on the application of several of the steps.

In the present case, the Court of Appeal had awarded the wife half of the total assets and there was no basis for interfering with this award.

Michael Lower

In Trustees of Property of Cummins v Cummins ([2006] HCA 6) title to a married couple’s family home was held by them as legal joint tenants. The wife had contributed two thirds of the purchase price. The husband transferred his interest in the joint tenancy to his wife. He later went into bankruptcy. The bankruptcy severed the joint tenancy. The transfer was void against the trustee in bankruptcy as a transaction intended to defraud creditors. The question was whether the couple had been beneficial joint tenants on the basis that the beneficial ownership was in line with the legal ownership. In this case, half of the value of the home was available to the husband’s creditors. The wife contended that she had a two thirds share under a resulting trust to reflect the unequal contributions to the purchase price; in that case, only one third of the value of the home would be available to the creditors. The High Court of Australia held that there was a beneficial joint tenancy.

In determining the beneficial ownership, the court was not confined to the proportionate contributions to the purchase price but could look at ‘evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction’ ([64]) The fact that the property was the matrimonial home had significant evidential value. The High Court endorsed the following statement in Professor Scott’s The Law of Trusts:

‘Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them.’ ([70])

The same applied, even more strongly, where the couple were legal joint tenants ([71]). Further:

‘The subsistence of the matrimonial relationship … supports the choice of joint tenancy with the prospect of survivorship.’ ([71]).

Note that the statement approved requires that both spouses should have made a contribution to the purchase price before the presumption of a beneficial joint tenancy of the matrimonial home arises.

Michael Lower

In Mortgage Express v Lambert ([2016] EWCA Civ 555, CA (Eng)) L agreed to sell her property to S and C. She had a right to set this transaction set aside on the grounds that it was an unconscionable bargain. S and C relied on bridging finance to complete the purchase but quickly re-mortgaged to Mortgage Express. The question was whether the charge in favour of Mortgage Express was subject to L’s right to have the sale to S and C set aside. The English Court of Appeal (Lewison LJ giving the only full judgment) looked at the question within the framework of the Land Registration Act 2002 and the Law of Property Act 1925. The right to have a transaction set aside is a mere equity ([16]). Section 116 of the Land Registration Act 2002 (‘LRA’) confirms that such rights are capable of binding third parties. While Mortgage Express’ charge was, in principle, not subject to unregistered interests (section 29 of the LRA), there was an exception for overriding interests and a mere equity could be such an interest (LRA, Schedule 3, para. 2). L’s claim failed principally because section 26 of the LRA defeats rights which would call into question the validity of a disponee’s title. Allowing the mere equity to be asserted against Mortgage Express would have this effect.  In addition, section 2 of the Law of Property Act 1925 provides that a conveyance by trustees to a purchaser of a legal estate overreaches any equitable interests. The mere equity was overreached by virtue of this provision.

Michael Lower

In Collins v Collins (No 2) ([2015] EWHC 2652; [2016] 2 P & C.R. 6) a mother and father executed a deed of trust of agricultural land. The beneficiaries were themselves and their three sons. At the time that the trust was created, it was contemplated that the land would be converted to commercial use. This contemplated change of use subsequently happened. The timing of the deed of trust was partly motivated by tax planning considerations which meant that the value of the land needed to be transferred to the beneficiaries. To the extent that any value was retained by the parents, the tax planning purpose would be frustrated.

The deed of trust was extremely simple. The subject matter of the trust was a parcel of land. There was no express grant of a right of way over a private road on the parents’ retained land yet the land subject to the trust was landlocked without the necessary easements over the roadways owned by the parents. It was now intended that the trust land should be sold to a third party but the potential buyer would only proceed if it could be shown that the trust land had the benefit of the necessary rights of way. Because there was a family dispute, the parents did not now want to grant such rights of way. Thus, the question was whether the necessary easements could be implied into the deed of trust.

In his judgment, Mr Edward Bartley Jones QC thought that an easement could be implied into the deed of trust by any of several routes. Whatever the chosen route, the starting point was to identify the subject matter of the grant, applying the general law on contractual interpretation as recently re-stated in Arnold v Britton ([65]). On the facts of this case, the parents intended to make a gift of the whole equitable interest in land which was intended for commercial purposes ([69]). The principle of non-derogation from grant could be relied upon as the basis for implying the necessary easements. It extends even to the grant of non-proprietary, contractual rights and so the fact that the parents were owners of both the dominant and servient tenements was no obstacle to the application of the principle here ([73]).

Equally, the easement could be one of common intention applying the principles in Pwllbach Colliery. The common intention was that the land should be developed for commercial purposes and a full vehicular right of way was necessary to give effect to the common intention ([74] – [78]. Even though the beneficiaries had only an equitable interest, whether the right of way was legal or equitable depended on the intention of the parties ([79] – [80]). It did not matter that the parents were owners of both the dominant and servient tenements. The right of way would subsist as a quasi-easement until the sale took place and the necessary diversity of ownership was in place. At that time section 62 of the Law of Property Act (equivalent to section 16 of the Conveyancing and Property Ordinance) would pass on the benefit of the already existing easement. In the process, the quasi-easement would become an enforceable easement ([83] – [85]).

Could it be argued that the easement was intended to be a right for vehicular access for agricultural purposes only. To answer this question involves answering the two questions posed by Neuberger LJ in McAdams Homes Ltd v Robinson: would the use for commercial purposes be a radical change in character of the contemplated use rather than a mere intensification; and would this use impose a substantial increase or alteration over the intended burden imposed on the servient tenement? ([61]). Here the parties had intended that the land would be converted to commercial use at the time of the deed of trust. The fact that the commercial development had been (perhaps unexpectedly) very successful only intensified the intended use. The McAdams questions could be answered in the negative.

Any buyer from the trustees would have an easement conferring the right to use the road for vehicular access to and from the commercial development.

Michael Lower

In Tsun Kok Chung Richard v Lee Chun Yu ([2016] HKEC 1482, CFI) P and D intended to get married. P bought a flat to be the matrimonial home and it was conveyed into the names of P and D as joint tenants. P alone paid the deposits and part of the purchase price. He was also solely responsible for repaying the loan taken out to cover the balance of the purchase price. D soon changed her mind about marrying P and moved out. The couple did not marry. P asked D to her to transfer her interest in the property to him. When she refused to do so, he brought proceedings seeking to compel her to make the transfer to him. P succeeded. The primary reason for the acquisition of the property was the intention that it should be the matrimonial home (Anderson Chow J at [80]). P did not intend an outright gift of a share of the purchase price to her. The intention was to make a gift to her that was conditional on marriage ([90]).  Anderson Chow J. referred to the judgment of the Court of Appeal in Ian Hung Wai v Cheung Sau Kuen ([2011] 3 HKLRD 458 at [19] – [20]) and to section 25 of the Law Amendment and Reform (Consolidation) Ordinance for the law concerning conditional gifts made by parties to an agreement to marry. Since the marriage did not take place the condition had not been satisfied. D was ordered to transfer her interest in the property to P ([94]).

Michael Lower

McGuiness v Preece ([2016] EWHC 1518 (Ch)) concerned a son’s claim to land owned by his parents. The parents had established a family business in which their four children worked. The parents transferred the business into a company set up for the purpose. The parents were the majority shareholders until they were bought out by the children when the father decided to retire. The parents retained in their own name the title to the land on which the business was carried on. The father died and ownership of the land passed to his wife. She then died leaving the land to her daughter. One of the sons claimed to have an interest in the land, relying on proprietary estoppel and / or a common intention constructive trust. The claim failed.

Newey J. accepted that the son had a genuine belief that he had or was to have an interest in the land. The claim failed, though, because nothing said or done by or on behalf of the father was a ‘clear enough’ (Thorner v Major) assurance. From a constructive trust perspective, there was no assurance or agreement. Newey J. was sympathetic to the argument that the sale of the business (without the land) was the subject of a contract and so there was no room for equity to play a part. For the sake of argument, however, he was prepared to assume that the contractual context did not preclude reliance on proprietary estoppel and the common intention constructive trust ([79]).

Michael Lower

In MWB Business Exchange Centres Ltd v Rock Advertising Ltd ([2016] EWCA Civ 553 , CA(Eng)) Rock was the licensee of business premises managed by MWB. Rock fell into arrears with the payments due under the licence. MWB brought these proceedings to recover the arrears. Rock’s managing director had had a telephone conversation about the arrears with MWB’s credit controller. They reached an oral agreement to the effect that Rock could pay a reduced amount for a period and then pay a larger amount later so that by the end of the period the arrears would have been cleared. It was found as a fact that the agreement had been reached and that the credit controller had authority to conclude the agreement on behalf of MWB. MWB received the first payment under the revised schedule but then wanted to revert to the payment arrangements in the original contract. The main question was whether the oral agreement was binding on MWB.

At first instance, Rock failed because the licence agreement contained the following clause:

‘This licence sets out all of the terms as agreed between MWB and the licensee. No other representations or terms shall apply or form part of this licence. All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.’

It was held at first instance that this precluded the possibility of an effective oral variation. Rock’s appeal against this conclusion succeeded. Notwithstanding the clause, the oral agreement to vary the payment terms was contractually binding. The English law on these clauses was considered in depth by the English Court of Appeal in April 2016  in Globe Motors  Inc v TRW Lucas Varity Electric Steering Ltd ([2016] EWCA Civ. 396, CA (Eng)). This respects the freedom of the parties to a contract to agree new terms (Kitchin LJ at [34]).

MWB also argued that Rock had not given any consideration for the agreement to vary the payment terms. This argument, too, was the subject of extensive comment in the judgment of Kitchin LJ and was the principal focus of Arden LJ’s judgment. MWB argued that the rule in Pinnel’s Case and the judgment in Foakes v Beer established that an agreement to accept a partial payment of a sum due under a contract was not binding unless some new consideration had been given. The judge at first instance had this in mind but thought that the arrangement did secure enough of an advantage for MWB for there to be consideration. The Court of Appeal agreed with this conclusion. The agreement would avoid a commercially harmful void period for the property and at least ensured that MWB got some of what was due to it.

The Court of Appeal also considered when the contract to revise the licence terms took effect. Kitchin LJ was of the view that the agreement was formed when the first payment was made and the promise to make further payments in accordance with the revised payment schedule was given ([49]). Arden LJ thought that this might be a collateral unilateral contract:

‘meaning that, collaterally to the licence, for so long as Rock was entitled to and did occupy the unit and paid the licence fee as renegotiated, MWB would be bound on payment of the initial £3,500 to accept the deferral of the arrears in accordance with the variation agreement. ‘ (Arden LJ at [89]).

Rock succeeded on its arguments as to the effectiveness of the oral contract. The Court of Appeal also considered, obiter, whether equity might have a part to play. Could promissory estoppel, for example, prevent MWB from going back on the agreement? As a result, there is a useful survey of the law. Kitchin LJ’s judgment contains this summary:

‘Drawing the threads together, it seems to me that all of these cases are best understood as illustrations of the broad principle that if one party to a contract makes a promise to the other that his legal rights under the contract will not be enforced or will be suspended and the other party in some way relies on that promise, whether by altering his position or in any other way, then the party who might otherwise have enforced those rights will not be permitted to do so where it would be inequitable having regard to all of the circumstances. It may be the case that it would be inequitable to allow the promisor to go back upon his promise without giving reasonable notice, as in the Tool Metal case; or it may be that it would be inequitable to allow the promisor to go back on his promise at all with the result that the right is extinguished. All will depend upon the circumstances. It follows that I do not for my part think that it can be said, consistently with the authorities, including, in particular, the decisions of the House of Lords in Foakes v Beer and this court in In re Selectmove , that in every case where a creditor agrees to accept payment of a debt by instalments, and the debtor acts upon that agreement by paying one of the instalments, and the creditor accepts that instalment, then it will necessarily be inequitable for the creditor later to go back upon the agreement and insist on payment of the balance. Again, all will depend upon the circumstances.’ ([61])

Here Rock did not suffer any detriment as a result of the speedy change of mind by MWB. The promissory estoppel defence would have failed ([63]).

Michael Lower