Trusts and the Limitation Ordinance

In Liu Wai Keung v Liu Wai Man ([2014] HKEC 2065, CA) title to a flat was in the name of a sister who held it on common intention constructive trust for her brother. The brother and his family were living in the property. He had made two demands for her to transfer title to him (in 1998/99 and in 2004/5) and these had not been complied with. The sister now sought to rely on section 20(2) of the Limitation Ordinance to defeat her brother’s claim. This failed, since the action fell within section 20(1)(b) of the Limitation Ordinance. It was an action ‘to recover from the trustee trust property or the proceeds thereof in the possession of the trustee’. The sister argued that ‘possession’ meant actual possession and that her brother was in possession. Kwan JA (giving the reasons for judgment of the court) explained that the trustee remained in possession ‘if the trustee has the power of control over the property and is in a position to obtain possession of it’. This was true in the present case because of the sister’s legal title ([21]). The sister’s legal title could not be said to be adverse to her brother’s beneficial interest but was entirely consistent with it ([26]). Lord Sumption JSC explained the underlying policy in Williams v Central Bank of Nigeria ([2014] AC 1189): trustees still in possession of the trust asset (here the legal title) should not be allowed to use the Limitation Ordinance to defeat the beneficiary’s claim and keep the trust property for themselves. This reasoning only applied to those who have assumed the responsibilities of a trustee, expressly or de facto. It did not apply to those ‘under a purely ancillary liability’ since their dealings with the assets were at all times adverse to those of the beneficiary.

Michael Lower

 

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