Marr v Collie: The interaction between presumed resulting and common intention constructive trusts

Introduction

How should the court proceed where the facts of a case are such that the presumed resulting trust (‘PRT’) and the common intention constructive trust (‘CICT’) might each be applicable?

This is an important question and one that arises frequently, especially in disputes concerning the ownership of the family home.

While the two trusts overlap, they can generate radically different outcomes. This is because the CICT has regard to a range of evidence that is broader than the factors relevant to a PRT analysis.

The CICT can, for example, consider mortgage or other payments that are made after the time of acquisition. The CICT, alone, has a rebuttable presumption of equality where there is a legal joint tenancy of a family home.

The PRT and the CICT answer the same questions but use different analytical frameworks and can generate different answers.

It is tempting to think of a binary choice between the PRT and the CICT and the presumptions built into them.

The Privy Council decision in Marr v Collie, however, points to a different approach that integrates the PRT and the CICT, rather than sharply distinguishing them.

I explain my reading of Marr v Collie and its integrated approach and one possible implication for the interaction between the PRT and CICT analytical frameworks.

The facts

The parties to this dispute were in a personal relationship with each other. They acquired several properties in their joint names. Some were acquired as investments, at least one was intended as a home.

Mr. Marr provided all the finance through a combination of direct investment and secured loans.

Mr. Collie was a builder and he claimed that the parties’ common intention was that his contribution to the properties would be in the form of building works improving their rental value.

The relationship broke down. Mr. Marr claimed the entire beneficial ownership under a PRT given that he provided the entire purchase price.

Mr. Collie, on the other hand, claimed that there was a CICT under which they would be equal beneficial owners.

The arguments

The parties in Marr v Collie saw their dispute as being about whether the PRT or the CICT provided the appropriate framework for determining their beneficial interests.

Mr. Marr was understandably keen to argue for a PRT approach since this would reward him with sole beneficial ownership.

Mr. Collie favoured a CICT approach since this would allow him to rely on additional evidence to establish his claim to a beneficial interest.

There was, for example, an email from Mr. Marr to his bankers implying an intention that he and Mr. Collie were to have equal shares.

This additional evidence would, he hoped, support his claim to a 50% interest in the properties.

The parties, then, saw the PRT and the CICT as being distinct, alternative possibilities. They, and the Bahamas Court of Appeal, thought that the PRT would apply if the relationship was predominantly ‘commercial’ and the CICT would apply if the case fell into the ‘domestic consumer’ category.

The problem seemed to be that the relationship, so far as the properties were concerned, belonged both to the domestic consumer and the commercial contexts.

Lord Kerr’s approach to the PRT / CICT relationship

The ownership arrangement recorded in the conveyance to the parties provides the starting point ([40]) but this can be displaced by evidence of the parties’ shared intentions ([41]).

The party seeking to show that there is a trust, that equitable ownership intentions differ from legal ownership, has the burden of proof.

If the only evidence of shared intentions is that there were differential financial contributions to the initial purchase price, then the PRT can be applied ([45]).

If the whole course of conduct in relation to the property includes additional evidence which might rebut the PRT, ‘there should be a direct focus on what the intentions of the parties were’ ([46]).

Regardless of context, ‘the answer is not to be provided by the presumption of one trust over another’ ([54]).

Lord Kerr thought that the only room for resort to a choice of presumptions was, perhaps, ‘where there is no evidence from which the parties’ intentions can be identified’ ([54]).

Applying this to Marr v Collie

The parties had contributed unequally to the purchase price. This raises the presumption of a resulting trust and is evidence from which a common intention constructive trust might be inferred.

The legal joint tenancy and the personal relationship between the parties might be thought to give rise to a presumption of equality after Stack v Dowden.

There was, however, additional evidence of the parties’ intentions, Mr. Marr’s email to his bankers for example, which had not been explored and evaluated.

The case was remitted to the Supreme Court of the Bahamas for this gathering and evaluation of relevant additional evidence to take place.

What does this mean for the future role of the PRT?

The PRT hands over to the CICT when the range of evidence, or the ability to give proper effect to it, goes beyond what the PRT can achieve.

Up to that point, the PRT and the CICT are interchangeable. Beyond that, the rigidity of the PRT is a barrier to determining the parties’ intentions.

Is there any need for the PRT, then, since the CICT provides a complete and more flexible alternative?

Marr v Collie illustrates the problems that arise where parallel PRT and CICT analyses are conducted.

In a later post, I will briefly outline the academic reception of Marr v Collie, not all of it is uncritical.

Michael Lower

Beneficial interest in land arising from contributions to purchase price – Presumed resulting trust or common intention constructive trust?

A presumed resulting trust can arise where title to land is in A’s name but B contributed to the purchase price. The same facts would readily give rise to an inference that B has a beneficial interest under a common intention constructive trust.

This overlap between the presumed resulting trust and the common intention constructive trust matters because of the potential for different outcomes when it comes to valuing beneficial interests.

The beneficiary’s interest under a presumed resulting trust is strictly proportionate to their contribution to the purchase price. This may not be true in the case of the common intention constructive trust.

For example:

• the beneficiary may have made financial contributions that count for common intention constructive trust purposes but that are not relevant to the presumed resulting trust calculation (informal mortgage contributions are the most obvious example);
• or there may be a finding that A and B’s intentions concerning ownership were shaped by a domestic partnership / pooled assets mindset. Equality of shares, irrespective of financial contributions is the outcome in this case (eg Chan Chui Mee v Mak Chi Choi – the first instance judgment is outlined in this earlier blog post).

That being so, which approach should the court apply?

The normal approach is to make use of the common intention constructive trust, at least in the domestic context. This is illustrated by the recent court of first instance decision in Tang Hin Fai Chris v Tang Hin Lung.

Title to a flat was in the name of P1 and P2. D1 and D2 claimed to have contributed to the purchase price. The financial contributions were not, however, the only relevant evidence as there were rival contentions as to the express agreement that explained these contributions.

The claim to a beneficial interest failed. D1 and D2 made payments to P1 and P2 (the legal owners), but these were pursuant to an oral licence agreement. They were not made in accordance with an oral agreement that D1 and D2 should have an ownership interest.

DHCJ Jenkin Suen SC, referring to the Court of Appeal judgment in Primecredit confirmed the primacy of the common intention constructive trust in the domestic context ([99]).

This provides a solution to the question posed at the outset as to which trust should apply when the claim to a beneficial interest is based on a contribution to purchase price. There is a problem, though: is it always possible to distinguish between a domestic and a non-domestic context?

A better solution might be to say that the purchase price resulting trust is now, effectively, a sub-category of common intention constructive trust. I’ll return to this thought in another blog post.

Michael Lower

Informal land contracts: overlapping equitable doctrines

Introduction

The judgment in Ng Yuk Pui Kelly v Dung Wai Man [2019] HKCFI 210, shows that part performance, common intention constructive trust and proprietary estoppel are each available to plaintiffs seeking to enforce oral land contracts. The court also decided that a belief that one is in possession as owner by virtue of a valid contract (even when this belief is correct), is no bar to a successful adverse possession defence / claim.

Facts

Kelly (P) and Kuen were brothers. Kuen provided the finance to acquire two flats but legal title was assigned to his wife (D). D held the flats on resulting trust for Kuen.

In 1985, Kuen was in financial difficulty and orally agreed to sell the flats to P for HK$1 million (‘the 1985 agreement’). P paid the HK$ 1 million to Kuen but agreed not to press D to assign the legal title to P.

Kuen died and D and her children denied that P was the beneficial owner pursuant to the 1985 agreement.

P relied on part performance, common intention constructive trust and proprietary estoppel. Alternatively P argued that his adverse possession since 1985 meant that D’s title was extinguished.

P was successful under each heading except for part performance (where the problem may have been technical rather than substantive).

Part performance

P argued that payment of the HK$ 1 million to Kuen was an act of part performance of the 1985 agreement. P’s claim failed because he had not shown that payment of the money was referable to the agreement ([460]).

Common intention constructive trust

This succeeded. The 1985 agreement provided the common intention and the payment of the HK$1 million was the detrimental reliance ([466]).

D’s attempt to rely on Luo Xing Juan (to argue that the fact that D was not a party to the common intention was fatal to P’s claim) failed. Kuen did own the beneficial interest and the common intention can refer to a beneficial interest ([468]).

D’s attempt to rely on CPO s. 3(1) also failed. Cobbe v Yeoman’s Row was distinguished on the basis that in that case there was no valid agreement while in this case there was ([469]).

Proprietary estoppel

P could also succeed in proprietary estoppel. The lack of written formality for the disposal of an equitable interest in land (CPO s. 5(1)) was not a problem ‘where constructive trust and proprietary estoppel overlap’ ([471]).

The 1985 agreement was the assurance and payment of the HK$ 1 million was the detrimental reliance ([473]).

Adverse possession

As mentioned above, the alternative adverse possession claim also succeeded ([488]).

Michael Lower

Cheung Lai Mui v Cheung Wai Shing (Hong Kong Court of Appeal)

Introduction

Cheung Lai Mui v Cheung Wai Shing ([2020] 2 HKLRD 15) concerned a claim based on common intention constructive trust and proprietary estoppel. Where the landowner (the maker of the relevant assurance) has died, does detrimental reliance need to take place before the death? What kind of knowledge of the detrimental reliance must the maker of an assurance have for a proprietary estoppel claim to succeed.

Facts

Three brothers (W, K and F) were tenants in common in equal shares of land in a village near Sai Kung. From the late 1970s onwards, they reached a common understanding (‘the common understanding’) that D3 (W’s grandson and the sole surviving male descendant of the Cheung family) would own the land when he became an adult.

P was K’s daughter. When he died, she became the executrix of his estate. F died intestate and letters of administration of his estate were granted to P. She thus became the legal owner of K and F’s shares and the beneficial owner of K’s share and beneficial co-owner of F’s share.

W was the last of the brothers to die (he passed away in 1999). His share in the tenancy in common passed to his son and daughter (D1 and D2). D3 was D1’s son.

In 2002, D3 built a one-storey structure on the land and in 2003 he created a second one-storey structure to which he added a second storey. D3 and his family began to live in these buildings in 2002 or 2003.

P lived near D3’s home and visited it on various occasions. She knew that D3 carried out work on the land and raised no objections.

Relations between P and D3 started to deteriorate in 2012. P sought an order for D3 to remove the structures he had built. D3 claimed to be the sole beneficial owner of the land relying on common intention constructive trust and proprietary estoppel.

D3’s claim was based (a) on the common understanding, and (b) on P’s acquiescence in the works that D3 carried out on the land.

The common understanding: timing of the detrimental reliance

P argued that D3’s claims based on common intention constructive trust and proprietary estoppel had to fail because D3’s detrimental reliance (the building works) was incurred after the death of the brothers.

The Court of Appeal agreed that this would be fatal to a common intention constructive trust claim. The case was remitted to the first instance judge for him to determine whether there was any detrimental reliance while the brothers were still alive.

There appears to have been a difference of opinion as to whether detrimental reliance also needed to have been incurred before death for the proprietary estoppel claim to succeed.

Lam VP ([1.6] and Cheung JA ([6.35 and 6.38]) agreed that for common intention constructive trust purposes the detrimental reliance needed to take place before death.

If it had then the brothers’ estates were subject to the equity that had arisen. If not then the property would pass according to their wills or under the intestacy rules, unencumbered by any equity ([1.20] and [6.36]).

Lam VP thought that, in this respect, the law of proprietary estoppel might be different from that of the common intention constructive trust ([1.28]) and that D3’s proprietary estoppel claim based on the common understanding succeeded ([1.35]).

The assurance was that D3 would become the owner of the land when he became an adult. It was not a promise that he would inherit the property on the death of the brothers.

Cheung JA, on the other hand, thought that the requirement for detrimental reliance before the death of the brothers was the same both for proprietary estoppel and the common intention constructive trust ([6.38]).

Could D3 succeed even if there were no detrimental reliance before the death of the brothers? Estoppel by silence.

Cheung JA thought that D3 might still succeed in proprietary estoppel even if D3 only incurred detrimental reliance after the death of the brothers.

It might be possible to argue that she was a party to the common understanding ([6.39]).

Alternatively, there might be an estoppel by acquiescence or standing by ([6.40]). Cheung JA referred to the outline of the relevant law in Mo Ying ([5.6]). P stood by and allowed D3 to carry out the building works in (possibly mistaken) reliance on the common understanding. The case was being remitted to the Court of First Instance and this aspect of the matter would also need to be re-appraised.

Does the maker of the assurance need to know about the detrimental reliance?

It is not normally necessary for the maker of the assurance (the brothers) to know about the detrimental reliance ( Lam VP at [1.34]). Cheung JA addresses this issue at some length in his judgment.

Cheung JA tied his discussion of a knowledge requirement into the ‘narrow’ concept of unconscionability which is concerned with the state of mind of the person giving the assurance ([6.46]). The emphasis is on the quality of the words used not on knowledge of any actual detrimental reliance (Thorner v Major Lord Hoffmann at [5]).

In active encouragement cases (express words of encouragement or assurance) there is not usually any need for the maker of the assurance to have actual knowledge that there was detrimental reliance or the form it took. This knowledge is necessary in the case of estoppel by silence or acquiescence ([6.59] – [6.60]).

Comparison of the common intention constructive trust and proprietary estoppel

Lam V-P thought that the outcome was different in the case of proprietary estoppel when compared with common intention constructive trust. It is not surprising, then, that he draws attention to their differences ([1.4]).

Equitable estoppel ‘is the more flexible tool’ and the court looks backwards from the time when the promise falls to be performed([1.10] referring to Lord Hoffmann’s words in Walton v Walton at [105]).

Michael Lower

The family home. Types of constructive trust. The end of detrimental reliance?

Archibald v Alexander: the facts

In Archibald v Alexander ([2020] EWHC 1621) a mother and her three children (Patsy, Brenda and John) orally agreed that a house would be purchased in the name of the mother and one of the siblings. It was to be held on trust for the mother for life and then for the three children equally.

This was for tax-planning reasons and to protect the property from any claim by the mother’s husband should she re-marry. The assumption was that there was no need to take excessive care to formalise the trust given the loving family context.

The property was transferred to the mother and Patsy as joint tenants, neither Brenda nor John was available to attend the solicitor’s office at the time of the purchase.

When the mother died, there was a dispute as to whether Patsy was the sole owner of the property or held it on the terms of the oral trust.

Was there reliance?

If this was a common intention constructive trust, then Brenda and John needed to show detrimental reliance. Fancourt J. held that there was reliance: ‘the non-signing siblings were self-evidently relying on the word and promise of those who did become owners’ ([14]).

Was there detriment?

Given the finding of reliance, the detriment was the decision of Brenda and John not to take steps to legally protect their ownership interest in the house; this was a sufficient change of position ([30]).

Not a common intention constructive trust?

The findings on detrimental reliance were obiter:

‘the instant case is of a different kind, in which a property is transferred (gratuitously) into the name of the owner on the basis of their express agreement to hold the property on trust for another. The owner only obtains the property on the terms of the agreement and equity does not permit them unconscionably to refuse to give effect to the terms. The trust arises from the terms on which the property was transferred, not from detrimental reliance on the agreement by the beneficiary.’ ([32]).

The essential elements of this constructive trust are: ‘property had been transferred to a volunteer on the basis of his promise to hold it on certain terms, and would not otherwise have been so transferred’ ([37]).

Fancourt J. referred to Rochefoucauld v Boustead; Bannister v Bannister and De Bruyne v De Bruyne.

There is no need to establish detrimental reliance for constructive trusts like this.

Michael Lower

 

Purchaser pays owner who enters into a second contract to sell to a third party

Introduction

In Mui So Bing v Wan Chi Sing ([2019] HKCA 1341) D1 and D2 orally agreed to sell property to P. The parties later entered into signed written agreements; these were not registered at the Land Registry.

P paid the entire purchase price in stages to D1 and D2. D1 and D2 then entered into signed written agreements to sell the same property to D3 and D4. D3 and D4 registered their agreements at the Land Registry.

At first instance, P’s claim to be entitled to the property as against D3 and D4 based on a presumed resulting trust failed. The facts did not bring the case within any category of resulting trust. There was no voluntary transfer by P nor did P provide any part of the purchase price at the time of D1 and D2’s acquisition.

P’s claim against D1 and D2 in unjust enrichment succeeded.

P appealed against the first instance decision seeking to rely instead on the common intention constructive trust or the vendor and purchaser constructive trust.

The common intention constructive trust

While a common intention constructive trust can arise in the commercial context, there was no such trust here. There was no basis for finding that D1 and D2 had agreed to hold the property on trust for P. They had agreed to sell the property to P ([25] Yuen JA).

Vendor and purchaser trust

The vendor and purchaser resulting trust only arises if specific performance is available ([27.3]). Since P had not argued for the existence of such a trust at trial, a number of facts relevant to whether specific performance would be awarded were not explored ([27.4]). It was too late for P to raise this argument on appeal.

Priority

In any event, the contract with D3 and D4 had priority over the contract with P. P had not registered and so D3 and D4 could rely on section 3(2) of the Land Registration Ordinance. Notice was irrelevant because D3 1nd D4 had duly registered ([28.4]).

Any unwritten equity that P may have had (though the Court of Appeal was clearly sceptical as to whether there was any) was subsumed by the written agreement between P and D1 / D2 ([28.3])

Importance of pleading the relevant legal consequence

The Court of Appeal was severely critical of P’s attempt to plead legal consequences (common intention constructive trust and vendor and purchaser constructive trust) for the first time on appeal:

 ‘As the court’s primary aim in exercising its powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties, and to further these objectives by actively managing cases 35 , it seems to me to be high time that consideration should be given to requiring legal representatives to plead not only material facts, but also all the legal consequences to which those facts validly lead 36 , with the effect that the parties would be barred from contending different legal consequences on appeal.’ ([23.3] per Yuen JA).

Michael Lower

Estoppel where the family home is owned by a company

 

The inference of a trust when the family home is owned by a company controlled by a spouse
In Prest v Petrodel Resources Ltd the UK Supreme Court established that English family law (specifically section 24 of the Matrimonial Causes Act) does not give the court any special power to pierce the corporate veil in the case of disputes concerning the family home owned by a company controlled by one of the spouses.

In an important passage of his judgment, however, Lord Sumption suggested that, ‘in the case of the matrimonial home, the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company.’ This beneficial interest would count among the spouse’s assets when dealing with ancillary relief.

Other forms of equitable intervention
There might be cases, though, where the courts do not feel able to infer the existence of a trust but where the spouse (or co-habitee) who owned and controlled the company has assured the other that they have or will have an interest in the family home.

On the face of it, the person giving the assurance has no legal or equitable interest in the property. It would seem to follow that there is no basis on which the recipient of the assurance can claim an interest in the family home.

How might equity intervene to protect the expectations of the recipient of the assurance in these circumstances? In 2008, in Luo Xing Juan v Hui Shui See, the Hong Kong Court of Final Appeal considered this question.

The facts in Luo Xing Juan v Hui Shui See

Luo Xing Juan (‘L’) and Hui Shui See (‘H’) co-habited in a property owned by Glory Rise Ltd (‘Glory Rise’). Glory Rise had acquired the property as an investment. The company had two shareholders when incorporated but subsequently H became the sole shareholder and director.

H asked L to marry him and she agreed. H assured L that he would give her a 35% interest in the property when he was in a position to do so. In the meantime, he transferred a 35% shareholding in Glory Rise to L.

H died before he was in a position to give effect to his promise to make L a co-owner of the property. H’s estate sought to revoke L’s licence to occupy the property. L responded with claims to an interest in the property based on the common intention constructive trust and proprietary estoppel.

The corporate veil rules out the use of the common intention constructive trust and proprietary estoppel

L’s claims failed because there was no reason to pierce the corporate veil: H had given an assurance about property owned not by him but by a third party, Glory Rise. Unlike Prest, it could not plausibly be suggested that the company held the property as trustee for H.

Promissory estoppel as the solution
L successfully resisted the company’s attempt to evict her by relying on promissory estoppel. H’s assurance was re-interpreted so that it related to the exercise of his powers as controlling shareholder of Glory Rise.

In effect, H had assured L that he would not allow his powers as controlling shareholder to be used to evict her until she had received the 35% beneficial interest in the property that she had been promised.

The Court of Final Appeal ordered that Glory Rise should be wound up on the just and equitable ground. The property was to be sold and L was to vacate it once a buyer had been found. L would then receive 35% of the net sale proceeds.

This solution has the clear merit of both respecting the corporate veil and of giving practical (and just) effect to H’s assurance and L’s detrimental reliance on it.

Promissory estoppel: no proprietary effect

Ribeiro PJ, in the main judgment in Luo Xing Juan, emphasised that promissory estoppel was a mere equity; it was not proprietary. It conditioned H’s exercise of the voting power connected with his controlling stake in Glory Rise and, indirectly, deferred Glory Rise’s ability to evict L.

The blurring of the distinction between proprietary and promissory estoppel

It is not surprising that promissory estoppel should be invoked so as to defer a licensor’s right to evict a licensee. Maharaj v Chand had already shown the way on this; promissory estoppel was used to prevent the man who was the legal owner of the family home from evicting his wife.

On the other hand, it is very noticeable that, in considering the relief to be granted, the Court of Final Appeal was guided by the classic English proprietary estoppel authorities (Crabb v Arun District Council; Pascoe v Turner; Gillett v Holt; Campbell v Griffin and Jennings v Rice). The Court of Final Appeal clearly intended that L’s relief should be designed with the exercise of the proprietary estoppel remedial discretion in mind.

Promissory estoppel was used, in effect, to protect L’s expectation of a 35% interest in Glory Rise’s property. This is surprising because it seems to contradict the proposition in Coombe v Coombe that promissory estoppel cannot be used as a cause of action.

The interplay between promissory estoppel and winding up on the just and equitable ground

The order was that Glory Rise should be wound up on the just and equitable ground. The substratum of Glory Rise was as ‘the intended vehicle for holding the Property as the matrimonial and family home of the deceased, Miss Luo and [Miss Luo’s daughter]’ (Ribeiro PJ at [74]). This substratum disappeared with H’s death.

This prompts the reflection that where, like L, the plaintiff is a shareholder in the company then a winding up petition (or, perhaps, unfair prejudice proceedings) are an option. Further, they represent an option which is available independently of any estoppel claim.

Limited to cases where the recipient of the assurance is a shareholder?

The Luo Xing Juan promissory estoppel approach is available even in cases where the recipient of the assurance is not a shareholder in the company that holds the property. Thus, in Hong Kong Hua Qiao Co Ltd v Cham Ka Tai (later upheld by the Hong Kong Court of Appeal), the Luo Xing Juan approach was adopted in a case with similar facts.

L and C began to co-habit in a property owned by a company in which L was effectively the sole shareholder. Each was already married when the relationship began.

L assured C that she would be able to live in the property for the rest of her life. L and C co-habited for five years before L died intestate. His wife and son sought to evict C from the property.

C was not a shareholder in the company that owned the family home, although the assurance concerned both the family home and shares in the company that owned it. Winding up would have been of no use to the recipient in this case.

Deputy Judge Saunders, relying on Luo Xing Juan, decided that L’s promises that C could live in the property for the rest of her life were ‘enforceable by way of promissory estoppel’ ([115]).

On relief, Deputy Judge Saunders, relying on Luo Xing Juan, said that C was entitled to an order transferring the legal title of the property to her ([118]). Again, this seems to have been a proprietary estoppel case in all but name.

Limited to family home cases?
Luo Xing Juan and Hong Kong Hua Qiao each concerned the use of promissory estoppel to establish a claim to the family home.

In Hong Kong Hua Qiao, Deputy Judge Saunders drew attention to the fact that both cases involved couples living together as man and wife ([93]) without explaining the significance of this fact. In Chan Sung Lai v Chan Sung Lim Paul, Deputy Judge Saunders (at [128]) expressed his uncertainty as to whether the doctrine could apply as between father and son.

Clearly, the distinction drawn in Thorner v Major between this context and the commercial context is likely to be relevant if there is any dispute as to the meaning of any words or conduct said to constitute an assurance.

Luo Xing Juan and Hong Kong Hia Qiao, however, were not concerned with questions of interpretation. If context was relevant it was for some other reason.

Deputy Judge Saunders may have intended to indicate that this approach to promissory estoppel was more likely to be used in the family home or ‘domestic’ context.

It may be that the Luo Xing Juan promissory estoppel will turn out to be confined to cases with the very specific features of these cases; it may be limited to cases where a couple are living together as man and wife (whether or not they are married) in a property owned by a company controlled by one of them (who gives the relevant assurance).

Limited to company owned by a single shareholder?

In both Luo Xing Juan and Hong Kong Hia Qiao, the company that owned the family home was solely owned by the maker of the relevant assurance. In Luo Xing Juan, H bought out his sister’s 20% minority stake around the same time as he transferred the 35% shareholding to L.

This raises the question as to whether the doctrine can only operate where the maker of the assurance is the sole shareholder. There are arguments in principle in favour of either possible answer to this question.

On the one hand, the relevant assurance is an assurance as to the exercise of voting control. There is no need for a shareholder to own all of the shares in a company to have the power to dictate the outcome of the board decision on any question.

On the other hand, if there are minority shareholders, other than the recipient of the assurance, then the effect of the use of the doctrine on their interests would need to be taken into consideration. They may view the property as an investment and in some market conditions might prefer the company to retain ownership.

This may seem a purely theoretical question but in Luo Xing Juan, H’s sister retained a 20% stake in the company for a few months after the transfer of the 35% shareholding to L. Had H died during those few months then this question would have had practical importance.

Limited to cases where the recipient of the assurance is in occupation of the relevant property at the time of the proceedings?

In Luo Xing Juan and Hong Kong Hia Qiao, the company that owned the family home sought to evict the recipient of the assurance who was in occupation of the property. Promissory estoppel is invoked, in the first place, as a defence against this attempted eviction.

Is this an essential element of the Luo Xing Juan doctrine? The company’s right to possession is not taken away but is conditioned by the estoppel. This accords with a traditional understanding of promissory estoppel and, as noted earlier, suggests a continuity with Maharaj v Chand.

Limiting the Luo Xing Juan approach to cases like this would be consistent with the idea, just discussed, that its use might be limited to family home cases.

A more general relaxation of the distinction between promissory and proprietary estoppel?

The approach in Luo Xing Juan challenges what had seemed to be a well-established distinction between proprietary and promissory estoppel in ways that I have indicated.

I have considered the possibility that the Luo Xing Juan approach is only intended to take effect in certain circumstances. I have considered what those circumstances might be.

It is possible, however, that the Court of Final Appeal intended to establish a more general proposition; it may be that the judgment intended to minimise or even abolish altogether the distinction between proprietary and promissory estoppel. This would explain why proprietary estoppel principles and authorities were applied so readily.

On the other hand, there is no express indication in any of the judgments to indicate that this was the intention; one would have expected that an intention to restructure the law in this way would be clearly flagged up and that some justification would be offered for it.

In paragraph [54] of his judgment, Ribeiro PJ raises the question of the relationship between promissory and proprietary estoppel:

‘The doctrine of estoppel continues to represent a developing area of the law and aspects of the applicable principles are subject to debate. Thus, there is discussion as to the extent to which promissory estoppel and proprietary estoppel overlap, with a body of opinion inclining towards the view that there is no real difference between them. In the present context, proprietary estoppel is inapplicable because the deceased, not being the owner of the Property, was not in a position to confer on Miss Luo a proprietary interest in it. However, as Maharaj v Chand establishes, this does not prevent recourse to promissory estoppel. The doctrines therefore differ at least to that extent. However, it is at the same time clear that many of the constituent elements of the two forms of estoppel are shared and where that is so, authorities on proprietary estoppel provide guidance in cases involving promissory estoppel.’

This passage leaves the question in the balance: there is substantial overlap but some (unspecified) difference. There is no suggestion here of an intention to effect radical change in the law.

Conclusion
When a limited company holds the title to the family home, assurances concerning ownership of the home given by a director or shareholder cannot directly limit the rights of the company nor give rise to a common intention constructive trust or proprietary estoppel claim.

Luo Xing Juan created the possibility that such an assurance could condition the exercise of that shareholder’s voting rights so that they could not be exercised in a way that is inconsistent with the assurance that has been given. This limitation is presented as a form of promissory estoppel.

The Court of Final Appeal went further when it decided that the effect of the estoppel was, in effect, to require the company to make good on the assurance given by the controlling shareholder.

It is not clear whether this promissory estoppel has general application or applies only in limited circumstances. If the latter, the circumstances in which the estoppel applies are not clearly defined.

Michael Lower

Whitlock v Moree: clauses declaring that a joint bank account is held under a joint tenancy

 

Introduction
When two or more people open a joint bank account, the account opening document may contain a provision to the effect that the account holders are joint tenants and that the right of survivorship is to apply. What is the status of such a statement? Is it determinative of the legal and beneficial ownership of the account? Does it merely deal with legal title so that it is principally concerned with the relationship between the joint holders and the bank?
Seventy years ago, in Niles v Lake ([1947] SCR 294), the Canadian Supreme Court had to consider a clause providing that the holders of a joint bank account were joint tenants. The court decided that the clause dealt only with legal title. It had recourse to the presumed resulting trust; the account holder who had supplied all the funds in the account was the sole beneficial owner.
In Whitlock v Moree ([2017] UKPC 44) the Privy Council had to consider a clause (clause 20) in a bank’s standard joint account opening document very like that in Niles v Lake:

‘JOINT TENANCY: Unless otherwise agreed in writing, all money which is now or may later be credited to the Account (including all interest) is our joint property with the right of survivorship. That means that if one of us dies, all money in the Account automatically becomes the property of the other account holder(s). In order to make this legally effective, we each assign such money to the other account holder (or the others jointly if there is more than one other account holder).’

The majority (Lord Briggs, Lady Hale and Lord Sumption) concluded that the declaration of joint tenancy covered both legal and beneficial ownership. The clause was dispositive; it brought about the proprietary arrangements that it described ([37]).
The meaning to be attached to such a clause depends on the principles of contractual interpretation applied to each specific case. There is no general rule that account agreements are only about legal title. It is a question of contractual interpretation in each case ([42]).

 

Facts
L was a successful businessman. With his friend, M, he opened a joint bank account which contained $190,000 at the date of L’s death. All the money in the joint account came from another account in L’s sole name. A bank official inserted the comment that the purpose of the account was ‘to pay utilities’.
The account opening form signed by L and M included clause 20 (set out above). L died in 2010. He left his home to M who was also one of three residuary legatees. The question was whether the money in the bank account: (a) belonged to M because of the right of survivorship; or (b) was held on presumed resulting trust for L so that it now formed part of L’s estate.
The Privy Council decided that L and M were joint tenants for all purposes so that M became solely entitled to the money in the bank account on L’s death.

 

Lord Briggs’ statement of ‘first principles’ about the law of co-ownership
Paragraphs [21] to [28] of Lord Briggs’ judgment contain a set of statements of first principles concerning the law of co-ownership. One of these is that a written declaration as to beneficial interests, whether in the instrument transferring the property to the co-owners or in a declaration by the co-owners, is usually conclusive ([23] – [24]). In the context of a joint bank account, the account opening document is the instrument most likely to include an express declaration as to beneficial interests ([27]).
Where a clause such as clause 20, properly interpreted, is intended as a declaration of beneficial interests then that is the end of the matter: ‘the document is determinative of itself in relation to the beneficial interests in the account’ ([30]). There is no room for the application of the doctrine of presumed resulting trusts ([31]). Lord Briggs thought that it would be undesirable for the courts to go behind a written declaration ([33]). The declaration is not simply one guide (among several) to intention. It is definitive.

 

 

The relevance of the approach to co-ownership arrangements in other types of property
Here, Lord Briggs refers to the co-ownership principles developed in the residential property context. Where there is no express written declaration, the common intention constructive trust or, as a ‘last resort’, the presumed resulting trust ([25]) come into play to settle ownership rights. These principles, in the view of the majority, are not confined to real property ([26]).
Lord Briggs notes that in the context of English residential property, there is a presumption that beneficial ownership reflects the legal title ([25] referring to Stack v Dowden [2007] UKHL 17, [53] and following). It should be said, though, that in the context of a bank account there is no need for the account holders to hold on any kind of trust.

 

The proper construction of clause 20
The view of the majority of the Privy Council was that, on an objective interpretation, clause 20 dealt with beneficial ownership. Key phrases were: ‘joint tenancy’; ‘our joint property with the right of survivorship’; and ‘if one of us dies, all money in the account automatically becomes the property of the other account holders’ ([47]).
Lord Briggs commented:

‘The meaning of this phrase is to be ascertained by reference to an objective assessment as to what reasonable Bahamian private customers of a bank would think that they meant. Private customers of a bank, whether in the Bahamas or elsewhere in the common law world, do not go around, like lawyers, thinking constantly of distinctions between legal title and beneficial ownership when contemplating the ownership of property.’ ([47])

Essentially, the parties must be taken to have meant something by this clause in a document that they have signed. The most natural approach is to imagine that they meant what they said!

 

 

The minority’s approach to the construction: account opening documents are sui generis

Lord Carnwath, speaking for the minority, thought it much more likely that the account opening document was intended solely to deal with legal title.

 

Lord Carnwath said:

‘from the point of view of the customer, the purpose of a bank account is not generally seen as to effect the transfer of property in the longer term, but rather to provide a convenient vehicle for holding and dealing in money for the time-being’ ([55]).

The ‘first principles’ that are relevant are the first principles relating to joint back accounts. This context, argues Lord Carnwath, is an important factor to be borne in mind in the process of interpretation; the decision in Niles v Lake provides an important benchmark for assessing similar clauses.
Lord Carnwath could see nothing to suggest that clause 20 was intended to deal with beneficial ownership ([86]). It was, he thought, implausible to suggest that ordinary people would use clause 20 to make a gift ([86]). Clause 20 had to be interpreted in the context of the agreement as a whole ([87]). The clause was part of the bank’s standard documentation and was not the sort of document that one would expect to see used to make a very generous personal gift ([88]).
Michael Lower

Family home in joint names and wife’s failure to transfer her interest to her husband in accordance with a consent order

In Chu Tsan Leung v Leung Mee Ling Amy ([2017] HKEC 2347) H and W were married. Title to the family home was in joint names. W left the family and in the subsequent matrimonial proceedings agreed to transfer her entire interest in the property to H. This agreement was incorporated in a consent order. W did not execute a deed to give effect to the order.

W was subsequently declared bankrupt. The Trustee in Bankruptcy claimed that W’s interest in the property remained an asset of hers. H sought a declaration that W did not have any beneficial interest in the property.

The Trustees in Bankruptcy argued that the consent order was procured through the exercise of undue influence by H and his solicitors. They argued that there was a presumption of undue influence on the facts of the case. This failed.

The evidence pointed away from the idea that the wife reposed trust and confidence in her husband at the time of signing the consent order. Nor was there anything unconscionable or manifestly disadvantageous to W when the context was properly considered: H, a construction worker, had been left to take care of two young children on his own.

It did not help W’s case for her to argue that she did not have full knowledge and understanding of the documents that she had signed. A person who signs a legal document he or she is bound by the act of signature (Bank of China (Hong Kong) Ltd v Fung Chin Kan and Ming Shiu Chung v Ming Shiu Sum).

H became the sole beneficial owner of the property from the moment of the decree absolute.

H argued, in the alternative, that he had always been the sole beneficial owner of the property since he alone had provided all of the purchase money and mortgage payments. This claim failed. Since title was in joint names, it was for H to show that she had no equitable interest. H was unable to do so.

Michael Lower

 

 

Variation of an express trust or a common intention constructive trust

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