In Cheung Ying Lun v Legal Way Ltd ([2013] HKEC 1817, CFI) Legal Way owed the plaintiffs around HK$2 million as a result of an order made requiring Legal Way to pay the plaintiff’s legal costs arising out of other proceedings between them. Soon after that order Legal Way assigned a property it owned for HK$2 million to another company. The evidence showed that this price meant that the sale had been at a substantial undervalue. The plaintiffs sought a declaration that the sale was voidable on the basis that it was a disposition with intent to defraud creditors (s. 60 of the Conveyancing and Property Ordinance). They succeeded.

Since consideration had been given, the question was whether it had been established that Legal Way had acted with intent to defraud creditors ([26]). There was ample evidence to establish this intent (including the substantial undervalue, and the fact that the sale came soon after the judgment that gave rise to the liability to the plaintiffs). The inference was that the transaction had been entered into to defraud creditors ([29]). The defendants had made no attempt to rely on the defence in s.60(3) of the CPO.

Michael Lower

In Habinteg Housing Association v James ((1995) 27 HLR 299, CA (Eng)) HHA owned an estate. J was HHA’s tenant in a flat on the estate. The flat had its own separate entrance and there were no common parts. HHA covenanted to keep the structure and exterior in repair. J covenanted to give HHA access if necessary for the purposes of complying with the repairing covenant. J’s property suffered from an infestation of cockroaches for around six years until HHA took remedial action. J suffered damage valued at GBP 10,0000.

It was held, however, that there was no basis on which HHA was liable to J.

J sought to rely on the principle in Wringe v Cohen ([1940] KB 229). Waite LJ accepted that it was possible that the principle could be extended to read:

‘If a person suffers injury to their person or property as a result of a nuisance of any kind emanating from premises in the ownership of another person, that owner will be liable, notwithstanding that his premises may be let to, and occupied by, a tenant, if the owner has retained sufficient control under the terms of the tenancy to give him the power to step in and abate the nuisance.’ (at 305).

Even then, however, it would not apply to the facts of the case since (a) it had not been shown that the cockroach infestation had started in any property of the landlord’s and (b) the landlord did not have a sufficient degree of control over the rest of the estate for the principle to operate.

Michael Lower

In Favourable Issue Co Ltd v Secretary for Justice ([2013] HKEC 1851, CA) the Government granted a lease to F’s predecessor of some land in 1962. The lease contained a special condition prohibiting any building exceeding 30% of the overall size of the Lot. The Lot was eventually assigned to F. The Government later wrote to F informing it that it was in breach of the special condition and requiring it to carry out work to comply with the special condition. Both F and the Government believed that there had been a breach of the special condition. A Temporary Waiver (and certain ancillary documents concerning breach of the terms of the licences of adjoining Government land occupied by F) were agreed.

Later, it was discovered that the relevant Government departments had, at the time the building was erected, given their express consent to the building as it stood even though it covered significantly more than 30% of the Lot. The question was whether this waiver covered the building works that had been carried out.

Cheung JA expressed the relevant principles thus:

‘Although the ambit of a waiver in a given situation is one of construction, the following principles are relevant:

1) there is a clear distinction between waiver of a breach of the covenant and waiver of the covenant itself.

2) waiver of a covenant cannot lightly be inferred. It can be, but only where the conduct of the grantor is sufficiently clear and unambiguous that it would be inherently unfair for him to be permitted to go back on his word, either actually spoken or inferred from his conduct.’ ([25])

Here the waiver that had been given was in respect of a particular proposed set of works and what was actually built was more extensive that what had been proposed. Hence the works were not covered by the waiver ([26]).

Michael Lower

Tsang Kwong Kuen v Hau Wai Keung Gaius ([2013] HKEC 1920, CFI) concerned an unsuccessful adverse possession claim to Tong land. The court found that the plaintiff had not been in possession and this was really the end of the matter. In any event, the judgment contained a reminder that a new equitable interest is created with the birth of each member of a Tong. As a result, the limitation period runs anew when that member attains his majority ([50]). The claim also failed on this basis ([51]).

Michael Lower

In Mak Ho Fung v Mak Kai ([2013] HKEC 1924, CA) the Court of Appeal had to consider the concept of ‘detriment’ and the linked concept of countervailing benefits.

Two aunts persuaded their nephew (the plaintiff) to move to Hong Kong from Guangzhou in the early 1980s. They assured him that they would give him their flat if he looked after them. In reliance, he officially changed his surname to that of his aunts and became the foster-son of one of them. He moved to Hong Kong. The aunts had looked after him and had given him a substantial amount of cash to start a business. The question was whether this amounted to detriment or not. The Court of Appeal found that it did.

The question had to be assessed as at the date when the aunts sought to resile from their assurance. Countervailing benefits had to be taken into account. The Court referred to Robert Walker LJ’s statement on the subject in Gillett v Holt (Chu JA at [28]). The judge at first instance had been justified in finding that the nephew had incurred detriment.

On the question of countervailing benefits:

‘[A]lthough countervailing benefits should be taken into account in judging detriments, the court should not embark upon a quantified comparison of the benefits received and the detriments suffered by a claimant. The issue is to be approached on the basis of a broad inquiry.

In view of the life-changing consequences of the giving up of the family name and the adoption of a new surname, notwithstanding the countervailing benefits relied on by the defendants, the Judge would be entitled in the exercise of his wide judgmental discretion to conclude that substantial detriment had been suffered by the plaintiff.’ ([37] – [38]).

Jennings v Rice was not relevant to the appeal since it considered the role of countervailing benefits in deciding on the appropriate relief and this was not the point being considered ([36]).

The aunts had sold the flat to third parties (other nephews). The nephews were ordered to transfer the property to the plaintiff.

Michael Lower

In Prime Sight Limited v Lavarello ([2013] UKPC 22, Privy Council) M assigned a long lease to Prime Sight (‘the company’) a company which was controlled by him. The deed of assignment acknowledged the payment and receipt of the consideration. No consideration had been paid. M’s trustee in bankruptcy sought payment of the consideration. When this was not forthcoming, L petitioned for the winding up of the company.

The company sought to have the petition struck out on the ground that the debt was disputed on substantial grounds.  The basis for the dispute was the company’s argument that M (and so the trustee) were estopped by the acknowledgement in the deed. The question was whether the company could rely on this acknowledgement when both parties knew it to be untrue.

The Privy Council concluded that the estoppel defence did amount to a substantial ground on which the debt was disputed and the winding up order that had been made at first instance was set aside.

First, it needed to be shown as a matter of construction that the statement was intended to bind either or both of the parties ([32]).

Lord Toulson approved this passage in in Spencer Bower on Estoppel by Representation 4th ed (2004) (at p. 197),

‘… an estoppel by convention need not involve any misleading of a representee by a representor, nor is it essential that the representee shall be shown to have believed in the assumed state of facts or law. The full facts may be known to both parties; but if, even knowing those facts to the full, they are shown to have assumed a different state of facts or law as between themselves for the purposes of a particular transaction, then a convention will be established. The claim of the party raising the estoppel is, not that he believed the assumed version of facts or law was true, but that he believed (and agreed) that it should be treated as true.’ (at [45]).

This statement also appled to estoppel by deed ([46]). The court may refuse to apply the convention in cases of fraud, illegality, mistake and misrepresentation or on the grounds that to apply it would be contrary to public policy ([47]). If the trustee wanted to argue that there was something illegal or contrary to public policy in the present case he would need to persuade the court that this was so ([51]).

Michael Lower

The WordPress.com stats helper monkeys prepared a 2013 annual report for this blog.

Here’s an excerpt:

The Louvre Museum has 8.5 million visitors per year. This blog was viewed about 240,000 times in 2013. If it were an exhibit at the Louvre Museum, it would take about 10 days for that many people to see it.

Click here to see the complete report.

In Smart Wealth Asia Pacific Ltd v Kelly Court (IO) ([2013] HKEC 2056, LT) Smart Wealth had acquired 92.5% of the shares in a building. All the members of the management committee had sold their shares and so ceased to be office-holders by operation of law. The owners meeting had resolved to dissolve the management committee and appoint an administrator but there was a serious doubt as to the validity of the resolution since the Building Management Ordinance required the management committee to call the owners meeting to consider such a resolution. This was an application by an owner for the dissolution of the management committee and the appointment of an administrator by the Tribunal under section 31 of the Building Management Ordinance.

The court made the orders sought. It was appropriate to dissolve the management committee to avoid doubts arising in the future as to whether or not one was in existence ([14]). It was also appropriate to appoint an administrator: there had to be a body capable of performing the duties and exercising the powers of the management committee under the terms of the Deed of Mutual Covenant and the Building Management Ordinance ([16]).

Michael Lower

In Yuen Long Tin Shing Court (IO) v Wong Mau ([2013] HKEC 2021, LT) a flat owner was alleged to be keeping a dog in the flat in breach of the DMC. This problem was not resolved despite repeated requests to do so. The owners’ corporation sought, and was granted, an injunction to restrain the keeping of the dog. The Tribunal noted that the DMC’s prohibition on keeping dogs was in a schedule of the DMC that constituted the House Rules. This did not deprive it of its normal legal effect.

Michael Lower

In Kiuwide Co Ltd v Tseung Ding Man ([2014] HKEC 5) the plaintiff had been the registered owner of a detached house since 1986. It was later discovered that the defendant had the formal title to part of the garden and swimming pool that had been enjoyed with the property at last since 1986. The plaintiff claimed that it had extinguished the defendant’s title by adverse possession and the court agreed. The court granted a declaration that the defendant’s title had been extinguished and that the plaintiff had possessory title to the land.

The court reminded itself of the law as to the core concepts of possession ([24] referrring to Powell v McFarlane) and intention to possess ([25] referring to Wong Tak Yue v Kung Kwok Wai).

Deputy Judge Marlene Ng made these comments concerning the intention to possess:

‘First, although the squatter must intend to exercise exclusive control for his own benefit, he need not have a conscious intention to exclude the true owner. It is enough that the squatter intends to exclude the owner “as best as he can” or “so far as reasonably practicable and so far as the process of the law allow”. Secondly, an intention to own the land or even an intention to acquire ownership is not required for establishing the animus possidendi. Thirdly, the animus possidendi can be established even if the squatter mistakenly believes himself to be the owner of the land.’ ([26]).

Michael Lower

In Hulme v Brigham ([1943] KB 152) the question was whether heavy machines in a factory were fixtures or chattels (and so whether or not they were included in a mortgage of the factory). They were attached to the ground only by their own (considerable) weight. They were driven by electricity and so were connected to driving belts which were attached to the factory. The machines could easily be detached from the belts. The machines were held to be chattels.

Birkett J made the following observation:

‘An article which is not physically attached to the land may yet in certain circumstances have become part and parcel of the land and have lost its chattel character. The question of annexation depends on a number of circumstances, and the cases show that each case must be considered and decided on its own circumstances, applying the principles of law which have been laid down.’ (pp. 154 – 5).

Michael Lower

In Wessex Reserve Forces and Cadets Association v White ([2005] EWHC 983) one question was whether certain structures erected on land by a tenant were fixtures or chattels. If they were fixtures, were they tenant’s fixtures?

Two huts were held to be fixtures. Although they could be dismantled and re-assembled elsewhere, this would be labour-intensive. It was also relevant to consider the general nature of the huts; they were like assembly or meeting halls and prima facie were real property ([44] – [53]). The other buildings on the land (a portakabin, a garden shed and a pre-cast concrete building on a concrete slab) could be easily dismantled and removed and were chattels ([54] – [60]). The landlord accepted that if any of the buildings were fixtures, they were tenant’s fixtures and could be removed by the tenant on the termination of the lease ([2]).

The case was an application by the landlord to resist the tenant’s application for a lease renewal under Part II of the Landlord and Tenant Act 1954. The landlord relied on section 30(1)(f) of the Act (that it intended to demolish or reconstruct a substantial part of the premises contained in the holding). It argued that it intended to demolish the buildings erected on the land by the tenant. The lease contained an obligation on the tenant to do this itself at the end of the lease. If the tenant were to fulfill this obligation, the landlord would not need possession to carry out this work and its ground of opposition would disappear. To counter this, the landlord executed a deed releasing the tenant from this obligation. The tenant was not a party to the deed. The landlord could only unilaterally release the obligation if it was an obligation that was for its benefit alone. This was not the case since the clause also gave (or at least confirmed) the tenant’s right to remove the buildings and structures. The deed was therefore ineffective ([65] – [66]).

Michael Lower

In Cherry Tree Investments Ltd v Landmain Limited ([2012] EWCA Civ 736, CA (Eng)) C had granted a charge of property to D pursuant to the terms of a facility agreement. The facility agreement extended the statutory power of sale in section 101(3) of the Law of Property Act 1925 by providing that the power of sale could be exercised at any time after the execution of the charge. This extension of the statutory power of sale did not appear in the charge. The charge was registered at the Land Registry but the facility agreement was not registered. D sold the property to L in exercise of the power of sale. It could only do so if the statutory power of sale had been extended as set out in the facility agreement. No claim was made for rectification of the charge. The primary question was whether the power of sale implied into the charge could be ‘interpreted’ in such a way as to include the extension found in the facility agreement. The English Court of Appeal decided (Arden LJ dissenting) that the charge could not be so interpreted.

Lewison LJ thought that he was bound to hold that the facility letter was admissible evidence for the purposes of interpreting the charge. But it was still necessary to consider the effect of this: what use could be made of the facility letter ([104] and [128])? The fact that the charge was a document that would be registered at the Land Registry was highly significant. The factual background carries a different weight in such cases than it would in other sorts of contract:

‘The reasonable reader’s background knowledge would, of course, include the knowledge that the charge would be registered in a publicly accessible register upon which third parties might be expected to rely. In other words a publicly registered document is addressed to anyone who wishes to inspect it. His knowledge would include the knowledge that in so far as documents or copy documents were retained by the registrar they were to be taken as containing all material terms, and that a person inspecting the register could not call for originals. The reasonable reader would also understand that the parties had a choice about what they put into the public domain and what they kept private. He would conclude that matters which the parties chose to keep private should not influence the parts of the bargain that they chose to make public.’ ([130])

A little later, Lewison LJ observed:

‘Even the staunchest advocates of the court’s ability to consider extrinsic evidence stop short at saying that by the process of interpretation the court can insert whole clauses that the parties have mistakenly failed to include.’ ([132]).

The charge could not be interpreted in such a way as to confer the more expansive power of sale contained in the facility agreement.

Longmore LJ agreed with the conclusion and reasoning of Lewison LJ ([150]).

Michael Lower

In Royal Bank of Scotland v Etridge (No 2) ([2002] 2 AC 773, HL) the House of Lords looked at the law of undue influence in the context of a wife acting as surety for the indebtedness of her husband or her husband’s business (though as will be seen, the principles enunciated in the judgments are not limited so as to apply only in this context). The House of Lords had to consider the circumstances in which the rights of the bank as against the wife might be affected should it transpire that the wife entered into the arrangement as a result of some misrepresentation or undue pressure by the husband. This post seeks to give an account of the judgment of Lord Nicholls (with whom Lords Bingham and Clyde agreed). The House of Lords was considering a set of appeals. In each case, the bank was seeking an order for possession as against the wife. In each case, the wife claimed that the bank was on notice that the transaction arose from the husband’s undue influence ([5]).

In such cases, it is for the wife to prove that she entered into the transaction as a result of her husband’s undue influence. Where the relationship is one of trust and confidence and the transaction calls for an explanation then the burden of proof passes to the husband to show that the wife’s consent to the transaction was not improperly procured. The relationship between a husband and a wife is not necessarily one of trust and confidence, but the wife may be able to show in any particular case that she reposed the necessary trust and confidence in her husband. In the last analysis, the court has to decide whether or not the transaction was the fruit of the wife’s informed and free consent. This is independent of the subordinate question as to whether or not the burden of proof passed to the husband in the way just described. There may have been undue influence even though the burden of proof never passed to the husband. The burden of proof may pass to the husband but he may be able to show that there was no undue influence.

The special focus of Etridge is whether the bank’s rights are affected if it should transpire that there was undue influence. The bank’s rights are only affected if it was put in inquiry as to the undue influence. This will occur in the same circumstances in which the burden of proof passes to the husband (but with the threshold being set lower than is necessary for the wife to show that there was undue influence ([44])). So the question is again whether the relationship was one of trust and confidence and whether the transaction was one that called for an explanation.

Where the bank is on inquiry, it can protect its rights under the guarantee ‘if it insists that the wife attend a private meeting with a representative of the bank at which she is told of the extent of her liability as surety, warned of the risk she is running and urged to take independent legal advice.’ ([50]). If the bank prefers not to give this advice through its own representatives then it may achieve the same protection by obtaining the confirmation of a solicitor acting for the wife that he has explained the nature of the documents to the wife as well as the practical implications they may have for her ([65]).

There then follows a detailed ‘code’ concerning the steps to be taken and the level of detail of the transaction and its financial context that are to be disclosed to the wife ([58] – [80]).

Lord Nicholls said that the bank is on inquiry whenever the relationship between the surety and the debtor is non-commercial ([87]). The principles set out in his judgment, and the steps to be taken, do not only apply in husband and wife cases.

Michael Lower

Agreement with Lord Nicholls

Lord Hobhouse agreed with Lord Nicholls but gave a lengthy judgment of his own as a commentary upon the issues and the scheme set out by Lord Nicholls.

Lord Hobhouse emphasised the continuity from O’Brien  to Etridge ([99]) and expressed his agreement with the judgment of Lord Nicholls:

‘I shall agree with my noble and learned friend Lord Nicholls and, specifically, the guidance which he gives  concerning the role of the burden of proof, the duties of solicitors towards their clients (paragraphs 64-68, and paragraph 74), and the steps which a lender which has been put on inquiry should take (paragraph 79).’ ([100]).

In the same paragraph ([100]) Lord Hobhouse states that Lord Nicholls’ advice ‘should not be treated as being optional, to be watered down when it proves convenient.’ Nor does the advice apply only to future transactions:

‘[I]t has represented, and continues to represent, the reasonable response to being put on inquiry.’ ([100]).

Unhelpful to speak of class 2B presumed undue influence

Lord Hobhouse comments on the role of ‘manifest disadvantage’ in the context of presumed undue influence:

‘It will be appreciated that the relevance of the concept of “manifest disadvantage” is evidential. It is relevant to the question whether there is any issue of abuse which can properly be raised. It is relevant to the determination whether in fact abuse did or did not occur. It is a fallacy to argue from the terminology normally used, “presumed undue influence”, to the position, not of presuming that one party reposed trust and confidence in the other, but of presuming that an abuse of that relationship has occurred; factual inference, yes, once the issue has been properly raised, but not a presumption.’ ([104])

It is the relationship of trust and confidence that is presumed in certain cases (such as solicitor-client) not undue influence. So the class 2B presumed undue influence category is unhelpful. The person seeking to rely on undue influence will have to prove both that there has been some manifest disadvantage and that the relationship was one of trust and confidence. There is no reliance on any presumption:

‘Nor is it clear why the mere “existence of such relationship raises the presumption of undue influence “. Where the relevant question is one of  fact and degree and of the evaluation of evidence, the language of presumption is likely to confuse rather than assist and this is borne out by experience.’ ([105])

Applying this to wives guaranteeing the debts of their husbands (or husband’s business):

‘The guarantee is not on its face advantageous to the wife, doubly so where her liability is secured upon her home. The wife may well have trusted the husband to take for her the decision whether she should give the guarantee. If he takes the decision in these circumstances, he owes her a duty to have regard to her interests before deciding. He is under a duty to deal fairly with her. He should make sure that she is entering into the obligation freely and in knowledge of the true facts. His duty may thus be analogous to that of a class 2(A) fiduciary so that it would be appropriate to require him to justify the decision. If no adequate justification is then provided, the conclusion would be that there had been an abuse of confidence. But any conclusion will only be reached after having received evidence. This evidence will inevitably cover as well whether there has in fact been an abuse of confidence or any other undue influence. The judge may have to draw inferences. He may have to decide whether he accepts the evidence of the wife and, if so, what it really amounts to, particularly if it is uncontradicted. Since there is no legal relationship of trust and confidence, the general burden of proving some form of wrongdoing remains with the wife, but the evidence which she has adduced may suffice to raise an inference of wrongdoing which the opposite party may find itself having to adduce evidence to rebut. If at the end of the trial the wife succeeds on the issue of undue influence, it will be because that is the right conclusion of fact on the state of the evidence at the end of the trial, not because of some artificial legal presumption that there must have been undue influence.’ ([106])

The class 2B presumption is not a useful forensic tool ([107]).

When is the bank on inquiry?

The bank is on inquiry in relation to any guarantee by a wife of her husband’s debts (or those of his company) ([110]).

What must the bank achieve if it is on inquiry?

It is not enough to ensure that the wife has understood the transaction. The bank must also be satisfied that the wife entered into the transaction freely. Lord Hobhouse expressly parts company with Lord Scott on this point ([111]).

The reasonable steps to be taken

Lord Hobhouse had already expressed his agreement with the steps set out by Lord Nicholls in para. 79. In the view of Lord Hobhouse, the central feature of Lord Nicholls’s scheme us that it requires the solicitor to act for the wife and the bank has to be satisfied that this relationship was established ([120]). The benefits derived from this in terms of mitigating the risk that the guarantee has been procured by undue influence are substantial:

‘If the bank follows this procedure then the fiction of independent advice and consent should be replaced by true independent advice and consent.’ ([121]).

Michael Lower

In CIBC Mortgages plc v Pitt ([1994] 1 A.C. 200, HL) a husband and wife granted CIBC a charge over the matrimonial home which was in joint names. The loan application (in joint names) stated that the money was to be used to buy a holiday home but it was in fact used to allow the husband to buy shares. The husband procured his wife’s agreement to the loan and charge as a result of actual undue influence. The wife had never read the documents. The Stock Market crashed and the husband was unable to meet the repayments. The lender sought an order for possession. The wife relied on a defence of undue influence. She failed, despite the actual undue influence, since there was nothing to put the bank on notice of it.

Lord Browne-Wilkinson gave the only full judgment and he held that manifest disadvantage was not necessary in cases of actual undue influence. He also held that there is nothing to put the bank on notice as to the possibility of undue influence when the loan is to the husband and wife jointly.

Manifest disadvantage

This is not an essential element of undue influence (and need not be shown in cases of actual undue influence) (208 – 9).

Notice

The husband was not the bank’s agent, nor did it have notice of the undue influence.

‘If third parties were to be fixed with constructive notice of undue influence in relation to every transaction between husband and wife, such transactions would become almost impossible. On every purchase of a home in the joint names, the building society or bank financing the purchase would have to insist on meeting the wife separately from her husband, advise her as to the nature of the transaction and recommend her to take legal advice separate from that of her husband. If that were not done, the financial institution would have to run the risk of a subsequent attempt by the wife to avoid her liabilities under the mortgage on the grounds of undue influence or misrepresentation. To establish the law in that sense would not benefit the average married couple and would discourage financial institutions from making the advance.

What distinguishes the case of the joint advance from the surety case is that, in the latter, there is not only the possibility of undue influence having been exercised but also the increased risk of it having in fact been exercised because, at least on its face, the guarantee by a wife of her husband’s debts is not for her financial benefit. It is the combination of these two factors that puts the creditor on inquiry.’ (at 211).

Michael Lower

In National Westminster Bank plc v Morgan ([1985] AC 686, HL) a husband and wife signed a charge over their jointly-owned property in favour of the bank. This was a condition attached to a bridging loan made by the bank. Without the loan, another lender would have enforced a possession order in respect of the property. The wife was hesitant about signing the charge but realised that otherwise she would lose her home. The manager of the local branch had brought the charge to her home and explained it to her. When, later, the couple were unable to repay the bridging loan, the bank sought an order for possession. The wife’s defence was that she had signed as a result of the bank’s undue influence.

Lord Scarman held that there was no undue influence. First, the relationship was simply that of banker and customer and there was no relationship of trust and confidence. Second, there is no presumption of undue influence unless there is something disadvantageous about the transaction (at 704). There was nothing disadvantageous to the wife about this transaction.

This ‘was an ordinary banking transaction whereby Mrs. Morgan sought to save her home’ (at 709).

Michael Lower

Tang Kim Kwan Patrick v Lee Chi Ting Karen ([2014] HKEC 292, CA) concerned four properties in Hong Kong. Three were purchased in the name of the defendant and one was in the joint names of the plaintiff and the defendant. The defendant, who had been the plaintiff’s mistress and had a child by him, had not provided any of the purchase price for any of the properties. The relationship between the parties broke down and the plaintiff alleged that the properties were all held on resulting trust for him and, in one case, the company that he used for his property investment activities.

The defendant appealed against the first instance decision in respect of two of the properties. In the case of one of the properties (Metro Harbour View) the plaintiff had told the defendant that this had been purchased for her ‘to hold onto’. What was the reasonable inference to be drawn from the plaintiff’s words and conduct (including the words just mentioned) ([21])? They were unequivocal evidence of an intention to make a gift ([25]). This was borne out by certain post-acquisition statements of the plaintiff which could be accepted as good evidence of his intention at the time of the acquisition ([27]). The property was intended to be a gift ([29]).

It was accepted that another property (Royal Peninsula) was held on resulting trust for the plaintiff. It had been found, however, that the intention was that the property should be re-sold quickly and that the defendant was entitled  to keep any profit. Although the profit could not be the subject matter of a gift, a power of sale could be. The plaintiff had made a gift of the power of sale ([43]). This was combined with a power to keep the net profit after sale ([42]). The defendant was ordered to sell the property and hand over the original purchase price to the plaintiff. She could keep the net profit (net of any rentals received) ([44]).

Michael Lower

In Shun Ho Energy Development Co Ltd v Golden Crown Industries Ltd ([2014] HKEC 446, LT) a tenant (T)’s leases of 3 shops expired. The landlords (L) served notices of expiry on T. These called upon T to state whether it would take new leases of the premises on the terms set out in the notice. If so, they were to return the reply slips. Some time after the deadline set out in the notice, T returned the reply slips. T’s representative had, in an earlier phone conversation, indicated that it was only prepared to pay certain lower rents. These counter-proposals were rejected by L’s representative.

The Lands Tribunal found that the return of the reply slips did not create binding leases. First, they were mere invitations to treat ([40]). Second, if they were offers, T’s counter-offer terminated the offer ([41]). Third, time was impliedly of the essence for returning the reply slips and T had replied after the express deadline ([43]).

When T’s representative agreed to pay L’s proposed rent for the new leases, L’s leasing manager replied ‘OK’. In the circumstances, however, it was clear as a matter of interpretation that this was not an acceptance of T’s offer to contract on the terms originally proposed by L. T had made it clear that she was acting as an intermediary and had no authority to conclude a lease ([45]).

T held over on expiry of the leases. L sent T a debit note calling on it to pay ‘rent’. Did this estop L from denying that it had agreed to new leases? It did not. There was no representation that new leases would be granted. The fact that the debit notes were generated automatically by a computer went a long way to undermining any suggestion that they were an accurate indicator of L’s intentions.

Michael Lower

In Hammond v Osborn ( [2002] EWCA Civ 885) O took care of P (an elderly neighbour) out of kindness and compassion. He gave her GBP300,000 (the value of his investments). Part of the money was used to buy a house. Title was in F’s name (O’s son) but he held it on trust for her. The result was that P lost over 90% of his assets and became prospectively liable for a large tax bill which he would not have been able to meet out of his remaining assets. O did not explain this to P, she merely asked him whether he was sure he wanted to make the gift. P later died intestate. The gift to O was challenged by H, the administratrix of P’s estate.

The relationship and the transaction were such as to give rise to the presumption of undue influence. The question was whether the presumption could be rebutted by showing that the transaction was the result of  the exercise of independent exercise of P’s free will. Had the gift been made only after full, free and informed thought about it? ([25]).

P had not received advice as to the nature and effect of the transaction from an independent, qualified person. In fact, he had not received any advice at all, even from O.

‘Even if it is correct to say that Mrs Osborn’s conduct was unimpeachable and that there was nothing sinister in it, that would be no answer to an application of the presumption …  the court does not interfere on the ground that any wrongful act has in fact been committed by the donee but on the ground of public policy, which requires it to be affirmatively established that the donor’s trust and confidence in the donee has not been betrayed or abused.’  (per Sir Martin Nourse at  32).

Ward LJ emphasised that in cases of presumed undue influence, the courts interefere on the grounds of public policy and not because there is any finding that there has been actual undue influence. The next stage of the inquiry, once the presumption has arisen, is to consider whether  the party to whom the burden has shifted can show that the transaction was the result of full, free and informed thought. This will usually be done by showing that the necessary independent advice was given. Here there was a total absence of independent advice ([50]).

A survey of the circumstances in which the decison was made and of its consequences for P did nothing to rebut the presumption of undue influence. The presumption had not been rebutted and the gift was set aside.

Michael Lower