Article – Marriage and acquisition of a beneficial interest in the family home in Hong Kong

Just published: M. Lower, ‘Marriage and the acquisition of a beneficial interest in the family home in Hong Kong.’ [2016] Conveyancer and Property Lawyer 453 – 465

LKW v DD -‘equal sharing’ principle

In LKW v DD ((2010) 13 HKCFAR 537) the Court of Final Appeal had to deal with the issue of the division of assets between a divorcing couple where the available assets exceeded the parties’ needs. Ribeiro PJ gave the only full judgment.

The principles that govern the making of an ancillary relief order are those contained in section 7 of the Matrimonial Proceedings and Property Ordinance. Given the close structural similarities between it and section 25 of England’s Matrimonial Causes Act 1973 it is unsurprising that Hong Kong’s courts have had regard to the English authorities on section 25 ([11]). Had the applicable principles in Hong Kong changed given the House of Lords decisions in White v White and Miller v Miller and McFarlane v McFarlane? C V C represented the law in Hong Kong before White v White. Wives in ‘big money’ cases got enough to meet their reasonable requirements and any surplus over joint needs went to the husband unless the wife could show that she had ‘earned’ a share in the surplus. The C v C approach was not good law since it gave excessive weight to ‘needs’ / ‘reasonable requirements’ which is only one of the section 7 criteria.

The overarching requirement is to achieve a fair solution:

‘what is fair treatment upon the dissolution of a marriage involves concepts which ‘change from one generation to the next’ and the values underlying C v C do not reflect elementary notions of fairness as between husband and wife in present day Hong Kong. To confine a non-working wife’s award to the sum needed to meet her “reasonable requirements” and to permit the husband to keep the remaining assets is patently unfair and discriminatory’ ([28]).

It was argued that to follow White v White would be to apply western values to Hong Kong’s Chinese population ([37]). Ribeiro PJ rejected this. White v White‘s insistence on fairness was equally relevant in Hong Kong ([40).

Ribeiro PJ emphasised that the guidance that he would give later in his judgment was only that. He was providing guidelines to assist judges in the exercise of their section 7 discretion case-by-case. The guidelines represent an attempt to balance flexibility and legal certainty ([47] – [53]). They only apply where there is a surplus of assets over needs ([54] – [55]).

Ribeiro PJ identified five steps to be followed:

1. Identify the parties’ assets ([71] – [73]);
2. Assess the parties’ financial needs ([74] – [79]);
3. Apply the sharing principle if assets exceed needs ([80] – [82]);
4. Consider whether there are good reasons for departing from equal division (equal sharing should not be applied mechanistically) ([83] – [86]);
5. Decide the outcome ([131] – [132]).

He also identified four principles to be gathered from White v White which judges should bear in mind in applying section 7:

1. The objective of fairness ([56]);
2. Rejection of discrimination ([57]);
3. Apply the yardstick of equal division ([58] – [61]);
4. Avoid ‘minute retrospective investigations’ (a lengthy and pointless trawl through the details of the parties’ conduct over the course of the marriage) ([62] – [69]).

The judgment contains useful guidance on the application of several of the steps.

In the present case, the Court of Appeal had awarded the wife half of the total assets and there was no basis for interfering with this award.

Michael Lower

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Proving the existence of a common intention constructive trust in sole name cases: is marriage enough? Beneficiaries have a duty to inform purchasers where they are aware that a contract has been signed.

In Mo Ying v Brillex Development Ltd ([2015] HKEC 583, CA) H married W in Hangzhou. Shortly afterwards, H returned to Hong Kong and bought a flat in his sole name, using a combination of his own money and a mortgage taken out in his own name. A few months later, W joined him in Hong Kong and asked why her name was not on the title deeds. H told her that this was troublesome and would cause expense. W did not pursue the matter as she thought that the fact of the marriage entitled her to a share in the property. The marriage broke up and W argued that she had an interest under a common intention constructive trust.

On the facts of this case, the husband’s excuse could not be construed as an agreement that W was entitled to an interest. Unlike Grant v Edwards  and Eves v Eves, the words used were equivocal and W did not take them to mean that she was to have an interest in the property ([7.6]  and [7.7] per Cheung JA). There was a suggestion that H had told W that ‘What belongs to me belongs to you’. Had it been proved, this would have been decisive in W’s favour; it had not been proved ([7.2] per Cheung JA).

The whole course of conduct can be referred to when deciding whether or not a common intention constructive trust exists in a sole name case ([6.2] per Cheung JA).  The fact that the parties are married is an important feature of the whole course of conduct but, on its own, it does not give rise to an inference that a common intention constructive trust exists ([7.17] per Cheung JA and [11.4] per Yuen JA). There were no other features of the case that pointed to the existence of a common intention constructive trust. The evidence did not suggest that the parties had pooled their assets and liabilities ([7.19] per Cheung JA). Any payments that W had made towards household expenses were not referable to any common intention that she was to have an interest in the property ([7.20] per Cheung JA). Detrimental reliance remains a necessary element of the common intention constructive trust ([6.12] per Cheung JA).

H sold the property. W was informed of the sale once the provisional sale and purchase agreement had been signed but did nothing to protect her interest or to inform the purchaser of her rights. The sale was later completed. While the purchaser had constructive notice of any interest that W might have (because of her occupation and the purchaser’s failure to inspect) this did not mean that W could not be estopped from enforcing her rights against the purchaser. Her silence, once she knew of the contract, gave rise to an estoppel ([8.7]  and [8.12] per Cheung JA, [11.10] per Yuen JA and [20] per Kwan JA). Even if it were seen as being a proprietary estoppel, it could be relied upon as a defence. It is unhelpful to draw rigid distinctions between types of estoppel ([8.9] and [8.10] per Cheung JA).

This case provide an extremely important review by the Court of Appeal of the framework for the law of the common intention constructive  trust in Hong Kong. It draws on the English developments in Stack v Dowden, Abbott v Abbott and Jones v Kernott. Further, W had commenced divorce proceedings. The comparison between W’s family law rights and her rights as a matter of strict property law is a fascinating thread running through Cheung JA’s judgment. As a wife, W had rights under family law. Should the law of the common intention constructive trust also be especially responsive to the relationship? As explained above, the conclusion reached, ‘with regret’ ([7.23]) was that in the absence of any basis other than marriage for inferring an agreement, W had no claim as a matter of property law.

Michael Lower