Posts Tagged ‘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

Contractual intention and agreements between family members

September 26, 2020

Facts

In Ho Lai King v Kwok Fung Ying ([2020] HKCA 657) the plaintiff (‘P’) owned property in Guangzhou. Ownership was resumed by the mainland authorities. P was an elderly woman. She asked her daughter (D1) and son-in-law (D2) to help her negotiate the compensation payment.

D1 and D2 agreed on the understandings that:

(1) P would not accept an offer from the authorities without their consent; and

(2) They would receive 50% of the compensation received.

Contrary to this agreement, P accepted an offer of RMB 3 million as compensation and denied that any payment was due to D1 and D2.

Question

The question was whether P and D1 / D2 intended to create contractual relations when they reached their agreement. P contended that there was no such intention. She relied on the rebuttable presumption against the existence of a contractual intention in the case of domestic agreements (Balfour v Balfour [1919] 2 KB 571).

Court of Appeal’s analysis

The Court of Appeal said that the presumption is a rebuttable presumption of fact and the court had to consider the facts of each case ([47]):

‘What will satisfy the court in a particular case must depend on the circumstances, including (without being exhaustive) the relationship between the parties, whether they are in amity or estranged, the subject matter of the agreement, the manner in which the agreement has been made’ ([48])

Strong evidence would be needed to prove a contractual intention for ‘oral agreements on maintenance support or other daily arrangements’ ([48]).

The Court of Appeal decided that there was a contractual intention in this case. The relevant factors were:

  • P favoured her son over D1 (D1 and D2 were reluctant to get involved because they suspected that the son would receive the entire payment;
  • While D1 might not have been willing to bring proceedings against P during P’s life she might bring proceedings against P’s estate or the son;
  • The agreement was about a major capital asset
  • P and D1 and D2’s actions after the agreement (D2 spent time and money in pursuing the negotiations) pointed to a contractual intention).

Michael Lower

Father’s gift of property to son: Conditional on son’s caring for father?

August 15, 2020

In Yeung Hock Wai v Chan Wai Man ([2020] HKCFI 1693) a father gave his son a 25% interest in two properties owned by the father (‘the properties’). The son pre-deceased his father.

After the son’s death the father (the father’s estate after the father’s death) claimed that the gift to the son was conditional and that, as the son had failed to satisfy the conditions, the father was entitled to recover the son’s interest in the properties.

The father alleged that the son had accepted that the gift to him was conditional on: (i) the son caring for the father; and (ii) the son working in the father’s business.

Bebe Chu J held that:

  • the gift was unconditional ([135]);
  • even if the father had attempted to impose the conditions on the gift to the son, the conditions were ‘precatory words’ not intended to have legal effect ([150]);
  • if the conditions were intended to have legal effect, they were void for uncertainty (so that the gift would still be unconditional) ([162]);
  • if they had been intended to have legal effect and been sufficiently certain, the conditions would not need to satisfy the formalities requirements in CPO s. 3(1) ([166]);
  • it was accepted on behalf of the son’s estate that if the conditions had been legally effective then, since they had not been complied with, the son’s interest in the properties would be held on ‘constructive or resulting’ trust for the father ([166]);
  • the trust would be a ‘type 2’ constructive trust under the Paragon Finance classification so that the Limitation Ordinance would apply and the father’s claim was brought outside the six year limitation period ([174]);
  • in any event the claim would be barred by the doctrine of laches (the son’s widow was prejudiced by the delay in bringing the claim ([176]).

Michael Lower

Commentary on Toms v Ruberry

July 24, 2020

Just published this commentary on Toms v Ruberry in the CUHK Law Issues in Property Law blog.

Michael Lower