Posts Tagged ‘common intention constructive trust’

Common intention constructive trust: context

April 26, 2017

Cheung Lai Mui v Cheung Wai Shing ([2017] HKEC 740) concerned property that had been owned by three brothers (W, F and K) as tenants in common in equal shares.

W died and D1 and D2 inherited W’s share. When F and K died, P (K’s adopted daughter) applied to be administratrix and executrix of their respective estates.

D3 was D1’s son. He claimed to be solely beneficially entitled as a result of a common intention constructive trust. This succeeded.

This was a traditional Chinese family residing in the New Territories ([78]). D3 was the only male descendant of the family. This was a significant fact that lent credence to the allegation of the common intention.

There was evidence of express discussions concerning the common intention and other surrounding circumstances that made it likely that the common intention had come into existence.

The lack of any formal written evidence of the common intention was understandable in the family context ([94] – [95]).

A defence of estoppel by standing by also succeeded ([103]).

So did D3’s adverse possession claim. He had erected a gate. This was an unambiguous assertion of control even though the gate had not been locked ([108]).

Michael Lower

The priority of unwritten equitable interests

April 4, 2017

In Si Tou Choi Kam v Wealth Credit Ltd ([2017] 1 HKLRD 1074) A and B acquired property as legal joint tenants. B’s creditor, C, obtained and registered charging orders over the property. C then applied for an order for sale of the property. A obtained a declaration that A was sole beneficial owner of the property (having supplied the entire purchase price) and registered it at the Land Registry.

The priority of unwritten equitable interests is governed by the doctrine of notice. The charging order is to be treated as if it were an equitable charge. Priority is governed by the first in time rule. A’s interest, having arisen at the time of acquisition, has priority under this rule.

There is no authority for the proposition that A is under a duty to obtain a declaration and register it in order to preserve this priority. It was surprising, therefore, that the court held that A’s priority was governed by the date of registration of the declaration.

Michael Lower

 

 

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

 

 

Family ownership disputes: when does Jones v Kernott apply?

March 4, 2017

In Wodzicki v Wodzicki ([2017] EWCA Civ 95, CA (Eng)) G and his wife (‘W’) bought a house intending that it should be a permanent home for G’s daughter (‘D’) and her children. Title to the house was in G and W’s name as legal joint tenants.

G died intestate. W began possession proceedings. D counterclaimed that she was the sole beneficial owner of the property.

The first instance judge was of the view that G’s beneficial ownership share belonged to D. He ordered an account to be taken of W and D’s respective contributions to the purchase price, maintenance and outgoings. Their ownership shares would correspond to their contributions.

D appealed. She argued that this resulting trust approach was inappropriate in this domestic context. This argument failed. The first instance judge found that G and W intended  the property to be D’s long-term home. They did not, however, intend D to be the sole beneficial owner. There were no grounds for departing from this finding of fact.

D argued that Jones v Kernott applied and that the intention that she was to be the sole beneficial owner should be imputed as a matter of fairness. This could not succeed given the judge’s finding as to the parties’ actual intentions.

In any event, this was not a context akin to that of co-habitees. D and W were not close. The use of a resulting trust approach was not precluded here.

Even if G had intended D to be sole beneficial owner, this intention could have no effect on W. D sought to rely on Hammersmith & Fulham LBC v Monk and to argue that W was bound by the intention of her joint tenant. This was a misapplication of Monk. That decision has no relevance to a purported disposal of a beneficial interest ([27]).

The finding as to G’s actual intention also meant that D’s claim to sole beneficial ownership based on proprietary estoppel had to fail.

A strange feature of the proceedings was that W presented no evidence when the account was taken. The result was that D was found to be sole beneficial owner.

Michael Lower

England: oral agreements and the common intention constructive trust

February 19, 2017

In Matchmove Ltd v Dowding ([2016] EWCA Civ 1233, CA (Eng)) Matchmove (a company controlled by F, a property developer) was negotiating for the purchase of a plot of land (‘the land’) and the adjoining meadow. F intended to split the land into two plots and to build a house on each plot. He orally agreed with his friend D that D would buy one of the plots and the meadow (D wanted to keep horses on the meadow).

In due course, Matchmove entered into a written contract for the sale of the plot to D and this sale was completed. There was, however, no written contract for the sale of the meadow to D. F and D fell out and F sought to resile from the oral agreement to sell the meadow to D.

D sought a declaration that Matchmove held the meadow on trust for him. Matchmove denied the existence of a binding agreement for the sale of the meadow. It relied on the lack of a signed written agreement to satisfy section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.

F had intended the oral agreement concerning the meadow to be immediately binding. He was well known by D to have a business approach that attached real importance to his word as a businessman. By the time of the dispute, D had paid the entire purchase price for the meadow to Matchmove.

In these circumstances, the question was whether the agreement gave rise to a common intention constructive trust that could fall within section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989.

The Court of Appeal referred to Arden LJ’s discussion of this question in Herbert v Doyle. There, Arden LJ said that section 2(5) could  not be relied on:  (1) if the parties intend to make a formal agreement setting out the terms on which one or more of the parties is to acquire an interest in property; (2) if further terms for that acquisition remain to be agreed between them so that the interest in property is not clearly identified; and (3) if the parties do not expect their agreement to be immediately binding.

The Court of Appeal did not see this statement as setting out three conditions to be satisfied but as being three ways of making the same point about the effect of the judgment in Cobbe v Yeoman’s Row ([32]).

There was a clear express agreement between the parties. Although both parties were well aware that a written contract would be needed, they regarded this as a technicality and took the view that they already had a binding agreement. The payments made by D provided the detrimental reliance.

There was a common intention constructive trust that fell within section 2(5). D could enforce the oral agreement for the purchase of the meadow.

Michael Lower

 

 

Did son hold property on trust for his mother?

January 19, 2017

In Primecredit Ltd v Yeung Chun Pang Barry ([2016] HKEC 2667) title to the family home was in the name of a father and his son as joint tenants. The father died and the son became sole owner by virtue of the right of survivorship. Primecredit was a judgment creditor of the son. It obtained a charging order in respect of the debt. The defendant’s mother claimed that she had a beneficial interest in the property under a common intention constructive trust or a presumed resulting trust.

The mother had the burden of proof to show that the beneficial ownership was different from the legal ownership. She had undoubtedly contributed to the purchase price. On the facts, however, the court did not believe that a trust in her favour should be inferred from these payments. She had intended to make a gift of the contributions to her son.

Michael Lower

Common intention constructive trust: when is the agreement ‘subject to contract’?

December 10, 2016

In Ely v Robson [2016] EWCA Civ 774 (CA, Eng) E and R co-habited in a property the title to which was in E’s name. When the relationship between E and R broke down, E began possession proceedings and R counterclaimed that she had a beneficial interest in the property under the terms of a common intention constructive trust. The couple met and orally agreed a relatively complex settlement under the terms of which E would hold the property for himself for life with the remainder interest belonging 80% to his children and 20% to R. There were terms governing the payment of outgoings, the right to occupy the property and the compromise of E’s claims to other properties owned by R. It was accepted that the terms of the arrangement would be reflected in a trust deed and that the precise form of the agreement was provisional since, amongst other things, the tax implications of the way in which the deal was structured would need to be considered. E did not pursue the proceedings any further given R’s acceptance of the settlement.

R claimed that the settlement was not binding on her since it was not incorporated in a signed, written agreement satisfying section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. E argued that R was bound by the agreement on the basis of either a common intention constructive trust or proprietary estoppel.

For the purposes of the judgment, the English Court of Appeal  (Kitchin LJ giving the judgment) assumed that R, prior to the agreement, had a beneficial interest in the property under a common intention constructive trust. It reminded itself of Lord Scott’s approach in Cobbe v Yeoman’s Row to the use of proprietary estoppel in the context of agreements concerning land that did not satisfy section 2(1). Lord Kitchin also referred to the passage of Arden LJ’s judgment in Herbert v Doyle concerning such agreements. There is no common intention constructive trust where:

  1. a formal written agreement is anticipated; or
  2. further terms remain to be agreed so that the interest in property to be acquired is not clearly identified; or
  3. the parties did not expect their agreement to be immediately binding.

In these situations, if the agreement is incomplete, the parties cannot rely on constructive trust or proprietary estoppel (Herbert v Doyle, Arden LJ [57]).

The Court of Appeal rejected R’s contention that these requirements were not satisfied in the present case:

  1. although a formal written agreement was contemplated, nothing was said or written that precluded the possibility that a binding compromise had been agreed in the meeting between the parties (‘This was not a commercial transaction.’); and
  2. there were no terms still to be agreed; and
  3. the terms were sufficiently clear to constitute a binding agreement.

E relied on the agreement to his detriment by: not pursuing the possession proceedings; abandoning his claims to R’s other properties; and allowing R to remain in possession. Consequently, E held the property on constructive trust in accordance with the terms that had been agreed.

Michael Lower

Article – Marriage and acquisition of a beneficial interest in the family home in Hong Kong

December 8, 2016

Just published: M. Lower, ‘Marriage and the acquisition of a beneficial interest in the family home in Hong Kong.’ [2016] Conveyancer and Property Lawyer 453 – 465

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

Actual intention? Common intention constructive trust not presumed resulting trust.

November 1, 2016

In Re Superyield Holdings Ltd ([2000] 2 HKC 90) a father and son each had one of the two issued shares in SH Ltd. SH Ltd, in turn, held one of the two issued shares in SC Ltd (along with another company LKR Ltd which was essentially owned and controlled by the son). SC Ltd owned a residential property (‘the property’). The question was whether the son was solely beneficially entitled to the property. Recorder Robert Kotewall SC found that he was. The son argued that since the property was bought using a combination of the son’s own funds and a loan to the company that the son had arranged, he could rely on the presumption of a resulting trust. The court seems rather to have found for the son on the basis of the father and son’s actual intention. The judge thought that where the trust rested on actual intention then the presumption of resulting trust had no part to play (at 111). He accepted that SH Ltd was in substance the son’s company and that the father was only involved as a formality to satisfy the then requirements of the Companies Ordinance. The father had been one of the joint guarantors of the loan to SC Ltd used to buy the property and it was possible to argue that this should be treated as a contribution to the purchase price by the father. This would depend upon underlying intention. In any case, the presumption of advancement would apply so that this contribution should be presumed to be a gift from father to son.

Michael Lower