Archive for the ‘Variation’ Category

Variation of an express trust or a common intention constructive trust

September 24, 2017

In Insol Funding Company Ltd v Cowlam ([2017] EWHC 1822 (Ch)) Ms Cowlam and Mr Cowey began to co-habit in 1994 and had a son in 1995. They lived in a property owned by Ms Cowlam. They sold it and in 1998 they bought a new property to be the family home (‘the property’). The transfer of the property into their joint names recorded that they held it as beneficial joint tenants. They did not sign the transfer form.

The purchase of the property was funded by the proceeds of sale of Ms Cowlam’s home and by a mortgage. Initially, they each contributed to the repayment of the mortgage. Ms. Cowlam later injected further substantial capital sums into the property helping to pay off the mortgage and to finance improvement works.

In November 2001 the couple agreed that, in the light of Ms Cowlam’s greater contributions to the property, she had an 80% share and Mr Cowey had a 20% share.

Mr Cowey received GBP85,000 as a severance payment from his employers. He used this to finance his new business. He refused to use any part of it towards the property. He also made it clear that he did not intend to marry Ms Cowlam. From 2006, Ms Cowlam made nearly all of the mortgage payments. From 2007 onwards she made all of the payments.

The court had now to consider the extent of the respective beneficial interests of Ms Cowlam and Mr Cowie (since Mr Cowie’s charge was subject to an equitable charge in favour of Insol Funding Company Ltd).

The declaration in the 1998 transfer of the property to the couple would have been decisive had it been signed by the couple ([76]). It could not have been displaced by a common intention constructive trust ([77] – [79]). It could have been affected by proprietary estoppel ([79]).

The declaration was not enforceable, however, since it was not manifested and proved in writing signed by the parties as required by section 53(1)(b) of the Law of Property Act 1925 (cf Conveyancing and Property Ordinance, s. 5(1)(b)).

There was, however, a presumption of a beneficial joint tenancy under a common intention constructive trust given the domestic context and the fact that the title was in joint names ([86]). There was nothing here to rebut the presumption. The presumption reflected the reality that in 1997 Ms Cowlam and Mr Cowie were a mutually committed couple ([89]).

It is, however, possible for a common intention constructive trust to be varied where the later emergence of a different common intention can be proved.

Such a variation could be shown here. The principal evidence of this was the express agreement between the parties in 2001 that Ms Cowlam had an 80% share. The variation was confirmed by Mr Cowey’s refusal to apply the severance pay to the property and by Ms Cowlam’s assumption of sole responsibility, in fact, for the mortgage payments.

This latter fact was also the necessary detrimental reliance on the changed common intention. Detrimental reliance remains an essential element of the common intention constructive trust ([99]). The fact that Ms Cowlam was also motivated by a concern to maintain a home for her son did not affect this conclusion ([102]).

Ms Cowlam had an 80% beneficial share in the property. Master Bowles would have been prepared to reach the same conclusion had he relied on the principles of proprietary estoppel ([109] – [110]).

Michael Lower


Post-acquisition variation of existing common intention?

November 5, 2016

In Chen Lily v Yip Tsun Wah Alvan ([2016] HKEC 2326, CA) a couple acquired a flat in which they intended to cohabit prior to marriage. The property was acquired in their joint names. The couple broke up and the defendant moved out. There was a dispute as to their respective beneficial entitlements. At first instance it was held, following Stack v Dowden, that given that the couple had purchased the flat as their family home the presumption was that they were beneficial joint tenants.

The plaintiff accepted that the original common intention was that the property would be held as beneficial joint tenants. She argued, however, that there was a subsequent variation of the original common intention so that she would have a larger share of the beneficial ownership. The plaintiff argued that the original joint tenancy was agreed to by her on the basis that the defendant would be solely responsible for the costs of acquiring the flat (both the up-front cost and the mortgage payments). She contended that the common intention was varied when it became clear that she would have to contribute to the acquisition costs because the defendant could not meet them entirely out of his own resources.

The Court of Appeal, Yuen JA giving the main judgment, accepted that such a variation could be inferred from conduct. It was for the plaintiff to prove this variation but she was unable to do so. There was no evidence of any changed common intention. This was a domestic joint venture and attempts to draw up a ‘balance sheet’ based on contributions made were ill-conceived. There was no evidence of any change in the original common intention to hold as beneficial joint tenants.

The domestic joint venture context no longer applied after separation and an order requiring the defendant to bear half the mortgage costs after separation reflected the parties’ intention in the changed circumstances. In any event, the plaintiff was entitled to recover these on the basis that they were payments that were made in order to preserve the property for the parties’ joint benefit ([28.3]).

Michael Lower

Common intention constructive trust – abandonment after Jones v Kernott

December 1, 2014

In Quintance v Tandan ([2012] EWHC 4416 (Ch)) a co-habiting couple bought a property in joint names. They agreed to hold it on trust for themselves as beneficial tenants in common in equal shares. Q made no contribution to the purchase price (though he was a party to the mortgage). Within weeks of acquisition of the property, Q abandoned T. T made all the payments as she had already been doing up until then). When the property was sold, Q claimed that he was entitled to half of the net proceeds of sale. This claim failed. The approach taken in Jones v Kernott was applied. Q’s conduct showed an agreement to abandon his half share. This could be expressed either as a variation of the original agreement inferred from post-acquisition conduct or as the fair outcome where there was no evidence that the parties had formulated any actual intention ([17] per HH Judge Waksman QC)). The question of fairness is fact-sensitive ([19]).

Michael Lower

Surrender and regrant: the tenant under the new lease is not a successor in title of the tenant under the original lease

December 6, 2012

In Tweedie v Souglides ([2012] EWCA Civ 1456, CA (Eng)) a residents’ association was the tenant under a headlease of the property. T was the tenant of flat 5 under the terms of an underlease. As a result of a first deed of variation, an extra floor (in the roof space above the area originally demised) was added to the underlease. This amounted to a surrender and regrant by operation of law (Friends Provident Life Office v British Railways Board). T and his brother acquired the freehold of the property. They granted T (as underlessee) and ‘the successors in title of the Lessee’ an option to extend the lease for a term of 60 years from the expiry of the term of the headlease. S acquired the underlease of flat 5. The residents’ association (the head lessee) entered into a second deed of variation adding the roof terrace to the underlease of flat 5. Again, this amounted to a surrender and regrant. S then sought to exercise the option.

It was held that he was not entitled to do so. He was not a ‘successor in title of T since he held under the new lease that arose from the second surrender and regrant. He was not therefore entitled to exercise the option. The option was void for perpetuity. S could not take advantage of the exception in section 9 of the Perpetuities and Accumulations Act 1964 since this was only available to the lessee or successors in title (and S was not a successor in title). It was not possible to contract out of the surrender and regrant by operation of law and so S could not overcome these problems by recourse to a liberal construction of the terms of the option.

An argument that S took the benefit of the option by virtue of section 62 of the Law of Property Act 1925 (Conveyancing and Property Ordinance, s.16) failed.

The Chancellor concluded his judgment:

‘[T]he problem has arisen because the Tweedies, as freeholders and grantors of the Option, were not parties to the Second Deed of Variation and 53 Ennismore Gardens Residents Assocation Ltd, which was, was not also a party to the Option. In the more normal case where the grantor of the option is also the lessor there may well be scope for arguing that the regrant included a regrant of the option. In that event the present problems would not have arisen.’ (at [19])

Variation of lease: did the other lease terms remain in effect?

July 12, 2012

Ho Kin Pong v Tam Kok Hung ([2012] HKEC 948 (District Court)) concerned a two year lease of a flat. The lease contained a right for either party to terminate the lease after one year. The parties then negotiated a rent reduction. Later, the landlord wanted to sell the property with vacant possession and served a notice to terminate the lease. The landlord had entered into a sale agreement. The tenant alleged that when the rent reduction had been agreed there had been a further agreement that the right to terminate would not be invoked. She refused to leave. The court found as a matter of fact that there had been no agreement to give up the break right. As a consequence of the tenant’s refusal to leave, the landlord’s sale had fallen through and he had been ordered to pay damages to the buyer. These damages and the costs of the buyer’s action were the result of the tenant’s breach and she was liable to compensate the landlord accordingly.

Did a licence to alter amount to an implied waiver?

May 21, 2012

In Faidi v Elliot Corporation ([2012] EWCA Civ 287, CA (Eng)) F and E were tenants of flats in the same block. F’s flat was below E’s flat. The leases in the block contained a covenant to lay carpet and underlay on the floors (presumably as a means of sound insulation). This covenant was made by each tenant with the landlord ‘and with and for the benefit of the Flat Owners.’ The landlord covenanted to enforce the lease covenants on request provided the tenant making the request paid the costs of the enforcement action. E’s predecessor in title got the landlord’s consent to alter the flat by installing underfloor heating and laying oak flooring. The Court of Appeal held that this amounted to a waiver of the covenant concerning carpet and underlay because it was obvious to all that there was no point in carrying out these expensive works and then laying carpet. They must have intended to waive the covenant. The Court of Appeal urged neighbours to settle their disputes through mediation rather than litigation.

Leases: when does a variation amount to a surrender and regrant? Personal covenants and covenants that ‘touch and concern’ the land.

January 17, 2012

A deed of variation of a lease only amounts to a surrender and re-grant where the legal estate has been altered (perhaps this can only be done by altering either the premises or the term). An assignee of the lease might agree to significant variations of the terms of the lease. In principle, the original tenant remains liable for the personal obligation in the original lease terms (but in Hong Kong section 41(8) of the Conveyancing and Property Ordinance releases assignors from liability for post-assignment breaches of covenants that fall within section 41(2)). Of course an original tenant could agree to be liable for post-assignment breaches (of the original and / or varied lease terms).

In Friends Provident Life Office v British Railways Board ((1997) 73 P & C.R. 9, CA (Eng)) L owned the reversion of a lease granted to T. T assigned to A1 who entered into a deed of variation that increased the rent and altered the user and alienation clauses. A1 assigned to A2. A2 went into liquidation. L claimed from T the rent arrears that had accrued while A2 was in possession. T argued that it had no liability under the lease at all since the changes introduced by the deed of variation had been so significant as to amount to a new lease. This failed in the Court of Appeal. A deed of variation of a lease only amounts to a surrender and re-grant where the legal estate has been altered (perhaps this can only be done by altering either the premises or the term). Here the variation was not so significant as to give rise to a change in the estate.

T was liable to pay the original rent because of its personal covenant to do so (this must be read in the light of CPO s.41(8) in Hong Kong). It was not liable to pay the increased rent since the terms of its covenant did not cover any such increase.

Joint name case: quantifying the beneficial interest by reference to the whole course of conduct

November 1, 2011

Hapeshi v Allnatt ([2010] EWHC 392) concerned a dispute as to the ownership of property bought in the joint names of a mother and her son M. There was an agreement that another son, K, was to have a beneficial interest in the property (para. 42). There had been no express agreement that the mother, M and K would hold as beneficial joint tenants. Although there was an express agreement that the mother and M were to hold as beneficial joint tenants, the judge thought that the mother (who spoke no English) had not understood the idea and that the property was actually held by them as tenants in common (para. 47). The mother and M died and the court had to decide how the beneficial ownership was to be divided between K and the estates of the mother and M. The judge referred to Stack and, based on an assessment of the whole course of conduct, decided that the mother’s estate was entitled to 50% of the equity, and that K and M’s estate were each entitled to 25% of the equity. Megarry & Wade’s explanation of the current law as to when a common intention constructive trust can arise (Megarry & Wade (2008) para. 11-025) was quoted with apparent approval (para. 18). This passage suggests that a common intention constructive trust can be inferred from the parties’ whole course of conduct. The finding at para. 42 seems to mean, however, that (in relation to the primary question as to the existence of a constructive trust) there was no need to rely on the whole course of conduct in the present case.

Michael Lower