Adverse possession: the slightest act of the paper owner sufficient to retain possession

September 17, 2017

Tierra Trading Ltd v Land Base Ltd ([2017] HKEC 1809) was an adverse dispute between neighbours. The disputed land comprised landings and staircases between the neighbouring buildings. The plaintiffs were the registered owners of the disputed land and they sought an order for possession against their neighbours (the defendants). The defendants claimed to have acquired title by adverse possession. They failed to establish the factual basis of their claim to have been in possession. Further, Deputy Judge Kenneth Kwok SC pointed to the statement by Slade J in Powell v McFarlane that the slightest act done by an owner in possession would negative discontinuance of possession. The plaintiffs had included the disputed land in their calculation of the Gross Floor Area of the development built on their land. This inclusion was a sufficient act to indicate their continued possession.

Michael Lower

Tierra Trading Ltd v Land Base Ltd ([2017] HKEC 1809) was an adverse possession dispute between neighbours. The disputed land comprised landings and staircases between the neighbouring buildings. The plaintiffs were the registered owners of the disputed land and they sought an order for possession against their neighbours (the defendants). The defendants claimed to have acquired title by adverse possession.

They failed to establish the factual basis of their claim to have been in possession. Further, Deputy Judge Kenneth Kwok SC pointed to the statement by Slade J in Powell v McFarlane that the slightest act done by an owner in possession would negative discontinuance of possession. The plaintiffs had included the disputed land in their calculation of the Gross Floor Area of the development built on their land. This inclusion was a sufficient act to indicate their continued possession.

Michael Lower

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Objective nature of the intention to possess: where the squatter believed itself to be the true owner

September 10, 2017

In Pang Yiu Chor v Wong Wai Leung ([2017] HKEC 1874) the Government mistakenly believed itself to be the owner of land in Fanling. In fact, the land belonged to the plaintiffs.

The Government granted permits to occupy the land to licensees in the early 1960s. These licences were taken over by later generations of the families of the original licensees.

The plaintiffs informed the Government of their ownership in 2000. The Government terminated the licences in 2003.

The question was whether the Government had defeated the plaintiff’s title by adverse possession. The plaintiffs contended that this was not the case; the Government’s belief that it was the owner of the paper title, they argued, meant that it had no intention to possess.

This argument failed. Anthony Chan J was able to point to a number of Hong Kong and English authorities showing that believing oneself to be the true owner does not prevent a squatter from having the intention to possess.

The intention to possess requirement demands an intention ‘to exclude the world at large, including the owner, from the land so far as is reasonably practicable and so far as the law allows’. Further, ‘[e]vidence of subjective intent should be approached with caution. Intention is normally better assessed from the acts of the possessor in the light of the nature of the land and its use’ (Tsang Foo Keung v Chu Jim Mi Jimmy CACV 178 / 2015 at [22]).

That the Government had the necessary intention was clear from its intentional exercise of power over the land: ‘There can be little doubt that the Government had every intention to exclude any person who was on the land without its expressed or implied permission. This can only be consistent with the requisite animus possidendi ([49]).

The Court of Appeal said in Cheung Kwong Yuen v Sun Hai Fang ([2016] 1 HKLRD 464) that ‘ “adverse” in this context is a convenient label only, in recognition of the fact that the possession is adverse to the interests of the paper owner.’

The Government had defeated the plaintiffs’ title; it had been in possession of the land up to 2003 through its licensees.

That said, the defendants (the licensees) had no title to the land. Their possession was attributable to that of the Government.

Michael Lower

 

 

Adverse possession: intention to possess when squatter was a licensee

September 5, 2017

In Jin Yu Chia v Personal Representatives of Lee Ah Hsin ([2017] HKEC 1829) the plaintiff lived with the registered owner of a flat from 1991 onwards. The plaintiff claimed that the relationship was that of sworn mother and sworn daughter.

The registered owner died in 1994 but the plaintiff remained in possession and paid for all outgoings in respect of the flat. Many years later the representatives of the registered owners sought to evict the plaintiff. She claimed to have defeated the estate’s title by adverse possession.

The plaintiff was easily able to establish that she had been in possession of the flat for the requisite period but her claim failed. Wilson Chow J held that she lacked the necessary intention to possess.

In Wong Tak Yue v Kung Kwok Wai, the Court of Final Appeal held that a squatter who acknowledged that they would have paid rent had it been demanded lacked the necessary intention to possess. It seems, then, that even a purely intra-mental acceptance that there is someone with a title superior to the squatter means that, in Hong Kong, there is no intention to possess. It would not be enough to be prepared to use the processes of the law to make the owner prove his title.

Thus, where a squatter’s possession began under the terms of a lease or licence but continued when that arrangement ended, the squatter has also to show an accompanying change in mindset. The squatter must establish that they had come to believe that there was no one with a superior title (or at least not with a superior title that they would acknowledge in any circumstances). This will be a very difficult thing to prove.

Michael Lower

 

Equitable ownership: single framework for ‘domestic consumer’ and ‘investment’ cases

August 27, 2017

Marr v Collie ([2017] UKPC 17) is an important Privy Council decision re-stating the framework for deciding when equitable ownership differs from the ownership position as revealed by the legal title. Lord Kerr, giving the judgment, stated that the same analytical framework is to be applied regardless of context. This framework applies equally to ‘domestic consumer’ and ‘investment’ or ‘commercial’ cases. Context has a role to play when inferring actual intentions.

 

The framework

When dealing with ownership disputes:

  1. determine the legal ownership of the property;
  2. the onus is then on the party claiming that the ownership position in equity varies from the legal position to establish that this is the case;
  3. where the only available relevant evidence is that the parties have made unequal financial contributions then it may be appropriate to have recourse to the presumed resulting trust;
  4. but the court may have evidence of the parties’ actual intentions so that it would be inappropriate to apply the presumption of resulting trust;
  5. in such cases, the court needs to make findings as to the parties’ actual intentions and give effect to them;
  6. in doing so, the court should examine the whole course of conduct (which would include the state of the title, the reasons for the decision to put the title in joint names if that is the case, the relationship between the parties, whether the property was intended as a family home, how the acquisition was financed and so on).

 

The facts

The case was an appeal from the Court of Appeal of the Bahamas. M was a Canadian citizen working in the Bahamas. C was a building contractor and a citizen of the Bahamas. M and C were in a personal relationship with each other from September 1991 to July 2008.

During that time M and C acquired several properties which were conveyed into their joint names. M paid the entire cost of purchasing the properties. When the relationship broke down, M claimed to be the sole beneficial owner applying the presumption of a resulting trust in his favour.

C claimed that the parties’ common intention was that they would be equal beneficial owners. According to C, the arrangement was that C would carry out renovation works at the properties. C also contended that M was the ‘breadwinner’ in the relationship and that this was relevant to the analysis.

M claimed that C had failed to carry out any renovation works. M also argued that his understanding was that C would make financial contributions to the acquisition of the properties that would equal his own but that no such contributions were made.

C had succeeded in the Court of Appeal. The court attached particular importance to an email from M to the bank that had provided a loan for the purchase of one of the properties. In this email, M told the bank that the property would be held in joint names, ‘meaning that we would have a 50% interest’. The Court of Appeal thought that this was very significant evidence as to the parties’ actual ownership intentions.

In the Privy Council, M’s case was that this email had not been mentioned at first instance nor in the Court of Appeal hearing. He argued that the Court of Appeal should therefore not have made use of the email in its analysis. In any event, the email was, M alleged, inadmissible for procedural reasons.

 

Clash of presumptions?

Lord Kerr considered whether cases like this gave rise to a ‘clash of presumptions’. On this view, the relationship between the parties might place the case in the ‘domestic consumer’ category; the result was a presumption that equity followed the law and that the parties were joint legal and beneficial owners. Or did the fact that the properties were bought as investments place the case in a ‘non-domestic’ category to which the presumption of resulting trust would apply ([53])?

Lord Kerr’s review of the authorities led him to reject this way of approaching the ownership question. He continued:

‘The Board considers that, save perhaps where there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one presumption over another. In this, as in so many areas of law, context counts for, if not everything, a lot. Context here is set by the parties’ common intention – or by the lack of it. If it is the unambiguous mutual wish of the parties, contributing in unequal shares to the purchase of property, that the joint beneficial ownership should reflect their joint legal ownership, then effect should be given to that wish. If, on the other hand, that is not their wish, or if they have not formed any intention as to beneficial ownership but had, for instance, accepted advice that the property be acquired in joint names, without considering or being aware of the possible consequences of that, the resulting trust solution may provide the answer.’ ([54]).

 

Further fact-finding necessary

The courts below had not considered the relevant facts in sufficient detail. For example, the significance of M’s email to the bank should have been considered at first instance. M should have been given adequate opportunity to make submissions with regard to it.

The Court of Appeal had not addressed the first instance finding that M’s evidence was to be preferred over C’s; this included his evidence as to ownership intentions and the expectation that C would make financial contributions that C had failed to make. The case had to be remitted for hearing before the Supreme Court of the Bahamas.

The court should also consider whether account should be taken of the contributions made by the parties to the costs of acquisition ‘in line with the decision in Muschinski‘ ([60]). This envisages that it might be appropriate (depending presumably on inferred intentions) to use the proceeds of sale of the property to repay the contributions made and then divide the balance between the parties in accordance with their common intention as to ownership ([39]).

Michael Lower

 

 

Compelling evidence of post-acquisition variation of common intention

August 17, 2017

In Chan Ling Ling v Chan Ching Kit ([2017] HKEC 1474) property was held by four siblings as tenants in common. The common intention at the time of acquisition was they would have equal shares.

The defendant argued that there was a post-acquisition variation of this common intention; the varied common intention was that the parties’ respective beneficial interests would reflect their financial contributions.

The defendant argued that the agreement to vary the original common intention should be inferred from an alleged failure of the other siblings to contribute to certain costs associated with the property.

He sought to show that he had contributed 80% of the purchase price / mortgage repayments and so had a corresponding equitable interest.

Deputy Judge Kent Yee summarised the relevant legal principles: there had to be compelling evidence of a post-acquisition variation of the common intention. The court should be slow to infer such an agreement from conduct alone ([38]).

Even if one accepted the defendant’s version of the facts, they did not provide the necessary compelling evidence. The parties remained equal beneficial owners.

Michael Lower

Equitable ownership of the family home: interaction of the common intention constructive trust and the presumed resulting trust

August 2, 2017

The Court of Appeal judgment in Primecredit Ltd v Yeung Chun Pang Barry ([2017] HKEC 1533, CA) deals with several important issues in the law of the ownership of the family home.

A husband (‘H’) and wife (‘W’) acquired a flat as the family home (‘the first flat’). Subsequently, the family bought a new flat  (‘the flat’) relying on the sale of the first flat to pay off a bridging loan used to acquire the flat.

W also helped to pay off the mortgage taken out to help fund the purchase. Title to the flat was in the name of the husband and S (the youngest child and the only son of the family).

Although H and S were legal joint tenants of the flat, W’s evidence was that she did not intend to make a gift to S during her life but only after H and W had died.

Primecredit (‘the creditor’) had the benefit of a charging order over the flat in respect of S’s indebtedness to the creditor.

H died and S became the sole legal owner through the right of survivorship. The creditor then sought an order for sale of the flat. W resisted this arguing that she had a beneficial interest.

Common intention constructive trust

The burden of proof was on W to show that beneficial ownership did not follow legal ownership.

There was no evidence of an express agreement that W was to have a beneficial interest in the flat. Could such a common intention be inferred? The majority of the Court of Appeal (Lam V-P and Cheung JA) thought so. Kwan JA agreed that W had a beneficial interest but on the basis of a presumed resulting trust rather than a common intention constructive trust.

Lam V-P thought that, ‘at least in the domestic context’, there was no need to resort to the resulting trust where the matter can be resolved by recourse to the common intention constructive trust ([1.3]).

He also said:

‘Since Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776, as far as Hong Kong is concerned, the modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context, see Mo Ying v Brillex Development Ltd ([2015] 2 HKLRD 985. In a domestic context, particularly in relation to a matrimonial home, the court is not constrained in that exercise by pure direct monetary contributions to the purchase price, see the judgment of Baroness Hale at [69] in Stack.

In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family were not that common, the court has to pay regard to circumstantial matters.’ ([1.6]). Cheung J.A. made the same point ([2.9]).

Whichever route is followed, the court ‘should have regard to the inherent probabilities in light of the surrounding circumstances at the time when the property was acquired.’ (1.4]). The ‘surrounding circumstances’ (another term for ‘whole course of dealing’?) clearly do need to be taken into account when determining intention; where there are rival interpretations / accounts of the surrounding circumstances, which is the most likely?

The fact that the flat was H and W’s only property was highly relevant ([1.5] per Lam V-P). Cheung J.A. thought it credible that H and W would intend to retain ownership in their lifetimes even if S rather than W was joint legal owner ([2.97]).

Cheung JA pointed to several matters which made it appropriate to infer the necessary common intention. There was W’s evidence that there was no intention that S should have an interest during H and W’s lifetime. The common intention could be inferred from W’s financial contributions ([2.10]).

Cheung JA also said:

‘What the judge seems to have overlooked is that the mother’s interest in the matrimonial home is not solely determined by her financial contributions but by reason of her status of a married woman.’ ([2.10]).

Resulting trust

Kwan JA, alone of the members of the Court of Appeal thought that the first instance finding that there was no common intention (common to H, W and S) could not be overturned ([2.6]).

Instead, he found that W had an interest under a resulting trust. This was based on her contributions and her evidence that no gift to S was intended ([42]). Again the ‘inherent probabilities’ are relevant ([46] – [48]).

Common intention constructive trust and resulting trust?

While Lam V-P thought that the applicability of the common intention constructive trust ruled out any application for the resulting trust ([1.3]). Cheung JA thought that the presumed resulting trust still had a role to play even where the analysis was based on common intention constructive trust ([2.14]).

Charging orders and joint ownership

Lam V-P urged masters dealing with charging order applications in respect of jointly owned property not make the order absolute unless notice has been given to all co-owners ([1.9]).

Charging orders and severance

Lam V-P left open the question as to whether the making of a charging order equitably severed a joint tenancy ([1.8]).

Michael Lower

 

 

 

Settlement induced by misrepresentation that one of the parties had title to land as bona fide purchaser for value

July 25, 2017

In Howin Industrial Ltd v China Group Global Ltd ([2017] HKEC 1485) P transferred land to D2 to D13 for no consideration. D2 to D13 were male indigenous villagers entitled to ding rights. D2 to D13 executed declarations of trust confirming that each of them held his land on trust for P. These declarations were not registered at the Land Registry.

P was wound up. The Government subsequently issued notices of resumption in respect of the land. D2 to D13 assigned the land to D1 which had been incorporated to handle the compensation claims.

P’s liquidators discovered the declarations of trust. They made inquiries and were led to believe that neither D1 nor its lawyers knew of the declarations and that D1 was a bona fide purchaser for value of the land (‘the representation’). This was shown to be false in subsequent criminal proceedings.

Influenced by the representation, P’s liquidators entered into a deed of settlement (‘the deed’) dividing the compensation monies between P and D1.

When P’s liquidators discovered the truth, they sought to have deed set aside. They were successful. It was enough that they were influenced to enter into the deed by the representation (Zurich Insurance Co plc v Hayward [2016] 3 WLR 637, SC).

Time did not start to run until they had discovered the fraud or concealment (Limitation Ordinance, s. 26(1)).

P was entitled to a declaration that it was the sole beneficial owner of the land. This appears to be founded on a resulting trust arising from the fact that D2 to D13 did not give consideration. P did not need to plead the illegality.

In the criminal proceedings, the Court of Appeal had taken the view that the assignments to D2 to D13 were sham documents having no legal effect. D2 to D13 thought that the point of the documents was to transfer the ability to exploit their ding rights.

P was entitled to all of the compensation paid by the Government.

Michael Lower

Easements of necessity

July 17, 2017

In Manjang v Drammeh ((1990) 61 P & CR 194, PC) R, having already occupied 63 Wellington Street in The Gambia for some time, was granted a lease of it for 21 years from 2 February 1977.

R also occupied an adjoining strip of land that lay between 63 Wellington Street and the River Gambia (‘the River Strip’). The only means of access to the River Strip on foot was through 63 Wellington Street. Again after a period of occupation on an uncertain legal basis, R was granted a lease of the River Strip in  1986.

In 1982, R assigned the lease of 63 Wellington Street to A. The assignment did not reserve an express right of way over 63 Wellington Street to access the River Strip.

R argued that a reservation of the right of way should be implied into the assignment. This argument failed.

Lord Oliver set out the three essential requirements for an easement of necessity to be implied: (1) there should have been a common owner of the two plots of land at the time of the assignment; (2) it had to be established that the only way to get to the public highway from the River Strip was across 63 Wellington Street; and (3) there must not have been a specific grant of the right claimed (196 – 7).

The first condition was not satisfied: R had not been the owner of the River Strip at the time of the assignment (R was granted the lease of the River Strip four years later).

It was also arguably the case that the second condition was not satisfied either: it was possible to access the River Strip by boat.

Contrary to the view of the majority of the Gambian Court of Appeal, an easement of necessity can not be implied purely on the grounds of convenience.

Michael Lower

Car parking spaces: common parts?

July 14, 2017

Tai Fat Development (Holding) Co Ltd v Gold King Industrial Building (IO) ([2017] HKEC 1366, CFA) concerned a dispute as to whether or not thirteen car parking spaces in the building were common parts. The first owner of the building claimed to be entitled to their exclusive use.

As always, this was a question of interpretation of the words used in the light of the DMC as a whole, other relevant documents and the factual matrix. The CFA agreed with the courts below that these factors all pointed to the conclusion that the car parking spaces were common parts.

The DMC referred to the spaces as ‘loading and unloading areas’. If the spaces were not common parts there would be a breach of the terms of the Government Grant. There would also be severe practical difficulties.

The first owners also relied on estoppel by convention. The incorporated owners had taken leases of the spaces from them. The necessary common understanding that the first owners owned the spaces was lacking, however; the incorporated owners disputed this claim even as they accepted the leases. Nor could the first owners point to any detriment.

Michael Lower

 

Repairing covenant and the removal of a handrail from a staircase

July 3, 2017

In Dodd v Raebarn Estates Ltd ([2017] EWCA Civ 439, CA (Eng)) Mr D was staying in a friend’s first floor flat. He died after falling while walking down the staircase leading from the flat to the ground floor.

Raebarn owned the freehold of the building. Part of the building was sub-let to an intermediate landlord which had granted further sub-leases of individual flats. The intermediate landlord had, with Raebarn’s consent, altered the building. It removed two existing staircases and replaced them with a new staircase.

The staircase as built did not conform to the plans approved by the local authority in that it seemed likely that the new staircase never had a handrail.

Mrs D brought proceedings against Raebarn under section 4(4) of the Defective Premises Act 1972. Under section 4(4) Raebarn could only be liable if the fact that the new staircase had no handrail amounted to a failure to maintain or repair the property. The question, then, was whether the lack of a handrail amounted to disrepair.

Lewison LJ gave the main judgment with which the other members of the Court of Appeal agreed. The obligation to repair only arises when the demised premises are out of repair ([16]). The duty to repair is not a duty to make safe ([17]). Where, however, there is a need to repair, the work must be carried out in accordance with any applicable regulations and in accordance with standards of good practice at the time that the work is carried out ([25]).

Mrs D’s argument was that the removal of the original staircases was a deterioration in the property giving rise to a need to repair them. The repair works had to be carried out to the requisite standard. The missing handrail meant that they did not satisfy this standard. There had therefore been a failure to maintain and repair the property so that Raebarn was liable under s. 4(4).

This argument failed. The work on the staircases did not give rise to a lack of repair since the head-lease contemplated that such work might be carried out with Raebarn’s consent.

Once the new staircase had been installed, the repairing covenant applied to the staircase as altered. Had it deteriorated? It had not if there had never been a handrail.

Even if the altered staircase had once had a handrail which had been removed, it did not necessarily follow that the staircase was in disrepair. If there was no disrepair, the duty to carry out repairing works to the requisite standard never arose.

Michael Lower