Archive for the ‘Uncategorized’ 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

 

 

 

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The equity of exoneration: tenant in common charging her share to protect property from partner’s creditor

October 8, 2017

Insol Funding Company Limited v Cowlam ([2017] EWHC 1822 (Ch)) also raised the question of the equity of exoneration.

Ms Cowlam co-habited with Mr Cowey. They were equitable tenants in common of the family home (‘the property’). Insol was Mr Cowey’s creditor with an equitable charge over Mr Cowey’s share in the property. It sought an order for sale of the property.

To protect her rights in the property, Ms Cowlam agreed to pay Insol GBP 330,000. This was to be treated as part payment of Mr Cowey’s debt. Ms Cowlam granted Insol an equitable charge over her share to secure the sum that she had agreed to pay.

Ms Cowlam claimed to have a proprietary right over Mr Cowey’s share by virtue of the equity of exoneration. This would arise on the date when she charged her interest with the payment of the sum due under her agreement with Insol ([38]).

Ms. Cowlam argued that in granting the charge and in making payment to Insol, she had charged her share with the payment of part of Mr Cowey’s indebtedness to Insol ([35]). Ms Cowlam argued that she had become a guarantor or surety for Mr Cowey’s indebtedness and was entitled to be exonerated out of his share ([113]).

Master Bowles explained that:

‘an equity of exoneration can arise in circumstances where property is charged for the benefit, not of the chargor, but as security for the debts of another and that, where such an equity arises, the chargor is to be regarded as a guarantor, or surety, for the debtor and can look to the debtor for indemnity, or exoneration, in the event that the charge is called upon.’ ([114]).

The equity is proprietary as well as conferring personal rights as against the debtor ([114]). Master Bowles saw no reason why it should not entitle the person claiming it to security over the debtor’s property ([114]).

The equity of exoneration arises from the ‘express, implied, or presumed, intentions of the parties’ ([115]). It was not available here. Ms Cowlam ‘entered into the settlement agreement, in her own right and for her own reasons and was, in so doing, acting purely as a volunteer’.

Michael Lower

 

Seminar about proprietary estoppel and the family home at CUHK Faculty of Law

October 6, 2017

We will run a seminar about the English Court of Appeal decision in Liden v Burton. Details are as follows:

Session A:
Date: 17 October 2017 (Tuesday)
Time: 1:00 – 3:00 pm
Venue: Classroom 3, CUHK Graduate Law Centre, 2/F., Bank of America Tower, Central
Speaker: Professor Michael Lower

Session B:
Date: 1 November 2017 (Wednesday)
Time: 1:30 – 3:30 pm
Venue: Breakout Room 510, 5/F, Lee Shau Kee Building, CUHK, Shatin
Speaker: Professor Michael Lower

 

(Same seminar in two different venues) 

 
All are welcome!
Please register at: www.law.cuhk.edu.hk/propertylawseminar
For enquiry, please contact Ms Vivian Chen at vivianc@cuhk.edu.hk.

 

ABSTRACT

Proprietary estoppel comes into play where: (1) a landowner (A) gives a third party (R) an assurance that R has or will have an interest in A’s land; (2) R incurs detriment; (3) in reliance on A’s assurance; and (4) in these circumstances it would be unconscionable for A to go back on the assurance given. In these circumstances, R can apply for relief and the court has a discretion to order the relief that it decides would undo the unconscionability arising from A’s attempt to resile from the assurance given.
Proprietary estoppel has a part to play where A and R are a couple in a stable relationship and the property to which the assurance refers is their family home. The courts have developed an approach to proprietary estoppel that is tailored to the family context and that surmounts potential obstacles to the use of proprietary estoppel here. Thus, the assurance may be couched in vague terms but still be clear enough in its context. The concept of detriment is wide enough to include the normal incidents of forming and maintaining a family. If claimants had to show that the assurance was the only factor inducing them to incur detriment it would be difficult for a proprietary estoppel claim to succeed; A would be able to defeat the claim by pointing to R’s mixed motives since the family relationship will often provide a convincing explanation for R’s actions. The courts have developed an approach to reliance that keeps alive the realistic prospect of a successful claim.
The decision of the English Court of Appeal in Liden v Burton ([2016] EWCA Civ 275) illustrates the ways in which the law of proprietary estoppel has been adapted by the courts for use in the family home context. Arguably, the decision represents a further stage in this process of adaptation. Here the assurance was that ‘we would be together for the future, that this would be our home and that he would look after me forever’. This might appear to be an assurance that A regarded the relationship as being for the long term. In its context, it was understood as an assurance that R would have an interest in A’s property.
Proprietary estoppel and the common intention constructive trust overlap; there is no obvious reason why Ms Liden could not have relied on the common intention constructive trust. It is, however, well-established that the fact that a property has been acquired as the family home of a couple who are married or in a long term stable relationship does not lead the courts to infer the existence of a common intention constructive trust. Arguably, there is a discrepancy here between the approach taken in Liden and that taken in common intention constructive trust cases.

 

 

Equitable subrogation: one co-habitee charging interest to secured creditor of her partner

October 1, 2017

In Insol Funding Company Limited v Cowlam ([2017] EWHC 1822 (Ch)) Ms Cowlam and Mr Cowey were equitable tenants in common of their family home. Mr Cowey gave his creditors (Insol) an equitable charge over his 20% share in the property.

Insol brought proceedings to enforce the charge. Ms Cowlam sought to head these off to protect her own interests. She agreed to pay Insol GBP325,000 by 31st December 2015. If this payment were not made then the amount to be paid would rise to GBP330,000 and the property would be put up for sale. Ms Cowlam gave Insol an equitable charge over her own share in the property as security for this payment.

The parties agreed that this would, as far as Ms Cowey and the property were concerned, exonerate Mr Cowey’s liability. Insol would lose its right to enforce its equitable charge over Mr Cowey’s share and seek an order for sale.

The property was now to be sold. Ms Cowlam claimed to have a right to be equitably subrogated to Insol’s equitable charge over Mr Cowey’s share. This right would have priority over the charge that Ms Cowlam had granted to Insol. Insol would, in effect, be deprived of any right to receive any of the proceeds of sale.

The equitable subrogation claim failed. Master Bowles explained that there are two situations in which equitable subrogation may apply:

‘firstly, where a guarantor, or surety, pays the principal debtor’s debt and, secondly, where a lender, in the expectation of security in respect of his lending, advances money in payment of a debt, or towards the purchase of property, but where, for one reason, or another, the expected security does not arise.’ ([120])

Neither of these situations applied in the present case:

‘Ms Cowlam has simply promised to pay, in her own right, a sum of money, in part satisfaction of Mr Cowey’s indebtedness, and, where, in due course, and pursuant to her promise, such a payment will be made ([123]).

Master Bowles thought that the right approach to equitable subrogation was to test his conclusions by reference to the principles of unjust enrichment. In one sense, Insol was enriched by the agreement with Ms Cowlam but there was no unjust enrichment:

‘Insol entered into a valid contractual bargain with Ms Cowlam under which she agreed to pay the settlement sum. It is hard to see that payment to Insol of an amount agreed to be paid to Insol, under a contract which has not, in itself, been impugned, can be said to unjustly enrich Insol.’ ([132])

Rather, allowing Ms Cowlam’s claim to succeed would be unjust to Insol ([132]). It would be inconsistent with the intended effect of Ms Cowlam’s agreement with Insol ([135]).

Michael Lower

 

 

Adverse possession: the slightest act of the paper owner sufficient to retain possession

September 17, 2017

Tierra Trading Ltd v Land Base Ltd ([2017] HKEC 1809) was an adverse dispute between neighbours. The disputed land comprised landings and staircases between the neighbouring buildings. The plaintiffs were the registered owners of the disputed land and they sought an order for possession against their neighbours (the defendants). The defendants claimed to have acquired title by adverse possession. They failed to establish the factual basis of their claim to have been in possession. Further, Deputy Judge Kenneth Kwok SC pointed to the statement by Slade J in Powell v McFarlane that the slightest act done by an owner in possession would negative discontinuance of possession. The plaintiffs had included the disputed land in their calculation of the Gross Floor Area of the development built on their land. This inclusion was a sufficient act to indicate their continued possession.

Michael Lower

Tierra Trading Ltd v Land Base Ltd ([2017] HKEC 1809) was an adverse possession dispute between neighbours. The disputed land comprised landings and staircases between the neighbouring buildings. The plaintiffs were the registered owners of the disputed land and they sought an order for possession against their neighbours (the defendants). The defendants claimed to have acquired title by adverse possession.

They failed to establish the factual basis of their claim to have been in possession. Further, Deputy Judge Kenneth Kwok SC pointed to the statement by Slade J in Powell v McFarlane that the slightest act done by an owner in possession would negative discontinuance of possession. The plaintiffs had included the disputed land in their calculation of the Gross Floor Area of the development built on their land. This inclusion was a sufficient act to indicate their continued possession.

Michael Lower

Objective nature of the intention to possess: where the squatter believed itself to be the true owner

September 10, 2017

In Pang Yiu Chor v Wong Wai Leung ([2017] HKEC 1874) the Government mistakenly believed itself to be the owner of land in Fanling. In fact, the land belonged to the plaintiffs.

The Government granted permits to occupy the land to licensees in the early 1960s. These licences were taken over by later generations of the families of the original licensees.

The plaintiffs informed the Government of their ownership in 2000. The Government terminated the licences in 2003.

The question was whether the Government had defeated the plaintiff’s title by adverse possession. The plaintiffs contended that this was not the case; the Government’s belief that it was the owner of the paper title, they argued, meant that it had no intention to possess.

This argument failed. Anthony Chan J was able to point to a number of Hong Kong and English authorities showing that believing oneself to be the true owner does not prevent a squatter from having the intention to possess.

The intention to possess requirement demands an intention ‘to exclude the world at large, including the owner, from the land so far as is reasonably practicable and so far as the law allows’. Further, ‘[e]vidence of subjective intent should be approached with caution. Intention is normally better assessed from the acts of the possessor in the light of the nature of the land and its use’ (Tsang Foo Keung v Chu Jim Mi Jimmy CACV 178 / 2015 at [22]).

That the Government had the necessary intention was clear from its intentional exercise of power over the land: ‘There can be little doubt that the Government had every intention to exclude any person who was on the land without its expressed or implied permission. This can only be consistent with the requisite animus possidendi ([49]).

The Court of Appeal said in Cheung Kwong Yuen v Sun Hai Fang ([2016] 1 HKLRD 464) that ‘ “adverse” in this context is a convenient label only, in recognition of the fact that the possession is adverse to the interests of the paper owner.’

The Government had defeated the plaintiffs’ title; it had been in possession of the land up to 2003 through its licensees.

That said, the defendants (the licensees) had no title to the land. Their possession was attributable to that of the Government.

Michael Lower

 

 

Equitable ownership: single framework for ‘domestic consumer’ and ‘investment’ cases

August 27, 2017

Marr v Collie ([2017] UKPC 17) is an important Privy Council decision re-stating the framework for deciding when equitable ownership differs from the ownership position as revealed by the legal title. Lord Kerr, giving the judgment, stated that the same analytical framework is to be applied regardless of context. This framework applies equally to ‘domestic consumer’ and ‘investment’ or ‘commercial’ cases. Context has a role to play when inferring actual intentions.

 

The framework

When dealing with ownership disputes:

  1. determine the legal ownership of the property;
  2. the onus is then on the party claiming that the ownership position in equity varies from the legal position to establish that this is the case;
  3. where the only available relevant evidence is that the parties have made unequal financial contributions then it may be appropriate to have recourse to the presumed resulting trust;
  4. but the court may have evidence of the parties’ actual intentions so that it would be inappropriate to apply the presumption of resulting trust;
  5. in such cases, the court needs to make findings as to the parties’ actual intentions and give effect to them;
  6. in doing so, the court should examine the whole course of conduct (which would include the state of the title, the reasons for the decision to put the title in joint names if that is the case, the relationship between the parties, whether the property was intended as a family home, how the acquisition was financed and so on).

 

The facts

The case was an appeal from the Court of Appeal of the Bahamas. M was a Canadian citizen working in the Bahamas. C was a building contractor and a citizen of the Bahamas. M and C were in a personal relationship with each other from September 1991 to July 2008.

During that time M and C acquired several properties which were conveyed into their joint names. M paid the entire cost of purchasing the properties. When the relationship broke down, M claimed to be the sole beneficial owner applying the presumption of a resulting trust in his favour.

C claimed that the parties’ common intention was that they would be equal beneficial owners. According to C, the arrangement was that C would carry out renovation works at the properties. C also contended that M was the ‘breadwinner’ in the relationship and that this was relevant to the analysis.

M claimed that C had failed to carry out any renovation works. M also argued that his understanding was that C would make financial contributions to the acquisition of the properties that would equal his own but that no such contributions were made.

C had succeeded in the Court of Appeal. The court attached particular importance to an email from M to the bank that had provided a loan for the purchase of one of the properties. In this email, M told the bank that the property would be held in joint names, ‘meaning that we would have a 50% interest’. The Court of Appeal thought that this was very significant evidence as to the parties’ actual ownership intentions.

In the Privy Council, M’s case was that this email had not been mentioned at first instance nor in the Court of Appeal hearing. He argued that the Court of Appeal should therefore not have made use of the email in its analysis. In any event, the email was, M alleged, inadmissible for procedural reasons.

 

Clash of presumptions?

Lord Kerr considered whether cases like this gave rise to a ‘clash of presumptions’. On this view, the relationship between the parties might place the case in the ‘domestic consumer’ category; the result was a presumption that equity followed the law and that the parties were joint legal and beneficial owners. Or did the fact that the properties were bought as investments place the case in a ‘non-domestic’ category to which the presumption of resulting trust would apply ([53])?

Lord Kerr’s review of the authorities led him to reject this way of approaching the ownership question. He continued:

‘The Board considers that, save perhaps where there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one presumption over another. In this, as in so many areas of law, context counts for, if not everything, a lot. Context here is set by the parties’ common intention – or by the lack of it. If it is the unambiguous mutual wish of the parties, contributing in unequal shares to the purchase of property, that the joint beneficial ownership should reflect their joint legal ownership, then effect should be given to that wish. If, on the other hand, that is not their wish, or if they have not formed any intention as to beneficial ownership but had, for instance, accepted advice that the property be acquired in joint names, without considering or being aware of the possible consequences of that, the resulting trust solution may provide the answer.’ ([54]).

 

Further fact-finding necessary

The courts below had not considered the relevant facts in sufficient detail. For example, the significance of M’s email to the bank should have been considered at first instance. M should have been given adequate opportunity to make submissions with regard to it.

The Court of Appeal had not addressed the first instance finding that M’s evidence was to be preferred over C’s; this included his evidence as to ownership intentions and the expectation that C would make financial contributions that C had failed to make. The case had to be remitted for hearing before the Supreme Court of the Bahamas.

The court should also consider whether account should be taken of the contributions made by the parties to the costs of acquisition ‘in line with the decision in Muschinski‘ ([60]). This envisages that it might be appropriate (depending presumably on inferred intentions) to use the proceeds of sale of the property to repay the contributions made and then divide the balance between the parties in accordance with their common intention as to ownership ([39]).

Michael Lower

 

 

Compelling evidence of post-acquisition variation of common intention

August 17, 2017

In Chan Ling Ling v Chan Ching Kit ([2017] HKEC 1474) property was held by four siblings as tenants in common. The common intention at the time of acquisition was they would have equal shares.

The defendant argued that there was a post-acquisition variation of this common intention; the varied common intention was that the parties’ respective beneficial interests would reflect their financial contributions.

The defendant argued that the agreement to vary the original common intention should be inferred from an alleged failure of the other siblings to contribute to certain costs associated with the property.

He sought to show that he had contributed 80% of the purchase price / mortgage repayments and so had a corresponding equitable interest.

Deputy Judge Kent Yee summarised the relevant legal principles: there had to be compelling evidence of a post-acquisition variation of the common intention. The court should be slow to infer such an agreement from conduct alone ([38]).

Even if one accepted the defendant’s version of the facts, they did not provide the necessary compelling evidence. The parties remained equal beneficial owners.

Michael Lower

Equitable ownership of the family home: interaction of the common intention constructive trust and the presumed resulting trust

August 2, 2017

The Court of Appeal judgment in Primecredit Ltd v Yeung Chun Pang Barry ([2017] HKEC 1533, CA) deals with several important issues in the law of the ownership of the family home.

A husband (‘H’) and wife (‘W’) acquired a flat as the family home (‘the first flat’). Subsequently, the family bought a new flat  (‘the flat’) relying on the sale of the first flat to pay off a bridging loan used to acquire the flat.

W also helped to pay off the mortgage taken out to help fund the purchase. Title to the flat was in the name of the husband and S (the youngest child and the only son of the family).

Although H and S were legal joint tenants of the flat, W’s evidence was that she did not intend to make a gift to S during her life but only after H and W had died.

Primecredit (‘the creditor’) had the benefit of a charging order over the flat in respect of S’s indebtedness to the creditor.

H died and S became the sole legal owner through the right of survivorship. The creditor then sought an order for sale of the flat. W resisted this arguing that she had a beneficial interest.

Common intention constructive trust

The burden of proof was on W to show that beneficial ownership did not follow legal ownership.

There was no evidence of an express agreement that W was to have a beneficial interest in the flat. Could such a common intention be inferred? The majority of the Court of Appeal (Lam V-P and Cheung JA) thought so. Kwan JA agreed that W had a beneficial interest but on the basis of a presumed resulting trust rather than a common intention constructive trust.

Lam V-P thought that, ‘at least in the domestic context’, there was no need to resort to the resulting trust where the matter can be resolved by recourse to the common intention constructive trust ([1.3]).

He also said:

‘Since Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776, as far as Hong Kong is concerned, the modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context, see Mo Ying v Brillex Development Ltd ([2015] 2 HKLRD 985. In a domestic context, particularly in relation to a matrimonial home, the court is not constrained in that exercise by pure direct monetary contributions to the purchase price, see the judgment of Baroness Hale at [69] in Stack.

In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family were not that common, the court has to pay regard to circumstantial matters.’ ([1.6]). Cheung J.A. made the same point ([2.9]).

Whichever route is followed, the court ‘should have regard to the inherent probabilities in light of the surrounding circumstances at the time when the property was acquired.’ (1.4]). The ‘surrounding circumstances’ (another term for ‘whole course of dealing’?) clearly do need to be taken into account when determining intention; where there are rival interpretations / accounts of the surrounding circumstances, which is the most likely?

The fact that the flat was H and W’s only property was highly relevant ([1.5] per Lam V-P). Cheung J.A. thought it credible that H and W would intend to retain ownership in their lifetimes even if S rather than W was joint legal owner ([2.97]).

Cheung JA pointed to several matters which made it appropriate to infer the necessary common intention. There was W’s evidence that there was no intention that S should have an interest during H and W’s lifetime. The common intention could be inferred from W’s financial contributions ([2.10]).

Cheung JA also said:

‘What the judge seems to have overlooked is that the mother’s interest in the matrimonial home is not solely determined by her financial contributions but by reason of her status of a married woman.’ ([2.10]).

Resulting trust

Kwan JA, alone of the members of the Court of Appeal thought that the first instance finding that there was no common intention (common to H, W and S) could not be overturned ([2.6]).

Instead, he found that W had an interest under a resulting trust. This was based on her contributions and her evidence that no gift to S was intended ([42]). Again the ‘inherent probabilities’ are relevant ([46] – [48]).

Common intention constructive trust and resulting trust?

While Lam V-P thought that the applicability of the common intention constructive trust ruled out any application for the resulting trust ([1.3]). Cheung JA thought that the presumed resulting trust still had a role to play even where the analysis was based on common intention constructive trust ([2.14]).

Charging orders and joint ownership

Lam V-P urged masters dealing with charging order applications in respect of jointly owned property not make the order absolute unless notice has been given to all co-owners ([1.9]).

Charging orders and severance

Lam V-P left open the question as to whether the making of a charging order equitably severed a joint tenancy ([1.8]).

Michael Lower

 

 

 

Settlement induced by misrepresentation that one of the parties had title to land as bona fide purchaser for value

July 25, 2017

In Howin Industrial Ltd v China Group Global Ltd ([2017] HKEC 1485) P transferred land to D2 to D13 for no consideration. D2 to D13 were male indigenous villagers entitled to ding rights. D2 to D13 executed declarations of trust confirming that each of them held his land on trust for P. These declarations were not registered at the Land Registry.

P was wound up. The Government subsequently issued notices of resumption in respect of the land. D2 to D13 assigned the land to D1 which had been incorporated to handle the compensation claims.

P’s liquidators discovered the declarations of trust. They made inquiries and were led to believe that neither D1 nor its lawyers knew of the declarations and that D1 was a bona fide purchaser for value of the land (‘the representation’). This was shown to be false in subsequent criminal proceedings.

Influenced by the representation, P’s liquidators entered into a deed of settlement (‘the deed’) dividing the compensation monies between P and D1.

When P’s liquidators discovered the truth, they sought to have deed set aside. They were successful. It was enough that they were influenced to enter into the deed by the representation (Zurich Insurance Co plc v Hayward [2016] 3 WLR 637, SC).

Time did not start to run until they had discovered the fraud or concealment (Limitation Ordinance, s. 26(1)).

P was entitled to a declaration that it was the sole beneficial owner of the land. This appears to be founded on a resulting trust arising from the fact that D2 to D13 did not give consideration. P did not need to plead the illegality.

In the criminal proceedings, the Court of Appeal had taken the view that the assignments to D2 to D13 were sham documents having no legal effect. D2 to D13 thought that the point of the documents was to transfer the ability to exploit their ding rights.

P was entitled to all of the compensation paid by the Government.

Michael Lower