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

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

 

 

 

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6 Responses to “Equitable ownership of the family home: interaction of the common intention constructive trust and the presumed resulting trust”

  1. Lauren Says:

    You have no idea how much you have helped my law studies over the last year. Thank you!

  2. avocawho Says:

    Very interesting read. Thank you.
    Any chance to follow through to the finalization of the matter and publish the result here.?

    • Michael Lower Says:

      Thanks for commenting. Unless the case goes to the Court of Final Appeal then the result is that the wife has a beneficial interest. The court doesn’t deal with the extent of her interest because, I guess, it was enough for her to establish that she had an equitable interest that would prevent the sale of the property.

  3. Ka-yue Lam Says:

    Dear Prof. Lower,

    Thanks I find this very useful, especially when we are dealing with one question which touches on the last paragraph of your summary:- Whether a Charging Order Absolute would sever a joint tenancy, and whether a discharge to that charging order would “cancel” the severance (A lot of my colleagues in practice thought that a discharge would have this effect).

    (I was a LLB student and took your Land Law class in Year 3 (2011-2012). Now I work as an assistant solicitor in Huen & Cheung. One of our major practice is to enforce the loan agreements for finance companies. )

    Thanks again and have a nice weekend!

    Regards, Florence Lam

    On Wed, Aug 2, 2017 at 10:34 PM, Hong Kong Land Law Blog wrote:

    > Michael Lower posted: “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 fir” >

    • Michael Lower Says:

      Dear Florence,
      Nice to hear from you and thanks for pointing out the practical relevance of this aspect of the case. Personally, I can’t see how, if a charging order does sever a joint tenancy, that severance could ever be ‘cancelled’? That could only be the case if there were something conditional about a severance (which there isn’t); a severance reflects an immediate intention. Once a tenancy in common has arisen, it would not be possible to revert to the joint tenancy since it would not be possible to re-create the unities. That’s my view anyway.
      Best wishes,
      Michael

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