Legal joint tenancy: determining beneficial ownership under a common intention constructive trust

In Lo Kau Kun v Cheung Yuk Yun ([2015] HKEC 316, CFI) a married couple bought a flat as joint tenants. P claimed that the property was held on common intention constructive trust in equal shares. D claimed that she was the sole beneficial owner. Deputy Judge Sakhrani referred to the statements in Stack v Dowden ([68] in Stack) and Jones v Kernott ( [51] in Jones) to the effect that where the legal title is in joint names and there is a question as to beneficial ownership equity follows the law (so that a legal joint tenancy gives rise to equal shares) but that it may be possible to show a contrary intention (the burden of proof being on the party seeking to establish this). P had paid the down payment. P and D were jointly liable under the terms of the mortgage and each had contributed to the mortgage payments. Crucially, there was a finding that the parties had discussed their intentions concerning the ownership of the property ([63]). The couple had agreed that the property was to be a family asset (to be held equally as a family asset according to P) ([64]). This (not the record of financial contributions) was determinative. The property was held on common intention constructive trust in equal shares ([66]).

D also argued that she had extinguished P’s title by adverse possession. P had left the property in 1993 after a violent argument and never returned ([77]). This argument failed since D was entitled to be in possession as co-owner. There was no evidence of the ouster that would be necessary for this claim to succeed ([81]).

Michael Lower

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Does a charging order sever a joint tenancy?

In Ho Hai Kwan v Chan Hon Kuen ([2015] HKEC 132, CFI) the question was whether there had been an equitable severance of a joint tenancy by virtue of a charging order in respect of the property against one of the co-owners. Was it an act operating on the joint tenant’s share? There were obiter dicta in previous Court of Appeal decisions (Malahon Credit Co Ltd v Siu Chun Wah Alice and Fortis Bank v Yu Kam Hoi Herman) to suggest that this was the case. In this case, it was successfully argued that a charging order did not have this effect. The argument was that a charging order (enforceable in the same way as an equitable charge by virtue of section 20B(3) of the High Court Ordinance) does not confer any title on the person who obtained it but merely creates an encumbrance ([19]). Thus, a charging order had no effect on the four unities of the joint tenancy and was insufficiently final and irrevocable; there was no alienation ([20] – [31]). The charging order did not sever the joint tenancy ([58]).

Michael Lower

Joint tenancies and part IV of England’s Housing Act 1985

In Solihull MBC v Hickin ([2012] UKSC 39) Mr and Mrs H were joint tenants of a lease and Solihull MBC (‘the Council’) was the landlord. Mr. and Mrs H had lived in the property together with their daughter since 1967. The lease created a secure tenancy for the purposes of the Housing Act 1989. Mr. H left the property many years ago. Mrs H died and the daughter claimed to be entitled to succeed to the tenancy by virtue of section 89 of the Housing Act 1989. The Council denied that she had a secure tenancy and purported to bring the secure tenancy to an end by serving notice to quit on Mr. H. It all turned on the interpretation of the scheme established by part IV of the Housing Act 1989.

According to the Council (and the majority of the Supreme Court) when Mrs. H died the right of survivorship as between joint tenants meant that Mr. H was the sole tenant. As he no longer lived at the property, ‘the tenant’ no longer occupied the property as his only or principal home. Thus, there was no longer a secure tenancy (sections 79 and 81).

The daughter put forward a different view which was (in slightly modified form) accepted by the minority (Lord Mance and Lord Clarke) which gave priority to the scheme in section 89 of the Housing Act over the operation of the right of survivorship. Section 89 applies on the death of a secure tenant under a periodic tenancy. When that happens, the secure tenancy vests in a person qualified to succeed the deceased tenant (section 89(2)). The daughter was qualified to succeed her mother since she was a child living in the property as her only or principal home at the time of her mother’s death (section 87). Lord Mance’s dissenting judgment was to the effect that while the father’s rights as sole tenant would trump the daughter’s rights as successor if he too lived in the home as his principal or only dwelling, the daughter was entitled to succeed to the secure tenancy where the father could not.

What if a notice to quit is served by one joint tenant of a lease but was induced by a misrepresentation?

In Potter v Dyer ([2011] EWCA Civ 1417, CA (Eng)) P’s parents granted him an oral tenancy of a farm. He assigned it to himself and C. C left the country. Some years later, D, the new owner of the farm, served notices on P under the Agricultural Holdings Act 1986 requiring him to carry out repair works at the farm. P disclosed the assignment to C and himself as joint tenants. C served notice to terminate the joint tenancy (thinking that this would leave the tenancy on foot but release her from any future obligations under it). P argued that C had been induced by D’s misrepresentation. P argued that as a result, the notice did not terminate the lease but operated simply as a surrender of C’s interest under the joint tenancy. This failed. If there had been a misrepresentation C would have to elect to affirm the notice or to rescind it. There was no support in the authorities or in principle for P’s proposed ‘middle way’.

Stack v Dowden in Hong Kong

In Ha Yuet Chi v Yeung Yiu Keung ([2010] HKEC 1726), a mother and son were joint tenants of a flat in Chevalier Garden in Shatin. The mother claimed that she had provided the purchase price and had not intended to make a gift to her son. She claimed to be the sole beneficial owner. The District Court thought that the son had probably made some contribution to mortgage payments. It invoked Stack v Dowden. A precise arithmetic approach to contributions was not necessary in family cases; rather one should look for the parties’ intentions having regard to family history and other relevant factors (para. 35). The court rejected the contention that the mother was intended to be solely beneficially entitled.

Commorientes and survivorship

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.

Agreeing to make mutual wills can sever a joint tenancy

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.

Equitable severance by mutual agreement

An oral (unenforceable) agreement whereby joint tenants agree that one of them is to acquire the other’s interest is an equitable severance. It is a mutual agreement and may sometimes (depending on the facts) be a course of conduct. A mutual agreement need not be specifically enforceable. Mutual agreement and course of conduct are separate methods of severing a joint tenancy.

In Burgess v Rawnsley ([1975] Ch 429, CA (Eng)) H and Mrs R bought a property as beneficial joint tenants. Mrs R orally agreed to sell her interest in the house to H but then refused to proceed because she wanted a higher price than that originally agreed. The Court of Appeal held that the joint tenancy had been severed. The oral agreement was a mutual agreement to sever even though the agreement could not be enforced (because neither written nor recorded in writing). Lord Denning MR thought it possible that there had also been a severance by course of conduct but the other members of the Court of Appeal disagreed. Mutual agreement and course of conduct are separate methods of severing a joint tenancy.

Lord Denning MR doubted that Nielson-Jones v Fedden had been correctly decided but the other members of the Court of Appeal did not find it necessary to consider this point.

Severance of an equitable joint tenancy under section 36(2) of the Law of Property Act 1925

A divorce petition asking the court to make an order (with an effect to be decided on by the court) at some time in the future does not satisfy the requirements in section 36(2) of the UK’s Law of Property Act 1925 for an effective notice to sever an equitable joint tenancy.

In Harris v Goddard ([1983] 1 WLR 1203 CA (Eng)) Mrs H filed a petition to divorce her husband (H). It contained a paragraph asking the court to make an order concerning the ownership of the property.  H died three days before the hearing and the question was whether the petition severed the joint tenancy.

Lawton LJ stressed that this decision was based on the correct interpretation of s.36(2) of the Law of Property Act 1925 (at 1208). Section 36(2) of the English Law of Property Act 1925 requires a notice purporting to sever an equitable joint tenancy to:

(a) express an intention for the severance to occur immediately (not at some time in the future); and

(b) for the proceeds of sale to be ‘held upon the trusts which would have been requisite for giving effect to the beneficial interests if there had been an actual severance.’

It was held that the relevant paragraph in the petition was not drafted in such a way as to satisfy s.36(2). It was quite unlike the petition in In Re Draper’s Conveyance ([1969] 1 Ch 486).

The applicability of this decision in Hong Kong is unclear since it rests on an interpretation of the Law of Property Act 1925. On the other hand, Lawton LJ commented that s.36(2) is an extension of severance by mutual agreement as expressed in Williams v Hensman (at 1208).

Effect of assignment to husband and wife ‘as joint tenants’

In Hong Kong where property is assigned to a husband and wife ‘as joint tenants’ there is a rebuttable presumption that they hold as joint tenants in law and equity.

In Ho Nga Sheung v Ma Fook Leung ([1993] HKEC 37, SC) property was conveyed to husband and wife ‘as joint tenants’. All of the mortgage payments were made by H. H gave evidence to the effect that he intended his wife to have some interest in the property but not a half share. How should the proceeds of sale be distributed between them?

Godfrey J held that in Hong Kong where property is conveyed into the joint names of husband and wife there is a rebuttable presumption of advancement by husband to wife so that they hold as joint tenants in equity as well as at law. The result was that when the joint tenancy was severed the proceeds of sale would be divided equally between them.