When is there sufficient evidence that a resulting trust has been brought to an end?

In Rose Palace Ltd v Jung Christopher Lam ([2013] HKEC 146, CFI) in October 1988 W and C were the purchasers of the property in question under a sale and purchase agreement. They each contributed to the 10% deposit and they were to acquire the property as tenants in common in equal shares. Then they entered into a Memorandum of Direction providing that the property would be assigned solely to C. In fact, C entered into a sub-sale with SF Ltd and the property was assigned directly to SF Ltd. C joined in as confirmor but W did not. P acquired the property from a successor of SF Ltd and had entered into an agreement to sell it to D.

D raised a requisition asking how W’s beneficial interest under the resulting trust that arose when he contributed to the deposit had been brought to an end. P relied on statutory declarations from a partner in the firm that acted for W and C to the effect that his firm’s practice at that time was to explain to W that the Memorandum brought an end to his interest. It was held that this was sufficient evidence that the interest had come to an end (and this was corroborated by the fact that W had never made any claim in the intervening years ([20]).

The court also considered whether any potential action by W would be barred by virtue of section 7(2) of the Limitation Ordinance. The question here was whether P was a trustee for the purposes of section 20(1)(b) of the Limitation Ordinance since, if so, there would be no limitation defence to W’s action. The court held that the section did not apply to constructive trustees who were strangers to the trust but became trustees by virtue of some dishonest acts of interference. P (if it was a constructive trustee at all) could only belong to this category of constructive trustee and so section 20 did not apply. W’s action would be time-barred.

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Tags: Michael Lower, ownership of the family home, resulting trust