Posts Tagged ‘inferred common intention’

Equitable ownership of the family home: interaction of the common intention constructive trust and the presumed resulting trust

August 2, 2017

The Court of Appeal judgment in Primecredit Ltd v Yeung Chun Pang Barry ([2017] HKEC 1533, CA) deals with several important issues in the law of the ownership of the family home.

A husband (‘H’) and wife (‘W’) acquired a flat as the family home (‘the first flat’). Subsequently, the family bought a new flat  (‘the flat’) relying on the sale of the first flat to pay off a bridging loan used to acquire the flat.

W also helped to pay off the mortgage taken out to help fund the purchase. Title to the flat was in the name of the husband and S (the youngest child and the only son of the family).

Although H and S were legal joint tenants of the flat, W’s evidence was that she did not intend to make a gift to S during her life but only after H and W had died.

Primecredit (‘the creditor’) had the benefit of a charging order over the flat in respect of S’s indebtedness to the creditor.

H died and S became the sole legal owner through the right of survivorship. The creditor then sought an order for sale of the flat. W resisted this arguing that she had a beneficial interest.

Common intention constructive trust

The burden of proof was on W to show that beneficial ownership did not follow legal ownership.

There was no evidence of an express agreement that W was to have a beneficial interest in the flat. Could such a common intention be inferred? The majority of the Court of Appeal (Lam V-P and Cheung JA) thought so. Kwan JA agreed that W had a beneficial interest but on the basis of a presumed resulting trust rather than a common intention constructive trust.

Lam V-P thought that, ‘at least in the domestic context’, there was no need to resort to the resulting trust where the matter can be resolved by recourse to the common intention constructive trust ([1.3]).

He also said:

‘Since Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776, as far as Hong Kong is concerned, the modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context, see Mo Ying v Brillex Development Ltd ([2015] 2 HKLRD 985. In a domestic context, particularly in relation to a matrimonial home, the court is not constrained in that exercise by pure direct monetary contributions to the purchase price, see the judgment of Baroness Hale at [69] in Stack.

In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family were not that common, the court has to pay regard to circumstantial matters.’ ([1.6]). Cheung J.A. made the same point ([2.9]).

Whichever route is followed, the court ‘should have regard to the inherent probabilities in light of the surrounding circumstances at the time when the property was acquired.’ (1.4]). The ‘surrounding circumstances’ (another term for ‘whole course of dealing’?) clearly do need to be taken into account when determining intention; where there are rival interpretations / accounts of the surrounding circumstances, which is the most likely?

The fact that the flat was H and W’s only property was highly relevant ([1.5] per Lam V-P). Cheung J.A. thought it credible that H and W would intend to retain ownership in their lifetimes even if S rather than W was joint legal owner ([2.97]).

Cheung JA pointed to several matters which made it appropriate to infer the necessary common intention. There was W’s evidence that there was no intention that S should have an interest during H and W’s lifetime. The common intention could be inferred from W’s financial contributions ([2.10]).

Cheung JA also said:

‘What the judge seems to have overlooked is that the mother’s interest in the matrimonial home is not solely determined by her financial contributions but by reason of her status of a married woman.’ ([2.10]).

Resulting trust

Kwan JA, alone of the members of the Court of Appeal thought that the first instance finding that there was no common intention (common to H, W and S) could not be overturned ([2.6]).

Instead, he found that W had an interest under a resulting trust. This was based on her contributions and her evidence that no gift to S was intended ([42]). Again the ‘inherent probabilities’ are relevant ([46] – [48]).

Common intention constructive trust and resulting trust?

While Lam V-P thought that the applicability of the common intention constructive trust ruled out any application for the resulting trust ([1.3]). Cheung JA thought that the presumed resulting trust still had a role to play even where the analysis was based on common intention constructive trust ([2.14]).

Charging orders and joint ownership

Lam V-P urged masters dealing with charging order applications in respect of jointly owned property not make the order absolute unless notice has been given to all co-owners ([1.9]).

Charging orders and severance

Lam V-P left open the question as to whether the making of a charging order equitably severed a joint tenancy ([1.8]).

Michael Lower

 

 

 

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Common intention constructive trust and equity’s darling

May 13, 2014

In Mo Ying v Brillex Development Ltd ([2014] HKEC 724, CFI) (partly reversed by the Court of Appeal) title to the flat that was the matrimonial home was in H’s name alone. H entered into an agreement to sell the flat to B and took a lease back. The lease arrangement continued after completion. When H failed to meet the rental payments, B brought proceedings to recover possession. W then claimed that she had a beneficial interest under a common intention constructive trust and that B had imputed or constructive notice of this interest and so took subject to it.

W argued that there was an express common intention in that, after acquisition, H had given an excuse for not putting her name on the title deeds. W invited the court to follow the example given by Grant v Edwards and Eves v Eves but the court refused to do so. The ‘excuse’ was equivocal and, anyway, did not induce W to believe that she had or would have any interest in the property ([59]). Further, this was an alleged post-acquisition agreement and the courts are reluctant to infer a common intention constructive trust in such a case ([60]). There was no express common intention.

W argued that a common intention constructive trust could be inferred from the fact of the marriage. Marriage, alone, however, is not a basis from which to infer a common intention constructive trust ([66] – [68]). W’s sister had made a loan to H. It could not be shown that this was used towards the purchase price of the property. In any event, it was not clear that this could be regarded as a contribution by W ([69] – [70]). While the pooling of family assets could be evidence of a common intention ([71]), there was no evidence of such pooling. In any event, it seems that the court was of the view that there was simply no such common intention ([80]); so even if there had been evidence of pooling, it would only be a factor to be taken into account in determining on the balance of probabilities whether or not there was a common intention. The court was not prepared to infer a common intention from W’s contributions to household expenses (‘the everyday expense of the family’ ([81])) ([81] – [85]).

There was no detrimental reliance; neither her contributions to household expenses nor her decision to give up her job could be so regarded in this case. The necessary causal link was missing ([92]).

Deputy Judge Eugene Fung SC went on to consider whether if, contrary to her view, W had a beneficial interest, B was subject to it. W argued that the estate agent handling the transaction knew of the interest and that this knowledge should be imputed to B. The factual basis of this proposition was doubted. In any event:

‘In cases where an agent’s function is to receive communications on behalf of his principal, one can readily understand why the knowledge of the agent would be imputed to the principal. However, I have some doubt as to whether such a principle applies to an estate agent in Hong Kong. In a typical case, an estate agent’s function is to perform a service by introducing a counter-party to his principal so as to enable his principal to conclude a particular transaction with that counter-party; his function is not to receive communications on behalf of his principal. No cases have been cited to suggest that an estate agent in Hong Kong has the general authority to receive communications for his principal. Accordingly, I am unable to accept Mr Wong’s submission that notice of an estate agent in Hong Kong is imputed to his principal.’ ([117]).

B had, however, failed to inspect the property and so, by virtue of W’s occupation, had constructive notice of any interest that W might have. The fact that this was a sale and leaseback made no difference to this ([131] – [132]).

B’s attempt to avoid this conclusion by invoking estoppel by representation failed since W did not owe B a duty to speak out and inform B of her interest ([148]). The facts did not support B’s defence of waiver ([154]) nor acquiescence ([155] – [157]).

Nor could B rely on laches. Section 20(2) of the Limitation Ordinance provided the limitation period for an action to recover trust property from a third party and this had not expired. In any event, there had been no substantial lapse of time and it was not inequitable for W to enforce her claim against B ([165]).

Michael Lower