Posts Tagged ‘ownership of the family home’

Proprietary estoppel: Australian take on proving detrimental reliance in relationship cases

January 24, 2018

In Sidhu v Van Dyke ([2014] HCA 19) V was married to the brother of S’s wife. V lived with her husband in Oaks Cottage which was part of a larger lot of land (Burra Station) owned by S and his wife. V and his wife lived in a homestead which was part of the same lot. S and V began a sexual relationship. V and her husband divorced when the latter discovered the relationship.

S assured V on several occasions that he would transfer Oaks Cottage to her on the sub-division of the lot that included Oaks Cottage. S gave V a written note to confirm that he had promised to give Oaks Cottage to V.

V did not seek a property settlement in her divorce proceedings; S suggested that there was no need for her to do so since she had Oaks Cottage. V carried out substantial unpaid maintenance and renovation works on Oaks Cottage and on other parts of Burra Station. She was also actively involved in the work related to the application to sub-divide Burra Station.  V did not seek full-time employment during the years in which she lived in Oaks Cottage.

The relationship ended after nine years. V brought a proprietary estoppel claim when S and his wife refused to convey Oaks Cottage to V.

The first instance judge (Ward J) found that S made two promises to transfer Oaks Cottage to V by way of gift. These promises were, he found, conditional on the sub-division of the Burra Station lot. The claim failed. First, it would not have been reasonable for V to rely on the promises since the condition could only be satisfied with the consent of S’s wife. Second, Ward J. concluded that V had not been able to prove reliance on the promises. His reading of the evidence was that she might have incurred the detriment even in the absence of the promises.

V succeeded on appeal to the Court of Appeal of the Supreme Court of New South Wales. First, it was not objectively unreasonable for V to have relied on S’s promises. Second, the Court of Appeal relied on Greasley v Cooke: the circumstances were such as to raise a ‘presumption of reliance’. Barrett JA said:

‘Where inducement by the promise may be inferred from the claimant’s conduct, as is the case here, the onus or burden shifts to the defendant to establish that the claimant did not rely on the promise. It was therefore for [S] to rebut the presumption and establish that [V] did not rely at all on the promises in acting or refraining from acting to her detriment’ (Van Dyke v Sidhu (2013) 301 ALR 769 at 786 [83]).

The presumption of reliance was raised and had not been rebutted. Having regard to S’s wife’s interest in the property, the Court of Appeal refused to order the transfer of Oaks Cottage to V. Rather, S was ordered to pay equitable compensation by reference to the value of the disappointed expectation.

S appealed to the High Court of Australia. S contended that the Court of Appeal had gone astray in speaking of a presumption of reliance and thus reversing the burden of proof. Further, equitable compensation should be calculated by reference to the loss suffered in reliance on the promises and not by reference to V’s expectation.

The High Court of Australia rejected the notion that there could be a presumption of reliance:

‘In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract’ ([58]).

There was no shifting of the burden of proof as regards reliance; the onus remained on V ([61]). Rather, ‘[t]he real question was as to the appropriate inference to be drawn from the whole of the evidence, including the answers elicited from the respondent in the course of cross-examination’ ([64]).

Put another way, the question was ‘whether, when all the facts are in, the court is satisfied on the balance of probabilities that the promises in question contributed to the respondent’s conduct in deciding to commit to her relationship  with the appellant and adhering to that relationship (with all that that entailed) for eight and a half years’ ([66]).

Nevertheless, V was able to show reliance: ‘A review of the whole of the evidence shows that the respondent had made out a compelling case of detrimental reliance’ ([67]). It was enough that the promises contributed to the decision by V to carry out work on the property. The promises did need not to be the sole cause of the detriment, merely to have influenced the decision (Amalgamated Investment & Property Co Ltd (In Liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 104 – 105). In Steria Ltd v Hutchison ([2007] ICR 448) Neuberger LJ said that the representation need only have been ‘a significant factor’. V was able to show that this was the case.

On the measure of relief, the High Court said that, ‘[t]he requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief ([83]). ‘If the respondent had been induced to make a small, readily quantifiable outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for her outlay’ ([84]).

This was not the right approach in this case, however, since the detriment involved ‘life-changing decisions with irreversible consequences of a profoundly personal nature’ (Donis v Donis (2007) 19 VR 577 at 588 – 589 [34] per Nettle JA).

‘[I]n the circumstances of the present case … justice will not be done by a remedy the value of which falls short of holding the appellant to his promises … [W]here the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise ([85]).

There was nothing conditional about the promises. These were ‘expressed categorically so as to leave no room for doubt that he would ensure that the subdivision would proceed and that the consent of the appellant’s wife would be forthcoming’ ([86]).

Michael Lower

 

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Proprietary estoppel and co-habitees: assurance must relate to a specific property

January 3, 2018

Lissimore v Downing ([2003] EWHC B1 (Ch)) concerned the proprietary estoppel claim brought by L on the break-down of her relationship with D, a rock star and the owner of Astbury hall, a large estate in England. The relationship began in 1993 and lasted for seven years. There was an ‘engagement’ but neither party expected to marry.

D was heavily invested in Astbury Hall, both in financial and in psychological terms. Astbury Hall represented the fruits of many years of hard work. Even before the relationship with L deteriorated, D consulted his solicitors as to the steps to be taken to ensure that L would have no claim to an interest in it.

HH Judge Norris QC outlined the law on proprietary estoppel. He emphasised the basic rule that a representation or assurance must relate either to some specific property ([12]) or to the whole of the representor’s property ([15]).

As regards detriment, the judge said, ‘the conduct must be in some sense prejudicial to the party relying on it, or of such a nature that it raises the inference that it must have been induced by some sort of promise.’ ([20]).

The claim failed because there was no representation; it was understood that L could live at Astbury Hall while the relationship lasted. Commenting on the legal effect of the relationship, HH Judge Norris QC said:

‘The fact that that state of affairs happened to endure for several years cannot of itself impose on Mr Downing an obligation to transfer some of his property when he did not undertake such an obligation at the outset. There may be a promissory estoppel (eg a defence to a claim to leave the property before reasonable notice of the change in the nature of the arrangements has expired): but proprietary estoppel is different’ ([37]).

He went on to note the problems that arise in this type of claim:

‘The advancing of a proprietary claim tends to require the claimant to list how much (s)he did, endowing small acts with a great significance whilst at the same time not recording that party’s true contribution to the relationship.’ ([47]).

L’s proprietary estoppel claim failed. D made no statement that would lead her to believe that she was to have a share in Astbury Hall. Nor did L believe that she had any such share ([51]). D’s statements ‘relate almost entirely to the currency of the relationship’ ([53]).

Nor was there any overall detriment: ‘looking at the matter in the round, balancing the burdens assumed in the relationship against the benefits derived from it, and making the assessment after the breakdown of the relationship, no substantial detriment had been suffered’ ([54]).

There is a distinction between property law and family law claims:

‘What I am being invited to do is to make a property adjustment order on the termination of the relationship, not to define what property rights were created during the relationship’ ([55]).

Michael Lower

 

Family home in joint names and wife’s failure to transfer her interest to her husband in accordance with a consent order

November 4, 2017

In Chu Tsan Leung v Leung Mee Ling Amy ([2017] HKEC 2347) H and W were married. Title to the family home was in joint names. W left the family and in the subsequent matrimonial proceedings agreed to transfer her entire interest in the property to H. This agreement was incorporated in a consent order. W did not execute a deed to give effect to the order.

W was subsequently declared bankrupt. The Trustee in Bankruptcy claimed that W’s interest in the property remained an asset of hers. H sought a declaration that W did not have any beneficial interest in the property.

The Trustees in Bankruptcy argued that the consent order was procured through the exercise of undue influence by H and his solicitors. They argued that there was a presumption of undue influence on the facts of the case. This failed.

The evidence pointed away from the idea that the wife reposed trust and confidence in her husband at the time of signing the consent order. Nor was there anything unconscionable or manifestly disadvantageous to W when the context was properly considered: H, a construction worker, had been left to take care of two young children on his own.

It did not help W’s case for her to argue that she did not have full knowledge and understanding of the documents that she had signed. A person who signs a legal document he or she is bound by the act of signature (Bank of China (Hong Kong) Ltd v Fung Chin Kan and Ming Shiu Chung v Ming Shiu Sum).

H became the sole beneficial owner of the property from the moment of the decree absolute.

H argued, in the alternative, that he had always been the sole beneficial owner of the property since he alone had provided all of the purchase money and mortgage payments. This claim failed. Since title was in joint names, it was for H to show that she had no equitable interest. H was unable to do so.

Michael Lower

 

 

The equity of exoneration: tenant in common charging her share to protect property from partner’s creditor

October 8, 2017

Insol Funding Company Limited v Cowlam ([2017] EWHC 1822 (Ch)) also raised the question of the equity of exoneration.

Ms Cowlam co-habited with Mr Cowey. They were equitable tenants in common of the family home (‘the property’). Insol was Mr Cowey’s creditor with an equitable charge over Mr Cowey’s share in the property. It sought an order for sale of the property.

To protect her rights in the property, Ms Cowlam agreed to pay Insol GBP 330,000. This was to be treated as part payment of Mr Cowey’s debt. Ms Cowlam granted Insol an equitable charge over her share to secure the sum that she had agreed to pay.

Ms Cowlam claimed to have a proprietary right over Mr Cowey’s share by virtue of the equity of exoneration. This would arise on the date when she charged her interest with the payment of the sum due under her agreement with Insol ([38]).

Ms. Cowlam argued that in granting the charge and in making payment to Insol, she had charged her share with the payment of part of Mr Cowey’s indebtedness to Insol ([35]). Ms Cowlam argued that she had become a guarantor or surety for Mr Cowey’s indebtedness and was entitled to be exonerated out of his share ([113]).

Master Bowles explained that:

‘an equity of exoneration can arise in circumstances where property is charged for the benefit, not of the chargor, but as security for the debts of another and that, where such an equity arises, the chargor is to be regarded as a guarantor, or surety, for the debtor and can look to the debtor for indemnity, or exoneration, in the event that the charge is called upon.’ ([114]).

The equity is proprietary as well as conferring personal rights as against the debtor ([114]). Master Bowles saw no reason why it should not entitle the person claiming it to security over the debtor’s property ([114]).

The equity of exoneration arises from the ‘express, implied, or presumed, intentions of the parties’ ([115]). It was not available here. Ms Cowlam ‘entered into the settlement agreement, in her own right and for her own reasons and was, in so doing, acting purely as a volunteer’.

Michael Lower

 

Seminar about proprietary estoppel and the family home at CUHK Faculty of Law

October 6, 2017

We will run a seminar about the English Court of Appeal decision in Liden v Burton. Details are as follows:

Session A:
Date: 17 October 2017 (Tuesday)
Time: 1:00 – 3:00 pm
Venue: Classroom 3, CUHK Graduate Law Centre, 2/F., Bank of America Tower, Central
Speaker: Professor Michael Lower

Session B:
Date: 1 November 2017 (Wednesday)
Time: 1:30 – 3:30 pm
Venue: Breakout Room 510, 5/F, Lee Shau Kee Building, CUHK, Shatin
Speaker: Professor Michael Lower

 

(Same seminar in two different venues) 

 
All are welcome!
Please register at: www.law.cuhk.edu.hk/propertylawseminar
For enquiry, please contact Ms Vivian Chen at vivianc@cuhk.edu.hk.

 

ABSTRACT

Proprietary estoppel comes into play where: (1) a landowner (A) gives a third party (R) an assurance that R has or will have an interest in A’s land; (2) R incurs detriment; (3) in reliance on A’s assurance; and (4) in these circumstances it would be unconscionable for A to go back on the assurance given. In these circumstances, R can apply for relief and the court has a discretion to order the relief that it decides would undo the unconscionability arising from A’s attempt to resile from the assurance given.
Proprietary estoppel has a part to play where A and R are a couple in a stable relationship and the property to which the assurance refers is their family home. The courts have developed an approach to proprietary estoppel that is tailored to the family context and that surmounts potential obstacles to the use of proprietary estoppel here. Thus, the assurance may be couched in vague terms but still be clear enough in its context. The concept of detriment is wide enough to include the normal incidents of forming and maintaining a family. If claimants had to show that the assurance was the only factor inducing them to incur detriment it would be difficult for a proprietary estoppel claim to succeed; A would be able to defeat the claim by pointing to R’s mixed motives since the family relationship will often provide a convincing explanation for R’s actions. The courts have developed an approach to reliance that keeps alive the realistic prospect of a successful claim.
The decision of the English Court of Appeal in Liden v Burton ([2016] EWCA Civ 275) illustrates the ways in which the law of proprietary estoppel has been adapted by the courts for use in the family home context. Arguably, the decision represents a further stage in this process of adaptation. Here the assurance was that ‘we would be together for the future, that this would be our home and that he would look after me forever’. This might appear to be an assurance that A regarded the relationship as being for the long term. In its context, it was understood as an assurance that R would have an interest in A’s property.
Proprietary estoppel and the common intention constructive trust overlap; there is no obvious reason why Ms Liden could not have relied on the common intention constructive trust. It is, however, well-established that the fact that a property has been acquired as the family home of a couple who are married or in a long term stable relationship does not lead the courts to infer the existence of a common intention constructive trust. Arguably, there is a discrepancy here between the approach taken in Liden and that taken in common intention constructive trust cases.

 

 

Equitable ownership: single framework for ‘domestic consumer’ and ‘investment’ cases

August 27, 2017

Marr v Collie ([2017] UKPC 17) is an important Privy Council decision re-stating the framework for deciding when equitable ownership differs from the ownership position as revealed by the legal title. Lord Kerr, giving the judgment, stated that the same analytical framework is to be applied regardless of context. This framework applies equally to ‘domestic consumer’ and ‘investment’ or ‘commercial’ cases. Context has a role to play when inferring actual intentions.

 

The framework

When dealing with ownership disputes:

  1. determine the legal ownership of the property;
  2. the onus is then on the party claiming that the ownership position in equity varies from the legal position to establish that this is the case;
  3. where the only available relevant evidence is that the parties have made unequal financial contributions then it may be appropriate to have recourse to the presumed resulting trust;
  4. but the court may have evidence of the parties’ actual intentions so that it would be inappropriate to apply the presumption of resulting trust;
  5. in such cases, the court needs to make findings as to the parties’ actual intentions and give effect to them;
  6. in doing so, the court should examine the whole course of conduct (which would include the state of the title, the reasons for the decision to put the title in joint names if that is the case, the relationship between the parties, whether the property was intended as a family home, how the acquisition was financed and so on).

 

The facts

The case was an appeal from the Court of Appeal of the Bahamas. M was a Canadian citizen working in the Bahamas. C was a building contractor and a citizen of the Bahamas. M and C were in a personal relationship with each other from September 1991 to July 2008.

During that time M and C acquired several properties which were conveyed into their joint names. M paid the entire cost of purchasing the properties. When the relationship broke down, M claimed to be the sole beneficial owner applying the presumption of a resulting trust in his favour.

C claimed that the parties’ common intention was that they would be equal beneficial owners. According to C, the arrangement was that C would carry out renovation works at the properties. C also contended that M was the ‘breadwinner’ in the relationship and that this was relevant to the analysis.

M claimed that C had failed to carry out any renovation works. M also argued that his understanding was that C would make financial contributions to the acquisition of the properties that would equal his own but that no such contributions were made.

C had succeeded in the Court of Appeal. The court attached particular importance to an email from M to the bank that had provided a loan for the purchase of one of the properties. In this email, M told the bank that the property would be held in joint names, ‘meaning that we would have a 50% interest’. The Court of Appeal thought that this was very significant evidence as to the parties’ actual ownership intentions.

In the Privy Council, M’s case was that this email had not been mentioned at first instance nor in the Court of Appeal hearing. He argued that the Court of Appeal should therefore not have made use of the email in its analysis. In any event, the email was, M alleged, inadmissible for procedural reasons.

 

Clash of presumptions?

Lord Kerr considered whether cases like this gave rise to a ‘clash of presumptions’. On this view, the relationship between the parties might place the case in the ‘domestic consumer’ category; the result was a presumption that equity followed the law and that the parties were joint legal and beneficial owners. Or did the fact that the properties were bought as investments place the case in a ‘non-domestic’ category to which the presumption of resulting trust would apply ([53])?

Lord Kerr’s review of the authorities led him to reject this way of approaching the ownership question. He continued:

‘The Board considers that, save perhaps where there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one presumption over another. In this, as in so many areas of law, context counts for, if not everything, a lot. Context here is set by the parties’ common intention – or by the lack of it. If it is the unambiguous mutual wish of the parties, contributing in unequal shares to the purchase of property, that the joint beneficial ownership should reflect their joint legal ownership, then effect should be given to that wish. If, on the other hand, that is not their wish, or if they have not formed any intention as to beneficial ownership but had, for instance, accepted advice that the property be acquired in joint names, without considering or being aware of the possible consequences of that, the resulting trust solution may provide the answer.’ ([54]).

 

Further fact-finding necessary

The courts below had not considered the relevant facts in sufficient detail. For example, the significance of M’s email to the bank should have been considered at first instance. M should have been given adequate opportunity to make submissions with regard to it.

The Court of Appeal had not addressed the first instance finding that M’s evidence was to be preferred over C’s; this included his evidence as to ownership intentions and the expectation that C would make financial contributions that C had failed to make. The case had to be remitted for hearing before the Supreme Court of the Bahamas.

The court should also consider whether account should be taken of the contributions made by the parties to the costs of acquisition ‘in line with the decision in Muschinski‘ ([60]). This envisages that it might be appropriate (depending presumably on inferred intentions) to use the proceeds of sale of the property to repay the contributions made and then divide the balance between the parties in accordance with their common intention as to ownership ([39]).

Michael Lower

 

 

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