Posts Tagged ‘informal land contracts’

Part performance and the balance of probabilities: Ng Yuk Pui Kelly v Ng Lai Ling Winnie in the Court of Final Appeal

March 9, 2022

Introduction

In Ng Yuk Pui Kelly v Ng Lai Ling Winnie  ([2021] HKCFA 40) the Court of Final Appeal explained the approach to the doctrine of part performance in Hong Kong. It settles any lingering doubts as to whether the balance of probabilities test is the relevant standard when seeking to show that the acts of part performance point to the existence of the alleged contract.

Mrs Ng was the legal owner of two neighbouring flats in the Central district of Hong Kong. She held the flats on trust for her husband, Kuen, who supplied the entire purchase price.

Kuen orally agreed to sell the two flats to his brother, Kelly, for HK$1 million. Kelly paid the entire purchase price but agreed to Kuen’s requests not to insist on the formal transfer of the title to Kelly. This was because Kuen feared the effect that news of the sale would have on Mrs Ng who had suffered some mental health issues. Kelly was tenant of the flats before the agreement and he stopped paying rent as a result of it.  

Ultimately, the question of the ownership of the flats came to a head when Mrs Ng contracted to sell one of the flats. Kelly brought proceedings to recover the two flats. Mrs. Ng argued that the oral agreement between Kuen and Kelly was unenforceable because of the failure to comply with the formalities requirements in section 3(1) of the Conveyancing and Property Ordinance.

Kelly relied on part performance, common intention constructive trust and proprietary estoppel. Kelly’s claim succeeded insofar as it relied on common constructive trust and proprietary estoppel. It was held that part performance had not been successfully established.

On appeal, Kelly’s claim succeeded based on part performance ([2021] HKCA 724). Mrs. Ng applied for leave to appeal to the Court of Final Appeal. The Court of Final Appeal refused this leave and its reasons for doing so provide extremely valuable guidance concerning the law of part performance.

Part performance

In Steadman v Steadman, Viscount Dilhorne said:

‘the acts of part performance which are alleged to have taken place must point to the existence of some such contract as that alleged.’

This leaves open the question as to whether the linkage between the acts and the contract had to be shown on the balance of probabilities or according to a more demanding ‘unequivocal referability’ test. Steadman adopted the balance of probabilities test, but this seems not (before now) to have been explicitly adopted in Hong Kong.

The Court of Appeal referred to the fact that Kelly remained in possession of the flats without paying rent and demands made by Kelly that the title should be transferred to him as acts of part performance. Mrs Ng argued that none of these, taken individually, satisfied the unequivocal  referability test.

In the Court of Final Appeal, however, Ribeiro PJ said:

‘In deciding whether the doctrine applies, the court looks at all the acts relied on as part performance to see whether, leaving aside evidence of the oral agreement, those acts prove on the balance of probability that they were done in reliance on a contract between the parties consistent with the contract sued upon by the plaintiff. There is no arguable basis for suggesting that one must look at each act individually to see if it is “unequivocally referable” to the contract. Nor is there any basis for the suggestion that one must refrain from assessing the cumulative effect of the acts relied on unless the individual test is satisfied. The authorities are clearly to the contrary.’ ([14] emphasis added)

Michael Lower

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Informal land contracts: overlapping equitable doctrines

March 3, 2021

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