Posts Tagged ‘MichaelLower’

Resulting or express trust?

October 28, 2015

In Ng Tak Kau v Cheung Man Kwai ([2015] HKEC 1942, CFI) title to the family home was conveyed into the names of a father and son as joint tenants. When the son ran into financial difficulties, the son assigned his interest in the property to the father. The son’s major creditor argued that this assignment was voidable under section 60 of the Conveyancing and Property Ordinance (on the basis that it as entered into with the intent to defraud creditors).

The first question that the court had to consider was whether the father was the sole beneficial owner. The evidence showed clearly that he had provided the entire purchase price and that, although the presumption of advancement arose, there was no intention to make a gift to the son. There was clear evidence of an agreement (reached with the concurrence of other family members) that the son’s name was on the title purely with a view to ‘easy administration of family assets’ in the event of the father’s death ([19]). Thus, the son had no share and the transaction was merely the exercise of the father’s rights as sole beneficial owner. The creditor’s claim failed. There was no question of estoppel since the creditor did not rely on any belief as to the son’s ownership when making the loan to the son.

It is perhaps surprising that the conclusion was that there was an express trust in favour of the father ([40]) given the lack of writing to evidence the trust (as required by section 5(1) of the Conveyancing and Property Ordinance). The analysis had been couched in resulting trust terms and could easily have been thought of as a common intention constructive trust.

Michael Lower

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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

No equitable lien where no part of the purchase price has been paid

October 2, 2015

In Wong Kam Fung v Smart Profit Enterprises Ltd ([2014] 5 HKLRD 853, CA) S entered into a provisional sale and purchase agreement for the sale of property to P. P sent S a cheque for the deposit but the cheque was never presented. P registered the agreement at the Land Registry. P later repudiated the agreement and this was accepted by S. P refused to vacate the registration of the agreement at the Land Registry. S sought an order requiring P to remove the registration. P counterclaimed for the return of the deposit and for damages for breach of contract.

The agreement was clearly no longer in existence. P argued, however, that it had an equitable lien over the property arising out of the delivery of the deposit cheque to S and that this lien entitled it to maintain the registration. It argued that the equitable lien also covered the claim for damages (P did not register the lis pendens). P’s argument failed and it was ordered to vacate the registration.

Given that the deposit cheque had not been presented, there had been no part payment of the purchase price and so there could be no equitable lien:

‘[T]here are two requirements to be satisfied before a purchaser can claim an equitable lien over the vendor’s property, namely (a) money has been paid on account of the purchase price, and (b) the money has been paid to the vendor.’ (Kwan JA at [30]).

There were cases in which the court had accepted that an equitable lien could cover a claim for damages in addition to the part payment of the purchase price where justice demanded it. They were not authority that the lien could cover a damages claim on its own ([29]).

Michael Lower

Property owner in breach of a covenant not to ‘permit or suffer’ a nuisance to be caused

September 16, 2015

In MTR Corp Ltd v Cheung Ching Kin ([2015] HKEC 1535, LT) MTR Corp (the applicant) was appointed Manager of an estate in Tseung Kwan O. The respondent was the owner of a flat on the estate occupied by his daughter (he had moved out). There were persistent and well-documented complaints of frequent loud hammering noises in the flat in the late night or early hours of the morning. The Tribunal had no hesitation in finding that these noises amounted to a nuisance. The applicant sought an injunction to restrain the nuisance. The relevant provision prohibited owners from doing anything which might be a nuisance or cause damage or annoyance to other owners and occupiers or to the public. There was also a prohibition on producing music or noise that might cause a nuisance to other users of the development. These covenants were extended; owners could not ‘permit or suffer’ a breach of the covenant. Here the noise was produced by the owner’s daughter, not the owner himself, so the question was whether he had permitted or suffered his daughter to cause the noise.

In Realty Harvest Limited & Others v Gold Margin Development Limited ([2001] 1 HKC 234, CA) the Court of Appeal endorsed the proposition that ‘permit’ and ‘suffer’ are synonyms. ‘Permit’:

‘ means one of two things, either to give leave for an act which without that leave could not be legally done, or to abstain from taking reasonable steps to prevent the act where it is within a man’s power to prevent it. Acts which fall short of that, though they be acts of sympathy or assistance, do not amount to permission at any rate in the covenants with which we are dealing.’

(Berton & Others v Alliance Economic Investment Company Limited [1922] 1 KB 742 at 759 per Atkins LJ).

The owner needs to know of the breach before he can be said to have permitted it ([38]). The owner knew of the breach and had taken no steps to prevent the noise problem from continuing. The injunction was granted.

Michael Lower

Making time of the essence for completion

September 9, 2015

In Many Gain Investment Ltd v Chan Fai Ho ([[2015] HKEC 1553, CFI) P, a property developer agreed to buy a property from D. P raised a requisition about D’s title and there was a dispute as to whether or not it had been properly answered. This dispute continued up to the contractual completion date of 31st May 2011. The parties agreed to extend the completion date to 14th June 2011. The next day, 15th June, D’s solicitors wrote to P’s solicitors requiring completion by 20th June. Despite this, on 16th June, D entered into an agreement to sell the property to another buyer. P now withdrew the requisition and sought specific performance. The question was whether P’s delay in completing amounted to a repudiatory breach entitling D to rescind.

Time was not expressly of the essence for completion and Anthony To J found that time was not impliedly of the essence in this case ([23]). The question then was whether the letter of 15th June made time of the essence (see United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904). As a matter of construction it did not. Anthony To J preferred P’s interpretation which was that the letter was no more than a demand that P should withdraw the requisition within 5 days ([24] – [27]).

For the sake of completeness, Anthony To J considered whether, if the letter were to be construed as a notice making time of the essence, the 5 day period it specified constituted reasonable notice. He held that it could have amounted to reasonable notice had D taken the necessary steps to make completion possible (including notifying P of the amounts of the split cheques that would be required on completion). The only other step to be taken within that time was that P had to decide whether or not it would insist on the requisition. As D had not taken the steps to make completion possible within 5 days, the 5 day period would not amount to reasonable notice ([33]).

P was granted the order of specific performance that it sought.

Michael Lower

Adverse possession: the effect of being added as a party after expiry of the limitation period to proceedings begun within the limitation period

September 2, 2015

In Yu Fung Co Ltd v Olympic City Properties Ltd ([2015] HKEC 1523, CFI) L was party to a ‘Redevelopment Agreement’ with Full Country Development Limited (‘Full Country’). Under the terms of the agreement, and subsequent sale and purchase agreements, L assigned his flat to Full Country in return for a new flat once a redevelopment scheme had been completed. L moved into the new flat in June 1997 but title to the flat was never assigned to him. Around the same time, June 1997, Full Country assigned the title to a third party. Title ultimately came into the hands of Olympic. Olympic borrowed from Yu Fung and Yu Fung had a charge over the flat. Olympic defaulted and Yu Fung brought possession proceedings. L argued that the sale and purchase agreement gave him an equitable title to the property and he was joined as a party to the proceedings.

The claim to an equitable interest in the flat as a result of the sale and purchase agreement failed: the agreement did not specify the flat (or quantify L’s undivided share in the development) ([33] – [34] per Deputy Judge Simon Leung).

L also relied on adverse possession. Possession had originally been with Full Country’s consent and so not adverse. This changed, however, when Full Country assigned the title to the flat. There was no evidence to show that the new owners had consented to L’s possession: the limitation period, therefore, began to run around June 1997. The fact that L believed that he was entitled to be in possession under the terms of the agreement did not stop the limitation period from running if possession and intention to possess were present ([71]). Time begins to run once a purchaser goes into possession pursuant to a sale with the intention of excluding the whole world including the vendor ([72]).

The question was whether the limitation period had expired. Proceedings against Olympic were brought in June 2008. Lai was joined as a party a month later, in July 2008. The claim against Lai was first made in a Notice and affidavit in October 2011. If the relevant proceedings were brought against Lai in June / July 2008, the limitation period would not have expired. If October 2011 was the relevant date then the limitation period had expired by then (twelve years from June 1997). Deputy Judge Simon Leung pointed to section 35(1)(b) of the Limitation Ordinance: new claims (other than third party proceedings) are deemed to have been commenced on the same date as the original action. The addition of a new party is a ‘new claim’ (Limitation Ordinance, s. 35(2)(a)). Thus, the limitation defence failed and Yu Fung was entitled to possession. L should have applied to strike out the 2011 Notice and affidavit on the grounds that they were an abuse of process ([84]). This application would, it seems, rely on section 35(3) of the Limitation Ordinance which prohibits new claims after the expiry of the time limit which would affect a new action to enforce that claim.

Michael Lower

Implied terms: the tension between the plain meaning of the words and an evident commercial purpose

August 26, 2015

In Aberdeen City Council v Stewart Milne Group ([2011] UKSC 56) the Council sold some development land to Stewart Milne Group Ltd (‘SMG’). The contract for the sale provided for a further payment (‘Profit Share’) to be paid to the Council in the event of (i) the service of a notice by SMG on the Council to trigger the obligation to pay; or (ii) a sale by SMG; or (iii) the grant of a lease by SMG. There was to be only one such payment and once it had been made there would be no further obligation to make any payment even if one of the relevant events occurred.

SMG sold the property to SMW, another company in the same group, at a price that the Council alleged was well below the open market value. SMG contended that this triggered the once and for all obligation to make a Profit Share payment. The Council refused to accept that this was the case. There was a tension between the wording of the contract and the alleged commercial purpose. The contract did not expressly rule out an intra-group transaction in its definition of event (ii) (a sale triggering the obligation to pay). On the other hand there was evidence from other provisions within the contract pointing to a contractual intention that the Profit Share would be calculated by reference to the property’s open market value.

The Supreme Court decided that there was a clear commercial intention that the Profit Share would be calculated by reference to the open market value.  They preferred to think of this in terms of an implied term rather than as a process of interpretation (though the result is the same whichever route is used ([33] Lord Clarke). A term was to be implied to the effect that where the sale was not at arm’s length, an open market valuation (rather than the actual price paid) would be used in the calculation of the Profit Share ([20] Lord Hope; [32] Lord Clarke).

Michael Lower

Where there are two arguable interpretations of a contractual provision it is reasonable to have regard to the commercial consequences of the rival approaches

August 24, 2015

Rainy Sky SA v Kookmin Bank ([2011] UKSC 50) arose out of contracts for the building and sale of ships. The purchasers were to pay the purchase price in five installments and the contract provided that the installments would be refunded to the purchasers on the happening of any of certain events specified in the contract. The contracts required the shipbuilder to procure refund guarantees to protect the buyers against the possibility that the shipbuilder might fail to refund advance payments when required to do so under the terms of the contract. Kookmin Bank provided the refund guarantees. After the purchasers had paid the first installments due under their respective contracts, an event occurred entitling the purchasers to call for a refund of the installments. The purchasers invoked this clause but the shipbuilder refused to repay the money. The purchasers then sought payment from the Bank under the terms of the guarantee. The Bank refused to pay arguing that the guarantee did not cover the event that had occurred.

Lord Clarke (with whom the other members of the Supreme Court agreed) considered the rival constructions argued for by the parties and concluded that each interpretation was arguable. In such a case, the court could legitimately have regard to the commercial consequences of the rival interpretations. The interpretation that was most in line with the parties’ reasonable interpretations could be preferred:

‘If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.’ ([21])

Where, however, the language was unambiguous then the court must apply it ([23]). At first instance an experienced judge of the Commercial Court expressed the view that the Bank’s construction ‘defies commercial common sense’. The purchasers’ construction was, therefore, to be preferred ([45]).

Michael Lower

Co-habitation and equitable accounting

August 14, 2015

In Wilcox v Tait ([2006] EWCA Civ 1867) W and T were co-habitees who acquired a property as the family home and the transfer to them contained an express declaration that they were beneficial joint tenants. When the relationship broke up, W sought a declaration as to her beneficial entitlement, an order for sale and a division of the property in equal shares. T argued that there should also be an equitable accounting. He had made nearly all of the mortgage payments and T argued that W should give credit for half of all of these from the time that the property was acquired. The effect would be to extinguish W’s share of the anticipated proceeds of sale. T failed.

There could be no hard and fast rule as to whether there should be such an accounting, it all depends on the intention of the parties as to how the expenditure should be treated (Jonathan Parker LJ at [65]):

‘That said … in the ordinary co-habitation case it is open to the court to infer from the fact of co-habitation that during the period of co-habitation 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 property during that period for their joint benefit. Whether the court draws that inference in the given case will of course depend on the facts of that case.’ (Jonathan Parker LJ at [66]).

Michael Lower

Signature requirement satisfied where written document intended to have contractual effect

July 25, 2013

In Leeman v Stocks ([1951] Ch 941) property was sold at auction. The auctioneer got the purchaser to sign a contract. He then reported to the seller on what had happened and the seller did not object. The contract was not signed by or on behalf of the seller. The wording of the printed contract ended with the words ‘As witness the hands of the parties’ and so seemed to envisage hand-written signatures. The seller later refused to proceed and the buyer sought specific performance.

The purchaser succeeded despite the lack of the seller’s signature. It was enough that the written contract was clearly regarded as the authorised and formal embodiment of the parties’ contractually binding intention and that the seller’s name was written in the contract. By requiring the purchaser to sign the contract, the auctioneer (as agent of the seller) was recognizing the name of the seller written in the contract as the seller’s signature.

While the contract seemed to require the parties’ hand-written signatures, this did not matter where there was evidence to show that neither party actually contemplated that there would be such a signature.

Michael Lower