In Man Leung v Man Yuet Kwai ([2013] 2 HKLRD 1122, CFI) a share in a wui had been left by H to ‘Fuk Ma’. The main question was whether, as a matter of fact, this referred to just one of H’s wives (Madam To) or to all three. It was in essence a dispute between those descended from  Madam To and the descendants of another wife. All of the wives died some time ago. The contest was between the descendants in the male line of Madam To (who alleged that only they were entitled) and those of a concubine or third wife who argued that they too were entitled to a share along with the descendants of the second wife. The descendants of Madam To succeeded. On the facts, ‘Fuk Ma’ referred only to their mother.

Devolution of the interest was governed by Chinese customary law ([143]). It was common ground between the parties that the share would pass to the descendants in the male line of Fuk Ma once the identity of the person or persons so referred to had been established.

Even though the assets of Madam To’s estate comprised a share in a wui, the estate had to be administered in accordance with ordinary Hong Kong law.  No probate or letters of administration had been granted in respect of Madam To’s estate([150] – [151]). The share in the proceeds of sale of the wui land belonging to Madam To’s estate could not be paid out until lawful personal representatives of Madam To had been appointed.

Michael Lower

In Suen Shu Tai v Tam Fung Tai ([2013] HKEC 1287, CFI) a mother transferred title to two properties to her daughter (probably to avoid any possible claim against the properties on the part of the father). There was no consideration for the assignments. The court found on the balance of probabilities that the mother did not intend to make a gift of the properties and that the daughter therefore held them on resulting trust for the mother ([96]).

There is a lengthy discussion as to whether the presumption of advancement should be extended to assignments by a mother to her child ([61] – [76]). Although the court doubted whether the presumption should be extended to this relationship, it was emphasised that this was not a factor in the decision in this case ([76]).

The daughter had sold one of the properties to a third party and no order was made as to the property (or the proceeds of sale) until the claims made by the third party could be investigated.

Michael Lower

In Tang Tak Sum v Tang Kai Fong ([2013] HKEC 1159, CFI) the first question was whether certain land in the New Territories was subject to a Chinese customary trust. It was held that it was not since no positive steps had been taken to establish such a trust and  there had been no transfer of land to such a trust. No managers had ever been appointed under section 15 of the New Territories Ordinance. Thus, the terms of a 1939 Division of Family document stating that the land was to be ancestral worship property were not effective. This conclusion was confirmed by the fact that the four sons of the person who had created the Division of Family had, on their father’s death, had themselves registered as tenants in common of the land under the now-repealed section 17 of the New Territories Ordinance ([59]).

Alternatively, even if the Division of Family had taken effect, the trust created was ended by the registration as tenants in common since this registration had priority over Chinese customary law ([67]). Further, this registration amounted to agreement by all the heads of the family for the purposes of Chinese customary law that the trust was to end ([74]). Alternatively, the registration as tenants in common was a valid basis for estoppel by convention to operate (the common assumption being that the land was not subject to an ancestral trust ([76] – [88]).

The plaintiffs claimed the quarter share due to them and even having failed to establish the existence of a Chinese customary trust, they would still be entitled to this as successors of one of the original tenants in common. The defendants had, however, collected the rent from the property without accounting to the plaintiffs for 31 years. This was held to be an ouster and, having continued for more than 20 years, it allowed the defendants to defeat the plaintiff’s title by adverse possession.

Michael Lower

In Yeung Mau Cheung v Ka Ming Court ([2013] HKEC 1271, CFI) the plaintiffs and their predecessors had used two portions of the common parts of a building as a refreshment store and associated storage area since 1965. The DMC for the building was created in 1970. The question was whether the plaintiffs were entitled to declarations that they had a possessory title and that the defendant’s title had been extinguished by the Limitation Ordinance. The court was satisfied that the plaintiffs had been in adverse possession for the necessary length of time ([29] – [30]).

The next question was whether the adverse possession claim was defeated by the covenant not to convert common parts to private use implied into the DMC by section 34I of the Building Management Ordinance. This defence failed. The court relied on, and regarded itself as being bound by the Court of Appeal decision in Wong Kim Lin v Peony House (IO).

Michael Lower

In Turbo Top Ltd v Lee Cheuk Yan ([2013] 3 HKLRD 41, CFI) P was the grantee of land on which there was both a building and an open space. P and the Financial Secretary were co-owners of the land. The Conditions of Exchange and the Deed of Mutual Covenant each provided that the open space was to be open to all members of the public for all lawful purposes (but the Conditions of Exchange made it clear that neither party intended to dedicate the open space to the public nor consented to any such dedication). The defendants were protesting outside the office in connection with an industrial dispute. P sought an interlocutory injunction requiring them to leave.

Godfrey Lam J said that ordinarily an injunction was available almost as of right to restrain a trespass ([17]). This, however, was not necessarily an ordinary case. It was plausible that the protesters as members of the public had a licence to use the open space as a result of the provisions in the Conditions of Exchange and Deed of Mutual Covenant. This could not be unilaterally revoked by one co-owner without the consent of the other ([26] – [27]).

Further:

‘In any event, when it comes to the question of the exercise of the rights of assembly and of demonstration (to which I refer below), it is the substantial character and practical function of the place that matters. From that perspective, it seems to me at this stage that, irrespective of the niceties concerning the precise legal status of the land in question, the Open Space has taken on the character of public space accessible to every person in Hong Kong without let or hindrance. It lies, in my view, towards the public end of the “spectrum” of the character of a place’. ([30] per Godfrey Lam J).

It had not been shown that the protesters were using the open space other than for lawful purposes. Thus, it was not appropriate to grant an interlocutory injunction requiring the protesters to leave the open space.

In Pilcher v Rawlins ((1871 – 72) LR 7 Ch. App. 259) a father set up a trust for his children. There were three trustees, one of whom was P the children’s uncle (a solicitor). The trustees advanced money to R on the security of a mortgage (the mortgage deed explained the existence of the trust). Two of the trustees died leaving P as the sole trustee. P and R connived in a fraudulent scheme. R (also a solicitor) prepared an abstract of title making no mention of the mortgage. R then purported to convey the property to S and L (who had no notice of the trust or the fraud). Immediately before that P executed a deed reconveying the property to R free of the mortgage (despite the fact that the loan had not been repaid). P and R agreed that the reconveyance to R would only be produced if necessary.

The fraud came to light and the beneficiaries sought a declaration that they were the beneficial owners and an order that S and L convey the title back to the trust. They failed on the basis that S and L were bona fide purchasers for value without notice of a legal estate (Sir G Mellish LJ at 273).

Given the facts above, the conveyance of the property by P to R (with its reference to the trust) was an essential element of S and L’s title. This did not fix them with constructive notice. They had acted diligently and at the time of the purchase had reasonably believed that they had good title. The later conveyance to R only came to light in the course of the proceedings. At the relevant time, S and L had ‘neither knowledge nor means of knowledge’ of the trust (Sir G Mellish LJ at 274).

Michael Lower

In Li  Sau Ying v Bank of China (Hong Kong) Ltd ((2004) 7 HKCFAR 579, CFA)  a businesswoman (L) supplied goods on credit to X. X ran up an indebtedness to her of HK$1m. When pressed to pay, X suggested that L should, instead, act as surety for a loan to his business. She agreed and also gave a mortgage over her apartment as collateral. There were several re-mortgages culminating in the re-mortgage in favour of a lender later acquired by the Bank of China. When the principal borrower defaulted and the Bank exercised its rights under the surety agreement with L, she sought to have the agreement and documents set aside on the basis that they had been entered into as a result of X’s undue influence and that the bank was implicated in this.

Lord Scott echoed the view that the class 2B category is not a useful forensic tool:

‘I do not wish to leave this issue without expressing the hope that in future cases, where undue influence has to be proved but where the relationship between the parties is not a relationship that falls within Slade LJ’s Class 2A category, the parties will concentrate on whether the evidence justifies the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence, that is to say, by an abuse by the allegedly dominant party of the trust and confidence reposed in him by the allegedly subservient party. References in such cases to, and attempts to invoke the assistance of, an alleged evidential presumption of undue influence are, in my opinion, likely to be, as they have been in this case, a source of confusion and an impediment to the evaluation of the available evidence.’ ([34])

Lord Scott explained that whether the bank is on notice depends on whether or not there are any circumstances that meant that knowledge of the initial impropriety could be attributed to the bank ([35]).

Where it is on notice, its duty is to take reasonable steps to ensure that the surety has had brought home to her, in a meaningful way, the potential implications for her of the proposed transaction (see Lord Nicholls in Etridge at [54]). What steps are reasonable is a question of fact in each case ([39]).

It is important to understand what these steps are trying to achieve and the limits of what is expected of the bank. The bank must take the reasonable steps needed to allow the surety to understand the transaction. It does not need to actually succeed in making the surety understand the transaction ([38]).

Lord Scott also commented on the category of ‘non-commercial’ surety arrangements established by Lord Nicholls, making the point that whether a case belonged to one category or another might not always be apparent to a bank unless it made unwarranted enquiries as to the nature of the relationship between the principal borrower and the surety. The lender is not expected to make any such enquiries and nothing that Lord Nicholls had said implied that such enquiries were necessary ([41]).

Lord Scott thought that the original surety agreement and mortgage may well have been the result of some undue influence ([30]).  So far as the Bank of China was concerned, however, this appeared to be a simple case of a borrower who wanted to re-mortgage on better terms. There was nothing in this to put the bank on inquiry. In any event, the solicitor acting for the bank had actually explained the documents to her and so the reasonable steps had been taken.

Michael Lower

In Bank of China (Hong Kong) Ltd v Leung Wai Man ([2011] 4 HKLRD 707) a husband and wife guaranteed the indebtedness of S Ltd to the bank. They also gave the bank a charge over their home. The husband did so because he hoped to become an employee or part owner of S Ltd. The wife joined in because she trusted her husband’s judgment in these matters and thought that she should defer to him. Things went badly and the bank sought to enforce its rights under the guarantee and charge.

The couple first sought to rely on misrepresentation as against the bank. They claimed to have told the bank’s employee responsible for the arrangement that they could not meet any liability exceeding HK$1 million. The charge was an all-monies charge and their eventual liability was higher than HK$ 1 million. The husband claimed that the employee had smiled and nodded at the suggestion that the liability was capped at HK$1 million and that this was an implied representation that the liability was so limited. This failed on the facts. In any event, silence and inaction do not amount to a representation unless there is a duty of disclosure or an important part of a representation is withheld ([44]).

The wife’s defence based on undue influence failed. The sources of the relevant legal principles were identified ([53]) as were the points to be considered when a wife seeks to set aside a guarantee in circumstances such as these ([54]).

There was no evidence of undue influence here ([56]). Here there was evidence pointing to the relationship between the husband and wife being one of trust and confidence ([56]). Even on this point, however, the court had to recall that in any healthy marriage there was a normal level of mutual trust that would not suffice for the purposes of undue influence ([57]). There was nothing about the transaction that called for an explanation since it was for the joint advantage of the husband and the wife: the couple secured an immediate benefit in that the original charge over their home had been paid off as part of the arrangement and they had hopes that the husband would secure an attractive business opportunity as a result of the arrangement ([58]).

As for the bank’s involvement, even if there had been undue influence there was nothing to put the bank on inquiry:

‘There is no evidence in the present case to show that the bank had suspected that the first defendant had exerted undue influence on the second defendant. In such circumstances, the bank did not have any responsibility to make inquiry.’ (Carlye Chu J at [59]).

Michael Lower

In Bank of China (Hong Kong) Ltd v Leung Ngai Hang ([2006] HKCU 78, CA) Miss C and Miss L had been friends and business partners. They bought an investment property together. They borrowed money to fund the purchase into their names as joint tenants, the loan being secured by a legal charge. They subsequently remortgaged with the Bank of China replacing the fixed term loan with more general banking facilities. By this time, Miss C no longer had any business relationship with Miss L. One element of the loan package was the provision of open-ended banking facilities to Miss L’s business.

The loans were not repaid. The bank sold the property but there was an outstanding balance. Miss C relied on undue influence and misrepresentation as her defence.

This failed since there was nothing to implicate the bank in any wrongdoing (assuming there had been some impropriety). Was there anything to put the bank on inquiry ([14])? A disadvantageous transaction on its own was not sufficient to achieve this. There was nothing about the relationship between Miss C and Miss L to suggest that there was a risk that consent had been procured by some improper means ([17]).

In any event, it was not clear that the present transaction was manifestly to Miss C’s disadvantage. The money had been used to redeem an earlier charge. There were benefits in replacing a fixed term loan with general banking faclities ([18]).

Michael Lower

In Mascall v Mascall ((1984) 50 P & CR 119, CA (Eng)) a father agreed to give his son a house. He refused to accept payment for it. About five years later, the son wanted to regularize the situation and he persuaded his father to transfer title to the house to him. The father handed over an executed transfer and the Land Certificate. The son then sent the document to the Inland Revenue for payment of the Stamp Duty. A delay occurred and this prevented completion of the registration of the son as proprietor. During that period, the father changed his mind and sought a declaration was void. This failed. The English Court of Appeal relied on Re Rose. The father had followed the appropriate procedure and had done all that he lay within his power to transfer title to his son.

Lawton LJ said:

[I]in the course of Re Rose, Rose v. Inland Revenue Commissioners, Jenkins L.J. pointed out that the statement that a failed transfer cannot be construed in any circumstances as a trust was a statement which was much too wide. He qualified the proposition by saying that, if the effect in law is that the donor holds the legal interest for the benefit of the donee, in those circumstances there is a trust to which the court will give effect.

In my judgment, that is the situation here. The plaintiff had done everything in his power to transfer the house to the defendant. He had intended to do it. He had handed over the land certificate. He had executed the transfer and all that remained was for the defendant, in the ordinary way of conveyancing, to submit the transfer for stamping and then to ask the Land Registry to register his title … He had done everything in his power in the ordinary way of the transfer of registered property and, in the ordinary way, it was for the defendant to get the Land Registry to register him as the proprietor of the property.’ (at 125 – 6).

Browne-Wilkinson L.J. explained the rationale behind this approach:

‘The basic principle underlying all the cases is that equity will not come to the aid of a volunteer. Therefore, if a donee needs to get an order from a court of equity in order to complete his title, he will not get it. If, on the other hand, the donee has under his control everything necessary to constitute his title completely without any further assistance from the donor, the donee needs no assistance from equity and the gift is complete. It is on that principle, which is laid down in Re Rose, that in equity it is held that a gift is complete as soon as the settlor or donor has done everything that the donor has to do, that is to say, as soon as the donee has within his control all those things necessary to enable him, the donee, to complete his title.’ (at 126)

Michael Lower

Sen v Headley [1991] Ch 425

BH had lived as man and wife with Mrs Sen for ten years. They separated but remained close friends. On his death bed he told her: ’The house is yours, Margaret. You have the keys. They are in your bag. The deeds are in the steel box.’ He died intestate having, it seems, slipped the keys to the house and the only key to the steel box in the house containing the title deeds into her hand bag.

The question was whether title to the house passed to her by way of donatio mortis causa:

‘If the question whether the subject matter is capable of passing by way of donatio mortis causa is put on one side, the three general requirements for such a gift may be stated very much as they are stated in Snell’s Equity , 29th ed. (1990), pp. 380-383. First, the gift must be made in contemplation, although not necessarily in expectation, of impending death. Secondly, the gift must be made upon the condition that it is to be absolute and perfected only on the donor’s death, being revocable until that event occurs and ineffective if it does not. Thirdly, there must be a delivery of the subject matter of the gift, or the essential indicia of title thereto, which amounts to a parting with dominion and not mere physical possession over the subject matter of the gift.’ (Nourse LJ at 431 – 2)

The problem was the third element. Had there been a delivery of the subject matter of the gift? The title deeds were the relevant indicia ((Nourse LJ at 437) Had there been a parting with possession of the dominion of the house? Delivery of the title deeds could be such a parting. Whether or not it is is a question of fact (at 438). Here there had been a parting with dominion. (Nourse LJ at 439)

There was a doubt as to whether title to land was capable of passing by way of donatio mortis causa. Nourse LJ held that it was (at 441).

Michael Lower

In Fordtime Industrial Ltd v Yip Shing Lam ([2013] HKEC 1613, LT) F had acquired a shop and the cockloft above it (which was a separate property). The acquisition of the cockloft was subject to a tenancy in favour of the previous owner of the shop. The tenancy had come to an end but the tenant refused to leave. The landlord sought vacant possession and mesne profits and was successful.

The tenant contended that the subject matter of the lease did not exist since the cocklofts were not referred to in the DMC. The judge found as a matter of fact that the cockloft did exist at the time of the execution of the DMC. The developer (as owner of all of the unassigned shares) was free to allocate a share to it. In any event, the tenant having enjoyed undisturbed possession during the lease term was estopped from denying the landlord’s title ([33] – [37]).

The landlord also sought an order for specific performance of the tenant’s covenant to reinstate the property by replacing the floor slab between the shop and cockloft at the end of the lease. The Lands Tribunal decided that it did not have jurisdiction to grant specific performance in an action for possession (see Lands Tribunal Ordinance ss. 8(8) and 8(9)).

Michael Lower

In Hong Kong Hua Qiao Co Ltd v Cham Ka Tai ([2013] HKEC 1182, CFI) L gave C (the unmarried partner with whom he co-habited) the title deeds to a property owned by a company controlled by him. At the same time, he told her that he would give her the property when he had redeemed the mortgage over it and that he would give her 300 shares in the company that owned the property. He had a transfer form prepared in respect of the shares. He died intestate as a result of an accident a year or so later.

C claimed to be entitled to the property and the shares. She based her claim on proprietary estoppel. The court dealt with the case as being one of promissory estoppel. It referred to the Court of Final Appeal’s decision in Luo Xing Juan v Estate of Hui Shui See and adopted the same approach.

The necessary pre-existing relationship was present in that L had sufficient control over the company that owned the property to cause it to exercise its ownership rights in a manner adverse to C (to evict her) ([92]). L made a clear promise to C that he would give her the property and shares ([101]). C had relied on the promise by remaining with L and separating from her husband ([105]). It would now be unconscionable for L (or his estate) to act inconsistently with that promise ([106]).

The court ordered that legal title to the property and the promised shares should be transferred to C ([118]).

It is interesting to note that the shares were also dealt with using promissory estoppel though there was no reason why proprietary estoppel could not be invoked.

The fact that the property was owned by the company and not L was held to be fatal to a claim based on a common intention constructive trust ([110]).

C also claimed to be entitled to another property owned by L. This too was considered under the promissory estoppel analysis but it was found that the promise made was equivocal and did not give rise to an estoppel. The facts did not support C’s common intention constructive trust claim in respect of this second property owned by L personally ([114]).

Michael Lower

In Secretary for Justice v Chung Kam Ho ([2013] HKEC 1667, CFI) a father assigned land to his son. Both father and son were indigenous villagers of the New Territories. The Government brought an action against the son to recover arrears of Government rent. The son relied on articles 40 and 122 of the Basic Law and contended that he was not liable to pay this rent. The court decided for the Government on the basis that it was bound by the decision of the Court of Appeal in Lai Hay On v Commissioner of Rating and Valuation and Director of Lands. That case had decided that succession (for the purposes of article 122) took place only on death and not as a result of an inter vivos gift.

Nor was the action time-barred by virtue of the Limitation Ordinance. The relevant provision is section 4(1)(d) of the Ordinance. The cause of action accrues when the demand note is issued ([24]).

The son’s contention that the matter raised a question of the interpretation of the Basic Law and that an interpretation by the NPCSC was needed was rejected. It amounted to a misreading of the second paragraph of article 158 of the Basic Law.

MichaelLower

In Ip Man Shan Henry v Ching Hing Construction Co Ltd ([2003] 1 HKC 256, CFI) 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, Henry. There was evidence to show that the common intention of ICP and Ching Hing was that the beneficial interest would be shared between them. Henry knew that he was merely nominee or trustee of the land. Thus, beneficial ownership of the property was shared between ICP and Ching Hing.

The court took a common intention constructive trust approach ([79]).

Johnson Lam J (then acting as a Deputy Judge) said that he thought Lord Bridge’s expression of the approach to proving the existence of the trust in Lloyds Bank v Rosset was too narrow:

‘I do not think that his Lordship intended to rule out completely the possibility of establishing common intention through conduct other than the payment of purchase price or mortgage instalments. I prefer to read the dicta as saying that the conduct relied upon have to be as concrete and compelling as these conduct.” ([86]).

Relevant evidence here that shed light on the common intention included the way in which other provision had been made for this son, the way other family investments had been handled, the fact that Henry had only recently graduated and a gift of such a large property made little sense, express discussions between ICP and his wife (the other major controller of Ching Hing) and a declaration explaining his intentions made by ICP. Also relevant was the fact that Ching Hing had paid the premium for the land but had been immediately reimbursed by ICP. Further, Henry had immediately on obtaining the Government lease granted a lease of the property to Ching Hing for virtually the entire term (including any renewal).

As to quantification, the judge took a whole course of dealing approach ([192]) and said:

‘In the absence of evidence as to precise agreement on the proportion in which the beneficial interest in the property was to be shared between ICP and Ching Hing, I think a fair inference in the circumstances of the present case is that each party held a beneficial interest in proportion to his contribution to the acquisition of the property, including the construction costs of the building. That proportion was crystallized upon the completion of the construction in 1965.’ ([194]).

Michael Lower

In Ahmad v Secret Garden (Cheshire) Ltd ([2013] EWCA Civ 1005, CA (Eng)) A and S negotiated the terms of a lease. They signed a document (lease 1) that did not contain all of the terms but did record some of the agreed terms. This allowed S to sub-let. They then signed a lease that did not allow S to sublet (lease 2). A assured S that the terms of lease 1 were valid and binding.  A sought possession on the grounds of unlawful sub-letting. Whether he could succeed depended on whether lease 2 could be rectified to include the terms agreed in lease 1. The Manchester County Court ordered rectification and A’s appeal against this failed.

On the question of the quality of evidence of a common mistake that is required, Arden LJ said:

‘The evidence must meet the requirement for the outward expression of accord. This stems from the law’s concern that parties should not be able to disassociate themselves from their agreement simply because it has become commercially undesirable. They have to show clear evidence of a consensus on some issue which the executed and unrectified agreement does not reflect. The agreement has to be objectively ascertained by reference to what they both did and said, and not to what each of them may privately have thought.’ ([43]).

The decision to execute a second agreement not containing the terms of lease 1 was not decisive in this case. This was not a case where the parties had made a conscious decision to keep some of the agreed terms in a separate document ([52] – [53]).

Michael Lower

In Hodgson v Marks ([1971] 2 All ER 684, CA (Eng)) a lady (Mrs H) made a voluntary transfer of her house to her lodger. It was accepted that they both knew that no gift was intended and that the purpose was simply to prevent the lady’s nephew from ejecting the lodger.

The English Court of Appeal found as a fact that the lodger held the property on trust for Mrs H. This was so first because this was a voluntary transfer and the evidence showed that there was no intention to make a gift. Alternatively, the resulting trust arose because this was an attempt to create an express trust that failed for want of compliance with section 53(1) of the Law of Property Act 1925 (in this respect in the same terms as section 5(1) of Hong Kong’s Conveyancing and Property Ordinance) (Russell LJ at 689).

Alternatively, this was a case of an express trust where compliance with section 53(1) could not be relied upon:

‘Quite plainly Mr Evans could not have placed any reliance on s.53 for that would have been to use the section as an instrument of fraud.’ (Russell LJ at p 689).

Michael Lower

In Huen Wai Kee v Choy Kwong Wan Christopher ([2013] HKEC 1784, CFI) H and C were the shareholders of P Ltd. C agreed to buy H’s shares for HK$40 million. C agreed that property (‘the property’) owned by R Ltd (a company controlled by C and his wife) would be security for C’s payment obligations under the share sale agreement. R Ltd entered into an agreement to sell the property to CG Ltd (a company controlled by H for HK$38.4 million). Any amount unpaid by C in respect of the shares would be set off against the price to be paid by CG Ltd. C failed to pay the full purchase price.

H and CG Ltd brought proceedings against C and R Ltd. H / CG Ltd sought the amount unpaid under the share sale agreement and in respect of dishonoured cheques and specific performance of R Ltd’s agreement to sell the property to CG Ltd.

They obtained an order for the payments to be made and, in the alternative, for specific performance of the agreement to sell the property to CG Ltd (with the amount owed by C being deducted from the purchase price of the property).

The order was registered at the Land Registry. C then entered into an agreement to sell the property to a third party for much more than the price payable by CG Ltd. C and R Ltd sought the vacation of the registration of the writ under section 19 of the Land Registration Ordinance.

They failed. The court’s intention was that it was H and CG Ltd who, under the terms of the order that had been made, had the option as to whether or not to insist on specific performance.

This hearing was not the occasion on which to argue that the order should not have been made.

Michael Lower

In Wise Think Global Ltd v Finance Worldwide Ltd ([2013] HKEC 1790, CFA) S agreed to sell property to P. A deposit of HK$500,000 was paid on the signing of the provisional agreement. A further HK$3.1m was to be paid on the signing of the formal agreement. The provisional agreement provided that if the vendor failed to complete the agreement, it would refund the deposit paid together with a further amount equal to the deposit. The provisional agreement also provided that the deposits would be held by the vendor’s solicitors as stakeholders.

The terms of the formal agreement were agreed and P sent the agreement signed on behalf of P and a cheque for HK$3.1m. P’s solicitors’ accompanying letter declared that the agreement and cheque were sent against S’ solicitors undertaking to send in return the part of the formal agreement signed on behalf of S within three days. S’ solicitors did not give this undertaking. They cashed the cheque but did not send a part of the formal agreement signed on behalf of S. Instead, more than three days later, S purported to terminate the provisional agreement by paying liquidated damages in accordance with the terms of the provisional agreement. S refunded both of the deposits and paid a further $500,000 (equal to the initial deposit). The question was whether it had also to pay further liquidated damages equal to the HK$3.1 m further deposit.

Litton NPJ said that the central question was whether the deposit had been paid to and accepted by the vendor’s solicitors ([23]). They were to hold the deposits as stakeholders but they were also the vendor’s agents. When they cashed the cheque, the money was received and paid ([25]). The terms of the undertaking that the purchaser’s solicitors sought to impose did not render the payment conditional. The only realistic interpretation of the proposed undertaking was that the vendor’s solicitors were being asked not to cash the cheque unless they were in a position to send the vendor’s signed part of the contract to the purchaser’s solicitors ([28]). Litton NPJ emphasised that this case turned on its special facts; it would be rare for a purchaser to pay a deposit before the contract had been signed ([31]).

Bokhary NPJ approached the matter on the basis that the purchaser had accepted the risk that the further deposit would be forfeited and that there was an expectation that the right to resile, and the consequences of doing so, would be matching (the same for each party) ([37]).

Lord Millett NPJ said that the vendor’s solicitors could refuse the deposit by returning the cheque, by holding it without cashing it or by cashing it on the express basis that the money was held to the purchaser’s solicitors order ([41]). Simply cashing the cheque, by contrast, amounted to acceptance of the deposit monies ([42]).

Since the right to resile had not been validly exercised, the Court of Final Appeal ordered specific performance of the contract.

Michael Lower

Cornhill Enterprises Ltd v 梁振生 ([2013] HKEC 1796, CFI) ‘is a classic example of how absent neglectful landowners create problems for themselves in the face of an acquisitive population seeking in the time-honoured fashion to scrape a living from apparently derelict land by traditional or progressively modern methods.’ (Deputy Judge Seagrott at [2]).

The plaintiffs had been the formal owners of certain plots of land for several decades but there was no sign at the property to indicate their ownership ([5]). The plots of land had been occupied by the second defendant and his family for over seventy years ([70]). There was ample evidence of their animus possidendi. They had, for example, seen off an attempt by a third party to take over possession of the land ([66]). There was also a lot of evidence to show the family’s attempts to cultivate and improve the land and then to adapt its use to changing circumstances. This all went to show that the family had the necessary animus possidendi ([67]).

Some portions of the land were not intensively cultivated in later years but they had not been completely abandoned and changes in the uses to which the land could effectively be put explained this lesser degree of attention ([68]).

The adverse possession claim succeeded.

Michael Lower