Posts Tagged ‘land’

Non-registration of trust. Dispositions to defraud creditors

June 1, 2016

In Goldfame Consultants Ltd v Tse Sai Ming ([2016] HKEC 1113, CFI) TCS agreed to sell land to Goldfame. The contract provided for the payment of deposits and then for the payment of the balance of the purchase price to be made on 14 August 2006. The contract provided that the assignment of the land would take place within 7 days of receipt of a letter from the Buildings Department approving the proposed site formation plan or at such other time as the purchaser might specify. The balance of the purchase price was duly paid on 14 August 2006 but the approval had not been received and the assignment did not take place. Instead, TCS executed Declarations of Trust under which he held the land on trust for Goldfame. TCS also nominated Goldfame as attorney to act for him in relation to the land. Neither the contract nor any of the other documents were registered with the Land Registry.

TCS died intestate in 2010 and TSM was granted letters of administration of his estate. TSM sold the land to H. Goldfame brought an action against TSM for breach of contract seeking damages or the return of the price paid to TCS. It also sought a declaration that TSM held the land on trust for Goldfame. It sought to have the sale to H set aside under section 60 of the Conveyancing and Property Ordinance.

There was no answer to the breach of contract claim and TSM was ordered to repay the purchase price with interest. It was accepted on all sides that the sale contract and the declarations of trust were void as against H since they had not been registered and there was no reason to doubt his good faith. Section 3(2) of the Land Registration Ordinance took effect.

Goldfame was forced to rely on section 60 of the Conveyancing and Property Ordinance. In Tradepower (Holdings) Ltd (in liquidation) v Tradepower (Hong Kong) Ltd, Ribeiro PJ  said that ‘where the disposition was made for valuable consideration, or where the disponor is not insolvent or where the disposition does not deplete the fund potentially available to creditors, an actual intent to defraud creditors must be shown as an inference properly to be drawn on the available evidence before s. 60 is engaged.’ (at [88]). The sale to H was not at an undervalue, nor was there any intention to defraud creditors ([94]). The claim against H failed.

In commenting on the expert evidence as to the market value of the property at the time of the sale to H, Recorder Coleman SC expressed his preference for valuation methods based on direct comparables where available. The subject matter of the transaction (undeveloped rural land where there was no guarantee that the approvals needed for development would be obtained) was somewhat out of the ordinary and so indices looking at the property market as a whole were unhelpful. Valuations based on the residual method involved too many assumptions to be as useful as direct comparables.

Michael Lower

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Compensation paid on the resumption of land is not ‘land’ for the purposes of section 13 of the New Territories Ordinance

March 25, 2015

In Lok Tin Choi v Lai Kwai Lin ([2015] HKEC 389, CA) a mother held land in the New Territories on trust for her son. The land included two lots that had been resumed by the Government. The mother claimed to have an interest in the compensation money. This was on the basis of Chinese law and custom requiring her son to maintain his mother for her life and to provide dowries (if applicable) for the two unmarried daughters.

Cheung JA gave the principal judgment. Section 13 of the New Territories Ordinance allows the court to recognise and enforce any Chinese custom or customary right affecting land in the New Territories. The definition of ‘land’ in section 2 of the Ordinance does not cover compensation received on the resumption of land and so the court had no power to enforce any Chinese custom or customary right said to affect the compensation money. The cases that held that compensation received in respect of Tong land remained subject to the trust were not authority for the proposition that the compensation was equivalent to land. Cheung JA refrained from comment on the Chinese law and custom that had been invoked.

Michael Lower

Land and donationes mortis causa

October 17, 2013

Sen v Headley [1991] Ch 425

BH had lived as man and wife with Mrs Sen for ten years. They separated but remained close friends. On his death bed he told her: ‘The house is yours, Margaret. You have the keys. They are in your bag. The deeds are in the steel box.’ He died intestate having, it seems, slipped the keys to the house and the only key to the steel box in the house containing the title deeds into her hand bag.

The question was whether title to the house passed to her by way of donatio mortis causa:

‘If the question whether the subject matter is capable of passing by way of donatio mortis causa is put on one side, the three general requirements for such a gift may be stated very much as they are stated in Snell’s Equity , 29th ed. (1990), pp. 380-383. First, the gift must be made in contemplation, although not necessarily in expectation, of impending death. Secondly, the gift must be made upon the condition that it is to be absolute and perfected only on the donor’s death, being revocable until that event occurs and ineffective if it does not. Thirdly, there must be a delivery of the subject matter of the gift, or the essential indicia of title thereto, which amounts to a parting with dominion and not mere physical possession over the subject matter of the gift.’ (Nourse LJ at 431 – 2)

The problem was the third element. Had there been a delivery of the subject matter of the gift? The title deeds were the relevant indicia ((Nourse LJ at 437) Had there been a parting with possession of the dominion of the house? Delivery of the title deeds could be such a parting. Whether or not it is is a question of fact (at 438). Here there had been a parting with dominion. (Nourse LJ at 439)

There was a doubt as to whether title to land was capable of passing by way of donatio mortis causa. Nourse LJ held that it was (at 441).

Michael Lower