Archive for the ‘common intention constructive trust’ Category

Post-acquisition variation of existing common intention?

November 5, 2016

In Chen Lily v Yip Tsun Wah Alvan ([2016] HKEC 2326, CA) a couple acquired a flat in which they intended to cohabit prior to marriage. The property was acquired in their joint names. The couple broke up and the defendant moved out. There was a dispute as to their respective beneficial entitlements. At first instance it was held, following Stack v Dowden, that given that the couple had purchased the flat as their family home the presumption was that they were beneficial joint tenants.

The plaintiff accepted that the original common intention was that the property would be held as beneficial joint tenants. She argued, however, that there was a subsequent variation of the original common intention so that she would have a larger share of the beneficial ownership. The plaintiff argued that the original joint tenancy was agreed to by her on the basis that the defendant would be solely responsible for the costs of acquiring the flat (both the up-front cost and the mortgage payments). She contended that the common intention was varied when it became clear that she would have to contribute to the acquisition costs because the defendant could not meet them entirely out of his own resources.

The Court of Appeal, Yuen JA giving the main judgment, accepted that such a variation could be inferred from conduct. It was for the plaintiff to prove this variation but she was unable to do so. There was no evidence of any changed common intention. This was a domestic joint venture and attempts to draw up a ‘balance sheet’ based on contributions made were ill-conceived. There was no evidence of any change in the original common intention to hold as beneficial joint tenants.

The domestic joint venture context no longer applied after separation and an order requiring the defendant to bear half the mortgage costs after separation reflected the parties’ intention in the changed circumstances. In any event, the plaintiff was entitled to recover these on the basis that they were payments that were made in order to preserve the property for the parties’ joint benefit ([28.3]).

Michael Lower

Actual intention? Common intention constructive trust not presumed resulting trust.

November 1, 2016

In Re Superyield Holdings Ltd ([2000] 2 HKC 90) a father and son each had one of the two issued shares in SH Ltd. SH Ltd, in turn, held one of the two issued shares in SC Ltd (along with another company LKR Ltd which was essentially owned and controlled by the son). SC Ltd owned a residential property (‘the property’). The question was whether the son was solely beneficially entitled to the property. Recorder Robert Kotewall SC found that he was. The son argued that since the property was bought using a combination of the son’s own funds and a loan to the company that the son had arranged, he could rely on the presumption of a resulting trust. The court seems rather to have found for the son on the basis of the father and son’s actual intention. The judge thought that where the trust rested on actual intention then the presumption of resulting trust had no part to play (at 111). He accepted that SH Ltd was in substance the son’s company and that the father was only involved as a formality to satisfy the then requirements of the Companies Ordinance. The father had been one of the joint guarantors of the loan to SC Ltd used to buy the property and it was possible to argue that this should be treated as a contribution to the purchase price by the father. This would depend upon underlying intention. In any case, the presumption of advancement would apply so that this contribution should be presumed to be a gift from father to son.

Michael Lower

Express agreement leads to constructive trust not resulting trust

October 8, 2016

In Wong Yuk Tung v Wong Po Ling ([2016] HKEC 2143) a husband and wife were legal joint tenants of the family home. The husband’s business ran into difficulties. He and his wife transferred title to the wife and two of their daughters as tenants in common in equal shares. The husband alleged that the arrangement was entered into to put the home out of reach of his creditors and that the daughters held on trust for him. The daughters disputed this. Recorder Lisa KY Wong SC held that since the question was whether or not there was an express agreement between the father and his daughters, this was a common intention constructive trust rather than a resulting trust case. She referred to Re Superyield Holdings Ltd and Liu Wai Keung v Liu Wai Man. She found that there was evidence of an express agreement that accorded with the father’s case. The daughters held the property (and the properties later bought using the proceeds of sale) on trust for the father.

Michael Lower

Can the creation of a common intention constructive trust be inferred from conduct alone?

August 31, 2016

In Morris v Morris ([2008] EWCA Civ 257) Mrs Morris argued that she was beneficially entitled to a share in the assets of the farming partnership business carried on by her husband and his mother. Mrs Morris’ claim was based on common intention constructive trust and proprietary estoppel. There was no express agreement between Mrs Morris, on the one hand, and her husband and mother-in-law on the other. She argued that, after Stack, the common intention constructive trust could be inferred from her conduct. The conduct that she relied upon was the fact that she did substantial unpaid work in her husband’s business. Mrs Morris also carried on her own, separate horse riding school at the farm. She invested money in the improvement of the land to accommodate this business. She relied on her work and the payment for these works as the basis for inferring the common intention constructive trust.

The English Court of Appeal unanimously held that Mrs Morris’ contributions were not evidence of a common intention to share beneficial ownership of the farming business and its assets. The financial contributions were explained by her desire to develop her own horse riding business. The lack of any express assurance was also fatal to the proprietary estoppel claim. The judgments in the Court of Appeal are significant because they stress that the courts are reluctant to infer a common intention from conduct alone ([23] Sir Peter Gibson and [36] May LJ). Sir Peter Gibson suggests (at [26]) that the common intention can only be inferred from conduct where the alleged agreement is the only explanation of the conduct. This must be too stringent a test; the true test must be whether the alleged agreement is the most likely explanation for the conduct.

Michael Lower

 

Man promises mistress a home for life if she leaves her home country to live with him

August 10, 2016

In Ungurian v Lesnoff ([1990] Ch. 206) L was Polish and had a flat in Poland which she had the right to occupy for the rest of her life. She also had a promising academic career there. She entered into a relationship with U. U bought a house in London with the intention that L would be able to live there for the rest of her life. In addition to giving up her flat and career, L carried out substantial work on the house. The relationship broke down and U sought possession. L claimed that she was entitled to live there for the rest of her life. Vinelott J. referred to the authorities concerning the common intention constructive trust (Grant v Edwards and Eves v Eves especially). The common understanding in this case was that if L left Poland to live with U then he would provide her with the security of a home (at 222) for the rest of her life (224). An irrevocable licence would not give full effect to the intention. U held the flat on trust to permit L to live there for the rest of her life unless U sold it with L’s consent and bought her another residence.

Following Bannister v Bannister, this made L a tenant fo life under the Settled Land Act 1925. She was entitled to call on U to execute a vesting deed in her favour. She could sell the house and buy another property or invest the proceeds and enjoy the income produced by this investment.

Michael Lower

Proprietary estoppel: genuine belief but no assurance

July 21, 2016

McGuiness v Preece ([2016] EWHC 1518 (Ch)) concerned a son’s claim to land owned by his parents. The parents had established a family business in which their four children worked. The parents transferred the business into a company set up for the purpose. The parents were the majority shareholders until they were bought out by the children when the father decided to retire. The parents retained in their own name the title to the land on which the business was carried on. The father died and ownership of the land passed to his wife. She then died leaving the land to her daughter. One of the sons claimed to have an interest in the land, relying on proprietary estoppel and / or a common intention constructive trust. The claim failed.

Newey J. accepted that the son had a genuine belief that he had or was to have an interest in the land. The claim failed, though, because nothing said or done by or on behalf of the father was a ‘clear enough’ (Thorner v Major) assurance. From a constructive trust perspective, there was no assurance or agreement. Newey J. was sympathetic to the argument that the sale of the business (without the land) was the subject of a contract and so there was no room for equity to play a part. For the sake of argument, however, he was prepared to assume that the contractual context did not preclude reliance on proprietary estoppel and the common intention constructive trust ([79]).

Michael Lower

Australia: presumption of beneficial joint tenancy where both spouses contributed to the purchase price of the matrimonial home

June 22, 2016

In Trustees of Property of Cummins v Cummins ([2006] HCA 6) title to a married couple’s family home was held by them as legal joint tenants. The wife had contributed two thirds of the purchase price. The husband transferred his interest in the joint tenancy to his wife. He later went into bankruptcy. The bankruptcy severed the joint tenancy. The transfer was void against the trustee in bankruptcy as a transaction intended to defraud creditors. The question was whether the couple had been beneficial joint tenants on the basis that the beneficial ownership was in line with the legal ownership. In this case, half of the value of the home was available to the husband’s creditors. The wife contended that she had a two thirds share under a resulting trust to reflect the unequal contributions to the purchase price; in that case, only one third of the value of the home would be available to the creditors. The High Court of Australia held that there was a beneficial joint tenancy.

In determining the beneficial ownership, the court was not confined to the proportionate contributions to the purchase price but could look at ‘evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction’ ([64]) The fact that the property was the matrimonial home had significant evidential value. The High Court endorsed the following statement in Professor Scott’s The Law of Trusts:

‘Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them.’ ([70])

The same applied, even more strongly, where the couple were legal joint tenants ([71]). Further:

‘The subsistence of the matrimonial relationship … supports the choice of joint tenancy with the prospect of survivorship.’ ([71]).

Note that the statement approved requires that both spouses should have made a contribution to the purchase price before the presumption of a beneficial joint tenancy of the matrimonial home arises.

Michael Lower

 

Establishing a common intention constructive trust

June 16, 2016

In Fung Oi Ha v Fung Pui On ([2016] HKEC 1272, CFI) the title to a family home was in the father’s name. In 2005, the father assigned the home into the names of himself and his son as joint tenants. In 2011, the father and son assigned the home into the son’s sole name. The son gave no consideration for either of these assignments. One of the daughters brought proceedings seeking a declaration that she had a beneficial interest under a common intention constructive trust. There was no express agreement that she was to have an interest. The daughter relied on the fact that, since taking up employment, she had over many years given a large proportion of her salary to her mother and this money had been used to discharge the outgoings and expenses of the property. She had also  looked after the father since his first stroke in 2003. The daughter’s claim failed.

Recorder Lisa K Y Wong SC considered whether the common intention could be inferred. She commented on the difference in approach between Lord Bridge in Rosset (only contributions to purchase price or mortgage installments will do) and Fox LJ in Burns v Burns (any payments  referable to the acquisition of the house will do, including contributions to household expenses that allow the other party to meet the mortgage payments) (at [78]). In fact, the judge took a broader view: a holistic review of the whole course of dealing applying the factors identified by Baroness Hale in paragraph 69 of Stack v Dowden should be undertaken ([90] – [94]). This did not help the plaintiff, in this case:

‘Given the multifactorial nature of the question of intention, just as there are cases where the proof of financial contributions by one who is not the legal owner or in excess of one’s share of legal ownership may readily justify the inference of an intention to share beneficial ownership, there would conceivably be instances where the establishment of financial contributions does not support the inference of a common intention to share beneficial ownership. I am inclined to think that this present case is just such an instance.’ ([100]).

Context is relevant: this was not a claim by a spouse to a share in the matrimonial home ([101]):

‘The relationship with which I am concerned is that between parents and children in what appears to be a conventional Chinese family practising traditional family values … I daresay, in a lot of these cases, the parents (and probably the children too) would be taken aback if they be told that, even in the absence of an express agreement or understanding, the children’s contributions could be used to support the inference of an intention to share the beneficial interest of the parents’ property (which may be the parents’ only shelter in old age) if such contributions should happen to be applied toward the mortgage payments of the property.’ ([102]).

The plaintiff failed and was ordered to give up possession of the property to her brother.

Michael Lower

 

Proving the existence of a common intention constructive trust

May 18, 2016

In Ip Man Shan v Ching Hing Construction Co Ltd ([2005] HKEC 188, CA) ICP paid for land but he channeled the payment through his company (Ching Hing). Ching Hing then paid the construction costs for the large family residence constructed on the land. Title to the land went into the name of ICP’s son, Ip Man Shan. At first instance, Johnson Lam J (as he then was) decided that there was sufficient evidence to establish that Ip Man Shan was a mere nominee, holding the title on common intention constructive trust for ICP and Ching Hing. This result could perhaps have been arrived at by applying the presumed resulting trust approach since ICP supplied the purchase price and Ching Hing financed and carried out the construction work. Nevertheless, Johnson Lam J. made it clear that he had looked at other additional evidence to support his conclusion as to the common intention constructive trust. He rejected a narrow approach to Lord Bridge’s statement in Rosset that only contributions to the purchase price or mortgage installments could be relied upon to infer the existence of a common intention constructive trust. He said that an intention to create a trust could also be inferred from other equally ‘concrete and compelling conduct’  (see here for an account of Johnson Lam J’s judgment). Ip Man Shan died. His son continued the proceedings and appealed against the first instance decision.

The Court of Appeal (Le Pichon JA giving the judgment with which the other members of the Court of Appeal agreed) upheld the first instance decision and the reasoning on which it was based. The judgment does not include an analysis of the law, so it seems that there was an implicit acceptance of Johnson Lam J’s approach. The judgment, rather, identifies the aspect of the whole course of conduct (at the time of acquisition and subsequently) that pointed to the intention being to create a trust (rather than make a gift to Ip Man Shan). This included evidence of discussions between the parents (who were also the founders of Ching Hing). The property was acquired subject to a condition as to the construction work that was to be carried our before the Crown Lease would be granted and Ip Man Shan (then recently graduated) was in no position to finance these works ([24]). Ip Man Shan’s parents and six siblings all had shares in Ching Hing so that it was not in a position to make a gift of the construction costs to Ip Man Shan ([25]). Ip Man Shan had no input into the design of the building and it was used as a residence for the whole family for many years ([26]). Ip Man Shan gave his mother a very wide-ranging power of attorney concerning the property and this was further proof that he accepted that he was a mere nominee. Exercising her power, the mother granted a lease of the property to Ching Hing for the full term of the Crown Lease less one day. This was a recognition of Ching Hing’s interest in the property. The Court of Appeal also considered the fact that the property was not shown as an asset in the company’s accounts; it was satisfied that this could be explained on the basis that this was thought to be the proper accounting treatment given that the legal title was vested in Ip Man Shan. So an analysis of the other ‘concrete and compelling conduct’ (in addition to financial contributions) confirmed that there was a trust in favour of ICP and Ching Hing.

Michael Lower

Burns v Burns: unmarried cohabitees, title to family home in sole name

May 11, 2016

In Burns v Burns ([1984] Ch. 317, CA (Eng)) the couple were unmarried (though the woman had changed her  family name to be the same as her partner’s). They lived together for two years and had a child before buying the house that was to be the family home. Title was in the man’s sole name and he made all of the contributions to the purchase price and mortgage installments). Although the female partner contributed to household expenses (rates, phone bills, domestic fixtures and fittings and redecoration) these payments could not be said to have been necessary to allow the man to meet the mortgage payments. The couple lived in the home for seventeen years before separating. The female partner claimed to be entitled to a beneficial interest in the property under a common intention constructive trust.

The claim failed. There was no evidence of an express intention that she was to have an interest in the property. Nor had she made any payments that could give her an interest under a  resulting trust. It was not possible to infer the existence of a common intention constructive trust from the payments that she had made since they were not referable to the acquisition of the property (Fox LJ ). It would have been different if there had either been direct contributions to the purchase price or if her contributions to the household finances had been necessary to allow the man to make the mortgage payments.

The fact that the woman carried out domestic duties and looked after the children could not be taken into account: ‘the mere fact that the parties live together and do the ordinary domestic tasks is, in my view, no indication at all that they thereby intended to alter the existing property rights of either of them’ (Fox LJ at 331). May LJ made the same point:

‘when the house is taken in the man’s name alone, if the woman makes no “real” or “substantial” financial contribution towards either the purchase price, deposit or mortgage instalments by means of which the family home was acquired, then she is not entitled to any share in the beneficial interest in that home even though over a very substantial number of years she may have worked just as hard as the man in maintaining the family in the sense of keeping the house, giving birth to and looking after and helping to bring up the children of the union’ (at 345).

Michael Lower