Archive for the ‘inferred’ Category

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

 

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