Primecredit Ltd v Yeung Chun Pang Barry And Another

CACV 246 /2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 246 OF 2016

(ON APPEAL FROM HCMP NO 2103 OF 2015)

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J U D G M E N T

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Hon Lam VP:

1.1. 1 I have the benefit of reading the judgments of Cheung and Kwan JJA in advance. I agree with them that we should allow the appeal and there should be an order in terms of [49] to [51] below.

1.2. I agree with Kwan JA’s analysis regarding resulting trust and for the reasons given by Her Ladyship we should overturn the judge’s conclusion in that respect.

1.3. As I see it, it is ultimately a question of the intention of the 2^nd Defendant (be it presumed or presumption rebutted) at the time when the Property was acquired (under the resulting trust analysis) or the common intention of the parents and the 1^st Defendant (under the constructive trust analysis). Between the two, at least in a domestic context, if it is possible to resolve the matter by reference to common intention, there is no need to resort to resulting trust: Drake v Whipp [1996] 1 FLR 826; Yuen Yat Shan Fiona v Sit Hin Kau [2005] 4 HKC 170 at [20]; Au Yul Lin v Wong Wang Hin Eddy [2013] 4 HKLRD 373; Stack v Dowden [2007] 2 AC 432 at [31][1].

1.4. Further, in either case, the court should have regard to inherent probabilities in light of the surrounding circumstances at the time when the Property was acquired. In the present case, the competing suggestions were: (1) the 2^nd Defendant together with the deceased father had beneficial interest in the Property and the 1^st Defendant was added as a joint tenant so that the Property would be passed to the son after the death of both parents; or (2) the 2^nd Defendant did not have any beneficial interest in the Property whilst the deceased father and 1^st Defendant held the beneficial interest in joint tenancy. Whilst there is a presumption of beneficial interest following legal interest, thus the starting point is in favour of (2), one must have regard to the circumstances when the Property was acquired to see if (1) can be made out.

1.5. In that connection, as Kwan JA highlighted at [46] below, the circumstantial factors (to which, with respect, the learned judge below failed to pay proper regard) strongly pointed in favour of the 2^nd Defendant retaining some beneficial interest in the Property. It has to be borne in mind that the Property was the only property which the parents had. It was not a case where the parents purchased an additional property in the name of their only son as his matrimonial home shortly before he got married or where they paid the down payment for the son’s home after he had established himself in life.

1.6. Since Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776, as far as Hong Kong is concerned, the modern approach on constructive trust is to assess the common intention of the parties by a holistic approach having regard to the context, see Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985. In a domestic context, particularly in relation to a matrimonial home, the court is not constrained in that exercise by pure direct monetary contributions to the purchase price, see the judgment of Baroness Hale at [69] in Stack. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family was not that common, the court has to pay more regard to circumstantial matters.

1.7. In the present case, I also respectfully agree with Cheung JA there is sufficient evidence to support the conclusion that the 2^nd Defendant had a beneficial interest in the Property based on constructive trust. Like His Lordship, I see nothing “nebulous” in the 2^nd Defendant having an intention to pass the Property to the 1^st Defendant upon death but retaining beneficial interest in the meantime. The judge’s observation on such intention at [20] of judgment below is, with respect, plainly wrong. The other matters alluded by Cheung JA further tainted the judge’s assessment of the case on constructive trust.

1.8. I note that the charging order in favour of the Plaintiff was made in 2003 at a time when the father was still alive. Apparently, no notice had been given to the parents regarding the charging order at that time. The father passed away in 2012. It was only in 2015 that the Plaintiff took steps to enforce the charging order by the present proceedings. Counsel have not addressed us on the question if the making of the charging order in favour of the Plaintiff would have the effect of equitable severance. There are conflicting local authorities: Ho Wai Kwan v Chan Hon Kuen [2015] 1 HKLRD 901 contra Malahon Credit Co Ltd v Siu Chun Wah Alice [1988] 1 HKLR 196. We leave that issue open for debate on another occasion.

1.9. However, it would be unimaginable that had notice been given to the parents in 2003 no step would be taken by the father to effect a severance of the joint tenancy to protect their interests in the Property. As Kwan JA observed, under Order 50 Rule 2(2), in an application for charging order, the court may direct service on any interested person. I agree with Her Ladyship that a co-owner, in particular a joint tenant, is an interested person. The present case shows that given the potential impact of a charging order on the interest of the co-owners other than the judgment debtor, in the interest of justice notice should be given to such persons before making any order absolute. This is a matter which I would like to bring attention to masters dealing with charging order applications. Copies of this judgment shall be given to the Registrar of the High Court and Registrar of the District Court.

Hon Cheung JA:

2.1. I agree with the judgment of Lam VP and the judgment of Kwan JA on the issue of resulting trust.

2.2. I would add the following observations of my own in respect of two matters canvassed in argument.

Difference between the second limb of common intention constructive trust and resulting trust

2.3. The first situation where common intention constructive trust may arise is where at any time prior to acquisition, or exceptionally at some later date, there is an agreement, arrangement or understanding reached between the parties on how the property is to be held beneficially.

2.4. The second situation is where there is no evidence to support a finding of an agreement or arrangement on the beneficial ownership of the property and the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention on the beneficial ownership of the property and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the party 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. See the judgment of Lord Bridge of Harwich in Lloyds Bank Plc. v Rosset [1991] AC 107 at 132.

2.5. What then is the difference between the second limb of common intention constructive trust and a resulting trust based on the payment of the purchase price of the property by a third party?

2.6. A glimpse of the difference may be gathered from the two separate doctrines that have emerged from the cases on the rationale of a resulting trust. The first view is that a resulting trust is in response to the absence of any intention on the part of the person providing the purchase price to benefit the recipient (‘the lack of intention analysis’). As Lord Millett stated in the Privy Council case of Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 at 1412 :

‘ Like a constructive trust, a resulting trust arises by operation of law, though unlike a constructive trust, it gives effect to intention. But it arises whether or not the transferor intended to retain a beneficial interest--he almost always does not--since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient.’

2.7. The second view, which is different from the first doctrine, is that a resulting trust arose from the presumed common intention of the parties (the ‘positive-intention analysis’). Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 2 All ER 961 at 989-990 stated :

‘ Under existing law a resulting trust arises in two sets of circumstances. (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B... (B) where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest... Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of...