Source: https://hklandlaw.wordpress.com/category/common-intention/
Timestamp: 2019-04-18 14:55:52+00:00

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In Ip Man Shan Henry v Ching Hing Construction Co Ltd ( 1 HKC 256, CFI) ICP paid for land but he channeled the payment through his company (Ching Hing). Ching Hing then paid the construction costs for the large family residence constructed on the land. Title to the land went into the name of ICP’s son, Henry. There was evidence to show that the common intention of ICP and Ching Hing was that the beneficial interest would be shared between them. Henry knew that he was merely nominee or trustee of the land. Thus, beneficial ownership of the property was shared between ICP and Ching Hing.
The court took a common intention constructive trust approach ().
‘I do not think that his Lordship intended to rule out completely the possibility of establishing common intention through conduct other than the payment of purchase price or mortgage instalments. I prefer to read the dicta as saying that the conduct relied upon have to be as concrete and compelling as these conduct.’ ().
Relevant evidence here that shed light on the common intention included the way in which other provision had been made for this son, the way other family investments had been handled, the fact that Henry had only recently graduated and a gift of such a large property made little sense, express discussions between ICP and his wife (the other major controller of Ching Hing) and a declaration explaining his intentions made by ICP. Also relevant was the fact that Ching Hing had paid the premium for the land but had been immediately reimbursed by ICP. Further, Henry had immediately on obtaining the Government lease granted a lease of the property to Ching Hing for virtually the entire term (including any renewal).
‘In the absence of evidence as to precise agreement on the proportion in which the beneficial interest in the property was to be shared between ICP and Ching Hing, I think a fair inference in the circumstances of the present case is that each party held a beneficial interest in proportion to his contribution to the acquisition of the property, including the construction costs of the building. That proportion was crystallized upon the completion of the construction in 1965.’ ().
In Pang Ketian Sally v Tam Yak Hung Annie ( HKEC 990, CFI) P, D and F entered into an agreement whereby each of them was to contribute to the deposit for the purchase of a flat and have a proportionate beneficial interest. D was named as the sole purchaser in the sale and purchase agreement. Completion of the purchase was expected to take place some 18 months later. The parties intended to achieve a sub-sale at a profit before the completion date. The property market deteriorated in the period before completion so that even if a sale had been possible it would have been at a loss rather than a profit. The parties had a second meeting at which P agreed to surrender her interest in the property in return for being released from any obligation to fund the purchase and any other costs associated with it. There was exceptionally clear evidence as to the terms of the original and of the second agreements.
P claimed to be entitled to a 5% share in the property in accordance with the original agreement. This failed since it was found as a fact that she had surrendered her interest as part of the second agreement. The case was expressly dealt with as one of a common intention constructive trust rather than resulting trust ().
The court relied on the first instance judgment in Chan Chui Mee v Mak Chi Choi and the House of Lords decision in Stack v Dowden for statements of the relevant legal principles ( – ).
Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 requires agreements for the sale or other disposition of an interest in land to be in writing and section 2(3) requires the written agreement to be signed by or on behalf of the parties to the agreement. Land contracts that do not comply with section 2(1) are invalid. Section 2(5), however, provides that resulting, implied or constructive trusts are not subject to these formality requirements.
The common intention constructive trust arises when A, the owner of an estate in land, enters into an agreement with B to the effect that B will have a beneficial interest in respect of that estate and B relies on that agreement to his detriment (Lloyds Bank v Rossett  1 AC 107, p. 132). While the common intention constructive trust often arises in the domestic context, it can arise even out of commercial bargains entered into between sophisticated business people. The necessary agreement can even arise when the parties have negotiated a detailed formal agreement which they expect to be in a form that would comply with section 2(1) but which does not do so. This seems surprising since the constructive trust then seems to offer a relatively easy way to by-pass the formalities requirements of section 2.
In fact, it is not so easy to persuade a court that the agreement necessary to the common intention constructive trust has been formed. If the parties intend to enter into a formal written agreement, their failure to do so will usually be a signal that the parties were still negotiating and that their mutual assurances were, in effect, ‘subject to contract’. If some details of the informal agreement have not been fully articulated and agreed upon, there may be an argument that the ‘agreement’ is not sufficiently certain or complete to be made enforceable by means of the common intention constructive trust.
In Herbert v Doyle ( EWCA Civ 1095), the English Court of Appeal had to consider whether a commercial land contract that did not comply with section 2 nevertheless gave rise to a constructive trust. The facts of the case required the court to examine the degree of certainty required for the purposes of the common intention constructive trust. It also had to decide whether the parties intended to be bound by their mutual assurances.
Mr Herbert was the freehold owner of a house and large garden. Mr Doyle and Mr Talati owned the freehold of a neighbouring property in which they carried on their practice as dental surgeons. Mr. Herbert got planning permission to build houses on the garden of his property. To carry out the development, Mr Herbert needed to acquire some of the parking spaces on his neighbours’ land.
In essence, the parties agreed to a land exchange; Mr Doyle and Mr Talati were to have title to car parking spaces on Mr Herbert’s land. In return, they would convey car parking spaces on their land to Mr. Herbert. Mr. Herbert was also to grant leases of two other parts of his land to them. Mr. Doyle and Mr. Talati were to pay a premium to Mr. Doyle. These terms had been agreed in principle in February 2003. It was, however, in April 2003, when Mr. Herbert was getting ready to begin the development work, that the parties had a further meeting at which they agreed that these terms would be immediately binding upon them despite the lack of the anticipated formal written contract. This arrangement was altered as a result of two later variations that the parties agreed. Other variations were discussed but these discussions did not lead to any further agreed variations.
Mr. Herbert later decided that he did not wish to proceed with the agreement. The question was whether the April 2003 agreement gave rise to a constructive trust so that it could be enforced by Messrs. Doyle and Talati notwithstanding the failure to comply with section 2(1).
There had to be clarity both as to the intention to be bound and as to the interest in property that is the subject matter of the trust. Mr. Herbert contended that each of these types of certainty was lacking as regards the April 2003 agreement.
Intention to be bound or mere agreement in principle?
Was this a case, like Yaxley v Gotts ( Ch. 162) in which the parties intended to be bound by an informal agreement? Or was it, like Cobbe, one in which the parties regarded themselves as being bound in honour only until a formal written agreement had been prepared and signed? The judge at first instance had found that the April 2003 agreement was not ‘subject to contract’ and that the parties intended to be bound by it. Arden L.J. regarded this as being surprising but thought that there was no basis on which the Court of Appeal could hold that this conclusion was clearly wrong (Herbert v Doyle  EWCA Civ 1095 ).
The April 2003 agreement could only give rise to a constructive trust if the relevant property and the terms of the agreement were sufficiently certain. While the number of spaces to be transferred by Mr. Herbert to Messrs. Doyle and Talati had been agreed in April 2003, one of the spaces had not been. The Court of Appeal upheld the decision at first instance to the effect that the parties had impliedly agreed that the court could identify a suitable space if Mr. Herbert refused to do this himself (Herbert v Doyle  EWCA Civ 1095  – ). The way to this conclusion was eased by the fact that the judge at first instance had found that the agreement was to transfer ‘reasonably accessible parking spaces on the site, so far as possible adjacent to [Mr. Herbert’s property].’ As Morgan J. (sitting in the Court of Appeal) pointed out, when the judge at first instance nominated a space, he did no more than to give effect to the term that the parties had already agreed (Herbert v Doyle  EWCA Civ 1095 ).
Second, the fact that the parties continued to negotiate after the April 2003 had been reached did not mean that the April 2003 agreement was not sufficiently certain at the time when the parties’ property interests were agreed (Herbert v Doyle  EWCA Civ 1095 ).
The April 2003 agreement provided for Mr. Herbert to grant leases of parts of his property. He argued that the terms of these leases had not been agreed and so there was a lack of certainty in this respect too. This failed since it had been agreed that the terms of these leases would follow the terms of an existing lease between the parties (Herbert v Doyle  EWCA Civ 1095 ).
As Arden L.J. remarked, there is something surprising about the idea that the common intention constructive trust can be based on a sophisticated commercial agreement negotiated by experienced business people. Its more natural home is the agreement between a co-habiting couple as to how the beneficial ownership of their home is to be shared between them. In this domestic context it is easy to understand that the parties might be reluctant to reach a formal agreement when so much depends on trust and where even to raise the question of ‘shares’ seems incongruous. Herbert v Doyle is a striking illustration of the fact that in either context the question is ultimately whether each party was entitled to believe that their legal rights and duties had been affected by the agreement. Must the parties be taken to have gone past the negotiation stage of the discussions? Did they have an intention to create legal relations?
Tanney (Anthony Tanney, ‘Constructive trusts to grant leases: have we not been here before?’, (2012) 16 L. & T. Review 53) has expressed some doubts as to whether the agreement in Herbert v Doyle can properly be thought of as a common intention constructive trust. Tanney questions whether this development is consistent with principle.
First, while it is true that an enforceable land agreement gives rise to an equitable interest (Walsh v Lonsdale (1882) L.R. 21 9 Ch.D. 9) the agreement in Herbert v Doyle was not enforceable since it did not comply with section 2(1). Second, some aspects of the agreement in Herbert v Doyle required the grant of new leases; that is they were agreements for the grant of new estates in land rather than for the sharing of the beneficial ownership of an existing interest. Where the enforceable contract is for the grant of a lease, the equitable interest relates not to the reversion but is a new equitable interest. Typically, however, the common intention constructive trust arises out of an agreement to share an existing interest in land.
Concerns have been expressed, then, as to whether all aspects of the agreement in Herbert v Doyle could all be properly take effect as a common intention constructive trust. Were it not for section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989, Herbert v Doyle could have been dealt with as a proprietary estoppel claim; Mr. Herbert had encouraged his neighbours to believe that they would acquire an interest in land and they had relied on that assurance to their detriment. Since Yaxley v Gotts ( Ch. 162), however, the courts have thought it necessary, in the case of some types of informal land bargain, to think only in terms of the common intention constructive trust. The saving for constructive trusts in section 2(5) has led to doubts as to whether there is any room for proprietary estoppel to work in relation to agreements concerning land.
Owen and Rees (Gwilim Owen and Osian Rees, ‘Section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989: a misconceived approach?’  Conv. 495) argue that this concern is misconceived. Proprietary estoppel is entirely independent of contract and proprietary estoppel claims do not engage section 2(1). Cases like Herbert v Doyle could more easily be dealt with as proprietary estoppel claims.
Common intention constructive trust? Applying Jones v Kernott.
There are two exceptions to this exclusive focus on actual intention. First, where there is a presumed resulting trust (but R had supplied the entire purchase price so there was no such trust in this case). This seems to suggest that the presumed resulting trust is in some way disconnected from actual intention. Second, the court can impute an intention once the existence of a trust has been proved but where the court cannot discern any actual agreement as to how the beneficial interests are to be shared. The quantification of the beneficial interests can rely on an imputed intention but imputation is not relevant to the question as to whether or not a common intention constructive trust had come into existence ().
‘actual intention may have been expressly manifested, or may be inferred from conduct; but actual intention it remains.’ (at ).
Here there was no evidence of a common intention (either formed at the time of acquisition or subsequently) that G was to have a beneficial interest at all.
In Thomson v Humphrey ( EWHC 3576) T and H co-habited in property belonging to H (Church Farm). He had previously bought a home for T and her children to live in (Long Stratton). This too had been in H’s name and had been sold, H retaining the proceeds of sale. When the relationship broke up, T claimed a beneficial interest in Church Farm. She failed. The court applied the approach in Lloyds Bank v Rosset as explained in Stack v Dowden. There was no evidence of an express agreement. Indeed, H had instructed his solicitor to prepare a cohabitation agreement that made it clear that H retained sole ownership of the property. This had been carefully explained to T. She had not signed it and H had continued to live with her but the court did not think that an agreement could be inferred from this. Nor had she incurred any detrimental reliance. There was no evidence that she was worse off than if she had not co-habited with T (though, of course, she would have made different arrangements).
In Hyett v Stanley ( EWCA Civ. 942, CA (Eng)) F and H co-habited. Their home was in F’s name alone. They pooled their financial resources. They were under financial strain and the bank would only lend money if H agreed to accept joint liability for the mortgage payments. F told her that she could safely do this without a formal transfer of title since, he asserted, allowing her name to be added to the mortgage have her a right to the property. The Court of Appeal found that this could only be construed as an agreement that she was to have an interest under a common intention constructive trust. Since she was jointly and severally liable under the terms of the mortgage the Court of Appeal inferred an understanding that each would have a one half beneficial interest in the property.
There was also a mortgage protection life assurance policy. F and H were said to be joint tenants of the proceeds of the policy. F had died and H claimed the entire proceeds. The Court of Appeal confirmed the first instance decision that the policy had first to be applied in paying off the mortgage. H was only entitled to the balance remaining after that repayment.

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