Posts Tagged ‘ownership of the family home’

Equitable ownership of the family home: interaction of the common intention constructive trust and the presumed resulting trust

August 2, 2017

The Court of Appeal judgment in Primecredit Ltd v Yeung Chun Pang Barry ([2017] HKEC 1533, CA) deals with several important issues in the law of the ownership of the family home.

A husband (‘H’) and wife (‘W’) acquired a flat as the family home (‘the first flat’). Subsequently, the family bought a new flat  (‘the flat’) relying on the sale of the first flat to pay off a bridging loan used to acquire the flat.

W also helped to pay off the mortgage taken out to help fund the purchase. Title to the flat was in the name of the husband and S (the youngest child and the only son of the family).

Although H and S were legal joint tenants of the flat, W’s evidence was that she did not intend to make a gift to S during her life but only after H and W had died.

Primecredit (‘the creditor’) had the benefit of a charging order over the flat in respect of S’s indebtedness to the creditor.

H died and S became the sole legal owner through the right of survivorship. The creditor then sought an order for sale of the flat. W resisted this arguing that she had a beneficial interest.

Common intention constructive trust

The burden of proof was on W to show that beneficial ownership did not follow legal ownership.

There was no evidence of an express agreement that W was to have a beneficial interest in the flat. Could such a common intention be inferred? The majority of the Court of Appeal (Lam V-P and Cheung JA) thought so. Kwan JA agreed that W had a beneficial interest but on the basis of a presumed resulting trust rather than a common intention constructive trust.

Lam V-P thought that, ‘at least in the domestic context’, there was no need to resort to the resulting trust where the matter can be resolved by recourse to the common intention constructive trust ([1.3]).

He also said:

‘Since Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776, as far as Hong Kong is concerned, the modern approach to constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context, see Mo Ying v Brillex Development Ltd ([2015] 2 HKLRD 985. In a domestic context, particularly in relation to a matrimonial home, the court is not constrained in that exercise by pure direct monetary contributions to the purchase price, see the judgment of Baroness Hale at [69] in Stack.

In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family were not that common, the court has to pay regard to circumstantial matters.’ ([1.6]). Cheung J.A. made the same point ([2.9]).

Whichever route is followed, the court ‘should have regard to the inherent probabilities in light of the surrounding circumstances at the time when the property was acquired.’ (1.4]). The ‘surrounding circumstances’ (another term for ‘whole course of dealing’?) clearly do need to be taken into account when determining intention; where there are rival interpretations / accounts of the surrounding circumstances, which is the most likely?

The fact that the flat was H and W’s only property was highly relevant ([1.5] per Lam V-P). Cheung J.A. thought it credible that H and W would intend to retain ownership in their lifetimes even if S rather than W was joint legal owner ([2.97]).

Cheung JA pointed to several matters which made it appropriate to infer the necessary common intention. There was W’s evidence that there was no intention that S should have an interest during H and W’s lifetime. The common intention could be inferred from W’s financial contributions ([2.10]).

Cheung JA also said:

‘What the judge seems to have overlooked is that the mother’s interest in the matrimonial home is not solely determined by her financial contributions but by reason of her status of a married woman.’ ([2.10]).

Resulting trust

Kwan JA, alone of the members of the Court of Appeal thought that the first instance finding that there was no common intention (common to H, W and S) could not be overturned ([2.6]).

Instead, he found that W had an interest under a resulting trust. This was based on her contributions and her evidence that no gift to S was intended ([42]). Again the ‘inherent probabilities’ are relevant ([46] – [48]).

Common intention constructive trust and resulting trust?

While Lam V-P thought that the applicability of the common intention constructive trust ruled out any application for the resulting trust ([1.3]). Cheung JA thought that the presumed resulting trust still had a role to play even where the analysis was based on common intention constructive trust ([2.14]).

Charging orders and joint ownership

Lam V-P urged masters dealing with charging order applications in respect of jointly owned property not make the order absolute unless notice has been given to all co-owners ([1.9]).

Charging orders and severance

Lam V-P left open the question as to whether the making of a charging order equitably severed a joint tenancy ([1.8]).

Michael Lower

 

 

 

Common intention constructive trust: context

April 26, 2017

Cheung Lai Mui v Cheung Wai Shing ([2017] HKEC 740) concerned property that had been owned by three brothers (W, F and K) as tenants in common in equal shares.

W died and D1 and D2 inherited W’s share. When F and K died, P (K’s adopted daughter) applied to be administratrix and executrix of their respective estates.

D3 was D1’s son. He claimed to be solely beneficially entitled as a result of a common intention constructive trust. This succeeded.

This was a traditional Chinese family residing in the New Territories ([78]). D3 was the only male descendant of the family. This was a significant fact that lent credence to the allegation of the common intention.

There was evidence of express discussions concerning the common intention and other surrounding circumstances that made it likely that the common intention had come into existence.

The lack of any formal written evidence of the common intention was understandable in the family context ([94] – [95]).

A defence of estoppel by standing by also succeeded ([103]).

So did D3’s adverse possession claim. He had erected a gate. This was an unambiguous assertion of control even though the gate had not been locked ([108]).

Michael Lower

The equity of exoneration: family homes and indirect benefits

April 18, 2017

In Armstrong v Onyearu ([2017] EWCA Civ 268, CA (Eng)) title to Mr and Mrs Onyearu’s family home was in Mr Onyearu’s name but the couple had equal beneficial shares. Mr Onyearu borrowed money to finance his business. The loan was secured by a charge over the family home. The business failed. A was Mr Onyearu’s trustee in bankruptcy.

The question was whether Mrs Onyearu was entitled to rely on an equity of exoneration as against Mr Onyearu (and as against A). A contended that she was not since she had derived an indirect benefit from the loan: it enabled Mr Onyearu to keep his business going and so to continue to meet the mortgage payments.

David Richards LJ, delivering the Court of Apeal’s judgment, explained the equity of exoneration:

‘Where property jointly owned by A and B is charged to secure the debts of B only, A is or may be entitled to a charge over B’s share of the property to the extent that B’s debts are paid out of A’s share.’ ([1])

Whether the equity applies depends on the parties’ common intention ([3]). Where there is no evidence of an actual intention, a presumed intention may arise depending on all the relevant circumstances. In particular, the court looks at whether the co-owner derived any benefit from the debt secured on the property ([3]).

The equity is part of the law relating to the rights of sureties ([24]).

The importance of this case is that it examines whether the type of indirect benefit that Mrs Onyearu was said to have derived from the loan to her husband was relevant to the parties’ presumed intention ([8]).

A contended that the equity could only arise if Mrs Onyearu received no benefit, direct or indirect, from the secured loan ([20]). In effect, A was arguing that the equity could rarely arise in the family home context given the likelihood that the parties’ financial affairs were, at least somewhat, intertwined.

David Richards LJ’s review of the authorities led him to the conclusion that an indirect benefit is not sufficient to deny a right of exoneration to parties in the position of Mrs Onyearu ([82]).

He said:

‘An indirect benefit of the type relied on in this case is far from certain to accrue. In the present case, any benefit was subject to a double contingency: first, that the firm would survive and, secondly, that it would be profitable. Further, the intention as regards the equity is to be inferred as at the date of the transaction. As at that date, the prospect of benefit was wholly uncertain and incapable of any valuation … In general, the benefits must be capable of carrying a financial value’ ([83]).

Mrs Onyearu was entitled to rely on the equity.

Michael Lower

 

The priority of unwritten equitable interests

April 4, 2017

In Si Tou Choi Kam v Wealth Credit Ltd ([2017] 1 HKLRD 1074) A and B acquired property as legal joint tenants. B’s creditor, C, obtained and registered charging orders over the property. C then applied for an order for sale of the property. A obtained a declaration that A was sole beneficial owner of the property (having supplied the entire purchase price) and registered it at the Land Registry.

The priority of unwritten equitable interests is governed by the doctrine of notice. The charging order is to be treated as if it were an equitable charge. Priority is governed by the first in time rule. A’s interest, having arisen at the time of acquisition, has priority under this rule.

There is no authority for the proposition that A is under a duty to obtain a declaration and register it in order to preserve this priority. It was surprising, therefore, that the court held that A’s priority was governed by the date of registration of the declaration.

Michael Lower

 

 

Common intention constructive trust: condition attached to express agreement not satisfied

March 11, 2017

In Gallarotti v Sebastianelli ([2012] EWCA Civ 865, CA (Eng)) G and S were friends. They had each gone to England from Italy. G and S shared rented accommodation and then bought a flat. This was a platonic arrangement. They were happy to share until they were ready to buy homes of their own.

The title was in S’s name. G and S had an express agreement that they would be equal beneficial owners. This agreement was conditional on G contributing more than S to the mortgage repayments since S made a larger contribution than G to the down payment.

G did make some contributions but did not pay as much as S did towards the mortgage; the disparity was significant. The conditional element of the express agreement was not satisfied.

The friends fell out and G sought a declaration as to the extent of his beneficial interest. Arden LJ gave the only full judgment; the other members of the English Court of Appeal were content to agree with her.

The terms of the express agreement showed that ‘the parties were concerned that their ultimate shares in the Flat should, broadly speaking, represent their contributions to it’ ([24]). ‘[T]he inference to be made from the parties’ course of conduct was that they intended that their financial contributions should be taken into account but not that there should be any precise accounting’ ([25]). S had a 75% beneficial interest and G had 25%.

Michael Lower

 

 

Family ownership disputes: when does Jones v Kernott apply?

March 4, 2017

In Wodzicki v Wodzicki ([2017] EWCA Civ 95, CA (Eng)) G and his wife (‘W’) bought a house intending that it should be a permanent home for G’s daughter (‘D’) and her children. Title to the house was in G and W’s name as legal joint tenants.

G died intestate. W began possession proceedings. D counterclaimed that she was the sole beneficial owner of the property.

The first instance judge was of the view that G’s beneficial ownership share belonged to D. He ordered an account to be taken of W and D’s respective contributions to the purchase price, maintenance and outgoings. Their ownership shares would correspond to their contributions.

D appealed. She argued that this resulting trust approach was inappropriate in this domestic context. This argument failed. The first instance judge found that G and W intended  the property to be D’s long-term home. They did not, however, intend D to be the sole beneficial owner. There were no grounds for departing from this finding of fact.

D argued that Jones v Kernott applied and that the intention that she was to be the sole beneficial owner should be imputed as a matter of fairness. This could not succeed given the judge’s finding as to the parties’ actual intentions.

In any event, this was not a context akin to that of co-habitees. D and W were not close. The use of a resulting trust approach was not precluded here.

Even if G had intended D to be sole beneficial owner, this intention could have no effect on W. D sought to rely on Hammersmith & Fulham LBC v Monk and to argue that W was bound by the intention of her joint tenant. This was a misapplication of Monk. That decision has no relevance to a purported disposal of a beneficial interest ([27]).

The finding as to G’s actual intention also meant that D’s claim to sole beneficial ownership based on proprietary estoppel had to fail.

A strange feature of the proceedings was that W presented no evidence when the account was taken. The result was that D was found to be sole beneficial owner.

Michael Lower

Did son hold property on trust for his mother?

January 19, 2017

In Primecredit Ltd v Yeung Chun Pang Barry ([2016] HKEC 2667) title to the family home was in the name of a father and his son as joint tenants. The father died and the son became sole owner by virtue of the right of survivorship. Primecredit was a judgment creditor of the son. It obtained a charging order in respect of the debt. The defendant’s mother claimed that she had a beneficial interest in the property under a common intention constructive trust or a presumed resulting trust.

The mother had the burden of proof to show that the beneficial ownership was different from the legal ownership. She had undoubtedly contributed to the purchase price. On the facts, however, the court did not believe that a trust in her favour should be inferred from these payments. She had intended to make a gift of the contributions to her son.

Michael Lower

Proprietary estoppel and co-habitation

January 12, 2017

In Southwell v Blackburn ([2014] EWCA Civ 1347, CA (Eng)) B and S began to co-habit in 2002. S bought a house in his name and he alone made the mortgage payments. He did not envisage marriage precisely because he knew that B might then have a claim against the house. Several years later, the relationship came to an end and S excluded B from the house. B’s claim that they had a common intention to be equal beneficial owners failed. In the alternative she relied on proprietary estoppel.

There was no specific assurance that B would have any right to the home. S did, however, assure B that he was making a long term commitment to provide B with a secure home. S’s assurance was that B would ‘have the sort of security that a wife would have, in terms of accommodation at the house, and income.’ ([16])

Before moving in with S, B had accommodation rented from a housing association. She spent GBP20,000 fitting and furnishing the house. Relying on S’s assurances, B left that accommodation. Although her income was much less than S’s, B did contribute to the couple’s joint expenses.

The first issue was whether the assurances were enough for proprietary estoppel purposes. It is clear that the assurance must be clear and unequivocal and relate to the property. An assurance that B would be provided with a secure home was sufficient to give rise to an equity (Greasley v Cooke). S’s assurance was not, in substance, conditional on the continuation of the relationship ([7]).

The fact that the common intention constructive trust claim to an equal beneficial share had failed did not mean that there could not be an assurance as to the security of B’s right to accommodation ([10]).

Then there was the question of detriment. B had enjoyed rent-free accommodation and had been able to take a degree that enhanced her earning capacity. Did this mean that the detriment had been dissipated over the course of the relationship?

First, it is true that ‘detriment has to be assessed over the course of the relationship’ ([13]). It was right to have regard to the benefits that had accrued to B as a result of the relationship ([14]). But S had also benefited from B’s contributions ([15]).

There are cases where, looking at the course of the relationship from the point at which the promisor reneges on his promise, the benefit has been dissipated. That said, ‘cases involving couples living together lend themselves .. less readily to an arithmetical accounting exercise’ ([17]). Benefits flowed both ways and were incidents of the relationship ([18]).

As for unconscionability, S contended that the relationship was not a marriage and was not expected to be permanent. Thus, there was no unconscionability about withdrawing the security of accommodation. This failed. The point was that B had incurred detriment in reliance on the assurances:

‘It is the detrimental reliance which makes the promise irrevocable and leads to the conclusion, at the end of a broad inquiry, that repudiation of the assurance is unconscionable.’ ([20]).

The relief that was awarded was a payment to reimburse her for the money that she had spent on the home that she had left and on S’s property.

Michael Lower

 

 

Common intention constructive trust: when is the agreement ‘subject to contract’?

December 10, 2016

In Ely v Robson [2016] EWCA Civ 774 (CA, Eng) E and R co-habited in a property the title to which was in E’s name. When the relationship between E and R broke down, E began possession proceedings and R counterclaimed that she had a beneficial interest in the property under the terms of a common intention constructive trust. The couple met and orally agreed a relatively complex settlement under the terms of which E would hold the property for himself for life with the remainder interest belonging 80% to his children and 20% to R. There were terms governing the payment of outgoings, the right to occupy the property and the compromise of E’s claims to other properties owned by R. It was accepted that the terms of the arrangement would be reflected in a trust deed and that the precise form of the agreement was provisional since, amongst other things, the tax implications of the way in which the deal was structured would need to be considered. E did not pursue the proceedings any further given R’s acceptance of the settlement.

R claimed that the settlement was not binding on her since it was not incorporated in a signed, written agreement satisfying section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. E argued that R was bound by the agreement on the basis of either a common intention constructive trust or proprietary estoppel.

For the purposes of the judgment, the English Court of Appeal  (Kitchin LJ giving the judgment) assumed that R, prior to the agreement, had a beneficial interest in the property under a common intention constructive trust. It reminded itself of Lord Scott’s approach in Cobbe v Yeoman’s Row to the use of proprietary estoppel in the context of agreements concerning land that did not satisfy section 2(1). Lord Kitchin also referred to the passage of Arden LJ’s judgment in Herbert v Doyle concerning such agreements. There is no common intention constructive trust where:

  1. a formal written agreement is anticipated; or
  2. further terms remain to be agreed so that the interest in property to be acquired is not clearly identified; or
  3. the parties did not expect their agreement to be immediately binding.

In these situations, if the agreement is incomplete, the parties cannot rely on constructive trust or proprietary estoppel (Herbert v Doyle, Arden LJ [57]).

The Court of Appeal rejected R’s contention that these requirements were not satisfied in the present case:

  1. although a formal written agreement was contemplated, nothing was said or written that precluded the possibility that a binding compromise had been agreed in the meeting between the parties (‘This was not a commercial transaction.’); and
  2. there were no terms still to be agreed; and
  3. the terms were sufficiently clear to constitute a binding agreement.

E relied on the agreement to his detriment by: not pursuing the possession proceedings; abandoning his claims to R’s other properties; and allowing R to remain in possession. Consequently, E held the property on constructive trust in accordance with the terms that had been agreed.

Michael Lower

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

December 8, 2016

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