Posts Tagged ‘Michael Lower’

Recovering pre-payment of purchase price where the agreement was never completed

September 11, 2021

In Hui Tze Ha v Ho Yuet Lin ([2021] HKCFI 1901) D and P entered into a written agreement on 18 September 1992 under which D agreed to sell property in Kowloon to P for HK$1.2 million. P paid a ‘deposit’ of HK$1 million. The agreement was never completed. Time for completion was of the essence.

P died in 2001. In March 2016, P’s estate brought proceedings to recover the deposit of HK$1million. In October 2016, D counterclaimed that she was entitled to forfeit the deposit and a declaration that the agreement was terminated by virtue of P’s repudiatory breach in failing to take the steps necessary to complete.

Deputy Judge MK Liu said that when neither party took the necessary steps to complete on the contractual completion date, the effect was that each party then had a reasonable time to complete (Camberra Investment Ltd v Chan Wai Tak, Chong Kai Tai Ringo v Lee Gee Kee).

Deputy Judge ML Liu held that D elected to treat the agreement as at an end when she brought her counterclaim for a declaration to this effect in October 2016 (drawing on the principles set out in Chao Keh Lung v Don Xia).

The payment of HK$1 million out of a total agreed consideration could not be treated as a deposit (Polyset Ltd v Panhandat Ltd). It was a payment in advance ([33]).

P’s estate’s unjust enrichment claim arose when the contract was terminated in October 2016 ([37]).

D was ordered to repay the HK$1 million ([46]).

Michael Lower

When is an occupation rent payable?

August 14, 2021

In Cheung Lai Mui v Cheung Wai Shing ([2021] HKEC 2263) the Court of Final Appeal was asked to consider whether the obligation to pay an occupation rent only arose when there was an ouster or where partition proceedings or some analagous process (such as sale and division of the proceeds) had been initiated.

The alternative view, rejected by the Court of Final Appeal, was that there is a new ‘modern’ approach in which an occupation rent is payable whenever this is equitable.

P, D1 and D2 were co-owners of a house. P had a two-thirds share in the tenancy in common of the house and D1/D2 were co-owners of the remaining one-third share.

P occupied one floor of the house herself. The other two floors were let out and P received the rent. There was no ouster of D1 or D2. Were they entitled to an occupation rent and an account of the rental income received and retained by P?

The Court of Final Appeal rejected this claim:

‘We conclude that the authorities considered above do not establish any new, free-standing “modern approach” such as that urged by the respondents and favoured by the Court of Appeal. Claims by one co-owner against a co-owner in occupation for payment of occupation rent or for an account of rent can only arise in accordance with the principles laid down in the established authorities. Unity of possession precludes such claims otherwise than in cases of ouster (including “constructive exclusion” as in domestic violence cases); or where an operative agreement renders the co-owner in occupation an agent or bailiff so as to come under a duty to account to the other. Where partition or analogous proceedings have been instituted, apart from cases of ouster, equity may recognise a defensive equity in favour of one of the co-owners regarding expenditure appropriately incurred and may, in the process of equitable accounting, require the other, viewed as a seeker of equity required to do equity, to be debited with an occupation rent to set off the expenditure incurred, thus reciprocally balancing the parties’ interests in the distribution of the realised proceeds of the co-owned property.’ (at [104])

There is no right to an occupation rent or to an account of rental income unless there is ouster (including constructive ouster) or agreement. Where a partition or order for sale has been sought or a sale has taken place, the court can order payment of an occupation rent or account for income as part of an equitable accounting exercise.

Michael Lower

Proprietary estoppel: Does detrimental reliance need to be incurred before the death of the promisor?

July 12, 2021

In Cheung Lai Mui v Cheung Wai Shing ([2021] HKEC 2263) the Court of Final Appeal had to consider whether, in proprietary estoppel cases, detrimental reliance had to be incurred before the death of the landowner who gave the assurance. If it did, they had to consider whether this requirement was satisfied in the present case.

The dispute concerned land in a village in the New Territories. The landowners in question were three brothers, each with a one third share in the land. D3 was the only grandson of the three brothers’ father.

There was a common understanding between the brothers, from the 1970s onwards, that D3 would inherit the land.

Knowing of this, D3, a building contractor, began building a wall around the property in the 1980s. D3 did further work in the early 1990s.

The death of the last of the brothers was in 1999. D3 erected two buildings and did improvement work at the property after 1999.

D3 inherited a one third share of the land. P was the executrix / administratrix of the other two thirds. She sought an order for sale of the land under the Partition Ordinance.

There were two questions:

(1) Did D3’s detrimental reliance have to have been incurred before the death of the brothers?

(2) If so, was the work that he did in the 1980s and early 1990s substantial enough to amount to detrimental reliance?

The Court of Final Appeal held that the detriment had to be incurred before the death of the landowner ([31]).

Where there were co-owners, the detriment had to be incurred before the last of the co-owners who gave the assurance ([33]).

Post-death events might be relevant to the form that the relief should take ([32]).

Implicitly, the Court of Final Appeal accepted that D3’s work before 1999 was detrimental reliance.

D3’s claim succeeded.

P held the two-thirds share on constructive trust for D3 who became, therefore, the sole beneficial owner ([38]).

Michael Lower

Demands for rent and waiver

May 15, 2021

In Greenwood Reversions Ltd v World Environment Foundation Ltd ([2008] EWCA Civ 47) the English Court of Appeal (Thomas LJ delivering the judgment) had to consider whether letters from a landlord’s solicitor to the assignor of a lease amounted to a waiver of the right to forfeit.

The long lease of a flat was vested in M. The lease required the landlord’s consent (not to be unreasonably withheld) to any assignment.

M. fell into arrears with the rent and then assigned the lease to WEF without obtaining the landlord’s consent.

The landlords’ solicitors wrote to M to say that forfeiture proceedings would be brought unless the landlords received the pre- and post-assignment arrears. The letter was copied to WEF (who later reassigned the flat to M, again without consent).

M contended that the letters from the landlord’s solicitors amounted to a waiver of the breach of the prohibition on assignment without consent (applying the test propounded by Neuberger J. in Yorkshire Metropolitan Properties Ltd v Co-Operative Retail Services Ltd ([2001] L& TR 26 at [91]).

Thomas LJ assumed, without deciding, that an unqualified demand for future rent would operate as a waiver ([27]).

Even on that assumption, there was no waiver first because the demand was addressed to M (the assignor) not WEF (the assignee and actual tenant at the time of the letters) ([28]).

More important, the letters were not ‘an unqualified demand’:

‘What the letter to Dr Mehra said was that, unless the sums enumerated in the letter (which included the unpaid judgment sum, interest and costs of the first action against Dr Mehra) were paid, proceedings which would include a claim for forfeiture, would be taken. The letter made it quite clear that it was only on payment of the rent that the landlord would accept the tenancy as continuing.’ ([29]).

Michael Lower

Prescriptive easements: deciding on whether user was as of right

March 30, 2021

In Poste Hotels Ltd v Cousins [2020] EWHC 582 (Ch) the court had to consider a claim to have acquired by prescription a right to park in a particular place in a private street by a person (Cousins) who had a house in the street. It mattered because Poste Hotels had a right of way over the street to the rear entrance to the hotel. The space over which the defendant claimed the car parking right was in front of the hotel entrance. Exercise of the right claimed would prevent the hotel from using the entrance.

Poste Hotels argued that there was an alternative explanation for the defendant’s parking right; this was that any member of the public could park in the street. The defendant’s use of the street for car parking was the same as any other member of the public.

Morgan J. explained how this kind of dispute should be approached:

‘Where the court is asked to choose between two explanations for the user both explanations must produce the result that the user was lawful. Where there are said to be two explanations for the user, each of them involving a lawful origin for the user, one has to ask whether both explanations are reasonably possible. If there are two reasonably possible lawful origins then the position is as stated in Gardner v Hodgson’s Kingston Brewery Company [1903] AC 229 per Lord Lindley at 239: “[i]f the enjoyment is equally consistent with two reasonable inferences, enjoyment as of right is not established ..” ‘ ([35])

In this case, however, there was no alternative lawful user that could account for the use of the street for car parking; the street was not a public highway so it was unlawful for members of the public to park there ([43]). In any event, the grant of an easement was, in the circumstances, the more likely explanation ([50]).

On the facts, the defendant was able to prove a prescriptive right to park in the street but not specifically in the space in front of the hotel entrance.

Michael Lower

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

The Small House Policy and the Basic Law

February 1, 2021

Introduction

Hong Kong’s Small House Policy confers significant benefits on indigenous inhabitants of the New Territories (‘NTIIs’). NTIIs are male persons, at least 18 years old, descended through the male line from a resident in 1898 of a recognised village.

The Small House Policy confers the following rights (exercisable only once) on NTIIs:

  1. a free building licence (allowing the NTII to build a residential house on land owned by him in the village without paying the usual premium);
  2. the Private Treaty Grant (allowing the NTII to buy Government land in the village at a concessionary rate);
  3. land exchange (enabling the NTII to exchange land owned by him in the village for other Government-owned land more suitable for residential building in the same village).

These rights have substantial financial value. It is accepted that they discriminate against females and against Hong Kong residents other than NTIIs.

The question for the Court of Appeal in Kwok Cheuk Kin v Director of Lands ([2021] HKCA 54) was whether the Small House Policy infringes articles 25 and 39 of the Basic Law and article 22 of the Bill of Rights. Alternatively, are the rights conferred by the Small House Policy ‘lawful traditional interests of the indigenous inhabitants of the New Territories’? Article 40 of the Basic Law requires these interests to be protected by the Government of the Hong Kong SAR. This protection would, it was argued, legitimate the Small House Policy rights despite their discriminatory nature and effects.

Interpreting article 40

Poon CJHC delivered the judgment of the Court of Appeal. The courts are to take a ‘contextual and purposive’ approach ([33]). The relevant contextual features taken into account were:

  • the new Colonial Government’s stated intentions concerning land ownership and respect for customs ([35] – [38])
  • the history of land ownership arrangements in the New Territories ([40] – ([47]);
  • the history of special policies and practices for small houses in New Territories villages, both before and after the introduction of the Small House Policy in 1972 ([[48] – [67]);
  • the relationship between the Small House Policy and the policies and practices that preceded it ([68] – [70]);
  • the ways in which legislation (before and after 1972) took account of the Small House Policy ([71] – 76]);
  • the recognition and preservation of ownership rights arising under the Small House Policy in the Joint Declaration ([77] – [82]);
  • contemporaneous materials relevant to the issue of rights protected by article 40 ([83] – [85]) which seem to suggest a level of controversy as to whether the Small House Policy rights were covered by article 40; and
  • the fact that there was no prior legal challenge to NTII rights under the Small House Policy ([86]).

Poon CJHC went on to say that ‘[w]hether a right or interest is traditional for the purposes of BL40 is to be determined by reference to the state of affairs in April 1990’ ([90]). A right might be traditional if it is an evolved form of a pre-1898 right, ‘provided it retains its essential or core features’ ([91]).

He continued:

‘In our view, “lawful traditional rights and interests of the NTIIs” in BL40 mean those which are, as a matter of historical fact, recognized to be the NTIIs’ lawful traditional rights and interests in the Hong Kong legal system at the time of the promulgation of the Basic Law on 4 April 1990 .. BL40 continues and elevates the recognition and protection to a constitutional level for such lawful traditional rights and interests of NTIIs after 1 July 1997.’ ([93])

Poon CJHC’s review of the contextual features listed above led him to conclude that NTII rights under the Small House Policy were lawful and traditional for the purposes of article 40 of the Basic Law ([94]). They are protected despite their discriminatory nature ([95]). Thus, ‘the Small House Policy is constitutional in its entirety'([116]).

The Court of Appeal disagreed with the first instance approach of considering whether each of the rights conferred by the Small House Policy could be traced back to the time before the New Territories Lease. That said, the court thought that each of the rights conferred by the Small House Policy could satisfy a ‘traceable’ test.

The first instance judge thought that the building licence could satisfy the test while the private treaty grant could not. The Court of Appeal, however, thought that the private treaty grant ‘captures or satisfies the essential feature(s) of a right or interest that was enjoyed by the NTIIs before the commencement of the New Territories Lease’ ([119]).

The rights of the ‘topsoil tenants of the customary tenure’ ([120]) were replaced by various forms of sale at a concessionary rate to NTIIs ([121]).

Michael Lower

‘Subject to contract’ re-affirmed

December 29, 2020

In Joanne Properties Ltd v Moneything Capital Ltd ([2020] EWCA Civ 1541) the English Court of Appeal had to consider whether a contract had been formed even though the relevant exchange was prefaced by the words ‘subject to contract’.

The parties were trying to negotiate a compromise of a dispute between them. Moneything’s solicitor introduced ‘subject to contract’ at an early stage in the discussions and nearly all the email and phone exchanges between the parties were explicitly ‘subject to contract’.

Moneything did, however, make one offer on 19 June 2019 which was not ‘subject to contract’. There were continuing negotiations (explicitly ‘subject to contract’). These exchanges culminated in an email offer on 11 July 2019 on behalf of Joanne Properties. Moneything’s solicitor’s reply was ‘agreed’. This email exchange, too, was ‘subject to contract’.

The terms in the 11 July 2019 offer were found not to be contractually binding. Lewison LJ reviewed the authorities on the meaning of ‘subject to contract’ and its continuing effect until expressly or impliedly withdrawn.

It was not enough that the parties appeared to have reached agreement on all terms nor even that one of the parties subjectively thought that the matter was settled. The ‘subject to contract’ umbrella prevented the emergence of a legally enforceable contract. The 19 June 2019 email had not ‘recalibrated’ the discussion by withdrawing the ‘subject to contract’ umbrella.

Michael Lower

Monat Investment Limited v All person(s) in occupation of part of the remaining portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen, Mui Wo

November 25, 2020

In Monat Investment Ltd v All Person(s) in Occupation of Part of Remaining Portion of Lot No 591 in Mui Wo DD 4, No 16 Ma Po Tsuen, Mui Wo Lantau Island ([2020] HKCFI 1970) the Court of First Instance had to consider the claim that a squatter’s unlawful actions meant that his adverse possession claim had to fail.

Facts

The disputed land comprised a building (‘the Brown area’) and an adjoining open area (‘the Green area’). D claimed to have acquired title to both by adverse possession.

D’s father built a wooden hut on the Brown area in 1954. Around 1977 or 1978 this was replaced by a two-storey brick house. D (one of eight children) moved out. In 1980, D’s father died and his mother remained in possession of the house with some of the children.

In 1996, part of the Green area was paved with concrete but not fenced in. D’s mother died in 1999. D did not live in the disputed land but kept the house under lock and key and paid the electricity bills. P (the owner of the paper title) brought possession proceedings.

Adverse possession

There was clear evidence, in the form of electricity bills, that D’s father took possession of the Brown area by January 1975 at the latest.

It was not until 1996 when the Green area was paved with concrete that D’s mother (after D’s father’s death) could be said to have taken possession of that area. Clearing vegetation from the Green area and then paving it was exactly what an owner might be expected to do ([33]).

D’s mother remained in possession with D’s brothers and sisters after the father’s death. She moved out before her death in 1999 but retained possession; the house was kept locked and she paid the electricity bills.

D took over possession after his mother’s death. He did not live there but, again, retained possession by keeping the house locked and paying the electricity bills.

Illegality

The plaintiff (‘P’) argued that D’s adverse possession claim failed because D had to plead his own illegality to establish his case. The illegal acts P relied on were: (i) trespass; (ii) erecting an unauthorised structure in breach of the Government lease and section 14 of the Buildings Ordinance.

Deputy Judge To pointed out that, of its nature, the doctrine of adverse possession has already balanced public policy and illegality ([59]). There is always some illegality in adverse possession cases; if the court were to frequently decide that illegality was a bar to success for an adverse possession claim, this would be to entirely defeat the doctrine ([62] – [63]).

Illegality is generally only relevant ‘when that the possession or the manner of possession is prohibited by some other statutory provisions’ ([63]).

Deputy Judge To said:

‘Even in circumstances where the possession or the manner of possession is prohibited by some other statutory provisions, given the legislative intent behind the Limitation Ordinance, it is difficult to see why the illegality associated with the squatter’s possession, use or occupation of land should have any impact on his entitlement to possessory title acquired by adverse possession. Usually, the prohibition could be enforced against the squatter after he has acquired title in just the same way as it could be or could have been enforced against him before he acquired legal title or could have been so enforced against the paper owner.’ ([64])

and:

‘Illegality whether in the act of possession or the manner of possession is generally irrelevant. It is only when the possession or the manner of possession is prohibited by some other statutory provisions that it becomes necessary for the court to resolve the conflict by statutory construction or by balancing the public interest and public policy behind the statutory provisions against those behind the Limitation Ordinance.’ ([79])

Conclusion

D’s adverse possession claim succeeded in respect of the Brown and Green areas. Even if there was a need to carry out a balancing exercise, D should succeed.

Michael Lower

Cheung Lai Mui v Cheung Wai Shing (Hong Kong Court of Appeal)

October 26, 2020

Introduction

Cheung Lai Mui v Cheung Wai Shing ([2020] 2 HKLRD 15) concerned a claim based on common intention constructive trust and proprietary estoppel. Where the landowner (the maker of the relevant assurance) has died, does detrimental reliance need to take place before the death? What kind of knowledge of the detrimental reliance must the maker of an assurance have for a proprietary estoppel claim to succeed.

Facts

Three brothers (W, K and F) were tenants in common in equal shares of land in a village near Sai Kung. From the late 1970s onwards, they reached a common understanding (‘the common understanding’) that D3 (W’s grandson and the sole surviving male descendant of the Cheung family) would own the land when he became an adult.

P was K’s daughter. When he died, she became the executrix of his estate. F died intestate and letters of administration of his estate were granted to P. She thus became the legal owner of K and F’s shares and the beneficial owner of K’s share and beneficial co-owner of F’s share.

W was the last of the brothers to die (he passed away in 1999). His share in the tenancy in common passed to his son and daughter (D1 and D2). D3 was D1’s son.

In 2002, D3 built a one-storey structure on the land and in 2003 he created a second one-storey structure to which he added a second storey. D3 and his family began to live in these buildings in 2002 or 2003.

P lived near D3’s home and visited it on various occasions. She knew that D3 carried out work on the land and raised no objections.

Relations between P and D3 started to deteriorate in 2012. P sought an order for D3 to remove the structures he had built. D3 claimed to be the sole beneficial owner of the land relying on common intention constructive trust and proprietary estoppel.

D3’s claim was based (a) on the common understanding, and (b) on P’s acquiescence in the works that D3 carried out on the land.

The common understanding: timing of the detrimental reliance

P argued that D3’s claims based on common intention constructive trust and proprietary estoppel had to fail because D3’s detrimental reliance (the building works) was incurred after the death of the brothers.

The Court of Appeal agreed that this would be fatal to a common intention constructive trust claim. The case was remitted to the first instance judge for him to determine whether there was any detrimental reliance while the brothers were still alive.

There appears to have been a difference of opinion as to whether detrimental reliance also needed to have been incurred before death for the proprietary estoppel claim to succeed.

Lam VP ([1.6] and Cheung JA ([6.35 and 6.38]) agreed that for common intention constructive trust purposes the detrimental reliance needed to take place before death.

If it had then the brothers’ estates were subject to the equity that had arisen. If not then the property would pass according to their wills or under the intestacy rules, unencumbered by any equity ([1.20] and [6.36]).

Lam VP thought that, in this respect, the law of proprietary estoppel might be different from that of the common intention constructive trust ([1.28]) and that D3’s proprietary estoppel claim based on the common understanding succeeded ([1.35]).

The assurance was that D3 would become the owner of the land when he became an adult. It was not a promise that he would inherit the property on the death of the brothers.

Cheung JA, on the other hand, thought that the requirement for detrimental reliance before the death of the brothers was the same both for proprietary estoppel and the common intention constructive trust ([6.38]).

Could D3 succeed even if there were no detrimental reliance before the death of the brothers? Estoppel by silence.

Cheung JA thought that D3 might still succeed in proprietary estoppel even if D3 only incurred detrimental reliance after the death of the brothers.

It might be possible to argue that she was a party to the common understanding ([6.39]).

Alternatively, there might be an estoppel by acquiescence or standing by ([6.40]). Cheung JA referred to the outline of the relevant law in Mo Ying ([5.6]). P stood by and allowed D3 to carry out the building works in (possibly mistaken) reliance on the common understanding. The case was being remitted to the Court of First Instance and this aspect of the matter would also need to be re-appraised.

Does the maker of the assurance need to know about the detrimental reliance?

It is not normally necessary for the maker of the assurance (the brothers) to know about the detrimental reliance ( Lam VP at [1.34]). Cheung JA addresses this issue at some length in his judgment.

Cheung JA tied his discussion of a knowledge requirement into the ‘narrow’ concept of unconscionability which is concerned with the state of mind of the person giving the assurance ([6.46]). The emphasis is on the quality of the words used not on knowledge of any actual detrimental reliance (Thorner v Major Lord Hoffmann at [5]).

In active encouragement cases (express words of encouragement or assurance) there is not usually any need for the maker of the assurance to have actual knowledge that there was detrimental reliance or the form it took. This knowledge is necessary in the case of estoppel by silence or acquiescence ([6.59] – [6.60]).

Comparison of the common intention constructive trust and proprietary estoppel

Lam V-P thought that the outcome was different in the case of proprietary estoppel when compared with common intention constructive trust. It is not surprising, then, that he draws attention to their differences ([1.4]).

Equitable estoppel ‘is the more flexible tool’ and the court looks backwards from the time when the promise falls to be performed([1.10] referring to Lord Hoffmann’s words in Walton v Walton at [105]).

Michael Lower