Archive for the ‘Whole course of conduct’ Category

Common intention constructive trust: condition attached to express agreement not satisfied

March 11, 2017

In Gallarotti v Sebastianelli ([2012] EWCA Civ 865, CA (Eng)) G and S were friends. They had each gone to England from Italy. G and S shared rented accommodation and then bought a flat. This was a platonic arrangement. They were happy to share until they were ready to buy homes of their own.

The title was in S’s name. G and S had an express agreement that they would be equal beneficial owners. This agreement was conditional on G contributing more than S to the mortgage repayments since S made a larger contribution than G to the down payment.

G did make some contributions but did not pay as much as S did towards the mortgage; the disparity was significant. The conditional element of the express agreement was not satisfied.

The friends fell out and G sought a declaration as to the extent of his beneficial interest. Arden LJ gave the only full judgment; the other members of the English Court of Appeal were content to agree with her.

The terms of the express agreement showed that ‘the parties were concerned that their ultimate shares in the Flat should, broadly speaking, represent their contributions to it’ ([24]). ‘[T]he inference to be made from the parties’ course of conduct was that they intended that their financial contributions should be taken into account but not that there should be any precise accounting’ ([25]). S had a 75% beneficial interest and G had 25%.

Michael Lower



Establishing a common intention constructive trust

June 16, 2016

In Fung Oi Ha v Fung Pui On ([2016] HKEC 1272, CFI) the title to a family home was in the father’s name. In 2005, the father assigned the home into the names of himself and his son as joint tenants. In 2011, the father and son assigned the home into the son’s sole name. The son gave no consideration for either of these assignments. One of the daughters brought proceedings seeking a declaration that she had a beneficial interest under a common intention constructive trust. There was no express agreement that she was to have an interest. The daughter relied on the fact that, since taking up employment, she had over many years given a large proportion of her salary to her mother and this money had been used to discharge the outgoings and expenses of the property. She had also  looked after the father since his first stroke in 2003. The daughter’s claim failed.

Recorder Lisa K Y Wong SC considered whether the common intention could be inferred. She commented on the difference in approach between Lord Bridge in Rosset (only contributions to purchase price or mortgage installments will do) and Fox LJ in Burns v Burns (any payments  referable to the acquisition of the house will do, including contributions to household expenses that allow the other party to meet the mortgage payments) (at [78]). In fact, the judge took a broader view: a holistic review of the whole course of dealing applying the factors identified by Baroness Hale in paragraph 69 of Stack v Dowden should be undertaken ([90] – [94]). This did not help the plaintiff, in this case:

‘Given the multifactorial nature of the question of intention, just as there are cases where the proof of financial contributions by one who is not the legal owner or in excess of one’s share of legal ownership may readily justify the inference of an intention to share beneficial ownership, there would conceivably be instances where the establishment of financial contributions does not support the inference of a common intention to share beneficial ownership. I am inclined to think that this present case is just such an instance.’ ([100]).

Context is relevant: this was not a claim by a spouse to a share in the matrimonial home ([101]):

‘The relationship with which I am concerned is that between parents and children in what appears to be a conventional Chinese family practising traditional family values … I daresay, in a lot of these cases, the parents (and probably the children too) would be taken aback if they be told that, even in the absence of an express agreement or understanding, the children’s contributions could be used to support the inference of an intention to share the beneficial interest of the parents’ property (which may be the parents’ only shelter in old age) if such contributions should happen to be applied toward the mortgage payments of the property.’ ([102]).

The plaintiff failed and was ordered to give up possession of the property to her brother.

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

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