In Tang Wai Tung v Tang Wai Lun ([2016] 3 HKLRD 96, CA) TWL claimed to have acquired title to Tso lands through adverse possession, having continued a period of adverse possession begin by his father, TPK. This may have been possible because there was a period of time during which there were no new members whose claim would not be defeated by a successful adverse possession claim. The claim failed because TWL could not establish factual possession. The Court of Appeal (Yuen JA giving the judgment) also considered an interesting issue concerning the effect of litigation commenced during the limitation period. Here, TPK began proceedings against the Tso in 1998 and these were taken over by TWL after TPK’s death. Amongst other things, TPK sought a declaration that the Tsos title to the land had been defeated by adverse possession. In its defence, the Tso denied this but it did not counterclaim for possession. The Court of Appeal considered that the 1998 proceedings (eventually struck out in 2011) stopped the limitation period running despite the absence of an express claim to possession by the Tso.  The court had to look at the substance of the issue and the claim to possession was at the heart of the 1999 proceedings ([49]). Further, TPK’s conduct in bringing the proceedings could be taken into account. Bringing the action, and then failing to progress it, may well have been motivated by a desire to prevent the Tso from bringing its own action to recover possession ([50]).

TWL also claimed that the disputed land had been conveyed to his grandfather. The court had serious concerns about the documents produced in support of this claim. In any event, there was no evidence that consent to a sale had been obtained  pursuant to section 15 of the New Territories Ordinance. This omission would invalidate the transaction in any event (Light Ocean Investments Ltd v Emway Development Ltd [1994] 3 HKC 31).

Michael Lower

In Ungurian v Lesnoff ([1990] Ch. 206) L was Polish and had a flat in Poland which she had the right to occupy for the rest of her life. She also had a promising academic career there. She entered into a relationship with U. U bought a house in London with the intention that L would be able to live there for the rest of her life. In addition to giving up her flat and career, L carried out substantial work on the house. The relationship broke down and U sought possession. L claimed that she was entitled to live there for the rest of her life. Vinelott J. referred to the authorities concerning the common intention constructive trust (Grant v Edwards and Eves v Eves especially). The common understanding in this case was that if L left Poland to live with U then he would provide her with the security of a home (at 222) for the rest of her life (224). An irrevocable licence would not give full effect to the intention. U held the flat on trust to permit L to live there for the rest of her life unless U sold it with L’s consent and bought her another residence.

Following Bannister v Bannister, this made L a tenant fo life under the Settled Land Act 1925. She was entitled to call on U to execute a vesting deed in her favour. She could sell the house and buy another property or invest the proceeds and enjoy the income produced by this investment.

Michael Lower

Yang Dandan v Hong Kong Resort Co Ltd ([2016] HKEC 1722, CA) concerned the alleged misrepresentation made by Hong Kong Resort Co Ltd (‘the developer’) in the sales brochure for the flat bought from it by Yang Dandan (‘YD’). YD pointed to passages in the sales brochure to the effect that she was acquiring the top floor flats in a ‘high rise’ development. The same brochure indicated  that the planned development on nearby land also owned by the developer would be a ‘mid rise’ development. YD was acquiring a duplex on the top two floors of the high rise development. She argued that the descriptions in the brochure amounted to representations: (a) that the mid-rise development would not obstruct the view enjoyed from her property; and (b) that the developer had the intention of ensuring that the top floor flats would continue to enjoy an unimpeded sea view in the future. The mid-rise development was later built and did have a minor impact on the view from YD’s balcony.  YD argued that this meant that there had been a misrepresentation. This claim was rejected by the Court of First Instance.

The Court of Appeal (Kwan JA giving the main judgment) dismissed her appeal. First, there was too great a leap from the contrasting ‘high-rise’ / ‘mid-rise’ descriptions to the notion that a reasonable person with YD’s characteristics (a highly educated purchaser) would infer that there would be a significant difference in height between the top of the mid-rise development and YD’s flat. Differences in topography, for example, would have to be taken into account ([56] – [58]). Second, since the mid-rise development had yet to be built at the time of the sale to YD, the ‘representation’ was as to future intention and not present fact. There was no suggestion that the developer was dishonestly concealing its then (at the time of the sale) present intentions concerning the mid-rise development. ‘An honest statement of future fact or intention is simply a prediction or a promise, not a representation’ ([65] per Kwan JA). Third, several passages in the brochure concerning the mid-rise development contained qualifications making it clear that plans and descriptions of it in the brochure were liable to change in the future, that the developer reserved its right to alter its plans and that any plans would have to be approved by the relevant Government departments. These were not exclusion clauses. They did, however, affect the way in which a reasonable purchaser would understand the descriptions of the proposed mid-rise development.

Michael Lower

In Patel v Mirza ([2016] UKSC 42) the UK Supreme Court considered the law concerning the recovery of money paid under a contract to carry out an illegal activity where the illegal act is not performed. If the activity were not illegal, the party who has paid the money would be entitled to recover the sum paid as a claim in unjust enrichment. The question is whether the illegality should prevent the claimant from recovering the money or other property transferred to the other party to the failed contract. In the context of Hong Kong’s property law, these principles are relevant, for example, where ding rights are sold to developers and false declarations are made to the Government as part of the overall performance of the contract. Can property transferred to developers in pursuance of the illegality-tainted contract be recovered?

Until now, English law in this area has been based on the House of Lords decision in Tinsley v Milligan and Hong Kong’s courts have applied this framework. Under the Tinsley approach, the question is dealt with as a procedural matter. The plaintiff is treated as having substantive legal rights and the question of illegality is dealt with as a procedural issue. The plaintiff can succeed if he has no need to plead his own illegality. If the plaintiff has to plead his own illegality (to rebut a presumption of advancement for example) then the claim will fail. This is subject to the possibility of a locus poenitentiae; the plaintiff who has to plead his own illegality might still be able to succeed if he can show that he withdrew from the transaction before implementation. This approach to the treatment of sums paid under illegal contracts that are not performed has come in for severe criticism. The  judgments of the nine members of the UK Supreme Court in this case are a collective attempt to create a new framework for dealing with cases of this sort. While there was unanimity as to the outcome on the facts of the case, there was disagreement within the Supreme Court on some of the fundamentals of the approach to be taken in this area.

In Patel, P paid GBP620,000 to M. M was to use the money to bet on shares in RBS relying on M’s insider information concerning an anticipated UK Government announcement. The announcement was never made. P sought to recover the GBP 620,000 on the basis that M would be unjustly enriched if he were permitted to keep it once the contract had failed. The question was whether the courts would help P given the illegality of the contract which amounted to a conspiracy to commit the offence of insider dealing. The UK Supreme Court were unanimous in deciding that P was entitled to recover the money despite the illegality of the contract and despite the fact that he would need to explain the nature of the agreement in order to establish his claim.

Lord Toulson and the majority: enforce the contract where to do so would be appropriate as a matter of policy (the ‘range of factors’ test)

The majority of the Supreme Court expressed agreement with the ‘range of factors’ approach articulated by Lord Toulson. Under this approach, the court would carry out a balancing act when deciding on whether or not to enforce a contract where there was unlawful conduct in its formation, purpose or performance. In broad terms, the court would:

a) consider the underlying purpose of the prohibition which has been transgressed, b) consider conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and c) keep in mind the possibility of overkill unless the law is applied with a due sense of proportionality.’ ([101] Lord Toulson).

Lord Toulson did not think any greater detail than that would help but suggested that relevant factors to be borne in mind when reaching a judgment would include: ‘the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties’ respective culpability.’ (107) The reliance approach in Tinsley should no longer be followed ([110] Lord Toulson).

Lord Neuberger’s Rule

Lord Neuberger takes a much simpler approach. He begins by saying that the appeal concerns, ‘a claim for the return of money paid by the claimant to the defendant pursuant to a contract to carry out an illegal activity, and the illegal activity is not in the event proceeded with owing to matters beyond the control of either party.’ ([145]). He contends for a very simple rule to the effect that the plaintiff is entitled to the money paid under such a contract (‘the Rule’) ([146]). This would apply ‘in appropriate cases’ even if the contract has been wholly or partly performed ([167]) though credit might have to be given for any benefit that the plaintiff has received ([168]). Lord Toulson’s balancing approach could be useful in deciding whether or not the case was an appropriate case for the application of the Rule ([174).

Do not enforce illegal contracts but order restitution of benefits conferred under contracts that fail on the grounds of illegality

The approach of the remaining judges is that the illegal contract is not enforced but is unravelled. Lord Mance disagreed with the majority’s suggestion that there needed to be a significant revision of the law in this area. His approach is that the unlawful contract could be rescinded and the parties put into the position that they would have been in had the contract never been entered into ([197]). Rescission would be available even if the contract had been partially performed, but the court would make adjustments to reflect any benefits that the plaintiff had received ([198]).

Lord Sumption spoke in favour of the illegality defence and the reliance principle as the appropriate guide as to when the defence was available (while accepting that its formulation in Tinsley was open to criticism). Where a contract fails then benefits conferred by one party on the other are recoverable ([247]). Equally, where the contract fails on the grounds of its illegality then the parties should be put into the position that they would have been had it never been entered into ([250]). The contract in this case was affected by the illegality principle ([267]) but restitution of the money that P paid to M in accordance with it should be ordered ([268]).

Michael Lower

In Morris v Morris ([2008] EWCA Civ 257) Mrs Morris argued that she was beneficially entitled to a share in the assets of the farming partnership business carried on by her husband and his mother. Mrs Morris’ claim was based on common intention constructive trust and proprietary estoppel. There was no express agreement between Mrs Morris, on the one hand, and her husband and mother-in-law on the other. She argued that, after Stack, the common intention constructive trust could be inferred from her conduct. The conduct that she relied upon was the fact that she did substantial unpaid work in her husband’s business. Mrs Morris also carried on her own, separate horse riding school at the farm. She invested money in the improvement of the land to accommodate this business. She relied on her work and the payment for these works as the basis for inferring the common intention constructive trust.

The English Court of Appeal unanimously held that Mrs Morris’ contributions were not evidence of a common intention to share beneficial ownership of the farming business and its assets. The financial contributions were explained by her desire to develop her own horse riding business. The lack of any express assurance was also fatal to the proprietary estoppel claim. The judgments in the Court of Appeal are significant because they stress that the courts are reluctant to infer a common intention from conduct alone ([23] Sir Peter Gibson and [36] May LJ). Sir Peter Gibson suggests (at [26]) that the common intention can only be inferred from conduct where the alleged agreement is the only explanation of the conduct. This must be too stringent a test; the true test must be whether the alleged agreement is the most likely explanation for the conduct.

Michael Lower

In Flora Garden (IO) v Li Do Wai ([2016] HKEC 1830, LT) the owners’ meeting approved the carrying out of renovation and improvement works at the estate. The incorporated owners added a 10% fee on top of the cost of the works to cover consultancy, contract and administrative fees and other ancillary costs (‘ancillary costs’). The owners’ meeting had approved the cost of the works but not the ancillary costs. When the works were complete, each owner was asked to pay the due share of the cost of the works including the ancillary costs. Deputy Judge Kot held that the ancillary costs could not be charged to the owners. They had not been approved by the owners nor had this aspect of the works been put out to tender. The incorporated owners’ submission that owners had paid such costs before without express approval and that this practice provided the necessary authorisation failed ([33] – [36]).

The DMC authorised the owners’ corporation to levy a 5% surcharge on late payers as well as a collection charge of HK$150. A demand for these sums was made of the owners who had paid late. They argued that these sums were a penalty and so irrecoverable. This argument failed. It did not matter that the sums were not a genuine pre-estimate of loss. The surcharge clause protected a legitimate commercial purpose of the incorporated owners and was not extravagant or unconscionable in amount ([47] – [48]).

Michael Lower

In Edwards v Kumarasamy ([2016] UKSC 40) the UK Supreme Court had to consider the landlord’s liability in respect of physical injury caused to his tenant. The lease was of the interior of a flat in a block of flats. The landlord (K) was himself a tenant of the flat and had the benefit of the right to use the entrance hall to the flats, the car park and the paved area between the front door and the car park. K sub-let the flat together with these ancillary rights to E. E injured himself when he tripped over an uneven paving stone in the paved area.

The primary question was whether the paved area was part of the exterior of the building of which the flat formed part. If it was, then K would be liable to T under the covenant imposed on landlords by section 11 of the Landlord and Tenant Act 1985. Lord Neuberger held that the paved area was not part of the exterior of the building. The natural meaning of the words of a statute should be applied unless they produced a nonsensical result or one which was inconsistent with the intention of the legislation. Here the natural meaning of the ‘exterior’ did not extend to the paved area ([17]).

That effectively meant that the case was decided in K’s favour. Lord Neuberger went on, however, to look at another, more general issue. He referred to the rule that, ‘a landlord is not liable under a covenant with his tenant to repair premises which are in the possession of the tenant and not of the landlord unless and until the landlord has notice of the repair’ ([30]). This is an implied term. It does not normally apply where the premises to be repaired are not in the tenant’s possession ([42]). If the landlord had been subject to a covenant to repair the paved area, did the tenant have to serve notice of disrepair on him before the landlord was under any liability to repair?

The distinguishing feature of this case was that the premises to be repaired were in the possession neither of the landlord nor the tenant but was property over which they both had a right of way. The premises were the paved area over which the landlord had been granted a right of way which he had effectively passed on to the tenant. The landlord had effectively disposed of his right to use the paved area to the tenant ([50]). Lord Neuberger held that the rule requiring the tenant to give notice of the disrepair applied to this case (49]).

Michael Lower

In Chow Chui Chui v Kafull Investment Ltd ([2016] HKEC 1889, CA) the DMC for a building divided the building by allocating 48 shares to a ground floor shop, 12 shares to each of the first to third floors (the ground to third floors being described as the ‘non-domestic accommodation’), one share to each domestic flat on the floors above the non-domestic accommodation and one share to the main roof and external walls. There was a first sub-DMC that sub-divided the ground floor into five units and allocated the 48 ground floor shares amongst these units. There was a second sub-DMC that sub-divided the units on the first and second floors of the building and divided the shares in the main DMC among the sub-divided units. Resolutions were passed at an owners’ meeting. Present at the meeting were fourteen owners from the non-domestic portion and two from the domestic portion. The question was whether the meeting failed to meet the quorum requirements in schedule 3, para. 5(1)(b) of the Building Management Ordinance (requiring that 10% of the owners should be present).

The contention was that only those who were ‘owners’ in accordance with the main DMC could be considered ‘owners’ for this purpose. Thus, there could only be 4 owners from the non-domestic portion (one for each floor). The Court of Appeal  (Kwan JA giving the Court’s judgment) rejected this contention. Section 2 of the Building Management Ordinance defines an ‘owner’ as one who appears from the Land Registry to be the owner of an undivided share of land on which there is a building. Section 39 of the Building Management Ordinance provides that an owner’s share is to be determined in accordance with a DMC registered at the Land Registry. Here, the shares had been attached to the sub-divided units by the terms of a sub-DMC, the owners of the sub-divided units had the right to exclusive possession and the Land Registry records confirmed their ownership ([35]). They were owners and, as a result, the meeting was quorate.

There was nothing to limit the Ordinance’s references to a ‘deed of mutual covenant’ to the main DMC ([39]) especially where, as here, the main DMC contemplated the possibility of sub-division. In fact, it is enough that the main DMC does not prohibit sub-division ([40]).

Michael Lower

In Chin Ling Investment Ltd v General of Salvation Army ([2016] HKEC 1876) Chin Ling Investment (‘CL’) and the Salvation Army (‘SA’) owned neighbouring lots, created by a 1958 division of the land. The original combined lot had the benefit of a right of way from the land to Castle Peak Road (‘RoW1). When the lot was divided, the owner of the SA land granted the owner of the CL land a further right of way  (‘RoW2′) over the SA land to access RoW1.

SA erected a gate on the land over which it enjoyed RoW1 at the boundary with the SA land. This was found to be a substantial interference by SA with its co-owners’ rights over RoW1.

SA had already moved the gate so that it was now on its own land. It had taken to locking the gate but had given a key to the owners of the CL land. This was a derogation from the grant of a ‘free and uninterrupted’ right over RoW2. Providing the key did not alter this ([79], Deputy Judge ST Poon). The owners of the SA land were ordered to demolish the gate.

Michael Lower

In Wong Yuk Tung v Wong Po Ling ([2016] HKEC 2143) a husband and wife were legal joint tenants of the family home. The husband’s business ran into difficulties. He and his wife transferred title to the wife and two of their daughters as tenants in common in equal shares. The husband alleged that the arrangement was entered into to put the home out of reach of his creditors and that the daughters held on trust for him. The daughters disputed this. Recorder Lisa KY Wong SC held that since the question was whether or not there was an express agreement between the father and his daughters, this was a common intention constructive trust rather than a resulting trust case. She referred to Re Superyield Holdings Ltd and Liu Wai Keung v Liu Wai Man. She found that there was evidence of an express agreement that accorded with the father’s case. The daughters held the property (and the properties later bought using the proceeds of sale) on trust for the father.

Michael Lower

In Tsang Wing Man v  Chung On Ling ([2016] HKEC 2164, CA) D agreed to sell his property to P. Completion was to be within 3 days of P’s sale of her own property. It was held that this arrangement was so vague and uncertain as to be of no legal effect. As a result, there was no agreement as to the completion date. As indicated in Kwan Siu Man v Yaacov Ozer, this was strong evidence that there was no contractual intent. P had later given an oral promise to complete by the end of August 2011. This did not help matters since the need to resort to an oral term meant that there was a failure to comply with section 3(1) of the Conveyancing and Property Ordinance.

Michael Lower

In Abbey National Building Society v Cann ([1991] 1 AC 56) the House of Lords considered the relative priorities of a charge used to acquire a home and an unwritten equitable interest in it which came into existence simultaneously. A man bought a home for his mother. She undoubtedly had an equitable interest in the home since this was their common intention and since she had provided part of the purchase price. Title to the home was in the son’s sole name. He borrowed money from the Abbey National Building Society (‘the lender’) to finance the purchase and granted the lender a charge over the home. The son was unable to meet the repayment obligations under the loan and the lender sought possession of the home. The mother argued that her equitable interest had priority over the charge. One of her arguments was that there was a notional gap (a moment in time or scintilla temporis) between the son’s acquisition of the title and the charge granted to the lender. She argued that her equitable interest attached to the property in that moment in time and so took priority over the charge.

The interpretation of the provisions of the Land Registration Act 1925 is an important feature of the judgments. Leaving this aside, the mother failed for what appear to be two (perhaps three) separate reasons. The first was that there is no moment in time in which the son had title to the home unfettered by the lender’s rights. The home could not have been acquired by the son without the aid of the loan. The acquisition of title to the home and the grant of the charge to the lender were a single composite transaction (Lord Oliver at 93 and Lord Jauncey at 102). The second reason given for the priority of the lender’s charge was that the mother knew that a loan would be needed to finance the purchase so that she must be taken to have accepted that the charge would have priority over her own interest (Lord Oliver at 94). Lord Oliver suggested a further argument in favour of the lender’s priority. Before completion it had agreed to advance funds on the security of a loan. This gave the lender an equitable interest that arose before the mother had any such interest (at 89).

Michael Lower

In Re Superyield Holdings Ltd ([2000] 2 HKC 90) a father and son each had one of the two issued shares in SH Ltd. SH Ltd, in turn, held one of the two issued shares in SC Ltd (along with another company LKR Ltd which was essentially owned and controlled by the son). SC Ltd owned a residential property (‘the property’). The question was whether the son was solely beneficially entitled to the property. Recorder Robert Kotewall SC found that he was. The son argued that since the property was bought using a combination of the son’s own funds and a loan to the company that the son had arranged, he could rely on the presumption of a resulting trust. The court seems rather to have found for the son on the basis of the father and son’s actual intention. The judge thought that where the trust rested on actual intention then the presumption of resulting trust had no part to play (at 111). He accepted that SH Ltd was in substance the son’s company and that the father was only involved as a formality to satisfy the then requirements of the Companies Ordinance. The father had been one of the joint guarantors of the loan to SC Ltd used to buy the property and it was possible to argue that this should be treated as a contribution to the purchase price by the father. This would depend upon underlying intention. In any case, the presumption of advancement would apply so that this contribution should be presumed to be a gift from father to son.

Michael Lower

In Chen Lily v Yip Tsun Wah Alvan ([2016] HKEC 2326, CA) a couple acquired a flat in which they intended to cohabit prior to marriage. The property was acquired in their joint names. The couple broke up and the defendant moved out. There was a dispute as to their respective beneficial entitlements. At first instance it was held, following Stack v Dowden, that given that the couple had purchased the flat as their family home the presumption was that they were beneficial joint tenants.

The plaintiff accepted that the original common intention was that the property would be held as beneficial joint tenants. She argued, however, that there was a subsequent variation of the original common intention so that she would have a larger share of the beneficial ownership. The plaintiff argued that the original joint tenancy was agreed to by her on the basis that the defendant would be solely responsible for the costs of acquiring the flat (both the up-front cost and the mortgage payments). She contended that the common intention was varied when it became clear that she would have to contribute to the acquisition costs because the defendant could not meet them entirely out of his own resources.

The Court of Appeal, Yuen JA giving the main judgment, accepted that such a variation could be inferred from conduct. It was for the plaintiff to prove this variation but she was unable to do so. There was no evidence of any changed common intention. This was a domestic joint venture and attempts to draw up a ‘balance sheet’ based on contributions made were ill-conceived. There was no evidence of any change in the original common intention to hold as beneficial joint tenants.

The domestic joint venture context no longer applied after separation and an order requiring the defendant to bear half the mortgage costs after separation reflected the parties’ intention in the changed circumstances. In any event, the plaintiff was entitled to recover these on the basis that they were payments that were made in order to preserve the property for the parties’ joint benefit ([28.3]).

Michael Lower

In Lam Fung Ching Annie v Tse Kwok Wing Jacky ([2016] HKEC 2387, CA) the Court of Appeal rejected an application to appeal to it. L, T and T’s father held property as joint tenants. L severed the joint tenancy by notice and successfully applied for an order for sale. T sought to appeal against this finding and order. It appears to have been accepted that there was an equitable tenancy in common since it was accepted that T held her share on trust for her father. At first instance, the judge rejected T’s argument that her father was the sole beneficial owner; L was able to show that she was entitled to a one-third beneficial interest. There was some discussion as to the burden of proof. The Court of Appeal (Kwan JA giving the judgment) took the view that, following the severance, L had a one third share as a legal tenant in common. It was for T to show why the equitable position should differ from this and she had failed to do so ([22] and [23]).

Michael Lower

In Lun Kwai Har v Hung Ying Yi ([2016] HKEC 724) the plaintiff (mother-in-law) and defendant (daughter-in-law) were the joint holders of a bank account. The daughter-in-law withdrew most of the money from the account and paid it into other accounts in her sole name. In Yung Shu Wu v Vivienne Sung Wu ((2011) the Court of Final Appeal approved the proposition that unless there is evidence of a contrary intention, a single joint holder is entitled to withdraw money from it for his or her own benefit. Here, however, there was evidence of a contrary intention. The joint account had been set up to receive the proceeds of sale of a property the legal title to which was in the joint names of the plaintiff and the defendant as tenants in common. This fact was evidence of the contrary intention. Each of the parties tried to argue that they were the sole beneficial owners of the property (and thus of the proceeds of sale). The starting point (equity follows the law) was that they were legal and equitable tenants in common and neither party succeeded in persuading Godfrey Lam J. to deviate from this position. The defendant had to repay the plaintiff’s share of the money taken from the bank account.

Michael Lower

In Greatland Property Consultants Ltd v Charis Patria Ltd ([2016] HKEC 2518) C signed sale and purchase agreements to sell two floors of a building to P (a company that owned two other floors of the building) for a total consideration of HK$ 6 million. This meant that P owned 80% of the shares in the building and could apply for a compulsory sale of the property under the Land (Compulsory Sale for Redevelopment) Ordinance. The sale was arranged by L, an estate agent. C had made it clear to L that it was prepared to sell for HK$6 million but that the price for a sale to P would be much higher. L represented to C that the buyer was a businessman from the mainland. On this basis, C agreed to sell for HK$ 6 million. The provisional sale and purchase agreements provided for C to pay L HK$60,000 by way of commission (or agreed damages if the sale did not go ahead). When C discovered that P was the purchaser it rescinded the sale and purchase agreements and paid P HK$300,000 by way of liquidated damages.

L brought proceedings against C claiming the HK60,000 she alleged was due under the sale and purchase agreements. C’s defence was that L had misrepresented the identity of the purchasers. To facilitate this, L had written the purchasers’ name in Chinese so that C would not realise that the purchaser was P. Although P’s company chop was placed next to the signature of the authorised signatory, this was only done after C’s representative had signed so that C had no way of seeing it before the contract was entered into. Overturning the finding at first instance that this misrepresentation had not induced the contract, the Court of Appeal (Chu JA giving the main judgment) held that C’s defence was successful. Its counterclaim to recover from L the HK$300,000 it had paid in damages to P was also successful.

Michael Lower

In Tang Fu Sun v Tang Lik Yuen ([2016] 4 HKLRD 608) the managers of two Chinese customary trusts sought declarations that the duty manager of the trusts (the same person being duty manager of both trusts) had been validly removed from office by a meeting of the general assembly of the descendants in January 2006. The defendant, the duty manager, argued that this resolution was ineffective since: (a) the proposed resolution to remove him had not appeared on the agenda for the meeting; and (b) that the customs of the trusts required resolutions of the assembly to be passed unanimously. The defendant argued that neither of these conditions for his valid removal had been satisfied. The plaintiffs were granted the declarations that they sought. Based on the law of meetings, there was no requirement to place the proposal to remove the duty manager on the agenda for the meeting since this amounted to a proposal to dismiss an employee and did not affect the interests of members as such. Nor was the defendant able to establish the existence of a custom that required decisions of the assembly to be reached unanimously.

Anthony To J. commented on the status of a duty manager. Unlike the manager, which was a requirement of section 15 of the New Territories Ordinance, there was no legal requirement to have a duty manager and the duty manager had the status of an employee. In the absence of some custom to the contrary, it was reasonable to think that the manager had the power to appoint and remove the duty manager since the manager would be legally liable for the duty manager’s actions or omissions. The managers’ evidence that the customs of the trusts gave them power to appoint and remove the duty manager as an exercise of their own authority was inherently reasonable and, for that reason, plausible. Since the duty manager was also a member of the trusts, a requirement for unanimity would amount to a requirement that he vote for his own removal; this would be an absurd requirement. Given that the assembly was at the heart of the governance of the trusts, it too had the power to remove the duty manager ([51]).

Michael Lower

Just published: M. Lower, ‘Marriage and the acquisition of a beneficial interest in the family home in Hong Kong.’ [2016] Conveyancer and Property Lawyer 453 – 465

In Ely v Robson [2016] EWCA Civ 774 (CA, Eng) E and R co-habited in a property the title to which was in E’s name. When the relationship between E and R broke down, E began possession proceedings and R counterclaimed that she had a beneficial interest in the property under the terms of a common intention constructive trust. The couple met and orally agreed a relatively complex settlement under the terms of which E would hold the property for himself for life with the remainder interest belonging 80% to his children and 20% to R. There were terms governing the payment of outgoings, the right to occupy the property and the compromise of E’s claims to other properties owned by R. It was accepted that the terms of the arrangement would be reflected in a trust deed and that the precise form of the agreement was provisional since, amongst other things, the tax implications of the way in which the deal was structured would need to be considered. E did not pursue the proceedings any further given R’s acceptance of the settlement.

R claimed that the settlement was not binding on her since it was not incorporated in a signed, written agreement satisfying section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. E argued that R was bound by the agreement on the basis of either a common intention constructive trust or proprietary estoppel.

For the purposes of the judgment, the English Court of Appeal  (Kitchin LJ giving the judgment) assumed that R, prior to the agreement, had a beneficial interest in the property under a common intention constructive trust. It reminded itself of Lord Scott’s approach in Cobbe v Yeoman’s Row to the use of proprietary estoppel in the context of agreements concerning land that did not satisfy section 2(1). Lord Kitchin also referred to the passage of Arden LJ’s judgment in Herbert v Doyle concerning such agreements. There is no common intention constructive trust where:

1. a formal written agreement is anticipated; or
2. further terms remain to be agreed so that the interest in property to be acquired is not clearly identified; or
3. the parties did not expect their agreement to be immediately binding.

In these situations, if the agreement is incomplete, the parties cannot rely on constructive trust or proprietary estoppel (Herbert v Doyle, Arden LJ [57]).

The Court of Appeal rejected R’s contention that these requirements were not satisfied in the present case:

1. although a formal written agreement was contemplated, nothing was said or written that precluded the possibility that a binding compromise had been agreed in the meeting between the parties (‘This was not a commercial transaction.’); and
2. there were no terms still to be agreed; and
3. the terms were sufficiently clear to constitute a binding agreement.

E relied on the agreement to his detriment by: not pursuing the possession proceedings; abandoning his claims to R’s other properties; and allowing R to remain in possession. Consequently, E held the property on constructive trust in accordance with the terms that had been agreed.

Michael Lower