Archive for the ‘Formalities’ Category

England: oral agreements and the common intention constructive trust

February 19, 2017

In Matchmove Ltd v Dowding ([2016] EWCA Civ 1233, CA (Eng)) Matchmove (a company controlled by F, a property developer) was negotiating for the purchase of a plot of land (‘the land’) and the adjoining meadow. F intended to split the land into two plots and to build a house on each plot. He orally agreed with his friend D that D would buy one of the plots and the meadow (D wanted to keep horses on the meadow).

In due course, Matchmove entered into a written contract for the sale of the plot to D and this sale was completed. There was, however, no written contract for the sale of the meadow to D. F and D fell out and F sought to resile from the oral agreement to sell the meadow to D.

D sought a declaration that Matchmove held the meadow on trust for him. Matchmove denied the existence of a binding agreement for the sale of the meadow. It relied on the lack of a signed written agreement to satisfy section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.

F had intended the oral agreement concerning the meadow to be immediately binding. He was well known by D to have a business approach that attached real importance to his word as a businessman. By the time of the dispute, D had paid the entire purchase price for the meadow to Matchmove.

In these circumstances, the question was whether the agreement gave rise to a common intention constructive trust that could fall within section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989.

The Court of Appeal referred to Arden LJ’s discussion of this question in Herbert v Doyle. There, Arden LJ said that section 2(5) could  not be relied on:  (1) if the parties intend to make a formal agreement setting out the terms on which one or more of the parties is to acquire an interest in property; (2) if further terms for that acquisition remain to be agreed between them so that the interest in property is not clearly identified; and (3) if the parties do not expect their agreement to be immediately binding.

The Court of Appeal did not see this statement as setting out three conditions to be satisfied but as being three ways of making the same point about the effect of the judgment in Cobbe v Yeoman’s Row ([32]).

There was a clear express agreement between the parties. Although both parties were well aware that a written contract would be needed, they regarded this as a technicality and took the view that they already had a binding agreement. The payments made by D provided the detrimental reliance.

There was a common intention constructive trust that fell within section 2(5). D could enforce the oral agreement for the purchase of the meadow.

Michael Lower



Resulting or express trust?

October 28, 2015

In Ng Tak Kau v Cheung Man Kwai ([2015] HKEC 1942, CFI) title to the family home was conveyed into the names of a father and son as joint tenants. When the son ran into financial difficulties, the son assigned his interest in the property to the father. The son’s major creditor argued that this assignment was voidable under section 60 of the Conveyancing and Property Ordinance (on the basis that it as entered into with the intent to defraud creditors).

The first question that the court had to consider was whether the father was the sole beneficial owner. The evidence showed clearly that he had provided the entire purchase price and that, although the presumption of advancement arose, there was no intention to make a gift to the son. There was clear evidence of an agreement (reached with the concurrence of other family members) that the son’s name was on the title purely with a view to ‘easy administration of family assets’ in the event of the father’s death ([19]). Thus, the son had no share and the transaction was merely the exercise of the father’s rights as sole beneficial owner. The creditor’s claim failed. There was no question of estoppel since the creditor did not rely on any belief as to the son’s ownership when making the loan to the son.

It is perhaps surprising that the conclusion was that there was an express trust in favour of the father ([40]) given the lack of writing to evidence the trust (as required by section 5(1) of the Conveyancing and Property Ordinance). The analysis had been couched in resulting trust terms and could easily have been thought of as a common intention constructive trust.

Michael Lower

The common intention constructive trust is an express trust

August 5, 2015

In Yip Yuk Kwong v Yip Chun Yin ([2015] HKEC 1312) title to property was in the names of a mother and son but (along with the father) the common intention was that the parents were the beneficial owners. The son’s name was on the title only because he was a solicitor and the firm that employed him would do the conveyancing at a concessionary rate if he were one of the buyers. The father made all the mortgage payments. The son became bankrupt in 1998 and he immediately asserted that he was only a trustee of the property. The court was satisfied that the common intention existed. It might have been better had there been a written declaration of trust but the purpose of the common intention constructive trust is precisely to allow the failure to comply with this formality to be overlooked ([18] per Deputy Judge Saunders).

Michael Lower

Agreement to transfer beneficial interest: proprietary estoppel as a way of circumventing a failure to satisfy the formalities

July 1, 2015

In Sum Fan Hung v Chum Mei Diu ([2015] HKEC 1100, CFI) the plaintiff and the defendant were sisters. The plaintiff bought a flat in 1997. Title was in the defendant’s name but there was no dispute that the property was held on trust (presumably a common intention constructive trust) for the plaintiff. In 2000, the plaintiff found she could no longer meet the mortgage payments. She orally agreed with the defendant that the defendant was to become the sole legal and beneficial owner of the property. In return, the defendant would take on all liabilities relating to the property without any right of recourse to the plaintiff.  This agreement was not recorded in writing signed by the plaintiff. This was a problem since section 5(1)(a) of the Conveyancing and Property Ordinance requires assignments of equitable interests in land to be in writing and signed by the assignor or an authorized agent. This problem was circumvented by dealing with it as a proprietary estoppel case. The agreement provided the assurance and the plaintiff’s later payments (of mortgage payments and so on) provided the detrimental reliance. The court declared that the defendant became the sole legal and beneficial owner from the time of the agreement. Proprietary estoppel circumvented the failure to satisfy the formality requirements.

Michael Lower

Signature requirement satisfied where written document intended to have contractual effect

July 25, 2013

In Leeman v Stocks ([1951] Ch 941) property was sold at auction. The auctioneer got the purchaser to sign a contract. He then reported to the seller on what had happened and the seller did not object. The contract was not signed by or on behalf of the seller. The wording of the printed contract ended with the words ‘As witness the hands of the parties’ and so seemed to envisage hand-written signatures. The seller later refused to proceed and the buyer sought specific performance.

The purchaser succeeded despite the lack of the seller’s signature. It was enough that the written contract was clearly regarded as the authorised and formal embodiment of the parties’ contractually binding intention and that the seller’s name was written in the contract. By requiring the purchaser to sign the contract, the auctioneer (as agent of the seller) was recognizing the name of the seller written in the contract as the seller’s signature.

While the contract seemed to require the parties’ hand-written signatures, this did not matter where there was evidence to show that neither party actually contemplated that there would be such a signature.

Michael Lower

No hand-written signature to contract where a signature is clearly anticipated

July 23, 2013

In Hubert v Treherne ((1842) 3 Man & G 743, 133 ER 1338) the parties entered into a contract that had to comply with the Statute of Frauds (and so had to be signed by them or on their behalf). The parties were identified by name at the beginning of the written contract. The contract ended with the words, ‘As witness the hands’ but no signature followed.

The court held that there was no signature. The problem was that the closing words (‘as witness the hands’) indicated that the parties intended to add hand-written signatures. The lack of such signatures was therefore fatal.

There was a difference of opinion as to whether the outcome would have been the same had those words (‘as witness..’) not appeared. Would it be enough that the names of the parties appeared in the body of the contract? At least two of the judges thought that this would be enough if it was clear that the written contract was a proper and authorised version of a concluded agreement. Another thought that this would not be enough since this degree of tolerance would effectively write the signature requirement out of existence.

Michael Lower

Section 2 Law of Property (Miscellaneous Provisions) Act 1989: oral supplemental term

February 28, 2013

In Keay v Morris Homes (West Midlands) Ltd ([2012] EWCA Civ 900, CA (Eng)) K entered into an agreement for the sale of land and the leaseback of part. MHL was to carry out building works on the part leased back. The agreement was later varied when a price reduction was agreed. The original agreement complied with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 and the supplemental agreement seemed also to do so. K alleged that a further term had been orally agreed at the time of the variation. The alleged term required MHL to proceed promptly with the building works. K was seeking damages for breach of this term.

This appeal concerned a preliminary point as to whether this term needed to be incorporated in the supplemental agreement (whether it needed to be part of an agreement that complied with section 2(1)). Rimer L.J. said that this was a question of fact. The question was whether the alleged term was part of the varied agreement for the sale and leaseback or whether it was a truly separate contract ([32]). This would need to be decided at trial. If it was part of the variation then the variation (and this term) were void for want of compliance with section 2(1).

In fact, the sale and leaseback were completed. K argued that once all the land elements of the sale and leaseback were complete any outstanding terms were valid contractual obligations even if the agreement had been void for failure to comply with section 2. This was rejected. If the alleged term was part of the supplemental agreement then the agreement was void and the fact that some terms of the void agreement had in fact been performed did not mean that any outstanding terms became valid ([47]).

Incorporation of an unincorporated association: who owned the association’s property?

February 5, 2013

In Chap Yick Clansman’s Association Ltd v Mok Fai ([1997] HKLRD 580, HC) the property of an unincorporated association was held by four trustees on trust for the members for the time being of the association. A company was incorporated to take over as the vehicle for the running of the association and all members of the unincorporated association at the time of incorporation were automatically members of the company. There was never any formal assignment by the members of their beneficial interests in the property to the company (as required by section 5(1) of the Conveyancing and Property Ordinance). Twenty years after incorporation, the company became one of the trustees of the property. The question was whether the beneficial ownership of the property had passed to the company or remained with the members immediately prior to incorporation.

The court held that ownership had passed to the company. There had been a novation of the terms of the contract between the members of the unincorporated association when they approved the company’s constitution. This conclusion was reinforced by the fact that the company had been treated as owner of the property for a twenty year period from the date of incorporation to its appointment as trustee. In any event, any member of the unincorporated association would now be estopped from asserting a beneficial claim to the property.

Missing terms and section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 (England and Wales)

January 11, 2013

In Francis v F Berndes Ltd ([2011] EWHC 3377 (Ch)) C alleged that D had agreed to sell property to him for GBP50,000. The agreement was alleged to have been reached orally and then recorded in a document on D’s headed paper that was signed by C and D. The written agreement recorded D’s willingness to sell for GBP50,000 but not C’s obligation to buy at that price. The court held that the agreement did not comply with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 (requiring land contracts to be written). C’s obligation to buy could not be implied from his signature on the contract ([31]). Nor was rectification available to allow the written document to be altered to reflect C’s oral agreement to buy. This was not a legitimate use of rectification and it would undermine the policy behind section 2(1) ([37] – [44]).

CPO s.3(1) and res iudicata

November 12, 2012

In Humphries v Humphries ([1910] 2 K.B. 531, CA (Eng)) L agreed to grant T a fourteen year lease of a house but there was no written contract or memorandum complying with section 4 of the Statute of Frauds (the equivalent of section 3(1) of the Conveyancing and Property Ordinance). T denied the existence of the contract in an action for rent arrears but did not plead the Statute of Frauds. L succeeded. T fell into arrears again and L brought proceedings. This time, T sought to rely on the Statute of Frauds but was not allowed to do so:

‘It may well be expedient to avoid the risk of fraud and perjury when there is no written evidence of a contract relating to land, by refusing to allow any evidence of such a contract to be given; but where the evidence has actually been taken and the contract has been proved by parol to the satisfaction of the Court, the reason for refusing it has disappeared, and a refusal to allow the contract to be sued upon would be an encouragement to dishonesty without any corresponding advantage to the public.’ (537, Farwell L.J.)

Michael Lower