Posts Tagged ‘contractual licence’

Common intention constructive trust: the family context confirms equality in a joint names case. Severance: contractual licence granted by tenant in common binding on a subsequent owner of the licensor’s share

June 3, 2015

In Chen Tek Yee v Chan Moon Shing ([2015] HKEC 735, CFI) Ms Chen and Chan Senior (a co-habiting couple) lived with Ms Chen’s daughters. The couple were in a stable, unmarried co-habitation relationship for several decades. Chan Senior was older than Ms Chen and lived in an old people’s home for the last few years of his life. He died in 2009.

The couple had no children together but they lived together with Ms Chen’s children from the early 1970s onwards. In 1980 they bought a flat (‘the Property’) as joint tenants. Ms Chen provided most of the purchase price and she and her daughters covered the mortgage installments and other outgoings in respect of the property. Mr Chan made a minor contribution to the purchase price and was able to provide the opportunity to buy the Property at a favourable price. On several occasions, Chan Senior assured Ms Chen and the daughters that they would be able to live in the property for the rest of their lives (‘the Contractual Licence’). Unknown to Ms Chen, Chan Senior executed an assignment severing the joint tenancy and assigning to his son, Chan, his 50% share in the property. Chan sold his share at auction to Ng at a substantial discount to the market value. By then, Ms Chen had learned of the severance and she began proceedings against Chan seeking a declaration that she and her daughters were entitled to sole and exclusive occupation of the property to the exclusion of Chan for the rest of their lives. The auction particulars made it clear that the sale was subject to these proceedings. Ng had visited the property and spoken to Ms Chen. Ms Chen and the daughters now sought declarations that: Chan Senior, Chan and Ng (in turn) held Chan’s 50% share on trust for Ms Chen; the Property was subject to the Contractual Licence; and that Ms Chen and her daughters were entitled to sole and exclusive occupation of the Property to the exclusion of Chan, Ng or their successors in title.

The first issue concerned the question as to whether the rebuttable presumption of equal beneficial interests (this being a joint names case) had been rebutted. This required a survey of the whole course of conduct ([73]). There had clearly been great inequality in terms of financial contributions. This fact was not enough to rebut the presumption of equality. A review of the overall context was enough to confirm that the presumption of equality reflected the parties’ intentions ([80]). The ‘domestic / familial’ context was relevant. The parties were in a stable, unmarried relationship and the parties had lived together as a family unit for some time before the acquisition of the Property ([74]). The acquisition of the Property was a ‘joint / common enterprise’ between Ms Chen and Chan Senior ‘following their express discussions with the common goal of providing a family residence and permanent home for the Family’ ([75]).  The purchase of the Property ‘reflected a joint or shared commitment by both Ms Chen and [Chan Senior] notwithstanding their unequal financial contributions’ ([77]). Ms Chen and Chan Senior were jointly and severally liable on the mortgage of the Property ([79]). It was true that in other respects there was no pooling of their financial resources but, ‘that is not to say they never acted for the common good or kept their affairs in relation to the Property strictly or rigidly separate’. There were ‘strong indications of their joint economic commitment in respect of acquisition of the Property’ ([80]).

Chan Senior had entered into the Contractual Licence with Ms Chen and the daughters and they had acted on this to their detriment. They met all of the financial outgoings in respect of the Property acting in reliance on the Contractual Licence. Chan Senior’s conscience was affected and the Contractual Licence gave rise to a constructive trust ([86] and [87]). Chan’s conscience was also affected: the circumstances showed that he ‘had undertaken a new obligation to give effect to the relevant encumbrance being the Contractual Licence that gave rise to the imposition of a trust’ ([92]). Ng had agreed to take subject to the proceedings brought by Ms Chen. This would often not be enough to affect his conscience. In this case, however, he was not only clearly on notice of the rights of Ms Chen and the daughters, he had also bought the share in the Property at a substantial discount to the market value (presumably because of those rights). His conscience was also affected and the Contractual Licence was binding on him ([113]). Ms Chen and the daughters obtained the declaration that they sought that they were entitled to sole and exclusive occupation of the Property during their lifetimes ([115]).

Michael Lower

Licence for life binding on trustee in bankruptcy

November 10, 2011

In Re Sharpe ([1980] 1 W.L.R. 219) J made a loan to her nephew S. The purpose was to allow him to buy a shop with living accommodation above it.  S had agreed that J would be able to live there with S and his wife as long as she liked. S became bankrupt and the trustee in bankruptcy sought vacant possession of the property so that he could sell it. This was refused. The licence arrangement gave rise to a constructive trust (on a basis akin to proprietary estoppel). The trustee in bankruptcy had notice of this and was subject to it. The trustee in bankruptcy had agreed to sell to a third party and the court was careful to say that it expressed no view as to whether that third party (who had no notice of the licence) was bound by it.

Michael Lower

A contractual licence does not bind a mortgagee

February 4, 2011

A contractual licence does not bind a third party such as a mortgagee.

In Chartered Bank v Wong ([1987] HKLR 844) a man had given his mistress a contractual licence to occupy the family apartment until the two children had finished full-time education. The man then mortgaged the property but failed to keep up with the mortgage repayments. The Bank sought possession of the property but the mistress refused to leave. She claimed that she had an interest that was binding on the bank. It was held that she had only a contractual licence and there was no equitable dimension to her rights (such as a proprietary estoppel or constructive trust). Her licence was not binding on the bank. Garcia J suggested that the result might have been different if the bank had had actual notice of the licence. It is hard to see why this should make a difference.

Michael Lower

Contractual licence coupled with an equity

October 25, 2010

In Binions v Evans ([1972] Ch 359 CA (Eng)) an employer had granted an employee’s widow a right to live in a cottage for the rest of her life. They sold the cottage ‘subject to’ the agreement with the widow. The purchasers, Mr and Mrs Binions, then tried to evict the widow. Lord Denning MR held that the purchasers who had notice of the agreement and may have paid a reduced price because of it, held the property on constructive trust for the widow. They could not evict her. The other judges in the Court of Appeal reached the same result but employed different reasoning. Lord Denning’s approach would amount to an exception to the rule that licences do not bind third parties.

Michael Lower