Mo Ying v. Brillex Development Ltd and Another

CACV 120/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 120 OF 2014

(ON APPEAL FROM HCA NO. 111 OF 2011)

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J U D G M E N T
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Hon Cheung JA :

1.The plaintiff wife (‘the wife’) claims beneficial ownership of a residential property in the State Theatre Building, North Point (‘the property’) which was registered in the sole name of the 2^nd defendant husband (‘the husband’). The property was sold by the husband to the 1^st defendant (‘the purchaser’) in October 2008. The wife claims against the husband and the purchaser for, among other things, a declaration that she has a beneficial interest in the property and the husband is holding that interest on trust for her. She also seeks to set aside the sale of the property to the purchaser. The wife’s claim against the husband and the purchaser was dismissed by Deputy High Court Judge Eugene Fung S.C. The wife now appeals.

I Background

2.1The wife was a resident of Hangzhou in the Mainland.  The husband was a Hong Kong resident.  On 29 October 1987 they were married in Hangzhou and about a year later in December 1988 the wife came to Hong Kong to join the husband and lived in the property as their matrimonial home.  Shortly after the marriage, on 31 May 1988 the husband bought the property for $500,000.  The sale was completed on 20 June 1988.  The husband paid a deposit of $50,000 and the balance of the purchase price of $450,000 was financed by a mortgage obtained by the husband.  The wife claims that the property was bought as their matrimonial home because she had planned to move to Hong Kong for residence after their marriage and she and the husband wished to have their own children.  The property was bought in the sole name of the husband because she was then still living in Hangzhou and had not yet moved to Hong Kong.  Before the husband bought the property, he was living on his own in Hong Kong in a smaller flat which he also owned.  That flat was sold shortly after the acquisition of the property.

2.2Shortly after the wife arrived in Hong Kong and lived in the property, she discussed with the husband about adding her name as a registered owner of the property (‘the discussion’). However, this was not done and the matter was not pursued further by the wife because at the discussion the husband told her that it would be very troublesome and they would have to incur expenses to add the wife as a registered owner. Another reason was that the wife was acting under the belief that as she was the lawful wife, she would have a beneficial interest in the property regardless of whether she was added as a registered owner or not.

2.3Two children were born of the marriage, a daughter in January 1990 and a son in November 1995.  The family continued to live in the property although since mid 1995 the martial relationship had deteriorated.  In July 2008, the husband entered into a provisional agreement to sell the property to the purchaser for $1.75 million. The wife was told by an estate agent that a provisional agreement had been signed.  The formal agreement was signed in July 2008 and the wife, by her own admission, knew of the sale by 1 October 2008.

2.4The husband told the wife he had bought other properties in Tai Po for the family to live in.  But the wife refused to move to Tai Po.  She also refused to move to a rented flat in North Point.  The husband then leased back the property from the purchaser for a term of one year on 9 October 2008.  The sale to the purchaser was completed on 29 October 2008.  The wife and the children continued to live at the property and the husband continued to rent it until July 2010.

2.5From late July 2010, the husband defaulted in the payment of rent.  On 13 September 2010, the purchaser commenced proceedings in the Lands Tribunal against the husband to recover vacant possession of the property.  Although the Lands Tribunal ordered that vacant possession of the property be delivered to the purchaser, it also allowed the wife to be joined as a party and stayed the order for possession on 25 January 2011.

2.6On 20 January 2011, the wife commenced the present action and on 30 January 2011 commenced divorce proceedings in the Family Court against the husband (‘FCMC 1264/2011’).

2.7At the time of the trial below, both the Lands Tribunal and the Family Court proceedings were stayed. On the hearing of the appeal we were informed that the wife had since moved out from the property.

II  Nature of the wife’s claim

3.The wife’s claim to the property is that the husband held the property on a common intention constructive trust for himself and her, and the husband sold the property without her knowledge and consent.  The purchaser did not inspect the property before the purchase and therefore had constructive notice of the wife’s beneficial interest in the property.

III  The Judge’s decision

A. The claim against the husband

4.1The Judge held that the burden is on the wife who was not a registered owner to prove she has a beneficial interest in the property.  He found that the wife had failed to establish the common intention constructive trust either expressly or by inference.

A.1) Express common intention

4.2In respect of the express common intention, the Judge held that the husband did not want to make the wife a co-owner of the property and the wife knew of this.  This is what the Judge found :

‘ 61. Having carefully reviewed the evidence, I find that there was a short conversation between the Husband and Wife shortly after December 1988. In this conversation, the Wife asked the Husband to add her name as a co‑owner of the Property. The Husband refused and said to the Wife “it’s troublesome, have to pay” (“好麻煩，要加錢”). The Wife did not have any substantive response and the conversation ended shortly thereafter. I find that the Husband at the time did not want to make the Wife a co‑owner of the Property, and that the Wife knew that this was the case. And that was the reason why the Wife never raised the subject with the Husband again. I do not think the words used by the Husband in fact led the Wife to believe that she was to have some interest in the Property. These findings are made not on the basis of my assessment of the credibility of the Husband and Wife, but on the basis of the Wife’s own evidence, namely that the reason why she believed at the time she had an interest in the Property was due to the fact that she was married to the Husband. Even on her evidence, the Wife never said that she was led by the Husband’s response in this short conversation into thinking that she had or would have an interest in the Property. Insofar as the Wife thought at the time that she had an interest in the Property, I find that her (erroneous) belief was not caused by what the Husband said to her during the short conversation shortly after December 1988.’ (emphasis added)

A.2) Inferred common intention

4.3The wife relied on the following matters in support of her case that the common intention can be inferred :

1) there was a marriage;

2) the wife made monetary contributions through the pooled family resources;

3) the husband abandoned the property after 2005;

4) the husband took away his hi‑fi equipment from the property in December 2008; and

5) the wife’s sister was allowed to stay at the property after its purchase.

4.4The finding of the Judge on this issue is as follows :

‘ 91. In the light of my findings made about regarding the absence of any alleged pooled family resources, it seems to me that the Wife can only rely on two matters to support her case on detriment: (1) that she paid for some of the household expenses (ie expenses not related to the Property) prior to 1997; and (2) that she resigned from work in around September 1997.

92. In my view, neither of these matters (whether taken singly or together) can constitute reliance on the part of the Wife to establish a common intention constructive trust.  As mentioned above, the sort of conduct sufficient to constitute detriment for the purpose of establishing a common intention constructive trust must be conduct on which the plaintiff could not reasonably have been expected to embark unless he/she was to have an interest in the property: see Grant v Edwards at 648G‑H (Nourse LJ).  The two matters relied upon by the Wife cannot be described as such conduct.  Indeed, as the Wife herself said so in her cross-examination, the reason why she gave up her job in 1997 was to look after the children and to help them with their studies, and she did not want to regret for not having done so.

93. Accordingly, even if the Wife has established a common intention to share the Property beneficially (which she has not), I would not have been able to find that the Wife acted to her detriment in reliance on any agreement, arrangement or understanding that she would take a beneficial interest in the Property.’

B. The claim against the purchaser

4.5The Judge held that his finding on the lack of a common intention was sufficient to dispose of the wife’s claim against the husband and the purchaser.  However the Judge also addressed other issues concerning the purchaser.

B.1) The purchaser’s constructive notice

4.6The Judge held that the purchaser was not a bona fide purchaser for value without notice.  The Judge held that if the land is occupied by a person jointly with the vendor, this occupation will be constructive notice of that person’s rights such as any rights stemming from a contribution to the purchase price: Wong Chim-ying v Cheng Kam-wing [1991] 2 HKLR 253 at 273C-G (Clough JA).  The Judge further held that the purchaser had constructive notice of the wife’s interest because of its failure to inspect the property :

‘ 132(2) I cannot accept that a purchaser’s duties to make enquiries would be different where a “sale-and-leaseback” arrangement is entered into between the purchaser and the vendor upon the completion of the sale and purchase. It is true that under such an arrangement, the vendor’s capacity would change from a vendor to a tenant after the completion of the sale and purchase. However, that change tells the purchaser nothing as to who was in actual occupation at the time when the property was being purchased. Without an inspection of the property, the purchaser would not be in a position to know whether anyone with an unwritten equity (eg a beneficial interest under a common intention constructive trust) is in occupation. A purchaser who chooses not to inspect the property in accordance with ordinary practice must bear the consequences. As Shaw LJ said in Midland Bank Ltd v Farmpride Hatcheries Ltd (1981) 260 EG 493 at 496: “[if] a purchaser … elects to proceed with the transaction upon the assumption that no adverse interest exists of which he is not told, he will generally do so at his peril if reasonable enquiry would have elicited that his assumption was ill‑founded”.’

B.2) The purchaser’s defence

4.7The Judge also found that the wife was aware of the sale at the latest on 1 October 2008 and the lease back in October 2008.  The purchaser contended that if the wife had a beneficial interest in the property, she had a duty to speak out in the circumstances of this case and having failed to speak out, she was estopped from asserting her interest.  The purchaser also relied on waiver, acquiescence and laches.

4.8The Judge found against the purchaser on all its defences. It is sufficient for this appeal to state the reason of the Judge why the defence of estoppel fails :

‘ 148. ……It cannot be disputed that the Purchaser had a duty to make inquiry, including a duty to inspect the Property (see Section G above). In view of this, I do not think a duty to speak could be imposed on the Wife to inform the Purchaser of her interest in the Property. Given that the Purchaser had failed to inspect the Property in the first place (and had therefore acquired constructive notice of the Wife’s interest in the Property), the Purchaser could not “reasonably assume” (using the words of Lord Wilberforce in Moorgate v Twitchings) that the Wife would not claim an interest in the Property.’ (emphasis added)

IV Common intention constructive trust

1) The parties’ common approach

5.1Both Mr William Wong SC and Mr Justin Lam on behalf of the wife and Ms Audrey Eu SC and Mr Alan Kwong on behalf of the purchaser accepted common intention constructive trust is the basis of the wife’s claim.  The dispute is really on the extent of the application of this principle to the wife’s claim.

2) Contrast with the matrimonial regime

5.2Mr Wong recognized that had the wife proceeded under the matrimonial regime in ancillary relief proceeding and asserted her interest in the property, the task of ascertaining her interest by way of such an arduous route would not have been necessary.  Under the matrimonial regime of DD v LKW (2010) 13 HKCFAR 537 which adopted the English White v White [2001] 1 AC 596 approach and based on the principle of fairness, the starting point of the wife’s interest in the property would be of an equal share.  However, the situation here is that the property had long been disposed of by the husband to the purchaser on 29 October 2008.  The husband had used the proceeds of sale to purchase three other properties in Tai Po.  One of these had since been sold by the husband. The wife has made a claim on the two remaining properties.  The purchaser has also joined in the ancillary relief application in order to protect its interest in the event that it is found liable in this action. 

5.3In order for the wife to assert an interest in the property against the purchaser, as distinct from asserting a share in the existing matrimonial assets of both the husband and wife, the wife has to resort to the constructive trust route.  This is the approach adopted in Wong Chim Ying where the wife who was the sole registered owner of a property disposed of it without the knowledge of her husband.  More recently in Abbott v. Abbott [2008] 1 FLR 1451, the Privy Council dealing with an appeal from the Eastern Caribbean Court of Appeal concerning the beneficial ownership of a former matrimonial home registered in the sole name of the husband and other assets of a husband, the wife in the divorce proceedings likewise had to proceed by way of the constructive trust route because Antigua, the Caribbean country from where the appeal originated does not have the equivalent of the wide powers of property adjustment enjoyed by divorce courts in the United Kingdom.  Property disputes have therefore to be resolved according to the ordinary law.  As Baroness Hale of Richmond held :

‘ [4]……It is now clear that the constructive trust is generally the more appropriate tool of analysis in most matrimonial cases.’

5.4She observed at paragraph 4 that there are two separate questions involved on this issue. First, was it intended that the parties should share the beneficial interest in a property conveyed to one of them only and second, if it was so intended, in what proportions was it intended that they share the beneficial interest?  Earlier at paragraph 2, she stated that :

‘ Nevertheless, the inferences to be drawn from the conduct of husband and wife may be different from those to be drawn from the conduct of parties to more commercial transactions.’

5.5Baroness Hale in her earlier decision in Stack v. Dowden [2007] 2 AC 432 (HL)identified the onus of proof in joint name and sole name situations :

‘ 56 Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest.’

3) The development of law

5.6The modern development of the law on constructive trust is found in the earlier landmark cases of Pettitt v Pettitt [1970] AC 777, [1969] 2 WLR 966, Gissing v Gissing [1971] AC 886, Lloyds Bank plc v Rosset and Another [1991] 1 AC 107.  More recently the highest courts in the United Kingdom and the Commonwealth have further elaborated on the common intention constructive trust principle in three cases : Stack (House of Lords), Abbott (Privy Council) and Jones v. Kernott [2012] 1 AC 776 (Supreme Court).

5.7In respect of the earlier approach it is sufficient first to refer to what Lord Diplock said in Gissing at 905 :

‘ A resulting, implied or constructive trust—and it is unnecessary for present purposes to distinguish between these three classes of trust—is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land.’

5.8Then in Rosset, Lord Bridge of Harwich at page 132 referred to the distinction between express discussion by the parties on the shares and inference to be drawn in the absence of such a discussion :

‘ The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust.  In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust.  But, as I read the authorities, it is at least extremely doubtful whether anything less will do.’  (emphasis added)

5.9As observed by Lord Walker of Gestingthorpe in Stack at paragraph 15, the three earlier cases of Pettitt,Gissing and Rosset have these common features : the dispute was between a husband (or his secured creditor) and a wife; the property in question was in single legal ownership; and the matter relied on by the non-owner claimant was no more than relatively trivial work and expenditure on the property.

5.10In respect of the trio of modern authorities, both Stack and Jones are concerned with the interest of cohabitants in a family home registered in their joint names.  The dispute is on the proportion of their respective interest.  In Stack at first instance, both were held to be entitled to an equal share.  On appeal, the woman (defendant) was given 65% in view of the fact she paid all the mortgage payments and household bills.  The House of Lords dismissed the claimant’s appeal.  In Jones the County Court Judge found that the claimant was entitled to 90% of the property.  The Court of Appeal ordered equal entitlement.  The Supreme Court reversed the Court of Appeal and restored the original apportionment.  Abbott deals with the interest of a wife in properties registered in the sole name of the husband.  The important feature in that case is that the husband conceded that the wife has a beneficial interest in the properties.

4) Nature of contribution

5.11Lord Walker in Stack at paragraph 26 commented on the view of Lord Bridge in Rosset that it is doubtful whether anything less than direct contributions to the purchase price (whether initial payment or mortgage instalments) may give rise to a constructive trust :

‘ 26 Lord Bridge’s extreme doubt “whether anything less will do” was certainly consistent with many first-instance and Court of Appeal decisions, but I respectfully doubt whether it took full account of the views (conflicting though they were) expressed in Gissing v Gissing [1971] AC 886 (see especially Lord Reid, at pp 896G–897B, and Lord Diplock, at p 909D–H). It has attracted some trenchant criticism from scholars as potentially productive of injustice: see Gray & Gray, Elements of Land Law, 4^th ed, paras 10.132–10.137, the last paragraph being headed “A More Optimistic Future”. Whether or not Lord Bridge’s observation was justified in 1990, in my opinion the law has moved on, and your Lordships should move it a little more in the same direction, while bearing in mind that the Law Commission may soon come forward with proposals which, if enacted by Parliament, may recast the law in this area.’ (emphasis added)

5.12At paragraph 31, Lord Walker further stated that :

‘ In a case about beneficial ownership of a matrimonial or quasi-matrimonial home (whether registered in the names of one or two legal owners) the resulting trust should not in my opinion operate as a legal presumption, although it may (in an updated form which takes account of all significant contributions, direct or indirect, in cash or in kind) happen to be reflected in the parties’ common intention.’

5.13Baroness Hale in Stack at paragraph 60 stated :

‘ ….The law has indeed moved on in response to changing social and economic conditions. The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it.’

5.14Specifically Baroness Hale in Stack stated more factors than financial contributions may be relevant to divining the parties’ true intention :

‘ 69 In law, “context is everything” and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties’ true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. When a couple are joint owners of the home and jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties’ individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.

70 This is not, of course, an exhaustive list.  There may also be reason to conclude that, whatever the parties’ intentions at the outset, these have now changed.  An example might be where one party has financed (or constructed himself) an extension or substantial improvement to the property, so that what they have now is significantly different from what they had then.’

5.15In Abbott Baroness Hale affirmed the need to consider the parties’ ‘whole course of conduct’ and the ‘holistic approach’, views she had earlier expressed in Stack.

5.16In Jones, Lord Walker and Baroness Hale in their joint judgment further elaborated on the applicable principles on disputes in respect of family homes in joint names and family homes in sole name.  In respect of joint name homes, the principles are as follows.  For ease of reading, I have arranged each of the five principles in separate paragraphs :

‘ 51 In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.

(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.

(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.

(3) Their common intention is to be deduced objectively from their conduct:

“ the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party”: Lord Diplock in Gissing v Gissing [1971] AC 886, 906.

Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden[2007] 2 AC 432, para 69.  

(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, “the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”: Chadwick LJ in Oxley v Hiscock[2005] Fam 211, para 69.  In our judgment, “the whole course of dealing … in relation to the property” should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties’ actual intentions. 

(5) Each case will turn on its own facts.  Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).’

5.17In respect of sole name family homes, the joint judgment held that the principles are :

‘ 52 …… The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above.’ (emphasis added)

V The present dispute

1) Factors in determining common intention

6.1What divided the parties in this case is what are the relevant principles or factors to be applied on the first issue of whether a claimant has any interest at all in a property. Ms Eu for the purchaser submitted that the factors identified in paragraph 69 in Stack are only relevant to the issue of quantification of shares but not on the issue of the common intention on ownership.  Mr Wong for the wife took a different view and submitted that those factors are applicable to ascertaining common intention on ownership as well.  Although the answer to this question does not appear to be readily available in Stack, in my view Jones provides the answer in paragraphs 51 and 52 of the joint judgment that I have just referred to.

6.2Reading paragraph 52 first, in a sole name case it was held that the first issue of whether it was the common intention that the other party has any beneficial interest in the property at all is to be deduced objectively from the conduct of parties.  Similar words are used in paragraphs 51(1), (2) and (3) when dealing with joint name cases, namely, the common intention on beneficial interest is to be deduced objectively from the conduct of the parties (paragraph 51(3)) and as to that, Lord Walker and Baroness Hale expressly stated that examples of the type of evidence which might be relevant to drawing such inferences are given in Stack at paragraph 69.  This means that examples of evidence used in Stack to draw inference are equally applicable to the first issue of determining whether there was a common intention of beneficial interest under sole name cases as well.

6.3Johnson Lam J (as he then was) in Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343 had also considered, in respect of the first issue, that the whole course of conduct in relation to the property must be taken into account in the inquiry :

‘ 66. However, I accept the plaintiff’s evidence that when the Property was acquired, the first defendant had told her the Property would be for the use of the family and it would be sufficient just to put down his name on the title deeds as he was the head of the family. Is this sufficient to satisfy the hurdle at the first stage?

67. By itself, such a statement is perhaps too equivocal to establish a common intention to share beneficial ownership between the plaintiff and the first defendant.  But as held in Stack v Dowden and Abbott v Abbott, the parties’ whole course of conduct in relation to the property must be taken into account in determining the shared intentions as to its ownership.’

6.4Two post Stack English cases are heavily relied upon by Ms Eu but they were decided before Jones and did not discuss what are the applicable factors in determining the common intention issue.  However they are illustrative of the reticent approach of the English courts in inferring common intention constructive trust based only on conduct even post Stack.  In James v Thomas [2007] 3 FCR 696 the parties formed a relationship and the claimant moved into a property owned by the defendant to live with the defendant as man and wife.  The property was solely owned by the defendant from where he carried on business as an agricultural building and drainage contractor.  The claimant assisted in the business and engaged in heavy work.  She asserted an interest in the property by way of constructive trust. She pleaded that :

‘ [33]…… whenever the parties discussed carrying out improvements to the property and matters relating to the business, the defendant would say to the claimant “this will benefit us both” .’

6.5Her claim was rejected.  The Court of Appeal, per Sir John Chadwick at 705, held that :

‘ [24] …… More pertinently, if the circumstances so demand, a constructive trust can arise some years after the property has been acquired by, and registered in the sole name of, one party who (at the time of the acquisition) was, beyond dispute, the sole beneficial owner: Gissing v Gissing [1970] 2 All ER 780 at 786, [1971] AC 886 at 901, Bernard v Josephs [1982] 3 All ER 162 at 170, [1982] Ch 391 at 404. But, as those cases show, in the absence of an express post-acquisition agreement, a court will be slow to infer from conduct alone that parties intended to vary existing beneficial interests established at the time of acquisition.’

6.6He further held that :

‘ [36] The judge did not find it necessary to address the question whether Miss James acted upon the assurances to her detriment. That is understandable, given that he held that the assurances were not sufficiently specific to found proprietary estoppel or constructive trust. In the circumstances that I share that view, I, too, find it unnecessary to address the question of reliance. But, for completeness, I should add that the factors which lead to the conclusion that the assurances were not intended or understood as a promise of some property interest lead, also, to the conclusion that it would be unreal to think that Miss James did what she did in reliance on such a promise. The true position, as it seems to me, is that she worked in the business, and contributed her labour to the improvements to the property, because she and Mr Thomas were making their life together as man and wife. The Cottage was their home: the business was their livelihood. It is a mistake to think that the motives which lead parties in such a relationship to act as they do are necessarily attributable to pecuniary self-interest.

……

[38] ….. Her interest in the property (if any) must be determined by applying principles of law and equity which (however inadequate to meet the circumstances in which parties live together in the twenty-first century) must now be taken as well-established. Unless she can bring herself within those principles, her claim in the present case must fail. As Baroness Hale of Richmond observed in Stack v Dowden [2007] UKHL 17 at [61], [2007] 2 FCR 280 at [61] it is not for the court to abandon the search for the result which reflects what the parties must, in the light of their conduct, be taken to have intended in favour of the result which the court itself considers fair.’

6.7In Morris v Morris [2008] EWCA Civ 257 the claimant is the wife of the 1^st defendant.  The 1^st defendant and his mother entered into a farming partnership.  One of the assets of this partnership is a farm property solely owned by the mother.  The wife assisted in the farming business and carried out improvements on the farm.  She asserted that she had a beneficial interest in the farm by reason of constructive trust, alternatively proprietary estoppel.  Her claim was rejected on appeal.

6.8The Court of Appeal, per Sir Peter Gibson, repeated what was said in James :

‘ 23. ….. the first question being whether an agreement arrangement or understanding that the claimant was to acquire a beneficial interest in the land has been shown. The authorities make clear that a common intention constructive trust based only on conduct will only be found in exceptional circumstances.’

6.9The Court held that the claimant did not state any belief or expectation that she was entitled to an interest in the land.  Further Sir Peter Gibson citing James held that :

‘ 25. Nor do I see that the conduct that is relied on by the claimant must lead to the conclusion that she was acquiring an interest in land. It has been said in a number of cases that the court should be cautious before finding that the activities of a wife or a cohabitant can only be explained on the footing that she believes that she was acquiring an interest in land.’

2) Inference and imputation

6.10There is discussion on the difference between inference and imputation of the common intention in respect of the second issue of quantification.  It is sufficient to refer to the following in the joint judgment of Lord Walker and Baroness Hale in Jones :

‘ 31 In deference to the comments of Lord Neuberger and Rimer LJ, we accept that the search is primarily to ascertain the parties’ actual shared intentions, whether expressed or to be inferred from their conduct. However, there are at least two exceptions. The first, which is not this case, is where the classic resulting trust presumption applies. Indeed, this would be rare in a domestic context, but might perhaps arise where domestic partners were also business partners: see Stack v Dowden, para 32. The second, which for reasons which will appear later is in our view also not this case but will arise much more frequently, is where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared. In those two situations, the court is driven to impute an intention to the parties which they may never have had.

……

34 However, while the conceptual difference between inferring and imputing is clear, the difference in practice may not be so great…..but rather that a finding as to subjective intention can only be made on an objective basis.’  (emphasis added)

3) Detriment

6.11Mr Wong further submits that detriment is no longer a component of the common intention constructive trust.  There is certainly support for this view from Simon Gardner and Katharine Davidson Q.C. in their paper ‘The Supreme Court on Family Homes’ (2012) 128 LQR 178 at 178 to 179 :

‘ There are two questions. The first is whether the claimant is to have a beneficial interest of a greater size than his or her prima facie one: that is, in the sole name case, whether there is a constructive trust at all, under which the claimant has a beneficial interest; and in the joint names case, whether the prevailing constructive trust gives him or her a greater than 50 per cent beneficial interest. The second question, arising only if the first is answered in the claimant’s favour, is what is the precise size of his or her resultant interest.

The first question is to be answered always by attending to the parties’ genuine common intention, if any, as to the point in question, and never by imputing to them a non-genuine intention.  This genuine common intention is to be discerned objectively from all manner of relevant evidence, as non-exhaustively described in Stack v Dowden at [69], and generalised as the parties’ “whole course of conduct in relation to [the property]” (at [60]).  By their conspicuous absence, we can conclude that there is no longer any requirement, so as to prove an implied common intention, to point to the claimant’s direct financial contributions to the acquisition of the house; nor of detrimental reliance upon the common intention.’  (emphasis added)

6.12However on this point the Court of Final Appeal in Luo Xing Juan v. Estate of Hui Shui See (2009) 12 HKCFAR 1 at 16, per Ribeiro PJ, has affirmed the requirement of detriment.  Both Stack and Abbott were referred to the Court of Final Appeal.  This is an approach this Court should follow :

‘ 38. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.’ (emphasis added)

4) Other jurisdiction

6.13It is of note that the Singapore Court of Appeal in Chan Yuen Lan v See Fong Mun [2014] SGCA 36 (a case not cited by the parties) after reviewing Stack and Jones, chose not to follow the constructive trust approach but instead chose to rely on resulting trust in deciding on the respective beneficial interest of a married couple in a property registered in the sole name of the wife but with the bulk of the purchase price coming from the husband.  Neither of the parties had commenced matrimonial proceedings.  The Court held that the starting point is that the parties’ respective shares of the beneficial interest in the property at the time of its acquisition would be in the same proportions as their respective contributions to the purchase of the property.  Nonetheless the Court will see if there is an express or an inferred common intention that the parties hold the beneficial interest in the property in a proportion which is different from the initial contributions.

6.14However, as the parties before us have not argued that the constructive trust approach should not be adopted, I would not deal with the case further.

VI The wife’s appeal

1) Express common intention

7.1Mr Wong challenged the Judge’s finding on the lack of any express common intention on the part of the parties to confer an interest on the wife.  He submitted that the Judge had ignored the wife’s evidence in cross-examination that the husband justified his refusal to register her name by saying that ‘What’s the problem with adding your name or not?  What belongs to me belongs to you, I am also yours.’

7.2I accept that this is a very important piece of evidence and if it is accepted that the husband actually said those words, then it would have put a different complexion on the husband’s excuse for not registering the wife’s name because it was troublesome and required expenses.  However this statement was not pleaded in the wife’s statement of claim nor stated in her witness statement when dealing with the discussion and excuse by the husband.  It was also not something that Mr Wong relied upon at the trial when he made his closing submission as something being said by the husband.  Mr Wong’s case below was simply that it was the wife’s understanding that the husband meant ‘that the Matrimonial Home would belong to both of them’.

7.3If this Court has to assess the credibility of this evidence, I would say immediately that it smacks very much of an afterthought.  Had the husband actually said those words, then they should have featured most prominently at the forefront of the wife’s claim because the words ‘what belonged to him also belonged to the wife’ would be the best evidence in support of the express common intention of the parties on the beneficial interest of the wife.

7.4The wife’s understanding of the husband’s meaning of those words would not have carried the matter further because she did not go on to say that because of what the husband told her, she was led to believe that she had an interest in the property.  This was precisely what the Judge found :

‘ 53. In her witness statement (in the same paragraph where she described the conversation with the Husband about the addition of name as a co-owner of the Property), she said irrespective of whether she was a registered owner, she believed that she would have some “beneficial interest” in the Property by reason of her being the wife of the Husband.  In her cross-examination, the Wife explained the use of the words “beneficial interest” in her witness statement and said that those words were used by her lawyers.  She said that what she meant was that she believed that she was to have a share in the Property by reason of her marriage.  There was no evidence from the Wife that she was led by the words uttered by the Husband in the conversation shortly after December 1988 into thinking that she had an interest in the Property.’  (emphasis added)

7.5In my view the Judge’s conclusion that the husband at the time of discussion did not want to make the wife a co-owner of the property and the wife knew that was the case is a matter this Court cannot lightly disturb.  After all the Judge had before reaching this conclusion considered the two different meanings of the words uttered by the husband and the other evidence before he came to such a conclusion :

‘ 59.(1) Looking objectively at the words uttered by the Husband during the conversation, it seems to me that those words are equivocal. On the one hand, it may be said that if the Husband truly thought that the Wife had no interest in the Property, he would have told her so directly and would not have just uttered the words. On the other hand, the words that were in fact said by the Husband may be taken to mean that he did not want to add the Wife’s name to the title of the Property and therefore told her not to hassle him and brushed her off.’

7.6The wife had relied heavily on Eves v. Eves [1975] 1 WLR 1338 and Grant v Edwards [1986] Ch 638 to support her claim on express common intention.  The Judge considered the relevance of these two cases.  It is sufficient to refer to the Judge’s summary and analysis of the cases.

‘55. In Eves v Eves, the parties lived together and intended to marry each other when they were free to do so.  A house was purchased in the man’s name.  He told the woman that it was to be their house, but that it would have to be in his name alone as she was under the age of 21.  This was an excuse to avoid a conveyance into joint names.  She made no financial contribution, but did a great deal of work in the house and garden.  After they parted, she successfully claimed a share of the beneficial interest in the house.

56. In Grant v Edwards, the defendant told the plaintiff with whom he was cohabiting that her name was not to go on to the title because, if the property were acquired jointly, it would operate to her prejudice in the matrimonial proceedings between her and her husband.  The English Court of Appeal concluded that there was a common intention between the parties that the plaintiff was to have some sort of proprietary interest in the house.

57. It is true that the man in both Eves v Eves and Grant v Edwards gave an excuse for not having the house conveyed into joint names, and that the English Court of Appeal in both cases concluded that a common intention existed between the parties for the woman to have some beneficial interest in the house.  However, it cannot be right to say that whenever a man makes an excuse for not wanting to convey a property into joint names, the court must necessarily find that there was a common intention between the parties that the property is to be shared beneficially.  The fact that a man makes an excuse does not necessarily mean that he accepts that the woman should have a share in the property.  Each case must turn on its own facts.  This was made abundantly clear in Stack v Dowden at 459B and Jones v Kernott at 794F.

58. One can understand why the excuse made by the man in Eves v Eves and Grant v Edwards led the English Court of Appeal to conclude that there was a common intention to share the house:

(1) In Eves v Eves, the man told the woman that but for the fact that she was under 21, he would have put the house into their joint names:

“He told her that it was to be their house and a home for themselves and their children. He said that, as she was under 21, it could not be in joint names and had to be in his name alone; and that, but for her age, it would have been purchased in joint names.” [Lord Denning MR at 1340C-D]

“It is clear from the evidence, and was so found by Pennycick V-C, that at the time of the purchase the defendant told the plaintiff that if she had been 21 years of age, he would have put the house into their joint names, because it was to be their joint home.” [Brightman J at 1343H]

(2) Accordingly, on the facts of the case, the man clearly led the woman to believe that she was to have an interest in the house and the only reason why the house was not bought in joint names was that she was under 21.  The basis for the court’s decision (Browne LJ and Brightman J) in favour of the woman rested upon the majority’s decision to draw an objective inference that there was an understanding that the woman was “intended to have some sort of proprietary interest in the house” (see 1343E, 1344A‑B and 1345B‑E). Lord Denning MR reached his decision on the basis that the man “should be judged by what he told her – by what he led her to believe – and not by his own intent which he kept to himself” (1342E‑F).

(3) In Grant v Edwards, similar reasoning was given by the English Court of Appeal:

“Just as in Eves v Eves …, these facts appear to me to raise a clear inference that there was an understanding between the plaintiff and the defendant, or a common intention, that the plaintiff was to have some sort of proprietary interest in the house; otherwise no excuse for not putting her name onto the title would have been needed.” [Nourse LJ at 649B-C]

“Whatever the defendant’s actual intention, the nature of the excuse which he gave must have led the plaintiff to believe that she would in the future have her name on the title, and this in turn would justify her in concluding that she had from the outset some kind of right to the house. The case does not fall precisely within either of categories (b), (c) or (d) above, but the defendant’s conduct must now preclude him from denying that it is sufficiently analogous to these categories to make the relevant principles apply.” [Mustill LJ at 653E-G]

“…the representation made by the defendant to the plaintiff that the house would have been in the joint names but for the plaintiff’s matrimonial disputes is clear direct evidence of a common intention that she was to have an interest in the house…” [Sir Nicolas Browne-Wilkinson at 655G-H]

(4) In both of these decisions, it seems to me that the courts wanted to ensure that the woman obtained the share in the property which she was led to believe by the man that she could have had.  The same result could similarly have been achieved by applying the principles underlying the law of proprietary estoppel. Indeed, Sir Nicolas Browne‑Wilkinson expressly referred to such a doctrine in Grant v Edwardsat 656G‑H as being “closely akin to those laid down in Gissing v Gissing”.  Be that as it may, even on the conventional common intention constructive trust approach, the courts in these two English cases inferred from the objective facts (including the making of the excuse by the man) that the man intended the woman to have share in the house, even though the man subjectively and in his own mind did not intend to do so.

59. In my view, the reasoning in Eves v Evesand Grant v Edwardsis not applicable to the facts of the present case:

(1) Looking objectively at the words uttered by the Husband during the conversation, it seems to me that those words are equivocal.  On the one hand, it may be said that if the Husband truly thought that the Wife had no interest in the Property, he would have told her so directly and would not have just uttered the words.  On the other hand, the words that were in fact said by the Husband may be taken to mean that he did not want to add the Wife’s name to the title of the Property and therefore told her not to hassle him and brushed her off. 

(2) However, on her own evidence, the Wife was not led by the Husband’s words into believing that she would have an interest in the Property.  I have already mentioned the Wife’s evidence above and will not repeat it again.

(3) In any event, the nature of the words used by the Husband is very different from that of the excuse made by the man in Eves v Eves and Grant v Edwards.  In the two English cases, the nature of the excuse was such that the woman could well believe that her name would be added to the title of the property when the excuse given by the woman was no longer relevant (ie when she reached the age of 21 or when her matrimonial proceedings with the husband were over).  However, the Wife could not in the present case have reasonably believed that the reasons given by the Husband would one day disappear and that her name would be added to the title of the Property in the future.  As will be apparent below, I do not believe the Wife ever held such a belief.

(4) In these circumstances, I cannot infer from the words uttered by the Husband that there was a common intention between the Husband and Wife that the Wife was to have some interest in the Property.’

7.7I would respectfully adopt the Judge’s analysis.  Whether the excuse made by the husband would lead to the conclusion of an express common intention on the beneficial interest of the wife is very much a fact sensitive and contextual issue and in this case the Judge’s conclusion that the husband by his words intended to brush off the wife is justified on the facts of this case.

2) Finding on the husband’s credibility

7.8Mr Wong had made the lack of finding by the Judge on the husband’s credibility as the prominent feature of the wife’s appeal.  He submitted that the Judge’s approach was fundamentally flawed.  For example, the Judge proceeded to consider the wife’s evidence in a vacuum without taking into account the husband’s evidence or credibility :

1) In relation to the discussion, in holding that the husband did not want to make the wife a co-owner of the property and the wife knew that this was the case, the Judge stated at paragraph 61 of the judgment that ‘[t]hese findings are made not on the basis of my assessment of the credibility of the husband and wife, but on the basis of the wife’s own evidence’.

2) In holding that the money from the sister’s loan was not applied towards the purchase of the property, the Judge stated at paragraph 69(5) of the judgment that ‘[i]t is apparent from the next sub-paragraph that I have not found it necessary to place any weight on the Husband’s evidence on the issue in order to arrive at my conclusion’.

7.9Other examples included the factual finding that the husband could afford to pay the mortgage without the wife’s assistance.  The Judge at paragraph 80 stated that :

‘ Third, I am not satisfied on the evidence that the Husband needed the Wife’s income to settle the mortgage instalments. If the Husband could afford paying the mortgage (as he claimed he could and I do not have sufficient basis to disbelieve him on this point), I find it inherently improbable that he would agree with the arrangement now contended by the Wife.’ (Emphasis added)

7.10Mr Wong submitted that the basis for the Judge to rely on the husband’s evidence on that point was stated to be ‘the Husband’s character and personality’.  As the Judge explained in paragraph 78, he considered that the husband ‘is a man of strong character’ with ‘a big ego’ and ‘in every respect a male chauvinist’.  This is in stark contrast to the Judge’s fastidious approach when probing for inconsistencies in the wife’s evidence.

7.11In my view what Mr Wong attempts to do is to find a theme which is so crucial that it will undermine the finding of facts by the Judge who conducted the trial and who had the benefit of hearing and observing the witnesses before him at first hand and also the benefit of having the whole spectrum of the evidence unfolding before him. However, as repeatedly said by the highest authorities such as Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336, the deference by an appellate court to finding of fact by the trial judge is based on principles and the well-established test is whether the finding is plainly wrong.  In this case on the express common intention issue the Judge was clearly entitled to rely solely on the wife’s evidence to make the necessary finding.  The relevant material is the words uttered by husband which were not challenged and the wife’s understanding of those words.  The husband’s evidence on this topic adds nothing further.

3) Inferring common intention

7.12I have to say this is a topic that vexed me most during the appeal.  One can see immediately the artificial nature of the exercise.  This is a married couple who had lived with their children in the property as their matrimonial home.  Their marriage lasted 24 years before the wife commenced her divorce proceeding.  The wife had worked for a substantial part of the marriage and she had also looked after the two children of the family.  Had this been an ancillary relief application under the matrimonial regime, her entitlement to the matrimonial home would not have been less than a 50/50 share.  No doubt the property had been disposed to a third party, namely, the purchaser.  But the disposal only occurred in July 2008 when the parties were already married for 20 years.  The relevance of the purchaser’s interest in the analysis is only to the extent of whether the sale should be set aside but the crucial issue is still whether the wife has any beneficial interest in the property at all. 

7.13I have already stated that the Stack and Jones approach on the need to consider the overall circumstances is applicable to the issue of inferring common intention from the conduct of the parties.  The difficulty is the extent to which one should consider the setting of a married couple and their matrimonial home on this issue.  Specifically, what weight should one put on a matrimonial relationship in the analysis which, after all, under the modern approach of fairness in the matrimonial regime, demands no discrimination in terms of the nature of contribution by a married couple.  Simon Gardner in his work entitled Family Property Today (2008) 124 L.Q.R. 422 discussed the implication of a married relationship at page 440 :

‘ Effectuating the implications of the parties’ relationship

In the kind of situation with which we are concerned, C and D will generally be in some sort of family relationship.  It may be right to giveC  an (enlarged) interest because that is what the relationship itself requires.

Say C and D are married or civil partners.  Their relationship generates at any rate a moral obligation on each of them to share their resources with the other.  The resources in question here are of many different kinds, but one kind is material wealth.  (“With all my goods I thee endow ... for richer, for poorer ... .”)  There are of course various ways in which the obligation to share material wealth can be understood, but a central candidate is that such wealth should simply belong equally (during the currency of the relationship jointly) to the parties.  It is this understanding that has in recent years been translated into a legal rule that, in the event of the relationship’s dissolution, such of the parties’ assets as are not required for more specific needs should be divided equally.  This rule does not itself bite before dissolution, but its underlying logic clearly applies at that stage too, so it is right to expect a sister rule working on the same lines from the outset.  (A law lacking such a rule, moreover, would perversely present an incentive to divorce.)  In the absence of statutory provision, this latter rule would naturally operate via a constructive trust over the assets of the wealthier party.’  (emphasis added)

7.14On reflection, whilst it is tempting to do so, in my view, it is wrong in principle to elide the matrimonial regime with the constructive trust approach.  The matrimonial regime is based on statute and supplemented by the common law which has been developed incrementally over decades before it reaches the present status of using equal share as the starting point.  In the constructive trust approach, the matrimonial relationship is no more than one of the factors to be considered in the inference exercise.  This factor should no doubt be given more weight because it is in the context of this relationship that the inference should be drawn but what one must not do is to too readily infer the existence of the common intention of a claimant’s beneficial interest simply because of this relationship.  Even in the light of Stack and Jones it is difficult to refute in principle what Lord Bridge said in Rosset at 130D :

‘ I pause to observe that neither a common intention by spouses that a house is to be renovated as a ‘joint venture’ nor a common intention that the house is to be shared by parents and children as the family home throws any light on their intentions with respect to the beneficial ownership of the property’

7.15Once this principle is recognized, there is very little Mr Wong can advance to challenge the finding by the Judge on the issue of common intention by inference. Mr Wong contends that in the present case, the relevant factors include: (1) the marriage between the husband and wife, (2) the acquisition of the property as the matrimonial home for their family/children, (3) the wife’s financial contribution to the family to enable the husband to meet mortgage payments, (4) the funding of the purchase of the property through the loan from the wife’s sister (albeit not a direct contribution by the wife) and (5) the sister’s occupation of the property after the purchase.

7.16I have already addressed factors (1) and (2), namely, the relationship and use of the matrimonial home.  The acquisition of the property as a matrimonial home does not add anything more to the analysis.  In my view factors (4) and (5), namely, the loan from the sister and her occupation of a room in the property after the purchase also do not add much to the inference of the common intent.

7.17Mr Wong’s main criticism is that the Judge wrongly decided on the issue of the wife’s contribution.  He submits that the wife’s contribution to household expenses enabled the husband to meet the mortgage payments, by relieving the husband’s burden to provide for the family on other matters.  The evidence shows that the wife made a substantial financial contribution to family expenses so as to enable the husband to meet the mortgage payments (i.e. relieving the husband’s burden to pay for other family expenses), given the dire state of the husband’s finance at the relevant time.  He submits that whilst it is correct that the mere payment of household expenses is not an expenditure referable to the acquisition of the property, however, it is well-established that the payment of household expenses which enables the other to pay the mortgage instalments is sufficient to establish an indirect contribution to the property: Gissing at 903B-C; Burns v Burns [1984] Ch 317 at 328H-329C, 330D.

7.18As submitted by Ms Eu there is ample evidence that the husband did not need any assistance from the wife to repay the mortgage loan :

1) The husband paid HK$200,000 odd as the initial payment for acquiring the property (the total sale price was HK$500,000).  Notably, around the time when the property was purchased in June 1988 the husband sold his former home in North Point at HK$301,000 receiving substantial sale proceeds.

2) The monthly mortgage repayment in respect of the property (for which the husband was solely responsible) was only HK$2,200.

3) Around 1987, the husband was earning monthly income of HK$5,500.  Around 1989, the husband was earning monthly income of HK$8,000 odd.

4) Moreover, the husband sublet the rooms in the property.  In the first two years, he earned monthly rental of HK$3,000.  Subsequently, he earned monthly rental of HK$5,000.  The wife admitted that the husband alone handled the subletting.

7.19On the contrary, the wife admitted she never had any joint bank account with the husband, and all her salaries were paid into her own bank account.  She never claimed that she had to use any part of the money in her account for payment towards the property or that the husband requested her to do so.  The wife also admitted all the mortgage instalment payments and all the expenses relating to the property were paid by the husband.  In the premises, as found by the Judge, the alleged ‘joint pool assets’ simply did not exist.

7.20In my view, dealing with Mr Wong’s criticism, the Judge had actually addressed the issue of contribution :

‘84. Mr Wong submitted that the Wife must have paid some household expenses.  I have no reason to doubt this.  However, I do not think this is a sufficient basis to infer that the Husband and Wife each intended to have a beneficial interest in the Property.  This is because the mere payment of household expenses is not an expenditure that is referable to the acquisition of the property: see Burns v Burns [1984] Ch 317 at 328H‑329C (Fox LJ); Grant v Edwardsat 647B.  I understand from Mr Wong’s submissions that this proposition was accepted by the Wife.

85. For these reasons, I cannot infer from the Wife’s payment of household expenses (ie expenses not related to the Property) that there was a common intention between the Husband and Wife that the Property was to be shared beneficially.’

7.21Fox LJ in Burns at 330 stated that :

‘ There remains the question of housekeeping and domestic duties. So far as housekeeping expenses are concerned, I do not doubt that (the house being bought in the man's name) if the woman goes out to work in order to provide money for the family expenses, as a result of which she spends her earnings on the housekeeping and the man is thus able to pay the mortgage instalments and other expenses out of his earnings, it can be inferred that there was a common intention that the woman should have an interest in the house–since she will have made an indirect financial contribution to the mortgage instalments. But that is not this case.

During the greater part of the period when the plaintiff and the defendant were living together she was not in employment or, if she was, she was not earning amounts of any consequence and provided no money towards the family expenses. Nor is it suggested that the defendant ever asked her to.  He provided, and was always ready to provide, all the money that she wanted for housekeeping.  The house was not bought in the contemplation that the plaintiff would, at some time, contribute to the cost of its acquisition.  She worked to suit herself.  And if towards the very end of the relationship she had money to spare she spent it entirely as she chose.  It was in no sense ‘joint’ money.  It was her own; she was not expected and was not asked to spend it on the household.’ (emphasis added)

7.22The words that I have underlined in Fox LJ’s judgment is apposite to the situation of the wife in the present case.

4) The wife failed to prove her interest

7.23In my view and with regret, under the present law, and based on the factual finding of the Judge, the wife has failed to establish a claim on the property.  Her remedy is really to pursue in the matrimonial regime for a share of the two flats in Tai Po which were brought by the husband with the proceeds of sale of the property.  This being the case the issue of the quantification of the wife’s interest in the property does not arise.

VII The purchaser’s challenge

1) Estoppel

8.1In the Court below the purchaser contended that the wife was estopped from asserting her claim against the purchaser in that the wife had a duty to inform the purchaser of her interest in property.  The Judge rejected the purchaser’s contention because the purchaser had failed to inspect the property in the first place (and therefore acquired constructive notice of the wife’s interest) and therefore could not reasonably assume that the wife would not claim any interest in the property.  This ruling proceeds on the assumption that the wife was successful in her primary case on the property.  The purchaser renews the challenge before us.

2) The principles

8.2Ms Eu relies on proprietary estoppel by reason of the failure of the wife to speak up and she submits that the cases on this topic includes reference to acquiescence, waiver etc.  Ms Eu has summarized the relevant principles in this area which I would gratefully adopt :

1) An estoppel by silence, inaction or acquiescence arises where ‘a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly, to bring the true facts to the attention of the other party known to him to be under a mistake as to their respective rights and obligations’ and this has been approved as the general principle underlying estoppel by acquiescence’: see Spencer Bower on the Law Relating to Estoppel by Representation (4^th Ed) paragraph III.4.3, at page 48, citing Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890, 903F (per Lord Wilberforce).  See also Lee Bing Cheung v Secretary for Justice (HCA 1092/2010, 21/2/2013) paragraphs 40-45 (DHCJ Marlene Ng).

2) A duty to speak, such as to found an estoppel on silence will arise in circumstances :

(1) ‘[w]here a person, having a title or right to property of any kind, perceives that another person is innocently, and ignorant, conducting himself with reference to the property in a manner inconsistent with such right or rights’: see Spencer Bower paragraph III.4.4(1);

(2) ‘[w]here an owner becomes aware that someone is attempting to dispose of his property’, and in such circumstances ‘he is bound to assert his rights and, if he fails to do so, he may be estopped against the disponee’. ‘His silence may be a representation either that he has no title or that the person dealing with the property has his authority’ see Handley on Estoppel by Conduct and Election paragraph 3-012; or

(3) ‘[w]hen anything in order to a purchase is publicly transacted, and a third person, knowing thereof, and of his own right to the lands intended to be purchased, does not give the purchaser notice of that right, he shall never afterwards be admitted to set up such rights to avoid the purchase; for it was an apparent fraud in him not to give notice of his title to the intended purchaser, and in such cases infancy…shall be no excuse.’: see Savage v Foster (1723) 9 Mod Rep 35, 37 (see also Spiro v Lintern [1973] 1 WLR 1002, 1010F-1011D).

3) Discussion

8.3The Judge’s reasoning has semblance (although not entirely) of the reasoning of the first instance decision of Godfrey J which was referred to in the Court of Appeal judgment in Wong Chim Ying at 276 :

‘ (4) Estoppel: Apparent Ownership

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 estopped 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.”

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.’ (emphasis added)

8.4In my view the mere fact that the purchaser in the present case had constructive notice of the wife’s interest at the time of purchase does not necessarily mean that estoppel is inoperative.  This case is different from Wong Chim Ying because the wife here knew of the sale to the purchaser and the leaseback (as found by the Judge) and yet she had chosen not to speak up until 27 months later.

8.5As pointed out by Ms Eu the effect of constructive notice by the purchaser of the wife’s interest operates to displace the purchaser’s priority over the property.  Lord Browne-Wilkinson in Barclays Bank Plc v O’Brien [1994] 1 AC 180, 195 observed :

‘ The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice)….’

8.6But it does not mean that the wife’s priority can never be lost, estopped and/or waived.  The following supports this view :

1) Goo & Lee on Land Law in Hong Kong (3rd Ed), at page 312 states ‘…[I]f the person in occupation of the land deliberately withholds information about his interest, the purchaser will not be fixed with constructive notice of that person’s equitable interest.  He may also be estopped from relying on constructive notice as a defence to the purchaser’s claim of unencumbered title.’

2) Snell’s Equity (32^nd Ed) paragraph 4-049 states that ‘(c) Fraud, estoppel and gross negligence.  Fraud, estoppel or circumstances giving rise to gross negligence are sufficient to displace a prior interest as with completing legal and equitable interests….’

3) Lewin on Trusts (19th Ed) paragraph 33-023 states that ‘The priority accorded to an equitable interest which was first in time can be lost by conduct of its owner such as to make it inequitable to rely on this priority.’  Such as ‘pre-existing equitable title…may…be defeated by conduct, by representations, by misstatements of a character which would operate and ensure to forfeit and take away the pre-existing title…’ (citing Shropshire Union Railways and Canal Co. v The Queen (1875) L.R. 7 H.L. 496 at 506–507, per Earl Cairns L.C.)

8.7In my view the wife must have a duty to speak up once she realized that the husband had agreed to sell the property to the purchaser and further agreed with the purchaser to lease back the property.  As a result of her silence the purchaser had completed the sale.  The purchaser must have been prejudiced by the wife’s conduct when they could have sought to rescind the sale if the wife had informed it of her interest. 

8.8There are arguments before us as to whether the purchaser can rely on other matters in support of its estoppel defence which were not pleaded such as the purchaser being forced to participate in the present action because the wife’s application to set aside the sale, it is also forced to intervene in the matrimonial proceedings so as to assert an interest in the two Tai Po flats bought with the proceeds of sale of the property in the event the sale is set aside, the husband’s admission that he had used up the sales proceeds of the third Tai Po flat which he had disposed of, the husband is not in a good financial state and another Tai Po flat is subject to a charge registered by a bank/credit card company which has obtained judgment against the husband.  Although Ms Eu submits that these matters were referred to in the purchaser’s closing submission below, the Judge only addressed the issue of the wife’s silence after he had knowledge of the sale and leaseback.  In my view this Court should likewise only consider the matter that the Judge himself had considered.  But even on that matter alone my view is that the estoppel defence is established.

4)  Shield or sword?

8.9In the Court below the purchaser relied on both estoppel by representation and proprietary estoppel.  The Judge held that the three broad elements of both types of estoppel are the same but he held proprietary estoppel cannot be used as a defence and he confined his discussion on estoppel by representation.  In my view the Judge was wrong when he said proprietary estoppel operates only as a defence.  First, to fit estoppel into different compartments may not be of use.  As Scarman LJ (as he then was) held in Crabb v Arun District Council [1976] 1 Ch 179 at 193 :

‘ …. I do not find helpful the distinction between promissory and proprietary estoppel. This distinction may indeed be valuable to those who have to teach or expound the law; but I do not think that, in solving the particular problem raised by a particular case, putting the law into categories is of the slightest assistance.’

8.10Second, while proprietary estoppel is usually used as a ‘sword’ to found a cause of action, it does not mean it cannot also be used as a ‘shield’ to defend a claim.  In Rose v Stavrou [2000] L.&T.R. 133 at 141 Neuberger J (as he then was) held that :

‘ There was some argument as to whether the estoppel was a promissory estoppel or a proprietary estoppel. I am not sure that it matters very much which it is. Classifications of estoppels sometimes can be of more interest to academic lawyers than anyone else. The reason why so much was made of it being a promissory estoppel was two-fold. The first is that if it is a promissory estoppel it is only a shield and not a sword and Mr Joseph says that, therefore, the claimant cannot seek a declaration on the face of it. I do not accept that. It seems to me that a person who claims to have the benefit of a promissory estoppel, although he cannot found it as a basis for claiming damages, or something like that, is perfectly entitled to seek the assistance of the court as to the extent of his right or defence under the estoppel in question. I know of no authority which would hold otherwise and I would find it surprising if there were.’ (emphasis added)

8.11In my view the same parity of reason applies to the present case as well.

8.12In the circumstances I would hold that the wife would be precluded from setting aside the sale to the purchaser in the event if she could establish an interest in the property.

VIII Conclusion

9.Accordingly the appeal is dismissed.

IX Costs

1) Costs below

10.1The Judge ordered the wife to pay the costs of the husband and the purchaser.  The Judge further granted certificate for two counsel to the purchaser.  The wife challenges the costs order.

10.2The wife argued before the Judge that the purchaser should pay two thirds of her costs or alternatively to deprive the purchaser of all or some part of its costs on the basis that of the three distinct issues at the trial, namely (1) the common intention construction trust issue, (2) the bona fide purchaser issue and (3) the estoppel, waiver, acquiescence and laches issue, the purchaser had failed on issues (2) and (3). 

10.3The Judge rejected this contention.  He adopted the general rule that costs should follow the event and issues (2) and (3) were all part of the purchaser’s defence to the wife’s claim and not separate and distinct in themselves so that the decision of them constituted an ‘event’.

10.4In my view an order for costs is discretionary and the Judge’s reasoning cannot be faulted particularly now that on appeal the purchaser has succeeded on the estoppel issue as well.

2) Costs of the appeal

10.5There will be an order nisi that the wife is to pay the husband and purchaser’s costs of the appeal.  There will be certificate for two counsel to the purchaser.

10.6The wife’s own costs are to be taxed according to the Legal Aid Regulations.

Hon Yuen JA :

11.1I agree with the reasons given in Cheung JA’s judgment for the dismissal of the wife’s appeal based on common intention constructive trust. It is trite to say that each case must be decided on its own facts but in cases where, because of the parties’ close relationship, contemporaneous documents recording their intentions are unlikely to exist, there is all the more reason for an appellate court to defer to a trial judge’s findings of fact made after he had seen and heard the witnesses giving evidence in court.

11.2In the present case, it is important to note that the wife asked the husband if her name could be added as a registered owner of the property in December 1988 - soon after she arrived in Hong Kong.  At that time, they had not lived together for any length of time (as she had been living on the mainland and he in Hong Kong), they had no children and she had made no financial contributions whether to the acquisition of the property or to the family.  After the husband made an excuse not to add her name, the wife did not make any further inquiries or take any steps to press for her name to be added as a registered owner – because she assumed she already had an interest in the property simply by reason of her status as his wife.  Further, and importantly, there was no evidence that her thinking, or the husband’s, changed at any time in the years before he sold the property.

11.3These facts are entirely consistent with the conclusion that no common intention constructive trust was ever intended.  The wife’s assumption that she had acquired a beneficial interest in the family home simply by reason of marriage to the title holder is not supported in law.  (Of course if they had divorced before the sale of the property, then her claim to a right in the subject property would have been resolved within the family law regime).

11.4In the absence of evidence of mutually intended “cooperative endeavour”, and in the light of the evidence that the wife had proceeded on the basis of her incorrect assumption, there was a certain degree of artificiality in the argument that the parties had intended to create a common intention constructive trust.  The court must be careful to guard against finding such a trust too easily in the absence of an express intention or very clear evidence of an inferred intention.  After a thorough consideration of the evidence, the judge came to the conclusion, correctly in my view, that these parties had never intended to create a common intention constructive trust.

11.5I then come to the estoppel argument (which is advanced on the assumption that the wife had been able to prove that a common intention constructive trust had been created such as to give her a beneficial interest in the property).

11.6In 1980 the House of Lords held in Williams & Glyn’s Bank Ltd v  Boland [1981] AC 487 that in the case of a property held in the name of the husband, the wife who had contributed to the purchase price and had thereby acquired a beneficial interest in the property had an “overriding interest” which took priority over a bank to whom the husband had charged the property.  The bank had not inspected the property before lending money on the security of the charge and was thus not aware of the wife’s interest, and the wife testified that she was not aware of the charge.  Boland was followed by this court (Clough and Penlington JJA and Mayo J) in Wong Chim Ying.

11.7In the present case the purchaser had failed to inspect the property before purchase and must be fixed with constructive notice of the wife’s interest.  However that is not to say that her claim is unassailable.  Her right to the interest, like all legal and equitable rights, can be waived.  And like all claimants, she may find that she is estopped from asserting her rights by reason of her conduct.

11.8In this respect, the following passage in Gray and Gray, Elements of Land Law (5^th ed) is instructive (para 8.2.108, footnotes not included):

‘ A further curtailment of the Boland ruling has been brought about by estoppels founded on the implied waiver of rights.  Courts will not allow a trust beneficiary to remain deliberately silent about his or her equitable rights at the date of a transaction of sale or charge, only to assert these rights later as having priority over a third party who has dealt in good faith with the sole registered proprietor.  In this context, of course, the applicability of estoppel doctrine depends vitally on the trust beneficiary’s awareness of the relevant disposition.  Where a beneficiary had no contemporaneous knowledge that the registered proprietor was dealing with his title, the courts have allowed the beneficiary to retain the protection of her overriding interest.  But where such knowledge was present, the courts have ruled that trust beneficiaries -- usually members of the registered proprietor’s family – are estopped from overriding the priority of the disponee.  Any other approach ‘would go near to saying that our system of conveyancing permits a mortgagor to obtain money under a false pretence’.  Thus, for instance, in Paddington Building Society v Mendelsohn a beneficial co-owner was deemed, by non-disclosure of her rights to a mortgagee, to have conceded priority to the latter.’

11.9The evidence in the present case was that the wife had been informed of the husband’s sale of the property some four weeks before completion. Yet she had stood by and let her husband complete the sale and receive the proceeds from a third party who had parted with the purchase money in good faith.  Her explanation was that she had wanted to save her marriage; in other words, she chose to go along with the husband’s decision to sell the property and in return (to comply with her wish to continue living in North Point) he rented the property back for her to continue living there.  That was a course that the wife chose with knowledge that the sale had not yet been completed and despite her belief that she had a beneficial interest in the property.

11.10In those circumstances, I take the view that a court might well have found that the wife had waived her rights to the proprietary interest she had in the property and/or had failed to come to the court with clean hands.

11.11I too would dismiss the wife’s appeal and make the orders in paras.9, 10.5 and 10.6 of Cheung JA’s judgment.

Hon Kwan JA :

12.I have had the benefit of reading in draft the judgments of Cheung JA and Yuen JA.  I respectfully agree that the wife’s appeal should be dismissed in that she had failed to establish a common intention constructive trust for the comprehensive reasons given in their judgments.  I also agree with the orders Cheung JA proposed to make on costs.  That being the case, it is not strictly necessary to deal with the purchaser’s contention in its respondent’s notice that the judge should have held that the wife is estopped from asserting any interest in the property.

13.But as Cheung JA had dealt with in full the submissions on estoppel, and in deference to the arguments made to us by the parties, I wish to say a few words of my own.  For my part, I would have upheld the defence of estoppel, on more restricted grounds, based on the defence as pleaded and the judge’s findings.

14.The judge found that the wife knew about the sale of the property by the husband on 1 October 2008 at the latest (paragraph 138 of the judgment) and that she knew in October 2008 or shortly thereafter that there was some lease arrangement in respect of the property (paragraph 141).  He found that between 18 July 2008 (the date of the provisional agreement for sale and purchase) and 29 October 2008 (the date of completion of the sale and purchase), the wife was told by the estate agent that the property was sold by the husband and the provisional agreement had been signed (paragraph 126).  The purchaser entered into an agreement with the husband to lease back the property to him for a year on 9 October 2008.

15.It was pleaded in the defence that the wife knew before the completion of the sale and purchase that a purchaser would purchase the property and that she could continue to stay on because the husband managed to reach agreement with the purchaser to have the property leased back to him (defence, paragraph 20(3)), that the wife knowingly and unreasonably chose not to take any action to stop or restrain the completion of the sale and purchase or to warn the purchaser (paragraph 20(4)), that by her conduct she had approved of or acquiesced in the sale to the purchaser (paragraph 20(5)), and that it would be inequitable and unjust for her to assert or enforce her interest in the property as the purchaser had altered its position to its detriment (paragraph 20(7)).

16.Like the judge, I do not find it necessary to differentiate between estoppel by representation and proprietary estoppel in this instance as the broad elements required to found estoppel by either route would appear to overlap.  He held that the purchaser had failed to establish the existence of a representation in that by the silence or inaction of the wife, the purchaser could not “reasonably assume” (using the words of Lord Wilberforce in Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 at 903F) that she would not claim an interest in the property, given that the purchaser had constructive notice of her interest as it had failed to inspect the property in the first place (paragraph 148).

17.It seems to me that the judge was in error in the above holding.

18.In the earlier part of his judgment in Moorgate Mercantile at902H to 903B, Lord Wilberforce had said this:

‘ English law has generally taken the robust line that a man who owns property is not under any general duty to safeguard it and that he may sue for its recovery any person into whose hands it has come … He is not estopped from asserting his title by mere inaction or silence, because inaction or silence, by contrast with positive conduct or statement, is colourless: it cannot influence a person to act to his detriment unless it acquires a positive content such that that person is entitled to rely on it. In order that silence or inaction may acquire a positive content it is usually said that there must be a duty to speak or act in a particular way, owed to the person prejudiced …’

19.And in a subsequent passage at 903F to G relied on by both Mr Wong and Ms Eu, Lord Wilberforce continued as follows:

‘ What I think we are looking for here is an answer to the question whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the “acquirer” of the property, would expect the “owner” acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by, the “acquirer” and whether, in the face of an omission to do so, the “acquirer” could reasonably assume that no such title was claimed.’

20.Applying the law as stated above, on the facts of this case, I am of the view there was “positive conduct” of the wife to found representation, alternatively her silence or inaction had acquired a “positive content” in that not only had she raised no objection to the sale, she had permitted or consented to the husband entering into a lease back arrangement with the purchaser.  Asking the question of the reasonable man, given this additional factor, the purchaser could “reasonably assume” that no adverse title or interest would be claimed as whoever who might have an interest in the property was content to have the property leased back to the husband.

21.The judge did not discuss the elements required for estoppel other than the requirement of a representation.  But I see no difficulty with the purchaser satisfying the other elements and no suggestion was made by any party that they could not be fulfilled.

Mr William Wong SC and Mr Justin Lam, instructed by Fairbairn Catley Low & Kong, assigned by Director of Legal Aid, for the plaintiff

Ms Audrey Eu SC and Mr Alan Kwong, instructed by Poon,Yeung & Li, for the 1^st defendant

The 2^nd defendant appeared in person