Archive for the ‘express declaration’ Category

Non-registration of trust. Dispositions to defraud creditors

June 1, 2016

In Goldfame Consultants Ltd v Tse Sai Ming ([2016] HKEC 1113, CFI) TCS agreed to sell land to Goldfame. The contract provided for the payment of deposits and then for the payment of the balance of the purchase price to be made on 14 August 2006. The contract provided that the assignment of the land would take place within 7 days of receipt of a letter from the Buildings Department approving the proposed site formation plan or at such other time as the purchaser might specify. The balance of the purchase price was duly paid on 14 August 2006 but the approval had not been received and the assignment did not take place. Instead, TCS executed Declarations of Trust under which he held the land on trust for Goldfame. TCS also nominated Goldfame as attorney to act for him in relation to the land. Neither the contract nor any of the other documents were registered with the Land Registry.

TCS died intestate in 2010 and TSM was granted letters of administration of his estate. TSM sold the land to H. Goldfame brought an action against TSM for breach of contract seeking damages or the return of the price paid to TCS. It also sought a declaration that TSM held the land on trust for Goldfame. It sought to have the sale to H set aside under section 60 of the Conveyancing and Property Ordinance.

There was no answer to the breach of contract claim and TSM was ordered to repay the purchase price with interest. It was accepted on all sides that the sale contract and the declarations of trust were void as against H since they had not been registered and there was no reason to doubt his good faith. Section 3(2) of the Land Registration Ordinance took effect.

Goldfame was forced to rely on section 60 of the Conveyancing and Property Ordinance. In Tradepower (Holdings) Ltd (in liquidation) v Tradepower (Hong Kong) Ltd, Ribeiro PJ  said that ‘where the disposition was made for valuable consideration, or where the disponor is not insolvent or where the disposition does not deplete the fund potentially available to creditors, an actual intent to defraud creditors must be shown as an inference properly to be drawn on the available evidence before s. 60 is engaged.’ (at [88]). The sale to H was not at an undervalue, nor was there any intention to defraud creditors ([94]). The claim against H failed.

In commenting on the expert evidence as to the market value of the property at the time of the sale to H, Recorder Coleman SC expressed his preference for valuation methods based on direct comparables where available. The subject matter of the transaction (undeveloped rural land where there was no guarantee that the approvals needed for development would be obtained) was somewhat out of the ordinary and so indices looking at the property market as a whole were unhelpful. Valuations based on the residual method involved too many assumptions to be as useful as direct comparables.

Michael Lower

An express declaration of trust is conclusive in the absence of a vitiating factor

March 23, 2016

In Pankhania v Chandegra ([2012] EWCA Civ 1438, CA (Eng)) title to a house was transferred into the joint names of P and C (an aunt and nephew). The transfer contained an express declaration of trust that P and C were equitable tenants in common in equal shares. P sought an order for sale and an equal share of the net proceeds. C claimed that there was, at the time of the acquisition, a common intention that she was to be the sole beneficial owner. C succeeded at first instance but P’s appeal was successful.

The express declaration was conclusive (Goodman v GallantPettitt v Pettitt) in the absence of a vitiating factor such as fraud or mistake. If the express declaration did not reflect the parties’ subjective intentions, either of them could apply for rectification but that had not been done. Further, the fact that the express declaration may not have reflected subjective intentions was not enough to render the declaration a sham. There was no attempt to deceive any third party; the arrangements between the co-owners were a matter of indifference to the mortgage lender.

Michael Lower

An express declaration as to the nature of a co-ownership is conclusive

December 14, 2010

If a deed (such as a conveyance) contains an express declaration as to whether a co-ownership is a joint tenancy or a tenancy in common then this declaration is conclusive. The severance of a joint tenancy leads to each joint tenant having an equal share as tenant in common.

In Goodman v Gallant ([1986] 2 WLR 236, [1986] 1 All ER 311, CA (Eng)) Goodman and Gallant were co-habitees. Their home had been conveyed into their joint names and the conveyance expressly provided that they were to hold as beneficial joint tenants. The Court of Appeal, Slade LJ giving the leading judgment, held that the express declaration was conclusive and that (in the absence of express words to the contrary in the conveyance) when a joint tenancy is severed the result is that the joint tenants hold as tenants in common in equal shares. The judgment of Slade LJ shows that there had been considerable doubt as to the correct law on each of these fundamentally important issues.