Read the full judgment text of FACV 1/2021 on BabelCite. This Court of Final Appeal judgment was delivered on 27 May 2021 before Chief Justice Cheung, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Bokhary NPJ and Mr Justice Gummow NPJ.
Equity – proprietary estoppel – oral promise relating to interest in land – detrimental reliance – timing – death of promisor – cut-off date – New Territories land – co-owners – successor's estate. The Disputed Land (Lot 1101 in DD 221) was the subject of a 'Common Understanding' among three brothers, Wan, Kau and Fuk, that D3, the eldest grandson of Wan, could use and build on it when he became an adult. D3 carried out works to the land from the 1980s as a teenager, in 1991/1992 heightened the stone walls, installed underground electricity cables and a gate, maintained the trees and storage house, and in March 1997 Wan and Kau signed a consent statement supporting his building application to the District Lands Office of Sai Kung. The last surviving brother, Wan, died in 1999; D3 erected Structures A and B in 2002/2003 and moved in with his family, having spent over HK$2 million. The trial judge accepted proprietary estoppel in D3's favour. Whether proprietary estoppel can arise from an oral promise binding on the estate of a promisor in the absence of detrimental reliance before the death of the promisor, and whether detrimental reliance only after the promisor's death can give rise to estoppel against the estate overriding beneficiaries' interests – held: no; the necessary detrimental reliance must occur before the death of the last surviving promisor; reliance only after death cannot found an equity against the estate because the promise is taken to have lapsed. Where the promise is by co-owners, the cut-off date is that of the last survivor. On the facts, D3's activities from 1992 to 1999 were sufficient detrimental reliance to complete the equity before Wan's death, and the appropriate remedy is a constructive trust by P of her 2/3 interests in the Disputed Land for D3. Co-ownership – equitable accounting – occupation rent – co-owner in sole occupation – ouster – partition – 'modern approach'. Whether a co-owner in sole occupation, in cases other than partition or ouster and in the absence of agreement, should be ordered to account to the other co-owners for occupation rent; and whether the proposition in Re Pavlou that a court of equity will order an inquiry and payment of occupation rent even without ouster when necessary to do equity between the parties should be confined to partition or analogous proceedings – held: no free-standing 'modern approach' exists. Unity of possession precludes such claims except in cases of ouster (including constructive exclusion, as in domestic violence cases), or where an operative agreement makes the occupying co-owner an agent or bailiff, or where partition or analogous proceedings have been instituted permitting equity to make adjustments by way of set-off in equitable accounting. In re Pavlou, Re Byford and French v Barcham are illustrations of equitable accounting on partition or analogous proceedings, not of a new equitable jurisdiction; the 'unreasonableness' test in French v Barcham was rightly doubted in Davis v Jackson. On the facts, the case proceeded on the basis of no ouster, no agreement, and no partition or analogous proceedings; the counterclaim by D1 and D2 for mesne profits, occupation rent and an account of rent failed, and the Court of Appeal's 'modern approach' remitter to assess rebuilding expenses was set aside. Appeal unanimously allowed; order of the Court of Appeal dated 5 March 2020 set aside; declaration that Plaintiff is estopped from denying that Third Defendant is beneficially entitled to Lot 1101 in DD221; Plaintiff to transfer her undivided 2/3 share in Lot 1101 to the Third Defendant; Plaintiff's claims against D1, D2 and D3 dismissed; counterclaim by D1 and D2 dismissed; costs submissions to be lodged within 14 days.
Legal issues: Timing of detrimental reliance in proprietary estoppel against estate of deceased promisor · Independent 'modern approach' basis for occupation rent between co-owners
Outcome: Appeal allowed; order of the Court of Appeal dated 5 March 2020 set aside; declaration made that Plaintiff is estopped from denying that the Third Defendant is beneficially entitled to Lot 1101 in DD221; Plaintiff to transfer her undivided 2/3 share in Lot 1101 to the Third Defendant; Plaintiff's claims against D1, D2 and D3 dismissed; counterclaim by D1 and D2 against Plaintiff dismissed; costs submissions to be lodged.
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