Wong Chim Ying v. Cheng Kam Wing

CACV000075/1990

Hong Kong Conveyancing Practice: Constructive Notice

Sale of domestic premises by vendor spouse holding legal title where both spouses in joint occupation: purchaser having Knowledge, before completion, of non-vendor spouse's actual occupation: duty to enquire regarding that spouses rights in the premises: such rights protected by the equitable doctrine of constructive notice : Williams & Glyn's Bank Ltd. v. Boland [1981] AC 487 (H.L.) applied.

BETWEEN

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Coram: Hon. Clough, Penlington, JJ.A. & Mayo, J.

Date of hearing: 5-8 February & 19-21 March of 1991

Date of handing down of judgment: 18 April 1991

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JUDGMENT

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Clough, J.A.:

1. This is the judgment of the court.

2. This appeal raises questions concerning the beneficial ownership of a matrimonial home, namely Flat A on the 4th Floor at No, 50 Kai Tak Road, Kowloon, and also the important question, for Hong Kong conveyancers, whether (as the learned judge held) the reasoning leading to the decision of the House of Lords in Williams & Glyn's Bank Ltd. v. Boland [1981] AC 487 requires this court to hold that a purchaser of a domestic property from one of two jointly resident spouses who is the registered absolute legal owner takes the property subject to the beneficial interest therein of the other spouse in circumstances where the purchaser had actual notice before assignment (and before contract) of the fact that the other spouse was resident in the property, but made no inquiry regarding the rights of that spouse in the property.

3. The plaintiff, Wong Chim-ying, who purchased the flat in question from Cheung Sim-chun ("the wife") appeals from the order of Godfrey J. declaring that the premises are held by the plaintiff on trust for the defendant Cheng Kam-wing, the wife's husband ("the husband") and requiring the plaintiff to transfer the premises to the husband. The flat was purchased in 1973 in the name of the wife and was the home of the wife and husband, and their two sons (born on the 7th December 1969 and the 22nd January 1972 respectively) until 1988 when the wife purported to sell it to the plaintiff without the knowledge or consent of the husband who has at all material times remained in occupation with the two sons.

4. The wife contrived to obtain payment of most of the purchase price of $305,000 from the plaintiff by persuading the latter to agree to allow the wife to remain in possession of the flat for two months (at a "licence fee" of $2,500 per month) after completion of the purported sale in order to give her time to find alternative accommodation for herself and her family. In fact the wife absconded two days after executing an assignment of the flat in favour of the plaintiff on the 11th May 1988 and obtaining payment of $300,000 of the purchase price from the plaintiff. When the plaintiff, acting by her daughter Yuen Pui-ying ("Miss Yuen") sought vacant possession of the flat on the 10th July 1988 the husband refused to give it.

5. The plaintiff brought proceedings, initially and unsuccessfully under Order 113 and Order 14 to obtain possession of the flat from the husband. Eventually the matter went to trial before Godfrey J. on pleadings in which the plaintiff claimed possession of the flat and damages against the husband as the registered owner and the husband counterclaimed for inter alia the relief which the judge eventually granted him on the basis that he was entitled to the entire beneficial interest in the flat because he had contributed the purchase price of the flat and had not, by so doing, intended to advance the wife. Evidence having been given by Miss Yuen (who had negotiated the transaction with the wife on the plaintiff's behalf) that the wife had told her on the 28th April 1988 (before execution of the preliminary agreement for sale and purchase on the 30th April) and again on the 2nd May (before execution of` the formal agreement for sale and purchase on the 3rd May) that the husband was living in the flat, the judge concluded that the plaintiff, who had made no inquiry concerning the husband's rights (if any) in the flat, had had constructive notice of his beneficial ownership and therefore took the property subject to his rights. An argument that the husband was estopped from asserting his rights against the plaintiff was rejected by the judge. The occasions upon which the plaintiff had thus acquired notice, through Miss Yuen, of the husband's residence in the flat had not been particularised in the husband's Defence, but on appeal leave to make the appropriate amendments was formally granted unopposed.

6. On appeal the plaintiff seeks to set aside the judge's order and to obtain an order for possession of the flat and the dismissal of the husband's counterclaim. In the alternative the plaintiff seeks a declaration that she holds the flat on trust for herself and the husband in equal shares or in such proportion as the court may determine. On behalf of the plaintiff it is contended in substance that the judge had erred by:

7. There are no local statutory provisions in Hong Kong which directly govern these issues and the court has to consider them in accordance with the relevant English common law and rules of equity, subject to the qualifications contained in section 3 of the Application of English Law Ordinance (Cap. 88) which provides as follows :

"3.    (1)     The common law and the rules of equity shall be in force in Hong Kong -

(2)     The common law and the rules of equity shall be in force in Hong Kong as provided in subsection (1) notwithstanding any amendment thereof as part of the law of England made at any time by an Order in Council or Act which does not apply to Hong Kong."

It was not suggested that in the present appeal this court should regard any of the relevant principles of common law or rules of equity (unamended by English legislation not applicable in Hong Kong) as inapplicable to the issues arising, or as requiring modification to allow for local circumstances, save that it was contended by Mr. Edward Chan on behalf of the plaintiff that, there being no registration of title in Hong Kong, there could be no justification for applying here (with specific reference to Boland) the "concept and practice required in registered land in England."

(1)    The husband's beneficial interest in the flat

8. In his defence the husband pleaded inter alia that since the marriage of the husband and wife in 1969 the wife had been a housewife and had no independent source of income. It was alleged that the flat had been registered in the wife's name purely for convenience as the husband had to work as a public light bus driver during the day and had to leave the conveyancing matters for the wife to attend to. It was further pleaded that it had been agreed between the husband and the wife that the wife only should be registered as the owner of the flat so as to dispense with the trouble of summoning the husband to sign documents and comply with formalities.

9. The only evidence of the circumstances under which the flat had been acquired was that of the husband, supported by documents, which included a copy of his relevant savings Bank statements and a Land Office search indicating that the flat had been assigned to the wife on the 1st June 1973 for a consideration of $45,000. The judge, who had seen and heard him examined, cross-examined and re-examined at some length thought the husband a truthful witness and made the following findings of fact:

10. The judge then stated his conclusions regarding the extent of the husband's contribution to the price of the flat. He indicated that it was "clear beyond argument that the husband has a beneficial interest in the flat"adding "perhaps the entire beneficial interest". Later on in his judgment he said:

"Given that the husband made a contribution to the purchase of the flat, it is clear that he had a beneficial interest commensurate with the amount of money which he put in, If he paid, as I find that he did, the entire purchase price, then the entire beneficial interest belongs to him."

Towards the end of his judgment the judge again introduced a note of uncertainty by saying:

"Since the husband has a beneficial interest in the flat, and perhaps the entire beneficial interest, it follows that he has a right to continue in occupation of the flat;"

11. The use of the equivocal word "perhaps" in the two passages cited above has understandably resulted in the contention on behalf of the plaintiff that the judge did not apply his mind seriously to the question whether the husband had the whole beneficial interest in the flat. We accept that the judgment can be rightly criticised for its indecisive language in the two passages cited above. However the judgment was extempore and the judge was concerned inter alia not only with the quantification of the husband's contribution to the purchase price, but also with the question of the husband's entitlement (albeit not specifically raised in his counterclaim) to possession of the property by virtue of the resulting trust arising from any contribution by him to the purchase price, whatever the amount. These two questions seem to have become confused in the judgment, but we consider that the inescapable conclusion must be that the order made by the judge can only have been intended to be to give effect to the passage in his judgment where he unequivocally held that the husband had contributed the entire purchase price.

12. The judge did not embark on a detailed consideration of the husband's evidence in support of his claim to have provided the entire purchase price for the flat. Mr. Chan for the plaintiff contended that the judge's acceptance of this claim was not warranted by the evidence adduced, at least as to the difference ($19,500) between the purchase price of $45,000 and the amount of $25,500 which was traceable to the husband's Savings Bank account.

13. Initially Mr. Chan mistakenly (as he acknowledged) based the first part of his argument on the footing that the assignment of the flat to the wife had been effected in 1972. On this basis he contended that when the assignment was executed the position was that the wife had a beneficial interest in the flat because $19,500 of the purchase price had been provided by the wife from loans raised by her. These loans could not, it was contended, have been obtained by the wife as the husband's agent as his evidence had been that he did not know the identity of the lenders or the terms of the loans. It was contended that even if the wife had used the husband's money to repay the loans, the effect of section 5(1) of the Conveyancing Ordinance (Cap. 219) was that there could not thereby be a transfer of the wife's beneficial interest in the flat.

14. It was also contended by Mr. Chan that, the husband's evidence having been that the loans were repaid in about 7 months and that he had given his wife about $100-$120 per day, (to use the words of Mr. Chan's written submissions) "it was unlikely that the repayment of the loan in 1972 within a few months would be out of money he gave to his wife". Mr. Chan also argued that the more realistic view was that the money given daily by the husband to the wife was "legally and beneficially gifted to the wife who was expected to use it for the benefit of the household" and that even if the money was to be taken as trust money for the benefit of the household the wife must have had a beneficial interest in it.

15. These arguments were substantially destroyed by the fact, as Mr. Andrew Li for the husband emphasised, that the flat was not assigned to the wife until the 1st June 1973. The delay in completion was due to the fact that when the husband first saw the property in March 1972 the premises were still under construction. There was therefore a period of more than a year which was ample, on the evidence of the husband's earnings and daily payments to the wife, to have enabled the loans, even if they had amounted to as much as $19,500, to have been applied towards the original purchase price of the flat and repaid by the husband through the wife before the execution of the assignment to the wife.

16. The crucial question regarding the loans was the capacity of the wife in obtaining, applying and repaying the loans. The husband's evidence had been that the wife had "no money" and did not work during the marriage. It was not disputed on appeal that he had drawn $25,500 from his Savings Bank account on the 16th March 1972 and paid it into the wife's bank account to facilitate the purchase of the flat. He said that he had paid a deposit of $3,000 towards the purchase price on the day he saw the premises which was, he said, about a week or so after he withdrew the $25,500. In this connection his Savings Bank account shows a withdrawal of $3,000 as having been made on the 4th April 1972. It seems likely therefore, making due allowance for the effect of lapse of time on the husband's recollection of the precise date of the relevant events, that the balance of the purchase price outstanding was not more than $16,500.

17. The husband, who was believed by the judge, said that he had had the ability to pay, for the flat and that he had done so. His explanation for the loans obtained by the wife was that he had intended to raise an instalment mortgage from a bank, but the wife had said the balance of the purchase price was just a small sum and that she would assume responsibility for borrowing the money "whereas I would be responsible for payments". The husband had accepted this suggestion of the wife and, whilst he had been indifferent to and ignorant of the identity of the lenders and the terms of the loans, his evidence was that he had provided the means of repayment by his daily payments to his wife.

18. We accept Mr. Li's submission that the judge was entitled to infer from the evidence of the husband that he had in truth and in fact provided the whole purchase price for the flat because the wife was nothing more than a conduit for the husband in raising the loans, applying them towards the purchase price and repaying them to the lenders. We agree with Mr. Li' that this is the substance of the matter and that it is neither necessary nor appropriate to determine whether, on strict analysis, the legal relationship of agency was created between the husband and the wife.

19. We mention that the appeal bundle in this case included a copy of the affirmation made by the husband and filed on the 19th July 1989 in opposition to the Order 14 application in these proceedings. He affirmed there inter alia that, in addition to the $25,500 paid by him towards the purchase price of the flat, another $10,000 odd came from cash savings kept at home, and that there was a shortfall of about $7,000 which the wife said could be borrowed from relatives. This evidence was not admissible at the trial. It appears from the record of the husband's evidence in chief that his counsel endeavoured to get him to repeat his earlier affirmation evidence about his savings but he was not successful. Counsel for the plaintiff, who must have been aware of the husband's previous evidence, did not raise the matter in cross-examination. Indeed he was not obliged to do so. The affirmation evidence of the husband was clearly inconsistent with his oral evidence at the trial but, as Mr. Li submitted, he might well have been able to give a reasonable explanation for the inconsistency if the affirmation had been put to him during the trial. In the event it was not put to him, but we do not regard it as casting any real doubt on the judge's assessment of his credibility (as distinct from his powers of recollection) or on his evidence that he provided all the purchase money for the flat. Although the two versions of his evidence differ they are both to the same ultimate effect.

(2)    The presumption of advancement

20. The judge had no difficulty in holding that the presumption of advancement had been rebutted in this case so that the presumption of resulting trust operated in favour of the husband whom he had found to have provided all the purchase money for the flat. He disposed of this issue very shortly in the following terms:

"I accept his evidence about the original purchase and I reject the suggestion that he bought the property with the intention of advancing the wife. I hold that the property was placed in her name for convenience only. The central question in the case, then, is whether the plaintiff took the flat free from the husband's beneficial interest, as she claims, or subject to it."

21. For the plaintiff Mr. Chan emphasised that although the presumption of advancement is weakened in modern times, it is still applicable. There was, he contended, no evidence that the husband did not intend the wife to be the beneficial owner of the flat, particularly as he had given her the money with which to buy the flat at a time when his mother in law wanted them out of her home. The husband's explanation of convenience did not, it was contended, show that he intended the flat to be his, it was neutral and equally consistent with the intention of the husband to make a gift to the wife, particularly as she was a non-working wife completely dependent upon the husband as wives had usually been in the past when the presumption of advancement had been stronger.

22. We are unable to accept this argument. The husband was never in terms asked what his intentions were at the time the flat was acquired but we agree with the judge's conclusion that the surrounding circumstances indicate that his sole reason for allowing the property to be vested in the wife as registered owner was one of convenience. It was left to the wife to see if a flat could be bought because the husband was at work all day. It was for this purpose that he transferred $25,500 into her bank account. His reason for telling his wife to go to the solicitor's office to deal with the formalities was that "I was not free. She should go." He left the documents of title and "application for utilities" to her also. She looked after the household. We can discern nothing in the surrounding circumstances of the transaction which raises the reasonable inference that this public light bus driver of limited means should have intended that the beneficial interest in his only asset of any substance, which he was constrained to acquire in order to house his family, should become wholly or partially the property of his wife by way of gift, or that he paid his money to her with the intention that she should purchase the flat for herself.

23. Convenience is not a neutral factor in the present context. We agree with Mr. Li's submission that it is positive evidence that the husband did not intend a gift to the wife: c.f. marshall v. Crutwell (1875) L.R. 20 Eq. 328 and see Snell, 29th edition at p.182. Moreover the asset acquired in this case was an unchanging one (the beneficial ownership in which is to be ascertained at the date of acquisition) and not one like the joint bank account of a husband and wife under consideration by Megarry J. in In re Figgis [1969]1 Ch 123 at p.145 which fluctuates from day to day and whose character can be subject to change in accordance with changes in the intention of the husband.

(3)    Constructive Notice

24. Miss Yuen, who negotiated the purported sale on behalf of the plaintiff, never encountered the husband in the flat until she tried unsuccessfully to obtain possession on the 10th July 1988. She inspected the flat on the 28th April 1988 together with the agent, Mr. Lee, prior to the making of any contract. On this occasion the wife told Miss Yuen that the wife and the husband used the main bedroom and the second bedroom was used by her two sons. The wife told Miss Yuen that she was looking for alternative accommodation and that that would take two months. On the 2nd May 1988, which was the day before the wife and the plaintiff signed the formal sale and purchase agreement, Miss Yuen went to the flat again to discuss what furniture she might want left after the sale. Miss Yuen'.s evidence was that on this occasion she asked the wife again if she was living with her husband at the flat and the wife confirmed that she was living with her husband and two sons.

25. Godfrey J. was firmly, and, in our opinion, rightly of the view that in such circumstances the plaintiff, who made no inquiries of the husband (or the wife) regarding the rights of the husband in the flat, was to be regarded as having constructive notice, through her agent Miss Yuen, of those rights. The judge put the matter thus:

26. The Judge could find no support for the plaintiff's arguments in Bailey v. Barnes [1894]1 Ch 25; the judgment of Farwell J. at first instance in Hunt v. Luck [1901]1 Ch 45 or National Provincial Bank Ltd. v. Ainsworth [1965] AC 1175 (H.L.). After a citation from Barnhart v. Greenshields (1853)9 Moo. P.C. 18, to which we will return later, he said:

"So far as the husband in the present case is concerned, he was in actual occupation of the flat, albeit an occupation shared with the wife; and the plaintiff must be taken to have been aware of that occupation since the plaintiff's daughter had been told of it by the wife. If any extension of the doctrine of constructive notice is involved in this case, it is an extension which is justified and indeed dictated by the decision in the Boland case. It may be that there is room for two views as to whether the House of Lords in that case should have so extended the doctrine of constructive notice, if that is indeed what it did. But the Boland case has, in effect, pre-empted any decision of this court upon the point. The decision of the House of Lords in Boland is, strictly speaking, of persuasive authority only in Hong Kong; but it is now well established that unless there is a very special reason for a Hong Kong court to differ on a point of law from views expressed in the House of Lords, it is the duty of the court in Hong Kong to follow the English decision."

27. The judge disposed finally of the constructive notice issue by saying:

"         In the present case, no inquiry of the husband was made at all, no doubt the plaintiff's daughter was satisfied, quite understandably, with the assertion of the wife that the family was looking for bigger accommodation. She should have made such inquiry and because she did not, the plaintiff took the property subject to the husband's rights."

28. This decision on the constructive notice issue by a judge who is versed in this field of the law (and who was junior counsel for the plaintiff in Hodgson v. Marks [1971] Ch 892) seems to us to be impeccable and consistent not only with the views of the Commissioners who prepared the 1982 Law Commission report (Law Com. No. 115) (Cmnd. 8636) on the implications of the Boland case, but also of the editors of Megarry and Wade on the Law of Real Property, 5th edition, at pp.149/50 and of the editors of the recent edition of Snell's Equity, 29th edition, at pp.54-55.

29. We nevertheless had the benefit of elaborate and able argument by leading counsel on both sides on this issue. We intend no disrespect to these arguments by declining to deal with them all in detail, because it seems to us that the substance of the issue between the parties can be disposed of without travelling down the byways of much of the argument. Mr. Chan for the plaintiff relied on the authorities indicating that the doctrine of constructive notice is not to be extended and that, as a matter of principle, unless there are special circumstances a purchaser should not be fixed with constructive notice of claims by a person in occupation of the land where such occupation (as in the case of a husband or wife of the owner or a member of his or her family or household) is wholly consistent with the title offered by the vendor.

30. This argument adopts Caunce v. Caunce [1969]1 WLR 286 as good law on constructive notice in relation to unregistered land in England and to land in Hong Kong. It rejects principles derived from cases on registered land in England as being not applicable to unregistered land there, or to land in Hong Kong where there is no registration of title. Mr. Chan conceded that the decision of the House of Lords in Boland decided, for the purposes of section 70(1) (g) of the Land Registration Act 1925, that where spouses resided jointly in the some property they were both in "actual occupation" of that property, and that it was not right to say that a person was in actual occupation of the land only if (1) the vendor was not at the same time in occupation or (2) the occupation of the occupant was inconsistent with that of the vendor. Mr. Chan further conceded, rightly in our opinion, that to the extent that Caunce v. Caunce and Bird v. Syme-Thomson [1979] 1 WLR 440 decided to the contrary, those decisions had, to that extent, been overruled.

31. However, Mr. Chan went on to rely on the undoubtedly correct proposition that section 70(1)(g) does not depend on the common law doctrine of constructive notice developed in relation to unregistered land. In relation to registered land it was the fact of occupation which mattered, so that if there was actual occupation, and the occupier had rights, the purchaser took subject to them (see Boland per Lord Wilberforce at p.504 E-F and per Lord Scarman at p.511 E-F) save where such rights were not disclosed on enquiry of such occupier. This was not the position in relation to unregistered land in England or land in Hong Kong, Mr. Chan argued, and the judge was wrong in holding that the principle of Boland should be extended to unregistered land in Hong Kong.

32. We emphasise that in the present case the facts were that the purchaser, through her agent Miss Yuen, had actual notice that the husband was residing in the flat jointly with the wife (and two sons). The crucial question seems to us therefore to be whether in the case of unregistered land in England (or band in Hong Kong) a husband's joint occupation of property held in the vendor wife's name is to be treated, for the purposes of the doctrine of constructive notice, as no different from that of a stranger to the wife or whether, as Stamp J. held in Caunce v. Caunce (in relation to a wife), the husband is to be regarded as not in apparent occupation or possession of the property because his presence is wholly consistent with the title offered by the wife to a purchaser.

33. We regard that question as crucial because, as Godfrey J. indicated in his judgment, the principle of English law is that (subject to requirements of registration) notice of occupation is notice of the occupier's rights. The application of the doctrine of constructive notice for the protection of the person in possession of land by actual occupation was clearly recognised by Lord Kingsdown (then Mr. Pemberton Leigh) when, delivering the judgment of the Privy Council in Barnhart v. Greenshields (1853) 9 Moo. P.C. 18, he observed at pp.32-4 (emphasis supplied):

34. This statement of the law (together with Lord Kingsdown's subsequent dictum in the same judgment, which Farwell J. followed, to the effect that there was no authority for the proposition that notice of a tenancy is notice of the title of the lessor) was cited by Farwell J. in Hunt v. Luck [1901]1 Ch 45 at pp.49-50. Farwell J. observed that he regarded the statement in question as "an authoritative and correct statement of the law as it was then, and as I understand it is still."

35. It is well settled that section 3 of the Conveyancing Act 1882 did no more than state the law as it was before but indicated that a restriction rather than an extension of the doctrine of constructive notice was intended: Bailey v. Barnes [1894]1 Ch 25 (C.A.) per Lindley L.J. at p.35, Subsections (1) and (3) of the 1882 Act provided:

"3.    (1)     A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing unless -

(3)     A purchaser shall not by reason of anything in this section be affected by notice in any case where he would not have been so affected if this section had not been enacted."

36. These provisions are now reproduced in section 199(1) (ii) and (3) of the Law of Property Act 1925. The introduction, in section 199(1) (i) of that Act, of provisions regarding any instrument or matter capable of registration under the Land Charges Act 1925 does not affect the issues arising in the present case. As the relevant statutory provisions contained in s.3(1) of the 1882 Act and s.199(1)(ii) have merely codified and not changed the material previous law the English authorities subsequent to 1882 are relevant and the development of the English law of constructive notice is material in Hong Kong for the purposes of section 3 of the Application of English Law Ordinance, subject to the provisions of section 3(1) (a) and (b).

37. In this connection section 14 of the law of Property Act 1925 (which provides that Part I of the Act "shall not prejudicially affect the interest of any person in possession or in actual occupation of land to which he may be entitled in right of such possession or occupation") does not impinge upon the doctrine of constructive notice in its application to unregistered land under section 199 of the Act because section 14 does not "enlarge or add to whatever interest it is that the occupant has 'in right of his occupation'": City of London v. Flegg [1988] AC 54 (H.L.) per Lord Oliver at p.80E, also approving, at p.80F-G, the notes on section 14 in Wolstenbolme and Cherry's Conveyancing Statutes, 13th edition (1972), vol. 1, p.69 indicating that section 14 "was designed to preserve the principle [exemplified by Hunt v. Luck [1902] 1 Ch 428] that a purchaser will have constructive notice of any rights reasonably discoverable from inspection of the property and, in particular, from inquiry of any occupier as to his interest and the terms on which he holds it."

38. The progressive improvement of the standing, financial and otherwise, of women in modern English society has led to significant developments in English law for their benefit in relation to the matrimonial home : see the succinct historical consideration of these developments by Lord Denning in the Boland case in the Court of Appeal: [1979] Ch 312 at pp 328 and 329 under the headings "Deserted wives" and "The wife's share".

39. However, as Stamp J. indicates in Caunce v. Caunce (decided on the 5th December 1968) at p.294 it had never prior to that case been suggested in textbooks or judicial utterances that, where one found a vendor and his wife living together on the property, a prudent solicitor acting for the purchaser ought to enquire of the wife whether she claimed an interest in the house. Stating the law relating to constructive notice and applicable to unregistered land as codified in section 199 of the Law of Property Act 1925 (which was designed not to extend but to limit the doctrine) Stamp J. observes at p.293C:

40. Substantial inroads were made into this reasoning in 1971 by the Court of Appeal in Hodgson v. Marks [1971] Ch. 892. In that case the joint occupiers were not husband and wife (they were the original owner and her lodger) and the property was registered land. The court was concerned inter alia with the question whether the plaintiff's equitable interest in the property was an overriding interest to which a mortgagee's interest in the property was subject under section 70(1)(g) of the Land Registration Act 1925 which provides that:

"(1)    All registered land shall, .... be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, ... (g) The rights or every person in actual occupation of the land or in receipt 'of the rents and profits thereof, save where inquiry is made of such person and the rights are not disclosed,....". (emphasis supplied).

41. When considering the meaning of the words "in actual occupation" in this provision Russell L.J., delivering the judgment of the court (which included Buckley and Cairns L.JJ.) expressed views bearing upon the principles of constructive notice, in relation to the rights of a person jointly in occupation with the vendor of unregistered land, which were at variance with the views expressed by Stamp J. in Caunce v. Caunce. Russell L.J. observed at p.931F-G:

42. Russell L.J. did not go so far as to disapprove of the actual decision in Caunce v. Caunce regarding the rights of the wife in joint occupation with her owner husband. He said at p.934H:

"         I would only add that I do not consider it necessary to this decision to pronounce on the decision in Caunce v. Caunce [1969]1 W.LR. 286. In that case the occupation of the wife may have been rightly taken to be not her occupation but that of her husband. In so far, however, as some phrases in the judgment might appear to lay down a general proposition that inquiry need not be made of any person on the premises if the proposed vendor himself appears to be in occupation, I would not accept them."

43. The question of the rights of a wife jointly occupying the matrimonial home (being registered land) with her owner husband was subsequently considered by Templeman J, (as he then was) in Bird v. Syme-Thomson in 1978. In that case the judge applied Caunce v. Caunce. He concluded at p.444A-D:

44. We have dwelt at some length on the reasoning contained in Barnhart v. Greenshields, Caunce v. Caunce, Hodgson v. Marks and Bird v. Syme-Thomson because it seems to us that it is helpful to do so in order to appreciate the full implication, in relation to unregistered land in England (and to land in Hong Kong), of the reasoning behind the decision of the House of Lords in Boland concerning the nature of "actual occupation" for the purposes of section 70(1)(g) of the Land Registration Act 1925 and the character of the joint occupation of property by a wife (who has a beneficial interest in the property) together with her husband who has the legal title to the property.

45. The two consolidated appeals in Boland were both concerned with the question (see per Lord Wlilberforce at p.502D-E) whether a wife "who has a beneficial interest in the matrimonial home, by virtue of having contributed to its purchase price, but whose spouse is the legal and registered owner, has an 'overriding interest' binding on a mortgagee who claims possession of the matrimonial home under a mortgage granted by that spouse alone". Lord Wilberforce made it clear that exactly the same issue could arise if the roles of husband and wife were reversed, or if the persons interested in the house were not married to each other.

46. Templeman J, (as he then was) had decided the first of the cases consolidated on appeal in favour of the mortgagee. In the second case (Brown) Where the same mortgagee bank was involved, a county court judge had applied the decision in the first case. The Court of Appeal has reversed both decisions.

47. When dealing with the first question, namely whether the wives were in "actual occupation" for the purposes of section 70(1) (g), Lord wilberforce (with whose speech Viscount Dilhorne, and Lords Salmon and Roskill concurred, Lord Scarman concurring in the decision but on more limited grounds) referred to the historical origins of those words (which he equated with "physical presence"), observing at p.504F:

"         These words are ordinary words of plain English, and should, in my opinion, be interpreted as such. Historically they appear to have emerged in the judgment of Lord Loughborough L.C. in Taylor v, Stibbert (1794)2 Ves. Jun. 437, 439-440, in a passage which repays quotation:

'.... whoever purchases an estate from the owner, knowing it to be in possession of tenants, is bound to inquire into the estates, those tenants have. It has been determined, that a purchaser being told, particular parts of the estate were in possession of a tenant, without any information as to his interest, and taking it for granted it was only from year to year, was bound by a lease, that tenant had, which was a surprise upon him. That was rightly determined; for it was sufficient to put the purchaser upon inquiry, that he was informed, the estate was not in the actual possession of the person, with whom he contracted; that he could not transfer the ownership and possession at the same time, that there were interests, as to the extent and terms of which it was his duty to inquire.

They were taken up in the judgment of the Privy Council in Barnhart v. Greenshields (1853)9 Moo, P.C. 18. The purpose for which they were used, in that case, was evidently to distinguish the case of a person who was in some kind of legal possession, as by receipt of the rents and profits, from that of a person actually in occupation as tenant. Given occupation, i.e., presence on the land, I do not think that the word 'actual' was intended to introduce any additional qualification, certainly not to suggest that possession must be 'adverse': it merely emphasises that what is required is physical presence, not some entitlement in law. So even if it were necessary to look behind these plain words into history, I would find no reason for denying them their plain meaning."

48. Lord Wilberforce could see no reason why the wives were not in actual occupation. As he put it at p.505C-D:

"         There was physical presence, with all the rights that occupiers have, including the right to exclude all others except those having similar rights. The house was a matrimonial home, intended to be occupied, and in fact occupied by both spouses, both of whom have an interest in it: it would require some special doctrine of law to avoid the result that each is in occupation."

49. He then addressed three arguments which had been advanced in support of a contrary conclusion. The first was the contention that section 70 (1) (g) did not apply where a vendor or mortgagor was in occupation. In rejecting this argument Lord Wilberforce expressly disapproved what was said on this question in Caunce v. Caunce and approved the views of Russell L.J. in Hodgson v. Marks. He said at p.505E:

"         But the presence of the vendor, with occupation, does not exclude the possibility of occupation of others. There are observations which suggest the contrary in the unregistered land case of Caunce v. Caunce [1969]1 W.L.R. 286, but I agree with the disapproval of these, and with the assertion of the proposition I have just stated by Russell L.J. in Hodgson v. Marks. [1971] Ch. 892, 934."

50. The second argument, based on Caunce v. Caunce and Bird v. Syme-Thomson, to the effect that the wives had merely occupied in the shadow of their husbands' occupation had evidently not been pressed. It was rejected in the following passage at p.505F:

"         Then it was suggested that the wife's occupation was nothing but the shadow of the husband's - a version I suppose of the doctrine of unity of husband and wife.  This expression and the argument flowing from it was used by Templeman J in Bird v. Syme-Thomson [1979] 1 W.L.R. 440, 444, a decision preceding and which he followed in the present case. The argument was also inherent in the judgment in Caunce v. Caunce [1969]1 W.L.R. 286 which influenced the decisions of Templeman J. It somewhat faded from the arguments in the present case and appears to me to be heavily obsolete."

51. The third and evidently the main argument on behalf of the mortgagee bank was the contention (a similar contention was advanced by Mr. Chan in the present case) that to come within section 70(1) (g) the occupation must be apparently inconsistent with the vendor's title. Lord Wilberforce dismissed this argument, (which seems to have its origins in the dictum of Stamp J. in Caunce v. Caunce cited above) in the following passage of his speech at p.505G:

"         The appellant's main and final position became in the end this: that, to come within the paragraph, the occupation in question must be apparently inconsistent with the title of the vendor. This, it was suggested, would exclude the wife of a husband-vendor because her apparent occupation would be satisfactorily accounted for by his. But, apart from the rewriting of the paragraph which this would involve, the suggestion is unacceptable. Consistency, or inconsistency, involves the absence, or presence, of an independent right to occupy, though I must observe that 'inconsistency' in this context is an inappropriate word. But now can either quality be predicate of a wife, simply qua wife? A wife may, and everyone knows this, have rights of her own; particularly, many wives have a share in a matrimonial home. How can it be said that the presence of a wife in the house, as occupier, is consistent or inconsistent with the husband's rights until one knows what rights she has? And if she has rights, why, just because she is a wife (or in the converse case, just bacause an occupier is the husband), should these rights be denied protection under the paragraph? If one looks beyond the case of husband and wife, the difficulty of all these arguments stands out if one considers the case of a man living with a mistress, or of a man and a woman - or for that matter two persons of the same sex - living in a house in separate or partially shared rooms. Are these cases of apparently consistent occupation, so that the rights of the other person (other than the vendor) can be disregarded? The only solution which is consistent with the Act (section 70(1) (g) and with common sense is to read the paragraph for  what it says. Occupation, existing as a fact, may protect rights if the person in occupation has rights."

52. At the end of his speech Lord Wilberforce considered the objections which had been raised to the difficulties which it was said would arise in registered land conveyancing if a decision were to be made in favour of the wives. He dealt with these objections thus at p.508F:

53. Although Boland was a decision relating to registered land and the question there decided which is material to this case concerned the meaning of "actual occupation" in section 70(1) (g) of the Land Registration Act 1925, it seems to us that its effect on the doctrine of constructive notice as applied under s.199 of the Law of Property Act 1925 in relation to unregistered land in England is manifest because, as Mr. Finlay Q.C. (an experienced property lawyer) observed when sitting as deputy judge of the High Court in Kingsnorth Finance Co. Ltd. v. Tizard [1986]1 W.L.R. 783 at p.787, (a case relating to unregistered land), before citing tae passages at pp.505-6 in Lord wilberforce's speech cited above in this judgment, "the decision illuminates the manner in which the presence of a wife in the matrimonial home is to be regarded."

54. The deputy judge went on at p.788 to apply Lord Wilberforce's "physical presence" test and held that the wife in that case was in occupation of the property in question notwithstanding that her husband was living there also. The case raised a number of evidential difficulties in circumstances, distinguishable from the facts of this case, where the mortgagee's agents did not actually discover that the wife was in occupation of the property but were held on the facts to have had constructive notice of the wife's rights in the property for the purposes of section 199 (1)(ii)(b) of the Law of Property Act 1925. However it is clear from the passage in his judgment to which we have already referred and from p.793H to p.794A that the deputy judge was applying Boland and Hodgson v. Marks and not Caunce v. Caunce when considering whether the wife had been in occupation for the purposes of putting the mortgagees and their agents on inquiry.

55. We entertain no doubt that the reasoning adopted in Boland (applying Hodgson v. Marks) in relation to "actual occupation", in accordance with the interpretation of those words as ordinary words of plain English, must now be applied when considering whether a spouse is in occupation of unregistered land in England, so as to put a purchaser with knowledge of that fact upon inquiry for the purposes of section 199 of the Law of Property Act 1925.  Accordingly if there is joint occupation by the spouses it matters not for these purposes, and there can be no question of regarding the spouse (or other relative) who is not the vendor with the legal title as occupying in the shadow of or consistently with the interest of the spouse who is such vendor.

56. No authority since Boland has been cited to the contrary and we respectfully agree with the statement of the law by the editor of Shell at p,54 where it is asserted that

"         Despite earlier rulings to the contrary (Caunce v. Caunce [1969] 1 WLR 286; Bird v. Syme-Thomson [1979]1 WLR 440), and subject to the statutory provisions about overreaching (City of London B.S. v. Flegg [1988]AC 54), it is now settled that if the land is occupied by a person jointly with the vendor, usually his wife or other relative, this occupation will be constructive notice of any rights stemming from a contribution to the purchase price (Kingsnorth Finance Co. Ltd. v. Tizard [1986]1 WLR 783, applying Williams and Glyn's Bank Ltd. v. Boland [1981]AC 487 at 505 .....; Hodgson v. Marks [1971] Ch 892 at 934."

57. In the present case where the plaintiff, by her agent Miss Yuen, inspected the flat and actually discovered from the wife that the husband was in occupation with the wife and their two sons, but no inquiry was made of the husband at all, there can in our opinion be no question but that, applying the relevant law applicable to English unregistered land (both before 1882 and as subsequently enacted without material amendment by section 3 of the Conveyancing Act 1882 arid section 199 of the Law of Property wet 1925) the plaintiff was fixed with constructive notice of the husbands rights in the flat. Furthermore we are in no doubt that if inquiry had been made of the husband whether he claimed any interest in the flat, his claim to the entire beneficial ownership would have been discovered immediately.

58. There can be no substance in the contention that the plaintiff was entitled to rely on the apparently reasonable and honest reasons (namely the need of the family to find more suitable accommodation) put forward by the wife to Miss Yuen for the sale of the flat. The purchasers inquiry must ultimately be addressed to the person in occupation and, as Russell L.J observed in Hodgson v. Marks at p.931 (cited above) "Reliance upon the untrue ipse dixit of the vendor will not suffice".

59. We were pressed, as was Godfrey J., with arguments based on National Provincial Bank Ltd. v. Ainsworth [1965] AC 1175 (H.L.) but we derive no assistance from that case which was concerned with the fatally nebulous rights formerly claimed for the deserted spouse in the matrimonial home and not a claim, by a spouse as in the present case, to a recognised beneficial interest in land based on resulting trust. This important distinguishing factor was, as Mr. Li pointed out in argument, identified by Ormrod L. J. at the beginning of his judgment in Boland (1979) Ch 312 at p.333.

60. In this connection Mr. Chan also relied on the decision of Garcia J. in Chartered Bank v. Wong [1987] HKLR 844. That case was concerned inter alia with the question whether a mortgagee's right to possession of the mortgagor's flat was subject to the contractual licence (declared by Hunter J. in other proceedings) of the mortgagor's former mistress (who was in occupation) to occupy that flat with her two children. Garcia J. formed the view that the right of the mistress to occupy the flat was merely contractual and could not have given rise to a trust in her favour. On this basis the interest under the licence was not an interest in the land. Garcia J.'s view has been confirmed by Ashburn Anstalt v. Arnold [1989] Ch 1.

61. However Garcia J. went on to consider the matter further on the footing that at the highest the licence would only avail against a purchaser for value with notice. He assumed, by reference to Midland Bank Ltd. v. Farmpride Hatcheries Ltd. (1981) 260 E.G. 493 (C.A.), that constructive notice of the licence to the mortgagee would have sufficed. On this basis he accepted an argument against constructive notice based on National Provincial Bank Ltd. v. Ainsworth. The mistress had represented herself to the mortgagor's representative as the mortgagor's wife. The judge concluded at p.853G that in the context of Hong Kong society "and anywhere else for that matter" the difficulties which mortgagees would face when inquiring into the affairs of men and their mistresses would not easily be overcome since the inquiries would entail offence and embarrassment. This would do little or no good for the business of banking in Hong Kong, the consequences of which might seriously affect the economic welfare of the business community here. He considered that the same considerations as were applied in the Ainsworth case by the House of Lords applied with equal or even greater force to such rights as may arise on the termination of an association between a man and his mistress. He accordingly held that the only notice which could have bound the mortgagee was actual notice either communicated to the mortgagee by the mortgagor or by entry of the beneficial interest in the Land Register.

62. It seems reasonably clear that Garcia J. decided this case on the basis of English law as applicable in Hong Kong and not on the basis that the mistress could have obtained protection for her interest under English law which was not applicable in Hong Kong. We agree with Mr. Li's contention that this case is distinguishable from the present case under appeal because it is now apparent from the decision of the English Court of Appeal in Ashburn Anstalt v. Arnold that the mistress did not have a recognised interest in the land, so that the consideration of the question of actual or constructive notice was irrelevant.  Furthermore the interest claimed by the mistress in the property in question was not based on her contribution to the purchase of the flat or on contributions to mortgage payments. A claim by a mistress who had contributed to the purchase price of the vendor's property would, in our opinion, be as entitled to the protection of the doctrine of constructive notice as would a similar claim by a wife or relative: see the passage cited above from p.505G of Lord Wilberforce's speech in Boland. Neither Boland nor Hodgson v. Marks were cited in the wong case.   We are not therefore persuaded that the Wong case is of assistance in this appeal, It is wholly distinguishable on its facts and it was too lightly argued on the issue of constructive notice, which has in any event turned out to have been irrelevant.

63. It remains to consider if there is any reason why the doctrine of constructive notice, as now embodied in section 199(1) (ii) of the Law of Property Act 1925, and enacting the pre 1882 English doctrine, should not be applied in the circumstances pertaining in Hong Kong by virtue of section 3 of the Application of English Law Ordinance, with or without modifications: see section 3(1)(a) and (b) of that Ordinance. As we have indicated earlier in this judgment our understanding is that Mr. Chan's main argument was directed to the upholding of the reasoning applied in Caunce v. Caunce and Bird v. syme-Thomson for the continuation of the former English practice, in relation to the doctrine of constructive notice now embodied in section 199 of the Law of Property Act 1925 in relation to unregistered land in England. He would have us apply that practice in Hong Kong.

64. However, he also stressed the lack of justification for "extending-the concept and practice required in registered land in England to Hong Kong." We understood him to go so far as to contend, or at least imply that, whatever view we took of the English law regarding constructive notice in relation to unregistered land in England, the circumstances of Hong Kong or its inhabitants are such that the doctrine of constructive notice should not be applied in this jurisdiction in the circumstances of this case (with or without modification) in accordance with the principles which were applied in Boland in relation to registered land in England.

65. We have given our reasons for concluding that the relevant Boland reasoning is applicable to the doctrine of constructive notice in relation to unregistered land in England. Although the application of such reasoning in Hong Kong will clearly create practical difficulties for purchasers and conveyancers, the Boland principles have been applied in England to both registered and unregistered land (albeit only at first instance in the case of unregistered land) notwithstanding similar difficulties of great complexity: see paragraphs 43 and 44 of the Law Commission's Report where the magnitude of those difficulties is emphasised. However, in England the property legislation is far more complex than the simple leaseholds machinery of Hong Kong which has an archaic system of registration of instruments affecting land and continues to retain legal joint and undivided interests in land, so that problems such as arose in City of London B.S. v. Flegg (where Boland was distinguished) do not arise. We have no doubt that in Hong Kong the conveyancing problems created by the application of Boland will therefore be far less complex than in England, We also accept Mr. Li's submission that in Hong Kong conveyancing is less complex because the leasehold titles have a shorter history and relate to smaller units which facilitate inspection.

66. The Boland decision was made in spite of the conveyancing disadvantages to which it would give rise. The decision seems to us to have involved not an extension of the law out-an acceptance that existing principles of law should be applied for the protection (to the extent that they could not be overreached by the statutory curtain) of recognised beneficial rights in property in England resulting (in the case of spouses and others) from a change in social and economic conditions  which caused, in the words of Lord Wilberforce in Boland at p.508G, "the extension," beyond the paterfamilias, of rights of ownership, itself following from the diffusion of property and earning capacity."

67. As Godfrey J. observed, social conditions in Hong Kong are different from those in the British Isles. However we agree with Mr. Li's submission that modern social and economic conditions prevail in Hong Kong and, in particular, in relation to property rights, the position of married women is broadly similar to that of married women in England. Hong Kong does not have the equivalent to the Matrimonial Homes Act. 1983, but the equivalent to the Married Women's property Act 1882 is the Married Persons Status Ordinance (Cap. 182), the precursor of which was the Married Women's Property Ordinance (Cap. 183) introduced in 1906 with effect from the 1st January 1883. Property adjustment as between husband and wife in matrimonial  proceedings is provided for by section 6 of the Matrimonial Proceedings and Property Ordinance which is derived from section 4 of the former Matrimonial Proceedings and Property Act 1970.

68. In the self reliant and productive community of Hong Kong it is a common pattern for both husband and wife to work and pool their resources. The situations in which questions of resulting trust or constructive trust may arise as between husband and wife (or others) in relation to domestic premises are by no means uncommon and the courts deal with them in accordance with the settled principles of the English rules of equity. It seems to us that the social, economic and legislative fabric of Hong Kong society is such as to make the Boland principles fully applicable for the purposes of section 3 of the Application of English Law Ordinance. The dicta of Lord Wilberforce in Boland was strictly obiter in relation to unregistered land in England and to land in Hong Kong so that this court is not strictly bound, in accordance with the principles laid down by Lord Scarman in Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. [1986] AC 80 (P.C.) at p.108, to apply Boland. However we have no hesitation in doing so.

(4)    Estoppel: Apparent Ownership

69. This point was only faintly argued and is not of any substance. Before Godfrey J. the argument seems to have been confined to estoppel. He dealt with it as follows:

"         The plaintiff contended that the husband was esteemed from asserting his rights as against her, since he had clothed the wife with all the indicia of title which enabled the wife to hold herself out to the plaintiff as the beneficial owner. But this is misconceived. If the plaintiff has no notice (actual or constructive) of the husband's rights, she would have taken free of those rights without need for recourse to the doctrine of estoppel. If she did have notice (actual or constructive) of those rights, she cannot claim to have been misled by the husband's conduct into believing that he had no such rights."

70. On appeal the emphasis was on the doctrine of apparent ownership on the basis that the husband had held out the wife to the whole world as the owner of the flat and had in fact connived in her dealing with the property as if it were her own. Abigail v. Lapin [1934]AC 491 (P.C.) and Central Newbury Car Auctions Ltd. v. Unity Finance Ltd. [1957]1 QB 371 (C.A.) were cited in support of this proposition. However in view of the dictum of Lord Wright in Abigail v. Lapin (which was concerned with land held under the Torrens systems of registration) at p.506 to the effect that the doctrine of apparent ownership did not apply where a purchaser or mortgagee was affected by actual or constructive notice of a prior interest, Mr. Chan conceded that if this court held that the plaintiff had constructive notice of the husband's rights in the present case, then his argument could not succeed. we have so held.

71. Accordingly we dismiss this appeal and make an order nisi awarding costs of the appeal to the husband with a direction for taxation of his costs in accordance with the Legal Aid Regulations.

Representation:

Edward Chan, Q.C. Horace Wong (M/s Poon & Cheung) for Appellant/Plaintiff

Andrew Li, Q.C., Y.L. Wong (M/s Robin Bridge & John Liu) for Respondent/Defendant