Archive for the ‘Trust’ Category

Gift or trust: proving the relevant intention

October 16, 2017

Leung Wing Yi Asther v Kwok Yu Wah ((2015) 18 HKCFAR 605) arose out of ancillary relief proceedings on the divorce of H and W. W was the daughter of F, a highly successful businessman. In 2005 F transferred shares in his company to W. The result of this transfer, and a 2006 issue of further shares to W arranged by F, was that W had 20 million shares in F’s company. H argued that these shares should be regarded as an asset of W for the purposes of the ancillary relief proceedings.

F and W argued that F had not given the shares to W but remained the sole beneficial owner of them. They pointed to the way in which, even before 2005, F had transferred shares to his children but later insisted on their re-transfer to him. They also pointed to the company’s 2012 purchase of two very valuable properties. The divorce proceedings had already begun by then. F and W argued that F would not have enhanced the company’s value in this way had he thought that part of the gain would go to H.

H succeeded at first instance and in the Court of Appeal. In the Court of Final Appeal, F and W argued that the first instance judge had mistakenly considered that he should decide on F’s objective intention in making the transfer. Stock NPJ agreed that the judge had to ascertain F’s subjective intention; in the absence of an express declaration this, ‘requires an objective inference drawn from the parties’ words and conduct’. The presumptions of resulting trust and advancement are only relevant where there is no evidence of actual intention ([53]). The judge had, however, taken the right approach to this question.

F and W also argued that the first instance judge had not given due weight to the 2012 acquisitions by the company when considering F’s intention. This conduct, though it post-dated the transfer to W, was admissible as evidence of F’s intention in making the transfer. That said, ‘contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event.’ ([56])

Michael Lower

 

 

 

Trusts and the Limitation Ordinance

December 22, 2014

In Liu Wai Keung v Liu Wai Man ([2014] HKEC 2065, CA) title to a flat was in the name of a sister who held it on common intention constructive trust for her brother. The brother and his family were living in the property. He had made two demands for her to transfer title to him (in 1998/99 and in 2004/5) and these had not been complied with. The sister now sought to rely on section 20(2) of the Limitation Ordinance to defeat her brother’s claim. This failed, since the action fell within section 20(1)(b) of the Limitation Ordinance. It was an action ‘to recover from the trustee trust property or the proceeds thereof in the possession of the trustee’. The sister argued that ‘possession’ meant actual possession and that her brother was in possession. Kwan JA (giving the reasons for judgment of the court) explained that the trustee remained in possession ‘if the trustee has the power of control over the property and is in a position to obtain possession of it’. This was true in the present case because of the sister’s legal title ([21]). The sister’s legal title could not be said to be adverse to her brother’s beneficial interest but was entirely consistent with it ([26]). Lord Sumption JSC explained the underlying policy in Williams v Central Bank of Nigeria ([2014] AC 1189): trustees still in possession of the trust asset (here the legal title) should not be allowed to use the Limitation Ordinance to defeat the beneficiary’s claim and keep the trust property for themselves. This reasoning only applied to those who have assumed the responsibilities of a trustee, expressly or de facto. It did not apply to those ‘under a purely ancillary liability’ since their dealings with the assets were at all times adverse to those of the beneficiary.

Michael Lower

 

Effect of failure to register a written declaration of trust

July 15, 2014

In HKSAR v Lau Kam Ying ([2013] HKEC 1503, CFA)  Company X transferred the title to land to indigenous villagers. The villagers executed declarations of trust to the effect that each of them held his section on trust for company X. This declaration was never registered. Company X was wound up.  When the Government resumed the land, some of the villagers assigned their land to Company Y which had been set up to collect compensation on their behalf. They made false statutory declarations to the effect that the title deeds had been lost. These were then submitted to the Government as part of the process of claiming the compensation.

The leading players behind the scheme were convicted of conspiracy to defraud. They had falsely represented that company Y was a bona fide purchaser for valuable consideration and concealed the beneficial interest of company X. In this decision, the Court of Final Appeal rejected the defendants’ application for leave to appeal against the convictions.

The defendants argued, first, that the declarations were null and void as against company Y as a result of section 3(2) of the Land Registration Ordinance. This failed since sections 3 and 4 of the Land Registration Ordinance, ‘concern priorities between registered instruments but do not affect remedies which may be available whether in contract, tort or equity.’ (Tang P.J. at [19]). The second argument was that the declaration was unenforceable on the grounds of public policy. This would have failed anyway since company X would not need to plead an illegal act (Tinsley v Milligan) ([20]).

In any event, the conviction relied on the fact of the concealment not on whether company X had an indefeasible beneficial interest ([21]).

 

 

Trustees ordered to hand over compensation payable on resumption

April 4, 2013

In Howin Industrial Ltd v Li Koon Lin ([2013] HKEC 372, CFI) P divided property it owned into sections and assigned one section to each of the defendants (to make use of their rights as indigenous villagers). They did not provide any consideration (although the assignments stated that they did). They then executed declarations of trust in favour of P (which was later wound up). The government resumed some of the land. The plaintiff was granted a declaration that it was the beneficial owner of the sections and entitled to any future compensation payments received from the government. Defendants who had already received compensation were ordered to pay it over to P.

Allegation of breach of trustees’ breach of duty: need to prove loss

December 11, 2012

In Man Ping Nam v Man Fong Hang ([2006] 4 HKLRD 484, CFA) the managers of a wui agreed to sell land to EY (a shell company) but without vacant possession and subject to severe restrictions on the permissible use. Shortly thereafter EY agreed to sub-sell to another company SLD at a considerably higher price but on terms that provided for a significant reduction in price if vacant possession could not be given and if it proved impossible to relax the restrictions on use. The transactions were later completed.

One of the members of the wui alleged a breach of trust in agreeing to sell at a substantial undervalue. The only evidence of this (given the unique nature of the land and the fact that it would be of interest only to a very limited set of buyers and middlemen prepared to take the risk of being able to sell on to them) was that the headline price in the sub-sale was higher than the price to be paid under the agreement with EY.

The Court of Final Appeal rejected this as evidence of a sale at an undervalue; the terms of the two transactions were radically different and there was no satisfactory way of comparing the two (or at least the plaintiff had not proved that this was possible). Hence, even if the managers’ conduct had been open to criticism, there was no evidence that any loss had been incurred by the wui.

Singapore: pleading express trust and resulting trust at the same time

July 26, 2012

The Singaporean case of Tee Yok Kiat v Pang Min Seng ([2012] SGHC 85) concerned payments made by a businesswoman to a contractor. She made payments to him on the basis, she alleged, that they would be applied by him in the purchase of certain properties. She alleged that, in breach of trust, he had kept the money for himself. She relied on there either being an express trust or a resulting trust. She did not explain which kind of resulting trust she had in mind; the court decided that she was alleging the existence of a Quistclose trust. The court decided that it was permissible in this case to allow these alternative pleadings. Each could arise from the same pleaded facts; there was no need to allege two inconsistent sets of facts. She was ‘essentially relying on the same factual matrix.’ ([33]). Both claims failed since the court thought, on the balance of probabilities, that she had made a gift of the money to the contractor.

Property disposed of in breach of trust

June 4, 2012

In Chan Ming Hung v Sum Choi Wan Chau ([2012] HKEC 759) C appointed S and her husband as trustees of his property. He was in the United Kingdom and they were family members. In breach of trust, they sold the property and invested at least part of the proceeds in a new property which was registered in their name.The property was then transferred into the names of S and her son (a volunteer who may well have been aware of the circumstances giving rise to C’s claim).  The court made a declaration that the proceeds of sale and the title to the property unlawfully purchased using them were held on trust for C.

Relief of trustee from liability to account where there was valid reason for ignorance of the terms of the trust

May 28, 2012

In Iles v Iles ([2012] EWHC 919 (Ch)) Mr and Mrs I held land on trust for their daughter under the terms of an express declaration made in 1992. Some years later, there was a new declaration of trust in favour of the daughter of land that had been acquired in exchange for the land held under the 1992 trust. The earlier trust entitled the daughter to receive the rents and profits and, on attaining the age of 21, to call for the title to be transferred to her. The later trust provided that she would be entitled to the trust property on attaining the age of 25. Since the land was subject to the 1992 trust, the variations were ineffective. Nevertheless, their effect on the mother’s mind was to reinforce her impression that the daughter’s entitlement would start when she attained the age of 25. Her husband, who had predeceased her had been in charge of the arrangements and she had only a broad understanding of the matter based on whatever explanations he had given to her. Although she had to account for rents and profits from the time her daughter attained the age of 25, she was relieved from liability to account for rents for the period between her daughter’s 21st and 25th birthdays by virtue of section 61 of England’s Trustee Act 1925.

Beneficiary seeking order for sale / account in an interlocutory application

November 9, 2011

In Lam Sik Shi v Lam Sik Ying ([2008] HKEC 1048) P was the beneficiary under a trust of his late father’s estate. D1, his half-brother, was the trustee. D2 was a company which had bought property forming part of the trust estate. P alleged that the sale was at an undervalue and he sought a declaration that the sale was void or voidable. He sought to have D2 account as constructive trustee. A lis pendens had been registered. In an interlocutory hearing, P sought an order for sale with the proceeds to be paid into court pending the final hearing or, alternatively, the appointment of a receiver. The court refused to make either order. P’s position was adequately protected by the registration of the lis pendens.

Michael Lower

Son holding land as nominee: failure to show that there had been a gift

April 15, 2011

In Ip Man Shan v Ching Hing Construction Co Ltd ([2005] HKEC, 188, CA) the title to property was in the name of a son but the purchase price of the land and the cost of building a family home on it had been paid by the father and by the construction company controlled by the father and mother. There was no evidence to show an intention to make a gift of the property to the son. He held the property as nominee and on trust for the father / the construction company. (See this more detailed account of the judgment).

Michael Lower