Archive for the ‘co-ownership’ Category

When is one co-owner who collected rent liable to account to the other?

November 24, 2011

Where one co-owner collects rents the mere fact of being co-owners does not give rise to a liability to account to the other co-owner(s). A liability to account to the other for the latter’s share arises where the former is the agent or bailiff of the latter. It can also arise in partition actions (or actions that are equivalent), administration actions, in other cases where there is a fund in court, where the court makes an order for sale as an alternative to partition or where one party claims an interest under a resulting or constructive trust and the court is asked to quantify that interest (paras. 103 – 105).

Where one co-owner collects the other’s share of rent, it is possible to imply an agency. It is also possible (depending on the context) that this agent holds the rents collected on a ‘real’ constructive trust so that there is no limitation period in respect of the claim by the agent for the rents received (see Limitation Ordinance, s. 20).

In Chen Yu Tsui v Tong Kui Kwong ([2005] HKEC 1679, CA) property was held by two brothers as tenants in common in equal shares. One brother (the defendant) collected all the rents and after a time stopped accounting to the other (the plaintiff’s deceased husband) for his share of the rents. The plaintiff brought an action to recover the rents. It was held that there was a duty to account in this case  since the defendant had impliedly acted as his brother’s agent (paras. 111 – 112). The action was not time-barred. This was a ‘real’ constructive trust to which section 20(1) of the Limitation ordinance applied (para. 123).

Michael Lower

Beneficiary seeking order for sale / account in an interlocutory application

November 9, 2011

In Lam Sik Shi v Lam Sik Ying ([2008] HKEC 1048) P was the beneficiary under a trust of his late father’s estate. D1, his half-brother, was the trustee. D2 was a company which had bought property forming part of the trust estate. P alleged that the sale was at an undervalue and he sought a declaration that the sale was void or voidable. He sought to have D2 account as constructive trustee. A lis pendens had been registered. In an interlocutory hearing, P sought an order for sale with the proceeds to be paid into court pending the final hearing or, alternatively, the appointment of a receiver. The court refused to make either order. P’s position was adequately protected by the registration of the lis pendens.

Michael Lower

Beneficial title in sole name even though the legal title is in joint names

September 22, 2011

Abbey National Bank plc v Stringer ([2006] EWCA Civ 338, CA (Eng)) concerned property the title to which was in the joint names of a mother and a son. This was because the mother was 50 years old at the time of the purchase and the lender wanted someone younger to be jointly liable on the mortgage. The son was 19 at the time. He made no contributions to the purchase price or mortgage instalments. Years later, the son persuaded his mother to sign some documents. She was elderly and poorly educated. She was Italian and did not speak good English. She was not familiar with business matters. She signed the documents because she trusted her son. They were not explained to her in either Italian or English. The documents were a second mortgage over the home in respect of a loan facility for a business in which the son was a partner. The second mortgagee sought possession of the property. The English Court of Appeal decided that although the legal title was in joint names, the mother was the sole beneficial owner; the Court of Appeal thought that there must have been an agreement between them to that effect. Thus, the son himself had no property in the home. This is a striking exception to the presumption formulated soon after in the House of Lords decision in Stack that there is a presumption of equal beneficial ownership where the title is in joint names. The Court of Appeal went on to hold that the mortgage was not enforceable against the mother because she had signed it as a result of her son’s undue influence. The bank had taken none of the steps required to show that the mother knew what she was signing and the associated risks.

Commorientes and survivorship

September 16, 2011

In Ting Kam Yuen v Cheung Wing Kin ([2011] HKEC 1151) H and W were joint tenants of two properties. They were both in the same fishing vessel that sank after colliding with a ship. Section 11(1) of the Conveyancing and Property Ordinance  provides that where there is uncertainty as to the order in which joint tenants have died the younger is deemed to survive the elder. W was younger than H. If there were any uncertainty, the property would pass into her estate. In this case, however, the court concluded on the facts that H had, in fact, survived a little while longer than W. As a result, the properties passed to H’s estate under the right of survivorship and so were available to his creditors.

Court can order separate properties to be sold as a single lot

December 27, 2010

The Partition Ordinance does not allow the Court to bundle several properties together to form a single property. Once the Court has decided that each of the properties is to be sold it can order that they be sold as if they were a single lot. Co-owners cannot resist the making of an order for sale simply because they would prefer that the other co-owners be locked into the co-ownership and so to pay an inflated price to buy out the relevant shares.

Golden Bay Investment Ltd v Chou Hung ([1994] 2 HKC 197, CA) concerned four separate co-owned properties. The plaintiffs had applied for an order for sale in respect of them, either as a single lot or as four separate units. The four properties were all empty; the buildings on them had been demolished because they were unsafe. The Court of Appeal ordered that the properties be sold as a single lot. This was the obviously sensible course if the best price was to be obtained. The Court, having decided that each property was to be sold, is empowered by section 6(4) to give such necessary or proper consequential directions. This allows it to order that separate properties be sold as if they were a single lot. Bokhary JA also remarked that the Court would not refrain from making an order for sale simply in order to lock the plaintiffs into a co-ownership and so force them to buy in the remaining shares at an inflated price.

Agreement in principle not enough to sever

December 26, 2010

An agreement in principle to sever a joint tenancy is not enough to amount to a mutual agreement or a course of conduct.

In Gore and Snell v Carpenter ((1990) 60 P & CR 456) a husband and wife owned two houses as joint tenants. They agreed in principle that they would have one of the houses each (and end the joint tenancies). A draft separation agreement included a clause severing one of the joint tenancies but this agreement was part of a package of proposals. Final agreement on the proposals had not been reached by the time of the husband’s death. Judge Blackett-Ord held that there had been no severance. It is a question of intention in each case (at 464). In this case, the parties had come close to agreeing but had not agreed. There was no course of conduct. This requires both parties to commit themselves to a severance but the wife never had.

Court can order a sale under the Partition Ordinance whether or not partition is feasible

December 22, 2010

The Court’s power to order a sale under the Partition Ordinance can be exercised whether or not a partition is physically feasible or practicable.

In Pun Jong-Sau v Poon Wong-Kong ([1980] HKLR 662, HC) the majority of the co-owners of a fairly old multi-storey building applied for an order for sale under the Partition Ordinance. Four co-owners (the defendants) argued against the making of such an order. Expert evidence showed that partition was physically but not economically feasible. The defendants argued that if the Court would not make an order for partition then it had no power to order a sale. Trainer J. rejected this. The aim of the Partition Ordinance was to give the Court the ability to respond as it saw fit and even to refuse to make an order. The Court could make an order for sale even when partition was not physically possible or practicable.

Agreeing to make mutual wills can sever a joint tenancy

December 21, 2010

An agreement to make mutual wills concerning property that the parties held as joint tenants can sever the joint tenancy.

In Re Wilford’s Estate ((1879) L.R. 11 Ch.D. 267) two sisters held certain property as joint tenants. They mutually agreed that they would each make wills leaving the property to the surviving sister and after her death to a niece. It was held that this was a dealing by each of the sisters with her half ‘share’ in the property. It is an example of severance by course of conduct.

Factors relevant to order for sale under the Partition Ordinance

December 21, 2010

In considering whether to order a sale under the Partition Ordinance the court is to consider how the order would affect persons ‘interested’ in the property. This refers only to those with a legal or beneficial interest in the property.

In Ip Sau Shu v Sham Lai Hing ([2003] 2 HKLRD 916, CFI) the plaintiff and defendant were joint tenants of the property at which they co-habited, They had a daughter who lived with them. They fell out. The plaintiff severed the joint tenancy and sought an order for sale. The power to order a sale is found in section 6 of the Partition Ordinance. Section 6(1) empowers the court to order a sale ‘where it appears to the Court that a partition of the property would not be beneficial to all the parties interested.’  One question was whether the daughter was ‘interested’. Deputy Judge Poon held that she was not. Only someone with a legal or beneficial interest in the property was ‘interested’ in the relevant sense. The daughter’s circumstances were relevant only as an aspect of her mother (the defendant’s) circumstances. On the facts, the plaintiff would suffer far greater hardship if a sale were denied than would be caused to the defendant by the sale. Accordingly, an order for sale was made.

A DMC need not attach a right to exclusive use to any particular shares in the land

December 19, 2010

The right to exclusive use or occupation of a specific part of  a building in multiple ownership in Hong Kong is usually created by covenant between the co-owners contained in the Deed of Mutual Covenant. The covenant can be enforced between co-owners (Conveyancing and Property Ordinance s.41(7)) whether or not the right to enforce the covenant is expressly attached to ownership of ‘shares’ (or to any particular shares)  in the building. It is enough that the party seeking to enforce the right to exclusive occupation has ‘shares’ in the building (is a tenant in common).  

In Jumbo King v Faithful Properties Ltd ([1999] 3 HKLRD 757, CFA) a developer purported to assign the right to the exclusive occupation of certain utility rooms and portions of a flat roof to purchasers of units in the commercial part of his development. The right to exclusive occuption of the utility rooms and portions of the flat roof was not expressly attached in the Deed of Mutual Covenant to ownership of shares in the building (a share being a stated fraction of a tenancy in common). The Court of Final Appeal held that there was no legal necessity for the right to exclusive use to be expressly attached to ownership of  a stated percentage ownership of the development (to specific shares). It is enough that the person claiming the right to exclusive occupation has some shares. This is necessary because the covenant in question is a land covenant made enforceable between co-owners by CPO s.41(7) and because the right to go to any part of the building relies on the unity of possession enjoyed by a tenant in common.