Posts Tagged ‘joint tenancy’

Equity follows the law: the burden of proof

November 12, 2016

In Lam Fung Ching Annie v Tse Kwok Wing Jacky ([2016] HKEC 2387, CA) the Court of Appeal rejected an application to appeal to it. L, T and T’s father held property as joint tenants. L severed the joint tenancy by notice and successfully applied for an order for sale. T sought to appeal against this finding and order. It appears to have been accepted that there was an equitable tenancy in common since it was accepted that T held her share on trust for her father. At first instance, the judge rejected T’s argument that her father was the sole beneficial owner; L was able to show that she was entitled to a one-third beneficial interest. There was some discussion as to the burden of proof. The Court of Appeal (Kwan JA giving the judgment) took the view that, following the severance, L had a one third share as a legal tenant in common. It was for T to show why the equitable position should differ from this and she had failed to do so ([22] and [23]).

Michael Lower

Australia: presumption of beneficial joint tenancy where both spouses contributed to the purchase price of the matrimonial home

June 22, 2016

In Trustees of Property of Cummins v Cummins ([2006] HCA 6) title to a married couple’s family home was held by them as legal joint tenants. The wife had contributed two thirds of the purchase price. The husband transferred his interest in the joint tenancy to his wife. He later went into bankruptcy. The bankruptcy severed the joint tenancy. The transfer was void against the trustee in bankruptcy as a transaction intended to defraud creditors. The question was whether the couple had been beneficial joint tenants on the basis that the beneficial ownership was in line with the legal ownership. In this case, half of the value of the home was available to the husband’s creditors. The wife contended that she had a two thirds share under a resulting trust to reflect the unequal contributions to the purchase price; in that case, only one third of the value of the home would be available to the creditors. The High Court of Australia held that there was a beneficial joint tenancy.

In determining the beneficial ownership, the court was not confined to the proportionate contributions to the purchase price but could look at ‘evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction’ ([64]) The fact that the property was the matrimonial home had significant evidential value. The High Court endorsed the following statement in Professor Scott’s The Law of Trusts:

‘Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them.’ ([70])

The same applied, even more strongly, where the couple were legal joint tenants ([71]). Further:

‘The subsistence of the matrimonial relationship … supports the choice of joint tenancy with the prospect of survivorship.’ ([71]).

Note that the statement approved requires that both spouses should have made a contribution to the purchase price before the presumption of a beneficial joint tenancy of the matrimonial home arises.

Michael Lower

 

Legal joint tenancy: unequal contributions often not enough to establish common intention constructive trust in the family context

October 21, 2015

In Chow Chung Kwan ([2015] HKEC 2112, CFI) H and W bought property as joint tenants and jointly charged it to a bank as security for the loan to fund the purchase. H’s bankruptcy severed the joint tenancy by operation of law. W claimed that she had provided the entire purchase price and that H and W held on trust for W alone under a common intention constructive trust.

Ng DJ referred to the recent review of the law in this area in Mo Ying v Brillex Developments and to the principles concerning common intention constructive trusts of the family home held in joint names in Jones v Kernott [51]. She also referred to the statements as to the whole course of conduct in Oxley v Hiscock and Stack v Dowden. 

The starting point where H and W held as joint tenants was that this was the actual ownership arrangement (Stack v Dowden). It was for W to prove that there was some other common intention ([28]). The fact that title was held by H and W as joint tenants and that they had jointly charged it to the bank provided the starting point for the analysis (Ip Man Shan Henry v Ching Hing Construction Co Ltd and Chan Chui Mee v Mak Chi Choi). Unequal contributions to the purchase price and mortgage installments will usually not be enough to establish the existence of a common intention constructive trust (Re Lau Hiu Tuen, bankrupt). Ng DJ said:

’35. In a family setting, if a married couple decides to buy a family home, almost always with the help of a mortgage for which they are jointly and severally liable, that is on the face of things a strong indication of emotional and / or economic commitment to a joint enterprise. The fact that parties in a trusting personal relationship do not hold each other to account financially is underpinned by the practical difficulty, in many cases, of taking such account many years later of the ups and downs of living together as a married couple.

36. A holistic approach should be adopted, and other than financial contributions for the purchase and usual outgoings, other relevant factors including how and why the property was acquired and the nature of the parties’ relationship would be considered in ascertaining the couple’s intention’

In fact, the facts did not establish that W had shouldered responsibility for making all of the payments. She had not established the existence of a common intention constructive trust in her favour.

The question then was whether H’s trustees in bankruptcy were entitled to an order for sale under section 6 of the Partition Ordinance. Section 6(1) focuses the question on the interests of ‘all of the persons interested.’ A sale was clearly not in the interests of H and W (both elderly and infirm). On the other hand, the creditors had a right to be paid. Ng DJ noted a difference of judicial opinion as to whether priority should be given to W’s interests and she had not been addressed on this conflict. She decided that she could not refuse an order for sale unless this were for the benefit of all of the co-owners (ie of the creditors, represented by H’s trustees in bankruptcy, as well as of W) ([40] – [46]). She granted the order for sale.

Michael Lower

England: Where one beneficial joint tenant is excluded from possession

July 15, 2015

In Begum v Issa (County Court (Leeds) 5 November 2014) the parties were a married couple with two children. The family home was in joint names and the transfer to them contained an express declaration that they held as beneficial joint tenants. Mr Issa (the husband), acting alone, transferred the property to his brother (it seems that Ms Begum’s signature on the transfer was forged). The brother was registered as the proprietor at HM Land Registry. Ms Begum, unaware of what had happened, remained in occupation with her husband and children. As Ms. Begum was in actual occupation and had not been a party to the transfer to the brother, the effect was that the brother’s registered title was subject to Ms Begum’s equitable interest (Land Registration Act 2002, s. 29).

The judge (HH Judge Behrens) then had to consider the rights of Ms Begum and the brother against each other as equitable co-owners. Section 12 of the Trusts of Land and Appointment of Trustees Act 1996 meant that both Ms Begum and the brother, as beneficiaries, had a right to occupation. Sections 13(1) and 14 gave the court power to exclude one co-owner (here the brother) from occupation on terms which may include the making of payments. Where the court makes such an order it must take into account the matters set out in section 15. The judge had regard to the intention of Ms Begum to occupy the property and the welfare of the two children (one of whom was disabled and who would find any move especially disruptive). On the other hand, it had to have regard to the brother’s intention to achieve a return on his investment in the property. The balance was struck by making an order for sale postponed for twelve months. This delay would allow Ms Begum time to find another suitable home. The brother was entitled to have Ms Begum make a contribution to the mortgage installments paid by the brother. However, the brother had borrowed GBP 92,250 while the outstanding amount on the mortgage taken out by the couple stood at GBP 33,241 at the date of the transfer to the brother. Ms Begum was only liable to pay a proportionate part of the brother’s mortgage payments (36% ie 33,241 / 92,250).

A further question was whether there should be any accounting as between Ms Begum and her husband who alone made all mortgage payments (even those due under the brother’s mortgage until the husband left the property). Was he entitled to a contribution to the mortgage payments from his wife despite their equitable joint tenancy? HH Judge Behrens decided that he was not. He referred to his own decision in Clarke v Harlowe and the English Court of Appeal decision in Wilcox v Tait. He concluded:

‘This is a case where the parties agreed that Nargis Begum would not work and would look after the children. All financial matters were dealt with by Nadeem Issa. In those circumstances I have no hesitation in coming to the conclusion that it was the common intention of the parties that neither should thereafter have to account to the other in respect of expenditure incurred by the other on the property during the period of cohabitation.’ ([112]).

The cohabitation context allows (but does not require) the court to infer a common intention that there would be no liability to account in respect of the period of co-habitation.

On the face of it, Ms Begum was subject to the rights of the mortgagee under the mortgage to which she was a party but not the rights of her brother-in-law’s mortgagee. However, the later mortgagee was subrogated to the rights of the earlier mortgagee to the extent of the amount outstanding under the earlier mortgage at the date of its redemption ([119]).

Michael Lower

Legal joint tenancy: determining beneficial ownership under a common intention constructive trust

March 11, 2015

In Lo Kau Kun v Cheung Yuk Yun ([2015] HKEC 316, CFI) a married couple bought a flat as joint tenants. P claimed that the property was held on common intention constructive trust in equal shares. D claimed that she was the sole beneficial owner. Deputy Judge Sakhrani referred to the statements in Stack v Dowden ([68] in Stack) and Jones v Kernott ( [51] in Jones) to the effect that where the legal title is in joint names and there is a question as to beneficial ownership equity follows the law (so that a legal joint tenancy gives rise to equal shares) but that it may be possible to show a contrary intention (the burden of proof being on the party seeking to establish this). P had paid the down payment. P and D were jointly liable under the terms of the mortgage and each had contributed to the mortgage payments. Crucially, there was a finding that the parties had discussed their intentions concerning the ownership of the property ([63]). The couple had agreed that the property was to be a family asset (to be held equally as a family asset according to P) ([64]). This (not the record of financial contributions) was determinative. The property was held on common intention constructive trust in equal shares ([66]).

D also argued that she had extinguished P’s title by adverse possession. P had left the property in 1993 after a violent argument and never returned ([77]). This argument failed since D was entitled to be in possession as co-owner. There was no evidence of the ouster that would be necessary for this claim to succeed ([81]).

Michael Lower

Does a charging order sever a joint tenancy?

February 4, 2015

In Ho Hai Kwan v Chan Hon Kuen ([2015] HKEC 132, CFI) the question was whether there had been an equitable severance of a joint tenancy by virtue of a charging order in respect of the property against one of the co-owners. Was it an act operating on the joint tenant’s share? There were obiter dicta in previous Court of Appeal decisions (Malahon Credit Co Ltd v Siu Chun Wah Alice and Fortis Bank v Yu Kam Hoi Herman) to suggest that this was the case. In this case, it was successfully argued that a charging order did not have this effect. The argument was that a charging order (enforceable in the same way as an equitable charge by virtue of section 20B(3) of the High Court Ordinance) does not confer any title on the person who obtained it but merely creates an encumbrance ([19]). Thus, a charging order had no effect on the four unities of the joint tenancy and was insufficiently final and irrevocable; there was no alienation ([20] – [31]). The charging order did not sever the joint tenancy ([58]).

Michael Lower