Post-acquisition variation of existing common intention?

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

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Implied grant of easements

In Collins v Collins (No 2) ([2015] EWHC 2652; [2016] 2 P & C.R. 6) a mother and father executed a deed of trust of agricultural land. The beneficiaries were themselves and their three sons. At the time that the trust was created, it was contemplated that the land would be converted to commercial use. This contemplated change of use subsequently happened. The timing of the deed of trust was partly motivated by tax planning considerations which meant that the value of the land needed to be transferred to the beneficiaries. To the extent that any value was retained by the parents, the tax planning purpose would be frustrated.

The deed of trust was extremely simple. The subject matter of the trust was a parcel of land. There was no express grant of a right of way over a private road on the parents’ retained land yet the land subject to the trust was landlocked without the necessary easements over the roadways owned by the parents. It was now intended that the trust land should be sold to a third party but the potential buyer would only proceed if it could be shown that the trust land had the benefit of the necessary rights of way. Because there was a family dispute, the parents did not now want to grant such rights of way. Thus, the question was whether the necessary easements could be implied into the deed of trust.

In his judgment, Mr Edward Bartley Jones QC thought that an easement could be implied into the deed of trust by any of several routes. Whatever the chosen route, the starting point was to identify the subject matter of the grant, applying the general law on contractual interpretation as recently re-stated in Arnold v Britton ([65]). On the facts of this case, the parents intended to make a gift of the whole equitable interest in land which was intended for commercial purposes ([69]). The principle of non-derogation from grant could be relied upon as the basis for implying the necessary easements. It extends even to the grant of non-proprietary, contractual rights and so the fact that the parents were owners of both the dominant and servient tenements was no obstacle to the application of the principle here ([73]).

Equally, the easement could be one of common intention applying the principles in Pwllbach Colliery. The common intention was that the land should be developed for commercial purposes and a full vehicular right of way was necessary to give effect to the common intention ([74] – [78]. Even though the beneficiaries had only an equitable interest, whether the right of way was legal or equitable depended on the intention of the parties ([79] – [80]). It did not matter that the parents were owners of both the dominant and servient tenements. The right of way would subsist as a quasi-easement until the sale took place and the necessary diversity of ownership was in place. At that time section 62 of the Law of Property Act (equivalent to section 16 of the Conveyancing and Property Ordinance) would pass on the benefit of the already existing easement. In the process, the quasi-easement would become an enforceable easement ([83] – [85]).

Could it be argued that the easement was intended to be a right for vehicular access for agricultural purposes only. To answer this question involves answering the two questions posed by Neuberger LJ in McAdams Homes Ltd v Robinson: would the use for commercial purposes be a radical change in character of the contemplated use rather than a mere intensification; and would this use impose a substantial increase or alteration over the intended burden imposed on the servient tenement? ([61]). Here the parties had intended that the land would be converted to commercial use at the time of the deed of trust. The fact that the commercial development had been (perhaps unexpectedly) very successful only intensified the intended use. The McAdams questions could be answered in the negative.

Any buyer from the trustees would have an easement conferring the right to use the road for vehicular access to and from the commercial development.

Michael Lower